As filed with the Securities and Exchange Commission
on August 21, 1997.
Registration Nos. 333-33365
811-XXXX
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. 1 / X /
Post-Effective Amendment No. / /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. / 1 / / X /
SAMCO FUND, INC.
(Exact Name of Registrant as Specified in Charter)
600 Fifth Avenue
New York, New York 10020
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (212) 332-5211
Christina Seix
Seix Investment Advisors Inc.
300 Tice Boulevard
Woodcliff Lake, NJ 07675-7633
(Name and Address of Agent for Service)
Copies to:
William Goodwin, Esq. Eric Nachimovsky
Dechert Price & Rhoads AMT Capital Services, Inc.
30 Rockefeller Plaza 600 Fifth Avenue, 26th Fl.
New York, NY 10112 New York, NY 10020
___________________
Approximate Date of Proposed Public Offering: As soon as practicable
after this Registration Statement becomes effective.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant hereby elects to register an indefinite number of shares of
Capital Stock, $.001 par value per share, of all series of the Registrant,
now existing or hereafter created.
The Registrant hereby amends this Registration Statement under the
Securities Act of 1933 on such date or dates as may be necessary to delay
its effective date until the Registrant shall file a further amendment
which specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to
said the provisions of Section 8(a), may determine.
SAMCO FUND, INC.
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
Under the Securities Act of 1933
N-1A Item No. Location
Part A Prospectus Caption
Item 1. Cover Page Cover Page
Item 2. Synopsis The Fund's Expenses
Item 3. Condensed Financial
Information Not Applicable
Item 4. General Description of
Registrant Additional Information --
Organization of the Fund;
Investment Objectives and
Policies; Investment
Limitations; Risk
Factors; Appendix
Item 5. Management of the Fund Management of the Fund
Item 5A. Management's Discussion
of Fund Performance Not Applicable
Item 6. Capital Stock and Other
Securities Additional Information --
Organization of the Fund;
Additional Information --
Dividends and Distributions;
Additional Information --
Shareholder Inquiries;
Additional Information --
Taxes
Item 7. Purchase of Securities
Being Offered Additional Information --
Determination of Net Asset Value;
Purchase of Shares
Item 8. Redemption or Repurchase Redemption of Shares
Item 9. Legal Proceedings Not Applicable
Statement of Additional
Part B Information Caption
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and
History Not Applicable
Item 13. Investment Objectives and
Policies Additional Information on
Portfolio Instruments and
Investment Policies;
Investment Restrictions
Item 14. Management of the
Registrant Management of the Fund
Item 15. Control Persons and
Principal Holders of
Securities Not Applicable
Item 16. Investment Advisory and
Other Services Management of the Fund
Item 17. Brokerage Allocation Portfolio Transactions and
Brokerage
Item 18. Capital Stock and Other
Securities Not Applicable
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered Purchase of Shares;
Determination of
Net Asset Value
Item 20. Tax Status Taxation
Item 21. Underwriters Purchase of Shares
Item 22. Calculation of
Performance Data Performance Data
Item 23. Financial Statements Not Applicable
Part C
Information required to be included in Part C is set
forth under the appropriate Item, so numbered, in Part C to this
Registration Statement.
SAMCO Fixed Income Portfolio
Class A Shares
SAMCO Fixed Income Portfolio (the "Fund") is a portfolio
of SAMCO Fund, Inc. an open-end management investment company.
The investment objective of the Fund is to provide investors
with a total return which consistently exceeds the total return
of the broad U.S. investment grade bond market. The Fund is
professionally managed and seeks to achieve its objective
through superior security selection and emphasis on current
income, while maintaining a duration neutral posture. There can
be no assurance that the Fund will achieve its investment
objective. See "Risk Factors."
Class A shares of the Fund may be purchased directly from
AMT Capital Services, Inc. (the "Distributor"), 600 Fifth
Avenue, New York, NY 10020 (800) 762-4848. The minimum initial
purchase is $1,000,000. See "Purchase of Shares." A
shareholder may redeem his or her shares at any time at net
asset value of the shares. See "Redemption of Shares."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Prospectus is a concise statement of information
about the Fund that is relevant to making an investment in Class
A shares of the Fund. This Prospectus should be retained for
future reference. A statement containing additional information
about the Fund, dated November 1, 1997 (the "Statement of
Additional Information"), has been filed with the Securities and
Exchange Commission and can be obtained, without charge, by
calling or by writing the Distributor at the above telephone
number or address. The Statement of Additional Information is
hereby incorporated by reference into this Prospectus.
SEIX INVESTMENT ADVISORS INC.--INVESTMENT ADVISER
AMT CAPITAL SERVICES, INC.--DISTRIBUTOR
The date of this Prospectus is November 1, 1997.
SAMCO FIXED INCOME PORTFOLIO
Table of Contents Page
PROSPECTUS SUMMARY
THE FUND'S EXPENSES
INVESTMENT OBJECTIVE AND
POLICIES
DESCRIPTION OF
INVESTMENTS
RISK FACTORS
INVESTMENT LIMITATIONS
MANAGEMENT OF THE FUND
PURCHASE OF SHARES
REDEMPTION OF SHARES
THE FUND'S PERFORMANCE
ADDITIONAL INFORMATION
SERVICE PROVIDERS
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY
THE FUND, THE DISTRIBUTOR OR THE INVESTMENT ADVISER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFERING IN ANY STATE IN WHICH SUCH OFFERING
MAY NOT LAWFULLY BE MADE.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by detailed
information appearing elsewhere in this Prospectus and in the
Statement of Additional Information.
The Fund and Its Investment Objective
The Fund is a no-load investment portfolio of the SAMCO Fund,
Inc., an open-end management investment company (the "Company")
incorporated in the state of Maryland on August 4, 1997. The
investment objective of the Fund is to provide investors with a total
return which consistently exceeds the total return of the broad U.S.
investment grade bond market. The Fund is professionally managed and
seeks to achieve its objective through superior security selection and
emphasis on current income, while maintaining a duration neutral
posture. A duration neutral posture infers that the Fund's interest rate
sensitivity will be similar to that of its benchmark. There can be no
assurance that the Fund will achieve its investment objective. See
"Investment Objective and Policies."
The Investment Adviser
Seix Investment Advisors Inc. (the "Investment Adviser") serves
as the Fund's investment adviser. For its services as investment
adviser, the Fund pays the Investment Adviser a monthly fee at an
annual rate of 0.25% of the Fund's average daily net assets. The
Investment Adviser believes the advisory fee is comparable to that of
other investment companies with similar investment objectives. See
"Management of the Fund."
Purchasing Shares
Shares of the Fund may be purchased without any sales charges at
its net asset value next determined after receipt of the order by
submitting an Account Application to the Distributor and wiring
federal funds to the Distributor's "Fund Purchase Account" at
Investors Bank & Trust Company (the "Transfer Agent"). Shares may be
purchased directly from the Distributor. The Fund is not available for
sale in all states. For information about the Fund's availability,
contact an account representative at the Distributor.
The minimum initial investment is $1,000,000. The Fund reserves
the right to waive the minimum initial investment amount. There are
no sales commissions (loads) or 12b-1 fees. For more information,
refer to "Purchase of Shares."
Redemption of Shares
Shares of the Fund may be redeemed, without charge, at the next
determined net asset value after receipt by either the Transfer Agent
or the Distributor of the redemption request. There is no redemption
fee. For more information, refer to "Redemption of Shares."
Dividends and Distributions
The Fund will distribute substantially all of its net investment
income to shareholders in the form of monthly dividends. Dividends
are reinvested on the last Business Day or paid in cash on the first
Business Day of the following month. If any net capital gains are
realized from the sale of the underlying securities, the Fund will
distribute such gains with the last dividend for the calendar year.
All distributions are reinvested automatically, unless otherwise
specified in writing by the investor, in shares of the Fund. See
"Additional Information".
Risk Factors
Prospective investors should consider certain risks associated
with an investment in the Fund. See "Risk Factors."
THE FUND'S EXPENSES
The following expense table is provided to assist investors in
understanding the various costs and expenses that an investor will
incur, either directly or indirectly, as a shareholder in the Fund,
which are calculated as a percentage of average daily net assets.
These are the only fund related expenses that an investor bears.
Annual Fund Operating Expenses (as a percentage of average net
assets)
Management fees 0.25%
Other expenses* 0.20%
Total Fund operating expenses* 0.45%
*After reimbursement of expenses.
See "Management of the Fund" for a description of fees and
expenses. "Other expenses" include fees for shareholder services,
custodial, administration, dividend disbursing and transfer agency
fees, legal and accounting fees, printing costs and registration fees.
The Investment Adviser and the Administrator have voluntarily agreed
to limit the total expenses of the Fund [(excluding interest, taxes,
brokerage, and extraordinary expenses)] to an annual rate of 0.45% of
the Fund's average daily net assets for an indefinite time period. As
long as this temporary expense limitation continues, it may lower the
Fund's expenses and increase its total return. In the event the
Investment Adviser and the Administrator remove such expense cap, the
Fund's expenses may increase and its total return may be reduced
depending on the total assets of the Fund. Without such cap, the
total annual operating expenses (on an annualized basis) are expected
to be approximately ___. Such figure is based on estimated amounts for
the current fiscal year. See "Management of the Fund."
Example: The following example demonstrates the projected dollar
amount of total cumulative expenses that would be incurred over
various periods with respect to a hypothetical investment in the Fund.
These amounts are based upon payments by the Fund of operating
expenses set forth in the table above, and are also based upon the
following assumptions:
A shareholder would pay the following expenses on a $1,000,000
investment, assuming (1) 5% annual return and (2) redemption at the
end of each time period:
After 1 year $______
After 3 years $______
The purpose of this table is to assist the investor in
understanding the various costs and expenses that an investor in the
Fund will bear directly or indirectly. This example should not be
considered a representation of future expenses and actual expenses
may be greater or less than those shown. Moreover, while the example
assumes a 5% annual return, the Fund's performance will vary and may
result in a return greater or less than 5%.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to provide investors
with a total return which consistently exceeds the total return of the
broad U.S. investment grade bond market. The Fund is professionally
managed and seeks to achieve its objective through superior security
selection and emphasis on current income, while maintaining a duration
neutral posture. This is a fundamental investment objective and may
not be changed without the affirmative vote of the holders of a
majority of the Fund's outstanding voting securities, as defined in
the Investment Company Act of 1940, as amended (the "1940 Act"). The
Fund seeks to achieve its objective through investments in fixed
income securities.
The Investment Adviser will manage the Fund based on its fixed
income approach which is founded upon four cornerstones: (1) Targeted
Duration; (2) Yield Tilt; (3) Comprehensive Sector Construction; and
(4) the use of Proprietary Analytics. Targeted Duration: The Fund
will be managed with a duration that is close to the duration of the
Fund's benchmark, the Lehman Brothers Aggregate Bond Index. Value is
added through sector, security, and yield curve decisions rather than
maturity management. Yield Tilt: Although the Fund is managed on a
total return basis, a premium is placed on yield. Income is
considered the most powerful contributor to fixed income returns.
Non-Treasury sectors generally play a dominant role in the Fund. The
yield of the benchmark is used as a performance goal in addition to
its total return. Comprehensive Sector Construction: Sector
commitments are made based on the duration contribution of each sector
to the overall duration of the Fund rather than the sector weighting.
Proprietary Analytics: Because of the growing complexity of the bond
market, the firm believes that the use of proprietary techniques is
key to identifying value and to adequately controlling risk.
The Fund will invest in the broad universe of available U.S.
dollar fixed income securities, including but not limited to: (1)
obligations issued or guaranteed by the United States Government, such
as United States Treasury securities; (2) obligations backed by the
full faith and credit of the United States, such as obligations of the
Government National Mortgage Association and the Export-Import Bank;
(3) obligations issued or guaranteed by United States Government
agencies, Government-Sponsored Enterprises (GSE's) or
instrumentalities where the Fund must look principally to the issuing
or guaranteeing agency for ultimate repayment; (4) obligations issued
or guaranteed by a foreign government, or any of its political
subdivisions, authorities, agencies, or instrumentalities or by
supranational organizations; (5) obligations of domestic or foreign
corporations or other entities, including securities issued under Rule
144A; (6) obligations of domestic or foreign banks; (7) mortgage- and
asset-backed securities (including Commercial Mortgage Backed
Securities and Collateralized Mortgage Obligations); (8) short-term
investments such as: time deposits, certificates of deposit (including
marketable variable rate certificates of deposit), bankers'
acceptances issued by a commercial bank or savings and loan
association; custodian's short-term investment fund (STIF); (9)
preferred stock; and (10) municipals (taxable and tax-exempt). The
Fund may only invest in investment grade securities that are those
rated by one or more nationally recognized statistical rating
organization (NRSRO) in one of the four highest rating categories at
the time of purchase (e.g. AAA, AA, A or BBB by Standard & Poor's
Corporation (Standard & Poor's), Duff & Phelps Credit Rating Co.
("Duff & Phelps"), or Fitch Investors Service, Inc., (Fitch) or Aaa,
Aa, A or Baa by Moody's Investors Service, Inc. (Moody's) If the
security is unrated, it must meet, in the judgement of the Investment
Adviser, the above minimum credit quality standards.
The Fund's investment policies (other than its investment
objective) are not fundamental and may be changed by the Board of
Directors of the Fund without the approval of shareholders.
DESCRIPTION OF INVESTMENTS
The Fund may invest in the securities defined below in
accordance with their listing of allowable investments and any
quality or policy constraints.
Agencies
The Fund may invest in agencies which are securities that are
not guaranteed by the United States Government, but which are issued,
sponsored or guaranteed by a federal agency or federally sponsored
agency such as the Student Loan Marketing Association or any of
several other agencies.
Bank Obligations.
The Fund may invest in obligations of domestic and foreign
banks, including time deposits, certificates of deposit, bankers'
acceptances, bank notes, deposit notes, Eurodollar time deposits,
Eurodollar certificates of deposit, variable rate notes, loan
participations, variable amount master demand notes, and custodial
receipts. Time deposits are non-negotiable deposits maintained in a
banking institution for a specified period of time at a stated
interest rate. Certificates of deposit are negotiable short-term
obligations issued by commercial banks or savings and loan
associations against funds deposited in the issuing institution.
Variable rate certificates of deposit are certificates of deposit on
which the interest rate is adjusted periodically prior to their stated
maturity based upon a specified market rate. A bankers' acceptance is
a time draft drawn on a commercial bank by a borrower usually in
connection with an international commercial transaction (to finance
the import, export, transfer, or storage of goods). The Fund may,
from time to time, concentrate more than 25% of its assets in domestic
bank obligations. Domestic bank obligations include instruments that
are issued by United States (domestic) banks; United States branches
of foreign banks, if such branches are subject to the same regulations
as United States banks; and foreign branches of United States banks,
if the Investment Adviser determines that the investment risk
associated with investing in instruments issued by such branches is
the same as that of investing in instruments issued by the United
States parent bank, in that the United States parent bank would be
unconditionally liable in the event that the foreign branch fails to
pay on its instruments. Bank obligations entail varying amounts of
interest rate and credit risk, with the lowest-rated and longest-dated
bank obligations entailing the greatest risk of loss to the Fund.
CMOs--Collateralized Mortgage Obligations
The Fund may purchase collateralized mortgage obligations which
are derivatives that are collateralized by mortgage pass-through
securities. Cash flows from the mortgage pass-through securities are
allocated to various tranches (a "tranche" is essentially a separate
security) in a predetermined, specified order. Each tranche has a
stated maturity - the latest date by which the tranche can be
completely repaid, assuming no prepayments - and has an average life -
the average of the time to receipt of a principal payment weighted by
the size of the principal payment. The average life is typically used
as a proxy for maturity because the debt is amortized (repaid a
portion at a time), rather than being paid off entirely at maturity,
as would be the case in a straight debt instrument.
Corporates
The Fund may invest in corporates which are debt instruments
issued by private corporations. Bondholders, as creditors, have a
prior legal claim over common and preferred stockholders of the
corporation as to both income and assets for the principal and
interest due to the bondholder. The Fund will buy corporates subject
to any quality constraints. If a security held by the Fund is down-
graded, the Fund may retain the security if the Investment Adviser
deems retention of the security to be in the best interests of the
Fund.
Floaters
Floaters--Floating and Variable Rate Obligations are debt
obligations with a floating or variable rate of interest, i.e. the
rate of interest varies with changes in specified market rates or
indices, such as the prime rate, or at specified intervals. Certain
floating or variable rate obligations may carry a demand feature that
permits the holder to tender them back to the issuer of the
underlying instrument, or to a third party, at par value prior to
maturity.
Foreign Government and International and Supranational Agency Debt
Securities.
The Fund may purchase U.S. dollar denominated debt obligations
issued or guaranteed by foreign governments or their subdivisions,
agencies, and instrumentalities, and debt obligations issued or
guaranteed by international agencies and supranational entities.
Investment Grade Debt Securities
The Fund may invest in investment grade securities that are
those rated by one or more nationally recognized statistical rating
organization (NRSRO) in one of the four highest rating categories at
the time of purchase (e.g. AAA, AA, A or BBB by Standard & Poor's,
Fitch, Duff & Phelps, or Aaa, Aa, A or Baa by Moody's). Securities
rated BBB or Baa represent the lowest of four levels of investment
grade securities and are regarded as borderline between definitely
sound obligations and those in which the speculative element begins to
predominate. Mortgage-backed securities, including mortgage pass-
throughs and collateralized mortgage obligations (CMOs), deemed
investment grade by the Investment Adviser, will either carry a
guarantee from an agency of the U.S. Government or a private issuer of
the timely payment of principal and interest (such guarantees do not
extend to the market value of such securities or the net asset value
per share of the Fund) or, in the case of unrated securities, be
sufficiently seasoned that they are considered by the Investment
Adviser to be investment grade quality. The Investment Adviser may
retain securities if their ratings fall below investment grade if it
deems retention of the security to be in the best interests of the
Fund. The Fund may hold unrated securities if the Investment Adviser
considers the risks involved in owning that security to be equivalent
to the risks involved in holding an Investment Grade Security.
Mortgage-Backed Securities and Asset-Backed Debt Securities.
Mortgage-backed debt securities are secured or backed by
mortgages or other mortgage-related assets. Such securities may be
issued by such entities as Government National Mortgage Association
("GNMA"), Federal National Mortgage Association ("FNMA"), Federal Home
Loan Mortgage Corporation ("FHLMC"), commercial banks, savings and
loan associations, mortgage banks, or by issuers that are affiliates
of or sponsored by such entities. Other asset-backed securities are
secured or backed by assets other than mortgage-related assets, such
as automobile and credit card receivables, and are issued by such
institutions as finance companies, finance subsidiaries of industrial
companies, and investment banks. The Fund will purchase only
asset-backed securities that the Investment Adviser determines to be
liquid. The Fund will not purchase mortgage backed or asset-backed
securities that do not meet the above minimum credit standards.
An important feature of mortgage-and asset-backed securities is
that the principal amount is generally subject to partial or total
prepayment at any time because the underlying assets (i.e., loans)
generally may be prepaid at any time. If an asset-backed security is
purchased at a premium to par, a prepayment rate that is faster than
expected will reduce yield to maturity, while a prepayment rate that
is slower than expected will have the opposite effect of increasing
yield to maturity. Conversely, if an asset-backed security is
purchased at a discount, faster than expected prepayments will
increase, while slower than expected prepayments will decrease, yield
to maturity. It should also be noted that these securities may not
have any security interest in the underlying assets, and recoveries on
repossessed collateral may not, in some cases, be available to support
payments on these securities.
Municipal Debt Securities.
The Fund may, from time to time, purchase municipal debt
securities when, in the Investment Adviser's opinion, such instruments
will provide a greater return than taxable instruments of comparable
quality. It is not anticipated that such securities will ever
represent a significant portion of the Fund's assets. Fund
distributions that are derived from interest on municipal debt
securities will be taxable to shareholders in the same manner as
distributions derived from taxable debt securities.
Preferred Stock.
The Fund may invest in preferred stock which are non-voting
ownership shares in a corporation which pay a fixed or variable
stream of dividends.
Repurchase Agreements.
Repurchase agreements are transactions by which the Fund
purchases a security and simultaneously commits to resell that
security to the seller (a bank or securities dealer) at an agreed
upon price on an agreed upon date (usually within seven days of
purchase). The resale price reflects the purchase price plus an
agreed upon market rate of interest which is unrelated to the coupon
rate or date of maturity of the purchased security. Such agreements
permit the Fund to keep all its assets at work while retaining
overnight flexibility in pursuit of investments of a longer term
nature. The Investment Adviser will continually monitor the value of
the underlying collateral to ensure that its value, including accrued
interest, always equals or exceeds the repurchase price.
When-lssued and Forward Commitment Securities.
The Fund may purchase securities on a "when-issued" basis and
may purchase or sell securities on a "forward commitment" basis. In
such transactions, instruments are bought with payment and delivery
taking place in the future in order to secure what is considered to be
an advantageous yield or price at the time of the transaction.
Delivery of and payment for these securities may take more than a
month after the date of the purchase commitment, but will take place
no more than 120 days after the trade date. No income accrues prior
to delivery on securities that have been purchased pursuant to a
forward commitment or on a when-issued basis. However, interest is
generated on the short-term investments that are segregated for the
settlement of these securities. At the time the Fund enters into a
transaction on a when-issued or forward commitment basis, a segregated
account consisting of cash or liquid securities equal to the value of
the when-issued or forward commitment securities will be established
in the Fund and maintained in the Fund and will be marked to market
daily. A short term investment in this segregated account may not
have a duration that exceeds 180 days. Forward commitments, or
delayed deliveries, are deemed to be outside the normal corporate
settlement structure. They are subject to segregation requirements;
however, when a forward commitment purchase is made to close a forward
commitment sale, or vice versa, the difference between the two may be
netted for segregation purposes until settlement date.
Zero Coupon Debt Securities.
The Fund may invest in zero coupon debt securities (bonds that
pay no interest but are originally sold at an original issue discount.
Because they do not pay interest until maturity, zero coupon
securities tend to be subject to greater fluctuation of market value
in response to changes in interest rates than interest-paying
securities of similar maturities.
RISK FACTORS
Interest Rate Risk.
Interest rate risk is the risk of fluctuations in bond prices
due to changing interest rates. As a rule, bond prices vary inversely
with market interest rates. For a given change in interest rates,
longer duration bonds fluctuate more in price than shorter-maturity
bonds. To compensate investors for these larger fluctuations, longer
duration bonds usually offer higher yields than shorter-maturity
bonds, other factors, including credit quality, being equal. As the
fund's benchmark is the Lehman Brothers Aggregate Bond Index, it is
expected to be subject to a moderate level of interest rate risk,
consistent with that of the index.
Prepayment Risk.
Prepayment risk is the possibility that, during periods of
declining interest rates, higher-yielding securities with optional
prepayment rights will be repaid before scheduled maturity, and the
Fund will be forced to reinvest the unanticipated payments at lower
interest rates. Debt obligations that can be prepaid (including most
mortgage-and asset-backed securities) will not enjoy as large a gain
in market value as other bonds when interest rates fall. In part to
compensate for prepayment risk, mortgage-and asset-backed securities
generally offer higher yields than bonds of comparable credit quality
and maturity.
Credit Risk.
Credit risk is the risk that an issuer of securities held
by the Fund will be unable to make payments of interest or principal.
The credit risk assumed by the Fund is a function of the credit
quality of its underlying securities. The average credit quality of
the Fund is expected to be high, and thus credit risk, in the
aggregate, should be low. The Fund will also be exposed to event
risk, the risk that corporate debt securities held by the Fund may
suffer a substantial decline in credit quality and market value due to
a corporate restructuring. Corporate restructurings, such as mergers,
leveraged buyouts, takeovers, or similar events, are often financed by
a significant increase in corporate debt. As a result of the added
debt burden, the credit quality and market value of a firm's existing
debt securities may decline significantly. While event risk may be
high for certain securities held by the Fund, event risk for the Fund
in the aggregate should be low because of the extensive
diversification expected in the Fund. For further discussion of
credit risk, see "Investment Grade Debt Securities". The ratings of
fixed income securities by S&P, Moody's, Duff & Phelps, and Fitch are
a generally accepted barometer of credit risk. They are, however,
subject to certain limitations from an investor's standpoint. The
rating of an issuer is heavily weighted by past developments and does
not necessarily reflect probable future conditions. There is
frequently a lag between the time a rating is assigned and the time it
is updated. In addition, there may be varying degrees of difference
in credit risk of securities within each rating category.
Non-Diversified Status
The Fund is classified as a "non-diversified" investment company
under the 1940 Act, which means the Fund is not limited by the 1940
Act in the proportion of its assets that may be invested in the
securities of a single issuer. However, the Fund intends to conduct
its operations so as to qualify as a regulated investment company for
purposes of the Internal Revenue Code of 1986, as amended (the
"Code"), which generally will relieve the Fund of any liability for
federal income tax to the extent its earnings are distributed to
shareholders. See "Additional Information - Taxes." To so qualify,
among other requirements, the Fund will limit its investments so that,
at the close of each quarter of the taxable year, (i) not more than
25% of the market value of the Fund's total assets will be invested in
securities of a single issuer, and (ii) with respect to 50% of the
market value of its total assets, not more than 5% of the market value
of its total assets will be invested in the securities of a single
issuer and the Fund will not own more than 10% of the outstanding
voting securities of a single issuer.
Under these investment requirements, the Fund must invest in at
least twelve securities positions. Ten of the positions may not
exceed 5% of total assets each at the time of purchase; the remaining
two positions could each comprise 25% of total assets at the time of
purchase. Generally, it is anticipated that the portfolio will
consist of more than twelve positions. To the extent that the Fund is
less diversified, it may be more susceptible to adverse economic,
political, or regulatory developments affecting a single issuer than
would be the case if it were more broadly diversified.
INVESTMENT LIMITATIONS
The Fund may not:
borrow money (including entering into reverse repurchase
agreements).;
invest more than 25% of the total assets of the Fund in the
securities of issuers having their principal activities in any
particular industry, except for obligations issued or guaranteed by
the U.S. government, its agencies, GSE's, instrumentalities or by any
state, territory or any possession of the United States or any of
their authorities, agencies, instrumentalities or political
subdivisions, or with respect to repurchase agreements collateralized
by any of such obligations. For purposes of this restriction,
supranational issuers will be considered to comprise an industry as
will each foreign government that issues securities purchased by the
Fund. In the case of Asset Backed Securities, the industry will be
defined by the underlying assets in each trust. (For example, credit
card receivables and auto loans would each be considered separate
industries); and
(3) invest the cash securing a forward commitment in mortgage
backed securities in investments that have a duration exceeding 180
days.
The limitations contained above may be changed only with the
affirmative vote of the holders of a majority of the Fund's
outstanding voting securities, as defined in the 1940 Act. The
percentage limitations contained above as well as elsewhere in this
Prospectus and in the Statement of Additional Information apply only
at the time of purchase and the Fund will not be required to dispose
of securities upon subsequent fluctuations in market value.
MANAGEMENT OF THE FUND
Board of Directors
The Board of Directors of the Company consists of five
individuals, two of whom are not "interested persons" of the Fund as
defined in the 1940 Act. The Directors of the Fund are responsible
for the overall supervision of the operations of the Fund and perform
the various duties imposed on the directors of investment companies by
the 1940 Act. The Directors and officers of the Fund and their
principal occupations are set forth below.
Investment Adviser
Seix Investment Advisors Inc., established in 1992, is a
registered investment adviser that specializes in professional fixed
income management for corporations, public funds, endowments,
foundations and hospitals. The Investment Adviser currently has
approximately $1.5 billion in assets under management. The Investment
Adviser is located at 300 Tice Boulevard, Woodcliff Lake, NJ 07675.
Seix Investment Advisors Inc. acts as the investment adviser to
the Fund and provides the Fund with management and investment advisory
services. The advisory agreement with the Investment Adviser (the
"Advisory Agreement") provides that, subject to the direction of the
Board of Directors of the Fund, the Investment Adviser is responsible
for the actual management of the Fund. The responsibility for making
decisions to buy, sell or hold a particular security rests with the
Investment Adviser, subject to review by the Board of Directors. The
Investment Adviser also is obligated to provide all the office space,
facilities, equipment and personnel necessary to perform its duties
under the Advisory Agreement.
The Investment Adviser receives monthly compensation at the
annual rate of 0.25% of the average daily net assets of the Fund. The
Investment Adviser may waive all or part of its fee from time to time
in order to increase the Fund's net income available for distribution
to shareholders. The Fund will not be required to reimburse the
Investment Adviser for any advisory fees waived. In addition, the
Investment Adviser and the Administrator have voluntarily agreed to
limit the total expenses of the Fund [(excluding interest, taxes,
brokerage, and extraordinary expenses)] to an annual rate of 0.45% of
the Fund's average daily net assets for an indefinite time period. As
long as this temporary expense limitation continues, it may lower the
Fund's expenses and increase its total return. In the event the
Investment Adviser and the Administrator remove the expense cap, the
Fund's expenses may increase and its total return may be reduced
depending on the total assets of the Fund.
