As filed with the Securities and Exchange Commission on
December 27, 1999.
File Nos. 333-33365,811-8323
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
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Post-Effective Amendment No. 6 [X ]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X ]
Amendment No. 9 [X]
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SAMCO FUNDS, INC.
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(Exact name of registrant as specified in charter)
600 FIFTH AVENUE, 26th FLOOR
NEW YORK, NEW YORK 10020
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(Address of principal executive offices)
Registrant's telephone number: 800-762-4848
Christina Seix
Seix Investment Advisors Inc.
300 Tice Boulevard
Woodcliff Lake, NJ 07675-7633
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(Name and address of agent for service)
With a copy to:
Jack Murphy, Esq.
Dechert Price & Rhoads
1775 Eye Street,
N.W., Washington, D.C. 20006-2401
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Approximate Date of Proposed Public Offering: As soon as practicable after this
Registration Statement becomes effective.
It is proposed that this filing will become effective:
/ / immediately upon filing pursuant to paragraph (b)
/ / On ______________, pursuant to paragraph (b)
/ / 60 days after filing, pursuant to paragraph (a)(1)
/ X/ On March 1, 2000, pursuant to paragraph (a) (1)
/ / 75 days after filing, pursuant to paragraph (a) (2)
/ / On _________, pursuant to paragraph (a) (2) of Rule 485.
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SAMCO FUNDS, INC.
SAMCO AGGREGATE FIXED INCOME FUND CLASS A SHARES
SAMCO INTERMEDIATE FIXED INCOME FUND CLASS A SHARES
The SAMCO Aggregate Fixed Income Fund (the "Fixed Income Fund") and the SAMCO
Intermediate Fixed Income Fund (the "Intermediate Fixed Income Fund") are
non-diversified investment portfolios (each a "Portfolio" and collectively the
"Portfolios") of SAMCO Funds, Inc., an open-end management investment company
(the "Fund").
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
THE DATE OF THIS PROSPECTUS IS MARCH 1, 2000.
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TABLE OF CONTENTS
PAGE
RISK/RETURN SUMMARY 1
FIXED INCOME FUND 1
INTERMEDIATE FIXED INCOME FUND 2
PRINCIPAL INVESTMENT RISKS 3
RISK/RETURN BAR CHARTS AND TABLES 4
RISK/RETURN SUMMARY: FEE TABLE 5
FUND MANAGEMENT 6
PURCHASE OF SHARES 7
REDEMPTION OF SHARES 7
ADDITIONAL INFORMATION 8
FINANCIAL HIGHLIGHTS 10
APPENDIX A: DESCRIPTION OF INVESTMENTS 11
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<PAGE>
RISK/RETURN SUMMARY
The following is a summary of certain key information about each
Portfolio, including investment objectives, principal investment strategies and
principal investment risks. A more detailed description of certain allowable
investments is included in Appendix A.
FIXED INCOME FUND
INVESTMENT OBJECTIVE: The Portfolio's investment objective is to provide
investors with a total return which consistently exceeds the total return of
the broad United States investment grade bond market. Performance is measured
against the Lehman Brothers Aggregate Bond Index (LBA Benchmark).
PRINCIPAL INVESTMENT STRATEGIES: The Portfolio seeks to achieve its objective
primarily through investment in various types of income producing debt
securities including mortgage-backed securities, United States Treasuries, and
corporate obligations. At least 65% of total assets will be invested in the
broad universe of available United States dollar denominated fixed income
securities.
INVESTMENT MANAGEMENT APPROACH: Seix Investment Advisors Inc.
(Investment Adviser) will manage the Portfolio based on its
fixed-income approach which is founded upon four cornerstones:
DURATION: The Portfolio will be managed with a duration that is close
to the duration of the LBA Benchmark, which is currently 4.7 years.
Duration measures the expected life of a debt security on a present
value basis.
YIELD: Although the Portfolio is managed on a total return basis, a
premium is placed on income. Income is considered the most powerful
contributor to fixed income returns. Non-Treasury securities
generally play a dominant role in the Portfolio.
PORTFOLIO CONSTRUCTION: Portfolio construction is generally
determined through a research driven process designed to identify
value areas within the fixed income market. In relation to the LBA
Benchmark, the Portfolio will usually maintain an over-weighting in
obligations of domestic or foreign corporations and an
under-weighting of United States Treasury securities.
PROPRIETARY ANALYSIS: Due to the complexity of the bond market, the
Investment Adviser uses financial investment techniques which it
developed internally to attempt to identify value and adequately
control risk.
CREDIT QUALITY: The Portfolio may only invest in investment grade securities,
which are those securities rated by one or more nationally recognized
statistical rating organizations (NRSROs) 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 judgment of the Investment Adviser, comparable credit quality
standards.
PRINCIPAL INVESTMENTS: The Portfolio will principally invest in the following
securities: obligations issued or guaranteed by the United States Government,
obligations of domestic or foreign corporations or other entities, obligations
of domestic or foreign banks, mortgage and asset-backed securities, obligations
backed by the full faith and credit of the United States, and obligations
issued or guaranteed by United States Government agencies, Government-Sponsored
Enterprises (GSE's) or instrumentalities where the Portfolio must look
principally to the issuing or guaranteeing agency for ultimate repayment.
PRINCIPAL RISKS: A loss of money on your investment in the Portfolio, or the
underperformance of the Portfolio relative to other investments could occur due
to certain risks. These include: interest rate risk, credit risk, prepayment
risk, non-diversification risk and portfolio turnover. See page 3 for
"Principal Investment Risks."
1
<PAGE>
INTERMEDIATE FIXED INCOME FUND
INVESTMENT OBJECTIVE: The Portfolio's investment objective is to provide
investors with a total return which consistently exceeds the total return of
the intermediate portion of the broad United States investment grade bond
market. Performance is measured against the Lehman Brothers Intermediate
Government Corporate Index (LBI Benchmark).
PRINCIPAL INVESTMENT STRATEGIES: The Portfolio seeks to achieve its objective
primarily through investment in various types of income producing debt
securities including mortgage-backed securities, United States Treasuries, and
corporate obligations. At least 65% of the Portfolio's total assets will be
invested in the broad universe of available United States dollar denominated
fixed income securities.
INVESTMENT MANAGEMENT APPROACH: Seix Investment Advisors Inc.
(Investment Adviser) will manage the Portfolio based on its
fixed-income approach which is founded upon four cornerstones:
DURATION: The Portfolio will be managed with a duration that is close
to the duration of the LBI Benchmark, which is currently 3.4 years.
Duration measures the expected life of a debt security on a present
value basis.
YIELD: Although the Portfolio is managed on a total return basis, a
premium is placed on income. Income is considered the most powerful
contributor to fixed income returns. Non-Treasury securities
generally play a dominant role in the Portfolio.
PORTFOLIO CONSTRUCTION: Portfolio construction is generally
determined through a research driven process designed to identify
value areas within the fixed income market. In relation to the LBI
Benchmark, the Portfolio will usually maintain an over-weighting in
obligations of domestic or foreign corporations and an
under-weighting of United States Treasury securities.
PROPRIETARY ANALYSIS: Due to the complexity of the bond market, the
Investment Adviser uses financial investment techniques which it
developed internally to attempt to identify value and adequately
control risk.
CREDIT QUALITY: The Portfolio may only invest in investment grade securities,
which are those securities rated by one or more nationally recognized
statistical rating organizations (NRSROs) 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 judgment of the Investment Adviser, comparable credit quality
standards. The Portfolio will not, at the time of purchase, invest more than
15% of its net assets in securities rated BBB by Standard & Poor's, Duff &
Phelps, or Fitch or Baa by Moody's.
PRINCIPAL INVESTMENTS: The Portfolio will principally invest in the following
securities: obligations issued or guaranteed by the United States Government,
obligations of domestic or foreign corporations or other entities, obligations
of domestic or foreign banks, mortgage and asset-backed securities, obligations
backed by the full faith and credit of the United States, and obligations
issued or guaranteed by United States Government agencies, Government-Sponsored
Enterprises (GSE's) or instrumentalities where the Portfolio must look
principally to the issuing or guaranteeing agency for ultimate repayment.
PRINCIPAL RISKS: A loss of money on your investment in the Portfolio, or the
underperformance of the Portfolio relative to other investments could occur due
to certain risks. These include: interest rate risk, credit risk, prepayment
risk, non-diversification risk and portfolio turnover. See page 3 for
"Principal Investment Risks."
2
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PRINCIPAL INVESTMENT RISKS
"Investment Risk" is the chance that you may lose money on an investment or
that it will not earn as much as you expect. In general, the greater the risk,
the greater the possibility of losing money. The possibility exists that the
investment decisions made by the portfolio managers of the Fund will not
accomplish what they are designed to achieve. No assurance can be given that a
Portfolio's investment objective will be achieved.
The principal risks associated with each Portfolio's investment policies and
strategies are as follows:
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INTEREST RATE RISK: Investing in debt securities will subject the
Portfolios to the risk that the market value of the
debt securities will decline because of rising
interest rates. The prices of debt securities are
generally linked to the prevailing market interest
rates. In general, when interest rates rise, the
prices of debt securities fall, and when interest
rates fall, the prices of debt securities rise. The
price volatility of a debt security also depends on
its maturity. Generally, the longer the maturity of a
debt security the greater its sensitivity to changes
in interest rates.
CREDIT RISK: The debt securities in the Fund's portfolios are
subject to credit risk. Credit risk is the
possibility that an issuer will fail to make timely
payments of interest or principal. Securities rated
in the lowest category of investment grade securities
have some risky characteristics and changes in
economic conditions are more likely to cause issuers
of these securities to be unable to make payments.
PREPAYMENT RISK: Payments from the pool of loans underlying mortgage or
asset-backed securities may not be enough to meet the
monthly payments of the mortgage or asset-backed
security. If this occurs such securities will lose
value. Also, prepayments of loans or mortgage
foreclosures will shorten the life of these
securities. Prepayments vary based on several
factors, including the level of interest rates,
general economic conditions, the location and age of
the mortgage and other demographic conditions. When
interest rates are declining, there are usually more
prepayments. The reinvestment of cash received from
prepayments will, therefore, usually be at a lower
interest rate than the original investment, lowering a
Portfolio's yield.
NON-DIVERSIFICATION
RISK: Each of the Portfolios is non-diversified in that it
concentrates its investments among fewer securities
than a diversified mutual fund would. Non-
diversification can intensify risk should a particular
investment suffer from adverse market conditions.
PORTFOLIO TURNOVER Because the Investment Adviser may engage in active
and frequent trading of portfolio securities
shareholders may incur taxes on any realized capital
gains.
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3
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RISK/RETURN BAR CHARTS AND TABLES
THE BAR CHART AND TABLE SHOWN BELOW INDICATE THE RISKS OF INVESTING IN THE
FIXED INCOME FUND BY ILLUSTRATING HOW IT HAS PERFORMED. THE BAR CHART SHOWS THE
YEARLY PERFORMANCE OF THE CLASS A SHARES OF THE FIXED INCOME FUND AND THE TABLE
BELOW SHOWS THE PERFORMANCE OF THE CLASS A SHARES OF THE FIXED INCOME FUND AS
COMPARED TO A SELECTED BROAD BASED INDEX. THE PAST PERFORMANCE OF THE FIXED
INCOME FUND DOES NOT NECESSARILY INDICATE HOW IT WILL PERFORM IN THE FUTURE.
TO BE UPDATED
BAR GRAPH
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Year 1998
___%
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During the periods shown in the Fixed Income Fund's bar chart, the highest
quarterly return was ____% (quarter ending x/xx/xx) and the lowest quarterly
return was ____% (quarter ending xx/xx/xx).
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AVERAGE ANNUAL TOTAL RETURNS PAST 1 YEAR SINCE INCEPTION*
(FOR THE PERIOD(S) ENDED
DECEMBER 31, 1999)
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SAMCO Aggregate Fixed Income Fund** % %
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Lehman Brothers Aggregate Bond Index % %
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</TABLE>
* Date of Inception: 12/30/1997 ** The name of the Portfolio was changed on
June 10, 1999 by the Board of Directors from SAMCO Fixed Income Portfolio to
SAMCO Aggregate Fixed Income Fund.
BECAUSE THE INTERMEDIATE FIXED INCOME FUND COMMENCED OPERATIONS ON JUNE 30,
1999 ITS PERFORMANCE INFORMATION HAS NOT BEEN INCLUDED.
4
<PAGE>
RISK/RETURN SUMMARY: FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
Class A shares of each of the Portfolios.
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TO BE UPDATED
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SHAREHOLDER FEES Fixed Income Fund Intermediate Fixed
(Fees Paid Directly Income Fund
From Your Investment)
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Sales Loads None None
Redemption Fees None None
Exchange Fee None None
ANNUAL FUND OPERATING EXPENSES
(Expenses Deducted From Fund
Assets)
Management Fees 0.25% 0.25%
Other Expenses (a) 0.xx% 0.xx% (b)
Total Annual Fund Operating
Expenses c) 0.xx% 0.xx%
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(a) Other Expenses include fees for shareholder services, custodial,
administration, dividend disbursing and transfer agency fees, legal and
accounting fees, printing costs and registration fees.
(b) Because Intermediate Fixed Income Fund commenced investment operations on
June 30, 1999, expenses are estimates based upon the expected expenses that the
Intermediate Fixed Income Fund would incur in the current fiscal year.
(c) The Investment Adviser and Investors Bank & Trust Company (the
"Administrator") have voluntarily agreed to limit the total expenses for each
of the Fixed Income Fund and the Intermediate Fixed Income Fund (excluding
interest, taxes, brokerage and extraordinary expenses) to annual rates of 0.45%
of their average daily net assets. THERE IS NO SPECIFIC TIME PERIOD FOR HOW
LONG THE VOLUNTARY EXPENSE LIMITATIONS WILL LAST, AND SUCH WAIVERS MAY BE
CANCELLED AT ANY TIME. As long as these temporary expense limitations continue,
it may lower the Portfolios' expenses and increase their total returns. For the
fiscal year ended October 31, 1999, the Investment Adviser and Administrator
waived fees in the amount of 0.xx% and 0.xx% for the Fixed Income Fund and the
Intermediate Fixed Income Fund, respectively.
EXAMPLE. This example is intended to help you compare the cost of investing in
each of the Portfolios with the cost of investing in other mutual funds.
The example assumes that:
o You invest $10,000 in the Portfolio for the time periods indicated;
o Your investment has a 5% return each year; and
o The Portfolio's operating expenses remain the same.
The results apply whether or not you redeem your investment at the end of each
period. Although your costs may be higher or lower, based on these assumptions
your costs would be:
TO BE UPDATED
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Fixed Income Fund Intermediate Fixed Income Fund
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1 Year xx xx
3 Years xx xx
5 Years xx
10 Years xx
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5
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FUND MANAGEMENT
BOARD OF DIRECTORS
The Board of Directors of the Fund consists of five individuals who are
responsible for the overall supervision of the operations of the Fund and
perform the various duties imposed on the directors of investment companies by
the Investment Company Act of 1940 Act, as amended (the "1940 Act"). The Fund's
Directors are Christina Seix, John G. Talty, Peter J. Bourke, John E. Manley,
Sr., and John R. O'Brien. Additional information about the Directors and the
Fund's executive officers may be found in the Statement of Additional
Information under the heading "Management of the Fund."
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 $5.2 billion in assets under
management. The Investment Adviser is located at 300 Tice Boulevard, Woodcliff
Lake, N.J. 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 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.
PAYMENT OF FUND EXPENSES
Fund expenses directly attributable to a Portfolio are charged to that
Portfolio; other expenses are allocated proportionately among all the
Portfolios in relation to their net assets. As compensation for the services
rendered by the Investment Adviser under the Advisory Agreements, each
Portfolio pays the Investment Adviser a monthly advisory fee. This advisory fee
is calculated by applying the following annual percentage rates to such
Portfolio's average daily net assets for the month:
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FUND NAME RATE
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Fixed Income Fund 0.25%
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Intermediate Fixed Income Fund 0.25%
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Because the Adviser voluntarily waived advisory fees for the fiscal year ending
October 31, 1999, fees paid by the Fixed Income Fund amounted to XX% of average
daily net assets.
Because the Adviser voluntarily waived advisory fees for the period June 30,
1999 (commencement of operations) to October 31, 1999, advisory fees paid by
the Intermediate Fixed Income Fund amounted to XX% of average daily net assets.
PORTFOLIO MANAGERS
Each Portfolio will be managed using a team approach with all of the portfolio
managers listed below contributing investment expertise in their respective
areas.
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
6
<PAGE>
MICHAEL MCEACHERN, CFA, DIRECTOR AND SENIOR PORTFOLIO MANAGER
Formerly, Vice President, Fixed Income, American General Corp., June 1997
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, June 1997
Total Investment Experience: 10 years
BS, New Jersey Institute of Technology, Industrial Engineering; MBA, New York
University, Finance
PURCHASE OF SHARES
There is no sales charge imposed by the Fund. The minimum initial
investment in the Class A shares of each Portfolio in the Fund is $1,000,000.
The minimum investment may be waived at any time at the discretion of the
Investment Adviser. Additional purchases may be of any amount.
The offering of shares of each Portfolio is continuous and purchases
of shares of the Portfolios 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. Each
Portfolio's shares are offered at a public offering price
equal to the net asset value next determined after receipt of a purchase order.
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 Investors Bank & Trust
Company (Transfer Agent) at (800) 247-0473 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 on a non-business day, or after 4:00 p.m. Eastern time,
or if Federal funds are received by the Transfer Agent after 4:00 p.m. Eastern
time, such purchase order shall be deemed received as of the next business day.
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 a Portfolio are:
Investors Bank & Trust Company
Boston, MA
ABA # 011-001-438
Acct: 303030303
Benf: (name of Portfolio)
F/F/C (Shareholder's Account at Fund)
REDEMPTION OF SHARES
The Fund will redeem all full and fractional shares of each Portfolio
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 4:00 p.m. Eastern time on any Business Day, the redemption will be effective
on that Business Day. If such notice of redemption is received by the Transfer
Agent after 4:00 p.m. Eastern time, the redemption 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 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 a
Portfolio; 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
Portfolio.
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.
7
<PAGE>
A shareholder may change its authorized agent, the address of record
or the account designated to receive redemption proceeds at any time by writing
to the Transfer Agent with a signature guaranteed by a national bank, which is
a member firm of any national or regional securities exchange (a Signature
Guarantee). If the guarantor institution belongs to one of the Medallion
Signature Programs, it must use the Medallion "Guaranteed" stamp. Notarized
signatures are not sufficient. 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 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.
ADDITIONAL INFORMATION
DIVIDENDS AND DISTRIBUTIONS
Dividends are automatically reinvested in additional Class A shares
of the applicable Portfolio on the last day of each month at the net asset
value per share on the last Business Day of that month unless shareholders
indicate their desire to receive dividends in cash (payable on the first
Business Day of the following month) on the Account Application Form. In the
event that a Portfolio realizes net long-term capital gains (i.e., with respect
to assets held more than 18 months), 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 Portfolio 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 a Portfolio
will be declared as a dividend payable monthly to shareholders of record as of
the last Business Day of each month. Each Portfolio 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 each Portfolio is calculated by the
Fund's Accounting Agent as of 4:00 p.m. Eastern time on each Business Day the
Fund is open. The net asset value per share of each class of each Portfolio is
computed by dividing the sum of the value of the securities held by the
Portfolio plus any cash or other assets (including interest and dividends
accrued but not yet received) minus all liabilities (including any accrued
expenses that are specific to that class) 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 a
Portfolio'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; and (3) 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. The procedures establish guidelines for the Board to follow in
pricing securities in the Portfolios for which market quotations are not
readily available. These securities will be priced by the Fund's Pricing
Committee and then reported to the Board seeking ratification of the price by
the Board at its next quarterly meeting.
To the extent that the Portfolios invest in foreign securities, these
securities may be listed on foreign exchanges that trade on days when the funds
do not price their shares. As a result, the net asset value per share of the
funds may change at a time when shareholders are not able to purchase or redeem
their shares.
8
<PAGE>
TAXES
The following discussion is only a brief summary of some of the
important tax considerations affecting each Portfolio 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.
Distributions paid by a Portfolio from net investment income are
designated by the Portfolio as "ordinary income dividends" and, whether paid in
cash or reinvested in additional shares, will be taxable to the Portfolio's
shareholders that are otherwise subject to tax as ordinary income.
Distributions made from a Portfolio's net capital gain which are designated by
the Portfolio as "capital gains dividends" are taxable to shareholders as
long-term capital gains, regardless of the length of time the shareholder has
owned the Portfolio's shares. Each Portfolio expects that its distributions
will represent primarily ordinary income to shareholders. Shareholders
receiving distributions from the Portfolio 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. Each shareholder will receive an annual statement
detailing the tax status of Portfolio distributions for each year.
