<PAGE>
As filed with the Securities and Exchange Commission on June 23, 1998
Registration Nos. 333-47467
811-08689
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
______________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
1
PRE-EFFECTIVE AMENDMENT NO. ____ [X]
POST-EFFECTIVE AMENDMENT NO. ____ [_]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. ____ [_]
(Check appropriate box or boxes.)
______________________
THE NEVIS FUND, INC.
(Exact Name of Registrant as Specified in Charter)
1119 St. Paul Street
Baltimore, MD 21202
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code: (410) 385-2645
David R. Wilmerding, III
President
The Nevis Fund, Inc.
1119 St. Paul Street
Baltimore, MD 21202
(Name and Address of Agent for Service)
Copies to:
Alan C. Porter, Esq.
Piper & Marbury L.L.P.
1200 Nineteenth Street, N.W.
Washington, DC 20036
Approximate Date of Proposed Offering: As soon as practicable after the
effective date of this Registration Statement.
DECLARATION PURSUANT TO RULE 24F-2
The Registrant hereby elects to register an indefinite number of shares of
Common Stock, par value $.01 per share, pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended.
The Registrant hereby amends the Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), shall
determine.
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<PAGE>
THE NEVIS FUND, INC.
CROSS REFERENCE SHEET
PART A
<TABLE>
<CAPTION>
Form N-1A Item No. Section in the Prospectus
- ------------------ -------------------------
<S> <C>
1. Cover Page..................................................... Cover Page
2. Synopsis....................................................... Fees and Expenses
3. Condensed Financial Information................................ Performance Information
4. General Description of Registrant.............................. Investment Objectives and
Policies; General Information
5. Management of the Fund......................................... Management
5A. Management's Discussion of Fund Performance.................... Not applicable
6. Capital Stock and Other Securities............................. Dividends and Taxes; General
Information
7. Purchase of Securities Being Offered........................... Purchase and Redemption of
Shares
8. Redemption or Repurchase....................................... Purchase and Redemption of
Shares
9. Pending Legal Proceedings...................................... Not applicable
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
June __, 1998
PROSPECTUS
THE NEVIS FUND, INC.
The Nevis Fund, Inc. (the "Fund") is a no-load mutual fund whose investment
objective is to provide long-term capital appreciation. The Fund seeks to
achieve its investment objective by investing in securities of public companies
experiencing dramatic earnings growth.
This Prospectus sets forth basic information that investors should know
about the Fund prior to investing and should be retained for future reference. A
Statement of Additional Information dated June __, 1998, has been filed with the
Securities and Exchange Commission ("SEC") and is incorporated herein by
reference. The Statement of Additional Information is available upon request and
without charge by calling the Fund at (877) 44 - NEVIS. The SEC also maintains a
Web site (http://www.sec.gov) that contains the Statement of Additional
Information, material incorporated by reference, and other information regarding
the Fund.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
June __, 1998
<PAGE>
SUMMARY
THE FUND
The Nevis Fund, Inc. (the "Fund") is a no-load mutual fund. The investment
objective of the Fund is to provide long-term capital appreciation. The Fund
seeks to achieve its investment objective by investing in securities of public
companies experiencing dramatic earnings growth. See "Investment Objectives and
Policies."
RISKS TO CONSIDER
The Fund invests in equity securities which are subject to market risks
that may cause their prices to fluctuate. Equity securities held by the Fund
may not perform well during certain market cycles and may not respond to general
market movements to the same extent as other securities. Moreover, because the
Fund is a "non-diversified" investment company, its portfolio may be
concentrated in the securities of relatively fewer issuers and, as a result,
shareholders may experience greater fluctuations in the value of their shares.
Thus, the Fund may be more suitable for long-term investors who can bear the
risk of short-term fluctuations. The Fund may invest up to 20% of its total net
assets in foreign securities and, accordingly, an investment in the Fund will be
subject to the risks associated with foreign investments. See "Risks To
Consider."
INVESTMENT ADVISER, ADMINISTRATOR AND DISTRIBUTOR
Nevis Capital Management, Inc. (the "Adviser") is the Fund's investment
adviser. SEI Investments Mutual Fund Services serves as the Fund's
administrator, and SEI Investments Distribution Co. (the "Distributor") is the
distributor of the Fund's shares. See "Management" and "General Information."
PURCHASE AND REDEMPTION OF SHARES
Investors may purchase shares of the Fund by contacting Forum Shareholder
Services, LLC, the Fund's transfer agent (the "Transfer Agent"), on any Business
Day. Shares are sold at their current net asset value without any sales charge.
The minimum initial investment in the Fund is $25,000 (except for Individual
Retirement Accounts and automatic investment plans). Subsequent investments
must be at least $500 (except for automatic investment plans). Shareholders may
redeem all or any portion of their shares at the net asset value next determined
after the Transfer Agent has received a redemption request. Shares redeemed
within 90 days of their purchase shall be subject to a redemption fee equal to
1% of their then current net asset value. The Fund reserves the right to waive
such redemption fee. See "Purchase and Redemption of Shares."
INVESTOR INQUIRIES
Investors with questions regarding the Fund should call (877) 44-NEVIS.
Share purchase and redemption transactions should be made through the Transfer
Agent by calling (888) 263-5597.
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FEES AND EXPENSES
The following table provides a summary of expenses relating to purchases
and sales of Fund shares, and the annual operating expenses of the Fund as a
percentage of average net assets. The expense summary format below was developed
for use by all mutual funds to assist investors in making investment decisions.
Investors should consider this information together with the other important
information included elsewhere in this Prospectus.
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Redemption Fee(1) 1.00%
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees (2) 1.50%
----
Other Expenses After Reimbursement (2) 0.00%
----
Total Fund Operating Expenses (after Expense
Reimbursement Paid) (2) 1.50%
----
1. Shares redeemed within 90 days of their purchase shall be subject to a
redemption fee equal to 1% of their then current net asset value. The Fund
reserves the right to waive such redemption fee. See "Purchase and
Redemption of Shares."
2. Pursuant to an investment management agreement with the Fund, the Adviser
bears all ordinary expenses incurred in the conduct of the Fund's
operations. The Fund bears all extraordinary expenses (as determined by use
of generally accepted accounting principles) incurred in the course of its
business. See "Investment Adviser" in the Statement of Additional
Information.
EXAMPLE
<TABLE>
<CAPTION>
One Year Three Years
-------- -----------
<S> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming (1) 5% annual
return and (2) redemption at the end of each
time period:
$13.00 $41.00
</TABLE>
The expense table and example above are provided to assist investors in
understanding the expenses they will bear directly or indirectly as a
shareholder of the Fund. For more information with respect to the expenses of
the Fund, see "Management." THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
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<PAGE>
PERFORMANCE INFORMATION
PERFORMANCE OF NEVIS CAPITAL MANAGEMENT, INC.
The chart below shows the historical performance of all accounts having
substantially the same investment objectives, policies, and strategies as the
Fund managed by Nevis Capital Management, Inc., the Fund's investment adviser.
The data, calculated on an average annual total return basis, is provided to
illustrate the Adviser's past performance in managing accounts in accordance
with the same investment objectives, policies, and strategies utilized for the
Fund. These accounts consist of separate and distinct portfolios and their
performance is not indicative of or a substitute for the past or future
performance of the Fund. As of the date of this Prospectus, the Fund had not
commenced investment operations and therefore did not have a performance record
of its own.
<TABLE>
<CAPTION>
Year Ended
December 31 Nevis Composite (1) S&P 500 (2) Russell 2000 (3)
----------- ------------------- ----------- ----------------
<S> <C> <C> <C>
1991* 10.2% 8.4% 5.4%
1992 13.0% 7.7% 16.6%
1993 32.3% 10.1% 17.0%
1994 15.8% 1.3% -3.1%
1995 57.4% 37.5% 26.3%
1996 35.0% 23.0% 14.8%
1997 10.1% 33.4% 20.5%
1998 (1st Quarter) 16.2% 13.9% 10.0%
Cumulative Returns
(since 9/30/91) 519.0% 234.2% 166.8%
Compound Annual Returns 28.8% 20.4% 16.3%
(since 9/30/91)
Average Annual Total Returns
One Year 46.5% 48.0% 42.0%
Five Years 32.3% 22.4% 17.7%
</TABLE>
* Period October 1, 1991 through December 31, 1991. On October 1, 1991,
the Adviser commenced the management of accounts that are included in
the Nevis Composite (as hereinafter defined).
1. The Adviser's composite performance data (the "Nevis Composite") was
developed from the aggregate performance of all accounts that are
managed with investment objectives, policies, and strategies sub-
stantially the same as the Adviser will employ in managing the assets
of the Fund. The Nevis Composite includes all accounts for which the
Adviser has full discretionary authority to manage in accordance with
its investment objectives, policies, and strategies. The composite
performance data has been calculated in accordance with recommended
standards of the Association for Investment Management and Research
("AIMR"), which differ from the SEC's method of performance
calculation. Investment advisory fees and other expenses have been
deducted. The fees and expenses deducted from the composite performance
data generally are lower than the expenses incurred by the Fund, and
the composite performance figures would have been lower if they had
been subject to the higher fees and expenses incurred by the Fund. In
addition, if the accounts within the Nevis Composite had been regulated
as investment companies under the federal securities and tax laws, the
composite performance might have been adversely affected by the
diversification requirements, tax restrictions and investment
limitations to which the Fund is subject.
2. The Standard & Poor's Composite Stock Price Index (the "S&P 500") is
composed of 500 selected common stocks, most of which are listed on the
New York Stock Exchange. The S&P 500 assigns relative weightings to the
common stocks included, and the value fluctuates with changes in the
market values of those common stocks.
3. The Russell 2000 Index is composed of the 2,000 smallest companies in
the Russell 3000 Index, representing 7% of the Russell 3000 total
market capitalization. The Russell 3000 Index is composed of 3,000
large U.S. companies ranked by market capitalization, representing
approximately 98% of the U.S. equity market.
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<PAGE>
THE ADVISER'S PERFORMANCE INFORMATION SHOULD BE CONSIDERED IN LIGHT OF THE
FUND'S INVESTMENT OBJECTIVES, POLICIES, AND STRATEGIES, AND MARKET CONDITIONS
DURING THE PERIODS FOR WHICH IT IS REPORTED. HISTORICAL PERFORMANCE INFORMATION
SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF THE FUTURE PERFORMANCE OF THE
FUND.
PERFORMANCE OF THE FUND
The Fund may quote its yield and total return in advertisements and reports to
shareholders and prospective investors. The Fund's performance may also be
compared to that of other mutual funds with similar investment objectives and to
stock or other relevant indices, such as the S&P 500 and the Russell 2000, that
are referenced in the Statement of Additional Information. Standard total
return results reported by the Fund do not take into account recurring and non-
recurring charges for optional services which only certain shareholders elect
and which involve nominal fees.
The Fund's yield is calculated by dividing the net investment income earned by
the Fund over a specified 30-day period, by the average number of shares
entitled to receive dividends, and expressing the result as an annualized
percentage rate based on the net asset value per share at the end of the 30-day
period. The effective yield is calculated similarly but, when annualized, the
income earned by an investment in the Fund is assumed to be reinvested. The
effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
The Fund's average annual total return is computed by determining the average
annual compounded rate of return for a specific period which, when applied to a
hypothetical $1,000 investment in the Fund at the beginning of the period, would
produce the redeemable value of that investment at the end of the period,
assuming reinvestment of all dividends and distributions during the period.
Further information concerning the Fund's yield and total return is included
in the Statement of Additional Information.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of the Fund is to provide long-term capital
appreciation. The Fund seeks to achieve its investment objective by investing
in securities of public companies experiencing dramatic earnings growth. The
investment objective of the Fund is not a fundamental policy and may be changed
after notice to, but without the approval of, the Fund's shareholders. There
can be no assurance that the Fund will achieve its investment objective. The
Fund's share price and investment return will fluctuate, and a shareholder's
investment in the Fund when redeemed may be worth more or less than the original
cost. See "Risks To Consider."
INVESTMENT STRATEGY
The Fund's investment strategy is founded on the belief that over time the
performance of a company's stock will track the growth of its earnings. The
Adviser's goal is to produce equity rates of return for the Fund that are
consistently superior to the S&P 500 by investing in public companies
experiencing dramatic earnings growth. When analyzing the earnings growth of a
company, the Adviser attempts to determine its "real" operating earnings power.
Accordingly, the Adviser is not interested in companies that report
unsustainable earnings growth attributable to investment income, extraordinary
gains or accounting legerdemain. Rather, the Adviser will select investments
for the Fund characterized by businesses that generate high returns on invested
capital and have strong, positive cash flows.
In addition to emphasizing earnings growth, the Fund's investment strategy
demands that the Adviser exhibit sensitivity to valuation when selecting stocks
for the Fund's portfolio. Typically, the Fund expects to pay a price/earnings
multiple no greater than 75% of a company's long-term sustainable growth rate.
The Adviser pays careful attention to a company's capital structure, preferring
companies with conservatively capitalized balance sheets that are self-
financing.
The Adviser's investment professionals function both as security analysts and
portfolio managers. In order for a company to be included in the Fund's
portfolio, the portfolio managers must have firsthand knowledge of its
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<PAGE>
business derived from primary sources. In keeping with this belief, the
Adviser's investment professionals follow an internal discipline which states
that they will not purchase a stock for the Fund before meeting with senior
management of the company. When researching a target company, they compile
thorough quantitative data from 10-Ks, 10-Qs and proxy statements. The Adviser's
investment professionals then add perspective to the numbers by interviewing
company management, suppliers, customers, competitors and research analysts. In
some cases, the companies selected for investment by the Fund will not be
followed by large brokerage firms. This lack of research coverage often results
in the opportunity to purchase securities of outstanding companies at attractive
prices. The Adviser has amassed a solid track record over the last five years in
managing institutional accounts utilizing this investment strategy.
PORTFOLIO INVESTMENTS
Equity Securities. The Fund expects to invest primarily in equity securities
which include common stock as well as securities with characteristics of common
stock, such as preferred stock and securities convertible into common stock.
Rule 144A Securities. Subject to the Fund's limitations on investing in
illiquid securities, the Fund may purchase Rule 144A securities. Rule 144A
securities are restricted securities in that they have not been registered under
the Securities Act of 1933, but they may be traded between certain qualified
institutional investors, including investment companies. The presence or
absence of a secondary market in these securities may affect their value. The
Fund's Board of Directors has established guidelines and procedures for
determining the liquidity of Rule 144A securities.
Money Market Instruments. The Adviser may invest a portion of the Fund's
assets in money market instruments to provide flexibility in meeting redemptions
and paying expenses of the Fund, and in the timing of new investments for the
Fund's portfolio. Money market instruments include U.S. government securities,
obligations of U.S. commercial banks, commercial paper, and repurchase
agreements.
Repurchase Agreements. The Fund may enter into repurchase agreements with
respect to U.S. Treasury securities. In a repurchase agreement, the Fund buys a
security and simultaneously agrees to sell it back at a higher price. In all
cases, the Adviser must find the creditworthiness of the other party to the
transaction to be satisfactory. In addition, all repurchase agreements entered
into by the Fund will be fully collateralized and marked to market daily. In
the event of a default by, or bankruptcy proceedings with respect to, the other
party to the repurchase agreement, the Fund could experience delays in
recovering its cash and a loss to the extent that, in the meantime, the value of
the securities repurchased has decreased.
Hedging Strategies. The Adviser, to the extent permitted by the Fund's
investment policies and restrictions, may buy and sell options on securities,
currencies, futures contracts, and options on such contracts to manage exposure
to changing security prices and currency exchange rates. Some strategies using
these instruments tend to hedge the Fund's investments against price
fluctuations. Other strategies tend to increase market exposure. Hedging
instruments may be used in combination with each other to adjust the risk/return
characteristics of the overall strategy. These strategies may increase the
volatility of the Fund and may involve a small investment of cash relative to
the magnitude of the risk assumed. In addition, the Fund may experience a loss
if the counterparty in the transaction does not perform as promised.
Investment Limitations. The Fund's investment program is subject to a number
of investment restrictions that reflect both self-imposed standards and
regulatory limitations. Restriction 2 is a fundamental policy and may only be
changed with shareholder approval. Restrictions 1, 3 and 4 may be changed by
the Fund's Board of Directors. The Fund will not:
(1) Borrow money other than for temporary or emergency purposes in an
amount not exceeding 10% of the value of its total assets at the time of
such borrowing; provided that, while borrowings by the Fund equaling 5%
or more of its total assets are outstanding, the Fund will not purchase
securities for investment;
(2) Concentrate its investments in any one industry (excluding securities
of the U.S. government and its agencies and instrumentalities);
-6-
<PAGE>
(3) Invest more than 15% of its net assets in illiquid securities,
including repurchase agreements with maturities of greater than seven
days; or
(4) Invest more than 20% of its net assets in foreign securities.
The Statement of Additional Information contains additional information
regarding the Fund's investment policies, including a complete listing of the
investment restrictions applicable to the Fund.
PORTFOLIO TURNOVER
The Fund anticipates that its annual portfolio turnover rate will not
exceed 40%, but the Fund's turnover rate will not be a limiting factor when the
Adviser deems portfolio changes appropriate.
RISKS TO CONSIDER
INVESTMENT IN EQUITY SECURITIES
Investments in equity securities are subject to market risks which may
cause their prices to fluctuate. Accordingly, the Fund may be more suitable for
long-term investors who can bear the risk of short-term fluctuations. Changes
in the value of portfolio securities will not necessarily affect income derived
from those securities but will affect the net asset value of the Fund's shares.
Equity securities held by the Fund may not perform well during certain market
cycles and may not respond to general market movements to the same extent as
other securities. Equity securities of companies with relatively small market
capitalizations frequently have experienced greater price volatility than equity
securities of larger companies, and they may be expected to do so in the future.
The reliance of smaller companies on limited product lines, markets, financial
resources, or other factors may make them more susceptible to setbacks and
downturns. As a result, their stock prices may be particularly volatile.
Moreover, if a special situation is involved, such as a new product or service,
or an acquisition or merger with favorable implications, there is the risk that
it will not develop as favorably as expected. For example, a new product or
service may not enjoy the anticipated market acceptance, or an acquisition or
merger may be blocked.
NON-DIVERSIFICATION
Investing in the Fund, which is a "non-diversified" company under the
Investment Company Act of 1940, may entail greater risk than investing in a
diversified mutual fund. The Fund's portfolio may be concentrated in the
securities of relatively fewer issuers and, as a result, shareholders may
experience greater fluctuations in the value of their shares. Any economic,
political, or regulatory development affecting the value of a security held in
the Fund's portfolio could have a greater impact on the net asset value of the
Fund than would be the case if the Fund's investments were diversified among a
greater number of issuers.
INVESTMENT IN FOREIGN SECURITIES
Investing in foreign securities involves considerations and possible risks
not typically associated with investing in domestic securities. The values of
foreign investments are affected by changes in currency rates or exchange
control regulations, application of foreign tax laws, including withholding
taxes, changes in governmental administration, or economic or monetary policy
(in the United States or abroad), or changed circumstances in dealings between
nations. Costs are incurred in connection with conversions between various
currencies. In addition, foreign brokerage commissions are generally higher
than in the United States, and foreign securities markets may be less liquid,
more volatile, and less subject to governmental supervision than in the United
States. Investments in foreign countries could be affected by other factors not
present in the United States, including expropriation, confiscatory taxation,
lack of uniform accounting and auditing standards, potential difficulties in
enforcing contractual obligations, and the possibility of extended settlement
periods.
YEAR 2000 ISSUE
The Fund depends on the smooth functioning of computer systems in almost
every aspect of its business. Like other mutual funds, businesses and
individuals around the world, the Fund could be adversely affected if the
computer systems used by its service providers do not properly process dates on
and after January 1, 2000 and distinguish between the year 2000 and the year
1900. The Fund has made inquiry of its service providers to determine whether
they expect to have their computer systems adjusted for the year 2000
transition, and is seeking assurances from each service provider that it expects
its system to accommodate the year 2000 transition without material adverse
consequences to the Fund. While it is likely that such assurances will be
obtained, the Fund and its shareholders may experience losses if these
assurances prove to be incorrect or as a result of year 2000 computer
difficulties experienced by issuers of portfolio securities or custodians,
banks, broker-dealers or others with which the Fund does business.
-7-
<PAGE>
MANAGEMENT
The business and affairs of the Fund are managed under the supervision of
its Board of Directors. The Fund's Board of Directors approves all significant
agreements between the Fund and persons or companies furnishing services to the
Fund, including the agreements with the Fund's investment adviser, distributor,
administrator, transfer agent and custodian. The management of the Fund's day-
to-day operations is delegated to its officers, investment adviser, and
administrator, subject always to the general supervision of the Board of
Directors.
INVESTMENT ADVISER
Nevis Capital Management, Inc. (the "Adviser") serves as investment adviser
of the Fund pursuant to an investment management agreement with the Fund. Under
the agreement, the Adviser manages the Fund's portfolio in accordance with its
investment objective, policies, and restrictions, makes investment decisions for
the Fund, places orders for the purchase and sale of securities and other
financial instruments on behalf of the Fund, and employs portfolio managers and
securities analysts who provide research services to the Fund. For the services
provided and the expenses assumed by the Adviser to the Fund under the
agreement, the Adviser is entitled to receive an investment advisory fee from
the Fund, computed daily and paid monthly, at the annual rate of 1.50% of the
Fund's average daily net assets.
The Adviser is a registered investment adviser which as of March 31, 1998,
had approximately $720 million in assets under management. The Adviser, which
was founded in 1991 by David R. Wilmerding, III and Jon C. Baker, provides
investment advice to high-net-worth individuals and institutional investors with
respect to investments in equity securities. Although the Adviser has not
previously served as investment adviser to a registered investment company, its
investment team has experience in managing client accounts in accordance with
the same strategy utilized for the Fund. The Adviser utilizes the same
research, analytical models, and professional staff in managing the Fund and its
other client accounts.
The Adviser is a Maryland corporation with its principal office located at
1119 St. Paul Street, Baltimore, Maryland 21202.
Officers and employees of the Adviser are permitted to engage in personal
securities transactions subject to restrictions and procedures set forth in the
code of ethics adopted by the Fund.
PORTFOLIO MANAGERS
David R. Wilmerding, III and Jon C. Baker, the Adviser's President and
Executive Vice-President, respectively, share primary responsibility for
managing the Fund's assets. Mr. Wilmerding has more than 14 years of investment
experience and has been a portfolio manager with the Adviser since July 1991.
Mr. Baker has more than 11 years of investment experience and has been a
portfolio manager with the Adviser since September 1991.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Board of Directors of the Fund,
the Adviser is responsible for placing orders for securities transactions.
Transactions involving equity securities will normally be conducted through
broker-dealers who charge a commission for their services. The Fund has no
obligation to enter into securities transactions with any particular broker-
dealer, issuer, underwriter, or other entity. In placing orders for the Fund,
it is the policy of the Adviser to obtain the most favorable execution. Where
such execution may be obtained from more than one firm, securities transactions
may be directed at higher commission rates to firms that provide research to the
Adviser. If more than one account managed by the Adviser is purchasing or
selling the same security, the orders may be aggregated in the interest of
achieving the most favorable execution.
ADMINISTRATOR
SEI Investments Mutual Fund Services (the "Administrator"), One Freedom
Valley Drive, Oaks, Pennsylvania 19456, serves as the Fund's administrator
pursuant to an administration agreement with the Fund. The Administrator
provides certain fund accounting and administrative services to the Fund,
including, among other services, accounting relating to the Fund and its
investment transactions, and computation of the net asset value of the Fund.
The
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<PAGE>
Administrator does not have any responsibility or authority for the management
of the assets of the Fund, the determination of its investment policies, or for
any matter pertaining to the distribution of its shares.
As compensation for the services and facilities provided by the
Administrator to the Fund, the Fund has agreed to pay a fee, computed daily and
paid monthly, at the annual rate of 0.12% of the first $100 million of the
average daily net assets of the Fund, 0.10% of the next $100 million of such
assets, and 0.08% of such assets in excess of $200 million (subject to a minimum
annual fee of $90,000) and to reimburse the Administrator for its out-of-pocket
expenses.
DISTRIBUTOR
Shares of the Fund are distributed through SEI Investments Distribution Co.
(the "Distributor"), One Freedom Valley Drive, Oaks, Pennsylvania 19456, the
principal underwriter and distributor of the Fund. The Distributor, a wholly-
owned subsidiary of SEI Investments Company, is a registered broker-dealer and
member firm of the National Association of Securities Dealers, Inc. No
compensation is paid to the Distributor for distribution services for the shares
of the Fund.
PURCHASE AND REDEMPTION OF SHARES
Investors may purchase and redeem shares of the Fund directly by contacting
the Transfer Agent at: The Nevis Fund, Inc., P.O. Box 446, Portland, ME 04112,
by mail, wire transfer, or through Automated Clearing House ("ACH") transfer.
Shareholders may place purchase and redemption orders by telephone at (888) 263-
5597. When market conditions are extremely busy, it is possible that investors
may experience difficulties placing orders by telephone and may wish to place
orders by mail. Purchases and redemptions of shares of the Fund may be made on
any day on which the Federal Reserve Banks are open for business, except days on
which the New York Stock Exchange is closed (a "Business Day"). Shares of the
Fund are offered only to residents of states in which such shares are eligible
for purchase.
MINIMUM INVESTMENTS
The minimum initial investment in the Fund, generally, is $25,000.
Subsequent investments, generally, must be at least $500. Lower minimums for
initial and subsequent investments apply for automatic investments through the
Fund's Systematic Investment Plan, as more fully described below, and for
investments of tax-sheltered Individual Retirement Account ("IRA") funds. The
minimum initial investment for an IRA is $2,000. Currently, there is no charge
for establishing an IRA account, although there is an annual maintenance fee of
$20. The Fund reserves the right to accept smaller purchases at its sole
discretion.
If the value of a shareholder account falls below $25,000 because of
redemptions, the Fund will notify the shareholder, and if the account value
remains below $25,000 for a continuous 60-day period, the shares in such account
will be subject to redemption by the Fund. Shares will not be redeemed
involuntarily as a result of a decline in account value due solely to a decline
in the Fund's net asset value. The Fund reserves the right to modify or
terminate the involuntary redemption features of the shares at any time upon 60
days' notice to shareholders.
PURCHASES BY MAIL
An account may be opened by mailing a check or other negotiable bank draft
(payable to The Nevis Fund, Inc.) for $25,000 or more, together with a completed
Account Application to: The Nevis Fund, Inc., P.O. Box 446, Portland, ME 04112.
Subsequent investments may also be mailed directly to the Transfer Agent. All
purchases made by check should be in U.S. dollars and made payable to The Nevis
Fund, Inc. Third party checks, credit card checks, and cash will not be
accepted. When purchases are made by check, redemption proceeds will be
forwarded only upon collection of payment for the shares purchased, which may
take up to 15 days from the date of purchase.
PURCHASES BY WIRE TRANSFER
INITIAL PURCHASES. Before making an initial investment by wire, an
investor must first telephone (888) 263-5597 to be assigned an account number.
The investor's name, account number, taxpayer identification number or Social
Security number, and address must be specified in the wire. In addition, the
investor should promptly forward a completed Account Application to the Transfer
Agent at: The Nevis Fund, Inc., P.O. Box 446, Portland, ME 04112.
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<PAGE>
Shareholders having an account with a commercial bank that is a member of
the Federal Reserve System may purchase shares of the Fund by requesting their
bank to transmit funds by wire to: First Union National Bank; ABA # 031000011
for Account Number 1421559309; Further Credit: The Nevis Fund, Inc. The
shareholder's name and account number must be specified in the wire.
SUBSEQUENT PURCHASES. Additional investments may be made at any time
through the wire procedures described above, which must include the
shareholder's name and account number The investor's bank may impose a fee for
investments by wire.
PURCHASE BY AUTOMATED CLEARING HOUSE ("ACH")
This service allows the purchase of additional shares through an electronic
transfer of money from a checking or savings account. When an additional
purchase is made by telephone, the Transfer Agent will automatically debit the
pre-designated bank account for the desired amount. Shareholders may call (888)
263-5597 to request an ACH transaction.
SYSTEMATIC INVESTMENT PLAN
Shareholders may also buy shares of the Fund through the Fund's systematic
investment plan. Under this plan, shareholders may arrange for automatic
monthly, quarterly, semi-annual, or annual investments in the Fund of $50 or
more by authorizing Forum Shareholder Services, LLC, the Fund's transfer agent,
to transfer funds from their respective checking accounts. The minimum initial
investment under the Fund's Systematic Investment Plan is $15,000.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders of the Fund may elect to make systematic withdrawals of at
least $50 from their Fund account if such shareholders are purchasing or already
own shares of the Fund with a net asset value of $25,000 or more. Under this
plan, shareholders may arrange systematic withdrawals on a monthly, quarterly,
semi-annual or annual basis.
GENERAL INFORMATION REGARDING PURCHASES
A purchase order will be effective as of the day received by the Transfer
Agent if the Transfer Agent receives the order and payment before 4:00 p.m.,
Eastern Time. Payment may be made by check or readily available funds. The
purchase price of shares of the Fund is the daily net asset value per share next
determined after a purchase order is received. Purchases will be made in full
and fractional shares of the Fund calculated to three decimal places. The Fund
will not issue certificates representing shares of the Fund.
The Fund reserves the right to reject a purchase order when it is
determined that it is in the best interest of the Fund and/or its shareholders
to do so.
REDEMPTIONS
Redemption orders received by the Transfer Agent prior to 4:00 p.m.,
Eastern Time, on any Business Day will be effective that day. The redemption
price is the net asset value per share next determined after a redemption
order is received. Shares redeemed within 90 days of their purchase shall be
subject to a redemption fee equal to 1% of their then current net asset value.
The Fund reserves the right to waive such redemption fee. See "Purchase and
Redemption of Shares." Payment for redeemed shares will be made as promptly as
possible and, in any event, within seven days after the redemption order is
received. Redemption proceeds, however, are not paid unless any check used for
investment has been cleared by the shareholder's bank, which may take up to 15
calendar days. Shareholders may not close their accounts by telephone.
