As filed with the Securities and Exchange Commission on July 15, 1998
Securities Act Registration No. 333-53837
Investment Company Act Registration No. 811-08793
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. _____ Post-Effective Amendment No. _____
(Check appropriate box or boxes)
THE WINTER HARBOR FUND
(Exact Name of Registrant as Specified in Charter)
511 Congress Street
Portland, Maine 04101
(Address of Principal Executive Offices:
Number, Street, City, State, Zip Code)
(800) 277-5573
(Area Code and Telephone Number)
Max Berueffy, Esq.
Forum Financial Services, Inc.
Two Portland Square
Portland, Maine 04101
(Name and Address of Agent for Service)
Copies to:
Wayne E. Tumlin, Esq. Gregory S. Fryer, Esq. Jennifer Olvey, Esq.
Verrill & Dana LLP Verrill & Dana LLP Dechert Price & Rhoads
One Portland Square One Portland Square 30 Rockefeller Plaza
Portland, Maine 04112-0586 Portland, Maine 04112-0586 New York, New York 10112
Approximate date of Proposed Public Offering:
As soon as practicable after the effective date of this Registration Statement
Title of Securities Being Registered:
The REvest Value Fund - Common Stock
No filing fee is due because of reliance on section 24(f).
The Registrant hereby amends this Registration Statement under the Securities
Act of 1933 on such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become effective in
accordance with the provisions of Section 8(a) of the Securities Act of 1933 or
until the Registration Statement shall become effective on such date as the
Commission, acting pursuant to Section 8(a), may determine.
<PAGE>
THE WINTER HARBOR FUND
REGISTRATION STATEMENT ON FORM N-14
CROSS REFERENCE SHEET
N-14 Item No. Location in Registration Statement
Part A: Information Required in the
Prospectus
1. Beginning of Registration Cover Page; Cross Reference Sheet
Statement and Outside Front
Cover Page of Prospectus
2. Beginning and Outside Back Table of Contents
Cover Page of Prospectus
3. Fee Table, Synopsis Information, Comparative Expense Table; Synopsis;
and Risk Factors Principal Risk Factors
4. Information about the Transaction The Proposed Reorganization; Comparative
Expense Table
5. Information about the Registrant Principal Risk Factors; Operation
of The REvest Value Fund Following the
Reorganization; Additional Information
About The Winter Harbor Fund and The
REvest Value Fund; Miscellaneous;
Current Prospectus of The REvest
Value Fund, a series of The Winter
Harbor Fund
6. Information about the Company Principal Risk Factors; Operation of The
Being Acquired REvest Value Fund Following the
Reorganization; Additional Information
About The REvest Growth & Income Fund;
Miscellaneous; Current Prospectus of The
REvest Growth & Income Fund, a series of
The Royce Fund
7. Voting Information Additional Information
8. Interest of Certain Persons and The Proposed Reorganization; Additional
Experts Information
9. Additional Information Required for Not Applicable
Reoffering by Persons Deemed to
be Underwriters
Part B: Information Required in a
Statement of Additional Information
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. Additional Information about Statement of Additional Information
the Registrant of The REvest Value Fund, a series of
The Winter Harbor Fund
13. Additional Information about Current Statement of Additional
the Company Being Acquired Information of The REvest Growth &
Income Fund, a series of The Royce Fund
14. Financial Statements Current Annual Report of The Royce Fund
Part C. Other Information
15. Indemnification Indemnification
16. Exhibits Exhibits
17. Undertakings Undertakings
Appendix A. Agreement and Plan of Reorganization
Appendix B. Prospectus of The Winter Harbor Fund
<PAGE>
June 30, 1998
Dear Friends and Fellow Shareholders:
As I mentioned in an earlier letter, The Board of Trustees of The Royce
Fund has recently approved and recommended shareholder approval of a proposal
for The REvest Growth & Income Fund ("RGI"), a series of The Royce Fund, to be
reorganized as The REvest Value Fund ("RVF"), a series of The Winter Harbor
Fund, a newly formed Delaware business trust that is unaffiliated with The Royce
Fund. Proxy material related to your approval of this proposed transaction is
enclosed.
The investment objectives, policies, strategies and restrictions of RVF
will be substantially identical to those of RGI. The only substantive changes
will be the addition of Gouws Capital Management, Inc. as sub-adviser, and
Countrywide Fund Services, Inc. and Star Bank, N.A. as back office service
providers. The total number and value of the RVF shares that you will receive as
a result of this transaction will be equal to the total number and value of your
shares in RGI on the closing date. The transaction is anticipated to be tax-free
for Federal income tax purposes.
Royce, Ebright & Associates, Inc. ("REA"), soon to be renamed Ebright
Investments, Inc., the investment adviser to both RGI and RVF, will pay all
costs incurred as a result of this reorganization, so there will be no
additional expense to RGI shareholders. Additionally, REA has agreed to waive
management fees to the extent necessary to ensure that RVF's total annual
expense ratio does not exceed 1.30% through December 31, 1999.
As you may know, RGI was started as a series of The Royce Fund in August
1994, to allow Thomas R. Ebright, a long-term employee of Royce & Associates,
Inc., to operate his own mutual fund. By starting under The Royce Fund umbrella,
RGI benefited from the economies of scale possible from an established fund
complex. By mid-1997, RGI was approaching three years of operating history and
had achieved an asset size which my father and I believed capable of sustaining
an independent operation. REA, Royce & Associates, Inc. and the Board of
Trustees of The Royce Fund started making preparations to reorganize RGI into a
separate entity, but the plans were put on hold in July 1997 at the time of my
father's death. Preparations began again earlier this year after Gouws Capital
Management was identified by me as a potential business partner for REA. The
Board of Trustees of The Royce Fund believes that the proposed arrangement is in
the best interests of RGI and its shareholders and ask you to approve the
proposal.
Your vote is very important. Please read the enclosed materials carefully,
and then complete and return the enclosed proxy card in the postage-paid
envelope, regardless of whether or not you plan on attending the meeting in
person.
As always, if you have any questions regarding the proxy material, please
call me at (800) 277-5573 during regular business hours. Thank you in advance
for your attention to this important matter.
Sincerely,
Jennifer Ebright Goff, President
Royce, Ebright & Associates, Inc.
<PAGE>
THE REVEST GROWTH & INCOME FUND
----------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
SEPTEMBER 14, 1998
----------------------
NOTICE IS HEREBY GIVEN that a Special Meeting of the Shareholders of The
REvest Growth & Income Fund ("RGI"), a series of The Royce Fund, will be held on
September 14, 1998, at 2 p.m. Eastern time, at the offices of The Royce Fund, at
1414 Avenue of the Americas, New York, New York 10019 (the "Meeting"), for the
following purpose:
To approve or disapprove the proposed Agreement and Plan of
Reorganization by and between The Royce Fund, with respect to RGI, and The
Winter Harbor Fund, a newly-created Delaware business trust with respect to
its one series -- The REvest Value Fund ("RVF"), providing for the transfer
of all or substantially all of the assets, and the assumption of all or
substantially all of the liabilities, of RGI in exchange for shares of RVF
issued by The Winter Harbor Fund (the "RVF Shares"), and the distribution
of such RVF Shares to the shareholders of RGI in complete liquidation of
RGI, as more fully described in the accompanying Combined Prospectus/Proxy
Statement.
The appointed proxies will vote in their discretion on any other business
as may properly come before the meeting or any adjournments or postponements
thereof.
The Trustees have fixed the close of business on June 15, 1998 as the
record date for the determination of shareholders entitled to notice of and to
vote at the Meeting or any adjournment or postponement thereof.
In the event that the necessary quorum to transact business or the vote
required to approve or reject any proposal is not obtained at the Meeting, the
persons named as proxies may propose one or more adjournments of the meeting, in
accordance with applicable law, to permit further solicitation of proxies. Any
such adjournment will require the affirmative vote of the holders of a majority
of the RGI shares present in person or by proxy at the meeting. The persons
named as proxies will vote in favor of such adjournment those proxies which they
are entitled to vote in favor and will vote against any such adjournment those
proxies to be voted against that proposal.
By order of the Board of Trustees,
John E. Denneen
Secretary
New York, New York
August ___, 1998
IMPORTANT: You are cordially invited to attend the meeting. Shareholders who do
not expect to attend the meeting in person are requested to complete, date and
sign the enclosed form of proxy and return it promptly in the addressed envelope
which requires no postage and is intended for your convenience. Your prompt
return of the enclosed proxy may save the necessity and expense of further
solicitations to assure a quorum at the meeting. The enclosed proxy is being
solicited on behalf of the Board of Trustees of The Royce Fund.
<PAGE>
COMBINED PROSPECTUS/PROXY STATEMENT
Relating to the Acquisition and Assumption by
THE REVEST VALUE FUND
A Series of The Winter Harbor Fund
511 Congress Street
Portland, Maine 04101
(800) 277-5573
of the Assets and Liabilities of
THE REVEST GROWTH & INCOME FUND
A Series of The Royce Fund
1414 Avenue of the Americas
New York, New York 10019
(800) 221-4268
----------------------------
SOLICITATION OF PROXIES
This Combined Prospectus/Proxy Statement is furnished in connection with
the solicitation of proxies by the Board of Trustees of The Royce Fund to be
voted at a Special Meeting of Shareholders of The REvest Growth & Income Fund
("RGI"), a series of The Royce Fund, to be held on September 14, 1998, at 2 p.m.
Eastern time, at the offices of The Royce Fund, at 1414 Avenue of the Americas,
New York, New York 10019 (the "Meeting"), and at any adjournments or
postponements thereof.
The purpose of the Meeting is to consider an Agreement and Plan of
Reorganization (the "Reorganization Plan") between The Royce Fund, on behalf of
RGI, and The Winter Harbor Fund, a newly-created Delaware business trust that
has one series, The REvest Value Fund ("RVF") (each such series, a "Fund" and
together, the "Funds"), that would effect the reorganization of RGI into RVF and
certain transactions and other actions in connection therewith, as described
below (the "Reorganization"). Pursuant to the Reorganization Plan, which has
been approved by the Board of Trustees of The Royce Fund, all or substantially
all of the assets of RGI would be acquired by RVF in exchange for shares of
beneficial interest in RVF issued by The Winter Harbor Fund (the "RVF Shares")
and the assumption by RVF of all or substantially all of the liabilities of RGI.
Such RVF Shares then would be distributed to RGI shareholders at the rate of one
RVF Share (or fraction thereof) for each share (or fraction thereof) of
beneficial interest in RGI. As a result of the proposed transactions, each
shareholder of RGI would receive a number of full and fractional RVF Shares
equal to the number of RGI shares owned by such RGI shareholder on the effective
date of the Reorganization. Such RVF Shares would have an aggregate net asset
value on the effective date of the Reorganization equal to the aggregate net
asset value of RGI shares on such date. A copy of the Reorganization Plan is set
forth in Appendix A to this Combined Prospectus/Proxy Statement.
The Royce Fund and The Winter Harbor Fund are both registered, open-end,
diversified, management investment companies (i.e., mutual funds) organized as
business trusts under the
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<PAGE>
laws of the State of Delaware. The investment objectives, policies and
restrictions of RVF will be substantially identical to those of RGI. Both RGI
and RVF primarily seek long-term growth and secondarily current income by
investing in a broadly diversified portfolio of common stocks and convertible
securities. Prospective portfolio investments for each Fund are selected on a
value basis and are primarily limited to small and medium-sized companies viewed
by the Funds' investment adviser as having attractive financial characteristics
and/or "vitality factors". Vitality factors are those factors (e.g., an active
acquisition program, stock buy-back program and/or cost reduction program) that
should, in the investment adviser's judgment, allow a company to build future,
incremental value for shareholders.
This Combined Prospectus/Proxy Statement, which should be retained for
future reference, sets forth concisely the information about RVF, The Winter
Harbor Fund, RGI, The Royce Fund, and the transactions contemplated by the
proposed Reorganization Plan that an investor should know before voting on the
proposed Reorganization Plan. For a more detailed discussion of the investment
objectives, policies, restrictions and risks of RVF, see the prospectus for RVF
dated __________, 1998, which is included herewith and incorporated herein by
reference (the "Prospectus"). For a more detailed discussion of the investment
objectives, policies, restrictions and risks of RGI, see the prospectus and
statement of additional information for RGI each dated February 27, 1998, which
are incorporated herein by reference and copies of which may be obtained without
charge by contacting Royce, Ebright & Associates, Inc. ("REA") at 511 Congress
Street, Portland, Maine 04101 or by telephoning REA at (800) 277-5573.
A statement of additional information regarding RVF, dated _______, 1998,
has been filed with the Securities and Exchange Commission (the "Commission"). A
statement of additional information, dated August ___, 1998 relating to the
proposed transactions and other actions described in this Combined
Prospectus/Proxy Statement, including historical financial statements, has also
been filed with the Commission and is incorporated by reference herein. Copies
of these documents may be obtained without charge by contacting REA at 511
Congress Street, Portland, Maine 04101 or by telephoning REA at (800) 277-5573.
Any shareholder giving a proxy has the power to revoke it by mail
(addressed to the Secretary at the principal executive office of The Royce Fund,
1414 Avenue of the Americas, New York, New York 10019), or in person at the
Meeting, by executing a superseding proxy or by submitting a notice of
revocation to RGI. All properly executed proxies received in time for the
Meeting will be voted as specified in the proxy, or if no specification is made,
in favor of the proposal.
The Board of Trustees of The Royce Fund has fixed the close of business on
June 15, 1998 as the record date for the determination of shareholders entitled
to notice of and to vote at the Meeting and at any adjournment or postponement
thereof. Shareholders on the record date will be entitled to one vote for each
share held. As of June 15, 1998, RGI had outstanding 2,507,281 shares of
beneficial interest, par value $.001 per share. As of June 15, 1998, the
following persons or groups owned beneficially or of record more than five
percent of the outstanding shares of beneficial interest of RGI:
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<PAGE>
<TABLE>
<CAPTION>
Name and Address Number of Shares Percentage Owned Type of Ownership
---------------- ---------------- ---------------- -----------------
<S> <C> <C>
The Carlisle Companies 473,582 18.89% Beneficial
Defined Benefit Retirement Plan
250 South Clinton Street
Suite 201
Syracuse, NY 13202
Charles Schwab & Co. Inc. 413,680 16.50% Record
Reinvest Account
Attn: Mutual Fund Department
101 Montgomery Street
San Francisco, CA 94104-4122
Grosky Druckman DiGiacamo 130,005 5.19% Beneficial
Clemens Profit Sharing Trust
4th & Hathaway Streets
Lebanon, PA 17402
</TABLE>
The Board of Trustees of The Royce Fund knows of no business other than
that mentioned in the Notice of the Meeting which will be presented for
consideration at the Meeting. If any other matter is properly presented, it is
the intention of the persons named in the enclosed proxy to vote in accordance
with their best judgment.
REA will furnish, without charge, a copy of RGI's Annual Report to
Shareholders for its fiscal year ended December 31, 1997, and a copy of any more
recent reports, to any RGI shareholder upon request. To request a copy, please
call or write to REA at 511 Congress Street, Portland Maine 04101, Telephone:
(800) 277-5573.
-----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
--------------------------
The date of this Combined Prospectus/Proxy Statement is August ___, 1998.
iii
<PAGE>
COMBINED PROSPECTUS/PROXY STATEMENT
TABLE OF CONTENTS
Page
Proposal: Approval of Agreement and Plan of Reorganization...................1
Synopsis......................................................................1
The Proposed Reorganization.............................................1
Overview of RGI and RVF.................................................2
Federal Income Tax Consequences of the Proposed Reorganization..........3
Principal Risk Factors........................................................3
The Proposed Reorganization...................................................4
Reasons for the Proposed Reorganization.................................5
Costs and Expenses of the Reorganization................................5
Continuation of Shareholder Accounts; Share Certificates................6
Comparative Information on Shareholder Rights...........................6
Federal Income Tax Consequences of the Proposed Reorganization..........6
Pro Forma Capitalization and Ratios.....................................7
Operation of The REvest Value Fund Following the Reorganization...............8
Comparative Information on Investment Policies..........................8
Comparative Information on Investment Advisory Agreements...............8
Comparative Information on Fund Expenses...............................10
Comparison of Distribution Arrangements................................11
Comparison of Transfer Agency and Service Arrangements.................11
Comparison of Custody Arrangements.....................................12
Management of the Affairs of The Winter Harbor Fund....................12
More Information about The Winter Harbor Fund and The REvest Value Fund......13
More Information about The REvest Growth & Income Fund.......................13
Additional Information.......................................................13
Expenses...............................................................13
Solicitation and Voting of Proxies.....................................14
Vote Required..........................................................14
Available Information..................................................15
Legal Matters..........................................................16
Financial Statements and Experts.......................................16
Other Business...............................................................16
Proposals for Future Meetings................................................16
<PAGE>
PROPOSAL: APPROVAL OF THE AGREEMENT
AND PLAN OF REORGANIZATION
On April 16, 1998, the Board of Trustees of The Royce Fund, including all
of the Trustees who are not "interested persons" of The Royce Fund, as that term
is defined in Section 2(a)(19) of the Investment Company Act of 1940 (the "Royce
Independent Trustees"), approved the Reorganization Plan which is subject to
approval by the shareholders of RGI.
SYNOPSIS
The following is a summary of certain information contained elsewhere in
this Combined Prospectus/Proxy Statement. This summary is qualified by reference
to the more complete information contained elsewhere in this Combined
Prospectus/Proxy Statement, the prospectuses of RGI and RVF and the
Reorganization Plan which is attached to this Combined Prospectus/Proxy
Statement as Appendix A. RGI shareholders should read this entire Combined
Prospectus/Proxy Statement carefully.
The Proposed Reorganization
RGI shareholders will be asked at the Meeting to vote upon and approve the
Reorganization Plan, a copy of which is attached as Appendix A to this Combined
Prospectus/Proxy Statement. Pursuant to the Reorganization Plan, RGI, a series
of The Royce Fund, would effectively be reorganized into RVF, a series of The
Winter Harbor Fund. The Reorganization Plan sets forth the terms and conditions
under which the proposed transactions contemplated by the Reorganization are to
be consummated. The Royce Fund's Board of Trustees, including the Royce
Independent Trustees, and the Board of Trustees of The Winter Harbor Fund,
including the Trustees who are not "interested persons" of The Winter Harbor
Fund, as that term is defined in Section 2(a)(19) of the Investment Company Act
of 1940 (the "Winter Harbor Independent Trustees"), have approved the
Reorganization Plan.
Pursuant to the Reorganization Plan, all or substantially all of the assets
of RGI would be acquired by RVF in exchange for RVF Shares and the assumption by
RVF of all or substantially all of the liabilities of RGI. Such RVF Shares then
would be distributed to RGI shareholders at the rate of one RVF Share (or
fraction thereof) for each share (or fraction thereof) of beneficial interest in
RGI. As a result of the proposed transactions, each shareholder of RGI would
receive a number of full and fractional RVF Shares equal to the number of RGI
shares owned by such RGI shareholder on the effective date of the
Reorganization. Such RVF Shares would have an aggregate net asset value on the
effective date of the Reorganization equal to the aggregate net asset value of
RGI shares.
The consummation of the transactions contemplated by the proposed
Reorganization is subject to a number of conditions set forth in the
Reorganization Plan, some of which conditions may be waived by The Royce Fund
(see "The Proposed Reorganization" below). Among the significant conditions
(which may not be waived) are (i) the receipt by The Royce Fund and The Winter
Harbor Fund of an opinion of counsel as to certain federal income tax aspects of
the Reorganization (see "The Proposed Reorganization -- Federal Income Tax
Consequences of the
1
<PAGE>
Proposed Reorganization" below) and (ii) the approval of the Reorganization Plan
by the affirmative vote of the holders of at least a majority of the outstanding
voting securities of RGI, as defined in the Investment Company Act of 1940, as
amended (the "1940 Act").
