As filed with the Securities and Exchange Commission on
March 31, 2000
Registration Nos. 33-97984
811-9108
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO. __ [ ]
POST-EFFECTIVE AMENDMENT NO. 7 [X]
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 9 [X]
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THE LIPPER FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
101 Park Avenue
New York, NY 10178
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (212) 883-6333
ABRAHAM BIDERMAN
THE LIPPER FUNDS, INC.
101 Park Avenue
New York, NY 10178
(Name and Address of Agent for Service)
--------------
Copies to:
Lawrence S. Block, Esq.
Lipper & Company
101 Park Avenue
New York, NY 10178
Sarah Cogan, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
--------------
It is proposed that this filing become effective:
(check appropriate box)
|X| immediately upon filing pursuant to Paragraph (b)
|_| on (date) pursuant to Paragraph (b)
| | 60 days after filing pursuant to Paragraph (a) (1)
|_| 75 days after filing to paragraph (a) (1)
|_| on (date) pursuant to Paragraph (a) (2) of Rule 485
If appropriate, check the following box:
|_| this post-effective amendment designates a new
effective date for a previously filed post-effective
amendment.
<PAGE>
THE LIPPER FUNDS, INC.
- --------------------------------------------------------------------------------
LIPPER PRIME EUROPE EQUITY FUND
PROSPECTUS
March 31, 2000
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RISK/RETURN SUMMARY................................................................3
Fund Investment Objective.......................................................3
Principal Investment Strategies of the Fund.....................................3
Principal Risks of Investing in the Fund........................................3
Fees and Expenses of the Fund...................................................5
Example.........................................................................6
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS............6
Investment Objective............................................................6
Other Investments...............................................................6
Temporary Investments.........................................................7
Risks...........................................................................7
General.......................................................................7
Risks of Investment in Non-U.S. Securities....................................7
MANAGEMENT.........................................................................8
Compensation....................................................................8
Executive Officers, Members of the Investment Committee and Portfolio Manager...8
SHAREHOLDER INFORMATION...........................................................10
Pricing of Fund Shares.........................................................10
Minimum Purchases, Additional Investments and Account Balances.................10
Purchasing Fund Shares.........................................................11
Other Purchase Information...................................................12
Redeeming Fund Shares..........................................................12
Other Redemption Information.................................................12
Exchange Privilege.............................................................14
Other Exchange Information...................................................14
Transfer of Registration.......................................................14
Dividends and Distributions....................................................15
Taxation of Distributions......................................................16
The Transfer...................................................................16
DISTRIBUTION ARRANGEMENTS.........................................................16
Sales Loads....................................................................16
Rule 12b-1 Fees................................................................17
Retail Distribution Plan.....................................................17
Group Retirement Servicing Plan..............................................17
Multiple Classes...............................................................18
FINANCIAL HIGHLIGHTS..............................................................19
</TABLE>
2
<PAGE>
RISK/RETURN SUMMARY
Fund Investment Objective
The investment objective of the Lipper Primer Europe Equity Fund is
long-term capital appreciation.
Principal Investment Strategies of the Fund
The Fund invests primarily in a diversified portfolio of medium and
large capitalization common stocks of "European companies." The Fund considers
European companies to include companies that:
o are organized under the laws of a European country, including
Austria, Belgium, Denmark, Finland, France, Germany, Italy,
Luxembourg, the Netherlands, Spain, Sweden, Switzerland, the
United Kingdom and Ireland;
o derive at least 50% of their revenues in a European country or
have at least 50% of their assets in a European country; or
o have securities that are traded principally on a European stock
exchange.
The Fund may also invest in common stocks of issuers organized under the laws
of Greece, Norway and Portugal. The Fund will not invest in common stocks of
issuers principally based in Eastern Europe or other emerging market countries.
Prime Lipper Asset Management, the Fund's investment adviser, focuses on
medium and large capitalization stocks that satisfy certain liquidity tests,
including those that have at least $250 million in "free float" market
capitalization and at least $500,000 in average daily trading volume. The
Adviser favors growth stocks over pure cyclical stocks. To identify the most
attractive growth stocks, the Adviser analyzes each issuer's financial situation
(including leverage and free cash flow available for capital investment),
historic return on equity and projected earnings per share growth rates. The
Adviser also considers certain qualitative factors, including the strength of
the issuer's management team, breadth of product lines and export potential. The
Adviser determines country allocations based on each country's share of the
overall European market capitalization. The Adviser expects to invest its assets
in a broad range of issuers in terms of country and industry.
The Fund is suitable for investors who seek long-term capital appreciation
and who want exposure to a diversified portfolio of medium and large
capitalization European common stocks.
Principal Risks of Investing in the Fund
The value of the Fund's shares will fluctuate in response to changes in
market and economic conditions, primarily in Europe, and changes in the
financial conditions and prospects of the issuers in which the Fund invests. In
addition, because the Adviser invests primarily in European common stocks, an
investment in the Fund involves additional risks not typically associated with
investing in U.S. common stocks, including:
o social, political, economic and currency risks;
o the fact that there may be less publicly available information
about European issuers than about U.S. issuers; and
o European issuers may not be subject to the same accounting,
auditing and financial recordkeeping standards as U.S. issuers.
Also the introduction of the Euro may increase volatility in financial markets
and may adversely affect the value of the Fund's shares. Finally, the Adviser
may engage in active and frequent trading to achieve the Fund's investment
objective, which may result in increased transaction costs and adverse tax
consequences. As a result, you may lose money by investing in the Fund.
3
<PAGE>
The following bar chart reflects the annual total returns for the Fund's
Premier Shares since the Fund's inception.* The information in this bar chart
provides some indication of the risks of investing in the Fund by showing the
changes in the Fund's performance from year to year. The Fund's past performance
is not necessarily an indication of how the Fund will perform in the future.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
(2.50)% 19.31% (1.77)% 23.17% 21.92% 18.83% 32.29% 15.70%
[Bar Chart] [Bar Chart] [Bar Chart] [Bar Chart] [Bar Chart] [Bar Chart] [Bar Chart] [Bar Chart]
1992 1993 1994 1995 1996 1997 1998 1999
</TABLE>
The Fund's highest return for a quarter was 22.33%, which occurred in the
1st quarter of 1998. The Fund's lowest return for a quarter was (11.77)%, which
occurred in the 3rd quarter of 1998.
The following table provides some indication of the risks of investing in
the Fund by comparing the average annual total return of the Fund for the one
and five year periods and since inception to that of the Morgan Stanley Capital
International Europe (15) Index ("MSCI Europe 15 Index"), a U.S. dollar
denominated, market-capitalization weighted index comprised of stocks from 15
developed countries in Western Europe, and the average total return generated by
the 152 European stock mutual funds tracked by Morningstar, Inc.:
<TABLE>
<CAPTION>
Average Annual Average Annual Total
1 Year Return Five Year Return* Return Since Inception*
------------------ ------------------ ------------------------
<S> <C> <C> <C>
Lipper Prime Europe Equity Fund
Premier Shares 15.70% 22.22% 15.27%
Retail Shares 15.54% 22.02% 15.16%
Group Retirement Plan Shares 15.47% 22.04% 15.16%
MSCI Europe 15 Index** 16.22% 22.54% 17.31%
Morningstar European Stock
Funds+ 24.93% 20.70% N/A
</TABLE>
- ----------
* Reflects performance of the Fund for the period April 1, 1996 through
December 31, 1999 and the performance of the Fund's predecessor partnership
for the period January 13, 1992 (date of inception) through March 31, 1996,
as applicable. On April, 1996, the Fund's predecessor partnership
transferred its assets to the Fund in exchange for the Fund's Premier
Shares. The investment policies, objectives, guidelines and restrictions of
the Fund are in all material respects equivalent to those of its
predecessor partnership. As a mutual fund registered under the Investment
Company Act, the Fund is subject to certain restrictions under the Act and
the Internal Revenue Code to which its predecessor partnership was not
subject. Had the Fund's predecessor partnership been registered under the
Act and subject to the provisions of the Act and the Code, its investment
performance may have been adversely affected.
** Unlike the Fund's returns, the total returns for the MSCI Europe 15 Index
do not include the effect of any brokerage commissions, transaction fees or
other costs of investing, which would reduce returns. Average Annual Total
Return Since Inception for the MSCI Europe 15 Index reflects average annual
total return for the period January 13, 1992 through December 31, 1999.
+ Returns for the Morningstar European Stock Funds include the reinvestment
of dividends and capital gains.
4
<PAGE>
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund:
<TABLE>
<CAPTION>
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None
Redemption Fee None#
Exchange Fee None#
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Management Fees
Premier Shares 1.10%
Retail Shares 1.10%
Group Retirement Plan Shares 1.10%
Distribution and Service (12b-1) Fees+
Premier Shares None
Retail Shares 0.25%
Group Retirement Plan Shares 0.25%
Other Expenses
Premier Shares 0.41%
Retail Shares 0.41%
Group Retirement Plan Shares 0.41%
-----
Total Annual Fund Operating Expenses
Premier Shares 1.51%
Retail Shares 1.76%
Group Retirement Plan Shares 1.76%
</TABLE>
Certain investment dealers, banks and financial services firms may charge
you direct fees in connection with purchasing or redeeming the Fund's shares.
These tables do not reflect those fees.
- -----------
# The Fund imposes a 1.00% Redemption and Exchange Fee on Fund Shares that
are redeemed or exchanged 30 days or less from the date of purchase.
+ You may purchase Premier Shares if you invest more than $1 million in the
Fund and you will not pay any Distribution or Service (12b-1) Fees. If you
are part of a 401(k), pension or other type of retirement plan, you must
purchase Group Retirement Plan Shares and you will have to pay an annual
Service Fee of up to 0.25% of the value of the average daily net assets of
the Fund's Group Retirement Plan Shares. All other investors may purchase
Retail Shares and will have to pay an annual Distribution Fee of 0.25% of
the value of the average daily net assets of the Fund's Retail Shares.
5
<PAGE>
Example
This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Premier Shares $154 $477 $824 $1,802
Retail Shares $179 $554 $954 $2,073
Group Retirement Plan Shares $179 $554 $954 $2,073
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
Investment Objective and Principal Investment Strategies
The Fund's investment objective is long-term capital appreciation. The Fund
invests primarily in a diversified portfolio of common stocks of "European
companies." The Fund considers European companies to include companies that
o are organized under the laws of a European country, including
Austria, Belgium, Denmark, Finland, France, Germany, Italy,
Luxembourg, the Netherlands, Spain, Sweden, Switzerland, the
United Kingdom and Ireland;
o derive at least 50% of their revenues in a European country or
have at least 50% of their assets in a European country; or
o have securities that are traded principally on a European stock
exchange.
The Adviser may also invest in common stocks of issuers organized under
the laws of Greece, Norway and Portugal. The Adviser will not invest in common
stocks of issuers principally based in Eastern Europe or other emerging market
countries.
The Adviser focuses on medium and large capitalization stocks that satisfy
certain liquidity tests, including those that have least $250 million in "free
float" market capitalization and at least $500,000 in average daily trading
volume. The Adviser favors growth stocks over pure cyclical stocks. To identify
the most attractive growth stocks, the Adviser analyzes each issuer's financial
situation (including leverage and free cash flow available for capital
investment), historic return on equity and projected earnings per share growth
rates. The Adviser also considers certain qualitative factors, including the
strength of the issuer's management team, breadth of product lines and export
potential.
To reduce risk, the Adviser focuses on the more liquid European markets.
The Adviser determines country allocations based on each country's share of the
overall European market capitalization. The Adviser expects to invest the Fund's
assets in a broad range of issuers in terms of country and industry.
Other Investments
The Adviser may invest the Fund's assets that are not invested in common
stocks of European companies in preferred stock, convertible securities, rights
and warrants, and depositary receipts. Although the Adviser intends to invest
primarily in securities listed on foreign stock exchanges, it may also invest in
securities traded in over-the-counter markets, and may also from time to time
invest in securities for which a public market does not exist or whose transfer
may be restricted.
6
<PAGE>
Temporary Investments
For temporary defensive purposes, the Adviser may invest the Fund's assets
in cash and/or high quality short-term debt instruments of U.S. issuers. The
Adviser may also at any time invest some of the Fund's assets in these
instruments to meet redemptions and to cover operating expenses. If the Adviser
takes a temporary defensive position, the Fund may not achieve its investment
objective.
Risks
General
The value of the Fund's shares will fluctuate with the market value of its
portfolio positions. Factors affecting the value of the Fund's securities
include:
o social, economic or political factors;
o factors affecting the industry in which a particular issuer
operates, such as competition or technological advances; and
o factors affecting an issuer directly, such as management changes,
labor relations, collapse of key suppliers or customers, or
material changes in overhead.
There is no assurance that the Fund will achieve its investment objective.
Risks of Investment in Non-U.S. Securities
The Adviser will invest the Fund's assets primarily in European common
stock that trade on European markets. Investments in European common stocks
involves certain considerations and risks not typically associated with
investing in U.S. common stocks, including
o future social, political and economic developments;
o the possible imposition of foreign withholding taxes on dividend
income payable on securities held by the Fund; and
o the possible seizure or nationalization of non-U.S. assets.
The Fund's investments are denominated in foreign currencies (including the
Euro). In general, the Adviser does not hedge any currency risks between the
U.S. dollar and foreign currencies. As a result, the strength or weakness of the
U.S. dollar against foreign currencies will account for part of the Fund's
investment performance. A decline in the value of any particular currency
against the U.S. dollar will cause a decline in the U.S. dollar value of the
Fund's holdings of securities denominated in that currency. As a result, the
value of the Fund's shares will decline.
On January 1, 1999, eleven European countries implemented a new currency
unit called the "Euro" that is expected to reshape financial markets, banking
systems and monetary policies in Europe and other parts of the world. While it
is impossible to predict the impact of the Euro, it is possible that it could
increase volatility in financial markets worldwide and adversely affect the
value of the Fund's shares. In addition, if the value of the Euro declines
against the U.S. dollar, the U.S. dollar value of the Fund's holdings of
securities denominated in the Euro will fall and the value of the Fund's shares
will decline.
Non-U.S. securities markets may have substantially less volume and may be
smaller, less liquid and subject to greater price volatility than U.S. markets.
Delays or problems with settlement in non-U.S. markets could affect the
liquidity of the Fund's investments and adversely affect performance.
7
<PAGE>
Investment by the Fund in European issuers may be restricted or controlled
to varying degrees. These restrictions may limit or preclude investment in
certain issuers or countries and may increase the costs and expenses of the
Fund.
There may be less publicly available information about European issuers
than about U.S. issuers, and European issuers may not be subject to the same
accounting, auditing and financial recordkeeping standards and requirements as
U.S. issuers.
The Adviser may engage in active and frequent trading to achieve the Fund's
principal investment objective. Frequent trading may result in increased
transaction costs and adverse tax consequences and may detract from the Fund's
performance.
MANAGEMENT
Prime Lipper Asset Management, located at 101 Park Avenue, New York, NY
10178, serves as the Fund's investment adviser. The Adviser is a joint venture
between affiliates of Lipper & Company, L.P., the Fund's distributor, and Prime
S.p.A.
Lipper & Company is a privately owned investment management and investment
banking firm founded in 1987. At December 31, 1999, Lipper & Company and its
affiliates managed assets having an aggregate market value on a gross basis of
approximately $5.5 billion on behalf of its institutional and high net worth
clients. Lipper & Company and its affiliates serve as the general partner and/or
investment adviser to several U.S. and non-U.S. investment limited partnerships
and mutual funds that offer complementary investment strategies in
intermediate-term high yield bonds, hedged convertible securities, investment
grade bonds, U.S. large capitalization equity securities and merger arbitrage.
Prime S.p.A. is a subsidiary of Assicurazioni Generali S.p.A., the Italian
insurance company. Prime, through subsidiaries and affiliates, is among the
oldest asset managers in Italy, and specializes in the management of portfolios
invested in European issuers, with approximately $8.7 billion of assets under
management as of December 31, 1999 from domestic and international investors.
Compensation
The Fund pays the Adviser an annual fee computed daily and paid monthly at
the annual rate of 1.10% of the Fund's average daily net assets. The Adviser may
voluntarily waive for a period of time all or a portion of its management fee
with respect to the Fund. For the most recent fiscal year, the Adviser's
management fee was 1.10%.
Executive Officers, Members of the Investment Committee and Portfolio Manager
An Investment Committee of the Adviser consisting of Kenneth Lipper,
Francesco Taranto, Abraham Biderman and Guido Guzzetti is responsible for
strategic decisions for the Fund. Mr. Guzzetti is the Senior Portfolio Manager
for the Fund. Paolo Vassalli is the Portfolio Manager and Chief Investment
Officer for the Fund and is responsible for the day-to-day management of the
Fund's portfolio. Set forth below is a biographical description of the Executive
Officers and Members of the Investment Committee of the Adviser and the
Portfolio Manager of the Fund.
8
<PAGE>
Kenneth Lipper is Co-Chairman of the Adviser and its Investment Committee.
Mr. Lipper has also been Chief Executive Officer and President of Lipper &
Company, L.P. (together with its predecessor, Lipper & Company, Inc.) since
1987. Mr. Lipper was a General Partner of Lehman Brothers Inc. from 1969 to 1975
and a General Partner and Managing Director of Salomon Brothers Inc. from 1976
to 1982. He subsequently served as Deputy Mayor of New York City from 1983 to
1985. As a specialist in corporate finance since 1969, Mr. Lipper has held all
levels of responsibility as an adviser to corporations in mergers, tender
offers, convertible issues, asset valuations and other investment banking
transactions. He is a member of the Federal Reserve Bank of New York's
International Advisory Board, a member of the Advisory Board of The Chase
Manhattan Bank, a Senior Financial Adviser to the New York City Council and a
Director and Chairman of the Audit Committee of New Holland N.V. Mr. Lipper also
serves as a Director of the Lincoln Center for the Performing Arts and a Trustee
of the Sundance Institute, Mr. Lipper serves on the Harvard Executive Committee
on University Resources and the Visitor's Committee of the Kennedy School of
Government at Harvard University. Mr. Lipper wrote the novels "Wall Street" and
"City Hall," wrote and produced the film "City Hall" and produced the films "The
Winter Guest" and "The Last Days". He also published Penguin Lives, a series of
short biographies of famous cultural figures by celebrated authors. He graduated
from Columbia University and Harvard Law School and is a member of the New York
State Bar.
Francesco Taranto is Co-Chairman of the Adviser and its Investment
Committee. Mr. Taranto is the Chief Executive Officer of Prime and PrimeGest
S.p.A. and Chairman of Prime Investment Management SIM S.p.A. As such, Mr.
Taranto oversees the development and implementation of investment strategy and
asset allocation policy. Mr. Taranto's market experience dates from 1959, and he
is responsible for the overall supervision of portfolio management of all mutual
funds advised by Prime. Mr. Taranto also serves as the Chairman of Prime
Luxembourg Investment Management S.A., Chairman of Prime Merrill Funds S.p.A.,
Vice Chairman of Prime Consult SIM S.p.A., a Director of Prime U.S.A., Inc. and
a Director of Prime Augusta Vita S.p.A. Prior to joining Prime, he served for
four years as the General Manager of Interbancaria Gestione, a prominent
Milan-based mutual fund company, from 1983 to 1987.
Abraham Biderman is an Executive Vice President of the Adviser and a member
of its Investment Committee. Mr. Biderman is also an Executive Vice President of
Lipper & Company, L.P. and Co-Manager of Lipper Convertibles, L.P., an
investment limited partnership and an affiliate of Lipper & Company and the
Adviser. Mr. Biderman joined Lipper & Company in 1990. He was the Commissioner
of the New York City Department of Housing, Preservation and Development from
1988 to 1989, and in that capacity was responsible for the largest housing
development project in the United States at that time. He was the Commissioner
of the New York City Department of Finance from 1986 to 1988, responsible for
the collection of over $20 billion per year in tax and other revenues. Mr.
Biderman also served as a Special Advisor to former Mayor Edward I. Koch from
1985 to 1987 and was an Assistant to then-Deputy Mayor Kenneth Lipper from 1983
to 1985.
Guido Guzzetti is the Senior Portfolio Manager of the Fund and a member of
the Adviser's Investment Committee. Mr. Guzzetti is also the Investment Director
of Prime's mutual fund and life insurance products. From 1992 through 1999, he
was a member of the Adviser's Investment Committee and was the Portfolio Manager
and Chief Investment Officer for the Fund. Mr. Guzzetti has been associated with
Prime S.p.A. since 1987. He has been responsible for the overall investment
process of Prime's European growth investment strategy and for the research and
development of structured asset management products for institutional investors.
Mr. Guzzetti has also been responsible for the oversight and management of
Prime's institutional clients. From 1981 to 1986, he was an information system
analyst and sales representative at IBM. Prior to that, he was a researcher on
mathematical and numerical modeling at ENI. Mr. Guzzetti holds a B.A. in Physics
from Milan University.
Paolo Vassalli is the Portfolio Manager and Chief Investment Officer for
the Fund. He has been with Prime Lipper Asset Management since 1993 where he has
worked as a European equity analyst for the Fund. Since 1998, Mr.
9
<PAGE>
Vassalli has been responsible for the European equity investments for Prime
S.p.A.'s institutional clients. From 1992 to 1993, he was an equity analyst for
PrimeGest S.p.A. with specific responsibility for industrial companies. Mr.
Vassalli received his B.A. in Economics from Bocconi University in Milan in
1990, where he graduated cum laude.
SHAREHOLDER INFORMATION
Pricing of Fund Shares
The price of each share is based on the net asset value of each class. The
Fund's net asset value is the value of its assets minus its liabilities.
Expenses attributable solely to a particular class will be borne exclusively by
that class. The net asset value per share of each class of shares of the Fund is
calculated every day the New York Stock Exchange is open.
The Fund determines the net asset value per share of each class as of the
close of regular trading on the NYSE, generally 4:00 p.m., New York time, on
days the NYSE is open. The Fund computes the net asset value per share by
dividing the value of the net assets of each class by the total number of shares
of that class outstanding. In calculating the net assets of each class, the Fund
values securities traded on an exchange on the basis of the last sale price or,
in the absence of a sale, at the mean between the closing bid and asked prices,
if available. The Fund values equity securities traded on the NASDAQ National
Market System for which no sales prices are available and over-the-counter
securities on the basis of the bid prices at the close of business on each day.
If market quotations for those securities are not readily available, the Fund
values such securities at fair value. Fair value is determined in accordance
with procedures approved by the Board of Directors. The Fund values fixed income
securities on the basis of valuations provided by brokers and/or a pricing
service, quotations from dealers and prices of comparable securities. The Fund
may value short-term investments that mature within 60 days at amortized cost if
it reflects the fair value of those investments.
Minimum Purchases, Additional Investments and Account Balances
Each of the Fund's classes has the following minimum amounts to purchase
shares initially, to make additional investments and to maintain your investment
in a particular class of shares:
<TABLE>
<CAPTION>
Minimum Minimum Minimum
Class of Shares Initial Purchase Additional Investment Account Balance
- --------------- ---------------- --------------------- ---------------
<S> <C> <C> <C>
Premier $1,000,000 $2,500 $500,000
Retail (non-I.R.A) $10,000 $2,500 $1,000
Retail (I.R.A.) $2,000 $250 $1,000
Group Retirement Plan None None None
</TABLE>
The Fund may vary or waive these minimum amounts at any time.
10
<PAGE>
Purchasing Fund Shares
Shares of the Fund are sold without any sales charge. You may purchase
shares of the Fund in one of the following ways:
Method for Purchase What You Need To Do
- ------------------- -------------------
Initial Purchase by Mail Mail your account application and a check made
payable to "The Lipper Funds, Inc." to:
The Lipper Funds, Inc.
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
Initial Purchase by Wire First, call Chase Global Funds Services Company,
the Fund's Transfer Agent, at 1-800-LIPPER9 and
provide (1) your name, address, telephone number
and social security or tax I.D. number, (2)
name of the Fund and class of shares you wish to
purchase, (3) amount you are wiring, (4)
name of the bank wiring the funds, and (5) whether
or not you have an existing account. The Transfer
Agent will provide you with a reference number.
Next, instruct your bank to wire the specified
amount to The Chase Manhattan Bank, the Fund's
Custodian, as follows:
The Chase Manhattan Bank
New York, NY 10003
ABA # 0210-0002-1
DDA Acct. #910-2-753168
F/B/O The Lipper Funds, Inc.
Ref: Lipper Prime Europe Equity Fund
Account/Reference Number ___________
Account Name _______________________
Finally, mail your account application to the
Transfer Agent at the address set forth above
under "Initial Purchase by Mail."
Additional Investments Mail a check payable to "The Lipper Funds, Inc."
to the Transfer Agent at the address set forth
above under "Initial Purchase by Mail" or wire
funds using the procedures set forth above under
"Initial Purchase by Wire." You should include the
name of the account, account number and the name
of the Fund and class of shares you wish to
purchase on the check or wire to ensure proper
crediting to your account.
11
<PAGE>
Other Purchase Information
You may also purchase shares of the Fund through participating dealers,
including banks and financial services firms that provide distribution,
administrative or shareholder services to the Fund, if you are a customer of
that participating dealer. Participating dealers may impose additional or
different conditions or other account fees on your purchase of Fund shares. Each
participating dealer is responsible for sending its customers a schedule of any
such fees and information regarding any additional or different conditions
regarding purchases and redemptions. If you are a customer of a participating
dealer, you should consult the dealer for information regarding these fees and
conditions. The Lipper Funds, the Distributor, the Adviser or any of the
Adviser's affiliates may compensate certain participating dealers. Compensation
may be different with respect to each class of shares.
The Distributor or a participating dealer must transmit your order to the
Transfer Agent within one business day after it receives your order. If the
Distributor or a participating dealer receives your order and transmits it to
the Transfer Agent prior to the close of regular trading on the NYSE, generally
4:00 p.m., New York time, on days the NYSE is open, the Fund will price your
shares at that day's net asset value. If not, the Fund will price your
shares based on the next business day's net asset value. The Distributor or a
participating dealer generally must receive payment for your shares on
settlement date, the third business day after the date on which you placed your
order. If you make payment prior to the settlement date, you may permit the
payment to be held in your brokerage account or you may designate a temporary
investment for such payment until the settlement date. The Fund may reject any
purchase order and suspend the offering of its shares for a period of time.
In the interest of economy and convenience, the Fund will not issue
certificates for shares unless you make a written request. The Fund will not
issue certificates for fractional shares under any circumstances. It is
considerably more difficult to redeem shares held in certificate form.
Redeeming Fund Shares
You may redeem shares of the Fund at any time in one of the following ways:
Method for Redemption What You Need to Do
- --------------------- -------------------
Redemption through the Call the Distributor at 1-800-LIPPER9 or your
Distributor or a Participating Dealer.
Participating Dealer
Redemption by Telephone Provided that you established the telephone
privilege when you completed your account
application, you may call the Transfer Agent at
1-800-LIPPER9 and request that the Transfer
Agent send you the redemption proceeds or wire
the funds to your account. The Transfer Agent
must employ reasonable procedures, such as a
form of personal identification, to confirm that
the instructions are genuine. If the Transfer
Agent does not follow such procedures, it may be
liable for any losses due to unauthorized or
fraudulent instructions. Neither The Lipper
Funds nor the Transfer Agent will be liable for
following telephone instructions reasonably
believed to be genuine.
Redemption by Mail Mail the Transfer Agent a letter at the address
specified under "Initial Purchase by Mail"
requesting a redemption. The letter should
include (1) name of the account, social security
or tax I.D. number, account address and account
number, (2) name of the Fund from which you
wish to redeem, (3) number of shares or
amount you wish to redeem, and (4) signature of
each owner of the account.
12
<PAGE>
Other Redemption Information
If the Fund receives your redemption request in proper form (including all
of the information set forth above) prior to the close of regular trading on the
NYSE, generally 4:00 p.m., New York time, on days the NYSE is open, the Fund
will redeem your shares at that day's net asset value. If not, the Fund will
redeem your shares based on the next business day's net asset value. The
proceeds paid to you upon redemption may be more or less than the amount you
originally invested depending upon the net asset value of the shares being
redeemed at the time of redemption. If you hold shares in more than one class of
the Fund, you must specify in your redemption request the class of shares being
redeemed. If you do not specify which class you want redeemed, or if you own
fewer shares of a class than specified, the Transfer Agent will delay your
request until it receives further instructions from you, the Distributor or a
participating dealer.
The Fund normally transmits redemption proceeds for credit to your account
at the Distributor or a participating dealer at no charge within seven days
after it receives your redemption request. Generally, the Fund will not invest
these funds for your benefit without specific instruction, and the Distributor
will benefit from the use of temporarily uninvested funds before these funds are
credited to your account. If you pay for your shares by personal check, you will
be credited with the proceeds of a redemption of those shares only after the
check has been collected, which may take up to 15 days form the purchase date.
If you anticipate the need for more immediate access to your investment, you
should purchase shares with Federal Funds, by bank wire or with a certified or
cashier's check.
If you reduce your account to below the minimum investment balances set
forth above, the Fund may redeem your account. The Fund will give you at least
30 days in which to increase your account balance to more than the required
minimum account balance. Group Retirement Plan Shareholders are not subject to
this minimum. If the Fund redeems your shares, you may reinvest in any class of
shares of the Fund at a later date provided that you meet any eligibility
requirements with respect to investing in the Fund at that time.
The Fund imposes a 1.00% fee (short-term trading fee) on Fund shares
redeemed 30 days or less from the date of purchase. The fee is based on the
shares' net asset value at redemption and is deducted from the redemption
proceeds. The fee is paid to the Fund to offset costs associated with short-term
shareholder trading. It does not apply to shares acquired through reinvestment
of distributions. So as not to penalize long-term investors, and for purposes of
computing the short-term trading fee, any shares bought through reinvestment of
distributions will be redeemed first without charging the fee, followed by the
shares held for the longest period of time. The Fund reserves the right to waive
this redemption fee at any time in its sole discretion.
Certain participating dealers may charge you fees in connection with
redeeming your shares.
The Fund may suspend your right to redeem your shares or postpone the date
of payment for any period during which trading on the NYSE is closed (other than
customary weekend and holiday closings) or restricted. The Fund may also suspend
your right to redeem your shares or postpone the date of payment if an emergency
exists for which the Fund cannot reasonably dispose of or value its securities
or for such other periods as the Securities and Exchange Commission may permit.
If the Board of Directors determines that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment wholly
or partly in cash, the Fund may pay your redemption proceeds in whole or in part
by a distribution of readily marketable securities held by the Fund in lieu of
cash in conformity with applicable rules of the SEC. You may incur brokerage
charges on the sale of such securities.
You must provide the Transfer Agent with a "signature guarantee" if (1) you
want your redemption proceeds sent to another person, (2) you want your
redemption proceeds sent to an address other than your registered address, or
(3) you want your shares transferred to another person. A signature guarantee
verifies your identity. You may obtain a signature guarantee from an "eligible
guarantor institution" (including banks, brokers and dealers that are members of
13
<PAGE>
a clearing corporation or that maintain net capital of at least $100,000, credit
unions authorized to issue signature guarantees, national securities exchanges,
registered securities associations, clearing agencies and savings associations)
that participates in a signature guarantee program. The signature guarantee must
appear on (1) your written request for redemption, (2) a stock power that
specifies the total number of shares and class of shares to be redeemed, or (3)
all of the stock certificates you tender for redemption (if you hold your shares
in certificated form).
Exchange Privilege
You may exchange your shares of the Fund for shares of the same class of
the other funds in The Lipper Funds family, including the Lipper High Income
Bond Fund and the Lipper U.S. Equity Fund, in one of the following ways:
Method for Exchange What You Need To Do
- ------------------- -------------------
Exchange by Telephone Provided that you established the telephone
privilege when you completed your account
application, you may call the Transfer Agent at
1-800-LIPPER9 and provide (1) name of the account,
social security or tax I.D. number, account
address and account number, (2) name of the Fund
and class of shares from which you wish to
exchange, (3) number of shares or amount you wish
to exchange, and (4) name of the Fund into which
you wish to exchange. The Transfer Agent must
employ reasonable procedures, such as a form of
personal identification, to confirm that the
instructions are genuine. If the Transfer Agent
does not follow such procedures, it may be liable
for any losses due to unauthorized or fraudulent
instructions. Neither The Lipper Funds nor the
Transfer Agent will be liable for following
telephone instructions reasonably believed to be
genuine.
Exchange by Mail Mail the Transfer Agent a letter at the address
set forth above under "Initial Purchase by Mail"
requesting an exchange. The letter should include
(1) name of the account, social security or tax
I.D. number, account address and account number,
(2) name of the Fund and class of shares from
which you wish to exchange, (3) number of shares
or amount you wish to exchange, and (4) name of
the Fund into which you wish to exchange.
Other Exchange Information
You may exercise the exchange privilege if the shares of the Fund into
which you wish to exchange are offered for sale in your state of residence and
the purchase meets the minimum investment and other eligibility requirements of
the Fund into which you are exchanging. To use the exchange privilege, you
should consult the Distributor or your participating dealer to determine if it
is available and whether any other conditions are imposed on its use.
If you exercise the exchange privilege, The Lipper Funds will exchange your
shares at the next determined net asset value. Except as described below, the
Lipper Funds does not currently charge any fees directly in connection with
exchanges, although it may charge shareholders a nominal fee upon at least 60
days' written notice.
The Fund imposes a 1.00% fee (short-term trading fee) on Fund shares
exchanged 30 days or less from the date of purchase. The fee is based on the
shares' net asset value at the time of the exchange and is deducted from the
amount exchanged. The fee is paid to the Fund to offset costs associated with
short-term shareholder trading. It does not apply to shares acquired through
reinvestment of distributions. So as not to penalize long-term investors, and
for purposes of computing the short-term trading fee, any shares bought through
reinvestment of distributions will be exchanged first
14
<PAGE>
without charging the fee, followed by the shares held for the longest period of
time. The Fund reserves the right to waive this exchange fee at any time in its
sole discretion.
You must obtain and should carefully review a copy of the current
prospectus of the Fund into which you wish to exchange before making any
exchange.
The Lipper Funds may limit exchanges as to amounts or frequency, and may
impose other restrictions to assure that exchanges do not disadvantage the Funds
or their shareholders. If your shares are held in a broker "street name," you
must contact your participating dealer to exchange such shares; you may not
exchange such shares by mail or telephone. The Lipper Funds may reject any
exchange request in whole or in part. The Lipper Funds may modify or terminate
the exchange privilege at any time upon notice to shareholders.
If you exchange shares of the Fund for shares of another Fund, the Internal
Revenue Service treats such an exchange as a sale of the shares. Therefore, you
may realize a taxable gain or loss upon an exchange.
Transfer of Registration
You may instruct the Transfer Agent to transfer the registration of your
shares to another person by sending the Transfer Agent a letter at the address
set forth above under "Initial Purchase by Mail." The letter should include (1)
your name and account number, (2) the name of the Fund from which you wish to
transfer your shares, (3) the number and class of shares you wish to transfer,
(4) the name of the person to whom you are transferring your shares, (5) your
signature, (6) a signature guarantee, and (7) an account application from the
person to whom you are transferring your shares.
Dividends and Distributions
Shares of the Fund begin accruing dividends on the first business day
following the day a purchase order is priced and continue to accrue dividends up
to and including the day that such shares are redeemed. The Fund will
automatically reinvest dividends and capital gains distributions on your shares
in additional shares of the same class at the net asset value of that class at
the time of reinvestment, unless you indicate on your application form that the
Fund should pay dividends and capital gains distributions on shares in cash to
your account.
The Fund will distribute substantially all of its net investment income to
shareholders annually. The Fund will distribute net capital gain, if any, with
the last dividend for the calendar year.
If you own Retail or Group Retirement Plan Shares, you will receive lower
per share dividends than Premier Shareholders because of the additional expenses
borne by Retail and Group Retirement Plan Shareholders under the Fund's Retail
Distribution Plan and Group Retirement Servicing Plan.
The Fund may pay additional distributions and dividends at other times if
necessary to avoid federal income taxes.
The Lipper Funds will send you an annual statement setting forth the amount
of any dividends and distributions made to you during each year and their
federal tax characterization.
15
<PAGE>
Taxation of Distributions
Fund dividends and distributions are taxable to you as ordinary income or
capital gain. Unless your Fund shares are in an IRA or other tax-advantaged
account, you are required to pay taxes on dividends and distributions whether
you receive them in cash or in the form of additional shares.
Distributions paid out of the Fund's "net capital gain" will be taxed to
you as long-term capital gain, regardless of how long you have owned shares. All
other distributions will be taxed to you as ordinary income.
You may want to avoid buying shares when the Fund is about to declare a
dividend or distribution, because the dividend or distribution will be taxable
to you even though it may actually represent a return of your capital.
If more than half of the total asset value of the Fund is invested in
non-U.S. stock or securities, the Fund may elect to "pass through" to its
shareholders the amount of foreign taxes paid. In such case, you would be
required to include your proportionate share of such taxes in your income and
may be entitled to deduct or credit such taxes when computing your taxable
income.
If you do not provide the Fund with your correct taxpayer identification
number and any other required certifications, you may be subject to backup
withholding of 31% of your dividends, distributions or redemption proceeds.
Because every investor has an individual tax situation, and also because
the tax laws are subject to periodic changes, you should always consult your tax
professional about federal, state and local tax consequences of owning shares of
the Fund.
The Transfer
Prior to the Fund's inception, the Fund operated as a limited partnership
for which the Adviser served as general partner and investment adviser. The
Fund's predecessor partnership was not registered under and subject to the
provisions of the Investment Company Act pursuant to an exemption from
registration for entities that have fewer than 100 holders. As an unregistered
entity, the Fund's predecessor partnership was not required to comply with the
requirements of the Investment Company Act, or the diversification, distribution
and other requirements imposed by the Internal Revenue Code. On April 1, 1996,
the Fund exchanged Premier Shares for certain portfolio securities of the Fund's
predecessor partnership and distributed Premier Shares to the predecessor
partnership's limited partners who elected to participate in the transfer.
If the Fund acquired securities in the transfer that appreciated in value
from the date its predecessor partnership originally acquired them, the transfer
may have adverse tax consequences to you. If the Fund sells securities acquired
in the transfer that appreciated in value from the date its predecessor
partnership originally acquired them, you will be taxed on any resulting gain
(including any appreciation in value from the date the partnership acquired them
through the date of the transfer). As a result, you will be taxed on a
distribution that economically represents a return of your purchase price rather
than an increase in the value of your investment. Your taxable gain will be
dependent on a number of factors, and there is no assurance that any gains
existing at the time of the transfer would in fact be recognized. Moreover, any
tax liability will affect shareholders differently, depending, among other
things, on individual decisions to redeem or continue to hold shares, the
timing of such decisions and applicable tax rates.
DISTRIBUTION ARRANGEMENTS
Sales Loads
The Lipper Funds does not charge investors any sales load for purchasing,
selling or exchanging shares of the Fund (other than the short-term trading fee
discussed above). Certain investment dealers, banks and financial services firms
may charge you fees in connection with the purchase, sale or exchange of the
Fund's shares.
16
<PAGE>
Rule 12b-1 Fees
The Board of Directors has adopted a Rule 12b-1 distribution plan for the
Fund's Retail Shares and a shareholder servicing plan for the Fund's Group
Retirement Plan Shares. Participating dealers may impose additional fees.
Retail Distribution Plan
Under the Retail Distribution Plan, Retail Shareholders pay the Distributor
an annual fee of 0.25% of the value of the average daily net assets of the
Fund's Retail Shares for distributing those shares. This fee may be more or less
than the actual expenses the Distributor incurs. The Distributor may, in turn,
pay one or more participating dealers all or a portion of this fee for selling
the Fund's Retail Shares. The Retail Distribution Plan also provides that the
Adviser may pay participating dealers out of its investment advisory fees, its
past profits or any other source available to the Adviser. From time to time,
the Distributor may defer or waive for a period of time its fees under the
Retail Distribution Plan.
Group Retirement Servicing Plan
Under the Group Retirement Servicing Plan, Group Retirement Plan
Shareholders may pay one or more participating dealers and/or the Distributor an
annual fee of up to 0.25% of the value of the average daily net assets of the
Fund's Group Retirement Plan Shares for providing certain administrative
services to their customers who are beneficial owners of the Fund's Group
Retirement Plan Shares. These services are intended to supplement the services
provided by the Administrator and Transfer Agent and include:
o establishing and maintaining accounts and records relating to
customers that invest in Group Retirement Plan Shares;
o processing dividend and distribution payments from the Fund on
behalf of customers;
o arranging for bank wires;
o providing sub-accounting with respect to Group Retirement Plan
Shares beneficially owned by customers or the information
necessary for sub-accounting;
o forwarding shareholder communications from the Fund (such as
proxies, shareholder reports, annual and semi-annual financial
statements and dividend, distribution and tax notices) to
customers;
o assisting in processing purchase, exchange and redemption
requests from customers and in placing such orders with The
Lipper Funds' service contractors;
o assisting customers in changing dividend options, account
designations and addresses;
o providing customers with a service that invests the assets of
their accounts in Group Retirement Plan Shares pursuant to
specific or pre-authorized instructions;
o providing information periodically to customers showing their
positions in Group Retirement Plan Shares and integrating such
statements with those of other transactions and balances in
customers' other accounts with the participating dealer;
o responding to customer inquiries relating to the services
performed by the participating dealer or the Distributor;
o responding to customer inquiries concerning investments in Group
Retirement Plan Shares; and
o providing other similar shareholder liaison services.
17
<PAGE>
Multiple Classes
The Fund offers three classes of shares: Premier Shares, Retail Shares, and
Group Retirement Plan Shares. If you invest more than $1 million in the Fund,
you may purchase Premier Shares and will not pay any 12b-1 fees. If you are part
of a 401(k), pension or other type of retirement plan, you must purchase Group
Retirement Plan Shares and you will have to pay an annual fee of up to 0.25% of
the value of the average daily net assets of the Fund's Group Retirement Plan
Shares. All other investors may purchase Retail Shares and will have to pay the
Distributor a 12b-1 fee at an annual rate of 0.25% of the value of the average
daily net assets of the Fund's Retail Shares.
Retail and Group Retirement Plan Shareholders pay fees out of the net
assets of those classes of shares on an ongoing basis. As a result, if you
purchase those classes of shares, over time the fees will increase the cost of
your investment and may cost you more than paying other types of sales charges
that may be associated with other mutual funds.
18
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the
Fund's financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that you would have earned on an
investment in the Fund (assuming you reinvested all dividends and
distributions). PricewaterhouseCoopers LLP, the Fund's independent accountants,
audited this information, and its report and the Fund's financial statements are
included in the Fund's annual report, which is available upon request.
Premier Shares
--------------
<TABLE>
<CAPTION>
January 1, 1999 January 1, 1998 January 1, 1997 April 1, 1996*
to to to to
December 31, December 31, December 31, December 31,
1999 1998 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 14.10 $ 11.74 $ 11.25 $ 10.00
-------- -------- ------- -------
Income From Investment Operations:
Net Investment Income (Loss)(1) (0.02) (0.01) 0.05 0.04
Net Realized and Unrealized Gain on Investments 2.11 3.79 2.06 1.62
-------- -------- ------- -------
Total From Investment Operations 2.09 3.78 2.11 1.66
-------- -------- ------- -------
Less Distributions:
Net Investment Income -- -- (0.03) (0.02)
Net Realized Gain (1.16) (1.42) (1.59) (0.39)
-------- -------- ------- -------
Total Distributions (1.16) (1.42) (1.62) (0.41)
-------- -------- ------- -------
Net Asset Value, End of Period $ 15.03 $ 14.10 $ 11.74 $ 11.25
======== ======== ======= =======
Total Return 15.70% 32.29% 18.83% 16.68%(2)
======== ======== ======= =======
Ratios/Supplemental Data:
Net Assets, End of Period (000's) $150,979 $124,406 $82,787 $62,942
Ratios After Expense Waiver and/or Reimbursement:
Expenses to Average Net Assets 1.51% 1.54% 1.59% 1.60%**
Net Investment Income (Loss) to Average Net Assets (0.15)% (0.06)% 0.43% 0.53%**
Ratios Before Expense Waiver and/or Reimbursement:
Expenses to Average Net Assets N/A N/A N/A 1.78%**
Net Investment Income (Loss) to Average Net Assets N/A N/A N/A 0.35%**
Portfolio Turnover Rate 52% 61% 71% 34%
</TABLE>
- ----------
* Commencement of Fund operations.
** Annualized.
(1) Voluntarily waived fees and reimbursed expenses affected the net investment
income per share in the amount of $0.01 for the period ended December 31,
1996.
(2) Total return would have been lower had the Adviser not waived or reimbursed
certain expenses during the period ended December 31, 1996. Total return
for the period ended December 31, 1996 is not annualized.
19
<PAGE>
Retail Shares
-------------
<TABLE>
<CAPTION>
January 1, 1999 January 1, 1998 January 1, 1997 April 11, 1996*
to to to to
December 31, December 31, December 31, December 31,
1999 1998 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 14.05 $ 11.73 $ 11.25 $ 9.93
--------- --------- --------- ---------
Income From Investment Operations:
Net Investment Income (Loss)(1) (0.04) (0.03) 0.02 (0.01)
Net Realized and Unrealized Gain on Investments 2.10 3.77 2.05 1.73
--------- --------- --------- ---------
Total From Investment Operations 2.06 3.74 2.07 1.72
--------- --------- --------- ---------
Less Distributions:
Net Investment Income -- -- -- (0.01)
Net Realized Gain (1.16) (1.42) (1.59) (0.39)
--------- --------- --------- ---------
Total Distributions (1.16) (1.42) (1.59) (0.40)
--------- --------- --------- ---------
Net Asset Value, End of Period $ 14.95 $ 14.05 $ 11.73 $ 11.25
========= ========= ========= =========
Total Return 15.54% 31.96% 18.49% 17.37%(2)
========= ========= ========= =========
Ratios/Supplemental Data:
Net Assets, End of Period (000's) $ 4,295 $ 2,472 $ 1,137 $ 609
Ratios After Expense Waiver and/or Reimbursement:
Expenses to Average Net Assets 1.76% 1.79% 1.84% 1.85%**
Net Investment Income (Loss) to Average Net Assets (0.34)% (0.25)% 0.16% (0.13)%**
Ratios Before Expense Waiver and/or Reimbursement:
Expenses to Average Net Assets N/A N/A N/A 2.07%**
Net Investment Income (Loss) to Average Net Assets N/A N/A N/A (0.35)%**
Portfolio Turnover Rate 52% 61% 71% 34%
</TABLE>
- ----------
* Initial offering of shares of the Fund.
** Annualized.
(1) Voluntarily waived fees and reimbursed expenses affected the net investment
income per share in the amount of $0.2 for the period ended December 31,
1996.
(2) Total return would have been lower had the Adviser not waived or reimbursed
certain expenses during the period ended December 31, 1996. Total return
for the period ended December 31, 1996 is not annualized.
20
<PAGE>
Group Retirement Plan Shares
----------------------------
<TABLE>
<CAPTION>
January 1, 1999 January 1, 1998 January 1, 1997 April 12, 1996*
to to to to
December 31, December 31, December 31, December 31,
1999 1998 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 14.05 $ 11.72 $ 11.24 $ 9.92
--------- --------- --------- ---------
Income From Investment Operations:
Net Investment Income (Loss)(1) (0.05) (0.03) 0.03 (0.02)
Net Realized and Unrealized Gain on Investments 2.10 3.78 2.05 1.74
--------- --------- --------- ---------
Total From Investment Operations 2.05 3.75 2.08 1.72
--------- --------- --------- ---------
Less Distributions:
Net Investment Income -- -- (0.01) (0.01)
Net Realized Gain (1.16) (1.42) (1.59) (0.39)
--------- --------- --------- ---------
Total Distributions (1.16) (1.42) (1.60) (0.40)
--------- ---------- --------- ---------
Net Asset Value, End of Period $ 14.94 $ 14.05 $ 11.72 $ 11.24
========= ========= ========= ==========
Total Return 15.47% 32.08% 18.60% 17.40%(2)
========= ========= ========= ==========
Ratios/Supplemental Data:
Net Assets, End of Period (000's) $ 3,287 $ 2,318 $ 941 $ 195
Ratios After Expense Waiver and/or Reimbursement:
Expenses to Average Net Assets 1.76% 1.79% 1.84% 1.85%**
Net Investment Income (Loss) to Average Net Assets (0.41)% (0.29)% 0.34% (0.43)%**
Ratios Before Expense Waiver and/or Reimbursement:
Expenses to Average Net Assets N/A N/A N/A 2.04%**
Net Investment Income (Loss) to Average Net Assets N/A N/A N/A (0.62)%**
Portfolio Turnover Rate 52% 61% 71% 34%
</TABLE>
- ----------
* Initial offering of shares of the Fund.
