Filed with the Securities and Exchange Commission on November 30, 1999
1933 Act Registration File No. 333-7805
1940 Act File No. 811-7675
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. 4 |X|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 6 |X|
BATTERY PARK FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
2 World Financial Center, Building B, New York, NY 10281-1198
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 667-9300
Robert Levine
Battery Park Funds, Inc.
2 World Financial Center
Building B
New York, NY 10281-1198
(Name and Address of Agent for Service)
Copies to:
John MacKinnon, Esq.
Brown & Wood LLP
One World Trade Center
New York, N.Y. 10048-0057
Patrick D. Sweeney, Esq.
Nomura Corporate Research and Asset Management Inc.
2 World Financial Center
Building B
New York, NY 10281-1198
It is proposed that this filing will become effective
_____ immediately upon filing pursuant to paragraph (b)
_____ on __________ pursuant to paragraph (b)
__X__ 60 days after filing pursuant to paragraph (a)(1)
_____ on January 28, 2000 pursuant to paragraph (a)(1)
_____ 75 days after filing pursuant to paragraph (a)(2)
_____ on ___________ pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
_____ This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
[LOGO]
B A T T E R Y
P A R KSM
F U N D S
Battery ParkSM
High Yield Fund
PROSPECTUS
JANUARY 28, 2000
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
BATTERY PARKSM HIGH YIELD FUND
Battery ParkSM Funds, Inc. currently offers one series in two
share classes to investors--the Battery ParkSM High Yield
Fund. The Fund is diversified and its investment objective is
to provide shareholders with high total return consisting of
current income and capital appreciation.
This prospectus has information you should know before you
invest. Please read it carefully and keep it with your
investment records.
TABLE OF CONTENTS
RISK/RETURN SUMMARY............................................................3
PAST PERFORMANCE...............................................................4
FUND EXPENSES..................................................................5
INVESTMENT OBJECTIVE...........................................................6
INVESTMENT POLICIES............................................................6
INVESTMENT RISKS...............................................................7
MANAGEMENT OF THE FUND........................................................10
DISTRIBUTION OF SHARES........................................................11
DESCRIPTION OF CLASSES........................................................11
PURCHASING SHARES.............................................................14
REDEEMING SHARES..............................................................16
EXCHANGING SHARES.............................................................17
REINSTATEMENT PRIVILEGE.......................................................18
PRICE OF SHARES...............................................................18
REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS......................19
TAXES.........................................................................19
RETIREMENT PLANS..............................................................20
YEAR 2000 ISSUE...............................................................20
FINANCIAL HIGHLIGHTS..........................................................21
FOR MORE INFORMATION SEE THE LAST PAGE
RISK/RETURN SUMMARY
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The goal of the Battery ParkSM High Yield Fund ("the Fund") is to provide
shareholders with high total return, consisting of current income and capital
appreciation.
INVESTMENT POLICIES
The Fund seeks to achieve its investment objective primarily by investing
in medium and lower quality fixed income securities (commonly referred to as
"junk bonds") of U.S. companies. Securities will include units of high yield
securities including warrants, convertible and non-convertible debt securities,
preferred stock, increasing rate, resettable and extendable notes, contingent
interest securities, pay-in-kind bonds or notes and zero coupon bonds or notes.
PRINCIPAL RISKS OF THE FUND
Investing in junk bonds involves special considerations and certain risks
because such securities are regarded as being very speculative as to the
issuer's ability to make payments of principal and interest. The main risks of
investing in the Fund include credit, market, maturity, investment management,
liquidity, portfolio turnover, foreign and emerging market, reinvestment,
pricing and price volatility risks. You should consider these risks carefully
before investing in this Fund. If the value of the Fund's investments goes down,
you may lose money.
WHO MAY WANT TO INVEST
This Fund may be appropriate for people who:
o wish to invest for the long term
o want to allocate some portion of their long-term investments to aggressive
fixed income investing
o are willing to accept a high degree of volatility and risk.
This Fund may not be appropriate for people who:
o are investing for the short term
o are risk adverse
PAST PERFORMANCE
- --------------------------------------------------------------------------------
The bar chart and table below illustrate the variability of the Battery
ParkSM High Yield Fund's returns. The bar chart indicates the risks of investing
in the Fund by showing the changes in the Fund's performance from year to year
(on a calendar year basis). The table shows how the Fund's average annual
returns for one-year and since inception compare with those of the Merrill Lynch
High Yield Master II Index, a broad measure of market performance. THE FUND'S
PAST PERFORMANCE IS NOT NECESSARILY AN INDICATION OF HOW THE FUND WILL PERFORM
IN THE FUTURE.
Battery Park High Yield Fund - Y Shares
Calendar Year Returns as of 12/31
1997 18.31%
1998 0.25%
Class Y shares do not impose any sales charges and therefore the returns shown
above are actual returns for Class Y shares. Returns for Class A shares are
lower than Class Y because of the sales charges imposed.
BEST QUARTER: 3 months ending 9/30/97 6.28%
WORST QUARTER: 3 months ending 9/30/98 -6.37%
Since
AVERAGE ANNUAL TOTAL RETURN THROUGH 12/31/99<F1>1 1 Year Inception<F2>2
- ------------------------------------------------- --------- -----------
Battery ParkSM High Yield Fund A Shares<F3>3
Y Shares
Merrill Lynch High Yield Master II Index<F4>4
- ------------------------------------------------- --------- -----------
FOR UPDATED YIELD INFORMATION PLEASE CALL 1-888-254-2874.
<F1>1 Management fee and expense waivers are reflected in the average annual
total returns shown above. If management did not provide waivers, the returns
would be lower than those shown.
<F2>2 Both Classes A and Y shares commenced operations on October 28, 1996.
<F3>3 The average annual total returns for Class A shares reflect the maximum
sales charge of 4.50%.
<F4>4 Source: Merrill Lynch & Co. The Merrill Lynch High Yield
Master II Index is a publicly reported unmanaged composite benchmark of the
hypothetical return on investment on approximately 1083 high yield securities of
at least $100 million ranging in rating from Ba1 to C by Moody's Investors
Service Inc., and BB+ to C by Standard & Poor's. The Index has no cash component
or transaction costs and is trader priced. Approximately 10% of the Index is
comprised of deferred interest bonds and pay-in-kind bonds in addition to cash
pay bonds. Certain of the information contained in this presentation has been
provided by Merrill Lynch. Any information sourced to Merrill Lynch & Co. has
been reprinted by permission, all rights reserved. Copyright(C) 1999 Merrill
Lynch, Pierce, Fenner & Smith Incorporated. The Index may not be copied, used or
distributed without Merrill Lynch's prior written approval. Merrill Lunch makes
no representation or warranty, express or implied, to any person including
without limitation, any recipient of this presentation or any member of the
public regarding the advisability of investing in securities generally or in the
ability of the Index (represented in the literature) to track market
performance. This presentation is not sponsored, endorsed, sold or promoted by
Merrill Lynch.
FUND EXPENSES
- --------------------------------------------------------------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
- ------------------------------------------------------------ ----------- -------
SHAREHOLDER FEES CLASS A CLASS Y
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)
- ------------------------------------------------------------ ----------- -------
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON PURCHASES (as a 4.50%<F5>1 None
percentage of offering price)
MAXIMUM DEFERRED SALES CHARGE (LOAD) None None
(as a percentage of offering price)
MAXIMUM SALES CHARGE (LOAD) IMPOSED ON REINVESTED DIVIDENDS None None
REDEMPTION FEE None None
EXCHANGE FEE None None
- ------------------------------------------------------------ ----------- -------
- ------------------------------------------------------------ ----------- -------
ANNUAL FUND OPERATING EXPENSES CLASS A CLASS Y
(EXPENSES DEDUCTED FROM FUND ASSETS)
- ------------------------------------------------------------ ----------- -------
MANAGEMENT FEES<F6>2 0.00% 0.00%
DISTRIBUTION AND SERVICE (12B-1) FEES<F7>3 0.25% None
OTHER EXPENSES<F6>2 1.00% 1.00%
TOTAL ANNUAL FUND OPERATING EXPENSES<F8>4 1.25% 1.00%
- ------------------------------------------------------------ ----------- -------
<F5>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."
<F6>2 The investment adviser charges a fee of 0.65% for each class of shares for
its services; however, the investment adviser waived management fees, and
reimbursed certain expenses of the Fund, for the fiscal year ended September 30,
1999 to the extent necessary to limit the Fund's annualized expenses for that
period to the annual rate of 1.25% of average daily net assets for Class A
shares and 1.00% of average daily net assets for Class Y shares. Pursuant to an
Expense Waiver and Reimbursement Agreement dated as of November 29, 1999, the
investment adviser has agreed to the same waiver and reimbursement arrangement
for the fiscal year of the Fund beginning October 1, 1999 and ending September
30, 2000. At October 1, 2000, the investment adviser may in its discretion agree
to continue, modify or discontinue this waiver and reimbursement arrangement.
<F7>3 Class A shareholders are charged a 12b-1 fee of 0.25% of average daily net
assets. Class Y shares are not subject to a Rule 12b-1 plan and therefore, Class
Y shareholders do not pay a Rule 12b-1 fee.
<F8>4 Without management fee and expense waivers as discussed in Footnote 2
above. Total Annual Fund Operating Expenses for Classes A and Y would have been
2.22% and 1.83%, respectively. See footnote 2 above.
EXAMPLE The example below is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds.
This example assumes that:
1. You invest $10,000 in the Fund for the time periods indicated and then
redeem all of your shares at the end of those periods,
2. You reinvested all dividends and capital gains distributions,
3. Your investment has a 5% return each year, and
4. The Fund's operating expenses remain the same.
Although your actual costs and returns may be higher or lower, based on these
assumptions your costs would be:
- ------------- -------- --------- ---------- -----------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------- -------- --------- ---------- -----------
CLASS A $572 $829 $1,105 $1,893
- ------------- -------- --------- ---------- -----------
CLASS Y $102 $318 $552 $1,225
- ------------- -------- --------- ---------- -----------
CLASS DESCRIPTIONS ARE ON PAGE __.
NOTE: The 5% return assumption is not intended to indicate that the Fund will
actually earn 5%. In fact, the Fund's return may be higher or lower then 5%.
INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
The investment objective of the Battery Park High Yield Fund is to
provide shareholders with high total return, consisting of current income and
capital appreciation. THE FUND CANNOT ASSURE YOU THAT IT WILL REACH ITS
INVESTMENT OBJECTIVE.
INVESTMENT POLICIES
- --------------------------------------------------------------------------------
The Fund attempts to achieve its investment objective by investing
primarily in medium and lower-quality fixed income securities of U.S. companies.
Under normal circumstances, the Fund will invest at least 80% of its total
assets in fixed income securities rated as follows:
o Ba1 or lower by Moody's Investors Service, Inc. (Moody's)
o BB+ or lower by Standard & Poor's (S&P), or
o unrated securities of comparable quality
There is no minimum rating in which the Fund may invest, and as a
result, the Fund may purchase or hold securities in the lowest rating
categories. Debt securities rated below Baa by Moody's or below BBB by S&P, and
unrated securities of comparable quality are commonly known as high yield or
"junk bonds."
The high yield market is generally defined as including bonds with
ratings below investment grade. However, when economic conditions cause a
narrowing of spreads between the yields received from medium to lower rated or
comparable non-rated securities and those received from higher rated securities,
the Fund may invest in higher rated fixed income securities which provide
similar yields with less risk. Since some issuers do not seek ratings for their
securities, unrated securities of similar quality will also be considered for
investment. However, the Fund will only purchase unrated securities when the
investment adviser believes that the issuers' financial condition, or the
protection provided by the terms of the securities themselves, limit the risk to
the Fund to a comparable degree to that of the rated securities in which the
Fund invests.
When buying junk bonds, the investment adviser considers, among other
things, the issuer's
o financial resources
o sensitivity to economic conditions and trends
o operating history
o quality of management , and
o regulatory matters.
The Fund will invest in a variety of high yield, high current-income
securities including:
o units of high yield securities o increasing rate and resettable and
(including warrants) extendable notes
o preferred stock o contingent interest securities
o both convertible and o pay-in-kind bonds or notes
non-convertible debt securities
o zero coupon bonds or notes
The Fund may also invest up to 25% of its assets in securities issued
by non-U.S. issuers. As part of its foreign investments, up to 15% of the
Fund's total assets may be invested in securities of issuers in
emerging markets. All of the Fund's foreign investments will be denominated
in U.S. dollars.
In seeking capital appreciation, the Fund also may invest in common
stock, rights or other equity securities which do not provide high current
income but offer the potential for capital appreciation.
The average maturity of the Fund's portfolio securities will vary based
upon the investment adviser's assessment of economic and market conditions.
However, to respond to adverse market, economic, political or other conditions
as a temporary defensive measure, or in anticipation of purchasing high yield
securities, the Fund may invest up to 100% of its assets in cash or short-term,
high quality securities. These securities include:
o U.S. government securities o repurchase agreements
o U.S. government agency or o short-term debt securities such as
instrumentality securities commercial paper and other corporate debt
o domestic bank or savings o bankers' acceptances
institution certificates
of deposit
To the extent the Fund engages in this temporary defensive strategy,
the Fund may not achieve its investment objective.
INVESTMENT RISKS
- --------------------------------------------------------------------------------
HIGH YIELD (JUNK) BONDS
Junk bonds are debt securities that are rated below investment grade by
the major rating agencies or are unrated securities that Fund management
believes are of comparable quality. Although junk bonds generally pay higher
rates of interest than investment grade bonds, they are high-risk investments
that may cause income and principal losses for the Fund. Junk bonds generally
are less liquid and experience more price volatility than higher rated debt
securities. The issuers of junk bonds may have a larger amount of outstanding
debt relative to their assets than issuers of investment grade bonds. In the
event of an issuer's bankruptcy, claims of other creditors may have priority
over the claims of junk bond holders, leaving few or no assets available to
repay junk bond holders. Junk bonds may be subject to greater call and
redemption risk than higher rated debt securities. During an economic downturn
or a sustained period of rising interest rates, issuers of junk bonds may be
more likely to experience financial stress, especially if such issuers are
highly leveraged. During periods of economic recession, such issuers may not
have sufficient revenues to meet their interest payment obligations. The
issuer's ability to service its debt obligations also may be adversely affected
by specific issuer developments or the issuer's inability to meet specific
projected business forecasts or the unavailability of additional financing. The
risk of loss due to default by the issuer is significantly greater for the
holders of junk bonds because such securities may be unsecured and may be
subordinated to other creditors of the issuer. In addition, the Fund may incur
additional expenses to the extent it is required to seek recovery upon a default
on a portfolio holding or participate in the restructuring of the obligation.
The following list explains the specific risks of junk bonds:
CREDIT RISKS: According to various rating agencies, junk bonds (i.e.,
bonds rated BB and lower by S&P or B and lower by Moody's) are more speculative
than other securities. Issuers of junk bonds may be highly leveraged and may not
be able to take advantage of traditional methods of financing. As a result,
these bonds are more susceptible to weakened economic conditions and their
market values tend to reflect developments of individual issuers to a greater
extent than higher-rated securities. As a result, the risk associated with
purchasing bonds from such issuers is generally higher than purchasing
higher-rated securities.
LIQUIDITY RISKS: The Fund may have difficulty disposing of certain junk
bonds because there may be a thin trading market for such securities. To the
extent that a secondary trading market for junk bonds does exist, it is
generally not as liquid as the secondary market for higher-rated securities.
Reduced secondary market liquidity may have an adverse effect on market price
and the Fund's ability to dispose of particular securities. This may make it
more difficult to meet the Fund's liquidity needs or to respond to specific
economic events such as deterioration in the creditworthiness of the issuer.
MARKET RISKS: As with all fixed income securities, changes in the
market yield will affect the Fund's net asset value because the prices of junk
bonds generally increase when interest rates decline and decrease when interest
rates rise. Prices of longer-term securities generally fluctuate more in
response to interest rate changes than do shorter-term securities.
PRICING RISKS: Reduced secondary market liquidity for certain junk
bonds also may make it more difficult for the Fund to obtain accurate market
quotations for purposes of valuing the Fund's portfolio. Market quotations are
generally available for many junk bonds only from a limited number of dealers
and may not necessarily represent firm bids of those dealers or prices for
actual sales. The Fund's directors, or the investment adviser following
guidelines adopted by the directors, will carefully consider the factors
affecting the market for junk bonds in determining whether a particular security
is liquid or illiquid and whether market quotations are readily available for
purposes of valuing portfolio securities.
PRICE VOLATILITY RISKS: The prices of junk bonds tend to fluctuate
more than the prices of higher rated securities.
REINVESTMENT RISKS: Junk bonds may have call or redemption features,
which would permit an issuer to repurchase the bonds from the Fund. If an issuer
exercises a call during a period of declining interest rates, the Fund would
likely have to replace the called securities with lower-yielding securities,
which would decrease the net investment income to the Fund and decrease your
dividends.
BOND SELECTION RISK: In purchasing junk bonds, the Fund relies on the
investment adviser's judgment, analysis and experience in evaluating the
creditworthiness of an issuer.
FOREIGN AND EMERGING MARKET SECURITIES
As stated above, the Fund may invest a limited portion of its assets in
foreign securities. Investing in foreign securities can carry higher returns
than those associated with domestic investments. However, foreign securities may
be substantially riskier than domestic investments. The economies of foreign
countries may differ from the U.S. economy in such respects as growth of gross
domestic product, rate of inflation, currency depreciation, capital
reinvestment, resource self-sufficiency, and balance of payments position.
Furthermore, the economies of emerging and developing countries generally are
heavily dependent on international trade and, accordingly, have been, and may
continue to be, adversely affected by trade barriers, exchange controls, managed
adjustments in relative currency values and other protective measures imposed or
negotiated by the countries with which they trade. These economies also have
been, and may continue to be, adversely affected by economic conditions in the
countries with which they trade.
STOCK MARKET RISKS
As stated above, the Fund may invest a portion of its portfolio in
equity securities to achieve capital appreciation. Equity securities are subject
to stock market risks and significant fluctuations in value. If the stock market
declines in value, the Fund is likely to decline in value. To the extent the
Fund invests in equity securities, you could lose money if the value of the Fund
declines.
The Statement of Additional Information contains more information about
the Fund and the types of securities in which it may invest. The SAI also
contains an Appendix that provides a detailed list of the bond rating
categories.
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
The investment adviser for the Fund is Nomura Corporate Research and
Asset Management Inc. ("NCRAM" or "Investment Adviser"). NCRAM is located at 2
World Financial Center, Building B, New York, New York 10281-1198. The
investment decisions NCRAM makes for the Fund are subject to the supervision of
the Fund's board of directors. The Investment Adviser conducts investment
research and supervision for the Fund and is responsible for the purchase and
sale of securities for the Fund's portfolios. The investment adviser charges a
fee of 0.65% for each class of shares for its services; however, the investment
adviser waived management fees, and reimbursed certain expenses of the Fund, for
the fiscal year ended September 30, 1999 to the extent necessary to limit the
Fund's annualized expenses for that period to the annual rate of 1.25% of
average daily net assets for Class A shares and 1.00% of average daily net
assets for Class Y shares. Pursuant to an Expense Waiver and Reimbursement
Agreement dated as of November 29, 1999, the investment adviser has agreed to
the same waiver and reimbursement arrangement for the fiscal year of the Fund
beginning October 1, 1999 and ending September 30, 2000. At October 1, 2000, the
investment adviser may in its discretion agree to continue, modify or
discontinue this waiver and reimbursement arrangement. As of September 30, 1999,
NCRAM managed $2.2 billion in high yield bonds.
PORTFOLIO MANAGER
RICHARD A. BUCH, CFA, has been the Senior Portfolio Manager of the Fund
since its inception on October 28, 1996. Mr. Buch joined NCRAM in 1993 as Senior
Vice President and served as a Director of NCRAM until 1995. In 1995, Mr. Buch
became a Managing Director of the Investment Adviser and in 1996 became one of
the Investment Adviser's board members. He has extensive experience in credit
selection and managing high yield portfolios. Prior to 1993, Mr. Buch was a
Senior Vice President and High Yield Portfolio Manager for Kidder Peabody High
Yield Asset Management. Mr. Buch received his MBA from Cornell University in
1985 and a Bachelor of Science in Management from State University of New York
at Binghamton. He is a Chartered Financial Analyst and a member of the
Association for Investment Management Research.
FUND ADMINISTRATION, FUND ACCOUNTING, TRANSFER AGENT AND CUSTODY SERVICES
Firstar Mutual Fund Services, LLC, located in Milwaukee, Wisconsin,
provides administrative, accounting and transfer agency services to the Fund.
Firstar Bank, N.A. serves as custodian for the Fund.
DISTRIBUTION OF SHARES
- --------------------------------------------------------------------------------
DISTRIBUTOR
Nomura Securities International, Inc., (the "Distributor ") an
affiliate of the Fund's Investment Adviser, serves as distributor for shares of
the Fund. The Distributor is registered as a broker-dealer and is a member of
the National Association of Securities Dealers.
The Distributor selects brokers, dealers and financial institutions to
enter into agreements to sell the Fund's shares. The Distributor also provides
marketing and shareholder servicing support for the Fund and coordinates the
distribution activities of the Fund, its service providers and selling dealers.
DISTRIBUTION PLAN
The Fund has adopted a distribution plan for Class A shares according
to Rule 12b-1 under the Investment Company Act of 1940. Under the distribution
plan, Class A shares may pay up to an annual rate of 0.25% of 1% of the average
daily net asset value of shares to the Distributor. The Distributor uses this
fee to finance activities that promote the sale of the Class A shares. Such
activities include, but are not necessarily limited to, advertising, printing
and mailing prospectuses to persons other than current shareholders, printing
and mailing sales literature, and compensating underwriters, dealers and sales
personnel.
Rule 12b-1 fees are paid out of Fund assets on an on-going basis. Over
time, these fees will increase the cost of your investment and may cost you more
than paying other types of sales charges.
DESCRIPTION OF CLASSES
- --------------------------------------------------------------------------------
The Fund offers its shares in two classes at a public offering price
equal to the next determined net asset value per share plus, in the case of
Class A shares, a sales charge imposed at the time of purchase. Each Class A
share and Class Y share represents an identical interest in the Fund and have
the same rights, except that Class A shares bear the expenses of the ongoing
distribution fees as explained above and Class A shares may be converted to
Class Y shares. The Fund or Distributor may suspend the continuous offering of
any class of Fund shares at any time in response to conditions in the securities
markets and may resume offering a class at any time thereafter. Each class is
described in greater detail below.
CLASS A SHARES
Class A shares are retail shares and may be purchased by individuals or
IRAs. With Class A shares, you will likely pay a sales charge when you invest.
Class A shares also impose a Rule 12b-1 fee (as discussed above) which is
assessed against the shares of the Fund. If you purchase Class A shares of the
Fund, you will pay the net asset value next determined after your order is
received PLUS a sales charge (shown in percentages below) depending on the
amount of your investment:
<TABLE>
<CAPTION>
- ------------------------- ----------------------------- ------------------------------- -------------------------------
AMOUNT OF PURCHASE SALES CHARGE AS A SALES CHARGE AS A PERCENTAGE DISCOUNT TO SELECTED DEALERS
PERCENTAGE OF PUBLIC OF NET AMOUNT INVESTED AS A PERCENTAGE OF OFFERING
OFFERING PRICE PRICE
- ------------------------- ----------------------------- ------------------------------- -------------------------------
<S> <C> <C> <C>
LESS THAN $50,000 4.50% 4.71% 4.00%
- ------------------------- ----------------------------- ------------------------------- -------------------------------
- ------------------------- ----------------------------- ------------------------------- -------------------------------
$50,000 - $99,999 4.00% 4.17% 3.50%
- ------------------------- ----------------------------- ------------------------------- -------------------------------
- ------------------------- ----------------------------- ------------------------------- -------------------------------
$100,000 - $249,999 3.25% 3.36% 2.75%
- ------------------------- ----------------------------- ------------------------------- -------------------------------
- ------------------------- ----------------------------- ------------------------------- -------------------------------
$250,000 - $499,999 2.50% 2.56% 2.25%
- ------------------------- ----------------------------- ------------------------------- -------------------------------
- ------------------------- ----------------------------- ------------------------------- -------------------------------
$500,000 - $999,999 2.00% 2.04% 1.80%
- ------------------------- ----------------------------- ------------------------------- -------------------------------
- ------------------------- ----------------------------- ------------------------------- -------------------------------
$1 MILLION + 0.00% 0.00% N/A
- ------------------------- ----------------------------- ------------------------------- -------------------------------
</TABLE>
WAIVERS AND FEE REDUCTIONS
YOU WILL NOT HAVE TO PAY A SALES CHARGE WHEN PURCHASING CLASS A SHARES
IF YOU ARE:
1. A registered representative or employee of a broker-dealer that
has a dealer agreement with the Distributor.
2. Participating in the NAV Transfer Program. To participate in the
NAV Transfer Program, you must show proof that within 90 days
prior to purchasing Class A shares of the Fund, you redeemed
shares from any load or no-load mutual fund (other than the Fund)
including money market funds. Adequate proof includes providing a
completed qualification form and a statement showing the value
liquidated from the other mutual fund.
3. A qualified investor or other entity ("Qualified Investors").
Qualified Investors include:
o U.S. purchasers which place orders through a broker that
maintains an omnibus account with the Fund and makes such
purchases:
(a) through U.S. investment advisers or financial planners placing
trades for their accounts or the accounts
of their clients, and who charge a fee for their services;
(b) for U.S. clients of such investment adviser or financial
planner who place trades for their own accounts if the
accounts are linked to a master account of such investment
adviser or financial planner on the books and records of
the broker or agent;
(c) for U.S. retirement and deferred compensation plans, and
trusts used to fund those plans, including but not limited
to those defined in section 401(a), 403(b) or 457 of the
Code or "rabbi trusts;" or
(d) using the proceeds of a redemption of shares of another
registered open-end investment company; charitable
organizations (as defined in section 501(c) of the Code)
investing $100,000 or more.
o any U.S. pension fund, corporation, state or local government,
Taft Hartley plan, foundation and/or endowment which is a
client of a consulting firm, if that firm has made appropriate
arrangements with the Fund, NCRAM or any of its affiliates of
NCRAM with respect to furnishing advice to the client or with
respect to the purchase of Fund shares by such client;
o accounts as to which a U.S. bank or broker-dealer charges an
account management fee, provided the bank or broker-dealer has an
agreement with NCRAM or any of its affiliates relating to
investment in the Fund;
o U.S. investors, and their spouses and minor children, who are
investment advisory clients of NCRAM or any of its affiliates or
who are affiliated persons or sponsoring companies of those
clients; and
o employees (and their spouses and minor children) of the
Investment Adviser.
YOU MAY HAVE THE SALES CHARGE REDUCED IF:
1. You aggregate your purchases of $50,000 or more made within a
13-month period using a letter of intention with your first
purchase. The letter of intention is not a binding obligation
to purchase any amount of Class A shares; however, if you meet
the terms of the letter of intention, you will pay lower sales
charges according to the table shown above.
2. You are a selected dealer with a dealer agreement with the
Distributor. The Distributor allows discounts to selected
dealers and retains the balance over such discounts. The
Distributor may waive the entire sales charge to dealers.
