Rule 497(e)
Registration No. 333-00767
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AMERINDO FUNDS INC PROSPECTUS
Class A Shares; Class D Shares September 20, 1999
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AMERINDO TECHNOLOGY FUND
A mutual fund whose investment objective is to seek long-term capital
appreciation.
The Securities and Exchange Commission Has Not Approved or
Disapproved These Securities or Passed upon the Adequacy of this
Prospectus. Any Representation to the Contrary is a Criminal Offense.
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Risk/Return Summary............................................2 How to Purchase Shares................................11
Fee Table......................................................4 For Class A Shareholders Only
Reduction or Elimination of Sales Loads...............13
Investment Objectives, Principal Investment
Strategies and Related Risks...................................5 How to Redeem Shares..................................14
Additional Investment Information and Risk Factors.............6 Dividends and Distributions...........................15
Management, Organization and Capital Structure.................8 Tax Consequences......................................16
Pricing of Fund Shares........................................10 Distribution Arrangements.............................17
Financial Highlights Information......................19
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RISK/RETURN SUMMARY
The Fund is currently composed of one portfolio called the Amerindo Technology
Fund.
Investment Objective
The Fund's investment objective is to seek long-term capital appreciation.
Current income is incidental to the Fund's investment objective. There is no
assurance that the Fund will achieve its investment objective.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by investing at least 65% of
its total assets (although the Fund intends, as a non-fundamental policy, to
invest at least 80% of its assets) in the common stocks of technology companies.
Technology companies are those companies with primary business operations in
either the technology or science areas. Industries likely to be represented in
the portfolio include computers, networking and internetworking software,
computer aided design, telecommunications, media and information services,
medical devices and biotechnology. In addition to investing at least 65% of its
assets in technology companies, the Fund may also invest in the stocks of
companies that should benefit from the commercialization of technological
advances, although they may not be directly involved in research and
development.
Principal Risks
o The loss of money is a risk of investing in the Fund.
o The value of the Fund's shares and the securities held by the Fund
can each decline in value.
o Investments in companies in the rapidly changing fields of
technology and science face special risks such as competitive
pressures and technological obsolescence and may be subject to
greater governmental regulation than many other industries.
o Investments in smaller capitalized companies may involve greater
risks, such as limited product lines, markets and financial or
managerial resources.
o As a non-diversified fund, compared to other mutual funds, this
Fund may invest a greater percentage of its assets in a particular
issuer. Therefore, investors should consider this greater risk
versus the safety that comes with a more diversified portfolio.
o During the Fund's current fiscal year, substantial capital gains
were realized on sales of securities. See "Additional Investment
Information and Risk Factors" for additional information.
Who May Want to Invest in This Fund
This Fund is designed for long-term investors who understand and are willing to
accept the risk of loss involved in investing in a fund seeking long-term
capital appreciation. Investors should consider their investment goals, their
time horizon for achieving them, and their tolerance for risks before investing
in the Fund. If you seek an aggressive approach to capital growth and can accept
the above average level of price fluctuations that this Fund is expected to
experience, this Fund could be an appropriate part of your overall investment
strategy. The Fund should not represent your complete investment program or be
used for short-term trading purposes.
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Risk/Return Bar Chart and Table
The following bar chart and table may assist in your decision to invest in the
Fund. The bar chart shows the average annual returns of the Fund for the life of
the Fund. The table shows how the Fund's average annual returns for a one-year
period compares with that of the Hambrecht & Quist Growth Index.* While
analyzing this information, please note that the Fund's past performance is not
an indication of how the Fund will perform in the future.
[BAR CHART INSERTED HERE]
Best Quarter 12/31/98: 49.07% Worst Quarter 3/31/97: (28.89%)
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Average Annual Total Returns
(for the periods ending 12/31/98)(2)(3)(4) Past One Year Since Inception (5)
Amerindo Technology Fund - Class A Shares NA 54.61%**
Hambrecht & Quist Growth Index * 45.10% 36.26%+
Amerindo Technology Fund - Class D Shares 84.67% 15.22%
Hambrecht & Quist Growth Index * 45.10% 17.59%++
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* The Hambrecht & Quist Growth Index is a multiple-sector growth
stock composite comprised of the publicly traded stocks of
approximately 275 companies that have annual revenues of less
than $300 million. The Index includes companies in the
technology, healthcare services, branded consumer, and Internet
sectors. You may not invest in The Hambrecht & Quist Growth
Index and unlike the Fund, it does not incur fees or charges.
** Not Annualized.
+ Since inception of Class A Shares.
++ Since inception of Class D Shares.
(1) The sales load is not reflected in the Bar Chart. If this
amount was reflected, returns would be less than those shown.
(2) Both Classes have substantially the same returns because the
shares are invested in the same portfolio of securities. The
annual returns differ only to the extent that the classes do
not have the same expenses.
(3) Shareholder Organizations may charge a fee to investors for
purchasing or redeeming shares. The net return to such
investors may be less than if they had invested in the Fund
directly.
(4) Sales loads are reflected in the Table.
(5) The date of inception of the Class A shares was August 3, 1998.
The date of inception of the Class D shares was October 28,
1996.
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FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
Class A Class D
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Load Imposed on Purchases
(as a percentage of the offering price) 5.75% None
Redemption Fees for shares held less than 1 year
(as a percent of amount redeemed, if applicable) 3.00% 3.00%
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
Management Fees 1.50% 1.50%
Distribution and/or Service 12b-1 Fees 0.50% 0.25%
Other Expenses 1.00% 1.00%
Total Annual Operating Expenses 3.00% 2.75%
The Adviser reimbursed the Fund 0.50% of the Adviser's fee. After this
reimbursement, the "Other Expenses" and "Total Annual Operating Expenses" were
0.50% and 2.50%, respectively, for the Class A shares and 0.50% and 2.25%,
respectively, for the Class D shares. The "Total Annual Operating Expenses,"
including "Other Expenses" for the Class A shares are based on the actual
expenses for the Class D shares for the fiscal year ended December, 31, 1998.
The Adviser may terminate the reimbursement arrangement at any time.
Example: This example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund over the time periods indicated and then
redeem all of your shares at the end of those periods. The Example also assumes
that your investment has a 5% return each year and that the Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
Year 1 Year 3 Year 5 Year 10
Class A $814 $1309 $1829 $3248
Class D $228 $ 703 $1205 $2585
You would pay the following expenses if you did not redeem your shares:
Year 1 Year 3 Year 5 Year 10
Class A $814 $1309 $1829 $3248
Class D $228 $ 703 $1205 $2585
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INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
Investment Objective. The Fund's investment objective is to seek long-term
capital appreciation. There can be no assurance that the Fund's investment
objective will be achieved. The investment objective is fundamental to the Fund
and may not be changed without shareholder approval. Current income is
incidental to the Fund's investment objective.
Principal Investment Strategies. The Fund seeks to achieve its investment
objectives by investing at least 65% of its assets (although the Fund intends,
as a non-fundamental policy, to invest at least 80% of its assets) in the common
stocks of technology companies. Technology companies are those companies with
primary business operations in either the technology or science areas.
Industries likely to be represented in the portfolio include computers,
networking and internetworking software, computer aided design,
telecommunications, media and information services, medical devices and
biotechnology. In addition to investing at least 65% of its assets in technology
companies, the Fund may also invest in the stocks of companies that should
benefit from the commercialization of technological advances, although they may
not be directly involved in research and development.
The Adviser believes that because of rapid advances in technology and science,
an investment in companies with business operations in these areas will offer
substantial opportunities for long-term capital appreciation. Of course, prices
of common stocks of even the best managed, most profitable corporations are
subject to market risk, which means their stock prices can decline. In addition,
swings in investor psychology or significant trading by large institutional
investors can result in price fluctuations.
The technology and science areas have exhibited and continue to demonstrate
rapid growth, both through increasing demand for existing products and services
and the broadening of the technology market. In general, the stocks of large
capitalized companies that are well established in the technology market can be
expected to grow with the market and will frequently be found in the Fund's
portfolio. The expansion of technology and science areas, however, also provides
a favorable environment for investment in small to medium capitalized companies.
The Fund's investment policy is not limited to any minimum capitalization
requirement and the Fund may hold securities without regard to the
capitalization of the issuer. The Adviser's overall stock selection for the Fund
is not based on the capitalization or size of the company but rather on an
assessment of the company's fundamental prospects. The Fund will not purchase
stocks of companies during their initial public offering or during an additional
public offering of the same security. The Adviser anticipates, however, that a
significant portion of the Fund's holdings will be invested in newly-issued
securities being sold in the secondary market.
Although the Fund will primarily invest in common stocks issued by U.S.
companies, the Fund also may invest in other types of securities such as
convertible stocks, preferred stocks, bonds and warrants, when the investment in
such securities is considered consistent with the Fund's investment objective by
the Adviser.
The Fund will not invest more than 20% of its total assets in convertible
stocks, preferred stocks, bonds and warrants. The bonds in which the Fund may
invest are not required to be rated by a recognized rating agency. As a matter
of policy, however, the Fund will invest only in "investment grade" debt
securities (i.e., rated within the four highest ratings categories by a
nationally recognized statistical rating organization, e.g., BBB or higher by
Standard & Poor's Ratings Services, a division of the McGraw-Hill Companies,
Inc. ("S&P"), Baa or higher by Moody's Investor Service, Inc. ("Moody's"), BBB
or higher by Fitch Investors Services, Inc. ("Fitch"), or BBB or higher by Duff
& Phelps Credit Rating Co.--such securities may have speculative
characteristics) or, in the case of unrated securities, debt securities that
are, in the opinion of the Adviser, of equivalent quality to "investment grade"
securities. In addition, the Fund will not necessarily dispose of any securities
that fall below investmen grade based upon the Adviser's determination as to
whether retention of such a security is consistent with the Fund's investment
objective, provided, however, that such securities do not exceed 5% of the
Fund's total assets.
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Portfolio Turnover. Purchases and sales are made for the Fund whenever
necessary, in the Adviser's opinion, to meet the Fund's investment objective,
other investment policies, and the need to meet redemptions. The turnover rate
of the Fund for the fiscal year ended December 31, 1998 was 78.46%. Fund
turnover may involve the payment by the Fund of dealer spreads or underwriting
commissions, and other transaction costs, on the sale of securities, as well as
on the investment of the proceeds in other securities. The greater the portfolio
turnover the greater the transaction costs to the Fund which could have an
adverse effect on the Fund's total rate of return. The Fund will minimize
portfolio turnover because it will not seek to realize profits by anticipating
short-term market movements and intends to buy securities for long-term capital
appreciation under ordinary circumstances.
Buy/Sell Decisions. The Fund's investment adviser considers the following
factors when buying and selling securities for the Fund: (i) the value of
individual securities relative to other investment alternatives, (ii) trends in
the determinants of corporate profits, (iii) corporate cash flow, (iv) balance
sheet changes, (v) management capability and practices and (vi) the economic and
political outlook.
ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS
The Technology and Science Areas. Companies in the rapidly changing fields of
technology and science face special risks. For example, their products or
services may not prove commercially successful or may become obsolete quickly.
The value of the Fund's shares may be susceptible to factors affecting the
technology and science areas and to greater risk and market fluctuation than an
investment in a fund that invests in a broader range of portfolio securities not
concentrated in any particular industry. As such, the Fund is not an appropriate
investment for individuals who are not long-term investors and who, as their
primary objective, require safety of principal or stable income from their
investments. The technology and science areas may be subject to greater
governmental regulation than many other areas and changes in governmental
policies and the need for regulatory approvals may have a material adverse
effect on these areas. Additionally, companies in these areas may be subject to
risks of developing technologies, competitive pressures and other factors and
are dependent upon consumer and business acceptance as new technologies evolve.
Concentration. The volatile nature of the technology and science areas could
cause price appreciation in a particular security or securities that results in
that investment increasing its concentration in the portfolio, in some cases,
well above the level at which it was originally purchased. For instance, even
though an investment may have been purchased at a time when it represented less
than 25% of the portfolio, appreciation may cause that concentration to be
significantly greater than 25% at variou times in a rising market.
The Adviser reviews the positions of the Fund on a regular basis to ensure that
all tax and regulatory requirements are maintained. In instances where the value
of an investment has risen above 25%, the Adviser will evaluate the
appropriateness of that level of investment in light of the overall investment
strategy of the Fund and applicable regulatory and tax implications.
Smaller Capitalized Companies. The Adviser believes that smaller capitalized
companies generally have greater earnings and sales growth potential than larger
capitalized companies. The level of risk will be increased to the extent that
the Fund has significant exposure to smaller capitalized or unseasoned companies
(those with less than a three-year operating history). Investments in smaller
capitalized companies may involve greater risks, such as limited product lines,
markets and financial or managerial resources. In addition, less
frequently-traded securities may be subject to more abrupt price movements than
securities of larger capitalized companies.
Capital Gains. During the Fund's current fiscal year, substantial capital gains
were realized on sales of securities. These capital gains are material ($6.13 of
long-term capital gain and $8.92 of short-term capital gain per share based upon
the outstanding shares of the Fund as of April 30, 1999). In accordance with
applicable tax law requirements and the Fund's procedures, it anticipates
distributing its net long-
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term capital gains and net investment income, including any net short-term
capital gains either immediately prior to or shortly after the end of its
taxable year ending October 31, 1999. Any Investor who acquires shares before
the Fund pays this dividend will be required to include that dividend in his/her
income even though the dividend represents, in effect, a return of capital. A
distribution of long- term capital gain (increased or decreased by all other
realized long-term capital gain and long or short-term capital losses incurred
during the course of the fiscal year) will be taxed to investors as long-term
capital gain for federal income tax purposes. A distribution of short-term
capital gain (increased or decreased by all other realized short-term capital
gains or ordinary income and long or short-term capital or ordinary losses
incurred during the course of the fiscal year) will be taxed to investors as
ordinary income for federal income tax purposes. Although there is no certainty
that the Fund will pay a dividend or at what level the dividend will be paid,
potential investors should be aware that these capital gains (if not reduced by
other transactions during the course of the fiscal year) may have material tax
consequences to them and should consult their tax advisers before investing in
the Fund.
Borrowing. The Fund may from time to time borrow money from banks for temporary,
extraordinary or emergency purposes. Such borrowing will not exceed an amount
equal to one-third of the value of the Fund's total assets less its liabilities
and will be made at prevailing interest rates. The Fund may not, however,
purchase additional securities while borrowings exceed 5% of its total assets.
Illiquid Securities. The Fund may invest up to 15% of its net assets in illiquid
securities, including restricted securities (i.e., securities subject to certain
restrictions on their transfer) and other securities that are not readily
marketable, such as repurchase agreements maturing in more than one week,
provided, however, that any illiquid securities purchased by the Fund will have
been registered under the Securities Act of 1933 or be securities of a class, or
convertible into a class, which is already publicly traded and the issuer of
which is filing reports required by Section 13 or 15 of the Securities Exchange
Act of 1934.
Temporary Investments. When the Adviser believes that adverse business or
financial conditions warrant a temporary defensive position, the Fund may invest
up to 100% of its assets in short-term instruments such as commercial paper,
bank certificates of deposit, bankers' acceptances, variable rate demand
instruments or repurchase agreements for such securities and securities of the
U.S. Government and its agencies and instrumentalities, as well as cash and cash
equivalents denominated in foreign currencies. Investments in domestic bank
certificates of deposit and bankers' acceptances will be limited to banks that
have total assets in excess of $500 million and are subject to regulatory
supervision by the U.S. Government or state governments. While taking a
defensive position, the Fund may not achieve its investment objective.
Repurchase Agreements. The Fund's portfolio position in cash or cash equivalents
may include entering into repurchase agreements. A repurchase agreement is an
instrument under which an investor purchases a U.S. Government security from a
vendor, with an agreement by the vendor to repurchase the security at the same
price, plus interest at a specified rate. Repurchase agreements may be entered
into with member banks of the Federal Reserve System or "primary dealers" (as
designated by the Federal Reserve Bank of New York) in U.S. Government
securities. Repurchase agreements usually have a short duration, often less than
one week. The Fund requires continual maintenance by the Fund's custodian of the
market value of underlying collateral in amounts equal to, or in excess of, the
value of the repurchase agreement including the agreed upon interest. If the
institution defaults on the repurchase agreement, the Fund will retain
possession of the underlying securities. In addition, if bankruptcy proceedings
are commenced with respect to the seller, realization on the collateral by the
Fund may be delayed or limited and the Fund may incur additional costs. In such
case the Fund will be subject to risks associated with changes in the market
value of the collateral securities. The Fund intends to limit repurchase
agreements to transactions with institutions believed by the Adviser to present
minimal credit risk. Repurchase agreements may be considered to be loans under
the Investment Company Act of 1940, as amended.
Year 2000 Compliance. As the Year 2000 approaches, an issue has emerged
regarding how existing application software programs and operating systems can
accommodate this date value. Failure to adequately address this issue could have
potentially serious repercussions. The Adviser is in the process of
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working with the Fund's service providers to prepare for the Year 2000. Based on
information currently available, the Adviser does not expect that the Fund will
incur significant operating expenses or be required to incur materials costs to
be Year 2000 compliant. Although the Adviser does not anticipate that the Year
2000 issue will have a material impact on the Fund's ability to provide service
at current levels, there can be no assurance that steps taken in preparation for
the Year 2000 will be sufficient to avoid any adverse impact on the Fund. The
Year 2000 problem may also adversely affect issuers of the Securities contained
in the Fund to varying degrees based upon various factors, and these may have a
corresponding adverse effect on the Fund's performance. The Manager is unable to
predict what effect, if any, the Year 2000 problem will have on such issues.
