As filed with the Securities and Exchange Commission on September 20, 1996
Securities Act File No. 333-7805
Investment Company Act File No. 811-7675
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
Pre-Effective Amendment No. 1 /x/
Post-Effective Amendment No. / /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 1 /x/
(Check Appropriate Box or Boxes)
___________
BATTERY PARK FUNDS, INC.*
(Exact Name of Registrant as Specified in Charter)
2 World Financial Center, Building B
New York, New York 10281-1198
(Address of Principal Executive Offices) (Zip Code)
(212) 667-9300
(Registrant's Telephone Number, including Area Code)
Mr. Robert Levine
c/o Nomura Corporate Research and Asset Management Inc.
2 World Financial Center, Building B
New York, New York 10281-1198
(Name and Address of Agent for Service)
___________
Copies to:
Deborah A. Montick, Esq.
c/o Nomura Corporate Research John A. MacKinnon, Esq.
and Asset Management Inc. Brown & Wood LLP
2 World Financial Center, Building B One World Trade Center
New York, New York 10281-1198 New York, New York 10048-0557
___________
Approximate Date of Proposed Public Offering: As soon as practicable
after the effective date of this Registration Statement.
___________
An indefinite number of shares of common stock of the Registrant is
being registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to Rule 24f-2 under the Investment Company Act
of 1940.
___________
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that
this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act or until the Registration Statement
shall become effective on such date as the Securities and Exchange
Commission, acting pursuant to said Section 8(a), may determine.
*This registration statement relates to the Battery Park High Yield Fund
series of the Registrant.
BATTERY PARK FUNDS, INC.
BATTERY PARK HIGH YIELD FUND
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
N-1A Item No.
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<TABLE>
<CAPTION>
<S> <C> <C>
PART A
- ------
Item 1. Cover Page ........................... Prospectus Front
Cover Page
Item 2. Synopsis ............................. Fee Table
Item 3. Condensed Financial Information ...... Not Applicable
Item 4. General Description of Registrant .... Investment Objectives and Policies; Additional
Information - Organization of the Fund
Item 5. Management of the Fund ................ Fee Table; Management of the Fund; Prospectus
Back Cover Page
Item 5A. Management's Discussion of
Fund Performance ....................... Not Applicable
Item 6. Capital Stock and Other Securities .... Prospectus Cover Page; Purchase of Shares;
Redemption of Shares; Taxes; Shareholder
Services; Additional Information
Item 7. Purchase of Securities Being
Offered ................................ Prospectus Cover
Page; Fee Table; Purchase of Shares;
Additional Information - Determination of Net Asset Value;
Shareholder Services; Prospectus Back Cover Page
Item 8. Redemption or Repurchase ............. Fee Table; Purchase of Shares; Redemption of Shares
Item 9. Pending Legal Proceedings ............. Not Applicable
PART B
- ------
Item 10. Cover Page .............................. Statement of Additional
Information Front Cover Page
Item 11. Table of Contents ....................... Statement of Additional
Information Back Cover Page
Item 12. General Information and History ...... Not Applicable
Item 13. Investment Objectives and Policies ... Investment Objectives and Policies; Portfolio
Transactions and Brokerage
Item 14. Management of the Fund ............... Management of the Fund
Item 15. Control Persons and Principal
Holders of Securities .................. Management of the Fund
Item 16. Investment Advisory and Other
Services ............................... Statement of Additional Information Front
Cover Page; Management of the Fund; Purchase
of Shares; Redemption of Shares; Shareholder Services;
General Information
Item 17. Brokerage Allocation and Other
Practices .............................. Portfolio Transactions and Brokerage
Item 18. Capital Stock and Other Securities .... Purchase of Shares; Redemption of Shares;
Shareholder Services; General Information
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered ........... Purchase of Shares; Redemption of
Shares; Determination of Net Asset Value;
Shareholder Services; General Information
Item 20. Tax Status ............................ Taxes
Item 21. Underwriters .......................... Portfolio Transactions and
Brokerage; Purchase of Shares
Item 22. Calculation of Performance Data ...... Performance Data
Item 23. Financial Statements ................... Independent Auditor's Report; Statement of Assets
and Liabilities
PART C
- ------
Items 24-32. Information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C to this Registration Statement.
</TABLE>
Information contained herein is subject to completion or amendment.
A registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an offer
to sell or the solicitation of an offer to buy nor shall there be any
sale of these securities in any State in which such offer, solicitation or
sale would be unlawful prior to registration or qualification under the
securities laws of any such State.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED SEPTEMBER 20, 1996
PROSPECTUS
- ----------
BATTERY PARK(SERVICE MARK) HIGH YIELD FUND
2 WORLD FINANCIAL CENTER, NEW YORK, NEW YORK 10281-1198, (212) 667-9300
ABOUT THE Battery Park(Service Mark) High Yield Fund (the "Fund") is the
FUND only existing series of Battery Park(Service Mark) Funds,
Inc., a newly organized, diversified, open-end series-type
investment company. The Fund's investment objective is
to provide shareholders with high total return, consisting of
current income and capital appreciation. The Fund attempts
to achieve its objective by investing principally
in fixed income securities of U.S. companies which are rated
in the lower rating categories of the established rating
services or are unrated securities of comparable
quality. See "Investment Objective and Policies." No
assurance can be given that the Fund's investment objective
will be realized.
The Fund's Investment Adviser is Nomura Corporate Research
and Asset Management Inc.
RISK FACTORS The Fund may invest up to 100% of its assets in lower rated or
unrated securities (commonly referred to as "junk bonds").
Investment in junk bonds involves special considerations and
certain risks, including risks of default and price volatility,
and such securities are regarded as being predominantly
speculative as to the issuer's ability to make payments
of principal and interest. Investors should consider these
risks carefully before investing. See "Risk Factors and
Special Considerations" and "Appendix A - Ratings of High Yield
Debt Securities."
PURCHASING The Fund offers two classes of shares with different fees and
SHARES other features. Shares may be purchased from securities
dealers which have entered into selected dealer agreements
with Nomura Securities International, Inc. ("NSI" or the
"Distributor"), 2 World Financial Center, Building B,
New York, New York 10281. The minimum initial purchase for
Class A shares is $1,000 and the minimum subsequent purchase
is $100. The minimum initial purchase for Class Y shares is
$1 million. See "Purchase of Shares."
ABOUT THIS This Prospectus is a concise statement of information about the
PROSPECTUS Fund that a prospective investor should know before investing
in the Fund. This Prospectus should be retained for future
reference. A statement containing additional information
about the Fund dated October __, 1996 (the "Statement of
Additional Information") has been filed with the Securities
and Exchange Commission (the "SEC") and is available, without
charge, by calling the Transfer Agent at 1-800-245-5000 or
writing to the Transfer Agent at its address on the back
cover of the Prospectus. The Statement of Additional
Information is hereby incorporated by reference into this
Prospectus.
The date of this Prospectus
is October __, 1996
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Summary of Fund Expenses . . . 3 Investment Account . . . . . 21
The Fund . . . . . . . . . . . 4 Reinvestment of Dividends and
The Investment Adviser . . . . 4 Capital Gains
Investment Objective and Policies 9 Distributions . . . . . . . 21
Other Investment Policies and
Practices . . . . . . . . . . . 10 Retirement Plans . . . . . . 21
Investment Restrictions . . . 12 Exchange Privilege . . . . . 22
Risk Factors and Special Taxes . . . . . . . . . . . . . 22
Considerations . . . . . . . . 12 Performance Data . . . . . . . 24
Management of the Fund . . . . 15 Portfolio Transactions . . . . 25
Directors . . . . . . . . . . 15 Additional Information . . . . 26
Management and Advisory Dividends and Distributions . 26
Arrangements . . . . . . . 15 Determination of Net Asset
Value . . . . . . . . . . 26
Transfer Agency Services . . 16 Organization of the Fund . . 27
Purchase of Shares . . . . . . 16 Shareholder Inquiries . . . . . 27
Class A Shares . . . . . . . 17 Shareholder Reports . . . . . . 28
# Class Y Shares . . . . . . . 20 Appendix A - Ratings of High Yield
Redemption of Shares . . . . . 20 Debt
Shareholder Services . . . . . 21 Securities . . . . . . . . . . A-1
Appendix B - Hedging
Transactions . . . . . . . . B-1
Purchase Application . . . . . C-1
SUMMARY OF FUND EXPENSES
<TABLE>
<CAPTION> CLASS A CLASS Y(1)
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<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.50%(2) None
Maximum Sales Load Imposed on Reinvested Dividend (as a percentage
of offering price) . . . . . . . . . . . . . . . . . . . . . . . . None None
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable) . . . . . . . . . . . . . . . . None None
Redemption Fees (as a percentage of amount redeemed, if applicable . None None
Exchange Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . None None
ANNUAL FUND OPERATING EXPENSES/*/
(AS A PERCENTAGE OF PROJECTED AVERAGE NET ASSETS)
Management Fees (after waiver)(3) . . . . . . . . . . . . . . . . . . 0.37% 0.37%
Rule 12b-1 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.25% None
Total Other Expenses (after waiver)(4) . . . . . . . . . . . . . . . 0.63% 0.63%
Total Annual Fund Operating Expenses(5) . . . . . . . . . . . 1.25% 1.00%
</TABLE>
____________________________
(1) Class Y shares are sold only to certain specified investors. See
"Purchase of Shares--Class Y Shares."
(2) Class A shares of the Fund held in accounts of financial planners or
individuals will convert to Class Y shares when the aggregate value of the
Class A shares in such account reaches $1 million or more. See "Purchase of
Shares-- Class A Shares--Conversion of Class A Shares to Class Y Shares."
(3) The Management fee has been reduced to reflect the voluntary waiver of
a portion of the management fee by the investment adviser. The adviser can
terminate this voluntary waiver at any time at its sole discretion. The
maximum management fee is 0.65%.
(4) Total other expenses have been reduced to reflect the voluntary waiver
of a portion of the administrative fee. The administrator can terminate
this voluntary waiver at any time at its sole discretion. The maximum
administrative fee is 0.15%.
(5) Total Annual Fund Operating Expenses for the Class A shares and Class Y
shares are estimated to be 1.58% and 1.33%, respectively, absent the
voluntary waivers of management and administrative fees.
/*/Annual Fund Operating Expenses are estimated based on average expenses
expected to be incurred during the fiscal year ending September 30, 1997.
During the course of this period, expenses may be more or less than the
average amount shown.
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder will bear either directly or
indirectly. For more complete descriptions of the various costs and
expenses, see "Purchase of Shares".
EXAMPLE
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return; (2) redemption at the end of each time period; and (3)
payment of the maximum sales charge, if applicable. The Fund charges no
redemption fees.
<TABLE>
<CAPTION> Class A Class Y
------- -------
<S> <C> <C>
1 Year . . . . . . . . . . . . . . $57 $10
3 Years . . . . . . . . . . . . . $83 $32
</TABLE>
The above example should not be considered a representation of past or
future performance. Actual expenses may be greater or less than those
shown. This example is based on estimated data for the Fund's fiscal year
ending September 30, 1997.
THE FUND
Battery Park(Service Mark) High Yield Fund (the "Fund") is a
diversified, open-end investment company. The Fund is the only existing
series of Battery Park(Service Mark) Funds, Inc. (the "Company"), a newly
organized series-type investment company that was incorporated under the
laws of the State of Maryland on June 4, 1996, and is registered under the
Investment Company Act of 1940 (the "Investment Company Act"). The Fund's
principal office is located at 2 World Financial Center, Building B, New
York, New York 10281-1198 and its telephone number is (212) 667-9300. The
Fund's investment objective is to provide shareholders with high total
return, consisting of current income and capital appreciation. The Fund
attempts to achieve its objective by investing principally in fixed income
securities of U.S. companies which are rated in the lower rating categories
of the established rating services or are unrated securities of comparable
quality. There can be no assurance that the Fund's investment objective
will be realized. See "Investment Objective and Policies."
Investment in lower rated or unrated securities (commonly referred to
as "junk bonds") involves special considerations and certain risks,
including risks of failure to pay interest and principal, default and price
volatility. Investors should carefully consider these risks before
investing. See "Risk Factors and Special Considerations."
THE INVESTMENT ADVISER
The Fund's Investment Adviser is Nomura Corporate Research and Asset
Management Inc. (the "Investment Adviser" or "NCRAM"). As of September 30,
1996, NCRAM managed in excess of $1.0 billion in high yield bonds.
Historical Investment Results of the Investment Adviser. Set forth
below is certain performance data provided by the Investment Adviser
relating to investment results of a composite of all client accounts whose
portfolios were managed by the Investment Adviser during a four and a half
year period commencing in 1991, which had the same investment objective as
the Fund and were managed using substantially similar, though not
necessarily identical, investment strategies and techniques as those
contemplated by the Fund (the "Advisory Accounts"). See "Investment
Objective and Policies". Because of the similarities in investment
strategies and techniques, the Investment Adviser believes that the Advisory
Accounts are sufficiently comparable to the Fund to make performance data
listed below relevant to investors in the Fund. The results presented (the
"Total Return Composite") are not intended to predict or suggest the returns
that will be experienced by the Fund or the return an investor will achieve
by investing in the Fund. Different methods of determining
performance from those described in the footnotes to the charts below may
result in different performance figures. An investor should not rely on the
following performance figures as an indication of future performance of
either the Investment Adviser's separate Advisory Accounts or the Fund.
<TABLE>
<CAPTION>
NCRAM High Yield Total Return Figures
Total Return Composite October 1, 1991 to March 31, 1996
- -----------------------------------------------------------------------------------------------
Average Total Return Net of Fees
- -----------------------------------------------------------------------------------------------
<S> <C>
1991 (Fourth Quarter) 4.22%
1992 18.70%
1993 25.37%
1994 8.39%
1995 22.43%
1996 (First Quarter) 2.43%
Annualized Total Return Since Inception 18.03%
===============================================================================================
</TABLE>
Another way to consider the above schedule is as follows: $10,000
invested in an Advisory Account on October 1, 1991 which received a return
based on the Total Return Composite would have grown to $21,081, including
reinvestment of dividends, by May 31, 1996.
<TABLE>
<CAPTION>
Performance of NCRAM High Yield Total Return Composite vs. Lipper High Yield Fund Average
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(Net of Fees) Q1 Q2 Q3 Q4 Annual
1996
NCRAM +2.43% N/A N/A N/A N/A
Lipper* +2.82% N/A N/A N/A N/A
1995
NCRAM +5.97% +6.19% +3.64% +4.99% +22.43%
Lipper* +4.37% +5.28% +3.13% +2.95% +16.66%
1994
NCRAM +3.60% +1.22% +0.51% +2.83% +8.39%
Lipper* -1.10% -1.37% -0.13% -1.32% -3.87%
1993
NCRAM +9.41% +5.17% +2.79% +6.00% +25.37%
Lipper* +6.71% +4.74% +2.04% +4.43% +19.10%
1992
NCRAM +5.45% +2.98% +7.29% +1.89% +18.70%
Lipper* +8.03% +3.21% +4.11% +1.11% +17.37%
1991
NCRAM N/A N/A N/A +4.22% N/A
Lipper* N/A N/A N/A +5.04% N/A
=================================================================================================
</TABLE>
*Source: Lipper Analytical Services, Inc.
The indices above each represent past performance, are shown solely for
comparative purposes and may not be indicative of future returns. Past
performance is no guarantee of future results. Mutual funds, including the
Fund and those funds comprising the Lipper High Yield Fund Average,
typically are subject to portfolio management restrictions, investment
limitations and diversification requirements imposed by the Investment
Company Act and the Internal Revenue Code of 1986 that are not applicable to
private accounts. The imposition of such restrictions may result in lower
returns than reflected in the above table for the NCRAM High Yield Total
Return Composite. See note 6, below. In particular, such funds are subject
to limitations on their profits attributable to purchases and sales of
shares held for less than three months. See "Investment Objective and
Policies - Other Investment Policies and Practices -- Portfolio Turnover."
Notes to Investment Performance
The schedule on page 6 represents the average investment results for the
periods ending after October 1, 1991 for all clients whose portfolios were
included in the Advisory Accounts managed by the Investment Adviser.
1. TYPES OF ACCOUNTS AND ELIGIBLE ACCOUNTS FOR COMPOSITE
The Total Return Composite contains accounts that are aggressively
managed for a high level of current income and capital appreciation.
Accounts in the Total Return Composite invest primarily in fixed income
securities of U.S. issuers which are rated in the lower rating categories of
the established rating services or are unrated securities of comparable
quality. Investments in fixed income securities include cash pay
securities, pay-in-kind and zero coupon notes, convertible debt securities
and increasing rate and resettable notes. These investments include both
new issues and issues traded in the secondary market.
New accounts are eligible for inclusion in the composite rate of return
calculations upon completion of the first full quarter under management.
Closed accounts are eligible for inclusion in the composite rate of return
calculations through the completion of the last full quarter under
management. All existing accounts under management are reevaluated for
possible inclusion in the composite on a quarterly basis.
2. CALCULATION OF RATES OF RETURN
All rate of return calculations conform to standards established by the
Association for Investment Management and Research. All accounts are valued
monthly based on principal market values plus accrued income. Account
returns are calculated monthly utilizing the modified Dietz methodology
where security and cash flows are "day-weighted" during the month. All
amounts are rounded to the nearest one-hundredth of one percent. Monthly
returns are geometrically linked to determine quarterly returns.
3. COMPOSITE CHANGES AND OTHER MATTERS
No alteration of Total Return Composite as presented here has occurred
at any time because of changes in personnel. The composition of the
composite has been amended only where a change in the investment mandates of
an account so dictates. Leverage has not been used in portfolios included
in the Total Return Composite. An affiliated account which represents an
average of approximately 7.58% of the total assets of the Total Return
Composite (for the period October 1, 1992 through March 31, 1994) was a
non-fee paying account. Due to a change of investment strategy, this
account was removed from the Total Return Composite as of April 1, 1994.
There has been no linkage with simulated portfolios.
4. TOTAL RETURN COMPOSITE
During the term of its existence, the Total Return Composite comprised
five or fewer separate accounts. As of May 31, 1996, assets in the Total
Return Composite Accounts aggregated approximately $103.3 million
(approximately 4.84% of the Investment Adviser's total assets under
management). As of May 31, 1996, the Investment Adviser also managed
approximately $1.0 billion of assets in portfolios comprised of
collateralized bond obligations ("CBOs") and approximately $700 million of
assets in a high yield mutual fund registered in Japan.
5. FEES
Fees range from .50% to 1% of assets under management.
6. LIPPER HIGH CURRENT YIELD FUND AVERAGE
The Lipper High Current Yield Fund Average (the "Index") is a published
average total return net of fees figure for approximately 140 high current
yield funds monitored by Lipper <PAGE> Analytical Services ("Lipper").
Lipper defines High Current Yield Funds as those that "aim at high
(relative) current income from fixed income securities." The Index has no
quality or maturity restrictions and the funds comprising the Index tend to
invest in lower-grade debt securities. Typically, such funds have
concentration, diversification, liquidity, portfolio turnover and
distribution restrictions which may result in lower returns than
aggressively traded accounts such as those included in the Total Return
Composite.
* * *
Experienced Management. NCRAM is 80% owned by Nomura Holding America
Inc. ("NHA") and 20% owned by The Nomura Securities Co., Ltd. ("NSC"), the
parent of NHA. NCRAM is affiliated with NSI, a broker-dealer and investment
adviser dually registered with the SEC. NSC and the Investment Adviser are
part of an affiliated group of Nomura companies.
Mr. Robert Levine founded the Investment Adviser in 1991 and is its
current President and Chief Executive Officer. He is a member of the Board
of Directors of the Investment Adviser and an Executive Managing Director of
NHA. Mr. Levine is responsible for the structuring, credit selection and
management of all the Investment Adviser's high yield portfolios. Mr.
Levine will be the chief investment officer for the Fund. Prior to his
present position at NCRAM, Mr. Levine was with Kidder, Peabody & Co., Inc.
("Kidder") for 13 years. His most recent position at Kidder was President
of Kidder, Peabody High Yield Asset Management, Inc. and Managing Director
for Kidder. Mr. Richard A. Buch, the Fund's portfolio manager, heads up the
Investment Adviser's trading operations and also is a member of its Board of
Directors. Mr. Buch joined the Investment Adviser from Kidder in 1993. He
has extensive experience in credit selection and the management of high
yield portfolios. Messrs. Levine and Buch are supported by five credit
analysts who specialize in different high yield industry sectors.
Investment Philosophy. NCRAM believes that the domestic high yield
market provides attractive investment opportunities for investors who
approach it with a long-term, diligent research-intensive approach. NCRAM's
investment approach is based upon identifying and investing in those
companies that it believes to be the strongest in the high yield market.
NCRAM's investment philosophy, style and approach in managing high
yield bonds are less dependent on interest rate exposure and forecasts and
more dependent on company success, i.e., credit risk. Credit research is
the fundamental basis for decision making. NCRAM seeks companies (bottom-up
approach) which it believes are improving their ability to service debt.
NCRAM refers to these companies as "strong horses". The securities of
these "strong horses" constitute the core holdings of NCRAM's high yield
portfolios.
Research constitutes the backbone of NCRAM and thus substantial
resources are allocated to the Investment Adviser's analysts, including five
in-house trained industry-specific research analysts plus two senior
analysts/managers, who provide in-depth coverage.
Initial Investment by NCRAM Affiliates. To facilitate the
establishment of the Fund's portfolio, NHA and the Nomura America
Foundation, a charitable trust, both of which are affiliates of NCRAM, will
invest an aggregate of $10 million in the Fund shortly after its
commencement of operations. Although these entities will purchase Fund
shares for investment purposes, all or a portion of this investment may be
redeemed at any time.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide shareholders with high
total return, consisting of current income and capital appreciation. The
foregoing investment objective is a fundamental policy of the Fund and may
not be changed without a vote of a majority of the outstanding shares of the
Fund. The Fund attempts to achieve its objective by investing principally
in fixed income securities which are rated in the lower rating categories of
the established rating services or are unrated securities of comparable
quality. No assurance can be given that the Fund's investment objective
will be realized.
Under normal circumstances, the Fund will invest at least 80% of its
total assets in fixed income securities rated Ba1 or lower by Moody's
Investors Service, Inc. ("Moody's") or BB+ or lower by Standard & Poor's
Ratings Group ("S&P"), or unrated securities of comparable quality. The
Fund has established no minimum acceptable rating for the securities in
which it will invest, and the Fund may, from time to time, purchase or hold
securities in the lowest rating categories. Securities rated below Baa by
Moody's or below BBB by S&P, and unrated securities of comparable quality,
are commonly known as "junk bonds." See Appendix A - "Ratings of High Yield
Debt Securities" for a description of these rating categories. The high
yield market is generally defined as including bonds with ratings below
investment grade. However, when prevailing economic conditions cause a
narrowing of spreads between the yields derived from medium to lower rated
or comparable non-rated securities and those derived from higher rated
securities, the Fund may invest in higher rated fixed income securities
which provide similar yields with less risk. Since some issuers do not seek
ratings for their securities, unrated securities also will be considered for
investment, but only when the Investment Adviser believes that the financial
condition of the issuers of such securities and/or the protection afforded
by the terms of the securities themselves limit the risk to the Fund to a
degree comparable to that of the rated securities which are consistent with
the Fund's investment objective and policies.
The Fund will seek to achieve its objective of high total return by
investing in a variety of high yield, high current income securities
including both convertible and non-convertible debt securities, preferred
stock, units of high yield securities (including warrants), pay-in-kind
bonds or notes, contingent interest securities and increasing rate and
resettable and extendable notes. In seeking capital appreciation, the Fund
also may invest in zero coupon bonds or notes, or common stock, rights or
other equity securities which do not provide high current income but offer
the potential for capital appreciation. See "Risk Factors and Special
Considerations."
The average maturity of the Fund's portfolio securities will vary based
upon the Investment Adviser's assessment of economic and market conditions.
The Fund reserves the right, as a temporary defensive measure or in
anticipation of purchasing high yield securities, to hold cash or
short-term, high quality securities such as United States Government
securities, United States Government agency or instrumentality securities,
domestic bank or savings institution certificates of deposit and bankers'
acceptances, short-term debt securities such as commercial paper and other
corporate debt, and repurchase agreements.
OTHER INVESTMENT POLICIES AND PRACTICES
Convertible Securities. The convertible securities to be held by the
Fund include any corporate debt security or preferred stock which may be
converted into underlying shares of common stock. Convertible securities
entitle the holder to receive interest payments paid on corporate debt
securities or the dividend preference on a preferred stock until such time
as the convertible security matures or is redeemed or until the holder
elects to exercise the conversion privilege. Although the Fund generally
expects that it will sell convertible securities rather than convert such
securities into common stock, the Fund may, at various times, exercise
conversion rights on convertible securities.
Non-U.S. Securities. The Fund may invest up to 25% of its total assets
in securities issued by non-U.S. issuers. Included within such investments,
the Fund may invest up to 15% of its total assets in securities of issuers
in emerging markets. All of the Fund's investments in securities of
non-U.S. issuers will be U.S. dollar-denominated. Investment in securities
of foreign issuers involves risks not typically related to domestic
investment. See "Risk Factors and Special Considerations."
Corporate Loans. The Fund may invest in corporate loans made by banks
or other financial institutions either at origination or by acquiring
participations in, assignments of or novations of corporate loans.
Corporate loans generally are not readily marketable and may be subject to
restrictions on resale and are therefore subject to the Fund's limitation on
illiquid securities, as set forth below. The corporate loans in which the
Fund invests typically are originated, negotiated and structured by a
syndicate of co-lenders, one or more of which administers the loan on behalf
of the syndicate. The value of a corporate loan depends primarily on the
creditworthiness of the borrower. The Fund will invest in a corporate loan
only if, in the Investment Adviser's judgment, the borrower can meet debt
service on such loan; however, the Investment Adviser has set no minimum
credit rating criteria regarding the borrowers. Although the Investment
Adviser will continue to monitor the creditworthiness of the borrowers of
corporate loans in which the Fund invests, there can be no assurance that
such analysis will disclose factors that will impair the value of a
corporate loan.
Asset-Backed Securities. The Fund may invest in asset-backed
securities, which are securities that directly or indirectly represent an
interest in, or are backed by and payable from, receivables (including lease
receivables) on pools of assets such as (but not limited to) mortgage loans
secured by real property, notes secured by property, equipment or lease
payments, credit card debt, automobile loans or student loans. Asset-backed
securities are issued in structured financings wherein the sponsor is often
a special purpose entity established for the purpose of securitizing the
underlying assets in order to increase the liquidity of those assets or to
achieve certain other financial goals. In choosing asset-backed securities
in which the Fund will invest, the Investment Adviser will take into
consideration, among other things, the underwriting standards of the
originator of the underlying obligations, applicable loan- to-value ratios
and the general sensitivity of the securities to economic conditions and
trends.
Repurchase Agreements. The Fund may invest in securities pursuant to
repurchase agreements. U.S. dollar-denominated repurchase agreements may be
entered into only with a member bank of the Federal Reserve System or a
primary dealer in U.S. Government securities or an affiliate thereof. Under
such agreements, the bank or primary dealer or an affiliate thereof agrees,
upon entering into the contract, to repurchase the security at a mutually
agreed upon time and price, thereby determining the yield during the term of
the agreement. This results in a fixed rate of return insulated from market
fluctuations during such period. Repurchase agreements may be construed to
be collateralized loans by the purchaser to the seller secured by the
securities transferred to the purchaser. As a purchaser, the Fund will
require the seller to provide additional collateral if the market value of
the securities that are the subject of the repurchase agreement falls below
the repurchase price at any time during the term of the repurchase
agreement. In the event of default by the seller under a repurchase
agreement construed to be a collateralized loan, the underlying securities
are not owned by the Fund but only constitute collateral for the seller's
obligation to pay the repurchase price. Therefore, the Fund may suffer time
delays and incur costs or possible losses in connection with disposition of
the collateral.