CLASS Y SHARES
Class Y shares are offered at net asset value without a sales charge to
you if you invest at least $1 million in the Fund. You may also purchase Class Y
shares through a fee-based financial planner whose clients have a current
investment in the Fund totaling at least $1 million. Directors of the Fund may
purchase Class Y shares even if they do not have at least $1 million invested in
the Fund. In addition, retirement plans administered by the Investment Adviser
or its affiliates for the benefit of employees of the Investment Adviser and its
affiliates may purchase Class Y shares for less than $1 million. If you purchase
Class Y shares of the Fund you will pay the NAV next determined after your order
is received. There is no sales charge on this class at the time you purchase
your shares
CONVERSION OF CLASS A SHARES TO CLASS Y SHARES
As a single investor of Class A shares, when your aggregate net
investments reach $1 million, you may have your shares converted into Class Y
shares if you send a written request to the Fund's transfer agent. Likewise,
clients of securities dealers or fee-based financial planners that have
appropriate arrangements with the Fund or the investment adviser may have their
Class A shares converted into Class Y shares if they send a written request to
the Fund's transfer agent. Once your shares have been converted, you (or your
securities dealer) will be offered Class Y shares as long as you (or your
securities dealer) have at least $1 million invested in the Fund at the time the
Fund receives your next purchase order. Eligible shares will be converted from
Class A to Class Y at net asset value on the day the transfer agent receives
your written request. There is no charge for the conversion. Requests for
conversion should be sent to the Fund's transfer agent at the following address:
BY REGULAR MAIL BY OVERNIGHT DELIVERY
Battery Park Funds Battery Park Funds
c/o Firstar Mutual Fund Services, LLC c/o Firstar Mutual Fund Services, LLC
P.O. Box 701 615 E. Michigan Street, Third Floor
Milwaukee, Wisconsin 53201-0701 Milwaukee, Wisconsin 53202
PURCHASING SHARES
- --------------------------------------------------------------------------------
OPENING AN ACCOUNT
To open an account, first determine if you are buying Class A or Y
shares (see page __ for class descriptions). The minimum initial and subsequent
investment purchase amounts are as follows:
MINIMUM MINIMUM
INITIAL PURCHASE SUBSEQUENT PURCHASE
Class A Shares $1,000 $100
($50 for automatic
investment plan)
Class Y Shares $1,000,000 $100
METHODS OF BUYING
BY TELEPHONE. If you are purchasing Class Y shares, call Battery ParkSM Funds,
Inc. at 1-888-254-2874 to place your order. (Note: For security reasons,
requests by telephone will be recorded.) If you are
purchasing Class A shares, call your dealer directly.
BY MAIL. Fill out the account application form and make your check
payable to "Battery Park Funds." Forward the check and your application to the
address below. No third party checks will be accepted. If your check is returned
for any reason, a $25 fee will be assessed against your account. To add to your
account, fill out the investment stub from an account statement and write the
Fund's name and account number on your check. Make your check payable to
"Battery Park Funds" and forward the check and stub to the address below.
BY REGULAR MAIL BY OVERNIGHT DELIVERY
Battery Park Funds Battery Park Funds
c/o Firstar Mutual Fund Services, LLC c/o Firstar Mutual Fund Services, LLC
P.O. Box 701 615 E. Michigan Street, Third Floor
Milwaukee, Wisconsin 53201-0701 Milwaukee, Wisconsin 53202
NOTE: THE FUND DOES NOT CONSIDER THE U.S. POSTAL SERVICE OR OTHER INDEPENDENT
DELIVERY SERVICES TO BE THEIR AGENTS. THEREFORE, DEPOSITS IN THE MAIL OR WITH
SUCH SERVICES, OR RECEIPT AT FIRSTAR MUTUAL FUND SERVICES, LLC'S POST OFFICE BOX
OF PURCHASE APPLICATIONS OR REDEMPTION REQUESTS DO NOT CONSTITUTE RECEIPT BY
FIRSTAR MUTUAL FUND SERVICES, LLC OR THE FUND.
BY FEDERAL FUNDS WIRE. You may not open an account with a wire. You must
first forward your application and check to Battery ParkSM Funds, Inc. at the
above address. To make subsequent purchases, call Battery ParkSM Funds, Inc.
at 1-888-254-2874 to notify of your incoming wire. You should use the following
instructions:
Firstar Bank, N.A.
Milwaukee, WI 53202
ABA #: 075000022
Credit: Firstar Mutual Fund Services, LLC
Account #: 112-952-137
Further Credit: Battery Park High Yield Fund, Class__
(Your name/title on the
account) (Account #)
AUTOMATIC INVESTMENT PLAN. Open an account using one of the above
methods. If by mail, be sure to include your checking account number on the
appropriate section of your application and enclose a voided check or deposit
slip. If you didn't set up an automatic investment plan with your original
application, call Battery ParkSM Funds, Inc. at 1-888-254-2874. You can choose
whether you wish to make automatic additional investments monthly or quarterly
from your checking account. The minimum subsequent investment under the
automatic investment plan is $50 per period.
THROUGH YOUR BROKER. You may purchase shares through your own broker or
dealer, but keep in mind that the broker/dealer may impose a service charge for
his or her services.
RECEIPT OF ORDERS
Shares may only be purchased on days the New York Stock Exchange and
the Federal Reserve wire system are open for business. Your order will be
considered received after your check is converted into federal funds and
received by Firstar Bank (usually the next business day). If you are paying with
federal funds (wire), your order will be considered received when Firstar Bank
receives the federal funds.
TIMING OF REQUESTS
When making a purchase request, make sure your request is in good order. "Good
order" means your purchase request includes:
o the NAME of the Fund
o the DOLLAR amount of shares to be purchased
o purchase application or investment stub
o check payable to BATTERY PARK FUNDS
The price per share will be the net asset value next computed after the
time your request is received in good order and accepted by the Fund or the
Fund's authorized agent. All requests (telephone orders and federal funds wire)
received in good order by the Fund before 4:00 p.m. EST will be executed on that
same day. Requests received after 4:00 p.m. will be processed on the next
business day.
REDEEMING SHARES
- --------------------------------------------------------------------------------
METHODS OF REDEEMING
BY TELEPHONE. If you own Class Y shares, you may call Battery ParkSM Funds,
Inc. at 1-888-254-2874 to redeem any amount of shares you wish. (NOTE: For
security reasons, requests by telephone will be recorded.) If
you own Class A shares, call your dealer directly to redeem shares.
BY MAIL. Send a letter instructing the Battery ParkSM Funds, Inc. to
redeem the dollar amount or number of shares you wish. The letter should contain
the Fund's name, the account number and the number of shares or the dollar
amount of shares to be redeemed. Be sure to have all shareholders sign the
letter. If your account is an IRA, your signature must be guaranteed and your
request must indicate whether or not 10% withholding should apply. Requests
submitted without an election whether or not to withhold will be subject to
withholding.
BY FEDERAL FUNDS WIRE. Call Battery ParkSM Funds, Inc. at 1-888-254-2874 to
request the amount of money you want to redeem. Be sure to have all necessary
information from your bank. Your bank may charge a fee to receive wired funds.
SYSTEMATIC WITHDRAWAL PLAN. Call Battery ParkSM Funds, Inc. at 1-888-254-2874
to arrange for regular monthly or quarterly fixed withdrawal payments by check
or through automatic payment by direct deposit. The minimum payment you may
receive is $50 per period. Note that this plan may deplete your investment
and affect your income or yield.
THROUGH YOUR BROKER. You may redeem shares through your own broker or dealer,
but keep in mind that the broker/dealer may impose a service charge for his or
her services.
WHEN REDEMPTION PROCEEDS ARE SENT TO YOU
Your shares may only be redeemed on days on which the Fund computes its
net asset value. Your redemption request cannot be processed on days the New
York Stock Exchange is closed or on federal holidays which
restrict wire transfers. Your shares will be redeemed at the net asset value
next determined after Battery Park Funds receives your redemption request in
good order.
When making a redemption request, make sure your request is in good order.
"Good order" means your letter of instruction includes:
o the NAME of the Fund
o the NUMBER of shares or the DOLLAR amount of shares to be redeemed
o SIGNATURES of all registered shareholders exactly as the shares are
registered (signature guaranteed for IRAs)
o the ACCOUNT registration number
All requests received in good order by Battery ParkSM Funds, Inc. before
4:00 p.m. (Eastern time), will normally be wired to the bank you indicate or
mailed on the following day to the address of record. In no event will proceeds
be wired or a check mailed more than 7 calendar days after Firstar receives a
proper redemption request.
If you purchase shares using a check and soon after request a
redemption, Battery ParkSM Funds, Inc. will honor the redemption request, but
will not mail the proceeds until your purchase check has cleared (usually within
12 days).
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, Battery
ParkSM Funds, Inc. may mail you a notice if your account falls below $500
requesting that you bring the account back up to $500 or close it out. If you do
not respond to the request within 60 days, Battery ParkSM Funds, Inc. may close
the account on your behalf and send you the proceeds. If you have an account
through a broker/dealer or other financial institution, consult your account
agreement for information on accounts with low balances.
SIGNATURE GUARANTEES
You will need your signature guaranteed if:
o you are redeeming $50,000 more.
o you are redeeming shares from an IRA account
o you request a redemption to be made payable to a person not on record with
the Fund, or
o you request that a redemption be mailed to an address other
than that on record with the Fund
You may obtain signature guarantees from most trust companies,
commercial banks or other eligible guarantor institutions. A notary public
cannot guarantee signatures.
EXCHANGING SHARES
- --------------------------------------------------------------------------------
As an investor of the Fund, you have the privilege of exchanging shares
of the Fund with shares of Firstar Money Market Fund, a money market Fund
advised by Firstar Investment Research and Management Company, LLC., an
affiliate of Firstar Mutual Fund Services, LLC. The same policies that apply to
purchases and sales apply to exchanges, including minimum investment amounts.
Currently, there is no limit on the number of times you may exercise the
exchange privilege. The exchange privilege is available only to U.S.
shareholders in states where the exchange legally may be made. You may only
exchange Class A shares of the Fund for Class A shares of Firstar Money Market
Fund. Likewise, you may only exchange Class Y shares of the Fund for Class Y
shares of Firstar Money Market Fund.
Exercising the exchange privilege is really two transactions: a sale of one
Fund and the purchase of another.
Should the relationship between the Fund and Firstar Mutual Fund
Services, LLC terminate, the Fund will seek to enter into arrangements with
another similar money market Fund to continue to provide the exchange
privilege. If you exchanged shares into Firstar Money Market Fund, you will
be given a one-time opportunity to exchange shares of the Firstar Money Market
Fund into the new money market Fund and thereby preserve the ability
to exchange new money market Fund shares with shares of the Fund at a future
date. This exchange the privilege may be modified or terminated in accordance
with SEC rules at any time.
REINSTATEMENT PRIVILEGE
- --------------------------------------------------------------------------------
If you are an investor who recently redeemed your Class A shares, you
have a one-time privilege to reinstate your account by purchasing Class A shares
of the Fund without a sales charge up to the dollar amount you redeemed. You
may exercise this reinstatement privilege at any time within 90 days from the
time your redemption request was accepted by the transfer agent. To exercise
your reinstatement privilege, send a written notice to the Fund's transfer
agent stating that you wish to exercise your reinstatement privilege together
with a check for the amount to be reinstated. The reinstatement will be made at
the net asset value per share next determined after the notice of reinstatement
is received.
PRICE OF SHARES
- --------------------------------------------------------------------------------
HOW NAV IS DETERMINED
The net asset value (NAV) is calculated by taking the value of the
Fund's assets, including interest and dividends accrued, but not yet collected,
less all liabilities including accrued expenses and dividing the result by the
number of shares outstanding. The net asset value for the Fund is determined as
of the close of trading (normally 4:00 p.m., EST) on the New York Stock
Exchange, Monday through Friday, except on the following days:
(1) days on which the value of the Fund's portfolio securities has not changed
enough to materially affect the NAV.
(2) days during which no shares are purchased or sold.
(3) days on which the New York Stock Exchange is closed, including New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day.
REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
- --------------------------------------------------------------------------------
The Fund declares dividends on daily basis and pays dividends on a
monthly basis. If the Fund realizes capital gains, they will be distributed at
least annually.
Unless you provide a written request to receive payments in cash, your
dividends and capital gains distributions will automatically be reinvested in
additional shares of the Fund at the net asset value without sales charge.
Dividends will be distributed on the last business day of each month. Dividends
or capital gains distributions paid in cash will be mailed to you via the U.S.
Postal Service. Keep in mind, undeliverable checks or checks not deposited
within six months will be reinvested in additional shares of the Fund at the
then current net asset value. Amounts paid in cash or in additional shares are
treated the same for tax purposes.
TAXES
- --------------------------------------------------------------------------------
The Fund will pay no federal income tax because it expects to meet
certain Internal Revenue Code requirements. The Fund will be treated as a
single, separate entity for federal income tax purposes so that income
(including capital gains, if any) and losses realized by the Fund will not be
combined for tax purposes with those realized by other Funds. The Fund will
provide you with detailed tax information for reporting purposes. The Fund
intends to distribute all ordinary income and net realized capital gains.
Unless otherwise exempt, shareholders are required to pay federal
income tax on any dividends and capital gains distributions received. This
applies whether dividends and distributions are received in cash or as
additional shares. All ordinary income dividends paid by the Fund which include
distributions of net realized short-term capital gains are taxable as ordinary
income. Distributions paid by the Fund from net realized long-term capital gains
are taxable as long-term capital gains. The capital gain holding period and the
applicable tax rate is determined by the length of time that the Fund has held
the security and not the length of time that you have held shares in the Fund.
The Fund expects that, because of its investment objectives, distributions will
consist primarily ordinary income dividends of long-term capital gains and
short-term capital gains, which will be passed through to shareholders as
ordinary income. The Fund will provide you with detailed tax information for
reporting purposes.
An exchange is not a tax-free transaction. An exchange of shares
pursuant to the Fund's exchange privilege is treated the same as an ordinary
sale and purchase for federal income tax purposes and you will realize a capital
gain or loss.
The Fund may be required to withhold federal income tax at a rate of
31% (back up withholding) from dividend payments, distributions and redemption
proceeds if you fail to furnish the Fund with your social security number. You
must also certify that your social security number is correct and that you are
not subject to backup withholding. The certification is included as part of the
purchase application.
You should consult your own tax adviser regarding the status of your
accounts under state and local tax laws.
RETIREMENT PLANS
- --------------------------------------------------------------------------------
You may purchase shares of the Fund for your individual retirement accounts. To
obtain the appropriate disclosure documentation and more complete information on
how to open a retirement account call 1-888-254-2874.
YEAR 2000 ISSUE
- --------------------------------------------------------------------------------
Like all financial service providers, the Fund Investment Adviser, the
Distributor and other third party service providers use systems that may be
affected by Year 2000 transition or other date related issues. The services
provided to you and the Fund by these service providers depend on the smooth
functioning of their computer systems and those of other parties. Many computer
software systems in use today cannot distinguish the Year 2000 from the Year
1900 because of the way dates are encoded and calculated. Such an event could
have a negative impact on handling securities trades, payments of interest and
dividends, pricing and account services. Although there can be no assurance at
this time that there will be no adverse impact on the Fund, the Fund service
providers have advised the Fund that they have been actively working on
necessary changes to their computer systems to prepare for the Year 2000. The
Fund service providers expect that their systems, and those of other parties
they deal with, will be adapted in time for that event. However, there can be no
assurance that the computer systems of the companies in which the Fund invests
will be timely converted or that the value of such investments will not be
adversely affected by the Year 2000 issue.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights tables set forth below are intended to help you
understand the Fund's financial performance for the past 3 years since the Fund
commenced operations. Most of the information reflects financial results with
respect to a single Fund share. The total returns in the tables represent the
rates that an investor would have earned (or lost) on an investment in a
Fund(assuming reinvestment of all dividends and distributions). This information
has been audited by ________________, whose report, along with the Fund's
financial statements, are included in the Fund's annual report, which is
available upon request.
<TABLE>
<CAPTION>
CLASS A SHARES YEAR ENDED SEPTEMBER 30,
<S> <C> <C> <C>
1999 1998 1997<F9>(a)
- ------------------------------------------------------------------ ---------------- -------------- -----------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.10 $11.40 $10.00
- ------------------------------------------------------------------ ---------------- -------------- -----------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------ ---------------- -------------- -----------------
Net investment income 0.80 0.89 0.84
- ------------------------------------------------------------------ ---------------- -------------- -----------------
Net realized and unrealized gain (loss) on investments (0.72) (0.70) 1.40
- ------------------------------------------------------------------ ---------------- -------------- -----------------
Total from investment operations 0.08 0.19 2.24
- ------------------------------------------------------------------ ---------------- -------------- -----------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------ ---------------- -------------- -----------------
Distributions from net investment income (0.79) (0.91) (0.84)
- ------------------------------------------------------------------ ---------------- -------------- -----------------
Distributions from net realized gain on investments (0.39) (0.58) --
- ------------------------------------------------------------------ ---------------- -------------- -----------------
Total distributions (1.18) (1.49) (0.84)
- ------------------------------------------------------------------ ---------------- -------------- -----------------
NET ASSET VALUE, END OF PERIOD $9.00 $10.10 $11.40
- ------------------------------------------------------------------ ---------------- -------------- -----------------
Total return <F10>(b) 0.77% 1.50% 23.13%
- ------------------------------------------------------------------ ---------------- -------------- -----------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------ ---------------- -------------- -----------------
Expenses 1.25% 1.25% 1.25%*
- ------------------------------------------------------------------ ---------------- -------------- -----------------
Net investment income 8.30% 8.44% 8.66%*
- ------------------------------------------------------------------ ---------------- -------------- -----------------
Expense waiver/reimbursement <F11>(c) 0.97% 1.67% 2.79%*
- ------------------------------------------------------------------ ---------------- -------------- -----------------
SUPPLEMENT DATA
- ------------------------------------------------------------------ ---------------- -------------- -----------------
Net assets, end of period (000 omitted) $4,211 $3,894 $1,829
- ------------------------------------------------------------------ ---------------- -------------- -----------------
Portfolio turnover<F12>(d) 181% 190% 236%
- ------------------------------------------------------------------ ---------------- -------------- -----------------
</TABLE>
* Computed on an annualized basis.
<F9>(a) Reflects operations for the period from October 28, 1996 (date of
initial public offering) to September 30, 1997.
<F10>(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
<F11>(c) This voluntary expense decrease is reflected in both the expense and
net investment income ratios shown above.
<F12>(d) Portfolio turnover rate is calculated on the basis of the Fund as a
whole without distinguishing between classes of shares issued.
<TABLE>
<CAPTION>
CLASS Y SHARES YEAR ENDED SEPTEMBER 30,
<S> <C> <C> <C>
1999 1998 1997<F13>(a)
- ------------------------------------------------------------------ ---------------- -------------- -----------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.10 $11.40 $10.00
- ------------------------------------------------------------------ ---------------- -------------- -----------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------ ---------------- -------------- -----------------
Net investment income 0.76 0.93 0.86
- ------------------------------------------------------------------ ---------------- -------------- -----------------
Net realized and unrealized gain (loss) on investments (0.64) (0.71) 1.40
- ------------------------------------------------------------------ ---------------- -------------- -----------------
Total from investment operations 0.12 0.22 2.26
- ------------------------------------------------------------------ ---------------- -------------- -----------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------ ---------------- -------------- -----------------
Distributions from net investment income (0.82) (0.94) (0.86)
- ------------------------------------------------------------------ ---------------- -------------- -----------------
Distributions from net realized gain on investments (0.39) (0.58) --
- ------------------------------------------------------------------ ---------------- -------------- -----------------
Total distributions (1.21) (1.52) (0.86)
- ------------------------------------------------------------------ ---------------- -------------- -----------------
NET ASSET VALUE, END OF PERIOD $9.01 $10.10 $11.40
- ------------------------------------------------------------------ ---------------- -------------- -----------------
Total return<F14>(b) 1.13% 1.76% 23.41%
- ------------------------------------------------------------------ ---------------- -------------- -----------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------ ---------------- -------------- -----------------
Expenses 1.00% 1.00% 1.00%*
- ------------------------------------------------------------------ ---------------- -------------- -----------------
Net investment income 8.55% 8.63% 8.73%*
- ------------------------------------------------------------------ ---------------- -------------- -----------------
Expense waiver/reimbursement <F15>(c) 0.83% 1.67% 2.87%*
- ------------------------------------------------------------------ ---------------- -------------- -----------------
SUPPLEMENT DATA
- ------------------------------------------------------------------ ---------------- -------------- -----------------
Net assets, end of period (000 omitted) $19,866 $16,158 $13,361
- ------------------------------------------------------------------ ---------------- -------------- -----------------
Portfolio turnover<F16>(d) 181% 190% 236%
- ------------------------------------------------------------------ ---------------- -------------- -----------------
</TABLE>
* Computed on an annualized basis.
<F13>(a) Reflects operations for the period from October 28, 1996 (date of
initial public offering) to September 30, 1997. For the period from
September 19, 1996 (start of business) to October 27, 1996, the investment
income was distributed to the Fund's Investment adviser.
<F14>(b) Based on net asset vale, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
<F15>(c) This voluntary expense is reflected in both the expense and net
investment income ratios shown above.
<F16>(d) Portfolio turnover rate is calculated on the basis of the Fund as a
whole without distinguishing between classes of shares issued.
B A T T E R Y
P A R K
H I G H Y I E L D F U N D
- ------------------------- ======================================
NOMURA CORPORATE RESEARCH AND ASSET
MANAGEMENT INC.
Investment Adviser 2 World Financial Center
Building B
New York, NY 10281-1198
HTTP://WWW1.NOMURANY.COM
- ------------------------- ======================================
- ------------------------- ======================================
Distributor NOMURA SECURITIES INTERNATIONAL, INC.
2 World Financial Center
Building B
New York, NY 10281-1198
- ------------------------- ======================================
- ------------------------- ======================================
Transfer Agent FIRSTAR MUTUAL FUND SERVICES, LLC
615 East Michigan Street, 3rd Floor
Milwaukee, WI 53202
- ------------------------- ======================================
- ------------------------- ======================================
Custodian FIRSTAR BANK MILWAUKEE, N.A.
615 East Michigan Street, 3rd Floor
Milwaukee, WI 53202
- ------------------------- ======================================
Additional information about the Fund is included in the Statement of Additional
Information (SAI). The SAI is incorporated into this prospectus by reference
(i.e., legally made a part of this prospectus). The SAI provides more details
about the Fund's policies and management. Additional information about the
Fund's investments is available in the Fund's annual and semiannual reports to
shareholders. In the Fund's annual report, you will find a discussion of the
market conditions and strategies that significantly affected the Fund's
performance during its last fiscal year.
To obtain a free copy of the SAI, the annual and semiannual reports or other
information about the Fund, or to make shareholder inquires about the Fund,
please call 1-888-254-2874. You may also write to:
BATTERY PARK FUNDS
c/o Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
You may review and obtain copies of Fund information (including the SAI) at the
SEC Public Reference Room in Washington, D.C. Please call 1-202-942-8090 for
information relating to the operation of the Public Reference Room. Reports and
other information about the Fund are available on the EDGAR Database on the
SEC's Internet site at http://www.sec.gov. Copies of the information may be
obtained, after paying a duplicating fee, by electronic request at the following
E-mail address: [email protected], or by writing the Public Reference Section,
Securities and Exchange Commission, Washington, D.C. 20549-0102.
Investment Company Act File # 811-05762
BATTERY PARKSM HIGH YIELD FUND
A SERIES OF BATTERY PARKSM FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
January 28, 2000
This Statement of Additional Information, incorporated by reference into the
Prospectus, is not a prospectus and should be read in conjunction with the
Fund's Prospectus dated January 28, 2000, which has been filed with the
Securities and Exchange Commission. To receive a copy of the Prospectus free of
charge, write to Battery ParkSM Funds, Inc. or call the toll-free number
1-888-254-2874.
The Fund's audited financial statements for the fiscal year ended September 30,
1999 are incorporated by reference to the Fund's 1999 Annual Report. You may
request a copy of the annual report at no charge by calling 1-888-254-2874
between 8:00 am and 5:00 pm central standard time on a any business day.
BATTERY PARKSM HIGH YIELD FUND
c/o Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
Nomura Corporate Research and Asset Management Inc. - Investment Adviser
Nomura Securities International, Inc. - Distributor
TABLE OF CONTENTS
General Information about Battery ParkSMFunds, Inc.............................3
Investment Objective and Policies..............................................3
Investment Restrictions........................................................7
Management of the Fund.........................................................9
Control Persons and Principal Holders of Securities...........................10
Management and Advisory Arrangements..........................................11
Fund Administration...........................................................12
Fund Accounting and Transfer Agent............................................13
Custodian.....................................................................13
Distributor...................................................................13
Distribution Plan.............................................................14
Brokerage Transactions........................................................15
Purchase of Shares............................................................16
Redeeming Shares..............................................................17
Determination of Net Asset Value..............................................17
Shareholder Services..........................................................19
Taxes.........................................................................20
Performance Data..............................................................22
Reports to Shareholders.......................................................24
Independent Auditors..........................................................24
Legal Counsel.................................................................24
APPENDIX A....................................................................25
APPENDIX B....................................................................28
GENERAL INFORMATION ABOUT BATTERY PARKSM FUNDS, INC.
- --------------------------------------------------------------------------------
Battery ParkSM High Yield Fund (the "Fund") is the only existing series of
Battery Park Funds, Inc. (the "Company"), a diversified, open-end series-type
investment company. The Company was incorporated under Maryland law on June 4,
1996.
CAPITAL STOCK
The Company has an authorized capital of 200,000,000 shares of common stock, par
value $0.001 per share, of which 50,000,000 shares are initially classified as
one series, namely the Fund. The Fund consists of two classes, designated Class
A and Class Y Common Stock, each of which consists of 25,000,000 shares. The
remaining 150,000,000 shares are not classified as to any class or series.
RIGHTS OF EACH SHARE CLASS
Shares of Class A and Class Y Common Stock represent interests in the same
assets of the Fund and are identical in all respects except that the Class A
shares bear certain expenses related to the distribution associated with such
shares. Class A shareholders each have exclusive voting rights with respect to
matters relating to expenditures made under that class's Rule 12b-1 plan, as
applicable.
Shareholders are entitled to one vote for each share held and fractional votes
for fractional shares held and will vote on the election of Directors and any
other matter submitted to a shareholder vote. The Fund does not intend to hold
meetings of shareholders in any year in which the Investment Company Act of
1940, as amended, ("1940 Act") does not require shareholders to act upon
election of Directors. The By-laws of the Company provide that, with written
request, holders of at least 10% of the outstanding shares of the Fund may call
a special meeting of shareholders for any purpose.
Voting rights for Directors are not cumulative. Shares issued are fully paid and
non-assessable and have no preemptive or conversion rights. Redemption rights
are discussed elsewhere herein and in the Prospectus. Each share is entitled to
participate equally in dividends and distributions declared by the Fund and in
the net assets of the Fund on liquidation or dissolution after satisfaction of
outstanding liabilities. Stock certificates will only be issued upon shareholder
request.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Investment Objective and Policies of the Fund are discussed in the
Prospectus. This section provides additional information regarding investments
and transactions the Fund is permitted to make.