The Fund is responsible for paying certain expenses incurred
in its operations including, among other things, the investment
advisory and administrative fees, legal and audit fees, unaffiliated
Directors' fees and expenses, custodian and transfer agency fees,
certain insurance premiums, accounting and pricing costs, federal and
state registration fees, the costs of issuing and redeeming shares,
costs of shareholder meetings, any extraordinary expenses and certain
of the costs of printing proxies, shareholders reports, prospectuses
and statements of additional information. The Fund also pays for
brokerage fees and commissions in connection with the purchase and
sale of portfolio securities.
Portfolio Managers
Christina Seix, CFA, Chairman, CEO & Chief Investment Officer
Formerly, Chairman & CEO, Head of Investment Policy, MacKay-Shields
Total Investment Experience: 24 years
BA, Fordham University, Mathematics
MA, SUNY, Mathematics
John Talty, CFA, President & Senior Portfolio Manager
Formerly, Chief Fixed Income Strategist, J.P. Morgan Securities
Total Investment Experience: 16 years
B.A., Connecticut College, Economics, Phi Beta Kappa, Magna Cum Laude
Barbara Hoffmann, Managing Director and Senior Portfolio Manager
Formerly, Senior Portfolio Manager, MetLife Investment Management Co.
Total Investment Experience: 18 years
BS, University of Maine, Education/Mathematics
Michael McEachern, CFA, Director and Senior Portfolio Manager
Formerly, Vice President, Fixed Income, American General Corp.
Total Investment Experience: 13 years
BA, University of California, Operations Research
MBA, Rice University, Accounting/Public Administration
Joseph Calabrese, Director and Senior Portfolio Manager
Formerly, Director, Fixed Income, MetLife Insurance Company
Total Investment Experience: 10 years
BS, New Jersey Institute of Technology, Industrial Engineering
MBA, New York University, Finance
Investment Adviser Composite Account Information
The Investment Adviser manages fixed income accounts for
institutional and private investors. These separate accounts are not
registered investment companies and are exempt from registration under
the 1940 Act. The composite performance information provided below is
intended to demonstrate the performance of the Investment Adviser in
managing accounts with fixed income investment strategies as measured
against a specific market index. The performance results of the
composite do not represent the performance of the Fund and should not
be considered to indicate past or future performance of the Fund.
The Investment Adviser's composite includes all actual, fee
paying, discretionary private accounts managed by the Investment
Adviser, including accounts no longer in existence, which have
investment objectives, policies, strategies and risks that are similar
to those of the Fund. Accounts are included from the first full month
following the date at which the account is deemed to be fully
invested. The average number of accounts included in the Investment
Adviser's composite is (insert number). Securities transactions are
accounted for on the trade date and accrual accounting is utilized.
Cash and equivalents are included in performance returns.
The composite performance information was calculated in
accordance with recommended standards of the Association for
Investment Management and Research ("AIMR"). The performance return
presented was calculated on a total return basis and include all
dividends and interest, cash and cash equivalents, realized and
unrealized gains and losses. The performance returns include
brokerage commissions and execution costs incurred by the composite
accounts without any provision for federal or state income taxes.
Securities transactions are accounted for on the trade date and
accrual accounting was utilized.
The private accounts that are included in the Investment
Adviser's composite are not subject to the same types of expenses to
which the Fund, a regulated investment company, would be subject such
as investment advisory fees, administration fees, transfer agency
fees, SEC registration fees and state filing fees, nor were they
subject to the diversification requirements, specific tax restrictions
and investment limitations imposed on the Fund by the Investment
Company Act or Subchapter M of the Internal Revenue Code. The
composite performance results of the Investment Adviser's private
accounts would be adversely affected if it were regulated as an
investment company under the federal securities laws. In addition,
the Investment Adviser has appropriately reduced the historical gross
performance of the composite to reflect the assumed deduction of Fund
operating expenses.
For the periods ended June 30, 1997:
Year to Date One Year Three Years* Since Inception*
(1/1/97-6/30/97) (7/1/96-6/30/97) (7/1/94-6/30/97) (9/30/89-6/30/97)
(unaudited) (unaudited) (unaudited) (unaudited)
Full Market
Management
Composite
Account
Lehman Brothers (1)
Aggregate Bond
Index
*Annualized
(1) Returns do not include commissions or fees which would be incurred
by an investor in the index portfolio.
Note: unlike a registered investment company which has specific
rules and regulations concerning performance information, the
information contained in the composite accounts are not required to
be updated continuously. The Investment Adviser will update the
performance information for the composite accounts in such a manner
so that the information included herein is not deemed misleading.
Administrator
AMT Capital Services, Inc., (in its capacity as administrator,
the "Administrator") acts as the Fund's administrator pursuant to an
administration agreement (the "Administration Agreement"). Pursuant
to the Administration Agreement, the Administrator is responsible for
providing administrative services to the Fund and assists in managing
and supervising all aspects of the general day-to-day business
activities and operations of the Fund other than investment advisory
activities, including certain accounting, auditing, clerical,
bookkeeping, custodial, transfer agency, dividend disbursing,
compliance and related services, Blue Sky compliance, corporate
secretarial services and assistance in the preparation and filing of
tax returns and reports to shareholders and the SEC. The Fund pays
the Administrator a monthly fee at the annual rate of 0.15% of the
Fund's average daily net assets and the Administrator is entitled to
reimbursement from the Fund for its out-of-pocket expenses incurred
under the Administration Agreement.
Transfer Agent
The Transfer Agent, with offices located at 200 Clarendon
Street, Boston, Massachusetts 02116, acts as the Fund's transfer agent
pursuant to a transfer agency, dividend disbursing agency and
shareholder servicing agency agreement (the "Transfer Agent
Agreement"). Pursuant to the Transfer Agent Agreement, the Transfer
Agent is responsible for the issuance, transfer and redemption of
shares and the opening and maintenance of shareholder accounts. The
Transfer Agent is entitled to reimbursement from the Fund for out-of-
pocket expenses incurred by the Transfer Agent under the Transfer
Agent Agreement.
PURCHASE OF SHARES
There is no sales charge imposed by the Fund. The minimum
initial investment in any Portfolio of the Fund is $1,000,000;
additional purchases may be of any amount.
The offering of shares of the Fund is continuous and purchases
of shares of the Fund may be made Monday through Friday, except for
the holidays declared by the Federal Reserve Banks of New York or
Boston (a "Business Day"). At the present time, these holidays are:
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Memorial
Day, Fourth of July, Labor Day, Columbus Day, Veterans Day,
Thanksgiving, and Christmas. The Fund's shares are offered at a
public offering price equal to the net asset value next determined
after a purchase order becomes effective.
In order to purchase shares on a particular Business Day,
subject to the offering dates described above, a purchaser must submit
a completed Account Application Form (and other required documents)
and call the Distributor at (800) 762-4848 [or within the City of New
York, (212) 332-5211] prior to 4:00 p.m. Eastern time to inform the
Fund of the incoming wire transfer. If Federal funds are received by
the Fund that same day, the order will be effective on that day. If
the Fund receives notification after 4:00 p.m. Eastern time, or if
Federal funds are not received by the Transfer Agent, such purchase
order shall be executed as of the date that Federal funds are
received. Shares purchased will begin accruing dividends on the day
Federal funds are received.
Purchases of shares must be made by wire transfer of Federal
funds. Please note that the shareholder's bank may impose a charge to
execute the wire transfer. The wiring instructions for purchasing
shares of the Fund are:
Investors Bank & Trust Company
Boston, MA
ABA # xx-xxxx-xxx
Acct: 999XXXXXXX
Benf: SAMCO Fixed Income Fund
F/F/C (Shareholder's Account at Fund)
REDEMPTION OF SHARES
The Fund will redeem all full and fractional shares of the Fund
upon request of shareholders. The redemption price is the net asset
value per share next determined after receipt by the Transfer Agent of
proper notice of redemption as described below. If such notice is
received by the Transfer Agent by 12:00 p.m. Eastern time on any
Business Day, the redemption will be effective on the date of receipt.
If such notice of redemption is received by the Transfer Agent after
12:00 p.m. Eastern time, the redemption of the shareholder shall be
effective on the following Business Day. Payment will ordinarily be
made by wire on the next Business Day but within no more than seven
Business Days from the date of receipt. If the notice is received on
a day that is not a Business Day or after the above-mentioned cut-off
times, the redemption notice will be deemed received as of the next
Business Day.
There is no charge imposed by the Fund to redeem shares of the
Fund; however, a shareholder's bank may impose its own wire transfer
fee for receipt of the wire. Redemptions may be executed in any
amount requested by the shareholder up to the amount such shareholder
has invested in the Fund.
To redeem shares, a shareholder or any authorized agent (so
designated on the Account Application Form) must provide the Transfer
Agent with the dollar or share amount to be redeemed, the account to
which the redemption proceeds should be wired (which account shall
have been previously designated by the shareholder on its Account
Application Form), the name of the shareholder and the shareholder's
account number. Shares redeemed receive dividends up to and including
the day preceding the day the redemption proceeds are wired.
A shareholder may change its authorized agent or the account
designated to receive redemption proceeds at any time by writing to
the Transfer Agent with an appropriate signature guarantee. Further
documentation may be required when deemed appropriate by the Transfer
Agent.
A shareholder may request redemption by calling the Transfer
Agent at (800) 247-0473. Telephone redemption is made available to
shareholders of the Fund on the Account Application Form. The Fund
and the Transfer Agent may employ reasonable procedures designed to
confirm that instructions communicated by telephone are genuine. If
either the Fund or the Transfer Agent does not employ such procedures,
it may be liable for losses due to unauthorized or fraudulent
instructions. The Fund or the Transfer Agent may require personal
identification codes and will only wire funds through pre-existing
bank account instructions. No bank instruction changes will be
accepted via telephone.
THE FUND'S PERFORMANCE
Total Return
From time to time, the Fund may advertise certain information
about its performance. The Fund may present its "average annual total
return" over various periods of time. Such total return figures show
the average annual percentage change in value of an investment in the
Fund from the beginning date of the measuring period to the end of the
measuring period. These figures reflect changes in the price of the
Fund's shares and assume that any income dividends and/or capital
gains distributions made by the Fund during the period were reinvested
in shares of the Fund. Figures may be given for the most current one-
, five- and ten-year periods (or the life of the Fund, if it has not
been in existence for any such period) and may be given for other
periods as well. When considering "average" total return figures for
periods longer than one year, it is important to note that the Fund's
annual total return for any one year in the period might have been
greater or less than the average for the entire period. In addition,
the Fund may make available information as to its respective "yield"
and "effective yield" over a thirty-day period, as calculated in
accordance with the Securities and Exchange Commission's prescribed
formula. The "effective yield" assumes that the income earned by an
investment in the Fund is reinvested, and will therefore be slightly
higher than the yield because of the compounding effect of this
assumed reinvestment.
Furthermore, in reports or other communications to shareholders
or in advertising material, the Fund may compare its performance with
that of other mutual funds as listed in the rankings prepared by
Lipper Analytical Services, Inc. or similar independent services which
monitor the performance of mutual funds, other industry or financial
publications or financial indices such as the Lehman Brothers
Aggregate Bond Index or a composite benchmark index. It is important
to note that the total return figures are based on historical returns
and are not intended to indicate future performance.
ADDITIONAL INFORMATION
Dividends and Distributions
Dividends are automatically reinvested in additional shares of
the Fund on the last day of each month at the net asset value per
share on the last Business Day of that month. Shareholders must
indicate their desire to receive dividends in cash (payable on the
first Business Day of the following month) on the Account Application
Form. Otherwise all dividends will be reinvested in additional shares
as described above. In the event that the Fund realizes net long-term
capital gains (i.e., with respect to assets held more than one year),
it will distribute them at least annually by automatically reinvesting
(unless a shareholder has elected to receive cash) such long-term
capital gains in additional shares of the Fund at the net asset value
on the date the distribution is declared.
The net investment income (including accrued but unpaid interest
and amortization of original issue and market discount or premium) of
the Fund will be declared as a dividend payable monthly to
shareholders of record as of the last Business Day of each month. The
Fund will also declare, to the extent necessary, a net short-term
capital gain dividend once per year. Dividends are paid on the first
Business Day of the month.
Determination of Net Asset Value
The net asset value per share of the Fund is determined each
Business Day the Fund is open. The net asset value per share 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 payable to the Investment Adviser, are
accrued daily.
The following methods are used to calculate the value of the
Fund's assets: (1) all portfolio securities for which over--
the-counter market quotations are readily available (including
asset-backed securities) are valued at the latest bid price; (2)
deposits and repurchase agreements are valued at their cost plus
accrued interest unless the Investment Adviser determines in good
faith, under procedures established by and under the general
supervision of the Fund's Board of Directors, that such value does not
approximate the fair value of such assets; (3) positions (e.g.,
futures and options) listed or traded on an exchange are valued at
their last sale price on that exchange (or if there were no sales that
day for a particular position, that position is valued at the closing
bid price); and (4) the value of other assets will be determined in
good faith by the Investment Adviser at fair value under procedures
established by and under the general supervision of the Fund's Board
of Directors.
Taxes
The following discussion is only a brief summary of some of the
important tax considerations affecting the Fund and its shareholders.
No attempt is made to present a detailed explanation of all federal,
state, local and foreign income tax considerations, and this
discussion is not intended as a substitute for careful tax planning.
Accordingly, potential investors are urged to consult their own tax
advisers with specific reference to their own tax situation.
The Fund intends to qualify and elect to be treated as a
"regulated investment company" for federal income tax purposes under
Subchapter M of the Code. If so qualified, the Fund will not be
subject to federal income taxes on its net investment income (i.e.,
its investment company taxable income) as that term is defined in the
Code, determined without regard to the deduction for dividends paid)
and net capital gain (i.e., the excess of the Fund's net long-term
capital gain over its net short-term capital loss), if any, that it
distributes to its shareholders in each taxable year. To qualify as a
regulated investment company, the Fund must, among other things,
distribute to its shareholders at least 90% of its net investment
company taxable income for such taxable year. However, the Fund would
be subject to corporate federal income tax at a rate of 35% on any
undistributed income or net capital gain. The Fund will be subject to
a 4% nondeductible excise tax on its taxable income to the extent it
does not meet certain distribution requirements. If in any year the
Fund should fail to qualify as a regulated investment company, the
Fund would be subject to federal income tax in the same manner as an
ordinary corporation and distributions to shareholders would be
taxable to such holders as ordinary income to the extent of the
earnings and profits of the Fund. Such distributions would qualify
for the dividends-received deduction available to corporate
shareholders. Distributions in excess of earnings and profits would
be treated as a tax-free return of capital, to the extent of a
holder's basis in its shares, and any excess, as a long- or short-term
capital gain.
Distributions paid by the Fund from net investment income are
designated by the Fund as "ordinary income dividends" and, whether
paid in cash or reinvested in additional shares, will be taxable to
Fund shareholders that are otherwise subject to tax as ordinary
income. A portion of the Fund's ordinary income dividends may be
eligible for the dividends-received deduction for corporations if
certain requirements are met. Distributions made from the Fund's net
capital gain which are designated by the Fund as "capital gains
dividends" are taxable to shareholders as long-term capital gains,
regardless of the length of time the shareholder has owned Fund
shares. Shareholders receiving distributions from the Fund in the
form of additional shares will be treated for federal income tax
purposes as receiving a distribution in an amount equal to the net
asset value of the additional shares on the date of such a
distribution.
Gain or loss, if any, recognized on the sale or other
disposition of shares of the Fund will be taxed as capital gain or
loss if the shares are capital assets in the shareholder's hands.
Generally, a shareholder's gain or loss will be a long-term gain or
loss if the shares have been held for more than one year. If a
shareholder sells or otherwise disposes of a share of the Fund before
holding it for more than six months, any loss on the sale or other
disposition of such share shall be treated as a long-term capital loss
to the extent of any capital gain dividends received by the
shareholder with respect to such share. A loss realized on a sale or
exchange of shares may be disallowed if other shares are acquired
within a 61-day period beginning 30 days before and ending 30 days
after the date that the shares are disposed of.
Dividends and distributions by the Fund are generally taxable
to the shareholders at the time the dividend or distribution is made.
Any dividend declared in December of any year, however, that is
payable to shareholders of record on a specified date in such months
will be deemed to have been received by the shareholders and paid by
the Fund on December 31 of such year in the event such dividends are
actually paid during January of the following year.
The Fund may be required to withhold federal income tax at a
rate of 31% ("backup withholding") from dividends and redemption
proceeds paid to non-corporate shareholders. This tax may be withheld
from dividends if (i) the shareholder fails to furnish the Fund with
the shareholder's correct taxpayer identification number, (ii) the
Internal Revenue Service ("IRS") notifies the Fund that the
shareholder has failed to report properly certain interest and
dividend income to the IRS and to respond to notices to that effect,
or (iii) when required to do so, the shareholder fails to certify that
he or she is not subject to backup withholding.
Organization of the Fund
The Fund is a portfolio of SAMCO Fund, Inc., an open-end
management investment company, which was incorporated under Maryland
law on August 4, 1997. The Company has an authorized capital of
2,500,000,000 shares of Common Stock, par value $0.001 per share. The
Fund currently is the only organized series of the Company. The Board
of Directors may, in the future, establish additional portfolios which
may have different investment objectives. All shares of each fund
will have equal voting rights and each shareholder is entitled to one
vote for each full 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 Company is not required
and does not intend to hold meetings of shareholders. The Fund has
undertaken to call a meeting of shareholders upon a written request of
10% of the Fund's outstanding shares, for the purpose of voting on
removal of one or more directors and the Fund will assist shareholder
communications with regard to such a meeting, as provided under
Section 16(c) of the 1940 Act. Shares of the Fund will, when issued,
be fully paid and non-assessable and have no preemptive or conversion
rights. 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. The Fund also issues another class of shares which may
have different operating and other expenses. For more information
about other classes of the Fund's shares, investors should contact the
Distributor at the address or phone number set forth on the cover of
this Prospectus.
SERVICE PROVIDERS
Custodian and Accounting Agent
Investors Bank & Trust Company, 200 Clarendon Street, Boston,
Massachusetts 02116, is Custodian and Accounting Agent for the Fund.
Transfer and Dividend Disbursing Agent
Investors Bank & Trust Company, 200 Clarendon Street, Boston,
Massachusetts 02116, is Transfer Agent for the shares of the Fund, and
Dividend Disbursing Agent for the Fund.
Legal Counsel
Dechert Price & Rhoads, 30 Rockefeller Plaza, New York, New York
10112, is legal counsel for the Fund.
Independent Auditors
To be decided.
Shareholder Inquiries
Shareholder inquiries may be addressed to the Fund or the
Distributor at the addresses or telephone numbers set forth on the
cover page of this Prospectus.
APPENDIX A
Description of Bond Ratings*
Duff & Phelps Credit Rating Co.
AAA: Highest credit quality. The risk factors are negligible,
being only slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA-: High credit quality. Protection factors are
strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
A+, A, A-: Protection factors are average but adequate.
However, risk factors are more variable and greater in periods of
economic stress.
BBB+, BBB, BBB-: Below average protection factors but still
considered sufficient for prudent investment. Considerable
variability in risk during economic cycles.
Plus (+) Minus (-): Plus and minus signs are used with a rating
symbol to indicate the relative position of a credit within the rating
category. Plus and minus signs are not used in the AAA category.
Fitch Investors Service, Inc.
AAA: Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds rated
AAA. Because bonds rated in the AAA and AA categories are not
significantly vulnerable to foreseeable future developments, short-
term debt of these issuers is generally rated F-1+.
A: Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with
higher ratings.
BBB: Bonds considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest
and repay principal is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely to
have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher ratings.
Moody's Investors Service, Inc.
Aaa: Bonds which are rated Aaa are judged to be of the best
quality and carry the smallest degree of investment risk. Interest
payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely
to impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they comprise what
generally are known as high grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-
term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Moody's applies numerical modifiers, 1, 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.
Standard & Poor's Corporation
AAA: Debt rated AAA has the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay principal is
extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest
and repay principal and differs from the higher rated issues only in
small degree.
A: Debt rated A has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions
than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity
to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity
to pay interest and repay principal for debt in this category than in
higher rated categories.
APPENDIX B
Description of Commercial Paper Ratings
Moody's Investors Service, Inc.
Prime-1 Issuers (or related supporting institutions)
rated "P-1" have a superior ability for repayment of senior
short-term debt obligations. "Prime-1" repayment ability will
often be evidenced by many of the following characteristics:
leading market positions in well-established industries, high
rates of return on funds employed, conservative capitalization
structures with moderate reliance on debt and ample asset
protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation, and well-
established access to a range of financial markets and assured
sources of alternate liquidity.
Prime-2 Issuers (or related supporting institutions)
rated "P-2" have a strong ability for repayment of senior short-
term debt obligations. This will normally be evidenced by many
of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions.
Ample alternative liquidity is maintained.
Standard & Poor's Corporation
A-1 This highest category indicates that the degree of
safety regarding timely payment is strong. Those issues
determined to possess extremely strong safety characteristics
are denoted with a plus (+) sign designation.
A-2 Capacity for timely payment on issues with this
designation is satisfactory. However, the relative degree of
safety is not as high as for issues designated "A-1."
* As described by the rating companies themselves.
STATEMENT OF ADDITIONAL INFORMATION
(Class A shares only)
SAMCO FIXED INCOME PORTFOLIO
600 Fifth Avenue, 26th Floor
New York, New York 10020
(212) 332-5211
SAMCO Fixed Income Portfolio (the "Fund") is a
portfolio of SAMCO Fund, Inc. an open-end management
investment company. Shares of the Fund may be purchased
through AMT Capital Services, Inc. (the "Distributor").
This Statement of Additional Information is not a
prospectus and should be read in conjunction with the
Prospectus of the Fund, dated November 1, 1997 (the
"Prospectus"), which has been filed with the Securities and
Exchange Commission (the "Commission") and can be obtained,
without charge, by calling or writing the Distributor at the
telephone number or address stated below. This Statement of
Additional Information incorporates by reference the
Prospectus.
Distributed by: AMT Capital Services, Inc.
600 Fifth Avenue, 26th Floor
New York, New York 10020
(212) 332-5211
(800) 762-4848 (outside New York City)
The date of this Statement of Additional Information is November 1, 1997
TABLE OF CONTENTS Page
Organization of the Fund
Management of the Fund
Board of Directors and Officers
Investment Adviser
Administrator
Distribution of Fund Shares
Supplemental Descriptions of Investments
Supplemental Investment Techniques
Supplemental Discussion of Risks Associated With the
Fund's Investment Policies and Investment Techniques
Options
Futures Contracts and Options on Futures Contracts
Investment Restrictions
Portfolio Transactions
Tax Considerations
Shareholder Information
Calculation of Performance Data
Financial Statements
Appendix
Quality Rating Descriptions
ORGANIZATION OF THE FUND
The authorized capital stock of the Fund consists of
2,500,000,000 shares with $.001 par value. Every share
issued by the Fund has equal voting rights; shareholders
receive one vote for each share held. All shares issued and
outstanding are fully paid and non-assessable, transferable,
and redeemable at net asset value at the option of the
shareholder. Shares have no preemptive or conversion rights.
The shares of the Fund have non-cumulative voting
rights, which means that the holders of more than 50% of the
shares voting for the election of Directors can elect 100% of
the Directors if they choose to do so, and, in such event,
the holders of the remaining less than 50% of the shares
voting for the election of Directors will not be able to
elect any person or persons to the Board of Directors.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS AND OFFICERS
The Fund is managed by its Board of Directors. The
Directors and officers of the Fund and their principal
occupations during the past five years are set forth below.
An asterisk (*) has been placed next to the name of each
director who is an "interested person" of the Fund, as such
term is defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), by virtue of his affiliation with
the Fund or the Fund's investment adviser, Seix Investment
Advisors Inc. (the "Investment Adviser").
Name, Address and Age Office Principal Occupation During Past Five Years
DIRECTORS
No employee of the Investment Adviser nor the
Distributor receives any compensation from the Fund for
acting as an officer or director of the Fund. The Fund pays
each director who is not a director, officer or employee of
the Investment Adviser or the Distributor or any of their
affiliates, a fee of $X,XXX for each meeting attended, and
each of the Directors receive an annual retainer of $X,XXX
which is paid in quarterly installments.
Estimated Director's Compensation Table
Fiscal Year Ended December 31, 1997
Director Aggregate Pension or Estimated Total
Compensation From Retirement Annual Compensation
Registrant Benefits benefits From Registrant
Accrued As Upon and Fund Complex
Part of Fund Retirement Paid to
Expenses Directors
Director #1 $0 $0 $0 $0
Director #2 $0 $0 $0 $0
Director #3 $0 $0 $0 $0
Director #4 $0 $0 $0 $0
By virtue of the responsibilities assmed by the Investment Adviser and the
Distributor and their affiliates under their respective agreements with the
Fund, the Fund itself requires no employees in addition to its officers.
INVESTMENT ADVISER AND ADVISORY AGREEMENT
Seix Investment Advisors Inc., established in 1992, is a registered
investment adviser that specializes in professional fixed income management for
corporations, public funds, endowments, foundations and hospitals. [ ]
may be deemed "controlling persons" of the Investment Adviser
[on the basis of their ownership of the Investment Adviser's stock].
Pursuant to the terms of the advisory agreement
between the Fund and the Investment Adviser (the "Advisory
Agreement"), the Investment Adviser, subject to the control
and supervision of the Fund's Board of Directors and in
conformance with the stated investment objectives and
policies of the Fund, shall manage the investment and
reinvestment of the assets of the Fund. In this regard, it
is the responsibility of the Investment Adviser to make
investment decisions for the Fund and to place the Fund's
purchase and sales orders for investment securities.
The Advisory Agreement shall remain in effect for two
years following their date of execution and thereafter will
automatically continue for successive annual periods, so long
as such continuance is specifically approved at least
annually by (a) the Board of Directors or (b) the vote of a
"majority" (as defined in the 1940 Act) of the Fund's
outstanding shares voting as a single class; provided, that
in either event the continuance is also approved by at least
a majority of the Board of Directors who are not "interested
persons" (as defined in the 1940 Act) of the Fund or the
Investment Adviser by vote cast in person at a meeting called
for the purpose of voting on such approval.
The Advisory Agreement is terminable without penalty on
not less than 60 days' notice by the Board of Directors or by
a vote of the holders of a majority of the Fund's outstanding
shares voting as a single class, or upon not less than 60
days' notice by the Investment Adviser. The Advisory
Agreement will terminate automatically in the event of its
"assignment" (as defined in the 1940 Act).
The Investment Adviser pays all of its expenses arising
from the performance of its obligations under the Advisory
Agreement, including all executive salaries and expenses of
the directors and officers of the Fund who are employees of
the Investment Adviser or its affiliates, and office rent of
the Fund. Subject to the expense reimbursement provisions
described in the Prospectus under "Fund Expenses", other
expenses incurred in the operation of the Fund are borne by
the Fund, including, without limitation, investment advisory
fees, brokerage commissions, interest, fees and expenses of
independent attorneys, auditors, custodians, accounting
agents, transfer agents, taxes, cost of stock certificates
and any other expenses (including clerical expenses) of
issue, sale, repurchase or redemption of shares, expenses of
registering and qualifying shares of the Fund under federal
and state laws and regulations, expenses of printing and
distributing reports, notices and proxy materials to existing
shareholders, expenses of printing and filing reports and
other documents filed with governmental agencies, expenses of
annual and special shareholders' meetings, fees and expenses
of Directors of the Fund who are not employees of the
Investment Adviser or its affiliates, membership dues in the
Investment Company Institute, insurance premiums and
extraordinary expenses such as litigation expenses.
As compensation for its services, the Investment
Adviser receives monthly compensation at the annual rate of
0.25% of the average daily net assets of the Fund. The
Investment Adviser may waive all or part of its fee from time
to time in order to increase the Fund's net income available
for distribution to shareholders. The Fund will not be
required to reimburse the Investment Adviser for any advisory
fees waived. In addition, the Investment Adviser and the
Administrator have voluntarily agreed to limit the total
expenses of the Fund [(excluding taxes, interest, brokerage,
and extraordinary expenses)] to an annual rate of 0.45% of
the Fund's average daily net assets for an indefinite time
period. As long as this temporary expense limitation
continues, it may lower the Fund's expenses and increase its
total return. In the event the Investment Adviser and/or the
Administrator remove the expense cap, the Fund's expenses may
increase and its total return may be reduced depending on the
total assets of the Fund.
The Advisory Agreement was approved on [
] by the Fund's Directors, including a majority of the
Directors who are not interested persons (as defined in the
1940 Act) of the Fund or the Investment Adviser.
ADMINISTRATOR
The administration agreement (the "Administration
Agreement") between the Fund and AMT Capital Services, Inc.
in such capacity, the "Administrator" will remain in effect
for a period of five successive annual periods. The
Administrator provides for, or assists in managing and
supervising all aspects of, the general day-to-day business
activities and operations of the Fund other than investment
advisory activities, including custodial, transfer agency,
dividend disbursing, accounting, auditing, compliance and
related services. The Fund pays the Administrator a monthly
fee at the annual rate of 0.15% of the Fund's average daily
net assets and the Administrator is entitled to reimbursement
from the Fund for its out-of-pocket expenses incurred under
the Administration Agreement.
DISTRIBUTION OF FUND SHARES
Shares of the Fund are distributed by the Distributor
pursuant to the distribution agreement (the "Distribution
Agreement") between the Fund and the Distributor, which is
subject to the approval of the Fund's Board of Directors. No
fees are payable by the Fund pursuant to the Distribution
Agreement, and the Distributor bears the expense of its
distribution activities. The Fund and the Distributor have
agreed to indemnify one another against certain liabilities.