"When-Issued" and "Delayed Delivery" Transactions. The Fund may
purchase and sell portfolio securities on a "when issued" and "delayed
delivery" basis. No income accrues to the Fund in such securities in
connection with such transactions prior to the date the Fund actually takes
delivery of such securities. These transactions are subject to market
fluctuation; the value of the securities at delivery may be more or less
than their purchase price, and yields generally available on such securities
when delivery occurs may be higher or lower than yields on the securities
obtained pursuant to such transactions. Failure of the buyer or seller, as
the case may be, to consummate the transaction may result in a missed
opportunity to obtain the best price or yield available on the purchase or
sale of the subject security.
Lending of Portfolio Securities. The Fund may from time to time lend
securities from its portfolio with a value not exceeding 33 1/3% of its
total assets, to banks, brokers and other financial institutions and receive
collateral in cash or securities issued or guaranteed by the United States
Government which will be maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities. During the
period of this loan, the Fund receives the income on the loaned securities
and either receives the income on the collateral or other compensation
(i.e., negotiated loan premium or fee) for entering into the loan and
thereby increases its yield. In the event that the borrower defaults on its
obligation to return borrowed securities, because of insolvency or
otherwise, the Fund could experience delays and costs in gaining access to
the collateral and could suffer a loss to the extent that the value of the
collateral falls below the market value of the borrowed securities.
Illiquid Securities. The Fund may invest up to 15% of its net assets
in securities that are not readily marketable, including securities that are
restricted as to disposition under the federal securities laws or otherwise.
If registration of such securities under the Securities Act of 1933 (the
"Securities Act") is required, such registration may not be readily
accomplished, and if such securities may be resold without registration,
such resale may be permissible only in limited quantities. In either event,
the inability to sell securities at the most opportune time may affect
negatively the net asset value of the Fund. Notwithstanding the foregoing,
the Fund may purchase certain restricted securities ("Rule 144A securities")
for which there is a secondary market of qualified institutional buyers as
defined by Rule 144A under the Securities Act. Rule 144A securities held by
the Fund that are determined to be liquid securities, either by the Fund's
Board of Directors or by the Investment Adviser pursuant to guidelines
approved by the Fund's Board, will not be subject to the Fund's limitation
on illiquid securities. See "Investment Objective and Policies - Rule 144A
Securities" in the Statement of Additional Information for additional
information regarding Rule 144A securities.
Portfolio Turnover. Generally, the Fund does not purchase securities
for short-term trading profits. However, the Fund may dispose of securities
without regard to the time they have been <PAGE> held when such actions,
for defensive or other reasons, appear advisable to the Investment Adviser
in light of a change in circumstances in general market, economic or
financial conditions. As a result of its investment policies, the Fund may
engage in a substantial number of portfolio transactions. Accordingly,
while the Fund anticipates that its annual portfolio turnover rate should
not exceed 200% under normal conditions, it is impossible to predict
portfolio turnover rates. The portfolio turnover rate is calculated by
dividing the lesser of the Fund's annual sales or purchases of portfolio
securities (exclusive of purchases or sales of securities whose maturities
at the time of acquisition were one year or less) by the monthly average
value of the securities in the portfolio during the year. Higher portfolio
turnover (over 100%) involves correspondingly greater transaction costs and
may result in the realization of greater net short-term capital gains. In
order to qualify as a regulated investment company for federal income tax
purposes, less than 30% of the annual gross income of the Fund must be
derived from the sale or other disposition of securities and certain other
investments held by the Fund for less than three months.
Leverage. Although the Fund does not presently intend to utilize
leverage to purchase portfolio securities, it is authorized to borrow from
banks amounts of up to 33 1/3% of its total assets (including the amount
borrowed). The Fund may also utilize its borrowing authority to obtain
funds to meet redemption requests or settle investment transactions or for
temporary or emergency purposes.
Borrowings by the Fund create an opportunity for greater total return
but, at the same time, increase exposure to capital risk. For example,
leveraging may exaggerate changes in the net asset value of Fund shares and
in the yield on the Fund's portfolio. Borrowing will create interest
expenses for the Fund which can exceed the income from the assets
attributable to the borrowed funds. To the extent the income derived from
securities purchased with borrowed funds exceeds the interest the Fund will
have to pay, the Fund's net income will be greater than if borrowing were
not used. Conversely, if the income from the assets acquired with borrowed
funds is not sufficient to cover the cost of borrowing, the net income of
the Fund will be less than if borrowing were not used, and therefore the
amount available for distribution to shareholders as dividends will be
reduced.
Options and Futures Transactions. The Fund is authorized, but does not
currently intend, to engage in various portfolio strategies to hedge its
portfolio against investment and interest rate risks, including the
utilization of options and futures. See Appendix B - "Hedging Transactions."
INVESTMENT RESTRICTIONS
The Fund has adopted a number of restrictions and policies relating to
the investment of its assets and its activities which are fundamental
policies and may not be changed without the approval of the holders of a
majority of the Fund's outstanding voting securities, as defined in the
Investment Company Act. Investors are referred to the Statement of
Additional Information for a complete description of such restrictions and
policies.
RISK FACTORS AND SPECIAL CONSIDERATIONS
Junk Bonds. Junk bonds (sometimes referred to as "high yield
securities") are predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with the terms of
the security and generally involve a greater volatility of price than
securities in higher rating categories. In purchasing such junk bonds, the
Fund will rely on the Investment Adviser's judgment, analysis and experience
in evaluating the creditworthiness of an issuer of such securities. The
Investment Adviser will take into consideration, among other things, the
issuer's financial resources, its sensitivity to economic conditions and
trends, its operating history, the quality of the issuer's management and
regulatory matters.
The market values of junk bonds tend to reflect individual issuer
developments to a greater extent than do higher rated securities, which
react primarily to fluctuations in the general level of interest rates.
Issuers of junk bonds may be highly leveraged and may not have available to
them more traditional methods of financing. Therefore, the risk associated
with acquiring the securities of such issuers generally is greater than is
the case with higher- rated securities. For example, during an economic
downturn or a sustained period of rising interest rates, issuers of junk
bonds may be more likely to experience financial stress, especially if such
issuers are highly leveraged. During periods of economic recession, such
issuers may not have sufficient revenues to meet their interest payment
obligations. The issuer's ability to service its debt obligations also may
be adversely affected by specific issuer developments or the issuer's
inability to meet specific projected business forecasts or the
unavailability of additional financing. The risk of loss due to default by
the issuer is significantly greater for the holders of junk bonds because
such securities may be unsecured and may be subordinated to other creditors
of the issuer.
Junk bonds may have call or redemption features which would permit an
issuer to repurchase the securities from the Fund. If a call were exercised
by the issuer during a period of declining interest rates, the Fund likely
would have to replace such called securities with lower-yielding
securities, thus decreasing the net investment income to the Fund and
dividends to shareholders.
As with all fixed income securities, changes in the market yield will
affect the Fund's net asset value as the prices of junk bonds generally
increase when interest rates decline and decrease when interest rates rise.
Prices of longer term securities generally fluctuate more in response to
interest rate changes than do shorter term securities.
The Fund may have difficulty disposing of certain junk bonds because
there may be a thin trading market for such securities. To the extent that
a secondary trading market for junk bonds does exist, it is generally not as
liquid as the secondary market for higher-rated securities. Reduced
secondary market liquidity may have an adverse effect on market price and
the Fund's ability to dispose of particular issues which is necessary to
meet the Fund's liquidity needs or in response to a specific economic event
such as deterioration in the creditworthiness of the issuer. Reduced
secondary market liquidity for certain junk bonds also may make it more
difficult for the Fund to obtain accurate market quotations for purposes of
valuing the Fund's portfolio. Market quotations are generally available on
many junk bonds only from a limited number of dealers and may not
necessarily represent firm bids of such dealers or prices for actual sales.
The Fund's Directors, or the Investment Adviser pursuant to guidelines which
may be adopted by the Directors, will carefully consider the factors
affecting the market for junk bonds in determining whether any particular
security is liquid or illiquid and whether market quotations are readily
available for purposes of valuing portfolio securities.
Adverse publicity and investor perceptions, which may not be based on
fundamental analysis, also may decrease the value and liquidity of junk
bonds, particularly in a thinly traded market. Factors adversely affecting
the market value of junk bonds are likely to affect adversely the Fund's net
asset value. In addition, the Fund may incur additional expenses to the
extent it is required to seek recovery upon a default on a portfolio holding
or participate in the restructuring of the obligation.
Foreign and Emerging Market Securities. Investment in the securities
of foreign issuers involves special considerations that are not typically
associated with investment in the securities of U.S. issuers. These risks
include adverse political, economic and social developments, trading
restrictions, low trading volume, greater price volatility, settlement
delays and less governmental supervision and regulation. Individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rates of inflation, capital
reinvestment, resources, self- sufficiency and balance of payments position.
Other risks include imposition of foreign withholding taxes on Fund income,
the possible seizure or nationalization of foreign assets and the possible
establishment of exchange controls, expropriation, confiscatory taxation, or
other foreign laws or restrictions that might affect adversely payments due
on securities held by the Fund. Moreover, brokerage commissions and other
transaction costs on foreign securities are generally higher than in the
United States. In addition, in the event of a default on a foreign
obligation, it may be more difficult for the Fund to obtain or enforce a
judgment against the issuer of such obligation.
There may be less publicly available information about a foreign issuer
than a U.S. issuer, and foreign issuers may not be subject to the same
auditing and financial recordkeeping standards and requirements as U.S.
issuers. Often foreign issuers are not subject to uniform accounting,
auditing and financial reporting standards or to practices comparable to
those applicable to U.S. companies, and therefore a foreign issuer's
financial statements may not reflect its financial position or results of
operations as they would be reflected had the financial statements been
prepared in accordance with U.S. generally accepted accounting principles.
These risks may be heightened in connection with investments in issuers
in emerging markets. Investment in certain emerging market securities is
restricted or controlled to varying degrees which may at times limit or
preclude investment in or disposal of those securities and may increase the
costs and expenses of trading in those securities to the Fund. In addition,
certain emerging market countries may significantly restrict foreign
investment, require governmental approval for investment by foreign
investors or to repatriate investment income, capital or the proceeds of
sales of securities by foreign investors, which also may adversely affect
the Fund.
In addition to the risks described above, investors will be subject to
risks resulting from the Fund's investment policies described under
"Investment Objective and Policies -- Other Investment Policies and
Practices."
Options and Futures Transactions. The Fund is authorized, but does not
currently intend, to engage in various portfolio strategies to hedge its
portfolio against investment and interest rate risks, including the
utilization of options and futures. See Appendix B - "Hedging Transactions."
MANAGEMENT OF THE FUND
DIRECTORS
The Directors of the Fund consist of five individuals, three of whom
are not "interested persons" as defined in the Investment Company Act. The
Directors are responsible for the overall supervision of the operations of
the Fund and perform the various duties imposed on the directors of
investment companies by the Investment Company Act.
The Directors of the Fund are:
Robert Levine* --Founder, President and Chief Executive Officer of the
Investment Adviser and an Executive Managing Director of NHA.
Michael A. Berman* --Chairman and Chief Executive Officer of NSI.
John Fitting, Jr.--Former Chairman and Chief Executive Officer of
National Securities & Research, Inc.
Francis L. Fraenkel--President of Delta Capital Management Inc.
Frank K. Reilly--Bernard J. Hank Professor of Business Administration,
University of Notre Dame College of Business Administration.
______________________________
* Interested person, as defined in the Investment Company Act, of the Fund.
MANAGEMENT AND ADVISORY ARRANGEMENTS
Subject to the direction of the Directors, the Investment Adviser is
responsible for the actual management of the Fund's portfolio and constantly
reviews the Fund's holdings in light of its own research analysis and that
from other relevant sources. The responsibilities for making decisions to
buy, sell or hold a particular security rest with the Investment Adviser.
The Investment Adviser performs certain of the other administrative services
and provides office space, facilities, equipment and personnel necessary for
management of the Fund.
Pursuant to the management agreement between the Investment Adviser and
the Fund (the "Investment Advisory Agreement"), the Investment Adviser is
entitled to receive from the Fund a monthly fee based upon the average daily
net assets of the Fund at an annual rate of 0.65%. During the Fund's first
year of operations, the Investment Adviser has agreed to waive that portion
of the investment advisory fee necessary to limit the total operating
expenses of each class of the Fund to 1.25% of average daily net assets.
The Investment Adviser may discontinue this waiver any time after the Fund's
first year of operations.
The Investment Advisory Agreement obligates the Fund to pay certain
expenses incurred in the Fund's operations, including, among other things,
the management fee, legal and audit fees, unaffiliated Directors' fees and
expenses, registration fees, custodian and transfer agency fees, accounting
and pricing costs, and certain of the costs of printing proxies, shareholder
reports, prospectuses and statements of additional information. To the
extent that accounting services are provided to the Fund by the Investment
Adviser, the Fund will reimburse the Investment Adviser for its costs in
connection with such services.
TRANSFER AGENCY SERVICES
Federated Shareholder Services Company ("FSS"), acts as the Fund's
transfer agent (the "Transfer Agent") pursuant to an agreement (the
"Transfer Agency Agreement"). Pursuant to the Transfer Agency Agreement,
the Transfer Agent is responsible for the issuance, transfer and redemption
of shares and the opening and maintenance of shareholder accounts.
PURCHASE OF SHARES
Shares of the Fund are offered continuously for sale by the Distributor
and other eligible securities dealers. The minimum initial purchase for
Class A shares is $1,000 and the minimum subsequent purchase is $100; the
minimum initial purchase for Class Y shares is $1 million.
The Fund offers its shares in two classes at a public offering price
equal to the next determined net asset value per share plus, in the case of
Class A shares, a sales charge imposed at the time of purchase. Class A
shares may be purchased through securities dealers that have entered into
selected dealer agreements with the Distributor. Class Y investors not
purchasing through a securities dealer should contact the Fund's Transfer
Agent at 1-800-245-5000 for further instructions. Purchase wires should be
sent to The Bank of New York, New York, NY, ABA# 021-000-018, Nomura
Securities Deposit Account, Account #8900312076, c/o Federated Shareholder
Services Company, For Further Credit To: Battery Park(Service Mark) High
Yield Fund, Account #______________. Purchase orders for Class A shares of
the Fund must be submitted through a securities dealer to the Fund's
Transfer Agent. Purchase orders must be received by securities dealers
prior to the close of business on the New York Stock Exchange (the "NYSE")
which is normally 4:00 p.m. E.S.T. and will include orders received after
the close of business on the previous day. The applicable offering price
will be based on the net asset value determined as of the close of business
on the NYSE that day, provided the Transfer Agent in turn receives the order
from the securities dealer prior to 30 minutes after the close of business
on the NYSE on that day (normally 4:30 p.m. E.S.T.). If the purchase orders
are not received by the Transfer Agent prior to 30 minutes after the close
of business on the NYSE, such orders shall be deemed received on the next
business day.
The Fund or the Distributor may suspend the continuous offering of any
class of the Fund's shares at any time in response to conditions in the
securities markets or otherwise and may thereafter resume such offering from
time to time. Any order may be rejected by the Distributor or the Fund.
Neither the Distributor nor the dealers are permitted to withhold placing
orders to benefit themselves by a price change.
Each Class A share and Class Y share of the Fund represents an
identical interest in the investment portfolio of the Fund and has the same
rights, except that Class A shares bear the expenses of the ongoing
distribution fees and Class A shares may convert to Class Y shares. See
"Class A Shares - Conversion of Class A Shares to Class Y Shares." The
distribution fees that are imposed on Class A shares will be imposed
directly against the assets represented by Class A shares and not against
all assets of the Fund and, accordingly, such charges will not affect the
net asset value of Class Y shares or have any impact on investors choosing
Class Y shares. Dividends paid by the Fund for both classes of shares will
be calculated in the same manner at the same time and will differ only to
the extent that distribution fees and any incremental costs relating to a
particular class are borne exclusively by that class. Class A shares have
exclusive voting rights with respect to the Class A Rule 12b-1 distribution
plan. See "Distribution Plan" below. Each class has an exchange privilege
with the Liberty U.S. Government Money Market Trust. See "Shareholder
Services--Exchange Privilege."
CLASS A SHARES
The public offering price of Class A shares is the next determined net
asset value plus varying sales charges (i.e., sales loads) as set forth in
the table below:
<TABLE>
<CAPTION> Sales Charge as a (Discount to
Sales Charge as a Percentage* of the Selected
Amount of Percentage Net Dealers as a
Purchase of Amount Invested Percentage
Offering Price of the Offering
Price)
- ------------------------------------- ------------------ ------------------ ----------------
<S> <C> <C> <C>
Less than $50,000 4.50% 4.71% 4.00%
$50,000 - $99,999 4.00% 4.17% 3.50%
$100,000 - $249,999 3.25% 3.36% 2.75%
$250,000 - $499,999 2.50% 2.56% 2.25%
$500,000 - $999,999 2.00% 2.04% 1.80%
$1,000,000 or more 0.00% 0.00% N/A
- ------------------------------------------------------------------------------------------------------
</TABLE>
____________________
* Rounded to the nearest one-hundredth percent.
Reduced initial sales charges are applicable to Class A share purchases
aggregating $50,000 or more made within a 13 month period starting with the
first purchase pursuant to a letter of intention in the form provided in
this prospectus. The letter of intention is not a binding obligation to
purchase any amount of Class A shares; however, its execution will result in
the purchaser paying a lower sales charge at the appropriate quantity level.
For details regarding letters of intention, see "Purchase of Shares-Letter
of Intention" in the Statement of Additional Information.
The Distributor may reallow discounts to selected dealers and retain
the balance over such discounts. At times the Distributor may reallow the
entire sales charge to such dealers. Since securities dealers selling Class
A shares of the Fund will receive a concession equal to a substantial
portion of the sales charge, they may be deemed underwriters under the
Securities Act.
Class A shares are available to certain qualified investors and other
entities (herein referred to as "Qualified Investors") without a sales
charge. Qualified Investors include:
- U.S. purchasers which place orders through a broker that maintains
an omnibus account with the Fund and makes such purchases: (i) through U.S.
investment advisers or financial planners placing trades for their accounts
or the accounts of their clients, and who charge a fee for their services;
(ii) for U.S. clients of such investment adviser or financial planner who
place trades for their own accounts if the accounts are linked to a master
account of such investment adviser or financial planner on the books and
records of the broker or agent; (iii) for U.S. retirement and deferred
compensation plans, and trusts used to fund those plans, including but not
limited to those defined in section 401(a), 403(b) or 457 of the Internal
Revenue Code or "rabbi trusts" or (iv) using the proceeds of a redemption of
shares of another registered open-end investment company;
- charitable organizations (as defined in section 501(c) of the
Internal Revenue Code of 1986, as amended) investing $100,000 or more;
- any U.S. pension fund, corporation, state or local government, Taft
Hartley plan, foundation and/or endowment which is a client of a consulting
firm, if that firm has made appropriate arrangements with the Fund, NHA,
NCRAM or any affiliate of NHA or NCRAM with respect to furnishing advice to
the client or with respect to the purchase of Fund shares by such client;
- accounts as to which a U.S. bank or broker-dealer charges an
account management fee, provided the bank or broker-dealer has an agreement
with NCRAM or NHA relating to investment in the Fund;
- U.S. investors, and their spouses and minor children, who are
investment advisory clients of NCRAM or NHA or any of their affiliates or
who are affiliated persons or sponsoring companies of those clients; and
- employees (and their spouses and minor children) of the Investment
Adviser.
Distribution Plan. The Fund has adopted a distribution plan for Class
A shares pursuant to Rule 12b-1 under the Investment Company Act (the
"Distribution Plan") with respect to the distribution fees paid by the Fund
to the Distributor with respect to such class.
Under the Distribution Plan the Distributor may be paid a fee in an
amount computed at an annual rate of .25 of 1% of the average daily net
assets of Class A shares to finance any activity which is principally
intended to result in the sale of Class A shares. The Distributor may
select financial institutions such as banks, fiduciaries, custodians for
public funds, investment advisers and broker/dealers to provide sales
services or distribution-related support services as agents for their
clients or customers.
Under the Distribution Plan, the Fund makes no payments to the
Distributor except as described above. Therefore, the Fund does not pay for
unreimbursed expenses of the Distributor, including amounts expended by the
Distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts
expended or the Distributor's overhead expenses. However, the Distributor
may be able to recover such amounts or may earn a profit from future
payments made by Class A shares under the Distribution Plan.
Shareholder Services Agreement. The Fund also may enter into a
Shareholder Services Agreement with FSS under which the Fund may make
additional payments up to .25 of 1% of the average daily net asset value of
Class A shares to obtain certain personal services for certain shareholders
and the maintenance of certain shareholder accounts. Under this Shareholder
Services Agreement, FSS would either perform shareholder services directly
or will select financial institutions to perform shareholder services, and
financial institutions would receive fees based upon Class A shares owned by
their clients or customers. The schedules of such fees and the basis upon
which such fees would be paid will be determined from time to time by the
Fund and FSS. The Fund has no current intention to enter into any
Shareholder Services Agreement.
Supplemental Payments to Financial Institutions. The Distributor may
also pay financial institutions a fee for providing certain services to
shareholders. This fee is in addition to the amounts paid under the
Distribution Plan and/or the Shareholder Services Agreement and, if paid,
will be reimbursed by the Investment Adviser and not the Fund. State
securities laws may require certain financial institutions, such as
depository institutions, to register as dealers.
Conversion of Class A Shares to Class Y Shares. When the aggregate net
investments of clients of a securities dealer with appropriate arrangements
with the Fund or NCRAM or the investment of a single investor in Class A
shares reaches $1 million, such Class A shares will convert to Class Y
shares upon written request by the securities dealer or investor.
Thereafter, such securities dealer or individual investor will be offered
Class Y shares of the Fund so long as such investor has at least $1 million
invested in the Fund at the date the purchase order is accepted by the
Transfer Agent. Eligible shares will be transferred from Class A to Class Y
at net asset value on the day that the written request is received by the
Transfer Agent without the imposition of any fee or other charge. If share
certificates were issued, the certificates must accompany the written
request to transfer the Class A shares to Class Y shares.
Share certificates for Class A shares of the Fund to be converted must
be delivered to the Transfer Agent with the written request to transfer the
shares. In the event such certificates are not received by the Transfer
Agent together with the request, the related Class A shares will convert to
Class Y shares on the next scheduled conversion date after such certificates
are delivered.
Reinstatement Privilege. Shareholders who have redeemed their Class A
shares have a one-time privilege to reinstate their accounts by purchasing
Class A shares of the Fund, at net asset value without a sales charge, up to
the dollar amount redeemed. The reinstatement privilege may be exercised by
sending a notice of exercise along with a check for the amount to be
reinstated to the Transfer Agent within 90 days of the date the request for
redemption was accepted by the Transfer Agent. The reinstatement will be
made at the net asset value per share next determined after the notice of
reinstatement is received and cannot exceed the amount of the redemption
proceeds. The reinstatement privilege is a one-time privilege and may be
exercised only the first time a Class A shareholder makes a redemption.
CLASS Y SHARES
Class Y shares are offered at net asset value without a sales charge
to investors investing at least $1 million in the Fund. Class Y shares also
are offered for purchases of less than $1 million to Directors of the Fund
and to retirement plans administered by the Investment Adviser or its
affiliates for the benefit of employees of the Investment Adviser and/or its
affiliates.
REDEMPTION OF SHARES
The Fund is required to redeem for cash all shares of the Fund upon
receipt of a written request in proper form. Class A shares and Class Y
shares of the Fund may be redeemed through securities dealers, or when
appropriate in the case of Class Y shares, by contacting the Transfer Agent
at 1-800-245-5000. The redemption price is the net asset value per share
next determined after the initial receipt of proper notice of redemption.
There will be no charge for redemption. Shareholders liquidating their
holdings will receive on redemption all dividends declared through the date
of redemption. The value of shares at the time of redemption may be more or
less than the shareholder's cost, depending on the market value of the
securities held by the Fund at such time.
A shareholder may redeem shares by sending a written request to the
Transfer Agent. The written request should include the shareholder's name,
the Fund name, the account number, the share or dollar amount requested and,
if share certificates were issued, the share certificates. Shareholders
should call the Transfer Agent for assistance in redeeming by mail.
Shareholders requesting a redemption of $50,000 or more, a redemption of any
amount to be sent to an address other than that on record with the Fund, or
a redemption payable other than to a shareholder of record must have
signatures on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by
the Bank Insurance Fund, which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest or Pacific
Stock Exchange;
- a savings bank or savings association whose deposits are insured by
the Savings Association Insurance Fund, which is administered by the FDIC; or
- any other "eligible guarantor institution" as defined by the
Securities Exchange Act of 1934.
The Transfer Agent does not accept signatures guaranteed by a notary
public. The Fund and its Transfer Agent have adopted standards for
accepting signature guarantees from the above institutions. The Transfer
Agent may elect in the future to limit eligible signature guarantees to
institutions that are members of a signature guarantee program. The Fund
and its Transfer Agent reserve the right to amend these standards at any
time without notice.
At various times the Fund may be requested to redeem shares for which
it has not yet received good payment (e.g., cash, Federal funds or certified
check drawn on a United States bank). The Fund may delay or cause to be
delayed the mailing of a redemption check until such time as it has assured
itself that good payment has been collected for the purchase of such Fund
shares, which will not exceed 10 days.
_______________________
Due to the relatively high cost of maintaining accounts of less than
$500, the Fund reserves the right to redeem shares in any Class A share
account for their then current net asset value (which will be promptly paid
to the shareholder), if at any time the total investment does not have a
value of at least $500. Shareholders will be notified that the value of
their account is less than $500 and allowed 60 days to make an additional
investment before the redemption is processed. In such event, the $100
minimum on subsequent investment will not be applicable.
SHAREHOLDER SERVICES
The Fund offers a number of shareholder services and investment plans
described below which are designed to facilitate investment in shares of the
Fund. Full details as to each of such services can be obtained from the
Fund by calling the telephone number on the cover page hereof or from the
Transfer Agent. Included in such services are the following:
INVESTMENT ACCOUNT
An Investment Account is established by the Transfer Agent for each
shareholder. The shareholder will receive statements with respect to share
transactions showing the activity in the shareholder's Investment Account.
Share certificates for full shares will be issued without charge upon the
request of the shareholder to the Transfer Agent.
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Unless specific instructions to the contrary are given as to the
methodof payment of dividends and capital gains distributions, dividends
anddistributions will automatically be reinvested in additional shares of
the Fund. Suchreinvestment will be at the net asset value of shares of the
Fund, without sales charge, as of the close of business on the last business
day of eachmonth. Shareholders may elect in writing to receive either
their income dividends or capital gains distributions, or both, in cash, in
which event payment will be mailed on the payment date.
Shareholders may, at any time, notify the Transfer Agent in writing
that they no longer wish to have their dividends and/or distributions
reinvested in shares of the Fund or vice versa, and commencing ten days
after the receipt by the Transfer Agent of such notice, those instructions
will be effected.
