A. Please insert the following "Financial Highlights" tables
as page 4 and page 5 of the prospectus. In addition, please
add the heading "Financial Highlights" to the Table of
Contents page.
BATTERY PARKSM HIGH YIELD FUND
Financial Highlights--Class A Shares
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD
ENDED
(UNAUDITED)
MARCH 31,
1997(A)
- ------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- ------------------------------------------------------------
Income from investment operations
- ------------------------------------------------------------
Net investment income 0.37
- ------------------------------------------------------------
Net realized and unrealized gain on investments 0.56
- ------------------------------------------------------------
Total from investment operations 0.93
- ------------------------------------------------------------
Less distributions
- ------------------------------------------------------------
Distributions from net investment income (0.37)
- ------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.56
- ------------------------------------------------------------
Total return (b) 9.37%
- ------------------------------------------------------------
Ratios to average net assets
- ------------------------------------------------------------
Expenses 1.25%*
- ------------------------------------------------------------
Net investment income 8.38%*
- ------------------------------------------------------------
Expense waiver/reimbursement (c) 2.80%*
- ------------------------------------------------------------
Supplemental Data
- ------------------------------------------------------------
Net assets, end of period (000 omitted) $1,205
- ------------------------------------------------------------
Portfolio turnover 98%
- ------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from October 28, 1996 (date of initial
public offering) to March 31, 1997.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
BATTERY PARKSM HIGH YIELD FUND
Financial Highlights--Class Y Shares
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD
ENDED
(UNAUDITED)
MARCH 31,
1997(A)
- ------------------------------------------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
- ------------------------------------------------------------
Income from investment operations
- ------------------------------------------------------------
Net investment income 0.38
- ------------------------------------------------------------
Net realized and unrealized gain on investments 0.56
- ------------------------------------------------------------
Total from investment operations 0.94
- ------------------------------------------------------------
Less distributions
- ------------------------------------------------------------
Distributions from net investment income (0.38)
- ------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $10.56
- ------------------------------------------------------------
Total return (b) 9.48%
- ------------------------------------------------------------
Ratios to average net assets
- ------------------------------------------------------------
Expenses 1.00%*
- ------------------------------------------------------------
Net investment income 8.63%*
- ------------------------------------------------------------
Expense waiver/reimbursement (c) 2.80%*
- ------------------------------------------------------------
Supplemental Data
- ------------------------------------------------------------
Net assets, end of period (000 omitted) $10,971
- ------------------------------------------------------------
Portfolio turnover 98%
- ------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from October 28, 1996 (date of initial
public investment) to March 31, 1997. For the period from September 19,
1996 (start of business) to October 27, 1996, the investment income was
distributed to the Fund's Adviser.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
B. Please delete the section entitled "The Investment Adviser"
which begins on page 4 of the prospectus and replace it
with the following.
THE INVESTMENT ADVISER
- --------------------------------------------------------------------------------
The Fund's Investment Adviser is Nomura Corporate Research and Asset Management
Inc. (the "Investment Adviser" or "NCRAM"). As of March 31, 1997, NCRAM managed
in excess of $855 million in high yield bonds.
HISTORICAL INVESTMENT RESULTS OF THE INVESTMENT ADVISER. Set forth below is
certain performance data provided by the Investment Adviser relating to
investment results of a composite of all client accounts whose portfolios were
managed by the Investment Adviser during a five year period commencing in 1991,
which had the same investment objective as the Fund and were managed using
substantially similar, though not necessarily identical, investment strategies
and techniques as those contemplated by the Fund (the "Advisory Accounts"). See
"Investment Objective and Policies." Because of the similarities in investment
strategies and techniques, the Investment Adviser believes that the Advisory
Accounts are sufficiently comparable to the Fund to make performance data
listed below relevant to investors in the Fund. The results presented (the
"Total Return Composite") are not intended to predict or suggest the returns
that will be experienced by the Fund or the return an investor will achieve by
investing in the Fund. Different methods of determining performance from those
described in the footnotes to the charts below may result in different
performance figures. An investor should not rely on the following performance
figures as an indication of future performance of either the Investment
Adviser's separate Advisory Accounts or the Fund.