** Annualized.
(1) Voluntarily waived fees and reimbursed expenses affected the net investment
income per share in the amount of $01 for the period ended December 31,
1996.
(2) Total return would have been lower had the Adviser not waived or reimbursed
certain expenses during the period ended December 31, 1996. Total return
for the period ended December 31, 1996 is not annualized.
21
<PAGE>
ADDITIONAL INFORMATION
- ---------------------------------------------
The Lipper Funds, Inc. offers three diversified
no-load portfolios: the Lipper Prime Europe
Equity Fund, the Lipper High Income Bond Fund
and the Lipper U.S. Equity Fund.
The Statement of Additional Information
contains additional information about the Fund
and is incorporated by reference into this
Prospectus. The Fund's annual and semi-annual
reports to shareholders also contain
additional information, including a discussion
of the market conditions and investment
strategies that significantly affected the
Fund's performance during its last fiscal year.
To obtain free copies of the Statement of
Additional Information, the Fund's annual or
semi-annual reports, or the Prospectuses for any
of The Lipper Funds, or to make shareholder
inquiries or request other information about the
Fund, call 1-800-LIPPER9, write the Fund's
Distributor at the address listed below, send an
electronic request to the following e-mail
address: [email protected], or visit The
Lipper Funds' Internet site at
http://www.lipper.com.
You can review and copy information about the
Fund, including the Statement of Additional
Information, at the SEC's Public Reference Room
in Washington, DC. Call 1-202-942-8090 for more
information on the operation of the SEC's Public
Reference Room. You may also obtain reports and
other information about the Fund from the EDGAR
Database on the SEC's Internet site at
http://www.sec.gov or, upon payment of a
duplicating fee, by sending an electronic request
to the following e-mail address:
[email protected]., or by writing the SEC's
Public Reference Section, Washington, DC
20549-0102.
For further information
- ---------------------------------------------
contact us at: 1-800-LIPPER9
visit our web site: www.lipper.com
e-mail us at: [email protected]
write us at: The Lipper Funds, Inc.
101 Park Avenue
New York, NY 10178
- ---------------------------------------------------------------------
| INVESTMENT ADVISER: PRIME LIPPER ASSET MANAGEMENT |
| |
| ADMINISTRATOR AND |
| TRANSFER AGENT: CHASE GLOBAL FUNDS |
| SERVICES COMPANY |
| |
| DISTRIBUTOR: LIPPER & COMPANY, L.P. |
| |
| CUSTODIAN: THE CHASE MANHATTAN BANK |
| |
| LEGAL COUNSEL: SIMPSON THACHER & BARTLETT |
| |
| INDEPENDENT ACCOUNTANTS: PRICEWATERHOUSECOOPERS LLP |
| |
| BOARD OF DIRECTORS: KENNETH LIPPER |
| ----------------------------------- |
| Chairman of the Board and President |
| The Lipper Funds, Inc. |
| Chairman of the Board and President |
| Lipper & Company |
| |
| ABRAHAM BIDERMAN |
| ----------------------------------- |
| Executive Vice President, |
| Secretary and Treasurer |
| The Lipper Funds, Inc. |
| Executive Vice President |
| Lipper & Company |
| |
| |
| STANLEY BREZENOFF |
| ----------------------------------- |
| Chief Executive Officer |
| Maimonides Medical Center |
| |
| MARTIN MALTZ |
| ----------------------------------- |
| Principal Scientist |
| Xerox Corporation |
| |
| IRWIN RUSSELL |
| ----------------------------------- |
| Attorney |
| Law Offices of Irwin E. Russell |
| Director |
| The Walt Disney Company |
| TICKER SYMBOLS: |
| |
| Premier Shares: LPEEX |
| Retail Shares: LPERX |
| Group Retirement Plan Shares: LPEGX |
| |
| |
| Investment Company Act File No. 811-9108 |
| |
| The Lipper Funds, Inc. is not affiliated with Lipper Inc. |
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<PAGE>
THE LIPPER FUNDS, INC.
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LIPPER HIGH INCOME BOND FUND
PROSPECTUS
March 31, 2000
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Page
RISK/RETURN SUMMARY..........................................................3
Fund Investment Objective.................................................3
Principal Investment Strategies of the Fund...............................3
Principal Risks of Investing in the Fund..................................3
Fees and Expenses of the Fund.............................................5
Example...................................................................6
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS......6
Investment Objective and Principal Investment Strategies..................6
Other Investments.......................................................7
Temporary Investments...................................................7
Risks.....................................................................8
General.................................................................8
Changes in Interest Rates...............................................8
High Yield Bonds .......................................................8
MANAGEMENT..................................................................10
Compensation.............................................................10
Executive Officers and Portfolio Manager.................................10
SHAREHOLDER INFORMATION.....................................................11
Pricing of Fund Shares...................................................11
Minimum Purchases, Additional Investments and Account Balances...........12
Purchasing Fund Shares...................................................12
Other Purchase Information.............................................13
Redeeming Fund Shares....................................................13
Other Redemption Information...........................................14
Exchange Privilege.......................................................15
Other Exchange Information.............................................15
Transfer of Registration.................................................16
Dividends and Distributions..............................................16
Taxation of Distributions................................................16
The Transfer.............................................................16
DISTRIBUTION ARRANGEMENTS...................................................17
Sales Loads..............................................................17
Rule 12b-1 Fees..........................................................17
Retail Distribution Plan...............................................17
Group Retirement Servicing Plan........................................18
Multiple Classes.........................................................18
FINANCIAL HIGHLIGHTS........................................................19
2
<PAGE>
RISK/RETURN SUMMARY
Fund Investment Objective
The investment objective of the Lipper High Income Bond Fund is high total
returns consistent with capital preservation.
Principal Investment Strategies of the Fund
The Fund invests primarily in a diversified portfolio of U.S. intermediate
term, high yield corporate bonds with maturities of 10 years or less rated at
the time of investment "Baa1" to "B3" by Moody's Investors Service, Inc.
("Moody's") or "BBB+" to "B-" by Standard & Poor's Corporation ("S&P"), or of
similar quality. These bonds are rated below investment grade and, under rating
agency guidelines, involve a greater risk than investment grade bonds that the
issuer will default in the timely payment of interest and principal or comply
with the other terms of the contract over a long period of time.
Lipper & Company, L.L.C., the Fund's investment adviser, focuses on high
yield bonds (commonly referred to as "junk bonds") with a target yield of
300-500 basis points above the corresponding U.S. Treasury security, and seeks
to maintain an average credit quality of "Ba3" by Moody's or "BB-" by S&P. The
Adviser invests the assets of the Fund in a broad range of issuers and
industries. The Adviser anticipates that the Fund's portfolio securities will
have an assumed dollar-weighted average maturity between five and seven years.
The Adviser actively seeks to manage credit risk and minimize interest rate risk
through credit analysis, credit diversity and emphasis on short- to
intermediate- term maturities. Depending on market and issuer-specific
conditions, the Adviser will generally sell any bonds that fall below "B3" by
Moody's or "B-" by S&P within a reasonable period of time.
The Fund is suitable for investors who seek a total return in excess of the
return typically offered by U.S. Treasury securities and who are comfortable
with the risks associated with investing in U.S. intermediate-term, high yield
corporate bonds of the credit quality in which the Fund invests.
Principal Risks of Investing in the Fund
The value of the Fund's shares will fluctuate in response to:
o changes in interest rates;
o changes in the actual and perceived creditworthiness of the
issuers of the Fund's investments;
o social, economic or political factors;
o factors affecting the industry in which a particular issuer
operates, such as competition or technological advances; and
o factors affecting an issuer directly, such as management changes,
labor relations, collapse of key suppliers or customers, or
material changes in overhead.
The Fund invests in bonds rated below investment grade. High yield bonds
involve greater risks than investment grade bonds, including greater price
volatility and a greater risk that the issuer of such bonds will default in the
timely payment of principal and interest. In addition, the Adviser may engage in
active and frequent trading to achieve the Fund's investment objective, which
may result in increased transaction costs and adverse tax consequences. As a
result, you may lose money by investing in the Fund.
3
<PAGE>
The following bar chart reflects the annual total returns for the Fund's
Premier Shares since the Fund's inception.* The information in this bar chart
provides some indication of the risks of investing in the Fund by showing the
changes in the Fund's performance from year to year. The Fund's past performance
is not necessarily an indication of how the Fund will perform in the future.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
10.64% 14.29% 0.47% 14.42% 11.01% 11.22% 3.61% 4.20%
[Bar Chart] [Bar Chart] [Bar Chart] [Bar Chart] [Bar Chart] [Bar Chart] [Bar Chart] [Bar Chart]
1992# 1993 1994 1995 1996 1997 1998 1999
</TABLE>
The highest return for a quarter was 4.54% (1st quarter of 1993) and the
lowest return for a quarter was (2.45)% (3rd quarter of 1998).
The following table provides some indication of the risks of investing in
the Fund by comparing the average annual total return of the Fund for the one
and five year periods and since inception to that of the Lehman Brothers BB
Intermediate Bond Index, an index comprised of BB-rated corporate bonds with
maturities of less than ten years, and the average total return generated by the
321 high yield mutual funds tracked by Morningstar, Inc.:
<TABLE>
<CAPTION>
Average Annual Average Annual Total
1 Year Return Five Year Return* Return Since Inception*
------------------ -------------------- --------------------------
<S> <C> <C> <C>
Lipper High Income Bond Fund
Premier Shares 4.20% 8.79% 8.71%
Retail Shares 3.84% 8.58% 8.57%
Group Retirement Plan Shares 3.84% 8.57% 8.57%
Lehman Brother BB Intermediate Bond Index** 2.20% 9.39% 9.00%
Morningstar High Yield
Bond Funds+ 4.19% 8.79% N/A
</TABLE>
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* Reflects performance of the Fund for the period April 1, 1996 through
December 31, 1999, and the performance of the Fund's predecessor
partnership for the period February 1, 1992 (date of inception) through
March 31, 1996, as applicable. On April 1, 1996, the Fund's predecessor
partnership transferred its assets to the Fund in exchange for the Fund's
Premier Shares. The investment policies, objectives, guidelines and
restrictions for the Fund are in all material respects equivalent to those
of its predecessor partnership. As a mutual fund registered under the
Investment Company Act, the Fund is subject to certain restrictions under
the Act and the Internal Revenue Code to which its predecessor partnership
was not subject. Had the Fund's predecessor partnership been registered
under the Act and subject to the provisions of the Act and the Code, its
investment performance may have been adversely affected.
# Reflects performance for the period February 1, 1992 (date of inception of
Fund's predecessor partnership) through December 31, 1992.
** Unlike the Fund's return, the total returns for the Lehman Brothers BB
Intermediate Bond Index do not include the effect of brokerage commissions,
transaction fees or other costs of investing, which would reduce returns.
Average Annual Total Return Since Inception for the Lehman Brothers BB
Intermediate Bond Index reflects average annual total return for the period
February 1, 1992 through December 31, 1999.
+ Returns for the Morningstar High Yield Bond Funds include the reinvestment
of dividends and capital gains.
4
<PAGE>
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund:
<TABLE>
<CAPTION>
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None
Redemption Fee None#
Exchange Fee None#
Annual Fund Operating Expenses (expenses that are deducted from Fund
assets)
Management Fees (before waiver)*
Premier Shares 0.75%
Retail Shares 0.75%
Group Retirement Plan Shares 0.75%
Distribution and Service (12b-1) Fees+
Premier Shares None
Retail Shares 0.25%
Group Retirement Plan Shares 0.25%
Other Expenses
Premier Shares 0.40%
Retail Shares 0.40%
Group Retirement Plan Shares 0.40%
-----
Total Annual Fund Operating Expenses (before waiver)*
Premier Shares 1.15%
Retail Shares 1.40%
Group Retirement Plan Shares 1.40%
Certain investment dealers, banks and financial services firms may charge
you direct fees in connection with purchasing or redeeming the Fund's shares.
These tables do not reflect those fees.
</TABLE>
- ----------
# The Fund imposes a 1.00% Redemption Fee and Exchange Fee on Fund shares
that are redeemed or exchanged 30 days or less from the date of purchase.
* The Adviser voluntarily waived a portion of its management fee during the
1999 fiscal year. As a result, the actual Management Fee was 0.60% for each
of the Fund's share classes and the Total Annual Fund Operating Expenses
were 1.00% for the Premier Shares and 1.25% for the Retail and Group
Retirement Plan Shares. The Adviser may discontinue this waiver at any
time.
+ You may purchase Premier Shares if you invest more than $1 million in the
Fund and you will not pay any Distribution or Service (12b-1) Fees. If you
are part of a 401(k), pension or other type of retirement plan, you must
purchase Group Retirement Plan Shares and you will have to pay an annual
Service Fee of up to 0.25% of the value of the average daily net assets of
the Fund's Group Retirement Plan Shares. All other investors may purchase
Retail Shares and will have to pay an annual Distribution Fee of 0.25% of
the value of average daily net assets of the Fund's Retail Shares.
5
<PAGE>
Example
This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:*
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Premier Shares $117 $365 $633 $1,398
Retail Shares $143 $443 $766 $1,680
Group Retirement Plan Shares $143 $443 $766 $1,680
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
Investment Objective and Principal Investment Strategies
The Fund's primary investment objective is high total return consistent
with capital preservation. The Fund invests primarily in a diversified portfolio
of U.S. intermediate-term, high yield corporate bonds with maturities of 10
years or less rated at the time of investment "Baa1" to "B3" by Moody's or
"BBB+" to "B-" by S&P, or in bonds determined by the Adviser to be of comparable
quality. The Adviser will not invest any of the Fund's assets in high yield
bonds that, at the time of investment, are rated "Caa1" or lower by Moody's or
"CCC+" or lower by S&P, or in comparable unrated bonds. Depending on market and
issuer-specific conditions, the Adviser will generally sell any bonds that fall
below "B3" by Moody's or "B-" by S&P within a reasonable period of time.
The Adviser focuses on high yield bonds (commonly referred to as "junk
bonds") with a target yield of 300-500 basis points above the corresponding U.S.
Treasury security, and seeks to maintain an average credit quality of "Ba3" by
Moody's or "BB-" by S&P by concentrating on the middle to high end of the
non-investment grade spectrum. The Adviser expects to invest the assets of the
Fund in a broad range of issuers and industries. The Adviser actively seeks to
manage credit risk and minimize interest rate risk through credit analysis,
credit diversity and emphasis on short- to intermediate-term maturities.
- ----------
* The example reflects the Fund's total operating expenses before taking into
consideration that the Adviser voluntarily waived a portion of its
management fee during the 1999 fiscal year. If you consider this voluntary
waiver, your costs for the one, three, five and ten year periods would be
$102, $318, $552 and $1,225, respectively, for the Premier Shares, and
$127, $397, $686 and $1,511, respectively, for the Retail and Group
Retirement Plan Shares.
6
<PAGE>
The Adviser considers various factors in evaluating securities for purchase
by the Fund, including:
o yield to maturity, yield to call (where appropriate), current
yield and the price of the bond relative to other bonds
of comparable quality and maturity;
o the difference, or "spread," between the yield of the bond
and the yield of a comparable U.S. Treasury security;
o the size of the issuer, the issuer's sensitivity to economic
conditions and trends and the issuer's operating history;
o the issuer's financial resources and financial condition,
including leverage and cash flow to cover interest expense and
principal repayment;
o review of the terms under which the bonds are issued and the
nature of, and coverage under, financial covenants;
o the experience and track record of the issuer's management;
o market-technical factors, including the market tone and
prevailing conditions, supply and demand and the amount of new
high yield bonds being issued; and
o underwriting factors, including size, capital and reputation of
the lead underwriter, number of additional underwriters and
their track records.
"High yield bonds" are fixed income securities rated below investment grade
that typically offer investors higher yields than other fixed income securities.
The higher yields are justified by the weaker credit profile of high yield
issuers as compared to investment grade issuers. High yield bonds include debt
obligations of all types issued by U.S. and non-U.S. corporate and governmental
issuers, including bonds, debentures and notes, and preferred stocks that have
priority over any other class of stock of the issuer as to the distribution of
assets or the payment of dividends. A high yield bond itself may be convertible
into or exchangeable for equity securities, or it may carry with it the right to
acquire equity securities evidenced by warrants attached to the bond or acquired
as part of a unit with the bond.
Debt securities differ in their interest rates and maturities, among other
factors. The Adviser's expectations as to future changes in interest rates
influence the maturity of the debt securities comprising the Fund's portfolio.
For example, if the Adviser expects interest rates to rise, the Adviser may
invest the Fund's assets more heavily in bonds with shorter maturities, enabling
the Fund to benefit from purchases of longer-term bonds after rates have risen.
Conversely, if the Adviser expects interest rates to fall, the Adviser may
invest the Fund's assets more heavily in bonds with longer maturities, in order
to take advantage of the higher rates then available. Under normal market
conditions, the Adviser anticipates that the Fund's portfolio will have an
assumed dollar-weighted average maturity between five and seven years. By
maintaining such a maturity, over the course of a year, the Adviser can reinvest
approximately 20% of the Fund's capital at current rates, minimizing potential
volatility in a changing interest rate environment.
Other Investments
The Adviser may also invest the Fund's assets in preferred stock (including
convertible preferred stock), warrants or common stock, as well as non-U.S.
dollar denominated securities.
Temporary Investments
If the Adviser believes that conditions in the securities markets would
make pursuing the Fund's basic investment strategy inconsistent with the best
interests of the Fund's shareholders, the Adviser may employ alternative
strategies, including investing a substantial portion of the Fund's assets in
cash, high quality short-term
7
<PAGE>
debt instruments, bonds rated higher than "Baa1" by Moody's or "BBB+" by S&P, or
in unrated bonds of comparable quality. The Adviser may also at any time invest
some of the Fund's assets in these instruments to meet redemptions and to cover
operating expenses. If the Adviser takes a temporary defensive position, the
Fund may not achieve its investment objective.
Risks
General
The value of the Fund's shares will fluctuate with the market value of its
portfolio positions. Factors affecting the value of the Fund's portfolio
include:
o changes in interest rates;
o changes in the actual and perceived creditworthiness of the
issuers of such bonds;
o social, economic or political factors;
o factors affecting the industry in which a particular issuer
operates, such as competition or technological advances; and
o factors affecting an issuer directly, such as management changes,
labor relations, the collapse of key suppliers or customers,
or material changes in overhead.
There is no assurance that the Fund will achieve its investment objective.
Changes in Interest Rates
The Fund's net asset value may change as general levels of interest rates
fluctuate. Generally, when interest rates decline, the value of the Fund's
investments will rise. Conversely, when interest rates rise, the value of the
Fund's investments will generally decline. These fluctuations are greater for
Fund investments with longer maturities than those with shorter maturities.
High Yield Bonds
The Adviser will invest all or substantially all of its assets in U.S.
intermediate-term, high yield corporate bonds, commonly referred to as "junk
bonds." High yield bonds are those securities rated below investment grade
(i.e., rated below "Baa" by Moody's or below "BBB" by S&P) and unrated
securities of comparable quality. These bonds involve greater risks than
investment grade bonds, including greater price volatility and a greater risk
that the issuer of such bonds will default in the timely payment of principal
and interest.
Under rating agency guidelines, bonds that are rated in the category "B"
(the lowest category in which the Fund may make an initial investment), or
comparable unrated bonds, generally lack characteristics of a desirable
investment, and there is little assurance that the issuer will pay interest and
principal or comply with other terms of the contract over any long period of
time. These factors may reduce the value of the Fund's investments and, in turn,
the value of the Fund's shares.
8
<PAGE>
The following factors may adversely affect the Fund's ability to dispose of
particular portfolio investments at their fair value:
o the secondary markets for high yield bonds are not as liquid
as the secondary markets for investment grade bonds;
o there may be relatively few market-makers for particular high
yield bonds;
o participants in the market are mostly institutional investors,
including insurance companies, banks, mutual funds and other
financial institutions;
o the secondary markets for high yield bonds may contract
under adverse market or economic conditions independent of any
specific adverse changes in the condition of a particular issuer;
and
o adverse publicity and investor perceptions about non-investment
grade bonds, whether or not based on fundamental analysis, may
tend to decrease the market value and liquidity of such
non-investment grade bonds. Less liquid secondary markets may
also affect the Adviser's ability to sell the Fund's investments
at their fair value.
The ratings of bonds by Moody's and S&P are a generally accepted
barometer of credit risk. However, you should note that the rating of an issuer
is heavily weighted by past developments and does not necessarily reflect
probable future conditions. There is frequently a lag between the time a rating
is assigned and the time it is updated. In addition, there may be varying
degrees of difference in the credit risk of bonds within each rating
category in which the Fund may invest. The Fund's ability to achieve its
investment objective may be more dependent on the Adviser's credit analysis of
issuers than would be the case if the Fund invested in higher quality
bonds.
The market values of bonds rated below investment grade and comparable
unrated bonds tend to react less to fluctuations in interest rate levels than
those of investment grade bonds. However, the market values of certain of these
bonds tend to be more sensitive to individual issuer developments and changes in
economic conditions than investment grade bonds. In addition, these bonds
generally present a higher degree of credit risk. Issuers of these bonds are
often highly leveraged and may not have more traditional methods of financing
available to them, so that their ability to service their debt obligations
during an economic downturn or during sustained periods of rising interest rates
may be impaired. The risk of loss due to default in payment of interest or
principal by such issuers is significantly greater than with investment grade
bonds because such bonds frequently are subordinated to the prior payment of
senior indebtedness.
Many fixed income securities contain call or buy-back features that permit
the issuer of the bond to call or repurchase the bond. Such bonds may present
risks based on payment expectations. If an issuer exercises such a "call option"
and redeems the bond, the Adviser may have to replace the called bond with a
lower yielding bond, resulting in a decreased rate of return for the Fund.
The Adviser may engage in active and frequent trading to achieve the Fund's
principal investment objective. Frequent trading may result in increased
transaction costs and adverse tax consequences and may detract from the Fund's
performance.
9
<PAGE>
MANAGEMENT
Lipper & Company, L.L.C., located at 101 Park Avenue, New York, NY 10178,
serves as the Fund's investment adviser.
The Adviser is an affiliate of Lipper & Company, L.P., which serves as the
Fund's distributor. Lipper & Company is a privately owned investment management
and investment banking firm founded in 1987. At December 31, 1999, Lipper &
Company and its affiliates managed assets having an aggregate market value on a
gross basis of approximately $5.5 billion on behalf of its institutional and
high net worth clients. Lipper & Company and its affiliates serve as the general
partner and/or investment adviser to several U.S. and non-U.S. investment
limited partnerships and mutual funds that offer complementary investment
strategies in intermediate-term high yield bonds, hedged convertible securities,
investment grade bonds, U.S. and European large capitalization equity securities
and merger arbitrage.
Compensation
The Fund pays the Adviser an annual fee computed daily and paid monthly at
the annual rate of 0.75% of the Fund's average daily net assets. The Adviser may
voluntarily waive for a period of time all or a portion of its management fee
with respect to the Fund. For the most recent fiscal year, the Adviser's
management fee was 0.60%.
Executive Officers and Portfolio Manager
Set forth below is a biographical description of the Executive Officers of
the Adviser and the Portfolio Manager of the Fund.
Kenneth Lipper is the Chief Executive Officer, President and Managing
Member of the Adviser, and has been Chief Executive Officer and President of
Lipper & Company, L.P. (together with its predecessor, Lipper & Company, Inc.)
since 1987. Mr. Lipper was a General Partner of Lehman Brothers Inc. from 1969
to 1975 and a General Partner and Managing Director of Salomon Brothers Inc.
from 1976 to 1982. He subsequently served as Deputy Mayor of New York City from
1983 to 1985. As a specialist in corporate finance since 1969, Mr. Lipper has
held all levels of responsibility as an adviser to corporations in mergers,
tender offers, convertible issues, asset valuations and other investment banking
transactions. He is a member of the Federal Reserve Bank of New York's
International Advisory Board, a member of the Advisory Board of The Chase
Manhattan Bank, a Senior Financial Adviser to the New York City Council and a
Director and Chairman of the Audit Committee of New Holland N.V. Mr. Lipper also
serves as a Director of the Lincoln Center for the Performing Arts and a Trustee
of the Sundance Institute. Mr. Lipper serves on the Harvard Executive Committee
on University Resources and the Visitor's Committee of the Kennedy School of
Government at Harvard University. Mr. Lipper wrote the novels "Wall Street" and
"City Hall," wrote and produced the film "City Hall" and produced the films "The
Winter Guest" and "The Last Days". He also published Penguin Lives, a series of
short biographies of famous cultural figures by celebrated authors. He graduated
from Columbia University and Harvard Law School and is a member of the New York
State Bar.
Abraham Biderman is an Executive Vice President of the Adviser and Lipper &
Company, L.P. Mr. Biderman is also Co-Manager of Lipper Convertibles, L.P., an
investment limited partnership and an affiliate of the Adviser. Mr. Biderman
joined Lipper & Company in 1990. He was the Commissioner of the New York City
Department of Housing, Preservation and Development from 1988 to 1989, and in
that capacity was responsible for the largest housing development project in the
United States at that time. He was the Commissioner of the New York City
Department of Finance from 1986 to 1988, responsible for the collection of over
$20 billion per year in tax and other revenues. Mr. Biderman also served as a
Special Advisor to former Mayor Edward I. Koch from 1985 to 1987 and was an
Assistant to then-Deputy Mayor Kenneth Lipper from 1983 to 1985.
10
<PAGE>
Edward Strafaci is an Executive Vice President and the Director of Fixed
Income Money Management for the Adviser and for Lipper & Company, L.P. Mr.
Strafaci is principally responsible for the trading operations of Lipper
Convertibles. He has co-managed Lipper Convertibles since 1989, and has been a
trader with Lipper Convertibles since its inception in 1985. Prior to joining
Lipper Convertibles, Mr. Strafaci was a trader at Dean Witter Reynolds Inc. from
1984 to 1985. Mr. Strafaci received his M.B.A. and B.S. from St. John's
University.
Steven Finkel is an Executive Vice President of the Adviser and Lipper &
Company, L.P. Mr. Finkel, a certified public accountant, is responsible for the
accounting and tax aspects of Lipper & Company and its affiliates. Prior to
joining Lipper & Company in 1987, Mr. Finkel was a tax partner with the
certified public accounting firm of Oppenheim, Appel, Dixon & Co., with whom he
was affiliated for 15 years, serving as the tax partner in charge of various
securities industry clients.
Wayne Plewniak is the Portfolio Manager for the Fund and is a Managing
Director of the Adviser and Lipper & Company, L.P. and Mr. Plewniak joined
Lipper & Company in 1991. Prior to joining Lipper & Company, he served as a
Senior Investment Analyst for Bell Atlantic Corporation from 1988 to 1991,
concentrating on private placement and high-yield investments. From 1986 to
1988, Mr. Plewniak worked for Paribas North America in its Merchant Banking
department. From 1985 to 1986, Mr. Plwniak was an Associate with Goldome
Strategic Investments, Inc. in the private equity group. Mr. Plewniak holds an
M.B.A. from Georgetown University and a B.S. in Industrial Engineering from
Rochester Institute of Technology.
SHAREHOLDER INFORMATION
Pricing of Fund Shares
The price of each share is based on the net asset value of each class. The
Fund's net asset value is the value of its assets minus its liabilities.
Expenses attributable solely to a particular class will be borne exclusively by
that class. The net asset value per share of each class of shares of the Fund is
calculated every day the New York Stock Exchange is open.
The Fund determines the net asset value per share of each class as of the
close of regular trading on the NYSE, generally 4:00 p.m., New York time, on
days the NYSE is open. The Fund computes the net asset value per share by
dividing the value of the net assets of each class by the total number of shares
of that class outstanding. In calculating the net assets of each class, the Fund
values securities traded on an exchange on the basis of the last sale price or,
in the absence of a sale, at the mean between the closing bid and asked prices,
if available. The Fund values equity securities traded on the NASDAQ National
Market System for which no sales prices are available and over-the-counter
securities on the basis of the bid prices at the close of business on each day.
If market quotations for those securities are not readily available, the Fund
values such securities at fair value. Fair value is determined in accordance
with procedures approved by the Board of Directors. The Fund values fixed income
securities on the basis of valuations provided by brokers and/or a pricing
service, quotations from dealers and prices of comparable securities. The Fund
may value short-term investments that mature within 60 days at amortized cost if
it reflects the fair value of those investments.
11
<PAGE>
Minimum Purchases, Additional Investments and Account Balances
Each of the Fund's classes has the following minimum amounts to purchase
shares initially, to make additional investments and to maintain your investment
in a particular class of shares:
<TABLE>
<CAPTION>
Minimum Minimum Minimum
Class of Shares Initial Purchase Additional Investment Account Balance
- --------------- ---------------- --------------------- ---------------
<S> <C> <C> <C>
Premier $1,000,000 $2,500 $500,000
Retail (non-I.R.A) $10,000 $2,500 $1,000
Retail (I.R.A.) $2,000 $250 $1,000
Group Retirement Plan None None None
</TABLE>
The Fund may vary or waive these minimum amounts at any time.
Purchasing Fund Shares
Shares of the Fund are sold without any sales charge. You may purchase
shares of the Fund in one of the following ways:
Method for Purchase What You Need To Do
- ------------------- -------------------
Initial Purchase by Mail Mail your account application and a check made
payable to "The Lipper Funds, Inc." to:
The Lipper Funds, Inc.
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
Initial Purchase by Wire First, call Chase Global Funds Services Company,
the Fund's Transfer Agent, at 1-800-LIPPER9 and
provide (1) your name, address, telephone number
and social security or tax I.D. number, (2) name
of the Fund and class of shares you wish to
purchase, (3) amount you are wiring, (4) name
of the bank wiring the funds, and (5) whether
or not you have an existing account. The Transfer
Agent will provide you with a reference number.
Next, instruct your bank to wire the specified
amount to The Chase Manhattan Bank, the Fund's
Custodian, as follows:
The Chase Manhattan Bank
New York, NY 10003
ABA # 0210-0002-1
DDA Acct. #910-2-753168
F/B/O The Lipper Funds, Inc.
Ref: Lipper High Income Bond Fund
Account/Reference Number ________
Account Name ____________________
Finally, mail your account application to the
Transfer Agent at the address set forth above
under "Initial Purchase by Mail."
Additional Investments Mail a check payable to "The Lipper Funds, Inc."
to the Transfer Agent at the address set forth
above under "Initial Purchase by Mail" or wire
funds using the procedures set forth above under
"Initial Purchase by Wire." You should include the
name of the account, the account number and the
name of the Fund and class of shares you wish to
purchase on the check or wire to ensure proper
crediting to your account.
12
<PAGE>
Other Purchase Information
You may also purchase shares of the Fund through participating dealers,
including banks and financial services firms that provide distribution,
administrative or shareholder services to the Fund, if you are a customer of
that participating dealer. Participating dealers may impose additional or
different conditions or other account fees on your purchase of Fund shares. Each
participating dealer is responsible for sending its customers a schedule of any
such fees and information regarding any additional or different conditions
regarding purchases and redemptions. If you are a customer of a
participating dealer, you should consult the dealer for information regarding
these fees and conditions. The Lipper Funds, the Distributor, the Adviser or any
of the Adviser's affiliates may compensate certain participating dealers.
Compensation may be different with respect to each class of shares.
The Distributor or a participating dealer must transmit your order to the
Transfer Agent within one business day after it receives your order. If the
Distributor or a participating dealer receives your order and transmits it to
the Transfer Agent prior to the close of regular trading on the NYSE, generally
4:00 p.m., New York time, on days the NYSE is open, the Fund will price your
shares at that day's net asset value. If not, the Fund will price your
shares based on the next business day's net asset value. The Distributor or a
participating dealer generally must receive payment for your shares on
settlement date, the third business day after the date on which you placed your
order. If you make payment prior to the settlement date, you may permit the
payment to be held in your brokerage account or you may designate a temporary
investment for such payment until the settlement date. The Fund may reject any
purchase order and suspend the offering of its shares for a period of time.
In the interest of economy and convenience, the Fund will not issue
certificates for shares unless you make a written request. The Fund will not
issue certificates for fractional shares under any circumstances. It is
considerably more difficult to redeem shares held in certificate form.
Redeeming Fund Shares
You may redeem shares of the Fund at any time in one of the following ways:
Method for Redemption What You Need to Do
- --------------------- -------------------
Redemption through the Call the Distributor at 1-800-LIPPER9 or your
Distributor or a Participating Dealer.
Participating Dealer
Redemption by Telephone Provided that your established the telephone
privilege when you completed your account
application, you may call the Transfer Agent at
1-800-LIPPER9 and request that the Transfer
Agent send you the redemption proceeds or wire
the funds to your account. The Transfer Agent
must employ reasonable procedures, such as a
form of personal identification, to confirm that
the instructions are genuine. If the Transfer
Agent does not follow such procedures, it may be
liable for any losses due to unauthorized or
fraudulent instructions. Neither The Lipper
Funds nor the Transfer Agent will be liable for
following telephone instructions reasonably
believed to be genuine.
Redemption by Mail Mail the Transfer Agent a letter at the address
specified under "Initial Purchase by Mail"
requesting a redemption. The letter should
include (1) name of the account, social security
or tax I.D. number, account address and account
number, (2) name of the Fund from which you
wish to redeem, (3) number of shares or
amount you wish to redeem, and (4) signature of
each owner of the account.
13
<PAGE>
Other Redemption Information
If the Fund receives your redemption request in proper form (including all
of the information set forth above) prior to the close of regular trading on the
NYSE, generally 4:00 p.m., New York time, on days the NYSE is open, it will
redeem your shares at that day's net asset value. If not, the Fund will redeem
your shares based on the next business day's net asset value. The proceeds paid
to you upon redemption may be more or less than the amount you originally
invested depending upon the net asset value of the shares being redeemed at the
time of redemption. If you hold shares in more than one class of the Fund, you
must specify in your redemption request the class of shares being redeemed. If
you do not specify which class you want redeemed, or if you own fewer shares of
a class than specified, the Transfer Agent will delay your request until it
receives further instructions from you, the Distributor or a participating
dealer.
The Fund normally transmits redemption proceeds for credit to your account
at the Distributor or a participating dealer at no charge within seven days
after it receives your redemption request. Generally, the Fund will not invest
these funds for your benefit without specific instruction, and the Distributor
will benefit from the use of temporarily uninvested funds before these funds are
credited to your account. If you pay for your shares by personal check, you will
be credited with the proceeds of a redemption of those shares only after the
check has been collected, which may take up to 15 days from the purchase date.
If you anticipate the need for more immediate access to your investment, you
should purchase shares with Federal Funds, by bank wire or with a certified or
cashier's check.
If you reduce your account to below the minimum investment balances set
forth above, the Fund may redeem your account. The Fund will give you at least
30 days in which to increase your account balance to more than the required
minimum account balance. Group Retirement Plan Shareholders are not subject to
this minimum. If the Fund redeems your shares, you may reinvest in any class of
shares of the Fund at a later date provided that you meet any eligibility
requirements with respect to investing in the Fund at that time.
The Fund imposes a 1.00% fee (short-term trading fee) on Fund shares
redeemed 30 days or less from the date of purchase. The fee is based on the
shares' net asset value at redemption and is deducted from the redemption
proceeds. The fee is paid to the Fund to offset costs associated with short-term
shareholder trading. It does not apply to shares acquired through reinvestment
of distributions. So as not to penalize long-term investors, and for purposes of
computing the short-term trading fee, any shares bought through reinvestment of
distributions will be redeemed first without charging the fee, followed by the
shares held for the longest period of time. The Fund reserves the right to waive
this redemption fee at any time in its sole discretion.
Certain participating dealers may charge you fees in connection with
redeeming your shares.
The Fund may suspend your right to redeem your shares or postpone the date
of payment for any period during which trading on the NYSE is closed (other than
customary weekend and holiday closings) or restricted. The Fund may also suspend
your right to redeem your shares or postpone the date of payment if an emergency
exists for which the Fund cannot reasonably dispose of or value its securities
or for such other periods as the Securities and Exchange Commission may permit.
If the Board of Directors determines that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment wholly
or partly in cash, the Fund may pay your redemption proceeds in whole or in part
by a distribution of readily marketable securities held by the Fund in lieu of
cash in conformity with applicable rules of the SEC. You may incur brokerage
charges on the sale of such securities.
You must provide the Transfer Agent with a "signature guarantee" if (1) you
want your redemption proceeds sent to another person, (2) you want your
redemption proceeds sent to an address other than your registered address, or
14
<PAGE>
(3) you want your shares transferred to another person. A signature guarantee
verifies your identity. You may obtain a signature guarantee from an "eligible
guarantor institution" (including banks, brokers and dealers that are members of
a clearing corporation or that maintain net capital of at least $100,000, credit
unions authorized to issue signature guarantees, national securities exchanges,
registered securities associations, clearing agencies and savings associations)
that participates in a signature guarantee program. The signature guarantee must
appear on (1) your written request for redemption, (2) a stock power that
specifies the total number of shares and class of shares to be redeemed, or (3)
all of the stock certificates you tender for redemption (if you hold your shares
in certificated form).
Exchange Privilege
You may exchange your shares of the Fund for shares of the same class of
the other funds in The Lipper Funds family, including the Lipper U.S. Equity
Fund and the Lipper Prime Europe Equity Fund, in one of the following ways:
Method for Exchange What You Need To Do
- ------------------- -------------------
Exchange by Telephone Provided that you established the telephone
privilege when you completed your account
application, you may call the Transfer Agent at
1-800-LIPPER9 and provide (1) name of the account,
social security or tax I.D. number, account
address and account number, (2) name of the Fund
and class of shares from which you wish to
exchange, (3) number of shares or amount you wish
to exchange, and (4) name of the Fund into which
you wish to exchange. The Transfer Agent must
employ reasonable procedures, such as a form of
personal identification, to confirm that the
instructions are genuine. If the Transfer Agent
does not follow such procedures, it may be liable
for any losses due to unauthorized or fraudulent
instructions. Neither The Lipper Funds nor the
Transfer Agent will be liable for following
telephone instructions reasonably believed to be
genuine.
Exchange by Mail Mail the Transfer Agent a letter at the address
set forth above under "Initial Purchase by Mail"
requesting an exchange. The letter should include
(1) name of the account, social security or tax
I.D. number, account address and account number,
(2) name of the Fund and class of shares from
which you wish to exchange, (3) number of shares
or amount you wish to exchange, (4) the name of
the Fund into which you wish to exchange.
Other Exchange Information
You may exercise the exchange privilege if the shares of the Fund into
which you wish to exchange are offered for sale in your state of residence and
the purchase meets the minimum investment and other eligibility requirements of
the Fund into which you are exchanging. To use the exchange privilege, you
should consult the Distributor or your participating dealer to determine if it
is available and whether any other conditions are imposed on its use.
If you exercise the exchange privilege, The Lipper Funds will exchange your
shares at the next determined net asset value. Except as described below, the
Lipper Funds does not currently charge any fees directly in connection with
exchanges, although it may charge shareholders a nominal fee upon at least 60
days' written notice.
The Fund imposes a 1.00% fee (short-term trading fee) on Fund shares
exchanged 30 days or less from the date of purchase. The fee is based on the
shares' net asset value at the time of the exchange and is deducted from the
amount exchanged. The fee is paid to the Fund to offset costs associated with
short-term shareholder trading. It does not apply to shares acquired through
reinvestment of distributions. So as not to penalize long-term investors, and
for purposes of
15
<PAGE>
computing the short-term trading fee, any shares bought through reinvestment of
distributions will be exchanged first without charging the fee, followed by the
shares held for the longest period of time. The Fund reserves the right to waive
this exchange fee at an time in its sole discretion.
You must obtain and should carefully review a copy of the current
prospectus of the Fund into which you wish to exchange before making any
exchange.
The Lipper Funds may limit exchanges as to amounts or frequency, and may
impose other restrictions to assure that exchanges do not disadvantage the Funds
or their shareholders. If your shares are held in a broker "street name," you
must contact your participating dealer to exchange such shares; you may not
exchange such shares by mail or telephone. The Lipper Funds may reject any
exchange request in whole or in part. The Lipper Funds may modify or terminate
the exchange privilege at any time upon notice to shareholders.
If you exchange shares of the Fund for shares of another Fund, the Internal
Revenue Service treats such an exchange as a sale of the shares. Therefore, you
may realize a taxable gain or loss upon an exchange.
Transfer of Registration
You may instruct the Transfer Agent to transfer the registration of your
shares to another person by sending the Transfer Agent a letter at the address
set forth above under "Initial Purchase by Mail." The letter should include
(1) your name and account number, (2) the name of the Fund from which you wish
to transfer your shares, (3) the number and class of shares you wish to
transfer, (4) the name of the person to whom you are transferring your shares,
(5) your signature, (6) a signature guarantee, and (7) an account application
from the person to whom you are transferring your shares.
Dividends and Distributions
Shares of the Fund begin accruing dividends on the first business day
following the day a purchase order is priced and continue to accrue dividends up
to and including the day that such shares are redeemed. The Fund will
automatically reinvest dividends and capital gains distributions on your shares
in additional shares of the same class at the net asset value of that class at
the time of reinvestment, unless you indicate on your application form that the
Fund should pay dividends and capital gains distributions on shares in cash to
your account.
The Fund will distribute substantially all of its net investment income to
shareholders annually. The Fund will distribute net capital gain, if any, with
the last dividend for the calendar year.
If you own Retail or Group Retirement Plan Shares, you will receive lower
per share dividends than Premier Shareholders because of the additional expenses
borne by Retail and Group Retirement Plan Shareholders under the Fund's Retail
Distribution Plan and Group Retirement Servicing Plan.
The Fund may pay additional distributions and dividends at other times if
necessary to avoid federal income taxes.
The Lipper Funds will send you an annual statement setting forth the amount
of any dividends and distributions made to you during each year and their
federal tax characterization.
Taxation of Distributions
Fund dividends and distributions are taxable to you as ordinary income or
capital gain. Unless your Fund shares are in an IRA or other tax-advantaged
account, you are required to pay taxes on dividends and distributions whether
you receive them in cash or in the form of additional shares.
16
<PAGE>
Distributions paid out of the Fund's "net capital gain" will be taxed to
you as long-term capital gain, regardless of how long you have owned shares. All
other distributions will be taxed to you as ordinary income.
You may want to avoid buying shares when the Fund is about to declare a
dividend or distribution, because the dividend or distribution will be taxable
to you even though it may actually represent a return of your capital.
If you do not provide the Fund with your correct taxpayer identification
number and any other required certifications, you may be subject to backup
withholding of 31% of your dividends, distributions or redemption proceeds.
Because every investor has an individual tax situation, and also because
the tax laws are subject to periodic changes, you should always consult your tax
professional about federal, state and local tax consequences of owning shares of
the Fund.
The Transfer
Prior to the Fund's inception, the Fund operated as a limited partnership
for which an affiliate of the Adviser served as general partner and investment
adviser. The Fund's predecessor partnership was not registered under and subject
to the provisions of the Investment Company Act pursuant to an exemption from
registration for entities that have fewer than 100 holders. As an unregistered
entity, the Fund's predecessor partnership was not required to comply with the
requirements of the Investment Company Act, or the diversification, distribution
and other requirements imposed by the Internal Revenue Code. On April 1, 1996,
the Fund exchanged Premier Shares for certain portfolio securities of the Fund's
predecessor partnership and distributed Premier Shares to the predecessor
partnership's limited partners who elected to participate in the transfer.
If the Fund acquired securities in the transfer that appreciated in value
from the date its predecessor partnership originally acquired them, the transfer
may have adverse tax consequences to you. If the Fund sells securities acquired
in the transfer that appreciated in value from the date its predecessor
partnership originally acquired them, you will be taxed on any resulting gain
(including any appreciation in value from the date the partnership acquired them
through the date of the transfer). As a result, you will be taxed on a
distribution that economically represents a return of your purchase price rather
than an increase in the value of your investment. Your taxable gain will be
dependent on a number of factors, and there is no assurance that any gains
existing at the time of the transfer would in fact be recognized. Moreover, any
tax liability will affect shareholders differently, depending, among other
things, on individual decisions to redeem or continue to hold shares, the timing
of such decisions and applicable tax rates.
DISTRIBUTION ARRANGEMENTS
Sales Loads
The Lipper Funds does not charge investors any sales load for purchasing,
selling or exchanging shares of the Fund (other than the short-term trading fee
discussed above). Certain investment dealers, banks and financial services firms
may charge you fees in connection with the purchase, sale or exchange of the
Fund's shares.
Rule 12b-1 Fees
The Board of Directors has adopted a Rule 12b-1 distribution plan for the
Fund's Retail Shares and a shareholder servicing plan for the Fund's Group
Retirement Plan Shares. Participating dealers may impose additional fees.
Retail Distribution Plan
Under the Retail Distribution Plan, Retail Shareholders pay the Distributor
an annual fee of 0.25% of the value of the average daily net assets of the
Fund's Retail Shares for distributing those shares. This fee may be more or less
than the actual expenses the Distributor incurs. The Distributor may, in turn,
pay one or more participating dealers all
17
<PAGE>
or a portion of this fee for selling the Fund's Retail Shares. The Retail
Distribution Plan also provides that the Adviser may pay participating dealers
out of its investment advisory fees, its past profits or any other source
available to the Adviser. From time to time, the Distributor may defer or waive
for a period of time its fees under the Retail Distribution Plan.
Group Retirement Servicing Plan
Under the Group Retirement Servicing Plan, Group Retirement Plan
Shareholders may pay one or more participating dealers and/or the Distributor an
annual fee of up to 0.25% of the value of the average daily net assets of the
Fund's Group Retirement Plan Shares for providing certain administrative
services to their customers who are beneficial owners of the Fund's Group
Retirement Plan Shares. These services are intended to supplement the services
provided by the Administrator and Transfer Agent and include:
o establishing and maintaining accounts and records relating to
customers that invest in Group Retirement Plan Shares;
o processing dividend and distribution payments from the Fund on
behalf of customers;
o arranging for bank wires;
o providing sub-accounting with respect to Group Retirement Plan
Shares beneficially owned by customers or the information
necessary for sub-accounting;
o forwarding shareholder communications from the Fund (such as
proxies, shareholder reports, annual and semi-annual financial
statements and dividend, distribution and tax notices) to
customers;
o assisting in processing purchase, exchange and redemption
requests from customers and in placing such orders with The
Lipper Funds' service contractors;
o assisting customers in changing dividend options, account
designations and addresses;
o providing customers with a service that invests the assets of
their accounts in Group Retirement Plan Shares pursuant to
specific or pre-authorized instructions;
o providing information periodically to customers showing their
positions in Group Retirement Plan Shares and integrating such
statements with those of other transactions and balances in
customers' other accounts with the participating dealer;
o responding to customer inquiries relating to the services
performed by the participating dealer or the Distributor;
o responding to customer inquiries concerning investments in Group
Retirement Plan Shares; and
o providing other similar shareholder liaison services.
Multiple Classes
The Fund offers three classes of shares: Premier Shares, Retail Shares, and
Group Retirement Plan Shares. If you invest more than $1 million in the Fund,
you may purchase Premier Shares and will not pay any 12b-1 fees. If you are part
of a 401(k), pension or other type of retirement plan, you must purchase Group
Retirement Plan Shares and you will have to pay an annual fee of up to 0.25% of
the value of the average daily net assets of the Fund's Group Retirement Plan
Shares. All other investors may purchase Retail Shares and will have to pay
the Distributor a 12b-1 fee at an annual rate of 0.25% of the value of the
average daily net assets of the Fund's Retail Shares.
Retail and Group Retirement Plan Shareholders pay fees out of the net
assets of those classes of shares on an ongoing basis. As a result, if you
purchase those classes of shares, over time the fees will increase the cost of
your investment and may cost you more than paying other types of sales charges
that may be associated with other mutual funds.
18
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the
Fund's financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that you would have earned on an
investment in the Fund (assuming you reinvested all dividends and
distributions). PricewaterhouseCoopers LLP, the Fund's independent accountants,
audited this information, and its report and the Fund's financial statements are
included in the Fund's annual report, which is available upon request.