RETIREMENT PLANS
Shares of the Fund may be purchased in connection with individual
retirement accounts. Copies of plans establishing such accounts are
available from dealers offering shares of the Fund.
Capital gains and income received in retirement plans are generally
exempt from federal taxation until distributed from the plans. Investors
considering participation in any such plan should review specific tax laws
relating thereto and should consult their attorneys or tax advisers with
respect to the establishment and maintenance of any such plan.
EXCHANGE PRIVILEGE
Shareholders of each class of shares of the Fund have an exchange
privilege with Liberty U.S. Government Money Market Trust (the "Money Fund")
Money Market Fund, a money market mutual fund advised by Federated Advisers,
an affiliate of FSS. There is currently no limitation on the number of
times a shareholder may exercise the exchange privilege. The exchange
privilege may be modified or terminated in accordance with the rules of the
SEC. The exchange privilege is available only to U.S. shareholders in
states where the exchange legally may be made. Exchanges of Class A shares
and Class Y shares are made on the basis of the relative net asset values
per Class A shares or Class Y shares, respectively, without the imposition
of any fee or other charge.
Should the relationship between the Fund and FSS terminate, the Fund
will seek to enter into arrangements with another similar money market fund
to continue to provide the exchange privilege. Should FSS be replaced,
former Fund shareholders who exchanged their shares of the Fund for shares
of the Money Fund will be given a one-time opportunity to exchange their
shares of the Money Fund for shares of the new money market fund and thus
preserve the ability to exchange their money market fund shares for shares
of the Fund at a future date.
TAXES
The Fund intends to elect and to qualify for the special tax treatment
afforded regulated investment companies ("RICs") under the Internal Revenue
Code of 1986, as amended (the "Code"). If it so qualifies, the Fund (but
not its shareholders) will not be subject to Federal income tax on the part
of its net ordinary income and net realized capital gains which it
distributes to Class A and Class Y shareholders (together, the
"shareholders"). The Fund intends to distribute all of such income.
Dividends paid by the Fund from its ordinary income or from an excess
of net short-term capital gains over net long-term capital losses (together
referred to hereafter as "ordinary income dividends") are taxable to
shareholders as ordinary income. Distributions made from an excess of net
long-term capital gains over net short-term capital losses (including gains
or losses from certain transactions in futures and options) ("capital gain
dividends") are taxable to shareholders as long-term capital gains,
regardless of the length of time the shareholder has owned Fund shares. Any
loss upon the sale or exchange of Fund shares held for one year or less,
however, will be treated as long-term capital loss to the extent of any
capital gain dividends received by the shareholder. Distributions in excess
of the Fund's earnings and profits will first reduce the adjusted tax basis
of a holder's shares and, after such adjusted tax basis is reduced to zero,
will constitute capital gains to such holder (assuming the shares are held
as a capital asset).
Dividends are taxable to shareholders even though they are reinvested
in additional shares of the Fund. Not later than 60 days after the close of
the taxable year, the Fund will provide its shareholders with a written
notice designating the amounts of any ordinary income dividends or capital
gain dividends. Distributions by the Fund, whether from ordinary income or
capital gains, generally will not be eligible for the dividends received
deduction allowed to corporations under the Code. If the Fund pays a
dividend in January which was declared in the previous October, November or
December to shareholders of record on a specified date in one of such
months, then such dividend will be treated for tax purposes as being paid by
the Fund and received by its shareholders on December 31 of the year in
which such dividend was declared.
Ordinary income dividends paid to shareholders who are nonresident
aliens or foreign entities will be subject to a 30% United States
withholding tax under existing provisions of the Code applicable to foreign
individuals and entities unless a reduced rate of withholding or a
withholding exemption is provided under applicable treaty law. Nonresident
shareholders are urged to consult their own tax advisers concerning the
applicability of the United States withholding tax.
Dividends and interest received by the Fund may give rise to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes.
Under certain provisions of the Code, some shareholders may be subject
to a 31% withholding tax on ordinary income dividends, capital gain
dividends and redemption payments ("backup withholding"). Generally,
shareholders subject to backup withholding will be those for whom no
certified taxpayer identification number is on file with the Fund or who, to
the Fund's knowledge, have furnished an incorrect number. When establishing
an account, an investor must certify under penalty of perjury that such
number is correct and that such investor is not otherwise subject to backup
withholding.
No gain or loss will be recognized on the conversion of Class A shares
into Class Y shares in the circumstances described in the Prospectus. A
shareholder's basis in the shares acquired will be the same as such
shareholder's basis in the shares converted, and the holding period of the
acquired shares will include the holding period for the converted shares.
If a shareholder exercises an exchange privilege within 90 days of
acquiring the shares, then the loss the shareholder can recognize on the
exchange will be reduced (or the gain increased) to the extent any sales
charge paid to the Fund on the exchanged shares reduces any sales charge the
shareholder would have owed upon purchase of the new shares in the absence
of the exchange privilege. Instead, such sales charge will be treated as an
amount paid for the new shares.
A loss realized on a sale or exchange of shares of the Fund will be
disallowed if other Fund shares are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61-day period beginning 30
days before and ending 30 days after the date that the shares are disposed
of. In such a case, the basis of the shares acquired will be adjusted to
reflect the disallowed loss.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For
the complete provisions, reference should be made to the pertinent Code
sections and the Treasury regulations promulgated thereunder. The Code and
the Treasury regulations are subject to change by legislative, judicial or
administrative action either prospectively or retroactively.
Ordinary income and capital gain dividends may also be subject to state
and local taxes.
Certain states exempt from state income taxation dividends paid by RICs
which are derived from interest on U.S. Government obligations. State law
varies as to whether dividend income attributable to U.S. Government
obligations is exempt from state income tax.
Shareholders are urged to consult their tax advisers regarding specific
questions as to Federal, foreign, state or local taxes. Foreign investors
should consider applicable foreign taxes in their evaluation of an
investment in the Fund.
PERFORMANCE DATA
From time to time the Fund may include its average annual total return
and yield for various specified time periods in advertisements or
information furnished to present or prospective shareholders. Average
annual total return and yield are computed separately for Class A and Class
Y shares in accordance with formulas specified by the SEC.
Average annual total return quotations for the specified period will be
computed by finding the average annual compounded rates of return (based on
net investment income and any realized and unrealized capital gains or
losses on portfolio investments over such periods) that would equate the
initial amount invested to the redeemable value of such investment at the
end of each period. Average annual total return will be computed assuming
all dividends and distributions are reinvested and taking into account all
applicable recurring and nonrecurring expenses, and the maximum sales charge
in the case of Class A shares. Dividends paid by the Fund with respect to
all shares, to the extent any dividends are paid, will be calculated in the
same manner at the same time on the same day and will be in the same amount,
except that account maintenance and distribution fees and any incremental
transfer agency costs relating to each class of shares will be borne
exclusively by that class. The Fund will include performance data for all
classes of shares of the Fund in any advertisement or information including
performance data of the Fund.
The Fund also may quote total return and aggregate total return
performance data for various specified time periods. Such data will be
calculated substantially as described above, except that (1) the rates of
return calculated will not be average annual rates, but rather, actual
annual, annualized or aggregate rates of return and (2) the maximum
applicable sales charges will not be included with respect to annual or
annualized rates of return calculations. Aside from the effect on the
performance data calculations of including or excluding the maximum
applicable sales charges, actual annual or annualized total return data
generally will be lower than average annual total return data since the
average annual rates of return reflect compounding; aggregate total return
data generally will be higher than average annual total return data since
the aggregate rates of return reflect compounding over a longer period of
time. In advertisements distributed to investors whose purchases are
subject to waiver of the sales charges in the case of Class A shares, the
performance data may not take the Class A sales charge into account and
therefore may reflect greater total return since a lower amount of expenses
is deducted. See "Purchase of Shares." The Fund's total return may be
expressed either as a percentage or as a dollar amount in order to
illustrate such total return on a hypothetical $1,000 investment in the Fund
at the beginning of each specified period.
Yield quotations will be computed based on a 30-day period by dividing
(a) net income based on the yield of each security earned during the period
by (b) the average daily number of shares outstanding during that period
that were entitled to receive dividends multiplied by the maximum offering
price per share on the last day of the period.
Total return and yield figures are based on the Fund's historical
performance and are not intended to indicate future performance. The Fund's
total return and yield will vary depending on market conditions, the
securities comprising the Fund's portfolio, the Fund's operating expenses
and the amount of realized and unrealized net capital gains or losses during
the period. The value of an investment in the Fund will fluctuate and an
investor's shares, when redeemed, may be worth more or less than their
original cost.
On occasion, the Fund may compare its performance to performance data
published by Lipper Analytical Services, Inc., Morningstar Publications,
Inc., Money Magazine, U.S. News & World Report, Business Week, CDA
Investment Technology, Inc., Forbes Magazine and Fortune Magazine. From
time to time, the Fund may include the Fund's Morningstar risk-adjusted
performance ratings in advertisements or supplemental sales literature. As
with other performance data, performance comparisons should not be
considered indicative of the Fund's relative performance for any future
period.
PORTFOLIO TRANSACTIONS
Subject to policies established by the Board of Directors of the Fund,
the Investment Adviser is primarily responsible for the execution of the
Fund's portfolio transactions. In executing such transactions, the
Investment Adviser seeks to obtain the best results for the Fund, taking
into account such factors as price (including the applicable brokerage
commission or dealer spread), size of order, difficulty of execution and
operational facilities of the firm involved and the firm's risk in
positioning a block of securities. While the Investment Adviser generally
seeks reasonably competitive commission rates or spreads, the Fund does not
necessarily pay the lowest commission or spread available.
The Fund has no obligation to deal with any broker or dealer in
execution of transactions in portfolio securities. Subject to obtaining the
best price and execution, securities firms which provided supplemental
investment research to the Investment Adviser, including NSI, may receive
orders for transactions by the Fund. Information so received will be in
addition to and not in lieu of the services required to be performed by the
Investment Adviser under the Investment Advisory Agreement, and the expenses
of the Investment Adviser will not necessarily be reduced as a result of the
receipt of such supplemental information. In addition, consistent with the
Conduct Rules of the National Association of Securities Dealers, Inc. and
policies established by the Directors of the Fund, the Investment Adviser
may consider sales of shares of the Fund as a factor in the selection of
brokers or dealers to execute portfolio transactions for the Fund.
The securities in which the Fund invests are traded primarily in the
over-the-counter market. Since portfolio transactions will generally not be
effected on foreign securities exchanges, the Fund does not expect typically
to incur potential settlement delays which may occur on certain of such
exchanges. Where possible, the Fund 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. Such dealers usually
are acting as principal for their own account. On occasion, securities may
be purchased directly from the issuer. Such portfolio securities are
generally traded on a net basis and do not normally involve either brokerage
commissions or transfer taxes. Securities firms may receive brokerage
commissions on certain portfolio transactions, including options, futures
and options on futures transactions and the purchase and sale of underlying
securities upon exercise of options. Under the Investment Company Act,
persons affiliated with the Fund, including NSI, are prohibited from dealing
with the Fund as a principal in the purchase and sale of securities unless a
permissive order allowing such transactions is obtained from the SEC. An
affiliated person of the Fund may serve as its broker in transactions
conducted on an exchange and in over-the-counter transactions conducted on
an agency basis.
Section 11(a) of the Securities Exchange Act of 1934, as amended,
generally prohibits members of United States national securities exchanges
from executing exchange transactions for their affiliates and institutional
accounts which they manage unless the member (i) has obtained prior express
authorization from the account to effect such transactions, (ii) at least
annually furnished the account with the aggregate compensation received by
the member in effecting such transactions, and (iii) complies with any rules
the SEC has prescribed with respect to the requirements of clauses (i) and
(ii). To the extent Section 11(a) would apply to NSI acting as a broker for
the Fund in any of its portfolio transactions executed on any such
securities exchange of which it is a member, appropriate consents have been
obtained from the Fund and annual statements as to aggregate compensation
will be provided to the Fund.
ADDITIONAL INFORMATION
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to distribute all its net investment income.
Dividends from such net investment income will be declared daily prior to
the determination of net asset value on that day and paid monthly. Shares
will accrue dividends as long as they are issued and outstanding. Shares
are issued and outstanding from the settlement date of a purchase order to
the settlement date of a redemption order. All net realized long-term and
short-term capital gains, if any, will be distributed to the Fund's
shareholders at least annually.
The per share dividends and distributions on each class of shares will
be reduced as a result of any fees or expenses applicable with respect to
such class of shares. See "Additional Information--Determination of Net
Asset Value". Dividends and distributions may be reinvested automatically
in shares of the Fund at net asset value. Shareholders may elect to receive
any such dividends or distributions, or both, in cash. Dividends and
distributions are taxable to shareholders as discussed under "Taxes" whether
they are reinvested in shares of the Fund or received in cash.
DETERMINATION OF NET ASSET VALUE
The net asset value of the Fund is determined as of the close of
trading (normally 4:00 p.m. E.S.T.) on the NYSE, Monday through Friday,
except on (i) days on which there is not sufficient changes in the value of
the Fund's portfolio securities that its net asset value might be materially
affected; (ii) days during which no shares are tendered for redemption and
no orders to purchase shares are received; or (iii) the following holidays:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset value per
share is computed by dividing the value of the securities held by the Fund
plus any cash or other assets (including interest and dividends accrued but
not yet received) minus all liabilities (including accrued expenses) by the
total number of shares outstanding at such time, rounded to the nearest
cent. Expenses, including the fees payable to the Investment Adviser and
any account maintenance and/or distribution fees payable to the Distributor,
are accrued daily.
The per share net asset value of the Class Y shares generally will be
higher than the per share net asset value of the Class A shares, reflecting
the daily expense accruals of the distribution fees applicable to Class A
shares. It is expected, however, that the per share net asset value of the
classes will tend to converge (although not necessarily meet) immediately
after the payment of dividends or distributions, which will differ by
approximately the amount of the expense accrual differentials between the
classes.
ORGANIZATION OF THE FUND
The Fund is the only existing series of the Company, a series-type
investment company incorporated under Maryland law on June 4, 1996. The
Company has an authorized capital of 200,000,000 shares of common stock, par
value $0.001 per share, of which 50,000,000 shares are initially classified
as one series, namely the Fund, consisting of two classes, designated Class
A and Class Y common stock, each of which consists of 25,000,000 shares and
the remainder of 150,000,000 shares are not classified as to any class or
series. Shares of Class A and Class Y common stock represent interests in
the same assets of the Fund and are identical in all respects except that
the Class A shares bear certain expenses related to the shareholder services
and distribution associated with such shares and may cease to be subject to
such expenses if they are converted to Class Y shares. Class A shareholders
have exclusive voting rights with respect to matters relating to that class'
shareholder services and distribution expenditures, as applicable. See
"Purchase of Shares." The Directors of the Fund may classify and reclassify
the unissued shares of the Fund and of the Company into additional classes
or series of common stock at a future date.
Shareholders are entitled to one vote for each share held and
fractional votes for fractional shares held and will vote on the election of
Directors and any other matter submitted to a shareholder vote. The Fund
does not intend to hold meetings of shareholders in any year in which the
Investment Company Act does not require shareholders to act upon the
election of directors. Also, the By-laws of the Fund require that a special
meeting of stockholders be held upon the written request of shareholders of
the Fund as required by Maryland corporate law and the Investment Company
Act. Voting rights for Directors are not cumulative. Shares issued are
fully paid and nonassessable and have no preemptive rights. Shares have the
conversion features described in this Prospectus. Each share of common
stock is entitled to participate equally in dividends and distributions
declared by the Fund and in the net assets of the Fund upon liquidation or
dissolution after satisfaction of outstanding liabilities except, as noted
above, the Class A shares bear certain additional expenses.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Fund at the address or
telephone number set forth on the cover page of this Prospectus.
SHAREHOLDER REPORTS
Only one copy of each shareholder report and certain shareholder
communications will be mailed to each identified shareholder regardless of
the number of accounts such shareholder has. If a shareholder wishes to
receive separate copies of each report and communication for each of the
shareholder's related accounts, the shareholder should notify in writing:
Battery Park Funds, Inc.
P.O. Box 1226
Pittsburgh, PA 15230-1226
The written notification should include the shareholder's name,
address, tax identification number and account numbers. If you have any
questions regarding this please call 1-888-254-2874.
APPENDIX A
RATINGS OF HIGH YIELD DEBT SECURITIES
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. ("MOODY'S") CORPORATE RATINGS
Ba-Bonds which are 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 which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Caa-Bonds which are 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 which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C-Bonds which are 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.
NOTE: Moody's applies numerical modifiers l, 2 and 3 in each generic
rating classification from Aa through B in its corporate bond rating system.
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.
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP ("S&P") CORPORATE DEBT RATINGS
An S&P corporate or municipal rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors,
insurers, or lessees.
The debt rating is not a recommendation to purchase, sell or hold a
security, inasmuch as it does not comment as to market price or suitability
for a particular investor.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not
perform an audit in connection with any rating and may, on occasion, rely on
unaudited financial information. The ratings may be changed, suspended or
withdrawn as a result of changes in, or unavailability of, such information,
or for other circumstances.
The ratings are based, in varying degrees, on the following
considerations:
I. Likelihood of default-capacity and willingness of the obligor
as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation;
II. nature of and provisions of the obligation; and
III. protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization or other arrangement
under the laws of bankruptcy and other laws affecting creditors' rights.
Debt rated BB, B, CCC, CC and C is regarded, on balance, as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The BB rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BBB- rating.
B Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied BB or BB- rating.
CCC Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic conditions
to meet timely payments of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it is not
likely to have the capacity to pay interest and repay principal. The CCC
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied B or B- rating.
CC The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC rating.
C The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed but
debt service payments are continued.
CI The rating CI is reserved for income bonds on which no interest is being
paid.
D Debt rated D is in payment default. The D rating category is also 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 also
will be used upon the filing of a bankruptcy petition if debt service
payments are jeopardized.
Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing with the major
ratings categories.
Provisional ratings: The letter "p" indicates that the rating is
provisional. A provisional rating assumes the successful completion of the
project being financed by the debt being rated and indicates that payment of
debt service requirements is largely or entirely dependent upon the
successful and timely completion of the project. This rating, however,
while addressing credit quality subsequent to completion of the project,
makes no comment on the likelihood of, or risk of default upon failure of,
such completion. The investor should exercise judgment with respect to such
likelihood and risk.
L The letter "L" indicates that the rating pertains to the principal
amount of those bonds to the extent that the underlying deposit collateral
is insured by the Federal Savings & Loan Insurance Corp. or the Federal
Deposit Insurance Corp. and interest is adequately collateralized.
* Continuance of the rating is contingent upon S&P's receipt of an
executed copy of the escrow agreement or closing documentation confirming
investments and cash flows.
NR Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that S&P does not rate a particular
type of obligation as a matter of policy.
Debt Obligations of Issuers outside the United States and its
territories are rated on the same basis as domestic corporate and municipal
issues. The ratings measure the creditworthiness of the obligor but do not
take into account currency exchange and related uncertainties.
Bond Investment Quality Standards: Under present commercial bank
regulations issued by the Comptroller of the Currency, Bonds rated in the
top four categories ("AAA", "AA", "A", "BBB", commonly known as "investment
grade" ratings) are generally regarded as eligible for bank investment. In
addition, the laws of various states governing legal investments may impose
certain rating or other standards for obligations eligible for investment by
savings banks, trust companies, insurance companies and fiduciaries
generally.
The ratings are based on current information furnished to S&P by the
issuer, and obtained by S&P from other sources it considers reliable. The
ratings may be changed, suspended, or withdrawn as a result of changes in,
or unavailability of such information.
APPENDIX B
HEDGING TECHNIQUES
The Fund may engage in various portfolio strategies to hedge its
portfolio against interest rate risks. These strategies include use of
options on portfolio positions, futures and options on such futures. The
Fund may enter into such transactions only in connection with its hedging
strategies. While the Fund's use of hedging strategies is intended to
reduce the volatility of the net asset value of Fund shares, the Fund's net
asset value will fluctuate. There can be no assurance that the Fund's
hedging transactions will be effective and the Fund may not necessarily be
engaging in hedging activities when movements in interest rates occur. See
"Investment Objective and Policies" in the Fund's Prospectus for further
information concerning these strategies.
Although certain risks are involved in options and futures transactions
(as discussed below in "Risk Factors in Options and Futures Transactions"),
the Investment Adviser believes that, because the Fund will only engage in
these transactions for hedging purposes, the options and futures portfolio
strategies of the Fund will not subject the Fund to the risks frequently
associated with the speculative use of options and futures transactions.
Tax requirements may limit the Fund's ability to engage in the hedging
transactions and strategies described below. See "Taxes" in the Statement
of Additional Information.
The Fund may use the hedging instruments described below to hedge
against interest rate risks:
Options. The Fund may purchase and write (i.e., sell) call options and
put options on securities and engage in transactions in financial futures
and related options, as described below.
The Fund may write covered call options with respect to securities it
owns and enter into closing purchase transactions with respect to such
options. A covered call option provides the holder of the option with the
right to buy the underlying security covered by the option at the stated
exercise price until the option expires. A covered call option is an option
where the Fund, in return for a premium, gives another party a right to buy
particular securities held by the Fund at a specified price for a certain
period of time. In return for the premium income realized from the sale of
the option, the Fund gives up the opportunity to profit from a price
increase in the underlying security above the option exercise price while
the option is in effect. In addition, the Fund's ability to sell the
underlying security will be limited until the option is closed or expires.
A closing purchase transaction cancels out the Fund's position as the
writer of an option by means of an offsetting purchase of an identical
option prior to the expiration of the option it has written. The Fund also
may purchase call options on securities held in its portfolio on which it
has written call options or on securities which it intends to purchase.
There is no percentage limitation with respect to portfolio securities on
which the Fund may write call options.
The Fund may purchase put options on portfolio securities. In return
for payment of a premium, the purchase of a put option gives the holder
thereof the right to sell the security underlying the option to another
party at a specified price until the put option is closed out, expires or is
exercised. The Fund will purchase put options to seek to reduce the risk of
a decline in value of the underlying security owned by the Fund. The Fund
does not intend to purchase uncovered puts in excess of 10% of its total
assets. The total return on the security may be reduced by the amount of
the premium paid for the option. The Fund may write put options which give
the holder of the option the right to sell the underlying security to the
Fund at the stated exercise price. The Fund will receive a premium for
writing a put option which increases the Fund's return. The Fund writes
only covered put options which means that so long as the Fund is obligated
as the writer of the option it will have deposited and maintained with its
custodian cash or liquid securities with a value equal to or greater than
the exercise price of the underlying securities. By writing a put, the Fund
will be obligated to purchase the underlying security at a price that may be
higher than the market value of that security at the time of exercise for as
long as the option is outstanding. The Fund may engage in closing
transactions in order to terminate put options that it has written or
purchased. The Fund intends to limit its writing of covered puts so that
the aggregate value of the obligations underlying the puts will not exceed
5% of its net assets.
Futures. The Fund also may purchase and sell financial futures
contracts ("futures contracts") as a hedge against adverse changes in
interest rates, as described below. A futures contract is an agreement
between two parties which obligates the purchaser of the futures contract to
buy and the seller of a futures contract to sell a security for a set price
on a future date. The Fund may effect transactions in futures contracts in
United States and foreign agency and government securities and corporate
debt securities. Transactions by the Fund in futures contracts are subject
to limitation as described below under "Restrictions on the Use of Futures
Transactions".
The Fund may sell futures contracts in anticipation of an increase in
the general level of interest rates. Generally, as interest rates rise, the
market value of securities held by the Fund will fall, thus reducing the net
asset value of the Fund. As interest rates rise, however, the value of the
Fund's short position in the futures contract also will tend to increase,
thus offsetting all or a portion of the depreciation in the market value of
the Fund's investments which are being hedged. While the Fund will incur
commission expenses in selling and closing out futures positions, these
commissions are generally less than the transaction expenses which would
have been incurred had the Fund sold portfolio securities in order to reduce
its exposure to increases in interest rates.
The Fund may purchase futures contracts in anticipation of a decline in
interest rates when it is not fully invested in a particular market in which
it intends to make investments to gain market exposure that may in part or
entirely offset an increase in the cost of securities it intends to
purchase. The Fund does not consider purchases of futures contracts to be a
speculative practice under these circumstances. In a substantial majority
of these transactions, the Fund will purchase securities upon termination of
the futures contract.
The Fund also may purchase and write call and put options on futures
contracts in connection with its hedging activities. Generally, these
strategies are utilized under the same market and market sector conditions
(i.e., conditions relating to specific types of investments) in which the
Fund enters into futures transactions. The Fund may purchase put options or
write call options on futures contracts rather than selling the underlying
futures contract in anticipation of an increase in interest rates.
Similarly, the Fund may purchase call options or write put options on
futures contracts as a substitute for the purchase of such futures to hedge
against the increased cost resulting from a decline in interest rates of
securities which the Fund intends to purchase. Limitations on transactions
in options on futures contracts are described below.
The Fund may engage in options and futures transactions on exchanges
and in the over-the-counter ("OTC") markets. In general, exchange-traded
contracts are third-party contracts (i.e., performance of the parties'
obligations is guaranteed by an exchange or clearing corporation) with
standardized strike prices and expiration dates. OTC transactions are
two-party contracts with price and terms negotiated by the buyer and seller.
The Fund will engage in OTC options only with member banks of the Federal
Reserve System and primary dealers in U.S. Government securities or with
affiliates of such banks or dealers which have capital of at least $50
million or whose obligations are guaranteed by an entity having capital of
at least $50 million.
The staff of the Securities and Exchange Commission (the "SEC") has
taken the position that purchased OTC options and the assets used as cover
for written OTC options are illiquid securities. Therefore, the Fund has
adopted an investment policy pursuant to which it will not purchase or sell
OTC options (including OTC options on futures contracts) if, as a result of
such transaction, the sum of the market value of OTC options currently
outstanding which are held by the Fund, the market value of the underlying
securities covered by OTC call options currently outstanding which were sold
by the Fund and margin deposits on the Funds existing OTC options on futures
contracts exceed 15% (10% to the extent required by certain state laws) of
the net assets of the Fund, taken at market value, together with all other
assets of the Fund which are illiquid or are not otherwise readily
marketable. However, if the OTC option is sold by the Fund to a primary
U.S. Government securities dealer recognized by the Federal Reserve Bank of
New York and the Fund has the unconditional contractual right to repurchase
such OTC option from the dealer at a predetermined price, then the Fund will
treat as illiquid such amount of the underlying securities as is equal to
the repurchase price less the amount by which the option is "in-the-money"
(i.e., current market value of the underlying security minus the option's
strike price). The repurchase price with the primary dealers is typically a
formula price which is generally based on a multiple of the premium received
for the option plus the amount by which the option is "in- the-money". This
policy as to OTC options is not a fundamental policy of the Fund and may be
amended by the Directors of the Fund without the approval of the Fund's
shareholders. However, the Fund will not change or modify this policy prior
to the change or modification by the SEC staff of its position.