<TABLE>
<CAPTION>
NCRAM HIGH YIELD TOTAL RETURN FIGURES
TOTAL RETURN COMPOSITE OCTOBER 1, 1991 TO MARCH 31, 1997
- --------------------------------------------------------------------------
<S> <C>
AVERAGE TOTAL RETURN NET OF FEES
- --------------------------------------------------------------------------
1991 (Fourth Quarter) 4.22%
- --------------------------------------------------------------------------
1992 18.70%
- --------------------------------------------------------------------------
1993 25.37%
- --------------------------------------------------------------------------
1994 8.39%
- --------------------------------------------------------------------------
1995 22.43%
- --------------------------------------------------------------------------
1996 19.59%
- --------------------------------------------------------------------------
1997 (First Quarter) 1.83%
- --------------------------------------------------------------------------
Annualized Total Return Since Inception 18.18%
- --------------------------------------------------------------------------
</TABLE>
Another way to consider the above schedule is as follows: $10,000 invested in
an Advisory Account on October 1, 1991 which received a return based on the
Total Return Composite would have grown to $25,066, including reinvestment of
dividends, by March 31, 1997.
<TABLE>
<CAPTION>
PERFORMANCE OF NCRAM HIGH YIELD TOTAL RETURN COMPOSITE VS. LIPPER HIGH YIELD FUND AVERAGE
- ------------------------------------------------------------------------------------------------------
[NET OF FEES] Q1 Q2 Q3 Q4 ANNUAL
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997
NCRAM +1.83% N/A N/A N/A N/A
Lipper* +0.77% N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------
1996
NCRAM +2.43% +2.69% +6.73% +6.52% +19.59%
Lipper* +2.87% +2.01% +4.68% +3.62% +13.83%
- ------------------------------------------------------------------------------------------------------
1995
NCRAM +5.97% +6.19% +3.64% +4.99% +22.43%
Lipper* +4.49% +5.26% +3.13% +2.96% +16.79%
- ------------------------------------------------------------------------------------------------------
1994
NCRAM +3.60% +1.22% +0.51% +2.83% +8.39%
Lipper* -0.97% -1.29% -0.17% -1.25% -3.63%
- ------------------------------------------------------------------------------------------------------
1993
NCRAM +9.41% +5.17% +2.79% +6.00% +25.37%
Lipper* +6.73% +4.63% +1.88% +4.58% +18.88%
- ------------------------------------------------------------------------------------------------------
1992
NCRAM +5.45% +2.98% +7.29% +1.89% +18.70%
Lipper* +8.27% +3.17% +4.10% +1.16% +17.63%
- ------------------------------------------------------------------------------------------------------
1991
NCRAM N/A N/A N/A +4.22% N/A
Lipper* N/A N/A N/A +5.05% N/A
- ------------------------------------------------------------------------------------------------------
</TABLE>
*Source: Lipper Analytical Services, Inc.
The indices above each represent past performance, are shown solely for
comparative purposes and may not be indicative of future returns. Past
performance is no guarantee of future results. Mutual funds, including the Fund
and those funds comprising the Lipper High Yield Fund Average, typically are
subject to portfolio management restrictions, investment limitations and
diversification requirements imposed by the Investment Company Act and the
Internal Revenue Code of 1986 that are not applicable to private accounts. The
imposition of such restrictions may result in lower returns than reflected in
the above table for the NCRAM High Yield Total Return Composite, as discussed
in note 6, below. In particular, such funds are subject to limitations on their
profits attributable to purchases and sales of shares held for less than three
months. See "Investment Objective and Policies--Other Investment Policies and
Practices--Portfolio Turnover."
NOTES TO INVESTMENT PERFORMANCE
The schedule on page 3 of this prospectus supplement represents the average
investment results for the periods ending after October 1, 1991 for all clients
whose portfolios were included in the Advisory Accounts managed by the
Investment Adviser.
1. TYPES OF ACCOUNTS AND ELIGIBLE ACCOUNTS FOR COMPOSITE
The Total Return Composite contains accounts that are aggressively managed for
a high level of current income and capital appreciation. Accounts in the Total
Return
Composite invest primarily in fixed income securities of U.S. issuers which are
rated in the lower rating categories of the established rating services or are
unrated securities of comparable quality. Investments in fixed income
securities include cash pay securities, pay-in-kind and zero coupon notes,
convertible debt securities and increasing rate and resettable notes. These
investments include both new issues and issues traded in the secondary market.
New accounts are eligible for inclusion in the composite rate of return
calculations upon completion of the first full quarter under management. Closed
accounts are eligible for inclusion in the composite rate of return
calculations through the completion of the last full quarter under management.
All existing accounts under management are reevaluated for possible inclusion
in the composite on a quarterly basis.