Gain or loss, if any, recognized on the sale or other disposition of
shares of a Portfolio 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. 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 a Portfolio are generally taxable to
the shareholders at the time the dividend or distribution is made. Any dividend
declared in October, November or December of any year, however, that is payable
to shareholders of record on a specified date in such month will be deemed to
have been received by the shareholders and paid by a Portfolio on December 31
of such year in the event such dividends are actually paid during January of
the following year.
A Portfolio may be required to withhold federal income tax at a rate
of 31% ("backup withholding") from dividends and redemption proceeds paid to
taxable shareholders. This tax may be withheld from dividends if (i) the
shareholder fails to furnish the Portfolio with the shareholder's correct
taxpayer identification number, (ii) the Internal Revenue Service ("IRS")
notifies the Portfolio 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.
9
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the financial
performance for the period of the Fixed Income Fund's operations. Certain
information reflects financial results for a single Fixed Income Fund share.
The total returns in the tables represent the rate that an investor would have
earned (or lost) on an investment in the Fixed Income Fund, assuming
reinvestment of all dividends and distributions. This information has been
audited by Ernst & Young LLP, whose report, along with the Fixed Income Fund's
financial statements, are included in the Annual Report, which is available
upon request.
(TO BE FILED BY AMENDMENT)
10
<PAGE>
APPENDIX A
DESCRIPTION OF INVESTMENTS
Each Portfolio may invest in the securities defined below in
accordance with their listing of allowable investments and any quality or
policy constraints.
AGENCIES
Each Portfolio 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
Each Portfolio 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). A Portfolio will not concentrate more
than 25% of its total 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 Portfolios may purchase collateralized mortgage obligations which
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.
CORPORATE ISSUES
The Portfolios may invest in corporate issues 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 Portfolios will buy corporate issues subject to any quality constraints. If
a security held by a Portfolio is downgraded, the Portfolio may retain the
security if the Investment Adviser deems retention of the security to be in the
best interests of the Portfolio.
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.
11
<PAGE>
FOREIGN GOVERNMENT AND INTERNATIONAL AND SUPRANATIONAL AGENCY DEBT SECURITIES
The Portfolios 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 Portfolios may invest in investment grade securities that are
those rated by one or more NRSROs 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, or
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
Portfolio) 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 Portfolio. The Portfolio 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 Portfolios will purchase only asset-backed
securities that the Investment Adviser determines to be liquid. The Portfolios
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 Portfolios 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 a Portfolio'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 Portfolios may invest in preferred stock which is non-voting
ownership shares in a corporation which pay a fixed or variable stream of
dividends.
12
<PAGE>
REPURCHASE AGREEMENTS
Repurchase agreements are transactions by which a Portfolio 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 Portfolio 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-ISSUED AND FORWARD COMMITMENT SECURITIES
The Portfolios 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 Portfolio 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 Portfolio and
maintained in the Portfolio 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 Portfolios 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.
13
<PAGE>
This Prospectus contains a concise statement of information investors should
know before they invest in the Portfolios. Please retain this Prospectus for
future reference. Additional information about each Portfolio's investments is
available in the Fund's annual and semi-annual reports to shareholders, as well
as the Statement of Additional Information (SAI). The SAI provides more
information about the Portfolios, including their operations and investment
policies. A current SAI is on file with the Securities and Exchange Commission
and is incorporated by reference, meaning it is legally considered a part of
this Prospectus. In the Fund's annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
performance during its last fiscal year.
The Fund's SAI, annual, semi-annual reports, and other information are
available, without charge, upon request by contacting Investors Bank & Trust
Company at their toll free telephone number (800) 247-0473.
Information about the Fund (including the SAI) can be reviewed and copied at
the Commission's Public Reference Room in Washington D.C. Information on the
operation of the public reference room may be obtained by calling the
Commission at 202-942-8092. Reports and other information about the Fund may be
obtained, after paying a duplicating fee, by electronic request at the
following e-mail address: [email protected]. Copies of this information may be
obtained, upon payment of a duplicating fee, by writing the Public Reference
Section of the Commission, Washington D.C. 20549-6009.
Fund's Investment Company Act File number: 811-8323.
14
<PAGE>
SAMCO FUNDS, INC.
SAMCO AGGREGATE FIXED INCOME FUND CLASS B SHARES
SAMCO INTERMEDIATE FIXED INCOME FUND CLASS B SHARES
The SAMCO Aggregate Fixed Income Fund (the "Fixed Income Fund") and the SAMCO
Intermediate Fixed Income Fund (the "Intermediate Fixed Income Fund") are
non-diversified investment portfolios (each a "Portfolio" and collectively the
"Portfolios") of SAMCO Funds, Inc., an open-end management investment company
(the "Fund").
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
THE DATE OF THIS PROSPECTUS IS MARCH 1, 2000.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
PAGE
RISK/RETURN SUMMARY 1
FIXED INCOME FUND 1
INTERMEDIATE FIXED INCOME FUND 2
PRINCIPAL INVESTMENT RISKS 3
RISK/RETURN BAR CHARTS AND TABLES 4
RISK/RETURN SUMMARY: FEE TABLE 5
FUND MANAGEMENT 6
PURCHASE OF SHARES 7
REDEMPTION OF SHARES 7
ADDITIONAL INFORMATION 8
APPENDIX A: DESCRIPTION OF INVESTMENTS 10
</TABLE>
<PAGE>
RISK/RETURN SUMMARY
The following is a summary of certain key information about each
Portfolio, including investment objectives, principal investment strategies and
principal investment risks. A more detailed description of certain allowable
investments is included in Appendix A.
FIXED INCOME FUND
INVESTMENT OBJECTIVE: The Portfolio's investment objective is to provide
investors with a total return which consistently exceeds the total return of
the broad United States investment grade bond market. Performance is measured
against the Lehman Brothers Aggregate Bond Index (LBA Benchmark).
PRINCIPAL INVESTMENT STRATEGIES: The Portfolio seeks to achieve its objective
primarily through investment in various types of income producing debt
securities including mortgage-backed securities, United States Treasuries, and
corporate obligations. At least 65% of total assets will be invested in the
broad universe of available United States dollar denominated fixed income
securities.
INVESTMENT MANAGEMENT APPROACH: Seix Investment Advisors Inc.
(Investment Adviser) will manage the Portfolio based on its
fixed-income approach which is founded upon four cornerstones:
DURATION: The Portfolio will be managed with a duration that is close
to the duration of the LBA Benchmark, which is currently 4.7 years.
Duration measures the expected life of a debt security on a present
value basis.
YIELD: Although the Portfolio is managed on a total return basis, a
premium is placed on income. Income is considered the most powerful
contributor to fixed income returns. Non-Treasury securities
generally play a dominant role in the Portfolio.
PORTFOLIO CONSTRUCTION: Portfolio construction is generally
determined through a research driven process designed to identify
value areas within the fixed income market. In relation to the LBA
Benchmark, the Portfolio will usually maintain an over-weighting in
obligations of domestic or foreign corporations and an
under-weighting of United States Treasury securities.
PROPRIETARY ANALYSIS: Due to the complexity of the bond market, the
Investment Adviser uses financial investment techniques which it
developed internally to attempt to identify value and adequately
control risk.
CREDIT QUALITY: The Portfolio may only invest in investment grade securities,
which are those securities rated by one or more nationally recognized
statistical rating organizations (NRSROs) 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 judgment of the Investment Adviser, comparable credit quality
standards.
PRINCIPAL INVESTMENTS: The Portfolio will principally invest in the following
securities: obligations issued or guaranteed by the United States Government,
obligations of domestic or foreign corporations or other entities, obligations
of domestic or foreign banks, mortgage and asset-backed securities, obligations
backed by the full faith and credit of the United States, and obligations
issued or guaranteed by United States Government agencies, Government-Sponsored
Enterprises (GSE's) or instrumentalities where the Portfolio must look
principally to the issuing or guaranteeing agency for ultimate repayment.
PRINCIPAL RISKS: A loss of money on your investment in the Portfolio, or the
underperformance of the Portfolio relative to other investments could occur due
to certain risks. These include: interest rate risk, credit risk, prepayment
risk, non-diversification risk and portfolio turnover. See page 3 for
"Principal Investment Risks."
1
<PAGE>
INTERMEDIATE FIXED INCOME FUND
INVESTMENT OBJECTIVE: The Portfolio's investment objective is to provide
investors with a total return which consistently exceeds the total return of
the intermediate portion of the broad United States investment grade bond
market. Performance is measured against the Lehman Brothers Intermediate
Government Corporate Index (LBI Benchmark).
PRINCIPAL INVESTMENT STRATEGIES: The Portfolio seeks to achieve its objective
primarily through investment in various types of income producing debt
securities including mortgage-backed securities, United States Treasuries, and
corporate obligations. At least 65% of the Portfolio's total assets will be
invested in the broad universe of available United States dollar denominated
fixed income securities.
INVESTMENT MANAGEMENT APPROACH: Seix Investment Advisors Inc.
(Investment Adviser) will manage the Portfolio based on its
fixed-income approach which is founded upon four cornerstones:
DURATION: The Portfolio will be managed with a duration that is close
to the duration of the LBI Benchmark, which is currently 3.4 years.
Duration measures the expected life of a debt security on a present
value basis.
YIELD: Although the Portfolio is managed on a total return basis, a
premium is placed on income. Income is considered the most powerful
contributor to fixed income returns. Non-Treasury securities
generally play a dominant role in the Portfolio.
PORTFOLIO CONSTRUCTION: Portfolio construction is generally
determined through a research driven process designed to identify
value areas within the fixed income market. In relation to the LBI
Benchmark, the Portfolio will usually maintain an over-weighting in
obligations of domestic or foreign corporations and an
under-weighting of United States Treasury securities.
PROPRIETARY ANALYSIS: Due to the complexity of the bond market, the
Investment Adviser uses financial investment techniques which it
developed internally to attempt to identify value and adequately
control risk.
CREDIT QUALITY: The Portfolio may only invest in investment grade securities,
which are those securities rated by one or more nationally recognized
statistical rating organizations (NRSROs) 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 judgment of the Investment Adviser, comparable credit quality
standards. The Portfolio will not, at the time of purchase, invest more than
15% of its net assets in securities rated BBB by Standard & Poor's, Duff &
Phelps, or Fitch or Baa by Moody's.
PRINCIPAL INVESTMENTS: The Portfolio will principally invest in the following
securities: obligations issued or guaranteed by the United States Government,
obligations of domestic or foreign corporations or other entities, obligations
of domestic or foreign banks, mortgage and asset-backed securities, obligations
backed by the full faith and credit of the United States, and obligations
issued or guaranteed by United States Government agencies, Government-Sponsored
Enterprises (GSE's) or instrumentalities where the Portfolio must look
principally to the issuing or guaranteeing agency for ultimate repayment.
PRINCIPAL RISKS: A loss of money on your investment in the Portfolio, or the
underperformance of the Portfolio relative to other investments could occur due
to certain risks. These include: interest rate risk, credit risk, prepayment
risk, non-diversification risk and portfolio turnover. See page 3 for
"Principal Investment Risks."
2
<PAGE>
PRINCIPAL INVESTMENT RISKS
"Investment Risk" is the chance that you may lose money on an investment or
that it will not earn as much as you expect. In general, the greater the risk,
the greater the possibility of losing money. The possibility exists that the
investment decisions made by the portfolio managers of the Portfolio will not
accomplish what they are designed to achieve. No assurance can be given that a
Portfolio's investment objective will be achieved.
The principal risks associated with each Portfolio's investment policies and
strategies are as follows:
<TABLE>
<CAPTION>
<S> <C>
INTEREST RATE RISK: Investing in debt securities will subject the Portfolios
to the risk that the market value of the debt securities
will decline because of rising interest rates. The
prices of debt securities are generally linked to the
prevailing market interest rates. In general, when
interest rates rise, the prices of debt securities
fall, and when interest rates fall, the prices of debt
securities rise. The price volatility of a debt
security also depends on its maturity. Generally, the
longer the maturity of a debt security the greater its
sensitivity to changes in interest rates.
CREDIT RISK: The debt securities in the Fund's portfolios are subject
to credit risk. Credit risk is the possibility that an
issuer will fail to make timely payments of interest or
principal. Securities rated in the lowest category of
investment grade securities have some risky
characteristics and changes in economic conditions are
more likely to cause issuers of these securities to be
unable to make payments.
PREPAYMENT RISK: Payments from the pool of loans underlying mortgage or
asset-backed securities may not be enough to meet the
monthly payments of the mortgage or asset-backed
security. If this occurs such securities will lose
value. Also, prepayments of loans or mortgage
foreclosures will shorten the life of these securities.
Prepayments vary based on several factors, including the
level of interest rates, general economic conditions,
the location and age of the mortgage and other
demographic conditions. When interest rates are
declining, there are usually more prepayments. The
reinvestment of cash received from prepayments will,
therefore, usually be at a lower interest rate than the
original investment, lowering a Portfolio's yield.
NON-DIVERSIFICATION Each of the Portfolios is non-diversified in that it
RISK: concentrates its investments among fewer securities than
a diversified mutual fund would. Non-diversification
can intensify risk should a particular investment suffer
from adverse market conditions.
PORTFOLIO TURNOVER Because the Investment Adviser may engage in active and
frequent trading of portfolio securities shareholders
may incur taxes on any realized capital gains.
</TABLE>
3
<PAGE>
RISK/RETURN BAR CHARTS AND TABLES
(CLASS A SHARES OF THE FIXED INCOME FUND INDICATED)
THE BAR CHART AND TABLE SHOWN BELOW INDICATE THE RISKS OF INVESTING IN THE
FIXED INCOME FUND BY ILLUSTRATING HOW IT HAS PERFORMED. THE BAR CHART SHOWS THE
YEARLY PERFORMANCE OF THE CLASS A SHARES OF THE FIXED INCOME FUND AND THE TABLE
BELOW SHOWS THE PERFORMANCE OF THE CLASS A SHARES OF THE FIXED INCOME FUND AS
COMPARED TO A SELECTED BROAD BASED INDEX. THE PAST PERFORMANCE OF THE FIXED
INCOME FUND DOES NOT NECESSARILY INDICATE HOW IT WILL PERFORM IN THE FUTURE.
BAR GRAPH
<TABLE>
<CAPTION>
FIXED INCOME FUND
<S> <C>
Year 1998
7.82%
</TABLE>
During the periods shown in the Fixed Income Fund's bar chart, the highest
quarterly return was ____% (quarter ending x/xx/xx) and the lowest quarterly
return was ____% (quarter ending xx/xx/xx).
TO BE UPDATED
<TABLE>
<CAPTION>
<S> <C> <C>
- ----------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS PAST 1 YEAR SINCE INCEPTION*
(FOR THE PERIOD(S) ENDED
DECEMBER 31, 1999)
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
SAMCO Aggregate Fixed
Income Fund** % %
- ----------------------------------------------------------------------
Lehman Brothers Aggregate
Bond Index % %
- ----------------------------------------------------------------------
* Date of Inception of Class A Shares of the Fixed Income Fund: 12/30/1997
** The returns in the bar chart and table are for shares in Class A of the
Fixed Income Fund which are not offered in this Prospectus. The Fixed Income
Fund expects that the annual returns of the Class B shares would be
substantially similar to the returns of Class A because both classes of shares
invest in the same portfolio of securities, and the returns would differ only
to the extent that the two classes of shares have different expenses. An
example of the different class fees are the 12b-1 fees in the amount of 0.25%
of the average daily net assets of the Fixed Income Fund which the Class B
Shares have and which the Class A Shares do not. The name of the Portfolio was
changed on June 10, 1999 by the Board of Directors from SAMCO Fixed Income
Portfolio to SAMCO Aggregate Fixed Income Fund.
</TABLE>
BECAUSE THE INTERMEDIATE FIXED INCOME FUND COMMENCED OPERATIONS ON JUNE 30,
1999 ITS PERFORMANCE INFORMATION HAS NOT BEEN INCLUDED.
4
<PAGE>
RISK/RETURN SUMMARY: FEE TABLE
This table describes the fees and expenses that you may pay if you buy and hold
Class A shares of each of the Portfolios.
TO BE UPDATED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
- -------------------------------------------------------------------------------
SHAREHOLDER FEES Fixed Income Fund Intermediate Fixed
(Fees Paid Directly From Your Income Fund
Investment)
- -------------------------------------------------------------------------------
Sales Loads None None
Redemption Fees None None
Exchange Fee None None
ANNUAL FUND OPERATING EXPENSES
(Expenses Deducted From Fund Assets)
Management Fees 0.25% 0.25%
Distribution (12b-1) and/or Service Fees 0.25% 0.25%
Other Expenses (a) 0.xx% 0.xx% (b)
Total Annual Fund Operating Expenses (c) 0.xx% 0.xx%
- -------------------------------------------------------------------------------
(a) Other Expenses include fees for shareholder services, custodial,
administration, dividend disbursing and transfer agency fees, legal and
accounting fees, printing costs and registration fees.
(b) Because Intermediate Fixed Income Fund commenced investment operations on
June 30, 1999, expenses are estimates based upon the expected expenses that the
Intermediate Fixed Income Fund would incur in the current fiscal year.
(c) The Investment Adviser and Investors Bank & Trust Company (the
"Administrator") have voluntarily agreed to limit the total expenses for each
of the Fixed Income Fund and the Intermediate Fixed Income Fund (excluding
interest, taxes, brokerage and extraordinary expenses) to annual rates of 0.45%
of their average daily net assets. There is no specific time period for how
long the voluntary expense limitations will last, and such waivers may be
cancelled at any time. As long as these temporary expense limitations continue,
it may lower the Portfolios' expenses and increase their total returns. For the
fiscal year ended October 31, 1999, the Investment Adviser and Administrator
waived fees in the amount of 0.xx% and 0.xx% for the Fixed Income Fund and the
Intermediate Fixed Income Fund, respectively.
</TABLE>
EXAMPLE. This example is intended to help you compare the cost of investing in
each of the Portfolios with the cost of investing in other mutual funds.
The example assumes that:
o You invest $10,000 in the Portfolio for the time periods indicated;
o Your investment has a 5% return each year; and
o The Portfolio's operating expenses remain the same.
The results apply whether or not you redeem your investment at the end of each
period. Although your costs may be higher or lower, based on these assumptions
your costs would be:
TO BE UPDATED
<TABLE>
<CAPTION>
<S> <C> <C>
- ------------------------------------------------------------------------------
Fixed Income Fund Intermediate Fixed Income Fund
- ------------------------------------------------------------------------------
1 Year xx xx
3 Years xx xx
5 Years xx
10 Years xx
- ------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
FUND MANAGEMENT
BOARD OF DIRECTORS
The Board of Directors of the Fund consists of five individuals who are
responsible for the overall supervision of the operations of the Fund and
perform the various duties imposed on the directors of investment companies by
the Investment Company Act of 1940 Act, as amended (the "1940 Act"). The Fund's
Directors are Christina Seix, John G. Talty, Peter J. Bourke, John E. Manley,
Sr., and John R. O'Brien. Additional information about the Directors and the
Fund's executive officers may be found in the Statement of Additional
Information under the heading "Management of the Fund."
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 $5.2 billion in assets under
management. The Investment Adviser is located at 300 Tice Boulevard, Woodcliff
Lake, N.J. 07675. Seix Investment Advisors Inc. acts as the investment adviser
to the Portfolio and provides the Portfolio with management and investment
advisory services. The advisory agreement with the Investment Adviser 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 Portfolio.
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.
Payment of Fund Expenses
Fund expenses directly attributable to a Portfolio are charged to that
Portfolio; other expenses are allocated proportionately among all the
Portfolios in relation to their net assets. As compensation for the services
rendered by the Investment Adviser under the Advisory Agreements, each
Portfolio pays the Investment Adviser a monthly advisory fee. This advisory fee
is calculated by applying the following annual percentage rates to such
Portfolio's average daily net assets for the month:
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------------------------------------------
FUND NAME RATE
- -------------------------------------------------------------------------------
Fixed Income Fund 0.25%
- -------------------------------------------------------------------------------
Intermediate Fixed Income Fund 0.25%
- -------------------------------------------------------------------------------
</TABLE>
Because the Adviser voluntarily waived advisory fees for the fiscal year ending
October 31, 1999, fees paid by the Fixed Income Fund amounted to XX% of average
daily net assets.
Because the Adviser voluntarily waived advisory fees the period June 30, 1999
(commencement of operations) to October 31, 1999, fees paid by the Intermediate
Fixed Income Fund amounted to XX% of average daily net assets.
PORTFOLIO MANAGERS
Each Portfolio will be managed using a team approach with all of the portfolio
managers listed below contributing investment expertise in their respective
areas.
