As filed with the Securities and Exchange Commission on September 23, 1999
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|
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. 2 |X|
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 4 |X|
(Check appropriate box or boxes.)
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THE NEVIS FUND, INC.
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(Exact Name of Registrant as Specified in Charter)
1119 St. Paul Street
Baltimore, MD 21202
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(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code: (410) 385-2645
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David R. Wilmerding, III
President
The Nevis Fund, Inc.
1119 St. Paul Street
Baltimore, MD 21202
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(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.
It is proposed that this filing will become effective (check appropriate box)
|_| immediately upon filing pursuant to paragraph (b)
|X| on September 24, 1999 pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)(1)
|_| on (date) pursuant to paragraph (a)(1)
|_| 75 days after filing pursuant to paragraph (a)(2)
|_| on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
|_| This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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<PAGE>
THE NEVIS FUND, INC.
CROSS REFERENCE SHEET
Part A
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<CAPTION>
Form N-1A Item No. Section in Prospectus
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<S> <C> <C>
1. Front and Back Cover Pages............................................. Front Cover Page; Back Cover Page
2. Risk/Return Summary: Investments, Risks, and Performance............... An Overview of the Fund
3. Risk/Return Summary: Fee Table......................................... Fees and Expenses of the Fund
4. Investment Objectives, Principal Investment Strategies, and
Related Risks.......................................................... An Overview of the Fund; The
Fund's Investments and
Strategies; More About Risk
5. Management's Discussion of Fund Performance............................ Not applicable
6. Management, Organization, and Capital Structure........................ Fund Management; Where to Find
More Information
7. Shareholder Information................................................ Purchasing and Selling Fund
Shares; Dividends, Distributions
and Taxes
8. Distribution Arrangements.............................................. Not applicable
9. Financial Highlights Information....................................... Financial Highlights
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THE NEVIS FUND, INC.
CROSS REFERENCE SHEET
Part B
<TABLE>
<CAPTION>
Section in Statement of
Form N-1A Item No. Additional Information
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10. Cover Page and Table of Contents....................................... Cover Page
11. Fund History........................................................... General Information
12. Description of the Fund and Its Investments and Risks.................. The Fund's Investments and
Strategies; Portfolio
Transactions and Brokerage
13. Management of the Fund................................................. Fund Management
14. Control Persons and Principal Holders of Securities.................... Fund Management
15. Investment Advisory and Other Services................................. Fund Management
16. Brokerage Allocation and Other Practices............................... Fund Management; General
Information
17. Capital Stock and Other Securities..................................... Portfolio Transactions and
Brokerage
18. Purchase, Redemption, and Pricing of Shares............................ Description of Capital Stock
19. Taxation of the Fund................................................... Purchasing and Selling Fund
Shares
20. Underwriters........................................................... Taxation
21. Calculation of Performance Data........................................ Fund Performance
22. Financial Statements................................................... Financial Statements
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PROSPECTUS
September 24, 1999
THE NEVIS FUND, INC.
The Nevis Fund, Inc. is a no-load mutual fund seeking long-term capital
appreciation.
This prospectus gives you important information about the Fund that you
should know before investing. Please read this prospectus and keep it for future
reference.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
FUND'S SHARES OR DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR
COMPLETE. IT IS A CRIME FOR ANYONE TO TELL YOU OTHERWISE.
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Nevis Capital Management, Inc.
Investment Adviser
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AN OVERVIEW OF THE FUND
This section describes the Fund's investment goals and strategies and the
principal risks of investing in the Fund.
INVESTMENT GOALS AND STRATEGIES OF THE FUND
The Fund's goal is long-term capital appreciation. The Fund generally
follows a growth strategy in selecting securities but may select stocks based
upon value-oriented criteria.
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
Fund's investment adviser will select investments for the Fund characterized by
businesses that generate high returns on invested capital and have strong,
positive cash flows. When analyzing a company's earnings growth, the investment
adviser attempts to determine its sustainable rate of growth of operating
earnings. The investment adviser is not interested in companies that report
unsustainable earnings growth attributable to investment income, extraordinary
gains or accounting legerdemain. The Fund generally invests in companies with
market capitalizations of more than $100 million, but may invest in companies of
any size.
The Fund's investment strategy also requires the investment adviser to be
sensitive to valuation when selecting stocks for the Fund's portfolio.
Typically, the stocks purchased by the Fund will have a price earnings (P/E)
multiple no greater than 75% of the company's long-term sustainable growth rate.
The Fund's investment adviser pays careful attention to a company's capital
structure, preferring companies with conservatively capitalized balance sheets
that are self-financing.
The Fund's investment adviser will generally sell a security when the
investment criteria no longer applies. The Fund takes a long-term approach to
investing, and as a result, the Fund expects it will generally experience
relatively low portfolio turnover.
PRINCIPAL RISKS OF INVESTING IN THE FUND
You may lose money on your investment in the Fund, just as you could with
other investments. As with all mutual funds, Fund shares are not bank deposits
and are not insured or guaranteed by the FDIC or any government agency.
The value of your investment in the Fund is based on the market prices of
the securities the Fund holds. Since it purchases equity securities, the Fund is
subject to the risk that stock prices will fall over short or extended periods
of time. These price movements, sometimes called volatility, may be greater or
lesser depending on the types of securities the Fund owns and the markets in
which they trade. Historically, the equity markets have moved in cycles, and the
value of the Fund's equity securities may fluctuate significantly from day to
day. Individual companies may report poor results or be negatively affected by
industry and/or economic trends and developments. The prices of securities
issued by such companies may suffer a decline in response. These factors
contribute to price volatility, which is the principal risk of investing in the
Fund.
The smaller capitalization companies the Fund invests in may be more
vulnerable to adverse business or economic events than larger, more established
companies. These companies typically have relatively lower revenues, limited
product lines and lack of management depth, and may have a smaller share of the
market for their products or services, than larger capitalization companies.
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2
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The Fund may select a security based upon value-oriented criteria. The
principal risk of value investing is that the security may remain undervalued.
The Fund is non-diversified, which means that it may invest in the
securities of relatively few companies. As a result, the Fund may be more
susceptible to a single adverse economic or regulatory occurrence affecting one
or more of these companies and may experience increased volatility due to its
investments in those securities.
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FEES AND EXPENSES
OF THE FUND
This table describes the fees and expenses that you may pay if you buy and
hold shares. You would pay these fees directly from your investment in the Fund:
Shareholder Fees (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases (as a % of
offering price).......................................................None
Maximum Deferred Sales Charge (Load) (as a % of net asset value)........None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends and other
Distributions (as a % of offering price)..............................None
Redemption Fee (as a % of amount redeemed)..............................1.00%*
Annual Fund Operating Expenses (expenses that are deducted from fund assets)
Management Fees.........................................................1.50%
Distribution and Service (12b-1) Fees.....................................00%
Other Expenses............................................................00%**
Total Annual Fund Operating Expenses....................................1.50%**
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*Shares redeemed within 90 days of their purchase are subject to a 1%
redemption fee which may be waived by the Fund. See "Purchasing and Selling
Fund Shares - Selling Shares."
**The Fund's investment adviser has contractually agreed to pay all ordinary
expenses of the Fund's operations. For more information about fees and
expenses, see "Fund Management - Investment Adviser."
Example
This example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The example assumes that
you invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of the period.