SUPPLEMENTAL DESCRIPTIONS OF INVESTMENTS
The investment objective of the Fund is to provide
investors with a total return which consistently exceeds the
total return of the broad U.S. investment grade bond market.
The different types of securities in which the Fund may
invest, subject to its investment objective, policies and
restrictions, are described in the Prospectus under
"Descriptions of Investments". Additional information
concerning the characteristics of certain of the Fund's
investments are set forth below.
Bank Obligations. The Fund limits its investments in
U.S. bank obligations to obligations of U.S. banks that in
the Investment Adviser's opinion meet sufficient
creditworthiness criteria.
The Fund limits its investments in foreign bank
obligations to obligations of foreign banks (including U.S.
branches of foreign banks) that, in the opinion of the
Investment Adviser, are of an investment quality comparable
to obligations of U.S. banks in which the Fund may invest.
Eurodollar and Yankee Obligations. Eurodollar bank
obligations are dollar-denominated certificates of deposit
and time deposits issued outside the U.S. capital markets by
foreign branches of U.S. banks and by foreign banks. Yankee
bank obligations are dollar- denominated obligations issued
in the U.S. capital markets by foreign banks.
Mortgage-Backed Securities. Mortgage-backed securities
are securities which represent ownership interests in, or are
debt obligations secured entirely or primarily by, "pools" of
residential or commercial mortgage loans or other mortgage-
backed securities (the "Underlying Assets"). In the case of
mortgage-backed securities representing ownership interests
in the Underlying Assets, the principal and interest payments
on the underlying mortgage loans are distributed monthly to
the holders of the mortgage-backed securities. In the case
of mortgage-backed securities representing debt obligations
secured by the Underlying Assets, the principal and interest
payments on the underlying mortgage loans, and any
reinvestment income thereon, provide the funds to pay debt
service on such mortgage-backed securities.
Certain mortgage-backed securities represent an
undivided fractional interest in the entirety of the
Underlying Assets (or in a substantial portion of the
Underlying Assets, with additional interests junior to that
of the mortgage-backed security), and thus have payment terms
that closely resemble the payment terms of the Underlying
Assets.
In addition, many mortgage-backed securities are issued
in multiple classes. Each class of such multi-class
mortgage-backed securities ("MBS"), often referred to as a
"traunche", is issued at a specific fixed or floating coupon
rate and has a stated maturity or final distribution date.
Principal prepayment on the Underlying Assets may cause the
MBSs to be retired substantially earlier than their stated
maturities or final distribution dates. Interest is paid or
accrues on all or most classes of the MBSs on a periodic
basis, typically monthly or quarterly. The principal of and
interest on the Underlying Assets may be allocated among the
several classes of a series of a MBS in many different ways.
In a relatively common structure, payments of principal
(including any principal prepayments) on the Underlying
Assets are applied to the classes of a series of a MBS in the
order of their respective stated maturities so that no
payment of principal will be made on any class of MBSs until
all other classes having an earlier stated maturity have been
paid in full.
Municipal Instruments. Municipal notes may include
such instruments as tax anticipation notes, revenue
anticipation notes, and bond anticipation notes. Municipal
notes are issued by state and local governments and public
authorities as interim financing in anticipation of tax
collections, revenue receipts or bond sales. Municipal
bonds, which may be issued to raise money for various public
purposes, include general obligation bonds and revenue bonds.
General obligation bonds are backed by the taxing power of
the issuing municipality and are considered the safest type
of bonds. Revenue bonds are backed by the revenues of a
project or facility such as the tolls from a toll bridge.
Industrial development revenue bonds are a specific type of
revenue bond backed by the credit and security of a private
user. Revenue bonds are generally considered to have more
potential risk than general obligation bonds.
Municipal obligations can have floating, variable or
fixed rates. The value of floating and variable rate
obligations generally is more stable than that of fixed rate
obligations in response to changes in interest rate levels.
Variable and floating rate obligations usually carry rights
that permit the Fund to sell them at par value plus accrued
interest upon short notice. The issuers or financial
intermediaries providing rights to sell may support their
ability to purchase the obligations by obtaining credit with
liquidity supports. These may include lines of credit, which
are conditional commitments to lend, and letters of credit,
which will ordinarily be irrevocable, both issued by domestic
banks or foreign banks which have a branch, agency or
subsidiary in the United States. When considering whether an
obligation meets the Fund's quality standards, the Investment
Adviser will look at the creditworthiness of the party
providing the right to sell as well as to the quality of the
obligation itself.
Municipal securities may be issued to finance private
activities, the interest from which is an item of tax
preference for purposes of the federal alternative minimum
tax. Such "private activity" bonds might include industrial
development revenue bonds, and bonds issued to finance such
projects as solid waste disposal facilities, student loans or
water and sewage projects
Other Asset-Backed Securities. The Fund may invest in
other asset-backed securities (unrelated to mortgage loans)
including securities backed by automobile loans and credit
card receivables.
Repurchase Agreements. When participating in
repurchase agreements, the Fund buys securities from a vendor
(e.g., a bank or securities firm) with the agreement that the
vendor will repurchase the securities at the same price plus
interest at a later date. Repurchase agreements may be
characterized as loans secured by the underlying securities.
Such transactions afford an opportunity for the Fund to earn
a return on available cash at minimal market risk, although
the Fund may be subject to various delays and risks of loss
if the vendor becomes subject to a proceeding under the U.S.
Bankruptcy Code or is otherwise unable to meet its obligation
to repurchase. The securities underlying a repurchase
agreement will be marked to market every business day so that
the value of such securities is at least equal to the value
of the repurchase price thereof, including the accrued
interest thereon.
In addition, repurchase agreements may also involve the
securities of certain foreign governments in which there is
an active repurchase market. The Investment Adviser expects
that such repurchase agreements will primarily involve
government securities of countries belonging to the
Organization for Economic Cooperation and Development
("OECD"). Transactions in foreign repurchase agreements may
involve additional risks.
U.S. Treasury and U.S. Government Agency Securities.
U.S. Government Securities include instruments issued by the
U.S. Treasury, including bills, notes and bonds. These
instruments are direct obligations of the U.S. Government
and, as such, are backed by the full faith and credit of the
United States. They differ primarily in their interest
rates, the lengths of their maturities and the dates of their
issuances. In addition, U.S. Government Securities include
securities issued by instrumentalities of the U.S.
Government, such as the Government National Mortgage
Association ("GNMA"), which are also backed by the full faith
and credit of the United States. U.S. Government Agency
Securities include instruments issued by instrumentalities
established or sponsored by the U.S. Government, such as the
Student Loan Marketing Association ("SLMA"), the Federal
National Mortgage Association ("FNMA") and the Federal Home
Loan Mortgage Corporation ("FHLMC"). While these
securities are issued, in general, under the authority of an
Act of Congress, the U.S. Government is not obligated to
provide financial support to the issuing instrumentalities.
Variable Amount Master Demand Notes. Variable amount
master demand notes permit the investment of fluctuating
amounts at varying rates of interest pursuant to direct
arrangements between the Fund (as lender) and the borrower.
These notes are direct lending arrangements between lenders
and borrowers, and are generally not transferable, nor are
they ordinarily rated by either Moody's Investors Service,
Inc., Standard & Poor's Corporation, Fitch Investors Service,
Inc., or Duff & Phelps Credit Rating Co.
Zero Coupon Securities and Custodial Receipts. Zero
coupon securities include securities issued directly by the
U.S. Treasury, and U.S. Treasury bonds or notes and their
unmatured interest coupons and receipts for their underlying
principal (the "coupons") which have been separated by their
holder, typically a custodian bank or investment brokerage
firm. A holder will separate the interest coupons from the
underlying principal (the "corpus") of the U.S. Treasury
security. A number of securities firms and banks have
stripped the interest coupons and receipts and then resold
them in custodial receipt programs with a number of different
names, including "Treasury Income Growth Receipts" ("TIGRS")
and "Certificate of Accrual on Treasuries" ("CATS"). The
underlying U.S. Treasury bonds and notes themselves are held
in book-entry form at the Federal Reserve Bank or, in the
case of bearer securities (i.e., unregistered securities
which are owned ostensibly by the bearer or holder thereof),
in trust on behalf of the owners thereof. Counsel to the
underwriters of these certificates or other evidences of
ownership of the U.S. Treasury securities have stated that
for Federal tax and securities law purposes, in their
opinion, purchasers of such certificates, such as the Fund,
most likely will be deemed the beneficial holders of the
underlying U.S. Treasury securities.
Recently, the Treasury has facilitated transfer of
ownership of zero coupon securities by accounting separately
for the beneficial ownership of particular interest coupon
and corpus payments on Treasury securities through the
Federal Reserve book-entry record-keeping system. The
Federal Reserve program as established by the Treasury
Department is known as "Separate Trading of Registered
Interest and Principal of Securities" ("STRIPS"). Under the
STRIPS program, the Fund can be able to have its beneficial
ownership of zero coupon securities recorded directly in the
book-entry record-keeping system in lieu of holding
certificates or other evidences of ownership of the
underlying U.S. Treasury securities.
When U.S. Treasury obligations have been stripped of
their unmatured interest coupons by the holder, the principal
or corpus is sold at a deep discount because the buyer
receives only the right to receive a future fixed payment on
the security and does not receive any rights to periodic
interest (cash) payments. Once stripped or separated, the
corpus and coupons may be sold separately. Typically, the
coupons are sold separately or grouped with other coupons
with like maturity dates and sold in such bundled form.
Purchasers of stripped obligations acquire, in effect,
discount obligations that are economically identical to the
zero coupon securities that the Treasury sells itself.
SUPPLEMENTAL DISCUSSION OF RISKS ASSOCIATED WITH THE FUND'S
INVESTMENT POLICIES AND INVESTMENT TECHNIQUES
The risks associated with the different types of
securities in which the Fund may invest are described in the
Prospectus under "Risks Associated With the Fund's Investment
Policies and Investment Techniques". Additional information
concerning risks associated with certain of the Fund's
investments is set forth below.
Eurodollar and Yankee Obligations. Eurodollar and
Yankee obligations are subject to the same risks that pertain
to domestic issues, notably credit risk, market risk and
liquidity risk. Additionally, Eurodollar (and to a limited
extent, Yankee) obligations are subject to certain sovereign
risks. One such risk is the possibility that a sovereign
country might prevent capital, in the form of dollars, from
flowing across their borders. Other risks include: adverse
political and economic developments; the extent and quality
of government regulation of financial markets and
institutions; the imposition of foreign withholding taxes;
and the expropriation or nationalization of foreign issuers.
Futures contracts. The Fund may enter into contracts
for the purchase or sale for future delivery (a "futures
contract") of fixed-income securities or foreign currencies,
or contracts based on financial indices including any index
of U.S. Government Securities, foreign government securities
or corporate debt securities. U.S. futures contracts have
been designed by exchanges which have been designated as
"contracts markets" by the CFTC, and must be executed through
a futures commission merchant, or brokerage firm, which is a
member of the relevant contract market. Futures contracts
trade on a number of exchange markets and, through their
clearing corporations, the exchanges guarantee performance of
the contracts as between the clearing members of the
exchange. The Fund will enter into futures contracts that
are based on debt securities that are backed by the full
faith and credit of the U.S. Government, such as long-term
U.S. Treasury Bonds, Treasury Notes, GNMA-modified pass-
through mortgage-backed securities and three-month U.S.
Treasury Bills.
The Fund would purchase or sell futures contracts to
attempt to protect the U.S. dollar-equivalent value of its
securities from fluctuations in interest or foreign exchange
rates without actually buying or selling securities or
foreign currency. For example, if the Fund expected the
value of a foreign currency to increase against the U.S.
dollar, the Fund might enter into futures contracts for the
sale of that currency. Such a sale would have much the same
effect as selling an equivalent value of foreign currency.
If the currency did increase, the value of the securities in
the portfolio would decline, but the value of the futures
contracts to the Fund would increase at approximately the
same rate, thereby keeping the net asset value of the Fund
from declining as much as it otherwise would have.
Although futures contracts by their terms call for the
actual delivery or acquisition of securities or currency, in
most cases the contractual obligation is fulfilled before the
date of the contract without having to make or take delivery
of the securities or currency. The offsetting of a
contractual obligation is accomplished by buying (or selling,
as the case may be) on a commodities exchange an identical
futures contract calling for delivery in the same month.
Such a transaction, which is effected through a member of an
exchange, cancels the obligation to make or take delivery of
the securities or currency. Since all transactions in the
futures market are made, offset or fulfilled through a
clearinghouse associated with the exchange on which the
contracts are traded, the Fund will incur brokerage fees when
it purchases or sells futures contracts.
At the time a futures contract is purchased or sold,
the Fund must allocate cash or securities as a deposit
payment ("initial margin"). It is expected that the initial
margin on U.S. exchanges may range from approximately 3% to
approximately 15% of the value of the securities or
commodities underlying the contract. Under certain
circumstances, however, such as periods of high volatility,
the Fund may be required by an exchange to increase the level
of its initial margin payment. Additionally, initial margin
requirements may be increased generally in the future by
regulatory action. An outstanding futures contract is valued
daily and the payment in cash of "variation margin" may be
required, a process known as "marking to the market". Each
day the Fund will be required to provide (or will be entitled
to receive) variation margin in an amount equal to any
decline (in the case of a long futures position) or increase
(in the case of a short futures position) in the contract's
value since the preceding day.
Futures contracts entail special risks. Among other
things, the ordinary spreads between values in the cash and
futures markets, due to differences in the character of these
markets, are subject to distortions relating to (1)
investors' obligations to meet additional variation margin
requirements, (2) decisions to make or take delivery, rather
than entering into offsetting transactions and (3) the
difference between margin requirements in the securities
markets and margin deposit requirements in the futures
market. The possibility of such distortion means that a
correct forecast of general market, foreign exchange rate or
interest rate trends by the Investment Adviser may still not
result in a successful transaction.
Although the Investment Adviser believes that use of
such contracts and options thereon will benefit the Fund, if
the Investment Adviser's judgment about the general direction
of securities market movements, foreign exchange rates or
interest rates is incorrect, the Fund's overall performance
would be poorer than if it had not entered into any such
contracts or purchased or written options thereon. For
example, if the Fund had hedged against the possibility of an
increase in interest rates which would adversely affect the
price of debt securities held in its portfolio and interest
rates decreased instead, the Fund would lose part or all of
the benefit of the increased value of its assets which it had
hedged because it would have offsetting losses in its futures
positions. In addition, particularly in such situations, if
the Fund has insufficient cash, it may have to sell assets
from its portfolio to meet daily variation margin
requirements. Any such sale of assets may, but will not
necessarily, be at increased prices which reflect the rising
market. Consequently, the Fund may have to sell assets at a
time when it may be disadvantageous to do so.
The Fund's ability to establish and close out positions
in futures contracts and options on futures contracts will be
subject to the development and maintenance of a liquid
market. Although the Fund generally will purchase or sell
only those futures contracts and options thereon for which
there appears to be a liquid market, there is no assurance
that a liquid market on an exchange will exist for any
particular futures contract or option thereon at any
particular time. Where it is not possible to effect a
closing transaction in a contract to do so at a satisfactory
price, the Fund would have to make or take delivery under the
futures contract or, in the case of a purchased option,
exercise the option. In the case of a futures contract that
the Fund has sold and is unable to close out, the Fund would
be required to maintain margin deposits on the futures
contract and to make variation margin payments until the
contract is closed.
Under certain circumstances, exchanges may establish
daily limits in the amount that the price of a futures
contract or related option contract may vary either up or
down from the previous day's settlement price. Once the
daily limit has been reached in a particular contract, no
trades may be made that day at a price beyond that limit. The
daily limit governs only price movements during a particular
trading day and therefore does not limit potential losses
because the limit may prevent the liquidation of unfavorable
positions. Futures or options contract prices could move to
the daily limit for several consecutive trading days with
little or no trading and thereby prevent prompt liquidation
of positions and subject some traders to substantial losses.
Buyers and sellers of foreign currency futures
contracts are subject to the same risks that apply to the use
of futures generally. In addition, there are risks
associated with foreign currency futures contracts and their
use as hedging devices similar to those associated with
options on foreign currencies described above. Further,
settlement of a foreign currency futures contract must occur
within the country issuing the underlying currency. Thus,
the Fund must accept or make delivery of the underlying
foreign currency in accordance with any U.S. or foreign
restrictions or regulations regarding the maintenance of
foreign banking arrangements by U.S. residents and may be
required to pay any fees, taxes or charges associated with
such delivery that are assessed in the country of the
underlying currency.
Illiquid and Restricted Securities. Under the 1940
Act, the Fund may invest up to 15% of the value of its assets
in illiquid assets. Illiquid assets are investments that are
difficult to sell at the price at which such assets are
valued by the Fund within seven days of the date a decision
to sell them is made. Securities treated as illiquid assets
include: over-the-counter options; repurchase agreements,
time deposits, and dollar roll transactions maturing in more
than seven days; loan participations; securities without
readily available market quotations, including interests in
private commingled investment vehicles in which the Fund
might invest; and certain restricted securities. Iliiquid
and restricted securities, including private placements, are
generally subject to legal or contractual restrictions on
resale. They can be eligible for purchase without SEC
registration by certain institutional investors known as
"qualified institutional buyers."
The Board of Directors of the Fund may consider certain
restricted securities, including but not limited to Rule 144A
and Section 4(2) commercial paper, liquid if such securities
meet specified criteria established by the Fund's Board of
Directors.
Due to the absence of an organized market for such
securities, interim valuations of the market value of
illiquid securities used in calculating Fund net asset values
for purchases and redemptions can diverge substantially from
their true value, notwithstanding the application of
appraisal methods deemed appropriate and prudent by the
Fund's Board and the Fund's independent accountants. Due to
possible restrictions on the transferability of illiquid
securities, forced liquidation of such securities to meet
redemption requests could produce large losses. Although,
the 1940 Act permits the Fund to invest up to 15% of its
assets in these securities; the Investment Adviser does not
anticipate investing over 5% of the Fund's assets in these
securities.
Mortgage and Other Asset-Backed Securities.
Prepayments on securitized assets such as mortgages,
automobile loans and credit card receivables ("Securitized
Assets") generally increase with falling interest rates and
decrease with rising interest rates; furthermore, prepayment
rates are influenced by a variety of economic and social
factors. In general, the collateral supporting non-mortgage
asset-backed securities is of shorter maturity than mortgage
loans and is less likely to experience substantial
prepayments. In addition to prepayment risk, borrowers on
the underlying Securitized Assets may default in their
payments creating delays or loss of principal.
Non-mortgage asset-backed securities involve certain
risks that are not presented by mortgage-backed securities.
Primarily, these securities do not have the benefit of a
security interest in assets underlying the related mortgage
collateral. Credit card receivables are generally unsecured
and the debtors are entitled to the protection of a number of
state and federal consumer credit laws, many of which give
such debtors the right to set off certain amounts owed on the
credit cards, thereby reducing the balance due. Most issuers
of automobile receivables permit the servicers to retain
possession of the underlying obligations. If the servicer
were to sell these obligations to another party, there is a
risk that the purchaser would acquire an interest superior to
that of the holders of the related automobile receivables.
In addition, because of the large number of vehicles involved
in a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile
receivables may not have an effective security interest in
all of the obligations backing such receivables. Therefore,
there is a possibility that recoveries on repossessed
collateral may not, in some cases, be available to support
payments on these securities.
Some forms of asset-backed securities are relatively
new forms of investments. Although the Fund will only invest
in asset-backed securities that the Investment Adviser
believes are liquid, because the market experience in certain
of these securities is limited, the market's ability to
sustain liquidity through all phases of a market cycle may
not have been tested.
Options on Foreign Currencies. The Fund may purchase
and sell (or write) put and call options on foreign
currencies to protect against a decline in the U.S. dollar-
equivalent value of its portfolio securities or payments due
thereon or a rise in the U.S. dollar-equivalent cost of
securities that it intends to purchase. A foreign currency
put option grants the holder the right, but not the
obligation, at a future date to sell a specified amount of a
foreign currency to its counterparty at a predetermined
price. Conversely, a foreign currency call option grants the
holder the right, but not the obligation, to purchase at a
future date a specified amount of a foreign currency at a
predetermined price.
As in the case of other types of options, the benefit
to the Fund deriving from the purchase of foreign currency
options will be reduced by the amount of the premium and
related transaction costs. In addition, where currency
exchange rates do not move in the direction or to the extent
anticipated, the Fund could sustain losses on transactions in
foreign currency options which would require them to forego a
portion or all of the benefits of advantageous changes in
such rates.
The Fund may write options on foreign currencies for
hedging purposes. For example, where the Fund anticipates a
decline in the dollar value of foreign currency denominated
securities due to adverse fluctuations in exchange rates it
could, instead of purchasing a put option, write a call
option on the relevant currency. If the expected decline
occurs, the option will most likely not be exercised, and the
decrease in value of portfolio securities will be offset by
the amount of the premium received.
Similarly, instead of purchasing a call option to hedge
against an anticipated increase in the dollar costs of
securities to be acquired, the Fund could write a put option
on the relevant currency which, if rates move in the manner
projected, will expire unexercised and allow the Fund to
hedge such increased costs up to the amount of the premium.
As in the case of other types of options, however, the
writing of a foreign currency option will constitute only a
partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this movement does
not occur, the option may be exercised and the Fund would be
required to purchase or sell the underlying currency at a
loss which may not be fully offset by the amount of the
premium. Through the writing of options on foreign
currencies, the Fund also may be required to forego all or a
portion of the benefits that might otherwise have been
obtained from favorable movements in exchange rates.
Options on Futures Contracts. The purchase of a call
option on a futures contract is similar in some respects to
the purchase of a call option on an individual security or
currency. Depending on the pricing of the option compared to
either the price of the futures contract upon which it is
based or the price of the underlying securities or currency,
it may or may not be less risky than ownership of the futures
contract or the underlying securities or currency. As with
the purchase of futures contracts, when the Fund is not fully
invested it may purchase a call option on a futures contract
to hedge against a market advance due to declining interest
rates or a change in foreign exchange rates.
The writing of a call option on a futures contract
constitutes a partial hedge against declining prices of the
security or foreign currency which is deliverable upon
exercise of the futures contract. If the futures price at
expiration of the option is below the exercise price, the
Fund will retain the full amount of the option premium which
provides a partial hedge against any decline that may have
occurred in the Fund's portfolio holdings. The writing of a
put option on a futures contract constitutes a partial hedge
against increasing prices of the security or foreign currency
which is deliverable upon exercise of the futures contract.
If the futures price at expiration of the option is higher
than the exercise price, the Fund will retain the full amount
of the option premium which provides a partial hedge against
any increase in the price of securities which the Fund
intends to purchase. If a put or call option the Fund has
written is exercised, the Fund will incur a loss that will be
reduced by the amount of the premium it receives. Depending
on the degree of correlation between changes in the value of
its portfolio securities and changes in the value of its
futures positions, the Fund's losses from existing options on
futures may to some extent be reduced or increased by changes
in the value of portfolio securities.
The purchase of a put option on a futures contract is
similar in some respects to the purchase of protective put
options on portfolio securities. For example, the Fund may
purchase a put option on a futures contract to hedge its
portfolio against the risk of rising interest rates.
The amount of risk the Fund assumes when it purchases
an option on a futures contract is the premium paid for the
option plus related transaction costs. In addition to the
correlation risks discussed above, the purchase of an option
also entails the risk that changes in the value of the
underlying futures contract will not be fully reflected in
the value of the option purchased.
Options on foreign currency futures contracts may
involve certain additional risks. Trading options on foreign
currency futures contracts is relatively new. The ability to
establish and close out positions in such options is subject
to the maintenance of a liquid secondary market. To mitigate
this problem, the Fund will not purchase or write options on
foreign currency futures contracts unless and until, in the
Investment Adviser's opinion, the market for such options has
developed sufficiently that the risks in connection with such
options are not greater than the risks in connection with
transactions in the underlying foreign currency futures
contracts. Compared to the purchase or sale of foreign
currency futures contracts, the purchase of call or put
options thereon involves less potential risk to the Fund
because the maximum amount at risk is the premium paid for
the option (plus transaction costs). However, there may be
circumstances when the purchase of a call or put option on a
foreign currency futures contract would result in a loss,
such as when there is no movement in the price of the
underlying currency or futures contract, when use of the
underlying futures contract would not.
Options on Securities. The Fund may also enter into
closing sale transactions with respect to options it has
purchased. A put option on a security grants the holder the
right, but not the obligation, at a future date to sell the
security to its counterparty at a predetermined price.
Conversely, a call option on a security grants the holder the
right, but not the obligation, to purchase at a future date
the security underlying the option at a predetermined price.
The Fund would normally purchase put options in
anticipation of a decline in the market value of securities
in its portfolio or securities it intends to purchase. If
the Fund purchased a put option and the value of the security
in fact declined below the strike price of the option, the
Fund would have the right to sell that security to its
counterparty for the strike price (or realize the value of
the option by entering into a closing transaction), and
consequently would protect itself against any further
decrease in the value of the security during the term of the
option.
Conversely, if the Investment Adviser anticipates that
a security that it intends to acquire will increase in value,
it might cause the Fund to purchase a call option on that
security or securities similar to that security. If the
value of the security does rise, the call option may wholly
or partially offset the increased price of the security. As
in the case of other types of options, however, the benefit
to the Fund will be reduced by the amount of the premium paid
to purchase the option and any related transaction costs.
If, however, the value of the security fell instead of rose,
the Fund would have foregone a portion of the benefit of the
decreased price of the security in the amount of the option
premium and the related transaction costs.
The Fund would purchase put and call options on
securities indices for the same purposes as it would purchase
options on securities. Options on securities indices are
similar to options on securities except that the options
reflect the change in price of a group of securities rather
than an individual security and the exercise of options on
securities indices are settled in cash rather than by
delivery of the securities comprising the index underlying
the option.
Transactions by the Fund in options on securities and
securities indices will be governed by the rules and
regulations of the respective exchanges, boards of trade or
other trading facilities on which the options are traded.
Considerations Concerning Options. The writer of an
option receives a premium which it retains regardless of
whether the option is exercised. The purchaser of a call
option has the right, for a specified period of time, to
purchase the securities or currency subject to the option at
a specified price (the "exercise price"). By writing a call
option, the writer becomes obligated during the term of the
option, upon exercise of the option, to sell the underlying
securities or currency to the purchaser against receipt of
the exercise price. The writer of a call option also loses
the potential for gain on the underlying securities or
currency in excess of the exercise price of the option during
the period that the option is open.
Conversely, the purchaser of a put option has the
right, for a specified period of time, to sell the securities
or currency subject to the option to the writer of the put at
the specified exercise price. The writer of a put option is
obligated during the term of the option, upon exercise of the
option, to purchase securities or currency underlying the
option at the exercise price. A writer might, therefore, be
obligated to purchase the underlying securities or currency
for more than their current market price or U.S. dollar
value, respectively.
The Fund may purchase and sell both exchange-traded and
OTC options. Currently, although many options on equity
securities and options on currencies are exchange-traded,
options on debt securities are primarily traded in the over-
the-counter market. The writer of an exchange-traded option
that wishes to terminate its obligation may effect a "closing
purchase transaction". This is accomplished by buying an
option of the same series as the option previously written.
Options of the same series are options with respect to the
same underlying security or currency, having the same
expiration date and the same exercise price. Likewise, an
investor who is the holder of an option may liquidate a
position by effecting a "closing sale transaction". This is
accomplished by selling an option of the same series as the
option previously purchased. There is no guarantee that
either a closing purchase or a closing sale transaction can
be effected.
An exchange-traded option position may be closed out
only where there exists a secondary market for an option of
the same series. For a number of reasons, a secondary market
may not exist for options held by the Fund, or trading in
such options might be limited or halted by the exchange on
which the option is trading, in which case it might not be
possible to effect closing transactions in particular options
the Fund has purchased with the result that the Fund would
have to exercise the options in order to realize any profit.
If the Fund is unable to effect a closing purchase
transaction in a secondary market in an option the Fund has
written, it will not be able to sell the underlying security
or currency until the option expires or deliver the
underlying security or currency upon exercise or otherwise
cover its position.
Exchange-traded options in the United States are issued
by a clearing organization affiliated with the exchange on
which the option is listed which, in effect, guarantees every
exchange-traded option transaction. In contrast, OTC options
are contracts between the Fund and its counterparty with no
clearing organization guarantee. Thus, when the Fund
purchases OTC options, it relies on the dealer from which it
purchased the OTC option to make or take delivery of the
securities underlying the option. Failure by the dealer to
do so would result in the loss of the premium paid by the
Fund as well as the loss of the expected benefit of the
transaction. The Investment Adviser will only purchase
options from dealers determined by the Investment Adviser to
be creditworthy.
Exchange-traded options generally have a continuous
liquid market whereas OTC options may not. Consequently, the
Fund will generally be able to realize the value of an OTC
option it has purchased only by exercising it or reselling it
to the dealer who issued it. Similarly, when the Fund writes
an OTC option, it generally will be able to close out the OTC
option prior to its expiration only by entering into a
closing purchase transaction with the dealer to which the
Fund originally wrote the OTC option. Although the Fund will
enter into OTC options only with dealers that agree to enter
into, and that are expected to be capable of entering into,
closing transactions with the Fund, there can be no assurance
that the Fund will be able to liquidate an OTC option at a
favorable price at any time prior to expiration. Until the
Fund is able to effect a closing purchase transaction in a
covered OTC call option the Fund has written, it will not be
able to liquidate securities used as cover until the option
expires or is exercised or different cover is substituted.