For the reasons set forth below under "The Proposed Reorganization --
Reasons for the Proposed Reorganization," The Royce Fund's Board of Trustees,
including all of the Royce Independent Trustees, has concluded that the
Reorganization would be in the best interest of RGI and its shareholders and the
interests of the existing RGI shareholders would not be diluted as a result of
the transactions contemplated by the Reorganization. The Royce Fund's Board,
therefore, has submitted the Reorganization Plan effecting the Reorganization
for approval by RGI shareholders at the Meeting, and recommends the approval of
the Reorganization Plan. Pending the approval of shareholders, the
Reorganization is anticipated to occur on September 18, 1998, or such later date
as the parties may agree.
Overview of RGI and RVF
Upon consummation of the Reorganization, the investment objectives,
policies and restrictions of RVF will be substantially identical to those of
RGI. Both RGI and RVF primarily seek long-term growth and secondarily current
income by investing in a broadly diversified portfolio of common stocks and
convertible securities. Prospective portfolio investments for each Fund are
selected on a value basis and are primarily limited to small and medium-sized
companies viewed by the Funds' investment adviser as having attractive financial
characteristics and/or "vitality factors". Vitality factors are those factors
(e.g., an active acquisition program, stock buy-back program and/or cost
reduction program) that should, in the investment adviser's judgment, allow a
company to build future, incremental value for shareholders.
RGI is currently advised by REA. Concurrent with the Reorganization, REA
will change its name to Ebright Investments, Inc. Throughout the rest of this
Combined Prospectus/Proxy Statement, the investment adviser will be referred to
as REA. RVF will be advised by REA under the terms of a new Investment Advisory
Agreement. The new Investment Advisory Agreement is substantially identical to
the Investment Advisory Agreement currently in effect for RGI in all material
respects. REA has selected Gouws Capital Management, Inc. ("GCM") to serve as
sub-adviser to RVF pursuant to an Investment Sub-Advisory Agreement. As
sub-adviser, GCM will provide investment research and advice and assist REA in
determining which portfolio securities shall be purchased or sold on behalf of
RVF. All investment decisions, however, will ultimately be made by REA. GCM, at
the direction of REA, will also be responsible for placing purchase and sell
orders for investments with broker-dealers and for other related transactions.
The respective terms of the new Investment Advisory Agreement, the
Investment Sub-Advisory Agreement and the Underwriting Agreement with respect to
RVF are substantially similar in all material respects to those of the current
Investment Advisory Agreement and the Distribution Agreement for RGI.
Accordingly, the aggregate contractual rates payable by RVF for investment
advisory services and distribution services will remain substantially the same.
2
<PAGE>
Each Fund's policies, procedures and restrictions concerning share
purchase, redemption, dividend payment and the determination of net asset value
are identical, as set forth in the prospectus for each Fund. While RGI allows
shareholders to exchange their RGI shares for shares of other series of The
Royce Fund, no such exchange privilege exists for RVF because RVF is currently
the only series of The Winter Harbor Fund.
A more detailed description of each Fund appears below in the section
entitled "Operation of The REvest Value Fund Following the Reorganization."
Federal Income Tax Consequences of the Proposed Reorganization
The Royce Fund and The Winter Harbor Fund will receive, as a condition to
the Reorganization, an opinion from Verrill & Dana LLP, counsel to The Winter
Harbor Fund and REA, to the effect that the proposed Reorganization will
constitute a tax-free reorganization within the meaning of Section 368(a) of the
U.S. Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, no
gain or loss will be recognized by RVF, RGI or their respective shareholders as
a result of the Reorganization. For additional information regarding the federal
income tax consequences of the Proposed Reorganization, see "Proposal 1 --
Federal Income Tax Considerations of the Proposed Reorganization" below.
PRINCIPAL RISK FACTORS
Because the investment objectives, policies and restrictions of RVF are
substantially identical to those of RGI, the risks associated with the
particular investment policies and strategies that RVF and RGI are authorized to
employ also are substantially identical.
As a mutual fund investing primarily in common stocks and/or securities
convertible into common stocks, RVF is subject to market risk, that is, the
possibility that common stock prices will decline over short or even extended
periods. RVF may invest in securities of companies that are not well-known to
the investing public, may not have significant institutional ownership and may
have cyclical, static or only moderate growth prospects. The stocks of such
companies may be more volatile in price and have lower trading volumes than the
larger capitalization stocks included in the Standard & Poor's 500 Index.
For additional information regarding the principal risk factors of
investing in RVF, see "Investment Risks" in the Prospectus.
THE PROPOSED REORGANIZATION
On April 16, 1998, the Board of Trustees of The Royce Fund, including the
Royce Independent Trustees, approved the Reorganization Plan, which is subject
to approval by the shareholders of RGI. The Reorganization Plan provides for (i)
the transfer of all or substantially all of the assets and liabilities of RGI to
RVF in exchange solely for RVF Shares, and (ii) the distribution to RGI
shareholders of RVF Shares in complete liquidation of RGI. As a result of the
Reorganization, each shareholder of RGI will become a shareholder of RVF and
will hold,
3
<PAGE>
immediately after the effective date of the Reorganization, the same number of
RVF Shares that such shareholder held in RGI immediately before the effective
date of the Reorganization.
Concurrent with the Reorganization, REA, RGI's current investment adviser,
will change its name to Ebright Investments, Inc. REA will be the investment
adviser of RVF after the Reorganization, and REA's services will be provided
under a new Investment Advisory Agreement. The new Investment Advisory Agreement
is substantially identical to the current Investment Advisory Agreement.
Jennifer E. Goff, who is now responsible for the day-to-day management of RGI's
assets, will continue as portfolio manager of RVF. REA has selected GCM to serve
as sub-adviser to RVF pursuant to an Investment Sub-Advisory Agreement between
REA and GCM.
GCM is an independent investment advisory firm located in Portland, Maine,
founded in 1984 and registered as an investment adviser with the Securities and
Exchange Commission. GCM, like REA, has a value orientation and emphasizes
in-depth fundamental analysis and company visitation. GCM's President, Johann H.
Gouws, and its Senior Vice President, Richard E. Curran, Jr., together own a
majority of the voting stock of GCM. In addition, Messrs. Gouws and Curran
together own a majority of the voting stock of Acadia Trust, N.A. ("AT"), an
affiliated trust company which acts as custodian for the majority of GCM's
approximately $800 million in client assets.
As compensation for its services to RVF, GCM is entitled to receive
sub-advisory fees from REA equal to one-half of REA's "net profit" (i.e., the
advisory fees paid to REA minus all of REA's expenses, including Ms. Goff's
salary and benefits, and the preferential distribution described below). GCM is
also entitled to a preferential distribution equal to Ms. Goff's salary and
benefits. Although REA remains responsible for the payment of the expenses of
the Reorganization, AT will be reimbursing REA for one-half of those expenses.
Concurrent with the Reorganization, and as compensation for their part in AT's
paying one-half the Reorganization expenses, Messrs. Gouws and Curran have been
designated by AT to receive forty-eight percent (48%) of REA's voting common
stock from REA. Ms. Goff and her sister, Ellen E. Carlton, will own the
remaining fifty-two percent (52%) of REA's voting common stock of REA. In the
event that, on or before April 1, 1999, GCM is terminated as RVF's subadviser,
either voluntarily or involuntarily, then at such time Messrs. Gouws and Curran,
AT's designees, are required to sell, and REA is required to purchase, the
shares of REA owned by AT for an amount equal to AT's actual out-of-pocket
expenses incurred as a direct result of the Reorganization.
As sub-adviser, GCM will provide investment research and advice and assist
REA in determining which portfolio securities shall be purchased or sold on
behalf of the portfolio; however, all investment decisions will ultimately be
made by REA. GCM, at the direction of REA, will be responsible for placing
purchase and sell orders for investments with broker-dealers and other related
transactions.
Countrywide Fund Services, Inc. will serve as administrator and transfer
agent, CW Fund Distributors, Inc. will serve as underwriter and Star Bank, N.A.,
will serve as custodian for RVF.
4
<PAGE>
In the event that shareholders of RGI do not approve the Reorganization
Plan, the Trustees of The Royce Fund will consider the alternatives available to
them.
Reasons for the Proposed Reorganization
RGI was started on August 1, 1994 to allow Thomas R. Ebright, a long-term
Royce & Associates, Inc. employee, to operate his own mutual fund. By being
permitted to start as a series of The Royce Fund, RGI benefited from The Royce
Fund's large size and resulting economies of scale. This allowed RGI to get
started with both a competitive expense ratio and also with the service support
of The Royce Fund and Royce & Associates, Inc., The Royce Fund's principal
investment adviser. These advantages were significant factors in the early
growth of RGI.
By mid-1997, RGI was approaching three years of operating history. REA,
Royce & Associates, Inc. and the Board of The Royce Fund started making
preparations to reorganize RGI into a separate entity, but the plans were put on
hold in July 1997 at the time of Tom's death. Preparations began again earlier
this year after GCM was identified by REA as a potential business partner for
it. Both Royce & Associates, Inc. and REA believe that RGI, by being a separate
mutual fund associated with GCM, will have a better opportunity to attract new
investors and thereby maintain and possibly improve its expense ratio.
For the reasons discussed below, the Board of Trustees of The Royce Fund,
including the Royce Independent Trustees, approved the Reorganization Plan and
determined that the interests of the shareholders of RGI will not be diluted as
a result of the Reorganization Plan, and that the proposed reorganization is in
the best interests of RGI and its shareholders.
In reaching this conclusion, the Board of Trustees of The Royce Fund
considered various factors, including the following: the continuity of the
investment objectives, policies and restrictions, as well as the service
features available to shareholders of RGI and RVF; the capabilities and
resources of REA, GCM and the other proposed service providers in the areas of
investment, administration, fund accounting, transfer agency, custody, marketing
and shareholder servicing, as applicable; the expense ratio of RGI and REA's
undertaking to limit RVF's total fund operating expense ratio to 1.30% through
December 31, 1999; the terms and conditions of the Reorganization Plan and
whether the Reorganization would result in a dilution of shareholder interests;
REA's undertaking to pay the costs of the Reorganization; Federal income tax
consequences of the Reorganization; possible alternatives to the Reorganization;
and the goal of REA and GCM to seek new investors for RVF.
Costs and Expenses of the Reorganization
The Reorganization Plan provides that REA will bear all of RGI's and RVF's
costs and expenses related to the Reorganization. Such costs and expenses to be
paid by REA will not result in an increase in management or distribution fees
payable by RGI or RVF.
5
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Continuation of Shareholder Accounts; Share Certificates
As a result of the proposed transactions contemplated by the Reorganization
Plan, each RGI shareholder will cease to be a shareholder of RGI and, as
described below, will receive RVF Shares at the rate of one RVF Share (or
fraction thereof) for each RGI share (or fraction thereof) held on the effective
date of the Reorganization, and the RVF Shares will have an aggregate net asset
value equal to the aggregate net asset value of such shareholder's RGI shares as
of the close of business on the effective date of the Reorganization.
RVF will establish an account for each RGI shareholder containing the
appropriate number of RVF Shares. Receipt of RVF Shares by a RGI shareholder
will be deemed to authorize RVF and its agents to establish for the RGI
shareholder, with respect to RVF, all of the same (i) account options, including
telephone redemptions, if any, (ii) dividend and distribution options, and (iii)
options for payment that the RGI shareholder had elected previously with respect
to RGI that are available to shareholders of RVF. Similarly, no further action
will be necessary in order to continue, with respect to RVF Shares, any
retirement plan currently maintained by a RGI shareholder.
RGI shareholders to whom certificates have been issued will be required to
surrender their certificates in order to receive RVF Shares. In the interest of
economy and convenience, certificates representing RVF Shares will not be
physically issued.
No sales charges or redemption fees will be imposed in connection with the
issuance of RVF Shares to RGI shareholders pursuant to the Reorganization.
Comparative Information on Shareholder Rights
General. The Royce Fund and The Winter Harbor Fund are Delaware business
trusts. The Royce Fund is an open-end registered investment company governed by
its Trust Instrument dated April 12, 1996 (as amended), and applicable Delaware
law. The Winter Harbor Fund is governed by its Trust Instrument dated June 26,
1997, as amended as of July 10, 1997, and applicable Delaware law. The business
and affairs of both RGI and RVF are managed under the direction of the
respective Boards of Trustees of The Royce Fund and The Winter Harbor Fund.
Shares. The number of authorized shares of beneficial interest of The Royce
Fund is unlimited. The number of authorized shares of beneficial interest of The
Winter Harbor Fund is also unlimited. Under the Trust Instruments of both The
Winter Harbor Fund and The Royce Fund, the Board of Trustees may, without
shareholder approval, provide for the issuance of additional classes or series
of shares of beneficial interest with such preferences, conversions or other
rights and characteristics as shall be determined by resolution of the Board of
Trustees.
Federal Income Tax Consequences of the Proposed Reorganization
The Royce Fund and The Winter Harbor Fund will receive, as a condition to
the Reorganization, an opinion from Verrill & Dana LLP, counsel to The Winter
Harbor Fund and REA, to the effect that, based on the facts, assumptions and
representations of the parties, for
6
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federal income tax purposes: (i) The transfer of all of RGI's assets in exchange
for the RVF Shares and the assumption by RVF of all or substantially all of the
liabilities of RGI followed by the distribution of the RVF Shares to RGI
shareholders in dissolution and liquidation of RGI, will constitute a
"reorganization" within the meaning of Section 368(a)(1)(F) of the Code, and RVF
and RGI will each be a "party to a reorganization" within the meaning of Section
368(b) of the Code; (ii) no gain or loss will be recognized by RVF upon the
receipt of the assets of RGI solely in exchange for the RVF Shares and the
assumption by RVF of the liabilities of RGI; (iii) no gain or loss will be
recognized by RGI upon the transfer of RGI's assets to RVF in exchange for the
RVF Shares and the assumption by RVF of the liabilities of RGI's or upon the
distribution (whether actual or constructive) of the RVF Shares to RGI's
shareholders in exchange for their shares of RGI; (iv) no gain or loss will be
recognized by RGI shareholders upon the exchange of their RGI shares for the RVF
Shares in liquidation of RGI; (v) the aggregate tax basis for the RVF Shares
received by each RGI shareholder pursuant to the Reorganization will be the same
as the aggregate tax basis of the RGI shares held by such shareholder
immediately prior to the Reorganization, and the holding period of the RVF
Shares to be received by each RGI shareholder will include the period during
which the RGI shares exchanged therefor were held by such shareholder (provided
the RGI shares were held as capital assets on the date of the Reorganization);
and (vi) the tax basis of the RGI assets acquired by RVF will be the same as the
tax basis of such assets to RGI immediately prior to the Reorganization, and the
holding period of the assets of RGI in the hands of RVF will include the period
during which those assets were held by RGI.
The foregoing is only intended to be a summary of the principal federal
income tax consequences of the Reorganization and should not be considered to be
tax advice. In addition, while it is believed that the foregoing is correct, it
is not certain that the U.S. Internal Revenue Service will agree with the
conclusions stated above. Shareholders of RGI should consult their own tax
advisers regarding the Federal, state, local and foreign tax consequences with
respect to the foregoing matters and any other considerations which may be
applicable to the shareholders of RGI.
Pro Forma Capitalization
The following table shows the capitalization of RGI and RVF separately as
of June 30, 1998 (unaudited), and combined in the aggregate on a pro forma basis
(unaudited), as of that date giving effect to the Reorganization:
The REvest Growth & The REvest Pro Forma
Income Fund Value Fund Combined
------------------- ---------- ---------
Net Assets $_____________ $0 $__________
Shares Outstanding _____________ 0 __________
Net Asset Value Per Share $13.08 $0 $13.08
7
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OPERATION OF THE REVEST VALUE FUND
FOLLOWING THE REORGANIZATION
Upon consummation of the Reorganization, RVF will operate in a manner that
is substantially similar to the current operation of RGI. RVF will be governed
by the Board of Trustees and officers of The Winter Harbor Fund. Background
information with respect to The Winter Harbor Fund's Trustees and officers is
set forth in RVF's statement of additional information, which is available
without charge from REA upon request. The responsibilities, powers and duties of
the Trustees of The Winter Harbor Fund are substantially similar to those of the
Trustees of The Royce Fund. The Winter Harbor Fund's Trustees supervise the
business affairs of RVF, whose investments will be managed on a daily basis by
REA, the adviser, and GCM, the sub-adviser.
Jennifer E. Goff, the portfolio manager at REA now responsible for the
day-to-day management of RGI, will serve as portfolio manager of RVF, a position
in which she will have the same discretion and decision-making authority over
RVF as she currently exercises over RGI.
Comparative Information on Investment Policies
The investment policies and restrictions of RVF will be substantially
identical to those of RGI. Both RGI and RVF primarily seek long-term growth and
secondarily current income by investing in a broadly diversified portfolio of
common stocks and convertible securities. Prospective portfolio investments for
each Fund are selected on a value basis and are primarily limited to small and
medium-sized companies viewed by the Funds' investment adviser as having
attractive financial characteristics and/or "vitality factors". Vitality factors
are those factors (e.g., an active acquisition program, stock buy-back program
and/or cost reduction program) that should, in the investment adviser's
judgment, allow a company to build future, incremental value for shareholders.
To achieve this objective, both RGI and RVF normally invest at least 90% of
their total assets in common stocks, convertible preferred stocks and
convertible bonds. At least 80% of these allowable securities will be
income-producing, and at least 80% of the allowable securities will be issued by
companies with stock market capitalizations between $200 million and $2 billion
at the time of investment. Both Funds will normally have a weighted average
market capitalization size in excess of $500 million. The remainder of each
Fund's assets may be invested in securities with lower or higher market
capitalizations, non-dividend paying common stocks and non-convertible fixed
income securities. The securities in which each Fund invests may be traded on
securities exchanges or in the over-the-counter market. While most of each
Fund's securities will be income-producing, the composite yield of each Fund's
securities may be either higher or lower than the composite yield of the stocks
in the S&P 500 Index.
Comparative Information on Investment Advisory Agreements
REA, under the name Ebright Investments, Inc., will be the investment
adviser of RVF after the Reorganization, and REA's services will be provided
under a new Investment Advisory
8
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Agreement. The duties and obligations of the adviser outlined under the current
and new Investment Advisory Agreements are substantially identical in all
material respects. REA has chosen GCM to act as sub-adviser. GCM's role as
sub-adviser is described more fully below.
Under the Investment Advisory Agreement currently in place for RGI, REA (i)
determines the composition of the portfolio of RGI, the nature and timing of the
changes therein and the manner of implementing such changes, and (ii) provides
RGI with such investment advisory, research and related services as RGI may,
from time to time, reasonably require for the investment of its funds. REA
performs its duties in accordance with the applicable provisions of RGI's Trust
Instrument and current prospectus and any directions it may receive from The
Royce Fund's Trustees. The current Investment Advisory Agreement continues from
year to year, so long as specifically approved at least annually by (i) the vote
of The Royce Fund's Trustees, including a majority of such Trustees who are not
parties to the agreement or "interested persons" (as such term is defined in
Section 2(a)(19) of the 1940 Act) of any such party, cast in person at a meeting
called for the purpose of voting on such approval, or (ii) the vote of a
majority of the outstanding voting securities of RGI (as defined in the 1940
Act) and the vote of The Royce Fund's Trustees, including a majority of such
Trustees who are not parties to the agreement or "interested persons" (as so
defined) of any such party.
The new Investment Advisory Agreement was approved by the Board of Trustees
of The Winter Harbor Fund, including a majority of the Winter Harbor Independent
Trustees, on April 6, 1998 on behalf of RVF, and by the sole shareholder of RVF
on _________, 1998. The new Investment Advisory Agreement will continue until
_________, 2000 and from year to year thereafter, provided that such continuance
is specifically approved at least annually in substantially the same manner as
the current Investment Advisory Agreement. Both the current and the new
Investment Advisory Agreements are terminable at any time without penalty, on
sixty days' written notice by the vote of a majority of the outstanding voting
securities of the Fund (as defined in the 1940 Act), or by the vote of a
majority of the applicable Board of Trustees or by REA, and will automatically
terminate in the event of its "assignment" (as such term is defined for purposes
of Section 15(a)(4) of the 1940 Act).