Non-Diversified Status. A "non-diversified" fund has the ability to take larger
positions in a smaller number of issuers. Because the appreciation or
depreciation of a single stock may have a greater impact on the net asset value
of a non-diversified fund, its share price can be expected to fluctuate more
than a comparable diversified fund. This fluctuation, if significant, may affect
the performance of the Fund.
MANAGEMENT, ORGANIZATION AND CAPITAL STRUCTURE
Adviser. Amerindo Investment Advisors Inc. (the "Adviser" or "Amerindo"), a
registered investment adviser, is a California corporation with its principal
office located at One Embarcadero, Suite 2300, San Francisco, California 94111.
The Adviser, an emerging growth stock manager specializing in the technology and
healthcare sectors, had assets under management of approximately $2.5 billion as
of December 31, 1998. Alberto W. Vilar and Dr. Gary A. Tanaka are primarily
responsible for the day-to-day management of the Fund's portfolio. Their
biographies are as follows:
Alberto W. Vilar, 58, has been Chairman of the Board of Directors and Chief
Executive Officer of the Fund since its inception. He began his career with
Citibank N.A. in New York in 1964 and worked there as an International Credit
Officer until 1967. From 1967 to 1971, he served as Vice President, Portfolio
Manager and Manager of the Investment Management Division of Drexel Burnham
Lambert in New York. From 1971 to 1973, he served as Executive Vice President,
Portfolio Manager and Director of Equity Strategy at M.D. Sass Investor Services
in New York. In 1973, he became Vice President and Portfolio Manager of
Endowment Management & Research Corporation in Boston. From 1977 to 1979, he
served as Senior Vice President, Director of Research, Chief Investment
Strategist and Partnership Manager of the Boston Company in Boston. He founded
the predecessors of Amerindo Advisors (U.K.) Limited and Amerindo Investment
Advisors, Inc. (Panama) in 1979 and has served since then as a Principal
Portfolio Manager He holds the degrees of B.A. in Economics from Washington &
Jefferson College and an M.B.A. from Iona College, and he completed the Doctoral
Studies Program in Economics at New York University. Mr. Vilar was awarded an
Honorary Doctorate of Humanities degree from Washington & Jefferson College. He
has been a Chartered Financial Analyst since 1975.
Dr. Gary A. Tanaka, 55, has been a Director and President of the Fund since its
inception. He served as a Portfolio Manager for Crocker Bank in San Francisco
from 1971 to 1977, and as a Partnership Manager for Crocker Investment
Management Corp. in San Francisco from 1978 to 1980. From 1975 to 1980, he also
served as a Consultant to Andron Cechettini & Associates in San Francisco. In
1980, he joined the predecessors of Amerindo Advisors (U.K.) Limited and
Amerindo Investment Advisors, Inc. (Panama) as Principal Portfolio Manager and
has served in this position since that time. Dr. Tanaka holds the degrees of
B.S. in Mathematics from Massachusetts Institute of Technology and Ph.D. in
Applied Mathematics from Imperial College, University of London.
Pursuant to the Investment Advisory Contract for the Fund, the Adviser manages
the Fund's portfolio of securities and makes the decisions with respect to the
purchase and sale of investments subject to the general control of the Board of
Directors of the Fund.
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Adviser's Fees. Pursuant to the terms of the Investment Advisory Agreement, the
Fund will pay an annual advisory fee paid monthly equal to 1.50% of the Fund's
average daily net assets. This fee is higher than the fee paid by most other
mutual funds, however, the Board of Directors believes it to be reasonable in
light of the advisory services the Fund receives. The Adviser will also receive
the service fees of 0.25% of each Class's average daily net assets. Any portion
of the advisory fees received by the Adviser may be used by the Adviser to
provide investor and administrative services and for distribution of Fund
shares. The Adviser may voluntarily waive a portion of its fee or assume certain
expenses of the Fund. This would have the effect of lowering the overall expense
ratio of the Fund and of increasing yield to investors in the Fund. See
"Voluntary Expense Subsidization" in Section V.A.2 of the Statement of
Additional Information.
Performance of the Adviser. In the early 1980s, Amerindo pioneered the
management of dedicated emerging technology portfolios of high technology and
healthcare stocks designed to service the financial needs of the institutional
investor. As reported in the Wall Street Journal's Money Manager Scorecard on
July 24, 1996, May 1, 1996 and January 18, 1996, Amerindo ranked first for its
one-year and five-year performance, respectively. Amerindo did not have a
ten-year performance number. Amerindo was not ranked by the Money Manager
Scorecard during 1997. Each Money Manager Scorecard represents a ranking at June
30, 1996, March 31, 1996 and December 31, 1995, respectively, of the estimated
stock-market performance of U.S. money managers with over $100 million under
management. The 1, 5 and 10-year performance rankings were compiled by Thompson
Investment Software, CDA Investment Technologies, utilizing data provided by
CDA/Spectrum, with respect to data on 754, 409, and 217 managers, respectively.
This performance information relates to Amerindo's management of institutional
accounts and should not be interpreted as indicative of future performance of
the Fund. The performance figures upon which these rankings were based do not
include a reduction for any charges or expenses with respect to such accounts.
Further, Amerindo has not independently verified the accuracy, completeness or
process underlying the performance figures upon which these rankings were based
and makes no representation as to the accuracy or completeness of this
performance information.
The performance of the Fund may be compared in various financial and news
publications to the performance of various indices and investments for which
reliable performance data is available. The performance of the Fund may be
compared in publications to averages, performance rankings, or other information
prepared by nationally recognized mutual fund ranking and statistical services.
As with other performance data, performance comparisons should not be considered
representative of the Fund's relative performance for any future period.
Amerindo's equity composite includes the portfolios managed in substantially
similar styles to that of the Fund of all clients which are institutions, such
as qualified retirement plans, charitable foundations and educational endowment
funds, for which investment income and realized capital gains are exempt from
Federal income tax, and for which Amerindo has full discretionary authority to
manage in accordance with the firm's equity strategy for separate accounts.
Amerindo has elected to comply with the American Association for Investment
Management and Research presentation standards for the period October 1, 1987
(inception of the composite) through December 31, 1998. An independent
accounting firm has conducted an examination with respect to Amerindo for the
period October 1, 1987 through December 31, 1998, and has confirmed that
Amerindo's performance presentation contained herein for such period conforms
with AIMR standards. The Independent Accountants' Report is available upon
request. AIMR has not been involved with the preparation or review of the
Independent Accountants' Report. The AIMR method of performance differs from
that of the SEC and can contain different results. The private accounts listed
do not have to comply with the Investment Company Act of 1940 or Subchapter M of
the Internal Revenue Code. If this compliance was necessary, the account's
performance could be adversely affected.
The following Schedule represents the rates of return for the equity composite
for the annual investment periods from January 1, 1989 through December 31,
1998. Accounts benchmarks are the Standard &
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Poor's 500 - Composite Stock Index, Hambrecht & Quist Growth Index and the
Russell 2000 Growth Index. The Independent Accountants' Report relates to their
examination of Amerindo's performance from the inception of the composite
October 1, 1987 through December 31, 1998, which is in accordance with AIMR
standards.
The following performance information relates to Amerindo's management of
institutional accounts. This data should not be interpreted as the Fund's
performance nor is it indicative of future performance of the Fund.
<TABLE>
<CAPTION>
Asset Weighted Asset Weighted Russell
Composite Rate Composite Rate H&Q 2000
of Return Net of of Return Gross of S&P Growth Growth
Year Advisory Fees Advisory Fees 500 Index Index Index
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1989 40.67% 42.49% 31.44% 17.41% 20.16%
1990 6.75% 8.49% -3.19% 3.89% -17.41%
1991 76.52% 78.39% 30.55% 94.49% 51.18%
1992 7.61% 8.73% 7.68% -3.57% 7.77%
1993 15.08% 16.42% 10.00% 7.81% 13.36%
1994 -2.66% -1.53% 1.33% 3.38% -2.43%
1995 87.51% 89.39% 37.50% 61.72% 31.04%
1996 8.04% 9.61% 23.22% 10.86% 11.26%
1997 -26.61% -26.05% 33.34% 2.39% 12.95%
1998 61.67% 64.14% 28.58% 45.04% 1.23%
Annualized rates of return for the period January 1, 1989 to December 31, 1998
22.71% 24.33% 20.36% 20.16% 11.82%
</TABLE>
Composite returns are shown both gross and net of investment
management fees. The composite is derived from all fully
discretionary, tax-free sheltered equity accounts in this style with
assets above $5,000,000. Past performance is no guarantee of future
results.
The Fund's total return for the period October 28, 1996 (commencement of
operations) through December 31, 1998 was 15.22%. The Fund's total return for
the calendar year ended December 31, 1998 was 84.67%.
PRICING OF FUND SHARES
Net asset value per share for each Class is determined by subtracting from the
value of such Class's total assets the amount of its liabilities and dividing
the remainder by the number of its outstanding shares. The value of each
security for which readily available market quotations exist is based on a
decision as to the broadest and most representative market for the security. The
value is based either on the last sale price on a national securities exchange,
or, in the absence of recorded sales, at the readily available closing bid price
on such exchanges, or at the quoted bid price in the over-the-counter market.
Assets for which market quotations are not readily available are valued in
accordance with procedures established by the Fund's Board of Directors,
including use of an independent pricing service or services which use prices
based on yields or prices of comparable securities, indications as to values
from dealers and general market conditions.
The Fund computes each Class's net asset value once daily on Monday through
Friday, at the regularly scheduled close of normal trading on the New York Stock
Exchange, which normally occurs at 4:00 p.m. Eastern time, except on New Year's
Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
10
<PAGE>
HOW TO PURCHASE SHARES
Initial Investments by Wire. You may purchase shares of each Class of the Fund
by wiring immediately available federal funds (subject to each Class's minimum
investment) to Bankers Trust Company from your bank. Your bank may charge a fee
for doing so (see instructions below). The minimum initial investment in Class A
and Class D shares is $2,500 ($1,000 for IRA accounts), each of which may be
waived by the Fund.
If money is to be wired, you must call the Transfer Agent at 1-888-TECH FUND to
set up your account and obtain an account number. You should be prepared at that
time to provide the information on the application. Then you should provide your
bank with the following information for purposes of wiring your investment:
Bankers Trust Company
New York, New York
ABA# 021001033
Account # 01-465-547
F/B/O Amerindo Technology Fund
Ref. (Class)
Fund Acct. No.____________________
Social Security or Tax Identification No._______________
You are required to mail a signed application to the Transfer Agent at the above
address in order to complete your initial wire purchase. Wire orders will be
accepted only on a day on which the Fund and the Custodian and Transfer Agent
are open for business. A wire purchase will not be considered made until the
wired money is received and the purchase accepted by the Fund. Shareholders will
receive the next determined net asset value per share after receipt of such wire
and the acceptance of the purchase by the Fund. Any delays which may occur in
wiring money, including delays which may occur in processing by the banks, are
not the responsibility of the Fund or the Transfer Agent. There is presently no
fee for the receipt of wired funds, but the right to charge shareholders for
this service is reserved by the Fund.
Initial Investments by Mail. An account may be opened by completing and signing
an Account Application and mailing it to the Fund at the address noted below,
together with a check (subject to each Class's minimum investment) payable to:
Amerindo Technology Fund
P.O. Box 446
Portland, ME 04112
Payment for the purchase of shares received by mail will be credited to a
shareholder's account at the net asset value per share of the particular Class
next determined after receipt. Such payment need not be converted into federal
funds (monies credited to the Fund's custodian bank by a Federal Reserve Bank)
before acceptance by the Fund's Distributor. In the event that there are
insufficient funds to cover a check, such prospective investor or investors will
be assessed a $15.00 charge.
Additional Investments. Additional investments may be made at any time (subject
to the minimum subsequent investment in Class A and Class D shares of $500) by
purchasing shares of the particular Class at net asset value, plus any
applicable sales load, by mailing a check to the Fund at the address noted under
"Initial Investments by Mail" (payable to Amerindo Technology Fund Class A/Class
D) or by wiring monies to the clearing bank as outlined above, or by telephone
with payment by Automated Clearing House ("ACH"), electronically transferring
frunds from the investor's designated bank account. In order to purchase shares
by telephone and make payment by ACH, an investor must complete the appropriate
sections of the application. Shareholders who have authorized telephone
purchases may effect purchases by calling the Transfer Agent at 1-888-TECH FUND.
11
<PAGE>
Other Purchase Information. Investors may open accounts in the Fund only through
the exclusive Distributor for the Fund. SEI Investments Distribution Co., for
nominal consideration and as agent for the Fund, will solicit orders for the
purchase of Fund shares, provided that any subscriptions and orders will not be
binding on the Fund until accepted by the Fund as principal.
The Fund reserves the right to redeem, after 60 days' written notice, shares in
accounts that fall below the minimum balance by reason of redemption and return
the proceeds to investors. The investors may restore and maintain a minimum
balance during the notice period.
Shareholders that purchased Class D shares during the period that the Fund was
not offering Class A shares for sale will remain Class D shareholders after the
date that Class A shares are offered for sale. Investors who purchased Class D
shares during such period are not required to meet the $25,000 minimum balance
requirement but will be required to maintain a minimum balance of $2,500.
The purchase price paid for shares of each Class is the current public offering
price, that is, the next determined net asset value of the shares after the
order is placed plus any applicable sales charge, with respect to Class A
shares. See "Net Asset Value" herein. The sales load, with respect to Class A
shares, is a one-time charge paid at the time of purchase of shares, most of
which ordinarily goes to the investor's broker-dealer as compensation for the
services provided the investor. Class A shares of the Fund are sold on a
continuous basis with a maximum front-end sales charge of 5.75% of the net asset
value per share. Class D shares are sold without a front-end sales load. Volume
discounts are provided for both initial purchase, as well as for additional
purchases of Class A shares of the Fund. See "Reduction or Elimination of Sales
Loads" herein. The Fund reserves the right to reject any subscription for
shares.
The Fund must receive an order and payment by the close of business for the
purchase to be effective and dividends to be earned on the same day. If funds
are received after the close of business, the purchase will become effective and
dividends will be earned on the next business day.
Shares of the Fund may be purchased in exchange for securities which are
permissible investments of the Fund, subject to the Adviser's determination that
the securities are acceptable. Securities accepted in exchange will be valued at
the mean between their bid and asked quotations. In addition, securities
accepted in exchange must be liquid securities that are not restricted as to
transfer and will have a value that is readily ascertainable (and not
established only by evaluation procedures) as evidenced by a listing on NASDAQ,
the American Stock Exchange or the New York Stock Exchange, or on the basis of
prices provided by a pricing service. The Fund and the Adviser reserve the right
to reject any such purchase order. Shareholders will bear any costs associated
with a purchase of Fund shares through such an exchange.
All purchases of the Fund's shares will be made in full and fractional shares of
the Fund calculated to three decimal places. The Fund does not intend to issue
certificates evidencing Fund shares.
Shares of the Fund may also be sold to corporations or other institutions such
as trusts, foundations or broker-dealers purchasing for the accounts of others
("Shareholder Organizations"). Investors purchasing and redeeming shares of the
Fund through a Shareholder Organization may be charged a transaction-based fee
or other fee for the services of such organization. Each Shareholder
Organization is responsible for transmitting to its customers a schedule of any
such fees and information regarding any additional or different conditions
regarding purchases and redemptions. Customers of Shareholder Organizations
should read this Prospectus in light of the terms governing accounts with their
organization. The Fund does not pay to or receive compensation from Shareholder
Organizations for the sale of the Fund's shares.
Purchases of Class D shares at net asset value may be made by investment
advisors or financial planners who place trades for their own accounts or the
accounts of their clients and who charge a management, consulting or other fee
for their services and by clients of such investment advisors or financial
planners who place trades for their own accounts if the accounts are linked to
the master account of such investment advisor or financial planner on the books
and records of the investment advisor or financial planner.
12
<PAGE>
The Fund has available a form of Individual Retirement Account ("IRA") which may
be obtained from the Fund that permits the IRA to invest in either Class A or
Class D shares of the Fund. The minimum initial investment for all retirement
plans investing in either Class of the Fund is $1,000 with a subsequent minimum
investment of $500. Investors desiring information regarding investments through
IRAs should write or telephone the Fund.
FOR CLASS A SHAREHOLDERS ONLY REDUCTION OR ELIMINATION OF SALES LOADS
Volume Discounts. Volume discounts are provided if the total amount being
invested in Class A shares of the Fund reaches the levels indicated in the sales
load schedule provided below. The applicable volume discount available to
investors is determined by aggregating all Class A share purchases of the Fund.