To protect shareholders and the Fund against fraud, signatures on certain
requests must have a signature guarantee. Requests must be made in writing and
include a signature guarantee for any of the following transactions: (1) any
endorsement on a share certificate; (2) written instruction to redeem shares
whose value exceeds $50,000; (3) instructions to change a shareholder's record
name; (4) redemption in an account in which the account address or account
registration has changed within the last 30 days; (5) redemption proceeds to be
sent to other than the address of record, preauthorized bank account, or
preauthorized brokerage firm account; (6) redemption proceeds to be paid to
someone other than the record owners or to an account with a different
registration; or (7) change of automatic investment or redemption, dividend
election, telephone redemption option election or any other option election in
connection with the shareholder's account. A signature guarantee may be obtained
from domestic banks or trust companies, brokers, dealers, clearing agencies, or
savings associations who are participants in a Medallion Program recognized by
the Securities Transfer Association. Please note that a notary public stamp or
seal is not acceptable.
Shareholders may receive redemption payments in the form of a check or by
Federal Reserve or ACH wire transfer. There is no charge for having a check for
redemption proceeds mailed. A wire charge up to $10 may be deducted from
the amount of a Federal Reserve wire redemption payment made at the request of a
shareholder. Shareholders cannot redeem shares of the Fund by Federal Reserve
wire on federal holidays restricting wire transfers. The Fund does not charge
for ACH wire transactions; however, such transactions will not be posted to a
shareholder's bank account until the second Business Day following the
transaction.
Shareholders are granted telephone redemption privileges automatically.
Neither the Fund nor the Transfer Agent will be responsible for the authenticity
of the redemption instructions received by telephone if it reasonably believes
those instructions are genuine. The Transfer Agent will employ reasonable
procedures to confirm that telephone instructions are genuine, and may be liable
for losses resulting from unauthorized or fraudulent telephone transactions if
it does not employ those procedures.
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<PAGE>
The right of redemption may be suspended or the date of payment of
redemption proceeds postponed during certain periods as set forth in the
Statement of Additional Information.
NET ASSET VALUE
The net asset value per share of the Fund is determined by dividing the
total market value of the Fund's investments and other assets, less any
liabilities, by the total outstanding shares of the Fund. Net asset value per
share is determined on each Business Day as of the close of regular trading on
the New York Stock Exchange, which normally occurs at 4:00 p.m., Eastern Time.
The Fund will use a pricing service to provide market quotations. Portfolio
securities for which reliable market values are not available are valued at
their fair values determined in accordance with procedures established and
monitored by the Board of Directors of the Fund.
DIVIDENDS AND TAXES
DIVIDENDS
The Fund's policy is to distribute substantially all of its investment
company taxable income and net capital gain (net long-term capital gain in
excess of net short-term capital loss), if any, in December of each year. The
Fund's investment company taxable income consists of all taxable income other
than the excess, if any, of net long-term capital gain over net short-term
capital loss, reduced by deductible expenses of the Fund.
Unless a shareholder elects payment by check, all dividends and capital
gain distributions, if any, will be reinvested in additional Fund shares at net
asset value as of the reinvestment date. Shareholders may elect to terminate
automatic reinvestment by giving written notice to the Transfer Agent (at the
address listed in this Prospectus) prior to the Record Date on which dividends
or distributions will be paid.
TAXES
The Fund intends to qualify for the special tax treatment afforded
regulated investment companies under the Internal Revenue Code so that it will
be relieved of federal income tax on its investment company taxable income and
net capital gain distributed to shareholders. In addition, the Fund expects to
make sufficient distributions prior to the end of each calendar year to avoid
liability for federal excise tax.
Dividends from the Fund's investment company taxable income are taxable to
shareholders as ordinary income (whether received in cash or in additional
shares) to the extent of the Fund's earnings and profits. Distributions of net
capital gain that are designated by the Fund as capital gain dividends are
taxable to shareholders as long-term capital gain, regardless of how long
shareholders have held their shares and regardless of whether the distributions
are received in cash or in additional shares. Only a portion of the dividends
paid by the Fund is expected to qualify for the dividends received deduction
available to corporate shareholders. The Fund provides shareholders annually
with information regarding the federal income tax status of its dividends and
distributions.
The net asset value of the Fund's shares will be reduced by the amount of
any dividend or distribution on the record date for the distribution. An
investor who purchases shares immediately prior to the record date will pay the
full net asset value for the shares and will receive a distribution which,
although in effect a return of capital to that shareholder, will be taxable as
described above.
The sale or redemption of Fund shares is a taxable event for the
shareholder.
Shareholders should consult their tax advisors regarding specific questions
as to federal, state, and local income taxes. The Statement of Additional
Information contains additional information regarding taxes.
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<PAGE>
GENERAL INFORMATION
DESCRIPTION OF SHARES
The Fund is an open-end, non-diversified management investment company
incorporated under the laws of the State of Maryland. Each share of the Fund
has one vote and is entitled to dividends and distributions when and if declared
by the Fund's Board of Directors. In the event of liquidation or dissolution of
the Fund, each share would be entitled to its pro rata portion of the Fund's
assets after all debts and expenses have been paid.
As of the date of this Prospectus, all shares of the Fund have been
classified as Common Stock. Under the charter of the Fund, the Board of
Directors is authorized to establish "series" of shares of capital stock, each
of which would evidence interests in a separate portfolio of securities, and
separate classes of shares of each series. Different classes of the Fund's
shares of any series may be offered to certain investors. The Board of
Directors of the Fund may add additional series or classes of shares in the
future. All classes of a particular series would share a common investment
objective and portfolio of investments; however, the net asset values per share
of the classes could differ to the extent there are different fees and expenses
applicable to the classes. Additional information concerning the capital stock
of the Fund may be obtained by calling (877) 44-NEVIS.
ANNUAL MEETINGS
Unless required under applicable Maryland law, the Fund does not expect to
hold annual meetings of shareholders. However, shareholders of the Fund retain
the right, under certain circumstances, to request that a meeting of
shareholders be held for the purpose of considering the removal of a director
from office, and if such a request is made, the Fund will assist with the
shareholder communications in connection with the meeting.
SHAREHOLDER REPORTS
The Fund furnishes shareholders with semi-annual reports containing
information about the Fund and its operations, including a list of investments
held in the Fund's portfolio and financial statements. The annual financial
statements will be audited by the Fund's independent accountants, Arthur
Andersen LLP.
OFFICERS AND DIRECTORS OF THE FUND
David R. Wilmerding, III* President and Director
Jon C. Baker* Senior Vice-President, Treasurer, Secretary
and Director
Joseph R. Hardiman Director
Charles E. Noell Director
_____
* Messrs. Wilmerding and Baker are "interested persons" of the Fund within the
meaning of the Investment Company Act of 1940.
CUSTODIAN
First Union National Bank, 530 Walnut Street, Mezzanine Level,
Philadelphia, PA 19106 serves as custodian of the Fund, and holds cash,
securities, and other assets of the Fund as required by the Investment Company
Act of 1940.
TRANSFER AGENT
Forum Shareholder Services, LLC, 3 Canal Plaza, Portland, Maine 04101 (the
"Transfer Agent"), serves as transfer agent and dividend paying agent for the
Fund's shares.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, 1601 Market Street, Philadelphia, PA 19103, has been
selected as independent public accountants for the Fund.
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<PAGE>
LEGAL COUNSEL
Piper & Marbury L.L.P., Baltimore, Maryland, serves as legal counsel to the
Fund.
INVESTOR INQUIRIES
Inquiries regarding the Fund should be directed as follows: The Nevis Fund,
Inc., c/o SEI Investments Mutual Fund Services, 530 East Swedesford Road, Wayne,
PA 14087. Shareholders may call the Fund at (877) 44-NEVIS. Share purchase and
redemption transactions should be made through the Transfer Agent by calling
(888) 263-5597.
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<PAGE>
================================================================================
No person is authorized to give any information or to make any representation
other than as contained in this Prospectus, and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Fund or the Distributor. This Prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any of the securities offered hereby
by any person in any jurisdiction in which it is unlawful to make such an offer
or solicitation.
Table of Contents
-----------------
Page
----
Summary
Fees and Expenses
Performance Information
Investment Objectives and Policies
Risks To Consider
Management
Purchase and Redemption of Shares
Dividends and Taxes
General Information
THE NEVIS FUND, INC.
Prospectus
June __, 1998
================================================================================
<PAGE>
THE NEVIS FUND, INC.
CROSS REFERENCE SHEET
Part B
<TABLE>
<CAPTION>
Section in Statement of
Form N-1A Item No. Additional Information
- ------------------ ----------------------
<S> <C>
10. Cover Page................................................................ Cover Page
11. Table of Contents......................................................... Cover Page
12. General Information and History........................................... General Information
13. Investment Objectives and Policies........................................ Investment Policies and
Practices; Investment
Restrictions; Portfolio
Transactions and Brokerage
14. Management of the Fund.................................................... Management
15. Control Persons and Principal Holders of Securities....................... Management
16. Investment Advisory and Other Services.................................... Management; Investment Adviser;
Administrator; General Information
17. Brokerage Allocation and Other Practices.................................. Portfolio Transactions and
Brokerage
18. Capital Stock and Other Securities........................................ Description of Capital Stock
19. Purchase, Redemption and Pricing of Securities Being Offered.............. Valuation of Portfolio
Securities; Redemption of Shares
20. Tax Status................................................................ Taxation
21. Underwriters.............................................................. Distributor
22. Calculation of Performance Data........................................... Performance Information
23. Financial Statements...................................................... Financial Statements
</TABLE>
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Statement of Additional Information and the related prospectus
shall not constitute an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under securities laws of any such State.
Subject to Completion
June __, 1998
THE NEVIS FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
June __, 1998
This Statement of Additional Information is not a prospectus but
provides additional information that should be read in conjunction with the
Prospectus dated June __, 1998 including any supplements thereto. To obtain
additional copies of the Prospectus, please call (888) 44-NEVIS.
TABLE OF CONTENTS
-----------------
Page
----
General Information
Investment Policies and Practices
Investment Restrictions
Portfolio Transactions and Brokerage
Calculation of Net asset Value
Redemption of Shares
Taxation
Management
Investment Adviser
Administrator
Distributor
Performance Information
Description of Capital Stock
Experts
Financial Statements
<PAGE>
GENERAL INFORMATION
The Nevis Fund, Inc. (the "Fund") an open-end, non-diversified
management investment company. Under the rules and regulations of the
Securities and Exchange Commission (the "SEC"), all mutual funds are required to
furnish prospective investors with certain information regarding the activities
of the fund being considered for investment. Important information concerning
the Fund is included in the Prospectus which may be obtained without charge from
the Fund. Some of the information required to be in this Statement of
Additional Information is also included in the Prospectus. To avoid unnecessary
repetition, references are made to related sections of the Prospectus.
As described in the Prospectus, the investment objective of the Fund
is to provide long-term capital appreciation. The Fund seeks to achieve its
investment objective by investing in securities of public companies experiencing
dramatic earnings growth.
The Fund was incorporated under the laws of the State of Maryland on
February 20, 1998. As of the date of this Statement of Additional Information,
the Fund had not yet commenced operations.
The name "Nevis" has been licensed to the Fund by the Adviser. Under
this arrangement, the Fund is required to cease using the name "Nevis" upon the
occurrence of certain events, including termination of the Adviser as investment
adviser of the Fund.
The Fund filed a registration statement with the SEC registering as an
open-end, non-diversified management investment company under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), and registering
an indefinite number of shares of the Fund under the Securities Act of 1933, as
amended (the "Securities Act"). The Prospectus and this Statement of Additional
Information, which constitute part of the registration statement, do not contain
all the information set forth in the registration statement, and the exhibits
and schedules to the registration statement filed with the SEC. Copies of the
registration statement, including those items omitted from this Statement of
Additional Information, may be examined and copied at the public reference
facilities maintained by the SEC at 450 Fifth Street, N.W., Washington DC 20549
and at the SEC's Regional Offices at 7 World Trade Center, 13th Floor, New York,
NY 10048 and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
IL 60661-2511. The SEC also maintains a Web site (http://www.sec.gov) which
contains the registration statement and other information regarding the Fund.
INVESTMENT POLICIES AND PRACTICES
The Fund's investment objective is to provide long term capital
appreciation. The Fund seeks to achieve its investment objective by investing
in securities of public companies experiencing dramatic earnings growth. There
can be no assurance that the Fund will achieve its investment objective. The
following information supplements, and should be read in conjunction with, the
discussion in the Prospectus of the investment objective and policies of the
Fund.
FOREIGN INVESTMENTS
The Fund may invest in foreign securities denominated in foreign
currencies. Foreign investments can involve significant risks in addition to
the risks inherent in U.S. investments. The value of securities denominated in
or indexed to foreign currencies, and of dividends and interest from such
securities, can change significantly when foreign currencies strengthen or
weaken relative to the U.S. dollar. Foreign securities markets generally have
less trading volume and less liquidity than U.S. markets, and prices on some
foreign markets can be highly volatile. Many foreign countries lack uniform
accounting and disclosure standards comparable to those applicable to U.S.
companies, and it may be more difficult to obtain reliable information regarding
an issuer's financial condition and
B-2
<PAGE>
operations. In addition, the costs of foreign investing, including withholding
taxes, brokerage commissions, and custodial costs, are generally higher than for
U.S. investments.
Foreign markets may offer less protection to investors than U.S. markets.
Foreign issuers, brokers, and securities markets may be subject to less
government supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may involve increased
risks in the event of a failed trade or the insolvency of a broker-dealer, and
may involve substantial delays. It may also be difficult to enforce legal
rights in foreign countries.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments adverse to
the interests of U.S. investors, including the possibility of expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. There may be a greater possibility of
default by foreign governments or foreign government-sponsored enterprises.
Investments in foreign countries also involve a risk of local political,
economic or social instability, military action or unrest, or adverse diplomatic
developments. There is no assurance that the Adviser will be able to anticipate
these potential events or counter their effects.
The considerations noted above generally are intensified for investments in
developing countries. Developing countries may have relatively unstable
governments, economies based on only a few industries, and securities markets
that trade a small number of securities.
The Fund may invest in foreign securities that impose restrictions on
transfer within the United States or to U.S. persons. Although securities
subject to transfer restrictions may be marketable abroad, they may be less
liquid than foreign securities of the same class that are not subject to such
restrictions.
HEDGING STRATEGIES
FUTURES TRANSACTIONS. The Fund may use futures contracts and options on
such contracts for bona fide hedging purposes within the meaning of regulations
promulgated by the Commodity Futures Trading Commission ("CFTC"). The Fund may
also establish positions for other purposes provided that the aggregate initial
margin and premiums required to establish such positions will not exceed 5% of
the liquidation value of the Fund after taking into account unrealized profits
and unrealized losses on any such instruments.
FUTURES CONTRACTS. When the Fund purchases a futures contract, it agrees
to purchase a specified underlying instrument at a specified future date. When
the Fund sells a futures contract, it agrees to sell the underlying instrument
at a specified future date. The price at which the purchase and sale will take
place is fixed when the Fund enters into the contract. Some currently available
futures contracts are based on specific securities, such as U.S. Treasury bonds
or notes, and some are based on indices of securities prices, such as the S&P
500. A futures contract can be held until its delivery date, or can be closed
out prior to its delivery date if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase the Fund's exposure to positive and negative
price fluctuations in the underlying instrument, much as if it had purchased the
underlying instrument directly. When the Fund sells a futures contract, by
contrast, the value of its futures position will tend to move in a direction
contrary to the market. Selling futures contracts, therefore, will tend to
offset both positive and negative market price changes, much as if the
underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the contract
is held until the delivery date. However, both the purchaser and seller are
required to deposit "initial margin" with a futures broker, known as a futures
commission merchant
B-3
<PAGE>
("FCM"), when the contract is entered into. Initial margin deposits are
typically equal to a percentage of the contract's value. If the value of either
party's position declines, that party will be required to make additional
"variation margin" payments to settle the change in value on a daily basis. The
party that has a gain may be entitled to receive all or a portion of this
amount. Initial and variation margin payments do not constitute purchasing
securities on margin for purposes of the Fund's investment limitations. In the
event of the bankruptcy of a FCM that holds margin on behalf of the Fund, the
Fund may be entitled to return of margin owed to it only in proportion to the
amount received by the FCM's other customers, potentially resulting in losses to
the Fund.
PURCHASING PUT AND CALL OPTIONS RELATING TO SECURITIES OR FUTURES
CONTRACTS. By purchasing a put option, the Fund obtains the right (but not the
obligation) to sell the option's underlying instrument at a fixed price (strike
price). In return for this right, the Fund pays the current market price for
the option (known as the option premium). Options have various types of
underlying instruments, including specific securities, indices of securities
prices, and futures contracts. The Fund may terminate its position in a put
option it has purchased by allowing it to expire or by exercising the option.
If the option is allowed to expire, the Fund will lose the entire premium it
paid. If the Fund exercises the option, it completes the sale of the underlying
instrument at the strike price. The Fund may also terminate a put option
position by closing it out in the secondary market at its current price, if a
liquid secondary market exists.
The buyer of a typical put option can expect to realize a gain if the price
of the underlying security falls substantially. However, if the underlying
instrument's price does not fall enough to offset the cost of purchasing the
option, a put-buyer can expect to suffer a loss (limited to the amount of the
premium paid, plus related transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's strike
price. A call-buyer typically attempts to participate in potential price
increases of the underlying instrument with risk limited to the cost of the
option if security prices fall. At the same time, the buyer can expect to
suffer a loss if the price of the underlying instrument does not rise
sufficiently to offset the cost of the option.
WRITING PUT AND CALL OPTIONS. When the Fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In return for
receipt of the premium, the Fund assumes the obligation to pay the strike price
for the option's underlying instrument if the other party to the option chooses
to exercise it. When writing an option on a futures contract the Fund will be
required to make margin payments to a FCM as described above for futures
contracts. The Fund may seek to terminate its position in a put option it
writes before exercise by closing out the option in the secondary market at its
current price. If the secondary market is not liquid for a put option the Fund
has written, however, the Fund must continue to be prepared to pay the strike
price while the option is outstanding, regardless of price changes, and must
continue to set aside assets to cover its position.
If the price of the underlying instrument rises, a put-writer would
generally expect to profit, although its gain would be limited to the amount of
the premium it received. If the price of the underlying instrument remains the
same over time, it is likely that the writer will also profit, because it should
be able to close out the option at a lower price. If the price of the
underlying instrument falls, the put-writer would expect to suffer a loss. This
loss should be less than the loss from purchasing the underlying instrument
directly, however, because the premium received for writing the option should
mitigate the effects of the decline.
Writing a call option obligates the Fund to sell or deliver the option's
underlying instrument, in return for the strike price, upon exercise of the
option. The characteristics of writing call options are similar to those of
writing put options, except that writing a call option is generally a profitable
strategy if prices remain the same or fall. Through receipt of the option
premium, a call-writer mitigates the effects of a price decline. At the same
time, because a call-writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is greater,
a call-writer gives up some ability to participate in security price increases.
B-4
<PAGE>
COMBINED POSITIONS. The Fund may purchase and write options in combination
with each other, or in combination with futures contracts or forward contracts,
to adjust the risk and return characteristics of the overall position. For
example, the Fund may purchase a put option and write a call option on the same
underlying instrument, in order to construct a combined position whose risk and
return characteristics are similar to selling a futures contract. Another
possible combined position would involve writing a call option at one strike
price and buying a call option at a lower strike price, in order to reduce the
risk of the written call option in the event of a substantial price increase.
Because combined options positions involve multiple trades, they result in
higher transaction costs and may be more difficult to open and close out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types
of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match the Fund's current or
anticipated investments exactly. The Fund may invest in options and futures
contracts based on securities with different issuers, maturities or other
characteristics than those of the securities in which it typically invests --
for example, by hedging intermediate-term securities with a futures contract on
an index of long-term bond prices, or by hedging stock holdings with a futures
contract on a broad-based stock index such as the S&P 500 -- which involves a
risk that the options or futures position will not track the performance of the
Fund's other investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund's
investments well. Options and futures prices are affected by such factors as
current and anticipated short-term interest rates, changes in volatility of the
underlying instrument, and the time remaining until expiration of the contract,
which may not affect the price of the underlying security the same way.
Imperfect correlation may also result from differing levels of demand in the
options and futures markets and the securities markets, from structural
differences in the trading of options, futures and securities, or from
imposition of daily price fluctuation limits or trading halts. The Fund may
purchase or sell options and futures contracts with a greater or lesser value
than the securities it wishes to hedge or intends to purchase in order to
attempt to compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price changes
in the Fund's options or futures positions are poorly correlated with its other
investments, the positions may fail to produce anticipated gains or may result
in losses that are not offset by gains in other investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance that a
liquid secondary market will exist for any particular options or futures
contract at any particular time. Options may have relatively-low trading volume
and liquidity if their strike prices are not close to the underlying
instrument's current price. In addition, exchanges may establish daily price
fluctuation limits for options and futures contracts, and may halt trading if
the price of an option or futures contract moves upward or downward more than
the limit in a given day. On volatile trading days when the price fluctuation
limit is reached or a trading halt is imposed, it may be impossible for the Fund
to enter into new positions or close out existing positions. If the secondary
market for a contract is not liquid because of price fluctuation limits or
otherwise, it could prevent prompt liquidation of unfavorable positions, and
potentially could require the Fund to continue to hold a position until delivery
or expiration regardless of changes in its value. As a result, the Fund's
access to other assets held to cover its options or futures positions could also
be impaired.
OTC OPTIONS. Unlike exchange-traded options, which are standardized with
respect to the underlying instrument, expiration date, contract size and strike
price, the terms of over-the-counter ("OTC") options (options not traded on
exchanges) generally are established through negotiation with the other party to
the option. While this type of arrangement allows the Fund greater flexibility
to tailor an option to its needs, OTC options generally involve greater credit
risk than exchange-traded options, which are guaranteed by the clearing
organization of the exchanges upon which they are traded. OTC options for which
no liquid secondary market exists will be subject to the Fund's policy regarding
investing in illiquid and restricted securities. See "--Illiquid and Restricted
Securities."
OPTIONS AND FUTURES CONTRACTS RELATING TO FOREIGN CURRENCIES. Currency
futures contracts are similar to forward currency exchange contracts, except
that they are traded on exchanges (and have margin requirements) and are
standardized as to contract size and delivery date. Most currency futures
contracts call for payment or
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delivery in U.S. dollars. The underlying instrument of a currency option may be
a foreign currency, which generally is purchased or delivered in exchange for
U.S. dollars, or may be a futures contract. The purchaser of a currency call
option obtains the right to purchase the underlying currency, and the purchaser
of a currency put option obtains the right to sell the underlying currency.
The uses and risks of currency options and futures contracts are similar to
options and futures contracts relating to securities or securities indices, as
discussed above. The Fund may purchase and sell currency futures and may
purchase and write currency options to increase or decrease its exposure to
different foreign currencies. The Fund may also purchase and write currency
options in conjunction with each other or with currency futures or forward
contracts. Currency futures and option values can be expected to correlate with
exchange rates, but may not reflect other factors that affect the value of the
Fund's investments. A currency hedge, for example, should protect a yen-
denominated security from a decline in the yen, but will not protect the Fund
against a price decline resulting from deterioration in the issuer's
creditworthiness. Because the value of the Fund's foreign-denominated
investments changes in response to many factors other than exchange rates, it
may not be possible to match exactly the amount of currency options and futures
held by the Fund to the value of its investments over time.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. The Fund will comply
with guidelines established by the SEC with respect to coverage of options and
futures strategies by mutual funds, and if the guidelines so require, will set
aside appropriate liquid assets in a segregated custodial account in the amount
prescribed. Securities held in a segregated account cannot be sold while the
futures or option position is outstanding, unless they are replaced with other
appropriate liquid assets. As a result, there is a possibility that segregation
of a large percentage of the Fund's assets could impede portfolio management or
the Fund's ability to meet redemption requests or other current obligations.
ILLIQUID AND RESTRICTED SECURITIES
As discussed in the Prospectus, the Fund may invest up to 15% of the value
of its net assets, measured at the time of investment, in illiquid securities.
Both restricted securities (other than Rule 144A securities that are deemed to
be liquid as discussed below), which may not be resold to the public without
registration under the Securities Act, and securities that, due to their market
or the nature of the security, have no readily available market for their
disposition are considered to be not readily marketable or "illiquid".
Limitations on resale and marketability may have the effect of preventing the
Fund from disposing of a security at the time desired or at a reasonable price.
In addition, in order to resell a restricted security, the Fund might have to
bear the expense and incur the delays associated with registration. In
purchasing illiquid securities, the Fund does not intend to engage in
underwriting activities, except to the extent the Fund may be deemed to be a
statutory underwriter under the Securities Act in purchasing or selling such
securities. Illiquid securities will be purchased for investment purposes only
and not for the purpose of exercising control or management of other companies.
In recent years, a large institutional market has developed for certain
securities that are not registered under the Securities Act. Institutional
investors generally will not seek to sell these instruments to the general
public, but instead will often depend on an efficient institutional market in
which such unregistered securities can readily be resold or on an issuer's
ability to honor a demand for repayment. Therefore, the fact that there are
contractual or legal restrictions on resale to the general public or certain
institutions is not dispositive of the liquidity of these investments.
Rule 144A under the Securities Act establishes a "safe harbor" from the
registration requirements of the Securities Act for resales of certain
securities to qualified institutional buyers. The Fund may invest in Rule 144A
securities which, as disclosed in the Prospectus, are restricted securities
which may or may not be readily marketable. Rule 144A securities are readily
marketable if institutional markets for the securities develop pursuant to Rule
144A and provide both readily ascertainable values for the securities and the
ability to liquidate the securities when liquidation is deemed necessary or
advisable. However, an insufficient number of qualified institutional buyers
interested in purchasing a Rule 144A security held by the Fund could affect
adversely the
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marketability of the security. In such an instance, the Fund might be unable to
dispose of the security promptly or at a reasonable price.
Securities eligible for resale pursuant to Rule 144A will not be subject to
the Fund's limitations on investing in securities that are not readily
marketable, provided that the Adviser determines that a liquid market exists for
such securities under guidelines adopted and monitored by the Fund's Board of
Directors. In making this determination, the Adviser will consider the
following factors, among others: (1) the unregistered nature of a Rule 144A
security; (2) the frequency of trades and quotes for the security; (3) the
number of dealers willing to purchase or sell the security and the number of
additional potential purchasers; (4) dealer undertakings to make a market in the
security; and (5) the nature of the security and the nature of market place
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of transfers).
INVESTMENT COMPANY SHARES
The Fund may invest up to 10% of its total assets in shares of other
investment companies that invest exclusively in those securities in which the
Fund may invest directly. These investment companies typically incur fees that
are separate from those fees incurred directly by the Fund. The Fund's purchase
of such investment company securities results in the layering of expenses, such
that shareholders would indirectly bear a proportionate share of the operating
expenses of such investment companies, including advisory fees, in addition to
paying Fund expenses. Under applicable regulations, the Fund is prohibited from
acquiring the securities of another investment company if, as a result of such
acquisition: (1) the Fund owns more than 3% of the total voting stock of the
other company; (2) securities issued by any one investment company represent
more than 5% of the Fund's total assets; or (3) securities (other than treasury
stock) issued by all investment companies represent more than 10% of the total
assets of the Fund.
MONEY MARKET INSTRUMENTS
From time to time the Fund may purchase high quality, short-term debt
securities, commonly known as money market instruments. These securities
include U.S. government securities, obligations of U.S. commercial banks and
commercial paper.
U.S. government securities include direct obligations of the U.S.
government, which consist of bills, notes and bonds issued by the U.S. Treasury,
and obligations issued by agencies of the U.S. government which, while not
direct obligations of the U.S. government, are either backed by the full faith
and credit of the United States or are guaranteed by the U.S. Treasury or
supported by the issuing agency's right to borrow from the U.S. Treasury.
The obligations of U.S. commercial banks include certificates of deposit
and bankers' acceptances. Certificates of deposit are negotiable interest-
bearing instruments with a specific maturity. Certificates of deposit are
issued by banks in exchange for the deposit of funds and normally can be traded
in the secondary market prior to maturity. Bankers' acceptances typically arise
from short-term credit arrangements designed to enable businesses to obtain
funds to finance commercial transactions. Generally, an acceptance is a time
draft drawn on a bank by an exporter or importer to obtain a stated amount of
funds to pay for specific merchandise. The draft is then "accepted" by a bank
that, in effect, unconditionally guarantees to pay the face value of the
instrument on its maturity date. The acceptance may then be held by the
accepting bank as an earning asset or it may be sold in the secondary market at
the going rate of discount for a specific maturity. Although maturities for
acceptances can be as long as 270 days, most acceptances have maturities of six
months or less.
Commercial paper consists of short-term (usually from one to 270 days)
unsecured promissory notes issued by corporations to finance their current
operations. A variable amount master demand note (which is a type of commercial
paper) represents a direct borrowing arrangement involving periodically
fluctuating rates of interest under a letter agreement between a commercial
paper issuer and an institutional lender pursuant to which the lender may
determine to invest in varying amounts.
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REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with financial institutions,
such as banks and broker-dealers, deemed by the Adviser to be creditworthy under
criteria established by the Board of Directors. A repurchase agreement is a
short-term investment in which the purchaser (i.e., the Fund) acquires ownership
of a debt security and the seller agrees to repurchase the obligation at a
future time and set price, usually not more than seven days from the date of
purchase, thereby determining the yield during the purchaser's holding period.
The value of underlying securities will be at least equal at all times to the
total amount of the repurchase obligation, including the interest factor. The
Fund makes payment for such securities only upon physical delivery or evidence
of book-entry transfer to the account of its custodian bank or its agent. The
underlying securities, which in the case of the Fund must be issued by the U.S.