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
6
<PAGE>
MICHAEL MCEACHERN, CFA, DIRECTOR AND SENIOR PORTFOLIO MANAGER
Formerly, Vice President, Fixed Income, American General Corp., June 1997
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, June 1997
Total Investment Experience: 10 years
BS, New Jersey Institute of Technology, Industrial Engineering; MBA, New York
University, Finance
PURCHASE OF SHARES
There is no sales charge imposed by the Fund, nor does the Fund
impose sales commissions (loads). The minimum initial investment in the Fund is
$1,000; additional purchases may be of any amount.
The offering of shares of each Portfolio is continuous and purchases
of shares of the Portfolios 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. Each
Portfolio's shares are offered at a public offering price
equal to the net asset value next determined after receipt of a purchase order.
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 Investors Bank & Trust
Company (Transfer Agent) at (800) 247-0473 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 on a non-business day, or after 4:00 p.m. Eastern time,
or if Federal funds are received by the Transfer Agent after 4:00 p.m. Eastern
time, such purchase order shall be deemed received as of the next business day.
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 a Portfolio are:
Investors Bank & Trust Company
Boston, MA
ABA # 011-001-438
Acct: 303030303
Benf: (name of Portfolio)
F/F/C (Shareholder's Account at Fund)
REDEMPTION OF SHARES
The Fund will redeem all full and fractional shares of each Portfolio
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 4:00 p.m. Eastern time on any Business Day, the redemption will be effective
on that Business Day. If such notice of redemption is received by the Transfer
Agent after 4:00 p.m. Eastern time, the redemption 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 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 a
Portfolio; 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
Portfolio.
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.
7
<PAGE>
A shareholder may change its authorized agent, the address of record
or the account designated to receive redemption proceeds at any time by writing
to the Transfer Agent with a signature guaranteed by a national bank, which is
a member firm of any national or regional securities exchange (a Signature
Guarantee). If the guarantor institution belongs to one of the Medallion
Signature Programs, it must use the Medallion "Guaranteed" stamp. Notarized
signatures are not sufficient. 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 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.
ADDITIONAL INFORMATION
DIVIDENDS AND DISTRIBUTIONS
Dividends are automatically reinvested in additional Class B shares
of the applicable Portfolio on the last day of each month at the net asset
value per share on the last Business Day of that month unless shareholders
indicate their desire to receive dividends in cash (payable on the first
Business Day of the following month) on the Account Application Form. In the
event that a Portfolio realizes net long-term capital gains (i.e., with respect
to assets held more than 18 months), 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 Portfolio 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 a Portfolio
will be declared as a dividend payable monthly to shareholders of record as of
the last Business Day of each month. Each Portfolio 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 each Portfolio is calculated by the
Fund's Accounting Agent as of 4:00 p.m. Eastern time on each Business Day the
Fund is open. The net asset value per share of each class of each Portfolio is
computed by dividing the sum of the value of the securities held by the
Portfolio plus any cash or other assets (including interest and dividends
accrued but not yet received) minus all liabilities (including any accrued
expenses that are specific to that class) 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 a
Portfolio'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; and (3) 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. The procedures establish guidelines for the Board to follow in
pricing securities in the Portfolios for which market quotations are not
readily available. These securities will be priced by the Fund's Pricing
Committee and then reported to the Board seeking ratification of the price by
the Board at its next quarterly meeting.
To the extent that the Portfolios invest in foreign securities, these
securities may be listed on foreign exchanges that trade on days when the
Portfolios do not price their shares. As a result, the net asset value per
share of the Portfolios may change at a time when shareholders are not able to
purchase or redeem their shares.
8
<PAGE>
RULE 12B-1 PLAN
Each Portfolio has adopted a Distribution Plan with respect to its
Class B shares pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, a
Portfolio may pay a quarterly distribution related fee in an amount not to
exceed 0.25% of the average daily value of the net assets attributable to Class
B shares of the Portfolio. Such amounts received under the Plan are to be used
for payments to qualifying dealers for their assistance in the distribution of
the Portfolio's shares and the provis of shareholder services and for other
expenses such as advertising costs and the payment for the printing and
distribution of prospectuses to prospective investors. Because these fees are
paid out of the Portfolio's assets on an on-going basis, over time these fees
will increase the cost of your investment and may cost you more than paying
other types of sales charges.
TAXES
The following discussion is only a brief summary of some of the
important tax considerations affecting each Portfolio 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.
Distributions paid by a Portfolio from net investment income are
designated by the Portfolio as "ordinary income dividends" and, whether paid in
cash or reinvested in additional shares, will be taxable to the Portfolio's
shareholders that are otherwise subject to tax as ordinary income.
Distributions made from a Portfolio's net capital gain which are designated by
the Portfolio as "capital gains dividends" are taxable to shareholders as
long-term capital gains, regardless of the length of time the shareholder has
owned the Portfolio's shares. Each Portfolio expects that its distributions
will represent primarily ordinary income to shareholders. Shareholders
receiving distributions from the Portfolio 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. Each shareholder will receive an annual statement
detailing the tax status of Portfolio distributions for each year.
Gain or loss, if any, recognized on the sale or other disposition of
shares of a Portfolio 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. 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 a Portfolio are generally taxable to
the shareholders at the time the dividend or distribution is made. Any dividend
declared in October, November or December of any year, however, that is payable
to shareholders of record on a specified date in such month will be deemed to
have been received by the shareholders and paid by a Portfolio on December 31
of such year in the event such dividends are actually paid during January of
the following year.
A Portfolio may be required to withhold federal income tax at a rate
of 31% ("backup withholding") from dividends and redemption proceeds paid to
taxable shareholders. This tax may be withheld from dividends if (i) the
shareholder fails to furnish the Portfolio with the shareholder's correct
taxpayer identification number, (ii) the Internal Revenue Service ("IRS")
notifies the Portfolio 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.
9
<PAGE>
APPENDIX A
DESCRIPTION OF INVESTMENTS
Each Portfolio may invest in the securities defined below in
accordance with their listing of allowable investments and any quality or
policy constraints.
AGENCIES
Each Portfolio 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
Each Portfolio 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). A Portfolio will not concentrate more
than 25% of its total 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
Portfolio.
CMOS--COLLATERALIZED MORTGAGE OBLIGATIONS
The Portfolios may purchase collateralized mortgage obligations which
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.
CORPORATE ISSUES
The Portfolios may invest in corporate issues 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 Portfolios will buy corporate issues subject to any quality constraints. If
a security held by a Portfolio is downgraded, the Portfolio may retain the
security if the Investment Adviser deems retention of the security to be in the
best interests of the Portfolio.
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.
10
<PAGE>
FOREIGN GOVERNMENT AND INTERNATIONAL AND SUPRANATIONAL AGENCY DEBT SECURITIES
The Portfolios 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 Portfolios may invest in investment grade securities that are
those rated by one or more NRSROs 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, or
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
Portfolio) 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 Portfolio. The Portfolio 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 Portfolios will purchase only asset-backed
securities that the Investment Adviser determines to be liquid. The Portfolios
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 Portfolios 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 a Portfolio's assets. Portfolio 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 Portfolios may invest in preferred stock which is non-voting
ownership shares in a corporation which pay a fixed or variable stream of
dividends.
11
<PAGE>
REPURCHASE AGREEMENTS
Repurchase agreements are transactions by which a Portfolio 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 Portfolio 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-ISSUED AND FORWARD COMMITMENT SECURITIES
The Portfolios 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 Portfolio 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 Portfolio and
maintained in the Portfolio 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 Portfolios 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.
12
<PAGE>
This Prospectus contains a concise statement of information investors should
know before they invest in the Portfolios. Please retain this Prospectus for
future reference. Additional information about each Portfolio's investments is
available in the Fund's annual and semi-annual reports to shareholders, as well
as the Statement of Additional Information (SAI). The SAI provides more
information about the Portfolios, including their operations and investment
policies. A current SAI is on file with the Securities and Exchange Commission
and is incorporated by reference, meaning it is legally considered a part of
this Prospectus. In the Fund's annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
performance during its last fiscal year.
The Fund's SAI, annual, semi-annual reports, and other information are
available, without charge, upon request by contacting Investors Bank & Trust
Company at (800) 247-0473.
Information about the Fund (including the SAI) can be reviewed and copied at
the Commission's Public Reference Room in Washington D.C. Information on the
operation of the public reference room may be obtained by calling the
Commission at 202-942-8092. Reports and other information about the Fund may be
obtained, after paying a duplicating fee, by electronic request at the
following e-mail address: [email protected]. Copies of this information may be
obtained, upon payment of a duplicating fee, by writing the Public Reference
Section of the Commission, Washington D.C. 20549-6009.
13
Fund's Investment Company Act File number: 811-8323.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
SAMCO FUNDS, INC.
SAMCO AGGREGATE FIXED INCOME FUND
SAMCO INTERMEDIATE FIXED INCOME FUND
200 Clarendon Street
Boston, MA 02116
(800) 247-0473
SAMCO Aggregate Fixed Income Fund (the "Fixed Income Fund") and SAMCO
Intermediate Fixed Income Fund (the "Intermediate Fixed Income Fund") are
non-diversified investment portfolios (each a "Portfolio" and collectively the
"Portfolios") of SAMCO Funds, Inc. (the "Fund"), an open-end management
investment company. Shares of each of the Portfolios may be purchased through
First Fund Distributors, 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 March 1, 2000 (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. The annual
report to shareholders dated October 31, 1999 is incorporated by reference
herein.
---------------
DISTRIBUTED BY: FIRST FUND DISTRIBUTORS, INC.
4455 EAST CAMELBACK ROAD
SUITE 261E
PHOENIX, AZ 85018
STATEMENT OF ADDITIONAL INFORMATION DATED MARCH 1, 2000
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
TABLE OF CONTENTS
-----------------
PAGE
MANAGEMENT OF THE FUND 3
INVESTMENT ADVISER AND ADVISORY AGREEMENTS 4
ADMINISTRATOR 5
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES 5
DISTRIBUTION OF FUND SHARES 6
SUPPLEMENTAL DESCRIPTION OF INVESTMENTS 7
SUPPLEMENTAL DESCRIPTIONS OF RISKS 11
INVESTMENT RESTRICTIONS 17
PORTFOLIO TURNOVER 18
PORTFOLIO TRANSACTIONS 18
TAX CONSIDERATIONS 19
SHAREHOLDER INFORMATION 21
SERVICE PROVIDERS 22
ORGANIZATION OF THE FUND AND DESCRIPTION OF CAPITAL STOCK 23
CALCULATION OF PERFORMANCE DATA 23
QUALITY RATING DESCRIPTIONS 24
</TABLE>
2
<PAGE>
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS AND OFFICERS
The Fund is managed by its Board of Directors. The Board of Directors is
generally responsible for management of the business and affairs of the Fund.
The Board of Directors formulates the general policies of the Fund, approves
contracts and authorizes Fund officers to carry out the decisions of the Board.
The Board of Directors and principal officers of the Fund are listed below
together with information on their positions with the Fund, address, age,
principal occupations during the past five years and other principal business
affiliations. 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 such
person's affiliation with the Fund or the Fund's investment adviser, Seix
Investment Advisors Inc. (the "Investment Adviser").
<TABLE>
<CAPTION>
<S> <C> <C>
Name, Address and Age Office Principal Occupation During Past Five Years
- --------------------- ------ -------------------------------------------
*Christina Seix Director Seix Investment Advisors Inc., Chairman and
300 Tice Blvd. and Chief Investment Officer 1992-Present
Woodcliff Lake, NJ 07675 Chairman
Age: 49
*John G. Talty Director Seix Investment Advisors Inc., Managing
300 Tice Blvd. and Director, President 1993-Present
Woodcliff Lake, NJ 07675 President
Age: 41
*Peter J. Bourke Director Seix Investment Advisors Inc., Managing
300 Tice Blvd. and Director, 1997-Present
Woodcliff Lake, NJ 07675 Assistant
Age: 48 Secretary
John R. O'Brien Director Retired
275 Manor Road
Ridgewood, NJ 07450
Age: 67
John E. Manley, Sr. Director Consultant to Mutual of America April 1996-
86505 Holmes March 1997
Chapel Hill, NC 27514
Age: 65
Carla E. Dearing Assistant Investors Capital Services, Inc., (Formerly
Investors Capital Treasurer AMT Capital Services, Inc.), President,
Services, Inc. 1/92 - present; AMT Capital Advisers, Inc.,
600 Fifth Avenue, 26th Principal and Senior Vice President, 1/92
Floor - 5/98; Morgan Stanley & Co., Vice
New York, NY 10020 President, 11/88 - 1/92.
Age: 36
William E. Vastardis Treasurer Investors Capital Services, Inc., (Formerly
Investors Capital and AMT Capital Services, Inc.), Managing
Services, Inc. Secretary Director 7/92 - present; Vanguard Group
600 Fifth Avenue, 26th Inc., Vice President, 1/87 - 4/92.
Floor
New York, NY 10020
Age: 42
</TABLE>
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. Each of the
Independent Directors receives an annual retainer of $2,000 which is paid in
quarterly installments and a fee of $1,000 for each meeting attended plus out
of pocket expenses.
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Director's Compensation Table
Fiscal Year Ended October 31, 1999
TO BE UPDATED
-----------
Director Aggregate Pension -or Estimated Total
Compensation From Retirement Benefits Annual Compensation
Registrant Accrued As Part of benefits Upon From Registrant
Fund Expenses Retirement and Fund Complex
Paid to Directors
John E.
Manley, Sr. $ $0 $0 $
John R.
O'Brien $ $0 $0 $
</TABLE>
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.
Directors and officers of the Fund collectively owned less than 1% of the
Fund's outstanding shares as of February 1, 2000.
INVESTMENT ADVISER AND ADVISORY AGREEMENTS
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. Christina
Seix may be deemed a "controlling person" of the Investment Adviser on the
basis of her ownership of the Investment Adviser's stock.
Pursuant to the terms of the advisory agreements between each Portfolio
of the Fund and the Investment Adviser (the "Advisory Agreements"), 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 each Portfolio 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.
Each Advisory Agreement shall remain in effect for two years following
its 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 a Portfolio'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 Agreements are 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 a Portfolio's outstanding shares voting as a single class, or upon
not less than 60 days' notice by the Investment Adviser. The Advisory
Agreements will terminate automatically in the event of their "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 Agreements, 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 "Risk/Return Summary: Fee Table," other expenses incurred in
the operation of the Fund are borne by each Portfolio of 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.
4
<PAGE>
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 each Portfolio of the Fund. The Investment Adviser may waive all or
part of its fee from time to time in order to increase the net income available
for distribution to shareholders of a Portfolio of the Fund. 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 Class A Shares of each Portfolio 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 a Portfolio's expenses and increase its total return. In the event the
Investment Adviser and/or the Administrator remove the expense cap, a
Portfolio's expenses may increase and its total return may be reduced depending
on the total assets of the Portfolio of the Fund.
For the period beginning December 30, 1997 to October 31, 1998, the
Fixed Income Fund incurred advisory fees of $44,287, of which the total amount
was waived by the Investment Adviser. For the fiscal year ended October 31,
1999, the Fixed Income Fund incurred advisory fees of $_____, of which _____
was waived by the Investment Adviser.
For the period beginning June 30, 1999 (commencement of operations) to
October 31, 1999, the Intermediate Fixed Income Fund incurred advisory fees of
$_____, of which ______ was waived by the Investment Adviser.
ADMINISTRATOR
The administration agreement dated _________ (the "Administration
Agreement") between the Fund and Investors Bank and Trust Company., the
"Administrator," will remain in effect for a period of _____. Prior to _______
the administrator of the Fund was Investors Capital Services, Inc. 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.XX% 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.
For the period beginning December 30, 1997 to October 31, 1998, the
Fixed Income Fund incurred administration fees (not including waivers and
reimbursements) of $41,667. For the fiscal year ended October 31, 1999, the
Fixed Income Fund incurred administration fees of $_____, of which _____ was
reimbursed by the Investment Adviser and/or Administrator.
For the period beginning June 30, 1999 (commencement of operations) to
October 31, 1999, the Intermediate Fixed Income Fund incurred administration
fees of $_____, of which ______ was reimbursed by the Investment Adviser and/or
Administrator.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of February 1, 2000, there were no "control persons" nor "principal
holders of securities" in the Class B shares of the Fund as that term is
defined in the Investment Company Act of 1940, as amended.
As of February 1, 2000, the following shareholders were deemed to be a
"control person" in the Class A shares of the Fund as that term is defined in
the Investment Company Act of 1940, as amended.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TO BE UPDATED
- -------------------------------------------------------------------------------
Name and Address of Nature of Beneficial Percent of
Title of Class Beneficial Owner Ownership Fixed Income Fund
- -------------- ---------------- --------- -----------------
Class A Shares of American College of Direct Ownership %
Common Stock, $.001 Cardiology,
per Share 911 Old Georgetown
Road,
Bethesda, MD 20814
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
As of February 1, 2000, the following persons held 5 percent or more of
the outstanding shares of the Class A shares of the Fixed Income Fund:
- -------------------------------------------------------------------------------
Name and Address of Nature of Beneficial Percent of
Title of Class Beneficial Owner Ownership Fixed Income Fund
- -------------- ---------------- --------- -----------------
Class A Shares of American College of Direct Ownership %
Common Stock, $.001 Cardiology,
per Share 911 Old Georgetown
Road,
Bethesda, MD 20814
Class A Shares of Regional Direct Ownership %
Common Stock, $.001 Transportation
per Share Authority Pension
Plan
P. O. Box 1443,
Chicago, IL
60690-1443
Class A Shares of ENRON Corporation Direct Ownership %
Common Stock, $.001 P. O. Box 92956,
per Share Chicago, IL 60675
Class A Shares of NOITU Individual Direct Ownership %
Common Stock, $.001 Account Pension Plan
per Share 148-06 Hillside Ave.
Jamaica, NY 11435
</TABLE>
The amount of shares of the Fund owned by all the officers, directors, and
members of the advisory board of the Fund as a group is less than 1% of the
Fund's outstanding securities.
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.
The Distribution Agreement was effective for an initial term through
November 3, 1999. The Distribution Agreement will continue in effect for
successive one-year periods, provided that each such continuance is
specifically approved (i) by the vote of a majority of the Directors or by a
vote of a majority of the shares of the Fund; and (ii) by a majority of the
Directors who are not parties to the Distribution Agreement or interested
persons (as defined in the 1940 Act) of any such person, cast in person at a
meeting called for the purpose of voting on such approval. The Distribution
Agreement was last approved by the Fund's Board of Directors on September 23,
1999.
Distribution Plan. Each Portfolio of 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, Class B
Shares of each Portfolio of the Fund make 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 each Portfolio of
the Fund's 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 Class B Shares of each Portfolio of the Fund by increasing
assets under management and reducing expense ratios and the cost to the Class B
Shares of each Portfolio of the Fund if such services were provided directly by
the Class B Shares of each Portfolio of 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 Class B
Shares of each Portfolio of the Fund and an increase in the expense ratio for
the Class B Shares of each Portfolio of 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
Class B Shares of each Portfolio of the Fund and its shareholders.
6
<PAGE>
Under the Distribution Plan, the Fund's Controller or Treasurer reports
quarterly to the Board of Directors 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.
SUPPLEMENTAL DESCRIPTIONS OF INVESTMENTS
The investment objective of the Fixed Income Fund is to provide
investors with a total return which consistently exceeds the total return of
the broad U.S. investment grade bond market as measured by the Lehman Brothers
Aggregate Bond Index. The investment objective of the Intermediate Fixed Income
Fund is to provide investors with a total return which consistently exceeds the
total return of the intermediate portion of the broad U.S. investment grade
bond market as measured by the Lehman Brothers Intermediate Government
Corporate Index. The different types of securities in which a Portfolio of 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 investments of a Portfolio of the Fund is set forth below. Each
Portfolio of the Fund is permitted to invest in the same types of securities.
Any reference to the term Fund in the following section is intended to include
both Portfolios of the Fund.
AGENCIES
Each Portfolio 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
Each Portfolio 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). A Portfolio will not concentrate more
than 25% of its total 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.
Each Portfolio 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. Each Portfolio 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.
CMOS--COLLATERALIZED MORTGAGE OBLIGATIONS
The Portfolios may purchase collateralized mortgage obligations which
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.
7
<PAGE>
CORPORATE ISSUES
The Portfolios may invest in corporate issues, 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 Portfolios will buy corporate issues subject to any quality constraints. If
a security held by a Portfolio is downgraded, the Portfolio may retain the
security if the Investment Adviser deems retention of the security to be in the
best interests of the Portfolio.
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.
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 Portfolios 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 Portfolios may invest in investment grade securities that are those
rated by one or more NRSROs 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, or 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. The Intermediate Fixed Income Fund
will not, at the time of purchase, invest more than 15% of its net assets in
securities rated BBB by Standard & Poor's, Duff & Phelps, or Fitch or Baa by
Moody's. 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 Portfolio) 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 Portfolio. A Portfolio 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.