Under the new Investment Advisory Agreement, REA's responsibilities as
RVF's investment adviser are identical in all material respects to REA's duties
under the current Investment Advisory Agreement with respect to RGI.
Pursuant to the Sub-Advisory Agreement between REA and GCM, GCM will serve
as sub-adviser to RVF. REA will be responsible for the management of the
investment portfolio of RVF and the supervision of GCM. GCM will, among other
things, (i) provide a continuous investment program for RVF, including
investment research; (ii) provide advice to REA as to which portfolio securities
should be purchased or sold by RVF; and (iii) at the direction of REA place
purchase and sell orders for investments with broker-dealers. Although some
investment advisory responsibilities are to be delegated to GCM rather than
being performed directly by REA, RVF will be managed in substantially the same
manner as RGI.
9
<PAGE>
Under the new Investment Advisory Agreement, RVF will pay REA on the last
day of each month, a fee, computed daily and payable monthly, of 1.00% per annum
of the first $50 million of the average daily net assets of RVF and 0.75% per
annum of the average daily net assets in excess of $50 million.
Under the Investment Sub-Advisory Agreement, REA will pay GCM a fee,
computed daily and payable monthly, at an annual rate equal to 50% of the net
advisory fee received by REA from RVF pursuant to the new Investment Advisory
Agreement, less costs and expenses incurred by REA associated therewith.
Comparative Information on Fund Expenses
The fee rates payable for investment advisory services by RGI and RVF are
identical. REA will pay GCM its sub-advisory fee pursuant to the Investment
Sub-Advisory Agreement out of REA's investment advisory fee.
REA has voluntarily agreed to limit the total fund operating expenses of
RGI (excluding interest, taxes, brokerage and extraordinary expenses) to an
annual rate of 1.30% of the RGI's average net assets until the effective date of
the Reorganization or, if the Reorganization is not approved, December 31, 1998.
REA has similarly voluntarily agreed to limit the total fund operating expenses
of RVF (excluding interest, taxes, brokerage and extraordinary expenses) to an
annual rate of 1.30% of the RVF's average annual net assets until December 31,
1999.
The following table and example provide a comparison of the annual
operating expenses (as a percentage of average net assets) RGI currently pays
and the estimated amounts RVF would pay following the Reorganization:
Comparative Shareholder Transaction Expenses
The REvest Growth The REvest
& Income Fund Value Fund
----------------- ----------
Sales Load Imposed on Purchases None None
Sales Load Imposed on Reinvested Dividends None None
Deferred Sales Load None None
Redemption Fees -
1 Year or More After Initial Purchase None None
Early Redemption Fees -
Less Than 1 Year After Initial Purchase 1%(a) 1%
Exchange Fees None None
- ---------------------
(a) The early redemption fee will not apply to the redemption of RGI shares in
connection with the Reorganization.
10
<PAGE>
Comparative Annual Fund Operating Expenses
(as a percentage of average net assets)
The REvest Growth The REvest
& Income Fund* Value Fund
----------------- ----------
Management Fees 1.00% 1.00%
Other Expenses .26% 0.30%
Total Fund Operating Expenses 1.26%(a) 1.30%(b)
- ------------------
* As of December 31, 1997.
(a) REA has voluntarily agreed to limit the total fund operating expenses of
RGI (excluding interest, taxes, brokerage and extraordinary expenses) to an
annual rate of 1.30% of RGI's average net assets until the effective date
of the Reorganization or, if the Reorganization is not approved, December
31, 1998. After such date, the expense limitation may be terminated or
revised at any time.
(c) REA has voluntarily agreed to limit the total fund operating expenses of
RVF (excluding interest, taxes, brokerage and extraordinary expenses) to an
annual rate of 1.30% of RVF's average net assets until December 31, 1999.
After such date, the expense limitation may be terminated or revised at any
time.
Example
You would pay the following expenses on a $1,000 investment, assuming 5%
annual return (cumulative through the end of each year):
1 year 3 years 5 years 10 years
------ ------- ------- --------
The REvest Growth & Income Fund $13 $40 $69 $152
The REvest Value Fund $13 $41 $71 $157
These examples should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or lesser than those
shown.
Comparison of Distribution Arrangements
CW Fund Distributors, Inc., an affiliate of Countrywide Fund Services,
Inc., 312 Walnut Street, Cincinnati, Ohio 45202, will serve as the underwriter
for RVF under an Underwriting Agreement with The Winter Harbor Fund, on behalf
of RVF. The Winter Harbor Fund's Underwriting Agreement relating to the RVF
Shares is substantially similar in all material respects to The Royce Fund's
Distribution Agreement currently in place for RGI. RGI does not pay, and RVF
will not pay, any fees for services under such agreements.
Comparison of Transfer Agency and Service Arrangements
Countrywide Fund Services, Inc. ("Countrywide"), 312 Walnut Street,
Cincinnati, Ohio 45202, will serve as the transfer agent and dividend disbursing
agent for RVF pursuant to a Transfer, Dividend Disbursing, Shareholder Service
and Plan Agency Agreement with The Winter Harbor Fund, on behalf of RVF, which
is substantially similar in all material respects to the current Transfer Agency
and Service Agreement between The Royce Fund, on behalf of RGI,
11
<PAGE>
and State Street Bank and Trust Company ("State Street"), except that
Countrywide, rather than State Street, will provide services to RVF.
Countrywide will provide administrative services to, and assist in managing
and supervising all aspects of, the general day-to-day business activities and
operations of RVF (other than investment advisory activities), including
oversight of custodial, transfer agency, dividend disbursing, accounting,
auditing, compliance and related services.
Comparison of Custody Arrangements
Star Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45202, will serve as
the custodian for RVF under a Custody Agreement with The Winter Harbor Fund, on
behalf of RVF. The Custody Agreement with Star Bank, N.A. is substantially
similar in all material respects to The Royce Fund's Custody Contract with State
Street.
Management of the Affairs of The Winter Harbor Fund
The Winter Harbor Fund and The Royce Fund's Boards of Trustees have the
power to determine a minimum net asset value of a shareholder account or minimum
investment which may be made by a shareholder. The Boards of Trustees may
authorize the closing of those shareholder accounts not meeting the specified
minimum amounts by redeeming all of the shares in such accounts upon notice to
the affected shareholders.
The Winter Harbor Fund and The Royce Fund may suspend redemptions in such
manner as may be approved from time to time by or pursuant to the discretion of
the Board of Trustees during any period (i) during which the New York Stock
Exchange is closed other than customary weekend and holiday closing, (ii) during
which trading on the New York Stock Exchange is restricted, (iii) during which
an emergency exists, as defined by Commission rules, as a result of which
disposal by the applicable Fund of its portfolio securities is not reasonably
practicable or it is not reasonably practicable for the applicable Fund to
determine fairly the value for its assets, or (iv) during any other period when
the Commission (or any succeeding governmental authority) may for the protection
of security holders of the applicable Fund by order permit suspension of the
right of redemption or postponement of the date of payment on redemption.
Shareholder Meetings. Neither The Royce Fund nor The Winter Harbor Fund is
required to hold annual meetings of shareholders, but are required to hold
meetings of shareholders for purposes of voting on certain matters as required
under the 1940 Act.
Liability and Indemnification of Trustees and Officers. Both The Royce Fund
and The Winter Harbor Fund provide for the indemnification of their Trustees and
officers to the full extent permitted by Delaware law.
Removal of Trustees. Both The Royce Fund and The Winter Harbor Fund may,
subject to the limits of the 1940 Act, remove a Trustee with or without cause,
by the affirmative vote of (i) two-thirds of the Board of Trustees, or (ii) the
shareholders owning at least two-thirds of the outstanding shares of the trust.
12
<PAGE>
The foregoing is only a summary of certain characteristics of the
operations of The Royce Fund and The Winter Harbor Fund, their Trust Instruments
and Delaware law. The foregoing is not a complete description of the documents
cited.
THE TRUSTEES, INCLUDING THE ROYCE INDEPENDENT TRUSTEES, RECOMMEND THAT
SHAREHOLDERS VOTE FOR THIS PROPOSAL AND ANY UNMARKED PROXIES WILL BE SO VOTED.
MORE INFORMATION ABOUT THE WINTER HARBOR
FUND AND THE REVEST VALUE FUND
Additional information about The Winter Harbor Fund and RVF is included in
the Prospectus. A copy of the Prospectus has been filed with the Commission and
is enclosed herewith and is incorporated by reference. Further information about
The Winter Harbor Fund and RVF is included in the statement of additional
information for RVF, dated __________, 1998, which also has been filed with the
Commission and is incorporated by reference. Both the Prospectus and the
statement of additional information may be obtained without charge by contacting
REA at 511 Congress Street, Portland, Maine 04101 or by telephoning REA at (800)
277-5573.
MORE INFORMATION ABOUT
THE REVEST GROWTH & INCOME FUND
Additional information about RGI is included in the current RGI prospectus
and statement of additional information each dated February 27, 1998, which are
incorporated herein by reference. Copies of RGI's prospectus and statement of
additional information may be obtained without charge by contacting REA at 511
Congress Street, Portland, Maine 04101 or by telephoning REA at (800) 277-5573.
Further information about RGI is also included in the statement of additional
information, dated August ____, 1998, relating to the proposed transactions and
other actions described in this Combined Prospectus/Proxy Statement, including
financial statements, and has been filed with the Commission. This statement of
additional information may be obtained without charge by contacting REA at 511
Congress Street, Portland, Maine 04101 or by telephoning REA at (800) 277-5573
and is incorporated by reference herein.
ADDITIONAL INFORMATION
Expenses
The Reorganization Plan provides that the expenses of the Reorganization,
including the costs and expenses incurred in the preparation and mailing of the
notice, this Combined Prospectus/Proxy Statement and the proxy and solicitation
of proxies, will be borne by REA. REA will reimburse banks, brokers and others
for their reasonable expenses in forwarding proxy solicitation material to the
beneficial owners of the shares of RGI. In order to obtain the necessary quorum
at the Meeting, supplementary solicitation may be made by mail, telephone,
telegraph or
13
<PAGE>
personal interview. Such solicitation may be conducted by, among others,
officers and employees of REA and GCM. REA may retain a proxy solicitation firm
at its own expense.
Solicitation and Voting of Proxies
Solicitation of proxies is being made primarily by the mailing of this
Combined Prospectus/Proxy Statement with its enclosures on or about August ___,
1998. A proxy solicitation firm (the "Proxy Solicitor") may be retained to
assist in the solicitation of proxies. As the meeting date approaches,
shareholders of RGI may receive a call from the Proxy Solicitor if The Royce
Fund has not yet received their vote. Authorization to permit the Proxy
Solicitor to execute proxies may be obtained by telephonic or electronically
transmitted instructions from shareholders of RGI. Proxies that are obtained
telephonically will be recorded in accordance with the procedures set forth
below. Management of The Royce Fund believes that these procedures are
reasonably designed to ensure that the identity of the shareholder casting the
vote is accurately determined and that the voting instructions of the
shareholder are accurately determined.
In all cases where a telephonic proxy is solicited, the Proxy Solicitor is
required to ask the shareholder for such shareholder's full name, address,
social security or employer identification number, title (if the person giving
the proxy is authorized to act on behalf of an entity, such as a corporation),
the number of shares owned and to confirm that the shareholder has received the
Combined Prospectus/Proxy Statement in the mail. If the information solicited
agrees with the information provided to the Proxy Solicitor by The Royce Fund,
then the Proxy Solicitor has the responsibility to explain the process, read the
proposal listed on the proxy card, and ask for the shareholder's instructions on
the proposal. The Proxy Solicitor, although he or she is permitted to answer
questions about the process, is not permitted to recommend to the shareholder
how to vote, other than to read any recommendation set forth in the proxy
statement. The Proxy Solicitor will record the shareholder's instructions on the
card. Within 72 hours, the Proxy Solicitor will send the shareholder a letter or
mailgram to confirm the shareholder's vote and asking the shareholder to call
the Proxy Solicitor immediately if the shareholder's instructions are not
correctly reflected in the confirmation.
If a shareholder wishes to participate in the Meeting, but does not wish to
give a proxy by telephone, such shareholder may still submit the proxy card
originally sent with the Combined Prospectus/Proxy Statement or attend in
person. Any proxy given by a shareholder, whether in writing or by telephone, is
revocable. A shareholder may revoke the accompanying proxy or a proxy given
telephonically at any time prior to its use by filing with The Royce Fund's
Secretary a written revocation or duly executed proxy bearing a later date. In
addition, any shareholder who attends the Meeting in person may vote by ballot
at the Meeting, thereby canceling any proxy previously given.
Vote Required
The presence at any shareholders' meeting, in person or by proxy, of the
holders of a majority of the shares entitled to be cast shall be necessary and
sufficient to constitute a quorum for the transaction of business. In the event
that the necessary quorum to transact business or the vote required to approve
or reject any proposal is not obtained at the Meeting, the persons named
14
<PAGE>
as proxies may propose one or more adjournments of the Meeting in accordance
with applicable law, to permit further solicitation of proxies with respect to
any proposal which did not receive the vote necessary for its passage or to
obtain a quorum. With respect to those proposals for which there is represented
a sufficient number of votes in favor, actions taken at the Meeting will be
effective irrespective of any adjournments with respect to any other proposals.
Any such adjournment will require the affirmative vote of the holders of a
majority of the Fund's shares present in person or by proxy at the Meeting. The
persons named as proxies will vote in favor of such adjournment those proxies
which they are entitled to vote in favor and will vote against any such
adjournment those proxies to be voted against that proposal. For purposes of
determining the presence of a quorum for transacting business at the Meeting,
abstentions and broker "non-votes" will be treated as shares that are present
but which have not been voted. Broker non-votes are proxies received by RGI from
brokers or nominees when the broker or nominee has neither received instructions
from the beneficial owner or other persons entitled to vote nor has
discretionary power to vote on a particular matter. Accordingly, shareholders
are urged to forward their voting instructions promptly.
Approval of the Agreement and Plan of Reorganization will require the
affirmative vote of a "majority of the outstanding voting securities" of RGI.
The term "majority of the outstanding voting securities" as defined in the 1940
Act and as used in this Combined Prospectus/Proxy Statement means: the
affirmative vote of the lesser of (1) 67% of the voting securities of RGI
present at the meeting if more than 50% of the outstanding shares of RGI are
present in person or by proxy or (2) more than 50% of the outstanding shares of
RGI.
Abstentions will have the effect of a "no" vote. Broker non-votes will have
the effect of a "no" vote if such vote is determined on the basis of obtaining
the affirmative vote of more than 50% of the outstanding shares of RGI. Broker
non-votes will not constitute "yes" or "no" votes and will be disregarded in
determining the voting securities "present" if such vote is determined on the
basis of the affirmative vote of 67% of the voting securities of the RGI present
at the Meeting with respect to the proposal.
Available Information
The Winter Harbor Fund and The Royce Fund are each registered under the
1940 Act and are subject to the informational requirements of the 1940 Act and,
in accordance therewith, each files reports, proxy materials and other
information with the Commission. Such reports, proxy materials and other
information may be inspected at the Securities and Exchange Commission at 450
Fifth Street, N.W., Washington, D.C. 20549.
Copies of such material also may be obtained from the Public Reference
Branch, Office of Consumer Affairs and Information Services, Securities and
Exchange Commission, 450 Fifth Street, N.W., Washington D.C. 20549, at
prescribed rates.
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<PAGE>
Legal Matters
Certain legal matters in connection with the issuance of the shares of RVF
will be passed upon by Verrill & Dana LLP, One Portland Square, Portland, Maine
04112. Verrill & Dana LLP will render an opinion as to certain Federal income
tax consequences of the Reorganization.
Financial Statements and Experts
The audited financial statements of RGI incorporated by reference in the
statement of additional information related to this Combined Prospectus/Proxy
Statement (the "SAI") have been audited by PricewaterhouseCoopers LLP
independent auditors, for the period indicated in their report thereon. Copies
of these financial statements may be obtained without charge by contacting REA
at 511 Congress Street, Portland, Maine 04101 or by telephoning REA at (800)
277-5573. There are no financial statements for RVF since it has not yet
commenced operations.
OTHER BUSINESS
The Trustees of The Royce Fund know of no other business to be brought
before the Meeting. However, if any other matters properly come before the
Meeting, proxies will be voted in accordance with the judgment of the Board of
Trustees of The Royce Fund.
PROPOSALS FOR FUTURE MEETINGS
As a Delaware business trust, The Winter Harbor Fund is not required to
hold annual shareholder meetings in any year in which no meeting is required
under the 1940 Act. Consequently, The Winter Harbor Fund does not intend to hold
annual shareholder meetings each year, but meetings may be called by the
Trustees of The Winter Harbor Fund from time to time. Proposals of shareholders
that are intended to be presented at a future shareholder meeting must be
received by The Winter Harbor Fund by a reasonable time prior to The Winter
Harbor Fund's mailing of information statements relating to such meeting.
By Order of the Board of Trustees,
John E. Denneen
Secretary
1414 Avenue of the Americas
New York, New York 10019
August ___, 1998
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Appendix A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this __ day of ____, 1998, by and between The Winter Harbor Fund ("WHF"), a
Delaware business trust, with respect to its The REvest Value Fund series (the
"New Fund"), with its principal place of business at 511 Congress Street,
Portland, Maine 04101, and The Royce Fund, a Delaware business trust ("TRF"),
with respect to its The REvest Growth & Income Fund series (the "Existing
Fund"), with its principal place of business at 1414 Avenue of the Americas, New
York, New York 10019.
This Agreement is intended to be and is adopted as a plan of reorganization
and liquidation within the meaning of Section 368 (a)(1)(F) of the United States
Internal Revenue Code of 1986 (the "Code"). The reorganization (the
"Reorganization") will consist of the transfer of all of the assets of the
Existing Fund in exchange solely for shares of beneficial interest of the New
Fund (the "New Fund Shares") and the assumption by the New Fund of all or
substantially all of the liabilities of the Existing Fund and the distribution,
after the Closing Date hereinafter referred to, of the New Fund Shares to the
shareholders of the Existing Fund in liquidation of the Existing Fund as
provided herein, all upon the terms and conditions hereinafter set forth in this
Agreement;
WHEREAS, the New Fund will become a separate investment series of a
registered open-end management investment company, the Existing Fund is a
separate investment series of such a company and the Existing Fund owns
securities which are assets of the character in which the New Fund is permitted
to invest;
WHEREAS, both Funds are authorized to issue their shares of beneficial
interest;
WHEREAS, the Trustees of WHF have determined that the exchange of all or
substantially all of the assets of the Existing Fund for New Fund Shares and the
assumption of all or substantially all of the liabilities of the Existing Fund
by the New Fund on the terms and conditions hereinafter set forth is in the best
interests of the New Fund; and
WHEREAS, the Trustees of TRF have determined that the Existing Fund should
exchange all or substantially all of its assets and all or substantially all of
its liabilities for New Fund Shares, and that the interests of the existing
shareholders of the Existing Fund will not be diluted as a result of the
transactions contemplated herein.
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
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ARTICLE I
TRANSFER OF ASSETS OF THE EXISTING FUND IN EXCHANGE FOR THE NEW
FUND SHARES AND ASSUMPTION OF THE EXISTING FUND'S LIABILITIES AND
LIQUIDATION OF THE EXISTING FUND
1.1. The Exchange. Subject to the terms and conditions herein set forth and
on the basis of the representations and warranties contained herein, the
Existing Fund agrees to transfer the Existing Fund's assets as set forth in
paragraph 1.2 to the New Fund, and the New Fund agrees in exchange therefor (i)
to deliver to the Existing Fund the number of New Fund Shares, including
fractional New Fund Shares, equal to the number of shares of the Existing Fund
that are issued and outstanding as of the time and date set forth in paragraph
2.1, and (ii) to assume all or substantially all of the liabilities of the
Existing Fund, as set forth in paragraph 1.3. Such transactions shall take place
at the closing provided for in paragraph 3.1 (the "Closing Date").