2. CALCULATION OF RATES OF RETURN
All rate of return calculations conform to standards established by the
Association for Investment Management and Research. All accounts are valued
monthly based on principal market values plus accrued income. Account returns
are calculated monthly utilizing the modified Dietz methodology where security
and cash flows are "day-weighted" during the month. All amounts are rounded to
the nearest one-hundredth of one percent. Monthly returns are geometrically
linked to determine quarterly returns.
3. COMPOSITE CHANGES AND OTHER MATTERS
No alteration of Total Return Composite as presented here has occurred at any
time because of changes in personnel. The composition of the composite has been
amended only where a change in the investment mandates of an account so
dictates. Leverage has not been used in portfolios included in the Total Return
Composite. An affiliated account which represents an average of approximately
7.58% of the total assets of the Total Return Composite (for the period October
1, 1992 through March 31, 1994) was a non-fee paying account. Due to a change
of investment strategy, this account was removed from the Total Return
Composite as of April 1, 1994.
There has been no linkage with simulated portfolios.
4. TOTAL RETURN COMPOSITE
During the term of its existence, the Total Return Composite comprised five or
fewer separate accounts. As of March 31, 1997, assets in the Total Return
Composite Accounts aggregated approximately $176 million (approximately 8.56%
of the Investment Adviser's total assets under management). As of March 31,
1997, the Investment Adviser managed approximately $678 million of assets in a
high yield mutual fund registered in Japan.
5. FEES
Fees range from .50% to 1% of assets under management.
6. LIPPER HIGH CURRENT YIELD FUND AVERAGE
The Lipper High Current Yield Fund Average (the "Index") is a published average
total return net of fees figure for approximately 175 high current yield funds
monitored by Lipper Analytical Services ("Lipper"). Lipper defines High Current
Yield Funds as those that "aim at high (relative) current income from fixed
income securities." The Index has no quality or maturity restrictions and the
funds tend to invest in lower-grade debt securities. Typically, such funds have
concentration, diversification, liquidity, portfolio turnover and distribution
restrictions which may result in lower returns than aggressively traded
accounts such as those in the Total Return Composite. The Index includes all
high yield funds in existence for the current period reported, whereas
historical averages are restated each quarter due to changes in the number of
component funds and revisions for new funds, mergers, liquidations, etc.
C. Please insert the following directly after the Class A
shares offering price chart on page 18 of the prospectus.
Class A shares may be sold at net asset value to registered representatives and
employees of broker-dealers that are parties to dealer agreements with the
Distributor. Class A shares may also be purchased without sales charges by
investors who participate in certain broker-dealer wrap fee investment
programs.
Class A shares of the Fund may be sold at net asset value without any sales
charge under a NAV Transfer Program. To qualify for the NAV Transfer Program,
an investor must provide adequate proof that within 90 days prior to the
purchase of Class A shares of the Fund an investor redeemed shares from a load
or no-load mutual fund other than the Fund or any money market fund. To provide
adequate proof, an investor must complete a qualification form and provide a
statement showing the value liquidated from the other mutual fund.
From October 10, 1996 through December 31, 1996, Class A shares of the Fund
were sold at net asset value, without a front-end sales charge (the "Special
Offer"). Class A shares purchased pursuant to this Special Offer that are
redeemed within one year of purchase, however, will be subject to a contingent
deferred sales charge, which will be paid to the Distributor, of 1.0% of the
amount invested or the proceeds of redemption, whichever is less.
THE FOLLOWING SUMMARY OF FUND EXPENSES RELATES TO CLASS A SHARES PURCHASED
DURING THE SPECIAL OFFER DESCRIBED ON THE PREVIOUS PAGE:
SUMMARY OF FUND EXPENSES
<TABLE>
<CAPTION>
CLASS A(1)
- -------------------------------------------------------------------------------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
- -------------------------------------------------------------------------------
Maximum Sales Load Imposed on Purchases (as a percentage of offer-
ing price) None(2)
- -------------------------------------------------------------------------------
Maximum Sales Load Imposed on Reinvested Dividends (as a percent-
age of offering price) None
- -------------------------------------------------------------------------------
Contingent Deferred Sales Charge (as a percentage of original pur-
chase price or redemption
proceeds, as applicable) 1.00%(3)
- -------------------------------------------------------------------------------
Redemption Fees (as a percentage of amount redeemed, if applica-
ble) None
- -------------------------------------------------------------------------------
Exchange Fee None
- -------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES (4)
(AS A PERCENTAGE OF PROJECTED AVERAGE NET ASSETS)
- -------------------------------------------------------------------------------
Management Fees (after waiver)(5) 0.37%
- -------------------------------------------------------------------------------
Rule 12b-1 Fees 0.25%
- -------------------------------------------------------------------------------
Total Other Expenses 0.63%
- -------------------------------------------------------------------------------
Total Annual Fund Operating Expenses (6) 1.25%
- -------------------------------------------------------------------------------
</TABLE>
(1) Class A shares of the Fund held in accounts of financial planners or
individuals will convert to Class Y shares when the aggregate value of the
Class A shares in such account reaches $1 million or more. See "Purchase of
Shares--Class A Shares--Conversion of Class A Shares to Class Y Shares."