INVESTMENT FUNDS
Each Portfolio is permitted to invest in investment funds and will make
such investments only where appropriate given that the Portfolios' shareholders
will bear indirectly the layer of expenses of the underlying investment funds
in addition to their proportionate share of the expenses of the Portfolio.
MORTGAGE-BACKED SECURITIES AND ASSET-BACKED DEBT SECURITIES
Mortgage-backed securities ("MBS") 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 asset-backed
securities (the "Underlying Assets"). Such securities may be issued by such
entities as Government National Mortgage Association ("GNMA"), Federal National
8
<PAGE>
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 Portfolios will purchase only
asset-backed securities that the Investment Adviser determines to be liquid.
The Portfolios will not purchase mortgage backed or asset-backed securities
that do not meet the above minimum credit standards. 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 often
referred to as a "tranche", 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.
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 Portfolios 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 a Portfolio'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.
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.
9
<PAGE>
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.
PREFERRED STOCK
The Portfolios may invest in preferred stock which is non-voting
ownership shares in a corporation which pay a fixed or variable stream of
dividends.
REPURCHASE AGREEMENTS
Repurchase agreements are transactions by which a Portfolio 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 Portfolio 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.
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.
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.
WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES
The Portfolios 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 Portfolio 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 Portfolio and
maintained in the Portfolio 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.
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ZERO COUPON DEBT SECURITIES
The Portfolios 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.
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 a Portfolio's
investments is set forth below. Each Portfolio of the Fund is permitted to
invest in the same types of securities. Any reference to the term Fund in the
following section is intended to include both Portfolios
of the Fund.
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 instituti the imposition of
foreign withholding taxes; and the expropriation or nationalization of foreign
issuers.
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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 Commodities Futures Trading
Commission ("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
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<PAGE>
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 net 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. 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 net 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.
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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 it 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 fut 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
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<PAGE>
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 lo 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
Over-the-Counter ("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.
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<PAGE>
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.
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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 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 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 each Portfolio of the Fund's assets and its activities.
These investment restrictions apply as indicated to each Portfolio of the Fund.
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).
As a fundamental investment policy the Fund may not:
(1) borrow money, including entering into reverse repurchase agreements;
(2) make loans except that it may enter into repurchase agreements;
(3) issue senior securities;
(4) 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);
(5) underwrite securities of other issuers;
(6) invest in companies for the purpose of exercising control or management;
(7) purchase or sell real estate (other than marketable securities
representing interests in, or backed by, real estate);
(8) purchase or sell physical commodities or related commodity contracts;
(9) 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 tax-exempt 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
(10) invest the cash securing a forward commitment in mortgage backed
securities in investments that have a duration exceeding 180 days
17
<PAGE>
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.
The Fund has the following non-fundamental investment policies:
(1) it will not invest in the securities of any company which has a
primary line of business in the manufacture and sale of tobacco
products;
(2) the Intermediate Fixed Income Fund will not engage in the strategy of
establishing or rolling forward TBA mortgage commitments; and
(3) the Intermediate Fixed Income Fund will not, at the time of purchase,
invest more than 15% of its net assets in securities rated BBB by
Standard & Poor's, Duff & Phelps, or Fitch or Baa by Moody's.
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.
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 investment policy applies to each Portfolio
of the Fund. This policy as to OTC options is not a fundamental policy of the
Fund and may be amended by the Directors of the Fund without the approval of
the Fund's shareholders. However, the Fund will not change or modify this
policy prior to a change or modification by the Commission staff of its
position.
PORTFOLIO TURNOVER
Each Portfolio of 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. The portfolio turnover rate of the
Fixed Income Fund for the period ended December 30, 1997 to October 31, 1998
and 1999 was 478% and ____%, respectively. The portfolio turnover rate of the
Intermediate Fixed Income Fund for the period June 30, 1999 (commencement of
operations) to October 31, 1999 was ___%. 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. Further, high turnover rates, such
as rates in excess of 400%, generate higher short-term capital gains. For a
more detailed description of short-term capital gain treatment, please refer to
the section entitled "Tax Considerations."
PORTFOLIO TRANSACTIONS
The debt securities in which each Portfolio of 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. Each Portfolio of the Fund may enter 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 a Portfolio 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
Investment Adviser will buy one asset and sell another only if the Investment
Adviser believes
18
<PAGE>
it is advantageous to do so after considering the effect of the additional
custodial charges and the spread on a Portfolio'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.
For the period beginning December 30, 1997 and ending October 31, 1998
and the fiscal year ended October 31, 1999 the amount of brokerage commissions
paid by the Fixed Income Fund was $0 and $___, respectively.
For the period beginning June 30, 1999 and ending October 31, 1999, the
amount of brokerage commissions paid by the Intermediate Fixed Income Fund was
$____.
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 Fixed Income Fund has qualified, and intends to continue to qualify, to be
treated as a regulated investment company ("RIC") under the Internal Revenue
---
Code of 1986, as amended (the "Code"). The Intermediate Fixed Income Fund
----
intends to qualify as a RIC. In order for a Portfolio to qualify as a RIC iy
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
Portfolio's taxable year:
i) at least 50% of the Portfolio's asset market value 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
Portfolio'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 Portfolio'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 the 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. To date, such regulations have not been promulgated.
If a Portfolio does not qualify as a RIC for any taxable year, all of its
taxable income will be taxed to the Portfolio at corporate rates. For each
taxable year the Portfolio 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) it distributes to its shareholders. In addition, to avoid a
nondeductible 4% federal excise tax, the Portfolio must distribute during each
calendar year an amount at least equal to the sum of :
a. 98% of its ordinary income (not taking into account any capital gains or
losses), determined on a calendar year basis;
b. 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.
Each Portfolio intends to distribute all of its net income and gains each year.
Each Portfolio will monitor its compliance with all of the rules set forth in
the preceding paragraph.
DISTRIBUTIONS
- -------------
Generally, shareholders will be treated as if the Portfolio had distributed
income and gains to them and they reinvested such amounts in Portfolio
shares--even though no cash distributions have been made to shareholders. The
distribution of ordinary income and net realized
19
<PAGE>
short-term Portfolio capital gains will be taxable to shareholders as ordinary
income. Each Portfolio's distribution of any net long-term capital gains
designated as capital gain dividends by the Portfolio will be taxable to the
shareholders as long-term capital gain. This is the case regardless of how long
they have held their shares. None of the amounts treated as distributed to a
Portfolio'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 the Portfolio:
a. declares it during October, November or December, and
b. the distribution has a record date in such a month, and
c. it is paid by the Portfolio 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. Each Portfolio will inform
shareholders of the amount and tax status of all amounts treated as
distributed to them in a calendar year in January of the following calendar
year.
SALE OF SHARES
- --------------
Upon the sale or other disposition of Portfolio shares, or upon receipt of a
distribution in complete liquidation of a Portfolio, a shareholder usually will
realize a capital gain or loss. This loss may be long-term or short-term,
generally depending upon the shareholder's holding period for the shares. For
tax purposes, a loss will be disallowed on the sale or exchange of shares if
the disposed of shares are replaced (including shares acquired pursuant to a
dividend reinvestment plan) within a period of 61 days. The 61 day time window
begins 30 days before and ends 30 days after the date of the sale or exchange
of such shares. Should a disposition fall within this 61 day window, the basis
of the acquired shares will be adjusted to reflect the disallowed loss. Any
loss realized by the shareholder on its 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
- ----------------------
A Portfolio's investment in zero coupon securities will result in Portfolio
income, equal to a portion of the excess of the amortized face value of the
securities over their issue price (the "original issue discount"), prior
-------------------------
amortized value or purchased cost for each year that the securities are held.
This is so, even though the Portfolio receives no cash interest payments during
the holding period. This income is included when determining the amount of
income the Portfolio must distribute to maintain its status as a RIC and to
avoid the payment of Federal income tax and the 4% excise tax.
BACKUP WITHHOLDING
- ------------------
A Portfolio 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 Portfolio of its income and gains in additional shares of
the Portfolio. The 31% rate applies to shareholders receiving redemption
payments who:
a. fail to provide the Portfolio with their correct taxpayer identification
number;
b. fail to make required certifications,
c. 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
- --------------------
A foreign shareholder, qualifying as a non-resident alien, a foreign trust or
estate, foreign corporation, or foreign partnership ("foreign shareholder") may
-------------------
have to pay U.S. tax depending on whether the Portfolio income is "effectively
connected" with a U.S. trade or business carried on by the shareholders.
If a foreign shareholder's Portfolio income is not "effectively connected" with
a U.S. trade or business, the distributions of investment company taxable
income, including net short-term capital gains, will be subject to a U.S. tax
of 30% (or lower treaty rate).
If a foreign shareholder's Portfolio income is effectively connected with a
U.S. trade or business, then:
a. distributions of investment company taxable income,
b. capital gain dividends, and
c. any gain realized upon the redemption, sale or exchange of shares of the
Portfolio 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.
20
<PAGE>
The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty may differ from those described herein. Foreign
shareholders are advised to consult their own tax advisers regarding investment
tax consequences in a Portfolio.
OTHER TAXES
- -----------
A Portfolio may be subject to state, local or foreign taxes in any jurisdiction
where the Portfolio is deemed to be doing business. In addition, Portfolio
shareholders may be subject to state, local or foreign taxes on Portfolio
distributions. In many states, Portfolio distributions derived from interest on
certain U.S. Government obligations may be exempt from taxation. Shareholders
should consult their own tax advisers concerning these matters.
SHAREHOLDER INFORMATION
Certificates representing shares of each Portfolio 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 a Portfolio'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, nor the Transfer Agent will be
responsible for the validity of written or telephonic requests.
PURCHASE OF SHARES
There is no sales charge imposed by the Fund, nor does the Fund impose
sales commissions (loads). The minimum initial investment in Class B shares of
each Portfolio is $1,000. The minimum initial investment in the Class A shares
of each Portfolio in the Fund is $1,000,000. The minimum investment in Class A
shares may be waived at any time at the discretion of the Investment Adviser.
Additional purchases of Class A or Class B shares may be of any amount.
The offering of shares of each Portfolio is continuous and purchases of
shares of the Portfolios 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. Each
Portfolio's shares are offered at a public offering price equal to the net
asset value next determined after receipt of a purchase order.
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 Investors Bank & Trust
Company at (800) 247-0473 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
on a non-business day, or after 4:00 p.m. Eastern time, or if Federal funds are
received by the Transfer Agent after 4:00 p.m. Eastern time, such purchase
order shall be deemed received as of the next business day. 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 a Portfolio are:
Investors Bank & Trust Company
Boston, MA
ABA # 011-001-438
Acct: 303030303
Benf: (name of Portfolio)
F/F/C (Shareholder's Account at Fund)
21
<PAGE>
REDEMPTION OF SHARES
The Fund will redeem all full and fractional shares of each Portfolio
in 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 4:00 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 4:00 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 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 a Portfolio;
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 Portfolio.
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 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.
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, 1775 Eye Street, N.W., Washington, D.C. 20006, is legal
counsel for the Fund.
INDEPENDENT AUDITORS
- -----------------
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019, is the
independent auditor for the Fund. Ernst & Young LLP also renders accounting
services to the Investment Adviser.
22
<PAGE>
ORGANIZATION OF THE FUND 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. For each Portfolio 350,000,000 are authorized as Class A shares and
150,000,000 are authorized as Class B shares. The Fund currently consists of
two portfolios: the SAMCO Aggregate Fixed Income Fund and the SAMCO
Intermediate Fixed Income Fund. Prior to June 10, 1999 the name of the SAMCO
Aggregate Fixed Income Fund was the SAMCO Fixed Income Portfolio and the name
of the Fund was "SAMCO Fund, Inc.". The Fund's shares have no preemptive,
conversion, exchange or redemption rights. Each share of the Fund has equal
voting, dividend, distribution and liquidation rights. All shares issued and
outstanding are fully paid and non-assessable, transferable, and redeemable at
their net asset value at the option of the shareholder. 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 less than 50% of the 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 portfolios with different
investment objectives, policies and restrictions. Any issuance of shares of
another series would be governed by the 1940 Act and Maryland law.
Each Portfolio currently offers two classes of shares, which may have
different operating and other expenses. For more information about other
classes of the Portfolios' 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
Each Portfolio may, from time to time, include the yield and total
return in reports to shareholders or prospective investors. Quotations of yield
for a Portfolio 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 a
Portfolio over periods of 1, 5 and 10 years (up to the life of the Portfolio),
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.
23
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURNS OF CLASS A SHARES FOR THE FISCAL YEAR ENDED
OCTOBER 31, 1999 AND SINCE INCEPTION ARE AS FOLLOWS:
- -------------------------------------------------------------------------------
1 year Since Inception*
- -------------------------------------------------------------------------------
Fixed Income Fund - A Shares
- -------------------------------------------------------------------------------
Intermediate Fixed Income Fund - A
Shares -
- -------------------------------------------------------------------------------
</TABLE>
The Fixed Income Fund commenced operations on December 30, 1997. The
Intermediate Fixed Income Fund commenced operations on June 30, 1999.
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.
24
<PAGE>
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.
25
<PAGE>
FINANCIAL STATEMENTS
The Fund's audited Financial Statements, including the Financial Highlights,
for the period ended October 31, 1999 appearing in the Annual Report to
Shareholders and the report thereon of Ernst & Young LLP, independent auditors,
appearing therein are hereby incorporated by reference in this Statement of
Additional Information. The Annual Report to Shareholders is delivered with
this Statement of Additional Information to shareholders requesting this
Statement of Additional Information.
26
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. EXHIBITS.
--------
EXHIBIT
NUMBER DESCRIPTION
------- -----------
a(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, on August 4, 1997) are incorporated herein by
reference.
a(2) -- Articles Supplementary to the Articles of
Incorporation, effective October 16, 1997 are filed herein.
a(3) -- Articles Supplementary to the Articles of
Incorporation, effective June 16, 1999 are filed herein.
b(1) -- By-Laws (previously filed as Exhibit 2 to the
Registrant's Registration Statement on Form N-1A, File No. 333-33365, on August
4, 1997) are incorporated herein by reference.
c -- None.
d(1) -- Advisory Agreement between the Registrant, on
behalf of SAMCO Fixed Income Portfolio and Seix Investment Advisors Inc., dated
November 3, 1997, is filed herein.
d(2) -- Advisory Agreement between the Registrant, on
behalf of SAMCO Intermediate Fixed Income Fund and Seix Investment Advisors
Inc., dated June 14, 1999, is filed herein.
e(1) -- Form of Distribution Agreement between the
Registrant and First Fund Distributors, Inc. is filed herein.
f -- None.
g -- Custodian Agreement between the Registrant and
Investors Bank & Trust Company (previously filed as Exhibit 8 to the
Pre-Effective Amendment No. 2 to the Registrant's Registration Statement on
Form N-1A, File No. 333-33365, filed on October 20, 1997) is incorporated
herein by reference.
h(1) -- Transfer Agency and Service Agreement between
Registrant and Investors Bank & Trust Company (previously filed as Exhibit 9(b)
to the Pre-Effective Amendment No. 2 to the Registrant's Registration Statement
on Form N-1A, File No. 333-33365, filed on October 20, 1997) is incorporated
herein by reference.
h(2) -- Administration Agreement between the Registrant
and Investors Capital Services, Inc., dated May 29, 1998 is filed herein.
i -- Opinion and Consent of Dechert Price & Rhoads
(previously filed as Exhibit 10 to the Pre-Effective Amendment No. 3 to the
Registrant's Registration Statement on Form N-1A, File No. 333-33365, filed on
October 29, 1997) is incorporated herein by reference.
j(1) -- Consent of Auditors to be filed by amendment.
<PAGE>
j(2) -- Powers of Attorney (previously filed as Exhibit
11(b) to the Pre-Effective Amendment No. 2 to the Registrant's Registration
Statement on Form N-1A, File No. 333-33365, filed on October 20, 1997) are
incorporated herein by reference.
k -- None.
l(1) -- Share Purchase Agreement between Registrant and
Seix Investment Advisors Inc. (previously filed as Exhibit 13(a) to the
Pre-Effective Amendment No. 2 to the Registrant's Registration Statement on
Form N-1A, File No. 333-33365, filed on October 20, 1997) is incorporated
herein by reference.
m(1) -- Services and Distribution Plan between the
Registrant and AMT Capital Securities, LLC. on behalf of SAMCO Fixed Income
Portfolio Class B (previously filed as Exhibit 15 to the Pre-Effective
Amendment No. 2 to the Registrant's Registration Statement on Form N-1A, File
No. 333-33365, filed on October 20, 1997) and incorporated herein by
reference.
m(2) -- Services and Distribution Plan between the
Registrant on behalf of SAMCO Intermediate Fixed Income Fund Class B and AMT
Capital Securities, LLC., dated June, 1999 is filed herein.
n -- Inapplicable.
o(1) -- Multiple Class Plan (previously filed as Exhibit
18 to the Pre-Effective Amendment No. 2 to the Registrant's Registration
Statement on Form N-1A, File No. 333-33365, filed on October 20, 1997) is
incorporated herein by reference.
o(2)-- Multiple Class Plan for SAMCO Intermediate Fixed
Income Fund (previously filed as Exhibit o(1) to the Post-Effective Amendment
No. 4 to the Registrant's Registration Statement on Form N-1A, File No.
333-33365, filed on March 30, 1999) is incorporated herein by reference.
ITEM 24
Persons Controlled by or under Common Control with Registrant
- -------------------------------------------------------------
As of December 13, 1999, the following shareholders were deemed to be a
"control person" of the Fund as such term is defined in the 1940 Act.
Name and Address of Nature of Beneficial Percent
Title of Class Beneficial Owner Ownership of Portfolio
- -------------- ---------------- --------- ------------
Class A Shares of American College of Direct Ownership 36.3%
SAMCO Aggregate Cardiology
Fixed Income Fund 911 Old Georgetown
Road,
Bethesda, MD 20814
Class A Shares of Noitu Insurance Trust Direct Ownership 100%
SAMCO Intermediate Fund H&W Plan (501)CA
Fixed Income Fund 148-06 Hillside Avenue
Jamaica, NY 11435
<PAGE>
ITEM 25
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.
ITEM 26
Business and Other Connections of Investment Adviser.
- ----------------------------------------------------
Seix Investment Advisors Inc. (the "Investment Adviser") is a company
organized under the laws of New Jersey and an investment adviser registered
under the Investment Advisers Act of 1940 (the "Advisers Act").
The list required by this Item 26 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).
<PAGE>
ITEM 27
Principal Underwriter.
- ---------------------
(a) The Registrant's principal underwriter also acts as principal underwriter
for the following investment companies:
Guiness Flight Investment Funds
Fleming Capital Mutual Fund Group, Inc.
Fremont Mutual Funds, Inc.
Jurika & Voyles Fund Group
Kayne Anderson Mutual Funds
Masters' Select Investment Trust
O'Shaughnessy Funds, Inc.
PIC Investment Trust
The Purisima Funds
Professionally Managed Portfolios
Rainier Investment Management Mutual Funds
RNC Mutual Fund Group, Inc.
Brandes Investment Trust
Allegiance Investment Trust
The Dessauer Global Equity Fund
Puget Sound Alternative Investment Trust
(b) The following information is furnished with respect to the officers and
directors of First Fund Distributors, Inc.:
Name and Principal
Business Address Positions & Offices Positions & Offices
with Distributor with Distributor with Registrant
Robert H. Wadsworth President & Treasurer None
4455 E. Camelback Road
Suite 261E
Phoenix, AZ 85018
Eric M. Banhazl Vice President None
2020 E. Financial Way
Suite 100
Glendora, CA 91741
Steven J. Paggioli Vice President & Secretary None
915 Broadway
Suite 1605
New York, NY 10010
(c) Not applicable.
<PAGE>
ITEM 28
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
Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02117-9130
ITEM 29
Management Services.
- -------------------
Not applicable.
Item 30
Undertakings.
- ------------
Not applicable.
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirement for effectiveness of this registration statement under rule
485(a) under the Securities Act of 1933 and has duly caused this registration
statement to be signed on its behalf by the undersigned, duly authorized, in
the City of Woodcliff Lake and State of New Jersey on the 27th day of December,
1999.
SAMCO FUNDS, INC.
By: /s/ Christina Seix
------------------------
Christina Seix
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities indicated on the 27th day of December, 1999.
SIGNATURE TITLE
/s/ Christina Seix Director
- ----------------------
Christina Seix
/s/ John G. Talty Director, President
- ----------------------
John G. Talty
/s/ Peter J. Bourke Director
- ----------------------
Peter J. Bourke
*/s/ John E. Manley, Sr. Director
- ---------------------------
John E. Manley, Sr.