1.2. Assets to be Acquired. The assets of the Existing Fund to be acquired
by the New Fund shall include all property, including without limitation all
cash, securities and dividends or interest receivable, which is owned by the
Existing Fund and any deferred or prepaid expenses shown as an asset on the
books of the Existing Fund on the Closing Date.
1.3. Liabilities to be Assumed. The Existing Fund will use its best efforts
to discharge all of its known liabilities and obligations that are then due and
payable prior to the Closing Date. The New Fund shall assume (i) all of the
liabilities, expenses, costs, charges and reserves reflected on an unaudited
Statement of Assets and Liabilities of the Existing Fund prepared by TRF as of
the Valuation Date (as defined in paragraph 2.1), in accordance with generally
accepted accounting principles consistently applied from the prior audited
period, and (ii) any other liabilities, whether absolute or contingent, accrued
or unaccrued, of the Existing Fund that are disclosed to the New Fund in writing
at or before the Closing Date or that the Existing Fund can otherwise show were
known or should have been known as of the Closing Date by Royce, Ebright &
Associates, Inc. ("RE&A"), the investment adviser of the Existing Fund and of
the New Fund.
1.4. Liquidation and Distribution. Immediately after the closing on the
Closing Date (the "Liquidation Date"), (i) the Existing Fund will liquidate and
distribute pro rata to the Existing Fund's shareholders of record, determined as
of the close of business on the Closing Date (the "Existing Fund Shareholders"),
the New Fund Shares received by the Existing Fund pursuant to paragraph 1.1, and
(ii) the Existing Fund will thereupon proceed to dissolve as set forth in
paragraph 1.8 below. Such liquidation and distribution will be accomplished by
the transfer of the New Fund Shares then credited to the account of the Existing
Fund on the books of the New Fund, to open accounts on the share records of the
New Fund in the names of the Existing Fund Shareholders and representing the
respective pro rata number of the New Fund Shares due such shareholders. All
issued and outstanding shares of the Existing Fund will simultaneously be
canceled on the books of the Existing Fund. Certificates representing shares of
the Existing Fund shall, following the closing on the Closing Date, represent
the same number
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of New Fund Shares issued in connection with such exchange. In the interest of
economy and convenience, certificates representing New Fund Shares will not be
physically issued.
1.5. Ownership of Shares. Ownership of New Fund Shares will be shown on the
books of the New Fund's transfer agent. Shares of the New Fund will be issued in
the manner described in the combined Prospectus and Proxy Statement on Form N-14
to be distributed to shareholders of the Existing Fund, as described in
paragraph 5.7.
1.6. Transfer Taxes. Any transfer taxes payable upon issuance of the New
Fund Shares in a name other than the registered holder of the Existing Fund
shares on the books of the Existing Fund as of that time shall, as a condition
of such issuance and transfer, be paid by the person to whom such New Fund
Shares are to be issued and transferred.
1.7. Reporting Responsibility. The Existing Fund is and shall remain
responsible for preparing, distributing and filing any shareholder reports and
regulatory or tax filings as required by Federal or state law relating to the
Existing Fund, whether they arise before or after the Closing Date.
1.8. Termination. The Existing Fund shall be terminated on the Closing Date
upon the making of all distributions pursuant to paragraph 1.4.
ARTICLE II
VALUATION
2.1. Valuation of Assets. The value of the Existing Fund's assets to be
acquired by the New Fund hereunder shall be the value of such assets computed as
of the close of regular trading on the New York Stock Exchange on the Closing
Date (such time and date being hereinafter called the "Valuation Date"), after
giving effect to the declaration and/or payment of any net investment income
dividends and/or capital gain distributions, using the valuation procedures set
forth in the Existing Fund's Trust Instrument and its then current prospectus
and statement of additional information (such valuation procedures also being
those of the New Fund) or such other valuation procedures as shall be mutually
agreed upon in writing by the parties.
2.2. Valuation of Shares. The net asset value of a New Fund Share shall be
deemed to be the net asset value of a share of the Existing Fund computed as of
the close of regular trading on the New York Stock Exchange on the Valuation
Date, after giving effect to the declaration and/or payment of any net
investment dividends and/or capital gain distributions, using the valuation
procedures set forth in the Existing Fund's Trust Instrument and its then
current prospectus and statement of additional information.
2.3. Shares to be Issued. The number of the New Fund Shares to be issued
(including fractional shares, if any) in exchange for the Existing Fund's net
assets shall be the number of shares of the Existing Fund that are issued and
outstanding immediately prior to the Closing on the Closing Date.
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2.4. Determination of Value. All computations of value shall be made by
State Street Bank and Trust Company ("State Street"), the custodian for the
Existing Fund, in accordance with its regular practice in pricing the shares and
valuing the net assets of the Existing Fund.
ARTICLE III
CLOSING AND CLOSING DATE
3.1. Closing Date. The Closing Date shall be [ ], 1998 or such later date
as the parties may agree to in writing. All acts taking place at the Closing
shall be deemed to take place simultaneously as of the close of business on the
Closing Date unless otherwise provided. The Closing shall be held as of 5:00
o'clock p.m. at TRF's principal place of business in New York, New York, or at
such other time and/or place as the parties may agree.
3.2. Custodian's Certificate. State Street shall deliver at the Closing, or
as soon thereafter as reasonably practicable, a certificate of an authorized
officer or employee stating that: (i) the Existing Fund's portfolio securities,
cash and any other assets shall have been delivered in proper form to Star Bank,
N.A. (or its nominee), as custodian for the New Fund, on the Closing Date and
(ii) all necessary taxes, including all applicable Federal and state stock
transfer stamps, if any, shall have been paid, or provision for payment shall
have been made, in conjunction with the delivery of such portfolio securities.
3.3. Effect of Suspension in Trading. In the event that on the Valuation
Date (i) the New York Stock Exchange or another primary trading market for
portfolio securities of the Existing Fund shall be closed to trading or trading
thereon shall be restricted or (ii) trading or the reporting of trading on such
Exchange or elsewhere shall be disrupted so that accurate appraisal of the value
of the net assets of the Existing Fund is impracticable, the Closing Date shall
be postponed until the first business day after the day when trading shall have
been fully resumed and reporting shall have been restored.
3.4. Transfer Agent's Certificate. National Financial Data Services, Inc.,
as transfer agent for the Existing Fund, shall deliver at the Closing, or as
soon thereafter as reasonably practicable, a certificate of an authorized
officer or employee stating that their records contain the names and addresses
of the Existing Fund Shareholders and the number and percentage ownership of
outstanding shares owned by each such shareholder immediately prior to the
Closing. Countrywide Fund Services, Inc., as transfer agent for the New Fund,
shall issue and deliver at the Closing, or as soon thereafter as reasonably
practicable, a confirmation evidencing the New Fund Shares credited to the
Existing Fund's account on the books and records of the New Fund on the Closing
Date to TRF's Secretary or provide evidence satisfactory to the Existing Fund
that such New Fund Shares have been so credited. At the Closing, each party
shall deliver to the other such checks, assignments, share certificates, if any,
receipts and other documents as such other party or its counsel may reasonably
request.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1. Representations of the Existing Fund. The Existing Fund represents and
warrants to the New Fund as follows:
(a) The Existing Fund is a separate investment series of a business
trust that is duly organized, validly existing and in good standing under
the laws of the State of Delaware;
(b) The Existing Fund is a separate investment series of a registered
investment company classified as a management company of the open-end type,
and its registration with the Securities and Exchange Commission (the
"Commission") as an investment company under the Investment Company Act of
1940 (the "1940 Act") is in full force and effect;
(c) The current prospectus and statement of additional information of
the Existing Fund conform in all material respects, to the applicable
requirements of the Securities Act of 1933 (the "1933 Act") and the 1940
Act and the rules and regulations of the Commission thereunder;
(d) TRF is not, and the execution, delivery and performance of this
Agreement (subject to shareholder approval) will not result, in violation
of any provision of TRF's Trust Instrument or By-laws or, to its knowledge,
of any agreement, indenture, instrument, contract, lease or other
undertaking to which TRF is a party and by which the Existing Fund is
bound;
(e) Except as may be disclosed to the New Fund in writing at or before
the Closing Date or that the Existing Fund can otherwise show were known or
should have been known as of the Closing Date by RE&A, no litigation,
administrative proceeding or investigation of or before any court or
governmental body is presently pending or to its knowledge threatened
against the Existing Fund or any of its properties or assets which, if
adversely determined, would materially and adversely affect its financial
condition, the conduct of its business or the ability of the Existing Fund
to carry out the transactions contemplated by this Agreement. TRF is not a
party to or subject to the provisions of any order, decree or judgment of
any court or governmental body which materially and adversely affects the
Existing Fund's business or its ability to consummate the transactions
herein contemplated. TRF knows of no facts which might form the basis for
the institution of such proceedings and is not a party to or subject to the
provisions of any order, decree or judgment of any court or governmental
body which adversely affects the Existing Fund's business or its ability to
consummate the transactions contemplated herein;
(f) At the Closing Date, all Federal and other tax returns and reports
of the Existing Fund required by law to have been filed by such date shall
have been filed and are or will be correct in all material respects, and
all Federal and other taxes shown as due or required to be shown as due
shall have been paid or provision shall have been made for the payment
thereof, and, to TRF's knowledge, no such return is currently under audit
and no assessment has been asserted with respect to such returns;
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(g) All issued and outstanding shares of the Existing Fund are, and at
the Closing Date will be, duly and validly issued and outstanding, fully
paid and non-assessable by the Existing Fund (except that, under
non-Delaware law, Existing Fund Shareholders could, under certain
circumstances, be held personally liable for obligations of the Existing
Fund). All of the issued and outstanding shares of the Existing Fund will,
at the time of the Closing Date, be held by the persons and in the amounts
set forth in the records of the transfer agent, as provided in paragraph
3.4;
(h) At the Closing Date, the Existing Fund will own the assets to be
transferred by it to the New Fund pursuant to paragraph 1.2 and have full
right, power and authority to sell, assign, transfer and deliver such
assets hereunder, and upon delivery and payment for such assets, the New
Fund will become the owner thereof, subject to no restrictions on the full
transfer thereof created by TRF, other than as disclosed to the New Fund in
writing at or before the Closing Date or that the Existing Fund can
otherwise show were known or should have been known as of the Closing Date
by RE&A;
(i) The execution, delivery and performance of this Agreement have
been duly authorized by all necessary action on the part of the Existing
Fund and, subject to approval by the Existing Fund's shareholders, this
Agreement constitutes a valid and binding obligation of the Existing Fund,
enforceable in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws relating
to or affecting creditors' rights and to general equity principles;
(j) The information to be furnished by TRF for the Existing Fund for
use in registration statements, proxy materials and other documents which
may be necessary in connection with the transactions contemplated hereby
shall be accurate and complete in all material respects and shall comply in
all material respects with Federal securities and other laws and
regulations thereunder applicable thereto;
(k) The proxy statement of the Existing Fund to be included in the
Registration Statement referred to in paragraph 5.7 (other than information
therein that relates to WHF, RE&A, Gouws Capital Management, Inc. ("GCM")
or any of their respective affiliates) will not, on the effective date of
the Registration Statement (the "Effective Date") and on the Closing Date,
to TRF's knowledge, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which such
statements were made, not misleading;
(l) The Statement of Assets and Liabilities of the Existing Fund at
December 31, 1997 has been audited by Coopers & Lybrand, independent
certified public accountants, and is in accordance with generally accepted
accounting principles ("GAAP") consistently applied, and such statement (a
copy of which has been furnished to the New Fund) presents fairly, in all
material respects, the financial position of the Existing Fund as of such
date in accordance with GAAP, and there are no known
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contingent liabilities of the Existing Fund required to be reflected on a
balance sheet (including notes thereto) in accordance with GAAP as of such
date not disclosed therein;
(m) Since December 31, 1997, to TRF's knowledge, there has not been
any material adverse change in the Existing Fund's financial condition,
assets, liabilities or business other than changes occurring in the
ordinary course of business, or any incurrence by the Existing Fund of
indebtedness maturing more than one year from the date such indebtedness
was incurred, except as otherwise disclosed to and accepted by the New
Fund. For the purposes of this subparagraph (m), a decline in net asset
value per share of the Existing Fund due to declines in the values of
securities in the Existing Fund's portfolio, the discharge of Existing Fund
liabilities or the redemption of Existing Fund shares by the Existing
Fund's shareholders shall not constitute a material adverse change; and
(n) For each taxable year of its operation (including the taxable year
including the Closing Date), the Existing Fund has elected to be treated as
a regulated investment company under Subchapter M of the Code, has computed
and will compute its Federal income tax under Section 852 of the Code and
will have distributed all of its investment company taxable income and net
capital gain (as defined in the Code) that has accrued through the Closing
Date.
4.2. Representations of the New Fund. The New Fund represents and warrants
to, and covenants with, the Existing Fund as follows:
(a) WHF is a business trust duly organized, validly existing and in
good standing under the laws of the State of Delaware;
(b) Prior to the Effective Date and on the Closing Date, WHF will be
registered as an investment company classified as a management company of
the open-end type, and its registration with the Commission as an
investment company under the 1940 Act will be in full force and effect;
(c) As of the Effective Date and on the Closing Date, the current
prospectus and statement of additional information of the New Fund (the
"New Fund Prospectus"), will conform in all material respects to the
applicable requirements of the 1933 Act and the 1940 Act and the rules and
regulations of the Commission thereunder and, to the knowledge of the New
Fund, will not include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not materially misleading, except that the New Fund makes no
representation regarding the accuracy or completeness of information
furnished, or representations made, by the Existing Fund pursuant to
subparagraphs 4(j) and (k) above;
(d) WHF is not, and the execution, delivery and performance of this
Agreement will not result, in any violation of WHF's Trust Instrument or
By-laws or of
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any agreement, indenture, instrument, contract, lease or other undertaking
to which WHF is a party and by which the New Fund is bound;
(e) No litigation, administrative proceeding or investigation of or
before any court or governmental body is presently pending or to its
knowledge threatened against the New Fund or any of its properties or
assets which, if adversely determined, would adversely affect its financial
condition and the conduct of its business or its ability to carry out the
transactions contemplated by this Agreement. The New Fund knows of no facts
which might form the basis for the institution of such proceedings and is
not a party to or subject to the provisions of any order, decree or
judgment of any court or governmental body which adversely affects its
business or its ability to consummate the transactions contemplated herein;
(f) The New Fund currently has only nominal assets or liabilities, has
not issued or agreed to issue any New Fund Shares except for the shares to
be issued pursuant to this Agreement (and except for shares that will be
cancelled concurrent with the Reorganization), will not issue any New Fund
Shares prior to the Closing on the Closing Date and will not commence
operations until the first business day after the Closing Date;
(g) The execution, delivery and performance of this Agreement have
been duly authorized by all necessary action on the part of the New Fund,
and this Agreement constitutes a valid and binding obligation of the New
Fund enforceable in accordance with its terms, subject as to enforcement,
to bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors' rights and to general equity
principles;
(h) The New Fund Shares to be issued and delivered to the Existing
Fund, for the account of the Existing Fund Shareholders, pursuant to the
terms of this Agreement will at the Closing Date have been duly authorized
and, when so issued and delivered, will be duly and validly issued New Fund
Shares and will be fully paid and non-assessable (except that, under
non-Delaware law, shareholders of the New Fund could, under certain
circumstances, be held personally liable for obligations of the New Fund);
(i) The information to be furnished by the New Fund for use in
registration statements, proxy materials and other documents which may be
necessary in connection with the transactions contemplated hereby shall be
accurate and complete in all material respects and shall comply in all
material respects with Federal securities and other laws and regulations
applicable thereto;
(j) The Prospectus and Proxy Statement to be included in the
Registration Statement (insofar as it relates to WHF, RE&A, GCM or any of
their respective affiliates) on the Effective Date and the Closing Date,
will not, to the New Fund's knowledge, contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which such statements were made, not misleading;
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(k) The New Fund agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act and
such of the state blue sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date;
(l) The New Fund will elect and qualify to be treated as a "regulated
investment company" under Subchapter M of the Code and will be eligible to,
and will for its first taxable year which ends after the Closing Date,
compute its Federal income tax under Section 852 of the Code;
(m) Immediately following the distribution referred to in Section 1.4,
the shareholders of the Existing Fund will collectively own all the shares
of the New Fund solely by reason of owning all the shares of the Existing
Fund;
(n) There is no plan or intention to sell or dispose of any assets
acquired from the Existing Fund other than in the ordinary course of
business; and
(o) There is no plan or intention to make redemptions of any New Fund
Shares other than in the ordinary course of business.
ARTICLE V
COVENANTS OF THE NEW FUND AND THE EXISTING FUND
5.1. Operation in Ordinary Course. The Existing Fund will operate its
business in the ordinary course between the date hereof and the Closing Date, it
being understood that such ordinary course of business will include customary
dividends and distributions.
5.2. Approval of Shareholders. TRF will call a meeting of the shareholders
of the Existing Fund to consider and act upon this Agreement and to take all
other action necessary to obtain approval of the transactions contemplated
herein.
5.3. Investment Representation. The Existing Fund covenants that the New
Fund Shares to be issued hereunder are not being acquired by it for the purpose
of making any distribution thereof other than in accordance with the terms of
this Agreement.
5.4. Additional Information. The Existing Fund will assist the New Fund in
obtaining such information as the New Fund reasonably requests concerning the
beneficial ownership of the Existing Fund shares.
5.5. Further Action. Subject to the provisions of this Agreement, the New
Fund and the Existing Fund will each take, or cause to be taken, all action, and
do or cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement,
including any actions required to be taken after the Closing Date.
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5.6. Statement of Earnings and Profits. As promptly as practicable, but in
any case within 75 days after the Closing Date, the Existing Fund shall furnish
the New Fund, in such form as is reasonably satisfactory to the New Fund, a
statement of the earnings and profits of the Existing Fund for Federal income
tax purposes, which will be carried over by the New Fund as a result of Section
381 of the Code, and which will be certified by TRF's President and Treasurer.