The Fund's investment objective is to provide shareholders with high total
return, consisting of current income and capital appreciation. The Fund attempts
to achieve its objective by investing principally in fixed income securities of
U.S. companies which securities are rated in the lower rating categories of the
established rating services or are unrated securities of comparable quality.
Under normal circumstances, the Fund will invest at least 80% of the Fund's
total assets in fixed income securities rated Ba1 or lower by Moody's Investors
Service, Inc. ("Moody's") or BB+ or lower by Standard & Poor's ("S&P"). The Fund
is authorized to, but does not currently intend to, engage in various portfolio
strategies to enhance income and to hedge its portfolio against investment and
interest rate risks, including the utilization of leverage and the use of
options and futures. No assurance can be given that the Fund will realize its
investment objective. Other securities in which the Fund may invest are
described below.
See Appendix A to this SAI for more information on ratings of high yield debt
securities.
CONVERTIBLE SECURITIES
The Fund may invest in convertible securities, which include any corporate debt
security or preferred stock that may be converted into underlying shares of
common stock. Convertible securities entitle the holder to receive interest
payments paid on corporate debt securities or the dividend preference on a
preferred stock until such time as the convertible security matures or is
redeemed or until the holder elects to exercise the conversion privilege.
Although the Fund generally expects that it will sell convertible securities
rather than convert such securities into common stock, the Fund may, at various
times, exercise conversion rights on convertible securities.
CORPORATE LOANS
The Fund may invest in corporate loans made by banks or other financial
institutions either at origination or by acquiring participations in,
assignments of or novations of corporate loans. Corporate loans generally are
not readily marketable and may be subject to restrictions on resale and are
therefore subject to the Fund's limitation on illiquid securities, as set forth
below. The corporate loans in which the Fund invests typically are originated,
negotiated and structured by a syndicate of co-lenders, one or more of which
administers the loan on behalf of the syndicate. The value of a corporate loan
depends primarily on the creditworthiness of the borrower. The Fund will invest
in a corporate loan only if, in the Investment Adviser's judgment, the borrower
can meet debt service on such loan; however, the Investment Adviser has set no
minimum credit rating criteria regarding the borrowers. Although the Investment
Adviser will continue to monitor the creditworthiness of the borrowers of
corporate loans in which the Fund invests, there can be no assurance that such
analysis will disclose factors that will impair the value of a corporate loan.
ASSET BACKED SECURITIES
The Fund may invest in asset-backed securities. Asset-backed securities are
securities that directly or indirectly represent an interest in, or are backed
by and payable from, receivables (including lease receivables) on pools of
assets such as, but not limited to, the following:
o mortgage loans secured by real property,
o notes secured by property,
o equipment or lease payments,
o credit card debt,
o automobile loans or student loans.
Asset-backed securities are issued in structured financings wherein the sponsor
is often a special purpose entity established for the purpose of securitizing
the underlying assets in order to increase the liquidity of those assets or to
achieve certain other financial goals. In choosing asset-backed securities in
which the Fund will invest, the Investment Adviser will take into consideration,
among other things, the underwriting standards of the originator of the
underlying obligations, applicable loan-to-value ratios and the general
sensitivity of the securities to economic conditions and trends.
REPURCHASE AGREEMENTS
The Fund may invest in securities pursuant to repurchase agreements. U.S.
dollar-denominated repurchase agreements may be entered into only with a member
bank of the Federal Reserve System or a primary dealer in U.S. government
securities or an affiliate thereof. Under such agreements, the bank or primary
dealer or an affiliate thereof agrees, upon entering into the contract, to
repurchase the security at a mutually agreed upon time and price, thereby
determining the yield during the term of the agreement. This results in a fixed
rate of return insulated from market fluctuations during such period. Repurchase
agreements may be construed to be collateralized loans by the purchaser to the
seller secured by the securities transferred to the purchaser. As a purchaser,
the Fund will require the seller to provide additional collateral if the market
value of the securities that are the subject of the repurchase agreement falls
below the repurchase price at any time during the term of the repurchase
agreement. In the event of default by the seller under a repurchase agreement
construed to be a collateralized loan, the underlying securities are not owned
by the Fund but only constitute collateral for the seller's obligation to pay
the repurchase price. Therefore, the Fund may suffer time delays and incur costs
or possible losses in connection with disposition of the collateral.
WHEN ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may purchase and sell portfolio securities on a "when-issued" and
"delayed delivery" basis. No income accrues to the Fund in such securities in
connection with such transactions prior to the date the Fund actually takes
delivery of such securities. These transactions are subject to market
fluctuation; the value of the securities at delivery may be more or less than
their purchase price, and yields generally available on such securities when
delivery occurs may be higher or lower than yields on the securities obtained
pursuant to such transactions. Failure of the buyer or seller, as the case may
be, to consummate the transaction may result in a missed opportunity to obtain
the best price or yield available on the purchase or sale of the subject
security.
LENDING PORTFOLIO SECURITIES
The Fund may from time to time lend securities from its portfolio with a value
not exceeding 33 1/3% of its total assets, to banks, brokers and other financial
institutions. The Fund may receive collateral in cash or securities issued or
guaranteed by the U.S. government that will be maintained at all times in an
amount equal to at least 100% of the current market value of the loaned
securities. During the period of this loan, the Fund receives the income on the
loaned securities and either receives the income on the collateral or other
compensation (i.e., negotiated loan premium or fee) for entering into the loan
and thereby increases its yield. In the event that the borrower defaults on its
obligation to return borrowed securities because of insolvency or otherwise, the
Fund could experience delays and costs in gaining access to the collateral. The
Fund could also suffer a loss to the extent that the value of the collateral
falls below the market value of the borrowed securities.
LEVERAGE
Although the Fund does not presently intend to utilize leverage to purchase
portfolio securities, it is authorized to borrow from banks amounts of up to 33
1/3% of its total assets (including the amount borrowed). The Fund may also
utilize its borrowing authority to obtain funds to meet redemption requests or
settle investment transactions or for temporary or emergency purposes.
Borrowings by the Fund create an opportunity for greater total return but, at
the same time, increase exposure to capital risk. For example, leveraging may
exaggerate changes in the net asset value of Fund shares and in the yield on the
Fund's portfolio. Borrowing will create interest expenses for the Fund, which
can exceed the income from the assets attributable to the borrowed funds. To the
extent the income derived from securities purchased with borrowed funds exceeds
the interest the Fund will have to pay, the Fund's net income will be greater
than if borrowing were not used. Conversely, if the income from the assets
acquired with borrowed funds is not sufficient to cover the cost of borrowing,
the net income of the Fund will be less than if borrowing were not used, and
therefore the amount available for distribution to shareholders as dividends
will be reduced.
OPTIONS AND FUTURES TRANSACTIONS
The Fund is authorized, but does not currently intend, to engage in various
portfolio strategies to hedge its portfolio against investment and interest
rate risks, including the utilization of options and futures. See
Appendix B to this SAI --"Hedging Techniques."
INVESTMENT IN FOREIGN AND EMERGING MARKETS
As stated in the Prospectus, the Fund may invest up to 25% of its total assets
in securities issued by non-U.S. issuers. Included within such investments, the
Fund may invest up to 15% of its total assets in securities of issuers in
emerging markets. All of the Fund's investments in securities of non-U.S.
issuers will be U.S. dollar-denominated. Investment in the securities of foreign
markets involve certain risk factors and special considerations in addition to
those discussed under "Investment Risks" in the Fund's Prospectus, and these
risks are often amplified in connection with investments in emerging markets.
Certain emerging market countries have the following qualities:
(1) require prior governmental approval of foreign investors,
(2) limit the amount of investment by foreign investors in a particular issuer,
(3) limit the investment by foreign investors only to a specified
class of securities that may have less advantageous rights than
other classes,
(4) restrict investment opportunities in issuers in industries deemed
important to national interests, and/or
(5) impose additional taxes on foreign investors.
Furthermore, it may be difficult to find qualified subcustodians in emerging
market countries with extensive operating experience, and the Fund may be more
limited in its ability to recover assets in the event of a subcustodian's
bankruptcy than it would be in more developed countries. Investing in local
markets in emerging market countries may require the Fund to adopt special
procedures, seek local government approvals or take other actions, each of which
may involve additional costs to the Fund.
The securities markets of emerging market countries are not as large as the U.S.
securities markets and have substantially less trading volume, resulting in a
lack of liquidity with high price volatility. Certain markets are in only the
earliest stages of development. There is also a high concentration of market
capitalization and trading volume in a small number of issuers representing a
limited number of industries, as well as a high concentration of investors and
financial intermediaries. Many of such markets also may be affected by
developments with respect to more established markets in the region. Brokers in
emerging market countries typically are fewer in number and less capitalized
than brokers in the United States.
Some foreign investments may be subject to repatriation controls that could
render such securities illiquid. Other countries might undergo nationalization,
expropriation, political changes, governmental regulation, social instability or
diplomatic developments (including war) that could adversely affect the
economies of such countries or the value of the investments in those countries.
For this reason, if the Fund invests a substantial portion of its portfolio in
the securities of certain foreign countries, it could be greatly impacted by any
political, economic or regulatory developments affecting the value of the
securities. Additional risks include differences in financial reporting
standards, and less stringent regulation of securities markets.
These factors, combined with the U.S. regulatory requirements for open-end
investment companies and the restrictions on foreign investment discussed in the
Prospectus, may result in potentially fewer investment opportunities for the
Fund and may have an adverse effect on the investment performance of the Fund.
See "Investment Risks" in the Prospectus for additional information regarding
foreign and emerging market securities.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest up to 15% of its net assets in securities that are not
readily marketable, including securities that are restricted as to disposition
under the federal securities laws or otherwise. If registration of such
securities under the Securities Act of 1933 (the "Securities Act") is required,
such registration may not be readily accomplished, and if such securities may be
resold without registration, such resale may be permissible only in limited
quantities. In either event, the inability to sell securities at the most
opportune time may negatively affect the net asset value of the Fund.
Notwithstanding the foregoing, the Fund may purchase certain restricted
securities ("Rule 144A securities") for which there is a secondary market of
qualified institutional buyers as defined by Rule 144A under the Securities Act.
Rule 144A securities held by the Fund that are determined to be liquid
securities, either by the Fund's Board of Directors (the "Directors") or by the
Investment Adviser pursuant to guidelines approved by the Fund's Board, will not
be subject to the Fund's limitation on illiquid securities.
In promulgating Rule 144A under the Securities Act, the SEC stated that the
ultimate responsibility for liquidity determinations rests with a fund's board
of directors; however, the board may delegate the day-to-day function of
determining liquidity to the investment adviser provided the board retains
sufficient oversight. The Directors of the Fund have adopted policies and
procedures for the purpose of determining whether securities that are eligible
for resale under Rule 144A are liquid or illiquid and has approved guidelines
under these policies and procedures pursuant to which the Investment Adviser
makes these determinations on an ongoing basis. In making these determinations,
consideration is given to, among other things, the frequency of trades and
quotes for the security, the number of dealers willing to sell the security and
the number of potential purchasers, dealer undertakings to make a market in the
security, the nature of the security and the time needed to dispose of the
security. The Directors periodically review Fund purchases and sales of Rule
144A securities.
To the extent that liquid Rule 144A securities become illiquid, due to the lack
of sufficient qualified institutional buyers or market or other conditions, the
percentage of the Fund's assets invested in illiquid assets would increase. The
Investment Adviser, under the supervision of the Directors, will monitor Fund
investments in Rule 144A securities and will consider appropriate measures to
enable the Fund to maintain sufficient liquidity for operating purposes and to
meet redemption requests.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The Fund has adopted both fundamental and nonfundamental restrictions and
policies relating to the investment of its assets and its activities.
Fundamental restrictions and policies may not be changed without the approval of
the holders of a majority of the Fund's outstanding voting securities. For this
purpose and under the 1940 Act, "majority shareholder approval" means the lesser
of:
(a) 67% of the shares represented at a meeting at which more than 50% of the
outstanding shares are represented or
(b) more than 50% of the outstanding shares.
Under these fundamental restrictions, the Fund may not:
1. Invest more than 25% of its assets, taken at market value, in the
securities of issuers in any particular industry (excluding the U.S.
government and its agencies and instrumentalities).
2. Make investments for the purpose of exercising control or management.
3. Purchase or sell real estate, except that, to the extent permitted by
applicable law, the Fund may invest in securities directly or indirectly
secured by real estate or interests therein or issued by companies that
invest in real estate or interests therein.
4. Make loans to other persons, except that the acquisition of bonds, debentures
or other corporate debt securities and investment in government obligations,
commercial paper, pass-through instruments, certificates of deposit, bankers
acceptances, repurchase agreements or any similar instruments shall not be
deemed to be the making of a loan, and except further that the Fund may lend
its portfolio securities, provided that the lending of portfolio securities may
be made only in accordance with applicable law and the guidelines set forth in
this Statement of Additional Information, as they may be amended from time to
time, provided that purchases of assignments or participations in loans
(including bridge loans) will not be prohibited by this paragraph.
5. Issue senior securities to the extent such issuance would violate applicable
law.
6. Borrow money, except that (a) the Fund may borrow from banks (as defined in
the Investment Company Act) in amounts up to 33 1/3% of its total assets
(including the amount borrowed), (b) the Fund may borrow up to an additional
5% of its total assets for temporary purposes, (c) the Fund may obtain such
short-term credit as may be necessary for the clearance of purchases and sales
of portfolio securities and (d) the Fund may purchase securities on margin to
the extent permitted by applicable law. The Fund may not pledge its assets
other than to secure such borrowings or, to the extent permitted by the Fund's
investment policies as set forth in its Prospectus and this Statement of
Additional Information, as they may be amended from time to
time, in connection with hedging transactions, short sales, when-issued and
forward commitment transactions and similar investment strategies.
7. Underwrite securities of other issuers except insofar as the Fund
technically may be deemed an underwriter under the Securities Act of 1933,
as amended (the "Securities Act"), in selling portfolio securities.
8. Purchase or sell commodities or contracts on commodities, except to the
extent that the Fund may do so in accordance with applicable law and the
Fund's Prospectus and Statement of Additional Information, as they may be
amended from time to time, and without registering as a commodity pool
operator under the Commodity Exchange Act.
9. Make any investment inconsistent with the Fund's classification as a
diversified investment company under the Investment Company Act.
Non-fundamental restrictions may be amended by a majority vote of the Directors
of the Fund. Under the non-fundamental investment restrictions, the Fund may
not:
1. Purchase securities of other investment companies, except to the extent
such purchases are permitted by applicable law or by order of the SEC.
2. Make short sales of securities or maintain a short position, except to the
extent permitted by applicable law. The Fund currently does not intend to
engage in short sales.
3. Invest in securities which cannot be readily resold because of legal or
contractual restrictions or which cannot otherwise be marketed, redeemed or
put to the issuer or a third party, if at the time of acquisition more than
15% of its net assets would be invested in such securities. This
restriction shall not apply to securities that mature within seven days or
securities that the Board of Directors of the Fund has otherwise determined
to be liquid pursuant to applicable law. Securities purchased in accordance
with Rule 144A under the Securities Act and determined to be liquid by the
Fund's Board of Directors are not subject to the limitations set forth in
this investment restriction.
4. Write, purchase or sell puts, calls, straddles, spreads or combinations
thereof, except to the extent permitted in the Fund's Prospectus and
Statement of Additional Information, as they may be amended from time to
time.
Portfolio securities of the Fund generally may not be purchased from, sold or
loaned to the Investment Adviser or its affiliates or any of their directors,
officers or employees, acting as principal, unless pursuant to a rule or
exemptive order under the 1940 Act.
Because of the affiliation of the Investment Adviser with the Fund and the
Distributor, the Fund is prohibited from engaging in portfolio transactions with
the Distributor or its affiliates acting as principal and from purchasing
securities inpublic offerings which are not registered under the Securities Act
in which the Distributor or any of its affiliates participate as an underwriter
or dealer. See "Portfolio Transactions."
PORTFOLIO TURNOVER
Generally, the Fund does not purchase securities for short-term trading profits.
However, the Fund may dispose of securities without regard to the time that they
have been held when such actions, for defensive or other reasons, appear
advisable to the Investment Adviser in light of a change in circumstances in
general market, economic or financial conditions. As a result of its investment
policies, the Fund may engage in a substantial number of portfolio transactions.
Accordingly, while the Fund anticipates that its annual portfolio turnover rate
should not exceed 200% under normal conditions, it is impossible to predict
portfolio turnover rates. The portfolio turnover rate is calculated by dividing
the lesser of the Fund's annual sales or purchases of portfolio securities
(exclusive of purchases or sales of securities whose maturities at the time of
acquisition were one year or less) by the monthly average value of the
securities in the portfolio during the year. Higher portfolio turnover (over
100%) involves correspondingly greater transaction costs and may result in the
realization of greater net short-term capital gains.
The portfolio turnover rates for the fiscal years ended September 30, 1998 and
1999 were as follows:
PORTFOLIO TURNOVER RATE
--------------------- -----------------------------
Sept. 30, 1998 190%
--------------------- -----------------------------
Sept. 30, 1999 181%
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
The Fund is managed by a Board of Directors. The Fund's Board of Directors
consists of four individuals, two of whom are not "interested persons" of the
Fund as that term is defined in the 1940 Act. The Directors are fiduciaries for
the Fund's shareholders and are governed by the laws of the State of Maryland in
this regard. They establish policies for the operation of the Fund and appoint
the officers who conduct the daily business of the Fund. The Directors and
executive officers of the Fund, their ages and their principal occupations for
at least the last five years are set forth below.
<TABLE>
<CAPTION>
- ------------------------------- -------- ---------------------- --------------------------------------------
NAME AND ADDRESS AGES POSITION AND OFFICE PRINCIPAL OCCUPATION
WITH THE COMPANY DURING THE PAST FIVE YEARS
- ------------------------------- -------- ---------------------- --------------------------------------------
<S> <C> <C> <C>
Robert Levine* 55 Chairman, President Founder, President and Chief Executive
2 World Financial Center, New and Director Officer of the Investment Adviser and an
York, New York Executive Managing Director of Nomura
10281-1198 Holding America Inc. from 1991 to present.
- ------------------------------- -------- ---------------------- --------------------------------------------
- ------------------------------- -------- ---------------------- --------------------------------------------
Francis L. Fraenkel 67 Director President of Delta Capital Management Inc.
2 World Financial Center, New from 1992 to present; Managing Director of
York, New York Salomon Brothers Inc. and President of
10281-1198 Salomon Brothers Asset Management Inc.
prior to 1992.
- ------------------------------- -------- ---------------------- --------------------------------------------
- ------------------------------- -------- ---------------------- --------------------------------------------
Frank K. Reilly 64 Director Bernard J. Hank Professor of Business
2 World Financial Center, New Administration, University of Notre Dame
York, New York College of Business Administration from
10281-1198 1981 to present.
- ------------------------------- -------- ---------------------- --------------------------------------------
- ------------------------------- -------- ---------------------- --------------------------------------------
Richard A. Buch* 40 Vice President and Managing Director of the Investment
2 World Financial Center, New Portfolio Manager Adviser from 1993 to present; Senior Vice
York, New York President and High Yield Portfolio Manager
10281-1198 for Kidder, Peabody Asset Management prior
to 1993.
- ------------------------------- -------- ---------------------- --------------------------------------------
- ------------------------------- -------- ---------------------- --------------------------------------------
Jennie Wong* 33 Director and Vice President of the Investment Advisor
2 World Financial Center, New Treasurer since June 1999. Employed in various
York, New York financial positions with the Investment
10281-1198 Advisor since 1993.
- ------------------------------- -------- ---------------------- --------------------------------------------
</TABLE>
* Interested person, as defined in the 1940 Act, of the Fund.
COMPENSATION
For their service as Directors, the non-interested Directors receive a fee of
$2,500 per meeting attended, as well as reimbursement for expenses incurred in
connection with attendance at such meetings. The "interested persons" of the
Fund receive no compensation for their service as Directors. None of the
executive officers receive compensation from the Fund. For the fiscal year ended
September 30, 1999, the Directors received the following compensation.
<TABLE>
<CAPTION>
- ---------------------------- ----------------- ----------------------- ---------------------- ------------------------
NAME AND POSITION AGGREGATE PENSION OR RETIREMENT ESTIMATED ANNUAL TOTAL COMPENSATION
COMPENSATION BENEFITS ACCRUED AS BENEFITS UPON FROM FUND COMPLEX PAID
FROM FUND PART OF FUND EXPENSES RETIREMENT TO DIRECTORS
COMPLEX
- ---------------------------- ----------------- ----------------------- ---------------------- ------------------------
<S> <C> <C> <C> <C>
Robert Levine* None None None None
Chairman, Director and
President
Francis L. Fraenkel $10,000 None None $10,000
Director
Frank K. Reilly $10,000 None None $10,000
Director
Jennie Wong* None None None None
Director and Treasurer
- ---------------------------- ----------------- ----------------------- ---------------------- ------------------------
</TABLE>
*This trustee is deemed to be an interested person as defined by the 1940 Act.
SALES LOADS
Directors and employees of the investment adviser or its affiliates have the
privilege of being able to purchase Class Y shares of the Fund with out meeting
all the purchase requirements. Class Y shares (unlike Class A shares) are
offered at net asset value without a sales charge. However, the typical investor
must invest at least $1 million in the Fund to be able to purchase Class Y
shares instead of Class A shares. The alternative is to purchase Class Y shares
through a fee-based financial planner whose clients have a current investment in
the Fund totaling at least $1 million. Directors of the Fund may purchase Class
Y shares even if they do not have $1 million invested in the Fund. In addition,
retirement plans administered by the Investment Adviser or its affiliates for
the benefit of employees of the Investment Adviser and its affiliates may
purchase Class Y shares for less than $1 million.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
- --------------------------------------------------------------------------------
CONTROL PERSON
As of January 1, 2000, the following shareholders are considered control persons
of the Fund because they have either:
(1) the beneficial ownership, either directly or through one or more controlled
companies, of more than 25% of the voting securities of a company
(2) the acknowledgment or assertion by either the controlled or controlling
party of the existence of control; or
(3) an adjudication under section 2(a)(9) of the 1940 Act, which has become
final, that control exists.
<TABLE>
<S> <C> <C> <C>
- ---------------------------- -------------------------- -------------------------- --------------------------
SHAREHOLDER NAME AND CLASS NUMBER OF SHARES PERCENTAGE OWNED
ADDRESS
- ---------------------------- -------------------------- -------------------------- --------------------------
</TABLE>
PRINCIPAL HOLDERS
As of January 1, 2000, the following shareholders are considered principal
holders of the Fund because they own of record or beneficially own 5% or more
the outstanding shares of the Fund.
<TABLE>
<S> <C> <C> <C>
- ---------------------------- -------------------------- -------------------------- --------------------------
SHAREHOLDER NAME AND CLASS NUMBER OF SHARES PERCENTAGE OWNED
ADDRESS
- ---------------------------- -------------------------- -------------------------- --------------------------
</TABLE>
MANAGEMENT OWNERSHIP
As of January 1, 2000, the officers and Directors own less than 1% of the Fund's
outstanding shares.
MANAGEMENT AND ADVISORY ARRANGEMENTS
- --------------------------------------------------------------------------------
See "Management of the Fund" in the Prospectus for certain information
concerning the management and advisory arrangements of the Fund.
The Fund's Investment Adviser is Nomura Corporate Research and Asset Management
Inc. located at 2 World Financial Center, Building B, New York, New York
10281-1198. The Investment Adviser serves as adviser for the Fund pursuant to an
Investment Advisory Agreement dated October 1, 1996 (the "Investment Advisory
Agreement").
The Investment Advisory Agreement provides that, subject to the direction of the
Directors of the Fund, the Investment Adviser is responsible for the actual
management of the Fund and for the review of the Fund's holdings in light of its
own research analysis and analyses from other relevant sources. The
responsibility for making decisions to buy, sell or hold a particular security
rests with the Investment Adviser, subject to review by the Directors. The
Investment Adviser employs portfolio managers for the Fund, who consider
analyses from various sources, make the necessary investment decisions and place
transactions accordingly. The Investment Adviser also is obligated to perform
certain administrative and management services for the Fund and is required to
provide all the office space, facilities, equipment and personnel necessary to
perform its duties under the Investment Advisory Agreement.
Securities held by the Fund also may be held by or be appropriate investments
for other funds for which the Investment Adviser or its affiliates act as
adviser or by investment advisory clients of the Investment Adviser. Because of
different investment objectives or other factors, a particular security may be
bought for one or more clients when one or more clients are selling the same
security. If purchases or sales of securities for the Fund or other funds for
which the Investment Adviser or its affiliates act as investment adviser or for
their advisory clients arise for consideration at or about the same time,
transactions in such securities will be made, insofar as feasible, for the
respective funds and clients in a manner deemed equitable to all. To the extent
that transactions on behalf of more than one client of the Investment Adviser or
its affiliates during the same period may increase the demand for securities
being purchased or the supply of securities being sold, there may be an adverse
effect on price.
The Investment Advisory Agreement obligates the Investment Adviser to provide
investment advisory services and to pay all compensation of and furnish office
space for officers and employees of the Fund connected with investment and
economic research, trading and investment management of the Fund, as well as the
fees of all Directors of the Fund who are affiliated persons of the Investment
Adviser or the Distributor or any of their subsidiaries. The Fund pays all other
expenses incurred in its operation, including redemption expenses, expenses of
portfolio transactions, shareholder servicing costs, expenses of registering the
shares under federal and state securities laws, pricing costs (including the
daily calculation of net asset value), interest, certain taxes, charges of the
Custodian and Transfer Agent, directors' fees, legal expenses, state franchise
taxes, auditing services, costs of printing proxies, stock certificates,
shareholder reports and prospectuses (except to the extent paid by the
Distributor), SEC fees, accounting costs and other expenses properly payable by
the Fund. To the extent accounting services are provided for the Fund by the
Investment Adviser, the Fund will reimburse the Investment Adviser for its costs
in connection with such services. As required by the Distribution Agreement, the
Distributor will pay certain of the expenses of the Fund incurred in connection
with the offering of shares of the Fund, including the expenses of printing the
prospectuses and statements of additional information used in connection with
the continuous offering of shares by the Fund.
DURATION AND TERMINATION
The Investment Advisory Agreement for the Fund will remain in effect from year
to year if approved annually (a) by the Directors of the Fund or by a majority
of the outstanding shares of the Fund and (b) by a majority of the Directors who
are not parties to such contract or interested persons (as defined in the
Investment Company Act) of any such party. Such contract is not assignable and
may be terminated without penalty on 60 days' written notice by the majority
vote of the Directors or of the outstanding voting securities of the Fund or on
120 days' written notice by the Investment Adviser.
ADVISORY FEES
The investment adviser charges a fee of 0.65% for each class of shares for its
services; however, the investment adviser waived management fees, and reimbursed
certain expenses of the Fund, for the fiscal year ended September 30, 1999 to
the extent necessary to limit the Fund's annualized expenses for that period to
the annual rate of 1.25% of average daily net assets for Class A shares and
1.00% of average daily net assets for Class Y shares. Pursuant to an Expense
Waiver and Reimbursement Agreement dated as of November 29, 1999, the investment
adviser has agreed to the same waiver and reimbursement arrangement for the
fiscal year of the Fund beginning October 1, 1999 and ending September 30, 2000.