(2) During the Special Offer, Class A shares were sold at the net asset value,
without a front-end sales charge.
(3) Class A shares purchased pursuant to the Special Offer that are redeemed
within one year of purchase will be subject to a contingent deferred sales
charge. The amount of the contingent deferred sales charge, which will be
paid to the Distributor, will be 1.00% of the amount invested or the
proceeds of redemption, whichever is less.
(4) Annual Fund Operating Expenses are estimated based on average expenses
expected to be incurred during the fiscal year ending September 30, 1997.
During the course of this period, expenses may be more or less than the
average amount shown.
(5) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee by the investment adviser. The adviser can
terminate this voluntary waiver at any time at its sole discretion. The
maximum management fee is 0.65%.
(6) Total Annual Fund Operating Expenses for the Class A shares are estimated
to be 1.53% absent the voluntary waiver of management fees.
The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder will bear either directly or indirectly.
For more complete descriptions of the various costs and expenses, see "Purchase
of Shares."
EXAMPLE
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return; (2) redemption at the end of each time period; and (3) payment
of the maximum sales charge, if applicable.
<TABLE>
<CAPTION>
CLASS A
- ----------------
<S> <C>
1 Year $23
- ----------------
1 Year+ $13
- ----------------
3 Years $40
- ----------------
</TABLE>
+Reflects expenses on the same investment, assuming no redemption.
The above example should not be considered a representation of past or future
performance. Actual expenses may be greater or less than those shown. This
example is based on estimated data for the Fund's fiscal year ending September
30, 1997.
D. Please insert the following as the second paragraph of the
section entitled "Redemption of Shares" on page 21 of the
prospectus.
Class A shares purchased between October 10, 1996 and December 31, 1996 are
subject to a contingent deferred sales charge if redeemed within one year. See
"Purchase of Shares--Class A Shares."
E. Please insert the following as the third paragraph of the
sub-section entitled "Organization of the Fund" which
begins on page 28 of the prospectus.
As of April 14, 1997, Nomura Holding America Inc. ("NHA"), New York, New York,
owned 98.95% of the Class Y shares of the Fund, comprising 89.70% of the total
common stock of the Fund, and, therefore, may, for certain purposes, be deemed
to control the Fund and be able to affect the outcome of certain matters
presented for a vote of shareholders.
F. Please insert the following Financial Statements after the
subsection entitled "Shareholder Reports" and before
Appendix A. In addition, please add the heading "Financial
Statements" to the Table of Contents page after the heading
"Shareholder Reports."