To trade futures contracts, the Fund is not required to deposit funds
equal to the value of the futures contract. The Fund need only make a
deposit, called an "initial margin deposit", equal to a percentage
(typically 15% or less) of the value of the futures contract. As a result,
a relatively small adverse move in the price of a futures contract may
result in a substantial loss. For example, if at the time of purchase 10%
of the price of a futures contract is deposited as margin, a 10% decrease in
the price of that contract would, if the contract were then closed out,
result in a total loss of the initial margin deposit before any deduction
for brokerage commissions and other transaction costs. A decrease of more
than 10% would result in a loss of more than the total initial margin
deposit. Options on futures contracts are generally similarly or even more
highly leveraged. However, when the Fund purchases a futures contract, or
writes a put option or purchases a call option thereon, an amount of cash
and cash equivalents will be deposited in a segregated account with the
Fund's custodian so that the amount so segregated, plus the amount of
initial and variation margin held in the account of its broker, equals the
market value of the futures contract, thereby minimizing the effect of
leverage from such futures contract.
Restrictions on the Use of Futures Transactions. Regulations of the
Commodity Futures Trading Commission (the "CFTC") applicable to the Fund
permit the Fund's futures and options on futures transactions to include (i)
bona fide hedging transactions without regard to the percentage of the
Fund's assets committed to margin and option premiums, and (ii) non-hedging
transactions, provided that the Fund not enter into such non-hedging
transactions if, immediately thereafter, the sum of the amount of initial
margin and option premiums required to establish non-hedging transactions
would exceed 5% of the market value of the Fund's liquidation value, after
taking into account unrealized profits and unrealized losses on any such
transactions. However, as stated above, the Fund intends to engage in
options and futures transactions only for hedging purposes.
When the Fund purchases a futures contract or writes a put option or
purchases a call option thereon, it will maintain an amount of cash, cash
equivalents (e.g., high grade commercial paper and daily tender adjustable
notes) or short-term high grade fixed income securities in a segregated
account with the Fund's custodian so that the amount so segregated, plus the
amount of initial and variation margin held in the account of its broker,
equals the market value of the futures contract, thereby ensuring that the
use of such futures is unleveraged.
Risk Factors in Options and Futures Transactions. Utilization of
futures transactions involves the risk of imperfect correlation in movements
in the price of futures contracts and movements in the price of the
securities and currencies which are the subject of the hedge. If the price
of the futures contract moves more or less than the price of the security or
currency, the Fund will experience a gain or loss which will not be
completely offset by movements in the price of the debt securities which are
the subject of the hedge. There is also a risk of imperfect correlations
where the securities underlying futures contracts have different maturities
than the portfolio securities being hedged. Transactions in options on
futures contracts involve similar risks.
The Fund intends to enter into options and futures transactions, on an
exchange or in the OTC market, only if there appears to be a liquid
secondary market for such options or futures or, in the case of OTC
transactions, management believes the Fund can receive on each business day
a bid or offer. There can be no assurance, however, that a liquid secondary
market will exist at any specific time. Thus, it may not be possible to
close an options or futures transaction. The inability to close options and
futures positions also could have an adverse impact on the Fund's ability to
effectively hedge its portfolio. There is also the risk of loss by the Fund
of margin deposits or collateral in the event of bankruptcy of a broker
with whom the Fund has an open position in an option, a futures contract or
related option.
The exchanges on which options on portfolio securities are traded have
generally established limitations governing the maximum number of call or
put options on the same underlying security (whether or not covered) which
may be written by a single investor, whether acting alone or in concert with
others (regardless of whether such options are written on the same or
different exchanges or are held or written on one or more accounts or
through one or more brokers). "Trading limits" are imposed on the maximum
number of contracts which any person may trade on a particular trading day.
The Investment Adviser does not believe that these trading and position
limits will have any adverse impact on the portfolio strategies; for hedging
the Fund's portfolio.
Interest Rate Hedging Transactions. In order to hedge the value of the
Fund's portfolio against interest rate fluctuations, the Fund may enter into
various hedging transactions, such as interest rate swaps and the purchase
or sale of interest rate caps and floors. The Fund expects to enter into
these transactions primarily to preserve a return or spread on a particular
investment or portion of its portfolio or to protect against any increase in
the price of securities the Fund anticipates purchasing at a later date.
The Fund intends to use these transactions as a hedge and not as a
speculative investment.
The purchase of an interest rate cap entitles the purchaser, to the
extent that a specified index exceeds a predetermined interest rate, to
receive payments of interest on a notional principal amount from the party
selling such interest rate cap. The purchase of an interest rate floor
entitles the purchaser, to the extent that a specified index falls below a
predetermined interest rate, to receive payments of interest on a notional
principal amount from the party selling such interest rate floor.
In an interest rate swap the Fund exchanges with another party their
respective commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments. The net amount of the
excess, if any, of the Fund's obligations over its entitlement with respect
to each interest rate swap will be accrued on a daily basis and an amount of
cash, cash equivalents or high grade liquid debt securities having an
aggregate net asset value at least equal to the accrued excess will be
maintained in a segregated account by the Fund's custodian.
The Fund will not enter into any interest rate swap, cap or floor
transaction unless the unsecured senior debt or the claims- paying ability
of the other party thereto is rated in one of the highest two rating
categories of at least one nationally recognized statistical rating
organization at the time of entering into such transaction or whose
creditworthiness is believed by the Investment Adviser to be equivalent to
such rating. If there is a default by the other party to such a
transaction, the Fund will have contractual remedies pursuant to the
agreements related to the transaction. The Investment Adviser believes that
the swap market is relatively liquid. Caps and floors, however, are less
liquid than swaps. The Fund will not enter into a cap or floor transaction
in an amount which, together with other illiquid investments of the Fund,
exceeds 15% of the Fund's total assets (or 10% of the Fund's total assets as
presently required by certain state laws).
BATTERY PARK FUNDS NEW ACCOUNT FORM
REGISTRATION INSTRUCTIONS
- - If you need assistance, our toll-free number is 1-800- - .
1 YOUR ACCOUNT REGISTRATION
Please provide the information exactly as you wish it to appear on your
account (e.g., as your name appears on your other financial/legal records,
such as your bank account, will, etc.) Corporations, trust, or others in
any representative capacity may need to provide additional documents before
registering and account. Call 1-800- - for details. PLEASE PROVIDE
YOUR TAXPAYER IDENTIFICATION NUMBER. FOR MOST INDIVIDUALS, THIS IS YOUR
SOCIAL SECURITY NUMBER.
2 MAILING ADDRESS OF ACCOUNT
Please provide your complete mailing address.
3 SHAREHOLDER EMPLOYMENT INFORMATION
We are required to ask for this information in accordance with the Rules of
Fair Practice of the National Association of Securities Dealers.
4 FUND SELECTION AND INITIAL INVESTMENT
Please be sure to indicate fund and amount.
5 YOUR METHOD OF INVESTING
Shares purchased by check may not be redeemed until payment is collected.
You will, however, earn dividends during this period.
6 DIVIDENDS AND CAPITAL GAINS PAYMENT OPTIONS
Unless a box is checked, all distributions will be reinvested.
7 TELEPHONE EXCHANGE AND REDEMPTION PRIVILEGE
Authorization to accept and act upon telephone instructions for redemptions
and exchanges.
8 BANK ACCOUNT INFORMATION
If using your bank account for Dividend and Capital gains payments or
Systematic Investment/Withdrawal Programs, please complete this section.
9 SIGNATURE
Please sign exactly as your name is registered in Section 1.
10 FOR DEALER USE ONLY
Do not complete.
NEW ACCOUNT FORM
1 ACCOUNT REGISTRATION /(CHECK ONE BOX)/
The completion of this section is REQUIRED. To open any ONE of the following
--
of accounts--Please check the appropriate box:
/ / INDIVIDUAL OR JOINT ACCOUNT
________________________________ Shareowner or Custodian (First, M.I., Last)
Social Security Number
_____________________________________________________________________________
Co-owner or (First, M.I., Last) Social Security Number
/ / CUSTODIAL ACCOUNT /(GIFT TO MINOR)/
_______________________________________________ Custodian (First, M.I., Last)
- -----------------------------------------------------------
Minor (First, M.I., Last)
- -------------------------------- ------------------
Minor's Social Security Number Date of Birth
Under the __________ uniform gifts or transfer to minors act.
(STATE)
/ / TRUST ACCOUNT
- -----------------------------------------------------------
Name of Trustee (First, M.I., Last)
- -----------------------------------------------------------
Name of Trust
- -----------------------------------------------------------
Name of Second Trustee (if any) (First, M.I., Last)
- -----------------------------------------------------------
Taxpayer Identification Number
- ----------------------------
Date of Trust
2 MAILING ADDRESS OF ACCOUNT
THE COMPLETION OF THIS SECTION IS REQUIRED.
- -----------------------------------------------------------
Street address or box number
- -------------------------------------- ------------------
City State
- ------------- -----------------------------------------
Zip Code Daytime phone
- -----------------------------------------------------------
Evening phone
3 SHAREHOLDER EMPLOYMENT INFORMATION
BY LAW, THE FOLLOWING INFORMATION MUST BE REQUESTED, BUT IS NOT REQUIRED TO
ESTABLISH AN ACCOUNT.
Employer's Name Occupation
- ------------------------------- -----------------------------
Co-Shareowner's Employer's Name Occupation
- ------------------------------- ----------------------------
- -----------------------------------------------------------
Street address or box number
- -----------------------------------------------------------
City State Zip Code
/ / Please check here if you are employed by or associated with a member of
the NASD.
4 FUND SELECTION AND INITIAL INVESTMENT
THE COMPLETION OF THIS SECTION IS REQUIRED.
A. Select the fund(s) you want to invest in now. B. Next to the fund name,
indicate the amount of your investment. Minimum initial and subsequent
investments per fund.
A. FUND CHOICE: B. AMOUNT: $1,000
/ / Battery Park $____________________
----------------------------
/ / High Yield Fund $____________________
----------------------------
/ / $____________________
----------------------------
/ / $____________________
-----------------------------
5 YOUR METHOD OF INVESTING
THE COMPLETION OF THIS SECTION IS REQUIRED.
You can open your account by one of these methods.
Please check your choice:
/ / BY CHECK Enclose a check payable to (Fund family name) for the total
shown in Part 4 above. (Redemption proceeds of shares purchased by check
are not available for 7 calendar days.
6 DIVIDEND AND CAPITAL GAINS PAYMENT OPTIONS
Both income dividends and capital gains will automatically be reinvested in
additional shares unless you choose otherwise below.
/ / Pay income dividends in cash.*
/ / Pay capital gains in cash.*
*NORMALLY, A CHECK IS MAILED TO THE ADDRESS OF RECORD. IF YOU WANT PAYMENTS
DEPOSITED TO YOUR ACCOUNT INSTEAD, CHECK THIS / / AND COMPLETE SECTION 9,
BANK ACCOUNT INFORMATION.
7 TELEPHONE EXCHANGE & REDEMPTION PRIVILEGE
/ / By checking this box, I (We) hereby authorize (the bank) to accept and
act upon telephone instructions from me or any of us for the redemption of
shares and/or the exchange of shares between one or more of the Funds in
(Fund Family name) having identical registrations. In the case of telephone
redemptions, a check will be mailed to the address and owners listed on my
account. I understand that redemption proceeds of shares purchased by check
are not available until (The bank) collects payments for those shares, and
this may take up to seven (7) calendar days.
8 BANK ACCOUNT INFORMATION FOR TELEPHONE REDEMPTION BY WIRE
_________________________________________________________________
Bank name ABA number (if known)
_________________________________________________________________
Bank address
_________________________________________________________________
City State Zip
_________________________________________________________________
Name(s) on bank account
_________________________________________________________________
Bank account number
Please attach one voided check or deposit ticket.
/ / Checking / / Savings
9 SIGNATURE
THE COMPLETION OF THIS SECTION IS REQUIRED. BY SIGNING THIS NEW ACCOUNT FORM
BELOW, I ASSURE THAT:
- - I have received and read the prospectus for each of the funds in which
I am investing. I understand that the prospectus terms are incorporated
into this New Account Form by reference. I am of legal age in my state and
have the authority and legal capacity to purchase mutual fund shares.
- - I understand that the shares of the Funds are not deposits or
obligations of the Bank, are not endorsed or guaranteed by the Bank, and are
not insured by the Federal Deposit Insurance Corporation ("FDIC"), the
Federal Reserve Board or any other governmental agency.
Investments in shares of the Funds involve investment risks, including
the possible loss of principal.
- - I understand that the investment is subject to risk that may cause the
value
of the investment to fluctuate. When the investment is sold, the value may
be greater or less than the amount originally paid by the shareholder.
- - I CERTIFY, UNDER PENALTIES OF PERJURY, THAT:
1) The Social Security or Taxpayer Identification Number shown on this
form is correct. (If I fail to give the correct number or to sign this
form, (Bank name) may reject, restrict, or redeem my investment. I may also
be subject to any applicable IRS Backup Withholding on all distributions and
redemptions.)
2) / / I am NOT currently subject to IRS Backup Withholding because:
(a) I have not been notified of it, or (b) notification has been revoked.
/ / I am currently subject to IRS Backup Withholding.
- - I agree that neither (the Bank), Federal Shareholder Services Company,
Federated Securities Corp., Edgewood Services, Inc., the Funds, nor any of
their affiliates will be responsible for the authenticity of any
instructions given and shall be fully indemnified as to, and held harmless
from , any and all direct and indirect liabilities, losses, or costs
resulting from acting upon such instructions.
_________________________________________________________________
Shareowners, Custodian, Trustee or Authorized officer Date
_________________________________________________________________
Co-Shareowner signature, Trustee or Authorized officer Date
10 FOR DEALER USE ONLY
_________________________________________________________________
Financial Institution Name
_________________________________________________________________
Address
________________________________________ ____________________
City State
______________________________
Zip
_________________________________________________________________________
Dealer Number Branch Number Representative's Number
_________________________________________________________________________
Representative's Full Name
_________________________________________________________________________
Representative's Branch Office
X
_________________________________________________________________________
Representative's Signature
X
_________________________________________________________________________
Supervisor's Signature
Mailing Information Battery Park Funds
P.O. Box
Pittsburgh, PA
Please send completed form to: Address
BATTERY PARK FUNDS LETTER OF INTENT
(PLEASE PRINT)
_________________________________________________________________
I intend, but am not obligated, to invest in any one or more of the
non-money market funds in the Battery Park Funds of funds during the 13
month period from the date of this letter an aggregate amount which will,
when added to my current applicable account balances, equal or exceed the
amount checked. All applicable account balances in non money market funds,
will be aggregated to provide a purchase credit toward fulfillment of this
letter. Prior trade prices will not be adjusted. Please review individual
fund prospectus for specific load structure and breakpoints. (Check one box
only.)
/ / $ / / $ / / $ / / $
The undersigned acknowledges that this Letter of Intent applies only with
respect to related accounts (to include spouse, and children under the age
of 21 residing in the same household). All qualifying accounts are listed
here:
______________________________ ______________________________
Fund Name Account Number
______________________________ ______________________________
Fund Name Account Number
______________________________ ______________________________
Fund Name Account Number
Subject to the conditions set forth on the reverse side hereof, each
purchase of Fund shares will be made at public offering price applicable to
a single transaction of the dollar amount checked above, as described in the
Fund's then current prospectus.
I am making no commitment to purchase additional shares, but if purchases
within thirteen months from this date do not aggregate the sum specified
above, I will pay the increased amount of sales charge prescribed in the
terms of escrow on the reverse side hereof. It is understood that 4.50% of
the dollar amount checked above will be held in escrow in the form of shares
(computed to the nearest full share) registered in my name. These shares
will be held by FEDERATED SERVICES COMPANY and will be subject to the terms
of escrow referred to above.
The undersigned shall specifically refer to this Letter of Intent in placing
any future order by the undersigned for shares while this Letter is in
effect.
__________________________________________________ __________
Signature of Shareowner Date
__________________________________________________ __________
Signature of Joint Shareowner Date
PLEASE PRINT:
___________________________________________ _____-___-_____
Name Social Security Number
__________________________________________________ __________
Street Address or Box Number Apt. Number
____________________ ______ ______- ____
City State Zip Code
MAILING INFORMATION Battery Park Funds
P.O. Box
Pittsburgh, PA
Please send completed form to:
TERMS OF ESCROW
1. Out of the purchase (or subsequent purchases if necessary) 4.50% of the
dollar amount specified in the Letter of Intent shall be held in escrow by
Federated Services Company in the form of shares (computed to the nearest
full share at the pubic offering price applicable to the initial purchase
hereunder) registered in my name. For instance, if the minimum amount
specified under this Letter is $100,000 AND THE PUBLIC OFFERING PRICE IS $10
A SHARE, 450 SHARES ($4,500 WORTH) would be held in escrow. All dividends
and any capital gains distributions on the "escrowed shares" will be
credited to my account or paid to my order.
2. If my total purchases pursuant to this Letter are less than the amount
specified by me as my expected aggregate purchases, I will remit to
FEDERATED SERVICES COMPANY any amount equal to the difference in the dollar
amount of sales charge actually paid by me and the amount of sales charge
which I would have paid on my aggregate purchases if the total of such
purchases had been made at a single time. If I do not pay such difference
in sales charge within 20 days after written request, FEDERATED SERVICES
COMPANY will redeem an appropriate number of the escrowed shares to pay this
amount.
3. I hereby irrevocably constitute and appoint FEDERATED SERVICES COMPANY
our attorney to surrender for redemption any or all escrowed shares with
full power of substitution in the premises.
4. Full shares remaining after the redemption referred to in Paragraph 2,
together with any excess cash proceeds of the shares so redeemed, will be
credited to my account or paid to my order by FEDERATED SERVICES COMPANY.
BATTERY PARK FUNDS ENROLLMENT FORM FOR
TELEPHONE REDEMPTION
(PLEASE PRINT)
_____________________________________________ _______________
Fund Name Account Number
__________________________________________________
Registered to
Please transmit all redemption proceeds per the following wiring
instructions:
_____________________________________________ _______________
Institution Name (please print) Account Type
_____________________________________________ _______________
Institution Address Account Number
________________________________________ _________ __________
City State Zip Code
_____________________________________________ _______________
Name(s) on Account ABA Routing Number
_________________________________________________________________
Special Instructions
1 AUTHORIZATION
THE FORM MUST BE SIGNED BY ALL OWNER(S) NAMED IN THE REGISTRATION. The
signatures must appear exactly as they do in the registration with no
abbreviations or eliminations of initials, etc. If the is registered as a
Trust or Custodial account, your capacity must appear after your
signature(s).
X
- ----------------------------------------- -------------
Signature of Shareowner Date
X
- ----------------------------------------- ------------
Signature of Joint Shareowner Date
2 SIGNATURE GUARANTEE
If you have designated your dividends or capital gains to be sent directly
to your bank account, a Signature Guarantee is required. A Signature
Guarantee is designed to protect you and the Funds against fraudulent
transactions by unauthorized persons. A Signature Guarantee is required for
all persons registered on an account.
The words "Signature Guaranteed" must be stamped or typed near your
signature. The guarantee must appear with the printed name, title, and
signature of an officer and the name of the guarantor institution. Please
not that a Notary Public stamp or seal is not acceptable. A Signature
Guarantee may be obtained from any eligible guarantor institution as defined
by the Securities and Exchange Commission. These institutions include
banks, savings associations, credit unions, brokerage firms, and others.
SIGNATURE(S) GUARANTEED BY
_________________________ ___________________________________
Name of Bank or Firm Signature of Officer and Title Date
Mailing Information Battery Park Funds
Mail completed form to: P.O. Box
Pittsburgh, PA
EMPLOYEE NEW ACCOUNT FORM
1 ACCOUNT REGISTRATION /(CHECK ONE BOX)/
The completion of this section is REQUIRED. To open any ONE of the following
---
type of accounts--Please check the appropriate box:
/ / INDIVIDUAL OR JOINT ACCOUNT
_________________________________ Shareowner or Custodian (First, M.I., Last)
Social Security Number
______________________________________________________________________________
Co-owner or (First, M.I., Last) Social Security Number
/ / CUSTODIAL ACCOUNT /(GIFT TO MINOR)/
______________________________________________ Custodian (First, M.I., Last)
- -----------------------------------------------------------
Minor (First, M.I., Last)
- -------------------------------- ------------------
Minor's Social Security Number Date of Birth
Under the __________ uniform gifts or transfer to minors act.
(STATE)
/ / TRUST ACCOUNT
- -----------------------------------------------------------
Name of Trustee (First, M.I., Last)
- -----------------------------------------------------------
Name of Trust
- -----------------------------------------------------------
Name of Second Trustee (if any) (First, M.I., Last)
- -----------------------------------------------------------
Taxpayer Identification Number
- ----------------------------
Date of Trust
2 MAILING ADDRESS OF ACCOUNT
THE COMPLETION OF THIS SECTION IS REQUIRED.
- -----------------------------------------------------------
Street address or box number
- -------------------------------------- ------------------
City State
- ------------- -----------------------------------------
Zip Code Daytime phone
- -----------------------------------------------------------
Evening phone
3 SHAREHOLDER EMPLOYMENT INFORMATION
BY LAW, THE FOLLOWING INFORMATION MUST BE REQUESTED, BUT IS NOT REQUIRED TO
ESTABLISH AN ACCOUNT.
Nomura Division Name
- ---------------------------- -----------------------------
Occupation
Co-Shareowner's Employer's Name
- ---------------------------- ----------------------------
Occupation
- -----------------------------------------------------------
Street address or box number
- -----------------------------------------------------------
City State Zip Code
/ / Please check here if you are employed by or associated with a member of
the
NASD.
4 FUND SELECTION AND INITIAL INVESTMENT
THE COMPLETION OF THIS SECTION IS REQUIRED.
A. Select the fund(s) you want to invest in now. B. Next to the fund name,
indicate the amount of your investment. Minimum initial and subsequent
investments per fund.
A. FUND CHOICE: B. AMOUNT: $1,000
/ / Batttery Park $____________________
----------------------------
/ / $____________________
------------------------
/ / $____________________
------------------------
/ / $____________________
------------------------
5 YOUR METHOD OF INVESTING
THE COMPLETION OF THIS SECTION IS REQUIRED.
You can open your account by one of these methods.
Please check your choice:
/ / BY CHECK Enclose a check payable to (Fund family name) for the total
shown in Part 4 above. (Redemption proceeds of shares purchased by check
are not available for 7 calendar days.
BY WIRE For wire instructions call (Bank name) at 1-800-000-0000.
6 DIVIDEND AND CAPITAL GAINS PAYMENT OPTIONS
Both income dividends and capital gains will automatically be reinvested in
additional shares unless you choose otherwise below.
/ / Pay income dividends in cash.*
/ / Pay capital gains in cash.*
*NORMALLY, A CHECK IS MAILED TO THE ADDRESS OF RECORD. IF YOU WANT PAYMENTS
DEPOSITED TO YOUR ACCOUNT INSTEAD, CHECK THIS / / AND COMPLETE SECTION 9,
BANK ACCOUNT INFORMATION.
7 TELEPHONE EXCHANGE & REDEMPTION PRIVILEGE
/ / By checking this box, I (We) hereby authorize (the bank) to accept and
act upon telephone instructions from me or any of us for the redemption of
shares and/or the exchange of shares between one or more of the Funds in
(Fund Family name) having identical registrations. In the case of telephone
redemptions, a check will be mailed to the address and owners listed on my
account. I understand that redemption proceeds of shares purchased by check
are not available until (The bank) collects payments for those shares, and
this may take up to sevel (7) calendar days.
8 BANK ACCOUNT INFORMATION FOR TELEPHONE REDEMPTION BY WIRE
_________________________________________________________________
Bank name ABA number (if known)
_________________________________________________________________
Bank address
_________________________________________________________________
City State Zip
_________________________________________________________________
Name(s) on bank account
_________________________________________________________________
Name(s) on bank account
_________________________________________________________________
Bank account number
Please attach one voided check or deposit ticket.
/ / Checking / / Savings
9 SIGNATURE
THE COMPLETION OF THIS SECTION IS REQUIRED. BY SIGNING THIS NEW ACCOUNT FORM
BELOW, I ASSURE THAT:
- - I have received and read the prospectus for each of the funds in which
I am investing. I understand that the prospectus terms are incorporated
into this New Account Form by reference.
I am of legal age in my state and have the authority and legal capacity
to purchase mutual fund shares.
- - I understand that the shares of the Funds are not deposits or
obligations of the Bank, are not endorsed or guaranteed by the Bank, and are
not insured by the Federal Deposit Insurance Corporation ("FDIC"), the
Federal Reserve Board or any other governmental agency.
Investments in shares of the Funds involve investment risks, including
the possible loss of principal.
- - I understand that the investment is subject to risk that may cause the
value of the investment to fluctuate. When the investment is sold, the
value may be greater or less than the amount originally paid by the
shareholder.
- - I CERTIFY, UNDER PENALTIES OF PERJURY, THAT:
1) The Social Security or Taxpayer Identification Number shown on this
form is correct. (If I fail to give the correct number or to sign this
form, (Bank name) may reject, restrict, or redeem my investment. I may also
be subject to any applicable IRS Backup Withholding on all distributions and
redemptions.)
2) / / I am NOT currently subject to IRS Backup Withholding because:
(a) I have not been notified of it, or (b) notification has been
revoked.
/ / I am currently subject to IRS Backup Withholding.
- - I agree that neither (the Bank), Federal Shareholder Services Company,
Federated Securities Corp., Edgewood Services, Inc., the Funds, nor any of
their affiliates will be responsible for the authenticity of any
instructions given and shall be fully indemnified as to, and held harmless
from , any and all direct and indirect liabilities, losses, or costs
resulting from acting upon such instructions.
_____________________________________________________________________
Shareowners, Custodian, Trustee or Authorized officer Date
_____________________________________________________________________
Co-Shareowner signature, Trustee or Authorized officer Date
BATTERY PARK FUNDS CHANGE OF DIVIDEND OR
CAPITAL GAINS OPTION
(PLEASE PRINT)
Please change my dividend or capital gains option as follows:
____________________ _______________ ________________________
FUND NAME: ACCOUNT NUMBER: DIVIDENDS CAPITAL GAINS
Reinvest Cash Reinvest Cash
____________________ _______________ / / / / / / / /
____________________ _______________ / / / / / / / /
____________________ _______________ / / / / / / / /
________________________
NOTE: Normally, a check is mailed
to the address of record. If you
want payments deposited to your bank
account instead, check this box / /
and complete Bank Account
Information.
No person has been authorized to give any
information or to make any representations, other
than those contained in this Prospectus, in
connection with the offer contained in this
Prospectus and, if given or made, such other
information or representation must not be relied
upon as having been authorized by the Fund, the
Investment Adviser or Distributor. This Prospectus
does not constitute an offering in any state in which
such offering may not lawfully be made.
BATTERY PARK(SERVICE MARK)
HIGH YIELD FUND
------------
BATTERY PARK(SERVICE MARK)
HIGH YIELD FUND
Investment NOMURA CORPORATE RESEARCH
Adviser AND ASSET MANAGEMENT INC.
2 World Financial Center
Building B, 25th Floor
New York, NY 10281-1198
Distributor NOMURA SECURITIES INTERNATIONAL, INC.