At October 1, 2000, the investment adviser may in its discretion agree to
continue, modify or discontinue this waiver and reimbursement arrangement.
Subject to the approval of the Board of Directors of the Fund, the investment
adviser may seek to recover management fees deferred pursuant to this Agreement
in subsequent fiscal periods of the Fund to the extent that the Fund's expenses
fall below the annualized rates of 1.25% and 1.00% of average daily net assets
for Class A shares and Class Y shares, respectively. For the fiscal years (or
period, as the case may be) ended September 30, 1997, 1998 and 1999 and the
Investment Adviser earned and was paid the following amounts, unless some
portion of the fee was waived as indicated.
<TABLE>
<CAPTION>
- ---------------------------- -------------------------- -------------------------- --------------------------
Fiscal Year Ended ADVISORY FEES ADVISORY FEES WAIVED ADVISORY FEES
September 30 EARNED PAID BY FUND
- ---------------------------- -------------------------- -------------------------- --------------------------
<S> <C> <C> <C>
1997* $ 74,637 $ 74,637 None
- ---------------------------- -------------------------- -------------------------- --------------------------
1998 $115,986 $115,986 None
- ---------------------------- -------------------------- -------------------------- --------------------------
1999 $163,178 $163,178 None
- ---------------------------- -------------------------- -------------------------- --------------------------
</TABLE>
*For the period from September 19, 1996 (start of business) to September 30,
1997.
FUND ADMINISTRATION
- --------------------------------------------------------------------------------
Firstar Mutual Fund Services, LLC ("Firstar") serves as Fund
Administrator pursuant to a Fund Administration Servicing Agreement with the
Company. As such Firstar provides all necessary bookkeeping, shareholder
recordkeeping services and share transfer services to the Fund.
Under the Fund Administration Servicing Agreement, Firstar receives an
administration fee for the Fund, at an annual rate of 7 basis points (0.07%) on
the first $200 million, 6 basis points (0.06%) on the next $500 million and 4
basis points (0.04%) on the balance of the daily average net assets of the Fund.
The Fund Administration Servicing Agreement further provides that the annual fee
in any event shall not be less than $30,000 for Class A shares and $25,000 for
Class Y shares. Fees are billed to the Fund on a monthly basis. Prior to August
30, 1999, Federated Services Company ("Federated") provided administrative
services to the Fund. Over the last three fiscal years, the Fund paid the
following amounts in administrative fees:
<TABLE>
<CAPTION>
Administrative Fees Paid to:
- ------------------------ -------------------------------- -----------------------------------
<S> <C> <C>
Fiscal Year Ended FEDERATED FIRSTAR
September 30 (Sept. 19, 1996 - Aug. 29, (Aug. 30, 1999 - Sept. 30, 1999)
1999)
- ------------------------ -------------------------------- -----------------------------------
1997* $46,164 N/A
- ------------------------ -------------------------------- -----------------------------------
1998 $50,001 N/A
- ------------------------ -------------------------------- -----------------------------------
1999 $45,834 $4,583
- ------------------------ -------------------------------- -----------------------------------
</TABLE>
*For the period from September 19, 1996 (start of business) to
September 30, 1997.
FUND ACCOUNTING AND TRANSFER AGENT
- --------------------------------------------------------------------------------
Firstar Mutual Fund Services, LLC, serves as Fund Accountant and
Transfer Agent to the Fund pursuant to a Fund Accounting Servicing Agreement and
a Transfer Agent Servicing Agreement. Under the Fund Accounting Servicing
Agreement, Firstar will provide portfolio accounting services, expense accrual
and payment services, fund valuation and financial reporting services, tax
accounting services and compliance control services. Firstar will receive a fund
accountant fee for the Fund, which will be billed on a monthly basis.
Under the Transfer Agent Servicing Agreement, Firstar will provide all
of the customary services of a transfer agent and dividend disbursing agent
including, but not limited to: (1) receiving and processing orders to purchase
or redeem shares; (2) mailing shareholder reports and prospectuses to current
shareholders; and (3) providing blue sky services to monitor the number of Fund
shares sold in each state. Firstar will receive a transfer agent fee, which will
be billed on a monthly basis.
CUSTODIAN
- --------------------------------------------------------------------------------
The Custodian for the Company and the Fund is Firstar Bank Milwaukee,
N.A., 615 East Michigan Street, Milwaukee, Wisconsin 53202. Firstar Bank
Milwaukee, N.A., as Custodian, holds all of securities and cash owned by the
Fund.
DISTRIBUTOR
- --------------------------------------------------------------------------------
Nomura Securities International, Inc. ("Nomura Securities" or
"Distributor") serves as distributor and principal underwriter for the Fund
pursuant to a Distribution Agreement and a Rule 12b-1 Plan. As stated in the
Prospectus, Nomura Securities is an affiliate of the Investment Adviser and is a
registered broker-dealer and member of the National Association of Securities
Dealers.
Nomura Securities bears all expenses of providing distribution services
pursuant to the Distribution Agreement. Under the Distribution Agreement, the
Distributor offers shares of the Fund continuously at the public offering price
as set forth in the Prospectus, which will not exceed the net asset value plus
and sales charge. Nomura Securities provides for the preparation of advertising
or sales literature and bears the cost of printing and mailing Prospectuses to
persons other than shareholders. The Fund bears the cost of qualifying and
maintaining the qualification of Fund shares for sale under the securities laws
of the various states and the expense of registering their shares with the
Securities and Exchange Commission. For its services under the Distribution
Agreement, Nomura Securities receives a fee, payable monthly, at the annual rate
of 0.25% of average daily net assets of Class A shares of the Fund. This fee is
accrued daily as an expense of the Fund.
The Distributor may enter into related selling group agreements with
various broker-dealer firms that provide distribution services to investors.
Since the Distribution Agreement provides for fees that are used by
Nomura Securities to pay for distribution services, the Distribution Agreement
along with the related selling agreements is approved and reviewed in accordance
with the Fund's Rule 12b-1 Plan under the 1940 Act, which regulates the manner
in which an investment company may, directly or indirectly, bear the expenses of
distributing its shares.
The Fund paid the Distributor the following commissions over the last
three fiscal years:
- ------------------------- ------------------------------------
Fiscal Year Ended DISTRIBUTION COMMISSIONS PAID
September 30
- ------------------------- ------------------------------------
1997*
- ------------------------- ------------------------------------
1998
- ------------------------- ------------------------------------
1999
- ------------------------- ------------------------------------
*For the period from September 19, 1996 (start of business) to
September 30, 1997.
Nomura Securities received the following commissions and compensations
over the past fiscal year ended September 30, 1999.
<TABLE>
<CAPTION>
- ------------------------------------ --------------------------------- ----------------- --------------------
NET UNDERWRITING DISCOUNTS AND COMPENSATION OR REDEMPTIONS AND BROKERAGE OTHER COMPENSATIONS
COMMISSIONS REPURCHASE COMMISSIONS
- ------------------------------------ --------------------------------- ----------------- --------------------
<S> <C> <C> <C>
- ------------------------------------ --------------------------------- ----------------- --------------------
- ------------------------------------ --------------------------------- ----------------- --------------------
- ------------------------------------ --------------------------------- ----------------- --------------------
</TABLE>
DISTRIBUTION PLAN
- --------------------------------------------------------------------------------
See "Distribution of Shares" in the Prospectus for certain information with
respect to the distribution plan for Class A shares pursuant to Rule 12b-1 under
the Investment Company Act (the "Distribution Plan") with respect to the
distribution fees paid by the Fund to the Distributor with respect to such
class.
Payments of the distribution fees are subject to the provisions of Rule 12b-1
under the 1940 Act. Among other things, the Distribution Plan provides that the
Distributor shall provide and the Directors shall review quarterly reports of
the disbursement of the distribution fees paid to the Distributor. In their
consideration of the Distribution Plan, the Directors must consider all factors
they deem relevant, including information as to the benefits of the Distribution
Plan to the Fund and its shareholders. The Distribution Plan further provides
that so long as the Distribution Plan remains in effect, the selection and
nomination of Directors who are not "interested persons" of the Fund, as defined
in the 1940 Act, (the "Independent Directors"), shall be committed to the
discretion of the Independent Directors then in office. In approving the
Distribution Plan in accordance with Rule 12b-1, the Independent Directors
concluded that there is a reasonable likelihood that such Distribution Plan will
benefit the Fund and its related class of shareholders. The Distribution Plan
can be terminated at any time, without penalty, by the vote of a majority of the
Independent Directors, or the vote of the holders of a majority of the
outstanding related class of voting securities of the Fund or by the Distributor
upon 60 days' written notice to the Fund. The Distribution Plan cannot be
amended to increase materially the amount to be spent by the Fund without the
approval of the related class of shareholders, and all material amendments are
required to be approved by the vote of Directors, including a majority of the
Independent Directors who have no direct or indirect financial interest in such
Distribution Plan, cast in person at a meeting called for that purpose. Rule
12b-1 further requires that the Fund preserve copies of the Distribution Plan
and any reports made pursuant to the plan for a period of not less than six
years from the date of such Distribution Plan or such report, the first two
years in an easily accessible place.
For the fiscal year ended September 30, 1999, the Class A shares incurred Rule
12b-1 fees of $12,696 representing compensation to the Distributor and Broker
Dealers.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
Subject to policies established by the Directors of the Fund, the Investment
Adviser is primarily responsible for the portfolio decisions of the Fund and the
placing of the portfolio transactions for the Fund. With respect to such
transactions, the Investment Adviser seeks to obtain the best net results for
the Fund, taking into account such factors as price (including the applicable
brokerage commission or dealer spread), size of order, difficulty of execution
and operational facilities of the firm involved and the firm's risk in
positioning a block of securities. While the Investment Adviser generally seeks
reasonably competitive commission rates, the Fund will not necessarily be paying
the lowest commission or spread available. Transactions with respect to the high
yield securities in which the Fund invests may involve specialized services on
the part of the broker or dealer and thereby entail higher commissions or
spreads than would be the case with transactions involving more widely traded
securities.
The Fund has no obligation to deal with any broker in the execution of
transactions for its portfolio securities. Subject to obtaining the best price
and execution, securities firms that provided supplemental investment research
to the Investment Adviser, including the Distributor, may receive orders for
transactions by the Fund. Information so received will be in addition to and not
in lieu of the services required to be performed by the Investment Adviser under
the Investment Advisory Agreement, and the expenses of the Investment Adviser
will not necessarily be reduced as a result of the receipt of such supplemental
information. In addition, consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc. and policies established by the
Directors of the Fund, the Investment Adviser may consider sales of shares of
the Fund as a factor in the selection of brokers or dealers to execute portfolio
transactions for the Fund.
The securities in which the Fund invests are traded primarily in the
over-the-counter market. Transactions in the over-the-counter market generally
are principal transactions with dealers and the costs of such transactions
involve dealer spreads. With respect to over-the-counter transactions, the Fund,
where possible, will deal directly with the dealers who make a market in the
securities involved except in those circumstances where better prices and
execution are available elsewhere. Such dealers usually act as principals for
their own account. On occasion, securities may be purchased directly from the
issuer. Bonds and money market securities are generally traded on a net basis
and do not normally involve either brokerage commissions or transfer taxes. Such
portfolio securities are generally traded on a net basis and do not normally
involve either brokerage commissions or transfer taxes. Securities firms may
receive brokerage commissions on certain portfolio transactions, including
options, futures and options on futures transactions and the purchase and sale
of underlying securities upon exercise of options. The cost of portfolio
securities transactions of the Fund will consist primarily of dealer or
underwriter spreads. Since portfolio transactions will generally not be effected
on foreign securities exchanges, the Fund does not expect typically to incur
potential settlement delays which may occur on certain of such exchanges.
Under the 1940 Act, persons affiliated with the Fund are prohibited from dealing
with the Fund as a principal in the purchase and sale of securities unless an
exemptive order allowing such transactions is obtained from the SEC. Since
transactions in the over-the-counter market usually involve transactions with
dealers acting as principal for their own account, affiliated persons of the
Fund, including the Distributor, may not serve as the Fund's dealer in
connection with such transactions. See "Investment Objective and
Policies--Investment Restrictions." However, with certain limitations, an
affiliated person of the Fund may serve as its broker in over-the-counter
transactions conducted on an agency basis.
The Directors of the Fund have considered the possibilities of seeking to
recapture for the benefit of the Fund brokerage commissions, dealer spreads and
other expenses of possible portfolio transactions, such as underwriting
commissions and tender offer solicitation fees, by conducting such portfolio
transactions through affiliated entities, including the Distributor. For
example, brokerage commissions received by the Distributor could be
offset against the advisory fee payable by the Fund to the Investment Adviser.
The Board of Directors will reconsider this matter from time to time. The
Investment Adviser has arranged for the Fund's custodian to receive any tender
offer solicitation fees on behalf of the Fund payable with respect to portfolio
securities of the Fund.
PURCHASE OF SHARES
- --------------------------------------------------------------------------------
See "Purchasing Shares" in the Prospectus for certain information as to the
purchase of shares of the Fund.
The term "purchase," as used in the Prospectus and this Statement of Additional
Information in connection with an investment in Class A and Class Y shares of
the Fund, refers to a single purchase by an individual or to concurrent
purchases, which in the aggregate are at least equal to the prescribed amounts,
by an individual, his or her spouse and their children under the age of 21 years
purchasing shares for his or her own account and to single purchases by a
trustee or other fiduciary purchasing shares for a single trust estate or single
fiduciary account although more than one beneficiary is involved. The term
"purchase" also includes purchases by any "company," as that term is defined in
the Investment Company Act, but does not include purchases by any such company
which has not been in existence for at least six months or which has no purpose
other than the purchase of shares of the Fund or shares of other registered
investment companies at a discount; provided, however, that it shall not include
purchases by any group of individuals whose sole organizational nexus is that
the participants therein are credit cardholders of a company, policyholders of
an insurance company, customers of either a bank or broker-dealer or clients of
an investment adviser.
PURCHASES THROUGH AGENTS OF THE FUND
The Fund has authorized one or more brokers to accept on its behalf purchase and
redemption orders. The Fund will be deemed to have received a purchase or
redemption order when an authorized broker accepts the order. Customer orders
will be priced at the Fund's net asset value next computed after they are
accepted by an authorized broker or the broker's designee.
REDUCED INITIAL SALES CHARGES
LETTER OF INTENTION. Reduced sales charges are applicable to purchases
aggregating $50,000 or more of the Class A shares of the Fund made within a
13-month period starting with the first purchase pursuant to the Letter of
Intention in the form provided in the Prospectus. The Letter of Intention is not
a binding obligation to purchase any amount of Class A shares; however, its
execution will result in the purchaser paying a lower sales charge at the
appropriate quantity purchase level. A purchase not originally made pursuant to
a Letter of Intention may be included under a subsequent Letter of Intention
executed within 90 days of such purchase if the Transfer Agent is informed in
writing of this intent within such 90-day period. The value of Class A shares of
the Fund may be included as a credit toward the completion of such Letter, but
the reduced sales charge applicable to the amount covered by such Letter will be
applied only to new purchases. If the total amount of shares does not equal the
amount stated in the Letter of Intention (minimum of $50,000), the investor will
be notified within 20 days of the expiration of such Letter. Class A shares
equal to up to 4.5% of the intended amount will be held in escrow during the
13-month period (while remaining registered in the name of the purchaser) for
this purpose. The first purchase under the Letter of Intention must be at least
5.0% of the dollar amount of such Letter. The value of any shares redeemed or
otherwise disposed of by the purchaser prior to termination or completion of the
Letter of Intention will be deducted from the total purchases made under such
Letter. If the amount specified in the Letter of Intention is not purchased, an
appropriate number of escrowed shares will be redeemed to realize the difference
between the sales charge on the Class A shares purchased at the reduced rate and
the sales charge applicable to the shares actually purchased through the Letter.
ACQUISITION OF CERTAIN INVESTMENT COMPANIES. The public offering price of Class
A shares may be reduced to the net asset value per Class A share in connection
with the acquisition of the assets of or merger or consolidation with a personal
holding company or a public or private investment company. The issuance of Class
A shares for consideration other than cash is limited to bona fide
reorganizations, statutory mergers or other acquisitions of portfolio securities
that
(a) meet the investment objective and policies of the Fund;
(b) are acquired for investment and not for resale (subject to the
understanding that the disposition of the Fund's portfolio securities
shall at all times remain within its control); and
(c) are liquid securities, the value of which is readily ascertainable,
which are not restricted as to transfer either by law or liquidity of
market (except that the Fund may acquire through such transactions
restricted or illiquid securities to the extent the Fund does not
exceed the applicable limits on acquisition of such securities set
forth under "Investment Objective and Policies" herein).
Reductions in or exemptions from the imposition of a sales load are due to the
nature of the investors and/or the reduced sales efforts that will be needed in
obtaining such investments. Under such programs, the Fund realizes economies of
scale and reduction of sales related expenses by virtue of familiarity with the
Fund.
REDEEMING SHARES
- --------------------------------------------------------------------------------
See "Redeeming Shares" in the Prospectus for certain information as to the
redemption and repurchase of shares of the Fund.
The right to redeem shares or to receive payment with respect to any such
redemption may be suspended only for any period during which trading on the New
York Stock Exchange is restricted as determined by the SEC or such Exchange is
closed (other than customary weekend and holiday closings), for any period
during which an emergency exists as defined by the SEC as a result of which
disposal of portfolio securities or determination of the net asset value of any
Fund is not reasonably practicable, and for such other periods as the SEC may by
order permit for the protection of shareholders of the Fund.
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
See "Price of Shares" in the Prospectus concerning the determination of net
asset value. Normally, the net asset value of the shares of the Fund is
determined once daily Monday through Friday as of 4:00 p.m., EST, on each day
during which the New York Stock Exchange is open for trading. The New York Stock
Exchange is not open on New Year's Day, Martin Luther King Jr., Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. The Fund also will determine its net asset value on any day
in which there is sufficient trading in its portfolio securities that the net
asset value might be affected materially, but only if on any such day the Fund
is required to sell or redeem shares. The net asset value per share of the Fund
is computed by dividing the sum of the value of the securities held by the Fund
plus any cash or other assets (including interest and dividends accrued but not
yet received) minus all liabilities (including accrued expenses) by the total
number of shares outstanding at such time, rounded to the nearest cent.
Expenses, including the investment advisory fees and distribution fees, are
accrued daily. The per share net asset value of the Class A shares of the Fund
generally will be lower than the per share net asset value of the Class Y shares
of the Fund reflecting the daily expense accruals of the distribution or
shareholder service fees applicable with respect to the Class A shares. It is
expected, however, that the per share net asset value of the two classes will
tend to converge immediately after the payment of dividends or distributions,
which will differ by approximately the amount of the expense accrual
differential between the classes.
Market and fair values of the Fund's portfolio securities are determined as
follows:
o for bonds and other fixed income securities, as determined by an independent
pricing service;
o for short-term obligations, according to the mean between bid and asked prices
as furnished by an independent pricing service, or for short-term obligations
with remaining maturities of 60 days or less at the time of purchase,
at amortized cost;
o for equity securities, according to the last sale price on a national
securities exchange, if applicable; o in the absence of recorded sales for
listed equity securities, according to the mean between the last
closing bid and asked prices;
o for unlisted equity securities, latest bid prices; or
o for all other securities, at fair value as determined in good faith by the
Directors.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may reflect institutional trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics and other market data. The Fund will value
futures contracts at their market value established by the exchanges at the
close of trading on such exchanges unless the Directors determine in good faith
that another method of valuing positions is necessary.
Over-the-counter put options will be valued at the mean between the bid and
asked prices. Covered call options will be valued at the last sale price on the
national exchange on which such option is traded. Unlisted call options will be
valued at the latest bid price as provided by brokers.
An illustration of the computation of the initial offering price for Fund
shares, based on the projected value of the Fund's estimated net assets and
projected number of shares outstanding on the date its shares are first offered
for sale to public investors is as follows:
<TABLE>
<CAPTION>
Class A Class Y
-------------- ----------------
<S> <C> <C>
Net Assets $4,210,884 $19,866,229
Number of Shares Outstanding 467,686 2,205,666
Net Asset Value Per Share $9.00 $9.01
(net assets divided by number of shares outstanding)
Sales Charge $0.42 $0
(4.5% on Class A only; 4.71% of amount invested)
Offering Price $9.42 $9.01
</TABLE>
OPTION ACCOUNTING PRINCIPLES
When a Fund sells an option, an amount equal to the premium received by the Fund
is included in the Fund's Statement of Assets and Liabilities as a deferred
credit. The amount of such liability will be subsequently marked to market to
reflect the current market value of the option written. If current market value
exceeds the premium received there is an unrealized loss; conversely, if the
premium exceeds current market value there is an unrealized gain. If an option
expires on its stipulated expiration date or if a Fund enters into a closing
purchase transaction, the Fund will realize a gain (or loss if the cost of a
closing purchase transaction exceeds the premium received when the option was
sold) without regard to any unrealized gain or loss on the underlying security,
and the liability related to such option will be extinguished. If an option is
exercised, the Fund will realize a gain or loss from the sale of the underlying
security and the proceeds of sale are increased by the premium originally
received.
TRADING IN FOREIGN SECURITIES
Trading in foreign securities may be completed at times that vary from the
closing of the New York Stock Exchange. In computing the net asset value, the
fund values foreign securities at the latest closing price on the exchange on
which they are traded immediately prior to the closing of the New York Stock
Exchange. Certain foreign currency exchange rates may also be determined at the
latest rate prior to the closing of the New York Stock Exchange. Foreign
securities quoted in foreign currencies are translated into U.S. dollars at
current rates. Occasionally, events that affect these values and exchange rates
may occur between the times at which they are determined and the closing of the
New York Stock Exchange. If such events materially affect the value of portfolio
securities, these securities may be valued at their fair value as determined in
good faith by the underlying fund's board of directors, although the actual
calculation may be done by others.
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
A number of shareholder services and investment plans are available which are
designed to facilitate investment in the Fund's shares. Full details as to each
of such services, copies of the various plans described below and instructions
as to how to participate in the various services or plans, or how to change
options with respect thereto, can be obtained from the Fund by calling the
telephone number on the cover page hereof or from the Transfer Agent.
AUTOMATIC REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
Unless specified otherwise, all dividends and capital gains distributions of the
Fund are reinvested automatically in full and fractional shares of the Fund, at
the net asset value per share next determined on the ex-dividend date of such
dividend or distribution. A shareholder may, at any time, by written
notification to the Transfer Agent, elect to have subsequent dividends or both
dividends and capital gains distributions paid in cash.
SYSTEMATIC WITHDRAWAL AND SYSTEMATIC INVESTMENT PLANS
A Class A or Class Y shareholder may elect to receive systematic redemption
payments from his or her Investment Account in the form of payments by check or
through automatic payment by direct deposit to his or her bank account on either
a monthly or quarterly basis.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS
The Investment Adviser and/or Distributor may pay financial institutions a fee
for providing certain services to both Class A and Class Y shareholders and for
services involved in connection with the distribution of shares of the Fund.
These fees are in addition to the amounts paid under the Distribution Plan
and/or Shareholder Services Agreement and, to the extent paid by the
Distributor, such fees will be reimbursed to the Distributor by the Investment
Adviser and not the Fund.
TAXES
- --------------------------------------------------------------------------------
The Fund intends to continue to qualify for the special tax treatment afforded
regulated investment companies ("RICs") under the Code. If it so qualifies, the
Fund (but not its shareholders) will not be subject to federal income tax on the
part of its net ordinary income and net realized capital gains which it
distributes to Class A and Class Y shareholders (together, the "shareholders").
The Fund intends to distribute all of such income.
Dividends paid by the Fund from its ordinary income or from an excess of net
short-term capital gains over net long-term capital losses (together referred to
hereafter as "ordinary income dividends") are taxable to shareholders as
ordinary income. Distributions made from an excess of net long-term capital
gains over net short-term capital losses (including gains or losses from certain
transactions in futures and options) ("capital gain dividends") are taxable to
shareholders as long-term capital gains, regardless of the length of time the
shareholder has owned Fund shares. Certain categories of capital gains are
taxable at different rates. The categories of gain and related rates will be
passed through to shareholders in capital gain dividends. Any loss upon the sale
or exchange of Fund shares held for six months or less will be treated as
long-term capital loss to the extent of any capital gain dividends received by
the shareholder. Distributions in excess of the Fund's earnings and profits will
first reduce the adjusted tax basis of a holder's shares and, after such
adjusted tax basis is reduced to zero, will constitute capital gains to such
holder (assuming the shares are held as a capital asset).
Dividends are taxable to shareholders even though they are reinvested in
additional shares of the Fund. Not later than 60 days after the close of its
taxable year, the Fund will provide its shareholders with a written notice
designating the amounts of any ordinary income dividends or capital gain
dividends as well as any amount of capital gain dividends in the different
categories of capital gain referred to above. Distributions by the Fund, whether
from ordinary income or capital gains, generally will not be eligible for the
dividends received deduction allowed to corporations under the Code. If the Fund
pays a dividend in January which was declared in the previous October, November
or December to shareholders of record on a specified date in one of such months,
then such dividend will be treated for tax purposes as being paid by the Fund
and received by its shareholders on December 31 of the year in which such
dividend was declared.
Ordinary income dividends paid to shareholders who are nonresident aliens or
foreign entities will be subject to a 30% United States withholding tax under
existing provisions of the Code applicable to foreign individuals and entities
unless a reduced rate of withholding or a withholding exemption is provided
under applicable treaty law. Nonresident shareholders are urged to consult their
own tax advisers concerning the applicability of the United States withholding
tax.
To the extent the Fund invests in securities issued by issuers in foreign
countries, dividends and interest received by the Fund may give rise to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes.
Under certain provisions of the Code, some shareholders may be subject to a 31%
withholding tax on ordinary income dividends, capital gain dividends and
redemption payments ("backup withholding"). Generally, shareholders subject to
backup withholding will be those for whom no certified taxpayer identification
number is on file with the Fund or who, to the Fund's knowledge, have furnished
an incorrect number. When establishing an account, an investor must certify
under penalty of perjury that such number is correct and that such investor is
not otherwise subject to backup withholding.
No gain or loss will be recognized on the conversion of Class A shares into
Class Y shares in the circumstances described in the Prospectus. A shareholder's
basis in the shares acquired will be the same as such shareholder's basis in the
shares converted, and the holding period of the acquired shares will include the
holding period for the converted shares.
If a shareholder exercises an exchange privilege within 90 days of acquiring
such shares, then the loss the shareholder can recognize on the exchange will be
reduced (or the gain increased) to the extent any sales charge paid to the Fund
on the exchanged shares reduces any sales charge the shareholder would have owed
upon the purchase of the new shares in the absence of the exchange privilege.
Instead, such sales charge will be treated as an amount paid for the new shares.
A loss realized on a sale or exchange of shares of the Fund will be disallowed
if other Fund shares are acquired (whether through the automatic reinvestment of
dividends or otherwise) within a 61-day period beginning 30 days before and
ending 30 days after the date that the shares are disposed of. In such a case,
the basis of the shares acquired will be adjusted to reflect the disallowed
loss.