Premier Shares
--------------
<TABLE>
<CAPTION>
January 1, 1999 to January 1, 1998 to January 1, 1997 to April 1, 1996* to
December 31, 1999 December 31, 1998 December 31, 1997 December 31, 1996
----------------- ------------------ ----------------- ------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.57 $ 10.11 $ 10.18 $ 10.00
----------- ----------- ----------- -----------
Income From Investment Operations:
Net Investment Income (1) 0.74 0.84 0.91 0.68
Net Realized and Unrealized Gain (Loss)
on Investments (0.35) (0.48) 0.19 0.21
----------- ----------- ----------- -----------
Total From Investment Operations 0.39 0.36 1.10 0.89
----------- ----------- ----------- -----------
Less Distributions:
Net Investment Income 0.74 (0.86) (0.91) (0.68)
Net Realized Gain -- (0.04) (0.26) (0.03)
----------- ----------- ----------- -----------
Total Distributions (0.74) (0.90) (1.17) (0.71)
----------- ----------- ----------- -----------
Net Asset Value, End of Period $ 9.22 $ 9.57 $ 10.11 $ 10.18
=========== =========== =========== ===========
Total Return(2) 4.20% 3.61% 11.22% 9.23%
=========== =========== =========== ===========
Ratios/Supplemental Data:
Net Assets, End of Period (000's) $ 66,163 $ 85,662 $ 85,151 $ 102,945
Ratios After Expense Waiver and/or Reimbursement:
Expenses to Average Net Assets 100% 1.00% 1.00% 1.00%**
Net Investment Income to Average Net Assets 7.72% 8.50% 8.58% 9.01%**
Ratios Before Expense Waiver and/or Reimbursement:
Expenses to Average Net Assets 1.15% 1.15% 1.16% 1.27%**
Net Investment Income to Average Net Assets 7.56% 8.35% 8.42% 8.74%**
Portfolio Turnover Rate 103% 110% 105% 74%
</TABLE>
- ----------
* Commencement of Fund operations.
** Annualized.
(1) Voluntarily waived fees and reimbursed expenses affected the net investment
income per share as follows:
Waiver/Reimbursement
Period (per share)
------ --------------------
January 1, 1999 to December 31, 1999 $0.02
January 1, 1998 to December 31, 1998 $0.01
January 1, 1997 to December 31, 1997 $0.02
April 1, 1996 to December 31, 1996 $0.02
(2) Total return would have been lower had the Adviser not waived or reimbursed
certain expenses during the 1999, 1998 and 1997 fiscal years and the period
ended December 31, 1996. Total return for the period ended December 31,
1996 is not annualized.
19
<PAGE>
Retail Shares
-------------
<TABLE>
<CAPTION>
January 1, 1999 to January 1, 1998 to January 1, 1997 to April 11, 1996* to
December 31, 1999 December 31, 1998 December 31, 1997 December 31, 1996
------------------ ----------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.57 $ 10.11 $ 10.18 $ 9.91
----------- --------- --------- ---------
Income From Investment Operations:
Net Investment Income (1) 0.73 0.82 0.84 0.62
Net Realized and Unrealized Gain (Loss)
on Investments (0.37) (0.49) 0.23 0.34
----------- --------- --------- ---------
Total From Investment Operations 0.36 0.33 1.07 0.96
----------- --------- --------- ---------
Less Distributions:
Net Investment Income 0.72 (0.83) (0.88) (0.66)
Net Realized Gain -- (0.04) (0.26) (0.03)
----------- --------- --------- ---------
Total Distributions (0.72) (0.87) (1.14) (0.69)
----------- --------- --------- ---------
Net Asset Value, End of Period $ 9.21 $ 9.57 $ 10.11 $ 10.18
=========== ========= ========= =========
Total Return(2) 3.84% 3.36% 10.97% 10.04%
=========== ========= ========= =========
Ratios/Supplemental Data:
Net Assets, End of Period (000's), $ 6,187 $ 5,950 $ 4,697 $ 845
Ratios After Expense Waiver and/or Reimbursement:
Expenses to Average Net Assets 1.25% 1.25% 1.25% 1.25%**
Net Investment Income to Average Net Assets 7.48% 8.12% 8.31% 8.95%**
Ratios Before Expense Waiver and/or Reimbursement:
Expenses to Average Net Assets 1.40% 1.40% 1.41% 1.59%**
Net Investment Income to Average Net Assets 7.32% 7.97% 8.15% 8.61%**
Portfolio Turnover Rate 103% 110% 105% 74%
</TABLE>
- ----------
* Initial offering of shares by the Fund.
** Annualized.
(1) Voluntarily waived fees and reimbursed expenses affected the net investment
income per share as follows:
Waiver/Reimbursement
Period (per share)
------ --------------------
January 1, 1999 to December 31, 1999 $0.02
January 1, 1998 to December 31, 1998 $0.01
January 1, 1997 to December 31, 1997 $0.02
April 11, 1996 to December 31, 1996 $0.02
(2) Total return would have been lower had the Adviser not waived or reimbursed
certain expenses during the 1999, 1998 and 1997 fiscal years and the period
ended December 31, 1996. Total return for the period ended through December
31, 1996 is not annualized.
20
<PAGE>
Group Retirement Plan Shares
----------------------------
<TABLE>
<CAPTION>
January 1, 1999 to January 1, 1998 to January 1, 1997 to April 12 1996* to
December 31, 1999 December 31, 1998 December 31, 1997 December 31, 1996
------------------ ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.57 $ 10.11 $ 10.18 $ 9.93
----------- --------- --------- ---------
Income From Investment Operations:
Net Investment Income (1) 0.72 0.80 0.85 0.62
Net Realized and Unrealized Gain (Loss)
on Investments (0.36) (0.47) 0.22 0.32
----------- --------- --------- ---------
Total From Investment Operations 0.36 0.33 1.07 0.94
----------- --------- --------- ---------
Less Distributions:
Net Investment Income 0.72 (0.83) (0.88) (0.66)
Net Realized Gain -- (0.04) (0.26) (0.03)
----------- --------- --------- ---------
Total Distributions (0.72) (0.87) (1.14) (0.69)
----------- --------- --------- ---------
Net Asset Value, End of Period $ 9.21 $ 9.57 $ 10.11 $ 10.18
=========== ========= ========= =========
Total Return(2) 3.84% 3.37% 10.96% 9.78%
=========== ========= ========= =========
Ratios/Supplemental Data:
Net Assets, End of Period (000's) $ 3,545 $ 4,515 $ 3,518 $ 2,198
Ratios After Expense Waiver and/or Reimbursement:
Expenses to Average Net Assets 1.25% 1.25% 1.25% 1.25%**
Net Investment Income to Average Net Assets 7.49% 8.13% 8.32% 8.91%**
Ratios Before Expense Waiver and/or Reimbursement:
Expenses to Average Net Assets 1.40% 1.40% 1.41% 1.55%**
Net Investment Income to Average Net Assets 7.33% 7.98% 8.16% 8.61%**
Portfolio Turnover Rate 103% 110% 105% 74%
</TABLE>
- ----------
* Initial offering of shares by the Fund.
** Annualized.
(1) Voluntarily waived fees and reimbursed expenses affected the net investment
income per share as follows:
Waiver/Reimbursement
Period (per share)
------ --------------------
January 1, 1999 to December 31, 1999 $0.02
January 1, 1998 to December 31, 1998 $0.01
January 1, 1997 to December 31, 1997 $0.02
April 11, 1996 to December 31, 1996 $0.02
(2) Total return would have been lower had the Adviser not waived or reimbursed
certain expenses during the 1999, 1998 and 1997 fiscal years and the period
ended December 31, 1996. Total return for the period ended December 31,
1996 is not annualized.
21
<PAGE>
<TABLE>
ADDITIONAL INFORMATION
- --------------------------------------------- ---------------------------------------------------------------------
<S> | <C> <C> |
| INVESTMENT ADVISER: LIPPER & COMPANY, L.L.C. |
The Lipper Funds, Inc. offers three | |
diversified no-load portfolios: the Lipper | ADMINISTRATOR AND |
High Income Bond Fund, the Lipper Prime | TRANSFER AGENT: CHASE GLOBAL FUNDS |
Europe Equity Fund and the Lipper U.S. | SERVICES COMPANY |
Equity Fund. | |
| DISTRIBUTOR: LIPPER & COMPANY, L.P. |
| |
The Statement of Additional Information | CUSTODIAN: THE CHASE MANHATTAN BANK |
contains additional information about | |
the Fund and is incorporated by | LEGAL COUNSEL: SIMPSON THACHER & BARTLETT |
reference into this Prospectus. The | |
Fund's annual and semi-annual reports to | INDEPENDENT ACCOUNTANTS: PRICEWATERHOUSECOOPERS LLP |
shareholders also contain additional | |
information, including a discussion of | BOARD OF DIRECTORS: KENNETH LIPPER |
the market conditions and investment | ----------------------------------- |
strategies that significantly affected | Chairman of the Board and President |
the Fund's performance during its last | The Lipper Funds, Inc. |
fiscal year. | Chairman of the Board and President |
| Lipper & Company |
| |
To obtain free copies of the Statement | |
of Additional Information, the Fund's | ABRAHAM BIDERMAN |
annual or semi-annual reports, or the | ----------------------------------- |
Prospectuses for any of The Lipper | Executive Vice President, |
Funds, or to make shareholder inquiries | Secretary and Treasurer |
or request other information about the | The Lipper Funds, Inc. |
Fund, call 1-800-LIPPER9, write the | Executive Vice President |
Fund's Distributor at the address listed | Lipper & Company |
below, send an electronic request to the | |
following e-mail address: lipper.funds | |
@lipper.com, or visit The Lipper Funds' | STANLEY BREZENOFF |
Internet site at http://www.lipper.com. | ----------------------------------- |
| Chief Executive Officer |
| Maimonides Medical Center |
You can review and copy information about | |
the Fund, including the Statement of | |
Additional Information, at the SEC's Public | MARTIN MALTZ |
Reference Room in Washington, DC. Call | ----------------------------------- |
1-202-942-8090 for more information on the | Principal Scientist |
operation of the SEC's Public Reference | Xerox Corporation |
Room. You may also obtain reports and other | |
information about the Fund from the EDGAR | |
Database on the SEC's Internet site at | IRWIN RUSSELL |
http://www.sec.gov or, upon payment of a | ----------------------------------- |
duplicating fee, by sending an electronic | Attorney |
request to the following e-mail address: | Law Offices of Irwin E. Russell |
[email protected], or by writing the SEC's | Director |
Public Reference Section, Washington, DC | The Walt Disney Company |
20549-0102. | |
| |
| TICKER SYMBOLS: |
For further information | |
- --------------------------------------------- | Premier Shares: LHIBX |
| Retail Shares: LHIRX |
contact us at: 1-800-LIPPER9 | Group Retirement Plan Shares: LHIGX |
visit our web site: www.lipper.com | |
e-mail us at: [email protected] | |
write us at: The Lipper Funds, Inc. | Investment Company Act File No. 811-9108 |
101 Park Avenue | |
New York, NY 10178 | The Lipper Funds, Inc. is not affiliated with Lipper Inc. |
| |
---------------------------------------------------------------------
</TABLE>
<PAGE>
THE LIPPER FUNDS, INC.
- --------------------------------------------------------------------------------
LIPPER U.S. EQUITY FUND
PROSPECTUS
March 31, 2000
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL ACCURACY OFFENSE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
RISK/RETURN SUMMARY..................................................................3
Fund Investment Objective.........................................................3
Principal Investment Strategies of the Fund.......................................3
Principal Risks of Investing in the Fund..........................................3
Fees and Expenses of the Fund.....................................................5
Example...........................................................................6
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS..............6
Investment Objective and Principal Investment Strategies..........................6
Other Investments...............................................................7
Temporary Investments...........................................................7
Risks.............................................................................8
MANAGEMENT...........................................................................8
Compensation......................................................................8
Executive Officers and Members of the Investment Committee........................8
SHAREHOLDER INFORMATION.............................................................10
Pricing of Fund Shares...........................................................10
Minimum Purchases, Additional Investments and Account Balances...................10
Purchasing Fund Shares...........................................................11
Other Purchase Information.....................................................12
Redeeming Fund Shares............................................................12
Other Redemption Information...................................................13
Exchange Privilege...............................................................14
Other Exchange Information.....................................................14
Transfer of Registration.........................................................14
Dividends and Distributions......................................................15
Taxation of Distributions........................................................15
DISTRIBUTION ARRANGEMENTS...........................................................16
Sales Loads......................................................................16
Rule 12b-1 Fees..................................................................16
Retail Distribution Plan.......................................................16
Group Retirement Servicing Plan................................................16
Multiple Classes.................................................................17
FINANCIAL HIGHLIGHTS................................................................18
</TABLE>
2
<PAGE>
RISK/RETURN SUMMARY
Fund Investment Objective
The investment objective of the Lipper U.S. Equity Fund is capital
common stocks.
Principal Investment Strategies of the Fund
The Fund invests primarily in large capitalization U.S. common stocks and
other equity securities.
Lipper & Company, L.L.C., the Fund's investment adviser, utilizes a value
oriented, "bottom-up" investment approach to identify U.S. common stocks and
equity securities selling at attractive prices relative to their historic
performance, strong business prospects and potential earnings growth. Through
rigorous fundamental analysis and analytical modeling, the Adviser selects
common stocks and other equity securities of well-established companies that are
selling below their inherent value.
The Fund is suitable for investors who seek long-term capital appreciation
and who want exposure to a portfolio of large capitalization U.S. common stocks
and other equity securities.
Principal Risks of Investing in the Fund
The value of the Fund's shares will fluctuate in response to (1) changes in
market and economic conditions, (2) changes in the financial conditions and
prospects of the issuers in which the Fund invests, (3) changes in the industry
in which a particular issuer operates, such as competition or technological
advance, (4) social, economic or political factors, and (5) market volatility.
In addition, the Adviser may engage in active and frequent trading to achieve
the Fund's investment objective, which may result in increased transaction costs
and adverse tax consequences. As a result, you may lose money by investing in
the Fund.
3
<PAGE>
The following bar chart reflects the annual total returns for the Fund's
Premier Shares since the Fund's inception. The information in this bar chart
provides some indication of the risks of investing in the Fund by showing the
changes in the Fund's performance from year to year. The Fund's past performance
is not necessarily an indication of how the Fund will perform in the future.
19.81% 18.96% 11.35% 10.25%
[Bar Chart] [Bar Chart] [Bar Chart] [Bar Chart]
1996 1997 1998 1999
The Fund's highest return for a quarter was 16.05%, which occurred in the
4th quarter of 1999. The Fund's lowest return for a quarter was (16.25)%, which
occurred in the 3rd quarter of 1998.
The following table provides some indication of the risks of investing in
the Fund by comparing the average annual total return of the Fund for the
periods presented to that of the Standard & Poor's 500 Index, a
market-capitalization weighted index of 500 stocks of U.S. issuers based on
market size, liquidity and industry group representation, and the average total
return generated by the 614 large capitalization value mutual funds tracked by
Morningstar, Inc.:
Average Annual Total
1 Year Return Return Since Inception*
Lipper U.S. Equity Fund ------------------ ------------------------
Premier Shares 10.25% 14.95%
Retail Shares 10.01% 14.78%
Group Retirement Plan Shares 9.96% 14.78%
S&P 500 Index** 21.07% 26.43%
Morningstar Large Cap Value Funds+ 6.59% 19.31%
- ----------
* Inception dates are January 2, 1996 for the Premier Shares and January 4,
1996 for the Retail and Group Retirement Plan Shares. Average Annual Total
Return Since Inception for the S&P 500 Index and the Morningstar, Inc.
Large Cap Value Funds reflects average annual total return for the period
January 2, 1996 through December 31, 1999.
** Unlike the Fund's return, the total returns for the S&P 500 Index do not
include the effect of brokerage commissions, transaction fees or other
costs of investing, which would reduce returns.
+ Returns for the Morningstar Large Cap Value Funds include the reinvestment
of dividends and capital gains.
4
<PAGE>
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund:
<TABLE>
<CAPTION>
<S> <C>
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None
Redemption Fee None#
Exchange Fee None#
Annual Fund Operating Expenses (expenses that are deducted from Fund
assets)
Management Fees (before waiver)*
Premier Shares 0.85%
Retail Shares 0.85%
Group Retirement Plan Shares 0.85%
Distribution and Service (12b-1) Fees+
Premier Shares None
Retail Shares 0.25%
Group Retirement Plan Shares 0.25%
Other Expenses
Premier Shares 0.66%
Retail Shares 0.66%
Group Retirement Plan Shares 0.66%
-----
Total Annual Fund Operating Expenses (before waiver)*
Premier Shares 1.51%
Retail Shares 1.76%
Group Retirement Plan Shares 1.76%
</TABLE>
Certain investment dealers, banks and financial services firms may charge
you direct fees in connection with purchasing or redeeming the Fund's shares.
These tables do not reflect those fees.
- ----------
# The Fund imposes a 1.00% Redemption Fee and Exchange Fee on Fund Shares
that are redeemed or exchanged 30 days or less from the date of purchase.
* The Adviser voluntarily waived a portion of its management fee during the
1999 fiscal year. As a result, the actual Management Fee was 0.44% for each
of the Fund's share classes and the Total Annual Fund Operating Expenses
were 1.10% for the Premier Shares and 1.35% for the Retail and Group
Retirement Plan Shares. The Adviser may discontinue this waiver at any
time.
+ You may purchase Premier Shares if you invest more than $1 million in
the Fund and you will not pay any Distribution or Service (12-1) Fees.
If you are part of a 401(K), pension or other type of retirement plan,
you must purchase Group Retirement Plan Shares and you will have to pay
an annual Service Fee of up to 0.25% of the value of the average daily net
assets of the Fund's Group Retirement Plan Shares. All other investors
may purchase Retail Shares and will have to pay an annual Distribution Fee
of 0.25% of the value of the average daily net assets of the Fund's Retail
Shares.
5
<PAGE>
Example
This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:*
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Premier Shares $154 $477 $824 $1,802
Retail Shares $179 $554 $954 $2,073
Group Retirement Plan Shares $179 $554 $954 $2,073
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
Investment Objective and Principal Investment Strategies
The Fund's investment objective is capital appreciation. The Adviser
invests the Fund's assets primarily in large capitalization U.S. common stocks
and other equity securities. The Adviser utilizes a value oriented, "bottom-up"
investment approach to identify U.S. common stocks and other equity securities
selling at attractive prices relative to their historic performance, strong
business prospects and potential earnings growth. Through rigorous fundamental
analysis and analytical modeling, the Adviser selects common stocks and other
equity securities issued by well-established companies that are selling below
their inherent value.
In managing the Fund, the Adviser attempts to structure a portfolio of
common stocks and other equity securities of issuers whose average five-year
estimated earnings per share growth rate is higher than that of the S&P 500
Index, and whose average price-to-earnings ratio is below that of the Index. The
Adviser focuses on industries and companies undergoing fundamental change that
may lead to improved profitability and accelerated earnings growth. For example,
the Adviser may target an industry undergoing deregulation. The Adviser may also
seek investment opportunities on a company-specific level, selecting a company
whose earnings outlook is less certain as a result of a merger, restructuring or
recent earnings disappointment. The Adviser also seeks common stocks and other
equity securities of corporations that are expected to generate substantial
surplus cash flows through high returns on equity or savings as a result of a
restructuring or a merger.
- ----------
* The example reflects the Fund's total operating expenses before taking into
consideration that the Adviser voluntarily waived a portion of its
management fee during the 1999 fiscal year. If you consider this voluntary
waiver, your costs for the one, three, five and ten year periods would be
$112, $350, $606 and $1,340, respectively, for the Premier Shares, and
$137, $428, $739 and $1,624, respectively, for the Retail and Group
Retirement Plan Shares.
6
<PAGE>
The Adviser may invest the Fund's assets in various forms of equity
securities other than common stocks, including preferred stocks, convertible
preferred stocks, convertible bonds, options and warrants issued by large
capitalization U.S. companies (or their affiliates) or large capitalization
non-U.S. companies (or their affiliates) whose common stock is traded in the
U.S. securities markets. The Adviser may also invest the Fund's assets in
non-U.S. dollar-denominated securities, options on indices, Standard & Poor's
Depositary Receipts (SPDRs), Diamonds, NASDAQ-100 Shares and other investments
that track broad-based U.S. market indices. SPDRs represent units in a trust
that holds a portfolio of common stocks that closely track the price,
performance and dividends of the S&P 500 Index. SPDRs also entitle holders to
receive proportionate quarterly cash distributions corresponding to the
dividends that accrue to the S&P 500 component stocks. Diamonds represent units
in an investment trust that holds the 30 component stocks comprising the Dow
Jones Industrial Average (DJIA) and are designed to track the performance of the
DJIA. Diamonds pay monthly dividends that correspond to the dividend yields of
the DJIA component stocks. NASDAQ-100 Shares represent ownership in the NASDAQ-
100 Trust, a unit investment trust that accumulates and holds a portfolio of
equity securities that comprise the NASDAQ-100 Index Shares and are designed to
track the performance and divided yield of the NASDAQ-100 Index. Both SPDRs and
Diamonds are listed on the American Stock Exchange. NASDAQ-100 Shares are listed
on the NASDAQ Stock Market.
The Adviser may seek to reduce investment risk and increase income by
employing a "Buy-Write" strategy for the Fund. The Adviser may use this strategy
for common stocks that are trading within a range that the Adviser believes
reflects their fair value. The Adviser may write a call option (e.g., sell, for
a certain price, the right to purchase shares at a particular "strike" price)
for a number of shares not to exceed the number of shares not to exceed the
number of shares of the underlying security the Adviser has purchased, thereby
generating income from the sale of the call option. This strategy is intended
both to increase the Fund's returns and to reduce some of the Fund's risk. A
"Buy-Write" strategy is generally considered more conservative than an outright
purchase of the underlying security. However, a "Buy-Write" strategy limits
potential capital gains because the Adviser may have to sell securities at the
"strike" price if the purchaser of the call option exercises its right to
purchase the securities.
Because the Adviser seeks to invest in those common stocks and other equity
securities it believes are undervalued, the Fund may not always be fully
invested. If the Adviser cannot find common stocks and other equity securities
that are undervalued, it will invest a portion of the Fund's assets in cash and
cash equivalents until such time as it finds stocks that meet its investment
criteria. If the Fund is not fully invested, it may not achieve its investment
objective.
Other Investments
The Adviser may invest the Fund's assets in American Depositary Receipts
(ADRs), Global Depositary Receipts (GDRs), European Depositary Receipts (EDRs)
and other types of depositary receipts. Depositary Receipts evidence ownership
of underlying securities issued by either a non-U.S. or a U.S. corporation that
have been deposited with a depository or custodian bank. Depositary Receipts may
be issued in connection with an offering of securities by the issuer of the
underlying securities or issued by a depository bank as a vehicle to promote
investment and trading in the underlying securities. ADRs are receipts issued by
U.S. banks or trust companies in respect of securities of non-U.S. issuers held
on deposit for use in the U.S. securities markets. GDRs, EDRs and other types of
Depositary Receipts are typically issued by a U.S. bank or trust company and
traded principally in the U.S. and other international markets.
Temporary Investments
For temporary defensive purposes, the Adviser may invest up to all of the
Fund's assets in cash and/or high quality short-term debt instruments. The
Adviser may also at any time invest some of the Fund's assets in these
instruments to meet redemptions and to cover operating expenses. If the Adviser
takes a temporary defensive position, The Fund may not achieve its investment
objective.
7
<PAGE>
Risks
The value of the Fund's shares will fluctuate with the market value of the
Fund's portfolio positions. The value of the Fund's portfolio positions may be
affected by:
o factors affecting an issuer directly, such as management changes,
labor relations, collapse of key suppliers or customers, or
material changes in overhead;
o factors affecting the industry in which a particular issuer
operates, such as competition or technological advances;
o social, economic or political factors; and
o market volatility.
The Fund's investments in non-U.S. securities, such as Depositary Receipts,
may subject the Fund to social, political, economic and currency risks not
typically associated with investing in U.S. equities.
The Adviser may engage in active and frequent trading to achieve the Fund's
principal investment objective. Frequent trading may result in increased
transaction costs and adverse tax consequences and may detract from the Fund's
performance.
MANAGEMENT
Lipper & Company, L.L.C., located at 101 Park Avenue, New York, NY 10178,
serves as the Fund's investment adviser.
The Adviser is an affiliate of Lipper & Company, L.P., which serves as the
Fund's distributor. Lipper & Company is a privately owned investment management
and investment banking firm founded in 1987. At December 31, 1999, Lipper &
Company and its affiliates managed assets having an aggregate market value on a
gross basis of approximately $5.5 billion on behalf of its institutional and
high net worth clients. Lipper & Company and its affiliates serve as the general
partner and/or investment adviser to several U.S. and non-U.S. investment
limited partnerships and mutual funds that offer complementary investment
strategies in intermediate-term high yield bonds, hedged convertible securities,
investment grade bonds, U.S. and European large capitalization equity securities
and merger arbitrage.
Compensation
The Fund pays the Adviser an annual fee computed daily and paid monthly at
the annual rate of 0.85% of the Fund's average daily net assets. The Adviser may
voluntarily waive for a period of time all or a portion of its management fee
with respect to the Fund. For the most recent fiscal year, the Adviser's
management fee was 0.44%.
Executive Officers and Members of the Investment Committee
An Investment Committee of the Adviser consisting of Kenneth Lipper,
Michael Visovsky and Max Zentman is responsible for the day-to-day management of
the Fund's portfolio. Set forth below is a biographical description of the
Executive Officers of the Adviser and the Members of the Fund's Investment
Committee.
Kenneth Lipper is the Chief Executive Officer, President and Managing
Member of the Adviser and a member of the Fund's Investment Committee. Mr.
Lipper has been Chief Executive Officer and President of Lipper & Company, L.P.
(together with its predecessor, Lipper & Company, Inc.) since 1987. Mr. Lipper
was a General Partner of Lehman Brothers Inc. from 1969 to 1975 and a General
Partner and Managing Director of Salomon Brothers Inc. from 1976 to 1982. He
subsequently served as Deputy Mayor of New York City from 1983 to 1985. As a
specialist in corporate finance since 1969, Mr. Lipper has held all levels of
responsibility as an adviser to corporations in mergers, tender offers,
convertible issues, asset valuations and other investment banking transactions.
He is a member of the Federal
8
<PAGE>
Reserve Bank of New York's International Advisory Board, a member of the
Advisory Board of The Chase Manhattan Bank, a Senior Financial Adviser to the
New York City Council and a Director and Chairman of the Audit Committee of New
Holland N.V. Mr. Lipper also serves as a Director of the Lincoln Center for the
Performing Arts and a Trustee of the Sundance Institute. Mr. Lipper serves on
the Harvard Executive Committee on University Resources and the Visitor's
Committee of the Kennedy School of Government at Harvard University. Mr. Lipper
wrote the novels Wall Street and City Hall, wrote and produced the film City
Hall and produced the films The Winter Guest and The Last Days. He also
published Penguin Lives, a series of short biographies of famous cultural
figures by celebrated authors. He graduated from Columbia University and Harvard
Law School and is a member of the New York State Bar.
Abraham Biderman is an Executive Vice President of the Adviser and Lipper &
Company, L.P. Mr. Biderman is also Co-Manager of Lipper Convertibles, L.P., an
investment limited partnership and an affiliate of the Adviser. Mr. Biderman
joined Lipper & Company in 1990. He was the Commissioner of the New York City
Department of Housing, Preservation and Development from 1988 to 1989, and in
that capacity was responsible for the largest housing development project in the
United States at that time. He was the Commissioner of the New York City
Department of Finance from 1986 to 1988, responsible for the collection of over
$20 billion per year in tax and other revenues. Mr. Biderman also served as a
Special Advisor to former Mayor Edward I. Koch from 1985 to 1987 and was an
Assistant to then-Deputy Mayor Kenneth Lipper from 1983 to 1985.
Edward Strafaci is an Executive Vice President and the Director of Fixed
Income Money Management for the Adviser and for Lipper & Company, L.P. Mr.
Strafaci is principally responsible for the trading operations of Lipper
Convertibles. He has co-managed Lipper Convertibles since 1989, and has been a
trader with Lipper Convertibles since its inception in 1985. Prior to joining
Lipper Convertibles, Mr. Strafaci was a trader at Dean Witter Reynolds Inc. from
1984 to 1985. Mr. Strafaci received his M.B.A. and B.S. from St. John's
University.
Steven Finkel is an Executive Vice President of the Adviser and Lipper &
Company, L.P. Mr. Finkel, a certified public accountant, is responsible for the
accounting and tax aspects of Lipper & Company and its affiliates. Prior to
joining Lipper & Company in 1987, Mr. Finkel was a tax partner with the
certified public accounting firm of Oppenheim, Appel, Dixon & Co., with whom he
was affiliated for 15 years, serving as the tax partner in charge of various
securities industry clients.
Michael Visovsky is a member of the Fund's Investment Committee and is a
Managing Director and the Director of Research for the Adviser and Lipper &
Company, L.P. Mr. Visovsky is responsible for all of Lipper & Company's research
operations, and has been responsible for research for Lipper Convertibles since
its inception in 1985. Previously, Mr. Visovsky was a research analyst at Dean
Witter Reynolds Inc. He received a law degree from Brooklyn Law School and is a
member of the New York State Bar. Mr. Visovsky received his M.B.A. from New York
University and his B.B.A. from Baruch College (CUNY).
Max Zentman is a member of the Fund's Investment Committee and is a Vice
President of the Adviser and Lipper & Company, L.P. Prior to joining Lipper &
Company Mr. Zentman served as Portfolio Manager at Bethlehem Steel Pension,
Trust and Senior Equity Research Analyst, Woodbridge Capital Management Division
of Comerica Bank. Mr. Zentman also served as Investment Officer and Research
Analyst at Marine National Exchange Bank and Investment Analyst at Manufacturers
National Bank. Mr. Zentman graduated with a B.S. in Finance and an M.A. in
Economics from Wayne State University.
9
<PAGE>
SHAREHOLDER INFORMATION
Pricing of Fund Shares
The price of each share is based on the net asset value of each class. The
Fund's net asset value is the value of its assets minus its liabilities.
Expenses attributable solely to a particular class will be borne exclusively by
that class. The net asset value per share of each class of shares of the Fund is
calculated every day the New York Stock Exchange is open.
The Fund determines the net asset value per share of each class as of the
close of regular trading on the NYSE, generally 4:00 p.m. New York time, on days
the NYSE is open. The Fund computes the net asset value per share by dividing
the value of the net assets of each class by the total number of shares of that
class outstanding. In calculating the net assets of each class, the Fund values
securities traded on an exchange on the basis of the last sale price or, in the
absence of a sale, at the mean between the closing bid and asked prices, if
available. The Fund values equity securities traded on the NASDAQ National
Market System for which no sales prices are available and over-the-counter
securities on the basis of the bid prices at the close of business on each day.
If market quotations for those securities are not readily available, the Fund
values such securities at fair value. Fair value is determined in accordance
with procedures approved by the Board of Directors. The Fund values fixed income
securities on the basis of valuations provided by brokers and/or a pricing
service, quotations from dealers and prices of comparable securities. The Fund
may value short-term investments that mature within 60 days at amortized cost if
it reflects the fair value of those investments.
Minimum Purchases, Additional Investments and Account Balances
Each of the Fund's classes has the following minimum amounts to purchase
shares initially, to make additional investments and to maintain your investment
in a particular class of shares:
<TABLE>
<CAPTION>
Minimum Minimum Minimum
Class of Shares Initial Purchase Additional Investment Account Balance
- --------------- ---------------- --------------------- ---------------
<S> <C> <C> <C>
Premier $1,000,000 $2,500 $500,000
Retail (non-I.R.A) $10,000 $2,500 $1,000
Retail (I.R.A.) $2,000 $250 $1,000
Group Retirement Plan None None None
</TABLE>
The Fund may vary or waive these minimum amounts at any time.
10
<PAGE>
Purchasing Fund Shares
Shares of the Fund are sold without any sales charge. You may purchase
shares of the Fund in one of the following ways:
Method for Purchase What You Need To Do
- ------------------- -------------------
Initial Purchase by Mail Mail your account application and a check made
payable to "The Lipper Funds, Inc." to:
The Lipper Funds, Inc.
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
Initial Purchase by Wire First, call Chase Global Funds Services Company,
the Fund's Transfer Agent, at 1-800-LIPPER9 and
provide (1) your name, address, telephone number
and social security or tax I.D. number, (2) name
of the Fund and class of shares you wish to
purchase, (3) amount you are wiring, (4) name
of the bank wiring the funds, and (5) whether
or not you have an existing account. The Transfer
Agent will provide you with a reference number.
Next, instruct your bank to wire the specified
amount to The Chase Manhattan Bank, the Fund's
Custodian, as follows:
The Chase Manhattan Bank
New York, NY 10003
ABA # 0210-0002-1
DDA Acct. #910-2-753168
F/B/O The Lipper Funds, Inc.
Ref: Lipper U.S. Equity Fund
Account/Reference Number __________
Account Name ______________________
Finally, mail your account application to the
Transfer Agent at the address set forth above
under "Initial Purchase by Mail."
Additional Investments Mail a check payable to "The Lipper Funds, Inc."
to the Transfer Agent at the address set forth
above under "Initial Purchase by Mail" or wire
funds using the procedures set forth above under
"Initial Purchase by Wire." You should include the
name of the account, account number and the name
of the Fund and class of shares you wish to
purchase on the check or wire to ensure proper
crediting to your account.
11
<PAGE>
Other Purchase Information
You may also purchase shares of the Fund through participating dealers,
including banks and financial services firms that provide distribution,
administrative or shareholder services to the Fund, if you are a customer of
that participating dealer. Participating dealers may impose additional or
different conditions or other account fees on your purchase of Fund shares. Each
participating dealer is responsible for sending its customers a schedule of any
such fees and information regarding any additional or different conditions
regarding purchases and redemptions. If you are a customer of a participating
dealer, you should consult the dealer for information regarding these fees and
conditions. The Lipper Funds, the Distributor, the Adviser or any of the
Adviser's affiliates may compensate certain participating dealers. Compensation
may be different with respect to each class of shares.
The Distributor or a participating dealer must transmit your order to the
Transfer Agent within one business day after it receives your order. If the
Distributor or a participating dealer receives your order and transmits it to
the Transfer Agent prior to the close of regular trading on the NYSE, generally
4:00 p.m., New York time, on days the NYSE is open, the Fund will price your
shares at that day's net asset value. If not, the Fund will price your
shares based on the next business day's net asset value. The Distributor or a
participating dealer generally must receive payment for your shares on
settlement date, the third business day after the date on which you placed your
order. If you make payment prior to the settlement date, you may permit the
payment to be held in your brokerage account or you may designate a temporary
investment for such payment until the settlement date. The Fund may reject any
purchase order and suspend the offering of its shares for a period of time.
In the interest of economy and convenience, the Fund will not issue
certificates for shares unless you make a written request. The Fund will not
issue certificates for fractional shares under any circumstances. It is
considerably more difficult to redeem shares held in certificate form.
Redeeming Fund Shares
You may redeem shares of the Fund at any time in one of the following ways:
Method for Redemption What You Need to Do
- --------------------- -------------------
Redemption through the Call the Distributor at 1-800-LIPPER9 or
Distributor or a your Participating Dealer.
Participating Dealer
Redemption by Telephone Provided that you established the telephone
privilege when you completed your account
application, you may call the Transfer Agent at
1-800-LIPPER9 and request that the Transfer Agent
send you the redemption proceeds or wire the funds
to your account. The Transfer Agent must employ
reasonable procedures, such as a form of personal
identification, to confirm that the instructions
are genuine. If the Transfer Agent does not follow
such procedures, it may be liable for any losses
due to unauthorized or fraudulent instructions.
Neither The Lipper Funds nor the Transfer Agent
will be liable for following telephone
instructions reasonably believed to be genuine.
Redemption by Mail Mail the Transfer Agent a letter at the address
specified under "Initial Purchase by Mail"
requesting a redemption. The letter should include
(1) name of the account, social security or tax
I.D. number, account address and account number,
(2) name of the Fund from which you wish to
redeem, (3) number of shares or amount you wish
to redeem, and (4) signature of each owner of
the account.
12
<PAGE>
Other Redemption Information
If the Fund receives your redemption request in proper form (including all
of the information set forth above) prior to the close of regular trading on the
NYSE, generally 4:00 p.m., New York time, on days the NYSE is open, the Fund
will redeem your shares at that day's net asset value. If not, the Fund will
redeem your shares based on the next business day's net asset value. The
proceeds paid to you upon redemption may be more or less than the amount you
originally invested depending upon the net asset value of the shares being
redeemed at the time of redemption. If you hold shares in more than one class of
the Fund, you must specify in your redemption request the class of shares being
redeemed. If you do not specify which class you want redeemed, or if you own
fewer shares of a class than specified, the Transfer Agent will delay your
request until it receives further instructions from you, the Distributor or a
participating dealer.
The Fund normally transmits redemption proceeds for credit to your account
at the Distributor or a participating dealer at no charge within seven days
after it receives your redemption request. Generally, the Fund will not invest
these funds for your benefit without specific instruction, and the Distributor
will benefit from the use of temporarily uninvested funds before these funds are
credited to your account. If you pay for your shares by personal check, you will
be credited with the proceeds of a redemption of those shares only after the
check has been collected, which may take up to 15 days from the purchase date.
If you anticipate the need for more immediate access to your investment, you
should purchase shares with Federal Funds, by bank wire or with a certified or
cashier's check.
If you reduce your account to below the minimum investment balances set
forth above, the Fund may redeem your account. The Fund will give you at least
30 days in which to increase your account balance to more than the required
minimum account balance. Group Retirement Plan Shareholders are not subject to
this minimum. If the Fund redeems your shares, you may reinvest in any class of
shares of the Fund at a later date provided that you meet any eligibility
requirements with respect to investing in the Fund at that time.
The Fund imposes a 1.00% fee (short-term trading fee) on Fund shares
redeemed 30 days or less from the date of purchase. The fee is based on the
shares' net asset value at redemption and is deducted from the redemption
proceeds. The fee is paid to the Fund to offset costs associated with short-term
shareholder trading. It does not apply to shares acquired through reinvestment
of distributions. So as not to penalize long-term investors, and for purposes of
computing the short-term trading fee, any shares bought through reinvestment of
distributions will be redeemed first without charging the fee, followed by the
shares held for the longest period of time. The Fund reserves the right to waive
this redemption fee at any time in its sole discretion.
Certain participating dealers may charge you fees in connection with
redeeming your shares.
The Fund may suspend your right to redeem your shares or postpone the date
of payment for any period during which trading on the NYSE is closed (other than
customary weekend and holiday closings) or restricted. The Fund may also suspend
your right to redeem your shares or postpone the date of payment if an emergency
exists for which the Fund cannot reasonably dispose of or value its securities
or for such other periods as the Securities and Exchange Commission may permit.
If the Board of Directors determines that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment wholly
or partly in cash, the Fund may pay your redemption proceeds in whole or in part
by a distribution of readily marketable securities held by the Fund in lieu of
cash in conformity with applicable rules of the SEC. You may incur brokerage
charges on the sale of such securities.
You must provide the Transfer Agent with a "signature guarantee" if (1) you
want your redemption proceeds sent to another person, (2) you want your
redemption proceeds sent to an address other than your registered address, or
(3) you want your shares transferred to another person. A signature guarantee
verifies your identity. You may obtain a
13
<PAGE>
signature guarantee from an "eligible guarantor institution" (including banks,
brokers and dealers that are members of a clearing corporation or that maintain
net capital of at least $100,000, credit unions authorized to issue signature
guarantees, national securities exchanges, registered securities associations,
clearing agencies and savings associations) that participates in a signature
guarantee program. The signature guarantee must appear on (1) your written
request for redemption, (2) a stock power that specifies the total number of
shares and class of shares to be redeemed, or (3) all of the stock certificates
you tender for redemption (if you hold your shares in certificated form).
Exchange Privilege
You may exchange your shares of the Fund for shares of the same class of
the other funds in The Lipper Funds family, including the Lipper High Income
Bond Fund and the Lipper Prime Europe Equity Fund, in one of the following ways:
Method for Exchange What You Need To Do
Exchange by Telephone Provided that you established the telephone
privilege when you completed your account
application, you may call the Transfer Agent at
1-800-LIPPER9 and provide (1) name of the account,
social security or tax I.D. number, account
address and account number, (2) name of the Fund
and class of shares from which you wish to
exchange, (3) number of shares or amount you wish
to exchange, and (4) name of the Fund into which
you wish to exchange. The Transfer Agent must
employ reasonable procedures, such as a form of
personal identification, to confirm that the
instructions are genuine. If the Transfer Agent
does not follow such procedures, it may be liable
for any losses due to unauthorized or fraudulent
instructions. Neither The Lipper Funds nor the
Transfer Agent will be liable for following
telephone instructions reasonably believed to be
genuine.
Exchange by Mail Mail the Transfer Agent a letter at the address
set forth under "Initial Purchase by Mail"
requesting an exchange. The letter should include
(1) name of the account, social security or tax
I.D. number, account address and account number,
(2) name of the Fund and class of share from
which you wish to exchange, (3) number of shares
or amount you wish to exchange, and (4) name
of the Fund into which you wish to exchange.
Other Exchange Information
You may exercise the exchange privilege if the shares of the Fund into
which you wish to exchange are offered for sale in your state of residence and
the purchase meets the minimum investment and other eligibility requirements of
the Fund into which you are exchanging. To use the exchange privilege, you
should consult the Distributor or your participating dealer to determine if it
is available and whether any other conditions are imposed on its use.
If you exercise the exchange privilege, The Lipper Funds will exchange your
shares at the next determined net asset value. Except as described below, The
Lipper Funds does not currently charge any fees directly in connection with
exchanges, although it may charge shareholders a nominal fee upon at least 60
days' written notice.
The Fund imposes 1.00% fee (short-term trading fee) on Fund shares
exchanged 30 days or less from the date of purchase. The fee is based on the
shares' net asset value at the time of the exchange and is deducted from the
amount exchanged. The fee is paid to the Fund to offset costs associated with
short-term shareholder trading. It does not apply to shares acquired through
reinvestment of distributions. So as not to penalize long-term investors, and
for purposes of computing the short-term trading fee, any shares bought through
reinvestment of distributions will be exchanged first without charging the fee,
followed by the shares held for the longest period of time. The Fund reserves
the right to waive this exchange fee at any time in its sole discretion.
14
<PAGE>
You must obtain and should carefully review a copy of the current
prospectus of the Fund into which you wish to exchange before making any
exchange.
The Lipper Funds may limit exchanges as to amounts or frequency, and may
impose other restrictions to assure that exchanges do not disadvantage the Funds
or their shareholders. If your shares are held in a broker "street name," you
must contact your participating dealer to exchange such shares; you may not
exchange such shares by mail or telephone. The Lipper Funds may reject any
exchange request in whole or in part. The Lipper Funds may modify or terminate
the exchange privilege at any time upon notice to shareholders.
If you exchange shares of the Fund for shares of another Fund, the Internal
Revenue Service treats such an exchange as a sale of the shares. Therefore, you
may realize a taxable gain or loss upon an exchange.
Transfer of Registration
You may instruct the Transfer Agent to transfer the registration of your
shares to another person by sending the Transfer Agent a letter at the address
set forth above under "Initial Purchase by Mail." The letter should include
(1) your name and account number, (2) the name of the Fund from which you wish
to transfer your shares, (3) the number and class of shares you wish to
transfer, (4) the name of the person to whom you are transferring your shares,
(5) your signature, (6) a signature guarantee, and (7) an account application
from the person to whom you are transferring your shares.
Dividends and Distributions
Shares of the Fund begin accruing dividends on the first business day
following the day a purchase order is priced and continue to accrue dividends up
to and including the day that such shares are redeemed. The Fund will
automatically reinvest dividends and capital gains distributions on your shares
in additional shares of the same class at the net asset value of that class at
the time of reinvestment, unless you indicate on your application form that the
Fund should pay dividends and capital gains distributions on shares in cash to
your account.
The Fund will distribute substantially all of its net investment income to
shareholders annually. The Fund will distribute net capital gain, if any, with
the last dividend for the calendar year.
If you own Retail or Group Retirement Plan Shares, you will receive lower
per share dividends than Premier Shareholders because of the additional expenses
borne by Retail and Group Retirement Plan Shareholders under the Fund's Retail
Distribution Plan and Group Retirement Servicing Plan.
The Fund may pay additional distributions and dividends at other times if
necessary to avoid federal income taxes.
The Lipper Funds will send you an annual statement setting forth the amount
of any dividends and distributions made to you during each year and their
federal tax characterization.
Taxation of Distributions
Fund dividends and distributions are taxable to you as ordinary income or
capital gain. Unless your Fund shares are in an IRA or other tax-advantaged
account, you are required to pay taxes on dividends and distributions whether
you receive them in cash or in the form of additional shares.
Distributions paid out of the Fund's "net capital gain" will be taxed to
you as long-term capital gain, regardless of how long you have owned shares. All
other distributions will be taxed to you as ordinary income.
You may want to avoid buying shares when the Fund is about to declare a
dividend or distribution, because the dividend or distribution will be
taxable to you even though it may actually represent a return of your capital.
15
<PAGE>
If you are a corporation, a significant portion of your ordinary income
dividends may be eligible for the dividends-received deduction.
If you do not provide the Fund with your correct taxpayer identification
number and any other required certifications, you may be subject to backup
withholding of 31% of your dividends, distributions or redemption proceeds.
Because every investor has an individual tax situation, and also because
the tax laws are subject to periodic changes, you should always consult your tax
professional about federal, state and local tax consequences of owning shares of
the Fund.
DISTRIBUTION ARRANGEMENTS
Sales Loads
The Lipper Funds does not charge investors any sales load for purchasing,
selling or exchanging shares of the Fund (other than the short-term trading fee
discussed above). Certain investment dealers, banks and financial services firms
may charge you fees in connection with the purchase, sale or exchange of the
Fund's shares.
Rule 12b-1 Fees
The Board of Directors has adopted a Rule 12b-1 distribution plan for the
Fund's Retail Shares and a shareholder servicing plan for the Fund's Group
Retirement Plan Shares. Participating dealers may impose additional fees.
Retail Distribution Plan
Under the Retail Distribution Plan, Retail Shareholders pay the Distributor
an annual fee of 0.25% of the value of the average daily net assets of the
Fund's Retail Shares for distributing those shares. This fee may be more or less
than the actual expenses the Distributor incurs. The Distributor may, in turn,
pay one or more participating dealers all or a portion of this fee for selling
the Fund's Retail Shares. The Retail Distribution Plan also provides that the
Adviser may pay participating dealers out of its investment advisory fees, its
past profits or any other source available to the Adviser. From time to time,
the Distributor may defer or waive for a period of time its fees under the
Retail Distribution Plan.
Group Retirement Servicing Plan
Under the Group Retirement Servicing Plan, Group Retirement Plan
Shareholders may pay one or more participating dealers and/or the Distributor an
annual fee of up to 0.25% of the value of the average daily net assets of the
Fund's Group Retirement Plan Shares for providing certain administrative
services to their customers who are beneficial owners of the Fund's Group
Retirement Plan Shares. These services are intended to supplement the services
provided by the Administrator and Transfer Agent and include:
o establishing and maintaining accounts and records relating to
customers that invest in Group Retirement Plan Shares;
o processing dividend and distribution payments from the Fund on
behalf of customers;
o arranging for bank wires;
o providing sub-accounting with respect to Group Retirement Plan
Shares beneficially owned by customers or the information
necessary for sub-accounting;
o forwarding shareholder communications from the Fund (such as
proxies, shareholder reports, annual and semi-annual financial
statements and dividend, distribution and tax notices) to
customers;
o assisting in processing purchase, exchange and redemption
requests from customers and in placing such orders with The
Lipper Funds' service contractors;
o assisting customers in changing dividend options, account
designations and addresses;
16
<PAGE>
o providing customers with a service that invests the assets of
their accounts in Group Retirement Plan Shares pursuant to
specific or pre-authorized instructions;
o providing information periodically to customers showing their
positions in Group Retirement Plan Shares and integrating such
statements with those of other transactions and balances in
customers' other accounts with the participating dealer;
o responding to customer inquiries relating to the services
performed by the participating dealer or the Distributor;
o responding to customer inquiries concerning investments in Group
Retirement Plan Shares; and
o providing other similar shareholder liaison services.