*/s/ John R. O'Brien Director
- --------------------------
John R. O'Brien
/s/ William E. Vastardis Treasurer
- --------------------------- (Principal Financial and Accounting
William E. Vastardis Officer)
/s/ William E. Vastardis *Attorney-in-Fact William E. Vastardis
- ---------------------------
William E. Vastardis
<PAGE>
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 FUNDS, INC.
<PAGE>
SAMCO FUNDS, INC.
INDEX TO EXHIBITS
Exhibit a(2)
Exhibit a(3)
Exhibit d(1)
Exhibit d(2)
Exhibit e(1)
Exhibit h(2)
Exhibit m(2)
EXHIBIT A(2)
SAMCO FUND, INC.
ARTICLES SUPPLEMENTARY
TO THE ARTICLES OF INCORPORATION
SAMCO Fund, Inc., a Maryland corporation (the "Corporation") having a principal
office in New York, New York and having the Corporation Trust Incorporated as
its resident agent located at 32 South Street, Baltimore, Maryland 21202,
hereby certifies to the State Department of Assessments and Taxation of
Maryland as follows:
FIRST: Pursuant to the authority vested in the Board of Directors in Article
FIFTH of the Articles of Incorporation of the Corporation (the "Charter"), the
Board of Directors may, without shareholder approval, designate one or more
classes of shares of common stock, fix the number of shares in any such class
and reclassify any unissued shares with respect to such class (subject to any
applicable rule, regulation or order of the Securities and Exchange Commission
or other applicable law or regulation) which shall have such preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, terms and conditions of redemption and other
characteristics as the Board may determine in the absence of contrary
determination set forth herein. The aforesaid power shall include the power to
create, by classifying unissued shares in the aforesaid manner, one or more
classes in addition to those initially designated in the Charter;
SECOND: Pursuant to the foregoing authority, the Board of Directors has
reclassified and designated: (a) 350,000,000 authorized but unissued shares of
the SAMCO Fixed Income Portfolio common stock, par value $.001 per share, as
SAMCO Fixed Income Portfolio Class A common stock, par value $.001 per share
(the "Class A shares"), and (b) 150,000,000 authorized but unissued shares of
the SAMCO Fixed Income Portfolio common stock, par value $.001 per share, as
SAMCO Fixed Income Portfolio Class B common stock (the "Class B shares"), par
value $.001 per share. The Class A shares and the Class B shares represent
interests in the same investment portfolio of the Corporation and together
shall be subject to all provisions of Article FIFTH of the Charter relating to
stock of the Corporation generally and shall have identical preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption, except as
follows:
(a) The dividends and distributions of investment income and capital
gains with respect to the Class A shares and the Class B shares,
respectively, shall be in such amount as may be declared from time to
time by the Board of Directors, and such dividends and distributions
may vary as between the Class A shares and the Class B shares to
reflect differing allocations of the expenses of the Corporation
between the holders of the Class A shares and the holders of the Class
B shares to such extent and for such purposes as the Board of
Directors may deem appropriate;
(b) The holders of the Class B shares shall have the exclusive voting
rights with respect to provisions of a distribution plan, if any,
adopted by the Corporation pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (a "Plan") applicable to the Class B shares and no
voting rights with respect to the provisions of any Plan applicable to
the Class A shares; and the holders of the Class A shares shall have
exclusive voting rights with respect to the provisions of any Plan
applicable to the Class A shares and no voting rights with respect to
the provisions of any Plan applicable to the Class B shares; and
<PAGE>
(c) The net asset value of a Class A share and the net asset value of
a Class B share shall be separately computed, and may vary from one
another, in order to reflect any differences in the undistributed
investment income or capital gains allocated to each such class, or in
the capital account of each such class, resulting from differing
allocations of the expenses of the Corporation between the holders of
the Class A shares and the holders of the Class B shares.
THIRD: The shares aforesaid have been duly classified or reclassified by the
Board of Directors pursuant to the authority and power contained in the
Corporation's Charter.
FOURTH: These Articles Supplementary to the Articles of Incorporation do not
increase the capital stock of the Corporation.
IN WITNESS WHEREOF, SAMCO Fund, Inc. has caused these presents to be signed in
its name and on its behalf by its President and witnessed by its Secretary on
September 23, 1997.
ATTESTED: SAMCO FUND, INC.
/s/ William E. Vastardis /s/ Christina Seix
- ------------------------------- ------------------------------
William E. Vastardis, Treasurer Christina Seix, President
THE UNDERSIGNED, Christina Seix, President of SAMCO Fund, Inc., who executed on
behalf of the Corporation the foregoing Articles Supplementary to the Articles
of Incorporation of which this certificate is made a part, hereby acknowledges
in the name and on behalf of said Corporation and hereby certifies that to the
best of her knowledge, information and belief the matters and facts set forth
therein with respect to the authorization and approval thereof are true in all
material respects under the penalties of perjury.
/s/ Christina Seix
------------------------------
Christina Seix, President
EXHIBIT A(3)
SAMCO FUND, INC.
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
SAMCO Fund, Inc., a Maryland corporation (the "Corporation") having a principal
office in New York, New York and having the Corporation Trust Incorporated as
its resident agent located at 32 South Street, Baltimore, Maryland 21202,
hereby certifies to the State Department of Assessments and Taxation of
Maryland as follows:
FIRST: The Charter of the Corporation is hereby amended by striking our Article
SECOND and inserting in its place the following:
"SECOND: The name of the Corporation is SAMCO Funds, Inc.
------
SECOND: Pursuant to the authority vested in the Board of Directors in Article
FIFTH of the Articles of Incorporation of the Corporation (the "Charter"), the
Board of Directors may, without shareholder approval, designate one or more
classes of shares of common stock, fix the number of shares in any such class
and reclassify any unissued shares with respect to such class (subject to any
applicable rule, regulation or order of the Securities and Exchange Commission
or other applicable law or regulation) which shall have such preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, terms and conditions of redemption and other
characteristics as the Board may determine in the absence of contrary
determination set forth herein. The aforesaid power shall include the power to
create, by classifying unissued shares in the aforesaid manner, one or more
classes in addition to those initially designated in the Charter;
THIRD: Pursuant to the foregoing authority, the Board of Directors has
reclassified and designated: (a) 350,000,000 authorized but unallocated shares
of the Corporation's common stock, par value $.001 per share, as SAMCO
Intermediate Fixed Income Fund Class A common stock, par value $.001 per share
(the "Class A shares"), and (b) 150,000,000 authorized but unallocated shares
of the Corporation's common stock, par value $.001 per share, as SAMCO
Intermediate Fixed Income Fund Class B common stock (the "Class B shares"), par
value $.001 per share. The Class A shares and the Class B shares represent
interests in the same investment portfolio of the Corporation and together
shall be subject to all provisions of Article FIFTH of the Charter relating to
stock of the Corporation generally and shall have identical preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption, except as
follows:
(a) The dividends and distributions of investment income and capital
gains with respect to the Class A shares and the Class B shares,
respectively, shall be in such amount as may be declared from time to
time by the Board of Directors, and such dividends and distributions
may vary as between the Class A shares
<PAGE>
and the Class B shares to reflect differing allocations of the expenses
of the Corporation between the holders of the Class A shares and the
holders of the Class B shares to such extent and for such purposes as
the Board of Directors may deem appropriate;
(b) The holders of the Class B shares shall have the exclusive voting
rights with respect to provisions of a distribution plan, if any,
adopted by the Corporation pursuant to Rule 12b-1 under the Investment
Company Act of 1940 (a "Plan") applicable to the Class B shares and no
voting rights with respect to the provisions of any Plan applicable to
the Class A shares; and the holders of the Class A shares shall have
exclusive voting rights with respect to the provisions of any Plan
applicable to the Class A shares and no voting rights with respect to
the provisions of any Plan applicable to the Class B shares; and
(c) The net asset value of a Class A share and the net asset value of a
Class B share shall be separately computed, and may vary from one
another, in order to reflect any differences in the undistributed
investment income or capital gains allocated to each such class, or in
the capital account of each such class, resulting from differing
allocations of the expenses of the Corporation between the holders of
the Class A shares and the holders of the Class B shares.
FOURTH: The Charter of the Corporation is hereby amended further to provide
that the Corporation's "Fixed Income Portfolio" series is hereby redesignated
the "SAMCO Aggregate Fixed Income Fund."
FIFTH: These Articles of Amendment to the Articles of Incorporation do not
increase the capital stock of the Corporation.
SIXTH: The Amendment to the Articles of Incorporation of the Corporation as
hereinabove set forth shall be effective on June 10, 1999.
SEVENTH: The foregoing amendment to the Articles of Incorporation of the
Corporation was approved by a majority of the entire Board of Directors of the
Corporation; the Charter amendment is limited to changes expressly permitted by
Section 2-605 of Subtitle 6 of Title 2 of the Maryland General Corporation law
to be made without action by the stockholders, and the Corporation is
registered as an open-end investment company under the Investment Company Act
of 1940, as amended.
<PAGE>
IN WITNESS WHEREOF, SAMCO Fund, Inc. has caused these presents to be signed in
its name and on its behalf by its President and witnessed by its Secretary on
June 10, 1999.
ATTESTED: SAMCO FUND, INC.
/s/ William E. Vastardis /s/ John G. Talty
- ------------------------------- ------------------------------
William E. Vastardis, Secretary John G. Talty, President
THE UNDERSIGNED, John G. Talty, President of SAMCO Fund, Inc., who executed on
behalf of the Corporation the foregoing Articles of Amendment to the Articles
of Incorporation of which this certificate is made a part, hereby acknowledges
in the name and on behalf of said Corporation and hereby certifies that to the
best of his knowledge, information and belief the matters and facts set forth
therein with respect to the authorization and approval thereof are true in all
material respects under the penalties of perjury.
/s/ John G. Talty
------------------------------
John G. Talty, President
EXHIBIT D(1)
ADVISORY AGREEMENT
ADVISORY AGREEMENT, dated November 3, 1997, between SAMCO Fund, Inc., a
Maryland corporation (the "Fund"), and Seix Investment Advisors Inc., a New
Jersey corporation (the "Adviser").
In consideration of the mutual agreements herein made, the parties hereto
agree as follows:
1. ATTORNEY-IN-FACT. The Fund appoints the Adviser as its attorney-in-fact
to invest and reinvest the assets of the SAMCO Fixed Income Portfolio (the
"Portfolio"), as fully as the Fund itself could do. The Adviser hereby accepts
this appointment.
2. DUTIES OF THE ADVISER. (a) The Adviser shall be responsible for
managing the investment assets of the Portfolio, including, without limitation,
providing investment research, advice and supervision, determining which
portfolio securities shall be purchased or sold by the Portfolio, purchasing
and selling securities on behalf of the Portfolio and determining how voting
and other rights with respect to portfolio securities of the Portfolio shall be
exercised, subject in each case to the control of the Board of Directors of the
Fund (the "Board") and in accordance with the objective, policies and
principles of the Portfolio set forth in the Registration Statement, as
amended, of the Fund, the requirements of the Investment Company Act of 1940,
as amended, (the "Act") and other applicable law. In performing such duties,
the Adviser shall provide such office space, and such executive and other
personnel as shall be necessary for the investment operations of the Portfolio.
In managing the Portfolio in accordance with the requirements set forth in this
paragraph 2, the Adviser shall be entitled to act upon advice of counsel to the
Fund or counsel to the Adviser.
(b) Subject to Section 36 of the Act, the Adviser shall not be liable to
the Fund for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the management of the
Portfolio and the performance of its duties under this Agreement except for
losses arising out of the Adviser's willful misfeasance, bad faith, or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement. It is agreed that
the Adviser shall have no responsibility or liability for the accuracy or
completeness of the Fund's Registration Statement under the Act and the
Securities Act of 1933 except for information about the Adviser contained in
the Prospectus included as part of such Registration Statement supplied by the
Adviser for inclusion therein. The Fund agrees to indemnify and hold the
Adviser harmless from and against all claims, losses, costs, damages and
expenses, including reasonable fees and expenses for counsel, incurred by it
resulting from any claim, demand, action or suit in connection with or arising
out of any action or omission by the Adviser in the performance of this
Agreement except for those claims, losses, costs, damages and expenses
resulting from the Adviser's willful misfeasance, bad faith, or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement.
2
<PAGE>
(c) The Adviser and its officers may act and continue to act as investment
advisers and managers for others (including, without limitation, other
investment companies), and nothing in this Agreement will in any way be deemed
to restrict the right of the Adviser to perform investment management or other
services for any other person or entity, and the performance of such services
for others will not be deemed to violate or give rise to any duty or obligation
to the Fund.
(d) Except as provided in Section 5, nothing in this Agreement will limit
or restrict the Adviser or any of its officers, affiliates or employees from
buying, selling or trading in any securities for its or their own account or
accounts. The Fund acknowledges that the Adviser and its officers, affiliates
or employees, and its other clients may at any time have, acquire, increase,
decrease or dispose of positions in investments which are at the same time
being acquired or disposed of for the account of the Portfolio. The Adviser
will have no obligation to acquire for the Portfolio a position in any
investment which the Adviser, its officers, affiliates or employees may acquire
for its or their own accounts or for the account of another client, if in the
sole discretion of the Adviser, it is not feasible or desirable to acquire a
position in such investment for the account of the Portfolio, provided that the
Adviser shall have acted in good faith and in a manner deemed equitable to the
Portfolio. The Adviser represents that it has adopted a code of ethics
governing personal trading that complies in all material respects with the
recommendations contained in the Investment Company Institute "Report of the
Advisory Group on Personal Investing," dated May 9, 1994, and the Adviser
agrees to furnish a copy of such code of ethics to the Directors of the Fund.
(e) If the purchase or sale of securities consistent with the investment
policies of the Portfolio and one or more other clients serviced by the Adviser
is considered at or about the same time, transactions in such securities will
be allocated among the Portfolio and clients in a manner deemed fair and
reasonable by the Adviser. Although there is no specified formula for
allocating such transactions, the various allocation methods used by the
Adviser, and the results of such allocations, are subject to periodic review by
the Board.
3. EXPENSES. The Adviser shall pay all of its expenses arising from the
performance of its obligations under this Agreement. Except as provided below,
the Adviser shall not be required to pay any other expenses of the Fund
(including out-of-pocket expenses, but not including the Adviser's overhead or
employee costs), including without limitation, organization expenses of the
Fund; brokerage commissions; maintenance of books and records which are
required to be maintained by the Fund's custodian or other agents of the Fund;
telephone, telex, facsimile, postage and other communications expenses;
expenses relating to investor and public relations; freight, insurance and
other charges in connection with the shipment of the Fund's portfolio
securities; indemnification of Directors and officers of the Fund; travel
expenses (or an appropriate portion thereof) of Directors and officers of the
Fund to the extent that such expenses relate to attendance at meetings of the
Board of Directors of the Fund or any committee thereof or advisors thereto
held outside of the Adviser's offices; interest, fees and expenses of
independent attorneys, auditors, custodians, accounting agents, transfer
agents, dividend disbursing agents and registrars; payment for portfolio
pricing or valuation service to pricing agents, accountants, bankers and other
3
<PAGE>
specialists, if any; taxes and government fees; 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, dividends and proxy materials to existing
stockholders; expenses of printing and filing reports and other documents filed
with governmental agencies, expenses of printing and distributing prospectuses;
expenses of annual and special stockholders' meetings; costs of stationery,
fees and expenses (specifically including travel expenses relating to Fund
business) of Directors of the Fund who are not employees of the Adviser or its
affiliates; membership dues in the Investment Company Institute; insurance
premiums and extraordinary expenses such as litigation expenses.
4. COMPENSATION. (a) As compensation for the services performed and the
facilities and personnel provided by the Adviser pursuant to this Agreement,
the Fund will pay to the Adviser promptly at the end of each calendar month, a
fee, calculated on each day during such month, at an annual rate of 0.25% of
the Portfolio's average daily net assets. The Adviser shall be entitled to
receive during any month such interim payments of its fee hereunder as the
Adviser shall request, provided that no such payment shall exceed 50% of the
amount of such fee then accrued on the books of the Portfolio and unpaid.
(b) If the Adviser shall serve hereunder for less than the whole of any
month, the fee payable hereunder shall be prorated.
(c) For purposes of this Section 4, the "average daily net assets" of the
Portfolio shall mean the average of the values placed on the Portfolio's net
assets on each day pursuant to the applicable provisions of the Fund's
Registration Statement, as amended.
5. PURCHASE AND SALE OF SECURITIES. The Adviser shall purchase securities
from or through and sell securities to or through such persons, brokers or
dealers as the Adviser shall deem appropriate in order to carry out the policy
with respect to the allocation of portfolio transactions as set forth in the
Registration Statement of the Fund, as amended, or as the Board may direct from
time to time. The Adviser will use its reasonable efforts to execute all
purchases and sales with dealers and banks on a best net price basis. The
Adviser will consider the full range and quality of services offered by the
executing broker or dealer when making these determinations. Neither the
Adviser nor any of its officers, affiliates or employees will act as principal
or receive any compensation from the Portfolio in connection with the purchase
or sale of investments for the Portfolio other than the fee referred to in
Paragraph 4 hereof.
6. TERM OF AGREEMENT. This Agreement shall continue in full force and
effect until two years from the date hereof, and will continue in effect from
year to year thereafter if such continuance is approved in the manner required
by the Act, provided that this Agreement is not otherwise terminated. The
Adviser may terminate this Agreement at any time, without the payment of any
penalty, upon 60 days' written notice to the Fund. The Fund may terminate this
Agreement
4
<PAGE>
with respect to the Portfolio at any time, without the payment of any penalty,
on 60 days' written notice to the Adviser by vote of either the majority of the
non-interested members of the Board or a majority of the outstanding voting
securities (as defined in Section 2(a)(42) of the Act) of the Portfolio. This
Agreement will automatically terminate in the event of its assignment (the term
"assignment" for this purpose having the meaning defined in Section 2(a)(4) of
the Act).
7. CHANGES IN MEMBERSHIP. The Adviser is a corporation duly existing under
the laws of the State of New Jersey. In the event the Adviser changes
ownership, the Adviser shall notify the Fund of such change within a reasonable
time after the change.
8. NOTICES. Any notice or other communication authorized or required
hereunder shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notice shall be addressed to the Fund at c/o AMT
Capital Services, Inc., 600 Fifth Avenue, 26th Floor, New York, NY 10020,
Attention: Mr. Paul Brook, Treasurer; and to Seix Investment Advisors Inc.,
Whiteweld Corporate Centre 300 Tice Boulevard, Woodcliff Lake, NJ 07675-7633,
Attention: Ms. Christina Seix. Either party may designate a different address
by notice to the other party. Any such notice or other communication shall be
deemed given when actually received.
9. AMENDMENT. This Agreement may be amended by the parties hereto with
respect to the Portfolio only if such amendment is specifically approved (i) by
the Board of Directors of the Fund or by the vote of a majority of outstanding
shares of the Portfolio ("Shares"), and (ii) by the Director(s) who are not
interested persons (the term "non interested" for this purpose having the
meaning defined in section 2 (a) (19) of the Act) of the Fund ("Non-Interested
Director(s)"), which vote must be cast in person at a meeting called for the
purpose of voting on such approval.
10. RIGHT OF ADVISER IN CORPORATE NAME. The Adviser and the Fund each
agree that the phrase "SAMCO" which comprises a component of the Fund's
corporate name, is a property right of the Adviser. The Fund agrees and
consents that (i) it will only use the phrase "SAMCO" as a component of its
corporate name and for no other purpose; (ii) it will not purport to grant to
any third party the right to use the phrase "SAMCO" for any purpose; (iii) the
Adviser or any corporate affiliate of the Adviser may use or grant to others
the right to use the phrase "SAMCO" or any combination or abbreviation thereof,
as all or a portion of a corporate or business name or for any commercial
purpose, including a grant of such right to any other investment company, and
at the request of the Adviser, the Fund will take such action as may be
required to provide its consent to such use or grant; and (iv) upon the
termination of any investment advisory agreement into which the Adviser and the
Fund may enter, the Fund shall, upon request by the Adviser, promptly take such
action, at its own expense, as may be necessary to change the Fund's corporate
name to one not containing the phrase "SAMCO" and following such a change,
shall not use the phrase "SAMCO" or any combination thereof, as part of the
Fund's corporate name or for any other commercial purpose, and shall use its
reasonable efforts to cause its officers, directors and stockholders to take
any and all actions which the Adviser may request to effect the foregoing and
recovery to the Adviser any and all rights to such phrase.
5
<PAGE>
11. MISCELLANEOUS. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey. Anything herein to the
contrary notwithstanding, this Agreement shall not be construed to require or
to impose any duty upon either of the parties to do anything in violation of
any applicable laws or regulations.
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement to
be executed by their duly authorized officers as of the date first written
above.