2 World Financial Center
Building B, 25th Floor
New York, NY 10281-1198
Transfer Agent FEDERATED SHAREHOLDER
SERVICES COMPANY
Federated Investors Tower
Pittsburgh, PA 15222-3775
Custodian The Bank of New York
48 Wall Street
New York, NY 10286
Independent
Auditors
Counsel BROWN & WOOD LLP
One World Trade Center
New York, NY 10048-0557
PROSPECTUS
October __, 1996
This prospectus should be retained
for future reference.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed
with the Securities and Exchange Commission. These securities may not
be sold nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This statement of additional information
shall not constitute an offer to sell or the solicitation of an offer to
buy nor shall there be any sale of these securities in any State in which
such offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION DATED SEPTEMBER 20
, 1996
STATEMENT OF ADDITIONAL INFORMATION
- -----------------------------------
BATTERY PARK(SERVICE MARK) HIGH YIELD FUND
2 WORLD FINANCIAL CENTER, NEW YORK, NEW YORK 10281-1198, (212) 667 - 9300
Battery Park(Service Mark) High Yield Fund (the "Fund") is the only
existing series of Battery Park Funds, Inc., a newly organized, diversified,
open-end series-type investment company. The Fund's investment objective is
to provide shareholders with high total return, consisting of current income
and capital appreciation. The Fund attempts to achieve its objective by
investing principally in fixed income securities of U.S. companies which are
rated in the lower rating categories of the established rating services or
are unrated securities of comparable quality. No assurance can be
given that the Fund's investment objective will be realized.
The Fund offers two classes of shares with different fees and other
features. Shares may be purchased from securities dealers which have
entered into selected dealer agreements with Nomura Securities
International, Inc. (the "Distributor"). The minimum initial purchase for
Class A shares is $1,000 and the minimum subsequent purchase is $100. The
minimum initial purchase for Class Y shares is $1,000,000.
___________________
This Statement of Additional Information of the Fund is not a prospectus
and should be read in conjunction with the prospectus of the Fund, dated
October __, 1996 (the "Prospectus"), which has been filed with the
Securities and Exchange Commission (the "SEC") and can be obtained, without
charge, by writing the Transfer Agent at Federated Shareholder Services
Company, Federated Investors Tower, Pittsburgh, PA 15222-3775, or by calling
1-800-245-5000. This Statement of Additional Information has been
incorporated by reference into the Prospectus.
_____________________
NOMURA CORPORATE RESEARCH AND ASSET MANAGEMENT INC.--INVESTMENT ADVISER
NOMURA SECURITIES INTERNATIONAL, INC.--DISTRIBUTOR
_____________________
The date of this Statement of Additional Information is October __, 1996.
</R.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
Reference is made to "Investment Objective and Policies" in the
Prospectus for a discussion of the investment objective and policies of the
Fund.
The Fund's investment objective is to provide shareholders with high
total return, consisting of current income and capital appreciation. The
Fund attempts to achieve its objective by investing principally in fixed
income securities of U.S. companies which securities are rated in the lower
rating categories of the established rating services or are unrated
securities of comparable quality. Under normal circumstances, the Fund will
invest at least 80% of the Fund's total assets in fixed income securities
rated Ba1 or lower by Moody's Investors Service, Inc. ("Moody's") or BB+ or
lower by Standard & Poor's Ratings Group ("S&P"). The Fund is authorized
to, but does not currently intend to, engage in various portfolio strategies
to enhance income and to hedge its portfolio against investment and interest
rate risks, including the utilization of leverage and the use of options and
futures. See "Risk Factors and Special Considerations" in the Prospectus
for a discussion of these risks.
Investment in Foreign and Emerging Markets. Investment in the
securities of foreign markets involve certain risk factors and special
considerations in addition to those discussed under "Investment Objective
and Policies--Risk Factors and Special Considerations-- Foreign and Emerging
Market Securities" in the Fund's Prospectus, and these risks are often
amplified in connection with investments in emerging markets. Certain
emerging market countries require prior governmental approval of foreign
investors, limit the amount of investment by foreign investors in a
particular issuer, limit the investment by foreign investors only to a
specified class of securities that may have less advantageous rights than
other classes, restrict investment opportunities in issuers in industries
deemed important to national interests and/or impose additional taxes on
foreign investors. It may be difficult to find qualified subcustodians in
emerging market countries with extensive operating experience, and the Fund
may be more limited in its ability to recover assets in the event of a
subcustodian's bankruptcy than it would be in more developed countries.
Investing in local markets in emerging market countries may require the Fund
to adopt special procedures, seek local government approvals or take other
actions, each of which may involve additional costs to the Fund.
See "Investment Objective and Policies-Investment in Foreign and Emerging
Markets" in the Prospectus for additional information regarding foreign and
emerging market securities.
The securities markets of emerging market countries are not as large as
the U.S. securities markets and have substantially less trading volume,
resulting in a lack of liquidity with high price volatility. Certain
markets are in only the earliest stages of development. There is also a
high concentration of market capitalization and trading volume in a small
number of issuers representing a limited number of industries, as well as a
high concentration of investors and financial intermediaries. Many of such
markets also may be affected by developments with respect to more
established markets in the region. Brokers in emerging market countries
typically are fewer in number and less capitalized than brokers in the
United States. These factors, combined with the U.S. regulatory
requirements for open-end investment companies and the restrictions on
foreign investment discussed
2
<PAGE>
in the Prospectus, may result in potentially fewer investment opportunities
for the Fund and may have an adverse effect on the investment performance of
the Fund.
Rule 144A Securities. In promulgating Rule 144A under the Securities
Act, the Securities and Exchange Commission (the "SEC") stated that the
ultimate responsibility for liquidity determinations rests with a fund's
board of directors; however, the board may delegate the day-to-day function
of determining liquidity to the investment adviser provided the board
retains sufficient oversight. The Board of Directors of the Fund has
adopted policies and procedures for the purpose of determining whether
securities that are eligible for resale under Rule 144A are liquid or
illiquid and has approved guidelines under these policies and procedures
pursuant to which the Investment Adviser makes these determinations on an
ongoing basis. In making these determinations, consideration is given to,
among other things, the frequency of trades and quotes for the security, the
number of dealers willing to sell the security and the number of potential
purchasers, dealer undertakings to make a market in the security, the nature
of the security and the time needed to dispose of the security. The Board
of Directors periodically reviews Fund purchases and sales of Rule 144A
securities.
To the extent that liquid Rule 144A securities become illiquid, due to
the lack of sufficient qualified institutional buyers or market or other
conditions, the percentage of the Fund's assets invested in illiquid assets
would increase. The Investment Adviser, under the supervision of the Board
of Directors, will monitor Fund investments in Rule 144A securities and will
consider appropriate measures to enable the Fund to maintain sufficient
liquidity for operating purposes and to meet redemption requests.
INVESTMENT RESTRICTIONS
In addition to the investment restrictions set forth in the Prospectus,
the Fund has adopted both fundamental and nonfundamental restrictions and
policies relating to the investment of its assets and its activities.
Fundamental restrictions and policies may not be changed without the
approval of the holders of a majority of the Fund's outstanding voting
securities (which for this purpose and under the Investment Company Act of
1940, as amended (the "Investment Company Act") means the lesser of (a) 67%
of the shares represented at a meeting at which more than 50% of the
outstanding shares are represented or (b) more than 50% of the outstanding
shares). Under these fundamental restrictions, the Fund may not:
1. Invest more than 25% of its assets, taken at market value, in
the securities of issuers in any particular industry (excluding the U.S.
Government and its agencies and instrumentalities). The electric,
telecommunications and oil and gas industries are deemed to be separate
industries for purposes of this restriction.
2. Make investments for the purpose of exercising control or
management.
3. Purchase or sell real estate, except that, to the extent
permitted by applicable law, the Fund may invest in securities directly or
indirectly secured by real
3
<PAGE>
estate or interests therein or issued by companies which invest in real
estate or interests therein.
4. Make loans to other persons, except that the acquisition of
bonds, debentures or other corporate debt securities and investment in
government obligations, commercial paper, pass-through instruments,
certificates of deposit, bankers acceptances, repurchase agreements or any
similar instruments shall not be deemed to be the making of a loan, and
except further that the Fund may lend its portfolio securities, provided
that the lending of portfolio securities may be made only in accordance with
applicable law and the guidelines set forth in the Fund's Prospectus and
Statement of Additional Information, as they may be amended from time to
time, provided that purchases of assignments or participations in loans
(including bridge loans) will not be prohibited by this paragraph.
5. Issue senior securities to the extent such issuance would
violate applicable law.
6. Borrow money, except that (i) the Fund may borrow from banks
(as defined in the Investment Company Act) in amounts up to 331/3% of its
total assets (including the amount borrowed), (ii) the Fund may borrow up to
an additional 5% of its total assets for temporary purposes, (iii) the Fund
may obtain such short-term credit as may be necessary for the clearance of
purchases and sales of portfolio securities and (iv) the Fund may purchase
securities on margin to the extent permitted by applicable law. The Fund
may not pledge its assets other than to secure such borrowings or, to the
extent permitted by the Fund's investment policies as set forth in its
Prospectus and Statement of Additional Information, as they may be amended
from time to time, in connection with hedging transactions, short sales,
when-issued and forward commitment transactions and similar investment
strategies.
7. Underwrite securities of other issuers except insofar as the
Fund technically may be deemed an underwriter under the Securities Act of
1933, as amended (the "Securities Act"), in selling portfolio securities.
8. Purchase or sell commodities or contracts on commodities,
except to the extent that the Fund may do so in accordance with applicable
law and the Fund's Prospectus and Statement of Additional Information, as
they may be amended from time to time, and without registering as a
commodity pool operator under the Commodity Exchange Act.
9. Make any investment inconsistent with the Fund's
classification as a diversified investment company under the Investment
Company Act.
Nonfundamental restrictions may be amended by a majority vote of the
Board of Directors of the Fund. Under the non-fundamental investment
restrictions, the Fund may not:
4
<PAGE>
a. Purchase securities of other investment companies, except to
the extent such
purchases are permitted by applicable law.
b. Make short sales of securities or maintain a short position,
except to the extent
permitted by
applicable law. The Fund currently does not intend to engage in short
sales.
c. Invest in securities which cannot be readily resold because of
legal or
contractual restrictions or which cannot otherwise be marketed, redeemed or
put to the issuer or a third party, if at the time of acquisition more than
15% of its net assets would be invested in such securities. This restriction
shall not apply to securities which mature within seven days or securities
which the Board of Directors of the Fund has otherwise determined to be
liquid pursuant to applicable law. Notwithstanding the 15% limitation
herein, to the extent the laws of any state in which the Fund's shares are
registered or qualified for sale require a lower limitation, the Fund will
observe such limitation. As of the date hereof, therefore, the Fund will not
invest more than 10% of its net assets in securities which are subject to
this investment restriction (c). Securities purchased in accordance with
Rule 144A under the Securities Act and determined to be liquid by the Fund's
Board of Directors are not subject to the limitations set forth in this
investment restriction (c).
d. Invest in warrants if, at the time of acquisition, its
investments in warrants, valued at the lower of cost or market value, would
exceed 5% of the Fund's net assets; included within such limitation, but not
to exceed 2% of the Fund's net assets, are warrants which are not listed on
the New York Stock Exchange or American Stock Exchange or a major foreign
exchange. For purposes of this restriction, warrants acquired by the Fund
in units or attached to securities may be deemed to be without value.
e. Invest in securities of companies having a record, together
with predecessors, of less than three years of continuous operation, if more
than 5% of the Fund's total assets would be invested in such securities.
This restriction shall not apply to mortgage-backed securities, asset-backed
securities or obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
f. Purchase or retain the securities of any issuer, if those
individual officers and directors of the Fund or the officers and directors
of the Investment Adviser or the officers and directors of any subsidiary
thereof each owning beneficially more than 1/2 of 1% of the securities of
such issuer own in the aggregate more than 5% of the securities of such
issuer.
g. Invest in real estate limited partnership interests or
interests in oil, gas or other mineral leases, or exploration or development
programs, except that the Fund may invest in securities issued by companies
that engage in oil, gas or other mineral exploration or development activities.
5
<PAGE>
h. Write, purchase or sell puts, calls, straddles, spreads or
combinations thereof, except to the extent permitted in the Fund's
Prospectus and Statement of Additional Information, as they may be amended
from time to time.
Portfolio securities of the Fund generally may not be purchased from,
sold or loaned to the Investment Adviser or its affiliates or any of their
directors, officers or employees, acting as principal, unless pursuant to a
rule or exemptive order under the Investment Company Act.
Because of the affiliation of the Investment Adviser with the Fund and
the Distributor, the Fund is prohibited from engaging in portfolio
transactions with the Distributor or its affiliates acting as principal and
from purchasing securities in public offerings which are not registered
under the Securities Act in which the Distributor or any of its affiliates
participate as an underwriter or dealer. See "Portfolio Transactions."
MANAGEMENT OF THE FUND
DIRECTORS AND OFFICERS
The Directors and executive officers of the Fund, their dates of birth
and their principal occupations for at least the last five years are set
forth below. Unless otherwise noted, the address of each executive officer
and Director is 2 World Financial Center, New York, New York 10281-1198.
ROBERT LEVINE*(September 19, 1944)--Chairman, President, Director and
Chief Investment Officer--Founder, President and Chief Executive Officer of
the Investment Adviser and an Executive Managing Director of Nomura Holding
America Inc .
MICHAEL A. BERMAN*(October 4, 1950)--Director--Chairman and Chief
Executive Officer of the Distributor since 1996; President and Chief
Operating Officer of the Distributor from 1994 to 1996; Senior Vice President
of the Distributor prior to 1994.
JOHN FITTING, JR.(May 29,1916)--Director--Former Chairman and Chief
Executive Officer of National Securities & Research, Inc.; Former President
of Dreyfus Asset Management, Individual Investors Accounts.
FRANCIS L. FRAENKEL(July 3, 1932)--Director--President of Delta Capital
Management Inc. from 1992 to present; Managing Director of Salomon Brothers
Inc and President of Salomon Brothers Asset Management Inc prior to 1992.
FRANK K. REILLY(December 30, 1935)--Director--Bernard J. Hank Professor
of Business Administration, University of Notre Dame College of Business
Administration.
RICHARD A. BUCH* (February 18, 1959)--Vice President and Portfolio
Manager--Managing Director of the Investment Adviser from 1993 to present;
portfolio manager for Kidder, Peabody & Co., Inc. prior to 1993.
6
<PAGE>
LANCE B. FRASER*(December 2, 1960)--Treasurer--Director of the Investment
Adviser.
DEBORAH A. MONTICK* (December 10, 1957)--Secretary--Counsel to the
Investment Adviser from 1993 to present; Associate Counsel to Kemper
Financial Services, Inc. prior to 1993.
(C. CHRISTINE THOMSON* (September 1, 1957)--Assistant Treasurer--
Biography to be provided)
(GAIL CAGNEY* (October 26, 1953)--Assistant Secretary--Biography to be
provided)
____________________________
* Interested person, as defined in the Investment Company Act, of the Fund.
Compensation of Directors. Pursuant to the terms of the Fund's
investment advisory agreement with the Investment Adviser relating to the
Fund (the "Investment Advisory Agreement"), the Investment Adviser pays all
compensation of officers and employees of the Fund as well as the fees of
all Directors of the Fund who are affiliated persons of the Distributor or
its subsidiaries. Each unaffiliated Director is paid $________ by the Fund
plus actual out-of-pocket expenses for each meeting of the Board of
Directors which he attends. The Fund also compensates each member of the
Audit Committee, which consists of the unaffiliated Directors. It is
anticipated that each unaffiliated Director will receive aggregate
compensation of approximately $________ from the Fund during its first
fiscal year. As of the date of this Statement of Additional Information,
none of the unaffiliated Directors serves on the board of another registered
investment company that (a) holds itself out to the public as related to the
Fund for purposes of investment or investor services or (b) has as its
investment adviser the Investment Adviser or one of its affiliates.
MANAGEMENT AND ADVISORY ARRANGEMENTS
Reference is made to "Management of the Fund - Management and Advisory
Arrangements" in the Prospectus for certain information concerning the
management and advisory arrangements of the Fund.
The Investment Advisory Agreement provides that, subject to the
direction of the Board of Directors of the Fund, the Investment Adviser is
responsible for the actual management of the Fund and for the review of the
Fund's holdings in light of its own research analysis and analyses from
other relevant sources. The responsibility for making decisions to buy,
sell or hold a particular security rests with the Investment Adviser,
subject to review by the Board of Directors. The Investment Adviser
supplies the portfolio managers for the Fund, who consider analyses from
various sources, make the necessary investment decisions and place
transactions accordingly. The Investment Adviser also is obligated to
perform certain administrative and management services for the Fund and is
required to provide all the office space, facilities, equipment and
personnel necessary to perform its
7
<PAGE>
duties under the Investment Advisory Agreement. As compensation for its
services to the Fund, the Investment Adviser will receive from the Fund a
monthly fee based on the average daily value of the Fund's net assets at an
annual rate of 0.65%.
Securities held by the Fund also may be held by or be appropriate
investments for other funds for which the Investment Adviser or its
affiliates act as adviser or by investment advisory clients of the
Investment Adviser. Because of different investment objectives or other
factors, a particular security may be bought for one or more clients when
one or more clients are selling the same security. If purchases or sales of
securities for the Fund or other funds for which the Investment Adviser or
its affiliates act as investment adviser or for their advisory clients arise
for consideration at or about the same time, transactions in such securities
will be made, insofar as feasible, for the respective funds and clients in a
manner deemed equitable to all. To the extent that transactions on behalf
of more than one client of the Investment Adviser or its affiliates during
the same period may increase the demand for securities being
purchased or the supply of securities being sold, there may be an adverse
effect on price.
The State of California imposes limitations on the expenses of the Fund.
At the date of this Statement of Additional Information, the limitations
require that the Investment Adviser reimburse the Fund in an amount
necessary to prevent the aggregate ordinary operating expenses of the Fund
(excluding interest, taxes, brokerage fees and commissions and extraordinary
charges such as litigation costs) from exceeding in any fiscal year 2.5% of
the Fund's first $30 million of average daily net assets, 2.0% of the next
$70 million of average daily net assets and 1.5% of the remaining average
daily net assets. No fee payment will be made to the Investment Adviser
during any fiscal year which will cause such expenses to exceed the pro rata
expense limitation at the time of such payment.
The Investment Advisory Agreement obligates the Investment Adviser to
provide investment advisory services and to pay all compensation of and
furnish office space for officers and employees of the Fund connected with
investment and economic research, trading and investment management of the
Fund, as well as the fees of all Directors of the Fund who are affiliated
persons of the Investment Adviser or the Distributor or any of their
subsidiaries. The Fund pays all other expenses incurred in its operation,
including redemption expenses, expenses of portfolio transactions,
shareholder servicing costs, expenses of registering the shares under
Federal and state securities laws, pricing costs (including the daily
calculation of net asset value), interest, certain taxes, charges of the
Custodian and Transfer Agent, directors' fees, legal expenses, state
franchise taxes, auditing services, costs of printing proxies, stock
certificates, shareholder reports and prospectuses (except to the extent
paid by the Distributor), SEC fees, accounting costs and other expenses
properly payable by the Fund. To the extent accounting services are
provided for the Fund by the Investment Adviser, the Fund will reimburse the
Investment Adviser for its costs in connection with such services. As
required by the Distribution Agreement, the Distributor will pay certain of
the expenses of the Fund incurred in connection with the offering of shares
of the Fund, including the expenses of printing the prospectuses and
statements of additional information used in connection with the continuous
offering of shares by the Fund.
Duration and Termination. Unless earlier terminated as described below,
the Investment Advisory Agreement for the Fund will remain in effect until
______, 1998 and thereafter from year
8
<PAGE>
to year if approved annually (a) by the Board of Directors of the Fund or by
a majority of the outstanding shares of the Fund and (b) by a majority of
the Directors who are not parties to such contract or interested persons
(as defined in the Investment Company Act) of any such party. Such contract
is not assignable and may be terminated without penalty on 60 days' written
notice by the majority vote of the Directors or of the outstanding voting
securities of the Fund or on 120 days' written notice by the Investment Adviser.
9
<PAGE>
PURCHASE OF SHARES
Reference is made to "Purchase of Shares" and "Redemption of Shares"
in the Prospectus for certain information as to the purchase of shares of
the Fund.
The term "purchase," as used in the Prospectus and this Statement of
Additional Information in connection with an investment in Class A and Class
Y shares of the Fund, refers to a single purchase by an individual or to
concurrent purchases, which in the aggregate are at least equal to the
prescribed amounts, by an individual, his or her spouse and their children
under the age of 21 years purchasing shares for his or her own account and
to single purchases by a trustee or other fiduciary purchasing shares for a
single trust estate or single fiduciary account although more than one
beneficiary is involved. The term "purchase" also includes purchases by any
"company," as that term is defined in the Investment Company Act, but does
not include purchases by any such company which has not been in existence
for at least six months or which has no purpose other than the purchase of
shares of the Fund or shares of other registered investment companies at a
discount; provided, however, that it shall not include purchases by any
group of individuals whose sole organizational nexus is that the
participants therein are credit cardholders of a company, policyholders of
an insurance company, customers of either a bank or broker-dealer or clients
of an investment adviser.
REDUCED INITIAL SALES CHARGES
Letter of Intention. Reduced sales charges are applicable to purchases
aggregating $50,000 or more of the Class A shares of the Fund made within a
13-month period starting with the first purchase pursuant to the Letter of
Intention in the form provided in the Prospectus. The Letter of Intention
is available only to investors whose accounts are maintained at the Fund's
Transfer Agent. The Letter of Intention is not a binding obligation to
purchase any amount of Class A shares; however, its execution will result in
the purchaser paying a lower sales charge at the appropriate quantity
purchase level. A purchase not originally made pursuant to a Letter of
Intention may be included under a subsequent Letter of Intention executed
within 90 days of such purchase if the Transfer Agent is informed in writing
of this intent within such 90-day period. The value of Class A shares of
the Fund may be included as a credit toward the completion of such Letter,
but the reduced sales charge applicable to the amount covered by such Letter
will be applied only to new purchases. If the total amount of shares does
not equal the amount stated in the Letter of Intention (minimum of $50,000),
the investor will be notified and must pay, within 20 days of the
expiration of such Letter, the difference between the sales charge on the
Class A shares purchased at the reduced rate and the sales charge applicable
to the shares actually purchased through the Letter. Class A shares equal
to at least five percent of the intended amount will be held in escrow
during the 13-month period (while remaining registered in the name of the
purchaser) for this purpose. The first purchase under the Letter of
Intention must be at least five percent on the dollar amount of such Letter.
The value of any shares redeemed or otherwise disposed of by the purchaser
prior to termination or completion of the Letter of Intention will be
deducted from the total purchases made under such Letter.
Acquisition of Certain Investment Companies. The public offering price
of Class A shares may be reduced to the net asset value per Class A share in
connection with the acquisition of the
10
<PAGE>
assets of or merger or consolidation with a personal holding company or a
public or private investment company. The issuance of Class A shares for
consideration other than cash is limited to bona fide reorganizations,
statutory mergers or other acquisitions of portfolio securities which (i)
meet the investment objective and policies of the Fund; (ii) are acquired
for investment and not for resale (subject to the understanding that the
disposition of the Fund's portfolio securities shall at all times remain
within its control); and (iii) are liquid securities, the value of which is
readily ascertainable, which are not restricted as to transfer either by law
or liquidity of market (except that the Fund may acquire through such
transactions restricted or illiquid securities to the extent the Fund does
not exceed the applicable limits on acquisition of such securities set forth
under "Investment Objective and Policies" herein).
Reductions in or exemptions from the imposition of a sales load are due
to the nature of the investors and/or the reduced sales efforts that will be
needed in obtaining such investments. Under such programs, the Fund
realizes economies of scale and reduction of sales related expenses by
virtue of familiarity with the Fund.
DISTRIBUTION PLAN
Reference is made to "Purchase of Shares--Class A Shares--Class A
Distribution Plan" in the Prospectus for certain information with respect to
the distribution plan for Class A shares pursuant to Rule 12b-1 under the
Investment Company Act (the "Distribution Plan") with respect to the
distribution fees paid by the Fund to the Distributor with respect to such
class.
Payments of the distribution fees are subject to the provisions of Rule
12b-1 under the Investment Company Act. Among other things, the
Distribution Plan provides that the Distributor shall provide and the
Directors shall review quarterly reports of the disbursement of the
distribution fees paid to the Distributor. In their consideration of the
Distribution Plan, the Directors must consider all factors they deem
relevant, including information as to the benefits of the Distribution Plan
to the Fund and its shareholders. The Distribution Plan further provides
that so long as the Distribution Plan remains in effect, the selection and
nomination of Directors who are not "interested persons" of the Fund, as
defined in the Investment Company Act (the "Independent Directors"), shall
be committed to the discretion of the Independent Directors then in office.
In approving the Distribution Plan in accordance with Rule 12b-1, the
Independent Directors concluded that there is a reasonable likelihood that
such Distribution Plan will benefit the Fund and its related class of
shareholders. The Distribution Plan can be terminated at any time, without
penalty, by the vote of a majority of the Independent Directors, or the vote
of the holders of a majority of the outstanding related class of voting
securities of the Fund or by the Distributor upon 60 days' written notice to
the Fund. The Distribution Plan cannot be amended to increase materially
the amount to be spent by the Fund without the approval of the related class
of shareholders, and all material amendments are required to be approved by
the vote of Directors, including a majority of the Independent Directors who
have no direct or indirect financial interest in such Distribution Plan,
cast in person at a meeting called for that purpose. Rule 12b-1 further
requires that the Fund preserve copies of the Distribution Plan and any
reports made pursuant to the plan for a period of not less than six years
from the date of such Distribution Plan or such report, the first two years
in an easily accessible place.
11
<PAGE>
REDEMPTION OF SHARES
Reference is made to "Redemption of Shares" in the Prospectus for certain
information as to the redemption and repurchase of shares of the Fund.
The right to redeem shares or to receive payment with respect to any
such redemption may be suspended only for any period during which trading on
the New York Stock Exchange is restricted as determined by the SEC or such
Exchange is closed (other than customary weekend and holiday closings), for
any period during which an emergency exists as defined by the SEC as a
result of which disposal of portfolio securities or determination of the net
asset value of any Fund is not reasonably practicable, and for such other
periods as the SEC may by order permit for the protection of shareholders
of the Fund.
PORTFOLIO TRANSACTIONS
Reference is made to "Portfolio Transactions" in the Prospectus.
Subject to policies established by the Board of Directors of the Fund, the
Investment Adviser is primarily responsible for the portfolio decisions of
the Fund and the placing of the portfolio transactions for the Fund. With
respect to such transactions, the Investment Adviser seeks to obtain the
best net results for the Fund, taking into account such factors as price
(including the applicable brokerage commission or dealer spread), size of
order, difficulty of execution and operational facilities of the firm
involved and the firm's risk in positioning a block of securities. While
the Investment Adviser generally seeks reasonably competitive commission
rates, the Fund will not necessarily be paying the lowest commission or
spread available. Transactions with respect to the high yield securities in
which the Fund invests may involve specialized services on the part of the
broker or dealer and thereby entail higher commissions or spreads than would
be the case with transactions involving more widely traded securities. The
Fund has no obligation to deal with any broker in the execution of
transactions for its portfolio securities.
The securities in which the Fund invests are traded primarily in the
over-the-counter market. Transactions in the over-the-counter market
generally are principal transactions with dealers and the costs of such
transactions involve dealer spreads. With respect to over-the- counter
transactions, the Fund, 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. Such dealers
usually act as principals for their own account. On occasion, securities
may be purchased directly from the issuer. Bonds and money market
securities are generally traded on a net basis and do not normally involve
either brokerage commissions or transfer taxes. The cost of portfolio
securities transactions of the Fund will consist primarily of dealer or
underwriter spreads.