Treasury, may have maturity dates exceeding one year. The Fund does not bear
the risk of a decline in value of the underlying securities unless the seller
defaults under its repurchase obligation. In the event of a bankruptcy or other
default of a seller of a repurchase agreement, the Fund could experience both
delays in liquidating the underlying securities and loss including (a) possible
decline in the value of the underlying security while the Fund seeks to enforce
its rights thereto, (b) possible subnormal levels of income and lack of access
to income during this period and (c) expenses of enforcing its rights.
REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements. In a reverse
repurchase agreement, the Fund sells a portfolio instrument to another party,
such as a bank or broker-dealer, in return for cash and agrees to repurchase the
instrument at a particular price and time. While a reverse repurchase agreement
is outstanding, the Fund will maintain appropriate liquid assets in a segregated
custodial account to cover its obligation under the agreement. The Fund will
enter into reverse repurchase agreements only with parties whose
creditworthiness has been found satisfactory by the Adviser. These transactions
may increase fluctuations in the market value of the Fund's assets and may be
viewed as a form of leverage.
SECURITIES LENDING
The Fund may lend securities to parties such as broker-dealers or
institutional investors. The market value of loaned securities will not exceed
one-third of the Fund's total assets. Securities lending allows the Fund to
retain ownership of the securities loaned and, at the same time, to earn
additional income. Since there may be delays in the recovery of loaned
securities, or even a loss of rights in collateral supplied should the borrower
fail financially, loans will be made only to parties whose creditworthiness has
been reviewed and found satisfactory by the Adviser.
It is the current view of the SEC that the Fund may engage in loan
transactions only under the following conditions: (1) the Fund must receive
100% of collateral in the form of cash or cash equivalents (e.g., U.S. Treasury
bills or notes) from the borrower; (2) the borrower must increase the collateral
whenever the market value of the securities loaned (determined on a daily basis)
rises above the value of the collateral; (3) after giving notice, the Fund must
be able to terminate the loan at any time; (4) the Fund must receive reasonable
interest on the loan or a flat fee from the borrower, as well as amounts
equivalent to any dividends, interest, or other distributions on the securities
loaned and to any increase in market value; (5) the Fund may pay only reasonable
custodian fees in connection with the loan; and (6) the Fund must be able to
vote proxies on the securities loaned, either by terminating the loan or by
entering into an alternative arrangement with the borrower. Cash received
through loan transactions may be invested in any security in which the Fund is
authorized to invest. Investing this cash subjects that investment, as well as
the security loaned, to market forces (i.e., capital appreciation or
depreciation).
SHORT SALES
The Fund may enter into short sales with respect to securities it owns, or
with respect to stocks underlying its convertible bond holdings (short sales
"against the box"). For example, if the Adviser anticipates a decline in the
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price of the stock underlying a convertible security it holds, the Fund may sell
the stock short. If the stock price substantially declines, the proceeds of the
short sale could be expected to offset all or a portion of the effect of the
stock's decline on the value of the convertible security.
When the Fund enters into a short sale against the box, it will be required
to set aside securities equivalent in kind and amount to those sold short (or
securities convertible or exchangeable into such securities) and will be
required to continue to hold them while the short sale is outstanding. The Fund
will incur transaction costs, including interest expense, in connection with
opening, maintaining and closing short sales against the box.
THE FUND'S RIGHTS AS A SHAREHOLDER
The Fund does not intend to direct or administer the day-to-day operations
of any company whose shares it holds. However, the Fund may exercise its rights
as a shareholder and may communicate its views on important matters of policy to
management, the board of directors and shareholders of a company when the
Adviser determines that such matters could have a significant effect on the
value of the Fund's investment in the company. The activities that the Fund may
engage in, either individually or in conjunction with other shareholders, may
include, among others: supporting or opposing proposed changes in a company's
corporate structure or business activities; seeking changes in a company's board
of directors or management; seeking changes in a company's direction or
policies; seeking the sale or reorganization of the company or a portion of its
assets; or supporting or opposing third-party takeover efforts. This area of
corporate activity is increasingly prone to litigation and it is possible that
the Fund could be involved in lawsuits related to such activities. The Adviser
will monitor such activities with a view to mitigating, to the extent possible,
the risk of litigation against the Fund and the risk of actual liability if the
Fund is involved in litigation. There is no guarantee, however, that litigation
against the Fund will not be undertaken or liabilities incurred.
WARRANTS
Warrants are securities that give the Fund the right to purchase equity
securities from an issuer at a specific price (the "strike price") for a limited
period of time. The strike price of a warrant is typically much lower than the
current market price of the underlying securities, yet a warrant is subject to
greater price fluctuations. As a result, warrants may be more volatile
investments than the underlying securities and may offer greater potential for
capital appreciation as well as capital loss.
Warrants do not entitle a holder to dividends or voting rights with respect
to the underlying securities and do not represent any rights in the assets of
the issuing company. Also, the value of the warrant does not necessarily change
with the value of the underlying securities and a warrant ceases to have value
if it is not exercised prior to the expiration date. These factors can make
warrants more speculative than other types of investments.
INVESTMENT RESTRICTIONS
The Fund's investment programs are subject to a number of restrictions that
reflect self-imposed standards as well as regulatory limitations. The
investment restrictions recited below are in addition to those described in the
Prospectus.
Investment restrictions which are designated as matters of fundamental
policy may only be changed with the approval of a "majority of the outstanding
voting securities" of the Fund. Under the Investment Company Act, the vote of a
majority of the outstanding voting securities of a company means the vote, at an
annual or a special meeting of the security holders of the company duly called,
(i) of 67% or more of the voting securities present at such meeting, if the
holders of more than 50% of the outstanding voting securities of such company
are present or represented by proxy; or (ii) of more than 50% of the outstanding
voting securities of such company, whichever is the less.
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The Fund may not as a matter of fundamental policy:
(1) Issue senior securities, except as permitted under the Investment
Company Act;
(2) Effect short sales of securities or sell any security which it does
not own unless by virtue of its ownership of other securities it has, at the
time of sale, a right to obtain securities, without payment of further
consideration, equivalent in kind and amount to the securities sold and,
provided that if such right is conditional, the sale is made upon the same
conditions; or purchase securities on margin (but the Fund may obtain such
short-term credits as may be necessary for the clearance of transactions);
(3) Borrow money, except that the Fund may borrow money for temporary or
emergency purposes in an amount not exceeding 33 1/3% of the value of its total
assets (including the amount borrowed) less liabilities (other than borrowings);
(4) Act as an underwriter of securities within the meaning of the U.S.
federal securities laws, except insofar as it might be deemed to be an
underwriter upon disposition of certain portfolio securities acquired within the
limitation on purchases of illiquid securities;
(5) Purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or instrumentalities)
if, as a result, more than 25% of the Fund's total assets would be invested in
the securities of companies whose principal business activities are in the same
industry;
(6) Purchase or sell real estate, provided that the Fund may invest in
securities of companies in the real estate industry and may purchase securities
secured or otherwise supported by interests in real estate;
(7) Purchase or sell commodities or commodities contracts, provided that
the Fund may invest in financial futures and options on such futures; or
(8) Make loans, except that the Fund may lend portfolio securities in
accordance with its investment policies and may enter into, purchase or invest
in repurchase agreements, debt instruments or other securities, whether or not
the purchase is made upon the original issuance of the securities.
The Fund does not intend to invest in or to enter into financial futures
contracts or purchase options on such futures or to lend portfolio securities
during the current fiscal year.
The following investment restrictions are not fundamental policies and may
be changed by the Fund's Board of Directors without shareholder approval. The
Fund will not as a matter of operating policy:
(i) Borrow money, except that the Fund may borrow money for temporary or
emergency purposes in an amount not exceeding 10% of the value of its total
assets at the time of such borrowing, provided that, while borrowings by the
Fund equaling 5% or more of its total assets are outstanding, the Fund will not
purchase securities for investment;
(ii) Invest in shares of any other investment company registered under the
Investment Company Act, except as permitted by federal law;
(iii) Invest for the purpose of exercising control or management; or
(iv) Invest more than 20% of its total assets in foreign securities.
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To meet federal tax requirements for qualification as a "regulated
investment company," the Fund will limit its investments so that at the close of
each quarter of its taxable year: (a) with regard to at least 50% of total
assets, no more than 5% of total assets are invested in the securities of a
single issuer; and (b) no more than 25% of total assets are invested in the
securities of a single issuer. Limitations (a) and (b) do not apply to
"Government securities" as defined for federal tax purposes.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser is responsible for decisions to buy and sell securities for the
Fund, for the selection of brokers and dealers to execute securities
transactions and for negotiation of commission rates. Purchases and sales of
securities on a securities exchange will be effected through broker-dealers
which charge a commission for their services. The Adviser may direct purchase
and sale orders to any registered broker-dealer. In the over-the-counter
market, transactions are effected on a "net" basis with dealers acting as
principal for their own accounts without charging a stated commission, although
the price of the security usually includes a profit to the dealer based on the
spread between the bid and asked price for the security. The prices of
securities purchased from underwriters include a commission or concession paid
by the issuer to the underwriter. On occasion, certain money market instruments
may be purchased directly from an issuer without payment of a commission or
concession.
The Adviser's primary consideration in effecting securities transactions is
to obtain the most favorable execution of orders on an overall basis. As
described below, the Adviser may, in its discretion, effect agency transactions
with broker-dealers that furnish research deemed by the Adviser to be beneficial
to the Fund's investment program. Certain research services furnished by broker-
dealers may be useful to the Adviser with clients other than the Fund.
Similarly, any research services received by the Adviser through placement of
portfolio transactions of other clients may be of value to the Adviser in
fulfilling its obligations to the Fund. No specific value can be determined for
research services furnished without cost to the Adviser by a broker-dealer. The
Adviser is of the opinion that because the material must be analyzed and
reviewed by its staff, its receipt does not tend to reduce expenses, but may be
beneficial in supplementing the Adviser's research and analysis. Therefore, it
may tend to benefit the Fund by improving the Adviser's investment advice.
The Adviser's policy is to pay a broker-dealer commissions for particular
transactions that are higher than might be charged if a different broker-dealer
had been chosen when, in the Adviser's opinion, this policy furthers the overall
objective of obtaining the most favorable execution. The Adviser is also
authorized to pay broker-dealers higher commissions on brokerage transactions
for the Fund in order to secure research services described above.
The Adviser manages other investment accounts. It is possible that, at
times, identical securities will be acceptable for the Fund and one or more of
such other accounts; however, the position of each account in the securities of
the same issuer may vary and the length of time that each account may choose to
hold its investment in such securities may likewise vary. The timing and amount
of purchase by each account will also be determined by its cash position. If
the purchase or sale of securities consistent with the investment policies of
the Fund or one or more of these accounts is considered at or about the same
time, transactions in such securities will be allocated among the accounts in a
manner deemed equitable by the Adviser.
The allocation of orders among broker-dealers and the commission rates paid
by the Fund will be reviewed periodically by the Board of Directors. The
foregoing policy under which the Fund may pay higher commissions to certain
broker-dealers in the case of agency transactions does not apply to transactions
effected on a principal basis.
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CALCULATION OF NET ASSET VALUE
The Fund's net asset value per share is determined as of the close of
regular trading hours on the New York Stock Exchange (the "NYSE"), which is
normally 4:00 p.m. (Eastern time), any day on which the Federal Reserve Banks
are open for business, except Good Friday (a "Business Day"). The Federal
Reserve Banks are open for business on all weekdays except for the following
holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
Portfolio securities traded on a national exchange on the valuation date
are valued at the last quoted sale price. Exchange traded securities for which
there have been no reported sales on the valuation date and securities traded
primarily in the over-the-counter market are valued at the last quoted bid
prices. Securities or other assets for which market quotations are not readily
available are valued at their fair value as determined in good faith under
procedures established and monitored by the Fund's Board of Directors. These
procedures may include the use of an independent pricing service which
calculates prices based upon yields or prices of securities of comparable
quality, coupon, maturity and type; indications as to value from dealers; and
general market conditions. Debt obligations with maturities of 60 days or less
are valued at amortized cost.
REDEMPTION OF SHARES
The Fund may suspend the right of redemption or postpone the date of
payment during any period when (a) trading on the NYSE is restricted by
applicable rules and regulations of the SEC; (b) the NYSE is closed for other
than customary weekend and holiday closings; (c) the SEC has by order permitted
such suspension; or (d) an emergency exists as determined by the SEC so that
valuation of the net assets of the Fund is not reasonably practicable.
Under normal circumstances, the Fund will redeem shares by check as
described in the Prospectus. However, if the Board of Directors determines that
it would be in the best interests of the remaining shareholders to make payment
of the redemption price in whole or in part by a distribution in kind of
portfolio securities in lieu of cash, in conformity with applicable rules of the
SEC, the Fund will make such distributions in kind. If shares are redeemed in
kind, the redeeming shareholder will incur brokerage costs in later converting
the assets into cash. The method of valuing portfolio securities is described
under "Calculation of Net Asset Value" and such valuation will be made as of the
same time the redemption price is determined. The Fund has elected to be
governed by Rule 18f-1 under the Investment Company Act pursuant to which the
Fund is obligated to redeem shares solely in cash up to the lesser of $250,000
or 1% of the net asset value of the Fund during any 90-day period for any one
shareholder.
The Board of Directors of the Fund may cause the redemption of a share
account with a balance of less than $25,000, provided (1) the value of the
account has been reduced for reasons other than market action below the minimum
initial investment in such shares at the time the account was established, (2)
the account has remained below the minimum level for 60 days, and (3) 60 days'
prior written notice of the proposed redemption has been sent to the
shareholder. Shares will be redeemed at the net asset value on the date fixed
for redemption by the Board of Directors. Prompt payment will be made by mail
to the last known address of the shareholder.
TAXATION
The following is only a summary of certain additional federal income tax
considerations generally affecting the Fund and its shareholders. No attempt is
made to present a detailed explanation of the federal, state or local tax
treatment of the Fund or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning.
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The following discussion of federal income tax consequences is based on the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
issued thereunder as in effect on the date of this Statement of Additional
Information. New legislation, as well as administrative changes, or court
decisions, may significantly change the conclusions expressed herein, and may
have a retroactive effect with respect to the transactions contemplated herein.
The Fund expects to qualify as a regulated investment company ("RIC") under
Subchapter M of the Code. In order to qualify as a RIC for any taxable year,
the Fund must derive at least 90% of its gross income from dividends, interest,
certain payments with respect to securities loans and gains from the sale or
other disposition of stock, securities or foreign currencies and other income
(including, but not limited to, gains from options, futures or forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies (the "Income Requirement"). In addition, at the close
of each quarter of the Fund's taxable year, (1) at least 50% of the value of its
assets must consist of cash and cash items, U.S. government securities,
securities of other RICs, and securities of other issuers (as to which the Fund
has not invested more than 5% of the value of its total assets in securities of
such issuer and as to which the Fund does not hold more than 10% of the
outstanding voting securities of such issuer), and (2) no more than 25% of the
value of its total assets may be invested in the securities of any one issuer
(other than U.S. government securities and securities of other RICs), or in two
or more issuers that the Fund controls and that are engaged in the same or
similar trades or businesses or related trades or businesses (the "Asset
Diversification Test"). Generally, the Fund will not lose its status as a RIC
if it fails to meet the Asset Diversification Test solely as a result of a
fluctuation in value of portfolio assets not attributable to a purchase.
Under Subchapter M of the Code, the Fund is exempt from federal income tax
on its taxable net investment income and net capital gains that it distributes
to shareholders, provided generally that it distributes at least 90% of its
investment company taxable income (net investment income and the excess of net
short-term capital gains over net long-term capital loss) for the year (the
"Distribution Requirement") and complies with the other requirements of the Code
described above. The Distribution Requirement for any year may be waived if a
RIC establishes to the satisfaction of the Internal Revenue Service that it is
unable to satisfy the Distribution Requirement by reason of distributions
previously made for the purpose of avoiding liability for federal excise tax
(discussed below).
If for any taxable year the Fund does not qualify as a RIC, all of its
taxable income will be subject to tax at regular corporate rates without any
deduction for distributions to shareholders, and such distributions generally
will be taxable as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. However, in the case of corporate
shareholders, such distributions generally will be eligible for the 70%
dividends received deduction for "qualifying dividends".
The Code imposes a nondeductible 4% excise tax on RICs that do not
distribute in each calendar year an amount equal to 98% of their ordinary income
for the calendar year plus 98% of their capital gains net income for the one-
year period ending on October 31 of such calendar year. The balance of such
income must be distributed during the next calendar year. For the foregoing
purposes, a RIC will include in the amount distributed any amount taxed to the
RIC as investment company taxable income or capital gains for any taxable year
ending in such calendar year. The Fund intends to make sufficient distributions
of its ordinary income and capital gains net income prior to the end of each
calendar year to avoid liability for excise tax. However, the Fund may in
certain circumstances be required to liquidate portfolio investments in order to
make sufficient distributions to avoid excise tax liability.
If the Fund acquires stock in certain non-U.S. corporations ("passive
foreign investment companies" or "PFICs") that receive at least 75% of their
annual gross income from passive sources (such as interest, dividends, rents,
royalties or capital gains) or at least 50% of whose average assets produce or
are held for the production of such passive income, the Fund indirectly through
its interest in the PFIC could be subject to federal income tax and additional
interest charges on "excess distributions" received from such companies or gain
from the sale of stock in such companies, even if the Fund distributes its share
of the PFIC income as a taxable dividend to its shareholders.
B-13
<PAGE>
A certain election (treating the PFIC as a "qualified electing fund") filed with
the Fund's federal income tax return may, if available, ameliorate these adverse
tax consequences, but any such election would require the Fund to recognize
ordinary taxable income and net capital gain of the PFIC without the
corresponding receipt of cash which may need to be distributed by the Company to
satisfy the Distribution Requirement.
Pursuant to proposed regulations, open-end regulated investment companies
such as the Fund would be entitled to avoid or substantially reduce the tax
consequences described in the preceding paragraph by electing to mark-to-market
their stock in certain PFICs. Marking to market in this context means
recognizing as gain for each taxable year the excess, as of the end of that
year, of the fair market value of each PFIC's stock over the owner's adjusted
basis in that stock (including mark-to-market gains of a prior year for which an
election was in effect). Making the election could result in the recognition of
gain without the corresponding receipt of cash which may need to be distributed
by the Fund to satisfy the Distribution Requirement.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long the shareholder
has held the Fund's shares and regardless of whether the distribution is
received in additional shares or in cash. Capital gains distributions are not
eligible for the dividends received deduction. Under recent legislation, net
"long-term capital gain" has been broken down into additional categories of
gain, taxable at different rates for individual taxpayers. These categories
include 20% rate gain and 28% rate gain and certain other categories of gain
that the Fund does not expect to realize. Twenty-eight percent rate gain on
assets held longer than 12 months but not longer than 18 months is taxed at the
taxpayer's marginal federal income tax rate, but not higher than 28%. Twenty
percent rate gain on assets held longer than 18 months is taxed at a maximum
rate of 20%. Not later than 60 days after the close of its taxable year, the
Fund will provide its shareholders with a written notice designating the
amounts of any ordinary income dividends or capital gain dividends as well as
the portions of its capital gain dividends that constitute 28% rate gain and
20% rate gain. Distributions of earnings and profits of the Fund other than
distributions of net long-term capital gains are taxable to shareholders as
ordinary income.
If capital gain distributions have been made with respect to shares of the
Fund that are sold at a loss after being held for six months or less, then the
loss is treated as a long-term capital loss to the extent of the capital gain
distributions. Any gain or loss recognized on a sale or redemption of shares of
the Fund by a shareholder who is not a dealer in securities generally will be
treated as a long-term capital gain or loss if the shares have been held for
more than twelve months and otherwise generally will be treated as a short-term
capital gain or loss.
The Fund will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of distributions payable to any shareholder who (i) has
provided the Fund either an incorrect tax identification number or no number at
all, (ii) is subject to backup withholding by the Internal Revenue Service for
failure to properly report payments of interest or dividends, or (iii) has
failed to certify to the Fund that such shareholder is not subject to backup
withholding.
Rules of state and local taxation of dividend and capital gains
distributions from RICs often differ from the rules for federal income taxation
described above. Shareholders are urged to consult their tax advisors as to the
consequences of these and other state and local tax rules affecting an
investment in the Fund and also as to the application of the rules set forth
above to a shareholder's particular circumstances.
MANAGEMENT
DIRECTORS AND OFFICERS
The Board of Directors of the Fund consists of four directors. The
directors and officers of the Fund, their ages and their principal occupations
during the last five years are set forth below. Each director who is an
"interested person" of the Fund (as defined in the Investment Company Act) is
indicated by an asterisk (*). The addresses of each of the directors is 1119 St.
Paul St., Baltimore, MD 21202.
B-14
<PAGE>
<TABLE>
<CAPTION>
POSITION(S) HELD PRINCIPAL OCCUPATIONS(S)
NAME AND ADDRESS AGE WITH REGISTRANT DURING THE PAST FIVE YEARS
- ---------------- --- --------------- --------------------------
<S> <C> <C> <C>
David R. Wilmerding, III* 36 President and Director President of Nevis Capital
Management, Inc.
Jon C. Baker* 34 Senior Vice President, Executive Vice President of Nevis
Treasurer, Secretary and Capital Management, Inc.
Director
Joseph R. Hardiman 61 Director Retired; President and Chief Executive
Officer and a member of the Board of
Directors and the Executive Committees
of the National Association of Securities
Dealers, Inc. and its wholly owned sub-
sidiary, The Nasdaq Stock Market, Inc.
from September 1987 to January 1997.
Charles E. Noell 46 Director General partner of JMI Equity Fund, L.P.
Mr. Noell is currently on the boards of
Expert Software, Inc.; Peregrine Systems,
Inc.; and Transaction System Architects,
Inc.
</TABLE>
The Fund's Articles of Incorporation require the Fund to indemnify its
directors and officers to the full extent permitted by Maryland law. Nothing in
the charter or bylaws of the Fund protects any director or officer against any
liability to the Fund or its shareholders to which he would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
The officers and directors of the Fund who are "interested persons" of the
Fund within the meaning of the Investment Company Act do not receive
compensation directly from the Fund for serving in the capacities described
above. However, those officers and directors who are affiliated with the
Adviser may receive remuneration indirectly from the Fund for services provided
in their respective capacities with the Adviser. Each of the non-interested
directors is expected to receive for his service on the Board of Directors an
annual fee of $6,000, a fee of $1,500 for each board meeting attended, plus
reimbursement for out-of-pocket expenses incurred in connection with attendance
at board meetings. The following table sets forth the information concerning the
compensation anticipated to be paid by the Fund to directors in the current
fiscal year. The Fund does not offer any pension or retirement benefits to its
directors.
<TABLE>
<CAPTION>
NAME OF DIRECTOR AGGREGATE COMPENSATION FROM THE FUND (1)
---------------- ----------------------------------------
<S> <C>
David R. Wilmerding, III $0
Jon C. Baker $0
Joseph R. Hardiman $12,000
Charles E. Noell $12,000
</TABLE>
(1) The Fund commenced operations in June 1998. The amounts indicated are
estimates of the compensation expected to be paid to directors of the
Fund during the Fund's first fiscal year ending May 31, 1999.
As of the date of this Statement of Additional Information, the officers
and directors of the Fund, as a group, owned of record and beneficially less
than 1% of the outstanding shares of the Fund.
CODE OF ETHICS
The Board of Directors of the Fund has adopted a code of ethics pursuant to
Rule 17j-1 under the Investment Company Act. The code of ethics applies to the
personal investing activities of all directors and officers of the Fund, as well
as to designated officers, directors, and employees of the Adviser and the
Distributor. As described below, the code of ethics imposes significant
restrictions on the Adviser's investment personnel, including
B-15
<PAGE>
the portfolio managers and employees who execute or help execute a portfolio
Adviser's decisions or who obtain contemporaneous information regarding the
purchase or sale of a security by the Fund.
The code of ethics requires that covered employees of the Adviser and all
Fund directors who are "interested persons" preclear personal securities
investments (with certain exceptions, such as non-volitional purchases or
purchases that are part of an automatic dividend reinvestment plan). The
preclearance requirement and associated procedures are designed to identify any
substantive prohibition or limitation applicable to the proposed investment.
The substantive restrictions applicable to investment personnel include a ban on
acquiring any securities in an initial public offering, a prohibition from
profiting on short-term trading in securities, and special preclearance of the
acquisition of securities in private placements. Furthermore, the code of
ethics provides for trading "blackout periods" that prohibit trading by
investment personnel and certain other employees within periods of trading by
the Fund in the same security. Officers, directors, and employees of the
Adviser and the Distributor may comply with codes instituted by those entities
so long as they contain similar requirements and restrictions.
INVESTMENT ADVISER
The Board of Directors of the Fund has approved an investment management
agreement between the Fund and the Adviser. Under the agreement, the Adviser
manages the Fund's investments subject to the supervision and direction of the
Board of Directors of the Fund. The Adviser is responsible for providing a
continuous investment program for the Fund, including the provision of
investment research and management with respect to all securities and
investments and cash equivalents purchased, sold, or held in the Fund, and the
selection of brokers-dealers through which securities transactions for the Fund
will be executed. In carrying out its responsibilities, the Adviser is required
to act in conformance with the Fund's charter, the Investment Company Act and
the Investment Advisers Act of 1940, as amended.
The investment management agreement will remain in effect for two years
from the date of its initial execution and from year to year thereafter, so long
as such continuance is specifically approved at least annually by the Board of
Directors of the Fund or by vote of a majority of the outstanding voting
securities of the Fund (as defined in the Investment Company Act) and by the
vote of a majority of the directors who are not parties to the agreement or
"interested persons" of any such party (as defined in the Investment Company
Act), cast in person at a meeting called for the purpose of voting on such
approval. The agreement may be terminated by either the Fund or the Adviser on
60 days' written notice. It will terminate automatically in the event of its
assignment (as defined by the Investment Company Act).
The Adviser bears all expenses in connection with the performance of
services under the investment management agreement with the Fund. In addition,
the Adviser bears all ordinary expenses incurred in the conduct of the Fund's
operations, including, without limitation, the following: the expenses of
directors and officers of the Fund; fees for administrative services; expenses
of organizing the Fund and continuing its existence; fees and expenses of
preparing and filing the Fund's registration statement under the Securities Act
of 1933 and the Investment Company Act, and any amendments thereto; fees and
expenses of directors and officers of the Fund; fees for administrative
services; expenses of preparing, printing and distributing prospectuses,
shareholder reports and other materials to shareholders; interest; brokerage
commissions; taxes and governmental fees; expenses of issue, purchase,
repurchase and redemption of shares; charges and expenses of custodians,
transfer agents, dividend disbursing agents and registrars; printing and mailing
costs; expenses of auditing, accounting and legal services; expenses of meetings
of the Board of Directors and shareholders and proxy solicitations; insurance
expenses; and association membership dues. The Fund bears all extraordinary
expenses (as determined by use of generally accepted accounting principles)
incurred in the course of its business.
B-16
<PAGE>
<PAGE>
ADMINISTRATOR
SEI Fund Resources (the "Administrator"), One Freedom Valley Drive, Oaks,
PA 19456, serves as the administrator for the Fund. SEI Financial Management
Corporation, a wholly-owned subsidiary of SEI Corp., is the owner of all
beneficial interest in the Administrator.
Pursuant to an administration agreement between the Administrator and the
Fund, the Administrator has agreed to provide certain fund accounting and
administrative services to the Fund, including among other services, accounting
relating to the Fund and its investment transactions; computing daily net asset
values; monitoring the investments and income of the Fund for compliance with
applicable tax laws; preparing for execution and filing federal and state tax
returns, and semi-annual and annual shareholder reports; preparing monthly
financial statements including a schedule of investments; assisting in the
preparation of registration statements and other filings related to the
registration of shares; coordinating contractual relationships and
communications between the Adviser and the Fund's custodian; preparing and
maintaining the Fund's books of account, records of securities transactions, and
all other books and records in accordance with applicable laws, rules and
regulations (including, but not limited to, those records required to be kept
pursuant to the Investment Company Act); and performing such other duties
related to the administration of the Fund as may be agreed upon in writing by
the parties to the respective agreements.
Compensation for the services and facilities provided by the Administrator
under its administration agreement with the Fund includes payment of the
Administrator's out-of-pocket expenses. The Administrator's reimbursable out-
of-pocket expenses include, but are not limited to, postage and mailing,
telephone, telex, Federal Express, independent pricing service charges, and
record retention/storage.
Because the Fund will commence operations in June 1998, the Fund has
not paid any fees to the Administrator as of the date of this Statement of
Additional Information.
DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor"), located at One
Freedom Valley Drive, Oaks, PA 19456, serves as the principal underwriter and
distributor for the Fund's shares pursuant to a distribution agreement with the
Fund. The distribution agreement was initially approved by the Board of
Directors of the Fund. The Distributor is a registered broker-dealer and a
member of the National Association of Securities Dealers, Inc. The Distributor
is an indirect wholly-owned subsidiary of SEI Investments Company.
The Distributor offers shares of the Fund continuously and has agreed to
use its best efforts to solicit purchase orders for shares. The Distributor is
not obligated to sell any specific amount of shares of the Fund. The
Distributor bears all expenses of providing services pursuant to its
distribution agreement with the Fund. The Fund bears the expenses of
registering its shares with the SEC and with applicable state regulatory
authorities.
The distribution agreement will remain in effect for two years from the
date of its initial execution and from year to year thereafter, so long as such
continuance is specifically approved at least annually by the Board of Directors
of the Fund or by vote of a majority of the outstanding voting securities of the
Fund (as defined in the Investment Company Act), and by the vote of a majority
of the directors who are not parties to the agreement or "interested persons" of
any such party (as defined in the Investment Company Act), cast in person at a
meeting called for the purpose of voting on such approval. The agreement may be
terminated by either the Fund or the Distributor on 60 days' written notice. It
will terminate automatically in the event of its assignment (as defined by the
Investment Company Act).
The Fund and the Distributor reserve the right to reject any purchase order
and to suspend the offering of shares of the Fund. The Fund reserves the right
to vary the minimums for initial and subsequent investments in the
B-17
<PAGE>
Fund's shares at any time. In addition, the Fund may waive the minimum
investment requirement for any investor. The factors to be considered in the
waiver or variation of such minimum investments include, but are not limited to,
the relationship of the investor to the Fund, the amount of the proposed
investment, and the type of investor.