The example also assumes that each year your investment has a 5% return and
Fund expenses remain the same. Although your actual costs and returns might be
different, your approximate costs of investing $10,000 in the Fund would be:
1 Year 3 Years 5 Years 10 Years
$153 $474 $818 $1,791
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3
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THE FUND'S INVESTMENTS AND STRATEGIES
The Fund's primary investments and strategies are described above under "An
Overview of the Fund." The Fund will normally invest at least 65% of its assets
in the types of securities described in this prospectus. However, the Fund also
may invest in other securities, use other strategies and engage in other
investment practices. These investments and strategies, as well as those
described in this prospectus, are described in detail in our Statement of
Additional Information. Of course there is no guarantee that the Fund will
achieve its investment goal.
EQUITY SECURITIES
Equity securities are the fundamental unit of ownership in a company. They
represent a share of the company's earnings and assets, after it pays its
liabilities. Equity securities offer greater potential for appreciation than
other types of securities because their value increases directly with the value
of the company's business. Equity securities include publicly and privately
issued common and preferred stocks, warrants, rights to subscribe to common
stock and convertible securities, as well as instruments that attempt to track
the price movement of equity indices.
Common stocks are the most prevalent type of equity security. Common
stockholders receive the residual value of the company's earnings and assets
after the company pays its creditors and any preferred stockholders. As a
result, changes in an issuer's earnings directly influence the value of its
common stock.
Holders of preferred stocks have the right to receive specified dividends
before the company makes payments on its common stock. Some preferred stocks
also participate in dividends and other distributions paid on common stock.
Preferred stocks may permit the company to redeem the stock.
Warrants give the Fund the option to buy a company's equity securities at a
specified price (the exercise price) at a specified future date (the expiration
date). The Fund may buy the designated securities by paying the exercise price
before the expiration date. Warrants may become worthless if the price of the
stock does not rise above the exercise price by the expiration date. This
increases the market risks of warrants as compared to the underlying security.
Rights are the same as warrants, except companies typically issue rights to
existing shareholders.
TEMPORARY INVESTMENTS
The investments and strategies described in this prospectus are those that
we use under normal conditions. During unusual economic or market conditions, or
for temporary defensive or liquidity purposes, the Fund may invest up to 100% of
its assets in cash and short-term securities that may not ordinarily be
consistent with the Fund's goals. The Fund may not achieve its investment goal
when so invested. The Fund will make such investments if the investment adviser
believes that the risk of loss outweighs the opportunity for gains.
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4
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MORE ABOUT RISK
There are risks associated with investing in the types of securities in
which the Fund invests. As a result, the Fund is a suitable investment only for
those investors who have long-term investment goals. Prospective investors who
are uncomfortable with an investment that will fluctuate in value should not
invest in the Fund.
MARKET RISK
Investments in equity securities are subject to market risks that may cause
their prices to fluctuate over time. The value of securities convertible into
equity securities, such as warrants or convertible debt, also is affected by
prevailing interest rates, the credit quality of the issuer and any call
provision. From time to time "value" investing falls out of favor with
investors. When it does, there is the risk that the market will not recognize a
company's improving fundamentals as quickly as it normally would. During these
periods, the Fund's relative performance may suffer.
Fluctuations in the value of equity securities in which the Fund invests
will cause the Fund's net asset value to fluctuate. An investment in a portfolio
of equity securities may be more suitable for long-term investors who can bear
the risk of these share price fluctuations.
SMALLER CAPITALIZATION COMPANY RISK
The Fund may invest in smaller capitalization companies. These companies
may be more vulnerable to adverse business or economic events than larger, more
established companies. Smaller capitalization companies typically have
relatively lower revenues, limited product lines and lack of management depth,
and may have a smaller share of the market for their products or services, than
larger capitalization companies. Therefore, small-cap stocks may be more
volatile than those of larger companies. The stocks of smaller capitalization
companies tend to have less trading volume than the stocks of larger companies.
Less trading volume may make it more difficult for the Fund to sell a small-cap
stock at its quoted market price. Finally, there are periods when investing in
small-cap stocks falls out of favor with investors and these stocks
underperform.
NON-DIVERSIFICATION RISK
The Fund is a non-diversified investment company. As such it likely will
invest in the securities of relatively fewer companies than diversified funds
and its performance may be more volatile. If the securities in which the Fund
invests perform poorly, the Fund could incur greater losses than it would have
incurred had it invested in a greater number of companies.
YEAR 2000 RISK
The Fund depends upon 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 do not distinguish between the year 2000 and the
year 1900. The Fund has asked its mission critical service providers whether
they expect to have their computer systems adjusted for the year 2000
transition, and has sought and received assurances from such service providers
that they are devoting significant resources to prevent material adverse
consequences to the Fund. While such assurances have been received, the Fund and
its shareholders may experience losses if these assurances prove to be incorrect
or as a result of
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5
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year 2000 computer difficulties experienced by issuers of securities or third
parties, such as custodians, banks, broker-dealers or others with which the Fund
does business.
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PURCHASING AND SELLING FUND SHARES
HOW TO CONTACT THE FUND
Write to us at:
The Nevis Fund, Inc.
P.O. Box 446
Portland, ME 04112
Telephone us toll-free at:
(877) 44-NEVIS
Wire investments (or ACH payments) to us at:
First Union National Bank
ABA #031201467
For Credit to:
Account # 2014215593095
The Nevis Fund, Inc.
(Your name)
(Your account number)
(Your Social Security number or tax identification number)
GENERAL INFORMATION
You pay no sales charge to purchase or sell (redeem) shares of the Fund.
The Fund purchases and sells shares at the net asset value per share or NAV next
calculated after the Fund's transfer agent receives your transaction request in
proper form. For instance, if the transfer agent receives your transaction
request in proper form prior to 4:00 p.m., your transaction will be priced at
that day's NAV. If the transfer agent receives your request after 4:00 p.m.,
your transaction will be priced at the next day's NAV. Purchases and redemptions
of Fund shares may be made on any day on which both the Federal Reserve Banks
and the New York Stock Exchange are open. The Fund will not accept orders that
request a particular day or price for the transaction or any other special
conditions.
Shares redeemed within 90 days of their purchase are subject to a
redemption fee equal to 1% of the NAV next calculated after receipt of the
redemption request in proper form. The Fund may waive the redemption fee if it
is in the best interests of the Fund and its shareholders to do so.
The Fund does not issue share certificates.
You will receive quarterly statements and a confirmation of each
transaction. You should verify the accuracy of all transactions in your account
as soon as you receive your confirmation.
The Fund reserves the right to impose minimum investment amounts and may
temporarily suspend (during unusual market conditions) or discontinue any
service or privilege.
When and How NAV is Determined. The Fund calculates its NAV as of the close
of the New York Stock Exchange (normally 4:00 p.m., Eastern time) on each
weekday except days when either the New York Stock Exchange or the Federal
Reserve Banks are closed. The time at which NAV is calculated may be changed in
case of an emergency. The Fund's NAV is determined by taking the market value of
all securities owned by the Fund (plus all other assets such as cash),
subtracting all liabilities and then dividing the result (net assets) by the
number of shares outstanding. The Fund values securities for which market
quotations are readily available at current market value. If market quotations
are not readily
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6
<PAGE>
available, the Fund values securities at fair value using methods approved by
the Fund's board of directors.
Transactions Through Third Parties. You may purchase and redeem shares of
the Fund through a broker or an agent, including banks, retirement plans and
financial advisers. You may be charged a fee if you make a purchase or
redemption of shares of the Fund through a broker or an agent. Such fees may
vary among brokers and agents but in all cases will be retained by the broker or
agent and not remitted to the Fund or the Fund's investment adviser. The Fund
may authorize one or more brokers, financial institutions or other service
providers (Processing Intermediaries), who may designate other Processing
Intermediaries, to accept purchase and redemption orders on behalf of the Fund.