Volume discounts are also available to investors making sufficient additional
purchases of Class A shares. The applicable sales charge may be determined by
adding to the total current value of Clas A shares already owned in the Fund the
value of new purchases computed at the offering price on the day the additional
purchase is made. For example, if an investor previously purchased, and still
holds, Class A shares worth $40,000 at the current offering price and purchases
an additional $10,000 worth of Class A shares, the sales charge applicable to
the new purchase would be that applicable to the $50,000 to $99,999 bracket in
the sales load schedule provided below.
<TABLE>
<CAPTION>
Amount of sales charge
reallowed to dealers as
Sales Charge as a % of a percent
Amount of Purchase Sales Charge Net Amount Invested of offering price
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.50%
$50,000 but less than $100,000 4.30% 4.71% 4.25%
$100,000 but less than $250,000 3.50% 3.63% 3.25%
$250,000 but less than $500,000 2.50% 2.56% 2.25%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 or more None None None
</TABLE>
Letter of Intent. Any investor in Class A shares may sign a Letter of Intent,
available from the Fund, stating an intention to make purchases of Class A
shares totaling a specified amount on an aggregate basis within a period of
thirteen months. Purchases within the thirteen-month period can be made at the
reduced sales load applicable to the total amount of the intended purchase noted
in the Letter of Intent. If a larger purchase is actually made during the
period, then a downward adjustment will be made to the sales charge based on the
actual purchase size. Any shares purchased within 90 days preceding the actual
signing of the Letter of Intent are eligible for the reduced sales charge and
the appropriate price adjustment will be made on those share purchases. A number
of shares equal to 5% of the dollar amount of intended purchases specified in
the Letter of Intent is held in escrow by the Distributor until the purchases
are completed. Dividends and distributions on the escrowed Class A shares are
paid to the investor. If the intended purchases are not completed during the
Letter of Intent period, the investor is required to pay the Fund an amount
equal to the difference between the regular sales load applicable to a single
purchase of the number of Class A shares actually purchased and the sales load
actually paid. If such payment is not made within 20 days after written request
by the Fund, then the Fund has the right to redeem a sufficient number of
escrowed Class A shares to effect paymen of the amount due. Any remaining
escrowed Class A shares are released to the investor's account. Agreeing to a
Letter of Intent does not obligate you to buy, or the Fund to sell, the
indicated amount of Class A shares. You should read the Letter of Intent
carefully before signing.
13
<PAGE>
Purchases At Net Asset Value. There is no initial sales charge for "Qualified
Persons." Qualified Persons is defined to include persons who are active or
retired Trustees, Directors, officers, partners, employees, clients, independent
professional contractors, shareholders or registered representatives (including
their spouses and children) of the Investment Adviser, Distributor or any
affiliates or subsidiaries thereof (the Directors, officers or employees of
which shall also include their parents and siblings for all purchases of Fund
shares) or any Director, officer, partner, employee or registered representative
(including their spouses and children) of any Broker-Dealer who has executed a
valid and currently active selling agreement with the Distributor.
HOW TO REDEEM SHARES
Shares of the Fund may be redeemed by mail, or, if authorized, by telephone. The
value of shares redeemed may be more or less than the purchase price, depending
on the market value of the investment securities held by the Fund.
By Mail. The Fund will redeem its shares at the net asset value next determined
after the request is received in "good order." The net asset value per share of
the Fund is determined as of 4:00 p.m., New York time, on each day that the New
York Stock Exchange, Inc. (the "NYSE"), the Fund and the Distributor are open
for business. Requests should be addressed to Amerindo Technology Fund, P.O. Box
446, Portland, ME 04112.
Requests in "good order" must include the following documentation:
(a) a letter of instruction, if required, or a stock assignment
specifying the number of shares or dollar amount to be redeemed,
signed by all registered owners of the shares in the exact names in
which they are registered;
(b) any required signature guarantees (see "Signature Guarantees" below);
and
(c) other supporting legal documents, if required, in the case of
estates, trusts, guardianships, custodianships, corporations, pension
and profit sharing plans and other organizations.
Signature Guarantees. To protect shareholder accounts, the Fund and its transfer
agent from fraud, signature guarantees are required to enable the Fund to verify
the identity of the person who has authorized a redemption from an account.
Signature guarantees are required for (1) redemptions where the proceeds are to
be sent to someone other than the registered shareholder(s) and the registered
address and (2) share transfer requests. Signature guarantees may be obtained
from certain eligible financial institutions, including but not limited to, the
following: banks, trust companies, credit unions, securities brokers and
dealers, savings and loan associations and participants in the Securities
Transfer Association Medallion Program ("STAMP"), the Stock Exchange Medallion
Program ("SEMP") or the New York Stock Exchange Medallion Signature Program
("MSP"). Shareholders may contact the Fund at 1-888-TECH FUND for further
details.
By Telephone. Provided the Telephone Redemption Option has been authorized, a
redemption of shares may be requested by calling the Fund at 1-888-TECH FUND and
requesting that the redemption proceeds be mailed to the primary registration
address or wired per the authorized instructions. If the Telephone Redemption
Option is authorized, the Fund and its transfer agent may act on telephone
instructions from any person representing himself or herself to be a shareholder
and believed by the Fund or its transfer agent to be genuine. The transfer
agent's records of such instructions are binding and shareholders, and not the
Fund or its transfer agent, bear the risk of loss in the event of unauthorized
instructions reasonably believed by the Fund or its transfer agent to be
genuine. The Fund will employ reasonable procedures to confirm that instructions
communicated are genuine and, if it does not, it may be liable for any losses
due to unauthorized or fraudulent instructions. The procedures employed by the
Fund in connection with
14
<PAGE>
transactions initiated by telephone may include tape recording of telephone
instructions and requiring some form of personal identification prior to acting
upon instructions received by telephone.
Optional Redemption by the Fund. Investors are required to maintain a minimum
account balance of at least $2,500 for Class A and Class D shares. The Fund
reserves the right to redeem, after 60 days' written notice, shares in accounts
that fall below the minimum balance by reason of redemption and return the
proceeds to investors. The investors may restore and maintain a minimum balance
during the notice period.
Further Redemption Information. Redemption proceeds for shares of the Fund
recently purchased by check may not be distributed until payment for the
purchase has been collected, which may take up to fifteen business days from the
purchase date. Shareholders can avoid this delay by utilizing the wire purchase
option.
Other than as described above, payment of the redemption proceeds will be made
within seven days after receipt of an order for a redemption. The Fund may
suspend the right of redemption or postpone the date at times when the NYSE or
the bond market is closed or under any emergency circumstances as determined by
the United States Securities and Exchange Commission (the "SEC").
If the Board of Directors determines that it would be detrimental to the best
interests of the remaining shareholders of the Fund to make a payment wholly or
partly in cash, the Fund may pay the redemption proceeds in whole or in part by
a distribution in-kind of readily marketable securities held by a Fund in lieu
of cash in conformity with applicable rules of the SEC. Investors generally will
incur brokerage charges on the sale of portfolio securities so received in
payment of redemptions.
Redemption Fee. The Fund is designed for long-term investors willing to accept
the risks associated with a long- term investment in the common stocks of
companies in the technology, technology-related and science industries. The Fund
is not designed for short-term traders whose frequent purchases and redemptions
can generate substantial cash flow. These cash flows can unnecessarily disrupt
the Fund's investment program. Short-term traders often redeem when the market
is most turbulent, thereby forcing the sale of underlying securities held by the
Fund at the worst possible time as far as long-term investors are concerned.
Additionally, short-term trading drives up the Fund's transaction
costs--measured by both commissions and bid/ask spreads--which are borne by the
remaining long-term investors. For these reasons, the Fund assesses a 3.00% fee
on the redemption of shares held for less than one year. Redemption fees will be
paid to the Fund to help offset transaction costs. The fee does not apply to any
shares purchased through reinvested distributions (dividends and capital gains).
This fee also does not apply to clients of the Adviser and its affiliates that
hold shares in IRA accounts or in retirement plans (such as 401(k), 403(b), 457,
Keogh, Profit Sharing Plans, and Money Purchase Pension Plans).
The Fund will use the first-in, first-out (FIFO) method to determine the
one-year holding period. Under this method, the date of the redemption will be
compared to the earliest purchase date of shares held in the account. If this
holding period is less than one year, the redemption fee will be assessed. In
determining "one year" the Fund will use the anniversary date of a transaction.
Thus, shares purchased on April 5, 1999, for example, will be subject to the fee
if they are redeemed on or prior to April 4, 2000. If they are redeemed on or
after April 5, 2000, the shares will not be subject to the redemption fee. The
redemption fee will be applied on redemptions of each investment made by a
shareholder that does not remain in the Fund for a one-year period from the date
of purchase.
DIVIDENDS AND DISTRIBUTIONS
At least 90% of each Class's net investment income will be declared as dividends
and paid annually. If an investor's shares are redeemed prior to the date on
which dividends are normally declared and paid, accrued but unpaid dividends
will be paid with the redemption proceeds. Substantially all the realized net
capital gains for each Class, if any, are declared and paid on an annual basis.
Dividends are payable to
15
<PAGE>
investors of record at the time of declaration. For a discussion of the taxation
of dividends or distributions, see "Taxes."
The net investment income of each Class for each business day is determined
immediately prior to the determination of net asset value. Net investment income
for other days is determined at the time net asset value is determined on the
prior business day. Shares of each Class earn dividends on the business day
their purchase is effective but not on the business day their redemption is
effective. See "Purchase of Shares" and "Redemption of Shares."
Choosing a Distribution Option. Distribution of dividends from each Class may be
made in accordance with several options. A shareholder may select one of three
distribution options:
1 Automatic Reinvestment Option. Both dividends and capital gains
distributions will be automatically reinvested in additional shares of the
Fund unless the investor has elected one of the other two options.
2 Cash Dividend Option. Dividends will be paid in cash, and capital gains, if
any, will be reinvested in additional shares.
3 All Cash Option. Both dividends and capital gains distributions will be
paid in cash.
TAX CONSEQUENCES
The Fund intends to elect to qualify as a regulated investment company under the
Internal Revenue Code of 1986, effective for its fiscal year beginning November
1, 1998. By qualifying, the Fund will generally not be subject to Federal income
tax on net ordinary income and net realized capital gains paid out to its
stockholders. The Fund can also avoid an annual 4% excise tax if it distributes
substantially all of its taxable income and capital gain each year. The Fund's
policy is to distribute as dividends each year 100% (and in no event less than
90%) of its investment company taxable income (which includes interest,
dividends and net short term capital gains). The Fund has adopted a policy of
declaring dividends annually. Distributions of net ordinary income and net
short-term capital gains are taxable to stockholders as ordinary income.
Although corporate stockholders would generally be entitled to the
dividends-received deduction to the extent that the Fund's income is derived
from qualifying dividends from domestic corporations, the Fund does not believe
that any of its distributions will qualify for this deduction.
The excess of net long-term capital gains over net short-term capital losses
realized and distributed by the Fund as capital gains distributions is taxable
to stockholders as long-term capital gains, without regard to the length of time
the stockholder may have held its shares in the Fund. Long-term capital gains
distributions are not eligible for the dividends-received deduction referred to
above. Long-term capital gains on sales of securities are currently taxable at a
maximum rate of 20% for non-corporate shareholders. Capital gain dividends,
designated in a notice mailed to investors not later than 60 days after the Fund
taxable year closes, will be taxed as long-term capital gain without regard to
the length of time for which the investor has held its shares. In determining
the amount of capital gains to be distributed, any capital loss carry over from
prior years will be taken into account in determining the amount of net long
term capital gain. However, if an investor receives a capita gain dividend and
sells shares after holding them for six months or less (not including, for
purposes of determining the length of the holding period, periods during which
the investor holds an offsetting position), then any loss realized on the sale
will be treated as long-term capital loss to the extent of such capital gain
dividend.
Distributions are taxable to investors whether received in cash or reinvested in
additional shares of the Fund. Any dividend or distribution received by a
stockholder shortly after the purchase of shares will reduce the net asset value
of the shares by the amount of the dividend or distribution. Furthermore, such
dividend or distribution, is subject to tax even though it is in effect, a
return of capital.
The redemption of shares may result in the stockholder's receipt of more or less
than the stockholder paid for its shares and, thus, in a taxable gain or loss to
the stockholder. If the redeemed shares have been held for more than one year,
the stockholder will generally realize a long-term capital gain or loss.
16
<PAGE>
The Fund is required, subject to certain exemptions, to withhold at a rate of
31% from dividends paid or credited to stockholders and from the proceeds from
the redemption of Fund shares, if a correct taxpayer identification number,
certified when required, is not on file with the Fund, or if the Fund or the
shareholder has been notified by the Internal Revenue Service that the
shareholder is subject to these backup withholding rates. Corporate stockholders
are not subject to this requirement.
If the Fund invests in securities of foreign issuers, it may be subject to
withholding and other similar income taxes imposed by a foreign country.
Dividends and distributions may be subject to state and local taxes.
Dividends paid or credited to accounts maintained by non-resident shareholders
may also be subject to U.S. non-resident withholding taxes. You should consult
your tax adviser regarding specific questions as to Federal, state and local
income withholding taxes.
DISTRIBUTION ARRANGEMENTS
Distributor. SEI Investments Distribution Co. ("SIDCO"), an affiliate of the
Administrator, has entered into a distribution agreement with the Fund to serve
as the Fund's distributor. SIDCO will be entitled to receive a distribution fee
equal to 0.25% of the Class A shares' average daily net assets under the terms
of the Plan and will pay the promotional and advertising expenses related to the
distribution of the Fund's shares and for the printing of all Fund prospectuses
used in connection with the distribution and sale of Fund shares. In addition,
pursuant to such distribution agreement, SIDCO may use a portion of the
distribution fee to compensate financial intermediaries for providing
distribution assistance with respect to the sale of Class A shares. See
"Management of Fund" in the Statement of Additional Information.
12b-1 Plan. The Fund, on behalf of each Class, has adopted a distribution and
service plan, pursuant to Rule 12b-1 under the Investment Company Act (the
"Rule"). The Rule provides that an investment company which bears any direct or
indirect expense of distributing its shares must do so only in accordance with a
plan permitted by the Rule. The Plan provides that each Class will compensate
the Adviser for certain expenses and costs incurred in connection with providing
shareholder servicing and maintaining shareholder accounts and to compensate
parties with which it has written agreements and whose clients own shares of
each Class for providing servicing to their clients ("shareholder servicing" ),
which is subject to a maximum service fee of 0.25% per annum of each Class's
average daily net assets. Because these fees are paid out of the Fund's assets
on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges. The
Plan also provides that the Distributor is paid a fee equal to 0.25% of Class
A's average daily net assets, on an annual basis, to enable it to provide
promotional support to the Fund and to make payments to broker-dealers and other
financial institutions with which it has written agreements and whose clients
are Class A shareholders (each a "broker-dealer") for providing distribution
assistance. Fees paid under the Plan may not be waived for individual
shareholders.
Each shareholder servicing agent that the Adviser retains will, as agent for its
customers, among other things: (i) answer customer inquiries regarding account
status and history, the manner in which purchases and redemptions of shares of
the Fund may be effected and certain other matters pertaining to the Fund; (ii)
assist shareholders in designating and changing dividend options, account
designations and addresses; (iii) provide necessary personnel and facilities to
establish and maintain shareholder accounts and records; (iv) assist in
processing purchase and redemption transactions; (v) arrange for the wiring of
funds; (vi) transmit and receive funds in connection with customer orders to
purchase or redeem shares; (vii) verify and guarantee shareholder signatures in
connection with redemption orders and transfers and changes in shareholder
designated accounts; (viii) furnish (either separately or on an integrated basis
with other reports sent to a shareholder by the Fund) quarterly and year-end
statements and confirmations in a timely fashion after activity is generated in
the account; (ix) transmit, on behalf of the Fund, proxy statements, annual
reports, updating prospectuses and other communications from the Fund to
shareholders; (x) receive, tabulate and
17
<PAGE>
transmit to the Fund, proxies executed by shareholders with respect to meetings
of shareholders of the Fund; and (xi) provide such other related services as the
Fund or a shareholder may request.
The Plan provides that the Adviser and the Distributor may make payments from
time to time from their own resources which may include the advisory fee and
past profits for the following purposes: (i) to defray the costs of and to
compensate others, including financial intermediaries with whom the Distributor
or Adviser has entered into written agreements, for performing shareholder
servicing and related administrative functions; (ii) to compensate certain
financial intermediaries for providing assistance in distributing each Class's
shares; (iii) to pay the costs of printing and distributing the Fund's
prospectus to prospective investors; and (iv) to defray the cost of the
preparation and printing of brochures and other promotional materials, mailings
to prospective shareholders, advertising, and other promotional activities,
including the salaries and/or commissions of sales personnel in connection with
the distribution of the Fund's shares. The Distributor or the Adviser, as the
case may be, in their sole discretion, will determine the amount of such
payments made pursuant to the Plan with the shareholder servicing agents and
broker-dealers they have contracted with, provided that such payments made
pursuant to the Plan will not increase the amount which the Fund is required to
pay to the Distributor or the Adviser for any fiscal year under the shareholder
servicing agreements or otherwise. Any servicing fees paid to the Adviser also
may be used for purposes of (i) above and any asset based sales charges paid to
the Distributor also may be used for purposes of (ii), (iii), or (iv) above.