5.7. Preparation of Form N-14 Registration Statement. The Existing Fund
will provide the New Fund with information reasonably necessary for the
preparation of a prospectus (the "Prospectus and Proxy Statement"), which will
include the proxy statement referred to in paragraph 4.1(k), all to be included
in a Registration Statement on Form N-14 of the New Fund (the "Registration
Statement"), in compliance with the 1933 Act, the Securities Exchange Act of
1934 (the "1934 Act") and the 1940 Act in connection with the meeting of the
shareholders of the Existing Fund to consider approval of this Agreement and the
transactions contemplated herein.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE EXISTING FUND
The obligations of the Existing Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by the
New Fund of all the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following further conditions:
6.1. All representations, warranties and covenants of the New Fund
contained in this Agreement shall be true and correct as of the date hereof and
as of the Closing Date, with the same force and effect as if made on and as of
the Closing Date, and the New Fund shall have delivered to the Existing Fund a
certificate executed in its name by its President and its Treasurer, in a form
reasonably satisfactory to the Existing Fund and dated as of the Closing Date,
to such effect and as to such other matters as the Existing Fund shall
reasonably request; and
6.2. The Existing Fund shall have received on the Closing Date an opinion
from Verrill & Dana, LLP, counsel to WHF, dated as of the Closing Date, in a
form reasonably satisfactory to the Existing Fund, to the following effect:
That (i) the New Fund is a separate series of a Delaware business
trust duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the power to own all of its properties and
assets and to carry on its business as proposed to be conducted; (ii) the
Agreement has been duly authorized, executed and delivered by the New Fund
and is a valid and binding obligation of the New Fund enforceable against
the New Fund in accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, moratorium and other laws relating
to or affecting creditors' rights generally and to general equity
principles; (iii) the New Fund Shares to be issued and delivered to the
Existing Fund on behalf of the Existing Fund Shareholders as provided by
this Agreement are duly authorized and upon such delivery
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will be legally issued and outstanding and fully paid and non-assessable
(except that, under non-Delaware law, shareholders of the New Fund could,
under certain circumstances, be held personally liable for obligations of
the New Fund); (iv) the execution and delivery of the Agreement did not,
and the consummation of the transactions contemplated hereby will not,
result in a violation of the New Fund's Trust Instrument or By-laws or any
provision of any material agreement, indenture, instrument, contract, lease
or other undertaking (in each case known to such counsel) to which the New
Fund is a party or by which it or any of its properties may be bound; (v)
to the knowledge of such counsel, no consent, approval, authorization or
order of any court or governmental authority of the United States or the
State of Delaware is required for the consummation by the New Fund of the
transactions contemplated herein, except such as have been obtained under
the 1933 Act, the l934 Act and the 1940 Act, and such as may be required
under state securities laws; (vi) insofar as they relate to the New Fund,
the descriptions in the Prospectus and Proxy Statement of statutes, legal
and governmental proceedings and material contracts, if any, are accurate
and fairly present the information required to be shown; (vii) such counsel
does not know of any legal or governmental proceedings, insofar as they
relate to the New Fund, existing on or before the effective date of the
Registration Statement or the Closing Date, required to be described in the
Registration Statement, which are not described as required; (viii) the New
Fund is registered as an investment company under the 1940 Act and, to such
counsel's knowledge, such registration with the Commission as an investment
company under the 1940 Act is in full force and effect; and (ix) to the
knowledge of such counsel, no litigation or administrative proceeding or
investigation of or before any court or governmental body is presently
pending or threatened as to the New Fund. Such opinion may state that such
counsel does not express any opinion or belief as to the financial
statements or any financial or statistical data, or to the information
relating to the Existing Fund, contained in the Prospectus and Proxy
Statement, the Registration Statement or the New Fund Prospectus, and that
such opinion is solely for the benefit of TRF and the Existing Fund. Such
opinion may contain such other assumptions and limitations as shall, in the
opinion of Verrill & Dana, LLP, be appropriate to render the opinions
expressed.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE NEW FUND
The obligations of the New Fund to complete the transactions provided for
herein shall be subject, at its election, to the performance by the Existing
Fund of all the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following conditions:
7.1. All representations, warranties and covenants of the Existing Fund
contained in this Agreement shall be true and correct as of the date hereof and
as of the Closing Date, with the same force and effect as if made on and as of
the Closing Date, and the Existing Fund shall have delivered to the New Fund on
the Closing Date a certificate executed in its name by TRF's
11
<PAGE>
President and Treasurer, in form and substance satisfactory to the New Fund and
dated as of the Closing Date, to such effect and as to such other matters as the
New Fund shall reasonably request;
7.2. The Existing Fund shall have delivered to the New Fund an unaudited
Statement of the Assets and Liabilities of the Existing Fund, together with a
list of the Existing Fund's portfolio securities showing the tax costs of such
securities by lot and the holding periods of such securities, as of the Closing
Date, certified by the Treasurer of TRF; and
7.3. The New Fund shall have received on the Closing Date an opinion of
Howard J. Kashner, Esq. or John E. Denneen, Esq., counsel to TRF, in a form
satisfactory to the New Fund, to the following effect:
That (i) the Existing Fund is a separate investment series of a
Delaware business trust that is duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the power to
own all of its properties and assets and to carry on its business as
presently conducted; (ii) the Agreement has been duly authorized, executed
and delivered by the Existing Fund and is a valid and binding obligation of
the Existing Fund enforceable against the Existing Fund in accordance with
its terms, subject as to enforcement to bankruptcy, insolvency,
reorganization, moratorium and other laws relating to or affecting
creditors' rights generally and to general equity principles; (iii) the
execution and delivery of the Agreement did not, and the consummation of
the transactions contemplated hereby will not, result in a violation of
TRF's Trust Instrument or By-laws or any provision of any material
agreement, indenture, instrument, contract, lease or other undertaking (in
each case known to such counsel) to which the Existing Fund is a party or
by which it or any of its properties may be bound; (iv) to the knowledge of
such counsel, no consent, approval, authorization or order of any court or
governmental authority of the United States or the State of Delaware is
required for the consummation by the Existing Fund of the transactions
contemplated herein, except such as have been obtained under the 1933 Act,
the 1934 Act and the 1940 Act and such as may be required under state
securities laws; (v) insofar as they relate to the Existing Fund, the
descriptions in the Prospectus and Proxy Statement of statutes, legal and
governmental proceedings and material contracts, if any, are accurate and
fairly present the information required to be shown; (vi) such counsel does
not know of any legal or governmental proceedings, insofar as they relate
to the Existing Fund, existing on or before the date of mailing of the
Prospectus and Proxy Statement and on the Closing Date, required to be
described in the Prospectus and Proxy Statement, which are not described or
filed as required; (vii) the Existing Fund is a separate investment series
of a Delaware business trust registered as an investment company under the
1940 Act and, to such counsel's knowledge, such registration with the
Commission as an investment company under the 1940 Act is in full force and
effect; and (viii) to the knowledge of such counsel, no litigation or
administrative proceeding or investigation of or before any court or
governmental body is presently pending or threatened as to the Existing
Fund or any of its respective properties or assets and the Existing Fund is
neither a party to nor subject to the provisions of any order, decree or
judgment of any court or governmental
12
<PAGE>
body, which materially and adversely affects its business. Such opinion may
contain such other assumptions and limitations as shall be in the opinion
of Howard J. Kashner, Esq. or John E. Denneen, Esq. appropriate to render
the opinions expressed therein.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE NEW FUND
AND THE EXISTING FUND
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Existing Fund or the New Fund, the other party
to this Agreement shall, at its option, not be required to consummate the
transactions contemplated by this Agreement:
8.1. This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding shares of
the Existing Fund in accordance with the provisions of TRF's Trust Instrument
and By-laws, and certified copies of the resolutions evidencing such approval
shall have been delivered to the New Fund. Notwithstanding anything herein to
the contrary, neither the New Fund nor the Existing Fund may waive the
conditions set forth in this paragraph 8.1;
8.2. On the Closing Date, the Commission shall not have issued an
unfavorable report under Section 25(b) of the 1940 Act or instituted any
proceeding seeking to enjoin the consummation of the transactions contemplated
by this Agreement under Section 25(c) of the 1940 Act, and no action, suit or
other proceeding shall be threatened or pending before any court or governmental
agency in which it is sought to restrain or prohibit, or obtain damages or other
relief in connection with, this Agreement or the transactions contemplated
herein;
8.3. All required consents of other parties and any other consents, orders
and permits of Federal and state regulatory authorities (including those of the
Commission) to permit consummation of the transactions contemplated hereby shall
have been obtained, except where failure to obtain any such consent, order or
permit would not involve a risk of a material adverse effect on the assets or
properties of the New Fund or the Existing Fund, provided that either party
hereto may for itself waive any of such conditions;
8.4. The Registration Statement shall have become effective under the 1933
Act and no stop orders suspending the effectiveness thereof shall have been
issued and, to the knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act;
8.5. The Existing Fund shall have declared a dividend or dividends which,
together with all previous such dividends, shall have the effect of distributing
to the shareholders of the Existing Fund all of the Existing Fund's investment
company taxable income for all taxable years ending on or prior to the Closing
Date (computed without regard to any deduction for dividends paid) and all of
its net capital gain realized in all taxable years ending on or prior to the
Closing Date (after reduction for any capital loss carry forward);
13
<PAGE>
8.6. The parties shall have received a favorable opinion of Verrill & Dana,
LLP, addressed to WHF and TRF, satisfactory to both parties, substantially to
the effect that, for Federal income tax purposes:
(i) The transfer of all of Existing Fund's assets in exchange for the New
Fund Shares and the assumption by the New Fund of all or substantially all of
the liabilities of Existing Fund followed by the distribution of the New Fund
Shares to Existing Fund shareholders in dissolution and liquidation of Existing
Fund, will constitute a "reorganization" within the meaning of Section
368(a)(l)(F) of the Code, and New Fund and Existing Fund will each be a "party
to a reorganization" within the meaning of Section 368(b) of the Code; (ii) no
gain or loss will be recognized by New Fund upon the receipt of the assets of
Existing Fund solely in exchange for the New Fund Shares and the assumption by
the New Fund of the liabilities of Existing Fund; (iii) no gain or loss will be
recognized by Existing Fund or upon the transfer of Existing Fund's assets to
New Fund in exchange for the New Fund Shares and the assumption by New Fund of
the liabilities of Existing Fund or upon the distribution (whether actual or
constructive) of the New Fund Shares to Existing Fund shareholders in exchange
for their shares of Existing Fund; (iv) no gain or loss will be recognized by
Existing Fund shareholders upon the exchange of their Existing Fund shares for
the New Fund Shares in liquidation of Existing Fund; (v) the aggregate tax basis
for the New Fund Shares received by each Existing Fund shareholder pursuant to
the Reorganization will be the same as the aggregate tax basis of Existing Fund
shares held by such shareholder immediately prior to the Reorganization, and the
holding period of the New Fund Shares to be received by each Existing Fund
shareholder will include the period during which the Existing Fund shares
exchanged therefor were held by such shareholder (provided the Existing Fund
shares were held as capital assets on the date of the Reorganization); and (vi)
the tax basis of the Existing Fund assets acquired by New Fund will be the same
as the tax basis of such assets to Existing Fund immediately prior to the
Reorganization, and the holding period of the assets of Existing Fund in the
hands of New Fund will include the period during which those assets were held by
Existing Fund.
Notwithstanding anything herein to the contrary, neither the New Fund nor
the Existing Fund may waive the condition set forth in this paragraph 8.6.
ARTICLE IX
EXPENSES
9.1. All expenses of the transactions contemplated by this Agreement
incurred by the New Fund and/or by the Existing Fund will be borne by RE&A and
GCM. Such expenses include, without limitation, (i) expenses incurred in
connection with the entering into and the carrying out of the provisions of this
Agreement; (ii) expenses associated with the preparation and filing of the
Registration Statement under the 1933 Act covering the New Fund Shares to be
issued pursuant to the provisions of this Agreement; (iii) fees and expenses of
preparing and filing such forms as are necessary under applicable state
securities laws in respect of the New Fund Shares to be issued in connection
herewith in each state in which the shareholders of the Existing Fund are
resident as of the date of the mailing of the Prospectus and Proxy Statement to
14
<PAGE>
such shareholders; (iv) postage; (v) printing; (vi) accounting fees; (vii) legal
fees; and (viii) solicitation cost of the transactions; provided, however, that
neither the New Fund or RE&A shall be responsible for in-house personnel costs
of TRF, Royce & Associates, Inc. or their respective affiliates. Notwithstanding
the foregoing, neither the New Fund or RE&A shall be responsible for the legal
fees of the Existing Fund's outside counsel unless (i) such fees are reasonably
incurred with respect to the Reorganization, and (ii) the New Fund receives
prior notice of the retention of such counsel and the purpose of such retention.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1. Neither party has made any representation, warranty or covenant not
set forth herein, and this Agreement constitutes the entire agreement between
the parties.
10.2. The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder.
ARTICLE XI
TERMINATION
11.1. This Agreement may be terminated by the mutual agreement of the New
Fund and the Existing Fund. In addition, either the New Fund or the Existing
Fund may, at its option, terminate this Agreement at or prior to the Closing
Date, notwithstanding approval of this Agreement by the Existing Fund
Shareholders, because:
(a) of a breach by the other of any representation, warranty or
covenant contained herein to be performed at or prior to the Closing Date,
if not cured within 15 days, or
(b) a condition herein expressed to be precedent to the obligations of
the terminating party has not been met and it reasonably appears that it
will not or cannot be met.
11.2. In the event of any such termination, in the absence of willful
default, there shall be no liability for damages on the part of either the New
Fund or the Existing Fund, TRF or their respective trustees or officers, to the
other party or its trustees or officers, but RE&A and GCM shall bear the
expenses incurred by the New Fund and/or by the Existing Fund incidental to the
preparation and carrying out of this Agreement as provided in paragraph 9.1.
15
<PAGE>
ARTICLE XII
AMENDMENTS
This Agreement may be amended, modified or supplemented in such manner
as may be mutually agreed upon in writing by the authorized officers of the
Existing Fund and the New Fund; provided, however, that following the meeting of
the shareholders of the Existing Fund called by TRF pursuant to paragraph 5.2 of
this Agreement, no such amendment may have the effect of changing the provisions
for determining the number of the New Fund Shares to be issued to the Existing
Fund Shareholders under this Agreement to the detriment of such shareholders
without their further approval.
ARTICLE XIII
NOTICES
Any notice, report, statement or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy, overnight courier or certified mail, addressed to
if to the New Fund:
The Winter Harbor Fund
511 Congress Street
Portland, Maine 04101
Attn: Jennifer E. Goff,
President
if to the Existing Fund:
The Royce Fund
1414 Avenue of the Americas
New York, New York 10019
Attn: John D. Diederich,
Director of Administration
ARTICLE XIV
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION
OF LIABILITY
14.1. The Article and paragraph headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
14.3. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
16
<PAGE>
14.4. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give anyone,
other than the parties hereto and their respective successors and assigns, any
rights or remedies under or by reason of this Agreement.
14.5. It is expressly agreed to that the obligations of the New Fund and of
the Existing Fund hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents or employees of WHF or TRF, personally,
but bind only the trust properties of the New Fund and of the Existing Fund, as
provided in their respective Trust Instruments. The execution and delivery of
this Agreement have been authorized by the Trustees of WHF and TRF on behalf of
the New Fund and the Existing Fund, respectively, and signed by authorized
officers of WHF and TRF, acting as such, and neither such authorization by such
Trustees nor such execution and delivery by such officers shall be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the respective trust properties of WHF and
TRF as provided in their Trust Instruments.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
THE WINTER HARBOR FUND
on behalf of The REvest Value Fund
By:--------------------------------
Jennifer E. Goff, President
THE ROYCE FUND,
on behalf of The REvest Growth &
Income Fund
By:--------------------------------
Name:
Title:
In order to induce The Royce Fund ("TRF") to enter into and perform the
foregoing Agreement and Plan of Reorganization, Royce, Ebright & Associates,
Inc. hereby personally guaranties to TRF, for the benefit of its The REvest
Growth & Income Fund series, the accuracy of the representations and warranties
of The REvest Value Fund (the "New Fund") as set forth in such Agreement and
Plan of Reorganization and the full and timely payment and performance
17
<PAGE>
when due of all of the obligations of the New Fund thereunder, as such
representations, warranties and obligations may be changed or otherwise modified
from time to time.
------------------------------------
Jennifer E. Goff,
as President
of Royce, Ebright & Associates, Inc.
18
<PAGE>
Appendix B
Prospectus of The Winter Harbor Fund
Please refer to the enclosed Prospectus of The Winter Harbor Fund dated
___________________, 1998.
<PAGE>
[Note: The prospectus for The Winter Harbor Fund will be presented to
shareholders as a separate document. It will accompany, and is referenced in,
the Combined Prospectus Proxy Statement.]
PROSPECTUS May XX, 1998
The REvest Value Fund
A No-Load Mutual Fund Managed in Maine
Managed by Ebright Investments, Inc.(formerly Royce, Ebright & Associates, Inc.)
A Series of The Winter Harbor Fund
The REvest Value Fund
Prospectus -- [date]
- ---------------------------------------------------------------------------
NEW ACCOUNT AND GENERAL INFORMATION: Investor Information -- 1-800-277-5573
- ---------------------------------------------------------------------------
SHAREHOLDER SERVICES -- 1-877-4REVEST (877-473-8378)
- ---------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
The REvest Value Fund (the "Fund") primarily seeks long-term growth and
secondarily current income by investing in a broadly diversified portfolio of
common stocks and convertible securities. Prospective portfolio investments are
selected on a value basis and are primarily limited to small and medium-sized
companies viewed by the Fund's investment adviser as having attractive financial
characteristics and/or "vitality factors". Vitality factors are those factors
(e.g., an active acquisition program, stock buy-back program and/or cost
reduction program) that should, in the investment adviser's judgment, allow a
company to build future, incremental value for shareholders. There can be no
assurance that the Fund will achieve its objectives.
The Fund is a no-load series of The Winter Harbor Fund (the "Trust"), a
diversified open-end management investment company. The Trust is currently
offering shares of only one series. The Fund's predecessor, The REvest Growth &
Income Fund, was a series of The Royce Fund.
- ----------------------------------------------------------------------------
ABOUT THIS PROSPECTUS
This Prospectus sets forth concisely the information that you should know about
the Fund before you invest. It should be retained for future reference. A
"Statement of Additional Information" ("SAI"), containing further information
about the Fund and the Trust, has been filed with the Securities and Exchange
Commission. The SAI is dated May XX, 1998 and has been incorporated by reference
into this Prospectus. A copy may be obtained without charge by writing to the
Trust or calling Investor Information.
<PAGE>
- ----------------------------------------------------------------------------
TABLE OF CONTENTS Page
Fund Expenses Open Item
Financial Highlights Open Item
Investment Performance Open Item
Investment Objectives Open Item
Investment Policies Open Item
Investment Risks Open Item
Investment Limitations Open Item
Management of the Trust Open Item
Size Limitations Open Item
General Information Open Item
Dividends, Distributions and Taxes Open Item
Net Asset Value Per Share Open Item
SHAREHOLDER GUIDE Open Item
Opening an Account and Purchasing Shares Open Item
Choosing a Distribution Option Open Item
Important Account Information Open Item
Redeeming Your Shares Open Item
Exchange Privilege Open Item
Transferring Ownership Open Item
Other Services Open Item
- ----------------------------------------------------------------------------
The Securities and Exchange Commission has not approved any fund's shares as an
investment or determined whether this prospectus is accurate or complete. Anyone
who tells you otherwise is committing a crime.
- ----------------------------------------------------------------------------
A Series of The Winter Harbor Fund
FUND EXPENSES
The Fund is no-load and has no 12b-1 fees.
The following table illustrates all expenses and fees that you would incur as a
shareholder of the Fund.
Shareholder Transaction Expenses
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Redemption Fee:
1 Year or More After Initial Purchase None
Early Redemption Fee:
Less Than 1 Year After Initial Purchase 1.00%
Annual Fund Operating Expenses
Management Fees 1.00%
Other Expenses .26%
------
Total Operating Expenses 1.26%
- -------------------
<PAGE>
The amounts of expenses and fees are those incurred during the Fund's
most recent fiscal year ended December 31, 1997. The adviser has agreed to limit
the Fund's expense ratio to 1.30% through December 31, 1999. The adviser and
sub-adviser have agreed to waive fees, in equal amounts, in order to maintain
this expense ratio. For a further discussion of these fees, see "Management of
the Trust".
The purpose of the above table is to assist you in understanding the
various costs and expenses that you would bear directly or indirectly as an
investor in the Fund.
The following examples illustrate the expenses that you would incur on
a $1,000 investment over various periods, assuming a 5% annual rate of return
and redemption at the end of each period.
1 Year 3 Years 5 Years 10 Years
$13 $40 $69 $152
These examples should not be considered a representation of past or
future expenses or performance. Actual expenses may be higher or lower than
those shown.
- ----------------------------------------------
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
The Fund is the successor to The REvest Growth & Income Fund. The
following financial highlights are part of The REvest Growth & Income Fund's
financial statements, which have been audited by PricewaterhouseCoopers L.L.P.
(formerly known as Coopers & Lybrand L.L.P.), independent accountants. Such
financial statements, accompanying notes and PricewaterhouseCoopers' reports on
them are included in The REvest Growth & Income Fund's Annual Report to
Shareholders for 1997 and are incorporated by reference into the Statement of
Additional Information and this Prospectus. Further information about the fund's
performance is contained elsewhere in this Prospectus and in The REvest Growth &
Income Fund's Annual Report to Shareholders for 1997, which may be obtained
without charge by calling Investor Information.