In such event, the Fund will be deemed to have received a purchase or redemption
order when accepted by the Processing Intermediary and the order will be priced
at the Fund's NAV next calculated after the order is accepted by the Processing
Intermediary. Consult a representative of your financial institution or
retirement plan for further information.
Retirement Accounts. The Fund offers IRA accounts, including traditional
and Roth IRAs. Fund shares may also be an appropriate investment for other
retirement plans. Before investing in any IRA or other retirement plan, you
should consult your tax adviser. Whenever making an investment in an IRA, be
sure to indicate the year in which the contribution is made.
PURCHASING SHARES
All investments must be in U.S. dollars and checks must be drawn on U.S.
banks.
Checks. For individual or UGMA/UTMA accounts, the check must be made
payable to "The Nevis Fund, Inc." or to one or more owners of the account and
endorsed to "The Nevis Fund, Inc." For all other accounts, the check must be
made payable on its face to "The Nevis Fund, Inc." No other method of check
payment is acceptable (for instance, you may not pay by travelers check).
Purchases by Automatic 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 Fund's transfer agent will automatically debit the pre-designated bank
account for the desired amount. Shareholders may call (877) 44-NEVIS to request
an ACH transaction.
Wires. Instruct your financial institution to wire payment to us. Your
financial institution may charge you a fee for this service.
Minimum Investments. The Fund accepts payments in the following minimum
amounts:
---------------------------
Minimum Minimum
Initial Additional
Investment Investment
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Standard Accounts $10,000 $500
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Traditional and Roth
IRA Accounts $2,000 None
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Automatic Investment
Plans $10,000 $50
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Automatic Redemption
Plans $25,000 $50
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Management of the Fund may choose to waive the investment minimum.
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ACCOUNT REQUIREMENTS
<TABLE>
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Type of Account Requirements
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Individual, Sole Proprietorship and Joint o Individual accounts are owned by one person,
Accounts as are sole proprietorship accounts
o Joint accounts can have two or more owners
(tenants)
o Instructions must be signed by all persons
required to sign (you choose who must sign)
exactly as each name appears on the account
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Gifts or Transfers to a Minor (UGMA, UTMA) o Depending on state laws, you can set up a
These custodial accounts provide a way to give custodial account under the Uniform Gift to
money to a child and obtain tax benefits. You can Minors Act or the Uniform Transfers to
give up to $10,000 a year per child without paying Minors Act
Federal gift tax. o The trustee must sign instructions in a manner
indicating trustee capacity
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Business Entities o For entities with officers, provide an original or
certified copy of a resolution that identifies the
authorized signers for the account
o For entities with partners or similar parties,
provide a certified partnership agreement or
organizational document, or certified pages
from the partnership agreement or organiza-
tional document, that identify the partners or
similar parties
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Trusts o The trust must be established before an
account can be opened
o Provide a certification for trust, or the pages
from the trust document that identify the
trustees
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INVESTMENT PROCEDURES
<TABLE>
<CAPTION>
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To Open an Account To Add to Your Account
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<S> <C>
By Check By Check
o Call or write us for an account application o Fill out an investment slip from a confirmation
o Complete the application statement or write a letter to us
o Mail us your application and a check o Write your account number on your check
o Mail us the slip (or your letter) and a check
By Wire By Wire
o Call or write us for an account application o Call to notify us of your incoming wire
o Complete the application o Instruct your bank to wire your money to us
o Call us and you will be assigned an account
number
o Mail us your application
o Instruct your bank to wire your money to us
By ACH Payment By Automatic Investment
o Call or write us for an account application o Complete the Automatic Investment Plan (AIP)
o Complete the application section on your account application
o Call us and you will be assigned an account o Complete the application
number o Attach a voided check to your application
o Mail us your application o Mail us the application and the voided check
o Make an ACH payment
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Automatic Investments. You may invest a specified amount of money in the
Fund once or twice a month on specified dates. These payments are taken from
your bank account by ACH payment. Automatic investments must be for at least
$50.
Limitations on Purchases. The Fund reserves the right to refuse any
purchase request, particularly requests that could adversely affect the Fund or
its operations. This includes those from any individual or group who, in the
Fund's view, are likely to engage in excessive trading (usually defined as more
than four transactions out of the Fund within a calendar year).
Canceled or Failed Payments. The Fund accepts checks and ACH transfers at
full value subject to collection. If your payment for shares is not received or
you pay with a check or ACH transfer that does not clear, your purchase will be
canceled. You will be responsible for any losses or expenses incurred by the
Fund or its transfer agent, and the Fund may redeem shares you own in the
account as reimbursement. The Fund and its agents have the right to reject or
cancel any purchase or redemption due to nonpayment.
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SELLING SHARES
The Fund processes redemption orders promptly and you will generally
receive redemption proceeds within a week. Delays may occur in cases of very
large redemptions, excessive trading or during unusual market conditions. If the
Fund has not yet collected payment for the shares you are selling, however, it
may delay sending redemption proceeds for up to 15 calendar days.
<TABLE>
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To Sell Shares from Your Account
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By Mail By Telephone
o Prepare a written request including: o Call us with your request (unless you declined
o Your name(s) and signature(s) telephone redemption privileges on your
o Your account number account application)
o The Fund name o Provide the following information:
o The dollar amount or number of shares you o Your account number
want to sell o Exact name(s) in which account is registered
o How and where to send your proceeds o Additional form of identification
o Obtain a signature guarantee (if required) o Your proceeds will be:
o Obtain other documentation (if required) o Mailed to you or
o Mail us your request and documentation o Wired to you (unless you have declined
telephone redemption privileges
By Wire -- See "By Wire")
o Wire requests are only available if:
o You did not decline wire redemption privileges Automatically
on your account application o Complete the Automatic Redemption Plan
and (ARP) section on your account application
o Your request is for $5,000 or more o Attach a voided check to your form
o Call us with your request (unless you have o Mail us your form and the voided check
declined telephone redemption privileges
-- See "By Telephone") or
o Mail us your request (See "By Mail")
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10
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Telephone Redemption Privileges. You may redeem your shares by telephone
unless you declined redemption privileges on your account application or a
separate form. You may be responsible for any fraudulent telephone order as long
as the Fund's transfer agent takes reasonable measures to verify the order.
Wire Redemption Privileges. You may redeem shares by wire unless you
declined wire redemption privileges on your account application or a separate
form. The minimum amount you may request by wire is $5,000. If you wish to make
your wire request by telephone, you must also elect telephone redemption
privileges.
Automatic Redemption. If you own shares of the Fund with an aggregated
value of at least $25,000, you may request a specified amount of money from your
account once a month, quarter, semi-annual or annual period on a specified date.
These payments are sent from your account to a designated bank account by ACH
payment. Automatic requests must be for at least $50.
Signature Guarantee Requirements. To protect you and the Fund against
fraud, signatures on certain requests must have a "signature guarantee." For
requests made in writing, a signature guarantee is required for any of the
following:
o Redeeming shares worth over $50,000
o Redeeming shares from your account if you have changed the address or
account registration within the last 30 days
o Sending proceeds to any person, address, brokerage firm or bank account
not on record
o Sending proceeds to an account with a different registration (name or
ownership) from yours
o Changing wire or ACH instructions on an account
o Changing the distribution, telephone requests or exchange option or any
other election in connection with your account
A signature guarantee verifies the authenticity of your signature. You can
obtain one from most banking institutions or securities brokers, but not from a
notary public.