ATTEST SAMCO FUND, INC.
By: /s/ Carla E. Dearing By: /s/ Paul Brook
---------------------------- ------------------------------
Carla E. Dearing, Assistant Treasurer Paul Brook, Treasurer
ATTEST SEIX INVESTMENT ADVISORS INC.
By: /s/ Peter J. Bourke By: /s/ Christina Seix
---------------------------- ------------------------------
Peter J. Bourke Christina Seix, Chairman & CIO
5
EXHIBIT D(2)
ADVISORY AGREEMENT
ADVISORY AGREEMENT, dated June 14, 1999, between SAMCO Fund, Inc., a
Maryland corporation (the "Fund"), and Seix Investment Advisors Inc., a New
Jersey corporation (the "Adviser").
In consideration of the mutual agreements herein made, the parties hereto
agree as follows:
1. ATTORNEY-IN-FACT. The Fund appoints the Adviser as its attorney-in-fact
to invest and reinvest the assets of the SAMCO Intermediate Fixed Income Fund
(the "Portfolio"), as fully as the Fund itself could do. The Adviser hereby
accepts this appointment.
2. DUTIES OF THE ADVISER. (a) The Adviser shall be responsible for
managing the investment assets of the Portfolio, including, without limitation,
providing investment research, advice and supervision, determining which
portfolio securities shall be purchased or sold by the Portfolio, purchasing
and selling securities on behalf of the Portfolio and determining how voting
and other rights with respect to portfolio securities of the Portfolio shall be
exercised, subject in each case to the control of the Board of Directors of the
Fund (the "Board") and in accordance with the objective, policies and
principles of the Portfolio set forth in the Registration Statement, as
amended, of the Fund, the requirements of the Investment Company Act of 1940,
as amended, (the "Act") and other applicable law. In performing such duties,
the Adviser shall provide such office space, and such executive and other
personnel as shall be necessary for the investment operations of the Portfolio.
In managing the Portfolio in accordance with the requirements set forth in this
paragraph 2, the Adviser shall be entitled to act upon advice of counsel to the
Fund or counsel to the Adviser.
(b) Subject to Section 36 of the Act, the Adviser shall not be liable to
the Fund for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the management of the
Portfolio and the performance of its duties under this Agreement except for
losses arising out of the Adviser's willful misfeasance, bad faith, or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement. It is agreed that
the Adviser shall have no responsibility or liability for the accuracy or
completeness of the Fund's Registration Statement under the Act and the
Securities Act of 1933 except for information about the Adviser contained in
the Prospectus included as part of such Registration Statement supplied by the
Adviser for inclusion therein. The Fund agrees to indemnify and hold the
Adviser harmless from and against all claims, losses, costs, damages and
expenses, including reasonable fees and expenses for counsel, incurred by it
resulting from any claim, demand, action or suit in connection with or arising
out of any action or omission by the Adviser in the performance of this
Agreement except for those claims, losses, costs, damages and expenses
resulting from the Adviser's willful misfeasance, bad faith, or gross
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement.
<PAGE>
(c) The Adviser and its officers may act and continue to act as investment
advisers and managers for others (including, without limitation, other
investment companies), and nothing in this Agreement will in any way be deemed
to restrict the right of the Adviser to perform investment management or other
services for any other person or entity, and the performance of such services
for others will not be deemed to violate or give rise to any duty or obligation
to the Fund.
(d) Except as provided in Section 5, nothing in this Agreement will limit
or restrict the Adviser or any of its officers, affiliates or employees from
buying, selling or trading in any securities for its or their own account or
accounts. The Fund acknowledges that the Adviser and its officers, affiliates
or employees, and its other clients may at any time have, acquire, increase,
decrease or dispose of positions in investments which are at the same time
being acquired or disposed of for the account of the Portfolio. The Adviser
will have no obligation to acquire for the Portfolio a position in any
investment which the Adviser, its officers, affiliates or employees may acquire
for its or their own accounts or for the account of another client, if in the
sole discretion of the Adviser, it is not feasible or desirable to acquire a
position in such investment for the account of the Portfolio, provided that the
Adviser shall have acted in good faith and in a manner deemed equitable to the
Portfolio. The Adviser represents that it has adopted a code of ethics
governing personal trading that complies in all material respects with the
recommendations contained in the Investment Company Institute "Report of the
Advisory Group on Personal Investing," dated May 9, 1994, and the Adviser
agrees to furnish a copy of such code of ethics to the Directors of the Fund.
(e) If the purchase or sale of securities consistent with the investment
policies of the Portfolio and one or more other clients serviced by the Adviser
is considered at or about the same time, transactions in such securities will
be allocated among the Portfolio and clients in a manner deemed fair and
reasonable by the Adviser. Although there is no specified formula for
allocating such transactions, the various allocation methods used by the
Adviser, and the results of such allocations, are subject to periodic review by
the Board.
3. EXPENSES. The Adviser shall pay all of its expenses arising from the
performance of its obligations under this Agreement. Except as provided below,
the Adviser shall not be required to pay any other expenses of the Fund
(including out-of-pocket expenses, but not including the Adviser's overhead or
employee costs), including without limitation, organization expenses of the
Fund; brokerage commissions; maintenance of books and records which are
required to be maintained by the Fund's custodian or other agents of the Fund;
telephone, telex, facsimile, postage and other communications expenses;
expenses relating to investor and public relations; freight, insurance and
other charges in connection with the shipment of the Fund's portfolio
securities; indemnification of Directors and officers of the Fund; travel
expenses (or an appropriate portion thereof) of Directors and officers of the
Fund to the extent that such expenses relate to attendance at meetings of the
Board of Directors of the Fund or any committee thereof or advisors thereto
held outside of the Adviser's offices; interest, fees and expenses of
independent attorneys, auditors, custodians, accounting agents, transfer
agents, dividend disbursing agents and registrars; payment
2
<PAGE>
for portfolio pricing or valuation service to pricing agents, accountants,
bankers and other specialists, if any; taxes and government fees; 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, dividends and proxy
materials to existing stockholders; expenses of printing and filing reports and
other documents filed with governmental agencies, expenses of printing and
distributing prospectuses; expenses of annual and special stockholders'
meetings; costs of stationery, fees and expenses (specifically including travel
expenses relating to Fund business) of Directors of the Fund who are not
employees of the Adviser or its affiliates; membership dues in the Investment
Company Institute; insurance premiums and extraordinary expenses such as
litigation expenses.
4. COMPENSATION. (a) As compensation for the services performed and the
facilities and personnel provided by the Adviser pursuant to this Agreement,
the Fund will pay to the Adviser promptly at the end of each calendar month, a
fee, calculated on each day during such month, at an annual rate of 0.25% of
the Portfolio's average daily net assets. The Adviser shall be entitled to
receive during any month such interim payments of its fee hereunder as the
Adviser shall request, provided that no such payment shall exceed 50% of the
amount of such fee then accrued on the books of the Portfolio and unpaid.
(b) If the Adviser shall serve hereunder for less than the whole of any month,
the fee payable hereunder shall be prorated.
(c) For purposes of this Section 4, the "average daily net assets" of the
Portfolio shall mean the average of the values placed on the Portfolio's net
assets on each day pursuant to the applicable provisions of the Fund's
Registration Statement, as amended.
5. PURCHASE AND SALE OF SECURITIES. The Adviser shall purchase securities
from or through and sell securities to or through such persons, brokers or
dealers as the Adviser shall deem appropriate in order to carry out the policy
with respect to the allocation of portfolio transactions as set forth in the
Registration Statement of the Fund, as amended, or as the Board may direct from
time to time. The Adviser will use its reasonable efforts to execute all
purchases and sales with dealers and banks on a best net price basis. The
Adviser will consider the full range and quality of services offered by the
executing broker or dealer when making these determinations. Neither the
Adviser nor any of its officers, affiliates or employees will act as principal
or receive any compensation from the Portfolio in connection with the purchase
or sale of investments for the Portfolio other than the fee referred to in
Paragraph 4 hereof.
6. TERM OF AGREEMENT. This Agreement shall continue in full force and
effect until two years from the date hereof, and will continue in effect from
year to year thereafter if such continuance is approved in the manner required
by the Act, provided that this Agreement is not otherwise terminated. The
Adviser may terminate this Agreement at any time, without the payment
3
<PAGE>
of any penalty, upon 60 days' written notice to the Fund. The Fund may
terminate this Agreement with respect to the Portfolio at any time, without the
payment of any penalty, on 60 days' written notice to the Adviser by vote of
either the majority of the non-interested members of the Board or a majority of
the outstanding voting securities (as defined in Section 2(a)(42) of the Act)
of the Portfolio. This Agreement will automatically terminate in the event of
its assignment (the term "assignment" for this purpose having the meaning
defined in Section 2(a)(4) of the Act).
7. CHANGES IN MEMBERSHIP. The Adviser is a corporation duly existing under
the laws of the State of New Jersey. In the event the Adviser changes
ownership, the Adviser shall notify the Fund of such change within a reasonable
time after the change.
8. NOTICES. Any notice or other communication authorized or required
hereunder shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notice shall be addressed to the Fund at c/o
Investors Capital Services, Inc., 600 Fifth Avenue, 26th Floor, New York, NY
10020, Attention: Mr. Bill Vastardis, Treasurer; and to Seix Investment
Advisors Inc., Whiteweld Corporate Centre 300 Tice Boulevard, Woodcliff Lake,
NJ 07675-7633, Attention: Ms. Christina Seix. Either party may designate a
different address by notice to the other party. Any such notice or other
communication shall be deemed given when actually received.
9. AMENDMENT. This Agreement may be amended by the parties hereto with
respect to the Portfolio only if such amendment is specifically approved (i) by
the Board of Directors of the Fund or by the vote of a majority of outstanding
shares of the Portfolio ("Shares"), and (ii) by the Director(s) who are not
interested persons (the term "non interested" for this purpose having the
meaning defined in section 2 (a) (19) of the Act) of the Fund ("Non-Interested
Director(s)"), which vote must be cast in person at a meeting called for the
purpose of voting on such approval.
10. RIGHT OF ADVISER IN CORPORATE NAME. The Adviser and the Fund each
agree that the phrase "SAMCO" which comprises a component of the Fund's
corporate name, is a property right of the Adviser. The Fund agrees and
consents that (i) it will only use the phrase "SAMCO" as a component of its
corporate name and for no other purpose; (ii) it will not purport to grant to
any third party the right to use the phrase "SAMCO" for any purpose; (iii) the
Adviser or any corporate affiliate of the Adviser may use or grant to others
the right to use the phrase "SAMCO" or any combination or abbreviation thereof,
as all or a portion of a corporate or business name or for any commercial
purpose, including a grant of such right to any other investment company, and
at the request of the Adviser, the Fund will take such action as may be
required to provide its consent to such use or grant; and (iv) upon the
termination of any investment advisory agreement into which the Adviser and the
Fund may enter, the Fund shall, upon request by the Adviser, promptly take such
action, at its own expense, as may be necessary to change the Fund's corporate
name to one not containing the phrase "SAMCO" and following such a change,
shall not use the phrase "SAMCO" or any combination thereof, as part of the
Fund's corporate name or for any other commercial purpose, and shall use its
reasonable efforts to cause its officers, directors and
4
<PAGE>
stockholders to take any and all actions which the Adviser may request to
effect the foregoing and recovery to the Adviser any and all rights to such
phrase.
11. MISCELLANEOUS. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey. Anything herein to the
contrary notwithstanding, this Agreement shall not be construed to require or
to impose any duty upon either of the parties to do anything in violation of
any applicable laws or regulations.
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement to
be executed by their duly authorized officers as of the date first written
above.
ATTEST SAMCO FUND, INC.
By: /s/ Susan C. Mosher By: /s/ William E. Vastardis
--------------------------- -------------------------------
Susan C. Mosher William E. Vastardis, Treasurer
ATTEST SEIX INVESTMENT ADVISORS INC.
By: /s/ Peter J. Bourke By: /s/ Christina Seix
--------------------------- -----------------------------------
Peter J. Bourke Christina Seix, Chairman & CIO
5
DISTRIBUTION AGREEMENT
This Agreement made as of the day of , 1999 [DATE OF BOARD
APPROVAL TO BE INSERTED] by and between SAMCO Funds, Inc., a Maryland
corporation, (the "Fund"), and FIRST FUND DISTRIBUTORS, INC., a Delaware
corporation (the "Distributor").
W I T N E S S E T H:
- --------------------
WHEREAS, the Fund is registered as an open-end management
investment company under the Investment Company Act of 1940 (the "1940 Act");
and it is in the interest of the Fund to offer its shares for sale
continuously; and
WHEREAS, the Distributor is registered as a broker-dealer under
the Securities Exchange Act of 1934 (the "1934 Act") and is a member in good
standing of the National Association of Securities Dealers, Inc. (the "NASD");
and
WHEREAS, the Fund and the Distributor wish to enter into an
agreement with each other with respect to the continuous offering of the shares
of each existing and future series (the "Shares") of the Fund;
NOW, THEREFORE, the parties agree as follows:
1. Appointment of Distributor. The Fund hereby appoints the
--------------------------
Distributor as exclusive agent to sell and to arrange for the sale of the
Shares, on the terms and for the period set forth in this Agreement, and the
Distributor hereby accepts such appointment and agrees to act hereunder
directly and/or through the Fund's transfer agent in the manner set forth in
the Prospectuses (as defined below). It is understood and agreed that the
services of the Distributor hereunder are not exclusive, and the Distributor
may act as principal underwriter for the shares of any other registered
investment company.
2. Services and Duties of the Distributor.
--------------------------------------
(a) The Distributor agrees to sell the Shares, as agent
for the Fund, from time to time during the term of this Agreement upon the
terms described in a Prospectus. As used in this Agreement, the term
"Prospectus" shall mean a prospectus and statement of additional information
included as part of the Fund's Registration Statement, as such prospectus and
statement of additional information may be amended or supplemented from time to
time, and the term "Registration Statement" shall mean the Registration
Statement filed from time to time by the Fund with the Securities
and Exchange Commission ("SEC") and currently effective under the Securities
Act of 1933 (the "1933 Act") and the 1940 Act, as such Registration Statement
is amended by any amendments thereto at the time in effect. The Distributor
shall not be obligated
<PAGE>
to sell any certain number of Shares.
(b) Upon commencement of operations of any series, the
Distributor will hold itself available to receive orders, satisfactory to the
Distributor, for the purchase of the Shares and will accept such orders and
will transmit such orders and funds received by it in payment for such Shares
as are so accepted to the Fund's transfer agent or custodian, as appropriate,
as promptly as practicable. Purchase orders shall be deemed accepted and shall
be effective at the time and in the manner set forth in the series'
Prospectuses. The Distributor shall not make any short sales of Shares.
(c) The offering price of the Shares shall be the net
asset value per share of the Shares, plus the sales charge, if any, (determined
as set forth in the Prospectuses). The Fund shall furnish the Distributor, with
all possible promptness, an advice of each computation of net asset value and
offering price.
(d) The Distributor shall have the right to enter into
selected dealer agreements with securities dealers of its choice ("selected
dealers") for the sale of Shares. Shares sold to selected dealers shall be for
resale by such dealers only at the offering price of the Shares as set forth in
the Prospectuses. The Distributor shall offer and sell Shares only to such
selected dealers as are members in good standing of the NASD, unless such
dealers are not eligible for membership in the NASD.
3. Duties of the Fund.
------------------
(a) Maintenance of Federal Registration. The Fund shall,
-----------------------------------
at its expense, take, from time to time, all necessary action and such steps,
including payment of the related filing fees, as may be necessary to register
and maintain registration of a sufficient number of Shares under the 1933 Act.
The Fund agrees to file from time to time such amendments, reports and other
documents as may be necessary in order that there may be no untrue statement of
a material fact in a Registration Statement or Prospectus, or necessary in
order that there may be no omission to state a material fact in the
Registration Statement or Prospectus which omission would make the statements
therein misleading.
(b) Maintenance of "Blue Sky" Qualifications. The Fund shall, at its
------------------------------------------
expense, use its best efforts to qualify and maintain the qualification of an
appropriate number of Shares for sale under the securities laws of such states
as the Distributor and the Fund may approve, and, if necessary or appropriate
in connection therewith, to qualify and maintain the qualification of the Fund
or the series as a broker or dealer in such states; provided that the Fund
shall not be required to amend its Agreement and Declaration of Fund or By-Laws
to comply with the laws of any state, to maintain an office in any state, to
change the terms of the offering of the Shares in any state, to change the
terms of the offering of the Shares in any state from the terms set forth in
Prospectuses, to qualify as a foreign Fund in any state or to consent to
service of process in any state other than with respect to claims arising out
of the offering and sale of the Shares. The Distributor shall furnish such
information and other material relating to its affairs and activities as may be
required by the Fund or its series in connection with such qualifications.
2
<PAGE>
(c) Copies of Reports and Prospectuses. The Fund shall, at its
----------------------------------
expense, keep the Distributor fully informed with regard to its affairs and in
connection therewith shall furnish to the Distributor copies of all
information, financial statements and other papers which the Distributor may
reasonably request for use in connection with the distribution of Shares,
including such reasonable number of copies of Prospectuses and annual and
interim reports as the Distributor may request and shall cooperate fully in the
efforts of the Distributor to sell and arrange for the sale of the Shares and
in the performance of the Distributor under this Agreement.
4. Conformity with Applicable Law and Rules. The Distributor agrees
----------------------------------------
that in selling Shares hereunder it shall conform in all respects with the laws
of the United States and of any state in which Shares may be offered, and with
applicable rules and regulations of the NASD.
5. Independent Contractor. In performing its duties hereunder, the
----------------------
Distributor shall be an independent contractor and neither the Distributor, nor
any of its officers, directors, employees, or representatives is or shall be an
employee of the Fund in the performance of the Distributor's duties hereunder.
The Distributor shall be responsible for its own conduct and the employment,
control, and conduct of its agents and employees and for injury to such agents
or employees or to others through its agents or employees. The Distributor
assumes full responsibility for its agents and employees under applicable
statutes and agrees to pay all employee taxes thereunder.
6. Indemnification.
---------------
(a) Indemnification of Fund. The Distributor agrees to
-----------------------
indemnify and hold harmless the Fund and each of its present or former
Trustees/Directors, officers, employees, representatives and each person, if
any, who controls or previously controlled the Fund within the meaning of
Section 15 of the 1933 Act against any and all losses, liabilities, damages,
claims or expenses (including the reasonable costs of investigating or
defending any alleged loss, liability, damage, claims or expense and reasonable
legal counsel fees incurred in connection therewith) to which the Fund or any
such person may become subject under the 1933 Act, under any other statute, at
common law, or otherwise, arising out of the acquisition of any Shares by any
person which (i) may be based upon any wrongful act by the Distributor or any
of the Distributor's directors, officers, employees or representatives, or (ii)
may be based upon any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, Prospectus, shareholder
report or other information covering Shares filed or made public by the Fund or
any amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such statement or
omission was made in reliance upon and in conformity with information furnished
to the Fund by the Distributor. In no case (i) is the Distributor's indemnity
in favor of the Fund, or any person indemnified to be deemed to protect the
Fund or such indemnified person against any liability to which the Fund or such
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the
3
<PAGE>
performance of the Fund's or such person's duties or by reason of reckless
disregard of the Fund's or such person's obligations and duties under this
Agreement or (ii) is the Distributor to be liable under its indemnity agreement
contained in this Paragraph with respect to any claim made against the Fund or
any person indemnified unless the Fund or such person, as the case may be,
shall have notified the Distributor in writing of the claim within a reasonable
time after the summons or other first written notification giving information
of the nature of the claim shall have been served upon the Fund or upon such
person (or after the Fund or such person shall have received notice of such
service on any designated agent). However, failure to notify the Distributor of
any such claim shall not relieve the Distributor from any liability which the
Distributor may have to the Fund or any person against whom such action is
brought otherwise than on account of the Distributor's indemnity agreement
contained in this Paragraph.
The Distributor shall be entitled to participate, at its own expense
in the defense, or, if the Distributor so elects, to assume the defense of any
suit brought to enforce any such claim, but, if the Distributor elects to
assume the defense, such defense shall be conducted by legal counsel chosen by
the Distributor and satisfactory to the Fund, and to the persons indemnified as
defendant or defendants, in the suit. In the event that the Distributor elects
to assume the defense of any such suit and retain such legal counsel, the Fund,
and the persons indemnified as defendant or defendants in the suit, shall bear
the fees and expenses of any additional legal counsel retained by them. If the
Distributor does not elect to assume the defense of any such suit, the
Distributor will reimburse the Fund and the persons indemnified defendant or
defendants in such suit for the reasonable fees and expenses of any legal
counsel retained by them. The Distributor agrees to promptly notify the Fund of
the commencement of any litigation of proceedings against it or any of its
officers, employees or representatives in connection with the issue or sale of
any Shares.