In the event of insolvency of the counterparty, the Fund may
be unable to liquidate an OTC option. In the case of options
written by the Fund, the inability to enter into a closing
purchase transaction may result in material losses to the
Fund. For example, since the Fund must maintain a covered
position with respect to any call option on a security it
writes, the Fund may be limited in its ability to sell the
underlying security while the option is outstanding. This
may impair the Fund's ability to sell the Fund security at a
time when such a sale might be advantageous.
There is no systematic reporting of last sale
information for foreign currencies or any regulatory
requirement that quotations available through dealers or
other market sources be firm or revised on a timely basis.
Quotation information available is generally representative
of very large transactions in the interbank market and thus
may not reflect relatively smaller transactions (i.e., less
than $1 million) where rates may be less favorable. The
interbank market in foreign currencies is a global, around-
the-clock market. To the extent that the U.S. options
markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements
may take place in the underlying markets that cannot be
reflected in the options market until they reopen. Because
foreign currency transactions occurring in the interbank
market involve substantially larger amounts than those that
may be involved in the use of foreign currency options,
investors may be disadvantaged by having to deal in an odd
lot market (generally consisting of transactions of less than
$1 million) for the underlying foreign currencies at prices
that are less favorable than for round lots.
The use of options to hedge the Fund's foreign
currency-denominated portfolio, or to enhance return raises
additional considerations. As described above, the Fund may,
among other things, purchase call options on securities it
intends to acquire in order to hedge against anticipated
market appreciation in the price of the underlying security
or currency. If the market price does increase as
anticipated, the Fund will benefit from that increase but
only to the extent that the increase exceeds the premium paid
and related transaction costs. If the anticipated rise does
not occur or if it does not exceed the amount of the premium
and related transaction costs, the Fund will bear the expense
of the options without gaining an offsetting benefit. If the
market price of the underlying currency or securities should
fall instead of rise, the benefit the Fund obtains from
purchasing the currency or securities at a lower price will
be reduced by the amount of the premium paid for the call
options and by transaction costs.
The Fund also may purchase put options on currencies or
portfolio securities when it believes a defensive posture is
warranted. Protection is provided during the life of a put
option because the put gives the Fund the right to sell the
underlying currency or security at the put exercise price,
regardless of a decline in the underlying currency's or
security's market price below the exercise price. This right
limits the Fund's losses from the currency's or security's
possible decline in value below the exercise price of the
option to the premium paid for the option and related
transaction costs. If the market price of the currency or
the Fund's securities should increase, however, the profit
that the Fund might otherwise have realized will be reduced
by the amount of the premium paid for the put option and by
transaction costs.
The value of an option position will reflect, among
other things, the current market price of the underlying
currency or security, the time remaining until expiration,
the relationship of the exercise price to the market price,
the historical price volatility of the underlying currency or
security and general market conditions. For this reason, the
successful use of options as a hedging strategy depends upon
the ability of the Investment Adviser to forecast the
direction of price fluctuations in the underlying currency or
securities market.
Options normally have expiration dates of up to nine
months. The exercise price of the options may be below,
equal to or above the current market values of the underlying
securities or currency at the time the options are written.
Options purchased by the Fund that expire unexercised have no
value, and therefore a loss will be realized in the amount of
the premium paid (and related transaction costs). If an
option purchased by the Fund is in-the-money prior to its
expiration date, unless the Fund exercises the option or
enters into a closing transaction with respect to that
position, the Fund will not realize any gain on its option
position.
The Fund's activities in the options market may result
in a higher portfolio turnover rates and additional brokerage
costs. Nevertheless, the Fund may also save on commissions
and transaction costs by hedging through such activities
rather than buying or selling securities or foreign
currencies in anticipation of market moves or foreign
exchange rate fluctuations.
Repurchase Agreements. The use of repurchase
agreements involves certain risks. For example, if the seller
of the agreements defaults on its obligation to repurchase
the underlying securities at a time when the value of these
securities has declined, the Fund may incur a loss upon
disposition of them. If the seller of the agreement becomes
insolvent and subject to liquidation or reorganization under
the Bankruptcy Code or other laws, a bankruptcy court may
determine that the underlying securities are collateral not
within the control of the Fund and therefore subject to sale
by the trustee in bankruptcy. Finally, it is possible that
the Fund may not be able to substantiate its interest in the
underlying securities. While the Fund's management
acknowledges these risks, it is expected that they can be
controlled through stringent security selection criteria and
careful monitoring procedures.
INVESTMENT RESTRICTIONS
The Fund has adopted the investment restrictions listed
below relating to the investment of the Fund's assets and its
activities. These are fundamental policies that may not be
changed without the approval of the holders of a majority of
the outstanding voting securities of the Fund (which for this
purpose and under the 1940 Act means the lesser of (i) 67% of
the shares represented at a meeting at which more than 50% of
the outstanding shares are represented or (ii) more than 50%
of the outstanding shares). The Fund may not: (1) borrow
money, including entering into reverse repurchase agreements;
(2) issue senior securities; (3) purchase securities on
margin (although deposits referred to as "margin" will be
made in connection with investments in futures contracts, as
explained above, and the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases
and sales of securities); (4) underwrite securities of other
issuers; (5) invest in companies for the purpose of
exercising control or management; (6) purchase or sell real
estate (other than marketable securities representing
interests in, or backed by, real estate); or (7) purchase or
sell physical commodities or related commodity contracts.
Whenever an investment policy or limitation states a
maximum percentage of the Fund's assets that may be invested
in any security or other asset or sets forth a policy
regarding quality standards, such standard or percentage
limitation shall be determined immediately after and as a
result of the Fund's acquisition of such security or other
asset. Accordingly, any later increase or decrease in a
percentage resulting from a change in values, net assets or
other circumstances will not be considered when determining
whether that investment complies with the Fund's investment
policies and limitations.
The Fund's investment objectives and other investment
policies not designated as fundamental in this Statement of
Additional Information are non-fundamental and may be changed
at any time by action of the Board of Directors.
Illiquid Securities. The staff of the Commission 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 generally will not purchase or
sell OTC options if, as a result of such transaction, the sum
of the market value of OTC options currently outstanding that
are held by the Fund, the market value of the underlying
securities covered by OTC call options currently outstanding
that were sold by the Fund and margin deposits on the Fund's
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 that are illiquid or are not
otherwise readily marketable. 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
or the Fund's shareholders. However, the Fund will not
change or modify this policy prior to a change or
modification by the Commission staff of its position.
PORTFOLIO TURNOVER
The Fund may engage in portfolio trading when
considered appropriate, but short-term trading will not be
used as the primary means of achieving its investment
objective. Although the Fund cannot accurately predict its
portfolio turnover rate, it is not expected to exceed 400% in
normal circumstances. However, there are no limits on the
rate of portfolio turnover, and investments may be sold
without regard to length of time held when, in the opinion of
the Investment Adviser, investment considerations warrant
such actions. Higher portfolio turnover rates, such as rates
in excess of 400%, and short-term trading involve
correspondingly greater commission expenses and transactions
costs.
PORTFOLIO TRANSACTIONS
The debt securities in which the Fund invests are
traded primarily in the over-the-counter market by dealers
who are usually acting as principal for their own account.
On occasion, securities may be purchased directly from the
issuer. Such securities are generally traded on a net basis
and do not normally involve either brokerage commissions or
transfer taxes. The Fund enters into financial futures and
options contracts which normally involve brokerage
commissions.
The cost of executing transactions will consist
primarily of dealer spreads. The spread is not included in
the expenses of the Fund and therefore is not subject to the
expense cap described above under "Investment Adviser and
Advisory Agreement"; nevertheless, the incurrence of this
spread, ignoring the other intended positive effects of each
such transaction, will decrease the total return of the Fund.
However, the Fund will buy one asset and sell another only
if the Investment Adviser believes it is advantageous to do
so after considering the effect of the additional custodial
charges and the spread on the Fund's total return.
All purchases and sales will be executed with major
dealers and banks on a best net price basis. No trades will
be executed with the Investment Adviser, their affiliates,
officers or employees acting as principal or agent for
others, although such entities and persons may be trading
contemporaneously in the same or similar securities.
TAX CONSIDERATIONS
The following summary of tax consequences, which does
not purport to be complete, is based on U.S. federal tax laws
and regulations in effect on the date of this Statement of
Additional Information, which are subject to change by
legislative or administrative action.
Qualification as a Regulated Investment Company. The
Fund intends to qualify annually and to elect in the future
to be treated as a regulated investment company ("RIC") under
the Internal Revenue Code of 1986, as amended (the "Code").
To qualify as a RIC, the Fund must, among other things, (a)
derive at least 90% of its gross income each taxable year
from dividends, interest, payments with respect to securities
loans and gains from the sale or other disposition of
securities or foreign currencies, or other income (including
gains from options, futures or forward contracts) derived
from its business of investing in securities or foreign
currencies (the "Qualifying Income Requirement"); (b)
diversify its holdings so that, at the end of each quarter of
the Fund's taxable year, (i) at least 50% of the market value
of the Fund's assets is represented by cash and cash items
(including receivables), U.S. Government Securities,
securities of other RICs and other securities, with such
other securities of any one issuer limited to an amount not
greater than 5% of the value of the Fund's total assets and
not greater than 10% of the outstanding voting securities of
such issuer and (ii) not more than 25% of the value of the
Fund's total assets is invested in the securities of any one
issuer (other than U.S. Government Securities or the
securities of other RICs); and (c) distribute at least 90% of
its investment company taxable income (which includes, among
other items, interest and net short-term capital gains in
excess of net long-term capital losses). The U.S. Treasury
Department has authority to promulgate regulations pursuant
to which gains from foreign currency (and options, futures
and forward contracts on foreign currency) not directly
related to a RIC's principal business of investing in stocks
and securities would not be treated as qualifying income for
purposes of the Qualifying Income Requirement. To date, such
regulations have not been promulgated.
If for any taxable year the Fund does not qualify as a
RIC, all of its taxable income will be taxed to the Fund at
corporate rates. For each taxable year that the Fund
qualifies as a RIC, it will not be subject to federal income
tax on that part of its investment company taxable income and
net capital gains (the excess of net long-term capital gain
over net short-term capital loss) that it distributes to its
shareholders. In addition, to avoid a nondeductible 4%
federal excise tax, the Fund must distribute during each
calendar year an amount at least equal to the sum of 98% of
its ordinary income (not taking into account any capital
gains or losses), determined on a calendar year basis, 98% of
its capital gains in excess of capital losses, determined in
general on an October 31 year-end basis, and any
undistributed amounts from previous years. The Fund intends
to distribute all of its net income and gains by
automatically reinvesting such income and gains in additional
shares of the Fund. The 30% Limitation may require that the
Fund defer closing out certain positions beyond the time when
it otherwise would be advantageous to do so, in order not to
be disqualified as a RIC. The Fund will monitor its
compliance with all of the rules set forth in the preceding
paragraph.
Distributions. The Fund's automatic reinvestment of
its ordinary income, net short-term capital gains and net
long-term capital gains in additional shares of the Fund and
distribution of such shares to shareholders will be taxable
to the Fund's shareholders. In general, such shareholders
will be treated as if such income and gains had been
distributed to them by the Fund and then reinvested by them
in shares of the Fund, even though no cash distributions have
been made to shareholders. The automatic reinvestment of
ordinary income and net realized short-term capital gains of
the Fund will be taxable to the Fund's shareholders as
ordinary income. The Fund's automatic reinvestment of any
net long-term capital gains designated by the Fund as capital
gain dividends will be taxable to the shareholders as
long-term capital gain, regardless of how long they have held
their Fund shares. None of the amounts treated as
distributed to the Fund's shareholders will be eligible for
the corporate dividends received deduction. A distribution
will be treated as paid on December 31 of the current
calendar year if it is declared by the Fund in October,
November or December with a record date in such a month and
paid by the Fund during January of the following calendar
year. Such distributions will be taxable to shareholders in
the calendar year in which the distributions are declared,
rather than in the calendar year in which the distributions
are received. The Fund will inform shareholders of the
amount and tax status of all amounts treated as distributed
to them not later than 60 days after the close of each
calendar year.
Sale of Shares. Upon the sale or other disposition of
shares of the Fund, or upon receipt of a distribution in
complete liquidation of the Fund, a shareholder generally
will realize a capital gain or loss which will be long-term
or short-term, generally depending upon the shareholder's
holding period for the shares. Any loss realized on the sale
or exchange will be disallowed to the extent the shares
disposed of are replaced (including shares acquired pursuant
to a dividend reinvestment plan) within a period of 61 days
beginning 30 days before and ending 30 days after disposition
of the shares. In such a case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss.
Any loss realized by the shareholder on a disposition of Fund
shares held by the shareholder for six months or less will be
treated as a long-term capital loss to the extent of any
distributions of net capital gains deemed received by the
shareholder with respect to such shares.
Zero Coupon Securities. Investments by the Fund in
zero coupon securities will result in income to the Fund
equal to a portion of the excess of the face value of the
securities over their issue price (the "original issue
discount") each year that the securities are held, even
though the Fund receives no cash interest payments. This
income is included in determining the amount of income which
the Fund must distribute to maintain its status as a RIC and
to avoid the payment of Federal income tax and the 4% excise
tax.
Hedging Transactions. Certain options, futures and
forward contracts in which the Fund may invest are "section
1256 contracts." Gains and losses on section 1256 contracts
are generally treated as 60 percent long-term and 40 percent
short-term capital gains or losses ("60/40 treatment"),
regardless of the Fund's actual holding period for the
contract. Also, a section 1256 contract held by the Fund at
the end of each taxable year (and generally, for the purposes
of the 4% excise tax, on October 31 of each year) must be
treated as if the contract had been sold at its fair market
value on that day ("mark to market treatment"), and any
deemed gain or loss on the contract is subject to 60/40
treatment. Foreign currency gain or loss (discussed below)
arising from section 1256 contracts may, however, be treated
as ordinary income or loss.
The hedging transactions undertaken by the Fund may
result in "straddles" for federal income tax purposes. The
straddle rules may affect the character of gains or losses
realized by the Fund. In addition, losses realized by the
Fund on positions that are part of a straddle may be deferred
under the straddle rules rather than being taken into account
in calculating the taxable income for the taxable year in
which such losses are realized. Further, the Fund may be
required to capitalize, rather than deduct currently, any
interest expense on indebtedness incurred or continued to
purchase or carry any positions that are part of a straddle.
Because only a few regulations implementing the straddle
rules have been implemented, the tax consequences to the
Funds of engaging in hedging transactions are not entirely
clear. Hedging transactions may increase the amount of
short-term capital gain realized by the Funds which is taxed
as ordinary income when distributed to shareholders.
The Fund may make one or more of the elections
available under the Code that are applicable to straddles.
If the Fund makes any of the elections, the amount, character
and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules
that vary according to the election(s) made. The rules
applicable under certain of the elections may accelerate the
recognition of gains or losses from the affected straddle
positions.
Because the straddle rules may affect the amount,
character and timing of gains or losses from the positions
that are part of a straddle, the amount of Fund income that
is distributed to shareholders and that is taxed to them as
ordinary income or long-term capital gain may be increased or
decreased as compared to a fund that did not engage in such
hedging transactions.
The distribution requirements applicable to the Fund's
assets may limit the extent to which the Fund will be able to
engage in transactions in options, futures and forward
contracts.
Backup Withholding. The Fund may be required to
withhold U.S. federal income tax at the rate of 31% of all
amounts deemed to be distributed as a result of the automatic
reinvestment by the Fund of its income and gains in
additional shares of the Fund and all redemption payments
made to shareholders who fail to provide the Fund with their
correct taxpayer identification number or to make required
certifications, or who have been notified by the Internal
Revenue Service that they are subject to backup withholding.
Backup withholding is not an additional tax. Any amounts
withheld will be credited against a shareholder's U.S.
federal income tax liability. Corporate shareholders and
certain other shareholders are exempt from such backup
withholding.
Foreign Shareholders. U.S. taxation of a shareholder
who, as to the United States, is a non-resident alien
individual, a foreign trust or estate, foreign corporation,
or foreign partnership ("foreign shareholder") depends on
whether the income from the Fund is "effectively connected"
with a U.S. trade or business carried on by such shareholder.
If the income from the Fund is not "effectively
connected" with a U.S. trade or business carried on by the
foreign shareholder, deemed distributions by the Fund of
investment company taxable income will be subject to a U.S.
tax of 30% (or lower treaty rate), which tax is generally
withheld from such distributions. Deemed distributions of
capital gain dividends and any gain realized upon redemption,
sale or exchange of shares will not be subject to U.S. tax at
the rate of 30% (or lower treaty rate) unless the foreign
shareholder is a nonresident alien individual who is
physically present in the U.S. for more than 182 days during
the taxable year and meets certain other requirements.
However, this 30% tax on capital gains of non-resident alien
individuals who are physically present in the United States
for more than the 182-day period only applies in exceptional
cases because any individual present in the United States for
more than 182 days during the taxable year is generally
treated as a resident for U.S. federal income tax purposes.
In that case, he or she would be subject to U.S. federal
income tax on his or her worldwide income at the graduated
rates applicable to U.S. citizens, rather than the 30% U.S.
tax. In the case of a foreign shareholder who is a non-
resident alien individual, the Fund may be required to
withhold U.S. federal income tax at a rate of 31% of deemed
distributions of net capital gains unless the foreign
shareholder certifies his or her non-U.S. status under
penalties of perjury or otherwise establishes an exemption.
See "Backup Withholding" above.
If the income from the Fund is effectively connected
with a U.S. trade or business carried on by a foreign
shareholder, then deemed distributions of investment company
taxable income and capital gain dividends and any gain
realized upon the redemption, sale or exchange of shares of
the Fund will be subject to U.S. Federal income tax at the
graduated rates applicable to U.S. citizens or domestic
corporations. Such shareholders may also be subject to the
branch profits tax at a 30% rate.
The tax consequences to a foreign shareholder entitled
to claim the benefits of an applicable tax treaty may be
different from those described herein. Foreign shareholders
are advised to consult their own advisers with respect to the
particular tax consequences to them of an investment in the
Fund.
SHAREHOLDER INFORMATION
Certificates representing shares of the Fund will not
be issued to shareholders. Investors Bank & Trust Company,
the Fund's transfer agent (the "Transfer Agent"), will
maintain an account for each shareholder upon which the
registration and transfer of shares are recorded, and any
transfers shall be reflected by bookkeeping entry, without
physical delivery. Detailed confirmations of each purchase
or redemption are sent to each shareholder. Monthly
statements of account are sent which include shares purchased
as a result of a reinvestment of the Fund's distributions.
The Transfer Agent will require that a shareholder
provide requests in writing, accompanied by a valid signature
guarantee form, when changing certain information in an
account (i.e., wiring instructions, telephone privileges,
etc.). Neither the Fund, the Administrator, or the Transfer
Agent will be responsible for the validity of written or
telephonic requests.
The Fund reserves the right, if conditions exist which
make cash payments undesirable, to honor any request for
redemption of the Fund by making payment in whole or in part
in readily marketable securities chosen by the Fund and
valued as they are for purposes of computing the Fund's net
asset value (redemption-in-kind). If payment is made in
securities, a shareholder may incur transaction expenses in
converting the securities to cash.
ORGANIZATION AND DESCRIPTION OF CAPITAL STOCK
The Fund was incorporated on August 4, 1997 as a
Maryland corporation and is authorized to issue 2,500,000,000
shares of Common Stock, $0.001 par value. The Fund's shares
have no preemptive, conversion, exchange or redemption
rights. Each share has equal voting, dividend, distribution
and liquidation rights. All shares of the Fund, when duly
issued, will be fully paid and nonassessable. Shareholders
are entitled to one vote per share. All voting rights for
the election of directors are noncumulative, which means that
the holders of more than 50% of the shares can elect 100% of
the Directors then nominated for election if they choose to
do so and, in such event, the holders of the remaining shares
will not be able to elect any Directors. The foregoing
description is subject to the provisions contained in the
Fund's Articles of Incorporation and By-laws.
The Board of Directors is authorized to reclassify and
issue any unissued shares of the Fund without shareholder
approval. Accordingly, in the future, the Directors may
create additional series of shares with different investment
objectives, policies and restrictions. Any issuance of
shares of another class would be governed by the 1940 Act and
Maryland law.
The Fund also issues another class of shares which may
have different operating and other expenses. For more
information about other classes of the Fund's shares,
investors should contact the Distributor at the address or
phone number set forth on the cover of this Statement of
Additional Information.
CALCULATION OF PERFORMANCE DATA
The Fund may, from time to time, include the yield and
total return in reports to shareholders or prospective
investors. Quotations of yield for the Fund will be based on
all investment income per share during a particular 30-day
(or one month) period (including dividends and interest),
less expenses accrued during the period ("net investment
income"), and are computed by dividing net investment income
by the maximum, offering price per share on the last day of
the period, according to the following formula which is
prescribed by the Commission:
YIELD = 2[( a - b + 1)6 - 1]
cd
Where a = dividends and interest earned during the period,
b = expenses accrued for the period (net of reimbursements),
c = the average daily number of Shares of the Fund outstanding
during he period that were entitled to receive dividends, and
d = the maximum offering price per share on the last day of
the period.
Quotations of average annual total return will
be expressed in terms of the average annual compounded rate
of return of a hypothetical investment in the Fund over
periods of 1, 5 and 10 years (up to the life of the Fund),
calculated pursuant to the following formula which is
prescribed by the SEC:
P(1 + T)n = ERV
Where P = a hypothetical initial payment of
$1,000,
T = the average annual total return,
n = the number of years, and
ERV = the ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period.
All total return figures assume that all dividends are reinvested when paid.
QUALITY RATING DESCRIPTIONS
Standard & Poors Corporation
AAA. Bonds rated AAA are highest grade debt
obligations. This rating indicates an extremely strong
capacity to pay principal and interest.
AA. Bonds rated AA also qualify as high-quality
obligations. Capacity to pay principal and interest is very
strong, and in the majority of instances they differ from AAA
issues only in small degree.
A. Bonds rated A have a strong capacity to pay
principal and interest, although they are more susceptible to
the adverse effects of changes in circumstances and economic
conditions.
BBB. Bonds rated BBB are regarded as having adequate
capacity to pay interest or principal. Although these bonds
normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more likely
to lead to a weakened capacity to pay interest and principal.
The ratings AA to D may be modified by the addition of
a plus or minus sign to show relative standing within the
major rating categories.
Municipal notes issued since July 29, 1984 are
designated "SP-1", "SP-2", and "SP-3". The designation SP-1
indicates a very strong capacity to pay principal and
interest. A "+" is added to those issues determined to
possess overwhelming safety characteristics.
A-1. Standard & Poor's Commercial Paper ratings are
current assessments of the likelihood of timely payments of
debts having original maturity of no more than 365 days. The
A-1 designation indicates the degree of safety regarding
timely payment is very strong.
A-2. Capacity for timely payment on issues with this
designation is strong. However, the relative degree of
safety is not as high as for issues designated A-1.
Moody's Investors Service, Inc.
Aaa. Bonds which are rated Aaa are judged to be of the
best quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edge". Interest
payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa. Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They
are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or
fluctuations of protective elements may be of greater
amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than the Aaa
securities.
A. Bonds which are rated A possess many favorable
investment attributes and may be considered as upper medium
grade obligations. Factors giving security to principal and
interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the
future.
Baa. Baa rated bonds are considered medium-grade
obligations, i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security
appear adequate for the present, but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well.
Moody's applies numerical modifiers, 1, 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.
Moody's ratings for state and municipal and other
short-term obligations will be designated Moody's Investment
Grade ("MIG"). This distinction is in recognition of the
differences between short-term credit risk and long-term
risk. Factors affecting the liquidity of the borrower are
uppermost in importance in short-term borrowing, while
various factors of the first importance in long-term
borrowing risk are of lesser importance in the short run.
MIG-1. Notes bearing this designation are of the best
quality enjoying strong protection from established cash
flows of funds for their servicing or from established and
broad-based access to the market for refinancing, or both.
MIG-2. Notes bearing this designation are of favorable
quality, with all security elements accounted for, but
lacking the undeniable strength of the previous grade.
Market access for refinancing, in particular, is likely to be
less well established.
P-1. Moody's Commercial Paper ratings are opinions of
the ability of issuers to repay punctually promissory
obligations not having an original maturity in excess of nine
months. The designation "Prime-1" or "P-1" indicates the
highest quality repayment capacity of the rated issue.
P-2. Issuers have a strong capacity for repayment of
short-term promissory obligations.
Thomson Bankwatch, Inc.
A. Company possess an exceptionally strong balance
sheet and earnings record, translating into an excellent
reputation and unquestioned access to its natural money
markets. If weakness or vulnerability exists in any aspect
of the company's business, it is entirely mitigated by the
strengths of the organization.
A/B. Company is financially very solid with a favorable
track record and no readily apparent weakness. Its overall
risk profile, while low, is not quite as favorable as
companies in the highest rating category.
IBCA Limited
A1. Short-term obligations rated A1 are supported by a
very strong capacity for timely repayment. A plus sign is
added to those issues determined to possess the highest
capacity for timely payment.
SAMCO Fixed Income Portfolio
Class B Shares
SAMCO Fixed Income Portfolio (the "Fund") is a portfolio of
SAMCO Fund, Inc. an open-end management investment company. The
investment objective of the Fund is to provide investors with a
total return which consistently exceeds the total return of the
broad U.S. investment grade bond market. The Fund is
professionally managed and seeks to achieve its objective through
superior security selection and emphasis on current income, while
maintaining a duration neutral posture. There can be no assurance
that the Fund will achieve its investment objective. See "Risk
Factors."
Class B shares of the Fund may be purchased directly from
AMT Capital Services, Inc. (the "Distributor"), 600 Fifth Avenue,
New York, NY 10020 (800) 762-4848. The minimum initial purchase
is $100,000. See "Purchase of Shares." A shareholder may redeem
his or her shares at any time at net asset value of the shares.
See "Redemption of Shares."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This Prospectus is a concise statement of information about
the Fund that is relevant to making an investment in Class B
shares of the Fund. This Prospectus should be retained for future
reference. A statement containing additional information about
the Fund, dated November 1, 1997 (the "Statement of Additional
Information"), has been filed with the Securities and Exchange
Commission and can be obtained, without charge, by calling or by
writing the Distributor at the above telephone number or address.
The Statement of Additional Information is hereby incorporated by
reference into this Prospectus.
SEIX INVESTMENT ADVISORS INC.--INVESTMENT ADVISER
AMT CAPITAL SERVICES, INC.--DISTRIBUTOR
The date of this Prospectus is November 1, 1997.
Table of Contents
SAMO FIXED INCOME PORTFOLIO
Page
PROSPECTUS SUMMARY
THE FUND'S EXPENSES
INVESTMENT OBJECTIVE AND
POLICIES
DESCRIPTION OF INVESTMENTS
RISK FACTORS
INVESTMENT LIMITATIONS
MANAGEMENT OF THE FUND
PURCHASE OF SHARES
REDEMPTION OF SHARES
THE FUND'S PERFORMANCE
ADDITIONAL INFORMATION
SERVICE PROVIDERS
SAMCO FIXED INCOME
PORTFOLIO
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
FUND, THE DISTRIBUTOR OR THE INVESTMENT ADVISER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFERING IN ANY STATE IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by detailed
information appearing elsewhere in this Prospectus and in the Statement
of Additional Information.
The Fund and Its Investment Objective
The Fund is a no-load investment portfolio of the SAMCO Fund,
Inc., an open-end management investment company (the "Company")
incorporated in the state of Maryland on August 4, 1997. The investment
objective of the Fund is to provide investors with a total return which
consistently exceeds the total return of the broad U.S. investment grade
bond market. The Fund is professionally managed and seeks to achieve
its objective through superior security selection and emphasis on
current income, while maintaining a duration neutral posture. A duration
neutral posture infers that the Fund's interest rate sensitivity will be
similar to that of its benchmark. There can be no assurance that the Fund
will achieve its investment objective. See "Investment Objective and Policies."
The Investment Adviser
Seix Investment Advisors Inc. (the "Investment Adviser") serves
as the Fund's investment adviser. For its services as investment
adviser, the Fund pays the Investment Adviser a monthly fee at an
annual rate of 0.25% of the Fund's average daily net assets. The
Investment Adviser believes the advisory fee is comparable to that of
other investment companies with similar investment objectives. See
"Management of the Fund."
Purchasing Shares
Shares of the Fund may be purchased without any sales charges at
its net asset value next determined after receipt of the order by
submitting an Account Application to the Distributor and wiring federal
funds to the Distributor's "Fund Purchase Account" at Investors Bank &
Trust Company (the "Transfer Agent"). Shares may be purchased directly
from the Distributor. The Fund is not available for sale in all states.
For information about the Fund's availability, contact an account
representative at the Distributor.
The minimum initial investment is $100,000. The Fund reserves the
right to waive the minimum initial investment amount. There are no
sales commissions (loads). For more information, refer to "Purchase of
Shares."