Multiple Classes
The Fund offers three classes of shares: Premier Shares, Retail Shares, and
Group Retirement Plan Shares. If you invest more than $1 million in the Fund,
you may purchase Premier Shares and will not pay any 12b-1 fees. If you are part
of a 401(k), pension or other type of retirement plan, you must purchase Group
Retirement Plan Shares and you will have to pay an annual fee of up to 0.25% of
the value of the average daily net assets of the Fund's Group Retirement Plan
Shares. All other investors may purchase Retail Shares and will have to pay the
Distributor a 12b-1 fee at an annual rate of 0.25% of the value of the average
daily net assets of the Fund's Retail Shares.
Retail and Group Retirement Plan Shareholders pay fees out of the net
assets of those classes of shares on an ongoing basis. As a result, if you
purchase those classes of shares, over time the fees will increase the cost of
your investment and may cost you more than paying other types of sales charges
that may be associated with other mutual funds.
17
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the
Fund's financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that you would have earned on an
investment in the Fund (assuming you reinvested all dividends and
distributions). PricewaterhouseCoopers LLP, the Fund's independent accountants,
audited this information, and its report and the Fund's financial statements are
included in the Fund's annual report, which is available upon request.
Premier Shares
--------------
<TABLE>
<CAPTION>
January 1, 1999 to January 1, 1998 to January 1, 1997 to January 2, 1996*
December 31, 1999 December 31, 1998 December 31, 1997 to December 31, 1996
------------------ ------------------ ------------------ --------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 12.62 $ 12.04 $ 11.38 $ 10.00
---------- ---------- ---------- ----------
Income From Investment Operations:
Net Investment Income (Loss)(1) (0.03) 0.13 0.16 0.18
Net Realized and Unrealized Gain
on Investments 1.25 1.26 1.96 1.81
---------- ---------- ---------- ----------
Total From Investment Operations 1.22 1.39 2.12 1.99
---------- ---------- ---------- ----------
Less Distributions:
Net Investment Income -- (0.14) (0.16) (0.19)
Net Realized Gain (1.14) (0.67) (1.30) (0.34)
In Excess of Net Realized Gain -- -- -- (0.08)
---------- ---------- ---------- ----------
Total Distributions (1.14) (0.81) (1.46) (0.61)
---------- ---------- ---------- ----------
Net Asset Value, End of Period $ 12.70 $ 12.62 $ 12.04 $ 11.38
========== ========== ========== ==========
Total Return(2) 10.25% 11.35% 18.96% 19.81%
========== ========== ========== ==========
Ratios/Supplemental Data:
Net Assets, End of Period (000's) $ 19,426 $ 22,088 $ 14,203 $ 15,098
Ratios After Expense Waiver and/or
Reimbursement:
Expenses to Average Net Assets 1.10% 1.10% 1.10% 1.10%**
Net Investment Income (Loss)
to Average Net Assets (0.22)% 1.07% 1.24% 1.68%**
Ratios Before Expense Waiver and/or
Reimbursement:
Expenses to Average Net Assets 1.51% 1.51% 1.76% 2.28%**
Net Investment Income (Loss)
to Average Net Assets (0.63)% 0.66% 0.58% 0.50%**
Portfolio Turnover Rate 123% 204% 145% 117%
</TABLE>
- ----------
* Commencement of Fund operations.
** Annualized.
(1) Voluntarily waived fees and reimbursed expenses affected the net investment
income per share as follows:
Waiver/Reimbursement
Period (per share)
------ --------------------
January 1, 1999 to December 31, 1999 $0.06
January 1, 1998 to December 31, 1998 $0.05
January 1, 1997 to December 31, 1997 $0.08
January 2, 1996 to December 31, 1996 $0.13
(2) Total return would have been lower had the Adviser not waived or reimbursed
certain expenses during the 1999, 1998 and 1997 fiscal years and the period
ended December 31, 1996. Total return for the period ended December 31,
1996 is not annualized.
18
<PAGE>
Retail Shares
-------------
<TABLE>
<CAPTION>
January 1, 1999 to January 1, 1998 to January 1, 1997 to January 4, 1996* to
December 31, 1999 December 31, 1998 December 31, 1997 December 31, 1996
------------------ ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 12.62 $ 12.03 $ 11.38 $ 10.00
---------- --------- --------- ---------
Income From Investment Operations:
Net Investment Income (Loss)(1) (0.14) 0.11 0.13 0.11
Net Realized and Unrealized Gain
on Investments 1.33 1.26 1.95 1.86
---------- --------- --------- ---------
Total From Investment Operations 1.19 1.37 2.08 1.97
---------- --------- --------- ---------
Less Distributions:
Net Investment Income -- (0.11) (0.13) (0.17)
Net Realized Gain (1.14) (0.67) (1.30) (0.34)
In Excess of Net Realized Gain -- -- -- (0.08)
---------- --------- --------- ---------
Total Distributions (1.14) (0.78) (1.43) (0.59)
---------- --------- --------- ---------
Net Asset Value, End of Period $ 12.67 $ 12.62 $ 12.03 $ 11.38
========== ========= ========= =========
Total Return(2) 10.01% 11.15% 18.58% 19.62%
========== ========= ========= =========
Net Assets, End of Period (000's) $ 565 $ 1,308 $ 899 $ 613
Ratios After Expense Waiver and/or
Reimbursement:
Expenses to Average Net Assets 1.35% 1.35% 1.35% 1.35%**
Net Investment Income (Loss)
to Average Net Assets (0.58)% 0.80% 0.96% 1.31%**
Ratios Before Expense Waiver and/or
Reimbursement:
Expenses to Average Net Assets 1.76% 1.76% 2.01% 2.75%**
Net Investment Income (Loss)
to Average Net Assets (1.12)% 0.39% 0.30% (0.09)%**
Portfolio Turnover Rate 123% 204% 145% 117%
</TABLE>
- ----------
* Initial offering of shares by the Fund.
** Annualized.
(1) Voluntarily waived fees and reimbursed expenses affected the net investment
income per share as follows:
Waiver/Reimbursement
Period (per share)
------ --------------------
January 1, 1999 to December 31, 1999 $0.10
January 1, 1998 to December 31, 1998 $0.06
January 1, 1997 to December 31, 1997 $0.09
January 2, 1996 to December 31, 1996 $0.13
(2) Total return would have been lower had the Adviser not waived or reimbursed
certain expenses during the 1999, 1998 and 1997 fiscal years and the period
ended December 31, 1996. Total return for the period ended December 31,
1996 is not annualized.
19
<PAGE>
Group Retirement Plan Shares
----------------------------
<TABLE>
<CAPTION>
January 1, 1999 to January 1, 1998 to January 1, 1997 to January 4, 1996* to
December 31, 1999 December 31, 1998 December 31, 1997 December 31, 1996
------------------ ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 12.59 $ 12.01 $ 11.38 $ 10.00
---------- ---------- --------- ---------
Income From Investment Operations:
Net Investment Income (Loss)(1) (0.06) 0.09 0.08 0.07
Net Realized and Unrealized Gain
on Investments 1.24 1.28 2.00 1.91
---------- --------- --------- ---------
Total From Investment Operations 1.18 1.37 2.08 1.98
---------- --------- --------- ---------
Less Distributions:
Net Investment Income -- (0.12) (0.15) (0.18)
Net Realized Gain (1.14) (0.67) (1.30) (0.34)
In Excess of Net Realized Gain -- -- -- (0.08)
---------- --------- --------- ---------
Total Distributions (1.14) (0.79) (1.45) (0.60)
---------- --------- --------- ---------
Net Asset Value, End of Period $ 12.63 $ 12.59 $ 12.01 $ 11.38
========== ========= ========= =========
Total Return(2) 9.96% 11.16% 18.55% 19.69%
========== ========= ========= =========
Ratios/Supplemental Data:
Net Assets, End of Period (000's) $ 3,737 $ 3,510 $ 1,887 $ 452
Ratios After Expense Waiver and/or
Reimbursement:
Expenses to Average Net Assets 1.35% 1.35% 1.35% 1.35%**
Net Investment Income (Loss)
to Average Net Assets (0.76)% 0.87% 0.89% 1.29%**
Ratios Before Expense Waiver and/or
Reimbursement:
Expenses to Average Net Assets 1.76% 1.76% 2.01% 2.39%**
Net Investment Income (Loss)
to Average Net Assets (1.12)% 0.46% 0.25% 0.25%**
Portfolio Turnover Rate 1.23% 204% 145% 117%
</TABLE>
- ----------
* Initial offering of shares by the Fund.
** Annualized.
(1) Voluntarily waived fees and reimbursed expenses affected the net investment
income per share as follows:
Waiver/Reimbursement
Period (per share)
------ --------------------
January 1, 1999 to December 31, 1999 $0.05
January 1, 1998 to December 31, 1998 $0.04
January 1, 1997 to December 31, 1997 $0.06
January 2, 1996 to December 31, 1996 $0.06
(2) Total return would have been lower had the Adviser not waived or reimbursed
certain expenses during the 1999, 1998 and 1997 fiscal years and the period
ended December 31, 1996. Total return for the period ended December 31,
1996 is not annualized.
20
<PAGE>
ADDITIONAL INFORMATION
- ---------------------------------------------
The Lipper Funds, Inc. offers three
diversified no-load portfolios: the Lipper
U.S. Equity Fund, the Lipper High Income Bond
Fund and the Prime Lipper Europe Equity Fund.
The Statement of Additional Information
contains additional information about the
Fund and is incorporated by reference into
this Prospectus. The Fund's annual and
semi-annual reports to shareholders also
contains additional information, including a
discussion of the market conditions and
investment strategies that significantly
affected the Fund's performance during its
last fiscal year.
To obtain free copies of the Statement of
Additional Information, the Fund's annual or
semi-annual reports, or the Prospectuses for any
of The Lipper Funds, or to make shareholder
inquiries or request other information about the
Fund, call 1-800-LIPPER9, write the Fund's
Distributor at the address listed on the front
cover of this Prospectus, sending an electronic
request to the following e-mail address:
[email protected], or visit The Lipper
Funds' Internet site at http://www.lipper.com.
You can review and copy information about the
Fund, including the Statement of Additional
Information, at the SEC's Public Reference
Room in Washington, DC. Call 1-202-942-8090
for more information. You may also obtain
reports and other information about the Fund
from the EDGAR Database on the SEC's Internet
site at http://www.sec.gov or, upon payment
of a duplicating fee, by sending an
electronic request to the following e-mail
address: [email protected], or by writing
the Public Reference Section of the SEC,
Washington, DC 20549-0102.
For further information
- ---------------------------------------------------------------------
contact us at: 1-800-LIPPER9
visit our website: www.lipper.com
e-mail us at: [email protected]
write us at: The Lipper Funds, Inc.
101 Park Avenue
New York, NY 10128
- ---------------------------------------------------------------------
| INVESTMENT ADVISER: LIPPER & COMPANY, L.L.C. |
| |
| ADMINISTRATOR AND |
| TRANSFER AGENT: CHASE GLOBAL FUNDS |
| SERVICES COMPANY |
| |
| DISTRIBUTOR: LIPPER & COMPANY, L.P. |
| |
| CUSTODIAN: THE CHASE MANHATTAN BANK |
| |
| LEGAL COUNSEL: SIMPSON THACHER & BARTLETT |
| |
| INDEPENDENT ACCOUNTANTS: PRICEWATERHOUSECOOPERS LLP |
| |
| BOARD OF DIRECTORS: KENNETH LIPPER |
| ----------------------------------- |
| Chairman of the Board and President |
| The Lipper Funds, Inc. |
| President and Chairman |
| Lipper & Company |
| |
| ABRAHAM BIDERMAN |
| ----------------------------------- |
| Executive Vice President, |
| Lipper & Company |
| |
| STANLEY BREZENOFF |
| ----------------------------------- |
| Chief Executive Officer |
| Maimonides Medical Center |
| |
| MARTIN MALTZ |
| ----------------------------------- |
| Principal Scientist |
| Xerox Corporation |
| |
| IRWIN RUSSELL |
| ----------------------------------- |
| Attorney |
| Law Offices of Irwin E. Russell |
| Director |
| The Walt Disney Company |
| TICKER SYMBOLS: |
| |
| Premier Shares: LUEPX |
| Retail Shares: LUERX |
| Group Retirement Plan Shares: LUEGX |
| |
| |
| Investment Company Act File No. 811-9108 |
| |
| The Lipper Funds, Inc. is not affiliated with Lipper Inc. |
- ---------------------------------------------------------------------
<PAGE>
THE LIPPER FUNDS, INC.
LIPPER HIGH INCOME BOND FUND
LIPPER U.S. EQUITY FUND
LIPPER PRIME EUROPE EQUITY FUND
The Lipper Funds, Inc.
101 Park Avenue
New York, New York 10178
1-800-LIPPER9
http://www.lipper.com
[email protected]
STATEMENT OF ADDITIONAL INFORMATION
March 31, 2000
The Lipper Funds, Inc. is an open-end, management investment company that
offers three diversified portfolios: the Lipper High Income Bond Fund, the
Lipper U.S. Equity Fund and the Lipper Prime Europe Equity Fund.
This Statement of Additional Information is not itself a prospectus and may
be distributed only if it is preceded or accompanied by a prospectus. You should
read this SAI in conjunction with the Funds' Prospectuses dated March 31, 2000,
and you should not make an investment in the Funds solely upon the information
contained herein. This Statement of Additional Information is incorporated by
reference in its entirety into each of the Prospectuses.
The financial statements for each of the Funds for the year ended December
31, 1999, which appear in each Fund's 1999 Annual Report to Shareholders, and
the report thereon of PricewaterhouseCoopers LLP, the Funds' independent
accountants, also appearing therein, were previously filed electronically with
the Securities and Exchange Commission and are incorporated herein by reference.
You may obtain copies of each of the Fund's Prospectuses and 1999 Annual
Reports without charge by writing or calling the Company at the address and toll
free telephone number set forth above, by accessing our Internet site at
http://www.lipper.com or by sending us an an electronic request at the following
e-mail address: [email protected].
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TABLE OF CONTENTS
Page
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The Company............................................................... 1
Investment Objectives, Strategies and Risks................................ 1
Investment Objectives and Principal Investment Strategies................ 1
Additional Investments and Investment Strategies......................... 1
Depositary Receipts..................................................... 1
Convertible Securities.................................................. 2
Warrants................................................................ 2
Illiquid and Restricted Securities...................................... 3
Preferred Stock......................................................... 4
Repurchase agreements................................................... 4
Zero Coupon securities, Pay-in-Kind Bonds and Discount Obligations...... 4
Index Securities........................................................ 5
Other Investment Funds.................................................. 5
When-Issued and Delayed Delivery Securities............................. 5
U.S. Government Obligations............................................. 6
Bank Obligations........................................................ 6
Borrowing............................................................... 6
Loans of Fund Securities................................................ 7
Short sales............................................................. 7
Hedging and Derivatives................................................. 7
General Characteristics of Options..................................... 8
Options on Securities Indices and Other Financial Indices.............. 9
Options on Currencies................................................. 10
Forward Foreign Currency Exchange Contracts........................... 10
Combined Transactions................................................. 10
Use of Segregated and Other Special Accounts.......................... 10
Investment Risks........................................................ 11
Non-U.S. Securities.................................................... 11
Derivatives............................................................ 12
Non-U.S. Derivatives................................................... 13
Temporary Defensive Position............................................ 13
Turnover................................................................ 13
Policies and Investment Limitations of the Funds.......................... 13
Management................................................................ 15
Board of Directors...................................................... 15
Directors and Officers.................................................. 15
Compensation of the Directors and Officers.............................. 17
Sales Loads............................................................. 18
Codes of Ethics......................................................... 18
Control Persons and Principal Holders of Shares of the Funds.............. 18
Control Persons......................................................... 18
Principal Holders of Shares of the Funds................................ 19
Management Ownership of Shares of the Funds............................. 22
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Page
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Investment Advisory and Other Services.................................... 23
Investment Advisers..................................................... 23
Investment Advisory Services and Compensation........................... 23
Rule 12b-1 Plans........................................................ 24
Retail Distribution.................................................... 24
Group Retirement servicing Plan........................................ 25
Administrator........................................................... 26
Custodian............................................................... 27
Transfer Agent.......................................................... 27
Distribution of the Funds................................................. 27
Distribution of Securities.............................................. 27
Compensation............................................................ 27
Other Payments.......................................................... 28
Compensation to Dealers................................................. 28
Brokerage Allocation and Other Practices.................................. 28
Brokerage Transactions.................................................. 28
Brokerage Selection..................................................... 29
Capital Stock............................................................. 30
Valuation of Shares....................................................... 31
Additional Purchase, Redemption and Exchange Information.................. 32
Purchase, Redemption and Exchange of Shares............................. 32
Suspension of the Right of Redemption................................... 32
Redemption in Kind...................................................... 32
Additional Information Concerning Taxation of the Funds................... 33
Performance Data.......................................................... 36
Average Annual Total Return............................................. 36
Aggregate Total Return.................................................. 37
Thirty Day Yield........................................................ 38
Other Information Concerning Performance Data........................... 38
Independent Accountants................................................... 40
Counsel................................................................... 40
Financial Statements...................................................... 40
Appendix: Description of Corporate Bond Ratings.......................... A-1
THE LIPPER FUNDS, INC. IS NOT AFFILIATED WITH LIPPER INC.
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THE COMPANY
The Lipper Funds, Inc. ("The Lipper Funds" or the "Company") was organized
as a corporation under the laws of the State of Maryland on August 22, 1995. The
Company is an open-end, management investment company that offers three
portfolios: the Lipper High Income Bond Fund; the Lipper Prime Europe Equity
Fund (formerly known as the "Prime Lipper Europe Equity Fund"); and the Lipper
U.S. Equity Fund (each, a "Fund" and collectively, the "Funds"). Lipper &
Company, L.L.C. serves as the investment adviser to the High Income Bond Fund
and the U.S. Equity Fund. Prime Lipper Asset Management serves as the investment
adviser to the Europe Equity Fund. Each Fund is diversified.
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
The investment objectives and principal investment strategies of each Fund
are described in the Prospectuses.
The High Income Bond Fund will invest at least 80% of its total net assets
under normal market conditions in U.S. intermediate-term, high yield corporate
bonds rated at the time of investment "Baa1" to "B3" by Moody's Investors
Service, Inc. or "BBB+" to "B-" by Standard & Poor's Corporation, or in
comparable securities. The Fund may invest up to 20% of its total assets in
preferred stock (including convertible preferred stock), warrants, convertible
securities, common stock or other equity securities. The Fund will generally
hold such equity investments as a result of purchases of unit offerings of fixed
income securities that include such securities or in connection with actual or
proposed conversion or exchange of fixed income securities. However, the Fund
may also purchase equity securities not associated with fixed income securities
when, in the opinion of the Adviser, such purchase is appropriate.
The U.S. Equity Fund will invest at least 65% of its total net assets under
normal market conditions in equity securities (including common stocks,
preferred stocks, convertible preferred stocks, convertible bonds, options and
warrants) issued by large capitalization U.S. companies (or their affiliates) or
large capitalization non-U.S. companies (or their affiliates) whose common stock
is traded in the U.S. securities markets, and securities that track broad-based
U.S. market indices.
The Europe Equity Fund will invest at least 65% of its total net assets
under normal market conditions in common stocks issued by medium and large
capitalization European companies.
ADDITIONAL INVESTMENTS AND INVESTMENT STRATEGIES
In addition to the principal investment strategies set forth in the
Prospectuses, the Funds may make investments in the securities, and engage in
the investment strategies, set forth below.
DEPOSITARY RECEIPTS
The Funds may invest in American Depositary Receipts (ADRs), Global
Depositary Receipts (GDRs), European Depositary Receipts (EDRs) and other types
of Depositary Receipts. Depositary Receipts evidence ownership of underlying
securities issued by either a non-U.S. or a U.S. corporation that have been
deposited with a depository or custodian bank. Depositary Receipts may be issued
in connection with an offering of securities by the issuer of the underlying
securities or issued by a depository bank as a vehicle to promote investment and
trading in the underlying securities. ADRs are receipts issued by U.S. banks or
trust companies in respect of securities of non-U.S. issuers held on deposit for
use in the U.S. securities markets. GDRs, EDRs and other types of Depositary
Receipts are typically issued by a U.S. bank or trust company and traded
principally in
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the U.S. and other international markets. The Funds will treat Depositary
Receipts as interests in the underlying securities for purposes of their
investment policies. While Depositary Receipts may not necessarily be
denominated in the same currency as the securities into which they may be
converted, they entail certain of the risks associated with investments in
non-U.S. securities.
Depositary Receipts that are not sponsored by the issuer of the underlying
securities may not have unlimited voting rights. A purchaser of such unsponsored
Depositary Receipts may not receive as much information about the issuer of the
underlying security as with sponsored Depositary Receipts. Each Fund will limit
its investment in such unsponsored Depositary Receipts to no more than 5% of the
value of such Fund's net assets (at the time of investment).
CONVERTIBLE SECURITIES
The Funds may invest in convertible securities, including bonds,
debentures, notes, preferred stocks or other securities that may be converted
into or exchanged for a prescribed amount of equity securities (generally common
stock) of the same or a different issuer within a particular period of time at a
specified price or formula. Convertible securities have general characteristics
similar to both fixed income and equity securities. Although to a lesser extent
than with fixed income securities generally, the market value of convertible
securities tends to decline as interest rates increase and, conversely, tends to
increase as interest rates decline. In addition, because of the conversion
feature, the market value of convertible securities tends to vary with
fluctuations in the market value of the underlying security and therefore will
also react to variations in the general market for equity securities. While no
securities investments are without risk, investments in convertible securities
generally entail less risk than investments in common stock of the same issuer.
A unique feature of convertible securities is that as the market price of
the underlying security declines, convertible securities tend to trade
increasingly on a yield basis, and thus may not experience market value declines
to the same extent as the underlying security. When the market price of the
underlying security increases, the price of the convertible security tends to
rise as a reflection of the value of the underlying security. Fixed income
convertible securities are investments that provide for a stable stream of
income with generally higher yields than common stocks. Of course, like all
fixed income securities, there can be no assurance of current income because the
issuer of fixed income convertible securities may default on its obligations.
Convertible securities, however, generally offer lower interest or dividend
yields than non-convertible securities of similar quality because of the
potential for capital appreciation. A fixed income convertible security, in
addition to providing fixed income, offers the potential for capital
appreciation through the conversion feature that enables the holder to benefit
from increases in the market price of the underlying security. There can be no
assurance of capital appreciation, however, because securities prices fluctuate.
Convertible securities generally are subordinated to other similar but
non-convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock of the
same issuer. Because of the subordination feature, however, convertible
securities typically have lower ratings than similar non-convertible securities.
WARRANTS
The Funds may invest in warrants, which are securities permitting, but not
obligating, their holder to subscribe for other securities. Warrants do not
carry with them the right to dividends or voting rights with respect to the
securities that they entitle their holder to purchase, and they do not represent
any rights in the assets of the issuer. As a result, an investment in warrants
may be considered speculative. In addition, the value of a warrant does not
necessarily change with the value of the underlying security and a warrant
ceases to have value if it is not exercised prior to its expiration date.
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ILLIQUID AND RESTRICTED SECURITIES
Each Fund may invest up to 15% of its assets in illiquid securities.
Illiquid securities are securities that may not be sold or disposed of in the
ordinary course of business within seven days at approximately the value at
which the Fund has valued the investments. Illiquid securities include
securities with legal or contractual restrictions on resale, time deposits,
repurchase agreements having maturities longer than seven days and securities
that do not have readily available market quotations and may involve the risk
that a Fund may be unable to sell such a security at the desired time. The price
at which a Fund values these securities could be less than that originally paid
by the Fund or less than that which may be considered the fair value of the
securities. In addition, each Fund may invest in securities that are sold in
private placement transactions between their issuers and their purchasers and
that are neither listed on an exchange nor traded over-the-counter. These
factors may have an adverse effect on a Fund's ability to dispose of particular
securities and may limit a Fund's ability to obtain accurate market quotations
for purposes of valuing securities and calculating net asset value and to sell
securities at fair value. If any privately placed securities held by a Fund are
required to be registered under the securities laws of one or more jurisdictions
before being resold, a Fund may be required to bear the expenses of
registration. Securities that have legal or contractual restrictions on resale
but have a readily available market are not considered illiquid for purposes of
this limitation.
Each Fund may also purchase securities that are not registered under the
Securities Act of 1933, as amended (the "Securities Act"), but that can be sold
to qualified institutional buyers in accordance with Rule 144A under the
Securities Act. Rule 144A securities generally must be sold to other qualified
institutional buyers. Rule 144A allows for a broader institutional trading
market for securities otherwise subject to restrictions on resale to the general
public. Rule 144A establishes a "safe harbor" from the registration requirements
of the Securities Act for resales of certain securities to qualified
institutional buyers. The Advisers anticipate that the market for certain
restricted securities will expand further as a result of this regulation and the
development of automated systems for the trading, clearance and settlement of
unregistered securities of domestic and non-U.S. issuers, such as the PORTAL
System sponsored by the National Association of Securities Dealers, Inc.
The Advisers will monitor the liquidity of restricted and other illiquid
securities under the supervision of the Company's Board of Directors. In
reaching liquidity decisions with respect to Rule 144A securities, the Advisers
will consider, among others, the following factors: (1) the unregistered nature
of a Rule 144A security; (2) the frequency of trades and quotes for a Rule 144A
security; (3) the number of dealers wishing to purchase or sell the Rule 144A
security and the number of other potential purchasers; (4) dealer undertakings
to make a market in the Rule 144A security; (5) the trading markets for the Rule
144A security; and (6) the nature of the Rule 144A security and the nature of
the marketplace trades (e.g., the time needed to dispose of the Rule 144A
security, the method of soliciting offers and the mechanics of the transfer).
The Funds may also invest in commercial obligations issued in reliance on
the so-called "private placement" exemption from registration afforded by
Section 4(2) of the Securities Act. Section 4(2) paper is restricted as to
disposition under the federal securities laws, and generally is sold to
institutional investors such as the Funds who agree that they are purchasing the
paper for investment and not with a view to public distribution. Any resale by
the purchaser must be in an exempt transaction. Section 4(2) paper normally is
resold to other institutional investors such as the Funds through, or with the
assistance of, the issuer or investment dealers who make a market in the Section
4(2) paper, thus providing liquidity.
If a particular investment in Rule 144A securities, Section 4(2) paper or
private placement securities is not determined to be liquid, that investment
will be included within the 15% limitation on investment in illiquid securities.
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PREFERRED STOCK
The Funds may invest in preferred stocks. Generally, preferred stocks are
non-voting shares of a corporation that pay a fixed or variable stream of
dividends. Preferred stock has a preference over common stock in liquidation and
generally in dividends as well, but is subordinated to the liabilities of the
issuer in all respects. Preferred stock may or may not be convertible into
common stock. As a general rule, the market value of preferred stock with a
fixed dividend rate and no conversion element varies inversely with interest
rates and perceived credit risk. Because preferred stock is subordinate to debt
securities and other obligations of the issuer, deterioration in the credit
quality of the issuer will cause greater changes in the value of a preferred
stock than in a more senior debt security with similar stated yield
characteristics.
REPURCHASE AGREEMENTS
The Funds may purchase instruments from financial institutions, such as
banks and broker-dealers, subject to the seller's agreement to repurchase them
at an agreed upon time and price ("repurchase agreements"). The Funds will enter
into repurchase agreements to generate additional income. The repurchase price
under the repurchase agreements generally equals the price paid by a Fund plus
interest negotiated on the basis of current short-term interest rates (that may
be more or less than the interest rate on the securities underlying the
repurchase agreement). Securities subject to repurchase agreements will be held
by the Company's custodian, sub-custodian or in the Federal Reserve/Treasury
book-entry system. Each Fund will enter into repurchase agreements only with
counterparties determined to be creditworthy by the Advisers. The seller under a
repurchase agreement will be required to maintain the value of the securities
subject to the agreement at not less than the repurchase price. Default by the
seller would, however, expose a Fund to possible loss because of adverse market
action or delay in connection with the disposition of the underlying
obligations.
ZERO COUPON SECURITIES, PAY-IN-KIND BONDS AND DISCOUNT OBLIGATIONS
The High Income Bond Fund may invest in zero coupon securities and
pay-in-kind bonds. In addition, each Fund may acquire certain debt securities at
a discount. These discount obligations involve special risk considerations. Zero
coupon securities are debt securities that pay no cash income but are sold at
substantial discounts from their value at maturity. When a zero coupon security
is held to maturity, its entire return, consisting of the amortization of the
discount, comes from the difference between its purchase price and its maturity
value. This difference is known at the time of purchase, so that investors
holding zero coupon securities until maturity know at the time of their
investment what the expected return on their investment will be. Certain zero
coupon securities, sold at substantial discounts from their maturity value,
provide for the commencement of regular interest payments at a deferred date.
The High Income Bond Fund may also purchase pay-in-kind bonds, which pay all or
a portion of their interest in the form of additional debt or equity securities.
Zero coupon securities, pay-in-kind bonds and discount obligations tend to
be subject to greater price fluctuations in response to changes in interest
rates than are ordinary interest-paying debt securities with similar maturities.
The value of zero coupon securities and discount obligations appreciates more
during periods of declining interest rates and depreciates more during periods
of rising interest rates than ordinary interest-paying debt securities with
similar maturities. Under current federal income tax law, the High Income Bond
Fund is required to accrue as income each year the value of securities received
in respect of pay-in-kind bonds and a portion of the original issue discount
with respect to zero coupon securities and other securities issued at a discount
to the stated redemption price. In addition, the High Income Bond Fund will
elect similar treatment for any market discount with respect to discount
obligations. Accordingly, the High Income Bond Fund may have to dispose of
portfolio securities under disadvantageous circumstances in order to generate
current cash to satisfy certain distribution requirements.
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INDEX SECURITIES
The U.S. Equity Fund may invest in various securities that are intended to
track broad-based U.S. market indices, including Standard & Poor's Depositary
Receipts (SPDRs), Diamonds and NASDAQ-100 Shares. SPDRs represent units in a
trust that holds a portfolio of common stocks that closely tracks the price,
performance and dividend yield of the S&P 500 Index. SPDRs also entitle holders
to receive proportionate quarterly cash distributions corresponding to the
dividends that accrue to the S&P 500 stocks in the underlying portfolio.
Diamonds represent units in an investment trust that holds the 30 component
stocks comprising the Dow Jones Industrial Average (DJIA) and are designed to
track the performance of the DJIA. Diamonds pay monthly dividends that
correspond to the dividend yields of the DJIA component stocks. NASDAQ-100
Shares represent ownership in the NASDAQ-100 Trust, a unit investment trust that
accumulates and holds a portfolio of equity securities that track the NASDAQ-100
Index. NASDAQ-100 Shares are designed to track the performance and dividend
yield of the NASDAQ-100 Index. SPDRs and Diamonds are listed on the American
Stock Exchange. NASDAQ-100 Shares are listed on the NASDAQ Stock Market.
The Europe Equity Fund may invest in various securities that track
broad-based European market indices.
OTHER INVESTMENT FUNDS
Each Fund may invest in the securities of other investment funds to the
extent permitted by the Investment Company Act of 1940, as amended (the
"Investment Company Act"). Under the Investment Company Act, each Fund as a
general rule may invest up to 10% of its total assets in shares of other
investment funds and up to 5% of its total assets in any one investment fund,
provided that the investment does not represent more than 3% of the voting stock
of the acquired investment fund. By investing in another investment fund, a Fund
bears a ratable share of the other investment fund's expenses, as well as
continuing to bear the Fund's advisory and administrative fees with respect to
the amount of the investment. In addition, each Fund may, in the future, seek to
achieve its investment objective through the adoption of a "master-feeder"
structure pursuant to which a Fund would invest all of its assets in a no-load,
open-end management investment company having the same investment objective and
policies and substantially the same investment restrictions as those applicable
to the Fund.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
Each Fund may purchase securities on a "when-issued" or delayed delivery
basis. When-issued and delayed delivery securities are securities purchased for
delivery beyond the normal settlement date at a stated price. A Fund will
generally not pay for such securities or start earning income on them until they
are received. Fixed income securities purchased on a when-issued or delayed
delivery basis are recorded as an asset and are subject to changes in value
based, among other factors, upon changes in the general level of interest rates.
A Fund will make commitments to purchase when-issued or delayed delivery
securities with the intention of actually acquiring the securities, but may sell
them before the settlement date if it is deemed advisable.
When a Fund agrees to purchase when-issued or delayed delivery securities,
The Chase Manhattan Bank, The Lipper Funds' custodian (the "Custodian"), will
set aside cash or liquid portfolio securities equal to the amount of the
commitment in a separate account. Normally, the Custodian will set aside
portfolio securities to satisfy a purchase commitment, and in such a case a Fund
may be required subsequently to place additional assets in the separate account
in order to ensure that the value of the account remains equal to the amount of
the Fund's commitment. It may be expected that a Fund's net assets will
fluctuate to a greater degree when it sets aside portfolio securities to cover
such purchase commitments than when it sets aside cash. When a Fund engages in
when-issued or delayed delivery transactions, it relies on the seller to
consummate the trade. Failure of the seller to do so may result in such Fund
incurring a loss or missing an opportunity to obtain a price considered to be
advantageous.
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U.S. GOVERNMENT OBLIGATIONS
Each Fund may hold certain types of U.S. government securities, including
U.S. Treasury Bills, the obligations of the Federal Housing Administration,
Farmers Home Administration, Export-Import Bank of the United States, Small
Business Administration, Government National Mortgage Association, Federal
National Mortgage Association, Federal Financing Bank, General Services
Administration, Student Loan Marketing Association, Central Bank for
Cooperatives, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation,
Federal Intermediate Credit Banks, Federal Land Banks, Federal Farm Credit
Banks, Maritime Administration, Resolution Trust Corporation, Tennessee Valley
Authority and the U.S. Postal Service.
BANK OBLIGATIONS
Each Fund may invest in bank obligations, including negotiable certificates
of deposit, bankers' acceptances, fixed time deposits and deposit notes. A
certificate of deposit is a short-term negotiable certificate issued by a
commercial bank against funds deposited in the bank and is either
interest-bearing or purchased on a discount basis. A bankers' acceptance is a
short-term draft drawn on a commercial bank by a borrower, usually in connection
with an international commercial transaction. The borrower is liable for payment
as is the bank, which unconditionally guarantees to pay the draft at its face
amount on the maturity date. Fixed time deposits are obligations of branches of
U.S. banks or foreign banks that are payable at a stated maturity date and bear
a fixed rate of interest. Although fixed time deposits do not have a market,
there are no contractual restrictions on the right to transfer a beneficial
interest in the deposit to a third party. Deposit notes are notes issued by
commercial banks that generally bear fixed rates of interest and typically have
original maturities ranging from eighteen months to five years.
Banks are subject to extensive governmental regulations that may limit both
the amounts and types of loans and other financial commitments that may be made
and the interest rates and fees that may be charged. The profitability of this
industry is largely dependent upon the availability and cost of capital funds
for the purpose of financing lending operations under prevailing money market
conditions. Also, general economic conditions play an important part in the
operations of this industry and exposure to credit losses arising from possible
financial difficulties of borrowers might affect a bank's ability to meet its
obligations. Bank obligations may be general obligations of the parent bank or
may be limited to the issuing branch by the terms of the specific obligations or
by government regulation. In addition, securities of foreign banks and foreign
branches of U.S. banks may involve investment risks in addition to those
relating to domestic bank obligations. Such risks include future political and
economic developments, the possible seizure or nationalization of foreign
deposits, and the possible adoption of foreign governmental restrictions that
might adversely affect the payment of principal and interest on such
obligations. In addition, foreign branches of U.S. banks and foreign banks may
be subject to less stringent reserve requirements and non-U.S. issuers generally
are subject to different accounting, auditing, reporting and recordkeeping
standards than those applicable to U.S. issuers.
BORROWING
Each Fund may borrow only from banks or by entering into reverse repurchase
agreements, in aggregate amounts not to exceed 33 1/3 % of its total assets
(including the amount borrowed) less its liabilities (excluding the amount
borrowed), and only for temporary or emergency purposes. Bank borrowings may be
from U.S. or foreign banks and may be secured or unsecured. Each Fund may also
borrow by entering into reverse repurchase agreements, pursuant to which it
would sell portfolio securities to financial institutions, such as banks and
broker-dealers, and agree to repurchase them at an agreed upon date and price.
Each Fund may also enter into reverse repurchase agreements to avoid otherwise
selling securities during unfavorable market conditions to meet redemptions.
Reverse repurchase agreements involve the risk that the market value of the
portfolio securities sold by a Fund may decline below the price at which the
Fund is obligated to repurchase such securities. Each Fund
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will enter into reverse repurchase agreements only with counterparties
determined to be creditworthy by its Adviser.
LOANS OF FUND SECURITIES
Each Fund may lend securities from its portfolio to brokers, dealers and
other financial organizations in order to generate additional income. There is
no limitation on the amount of securities that a Fund may loan. The Funds may
not lend their portfolio securities to their Advisers or their affiliates
without specific authorization from the Securities and Exchange Commission. The
Funds may lend portfolio securities consisting of cash or securities that are
consistent with their permitted investments, against collateral that is equal at
all times to at least 100% of the value of the securities loaned. Loans of
portfolio securities by a Fund will be collateralized by cash, letters of credit
or securities that are consistent with its permitted investments, that will be
maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. From time to time, the Funds may return a
part of the interest earned from the investment of collateral received for
securities loaned to the borrower and/or a third party, that is unaffiliated
with the Funds or the Advisers, and that is acting as a "finder." With respect
to loans by a Fund of its portfolio securities, such Fund would continue to
accrue interest on loaned securities and would also earn income on loans. Any
cash collateral received by a Fund in connection with such loans would be
invested in securities in which such Fund is permitted to invest. Such loans
would involve risks of delay in receiving additional collateral or in recovering
the securities loaned or even loss of rights in the collateral should the
borrower of the securities fail financially. However, loans will be made only to
borrowers deemed by the Advisers to be of good standing and only when, in the
judgment of the Advisers, the income to be earned from the loans justifies the
attendant risks.
SHORT SALES
The Funds may make short sales of securities "against the box." A short
sale is a transaction in which a Fund sells a security it does not own in
anticipation that the market price of that security will decline. In a short
sale "against the box," at the time of sale a Fund owns or has the immediate and
unconditional right to acquire the identical security. Short sales against the
box are a form of hedging to offset potential declines in long positions in
similar securities.
HEDGING AND DERIVATIVES
Each Fund is authorized to use various hedging and investment strategies to
hedge market risks (such as broad or specific market movements and interest
rates, or other factors relevant to the Fund's investments, such as rates of
inflation), to manage the effective maturity or duration of debt instruments
held by a Fund, or to seek to increase the Fund's income or gain. The Funds will
not be obligated, however, to use any Derivatives (as defined below) and make no
representations as to the availability or use of these techniques at this time
or at any time in the future. "Derivatives," as used herein, refers to the
purchase and sale (or writing) of exchange listed and over-the-counter put and
call options on securities, securities indices, currencies and other financial
instruments, and entering into currency forward contracts. Over time, techniques
and instruments may change as new instruments and strategies are developed or
regulatory changes occur. The Funds will not engage in transactions in futures
or options on futures.
Derivatives may be used to attempt to protect against possible changes in
the market value of securities held in or to be purchased by a Fund resulting
from securities markets or currency exchange rate fluctuations, to protect a
Fund's unrealized gains in the value of its securities, to facilitate the sale
of those securities for investment purposes, to establish a position in the
Derivatives markets as a substitute for purchasing or selling particular
securities or to seek to enhance a Fund's income or gain. Each Fund may use any
or all types of Derivatives at any time; no particular strategy will dictate the
use of one type of transaction rather than another, as use of any authorized
Derivative will be a function of numerous variables, including market
conditions. The ability of the Funds to utilize Derivatives successfully will
depend on the Advisers' ability to predict pertinent
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market movements, which cannot be assured. These skills are different from those
needed to select securities. The use of Derivatives in certain circumstances
will require a Fund to segregate cash or other liquid assets to the extent the
Fund's obligations are not otherwise "covered" through ownership of the
underlying security or financial instrument.
Set forth below is a detailed discussion of Derivatives that may be used by
the Advisers on behalf of the Funds.
GENERAL CHARACTERISTICS OF OPTIONS. Put options and call options typically
have similar structural characteristics and operational mechanics regardless of
the underlying instrument on which they are purchased or sold. Thus, the
following general discussion relates to each of the particular types of options
discussed in greater detail below. In addition, many Derivatives involving
options require segregation of Fund assets in special accounts, as described
below under "Use of Segregated and Other Special Accounts."
A put option gives the purchaser of the option, upon payment of a premium,
the right to sell, and the writer the obligation to buy, the underlying
security, index or other instrument at the exercise price. A Fund's purchase of
a put option on a security, for example, might be designed to protect its
holdings in the underlying instrument (or, in some cases, a similar instrument)
against a substantial decline in the market value of such instrument by giving
such Fund the right to sell the instrument at the option exercise price. A call
option, upon payment of a premium, gives the purchaser of the option the right
to buy, and the seller the obligation to sell, the underlying instrument at the
exercise price. A Fund's purchase of a call option on a security, index or other
instrument might be intended to protect such Fund against an increase in the
price of the underlying instrument that it intends to purchase in the future by
fixing the price at which it may purchase the instrument. An "American" style
put or call option may be exercised at any time during the option period,
whereas a "European" style put or call option may be exercised only upon
expiration or during a fixed period prior to expiration. Exchange-listed options
are issued by a regulated intermediary, such as the Options Clearing
Corporation ("OCC"), which guarantees the performance of the obligations of the
parties to the options. The discussion below uses the Options Clearing
Corporation as an example, but is also applicable to other similar financial
intermediaries.
OCC-issued and exchange-listed options, with certain exceptions, generally
settle by physical delivery of the underlying security, although in the future,
cash settlement may become available. Index options are cash settled for the net
amount, if any, by which the option is "in-the-money" (that is, the amount by
which the value of the underlying instrument exceeds, in the case of a call
option, or is less than, in the case of a put option, the exercise price of the
option) at the time the option is exercised. Frequently, rather than taking or
making delivery of the underlying instrument through the process of exercising
the option, listed options are closed by entering into offsetting purchase or
sale transactions that do not result in ownership of the new option.
A Fund's ability to close out its position as a purchaser or seller of an
OCC-issued or exchange-listed put or call option is dependent, in part, upon the
liquidity of the particular option market. Among the possible reasons for the
absence of a liquid option market on an exchange are: (1) insufficient trading
interest in certain options; (2) restrictions on transactions imposed by an
exchange; (3) trading halts, suspensions or other restrictions imposed with
respect to particular classes or series of options or underlying securities,
including reaching daily price limits; (4) interruption of the normal operations
of the OCC or an exchange; (5) inadequacy of the facilities of an exchange or
the OCC to handle current trading volume; or (6) a decision by one or more
exchanges to discontinue the trading of options (or a particular class or series
of options), in which event the relevant market for that option on that exchange
would cease to exist, although any such outstanding options on that exchange
would continue to be exercisable in accordance with their terms.
The hours of trading for listed options may not coincide with the hours
during which the underlying
8
<PAGE>
financial instruments are traded. To the extent that the option markets close
before the markets for the underlying financial instruments, significant price
and rate movements can take place in the underlying markets that would not be
reflected in the corresponding option markets.
Over-the-counter ("OTC") options are purchased from or sold to securities
dealers, financial institutions or other "counterparties" through a direct
bilateral agreement with the counterparty. In contrast to exchange-listed
options, that generally have standardized terms and performance mechanics, all
of the terms of an over-the-counter option, including such terms as method of
settlement, term, exercise price, premium, guarantees and security, are
determined by negotiation of the parties. It is anticipated that any Fund
authorized to use over-the-counter options will generally only enter into
over-the-counter options that have cash settlement provisions, although it will
not be required to do so.
Unless the parties provide for it, no central clearing or guarantee
function is involved in an over-the-counter option. As a result, if a
counterparty fails to make or take delivery of the security or other instrument
underlying an over-the-counter option it has entered into with a Fund or fails
to make a cash settlement payment due in accordance with the terms of that
option, such Fund will lose any premium it paid for the option as well as any
anticipated benefit of the transaction. Thus, a Fund's Adviser must assess the
creditworthiness of each such counterparty or any guarantor or credit
enhancement of the counterparty's credit to determine the likelihood that the
terms of the over-the-counter option will be met. A Fund will enter into
over-the-counter option transactions only with U.S. Government securities
dealers recognized by the Federal Reserve Bank of New York as "primary dealers,"
or broker-dealers, domestic or foreign banks, or other financial institutions
that its Adviser deems to be creditworthy. In the absence of a change in the
current position of the staff of the SEC, over-the-counter options purchased by
a Fund and the amount of such Fund's obligation pursuant to an over-the-counter
option sold by the Fund (the cost of the sell-back plus the in-the-money amount,
if any) or the value of the assets held to cover such options will be deemed
illiquid.
If a Fund sells a call option, the premium that it receives may serve as a
partial hedge, to the extent of the option premium, against a decrease in the
value of the underlying securities or instruments held by such Fund or will
increase such Fund's income. Similarly, the sale of put options can also provide
gains.
A Fund may purchase and sell call options on securities that are traded on
U.S. and foreign securities exchanges and in the over-the-counter markets, and
on securities indices. All calls sold by a Fund must be "covered" (that is, the
Fund must own the securities subject to the call), or must otherwise meet the
asset segregation requirements described below for so long as the call is
outstanding. Even though a Fund will receive the option premium to help protect
it against loss, a call sold by a Fund will expose such Fund during the term of
the option to possible loss of opportunity to realize appreciation in the market
price of the underlying security or instrument and may require the Fund to hold
a security or instrument that it might otherwise have sold.
Each Fund reserves the right to purchase or sell options on instruments and
indices that may be developed in the future to the extent consistent with
applicable law, such Fund's investment objective and the restrictions set forth
herein.
Each Fund may purchase and sell put options on securities (whether or not
it holds the securities in its portfolio) and on securities indices. A Fund will
not sell put options if, as a result, more than 50% of such Fund's assets would
be required to be segregated to cover its potential obligations under put
options. In selling put options, a Fund faces the risk that it may be required
to buy the underlying security at a disadvantageous price above the market
price.
OPTIONS ON SECURITIES INDICES AND OTHER FINANCIAL INDICES. Each Fund may
purchase and sell call and put options on securities indices and other financial
indices. In so doing, a Fund can achieve many of the same objectives it would
achieve through the sale or purchase of options on individual securities or
other instruments. Options on securities indices and other financial indices are
similar to options on a security or other instrument except that, rather than
settling by physical delivery of the underlying instrument, options on indices
settle by
9
<PAGE>
cash settlement; that is, an option on an index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
the index upon which the option is based exceeds, in the case of a call, or is
less than, in the case of a put, the exercise price of the option (except if, in
the case of an over-the-counter option, physical delivery is specified). This
amount of cash is equal to the excess of the closing price of the index over the
exercise price of the option, which also may be multiplied by a formula value.
The seller of the option is obligated, in return for the premium received, to
make delivery of this amount. The gain or loss on an option on an index depends
on price movements in the instruments comprising the market, market segment,
industry or other composite on which the underlying index is based, rather than
price movements in individual securities, as is the case with respect to options
on securities.
OPTIONS ON CURRENCIES. Each Fund may purchase and sell put and call options
on foreign currencies for the purposes of protecting against declines in the
U.S. dollar value of non-U.S. portfolio securities and anticipated dividends on
such securities and against increases in the U.S. dollar cost of non-U.S.
securities to be acquired. Each Fund may use options on currency to cross-hedge,
which involves writing or purchasing options of one currency to hedge against
changes in exchange rates for a different currency, if there is a pattern of
correlation between the two currencies. As with other kinds of options
transactions, however, the writing of an option on foreign currency will
constitute only a partial hedge, up to the amount of the premium received. A
Fund could be required to purchase or sell foreign currencies at disadvantageous
exchange rates, thereby incurring losses. The purchase of an option on foreign
currency may constitute an effective hedge against exchange rate fluctuations;
however, in the event of exchange rate movements adverse to a Fund's position,
the Fund may forfeit the entire amount of the premium plus related transactions
costs. In addition, a Fund may purchase call or put options on a currency for
non-hedging purposes when its Adviser anticipates that the currency will
appreciate or depreciate in value, but securities denominated in that currency
do not present attractive investment opportunities. Currency transactions are
subject to risks different from other portfolio transactions, as discussed below
under "Investment Risks."