PERFORMANCE INFORMATION
The Fund may compare its performance to other funds or to relevant indices,
such as the Standard & Poor's Composite Stock Price Index (the "S&P 500") and
the Russell 2000. The S&P 500 is composed of 500 selected common stocks, most
of which are listed on the New York Stock Exchange. The S&P 500 assigns relative
weightings to the common stocks included in the Index, and the value fluctuates
with changes in the market values of those common stocks. The Russell 2000 Index
is composed of the 2,000 smallest companies in the Russell 3000 Index,
representing 7% of the Russell 3000 total market capitalization. The Russell
3000 Index is composed of 3,000 large U.S. companies ranked by market
capitalization, representing approximately 98% of the U.S. equity market.
For purposes of quoting and comparing the performance of the Fund to that
of other mutual funds and to stock or other relevant indices or averages in
advertisements or in certain reports to shareholders, performance will generally
be stated both in terms of total return and in terms of yield. However, the
Fund may also from time to time state its performance solely in terms of total
return.
TOTAL RETURN CALCULATIONS
The total return quotations, under the rules of the SEC, must be calculated
according to the following formula:
P(1 + T)(n) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5 or 10)
ERV = ending redeemable value of the hypothetical $1,000
payment made at the beginning of the designated period
(or fractional portion thereof)
Under the foregoing formula, the time periods used in advertising will be
based on rolling calendar quarters, updated to the last day of the most recent
quarter prior to submission of the advertising for publication, and will cover
one-, five-, and ten-year periods or a shorter period dating from the
effectiveness of the Fund's registration statement (or the later commencement of
operations of the Fund). In calculating the ending redeemable value for the
Fund's shares, all dividends and distributions by the Fund are assumed to have
been reinvested at net asset value as described in the Prospectus on the
reinvestment dates during the period. "T" in the formula above is calculated by
finding the average annual compounded rate of return over the period that would
equate an assumed initial payment of $1,000 to the ending redeemable value. Any
recurring account charges that might be imposed by the Fund in the future would
be included.
The Fund may also from time to time include in such advertising total
return figures that are not calculated according to the formulate set forth
above to compare more accurately the Fund's performance with other measures of
investment return. For example, in comparing the Fund's total return with data
published by Lipper Analytical Services, Inc., CDA/Weisenberger or Morningstar
Inc., the Fund calculates its aggregate and average annual total return for the
specified periods of time by assuming the investment of $10,000 in shares and
assuming the reinvestment of each dividend or other distribution at net asset
value on the reinvestment date.
Alternative total return information will be given no greater prominence in
such advertising than the information prescribed under SEC rules, and all
advertisements containing performance data will include a legend
B-18
<PAGE>
disclosing that such performance data represent past performance and that the
investment return and principal value of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
YIELD CALCULATIONS
The yield of Fund shares is computed by dividing the Fund's net investment
income per share during a base period of 30 days, or one month, by the maximum
offering price per share on the last day of such base period in accordance with
the following formula:
YIELD = 2[(a - b + 1)/6/ - 1 ]
-----
cd
Where: a = net investment income earned during the period
b = net expenses accrued for the period
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends
d = the maximum offering price per share
Net investment income will be determined in accordance with rules
established by the SEC.
DESCRIPTION OF CAPITAL STOCK
The Fund is authorized to issue 100,000,000 shares of Common Stock, par
value $.01 per share. The Board of Directors may increase or decrease the number
of authorized shares without shareholder approval.
The Fund's Articles of Incorporation provide for the establishment of
separate series and separate classes of shares by the Board of Directors at any
time. In the event series of shares are established, each series would be
managed separately and shareholders of each series would have an undivided
interest in the net assets of that series. For tax purposes, the series will be
treated as separate entities. In the event additional classes of shares are
established, each class of shares issued generally will be identical to every
other class and expenses of the Fund or a series thereof (other than any fees or
expenses attributable a particular class) would be prorated among all classes
based upon relative net assets.
All shares of the Fund, regardless of class or series, have equal rights
with respect to voting, except that the holders of a particular class or series
of shares are not entitled to vote on any matter which does not affect any
interest of that class or series. All classes and series of Fund shares vote
together as a single class, except as otherwise required by applicable law.
Shareholders of the Fund do not have cumulative voting rights, and therefore the
holders of more than 50% of the outstanding shares voting together for election
of directors may elect all the members of the Board of Directors of the Fund.
In such event, the remaining holders cannot elect any members of the Board of
Directors.
There are no preemptive, conversion, or exchange rights applicable to any
shares of the Fund. The outstanding shares are fully paid and non-assessable.
In the event of liquidation or dissolution of the Fund, each share is entitled
to its portion of the Fund's assets (or the assets allocated to a separate
series of shares if there is more than one series) after all debts and expenses
have been paid.
B-19
<PAGE>
EXPERTS
The Statement of Assets and Liabilities of the Fund at June __, 1998 has
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto and is included in reliance upon
such report and upon the authority of such firm as experts in accounting and
auditing.
B-20
<PAGE>
THE NEVIS FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
_______ __, 1998
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Cash........................................................................... $100,000
Deferred Organization Expenses.................................................
Total Assets.................................................................
LIABILITIES:
Organization Expenses Payable to the Adviser
NET ASSETS:..................................................................... $100,000
========
NET ASSETS CONSIST OF:
Common Stock, par value $.01 per share, 100,000,000 shares authorized.......... $ 100
Additional paid-in capital..................................................... 99,900
--------
Total........................................................................ $100,000
========
NET ASSETS VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
($100,000 / 10,000 shares outstanding).......................................... $10.00
======
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
1. ORGANIZATION
The Nevis Fund, Inc. (the "Fund"), a Maryland corporation, is registered
under the Investment Company Act of 1940, as amended, as an open-end non-
diversified management investment company. The Fund has not commenced
operations except those relating to organizational matters and the sale of
shares in the amount of $100,000 to Nevis Capital Management, Inc. the
Fund's sponsor.
2. SIGNIFICANT ACCOUNTING POLICIES
Organization expenses will be amortized on a straight-line basis over a
period not to exceed five years from the commencement date of operations.
In the event Nevis Capital Management, Inc. redeems all or part of its
initial investment in shares of the Fund, the proceeds will be reduced by
the product of any unamortized organization expenses and the proportion of
the number of shares redeemed to the initial shares invested.
The initial state registration costs have been deferred and will be charged
to expense over the period that a benefit is expected to be realized.
3. INVESTMENT ADVISORY FEES, ADMINISTRATIVE FEES AND
OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into (1) an investment management agreement with Nevis
Capital Management, Inc. (the "Adviser"), (2) an administration agreement
with SEI Investments Mutual Fund Services ("SIM") under which SIM provides
administration and accounting services to the Fund, and (3) a distribution
agreement with SEI Investments Distribution Co. ("SDC") under which SDC
will distribute shares of the Fund and provide information to shareholders.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
of The Nevis Fund, Inc.:
We have audited the accompanying Statement of Assets and Liabilities of The
Nevis Fund, Inc. (the "Fund") as of _______ __, 1998. This financial statement
is the responsibility of the Fund's management. Our responsibility is to
express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of The Nevis Fund, Inc. as of
_______ __, 1998 in conformity with generally accepted accounting principles.
_______ __, 1998
<PAGE>
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements:
Included in Parts A and B:
Statement of Assets and Liabilities of the Registrant at June __,
1998.
Notes to Statement of Assets and Liabilities.
Report of Independent Public Accountants.
Included in Part C:
Consent of Independent Public Accountants.
All other financial statements, schedules, and historical financial
information are omitted because the conditions requiring their filing do not
exist.
(b) Exhibits:
(1) Articles of Incorporation of the Registrant.*
(2) Amended and Restated By-Laws of the Registrant.
(3) Not applicable.
(4) Not applicable.
(5) Investment Management Agreement between the Registrant and
Nevis Capital Management, Inc.
(6) Distribution Agreement between the Registrant and SEI
Investments Distribution Co.
(7) Not applicable.
(8) Custodian Agreement between the Registrant and First Union
National Bank.
(9) (a) Administration Agreement between the Registrant and SEI
Investments Mutual Fund Services.
(b) Transfer Agency and Services Agreement between the Registrant
and Forum Shareholder Services, LLC.
(10) Opinion and Consent of Piper & Marbury L.L.P.
(11) Consent of Independent Public Accountants.**
(12) Not applicable.
<PAGE>
(13) Initial Capital Agreement.
(14) Not applicable.
(15) Not applicable.
(16) Not applicable.
(17) Not applicable.
(18) Not applicable.
________
* Previously filed.
** To be filed by amendment.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
Title of Class Number of Record Holders*
-------------- ------------------------
Common Stock, par value $.01 per share 1
* As of _______ __, 1998.
ITEM 27. INDEMNIFICATION
Reference is made to Article Eighth, Section 5 of the Articles of
Incorporation and Article VII of the By-Laws of the Registrant filed as Exhibits
1 and 2, respectively.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant 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 Act and will be governed by the final adjudication of
such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
A description of the directors and officers of the Registrant's investment
adviser and other required information is incorporated herein by reference to
the Form ADV and schedules thereto of Nevis Capital Management, Inc., as
amended, filed (File No. 801-39504) with the Securities and Exchange Commission
under the Investment Advisers Act of 1940.
C-2
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITERS
(a) SEI Investments Distribution Co. (formerly SEI Financial Services
Company) acts as distributor for the Registrant. SEI Investments Distribution
Co. also acts as distributor for: SEI Daily Income Trust, SEI Liquid Asset
Trust, SEI Tax Exempt Trust, SEI Index Funds, SEI Institutional Managed Trust,
SEI International Trust, SEI Asset Allocation Trust, Stepstone Funds, The
Advisors' Inner Circle Fund, The Pillar Funds, CUFund, STI Classic Funds,
CoreFunds, Inc., First American Funds, Inc., First American Investment Funds,
Inc., The Arbor Fund, Boston 1784 Funds', Marquis Funds', Morgan Grenfell
Investment Trust, The PBHG Funds, Inc., The Achievement Funds Trust, Bishop
Street Funds, Monitor Funds, FMB Funds, Inc., STI Classic Variable Trust, TIP
Funds, CrestFunds, Inc., First American Strategy Funds, Inc., HighMark Funds and
Expedition Funds.
SEI Investments Distribution Co. provides numerous financial services to
investment managers, pension plan sponsors, and bank trust departments. These
services include portfolio evaluation, performance measurement and consulting
services, and automated execution, clearing and settlement of securities
transactions.
(b) Directors, officers and partners of SEI Investments Distribution Co.
are as follows:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address* With Underwriter With Registrant
- ----------------- ---------------- ---------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman and Chief Executive None
Officer
Henry H. Greer Director, President and Chief Operating None
Officer
Carmen V. Romeo Director, Executive Vice President, None
President - Investment Advisory Group
Richard B. Lieb Director, Executive Vice President, None
President-Investment Services Division
William M. Doran Director None
Henry H. Porter, Jr. Director None
Gilbert L. Beebower Executive Vice President None
Dennis J. McGonigle Executive Vice President None
Leo J. Dolan, Jr. Senior Vice President None
Carl A. Guarino Senior Vice President None
Larry Hutchison Senior Vice President None
David G. Lee Senior Vice President None
Jack May Senior Vice President None
A. Keith McDowell Senior Vice President None
Hartland J. McKeown Senior Vice President None
Barbara J. Moore Senior Vice President None
Kevin P. Robins Senior Vice President, General Counsel and None
Secretary
Robert Wagner Senior Vice President None
</TABLE>
C-3
<PAGE>
<TABLE>
<S> <C> <C>
Patrick K. Walsh Senior Vice President None
Robert Crudup Vice President and Managing Director None
Barbara Dayne Vice President None
Vic Galef Vice President and Managing Director None
Kim Kirk Vice President and Managing Director None
John Krzeminski Vice President and Managing Director None
Carolyn McLaurin Vice President and Managing Director None
Donald Pepin Vice President and Managing Director None
Mark Samuels Vice President and Managing Director None
Wayne M. Withrow Vice President and Managing Director None
Robert Aller Vice President None
Gordon W. Carpenter Vice President None
Marc H. Cahn Vice President and Assistant Secretary None
Todd Cipperman Vice President and Assistant Secretary None
Jeff Drennen Vice President None
Kathy Heilig Vice President and Treasurer None
Michael Kantor Vice President None
Samuel King Vice President None
W. Kelso Morril Vice President None
Joanne Nelson Vice President None
Sandra K. Orlow Vice President and Assistant Secretary None
Cynthia M. Parrish Vice President and Assistant Secretary None
Kim Rainey Vice President None
Steve Smith Vice President None
Kathryn L. Stanton Vice President and Assistant Secretary None
Daniel Spaventa Vice President None
James Dougherty Director of Brokerage Services None
</TABLE>
______________
* One Freedom Valley Drive, Oaks, PA 19456
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The Registrant maintains the records required by Section 31(a) of the
Investment Company Act of 1940, as amended, and Rules 31a-1, 31a-2 and 31a-3
thereunder at its principal office located at 1119 St Paul Street, Baltimore, MD
21202. Certain records may be maintained pursuant to Rule 31a-3 at the offices
of the Registrant's administrator, SEI Investments Mutual Fund Services, located
at One Freedom Valley Drive, Oaks, PA 19456. Certain records,
C-4
<PAGE>
including records relating to the Registrant's shareholders, may be maintained
pursuant to Rule 31a-3 at the offices of the Registrant's transfer agent,
Forum Shareholder Services, LLC located at 3 Canal Plaza, Portland, Maine 04101.
Certain records relating to the physical possession of the Registrant's
securities may be maintained at the offices of the Registrant's custodian, First
Union National Bank, located at 530 Walnut Street, Mezzanine Level,
Philadelphia, Pennsylvania 19106.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Not applicable.
(b) The Registrant undertakes to file a post-effective amendment,
including financial statements which need not be audited, within four to six
months from the effective date of this Registration Statement.
(c) The Registrant undertakes to furnish each person to whom a prospectus
is delivered with a copy of its latest annual report to shareholders upon
request and without charge if the Registrant includes the information called for
by Item 5A of Form N-1A in such annual report.
C-5
<PAGE>
SIGNATURES
B
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Pre-
Effective Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, hereunto duly authorized, in the City of Baltimore,
and State of Maryland, on the 18th day of June, 1998.
THE NEVIS FUND, INC.
By: /s/ David R. Wilmerding, III
------------------------------
David R. Wilmerding, III
President
Pursuant to the requirements of the Securities Act of 1933, this Pre-
Effective Amendment No. 1 to the Registration Statement has been signed below by
the following persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ David R. Wilmerding, III President (principal executive officer) June 18, 1998
- -------------------------- and Director
David R. Wilmerding, III
/s/ * Treasurer (principal financial and June 18, 1998
- -------------------------- accounting officer) and Director
Jon C. Baker
/s/ * Director June 18, 1998
- --------------------------
Joseph R. Hardiman
/s/ * Director June 18, 1998
- --------------------------
Charles E. Noell
* By: /s/ David R. Wilmerding, III
----------------------------
David R. Wilmerding, III
Power-of-Attorney
</TABLE>
<PAGE>
EXHIBIT 2
THE NEVIS FUND, INC
AMENDED AND RESTATED BY-LAWS
(as amended and restated on June 11, 1998)
ARTICLE I
STOCKHOLDERS
SECTION 1.01. Annual Meeting. The Corporation is not required to hold an
--------------
annual meeting of its stockholders in any year in which the election of
directors is not required to be acted upon under the Investment Company Act of
1940, as amended (the "Investment Company Act"). If the Corporation is required
by the Investment Company Act to hold a meeting of stockholders to elect
directors, such meeting shall be held at a date and time set by the Board of
Directors in accordance with the Investment Company Act and no later than 120
days after the occurrence of the event requiring the meeting. Any stockholders'
meeting held in accordance with the preceding sentence shall for all purposes
constitute the annual meeting of stockholders for the fiscal year of the
Corporation in which the meeting is held. Except as the Charter or statute
provides otherwise, any business may be considered at an annual meeting without
the purpose of the meeting having been specified in the notice. Failure to hold
an annual meeting does not invalidate the Corporation's existence or affect any
otherwise valid corporate acts.
SECTION 1.02. Special Meeting. At any time in the interval between annual
---------------
meetings, a special meeting of stockholders may be called by the Chairman or the
President or by a majority of the Board of Directors by vote at a meeting or in
writing (addressed to the Secretary of the Corporation) with or without a
meeting. Special meetings of the stockholders shall be called by the Secretary
at the request of stockholders only on the written request of stockholders
entitled to cast at least 25 percent of all the votes entitled to be cast at the
meeting. A request for a special meeting shall state the purpose of the meeting
and the matters proposed to be acted on at it. The Secretary shall inform the
stockholders who make the request of the reasonably estimated costs of preparing
and mailing a notice of the meeting and, on payment of these costs to the
Corporation, notify each stockholder entitled to notice of the meeting. Unless
requested by stockholders entitled to cast a majority of all the votes entitled
to be cast at the meeting, a special meeting need not be called to consider any
matter which is substantially the same as a matter voted on at any special
meeting of stockholders held in the preceding 12 months.
SECTION 1.03. Place of Meetings. Meetings of stockholders shall be held
-----------------
at such place in the United States as is set from time to time by the Board of
Directors.
SECTION 1.04. Notice of Meetings; Waiver of Notice. Not less than ten nor
------------------------------------
more than 90 days before each stockholders' meeting, the Secretary shall give
written notice of the meeting
<PAGE>
to each stockholder entitled to vote at the meeting and each other stockholder
entitled to notice of the meeting. The notice shall state the time and place of
the meeting and, if the meeting is a special meeting or notice of the purpose is
required by statute, the purpose of the meeting. Notice is given to a
stockholder when it is personally delivered to him, left at his residence or
usual place of business, or mailed to him at his address as it appears on the
records of the Corporation. Notwithstanding the foregoing provisions, each
person who is entitled to notice waives notice if he before or after the meeting
signs a waiver of the notice which is filed with the records of stockholders'
meetings, or is present at the meeting in person or by proxy.
SECTION 1.05. Quorum; Voting. Unless statute or the Charter provides
--------------
otherwise, at a meeting of stockholders the presence in person or by proxy of
stockholders entitled to cast a majority of all the votes entitled to be cast at
the meeting constitutes a quorum, and a majority of all the votes cast at a
meeting at which a quorum is present is sufficient to approve any matter which
properly comes before the meeting, except that a plurality of all the votes cast
at a meeting at which a quorum is present is sufficient to elect a director.
SECTION 1.06. Adjournments. Whether or not a quorum is present, a meeting
------------
of stockholders convened on the date for which it was called may be adjourned
from time to time without further notice by a majority vote of the stockholders
present in person or by proxy to a date not more than 120 days after the
original record date. Any business which might have been transacted at the
meeting as originally notified may be deferred and transacted at any such
adjourned meeting at which a quorum shall be present.
SECTION 1.07. General Right to Vote; Proxies. Unless the Charter provides
------------------------------
for a greater or lesser number of votes per share or limits or denies voting
rights, each outstanding share of stock is entitled to one vote on each matter
submitted to a vote at a meeting of stockholders. In all elections for
directors, each share of stock may be voted for as many individuals as there are
directors to be elected and for whose election the share is entitled to be
voted, and cumulative voting in the election of directors is not permitted. A
stockholder may vote the stock the stockholder owns of record either in person
or by proxy. A stockholder may sign a writing authorizing another person to act
as proxy. Signing may be accomplished by the stockholder or the stockholder's
authorized agent signing the writing or causing the stockholder's signature to
be affixed to the writing by any reasonable means, including facsimile
signature. A stockholder may authorize another person to act as proxy by
transmitting, or authorizing the transmission of, a telegram, cablegram,
datagram or other means of electronic transmission to the person authorized to
act as proxy or to a proxy solicitation firm, proxy support service
organization, or other person authorized by the person who will act as proxy to
receive the transmission. Unless a proxy provides otherwise, it is not valid
more than 11 months after its date. A proxy is revocable by a stockholder at
any time without condition or qualification unless the proxy states that it is
irrevocable and the proxy is coupled with an interest. A proxy may be made
irrevocable for so long as it is coupled with an interest. The interest with
which a proxy may be coupled includes an interest in the stock to be voted under
the proxy or another general interest in the Corporation or its assets or
liabilities.
-2-
<PAGE>
SECTION 1.08. List of Stockholders. At each meeting of stockholders, a
--------------------
full, true and complete list of all stockholders entitled to vote at such
meeting, showing the number of shares held by each and certified by the transfer
agent or by the Secretary, shall be furnished by the Secretary.
SECTION 1.09. Conduct of Business. Nominations of persons for election to
-------------------
the Board of Directors and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (a) pursuant to
the Corporation's notice of meeting, (b) by or at the direction of the Board of
Directors or (c) by any stockholder of the Corporation who was a stockholder of
record at the time of giving notice provided for in Section 1.11, who is
entitled to vote at the meeting and who complied with the notice procedures set
forth in Section 1.11. The chairman of the meeting shall have the power and
duty to determine whether a nomination or any business proposed to be brought
before the meeting was made in accordance with the procedures set forth in this
Section and Section 1.11 and, if any proposed nomination or business is not in
compliance with this Section and Section 1.11, to declare that such defective
nomination or proposal be disregarded.
SECTION 1.10. Conduct of Voting. At all meetings of stockholders, unless
-----------------
the voting is conducted by inspectors, the proxies and ballots shall be
received, and all questions touching the qualification of voters and the
validity of proxies, the acceptance or rejection of votes and procedures for the
conduct of business not otherwise specified by these By-Laws, the Charter or
law, shall be decided or determined, by the chairman of the meeting. If demanded
by stockholders, present in person or by proxy, entitled to cast 10 percent in
number of votes entitled to be cast, or if ordered by the chairman, the vote
upon any election or question shall be taken by ballot and, upon like demand or
order, the voting shall be conducted by two inspectors, in which event the
proxies and ballots shall be received, and all questions touching the
qualification of voters and the validity of proxies and the acceptance or
rejection of votes shall be decided, by such inspectors. Unless so demanded or
ordered, no vote need be by ballot and voting need not be conducted by
inspectors. The stockholders at any meeting may choose an inspector or
inspectors to act at such meeting, and in default of such election the chairman
of the meeting may appoint an inspector or inspectors. No candidate for
election as a director at a meeting shall serve as an inspector thereat.
SECTION 1.11. Stockholder Proposals. For any stockholder proposal to be
---------------------
presented in connection with an annual meeting of stockholders of the
Corporation (other than proposals made under Rule 14a-8 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), including any proposal
relating to the nomination of a director to be elected to the Board of Directors
of the Corporation, the stockholders must have given timely notice thereof in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to the Secretary at the principal executive offices of
the Corporation not later than 10 days following the day on which public
announcement of the date of such meeting is first made. Such stockholder's
notice shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or reelection as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise
-3-
<PAGE>
required, in each case pursuant to Regulation 14A under the Exchange Act
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); (b) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and of the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the stockholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is
made, (i) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (ii) the number of shares
of stock of the Corporation which are owned beneficially and of record by such
stockholder and such beneficial owner.
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.01. Function of Directors. The business and affairs of the
---------------------
Corporation shall be managed under the direction of its Board of Directors. All
powers of the Corporation may be exercised by or under authority of the Board of
Directors, except as conferred on or reserved to the stockholders by statute or
by the Charter or By-Laws. The Board may delegate the duty of management of the
assets and the administration of the day-to-day operations of the Corporation to
one or more entities or individuals pursuant to a written contract or contracts
which have obtained the approvals, including the approval of renewals thereof,
required by the Investment Company Act.
SECTION 2.02. Number of Directors. The Corporation shall have at least
-------------------
three directors; provided that, if there is no stock outstanding, the number of
directors may be less than three but not less than one, and, if there is stock
outstanding and so long as there are fewer than three stockholders, the number
of directors may be less than three but not less than the number of
stockholders. The Corporation Shall have the number of directors provided in the
Charter until changed as herein provided. A majority of the entire Board of
Directors may alter the number of directors set by the Charter to not exceeding
25 nor less than the minimum number then permitted herein, but the action may
not affect the tenure of office of any director.
SECTION 2.03. Election and Tenure of Directors. At each annual meeting,
--------------------------------
the stockholders shall elect directors to hold office until the next annual
meeting and until their successors are elected and qualify.
SECTION 2.04. Removal of Director. Unless statute or the Charter provides
-------------------
otherwise, the stockholders may remove any director, with or without cause, by
the affirmative vote of a majority of all the votes entitled to be cast for the
election of directors.
-4-
<PAGE>
SECTION 2.05. Vacancy on Board. The stockholders may elect a successor to
----------------
fill a vacancy on the Board of Directors which results from the removal of a
director. A director elected by the stockholders to fill a vacancy which
results from the removal of a director serves for the balance of the term of the
removed director. A a majority of the remaining directors, whether or not
sufficient to constitute a quorum, may fill a vacancy on the Board of Directors
which results from any cause except an increase in the number of directors;
provided, however, that no vacancy shall be so filled unless immediately
thereafter at least two-thirds of the directors then holding office shall have
been elected to such office by the stockholders; and, provided further, that if
at any time (other than prior to the first annual meeting of stockholders) less
than a majority of the directors holding office at that time were elected by the
stockholders, a meeting of the stockholders shall be held promptly and in any
event within 60 days for the purpose of electing directors to fill any existing
vacancy in the Board of Directors, unless the Securities and Exchange Commission
(the "Commission") shall by order extend such period under the authority granted
by Section 16(a) of the Investment Company Act. A majority of the entire Board
of Directors may fill a vacancy which results from an increase in the number of
directors. A Director elected by the Board of Directors to fill a vacancy
serves until the next annual meeting of stockholders and until his successor is
elected and qualifies.
SECTION 2.06. Regular Meetings. After each meeting of stockholders at
----------------
which directors shall have been elected, the Board of Directors shall meet as
soon as practicable for the purpose of organization and the transaction of other
business. In the event that no other time and place are specified by resolution
of the Board, the President or the Chairman, with notice in accordance with
Section 2.08, the Board of Directors shall meet immediately following the close
of, and at the place of, such stockholders' meeting. Any other regular meeting
of the Board of Directors shall be held on such date and at any place as may be
designated from time to time by the Board of Directors.
SECTION 2.07. Special Meetings. Special meetings of the Board of
----------------
Directors may be called at any time by the Chairman or the President or by a
majority of the Board of Directors by vote at a meeting, or in writing with or
without a meeting. A special meeting of the Board of Directors shall be held on
such date and at any place as may be designated from time to time by the Board
of Directors. In the absence of designation such meeting shall be held at such
place as may be designated in the call.
SECTION 2.08. Notice of Meeting. Except as provided in Section 2.06, the
-----------------
Secretary shall give notice to each director of each regular and special meeting
of the Board of Directors. The notice shall state the time and place of the
meeting. Notice is given to a director when it is delivered personally to him,
left at his residence or usual place of business, or sent by telegraph,
facsimile transmission or telephone, at least 24 hours before the time of the
meeting or, in the alternative, by mail to his address as it shall appear on the
records of the Corporation, at least 72 hours before the time of the meeting.
Unless these By-Laws or a resolution of the Board of Directors provides
otherwise, the notice need not state the business to be transacted at or the
purposes of any regular or special meeting of the Board of Directors. No notice
of any meeting of the Board of Directors need be given to any director who
attends except where a director
-5-
<PAGE>
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened, or to any
director who, in a writing executed and filed with the records of the meeting
either before or after the holding thereof, waives such notice. Any meeting of
the Board of Directors, regular or special, may adjourn from time to time to
reconvene at the same or some other place, and no notice need be given of any
such adjourned meeting other than by announcement.
SECTION 2.09. Action by Directors. A majority of the entire Board of
-------------------
Directors shall constitute a quorum for the transaction of business. In the
absence of a quorum, the directors present by majority vote and without notice
other than by announcement may adjourn the meeting from time to time until a
quorum shall attend. At any such adjourned meeting at which a quorum shall be
present, any business may be transacted which might have been transacted at the
meeting as originally notified. Unless statute or the Charter or By-Laws
requires a greater proportion, the action of a majority of the directors present
at a meeting at which a quorum is present is action of the Board of Directors.
Any action required or permitted to be taken at a meeting of the Board of
Directors may be taken without a meeting, if an unanimous written consent which
sets forth the action is signed by each member of the Board and filed with the
minutes of proceedings of the Board.
SECTION 2.10. Meeting by Conference Telephone. Members of the Board of
-------------------------------
Directors may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time. Participation in a meeting by these means
constitutes presence in person at a meeting.
SECTION 2.11. Compensation. By resolution of the Board of Directors a
------------
fixed sum and expenses, if any, for attendance at each regular or special
meeting of the Board of Directors or of committees thereof, and other
compensation for their services as such or on committees of the Board of
Directors, may be paid to directors. Directors who are affiliates of any entity
serving as investment adviser or administrator of the Corporation need not be
paid for attendance at meetings of the board or committees thereof for which
fees are paid to other directors. A director who serves the Corporation in any
other capacity also may receive compensation for such other services, pursuant
to a resolution of the directors.
SECTION 2.12. Resignation. Any director may resign at any time by sending
-----------
a written notice of such resignation to the home office of the Corporation
addressed to the Chairman or the President. Unless otherwise specified therein
such resignation shall take effect upon receipt thereof by the Chairman or the
President.
SECTION 2.13. Presumption of Assent. A director of the Corporation who is
---------------------
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent or abstention shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person acting
as the secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the Secretary of the Corporation immediately
after the
-6-
<PAGE>
adjournment of the meeting. Such right to dissent shall not apply to
a director who votes in favor of such action.