<TABLE>
<CAPTION>
Year Year Year 8/1/94
Ended Ended Ended to
12/31/97 12/31/96 12/31/95 12/31/94
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $12.21 $10.73 $9.66 $10.00
Investment Operations:
Net investment income 0.21 0.21 0.18 0.04
Net realized and unrealized gain (loss)
on investments 2.64 2.16 1.38 (0.33)
Total from Investment Operations 2.85 2.37 1.56 (0.29)
Dividends and Distributions:
Net investment income (0.19) (0.21) (0.17) (0.05)
Net realized gain on investments (1.87) (0.68) (0.32) -------
Total Dividends and Distributions (2.06) (0.89) (0.49) (0.05)
Net Asset Value, End of Period $13.00 $12.21 $10.73 $ 9.66
Total Return: 23.5% 22.3% 16.2% (2.9%)
Ratios/Supplemental Data:
Net Assets, End of Period (000's) $38,886 $42,099 $35,804 $21,676
Ratio of Expenses to
Average Net Assets (a) 1.26% 1.29% 1.30% 1.42%*
<PAGE>
Ratio of Net Investment Income
to Average Net Assets (a) 1.60% 1.78% 1.73% 1.45%*
Portfolio Turnover Rate 54% 64% 53% 5%
Average Commission Rate Paid+ $0.0594 $0.0580 ------- -------
- -------------------
</TABLE>
* Annualized.
(a) The ratio of expenses to average net assets before waiver of fees by the
investment adviser for the Fund would have been 1.78% for the period ended
December 31, 1994.
+ For fiscal years beginning in 1996, The REvest Growth & Income Fund is
required to disclose its average commission rate paid per share for purchases
and sales of investments.
- ----------------------------------------------
INVESTMENT PERFORMANCE
Total return is the change in value over a given period for a
continuous shareholder, assuming reinvestment of dividends and capital gains
distributions.
From time to time, the Fund may include in communications to current or
prospective shareholders figures reflecting total return over various time
periods. "Total return" is the rate of return on an amount invested in the Fund
from the beginning to the end of the stated period and assumes redemption at the
end of the period. "Average annual total return" is the annual compounded
percentage change in the value of an amount invested in the Fund from the
beginning until the end of the stated period.
Total returns are historical measures of past performance and are not
intended to indicate future performance. Both rates of return assume the
reinvestment of all net investment income dividends and capital gains
distributions. The figures below are those of the Fund's predecessor, The REvest
Growth & Income Fund. These figures are used since The REvest Growth & Income
Fund's investment objectives and investment policies, strategies and risks are
substantially identical to those of the Fund. The figures do not reflect the
Fund's early redemption fee because it applies only to redemptions in accounts
open for less than one year. Total return and principal value of an investment
in the Fund will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
The average annual total returns for the Fund (formerly The REvest
Growth & Income Fund), the S&P 500 and the Russell 2000 for the periods
indicated below were:
<TABLE>
<CAPTION>
Year 3-Years 8/1/94*
Ended Ended to
12/31/97 12/31/97 12/31/97
-------- -------- --------
<S> <C> <C> <C>
REvest average annual total return 23.5% 20.6% 16.9%
S&P 5001 average annual total return 33.4% 31.3% 27.5%
Russell 20002 average annual total return 22.4% 22.3% 20.5%
</TABLE>
1 The S&P 500 Composite Stock Price Index is an unmanaged index of common stocks
frequently used as a general measure of stock market performance. The Index's
performance figures reflect changes of market prices and quarterly reinvestment
of all distributions.
2 The Russell 2000 Index, prepared by the Frank Russell Company, tracks the
return of the common stocks of the 2,000 smallest out of the 3,000 largest
publicly traded U.S.-domiciled companies by market capitalization. The Russell
2000 tracks the return based on price appreciation or depreciation and includes
dividends.
* Commencement of Operations - August 1, 1994
- ----------------------------------------------
<PAGE>
INVESTMENT OBJECTIVES
The Fund primarily seeks long-term growth and secondarily current
income by investing in a broadly diversified portfolio of common stocks and
convertible securities. Prospective portfolio investments are selected on a
value basis and are primarily limited to small and medium-sized companies viewed
by the Fund's investment adviser as having attractive financial characteristics
and/or "vitality factors". Vitality factors are those factors (e.g., an active
acquisition program, stock buy-back program and/or cost reduction program) that
should, in the investment adviser's judgment, allow a company to build future,
incremental value for shareholders. Since certain risks are inherent in owning
any security, there can be no assurance that the Fund will achieve its
objectives.
The investment objectives of primarily long-term growth and secondarily
current income are fundamental and may not be changed without the approval of a
majority of the Fund's voting shares, as that term is defined in the Investment
Company Act of 1940 (the "1940 Act").
- ----------------------------------------------
INVESTMENT POLICIES
The Fund invests on a "value" basis
Ebright Investments, Inc. (formerly named Royce, Ebright & Associates,
Inc.), the Fund's investment adviser, uses a "value" method in managing the
Fund's assets. In its selection process, Ebright Investments, Inc. ("EII")
considers a company's cash flows, its balance sheet quality, an understanding of
various internal returns indicative of profitability and its growth prospects in
trying to relate such factors to the price of a given security. With regard to
each portfolio security in which the Fund invests, EII seeks to identify a
"valuation discrepancy" between the security's then current market price and its
"business worth," that is, what a knowledgeable buyer would pay for the entire
company, based on an appraisal of its financial characteristics and/or growth
prospects.
After this appraisal of value process is completed, EII then, in
addition, seeks to identify and evaluate "vitality factors", which are those
characteristics of a portfolio company that should result in the building of
future value for shareholders. Examples of such "vitality factors" include
research and development efforts, new products, new market development efforts,
the redeployment of underutilized assets, an active acquisition program, stock
buy-back program, cost reduction program and investments in new technologies or
processes.
The portfolio, therefore, is a collection of securities that EII
believes have all been purchased at a discount to their real "business worth"
and possess, in addition, "vitality factors" that should allow them to build
future incremental value for shareholders. EII believes that profits can come
both from the continued success and growth of each portfolio company as well as
the eventual elimination of each security's valuation discrepancy.
The Fund invests primarily in small and medium-sized companies.
EII believes that there are many high quality companies in the
"small-cap" and "mid-cap" sectors that have above average growth prospects but
are not widely followed or understood by investors. EII seeks to identify and
invest in such companies when their securities can be purchased at appropriate
discounts to EII's assessment of their "business worth".
<PAGE>
In accordance with its objectives of seeking primarily long-term growth
(realized and unrealized) and secondarily current income, the Fund will normally
invest at least 90% of its assets in common stocks, convertible preferred stocks
and convertible bonds. At least 80% of these allowable securities will be
income-producing, and at least 80% of allowable securities will be issued by
companies with stock market capitalizations between $200 million and $2 billion
at the time of investment. The Fund will normally have a weighted average market
capitalization size in excess of $500 million. The remainder of the Fund's
assets may be invested in securities with lower or higher market
capitalizations, non-dividend paying common stocks and non-convertible fixed
income securities. The securities in which the Fund invests may be traded on
securities exchanges or in the over-the-counter market. While most of the Fund's
securities will be income-producing, the composite yield of the Fund's
securities may be either higher or lower than the composite yield of the stocks
in the S&P 500 Index.
- ----------------------------------------------
INVESTMENT RISKS
The Fund is subject to certain investment risks.
As a mutual fund investing primarily in common stocks and/or securities
convertible into common stocks, the Fund is subject to market risk, that is, the
possibility that common stock prices will decline over short or even extended
periods. The Fund may invest in securities of companies that are not well-known
to the investing public, may not have significant institutional ownership and
may have cyclical, static or only moderate growth prospects. The stocks of such
companies may be more volatile in price and have lower trading volumes than the
larger capitalization stocks included in the S&P 500 Index. Accordingly, EII's
investment method requires a long-term investment horizon. The Fund should not
be used by "market timers".
- ----------------------------------------------
INVESTMENT LIMITATIONS
The Fund has adopted a number of fundamental investment policies,
designed to reduce its exposure to specific situations, which may not be changed
without the approval of a majority of its outstanding voting shares, as that
term is defined in the 1940 Act. These policies are set forth in the Statement
of Additional Information and provide, among other things, that the Fund will
not:
(1) with respect to 75% of its assets, invest more than 5% of its
assets in the securities of any one issuer (excluding obligations of
the U.S. Government), or acquire more than 10% of the outstanding
voting securities of any one issuer;
(2) invest more than 25% of its assets in any one industry; or
(3) invest in companies for the purpose of exercising control of
management.
Other Investment Practices:
In addition to investing primarily in the equity and fixed income
securities described above, the Fund may follow a number of additional
investment practices.
Short-term fixed income securities:
The Fund may invest in short-term fixed income securities for temporary
defensive purposes, to invest uncommitted cash balances or to maintain liquidity
to meet shareholder redemptions. These
<PAGE>
securities consist of United States Treasury bills, domestic bank certificates
of deposit, high-quality commercial paper and repurchase agreements
collateralized by U.S. Government securities. In a repurchase agreement, a bank
sells a security to the Fund at one price and agrees to repurchase it at the
Fund's cost plus interest within a specified period of seven or fewer days. In
these transactions, which are, in effect, secured loans by the Fund, the
securities purchased by the Fund will have a value equal to or in excess of the
value of the repurchase agreement and will be held by the Fund's custodian bank
until repurchased. Should the Fund implement a temporary defensive investment
policy, its investment objectives may not be achieved.
Foreign securities
The Fund may invest up to 5% of its net assets in debt and/or equity
securities of foreign issuers. Foreign investments involve certain risks, such
as political or economic instability of the issuer or of the country of issue,
fluctuating exchange rates and the possibility of imposition of exchange
controls. These securities may also be subject to greater fluctuations in price
than the securities of U.S. corporations, and there may be less publicly
available information about their operations. Foreign companies may not be
subject to accounting standards or governmental supervision comparable to U.S.
companies, and foreign markets may be less liquid or more volatile than U.S.
markets and may offer less protection to investors such as the Fund.
Lower-rated debt securities
The Fund may also invest no more than 5% of its net assets in
lower-rated (high-risk) non-convertible debt securities, which are below
investment grade. The Fund does not expect to invest in non-convertible debt
securities that are rated lower than Caa by Moody's Investors Service, Inc. or
CCC by Standard & Poor's Corporation or, if unrated, determined to be of
comparable quality.
Portfolio Turnover
Although the Fund generally seeks to invest for the long term, it
retains the right to sell securities regardless of how long they have been held.
For the years ended December 31, 1997, 1996 and 1995, The REvest Growth & Income
Fund experienced portfolio turnover rates of 54%, 64% and 53%, respectively.
Higher portfolio turnover rates would increase the Fund's transaction costs,
including brokerage commissions.
- ----------------------------------------------
MANAGEMENT OF THE TRUST
Investment Adviser
The Trust's business and affairs are managed under the direction of its
Board of Trustees. Ebright Investments, Inc. ("EII"), the Fund's investment
adviser, is responsible for the management of the Fund's portfolio of
investments, subject to the authority of the Board of Trustees. EII, located at
511 Congress Street, Portland, Maine, is an independent investment advisory
firm, founded in 1994 and registered as an investment adviser with the
Securities and Exchange Commission. EII was formerly known as Royce, Ebright &
Associates, Inc. EII was the investment adviser to The REvest Growth & Income
Fund, which commenced operations as a series of The Royce Fund on August 1,
1994. On {OPEN ITEM}, 1998, The REvest Growth & Income Fund ceased to be a
series of The Royce Fund and was reorganized into the Fund as the sole series of
the Trust. This reorganization consisted of the transfer of all of the assets of
The REvest Growth & Income Fund to the Fund in exchange solely for shares of
beneficial interest of the Fund, the assumption by the Fund of all of the
liabilities of The REvest Growth & Income Fund, and the distribution of shares
of the Fund to shareholders of The REvest Growth & Income Fund upon liquidation
of The REvest Growth & Income Fund.
<PAGE>
The Fund's portfolio is managed by Jennifer E. Goff, President of EII.
She has been a director and a shareholder of EII since its inception. Jennifer
succeeded her father, Thomas R. Ebright, as President when Mr. Ebright passed
away in 1997. Prior to assuming the office of President, Ms. Goff was Vice
President and Assistant Portfolio Manager. During the last five years, Ms. Goff
has worked full-time as a security analyst at Royce & Associates, Inc. (formerly
Quest Advisory Corp.) and completed her graduate studies in Finance at Columbia
University (M.B.A. `96). While Ms. Goff is responsible for EII's investment
management activities, EII has entered into a sub-advisory agreement with Gouws
Capital Management, Inc. to share resources in growing and managing the Fund.
As compensation for its services to the Fund, EII is entitled to
receive advisory fees equal to 1.00% per annum of the first $50 million of the
Fund's average net assets and 0.75% per annum of any additional average net
assets over $50 million. These fees are payable monthly from the assets of the
Fund. For 1997, the fees paid to EII by The REvest Growth & Income Fund were
1.00% of its average net assets.
Investment Sub-adviser
EII has retained Gouws Capital Management, Inc. ("GCMI") to provide
investment sub-advisory and marketing support services to the Fund. GCMI,
located at 511 Congress Street, Portland, Maine, is an independent investment
advisory firm, founded in 1984 and registered as an investment adviser with the
Securities and Exchange Commission. GCMI's principal and President, Johann H.
Gouws, is not engaged in any other business or profession other than his
involvement in establishing Acadia Trust, N.A. ("AT"), an affiliated trust
company. GCMI provides investment advisory services to AT, who acts as a
custodian for GCMI's approximately $1 billion in client assets. GCMI has a value
orientation and emphasizes in-depth fundamental analysis and company visitation
similar to EII.
Although EII alone will determine the investments that will be
purchased, retained or sold by the Fund, GCMI will assist EII in such
determinations. GCMI will also, at the direction of EII, be responsible for
placing purchase and sell orders for investments with broker-dealers, and for
other related transactions. GCMI has agreed to provide services in accordance
with the Fund's investment objectives, policies and restrictions.
Directly assisting EII with the portfolio management of the Fund will
be Jan F. Macleod, a Vice President and Director of Research for GCMI. Prior to
joining GCMI in 1996, Ms. Macleod was with Ram Trust Services in Portland,
Maine. Ms. Macleod received her M.B.A. from the University of Chicago in
Chicago, Illinois. Gregg A. Marston will also directly assist EII. Mr. Marston
is a Senior Vice President for GCMI and the sole manager of GCMI's Small Cap
Value common trust. Mr. Marston received his B.S. from the University of Vermont
in Burlington, Vermont.
As compensation for its services to the Fund, GCMI is entitled to
receive sub-advisory fees from EII equal to one-half the net profit (net profit
shall mean the advisory fee paid to EII minus all of EII's expenses, including
Ms. Goff's salary and benefits, and the preferential distribution). GCMI is also
entitled to a preferential distribution equal to Ms. Goff's salary and benefits.
Concurrent with the reorganization of the Fund and as compensation for their
part in AT's paying half the expenses incurred in the reorganization, two of the
principals of AT, Johann H. Gouws and Richard E. Curran, Jr. will receive
forty-eight percent (48%) of the outstanding voting common stock of EII. Ms.
Goff and her sister, Ellen E. Carlton, will own the remaining fifty-two percent
(52%) of the outstanding voting common stock of EII.
Administrator
Countrywide Fund Services, Inc. ("Countrywide") located at 312 Walnut
Street, 21st Floor, Cincinnati, Ohio 45202, serves as administrator to the Fund.
Countrywide is a wholly-owned indirect subsidiary of Countrywide Credit
Industries, Inc., a New York Stock Exchange listed company principally
<PAGE>
engaged in the business of residential mortgage lending. As compensation, the
Trust shall pay Countrywide a monthly fee at the annual rate of .09% of the
Fund's average daily net assets up to $100 million; .075% of such assets from
$100 million to $200 million; and .05% of such assets in excess of $200 million.
However, Countrywide shall be paid at least $2,000 per month for its services
for each series of the Fund.
Distribution
CW Fund Distributors, Inc. ("CW Fund") located at 312 Walnut Street,
21st Floor, Cincinnati, Ohio 45202, acts as distributor of the Fund's shares.
EII may pay, to unaffiliated broker-dealers, financial institutions or other
service providers who introduce investors to the Fund and/or provide certain
administrative services to those of their customers who are Fund shareholders,
up to .25% of the assets invested in the Fund by their customers. Compensation
paid in connection with such programs may include payments from the Fund for
certain shareholder-related services being provided to the Fund. When shares of
the Fund are purchased in this way, the service provider, rather than its
customer, may be the shareholder of record of the Fund's shares. Investors
should read the program materials provided by the service provider, including
information regarding fees which may be charged, in conjunction with this
Prospectus. Certain shareholder servicing features of the Fund may not be
available or may be modified in connection with the program of services offered.
Brokerage Allocation
EII selects the brokers who execute the purchases and sales of the
Fund's portfolio securities and may have orders placed with brokers who provide
brokerage and research services to EII. EII and GCMI are authorized, in
recognition of the value of brokerage and research services provided, to pay
commissions to a broker in excess of the amounts which another broker might have
charged for the same transaction.
Custodian
The custodian for the securities, cash and other assets of the Fund is
Star Bank, N.A.
- ----------------------------------------------
YEAR 2000 DISCLOSURE
Like other mutual funds, financial and other business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by EII and other service providers to the Fund do not
properly process and calculate date-related information and data from and after
January 1, 2000. EII and the administrator are taking steps to address the Year
2000 issue with respect to the computer systems that they use and to obtain
reasonable assurances that comparable steps are being taken by the Fund's other
major service providers. There can be no assurance, however, that these steps
will be sufficient to avoid adverse impact on the Fund from this problem.
- ----------------------------------------------
SIZE LIMITATIONS
If the Fund's assets total $350 million or more on December 31 of any
year, then the Fund will, commencing on March 1 of the next year, cease selling
shares to any new investors and will not resume selling its shares to new
investors unless and until its assets total $250 million or less on the last day
of any subsequent calendar quarter, in which case it may resume sales to new
investors on the first day of the next calendar quarter and continue them
subject to the $350 million limitation. Shareholders at the time of closure will
be able to purchase new shares after the Fund has closed.
<PAGE>
- ----------------------------------------------
GENERAL INFORMATION
The Winter Harbor Fund (the "Trust") is a Delaware business trust
registered with the Securities and Exchange Commission as an open-end,
diversified management investment company. The Trustees have the authority to
issue an unlimited number of shares of beneficial interest, without shareholder
approval, and these shares may be divided into an unlimited number of series.
Shareholders are entitled to one vote per share. Shares vote by individual
series on all matters, except that shares are voted in the aggregate and not by
individual series when required by the 1940 Act and that if the Trustees
determine that a matter affects only one series, then only shareholders of that
series are entitled to vote on that matter.
Meetings of shareholders will not be held except as required by the
1940 Act or other applicable law. A meeting will be held to vote on the removal
of a Trustee or Trustees of the Trust if requested in writing by the holders of
not less than 10% of the outstanding shares of the Trust.
- ----------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund pays dividends from net investment income quarterly and
distributes its net realized capital gains annually in December. Dividends and
distributions will be automatically reinvested in additional shares of the Fund
unless the shareholder chooses otherwise.
Shareholders will receive information annually as to the tax status of
distributions made by the Fund for the calendar year. For Federal income tax
purposes, all distributions by the Fund are taxable to shareholders when
declared, whether received in cash or reinvested in shares. Distributions paid
from the Fund's net investment income and short-term capital gains are taxable
to shareholders as ordinary income dividends. A portion of the Fund's dividends
may qualify for the corporate dividends-received deduction, subject to certain
limitations. The portion of the Fund's dividends qualifying for such deduction
is generally limited to the aggregate taxable dividends received by the Fund
from domestic corporations. Distributions paid from long-term capital gains of
the Fund are treated as long-term capital gains, regardless of how long the
shareholder has held Fund shares.
If a shareholder disposes of shares held for six months or less at a
loss, such loss will be treated as a long-term capital loss to the extent of any
long-term capital gains reported by the shareholder with respect to such shares.