Under the Investment Company Act, persons affiliated with the Fund are
prohibited from dealing with the Fund as a principal in the purchase and
sale of securities unless an exemptive order allowing such transactions is
obtained from the SEC. Since transactions in the over- the-counter market
usually involve transactions with dealers acting as principal for their own
account, affiliated persons of the Fund, including the Distributor,
may not serve as the Fund's dealer in connection with such transactions.
See "Investment Objective and Policies - Investment Restrictions." However,
12
<PAGE>
with certain limitations, an affiliated person of the Fund may serve as its
broker in over-the-counter transactions conducted on an agency basis.
The Board of Directors of the Fund has considered the possibilities of
seeking to recapture for the benefit of the Fund brokerage commissions,
dealer spreads and other expenses of possible portfolio transactions, such
as underwriting commissions and tender offer solicitation fees, by
conducting such portfolio transactions through affiliated entities,
including the Distributor. For example, brokerage commissions received by
the Distributor could be offset against the advisory fee payable by the Fund
to the Investment Adviser. The Board will reconsider this matter from time
to time. The Investment Adviser has arranged for the Fund's custodian to
receive any tender offer solicitation fees on behalf of the Fund payable with
respect to portfolio securities of the Fund.
PORTFOLIO TURNOVER
The Fund intends to comply with the various requirements of the Code so
as to qualify as a "regulated investment company" thereunder. See "Taxes."
Among such requirements is a limitation to less than 30% on the amount of
gross income which the Fund may derive from gain on the sale or other
disposition of securities held for less than three months. Accordingly, the
Fund's ability to effect certain portfolio transactions may be limited.
DETERMINATION OF NET ASSET VALUE
Reference is made to "Additional Information - Determination of Net
Asset Value" in the Prospectus concerning the determination of net asset
value. Normally, the net asset value of the shares of the Fund is
determined once daily Monday through Friday as of 4:00 p.m., New York time,
on each day during which the New York Stock Exchange is open for trading.
The New York Stock Exchange is not open on New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The Fund also will determine its net asset value on any day
in which there is sufficient trading in its portfolio securities that the
net asset value might be affected materially, but only if on any such day
the Fund is required to sell or redeem shares. The net asset value per
share of the Fund is computed by dividing the sum of the value of the
securities held by the Fund plus any cash or other assets (including
interest and dividends accrued but not yet received) minus all liabilities
(including accrued expenses) by the total number of shares outstanding at
such time, rounded to the nearest cent. Expenses, including the investment
advisory fees and distribution fees, are accrued daily. The per share net
asset value of the Class A shares of the Fund generally will be lower than
the per share net asset value of the Class Y shares of the Fund reflecting
the daily expense accruals of the distribution or shareholder service fees
applicable with the respect to the Class A shares. It is expected, however,
that the per share net asset value of the two classes will tend to converge
immediately after the payment of dividends or distributions, which will
differ by approximately the amount of the expense accrual differential
between the classes.
13
<PAGE>
Market and fair values of the Fund's portfolio securities are determined
as follows:
for bonds and other fixed income securities, as determined by an
independent pricing service;
for short-term obligations, according to the mean between bid and
asked prices as furnished by an independent pricing service, or for
short-term obligations with remaining maturities of 60 days or less at the
time of purchase, at amortized cost;
for equity securities, according to the last sale price on a national
securities exchange, if applicable;
in the absence of recorded sales for listed equity securities,
according to the mean between the last closing bid and asked prices;
for unlisted equity securities, latest bid prices; or
for all other securities, at fair value as determined in good faith
by the Directors.
Prices provided by independent pricing services may be determined
without relying exclusively on quoted prices and may reflect: institutional
trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics and other market data.
The Fund will value futures contracts at their market value established
by the exchanges at the close of options trading on such exchanges unless
the Directors determine in good faith that another method of valuing option
positions is necessary.
Over-the-counter put options will be valued at the mean between the bid
and asked prices. Covered call options will be valued at the last sale
price on the national exchange on which such option is traded. Unlisted
call options will be valued at the latest bid price as provided by brokers.
Option Accounting Principles. When a Fund sells an option, an amount
equal to the premium received by the Fund is included in the Fund's
Statement of Assets and Liabilities as a deferred credit. The amount of such
liability will be subsequently marked to market to reflect the current
market value of the option written. If current market value exceeds the
premium received there is an unrealized loss; conversely, if the premium
exceeds current market value there is an unrealized gain. If an option
expires on its stipulated expiration date or if a Fund enters into a closing
purchase transaction, the Fund will realize a gain (or loss if the cost of a
closing purchase transaction exceeds the premium received when the option
was sold) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option will be extinguished. If
an option is exercised, the Fund will realize a gain or loss from the sale
of the underlying security and the proceeds of sale are increased by the
premium originally received.
SHAREHOLDER SERVICES
A number of shareholder services and investment plans are available
which are designed to facilitate investment in the Fund's shares. Full
details as to each of such services, copies of the various plans described
below and instructions as to how to participate in the various services or
14
<PAGE>
plans, or how to change options with respect thereto, can be obtained from
the Fund by calling the telephone number on the cover page hereof or from the
Transfer Agent.
AUTOMATIC REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
All dividends and capital gains distributions of the Fund are reinvested
automatically in full and fractional shares of the Fund, at the net asset
value per share next determined on the ex-dividend date of such dividend or
distribution. A shareholder may, at any time, by written notification to
the Transfer Agent, elect to have subsequent dividends or both dividends and
capital gains distributions paid in cash and held in such shareholder's IRA
account rather than reinvested.
SYSTEMATIC REDEMPTION AND AUTOMATIC INVESTMENT PLANS
At age 591/2, a Class A or Class Y shareholder may elect to receive
systematic redemption payments from his or her Investment Account in the
form of payments by check or through automatic payment by direct deposit to
his or her bank account on either a monthly or quarterly basis.
TAXES
The Fund intends to elect and to qualify for the special tax treatment
afforded regulated investment companies ("RICs") under the Code. If it so
qualifies, the Fund (but not its shareholders) will not be subject to
Federal income tax on the part of its net ordinary income and net realized
capital gains which it distributes to Class A and Class Y shareholders
(together, the "shareholders"). The Fund intends to distribute all of such
income.
Dividends paid by the Fund from its ordinary income or from an excess of
net short-term capital gains over net long-term capital losses (together
referred to hereafter as "ordinary income dividends") are taxable to
shareholders as ordinary income. Distributions made from an excess of net
long-term capital gains over net short-term capital losses (including gains
or losses from certain transactions in futures and options) ("capital gain
dividends") are taxable to shareholders as long-term capital gains,
regardless of the length of time the shareholder has owned Fund shares. Any
loss upon the sale or exchange of Fund shares held for one year or less,
however, will be treated as long-term capital loss to the extent of any
capital gain dividends received by the shareholder. Distributions in excess
of the Fund's earnings and profits will first reduce the adjusted tax basis
of a holder's shares and, after such adjusted tax basis is reduced to zero,
will constitute capital gains to such holder (assuming the shares are held
as a capital asset).
Dividends are taxable to shareholders even though they are reinvested in
additional shares of the Fund. Not later than 60 days after the close of
its taxable year, the Fund will provide its shareholders with a written
notice designating the amounts of any ordinary income dividends or capital
gain dividends. Distributions by the Fund, whether from ordinary income or
capital gains, generally will not be eligible for the dividends received
deduction allowed to corporations under the Code. If the Fund pays a
dividend in January which was declared in the previous October, November or
December to shareholders of record on a specified date in one of such
months, then
15
<PAGE>
such dividend will be treated for tax purposes as being paid by
the Fund and received by its shareholders on December 31 of the year in
which such dividend was declared.
Ordinary income dividends paid to shareholders who are nonresident
aliens or foreign entities will be subject to a 30% United States
withholding tax under existing provisions of the Code applicable to foreign
individuals and entities unless a reduced rate of withholding or a
withholding exemption is provided under applicable treaty law. Nonresident
shareholders are urged to consult their own tax advisers concerning the
applicability of the United States withholding tax.
To the extent the Fund invests in securities issued by issuers in
foreign countries, dividends and interest received by the Fund may give rise
to withholding and other taxes imposed by foreign countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes.
Under certain provisions of the Code, some shareholders may be subject
to a 31% withholding tax on ordinary income dividends, capital gain
dividends and redemption payments ("backup withholding"). Generally,
shareholders subject to backup withholding will be those for whom no
certified taxpayer identification number is on file with the Fund or who, to
the Fund's knowledge, have furnished an incorrect number. When establishing
an account, an investor must certify under penalty of perjury that such
number is correct and that such investor is not otherwise subject to backup
withholding.
No gain or loss will be recognized on the conversion of Class A shares
into Class Y shares in the circumstances described in the Prospectus. A
shareholder's basis in the shares acquired will be the same as such
shareholder's basis in the shares converted, and the holding period of the
acquired shares will include the holding period for the converted shares.
If a shareholder exercises an exchange privilege within 90 days of
acquiring such shares, then the loss the shareholder can recognize on the
exchange will be reduced (or the gain increased) to the extent any sales
charge paid to the Fund on the exchanged shares reduces any sales charge the
shareholder would have owed upon the purchase of the new shares in the
absence of the exchange privilege. Instead, such sales charge will be
treated as an amount paid for the new shares.
A loss realized on a sale or exchange of shares of the Fund will be
disallowed if other Fund shares are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61-day period beginning 30
days before and ending 30 days after the date that the shares are disposed
of. In such a case, the basis of the shares acquired will be adjusted to
reflect the disallowed loss.
The Code requires a RIC to pay a nondeductible 4% excise tax to the
extent the RIC does not distribute, during each calendar year, 98% of its
ordinary income, determined on a calendar year basis, and 98% of its capital
gains, determined, in general, on an October 31 year end, plus certain
undistributed amounts from previous years. While the Fund intends to
distribute its income and capital gains in the manner necessary to minimize
imposition of the 4% excise tax, there can be no assurance that sufficient
amounts of the Fund's taxable income and capital gains will be distributed
to avoid entirely the imposition of the tax. In such event, the Fund will
be liable for the tax only on the amount by which it does not meet the
foregoing distribution requirements.
16
<PAGE>
The Fund will invest in securities rated in the lower rating categories
of nationally recognized rating organizations, and in unrated securities
("junk bonds" or "high yield securities"), as described in the Prospectus.
Some of these high yield securities may be purchased at a discount and may
therefore cause the Fund to accrue and distribute income before amounts due
under the obligations are paid. In addition, a portion of the interest
payments on such high yield securities may be treated as dividends for
Federal income tax purposes; in such case, if the issuer of such high yield
securities is a domestic corporation, dividend payments by the Fund will be
eligible for the dividends received deduction to the extent of the deemed
dividend portion of such interest payments.
TAX TREATMENT OF OPTIONS AND FUTURES TRANSACTIONS
The Fund may write, purchase or sell options and futures. Options and
futures contracts that are "Section 1256 contracts" will be "marked to
market" for Federal income tax purposes at the end of each taxable year,
i.e., each such option or futures contract will be treated as sold for its
fair market value on the last day of the taxable year. In general, unless
an election is available to the Fund or an exception applies, options and
futures contracts that are "Section 1256 contracts" will be "marked to
market" for Federal income tax purposes at the end of each taxable year,
i.e., each such option or futures contract will be treated as sold for its
fair market value on the last day of the taxable year, and any gain or loss
attributable to Section 1256 contracts will be 60% long-term and 40%
short-term capital gain or loss. Application of these rules to Section 1256
contracts held by the Fund may alter the timing and character of
distributions to shareholders. The mark- to-market rules outlined above,
however, may not apply to certain transactions entered into by the Fund
solely to reduce the risk of changes in price or interest or currency
exchange rates with respect to its investments.
Code Section 1092, which applies to certain "straddles," may affect the
taxation of the Fund's sales of securities and transactions in options and
futures contracts. Under Section 1092, the Fund may be required to postpone
recognition for tax purposes of losses incurred in certain sales of
securities and certain closing transactions in options and futures contracts.
One of the requirements for qualification as a RIC is that less than 30%
of the Fund's gross income be derived from gains from the sale or other
disposition of securities held for less than three months. Accordingly, the
Fund may be restricted in effecting closing transactions within three months
after entering into an options or futures contract.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations presently in effect. For
the complete provisions, reference should be made to the pertinent Code
sections and the Treasury regulations promulgated thereunder. The Code and
the Treasury regulations are subject to change by legislative, judicial or
administrative action either prospectively or retroactively.
Ordinary income and capital gain dividends may also be subject to state
and local taxes.
17
<PAGE>
Certain states exempt from state income taxation dividends paid by RICs
which are derived from interest on U.S. Government obligations. State law
varies as to whether dividend income attributable to U.S. Government
obligations is exempt from state income tax.
Shareholders are urged to consult their own tax advisers regarding
specific questions as to Federal, foreign, state or local taxes. Foreign
investors should consider applicable foreign taxes in their evaluation of an
investment in the Fund.
PERFORMANCE DATA
From time to time the Fund may include its average total return and
other total return data, as well as yield, in advertisements or information
furnished to present or prospective shareholders. Total return and yield
figures will be based on the Fund's historical performance and are not
intended to indicate future performance. Average annual total return and
yield are determined separately for Class A and Class Y shares of the Fund
in accordance with formulae specified by the SEC.
Average annual total return quotations for the Fund for the specified
periods will be computed by finding the average annual compounded rates of
return (based on net investment income and any realized and unrealized
capital gains or losses on portfolio investments over such periods) that
would equate the initial amount invested to the redeemable value of such
investment at the end of each period. Average annual total return will be
computed assuming all dividends and distributions are reinvested and taking
into account all applicable recurring and nonrecurring expenses, including
the maximum sales charge in the case of Class A shares.
The Fund also may quote total return and aggregate total return
performance data for various specified time periods. Such data will be
computed as described above, except that (1) the rates of return calculated
will not be average annual rates, but rather, actual annual, annualized or
aggregate rates of return and (2) the maximum applicable sales charges will
not be included with respect to annual or annualized rates of return
calculations. Aside from the impact on the performance data calculations of
including or excluding the maximum applicable sales charges, actual annual
or annualized total return data generally will be lower than average annual
total return data since the average rates of return reflect compounding of
return; aggregate total return data generally will be higher than average
annual total return since the aggregate rates of return reflect compounding
over a longer period of time. The Fund's total return may be expressed
either as a percentage or as a dollar amount in order to illustrate the
effect of such total return on a hypothetical $1,000 investment in a Fund at
the beginning of each specified period.
Yield quotations for the Fund will be computed based on a 30-day period
by dividing (a) the net income based on the yield of each security earned
during the period by (b) the average daily number of shares outstanding in
the Fund during the period that were entitled to receive dividends
multiplied by the maximum offering price/net asset value per share of the
Fund on the last day of the period.
Total return figures and yield figures are based on the Fund's
historical performance and are not intended to indicate future performance.
The Fund's total return will vary depending on market
18
<PAGE>
conditions, the securities comprising the Fund's holdings, operating expenses
and the amount of realized and unrealized net capital gains or losses during
the period. The value of an investment in the Fund will fluctuate and an
investor's shares, when redeemed, may be worth more or less than their
original cost.
On occasion, the Fund may compare its performance to that of the Merrill
Lynch High Yield Master Index, the Standard & Poor's 500 Composite Stock
Price Index, the Dow Jones Industrial Average, or performance data published
by Lipper Analytical Services, Inc., Morningstar Publications, Inc., Money
Magazine, U.S. News & World Report, Business Week, CDA Investment
Technology, Inc., Forbes Magazine and Fortune Magazine. As with other
performance data, performance comparisons should not be considered
representative of the Fund's relative performance for any future period.
GENERAL INFORMATION
DIVIDENDS AND DISTRIBUTIONS
Reference is made to "Additional Information - Dividends and
Distributions" in the Prospectus.
DESCRIPTION OF SHARES
The Fund is the only existing series of Battery Park Funds, Inc. (the
"Company"), a series-type investment company incorporated under Maryland law
on June 4, 1996. The Company has an authorized capital of 200,000,000
shares of common stock, par value $0.001 per share, of which 50,000,000
shares are initially classified as one series, namely the Fund, consisting
of two classes, designated Class A and Class Y Common Stock, each of which
consists of 25,000,000 shares, and the remainder of 150,000,000 shares are
not classified as to any class or series. Shares of Class A and Class Y
Common Stock represent interests in the same assets of the Fund and are
identical in all respects except that the Class A shares bear certain
expenses related to the distribution associated with such shares. Class A
shareholders each have exclusive voting rights with respect to matters
relating to expenditures made under that class's Rule 12b-1 plan, as
applicable. The Board of Directors of the Company may classify and
reclassify the shares of the Fund into additional classes of Common Stock at
a future date.
Shareholders are entitled to one vote for each share held and fractional
votes for fractional shares held and will vote on the election of Directors
and any other matter submitted to a shareholder vote. The Fund does not
intend to hold meetings of shareholders in any year in which the Investment
Company Act does not require shareholders to act upon election of Directors.
The By-laws of the Company provide that a special meeting of shareholders
may be called for any purpose on the written request of the holders of at
least 10% of the outstanding shares of the Fund. Voting rights for
Directors are not cumulative. Shares issued are fully paid and non-
assessable and have no preemptive or conversion rights. Redemption rights
are discussed elsewhere herein and in the Prospectus. Each share is
entitled to participate equally in dividends and distributions declared by
the Fund and in the net assets of the Fund on liquidation or dissolution
after satisfaction of outstanding liabilities. Stock
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<PAGE>
certificates are issued by the Transfer Agent only on specific request.
Certificates for fractional shares are not issued in any case.
COMPUTATION OF OFFERING PRICE PER SHARE
An illustration of the computation of the initial offering price for
Fund shares, based on the projected value of the Fund's estimated net assets
and projected number of shares outstanding on the date its shares are first
offered for sale to public investors is as follows:
<TABLE>
<CAPTION>
Class A Class Y
------- -------
<S> <C> <C>
Net Assets . . . . . . . . . . . . . . . . . . . . . . . . . . $50,000 $50,000
Number of Shares Outstanding . . . . . . . . . . . . . . . . . 5,000 5,000
Net Asset Value Per Share (net assets divided
by number of shares outstanding) . . . . . . . . . . . . . . $10.00 $10.00
Sales Charge (4.50% on Class A only; 4.71%
of amount invested) . . . . . . . . . . . . . . . . . . . . . $ .47 $ --
Offering Price . . . . . . . . . . . . . . . . . . . . . . . . $10.47 $10.00
</TABLE>
INDEPENDENT AUDITORS
__________________, has been selected as the independent auditors of the
Fund. The selection of independent auditors is subject to ratification by
the shareholders of the Fund. The independent auditors are responsible for
auditing the annual financial statements of the Fund.
CUSTODIAN
The Bank of New York, 48 Wall Street, New York, NY 10286, acts as
Custodian of the Fund's assets. The Custodian is responsible for
safeguarding and controlling the Fund's cash and securities, handling the
receipt and delivery of securities and collecting interest and dividends on
the Fund's investments.
TRANSFER AGENT
Federated Shareholder Services Company, Federated Investors Tower,
Pittsburgh, PA 15222-3775, acts as the Fund's transfer agent. The Transfer
Agent is responsible for the issuance, transfer and redemption of shares and
the opening, maintenance and servicing of shareholder accounts. See
"Management of the Fund - Transfer Agency Services" in the Prospectus.
LEGAL COUNSEL
Brown & Wood LLP, One World Trade Center, New York, NY 10048-0557, is
counsel for the Fund.
20
<PAGE>
REPORTS TO SHAREHOLDERS
The fiscal year of the Fund ends on September 30 of each year. The Fund
will send to its shareholders at least semiannually reports showing the
Fund's portfolio and other information. An annual report, containing
financial statements audited by independent auditors, is sent to
shareholders each year. After the end of each calendar year, shareholders
will receive Federal income tax information regarding dividends and capital
gains distributions.
ADDITIONAL INFORMATION
The Prospectus and this Statement of Additional Information do not
contain all the information set forth in the Registration Statement and the
exhibits relating thereto which the Fund has filed with the SEC, Washington,
D.C., under the Securities Act of 1933 and the Investment Company Act, to
which reference is hereby made.
21
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder,
Battery Park(Service Mark) High Yield Fund of
Battery Park Funds, Inc.
We have audited the accompanying statement of assets and liabilities of
Battery Park(Service Mark) High Yield Fund (the "Fund") of Battery Park
Funds, Inc. as of September __, 1996. This financial statement is the
responsibility of the Fund's management. Our responsibility is to express
an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such statement of assets and liabilities presents
fairly, in all material respects, the financial position of the Fund as of
September __, 1996, in conformity with generally accepted accounting
principles.
(AUDITORS)
October __, 1996
22
<PAGE>
BATTERY Park(Service Mark) HIGH YIELD FUND
OF
BATTERY Park FUNDS, INC.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER __, 1996
<TABLE>
<CAPTION>
<S> <C>
Assets:
Cash in bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Prepaid registration fees (Note 3) . . . . . . . . . . . . . . . . . . . . . . .
Deferred organization expenses (Note 4) . . . . . . . . . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities-accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Assets (equivalent to $_____ per share on
10 shares of Class A common stock (par value $0.001) and 10,000 shares of Class Y
common stock (par value $0.001)
outstanding with 50,000,000 shares
authorized) (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100,100
</TABLE>
_______________________
(1) Battery Park(Service Mark) High Yield Fund (the "Fund") is the only
existing series of Battery Park Funds, Inc. (the "Company") which was
organized as a Maryland corporation on June 4, 1996. The Company is
registered under the Investment Company Act of 1940 as an open-end
investment company. To date, the Fund has not had any transactions other
than those relating to organizational matters and the sale of 10 Class A
shares and 10,000 Class Y shares of common stock to Nomura Corporate
Research and Asset Management Inc. (the "Investment Adviser").
(2) The Fund has entered into an Investment Advisory Agreement (the
"Investment Advisory Agreement") with the Investment Adviser, and a
distribution agreement (the "Distribution Agreement") with Nomura Securities
International, Inc. (the "Distributor"). See "Management and Advisory
Arrangements" in the Statement of Additional Information. Certain officers
and/or directors of the Fund are officers and/or directors of the Investment
Adviser and/or the Distributor.
(3) Prepaid registration fees are charged to income as the related shares
are issued.
(4) Deferred organization expenses will be amortized over a period from
the date the Fund commences operations not exceeding five years. In the
event that the Investment Adviser (or any subsequent holder) redeems any of
its original shares prior to the end of the five-year period, the proceeds
of the redemption payable in respect of such shares shall be reduced by the
pro rata share (based on the proportionate share of the original shares
redeemed to the total number of original shares outstanding at the time of
redemption) of the unamortized deferred organization expenses as of the date
of such redemption. In the event that the Fund is liquidated prior to the
end of the five-year
23
<PAGE>
period, the Investment Adviser (or any subsequent
holder) shall bear the unamortized deferred organization expenses.
24
<PAGE>
TABLE OF CONTENTS Transactions . . . . . . . . . 15
Page Performance Data . . . . . . . . 17
General Information . . . . . . . 18
--- Dividends and Distributions . . 18
Investment Objective and Policies 2 Description of Shares . . . . . 18
Investment Restrictions . . . . 3 Computation of Offering Price
Management of the Fund . . . . . 6 per Share . . . . . . . . . . 18
Directors and Officers . . . . 6 Independent Auditors . . . . . 19
Management and Advisory Custodian . . . . . . . . . . . 19
Arrangements . . . . . . . . . . 7 Transfer Agent . . . . . . . . 19
Purchase of Shares . . . . . . . 8 Legal Counsel . . . . . . . . . 19
Reduced Initial Sales Charges . 8 Reports to Shareholders . . . . 19
Distribution Plan . . . . . . . 9 Additional Information . . . . 20
Redemption of Shares . . . . . . 10 Independent Auditors' Report . . 21
Portfolio Transactions . . . . . 10 Statement of Assets and Liabilities
22
Portfolio Turnover . . . . . . 11
Determination of Net Asset Value 12
Shareholder Services . . . . . . 13
Automatic Reinvestment of
Dividends
and Capital Gains Distributions
13
Systematic Redemption and
Automatic
Investment Plans . . . . . . 13
Taxes . . . . . . . . . . . . . . 14
Tax Treatment of Options and
Futures
BATTERY PARK(SERVICE MARK)
HIGH YIELD FUND
STATEMENT OF ADDITIONAL
INFORMATION
OCTOBER __, 1996
DISTRIBUTOR:
NOMURA SECURITIES INTERNATIONAL,
INC.
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
--------------------
Included in Part B:
Independent Auditors' Report
Statement of Assets and Liabilities as of September __, 1996
(b) Exhibits:
------
1.(a) Articles of Incorporation of the Registrant.
(b) Articles of Amendment to the Articles of Incorporation.
2.(a) By-Laws of the Registrant.(b)
(b) Amended By-Laws of the Registrant.
3. None.
4.(a) Portion of the Articles of Incorporation and By-Laws of the
Registrant defining the rights of shareholders.(a)
(b) Class A Specimen Share Certificate.(c)
(c) Class Y Specimen Share Certificate.(c)
5. Investment Advisory Agreement between the Registrant and Nomura
Corporate Research and Asset Management Inc. (the "Investment
Adviser").(c)
6. Distribution Agreement between the Registrant and Nomura
Securities International, Inc. (the "Distributor").(c)
7. None.
8. Custody Agreement between the Registrant and The Bank of New
York.(c)
9.(a) Transfer Agency, Dividend Disbursing Agency and Shareholder
Servicing Agency Agreement between the Registrant and
Federated Shareholder Services Company (the "Transfer
Agent").(c)
(b) License Agreement between the Registrant and the Investment
Adviser permitting use of the name "Battery Park(Service
Mark)".(c)
10. Opinion of Brown & Wood LLP, counsel to the Registrant.(c)
11. Consent of _____, independent accountants for the Registrant.(c)
12. None.
13. None.
14. None.
15. Class A Shares Distribution Plan pursuant to Rule 12b-1 under
the Investment Company Act of 1940, as amended ("1940 Act").(c)
16. None.
C-1
<PAGE>
17. None.
18. Plan pursuant to Rule 18f-3 under the 1940 Act.(c)
________________________
(a) Reference is made to Articles IV, V, VI, VII and IX of the Registrant's
Articles of Incorporation, filed herewith as Exhibit 1 to this Registration
Statement on Form N-1A and to Articles II, III, VII, XIII and XIV of the
Registrant's By-Laws, filed herewith as Exhibit 2 to this Registration
Statement on Form N-1A.
(b) Previously filed on June 19, 1996 as an exhibit to the Registration
Statement.
(c) To be filed by amendment.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE
REGISTRANT
Prior to the effective date of this Registration Statement, the Fund
will sell 10 Class A shares of its Common Stock and 10,000 Class Y shares of
its Common Stock to the Investment Adviser for an aggregate of $100,100.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
Number of Record
Holders as of
Title of Class September 20, 1996
----------- -----------------
Class A Shares of Common Stock, par value $.001 per share 0
Class Y Shares of Common Stock, par value $.001 per share 0
ITEM 27. INDEMNIFICATION
Reference is made to Article V of the Registrant's Articles of
Incorporation and to Article VI of the Registrant's By-Laws, incorporated by
reference to Exhibits 1 and 2 to this Registration Statement, and to Section
2-418 of the Maryland General Corporation Law.