Small Accounts. If the value of your account falls below $10,000 (with the
exception of an IRA account), the Fund may ask you to increase your balance. If
the account value is still below $10,000 after 60 days, the Fund may close your
account and send you the proceeds. The Fund will not close your account if it
falls below these amounts solely as a result of a reduction in your account's
market value.
Redemption In Kind. The Fund reserves the right to make redemptions "in
kind" -- payment of redemption proceeds in portfolio securities rather than cash
- -- if the amount requested is large enough to affect the Fund's operations (for
example, if it represents more than 1% of the Fund's assets).
Lost Accounts. The Fund's transfer agent will consider your account "lost"
if correspondence to your address of record is returned as undeliverable, unless
the transfer agent determines your new address. When an account is "lost," all
distributions on the account will be reinvested in additional shares of the
Fund. In addition, the amount of any outstanding (unpaid for six months or more)
checks for distributions that have been returned to the Fund's transfer agent
will be reinvested and the checks will be canceled.
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11
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DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
The Fund distributes substantially all of its investment income and capital
gains annually.
Your dividends and capital gains distributions will be automatically
reinvested in additional Fund shares, unless you elect to receive payment in
cash. To elect cash payment, you must notify the Fund in writing prior to the
date of distribution. Your election will be effective for dividends and
distributions paid after the Fund receives your written notice. To cancel your
election, simply send the Fund written notice.
TAXES
Please consult your tax adviser regarding your specific questions about
Federal, state and local income taxes. Below we have summarized some important
tax issues that affect the Fund and its shareholders. This summary is based on
current tax laws, which may change.
The Fund will distribute substantially all of its income and capital gains,
if any. The dividends and distributions you receive may be subject to Federal,
state and local taxation, depending upon your tax situation. Distributions you
receive from the Fund may be taxable whether or not you reinvest them in
additional Fund shares. Income distributions are generally taxable at ordinary
income tax rates. Capital gains distributions are generally taxable at the rates
applicable to long-term capital gains. Each sale of shares is a taxable event.
More information about taxes is in the Statement of Additional Information.
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FUND MANAGEMENT
BOARD OF DIRECTORS
The business and affairs of the Fund are managed under the supervision of
its board of directors. The board approves all significant agreements between
the Fund and its service providers, including agreements with the Fund's
investment adviser, distributor, administrator, transfer agent and custodian. A
majority of the Fund's directors are not affiliated with the investment adviser
or the distributor of the Fund.
INVESTMENT ADVISER
Nevis Capital Management, Inc. (the Adviser) is the Fund's investment
adviser. As investment adviser to the Fund, the Adviser manages the Fund's
investment portfolio. It makes decisions as to which securities to buy and which
securities to sell.
During the last fiscal year, the Fund paid the Adviser an annual investment
advisory fee equal to 1.50% of the Fund's average daily net assets. The Adviser
has contractually agreed to pay all ordinary expenses incurred in the conduct of
the Fund's operations. The Fund will bear any extraordinary expenses incurred in
the course of its business.
The Adviser was founded in 1991 by David R. Wilmerding, III and Jon C.
Baker to provide a vehicle for investing in superior growth companies in a
focused manner. The Adviser provides investment advisory services to
institutional investors, as well as high net worth individual investors. The
Adviser acts as investment adviser to private accounts and investment company
portfolios with aggregate assets of approximately $720 million as of August
31, 1999.
- --------------------------------------------------------------------------------
12
<PAGE>
Messrs. Wilmerding and Baker, as portfolio managers, are primarily
responsible for the day-to-day management of the Fund's portfolio. Mr.
Wilmerding is President of the Adviser. He has more than 15 years of investment
experience and has been a portfolio manager with the Adviser since July 1991.
Mr. Baker is Senior Vice President of the Adviser. He has more than 12 years of
investment experience and has been a portfolio manager with the Adviser since
September 1991.
PRIOR PERFORMANCE OF INVESTMENT ADVISER
The chart below shows the performance of all accounts managed by the
Adviser using substantially the same goals, policies and strategies as the Fund.
This information does not represent the performance of the Fund and you should
not consider it as an indication of how the Fund will perform in the future. The
Fund's performance for the period June 29, 1998 (commencement of operations)
through May 31, 1999 is contained in the Fund's 1999 annual report.
Year Ended Nevis Russell
December 31 Composite(1) S&P 500(2) 2000(3)
- ----------- ------------ ---------- -------
1991* 10.2% 8.4% 5.4%
1992 13.0% 7.6% 16.4%
1993 32.3% 10.1% 17.0%
1994 15.8% 1.3% -3.2%
1995 57.4% 37.5% 26.2%
1996 35.0% 23.0% 14.7%
1997 10.1% 33.4% 20.5%
1998 12.2% 28.5% -3.5%
Cumulative
Returns
(since 9/30/91) 400.8% 277.1% 133.9%
Compound
Annual Returns
(since 9/30/91) 24.9% 20.1% 12.4%
Average Annual
Total Returns
1 Year 12.2% 28.5% -3.5%
5 Years 24.9% 24.0% 10.3%
Since Inception 24.9% 20.1% 12.4%
- -----------
*For the period October 1, 1991 through December 31, 1991. The Adviser began
managing accounts included in the Nevis Composite on October 1, 1991.
(1) The Nevis Composite was developed from the aggregate performance of all
accounts that are managed by the Adviser with full discretionary authority
and substantially the same investment goals and strategies as the Fund.
Investment advisory fees and other expenses have been deducted. These fees
and expenses generally are lower than those incurred by the Fund, and the
returns would have been lower if the accounts had been subject to the higher
fees and expenses. In addition, if the accounts were regulated investment
companies under the Federal securities and tax laws, the performance of the
accounts might have been adversely affected by the tax restrictions and
investment limitations to which the Fund is subject. The net investment
performance represents total return, assuming reinvestment of all dividends
and proceeds from capital transactions.
(2) The S&P 500 Index is composed of 500 selected common stocks, most of which
are listed on the New York Stock Exchange. The S&P 500 Index 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.
DISTRIBUTION OF FUND SHARES
Shares of the Fund are distributed through SEI Investments Distribution Co.
The Fund's distributor markets shares of the Fund to institutions and
individuals, directly or through brokers and other financial institutions that
have an agreement with the distributor. The Fund does not pay the distributor or
others for distribution services. The Adviser may pay fees to brokers and other
financial institutions selling Fund shares to compensate them for services they
provide to their customers.
The Fund's distributor may from time to time, in its sole discretion,
institute one or more promotional incentive programs for dealers, which will be
paid for by the distributor from any source
- --------------------------------------------------------------------------------
13
<PAGE>
available to it. Under any such program, the distributor may provide incentives,
in the form of cash or other compensation, including merchandise, airline
vouchers, trips and vacation packages, to dealers selling shares of the Fund.
================================================================================
FINANCIAL HIGHLIGHTS
The table that follows presents performance information about the Fund
shares and is intended to help you understand the Fund's financial performance
for the period of its operations. Some information reflects financial results
for a single Fund share. The total returns in the table represent the rate that
an investor would have earned (or lost) on an investment in the Fund, assuming
reinvestment of all of dividends and distributions. This information has been
audited by Arthur Andersen LLP, whose report, along with the Fund's financial
statements, are included in the Fund's annual report which is available upon
request.