Shareholder servicing agents and broker-dealers may charge investors a fee in
connection with their use of specialized purchase and redemption procedures
offered to investors by the shareholder servicing agents and broker-dealers. In
addition, shareholder servicing agents and broker-dealers offering purchase and
redemption procedures similar to those offered to shareholders who invest in the
Fund directly may impose charges, limitations, minimums and restrictions in
addition to or different from those applicable to shareholders who invest in the
Fund directly. Accordingly, the net yield to investors who invest through
shareholder servicing agents and broker-dealers may be less than by investing in
the Fund directly. An investor should read the Prospectus in conjunction with
the materials provided by the shareholder servicing agent and broker-dealer
describing the procedures under which Fund shares may be purchased and redeemed
through the shareholder servicing agent and broker-dealer.
18
<PAGE>
FINANCIAL HIGHLIGHTS INFORMATION
The following table is intended to help you understand the Fund's financial
performance since its inception. Certain information reflects financial results
for a single Fund share. The total returns in the table represent the rate that
an investor would have earned (or lost) on an investment in the Class A and
Class D shares of the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Morrison, Brown, Argiz &
Co, P.A., whose report, along with the Fund's financial statements, are included
in the annual report, which is available upon request. The table is part of the
Fund's financial statements for the year ended December 31, 1998, which are
available to shareholders upon request.
<TABLE>
<CAPTION>
CLASS A SHARES
For the period
August 3, 1998
(commencement of
operations) through
December 31, 1998
--------------------
<S> <C>
Net asset value, beginning of period $ 8.44
Income (loss) from investment operations: ----------
Net investment loss (0.10)
Net realized and unrealized gain (loss) on investments 5.25
----------
Total from investment operations 5.15
Less distributions: ----------
Dividends from net investment income 0.00
Distributions from realized gains from security transactions 0.00
Total distributions 0.00
----------
Net asset value, end of period $13.59
=========
Total return** 61.02%***
Ratios/supplemental data:
Net assets end of period (in 000's) $ 803
Ratio of expenses to average net assets 2.86%*
Ratio of expenses to average net assets, net of reimbursement 2.50%*
Ratio of net investment income (loss) to average net assets (2.76%)*
Ratio of net investment income (loss) to average net assets,
net of reimbursement (2.40%)*
Portfolio turnover rate 78.46%
</TABLE>
- ------------------
* Annualized
** Based on net asset value per share
*** Not Annualized
19
<PAGE>
<TABLE>
<CAPTION>
CLASS D SHARES
For the period
October 29, 1996
(commencement
of investment
For the fiscal year ended December 31, operations) through
1998 1997 December 31, 1996
---------- -------- --------------------
<S> <C> <C> <C>
Net asset value, beginning of period.............. $ 7.37 $ 9.00 $10.00
Income (loss) from investment operations:
Net investment loss............................... (0.20) (0.16) (0.04)
Net realized and unrealized gain (loss) on
investments.................................. 6.44 (1.47) (0.96)
------- -------- ---------
Total from investment operations.................. 6.24 (1.63) (1.00)
------- -------- ---------
Less distributions:
Dividends from net investment income.............. 0.00 0.00 0.00
Distribution from realized gains from
security transactions........................... 0.00 0.00 0.00
Total distributions............................... 0.00 0.00 0.00
------- -------- ---------
Net asset value, end of period.................... $13.61 $ 7.37 $ 9.00
======= ======== =========
Total return** 84.67 (18.11%) (10.008)***
Ratios/supplemental data:
Net assets end of period (in 000's)................ 64,194 40,191 34,210
Ratio of expenses to average net assets............ 2.75% 2.83% 3.82%*
Ratio of expenses to average net assets, net
of reimbursement................................ 2.25% 2.25% 2.25%*
Ratio of net investment income (loss) to
average net assets.............................. (2.72%) (2.83%) (3.82%)*
Ratio of net investment income (loss) to
average net assets, net of reimbursement........ (2.21%) (2.25%) (2.25%)*
Portfolio turnover rate............................ 78.46% 355.21% 0.00%
</TABLE>
- ----------------------
* Annualized
** Based on net asset value per share
*** Not Annualized
<TABLE>
<CAPTION>
AMERINDO FUNDS INC. For assistance in completing the application,
Mail to: Amerindo Technology Fund call the Amerindo Technology Fund at
P.O. Box 446 1-888-TECH FUND (832-4386)
Portland, ME 04112
Amerindo Technology Fund-New Account Application
- ------------------------------------------------------------------------------------------------------------------------------------
<S><C>
1. INITIAL INVESTMENT
|_| Class A (Broker Class) $_______________ ($2,500 minimum)
|_| Class D $_______________ ($2,500 minimum)
- ------------------------------------------------------------------------------------------------------------------------------------
2. ACCOUNT REGISTRATION
|_| Individual ____________________________________________________________________________ if joint, check one:
first middle last |_| With Right of
Survivorship
|_| Tenants in
Common
|_| Joint Tenant ___________________________________________________________________________ |_| Tenants by the
first middle last Entireties
|_| Uniform Gifts/Transfers to Minors Act _____________________________________________________________________
Custodian's Name
Minor's Birthdate ___/___/___
as Custodian for ________________________________________________ State of Residency________________________
Minor's Name
|_| Corporation, Trust Partnership, or other Entity ____________________________________________________________
Legal Entity Name
______________________________________________________________________________________________________
Trustee's Name (for trust only) Date of Trust (if applicable)
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3. ACCOUNT ADDRESS
Street Address ___________________________________________________________________________________
City/State/Zip ___________________________________________________________________________________
___________________________________________________________________________________
Daytime Telephone ___________________________________________________________________________________
Citizen of: |_| U.S. |_| Other Country _______________________________ (e-mail address) ______________
Country of Residence
- ------------------------------------------------------------------------------------------------------------------------------------
4. SOCIAL SECURITY/TAX IDENTIFICATION NUMBER
___________________________________________________ or ________________________________________________
Social Security Number Taxpayer Identification Number
___________________________________________________
Social Security Number (Joint Tenant)
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------------
5. SOURCE OF INTEREST (PLEASE SPECIFY)
|_| Advertisement ________________________________________ |_| TV/Newspaper _________________________________
|_| Internet |_| Referral _______________________________ |_| Other ________________________________________
- ------------------------------------------------------------------------------------------------------------------------------------
6. DISTRIBUTIONS
Dividends and capital gains will be automatically reinvested unless otherwise indicated. If you wish Dividend/Capital Gains to be
paid in cash, please check the appropriate box.
Dividends are to be: |_| Paid in Cash Capital gains are to be: |_| Paid in Cash
- ------------------------------------------------------------------------------------------------------------------------------------
7. LETTER OF INTENT (LOI) FOR CLASS A SHARES
|_| I agree to the terms of the Letter of Intent and provisions set forth in the Prospectus. Although I am not obligated to do so,
it is my intention to invest over a 13 month period:
|_| $50,000 but less than $100,000 |_| $250,000 but less than $500,000 |_| $1,000,000 or more
|_| $100,000 but less than $250,000 |_| $500,000 but less than $1,000,000
(purchases made within the last 90 days will be applied towards LOI amount)
- ------------------------------------------------------------------------------------------------------------------------------------
8. AUTOMATIC INVESTMENT PLAN
|_| Each month, I would like to have Forum Shareholder Services LLC draw an Automatic Clearing House (ACH) debit electronically
against the account of my Financial Institution listed below, to purchase shares of the AMERINDO TECHNOLOGY FUND.
I understand that the shares of the Fund are purchased on the day of the debit. I also understand that if the automatic purchase
cannot be made due to insufficient funds or stop payment, a $15.00 fee will be assessed.
Please mark one of your personal checks "VOID" and attach the voided check to this application, or fill in the information below. As
soon as your Financial Institution accepts your authorization, debits will be generated and purchases of Fund shares will begin.
Please note that your Financial Institution must be able to accept ACH transactions. Please allow one month for processing of this
Automatic Investment Plan option before the first debit occurs.
Please begin Automatic Investing for me and invest $___________ ($100 minimum) in shares of the Fund on the:
|_| 10th
|_| 20th of each month, or first business day thereafter.
____________________________________________________________________________________________________________________________________
Name of my Financial Institution Address of my Financial Institution Type of Account (checking/savings)
____________________________________________________________________________________________________________________________________
My Financial Institution's ABA Number My Account Number Name(s) on Account
I understand that my ACH debit will be dated each month on the day specified above. I agree that if such debit is not honored
upon presentation, Forum Shareholder Services LLC may discontinue this service, and any purchase of Fund shares may be reversed.
I further understand that the net asset value of the shares of the Fund at the time of such reversal may be less than the net
asset value on the day of the original purchase. Forum Shareholder Services LLC is authorized to redeem sufficient additional
full and fractional shares from my account to make up the deficiency. The Automatic Investment Plan may be discontinued by Forum
Shareholder Services LLC upon 30 days written notice or by the investor by written notice to Forum Shareholder Services LLC
provided the notice is received no later than 5 business days prior to the specified investment date.
____________________________________________________________________________________________________________________________________
Signature of Depositor Signature of Co-Depositor (required for joint accounts) Date
<PAGE>
- ------------------------------------------------------------------------------------------------------------------------------------
9. TELEPHONE REDEMPTIONS
If you do not want telephone redemption privileges, check here. |_|
I (we) authorize The Amerindo Funds and its agents to act upon instructions, from shareholder or dealer of record, received by
telephone or letter, to have amounts wired to my (our) bank account designated below or mailed to the address of record established
for this account. I (we) ratify any such instructions. If you will be utilizing the bank wiring option, please attach a voided check
from your bank account and complete the information below.
____________________________________________________________________________________________________________________________________
Bank Name
____________________________________________________________________________________________________________________________________
Street
____________________________________________________________________________________________________________________________________
City State Zip Code
____________________________________________________________________________________________________________________________________
Account Name
____________________________________________________________________________________________________________________________________
ABA Routing Number Account Number
- ------------------------------------------------------------------------------------------------------------------------------------
10. INFORMATION RELEASE TO AND INSTRUCTIONS FROM DEALER/SERVICE ORGANIZATIONS (IF APPLICABLE)
|_| I hereby authorize the Fund and Forum Shareholder Services LLC to accept instructions from and transmit information (such
as account statements) to the dealer/service organization designated in Section 12 below.
- ------------------------------------------------------------------------------------------------------------------------------------
11. SIGNATURE & CERTIFICATION FOR THE IRS (US INVESTORS ONLY)
Each of the undersigned has the authority and legal capacity to purchase mutual fund shares, each is of legal age in their state and
believes each investment is suitable for themselves. Each of the undersigned has received and read the Prospectus and agrees to its
terms.
Certification - under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me),and
(2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by
the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or
dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding.
Certification Instructions - you must cross out item (2) above if you have been notified by the IRS that you are currently subject
to backup withholding because of underreporting interest or dividends on your tax return.
The Internal Revenue Service does not require your consent to any provision of this document other than the certifications required
to avoid backup withholding.
______________________________________________ ____________________________
Signature Date
_______________________________________________ ____________________________
Signature Date
* If joint account, all tenants must sign
** If corporate account or other legal entity, authorized person must sign in capacity.
- ------------------------------------------------------------------------------------------------------------------------------------
<PAGE>
12. FOR DEALER/SERVICE ORGANIZATION USE ONLY
We hereby submit this application for the purchase of shares of the Fund in accordance with the terms of our selling agreement
with SEI Investments Distribution Co. and with the Fund's prospectus. We agree to notify the Distributor of any purchases of
Class A shares which may be eligible for reduced or eliminated sales charges.
____________________________________________________________________________________________________________________________________
Firm's Name Account Rep. Name
____________________________________________________________________________________________________________________________________
Branch Address Branch Telephone Number
____________________________________________________________________________________________________________________________________
Fund Assigned Firm Number Fund Assigned Branch Number Fund Assigned Rep Number
____________________________________________________________________________________________________________________________________
Authorized Signature of Dealer
</TABLE>
<PAGE>
Amerindo Technology Fund
Board of Directors
--------------------------
Alberto W. Vilar Amerindo Investment Advisors Inc.
Gary A. Tanaka Amerindo Investment Advisors Inc.
John Rutledge Rutledge Capital LLC
Jude T. Wanniski Polyconomics, Inc.
Officers of Fund
---------------------------
Alberto W. Vilar Chairman of the Board
Gary A. Tanaka President
Anthony Ciulla Vice President
Dana E. Smith Vice President
<TABLE>
<CAPTION>
AMERINDO TECHNOLOGY FUND
September 20, 1999
<S> <C>
Investment Advisor A Statement of Additional Information (SAI), dated
Amerindo Investment Advisors Inc. September 20, 1999, and the Fund's Annual and Semi-
San Francisco, California Annual Reports include additional information about
New York, New York the Fund and its investments and are incorporated by
reference into this prospectus. In the Fund's Annual
Administrator Report is a discussion of the market and investment
SEI Investments Mutual Funds Services strategies that significantly affected the Fund's
Oaks, Pennsylvania performance during its last fiscal year. You may
obtain the SAI, the Annual and Semi-Annual
Reports and material incorporated by reference
Distributor without charge by calling the Fund at 1-888-TECH-
SEI Investments Distribution Co. FUND. To request other information, please call
Oaks, Pennsylvania 19456 your financial intermediary or the Fund.
Transfer and Dividend Agent A Current SAI has been filed with the Securities and
Forum Shareholder Services LLC Exchange Commission. You may visit the Securities
Portland, Maine and Exchange Commission's Internet website
(www.sec.gov) to view the SAI, material
Custodian incorporated by reference and other information.
The Northern Trust Company These materials can also be reviewed and copied at
Chicago, Illinois the Commission's Public Reference Room in
Washington, D.C. Information on the operation of
Legal Counsel the Public Reference Room may be obtained by
Battle Fowler LLP calling the Commission at 1-800-SEC-0330. In
New York, New York addition, copies of these materials may be obtained,
upon payment of a duplicating fee, by writing the
Independent Auditors Public Reference Section of the Commission,
Morrison, Brown, Argiz & Company Washington, DC 20549-6009.
Miami, Florida
</TABLE>
1-888-TECH FUND
www.amerindo.com
811-07531
<PAGE>
AMERINDO TECHNOLOGY FUND
-----------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
September 20, 1999
RELATING TO THE AMERINDO TECHNOLOGY FUND
PROSPECTUS DATED SEPTEMBER 20, 1999
-----------------------------------------------------------------
This Statement of Additional Information sets forth information which may
be of interest to investors but which is not necessarily included in the Fund's
Prospectus, dated September 20, 1999 (the "Prospectus").
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus, a copy of which may be obtained without
charge by writing to the Fund at 399 Park Avenue, 22nd Floor, New York, New York
10022.
This Statement of Additional Information is incorporated by reference into
the Prospectus in its entirety.
<TABLE>
TABLE OF CONTENTS
<S> <C>
Fund History . . . . . . . . . . . . . . . . . . . . . . . . . .1 Capital Stock and Other Securities . . . . . . . . . . .17
Description of the Fund and its Investments and Risks. . . . . .1 Purchase, Redemption and Pricing of Shares . . . . . . .18
Management of the Fund . . . . . . . . . . . . . . . . . . . . 8 Taxation of the Fund . . . . . . . . . . . . . . . . . .18
Control Persons and Principal Holders
of Securities . . . . . . . . . . . . . . . . . . . . . . . . 10 Underwriters . . . . . . . . . . . . . . . . . . . . . .21
Investment Advisory and Other
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Calculation of Performance Data . . . . . . . . . . . .21
Brokerage Allocation and Other Practices . . . . . . . . . . . 16 Financial Statements . . . . . . . . . . . . . . . . . .23
</TABLE>
<PAGE>
I. FUND HISTORY
Amerindo Funds, Inc. (the "Fund") was incorporated in Maryland on
February 6, 1996.
II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
A. INVESTMENT STRATEGIES AND RISKS
The Fund is a non-diversified, open-end, management investment
company. The Fund's investment objective is to seek long-term capital
appreciation by investing at least 65% of its assets (although the Fund intends,
as a non-fundamental policy, to invest at least 80% of its assets) in the common
stocks of technology companies. Technology companies are those companies with
primary business operations in either the technology or science areas. Current
income is incidental to the Fund's investment objective. The investment
objective is fundamental to the Fund and may not be changed without shareholder
approval. There can be no assurance that the Fund's investment objective will be
achieved.
This Fund is designed for long-term investors who understand and are
willing to accept the risk of loss involved in investing in a mutual fund
seeking long-term capital appreciation. Investors should consider their
investment goals, their time horizon for achieving them, and their tolerance for
risks before investing in the Fund. If you seek an aggressive approach to
capital growth and can accept the above average level of price fluctuations that
this Fund is expected to experience, this Fund could be an appropriate part of
your overall investment strategy. The Fund should not be used as a trading
vehicle.
B. DESCRIPTION OF THE FUND'S INVESTMENT SECURITIES AND DERIVATIVES
1. The Technology and Science Areas. The Adviser believes that
because of rapid advances in technology and science, an investment in companies
with business operations in these areas will offer substantial opportunities for
long-term capital appreciation. Of course, prices of common stocks of even the
best managed, most profitable corporations are subject to market risk, which
means their stock prices can decline. In addition, swings in investor psychology
or significant trading by large institutional investors can result in price
fluctuations. Industries likely to be represented in the portfolio include
computers, networking and internetworking software, computer aided design,
telecommunications, media and information services, medical devices and
biotechnology. The Fund may also invest in the stocks of companies that should
benefit from the commercialization of technological advances, although they may
not be directly involved in research and development.