The Code requires a RIC to pay a nondeductible 4% excise tax to the extent the
RIC does not distribute, during each calendar year, 98% of its ordinary income,
determined on a calendar year basis, and 98% of its capital gains, determined,
in general, on an October 31 year end, plus certain undistributed amounts from
previous years. While the Fund intends to distribute its income and capital
gains in the manner necessary to minimize imposition of the 4% excise tax, there
can be no assurance that sufficient amounts of the Fund's taxable income and
capital gains will be distributed to avoid entirely the imposition of the tax.
In such event, the Fund will be liable for the tax only on the amount by which
it does not meet the foregoing distribution requirements.
The Fund will invest in securities rated in the lower rating categories of
nationally recognized statistical rating organizations, and in unrated
securities ("junk bonds" or "high yield securities"), as described in the
Prospectus. Some of these high yield securities may be purchased at a discount
and may therefore cause the Fund to accrue and distribute income before amounts
due under the obligations are paid. In addition, a portion of the interest
payments on such high yield securities may be treated as dividends for federal
income tax purposes; in such case, if the issuer of such high yield securities
is a domestic corporation, dividend payments by the Fund will be eligible for
the dividends received deduction to the extent of the deemed dividend portion of
such interest payments.
TAX TREATMENT OF OPTIONS AND FUTURES TRANSACTIONS
The Fund may write, purchase or sell options and futures. Options and futures
contracts that are "Section 1256 contracts" will be "marked to market" for
federal income tax purposes at the end of each taxable year, I.E., each such
option or futures contract will be treated as sold for its fair market value on
the last day of the taxable year. In general, unless an election is available to
the Fund or an exception applies, options and futures contracts that are
"Section 1256 contracts" will be "marked to market" for federal income tax
purposes at the end of each taxable year, I.E., each such option or futures
contract will be treated as sold for its fair market value on the last day of
the taxable year, and any gain or loss attributable to Section 1256 contracts
will be 60% long-term and 40% short-term capital gain or loss. Application of
these rules to Section 1256 contracts held by the Fund may alter the timing and
character of distributions to shareholders. The mark-to-market rules outlined
above, however, may not apply to certain transactions entered into by the Fund
solely to reduce the risk of changes in price or interest or currency exchange
rates with respect to its investments.
Code Section 1092, which applies to certain "straddles," may affect the taxation
of the Fund's sales of securities and transactions in options and futures
contracts. Under Section 1092, the Fund may be required to postpone recognition
for tax purposes of losses incurred in certain sales of securities and certain
closing transactions in options and futures contracts.
The foregoing is a general and abbreviated summary of the applicable provisions
of the Code and Treasury regulations presently in effect. For the complete
provisions, reference should be made to the pertinent Code sections and the
Treasury regulations promulgated thereunder. The Code and the Treasury
regulations are subject to change by legislative, judicial or administrative
action either prospectively or retroactively.
Ordinary income and capital gain dividends may also be subject to state and
local taxes.
Certain states are exempt from state income taxation dividends paid by RICs,
which are derived from interest on U.S. government obligations. State law varies
as to whether dividend income attributable to U.S. government obligations is
exempt from state income tax.
Shareholders are urged to consult their own tax advisers regarding specific
questions as to federal, foreign, state or local taxes. Foreign investors should
consider applicable foreign taxes in their evaluation of an investment in the
Fund.
PERFORMANCE DATA
- --------------------------------------------------------------------------------
From time to time, the Fund may include its average annual total return and
other total return data, as well as yield, in advertisements or information
furnished to present or prospective shareholders. Total return and yield figures
will be based on the Fund's historical performance and are not intended to
indicate future performance. Average annual total return and yield are
determined separately for Class A and Class Y shares of the Fund in accordance
with formulae specified by the SEC.
Average annual total return quotations for the Fund for the specified periods
will be computed by finding the average annual compounded rates of return (based
on net investment income and any realized and unrealized capital gains or losses
on portfolio investments over such periods) that would equate the initial amount
invested to the redeemable value of such investment at the end of each period.
Average annual total return will be computed assuming all dividends and
distributions are reinvested and taking into account all applicable recurring
and nonrecurring expenses, including the maximum sales charge in the case of
Class A shares.
The Fund also may quote total return and aggregate total return performance data
for various specified time periods. Such data will be computed as described
above, except that (1) the rates of return calculated will not be average annual
rates, but rather, actual annual, annualized or aggregate rates of return and
(2) the maximum applicable sales charges will not be included with respect to
annual or annualized rates of return calculations. Aside from the impact on the
performance data calculations of including or excluding the maximum applicable
sales charges, actual annual or annualized total return data generally will be
lower than average annual total return data since the average rates of return
reflect compounding of return; aggregate total return data generally will be
higher than average annual total return since the aggregate rates of return
reflect compounding over a longer period of time. The Fund's total return may be
expressed either as a percentage or as a dollar amount in order to illustrate
the effect of such total return on a hypothetical $1,000 investment in a Fund at
the beginning of each specified period.
Yield quotations for the Fund will be computed based on a 30-day period by
dividing (a) the net income based on the yield of each security earned during
the period by (b) the average daily number of shares outstanding in the Fund
during the period that were entitled to receive dividends multiplied by the
maximum offering price/net asset value per share of the Fund on the last day of
the period.
Total return figures and yield figures are based on the Fund's historical
performance and are not intended to indicate future performance. The Fund's
total return will vary depending on market conditions, the securities comprising
the Fund's holdings, operating expenses and the amount of realized and
unrealized net capital gains or losses during the period. The value of an
investment in the Fund will fluctuate and an investor's shares, when redeemed,
may be worth more or less than their original cost.
On occasion, the Fund may compare its performance to that of the Merrill Lynch
High Yield Master Index, the Standard & Poor's 500 Composite Stock Price Index,
the Dow Jones Industrial Average, or performance data published by Lipper
Analytical Services, Inc., Morningstar Publications, Inc., MONEY MAGAZINE, U.S.
NEWS & WORLD REPORT, BUSINESS WEEk, CDA Investment Technology, Inc., FORBES
MAGAZINE and FORTUNE MAGAZINe. As with other performance data, performance
comparisons should not be considered representative of the Fund's relative
performance for any future period.
TOTAL RETURN
The average annual total return of the Fund for one year ending September 30,
1999 and from inception to September 30, 1999 is as follows:
- ---------------------------------------- -------------- ------------
ANNUALIZED TOTAL RETURN CLASS A* CLASS Y
- ---------------------------------------- -------------- ------------
1 year ending 9/30/99 -3.80% 1.13%
- ---------------------------------------- -------------- ------------
10/28/96 (Inception) to 9/30/99 6.52% 8.51%
- ---------------------------------------- -------------- ------------
*With maximum sales load of 4.50%.
Average annual total return quotations used in the Fund's advertising and
promotional materials are calculated according to the following formula:
P(1+T)n = ERV
where P equals a hypothetical initial payment of $1,000; T equals average annual
total return; n equals the number of years; and ERV equals the ending redeemable
value at the end of the period of a hypothetical $1,000 payment made at the
beginning of the period.
Under the foregoing formula, the time periods used in advertising will be based
on rolling calendar quarters, updated to the last day of the most recent
calendar quarter prior to submission of the advertising for publication. Average
annual total return, or "T" in the above formula, is computed by finding the
average annual compounded rates of return over the period that would equate the
initial amount invested to the ending redeemable value. Average annual total
return assumes the reinvestment of all dividends and distributions.
YIELD
The Fund's yield for the thirty-day period ended September 30, 1999 was as
follows:
- ------------------------------------- ----------- ------------
YIELD CLASS A CLASS Y
- ------------------------------------- ----------- ------------
30 days ending 9/30/99 9.07% 9.75%
Annualized yield quotations used in a Fund's advertising and promotional
materials are calculated by dividing the Fund's interest income for a specified
thirty-day period, net of expenses, by the average number of shares outstanding
during the period, and expressing the result as an annualized percentage
(assuming semi-annual compounding) of the net asset value per share at the end
of the period. Yield quotations are calculated according to the following
formula:
YIELD = 2[(A-B + 1)6 - 1]
--
c-d
where "a" equals dividends and interest earned during the period; "b" equals
expenses accrued for the period, net of reimbursements; "c" equals the average
daily number of shares outstanding during the period that are entitled to
receive dividends; and "d" equals the maximum offering price per share on the
last day of the period.
For purposes of these calculations, the maturity of an obligation with one or
more call provisions is assumed to be the next date on which the obligation
reasonably can be expected to be called or, if none, the maturity date.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
The fiscal year of the Fund ends on September 30 of each year. The Fund will
send to its shareholders at least semi-annually reports showing the Fund's
portfolio and other information. An annual report, containing financial
statements audited by independent auditors, is sent to shareholders each year.
After the end of each calendar year, shareholders will receive federal income
tax information regarding dividends and capital gains distributions.
INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
__________________, Two Prudential Plaza, 180 North Stetson Avenue, Chicago,
Illinois 60601-6779, has been selected as the independent auditors of the Fund.
LEGAL COUNSEL
- --------------------------------------------------------------------------------
Brown & Wood LLP, One World Trade Center, New York, NY 10048-0557, is counsel
for the Fund.
APPENDIX A
- --------------------------------------------------------------------------------
RATINGS OF HIGH YIELD DEBT SECURITIES DESCRIPTION OF MOODY'S INVESTORS SERVICE,
INC. CORPORATE RATINGS Ba-Bonds which are rated Ba are judged to have
speculative elements; their future cannot be considered as well assured. Often
the protection of interest and principal payments may be very moderate and
thereby not well-safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B-Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa-Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca-Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C-Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
NOTE: Moody's applies numerical modifiers l, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
DESCRIPTION OF STANDARD & POOR'S CORPORATE DEBT RATINGS
An S&P corporate or municipal rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees.
The debt rating is not a recommendation to purchase, sell or hold a security,
nor a comment as to market price or suitability for a particular investor.
The ratings are based on current information furnished by the issuer or obtained
by S&P from other sources it considers reliable. S&P does not perform an audit
in connection with any rating and may, on occasion, rely on unaudited financial
information. The ratings may be changed, suspended or withdrawn as a result of
changes in, or unavailability of, such information, or for other circumstances.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation;
II. nature of and provisions of the obligation; and
III. protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization or other
arrangement under the laws of bankruptcy and other laws
affecting creditors' rights.
Debt rated BB, B, CCC, CC and C is regarded, on balance, as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
BB--Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B--Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial or economic conditions would likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC--Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial and economic conditions to meet
timely payments of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC--The rating CC is typically applied to debt subordinated to senior debt that
is assigned an actual or implied CCC rating.
C--The rating C is typically applied to debt subordinated to senior debt that is
assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed but debt service
payments are continued.
CI--The rating CI is reserved for income bonds on which no interest is being
paid.
D--Debt rated D is in payment default. The D rating category is also used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing with the major
ratings categories.
Provisional ratings: The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the debt being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the likelihood of,
or risk of default upon failure of, such completion. The investor should
exercise judgment with respect to such likelihood and risk.
L--The letter "L" indicates that the rating pertains to the principal amount of
those bonds to the extent that the underlying deposit collateral is insured by
the Federal Savings & Loan Insurance Corp. or the Federal Deposit
Insurance Corp. and interest is adequately collateralized.
*--Continuance of the rating is contingent upon S&P's receipt of an executed
copy of the escrow agreement or closing documentation confirming investments and
cash flows.
NR--Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that S&P does not rate a particular
type of obligation as a matter of policy.
Debt obligations of issuers outside the U.S. and its territories are rated on
the same basis as domestic corporate and municipal issues. The ratings measure
the creditworthiness of the obligor but do not take into account currency
exchange and related uncertainties.
Bond Investment Quality Standards: Under present commercial bank regulations
issued by the Comptroller of the Currency, Bonds rated in the top four
categories ("AAA", "AA", "A", "BBB", commonly known as "investment grade"
ratings) are generally regarded as eligible for bank investment. In addition,
the laws of various states governing legal investments may impose certain rating
or other standards for obligations eligible for investment by savings banks,
trust companies, insurance companies and fiduciaries generally.
The ratings are based on current information furnished to S&P by the issuer, and
obtained by S&P from other sources it considers reliable. The ratings may be
changed, suspended, or withdrawn as a result of changes in, or unavailability of
such information.
APPENDIX B
- --------------------------------------------------------------------------------
HEDGING TECHNIQUES
The Fund may engage in various portfolio strategies to hedge its portfolio
against interest rate risks. These strategies include use of options on
portfolio positions, futures and options on such futures. The Fund may enter
into such transactions only in connection with its hedging strategies. While the
Fund's use of hedging strategies is intended to reduce the volatility of the net
asset value of Fund shares, the Fund's net asset value will fluctuate. There can
be no assurance that the Fund's hedging transactions will be effective and the
Fund may not necessarily be engaging in hedging activities when movements in
interest rates occur. See "Investment Objective and Policies" in the Fund's
Prospectus for further information concerning these strategies.
Although certain risks are involved in options and futures transactions (as
discussed below in "Risk Factors in Options and Futures Transactions"), the
Investment Adviser believes that, because the Fund will only engage in these
transactions for hedging purposes, the options and futures portfolio strategies
of the Fund will not subject the Fund to the risks frequently associated with
the speculative use of options and futures transactions. See "Taxes" in the
Statement of Additional Information.
The Fund may use the hedging instruments described below to hedge against
interest rate risks:
OPTIONS. The Fund may purchase and write (i.e., sell) call options and put
options on securities and engage in transactions in financial futures and
related options, as described below.
The Fund may write covered call options with respect to securities it owns and
enter into closing purchase transactions with respect to such options. A covered
call option provides the holder of the option with the right to buy the
underlying security covered by the option at the stated exercise price until the
option expires. A covered call option is an option where the Fund, in return for
a premium, gives another party a right to buy particular securities held by the
Fund at a specified price for a certain period of time. In return for the
premium income realized from the sale of the option, the Fund gives up the
opportunity to profit from a price increase in the underlying security above the
option exercise price while the option is in effect. In addition, the Fund's
ability to sell the underlying security will be limited until the option is
closed or expires. A closing purchase transaction cancels out the Fund's
position as the writer of an option by means of an offsetting purchase of an
identical option prior to the expiration of the option it has written. The Fund
also may purchase call options on securities held in its portfolio on which it
has written call options or on securities which it intends to purchase. There is
no percentage limitation with respect to portfolio securities on which the Fund
may write call options.
The Fund may purchase put options on portfolio securities. In return for payment
of a premium, the purchase of a put option gives the holder thereof the right to
sell the security underlying the option to another party at a specified price
until the put option is closed out, expires or is exercised. The Fund will
purchase put options to seek to reduce the risk of a decline in value of the
underlying security owned by the Fund. The Fund does not intend to purchase
uncovered puts in excess of 10% of its total assets. The total return on the
security may be reduced by the amount of the premium paid for the option. The
Fund may write put options which give the holder of the option the right to sell
the underlying security to the Fund at the stated exercise price. The Fund will
receive a premium for writing a put option, which increases the Fund's return.
The Fund writes only covered put options which means that so long as the Fund is
obligated as the writer of the option it will have deposited and maintained with
its custodian cash or liquid securities with a value equal to or greater than
the exercise price of the underlying securities. By writing a put, the Fund will
be obligated to purchase the underlying security at a price that may be higher
than the market value of that security at the time of exercise for as long as
the option is outstanding. The Fund may engage in closing transactions in order
to terminate put options that it has written or purchased. The Fund intends to
limit its writing of covered puts so that the aggregate value of the obligations
underlying the puts will not exceed 5% of its net assets.
FUTURES. The Fund also may purchase and sell financial futures contracts
("futures contracts") as a hedge against adverse changes in interest rates, as
described below. A futures contract is an agreement between two parties which
obligates the purchaser of the futures contract to buy and the seller of a
futures contract to sell a security for a set price on a future date. The Fund
may effect transactions in futures contracts in U.S. and foreign agency and
government securities and corporate debt securities. Transactions by the Fund in
futures contracts are subject to limitation as described below under
"Restrictions on the Use of Futures Transactions."
The Fund may sell futures contracts in anticipation of an increase in the
general level of interest rates. Generally, as interest rates rise, the market
value of securities held by the Fund will fall, thus reducing the net asset
value of the Fund. As interest rates rise, however, the value of the Fund's
short position in the futures contract also will tend to increase, thus
offsetting all or a portion of the depreciation in the market value of the
Fund's investments which are being hedged. While the Fund will incur commission
expenses in selling and closing out futures positions, these commissions are
generally less than the transaction expenses which would have been incurred had
the Fund sold portfolio securities in order to reduce its exposure to increases
in interest rates.
The Fund may purchase futures contracts in anticipation of a decline in interest
rates when it is not fully invested in a particular market in which it intends
to make investments to gain market exposure that may in part or entirely offset
an increase in the cost of securities it intends to purchase. The Fund does not
consider purchases of futures contracts to be a speculative practice under these
circumstances. In a substantial majority of these transactions, the Fund will
purchase securities upon termination of the futures contract.
The Fund also may purchase and write call and put options on futures contracts
in connection with its hedging activities. Generally, these strategies are
utilized under the same market and market sector conditions (i.e., conditions
relating to specific types of investments) in which the Fund enters into futures
transactions. The Fund may purchase put options or write call options on futures
contracts rather than selling the underlying futures contract in anticipation of
an increase in interest rates. Similarly, the Fund may purchase call options or
write put options on futures contracts as a substitute for the purchase of such
futures to hedge against the increased cost resulting from a decline in interest
rates of securities which the Fund intends to purchase. Limitations on
transactions in options on futures contracts are described below.
The Fund may engage in options and futures transactions on exchanges and in the
over-the-counter ("OTC") markets. In general, exchange-traded contracts are
third-party contracts (i.e., performance of the parties' obligations is
guaranteed by an exchange or clearing corporation) with standardized strike
prices and expiration dates. OTC transactions are two-party contracts with price
and terms negotiated by the buyer and seller. The Fund will engage in OTC
options only with member banks of the Federal Reserve System and primary dealers
in U.S. government securities or with affiliates of such banks or dealers which
have capital of at least $50 million or whose obligations are guaranteed by an
entity having capital of at least $50 million.
The staff of the SEC has taken the position that purchased OTC options and the
assets used as cover for written OTC options are illiquid securities. Therefore,
the Fund has adopted an investment policy pursuant to which it will not purchase
or sell OTC options (including OTC options on futures contracts) if, as a result
of such transaction, the sum of the market value of OTC options currently
outstanding which are held by the Fund, the market value of the underlying
securities covered by OTC call options currently outstanding which were sold by
the Fund and margin deposits on the Funds existing OTC options on futures
contracts exceed 15% of the net assets of the Fund, taken at market value,
together with all other assets of the Fund which are illiquid or are not
otherwise readily marketable. However, if the OTC option is sold by the Fund to
a primary U.S. government securities dealer recognized by the Federal Reserve
Bank of New York and the Fund has the unconditional contractual right to
repurchase such OTC option from the dealer at a predetermined price, then the
Fund will treat as illiquid such amount of the underlying securities as is equal
to the repurchase price less the amount by which the option is "in-the-money"
(i.e., current market value of the underlying security minus the option's strike
price). The repurchase price with the primary dealers is typically a formula
price which is generally based on a multiple of the premium received for the
option plus the amount by which the option is "in-the-money. " This policy as to
OTC options is not a fundamental policy of the Fund and may be amended by the
Directors of the Fund without the approval of the Fund's shareholders. However,
the Fund will not change or modify this policy prior to the change or
modification by the SEC staff of its position.
To trade futures contracts, the Fund is not required to deposit funds equal to
the value of the futures contract. The Fund need only make a deposit, called an
"initial margin deposit," equal to a percentage (typically 15% or less) of the
value of the futures contract. As a result, a relatively small adverse move in
the price of a futures contract may result in a substantial loss. For example,
if at the time of purchase 10% of the price of a futures contract is deposited
as margin, a 10% decrease in the price of that contract would, if the contract
were then closed out, result in a total loss of the initial margin deposit
before any deduction for brokerage commissions and other transaction costs. A
decrease of more than 10% would result in a loss of more than the total initial
margin deposit. Options on futures contracts are generally similarly or even
more highly leveraged. However, when the Fund purchases a futures contract, or
writes a put option or purchases a call option thereon, an amount of cash and
cash equivalents will be deposited in a segregated account with the Fund's
custodian so that the amount so segregated, plus the amount of initial and
variation margin held in the account of its broker, equals the market value of
the futures contract, thereby minimizing the effect of leverage from such
futures contract.
RESTRICTIONS ON THE USE OF FUTURES TRANSACTIONS. Regulations of the Commodity
Futures Trading Commission (the "CFTC") applicable to the Fund Permit the Fund's
futures and options on futures transactions to include (i) bona fide hedging
transactions without regard to the percentage of the Fund's assets committed to
margin and option premiums, and (ii) non-hedging transactions, provided that the
Fund not enter into such non-hedging transactions if, immediately thereafter,
the sum of the amount of initial margin and option premiums required to
establish non-hedging transactions would exceed 5% of the market value of the
Fund's liquidation value, after taking into account unrealized profits and
unrealized losses on any such transactions. However, as stated above, the Fund
intends to engage in options and futures transactions only for hedging purposes.
When the Fund purchases a futures contract or writes a put option or purchases a
call option thereon, it will maintain an amount of cash, cash equivalents (e.g.,
high grade commercial paper and daily tender adjustable notes) or short-term
high grade fixed income securities in a segregated account with the Fund's
custodian so that the amount so segregated, plus the amount of initial and
variation margin held in the account of its broker, equals the market value of
the futures contract, thereby ensuring that the use of such futures is
unleveraged.
RISK FACTORS IN OPTIONS AND FUTURES TRANSACTIONS. Utilization of futures
transactions involves the risk of imperfect correlation in movements in the
price of futures contracts and movements in the price of the securities and
currencies, which are the subject of the hedge. If the price of the futures
contract moves more or less than the price of the security or currency, the Fund
will experience a gain or loss, which will not be completely offset by movements
in the price of the debt securities which are the subject of the hedge. There is
also a risk of imperfect correlations where the securities underlying futures
contracts have different maturities than the portfolio securities being hedged.
Transactions in options on futures contracts involve similar risks.
The Fund intends to enter into options and futures transactions, on an exchange
or in the OTC market, only if there appears to be a liquid secondary market for
such options or futures or, in the case of OTC transactions, management believes
the Fund can receive on each business day a bid or offer. There can be no
assurance, however, that a liquid secondary market will exist at any specific
time. Thus, it may not be possible to close an options or futures transaction.
The inability to close options and futures positions also could have an adverse
impact on the Fund's ability to effectively hedge its portfolio. There is also
the risk of loss by the Fund of margin deposits or collateral in the event of
bankruptcy of a broker with whom the Fund has an open position in an option, a
futures contract or related option.
The exchanges on which options on portfolio securities are traded have generally
established limitations governing the maximum number of call or put options on
the same underlying security (whether or not covered) which may be written by a
single investor, whether acting alone or in concert with others (regardless of
whether such options are written on the same or different exchanges or are held
or written on one or more accounts or through one or more brokers). "Trading
limits" are imposed on the maximum number of contracts that any person may trade
on a particular trading day. The Investment Adviser does not believe that these
trading and position limits will have any adverse impact on the portfolio
strategies for hedging the Fund's portfolio.
INTEREST RATE HEDGING TRANSACTIONS. In order to hedge the value of the Fund's
portfolio against interest rate fluctuations, the Fund may enter into various
hedging transactions, such as interest rate swaps and the purchase or sale of
interest rate caps and floors. The Fund expects to enter into these transactions
primarily to preserve a return or spread on a particular investment or portion
of its portfolio or to protect against any increase in the price of securities
the Fund anticipates purchasing at a later date. The Fund intends to use these
transactions as a hedge and not as a speculative investment.
The purchase of an interest rate cap entitles the purchaser, to the extent that
a specified index exceeds a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling such interest
rate cap. The purchase of an interest rate floor entitles the purchaser, to the
extent that a specified index falls below a predetermined interest rate, to
receive payments of interest on a notional principal amount from the party
selling such interest rate floor.
In an interest rate swap, the Fund exchanges with another party their respective
commitments to pay or receive interest, e.g., an exchange of floating rate
payments for fixed rate payments. The net amount of the excess, if any, of the
Fund's obligations over its entitlement with respect to each interest rate swap
will be accrued on a daily basis and an amount of cash, cash equivalents or high
grade liquid debt securities having an aggregate net asset value at least equal
to the accrued excess will be maintained in a segregated account by the Fund's
custodian.
The Fund will not enter into any interest rate swap, cap or floor transaction
unless the unsecured senior debt or the claims-paying ability of the other party
thereto is rated in one of the highest two rating categories of at least one
nationally recognized statistical rating organization at the time of entering
into such transaction or whose creditworthiness is believed by the Investment
Adviser to be equivalent to such rating. If there is a default by the other
party to such a transaction, the Fund will have contractual remedies pursuant to
the agreements related to the transaction. The Investment Adviser believes that
the swap market is relatively liquid. Caps and floors, however, are less liquid
than swaps. The Fund will not enter into a cap or floor transaction in an
amount, which, together with other illiquid investments of the Fund, exceeds 15%
of the Fund's total assets.
BATTERY PARK FUND
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
(a) ARTICLES OF INCORPORATION
(1) Conformed copy of Articles of Incorporation of the Registrant. (2)
(2) Conformed copy of Articles of Amendment to the Articles of
Incorporation. (2)
(b) BY-LAWS
(1) Copy of By-Laws of the Registrant. (1)
(2) Copy of Amended By-Laws of the Registrant. (2)
(c) INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS
(1) Portion of the Articles of Incorporation and By-Laws of the
Registrant defining the rights of shareholders. (3)
(2) Copy of Class A Specimen Share Certificate. (3)
(3) Copy of Class Y Specimen Share Certificate. (3)
(d) INVESTMENT ADVISORY AGREEMENT of the Registrant. (3)
(e) DISTRIBUTION AGREEMENT of the Registrant. (3)
(f) BONUS OR PROFIT SHARING CONTRACTS. Not Applicable.
(g) CUSTODIAN AGREEMENT between Registrant and Firstar Bank, N.A. dated
August 30, 1999 filed herewith.
(h) OTHER MATERIAL CONTRACTS
(1) Fund Accounting Services Agreement between Registrant and Firstar
Mutual Fund Services, LLC dated August 30, 1999 filed herewith.
(2) Administrative Services Agreement between Registrant and Firstar
Mutual Fund Services, LLC dated August 30, 1999 filed herewith.
(3) Transfer Agency Services Agreement between Registrant and Firstar
Mutual Fund Services, LLC dated August 30, 1999 filed herewith.
(4) Conformed copy of License Agreement of the Registrant. (3)
(5) Conformed copy of Amended and Restated Shareholder Services
Agreement filed herewith.
(6) Form of Expense Waiver and Reimbursement Agreement between the
Registrant and Nomura Corporate Research and Assets Management Inc.
filed herewith.
(i) OPINION AND CONSENT OF COUNSEL as to legality of shares being
registered. (3)
(j) CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS to be filed by subsequent
post-effective amendment.
(k) OMITTED FINANCIAL STATEMENTS. Not applicable.
(l) CERTIFICATE OF INITIAL CAPITAL UNDERSTANDING. (3)
(m) RULE 12B-1 PLAN
(1) Conformed copy of Distribution Plan. (3)
(2) Conformed copy of Amendment to Distribution Plan. (4)
(n) FINANCIAL DATA SCHEDULE. Not applicable.