ARTICLE III
COMMITTEES
SECTION 3.01. Committees. The Board of Directors may appoint from among
----------
its members an Executive Committee, an Audit Committee, and other committees
composed of one or more directors and delegate to these committees any of the
powers of the Board of Directors, except the power to authorize dividends on
stock, elect directors, issue stock other than as provided in the next sentence,
recommend to the stockholders any action which requires stockholder approval,
amend these By-Laws, or approve any merger or share exchange which does not
require stockholder approval. If the Board of Directors has given general
authorization for the issuance of stock providing for or establishing a method
or procedure for determining the maximum number of shares to be issued, a
committee of the Board, in accordance with that general authorization or any
stock option or other plan or program adopted by the Board of Directors, may
authorize the terms on which any stock may be issued, including all terms and
conditions required or permitted to be established or authorized by the Board of
Directors.
SECTION 3.02. Committee Procedure. Each committee may fix rules of
-------------------
procedure for its business. A majority of the members of a committee shall
constitute a quorum for the transaction of business and the act of a majority of
those present at a meeting at which a quorum is present shall be the act of the
committee. The members of a committee present at any meeting, whether or not
they constitute a quorum, may appoint a director to act in the place of an
absent member. Any action required or permitted to be taken at a meeting of a
committee may be taken without a meeting, if an unanimous written consent which
sets forth the action is signed by each member of the committee and filed with
the minutes of the committee. The members of a committee may conduct any
meeting thereof by conference telephone in accordance with the provisions of
Section 2.10.
SECTION 3.03. Emergency. In the event of a state of disaster of
---------
sufficient severity to prevent the conduct and management of the affairs and
business of the Corporation by its directors and officers as contemplated by the
Charter and these By-Laws, any two or more available members of the then
incumbent Executive Committee shall constitute a quorum of that Committee for
the full conduct and management of the affairs and business of the Corporation
in accordance with the provisions of Section 3.01. In the event of the
unavailability, at such time, of a minimum of two members of the then incumbent
Executive Committee, the available directors shall elect an Executive Committee
consisting of any two members of the Board of Directors, whether or not they be
officers of the Corporation, which two members shall constitute the Executive
Committee for the full conduct and management of the affairs of the Corporation
in accordance with the foregoing provisions of this Section. This Section shall
be subject to implementation by resolution of the Board of Directors passed from
time to time for that
-7-
<PAGE>
purpose, and any provisions of these By-Laws (other than this Section)
and any resolutions which are contrary to the provisions of this Section or to
the provisions of any such implementary resolutions shall be suspended until it
shall be determined by any interim Executive Committee acting under this Section
that it shall be to the advantage of the Corporation to resume the conduct and
management of its affairs and business under all the other provisions of these
By-Laws.
ARTICLE IV
OFFICERS
SECTION 4.01. Executive and Other Officers. The Corporation shall have a
----------------------------
President, a Secretary and a Treasurer. The Corporation may also have a
Chairman. The Board of Directors shall designate who shall serve as chief
executive officer, who shall have general supervision of the business and
affairs of the Corporation, and may designate a chief operating officer, who
shall have supervision of the operations of the Corporation. In the absence of
any designation by the Board of Directors, the Chairman, if one is elected,
shall serve as chief executive officer, and the President shall serve as chief
operating officer. In the absence of the Chairman, or if a Chairman is not
elected, the President shall be the chief executive officer. The same person
may hold both offices. The Corporation may also have one or more Vice-
Presidents, assistant officers and subordinate officers as may be established by
the Board of Directors. A person may hold more than one office in the
Corporation except that no person may serve concurrently as both President and
Vice-President of the Corporation. The Chairman shall be a director, and the
other officers may be directors.
SECTION 4.02. Chairman. The Chairman shall preside at all meetings of the
--------
Board of Directors and of the stockholders at which he shall be present. Unless
otherwise specified by the Board of Directors, he shall be the chief executive
officer of the Corporation. In general, he shall perform such duties as are
customarily performed by the chief executive officer of a corporation, and may
perform any duties of the President and shall perform such other duties and have
such other powers as are from time to time assigned to him by the Board of
Directors.
SECTION 4.03. President. Unless otherwise provided by resolution of the
---------
Board of Directors, the President, in the absence of the Chairman, shall preside
at all meetings of the Board of Directors and of the stockholders at which he
shall be present. Unless otherwise specified by the Board of Directors, the
President shall be the chief operating officer of the Corporation and perform
the duties customarily performed by chief operating officers. He may execute,
in the name of the Corporation, all authorized deeds, mortgages, bonds,
contracts or other instruments, except in cases in which the signing and
execution thereof shall have been expressly delegated to some other officer or
agent of the Corporation. In general, he shall perform such other duties
customarily performed by a president of a corporation and shall perform such
other duties and have such other powers as are from time to time assigned to him
by the Board of Directors or the chief executive officer of the Corporation.
-8-
<PAGE>
SECTION 4.04. Vice-Presidents. The Vice-President or Vice-Presidents,
---------------
at the request of the chief executive officer or the President, or in the
President's absence or during his inability to act, shall perform the duties and
exercise the functions of the President, and when so acting shall have the
powers of the President. If there be more than one Vice-President, the Board of
Directors may determine which one or more of the Vice-Presidents shall perform
any of such duties or exercise any of such functions, or if such determination
is not made by the Board of Directors, the chief executive officer or the
President may make such determination; otherwise any of the Vice-Presidents may
perform any of such duties or exercise any of such functions. Each Vice-
President shall perform such other duties and have such other powers, and have
such additional descriptive designations in their titles (if any), as are from
time to time assigned to them by the Board of Directors, the chief executive
officer, or the President.
SECTION 4.05. Secretary. The Secretary shall keep the minutes of the
---------
meetings of the stockholders, of the Board of Directors and of any committees,
in books provided for the purpose; he shall see that all notices are duly given
in accordance with the provisions of these By-Laws or as required by law; he
shall be custodian of the records of the Corporation; he may witness any
document on behalf of the Corporation, the execution of which is duly
authorized, see that the corporate seal is affixed where such document is
required or desired to be under its seal, and, when so affixed, may attest the
same. In general, he shall perform such other duties customarily performed by a
secretary of a corporation, and shall perform such other duties and have such
other powers as are from time to time assigned to him by the Board of Directors,
the chief executive officer, or the President.
SECTION 4.06. Treasurer. The Treasurer shall have charge of and be
---------
responsible for all funds, securities, receipts and disbursements of the
Corporation, and shall deposit, or cause to be deposited, in the name of the
Corporation, all moneys or other valuable effects in such banks, trust companies
or other depositories as shall, from time to time, be selected by the Board of
Directors; he shall render to the President and to the Board of Directors,
whenever requested, an account of the financial condition of the Corporation.
In general, he shall perform such other duties customarily performed by a
treasurer of a corporation, and shall perform such other duties and have such
other powers as are from time to time assigned to him by the Board of Directors,
the chief executive officer, or the President.
SECTION 4.07. Assistant and Subordinate Officers. The assistant and
----------------------------------
subordinate officers of the Corporation are all officers below the office of
Vice-President, Secretary or Treasurer. The assistant or subordinate officers
shall have such duties as are from time to time assigned to them by the Board of
Directors, the chief executive officer, or the President.
SECTION 4.08. Election, Tenure and Removal of Officers. The Board of
----------------------------------------
Directors shall elect the officers of the Corporation. The Board of Directors
may from time to time authorize any committee or officer to appoint assistant
and subordinate officers. Election or appointment of an officer, employee or
agent shall not of itself create contract rights. All officers shall be
appointed to hold their offices, respectively, during the pleasure of the Board.
The Board of Directors (or, as to any assistant or subordinate officer, any
committee or officer authorized by
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the Board) may remove an officer at any time. The removal of an officer does not
prejudice any of his contract rights. The Board of Directors (or, as to any
assistant or subordinate officer, any committee or officer authorized by the
Board) may fill a vacancy which occurs in any office for the unexpired portion
of the term.
SECTION 4.09. Compensation. The Board of Directors shall have power to fix
------------
the salaries and other compensation and remuneration, of whatever kind, of all
officers of the Corporation. No officer shall be prevented from receiving such
salary by reason of the fact that he is also a director of the Corporation. The
Board of Directors may authorize any committee or officer, upon whom the power
of appointing assistant and subordinate officers may have been conferred, to fix
the salaries, compensation and remuneration of such assistant and subordinate
officers.
ARTICLE V
STOCK
SECTION 5.01. Certificates for Stock. The Board of Directors may determine
----------------------
to issue certificated or uncertificated shares of capital stock and other
securities of the Corporation. For certificated stock, each stockholder is
entitled to certificates which represent and certify the shares of stock he
holds in the Corporation. Each stock certificate shall include on its face the
name of the Corporation, the name of the stockholder or other person to whom it
is issued, and the class of stock and number of shares it represents. It shall
also include on its face or back (a) a statement of any restrictions on
transferability and (b) a statement which provides in substance that the
Corporation will furnish to any stockholder on request and without charge a full
statement of the designations and any preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption of the stock of each class which the
Corporation is authorized to issue, of the differences in the relative rights
and preferences between the shares of each series of a preferred or special
class in series which the Corporation is authorized to issue, to the extent they
have been set, and of the authority of the Board of Directors to set the
relative rights and preferences of subsequent series of a preferred or special
class of stock and any restrictions on transferability. Such request may be
made to the Secretary or to its transfer agent. Upon the issuance of
uncertificated shares of capital stock, the Corporation shall send the
stockholder a written statement of the same information required above on the
certificate and by the Maryland Uniform Commercial Code - Investment Securities.
It shall be in such form, not inconsistent with law or with the Charter, as
shall be approved by the Board of Directors or any officer or officers
designated for such purpose by resolution of the Board of Directors. Each stock
certificate shall be signed by the Chairman, the President, or a Vice-President,
and countersigned by the Secretary, an Assistant Secretary, the Treasurer, or an
Assistant Treasurer. Each certificate may be sealed with the actual corporate
seal or a facsimile of it or in any other form and the signatures may be either
manual or facsimile signatures. A certificate is valid and may be issued
whether or not an officer who signed it is still an officer when it is issued.
A certificate may not be issued until the stock represented by it is
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fully paid, except in the case of stock purchased under a plan, agreement, or
transaction as provided by law and with such statement on future payments as
required by law.
SECTION 5.02. Transfers. The Board of Directors shall have power and
---------
authority to make such rules and regulations as it may deem expedient concerning
the issue, transfer and registration of stock; and may appoint transfer agents
and registrars thereof. The duties of transfer agent and registrar may be
combined.
SECTION 5.03. Record Dates or Closing of Transfer Books. The Board of
-----------------------------------------
Directors may set a record date or direct that the stock transfer books be
closed for a stated period for the purpose of making any proper determination
with respect to stockholders, including which stockholders are entitled to
notice of a meeting, vote at a meeting, receive a dividend, or be allotted other
rights. The record date may not be prior to the close of business on the day
the record date is fixed nor, subject to Section 1.06, more than 90 days before
the date on which the action requiring the determination will be taken; the
transfer books may not be closed for a period longer than 20 days; and, in the
case of a meeting of stockholders, the record date or the closing of the
transfer books shall be at least ten days before the date of the meeting.
SECTION 5.04. Stock Ledger. The Corporation shall maintain a stock ledger
------------
which contains the name and address of each stockholder and the number of shares
of stock which the stockholder holds. The stock ledger may be in written form
or in any other form which can be converted within a reasonable time into
written form for visual inspection. The original or a duplicate of the stock
ledger shall be kept at the offices of a transfer agent, or, if none, at the
principal office in the State of Maryland or the principal executive offices of
the Corporation.
SECTION 5.05. Lost Stock Certificates. The Board of Directors of the
-----------------------
Corporation may determine the conditions for issuing a new stock certificate in
place of one which is alleged to have been lost, stolen or destroyed, or the
Board of Directors may delegate such power to any officer or officers of the
Corporation. In their discretion, the Board of Directors or such officer or
officers may require the owner of the certificate to give bond, with sufficient
surety, to indemnify the Corporation against any loss or claim arising as a
result of the issuance of a new certificate. In their discretion, the Board of
Directors or such officer or officers may refuse to issue such new certificate
save upon the order of some court having jurisdiction in the premises.
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<PAGE>
ARTICLE VI
FINANCE
SECTION 6.01. Checks, Drafts, Etc. All checks, drafts and orders for the
-------------------
payment of money, notes and other evidences of indebtedness, issued in the name
of the Corporation, shall, unless otherwise provided by resolution of the Board
of Directors, be signed by any two of the Chairman, the President, a Vice-
President, an Assistant Vice-President, and the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary.
SECTION 6.02. Annual Statement of Affairs. The President or chief account
---------------------------
officer shall prepare annually a full and correct statement of the affairs of
the Corporation, to include a balance sheet and a financial statement of
operations for the preceding fiscal year. The statement of affairs shall be
placed on file at the Corporation's principal office within 120 days after the
end of the fiscal year.
SECTION 6.03. Fiscal Year. The fiscal year of the Corporation shall be the
-----------
12-calendar-month period ending May 31 in each year, unless otherwise provided
by the Board of Directors.
SECTION 6.04. Dividends. If declared by the Board of Directors at any
---------
meeting thereof, the Corporation may pay dividends on its shares in cash,
property, or in shares of the capital stock of the Corporation, unless such
dividend is contrary to law or to a restriction contained in the Charter.
ARTICLE VII
INDEMNIFICATION
SECTION 7.02. Procedure. Any indemnification by the Corporation for a
---------
specific action, suit or proceeding shall (unless ordered by a court) be made by
the Corporation only upon (a) a final decision on the merits by a court or other
body before whom the action, suit or proceeding was brought that a person
permitted by the Charter to seek indemnification (the "Covered Person") was not
liable by reason of Disabling Conduct (hereafter defined), (b) dismissal of the
proceeding against the Covered Person for insufficiency of evidence of any
Disabling Conduct, or (c) a reasonable determination, based upon a review of the
facts, by a majority of a quorum of the directors who are neither "interested
persons" of the Corporation as defined in the Investment Company Act nor parties
to the proceeding ("Disinterested, Non-Party Directors"), or an independent
legal counsel in a written opinion, that the Covered Person was not liable by
reason of Disabling Conduct. Disabling Conduct includes (a) liability in
connection with any proceeding in which it is determined that (i) the act or
omission of the Covered Person was material to the matter giving rise to the
proceeding, and was committed in bad faith or was the result of active and
deliberate dishonesty, or (ii) the Covered Person actually received an
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improper personal benefit in money, property or services, or (iii) in the case
of any criminal proceeding, the Covered Person had reasonable cause to believe
that the act or omission was unlawful, and (b) liability to the Corporation or
its stockholders to which the Covered Person would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office. The termination of any
proceeding by judgment, order or settlement shall not create a presumption that
the Covered Person did not meet the required standard of conduct; the
termination of any proceeding by conviction, or a plea of nolo contendere or its
equivalent, or an entry of an order of probation prior to judgment, shall create
a rebuttable presumption that the Covered Person did not meet the required
standard of conduct. Any determination pursuant to this Section 7.01 shall not
prevent recovery from any Covered Person of any amount paid to him in accordance
with this By-Law as indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction to be liable by reason of
Disabling Conduct.
SECTION 7.02. Enforcement of Indemnification Right. Any indemnification,
------------------------------------
or payment of expenses in advance of the final disposition of any action, suit
or proceeding, shall be made promptly, and in any event within 60 days, upon the
written request of the Covered Person. The right to indemnification and advances
hereunder shall be enforceable by the Covered Person in any court of competent
jurisdiction, if (i) the Corporation denies such request, in whole or in part,
or (ii) no disposition thereof is made within 60 days. The Covered Person's
costs and expenses incurred in connection with successfully establishing his
right to indemnification, in whole or in part, in any such action shall also be
reimbursed by the Corporation. It shall be a defense to any action for advance
for expenses that (a) a determination has been made that the facts then known to
those making the determination would preclude indemnification or (b) the
Corporation has not received both (i) an undertaking as required by law to repay
such advances in the event it shall ultimately be determined that the standard
of conduct has not been met and (ii) a written affirmation by the Covered Person
of such Covered Person's good faith belief that the standard of conduct
necessary for indemnification by the Corporation has been met.
SECTION 7.03. Advance Payment of Expenses. Reasonable expenses (including
---------------------------
attorney's fees) incurred by a Covered Person may be paid or reimbursed by the
Corporation in advance of the final disposition of an action, suit or proceeding
upon receipt by the Corporation of (a) a written affirmation by the Covered
Person of his good faith belief that the standard of conduct necessary for
indemnification under this By-Law has been met and (b) a written undertaking by
or on behalf of the Covered Person to repay the amount if it is ultimately
determined that such standard of conduct has not been met, so long as either (i)
the Covered Person has provided a security for his undertaking, (ii) the
Corporation is insured against losses arising by reason of any lawful advances,
or (iii) a majority of a quorum of the Disinterested, Non-Party Directors or an
independent legal counsel in a written opinion has determined, based on a review
of readily available facts (as opposed to a full trial-type inquiry), that there
is reason to believe that the Covered Person ultimately will be found entitled
to indemnification.
SECTION 7.04. Insurance. The Corporation may purchase and maintain
---------
insurance on behalf of any Covered Person against any liability asserted against
him and incurred by him in
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any such capacity, or arising out of his status as such; provided, however, that
the Corporation shall not purchase insurance to indemnify any Covered Person
against liability for Disabling Conduct.
SECTION 7.05. Exclusivity, Etc. The indemnification and advance of expenses
----------------
provided by the Charter and this By-Law shall not be deemed exclusive of any
other rights to which a Covered Person seeking indemnification or advance of
expenses may be entitled under any law (common or statutory), or any agreement,
vote of stockholders or disinterested directors, or other provision that is
consistent with law, both as to action in an official capacity and as to action
in another capacity while holding office or while employed by or acting as agent
for the Corporation, shall continue in respect of all events occurring while the
Covered Person was a director or officer after such Covered Person has ceased to
be a director or officer, and shall inure to the benefit of the estate, heirs,
executors and administrators of such Covered Person. The Corporation shall not
be liable for any payment under this By-Law in connection with a claim made by a
director or officer to the extent such director or officer has otherwise
actually received payment under an insurance policy, agreement, vote or
otherwise, of the amounts otherwise indemnifiable hereunder. All rights to
indemnification and advance of expenses under the Charter and hereunder shall be
deemed to be a contract between the Corporation and each director or officer of
the Corporation who serves or served in such capacity at any time while this By-
Law is in effect. Nothing herein shall prevent the amendment of this By-Law,
provided that no such amendment shall diminish the rights of any Covered Person
hereunder with respect to events occurring or claims made before its adoption or
as to claims made after its adoption in respect of events occurring before its
adoption. Any repeal or modification of this By-Law shall not in any way
diminish any rights to indemnification or advance of expenses of a Covered
Person or the obligations of the Corporation arising hereunder with respect to
events occurring, or claims made, while this By-Law or any provision hereof is
in force.
SECTION 7.06. Severability; Definitions. The invalidity or
-------------------------
unenforceability of any provision of this Article VII shall not affect the
validity or enforceability of any other provision hereof. The phrase "this By-
Law" in this Article VII means this Article VII in its entirety.
ARTICLE VIII
SUNDRY PROVISIONS
SECTION 8.01. Books and Records. The Corporation shall keep correct and
-----------------
complete books and records of its accounts and transactions and minutes of the
proceedings of its stockholders and Board of Directors and of any executive or
other committee when exercising any of the powers of the Board of Directors.
The books and records of the Corporation may be in written form or in any other
form which can be converted within a reasonable time into written form for
visual inspection. Minutes shall be recorded in written form but may be
maintained in
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the form of a reproduction. The original or a certified copy of these By-Laws
shall be kept at the principal office of the Corporation.
SECTION 8.02. Corporate Seal. The Board of Directors shall provide a
--------------
suitable seal, bearing the name of the Corporation, which shall be in the charge
of the Secretary. The Board of Directors may authorize one or more duplicate
seals and provide for the custody thereof. If the Corporation is required to
place its corporate seal to a document, it is sufficient to meet the requirement
of any law, rule or regulation relating to a corporate seal to place the word
"(seal)" adjacent to the signature of the person authorized to sign the document
on behalf of the Corporation.
SECTION 8.03. Bonds. The Board of Directors may require any officer, agent
-----
or employee of the Corporation to give a bond to the Corporation, conditioned
upon the faithful discharge of his duties, with one or more sureties and in such
amount as may be satisfactory to the Board of Directors.
SECTION 8.04. Voting Stock in Other Corporations. Stock of other
----------------------------------
corporations or associations, registered in the name of the Corporation, may be
voted by the Chairman, the President, a Vice-President, the Treasurer or a proxy
appointed by any of them. The Board of Directors, however, may by resolution
appoint some other person to vote such shares, in which case such person shall
be entitled to vote such shares upon the production of a certified copy of such
resolution.
SECTION 8.05. Mail. Any notice or other document which is required by
----
these By-Laws to be mailed shall be deposited in the United States mails,
postage prepaid.
SECTION 8.06. Contracts and Agreements. To the extent permitted by
------------------------
applicable law, and except as otherwise prescribed by the Charter or these By-
Laws, the Board of Directors may authorize any officer, employee or agent of the
Corporation to enter into any contract or execute and deliver any instrument in
the name of and on behalf of the Corporation. Such authority may be general or
confined to specific instances. A person who holds more than one office in the
Corporation may not act in more than one capacity to execute, acknowledge or
verify an instrument required by law to be executed, acknowledged or verified by
more than one officer.
SECTION 8.07. Reliance. Each director, officer, employee and agent of the
--------
Corporation shall, in the performance of his duties with respect to the
Corporation, be fully justified and protected with regard to any act or failure
to act in reliance in good faith upon the books of account or other records of
the Corporation, upon an opinion of counsel or upon reports made to the
Corporation by any of its officers or employees or by the adviser, accountants,
appraisers or other experts or consultants selected by the Board of Directors or
officers of the Corporation, regardless of whether such counsel or expert may
also be a director.
SECTION 8.08. Certain Rights of Directors, Officers, Employees and Agents.
-----------------------------------------------------------
The directors shall have no responsibility to devote their full time to the
affairs of the Corporation.
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<PAGE>
Any director or officer, employee or agent of the Corporation, in his personal
capacity or in a capacity as an affiliate, employee or agent of any other
person, or otherwise, may have business interests and engage in business
activities similar to or in addition to those of or relating to the Corporation.
SECTION 8.09. Employment of Custodian. The Corporation shall place and
-----------------------
maintain its securities and similar investments in the custody of one or more
custodians meeting the requirements of the Investment Company Act, or may serve
as its own custodian in accordance with such rules and regulations or orders as
the Securities and Exchange Commission may from time to time prescribe for the
protection of investors. Securities held by a custodian may be registered in
the name of the Corporation or any such custodian, or the nominee of either of
them. Subject to such rules, regulations and orders as the Commission may adopt
as necessary or appropriate for the protection of investors, the Corporation or
any custodian, with the consent of the Corporation, may deposit all or any part
of the securities owned by the Corporation in a system for the central handling
of securities, pursuant to which system all securities of a particular class or
series of any issuer deposited within the system are treated as fungible and may
be transferred or pledged by bookkeeping entry without physical delivery of such
securities.
SECTION 8.10. Amendments. Subject to the special provisions of Section
----------
2.02, (a) any and all provisions of these By-Laws may be altered or repealed and
new bylaws may be adopted at any annual meeting of the stockholders, or at any
special meeting called for that purpose, and (b) the Board of Directors shall
have the power, at any regular or special meeting thereof, to make and adopt new
bylaws, or to amend, alter or repeal any of these By-Laws of the Corporation.
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<PAGE>
Exhibit 5
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the __ day of June, 1998, by and between The Nevis
Fund, Inc., a Maryland corporation (the "Fund"), and Nevis Capital Management,
Inc., a Maryland corporation (the "Adviser").
W I T N E S S E T H:
WHEREAS, the Fund is engaged in business as an open-end management
investment company and is so registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"); and
WHEREAS, the Adviser is engaged in the business of providing investment
management and advisory services and is registered under the Investment Advisers
Act of 1940, as amended (the "Advisers Act"); and
WHEREAS, the Fund desires to retain the Adviser to provide investment
management services, and the Adviser is willing to perform such services on the
terms set forth herein;
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth herein, the parties hereto agree as follows:
1. Appointment of Adviser. The Fund hereby appoints the Adviser as
----------------------
investment adviser of the Fund for the period and on the terms set forth in this
Agreement. The Adviser accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
2. Duties of Adviser. (a) Subject to the supervision of the Board of
-----------------
Directors of the Fund, the Adviser shall be responsible for providing a
continuous investment program for the Fund, including the provision of
investment research and management with respect to all securities and
investments and cash equivalents purchased, sold or held by the Fund and the
selection of brokers and dealers through which portfolio transactions for the
Fund are to be executed. In carrying out its responsibilities under this
Agreement, the Adviser shall at all times act in accordance with the investment
objectives, policies and restrictions of the Fund as stated in the Fund's
registration statement under the Securities Act of 1933 and the Investment
Company Act, as amended from time to time (the "Registration Statement"), as
well as all applicable laws and regulations.
(b) The Adviser agrees that it will:
(i) promptly advise the Fund's custodian and accounting services
agent of each purchase and sale, as the case may be, made on behalf of the Fund
of any security or other investment specifying in each case: the name and
quantity of the investment purchased or sold, the units and aggregate purchase
or sale price, the commission paid, the market on which the transaction was
effected, the trade date, the settlement date, the identity of the effecting
broker or
<PAGE>
dealer, and such other information as the Fund's custodian or accounting agent
may reasonably request, all in such manner as the Fund's custodian or accounting
agent may from time to time reasonably request;
(ii) provide, in a timely manner, such information as the Fund or
its authorized agent may reasonably request in connection with the computation
of the net asset value and net income of the Fund in accordance with the
procedures prescribed in the Registration Statement, or more frequently as
requested by the Board of Directors of the Fund; provided, however, that the
Adviser shall not be responsible for any such computation or for the calculation
of the net asset value per share of the Fund;
(iii) render regular reports to the Board of Directors of the Fund
concerning the Adviser's performance of its responsibilities under this
Agreement and such other periodic and special reports as the Board may request;
in particular, the Adviser agrees that it will attend meetings of the Board of
Directors and the validly constituted committees thereof;
(iv) permit individuals who are officers or employees of the
Adviser to serve (if duly elected or appointed) as officers, directors, or
members of any advisory board or committee of the Fund; and
(v) furnish office space, facilitates, equipment and personnel
adequate for the performance of its duties under this Agreement.
3. Brokerage Transactions. (a) The Adviser, subject to the control and
----------------------
direction of the Board of Directors of the Fund, shall have authority and
discretion to select brokers and dealers to execute portfolio transactions for
the Fund, and to select the markets on or in which the transactions will be
executed. In acting pursuant to this Section 3, the Adviser shall place orders
through such brokers or dealers in conformity with the policies with respect to
portfolio transactions set forth in the Registration Statement. It is understood
that neither the Fund nor the Adviser will adopt a formula for allocation of the
brokerage of the Fund. It is further understood that the Adviser may, to the
extent permitted by applicable laws and regulations, aggregate securities to be
sold or purchased for the Fund and for other clients in order to obtain the most
favorable execution. In such event, allocation for the securities purchased or
sold, as well as expenses incurred in the transaction, shall be made by the
Adviser in the manner it considers to be the most equitable and consistent with
its fiduciary obligations to the Fund and to its other clients. The Adviser
shall provide such reports as the Board of Directors may reasonably request with
respect to the Fund's total brokerage and portfolio transaction activities, and
the manner in which such transactions were allocated.
(b) The Adviser agrees that in placing orders with brokers and
dealers, it will attempt to obtain the best net results in terms of price and
execution; provided that, on behalf of the Fund, the Adviser may, in its
discretion, purchase and sell portfolio securities through broker-dealers that
provide research services (within the meaning of Section 28(e) of the Securities
Exchange Act of 1934), and the Adviser may cause the Fund to pay those broker-
dealers, in return for such brokerage and research services, a higher commission
than may
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be charged by other broker-dealers, subject to the Adviser determining in good
faith that such commission is reasonable in terms either of the particular
transaction or of the overall responsibility of the Adviser to the Fund and its
other clients.
4. Books and Records. The Adviser shall create and maintain all necessary
-----------------
books and records in accordance with all applicable laws and regulations,
including, but not limited to, the records required by Section 31(a) of the
Investment Company Act and the rules thereunder, as the same may be amended from
time to time, pertaining to the services performed by it hereunder which are not
otherwise created and maintained by or on behalf of the Fund. The Adviser agrees
to preserve, for the periods prescribed by Rule 31a-2 under the Investment
Company Act, the records required to be maintained by Rule 31a-1 under the
Investment Company Act. In compliance with the requirements of Rule 31a-3 under
the Investment Company Act, the Adviser hereby agrees that all records which it
maintains for the Fund are the property of the Fund. The Adviser further agrees
that the Fund, or the Fund's authorized representatives, shall have access to
such books and records at all times during the Adviser's normal business hours
and that copies of any such books and records shall be provided to the Fund
promptly upon request by the Fund or its authorized representative.
5. Activities and Affiliates of Adviser. (a) The services furnished by
------------------------------------
the Adviser hereunder shall not be deemed to be exclusive, the Adviser being
free to render investment management services to others and to engage in other
activities; provided, however, that such services and activities do not, during
the term of this Agreement, interfere in a material manner with the Adviser's
ability to meet its obligations to the Fund hereunder.
(b) The Fund acknowledges that the Adviser, or one or more of its
affiliated persons, may have investment responsibilities or render investment
advice to or perform other investment advisory services for other individuals or
entities; and that the Adviser, its affiliated persons or any of its or their
directors, officers, agents or employees may buy, sell or trade in securities
for its or their respective accounts ("Affiliated Accounts"). Subject to the
provisions of Section 3, the Fund agrees that the Adviser or its affiliated
persons may give advice or exercise investment responsibility and take such
other action with respect to Affiliated Accounts which may differ from the
advice given or the timing or nature of action taken with respect to the Fund,
provided that the Adviser acts in good faith. The Fund acknowledges that one or
more Affiliated Accounts may at any time hold, acquire, increase, decrease,
dispose of or otherwise deal with positions in investments in which the Fund may
have an interest. The Adviser shall have no obligation to acquire for the Fund
any investment that an Affiliated Account may acquire, and the Fund shall have
no first refusal, co-investment or other rights in respect of any such
investment, either for the Fund or otherwise.