BATTERY PARKSM HIGH YIELD FUND
Portfolio of Investments
March 31, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------
CORPORATE BONDS--91.5%
- ---------------------------------------------------------------------------
<C> <S> <C>
AEROSPACE & DEFENSE--4.2%
- ---------------------------------------------------------------------------
$500,000 Newport News Shipping, 9.25%, 12/1/2006 $ 512,500
- ---------------------------------------------------------------------------
AUTOMOTIVE--6.4%
- ---------------------------------------------------------------------------
500,000 Blue Bird Body Co., 10.75%, 11/15/2006 525,000
- ---------------------------------------------------------------------------
250,000 LDM Technologies, Inc., 10.75%, 1/15/2007 256,250
- ---------------------------------------------------------------------------
Total 781,250
- ---------------------------------------------------------------------------
BROADCAST RADIO & TV--7.8%
- ---------------------------------------------------------------------------
500,000 Katz Media Corp., 10.50%, 1/15/2007 505,000
- ---------------------------------------------------------------------------
450,000 Sinclair Broadcast Group, Inc., 10.00%, 12/15/2003 449,438
- ---------------------------------------------------------------------------
Total 954,438
- ---------------------------------------------------------------------------
BUSINESS EQUIPMENT & SERVICES--3.5%
- ---------------------------------------------------------------------------
400,000 Unisys Corp., 11.75%, 10/15/2004 424,000
- ---------------------------------------------------------------------------
CHEMICAL--3.9%
- ---------------------------------------------------------------------------
450,000 Sterling Chemicals, Inc., 11.75%, 8/15/2006 475,875
- ---------------------------------------------------------------------------
CONTAINERS--4.2%
- ---------------------------------------------------------------------------
500,000 Plastic Containers, Inc., 10.00%, 12/15/2006 512,500
- ---------------------------------------------------------------------------
ELECTRONICS--4.2%
- ---------------------------------------------------------------------------
500,000 Fairchild Semiconductor Corp., 10.125%, 3/15/2007 506,250
- ---------------------------------------------------------------------------
FOOD PRODUCTS--4.2%
- ---------------------------------------------------------------------------
500,000 CFP Holdings, Inc., 11.625%, 1/15/2004 512,500
- ---------------------------------------------------------------------------
HEALTHCARE--6.4%
- ---------------------------------------------------------------------------
500,000 IMED Corp., 9.75%, 12/1/2006 511,250
- ---------------------------------------------------------------------------
250,000 Quest Diagnostic Inc., 10.75%, 12/15/2006 261,874
- ---------------------------------------------------------------------------
Total 773,124
- ---------------------------------------------------------------------------
HOTELS/CASINOS--4.1%
- ---------------------------------------------------------------------------
500,000 Grand Casinos, Inc., 10.125%, 12/1/2003 502,500
- ---------------------------------------------------------------------------
NON-FERROUS METALS--3.3%
- ---------------------------------------------------------------------------
400,000 Westmin Resources Ltd., 11.00%, 3/15/2007 397,000
- ---------------------------------------------------------------------------
OIL & GAS--4.3%
- ---------------------------------------------------------------------------
500,000 Abraxas Petroleum Corp., 11.50%, 11/1/2004 525,000
- ---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
- -------------------------------------------------------------------------------
<C> <S> <C>
PUBLISHING--2.0%
- -------------------------------------------------------------------------------
$250,000 Hollinger International Publishing, Inc., 9.25%,
3/15/2007 $ 245,000
- -------------------------------------------------------------------------------
RETAILER--3.6%
- -------------------------------------------------------------------------------
500,000 K Mart Corp., 7.75%, 10/1/2012 443,750
- -------------------------------------------------------------------------------
STEEL--8.1%
- -------------------------------------------------------------------------------
500,000 Acindar Industria Argentina de Aceros S.A., 11.25%,
2/15/2004 507,505
- -------------------------------------------------------------------------------
450,000 GS Technologies Operating Co., Inc., 12.25%, 10/1/2005 478,125
- -------------------------------------------------------------------------------
Total 985,630
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS--15.0%
- -------------------------------------------------------------------------------
500,000 ESAT Holdings Ltd., 0/12.50%, 2/1/2007 282,500
- -------------------------------------------------------------------------------
500,000 Globalstar LP/ Capital, 11.375%, 2/15/2004 490,000
- -------------------------------------------------------------------------------
500,000 McLeod, Inc., 0/10.50%, 3/1/2007 277,500
- -------------------------------------------------------------------------------
250,000 Sprint PCS, 11.00%, 8/15/2006 265,000
- -------------------------------------------------------------------------------
750,000 Teleport Communications Group, Inc., 0/11.125%,
7/1/2007 506,250
- -------------------------------------------------------------------------------
Total 1,821,250
- -------------------------------------------------------------------------------
TEXTILES--2.1%
- -------------------------------------------------------------------------------
250,000 William Carter Co., 10.375%, 12/1/2006 253,750
- -------------------------------------------------------------------------------
TRANSPORTATION--4.2%
- -------------------------------------------------------------------------------
500,000 Atlantic Express Transportation Corp., 10.75%,
2/1/2004 513,750
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $10,894,950) 11,140,067
- -------------------------------------------------------------------------------
<CAPTION>
(A) REPURCHASE AGREEMENT--6.7%
- -------------------------------------------------------------------------------
<C> <S> <C>
821,644 Merrill Lynch, Pierce, Fenner and Smith, Inc. 5.25%,
dated 3/31/1997, due 4/3/1997 (at amortized cost) 821,644
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST $11,716,594)(B) $11,961,711
- -------------------------------------------------------------------------------
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
(b) The cost of investments for federal tax purposes amounts to $11,716,594.