(o) RULE 18F-3 PLAN. Multiple Class Plan. (3)
(1) Response is incorporated by reference to Registrant's Initial
Registration Statement of Form N-1A filed June 19, 1996.
(2) Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed September 20, 1996.
(3) Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 2 on Form N-1A filed October 10, 1996.
(4) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 2 on Form N-1A filed November 26, 1997.
ITEM 24 PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT:
None
ITEM 25 INDEMNIFICATION:
Reference is made to Article V of the Registrant's Articles of Incorporation and
to Article VI of the Registrant's By-Laws, incorporated by reference to Exhibits
1 and 2 to this Registration Statement, and to Section 2-418 of the Maryland
General Corporation Law.
Insofar as the conditional advancing of indemnification moneys for actions based
on the 1940 Act may be concerned, Article VI of the Registrant's By-Laws
provides that such payments will be made only on the following conditions: (i)
the person seeking indemnification shall provide to the Registrant a written
affirmation of his good faith belief that the standard of conduct necessary for
indemnification by the Registrant has been met and a written undertaking to
repay any such advance, if it ultimately should be determined that the standard
of conduct has not been met, and (ii) at least one of the following additional
conditions is met: (a) the person seeking indemnification shall provide a
security in form and amount acceptable to the Registrant for his or her
undertaking, (b) the Registrant is insured against losses arising by reason of
the advance, or (c) a majority of a quorum of non-party independent directors,
or independent legal counsel in a written opinion shall determine, based upon a
review of facts readily available to the Registrant at the time the advance is
proposed to be made, that there is reason to believe that the person seeking
indemnification will ultimately be found to be entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "1933 Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the 1933 Act and therefore is unenforceable. In the event that a claim for
indemnification against such liabilities (other than for expenses paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant, unless the matter has been settled by controlling precedent in the
opinion of its counsel, will submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the 1933 Act and will be governed by the final adjudication of such
issue.
ITEM 26 BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER:
For a description of the other business of the investment adviser, see the
sections entitled "The Investment Adviser" and "Management of the Fund" in Part
A. The address of the investment adviser is 2 World Financial Center, Building
B, New York, New York 10281-1198.
Set forth below is a list of each executive officer and partner of the
investment adviser indicating each business, profession, vocation or employment
of a substantial nature in which each such person or entity has been engaged
since September 30, 1994, for his or its own account or in the capacity of
director, officer, partner or trustee.
<TABLE>
<S> <C> <C>
POSITION(S) WITH INVESTMENT ADVISER BUSINESS, PROFESSION, VOCATION OR
NAME EMPLOYMENT
- ------------------------ -------------------------------------- -------------------------------------------
Robert Levine President, Chief Executive Officer, Executive Managing Director, Nomura
and Executive Managing Director Holding America Inc.
- ------------------------ -------------------------------------- -------------------------------------------
Richard A. Buch Managing Director
</TABLE>
ITEM 27 PRINCIPAL UNDERWRITERS:
(a) The Registrant's principal underwriter, Nomura Securities
International, Inc. also serves as principal
underwriter for Nomura Pacific Basin Fund, Inc.
(b) Set forth below is information concerning each director and officer of
the distributor. The principal business address of each such person is
2 World Financial Center, Building B, New York, New York 10281-1198.
<TABLE>
<S> <C> <C>
NAME AND PRINCIPAL BUSINESS POSITIONS AND OFFICES WITH POSITIONS AND OFFICES WITH
ADDRESS UNDERWRITER REGISTRANT
--------------------------------- ----------------------------------- ----------------------------
Atsushi Yoshikawa Co-President None
--------------------------------- ----------------------------------- ----------------------------
Joseph D. Schmuckler Co-President None
--------------------------------- ----------------------------------- ----------------------------
John E. Toffolon, Jr. Chief Financial Officer and None
Executive Managing Director
--------------------------------- ----------------------------------- ----------------------------
Howard Steinberg General Counsel and Managing None
Director
--------------------------------- ----------------------------------- ----------------------------
William B. Aimetti Executive Managing Director None
--------------------------------- ----------------------------------- ----------------------------
Yoshikazu Yasuoka Managing Director None
--------------------------------- ----------------------------------- ----------------------------
Yukiko Murata Assistant Vice President None
--------------------------------- ----------------------------------- ----------------------------
Arthur S. Ainsberg Independent Director None
--------------------------------- ----------------------------------- ----------------------------
</TABLE>
(c) Not applicable.
ITEM 28 LOCATION OF ACCOUNTS AND RECORDS:
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and the Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
<TABLE>
<S> <C>
- ------------------------------------------------------- ------------------------------------
ENTITY ADDRESS
- ------------------------------------------------------- ------------------------------------
Registrant 2 World Financial Center Building B
New York, NY 10281-1198
- ------------------------------------------------------- ------------------------------------
Firstar Mutual Fund Services, LLC 615 East Michigan Street
(Transfer Agent, Fund Accountant, Administrator) Milwaukee, WI 53202
- ------------------------------------------------------- ------------------------------------
Nomura Corporate Research and Asset Management Inc. 2 World Financial Center Building B
(Adviser) New York, NY 10281-1198
- ------------------------------------------------------- ------------------------------------
Firstar Bank Milwaukee, N.A. 615 East Michigan Street
(Custodian) Milwaukee, WI 53202
- ------------------------------------------------------- ------------------------------------
</TABLE>
ITEM 29 MANAGEMENT SERVICES:
Not applicable.
ITEM 30 UNDERTAKINGS:
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, BATTERY PARK FUNDS, INC.,
certifies that it meets all of the requirements for effectiveness of this
Amendment to its Registration Statement pursuant to Rule 485(a) under the
Securities Act of 1933 and has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Pittsburgh and Commonwealth of Pennsylvania, on the
30th day of November, 1999.
BATTERY PARK FUNDS, INC.
BY: /S/ ROBERT LEVINE*
Robert Levine, Chairman and President
November 30, 1999
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below on November 30,
1999 by the following person in the capacity and on the date indicated.
Name Title
/S/ ROBERT LEVINE* Chairman, President and Director
- ------------------
Robert Levine
/S/ JENNIE WONG Director and Treasurer
- ---------------
Jennie Wong
/S/ FRANCIS L. FRAENKEL* Director
- ------------------------
Francis L. Fraenkel
/S/ FRANK K. REILLY* Director
- --------------------
Frank K. Reilly
*By:/S/ LACE B. FRASER___
Attorney in Fact for the Persons
Listed Above
CUSTODIAN SERVICING AGREEMENT
THIS AGREEMENT made on 30th day of August, 1999, between Battery
Park Funds, Inc, a Maryland corporation currently sponsoring the Battery Park
High Yield Fund (hereinafter called the ("Fund"), and FIRSTAR BANK MILWAUKEE,
NA, a corporation organized under the laws of the State of Wisconsin
(hereinafter called "Custodian"),
WHEREAS, the Fund desires that its securities and cash shall be
hereafter held and administered by Custodian pursuant to the terms of this
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
made, the Fund and Custodian agree as follows:
1. DEFINITIONS
The word "securities" as used herein includes stocks, shares,
bonds, debentures, notes, mortgages or other obligations, and any certificates,
receipts, warrants or other instruments representing rights to receive, purchase
or subscribe for the same, or evidencing or representing any other rights or
interests therein, or in any property or assets.
The words "officers' certificate" shall mean a request or
direction or certification in writing signed in the name of the Fund by any two
of the President, a Vice President, the Secretary and the Treasurer of the Fund,
or any other persons duly authorized to sign by the Board of Directors.
The word "Board" shall mean Board of Directors of Battery Park
Funds, Inc..
2. NAMES, TITLES, AND SIGNATURES OF THE FUND'S OFFICERS
An officer of the Fund will certify to Custodian the names and
signatures of those persons authorized to sign the officers' certificates
described in Section 1 hereof, and the names of the members of the Board of
Directors, together with any changes which may occur from time to time.
ADDITIONAL SERIES. In the event that the Battery Park Funds, Inc.
establishes one or more series of shares with respect to which it desires to
have Custodian render custody services, under the terms hereof, it shall so
notify Custodian in writing, and if Custodian agrees in writing to provide such
services, such series will be subject to the terms and conditions of this
Agreement, and shall be maintained and accounted for the the Custodian on a
discrete basis. The Battery Park High Yield Fund is currently the only Fund
covered by this Agreement.
3. RECEIPT AND DISBURSEMENT OF MONEY
A. Custodian shall open and maintain a separate account or
accounts in the name of the Fund, subject only to draft or order by Custodian
acting pursuant to the terms of this Agreement. Custodian shall hold in such
account or accounts, subject to the provisions hereof, all cash received by it
from or for the account of the Fund. Custodian shall make payments of cash to,
or for the account of, the Fund from such cash only:
(a) for the purchase of securities for the portfolio of the
Fund upon the delivery of such securities to Custodian,
registered in the name of the Fund or of the nominee of
Custodian referred to in Section 7 or in proper form for
transfer;
(b) for the purchase or redemption of shares of the common
stock of the Fund upon delivery thereof to Custodian, or
upon proper instructions from Battery Park Funds, Inc.;
(c) for the payment of interest, dividends, taxes, investment
adviser's fees or operating expenses (including, without
limitation thereto, fees for legal, accounting, auditing
and custodian services and expenses for printing and
postage);
(d) for payments in connection with the conversion, exchange
or surrender of securities owned or subscribed to by the
Fund held by or to be delivered to Custodian; or
(e) for other proper corporate purposes certified by
resolution of the Board of Directors of the Fund.
Before making any such payment, Custodian shall receive (and may
rely upon) an officers' certificate requesting such payment and stating that it
is for a purpose permitted under the terms of items (a), (b), (c), or (d) of
this Subsection A, and also, in respect of item (e), upon receipt of an
officers' certificate specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or persons to whom such payment
is to be made, provided, however, that an officers' certificate need not precede
the disbursement of cash for the purpose of purchasing a money market
instrument, or any other security with same or next-day settlement, if the
President, a Vice President, the Secretary or the Treasurer of the Fund issues
appropriate oral or facsimile instructions to Custodian and an appropriate
officers' certificate is received by Custodian within two business days
thereafter.
B. Custodian is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received by Custodian
for the account of the Fund.
C. Custodian shall, upon receipt of proper instructions, make
federal funds available to the Fund as of specified times agreed upon from time
to time by the Fund and the custodian in the amount of checks received in
payment for shares of the Fund which are deposited into the Fund's account.
4. SEGREGATED ACCOUNTS
Upon receipt of proper instructions, the Custodian shall
establish and maintain a segregated account(s) for and on behalf of the
portfolio, into which account(s) may be transferred cash and/or securities.
5. TRANSFER, EXCHANGE, REDELIVERY, ETC. OF SECURITIES
Custodian shall have sole power to release or deliver any
securities of the Fund held by it pursuant to this Agreement. Custodian agrees
to transfer, exchange or deliver securities held by it hereunder only:
(a) for sales of such securities for the account of the Fund
upon receipt by Custodian of payment therefore;
(b) when such securities are called, redeemed or retired or
otherwise become payable;
(c) for examination by any broker selling any such securities
in accordance with "street delivery" custom;
(d) in exchange for, or upon conversion into, other securities
alone or other securities and cash whether pursuant to any
plan of merger, consolidation, reorganization,
recapitalization or readjustment, or otherwise;
(e) upon conversion of such securities pursuant to their terms
into other securities;
(f) upon exercise of subscription, purchase or other similar
rights represented by such securities;
(g) for the purpose of exchanging interim receipts or
temporary securities for definitive securities;
(h) for the purpose of redeeming in kind shares of common
stock of the Fund upon delivery thereof to Custodian; or
(i) for other proper corporate purposes.
As to any deliveries made by Custodian pursuant to items (a),
(b), (d), (e), (f), and (g), securities or cash receivable in exchange therefore
shall be deliverable to Custodian.
Before making any such transfer, exchange or delivery, Custodian
shall receive (and may rely upon) an officers' certificate requesting such
transfer, exchange or delivery, and stating that it is for a purpose permitted
under the terms of items (a), (b), (c), (d), (e), (f), (g), or (h) of this
Section 5 and also, in respect of item (i), upon receipt of an officers'
certificate specifying the securities to be delivered, setting forth the purpose
for which such delivery is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom delivery of such
securities shall be made, provided, however, that an officers' certificate need
not precede any such transfer, exchange or delivery of a money market
instrument, or any other security with same or next-day settlement, if the
President, a Vice President, the Secretary or the Treasurer of the Fund issues
appropriate oral or facsimile instructions to Custodian and an appropriate
officers' certificate is received by Custodian within two business days
thereafter.
6. CUSTODIAN'S ACTS WITHOUT INSTRUCTIONS
Unless and until Custodian receives an officers' certificate to
the contrary, Custodian shall: (a) present for payment all coupons and other
income items held by it for the account of the Fund, which call for payment upon
presentation and hold the cash received by it upon such payment for the account
of the Fund; (b) collect interest and cash dividends received, with notice to
the Fund, for the account of the Fund; (c) hold for the account of the Fund
hereunder all stock dividends, rights and similar securities issued with respect
to any securities held by it hereunder; and (d) execute, as agent on behalf of
the Fund, all necessary ownership certificates required by the Internal Revenue
Code or the Income Tax Regulations of the United States Treasury Department or
under the laws of any state now or hereafter in effect, inserting the Fund's
name on such certificates as the owner of the securities covered thereby, to the
extent it may lawfully do so.
7. REGISTRATION OF SECURITIES
Except as otherwise directed by an officers' certificate,
Custodian shall register all securities, except such as are in bearer form, in
the name of a registered nominee of Custodian as defined in the Internal Revenue
Code and any Regulations of the Treasury Department issued hereunder or in any
provision of any subsequent federal tax law exempting such transaction from
liability for stock transfer taxes, and shall execute and deliver all such
certificates in connection therewith as may be required by such laws or
regulations or under the laws of any state. Custodian shall use its best efforts
to the end that the specific securities held by it hereunder shall be at all
times identifiable in its records.
The Fund shall from time to time furnish to Custodian appropriate
instruments to enable Custodian to hold or deliver in proper form for transfer,
or to register in the name of its registered nominee, any securities which it
may hold for the account of the Fund and which may from time to time be
registered in the name of the Fund.
8. VOTING AND OTHER ACTION
Neither Custodian nor any nominee of Custodian shall vote any of
the securities held hereunder by or for the account of the Fund, except in
accordance with the instructions contained in an officers' certificate.
Custodian shall deliver, or cause to be executed and delivered, to the
Corporation all notices, proxies and proxy soliciting materials with relation to
such securities, such proxies to be executed by the registered holder of such
securities (if registered otherwise than in the name of the Fund), but without
indicating the manner in which such proxies are to be voted.
9. TRANSFER TAX AND OTHER DISBURSEMENTS
The Fund shall pay or reimburse Custodian from time to time for
any transfer taxes payable upon transfers of securities made hereunder, and for
all other necessary and proper disbursements and expenses made or incurred by
Custodian in the performance of this Agreement.
Custodian shall execute and deliver such certificates in
connection with securities delivered to it or by it under this Agreement as may
be required under the provisions of the Internal Revenue Code and any
Regulations of the Treasury Department issued thereunder, or under the laws of
any state, to exempt from taxation any exemptable transfers and/or deliveries of
any such securities.
10. CONCERNING CUSTODIAN
Custodian shall be paid as compensation for its services pursuant
to this Agreement such compensation as may from time to time be agreed upon in
writing between the two parties. Until modified in writing, such compensation
shall be as set forth in Exhibit A attached hereto. If the Fund elects to
terminate this Agreement prior to the 3rd anniversary of this Agreement for
reasons other than unacceptable service levels,
the Fund agrees to reimburse Agent for the difference between the standard fee
schedule and the discounted fee schedule agreed to between the parties from the
date of termination.
Custodian shall not be liable for any action taken in good faith
upon any certificate herein described or certified copy of any resolution of the
Board, and may rely on the genuineness of any such document which it may in good
faith believe to have been validly executed.
The Fund agrees to indemnify and hold harmless Custodian and its
nominee from all taxes, charges, expenses, assessments, claims and liabilities
(including counsel fees) incurred or assessed against it or by its nominee in
connection with the performance of this Agreement, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct. Custodian is authorized to charge any account of the Fund for such
items.
In the event of any advance of cash for any purpose made by Custodian resulting
from orders or instructions of the Fund, or in the event that Custodian or its
nominee shall incur or be assessed any taxes, charges, expenses, assessments,
claims or liabilities in connection with the performance of this Agreement,
except such as may arise from its or its nominee's own negligent action,
negligent failure to act or willful misconduct, any property at any time held
for the account of the Fund shall be security therefore.
Custodian agrees to indemnify and hold harmless the Fund from all charges,
expenses, assessments, and claims/liabilities (including counsel fees) incurred
or assessed against it in connection with the performance of this agreement,
except such as may arise from the Fund's own negligent action, negligent failure
to act, or willful misconduct.
11. SUBCUSTODIANS
Custodian is hereby authorized to engage another bank or trust
company as a Subcustodian for all or any part of the Fund's assets, so long as
any such bank or trust company is a bank or trust company organized under the
laws of any state of the United States, having an aggregate capital, surplus and
undivided profit, as shown by its last published report, of not less than Two
Million Dollars ($2,000,000) and provided further that, if the Custodian
utilizes the services of a Subcustodian, the Custodian shall remain fully liable
and responsible for any losses caused to the Fund by the Subcustodian as fully
as if the Custodian was directly responsible for any such losses under the terms
of the Custodian Agreement.
Notwithstanding anything contained herein, if the Fund requires
the Custodian to engage specific Subcustodians for the safekeeping and/or
clearing of assets, the Fund agrees to indemnify and hold harmless Custodian
from all claims, expenses and liabilities incurred or assessed against it in
connection with the use of such Subcustodian in regard to the Fund's assets,
except as may arise from its own negligent action, negligent failure to act or
willful misconduct.
12. REPORTS BY CUSTODIAN
Custodian shall furnish the Fund periodically as agreed upon with
a statement summarizing all transactions and entries for the account of Fund.
Custodian shall furnish to the Fund, at the end of every month, a list of the
portfolio securities showing the aggregate cost of each issue. The books and
records of Custodian pertaining to its actions under this Agreement shall be
open to inspection and audit at reasonable times by officers of, and of auditors
employed by, the Fund.
13. TERMINATION OR ASSIGNMENT
This Agreement may be terminated by the Fund, or by Custodian, on
ninety (90) days notice, given in writing and sent by registered mail to
Custodian at Firstar Bank Milwaukee, NA, 615 East Michigan Street, Milwaukee,
Wisconsin 53202, or to the Fund at Battery Park Funds, Inc. 2 World Financial
Center, Bldg. B, New York, NY 10281-1198, as the case may be. It is understood
and agreed to by the parties that a notice to terminate one of the servicing
contracts constitutes notice of termination for all servicing contracts that
exist between the parties. Upon any termination of this Agreement, pending
appointment of a successor to Custodian or a vote of the shareholders of the
Fund to dissolve or to function without a custodian of its cash, securities and
other property, Custodian shall not deliver cash, securities or other property
of the Fund to the Fund, but may deliver them to a bank or trust company of its
own selection, having an aggregate capital, surplus and undivided profits, as
shown by its last published report of not less than Two Million Dollars
($2,000,000) as a Custodian for the Fund to be held under terms similar to those
of this Agreement, provided, however, that Custodian shall not be required to
make any such delivery or payment until full payment shall have been made by the
Fund of all liabilities constituting a charge on or against the properties then
held by Custodian or on or against Custodian, and until full payment shall have
been made to Custodian of all its fees, compensation, costs and expenses,
subject to the provisions of Section 10 of this Agreement.
This Agreement may not be assigned by Custodian without the
consent of the Fund, authorized or approved by a resolution of its Board of
Directors.
14. DEPOSITS OF SECURITIES IN SECURITIES DEPOSITORIES
No provision of this Agreement shall be deemed to prevent the use
by Custodian of a central securities clearing agency or securities depository,
provided, however, that Custodian and the central securities clearing agency or
securities depository meet all applicable federal and state laws and
regulations, and the Board of Directors of the Fund approves by resolution the
use of such central securities clearing agency or securities depository.
15. RECORDS
To the extent that Custodian in any capacity prepares or
maintains any records required to be maintained and preserved by the Fund
pursuant to the provisions of the Investment Company Act of 1940, as amended, or
the rules and regulations promulgated thereunder, Custodian agrees to make any
such records available to the Fund upon request and to preserve such records for
the periods prescribed in Rule 31a-2 under the Investment Company Act of 1940,
as amended.
16. NOTICES
Notices of any kind to be given by either party to the other
party shall be in writing and shall be duly given if mailed or delivered as
follows: Notice to FBM shall be sent to:
Firstar Bank Milwaukee, NA
615 East Michigan Street
Milwaukee, WI 53202
and notice to the Fund shall be sent to:
Battery Park Funds, Inc.
Attn: President
2 World Financial Center, Bldg. B
New York, NY 10281-1198
17. FIRSTAR MUTUAL FUND SERVICES, LLC YEAR 2000 READINESS DISCLOSURE
The Custodian represents to the Fund that the computer software,
computer firmware, computer hardware (whether general or special purpose) and
other similar related items of automated, computerized and/or software systems
that are owned or licensed by Custodian and will be utilized by the Custodian
or its agents in connection with the provisions of services described in this
Agreement are "Year 2000 compliant" (as defined below). As used in this Section
17 of this Agreement, the term "Year 2000 compliant" shall mean the ability of
the relevant system to provide all of the following functions:
A. Process date information before, during and after
January 1, 2000, including but not limited to accepting specific input data,
providing date specific output data, and performing calculations on dates or
portions of dates;
B. Function accurately and without interruption or malfunction
before, during and after January 1, 2000 without any change in operations
associated with the advent of the new millennium and assuming no other defects,
bugs, viruses or other problems unrelated to the Year 2000 compliance issues
which disrupt functionality;
C. Respond to two-digit, year-date input in a way that resolves
the ambiguity as to century and in a disclosed, defined and predetermined
manner; and
D. Store and provide output data of specific information in ways
that are unambiguous as to century.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed and their respective corporate seals to be affixed hereto as of
the date first above-written by their respective officers thereunto duly
authorized.
Executed in several counterparts, each of which is an original.
Battery Park Funds, Inc. FIRSTAR BANK MILWAUKEE, NA
By: /S/ ROBERT LEVINE By: /S/ PAUL ROCK
- ------------------------ -------------------------------
Print:ROBERT LEVINE Print: PAUL ROCK
- ------------------------ -------------------------------
Title: PRESIDENT Title: SENIOR VICE PRESIDENT
- ------------------------ -------------------------------
Date: AUGUST 27, 1999 Date: SEPTEMBER 1, 1999
- ------------------------ -----------------------------
Attest: /S/ JENNIE WONG Attest: /S/ FREDDIE JACOBS, JR.
- ------------------------ -------------------------------
Print: JENNIE WONG Print: FREDDIE JACOBS, JR.
- ------------------------ -------------------------------
FUND ACCOUNTING SERVICING AGREEMENT
This Agreement between Battery Park Funds, Inc., a Maryland corporation,
hereinafter called the Fund, and Firstar Mutual Fund Services, LLC, a Wisconsin
corporation, hereinafter called "FMFS," is entered into on this 30th day of
August, 1999.
WHEREAS, the Fund, is an open-ended management investment company
registered under the Investment Company Act of 1940; and
WHEREAS, Firstar Mutual Fund Services, LLC ("FMFS") is in the business
of providing, among other things, mutual fund accounting services to investment
companies;
NOW, THEREFORE, the parties do mutually promise and agree as follows:
1. SERVICES. FMFS agrees to provide the following mutual fund
accounting services to the Fund:
A. Portfolio Accounting Services:
(1) Maintain portfolio records on a trade date +1 basis
using security trade information communicated from the investment
manager on a timely basis.
(2) For each valuation date, obtain prices from a pricing
source approved by the Board of Directors and apply those prices
to the portfolio positions. For those securities where market
quotations are not readily available, the Board of Directors
shall approve, in good faith, the method for determining the fair
value for such securities.
(3) Identify interest and dividend accrual balances as of
each valuation date and calculate gross earnings on investments
for the accounting period.
(4) Determine gain/loss on security sales and identify
them as to short-short, short- or long-term status; account for
periodic distributions of gains or losses to shareholders and
maintain undistributed gain or loss balances as of each valuation
date.
B. Expense Accrual and Payment Services:
(1) For each valuation date, calculate the expense accrual
amounts as directed by the Fund as to methodology, rate or dollar
amount.
(2) Record payments for Fund expenses upon receipt of
written authorization from the Fund.
(3) Account for fund expenditures and maintain expense
accrual balances at the level of accounting detail, as agreed
upon by FMFS and the Fund.
(4) Provide expense accrual and payment reporting.
C. Fund Valuation and Financial Reporting Services:
(1) Account for fund share purchases, sales, exchanges,
transfers, dividend reinvestments, and other fund share activity
as reported by the transfer agent on a timely basis.
(2) Apply equalization accounting as directed by the Fund.
(3) Determine net investment income (earnings) for the
Fund as of each valuation date. Account for periodic
distributions of earnings to shareholders and maintain
undistributed net investment income balances as of each valuation
date.
(4) Maintain a general ledger for the Fund in the form as
agreed upon.
(5) For each day the Fund is open as defined in the
prospectus, determine the net asset value of the according to the
accounting policies and procedures set forth in the prospectus.
(6) Calculate per share net asset value, per share net
earnings, and other per share amounts reflective of fund
operation at such time as required by the nature and
characteristics of the Fund.
(7) Communicate, at an agreed upon time, the per share
price for each valuation date to parties as agreed upon from time
to time.
(8) Prepare monthly reports which document the adequacy of
accounting detail to support month-end ledger balances.
D. Tax Accounting Services:
(1) Maintain accounting records for the investment
portfolio of the Fund to support the tax reporting required for
IRS-defined regulated investment companies.
(2) Maintain tax lot detail for the investment portfolio.
(3) Calculate taxable gain/loss on security sales using
the tax lot relief method designated by the Fund.
(4) Provide the necessary financial information to support
the taxable components of income and capital gains distributions
to the transfer agent to support tax reporting to the
shareholders.
E. Compliance Control Services:
(1) Support reporting to regulatory bodies and support
financial statement preparation by making the fund accounting
records available to the Fund, the Securities and Exchange
Commission, and the outside auditors.
(2) Maintain accounting records according to the
Investment Company Act of 1940 and regulations provided
thereunder.
2. PRICING OF SECURITIES. For each valuation date, obtain prices from a
pricing source selected by FMFS but approved by the Fund's Board and apply those
prices to the portfolio positions. For those securities where market quotations
are not readily available, the Fund's Board shall approve, in good faith, the
method for determining the fair value for such securities.
If the Fund desires to provide a price which varies from the
pricing source, the Fund shall promptly notify and supply FMFS with the
valuation of any such security on each valuation date. All pricing changes made
by the Fund will be in writing and must specifically identify the securities to
be changed by CUSIP, name of security, new price or rate to be applied, and, if
applicable, the time period for which the new price(s) is/are effective.
3. CHANGES IN ACCOUNTING PROCEDURES. Any resolution passed by the Board
of Directors that affects accounting practices and procedures under this
agreement shall be effective upon written receipt and acceptance by the FMFS.