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. Each Fund may enter into
forward foreign currency exchange contracts that provide for the purchase or
sale of an amount of a specified currency at a future date. Forward contracts
may be used to (1) protect against fluctuations in the value of a foreign
currency against the U.S. dollar between the trade date and settlement date when
a Fund purchases or sells securities, (2) lock in the U.S. dollar value of
dividends declared on securities held by a Fund, and (3) generally protect
the U.S. dollar value of securities held by a Fund against exchange rate
fluctuation.
COMBINED TRANSACTIONS. A Fund may enter into multiple transactions,
including multiple options transactions, multiple interest rate transactions and
any combination of options and interest rate transactions, instead of a single
Derivative, as part of a single or combined strategy when, in the judgment of
its Adviser, it is in the best interests of such Fund to do so. A combined
transaction will usually contain elements of risk that are present in each of
its component transactions. Although combined transactions will normally be
entered into by a Fund based on its Adviser's judgment that the combined
strategies will reduce risk or otherwise more effectively achieve the desired
portfolio management goal, it is possible that the combination will instead
increase the risks or hinder achievement of such Fund's management objective.
USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS. Use of many Derivatives by a
Fund will require, among other things, that such Fund segregate cash or other
assets with the Custodian, or a designated sub-custodian, to the extent such
Fund's obligations are not otherwise "covered" through ownership of the
underlying security or financial instrument. In general, either the full amount
of any obligation by a Fund to pay or deliver securities or assets must be
covered at all times by the securities or instruments required to be delivered,
or, subject to any regulatory restrictions, an amount of cash or other assets at
least equal to the current amount of the obligation must be segregated with the
Custodian or sub-custodian. The segregated assets cannot be sold or transferred
unless equivalent assets are substituted in their place or it is no longer
necessary to segregate them. A call option on securities written by a Fund, for
example, will require such Fund to hold the securities subject to the call (or
securities convertible into the needed securities without additional
consideration) or to segregate assets sufficient to purchase and deliver the
securities if the call is exercised. A call option sold by a Fund on an index
will require
10
<PAGE>
such Fund to own portfolio securities that correlate with the index or to
segregate assets equal to the excess of the index value over the exercise price
on a current basis. A put option on securities written by a Fund will require
such Fund to segregate assets equal to the exercise price.
Over-the-counter options entered into by a Fund, including those on
securities, financial instruments or indices, and OCC-issued and exchange-listed
index options will generally provide for cash settlement, although such Fund
will not be required to do so. As a result, when a Fund sells these instruments
it will segregate an amount of assets equal to its obligations under the
options. OCC-issued and exchange-listed options sold by such Fund other than
those described above generally settle with physical delivery, and such Fund
will segregate an amount of assets equal to the full value of the option.
Over-the-counter options settling with physical delivery or with an election of
either physical delivery or cash settlement will be treated the same as other
options settling with physical delivery.
Derivatives may be covered by means other than those described above when
consistent with applicable regulatory policies. A Fund may also enter into
offsetting transactions so that its combined position, coupled with any
segregated assets, equals its net outstanding obligation in related Derivatives.
A Fund could purchase a put option, for example, if the strike price of that
option is the same or higher than the strike price of a put option sold by such
Fund. Moreover, instead of segregating assets if it holds a forward contract, a
Fund could purchase a put option on the same forward contract with a strike
price as high or higher than the price of the contract held. Other Derivatives
may also be offset in combinations. If the offsetting transaction terminates at
the time of or after the primary transaction, no segregation is required, but if
it terminates prior to that time, assets equal to any remaining obligation would
need to be segregated.
INVESTMENT RISKS
The principal risks of investing in each Fund is described in the Fund's
Prospectus. Each Fund may also be subject to the additional investment risks set
forth below.
NON-U.S. SECURITIES
The Europe Equity Fund will, and the High Income Bond Fund and U.S. Equity
Fund may from time to time, invest in securities of non-U.S. corporate and
government issuers. The U.S. Equity Fund may invest up to 15% of its total net
assets in Depositary Receipts and equity securities issued by non-U.S. issuers.
The High Income Bond Fund may invest up to 15% of its total net assets in
non-U.S. dollar-denominated securities. Securities of non-U.S. issuers may trade
in U.S. or non-U.S. securities markets. Securities of non-U.S. issuers involve
certain considerations and risks not typically associated with investing in
securities of U.S. companies or the U.S. Government, including uncertainties
regarding future social, political and economic developments, the possible
imposition of foreign withholding taxes on dividend income payable on securities
held by a Fund, the possible seizure or nationalization of non-U.S. assets and
the possible establishment of non-U.S. government laws or restrictions that
might adversely affect the payment of interest on equity securities held by a
Fund. Because a Fund may invest in the securities of non-U.S. issuers
denominated in non-U.S. currencies, the strength or weakness of the U.S. dollar
against such non-U.S. currencies will account for part of the Fund's investment
performance. A decline in the value of any particular currency against the U.S.
dollar will cause a decline in the U.S. dollar value of a Fund's holdings of
securities denominated in such currency and, therefore, will cause an overall
decline in that Fund's net asset value and any net investment income and capital
gains to be distributed in U.S. dollars to shareholders of that Fund. Non-U.S.
securities markets may have substantially less volume and may be smaller, less
liquid and subject to greater price volatility than U.S. markets. Delays or
problems with settlement in non-U.S. markets could affect the liquidity of a
Fund's foreign investments and adversely affect performance. Investment in
non-U.S. securities also may result in higher brokerage and other costs and the
imposition of transfer taxes or transaction charges. Investment by a Fund in
non-U.S. issuers may be restricted or controlled to varying degrees. These
restrictions may limit or preclude investment in certain issuers or countries
and may increase the costs and expenses of a Fund. In addition, the repatriation
of both investment income and capital from some countries
11
<PAGE>
requires governmental approval and if there is a deterioration in a country's
balance of payments or for other reasons, a country may impose temporary
restrictions on foreign capital remittances abroad. Even where there is no
outright restriction on repatriation of capital, the mechanics of repatriation
may affect certain aspects of the operation of a Fund. A Fund could be adversely
affected by delays in, or a refusal to grant any required governmental approval
for repatriation of capital, as well as by the application to a Fund of any
restrictions on investments. In addition, there may be less publicly available
information about a non-U.S. issuer than about a U.S. issuer, and non-U.S.
issuers may not be subject to the same accounting, auditing and financial
recordkeeping standards and requirements as U.S. issuers. Finally, in the event
of a default in any such non-U.S. obligations, it may be more difficult for a
Fund to obtain or enforce a judgment against the issuers of such securities.
On January 1, 1999, eleven European countries implemented a new currency
unit called the "Euro" that is expected to reshape financial markets, banking
systems and monetary policies in Europe and other parts of the world. While it
is impossible to predict the impact of the Euro, it is possible that it could
increase volatility in financial markets worldwide and adversely affect the
value of a Fund's shares.
DERIVATIVES
Derivatives involve special risks, including possible default by the other
party to the transaction, illiquidity and, to the extent the Advisers' views as
to certain market movements is incorrect, the risk that the use of Derivatives
could result in greater losses than if they had not been used. Use of put and
call options could result in losses to a Fund, force the purchase or sale of
portfolio securities at inopportune times or for prices higher than (in the case
of put options) or lower than (in the case of call options) current market
values, or cause a Fund to hold a security they might otherwise not purchase or
sell. The use of currency transactions could result in a Fund's incurring losses
as a result of the imposition of exchange controls or the inability to deliver
or receive a specified currency in addition to exchange rate fluctuations.
Losses resulting from the use of Derivatives will reduce a Fund's net asset
value, and possibly income, and the losses may be greater than if Derivatives
had not been used.
The use of options transactions entails certain special risks. In
particular, options markets could be illiquid in some circumstances and certain
over-the-counter options could have no markets. As a result, in certain markets,
a Fund might not be able to close out a transaction without incurring
substantial losses. Although a Fund's use of options transactions for hedging
should tend to minimize the risk of loss due to a decline in the value of the
hedged position, at the same time it will tend to limit any potential gain to
the Fund that might result from an increase in value of the position.
Currency hedging involves some of the same risks and considerations as
other transactions with similar instruments. Currency transactions can result in
losses to a Fund if the currency being hedged fluctuates in value to a degree or
in a direction that is not anticipated. Further, the risk exists that the
perceived linkage between various currencies may not be present or may not be
present during the particular time that a Fund is engaging in hedging. Currency
transactions are also subject to risks different from those of other portfolio
transactions. Because currency control is of great importance to the issuing
governments and influences economic planning and policy, purchases and sales of
currency and related instruments can be adversely affected by government
exchange controls, limitations or restrictions on repatriation of currency, and
manipulations or exchange restrictions imposed by governments. Currency exchange
rates may fluctuate based on factors extrinsic to the issuing countries'
economies.
Losses resulting from the use of Derivatives will reduce a Fund's net asset
value, and possibly income, and the losses can be greater than if Derivatives
had not been used.
12
<PAGE>
NON-U.S. DERIVATIVES
When conducted outside the United States, Derivatives may not be regulated
as rigorously as in the United States, may not involve a clearing mechanism and
related guarantees, and will be subject to the risk of governmental actions
affecting trading in, or the prices of, foreign securities and other
instruments. The value of positions taken as part of non-U.S. Derivatives also
could be adversely affected by: (1) other complex non-U.S. political, legal and
economic factors; (2) lesser availability of data on which to make trading
decisions than in the United States; (3) delays in a Fund's ability to act upon
economic events occurring in foreign markets during non-business hours in the
United States; (4) the imposition of different exercise and settlement terms and
procedures and margin requirements than in the United States; and (5) lower
trading volume and liquidity.
TEMPORARY DEFENSIVE POSITION
For temporary defensive purposes, an Adviser may invest up to all of a
Fund's assets in cash and/or high quality short-term U.S. debt instruments. An
Adviser may also at any time invest some of a Fund's assets in these instruments
to meet redemptions and to cover operating expenses. If an Adviser take a
temporary defensive position, a Fund may not achieve its investment objectives.
TURNOVER
The portfolio turnover rate of a Fund is calculated by dividing the lesser
of sales or purchases of portfolio securities for any given year by the average
monthly value of the Fund's portfolio securities for that year. For purposes of
this calculation, no regard is given to securities having a maturity or
expiration date at the time of acquisition of one year or less. Portfolio
turnover directly affects the amount of transaction costs that are borne by each
Fund. Higher portfolio turnover results in the incurrence of higher transaction
costs.
The "Financial Highlights" section of each Fund's Prospectus sets forth the
portfolio turnover rates for each Fund. The Funds have not experienced any
significant variation in their portfolio turnover rates over the two most
recently completed fiscal years. Nor do the Funds anticipate any variation in
their portfolio turnover rates in the fiscal year ending December 31, 2000, from
the reported portfolio turnover rates for the fiscal year ended December 31,
1999.
POLICIES AND INVESTMENT LIMITATIONS OF THE FUNDS
Policies numbered 1 through 8 below are fundamental policies and may not be
changed with respect to a Fund without a vote of that Fund's shareholders. Each
Fund's investment objectives (as set forth in the Fund's Prospectus) and
policies numbered 9 through 12 below may be changed by the Company's Board of
Directors without shareholder approval at any time.
1. A Fund may not purchase the securities of any one issuer if as a
result more than 5% of the value of its total assets would be invested
in the securities of such issuer, except that up to 25% of the value
of its total assets may be invested without regard to this 5%
limitation and provided that there is no limitation with respect to
investments in U.S. Government Securities, and provided further that a
Fund may invest all or substantially all of its assets in another
regulated investment company having the same investment objective and
policies and substantially the same investment restrictions as those
with respect to such Fund.
2. A Fund may not borrow money, except that each Fund may borrow money
from banks or enter into reverse repurchase agreements, in each case
for temporary or emergency purposes only (not for leveraging or
investment), in aggregate amounts not exceeding 33 1/3% of the value
of its total assets at the time of such borrowing. For purposes of the
foregoing investment limitation,
13
<PAGE>
the term "total assets" shall be calculated after giving effect to the
net proceeds of any borrowings and reduced by any liabilities and
indebtedness other than such borrowings. Additional investments will
not be made by a Fund when borrowings exceed 5% of its total net
assets.
3. A Fund may not issue senior securities, except as permitted under the
Investment Company Act.
4. A Fund may not purchase any securities that would cause 25% or more of
the value of its total assets at the time of such purchase to be
invested in the securities of one or more issuers conducting their
principal business activities in the same industry; provided that
there is no limitation with respect to investments in U.S. Government
Securities, and provided further, that a Fund may invest all or
substantially all of its assets in another regulated investment
company having the same investment objective and policies and
substantially the same investment restrictions as those with respect
to such Fund. In such circumstances, the Fund would invest all or
substantially all of its assets in another regulated investment
company in connection with the adoption by The Lipper Funds of a
"master-feeder" structure.
5. A Fund may not make loans, except that it may purchase or hold debt
instruments in accordance with its investment objective and policies,
may lend its portfolio securities as described in its Prospectus and
may enter into repurchase agreements with respect to portfolio
securities.
6. A Fund may not act as an underwriter of securities, except insofar as
it may be deemed an underwriter under applicable securities laws in
selling portfolio securities.
7. A Fund may not purchase or sell real estate or real estate limited
partnerships, provided that it may purchase securities of issuers that
invest in real estate or interests therein.
8. A Fund may not purchase or sell commodities unless acquired as a
result of ownership of securities or other instruments (but this shall
not prevent a Fund from purchasing or selling options and futures
contracts or from investment in securities or other instruments backed
by or indexed to, or representing interests in, physical commodities
or investing or trading in Derivatives), or invest in oil, gas or
mineral exploration or development programs or in mineral leases.
9. A Fund may not invest more than 15% of the value of its assets in
securities that are illiquid, provided, however, that a Fund may
invest all or substantially all of its assets in another regulated
investment company having the same investment objective and policies
and substantially the same investment restrictions as those with
respect to such Fund.
10. A Fund may not purchase securities on margin, make short sales of
securities or maintain a short position, except that a Fund may make
short sales against the box and except in connection with Derivatives.
11. A Fund may not write or sell puts, calls, straddles, spreads or
combinations thereof except in connection with Derivatives.
12. A Fund may not purchase securities of other investment companies
except as permitted under the Investment Company Act or in connection
with a merger, consolidation, acquisition or reorganization.
The percentage limitations set forth above apply at the time a transaction
is effected. Subsequent changes in a percentage resulting from market
fluctuations or any other cause other than a direct action by a Fund will not
14
<PAGE>
require the Fund to dispose of its securities or to take other action to satisfy
the percentage limitation. Thus, if a percentage restriction set forth above is
adhered to at the time a transaction is effected, later changes in percentages
resulting from changes in value or in the number of outstanding securities of an
issuer will not be considered a violation. However, with respect to investment
restriction 2 above, to the extent that asset coverage with respect to
borrowings falls at any time below 300%, then the Fund will within three
business days or such longer period as the SEC may prescribe, reduce the amount
of borrowings so that asset coverage shall be at least 300%.
Each Fund may, in the future, seek to achieve its investment objective by
investing all of its assets in a no-load, open-end management investment company
having the same investment objective and policies and substantially the same
investment restrictions as those applicable to a Fund. In such event, the Fund's
investment advisory agreement would be terminated since the investment
management would be performed by or on behalf of such other investment company.
MANAGEMENT
BOARD OF DIRECTORS
The Board of Directors manages the business and affairs of The Lipper Funds
and is responsible for the overall management and operations of each Fund. The
Board of Directors approves all significant agreements between The Lipper Funds
and the persons or companies that furnish services to it, including agreements
with the Lipper & Company, L.L.C. and Prime Lipper Asset Management, the Funds'
investment advisers (each, an "Adviser" and collectively, the "Advisers"),
Lipper & Company, L.P., the Company's principal underwriter and distributor (the
"Distributor"), Chase Global Funds Services Company, the Company's administrator
and transfer agent (the "Administrator"), and The Chase Manhattan Bank, the
Company's custodian. The Board of Directors delegated the day-to-day operations
of The Lipper Funds to the Advisers and the Administrator.
DIRECTORS AND OFFICERS
The directors and officers of The Lipper Funds, their addresses, ages and
principal occupations during the past five years are set forth below:
<TABLE>
<CAPTION>
=========================================================================================================================
(1) | (2) | (3)
- ----------------------------|------------------------------|-------------------------------------------------------------
| POSITION(S) HELD | PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE | WITH THE COMPANY | DURING PAST 5 YEARS
- ----------------------------|------------------------------|-------------------------------------------------------------
<S> | <C> | <C>
Kenneth Lipper* | Director, Chairman of | Chief Executive Officer, President and Managing Member of
101 Park Avenue | the Board and President | Lipper & Company, L.L.C. since 1995; Co-chairman of Prime
New York, NY 10178 | | Lipper Asset Management and its Investment Committee since
Age: 58 | | 1992; Chief Executive Officer and President of Lipper &
| | Company, L.P. since 1991; Chairman, Chief Executive Officer
| | and President of Lipper & Company, Inc. since 1987.
=========================================================================================================================
____________
* Director considered to be an "interested person" of The Lipper Funds as
defined in the Investment Company Act.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================================
(1) | (2) | (3)
- ----------------------------|------------------------------|---------------------------------------------------------------
| POSITION(S) HELD | PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE | WITH THE COMPANY | DURING PAST 5 YEARS
- ----------------------------|------------------------------|---------------------------------------------------------------
<S> | <C> | <C>
Abraham Biderman* | Director, Executive | Executive Vice President of Lipper & Company, L.L.C. since
101 Park Avenue | Vice President, | 1995; Executive Vice President and Member of the Investment
New York, NY 10178 | Treasurer and Secretary | Committee of Prime Lipper Asset Management since 1992;
Age: 52 | | Executive Vice President of Lipper & Company, L.P. since
| | 1991; Executive Vice President of Lipper & Company, Inc.
| | since 1990.
- ----------------------------|------------------------------|-------------------------------------------------------------
Stanley Brezenoff** | Director | Chief Executive Officer of Maimonides Medical Center since
510 E. 23rd Street | | February 1995; Executive Director of Port Authority of New
New York, NY 10010 | | York and New Jersey from September 1990 through February
Age: 63 | | 1995.
- ----------------------------|------------------------------|---------------------------------------------------------------
Martin Maltz** | Director | Principal Scientist, Xerox Corporation
25 Dunrovin Lane | |
Rochester, NY 14618 | |
Age: 59 | |
- ----------------------------|------------------------------|---------------------------------------------------------------
Irwin Russell** | Director | Attorney, Law Offices of Irwin E. Russell since November
433 North Camden Drive | | 1992.
#1200 | |
Los Angeles, CA 90210 | |
Age: 74 | |
- ----------------------------|------------------------------|---------------------------------------------------------------
Steven Finkel | Executive Vice President | Executive Vice President of Lipper & Company, L.L.C. since
101 Park Avenue | | 1995; Executive Vice President of Lipper & Company, L.P.
New York, NY 10178 | | since 1991; Executive Vice President of Lipper & Company,
Age: 53 | | Inc. since 1987.
- ----------------------------|------------------------------|---------------------------------------------------------------
Lawrence S. Block | Vice President | General Counsel, Lipper & Company, L.P., Lipper & Company,
101 Park Avenue | | L.L.C. and their affiliates since 1998; Attorney,
New York, NY 10178 | | Cadwalader, Wickersham & Taft from 1996 through 1997;
Age: 33 | | Attorney, Proskauer Rose Goetz & Mendelsohn LLP from 1992
| | through 1996
- ----------------------------|------------------------------|---------------------------------------------------------------
Kim B. Fields | Vice President | Vice President for Marketing and Product Development, Lipper
101 Park Avenue | | & Company, L.P., Prime Lipper Asset Management and their
New York, NY 10178 | | affiliate since 1998; Fixed income research analyst, Lipper
Age: 31 | | & Company, L.P. and Lipper Convertibles, L.P. from 1996
| | through 1998; Attorney, Gordon Altman Butowsky Weitzen Shalov
| | and Wein from 1993 through 1996.
- ----------------------------|------------------------------|---------------------------------------------------------------
Karl O. Hartmann | Assistant Secretary | Senior Vice President, Secretary and General Counsel of
Chase Global Funds | | Chase Global Funds Services Company ("CGFSC") since November
Services Company | | 1991.
73 Tremont Street | |
Boston, MA 02108-3913 | |
Age: 45 | |
=========================================================================================================================
____________
** Member of The Lipper Funds' Adult Committee and Nominating Committee.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
=========================================================================================================================
(1) | (2) | (3)
- ----------------------------|------------------------------|-------------------------------------------------------------
| POSITION(S) HELD | PRINCIPAL OCCUPATION(S)
NAME, ADDRESS AND AGE | WITH THE COMPANY | DURING PAST 5 YEARS
- ----------------------------|------------------------------|-------------------------------------------------------------
<S> | <C> | <C>
Ellen Watson | Assistant Secretary | Supervisor of State Regulation of CGFSC since November 1991.
Chase Global Funds | |
Services Company | |
73 Tremont Street | |
Boston, MA 02108-3913 | |
Age: 42 | |
- ----------------------------|------------------------------|-------------------------------------------------------------
Helen A. Robichaud | Assistant Secretary | Vice President and Associate General Counsel of CGFSC since
Chase Global Funds | | August 1994.
Services Company | |
73 Tremont Street | |
Boston, MA 02108-3913 | |
Age: 48 | |
- ----------------------------|------------------------------|-------------------------------------------------------------
John M. Corcoran | Assistant Treasurer | Vice President, Director of Fund Administration of CGFSC
Chase Global Funds | | since April 1998; Vice President and Senior Manager of CGFSC
Services Company | | from July 1996 through April 1998; Assistant Vice President
73 Tremont Street | | and Manager of Fund Administration of CGFSC from October
Boston, MA 02108-3913 | | 1993 through July 1996.
Age: 34 | |
- ----------------------------|------------------------------|-------------------------------------------------------------
Patricia M. Leyne | Assistant Treasurer | Vice President and Senior Manager of CGFSC since August
Chase Global Funds | | 1999; Assistant Vice President of Fund Administration of
Services Company | | CGFSC from July 1998 through August 1999; Assistant
73 Tremont Street | | Treasurer of CGFSC from November 1996 through July 1998;
Boston, MA 02108-3913 | | Supervisor of CGFSC from September 1995 through November
Age: 32 | | 1996; Fund Administrator of CGFSC from February 1993 through
| | September 1995.
=========================================================================================================================
</TABLE>
COMPENSATION OF THE DIRECTORS AND OFFICERS
The Lipper Funds does not pay any compensation to any officer or employee
of either of the Advisers or the Administrator for serving as an officer or
director of The Lipper Funds, including Messrs. Lipper and Biderman. The Lipper
Funds pays each director who is not a director, officer or employee of either of
the Advisers or the Administrator (or any of their affiliates) a fee of $8,000
per annum plus $500 per quarterly meeting attended and reimburses them for their
travel and out-of-pocket expenses. The Lipper Funds does not provide any pension
or retirement benefits to any of its directors. The aggregate amount of fees
paid to each non-interested director of The Lipper Funds during the fiscal year
ending December 31, 1999 is set forth below:
=============================================================================
(1) | (2) | (3)
- ------------------------|-----------------------------|----------------------
NAME OF BOARD MEMBER | AGGREGATE COMPENSATION | TOTAL COMPENSATION
- ------------------------|-----------------------------|----------------------
Stanley Brezenoff | $10,000 | $10,000
- ------------------------|-----------------------------|----------------------
Martin Maltz | $10,000 | $10,000
- ------------------------|-----------------------------|----------------------
Irwin Russell | $10,000 | $10,000
=============================================================================
17
<PAGE>
In addition, the Company reimbursed directors for travel and out-of-pocket
expenses for the fiscal year ending December 31, 1999 in the aggregate amount of
$3,198.
By virtue of the responsibilities assumed by the Funds' Advisers, the
Administrator and their affiliates under their respective agreements with The
Lipper Funds, The Lipper Funds itself requires no employees other than its
officers.
SALES LOADS
The Lipper Funds does not charge investors any sales loads for the Funds.
The Lipper Funds offers shares of the Funds to directors, officers and other
affiliated persons on the same terms as it offers such shares to the public.
CODES OF ETHICS
The Lipper Funds, the Advisers and the Distributor have adopted codes of
ethics under Rule 17j-1 of the Investment Company Act. These codes of ethics
permit persons subject to the codes to invest in securities for their personal
accounts, but restrict such persons from investing in securities that may be
purchased or held by any of the Funds.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SHARES OF THE FUNDS
CONTROL PERSONS
Listed below are the names, addresses and percentage ownership of those
shareholders of record of each Fund who own greater than 25% of the shares of a
class of a Fund as of March 3, 2000. Because of their percentage ownership of
shares of a class, such shareholders are deemed to be "control persons" of such
class. In the event of a vote by all of shareholders of The Lipper Funds or by
the shareholders of a particular Fund, the vote of such "control person" will
have greater weight than the vote of other shareholders.
<TABLE>
<CAPTION>
FUND AND CLASS OF SHARES NAME AND ADDRESS OF SHAREHOLDER PERCENTAGE HELD
- ------------------------ ------------------------------- ---------------
<S> <C> <C>
HIGH INCOME BOND FUND -- City National Bank 42.03%
GROUP RETIREMENT PLAN SHARES Creative Artists
Attn. Mutual Funds Processing
P.O. Box 60520
Los Angeles, CA 90060-0520
EUROPE EQUITY FUND -- Lipper & Company Salary Savings Plan 40.54%
GROUP RETIREMENT PLAN SHARES 101 Park Avenue, 6th Floor
New York, NY 10178-0694
City National Bank 34.66%
Creative Artists
Attn. Mutual Funds Processing
P.O. Box 60520
Los Angeles, CA 90060-0520
U.S. EQUITY FUND -- Kenneth Lipper 27.25%
PREMIER SHARES c/o Lipper & Company
101 Park Avenue, 6th Floor
New York, NY 10178-0694
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
FUND AND CLASS OF SHARES NAME AND ADDRESS OF SHAREHOLDER PERCENTAGE HELD
- ------------------------ ------------------------------- ---------------
<S> <C> <C>
U.S. EQUITY FUND -- City National Bank 47.53%
GROUP RETIREMENT PLAN SHARES Creative Artists
Attn. Mutual Funds Processing
P.O. Box 60520
Los Angeles, CA 90060-0520
Lipper & Company Salary Savings Plan 31.22%
101 Park Avenue, 6th Floor
New York, NY 10178-0694
PRINCIPAL HOLDERS OF SHARES OF THE FUNDS
Listed below are the names, addresses and percentage ownership of those
shareholders of record of each Fund who own greater than 5% of the shares of a
class of a Fund as of March 3, 2000:
</TABLE>
<TABLE>
<CAPTION>
FUND AND CLASS OF SHARES NAME AND ADDRESS OF SHAREHOLDER PERCENTAGE HELD
- ------------------------ ------------------------------- ---------------
<S> <C> <C>
HIGH INCOME BOND FUND -- First Trust National Association 10.38%
PREMIER SHARES Agent Frey Group
P.O. Box 64010
St. Paul, MN 55164-0010
The Gruss-Lipper Foundation 7.38%
Joanna Lipper, Successor Trustee
c/o Lipper & Company
101 Park Avenue, 6th Floor
New York, NY 10178-0694
Hadassah Medical Relief Association Inc. 7.30%
50 West 58th Street
New York, NY 10019
Bank Leumi Le Israel Corp. 6.83%
420 Lexington Avenue, 10th Floor
New York, NY 10170
Ridgefield Foundation, Inc. 5.97%
641 Lexington Avenue, 26th Floor
New York, NY 10022
SEI Trust Co. 5.59%
Attn: Mutual Fund Administrator
One Freedom Valley Drive
Oaks, PA 19456
Fred M. Lowenfels, Trustee 5.40%
FBO Leir Charitable Lead Trust II
641 Lexington Avenue
New York, NY 10022
HIGH INCOME BOND FUND -- Fred Milstein 8.27%
RETAIL SHARES 18 Sunburst Drive
Deer Park, NY 11729
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
FUND AND CLASS OF SHARES NAME AND ADDRESS OF SHAREHOLDER PERCENTAGE HELD
- ------------------------ ------------------------------- ---------------
<S> <C> <C>
HIGH INCOME BOND FUND -- Ryan P. Murphy 7.82%
RETAIL SHARES (CONT.) 2718 Westshire Drive
Los Angeles, CA 90068
Rapoport Family Foundation 5.92%
c/o Avar Corp.
1101 17th Street, N.W.
Suite 605
Washington, DC 20036
James R. Jacks 5.36%
760 W. La Cienega Boulevard
Los Angeles, CA 90069
Robert G. Paulus and 5.16%
Kathleen Paulus
186 Phalanx Road
Colts Neck, NJ 07722
HIGH INCOME BOND FUND -- Lipper & Company Salary Savings Plan 23.68%
GROUP RETIREMENT PLAN SHARES 101 Park Avenue, 6th Floor
New York, NY 10178-0694
Lipper & Company Deferred Benefit Plan 21.26%
101 Park Avenue, 6th Floor
New York, NY 10178-0694
H Enterprises 12.01%
2300 One Financial Plaza
120 S. 6th Street
Minneapolis, MN 55402
EUROPE EQUITY FUND -- Kenneth Lipper, Trustee 6.99%
PREMIER SHARES UWIL Joseph Gruss Trust
FBO Evelyn G. Lipper Descendants
101 Park Avenue, 6th Floor
New York, NY 10178-0694
Joseph S. Gruss Trust 5.57%
Raymond Golden, Trustee
c/o Kenneth Lipper
101 Park Avenue, 6th Floor
New York, NY 10178-0694
EUROPE EQUITY FUND -- Lee Caldecot Chubb, Trustee 11.96%
RETAIL SHARES FBO Chubb Family Trust
U/A DTD 8/15/90
410 23rd Street
Santa Monica, CA 90402-3281
Albert J. Crosson, Trustee 8.09%
FBO Virginia K. Crosson
Exemption Equivalent Trust
2380 Rock Hill Circle
Reno, NV 89509
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
FUND AND CLASS OF SHARES NAME AND ADDRESS OF SHAREHOLDER PERCENTAGE HELD
- ------------------------ ------------------------------- ---------------
<S> <C> <C>
EUROPE EQUITY FUND -- Gabriel Ferrucci, Trustee 5.04%
RETAIL SHARES (CONT.) FBO The Gabriel Ferrucci Living Trust
23832 Brant Lane
Laguna Niguel, CA 92677
EUROPE EQUITY FUND -- Lipper & Company Deferred Benefit Plan 23.40%
GROUP RETIREMENT PLAN SHARES 101 Park Avenue, 6th Floor
New York, NY 10178-0694
U.S. EQUITY FUND -- Daniella Lipper, Tamara Lipper and Julie 12.62%
PREMIER SHARES Lipper, Successor Trustees
FBO Joseph Gruss Settlor Trust
101 Park Avenue, 6th Floor
New York, NY 10178-0694
Tamara Lipper, Daniella Lipper and Julie 10.80%
Lipper, Successor Trustees
Joseph Gruss Charitable Lead Trust
101 Park Avenue, 6th Floor
New York, NY 10178-0694
Kenneth Lipper, Trustee 9.83%
UWIL Joseph Gruss Trust
FBO Evelyn Lipper Descendants
c/o Lipper & Company
101 Park Avenue, 6th Floor
New York, NY 10178-0694
Lipper & Company, L.L.C. 6.36%
101 Park Avenue, 6th Floor
New York, NY 10178-0694
U.S. EQUITY FUND -- International Consumer Corp. 8.99%
RETAIL SHARES Profit Sharing Plan
7301 West Palmetto Park Road
Boca Raton, FL 33433
James Jacks Money Purchase Plan 8.89%
760 North La Cienega Boulevard
Los Angeles, CA 90069-5231
Lauren B. Anderson 8.72%
60 East End Avenue, Apt. 21B
New York, NY 10028
Steven S. Anderson 7.75%
60 East End Avenue, Apt. 21B
New York, NY 10028
Kenneth Lipper, Trustee 6.51%
FBO Trust U/W/O Norma Ried
c/o Lipper & Company
101 Park Avenue, 6th Floor
New York, NY 10178
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
FUND AND CLASS OF SHARES NAME AND ADDRESS OF SHAREHOLDER PERCENTAGE HELD
- ------------------------ ------------------------------- ---------------
<S> <C> <C>
U.S. EQUITY FUND -- National Investor Services Corp. 5.67%
RETAIL SHARES (CONT.) 55 Water Street, 32nd Floor
New York, NY 10041
Jamie G. Feig 5.36%
7268 Mandarin Drive
Boca Raton, FL 33433
Donald Petrie 5.25%
UTMA Custodian for
Emily C. Petrie
760 N. La Cienega Boulevard
Los Angeles, CA 90069
Donald Petrie 5.25%
UTMA Custodian for
Charles D. Petrie
760 N. La Cienega Boulevard
Los Angeles, CA 90069
Carol Goren 5.22%
890 Bobby's Court
Ridgefield, CT 06877
U.S. EQUITY FUND -- Lipper & Company 21.21%
GROUP RETIREMENT PLAN SHARES Deferred Benefit Plan
101 Park Avenue, 6th Floor
New York, NY 10178-0694
</TABLE>
MANAGEMENT OWNERSHIP OF SHARES OF THE FUNDS
Listed below are the number of shares of each class of each Fund owned
beneficially by all directors and officers of The Lipper Funds as a group as of
March 3, 2000:
NUMBER OF SHARES
FUND AND CLASS BENEFICIALLY OWNED PERCENTAGE OWNERSHIP
-------------- ------------------ --------------------
HIGH INCOME BOND FUND
Premier Shares 110,787.117 1.50%
Retail Shares 10,867.050 1.67%
Group Retirement Plan Shares 175,553.400 45.13%
EUROPE EQUITY FUND
Premier Shares 1,642,030.159 16.47%
Retail Shares 25,857.696 8.82%
Group Retirement Plan Shares 173,161.391 65.02%
U.S. EQUITY FUND
Premier Shares 390,544.282 23.91%
Retail Shares 4,243.857 8.97%
Group Retirement Plan Shares 171,370.440 52.47%
22
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISERS
Lipper & Company, L.L.C. serves as the investment adviser to the High
Income Bond Fund and the U.S. Equity Fund. Prime Lipper Asset Management serves
as investment adviser to the Europe Equity Fund. The Advisers are located at 101
Park Avenue, New York, New York 10178, and are registered as investment advisers
under the Investment Advisers Act of 1940, as amended.
Lipper & Company, L.L.C. is an affiliate of Lipper & Company, L.P., the
principal underwriter and distributor of The Lipper Funds. Lipper & Company,
L.P. is a privately owned investment management and investment banking firm
founded in 1987. At December 31, 1999, Lipper & Company, L.P. and its affiliates
managed assets having an aggregate market value on a gross basis of
approximately $5.5 billion on behalf of its institutional and high net worth
clients. Lipper and its affiliates serve as the general partner and/or
investment adviser to several U.S. and non-U.S. investment limited partnerships
and mutual funds that offer complementary investment strategies in
intermediate-term high yield bonds, hedged convertible securities, investment
grade bonds, U.S. and European large capitalization equity securities and merger
arbitrage. Lipper & Company, L.P. is registered as a broker-dealer with the SEC,
the NASD and a majority of the States, and as an investment adviser with the
SEC. Lipper & Company, L.P.'s address is the same as that of the Advisers.
Prime Lipper Asset Management is a joint venture between Lipper Europe,
L.P., an affiliate of Lipper & Company, L.P., and Prime USA Inc., a wholly owned
subsidiary of Prime S.p.A. Lipper Europe is a limited partnership for which
Lipper & Company, Inc. is the general partner and Lipper & Company, L.P. is the
limited partner.
Prime S.p.A. is a subsidiary of Assicurazioni Generali S.p.A., the Italian
insurance company. Prime, through subsidiaries and affiliates, is among the
oldest asset managers in Italy, and specializes in management of portfolios
invested in European issuers, with approximately $8.7 billion of assets under
management as of December 31, 1999 from domestic and international investors.
Kenneth Lipper, Chairman and President of The Lipper Funds, is a control
person of the Funds' Advisers and the Distributor. Mr. Lipper is the Chief
Executive Officer, President and Managing Member of Lipper & Company, L.L.C.,
Chief Executive Officer and President of Lipper & Company, L.P., and Co-Chairman
of Prime Lipper Asset Management and its Investment Committee. Abraham Biderman,
a director, Secretary, Treasurer and Executive Vice President of The Lipper
Funds, is an Executive Vice President of Lipper & Company, L.P. and the Advisers
and a member of the Investment Committee of Prime Lipper Asset Management.
Francesco Taranto, Managing Director of Prime S.p.A., is Co-Chairman of Prime
Lipper Asset Management and its Investment Committee. Steven Finkel, an
Executive Vice President of The Lipper Funds, is an Executive Vice President of
Lipper & Company, L.L.C. and Lipper & Company, L.P. Lawrence Block, a Vice
President of The Lipper Funds, is General Counsel for Lipper & Company, L.P. and
the Advisers. Kim Fields, a Vice President of The Lipper Funds, is Vice
President for Marketing and New Product Development for Lipper & Company, L.P.
and the Advisers.
INVESTMENT ADVISORY SERVICES AND COMPENSATION
The Advisers serve as the Funds' investment advisers pursuant to separate
written advisory agreements approved by the Company's Board of Directors,
including a majority of the directors who are not "interested persons" (as
defined in the Investment Company Act) of The Lipper Funds or the Advisers.
The Lipper Funds has agreed to pay Lipper & Company, L.L.C. under separate
investment advisory agreements an annual fee computed daily and paid monthly at
the annual rate of 0.75% of the High Income Bond
23
<PAGE>
Fund's average daily net assets and 0.85% of the U.S. Equity Fund's average
daily net assets. The Lipper Funds has agreed to pay Prime Lipper Asset
Management under an investment advisory agreement an annual fee computed daily
and paid monthly at the annual rate of 1.10% of the Europe Equity Fund's average
daily net assets. From time to time, the Advisers may voluntarily waive for a
period of time all or a portion of their investment advisory fees with respect
to any of the Funds.
The following tables set forth the amount of fees the Funds paid to the
Advisers and the amount of advisory fees (if any) waived by the Advisers:
MANAGEMENT FEES PAID BY THE
HIGH INCOME BOND FUND TO LIPPER & COMPANY, L.L.C.
Period Management Fees Paid Management Fees Waived
------ -------------------- ----------------------
Year ended December 31, 1999 $522,540 $140,133
Year ended December 31, 1998 $553,087 $137,400
Year ended December 31, 1997 $608,516 $170,854
Period ended December 31, 1996 $344,390 $198,834
MANAGEMENT FEES PAID BY THE
U.S. EQUITY FUND TO LIPPER & COMPANY, L.L.C.
Period Management Fees Paid Management Fees Waived
------ -------------------- ----------------------
Year ended December 31, 1999 $118,893 $110,370
Year ended December 31, 1998 $110,556 $103,555
Year ended December 31, 1997 $30,017 $100,445
Period ended December 31, 1996 $0 $99,280
MANAGEMENT FEES PAID BY THE
EUROPE EQUITY FUND TO PRIME LIPPER ASSET MANAGEMENT
Period Management Fees Paid Management Fees Waived
------ -------------------- ----------------------
Year ended December 31, 1999 $1,494,623 $0
Year ended December 31, 1998 $1,198,678 $0
Year ended December 31, 1997 $837,255 $0
Period ended December 31, 1996 $383,796 $74,333
The Advisers bear all expenses in connection with the performance of their
services and pay the salaries of all officers or employees who are employed by
them. Each Fund pays for brokerage fees and commissions (if any) in connection
with the purchase and sale of portfolio securities.
RULE 12B-1 PLANS
The Board of Directors has adopted a Rule 12b-1 distribution plan for the
Retail Shares of the Funds and a shareholder servicing plan for the Group
Retirement Plan Shares of the Funds.
RETAIL DISTRIBUTION PLAN
An investment company may bear expenses of distributing its shares only
pursuant to a plan adopted in accordance with Rule 12b-1, promulgated by the SEC
under the Investment Company Act. Some or all of the fees paid by the Retail
Shares of each Fund to the Distributor and to certain participating dealers,
including banks and financial services firms
24
<PAGE>
that provide distribution, administrative or shareholder services to the Funds,
could be deemed to be payment of distribution expenses. Accordingly, the Board
of Directors has adopted a plan with respect to the Retail Shares of each Fund.
The Board of Directors believes that there is a reasonable likelihood that the
Retail Distribution Plan will benefit each Fund and the holders of its Retail
Shares.
Under the Retail Distribution Plan, Retail Shareholders pay the Funds'
Distributor an annual fee of 0.25% of the value of the average daily net assets
of the Funds' Retail Shares for distributing those shares. The Retail
Shareholders pay this fee to cover various expenses of the Distributor,
including advertising, printing and mailing prospectuses to persons other than
current shareholders of the Funds, and compensation to participating dealers,
without regard to the actual expenses the Distributor incurs. The Distributor
may, in turn, pay one or more participating dealers a fee for distributing the
Funds' Retail Shares in an amount and manner the Distributor determines. The
Retail Distribution Plan also provides that the Advisers may pay participating
dealers out of their investment advisory fees, their past profits or any other
source available to the Advisers. From time to time, the Distributor may defer
or waive for a period of time its fees under the Retail Distribution Plan. The
Funds' Premier Shares and Group Retirement Plan Shares do not bear any fees
under the Retail Distribution Plan.
Quarterly reports of the amounts expended under the Retail Distribution
Plan with respect to each Fund, and the purposes for which such expenditures
were incurred, must be made to the Board of Directors for its review. In
addition, the Retail Distribution Plan provides that it may not be amended to
increase materially the costs that the Retail Shares of any Fund may bear
pursuant to such plan without approval of the holders of such Fund's Retail
Shares, and that other material amendments of the Retail Distribution Plan must
be approved by the Board of Directors and by the directors who are neither
interested persons of The Lipper Funds nor have any direct or indirect financial
interest in the operation of such plan or in any agreements entered into in
connection with such plan, by vote cast in person at a meeting called for the
purpose of considering such amendments. The Retail Distribution Plan and any
agreements entered into in connection with such plan are subject to annual
approval with respect to each Fund by such vote of the Board of Directors cast
in person at a meeting called for the purpose of voting on the Retail
Distribution Plan. The Retail Distribution Plan may be terminated at any time
with respect to any Fund by vote of a majority of the directors who are not
interested persons and have no direct or indirect financial interest in the
operation of such plan or in any agreements entered into in connection with such
plan or by vote of a majority of the Retail Shares of a Fund. Any agreement
entered into in connection with the Retail Distribution Plan may be terminated
without penalty at any time, by such vote. Each such agreement will terminate
automatically in the event of its assignment (as defined in the Investment
Company Act).
In accordance with the Retail Distribution Plan, the Distributor accrued
fees from the High Income Bond Fund, U.S. Equity Fund and Europe Equity Fund in
the amount of $17,158, $2,778 and $8,142, respectively, as compensation for the
distribution of the Funds' Retail Shares during the fiscal year ended December
31, 1999.
For the fiscal year ending December 31, 1999, the Distributor incurred fees
for distributing the Funds:
<TABLE>
<CAPTION>
High Income Bond Fund U.S. Equity Fund Europe Equity Fund
--------------------- ---------------- ------------------
<S> <C> <C> <C>
Printing Prospectuses $1,716 $1,716 $1,716
Advertising $9,264 $6,467 $13,961
Compensation to Other Broker-Dealers
for Distributing the Funds' Share $8,244 $2,000 $6,033
</TABLE>
GROUP RETIREMENT SERVICING PLAN
As set forth in the Prospectuses, the Board of Directors has adopted a
Group Retirement Servicing Plan, whereby The Lipper Funds intends to enter into
shareholder servicing agreements pursuant to which participating dealers and
sometimes the Funds' Distributor will, as agent for their customers, render
certain administrative services to their customers who are beneficial owners of
Group Retirement Plan Shares. Under the Group Retirement Servicing Plan, Group
Retirement Plan Shareholders may pay one or more participating dealers
25
<PAGE>
and/or the Distributor an annual fee of up to 0.25% of the value of the average
daily net assets of the Funds' Group Retirement Plan Shares for providing one or
more of the services described in the Prospectuses. Such services are intended
to supplement the services provided by the Company's Administrator and Transfer
Agent. Servicing agreements between The Lipper Funds and participating dealers
and/or the Distributor with respect to the Funds' Group Retirement Plan Shares
will be terminable by either party at any time without penalty.
Conflict of interest restrictions may apply to an institution's receipt of
compensation paid by the Funds in connection with the investment of fiduciary
monies in the Funds. Institutions, including banks regulated by state banking
authorities and the Board of Governors of the Federal Reserve System and
investment advisers and other money managers subject to the jurisdiction of the
SEC, the Department of Labor or state securities commissions are urged to
consult their legal advisers before investing fiduciary monies in the Funds.
Group Retirement Plan Shareholders of the High Income Bond Fund, U.S.
Equity Fund and Europe Equity Fund paid fees of $12,989, $9,264 and $7,067,
respectively, during the fiscal year ended December 31, 1999, for shareholder
services.
ADMINISTRATOR
Chase Global Funds Services Company, 73 Tremont Street, Boston, MA 02108,
serves as the Funds' administrator pursuant to an Administrative Services
Agreement. The Administrator is a corporate affiliate of The Chase Manhattan
Bank. The Administrator has agreed to provide the following services to the
Company: (1) assist generally in supervising each Fund's operations, providing
and supervising the operation of an automated data processing system to process
purchase and redemption orders, providing information concerning the Funds to
their shareholders of record, handling shareholder problems, supervising the
services of employees whose principal responsibility and function is to preserve
and strengthen shareholder relations and monitoring the arrangements pertaining
to The Lipper Funds' agreements with participating dealers; (2) prepare reports
to the Funds' shareholders and prepare tax returns and reports to and filings
with the SEC; (3) compute the net asset value per share of each class of each
Fund; (4) provide the services of certain persons who may be elected as
directors or appointed as officers by the Board of Directors; and (5) maintain
the registration of each Fund's shares for sale under state securities laws.
The Lipper Funds pays the Administrator as compensation for its services a
monthly fee at the annual rate of 0.20% of the value of the Funds' average daily
net assets up to and including $200 million; 0.10% of the Funds' average daily
net assets in excess of $200 million up to and including $400 million; and 0.05%
of the Funds' average daily net assets in excess of $400 million. The following
table sets forth the amount of fees paid by each of the Funds to the
Administrator:
FEES PAID BY THE FUNDS TO THE ADMINISTRATOR
<TABLE>
<CAPTION>
Administration Fee Administration Fee Administration Fee
Paid by the Paid by the Paid by the
Period High Income Bond Fund U.S. Equity Fund Europe Equity Fund
------ --------------------- ---------------- ------------------
<S> <C> <C> <C>
Year ended December 31, 1999 $193,025 $78,306 $271,813
Year ended December 31, 1998 $204,009 $76,675 $224,826
Year ended December 31, 1997 $245,328 $73,478 $170,709
Period ended December 31, 1996 $164,042 $76,284 $96,187
</TABLE>
CUSTODIAN
The Chase Manhattan Bank, 270 Park Avenue, New York, NY 10017, serves as
The Lipper Funds custodian pursuant to a Custody Agreement. Under the Custody
Agreement, the Custodian holds the Funds' portfolio securities and keeps all
necessary accounts and records. For its services, the Custodian receives a
26
<PAGE>
monthly fee based upon the month-end market value of securities held in custody
and also receives securities transaction charges, including out-of-pocket
expenses. The Lipper Funds' assets are held under bank custodianship in
compliance with the Investment Company Act.
TRANSFER AGENT
Chase Global Funds Services Company serves as The Lipper Funds' transfer
agent pursuant to the Administrative Services Agreement. Under the
Administrative Services Agreement, the Transfer Agent maintains the shareholder
account records for The Lipper Funds, handles certain communications between
shareholders and The Lipper Funds, distributes dividends and distributions
payable by The Lipper Funds and produces statements with respect to account
activity for The Lipper Funds and its shareholders. For these services, the
Transfer Agent receives a monthly fee computed separately for each class of each
Fund's shares and is reimbursed separately by each class for out-of-pocket
expenses.