(b) Indemnification of the Distributor. The Fund agrees to
-----------------------------------
indemnify and hold harmless the Distributor and each of its present or former
directors, officers, employees, representatives and each person, if any, who
controls or previously controlled the Distributor within the meaning of Section
15 of the 1933 Act against any and all losses, liabilities, damages, claims or
expenses (including the reasonable costs of investigating or defending any
alleged loss, liability, damage, claim or expense and reasonable legal counsel
fees incurred in connection therewith) to which the Distributor or any such
person may become subject under the 1933 Act, under any other statute, at
common law, or otherwise, arising out of the acquisition of any Shares by any
person which (i) may be based upon any wrongful act by the Fund or any of the
Fund's Trustees/Directors, officers, employees or representatives, or (ii) may
be based upon any untrue statement or alleged untrue statement of a material
fact contained in a Registration Statement, Prospectus, shareholder report or
other information covering Shares filed or made public by the Fund or any
amendment thereof or supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading unless such statement or omission
was made in reliance upon and in conformity with information furnished to the
Fund by the Distributor. In no case (i) is the Fund's indemnity in favor of the
Distributor, or any person indemnified to be deemed to protect the Distributor
or such indemnified person against any liability to which the Distributor or
such
4
<PAGE>
person would otherwise be subject by reason of willful misfeasance, bad faith,
or gross negligence in the performance of such person's duties or by reason of
reckless disregard of such person's obligations and duties under this Agreement
or (ii) is the Fund to be liable under their indemnity agreement contained in
this Paragraph with respect to any claim made against Distributor, or person
indemnified unless the Distributor, or such person, as the case may be, shall
have notified the Fund in writing of the claim within a reasonable time after
the summons or other first written notification giving information of the
nature of the claim shall have been served upon the Distributor or upon such
person (or after the Distributor or such person shall have received notice of
such service on any designated agent). However, failure to notify the Fund of
any such claim shall not relieve the Fund from any liability which the Fund may
have to the Distributor or any person against whom such action is brought
otherwise than on account of the Fund's indemnity agreement contained in this
Paragraph.
The Fund shall be entitled to participate, at its own expense, in the
defense, or, if the Fund so elects, to assume the defense of any suit brought
to enforce any such claim, but if the Fund elects to assume the defense, such
defense shall be conducted by legal counsel chosen by the Fund and satisfactory
to the Distributor and to the persons indemnified as defendant or defendants,
in the suit. In the event that the Fund elects to assume the defense of any
such suit and retain such legal counsel, the Distributor, the persons
indemnified as defendant or defendants in the suit, shall bear the fees and
expenses of any additional legal counsel retained by them. If the Fund does not
elect to assume the defense of any such suit, the Fund will reimburse the
Distributor and the persons indemnified as defendant or defendants in such suit
for the reasonable fees and expenses of any legal counsel retained by them. The
Fund agrees to promptly notify the Distributor of the commencement of any
litigation or proceedings against it or any of its Trustees/Directors,
officers, employees or representatives in connection with the issue or sale of
any Shares.
7. Authorized Representations. The Distributor is not authorized by
--------------------------
the Fund to give on behalf of the Fund any information or to make any
representations in connection with the sale of Shares other than the
information and representations contained in a Registration Statement or
Prospectus filed with the SEC under the 1933 Act and/or the 1940 Act, covering
Shares, as such Registration Statement and Prospectus may be amended or
supplemented from time to time, or contained in shareholder reports or other
material that may be prepared by or on behalf of the Fund for the Distributor's
use. This shall not be construed to prevent the Distributor from preparing and
distributing tombstone ads and sales literature or other material as it may
deem appropriate. No person other than the Distributor is authorized to act as
principal underwriter (as such term is defined in the 1940 Act) for the Fund.
8. Term of Agreement. The term of this Agreement shall begin on the
-----------------
date first above written, and unless sooner terminated as hereinafter provided,
this Agreement shall remain in effect for a period of two years from the date
first above written. Thereafter, this Agreement shall continue in effect from
year to year, subject to the termination provisions and all other terms and
conditions thereof, so long as such continuation shall be specifically approved
at least annually by (i) the Board of Trustees/Directors or by vote of a
majority of the outstanding voting
5
<PAGE>
securities of each series of the Fund and,(ii) by the vote, cast in person at
a meeting called for the purpose of voting on such approval, of a majority of
the Trustees/Directors of the Fund who are not parties to this Agreement or
interested persons of any such party. The Distributor shall furnish to the
Fund, promptly upon its request, such information as may reasonably be
necessary to evaluate the terms of this Agreement or any extension, renewal or
amendment hereof.
9. Amendment or Assignment of Agreement. This Agreement may not be
------------------------------------
amended or assigned except as permitted by the 1940 Act, and this Agreement
shall automatically and immediately terminate in the event of its assignment.
10. Termination of Agreement. This Agreement may be terminated by
------------------------
either party hereto, without the payment of any penalty, on not more than upon
60 days' nor less than 30 days' prior notice in writing to the other party;
provided, that in the case of termination by the Fund such action shall have
been authorized by resolution of a majority of the Trustees/Directors of the
Fund who are not parties to this Agreement or interested persons of any such
party, or by vote of a majority of the outstanding voting securities of each
series of the Fund.
11. Miscellaneous. The captions in this Agreement are included for
-------------
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Nothing herein contained shall be deemed to require the Fund to take
any action contrary to its Agreement and Declaration of Fund or By-Laws, or any
applicable statutory or regulatory requirement to which it is subject or by
which it is bound, or to relieve or deprive the Board of Trustees/Directors of
the Fund of responsibility for and control of the conduct of the affairs of the
Fund.
12. Definition of Terms. Any question of interpretation of any term
-------------------
or provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the 1940 Act shall be resolved by reference to such
term or provision of the 1940 Act and to interpretation thereof, if any, by the
United States courts or, in the absence of any controlling decision of any such
court, by rules, regulations or orders of the SEC validly issued pursuant to
the 1940 Act. Specifically, the terms "vote of a majority of the outstanding
voting securities", "interested persons," "assignment," and "affiliated
person," as used in Paragraphs 8, 9 and 10 hereof, shall have the meanings
assigned to them by Section 2(a) of the 1940 Act. In addition, where the effect
of a requirement of the 1940 Act reflected in any provision of this Agreement
is relaxed by a rule, regulation or order of the SEC, whether of special or of
general application, such provision shall be deemed to incorporate the effect
of such rule, regulation or order.
13. Compliance with Securities Laws. The Fund represents that it is
-------------------------------
registered as
6
<PAGE>
an open-end management investment company under the 1940 Act, and agrees that
it will comply with all the provisions of the 1940 Act and of the rules and
regulations thereunder. The Fund and the Distributor each agree to comply with
all of the applicable terms and provisions of the 1940 Act, the 1933 Act and,
subject to the provisions of Section 4(d), all applicable "Blue Sky" laws. The
Distributor agrees to comply with all of the applicable terms and provisions of
the 1934 Act.
14. Notices. Any notice required to be given pursuant to this
-------
Agreement shall be deemed duly given if delivered or mailed by registered mail,
postage prepaid, to the Distributor at 4455 E. Camelback Road, Suite 261-E,
Phoenix, Arizona, 85018 or to the Fund at [ADDRESS].
15. Governing Law. This Agreement shall be governed and construed in
-------------
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers designated below on the date first written above.
[TRUST/COPORATION]
By:
-----------------------------------------
Name:
Title:
FIRST FUND DISTRIBUTORS, INC
By:
-----------------------------------------
Name:
Title:
7
EXHIBIT H(2)
ADMINISTRATION AGREEMENT
------------------------
AGREEMENT dated as of May 29, 1998 by and between SAMCO Fund, Inc., a
Maryland corporation (the "Fund"), and Investors Capital Services, Inc. a
Delaware corporation ("Investors Capital").
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and offers shares of common stock, par value $.001 per share, which have been
registered under the Securities Act of 1933, as amended;
WHEREAS, Investors Capital is a service company which provides management,
administrative and other services to investment companies and other entities;
and
WHEREAS, the Fund desires to retain Investors Capital to render certain
management and administrative services, including supervision of certain third
party vendors to the Fund.
NOW, THEREFORE, in consideration of the above premises and of other good
and valuable consideration the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Appointment of Administrator
----------------------------
The Fund hereby appoints Investors Capital to act as administrator to the
Fund for the period and on the terms set forth in this Agreement. This
appointment applies to each existing series of the Fund, as well as any future
series provided (i) the Fund does not object to Investors Capital in writing on
any basis or (ii) Investors Capital does not object to the Fund in writing on
the basis of the capabilities of Investors Capital. Investors Capital accepts
such appointment and agrees to render the services and provide, at its own
expense, the office space, furnishings and equipment, and the personnel
required by it to perform the services on the terms and for the compensation
herein provided.
As further delineated on SCHEDULE A of this Agreement, which may be
amended by the parties from time to time, Investors Capital shall provide for,
or assist in managing and supervising all aspects of, the general day-to-day
business activities and operations of the Fund except for investment advisory
services, custodial, transfer agency, dividend disbursing, accounting, auditing
and legal services. Investors Capital shall discharge such responsibilities
subject to the supervision and direction of the Fund's officers and Board of
Directors, and in compliance with the objectives, policies and limitations set
forth in the Fund's registration statement, Articles of Incorporation, By-Laws
and applicable laws and regulations. All agreements with third parties shall be
subject to review and approval by the Fund's executive officers or Board of
Directors.
<PAGE>
Investors Capital will perform all of its obligations under this Agreement
in accordance with applicable law, including without limitation laws against
discrimination.
2. Representation and Warranties of Investors Capital
--------------------------------------------------
Investors Capital represents and warrants to the Fund that:
A. Investors Capital is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has full power and
authority, corporate and otherwise, to consummate the transactions contemplated
by this Agreement. Investors Capital is duly qualified to carry out its
business, and is in good standing, in the State of New York.
B. The Board of Directors and stockholders of Investors Capital have taken
all action required by law and Investors Capital's Certificate of Incorporation
and By-Laws to authorize the execution and delivery of this Agreement by
Investors Capital and the consummation on behalf of Investors Capital of the
transactions contemplated by this Agreement. This Agreement constitutes a
legal, valid and binding obligation of Investors Capital enforceable in
accordance with its terms. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
result in a breach of, or constitute a default under, or with lapse of time or
giving of notice or both will result in a breach of or constitute a default
under, or otherwise give any party thereto the right to terminate (a) any
mortgage, indenture, loan or credit agreement or any other agreement or
instrument evidencing indebtedness for money borrowed to which Investors
Capital is a party or by which Investors Capital or any of its properties is
bound or affected, or pursuant to which Investors Capital has guaranteed the
indebtedness of any person, or (b) any lease, license, contract or other
agreement to which Investors Capital is a party or by which Investors Capital
or any of its properties is bound or affected. Neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will result in, or require, the creation or imposition of
any mortgage, deed or trust, pledge, lien, security interest, or other charge
or encumbrance of any nature upon or with respect to any of the properties now
or hereafter owned by Investors Capital.
C. Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will violate any provision
of the Certificate of Incorporation or By-Laws of Investors Capital.
D. Except such as have been obtained and as are in full force and effect
and subject to no dispute, claim or challenge, no permit, license, franchise,
approval, authorization, qualification or consent of, registration or filing
with, or notice to, any governmental authority is required in connection with
the execution and delivery by Investors Capital of this Agreement or in
connection with the consummation by Investors Capital of any transactions
contemplated by this Agreement,
2
<PAGE>
and no such permit, license, franchise, approval, authorization, qualification
or consent of, registration or filing with, or notice to any federal, state or
local governmental authority is required in connection with Investors Capital's
business or operations as currently conducted or as currently contemplated to
be conducted. Investors Capital has conducted its business and operations in
compliance with all applicable laws and regulations.
3. Duties of the Fund
-------------------
A. The Fund will deliver to Investors Capital copies of each of the
following documents and will deliver to Investors Capital all future amendments
and supplements, if any:
(1) A certified copy of the Articles of Incorporation of the Fund as
amended and currently in effect;
(2) A copy of the Fund's By-Laws as amended and currently in effect,
certified by the Secretary of the Fund;
(3) A copy of the resolution of the Fund's Board of Directors authorizing
this Agreement, certified by the Secretary of the Fund;
(4) The Fund's registration statement on Form N-1A as filed with, and
declared effective by, the U.S. Securities and Exchange Commission ("SEC"), and
all amendments thereto;
(5) Each resolution of the Board of Directors of the Fund authorizing the
original issue of its shares, certified by the Secretary of the Fund;
(6) Copies of the resolutions of the Fund's Board of Directors
authorizing: (i) certain officers and employees of Investors Capital to give
instructions to the Fund's custodian and transfer agent as required by
agreements with such parties, and (ii) certain officers and employees of
Investors Capital to sign checks and pay expenses on behalf of the Fund,
certified by the Secretary of the Fund;
(7) A copy of the current Investment Advisory Agreement between the Fund
and Seix Investment Advisors, Inc.;
(8) A copy of the Custodian Agreement and Transfer Agency Agreement
relating to the Fund; and
(9) Such other certificates, documents or opinions which Investors Capital
may, in its reasonable discretion, deem necessary or appropriate in the proper
performance of its duties.
3
<PAGE>
B. The Fund will cooperate in providing Investors Capital with all
information reasonably necessary to permit Investors Capital to perform its
duties hereunder.
C. The Fund certifies to Investors Capital that, as of the close of
business on the date of this Agreement, it has authorized capitalization of
2,500,000,000 shares of its common stock, $.001 par value (the "Shares"), and
agrees that Investors Capital will be promptly notified from time to time when
the Fund takes corporate action to increase the number of authorized shares,
including restoring redeemed shares held in its treasury to the status of
authorized and unissued shares.
4. Services To Be Obtained Independently By the Fund
-------------------------------------------------
The Fund shall, at its own expense, provide for any of its own:
A. Organizational expenses;
B. Services of an independent accountant;
C. Services of outside legal counsel (including such counsel's review of
the Fund's registration statement, proxy materials and other reports and
materials prepared by Investors Capital under this Agreement);
D. Services contracted for by the Fund directly from parties other than
Investors Capital acting as administrator (or subcontracted for by Investors
Capital on behalf of the Fund, subject to review and approval by the Fund's
executive officers or Board of Directors);
E. Trading operations and brokerage fees, commissions and transfer taxes
in connection with the purchase and sale of securities for its investment
portfolio;
F. Investment advisory services;
G. Taxes, insurance premiums and other fees and expenses applicable to its
operation;
H. Costs incidental to any meeting of shareholders including, but not
limited to, legal and accounting fees, proxy filing fees and costs incidental
to the preparation, printing and mailing of any proxy materials;
I. Cost incidental to Directors' meetings, including fees and expenses of
Directors;
J. The salary and expenses of any officer or employee of the Fund who is
not also an officer or employee of Investors Capital;
4
<PAGE>
K. Custodian and depository banks, and all services related thereto;
L. Costs incidental to the preparation, printing and distribution of its
registration statement and any amendments thereto, and shareholder reports,
including printing setup, printing and mailing costs;
M. All registration fees and filing fees required under the securities
laws of the United States and state regulatory authorities;
N. Fidelity bond and director's and officers' liability insurance;
O. Record retention costs of third parties;
P. Distribution fees pursuant to any distribution plan, if and when
adopted pursuant to Rule 12b-1 under the 1940 Act; and
Q. Litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Fund's business.
5. Price, Charges and Instructions
-------------------------------
In consideration of the services rendered and expenses assumed by
Investors Capital pursuant to this Agreement, the Fund will pay Investors
Capital a monthly fee at the annual rate of 0.15 % of the Fund's average daily
net assets, subject to a minimum fee of $50,000 for the first twelve (12)
months after the Fund commences investment operations. Such sum shall be paid
in monthly installments by the tenth day of each month for the previous month.
For purposes of this Section 5, the "average daily net assets" of the Fund
shall mean the average of the values placed on the Fund's net assets on each
day pursuant to the applicable provisions of the Fund's Registration Statement,
as amended.
In addition, Investors Capital shall be reimbursed for the reasonable cost
of any and all forms, including blank checks and proxies, used by it in
communicating with shareholders, directors, Fund management, Fund vendors, or
any regulatory agencies on behalf of the Fund, or especially prepared for use
in connection with its obligations hereunder, as well as the reasonable cost of
postage, telephone, telex and telecopy used in communicating with shareholders,
directors, Fund management, Fund vendors or any regulatory agencies on behalf
of the Fund, travel-related expenses when incurred on official Fund business
and microfilm used each year to record the previous year's transactions in
shareholder accounts and computer tapes used for reasonable permanent storage
of records, permanent storage costs for hard copy Fund records and reasonable
5
<PAGE>
cost of insertion of materials in mailing envelopes by outside firms. Prior to
ordering any forms in such supply as it estimates will be adequate for more
than two years' use, Investors Capital shall obtain the written consent of the
Fund. All forms for which Investors Capital has received reimbursement from the
Fund shall be and remain the property of the Fund until used.
At any time Investors Capital may apply to any executive officer of the
Fund or executive officer of the Fund's investment adviser for instructions,
and may consult with legal counsel for the Fund, if consented to by an
executive officer of the Fund at the expense of the Fund, with respect to any
matter arising in connection with the services to be performed by Investors
Capital under this Agreement and Investors Capital shall not be liable and
shall be indemnified by the Fund for any action taken or omitted by it in good
faith in reliance upon such instructions or upon the opinion of such counsel.
Investors Capital shall be protected and indemnified in acting upon any paper
or document of the Fund reasonably believed by it to be genuine and to have
been signed by the proper person or persons and shall not be held to have
notice of any change of authority of any representative of the Fund, until
receipt of written notice thereof from the Fund, unless an officer of Investors
Capital shall have actual knowledge of such change. Investors Capital shall
also be protected and indemnified, except where a stop order is in effect, in
recognizing transfer documents which Investors Capital reasonably believes to
bear the proper manual or facsimile signature of the officers of the Fund, and
the proper counter-signatures of any present or former transfer agent.
6. Limitation of Liability and Indemnification
-------------------------------------------
A. Investors Capital shall provide its services in a professional manner
customarily provided by leading mutual fund administration companies. Investors
Capital shall be responsible for the performance of only such duties as are set
forth or contemplated herein or contained in instructions given to it by the
Fund which are not contrary to this Agreement. Investors Capital shall have no
liability for any loss or damage resulting from the performance or
non-performance of its duties hereunder unless caused by or resulting from the
gross negligence, bad faith or willful misconduct of Investors Capital, its
officers or employees or the violation by any of such persons of this
Agreement. In no event, however, shall Investors Capital be liable for any
consequential damages including, without limitation, any taxes, penalties,
litigation expenses or other loss or damage resulting from the failure by other
persons providing services to the Fund to conform to applicable legal or
regulatory requirements, or to the Fund's investment policies and restrictions
as set forth in its registration statement, notwithstanding that Investors
Capital, in the course of carrying out its monitoring duties hereunder, failed
to discover such failure.
B. The Fund shall indemnify and hold Investors Capital harmless from all
loss, cost, damage and expense, including reasonable expenses for counsel,
incurred by it resulting from any claim, demand, action or suit in connection
with any action or omission by it in the performance of its duties hereunder,
or as a result of acting upon any instructions reasonably believed by it to
have
6
<PAGE>
been executed by a duly authorized officer of the Fund, provided that this
indemnification shall not apply to actions or omissions of Investors Capital,
its officers or employees in cases of its or their own gross negligence or
misconduct or the violation by any of such persons of this Agreement.
C. The Fund will be entitled to participate at its own expense in the
defense, or, if it so elects, to assume the defense of any suit brought to
enforce any liability subject to the indemnification provided above, and if the
Fund elects to assume the defense, such defense shall be conducted by counsel
chosen by the Fund. In the event the Fund elects to assume the defense of any
such suit and retain such counsel, Investors Capital or any of its affiliated
persons, named as defendant or defendants in the suit, may retain additional
counsel at its or their own expense, except that, if the Fund shall have
specifically authorized the retaining of such counsel, then the reasonable
expenses for such counsel shall be reimbursed by the Fund.
7. Confidentiality
---------------
Investors Capital agrees on behalf of itself and its directors, officers
and employees to treat confidentially and as proprietary information of the
Fund all records and other information relative to the Fund and its prior,
present or potential shareholders, and not to use such records and information
for any purpose other than performance of its responsibilities hereunder,
except (i) after prior notification to and approval in writing by the Fund,
which approval shall not be unreasonably withheld, when requested to divulge
such information by duly constituted authorities and may not be withheld where
Investors Capital may be exposed to civil or criminal contempt proceedings for
failure to comply, and Investors Capital shall disclose all such records and
information to the investment adviser to the Fund when so requested by the
adviser or the Fund.