The technology and science areas have exhibited and continue to
exhibit rapid growth, both through increasing demand for existing products and
services and the broadening of the technology market. In general, the stocks of
large capitalized companies that are well established in the technology market
can be expected to grow with the market and will frequently be found in the
Fund's portfolio. The expansion of technology and its related industries,
however, also provides a favorable environment for investment in small to medium
capitalized companies. The Fund's investment policy is not limited to any
minimum capitalization requirement and the Fund may hold securities without
regard to the capitalization of the issuer. The Adviser's overall stock
selection for the Fund is not based on the capitalization or size of the company
but rather on an assessment of the company's fundamental prospects. The Fund
will not purchase stocks of companies during their initial public offering or
during an additional public offering of the same security. The Adviser
anticipates, however, that a significant portion of the Fund's holdings will be
invested in newly-issued securities being sold in the secondary market.
Companies in the rapidly changing fields of technology and science
face special risks. For example, their products or services may not prove
commercially successful or may become obsolete quickly. The
-1-
<PAGE>
value of the Fund's shares may be susceptible to factors affecting the
technology and science areas and to greater risk and market fluctuation than an
investment in a fund that invests in a broader range of portfolio securities not
concentrated in any particular industry. As such, the Fund is not an appropriate
investment for individuals who are not long-term investors and who, as their
primary objective, require safety of principal or stable income from their
investments. The technology and science areas may be subject to greater
governmental regulation than many other areas and changes in governmental
policies and the need for regulatory approvals may have a material adverse
effect on these areas. Additionally, companies in these areas may be subject to
risks of developing technologies, competitive pressures and other factors and
are dependent upon consumer and business acceptance as new technologies evolve.
2. Foreign Securities. The Fund may invest up to 20% of its assets in
foreign securities. It is, however, the present intention of the Fund to limit
the investment in foreign securities to no more than 5% of its assets. By
investing a portion of its assets in foreign securities, the Fund will attempt
to take advantage of differences among economic trends and the performance of
securities markets in various countries. To date, the market values of
securities of issuers located in different countries have moved relatively
independently of each other. During certain periods, the return on equity
investments in some countries has exceeded the return on similar investments in
the United States. The Adviser believes that, in comparison with investment
companies investing solely in domestic securities, it may be possible to obtain
significant appreciation from a portfolio of foreign investments and securities
from various markets that offer different investment opportunities and are
affected by different economic trends. International diversification reduces the
effect that events in any one country will have on the Fund's entire investment
portfolio. On the other hand, a decline in the value of the Fund's investments
in one country may offset potential gains from investments in another country.
Investment in obligations of foreign issuers and in direct
obligations of foreign nations involves somewhat different investment risks from
those affecting obligations of United States domestic issuers. There may be
limited publicly available information with respect to foreign issuers and
foreign issuers are not generally subject to uniform accounting, auditing and
financial standards and requirements comparable to those applicable to domestic
companies. There may also be less government supervision and regulation of
foreign securities exchanges, brokers and listed companies than in the United
States. Foreign securities settlements may in some instances be subject to
delays and related administrative uncertainties that could result in temporary
periods when assets of the Fund are uninvested and no return is earned thereon
and may involve a risk of loss to the Fund. Foreign securities markets have
substantially less volume than domestic securities exchanges and securities of
some foreign companies are less liquid and more volatile than securities of
comparable domestic companies. Brokerage commissions and other transaction costs
on foreign securities exchanges are generally higher than in the United States.
Dividends and interest paid by foreign issuers may be subject to withholding and
other foreign taxes, which may decrease the net return on foreign investments as
compared to dividends and interest paid to the Fund by domestic companies.
Additional risks include future political and economic developments, the
possibility that a foreign jurisdiction might impose or change withholding taxes
on income payable with respect to foreign securities, the possible seizure,
nationalization or expropriation of the foreign issuer or foreign deposits (in
which the Fund could lose its entire investment in a certain market) and the
possible adoption of foreign governmental restrictions such as exchange
controls. There can be no assurance that the Fund's foreign investments will
present less risk then a portfolio of domestic securities.
Foreign Currency. Investments in foreign securities will usually be
denominated in foreign currency, and the Fund may contemporarily hold funds in
foreign currencies. The value of the Fund's investments denominated in foreign
currencies may be affected, favorably or unfavorably, by the relative strength
of the U.S. dollar, changes in foreign currency and U.S. dollar exchange rates
and exchange control regulations. The Fund may incur costs in connection with
conversions between various currencies. The Fund's net asset value per share
will be affected by changes in currency exchange rates. Changes in foreign
currency exchange rates may also affect the value of dividends and interest
earned, gains and losses realized on the sale of securities and net investment
income and gains, if any, to be distributed to shareholders by the Fund. The
rate of exchange between
-2-
<PAGE>
the U.S. dollar and other currencies is determined by the forces of supply and
demand in the foreign exchange markets (which in turn are affected by interest
rates, trade flow and numerous other factors, including, in some countries,
local governmental intervention).
3. U.S. Government Obligations. U.S. Government obligations are
obligations that are backed by the full faith and credit of the United States,
by the credit of the issuing or guaranteeing agency or by the agency's right to
borrow from the U.S. Treasury. They include (i) U.S. Treasury obligations, which
differ only in their interest rates, maturities and times of issuance as
follows: U.S. Treasury bills (maturity of one year or less), U.S. Treasury notes
(maturity of one year or ten years), U.S. Treasury bonds (generally maturities
of more than ten years), and (ii) obligations issued or guaranteed by U.S.
Government agencies and instrumentalities that are supported by the full faith
and credit of the United States (such as securities issued by the Government
National Mortgage Association, the Federal Housing Administration, the
Department of Housing and Urban Development, the Export-Import Bank, the General
Services Administration and the Maritime Administration, and certain securities
issued by the Farmers' Home Administration and the Small Business
Administration, most of which are explained below under the section entitled
"Mortgage-Backed Securities"). The maturities of U.S. Government obligations
usually range from three months to thirty years.
4. Repurchase Agreements. When the Fund purchases securities, it may
enter into a repurchase agreement with the seller wherein the seller agrees, at
the time of sale, to repurchase the security at a mutually agreed upon time and
price. The Fund may enter into repurchase agreements with member banks of the
Federal Reserve System and with broker-dealers who are recognized as primary
dealers in United States Government securities by the Federal Reserve Bank of
New York. Although the securities subject to the repurchase agreement might bear
maturities exceeding one year, settlement for the repurchase would never be more
than 397 days after the Fund's acquisition of the securities and normally would
be within a shorter period of time. The resale price will be in excess of the
purchase price, reflecting an agreed upon market rate effective for the period
of time the Fund's money will be invested in the security, and will not be
related to the coupon rate of the purchased security. At the time the Fund
enters into a repurchase agreement the value of the underlying security,
including accrued interest, will be equal to or exceed the value of the
repurchase agreement, and, in the case of a repurchase agreement exceeding one
day, the seller will agree that the value of the underlying security, including
accrued interest, will at all times be equal to or exceed the value of the
repurchase agreement. The Fund may engage in a repurchase agreement with respect
to any security in which it is authorized to invest, even though the underlying
security may mature in more than one year. The collateral securing the seller's
obligation must be of a credit quality at least equal to the Fund's investment
criteria for securities in which it invests and will be held by the Custodian or
in the Federal Reserve Book Entry System.
For purposes of the Investment Company Act of 1940, a repurchase
agreement is deemed to be a loan from the Fund to the seller subject to the
repurchase agreement and is therefore subject to the Fund's investment
restriction applicable to loans. It is not clear whether a court would consider
the securities purchased by the Fund subject to a repurchase agreement as being
owned by the Fund or as being collateral for a loan by the Fund to the seller.
In the event of the commencement of bankruptcy or insolvency proceedings with
respect to the seller of the securities before repurchase of the security under
a repurchase agreement, the Fund may encounter a delay and incur costs before
being able to sell the security. Delays may involve loss of interest or decline
in price of the security. If the court characterized the transaction as a loan
and the Fund has not perfected a security interest in the security, the Fund may
be required to return the security to the seller's estate and be treated as an
unsecured creditor of the seller. As an unsecured creditor, the Fund would be at
the risk of losing some or all of the principal and income involved in the
transaction. As with any unsecured debt obligation purchased for the Fund, the
Adviser seeks to minimize the risk of loss through repurchase agreements by
analyzing the creditworthiness of the obligor, in this case the seller. Apart
from the risk of bankruptcy or insolvency proceedings, there is also the risk
that the seller may fail to repurchase the security, in which case the Fund may
incur a loss if the proceeds of the sale to a third party are less than the
repurchase price. However, if the market value of the securities subject to the
repurchase agreement becomes less than the repurchase price (including
-3-
<PAGE>
interest), the Fund involved will direct the seller of the security to deliver
additional securities so that the market value of all securities subject to the
repurchase agreement will equal or exceed the repurchase price. It is possible
that a Fund will be unsuccessful in seeking to impose on the seller a
contractual obligation to deliver additional securities.
5. Hedging Transactions. The Fund may, but does not currently intend
to, enter into hedging transactions. Hedging is a means of transferring risk
which an investor does not desire to assume during an uncertain market
environment. The Fund is permitted to enter into the transactions solely (a) to
hedge against changes in the market value of portfolio securities or (b) to
close out or offset existing positions. The transactions must be appropriate to
reduction of risk; they cannot be for speculation. In particular, the Fund may
write covered call options on securities or stock indices. By writing call
options, the Fund limits its profit to the amount of the premium received. By
writing a covered call option, the Fund assumes the risk that it may be required
to deliver the security having a market value higher than its market value at
the time the option was written. The Fund will not write options if immediately
after such sale the aggregate value of the obligations under the outstanding
options would exceed 25% of the Fund's net assets.
To the extent the Fund uses hedging instruments which do not involve
specific portfolio securities, offsetting price changes between the hedging
instruments and the securities being hedged will not always be possible, and
market value fluctuations of the Fund may not be completely eliminated. When
using hedging instruments that do not specifically correlate with securities in
the Fund, the Adviser will attempt to create a very closely correlated hedge.
Short Sales. The Fund may make short sales of securities
"against-the-box." A short sale "against-the-box" is a sale of a security that
the Fund either owns an equal amount of or has the immediate and unconditional
right to acquire at no additional cost. The Fund will make short sales
"against-the-box" as a form of hedging to offset potential declines in long
positions in the same or similar securities.
6. Options Transactions. The Fund may, but does not currently intend
to, enter into options transactions. The Fund may purchase call and put options
on securities and on stock indices in an attempt to hedge its portfolio and to
increase its total return. Call options may be purchased when it is believed
that the market price of the underlying security or index will increase above
the exercise price. Put options may be purchased when the market price of the
underlying security or index is expected to decrease below the exercise price.
The Fund may also purchase all options to provide a hedge against an increase in
the price of a security sold short by it. When the Fund purchases a call option,
it will pay a premium to the party writing the option and a commission to the
broker selling the option. If the option is exercised by the Fund, the amount of
the premium and the commission paid may be greater than the amount of the
brokerage commission that would be charged if the security were purchased
directly.
In addition, the Fund may write covered call options on securities or
stock indices. By writing options, the Fund limits its profits to the amount of
the premium received. By writing a call option, the Fund assumes the risk that
it may be required to deliver the security at a market value higher than its
market value at the time the option was written plus the difference between the
original purchase price of the stock and the strike price. By writing a put
option, the Fund assumes the risk that it may be required to purchase the
underlying security at a price in excess of its current market value.
7. Lending of Securities. The Fund may, but does not currently intend
to, lend its portfolio securities to qualified institutions as determined by the
Adviser. By lending its portfolio securities, the Fund attempts to increase its
income through the receipt of interest on the loan. Any gain or loss in the
market price of the securities loaned that may occur during the term of the loan
will be for the account of the Fund in such transaction. The Fund will not lend
portfolio securities if, as a result, the aggregate of such loans exceeds 33% of
the value of its total assets (including such loans). All relevant facts and
circumstances, including the
-4-
<PAGE>
creditworthiness of the qualified institution, will be monitored by the Adviser,
and will be considered in making decisions with respect to lending of
securities, subject to review by the Fund's Board of Directors. The Fund may pay
reasonable negotiated fees in connection with loaned securities, so long as such
fees are set forth in a written contract and their reasonableness is determined
by the Fund's Board of Directors.
8. Variable-Amount Master Demand Notes. The Fund may purchase
variable amount master demand notes ("VANs"). VANs are debt obligations that
provide for a periodic adjustment in the interest rate paid on the instrument
and permit the holder to demand payment of the unpaid principal balance plus
accrued interest at specified intervals upon a specified number of days' notice
either from the issuer or by drawing on a bank letter of credit, a guarantee,
insurance or other credit facility issued with respect to such instrument.
The VANs in which the Fund may invest are payable on not more than
seven calendar days' notice either on demand or at specified intervals not
exceeding one year depending upon the terms of the instrument. The terms of the
instruments provide that interest rates are adjustable at intervals ranging from
daily to up to one year and their adjustments are based upon the prime rate of a
bank or other appropriate interest rate adjustment index as provided in the
respective instruments. The Fund will decide which variable rate demand
instruments it will purchase in accordance with procedures prescribed by its
Board of Directors to minimize credit risks.
The VANs that the Fund may invest in include participation
certificates purchased by the Fund from banks, insurance companies or other
financial institutions in fixed or variable rate, or taxable debt obligations
(VANs) owned by such institutions or affiliated organizations. A participation
certificate gives the Fund an undivided interest in the obligation in the
proportion that the Fund's participation interest bears to the total principal
amount of the obligation and provides the demand repurchase feature described
below. Where the institution issuing the participation does not meet the Fund's
high quality standards, the participation is backed by an irrevocable letter of
credit or guaranty of a bank (which may be a bank issuing a confirming letter of
credit, or a bank serving as agent of the issuing bank with respect to the
possible repurchase of the certificate of participation or a bank serving as
agent of the issuer with respect to the possible repurchase of the issue) or
insurance policy of an insurance company that the Board of Directors of the Fund
has determined meets the prescribed quality standards for the Fund. The Fund has
the right to sell the participation certificate back to the institution and,
where applicable, draw on the letter of credit, guarantee or insurance after no
more than 30 days' notice either on demand or at specified intervals not
exceeding 397 days (depending on the terms of the participation), for all or any
part of the full principal amount of the Fund's participation interest in the
security, plus accrued interest. The Fund intends to exercise the demand only
(1) upon a default under the terms of the bond documents, (2) as needed to
provide liquidity to the Fund in order to make redemptions of the Fund's shares,
or (3) to maintain a high quality investment portfolio. The institutions issuing
the participation certificates will retain a service and letter of credit fee
(where applicable) and a fee for providing the demand repurchase feature, in an
amount equal to the excess of the interest paid on the instruments over the
negotiated yield at which the participations were purchased by the Fund. The
total fees generally range from 5% to 15% of the applicable prime rate* or other
interest rate index. With respect to insurance, the Fund will attempt to have
the issuer of the participation certificate bear the cost of the insurance,
although the Fund retains the option to purchase insurance if necessary, in
which case the cost of insurance will be an expense of the Fund subject to the
expense limitation on investment company expenses prescribed by any state in
which the Fund's shares are qualified for sale. The Adviser has been instructed
by the Fund's Board of Directors to continually monitor the pricing, quality and
liquidity of the variable rate demand instruments held by the Fund, including
the participation certificates, on the basis of published financial
- -------------------
* The "prime rate" is generally the rate charged by a bank to its most
creditworthy customers for short term loans. The prime rate or a
particular bank may differ from other bank and will be the rate announced
by each bank on a particular day. Changes in the prime rate may occur
with great frequency and generally become effective on the date
announced.
-5-
<PAGE>
information and reports of the rating agencies and other bank analytical
services to which the Fund may subscribe. Although these instruments may be sold
by the Fund, the Fund intends to hold them until maturity, except under the
circumstances stated above.
While the value of the underlying variable rate demand instruments
may change with changes in interest rates generally, the variable rate nature of
the underlying variable rate demand instruments should minimize changes in value
of the instruments. Accordingly, as interest rates decrease or increase, the
potential for capital appreciation and the risk of potential capital
depreciation is less than would be the case with a portfolio of fixed income
securities. The Fund may contain VANs on which stated minimum or maximum rates,
or maximum rates set by state law, limit the degree to which interest on such
VANs may fluctuate. To the extent that the Fund holds VANs with these limits,
increases or decreases in value may be somewhat greater than would be the case
without such limits. In the event that interest rates increased so that the
variable rate exceeded the fixed-rate on the obligations, the obligations could
no longer be valued at par and this may cause the Fund to take corrective
action, including the elimination of the instruments. Because the adjustment of
interest rates on the VANs is made in relation to movements of the applicable
banks' "prime rate," or other interest rate adjustment index, the VANs are not
comparable to long-term fixed-rate securities. Accordingly, interest rates on
the VANs may be higher or lower than current market rates for fixed-rate
obligations or obligations of comparable quality with similar maturities.