Redemption of Shares
Shares of the Fund may be redeemed, without charge, at the next
determined net asset value after receipt by either the Transfer Agent
or the Distributor of the redemption request. There is no redemption
fee. For more information, refer to "Redemption of Shares."
Dividends and Distributions
The Fund will distribute substantially all of its net investment
income to shareholders in the form of monthly dividends. Dividends are
reinvested on the last Business Day or paid in cash on the first
Business Day of the following month. If any net capital gains are
realized from the sale of the underlying securities, the Fund will
distribute such gains with the last dividend for the calendar year. All
distributions are reinvested automatically, unless otherwise specified
in writing by the investor, in shares of the Fund. See "Additional
Information".
Risk Factors
Prospective investors should consider certain risks associated
with an investment in the Fund. See "Risk Factors."
THE FUND'S EXPENSES
The following expense table is provided to assist investors in
understanding the various costs and expenses that an investor will
incur, either directly or indirectly, as a shareholder in the Fund,
which are calculated as a percentage of average daily net assets.
These are the only fund related expenses that an investor bears.
Annual Fund Operating Expenses (as a percentage of average net assets)
Management fees 0.25%
Rule 12b-1 fees 0.25%
Other expenses* 0.20%
Total Fund operating expenses* 0.65%
*After reimbursement of expenses.
See "Management of the Fund" for a description of fees and
expenses. "Other expenses" include fees for shareholder services,
custodial, administration, dividend disbursing and transfer agency fees,
legal and accounting fees, printing costs and registration fees. The
Investment Adviser and the Administrator have voluntarily agreed to
limit the total expenses of the Fund [(excluding interest, taxes,
brokerage, and extraordinary expenses)] to an annual rate of 0.45% of
the Fund's average daily net assets for an indefinite time period. As
long as this temporary expense limitation continues; it may lower the
Fund's expenses and increase its total return. In the event the
Investment Adviser and the Administrator remove such expense cap, the
Fund's expenses may increase and its total return may be reduced
depending on the total assets of the Fund. Without such cap, the total
annual operating expenses (on an annualized basis) are expected to be
approximately ___. Such figure is based on estimated amounts for the
current fiscal year. See "Management of the Fund."
Example: The following example demonstrates the projected dollar amount
of total cumulative expenses that would be incurred over various periods
with respect to a hypothetical investment in the Fund. These amounts
are based upon payments by the Fund of operating expenses set forth in
the table above, and are also based upon the following assumptions:
A shareholder would pay the following expenses on a $100,000
investment, assuming (1) 5% annual return and (2) redemption at the end
of each time period:
After 1 year $______
After 3 years $______
The purpose of this table is to assist the investor in
understanding the various costs and expenses that an investor in the
Fund will bear directly or indirectly. This example should not be
considered a representation of future expenses and actual expenses may
be greater or less than those shown. Moreover, while the example
assumes a 5% annual return, the Fund's performance will vary and may
result in a return greater or less than 5%.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to provide investors with
a total return which consistently exceeds the total return of the broad
U.S. investment grade bond market. The Fund is professionally managed
and seeks to achieve its objective through superior security selection
and emphasis on current income, while maintaining a duration neutral
posture. This is a fundamental investment objective and may not be
changed without the affirmative vote of the holders of a majority of the
Fund's outstanding voting securities, as defined in the Investment
Company Act of 1940, as amended (the "1940 Act"). The Fund seeks to
achieve its objective through investments in fixed income securities.
The Investment Adviser will manage the Fund based on its fixed
income approach which is founded upon four cornerstones: (1) Targeted
Duration; (2) Yield Tilt; (3) Comprehensive Sector Construction; and (4)
the use of Proprietary Analytics. Targeted Duration: The Fund will be
managed with a duration that is close to the duration of the Fund's
benchmark, the Lehman Brothers Aggregate Bond Index. Value is added
through sector, security, and yield curve decisions rather than maturity
management. Yield Tilt: Although the Fund is managed on a total
return basis, a premium is placed on yield. Income is considered the
most powerful contributor to fixed income returns. Non-Treasury sectors
generally play a dominant role in the Fund. The yield of the benchmark
is used as a performance goal in addition to its total return.
Comprehensive Sector Construction: Sector commitments are made based on
the duration contribution of each sector to the overall duration of the
Fund rather than the sector weighting. Proprietary Analytics: Because
of the growing complexity of the bond market, the firm believes that the
use of proprietary techniques is key to identifying value and to
adequately controlling risk.
The Fund will invest in the broad universe of available U.S.
dollar fixed income securities, including but not limited to: (1)
obligations issued or guaranteed by the United States Government, such
as United States Treasury securities; (2) obligations backed by the full
faith and credit of the United States, such as obligations of the
Government National Mortgage Association and the Export-Import Bank; (3)
obligations issued or guaranteed by United States Government agencies,
Government-Sponsored Enterprises (GSE's) or instrumentalities where the
Fund must look principally to the issuing or guaranteeing agency for
ultimate repayment; (4) obligations issued or guaranteed by a foreign
government, or any of its political subdivisions, authorities, agencies,
or instrumentalities or by supranational organizations; (5) obligations
of domestic or foreign corporations or other entities, including
securities issued under Rule 144A; (6) obligations of domestic or
foreign banks; (7) mortgage- and asset-backed securities (including
Commercial Mortgage Backed Securities and Collateralized Mortgage
Obligations); (8) short-term investments such as: time deposits,
certificates of deposit (including marketable variable rate certificates
of deposit), bankers' acceptances issued by a commercial bank or savings
and loan association; custodian's short-term investment fund (STIF); (9)
preferred stock; and (10) municipals (taxable and tax-exempt). The Fund
may only invest in investment grade securities that are those rated by
one or more nationally recognized statistical rating organization
(NRSRO) in one of the four highest rating categories at the time of
purchase (e.g. AAA, AA, A or BBB by Standard & Poor's Corporation
(Standard & Poor's), Duff & Phelps Credit Rating Co. ("Duff & Phelps"),
or Fitch Investors Service, Inc., (Fitch) or Aaa, Aa, A or Baa by
Moody's Investors Service, Inc. (Moody's) If the security is unrated,
it must meet, in the judgement of the Investment Adviser, the above
minimum credit quality standards.
The Fund's investment policies (other than its investment
objective) are not fundamental and may be changed by the Board of
Directors of the Fund without the approval of shareholders.
DESCRIPTION OF INVESTMENTS
The Fund may invest in the securities defined below in accordance
with their listing of allowable investments and any quality or policy
constraints.
Agencies
The Fund may invest in agencies which are securities that are not
guaranteed by the United States Government, but which are issued,
sponsored or guaranteed by a federal agency or federally sponsored
agency such as the Student Loan Marketing Association or any of several
other agencies.
Bank Obligations.
The Fund may invest in obligations of domestic and foreign banks,
including time deposits, certificates of deposit, bankers' acceptances,
bank notes, deposit notes, Eurodollar time deposits, Eurodollar
certificates of deposit, variable rate notes, loan participations,
variable amount master demand notes, and custodial receipts. Time
deposits are non-negotiable deposits maintained in a banking institution
for a specified period of time at a stated interest rate. Certificates
of deposit are negotiable short-term obligations issued by commercial
banks or savings and loan associations against funds deposited in the
issuing institution. Variable rate certificates of deposit are
certificates of deposit on which the interest rate is adjusted
periodically prior to their stated maturity based upon a specified
market rate. A bankers' acceptance is a time draft drawn on a
commercial bank by a borrower usually in connection with an
international commercial transaction (to finance the import, export,
transfer, or storage of goods). The Fund may, from time to time,
concentrate more than 25% of its assets in domestic bank obligations.
Domestic bank obligations include instruments that are issued by United
States (domestic) banks; United States branches of foreign banks, if
such branches are subject to the same regulations as United States
banks; and foreign branches of United States banks, if the Investment
Adviser determines that the investment risk associated with investing in
instruments issued by such branches is the same as that of investing in
instruments issued by the United States parent bank, in that the United
States parent bank would be unconditionally liable in the event that the
foreign branch fails to pay on its instruments. Bank obligations entail
varying amounts of interest rate and credit risk, with the lowest-rated
and longest-dated bank obligations entailing the greatest risk of loss
to the Fund.
CMOs--Collateralized Mortgage Obligations
The Fund may purchase collateralized mortgage obligations which
are derivatives that are collateralized by mortgage pass-through
securities. Cash flows from the mortgage pass-through securities are
allocated to various tranches (a "tranche" is essentially a separate
security) in a predetermined, specified order. Each tranche has a stated
maturity - the latest date by which the tranche can be completely
repaid, assuming no prepayments - and has an average life - the average
of the time to receipt of a principal payment weighted by the size of
the principal payment. The average life is typically used as a proxy for
maturity because the debt is amortized (repaid a portion at a time),
rather than being paid off entirely at maturity, as would be the case in
a straight debt instrument.
Corporates
The Fund may invest in corporates which are debt instruments
issued by private corporations. Bondholders, as creditors, have a prior
legal claim over common and preferred stockholders of the corporation as
to both income and assets for the principal and interest due to the
bondholder. The Fund will buy corporates subject to any quality
constraints. If a security held by the Fund is down-graded, the Fund may
retain the security if the Investment Adviser deems retention of the
security to be in the best interests of the Fund.
Floaters
Floaters--Floating and Variable Rate Obligations are debt
obligations with a floating or variable rate of interest, i.e. the rate
of interest varies with changes in specified market rates or indices,
such as the prime rate, or at specified intervals. Certain floating or
variable rate obligations may carry a demand feature that permits the
holder to tender them back to the issuer of the underlying instrument,
or to a third party, at par value prior to maturity.
Foreign Government and International and Supranational Agency Debt
Securities.
The Fund may purchase U.S. dollar denominated debt obligations
issued or guaranteed by foreign governments or their subdivisions,
agencies, and instrumentalities, and debt obligations issued or
guaranteed by international agencies and supranational entities.
Investment Grade Debt Securities
The Fund may invest in investment grade securities that are those
rated by one or more nationally recognized statistical rating
organization (NRSRO) in one of the four highest rating categories at the
time of purchase (e.g. AAA, AA, A or BBB by Standard & Poor's, Fitch,
Duff & Phelps, or Aaa, Aa, A or Baa by Moody's). Securities rated BBB or
Baa represent the lowest of four levels of investment grade securities
and are regarded as borderline between definitely sound obligations and
those in which the speculative element begins to predominate. Mortgage-
backed securities, including mortgage pass-throughs and collateralized
mortgage obligations (CMOs), deemed investment grade by the Investment
Adviser, will either carry a guarantee from an agency of the U.S.
Government or a private issuer of the timely payment of principal and
interest (such guarantees do not extend to the market value of such
securities or the net asset value per share of the Fund) or, in the case
of unrated securities, be sufficiently seasoned that they are considered
by the Investment Adviser to be investment grade quality. The Investment
Adviser may retain securities if their ratings fall below investment
grade if it deems retention of the security to be in the best interests
of the Fund. The Fund may hold unrated securities if the Investment
Adviser considers the risks involved in owning that security to be
equivalent to the risks involved in holding an Investment Grade
Security.
Mortgage-Backed Securities and Asset-Backed Debt Securities.
Mortgage-backed debt securities are secured or backed by mortgages
or other mortgage-related assets. Such securities may be issued by such
entities as Government National Mortgage Association ("GNMA"), Federal
National Mortgage Association ("FNMA"), Federal Home Loan Mortgage
Corporation ("FHLMC"), commercial banks, savings and loan associations,
mortgage banks, or by issuers that are affiliates of or sponsored by
such entities. Other asset-backed securities are secured or backed by
assets other than mortgage-related assets, such as automobile and credit
card receivables, and are issued by such institutions as finance
companies, finance subsidiaries of industrial companies, and investment
banks. The Fund will purchase only asset-backed securities that the
Investment Adviser determines to be liquid. The Fund will not purchase
mortgage backed or asset-backed securities that do not meet the above
minimum credit standards.
An important feature of mortgage-and asset-backed securities is
that the principal amount is generally subject to partial or total
prepayment at any time because the underlying assets (i.e., loans)
generally may be prepaid at any time. If an asset-backed security is
purchased at a premium to par, a prepayment rate that is faster than
expected will reduce yield to maturity, while a prepayment rate that is
slower than expected will have the opposite effect of increasing yield
to maturity. Conversely, if an asset-backed security is purchased at a
discount, faster than expected prepayments will increase, while slower
than expected prepayments will decrease, yield to maturity. It should
also be noted that these securities may not have any security interest
in the underlying assets, and recoveries on repossessed collateral may
not, in some cases, be available to support payments on these
securities.
Municipal Debt Securities.
The Fund may, from time to time, purchase municipal debt
securities when, in the Investment Adviser's opinion, such instruments
will provide a greater return than taxable instruments of comparable
quality. It is not anticipated that such securities will ever represent
a significant portion of the Fund's assets. Fund distributions that are
derived from interest on municipal debt securities will be taxable to
shareholders in the same manner as distributions derived from taxable
debt securities.
Preferred Stock.
The Fund may invest in preferred stock which are non-voting
ownership shares in a corporation which pay a fixed or variable stream
of dividends.
Repurchase Agreements.
Repurchase agreements are transactions by which the Fund
purchases a security and simultaneously commits to resell that security
to the seller (a bank or securities dealer) at an agreed upon price on
an agreed upon date (usually within seven days of purchase). The resale
price reflects the purchase price plus an agreed upon market rate of
interest which is unrelated to the coupon rate or date of maturity of
the purchased security. Such agreements permit the Fund to keep all its
assets at work while retaining overnight flexibility in pursuit of
investments of a longer term nature. The Investment Adviser will
continually monitor the value of the underlying collateral to ensure
that its value, including accrued interest, always equals or exceeds
the repurchase price.
When-lssued and Forward Commitment Securities.
The Fund may purchase securities on a "when-issued" basis and may
purchase or sell securities on a "forward commitment" basis. In such
transactions, instruments are bought with payment and delivery taking
place in the future in order to secure what is considered to be an
advantageous yield or price at the time of the transaction. Delivery of
and payment for these securities may take more than a month after the
date of the purchase commitment, but will take place no more than 120
days after the trade date. No income accrues prior to delivery on
securities that have been purchased pursuant to a forward commitment or
on a when-issued basis. However, interest is generated on the short-
term investments that are segregated for the settlement of these
securities. At the time the Fund enters into a transaction on a when-
issued or forward commitment basis, a segregated account consisting of
cash or liquid securities equal to the value of the when-issued or
forward commitment securities will be established in the Fund and
maintained in the Fund and will be marked to market daily. A short term
investment in this segregated account may not have a duration that
exceeds 180 days. Forward commitments, or delayed deliveries, are
deemed to be outside the normal corporate settlement structure. They are
subject to segregation requirements; however, when a forward commitment
purchase is made to close a forward commitment sale, or vice versa, the
difference between the two may be netted for segregation purposes until
settlement date.
Zero Coupon Debt Securities.
The Fund may invest in zero coupon debt securities (bonds that pay
no interest but are originally sold at an original issue discount.
Because they do not pay interest until maturity, zero coupon securities
tend to be subject to greater fluctuation of market value in response to
changes in interest rates than interest-paying securities of similar
maturities.
RISK FACTORS
Interest Rate Risk.
Interest rate risk is the risk of fluctuations in bond prices due
to changing interest rates. As a rule, bond prices vary inversely with
market interest rates. For a given change in interest rates, longer
duration bonds fluctuate more in price than shorter-maturity bonds. To
compensate investors for these larger fluctuations, longer duration
bonds usually offer higher yields than shorter-maturity bonds, other
factors, including credit quality, being equal. As the fund's benchmark
is the Lehman Brothers Aggregate Bond Index, it is expected to be
subject to a moderate level of interest rate risk, consistent with that
of the index.
Prepayment Risk.
Prepayment risk is the possibility that, during periods of
declining interest rates, higher-yielding securities with optional
prepayment rights will be repaid before scheduled maturity, and the Fund
will be forced to reinvest the unanticipated payments at lower interest
rates. Debt obligations that can be prepaid (including most mortgage-
and asset-backed securities) will not enjoy as large a gain in market
value as other bonds when interest rates fall. In part to compensate
for prepayment risk, mortgage-and asset-backed securities generally
offer higher yields than bonds of comparable credit quality and
maturity.
Credit Risk.
Credit risk is the risk that an issuer of securities held by
the Fund will be unable to make payments of interest or principal. The
credit risk assumed by the Fund is a function of the credit quality of
its underlying securities. The average credit quality of the Fund is
expected to be high, and thus credit risk, in the aggregate, should be
low. The Fund will also be exposed to event risk, the risk that
corporate debt securities held by the Fund may suffer a substantial
decline in credit quality and market value due to a corporate
restructuring. Corporate restructurings, such as mergers, leveraged
buyouts, takeovers, or similar events, are often financed by a
significant increase in corporate debt. As a result of the added debt
burden, the credit quality and market value of a firm's existing debt
securities may decline significantly. While event risk may be high for
certain securities held by the Fund, event risk for the Fund in the
aggregate should be low because of the extensive diversification
expected in the Fund. For further discussion of credit risk, see
"Investment Grade Debt Securities". The ratings of fixed income
securities by S&P, Moody's, Duff & Phelps, and Fitch are a generally
accepted barometer of credit risk. They are, however, subject to
certain limitations from an investor's standpoint. The rating of an
issuer is heavily weighted by past developments and does not necessarily
reflect probable future conditions. There is frequently a lag between
the time a rating is assigned and the time it is updated. In addition,
there may be varying degrees of difference in credit risk of securities
within each rating category.
Non-Diversified Status
The Fund is classified as a "non-diversified" investment company
under the 1940 Act, which means the Fund is not limited by the 1940 Act
in the proportion of its assets that may be invested in the securities
of a single issuer. However, the Fund intends to conduct its operations
so as to qualify as a regulated investment company for purposes of the
Internal Revenue Code of 1986, as amended (the "Code"), which generally
will relieve the Fund of any liability for federal income tax to the
extent its earnings are distributed to shareholders. See "Additional
Information - Taxes." To so qualify, among other requirements, the Fund
will limit its investments so that, at the close of each quarter of the
taxable year, (i) not more than 25% of the market value of the Fund's
total assets will be invested in securities of a single issuer, and (ii)
with respect to 50% of the market value of its total assets, not more
than 5% of the market value of its total assets will be invested in the
securities of a single issuer and the Fund will not own more than 10% of
the outstanding voting securities of a single issuer.
Under these investment requirements, the Fund must invest in at
least twelve securities positions. Ten of the positions may not exceed
5% of total assets each at the time of purchase; the remaining two
positions could each comprise 25% of total assets at the time of
purchase. Generally, it is anticipated that the portfolio will consist
of more than twelve positions. To the extent that the Fund is less
diversified, it may be more susceptible to adverse economic, political,
or regulatory developments affecting a single issuer than would be the
case if it were more broadly diversified.
INVESTMENT LIMITATIONS
The Fund may not:
borrow money (including entering into reverse repurchase
agreements).;
invest more than 25% of the total assets of the Fund in the
securities of issuers having their principal activities in any
particular industry, except for obligations issued or guaranteed by the
U.S. government, its agencies, GSE's, instrumentalities or by any
state, territory or any possession of the United States or any of their
authorities, agencies, instrumentalities or political subdivisions, or
with respect to repurchase agreements collateralized by any of such
obligations. For purposes of this restriction, supranational issuers
will be considered to comprise an industry as will each foreign
government that issues securities purchased by the Fund. In the case of
Asset Backed Securities, the industry will be defined by the underlying
assets in each trust. (For example, credit card receivables and auto
loans would each be considered separate industries); and
(3) invest the cash securing a forward commitment in mortgage
backed securities in investments that have a duration exceeding 180
days.
The limitations contained above may be changed only with the
affirmative vote of the holders of a majority of the Fund's outstanding
voting securities, as defined in the 1940 Act. The percentage
limitations contained above as well as elsewhere in this Prospectus and
in the Statement of Additional Information apply only at the time of
purchase and the Fund will not be required to dispose of securities
upon subsequent fluctuations in market value.
MANAGEMENT OF THE FUND
Board of Directors
The Board of Directors of the Company consists of five
individuals, two of whom are not "interested persons" of the Fund as
defined in the 1940 Act. The Directors of the Fund are responsible for
the overall supervision of the operations of the Fund and perform the
various duties imposed on the directors of investment companies by the
1940 Act. The Directors and officers of the Fund and their principal
occupations are set forth below.
Investment Adviser
Seix Investment Advisors Inc., established in 1992, is a
registered investment adviser that specializes in professional fixed
income management for corporations, public funds, endowments,
foundations and hospitals. The Investment Adviser currently has
approximately $1.5 billion in assets under management. The Investment
Adviser is located at 300 Tice Boulevard, Woodcliff Lake, NJ 07675.
Seix Investment Advisors Inc. acts as the investment adviser to
the Fund and provides the Fund with management and investment advisory
services. The advisory agreement with the Investment Adviser (the
"Advisory Agreement") provides that, subject to the direction of the
Board of Directors of the Fund, the Investment Adviser is responsible
for the actual management of the Fund. The responsibility for making
decisions to buy, sell or hold a particular security rests with the
Investment Adviser, subject to review by the Board of Directors. The
Investment Adviser also is obligated to provide all the office space,
facilities, equipment and personnel necessary to perform its duties
under the Advisory Agreement.
The Investment Adviser receives monthly compensation at the
annual rate of 0.25% of the average daily net assets of the Fund. The
Investment Adviser may waive all or part of its fee from time to time in
order to increase the Fund's net income available for distribution to
shareholders. The Fund will not be required to reimburse the Investment
Adviser for any advisory fees waived. In addition, the Investment
Adviser and the Administrator have voluntarily agreed to limit the total
expenses of the Fund [(excluding interest, taxes, brokerage, and
extraordinary expenses)] to an annual rate of 0.45% of the Fund's
average daily net assets for an indefinite time period. As long as this
temporary expense limitation continues, it may lower the Fund's expenses
and increase its total return. In the event the Investment Adviser and
the Administrator remove the expense cap, the Fund's expenses may
increase and its total return may be reduced depending on the total
assets of the Fund.
The Fund is responsible for paying certain expenses incurred in
its operations including, among other things, the investment advisory
and administrative fees, legal and audit fees, unaffiliated Directors'
fees and expenses, custodian and transfer agency fees, certain
insurance premiums, accounting and pricing costs, federal and state
registration fees, the costs of issuing and redeeming shares, costs of
shareholder meetings, any extraordinary expenses and certain of the
costs of printing proxies, shareholders reports, prospectuses and
statements of additional information. The Fund also pays for brokerage
fees and commissions in connection with the purchase and sale of
portfolio securities.
Portfolio Managers
Christina Seix, CFA, Chairman, CEO & Chief Investment Officer
Formerly, Chairman & CEO, Head of Investment Policy, MacKay-Shields
Total Investment Experience: 24 years
BA, Fordham University, Mathematics
MA, SUNY, Mathematics
John Talty, CFA, President & Senior Portfolio Manager
Formerly, Chief Fixed Income Strategist, J.P. Morgan Securities
Total Investment Experience: 16 years
B.A., Connecticut College, Economics, Phi Beta Kappa, Magna Cum Laude
Barbara Hoffmann, Managing Director and Senior Portfolio Manager
Formerly, Senior Portfolio Manager, MetLife Investment Management Co.
Total Investment Experience: 18 years
BS, University of Maine, Education/Mathematics
Michael McEachern, CFA, Director and Senior Portfolio Manager
Formerly, Vice President, Fixed Income, American General Corp.
Total Investment Experience: 13 years
BA, University of California, Operations Research
MBA, Rice University, Accounting/Public Administration
Joseph Calabrese, Director and Senior Portfolio Manager
Formerly, Director, Fixed Income, MetLife Insurance Company
Total Investment Experience: 10 years
BS, New Jersey Institute of Technology, Industrial Engineering
MBA, New York University, Finance
Investment Adviser Composite Account Information
The Investment Adviser manages fixed income accounts for
institutional and private investors. These separate accounts are not
registered investment companies and are exempt from registration under
the 1940 Act. The composite performance information provided below is
intended to demonstrate the performance of the Investment Adviser in
managing accounts with fixed income investment strategies as measured
against a specific market index. The performance results of the
composite do not represent the performance of the Fund and should not be
considered to indicate past or future performance of the Fund.
The Investment Adviser's composite includes all actual, fee
paying, discretionary private accounts managed by the Investment
Adviser, including accounts no longer in existence, which have
investment objectives, policies, strategies and risks that are similar
to those of the Fund. Accounts are included from the first full month
following the date at which the account is deemed to be fully invested.
The average number of accounts included in the Investment Adviser's
composite is (insert number). Securities transactions are accounted for
on the trade date and accrual accounting is utilized. Cash and
equivalents are included in performance returns.
The composite performance information was calculated in accordance
with recommended standards of the Association for Investment Management
and Research ("AIMR"). The performance return presented was calculated
on a total return basis and include all dividends and interest, cash and
cash equivalents, realized and unrealized gains and losses. The
performance returns include brokerage commissions and execution costs
incurred by the composite accounts without any provision for federal or
state income taxes. Securities transactions are accounted for on the
trade date and accrual accounting was utilized.
The private accounts that are included in the Investment Adviser's
composite are not subject to the same types of expenses to which the
Fund, a regulated investment company, would be subject such as
investment advisory fees, administration fees, transfer agency fees, SEC
registration fees and state filing fees, nor were they subject to the
diversification requirements, specific tax restrictions and investment
limitations imposed on the Fund by the Investment Company Act or
Subchapter M of the Internal Revenue Code. The composite performance
results of the Investment Adviser's private accounts would be adversely
affected if it were regulated as an investment company under the federal
securities laws. In addition, the Investment Adviser has appropriately
reduced the historical gross performance of the composite to reflect the
assumed deduction of Fund operating expenses.
For the periods ended June 30, 1997:
Year to Date One Year Three Years* Since Inception*
(1/1/97-6/30/97) (7/1/96-6/30/97 (7/1/94-6/30/97) 9/30/89-6/30/97)
(unaudited) (unaudited) (unaudited) (unaudited)
Full Market
Management
Composite
Account
Lehman Brothers (1)
Aggregate Bond
Index
*Annualized
(1) Returns do not include commissions or fees which would be incurred
by an investor in the index portfolio.
Note: unlike a registered investment company which has specific
rules and regulations concerning performance information, the
information contained in the composite accounts are not required to be
updated continuously. The Investment Adviser will update the
performance information for the composite accounts in such a manner so
that the information included herein is not deemed misleading.
Administrator
AMT Capital Services, Inc., (in its capacity as administrator,
the "Administrator") acts as the Fund's administrator pursuant to an
administration agreement (the "Administration Agreement"). Pursuant to
the Administration Agreement, the Administrator is responsible for
providing administrative services to the Fund and assists in managing
and supervising all aspects of the general day-to-day business
activities and operations of the Fund other than investment advisory
activities, including certain accounting, auditing, clerical,
bookkeeping, custodial, transfer agency, dividend disbursing, compliance
and related services, Blue Sky compliance, corporate secretarial
services and assistance in the preparation and filing of tax returns and
reports to shareholders and the SEC. The Fund pays the Administrator a
monthly fee at the annual rate of 0.15% of the Fund's average daily net
assets and the Administrator is entitled to reimbursement from the Fund
for its out-of-pocket expenses incurred under the Administration
Agreement.
Transfer Agent
The Transfer Agent, with offices located at 200 Clarendon Street,
Boston, Massachusetts 02116, acts as the Fund's transfer agent pursuant
to a transfer agency, dividend disbursing agency and shareholder
servicing agency agreement (the "Transfer Agent Agreement"). Pursuant
to the Transfer Agent Agreement, the Transfer Agent is responsible for
the issuance, transfer and redemption of shares and the opening and
maintenance of shareholder accounts. The Transfer Agent is entitled to
reimbursement from the Fund for out-of-pocket expenses incurred by the
Transfer Agent under the Transfer Agent Agreement.
Rule 12b-1 Plan
The Fund has adopted a Distribution Plan (the "Plan") pursuant to
Rule 12b-1 under the 1940 Act. Under the Plan, the Fund may pay a
quarterly distribution related fee at an amount not to exceed 0.25% of
the average daily value of the Fund's net assets. Such amounts received
under the Plan are to be used to for payments to qualifying dealers for
their assistance in the distribution of the Fund's shares and the
provision of shareholder services and for other expenses such as
advertising costs and the payment for the printing and distribution of
prospectuses to prospective investors.
PURCHASE OF SHARES
There is no sales charge imposed by the Fund. The minimum initial
investment in the Fund is $100,000; additional purchases may be of any
amount.
The offering of shares of the Fund is continuous and purchases of
shares of the Fund may be made Monday through Friday, except for the
holidays declared by the Federal Reserve Banks of New York or Boston (a
"Business Day"). At the present time, these holidays are: New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Memorial Day, Fourth
of July, Labor Day, Columbus Day, Veterans Day, Thanksgiving, and
Christmas. The Fund's shares are offered at a public offering price
equal to the net asset value next determined after a purchase order
becomes effective.