For the Period
Ended May 31, 1999*
-------------------
Net Asset Value,
Beginning of Period $10.00
- --------------------------------------------------
Increase/Decrease from
Operations:
Net Investment Income (Loss) (0.01)
Net Realized and Unrealized
Gains on Securities 9.02
Total From Investment
Operations 9.01
- --------------------------------------------------
Less Distributions:
Dividends (from net
investment income) --
Distributions (from capital gains) --
Total Distributions --
Net Asset Value, End of Period 19.01
Total Return 90.10%
- --------------------------------------------------
Ratios/Supplemental Data:
Net Assets, End of Period $9,975,000
Ratio of Expenses to
Average Net Assets(1) 1.50%
Ratio of Net Income (Loss) to
Average Net Assets(2) (1.03)%
Portfolio Turnover Rate 251.60%
- ---------
*For the period June 29, 1998 (commencement of operations) through May 31, 1999.
All ratios for the period have been annualized. Total return for the period has
not been annualized.
(1) The annualized expense ratio without waivers and reimbursements for the
period ended May 31, 1999 would have been 10.18%.
(2) The annualized net investment income (loss) ratio without waivers and
reimbursements for the period ended May 31, 1999 would have been (9.71)%.
================================================================================
WHERE TO FIND MORE INFORMATION
More information about the Fund is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI dated September 24, 1999, includes detailed information about the
Fund. The SAI is on file with the SEC and is incorporated by reference into this
prospectus. This means that the SAI, for legal purposes, is a part of this
prospectus.
ANNUAL AND SEMI-ANNUAL REPORTS
These reports list the Fund's holdings and contain information from the
Fund's investment adviser about strategies and recent market conditions and
trends. The reports also contain detailed financial information about the Fund.
- --------------------------------------------------------------------------------
14
<PAGE>
TO OBTAIN MORE INFORMATION
By Telephone: Call toll-free at (877)-44-NEVIS
By Mail: Write to us:
The Nevis Fund, Inc.
c/o SEI Investments Mutual
Fund Services
530 East Swedesford Road
Wayne, PA 19087
By Internet: www.nevisfund.com
From the SEC: You also can obtain the SAI or the annual and semi-annual
reports, as well as other information about the Fund, from the SEC's Web site
("http://www.sec.gov"). You may review and copy documents at the SEC Public
Reference Room in Washington, DC (for information call 1-800-SEC-0330). You may
request documents by mail from the SEC, upon payment of a duplicating fee, by
writing to: Securities and Exchange Commission, Public Reference Section,
Washington, DC 20549-6009. The Fund's Investment Company Act registration number
is 811-08689.
INVESTMENT ADVISER
Nevis Capital Management, Inc.
1119 St. Paul Street
Baltimore, MD 21202
DISTRIBUTOR
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, PA 19456
TRANSFER AGENT
Forum Shareholder Services, LLC
Two Portland Square
Portland, ME 04101
CUSTODIAN
First Union National Bank
123 South Broad Street
Philadelphia, PA 19109
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
1601 Market Street
Philadelphia, PA 19103
LEGAL COUNSEL
Piper & Marbury L.L.P.
36 S. Charles Street
Baltimore, MD 21201
- --------------------------------------------------------------------------------
15
<PAGE>
================================================================================
TABLE OF CONTENTS
An Overview of the Fund ................................................... 2
Fees and Expenses of the Fund ............................................. 3
The Fund's Investments and Strategies ..................................... 4
More About Risk ........................................................... 5
Purchasing and Selling Fund Shares ........................................ 6
Dividends, Distributions and Taxes ........................................ 12
Fund Management ........................................................... 12
Financial Highlights ...................................................... 14
Where to Find More Information ............................................ 14
NEV-F-001-02
THE NEVIS FUND, INC.
PROSPECTUS
September 24, 1999
<PAGE>
THE NEVIS FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
September 24, 1999
This Statement of Additional Information is not a prospectus but provides
additional information that should be read in conjunction with the Fund's
prospectus dated September 24, 1999 including any supplements thereto. The
Fund's annual report (including financial statements for the fiscal year ended
May 31, 1999) is incorporated herein by reference. To obtain additional copies
of the prospectus or the annual report, please call toll-free at (877) 44-NEVIS.
-------------------------
TABLE OF CONTENTS
Page
----
General Information....................................................B-1
The Fund's Investments and Strategies..................................B-1
Portfolio Transactions and Brokerage...................................B-12
Purchasing and Selling Fund Shares.....................................B-13
Taxation...............................................................B-15
Fund Management........................................................B-17
Fund Performance.......................................................B-22
Description of Capital Stock...........................................B-24
Financial Statements...................................................B-24
-------------------------
Nevis Capital Management, Inc.
Investment Adviser
<PAGE>
GENERAL INFORMATION
The Nevis Fund, Inc. is an open-end, non-diversified management investment
company. Under the rules and regulations of the Securities and Exchange
Commission (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 (SAI) is
also included in the prospectus. To avoid unnecessary repetition, references are
made to related sections of the prospectus.
The Fund was incorporated under the laws of the State of Maryland on
February 20, 1998.
The name "Nevis" has been licensed to the Fund by Nevis Capital Management,
Inc., the Fund's investment adviser. Under this arrangement, the Fund is
required to cease using the name "Nevis" upon the occurrence of certain events,
including termination of Nevis Capital Management, Inc. 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 Fund's prospectus and this SAI, 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 SAI, 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.
THE FUND'S INVESTMENTS AND STRATEGIES
The following information supplements, and should be read in conjunction
with, the discussion in the prospectus of the Fund's investments and strategies.
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
<PAGE>
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 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 Fund's investment adviser will be
able to anticipate these potential events or counter their effects.
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 Index. 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
B-2
<PAGE>
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 (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
B-3
<PAGE>
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.
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 Index - 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
B-4
<PAGE>
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" below.
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 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.
B-5
<PAGE>
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
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
B-6
<PAGE>
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 are restricted securities and 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 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 Fund's investment 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 investment 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.
B-7
<PAGE>
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.
Repurchase Agreements
The Fund may enter into repurchase agreements with financial institutions,
such as banks and broker-dealers, deemed by the Fund's investment 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.
B-8
<PAGE>
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 Fund's investment 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 Fund's investment 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
A short sale is a sale of stock that one does not own. The short seller
expects the market price of the security to fall, enabling him to purchase, at
lower price, shares to be delivered against the sale. A short sale against the
box is a form of short sale in which the seller owns a sufficient number of
shares to cover the sale, but borrows from a broker or other person the shares
to be delivered against the sale. The seller may elect to replace the borrowed
stock with shares purchased in the open market or with shares already owned.
The Fund may enter into short sales against the box with respect to
securities it owns, or with respect to stocks underlying its convertible bond
holdings. For example, if the Fund's investment adviser anticipates a decline in
the 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
B-9
<PAGE>
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 Fund's
investment 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 Fund's investment 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 strategies 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
Fund's 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.
B-10
<PAGE>
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.
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.
B-11
<PAGE>
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.
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 Fund's investment 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 investment
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 investment adviser's primary consideration in effecting securities
transactions is to obtain the most favorable price and execution of orders on
an overall basis. As described below, the investment adviser may, in its
discretion, effect agency transactions with broker-dealers that furnish research
deemed by the investment adviser to be beneficial to the Fund's investment
B-12
<PAGE>
program. Certain research services furnished by broker-dealers may be useful to
the investment adviser with clients other than the Fund. Similarly, any research
services received by the investment adviser through placement of portfolio
transactions of other clients may be of value to the investment adviser in
fulfilling its obligations to the Fund. No specific value can be determined for
research services furnished without cost to the investment adviser by a
broker-dealer. The Fund's investment 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 investment
adviser's research and analysis. Therefore, it may tend to benefit the Fund by
improving the investment adviser's investment advice.