(c) Subject to and in accordance with the charter and bylaws of the
Fund, as currently in effect and as amended from time to time, and the
Investment Company Act and the rules thereunder, it is understood that
directors, officers, agents and shareholders of the Fund are or may be
interested in the Adviser or its affiliated persons, as directors, officers,
agents and shareholders or otherwise; that directors, officers, agents and
shareholders of the Adviser or its affiliated persons are or may be interested
persons of the Fund, as directors, officers, agents,
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<PAGE>
shareholders or otherwise; that the Adviser or its affiliated persons may be
interested in the Fund, as shareholders or otherwise; and that the effect of any
such interests shall be governed by the charter and bylaws of the Fund, and the
Investment Company Act and the rules thereunder.
6. Expenses. (a) The Adviser agrees to bear all expenses incurred by it in
--------
performing its duties under this Agreement. In addition, during the term of this
Agreement, the Adviser shall, at is own expense, pay all ordinary expenses
incurred in the conduct of the Fund's operations, including, without limitation,
the following: the expenses of organizing the Fund and continuing its existence;
fees and expenses of preparing and filing the Fund's registration statement
under the Securities Act of 1933 and the Investment Company Act, and any
amendments thereto; fees and expenses of directors and officers of the Fund;
fees for administrative services; expenses of preparing, printing and
distributing prospectuses, shareholder reports and other materials to
shareholders; interest; brokerage commissions; taxes and governmental fees;
expenses of issue, purchase, repurchase and redemption of shares; charges and
expenses of custodians, transfer agents, dividend disbursing agents and
registrars; printing and mailing costs; expenses of auditing, accounting and
legal services; expenses of meetings of the Board of Directors and shareholders
and proxy solicitations; insurance expenses; and association membership dues.
(b) The Fund shall pay, or arrange for others to pay, all
extraordinary expenses incurred in the course of its business.
7. Compensation. (a) For the services provided and the expenses assumed
------------
pursuant to this Agreement, the Fund shall pay the Adviser a fee at the annual
rate of 1.50% of the average daily net assets of the Fund. Such fee shall be
accrued daily and paid monthly as soon as practicable after the end of each
month. For purposes of calculating the Adviser's fee, the value of the net
assets of the Fund shall be determined as described in the Registration
Statement. If the Adviser shall serve for less than the whole of any month, the
foregoing compensation shall be prorated.
(b) The Adviser may, from time to time and for such periods as it
deems appropriate, reduce its compensation from the Fund to the extent the
expenses of the Fund exceed such expense limitation as the Adviser may, by
notice to the Fund, voluntarily declare to be effective.
8. Liability of Adviser. The Adviser shall not be liable to the Fund or
--------------------
any shareholder for any act or omission in connection with the performance of
its duties hereunder including, without limitation, losses that may be sustained
in the purchase, holding or sale of any security or the making of any investment
for or on behalf of the Fund, except for liability to which the Adviser would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of reckless disregard
of its obligations and duties under this Agreement.
9. Term and Termination. (a) This Agreement shall become effective as of
--------------------
the date of its execution and shall continue in effect for two years from such
date, provided that this
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<PAGE>
Agreement has first been approved by (i) the Board of Directors of the Fund,
including a majority of the directors who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting called for the
purpose of voting on such approval, and (ii) the vote of a majority of the
outstanding voting securities of the Fund. Thereafter, this Agreement shall
continue for successive periods of one year, but only so long as such
continuance is specifically approved at least annually by (i) the Board of
Directors or the vote of a majority of the outstanding voting securities of the
Fund, and (ii) the vote of a majority of the directors of the Fund who are not
parties to this Agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval.
(b) Notwithstanding any provision hereof, this Agreement may be
terminated at any time, without payment of any penalty, by the Board of
Directors of the Fund or by the vote of a majority of the outstanding voting
securities of the Fund on 60 days' written notice to the Adviser, or by the
Adviser on 60 days' written notice to the Fund. This Agreement shall terminate
automatically and immediately in the event of its assignment.
10. Use of Adviser's Name. The Fund may include the name "Nevis" or any
---------------------
other name derived from the name "Nevis" only for so long as this Agreement or
any extension, renewal or amendment hereof remains in effect, including any
similar agreement with any organization which shall have succeeded to the
business of the Adviser as investment adviser. At such time as this Agreement or
any extension, renewal or amendment hereof, or such other similar agreement
shall no longer be in effect, the Fund will (by corporate action, if necessary)
cease to use any name derived from the name "Nevis", any name similar thereto or
any other name indicating that it is advised by or otherwise connected with the
Adviser, or with any organization which shall have succeeded to the Adviser's
business as investment adviser.
11. Amendment. No material provision of this Agreement may be changed,
---------
waived, discharged or terminated except by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of any material term of this Agreement
shall be effective until it has been approved both by the Board of Directors of
the Fund, including a majority of the directors who are not parties to this
Agreement or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such amendment, and, when required by the
Investment Company Act, by a majority of the outstanding voting securities of
the Fund.
12. Definitions. As used in this Agreement, the terms "affiliated person",
-----------
"assignment", "control", "interested person", and "vote of a majority of the
outstanding voting securities" shall have the meanings given them in the
Investment Company Act, subject to any applicable orders of exemption issued by
the Securities and Exchange Commission.
13. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Maryland, without giving effect to the
choice of law principles thereof. To the extent applicable Maryland law or any
provision of this Agreement conflicts with applicable provisions of the
Investment Company Act, the Advisers Act, or other applicable federal laws or
regulations, the latter shall control.
-5-
<PAGE>
14. Miscellaneous. If any provision of this Agreement shall be held or made
-------------
invalid by a court decision, statute, rule or otherwise, the remainder shall not
be affected thereby. The title of this Agreement and the headings of the
sections herein are for convenience of the parties only, and are not intended to
be part of or affect the meaning or interpretation of this Agreement. This
Agreement constitutes the entire agreement of the parties hereto with respect to
the matters referred to herein, and no other agreement, verbal or otherwise,
shall be binding as between the parties. No failure or delay on the part of any
party hereto in exercising any right power or remedy hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. Any waiver granted hereunder must be in
writing and shall be valid only in the specific instance in which given.
IN WITNESS WHEREOF, this Agreement has been executed for and on behalf of
the undersigned as of the day and year first above written.
Attest: THE NEVIS FUND, INC.
By:
- ------------------------------- ------------------------------
Secretary
Attest: NEVIS CAPITAL MANAGEMENT, INC.
By:
- ------------------------------- ------------------------------
Secretary
-6-
<PAGE>
EXHIBIT 6
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of this ___ day of June, 1998, between The
Nevis Fund, Inc. (the "Fund"), a Maryland corporation, and SEI Investments
Distribution Co. (the "Distributor"), a Pennsylvania corporation.
WHEREAS, the Fund is registered as an investment company with the
Securities and Exchange Commission (the "SEC") under the Investment Company Act
of 1940, as amended (the "1940 Act"), and its shares are registered with the SEC
under the Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the Fund and Distributor hereby agree as follows:
ARTICLE 1. Sale of Shares. The Fund grants to the Distributor the
--------------
exclusive right to sell shares of common stock (the "Shares") of the Fund at the
net asset value per Share, plus any applicable sales charges in accordance with
the current prospectus, as agent and on behalf of the Fund, during the term of
this Agreement and subject to the registration requirements of the 1933 Act, the
rules and regulations of the SEC and the laws governing the sale of securities
in the various states ("Blue Sky Laws"). Notwithstanding any other provision
hereof, the Fund may terminate, suspend or withdraw the offering of Shares of
the Fund whenever, in its sole discretion, it deems such action to be desirable.
ARTICLE 2. Solicitation of Sales. In consideration of the rights
---------------------
granted to the Distributor by the Fund, the Distributor agrees to use all
reasonable efforts, consistent with its other business, in connection with the
distribution of Shares of the Fund; provided, however, that the Distributor
shall not be prevented from entering into like arrangements with other issuers.
The Distributor may sell Shares of the Fund to or through qualified dealers or
others and shall require each such dealer to conform to the provisions hereof,
the Registration Statement, the Prospectus and Statement of Additional
Information, and applicable law. The provisions of this paragraph do not
obligate the Distributor to register as a broker or dealer under the Blue Sky
Laws of any jurisdiction or to maintain its registration in any jurisdiction in
which it is now registered when it determines it would be uneconomical for it to
do so nor obligate the Distributor to sell any particular number of Shares.
ARTICLE 3. Authorized Representations. The Distributor is not
--------------------------
authorized by the Fund to give any information or to make any representations
other than those contained in the
1
<PAGE>
current registration statement and prospectus of the Fund filed with the SEC or
contained in Shareholder reports or other material that may be prepared by or on
behalf of the Fund for the Distributor's use. The Distributor may prepare and
distribute sales literature and other material as it may deem appropriate,
provided that such literature and materials have been prepared in accordance
with applicable rules and regulations.
ARTICLE 4. Registration of Shares. The Fund agrees that it will take
----------------------
all action necessary to register Shares under the federal and state securities
laws so that there will be available for sale the number of Shares the
Distributor may reasonably be expected to sell and to pay all fees associated
with said registration. The Fund shall make available to the Distributor such
number of copies of its currently effective prospectus and statement of
additional information as the Distributor may reasonably request. The Fund 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 of the Fund.
ARTICLE 5. Compensation; Distribution Plan Reports. A. As
---------------------------------------
compensation for providing the services under this Agreement:
(a) The Distributor shall receive from the Fund:
(1) all distribution and service fees, as applicable, at the
rate and under the terms and conditions set forth in each
distribution and shareholder services plan adopted by the
appropriate class of Shares, as such plans may be amended from
time to time, and subject to any further limitations on such
fees as the Board of Directors of the Fund may impose;
(2) all contingent deferred sales charges applied on redemptions
of Shares on the terms and subject to such waivers as are
described in the Fund's registration statement and current
prospectus, as amended from time to time, or as otherwise
required pursuant to applicable law; and
(3) all front-end sales charges, if any, on purchases of Shares
sold subject to such charges as described in the Fund's
registration statement and current prospectus, as amended from
time to time. The Distributor, or brokers, dealers and other
financial institutions and intermediaries that have entered into
agreements with the Distributor may collect the gross proceeds
derived from the sale of such Shares, remit the net asset value
thereof to the Fund upon receipt of the proceeds and retain the
applicable sales charge.
(b) The Distributor may reallow any or all of the distribution or
service fees, contingent deferred sales charges and front-end sales charges
which it is paid by the Fund
2
<PAGE>
to such brokers, dealers and other financial institutions and
intermediaries as the Distributor may from time to time determine.
B. The Distributor shall prepare and deliver reports to the Board of
Directors of the Fund on a regular basis, at least quarterly, showing the
payments made by the Fund to the Distributor pursuant to each distribution and
shareholder services plan adopted by the appropriate class of Shares, as such
plans may be amended from time to time, and the amounts expended by the
Distributor in connection with its activities hereunder and the purpose for
which such expenditures were made, as well as any supplemental reports as the
Board of Directors of the Fund may from time to time reasonably request.
ARTICLE 6. Indemnification of Distributor. The Fund agrees to
------------------------------
indemnify and hold harmless the Distributor and each of its directors and
officers and each person, if any, who controls the Distributor within the
meaning of Section 15 of the 1933 Act, against any loss, liability, claim,
damages or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damages, or expense and reasonable counsel
fees and disbursements incurred in connection therewith), arising by reason of
any person acquiring any Shares and based upon the allegation that the
registration statement, prospectus (other than an omitting prospectus prepared
pursuant to Rule 482 under the 1933 Act, unless such omitting prospectus has
been specifically approved by the Fund), Shareholder reports or other
information filed or made public by the Fund (as from time to time amended)
included an untrue statement of a material fact or omitted to state a material
fact required to be stated or necessary in order to make the statements made not
misleading. However, the Fund does not agree to indemnify the Distributor or any
other person or hold it or them harmless to the extent that the statements or
omission was made in reliance upon, and in conformity with, information
furnished to the Fund by or on behalf of the Distributor.
In no case (i) is the indemnity of the Fund to be deemed to protect the
Distributor or any other person against any liability to which the Distributor
or such person otherwise would be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of its or his duties or by reason
of its or his reckless disregard of the obligations and duties under this
Agreement, or (ii) is the Fund to be liable under the indemnity agreement
contained in this paragraph with respect to any claim made against the
Distributor or any person unless the Distributor or 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 such person
(or after the Distributor or such person shall have received notice of service
on any designated agent). However, failure to notify the Fund of any claim
shall not relieve the Fund from any liability which it may have to the
Distributor or any person against whom such action is brought otherwise than on
account of its indemnity agreement contained in this paragraph.
3
<PAGE>
The Fund shall 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 claims subject to this indemnity provision. If the Fund elects to
assume the defense of any such claim, the defense shall be conducted by counsel
chosen by the Fund and satisfactory to the indemnified defendants whose approval
shall not be unreasonably withheld. In the event that the Fund elects to assume
the defense of any suit and retain counsel, the indemnified defendants shall
bear the fees and expenses of any additional counsel retained by them. If the
Fund does not elect to assume the defense of a suit, it will reimburse the
indemnified defendants for the reasonable fees and expenses of any counsel
retained by them.
The Fund agrees to notify the Distributor promptly of the commencement
of any litigation or proceedings against it or any of its officers or Directors
in connection with the issuance or sale of any of its Shares.
ARTICLE 7. Indemnification of Fund. The Distributor agrees to
-----------------------
indemnify and hold harmless the Fund and each of its Directors and officers and
each person, if any, who controls the Fund within the meaning of Section 15 of
the 1933 Act, against any loss, liability, damages, claim or expense (including
the reasonable cost of investigating or defending any alleged loss, liability,
damages, claim or expense and reasonable counsel fees incurred in connection
therewith), arising by reason of any person acquiring any Shares, and based upon
a wrongful act of the Distributor or any of its employees or the allegation that
the registration statement, prospectus, Shareholder reports or other information
filed or made public by the Fund (as from time to time amended) included an
untrue statement of a material fact or omitted to state a material fact required
to be stated or necessary in order to make the statements not misleading,
insofar as the statement or omission was made in reliance upon and in conformity
with information furnished to the Fund by or on behalf of the Distributor.
In no case (i) is the indemnity of the Distributor to be deemed to
protect the Fund or any other person against any liability to which the Fund or
such other person would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of its or his duties or by
reason of its or his reckless disregard of the 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 unless the Fund or 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 such person (or after the Fund
or such person shall have received notice of service on any designated agent).
However, failure to notify the Distributor of any claim shall not relieve the
Distributor from any liability which it may have to the Fund or any person
against whom the action is brought otherwise than on account of its indemnity
agreement contained in this paragraph.
4
<PAGE>
The Distributor shall 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 claims subject to this indemnity provision. If the Distributor
elects to assume the defense of any such claim, the defense shall be conducted
by counsel chosen by the Distributor and satisfactory to the indemnified
defendants whose approval shall not be unreasonably withheld. In the event that
the Distributor elects to assume the defense of a suit and retain counsel, the
indemnified defendants shall bear the fees and expenses of any additional
counsel retained by them. If the Distributor does not elect to assume the
defense of a suit, it will reimburse the indemnified defendants for the
reasonable fees and expenses of any counsel retained by them.
The Distributor agrees to notify the Fund promptly of the commencement
of any litigation or proceedings against it or any of its directors, officers or
controlling persons in connection with the issue and sale of any of the Shares.
ARTICLE 8. Effective Date. This Agreement shall be effective upon its
--------------
execution, and unless terminated as herein provided, shall continue in force for
two years from the effective date and thereafter from year to year, provided
that such annual continuance is approved by (i) either the vote of a majority of
the Directors of the Fund, or the vote of a majority of the outstanding voting
securities of the Fund, and (ii) the vote of a majority of those Directors of
the Fund who are not parties to this Agreement or any distribution plan by the
Fund adopted pursuant to Rule 12b-1 under the 1940 Act or interested persons of
any such party ("Qualified Directors"), cast in person at a meeting called for
the purpose of voting on the approval. This Agreement shall automatically
terminate in the event of its assignment. As used in this paragraph the terms
"vote of a majority of the outstanding voting securities", "assignment" and
"interested person" shall have the respective meanings specified in the 1940
Act. In addition, this Agreement may at any time be terminated without penalty
by the Distributor, by a vote of a majority of Qualified Directors or by vote of
a majority of the outstanding voting securities of the Fund upon not less than
sixty days prior written notice to the other party.
ARTICLE 9. Notices. Any notice required or permitted to be given by
-------
either party to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice to the
other party at the last address furnished by the other party to the party giving
notice: if to the Fund, at 1119 St. Paul Street, Baltimore, Maryland 21202, and
if to the Distributor, 1 Freedom Valley Drive, Oaks, Pennsylvania 19456.
ARTICLE 10. Governing Law. This Agreement shall be construed in
-------------
accordance with the laws of the State of Maryland and the applicable provisions
of the 1940 Act. To the extent that the applicable laws of the State of
Maryland, or any of the provisions herein, conflict with the applicable
provisions of the 1940 Act, the latter shall control.
5
<PAGE>
ARTICLE 11. Multiple Originals. This Agreement may be executed in
------------------
two or more counterparts, each of which when so executed shall be deemed to be
an original, but such counterparts shall together constitute but one and the
same instrument.
IN WITNESS, the Fund and Distributor have each duly executed this
Agreement, as of the day and year above written.
THE NEVIS FUND, INC.
By:
---------------------------------
Attest:
-----------------------------
SEI INVESTMENTS DISTRIBUTION CO.
By:
---------------------------------
Attest:
-----------------------------
6
<PAGE>
EXHIBIT 8
CUSTODIAN AGREEMENT
THE NEVIS FUND, INC.
This agreement date as of the 1st day of June 1998 by and between The
Nevis Fund, Inc. (the "Trust"), a business trust duly organized under the laws
of the State of Maryland and First Union National Bank (the "Bank").
WHEREAS, the Trust desires to appoint the Bank to act as Custodian of
its portfolio securities, cash and other property from time to time deposited
with or collected by the Bank for the Trust;
WHEREAS, the Bank is qualified and authorized to act as Custodian for
the Trust and the separate series thereof (each a "Fund" and collectively, the
"Funds"), and is willing to act in such capacity upon the terms and conditions
herein set forth;
NOW THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto, intending to be illegally bound,
do hereby agree as follows:
SECTION 1. The terms as defined in this Section wherever used in this
- ----------
Agreement, or in any amendment or supplements hereto, shall have meanings
specified unless the context otherwise requires.
CUSTODIAN: The term Custodian shall mean the Bank in its capacity as Custodian
under this Agreement.
DEPOSITORY: The term Depository means any depository service which acts as a
system for the central handling of securities where all securities of any
particular class or series of an issuer deposited within the system are treated
as fungible and may be transferred by bookkeeping entry without physical
delivery.
PROPERTY INSTRUCTIONS: For purposes of this Agreement, the Custodian shall be
deemed to have received Proper Instructions upon receipt of written (including
instructions received by means of computer terminals of facsimile
transmissions), telephone or telegraphic instructions from a person or persons
authorized from time to time by Trustees of the Trust to give the particular
class of instructions. Telephone or telegraphic instructions shall be confirmed
in writing by such persons as said Trustees shall have from time to time
authorized to give the particular class of instructions in question. The
Custodian may act upon telephone or telegraphic instructions without awaiting
receipt of written confirmation, and shall not be liable for the Trust's failure
to confirm such instructions in writing.
1
<PAGE>
SECURITIES: The term Securities means stock, bonds, rights, warrants and all
other negotiable or non-negotiable paper issued in certificated or book-entry
form commonly known as "Securities" in banking custom or practice.
SHAREHOLDERS: The term Shareholders shall mean the registered owners from time
to time of the Shares of the Trust in accordance with the registry records
maintained by the Trust or agents on its behalf.
SECTION 2. The Trust hereby appoints the Custodian as Custodian of the Trust's
- ----------
cash. Securities and other property, to be held by the Custodian as provided in
this Agreement. The Custodian hereby accepts such appointment subject to the
terms and conditions hereinafter provided. The Bank shall open a separate
custodial account in the name of the Trust on the books and records of the Bank
to hold the Securities of the Trust deposited with, transferred to or collected
by the Bank for the account of each Fund of the Trust, and a separate cash
account to which the Bank shall credit monies received by the Bank for the
account of or from each Fund of the Trust. Such cash shall be segregated from
the assets of others and shall be and remain the sole property of the Trust.
SECTION 3. The Trust shall from time to time file with the Custodian a
- ----------
certified copy of each resolution of its Board of Trustees authorizing the
person or persons to give Proper Instructions and specifying the class of
instructions that may be given by each person to the Custodian under this
Agreement, together with certified signatures of such persons authorized to
sign, which shall constitute conclusive evidence of the authority of the
officers and signatories designated therein to act, and shall be considered in
full force and effect with the Custodian fully protected in acting in reliance
thereon until it receives written notice to the contrary; provided, however,
that if the certifying officer is authorized to give Proper Instructions, the
certification shall be also signed by a second officer of the Trust.
SECTION 4. The Trust will cause to be deposited with the Custodian hereunder
- ----------
the applicable net asset value of Shares sold from time to time whether
representing initial issue, other stock or reinvestments of dividends and/or
distributions payable to Shareholders.
SECTION 5. The Bank, acting as agent for the Trust, is authorized, directed and
- ----------
instructed subject to the further provisions of this Agreement.
(a) to hold Securities issued only in bearer from in bearer form;
(b) to register in the name of the nominee of the Bank, the Bank's
Depositories, or sub-custodians, (i) Securities issued only in
registered form, and (ii) Securities issued in both bearer and
registered form, which are freely interchangeable without
penalty;
2
<PAGE>
(c) to deposit any securities which are eligible for deposit (i)
with any domestic or foreign Depository on such terms and
conditions as such Depository may require, including provisions
for limitation or exclusion of liability on the part of the
Depository, and (ii) with any sub-custodian which the Bank uses,
including any subsidiary or affiliate of the Bank;
(d) (i) to credit for the account of the Trust all proceeds
received and payable on or in respect of the assets
maintained hereunder.
(ii) to debit the account of the Trust for the cost of
acquiring Securities the Bank has received for the
Trust, against delivery of such Securities to the Bank,
(iii) to present for payment Securities and other obligations
(including coupons) upon maturity, when called for
redemption, and when income payments are due, and
(iv) to make exchange of Securities which, in the Bank's
opinion, are purely ministerial as, for example, the
exchange of Securities in temporary form for Securities
in definitive form or the mandatory exchange of
certificates;
(e) to forward to the Trust, and/or any other person designated by
the Trust, all proxies and proxy materials received by the Bank
in connection with Securities held in the Trust's account, which
have been registered in the name of the Bank's nominee, or are
being held by any Depository, or sub-custodian, on behalf of the
Bank;
(f) to sell any fractional interest of any Securities which the Bank
has received resulting from any stock dividend, stock split,
distribution, exchange, conversion or similar activity;
(g) to release the Trust's name, address and aggregate share
position to the issuers of any domestic Securities in the
account of the Trust, provided any such information to any
issuer;
(h) to endorse and collect all checks, drafts or other orders for
the payment of money received by the Bank for the account of or
from the Trust;
(i) at the direction of the Trust, to enroll designated Securities
belonging to the Trust and held hereunder in a program for the
automatic reinvestment of all income and capital gains
distributions on those Securities in new shares (an "Automatic
Reinvestment Program"), or instruct any Depository holding such
3
<PAGE>
Securities to enroll those Securities in an Automatic
Reinvestment Program;
(j) at the direction of the Trust, to receive, deliver and transfer
Securities and make payments and collections of monies in
connection therewith, enter purchase and sale orders and perform
any other acts incidental or necessary to the performance of the
above acts with brokers, dealers or similar agents selected by
the Trust, including any broker, dealer or similar agent
affiliated with the Bank, for the account and risk of the Trust
in accordance with accepted industry practice in the relevant
market, provided, however, if it is determined that any
certificated Securities transferred to a Depository or sub-
custodian, the Bank, or the Bank's nominee, the Bank's sole
responsibility for such Securities under this Agreement shall be
to safekeep the Securities in accordance with Section 11 hereof,
and
(k) to notify the Trust and/or any other person designated by the
Trust upon receipt of notice by the Bank of any call for
redemption, tender offer, subscription rights, merger,
consolidation, reorganization or recapitalization which
(i) appears in The Wall Street Journal (New York edition),
The Standard & Poor's Called Bond Record for Preferred Stocks,
Financial Daily Called Bond Service, The Kenny Services, any
official notifications from The Depository Trust Company and
such other publications or services to which the Bank may from
time to time subscribe, (ii) requires the Bank to act in
response thereto, and (iii) pertain to Securities belonging to
the Trust and held hereunder which have been registered in the
name of the Bank's nominee or are being held by a Depository or
sub-custodian on behalf of the Bank. Nothwithstanding anything
contained herein to the contrary, the Trust shall have the sole
responsibility for monitoring the applicable dates on which
Securities with put option features must be exercised. All
solicitation fees payable to the Bank as agent in connection
herewith will be retained by the Bank unless expressly agreed
to the contrary in writing by the Bank.
Nothwithstanding anything in this Section to the contrary, the Bank is
authorized to hold Securities for the Trust which have transfer limitations
imposed upon them by the Securities Act of 1993, as amended, or represent shares
of mutual funds (i) in the name of the Trust, (ii) in the name of the Bank's
nominee, or (iii) with any Depository or sub-custodian.
SECTION 6. The Custodian's compensation shall be as set forth in Schedule A
- ---------
hereto attached, or as shall be set forth in amendments to such schedule
approved by the Trust and to the extent such compensation relates to services
provided hereunder to such Fund. All expenses and taxes payable with respect to
the Securities in the account of the Trust including, without limitation,
commission charges on purchases and sales and the amount of any loss or
liability for stockholders' assessments or otherwise, claimed or asserted
against the bank or against the
4
<PAGE>
Bank's nominee by reason of any registration hereunder shall be charged to the
Trust.
SECTION 7. In connection with its functions under this Agreement, the
- ----------
Custodian shall:
(a) render to the Trust a daily report of all monies received or
paid on behalf of the Trust; and
(b) create, maintain and retain all records relating to its
activities and obligations under this Agreement in such manner
as will meet the obligations of the Trust with respect to said
Custodian's activities in accordance with generally accepted
accounting principles. All records maintained by the Custodian
in connection with the performance of its duties under this
Agreement will remain the property of the Trust and in the event
of termination of this Agreement will be relinquished to the
Trust.
SECTION 8. Any Securities deposited with any Depository or with any
- ----------
sub-custodian will be represented in accounts in the name of the Bank which
include only property held by the Bank as Custodian for customers in which the
Bank acts in a fiduciary or agency capacity.
Should any Securities which are forwarded to the Bank by the Trust, and which
are subsequently deposited to the Bank's account in any Depository or with any
sub-custodian, or which the Trust may arrange to deposit in the Bank's account
in any Depository or with any sub-custodian, not be deemed acceptable for
deposit by such Depository or sub-custodian, for any reason, and as a result
thereof there is a short position in the account of the Bank with the Depository
for such Security, the Trust agrees to furnish the Bank immediately with like
Securities in acceptable form.
SECTION 9. The Trust represents and warrants that: (i) it has the legal
- ----------
right, power and authority to execute, deliver and perform this Agreement and to
carry out all of the transactions contemplated hereby; (ii) it has obtained all
necessary authorizations; (iii) the execution, delivery and performance of this
Agreement and the carrying out of any of the transactions contemplated hereby
will not be in conflict with, result in a breach of or constitute a default
under any agreement or other instrument to which the Trust is a party or which
is otherwise known to the Trust; (iv) it does not require the consent or
approval of any governmental agency or instrumentality, except any such consents
and approvals which the Trust has obtained; (v) the execution and delivery of
this Agreement by the Trust will not violate any law, regulation, charter,
by-law, order of any court or governmental agency or judgment applicable to the
Trust; and (vi) all persons executing this Agreement on behalf of the Trust and
carrying out the transactions contemplated hereby on behalf of the Trust are
duly authorized to do so.
In the event any of the foregoing representations should become untrue,
incorrect or misleading,
5
<PAGE>
the Trust agrees to notify the Bank immediately in writing thereof.
SECTION 10. The Bank represents and warrants that: (i) it has the legal
- -----------
right, power and authority to execute, deliver and perform this Agreement and to
carry out all of the transactions contemplated hereby; (ii) it has obtained all
necessary authorizations; (iii) the execution, delivery and performance of this
Agreement and the carrying out of any of the transactions contemplated hereby
will not be in conflict with, result in a breach of or constitute a default
under any agreement or other instrument to which the Bank is a party or which
is otherwise known to the Bank; (iv) it does not require the consent or
approval of any governmental agency or instrumentality, except any such consents
and approvals which the Bank has obtained; (v) the execution and delivery of
this Agreement by the Bank will not violate any law, regulation, charter,
by-law, order of any court or governmental agency or judgment applicable to the
Bank; and (vi) all persons executing this Agreement on behalf of the Bank and
carrying out the transactions contemplated hereby on behalf of the Bank are
duly authorized to do so. In the event that any of the foregoing representations
should become untrue, incorrect or misleading, the Bank agrees to notify the
Trust immediately in writing thereof.
SECTION 11. All cash and Securities held by the Bank hereunder shall be kept
- -----------
with the care exercised as to the Bank's own similar property. The Bank may at
its option insure itself against loss from any cause but shall be under no
obligation to insure for the benefit of the Trust.