The net unrealized appreciation of investments on a federal tax basis
amounts to $245,117 which is comprised of $286,431 appreciation and $41,314
depreciation at March 31, 1997.
Note: The categories of investments are shown as a percentage of net assets
($12,176,588) at March 31, 1997.
The following acronym is used throughout this portfolio:
LP--Limited Partnership
(See Notes which are an integral part of the Financial Statements)
BATTERY PARKSM HIGH YIELD FUND
Statement of Assets and Liabilities
March 31, 1997 (unaudited)
<TABLE>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------
Total investments in securities, at
value (identified and tax cost
$11,716,594) $11,961,711
- ---------------------------------------------------
Cash 22,383
- ---------------------------------------------------
Income receivable 285,796
- ---------------------------------------------------
Receivable for shares sold 49,669
- ---------------------------------------------------
Total assets 12,319,559
- ---------------------------------------------------
LIABILITIES:
- ---------------------------------------------------
Income distribution payable $95,537
- ---------------------------------------------------
Accrued expenses 47,434
- ---------------------------------------------------
Total liabilities 142,971
- ---------------------------------------------------
Net Assets for 1,153,493 shares
outstanding $12,176,588
- ---------------------------------------------------
NET ASSETS CONSIST OF:
- ---------------------------------------------------
Paid in capital $11,622,795
- ---------------------------------------------------
Net unrealized appreciation of
investments 245,117
- ---------------------------------------------------
Accumulated net realized gain on
investments 308,676
- ---------------------------------------------------
Total Net Assets $12,176,588
- ---------------------------------------------------
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PROCEEDS PER SHARE:
- ---------------------------------------------------
CLASS A SHARES:
- ---------------------------------------------------
Net Asset Value Per Share ($1,205,447 /
114,196 shares outstanding) $10.56
- ---------------------------------------------------
Offering Price Per Share (100/95.50 of
$10.56)* $11.06
- ---------------------------------------------------
Redemption Proceeds Per Share $10.56
- ---------------------------------------------------
CLASS Y SHARES:
- ---------------------------------------------------
$10,971,141 / 1,039,297 shares
outstanding $10.56
- ---------------------------------------------------
</TABLE>
*See "Purchase of Shares--Class A Shares" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
BATTERY PARKSM HIGH YIELD FUND
Statement of Operations
For the Period from September 19, 1996 (Start of Business) through March 31,
1997 (unaudited)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------------
Interest $458,452
- --------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------------
Investment advisory fee $ 30,873
- --------------------------------------------------------------------------
Administrative personnel and services fee 21,096
- --------------------------------------------------------------------------
Custodian fees 2,736
- --------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and
expenses 25,546
- --------------------------------------------------------------------------
Directors'/Trustees' fees 13,709
- --------------------------------------------------------------------------
Legal fees 18,278
- --------------------------------------------------------------------------
Portfolio accounting fees 27,603
- --------------------------------------------------------------------------
Distribution services fee--Class A shares 515
- --------------------------------------------------------------------------
Share registration costs 24,659
- --------------------------------------------------------------------------
Printing and postage 5,002
- --------------------------------------------------------------------------
Insurance premiums 1,371
- --------------------------------------------------------------------------
Taxes 2,091
- --------------------------------------------------------------------------
Miscellaneous 7,715
- --------------------------------------------------------------------------
Total expenses 181,194
- --------------------------------------------------------------------------
Waivers and reimbursements--
- --------------------------------------------------------------------------
Waiver of investment advisory fee $ (30,873)
- --------------------------------------------------------------------------
Reimbursement of other operating expenses (102,310)
- --------------------------------------------------------------------------
Total waivers and reimbursements (133,183)
- --------------------------------------------------------------------------
Net expenses 48,011
- --------------------------------------------------------------------------
Net investment income 410,441
- --------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- --------------------------------------------------------------------------
Net realized gain on investments 308,676
- --------------------------------------------------------------------------
Net change in unrealized appreciation of investments 245,117
- --------------------------------------------------------------------------
Net realized and unrealized gain on investments 553,793
- --------------------------------------------------------------------------
Change in net assets resulting from operations $964,234
- --------------------------------------------------------------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
BATTERY PARKSM HIGH YIELD FUND
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
PERIOD
ENDED
(UNAUDITED)
MARCH 31,
1997(A)
- ----------------------------------------------------------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------------------------
Net investment income $ 410,441
- ----------------------------------------------------------------------------
Net realized gain (loss) on investments ($308,676, as computed
for federal tax purposes) 308,676
- ----------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 245,117
- ----------------------------------------------------------------------------
Change in net assets resulting from operations 964,234
- ----------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------------------------------
Distributions from net investment income
- ----------------------------------------------------------------------------
Class A Shares (18,463)
- ----------------------------------------------------------------------------
Class Y Shares (391,978)
- ----------------------------------------------------------------------------
Change in net assets resulting from distributions to
shareholders (410,441)
- ----------------------------------------------------------------------------
SHARE TRANSACTIONS--
- ----------------------------------------------------------------------------
Proceeds from sale of shares 11,242,140
- ----------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 314,443
- ----------------------------------------------------------------------------
Cost of shares redeemed (33,888)
- ----------------------------------------------------------------------------
Change in net assets resulting from share transactions 11,522,695
- ----------------------------------------------------------------------------
Change in net assets 12,076,488
- ----------------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------------
Beginning of period 100,100
- ----------------------------------------------------------------------------
End of period $12,176,588
- ----------------------------------------------------------------------------
</TABLE>
(a) For the period from September 19, 1996 (start of business) to March 31,
1997.