4. CHANGES IN EQUIPMENT, SYSTEMS, SERVICE, ETC. FMFS reserves the right
to make changes from time to time, as it deems advisable, relating to its
services, systems, programs, rules, operating schedules and equipment, so long
as such changes do not adversely affect the service provided to the Fund under
this Agreement.
5. COMPENSATION. FMFS shall be compensated for providing the services
set forth in this Agreement in accordance with the Fee Schedule attached hereto
as Exhibit A and as mutually agreed upon and amended from time to time. If the
Fund elects to terminate this Agreement prior to the 3rd anniversary of this
Agreement for reasons other than unacceptable service levels, the Fund agrees to
reimburse Agent for the difference between the standard fee schedule and the
discounted fee schedule agreed to between the parties from the date of
termination.
6. PERFORMANCE OF SERVICE.
A. FMFS shall exercise reasonable care in the performance
of its duties under this Agreement. FMFS shall not be liable for
any error of judgment or mistake of law or for any loss suffered
by the Fund in connection with matters to which this Agreement
relates, including losses resulting from mechanical breakdowns or
the failure of communication or power supplies beyond FMFS's
control, except a loss resulting from FMFS's refusal or failure
to comply with the terms of this Agreement or from bad faith,
negligence, or willful misconduct on its part in the performance
of its duties under this Agreement. Notwithstanding any other
provision of this Agreement, the Fund shall indemnify and hold
harmless FMFS from and against any and all claims, demands,
losses, expenses, and liabilities (whether with or without basis
in fact or law) of any and every nature (including reasonable
attorneys' fees) which FMFS may sustain or incur or which may be
asserted against FMFS by any person arising out of any action
taken or omitted to be taken by it in performing the services
hereunder (i) in accordance with the foregoing standards, or (ii)
in reliance upon any written or oral instruction provided to FMFS
by any duly authorized officer of the Fund, such duly authorized
officer to be included in a list of authorized officers furnished
to FMFS and as amended from time to time in writing by resolution
of the Board of Directors of the Fund.
In the event of a mechanical breakdown or failure of
communication or power supplies beyond its control, FMFS shall
take all reasonable steps to minimize service interruptions for
any period that such interruption continues beyond FMFS's
control. FMFS will make every reasonable effort to restore any
lost or damaged data and correct any errors resulting from such a
breakdown at the expense of FMFS. FMFS agrees that it shall, at
all times, have reasonable contingency plans with appropriate
parties, making reasonable provision for emergency use of
electrical data processing equipment to the extent appropriate
equipment is available. Representatives of the Fund shall be
entitled to inspect FMFS's premises and operating capabilities at
any time during regular business hours of FMFS, upon reasonable
notice to FMFS.
Regardless of the above, FMFS reserves the right to
reprocess and correct administrative errors at its own expense.
B. In order that the indemnification provisions contained
in this section shall apply, it is understood that if in any case
the Fund may be asked to indemnify or hold FMFS harmless, the
Fund shall be fully and promptly advised of all pertinent facts
concerning the situation in question, and it is further
understood that FMFS will use all reasonable care to notify the
Fund promptly concerning any situation which presents or appears
likely to present the probability of such a claim for
indemnification against the Fund. The Fund shall have the option
to defend FMFS against any claim which may be the subject of this
indemnification. In the event that the Fund so elects, it will so
notify FMFS and thereupon the Fund shall take over complete
defense of the claim, and FMFS shall in such situation initiate
no further legal or other expenses for which it shall seek
indemnification under this section. FMFS shall in no case confess
any claim or make any compromise in any case in which the Fund
will be asked to indemnify FMFS except with the Fund's prior
written consent.
C. FMFS shall indemnify and hold the Fund harmless from
and against any and all claims, demands, losses, expenses, and
liabilities (whether with or without basis in fact or law) of any
and every nature (including reasonable attorneys' fees) which may
be asserted against the Fund by any person arising out of any
action taken or omitted to be taken by FMFS as a result of FMFS's
refusal or failure to comply with the terms of this Agreement,
its bad faith, negligence, or willful misconduct.
7. RECORDS. FMFS shall keep records relating to the services to be
performed hereunder, in the form and manner, and for such period as it may deem
advisable and is agreeable to the Fund but not inconsistent with the rules and
regulations of appropriate government authorities, in particular, Section 31 of
The Investment Company Act of 1940 as amended (the "Investment Company Act"),
and the rules thereunder. FMFS agrees that all such records prepared or
maintained by FMFS relating to the services to be performed by FMFS hereunder
are the property of the Fund and will be preserved, maintained, and made
available with such section and rules of the Investment Company Act and will be
promptly surrendered to the Fund on and in accordance with its request.
8. CONFIDENTIALITY. FMFS shall handle in confidence all information
relating to the Fund's business, which is received by FMFS during the course of
rendering any service hereunder.
9. DATA NECESSARY TO PERFORM SERVICES. The Fund or its agent, which may
be FMFS, shall furnish to FMFS the data necessary to perform the services
described herein at times and in such form as mutually agreed upon.
10. NOTIFICATION OF ERROR. The Fund will notify FMFS of any balancing or
control error caused by FMFS within three (3) business days after receipt of any
reports rendered by FMFS to the Fund, or within three (3) business days after
discovery of any error or omission not covered in the balancing or control
procedure, or within three (3) business days of receiving notice from any
shareholder.
11. ADDITIONAL SERIES. In the event that Battery Park Funds, Inc.
establishes one or more series of shares with respect to which it desires to
have FMFS render accounting services, under the terms hereof, it shall so notify
FMFS in writing, and if FMFS agrees in writing to provide such services, such
series will be subject to the terms and conditions of this Agreement, and shall
be maintained and accounted for by FMFS on a discrete basis. The portfolios
currently covered by this Agreement are: Battery Park High Yield Fund.
12. TERM OF AGREEMENT. This Agreement may be terminated by either party
upon giving ninety (90) days prior written notice to the other party or such
shorter period as is mutually agreed upon by the parties. However, this
Agreement may be replaced or modified by a subsequent agreement between the
parties. It is understood and agreed to by the parties that a notice to
terminate one of the servicing contracts constitutes notice of termination for
all servicing contracts that exist between the parties.
13. DUTIES IN THE EVENT OF TERMINATION. In the event that in connection
with termination a Successor to any of FMFS's duties or responsibilities
hereunder is designated by Battery Park Funds, Inc. by written notice to FMFS,
FMFS will promptly, upon such termination and at the expense of Battery Park
Funds, Inc., transfer to such Successor all relevant books, records,
correspondence and other data established or maintained by FMFS under this
Agreement in a form reasonably acceptable to Battery Park Funds, Inc. (if such
form differs from the form in which FMFS has maintained the same, Battery Park
Funds, Inc. shall pay any expenses associated with transferring the same to such
form), and will cooperate in the transfer of such duties and responsibilities,
including provision for assistance from FMFS's personnel in the establishment of
books, records and other data by such successor.
14. FIRSTAR MUTUAL FUND SERVICES YEAR 2000 READINESS DISCLOSURE
FMFS represents to the Fund that the computer software, firmware,
computer hardware (whether general or special purpose) and other similar related
items of automated computerized and/or software systems that are owned or
licensed by FMFS and will be utilized by FMFS or its agents in connection with
the provision of services described in this Agreement are "Year 2000 compliant"
(as defined below). As used in this section 14 of this Agreement, the term "Year
2000 compliant" shall mean the ability of the relevant system to provide all of
the following functions:
A. Process date information before, during and after
January 1, 2000, including but not limited to accepting specific input data,
providing date specific output data, and performing calculations on dates or
portions of dates:
B. Function accurately and without interruption or malfunction
before, during and after January 1, 2000 without any change in operations
associated with the advent of the new millennium and assuming no other defects,
bugs, viruses or other problems unrelated to Year 2000 compliance issues which
disrupt functionality;
C. Respond to two-digit, year-date input in a way that resolves
the ambiguity as to century and in a disclosed, defined and predetermined
manner; and
D. Store and provide output data of specific information in ways
that are unambiguous as to century.
15. NOTICES. Notices of any kind to be given by either party to the
other party shall be in writing and shall be duly given if mailed or delivered
as follows: Notice to FMFS shall be sent to:
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
and notice to Fund shall be sent to:
Battery Park Funds, Inc.
Attn: President
2 World Financial Center, Bldg. B
New York, NY 10281-1198
16. CHOICE OF LAW. This Agreement shall be construed in accordance with
the laws of the State of Wisconsin.
IN WITNESS WHEREOF, the due execution hereof on the date first above
written.
Battery Park Funds, Inc. Firstar Mutual Fund Services, LLC
By: /S/ ROBERT LEVINE By: /S/ PAUL ROCK
- ------------------------ -------------------------------
Print:ROBERT LEVINE Print: PAUL ROCK
- ------------------------ -------------------------------
Title: PRESIDENT Title: SENIOR VICE PRESIDENT
- ------------------------ -------------------------------
Date: AUGUST 27, 1999 Date: SEPTEMBER 1, 1999
- ------------------------ -----------------------------
Attest: /S/ JENNIE WONG Attest: /S/ FREDDIE JACOBS, JR.
- ------------------------ -------------------------------
Print: JENNIE WONG Print: FREDDIE JACOBS, JR.
- ------------------------ -------------------------------
FUND ADMINISTRATION SERVICING AGREEMENT
This Agreement is made and entered into on this 30th day of August, 1999 by
amd between Battery Park Funds, Inc. (hereinafter referred to as the "Fund") and
Firstar Mutual Fund Services, LLC, a corporation organized under the laws of the
State of Wisconsin (hereinafter referred to as "FMFS").
WHEREAS, The Fund is an open-ended management investment company which is
registered under the Investment Company Act of 1940;
WHEREAS, FMFS is a trust company and, among other things, is in the
business of providing fund administration services for the benefit of its
customers;
NOW, THEREFORE, the Fund and FMFS do mutually promise and agree as follows:
I. Appointment of Administrator
The Fund hereby appoints FMFS as Administrator of the Fund on the terms
and conditions set forth in this Agreement, and FMFS hereby accepts
such appointment and agrees to perform the services and duties set
forth in this Agreement in consideration of the compensation provided
for herein.
II. Duties and Responsibilities of FMFS
A. General Fund Management
1. Act as liaison among all fund service providers
2. Coordinate board communication by:
a. Assisting fund counsel in establishing meeting agendas
b. Preparing board reports based on financial and
administrative data
c. Evaluating independent auditor
d. Securing and monitoring fidelity bond and director and
officers liability coverage, and making the necessary SEC
filings relating thereto
3. Audits
a. Prepare appropriate schedules and assist independent
auditors
b. Provide information to SEC and facilitate audit process
c. Provide office facilities
4. Assist in overall operations of the Fund
a. Attendance at board meeting
b. Preparation of Minutes of board meetings
B. Compliance
1. Regulatory Compliance
a. Monitor at least quarterly compliance with Investment
Company Act of 1940 requirements:
1) Asset diversification tests
2) Total return and SEC yield calculations
3) Maintenance of books and records under Rule 31a-3
4) Code of ethics
b. Monitor no less frequently than annually Fund's
compliance with the policies and investment
limitations of the Fund as set forth in its prospectus
and statement of additional information
c. Monitor at least semiannually fidelity bond coverage
2. Blue Sky Compliance
a. Prepare and file with the appropriate state securities
authorities any and all required compliance filings
relating to the registration of the securities of the
Fund so as to enable the Fund to make a continuous
offering of its shares
b. Monitor status and maintain registrations in each state
3. SEC Registration and Reporting
a. Assisting Fund's counsel in updating prospectus and
statement of additional information; and in preparing
proxy statements, and preparing and filing Rule 24f-2
notices,
b. Prepare and file annual and semiannual reports
4. IRS Compliance
a Periodically monitor Fund's status as a regulated
investment company under Subchapter M through review
of the following:
1) Asset diversification requirements
2) Qualifying income requirements
3) Distribution requirements
b. Calculate required distributions (including excise
tax distributions)
C. Financial Reporting
1. Provide financial data required by fund prospectus and
statement of additional information
2. Prepare financial reports for shareholders, the board, the
SEC, and independent auditors
3. Supervise the Fund's Custodian and Fund Accountants in the
maintenance of the Fund's general ledger and in the
preparation of the Fund's financial statements including
oversight of expense accruals and payments, of the
determination of net asset value of the Fund's net assets
and of the Fund's shares, and of the declaration and payment
of dividends and other distributions to shareholders
D. Tax Reporting
1. Prepare and file on a timely basis appropriate federal and
state tax returns including forms 1120/8610 with any
necessary schedules
2. Prepare state income breakdowns where relevant
3. File 1099 Miscellaneous for payments to directors and other
service providers
4. Monitor wash losses
5. Calculate eligible dividend income for corporate shareholders
III. Compensation
The Fund agrees to pay FMFS for performance of the duties listed in
this Agreement and the fees and out-of-pocket expenses as set forth in
the attached Schedule A.
These fees may be changed from time to time, subject to mutual written
Agreement between the Fund and FMFS. If the Fund elects to terminate
this Agreement prior to the 3rd anniversary of this Agreement for
reasons other than unacceptable service levels, the Fund agrees to
reimburse Agent for the difference between the standard fee schedule
and the discounted fee schedule agreed to between the parties from the
date of termination.
The Fund agrees to pay all fees and reimbursable expenses within ten
(10) business days following the mailing of the billing notice.
IV. Additional Series
In the event that Battery Park Fund, Inc. establishes one or more
series of shares with respect to which it desires to have FMFS render
fund administration services, under the terms hereof, it shall so \
notify FMFS in writing, and if FMFS agrees in writing to provide such
services, such series will be subject to the terms and conditions of
this Agreement, and shall be maintained and accounted for by FMFS on a
discrete basis. The funds currently covered by this Agreement are:
Battery Park High Yield Fund
V. Performance of Service; Limitation of Liability
A. FMFS shall exercise reasonable care in the performance of its
duties under this Agreement. FMFS shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in
connection with matters to which this Agreement relates, including
losses resulting from mechanical breakdowns or the failure of
communication or power supplies beyond FMFS's control, except a loss
resulting from FMFS's refusal or failure to comply with the terms of
this Agreement or from bad faith, negligence, or willful misconduct on
its part in the performance of its duties under this Agreement.
Notwithstanding any other provision of this Agreement, the Fund shall
indemnify and hold harmless FMFS from and against any and all claims,
demands, losses, expenses, and liabilities (whether with or without
basis in fact or law) of any and every nature (including reasonable
attorneys' fees) which FMFS may sustain or incur or which may be
asserted against FMFS by any person arising out of any action taken or
omitted to be taken by it in performing the services hereunder (i) in
accordance with the foregoing standards, or (ii) in reliance upon any
written or oral instruction provided to FMFS by any duly authorized
officer of the Fund, such duly authorized officer to be included in a
list of authorized officers furnished to FMFS and as amended from time
to time in writing by resolution of the Board of Directors of the Fund.
In the event of a mechanical breakdown or failure of
communication or power supplies beyond its control, FMFS shall take all
reasonable steps to minimize service interruptions for any period that
such interruption continues beyond FMFS's control. FMFS will make every
reasonable effort to restore any lost or damaged data and correct any
errors resulting from such a breakdown at the expense of FMFS. FMFS
agrees that it shall, at all times, have reasonable contingency plans
with appropriate parties, making reasonable provision for emergency use
of electrical data processing equipment to the extent appropriate
equipment is available. Representatives of the Fund shall be entitled
to inspect FMFS's premises and operating capabilities at any time
during regular business hours of FMFS, upon reasonable notice to FMFS.
Regardless of the above, FMFS reserves the right to
reprocess and correct administrative errors at its own expense.
B. In order that the indemnification provisions contained in this
section shall apply, it is understood that if in any case the Fund may
be asked to indemnify or hold FMFS harmless, the Fund shall be fully
and promptly advised of all pertinent facts concerning the situation in
question, and it is further understood that FMFS will use all
reasonable care to notify the Fund promptly concerning any situation
which presents or appears likely to present the probability of such a
claim for indemnification against the Fund. The Fund shall have the
option to defend FMFS against any claim which may be the subject of
this indemnification. In the event that the Fund so elects, it will so
notify FMFS and thereupon the Fund shall take over complete defense of
the claim, and FMFS shall in such situation initiate no further legal
or other expenses for which it shall seek indemnification under this
section. FMFS shall in no case confess any claim or make any compromise
in any case in which the Fund will be asked to indemnify FMFS except
with the Fund's prior written consent.
C. FMFS shall indemnify and hold the Fund harmless from and
against any and all claims, demands, losses, expenses, and liabilities
(whether with or without basis in fact or law) of any and every nature
(including reasonable attorneys' fees) which may be asserted against
the Fund by any person arising out of any action taken or omitted to be
taken by FMFS as a result of FMFS's refusal or failure to comply with
the terms of this Agreement, its bad faith, negligence, or willful
misconduct.
VI. Confidentiality
FMFS shall handle, in confidence, all information relating to the
Fund's business which is received by FMFS during the course of
rendering any service hereunder.
VII. Data Necessary to Perform Service
The Fund or its agent, which may be FMFS, shall furnish to FMFS the
data necessary to perform the services described herein at times and in
such form as mutually agreed upon.
VIII. Terms of Agreement
This Agreement shall become effective on August 30, 1999 and,
unless sooner terminated as provided herein, shall continue
automatically in effect for successive annual periods. The Agreement
may be terminated by either party upon giving ninety (90) days prior
written notice to the other party or such shorter period as is mutually
agreed upon by the parties. It is understood and agreed to by the
parties that a notice to terminate one of the servicing contacts
constitutes notice of termination for all servicing contracts that
exist between the parties.
IX. Duties in the Event of Termination
In the event that, in connection with termination, a successor to any
of FMFS's duties or responsibilities hereunder is designated by the
Fund by written notice to FMFS, FMFS will promptly, upon such
termination and at the expense of the Fund, transfer to such successor
all relevant books, records, correspondence, and other data established
or maintained by FMFS under this Agreement in a form reasonably
acceptable to the Fund (if such form differs from the form in which
FMFS has maintained, the Fund shall pay any expenses associated with
transferring the data to such form), and will cooperate in the transfer
of such duties and responsibilities, including provision for assistance
from FMFS's personnel in the establishment of books, records, and other
data by such successor.
FIRSTAR MUTUAL FUND SERVICES, LLC YEAR 2000 READINESS DISCLOSURE
FMFS represents to the Fund that the computer software, computer
firmware, computer hardware (whether general or special purpose) and
other similar related items of automated, computerized and/or software
systems that are owned or licensed by FMFS and will be utilized by FMFS
or its agents in connection with the provision of services described in
this Agreement are "Year 2000 compliant" (as defined below). As used in
this Section X of this Agreement, the term "Year 2000 compliant" shall
mean the ability of the relevant system to provide all of the following
functions:
A. Process date information before, during and after January 1, 2000,
including but not limited to accepting specific input data, providing
date specific output data, and performing calculations on dates or
portions of dates;
B. Function accurately and without interruption or malfunction before,
during and after January 1, 2000, without any change in operations
associated with the advent of the new millennium and assuming no other
defects, bugs, viruses or other problems unrelated to Year 2000
compliance issues which disrupt functionality;
C. Respond to two-digit, year-date input in a way that resolves the
ambiguity as to century and in a disclosed, defined and predetermined
manner; and
D. Store and provide output data of specific information in ways that
are unambiguous as to century.
XI. Choice of Law
This Agreement shall be construed in accordance with the laws of the
State of Wisconsin.
XII. Notices
Notices of any kind to be given by either party to the other party
shall be in writing and shall be duly given if mailed or delivered as
follows: Notice to FMFS shall be sent to:
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
and notice to the Fund shall be sent to:
Battery Park Funds, Inc.
Attn: President
2 World Financial Center, Bldg. B
New York, NY 10281-1198
XIII. Records
FMFS shall keep records relating to the services to be performed
hereunder, in the form and manner, and for such period as it may deem
advisable and is agreeable to the Fund but not inconsistent with the
rules and regulations of appropriate government authorities, in
particular, Section 31 of the Investment Company Act of 1940 as amended
(the "Investment Company Act"), and the rules thereunder. FMFS agrees
that all such records prepared or maintained by FMFS relating to the
services to be performed by FMFS hereunder are the property of the Fund
and will be preserved, maintained, and made available with such section
and rules of the Investment Company Act and will be promptly
surrendered to the Fund on and in accordance with its request.
Battery Park Funds, Inc. Firstar Mutual Fund Services, LLC
By: /S/ ROBERT LEVINE By: /S/ PAUL ROCK
- ------------------------ -------------------------------
Print:ROBERT LEVINE Print: PAUL ROCK
- ------------------------ -------------------------------
Title: PRESIDENT Title: SENIOR VICE PRESIDENT
- ------------------------ -------------------------------
Date: AUGUST 27, 1999 Date: SEPTEMBER 1, 1999
- ------------------------ -----------------------------
Attest: /S/ JENNIE WONG Attest: /S/ FREDDIE JACOBS, JR.
- ------------------------ -------------------------------
Print: JENNIE WONG Print: FREDDIE JACOBS, JR.
- ------------------------ -------------------------------
TRANSFER AGENT SERVICING AGREEMENT
THIS AGREEMENT is made and entered into on this 30th day of August,
1999, by and between Battery Park Funds, Inc., currently sponsoring the Battery
Park High Yield Fund (hereinafter referred to as the "Fund") and Firstar Mutual
Fund Services, LLC, a corporation organized under the laws of the State of
Wisconsin (hereinafter referred to as the "Agent").
WHEREAS, the Fund is open-ended management investment registered under
the Investment Company Act of 1940; and
WHEREAS, the Agent is a trust company and, among other things, is in the
business of administering transfer and dividend disbursing agent functions for
the benefit of its customers;
NOW, THEREFORE, the Fund and the Agent do mutually promise and agree as
follows:
1. TERMS OF APPOINTMENT; DUTIES OF THE AGENT
Subject to the terms and conditions set forth in this Agreement, the
Fund hereby appoints and employees the Agent to act as transfer agent and
dividend disbursing agent.
The Agent shall perform all of the customary services of a transfer
agent and dividend disbursing agent, and as relevant, agent in connection with
accumulation, open account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including but not
limited to:
A. Receive orders for the purchase of shares;
B. Process purchase orders and issue the appropriate number of
certificated or uncertificated shares with such uncertificated
shares being held in the appropriate shareholder account;
C. Process redemption requests received in good order;
D. Pay monies in accordance with the instructions of redeeming
shareholders;
E. Process transfers of shares in accordance with the shareowner's
instructions;
F. Process exchanges between funds within the same family of funds;
G. Issue AND/OR cancel certificates as instructed; replace lost,
stolen or destroyed certificates upon receipt of satisfactory
indemnification or surety bond;
H. Prepare and transmit payments for dividends and distributions
declared by the Fund;
I. Make changes to shareholder records, including, but not limited
to, address changes in plans (i.e., systematic withdrawal,
automatic investment, dividend reinvestment, etc.);
J. Record the issuance of shares of the Fund and maintain, pursuant
to Securities Exchange Act of 1934 Rule 17ad-10(e), a record of
the total number of shares of the Fund which are authorized,
issued and outstanding;
K. Prepare shareholder meeting lists and, if applicable, mail,
receive and tabulate proxies;
L. Mail shareholder reports and prospectuses to current
shareholders;
M. Prepare and file U.S. Treasury Department forms 1099 and other
appropriate information returns required with respect to
dividends and distributions for all shareholders;
N. Provide shareholder account information upon request and prepare
and mail confirmations and statements of account to shareholders
for all purchases, redemptions and other confirmable transactions
as agreed upon with the Fund; and
O. Provide a Blue Sky System which will enable the Fund to monitor
the total number of shares sold in each state. In addition, the
Fund shall identify to the Agent in writing those transactions
and assets to be treated as exempt from the Blue Sky reporting to
the Fund for each state.
P. Support NSCC-Fund/SERV functionality including all networking
levels (1-4).
2. COMPENSATION
The Fund agrees to pay the Agent for performance of the duties listed in
this Agreement; the fees and out-of-pocket expenses include, but are not limited
to the following: printing, postage, forms, stationery, record retention,
mailing, insertion, programming, labels, shareholder lists and proxy expenses.
If the Fund elects to terminate this Agreement prior to the 3rd anniversary of
this Agreement for reasons other than unacceptable service levels, the Fund
agrees to reimburse Agent for the difference between the standard fee schedule
and the discounted fee schedule agreed to between the parties from the date of
termination.
These fees and reimbursable expenses may be changed from time to time
subject to mutual written agreement between the Fund and the Agent.
The Fund agrees to pay all fees and reimbursable expenses within ten
(10) business days following the mailing of the billing notice.
3. REPRESENTATIONS OF AGENT
The Agent represents and warrants to the Fund that:
A. It is a Limited Liability Company duly organized, existing and
in good standing under the laws of Wisconsin;
B. It is a registered transfer agent under the Securities Exchange
Act of 1934 as amended.
C. It is duly qualified to carry on its business in the state of
Wisconsin;
D. It is empowered under applicable laws and by its LLC Agreement to
enter into and perform this Agreement;
E. All requisite corporate proceedings have been taken to authorize
it to enter and perform this Agreement; and
F. It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
G. It will comply with all applicable requirements of the Securities
Act of 1933 and the Securities Exchange Act of 1934, as amended,
the Investment Company Act of 1940, as amended, and any laws,
rules, and regulations of governmental authorities having
jurisdiction.
4. REPRESENTATIONS OF THE FUND
The Fund represents and warrants to the Agent that:
A. The Fund is open-ended diversified investment company under the
Investment Company Act of 1940;
B. The Fund is a corporation organized, existing, and in good
standing under the laws of Maryland;
C. The Fund is empowered under applicable laws and by its Corporate
Charter and bylaws to enter into and perform this Agreement;
D. All necessary proceedings required by the Corporate Charter have
been taken to authorize it/them to enter into and perform this
Agreement;
E. The Fund will comply with all applicable requirements of the
Securities Act of 1933 and the Securities Exchange Act of 1934,
as amended, the Investment Company Act of 1940, as amended, and
any laws, rules and regulations of governmental authorities
having jurisdiction; and
F. A registration statement under the Securities Act of 1933 is
currently effective and will remain effective, and appropriate
state securities law filings have been made and will continue to
be made, with respect to all shares of the Fund being offered for
sale.
5. COVENANTS OF FUND AND AGENT
The Fund shall furnish the Agent a certified copy of the resolution of
the Board of Directors of the Fund authorizing the appointment of the Agent and
the execution of this Agreement. The Fund shall provide to the Agent a copy of
the Corporate Charter , bylaws of the Corporation and all amendments.
The Agent shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended, and
the rules thereunder, the Agent agrees that all such records prepared or
maintained by the Agent relating to the services to be performed by the Agent
hereunder are the property of the Fund and will be preserved, maintained and
made available in accordance with such section and rules and will be surrendered
to the Fund on and in accordance with its request.