SECTION 12. No liability of any kind shall be attached to or incurred by the
- -----------
Custodian by reason of its custody of the Trust's assets held by it from time to
time under this Agreement, or otherwise by reason of its position as Custodian
hereunder except only for its own negligence, bad faith, or willful misconduct
in the performance of its duties as specifically set forth in the Custodian
Agreement. Without limiting the generality of the foregoing sentence, the
Custodian:
(a) may rely upon the advice of counsel for the Trust; and for any
action taken or suffered in good faith based upon such advice or
statements the Custodian shall not be liable to anyone;
(b) shall not be liable for anything done or suffered to be done in
good faith in accordance with any request or advice of, or based
upon information furnished by, the Trust or its authorized
officers or agents;
(c) is authorized to accept a certificate of the Secretary or
Assistant Secretary of the Trust, or Proper Instructions, to the
effect that a resolution in the form submitted has been duly
adopted by its Board of Trustees or by the Shareholders, as
conclusive evidence that such resolution has been duly adopted
and is in full force and effect; and
(d) may rely and shall be protected in acting upon any signature,
written (including telegraph or other mechanical) instructions,
request, letter of transmittal,
6
<PAGE>
certificate, opinion of counsel, statement, instrument, report,
notice, consent, order, or other paper or document reasonably
believed by it to be genuine and to have been signed, forwarded
or presented by the purchaser, Trust or other proper party or
parties.
SECTION 13. The Trust, its successors and assigns do hereby fully indemnify
- -----------
and hold harmless the Custodian its successors and assigns, from any and all
loss, liability, claims, demands, actions, suits and expenses of any nature as
the same may arise from the failure of the Trust to comply with any law, rule
regulation or order of the United States, any state or any other jurisdiction,
governmental authority, body, or board relating to the sale, registration,
qualification of units of beneficial interest in the Trust, or from the failure
of the Trust to perform any duty or obligation under this Agreement.
Upon written request of the Custodian, the Trust shall assume the entire defense
of any claim subject to the foregoing indemnity, or the joint defense with the
Custodian of such claim, as the Custodian shall request. The indemnities and
defense provisions of this Section 13 shall indefinitely survive termination of
this Agreement.
SECTION 14. This Agreement may be amended from time to time without notice
- -----------
to or approval of the Shareholders by a supplemental agreement executed by the
Trust and the Bank and amending and supplementing this Agreement in the manner
mutually agreed.
SECTION 15. Either the Trust or the Custodian may give one hundred twenty
- ----------
(120) days' written notice to the other of the termination of this Agreement,
such termination to take effect at the time specified in the notice. In case
such notice of termination is given either by the Trust or by the Custodian, the
Trustees of the Trust shall, by resolution duly adopted, promptly appoint a
successor Custodian (the "Successor Custodian") which Successor Custodian shall
be a bank, trust company, or a bank and trust company in good standing, with
legal capacity to accept custody of the cash and Securities of a mutual fund.
Upon receipt of written notice from the Trust of the appointment of such
Successor Custodian any upon receipt of Proper Instructions, the Custodian shall
deliver such cash and Securities as it may then be holding hereunder directly
and only to the Successor Custodian. Unless or until a Successor Custodian has
been appointed as above provided, the Custodian then acting shall continue to
act as Custodian under this Agreement.
Every Successor Custodian appointed hereunder shall execute and deliver an
appropriate written acceptance of its appointment and shall thereupon become
vested with the rights, powers, obligations and custody of its predecessor
Custodian. The Custodian ceasing to act shall nevertheless, upon request of the
Trust and the Successor Custodian and upon payment of its charges and
disbursements, execute and instrument in form approved by its counsel
transferring to the Successor Custodian all the predecessor Custodian's rights,
duties, obligations and
7
<PAGE>
custody.
Subject to the provisions of Section 21 hereof, in case the Custodian shall
consolidate with or merge into any other corporation, the corporation remaining
after or resulting from such consolidation or merger shall ipso facto without
the execution of filing of any papers or other documents, succeed to and be
substituted for the Custodian with like effect as though originally named as
such, provided, however, in every case that said Successor corporation maintains
-----------------
the qualifications set out in Section 17(f) of the Investment Company Act of
1940, as amended.
SECTION 16. This Agreement shall take effect when assets of the Trust are first
- ----------
delivered to the Custodian.
SECTION 17. This Agreement may be executed in two or more counterparts, each of
- ----------
which when so executed shall be deemed to be an original, but such counterparts
shall together constitute but one and the same instrument.
SECTION 18. A copy of the Declaration of Trust of the Trust is on file with the
- ----------
Secretary of State of Maryland, and notice is hereby given that this instrument
is executed on behalf of the Trustees of the Trust as Trustees and not
individually and that the obligations of this instrument are not binding upon
any of the Trustees, officers or Shareholders of the Trust individually, but
binding only upon the assets and property of the Trust. No Fund of the Trust
shall be liable for the obligations of any other Fund of the Trust.
SECTION 19. The Custodian shall create and maintain all records relating to its
- ----------
activities and obligations under this Agreement in such manner as will meet the
obligations of the Trust under the Investment Company Act of 1940, as amended,
with particular attention to Section 31 thereof and Rules 31a-1 and 31a-2
thereunder, applicable Federal and state tax laws and any other law or
administrative rules or procedures which may be applicable to the Trust.
Subject to security requirements of the Custodian applicable to its own
employees having access to similar records within the Custodian, the books and
records of the Custodian pertaining to this Agreement shall be open to
inspection and audit at any reasonable times by officers of, attorneys for, and
auditors employed by, the Trust.
SECTION 20. Any sub-custodian appointed hereunder shall be qualified under
- ----------
Section 17(f) of the 1940 Act and will perform its duties in accordance with the
requirements of this Agreement.
SECTION 21. Nothing contained in this Agreement is intended to or shall require
- ----------
the Custodian in any capacity hereunder to perform any functions or duties on
any holiday or other day of special observance on which the Custodian is closed.
Functions or duties normally scheduled to be performed on such days shall be
performed on, and as of, the next business day the Custodian is open.
8
<PAGE>
SECTION 22. This Agreement shall extend to and shall be binding upon the
- ----------
parties hereto and their respective successors and assigns; provided, however,
that this Agreement shall not be assignable by the Trust without the written
consent of the Custodian, or by the Custodian without the written consent of the
Trust, authorized or approved by a resolution of its Board of Trustees.
SECTION 23. All communications (other than Proper instructions which are to be
- ----------
furnished hereunder to either party, or under any amendment hereto, shall be
sent by mail to the address listed below, provided that in the event that the
Bank, in its sole discretion, shall determine that an emergency exists, the Bank
may use such other means of communications as the Bank deems advisable.
To the Trust: SEI Corporation
530 East Swedesford Road
Wayne, PA 19087
To the Bank: First Union Bank
530 Walnut St.
Philadelphia, PA 19101-7618
SECTION 20. This Agreement, and any amendments hereto, shall be governed,
- ----------
construed and interpreted in accordance with the laws of The Commonwealth of
Pennsylvania applicable to agreements made and to be performed entirely within
such Commonwealth.
9
<PAGE>
IN WITNESS WHEREOF, the Trust and the Custodian have caused this Agreement to be
signed by their respective officers as of the day and year first above written.
By: THE NEVIS FUND, INC.
____________________________
Name:
Title:
By: FIRST UNION NATIONAL BANK
/s/ Paul T. Cahill
____________________________
Name: Paul T. Cahill
Title: Vice President
10
<PAGE>
SCHEDULE A
FEE SCHEDULE
CUSTODY ADMINISTRATIVE FEES:
1.00 basis points on the first $2.5 billion
.75 basis points on the next $2.5 billion
.50 basis points on the next $5.0 billion
.40 basis points on the remainder.
TRANSACTION FEES:
$ 4.00 per trade and maturity through Depository Trust Company.
$10.00 per trade and maturity clearing book entry through Federal
Reserve.
$30.00/transaction for GIC contracts/Physical Securities
$10.00 per trade and maturity clearing through Participants Trust
Company.
$ 4.00 paydowns on mortgage-backed securities.
$ 5.50 Fed wire charge on Repo collateral in/out.
$ 5.50/$7.50 other cash wire transfers in/out.
$ 5.50 Dividend reinvestment.
$ 2.50 Fed charge for sale/return of collateral.
$ 8.00 Future Contracts
$15.00 Options
<PAGE>
EXHIBIT 9(a)
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this __ day of _______, 1998, by and
between The Nevis Fund, Inc., a Maryland corporation, (the "Fund"), and SEI
Investments Mutual Fund Services (the "Administrator"), a Delaware business
trust.
WHEREAS, the Fund is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act").
WHEREAS, the Fund desires the Administrator to provide, and the
Administrator is willing to provide, management and administrative services to
such series of the Fund as the Fund and the Administrator may agree on
("Portfolios") and as listed on the schedules attached hereto ("Schedules") and
made a part of this Agreement, on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Fund and the Administrator hereby agree as follows:
ARTICLE 1. Retention of the Administrator. The Fund hereby retains the
------------------------------
Administrator to act as the administrator of the Portfolios and to furnish the
Portfolios with the management and administrative services as set forth in
Article 2 below. The Administrator hereby accepts such employment to perform the
duties set forth below.
The Administrator shall, for all purposes herein, be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Fund in any way and shall
not be deemed an agent of the Fund.
ARTICLE 2. Administrative and Accounting Services. The Administrator
--------------------------------------
shall perform or supervise the performance by others of administrative services
in connection with the operations of the Portfolios, and, on behalf of the Fund,
will investigate, assist in the selection of and conduct relations with
custodians, depositories, accountants, legal counsel, underwriters, brokers and
dealers, corporate fiduciaries, insurers, banks and persons in any other
capacity deemed to be necessary or desirable for the Portfolios' operations. The
Administrator shall provide the Board of Directors of the Fund with such reports
regarding investment performance and compliance with investment policies and
applicable laws, rules and regulations as they may reasonably request but shall
have no responsibility for supervising the performance by any investment adviser
or sub-adviser of its responsibilities. The Administrator may, with the prior
consent of the Fund, appoint a sub-administrator to perform certain of the
services to be performed by the Administrator hereunder.
The Administrator shall provide the Fund with administrative services,
regulatory reporting, fund accounting and related portfolio accounting services,
all necessary office space, equipment, personnel, compensation and facilities
(including facilities for shareholders' and Directors' meetings) for handling
the affairs of the Portfolios and such other services as the
1
<PAGE>
Directors may, from time to time, reasonably request and the Administrator
shall, from time to time, reasonably determine to be necessary to perform its
obligations under this Agreement. In addition, at the request of the Fund's
Board of Directors (the "Directors"), the Administrator shall make reports to
the Directors concerning the performance of its obligations hereunder.
Without limiting the generality of the foregoing, the Administrator shall:
(A) calculate contractual Fund expenses and control all disbursements for
the Fund, and as appropriate compute the Portfolios' yields, total
returns, expense ratios, portfolio turnover rates and, if required,
portfolio average dollar-weighed maturities;
(B) assist Fund counsel with the preparation of prospectuses, statements
of additional information, registration statements, and proxy
materials;
(C) prepare such reports, applications and documents (including reports
regarding the sale and redemption of shares as may be required in
order to comply with Federal and state securities law) as may be
necessary or desirable to register the Fund's shares with state
securities authorities, monitor sale of Fund shares for compliance
with state securities laws, and file with the appropriate state
securities authorities the registration statements and reports for the
Fund and the Fund's shares and all amendments thereto, as may be
necessary or convenient to register and keep effective the Fund and
the Fund's shares with state securities authorities to enable the Fund
to make a continuous offering of its shares;
(D) develop and prepare communications to shareholders, including the
annual report to shareholders, coordinate mailing prospectuses,
notices, proxy statements, proxies and other reports to Fund
shareholders, and supervise and facilitate the solicitation of proxies
solicited by the Fund for all shareholder meetings, including
tabulation process for shareholder meetings;
(E) coordinate with Fund counsel the preparation and negotiation of, and
administer contracts on behalf of the Fund with, among others, the
Fund's investment adviser, distributor, custodian, and transfer agent;
(F) maintain the Fund's general ledger and prepare the Fund's financial
statements, including expense accruals and payments, determine the net
asset value of the Fund's assets and of the Fund's shares, and
supervise the Fund's transfer agent with respect to the payment of
dividends and other distributions to shareholders;
(G) calculate performance data of the Portfolios for dissemination to
information services covering the investment company industry;
(H) coordinate and supervise the preparation and filing of the Portfolios'
tax returns;
2
<PAGE>
(I) examine and review the operations and performance of the various
organizations providing services to the Fund or any Portfolio,
including, without limitation, the Fund's investment adviser,
distributor, custodian, transfer agent, outside legal counsel and
independent public accountants, and at the request of the Directors,
report to the Directors on the performance of organizations;
(J) assist with the layout and printing of publicly disseminated
prospectuses and assist with and coordinate layout and printing of the
Fund's semi-annual and annual reports to shareholders;
(K) provide internal legal and administrative services as requested by the
Fund from time to time;
(L) assist with the design, development, and operation of the Fund,
including new portfolio and class investment objectives, policies and
structure;
(M) provide individuals acceptable to the Directors for nomination,
appointment, or election as officers of the Fund, who will be
responsible for the management of certain of the Fund's affairs as
determined by the Directors;
(N) advise the Fund and its Directors on matters concerning the Fund and
its affairs;
(O) obtain and keep in effect fidelity bonds and directors and
officers/errors and omissions insurance policies for the Fund in
accordance with the requirements of Rules 17g-1 and 17d-1(d)(7) under
the 1940 Act as such bonds and policies are approved by the Fund's
Board of Directors;
(P) monitor and advise the Fund and its Portfolios on their regulated
investment company status under the Internal Revenue Code of 1986, as
amended;
(Q) perform all administrative services and functions of the Fund and each
Portfolio to the extent administrative services and functions are not
provided to the Fund or such Portfolio pursuant to the Fund's or such
Portfolio's investment advisory agreement, distribution agreement,
custodian agreement and transfer agent agreement;
(R) furnish advice and recommendations with respect to other aspects of
the business and affairs of the Portfolios as the Fund and the
Administrator shall determine desirable; and
(S) prepare and file with the SEC the semi-annual report for the Fund on
Form N-SAR and all required notices pursuant to Rule 24f-2.
Also, the Administrator will perform other services for the Fund as agreed from
time to time, including, but not limited to performing internal audit
examinations; mailing the annual reports
3
<PAGE>
of the Portfolios; preparing an annual list of shareholders; and mailing notices
of shareholders' meetings, proxies and proxy statements, for all of which the
Fund will pay the Administrator's out-of-pocket expenses.
ARTICLE 3. Allocation of Charges and Expenses.
----------------------------------
(A) The Administrator. The Administrator shall furnish at its own
-----------------
expense the executive, supervisory and clerical personnel necessary to perform
its obligations under this Agreement. The Administrator shall also provide the
items which it is obligated to provide under this Agreement, and shall pay all
compensation, if any, of officers of the Fund as well as all Directors of the
Fund who are affiliated persons of the Administrator or any affiliated
corporation of the Administrator; provided, however, that unless otherwise
specifically provided, the Administrator shall not be obligated to pay the
compensation of any employee of the Fund retained by the Directors of the Fund
to perform services on behalf of the Fund.
(B) The Fund. The Fund assumes and shall pay or cause to be paid all
--------
other expenses of the Fund not otherwise allocated herein, including, without
limitation, organizational costs, taxes, expenses for legal and auditing
services, the expenses of preparing (including typesetting), printing and
mailing reports, prospectuses, statements of additional information, proxy
solicitation material and notices to existing shareholders, all expenses
incurred in connection with issuing and redeeming shares, the costs of pricing
services, the costs of custodial services, the cost of initial and ongoing
registration of the shares under Federal and state securities laws, fees and
out-of-pocket expenses of Directors who are not affiliated persons of the
Administrator or the investment adviser to the Fund or any affiliated
corporation of the Administrator or the investment adviser, the costs of
Directors' meetings, insurance, interest, brokerage costs, litigation and other
extraordinary or nonrecurring expenses, and all fees and charges of investment
advisers to the Fund.
ARTICLE 4. Compensation of the Administrator.
---------------------------------
(A) Administration Fee. For the services to be rendered, the
------------------
facilities furnished and the expenses assumed by the Administrator pursuant to
this Agreement, the Fund shall pay to the Administrator compensation at an
annual rate specified in the Schedules. Such compensation shall be calculated
and accrued daily, and paid to the Administrator monthly. The Fund shall also
reimburse the Administrator for its reasonable out-of-pocket expenses.
If this Agreement becomes effective subsequent to the first day of a
month or terminates before the last day of a month, the Administrator's
compensation for that part of the month in which this Agreement is in effect
shall be prorated in a manner consistent with the calculation of the fees as set
forth above. Payment of the Administrator's compensation for the preceding month
shall be made promptly.
(B) Compensation from Transactions. The Fund hereby authorizes any
------------------------------
entity or person associated with the Administrator which is a member of a
national securities exchange to effect any transaction on the exchange for the
account of the Fund which is permitted by Section
4
<PAGE>
11 (a) of the Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and
the Fund hereby consents to the retention of compensation for such transactions
in accordance with Rule 11a2-2(T) (a) (2) (iv).
(C) Survival of Compensation Rates. All rights of compensation under
------------------------------
this Agreement for services performed as of the termination date shall survive
the termination of this Agreement.
ARTICLE 5. Limitation of Liability of the Administrator. The duties
--------------------------------------------
of the Administrator shall be confined to those expressly set forth herein, and
no implied duties are assumed by or may be asserted against the Administrator
hereunder. The Administrator shall not be liable 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 carrying out its duties hereunder, except a loss resulting from
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of reckless disregard of its obligations and duties
hereunder, except as may otherwise be provided under provisions of applicable
law which cannot be waived or modified hereby. (As used in this Article 5, the
term "Administrator" shall include directors, officers, employees and other
agents of the Administrator as well as that corporation itself.)
So long as the Administrator, or its agents, acts in good faith and with
due diligence the Fund assumes full responsibility and shall indemnify the
Administrator and hold it harmless from and against any and all actions, suits
and claims, whether groundless or otherwise, and from and against any and all
losses, damages, costs, charges, reasonable counsel fees and disbursements,
payments, expenses and liabilities (including reasonable investigation expenses)
arising directly or indirectly out of said administration, transfer agency, and
dividend disbursing relationships to the Fund or any other service rendered to
the Fund hereunder. The indemnity and defense provisions set forth herein shall
indefinitely survive the termination of this Agreement.
The rights hereunder shall include the right to reasonable advances of
defense expenses in the event of any pending or threatened litigation with
respect to which indemnification hereunder may ultimately be merited. In order
that the indemnification provision contained herein shall apply, however, it is
understood that if in any case the Fund may be asked to indemnify or hold the
Administrator harmless, the Fund shall be fully and promptly advised of all
pertinent facts concerning the situation in question, and it is further
understood that the Administrator will use all reasonable care to identify and
notify the Fund promptly concerning any situation which presents or appears
likely to present the probability of such a claim for indemnification against
the Fund, but failure to do so in good faith shall not affect the rights
hereunder.
The Fund shall be entitled to participate at its own expense or, if it
so elects, to assume the defense of any suit brought to enforce any claims
subject to this indemnity provision. If the Fund elects to assume the defense of
any such claim, the defense shall be conducted by counsel chosen by the Fund and
satisfactory to the Administrator, whose approval shall not be unreasonably
withheld. In the event that the Fund elects to assume the defense of any suit
and retain counsel, the Administrator shall bear the fees and expenses of any
additional counsel retained by it. If the Fund does not elect to assume the
defense of a suit, it will reimburse the
5
<PAGE>
Administrator for the reasonable fees and expenses of any counsel retained by
the Administrator.
The Administrator may apply to the Fund at any time for instructions and
may consult counsel for the Fund or its own counsel and with accountants and
other experts with respect to any matter arising in connection with the
Administrator's duties, and the Administrator shall not be liable or accountable
for any action taken or omitted by it in good faith in accordance with such
instruction or with the opinion of such counsel, accountants or other experts.
Also, the Administrator shall be protected in acting upon any document
which it reasonably believes to be genuine and to have been signed or presented
by the proper person or persons. Nor shall the Administrator be held to have
notice of any change of authority of any officers, employee or agent of the Fund
until receipt of written notice thereof from the Fund.
ARTICLE 6. Activities of the Administrator. The services of the
-------------------------------
Administrator rendered to the Fund are not to be deemed to be exclusive. The
Administrator is free to render such services to others and to have other
businesses and interests, so long as the services rendered to the Fund and the
Portfolios hereunder are not impaired. It is understood that Directors,
officers, employees and Shareholders of the Fund are or may be or become
interested in the Administrator, as directors, officers, employees and
shareholders or otherwise and that directors, officers, employees and
shareholders of the Administrator and its counsel are or may be or become
similarly interested in the Fund, and that the Administrator may be or become
interested in the Fund as a Shareholder or otherwise.
ARTICLE 7. Confidentiality. The Administrator agrees on behalf of
---------------
itself and its employees to treat confidentially all records and other
information relative to the Fund and its prior, present or potential
shareholders and relative to the Fund's investment adviser and its prior,
present or potential customers, except, after prior notification to and approval
in writing by the Fund, which approval shall not be unreasonably withheld and
may not be withheld where the Administrator may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or when so requested by the Fund.
ARTICLE 8. Equipment Failures. In the event of equipment failures
------------------
beyond the Administrator's control, the Administrator shall, at no additional
expense to the Fund, take reasonable steps to minimize service interruptions but
shall have no liability with respect thereto. The Administrator shall develop
and maintain a plan for recovery from equipment failures which may include
contractual arrangements with appropriate parties making reasonable provision
for emergency use of electronic data processing equipment to the extent
appropriate equipment is available.
ARTICLE 9. Compliance With Governmental Rules and Regulations. The
--------------------------------------------------
Administrator undertakes to comply with all applicable requirements of the
Securities Act of 1933, the Securities Exchange Act of 1934, the 1940 Act and
any laws, rules and regulations of governmental authorities having jurisdiction
with respect to the duties to be performed by the Administrator hereunder.
6
<PAGE>
ARTICLE 10. Duration and Termination of this Agreement. This
------------------------------------------
Agreement shall become effective on the date hereof and unless terminated in
accordance with the provisions of this Article 10, shall remain in effect for an
initial term of three years (the "Initial Term") and thereafter, if approved by
the Board of Directors of the Fund, shall continue in effect for successive
periods of one (1) year. This Agreement may be terminated only: (a) by the
mutual written agreement of the parties; (b) by either party hereto, as of the
end of the Initial Term or thereafter; (c) by either party hereto on such date
as is specified in written notice given by the terminating party, in the event
of a material breach of this Agreement by the other party, provided the
terminating party has notified the other party of such breach at least 45 days
prior to the specified date of termination and the breaching party has not
remedied such breach by the specified date; (d) effective upon the liquidation
of the Administrator; or (e) as to any Portfolio or the Fund, effective upon the
liquidation of such Portfolio or the Fund, as the case may be. For purposes of
this Article 10, the term "liquidation" shall mean a transaction in which the
assets of the Administrator, the Fund or a Portfolio are sold or otherwise
disposed of and proceeds therefrom are distributed in cash to the shareholders
in complete liquidation of the interests of such shareholders in the entity.
This Agreement shall not be assignable by the Administrator, without the
prior written consent of the Fund.
ARTICLE 11. Amendments. This Agreement or any part hereof may be
----------
changed or waived only by an instrument in writing signed by the party against
which enforcement of such change or waiver is sought.
ARTICLE 12. Certain Records. The Administrator shall maintain
---------------
customary records in connection with its duties as specified in this Agreement.
Any records required to be maintained and preserved pursuant to Rules 31a-1 and
31a-2 under the 1940 Act which are prepared or maintained by the Administrator
on behalf of the Fund shall be prepared and maintained at the expense of the
Administrator, but shall be the property of the Fund and will be made available
to or surrendered promptly to the Fund on request.
In case of any request or demand for the inspection of such records by
another party, the Administrator shall notify the Fund and follow the Fund's
instructions as to permitting or refusing such inspection; provided that the
Administrator may exhibit such records to any person in any case where it is
advised by its counsel that it may be held liable for failure to do so, unless
(in cases involving potential exposure only to civil liability) the Fund has
agreed to indemnify the Administrator against such liability.
ARTICLE 13. Definitions of Certain Terms. The terms "interested
----------------------------
person" and "affiliated person," when used in this Agreement, shall have the
respective meanings specified in the 1940 Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities and
Exchange Commission.
ARTICLE 14. Notice. Any notice required or permitted to be given by
------
either party to
7
<PAGE>
the other shall be deemed sufficient if sent by registered or certified mail,
postage prepaid, addressed by the party giving notice to the other party at the
last address furnished by the other party to the party giving notice: if to the
Fund, c/o Nevis Capital Management, Inc., 1119 St. Paul Street, Baltimore,
Maryland 21202; and if to the Administrator at 1 Freedom Valley Drive, Oaks,
Pennsylvania, 19456.
ARTICLE 15. Governing Law. This Agreement shall be construed in
-------------
accordance with the laws of the State of Maryland and the applicable provisions
of the 1940 Act. To the extent that the applicable laws of the State of
Maryland, or any of the provisions herein, conflict with the applicable
provisions of the 1940 Act, the latter shall control.
ARTICLE 16. Multiple Originals. This Agreement may be executed in two
------------------
or more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
ARTICLE 17. Binding Agreement. This Agreement, and the rights and
-----------------
obligations of the parties hereunder, shall be binding on, and inure to the
benefit of, the parties and the respective successors and assigns of each of
them.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
THE NEVIS FUND, INC.
By:
--------------------------------
Attest:
----------------------------
SEI INVESTMENTS MUTUAL FUND SERVICES
By:
--------------------------------
Attest:
----------------------------
8
<PAGE>
SCHEDULE
TO THE ADMINISTRATION AGREEMENT
DATED AS OF ______________, 1998
BETWEEN
THE NEVIS FUND, INC.
AND
SEI INVESTMENTS MUTUAL FUND SERVICES
Portfolios: This Agreement shall apply to all Portfolios of the Fund, either
now or in the future created. The following is a listing of the
current portfolios of the Fund ________________ (collectively, the
"Portfolios").
Fees: Pursuant to Article 4, Section A, the Fund shall pay the
Administrator compensation for services rendered to the Portfolios
at an annual rate, which is calculated daily and paid monthly, at a
maximum administrative fee equal to the greater of 0.12% of the
first $100 million of the Portfolios' aggregate average daily net
assets, 0.10% of the next $100 million of such assets and 0.08% of
such assets in excess of $200 million, or $90,000 per Portfolio
plus $15,000 per each additional share class thereof.
9
<PAGE>
EXHIBIT 9(b)
THE NEVIS FUND, INC.
TRANSFER AGENCY AND SERVICES AGREEMENT
AGREEMENT made as of the 29th day of June, 1998, by and between The Nevis
Fund, Inc., a Maryland corporation, with its principal office and place of
business at 119 St. Paul Street, Baltimore, Maryland 21202 (the "Fund"), and
Forum Shareholder Services, LLC, a Delaware limited liability company with its
principal office and place of business at Two Portland Square, Portland, Maine
04101 ("Forum").
WHEREAS, the Fund is authorized to issue shares of common stock ("Shares");
and
WHEREAS, the Fund desires to appoint Forum as its transfer agent and
dividend disbursing agent and Forum desires to accept such appointment;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the Fund and Forum hereby agree as follows:
SECTION 1. APPOINTMENT; DELIVERY OF DOCUMENTS
(a) Appointment. The Fund hereby appoints Forum to act as, and Forum
-----------
agrees to act as, (i) transfer agent for the authorized and issued Shares, (ii)
dividend disbursing agent and (iii) agent in connection with any accumulation,
open-account or similar plans provided to the registered owners of Shares
("Shareholders") and set out in the Prospectus (as defined below) of the Fund,
including, without limitation, any periodic investment plan or periodic
withdrawal program.
(b) Document Delivery. The Fund has delivered to Forum copies of (i) the
-----------------
Fund's Charter and Bylaws (collectively, as amended from time to time, "Organic
Documents"), (ii) the Fund's Registration Statement and all amendments thereto
filed with the U.S. Securities and Exchange Commission ("SEC") pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), or the Investment
Company Act of 1940, as amended ("1940 Act")(the "Registration Statement"),
(iii) the Fund's current prospectus and statement of additional information of
the Fund (collectively, as currently in effect and as amended or supplemented,
the "Prospectus"), and (iv) each current plan of distribution or similar
document adopted by the Fund under Rule 12b-1 under the 1940 Act ("Plan") and
each current shareholder service plan or similar document adopted by the Fund
("Service Plan"), and shall promptly furnish Forum with all amendments of or
supplements to the foregoing. The Fund shall deliver to Forum a certified copy
of the resolution of the Board of Directors of the Fund (the "Board") appointing
Forum and authorizing the execution and delivery of this Agreement.