The investment 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 investment adviser's opinion, this
policy furthers the overall objective of obtaining the most favorable execution.
The investment 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 investment 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 investment 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.
For the fiscal year ended May 31, 1999, the Fund paid brokerage commissions
of $10,417. The Fund is required to identify any securities of its "regular
brokers or dealers" (as such term is defined in the Investment Company Act)
which the Fund has acquired during its most recent fiscal year. As of May 31,
1999, the Fund did not hold any securities of its regular brokers or dealers.
PURCHASING AND SELLING FUND SHARES
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), on each weekday except days when either the
NYSE or the Federal Reserve Bank is closed (a Business Day). The New York Stock
Exchange is 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.
B-13
<PAGE>
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.
SELLING 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 as described in the
prospectus. However, if the Fund's 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 Fund's board of directors may cause the redemption of a share account
with a balance of less than $10,000, 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.
General Information
The Fund and its 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 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
B-14
<PAGE>
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.
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.
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 SAI. 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 not subject to 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
B-15
<PAGE>
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 dividend
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. 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 Fund to satisfy the Distribution
Requirement.
Under a recently enacted Code provision, regulated investment companies
which have outstanding stock that is redeemable at its net asset value 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 certain other categories of gain that the Fund does
not expect to realize.
B-16
<PAGE>
Gain on assets held longer than one year 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 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 12 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.
FUND MANAGEMENT
Directors and Officers
The Fund's board of directors consists of five directors. The Fund's
business is managed under the direction of its board of directors. The board
meets on a regularly scheduled basis during the Fund's fiscal year to review
significant developments affecting the Fund and to act on matters requiring
board approval. The board of directors also holds special meetings when an
important matter requires board action between scheduled meetings.
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 address of each of the directors is 1119 St.
Paul Street, Baltimore, Maryland 21202.
<TABLE>
<CAPTION>
Position(s) Held Principal Occupations(s)
Name Age With Registrant During the Past Five Years
- ---------------- --- --------------- --------------------------
<S> <C> <C> <C>
David R. Wilmerding, III* 38 President and Director President of Nevis Capital
Management, Inc.
Jon C. Baker* 35 Senior Vice President, Senior Vice President of Nevis
Treasurer, Secretary and Capital Management, Inc.
Director
</TABLE>
B-17
<PAGE>
<TABLE>
<S> <C> <C> <C>
Joseph R. Hardiman 62 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 subsidiary,
The Nasdaq Stock Market, Inc. from
September 1987 to January 1997.
Bailey Morris-Eck 56 Director Senior Associate of the Reuters
Foundation and Director of
Reuters/Carnegie Public Policy
Series. Served as Vice President of
the Brookings Institution from April
1997 through April 1999. Served as a
Senior Advisor to the U.S. President
on Economic Policy and Summit
Coordination from 1994 through 1997.
Charles E. Noell 47 Director General partner of JMI Equity Fund,
L.P.
</TABLE>
The Fund's charter requires 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 or she 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 or her office.
B-18
<PAGE>
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 Fund's
investment adviser may receive remuneration indirectly from the Fund for
services provided in their respective capacities with the investment adviser.
Each of the non-interested directors receives for his or her service on the
board of directors a fee of $2,500 for each board meeting attended in person, a
fee of $1,500 for each telephone board meeting, plus reimbursement for
out-of-pocket expenses incurred in connection with attendance in person at board
meetings. The following table sets forth the information concerning the
compensation paid by the Fund to directors during the fiscal year ended May 31,
1999. The Fund does not offer any pension or retirement benefits to its
directors.
Name of Director Aggregate Compensation From the Fund (1)
---------------- ----------------------------------------
David R. Wilmerding, III $0
Jon C. Baker $0
Joseph R. Hardiman $10,000
Bailey Morris-Eck $ 1,500
Charles E. Noell $ 9,000
- ----------
(1) The Fund commenced operations on June 29, 1998.
Code of Ethics
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 Fund's investment adviser and its
distributor. As described below, the code of ethics imposes significant
restrictions on the investment adviser's investment personnel, including the
portfolio managers and employees who execute or help execute a portfolio
manager's decisions or who obtain contemporaneous information regarding the
purchase or sale of a security by the Fund.
The code of ethics requires that investment personnel and other covered
employees of the Fund's investment adviser 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 Fund's investment
adviser and distributor may comply with codes instituted by those entities so
long as they contain similar requirements and restrictions.
B-19
<PAGE>
Investment Adviser
The board of directors of the Fund has approved an investment management
agreement between the Fund and Nevis Capital Management, Inc. (the Adviser).
Under the agreement, the Adviser manages the Fund's investments subject to the
supervision and direction of the Fund's board of directors. 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 Fund's
board of directors 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
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 incurred in the
course of its business.
David R. Wilmerding, III and Jon C. Baker are principal stockholders of the
Adviser. Further, Mr. Wilmerding serves as President of the Adviser and Mr.
Baker serves as, among other positions, Senior Vice President of the Adviser.
The Adviser receives an investment advisory fee equal to 1.50% of Fund
assets in connection with the performance of services under the investment
management agreement with the Fund. For the fiscal year ended May 31, 1999, the
investment advisory fee paid by the Fund to the Adviser was $32,842.
In addition to receiving its advisory fee, the Adviser may also act and be
compensated as investment manager for its clients with respect to assets that
are invested in the Fund. In some instances the Adviser may elect to credit
against any investment management fee received from a
B-20
<PAGE>
client that is also a shareholder of the Fund an amount equal to all or a
portion of the fee received by the Adviser from the Fund with respect to the
client's assets invested in the Fund.
Administrator
SEI Investments Mutual Fund Services (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 Fund's investment adviser and 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.
For the fiscal year ended May 31, 1999, the administration fee paid to the
Administrator was $82,851.
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 Fund's board of
directors. 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
B-21
<PAGE>
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 Fund's board of
directors 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).
FUND PERFORMANCE
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 in terms of total return.
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 above 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
B-22
<PAGE>
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 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.
For the period June 29, 1998 (commencement of operations) through May 31,
1999, the Fund's average annual total return was 90.10%.
B-23
<PAGE>
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 charter provides 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 Fund's board of directors. 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.
As of September 10, 1999, the officers and directors of the Fund, as a
group, owned approximately 5.3% of the outstanding shares of the Fund and the
following person owned of record or beneficially more than 5% of the Fund's
outstanding shares:
Charles Schwab & Co., Inc., as custodian 20.0%
101 Montgomery Street
San Francisco, CA 94104
FINANCIAL STATEMENTS
The audited financial statements for the Fund as of and for the period
ended May 31, 1999, together with the notes thereto and the report of Arthur
Andersen LLP, 1601 Market Street, Philadelphia, PA, 19103, are incorporated
herein by reference to the Annual Report of the Fund. The financial statements
incorporated by reference into this Statement of Additional Information and the
Financial Highlights included in the prospectus have been audited by Arthur
Andersen LLP, independent public accountants as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in giving said report.
B-24
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits
(a) Articles of Amendment and Restatement of the Registrant are
incorporated by reference to Exhibit (a) to Post-Effective
Amendment No. 1.
(b) Amended and Restated By-Laws of the Registrant are incorporated
by reference to Exhibit 2 to Pre-Effective Amendment No. 1.
(c) Not applicable.