Insofar as the conditional advancing of indemnification moneys for
actions based on the 1940 Act may be concerned, Article VI of the
Registrant's By-Laws provides that such payments will be made only on the
following conditions: (i) the person seeking indemnification shall provide
to the Registrant a written affirmation of his good faith belief that the
standard of conduct necessary for indemnification by the Registrant has been
met and a written undertaking to repay any such advance, if it ultimately
should be determined that the standard of conduct has not been met, and (ii)
at least one of the following additional conditions is met: (a) the person
seeking indemnification shall provide a security in form and amount
acceptable to the Registrant for his or her undertaking, (b) the Registrant
is insured against losses arising by reason of the advance, or (c) a
majority of a quorum of non-party independent directors, or independent
legal counsel in a written opinion shall determine, based upon a review of
facts readily available to the Registrant at the time the advance is
proposed to be made, that there is reason to believe that the person seeking
indemnification will ultimately be found to be entitled to indemnification.
C-2
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "1933 Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the 1933 Act and therefore is unenforceable. In the
event that a claim for indemnification against such liabilities (other than
for expenses 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, unless the matter has been
settled by controlling precedent in the opinion of its counsel, will submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act
and will be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
The address of the Investment Adviser is 2 World Financial Center,
Building B, New York, New York 10281-1198.
Set forth below is a list of each executive officer and partner of the
Investment Adviser indicating each business, profession, vocation or
employment of a substantial nature in which each such person or entity has
been engaged since August 31, 1994, for his or its own account or in the
capacity of director, officer, partner or trustee.
<TABLE>
<CAPTION> OTHER SUBSTANTIAL BUSINESS, PROFESSION,
NAME POSITION(S) WITH INVESTMENT ADVISER VOCATION OR EMPLOYMENT
---- ----------------------------------- ---------------------------------------
<S> <C> <C>
Robert Levine President and CEO Executive Managing Director,
Nomura Holding America Inc.
Richard A. Buch Managing Director None
Lance B. Fraser Director None
Steven Sorensen Director Director of Institutional Services,
Neuberger & Berman
</TABLE>
Information on the Investment Adviser is incorporated by reference to
the Prospectus included in this Registration Statement.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) The Registrant's principal underwriter, Nomura Securities
International, Inc. (the "Distributor"), also serves as principal underwriter
for Nomura Pacific Basin Fund, Inc.
C-3
<PAGE>
(b) Set forth below is information concerning each director and officer
of the Distributor. The principal business address of each such person is
2 World Financial Center, Building B, New York, New York 10281-1198.
(2) (3)
(1) Position(s) and Office(s) Position(s) and Office(s)
Name with the Distributor with Registrant
---- ------------------------- -------------------------
[to be provided by amendment]
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules thereunder are maintained at the
offices of the Registrant, 2 World Financial Center, Building B, New York,
New York 10281-1198, and its transfer agent, Federated Shareholder Services
Company, Federated Investors Tower, Pittsburg, PA 15222-3775
ITEM 31. MANAGEMENT SERVICES
Other than as set forth under the caption "Management of the Fund--
Management and Advisory Arrangements" in the Prospectus constituting Part A
of the Registration Statement and under "Management of the Fund--Management
and Advisory Arrangements" in the Statement of Additional Information
constituting Part B of the Registration Statement, the Registrant is not a
party to any management-related service contract.
ITEM 32. UNDERTAKINGS
(a) Registrant undertakes to file a post effective amendment using
financial statements, which need not be certified, within four to six months
from the effective date of this registration statement.
(b) Registrant undertakes to furnish each person to whom a Prospectus is
delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
C-4
<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
Pre-Effective Amendment to its 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 20th day of September, 1996.
BATTERY Park(Service Mark) FUNDS, INC.
(Registrant)
By: /s/ ROBERT LEVINE
------------------------------------
(Robert Levine, President)
Pursuant to the requirements of the Securities Act of 1933, this Pre-
Effective Amendment to its Registration Statement has been signed below by
the following person in the capacity and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ROBERT LEVINE President (Principal September 20, 1996
---------------------------------
(Robert Levine) Executive Officer) and
Director
LANCE B. FRASER* Treasurer (Principal
---------------------------------
(Lance B. Fraser) Financial and Accounting
Officer)
*By /s/ ROBERT LEVINE September 20, 1996
---------------------------------
(Robert Levine, Attorney-in-Fact)
</TABLE>
ARTICLES OF INCORPORATION
BATTERY PARK FUNDS, INC.
THE UNDERSIGNED, ROBERT J. BORZONE, JR., whose post office address is
One World Trade Center, New York, New York 10048-0557, being at least
eighteen years of age, does hereby act as an incorporator, under and by
virtue of the General Laws of the State of Maryland authorizing the
formation of corporations and with the intention of forming a corporation.
ARTICLE I
NAME
----
The name of the corporation is BATTERY PARK FUNDS, INC. (the
"Corporation").
ARTICLE II
PURPOSES AND POWERS
-------------------
The purpose or purposes for which the Corporation is formed, the
powers, rights and privileges that the Corporation shall be authorized to
exercise and enjoy, and the business or objects to be transacted, carried
on and promoted by it are as follows:
(1) To conduct and carry on the business of an investment company of
the management type.
(2) To hold, invest and reinvest its assets in securities, and in
connection therewith to hold part or all of its assets in cash.
(3) To issue and sell shares of its own capital stock in such
amounts and on such terms and conditions, for such purposes and for such
amount or kind of consideration now or hereafter permitted by the General
Laws of the State of Maryland and by these Articles of Incorporation, as
its Board of Directors may determine.
(4) To redeem, purchase or otherwise acquire, hold, dispose of,
resell, transfer, reissue or cancel (all without the vote or consent of
the stockholders of the Corporation) shares of its capital stock of any
class or series, as its Board of Directors may determine, in any manner
and to the extent now or hereafter permitted by the General Laws of the
State of Maryland and by these Articles of Incorporation.
(5) To do any and all such further acts or things and to exercise
any and all such further powers or rights as may be necessary, incidental,
relative, conducive, appropriate or desirable for the accomplishment,
carrying out or attainment of all or any of the foregoing purposes or
objects.
The Corporation shall be authorized to exercise and enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations
by the General Laws of the State of Maryland now or hereafter in force,
and the enumeration of the foregoing purposes, powers, rights and
privileges shall not be deemed to exclude any powers, rights or privileges
so granted or conferred.
ARTICLE III
PRINCIPAL OFFICE AND RESIDENT AGENT
-----------------------------------
The post office address of the principal office of the Corporation in
the State of Maryland is c/o The Corporation Trust Incorporated, 32 South
Street, Baltimore, Maryland 21202. The name of the resident agent of the
Corporation in this State is The Corporation Trust Incorporated, a
corporation of this State, and the post office address of the resident
agent is 32 South Street, Baltimore, Maryland 21202.
ARTICLE IV
CAPITAL STOCK
-------------
(1) The total number of shares of capital stock which the
Corporation shall have authority to issue is Two Hundred Million
(200,000,000) shares of Common Stock, of the par value of one-tenth of one
cent ($.001) per share, and of the aggregate par value of Two Hundred
Thousand Dollars ($200,000). The capital stock initially is classified
into one series, which consists of two classes of Common Stock, as
follows:
<TABLE>
<CAPTION>
Class A Class D
Common Stock Common Stock
<S> <C> <C>
Battery Park High Yield Fund 25,000,000 25,000,000
shares shares
</TABLE>
The remainder of the Corporation's capital stock, One Hundred Fifty
Million (150,000,000) shares of Common Stock is not initially classified
as to any class or series.
(2) The Board of Directors may classify and reclassify any unissued
shares of capital stock, of any class or series, into one or more
additional or other classes or series as may be established from time to
time by setting or changing in any one or more respects the designations,
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms or conditions of
redemption of such shares of stock and pursuant to such classification or
reclassification to increase or decrease the number of authorized shares
of any existing class or series.
(3) Unless otherwise expressly provided in the charter of the
Corporation, including any Articles Supplementary creating any class or
series of capital stock, the holders of each class or series of capital
stock shall be entitled to dividends and distributions in such amounts and
at such times as may be determined by the Board of Directors, and the
dividends and distributions paid with respect to the various classes or
series of capital stock may vary among such classes and series. Dividends
on a class or series may be declared or paid only out of the net assets of
that class or series. Expenses related to the distribution of, and other
identified expenses that should properly be allocated to, the shares of a
particular class or series of capital stock may be charged to and borne
solely by such class or series and the bearing of expenses solely by a
class or series of capital stock may be appropriately reflected (in a
manner determined by the Board of Directors) and cause differences in the
net asset value attributable to, and the dividend, redemption and
liquidation rights of, the shares of each class or series of capital
stock.
(4) Unless otherwise expressly provided in the charter of the
Corporation, including those matters set forth in Article II, Section (3)
hereof and including any Articles Supplementary creating any class or
series of capital stock, on each matter submitted to a vote of
stockholders, each holder of a share of capital stock of the Corporation
shall be entitled to one vote for each share standing in such holder's
name on the books of the Corporation, irrespective of the class or series
thereof, and all shares of all classes and series shall vote together as a
single class; provided, however, that (a) as to any matter with respect to
which a separate vote of any class or series is required by the Investment
Company Act of 1940, as amended (the "Investment Company Act"), as in
effect from time to time, or any rules, regulations or orders issued
thereunder, or by the Maryland General Corporation Law, such requirement
as to a separate vote by that class or series shall apply in lieu of a
general vote of all classes and series as described above, (b) in the
event that the separate vote requirements referred to in (a) above apply
with respect to one or more classes or series, then, subject to paragraph
(c) below, the shares of all other classes and series not entitled to a
separate class vote shall vote as a single class, and (c) as to any matter
which does not affect the interest of a particular class or series, such
class or series shall not be entitled to any vote and only the holders of
shares of the affected classes and series, if any, shall be entitled to
vote.
(5) Notwithstanding any provision of the Maryland General
Corporation Law requiring a greater proportion than a majority of the
votes of all classes or series of capital stock of the Corporation (or of
any class or series entitled to vote thereon as a separate class or
series) to take or authorize any action, the Corporation is hereby
authorized (subject to the requirements of the Investment Company Act as
in effect from time to time, and any rules, regulations and orders issued
thereunder) to take such action upon the concurrence of a majority of the
votes entitled to be cast by holders of capital stock of the Corporation
(or a majority of the votes entitled to be cast by holders of a class or
series entitled to vote thereon as a separate class or series).
(6) Unless otherwise expressly provided in the charter of the
Corporation, including any Articles Supplementary creating any class or
series of capital stock, in the event of any liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, the
holders of each class or series of capital stock of the Corporation shall
be entitled, after payment or provision for payment of the debts and other
liabilities of the Corporation, to share ratably in the remaining net
assets of the Corporation applicable to that class or series.
(7) Any fractional shares shall carry proportionately all the rights
of a whole share, excepting any right to receive a certificate evidencing
such fractional share, but including, without limitation, the right to
vote and the right to receive dividends.
(8) The presence in person or by proxy of the holders of shares
entitled to cast one-third of the votes entitled to be cast shall
constitute a quorum at any meeting of stockholders, except with respect to
any matter which requires approval by a separate vote of one or more
classes or series of stock, in which case the presence in person or by
proxy of the holders of shares entitled to cast one-third of the votes
entitled to be cast by each class or series entitled to vote as a separate
class or series shall constitute a quorum.
(9) All persons who shall acquire stock in the Corporation, of any
class or series, shall acquire the same subject to the provisions of the
charter and By-Laws of the Corporation. As used in the charter of the
Corporation, the terms "charter" and "Articles of Incorporation" shall
mean and include the Articles of Incorporation of the Corporation as
amended, supplemented and restated from time to time by Articles of
Amendment, Articles Supplementary, Articles of Restatement or otherwise.
(10)(a) Each series of capital stock of the Corporation shall relate
to a separate portfolio of investments. All shares of stock in each
series shall be identical except that there may be variations among and
within the different classes comprising the series as to the purchase
price, determination of net asset value, designations, preferences,
conversion or other rights, voting powers, restrictions, special and
relative rights and limitations as to dividends and on liquidation,
qualifications or terms or conditions of redemption of such shares of
stock.
(b) Subject to the power of the Board of Directors to
reclassify unissued shares of stock, each series of stock of the
Corporation shall have the following powers, preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends,
and terms and conditions of redemption:
(i) All consideration received by the Corporation for the
issue or sale of stock of each series, together with all assets in which such
consideration is invested or reinvested, all income, earnings, profits and
proceeds received thereon, including any proceeds derived from
the sale, exchange or liquidation thereof, and any assets, funds or payments
derived from any reinvestment of such proceeds in whatever form the same may
be, shall irrevocably belong to the series of stock with respect to which
such assets, payments or funds were received by the Corporation for all
purposes, subject only to the rights of creditors, and
shall be so handled in the books of account of the Corporation. Such assets,
payments and funds, including any proceeds derived from the sale, exchange or
liquidation thereof, and any assets, funds or payments derived
from any reinvestment of such proceeds in whatever form the same may be, are
herein referred to as "assets belonging to" such series. In the event
that there are any assets, income, earnings, profits and proceeds thereof,
funds or payments that are not readily identifiable as belonging to any
particular series, the Board of Directors of the Corporation shall allocate
them among any one or more of the series established and designated from time
to time in such manner and on such basis as the Board
of Directors, in their sole discretion, deem fair and equitable. Each
allocation by the Board of Directors shall be conclusive and binding on the
shareholders of the Corporation of all series for all purposes.
(ii) The assets belonging to each series of stock shall be
charged with the liabilities in respect to such series, and also shall be
charged with their share of the general liabilities of the Corporation, in
proportion to the relative asset values of the respective series determined
in accordance with the charter of the Corporation or in such other manner as
may be determined by the Board of Directors in accordance with law. The
determination of the Board of Directors shall be conclusive
as to the amount of liabilities, including accrued expenses and reserves, as
to the allocation of the same to a given series, and as to whether the same
or general assets of the Corporation are allocable to one or more series.
(11) At such times (which may vary within a class of stock) as may be
determined by the Board of Directors (or with the authorization of the
Board of Directors, by the officers of the Corporation) in accordance with
the Investment Company Act as in effect from time to time, applicable
rules and regulations thereunder and applicable rules of the National
Association of Securities Dealers, Inc. and reflected in the Corporation's
pertinent registration statement, shares of a particular class of stock of
the Corporation may be automatically converted into shares of another
class of stock of the Corporation within the same series based on the
relative net asset values of such classes at the time of conversion,
subject, however, to any conditions of conversion that may be imposed by
the Board of Directors (or with the authorization of the Board of
Directors, by the officers of the Corporation) and reflected in the
Corporation's pertinent registration statement as aforesaid.
ARTICLE V
PROVISIONS FOR DEFINING, LIMITING AND
REGULATING CERTAIN POWERS OF THE CORPORATION
AND OF THE DIRECTORS AND STOCKHOLDERS
-------------------------------------
(1) The initial number of directors of the Corporation shall be two,
which number may be increased or decreased pursuant to the By-Laws of the
Corporation but shall never be less than the minimum number permitted by
the General Laws of the State of Maryland. The names of the directors who
shall act until their successors are duly elected and qualify are:
Robert Levine
Lance B. Fraser
(2) The Board of Directors of the Corporation is hereby empowered to
authorize the issuance from time to time of shares of capital stock, of
any class or series, and securities convertible into shares of capital
stock of the Corporation, whether now or hereafter authorized, for such
consideration as the Board of Directors may deem advisable, subject to
such limitations as may be set forth in these Articles of Incorporation or
in the By-Laws of the Corporation or in the General Laws of the State of
Maryland.
(3) No holder of stock of the Corporation shall, as such holder,
have any right to purchase or subscribe for any shares of the capital
stock of the Corporation or any other security of the Corporation which it
may issue or sell (whether out of the number of shares authorized by these
Articles of Incorporation, or out of any shares of the capital stock of
the Corporation, of any class or series, acquired by it after the issue
thereof, or otherwise) other than such right, if any, as the Board of
Directors, in its discretion, may determine.
(4) Each director and each officer of the Corporation shall be
indemnified and advanced expenses by the Corporation to the full extent
permitted by the General Laws of the State of Maryland, subject to the
requirements of the Investment Company Act. No amendment of these
Articles of Incorporation or repeal of any provision hereof shall limit or
eliminate the benefits provided to directors and officers under this
provision in connection with any act or omission that occurred prior to
such amendment or repeal.
(5) To the fullest extent permitted by the General Laws of the State
of Maryland, subject to the requirements of the Investment Company Act, no
director or officer of the Corporation shall be personally liable to the
Corporation or its security holders for money damages. No amendment of
these Articles of Incorporation or repeal of any provision hereof shall
limit or eliminate the benefits provided to directors and officers under
this provision in connection with any act or omission that occurred prior
to such amendment or repeal.
(6) The Board of Directors of the Corporation is vested with the
sole power, to the exclusion of the stockholders, to make, alter or repeal
from time to time any of the By-Laws of the Corporation except any
particular By-Law which is specified as not subject to alteration or
repeal by the Board of Directors, subject to the requirements of the
Investment Company Act.
ARTICLE VI
REDEMPTION
----------
(1) Each holder of shares of capital stock of the Corporation shall
be entitled to require the Corporation to redeem all or any part of the
shares of capital stock of the Corporation standing in the name of such
holder on the books of the Corporation, and all shares of capital stock
issued by the Corporation shall be subject to redemption by the
Corporation, at the redemption price of such shares as in effect from time
to time as may be determined by the Board of Directors of the Corporation
in accordance with the provisions hereof, subject to the right of the
Board of Directors of the Corporation to suspend the right of redemption
of shares of capital stock of the Corporation or postpone the date of
payment of such redemption price in accordance with provisions of
applicable law. The redemption price of shares of capital stock of the
Corporation shall be the net asset value thereof as determined by the
Board of Directors of the Corporation from time to time in accordance with
the provisions of applicable law, less such redemption fee or liquidation
fee, contingent deferred sales charge, or other fee or charge (which fees
and charges may vary within and among the classes and series of capital
stock), if any, as may be approved by the Board of Directors of the
Corporation.
(2) The Corporation shall, to the extent permitted by applicable
law, have the right at any time, at its option, to redeem the shares owned
by any holder of capital stock of the Corporation (i) if the redemption
is, in the opinion of the Board of Directors, desirable in order to
prevent the Corporation from being deemed a "personal holding company"
within the meaning of the Internal Revenue Code of 1986, as amended, or
(ii) if the value of the shares in the account maintained by the
Corporation or its transfer agent for any class of stock for the
stockholder is below an amount determined from time to time by the Board
of Directors (the "Minimum Account Balance") and the stockholder has been
given at least 60 days' written notice of the redemption and has failed to
make additional purchases of shares in an amount sufficient to bring the
value in his account to at least the Minimum Account Balance before the
redemption is effected by the Corporation.
(3) The Corporation, at its option, pursuant to resolution of the
Board of Directors, may also cause the redemption upon the terms set forth
in such resolution and in paragraphs (1) and (4) of this Article VI of all
of the outstanding shares of capital stock of any class or series of
Common Stock if the Board of Directors has determined that it is in the
best interests of the Corporation and its stockholders to discontinue
issuance of shares of capital stock of the particular class or series.
Notwithstanding any other provision of this Article VI, if certificates
representing such redeemed shares of capital stock have been issued, the
redemption price need not be paid by the Corporation until such
certificates are presented in proper form for transfer to the Corporation
or the agent of the Corporation appointed for such purpose; however, the
redemption shall be effective, in accordance with the resolution of the
Board of Directors, regardless of whether or not such presentation has
been made.
(4) Payment of the redemption price by the Corporation may be made
either in cash or in securities or other assets at the time owned by the
Corporation or partly in cash and partly in securities or other assets at
the time owned by the Corporation. Payment of the redemption price shall
be made in such manner as may be determined from time to time by the Board
of Directors of the Corporation.
ARTICLE VII
DETERMINATION BINDING
---------------------
Any determination made in good faith, so far as accounting matters
are involved, in accordance with accepted accounting practice by or
pursuant to the direction of the Board of Directors, as to the amount of
assets, obligations or liabilities of the Corporation, as to the amount of
net income of the Corporation from dividends and interest for any period
or amounts at any time legally available for the payment of dividends, as
to the amount of any reserves or charges set up and the propriety thereof,
as to the time of or purpose for creating reserves or as to the use,
alteration or cancellation of any reserves or charges (whether or not any
obligation or liability for which such reserves or charges shall have been
created, shall have been paid or discharged or shall be then or thereafter
required to be paid or discharged), as to the price of any security owned
by the Corporation or as to any other matters relating to the issuance,
sale, redemption or other acquisition or disposition of securities or
shares of capital stock of the Corporation, and any reasonable
determination made in good faith by the Board of Directors as to whether
any transaction constitutes a purchase of securities on "margin," a sale
of securities "short," or an underwriting or the sale of, or a
participation in any underwriting or selling group in connection with the
public distribution of, any securities, shall be final and conclusive, and
shall be binding upon the Corporation and all holders of its capital
stock, past, present and future, and shares of the capital stock of the
Corporation are issued and sold on the condition and understanding,
evidenced by the purchase of shares of capital stock or acceptance of
share certificates, that any and all such determinations shall be binding
as aforesaid. No provision in this charter shall be effective to (a)
require a waiver of compliance with any provision of the Securities Act of
1933, as amended, or the Investment Company Act, or of any valid rule,
regulation or order of the Securities and Exchange Commission thereunder
or (b) protect or purport to protect any director or officer of the
Corporation against any liability to the Corporation or its security
holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
ARTICLE VIII
PERPETUAL EXISTENCE
-------------------
The duration of the Corporation shall be perpetual.
ARTICLE IX
AMENDMENT
---------
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in its charter, in any manner now or hereafter
prescribed by statute, including any amendment which alters the contract
rights, as expressly set forth in the charter, of any outstanding stock
and substantially adversely affects the stockholder's rights, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
IN WITNESS WHEREOF, the undersigned incorporator of BATTERY PARK
FUNDS, INC. hereby executes the foregoing Articles of Incorporation and
acknowledges the same to be his act.
Dated this 4th day of June, 1996.
------------------------------
Robert J. Borzone, Jr.
BATTERY PARK FUNDS, INC.
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
Battery Park Funds, Inc., a Maryland corporation (the "Corporation"),
having its principal office at 2 World Financial Center, New York, New York,
10281-1198, does hereby certify to the State Department of Assessments and
Taxation of Maryland as follows:
FIRST: The charter of the Corporation is hereby amended by striking out
Article IV Section (1) of the Articles of Incorporation and inserting in lieu
thereof the following:
"ARTICLE IV
CAPITAL STOCK
-------------
(1) The total number of shares of capital stock which the
Corporation shall have authority to issue is Two Hundred Million
(200,000,000) shares of Common Stock, of the par value of one-tenth of one
cent ($.001) per share, and of the aggregate par value of Two Hundred
Thousand Dollars ($200,000). The capital stock initially is classified into
one series, which consists of two classes of Common Stock, as follows:
<TABLE>
<CAPTION>
Class A Class Y
Common Stock Common Stock
<S> <C> <C>
Battery Park High Yield Fund 25,000,000 25,000,000
shares shares
</TABLE>
The remainder of the Corporation's capital stock, One Hundred
Fifty Million (150,000,000) shares of Common Stock is not initially
classified as to any class or series."
SECOND: The Amendment to the Articles of Incorporation of the
Corporation, as hereinabove set forth, was approved by a majority of the
entire Board of Directors. No stock entitled to be voted on the matter was
outstanding or subscribed for at the time of the approval.
IN WITNESS WHEREOF, the officers of the Corporation who hereby execute
on behalf of the Corporation these Articles of Amendment hereby acknowledge,
in the name and on behalf of the Corporation, these Articles of Amendment to
be the corporate act of the Corporation and further certify, under the
penalties of perjury, that, to the best of their knowledge, information and
belief, the matters and facts set forth therein with respect to the approval
thereof are true in all material respects, all on this th day of August,
1996.
BATTERY PARK FUNDS, INC.
By:
---------------------------------
Robert Levine
President
Attest:
- ---------------------------------
Deborah A. Montick
Secretary
AMENDED BY-LAWS
OF
BATTERY PARK FUNDS, INC.
ARTICLE I.
Offices
-------
Section 1. Principal Office. The principal office of the
----------------
Corporation shall be in the City of Baltimore and State of Maryland.
Section 2. Principal Executive Office. The principal executive
--------------------------
office of the Corporation shall be at 2 World Financial Center, Building
B, New York, New York 10281-1198.
Section 3. Other Offices. The Corporation may have such other
-------------
offices in such places as the Board of Directors from time to time may
determine.
ARTICLE II.
Meetings of Stockholders
------------------------
Section 1. Annual Meeting. The Corporation shall not be required to
--------------
hold an annual meeting of its stockholders in any year in which the
election of directors is not required to be acted upon under the
Investment Company Act of 1940, as amended (the "Investment Company Act").
In the event that the Corporation shall be required to hold an annual
meeting of stockholders to elect directors by the Investment Company Act,
such meeting shall be held no later than 120 days after the occurrence of
the event requiring the meeting. Any stockholders' meeting held in
accordance with this Section shall for all purposes constitute the annual
meeting of stockholders for the year in which the meeting is held.
Section 2. Special Meetings. Special meetings of the stockholders,
----------------
unless otherwise provided by law, may be called for any purpose or
purposes by a majority of the Board of Directors, the President, or on the
written request of the holders of at least 10% of the outstanding shares
of capital stock of the Corporation entitled to vote at such meeting if
they comply with Section 2-502(b) or (c) of the Maryland General
Corporation Law.
Section 3. Place of Meetings. Any annual meeting and any special
-----------------
meeting of the stockholders shall be held at such place within the United
States as the Board of Directors from time to time may determine.
Section 4. Notice of Meetings; Waiver of Notice. Notice of the
------------------------------------
place, date and time of the holding of each annual and special meeting of
the stockholders and the purpose or purposes of each special meeting shall
be given personally or by mail, not less than ten nor more than ninety
days before the date of such meeting, to each stockholder entitled to vote
at such meeting and to each other stockholder entitled to notice of the
meeting. Notice by mail shall be deemed to be duly given when deposited
in the United States mail addressed to the stockholder at his or her
address as it appears on the records of the Corporation, with postage
thereon prepaid.
Notice of any meeting of stockholders shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, or who,
either before or after the meeting, shall submit a signed waiver of notice
which is filed with the records of the meeting. When a meeting is
adjourned to another time and place, unless the Board of Directors, after
the adjournment, shall fix a new record date for an adjourned meeting, or
unless the adjournment is for more than one hundred and twenty days after
the original record date, notice of such adjourned meeting need not be
given if the time and place to which the meeting shall be adjourned were
announced at the meeting at which the adjournment is taken.