SECTION 2. DUTIES OF FORUM
(a) Services. Forum agrees that in accordance with procedures established
--------
from time to time by agreement between the Fund and Forum, Forum will perform
the following services:
<PAGE>
(i) provide the services of a transfer agent, dividend disbursing agent
and, as relevant, agent in connection with accumulation, open-account or
similar plans (including without limitation any periodic investment plan or
periodic withdrawal program) that are customary for open-end management
investment companies including: (A) maintaining all Shareholder accounts,
(B) preparing Shareholder meeting lists, (C) mailing withholding taxes on
U.S. resident and non-resident alien accounts, (D) preparing and filing
U.S. Treasury Department Forms 1099 and other appropriate forms required by
federal authorities with respect to distributions for Shareholders, (E)
preparing and mailing confirmation forms (with confirming Prospectuses when
appropriate) and statements of account to Shareholders for all purchases
and redemptions of Shares and other confirmable transactions in Shareholder
accounts, (F) preparing and mailing activity statements for Shareholders,
and (G) providing Shareholder account information;
(ii) receive for acceptance orders for the purchase of Shares and
promptly deliver payment and appropriate documentation therefor to the
custodian of the Fund (the "Custodian") or, in the case of Fund's operating
in a master-feeder or fund of funds structure, to the transfer agent or
interestholder recordkeeper for the master portfolios in which the Fund
invests;
(iii) pursuant to purchase orders, issue the appropriate number of Shares
and hold such Shares in the appropriate Shareholder account;
(iv) receive for acceptance redemption requests and deliver the
appropriate documentation therefor to the Custodian or, in case the Fund
operates in a master-feeder or fund of funds structure, to the transfer
agent or interestholder recordkeeper for the master portfolios in which the
Fund invests;
(v) as and when it receives monies paid to it by the Custodian with
respect to any redemption, pay the redemption proceeds as required by the
Prospectus pursuant to which the redeemed Shares were offered and as
instructed by the redeeming Shareholders;
(vi) effect transfers of Shares upon receipt of appropriate instructions
from Shareholders;
(vii) prepare and transmit to Shareholders (or credit the appropriate
Shareholder accounts) payments for all distributions declared by the Fund
with respect to Shares;
(viii) issue share certificates and replacement share certificates for
those share certificates alleged to have been lost, stolen, or destroyed
upon receipt by Forum of indemnification satisfactory to Forum and
protecting Forum and the Fund and, at the option of Forum, issue
replacement certificates in place of mutilated share certificates upon
presentation thereof without requiring indemnification;
(ix) receive from Shareholders or debit Shareholder accounts for sales
commissions,
- 2 -
<PAGE>
including contingent deferred, deferred and other sales charges, and
service fees (i.e., wire redemption charges) and prepare and transmit
payments to underwriters, selected dealers and others for commissions and
service fees received;
(x) track shareholder accounts by financial intermediary source and
otherwise as requested by the Fund and provide periodic reporting to the
Fund or its administrator or other agent;
(xi) maintain records of account for and provide reports and statements
to the Fund and Shareholders as to the foregoing;
(xii) record the issuance of Shares and maintain pursuant to Rule
17Ad-10(e) under the Securities Exchange Act of 1934, as amended ("1934
Act") a record of the total number of Shares that are authorized, based
upon data provided to it by the Fund, and are issued and outstanding and
provide the Fund on a regular basis a report of the total number of Shares
that are authorized and the total number of Shares that are issued and
outstanding; and
(xiii) provide a system which will enable the Fund to calculate the total
number of Shares sold in each State.
(b) Other Services. Forum shall provide the following additional services
--------------
on behalf of the Fund and such other services agreed to in writing by the Fund
and Forum: monitor and make appropriate filings with respect to the escheatment
laws of the various states and territories of the United States.
(c) Blue Sky Matters. The Fund or its administrator or other agent (i)
----------------
shall identify to Forum in writing those transactions and assets to be treated
as exempt from reporting for each state and territory of the United States and
for each foreign jurisdiction (collectively "States") and (ii) shall monitor the
sales activity with respect to Shareholders domiciled or resident in each State.
The responsibility of Forum for the Fund's State registration status is solely
limited to the reporting of transactions to the Fund, and Forum shall have no
obligation, when recording the issuance of Shares, to monitor the issuance of
such Shares or to take cognizance of any laws relating to the issue or sale of
such Shares, which functions shall be the sole responsibility of the Fund or its
administrator or other agent.
(d) Safekeeping. Forum shall establish and maintain facilities and
-----------
procedures reasonably acceptable to the Fund for the safekeeping, control,
preparation and use of share certificates, check forms, and facsimile signature
imprinting devices. Forum shall establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of all records
maintained by Forum pursuant to this Agreement.
(e) Cooperation With Accountants. Forum shall cooperate with the Fund's
----------------------------
independent public accountants and shall take reasonable action to make all
necessary information available to the accountants for the performance of the
accountants' duties.
- 3 -
<PAGE>
(f) Responsibility for Compliance With Law. Except with respect to
--------------------------------------
Forum's duties as set forth in this Section 2 and except as otherwise
specifically provided herein, the Fund assumes all responsibility for ensuring
that the Fund complies with all applicable requirements of the Securities Act,
the 1940 Act and any laws, rules and regulations of governmental authorities
with jurisdiction over the Fund. All references to any law in this Agreement
shall be deemed to include reference to the applicable rules and regulations
promulgated under authority of the law and all official interpretations of such
law or rules or regulations.
SECTION 3. RECORDKEEPING
(a) Predecessor Records. Prior to the commencement of Forum's
-------------------
responsibilities under this Agreement, if applicable, the Fund shall deliver or
cause to be delivered over to Forum (i) an accurate list of Shareholders of the
Fund, showing each Shareholder's address of record, number of Shares owned and
whether such Shares are represented by outstanding share certificates and (ii)
all Shareholder records, files, and other materials necessary or appropriate for
proper performance of the functions assumed by Forum under this Agreement
(collectively referred to as the "Materials"). The Fund shall on behalf of the
Fund indemnify and hold Forum harmless from and against any and all losses,
damages, costs, charges, counsel fees, payments, expenses and liability arising
out of or attributable to any error, omission, inaccuracy or other deficiency of
the Materials, or out of the failure of the Fund to provide any portion of the
Materials or to provide any information in the Fund's possession or control
reasonably needed by Forum to perform the services described in this Agreement.
(b) Recordkeeping. Forum shall keep records relating to the services to
-------------
be performed under this Agreement, in the form and manner as it may deem
advisable and as required by applicable law. To the extent required by Section
31 of the 1940 Act, and the rules thereunder, Forum agrees that all such records
prepared or maintained by Forum relating to the services to be performed by
Forum under this Agreement are the property of the Fund and will be preserved,
maintained and made available in accordance with Section 31 of the 1940 Act and
the rules thereunder, and will be surrendered promptly to the Fund on and in
accordance with the Fund's request. The Fund and the Fund's authorized
representatives shall have access to Forum's records relating to the services to
be performed under this Agreement at all times during Forum's normal business
hours. Upon the reasonable request of the Fund, copies of any such records shall
be provided promptly by Forum to the Fund or the Fund's authorized
representatives.
(c) Confidentiality of Records. Forum and the Fund agree that all books,
--------------------------
records, information, and data pertaining to the business of the other party
which are exchanged or received pursuant to the negotiation or the carrying out
of this Agreement shall remain confidential, and shall not be voluntarily
disclosed to any other person, except as may be required by law.
(d) Inspection of Records by Others. In case of any requests or demands
-------------------------------
for the inspection of the Shareholder records of the Fund, Forum will endeavor
to notify the Fund and to secure instructions from an authorized officer of the
Fund as to such inspection. Forum shall
- 4 -
<PAGE>
abide by the Fund's instructions for granting or denying the inspection;
provided, however, that Forum may grant the inspection without instructions if
Forum is advised by counsel to Forum that failure to do so will result in
liability to Forum.
SECTION 4. ISSUANCE AND TRANSFER OF SHARES
(a) Issuance of Shares. Forum shall make original issues of Shares in
------------------
accordance with the Prospectus only upon receipt of (i) instructions requesting
the issuance, (ii) a certified copy of a resolution of the Board authorizing the
issuance, (iii) necessary funds for the payment of any original issue tax
applicable to such Shares, and (iv) an opinion of the Fund's counsel as to the
legality and validity of the issuance, which opinion may provide that it is
contingent upon the filing by the Fund of an appropriate notice with the SEC, as
required by Section 24 of the 1940 Act or the rules thereunder. If the opinion
described in (iv) above is contingent upon a filing under Section 24 of the 1940
Act, the Fund shall indemnify Forum for any liability arising from the failure
of the Fund to comply with that section or the rules thereunder.
(b) Transfer of Shares. Transfers of Shares shall be registered on the
------------------
Shareholder records maintained by Forum. In registering transfers of Shares,
Forum may rely upon the Uniform Commercial Code as in effect in the State of
Maryland or any other statutes that, in the opinion of Forum's counsel, protect
Forum and the Fund from liability arising from (i) not requiring complete
documentation, (ii) registering a transfer without an adverse claim inquiry,
(iii) delaying registration for purposes of such inquiry or (iv) refusing
registration whenever an adverse claim requires such refusal. As Transfer
Agent, Forum will be responsible for delivery to the transferor and transferee
of such documentation as is required by the Uniform Commercial Code.
SECTION 5. SHARE CERTIFICATES
(a) Certificates. The Fund shall furnish to Forum a supply of blank Share
------------
certificates of the Fund and, from time to time, will renew such supply upon
Forum's request. Blank Share certificates shall be signed manually or by
facsimile signatures of officers of the Fund authorized to sign by the Organic
Documents of the Fund and, if required by the Organic Documents, shall bear the
Fund's seal or a facsimile thereof. Unless otherwise directed by the Fund,
Forum may issue or register Share certificates reflecting the manual or
facsimile signature of an officer who has died, resigned or been removed by the
Fund.
(b) Endorsement; Transportation. New Share certificates shall be issued
---------------------------
by Forum upon surrender of outstanding Share certificates in the form deemed by
Forum to be properly endorsed for transfer and satisfactory evidence of
compliance with all applicable laws relating to the payment or collection of
taxes. Forum shall forward Share certificates in "non-negotiable" form by
first-class or registered mail, or by whatever means Forum deems equally
reliable and expeditious. Forum shall not mail Share certificates in
"negotiable" form unless requested in writing by the Fund and fully indemnified
by the Fund to Forum's satisfaction.
(c) Non-Issuance of Certificates. In the event that the Fund informs
----------------------------
Forum that the
- 5 -
<PAGE>
Fund does not issue Share certificates, Forum shall not issue any such Share
certificates and the provisions of this Agreement relating to Share certificates
shall not be applicable with respect to the Fund.
SECTION 6. SHARE PURCHASES; ELIGIBILITY TO RECEIVE DISTRIBUTIONS
(a) Purchase Orders. Shares shall be issued in accordance with the terms
---------------
of the Prospectus after Forum or its agent receives either:
(i) (A) an instruction directing investment in the Fund, (B) a check
(other than a third party check) or a wire or other electronic payment in
the amount designated in the instruction and (C), in the case of an initial
purchase, a completed account application; or
(ii) the information required for purchases pursuant to a selected dealer
agreement, processing organization agreement, or a similar contract with a
financial intermediary.
(b) Distribution Eligibility. Shares issued after receipt of a completed
------------------------
purchase order shall be eligible to receive distributions of the Fund at the
time specified in the Prospectus.
(c) Determination of Federal Funds. Shareholder payments shall be
------------------------------
considered Federal Funds no later than on the day indicated below unless other
times are noted in the Prospectus:
(i) for a wire received, at the time of the receipt of the wire;
(ii) for a check drawn on a member bank of the Federal Reserve System, on
the second Fund Business Day following receipt of the check; and
(iv) for a check drawn on an institution that is not a member of the
Federal Reserve System, at such time as Forum is credited with Federal
Funds with respect to that check.
SECTION 7. FEES AND EXPENSES
(a) Fees. For the services provided by Forum pursuant to this Agreement,
----
the Fund, on behalf of the Fund, agrees to pay Forum the fees set forth in
Clauses (i) and (ii) of Appendix A hereto. Fees will begin to accrue for the
Fund on the latter of the date of this Agreement or the date of commencement of
operations of the Fund. If fees begin to accrue in the middle of a month or if
this Agreement terminates before the end of any month, all fees for the period
from that date to the end of that month or from the beginning of that month to
the date of termination, as the case may be, shall be prorated according to the
proportion that the period bears to the full month in which the effectiveness or
termination occurs. Upon the termination of this Agreement, the Fund shall pay
to Forum such compensation as shall be payable prior to the effective date of
termination.
- 6 -
<PAGE>
(b) Expenses. In connection with the services provided by Forum pursuant
--------
to this Agreement, the Fund agrees to reimburse Forum for the expenses set forth
in Appendix A hereto.
(c) Payment. All fees and reimbursements are payable in arrears on a
-------
monthly basis and the Fund agrees to pay all fees and reimbursable expenses
within five (5) business days following receipt of the respective billing
notice.
SECTION 8. REPRESENTATIONS AND WARRANTIES
(a) Representations and Warranties of Forum. Forum represents and
---------------------------------------
warrants to the Fund that:
(i) It is a limited liability company duly organized and existing and
in good standing under the laws of the State of Delaware.
(ii) It is duly qualified to carry on its business in the State of
Maine.
(iii) It is empowered under applicable laws and by its Operating
Agreement to enter into this Agreement and perform its duties under this
Agreement.
(iv) All requisite corporate proceedings have been taken to authorize it
to enter into this Agreement and perform its duties under this Agreement.
(v) It has access to the necessary facilities, equipment, and personnel
to perform its duties and obligations under this Agreement.
(vi) This Agreement, when executed and delivered, will constitute a
legal, valid and binding obligation of Forum, enforceable against Forum in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
the rights and remedies of creditors and secured parties.
(vii) It is registered as a transfer agent under Section 17A of the 1934
Act.
(viii) It has conducted an inventory of the hardware, software and
embedded microcontrollers in noncomputer equipment (the "Computer Systems")
used by it in its business in order to determine whether the Computer
Systems are Year 2000 compliant and has determined that its Computer
Systems are Year 200 compliant. As used in this Agreement, the phrase
"Year 2000 compliant" means technology, including but not limited to,
information technology embedded systems or any other electro-mechanical or
processor-based system, when used in connection with its associated
documentation, that is capable of accurately processing, providing, or
receiving date data from, into, and between the twentieth and twenty-first
centuries, and the years 1999 and 2000, including leap year calculations,
provided that all other technology properly exchanges date data with it.
- 7 -
<PAGE>
(b) Representations and Warranties of the Fund. The Fund represents and
------------------------------------------
warrants to Forum that:
(i) It is a corporation duly organized and existing and in good standing
under the laws of the State of Maryland.
(ii) It is empowered under applicable laws and by its Organic Documents
to enter into this Agreement and perform its duties under this Agreement.
(iii) All requisite corporate proceedings have been taken to authorize it
to enter into this Agreement and perform its duties under this Agreement.
(iv) It is an open-end management investment company registered under the
1940 Act.
(v) This Agreement, when executed and delivered, will constitute a
legal, valid and binding obligation of the Fund, enforceable against the
Fund in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
the rights and remedies of creditors and secured parties.
(vi) A registration statement under the Securities Act is currently
effective and appropriate State securities law filings have been made with
respect to Shares of the Fund being offered for sale.
SECTION 9. PROPRIETARY INFORMATION
(a) Proprietary Information of Forum. The Fund acknowledges that the
--------------------------------
databases, computer programs, screen formats, report formats, interactive design
techniques, and documentation manuals maintained by Forum on databases under the
control and ownership of Forum or a third party constitute copyrighted, trade
secret, or other proprietary information (collectively, "Proprietary
Information") of substantial value to Forum or the third party. The Fund agrees
to treat all Proprietary Information as proprietary to Forum and further agrees
that it shall not divulge any Proprietary Information to any person or
organization except as may be provided under this Agreement.
(b) Proprietary Information of the Fund. Forum acknowledges that the
-----------------------------------
Shareholder list and all information related to Shareholders furnished to Forum
by the Fund or by a Shareholder in connection with this Agreement (collectively,
"Customer Data") constitute proprietary information of substantial value to the
Fund. In no event shall Proprietary Information be deemed Customer Data. Forum
agrees to treat all Customer Data as proprietary to the Fund and further agrees
that it shall not divulge any Customer Data to any person or organization except
as may be provided under this Agreement or as may be directed by the Fund.
SECTION 10. INDEMNIFICATION
(a) Indemnification of Forum. Forum shall not be responsible for, and the
------------------------
Fund shall
- 8 -
<PAGE>
indemnify and hold Forum harmless from and against, any and all losses, damages,
costs, charges, reasonable counsel fees, payments, expenses and liability
arising out of or attributable to:
(i) all actions of Forum or its agents or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are taken in
good faith and without gross negligence or willful misconduct;
(ii) the Fund's lack of good faith or the Fund's gross negligence or
willful misconduct;
(iii) the reasonable reliance on or use by Forum or its agents or
subcontractors of information, records, documents or services which have
been prepared, maintained or performed by the Fund or any other person or
firm on behalf of the Fund;
(iv) the reasonable reliance on, or the carrying out by Forum or its
agents or subcontractors of, any instructions or requests of the Fund; and
(v) the offer or sale of Shares in violation of any requirement under
the Federal securities laws or regulations or the securities laws or
regulations of any State that such Shares be registered in such State or in
violation of any stop order or other determination or ruling by any federal
agency or any State with respect to the offer or sale of such Shares in
such State.
(b) Indemnification of Fund. Forum shall indemnify and hold the Fund
-----------------------
harmless from and against any and all losses, damages, costs, charges,
reasonable counsel fees, payments, expenses and liability arising out of or
attributed to any breach of any representation or warranty in Section 8(a) or
any action or failure or omission to act by Forum as a result of Forum's lack of
good faith, gross negligence or willful misconduct with respect to the services
performed under or in connection with this Agreement.
(c) Reliance. At any time Forum may apply to any officer of the Fund for
--------
instructions, and may consult with legal counsel to the Fund or to Forum with
respect to any matter arising in connection with the services to be performed by
Forum under this Agreement, and Forum and its agents or subcontractors shall not
be liable and shall be indemnified by the Fund for any action taken or omitted
by it in reasonable reliance upon such instructions or upon the advice of such
counsel. Forum, its agents and subcontractors shall be protected and
indemnified in acting upon (i) any paper or document furnished by or on behalf
of the Fund, reasonably believed by Forum to be genuine and to have been signed
by the proper person or persons, (ii) any instruction, information, data,
records or documents provided Forum or its agents or subcontractors by machine
readable input, telex, CRT data entry or other similar means authorized by the
Fund, and (iii) any authorization, instruction, approval, item or set of data,
or information of any kind transmitted to Forum in person or by telephone, vocal
telegram or other electronic means, reasonably believed by Forum to be genuine
and to have been given by the proper person or persons. Forum shall not be held
to have notice of any change of authority of
- 9 -
<PAGE>
any person, until receipt of written notice thereof from the Fund. Forum, its
agents and subcontractors shall also be protected and indemnified in recognizing
Share certificates which are reasonably believed to bear the proper manual or
facsimile signatures of the officers of the Fund, and the proper
countersignature of any former transfer agent or former registrar or of a co-
transfer agent or co-registrar of the Fund.
(d) Reliance on Electronic Instructions. If the Fund has the ability to
-----------------------------------
originate electronic instructions to Forum in order to (i) effect the transfer
or movement of cash or Shares or (ii) transmit Shareholder information or other
information, then in such event Forum shall be entitled to rely on the validity
and authenticity of such instruction without undertaking any further inquiry as
long as such instruction is undertaken in conformity with security procedures
established by Forum from time to time.
(e) Use of Fund/SERV and Networking. The Fund has authorized or in the
-------------------------------
future may authorize Forum to act as a "Mutual Fund Services Member" for the
Fund. Fund/SERV and Networking are services sponsored by the National
Securities Clearing Corporation ("NSCC") and as used herein have the meanings as
set forth in the then current edition of NSCC Rules and Procedures published by
-------------------------
NSCC or such other similar publication as may exist from time to time. The Fund
shall indemnify and hold Forum harmless from and against any and all losses,
damages, costs, charges, reasonable counsel fees, payments, expenses and
liability arising directly or indirectly out of or attributed to any action or
failure or omission to act by NSCC.
(f) Notification of Claims. In order that the indemnification provisions
----------------------
contained in this Section shall apply, upon the assertion of a claim for which
either party may be required to indemnify the other, the party seeking
indemnification shall promptly notify the other party of such assertion, and
shall keep the other party advised with respect to all developments concerning
such claim. The party who may be required to indemnify shall have the option to
participate with the party seeking indemnification in the defense of such claim
or to defend against said claim in its own name or in the name of the other
party. The party seeking indemnification shall in no case confess any claim or
make any compromise in any case in which the other party may be required to
indemnify it except with the other party's prior written consent.
SECTION 11. EFFECTIVENESS, TERMINATION AND SURVIVAL
(a) Effectiveness. This Agreement shall become effective with respect to
-------------
the Fund on the date first above written. Upon effectiveness of this Agreement,
it shall supersede all previous agreements between the parties hereto covering
the subject matter hereof insofar as such Agreement may have been deemed to
relate to the Fund.
(b) Termination. This Agreement may be terminated at any time, without
-----------
the payment of any penalty (i) by the Board on 60 days' written notice to Forum
or (ii) by Forum on 60 days' written notice to the Fund. Any termination shall
be effective as of the date specified in the notice. Upon notice of termination
of this Agreement by either party, Forum shall promptly transfer to the
successor transfer agent the original or copies of all books and records
maintained
- 10 -
<PAGE>
by Forum under this Agreement including, in the case of records maintained on
computer systems, copies of such records in machine-readable form, and shall
cooperate with, and provide reasonable assistance to, the successor transfer
agent in the establishment of the books and records necessary to carry out the
successor transfer agent's responsibilities.
(c) Survival. The obligations of Sections 7, 9 and 10 shall survive any
--------
termination of this Agreement.
SECTION 12. ADDITIONAL FUNDS AND CLASSES. [INTENTIONALLY LEFT BLANK]
SECTION 13. ASSIGNMENT. Except as otherwise provided in this Agreement,
neither this Agreement nor any rights or obligations under this Agreement may be
assigned by either party without the written consent of the other party. This
Agreement shall inure to the benefit of and be binding upon the parties and
their respective permitted successors and assigns. Forum may, upon prior
consent of the Fund, subcontract for the performance hereof with any entity,
including affiliated persons of Forum; provided however, that Forum shall be as
fully responsible to the Fund for the acts and omissions of any subcontractor as
Forum is for its own acts and omissions.
SECTION 14. DISASTER RECOVERY. Forum shall enter into and shall maintain
in effect with appropriate parties one or more agreements making reasonable
provisions for emergency use of electronic data processing equipment to the
extent appropriate equipment is available. In the event of equipment failures,
Forum shall, at no additional cost to the Fund, take reasonable steps to
minimize service interruptions. Forum shall have no liability with respect to
the loss of data or service interruptions caused by equipment failure, provided
such loss or interruption is not caused by Forum acting in good faith without
gross negligence.
SECTION 15. FORCE MAJEURE. Except as provided in Section 14, Forum shall
not be responsible or liable for any failure or delay in performance of its
obligations under this Agreement arising out of or caused, directly or
indirectly, by circumstances beyond its reasonable control including, without
limitation, acts of civil or military authority, national emergencies, labor
difficulties, fire, mechanical breakdowns, flood or catastrophe, acts of God,
insurrection, war, riots or failure of the mails or any transportation medium,
communication system or power supply; provided, however, that any failure or
delay by Forum in the performance of its obligations under this Agreement
arising out of or caused by, directly or indirectly, its failure to be Year 2000
complaint shall not constitute a circumstance beyond its reasonable control.
SECTION 16. TAXES. Forum shall not be liable for any taxes, assessments
or governmental charges that may be levied or assessed on any basis whatsoever
in connection with the Fund or any Shareholder or any purchase of Shares,
excluding taxes assessed against Forum for compensation received by it under
this Agreement.
- 11 -
<PAGE>
SECTION 17. MISCELLANEOUS
(a) No Consequential Damages. Neither party to this Agreement shall be
------------------------
liable to the other party for consequential damages under any provision of this
Agreement.
(b) Amendments. No provisions of this Agreement may be amended or
----------
modified in any manner except by a written agreement properly authorized and
executed by both parties hereto.
(c) Choice of Law. This Agreement shall be construed and the provisions
-------------
thereof interpreted under and in accordance with the laws of the State of
Maryland.
(d) Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties hereto and supersedes any prior agreement with respect to
the subject matter hereof whether oral or written.
(e) Counterparts. This Agreement may be executed by the parties hereto on
------------
any number of counterparts, and all of the counterparts taken together shall be
deemed to constitute one and the same instrument.
(f) Severability. If any part, term or provision of this Agreement is
------------
held to be illegal, in conflict with any law or otherwise invalid, the remaining
portion or portions shall be considered severable and not be affected, and the
rights and obligations of the parties shall be construed and enforced as if the
Agreement did not contain the particular part, term or provision held to be
illegal or invalid.
(g) Headings. Section and paragraph headings in this Agreement are
--------
included for convenience only and are not to be used to construe or interpret
this Agreement.
(h) Notices. Notices, requests, instructions and communications received
-------
by the parties at their respective principal addresses, or at such other address
as a party may have designated in writing, shall be deemed to have been properly
given.
(i) Business Days. Nothing contained in this Agreement is intended to or
-------------
shall require Forum, in any capacity hereunder, to perform any functions or
duties on any day other than a Fund Business Day. Functions or duties normally
scheduled to be performed on any day which is not a Fund Business Day shall be
performed on, and as of, the next Fund Business Day, unless otherwise required
by law.
(j) Nonliability of Affiliates. No affiliated person (as that term is
--------------------------
defined in the 1940 Act), employee, agent, director, officer or manager of Forum
shall be liable at law or in equity for Forum's obligations under this
Agreement.
(k) Representation of Signatories. Each of the undersigned expressly
-----------------------------
warrants and represents that they have full power and authority to sign this
Agreement on behalf of the party indicated and that their signature will bind
the party indicated to the terms hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
persons, as of the day and year first above written.
THE NEVIS FUND, INC.
BY:
DAVID R. WILMERDING, III
PRESIDENT
FORUM SHAREHOLDER SERVICES, LLC
BY:
LISA J. WEYMOUTH
DIRECTOR
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<PAGE>
THE NEVIS FUND, INC.
TRANSFER AGENCY AND SERVICES AGREEMENT
APPENDIX A
Fees and Expenses
(i) Base Fee:
Fees per Fund with
one Class $24,000/yr.
Fees per Fund with
more than one Class $24,000/yr. plus $12,000/yr. per each class above one
The rates set forth above shall remain fixed through December 31, 1998.
On January 1, 1999, and on each successive January 1, the rates may be
adjusted automatically by Forum without action of the Fund to reflect
changes in the Consumer Price Index for the preceding calendar year, as
published by the U.S. Department of Labor, Bureau of Labor Statistics.
Forum shall notify the Fund each year of the new rates, if applicable.
(ii) Shareholder Account Fees:
$25 per Shareholder account per year.
Shareholder account fees are based upon the number of Shareholder
accounts as of the last Fund Business Day of the prior month.
(iii) Out-Of-Pocket and Related Expenses
The Fund shall reimburse Forum for all out-of-pocket and ancillary
expenses in providing the services described in this Agreement, including
but not limited to the cost of (or appropriate share of the cost of): (i)
statement, confirmation, envelope and stationary stock, (ii) share
certificates, (iii) printing of checks and drafts, (iv) postage, (v)
telecommunications, (vi) banking services (DDA account, wire and ACH,
check and draft clearing and lock box fees and charges), (vii) NSCC
Mutual Fund Service Member fees and expenses, (viii) outside proxy
solicitors and tabulators, (ix) proxy solicitation fees and (x) microfilm
and microfiche. In addition, any other expenses incurred by Forum at the
request or with the consent of the Fund, will be reimbursed by the Fund.
<PAGE>
EXHIBIT 10
[LETTERHEAD OF PIPER & MARBURY L.L.P. APPEARS HERE]
June 18, 1998
The Nevis Fund, Inc.
1119 St. Paul Street
Baltimore, Maryland 21202
Re: Registration Statement on Form N-1A
-----------------------------------
Gentlemen:
We have acted as counsel to The Nevis Fund, Inc., a Maryland corporation
(the "Fund"), in connection with the filing with the Securities and Exchange
Commission of a registration statement on Form N-1A (File Nos. 333-47467; 811-
08689), as amended (the "Registration Statement"), registering an indefinite
number of shares of the Common Stock, par value $.01 per share (the "Shares"),
of the Fund under the Securities Act of 1933, as amended (the "Act").
In our capacity as counsel to the Fund, we have examined the charter and
bylaws of the Fund, the Registration Statement, the corporate action taken by
the Fund that provides for the issuance of the Shares, and such other documents
and matters as we have deemed necessary and appropriate to render the opinion
set forth below. In reaching the opinion set forth below, we have assumed all
documents submitted to us as originals are authentic, all documents submitted to
us as certified or photostatic copies conform to the original documents, all
signatures on all documents submitted to us for examination are genuine, and all
public records reviewed are accurate and complete.
Based upon and subject to the foregoing, we are of the opinion that the
Shares have been duly authorized for issuance and, when issued and paid for as
described in the Registration Statement, the Shares will be validly issued,
fully paid and nonassessable.
<PAGE>
The Nevis Fund, Inc.
June 18, 1998
Page 2
We hereby consent to the filing of this opinion letter as an exhibit to the
Registration Statement and to the reference to our firm and the opinion set
forth herein in the prospectus included in the Registration Statement. In
giving our consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Act or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Piper & Marbruy L.L.P.
<PAGE>
Exhibit 13
INITIAL CAPITAL AGREEMENT
June ___, 1998
The Nevis Fund, Inc.
1119 St. Paul Street
Baltimore, Maryland 21202
Gentlemen:
The Nevis Fund, Inc. (the "Fund"), a newly-organized open-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), proposes to issue and sell to the public its shares
pursuant to a registration statement on Form N-1A (File No. 333-47467), as from
time to time amended (the "Registration Statement"), filed with the Securities
and Exchange Commission. In order to provide the Fund with a net worth
sufficient to commence operations and to meet the requirements of Section 14 of
the 1940 Act, we agree to purchase shares of the Fund in accordance the terms
and conditions set forth below.
We hereby agree to purchase from the Fund ___________ shares (the "Shares")
of the Fund for an aggregate purchase price of $100,000. We shall deliver
payment for the Shares in immediately available funds to the Fund's custodian
bank at least two business days prior to the date specified by the Fund as the
effective date of the Registration Statement.
We represent and warrant that we are acquiring the Shares for our own
account for investment and not with a view to the resale or further distribution
thereof, and that we have no present plan or intention to sell, redeem or
otherwise dispose of the Shares or any part thereof. We acknowledge and agree
that in the event that any of the Shares are redeemed prior to complete
amortization of the deferred organizational expenses of the Fund, the proceeds
of redemption of such Shares shall be reduced by the pro rata share (based on
the number of Shares redeemed and the total number of Shares then outstanding)
of the unamortized organizational expenses as of the date of such redemption.
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please so indicate by signing in the space provided below, whereupon this letter
will become a binding agreement between us in accordance with its terms.
Very truly yours,
NEVIS CAPITAL MANAGEMENT, INC.
By:
-----------------------------------
David R. Wilmerding, III
President
The foregoing Initial Capital Agreement
is hereby confirmed and accepted as of
the date first written above.
THE NEVIS FUND, INC.
By:
-----------------------------
David R. Wilmerding, III
President
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