For purposes of determining whether a VAN held by a Fund matures
within 397 days from the date of its acquisition, the maturity of the instrument
will be deemed to be the longer of (1) the period required before the Fund is
entitled to receive payment of the principal amount of the instrument or (2) the
period remaining until the instrument's next interest rate adjustment. If a
variable rate demand instrument ceases to meet the investment criteria of the
Fund, it will be sold in the market or through exercise of the repurchase
demand.
C. FUND POLICIES - INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental investment
restrictions which may not be changed unless approved by a majority of the
Fund's outstanding shares. As used in this Prospectus, the term "majority of the
outstanding shares" of the Fund means, respectively, the vote of the lesser of
(i) 67% or more of the shares of the Fund present at the meeting, if more than
50% of the outstanding shares of the Fund are present or represented by proxy,
or (ii) more than 50% of the outstanding shares of the Fund.
The Fund may not:
(1) Make portfolio investments other than as described herein or any other
form of investment, where applicable, which meets the Fund's
investment criteria, as determined by the Adviser and the Board of
Directors, and which is consistent with the Fund's objective and
policies.
(2) Borrow money. This restriction shall not apply to borrowing from banks
for temporary or emergency (not leveraging) purposes, including the
meeting of redemption requests that might otherwise require the
untimely disposition of securities, in an amount up to one-third of
the value of the Fund's total assets (including the amount borrowed)
valued at market less liabilities (not including the amount borrowed)
at the time the borrowing was made. While borrowings exceed 5% of the
value of the Fund's total assets, the Fund will not purchase
additional securities. Interest paid on borrowings will reduce net
income. 300% asset coverage is maintained at all times.
(3) Mortgage, pledge or hypothecate any assets except that the Fund may
pledge not more than one-third of its total assets to secure
borrowings made in accordance with paragraph (2) above. However,
although not a fundamental policy of the Fund, as a matter of
operating policy in order
-6-
<PAGE>
to comply with certain state statutes, the Fund will not pledge its
assets in excess of an amount equal to 15% of net assets.
(4) Sell securities short, except short sales "against-the-box," or
purchase securities on margin, or engage in the purchase and sale of
put, call, straddle or spread options or in writing such options,
except to the extent permitted in the Prospectus or this Statement of
Additional Information or, to the extent that securities subject to a
demand obligation and stand-by commitments may be purchased as set
forth under "Description of the Fund and Its Investments and Risks."
(5) Underwrite the securities of other issuers, except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933 in
disposing of a portfolio security.
(6) Invest more than an aggregate of 15% of its net assets in repurchase
agreements maturing in more than seven days, variable rate demand
instruments exercisable in more than seven days, securities that are
not readily marketable or are illiquid investments. Such Securities
include foreign securities and bank participation interests for which
a readily available market does not exist, except as described in the
Fund's Prospectus.
(7) Purchase or sell real estate, real estate investment trust securities,
commodities or commodity contracts, or oil and gas interests, but this
shall not prevent the Fund from investing in Government obligations
secured by real estate or interests in real estate.
(8) Make loans to others, except through the purchase of portfolio
investments, including repurchase agreements, exceeding in the
aggregate one-third of the market value of the Fund's total assets
less liabilities other than obligations created by these transactions
as described under "Description of the Fund and Its Investments and
Risks."
(9) Invest more than 25% of its assets in the securities of "issuers" in
any single industry, except in the technology and science areas as set
forth under "Investment Objectives, Principal Investment Strategies
and Related Risks" in the Prospectus, provided also that there shall
be no limitation on the Fund to purchase obligations issued or
guaranteed by the United States Government, its agencies or
instrumentalities. When the assets and revenues of an agency,
authority, instrumentality or other political subdivision are separate
from those of the government creating the issuing entity and a
security is backed only by the assets and revenues of the entity, the
entity would be deemed to be the sole issuer of the security.
Similarly, in the case of an industrial revenue bond, if that bond is
backed only by the assets and revenues of the non-governmental issuer,
then such non-governmental issuer would be deemed to be the sole
issuer. If, however, in either case, the creating government
guarantees a security, such a guarantee would be considered a separate
security and would be treated as an issue of such government.
(10) Invest in securities of other investment companies, except (i) the
Fund may purchase unit investment trust securities where such unit
investment trusts meet the investment objective of the Fund and then
only up to 5% of the Fund's net assets, except as they may be acquired
as part of a merger, consolidation or acquisition of assets and (ii)
as permitted by Section 12(d) of the Act.
(11) Issue senior securities except insofar as the Fund may be deemed to
have issued a senior security in connection with any permitted
borrowing.
The Fund will not be in violation of any maximum percentage limitation
when the change in the percentage of the Fund's held holdings is due to a change
in value of the Fund's securities. This qualification does not apply to the
restriction on the Fund's ability to purchase additional securities when
borrowings earn 5% of the
-7-
<PAGE>
value of the Fund's total assets. Investment restrictions that involve a maximum
percentage of securities or assets will be violated, however, if an excess over
the percentage occurs immediately after, and is caused by, an acquisition of
securities or assets of, or borrowings by, the Fund.
D. TEMPORARY DEFENSIVE POSITIONS
When the Adviser believes that market conditions warrant a temporary
defensive position, the Fund may invest up to 100% of its assets in short-term
instruments such as commercial paper, bank certificates of deposit, bankers'
acceptances, variable rate demand instruments or repurchase agreements for such
securities and securities of the U.S. Government and its agencies and
instrumentalities, as well as cash and cash equivalents denominated in foreign
currencies. Investments in domestic bank certificates of deposit and bankers'
acceptances will be limited to banks that have total assets in excess of $500
million and are subject to regulatory supervision by the U.S. Government or
state governments. The Fund's investments in foreign short-term instruments will
be limited to those that, in the opinion of the Adviser, equate generally to the
standards established for U.S. short-term instruments.
E. PORTFOLIO TURNOVER
The variation in the Fund's portfolio turnover within the two most
recently completed fiscal years (from 355.21% in 1997 to 78.46% in 1998) was due
to less trading by the Fund. In response to current market conditions the Fund
has employed more of a buy and hold strategy which has decreased the portfolio
turnover rate over the last fiscal year. This strategy is consistent with the
Fund's investment objectives and overall investment policies and strategies.
III. MANAGEMENT OF THE FUND
The Fund's Board of Directors is responsible for the overall
management and supervision of the Fund. The Board employs Amerindo Investment
Advisors, Inc. (the "Adviser" or "Amerindo") as the investment adviser to the
Fund. The Adviser supervises all aspects of the Fund's operations and provides
investment advice and portfolio management services to the Fund. Subject to the
Board's supervision, the Adviser makes all of the day-to-day investment
decisions, arranges for the execution of portfolio transactions and generally
manages the portfolio investments.
The directors and officers of the Fund and their principal occupations
during the past five years are set forth below. Their titles may have varied
during this period. Asterisks indicate that those directors are "interested
persons" (as defined in the Investment Company Act of 1940, as amended) of the
Fund. Unless otherwise indicated, the address of each director and officer is
399 Park Avenue, New York, New York 10022.
OFFICERS AND DIRECTORS OF THE FUND
<TABLE>
<S> <C>
ALBERTO W. VILAR* Mr. Vilar has been Chairman of the Board of Directors and
Amerindo Investment Advisors Inc. Chief Executive Officer of the Fund since its inception. He
One Embarcadero began his career with Citibank N.A. in New York in 1964
Suite 2300 and worked there as an International Credit Officer until
San Francisco, CA 94111 1967. From 1967 to 1971, he served as Vice President,
399 Park Avenue Portfolio Manager and Manager of the Investment
22nd Floor Management Division of Drexel Burnham Lambert in New
New York, NY 10022 York. From 1971 to 1973, he served as Executive Vice
</TABLE>
- ----------------------
* "Interested person" of the Fund, as defined in the Investment Company Act.
-8-
<PAGE>
<TABLE>
<S> <C>
(58) President, Portfolio Manager and Director of Equity
Strategy at M.D. Sass Investor Services in New York. In
1973, he became Vice President and Portfolio Manager of
Endowment Management & Research Corporation in
Boston. From 1977 to 1979, he served as Senior Vice
President, Director of Research, Chief Investment Strategist
and Partnership Manager of the Boston Company in
Boston. He founded the predecessors of Amerindo
Advisors (U.K.) Limited and Amerindo Investment
Advisors, Inc. (Panama) in 1979 and has served since then
as a Principal Portfolio Manager. He holds the degrees of
B.A. in Economics from Washington & Jefferson College
and an M.B.A. from Iona College, and he completed the
Doctoral Studies Program in Economics at New York
University. Mr. Vilar was awarded an Honorary Doctorate
of Humanities Degree from Washington & Jefferson
College. He has been a Chartered Financial Analyst since
1975.
DR. GARY A. TANAKA Dr. Tanaka has been a Director and President of the Fund
Amerindo Investment Advisors Inc. since its inception. He served as a Portfolio Manager for
43 Upper Grosvenor Street Crocker Bank in San Francisco from 1971 to 1977, and as a
London, England W1X9PG Partnership Manager for Crocker Investment Management
(55) Corp. in San Francisco from 1978 to 1980. From 1975 to
1980, he also served as a Consultant to Andron Cechettini
& Associates in San Francisco. In 1980, he joined the
predecessors of Amerindo Advisors (U.K.) Limited and
Amerindo Investment Advisors, Inc. (Panama) as a
Principal Portfolio Manager and has served in this position
since that time. Dr. Tanaka holds the degrees of B.S. in
Mathematics from Massachusetts Institute of Technology
and Ph.D. in Applied Mathematics from Imperial College,
University of London.
DR. JOHN RUTLEDGE Dr. Rutledge has been a Director of the Fund since its
Rutledge & Company, Inc. inception. He also has been Chairman of Rutledge &
One Greenwich Office Park Company, Inc., a merchant banking firm, since 1991 and
Greenwich, CT 06831 serves as a director of Earle M. Jorgensen Company,
(52) Lazard Freres Funds, Fluidrive, Inc., General Medical
Corporation, Medical Specialties Group, United
Refrigerated Services, Inc. and Utenduhl Capital Partners
and is a special advisor to Kelso & Companies, Inc. He is
the author of books and investment publications, writes a
monthly column in Forbes Magazine and is a frequent
contributor to periodicals.
JUDE T. WANNISKI Mr. Wanniski has been a Director of the Fund since its
Polyconomics, Inc. inception. He also has been president of Polyconomics,
86 Maple Avenue Inc. since 1978 and serves as a director for Repap
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<PAGE>
Morristown, NJ 07960 Enterprises Inc.
(63)
DANA E. SMITH Ms. Smith has been the Vice President of and Treasurer to
Amerindo Investment Advisors Inc. the Fund since its inception. She has been the Chief
22nd Floor Compliance Officer of Amerindo Investment Advisors Inc.
399 Park Avenue since April 1993. From December 1991 to March 1993,
New York, NY 10022 she was a Mutual Fund Marketing Associate at Lazard
(40) Freres Asset Management and an officer of The Lazard
Funds, Inc.
ANTHONY CIULLA Mr. Ciulla has been Vice President of the Fund since its
Amerindo Investment Advisors Inc. inception. He has been the Senior Trader of Amerindo
One Embarcadero Investment Advisers Inc. since October 1, 1990.
Suite 2300
San Francisco, CA 94111
(67)
</TABLE>
<TABLE>
<CAPTION>
COMPENSATION TABLE
(For Fiscal Year Ended December 31, 1998)
Aggregate Pension or Retirement
Name of Person and Compensation Benefits Accrued as Part Estimated Annual Benefit Total Compensation
Position with Fund From Fund of Fund Expenses Upon Retirement From the Fund
- ---------------------- --------------- ------------------------ ------------------------ ------------------
<S> <C> <C> <C> <C>
Alberto W. Vilar $ 0 $ 0 $ 0 $ 0
Director
Dr. Gary A. Tanaka 0 0 0 0
Director
Dr. John Rutledge 30,000 0 0 30,000
Director
Jude T. Wanniski 30,000 0 0 30,000
Director
</TABLE>
Each Director who is not an interested person of the Fund receives a base annual
fee of $25,000 which is paid by the Fund, plus $1,250 for each meeting attended.
IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
On March 31, 1999, there were 168,099 Class A shares and 4,337,327
Class D shares of the Fund outstanding. As of this date, the directors and
officers of the Fund, as a group, owned less than 1% of both the Class A and
Class D shares.
-10-
<PAGE>
The following represents a list of persons who owned 5% or more of the
Fund's outstanding common stock as of March 31, 1999:
<TABLE>
<CAPTION>
CLASS A SHARES Name & Address Percentage of Class Nature of Ownership
-------------- ------------------- -------------------
<S> <C> <C> <C>
Light & Co. 10.54% Record
P.O. Box 1596
Baltimore, MD 21203
G. Becker IRA 10.01% Beneficial
1400 Willow - 2006
Louisville, KY 40204
E. Tilghman 6.41% Beneficial
4 Bassett Creek Trail N.
Hobe Sound, FL 33445
E. Shumaker 6.08% Beneficial
407 Tiffany Drive
Waukegan, IL 60085
CLASS D SHARES Name & Address Percentage of Class Nature of Ownership
-------------- ------------------- -------------------
Antar & Co. 8.33% Record
Legacy Trust Company
P.O. Box 1471
Houston, TX 77251-1471
Mac & Co. 17.91% Record
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
</TABLE>
V. INVESTMENT ADVISORY AND OTHER SERVICES
A. INVESTMENT ADVISER
1. General Information. Amerindo Investment Advisors Inc. (The
"Adviser" or "Amerindo"), a registered investment adviser, is a California
corporation, with its principal office located at One Embarcadero, Suite 2300,
San Francisco, California 94111. The Adviser has been employed by the Board of
Directors to serve as the investment adviser of the Fund pursuant to an
Investment Advisory Agreement entered into by the Fund on behalf of each Class.
The Adviser supervises all aspects of the Fund's operations and provides
investment advice and portfolio management services to the Fund. Pursuant to the
Advisory Agreement and subject to the supervision of the Fund's Board of
Directors, the Adviser makes the Fund's day-to-day investment decisions,
arranges for the execution of portfolio transactions and generally manages the
Fund's investments.
The Adviser provides persons satisfactory to the Board of Directors of
the Fund to serve as officers of the Fund. Such officers, as well as certain
other employees and directors of the Fund, may be directors, officers or
employees of the Adviser or its affiliates.
-11-
<PAGE>
The Adviser may also provide the Fund with supervisory personnel who
will be responsible for supervising the performance of administrative services,
accounting and related services, net asset value and yield calculation, reports
to and filings with regulatory authorities, and services relating to such
functions. However, the Administrator will provide personnel who will be
responsible for performing the operational components of such services. The
personnel rendering such supervisory services may be employees of the Adviser,
of its affiliates or of other organizations.
The Advisory Agreement was approved on May 14, 1996 by the Board of
Directors, including a majority of the directors who are not interested persons
(as defined in the Investment Company Act of 1940, as amended) of the Fund or
the Adviser. On July 13, 1999, the Board voted to extend the term of the
Advisory Agreement to July 30, 2000. The Agreement, which currently extends to
July 30, 2000, may be continued in force thereafter for successive twelve-month
periods beginning each July 31, provided that such continuance is specifically
approved annually by majority vote of the Fund's outstanding voting securities
or by the Board of Directors, and in either case by a majority of the directors
who are not parties to the Advisory Agreement or interested persons of any such
party, by votes cast in person at a meeting called for the purpose of voting on
such matter.
The Advisory Agreement is terminable without penalty by the Fund on
sixty days' written notice when authorized either by majority vote of the
outstanding voting shares of the Fund or by a vote of a majority of the Fund's
Board of Directors, or by the Adviser on sixty days' written notice, and will
automatically terminate in the event of its assignment. The Advisory Agreement
provides that in the absence of willful misfeasance, bad faith or gross
negligence on the part of the Adviser, or of reckless disregard of its
obligations thereunder, the Adviser shall not be liable for any action or
failure to act in accordance with its duties thereunder.
2. Adviser's Fees. Pursuant to the terms of the Advisory Agreement,
the Fund, on behalf of each Class, will pay an annual advisory fee paid monthly
equal to 1.50% of the Fund's average daily net assets.
Fees Paid to the Adviser Under the Advisory Agreement
Fiscal Year Ended,
1998 1997 1996
Fees Paid $674,525 $609,301 $62,809
Reimbursements $225,991 $234,645 $65,782
This fee is higher than the fee paid by most other mutual funds;
however, the Board of Directors believes that this fee is reasonable in light of
the advisory services performed by the Adviser for the Fund. Any portion of the
advisory fees received by the Adviser may be used by the Adviser to provide
investor and administrative services and for distribution of Fund shares.
The Adviser may voluntarily waive a portion of its fee or assume
certain expenses of the Fund. This would have the effect of lowering the overall
expense ratio of the Fund and of increasing yield to investors.