Section 5. Quorum. The presence in person or by proxy of the
------
holders of shares entitled to cast one-third of the votes entitled to be
cast shall constitute a quorum at any meeting of stockholders, except with
respect to any matter which requires approval by a separate vote of one or
more classes or series of stock, in which case the presence in person or
by proxy of the holders of shares entitled to cast one-third of the votes
entitled to be cast by each class or series entitled to vote as a separate
class or series shall constitute a quorum. In the absence of a quorum no
business may be transacted, except that the holders of a majority of the
shares of stock present in person or by proxy and entitled to vote may
adjourn the meeting from time to time, without notice other than
announcement thereat except as otherwise required by these By-Laws, until
the holders of the requisite amount of shares of stock shall be so
present. At any such adjourned meeting at which a quorum may be present
any business may be transacted which might have been transacted at the
meeting as originally called. The absence from any meeting, in person
or by proxy, of holders of the number of shares of stock of the
Corporation in excess of a majority thereof which may be required by the
laws of the State of Maryland, the Investment Company Act, or other
applicable statute, the Charter, or these By-Laws, for action upon any
given matter shall not prevent action at such meeting upon any other
matter or matters which properly may come before the meeting, if there
shall be present thereat, in person or by proxy, holders of the number of
shares of stock of the Corporation required for action in respect of such
other matter or matters.
Section 6. Organization. At each meeting of the stockholders, the
------------
Chairman of the Board (if one has been designated by the Board), or in his
or her absence or inability to act, the President, or in the absence or
inability to act of the Chairman of the Board and the President, a Vice
President, shall act as chairman of the meeting. The Secretary, or in his
or her absence or inability to act, any person appointed by the chairman
of the meeting, shall act as secretary of the meeting and keep the minutes
thereof.
Section 7. Order of Business. The order of business at all meetings
-----------------
of the stockholders shall be as determined by the chairman of the meeting.
Section 8. Voting. Except as otherwise provided by statute or the
------
Charter, each holder of record of shares of stock of the Corporation
having voting power shall be entitled at each meeting of the stockholders
to one vote for every share of such stock standing in his or her name on
the record of stockholders of the Corporation as of the record date
determined pursuant to Section 9 of this Article or, if such record date
shall not have been so fixed, then at the later of (i) the close of
business on the day on which notice of the meeting is mailed or (ii) the
thirtieth day before the meeting.
Each stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him or her by a proxy
signed by such stockholder or his or her attorney-in-fact. No proxy shall
be valid after the expiration of eleven months from the date thereof,
unless otherwise provided in the proxy. Every proxy shall be revocable at
the pleasure of the stockholder executing it, except in those cases where
such proxy states that it is irrevocable and where an irrevocable proxy is
permitted by law. Except as otherwise provided by statute, the Charter or
these By-Laws, any corporate action to be taken by vote of the
stockholders (other than the election of directors, which shall be by a
plurality of votes cast) shall be authorized by a majority of the total
votes cast at a meeting of stockholders by the holders of shares present
in person or represented by proxy and entitled to vote on such action.
If a vote shall be taken on any question other than the election of
directors, which shall be by written ballot, then unless required by
statute or these By-Laws, or determined by the chairman of the meeting to
be advisable, any such vote need not be by ballot. On a vote by ballot,
each ballot shall be signed by the stockholder voting, or by his or her
proxy, if there be such proxy, and shall state the number of shares voted.
Section 9. Fixing of Record Date. The Board of Directors may set a
---------------------
record date for the purpose of determining stockholders entitled to vote
at any meeting of the stockholders. The record date, which may not be
prior to the close of business on the day the record date is fixed, shall
be not more than ninety nor less than ten days before the date of the
meeting of the stockholders. All persons who were holders of record of
shares at such time, and not others, shall be entitled to vote at such
meeting and any adjournment thereof.
Section 10. Inspectors. The Board, in advance of any meeting of
----------
stockholders, may appoint one or more inspectors to act at such meeting or
any adjournment thereof. If the inspectors shall not be so appointed or
if any of them shall fail to appear or act, the chairman of the meeting
may, and on the request of any stockholder entitled to vote thereat shall,
appoint inspectors. Each inspector, before entering upon the discharge of
his or her duties, shall take and sign an oath to execute faithfully the
duties of inspector at such meeting with strict impartiality and according
to the best of his or her ability. The inspectors shall determine the
number of shares outstanding and the voting powers of each, the number of
shares represented at the meeting, the existence of a quorum, and the
validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots
or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On
request of the chairman of the meeting or any stockholder entitled to vote
thereat, the inspectors shall make a report in writing of any challenge,
request or matter determined by them and shall execute a certificate of
any fact found by them. No director or candidate for the office of
director shall act as inspector of an election of directors. Inspectors
need not be stockholders.
Section 11. Consent of Stockholders in Lieu of Meeting.
------------------------------------------
Except as otherwise provided by statute or the Charter, any action
required to be taken at any annual or special meeting of stockholders, or
any action which may be taken at any annual or special meeting of such
stockholders, may be taken without a meeting, without prior notice and
without a vote, if the following are filed with the records of
stockholders' meetings: (i) a unanimous written consent which sets forth
the action and is signed by each stockholder entitled to vote on the
matter and (ii) a written waiver of any right to dissent signed by each
stockholder entitled to notice of the meeting but not entitled to vote
thereat.
ARTICLE III.
Board of Directors
------------------
Section 1. General Powers. Except as otherwise provided in the
--------------
Charter, the business and affairs of the Corporation shall be managed
under the direction of the Board of Directors. All powers of the
Corporation may be exercised by or under authority of the Board of
Directors except as conferred on or reserved to the stockholders by law or
by the Charter or these By-Laws.
Section 2. Number of Directors. The number of directors shall be
-------------------
fixed from time to time by resolution of the Board of Directors adopted by
a majority of the entire Board of Directors; provided, however, that in no
event shall the number of directors be less than the minimum permitted by
the General Law of the State of Maryland nor more than fifteen. Any
vacancy created by an increase in the number of directors may be filled in
accordance with Section 6 of this Article III. No reduction in the number
of directors shall have the effect of removing any director from office
prior to the expiration of his or her term unless such director
specifically is removed pursuant to Section 5 of this Article III at the
time of such decrease. Directors need not be stockholders.
Section 3. Election and Term of Directors. Directors shall be
------------------------------
elected annually, by written ballot, at a meeting of stockholders held for
that purpose; provided, however, that if no meeting of the stockholders of
the Corporation is required to be held in a particular year pursuant to
Section 1 of Article II of these By-Laws, directors shall be elected at
the next meeting held. The term of office of each director shall be from
the time of his or her election and qualification until the election of
directors next succeeding his or her election and until his or her
successor shall have been elected and shall have qualified, or until his
or her death, or until he shall have resigned or until December 31 of the
year in which he shall have reached eighty-five years of age, or until he
shall have been removed as hereinafter provided in these By-Laws, or as
otherwise provided by statute or the Charter.
Section 4. Resignation. A director of the Corporation may resign at
-----------
any time by giving written notice of his or her resignation to the Board
or the Chairman of the Board or the President or the Secretary. Any such
resignation shall take effect at the time specified therein or, if the
time when it shall become effective shall not be specified therein,
immediately upon its receipt; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it
effective.
Section 5. Removal of Directors. Any director of the Corporation
--------------------
may be removed (with or without cause) by the stockholders by a vote of a
majority of the outstanding shares of capital stock then entitled to vote
in the election of such director.
Section 6. Vacancies. Subject to the provisions of the Investment
---------
Company Act, any vacancies in the Board of Directors, whether arising from
death, resignation, removal, an increase in the number of directors or any
other cause, shall be filled by a vote of a majority of the Board of
Directors then in office, regardless of whether they constitute a quorum.
Section 7. Place of Meetings. Meetings of the Board may be held at
-----------------
such place as the Board from time to time may determine or as shall be
specified in the notice of such meeting.
Section 8. Regular Meeting. Regular meetings of the Board may be
---------------
held without notice at such time and place as may be determined by the
Board of Directors.
Section 9. Special Meetings. Special meetings of the Board may be
----------------
called by two or more directors of the Corporation or by the Chairman of
the Board or the President.
Section 10. Telephone Meetings. Members of the Board of Directors
------------------
or of any committee thereof may participate in a meeting by means of a
conference telephone or similar communications equipment if all persons
participating in the meeting can hear each other at the same time.
Subject to the provisions of the Investment Company Act, participation in
a meeting by these means constitutes presence in person at the meeting.
Section 11. Notice of Special Meetings. Notice of each special
--------------------------
meeting of the Board shall be given by the Secretary as hereinafter
provided, in which notice shall be stated the time and place of the
meeting. Notice of each such meeting shall be delivered to each director,
either personally or by telephone or any standard form of
telecommunication, at least twenty-four hours before the time at which
such meeting is to be held, or by first-class mail, postage prepaid,
addressed to him or her at his or her residence or usual place of
business, at least three days before the day on which such meeting is to
be held.
Section 12. Waiver of Notice of Meetings. Notice of any special
----------------------------
meeting need not be given to any director who, either before or after the
meeting, shall sign a written waiver of notice which is filed with the
records of the meeting or who shall attend such meeting. Except as
otherwise specifically required by these By-Laws, a notice or waiver of
notice of any meeting need not state the purposes of such meeting.
Section 13. Quorum and Voting. One-third, but not less than two
-----------------
(unless there is only one Director), of the members of the entire Board
shall be present in person at any meeting of the Board in order to
constitute a quorum for the transaction of business at such meeting, and
except as otherwise expressly required by statute, the Charter, these
By-Laws, the Investment Company Act, or other applicable statute, the act
of a majority of the directors present at any meeting at which a quorum is
present shall be the act of the Board. In the absence of a quorum at any
meeting of the Board, a majority of the directors present thereat may
adjourn such meeting to another time and place until a quorum shall be
present thereat. Notice of the time and place of any such adjourned
meeting shall be given to the directors who were not present at the time
of the adjournment and, unless such time and place were announced at the
meeting at which the adjournment was taken, to the other directors. At
any adjourned meeting at which a quorum is present, any business may be
transacted which might have been transacted at the meeting as originally
called.
Section 14. Organization. The Board, by resolution adopted by a
------------
majority of the entire Board, may designate a Chairman of the Board, who
shall preside at each meeting of the Board. In the absence or inability
of the Chairman of the Board to preside at a meeting, the President or, in
his or her absence or inability to act, another director chosen by a
majority of the directors present, shall act as chairman of the meeting
and preside thereat. The Secretary (or, in his or her absence or
inability to act, any person appointed by the Chairman) shall act as
secretary of the meeting and keep the minutes thereof.
Section 15. Written Consent of Directors in Lieu of a Meeting.
----------------------------------------- -------
Subject to the provisions of the Investment Company Act, any action
required or permitted to be taken at any meeting of the Board of Directors
or of any committee thereof may be taken without a meeting if all members
of the Board or the committee, as the case may be, consent thereto in
writing, and the writings or writing are filed with the minutes of the
proceedings of the Board or the committee.
Section 16. Compensation. Directors may receive compensation for
------------
services to the Corporation in their capacities as directors or otherwise
in such manner and in such amounts as may be fixed from time to time by
the Board.
ARTICLE IV.
Committees
----------
Section 1. Executive Committee. The Board, by resolution adopted by
-------------------
a majority of the entire board, may designate an Executive Committee
consisting of two or more of the directors of the Corporation, which
committee shall have and may exercise all of the powers and authority of
the Board with respect to all matters other than:
(1) the submission to stockholders of any action requiring
authorization of stockholders pursuant to statute or the Charter;
(2) the filling of vacancies on the Board of Directors;
(3) the fixing of compensation of the directors for serving on the
Board or on any committee of the Board, including the Executive Committee;
(4) the approval or termination of any contract with an investment
adviser or principal underwriter, as such terms are defined in the
Investment Company Act, or the taking of any other action required to be
taken by the Board of Directors by the Investment Company Act;
(5) the amendment or repeal of these By-Laws or the adoption of new
By-Laws;
(6) the amendment or repeal of any resolution of the Board which by
its terms may be amended or repealed only by the Board;
(7) the declaration of dividends and, except to the extent permitted
by law, the issuance of capital stock of the Corporation; and
(8) the approval of any merger or share exchange which does not
require stockholder approval.
The Executive Committee shall keep written minutes of its proceedings
and shall report such minutes to the Board. All such proceedings shall be
subject to revision or alteration by the Board; provided, however, that
third parties shall not be prejudiced by such revision or alteration.
Section 2. Other Committees of the Board. The Board of Directors
-----------------------------
from time to time, by resolution adopted by a majority of the whole Board,
may designate one or more other committees of the Board, each such
committee to consist of two or more directors and to have such powers and
duties as the Board of Directors, by resolution, may prescribe.
Section 3. General. One-third, but not less than two, of the
-------
members of any committee shall be present in person at any meeting of such
committee in order to constitute a quorum for the transaction of business
at such meeting, and the act of a majority present shall be the act of
such committee. The Board may designate a chairman of any committee and
such chairman or any two members of any committee may fix the time and
place of its meetings unless the Board shall otherwise provide. In the
absence or disqualification of any member of any committee, the member or
members thereof present at any meeting and not disqualified from voting,
whether or not he or she or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in
the place of any such absent or disqualified member. The Board shall have
the power at any time to change the membership of any committee, to fill
all vacancies, to designate alternate members to replace any absent or
disqualified member, or to dissolve any such committee. Nothing herein
shall be deemed to prevent the Board from appointing one or more
committees consisting in whole or in part of persons who are not directors
of the Corporation; provided, however, that no such committee shall have
or may exercise any authority or power of the Board in the management of
the business or affairs of the Corporation except as may be prescribed by
the Board.
ARTICLE V.
Officers, Agents and Employees
------------------------------
Section 1. Number of Qualifications. The officers of the
------------------------
Corporation shall be a President, a Secretary and a Treasurer, each of
whom shall be elected by the Board of Directors. The Board of Directors
may elect or appoint one or more Vice Presidents and also may appoint such
other officers, agents and employees as it may deem necessary or proper.
Any two or more offices may be held by the same person, except the offices
of President and Vice President, but no officer shall execute, acknowledge
or verify any instrument in more than one capacity. Such officers shall
be elected by the Board of Directors each to hold office until his or her
successor shall have been duly elected and shall have qualified, or until
his or her death, or until he or she shall have resigned, or have been
removed, as hereinafter provided in these By-Laws. The Board from time to
time may elect, or delegate to the President the power to appoint, such
officers (including one or more Assistant Vice Presidents, one or more
Assistant Treasurers and one or more Assistant Secretaries) and such
agents, as may be necessary or desirable for the business of the
Corporation. Such officers and agents shall have such duties and shall
hold their offices for such terms as may be prescribed by the Board or by
the appointing authority.
Section 2. Resignations. Any officer of the Corporation may resign
------------
at any time by giving written notice of resignation to the Board, the
Chairman of the Board, the President or the Secretary. Any such
resignation shall take effect at the time specified therein or, if the
time when it shall become effective shall not be specified therein,
immediately upon its receipt; and, unless otherwise specified therein, the
acceptance of such resignation shall be necessary to make it effective.
Section 3. Removal of Officer, Agent or Employee. Any officer,
-------------------------------------
agent or employee of the Corporation may be removed by the Board of
Directors with or without cause at any time, and the Board may delegate
such power of removal as to agents and employees not elected or appointed
by the Board of Directors. Such removal shall be without prejudice to
such person's contract rights, if any, but the appointment of any person
as an officer, agent or employee of the Corporation shall not of itself
create contract rights.
Section 4. Vacancies. A vacancy in any office, whether arising from
---------
death, resignation, removal or any other cause, may be filled for the
unexpired portion of the term of the office which shall be vacant, in the
manner prescribed in these By-Laws for the regular election or appointment
to such office.
Section 5. Compensation. The compensation of the officers of the
------------
Corporation shall be fixed by the Board of Directors, but this power may
be delegated to any officer in respect of other officers under his or her
control.
Section 6. Bonds or Other Security. If required by the Board, any
-----------------------
officer, agent or employee of the Corporation shall give a bond or other
security for the faithful performance of his or her duties, in such amount
and with such surety or sureties as the Board may require.
Section 7. President. The President shall be the chief executive
---------
officer of the Corporation. In the absence of the Chairman of the Board
(or if there be none), the President shall preside at all meetings of the
stockholders and of the Board of Directors. He or she shall have, subject
to the control of the Board of Directors, general charge of the business
and affairs of the Corporation. He or she may employ and discharge
employees and agents of the Corporation, except such as shall be appointed
by the Board, and he or she may delegate these powers.
Section 8. Vice President. Each Vice President shall have such
--------------
powers and perform such duties as the Board of Directors or the President
from time to time may prescribe.
Section 9. Treasurer. The Treasurer shall:
---------
(1) have charge and custody of, and be responsible for, all of the
funds and securities of the Corporation, except those which the Corporation
has placed in the custody of a bank or trust company or member of
a national securities exchange (as that term is defined in the Securities
Exchange Act of 1934, as amended) pursuant to a written agreement designating
such bank or trust company or member of a national securities exchange as
custodian of the property of the Corporation;
(2) keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation;
(3) cause all moneys and other valuables to be deposited to the
credit of the Corporation;
(4) receive, and give receipts for, moneys due and payable to the
Corporation from any source whatsoever;
(5) disburse the funds of the Corporation and supervise the
investment of its funds as ordered or authorized by the Board, taking
proper vouchers therefor; and
(6) in general, perform all of the duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him
or her by the Board or the President.
Section 10. Secretary. The Secretary shall:
---------
(1) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board, the committees of the
Board and the stockholders;
(2) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(3) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all stock certificates of the Corporation
(unless the seal of the Corporation on such certificates shall be a
facsimile, as hereinafter provided) and affix and attest the seal to all
other documents to be executed on behalf of the Corporation under its seal;
(4) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly kept
and filed; and
(5) in general, perform all of the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to
him or her by the Board or the President.
Section 11. Delegation of Duties. In case of the absence of any
--------------------
officer of the Corporation, or for any other reason that the Board may
deem sufficient, the Board may confer for the time being the powers or
duties, or any of them, of such officer upon any other officer or upon any
director.
ARTICLE VI.
Indemnification
---------------
Section 1. General Indemnification. Each officer and director of
-----------------------
the Corporation shall be indemnified by the Corporation to the full extent
permitted under the General Laws of the State of Maryland, except that
such indemnity shall not protect any such person against any liability to
the Corporation or any stockholder thereof to which such person otherwise
would be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of
his or her office. Absent a court determination that an officer or
director seeking indemnification was not liable on the merits or guilty of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office, the decision by
the Corporation to indemnify such person must be based upon the reasonable
determination of independent legal counsel or the vote of a majority of a
quorum of the directors who are neither "interested persons," as defined
in Section 2(a)(19) of the Investment Company Act, nor parties to the
proceeding ("non-party independent directors"), after review of the facts,
that such officer or director is not guilty of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in
the conduct of his or her office.
Each officer and director of the Corporation claiming indemnification
within the scope of this Article VI shall be entitled to advances from the
Corporation for payment of the reasonable expenses incurred by him or her
in connection with proceedings to which he or she is a party in the manner
and to the full extent permitted under the General Laws of the State of
Maryland; provided, however, that the person seeking indemnification shall
provide to the Corporation a written affirmation of his or her good faith
belief that the standard of conduct necessary for indemnification by the
Corporation has been met and a written undertaking to repay any such
advance, if it ultimately should be determined that the standard of
conduct has not been met, and provided further that at least one of the
following additional conditions is met:
(i) the person seeking indemnification shall provide a security in
form and amount acceptable to the Corporation for his or her undertaking;
(ii) the Corporation is insured against losses arising by reason of
the advance; or
(iii) a majority of a quorum of non-party independent directors, or
independent legal counsel in a written opinion shall determine, based on a
review of facts readily available to the Corporation at the time the
advance is proposed to be made, that there is reason to believe that the
person seeking indemnification will ultimately be found to be entitled to
indemnification.
The Corporation may purchase insurance on behalf of an officer or
director protecting such person to the full extent permitted under the
General Laws of the State of Maryland, from liability arising from his or
her activities as an officer or director of the Corporation. The
Corporation, however, may not purchase insurance on behalf of any officer
or director of the Corporation that protects or purports to protect such
person from liability to the Corporation or to its stockholders to which
such officer or director otherwise would be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of his or her office.
The Corporation may indemnify, make advances or purchase insurance to
the extent provided in this Article VI on behalf of an employee or agent
who is not an officer or director of the Corporation.
Section 2. Other Rights. The indemnification provided by this
------------
Article VI shall not be deemed exclusive of any other right, in respect of
indemnification or otherwise, to which those seeking such indemnification
may be entitled under any insurance or other agreement, vote of
stockholders or disinterested directors or otherwise, both as to action by
a director or officer of the Corporation in his or her official capacity
and as to action by such person in another capacity while holding such
office or position, and shall continue as to a person who has ceased to be
a director or officer and shall inure to the benefit of the heirs,
executors and administrators of such person.
ARTICLE VII.
Capital Stock
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Section 1. Stock Certificates. Each holder of stock of the
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Corporation shall be entitled upon written request to have a certificate
or certificates, in such form as shall be approved by the Board, representing
the number of shares of stock of the Corporation owned by him or
her, provided, however, that certificates for fractional shares will not
be delivered in any case. The certificates representing shares of stock
shall be signed by or in the name of the Corporation by the Chairman of
the Board of Directors, the President or a Vice President and by the
Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer and sealed with the seal of the Corporation. Any or all of the
signatures or the seal on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile sig-
nature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate shall be
issued, it may be issued by the Corporation with the same effect as if
such officer, transfer agent or registrar were still in office at the date
of issue.
Section 2. Books of Account and Record of Stockholders. There shall
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be kept at the principal executive office of the Corporation correct and
complete books and records of account of all the business and transactions
of the Corporation.
Section 3. Transfers of Shares. Transfers of shares of stock of the
-------------------
Corporation shall be made on the stock records of the Corporation only by
the registered holder thereof, or by his or her attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary
or with a transfer agent or transfer clerk, and on surrender of the
certificate or certificates, if issued, for such shares properly endorsed
or accompanied by a duly executed stock transfer power and the payment of
all taxes thereon. Except as otherwise provided by law, the Corporation
shall be entitled to recognize the exclusive right of a person in whose
name any share or shares stand on the record of stockholders as the owner
of such share or shares for all purposes, including, without limitation,
the rights to receive dividends or other distributions, and to vote as
such owner, and the Corporation shall not be bound to recognize any
equitable or legal claim to or interest in any such share or shares on the
part of any other person.
Section 4. Regulations. The Board may make such additional rules
-----------
and regulations, not inconsistent with these By-Laws, as it may deem
expedient concerning the issue, transfer and registration of certificates
for shares of stock of the Corporation. It may appoint, or authorize any
officer or officers to appoint, one or more transfer agents or one or more
transfer clerks and one or more registrars and may require all
certificates for shares of stock to bear the signature or signatures of
any of them.
Section 5. Lost, Destroyed or Mutilated Certificates. The holder of
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any certificates representing shares of stock of the Corporation
immediately shall notify the Corporation of any loss, destruction or
mutilation of such certificate, and the Corporation may issue a new
certificate of stock in the place of any certificate theretofore issued by
it which the owner thereof shall allege to have been lost or destroyed or
which shall have been mutilated, and the Board, in its discretion, may
require such owner or his or her legal representatives to give to the
Corporation a bond in such sum, limited or unlimited, and in such form and
with such surety or sureties, as the Board in its absolute discretion
shall determine, to indemnify the Corporation against any claim that may
be made against it on account of the alleged loss or destruction of any
such certificate, or issuance of a new certificate. Anything herein to
the contrary notwithstanding, the Board, in its absolute discretion, may
refuse to issue any such new certificate, except pursuant to legal
proceedings under the laws of the State of Maryland.
Section 6. Fixing of a Record Date for Dividends and Distributions.
----------------------------------------- -------------
The Board may fix, in advance, a date not more than ninety days preceding
the date fixed for the payment of any dividend or the making of any
distribution or the allotment of rights to subscribe for securities of the
Corporation, or for the delivery of evidences of rights or evidences of
interests arising out of any change, conversion or exchange of common
stock or other securities, as the record date for the determination of the
stockholders entitled to receive any such dividend, distribution,
allotment, rights or interests, and in such case only the stockholders of
record at the time so fixed shall be entitled to receive such dividend,
distribution, allotment, rights or interests.
Section 7. Information to Stockholders and Others. Any stockholder
--------------------------------------
of the Corporation or his or her agent may inspect and copy during usual
business hours the Corporation's By-Laws, minutes of the proceedings of
its stockholders, annual statements of its affairs, and voting trust
agreements on file at its principal office.
ARTICLE VIII.
Seal
----
The seal of the Corporation shall be circular in form and shall bear,
in addition to any other emblem or device approved by the Board of
Directors, the name of the Corporation, the year of its incorporation and
the words "Corporate Seal" and "Maryland". Said seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in any
other manner reproduced.
ARTICLE IX.
Fiscal Year
-----------
Unless otherwise determined by the Board, the fiscal year of the
Corporation shall end on the 30th day of September.
ARTICLE X.
Depositories and Custodians
---------------------------
Section 1. Depositories. The funds of the Corporation shall be
------------
deposited with such banks or other depositories as the Board of Directors
of the Corporation from time to time may determine.
Section 2. Custodians. All securities and other investments shall
----------
be deposited in the safekeeping of such banks or other companies as the
Board of Directors of the Corporation from time to time may determine.
Every arrangement entered into with any bank or other company for the
safekeeping of the securities and investments of the Corporation shall
contain provisions complying with the Investment Company Act, and the
general rules and regulations thereunder.
ARTICLE XI.
Execution of Instruments
------------------------
Section 1. Checks, Notes, Drafts, etc. Checks, notes, drafts,
--------------------------
acceptances, bills of exchange and other orders or obligations for the
payment of money shall be signed by such officer or officers or person or
persons as the Board of Directors by resolution from time to time shall
designate.
Section 2. Sale or Transfer of Securities. Stock certificates,
------------------------------
bonds or other securities at any time owned by the Corporation may be held
on behalf of the Corporation or sold, transferred or otherwise disposed of
subject to any limits imposed by these By-Laws and pursuant to
authorization by the Board and, when so authorized to be held on behalf of
the Corporation or sold, transferred or otherwise disposed of, may be
transferred from the name of the Corporation by the signature of the
President or a Vice President or the Treasurer or pursuant to any
procedure approved by the Board of Directors, subject to applicable law.
ARTICLE XII.
Independent Public Accountants
------------------------------
The firm of independent public accountants which shall sign or
certify the financial statements of the Corporation which are filed with
the Securities and Exchange Commission shall be selected annually by the
Board of Directors and ratified by the stockholders in accordance with the
provisions of the Investment Company Act.
ARTICLE XIII.
Annual Statement
----------------
The books of account of the Corporation shall be examined by an
independent firm of public accountants at the close of each annual period
of the Corporation and at such other times as may be directed by the
Board. A report to the stockholders based upon each such examination
shall be mailed to each stockholder of record of the Corporation on such
date with respect to each report as may be determined by the Board, at his
or her address as the same appears on the books of the Corporation. Such
annual statement also shall be available at any annual meeting of
stockholders and shall be placed on file at the Corporation's principal
office in the State of Maryland. Each such report shall show the assets
and liabilities of the Corporation as of the close of the annual or
quarterly period covered by the report and the securities in which the
funds of the Corporation then were invested. Such report also shall show
the Corporation's income and expenses for the period from the end of the
Corporation's preceding fiscal year to the close of the annual or
quarterly period covered by the report and any other information required
by the Investment Company Act, and shall set forth such other matters as
the Board or such firm of independent public accountants shall determine.
ARTICLE XIV.
Amendments
----------
These By-Laws may be amended, altered or repealed by the affirmative
vote of a majority of the Board of Directors at any regular or special
meeting of the Board of Directors, except any particular By-Law which is
specified as not subject to alteration or repeal by the Board of
Directors, subject to the requirements of the Investment Company Act.