DISTRIBUTION OF THE FUNDS
DISTRIBUTION OF SECURITIES
Lipper & Company, L.P., 101 Park Avenue, New York, NY 10178, serves as the
principal underwriter and distributor of the shares of The Lipper Funds. The
Distributor and its employees are affiliated persons of the Advisers and The
Lipper Funds. The Distributor distributes the Funds' shares continuously on a
best efforts basis pursuant to an agreement that is renewable annually. Pursuant
to the Retail Distribution Plan, the Distributor is entitled to receive an
annual distribution fee in the amount of 0.25% of the value of the average daily
net assets of the Funds' Retail Shares. The Distributor may also receive all or
a portion of the annual service fee of up to 0.25% (on an annualized basis) of
the value of the average daily net assets of the Funds' Group Retirement Plan
Shares. See "Rule 12b-1 Plans."
The following table sets forth the amount of fees accrued by the
Distributor under the Rule 12b-1 Plans:
<TABLE>
<CAPTION>
Rule 12b-1 Fee Rule 12b-1 Fee Rule 12b-1 Fee
Accrued by the Accrued by the Accrued by the
Period High Income Bond Fund U.S. Equity Fund Europe Equity Fund
------ --------------------- ---------------- ------------------
<S> <C> <C> <C>
Year ended December 31, 1999 $17,158 $2,778 $8,142
Year ended December 31, 1998 $14,372 $3,263 $5,135
Year ended December 31, 1997 $6,323 $2,180 $2,356
Period ended December 31, 1996 $824 $1,028 $829
</TABLE>
COMPENSATION
Set forth below is the commissions and other compensation received by the
Distributor, directly or indirectly, for the fiscal year ending December 31,
1999:
===============================================================================
(1) | (2) | (3) | (4)
- ------------------------|--------------------|-----------------|---------------
| NET UNDERWRITING | COMPENSATION ON |
NAME OF | DISCOUNTS AND | REDEMPTIONS AND | BROKERAGE
PRINCIPAL DISTRIBUTOR | COMMISSIONS | REPURCHASES | COMMISSIONS
- ------------------------|--------------------|-----------------|---------------
Lipper & Company, L.P. | $0 | $0 | $0
===============================================================================
27
<PAGE>
OTHER PAYMENTS
In accordance with the Group Retirement Servicing Plan, The Lipper Funds
may enter into servicing agreements whereby participating dealers, including the
Distributor, will render certain administrative services to their customers who
are beneficial owners of the Funds' Group Retirement Plan Shares. These services
are intended to supplement the services provided by the Administrator and
Transfer Agent. Under the Group Retirement Servicing Plan, Group Retirement Plan
Shareholders may pay one or more participating dealers and/or the Distributor an
annual fee of up to 0.25% of the value of the average daily net assets of the
Funds' Group Retirement Plan Shares for providing various administrative or
shareholder services to the Funds' Group Retirement Shares.
The Distributor, the Advisers and their affiliates may pay one or more
participating dealers out of their fees, past profits or any other available
source a fee for distributing the Funds' Premier Shares.
COMPENSATION TO DEALERS
Under the Retail Distribution Plan, the Funds' Retail Shareholders pay the
Distributor an annual fee of up to 0.25% of the value of the average daily net
assets of the Funds' Retail Shares for distributing those shares. The
Distributor may use this distribution fee, among other things, to compensate or
reimburse selected dealers for providing distribution and related services to a
Fund.
The Distributor customarily pays selected dealers with whom it has entered
into a distribution agreement a fee in the amount of 0.25% of the value of the
average daily net assets of the Funds attributable to the dealer. However, the
Distributor has entered into distribution agreements with Fidelity Investment
Advisor Group and Charles Schwab & Co., Inc., whereby the Distributor has agreed
to pay 0.35% of the value of the average daily net assets of the Funds' Retail
Classes attributable to Fidelity and Schwab, respectively.
BROKERAGE ALLOCATION AND OTHER PRACTICES
BROKERAGE TRANSACTIONS
Subject to the general control of the Board of Directors, Advisers are
responsible for making decisions with respect to, and placing orders for, all
purchases and sales of portfolio securities for the Funds for which each serves
as investment adviser. Portfolio transactions for the U.S. Equity Fund and the
Europe Equity Fund will involve the payment of brokerage commissions. Portfolio
transactions for the High Income Bond Fund will occur primarily with issuers,
underwriters and major dealers acting as principals. Portfolio transactions for
the U.S. Equity Fund and the Europe Equity Fund may consist of such
transactions. Such transactions are normally on a net basis, include any markups
and markdowns, and do not involve the payment of brokerage commissions. The cost
of securities purchased from underwriters includes an underwriter's commission
or concession, and the prices at which securities are purchased from and sold to
dealers include an undisclosed dealer spread. Transactions on foreign securities
exchanges may involve the payment of negotiated brokerage commissions that may
vary among different brokers or the payment of fixed brokerage commissions.
Investment decisions for each Fund are made independently from those for
the other Funds or other investment company portfolios or accounts advised by
the Advisers or their affiliates. Such other portfolios may also invest in the
same securities as the Funds. When purchases or sales of the same security are
made at substantially the same time on behalf of such other portfolios or
accounts, transactions are averaged as to price, and available investments
allocated as to amount, in a manner that the Advisers believe to be equitable to
each portfolio, including the Funds, pursuant to procedures adopted by the
Advisers and approved by the Company's Board of Directors. In some instances,
these investment procedures may adversely affect the price paid or received by
the Funds or the size of the position obtainable for a Fund.
28
<PAGE>
To the extent permitted by law, the Advisers may aggregate or "bunch" the
securities to be sold or purchased for the Funds with those to be sold or
purchased for such other portfolios or accounts in order to obtain best
execution. Bunching allows the Advisers to facilitate best execution and to
reduce brokerage commissions or other costs. The Funds and such other portfolios
participate at the average share price for all of the Advisers' transactions in
a particular security on a given business day for such bunched order. An Adviser
generally allocates securities purchased or sold in a bunched transaction to the
Fund and such other portfolio before the bunched order is placed, as determined
by the Adviser to be fair and equitable and consistent with the Adviser's
fiduciary responsibility. Allocation decisions may vary from transaction to
transaction and depend upon factors including, but not limited to, the type of
investment, the number of shares purchased or sold, the size of the account, and
the size of an existing security position in a client account. After execution
of the bunched order, the Adviser allocates the transaction to the Fund and such
other portfolio according to the allocation decision made by the Adviser before
it placed the transaction. If the Adviser is unable to fully execute a bunched
transaction, the transaction is allocated pro rata to the Fund and such other
portfolio. However, if the Adviser determines that it would be impractical to
allocate a small number of securities among the Fund and such other portfolios
on a pro-rata basis, the Adviser may allocate the securities in a manner
determined in good faith to be fair and equitable. In addition, the Adviser may
increase or decrease the amount of securities allocated to the Fund and such
other portfolio if necessary to avoid holding odd-lot or small number of shares
or to satisfy the regulatory or other investment requirements of the Fund or
such other portfolio.
The following table sets forth the amount of brokerage commissions paid by
the Funds:
<TABLE>
<CAPTION>
Brokerage Fees Brokerage Fees Brokerage Fees
Paid by the Paid by the Paid by the
Period High Income Bond Fund U.S. Equity Fund Europe Equity Fund
------ --------------------- ---------------- ------------------
<S> <C> <C> <C>
Year ended December 31, 1999 $0 $38,813 $343,786
Year ended December 31, 1998 $0 $56,289 $346,663
Year ended December 31, 1997 $0 $25,838 $370,449
Period ended December 31, 1996 $0 $26,389 $163,654
</TABLE>
BROKERAGE SELECTION
In making portfolio investments, the Advisers seek to obtain the best net
price and the most favorable execution of orders, taking into account factors
such as (1) the general execution and operational facilities of the broker or
dealer, (2) the type and size of the transaction involved, (3) the
creditworthiness of the broker or dealer, (4) the stability of the broker or
dealer, (5) execution and settlement capabilities, (6) time required to
negotiate and execute the trade, (7) overall performance and (8) the broker's
commissions or dealer's spread or mark-up. To the extent that the execution and
price offered by more than one broker or dealer are comparable, the Advisers
may, in their discretion, effect transactions in portfolio securities with
brokers or dealers who provide the Advisers with research advice or other
services. Research advice and other services furnished by brokers through whom
the Funds effect securities transactions may be used by the Advisers and their
affiliates in servicing accounts in addition to the Funds, and not all such
services will necessarily benefit the Funds.
While the Advisers generally seek the best price in placing its order, the
Funds may not necessarily be paying the lowest price available. Notwithstanding
the above, the Advisers may, in compliance with Section 28(e) of the Securities
Exchange Act of 1934, as amended, select brokers who charge a commission in
excess of that charged by other brokers, if the Advisers determine in good faith
that the commission to be charged is reasonable in relation to the brokerage and
research services provided to the Advisers by such broker. The Advisers may also
have arrangements with brokers pursuant to which such brokers provide research
services to the Advisers in exchange for a certain volume of brokerage
transactions to be executed through such broker.
29
<PAGE>
With respect to over-the-counter transactions, the Funds, where possible,
will deal directly with the dealers who make a market in the securities involved
except in those circumstances where better prices and execution are available
elsewhere.
The Funds will not execute portfolio transactions through, acquire
portfolio securities issued by or enter into repurchase agreements with the
Advisers or any affiliated person (as such term is defined in the Investment
Company Act) of the Advisers, except to the extent permitted by the SEC. The
Funds will not purchase securities during the existence of any underwriting or
selling group relating thereto of which the Advisers or any affiliate thereof is
a member, except to the extent permitted by the SEC. Under certain
circumstances, the Funds may be at a disadvantage because of these limitations
in comparison with other investment company portfolios that have similar
investment objectives but are not subject to such limitations.
CAPITAL STOCK
The Lipper Funds has authorized capital stock of 10,000,000,000 shares
having a par value of $.001 per share. The Lipper Funds' Articles of Amendment
and Restatement currently authorizes the issuance of three series of shares, one
series corresponding to each of the U.S. Equity Fund, High Income Bond Fund and
Europe Equity Fund. The Articles of Amendment and Restatement also authorizes
three classes of shares with respect to each series, Premier Shares, Retail
Shares and Group Retirement Plan Shares. The Board of Directors may, in the
future, authorize the issuance of additional series of capital stock
representing shares of additional investment funds or additional classes of
shares of the Funds.
Shares of each class of each Fund represent interests in the Fund in
proportion to the net asset value of each class. A Fund's expenses are allocated
to each class of the Fund's shares based upon expenses identifiable by class or
the relative net assets of the class and the other classes of its shares.
All shares of The Lipper Funds have equal voting rights and will be voted
in the aggregate, and not by series or class, except where voting by series or
class is required by law or where the matter involved affects one series or
class. Under the corporate law of the State of Maryland, The Lipper Funds' state
of incorporation, and The Lipper Funds' By-Laws (except as required under the
Investment Company Act), The Lipper Funds is not required and does not currently
intend to hold annual meetings of shareholders for the election of directors.
Shareholders, however, do have the right to call for a meeting to consider the
removal of one or more of the directors if such a request is made, in writing,
by the holders of at least 10% of the outstanding voting The Lipper Funds'
securities. To the extent required by law, The Lipper Funds will assist in
shareholder communication in such matters.
All shares of The Lipper Funds, when issued, will be fully paid and
nonassessable.
As used in this Statement of Additional Information and in the
Prospectuses, a "majority of the outstanding shares," when referring to the
Investment Company Act approvals to be obtained from shareholders in connection
with matters affecting any particular Fund (e.g., approval of investment
advisory contracts) or any particular class (e.g., approval of the plan of
distribution with respect to the Retail Shares of each Fund) means the lesser of
(1) 67% of the shares of that particular portfolio or class, as appropriate,
represented at a meeting at which the holders of more than 50% of the
outstanding shares of such portfolio or class, as appropriate, are present in
person or by proxy, or (2) more than 50% of the outstanding shares of such
portfolio or class, as appropriate.
Shares of each class of each Fund are entitled to such dividends and
distributions out of the assets belonging to that class as are declared in the
discretion of the Board of Directors. In determining the net asset value of a
class of a portfolio, assets belonging to a particular class are credited with a
proportionate share of any general assets of The Lipper Funds not belonging to a
particular class of a portfolio and are charged with the
30
<PAGE>
direct liabilities in respect of that class of the portfolio and with a share of
the general liabilities of The Lipper Funds that are normally allocated in
proportion to the relative net asset values of the respective classes of the
portfolios of The Lipper Funds at the time of allocation.
Shareholders of each class of each Fund have the right to redeem their
shares, as more fully set forth in the Prospectuses under "Shareholder
Information - Purchasing Fund Shares" and "Shareholder Information Other
Purchase Information."
Subject to compliance with the requirements of the Investment Company Act,
the Articles of Amendment and Restatement authorizes the Board of Directors to
provide that shareholders of each class of each Fund shall have the right to
convert or exchange their shares into shares of one or more other Funds. The
Board of Directors has established such procedures, which are more fully set
forth in the Prospectuses under "Shareholder Information - Exchange Privilege"
and "Shareholder Information - Other Exchange Information."
In the event of the liquidation or dissolution of The Lipper Funds, shares
of each class of a Fund are entitled to receive the assets attributable to it
that are available for distribution, and a proportionate distribution, based
upon the relative net assets of the classes of each portfolio, of any general
assets not attributable to a portfolio that are available for distribution.
Shareholders are not entitled to any preemptive rights.
Subject to the provisions of the Articles of Amendment and Restatement,
determinations by the Board of Directors as to the direct and allocable
liabilities and the allocable portion of any general assets of The Lipper Funds
with respect to a particular portfolio or class are conclusive.
VALUATION OF SHARES
The net asset value of each share is based on the net asset value of each
of the Fund's classes. Because of the differences in distribution fees, service
fees and class-specific expenses, the net asset value per share of each class of
each Fund may differ. In addition, although The Lipper Funds does not charge any
sales loads, certain dealers may charge you fees in connection with your
purchases of the Funds' shares.
The Lipper Funds computes the net asset value per share by dividing the
value of the net assets of each of the Fund's classes by the total number of
shares of that class outstanding as of the close of regular trading on the New
York Stock Exchange. The net asset value per share of each class of shares of
each Fund is calculated Monday through Friday, except on days on which the NYSE
is closed. Currently, the NYSE is closed on New Year's Day, Martin Luther King,
Jr.'s Birthday, Presidents' Day, Good Friday, Memorial Day (observed),
Independence Day (observed), Labor Day, Thanksgiving Day and Christmas Day.
The following is a description of the procedures used by each Fund in
valuing its assets. Except as described below, securities traded on an exchange
will be valued on the basis of the last sale price on the principal market on
which such securities are traded, on the date on which the valuation is made or,
in the absence of sales in such market will be valued at the mean between the
closing bid and asked prices, if available. Equity securities traded on the
NASDAQ National Market System for which no sales prices are available and
over-the-counter securities will be valued on the basis of the bid prices at the
close of business on each day, or, if market quotations for those securities are
not readily available, at fair value, as determined in good faith by the Board
of Directors. Fixed income securities may be valued on the basis of valuations
provided by brokers and/or a pricing service that uses information with respect
to transactions in fixed income securities, quotations from dealers and prices
of comparable securities. Such valuations may reflect bid or mean between bid
and asked prices for securities. Securities that are traded both in the
over-the-counter market and on a stock exchange will be valued according to the
broadest and most representative market. Securities may be valued by independent
pricing services or other sources. Short-term obligations with maturities of 60
days or less are valued at amortized cost, which constitutes fair value as
determined by the Board of Directors. Amortized cost involves valuing an
31
<PAGE>
instrument at its original cost to a Fund and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. All other
securities and other assets of a Fund will be valued at fair value as determined
in good faith by the Advisers in accordance with procedures approved by The
Lipper Funds' Board of Directors.
ADDITIONAL PURCHASE, REDEMPTION AND EXCHANGE INFORMATION
PURCHASE, REDEMPTION AND EXCHANGE OF SHARES
Information on how to purchase, redeem and exchange shares of each Fund is
included in the Prospectuses under "Shareholder Information." The issuance of a
Fund's shares is recorded on such Fund's books, and certificates for shares are
not issued unless expressly requested in writing to the Transfer Agent.
Certificates are not issued for fractional shares.
SUSPENSION OF THE RIGHT OF REDEMPTION
Under the Investment Company Act, a Fund may suspend the right of
redemption or postpone the date of payment upon redemption for any period during
which the NYSE is closed, other than customary weekend and holiday closings, or
during which trading on the NYSE is restricted, or during which (as determined
by the SEC by rule or regulation) an emergency exists as a result of which
disposal or valuation of portfolio securities is not reasonably practicable, or
for such other periods as the SEC may permit. (A Fund may also suspend or
postpone the recordation of the transfer of its shares upon the occurrence of
any of the foregoing conditions.)
REDEMPTION IN KIND
Each Fund is obligated to redeem shares solely in cash up to $250,000 or 1%
of its net asset value, whichever is less, for any one shareholder within a
90-day period. Any redemption beyond this amount will also be in cash unless the
Board of Directors determines that conditions exist that make payment of
redemption proceeds wholly in cash unwise or undesirable. In such a case, a Fund
may make payment wholly or partly in readily marketable securities or other
property, valued in the same way as such Fund determines net asset value.
Redemption in kind is not as liquid as a cash redemption. Shareholders who
receive a redemption in kind may incur transaction costs, if they sell such
securities or property, and may receive less than the redemption value of such
securities or property upon sale, particularly where such securities are sold
prior to maturity.
Pursuant to procedures approved by The Lipper Funds' Board of Directors,
each Fund may satisfy a redemption request from an affiliated person (whether or
not such affiliated person is an investment company registered under the
Investment Company Act) by means of an in-kind distribution of portfolio
securities, provided that (1) the redemption in kind is effected at
approximately the affiliated shareholder's proportionate share of the Fund's
current net assets, (2) the distributed securities are valued in the same manner
as they are valued for purposes of computing the Fund's net asset value, (3) the
redemption in kind is consistent with the Fund's redemption policies and
undertakings, as set forth in the Fund's Prospectus and this SAI, and (4)
neither the affiliated shareholder nor any other party with the ability and the
pecuniary incentive to influence the redemption in kind selects, or influences
the selection of, the distributed securities.
ADDITIONAL INFORMATION CONCERNING TAXATION OF THE FUNDS
The following discussion is only a brief summary of certain additional tax
considerations affecting the Funds and their shareholders. No attempt is made to
present a detailed explanation of all federal, state and local tax concerns, and
the discussion set forth here and in the Prospectuses is not intended as a
substitute for careful
32
<PAGE>
tax planning. Investors are urged to consult their own tax advisers with
specific questions relating to federal, state or local taxes.
Each Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended, and to continue
to so qualify. Qualification as a regulated investment company requires, among
other things, that a Fund: (1) derive at least 90% of its gross income in each
taxable year from dividends, interest, payments with respect to securities loans
and gains from the sale or other disposition of stock, securities or foreign
currencies, or other income (including gains from options, futures or forward
contracts) derived with respect to its business of investing in such stocks,
securities or currencies; and (2) diversify its holdings so that, at the end of
each quarter of each taxable year, (a) at least 50% of the market value of such
Fund's assets is represented by cash, cash items, U.S. government securities,
securities of other registered investment companies and other securities with
such other securities limited, in respect of any issuer, to an amount not
greater than 5% of the value of such Fund's assets and 10% of the outstanding
voting securities of such issuer, and (b) not more than 25% of the value of its
assets is invested in the securities (other than U.S. government securities or
the securities of other registered investment companies) of any one issuer, or
in two or more issuers that a Fund controls and that are engaged in the same or
similar trades or businesses.
If a Fund qualifies as a regulated investment company, such Fund will not
be subject to federal income tax on the portion of its net investment income
(i.e., it investment company taxable income, as that term is defined in the
Internal Revenue Code, without regard to the deduction for dividends paid) and
net capital gain (i.e., the excess of its net long-term capital gains over net
short-term capital losses) that it distributes to shareholders, provides that it
distributes at least 90% of its net investment income for the taxable year.
Distributions by a Fund made during the taxable year or, under specified
circumstances, within twelve months after the close of the taxable year, will be
considered distributions of income and gains of the taxable year and can
therefore satisfy the distribution requirement.
If for any taxable year a Fund does not qualify for tax treatment as a
regulated investment company, all of such Fund's taxable income will be subject
to tax at regular corporate rates without any deduction for distributions to
such Fund's shareholders. In such event, dividend distributions to shareholders
would be taxable as ordinary income to the extent of such Fund's earnings and
profits, and would be eligible for the dividends received deduction in the case
of corporate shareholders.
A 4% non-deductible excise tax is imposed on registered investment
companies that fail to distribute in each calendar year an amount equal to 98%
of ordinary taxable income for the calendar year and 98% of capital gain net
income for the one-year period ended on October 31 of such calendar year (or, at
the election of a regulated investment company having a taxable year ending
November 30 or December 31, for its taxable year (a "taxable year election")).
The balance of such income must be distributed during the next calendar year.
For the foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year. Each Fund intends to make sufficient distributions
or deemed distributions of its ordinary taxable income and any capital gain net
income prior to the end of each calendar year to avoid liability for this excise
tax.
A Fund may make investments that produce income that is not matched by a
corresponding cash distribution to such Fund, such as investments in obligations
that have original issue discount (i.e., an amount equal to the excess of the
stated redemption price of the security at maturity over its issue price), or
market discount (i.e., an amount equal to the excess of the stated redemption
price of the security at maturity over its basis immediately after it was
acquired) if such Fund elects to accrue market discount on a current basis.
Because such income may not be matched by a corresponding cash distribution to a
Fund, such Fund may be required to dispose of other securities to be able to
make distributions to its investors.
Each Fund may engage in hedging or derivatives transactions involving
foreign currencies, forward contracts, option and futures contracts (including
options, futures and forward contracts on foreign currencies)
33
<PAGE>
and short sales. Such transactions will be subject to special provisions of the
Internal Revenue Code that, among other things, may affect the character of
gains and losses realized by a Fund (that is, may affect whether gains or losses
are ordinary or capital), accelerate recognition of income to a Fund and defer
recognition of certain of a Fund's losses. These rules could therefore affect
the character, amount and timing of distributions to shareholders. In addition,
these provisions (1) will require a Fund to "mark-to-market" certain types of
positions in its portfolio (that is, treat them as if they were closed out) and
(2) may cause a Fund to recognize income without receiving cash with which to
pay dividends or make distributions in amounts necessary to satisfy the
distribution requirements for avoiding income and excise taxes. Each Fund
intends to monitor its transactions, will make the appropriate tax elections and
will make the appropriate entries in its books and records when it acquires any
forward contracts, options or hedged investment in order to mitigate the effect
of these rules and prevent disqualification of the Fund as a regulated
investment company.
A Fund may be subject to certain taxes, including without limitation, taxes
imposed by foreign countries with respect to its income and capital gains.
Each Fund's net capital gain, if any, will be taxable to each Fund's
shareholders as long-term capital gain, regardless of how long a shareholder has
held such Fund's shares. Such distributions will be designated as capital gain
dividends in a written notice mailed by a Fund to its shareholders not later
than 60 days after the close of such Fund's taxable year.
Distributions of a Fund's net investment income will be taxable to such
Fund's shareholders as ordinary income, whether paid in cash or reinvested in
additional shares.
Investors should consider the tax implications of buying shares just prior
to a distribution. Although the price of shares purchased at that time may
reflect the amount of the forthcoming distribution, those purchasing just prior
to a distribution will receive a distribution that will nevertheless be taxable
to them.
Gain or loss, if any, on the sale or other disposition of shares of a Fund
will generally result in capital gain or loss to shareholders. Generally, a
shareholder's gain or loss will be a long-term gain or loss if the shares have
been held for more than one year. If a shareholder sells or otherwise disposes
of a share of a Fund before holding it for more than six months, any loss on the
sale or other disposition of such share shall be treated as a long-term capital
loss to the extent of any capital gain dividends received by the shareholder
with respect to such share. Currently, the maximum federal income tax rate
imposed on individuals with respect to long-term capital gain is 20%. The
maximum federal income tax rate imposed on individuals with respect to
short-term capital gain (that is taxed at the same rates as ordinary income) is
39.6%.
Each Fund will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of taxable dividends or 31% of gross redemption proceeds paid
to its shareholders who have failed to provide a correct tax identification
number in the manner required, who are subject to backup withholding by the
Internal Revenue Service for failure properly to include on their return
payments of taxable interest or dividends, or who have failed to certify to such
Fund that they are not subject to backup withholding when required to do so or
that they are "exempt recipients."
A portion of the dividends of net investment income received by corporate
shareholders from a Fund may qualify for the federal dividends received
deduction generally available to corporations. The dividends received deduction
for corporate shareholders may be reduced if the securities with respect to
which dividends are received by a Fund are (1) considered to be "debt-financed"
(generally, acquired with borrowed funds), (2) held by a Fund for less than 46
days (91 days in the case of certain preferred stock) during the 90 day period
beginning on the date that is 45 days before the date on which such shares
become ex-dividend with respect to such dividend (during the 180 day period
beginning 90 days before such date in the case of certain preferred stock)) or
(3) subject to certain forms of hedges or short sales. The amount of any
dividend distribution eligible for the corporate dividends received deduction
will be designated by a Fund in a written notice within 60 days of the
34
<PAGE>
close of the taxable year. Moreover, the dividends-received deduction for a
corporate shareholder may be disallowed or reduced if the corporate shareholder
fails to satisfy the foregoing requirements with respect to its shares of a
Fund. The High Income Bond Fund and the Europe Equity Fund each do not expect to
pay a significant amount of dividends that will be eligible for the corporate
dividends received deduction, if any.
If more than 50% of the value of the total assets of the Europe Equity Fund
at the close of its taxable year consists of the stock or securities of foreign
corporations, the Fund may elect to "pass through" to its shareholders the
amount of foreign taxes paid it. If the Europe Equity Fund so elects, each
shareholder would be required to include in gross income, even though not
actually received, his pro rata share of the foreign taxes paid by the Fund, but
would be treated as having paid his pro rata share of such foreign taxes and
would therefore be allowed to either deduct such amount in computing taxable
income or use such amount (subject to various Internal Revenue Code limitations)
as a foreign tax credit against federal income tax (but not both). For purposes
of the foreign tax credit limitation rules of the Internal Revenue Code, each
shareholder would treat as foreign source income his pro rata share of such
foreign taxes plus the portion of dividends received from the Europe Equity Fund
representing income derived from foreign sources. No deduction for foreign taxes
could be claimed by an individual shareholder who does not itemize deductions.
In certain circumstances, a shareholder that (1) has held shares of the Europe
Equity Fund for less than a specified minimum period during which it is not
protected from risk of loss or (2) is obligated to make payments related to the
dividends, will not be allowed a foreign tax credit for foreign taxes deemed
imposed on dividends paid on such shares. Additionally, the Europe Equity Fund
must also meet this holding period requirement with respect to its foreign
stocks and securities in order for "creditable" taxes to flow-through. Each
shareholder should consult his own tax adviser regarding the potential
application of foreign tax credits.
If a Fund purchases shares in "passive foreign investment companies", the
Fund may be subject to U.S. federal income tax on a portion of any "excess
distribution" or gain from the disposition of shares even if the income is
distributed as a taxable dividend by the Fund to its shareholders. Additional
charges in the nature of interest may be imposed on a Fund with respect to
deferred taxes arising from the distribution or gains. If a Fund were to invest
in a passive foreign investment company and (if the Fund received the necessary
information available from the passive foreign investment company, that may be
difficult to obtain) elected to treat the passive foreign investment company as
a "qualified electing fund" under the Internal Revenue Code, in lieu of the
foregoing requirements, the Fund might be required to include in income each
year a portion of the ordinary earnings and net capital gain of the passive
foreign investment company, even if not distributed to the Fund. Alternatively,
a Fund can elect to mark-to-market at the end of each taxable year its shares in
a passive foreign investment company; in this case, the Fund would recognize as
ordinary income any increase in the value of such shares, and as ordinary loss
any decrease in such value to the extent it did not exceed prior increases
included in income. Under either election, a Fund might be required to recognize
in a year income in excess of its distributions from passive foreign investment
companies and its proceeds from dispositions of passive foreign investment
company stock during that year, and such income would nevertheless be subject to
the distribution requirements to avoid corporate level taxes and the 4% excise
tax.
PERFORMANCE DATA
From time to time, each Fund may quote total return information, and the
High Income Bond Fund may quote yield information, for one or more classes of
its shares in advertisements or in reports and other communications to
shareholders and compare total return and yield on one or more classes of its
shares to that of other funds or accounts with a similar objective and to
relevant indices. Total return for the High Income Bond Fund and the Europe
Equity Fund will include the performance of a corresponding limited partnership
that was the predecessor entity to each Fund.
35
<PAGE>
AVERAGE ANNUAL TOTAL RETURN
Under the rules of the SEC, advertising performance for the Funds must
include "average annual total return" figures computed according to a formula
prescribed by the SEC. The formula can be expressed as follows:
P(1 + T)n = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a hypothetical $1,000 payment made at
the beginning of the 1-, 5-, or 10 year periods at the end of the
1-, 5-, or 10-year period (or fractional portion thereof),
assuming reinvestment of all dividends and distributions.
The following tables sets forth the average annual return for the Funds for
the one and five year periods and since inception:
<TABLE>
<CAPTION>
ANNUAL RETURN AVERAGE ANNUAL
FOR THE ONE YEAR RETURN FOR THE FIVE AVERAGE
PERIOD ENDING YEAR PERIOD ENDING ANNUAL RETURN
DECEMBER 31, 1999 DECEMBER 31, 1999 SINCE INCEPTION*
----------------- ----------------- ----------------
<S> <C> <C> <C>
FUND AND CLASS
EUROPE EQUITY FUND**
Premier Shares 15.70% 22.22% 15.27%
Retail Shares 15.54% 22.02% 15.16%
Group Retirement Plan Shares 15.47% 22.04% 15.16%
U.S. EQUITY FUND
Premier Shares 10.25% N/A 14.95%
Retail Shares 10.01% N/A 14.78%
Group Retirement Plan Shares 9.96% N/A 14.78%
HIGH INCOME BOND FUND**
Premier Shares 4.20% 8.79% 8.71%
Retail Shares 3.84% 8.58% 8.57%
Group Retirement Plan Shares 3.84% 8.57% 8.57%
</TABLE>
_____________
* Inception dates for the Europe Equity Fund are April 1, 1996 for the
Premier Shares, April 11, 1996 for the Retail Shares, and April 12, 1996
for the Group Retirement Plan Shares. The Europe Equity Fund's predecessor
partnership had an inception date of January 13, 1992. Inception dates for
the U.S. Equity Fund are January 2, 1996 for the Premier Shares and January
4, 1996 for the Retail and Group Retirement Plan Shares. Inception dates
for the High Income Bond Fund are April 1, 1996 for the Premier Shares,
April 11, 1996 for the Retail Shares, and April 12, 1996 for the Group
Retirement Plan Shares. The High Income Bond Fund's predecessor partnership
had an inception date of February 1, 1992.
** Average Annual Return for the Five Year Period Ending December 31, 1999 and
Average Annual Return Since Inception reflects the performance of the
Fund's predecessor partnership for periods prior to the Fund's inception
date. On April 1, 1996, the assets of the Fund's predecessor partnership
were transferred to the Fund and the limited partnership interests of the
Fund's predecessor partnership were exchanged for Premier Shares. The
investment policies, objectives, guidelines and restrictions of the Fund
are in all material respects equivalent to those of the Fund's predecessor
partnership. As a mutual fund registered under the Investment Company Act,
the Fund is subject to certain restrictions under the Act and the Internal
Revenue Code to which its predecessor partnership was not subject. Had the
Fund's predecessor partnership been registered under the Act and subject to
the provisions of the Act and the Code, its investment performance may have
been adversely affected.
36
<PAGE>
AGGREGATE TOTAL RETURN
"Aggregate total return" figures represent the cumulative change in the
value of an investment in a class of a Fund's shares for the specified period
and are computed by the following formula:
AGGREGATE TOTAL RETURN = ERV - P
-------
P
Where:
P = a hypothetical initial payment of $10,000.
ERV = Ending Redeemable Value of a hypothetical $10,000 investment made at
the beginning of a 1-, 5-, or 10-year period at the end of the 1-,
5-, or 10-year period (or fractional portion thereof), assuming
reinvestment of all dividends and distributions.
The following tables sets forth the aggregate total return for the Funds
for the for a five year period and since inception:
<TABLE>
<CAPTION>
AGGREGATE TOTAL RETURN FOR
THE FIVE YEAR PERIOD AGGREGATE TOTAL
ENDING DECEMBER 31, 1999 RETURN SINCE INCEPTION*
------------------------ -----------------------
<S> <C> <C>
FUND AND CLASS
- --------------
EUROPE EQUITY FUND**
Premier Shares 173.12% 212.08%
Retail Shares 170.97% 209.63%
Group Retirement Plan Shares 171.11% 209.79%
HIGH INCOME BOND FUND**
Premier Shares 52.52% 93.75%
Retail Shares 51.04% 91.86%
Group Retirement Plan Shares 50.97% 91.78%
U.S. EQUITY FUND
Premier Shares N/A 74.96%
Retail Shares N/A 73.45%
Group Retirement Plan Shares N/A 73.42%
</TABLE>
___________
* Inception dates for the Europe Equity Fund are April 1, 1996 for the
Premier Shares, April 11, 1996 for the Retail Shares, and April 12, 1996
for the Group Retirement Plan Shares. The Europe Equity Fund's predecessor
partnership had an inception date of January 13, 1992. Inception dates for
the High Income Bond Fund are April 1, 1996 for the Premier Shares, April
11, 1996 for the Retail Shares, and April 12, 1996 for the Group Retirement
Plan Shares. The High Income Bond Fund's predecessor partnership had an
inception date of February 1, 1992. Inception dates for the U.S. Equity
Fund are January 2, 1996 for the Premier Shares and January 4, 1996 for the
Retail and Group Retirement Plan Shares.
** Aggregate Total Return for the Five Year Period Ending December 31, 1999
and Aggregate Total Return Since Inception reflects the performance of the
Fund's predecessor partnership for periods prior to the Fund's inception
date. On April 1, 1996, the assets of the Fund's predecessor partnership
were transferred to the Fund and the limited partnership interests of the
Fund's predecessor partnership were exchanged for Premier Shares. The
investment policies, objectives, guidelines and restrictions of the Fund
are in all material respects equivalent to those of the Fund's predecessor
partnership. As a mutual fund registered under the Investment Company Act,
the Fund is subject to certain restrictions under the Act and the Internal
Revenue Code to which its predecessor partnership was not subject. Had the
Fund's predecessor partnership been registered under the Act and subject to
the provisions of the Act and the Code, its investment performance may have
been adversely affected.
37
<PAGE>
THIRTY DAY YIELD
The High Income Bond Fund may advertise the yield on one or more classes of
its shares based on a 30-day (or one month) period, computed by dividing the net
investment income per share earned during the period by the maximum offering
price per share on the last day of the period, according to the following
formula:
YIELD = 2[(a-b)/CD+1)6-1]
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends
d = the maximum offering price per share on the last day of the period
Under this formula, interest earned on debt obligations for purposes of "a"
above, is calculated by (1) computing the yield to maturity of each obligation
held by the High Income Bond Fund based on the market value of the obligation
(including actual accrued interest) at the close of business on the last day of
each month, or, with respect to obligations purchased during the month, the
purchase price (plus actual accrued interest), (2) dividing that figure by 360
and multiplying the quotient by the market value of the obligation (including
actual accrued interest as referred to above) to determine the interest income
on the obligation in the High Income Bond Fund's portfolio (assuming a month of
30 days) and (3) computing the total of the interest earned on all debt
obligations during the 30-day or one month period. Undeclared earned income,
computed in accordance with generally accepted accounting principles, may be
subtracted from the maximum offering price calculation required pursuant to "d"
above.
The thirty-day yield of the High Income Bond Fund as of December 31, 1999
was 8.43% for the Premier Shares, 8.17% for the Retail Shares and 8.15% for the
Group Retirement Plan Shares.
OTHER INFORMATION CONCERNING PERFORMANCE DATA
Each Fund may also from time to time include in advertisements a total
return figure that is not calculated according to the formulas set forth above.
Any such figure, and any quotation of the High Income Bond Fund's performance
stated in terms of yield (whether or not based on a 30-day period), will be
given no greater prominence than the information prescribed under SEC rules.
Each Fund's performance will vary from time to time depending upon market
conditions, the composition of such Fund's portfolio and operating expenses.
Consequently, any given performance quotations should not be considered
representative of the performance of any class of a Fund's shares for any
specified period in the future. Because performance will vary, it may not
provide a basis for comparing an investment in a Fund's shares with certain bank
deposits or other investments that pay a fixed yield for a stated period of
time. Investors comparing a Fund's performance with that of other mutual funds
should give consideration to the nature, quality and maturity of the respective
investment companies' portfolio securities and market conditions.
Each Fund may also from time to time include discussions or illustrations
of the effects of compounding in advertisements. "Compounding" refers to the
fact that, if dividends or other distributions on a Fund investment are
reinvested by being paid in additional Fund shares, any future income or capital
appreciation of a Fund would increase the value, not only of the original
investment in the Fund, but also of the additional Fund shares received through
reinvestment. Each Fund may also include discussions or illustrations of the
potential investment goals of a prospective investor (including materials that
describe general principles of investing, such as asset allocation,
diversification, risk tolerance and goal setting, questionnaires designed to
help create a personal financial profile, worksheets used to project savings
needs based on assumed rates of inflation and hypothetical rates of return and
38
<PAGE>
action plans offering investment alternatives), investment management
techniques, policies or investment suitability of a Fund (such as value
investing, market timing, dollar cost averaging, asset allocation, constant
ratio transfer, automatic account rebalancing and the advantages and
disadvantages of investing in tax-deferred and taxable investments), economic
and political conditions and the relationship between sectors of the economy and
the economy as a whole, the effects of inflation and historical performance of
various asset classes, including but not limited to, stocks, bonds and Treasury
bills. From time to time advertisements, sales literature, communications to
shareholders or other materials may summarize the substance of information
contained in relevant articles appearing in newspapers or periodicals,
shareholder reports (including the investment composition of a Fund), as well as
the views of the Funds' Advisers as to current market, economy, trade and
interest rate trends, legislative, regulatory and monetary developments,
investment strategies and related matters believed to be of relevance to a Fund.
In addition, selected indices may be used to illustrate historic performance of
select asset classes. Each Fund may also include in advertisements, sales
literature, communications to shareholders or other materials, charts, graphs or
drawings that illustrate the potential risks and rewards of investment in
various investment vehicles, including but not limited to, stocks, bonds,
Treasury bills and shares of a Fund. In addition, advertisements, sales
literature, shareholder communications or other materials may include a
discussion of certain attributes or benefits to be derived by an investment in a
Fund and/or other mutual funds, benefits, characteristics or services associated
with a particular class of shares, shareholder profiles and hypothetical
investor scenarios, timely information on financial management, tax and
retirement planning and investment alternatives to certificates of deposit and
other financial instruments. Such advertisements or communications may include
symbols, headlines or other materials that highlight or summarize the
information discussed in more detail therein. Materials may include lists of
representative clients of the Funds' Advisers. Materials may refer to the CUSIP
numbers of the various classes of the Funds and may illustrate how to find the
listings of the Funds in newspapers and periodicals. Materials may also include
discussions of other Funds, products and services and may include rankings based
on performance or other characteristics as measured by independent third
parties, including but not limited to Morninstar and Lipper Inc. (not affiliated
with The Lipper Funds).
Charts and graphs using net asset value, adjusted NAVs and benchmark
indices may be used to exhibit performance. An adjusted NAV includes any
distributions paid and reflects all elements of return. Unless otherwise
indicated, the adjusted NAVs are not adjusted for sales charges, if any.
Each Fund may illustrate performance using moving averages. A long-term
moving average is the average of each week's adjusted closing NAV for a
specified period. A short-term moving average is the average of each day's
adjusted closing NAV for a specified period. Moving Average Activity Indicators
combine adjusted closing NAVs from the last business day of each week with
moving averages for a specified period to produce indicators showing when an NAV
has crossed, stayed above, or stayed below its moving average.
Each Fund may quote various measures of volatility and benchmark
correlation in advertising. In addition, each Fund may compare these measures to
those of other mutual funds. Measures of volatility seek to compare the
historical share price fluctuations or total returns to those of a benchmark.
Measures of benchmark correlation indicate how valid a comparative benchmark may
be. All measures of volatility and correlation are calculated using averages of
historical data.
Momentum indicators indicate a Fund's price movements over specific periods
of time. Each point on the momentum indicator represents the Fund's percentage
change in price movements over that period.
Each Fund may advertise examples of the effects of periodic investment
plans, including the principle of dollar cost averaging. In such a program, an
investor invests a fixed dollar amount in a Fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares are purchased at the same intervals. In evaluating such
a plan, investors should consider their ability to continue purchasing shares
during periods of low price levels. Each Fund may be
39
<PAGE>
available for purchase through retirement plans or other programs offering
deferral of, or exemption from, income taxes, that may produce superior
after-tax returns over time.
Each Fund may advertise its current interest rate sensitivity, duration,
weighted average maturity or similar maturity characteristics.
Advertisements and sales materials relating to a Fund may include
information regarding the background, experience and expertise of the Advisers
and/or portfolio managers for each Fund.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New York
10036, serves as the Company's independent accountants. The financial statements
incorporated by reference in this Statement of Additional Information have been
so incorporated in reliance on the report of the Company's independent
accountant, given on the authority of that firm as experts in auditing and
accounting.
COUNSEL
Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York
10017-3954, serves as counsel to the Company. Piper Marbury Rudnick & Wolfe LLP,
36 South Charles Street, Baltimore, Maryland 21201-3018, passed upon the
validity of the Company's shares under Maryland law.
FINANCIAL STATEMENTS
The financial highlights for each Fund for the year ended December 31, 1999
are set forth in each Fund's Prospectus. The financial statements for each Fund
for the year ended December 31, 1999, and the report thereon of
PricewaterhouseCoopers LLP, that appear in each Fund's 1999 Annual Report to
Shareholders, were previously filed electronically with the SEC and are
incorporated herein by reference.
40
<PAGE>
APPENDIX
DESCRIPTION OF CORPORATE BOND RATINGS
A description of the rating policies of Moody's Investor Services Corp. and
Standard & Poor's with respect to bonds and commercial paper appears below.
MOODY'S INVESTORS SERVICE'S CORPORATE BOND RATINGS
AAA -- Bonds rated "Aaa" are judged to be of the best quality and carry the
smallest degree of investment risk. Interest payments are protected by a large
or by an exceptionally stable margin, and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
AA -- Bonds rated "Aa" are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present that
make the long-term risks appear somewhat larger than in "Aaa" securities.
A -- Bonds rated "A" possess many favorable investment qualities and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present that
suggest a susceptibility to impairment sometime in the future.
BAA -- Bonds re rated "Baa" are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA -- Bonds rated "Ba" are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -- Bonds rated "B" generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance and
other terms of the contract over any long period of time may be small.
CAA -- Bonds rated "Caa" are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA -- Bonds re rated "Ca" represent obligations that are speculative in
high degree. Such issues are often in default or have other marked shortcomings.
C -- Bonds rated "C" are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies numerical modifiers "1," "2" and "3" to certain of its
rating classifications. The modifier "1" indicates that the security ranks in
the higher end of its generic rating category; the modifier "2" indicates a
mid-range ranking; and the modifier "3" indicates that the issue ranks in the
lower end of its generic rating category.
STANDARD & POOR'S RATINGS GROUP CORPORATE BOND RATINGS
AAA -- This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to repay principal and pay
interest.
AA -- Bonds rated "AA" also qualify as high quality debt obligations.
Capacity to pay principal and interest is very strong, and differs from "AAA"
issues only in small degree.
A-1
<PAGE>
A -- Bonds rated "A" have a strong capacity to repay principal and pay
interest, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB -- Bonds rated "BBB" are regarded as having an adequate capacity to
repay principal and pay interest. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to repay principal and pay interest
for bonds in this category than for higher rated categories.
BB-B-CCC-CC-C -- Bonds rated "BB," "B," "CCC," "CC" and "C" are regarded,
on balance, as predominantly speculative with respect to the issuer's capacity
to pay interest and repay principal in accordance with the terms of the
obligations. BB indicates the lowest degree of speculation and C the highest
degree of speculation. While such bonds will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
CI -- Bonds rated "CI" are income bonds on which no interest is being paid.
D -- Bonds rated "D" are in default. The "D" category is used when interest
payments or principal payments are not made on the date due even if the
applicable grace period has not expired unless S&P believes that such payments
will be made during such grace period. The "D" rating is also used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
The ratings set forth above may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
MOODY'S INVESTORS SERVICE'S COMMERCIAL PAPER RATINGS
PRIME-1 -- Issuers (or related supporting institutions) rated "Prime-1"
have a superior ability for repayment of senior short-term debt obligations.
"Prime-1" repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries, high
rates of return on funds employed, conservative capitalization structures with
moderate reliance on debt and ample asset protection, broad margins in earnings
coverage of fixed financial charges and high internal cash generation, and
well-established access to a range of financial markets and assured sources of
alternate liquidity.
PRIME-2 -- Issuers (or related supporting institutions) rated "Prime-2"
have a strong ability for repayment of senior short-term debt obligations. This
will normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternative liquidity is
maintained.
PRIME-3 -- Issuers (or related supporting institutions) rated "Prime-3"
have an acceptable ability for repayment of senior short-term obligations. The
effect of industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
NOT PRIME -- Issuers rated "Not Prime" do not fall within any of the Prime
rating categories.
STANDARD & POOR'S RATINGS GROUP COMMERCIAL PAPER RATINGS
A S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest. The four categories are as follows:
A-1 -- This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) sign designation.
A-2
<PAGE>
A-2 -- Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
A-3 -- Issues carrying this designation have adequate capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
B -- Issues rated "B" are regarded as having only speculative capacity for
timely payment.
C -- This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D -- Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date due, even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.
A-3
<PAGE>
THE LIPPER FUNDS, INC.
PART C. OTHER INFORMATION
Item 22. Financial Statements
(a) Registration Statement.
(1) Financial Highlights for the year ended December 31, 1999 and
previous years.
(b) Annual Report.
Included in Part B of the Registration Statement+:
(i) Statement of Assets and Liabilities dated December 31, 1999.
(ii) Independent Accountants' Reports dated February 15, 2000.
(iii) Portfolio of Investments for the High Income Bond Fund dated
December 31, 1999.+
(iv) Portfolio of Investments for the U.S. Equity Fund dated December
31, 1999.+
(v) Portfolio of Investments for the Europe Equity Fund dated
December 31, 1999.+
(vi) Statement of Assets and Liabilities for the High Income Bond
Fund, U.S. Equity Fund and Europe Equity Fund dated December 31,
1999.+
(vii) Statement of Operations for the High Income Bond Fund, U.S.
Equity Fund and Europe Equity Fund for the period ended December
31, 1999.+
(viii) Statement of Changes in Net Assets for the High Income Bond
Fund, U.S. Equity Fund and Europe Equity Fund for the periods
ended December 31, 1999 and December 31, 1998.+
+ Incorporated by reference to the Annual Reports of the High
Income Bond Fund, U.S. Equity Fund and Europe Equity Fund for the
year ended December 31, 1999 filed on March 6, 2000
(Accession No. 0000950110-00-000174).
Item 23. Exhibits:
(a) Articles of Incorporation.
(1) Registrant's Amended and Restated Articles of Incorporation.*
(b) By-Laws.
(1) Registrant's Amended and Restated By-Laws.**
(c) Instruments Defining Rights of Security Holders.
(1) Form of Stock Certificate for Premier Shares of common stock.**
(2) Form of Stock Certificate for Retail Shares of common stock.**
(3) Form of Stock Certificate for Group Retirement Plan Shares of
common stock.**
The rights of security holders of the Registrant are further defined in the
following sections of the Registrant's By-Laws and Declaration:
a. By-Laws.
See Article I and Article V.
b. Declaration.
See Article V.
<PAGE>
(d) Investment Advisory Contracts.
(1) Investment Advisory Agreement between Registrant and Lipper &
Company, L.L.C. relating to the High Income Bond Fund.***
(2) Investment Advisory Agreement between Registrant and Lipper &
Company, L.L.C. relating to the U.S. Equity Fund.***
(3) Investment Advisory Agreement between Registrant and Prime Lipper
Asset Management relating to the Europe Equity Fund.**
(e) Underwriting Contracts.