Voluntary Expense Subsidization. From time to time, the Adviser may
voluntarily assume certain expenses of the Fund. This would have the effect of
lowering the overall expense ratio and of increasing yield to investors. Subject
to any such voluntary assumption of certain expenses by the Adviser, the Fund
has, under the Advisory Agreement, confirmed its obligation for payment of all
other expenses, including without limitation: (i) fees payable to the Adviser,
Administrator, Custodian, Transfer Agent and Dividend Agent; (ii) brokerage and
commission expenses; (iii) Federal, state or local taxes, including issuance and
transfer taxes incurred by or levied on it; (iv) commitment fees, certain
insurance premiums and membership fees and dues in investment company
organizations; (v) interest charges on borrowings;
-12-
<PAGE>
(vi) telecommunications expenses; (vii) recurring and non-recurring legal and
accounting expenses; (viii) costs of organizing and maintaining the Fund's
existence as a corporation; (ix) compensation, including directors' fees, of any
directors, officers or employees who are not also officers of the Adviser or its
affiliates and costs of other personnel providing administrative and clerical
services; (x) costs of stockholders' services and costs of stockholders'
reports, proxy solicitations, and corporate meetings; (xi) fees and expenses of
registering its shares under the appropriate Federal securities laws and of
qualifying its shares under applicable state securities laws, including expenses
attendant upon the initial registration and qualification of these shares and
attendant upon renewals of, or amendments to, those registrations and
qualifications; and (xii) expenses of preparing, printing and delivering the
Prospectus to existing shareholders and of printing shareholder application
forms for shareholder accounts.
The Fund may from time-to-time hire its own employees or contract to
have management services performed by third parties, and the management of the
Fund intends to do so whenever it appears advantageous to the Fund. The Fund's
expenses for employees and for such services are among the expenses subject to
the expense limitation described above.
B. THE DISTRIBUTION AND SERVICE PLAN
The Fund, on behalf of each Class, has adopted a distribution and
service plan, pursuant to Rule 12b-1 under the Investment Company Act (the
"Rule"). The Rule provides that an investment company which bears any direct or
indirect expense of distributing its shares must do so only in accordance with a
plan permitted by the Rule.
The Plan provides that each Class of the Fund will compensate the
Distributor or the Adviser for certain expenses and costs incurred in connection
with providing shareholder servicing and maintaining shareholder accounts and to
compensate parties with which it has written agreements and whose clients own
shares of either Class of shares of the Fund for providing servicing to their
clients ("Shareholder Servicing"). These fees are subject to a maximum of 0.25%
per annum of each Class' average daily net assets. The Plan also provides that
the Distributor is paid a fee equal to 0.25% of the Class A shares' average
daily net assets on an annual basis to permit it to make payments to
broker-dealers and other financial institutions with which it has written
agreements and whose clients are Fund shareholders (each a "broker-dealer") for
providing distribution assistance and promotional support to the Fund. Fees paid
under the Plan may not be waived for individual shareholders.
For the fiscal year ended December 31, 1998, the Fund paid shareholder
servicing fees to the Adviser in an amount equal to $112,768. These fees were
used to provide shareholder servicing and maintain shareholder accounts.
Under the Plan, each shareholder servicing agent and broker-dealer
will, as agent for its customers, among other things: (i) answer customer
inquiries regarding account status and history, the manner in which purchases
and redemptions of shares of each Class of the Fund may be effected and certain
other matters pertaining to the Fund; (ii) assist shareholders in designating
and changing dividend options, account designations and addresses; (iii) provide
necessary personnel and facilities to establish and maintain shareholder
accounts and records; assist in processing purchase and redemption transactions;
(iv) arrange for the wiring of funds; (v) transmit and receive funds in
connection with customer orders to purchase or redeem shares; (vi) verify and
guarantee shareholder signatures in connection with redemption orders and
transfers and changes in shareholder designated accounts; (vii) furnish
quarterly and year-end statements and confirmations within five business days
after activity in the account; (viii) transmit to shareholders of each Class
proxy statements, annual reports, updated prospectuses and other communications;
(ix) receive, tabulate and transmit proxies executed by shareholders with
respect to meetings of shareholders of the Fund; and (x) provide such other
related services as the Fund or a shareholder may request.
The Plan, the shareholder servicing agreements and the distribution
agreement each provide that the Adviser and SEI Investments Distribution Co.
("SIDCO"), the Fund's Distributor, may make payments from time to time from
their own resources which may include the advisory fee and the asset based sales
charges and past profits for the following purposes: (i) to defray the costs of
and to compensate others, including financial intermediaries with whom
-13-
<PAGE>
SIDCO or the Adviser has entered into written agreements, for performing
shareholder servicing and related administrative functions of each Class; to
compensate certain financial intermediaries for providing assistance in
distributing Class shares; (ii) to pay the costs of printing and distributing
the Fund's Prospectus to prospective investors; and (iii) to defray the cost of
the preparation and printing of brochures and other promotional materials,
mailings to prospective shareholders, advertising, and other promotional
activities, including the salaries and/or commissions of sales personnel in
connection with the distribution of the Fund's shares. Further, the Agreements
provide that the Adviser may use its service fee for the purposes enumerated in
(i) above and any asset based sales charges paid to SIDCO also may be used for
purposes of (ii) or (iii) above. SIDCO or the Adviser, as the case may be, in
their sole discretion, will determine the amount of such payments made pursuant
to the Plan with the shareholder servicing agents and broker-dealers with whom
they have contracted, provided that such payments made pursuant to the Plan will
not increase the amount which a Class is required to pay SIDCO or the Adviser
for any fiscal year under the shareholder servicing agreements or otherwise. For
the fiscal year ending December 31, 1998, the Adviser, under the Plan, made
payments of $523,337 in advertising and related costs. The excess of such
payments over the total payments the Adviser received from the Fund represents
distribution expenses funded by the Adviser from its own resources including the
Advisory fee.
Shareholder servicing agents and broker-dealers may charge investors a
fee in connection with their use of specialized purchase and redemption
procedures offered to investors by the shareholder servicing agents and
broker-dealers. In addition, shareholder servicing agents and broker-dealers
offering purchase and redemption procedures similar to those offered to
shareholders who invest in the fund directly may impose charges, limitations,
minimums and restrictions in addition to or different from those applicable to
shareholders who invest in the Fund directly. Accordingly, the net yield to
investors who invest through shareholder servicing agents and broker-dealers may
be less than realized by investing in the Fund directly. An investor should read
the Prospectus in conjunction with the materials provided by the shareholder
servicing agent and broker-dealer describing the procedures under which Fund
shares may be purchased and redeemed through the shareholder servicing agent and
broker-dealer.
In accordance with the Rule, the Plan provides that all written
agreements relating to the Plan entered into by the Fund, on behalf of each
Class, the distributor or the Adviser, and the shareholder servicing agents,
broker-dealers, or other organizations, must be in a form satisfactory to the
Fund's Board of Directors. In addition, the Plan requires the Fund and the
Distributor to prepare, at least quarterly, written reports setting forth all
amounts expended for distribution purposes by the Fund and the Distributor
pursuant to the Plan and identifying the distribution activities for which those
expenditures were made.
C. ADMINISTRATOR
1. General Information. The Fund and SEI Investment Mutual Funds
Services (the "Administrator") have entered into an Administrative Agreement
effective September 20, 1999.
The Administrator, a Delaware business trust, has its principal
business offices at One Freedom Valley Drive, Oaks, Pennsylvania 19456. SEI
Investment Management Corporation ("SIMC"), a wholly-owned subsidiary of SEI
Investment Company ("SEI Investments"), is the owner of all beneficial interests
in the Administrator. SEI Investments and its affiliates, including the
Administrator, are leading providers of funds evaluation services, trust
accounting systems, and brokerage and information services to financial
institutions, institutional investors, and money managers. The Administrator and
its affiliates also serve as administrator or sub-administrator to over 34
mutual funds.
Pursuant to an Administration Agreement with the Fund, the
Administrator provides all administrative services necessary for the Fund, other
than those provided by the Adviser, subject to the supervision of the Fund's
Board of Directors. The Administrator will provide persons to serve as officers
of the Fund. Such officers may be directors, officers or employees of the
Administrator or its affiliates.
The Administration Agreement shall remain in effect for five years
commencing September 20, 1999 (the "Initial Term") and each renewal term of two
years each (each, a "Renewal Term"), unless terminated (a) by the mutual
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written agreement of the Fund and the Administrator; (b) by either the Fund or
the Administrator on 90 days' written notice, as of the end of the Initial Term
or the end of any Renewal Term; (c) by either the Fund or the Administrator on
such date as is specified in written notice given by the terminating party, in
the event of a material breach of the Agreement by the other party, provided the
terminating party has notified the other party of such breach at least 45 days
prior to the specified date of termination and the breaching party has not
remedied such breach by the specified date; (d) effective upon the liquidation
of the Administrator; or (e) as to any portfolio or the Fund, effective upon the
liquidation of such portfolio or the Fund as the case may be. The Agreement
shall not be assignable by the Administrator, without the prior written consent
of the Fund, except to an entity that is controlled by, or under common control,
with the Administrator. The Agreement also provides that the Administrator shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Fund in connection with the matters to which the Administration
Agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of the Administrator in the performance of its
duties or from reckless disregard by it of its duties and obligations
thereunder.
Under the Administration Agreement, the Administrator performs or
supervises the performance by others of other administrative services in
connection with the operations of the Portfolios, and, on behalf of the Fund,
investigates, assists in the selection of and conducts relations with
custodians, depositories, accountants, legal counsel, underwriters, brokers and
dealers, corporate fiduciaries, insurers, banks and persons in any other
capacity deemed to be necessary or desirable for the Portfolios' operations. The
Administrator provides the Directors of the Fund with such reports regarding
investment performance as they may reasonably request but shall have no
responsibility for supervising the performance by any investment adviser or
sub-adviser of its responsibilities. The Administrator may appoint a
sub-administrator to perform certain of the services to be performed by the
Administrator hereunder.
The Administrator provides the Fund with administrative services,
regulatory reporting, fund accounting and related portfolio accounting services,
all necessary office space, equipment, personnel, compensation and facilities
(including facilities for Shareholders' and Directors' meetings) for handling
the affairs of the Fund and such other services as the Directors may, from time
to time, reasonably request and the Administrator shall, from time to time,
reasonably determine to be necessary to perform its obligations under the
Agreement. In addition, at the request of the Board of Directors, the
Administrator shall make reports to the Directors concerning the performance of
its obligations hereunder.
2. Administrator's Fees. For the services rendered to the Fund by the
Administrator, the Fund pays the Administrator a monthly fee based on the Fund's
average net assets.
Calculation of Administrator's Monthly Fee
Fund's Net Assets Fee
- --------------------- -------------
Up to $250 million .125%
Next $250 million .09%
Next $500 million .07%
On assets over $1 Billion .05%
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Fees Paid to the Administrator*
Fiscal Year Ended,
1998 1997 1996
Fees $73,466 $66,170 $10,468
D. CUSTODIAN, TRANSFER AGENT AND DIVIDEND AGENT
The Northern Trust Company, 50 S. Lasalle Street, Chicago, Illinois
60675, serves as custodian for the Fund's cash and securities. Pursuant to a
Custodian Agreement with the Fund, it is responsible for maintaining the books
and records of the Fund's portfolio securities and cash. The Custodian does not
assist in, and is not responsible for, investment decisions involving assets of
the Fund. Forum Shareholder Services LLC also acts as the Fund's transfer and
dividend agent. Forum Shareholder Services LLC has its principal office at 2
Portland Square, Portland, Maine 04101.
E. COUNSEL AND INDEPENDENT AUDITORS
Legal matters in connection with the issuance of shares of common
stock of the Fund are passed upon by Battle Fowler LLP, 75 East 55th Street, New
York, NY 10022. Morrison, Brown, Argiz & Co., P.A., 1001 Brickel Bay Drive, 9th
Floor, Miami, Florida 33131, have been selected as auditors for the Fund.
VI. BROKERAGE ALLOCATION AND OTHER PRACTICES
The Adviser makes the Fund's portfolio decisions. In the
over-the-counter market, where a majority of the portfolio securities are
expected to be traded, orders are placed with responsible primary market-makers
unless a more favorable execution or price is believed to be obtainable.
Regarding exchange-traded securities, the Adviser determines the broker to be
used in each specific transaction with the objective of negotiating a
combination of the most favorable commission and the best price obtainable on
each transaction (generally defined as best execution). The Adviser will also
consider the reliability, integrity and financial condition of the
broker-dealer, the size of and difficulty in executing the order, the value of
the expected contribution of the broker-dealer to the investment performance of
the Fund on a continuing basis, as well as other factors such as the
broker-dealer's ability to engage in transactions in securities of issuers which
are thinly traded. The Adviser does not intend to employ a broker-dealer whose
commission rates fall outside of the prevailing ranges of execution costs
charged by other broker-dealers offering similar services. When consistent with
the objective of obtaining best execution, brokerage may be directed to persons
or firms supplying investment information to the Adviser, or portfolio
transactions may be effected by the Adviser. Neither the Fund nor the Adviser
has entered into agreements or understandings with any brokers regarding the
placement of securities transactions because of research services they provide.
To the extent that such persons or firms supply investment information to the
Adviser for use in rendering investment advice to the Fund, such information may
be supplied at no cost to the Adviser and, therefore, may have the effect of
reducing the expenses of the Adviser in rendering advice to the Fund. While it
is impossible to place an actual dollar value on such investment information,
its receipt by the Adviser probably does not reduce the overall expenses of the
Adviser to any material extent. Consistent with the Conduct Rules of the NASD,
and subject to seeking best execution, the Adviser may consider sales of shares
of the Fund as a factor in the selection of brokers to execute portfolio
transactions for the Fund. For the fiscal years ended December 31, 1998, 1997
and 1996, the Fund paid brokerage commissions in the amount of $16,443, $16,944
and $3,285, respectively.
- ------------------------
* These fees were paid to American Date Service, Inc., the Fund's
Administrator prior to September 20, 1999.
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<PAGE>
The investment information provided to the Adviser is of the type
described in Section 28(e) of the Securities Exchange Act of 1934 and is
designed to augment the Adviser's own internal research and investment strategy
capabilities. Research services furnished by brokers through which the Fund
effects securities transactions are used by the Adviser in carrying out its
investment management responsibilities with respect to all its clients'
accounts. There may be occasions where the transaction cost charged by a broker
may be greater than that which another broker may charge if the Adviser
determines in good faith that the amount of such transaction cost is reasonable
in relation to the value of brokerage and research services provided by the
executing broker. The Adviser may consider the sale of shares of the Fund by
brokers including the Distributor as a factor in its selection of brokers of
Fund transactions.
A majority of the portfolio securities that the Fund purchases or
sells will be done as principal transactions. In addition, debt instruments are
normally purchased directly from the issuer, from banks and financial
institutions or from an underwriter or market maker for the securities. There
usually are not brokerage commissions paid for any such purchases. Any
transactions involving such securities for which the Fund pays a brokerage
commission will be effected at the best price and execution available. Purchases
from underwriters of portfolio securities include a commission or concession
paid by the issuer to the underwriter, and purchases from dealers serving as
market makers include the spread between the bid and asked price. The Fund may
purchase Government Obligations with a demand feature from banks or other
financial institutions at a negotiated yield to the Fund based on the applicable
interest rate adjustment index for the security. The interest received by the
Fund is net of a fee charged by the issuing institution for servicing the
underlying obligation and issuing the participation certificate, letter of
credit, guarantee or insurance and providing the demand repurchase feature.
Allocation of transactions, including their frequency, to various
dealers is determined by the Adviser in its best judgment and in a manner deemed
in the best interest of shareholders of the Fund rather than by a formula. The
primary consideration is prompt execution of orders in an effective manner at
the most favorable price.
Investment decisions for the Fund will be made independently from
those for any other investment companies or accounts that may become managed by
the Adviser or its affiliates. If, however, the Fund and other investment
companies or accounts managed by the Adviser are simultaneously engaged in the
purchase or sale of the same security, the transactions will be averaged as to
price and allocated equitably to each account. In some cases, this policy might
adversely affect the price paid or received by the Fund or the size of the
position obtainable for the Fund. In addition, when purchases or sales of the
same security for the Fund and for other investment companies managed by the
Adviser occur contemporaneously, the purchase or sale orders may be aggregated
in order to obtain any price advantage available to large denomination
purchasers or sellers.
In addition to managing the assets of the Fund, the Adviser manages
assets on a discretionary basis for other clients and, as a result, the Adviser
may effect transactions in such clients' accounts in securities in which the
Fund currently holds or, in the near future may hold, a position. The Adviser
makes the determination to purchase or sell a security based on numerous
factors, including those that may be particular to one or more of its clients.
Therefore, it is possible that the Adviser will effect transactions in certain
securities for select clients, which may or may not include the Fund, that it
may not deem, in its sole discretion, as being appropriate for other clients,
which may or may not include the Fund.
VII. CAPITAL STOCK AND OTHER SECURITIES
The authorized capital stock of the Fund consists of one billion
shares of stock having a par value of one-tenth of one cent ($.001) per share.