(See Notes which are an integral part of the Financial Statements)
BATTERY PARKSM HIGH YIELD FUND
Notes to Financial Statements
March 31, 1997 (unaudited)
1. ORGANIZATION
Battery Park Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-ended management
investment company. The Company consists of one portfolio. The financial
statements included herein are only those of Battery Park High Yield Fund (the
"Fund"), a diversified portfolio. The Fund offers two classes of shares: Class
A shares and Class Y shares. The Fund's investment objective is to provide
shareholders with high total return, consisting of current income and capital
appreciation.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS. U.S. government securities, listed corporate bonds,
(other fixed income and asset-backed securities), unlisted and private
placement securities are generally valued at the mean of the latest bid and
asked price as furnished by an independent pricing service. Short-term
securities are valued at the prices provided by an independent pricing service.
However, short-term securities with remaining maturities of sixty days or less
at the time of purchase may be valued at amortized cost, which approximates
fair market value.
REPURCHASE AGREEMENTS. It is the policy of the Fund to require the custodian
bank to take possession, to have legally segregated in the Federal Reserve Book
Entry System, or to have segregated within the custodian bank's vault, all
securities held as collateral under repurchase agreement transactions.
Additionally, procedures have been established by the Fund to monitor, on a
daily basis, the market value of each repurchase agreement's collateral to
ensure that the value of collateral at least equals the repurchase price to be
paid under the repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Directors (the "Directors").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less
than the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS. Interest income and expenses are
accrued daily. Bond premium and discount, if applicable, are amortized as
required by the Internal Revenue Code of 1986, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES. It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provision for Federal income taxes are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may engage in when-
issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis are
marked to market daily and begin earning interest on the settlement date.
USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities, expenses and
revenues reported in the financial statements. Actual results could differ from
those estimated.
OTHER. Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At March 31, 1997, the Fund has authorized capital of 200,000,000 shares of
common stock, par value $0.001 per share, initially classified as one series,
namely the Fund, consisting of two classes as follows:
<TABLE>
<CAPTION>
CAPITAL STOCK
CLASS NAME CLASSIFIED
- -----------------------------
<S> <C>
Class A shares 25,000,000
- -----------------------------
Class Y shares 25,000,000
- -----------------------------
</TABLE>
The remainder of 150,000,000 shares are not classified as to any class or
series. Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31, 1997(A)
- -------------------------------------------------------------------------------
CLASS A SHARES SHARES AMOUNT
- -------------------------------------------------------------------------------
<S> <C> <C>
Shares sold 116,621 $1,237,990
- -------------------------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 808 8,676
- -------------------------------------------------------------------------------
Shares redeemed (3,243) (33,888)
- -------------------------------------------------------------------------------
Net change resulting from Class A shares transactions 114,186 $1,212,778
- -------------------------------------------------------------------------------
</TABLE>
(a) For the period from October 28, 1996 (date of initial public offering) to
March 31, 1997.