(1) Distribution Agreement between Registrant and Lipper & Company,
L.P.***
(f) Bonus or Profit Sharing contracts.
None.
(g) Custodian Agreements.
(1) Global Custody Agreement between Registrant and The Chase
Manhattan Bank.***
(h) Other Material Contracts.
(1) Administration Agreement between Registrant and Chase Global Funds
Services Company.***
(i) Legal Opinion.
(1) Opinion and Consent of Piper & Marbury.**
(j) Other Opinions.
(1) Consent of Independent Accountants (filed herewith).
(k) Omitted Financial Statements.
None.
(l) Initial Capital Agreements.
(1) Purchase Agreement among Registrant, Lipper & Company, L.L.C. and
Prime Lipper Asset Management.***
(m) Rule 12-b-1 Plan.
(1) Retail Distribution Plan.***
(2) Form of Group Retirement Servicing Plan.***
(n) Financial Data Schedule.
(1) Financial Data Schedules.***
(o) Rule 18f-3 Plan.
(1) Multiclass Plan.***
(p) Power of Attorney.
(1) Powers of Attorney for Kenneth Lipper, Abraham Biderman and Stanley
Brezenoff.*
(2) Power of Attorney for Irwin Russell.**
(3) Power of Attorney for Martin Maltz.***
(q) Codes of Ethics
(1) Code of Ethics of The Lipper Funds, Inc. (attached hereto)
(2) Code of Ethics of Lipper & Company, L.L.C. (attached hereto)
(3) Code of Ethics Prime Lipper Asset Management (attached hereto)
(4) Code of Ethics of Lipper & Company, L.P. (attached hereto)
* Incorporated by reference to Pre-Effective Amendment No. 1 to
Registration Statement filed on December 29, 1995.
** Incorporated by reference to Registration Statement filed on March
25, 1998.
*** Incorporated by reference to Registration Statement filed on
February 26, 1999.
<PAGE>
Item 24. Persons Controlled by or under Common Control with the Registrant
Kenneth Lipper may be deemed to control Registrant, Lipper &
Company, L.L.C., Prime Lipper Asset Management, Lipper & Company, L.P. and
affiliates thereof. Accordingly, these entities may be deemed to be under common
control with Registrant.
Item 25. Indemnification
Reference is made to Article VII of Registrant's Articles of
Incorporation, Article IV of Registrant's By-laws, and subsections 4.1 and 4.2
of the Distribution Agreement between the Registrant and Lipper & Company, L.P.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), may be permitted to
directors, officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant understands that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
<PAGE>
Item 26. Business and Other Connections of the Investment Advisers
Reference is made to the Sections entitled "Management" in the
Prospectuses and the Statement of Additional Information.
The list required by this Item 26 of officers and directors of
Lipper & Company, L.L.C., together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by such
officers, directors and partners during the past two years, is incorporated by
reference to Schedules C and D to Form ADV filed by Lipper & Company, L.L.C.
pursuant to the Investment Advisers Act of 1940, as amended (the "Advisers Act")
(SEC File No. 801-50666).
The list required by this Item 26 of officers, directors and
partners of Prime Lipper Asset Management, together with information as to any
other business, profession, vocation or employment of a substantial nature
engaged in by such officers, directors and partners during the past two years,
is incorporated by reference to Schedules B and D to Form ADV filed by Prime
Lipper Asset Management pursuant to the Advisers Act (SEC File No. 801-41430).
Item 27. Principal Underwriters
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal
underwriter or exclusive distributor: None.
(b) The information required by this Item 29(b) with respect to each
director, officer and partner of Lipper & Company, L.P. is
incorporated by reference to the Form BD filed by Lipper &
Company, L.P. pursuant to the Securities Exchange Act of 1934,
as amended (SEC File No. 8-030161).
(c) Not applicable.
Item 28. Location of Accounts and Records
All accounts, books and other documents required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the rules thereunder
will be maintained at the offices of:
Lipper & Company, L.L.C., 101 Park Avenue, New York, New York
10178;
Prime Lipper Asset Management, 101 Park Avenue, New York, New
York 10178 and Via Turati 9, Milan, Italy 20124;
The Chase Manhattan Bank, 270 Park Avenue, New York, New York
10017;
Chase Global Funds Services Company, 73 Tremont Street, Boston,
Massachusetts 02108
Item 29. Management Services
Not applicable.
Item 30. Undertakings
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
the Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, in the City of New York and State of New York on the
31st day of March, 2000
THE LIPPER FUNDS, INC.
By /s/ Abraham Biderman
--------------------
Abraham Biderman
Director
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
Signature Title Date
/s/ Kenneth Lipper Director, Chairman of the Board March 31, 2000
- --------------------- (principal executive officer),
Kenneth Lipper and President
/s/ Abraham Biderman Director, Executive Vice March 31, 2000
- --------------------- President, Treasurer (principal
Abraham Biderman financial and accounting officer)
and Secretary
* Director March 31, 2000
- ---------------------
Stanley Brezenoff
* Director March 31, 2000
- ---------------------
Martin Maltz
* Director March 31, 2000
- ---------------------
Irwin E. Russell
*By: /s/ Abraham Biderman
--------------------
Abraham Biderman
Attorney-in-Fact
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 6 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated February 15, 2000, relating to the financial
statements and financial highlights appearing in the December 31, 1999 Annual
Reports to Shareholders of The Lipper Funds, Inc., which are also incorporated
by reference into the Registration Statement. We also consent to the references
to us under the heading "Financial Highlights" in the Prospectuses and under the
headings "Independent Accountants" and "Financial Statements" in the Statement
of Additional Information.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
March 29, 2000
THE LIPPER FUNDS, INC.
CODE OF ETHICS
I. INTRODUCTION.
The purpose of this Code of Ethics is to prevent Access Persons (as defined
below) of The Lipper Funds, Inc. (the "Company") from engaging in any act,
practice or course of business prohibited by paragraph (b) of Rule 17j-1 (the
"Rule") under the Investment Company Act of 1940, as amended (the "Act"). This
Code of Ethics is required by paragraph (c) of the Rule. A copy of the Rule is
attached to this Code of Ethics as Appendix 1.
Access Persons of the Company, in conducting their personal securities
transactions, owe a fiduciary duty to the shareholders of the Company. The
fundamental standard to be followed in personal securities transactions is that
Access Persons may not take inappropriate advantage of their positions. All
personal securities transactions by Access Persons must be conducted in such a
manner as to avoid any actual or potential conflict of interest between the
Access Person's interest and the interests of the Company, or any abuse of an
Access Person's position of trust and responsibility. Potential conflicts
arising from personal investment activities could include buying or selling
securities based on knowledge of the Company's trading position or plans
(sometimes referred to as front-running), and acceptance of personal favors that
could influence trading judgments on behalf of the Company.
While this Code of Ethics is designed to address identified conflicts and
potential conflicts, it cannot possibly be written broadly enough to cover all
potential situations and, in this regard, Access Persons are expected to adhere
not only to the letter, but also the spirit, of the policies contained herein.
For example, the restrictions contained herein on the purchase or sale of a
security would include the purchase or sale of an equivalent security, such as
the writing of an option to purchase or sell a security, and restrictions
contained herein on personal securities transactions for an Access Person's
account would apply equally to an account in which such Access Person has
"beneficial ownership." Such accounts include, but are not limited to, accounts
owned by the Access Person, the Access Person's spouse, minor children or other
persons residing in the Access Person's household or to whose support the Access
Person contributes significantly, and any other account in which the Access
Person has a pecuniary interest. "Pecuniary interest" generally is the
opportunity, directly or indirectly, to profit or share in any profit derived
from a transaction in securities.
<PAGE>
2
II. DEFINITIONS.
In order to understand how this Code of Ethics applies to particular
persons and transactions, familiarity with the key terms and concepts used in
this Code of Ethics is necessary. Those key terms and concepts are:
1. "Access Person" means any director, officer or "advisory person" of the
Company. A list of the Company's Access Persons is attached as Appendix 2 to
this Code of Ethics and will be updated from time to time.
2. "Administrator" means Chase Global Fund Services Company, the Company's
administrator.
3. "Administrator Code" means the Code of Ethics adopted by the
Administrator.
4. "Advisory person" means (a) any employee of the Company or of any
company in a control relationship to the Company, who, in connection with his
regular functions or duties, makes, participates in, or obtains information
regarding the purchase or sale of a "covered security" by the Company, or whose
functions relate to the making of any recommendations with respect to such
purchases or sales; and (b) any natural person in a control relationship to the
Company who obtains information concerning recommendations made to the Company
with regard to the purchase or sale of "covered securities".
5. "Beneficial ownership" has the meaning set forth in Rule 16a-1(a)(2) of
the Securities Exchange Act of 1934, as amended, a copy of which is included as
Appendix 3.
6. "Control" has the meaning set forth in Section 2(a)(9) of the Act.
7. "Covered Security" means a security as defined in Section 2(a)(36) of
the Act, and includes, but is not limited to, notes, stocks, bonds, investment
contracts, puts, calls and options, except that it does not include direct
obligations of the U.S. Government, bankers' acceptances, bank certificates of
deposit, commercial paper and high quality short-term debt instruments,
including repurchase agreements, and shares issued by open-end funds.
8. "Independent director" means a director of the Company who is not an
"interested person" of the Company within the meaning of Section 2(a)(19) of the
Act.
9. "Lipper" means Lipper & Company, L.L.C., the investment adviser for the
U.S. Equity Fund and the Lipper High Income Bond Fund.
10. "Lipper Code" means the Code of Ethics adopted by Lipper and attached
as Appendix 4 to this Code of Ethics.
11. "Lipper L.P." means Lipper & Company, L.P., the principal underwriter
of the Company.
<PAGE>
3
12. "Lipper L.P. Code" means the Code of Ethics adopted by Lipper L.P. and
attached as Appendix 5 to this Code of Ethics.
13. "Prime Lipper" means Prime Lipper Asset Management, the investment
adviser for the Lipper Prime Europe Equity Fund.
14. "Prime Lipper Code" means the Code of Ethics adopted by Prime Lipper
and attached as Appendix 6 to this Code of Ethics.
15. "Purchase or sale of a Covered Security" includes, among other things,
the purchase or sale of an equivalent security, such as the writing of an option
to purchase or sell a Covered Security.
III. RESTRICTIONS APPLICABLE TO OFFICERS AND EMPLOYEES OF LIPPER, PRIME LIPPER
AND LIPPER L.P. AND ACCESS PERSONS WHO ARE DIRECTORS, OFFICERS OR EMPLOYEES
OF THE ADMINISTRATOR.
1. All officers and employees of Lipper, Prime Lipper and Lipper L.P. shall
be subject to the restrictions, limitations and reporting responsibilities set
forth in the Lipper Code, the Prime Lipper Code and the Lipper L.P. Code,
respectively, as if fully set forth herein.
2. All Access Persons who are directors, officers or employees of the
Administrator shall be subject to the restrictions, limitations and reporting
responsibilities set forth in the Administrator Code, as if fully set forth
herein.
3. Persons subject to this Section III shall not be subject to the
restrictions, limitations and reporting responsibilities set forth in Sections
IV and V below.
IV. PROHIBITIONS; EXEMPTIONS.
1. PROHIBITED PURCHASES AND SALES.
No Access Person may purchase or sell, directly or indirectly, any Covered
Security in which that Access Person has, or by reason of the transaction would
acquire, any direct or indirect beneficial ownership and which to the actual
knowledge of that Access Person at the time of such purchase or sale:
A. is being actively considered for purchase or sale by the Company; or
B. is being purchased or sold by the Company.
2. EXEMPTIONS FROM CERTAIN PROHIBITIONS.
A. The prohibited purchase and sale transactions described in Section IV.1.
above do not apply to the following personal securities transactions:
<PAGE>
4
(1) purchases or sales effected in any account over which the Access
Person has no direct or indirect influence or control;
(2) purchases or sales which are non-volitional on the part of either the
Access Person or the Company;
(3) purchases which are part of an automatic dividend reinvestment plan
(other than pursuant to a cash purchase plan option);
(4) purchases effected upon the exercise of rights issued by an issuer PRO
RATA to all holders of a class of its securities, to the extent the
rights were acquired from that issuer, and sales of the rights so
acquired;
(5) any purchase or sale, or series of related transactions, involving not
more than 1,000 shares or .01% of the market capitalization in the
aggregate, if the issuer has a market capitalization (outstanding
shares multiplied by the current market price per share) greater than
$1 billion; and
(6) any purchase or sale which a person or persons designated by a
majority of the independent directors of the Company approves on the
grounds that its potential harm to the Company is remote.
3. PROHIBITED RECOMMENDATIONS.
An Access Person may not recommend the purchase or sale of any Covered
Security to or for the Company without having disclosed his or her interest, if
any, in the Covered Security or the issuer thereof, including without
limitation:
(1) any direct or indirect beneficial ownership of any Covered Security of
such issuer, including any Covered Security received in a private
securities transaction;
(2) any contemplated purchase or sale by such person of a Covered
Security;
(3) any position with such issuer or its affiliates; or
(4) any present or proposed business relationship between such issuer or
its affiliates and such person or any party in which such person has a
significant interest.
4. PRE-APPROVAL OF INVESTMENTS IN INITIAL PUBLIC OFFERINGS OR LIMITED
OFFERINGS.
Access Persons of the Company must obtain approval from the Company before
directly or indirectly acquiring beneficial ownership in any securities in an
initial public offering
<PAGE>
5
or offering exempt from registration under Sections 4(2) or 4(6) of the
Securities Act of 1933, as amended, or Rules 504, 505 or 506 thereunder
("Limited Offerings").
V. ADOPTION AND APPROVAL OF THE CODE OF ETHICS OF THE COMPANY, LIPPER, PRIME
LIPPER AND LIPPER L.P.
The Board of Directors of the Company, including a majority of the
independent directors must approve this Code of Ethics, the Code of Ethics of
Lipper, Prime Lipper and Lipper L.P. and any material changes to the Codes. The
Board must approve material changes no later than six (6) months after the
adoption of such changes.
Before approving the Codes, the Board will receive a certification from the
Company, Lipper, Prime Lipper and Lipper L.P. respectively, that each has
adopted procedures reasonably necessary to prevent Access Persons from violating
the applicable Code.
The Board must approve the Code of Ethics of an investment adviser or
principal underwriter before retaining their services.
VI. REPORTING.
1. INITIAL HOLDINGS REPORTS.
No later than ten (10) days after a person becomes an Access Person, he
must report to the Company the following information:
(i) the title, number of shares and principal amount of each Covered
Security in which the Access Person had any direct or indirect beneficial
ownership when the person became an Access Person;
(ii) the name of any broker, dealer or bank with whom the Access
person maintained an account in which any securities were held for the
direct or indirect benefit of the Access Person as of the date the person
became an Access Person; and
(iii) the date that the report is submitted by the Access Person.
2. QUARTERLY REPORTING.
A. Subject to the provisions of paragraph B below, every Access Person
shall either report to the Company the information described in paragraph C
below with respect to transactions in any Covered Security in which the Access
Person has, or by reason of the transaction acquires, any direct or indirect
beneficial ownership in the security or, in the alternative, make the
representation in paragraph E below.
B. (1) An Access Person is not required to make a report with respect to
any transaction effected for any account over which the Access Person does not
have any direct or
<PAGE>
6
indirect influence or control; provided, however, that if the Access Person is
relying upon the provisions of this paragraph B(1) to avoid making such a
report, the Access Person shall, not later than 10 days after the end of each
calendar quarter, identify any such account in writing and certify in writing
that he or she had no direct or indirect influence over any such account.
(2) An independent director of the Company who would be required to make a
report pursuant to paragraph 1 or paragraph 2 above solely by reason of being a
director of the Company is required to report a transaction in a security only
if the independent director, at the time of the transaction, knew or, in the
ordinary course of fulfilling the independent director's official duties as a
director of the Company, should have known that (a) the Company has engaged in a
transaction in the same security within the last 15 days or is engaging or going
to engage in a transaction in the same security within the next 15 days, or (b)
the Company, Lipper or Prime Lipper has within the last 15 days considered a
transaction in the same security or is considering a transaction in the same
security or within the next 15 days is going to consider a transaction in the
same security.
C. Every report shall be made not later than 10 days after the end of the
calendar quarter in which the transaction to which the report relates was
effected and shall contain the following information:
(i) the date of the transaction, the title, the interest rate and
maturity date (if applicable), the number of shares and the principal
amount of each Covered Security involved;
(ii) the nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
(iii) the price at which the transaction was effected;
(iv) the name of the broker, dealer or bank with or through whom the
transaction was effected;
(v) the date that the report is submitted by the Access Person; and
(vi) a description of any factors potentially relevant to an analysis
of whether the Access Person may have a conflict of interest with respect
to the transaction, including the existence of any substantial economic
relationship between the transaction and securities held or to be acquired
by the Company.
D. With respect to any account established by the Access Person in which
any securities were held during the quarter for the direct or indirect benefit
of the Access Person.
(i) the name of the broker, dealer or bank with whom the Access Person
established the account;
(ii) the date the account was established; and
<PAGE>
7
(iii) the date that the report is submitted by the Access Person.
E. If no transactions were conducted by an Access Person during a calendar
quarter that are subject to the reporting requirements described above, such
Access Person shall, not later than 10 days after the end of that calendar
quarter, provide a written representation to that effect to the Company.
2. ANNUAL REPORTING AND CERTIFICATION.
A. All Access Persons are required to certify annually that they have read
and understand this Code of Ethics and recognize that they are subject to the
provisions hereof and will comply with the policy and procedures stated herein.
Further, all Access Persons are required to certify annually that they have
complied with the requirements of this Code of Ethics and that they have
reported all personal securities transactions required to be disclosed or
reported pursuant to the requirements of such policies. A copy of the
certification form to be used in complying with this paragraph A is attached to
this Code of Ethics as Appendix 7. Upon approval of this Code of Ethics by the
Board, the Independent Directors shall be deemed to have complied with the
requirements of this paragraph A, and shall not have to complete the annual
certification form.
B. The Company, Lipper, Prime Lipper and Lipper L.P. shall each prepare an
annual report to the Board of Directors of the Company to be presented at the
first meeting of the Board after the end of each calendar year and which shall:
(1) summarize existing procedures concerning personal investing, including
preclearance policies and the monitoring of personal investment activity after
preclearance has been granted, and any changes in the procedures during the past
year;
(2) describe any issues arising under the Code of Ethics since the last
report to the Board including, but not limited to, identifying any violations
requiring significant remedial action and the sanctions imposed during the past
year;
(3) identify any recommended changes in existing restrictions or procedures
based upon experience under this Code of Ethics, evolving industry practice or
developments in applicable laws and regulations;
(4) contain such other information, observations and recommendations as
deemed relevant by the Company, Lipper, Prime Lipper or Lipper L.P.; and
(5) certify that the Fund, Lipper, Prime Lipper and Lipper L.P. have
adopted Codes of Ethics with procedures reasonably necessary to prevent Access
Persons from violating the Code.
<PAGE>
8
3. NOTIFICATION OF REPORTING OBLIGATION AND REVIEW OF REPORTS.
Each Access Person shall receive a copy of this Code of Ethics and be
notified of his reporting obligations. All reports shall be promptly submitted
upon completion to the Compliance Officer for his review.
4. MISCELLANEOUS.
Any report under this Code of Ethics may contain a statement that the
report shall not be construed as an admission by the person making the report
that the person has any direct or indirect beneficial ownership in the
securities to which the report relates.
VII. CONFIDENTIALITY.
No Access Person shall reveal to any other person (except in the normal
course of his or her duties on behalf of the Company) any information regarding
securities transactions by the Company or consideration by the Company, Lipper
or Prime Lipper of any such securities transaction.
All information obtained from any Access Person hereunder shall be kept in
strict confidence, except that reports of securities transactions hereunder will
be made available to the Securities and Exchange Commission or any other
regulatory or self-regulatory organization to the extent required by law or
regulation.
VIII. SANCTIONS.
Upon discovering a violation of this Code of Ethics, the Board of Directors
of the Company may impose any sanctions it deems appropriate, including a letter
of censure, the suspension or termination of any director, officer or employee
of the Company, or the recommendation to the employer of the violator of the
suspension or termination of employment.
Dated: December 15, 1999
<PAGE>
APPENDIX 1
Rule 17j-1 of the Investment Company Act of 1940, as attached.
<PAGE>
17 CFR s 27.17j-1
17 C.F.R. section 270.17j-1 PAGE 1
CODE OF FEDERAL REGULATIONS
TITLE 17--COMMODITY AND SECURITIES
EXCHANGES
CHAPTER II--SECURITIES AND EXCHANGE
COMMISSION
PART 270--RULES AND REGULATIONS,
INVESTMENT COMPANY ACT OF 1940
Current through January 14, 2000; 65 FR 2502
Section 270.17j-1 Personal investment activities of investment
company personnel.
[Compliance date of section see 64 FR 46821, section IV, Aug. 27, 1999.]
(a) Definitions. For purposes of this section:
(1) Access Person means:
(i) Any director, officer, general partner or advisory Person of a Fund or of a
Fund's investment adviser.
(A) If an investment adviser is primarily engaged in a business or businesses
other than advising Funds or other advisory clients, the term Access Person
means any director, officer, general partner or Advisory Person of the
investment adviser who, with respect to any Fund, makes any recommendation,
participates in the determination of which recommendation will be made, or whole
principal function or duties relate to the determination of which recommendation
will be made, or who, in connection with his or her duties, obtains any
information concerning recommendations on Covered Securities being made by the
investment adviser to any Fund.
(B) An investment adviser is "primarily engaged in a business or businesses
other than advising Funds or other advisory clients" if, for each of its most
recent three fiscal years or for the period of time since its organization,
whichever, is less, the investment adviser derived, on an unconsolidated basis,
more than 50 percent of its total sales and revenues and more than 50 percent of
its income (or loss), before income taxes an extraordinary items, from the other
business or businesses.
(ii) Any director, officer or general partner of a principal underwriter who, in
the ordinary course of business, makes, participates in or obtains information
regarding, the purchase or sale of Covered Securities by the Fund for which the
principal underwriter acts, or whose functions or duties in the ordinary course
of business relate to the making of any recommendation to the Fund regarding the
purchase or sale of Covered Securities.
(2) Advisory Person of a Fund or of a Fund's investment adviser means:
(i) Any employee of the Fund or investment adviser (or of any company in a
control relationship to the Fund or investment adviser) who, in connection with
his or her regular functions or duties, makes, participates in, or obtains
information regarding the purchase or sale of Covered Securities by a Fund, or
whose functions relate to the making of any recommendations with respect to the
purchases or sales; and
(ii) Any natural person in a control relationship to the Fund or investment
adviser who obtains information concerning recommendations made to the Fund with
regard to the purchase or sale of Covered Securities by the Fund.
(3) Control has the same meaning as in section 2(a)(9) of the Act [15 U.S.C.
80a-2(a)(9)].
(4) Covered Security means a security as defined in section 2(a)(36) of the Act
[15 U.S.C. 80a-2(a)(36)], except that it does not include:
(i) Direct obligations of the Government of the United States;
(ii) Bankers' acceptances, bank certificates of deposit, commercial paper and
high quality short-term debt instruments, including repurchase agreements; and
(iii) Shares issued by open-end Funds.
(5) Fund means an investment company registered under the Investment Company
Act.
(6) An Initial Public Offering means an offering of securities registered under
the Securities Act of 1933 [15 U.S.C. 77a], the issuer of which, immediately
before the registration, was not subject to the reporting requirements of
section 13 or 15(d) of the Securities Exchange Act of 1934 [15 U.S.C. 78m or
78o(d)].
(7) Investment Personnel of a Fund or of a Fund's investment adviser means:
(i) Any employee of the Fund or investment adviser (or of any company in control
relationship to the Fund or investment adviser) who, in connection with
<PAGE>
17 CFR s 270.17j-1 PAGE 2
his or her regular functions or duties, makes or participates in making
recommendations regarding the purchase or sale of securities by the Fund.
(ii) Any natural person who controls the Fund or investment adviser and who
obtains information concerning recommendations made to the Fund regarding the
purchase or sale of securities by the Fund.
(8) A Limited Offering means an offering that is exempt from registration under
the Securities Act of 1933 pursuant to section 4(2) or section 4(6) [15 U.S.C.
77d(2) or 77d(6)] or pursuant to rule 504, rule 505, or rule 506 [17 CFR
230.504,2 230.505, or 230.506] under the Securities Act of 1933.
(9) Purchase or sale of a Covered Security includes, among other things, the
writing of an option to purchase or sell a Covered Security.
(10) Security Held or to be Acquired by a Fund means:
(i) Any Covered Security which, within the most recent 15 days:
(A) Is or has been held by the Fund; or
(B) Is being or has been considered by the Fund or its investment adviser for
purchase by the Fund; and
(ii) Any option to purchase or sell, and any security convertible into or
exchangeable for, a Covered Security described in paragraph (a)(10)(i) of this
section.
(b) Unlawful Actions. It is unlawful for any affiliated person of or principal
underwriter for a Fund, or any affiliated person of an investment adviser of or
principal underwriter for a Fund, in connection with the purchase or sale,
directly or indirectly, by the person of a Security Held or to be Acquired by
the Fund:
(1) To employ any devise, scheme or artifice to defraud the Fund;
(2) To make any untrue statement of a material fact to the Fund or omit to state
a material fact necessary in order to make the statements made to the Fund, in
light of the circumstances under which they are made, not misleading;
(3) To engage in any act, practice or course of business that operates or would
operate as a fraud or deceit on the Fund; or
(4) To engage in any manipulative practice with respect to the Fund.
(c) Code of Ethics.
(1) Adoption and Approval of Code of Ethics.
(i) Every Fund (other than a money market Fund or a Fund that does not invest in
Covered Securities) and each investment adviser of and principal underwriter for
the Fund, must adopt a written code of ethics containing provisions reasonably
necessary to prevent its Access Persons from engaging in any conduct prohibited
by (b) of this section.
(ii) The board of directors of a Fund, including a majority of directors who are
not interested persons, must approve the code of ethics of the Fund, the code of
ethics of each investment adviser and principal underwriter of the Fund, and any
material changes to these codes. The board must base its approval of a code and
any material changes to the code on a determination that the code contains
provisions reasonably necessary to prevent Access Persons from engaging in any
conduct prohibited by the paragraph (b) of this section. Before approving a code
of a Fund, investment adviser or principal underwriter or any amendment to the
code, the board of directors must receive a certification from the Fund,
investment adviser or principal underwriter that it has adopted procedures
reasonably necessary to prevent Access Persons from violating the investment
adviser's or principal underwriter before initially retaining the services of
the investment adviser or principal underwriter. The Fund's board must approve a
material change to a code no later than six months after adoption of the
material change.
(iii) If a Fund is a unit investment trust, the Fund's principal underwriter or
depositor must approve the Fund's code of ethics, as required by paragraph
(c)(1)(ii) of this section. If the Fund has more than one principal underwriter
or depositor, the principal underwriters and depositors may designate, in
writing, which principal underwriter or depositor must conduct the approval
required by paragraph (c)(1)(ii) of this section, if they obtain written consent
from the designated principal underwriter or depositor.
(2) Administration of Code of Ethics.
<PAGE>
17 CFR s 270.17j-1 PAGE 3
(i) The Fund, investment adviser and principal underwriter must use reasonable
diligence and institute procedures reasonably necessary to prevent violations of
its code of ethics.
(ii) No less frequently than annually, every Fund (other than a unit investment
trust) and its investment adviser and principal underwriters must furnish to the
Fund's board of directors, and the board of directors must consider, a written
report that:
(A) Describes any issues arising under the code of ethics or procedures since
the last report to the board of directors, including, but not limited to,
information about material violations of the code or procedures and sanctions
imposed in response to the material violations; and
(B) Certifies that the Fund, investment adviser or principal underwriter, as
applicable, has adopted procedures reasonably necessary to prevent Access
Persons from violating the code.
(3) Exception for Principal Underwriters. The requirements of paragraphs (c)(1)
and (c)(2) of this section do not apply to any principal underwriter unless:
(i) The principal underwriter is an affiliated person of the Fund or of the
Fund's investment adviser; or
(ii) An officer, director or general partner of the principal underwriter serves
as officer, director or general partner of the Fund or of the Fund's investment
adviser.
(d) Reporting Requirements of Access Persons.
(1) Reports Required. Unless excepted by paragraph (d)(2) of this section, every
Access Person of a Fund (other than a money market Fund or a Fund that does not
invest in Covered Securities) and every Access Person of an investment adviser
of or principal underwriter for the Fund, must report to that Fund, investment
adviser or principal underwriter:
(i) Initial Holdings Reports. No later than 10 days after the person become an
Access Person, the following information:
(A) The title, number of shares and principal amount of each Covered Security in
which the Access Person had any direct or indirect beneficial ownership when
the person became an Access Person;
(B) The name of any broker, dealer or bank with whom the Access Person
maintained an account in which any securities were held for the direct or
indirect benefit of the Access Person as of the date the person became an Access
Person; and
(C) The date that the report is submitted by the Access Person.
(ii) Quarterly Transaction Reports. No later than 10 days after the end of a
calendar quarter, the following information:
(A) With respect to any transaction during the quarter in a Covered Security in
which the Access Person had any direct or indirect beneficial ownership:
(1) The date of the transactions, the title, the interest rate and maturity date
(if applicable), the number of shares and the principal amount of each Covered
Security involved;
(2) The nature of the transaction (i.e., purchase, sale or any other type of
acquisition or disposition);
(3) The price of the Covered Security at which the transaction was effected;
(4) The name of the broker, dealer or bank with or through which the transaction
was effected: and
(5) The date that the report is submitted by the Access Person.
(B) With respect to any account established by the Access Person in which any
securities were held during the quarter for the direct or indirect benefit of
the Access Person:
(1) The name of the broker, dealer or bank with whom the Access Person
established the account;
(2) The date the account was established; and
(3) The date that the report is submitted by the Access Person.
(iii) Annual Holding Reports. Annually, the following information (which
information must be current as of a date no more than 30 days before the report
is submitted):
(A) The tile, number of share sand principal amount of each Covered Security in
which the Access Person had any direct or indirect beneficial ownership;
<PAGE>
17 CFR s 270.17j-1 PAGE 4
(B) The name of any broker, dealer or bank with whom the Access Person maintains
an account in which any securities are held for the direct or indirect benefit
of the Access Person; and
(C) The date that the report is submitted by the Access Person.
(2) Exceptions from Reporting Requirements.
(i) A person need not make a report under paragraph (d)(1) of this section with
respect to transactions effected for, and Covered Securities held in, any
account over which the person has no direct or indirect influence or control.
(ii) A director of a Fund who is not an "interested person" of the Fund within
the meaning of section 2(a)(19) of the Act [15 U.S.C. 80a-22(a)(19)], and who
would be required to make a report solely by reason of being a Fund director,
need not make:
(A) An initial holdings report under paragraph (d)(1)(i) of this section and an
annual holdings report under paragraph (d)(1)(iii) of this section; and
(B) A quarterly transaction report under paragraph (d)(1)(ii) of this section,
unless the director know or, in the ordinary course of fulfilling his or her
official duties as a Fund director, should have known that during the 15-day
period immediately before or after the director's transaction in a Covered
Security, the Fund purchased or sold the Covered Security, or the Fund or its
investment adviser considered purchasing or selling the Covered Security.
(iii) An Access Person to a Fund's principal underwriter need not make a report
to the principal underwriter under paragraph (d)(1) of this section if:
(A) The principal underwriter is not an affiliated person of the Fund (unless
the Fund is a unit investment trust) or any investment adviser of the Fund; and
(B) The principal underwriter has no officer, director or general partner who
serves as an officer, director or general partner of the Fund or any investment
adviser of the Fund.
(iv) An Access Person to an investment adviser need not make a quarterly
transaction report to the investment adviser under paragraph (d)(1)(ii) of this
section if all the information in the report would duplicate information
required to be recorded under sections 275.204-2(a)(12) or 275.204(a)(13) of
this chapter.
(v) An Access Person need not make a quarterly transaction report under
paragraph (d)(1)(ii) of this section if the report would duplicate information
contained in broker trade confirmations or account statements received by the
Fund, investment adviser or principal underwriter with respect to the Access
Person in the time period required by paragraph (d)(1)(ii), if all of the
information required by that paragraph is contained in the broker trade
confirmations or account statements, or in the record of the Fund, investment
adviser or principal underwriter.
(3) Review of Reports. Each Fund, investment adviser and principal underwriter
to which reports are required to be made by paragraph (d)(1) of this section
must institute procedures by which appropriate management or compliance
personnel review these reports.
(4) Notification of Reporting Obligation. Each Fund, investment adviser and
principal underwriter to which reports are required to be made by paragraph
(d)(1) of this section must identify all Access Persons who are required to make
these reports and must inform those Access Persons of their reporting
obligation.
(5) Beneficial Ownership. For purposes of this section, beneficial ownership is
interpreted in the same manner as it would be under section 240.16a-1(a)(2) of
this chapter in determining whether a person is the beneficial owner of a
security for purposes of section 16 of the Securities Exchange Act of 1934 (15
U.S.C. 78p] and the rules and regulations thereunder. Any report required by
paragraph (d) of this section may contain a statement that the report will not
be construed as an admission that the person making the report has any direct or
indirect beneficial ownership in the Covered Security to which the report
relates.
(e) Pre-approval of Investments in IPOs and Limited Offerings. Investment
Personnel of a Fund or its investment adviser must obtain approval from the Fund
or the Fund's investment adviser before directly or indirectly acquiring
beneficial ownership in any securities in an Initial Public Offering or in a
Limited Offering.
(f) Recordkeeping Requirements.
(1) Each Fund, investment adviser and principal underwriter that is required to
adopt a code of ethics or to which reports are required to be made by Access
Persons must, at its principal place of business,
<PAGE>
17 CFR s 270.17j-1 PAGE 5
maintain records in the manner and to the extent set out in this paragraph (f),
and must make these records available to the Commission or any representative of
the Commission at any time and from time to time for reasonable periodic,
special or other examination:
(A) A copy of each code of ethics for the organization that is in effect, or at
any time within the past five years was in effect, must be maintained in an
easily accesable place;
(B) A record of any violation of the code of ethics, and of any action taken as
a result of the violation, must be maintained in an easily accessible place for
at least five years after the end of the fiscal year in which the violation
occurs;
(C) A copy of each report made by an Access Person as required by this section,
including any information provided in lieu of the reports under paragraph
(d)(2)(v) of this section, must be maintained for at least five years after the
end of the fiscal year in which the report is made or the information is
provided, the first two years in an easily accessable place;
(D) A record of all persons, currently or within the past five years, who are or
were required to make reports under paragraph (d) of this section, or who are or
were responsible for reviewing these reports, must be maintained in an easily
accessible place; and
(E) A copy of each report required by paragraph (c)(2)(ii) of this section must
be maintained for at least five years after the end of the fiscal year in which
it is made, the first two years in an easily accessible place.
(2) A Fund or investment adviser must maintain a record of any decision, and the
reasons supporting the decision, to approve the acquisition by investment
personnel of securities under paragraph (e), for at least five years after the
end of the fiscal year in which the approval in granted.
[45 FR 73919, Nov. 7, 1980; 64 FR 46834, Aug. 27, 1999]
[General Materials (GM) - References, Annotations, or Tables]
17 C.F.R. section 270.17j-1
17 CFR section 270.17j-1
<PAGE>
APPENDIX 2
The following persons are "Access Persons" for purposes of The Lipper
Funds, Inc.'s Code of Ethics:
Kenneth Lipper
Abraham Biderman
Martin Maltz
Stanley Brezenoff
Irwin Russell
Steven Finkel
Lawrence S. Block
Kim Fields
John Corcoran
Karl Hartmann
Helen Robichaud
Ellen Watson
Patricia Leyne
<PAGE>
APPENDIX 3
Rule 16a-1(a)(2) of the Securities Exchange Act of 1934, as attached.
<PAGE>
17 CFR s 240.16a-1
17 C.F.R. Section 240.16a-1
CODE OF FEDERAL REGULATIONS
TITLE 17--COMMODITY AND SECURITIES
EXCHANGES
CHAPTER II--SECURITIES AND EXCHANGE
COMMISSION
PART 240--GENERAL RULES AND
REGULATIONS, SECURITIES EXCHANGE ACT
OF 1934
SUBPART A--RULES AND REGULATIONS
UNDER THE SECURITIES EXCHANGE ACT OF
1934
REGISTRATION OF GOVERNMENT SECURITIES
BROKERS AND GOVERNMENT SECURITIES
DEALERS
REPORTS OF DIRECTORS, OFFICERS, AND
PRINCIPAL SHAREHOLDERS
Current through November 19, 1999; 64 FR 63557
Section 240.16a-1 Definition of Terms.
Terms defined in this rule shall apply solely to section 16 of the Act and the
rules thereunder. These terms shall not be limited to section 16(a) of the Act
but also shall apply to all other subsections under section 16 of the Act.
(a) The term beneficial owner shall have the following applications:
(1) Solely for purpose of determining whether a person is a beneficial owner of
more than ten percent of any class of equity securities registered pursuant to
section 12 of the Act, the term "beneficial owner" shall mean any person who is
deemed a beneficial owner pursuant to section 13(d) of the Act and the rules
thereunder; provided, however, that the following institutions or persons shall
not be deemed the beneficial owner of securities of such class held for the
benefit of third parties or in customer or fiduciary accounts in the ordinary
course of business (or in the case of an employee benefit plan specified in
paragraph (a)(1)(vi) of this section, of securities of such class allocated to
plan participants where participants have voting power) as long as such shares
are acquired by such institutions or persons without the purpose or effect of
changing or influencing control of the issuer or engaging in any arrangement
subject to Rule 13d-3(b)(Section 240.13d-3(b)):
(i) A broker or dealer registered under section 15 of the Act (15 U.S.C. 78o);
(ii) A bank as defined in section 3(a)(6) of the Act (16 U.S.C. 78c);
(iii) An insurance company as defined in section 3(a)(19) of the Act (15 U.S.C.
78c);
(iv) An investment company registered under section 8 of the Investment Company
Act of 1940 (15 U.S.C. 80a-8);
(v) Any person register as an investment adviser under Section 203 of the
Investment Advisers Act of 1940 (15 U.S.C. 80b-3) or under the laws of any
state;
(vi) an employee benefit plan as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended, 29 U.S.C. 1001 et seq.
("ERISA") that is subject to the provisions of ERISA, or any such plan that is
not subject to ERISA that is maintained primarily for the benefit of the
employees of a state or local government or instrumentality, or an endowment
fund;
(vii) A parent holding company or control person, provided the aggregate amount
held directly by the parent or control person, and directly and indirectly by
their subsidiaries or affiliates that are not persons specified in paragraphs
(a)(1)(i) through (ix), does not exceed one percent of the securities of the
subject class;
(viii) A savings association as defined in Section 3(b) of the Federal Deposit
Insurance Act (12 U.S.C. 1813);
(ix) A church plan that is excluded from the definition of an investment company
under section 3(c)(14) of the investment Company Act of 1940 (15 U.S.C. 80a-3);
and
(x) A group, provided that all the members are persons specified in Section
240.16a-1(a)(1)(i) through (ix).
(xi) A group, provided that all the members are persons specified in Section
240.16a-1(a)(1)(i) through (vii).
Note to paragraph (a). Pursuant to this section, a person deemed a beneficial
owner of more than ten percent of any class of equity securities registered
under section 12 of the Act would file a Form 3 (Section 249.103), but the
securities holdings disclosed on Form 3, and changes in beneficial ownership
reported on subsequent Forms 4 (Section 249.104) or 5 (Section 249.105), would
be determined by the definition of "beneficial owner" in paragraph(a)(s) of this
section.
<PAGE>
17 CFR s 240.16a-1
17 C.F.R. Section 240.16a-1
(2) Other than for purposes of determining whether a person is a beneficial
owner of more than ten percent of any class of equity securities registered
under Section 12 of the Act, the term beneficial owner shall mean any person
who, directly or indirectly, through any contract, arrangement, understanding,
relationship or otherwise, has or shares a direct or indirect pecuniary interest
in the equity securities, subject to the following:
(i) The term pecuniary interest in any class of equity securities shall mean the
opportunity, directly or indirectly, to profit or share in any profit derived
from a transaction in the subject securities.
(ii) The term indirect pecuniary interest in any class of equity securities
shall include, but not be limited to:
(A) Securities held by members of a person's immediate family sharing the same
household; provided, however, that the presumption of such beneficial ownership
may be rebutted; see also Section 240.16a-1(a)(4);
(B) A General partner's proportionate interest in the portfolio securities held
by a general or limited partnership. The general partner's proportionate
interest, as evidenced by the partnership agreement in effect at the time of the
transaction and the partnership's most recent financial statements, shall be the
greater of:
(1) The general partner's share of the partnership's profits, including profits
attributed to any limited partnership interests held by the general partner and
any other interests in profits that arise from the purchase and sale of the
partnership's portfolio securities; or
(2) The general partner's share of the partnership capital account, including
the share attributable to any limited partnership interest held by the general
partner.
(C) A performance-related fee, other than an asset-based fee, received by any
broker, dealer, bank, insurance company, investment company, investment adviser,
investment manager, trustee or person or entity performing a similar function;
provided, however, that not pecuniary interest shall be present where;
(1) The performance-related fee, regardless of when payable, is calculated based
upon net capital gains and/or net capital appreciation generated from the
portfolio or from the fiduciary's overall performance over period of one year or
more; and
(2) Equity securities of the issuer do not account for more than ten percent of
the market value of the portfolio. A right to a nonperformance-related fee alone
shall not represent a pecuniary interest in the securities;
(D) A person's right to dividends that is separated or separable from the
underlying securities. Otherwise, a right to dividends alone shall not represent
a pecuniary interest in the securities;
(E) A person's interest in securities held by a trust, as specified in Section
240.16a-8(b); and
(F) A person's right to acquire equity securities through the exercise or
conversion of any derivative security, whether or not presently exercisable.
(iii) A shareholder shall not be deemed to have pecuniary interest in the
portfolio securities held by a corporation or similar entity in which the person
owns securities if the shareholder is not a controlling shareholder of the
entity and does not have or share investment control over the entity's
portfolio.
(3) Where more than one person subject to section 16 of the Act is deemed to be
a beneficial owner of the same equity securities, all such persons must report
as beneficial owners of the securities, either separately or jointly, as
provided in Section 240.16a-3(j). In such cases, the amount of short-swing
profit recoverable shall not be increased above the amount recoverable if there
were only one beneficial owners.
(4) Any person filing a statement pursuant to section 16(a) of the Act may state
that the filing shall not be deemed on admission that such person is, for
purposes of section 16 of the Act or otherwise, the beneficial owner of any
equity securities covered by the statement.
(5) The following interests are deemed not to confer beneficial ownership for
purposes of section 16 of the Act:
(i) Interests in portfolio securities held by any holding company registered
under the Public Utility Holding Company Act of 1935 (15 U.S.C. 79a et seq.);
(ii) Interests in portfolio securities held by any investment company registered
under the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.); and
<PAGE>
17 CFR s 240.16a-1
17 C.F.R. Section 240.16a-1
(iii) Interests in securities comprising part of a broad-based, publicly traded
market basket or index of stocks, approved for trading by the appropriate
federal governmental authority.
<PAGE>
APPENDIX 4
Lipper & Company, L.L.C.'s Code of Ethics, as attached.
<PAGE>
APPENDIX 5
Lipper & Company, L.P.'s Code of Ethics, as attached.
<PAGE>
APPENDIX 6
Prime Lipper Asset Management's Code of Ethics, as attached
<PAGE>
APPENDIX 7
CERTIFICATION FORM
This is to certify that I have read and understand the Code of Ethics of
The Lipper Funds, Inc. and that I recognize that I am subject to the provisions
thereof and will comply with the policy and procedures stated therein.
This is to further certify that I have complied with the requirements of
such Code of Ethics and that I have reported all personal securities
transactions required to be disclosed or reported pursuant to the requirements
of such Code of Ethics.
Please sign your name here: __________________________
Please print your name here: __________________________
Please date here: __________________________
Please sign two copies of this Certification Form, return one copy to
Abraham Biderman, The Lipper Funds, Inc., 101 Park Avenue, New York, New York
10178, and retain the other copy, together with a copy of the Code of Ethics,
for your records.
LIPPER & COMPANY, L.L.C.
CODE OF ETHICS
I. INTRODUCTION.
The purpose of this Code of Ethics is to prevent Access Persons (as defined
below) of Lipper & Company, L.L.C. (the "Adviser") from engaging in any act,
practice or course of business prohibited by paragraph (b) of Rule 17j-1 (the
"Rule") under the Investment Company Act of 1940, as amended (the "Act"). This
Code of Ethics is required by paragraph (c) of the Rule.
Access Persons of the Adviser, in conducting their personal securities
transactions, owe a fiduciary duty to the U.S. registered investment companies
(the "Funds") for which the Adviser serves as investment adviser and the
shareholders of such Funds. The fundamental standard to be followed in personal
securities transactions is that Access Persons may not take inappropriate
advantage of their positions. All personal securities transactions by Access
Persons must be conducted in such a manner as to avoid any actual or potential
conflict of interest between the Access Person's interest and the interests of
each Fund, or any abuse of an Access Person's position of trust and
responsibility. Potential conflicts arising from personal investment activities
could include buying or selling securities based on knowledge of a Fund's
trading position or plans (sometimes referred to as front-running), and
acceptance of personal favors that could influence trading judgments on behalf
of a Fund.
While this Code of Ethics is designed to address identified conflicts and
potential conflicts, it cannot possibly be written broadly enough to cover all
potential situations. In this regard, Access Persons are expected to adhere not
only to the letter, but also the spirit, of the policies contained herein. For
example, the restrictions contained herein on the purchase or sale of a security
would include the purchase or sale of an equivalent security, such as the
writing of an option to purchase or sell a security, and restrictions contained
herein on personal securities transactions for an Access Person's account would
apply equally to an account in which such Access Person has "beneficial
ownership" (as defined in Rule 16a-1(a)(2) of the Securities Exchange Act of
1934, as amended). Such accounts include, but are not limited to, accounts owned
by the Access Person, the Access Person's spouse, minor children or other
persons residing in the Access Person's household or to whose support the Access
Person contributes significantly, and any other account in which the Access
Person has a pecuniary interest. "Pecuniary interest" generally is the
opportunity, directly or indirectly, to profit or share in any profit derived
from a transaction in securities.
In furtherance of the above principles, this Code of Ethics contains
certain restrictions on personal securities transactions by personnel of the
Adviser, certain restrictions on other activities of such personnel when an
actual or potential conflict of interest between such personnel and a Fund may
exist, and certain reporting requirements to enable the Adviser to ensure
compliance with this Code of Ethics. Any questions regarding the application or
scope of
<PAGE>
2
the restrictions and reporting requirements contained herein should be
directed to Abraham Biderman, the Adviser's Compliance Officer.
For purposes of the restrictions and reporting requirements contained
herein, personnel of the Adviser are divided into "Access Persons" and
"Portfolio Managers," with such categories determining which of the restrictions
and reporting obligations in this Code of Ethics will apply to each individual:
"Access Person" is the broadest category, and includes any member, officer
or employee of the Adviser. All Portfolio Managers of the Adviser (as
defined below) are also considered "Access Persons." For purposes of this
definition, "Access Person" also includes any natural person in a control
relationship to the Adviser who obtains information concerning
recommendations made to a Fund with regard to the purchase or sale of a
security.
"Portfolio Manager" is the narrowest category, and includes only officers
or employees of the Adviser having direct responsibility and authority to
make investment decisions affecting a Fund.
A list of Access Persons and Portfolio Managers is attached as Appendix 1 to
this Code of Ethics and will be updated from time to time.
To the extent that this Code of Ethics conflicts with any other code of
ethics or other policy to which an Access Person is also subject, this Code of
Ethics shall control; except that if the other code of ethics or other policy is
more restrictive than this Code of Ethics, such other code of ethics or other
policy shall control.
II. PROHIBITIONS; EXEMPTIONS.
1. PROHIBITED PURCHASES AND SALES.
ACCESS PERSONS
The following purchases and sales are prohibited for all Access
Persons:
A. No Access Person may purchase or sell, directly or indirectly, any
"Covered Security" in which that Access Person has, or by reason of the
transaction would acquire, any direct or indirect beneficial ownership and
which to the actual knowledge of that Access Person at the time of such
purchase or sale:
(1) is being actively considered for purchase or sale on behalf of
any Fund; or
(2) is being purchased or sold on behalf of any Fund.