In order to purchase shares on a particular Business Day, subject
to the offering dates described above, a purchaser must submit a
completed Account Application Form (and other required documents) and
call the Distributor at (800) 762-4848 [or within the City of New York,
(212) 332-5211] prior to 4:00 p.m. Eastern time to inform the Fund of
the incoming wire transfer. If Federal funds are received by the Fund
that same day, the order will be effective on that day. If the Fund
receives notification after 4:00 p.m. Eastern time, or if Federal funds
are not received by the Transfer Agent, such purchase order shall be
executed as of the date that Federal funds are received. Shares
purchased will begin accruing dividends on the day Federal funds are
received.
Purchases of shares must be made by wire transfer of Federal
funds. Please note that the shareholder's bank may impose a charge to
execute the wire transfer. The wiring instructions for purchasing
shares of the Fund are:
Investors Bank & Trust Company
Boston, MA
ABA # xx-xxxx-xxx
Acct: 999XXXXXXX
Benf: SAMCO Fixed Income Fund
F/F/C (Shareholder's Account at Fund)
REDEMPTION OF SHARES
The Fund will redeem all full and fractional shares of the Fund
upon request of shareholders. The redemption price is the net asset
value per share next determined after receipt by the Transfer Agent of
proper notice of redemption as described below. If such notice is
received by the Transfer Agent by 12:00 p.m. Eastern time on any
Business Day, the redemption will be effective on the date of receipt.
If such notice of redemption is received by the Transfer Agent after
12:00 p.m. Eastern time, the redemption of the shareholder shall be
effective on the following Business Day. Payment will ordinarily be
made by wire on the next Business Day but within no more than seven
Business Days from the date of receipt. If the notice is received on a
day that is not a Business Day or after the above-mentioned cut-off
times, the redemption notice will be deemed received as of the next
Business Day.
There is no charge imposed by the Fund to redeem shares of the
Fund; however, a shareholder's bank may impose its own wire transfer fee
for receipt of the wire. Redemptions may be executed in any amount
requested by the shareholder up to the amount such shareholder has
invested in the Fund.
To redeem shares, a shareholder or any authorized agent (so
designated on the Account Application Form) must provide the Transfer
Agent with the dollar or share amount to be redeemed, the account to
which the redemption proceeds should be wired (which account shall have
been previously designated by the shareholder on its Account Application
Form), the name of the shareholder and the shareholder's account number.
Shares redeemed receive dividends up to and including the day preceding
the day the redemption proceeds are wired.
A shareholder may change its authorized agent or the account
designated to receive redemption proceeds at any time by writing to the
Transfer Agent with an appropriate signature guarantee. Further
documentation may be required when deemed appropriate by the Transfer
Agent.
A shareholder may request redemption by calling the Transfer Agent
at (800) 247-0473. Telephone redemption is made available to
shareholders of the Fund on the Account Application Form. The Fund and
the Transfer Agent may employ reasonable procedures designed to confirm
that instructions communicated by telephone are genuine. If either the
Fund or the Transfer Agent does not employ such procedures, it may be
liable for losses due to unauthorized or fraudulent instructions. The
Fund or the Transfer Agent may require personal identification codes and
will only wire funds through pre-existing bank account instructions. No
bank instruction changes will be accepted via telephone.
THE FUND'S PERFORMANCE
Total Return
From time to time, the Fund may advertise certain information
about its performance. The Fund may present its "average annual total
return" over various periods of time. Such total return figures show
the average annual percentage change in value of an investment in the
Fund from the beginning date of the measuring period to the end of the
measuring period. These figures reflect changes in the price of the
Fund's shares and assume that any income dividends and/or capital gains
distributions made by the Fund during the period were reinvested in
shares of the Fund. Figures may be given for the most current one-,
five- and ten-year periods (or the life of the Fund, if it has not been
in existence for any such period) and may be given for other periods as
well. When considering "average" total return figures for periods
longer than one year, it is important to note that the Fund's annual
total return for any one year in the period might have been greater or
less than the average for the entire period. In addition, the Fund may
make available information as to its respective "yield" and "effective
yield" over a thirty-day period, as calculated in accordance with the
Securities and Exchange Commission's prescribed formula. The "effective
yield" assumes that the income earned by an investment in the Fund is
reinvested, and will therefore be slightly higher than the yield because
of the compounding effect of this assumed reinvestment.
Furthermore, in reports or other communications to shareholders
or in advertising material, the Fund may compare its performance with
that of other mutual funds as listed in the rankings prepared by Lipper
Analytical Services, Inc. or similar independent services which monitor
the performance of mutual funds, other industry or financial
publications or financial indices such as the Lehman Brothers Aggregate
Bond Index or a composite benchmark index. It is important to note that
the total return figures are based on historical returns and are not
intended to indicate future performance.
ADDITIONAL INFORMATION
Dividends and Distributions
Dividends are automatically reinvested in additional shares of the
Fund on the last day of each month at the net asset value per share on
the last Business Day of that month. Shareholders must indicate their
desire to receive dividends in cash (payable on the first Business Day
of the following month) on the Account Application Form. Otherwise all
dividends will be reinvested in additional shares as described above.
In the event that the Fund realizes net long-term capital gains (i.e.,
with respect to assets held more than one year), it will distribute them
at least annually by automatically reinvesting (unless a shareholder has
elected to receive cash) such long-term capital gains in additional
shares of the Fund at the net asset value on the date the distribution
is declared.
The net investment income (including accrued but unpaid interest
and amortization of original issue and market discount or premium) of
the Fund will be declared as a dividend payable monthly to shareholders
of record as of the last Business Day of each month. The Fund will also
declare, to the extent necessary, a net short-term capital gain dividend
once per year. Dividends are paid on the first Business Day of the
month.
Determination of Net Asset Value
The net asset value per share of the Fund is determined each
Business Day the Fund is open. The net asset value per share 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 payable to the Investment Adviser, are accrued daily.
The following methods are used to calculate the value of the
Fund's assets: (1) all portfolio securities for which over-the-counter
market quotations are readily available (including asset-backed
securities) are valued at the latest bid price; (2) deposits and
repurchase agreements are valued at their cost plus accrued interest
unless the Investment Adviser determines in good faith, under procedures
established by and under the general supervision of the Fund's Board of
Directors, that such value does not approximate the fair value of such
assets; (3) positions (e.g., futures and options) listed or traded on an
exchange are valued at their last sale price on that exchange (or if
there were no sales that day for a particular position, that position is
valued at the closing bid price); and (4) the value of other assets will
be determined in good faith by the Investment Adviser at fair value
under procedures established by and under the general supervision of the
Fund's Board of Directors.
Taxes
The following discussion is only a brief summary of some of the
important tax considerations affecting the Fund and its shareholders.
No attempt is made to present a detailed explanation of all federal,
state, local and foreign income tax considerations, and this discussion
is not intended as a substitute for careful tax planning. Accordingly,
potential investors are urged to consult their own tax advisers with
specific reference to their own tax situation.
The Fund intends to qualify and elect to be treated as a
"regulated investment company" for federal income tax purposes under
Subchapter M of the Code. If so qualified, the Fund will not be subject
to federal income taxes on its net investment income (i.e., its
investment company taxable income) as that term is defined in the Code,
determined without regard to the deduction for dividends paid) and net
capital gain (i.e., the excess of the Fund's net long-term capital gain
over its net short-term capital loss), if any, that it distributes to
its shareholders in each taxable year. To qualify as a regulated
investment company, the Fund must, among other things, distribute to its
shareholders at least 90% of its net investment company taxable income
for such taxable year. However, the Fund would be subject to corporate
federal income tax at a rate of 35% on any undistributed income or net
capital gain. The Fund will be subject to a 4% nondeductible excise tax
on its taxable income to the extent it does not meet certain
distribution requirements. If in any year the Fund should fail to
qualify as a regulated investment company, the Fund would be subject to
federal income tax in the same manner as an ordinary corporation and
distributions to shareholders would be taxable to such holders as
ordinary income to the extent of the earnings and profits of the Fund.
Such distributions would qualify for the dividends-received deduction
available to corporate shareholders. Distributions in excess of
earnings and profits would be treated as a tax-free return of capital,
to the extent of a holder's basis in its shares, and any excess, as a
long- or short-term capital gain.
Distributions paid by the Fund from net investment income are
designated by the Fund as "ordinary income dividends" and, whether paid
in cash or reinvested in additional shares, will be taxable to Fund
shareholders that are otherwise subject to tax as ordinary income. A
portion of the Fund's ordinary income dividends may be eligible for the
dividends-received deduction for corporations if certain requirements
are met. Distributions made from the Fund's net capital gain which are
designated by the Fund as "capital gains dividends" are taxable to
shareholders as long-term capital gains, regardless of the length of
time the shareholder has owned Fund shares. Shareholders receiving
distributions from the Fund in the form of additional shares will be
treated for federal income tax purposes as receiving a distribution in
an amount equal to the net asset value of the additional shares on the
date of such a distribution.
Gain or loss, if any, recognized on the sale or other disposition
of shares of the Fund will be taxed as capital gain or loss if the
shares are capital assets in the shareholder's hands. Generally, a
shareholder's gain or loss will be a long-term gain or loss if the
shares have been held for more than one year. If a shareholder sells or
otherwise disposes of a share of the Fund before holding it for more
than six months, any loss on the sale or other disposition of such share
shall be treated as a long-term capital loss to the extent of any
capital gain dividends received by the shareholder with respect to such
share. A loss realized on a sale or exchange of shares may be disallowed
if other shares are acquired within a 61-day period beginning 30 days
before and ending 30 days after the date that the shares are disposed
of.
Dividends and distributions by the Fund are generally taxable to
the shareholders at the time the dividend or distribution is made. Any
dividend declared in December of any year, however, that is payable to
shareholders of record on a specified date in such months will be deemed
to have been received by the shareholders and paid by the Fund on
December 31 of such year in the event such dividends are actually paid
during January of the following year.
The Fund may be required to withhold federal income tax at a rate
of 31% ("backup withholding") from dividends and redemption proceeds
paid to non-corporate shareholders. This tax may be withheld from
dividends if (i) the shareholder fails to furnish the Fund with the
shareholder's correct taxpayer identification number, (ii) the Internal
Revenue Service ("IRS") notifies the Fund that the shareholder has
failed to report properly certain interest and dividend income to the
IRS and to respond to notices to that effect, or (iii) when required to
do so, the shareholder fails to certify that he or she is not subject to
backup withholding.
Organization of the Fund
The Fund is a portfolio of SAMCO Fund, Inc., an open-end
management investment company, which was incorporated under Maryland law
on August 4, 1997. The Company has an authorized capital of
2,500,000,000 shares of Common Stock, par value $0.001 per share. The
Fund currently is the only organized series of the Company. The Board
of Directors may, in the future, establish additional portfolios which
may have different investment objectives. All shares of each fund will
have equal voting rights and each shareholder is entitled to one vote
for each full 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 Company is not required and does
not intend to hold meetings of shareholders. The Fund has undertaken to
call a meeting of shareholders upon a written request of 10% of the
Fund's outstanding shares, for the purpose of voting on removal of one
or more directors and the Fund will assist shareholder communications
with regard to such a meeting, as provided under Section 16(c) of the
1940 Act. Shares of the Fund will, when issued, be fully paid and non-
assessable and have no preemptive or conversion rights. 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. The Fund
also issues another class of shares which may have different operating
and other expenses. For more information about other classes of the
Fund's shares, investors should contact the Distributor at the address
or phone number set forth on the cover of this Prospectus.
SERVICE PROVIDERS
Custodian and Accounting Agent
Investors Bank & Trust Company, 200 Clarendon Street, Boston,
Massachusetts 02116, is Custodian and Accounting Agent for the Fund.
Transfer and Dividend Disbursing Agent
Investors Bank & Trust Company, 200 Clarendon Street, Boston,
Massachusetts 02116, is Transfer Agent for the shares of the Fund, and
Dividend Disbursing Agent for the Fund.
Legal Counsel
Dechert Price & Rhoads, 30 Rockefeller Plaza, New York, New York
10112, is legal counsel for the Fund.
Independent Auditors
To be decided.
Shareholder Inquiries
Shareholder inquiries may be addressed to the Fund or the
Distributor at the addresses or telephone numbers set forth on the
cover page of this Prospectus.
APPENDIX A
Description of Bond Ratings*
Duff & Phelps Credit Rating Co.
AAA: Highest credit quality. The risk factors are negligible,
being only slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA-: High credit quality. Protection factors are
strong. Risk is modest but may vary slightly from time to time because
of economic conditions.
A+, A, A-: Protection factors are average but adequate. However,
risk factors are more variable and greater in periods of economic
stress.
BBB+, BBB, BBB-: Below average protection factors but still
considered sufficient for prudent investment. Considerable variability
in risk during economic cycles.
Plus (+) Minus (-): Plus and minus signs are used with a rating
symbol to indicate the relative position of a credit within the rating
category. Plus and minus signs are not used in the AAA category.
Fitch Investors Service, Inc.
AAA: Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA: Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds rated
AAA. Because bonds rated in the AAA and AA categories are not
significantly vulnerable to foreseeable future developments, short-term
debt of these issuers is generally rated F-1+.
A: Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes
in economic conditions and circumstances than bonds with higher ratings.
BBB: Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse
impact on these bonds, and therefore impair timely payment. The
likelihood that the ratings of these bonds will fall below investment
grade is higher than for bonds with higher ratings.
Moody's Investors Service, Inc.
Aaa: Bonds which are rated Aaa are judged to be of the best
quality and carry the smallest degree of investment risk. Interest
payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what generally
are known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well.
Moody's applies numerical modifiers, 1, 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.
Standard & Poor's Corporation
AAA: Debt rated AAA has the highest rating assigned by Standard
& Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA: Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only in small
degree.
A: Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt in
higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity
to pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
APPENDIX B
Description of Commercial Paper Ratings
Moody's Investors Service, Inc.
Prime-1 Issuers (or related supporting institutions) rated
"P-1" have a superior ability for repayment of senior short-term
debt obligations. "Prime-1" repayment ability will often be
evidenced by many of the following characteristics: leading
market positions in well-established industries, high rates of
return on funds employed, conservative capitalization structures
with moderate reliance on debt and ample asset protection, broad
margins in earnings coverage of fixed financial charges and high
internal cash generation, and well-established access to a range
of financial markets and assured sources of alternate liquidity.
Prime-2 Issuers (or related supporting institutions) rated
"P-2" have a strong ability for repayment of senior short-term
debt obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample
alternative liquidity is maintained.
Standard & Poor's Corporation
A-1 This highest category indicates that the degree of
safety regarding timely payment is strong. Those issues
determined to possess extremely strong safety characteristics are
denoted with a plus (+) sign designation.
A-2 Capacity for timely payment on issues with this
designation is satisfactory. However, the relative degree of
safety is not as high as for issues designated "A-1."
STATEMENT OF ADDITIONAL INFORMATION
(Class B shares only)
SAMCO FIXED INCOME PORTFOLIO
600 Fifth Avenue, 26th Floor
New York, New York 10020
(212) 332-5211
SAMCO Fixed Income Portfolio (the "Fund") is a
portfolio of SAMCO Fund, Inc. an open-end management
investment company. Shares of the Fund may be purchased
through AMT Capital Services, Inc. (the "Distributor").
This Statement of Additional Information is not a
prospectus and should be read in conjunction with the
Prospectus of the Fund, dated November 1, 1997 (the
"Prospectus"), which has been filed with the Securities and
Exchange Commission (the "Commission") and can be obtained,
without charge, by calling or writing the Distributor at the
telephone number or address stated below. This Statement of
Additional Information incorporates by reference the
Prospectus.
Distributed by: AMT Capital Services, Inc.
600 Fifth Avenue, 26th Floor
New York, New York 10020
(212) 332-5211
(800) 762-4848 (outside New York City)
The date of this Statement of Additional Information is November 1, 1997
TABLE OF CONTENTS Page
Organization of the Fund
Management of the Fund
Board of Directors and Officers
Investment Adviser
Administrator
Distribution of Fund Shares
Supplemental Descriptions of Investments
Supplemental Investment Techniques
Supplemental Discussion of Risks Associated With the
Fund's Investment Policies and Investment Techniques
Options
Futures Contracts and Options on Futures Contracts
Investment Restrictions
Portfolio Transactions
Tax Considerations
Shareholder Information
Calculation of Performance Data
Financial Statements
Appendix
Quality Rating Descriptions
ORGANIZATION OF THE FUND
The authorized capital stock of the Fund consists of
2,500,000,000 shares with $.001 par value. Every share
issued by the Fund has equal voting rights; shareholders
receive one vote for each share held. All shares issued and
outstanding are fully paid and non-assessable, transferable,
and redeemable at net asset value at the option of the
shareholder. Shares have no preemptive or conversion rights.
The shares of the Fund have non-cumulative voting
rights, which means that the holders of more than 50% of the
shares voting for the election of Directors can elect 100% of
the Directors if they choose to do so, and, in such event,
the holders of the remaining less than 50% of the shares
voting for the election of Directors will not be able to
elect any person or persons to the Board of Directors.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS AND OFFICERS
The Fund is managed by its Board of Directors. The
Directors and officers of the Fund and their principal
occupations during the past five years are set forth below.
An asterisk (*) has been placed next to the name of each
director who is an "interested person" of the Fund, as such
term is defined in the Investment Company Act of 1940, as
amended (the "1940 Act"), by virtue of his affiliation with
the Fund or the Fund's investment adviser, Seix Investment
Advisors Inc. (the "Investment Adviser").
Name, Address and Age Office Principal Occupation During Past Five Years
DIRECTORS
No employee of the Investment Adviser nor the
Distributor receives any compensation from the Fund for
acting as an officer or director of the Fund. The Fund pays
each director who is not a director, officer or employee of
the Investment Adviser or the Distributor or any of their
affiliates, a fee of $X,XXX for each meeting attended, and
each of the Directors receive an annual retainer of $X,XXX
which is paid in quarterly installments.
Estimated Director's Compensation Table
Fiscal Year Ended December 31, 1997
Director Aggregate Pension or Estimated Total
Compensation From Retirement Annual Compensation
Registrant Benefits Accrued benefits Upon From
As Part of Fund Retirement Registrant
Expenses and Fund
Complex
Paid to
Directors
Director #1 $0 $0 $0 $0
Director #2 $0 $0 $0 $0
Director #3 $0 $0 $0 $0
Director #4 $0 $0 $0 $0
By virtue of the responsibilities assumed by the Investment
Adviser and the Distributor and their affiliates under their
respective agreements with the Fund, the Fund itself requires
no employees in addition to its officers.
INVESTMENT ADVISER AND ADVISORY AGREEMENT
Seix Investment Advisors Inc., established in 1992, is
a registered investment adviser that specializes in
professional fixed income management for corporations, public
funds, endowments, foundations and hospitals. [
] may be deemed "controlling persons" of the
Investment Adviser [on the basis of their ownership of the
Investment Adviser's stock].
Pursuant to the terms of the advisory agreement
between the Fund and the Investment Adviser (the "Advisory
Agreement"), the Investment Adviser, subject to the control
and supervision of the Fund's Board of Directors and in
conformance with the stated investment objectives and
policies of the Fund, shall manage the investment and
reinvestment of the assets of the Fund. In this regard, it
is the responsibility of the Investment Adviser to make
investment decisions for the Fund and to place the Fund's
purchase and sales orders for investment securities.
The Advisory Agreement shall remain in effect for two
years following their date of execution and thereafter will
automatically continue for successive annual periods, so long
as such continuance is specifically approved at least
annually by (a) the Board of Directors or (b) the vote of a
"majority" (as defined in the 1940 Act) of the Fund's
outstanding shares voting as a single class; provided, that
in either event the continuance is also approved by at least
a majority of the Board of Directors who are not "interested
persons" (as defined in the 1940 Act) of the Fund or the
Investment Adviser by vote cast in person at a meeting called
for the purpose of voting on such approval.
The Advisory Agreement is terminable without penalty on
not less than 60 days' notice by the Board of Directors or by
a vote of the holders of a majority of the Fund's outstanding
shares voting as a single class, or upon not less than 60
days' notice by the Investment Adviser. The Advisory
Agreement will terminate automatically in the event of its
"assignment" (as defined in the 1940 Act).
The Investment Adviser pays all of its expenses arising
from the performance of its obligations under the Advisory
Agreement, including all executive salaries and expenses of
the directors and officers of the Fund who are employees of
the Investment Adviser or its affiliates, and office rent of
the Fund. Subject to the expense reimbursement provisions
described in the Prospectus under "Fund Expenses", other
expenses incurred in the operation of the Fund are borne by
the Fund, including, without limitation, investment advisory
fees, brokerage commissions, interest, fees and expenses of
independent attorneys, auditors, custodians, accounting
agents, transfer agents, taxes, cost of stock certificates
and any other expenses (including clerical expenses) of
issue, sale, repurchase or redemption of shares, expenses of
registering and qualifying shares of the Fund under federal
and state laws and regulations, expenses of printing and
distributing reports, notices and proxy materials to existing
shareholders, expenses of printing and filing reports and
other documents filed with governmental agencies, expenses of
annual and special shareholders' meetings, fees and expenses
of Directors of the Fund who are not employees of the
Investment Adviser or its affiliates, membership dues in the
Investment Company Institute, insurance premiums and
extraordinary expenses such as litigation expenses.
As compensation for its services, the Investment
Adviser receives monthly compensation at the annual rate of
0.25% of the average daily net assets of the Fund. The
Investment Adviser may waive all or part of its fee from time
to time in order to increase the Fund's net income available
for distribution to shareholders. The Fund will not be
required to reimburse the Investment Adviser for any advisory
fees waived. In addition, the Investment Adviser and the
Administrator have voluntarily agreed to limit the total
expenses of the Fund [(excluding taxes, interest, brokerage,
and extraordinary expenses)] to an annual rate of 0.45% of
the Fund's average daily net assets for an indefinite time
period. As long as this temporary expense limitation
continues, it may lower the Fund's expenses and increase its
total return. In the event the Investment Adviser and/or the
Administrator remove the expense cap, the Fund's expenses may
increase and its total return may be reduced depending on the
total assets of the Fund.
The Advisory Agreement was approved on [
] by the Fund's Directors, including a majority of the
Directors who are not interested persons (as defined in the
1940 Act) of the Fund or the Investment Adviser.
ADMINISTRATOR
The administration agreement (the "Administration
Agreement") between the Fund and AMT Capital Services, Inc.
in such capacity, the "Administrator" will remain in effect
for a period of five successive annual periods. The
Administrator provides for, or assists in managing and
supervising all aspects of, the general day-to-day business
activities and operations of the Fund other than investment
advisory activities, including custodial, transfer agency,
dividend disbursing, accounting, auditing, compliance and
related services. The Fund pays the Administrator a monthly
fee at the annual rate of 0.15% of the Fund's average daily
net assets and the Administrator is entitled to reimbursement
from the Fund for its out-of-pocket expenses incurred under
the Administration Agreement.
DISTRIBUTION OF FUND SHARES
Distribution Agreement. Shares of the Fund are
distributed by the Distributor pursuant to the distribution
agreement (the "Distribution Agreement") between the Fund and
the Distributor, which is subject to the approval of the
Fund's Board of Directors. [No fees are payable by the Fund
pursuant to the Distribution Agreement, and the Distributor
bears the expense of its distribution activities.] The Fund
and the Distributor have agreed to indemnify one another
against certain liabilities.
Distribution Plan. The Fund has adopted a Distribution
Plan and related agreements pursuant to Rule 12b-1 under the
1940 Act, which provides that investment companies may pay
distribution expenses, directly or indirectly, pursuant to a
distribution plan adopted by the investment company's board
and approved by its shareholders. Under the Distribution
Plan, the Fund makes assistance payments to brokers,
financial institutions and other financial intermediaries
("payee(s)") for shareholder accounts ("qualified accounts")
as to which a payee has rendered distribution assistance
services to the Class B shares at an annual rate of 0.25% of
the average net asset value of the Class B shares.
Substantially all such monies are paid by the Investment
Adviser to payees for their distribution assistance with any
remaining amounts being used to partially defray other
expenses incurred by the Investment Adviser in distributing
Fund shares. In addition to the amounts required by the
Distribution Plan, the Investment Adviser may, in its
discretion, pay additional amounts from its own resources.
The rate of any additional amounts that may be paid will be
based upon the Investment Adviser's analysis of the
contribution that a payee makes to the Fund by increasing
assets under management and reducing expense ratios and the
cost to the Fund if such services were provided directly by
the Fund or other authorized persons. The Investment Adviser
will also consider the need to respond to competitive offers
of others, which could result in assets being withdrawn from
the Fund and an increase in the expense ratio for the Fund.
The Investment Adviser may elect to retain a portion of the
distribution assistance payments to pay for sales material or
other promotional activities. The Directors have determined
that there is a reasonable likelihood the Distribution Plan
will benefit the Fund and its shareholders.
The Glass-Steagall Act prohibits all entities which
receive deposits from engaging to any extent in the business
of issuing, underwriting, selling, or distributing
securities, although national and state chartered banks are
permitted to purchase and sell securities upon the order and
for the account of their customers. Those persons who wish
to provide assistance in the form of activities not primarily
intended to result in the sale of Fund shares (such as
administrative and account maintenance services) may include
banks, upon advice of counsel that they are permitted to do
so under applicable laws and regulations, including the
Glass-Steagall Act. In such event, no preference will be
given to securities issued by such banks as investments and
the assistance payments received by such banks under the
Distribution Plan may or may not compensate the banks for
their administrative and account maintenance services for
which the banks may also receive compensation from the bank
accounts they service. It is Fund management's position that
payments to banks pursuant to the Distribution Plan for
activities not primarily intended it result in the sale of
Fund shares, such as administrative and account maintenance
services, do not violate the Glass-Steagall Act. However,
this is an unsettled area of the law and if a determination
contrary to management's position is made by a bank
regulatory agency or court concerning payments to banks
contemplated by the Distribution Plan, any such payments will
be terminated and any shares registered in the bank's name,
for its underlying customer, will be registered in the name
of that customer. Financial institutions providing
distribution assistance or administrative services for the
Fund may be required to register as a securities dealer in
certain states.
Under the Distribution Plan, the Fund's Controller or
Treasurer reports quarterly the amounts and purposes of
assistance payments. During the continuance of the
Distribution Plan the selection and nomination of the
disinterested Directors are at the discretion of the
disinterested Directors currently in office.
The Distribution Plan and related agreements were duly
approved by shareholders and may be terminated at any time by
a vote of a majority of the outstanding voting securities or
by vote of the disinterested Directors. The Distribution
Plan and related agreements may be renewed from year to year
if approved by a vote of the majority of the Board of
Directors, and by the vote of a majority of the disinterested
Directors cast in person at a meeting called for the purpose
of voting on such renewal. The Distribution Plan may not be
amended to increase materially the amount to be spent for
distribution without shareholder approval. All material
amendments to the Distribution Plan must be approved by a
vote of the Board of Directors and of the disinterested
Directors, cast in person at a meeting called for the purpose
of such vote.
SUPPLEMENTAL DESCRIPTIONS OF INVESTMENTS
The investment objective of the Fund is to provide
investors with a total return which consistently exceeds the
total return of the broad U.S. investment grade bond market.
The different types of securities in which the Fund may
invest, subject to its investment objective, policies and
restrictions, are described in the Prospectus under
"Descriptions of Investments". Additional information
concerning the characteristics of certain of the Fund's
investments are set forth below.
Bank Obligations. The Fund limits its investments in
U.S. bank obligations to obligations of U.S. banks that in
the Investment Adviser's opinion meet sufficient
creditworthiness criteria.
The Fund limits its investments in foreign bank
obligations to obligations of foreign banks (including U.S.
branches of foreign banks) that, in the opinion of the
Investment Adviser, are of an investment quality comparable
to obligations of U.S. banks in which the Fund may invest.
Eurodollar and Yankee Obligations. Eurodollar bank
obligations are dollar-denominated certificates of deposit
and time deposits issued outside the U.S. capital markets by
foreign branches of U.S. banks and by foreign banks. Yankee
bank obligations are dollar- denominated obligations issued
in the U.S. capital markets by foreign banks.
Mortgage-Backed Securities. Mortgage-backed securities
are securities which represent ownership interests in, or are
debt obligations secured entirely or primarily by, "pools" of
residential or commercial mortgage loans or other mortgage-
backed securities (the "Underlying Assets"). In the case of
mortgage-backed securities representing ownership interests
in the Underlying Assets, the principal and interest payments
on the underlying mortgage loans are distributed monthly to
the holders of the mortgage-backed securities. In the case
of mortgage-backed securities representing debt obligations
secured by the Underlying Assets, the principal and interest
payments on the underlying mortgage loans, and any
reinvestment income thereon, provide the funds to pay debt
service on such mortgage-backed securities.
Certain mortgage-backed securities represent an
undivided fractional interest in the entirety of the
Underlying Assets (or in a substantial portion of the
Underlying Assets, with additional interests junior to that
of the mortgage-backed security), and thus have payment terms
that closely resemble the payment terms of the Underlying
Assets.
In addition, many mortgage-backed securities are issued
in multiple classes. Each class of such multi-class
mortgage-backed securities ("MBS"), often referred to as a
"traunche", is issued at a specific fixed or floating coupon
rate and has a stated maturity or final distribution date.
Principal prepayment on the Underlying Assets may cause the
MBSs to be retired substantially earlier than their stated
maturities or final distribution dates. Interest is paid or
accrues on all or most classes of the MBSs on a periodic
basis, typically monthly or quarterly. The principal of and
interest on the Underlying Assets may be allocated among the
several classes of a series of a MBS in many different ways.