8. Compliance With Governmental Rules and Regulations
--------------------------------------------------
The Fund assumes full responsibility for complying with all applicable
requirements of the Securities Act of 1933, the 1940 Act and the Securities
Exchange Act of 1934, all as amended, and any laws, rules and regulations of
governmental authorities having jurisdiction, except to the extent that
Investors Capital specifically assumes any such obligations under the terms of
this Agreement.
Investors Capital shall maintain and preserve for the period prescribed,
such records relating to the services to be performed by Investors Capital
under this Agreement as are required pursuant to the 1940 Act and the
Securities Exchange Act of 1934, all as amended, and the rules and regulations
thereunder. All such records shall at all times remain the respective
properties of the Fund, shall be readily accessible during normal business
hours and shall be promptly surrendered upon the termination of this Agreement
or otherwise on written request. Records shall be surrendered in usable machine
readable form.
7
<PAGE>
9. Status of Investors Capital
---------------------------
Investors Capital shall be deemed to be an independent contractor and
shall, unless otherwise expressly provided herein or authorized by the Fund
from time to time, have no authority to act or represent the Fund in any way or
otherwise be deemed an agent of the Fund.
Nothing herein shall be deemed to limit or restrict Investors Capital's
right or that of any of its affiliates or employees, to engage in any other
business or to devote time and attention to the administration or other related
aspects of any other registered investment company or to render services of any
kind to any other corporation, firm, individual or association.
10. Printed Matter Concerning the Fund or Investors Capital
-------------------------------------------------------
Neither the Fund nor Investors Capital shall publish and circulate any
printed matter which contains any reference to the other party without its
prior written approval, excepting such printed matter as refers in accurate
terms to Investors Capital's appointment under this Agreement and/or any other
agreement between the Fund and Investors Capital, and excepting as may be
required by applicable laws or regulations.
11. Term, Amendment and Termination
-------------------------------
This Agreement may be modified or amended, from time to time, by mutual
agreement between the parties hereto. This Agreement shall remain in effect
from the date hereof, and shall expire on November 3, 2002. After the
expiration date, this Agreement shall automatically be renewed annually
thereafter, and may be terminated thereafter, by either party on 120 days'
prior written notice. Upon termination of the Agreement, the Fund shall pay to
Investors Capital such compensation as may be due under the terms hereof on the
date of such termination.
12. Default
- -------------
Should either party materially breach, materially neglect or materially
fail, in whole or in part, to perform its duties and/or observe its obligations
hereunder (a "Default"), that party shall be in Default hereunder (the
"Defaulting Party"). The other party hereto may give written notice to the
Defaulting Party, and if such Default fails to be remedied within thirty (30)
days after receipt of such written notice, then the party giving such notice
may terminate this Agreement by thirty (30) days' written notice of such
termination to the Defaulting Party. Such termination shall not affect any
rights or obligations of either party arising from, or relating to, such
Default under the terms hereof.
Not in limitation of the foregoing, the Fund may terminate this Agreement
prior to November 3, 2002 for reasons other than a Default by Investors
Capital, upon ninety (90) days'
8
<PAGE>
written notice to Investors Capital and payment of liquidated damages to
Investors Capital. The liquidated damages amount shall equal the aggregate of
monthly fees due or paid to Investors Capital under this Agreement for the last
three (3) months prior to receipt of notice of termination. Upon payment of
such sum, Investors Capital shall have no further claim to fees due under this
Agreement for periods after the termination date.
The provisions of this Section 12 shall not limit either party's
termination rights under Section 11 of this Agreement. The provisions of
Section 11 and this Section 12 shall govern the method of termination of this
Agreement, but shall not limit any other rights or remedies of either party in
the event of any breach of this Agreement by the other party.
13. Notices
-------
Any notice or other communication authorized or required hereunder shall
be in writing or by confirming telegram, cable, telex or facsimile sending
device. Notice shall be addressed to the Fund at c/o Investors Capital
Services, Inc., 600 Fifth Avenue, 26th Floor, New York, NY 10020, Attention:
Mr. Paul Brook, Treasurer; and to Investors Capital Services, Inc., 600 Fifth
Avenue, 26th Floor, New York, New York 10020, Attention: Carla E. Dearing,
President. Either party may designate a different address by notice to the
other party. Any such notice or other communication shall be deemed given when
actually received.
14. Non-Assignability
-----------------
This Agreement shall not be assigned by either of the parties hereto
without the prior consent in writing of the other party. Any purported
assignment in violation of this Agreement shall be void and of no effect.
15. Successors
----------
This Agreement shall be binding on and shall inure to the benefit of the
Fund and Investors Capital, and their respective successors and permitted
assigns.
16. Governing Law
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first above
written.
ATTEST: SAMCO FUND, INC.
/s/ Peter J. Bourke By: /s/ Christina Seix
-------------------------------- ----------------------------
Peter J. Bourke, Assistant Secretary Christina Seix, Chairman
ATTEST: INVESTORS CAPITAL SERVICES, INC.
/s/ William E. Vastardis By: /s/ Carla E. Dearing
- ------------------------------ ----------------------------
William E. Vastardis Carla E. Dearing
10
<PAGE>
SCHEDULE A
TO
ADMINISTRATION AGREEMENT
BETWEEN
SAMCO FUND, INC.
AND
INVESTORS CAPITAL SERVICES, INC.
Pursuant to the attached Administration Agreement, Investors Capital Services,
Inc. ("Investors Capital") will provide the following services to SAMCO Fund,
Inc. (the "Fund"):
1) SUPERVISION OF ALL THIRD PARTY VENDORS TO THE FUND -
Investors Capital will supervise the quality of service and
competitiveness of fees of all Fund vendors, except the
investment adviser. Investors Capital will develop day-to-day
working relationships with existing vendors as well as
evaluate alternative vendor candidates, as reasonably
requested by the Fund's officers. The vendors that Investors
Capital will be responsible for include:
a) Transfer and Dividend Disbursing Agent, Fund
-----------------------------------------------------
Accounting Agent and Custodian - Investors Capital
------------------------------
will make necessary efforts to ensure that all
legally required functions are performed at a high
quality level and at a competitive fee. Investors
Capital will strive to enhance the service levels as
well as reporting capabilities.
b) Outside Counsel, Independent Accountant and Other
----------------------------------------------------
Vendors -
-------
Investors Capital will coordinate communications
with all other Fund vendors with a goal of enhancing
service levels while controlling costs.
c) Insurance Providers - Investors Capital will identify
-------------------
potential insurance providers and evaluate the
comparative terms and costs of fidelity bond, E&O and
D&O coverage. Investors Capital will continually
monitor the appropriateness of the chosen providers
and coverage.
2) MONITOR AND REPORT ON COMPLIANCE - Investors Capital will
monitor the Fund's compliance with the regulations of
Sub-Chapter M of the Internal Revenue Code with particular
emphasis on the asset diversification, income and short-short
tests. Investors Capital will monitor the Fund's compliance
with the securities laws, particularly the Investment Company
Act of 1940, with particular emphasis on the diversification
and voting stock tests. Investors Capital will monitor all
Prospectus, Statement of Additional Information and
Board-imposed compliance limitations.
11
<PAGE>
Investors Capital will report compliance status in all
required areas in a format and at a frequency mutually
agreed upon between Fund officers and directors and
Investors Capital, including a quarterly review and
reporting pursuant to the Fund's Code of Ethics policy.
3) PREPARE AND MONITOR ANNUAL COMPLIANCE AND ADMINISTRATIVE
CALENDAR - Investors Capital will prepare an annual calendar
which will include key dates in the operations of the Fund,
such as Board and Audit Committee meetings and mailings,
filing dates, compliance monitoring and other mutually agreed
upon events. Investors Capital will monitor the calendar and
report on status of activity on a regular basis to Fund
officers.
4) BOARD OF DIRECTORS' MEETINGS - Investors Capital will prepare
and mail all necessary Resolutions, Agenda, Powers of
Attorney and other material in advance of each Board meeting,
and will prepare and mail all Board written consents.
Investors Capital will do a presentation to the Board of the
status of all administrative and operations functions at each
meeting. Investors Capital will coordinate other Vendor
presentations to the Board when required. Investors Capital
will pay all required directors' fees and expenses, from the
Fund's accounts maintained with its custodian, on a timely
and accurate basis.
5) MONTHLY FUND MANAGEMENT REPORTING - Investors Capital will
collect, review and summarize all Vendor reports. Investors
Capital will prepare a monthly administrative report which
will include the financial statements, a compliance summary,
expense ratio calculations, portfolio turnover ratio
calculations and performance calculations, and will prepare
other reasonably requested activity reports.
6) SHAREHOLDER REPORTS - Investors Capital will prepare the
semi-annual and annual financial reports and footnotes
required by Securities and Exchange Commission ("SEC")
regulation for reporting to the shareholders and the SEC.
Investors Capital will coordinate with the Investment Adviser
and Independent Accountants to obtain the appropriate letters
to the shareholders. Investors Capital will coordinate the
printing of the reports and mail to the shareholders as well
as file copies with the appropriate regulatory authorities.
Investors Capital will respond to any shareholder inquiries
under the direction of the Fund's officers.
7) TAX FILINGS - Investors Capital will prepare for Fund officer
review all necessary tax returns and file such returns on a
timely basis with the appropriate regulatory authorities.
These will include all Federal corporate and excise tax
returns, state
12
<PAGE>
returns, and 1099 MISC returns for directors fees, and if
required, for fees to third party vendors.
8) SEC FILINGS - Investors Capital will prepare for Fund officer
review all necessary filings and make such filings on a
timely basis with the SEC. These will include Form N-SAR,
Rule 24e-2 and 24f-2 filings, proxy materials, post-effective
amendments to Form N-1A and any other SEC filings.
9) BLUE SKY MONITORING AND FILINGS - Investors Capital will
monitor Blue Sky compliance in each jurisdiction and perform
all administrative functions, including the making of
necessary filings on behalf of the Fund, under the
supervision of the Fund's Distributor. Investors Capital will
report the status of the Fund's registration of each series
of Shares on a regular basis to the Fund's directors and
officers.
10) OTHER FILINGS - On behalf of the Fund, Investors Capital will
prepare and file any other required documents with the
appropriate jurisdiction, including abandoned property
reports and state corporate law filings.
11) HOLDINGS RECONCILIATIONS - Investors Capital will review
holdings reconciliations between the Investment Adviser and
the Custodian/Fund Accounting Agent. All discrepancies will
be researched and reported promptly to the Fund's officers or
directors.
12) PROXY STATEMENT AND ANNUAL MEETING - Investors Capital will
prepare with the assistance of Fund counsel all proxy
materials, file them with the SEC and mail them to the
shareholders. If it is necessary for the Fund to have an
Annual Meeting, Investors Capital will set up the Annual
Meeting, prepare the agenda and script, tabulate and solicit
votes if requested to do so by the Fund's officers or
directors and perform the duties of the inspector of
elections.
13) FUND EXPENSES - Investors Capital will review all Fund
expenses and strive to create efficiencies and economies of
scale wherever possible. Investors Capital, under supervision
and direction of Fund officers, will pay all Fund bills in an
accurate and timely manner from the Fund's accounts
maintained with its custodian.
14) NEW SERIES REGISTRATION - Investors Capital will assist
management in the preparation of and filing with the SEC of
all new Series or other changes to the Fund's prospectus and
Statement of Additional Information.
15) GENERAL - Investors Capital will make its staff available to
Fund management to assist in or to respond to any reasonable
request for Fund- or industry-related
13
<PAGE>
information. If requested, Investors Capital will make its
facilities available for meetings of the Fund's officers or
directors. Investors Capital will assist in any examination
of the Fund by the SEC, Internal Revenue Service or any other
regulatory agency.
14
Exhibit m(2)
SAMCO FUND, INC.
SERVICES AND DISTRIBUTION PLAN
------------------------------
The following Services and Distribution Plan (the "Plan") has been adopted
in accordance with Rule 12b-1 (the "Rule") under the Investment Company Act of
1940, as amended (the "1940 Act"), for the Class B shares of the SAMCO
Intermediate Fixed Income Fund (the "Shares" or the "Portfolio"), a portfolio
of SAMCO Fund, Inc., a corporation organized under the laws of the State of
Maryland operating as an open-end management investment company (the "Fund").
The Plan has been approved by a majority of the Fund's directors, including a
majority of the directors who are not interested persons of the Fund and who
have no direct or indirect financial interest in the operation of the Plan (the
"non-interested directors"), cast in person at a meeting called for the purpose
of voting on such Plan. Such approval included a determination that in the
exercise of reasonable business judgment and in light of their fiduciary
duties, there is a reasonable likelihood that the Plan will benefit the
shareholders of the Shares. The Plan has been approved by a vote of at least a
majority of the Portfolio's outstanding voting securities, as defined in the
1940 Act.
The provisions of the Plan are:
SECTION 1. ANNUAL FEES.
------------
(a) Service Fee. The Portfolio will pay to the distributor of its
------------
shares, AMT Capital Securities, L.L.C. ("AMT Capital"), a corporation organized
under the laws of the State of Maryland (the "distributor"), on behalf of the
Portfolio, a service fee under the Plan at the annual rate of 0.00% of the
average daily net assets of the Shares (the "Service Fee").
(b) Distribution Fee. In addition to the Service Fee, the Portfolio
-----------------
will pay to the distributor, on behalf of the Shares, a distribution fee
under the Plan at the annual rate of 0.25% of the average daily net assets
of the Shares, or such lesser fee as determined from time to time by the
Fund's Board of Directors (the "Distribution Fee").
(c) Payment of Fees. The Service Fee and Distribution Fee will be
----------------
calculated daily and paid monthly by the Portfolio at the annual rates
indicated above. The distributor may make payments to assist in the
distribution of the Shares out of any portion of any fee paid to the
distributor or any of its affiliates by the Portfolio, its past profits or any
other sources available to it.
SECTION 2. EXPENSES COVERED BY THE PLAN.
-----------------------------
(a) The Service Fee payable with respect to the Shares is in return for
certain administrative and shareholder services provided by the distributor to
the investors that purchase the Shares. Such administrative and shareholder
services may include processing purchase, exchange and redemption requests from
customers and placing orders with Portfolio's transfer agent; processing
dividend and distribution payments from the Shares on behalf of customers;
<PAGE>
providing information periodically to customers showing their positions in the
Shares; responding to inquiries from customers concerning their investment in
the Shares; arranging for bank wires; and providing such other similar services
as may be reasonably requested.
The distributor may retain all or a portion of the payments made to it
pursuant to the Plan for the provision of services to holders of the Shares
pursuant to Dealer Agreements entered into by the distributor in its sole
discretion and may make payments to third parties to assist in providing the
services provided to the Shares. All expenses incurred by the Fund in
connection with the Dealer Agreements and the implementation of this Plan with
respect to the Shares shall be borne entirely by the holders of the Shares.
(b) The Distribution Fee with respect to the Shares may be used by the
distributor to cover advertising, marketing and distribution expenses intended
to result in the sale of the Shares, including, without limitation,
compensation for the distributor's initial expense of paying its investment
representatives or introducing brokers a commission upon the sale of the Shares
and accruals for interest on the amount of the foregoing expenses that exceed
the Distribution Fee. In addition, the Service Fee with respect to the Shares
may be used by the distributor primarily to pay its financial consultants or
introducing brokers for servicing shareholder accounts, including a continuing
fee to each such financial consultant or introducing broker, which fee shall
begin to accrue immediately after the sale of such shares.
(c) The amount of the Distribution Fee and Service Fee payable by the
Portfolio under Section 1 hereof is not related directly to expenses incurred
by the distributor and this Section 2 does not obligate the Portfolio to
reimburse the distributor for such expenses. The Distribution Fee and Service
Fee set forth in Section 1 will be paid by the Portfolio to the distributor
unless and until the Plan is terminated or not renewed with respect to the
Portfolio or Class thereof, and any distribution or service expenses incurred
by the distributor on behalf of the Shares in excess of payments of the
Distribution and Service Fees specified in Section 1 hereof which the
distributor has accrued through the termination date are the sole
responsibility and liability of the distributor and not an obligation of the
Portfolio.
SECTION 3. APPROVAL OF SHAREHOLDERS.
-------------------------
The Plan will not take effect with respect to the Shares, and no fee will
be payable in accordance with Section 1 of the Plan, until the Plan has been
approved by a vote of at least a majority of the outstanding voting securities
of the Shares.
SECTION 4. APPROVAL OF DIRECTORS.
----------------------
Neither the Plan nor any related agreements will take effect with respect
to the Shares until approved by a majority of both (a) the full Board of
Directors of the Fund and (b) those Directors who are not interested persons of
the Fund and who have no direct or indirect financial interest in the operation
of the Plan or in any agreements related to it (the "Independent Directors"),
cast in person at a meeting called for the purpose of voting on the Plan and
the related agreements.
<PAGE>
SECTION 5. CONTINUANCE OF THE PLAN.
------------------------
The Plan will continue in effect from year to year with respect to the
Shares, so long as its continuance is specifically approved at least annually
by the vote of the Fund's Board of Directors in the manner described in Section
4 above.
SECTION 6. TERMINATION.
------------
The Plan may be terminated with respect to the Shares at any time, without
the payment of any penalty, by the vote of a majority of the outstanding voting
securities (as so defined) of the Portfolio or by a vote of the Independent
Directors, in any such event on sixty days' notice to the distributor.
SECTION 7. AMENDMENTS.
-----------
The Plan may not be amended with respect to the Shares so as to increase
materially the amounts of the fees described in Section 1 above, unless the
amendment is approved by a vote of the holders of at least a majority of the
outstanding voting securities of the Shares. No material amendment to the Plan
may be made unless approved by the Fund's Board of Directors in the manner
described in Section 4 above.
SECTION 8. SELECTION OF CERTAIN DIRECTORS.
-------------------------------
While the Plan is in effect, the selection and nomination of the Fund's
Directors who are not interested persons of the Fund will be committed to the
discretion of the Directors then in office who are not interested persons of
the Fund.
SECTION 9. WRITTEN REPORTS.
----------------
In each year during which the Plan remains in effect, any person
authorized to direct the disposition of monies paid or payable by the Portfolio
pursuant to the Plan or any related agreement will prepare and furnish to the
Fund's Board of Directors, and the Board will review, at least quarterly,
written reports complying with the requirements of the Rule which set out the
amounts expended under the Plan and the purposes for which those expenditures
were made.
SECTION 10. PRESERVATION OF MATERIALS.
--------------------------
The Fund will preserve copies of the Plan, any agreement relating to the
Plan and any report made pursuant to Section 9 above, for a period of not less
than six years (the first two years in an easily accessible place) from the
date of the Plan, agreement or report.
SECTION 11. MEANINGS OF CERTAIN TERMS.
--------------------------
As used in the Plan, the terms "interested person" and "majority of the
outstanding voting securities" will be deemed to have the same meaning that
those terms have under the 1940 Act
<PAGE>
and the rules and regulations under the 1940 Act, subject to any exemption that
may be granted to the Fund under the 1940 Act by the Securities and Exchange
Commission.
SECTION 12. FILING OF ARTICLES OF INCORPORATION.
------------------------------------
The Fund represents that a copy of its Articles of Incorporation, as
amended from time to time (the "Articles of Incorporation"), is on file with
the Secretary of the State of Maryland.
SECTION 13. LIMITATION OF LIABILITY.
------------------------
The obligations of the Fund under this Plan will not be binding upon any
of the Directors of the Fund, shareholders of the Shares, nominees, officers,
employees or agents, whether past, present or future, of the Fund,
individually, but are binding only upon the assets and property of the Shares,
as provided in the Articles of Incorporation. The execution and delivery of
this Plan have been authorized by the Directors of the Fund, and signed by an
authorized officer of the Fund, acting as such, and neither the authorization
by the Directors nor the execution and delivery by the officer will be deemed
to have been made by any of them individually or to impose any liability on any
of them personally, but will bind only the property of the Shares as provided
in the Articles of Incorporation. No other portfolios or classes of shares of
the Fund will be liable for any claims against the Shares.
SECTION 14. EFFECTIVE DATES.
----------------
The Plan will become effective with respect to the Shares upon the date
the Shares first commence its investment operations.
SECTION 15. GOVERNING LAW.
--------------
This Plan shall be governed by, and construed and interpreted in
accordance with, the law of the State of New York.
<PAGE>
This Plan and the terms and provisions thereof are hereby accepted and
agreed to by the undersigned, as evidenced by their execution thereof.
Dated: June , 1999
SAMCO FUND, INC.
By: /s/ William E. Vastardis
----------------------------
Name: William E. Vastardis
Title: Treasurer
AMT CAPITAL SECURITIES, L.L.C.
By: /s/ Arthur Goetchius
------------------------
Name: Arthur Goetchius
Title: President