(d) Investment Management Agreement dated as of June 29, 1998,
between the Registrant and Nevis Capital Management, Inc. is
incorporated by reference to Exhibit 5 to Pre-Effective Amendment
No. 1.
(e) (1) Distribution Agreement dated as of June 29, 1998, between
the Registrant and SEI Investments Distribution Co. is
incorporated by reference to Exhibit 6 to Pre-Effective
Amendment No. 1.
(2) Administration Agreement dated as of June 29, 1998, between
the Registrant and SEI Investments Mutual Fund Services is
incorporated by reference to Exhibit 9(a) to Pre-Effective
Amendment No. 1.
(f) Not applicable.
(g) Custodian Agreement dated as of June 29, 1998, between the
Registrant and First Union National Bank.
(h) Transfer Agency and Services Agreement dated as of June 29, 1998,
between the Registrant and Forum Shareholder Services, LLC is
incorporated by reference to Exhibit 9(b) to Pre-Effective
Amendment No. 1.
(i) Opinion and Consent of Piper & Marbury L.L.P. is incorporated by
reference to Exhibit 10 to Pre-Effective Amendment No. 1.
(j) Consent of Independent Public Accountants.
(k) Not applicable.
(l) Initial Capital Agreement dated as of June 29, 1998, between the
Registrant and Nevis Capital Management, Inc. is incorporated by
reference to Exhibit 13 to Pre-Effective Amendment No. 1.
(m) Not applicable.
(n) Not applicable.
(o) Not applicable.
- ----------
<PAGE>
Item 24. Persons Controlled by or Under Common Control with the Fund
None.
Item 25. Indemnification
Reference is made to Article Eighth, Section 5 of the Articles of Amendment
and Restatement and Article VII of the Amended and Restated By-Laws of the
Registrant filed as Exhibits (a) and (b), 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 26. Business and Other Connections of the 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.
Item 27. Principal Underwriters
(a) SEI Investments Distribution Co. (the "Distributor") acts as
distributor for the Registrant. The Distributor also acts as distributor for:
SEI Daily Income Trust July 15, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Index Funds July 10, 1985
SEI Institutional Managed Trust January 22, 1987
SEI International Trust August 30, 1988
The Advisors' Inner Circle Fund November 14, 1991
The Pillar Funds February 28, 1992
CUFUND May 1, 1992
STI Classic Funds May 29, 1992
First American Funds, Inc. November 1, 1992
C-2
<PAGE>
First American Investment Funds, Inc. November 1, 1992
The Arbor Fund January 28, 1993
Boston 1784 Funds June 1, 1993
The PBHG Funds, Inc. July 16, 1993
Morgan Grenfell Investment Trust January 3, 1994
The Achievement Funds Trust December 27, 1994
Bishop Street Funds January 27, 1995
STI Classic Variable Trust August 18, 1995
ARK Funds
Huntington Funds January 11, 1996
SEI Asset Allocation Trust April 1, 1996
TIP Funds April 28, 1996
SEI Institutional Investments Trust June 14, 1996
First American Strategy Funds, Inc. October 1, 1996
HighMark Funds February 15, 1997
Armada Funds March 8, 1997
PBGH Insurance Series Fund, Inc. April 1, 1997
The Expedition Funds June 9, 1997
Alpha Select Funds January 1, 1998
Oak Associates Funds February 27, 1998
The Parkstone Group of Funds September 14, 1998
CNI Charter Funds April 1, 1999
The Parkstone Advantage Fund May 1, 1999
The Distributor provides numerous financial services to investment
managers, pension plan sponsors, and bank trust departments. These services
include portfolio evaluation, performance measurement and consulting services
("Funds Evaluation") and automated execution, clearing and settlement of
securities transactions ("MarketLink").
(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 of the Board of Directors
Richard B. Lieb Director and Executive Vice President
Carmen V. Romeo Director
Mark J. Held President and Chief Operating Officer
Gilbert L. Beebower Executive Vice President
</TABLE>
C-3
<PAGE>
<TABLE>
<S> <C> <C>
Dennis J. McGonigle Executive Vice President
Robert M. Silvestri Chief Financial Officer and Treasurer
Leo J. Dolan, Jr. Senior Vice President
Carl A. Guarino Senior Vice President
Larry Hutchison Senior Vice President
Jack May Senior Vice President
Hartland J. McKeown Senior Vice President
Kevin P. Robins Senior Vice President and General Counsel
Patrick K. Walsh Senior Vice President
Robert Crudup Vice President and Managing Director
Barbara Doyne Vice President
Vic Galef Vice President and Managing Director
Kim Kirk Vice President and Managing Director
John Krzeminski Vice President and Managing Director
Carolyn McLaurin Vice President and Managing Director
Lauri White Vice President and Assistant Secretary
Wayne M. Withrow Vice President and Managing Director
Robert Aller Vice President
Gordon W. Carpenter Vice President
Todd Cipperman Vice President and Assistant Secretary
S. Courtney Collier Vice President and Assistant Secretary
Richard A. Deak Vice President and Assistant Secretary
Jeff Drennen Vice President
</TABLE>
C-4
<PAGE>
<TABLE>
<S> <C> <C>
James R. Foggo Vice President and Assistant Secretary
Lydia A. Gavalis Vice President and Assistant Secretary
Greg Gettinger Vice President and Assistant Secretary
Kathy Heilig Vice President
Jeff Jacobs Vice President
Samuel King Vice President
W. Kelso Morrill Vice President
Mark Nagle Vice President
Joanne Nelson Vice President
Cynthia M. Parrish Vice President and Secretary
Kim Rainey Vice President
Robert Redican Vice President
Maria Rinehart Vice President
Steve Smith Vice President
Kathryn L. Stanton Vice President
Lynda J. Striegel Vice President and Assistant Secretary
</TABLE>
- ----------
* 1 Freedom Valley Drive, Oaks, PA 19456
(c) Not applicable.
Item 28. 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, 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 Two Portland Square, Portland, Maine 04101. Certain
records relating to the physical possession of
C-5
<PAGE>
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 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment No. 2 to the
Registration Statement under Rule 485(b) and has duly caused this Post-Effective
Amendment No. 2 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 23rd day of September, 1999.
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
Post-Effective Amendment No. 2 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) September 23, 1999
- ---------------------------- and Director
David R. Wilmerding, III
/s/ Jon C. Baker Treasurer (principal financial and September 23, 1999
- ---------------------------- accounting officer) and Director
Jon C. Baker
* Director
- ----------------------------
Joseph R. Hardiman
* Director
- ----------------------------
Bailey Morris-Eck
* Director
- ----------------------------
Charles E. Noell
* By: /s/ David R. Wilmerding, III September 23, 1999
----------------------------
David R. Wilmerding, III
Attorney-in-Fact
</TABLE>
A power of attorney authorizing David R. Wilmerding, III to execute
amendments to this Registration Statement for each director of the Registrant on
whose behalf this amendment to the Registration Statement is filed has been
filed with the Commission.
CUSTODIAN AGREEMENT
The Nevis Fund, Inc.
This agreement dated as of the 29th day of June, 1998, by and between The
Nevis Fund, Inc. (the "Fund"), a Maryland corporation, and First Union National
Bank (the "Bank").
WHEREAS, the Fund 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 Fund;
WHEREAS, the Bank is qualified and authorized to act as Custodian for the
Fund 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 legally 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 supplement hereto, shall have the meanings herein
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.
PROPER 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 the Board of Directors of the Fund to give the
particular class of instructions. Telephone or telegraphic instructions shall be
confirmed in writing by such persons as said Board of Directors 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 Fund's failure to confirm such instructions in writing.