In a relatively common structure, payments of principal
(including any principal prepayments) on the Underlying
Assets are applied to the classes of a series of a MBS in the
order of their respective stated maturities so that no
payment of principal will be made on any class of MBSs until
all other classes having an earlier stated maturity have been
paid in full.
Municipal Instruments. Municipal notes may include
such instruments as tax anticipation notes, revenue
anticipation notes, and bond anticipation notes. Municipal
notes are issued by state and local governments and public
authorities as interim financing in anticipation of tax
collections, revenue receipts or bond sales. Municipal
bonds, which may be issued to raise money for various public
purposes, include general obligation bonds and revenue bonds.
General obligation bonds are backed by the taxing power of
the issuing municipality and are considered the safest type
of bonds. Revenue bonds are backed by the revenues of a
project or facility such as the tolls from a toll bridge.
Industrial development revenue bonds are a specific type of
revenue bond backed by the credit and security of a private
user. Revenue bonds are generally considered to have more
potential risk than general obligation bonds.
Municipal obligations can have floating, variable or
fixed rates. The value of floating and variable rate
obligations generally is more stable than that of fixed rate
obligations in response to changes in interest rate levels.
Variable and floating rate obligations usually carry rights
that permit the Fund to sell them at par value plus accrued
interest upon short notice. The issuers or financial
intermediaries providing rights to sell may support their
ability to purchase the obligations by obtaining credit with
liquidity supports. These may include lines of credit, which
are conditional commitments to lend, and letters of credit,
which will ordinarily be irrevocable, both issued by domestic
banks or foreign banks which have a branch, agency or
subsidiary in the United States. When considering whether an
obligation meets the Fund's quality standards, the Investment
Adviser will look at the creditworthiness of the party
providing the right to sell as well as to the quality of the
obligation itself.
Municipal securities may be issued to finance private
activities, the interest from which is an item of tax
preference for purposes of the federal alternative minimum
tax. Such "private activity" bonds might include industrial
development revenue bonds, and bonds issued to finance such
projects as solid waste disposal facilities, student loans or
water and sewage projects
Other Asset-Backed Securities. The Fund may invest in
other asset-backed securities (unrelated to mortgage loans)
including securities backed by automobile loans and credit
card receivables.
Repurchase Agreements. When participating in
repurchase agreements, the Fund buys securities from a vendor
(e.g., a bank or securities firm) with the agreement that the
vendor will repurchase the securities at the same price plus
interest at a later date. Repurchase agreements may be
characterized as loans secured by the underlying securities.
Such transactions afford an opportunity for the Fund to earn
a return on available cash at minimal market risk, although
the Fund may be subject to various delays and risks of loss
if the vendor becomes subject to a proceeding under the U.S.
Bankruptcy Code or is otherwise unable to meet its obligation
to repurchase. The securities underlying a repurchase
agreement will be marked to market every business day so that
the value of such securities is at least equal to the value
of the repurchase price thereof, including the accrued
interest thereon.
In addition, repurchase agreements may also involve the
securities of certain foreign governments in which there is
an active repurchase market. The Investment Adviser expects
that such repurchase agreements will primarily involve
government securities of countries belonging to the
Organization for Economic Cooperation and Development
("OECD"). Transactions in foreign repurchase agreements may
involve additional risks.
U.S. Treasury and U.S. Government Agency Securities.
U.S. Government Securities include instruments issued by the
U.S. Treasury, including bills, notes and bonds. These
instruments are direct obligations of the U.S. Government
and, as such, are backed by the full faith and credit of the
United States. They differ primarily in their interest
rates, the lengths of their maturities and the dates of their
issuances. In addition, U.S. Government Securities include
securities issued by instrumentalities of the U.S.
Government, such as the Government National Mortgage
Association ("GNMA"), which are also backed by the full faith
and credit of the United States. U.S. Government Agency
Securities include instruments issued by instrumentalities
established or sponsored by the U.S. Government, such as the
Student Loan Marketing Association ("SLMA"), the Federal
National Mortgage Association ("FNMA") and the Federal Home
Loan Mortgage Corporation ("FHLMC"). While these
securities are issued, in general, under the authority of an
Act of Congress, the U.S. Government is not obligated to
provide financial support to the issuing instrumentalities.
Variable Amount Master Demand Notes. Variable amount
master demand notes permit the investment of fluctuating
amounts at varying rates of interest pursuant to direct
arrangements between the Fund (as lender) and the borrower.
These notes are direct lending arrangements between lenders
and borrowers, and are generally not transferable, nor are
they ordinarily rated by either Moody's Investors Service,
Inc., Standard & Poor's Corporation, Fitch Investors Service,
Inc., or Duff & Phelps Credit Rating Co.
Zero Coupon Securities and Custodial Receipts. Zero
coupon securities include securities issued directly by the
U.S. Treasury, and U.S. Treasury bonds or notes and their
unmatured interest coupons and receipts for their underlying
principal (the "coupons") which have been separated by their
holder, typically a custodian bank or investment brokerage
firm. A holder will separate the interest coupons from the
underlying principal (the "corpus") of the U.S. Treasury
security. A number of securities firms and banks have
stripped the interest coupons and receipts and then resold
them in custodial receipt programs with a number of different
names, including "Treasury Income Growth Receipts" ("TIGRS")
and "Certificate of Accrual on Treasuries" ("CATS"). The
underlying U.S. Treasury bonds and notes themselves are held
in book-entry form at the Federal Reserve Bank or, in the
case of bearer securities (i.e., unregistered securities
which are owned ostensibly by the bearer or holder thereof),
in trust on behalf of the owners thereof. Counsel to the
underwriters of these certificates or other evidences of
ownership of the U.S. Treasury securities have stated that
for Federal tax and securities law purposes, in their
opinion, purchasers of such certificates, such as the Fund,
most likely will be deemed the beneficial holders of the
underlying U.S. Treasury securities.
Recently, the Treasury has facilitated transfer of
ownership of zero coupon securities by accounting separately
for the beneficial ownership of particular interest coupon
and corpus payments on Treasury securities through the
Federal Reserve book-entry record-keeping system. The
Federal Reserve program as established by the Treasury
Department is known as "Separate Trading of Registered
Interest and Principal of Securities" ("STRIPS"). Under the
STRIPS program, the Fund can be able to have its beneficial
ownership of zero coupon securities recorded directly in the
book-entry record-keeping system in lieu of holding
certificates or other evidences of ownership of the
underlying U.S. Treasury securities.
When U.S. Treasury obligations have been stripped of
their unmatured interest coupons by the holder, the principal
or corpus is sold at a deep discount because the buyer
receives only the right to receive a future fixed payment on
the security and does not receive any rights to periodic
interest (cash) payments. Once stripped or separated, the
corpus and coupons may be sold separately. Typically, the
coupons are sold separately or grouped with other coupons
with like maturity dates and sold in such bundled form.
Purchasers of stripped obligations acquire, in effect,
discount obligations that are economically identical to the
zero coupon securities that the Treasury sells itself.
SUPPLEMENTAL DISCUSSION OF RISKS ASSOCIATED WITH THE FUND'S
INVESTMENT POLICIES AND INVESTMENT TECHNIQUES
The risks associated with the different types of
securities in which the Fund may invest are described in the
Prospectus under "Risks Associated With the Fund's Investment
Policies and Investment Techniques". Additional information
concerning risks associated with certain of the Fund's
investments is set forth below.
Eurodollar and Yankee Obligations. Eurodollar and
Yankee obligations are subject to the same risks that pertain
to domestic issues, notably credit risk, market risk and
liquidity risk. Additionally, Eurodollar (and to a limited
extent, Yankee) obligations are subject to certain sovereign
risks. One such risk is the possibility that a sovereign
country might prevent capital, in the form of dollars, from
flowing across their borders. Other risks include: adverse
political and economic developments; the extent and quality
of government regulation of financial markets and
institutions; the imposition of foreign withholding taxes;
and the expropriation or nationalization of foreign issuers.
Futures contracts. The Fund may enter into contracts
for the purchase or sale for future delivery (a "futures
contract") of fixed-income securities or foreign currencies,
or contracts based on financial indices including any index
of U.S. Government Securities, foreign government securities
or corporate debt securities. U.S. futures contracts have
been designed by exchanges which have been designated as
"contracts markets" by the CFTC, and must be executed through
a futures commission merchant, or brokerage firm, which is a
member of the relevant contract market. Futures contracts
trade on a number of exchange markets and, through their
clearing corporations, the exchanges guarantee performance of
the contracts as between the clearing members of the
exchange. The Fund will enter into futures contracts that
are based on debt securities that are backed by the full
faith and credit of the U.S. Government, such as long-term
U.S. Treasury Bonds, Treasury Notes, GNMA-modified pass-
through mortgage-backed securities and three-month U.S.
Treasury Bills.
The Fund would purchase or sell futures contracts to
attempt to protect the U.S. dollar-equivalent value of its
securities from fluctuations in interest or foreign exchange
rates without actually buying or selling securities or
foreign currency. For example, if the Fund expected the
value of a foreign currency to increase against the U.S.
dollar, the Fund might enter into futures contracts for the
sale of that currency. Such a sale would have much the same
effect as selling an equivalent value of foreign currency.
If the currency did increase, the value of the securities in
the portfolio would decline, but the value of the futures
contracts to the Fund would increase at approximately the
same rate, thereby keeping the net asset value of the Fund
from declining as much as it otherwise would have.
Although futures contracts by their terms call for the
actual delivery or acquisition of securities or currency, in
most cases the contractual obligation is fulfilled before the
date of the contract without having to make or take delivery
of the securities or currency. The offsetting of a
contractual obligation is accomplished by buying (or selling,
as the case may be) on a commodities exchange an identical
futures contract calling for delivery in the same month.
Such a transaction, which is effected through a member of an
exchange, cancels the obligation to make or take delivery of
the securities or currency. Since all transactions in the
futures market are made, offset or fulfilled through a
clearinghouse associated with the exchange on which the
contracts are traded, the Fund will incur brokerage fees when
it purchases or sells futures contracts.
At the time a futures contract is purchased or sold,
the Fund must allocate cash or securities as a deposit
payment ("initial margin"). It is expected that the initial
margin on U.S. exchanges may range from approximately 3% to
approximately 15% of the value of the securities or
commodities underlying the contract. Under certain
circumstances, however, such as periods of high volatility,
the Fund may be required by an exchange to increase the level
of its initial margin payment. Additionally, initial margin
requirements may be increased generally in the future by
regulatory action. An outstanding futures contract is valued
daily and the payment in cash of "variation margin" may be
required, a process known as "marking to the market". Each
day the Fund will be required to provide (or will be entitled
to receive) variation margin in an amount equal to any
decline (in the case of a long futures position) or increase
(in the case of a short futures position) in the contract's
value since the preceding day.
Futures contracts entail special risks. Among other
things, the ordinary spreads between values in the cash and
futures markets, due to differences in the character of these
markets, are subject to distortions relating to (1)
investors' obligations to meet additional variation margin
requirements, (2) decisions to make or take delivery, rather
than entering into offsetting transactions and (3) the
difference between margin requirements in the securities
markets and margin deposit requirements in the futures
market. The possibility of such distortion means that a
correct forecast of general market, foreign exchange rate or
interest rate trends by the Investment Adviser may still not
result in a successful transaction.
Although the Investment Adviser believes that use of
such contracts and options thereon will benefit the Fund, if
the Investment Adviser's judgment about the general direction
of securities market movements, foreign exchange rates or
interest rates is incorrect, the Fund's overall performance
would be poorer than if it had not entered into any such
contracts or purchased or written options thereon. For
example, if the Fund had hedged against the possibility of an
increase in interest rates which would adversely affect the
price of debt securities held in its portfolio and interest
rates decreased instead, the Fund would lose part or all of
the benefit of the increased value of its assets which it had
hedged because it would have offsetting losses in its futures
positions. In addition, particularly in such situations, if
the Fund has insufficient cash, it may have to sell assets
from its portfolio to meet daily variation margin
requirements. Any such sale of assets may, but will not
necessarily, be at increased prices which reflect the rising
market. Consequently, the Fund may have to sell assets at a
time when it may be disadvantageous to do so.
The Fund's ability to establish and close out positions
in futures contracts and options on futures contracts will be
subject to the development and maintenance of a liquid
market. Although the Fund generally will purchase or sell
only those futures contracts and options thereon for which
there appears to be a liquid market, there is no assurance
that a liquid market on an exchange will exist for any
particular futures contract or option thereon at any
particular time. Where it is not possible to effect a
closing transaction in a contract to do so at a satisfactory
price, the Fund would have to make or take delivery under the
futures contract or, in the case of a purchased option,
exercise the option. In the case of a futures contract that
the Fund has sold and is unable to close out, the Fund would
be required to maintain margin deposits on the futures
contract and to make variation margin payments until the
contract is closed.
Under certain circumstances, exchanges may establish
daily limits in the amount that the price of a futures
contract or related option contract may vary either up or
down from the previous day's settlement price. Once the
daily limit has been reached in a particular contract, no
trades may be made that day at a price beyond that limit. The
daily limit governs only price movements during a particular
trading day and therefore does not limit potential losses
because the limit may prevent the liquidation of unfavorable
positions. Futures or options contract prices could move to
the daily limit for several consecutive trading days with
little or no trading and thereby prevent prompt liquidation
of positions and subject some traders to substantial losses.
Buyers and sellers of foreign currency futures
contracts are subject to the same risks that apply to the use
of futures generally. In addition, there are risks
associated with foreign currency futures contracts and their
use as hedging devices similar to those associated with
options on foreign currencies described above. Further,
settlement of a foreign currency futures contract must occur
within the country issuing the underlying currency. Thus,
the Fund must accept or make delivery of the underlying
foreign currency in accordance with any U.S. or foreign
restrictions or regulations regarding the maintenance of
foreign banking arrangements by U.S. residents and may be
required to pay any fees, taxes or charges associated with
such delivery that are assessed in the country of the
underlying currency.
Illiquid and Restricted Securities. Under the 1940
Act, the Fund may invest up to 15% of the value of its assets
in illiquid assets. Illiquid assets are investments that are
difficult to sell at the price at which such assets are
valued by the Fund within seven days of the date a decision
to sell them is made. Securities treated as illiquid assets
include: over-the-counter options; repurchase agreements,
time deposits, and dollar roll transactions maturing in more
than seven days; loan participations; securities without
readily available market quotations, including interests in
private commingled investment vehicles in which the Fund
might invest; and certain restricted securities. Iliiquid
and restricted securities, including private placements, are
generally subject to legal or contractual restrictions on
resale. They can be eligible for purchase without SEC
registration by certain institutional investors known as
"qualified institutional buyers."
The Board of Directors of the Fund may consider certain
restricted securities, including but not limited to Rule 144A
and Section 4(2) commercial paper, liquid if such securities
meet specified criteria established by the Fund's Board of
Directors.
Due to the absence of an organized market for such
securities, interim valuations of the market value of
illiquid securities used in calculating Fund net asset values
for purchases and redemptions can diverge substantially from
their true value, notwithstanding the application of
appraisal methods deemed appropriate and prudent by the
Fund's Board and the Fund's independent accountants. Due to
possible restrictions on the transferability of illiquid
securities, forced liquidation of such securities to meet
redemption requests could produce large losses. Although,
the 1940 Act permits the Fund to invest up to 15% of its
assets in these securities; the Investment Adviser does not
anticipate investing over 5% of the Fund's assets in these
securities.
Mortgage and Other Asset-Backed Securities.
Prepayments on securitized assets such as mortgages,
automobile loans and credit card receivables ("Securitized
Assets") generally increase with falling interest rates and
decrease with rising interest rates; furthermore, prepayment
rates are influenced by a variety of economic and social
factors. In general, the collateral supporting non-mortgage
asset-backed securities is of shorter maturity than mortgage
loans and is less likely to experience substantial
prepayments. In addition to prepayment risk, borrowers on
the underlying Securitized Assets may default in their
payments creating delays or loss of principal.
Non-mortgage asset-backed securities involve certain
risks that are not presented by mortgage-backed securities.
Primarily, these securities do not have the benefit of a
security interest in assets underlying the related mortgage
collateral. Credit card receivables are generally unsecured
and the debtors are entitled to the protection of a number of
state and federal consumer credit laws, many of which give
such debtors the right to set off certain amounts owed on the
credit cards, thereby reducing the balance due. Most issuers
of automobile receivables permit the servicers to retain
possession of the underlying obligations. If the servicer
were to sell these obligations to another party, there is a
risk that the purchaser would acquire an interest superior to
that of the holders of the related automobile receivables.
In addition, because of the large number of vehicles involved
in a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile
receivables may not have an effective security interest in
all of the obligations backing such receivables. Therefore,
there is a possibility that recoveries on repossessed
collateral may not, in some cases, be available to support
payments on these securities.
Some forms of asset-backed securities are relatively
new forms of investments. Although the Fund will only invest
in asset-backed securities that the Investment Adviser
believes are liquid, because the market experience in certain
of these securities is limited, the market's ability to
sustain liquidity through all phases of a market cycle may
not have been tested.
Options on Foreign Currencies. The Fund may purchase
and sell (or write) put and call options on foreign
currencies to protect against a decline in the U.S. dollar-
equivalent value of its portfolio securities or payments due
thereon or a rise in the U.S. dollar-equivalent cost of
securities that it intends to purchase. A foreign currency
put option grants the holder the right, but not the
obligation, at a future date to sell a specified amount of a
foreign currency to its counterparty at a predetermined
price. Conversely, a foreign currency call option grants the
holder the right, but not the obligation, to purchase at a
future date a specified amount of a foreign currency at a
predetermined price.
As in the case of other types of options, the benefit
to the Fund deriving from the purchase of foreign currency
options will be reduced by the amount of the premium and
related transaction costs. In addition, where currency
exchange rates do not move in the direction or to the extent
anticipated, the Fund could sustain losses on transactions in
foreign currency options which would require them to forego a
portion or all of the benefits of advantageous changes in
such rates.
The Fund may write options on foreign currencies for
hedging purposes. For example, where the Fund anticipates a
decline in the dollar value of foreign currency denominated
securities due to adverse fluctuations in exchange rates it
could, instead of purchasing a put option, write a call
option on the relevant currency. If the expected decline
occurs, the option will most likely not be exercised, and the
decrease in value of portfolio securities will be offset by
the amount of the premium received.
Similarly, instead of purchasing a call option to hedge
against an anticipated increase in the dollar costs of
securities to be acquired, the Fund could write a put option
on the relevant currency which, if rates move in the manner
projected, will expire unexercised and allow the Fund to
hedge such increased costs up to the amount of the premium.
As in the case of other types of options, however, the
writing of a foreign currency option will constitute only a
partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this movement does
not occur, the option may be exercised and the Fund would be
required to purchase or sell the underlying currency at a
loss which may not be fully offset by the amount of the
premium. Through the writing of options on foreign
currencies, the Fund also may be required to forego all or a
portion of the benefits that might otherwise have been
obtained from favorable movements in exchange rates.
Options on Futures Contracts. The purchase of a call
option on a futures contract is similar in some respects to
the purchase of a call option on an individual security or
currency. Depending on the pricing of the option compared to
either the price of the futures contract upon which it is
based or the price of the underlying securities or currency,
it may or may not be less risky than ownership of the futures
contract or the underlying securities or currency. As with
the purchase of futures contracts, when the Fund is not fully
invested it may purchase a call option on a futures contract
to hedge against a market advance due to declining interest
rates or a change in foreign exchange rates.
The writing of a call option on a futures contract
constitutes a partial hedge against declining prices of the
security or foreign currency which is deliverable upon
exercise of the futures contract. If the futures price at
expiration of the option is below the exercise price, the
Fund will retain the full amount of the option premium which
provides a partial hedge against any decline that may have
occurred in the Fund's portfolio holdings. The writing of a
put option on a futures contract constitutes a partial hedge
against increasing prices of the security or foreign currency
which is deliverable upon exercise of the futures contract.
If the futures price at expiration of the option is higher
than the exercise price, the Fund will retain the full amount
of the option premium which provides a partial hedge against
any increase in the price of securities which the Fund
intends to purchase. If a put or call option the Fund has
written is exercised, the Fund will incur a loss that will be
reduced by the amount of the premium it receives. Depending
on the degree of correlation between changes in the value of
its portfolio securities and changes in the value of its
futures positions, the Fund's losses from existing options on
futures may to some extent be reduced or increased by changes
in the value of portfolio securities.
The purchase of a put option on a futures contract is
similar in some respects to the purchase of protective put
options on portfolio securities. For example, the Fund may
purchase a put option on a futures contract to hedge its
portfolio against the risk of rising interest rates.
The amount of risk the Fund assumes when it purchases
an option on a futures contract is the premium paid for the
option plus related transaction costs. In addition to the
correlation risks discussed above, the purchase of an option
also entails the risk that changes in the value of the
underlying futures contract will not be fully reflected in
the value of the option purchased.
Options on foreign currency futures contracts may
involve certain additional risks. Trading options on foreign
currency futures contracts is relatively new. The ability to
establish and close out positions in such options is subject
to the maintenance of a liquid secondary market. To mitigate
this problem, the Fund will not purchase or write options on
foreign currency futures contracts unless and until, in the
Investment Adviser's opinion, the market for such options has
developed sufficiently that the risks in connection with such
options are not greater than the risks in connection with
transactions in the underlying foreign currency futures
contracts. Compared to the purchase or sale of foreign
currency futures contracts, the purchase of call or put
options thereon involves less potential risk to the Fund
because the maximum amount at risk is the premium paid for
the option (plus transaction costs). However, there may be
circumstances when the purchase of a call or put option on a
foreign currency futures contract would result in a loss,
such as when there is no movement in the price of the
underlying currency or futures contract, when use of the
underlying futures contract would not.
Options on Securities. The Fund may also enter into
closing sale transactions with respect to options it has
purchased. A put option on a security grants the holder the
right, but not the obligation, at a future date to sell the
security to its counterparty at a predetermined price.
Conversely, a call option on a security grants the holder the
right, but not the obligation, to purchase at a future date
the security underlying the option at a predetermined price.
The Fund would normally purchase put options in
anticipation of a decline in the market value of securities
in its portfolio or securities it intends to purchase. If
the Fund purchased a put option and the value of the security
in fact declined below the strike price of the option, the
Fund would have the right to sell that security to its
counterparty for the strike price (or realize the value of
the option by entering into a closing transaction), and
consequently would protect itself against any further
decrease in the value of the security during the term of the
option.
Conversely, if the Investment Adviser anticipates that
a security that it intends to acquire will increase in value,
it might cause the Fund to purchase a call option on that
security or securities similar to that security. If the
value of the security does rise, the call option may wholly
or partially offset the increased price of the security. As
in the case of other types of options, however, the benefit
to the Fund will be reduced by the amount of the premium paid
to purchase the option and any related transaction costs.
If, however, the value of the security fell instead of rose,
the Fund would have foregone a portion of the benefit of the
decreased price of the security in the amount of the option
premium and the related transaction costs.
The Fund would purchase put and call options on
securities indices for the same purposes as it would purchase
options on securities. Options on securities indices are
similar to options on securities except that the options
reflect the change in price of a group of securities rather
than an individual security and the exercise of options on
securities indices are settled in cash rather than by
delivery of the securities comprising the index underlying
the option.
Transactions by the Fund in options on securities and
securities indices will be governed by the rules and
regulations of the respective exchanges, boards of trade or
other trading facilities on which the options are traded.
Considerations Concerning Options. The writer of an
option receives a premium which it retains regardless of
whether the option is exercised. The purchaser of a call
option has the right, for a specified period of time, to
purchase the securities or currency subject to the option at
a specified price (the "exercise price"). By writing a call
option, the writer becomes obligated during the term of the
option, upon exercise of the option, to sell the underlying
securities or currency to the purchaser against receipt of
the exercise price. The writer of a call option also loses
the potential for gain on the underlying securities or
currency in excess of the exercise price of the option during
the period that the option is open.
Conversely, the purchaser of a put option has the
right, for a specified period of time, to sell the securities
or currency subject to the option to the writer of the put at
the specified exercise price. The writer of a put option is
obligated during the term of the option, upon exercise of the
option, to purchase securities or currency underlying the
option at the exercise price. A writer might, therefore, be
obligated to purchase the underlying securities or currency
for more than their current market price or U.S. dollar
value, respectively.
The Fund may purchase and sell both exchange-traded and
OTC options. Currently, although many options on equity
securities and options on currencies are exchange-traded,
options on debt securities are primarily traded in the over-
the-counter market. The writer of an exchange-traded option
that wishes to terminate its obligation may effect a "closing
purchase transaction". This is accomplished by buying an
option of the same series as the option previously written.
Options of the same series are options with respect to the
same underlying security or currency, having the same
expiration date and the same exercise price. Likewise, an
investor who is the holder of an option may liquidate a
position by effecting a "closing sale transaction". This is
accomplished by selling an option of the same series as the
option previously purchased. There is no guarantee that
either a closing purchase or a closing sale transaction can
be effected.
An exchange-traded option position may be closed out
only where there exists a secondary market for an option of
the same series. For a number of reasons, a secondary market
may not exist for options held by the Fund, or trading in
such options might be limited or halted by the exchange on
which the option is trading, in which case it might not be
possible to effect closing transactions in particular options
the Fund has purchased with the result that the Fund would
have to exercise the options in order to realize any profit.
If the Fund is unable to effect a closing purchase
transaction in a secondary market in an option the Fund has
written, it will not be able to sell the underlying security
or currency until the option expires or deliver the
underlying security or currency upon exercise or otherwise
cover its position.
Exchange-traded options in the United States are issued
by a clearing organization affiliated with the exchange on
which the option is listed which, in effect, guarantees every
exchange-traded option transaction. In contrast, OTC options
are contracts between the Fund and its counterparty with no
clearing organization guarantee. Thus, when the Fund
purchases OTC options, it relies on the dealer from which it
purchased the OTC option to make or take delivery of the
securities underlying the option. Failure by the dealer to
do so would result in the loss of the premium paid by the
Fund as well as the loss of the expected benefit of the
transaction. The Investment Adviser will only purchase
options from dealers determined by the Investment Adviser to
be creditworthy.
Exchange-traded options generally have a continuous
liquid market whereas OTC options may not. Consequently, the
Fund will generally be able to realize the value of an OTC
option it has purchased only by exercising it or reselling it
to the dealer who issued it. Similarly, when the Fund writes
an OTC option, it generally will be able to close out the OTC
option prior to its expiration only by entering into a
closing purchase transaction with the dealer to which the
Fund originally wrote the OTC option. Although the Fund will
enter into OTC options only with dealers that agree to enter
into, and that are expected to be capable of entering into,
closing transactions with the Fund, there can be no assurance
that the Fund will be able to liquidate an OTC option at a
favorable price at any time prior to expiration. Until the
Fund is able to effect a closing purchase transaction in a
covered OTC call option the Fund has written, it will not be
able to liquidate securities used as cover until the option
expires or is exercised or different cover is substituted.
In the event of insolvency of the counterparty, the Fund may
be unable to liquidate an OTC option. In the case of options
written by the Fund, the inability to enter into a closing
purchase transaction may result in material losses to the
Fund. For example, since the Fund must maintain a covered
position with respect to any call option on a security it
writes, the Fund may be limited in its ability to sell the
underlying security while the option is outstanding. This
may impair the Fund's ability to sell the Fund security at a
time when such a sale might be advantageous.
There is no systematic reporting of last sale
information for foreign currencies or any regulatory
requirement that quotations available through dealers or
other market sources be firm or revised on a timely basis.
Quotation information available is generally representative
of very large transactions in the interbank market and thus
may not reflect relatively smaller transactions (i.e., less
than $1 million) where rates may be less favorable. The
interbank market in foreign currencies is a global, around-
the-clock market. To the extent that the U.S. options
markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements
may take place in the underlying markets that cannot be
reflected in the options market until they reopen. Because
foreign currency transactions occurring in the interbank
market involve substantially larger amounts than those that
may be involved in the use of foreign currency options,
investors may be disadvantaged by having to deal in an odd
lot market (generally consisting of transactions of less than
$1 million) for the underlying foreign currencies at prices
that are less favorable than for round lots.
The use of options to hedge the Fund's foreign
currency-denominated portfolio, or to enhance return raises
additional considerations. As described above, the Fund may,
among other things, purchase call options on securities it
intends to acquire in order to hedge against anticipated
market appreciation in the price of the underlying security
or currency. If the market price does increase as
anticipated, the Fund will benefit from that increase but
only to the extent that the increase exceeds the premium paid
and related transaction costs. If the anticipated rise does
not occur or if it does not exceed the amount of the premium
and related transaction costs, the Fund will bear the expense
of the options without gaining an offsetting benefit. If the
market price of the underlying currency or securities should
fall instead of rise, the benefit the Fund obtains from
purchasing the currency or securities at a lower price will
be reduced by the amount of the premium paid for the call
options and by transaction costs.
The Fund also may purchase put options on currencies or
portfolio securities when it believes a defensive posture is
warranted. Protection is provided during the life of a put
option because the put gives the Fund the right to sell the
underlying currency or security at the put exercise price,
regardless of a decline in the underlying currency's or
security's market price below the exercise price. This right
limits the Fund's losses from the currency's or security's
possible decline in value below the exercise price of the
option to the premium paid for the option and related
transaction costs. If the market price of the currency or
the Fund's securities should increase, however, the profit
that the Fund might otherwise have realized will be reduced
by the amount of the premium paid for the put option and by
transaction costs.