6. INDEMNIFICATION; REMEDIES UPON BREACH
The Agent shall exercise reasonable care in the performance of its
duties under this Agreement. The Agent shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Fund in connection
with matters to which this Agreement relates, including losses resulting from
mechanical breakdowns or the failure of communication or power supplies beyond
the Agent's control, except a loss resulting from the Agent's refusal or failure
to comply with the terms of this Agreement or from bad faith, negligence, or
willful misconduct on its part in the performance of its duties under this
Agreement. Notwithstanding any other provision of this Agreement, the Fund shall
indemnify and hold harmless the Agent from and against any and all claims,
demands, losses, expenses, and liabilities (whether with or without basis in
fact or law) of any and every nature (including reasonable attorneys' fees)
which the Agent may sustain or incur or which may be asserted against the Agent
by any person arising out of any action taken or omitted to be taken by it in
performing the services hereunder (i) in accordance with the foregoing
standards, or (ii) in reliance upon any written or oral instruction provided to
the Agent by any duly authorized officer of the Fund, such duly authorized
officer to be included in a list of authorized officers furnished to the Agent
and as amended from time to time in writing by resolution of the Board of
Directors of the Fund.
Further, the Fund will indemnify and hold the Agent harmless against any
and all losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) resulting from any claim, demand, action, or suit as
a result of the negligence of the Fund or the principal underwriter (unless
contributed to by the Agent's breach of this Agreement or other Agreements
between the Fund and the Agent, or the Agent's own negligence or bad faith); or
as a result of the Agent acting upon telephone instructions relating to the
exchange or redemption of shares received by the Agent and reasonably believed
by the Agent under a standard of care customarily used in the industry to have
originated from the record owner of the subject shares; or as a result of acting
in reliance upon any genuine instrument or stock certificate signed,
countersigned, or executed by any person or persons authorized to sign,
countersign, or execute the same.
In the event of a mechanical breakdown or failure of communication or
power supplies beyond its control, the Agent shall take all reasonable steps to
minimize service interruptions for any period that such interruption continues
beyond the Agent's control. The Agent will make every reasonable effort to
restore any lost or damaged data and correct any errors resulting from such a
breakdown at the expense of the Agent. The Agent agrees that it shall, at all
times, have reasonable contingency plans with appropriate parties, making
reasonable provision for emergency use of electrical data processing equipment
to the extent appropriate equipment is available. Representatives of the Fund
shall be entitled to inspect the Agent's premises and operating capabilities at
any time during regular business hours of the Agent, upon reasonable notice to
the Agent.
Regardless of the above, the Agent reserves the right to reprocess and
correct administrative errors at its own expense.
In order that the indemnification provisions contained in this section
shall apply, it is understood that if in any case the Fund may be asked to
indemnify or hold the Agent harmless, the Fund shall be fully and promptly
advised of all pertinent facts concerning the situation in question, and it is
further understood that the Agent will use all reasonable care to notify the
Fund promptly concerning any situation which presents or appears likely to
present the probability of such a claim for indemnification against the Fund.
The Fund shall have the option to defend the Agent against any claim which may
be the subject of this indemnification. In the event that the Fund so elects, it
will so notify the Agent and thereupon the Fund shall take over complete defense
of the claim, and the Agent shall in such situation initiate no further legal or
other expenses for which it shall seek indemnification under this section. The
Agent shall in no case confess any claim or make any compromise in any case in
which the Fund will be asked to indemnify the Agent except with the Fund's prior
written consent.
The Agent shall indemnify and hold the Fund harmless from and against
any and all claims, demands, losses, expenses, and liabilities (whether with or
without basis in fact or law) of any and every nature (including reasonable
attorneys' fees) which may be asserted against the Fund by any person arising
out of any action taken or omitted to be taken by the Agent as a result of the
Agent's refusal or failure to comply with the terms of this Agreement, its bad
faith, negligence, or willful misconduct.
7. CONFIDENTIALITY
The Agent agrees on behalf of itself and its employees to treat
confidentially all records and other information relative to the Fund and its
shareholders and shall not be disclosed to any other party, except after prior
notification to and approval in writing by the Fund, which approval shall not be
unreasonably withheld and may not be withheld where the Agent may be exposed to
civil or criminal contempt proceedings for failure to comply after being
requested to divulge such information by duly constituted authorities.
8. ADDITIONAL SERIES
In the event that The Battery Park Funds, Inc establishes
one or more series of shares with respect to which it desires to have Agent
render transfer agent services, under the terms hereof, it shall so notify Agent
in writing, and if Agent agrees in writing to provide such services, such series
will be subject to the terms and conditions of this Agreement, and shall be
maintained and accounted for by the Agent on a discrete basis. The Battery Park
High Yield Fund is currently the only Fund covered by this Agreement.
9. RECORDS
The Agent shall keep records relating to the services to be performed
hereunder, in the form and manner, and for such period as it may deem advisable
and is agreeable to the Fund but not inconsistent with the rules and regulations
of appropriate government authorities, in particular, Section 31 of The
Investment Company Act of 1940 as amended (the "Investment Company Act"), and
the rules thereunder. The Agent agrees that all such records prepared or
maintained by The Agent relating to the services to be performed by the Agent
hereunder are the property of the Fund and will be preserved, maintained, and
made available with such section and rules of the Investment Company Act and
will be promptly surrendered to the Fund on and in accordance with its request.
10. WISCONSIN LAW TO APPLY
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the state of Wisconsin.
11. FIRSTAR MUTUAL FUND SERVICES YEAR 2000 READINESS DISCLOSURE
The Agent represents to the Fund that the computer software, computer
firmware, computer hardware (whether general or special purpose) and other
similar related items of automated, computerized and/or software systems that
are owned or licensed by the Agent and will be utilized by the Agent or its
agents in connection with the provision of services described in this Agreement
are "Year 2000 compliant (as defined below). As used in this Section 11 of this
Agreement, the term "Year 2000 Compliant" shall mean the ability of the relevant
system to provide all of the following functions:
A. Process date information before, during and after January 1,
2000, including but not limited to accepting specific input data,
providing date specific output data, and performing calculations
on dates or portions of dates;
B. Function accurately and without interruption or malfunction
before, during and after January 1, 2000, without any change in
operations associated with the advent of the new millennium and
assuming no other defects, bugs, viruses or other problems
unrelated to Year 2000 compliance issues which disrupt
functionality;
C. Respond to two-digit, year-date input in a way that resolves
the ambiguity as to century and in a disclosed, defined and
predetermined manner; and
D. Store and provide output data of specific information in ways
that are unambiguous as to century.
12. AMENDMENT, ASSIGNMENT, TERMINATION AND NOTICE
A. This Agreement may be amended by the mutual written consent of
the parties.
B. This Agreement may be terminated upon ninety (90) day's written
notice given by one party to the other. It is understood and
agreed to by the parties that a notice to terminate one of the
servicing contracts constitutes notice of termination for all
servicing contracts that exist between the parties.
C. This Agreement and any right or obligation hereunder may not be
assigned by either party without the signed, written consent of
the other party.
D. Any notice required to be given by the parties to each other
under the terms of this Agreement shall be in writing, addressed
and delivered, or mailed to the principal place of business of
the other party.
If to the agent, such notice should to be sent to:
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
If to the Fund, such notice should be sent to:
Battery Park Funds, Inc.
Attn: President
2 World Financial Center, Bldg. B
New York, NY 10281-1198
E. In the event that the Fund gives to the Agent its written
intention to terminate and appoint a successor transfer agent,
the Agent agrees to cooperate in the transfer of its duties and
responsibilities to the successor, including any and all relevant
books, records and other data established or maintained by the
Agent under this Agreement.
F. Should the Fund exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records
and material will be paid by the Fund.
Battery Park Funds, Inc. Firstar Mutual Fund Services, LLC
By: /S/ ROBERT LEVINE By: /S/ PAUL ROCK
- ------------------------ -------------------------------
Print:ROBERT LEVINE Print: PAUL ROCK
- ------------------------ -------------------------------
Title: PRESIDENT Title: SENIOR VICE PRESIDENT
- ------------------------ -------------------------------
Date: AUGUST 27, 1999 Date: SEPTEMBER 1, 1999
- ------------------------ -----------------------------
Attest: /S/ JENNIE WONG Attest: /S/ FREDDIE JACOBS, JR.
- ------------------------ -------------------------------
Print: JENNIE WONG Print: FREDDIE JACOBS, JR.
- ------------------------ -------------------------------
FORM OF EXPENSE WAIVER AND
REIMBURSEMENT AGREEMENT
AGREEMENT made this 29th day of November, 1999, between Battery Park
Funds, Inc., a Maryland corporation (hereinafter called "Corporation"), and
Nomura Corporate Research and Asset Management Inc., a Delaware corporation
(hereinafter called "NCRAM").
W I T N E S S E T H
WHEREAS, NCRAM has entered into an Investment Advisory Agreement with
the Corporation, pursuant to which NCRAM agrees to provide, or arrange for the
provision of, investment advisory and management services to the Corporation;
and
WHEREAS, the Corporation and NCRAM believe that capping the total
expenses of each class of shares of the Battery Park High Yield Fund (the
"Fund") of the Corporation will enable the Fund to target niches within the load
and no-load product market and will benefit the Fund;
NOW, THEREFORE, the parties hereto do hereby agree as follows:
1. EXPENSE WAIVER AND REIMBURSEMENT BY NCRAM. NCRAM agrees to reduce all or a
portion of its management fee and, if necessary, to bear certain other expenses
(including all expenses allocated pro-rata among the various classes of shares
of the Fund, and other expenses to the extent permitted by the Internal Revenue
Code of 1986, as amended) associated with operating the Fund to the extent
necessary to limit the Fund's annualized expenses to the annual rate of 1.25% of
average daily net assets for Class A shares and 1.00% of average daily net
assets for Class Y shares for the period from October 1, 1999 to September 30,
2000.
2. DUTY OF FUND TO REIMBURSE. Subject to approval by the Fund's Board of
Directors, the Fund agrees to reimburse NCRAM such deferred fees (but not
expenses borne) in later periods to the extent the Fund's expenses fall below
the annualized rates of 1.25% of average daily net assets for Class A shares and
1.00% of average daily net assets for Class Y shares; provided, however, that
the Fund is not obligated to pay any such deferred fees more than two years
after the end of the fiscal year in which the fee was deferred.
3. ASSIGNMENT. No assignment of this Agreement shall be made by NCRAM without
the prior consent of the Corporation.
4. DURATION AND TERMINATION. This Agreement shall be effective for the period
from October 1, 1999 to September 30, 2000, and shall continue in effect
thereafter unless terminated by either of the parties hereto upon written notice
to the other of not less than five (5) days. This Agreement shall automatically
terminate upon the termination of the Investment Advisory Agreement.
5. CHOICE OF LAW. This Agreement shall be construed in accordance with the laws
of New York.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
BATTERY PARK FUNDS, INC.
By___________________________________________
Name: Robert Levine
Title: President
NOMURA CORPORATE RESEARCH AND ASSET MANAGEMENT INC.
By___________________________________________
Name: Lance Fraser
Title: Managing Director
BATTERY PARK FUNDS, INC.
CODE OF ETHICS
1. STATEMENT OF GENERAL FIDUCIARY PRINCIPLES
This Code of Ethics is based on the principles that (i) Access Persons
(as such term is hereinafter defined) owe a fiduciary duty to, among others, the
shareholders of the Fund to conduct their personal transactions in Securities in
a manner which neither interferes with Fund portfolio transactions nor otherwise
takes unfair or inappropriate advantage of an Access Person's relationship to
the Fund; (ii) in complying with this fiduciary duty, Access Persons owe
shareholders the highest duty of trust and fair dealing; and (iii) Access
Persons must, in all instances, place the interests of the shareholders of the
Fund ahead of the Access Person's own personal interests or the interests of
others. For example, in order to avoid the appearance of conflict from a
personal transaction in a Security, the failure to recommend that Security to,
or the failure to purchase that Security for, the Fund, may be considered a
violation of this Code.
Access Persons must adhere to these general fiduciary principles, as
well as comply with the specific provisions of this Code. Technical compliance
with the terms of this Code will NOT automatically insulate an Access Person
from scrutiny in instances where the personal transactions in a Security
undertaken by such Access Person show a pattern of abuse of such Access Person's
fiduciary duty to the Fund and its shareholders or a failure to adhere to these
general fiduciary principles.
2. DEFINITIONS
(a) "Fund" means each registered investment company named above
which adopts this Code and any series or portfolios of such
Fund.
(b) "Access Person" means any director, trustee, officer, managing
general partner, general partner, or Advisory Person of the
Fund, and all relatives living within the same household as
such Access Person; provided, however, that any Access Person
who is an employee of the Fund's investment adviser, its
principal underwriter, or of any operating company that is an
affiliate of subsidiary of the Fund's investment adviser or
principal underwriter, shall be subject to the provisions and
terms of such adviser's or underwriter's code of ethics, and
shall not be subject to this Code.
(c) The "1940 Act" means the Investment Company Act of 1940, as
amended.
(d) "Advisory Person" means (i) any employee of either the Fund or
of any company in a control relationship to the Fund who, in
connection with the employee's regular functions or duties,
makes, participates in, or normally obtains information
regarding the current purchases or sales of a Security by the
Fund, or whose functions relate to the making of any
recommendations with respect to such purchases or sales; and
(ii) any natural person in a control relationship to the Fund
who normally obtains information concerning current
recommendations made to the Fund with regard to the purchases
or sales of a Security.
(e) A Security is "being considered for purchase or sale" when a
recommendation to purchase or sell a Security has been made
and communicated and, with respect to the person making the
recommendation, when such person seriously considers making
such a recommendation.
(f) "Beneficial ownership" shall be interpreted in the same manner
as it would be in determining whether a person is subject to
the provisions of Section 16 of the Securities Exchange Act
of 1934, and the rules and regulations thereunder, except that
the determination of direct or indirect beneficial ownership
shall apply to all Securities which an Access Person has or
acquires. As a general matter, "beneficial ownership" will
be attributed to an Access Person in all instances where the
Access Person (i) possess the ability to purchase or sell the
Securities (or the ability to direct the disposition of the
Securities); (ii) possesses voting power (including the power
to vote or to direct the voting) over such Securities; or
(iii) receives any benefits substantially equivalent to those
of ownership.
(g) "Control" shall have the same meaning as that set forth in
Section 2(a)(9) of the 1940 Act.
(h) "Disinterested director" means a director, trustee, or
managing general partner of the Fund who is not an "interested
person" of the Fund within the meaning of Section 2(a)(19) of
the 1940 Act.
(i) "Purchase of sale of Security" includes, INTER ALIA, the
writing of an option to purchase or sell a Security.
(j) "Investment Personnel" include: Access Persons with direct
responsibility and authority to make investment decisions
affecting the Fund (such as portfolio managers); Access
Persons who provide information and advice to such portfolio
managers (such as securities analysts); and Access Persons who
assist in executing investment decisions for the Fund (such as
traders). As the context requires, "Investment Personnel" may
refer to one or more Access Persons.
(k) "Security" shall have the meaning set forth in Section 2(a)
(36) of the 1940 Act, and shall include: equity and debt
securities; options on and warrants to purchase equity or
debt securities; shares of closed-end investment companies;
and Related Securities. "Related Securities" are instruments
and securities that are related to, but no the same as, a
Security. For example, a Related Security may be convertible
into a Security, or give its holder the right to purchase
the Security. For purposes of reporting, "Security" shall
include futures contracts. "Security" shall not include:
securities issued by the Government of the United States
(including short term debt securities which are U.S.
government securities pursuant to Section 2(a)(16) of the
1940 Act); bankers' acceptances; bank certificates of deposit;
commercial paper; shares of registered open-end investment
companies; Securities which are not eligible for purchase or
sale by the Fund (including any Securities representing an
ownership interest in Federated Investors); and such other
instruments as may be determined by the Fund's Board of
Directors, from time to time.
(l) "Public Company" means an entity subject to the reporting
requirements of the Securities Exchange Act of 1934
3. EXEMPTED TRANSACTIONS
The prohibitions of Section 4 of this Code shall not apply to:
(a) Purchases or sales effected in any account over which the
Access Person has no direct or indirect influence or control.
(b) Purchases or sales which are non-volitional on the part of
either the Access Person or the Fund, subject to the
provisions of Section 4(h) of this Code.
(c) Purchases which are either: made solely with the dividend
proceeds received in a dividend reinvestment plan; or part of
an automatic payroll deduction plan, whereby an employee
purchases securities issued by an employer.
(d) Purchases effected upon the exercise of rights issued by an
issuer PRO RATA to all holders of a class of its Securities,
to the extent such rights were acquired from such issuer, and
any sales of such rights so acquired.
4. PROHIBITED TRANSACTIONS AND ACTIVITIES
(a) No Access Person shall purchase or sell, directly or
indirectly, any Security in which he or she has, or by reason
of such transaction acquires, a direct or indirect beneficial
ownership interest and which he or she knows, or should have
known, at the time of such purchase or sale:
(i) is being considered for purchase or sale by the fund; or
(ii) is being purchased or sold by the Fund.
(b) Inducing or causing the Fund to take action, or to fail to
take action, for the purpose of achieving a personal benefit,
rather than to benefit the Fund, is a violation of this Code.
Examples of this would include causing the Fund to purchase a
Security owned by the Access Person for the purpose of
supporting or driving up the price of the Security, and
causing the Fund to refrain from selling a Security in an
attempt to protect the value of the Access Person's
investment, such as an outstanding option.
(c) Using knowledge of the Fund's portfolio transactions to profit
by the market effect of such transactions is a violation of
this Code. One test which will be applied to determining
whether this prohibition has been violated will be to review
the Securities transactions of Access Persons for patterns.
However, it is important to note that a violation could result
from a single transaction if the circumstances warranted a
finding that the provision of Section 1 of this Code has been
violated.
(d) All Access Persons are prohibited from acquiring any Security
distributed in an initial public offering, until trading of
the Security commences in the secondary market.
(e) All Access Persons are prohibited from acquiring Securities for their
personal accounts in a private placement made by an issuer that is a Public
Company, without the express prior approval of the President of the Fund's
investment adviser (or his designee). In instances where an Investment
Personnel, after receiving prior approval, acquires a Security in a private
placement, the Investment Personnel has an affirmative obligation to
disclose this investment to the President of the Fund's investment adviser
(or his designee) if the Investment Personnel participates in any
subsequent consideration of any potential investment, by the Fund, in the
issuer of those Securities. The Fund's decision to purchase Securities of
such issuer (following a purchase by an Investment Personnel in an approved
personal transaction) will be subject to an independent review by the
President of the Fund's investment adviser, or his designee, so long as the
person conducting such review has no personal interest in the issuer.
(f) All Access Persons are prohibited from executing a personal
transaction in all Securities (including transactions in
pension or profit-sharing plans in which the Access Person has
a beneficial interest), without express prior approval of the
President of the Fund's investment adviser (or his designee).
Notwithstanding the receipt of express prior approval, any
purchases or sales by Access Persons undertaken in reliance on
this provision remain subject to the prohibitions enumerated
in Sections 4(g) and (h) of this Code.
(g) All Access Persons are prohibited from executing a personal transaction
in any Security on a day during which the Fund has a pending "buy" or
"sell" order for that Security, until the Fund's order is either executed
or withdrawn. All Investment Personnel are prohibited from purchasing or
selling any Security within seven (7) calendar days before and after the
Fund purchases or sells the same Security. Transactions undertaken in
violation of this prohibition will either be required to be unwound, or
any profits realized by an Access Person on any personal
transactions in Securities within the proscribed periods (either undertaken
while the Fund has an open order, or within the 7-day blackout period)
will be required to be disgorged (to an entity designated by the President
of the Fund's investment adviser [or his designee]), and the Access Person
will be subject to disciplinary action, as determined by the Director of
Compliance and/or the Fund's Board of Directors.
(h) All Investment Personnel are prohibited from profiting in the purchase
and sale, or sale and purchase, of the same (or equivalent) Securities
within 60 calendar days, if such Security was also in the Fund's portfolio
at the time of the Investment Personnel's purchase or sale. Transactions
undertaken in violation of this prohibition will either be required to be
unwound, or any profits realized on such short-term trades will be required
to be disgorged. For purposes of this prohibition, each personal
transaction in the Security will begin in a new 60 calendar day
period. As an illustration, if an Investment Personnel purchases 1000
shares of Omega Corporation on June 1st, 500 shares on July 1st, and 250
shares on August 1st, the profit from the sale of the 1000 shares
purchased on June 1st is prohibited for any transaction prior to
October 1st (i.e., 60 calendar days following August 1st). In
circumstances where a personal transaction in Securities within the
proscribed period is involuntary (for example, due to
unforeseen corporate activity, such as a merger), the Investment
Personnel must notify the Director of Compliance.
In circumstances where an Investment Personnel can document
personal exigencies, the President of the Fund's investment
adviser (or his designee) may grant an exemption from the
prohibition of profiting in the purchases and sale, or sale
and purchase, of the same (or equivalent) Securities within 60
calendar days. Such an exemption is wholly within the
discretion of the President of the Investment adviser (or his
designee), and any request for such an exemption will be
evaluated on the basis of the facts of the particular
situation.
(i) All Investment Personnel are prohibited from receiving any
gift, favor, preferential treatment, valuable consideration,
or other thing of more than a DE MINIMIS value in any year
from any person or entity from, to or through whom the Fund
purchases or sells Securities, or an issuer of Securities. For
purposes of this Code, "DE MINIMIS value" is equal to $100 or
less.
(j) All Investment Personnel are prohibited from serving on the boards of
directors of any Public Company, absent express prior authorization from
the President of the Fund's investment adviser (or his designee).
Authorization to serve on the board of a Public Company may be granted
in instances where the President of the Fund's investment adviser (or his
designee) determines that such board service would be consistent with the
interests of the Fund and its shareholders. If prior approval to serve as
a director of a Public Company is granted, an Investment Personnel
has an affirmative duty to recuse himself from participating in any
deliberations by the Fund regarding possible investments in the securities
issued by the Public Company on whose board
the Investment Personnel sits.
(k) Notwithstanding the other restrictions of this Code to which
Disinterested directors are subject, subparagraphs (d) through
(h) of this Section 4 shall not apply to Disinterested
directors.
5. REPORTING
(a) Every Access Person shall report to the Fund the information
described in Section 5(c) of this Code with respect to
transactions (other than those personal transactions in
Securities exempted under Section 3 of this Code) in any
Security in which such Access Person has, or by reason of such
transaction acquires, any direct or indirect beneficial
ownership.
(b) A Disinterested director of the Fund need only report a
personal transactions in a Security if such director, at the
time of that personal transaction, knew or, in ordinary course
of fulfilling his of her official duties as a director of the
Fund, should have known that, during the 15-day period
immediately preceding or following the date of the personal
transaction by the director, such Security was purchased or
sold by the Fund or was being considered for purchase or sale
by the Fund or its investment adviser.
(c) Every report shall be made not later than 10 calendar days
after the end of the calendar quarter in which the transaction
to which the report relates was effected, shall be dated and
signed by the Access Person submitting the report, and shall
contain the following information:
(i) the date of the transaction, the title and the number of shares,
and the principal amount of each Security involved;
(ii) the nature of the transaction (i.e., purchase, sale or any other
type of acquisition of disposition);
(iii) the price at which the transaction was effected;
(iv) the name of the broker, dealer or bank through whom the
transaction was effected; and
(v) if there were no personal transactions in
Securities during the period, either a
statement to that effect or the word "None"
(or some similar designation).
(d) Any such report may contain a statement that the report shall
not be construed as an admission by the person making such
report that he or she has any direct or indirect beneficial
ownership in the Security to which the report relates.
(e) Every Access Person is required to direct his of her broker to
forward to the President of the Fund's investment adviser (or
his designee), on timely basis, duplicate copies of both
confirmations of all personal transactions in Securities
effected for any account in which such Access Person has any
direct or indirect beneficial ownership interest and periodic
statements relating to any such account.
(f) Any Access Person who receives any gift, favor, preferential
treatment, valuable consideration or other thing of value of
more than DE MINIMIS value in any year from any person or
entity that does business either with or on behalf of the Fund
(including an issuer of Securities or any entity or person
through whom the Fund purchases or sells Securities) is
required to report the receipt of such gift to the Director of
Compliance (or his designee). This reporting requirement shall
not apply to:
(i) salaries, wages, fees or other compensation
paid, or expenses paid or reimbursed, in the
usual scope of an Access Person's employment
responsibilities for the Access Person's employer;
(ii) the acceptance of meals, refreshments or
entertainments of reasonable value in the
course of a meeting or other occasion, the
purpose of which is to hold bona fide
business discussions;
(iii) the acceptance of advertising or promotional
material of nominal value, such as pens,
pencils, note pads, key chains, calendars
and similar items;
(iv) the acceptance of gifts, meals, refreshments, or entertainments
of reasonable value that are related to
commonly recognized events or occasions,
such as a promotion, new job, Christmas, or
other recognized holiday; or
(v) the acceptance of awards, from employer to an employee, for
recognition of service and accomplishment.
(g) All Access Persons, on an annual basis or upon request of the
Director of Compliance (or his designee), will be required to
furnish a list of all Securities held by such Access Person or
the members of his household. All Access Persons, upon
commencement of employment, are required to disclose all
personal Securities holdings.
In addition, all Access Persons are required, on an annual
basis, to certify that they have received, read, and
understand the provisions of this Code, and that they
recognize that they are subject to its provisions. Such
certification shall also include a statement that the Access
Person has complied with the requirements of this Code and
that the Access Person has disclosed or reported all personal
transactions in Securities that are required to be disclosed
or reported pursuant to the requirements of this Code.
(h) A Disinterested director shall be exempt from the reporting
requirements contained in subparagraphs (e) and (g) of this
Section 5 of this Code, so long as at the time of the personal
transaction in the Security, the Disinterested director
neither knew, nor, in the ordinary course of fulfilling his
official duties as a director of the Fund, should have known
that during the 15-day period immediately preceding of after
the date of the transaction in the Security by the
Disinterested director the Security was purchased or sold by
the Fund, or considered for purchase or sale.
6. SANCTIONS
Upon discovering a violation of this Code, the Board of Directors of
the Fund may take such actions or impose such sanctions, if any, as it deems
appropriate, including, INTER ALIA, a letter of censure or suspension, a fine,
or a recommendation of the termination of the employment of the violator. (In
instances where the violation is committed by a member of the Access Person's
household, any sanction would be imposed on the Access Person.) The filing of
any false, incomplete or untimely reports, as required by Section 5 of this
Code, may (depending on the circumstances) be considered a violation of this
Code.
POWER OF ATTORNEY
The undersigned officers and directors of Battery Park Funds, Inc. (the
"Company") hereby appoint the Treasurer, Secretary and Assistant Secretary of
the Company as attorneys-in-fact and agents, with full power of substitution and
resubstitution for them and in their names, place and stead, in any and all
capacities, to sign any and all documents to be filed with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, the Securities
Exchange Act o f1934 and the Investment Company Act of 1940, by means of the
Securities and Exchange Commission's electronic disclosure system known EDGAR;
and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
sign and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as each of them in
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his or her substitute
or substitutes, may lawfully do or cause to be done by virtue thereof.
The undersigned officers and directors hereby execute this Power of
Attorney as of this 30th day of November, 1999.
NAME TITLE
/S/ROBERT LEVINE* Chairman, President and Director
- ----------------------
Robert Levine
/S/ FRANCIS L. FRAENKEL* Director
- -------------------------
Francis L. Fraenkel
/S/ FRANK K. REILLY* Director
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Frank K. Reilly
/S/ JENNIE WONG Director and Treasurer
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Jennie Wong
*By:/S/ LACE B. FRASER
Attorney in Fact for the Persons
Listed Above