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31, 1997(B)
- -----------------------------------------------------------------------------
CLASS Y SHARES SHARES AMOUNT
- -----------------------------------------------------------------------------
<S> <C> <C>
Shares sold 1,000,400 $10,004,150
- -----------------------------------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 28,897 305,767
- -----------------------------------------------------------------------------
Shares redeemed -- --
- -----------------------------------------------------------------------------
Net change resulting from Class Y shares transactions 1,029,297 $10,309,917
- -----------------------------------------------------------------------------
Net change resulting from Class A shares and Class Y
shares transactions 1,143,483 $11,522,695
- -----------------------------------------------------------------------------
</TABLE>
(b) For the period from October 28, 1996 (date of initial public investment) to
March 31, 1997.
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE. Nomura Corporate Research and Asset Management Inc.,
the Fund's investment adviser (the "Adviser"), receives for its services an
annual investment advisory fee equal to 0.65% of the Fund's average daily net
assets. The Adviser may voluntarily choose to waive any portion of its fee and
reimburse certain operating expenses of the Fund. The Adviser can modify or
terminate this voluntary waiver and reimbursement at any time at its sole
discretion.
ADMINISTRATIVE FEE. Federated Services Company ("FServ") provides the Fund with
certain administrative personnel and services. The fee paid to FServ is based
on the level of average aggregate net assets of the Company for the period.
DISTRIBUTION SERVICES FEE. The Fund has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the
Fund will compensate Nomura Securities International, Inc., the (the
"distributor") of the Fund's shares, from the net assets of the Fund's Class A
shares to finance activities intended to result in the sale of the Fund's Class
A shares. The Plan provides that the Fund may incur distribution expenses up to
0.25% of the average daily net assets of Class A shares annually to compensate
the distributor. The distributor may voluntarily choose to waive any portion of
its fee. The distributor can modify or terminate any such voluntary waiver at
any time at its sole discretion.
SHAREHOLDER SERVICES AGREEMENT. The Fund also may enter into a Shareholder
Services Agreement with Federated Shareholder Services Company ("FSSC") under
which the Fund may make additional payments up to 0.25% of the average daily
net asset value of Class A shares to obtain certain personal services for
certain shareholders and the maintenance of certain shareholder accounts. Under
this Shareholder Services Agreement, FSSC would either perform shareholder
service directly or will select financial institutions to perform shareholder
services, and financial institutions would receive fees based upon Class A
shares owned by their clients or customers. The schedules of such fees and the
basis upon which such fees would be paid will be determined from time to time
by the Fund and FSSC. The Fund has no current intention to enter into any
Shareholder Services Agreement.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES. FServ, through its
subsidiary, FSSC serves as transfer and dividend disbursing agent for the Fund.
The fee paid to FSSC is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES. FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES. Organizational and/or start-up administrative service
expenses of $212,000 were borne initially by the Adviser. The Fund has agreed
to reimburse the Adviser for the organizational and/or start-up administrative
expenses during the five year period following effective date. For the period
ended March 31, 1997, the Fund paid $5,889 pursuant to this agreement.
GENERAL. Certain of the Officers of the Company are Officers and Directors or
Trustees of FServ and/or FSSC.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended March 31, 1997, were as follows:
<TABLE>
- ----------------------
<S> <C>
PURCHASES $20,055,988
- ----------------------
SALES $ 9,507,281
- ----------------------
</TABLE>
Directors Officers
- --------------------------------------------------------------------------------
Michael A. Berman Robert Levine
Chairman and President
John Fitting, Jr.
Richard A. Buch
Francis L. Fraenkel
Vice President
Robert Levine
Lance B. Fraser
Frank K. Reilly
Treasurer
C. Christine Thomson
Assistant Treasurer
Deborah A. Montick
Secretary
Gail Cagney
Assistant Secretary
Mutual funds are not obligations of or insured by any bank nor are
they insured by the federal government or any of its agencies.
Investment in these shares involves risk, including the possible
loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus, which contains facts
concerning its investment objective and policies, management fees, expenses and
other information.
NOMURA SECURITIES
INTERNATIONAL, INC.
Distributor
2 World Financial Center
Building B, 25th Floor
New York, NY 10281-1198
Cusip 07132Q108
Cusip 07132Q207
G02047-01 (4/97)
[LOGO]
BATTERY PARK /SM/
HIGH YIELD FUND
SEMI-ANNUAL REPORT
AND SUPPLEMENT TO
PROSPECTUS DATED
OCTOBER 10, 1996
APRIL 30, 1997
NOMURA CORPORATE RESEARCH
AND ASSET MANAGEMENT INC.
2 World Financial Center
Building B, 25th Floor
New York, NY 10281-1198