A loss realized on a taxable disposition of Fund shares may be disallowed to the
extent that additional Fund shares are purchased (including by reinvestment of
distributions) within 30 days before or after such disposition.
The redemption of shares is a taxable event, and a shareholder may
realize a capital gain or capital loss. The Fund will report to redeeming
shareholders the proceeds of their redemptions. However, because the tax
consequences of a redemption will also depend on the shareholder's basis in the
redeemed shares for tax purposes, shareholders should retain their account
statements for use in determining their tax liability on a redemption.
At the time of a shareholder's purchase, the Fund's net asset value may
reflect undistributed income or capital gains. A subsequent distribution of
these amounts by the Fund will be taxable to the shareholder even though the
distribution economically is a return of part of the shareholder's investment.
The Fund is required to withhold 31% of taxable dividends, capital
gains distributions and redemptions paid to non-corporate shareholders who have
not complied with Internal Revenue Service taxpayer identification regulations.
Shareholders may avoid this withholding requirement by certifying on
<PAGE>
the Account Application Form their proper Social Security or Taxpayer
Identification Number and certifying that they are not subject to backup
withholding.
The discussion of Federal income taxes above is for general information
only. The Statement of Additional Information includes an additional description
of Federal income tax aspects that may be relevant to a shareholder.
Shareholders may also be subject to state and local taxes on their investment.
Investors should consult their own tax advisers concerning the tax consequences
of an investment in the Fund.
- ----------------------------------------------
NET ASSET VALUE PER SHARE
Net asset value per share (NAV) is determined as of the close of
regular trading on the New York Stock Exchange (normally 4:00 p.m., Eastern
Time) on each day it is open for business. The New York Stock Exchange is
normally closed on the following days: New Year's Day, Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas. Fund shares are purchased and redeemed at their
net asset value per share next determined after an order is received by the
Fund's transfer agent. The net asset value per share is determined by dividing
the total value of the Fund's investments and other assets, less any
liabilities, by the number of outstanding shares of the Fund.
In determining net asset value, securities listed on an exchange or the
Nasdaq National Market System are valued on the basis of the last reported sale
price prior to the time the valuation is made or, if no sale is reported for
that day, at their bid price for exchange-listed securities and at the average
of their bid and ask prices for Nasdaq securities. Quotations are taken from the
market where the security is primarily traded. Other over-the counter securities
for which market quotations are readily available are valued at their bid price.
Securities for which market quotations are not readily available are valued at
their fair value under procedures established and supervised by the Board of
Trustees. Bonds and other fixed income securities may be valued by reference to
other securities with comparable ratings, interest rates and maturities, using
established independent pricing services.
- ----------------------------------------------
SHAREHOLDER GUIDE
OPENING AN ACCOUNT AND PURCHASING SHARES
The Fund's shares are offered on a no-load basis. To open a new
account, other than an IRA or 403(b)(7) account, either by mail, by wire or
through broker-dealers, simply complete and return the Account Application.
Separate forms must be used for opening IRA's or 403(b)(7) accounts; please call
Investor Information at 1-800-277-5573 if you need these forms. Please indicate
the amount you wish to invest. Your initial purchase must be at least $2,000
except for IRA's and accounts establishing an Automatic Investment Plan, which
have $500 minimums. If you need assistance with the Account Application Form or
have any questions about the Fund, please call Investor Information at
1-800-277-5573.
Subsequent investments may be made by mail, wire, or Automatic
Investment (a system of electronic funds transfer from your bank account), or
Direct Deposit.
- -------------------
Purchasing By Mail:
Complete and sign the enclosed Account Application Form
<PAGE>
NEW ACCOUNT
Please include the amount of your initial investment on the Application Form,
make your check payable to "The REvest Value Fund", and mail to:
The REvest Value Fund
P.O. Box 5354
Cincinnati, OH 45201-5354
For express or registered mail, send to:
The REvest Value Fund
312 Walnut Street
21st Floor
Cincinnati, OH 45202
ADDITIONAL INVESTMENTS TO EXISTING ACCOUNTS
Additional investments should include the Invest-by-Mail remittance
form attached to your Fund confirmation statements. Please make your check
payable to "The REvest Value Fund", write your account number on your check and,
using the return envelope provided, mail to the address indicated on the
Invest-by-Mail form.
All written requests should be mailed to one of the addresses indicated
for new accounts.
- -------------------
Purchasing By Wire:
Before wiring: Please contact Shareholder Services at 1-877-4REVEST for wiring
instructions. To ensure proper receipt, please be sure your bank includes the
name of the Fund and your order number or account number. If you are opening a
new account, you must call Shareholder Services, complete the Account
Application Form and mail it to the "New Account" address above after completing
your wire arrangement. Note: Federal Funds wire purchase orders will be accepted
only when the Fund and Custodian are open for business.
- ------------------
Purchasing By Automatic Investment:
The Automatic Investment Plan allows you to make regular, automatic
transfers ($50 minimum) from your bank account to purchase shares in your Winter
Harbor Fund account on the 15th or last day of the month. To establish the
Automatic Investment Plan, please provide the appropriate information on the
Account Application Form and attach a voided check.
Purchasing By Direct Deposit
The Payroll Direct Deposit Plan and Government Direct Deposit Plan let
you have investments ($50 minimum) made from your net payroll or government
check into your existing Winter Harbor Fund account each pay period. Your
employer must have direct deposit capabilities through ACH (Automated Clearing
House) available to its employees. You may terminate participation in these
programs by giving written notice to your employer or government agency, as
appropriate. The Fund is not responsible for the efficiency of the employer or
government agency making the payment or any financial institution transmitting
payments.
<PAGE>
To initiate a Direct Deposit Plan, you must complete an Authorization
for Direct Deposit form, which may be obtained from Investor Information by
calling 1-800-277-5573.
- ----------------------------------------------
CHOOSING A DISTRIBUTION OPTION
You may select one of three distribution options:
1. Automatic Reinvestment Option: Both net investment income dividends and
capital gains distributions will be reinvested in additional Fund shares. This
option will be selected for you automatically unless you specify one of the
other options.
2. Cash Dividend Option: Your dividends will be paid in cash and your capital
gains distributions will be reinvested in additional Fund shares.
3. All Cash Option: Both dividends and capital gains distributions will be paid
in cash.
You may change your option by calling Shareholder Services at 1-877-4REVEST.
- ----------------------------------------------
IMPORTANT ACCOUNT INFORMATION
The easiest way to establish optional services on your account is to
select the options you desire when you complete your Account Application Form.
If you want to add shareholder options later, you may need to provide additional
information and a signature guarantee. Please call Shareholder Services at
1-877-4REVEST for further assistance.
Signature Guarantees
For our mutual protection, we may require a signature guarantee on
certain written transaction requests. A signature guarantee verifies the
authenticity of your signature and may be obtained from banks, brokerage firms
and any other guarantor that our transfer agent deems acceptable. A signature
guarantee cannot be provided by a notary public.
Broker/Dealer Purchases
If you purchase Fund shares through a registered broker-dealer or
investment adviser, the broker-dealer or adviser may charge a service fee.
Telephone Transactions
Neither the Fund nor its transfer agent will be liable for following
instructions communicated by telephone that are reasonably believed to be
genuine. The transfer agent uses certain procedures to confirm that telephone
instructions are genuine, which may include requiring some form of personal
identification prior to acting on the instructions, providing written
confirmation of the transaction and/or recording incoming calls, and if it does
not follow such procedures, the Fund or the transfer agent may be liable for any
losses due to unauthorized or fraudulent instructions.
<PAGE>
Nonpayment
If your check or wire does not clear, the transaction will be canceled
and you will be responsible for any loss the Fund incurs. If you are already a
shareholder, the Fund can redeem shares from any identically registered account
in the Fund as reimbursement for any loss incurred.
Trade Date for Purchases
Your trade date is the date on which share purchases are credited to
your account. If your purchase is made by check or Federal Funds wire and is
received by the close of regular trading on the New York Stock Exchange
(generally 4:00 p.m., Eastern time), your trade date is the date of receipt. If
your purchase is received after the close of regular trading on the Exchange,
your trade date is the next business day. Your shares are purchased at the net
asset value determined on your trade date.
In order to prevent lengthy processing delays caused by the clearing of
foreign checks, the Fund will accept only a foreign check which has been drawn
in U.S. dollars and has been issued by a foreign bank with a United States
correspondent bank.
The Trust reserves the right to suspend the offering of Fund shares to
new investors. The Trust also reserves the right to reject any specific purchase
request.
- ----------------------------------------------
REDEEMING YOUR SHARES
You may redeem any portion of your account at any time. You may request
a redemption in writing or by telephone. Redemption proceeds normally will be
sent within two business days after the receipt of the request in Good Order.
- -------------------
Redeeming By Mail
Requests should be mailed to: The REvest Value Fund, P.O. Box 5354,
Cincinnati, OH 45201-5354. (For express or registered mail, send your request
to: The REvest Value Fund, 312 Walnut Street, 21st Floor, Cincinnati, OH 45202).
The redemption price of shares will be their net asset value next determined
after the Transfer Agent has received all required documents in Good Order.
Definition of Good Order
Good Order means that the request includes the following:
1. The account number and Fund name.
2. The amount of the transaction (specified in dollars or shares).
3. Signatures of all owners exactly as they are registered on the account.
4. Signature guarantees if either the value of the shares being redeemed
exceeds $25,000 or if the payment is to be sent to an address other than
the address of record or is to be made to a payee other than the
shareholder.
5. Other supporting legal documentation that might be required, in the case
of retirement plans, corporations, trusts, estates and certain other
accounts.
<PAGE>
If you have any questions about what is required as it pertains to your
request, please call Shareholder Services at 1-877-4REVEST.
Redeeming by Telephone
Shareholders who have not established Automatic Withdrawal may redeem
up to $25,000 of their Fund shares by telephone, provided the proceeds are
mailed to their address of record. To redeem shares by telephone, you or your
pre-authorized representative may call Shareholder Services at 1-877-4REVEST.
Redemption requests received by telephone prior to the close of regular trading
on the New York Stock Exchange (generally 4:00 p.m., Eastern time) are processed
on the day of receipt; redemption requests received by telephone after the close
of regular trading on the Exchange are processed on the business day following
receipt. Telephone redemption service is not available for Trust-sponsored
retirement plan accounts or if certificates are held. Telephone redemptions will
not be permitted for a period of sixty days after a change in the address of
record. See also "Important Account Information - Telephone Transactions".
Redeeming By Automatic Withdrawal
If you select the Automatic Withdrawal option, shares will be
automatically redeemed from your Fund account and the proceeds transferred to
your bank account according to the schedule you have selected. You must have at
least $25,000 in your Fund account to establish the Automatic Withdrawal option.
Redeeming By Wire
The Wire Redemption option lets you redeem up to $25,000 of shares from
your Fund account by telephone and transfer the proceeds directly to your bank
account. You may elect Wire Redemptions on the Account Application Form or call
Shareholder Services at 1-877-4REVEST for further assistance. There may be a
charge from the Transfer Agent and/or your bank for this service.
Important Redemption Information
If you are redeeming shares recently purchased by check or Automatic
Investment Plan, the proceeds of the redemption may not be sent until payment
for the purchase is collected, which may take up to fifteen calendar days.
Otherwise, redemption proceeds must be sent to you within seven days of receipt
of your request in Good Order.
If you experience difficulty in making a telephone redemption during
periods of drastic economic or market changes, your redemption request may be
made by regular or express mail. It will be processed at the net asset value
next determined after your request has been received by the Transfer Agent in
Good Order. The Trust reserves the right to revise or terminate the telephone
redemption privilege at any time.
The Trust may suspend the redemption right or postpone payment at times
when the New York Stock Exchange is closed or under any emergency circumstances
as determined by the Securities and Exchange Commission.
Although redemptions have always been made in cash, the Fund may redeem
in kind under certain circumstances.
Early Redemption Fee
In order to discourage short-term trading, an early redemption fee of
1% of the net asset value of the shares being redeemed is imposed if a
shareholder redeems shares of the Fund less than one year after becoming a
shareholder. The fee is payable to the Fund out of the redemption proceeds
otherwise payable
<PAGE>
to the shareholder and is used to offset the costs associated with redemptions.
No redemption fee will be payable by shareholders who are (1) employees or
representatives of the Trust or EII or members of their immediate families or
employee benefit plans for them, (2) participants in the Automatic Withdrawal
Plan, (3) certain Trust-approved Group Investment Plans and charitable
organizations, or (4) omnibus and other similar account customers of certain
Trust-approved broker-dealers and other institutions.
Minimum Account Balance Requirement
Due to the relatively high cost of maintaining smaller accounts, the
Trust reserves the right to involuntarily redeem shares in any Fund account that
falls below the minimum initial investment due to redemptions by the
shareholder. If at any time the balance in an account does not have a value at
least equal to the minimum initial investment or if an Automatic Investment Plan
is discontinued before an account reaches the minimum initial investment that
would otherwise be required, you may be notified that the value of your account
is below the Fund's minimum account balance requirement. You would then have
sixty days to increase your account balance before the account is liquidated.
Proceeds would be promptly paid to the shareholder.
TRANSFERRING OWNERSHIP
You may transfer the ownership of any of your Fund shares to another
person by writing to: Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, OH 45201-5354. The request must be in Good Order (see "Redeeming
Your Shares - Definition of Good Order"). Before mailing your request, please
contact Shareholder Services (1-877-4REVEST) for full instructions.
OTHER SERVICES
For more information about any of these services, please call Investor
Information at 1-800-277-5573.
Statements and Reports
A statement will be sent to you each time you have a transaction in
your account and quarterly. Financial reports will be mailed semi-annually. To
reduce expenses, only one copy of most shareholder reports may be mailed to a
household. Please call Investor Information if you need additional copies.
Tax-Sheltered Retirement Plans
Shares of the Fund are available for purchase in connection with
certain types of tax-sheltered retirement plans, including Individual Retirement
Accounts (IRA's) for individuals and 403(b)(7) Plans for employees of certain
tax-exempt organizations.
These plans should be established with the Trust only after an investor
has consulted with a tax adviser or attorney. Information about the plans and
the appropriate forms may be obtained from Investor Information at
1-800-277-5573.
The Winter Harbor Fund
511 Congress Street
Portland, Maine 04101
Investment Adviser:
- ------------------
Ebright Investments, Inc.
Jennifer E. Goff, President
511 Congress Street
Portland, Maine 04101
<PAGE>
Investment Sub-Adviser:
- ----------------------
Gouws Capital Management, Inc.
511 Congress Street
Portland, Maine 04101
Distributor:
- -----------
CW Fund Distributors, Inc.
P.O. Box 5354
Cincinnati, OH 45201-5354
Transfer Agent:
- --------------
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, OH 45201-5354
Custodian:
- ---------
Star Bank, N.A.
425 Walnut Street
Cincinnati, OH 45202
Officers of the Trust:
- ---------------------
Jennifer E. Goff, President
Robert G. Dorsey, Vice President
Mark J. Seger, Treasurer
John F. Splain, Secretary
Tina D. Hosking, Assistant Secretary
Brian J. Manley, Assistant Secretary
REVEST VALUE FUND
A SERIES OF THE WINTER HARBOR FUND
<PAGE>
PART B
THE REVEST VALUE FUND
A Series of The Winter Harbor Fund
511 Congress Street
Portland, Maine 04101
(800) 277-5573
----------------
STATEMENT OF ADDITIONAL INFORMATION
This statement of additional information is not a prospectus and should be
read in conjunction with the Combined Prospectus/Proxy Statement dated August
___, 1998 (the "Combined Prospectus/Proxy Statement"), for the special meeting
of shareholders of The REvest Growth & Income Fund ("RGI"), a series of The
Royce Fund, an open-end management investment company, to be held on September
14, 1998 (the "Meeting").
The Combined Prospectus/Proxy Statement describes certain transactions and
other actions contemplated by the Reorganization Plan pursuant to which all or
substantially all of the assets of RGI would be acquired by The REvest Value
Fund ("RVF"), a series of The Winter Harbor Fund in exchange for shares of RVF
and the assumption by RVF of all or substantially all of the liabilities of RGI.
As described in the Combined Prospectus/Proxy Statement, RVF has investment
objectives and investment policies that are substantially identical to RGI. The
Combined Prospectus/Proxy Statement also describes a new Advisory Agreement
between RVF and Royce, Ebright & Associates, Inc. ("REA"), a new sub-advisory
agreement between REA, which will be changing its name to Ebright Investments,
Inc. concurrent with the Reorganization, and Gouws Capital Management, Inc., a
new Administration Agreement between RVF and Countrywide Fund Services, Inc.
("Countrywide"), a new Underwriting Agreement between RVF and CW Fund
Distributors, Inc., an affiliate of Countrywide, and a new Custody Agreement
with Star Bank, N.A. The shareholders of RGI are being requested to approve the
Reorganization Plan at the Meeting.
Pro forma financial statements are not presented herewith inasmuch as the
Reorganization Plan does not involve a change in the net assets of RGI or the
net asset value of RGI shares. Pursuant to the Reorganization Plan, shares will
be exchanged at the same net asset value and the number of outstanding RVF
Shares immediately following the Reorganization will be the same as the number
of RGI shares outstanding immediately prior to the Reorganization. The
capitalization of RVF will be the same as RGI, and RVF will report its financial
highlights and per share data in the same form as RGI.
The Combined Prospectus/Proxy Statement may be obtained without charge from
REA at 511 Congress Street, Portland, Maine 04101 or by telephoning REA at (800)
277-5573. Additional and more detailed information about the operations and
activities of The Royce Fund,
Part B -- 1
<PAGE>
RGI, The Winter Harbor Fund and RVF can be found in the following documents,
each of which is incorporated by reference herein:
(1) Statement of Additional Information of The Winter Harbor Fund dated
__________, 1998.
(2) Current Statement of Additional Information of RGI, a series of The
Royce Fund dated February 27, 1998.
(3) The financial statements and schedules of investments of RGI for the
fiscal year ended December 31, 1997, with the related Report of
Independent Accountants, are included in the Annual Report to
Shareholders of RGI, for the fiscal year ended December 31, 1997. Such
Annual Report has been filed with the Securities and Exchange
Commission pursuant to Rule 30b2-1 under the Investment Company Act of
1940, as amended, and such financial statements and schedules of
investments are incorporated herein by reference, together with the
management discussion of the Fund's performance included in such
Annual Report.
(4) The unaudited financial statements and schedules of investments of RGI
for the six months ended June 30, 1998 are included in the Semi-Annual
Report to Shareholders of RGI, for the period ended June 30, 1998.
Such Semi-Annual Report has been filed with the Securities and
Exchange Commission pursuant to Rule 30b2-1 under the Investment
Company Act of 1940, as amended, and such financial statements and
schedules of investments are incorporated herein by reference.
The date of this statement of additional information is August ___, 1998.
Part B -- 2
<PAGE>
PART C
THE WINTER HARBOR FUND
The REvest Value Fund
PART C. OTHER INFORMATION
Item 15. Indemnification
(a) Article X of the Declaration of Trust of the Registrant provides as
follows:
ARTICLE X
LIMITATION OF LIABILITY AND INDEMNIFICATION
LIMITATION OF LIABILITY
"Section 10.01 Limitation of Liability. A Trustee, when acting in such
capacity, shall not be personally liable to any Person other than the Trust or
beneficial owner for any act, omission or obligation of the Trust or any
Trustee. A Trustee shall not be liable for any act or omission or any conduct
whatsoever in his capacity as Trustee, provided that nothing contained herein or
in the Delaware Act shall protect any Trustee against any liability to the Trust
or to Shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee hereunder."