The value of an option position will reflect, among
other things, the current market price of the underlying
currency or security, the time remaining until expiration,
the relationship of the exercise price to the market price,
the historical price volatility of the underlying currency or
security and general market conditions. For this reason, the
successful use of options as a hedging strategy depends upon
the ability of the Investment Adviser to forecast the
direction of price fluctuations in the underlying currency or
securities market.
Options normally have expiration dates of up to nine
months. The exercise price of the options may be below,
equal to or above the current market values of the underlying
securities or currency at the time the options are written.
Options purchased by the Fund that expire unexercised have no
value, and therefore a loss will be realized in the amount of
the premium paid (and related transaction costs). If an
option purchased by the Fund is in-the-money prior to its
expiration date, unless the Fund exercises the option or
enters into a closing transaction with respect to that
position, the Fund will not realize any gain on its option
position.
The Fund's activities in the options market may result
in a higher portfolio turnover rates and additional brokerage
costs. Nevertheless, the Fund may also save on commissions
and transaction costs by hedging through such activities
rather than buying or selling securities or foreign
currencies in anticipation of market moves or foreign
exchange rate fluctuations.
Repurchase Agreements. The use of repurchase
agreements involves certain risks. For example, if the seller
of the agreements defaults on its obligation to repurchase
the underlying securities at a time when the value of these
securities has declined, the Fund may incur a loss upon
disposition of them. If the seller of the agreement becomes
insolvent and subject to liquidation or reorganization under
the Bankruptcy Code or other laws, a bankruptcy court may
determine that the underlying securities are collateral not
within the control of the Fund and therefore subject to sale
by the trustee in bankruptcy. Finally, it is possible that
the Fund may not be able to substantiate its interest in the
underlying securities. While the Fund's management
acknowledges these risks, it is expected that they can be
controlled through stringent security selection criteria and
careful monitoring procedures.
INVESTMENT RESTRICTIONS
The Fund has adopted the investment restrictions listed
below relating to the investment of the Fund's assets and its
activities. These are fundamental policies that may not be
changed without the approval of the holders of a majority of
the outstanding voting securities of the Fund (which for this
purpose and under the 1940 Act means the lesser of (i) 67% of
the shares represented at a meeting at which more than 50% of
the outstanding shares are represented or (ii) more than 50%
of the outstanding shares). The Fund may not: (1) borrow
money, including entering into reverse repurchase agreements;
(2) issue senior securities; (3) purchase securities on
margin (although deposits referred to as "margin" will be
made in connection with investments in futures contracts, as
explained above, and the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases
and sales of securities); (4) underwrite securities of other
issuers; (5) invest in companies for the purpose of
exercising control or management; (6) purchase or sell real
estate (other than marketable securities representing
interests in, or backed by, real estate); or (7) purchase or
sell physical commodities or related commodity contracts.
Whenever an investment policy or limitation states a
maximum percentage of the Fund's assets that may be invested
in any security or other asset or sets forth a policy
regarding quality standards, such standard or percentage
limitation shall be determined immediately after and as a
result of the Fund's acquisition of such security or other
asset. Accordingly, any later increase or decrease in a
percentage resulting from a change in values, net assets or
other circumstances will not be considered when determining
whether that investment complies with the Fund's investment
policies and limitations.
The Fund's investment objectives and other investment
policies not designated as fundamental in this Statement of
Additional Information are non-fundamental and may be changed
at any time by action of the Board of Directors.
Illiquid Securities. The staff of the Commission 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 generally will not purchase or
sell OTC options if, as a result of such transaction, the sum
of the market value of OTC options currently outstanding that
are held by the Fund, the market value of the underlying
securities covered by OTC call options currently outstanding
that were sold by the Fund and margin deposits on the Fund's
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 that are illiquid or are not
otherwise readily marketable. 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
or the Fund's shareholders. However, the Fund will not
change or modify this policy prior to a change or
modification by the Commission staff of its position.
PORTFOLIO TURNOVER
The Fund may engage in portfolio trading when
considered appropriate, but short-term trading will not be
used as the primary means of achieving its investment
objective. Although the Fund cannot accurately predict its
portfolio turnover rate, it is not expected to exceed 400% in
normal circumstances. However, there are no limits on the
rate of portfolio turnover, and investments may be sold
without regard to length of time held when, in the opinion of
the Investment Adviser, investment considerations warrant
such actions. Higher portfolio turnover rates, such as rates
in excess of 400%, and short-term trading involve
correspondingly greater commission expenses and transactions
costs.
PORTFOLIO TRANSACTIONS
The debt securities in which the Fund invests are
traded primarily in the over-the-counter market by dealers
who are usually acting as principal for their own account.
On occasion, securities may be purchased directly from the
issuer. Such securities are generally traded on a net basis
and do not normally involve either brokerage commissions or
transfer taxes. The Fund enters into financial futures and
options contracts which normally involve brokerage
commissions.
The cost of executing transactions will consist
primarily of dealer spreads. The spread is not included in
the expenses of the Fund and therefore is not subject to the
expense cap described above under "Investment Adviser and
Advisory Agreement"; nevertheless, the incurrence of this
spread, ignoring the other intended positive effects of each
such transaction, will decrease the total return of the Fund.
However, the Fund will buy one asset and sell another only
if the Investment Adviser believes it is advantageous to do
so after considering the effect of the additional custodial
charges and the spread on the Fund's total return.
All purchases and sales will be executed with major
dealers and banks on a best net price basis. No trades will
be executed with the Investment Adviser, their affiliates,
officers or employees acting as principal or agent for
others, although such entities and persons may be trading
contemporaneously in the same or similar securities.
TAX CONSIDERATIONS
The following summary of tax consequences, which does
not purport to be complete, is based on U.S. federal tax laws
and regulations in effect on the date of this Statement of
Additional Information, which are subject to change by
legislative or administrative action.
Qualification as a Regulated Investment Company. The
Fund intends to qualify annually and to elect in the future
to be treated as a regulated investment company ("RIC") under
the Internal Revenue Code of 1986, as amended (the "Code").
To qualify as a RIC, the Fund must, among other things, (a)
derive at least 90% of its gross income each taxable year
from dividends, interest, payments with respect to securities
loans and gains from the sale or other disposition of
securities or foreign currencies, or other income (including
gains from options, futures or forward contracts) derived
from its business of investing in securities or foreign
currencies (the "Qualifying Income Requirement"); (b)
diversify its holdings so that, at the end of each quarter of
the Fund's taxable year, (i) at least 50% of the market value
of the Fund's assets is represented by cash and cash items
(including receivables), U.S. Government Securities,
securities of other RICs and other securities, with such
other securities of any one issuer limited to an amount not
greater than 5% of the value of the Fund's total assets and
not greater than 10% of the outstanding voting securities of
such issuer and (ii) not more than 25% of the value of the
Fund's total assets is invested in the securities of any one
issuer (other than U.S. Government Securities or the
securities of other RICs); and (c) distribute at least 90% of
its investment company taxable income (which includes, among
other items, interest and net short-term capital gains in
excess of net long-term capital losses). The U.S. Treasury
Department has authority to promulgate regulations pursuant
to which gains from foreign currency (and options, futures
and forward contracts on foreign currency) not directly
related to a RIC's principal business of investing in stocks
and securities would not be treated as qualifying income for
purposes of the Qualifying Income Requirement. To date, such
regulations have not been promulgated.
If for any taxable year the Fund does not qualify as a
RIC, all of its taxable income will be taxed to the Fund at
corporate rates. For each taxable year that the Fund
qualifies as a RIC, it will not be subject to federal income
tax on that part of its investment company taxable income and
net capital gains (the excess of net long-term capital gain
over net short-term capital loss) that it distributes to its
shareholders. In addition, to avoid a nondeductible 4%
federal excise tax, the Fund must distribute during each
calendar year an amount at least equal to the sum of 98% of
its ordinary income (not taking into account any capital
gains or losses), determined on a calendar year basis, 98% of
its capital gains in excess of capital losses, determined in
general on an October 31 year-end basis, and any
undistributed amounts from previous years. The Fund intends
to distribute all of its net income and gains by
automatically reinvesting such income and gains in additional
shares of the Fund. The 30% Limitation may require that the
Fund defer closing out certain positions beyond the time when
it otherwise would be advantageous to do so, in order not to
be disqualified as a RIC. The Fund will monitor its
compliance with all of the rules set forth in the preceding
paragraph.
Distributions. The Fund's automatic reinvestment of
its ordinary income, net short-term capital gains and net
long-term capital gains in additional shares of the Fund and
distribution of such shares to shareholders will be taxable
to the Fund's shareholders. In general, such shareholders
will be treated as if such income and gains had been
distributed to them by the Fund and then reinvested by them
in shares of the Fund, even though no cash distributions have
been made to shareholders. The automatic reinvestment of
ordinary income and net realized short-term capital gains of
the Fund will be taxable to the Fund's shareholders as
ordinary income. The Fund's automatic reinvestment of any
net long-term capital gains designated by the Fund as capital
gain dividends will be taxable to the shareholders as
long-term capital gain, regardless of how long they have held
their Fund shares. None of the amounts treated as
distributed to the Fund's shareholders will be eligible for
the corporate dividends received deduction. A distribution
will be treated as paid on December 31 of the current
calendar year if it is declared by the Fund in October,
November or December with a record date in such a month and
paid by the Fund during January of the following calendar
year. Such distributions will be taxable to shareholders in
the calendar year in which the distributions are declared,
rather than in the calendar year in which the distributions
are received. The Fund will inform shareholders of the
amount and tax status of all amounts treated as distributed
to them not later than 60 days after the close of each
calendar year.
Sale of Shares. Upon the sale or other disposition of
shares of the Fund, or upon receipt of a distribution in
complete liquidation of the Fund, a shareholder generally
will realize a capital gain or loss which will be long-term
or short-term, generally depending upon the shareholder's
holding period for the shares. Any loss realized on the sale
or exchange will be disallowed to the extent the shares
disposed of are replaced (including shares acquired pursuant
to a dividend reinvestment plan) within a period of 61 days
beginning 30 days before and ending 30 days after disposition
of the shares. In such a case, the basis of the shares
acquired will be adjusted to reflect the disallowed loss.
Any loss realized by the shareholder on a disposition of Fund
shares held by the shareholder for six months or less will be
treated as a long-term capital loss to the extent of any
distributions of net capital gains deemed received by the
shareholder with respect to such shares.
Zero Coupon Securities. Investments by the Fund in
zero coupon securities will result in income to the Fund
equal to a portion of the excess of the face value of the
securities over their issue price (the "original issue
discount") each year that the securities are held, even
though the Fund receives no cash interest payments. This
income is included in determining the amount of income which
the Fund must distribute to maintain its status as a RIC and
to avoid the payment of Federal income tax and the 4% excise
tax.
Hedging Transactions. Certain options, futures and
forward contracts in which the Fund may invest are "section
1256 contracts." Gains and losses on section 1256 contracts
are generally treated as 60 percent long-term and 40 percent
short-term capital gains or losses ("60/40 treatment"),
regardless of the Fund's actual holding period for the
contract. Also, a section 1256 contract held by the Fund at
the end of each taxable year (and generally, for the purposes
of the 4% excise tax, on October 31 of each year) must be
treated as if the contract had been sold at its fair market
value on that day ("mark to market treatment"), and any
deemed gain or loss on the contract is subject to 60/40
treatment. Foreign currency gain or loss (discussed below)
arising from section 1256 contracts may, however, be treated
as ordinary income or loss.
The hedging transactions undertaken by the Fund may
result in "straddles" for federal income tax purposes. The
straddle rules may affect the character of gains or losses
realized by the Fund. In addition, losses realized by the
Fund on positions that are part of a straddle may be deferred
under the straddle rules rather than being taken into account
in calculating the taxable income for the taxable year in
which such losses are realized. Further, the Fund may be
required to capitalize, rather than deduct currently, any
interest expense on indebtedness incurred or continued to
purchase or carry any positions that are part of a straddle.
Because only a few regulations implementing the straddle
rules have been implemented, the tax consequences to the
Funds of engaging in hedging transactions are not entirely
clear. Hedging transactions may increase the amount of
short-term capital gain realized by the Funds which is taxed
as ordinary income when distributed to shareholders.
The Fund may make one or more of the elections
available under the Code that are applicable to straddles.
If the Fund makes any of the elections, the amount, character
and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules
that vary according to the election(s) made. The rules
applicable under certain of the elections may accelerate the
recognition of gains or losses from the affected straddle
positions.
Because the straddle rules may affect the amount,
character and timing of gains or losses from the positions
that are part of a straddle, the amount of Fund income that
is distributed to shareholders and that is taxed to them as
ordinary income or long-term capital gain may be increased or
decreased as compared to a fund that did not engage in such
hedging transactions.
The distribution requirements applicable to the Fund's
assets may limit the extent to which the Fund will be able to
engage in transactions in options, futures and forward
contracts.
Backup Withholding. The Fund may be required to
withhold U.S. federal income tax at the rate of 31% of all
amounts deemed to be distributed as a result of the automatic
reinvestment by the Fund of its income and gains in
additional shares of the Fund and all redemption payments
made to shareholders who fail to provide the Fund with their
correct taxpayer identification number or to make required
certifications, or who have been notified by the Internal
Revenue Service that they are subject to backup withholding.
Backup withholding is not an additional tax. Any amounts
withheld will be credited against a shareholder's U.S.
federal income tax liability. Corporate shareholders and
certain other shareholders are exempt from such backup
withholding.
Foreign Shareholders. U.S. taxation of a shareholder
who, as to the United States, is a non-resident alien
individual, a foreign trust or estate, foreign corporation,
or foreign partnership ("foreign shareholder") depends on
whether the income from the Fund is "effectively connected"
with a U.S. trade or business carried on by such shareholder.
If the income from the Fund is not "effectively
connected" with a U.S. trade or business carried on by the
foreign shareholder, deemed distributions by the Fund of
investment company taxable income will be subject to a U.S.
tax of 30% (or lower treaty rate), which tax is generally
withheld from such distributions. Deemed distributions of
capital gain dividends and any gain realized upon redemption,
sale or exchange of shares will not be subject to U.S. tax at
the rate of 30% (or lower treaty rate) unless the foreign
shareholder is a nonresident alien individual who is
physically present in the U.S. for more than 182 days during
the taxable year and meets certain other requirements.
However, this 30% tax on capital gains of non-resident alien
individuals who are physically present in the United States
for more than the 182-day period only applies in exceptional
cases because any individual present in the United States for
more than 182 days during the taxable year is generally
treated as a resident for U.S. federal income tax purposes.
In that case, he or she would be subject to U.S. federal
income tax on his or her worldwide income at the graduated
rates applicable to U.S. citizens, rather than the 30% U.S.
tax. In the case of a foreign shareholder who is a non-
resident alien individual, the Fund may be required to
withhold U.S. federal income tax at a rate of 31% of deemed
distributions of net capital gains unless the foreign
shareholder certifies his or her non-U.S. status under
penalties of perjury or otherwise establishes an exemption.
See "Backup Withholding" above.
If the income from the Fund is effectively connected
with a U.S. trade or business carried on by a foreign
shareholder, then deemed distributions of investment company
taxable income and capital gain dividends and any gain
realized upon the redemption, sale or exchange of shares of
the Fund will be subject to U.S. Federal income tax at the
graduated rates applicable to U.S. citizens or domestic
corporations. Such shareholders may also be subject to the
branch profits tax at a 30% rate.
The tax consequences to a foreign shareholder entitled
to claim the benefits of an applicable tax treaty may be
different from those described herein. Foreign shareholders
are advised to consult their own advisers with respect to the
particular tax consequences to them of an investment in the
Fund.
SHAREHOLDER INFORMATION
Certificates representing shares of the Fund will not
be issued to shareholders. Investors Bank & Trust Company,
the Fund's transfer agent (the "Transfer Agent"), will
maintain an account for each shareholder upon which the
registration and transfer of shares are recorded, and any
transfers shall be reflected by bookkeeping entry, without
physical delivery. Detailed confirmations of each purchase
or redemption are sent to each shareholder. Monthly
statements of account are sent which include shares purchased
as a result of a reinvestment of the Fund's distributions.
The Transfer Agent will require that a shareholder
provide requests in writing, accompanied by a valid signature
guarantee form, when changing certain information in an
account (i.e., wiring instructions, telephone privileges,
etc.). Neither the Fund, the Administrator, or the Transfer
Agent will be responsible for the validity of written or
telephonic requests.
The Fund reserves the right, if conditions exist which
make cash payments undesirable, to honor any request for
redemption of the Fund by making payment in whole or in part
in readily marketable securities chosen by the Fund and
valued as they are for purposes of computing the Fund's net
asset value (redemption-in-kind). If payment is made in
securities, a shareholder may incur transaction expenses in
converting the securities to cash.
ORGANIZATION AND DESCRIPTION OF CAPITAL STOCK
The Fund was incorporated on August 4, 1997 as a
Maryland corporation and is authorized to issue 2,500,000,000
shares of Common Stock, $0.001 par value. The Fund's shares
have no preemptive, conversion, exchange or redemption
rights. Each share has equal voting, dividend, distribution
and liquidation rights. All shares of the Fund, when duly
issued, will be fully paid and nonassessable. Shareholders
are entitled to one vote per share. All voting rights for
the election of directors are noncumulative, which means that
the holders of more than 50% of the shares can elect 100% of
the Directors then nominated for election if they choose to
do so and, in such event, the holders of the remaining shares
will not be able to elect any Directors. The foregoing
description is subject to the provisions contained in the
Fund's Articles of Incorporation and By-laws.
The Board of Directors is authorized to reclassify and
issue any unissued shares of the Fund without shareholder
approval. Accordingly, in the future, the Directors may
create additional series of shares with different investment
objectives, policies and restrictions. Any issuance of
shares of another class would be governed by the 1940 Act and
Maryland law.
The Fund also issues another class of shares which may
have different operating and other expenses. For more
information about other classes of the Fund's shares,
investors should contact the Distributor at the address or
phone number on the cover of this Statement of Additional
Information.
CALCULATION OF PERFORMANCE DATA
The Fund may, from time to time, include the yield and
total return in reports to shareholders or prospective
investors. Quotations of yield for the Fund will be based on
all investment income per share during a particular 30-day
(or one month) period (including dividends and interest),
less expenses accrued during the period ("net investment
income"), and are computed by dividing net investment income
by the maximum, offering price per share on the last day of
the period, according to the following formula which is
prescribed by the Commission:
YIELD = 2[( a - b + 1)6 - 1]
cd
Where a = dividends and interest earned during the period,
b = expenses accrued for the period (net of reimbursements),
c = the average daily number of Shares of the Fund
outstanding during the period that were entitled to receive
dividends, and
d = the maximum offering price per share on the last day of
the period.
Quotations of average annual total return will
be expressed in terms of the average annual compounded rate
of return of a hypothetical investment in the Fund over
periods of 1, 5 and 10 years (up to the life of the Fund),
calculated pursuant to the following formula which is
prescribed by the SEC:
P(1 + T)n = ERV
Where P = a hypothetical initial payment of $1,000,
T = the average annual total return,
n = the number of years, and
ERV = the ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period.
All total return figures assume that all dividends are reinvested when paid.
QUALITY RATING DESCRIPTIONS
Standard & Poors Corporation
AAA. Bonds rated AAA are highest grade debt
obligations. This rating indicates an extremely strong
capacity to pay principal and interest.
AA. Bonds rated AA also qualify as high-quality
obligations. Capacity to pay principal and interest is very
strong, and in the majority of instances they differ from AAA
issues only in small degree.
A. Bonds rated A have a strong capacity to pay
principal and interest, although they are more susceptible to
the adverse effects of changes in circumstances and economic
conditions.
BBB. Bonds rated BBB are regarded as having adequate
capacity to pay interest or principal. Although these bonds
normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more likely
to lead to a weakened capacity to pay interest and principal.
The ratings AA to D may be modified by the addition of
a plus or minus sign to show relative standing within the
major rating categories.
Municipal notes issued since July 29, 1984 are
designated "SP-1", "SP-2", and "SP-3". The designation SP-1
indicates a very strong capacity to pay principal and
interest. A "+" is added to those issues determined to
possess overwhelming safety characteristics.
A-1. Standard & Poor's Commercial Paper ratings are
current assessments of the likelihood of timely payments of
debts having original maturity of no more than 365 days. The
A-1 designation indicates the degree of safety regarding
timely payment is very strong.
A-2. Capacity for timely payment on issues with this
designation is strong. However, the relative degree of
safety is not as high as for issues designated A-1.
Moody's Investors Service, Inc.
Aaa. Bonds which are rated Aaa are judged to be of the
best quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edge". Interest
payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa. Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They
are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or
fluctuations of protective elements may be of greater
amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than the Aaa
securities.
A. Bonds which are rated A possess many favorable
investment attributes and may be considered as upper medium
grade obligations. Factors giving security to principal and
interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the
future.
Baa. Baa rated bonds are considered medium-grade
obligations, i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security
appear adequate for the present, but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well.
Moody's applies numerical modifiers, 1, 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.
Moody's ratings for state and municipal and other
short-term obligations will be designated Moody's Investment
Grade ("MIG"). This distinction is in recognition of the
differences between short-term credit risk and long-term
risk. Factors affecting the liquidity of the borrower are
uppermost in importance in short-term borrowing, while
various factors of the first importance in long-term
borrowing risk are of lesser importance in the short run.
MIG-1. Notes bearing this designation are of the best
quality enjoying strong protection from established cash
flows of funds for their servicing or from established and
broad-based access to the market for refinancing, or both.
MIG-2. Notes bearing this designation are of favorable
quality, with all security elements accounted for, but
lacking the undeniable strength of the previous grade.
Market access for refinancing, in particular, is likely to be
less well established.
P-1. Moody's Commercial Paper ratings are opinions of
the ability of issuers to repay punctually promissory
obligations not having an original maturity in excess of nine
months. The designation "Prime-1" or "P-1" indicates the
highest quality repayment capacity of the rated issue.
P-2. Issuers have a strong capacity for repayment of
short-term promissory obligations.
Thomson Bankwatch, Inc.
A. Company possess an exceptionally strong balance
sheet and earnings record, translating into an excellent
reputation and unquestioned access to its natural money
markets. If weakness or vulnerability exists in any aspect
of the company's business, it is entirely mitigated by the
strengths of the organization.
A/B. Company is financially very solid with a favorable
track record and no readily apparent weakness. Its overall
risk profile, while low, is not quite as favorable as
companies in the highest rating category.
IBCA Limited
A1. Short-term obligations rated A1 are supported by a
very strong capacity for timely repayment. A plus sign is
added to those issues determined to possess the highest
capacity for timely payment.
PART C. OTHER INFORMATION
Financial Statements and Exhibits.
Financial Statements:
Statement of Assets and Liabilities*
Independent Auditors' Report*
Exhibits:
Exhibit
Number Description
1 -- Registrant's Articles of Incorporation
(previously filed as Exhibit 1 to the Registrant's Registration
Statement on Form N-1A, File No. 333-33365, filed on August 4,
1997) and incorporated herein by reference.
2 -- By-Laws (previously filed as Exhibit 2 to the Registrant's
Registration Statement on Form N-1A, File No. 333-33365, filed on
August 4, 1997) and incorporated herein by reference.
3 -- None.
4 -- None.
5 -- Form of Advisory Agreement between
Registrant and Seix Investment Advisors Inc. (previously filed as
Exhibit 5 to the Registrant's Registration Statement on Form N-1A,
File No. 333-33365, filed on August 4, 1997) and incorporated
herein by reference.
6 -- Form of Distribution Agreement between
Registrant and AMT Capital Services, Inc. (previously filed as
Exhibit 6 to the Registrant's Registration Statement on Form N-1A,
File No. 333-33365, filed on August 4, 1997) and incorporated
herein by reference.
7 -- None.
8 -- Custodian Agreement between Registrant and Investors Bank & Trust
Company.*
9(a) -- Form of Administration Agreement between
Registrant and AMT Capital Services, Inc. (previously filed as
Exhibit 9(a) to the Registrant's Registration Statement on Form N-
1A, File No. 333-33365, filed on August 4, 1997) and incorporated
herein by reference.
9(b) -- Transfer Agency and Service Agreement between Registrant and
Investors Bank & Trust Company.*
10 -- Opinion and Consent of Dechert Price & Rhoads.*
11(a) -- Consent of Auditors*
11(b) -- Powers of Attorney.*
12 -- None.
13(a) -- Share Purchase Agreement [between Registrant and Seix Investment
Advisors, Inc.]*
14 -- None.
15-18 -- None.
* To Be Filed by Amendment.
Persons Controlled by or under Common Control with Registrant
Not Applicable. The Registrant is a recently organized
corporation and has no outstanding shares of common stock.
Number of Holders of Securities
The Registrant is a recently organized corporation and has
not issued any securities as of the date of this Registration
Statement.
Indemnification.
The Registrant shall indemnify directors, officers,
employees and agents of the Registrant against judgements, fines,
settlements and expenses to the fullest extent allowed, and in the
manner provided, by applicable federal and Maryland law, including
Section 17(h)and (i) of the Investment Company Act of 1940. In
this regard, the Registrant undertakes to abide by the provisions
of Investment Company Act Releases No. 11330 and 7221 until
amended or superseded by subsequent interpretation of legislative
or judicial action.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), may be
permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise,
Registrant understands that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Registrant of
expenses incurred or paid by a director, officer or controlling
person of Registrant in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed
in the Securities Act and will be governed by the final
adjudication of such issue.
Business and Other Connections of Investment Adviser.
Seix Investment Advisors Inc. (the "Investment Adviser") is
a company organized under the laws of New Jersey State and it is
an investment adviser registered under the Investment Advisers Act
of 1940 (the "Advisers Act").
The list required by this Item 28 of officers and directors
of the Investment Adviser, together with information as to any
other business, profession, vocation or employment of a
substantial nature engaged in by such officers and directors
during the past two years, is incorporated by reference to
Schedules A and D of Form ADV filed by the Investment Adviser
pursuant to the Advisers Act (SEC File No. 801-42070).
Principal Underwriter.
In addition to Registrant, AMT Capital Services, Inc. currently
acts as distributor to FFTW Fund, Inc., Harding Loevner Fund,
Inc., Holland Series Fund, Inc. and TIFF Investment Program, Inc.
AMT Capital Services, Inc. is registered with the Securities and
Exchange Commission as a broker/dealer and is a member of the
National Association of Securities Dealers, Inc.
For each Director or officer of AMT Capital Services, Inc.
Name and Principal
Business Address Positions & Officers
with Underwriter with Registrant Positions & Officers
Alan M. Trager Director, Chairman and None
600 Fifth Avenue Treasurer
26th Floor
New York, NY 10020
Carla E. Dearing Director, President None
600 Fifth Avenue
26th Floor
New York, NY 10020
Ruth L. Lanser Secretary None
Gilbert, Segall & Young
430 park Avenue
New York, NY 10022
Paul Brook Managing Director None
600 Fifth Avenue
26th Floor
New York, NY 10020
William E. Vastardis Managing Director None
600 Fifth Avenue
26th Floor
New York, NY 10020
F. Michael Gozzillo Vice President None
600 Fifth Avenue
26th Floor
New York, NY 10020
Gary Vogel Vice President None
600 Fifth Avenue
26th Floor
New York, NY 10020
Not applicable.
Location of Accounts and Records.
All accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940,
as amended (the "1940 Act"), and the rules thereunder will be
maintained at the offices of the Investment Adviser, the Custodian
and the Administrator.
Seix Investment Advisors Inc.
300 Tice Boulevard
Woodcliff Lake, NJ 07675-7633
AMT Capital Services, Inc.
600 Fifth Avenue
New York, New York 10020
Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02117-9130
Management Services.
Not applicable.
Undertakings.
Not applicable
Registrant hereby undertakes to file a post-effective amendment,
containing financial statements as of a reasonably current date
which need not be certified, within four to six months from the
effective date of the Fund's registration statement.
Registrant hereby undertakes to call a meeting of shareholders
for the purpose of voting upon the question of removal of one or
more of the Registrant's directors when requested in writing to do
so by the holders of at least 10% of the Registrant's outstanding
shares of common stock and, in connection with such meeting, to
assist in communications with other shareholders in this regard,
as provided under Section 16(c) of the 1940 Act.
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, and the Investment Company Act of 1940, as
amended, the Registrant certifies that it has duly caused this
Registration Statement to be signed on its behalf by the
undersigned thereto duly authorized, in the City of Woodcliff Lake
and State of New Jersey on the 21th day of August 1997.
SAMCO FUND, INC.
By: /s/ Christina Seix
Christina Seix
President
Pursuant to the requirements of the Securities Act of
1933, as amended, this Registration Statement has been signed
below by the following person in the capacities indicated on the
20th day of August, 1997.
Signature Title
/s/ Christina Seix Director and President
Christina Seix (Principal Executive,
Financial and Accounting Officer)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
EXHIBITS
TO
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND THE
INVESTMENT COMPANY ACT OF 1940
_________________
SAMCO FUND, INC.
SAMCO FUND, INC.
INDEX TO EXHIBITS
Exhibit Sequentially
Number Description of Exhibit Numbered Page
None.