The Fund's Board of Directors is authorized to divide the unissued shares into
separate classes and series of stock, each series representing a separate,
additional investment portfolio. The Board currently has authorized the division
of the unissued shares into two Classes -- Class A and Class D. Shares of any
class or series will have identical voting rights, except where, by law, certain
matters must be approved by a majority of the shares of the affected class or
series. Each share of any class or series of shares when issued has equal
dividend, distribution,
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liquidation and voting rights within the class or series for which it was
issued, and each fractional share has those rights in proportion to the
percentage that the fractional share represents of a whole share. Shares will be
voted in the aggregate.
There are no conversion or preemptive rights in connection with any
shares of the Fund. All shares, when issued in accordance with the terms of the
offering, will be fully paid and non-assessable. Shares are redeemable at net
asset value, at the option of the investor.
The shares of the Fund have non-cumulative voting rights, which means
that the holders of more than 50% of the shares outstanding voting for the
election of directors can elect 100% of the directors if the holders choose to
do so, and, in that event, the holders of the remaining shares will not be able
to elect any person or persons to the Board of Directors. Unless specifically
requested by an investor who is an investor of record, the Fund does not issue
certificates evidencing Fund shares.
As a general matter, the Fund will not hold annual or other meetings
of the Fund's shareholders. This is because the By-laws of the Fund provide for
annual meetings only (a) for the election of directors, (b) for approval of
revisions to the Fund's investment advisory agreement, (c) for approval of
revisions to the Fund's distribution agreement with respect to a particular
class or series of stock, and (d) upon the written request of holders of shares
entitled to cast not less than twenty-five percent of all the votes entitled to
be cast at such meeting. Annual and other meetings may be required with respect
to such additional matters relating to the Fund as may be required by the
Investment Company Act of 1940 (the "Act") including the removal of Fund
directors and communication among shareholders, any registration of the Fund
with the Securities and Exchange Commission or any state, or as the Directors
may consider necessary or desirable. Each Director serves until the next meeting
of shareholders called for the purpose of considering the election or reelection
of such Director or of a successor to such Director, and until the election and
qualification of his or her successor, elected at such meeting, or until such
Director sooner dies, resigns, retires or is removed by the vote of the
shareholders.
Rule 18f-2 under the Act provides that any matter required to be
submitted by the provisions of the Act or applicable state law, or otherwise, to
the holders of the outstanding voting securities of an investment company such
as the Fund shall not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding shares of each class or
series affected by such matter, i.e., by a majority of the Fund's outstanding
shares. Rule 18f-2 further provides that a class or series shall be deemed to be
affected by a matter unless it is clear that the interests of each class or
series in the matter are substantially identical or that the matter does not
affect any interest of such class or series. However, the Rule exempts the
selection of independent public accountants, the approval of principal
distribution contracts and the election of directors from the separate voting
requirements of the Rule.
VIII. PURCHASE, REDEMPTION AND PRICING OF SHARES
The material relating to purchase, redemption and pricing of shares is
located in the Shareholder Information section of the Prospectus and is hereby
incorporated by reference.
IX. TAXATION OF THE FUND
Prospective investors should consult their tax advisors with respect
to the tax consequences of an investment in the Fund.
The Fund intends to elect to be treated as a regulated investment
company under the Internal Revenue Code of 1986 effective for its taxable year
beginning November 1, 1998. To qualify as a regulated investment company, the
Fund must distribute to shareholders at least 90% of its investment company
taxable income (which includes, among other items, dividends, taxable interest
and the excess of net short-term capital gains over net long-term capital
losses), and meet certain diversification of assets, source of income, and other
requirements discussed below. By meeting these requirements,
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the Fund generally will not be subject to Federal income tax on investment
company taxable income, and on net capital gains (the excess of net long-term
capital gains over net short-term capital losses) designated by the Fund as
capital gain dividends, distributed to shareholders. In determining the amount
of net capital gains to be distributed, any capital loss carryover from prior
years will be applied against capital gains to reduce the amount of
distributions paid. If the Fund does not meet all of these requirements, it will
be taxed as an ordinary corporation and distributions will generally be taxed to
shareholders as ordinary income.
The Fund's policy is to declare dividends annually and distribute as
dividends each year 100% (and in no event less than 90%) of its investment
company taxable income. Amounts, other than tax-exempt interest, not distributed
on a timely basis may be subject to a nondeductible 4% excise tax. To prevent
imposition of the excise tax, the Fund must distribute for the calendar year an
amount equal to the sum of (1) at least 98% of its ordinary income (excluding
any capital gains or losses) for the calendar year, (2) at least 98% of the
excess of its capital gains over capital losses (adjusted for certain losses)
for the one-year period ending December 31 of such year, and (3) all ordinary
income and capital gain net income (adjusted for certain ordinary losses) for
previous years that were not distributed during such years.
Distributions of investment company taxable income, including net
short term capital gains, generally are taxable to shareholders as ordinary
income. Distributions of net capital gains, if any, designated by the Fund as
capital gain dividends are taxable to shareholders as long-term capital gains,
regardless of the length of time the shareholder has held its shares of the
Fund. Shareholders will be notified annually as to the Federal tax status of
distributions. Distributions are taxable to shareholders whether received in
cash or reinvested in additional shares of the Fund. Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the amount of the cash dividend that
otherwise would have been distributable (where the additional shares are
purchased in the open market), or the fair market value of the shares received,
determined as of the reinvestment date. Shareholders electing to receive
distributions in the form of additional shares will have a cost basis for
federal income tax purposes in each share so received equal to the value of a
share on the reinvestment date. The Fund does not expect that any of its
distributions will qualify for the dividends-received deduction for
corporations.
In addition to satisfying the distribution requirement described
above, a regulated investment company must derive at least 90% of its gross
income from dividends, interest, certain payments with respect to securities
loans, gains from the sale or other disposition of stock or securities or
foreign currencies (to the extent such currency gains are directly related to
the regulated investment company's principal business of investing in stock or
securities) and other income (including but not limited to gains from options,
futures or forward contracts) derived with respect to its business of investing
in such stock, securities or currencies.
The Fund must also satisfy an asset diversification test in order to
qualify as a regulated investment company. Under this test, at the close of each
quarter of the Fund's taxable year, at least 50% of the value of the Fund's
assets must consist of cash and cash items, U.S. Government securities,
securities of other regulated investment companies, and securities of other
issuers (as to which the Fund has not invested more than 5% of the value of the
Fund's total assets in securities of such issuer and as to which the Fund does
not hold more than 10% of the outstanding voting securities of such issuer), and
no more than 25% of the value of its total assets may be invested in the
securities of any one issuer (other than U.S. Government securities and
securities of other regulated investment companies), or in two or more issuers
which the Fund controls and which are engaged in the same or similar trades or
businesses. Generally, an option (call or put) with respect to a security is
treated as issued by the issuer of the security not the issuer of the option.
If for any taxable year the Fund did not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
would be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and any distributions would be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current or
accumulated earnings and profits. Such distributions generally would be eligible
for the dividends received deduction in the case of corporate shareholders.
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Investors should carefully consider the tax implications of buying
shares prior to a distribution by the Fund. The price of shares purchased at
that time includes the amount of the forthcoming distributions. Distributions by
the Fund reduce the net asset value of the Fund's shares, and if a distribution
reduces the net asset value below a stockholder's cost basis, such distribution,
nevertheless, would be taxable to the shareholder as ordinary income or capital
gain as described above, even though, from an investment standpoint, it may
constitute a partial return of capital.
Dividends and interest paid by foreign issuers may be subject to
withholding and other foreign taxes, which may decrease the net return on
foreign investments as compared to dividends and interest paid by domestic
issuers. The Fund does not expect that it will qualify to elect to pass through
to its shareholders the right to take a foreign tax credit for foreign taxes
withheld from dividends and interest payments. Gains or losses attributable to
fluctuations in exchange rates resulting from transactions the Fund accrues
interest or other receivables or accrues expenses or other liabilities
denominated in a foreign currency generally are treated as ordinary income or
ordinary loss. These gains or losses, may increase, decrease, or eliminate the
amount of the Fund's investment company taxable income to be distributed to its
shareholders as ordinary income.
Upon the taxable disposition (including a sale or redemption) of
shares of the Fund, a shareholder may realize a gain or loss depending upon its
basis in the shares. Such gain or loss will be treated as capital gain or loss
if the shares are capital assets in the shareholder's hands, and will be
long-term or short-term, generally depending upon the shareholder's holding
period for the shares. Non-corporate shareholders are subject to tax at a
maximum rate of 20% on capital gains resulting from the disposition of shares
held for more than 12 months (10% if the taxpayer is, and would be after
accounting for such gains, subject to the 15% tax bracket for ordinary income).
However, a loss realized by a shareholder on the disposition of Fund shares with
respect to which capital gains dividends have been paid will, to the extent of
such capital gain dividends, also be treated as long-term capital loss if such
shares have been held by the shareholder for six months or less. Further, a loss
realized on a disposition will be disallowed to the extent the shares disposed
of are replaced (whether by reinvestment of distributions or otherwise) within a
period of 61 days beginning 30 days before and ending 30 days after the shares
are disposed of. In such a case, the basis of the shares acquired will be
adjusted to reflect the disallowed loss. Shareholders receiving distributions in
the form of additional shares will have a cost basis for Federal income tax
purposes in each share received equal to the net asset value of a share of the
Fund on the reinvestment date. Capital losses in any year are deductible only to
the extent of capital gains plus, in the case of a noncorporate taxpayer, $3,000
of ordinary income ($1,500 for married individuals filing separately).
If any net capital gains are retained by the Fund for reinvestment,
requiring federal income taxes thereon to be paid by it, the Fund can elect to
treat such capital gains as having been distributed to shareholders. In that
event, shareholders will report such capital gains as net capital gains, will be
able to claim their share of federal income taxes paid by the Fund on such gains
as a credit against their own federal income tax liability, and will be entitled
to increase the adjusted tax basis of their Fund shares by 65% of their share of
the undistributed gain.
The Fund will be required to report to the Internal Revenue Service
all distributions of taxable income and capital gains as well as gross proceeds
from the redemption or exchange of Fund shares, except in the case of exempt
shareholders, which include most corporations. Under the backup withholding
provisions, distributions of taxable income and capital gains and proceeds from
the redemption or exchange of the shares of a regulated investment company may
be subject to withholding of federal income tax at the rate of 31% in the case
of non-exempt shareholders who fail to furnish the investment company with their
taxpayer identification numbers and their required certifications regarding
their status under the federal income tax law. If the withholding provisions are
applicable, any such distributions and proceeds, whether taken in cash or
reinvested in additional shares, will be reduced by the amounts required to be
withheld. Corporate shareholders should provide the Fund with their taxpayer
identification numbers and should certify their exempt status in order to avoid
possible erroneous application of backup withholding.
The foregoing discussion of U.S. federal income tax law relates solely
to the application of that law to U.S. persons, i.e., U.S. citizens and
residents and U.S. domestic corporations, partnerships, trusts and estates. Each
shareholder who is not a U.S. person should consider the U.S. and foreign tax
consequences of ownership of Fund shares,
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<PAGE>
including the possibility that such a shareholder may be subject to a U.S.
withholding tax at a rate of 30% (or at a lower rate under an applicable income
tax treaty) on amounts received by such person.
The Fund may be subject to state or local tax in jurisdictions in
which the Fund is organized or may be deemed to be doing business. However,
Maryland taxes regulated investment companies in a manner that is generally
similar to the federal income tax rules described herein.
Distributions may be subject to state and local income taxes. In
addition, the treatment of the Fund and its shareholders in those states that
have income tax laws might differ from their treatment under the federal income
tax laws.
X. UNDERWRITERS
The Fund sells and redeems its shares on a continuing basis at their
net asset value and imposes a sales charge. The Distributor does not receive an
underwriting commission. In effecting sales of Fund shares under the
Distribution Agreement, the Distributor, for nominal consideration (i.e. $1.00)
and as agent for the Fund, will solicit orders for the purchase of the Fund's
shares, provided that any subscriptions and orders will not be binding on the
Fund until accepted by the Fund as a principal. In addition, as further
described in "B, The Distribution and Service Plan," the Distributor receives a
fee equal to 0.25% of the Class A shares' average daily net assets on an annual
basis to permit it to make payments to broker-dealers and other financial
institutions with which it has written agreements and whose clients are Fund
shareholders for providing distriubution assistance and shareholder support to
the Fund.
The Glass-Steagall Act limits the ability of a depository institution
to become an underwriter or distributor of securities. It is the Fund's
position, however, that banks are not prohibited from acting in other capacities
for investment companies, such as providing administrative and shareholder
account maintenance services and receiving compensation from the distributor for
providing such services. This is an unsettled area of the law, however, and if a
determination contrary to the Fund's position concerning shareholder servicing
and administration payments to banks from the distributor is made by a bank
regulatory agency or court, any such payments will be terminated and any shares
registered in the banks' names, for their underlying customers, will be
re-registered in the names of the customers at no cost to each Class or its
shareholders. In addition, state securities laws on this issue may differ from
the interpretation of Federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
XI. CALCULATION OF PERFORMANCE DATA
The Fund, on behalf of each Class, may from time to time include
yield, effective yield and total return information in advertisements or reports
to investors or prospective investors. Currently, the Fund intends to provide
these reports to investors and prospective investors semi-annually, but may from
time to time, in its sole discretion, provide reports on a more frequent basis,
such as quarterly. The "yield" refers to income generated by an investment in a
particular Class of the Fund over a thirty-day period. This income is then
"annualized." That is, the amount of income generated by the investment during
that month is assumed to be generated each month over a 12-month period and is
shown as a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the monthly income earned by an investment in a
particular Class of the Fund is assumed to be reinvested. The "effective yield"
will be slightly higher than the "yield" because of the compounding effect of
this assumed reinvestment. The "total return" of the Fund is required to be
included in any advertisement containing each Class's yield. Total return is the
average annual total return for the period which began at the inception of a
particular Class of the Fund and ended on the date of the most recent balance
sheet, and is computed by finding the average annual compound rates of return
over the period that would equate the initial amount invested to the ending
redeemable value. For a description of the methods used to calculate total
return, see the Statement of Additional Information. Yield, effective yield and
total return may fluctuate daily and do not provide a basis for determining
future yields, effective yields or total returns. For Class A shares, the annual
total rate of return and
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yield figures will assume payment of the maximum initial sales load at the time
of purchase. One-, five- and ten-year periods will be shown, unless the Class of
the Fund has been in existence for a shorter period.
The yields and the net asset values of each Class of shares of the
Fund will vary based on the current market value of the securities held by the
Fund and changes in such Class's expenses. The Adviser, the Administrator or the
Distributor may voluntarily waive a portion of their fees on a month-to-month
basis. These actions would have the effect of increasing the net income (and
therefore the yield and total rate of return) of a Class of shares of the Fund
during the period such waivers are in effect. These factors and possible
differences in the methods used to calculate the yields and total rates of
return should be considered when comparing the yields or total rates of return
of a Class of the Fund to yields and total rates of return published for other
investment companies and other investment vehicles.
The Fund computes yield based on a 30-day (or one month) period ended
on the date of the most recent balance sheet included in the registration
statement, computed by dividing the net investment income per share earned
during the period by the maximum offering price per share on the last day of the
period, according to the following formula:
YIELD = 2[(a-b + 1)6 - 1]
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to dividends.
d = the maximum offering price per share on the last day of
the period.
Actual future yields will depend on the type, quality, and
maturities of the investments held by the Fund, changes in interest rates on
investments, and the Fund's expenses during the period.
COMPUTATION OF TOTAL RETURN. The total return must be
displayed in any advertisement containing the Fund's yield. Total return is the
average annual total return for the 1-, 5- and 10-year period ended on the date
of the most recent balance sheet included in the Statement of Additional
Information, computed by finding the average annual compounded rates of return
over 1-, 5- and 10-year periods that would equate the initial amount invested to
the ending redeemable value according to the following formula:
P(1 + T)n = ERV
Where:
P = a hypothetical initial investment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1000 payment
made at the beginning of the 1-, 5- or 10-year periods at
the end of the 1-, 5-or 10-year periods (or fractions
thereof).
Because the Fund has not had a registration in effect for 5 or 10
years, the period during which the registration has been effective shall be
substituted.
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Yield information may be useful for reviewing the performance of
the Fund and for providing a basis for comparison with other investment
alternatives. However, unlike bank deposits or other investments which pay a
fixed yield for a stated period of time, the Fund's yield does fluctuate, and
this should be considered when reviewing performance or making comparisons.
From time to time evaluations of performance of the Fund made by
independent sources may be used in advertisements. These sources may include
Lipper Analytical Services, Wiesenberger Investment Company Service, Donoghue's
Money Fund Report, Barron's, Business Week, Changing Times, Financial World,
Forbes, Fortune, Money, Personal Investor, Bank Rate Monitor, and The Wall
Street Journal. From time to time evaluations of performance of the Adviser made
by independent sources may be used in advertisements of the Fund.
XII. FINANCIAL STATEMENTS
The financial statements for the year ended December 31, 1998 are
available, without charge, upon request. Shareholders will receive Semi-Annual
and Annual Reports from the Fund. The annual financial statements are audited by
the Fund's independent financial accountants. Copies are available, without
charge, upon request. The audited financial statements for the Fund dated
December 31, 1998 and the Report of Morrison, Brown, Argiz & Co. thereon, are
incorporated herein by reference to the Annual Report to Shareholders dated
December 31, 1998.