<PAGE>
SECURITIES: The term Securities means stocks, 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.
STOCKHOLDERS: The term Stockholders shall mean the registered owners from time
to time of shares of common stock of the Fund (the "Shares") in accordance with
the registry records maintained by the Fund or agents on its behalf.
SECTION 2. The Fund hereby appoints the Custodian as Custodian of the Fund'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 Fund on the books and records of the Bank
to hold the Securities of the Fund deposited with, transferred to or collected
by the Bank for the account of the Fund, and a separate cash account to which
the Bank shall credit monies received by the Bank for the account of or from the
Fund. Such cash shall be segregated from the assets of others and shall be and
remain the sole property of the Fund.
SECTION 3. The Fund shall from time to time file with the Custodian a certified
copy of each resolution of its Board of Directors 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 Fund.
SECTION 4. The Fund 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 Stockholders.
SECTION 5. The Bank, acting as agent for the Fund, is authorized, directed and
instructed subject to the further provisions of this Agreement:
(a) to hold Securities issued only 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) upon Proper Instructions, to deposit any Securities which are eligible
for deposit (i) with any domestic Depository which is itself qualified
under the Investment Company Act of 1940, as amended (the "1940 Act"),
to act as custodian 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 Fund all proceeds received and
payable on or in respect of the assets maintained hereunder,
(ii) to debit the account of the Fund for the cost of acquiring
Securities the Bank has received for the Fund, 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 exchanges 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 Fund, and/or any other person designated by the
Fund, all proxies and proxy materials received by the Bank in
connection with Securities held in the Fund'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 Fund's name, address and aggregate share position to
the issuers of any domestic Securities in the account of the Fund,
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
Fund;
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(i) at the direction of the Fund, to enroll designated Securities
belonging to the Fund 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 Securities to
enroll those Securities in an Automatic Reinvestment Program;
(j) at the direction of the Fund, 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 Fund, including any
broker, dealer or similar agent affiliated with the Bank, for the
account and risk of the Fund 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 Fund and/or any other person designated by the Fund 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 Fund 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) pertains to Securities belonging to the Fund 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.
Notwithstanding anything contained herein to the contrary, the Fund
shall have the sole responsibility for monitoring the applicable dates
on which Securities with put option features must be exercised.
Notwithstanding anything in this Section to the contrary, the Bank is authorized
to hold Securities for the Fund which have transfer limitations imposed upon
them by the Securities Act of 1933, as amended, or represent shares of mutual
funds (i) in the name of the Fund, (ii) in the name of the Bank's nominee, or
(iii) with any Depository or sub-custodian.
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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 Fund and to the extent such compensation relates to services
provided hereunder to the Fund. All expenses and taxes payable with respect to
the Securities in the account of the Fund 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 Bank's nominee by reason of any registration
hereunder shall be charged to the Fund.
SECTION 7. In connection with its functions under this Agreement, the Custodian
shall:
(a) render to the Fund a daily report of all monies received or paid on
behalf of the Fund; 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 Fund 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 Fund and
in the event of termination of this Agreement will be relinquished to
the Fund.
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 Fund, and which are
subsequently deposited to the Bank's account in any Depository or with any
sub-custodian, or which the Fund 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 Fund agrees to furnish the Bank immediately with like
Securities in acceptable form.
SECTION 9. The Fund 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 Fund is a party or which is
otherwise known to the Fund; (iv) it does not require the consent or approval of
any governmental agency or instrumentality, except any such consents and
approvals which the Fund has obtained; (v) the
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execution and delivery of this Agreement by the Fund will not violate any law,
regulation, charter, by-law, order of any court or governmental agency or
judgment applicable to the Fund; and (vi) all persons executing this Agreement
on behalf of the Fund and carrying out the transactions contemplated hereby on
behalf of the Fund are duly authorized to do so.
In the event any of the foregoing representations should become untrue,
incorrect or misleading, the Fund 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
Fund 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 Fund.
SECTION 12. No liability of any kind shall be attached to or incurred by the
Custodian by reason of its custody of the Fund'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 this Agreement.
Without limiting the generality of the foregoing sentence, the Custodian:
(a) may rely upon the advice of counsel for the Fund; 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 Fund or its authorized officers or
agents;
(c) is authorized to accept a certificate of the Secretary or Assistant
Secretary of the Fund, or Proper Instructions, to the effect that a
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resolution in the form submitted has been duly adopted by its Board of
Directors or by the Stockholders, 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, 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, the Fund or other proper
party or parties.
SECTION 13. The Fund and its successors and assigns do hereby agree to fully
indemnify and hold harmless the Custodian and its successors and assigns, from
any and all losses, liabilities, claims, demands, actions, suits and expenses of
any nature as the same may arise from the failure of the Fund 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, or qualification of Shares. Neither the Custodian nor its
affiliates, successors or assigns shall be indemnified against any liability or
any expense incident to such liability arising out of the negligence, bad faith
or willful misconduct of the Custodian or its affiliates, successors or assigns
in the performance of its or their duties under this Agreement.
Upon written request to the Custodian, the Fund may assume the entire defense of
any claim subject to the foregoing indemnity. The indemnity 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 Stockholders by a supplemental agreement executed by the Fund
and the Bank.
SECTION 15. Either the Fund or the Custodian may give sixty (60) 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 Fund or by the Custodian, the Board of
Directors of the Fund 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 Fund of the appointment of such
Successor Custodian and 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,
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obligations and custody of its predecessor Custodian. The Custodian ceasing to
act shall nevertheless, upon request of the Fund and the Successor Custodian and
upon payment of its charges and disbursements, execute an instrument in form
approved by its counsel transferring to the Successor Custodian all the
predecessor Custodian's rights, duties, obligations and 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 or 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 1940 Act.
SECTION 16. This Agreement shall take effect when assets of the Fund 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. 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 Fund under the 1940 Act, 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 Fund.
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 Fund.
SECTION 19. Any sub-custodian appointed hereunder shall be qualified under
Section 17(f) of the 1940 Act, will perform its duties in accordance with the
requirements of this Agreement and prior to appointment, shall be approved by
the Fund.
SECTION 20. 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.
SECTION 21. 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 Fund without the written consent of the
Custodian, or by the Custodian without the written consent of the Fund,
authorized or approved by a resolution of its Board of Directors.
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SECTION 22. 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 Fund: The Nevis Fund, Inc.
1119 St. Paul Street
Baltimore, Maryland 21202
Copy to: Alan C. Porter, Esq.
Piper & Marbury L.L.P.
1200 Nineteenth Street, N.W.
Washington, D.C. 20036-2430
To the Bank: First Union National Bank
123 South Broad Street
Philadelphia, Pennsylvania 19109
SECTION 23. 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
the Commonwealth.
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IN WITNESS WHEREOF, the Fund and the Custodian have caused this Agreement
to be signed by their respective officers as of the day and year first above
written.
THE NEVIS FUND, INC.
By:
-------------------------------
Name: David R. Wilmerding, III
Title: President
FIRST UNION NATIONAL BANK
By:
-------------------------------
Name: Paul T. Cahill
Title: Vice President
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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 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.
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CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated July 9, 1999, on
the May 31, 1999 financial statements of The Nevis Fund, Inc. included in the
previously filed Form N-1A dated July 21, 1999, and to all references to our
Firm included in or made part of this Post-Effective Amendment No. 2 to the
Registration Statement File Nos. 333-47467 and 811-08689.
/s/ Arthur Andersen LLP
Philadelphia, PA
September 22, 1999