<PAGE>
3
"Covered Security" means a security as defined in Section 2(a)(36) of the
Act, and includes, but is not limited to, notes, stocks, bonds, investment
contracts, puts, calls and options, except that it does not include direct
obligations of the U.S. Government, bankers' acceptances, bank certificates of
deposit, commercial paper and high quality short-term debt instruments,
including repurchase agreements and shares issued by open-end funds.
B. No Access Person may purchase or sell a Covered Security on any day
during which any Fund has a pending "buy" or "sell" order in that same
Covered Security until that order is executed or withdrawn.
C. No Access Person may purchase, directly or indirectly, any security
in an initial public offering. In addition, Access Persons must obtain
approval from the Compliance Officer before directly or indirectly
acquiring beneficial ownership in any offering exempt from registration
under Sections 4(2) or 4(6) of the Securities Act of 1933, as amended, or
Rules 504, 505 or 506 thereunder ("Limited Offerings").
PORTFOLIO MANAGERS
In addition to the above prohibitions, the following purchases and
sales are also prohibited for all Portfolio Managers:
D. No Portfolio Manager may purchase or sell, directly or indirectly,
any Covered Security in which that Portfolio Manager has, or by reason of
the transaction would acquire, any direct or indirect beneficial ownership
within seven (7) calendar days before or after any Fund trades in that
Covered Security.
2. EXEMPTIONS FROM CERTAIN PROHIBITIONS.
A. The prohibited purchase and sale transactions described in Section II.1.
above do not apply to the following personal securities transactions:
(1) purchases or sales effected in any account over which the Access
Person has no direct or indirect influence or control;
(2) purchases or sales which are non-volitional on the part of either the
Access Person or the relevant Fund, including purchases or sales in
connection with any merger, acquisition or corporate reorganization
regardless of whether or not such Access Person or Fund votes in favor
of or against or abstains from voting in connection with such
transaction;
(3) purchases which are part of an automatic dividend reinvestment plan
(other than pursuant to a cash purchase plan option);
(4) purchases effected upon the exercise of rights issued by an issuer PRO
RATA to all holders of a class of its securities, to the extent the
rights were acquired from that issuer, and sales of the rights so
acquired;
<PAGE>
4
(5) purchases or sales of securities for the account of any form of
investment vehicle managed by the Adviser or its affiliates other than
a U.S. registered investment company, including but not limited to
foreign investment companies, partnerships and separate accounts,
provided that any such purchase or sale is not intended to contravene
the policies contained in this Code of Ethics (such purchases and
sales shall be conducted in accordance with the Adviser's "Procedures
for Allocating Portfolio Trades" to the extent applicable); and
(6) any purchase or sale which the Compliance Officer (or Kenneth Lipper
with respect to the Compliance Officer personal securities
transactions) approves on the grounds that its potential harm to the
respective Fund is remote.
B. The prohibited purchase and sale transactions described in Section
II.1.A. and II.1.B. above do not apply to any purchase or sale, or series of
related transactions, involving any issuer which has an aggregate market
capitalization (outstanding shares multiplied by the current market price per
share) greater than $1 billion, provided that such purchase or sale does not
exceed the greater of 1,000 shares or .01% of the issuer's market
capitalization.
3. PROHIBITED RECOMMENDATIONS.
A. Access Persons may not recommend the purchase or sale of any Covered
Security to or for any Fund without having disclosed his or her interest, if
any, in such security or the issuer thereof, to the Compliance Officer,
including without limitation:
(1) any direct or indirect beneficial ownership of any Covered Security of
such issuer, including any security received in a private securities
transaction;
(2) any contemplated purchase or sale by such person of such Covered
Security;
(3) any position with such issuer or its affiliates; or
(4) any present or proposed business relationship between such issuer or
its affiliates and such person or any party in which such person has a
significant interest.
B. In circumstances in which Access Persons are required to disclose an
interest in a Covered Security or an issuer to the Compliance Officer, as
described above, the Adviser's decision to purchase or sell a Covered Security
(or to recommend the purchase or sale of a Covered Security) of the same issuer
for any Fund shall be subject to an independent review by an Access Person with
no personal interest in the issuer.
<PAGE>
5
III. PRE-CLEARANCE OF PERSONAL SECURITIES TRANSACTIONS.
1. All Access Persons must obtain approval from the Compliance Officer
prior to entering into any personal securities transaction involving the
purchase or sale of any security, other than (i) the transactions described
included in Section II.2.A.(1) - (6), above.
2. Access Persons may pre-clear personal securities transactions only in
cases where they have a present intention to engage in a transaction in the
security for which pre-clearance is sought. It is not permitted for an Access
Person to obtain a general or open-ended pre-clearance. This requirement does
not proscribe a price limit order, provided the Access Person shall have a
present intention to effect a transaction at such price.
3. All Access Persons must provide to the Compliance Officer at the time
pre-clearance is sought a description of any factors such Access Person
reasonably believes to be potentially relevant to a determination of whether
pre-clearance should be granted, including the existence of any substantial
economic relationship between the transaction and securities held or to be
acquired by any Fund.
4. Pre-clearance of a personal securities transaction shall be valid and in
effect for three business days commencing on the day which pre-clearance is
made; provided, however, that a pre-clearance will expire upon an Access Person
becoming aware of facts or circumstances that such person reasonably believes
would prevent a proposed personal securities transaction from being pre-cleared
were such facts or circumstances made known to the Compliance Officer.
Accordingly, if an Access Person becomes aware of new or changed facts or
circumstances which such person reasonably believes gives rise to a question as
to whether pre-clearance could be obtained if the Compliance Officer were aware
of such facts or circumstances, the Access Person shall be required to so advise
the Compliance Officer before proceeding with such personal securities
transaction.
5. Limited Offerings and other non-brokered securities transactions (not
otherwise excluded from the definition of "Covered Security" set forth herein)
are included in the category of personal securities transactions that require
pre-clearance. It is the responsibility of the Access Person to report to the
Compliance Officer all such transactions upon the consummation thereof so that
the Compliance Officer can maintain a current record of such non-brokered
securities transactions. In determining whether to approve Limited Offerings and
other non-brokered securities transactions involving Access Persons, the
Compliance Officer will take into account, among other factors, whether the
investment opportunity should be reserved for a Fund, and whether the
opportunity is being offered to the individual by virtue of his or her position
with the Adviser.
6. Personal securities transactions of the Compliance Officer shall be
subject to the requirements under this Section III, except that any required
approvals shall be obtained from, and any disclosures made to, Kenneth Lipper
rather than the Compliance Officer.
<PAGE>
6
IV. PROHIBITIONS ON GIFTS AND SERVICES.
1. Access Persons may not receive cash gifts, or non-cash gifts or other
things of more than de minimis value, from any person or entity that does
business with or on behalf of any Fund.
2. Access Persons shall not serve on the boards of directors of publicly
held companies, absent prior approval from the Compliance Officer (or Kenneth
Lipper in the case of the Compliance Officer). In determining whether to grant
such approval, the Compliance Officer (or Kenneth Lipper as applicable) shall
review whether that board service would be consistent with the best interests of
the shareholders of the Funds.
V. REPORTING.
1. INITIAL REPORTING.
All Access Persons must report to the Adviser all personal holdings of
Covered Securities within 10 days of commencement of such person's status
as an Access Person. The following information must be included in the
report: (i) the title, number of shares and principal amount of each
Covered Security in which the Access Person had any direct or indirect
beneficial ownership when the person became an Access Person; (ii) the name
of any broker, dealer or bank with whom the Access Person maintained an
account in which any securities were held for the direct or indirect
benefit of the Access Person as of the date the person became an Access
Person; and (iii) the date that the report is submitted by the Access
Person.
2. QUARTERLY REPORTING.
A. Subject to the provisions of paragraphs B and D below, every Access
Person shall either report to the Adviser the information described in
paragraph C below with respect to transactions in any Covered Security in
which the Access Person has, or by reason of the transaction acquires, any
direct or indirect beneficial ownership in the Covered Security.
B. An Access Person is not required to make a report with respect to
any transaction which is included in Section II.2.A. (1)-(6) above.
C. Every report shall be made not later than 10 days after the end of
the calendar quarter in which the transaction to which the report relates
was effected and shall contain the following information:
(1) the date of the transaction, the title, the interest rate and
maturity date (if applicable), the number of shares and the
principal amount of each Covered Security involved;
<PAGE>
7
(2) the nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
(3) the price at which the transaction was effected;
(4) the name of the broker, dealer or bank with or through whom the
transaction was effected;
(5) the date that the report is submitted by the Access Person; and
(6) a description of any factors the Access Person reasonably
believes is potentially relevant to an analysis of whether the
Access Person may have a conflict of interest with respect to the
transaction, including the existence of any substantial economic
relationship between the transaction and securities held or to be
acquired by any Fund.
D. Notwithstanding the foregoing, an Access Person need not separately
report to the Adviser information regarding transactions conducted through
securities accounts, PROVIDED that (a) copies of the relevant confirmations and
statements are furnished to the Adviser as required by Section V.4. below, and
(b) not later than 10 days after the end of each calendar quarter, such Access
Person delivers a written report containing (i) the information required to be
reported above with respect to any transactions during such calendar quarter
which were not conducted through such securities accounts and (ii) if
applicable, with respect to transactions conducted through securities accounts,
a description of any factors the Access Person reasonably believes are
potentially relevant to a conflict of interest analysis, as described in Section
V.2.C.v. above.
3. ANNUAL REPORTING AND CERTIFICATION.
A. All Access Persons must report all personal securities holdings of
Covered Securities within 30 days after the end of each calendar year,
together with a list of all accounts maintained at brokerage firms which
are subject to the provisions of this Code of Ethics, including the names
of the firms and the account numbers.
B. All Access Persons are required to certify annually that they have
read and understand this Code of Ethics and recognize that they are subject
to the provisions hereof and will comply with the policy and procedures
stated herein. Further, all Access Persons are required to certify annually
that they have complied with the requirements of this Code of Ethics and
that they have reported all personal securities transactions required to be
disclosed or reported pursuant to the requirements of such policies. A copy
of the certification form to be used in complying with this paragraph B is
attached to this Code of Ethics as Appendix 2. Upon approval of this Code
of Ethics by the Board, the Independent Directors shall be deemed to have
complied with the requirements of this paragraph B, and shall not have to
complete the annual certification form.
<PAGE>
8
C. The Adviser shall prepare an annual report to the Board of
Directors of the Funds for which it serves as Investment Adviser to be
presented at the first meeting of the Board after the end of each calendar
year and which shall:
(1) summarize existing procedures concerning personal investing,
including preclearance policies and the monitoring of personal
investment activity after preclearance has been granted, and any
changes in the procedures during the past year;
(2) describe any issues arising under the Code of Ethics since the
last report to the Board including, but not limited to,
identifying any violations requiring significant remedial action
and the sanctions imposed during the past year;
(3) identify any recommended changes in existing restrictions or
procedures based upon experience under this Code of Ethics,
evolving industry practice or developments in applicable laws and
regulations;
(4) contain such other information, observations and recommendations
as deemed relevant by the Adviser; and
(5) certify that the Adviser has adopted this Code of Ethics with
procedures reasonably necessary to prevent Access Person from
violating the Code.
4. BROKERAGE CONFIRMATIONS AND STATEMENTS.
All Access Persons must direct their brokers to supply to the
Compliance Officer, on a timely basis, duplicate copies of confirmations of
any purchase or sale of a security and copies of all periodic statements
for all securities accounts.
5. NOTIFICATION OF REPORTING OBLIGATION AND REVIEW OF REPORTS.
Each Access Person shall receive a copy of this Code of Ethics and be
notified of his or her reporting obligation. All reports under this Code of
Ethics shall be promptly submitted upon completion to the Compliance
Officer for his or her review.
6. MISCELLANEOUS.
Any report under this Code of Ethics may contain a statement that the
report shall not be construed as an admission by the person making the
report that the person has any direct or indirect beneficial ownership in
the securities to which the report relates.
<PAGE>
9
VI. CONFIDENTIALITY.
No Access Person shall reveal to any other person (except in the normal
course of his or her duties on behalf of the Adviser) any information regarding
securities transactions by any Fund or consideration by any Fund or the Adviser
of any such securities transaction.
All information obtained from any Access Person hereunder shall be kept in
strict confidence, except that reports of securities transactions hereunder will
be made available to the Securities and Exchange Commission or any other
regulatory or self-regulatory organization to the extent required by law or
regulation.
VII. SANCTIONS.
Any trades made in violation of the provisions set forth under paragraphs
II.1.B, C and D must be unwound, or, if that is impractical, any profits
realized on trades made in violation of these prohibitions must be disgorged to
the appropriate Fund or Funds (or, alternatively, to a charitable organization)
under the direction of the Compliance Officer.
Upon discovering a violation of this Code of Ethics, the Adviser may impose
any sanctions it deems appropriate, including a letter of censure or the
suspension or termination of the employment of the violator.
Dated: December 15, 1999
<PAGE>
APPENDIX 1
1. The following persons are "Access Persons" for purposes of the Lipper &
Company, L.L.C.'s Code of Ethics:
All employees of the Lipper & Company, L.L.C. and its affiliates.
<PAGE>
APPENDIX 2
CERTIFICATION FORM
This is to certify that I have read and understand the Code of Ethics of
Lipper & Company, L.L.C. and that I recognize that I am subject to the
provisions thereof and will comply with the policy and procedures stated
therein.
This is to further certify that I have complied with the requirements of
such Code of Ethics and that I have reported all personal securities
transactions required to be disclosed or reported pursuant to the requirements
of such Code of Ethics.
Please sign your name here: ____________________________
Please print your name here: ____________________________
Please date here: ____________________________
Please sign two copies of this Certification Form, return one copy to
Abraham Biderman, Lipper & Company, L.L.C., 101 Park Avenue, New York, New York
10178, and retain the other copy, together with a copy of the Code of Ethics,
for your records.
PRIME LIPPER ASSET MANAGEMENT
CODE OF ETHICS
I. INTRODUCTION.
The purpose of this Code of Ethics is to prevent Access Persons (as defined
below) of Prime Lipper Asset Management (the "Adviser") from engaging in any
act, practice or course of business prohibited by paragraph (b) of Rule 17j-1
(the "Rule") under the Investment Company Act of 1940, as amended (the "Act").
This Code of Ethics is required by paragraph (c) of the Rule.
Access Persons of the Adviser, in conducting their personal securities
transactions, owe a fiduciary duty to the U.S. registered investment companies
(the "Funds") for which the Adviser serves as investment adviser and the
shareholders of such Funds. The fundamental standard to be followed in personal
securities transactions is that Access Persons may not take inappropriate
advantage of their positions. All personal securities transactions by Access
Persons must be conducted in such a manner as to avoid any actual or potential
conflict of interest between the Access Person's interest and the interests of
each Fund, or any abuse of an Access Person's position of trust and
responsibility. Potential conflicts arising from personal investment activities
could include buying or selling securities based on knowledge of a Fund's
trading position or plans (sometimes referred to as front-running), and
acceptance of personal favors that could influence trading judgments on behalf
of a Fund.
While this Code of Ethics is designed to address identified conflicts and
potential conflicts, it cannot possibly be written broadly enough to cover all
potential situations. In this regard, Access Persons are expected to adhere not
only to the letter, but also the spirit, of the policies contained herein. For
example, the restrictions contained herein on the purchase or sale of a security
would include the purchase or sale of an equivalent security, such as the
writing of an option to purchase or sell a security, and restrictions contained
herein on personal securities transactions for an Access Person's account would
apply equally to an account in which such Access Person has "beneficial
ownership" (as defined in Rule 16a-1(a)(2) of the Securities Exchange Act of
1934, as amended). Such accounts include, but are not limited to, accounts owned
by the Access Person, the Access Person's spouse, minor children or other
persons residing in the Access Person's household or to whose support the Access
Person contributes significantly, and any other account in which the Access
Person has a pecuniary interest. "Pecuniary interest" generally is the
opportunity, directly or indirectly, to profit or share in any profit derived
from a transaction in securities.
In furtherance of the above principles, this Code of Ethics contains
certain restrictions on personal securities transactions by personnel of the
Adviser, certain restrictions on other activities of such personnel when an
actual or potential conflict of interest between such personnel and a Fund may
exist, and certain reporting requirements to enable the Adviser to ensure
compliance with this Code of Ethics. Any questions regarding the application or
scope of
<PAGE>
2
the restrictions and reporting requirements contained herein should be directed
to Laura Coletto or Abraham Biderman, the Adviser's Compliance Officers.
For purposes of the restrictions and reporting requirements contained
herein, personnel of the Adviser are divided into "Access Persons" and
"Portfolio Managers," with such categories determining which of the restrictions
and reporting obligations in this Code of Ethics will apply to each individual:
"Access Person" is the broadest category, and includes any director,
officer or employee of the Adviser. All Portfolio Managers of the Adviser
(as defined below) are also considered "Access Persons." For purposes of
this definition, "Access Person" also includes any natural person in a
control relationship to the Adviser who obtains information concerning
recommendations made to a Fund with regard to the purchase or sale of a
security.
"Portfolio Manager" is the narrowest category, and includes only officers
or employees of the Adviser having direct responsibility and authority to
make investment decisions affecting a Fund.
A list of Access Persons and Portfolio Managers is attached as Appendix 1 to
this Code of Ethics and will be updated from time to time.
To the extent that this Code of Ethics conflicts with any other code of
ethics or other policy to which an Access Person is also subject, this Code of
Ethics shall control; except that if the other code of ethics or other policy is
more restrictive than this Code of Ethics, such other code of ethics or other
policy shall control.
II. PROHIBITIONS; EXEMPTIONS.
1. PROHIBITED PURCHASES AND SALES.
ACCESS PERSONS
The following purchases and sales are prohibited for all Access
Persons:
A. No Access Person may purchase or sell, directly or indirectly, any
"Covered Security" in which that Access Person has, or by reason of the
transaction would acquire, any direct or indirect beneficial ownership and
which to the actual knowledge of that Access Person at the time of such
purchase or sale:
(1) is being actively considered for purchase or sale on behalf of
any Fund; or
(2) is being purchased or sold on behalf of any Fund.
<PAGE>
3
"Covered Security" means a security as defined in Section 2(a)(36) of
the Act, and includes, but is not limited to, notes, stocks, bonds, investment
contracts, puts, calls and options, except that it does not include direct
obligations of the U.S. Government, bankers' acceptances, bank certificates of
deposit, commercial paper and high quality short-term debt instruments,
including repurchase agreements and shares issued by open-end funds.
B. No Access Person may purchase or sell a Covered Security on
any day during which any Fund has a pending "buy" or "sell" order in
that same Covered Security until that order is executed or withdrawn.
C. No Access Person may purchase, directly or indirectly, in an
initial public offering, any security of any issuer that is included
in the universe of approved issuers maintained by the Adviser. In
addition, Access Persons must obtain approval from the Compliance
Officer before directly or indirectly acquiring beneficial ownership
in any securities in an initial public offering or an offering exempt
from registration under Sections 4(2) or 4(6) of the Securities Act of
1933, as amended, or Rules 504, 505 or 506 thereunder ("Limited
Offerings").
PORTFOLIO MANAGERS
In addition to the above prohibitions, the following purchases
and sales are also prohibited for all Portfolio Managers:
D. No Portfolio Manager may purchase or sell, directly or
indirectly, any Covered Security in which that Portfolio Manager has,
or by reason of the transaction would acquire, any direct or indirect
beneficial ownership within seven (7) calendar days before or after
any Fund trades in that Covered Security.
2. EXEMPTIONS FROM CERTAIN PROHIBITIONS.
A. The prohibited purchase and sale transactions described in
Section II.1. above do not apply to the following personal securities
transactions:
(1) purchases or sales effected in any account over which the
Access Person has no direct or indirect influence or
control;
(2) purchases or sales which are non-volitional on the part of
either the Access Person or the relevant Fund, including
purchases or sales in connection with any merger,
acquisition or corporate reorganization regardless of
whether or not such Access Person or Fund votes in favor of
or against or abstains from voting in connection with such
transaction;
(3) purchases which are part of an automatic dividend
reinvestment plan (other than pursuant to a cash purchase
plan option);
<PAGE>
4
(4) purchases effected upon the exercise of rights issued by an
issuer PRO RATA to all holders of a class of its securities,
to the extent the rights were acquired from that issuer, and
sales of the rights so acquired;
(5) purchases or sales of securities for the account of any form
of investment vehicle managed by the Adviser or its
affiliates other than a U.S. registered investment company,
including but not limited to foreign investment companies,
partnerships and separate accounts, provided that any such
purchase or sale is not intended to contravene the policies
contained in this Code of Ethics (such purchases and sales
shall be conducted in accordance with the Adviser's
"Procedures for Allocating Portfolio Trades" to the extent
applicable); and
(6) any purchase or sale which the Compliance Officer (or Mario
Barlocco with respect to the Compliance Officers personal
securities transactions) approves on the grounds that its
potential harm to the respective Fund is remote.
B. The prohibited purchase and sale transactions described in
Section II.1.A. and II.1.B. above do not apply to any purchase or
sale, or series of related transactions, involving not more than 1,000
shares or .01% of the market capitalization in the aggregate, if the
issuer has a market capitalization (outstanding shares multiplied by
the current market price per share) greater than $1 billion.
3. PROHIBITED RECOMMENDATIONS.
A. Access Persons may not recommend the purchase or sale of any
Covered Security to or for any Fund without having disclosed his or
her interest, if any, in such security or the issuer thereof, to the
Compliance Officer, including without limitation:
(1) any direct or indirect beneficial ownership of any Covered
Security of such issuer, including any security received in
a private securities transaction;
(2) any contemplated purchase or sale by such person of such
Covered Security;
(3) any position with such issuer or its affiliates; or
(4) any present or proposed business relationship between such
issuer or its affiliates and such person or any party in
which such person has a significant interest.
B. In circumstances in which Access Persons are required to
disclose an interest in a Covered Security or an issuer to the
Compliance Officer, as described above, the Adviser's decision to
purchase or sell a Covered Security (or to recommend the
<PAGE>
5
purchase or sale of a Covered Security) of the same issuer for a Fund
shall be subject to an independent review by an Access Person with no
personal interest in the issuer.
III. PRE-CLEARANCE OF PERSONAL SECURITIES TRANSACTIONS.
1. All Access Persons must obtain approval from the Compliance Officer
prior to entering into any personal securities transaction involving the
purchase or sale of any security, other than (i) the transactions described
included in Section II.2.A.(1) - (6), above, and (ii) transactions in
securities of any issuer not included in the universe of approved issuers
maintained by the Adviser.
2. Access Persons may pre-clear personal securities transactions only
in cases where they have a present intention to engage in a transaction in
the security for which pre-clearance is sought. It is not permitted for an
Access Person to obtain a general or open-ended pre-clearance. This
requirement does not proscribe a price limit order, provided the Access
Person shall have a present intention to effect a transaction at such
price.
3. All Access Persons must provide to the Compliance Officer at the
time pre-clearance is sought a description of any factors such Access
Person reasonably believes to be potentially relevant to a determination of
whether pre-clearance should be granted, including the existence of any
substantial economic relationship between the transaction and securities
held or to be acquired by any Fund.
4. Pre-clearance of a personal securities transaction shall be valid
and in effect for three business days commencing on the day on which
pre-clearance is made; provided, however, that a pre-clearance will expire
upon an Access Person becoming aware of facts or circumstances that such
person reasonably believes would prevent a proposed personal securities
transaction from being pre-cleared were such facts or circumstances made
known to the Compliance Officer. Accordingly, if an Access Person becomes
aware of new or changed facts or circumstances which such person reasonably
believes gives rise to a question as to whether pre-clearance could be
obtained if the Compliance Officer were aware of such facts or
circumstances, the Access Person shall be required to so advise the
Compliance Officer before proceeding with such personal securities
transaction.
5. Limited Offerings and other non-brokered securities transactions
(not otherwise excluded from the definition of "Covered Security" set forth
herein) are included in the category of personal securities transactions
that require pre-clearance. It is the responsibility of the Access Person
to report to the Compliance Officer all such transactions upon the
consummation thereof so that the Compliance Officer can maintain a current
record of such non-brokered securities transactions. In determining whether
to approve Limited Offerings and other non-brokered securities transactions
involving Access Persons, the Compliance Officer will take into account,
among other factors, whether the investment opportunity should be reserved
for a Fund, and whether the opportunity is being offered to the individual
by virtue of his or her position with the Adviser.
<PAGE>
6
6. Personal securities transactions of the Compliance Officer shall be
subject to the requirements under this Section III, except that any
required approvals shall be obtained from, and any disclosures made to,
Mario Barlocco rather than the Compliance Officer.
IV. PROHIBITIONS ON GIFTS AND SERVICES.
1. Access Persons may not receive cash gifts, or non-cash gifts or
other things of more than de minimis value, from any person or entity that
does business with or on behalf of any Fund.
2. Access Persons shall not serve on the boards of directors of
publicly held companies, absent prior approval from the Compliance Officer
(or Mario Barlocco in the case of the Compliance Officer). In determining
whether to grant such approval, the Compliance Officer (or Mario Barlocco,
as applicable) shall review whether that board service would be consistent
with the best interests of the shareholders of the Funds.
V. REPORTING.
1. INITIAL REPORTING.
All Access Persons must report to the Adviser all personal
holdings of Covered Securities within 10 days of commencement of such
person's status as an Access Person. The following information must be
included in the report: (i) the title, number of shares and principal
amount of each Covered Security in which the Access Person had any
direct or indirect beneficial ownership when the person became an
Access Person; (ii) the name of any broker, dealer or bank with whom
the Access Person maintained an account in which any securities were
held for the direct or indirect benefit of the Access Person as of the
date the person became an Access Person; and (iii) the date that the
report is submitted by the Access Person.
2. QUARTERLY REPORTING.
A. Subject to the provisions of paragraphs B and D below, every
Access Person shall either report to the Adviser the information
described in paragraph C below with respect to transactions in any
Covered Security in which the Access Person has, or by reason of the
transaction acquires, any direct or indirect beneficial ownership in
the Covered Security.
B. An Access Person is not required to make a report with respect
to any transaction which is included in Section II.2.A. (1)-(6) above.
C. Every report shall be made not later than 10 days after the
end of the calendar quarter in which the transaction to which the
report relates was effected and shall contain the following
information:
<PAGE>
7
(1) the date of the transaction, the title, the interest rate
and maturity date (if applicable), the number of shares and
the principal amount of each Covered Security involved;
(2) the nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition);
(3) the price at which the transaction was effected;
(4) the name of the broker, dealer or bank with or through whom
the transaction was effected;
(5) the date that the report is submitted by the Access Person;
and
(6) a description of any factors the Access Person reasonably
believes is potentially relevant to an analysis of whether
the Access Person may have a conflict of interest with
respect to the transaction, including the existence of any
substantial economic relationship between the transaction
and securities held or to be acquired by any Fund.
D. Notwithstanding the foregoing, an Access Person need not
separately report to the Adviser information regarding transactions
conducted through securities accounts, PROVIDED that (a) copies of the
relevant confirmations and statements are furnished to the Adviser as
required by Section V.4. below, and (b) not later than 10 days after
the end of each calendar quarter, such Access Person delivers a
written report containing (i) the information required to be reported
above with respect to any transactions during such calendar quarter
which were not conducted through such securities accounts and (ii) if
applicable, with respect to transactions conducted through securities
accounts, a description of any factors the Access Person reasonably
believes are potentially relevant to a conflict of interest analysis,
as described in Section V.2.C.vi. above.
3. ANNUAL REPORTING AND CERTIFICATION.
A. All Access Persons must report all personal securities
holdings of Covered Securities within 30 days after the end of each
calendar year, together with a list of all accounts maintained at
brokerage firms which are subject to the provisions of this Code of
Ethics, including the names of the firms and the account numbers.
B. All Access Persons are required to certify annually that they
have read and understand this Code of Ethics and recognize that they
are subject to the provisions hereof and will comply with the policy
and procedures stated herein. Further, all Access Persons are required
to certify annually that they have complied with the requirements of
this Code of Ethics and that they have reported all personal
securities transactions required to be disclosed or reported pursuant
to the requirements of such policies. A copy of the certification form
to be used in complying with this paragraph B is attached to this
<PAGE>
8
Code of Ethics as Appendix 2. Upon approval of this Code of Ethics by
the Board, the Independent Directors shall be deemed to have complied
with the requirements of this paragraph B, and shall not have to
complete the annual certification form.
C. The Adviser shall prepare an annual report to the Board of
Directors of the Funds for which it serves as Investment Adviser to be
presented at the first meeting of the Board after the end of each
calendar year and which shall:
(1) summarize existing procedures concerning personal investing,
including preclearance policies and the monitoring of
personal investment activity after preclearance has been
granted, and any changes in the procedures during the past
year;
(2) describe any issues arising under the Code of Ethics since
the last report to the Board including, but not limited to,
identifying any violations requiring significant remedial
action and the sanctions imposed during the past year;
(3) identify any recommended changes in existing restrictions or
procedures based upon experience under this Code of Ethics,
evolving industry practice or developments in applicable
laws and regulations;
(4) contain such other information, observations and
recommendations as deemed relevant by the Adviser; and
(5) certify that the Adviser has adopted this Code of Ethics
with procedures reasonably necessary to prevent Access
Person from violating the Code.
4. BROKERAGE CONFIRMATIONS AND STATEMENTS.
All Access Persons must direct their brokers to supply to the
Compliance Officer, on a timely basis, duplicate copies of
confirmations of any purchase or sale of a security and copies of all
periodic statements for all securities accounts.
5. NOTIFICATION OF REPORTING OBLIGATION AND REVIEW OF REPORTS.
Each Access Person shall receive a copy of this Code of Ethics
and be notified of his or her reporting obligation. All reports under
this Code of Ethics shall be promptly submitted upon completion to the
Compliance Officer for his or her review.
6. MISCELLANEOUS.
Any report under this Code of Ethics may contain a statement that
the report shall not be construed as an admission by the person making
the report that the person has any direct or indirect beneficial
ownership in the securities to which the report relates.
<PAGE>
9
VI. CONFIDENTIALITY.
No Access Person shall reveal to any other person (except in the
normal course of his or her duties on behalf of the Adviser) any
information regarding securities transactions by any Fund or consideration
by any Fund or the Adviser of any such securities transaction.
All information obtained from any Access Person hereunder shall be
kept in strict confidence, except that reports of securities transactions
hereunder will be made available to the Securities and Exchange Commission
or any other regulatory or self-regulatory organization to the extent
required by law or regulation.
VII. SANCTIONS.
Any trades made in violation of the provisions set forth under
paragraphs II.1.B, C and D must be unwound, or, if that is impractical, any
profits realized on trades made in violation of these prohibitions must be
disgorged to the appropriate Fund or Funds (or, alternatively, to a
charitable organization) under the direction of the Compliance Officer.
Upon discovering a violation of this Code of Ethics, the Adviser may
impose any sanctions it deems appropriate, including a letter of censure or
the suspension or termination of the employment of the violator.
Dated: December 15, 1999
<PAGE>
APPENDIX 1
1. The following persons are "Access Persons" for purposes of the Prime Lipper
Asset Management's Code of Ethics:
Francesco Taranto
Laura Coletto
Stefano Bruschi
M. Giuseppina Ragona
M. Antonietta Colangelo
2. The following are "Portfolio Managers" for purposes of the Prime Lipper
Asset Management's Code of Ethics:
Guido Guzzetti
Paolo Vassalli
Beatrice Finamore
Claudio Gatti
Paolo Longinotti
<PAGE>
APPENDIX 2
CERTIFICATION FORM
This is to certify that I have read and understand the Code of Ethics of
Prime Lipper Asset Management and that I recognize that I am subject to the
provisions thereof and will comply with the policy and procedures stated
therein.
This is to further certify that I have complied with the requirements of
such Code of Ethics and that I have reported all personal securities
transactions required to be disclosed or reported pursuant to the requirements
of such Code of Ethics.
Please sign your name here: ____________________________
Please print your name here: ____________________________
Please date here: ____________________________
Please sign two copies of this Certification Form, return one copy to Laura
Coletto at Prime Lipper Asset Management, and retain the other copy, together
with a copy of the Code of Ethics, for your records.
LIPPER & COMPANY, L.P.
CODE OF ETHICS
I. INTRODUCTION.
The purpose of this Code of Ethics is to prevent Access Persons (as defined
below) of Lipper & Company, L.P. (the "Underwriter") from engaging in any act,
practice or course of business prohibited by paragraph (b) of Rule 17j-1 (the
"Rule") under the Investment Company Act of 1940, as amended (the "Act"). This
Code of Ethics is required by paragraph (c) of the Rule.
Access Persons of the Underwriter, in conducting their personal securities
transactions, owe a fiduciary duty to the U.S. registered investment companies
(the "Funds") for which the Underwriter serves as principal underwriter and the
shareholders of such Funds. The fundamental standard to be followed in personal
securities transactions is that Access Persons may not take inappropriate
advantage of their positions. All personal securities transactions by Access
Persons must be conducted in such a manner as to avoid any actual or potential
conflict of interest between the Access Person's interest and the interests of
each Fund, or any abuse of an Access Person's position of trust and
responsibility. Potential conflicts arising from personal investment activities
could include buying or selling securities based on knowledge of a Fund's
trading position or plans (sometimes referred to as front-running), and
acceptance of personal favors that could influence trading judgments on behalf
of a Fund.
While this Code of Ethics is designed to address identified conflicts and
potential conflicts, it cannot possibly be written broadly enough to cover all
potential situations. In this regard, Access Persons are expected to adhere not
only to the letter, but also the spirit, of the policies contained herein. For
example, the restrictions contained herein on the purchase or sale of a security
would include the purchase or sale of an equivalent security, such as the
writing of an option to purchase or sell a security, and restrictions contained
herein on personal securities transactions for an Access Person's account would
apply equally to an account in which such Access Person has "beneficial
ownership" (as defined in Rule 16a-1(a)(2) of the Securities Exchange Act of
1934, as amended). Such accounts include, but are not limited to, accounts owned
by the Access Person, the Access Person's spouse, minor children or other
persons residing in the Access Person's household or to whose support the Access
Person contributes significantly, and any other account in which the Access
Person has a pecuniary interest. "Pecuniary interest" generally is the
opportunity, directly or indirectly, to profit or share in any profit derived
from a transaction in securities.
In furtherance of the above principles, this Code of Ethics contains
certain restrictions on personal securities transactions by personnel of the
Underwriter, certain restrictions on other activities of such personnel when an
actual or potential conflict of interest between such personnel and a Fund may
exist, and certain reporting requirements to enable the Underwriter to ensure
compliance with this Code of Ethics. Any questions regarding the application or
scope of
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2
the restrictions and reporting requirements contained herein should be directed
to Abraham Biderman, the Distributor's Compliance Officer.
For purposes of the restrictions and reporting requirements contained
herein, "Access Persons" refers to any general partner, limited partner, officer
or employee of the Underwriter who, in the ordinary course of business, makes,
participates in or obtains information regarding, the purchase or sale of
"Covered Securities" by the Fund for which the Underwriter acts, or whose
functions or duties in the ordinary course of business relate to the making of
any recommendation to the Fund regarding the purchase or sale of "Covered
Securities."
"Covered Security" means a security as defined in Section 2(a)(36) of the
Act, and includes, but is not limited to, notes, stocks, bonds, investment
contracts, puts, calls and options, except that it does not include direct
obligations of the U.S. Government, bankers' acceptances, bank certificates of
deposit, commercial paper and high quality short-term debt instruments,
including repurchase agreements and shares issued by open-end funds.
A list of Access Persons is attached as Appendix 1 to this Code of Ethics
and will be updated from time to time.
To the extent that this Code of Ethics conflicts with any other code of
ethics or other policy to which an Access Person is also subject, this Code of
Ethics shall control; except that if the other code of ethics or other policy is
more restrictive than this Code of Ethics, such other code of ethics or other
policy shall control.
II. PROHIBITIONS; EXEMPTIONS.
1. PROHIBITED PURCHASES AND SALES.
ACCESS PERSONS
The following purchases and sales are prohibited for all Access
Persons:
A. No Access Person may purchase or sell, directly or indirectly, any
Covered Security in which that Access Person has, or by reason of the
transaction would acquire, any direct or indirect beneficial ownership and
which to the actual knowledge of that Access Person at the time of such
purchase or sale:
(1) is being actively considered for purchase or sale on behalf of
any Fund; or
(2) is being purchased or sold on behalf of any Fund.
B. No Access Person may purchase or sell a Covered Security on any day
during which any Fund has a pending "buy" or "sell" order in that same
Covered Security until that order is executed or withdrawn.
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3
C. No Access Person may purchase, directly or indirectly, any security
in an initial public offering. In addition, Access Persons must obtain
approval from the Compliance Officer before directly or indirectly
acquiring beneficial ownership in any offering exempt from registration
under Sections 4(2) or 4(6) of the Securities Act of 1933, as amended, or
Rules 504, 505 or 506 thereunder ("Limited Offerings").
2. EXEMPTIONS FROM CERTAIN PROHIBITIONS.
A. The prohibited purchase and sale transactions described in Section
II.1. above do not apply to the following personal securities transactions:
(1) purchases or sales effected in any account over which the Access
Person has no direct or indirect influence or control;
(2) purchases or sales which are non-volitional on the part of either
the Access Person or the relevant Fund, including purchases or
sales in connection with any merger, acquisition or corporate
reorganization regardless of whether or not such Access Person or
Fund votes in favor of or against or abstains from voting in
connection with such transaction;
(3) purchases which are part of an automatic dividend reinvestment
plan (other than pursuant to a cash purchase plan option);
(4) purchases effected upon the exercise of rights issued by an
issuer PRO RATA to all holders of a class of its securities, to
the extent the rights were acquired from that issuer, and sales
of the rights so acquired;
(5) purchases or sales of securities for any form of investment
vehicle managed by the Underwriter or its affiliates other than a
U.S. registered investment company, including but not limited to
foreign investment companies, partnerships and separate accounts,
provided that any such purchase or sale is not intended to
contravene the policies contained in this Code of Ethics (such
purchases and sales shall be conducted in accordance with the
Distributor's "Procedures for Allocating Portfolio Trades" to the
extent applicable); and
(6) any purchase or sale which the Compliance Officer (or Kenneth
Lipper with respect to the Compliance Officer's personal
securities transactions) approves on the grounds that its
potential harm to the respective Fund is remote.
B. The prohibited purchase and sale transactions described in Section
II.1.A. and II.1.B. above do not apply to any purchase or sale, or series
of related transactions, involving any issuer which has an aggregate market
capitalization (outstanding shares multiplied by the current market price
per share) greater than $1 billion, provided that
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4
such purchase or sale does not exceed the greater of 1,000 shares or .01%
of the issuer's market capitalization.
III. PRE-CLEARANCE OF PERSONAL SECURITIES TRANSACTIONS.
1. All Access Persons must obtain approval from the Compliance Officer
prior to entering into any personal securities transaction involving the
purchase or sale of any security, other than (i) the transactions described
included in Section II.2.A.(1) - (6), above.
2. Access Persons may pre-clear personal securities transactions only in
cases where they have a present intention to engage in a transaction in the
security for which pre-clearance is sought. It is not permitted for an Access
Person to obtain a general or open-ended pre-clearance. This requirement does
not proscribe a price limit order, provided the Access Person shall have a
present intention to effect a transaction at such price.
3. All Access Persons must provide to the Compliance Officer at the time
pre-clearance is sought a description of any factors such Access Person
reasonably believes to be potentially relevant to a determination of whether
pre-clearance should be granted, including the existence of any substantial
economic relationship between the transaction and securities held or to be
acquired by any Fund.
4. Pre-clearance of a personal securities transaction shall be valid and in
effect for three business days commencing on the day which pre-clearance is
made; provided, however, that a pre-clearance will expire upon an Access Person
becoming aware of facts or circumstances that such person reasonably believes
would prevent a proposed personal securities transaction from being pre-cleared
were such facts or circumstances made known to the Compliance Officer.
Accordingly, if an Access Person becomes aware of new or changed facts or
circumstances which such person reasonably believes gives rise to a question as
to whether pre-clearance could be obtained if the Compliance Officer were aware
of such facts or circumstances, the Access Person shall be required to so advise
the Compliance Officer before proceeding with such personal securities
transaction.
5. Limited Offerings and other non-brokered securities transactions (not
otherwise excluded from the definition of "Covered Security" set forth herein)
are included in the category of personal securities transactions that require
pre-clearance. It is the responsibility of the Access Person to report to the
Compliance Officer all such transactions upon the consummation thereof so that
the Compliance Officer can maintain a current record of such non-brokered
securities transactions. In determining whether to approve Limited Offerings and
other non-brokered securities transactions involving Access Persons, the
Compliance Officer will take into account, among other factors, whether the
investment opportunity should be reserved for a Fund, and whether the
opportunity is being offered to the individual by virtue of his or her position
with the Underwriter.
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5
6. Personal securities transactions of the Compliance Officer shall be
subject to the requirements under this Section III, except that any required
approvals shall be obtained from, and any disclosures made to, Kenneth Lipper
rather than the Compliance Officer.
IV. PROHIBITIONS ON GIFTS AND SERVICES.
1. Access Persons may not receive cash gifts, or non-cash gifts or other
things of more than de minimis value, from any person or entity that does
business with or on behalf of any Fund.
2. Access Persons shall not serve on the boards of directors of publicly
held companies, absent prior approval from the Compliance Officer (or Kenneth
Lipper in the case of the Compliance Officer). In determining whether to grant
such approval, the Compliance Officer (or Kenneth Lipper as applicable) shall
review whether that board service would be consistent with the best interests of
the shareholders of the Funds.
V. REPORTING.
1. INITIAL REPORTING.
All Access Persons must report to the Underwriter all personal
holdings of Covered Securities within 10 days of commencement of such
person's status as an Access Person. The following information must be
included in the report: (i) the title, number of shares and principal
amount of each Covered Security in which the Access Person had any direct
or indirect beneficial ownership when the person became an Access Person;
(ii) the name of any broker, dealer or bank with whom the Access Person
maintained an account in which any securities were held for the direct or
indirect benefit of the Access Person as of the date the person became an
Access Person; and (iii) the date that the report is submitted by the
Access Person.
2. QUARTERLY REPORTING.
A. Subject to the provisions of paragraphs B and D below, every Access
Person shall either report to the Underwriter the information described in
paragraph C below with respect to transactions in any Covered Security in
which the Access Person has, or by reason of the transaction acquires, any
direct or indirect beneficial ownership in the Covered Security.
B. An Access Person is not required to make a report with respect to
any transaction which is included in Section II.2.A. (1)-(6) above.
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6
C. Every report shall be made not later than 10 days after the end of
the calendar quarter in which the transaction to which the report relates
was effected and shall contain the following information:
(1) the date of the transaction, the title, the interest rate and
maturity date (if applicable), the number of shares and the
principal amount of each Covered Security involved;
(2) the nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
(3) the price at which the transaction was effected;
(4) the name of the broker, dealer or bank with or through whom the
transaction was effected;
(5) the date that the report is submitted by the Access Person; and
(6) a description of any factors the Access Person reasonably
believes is potentially relevant to an analysis of whether the
Access Person may have a conflict of interest with respect to the
transaction, including the existence of any substantial economic
relationship between the transaction and securities held or to be
acquired by any Fund.
D. Notwithstanding the foregoing, an Access Person need not separately
report to the Underwriter information regarding transactions conducted
through securities accounts, PROVIDED that (a) copies of the relevant
confirmations and statements are furnished to the Underwriter as required
by Section V.4. below, and (b) not later than 10 days after the end of each
calendar quarter, such Access Person delivers a written report containing
(i) the information required to be reported above with respect to any
transactions during such calendar quarter which were not conducted through
such securities accounts and (ii) if applicable, with respect to
transactions conducted through securities accounts, a description of any
factors the Access Person reasonably believes are potentially relevant to a
conflict of interest analysis, as described in Section V.2.C.v. above.
3. ANNUAL REPORTING AND CERTIFICATION.
A. All Access Persons must report all personal securities holdings of
Covered Securities within 30 days after the end of each calendar year,
together with a list of all accounts maintained at brokerage firms which
are subject to the provisions of this Code of Ethics, including the names
of the firms and the account numbers.
B. All Access Persons are required to certify annually that they have
read and understand this Code of Ethics and recognize that they are subject
to the provisions hereof and will comply with the policy and procedures
stated herein. Further, all Access
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7
Persons are required to certify annually that they have complied with the
requirements of this Code of Ethics and that they have reported all
personal securities transactions required to be disclosed or reported
pursuant to the requirements of such policies. A copy of the certification
form to be used in complying with this paragraph B is attached to this Code
of Ethics as Appendix 2. Upon approval of this Code of Ethics by the Board,
the Independent Directors shall be deemed to have complied with the
requirements of this paragraph B, and shall not have to complete the annual
certification form.
C. The Underwriter shall prepare an annual report to the Board of
Directors of the Funds for which it serves as Underwriter to be presented
at the first meeting of the Board after the end of each calendar year and
which shall:
(1) summarize existing procedures concerning personal investing,
including preclearance policies and the monitoring of personal
investment activity after preclearance has been granted, and any
changes in the procedures during the past year;
(2) describe any issues arising under the Code of Ethics since the
last report to the Board including, but not limited to,
identifying any violations requiring significant remedial action
and the sanctions imposed during the past year;
(3) identify any recommended changes in existing restrictions or
procedures based upon experience under this Code of Ethics,
evolving industry practice or developments in applicable laws and
regulations;
(4) contain such other information, observations and recommendations
as deemed relevant by the Underwriter; and
(5) certify that the Underwriter has adopted this Code of Ethics with
procedures reasonably necessary to prevent Access Person from
violating the Code.
4. BROKERAGE CONFIRMATIONS AND STATEMENTS.
All Access Persons must direct their brokers to supply to the
Compliance Officer, on a timely basis, duplicate copies of confirmations of
any purchase or sale of a security and copies of all periodic statements
for all securities accounts.
5. NOTIFICATION OF REPORTING OBLIGATION AND REVIEW OF REPORTS.
Each Access Person shall receive a copy of this Code of Ethics and be
notified of his or her reporting obligation. All reports under this Code of
Ethics shall be promptly submitted upon completion to the Compliance
Officer for his or her review.
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8
6. MISCELLANEOUS.
Any report under this Code of Ethics may contain a statement that the
report shall not be construed as an admission by the person making the
report that the person has any direct or indirect beneficial ownership in
the securities to which the report relates.
VI. CONFIDENTIALITY.
No Access Person shall reveal to any other person (except in the normal
course of his or her duties on behalf of the Underwriter) any information
regarding securities transactions by any Fund or consideration by any Fund or
the Underwriter of any such securities transaction.
All information obtained from any Access Person hereunder shall be kept in
strict confidence, except that reports of securities transactions hereunder will
be made available to the Securities and Exchange Commission or any other
regulatory or self-regulatory organization to the extent required by law or
regulation.
VII. SANCTIONS.
Any trades made in violation of the provisions set forth under paragraphs
II.1.B and C must be unwound, or, if that is impractical, any profits realized
on trades made in violation of these prohibitions must be disgorged to the
appropriate Fund or Funds (or, alternatively, to a charitable organization)
under the direction of the Compliance Officer.
Upon discovering a violation of this Code of Ethics, the Underwriter may
impose any sanctions it deems appropriate, including a letter of censure or the
suspension or termination of the employment of the violator.
Dated: December 15, 1999
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APPENDIX 1
1. The following persons are "Access Persons" for purposes of the Lipper &
Company, L.P.'s Code of Ethics:
All employees of Lipper & Company, L.P. and its affiliates.
<PAGE>
APPENDIX 2
CERTIFICATION FORM
This is to certify that I have read and understand the Code of Ethics of
Lipper & Company, L.P. and that I recognize that I am subject to the provisions
thereof and will comply with the policy and procedures stated therein.
This is to further certify that I have complied with the requirements of
such Code of Ethics and that I have reported all personal securities
transactions required to be disclosed or reported pursuant to the requirements
of such Code of Ethics.
Please sign your name here: ____________________________
Please print your name here: ____________________________
Please date here: ____________________________
Please sign two copies of this Certification Form, return one copy to
Abraham Biderman, Lipper & Company, L.P., 101 Park Avenue, New York, New York
10178, and retain the other copy, together with a copy of the Code of Ethics,
for your records.