INDEMNIFICATION
"Section 10.02 Indemnification. (a) Subject to the exceptions and
limitations contained in Subsection 10.02(b): (i) every Person who is, or has
been, a Trustee or officer of the Trust (hereinafter referred to as a "Covered
Person") shall be indemnified by the Trust to the fullest extent permitted by
law against liability and against all expenses reasonably incurred or paid by
him in connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been a Trustee
or officer and against amounts paid or incurred by him in the settlement
thereof; (ii) the words "claim," "action," "suit," or "proceeding" shall apply
to all claims, actions, suits or proceedings (civil, criminal or other,
including appeals), actual or threatened while in office or thereafter, and the
words "liability" and "expenses" shall include, without limitation, attorneys'
fees, costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person: (i)
who shall have been adjudicated by a court or body before which the proceeding
was brought (A) to be liable to the Trust or its Shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office or (B) not to have acted in good
faith in the reasonable belief that his action was in the best interest of the
Trust; or (ii) in the event of a settlement, unless there has been a
determination that such Trustee
Part C -- 1
<PAGE>
or officer did not engage in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his office, (x) by
the court or other body approving the settlement; (y) by at least a majority of
those Trustees who are neither Interested Persons of the Trust nor are parties
to the matter based upon a review of readily available facts (as opposed to a
full trial-type inquiry); or (z) by written opinion of independent legal counsel
based upon a review of readily available facts (as opposed to a full trial-type
inquiry); provided, however, that any Shareholder may, by appropriate legal
proceedings, challenge any such determination by the Trustees or by independent
counsel.
(c) The rights of indemnification herein provided may be insured against by
policies maintained by the Trust, shall be severable, shall not be exclusive of
or affect any other rights to which any Covered Person may now or hereafter be
entitled, shall continue as to a Person who has ceased to be a Covered Person
and shall inure to the benefit of the heirs, executors and administrators of
such a Person. Nothing contained herein shall affect any rights to
indemnification to which Trust personnel, other than Covered Persons, and other
Persons may be entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described in
Subsection 10.02(a) of this Section 10.02 may be paid by the Trust or Series
from time to time prior to final disposition thereof upon receipt of an
undertaking by or on behalf of such Covered Person that such amount will be paid
over by him to the Trust or Series if it is ultimately determined that he is not
entitled to indemnification under this Section 10.02; provided, however, that
either (i) such Covered Person shall have provided appropriate security for such
undertaking, (ii) the Trust is insured against losses arising out of any such
advance payments or (iii) either a majority of the Trustees who are neither
Interested Persons of the Trust nor parties to the matter, or independent legal
counsel in a written opinion, shall have determined, based upon a review of
readily available facts (as opposed to a trial-type inquiry or full
investigation), that there is reason to believe that such Covered Person will be
found entitled to indemnification under Section 10.02."
(b)(1) Paragraph 8 of the Investment Advisory Agreement by and between the
Registrant and Ebright Investments, Inc. provides as follows:
"8. Protection of the Adviser. The Adviser shall not be liable to the Fund
or to the Series for any action taken or omitted to be taken by the Adviser in
connection with the performance of any of its duties or obligations under this
Agreement or otherwise as an investment adviser for the Series, and the Series
shall indemnify the Adviser and hold it harmless from and against all damages,
liabilities, costs and expenses (including reasonable attorneys' fees and
amounts reasonably paid in settlement) incurred by the Adviser in or by reason
of any pending, threatened or completed action, suit, investigation or other
proceeding (including an action or suit by or in the right of the Fund or the
Series or its security holders) arising out of or otherwise based upon any
action actually or allegedly taken or omitted to be taken by the Adviser in
connection with the performance of any of its duties or obligations under this
Agreement or otherwise as an investment adviser for the Series. Notwithstanding
the preceding sentence of this Paragraph 8 to the contrary, nothing contained
herein shall protect or be deemed to protect
Part C -- 2
<PAGE>
the Adviser against or entitle or be deemed to entitle the Adviser to
indemnification in respect of, any liability to the Fund or to the Series or its
security holders to which the Adviser would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of its reckless disregard of its duties and obligations
under this Agreement.
Determinations of whether and the extent to which the Adviser is entitled
to indemnification hereunder shall be made by reasonable and fair means,
including (a) a final decision on the merits by a court or other body before
whom the action, suit or other proceeding was brought that the Adviser was not
liable by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of its duties or (b) in the absence of such a decision, a reasonable
determination, based upon a review of the facts, that the Adviser was not liable
by reason of such misconduct by (i) the vote of a majority of a quorum of the
Trustees of the Fund who are neither "interested persons" of the Fund (as
defined in Section 2(a)(19) of the Investment Company Act of 1940) nor parties
to the action, suit or other proceeding, or (ii) an independent legal counsel in
a written opinion."
(b)(2) Paragraph 7 of the Investment Sub-Advisory Agreement by and between
Ebright Investments, Inc. ("EII") and Gouws Capital Management, Inc.
("Sub-Adviser"). provides as follows:
"7. Limitation of Liability. The Sub-Adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Series, the
Trust or its shareholders or by EII in connection with the matters to which this
Agreement relates, except to the extent that such a loss results from willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties and obligations under this Agreement and applicable law."
(c) Paragraphs 8 and 9 of the Distribution Agreement made by and between
the Registrant and CW Fund Distributors, Inc. provides as follows:
"8. Indemnification of Trust.
Underwriter agrees to indemnify and hold harmless the Trust and each person
who has been, is, or may hereafter be a trustee, officer, employee, shareholder
or control person of the Trust, against any loss, damage or expense (including
the reasonable costs of investigation) reasonably incurred by any of them in
connection with any claim or in connection with any action, suit or proceeding
to which any of them may be a party, which arises out of or is alleged to arise
out of or is based upon any untrue statement or alleged untrue statement of a
material fact, or the omission or alleged omission to state a material fact
necessary to make the statements not misleading, on the part of Underwriter or
any agent or employee of Underwriter or any other person for whose acts
Underwriter is responsible, unless such statement or omission was made in
reliance upon written information furnished by the Trust. Underwriter likewise
agrees to indemnify and hold harmless the Trust and each such person in
connection with any claim or in connection with any action, suit or proceeding
which arises out of or is alleged to arise out of Underwriter's failure to
exercise reasonable care and diligence with respect to its services, if any,
rendered in connection with investment, reinvestment, automatic withdrawal and
other plans for
Part C -- 3
<PAGE>
Shares. The term "expenses" for purposes of this and the next paragraph includes
amounts paid in satisfaction of judgments or in settlements which are made with
Underwriter's consent. The foregoing rights of indemnification shall be in
addition to any other rights to which the Trust or each such person may be
entitled as a matter of law.
9. Indemnification of Underwriter.
The Trust agrees to indemnify and hold harmless Underwriter and each person
who has been, is, or may hereafter be a director, officer, employee, shareholder
or control person of Underwriter against any loss, damage or expense (including
the reasonable costs of investigation) reasonably incurred by any of them in
connection with the matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or negligence on the part of any
of such persons in the performance of Underwriter's duties or from the reckless
disregard by any of such persons of Underwriter's obligations and duties under
this Agreement. The Trust will advance attorneys' fees or other expenses
incurred by any such person in defending a proceeding, upon the undertaking by
or on behalf of such person to repay the advance if it is ultimately determined
that such person is not entitled to indemnification. Any person employed by
Underwriter who may also be or become an officer or employee of the Trust shall
be deemed, when acting within the scope of his employment by the Trust, to be
acting in such employment solely for the Trust and not as an employee or agent
of Underwriter."
Item 16. Exhibits
(1) Trust Instrument, dated June 26, 1997 (as amended) (previously filed as
Exhibit (1) to Registrant's Registration Statement on Form N-1A, File Nos.
333-53837, 811-08793 and incorporated by reference herein).
(2) Not Applicable.
(3) Not Applicable.
(4) Form of Agreement and Plan of Reorganization annexed hereto as Appendix
A.
(5) (a) Sections 2.02, 2.04 and 2.06 of Registrant's Trust Instrument
provide as follows:
SECTION 2.02 ISSUANCE OF SHARES. Subject to applicable law, the
Trustees in their discretion may, from time to time, without vote of
the Shareholders, issue Shares, in addition to the then issued and
Outstanding Shares and Shares held in the treasury, to such party or
parties and for such amount and type of consideration, including cash
or securities, at such time or times and on such terms as the Trustees
may deem appropriate, and may in such manner acquire other assets
(including the acquisition of assets subject to, and in connection
with, the assumption of liabilities) and businesses. In connection
with any issuance of Shares, the Trustees may issue fractional Shares
and Shares held in
Part C -- 4
<PAGE>
the treasury. The Trustees may from time to time divide or combine the
Shares into a greater or lesser number without thereby changing the
proportionate beneficial interests in the Trust. Contributions to the
Trust may be accepted for, and Shares shall be redeemed as, whole
Shares and/or 1/1,000th of a Share or integral multiples thereof.
SECTION 2.04 TRANSFER OF SHARES. Except as otherwise provided by the
Trustees, Shares shall be transferable on the records of the Trust
only by the record holder thereof or by that holder's agent thereunto
duly authorized in writing, upon delivery to the Trustees or the
Transfer Agent of a duly executed instrument of transfer and such
evidence of the genuineness of such execution and authorization and of
such other matters as may be required by the Trustees or Transfer
Agent. Upon such delivery the transfer shall be recorded on the
register of the Trust. Until such record is made, the Shareholder of
record shall be deemed to be the holder of such Shares for all
purposes hereunder and neither the Trustees nor the Trust, nor any
Transfer Agent or registrar nor any officer, employee or agent of the
Trust shall be affected by any notice of the proposed transfer.
SECTION 2.06 ESTABLISHMENT OF SERIES OR CLASS. The Trust created
hereby shall consist of one or more Series and separate and distinct
records shall be maintained by the Trust for each Series and the
assets associated with any such Series shall be held and accounted for
separately from the assets of the Trust or any other Series. The
Trustees may divide the Shares of any Series into Classes. The
Trustees shall have full power and authority, in their sole
discretion, and without obtaining any prior authorization or vote of
the Shareholders of any Series, to establish and designate and to
change in any manner any such Series or Class and to fix such
preference, voting powers, rights and privileges of such Series or
Classes as the Trustees may from time to time determine, to divide or
combine the Shares of any Series or Classes into a greater or lesser
number, to classify or reclassify any issued Shares of any Series or
Classes into one or more Series or Classes, and to take such other
action with respect to the Shares as the Trustees may deem desirable.
The establishment and designation of any Series or Class shall be
effective when specified in the resolution of the Trustees setting
forth such establishment and designation and the relative rights and
preferences of the Shares of such Series or Class.
Part C -- 5
<PAGE>
All references to Shares in this Trust Instrument shall be deemed to
be Shares of any or all Series or Classes, as the context may require.
All provisions herein relating to the Trust shall apply equally to
each Series and each Class, except as the context otherwise requires.
Each Share of a Series of the Trust shall represent an equal
beneficial interest in the net assets of such Series subject to
Section 2.08 and the preferences, rights and privileges of each Class
of that Series. Each holder of Shares of a Series or Class thereof
shall be entitled to receive the holder's pro rata share of all
distributions made with respect to such Series or Class thereof. Upon
redemption of Shares, such Shareholder shall be paid solely out of the
funds and property of such Series of the Trust.
Each Series and Class thereof of the Trust and their attributes will
be set forth in Annex A to this Trust Instrument.
(6) (a) Form of Investment Advisory Agreement between the Registrant and
Ebright Investments, Inc. (previously filed as Exhibit (5)(a) to Registrant's
Registration Statement on Form N-1A, File Nos. 333-53837, 811-08793 and
incorporated by reference herein).
(b) Form of Sub-Advisory Agreement between Ebright Investments, Inc.
and Gouws Capital Management, Inc. (previously filed as Exhibit (5)(b) to
Registrant's Registration Statement on Form N-1A, File Nos. 333-53837, 811-08793
and incorporated by reference herein).
(7) Form of Underwriting Agreement between Registrant and CW Fund
Distributors, Inc. (previously filed as Exhibit (6) to Registrant's Registration
Statement on Form N-1A, File Nos. 333-53837, 811-08793 and incorporated by
reference herein).
(8) Not Applicable.
(9) Form of Custodian Agreement between Registrant and Star Bank, N.A.
(previously filed as Exhibit (8)(b) to Registrant's Registration Statement on
Form N-1A, File Nos. 333-53837, 811-08793 and incorporated by reference herein).
(10) Not Applicable.
(11) Opinion and Consent of Verrill & Dana LLP (previously filed as Exhibit
(10) to Registrant's Registration Statement on Form N-1A, File Nos. 333-53837,
811-08793 and incorporated by reference herein).
(12) Opinion of Verrill & Dana LLP regarding certain tax matters and
consequences to shareholders filed herewith.
Part C -- 6
<PAGE>
(13) (a) Form of Transfer, Dividend Disbursing, Shareholder Service and
Plan Agency Agreement between Registrant and Countrywide Fund Services, Inc.
(previously filed as Exhibit (8)(a) to Registrant's Registration Statement on
Form N-1A, File Nos. 333-53837, 811-08793 and incorporated by reference herein).
(b) Form of Administration Agreement between Registrant and
Countrywide Fund Services, Inc. (previously filed as Exhibit (9) to Registrant's
Registration Statement on Form N-1A, File Nos. 333-53837, 811-08793 and
incorporated by reference herein).
(14) Consents of PricewaterhouseCoopers LLP, independent auditors for RGI
and The Winter Harbor Fund filed herewith.
(15) There are no financial statements omitted pursuant to Item 14(a)(1).
(16) Powers of Attorney (previously filed as exhibits to Registrant's
Registration Statement on Form N-1A, Files Nos. 333-53837, 811-08793 and
incorporated by reference herein).
(17) Form of Proxy filed herewith.
Item 17. Undertakings
(a) The undersigned Registrant agrees that prior to any public reoffering
of the securities registered through the use of a prospectus which is a part of
this Registration Statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) under the Securities Act of 1933,
as amended, the reoffering prospectus will contain the information called for by
the applicable registration form for reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items if
the applicable form.
(b) The undersigned Registrant agrees that every prospectus that is filed
under paragraph (a), above, will be filed as part of an amendment to this
Registration Statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act of 1933, as
amended, each post-effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering of the securities
at that time shall be deemed to be the initial bona fide offering of them.
Part C -- 7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Portland, State of Maine on the 15th day of July,
1998.
THE WINTER HARBOR FUND
Jennifer E. Goff, President*
*By:/s/ Max Berueffy
------------------------
Name: Max Berueffy
Title: Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement had been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
(a) Principal Executive Officer
Jennifer E. Goff* President and Trustee 7/15/98
*By:/s/ Max Berueffy
----------------
Max Berueffy
Attorney-in-Fact
(a) Principal Financial and Accounting
Officer
Mark J. Seger* Treasurer 7/15/98
*By:/s/ Max Berueffy
----------------
Max Berueffy
Attorney-in-Fact
(c) All of the Trustees
Jennifer E. Goff* Trustee 7/15/98
Judith Freyer* Trustee 7/15/98
Earl Mummert* Trustee 7/15/98
Vincent Phillips* Trustee 7/15/98
*By:/s/ Max Berueffy
----------------
Max Berueffy
Attorney-in-Fact
<PAGE>
INDEX TO EXHIBITS INCLUDED IN PART C
Exhibit 12 Consent of PricewaterhouseCoopers LLP, independent
auditors for The Revest Growth & Income Fund
Exhibit 14 Opinion of Verrill & Dana LLP
Exhibit 17 Form of Proxy
To the Board of Trustees of The Winter Harbor Fund and
Shareholders of The REvest Value Fund:
We consent to the reference to our Firm in Form N-14 in connection with the
reorganization of The REvest Value Fund, a series of The Winter Harbor Fund,
(File No. 333-53837) under the Securities Act of 1933 and (File No. 811-08793)
under the Investment Company Act of 1940. We further consent to the reference to
our Firm under the headings "Available Information" in the Prospectus and the
reference to our Firm in Article IV(k)(l) of the Agreement and Plan of
Reorganization.
PricewaterhouseCoopers LLP
Boston, Massachusetts
July 14, 1998
[FORM OF VERRILL & DANA LLP OPINION]
[DATE]
Board of Trustees
The Winter Harbor Fund
511 Congress Street
Portland, Maine 04101
Board of Trustees
The Royce Fund
1414 Avenue of the Americas
New York, New York 10019
Ladies and Gentlemen:
We have acted as counsel to The Winter Harbor Fund, a Delaware business
trust (the "Trust"), in connection with the planned transfer by The REvest
Growth and Income Fund (the "Selling Fund"), a series of The Royce Fund, a
Delaware business trust, of all of its assets to The REvest Value Fund (the
"Acquiring Fund"), a series of the Trust, solely in exchange for the voting
stock of the Acquiring Fund 1 and the assumption by the Acquiring Fund of the
liabilities of the Selling Fund, followed by the distribution by the Selling
Fund of such Acquiring Fund stock pro rata to its shareholders solely in
exchange for their Selling Fund stock in liquidation of the Selling Fund. Such
transaction (the "Reorganization") is planned pursuant to the Agreement and Plan
of Reorganization approved by the Board of Trustees of the Trust on July 11,
1997 and April 6, 1998, and the Board of Trustees of The Royce Fund on April 16,
1998 (the "Plan"). This opinion is being delivered to you at the Trust's
request. All capitalized terms used herein and not otherwise defined shall have
the meaning set forth in the Plan.
The opinions expressed in this letter are based solely upon current
law, including the Internal Revenue Code of 1986, as amended (the "Code"),
applicable Treasury Regulations promulgated or proposed thereunder, current
positions of the Internal Revenue Service (the "IRS") contained in published
Revenue Rulings and Revenue Procedures, other current published administrative
positions of the IRS, and existing judicial decisions. It should be understood
by all of the recipients of this opinion that the legal authorities relied upon
herein are subject to change or modification at any time, and any such changes
or modifications could apply
- ----------------------------
1 Under Delaware law, ownership interests in the Acquiring fund constitute
shares of beneficial interest. Such intersts are considered stock for federal
income tax purposes and are referred to as "stock" herein.
<PAGE>
Board of Trustees, The Winter Harbor Fund
Board of Trustees, The Royce Fund
[DATE]
Page 2
retroactively; that no ruling has been (or will be) sought from the IRS by the
Trust or The Royce Fund as to the federal income tax consequences of any aspect
of the Reorganization; that there can be no assurance that the IRS or a court of
competent jurisdiction will not disagree with the opinions expressed herein;
and, that any inaccuracy in, or breach of, any of the representations or
assumptions set forth below or in the Plan, or any change after the date hereof
in applicable law, could adversely affect our opinion.
For purposes of the opinions set forth below, we have reviewed and relied
upon (i) the Plan, (ii) the most recent audited financial statements of the
Selling Fund, and (iii) such other documents, records, and instruments as we
have deemed necessary or appropriate as a basis for our opinion. In addition, in
rendering our opinion we have reviewed and relied upon representations from the
Trust, The Royce Fund, and Royce, Ebright & Associates, Inc., the investment
adviser to the Selling Fund ("RE&A"), which representations we have assumed to
be accurate and will neither investigate nor verify. Also, we have assumed that
(i) at all relevant times, the Selling Fund and the Acquiring Fund will continue
to be operated as regulated investment companies within the meaning of
Subchapter M of the Code; (ii) all documents we have reviewed are true and
accurate, accurately reflect the originals, and have been properly executed; and
(iii) the activities of the Selling Fund and the Acquiring Fund in connection
with the Plan and the transactions contemplated therein have been and will be
conducted in the manner provided in such documents and as set forth herein.
Furthermore, we have assumed that (i) all representations which are made "to the
best knowledge" of any person will be true, correct, and complete as if made
without such qualification; (ii) the Reorganization will be consummated
substantially in accordance with the Plan; and (iii) there are no shareholders
that will directly own, at the time of the Reorganization, more than five
percent (5%) of the shares of the Selling Fund, other than Charles Schwab & Co.,
Inc. ("Schwab") and The Carlisle Companies ("Carlisle").
We understand that, as of the close of business on [ ], 1998, Schwab owns [
] shares of the Selling Fund, which constitutes [ ]% of the Selling Fund, and
Carlisle owns [ ] shares of the Selling Fund, which constitutes [ %] of the
Selling Fund. We further understand that, during the period from [ ], 1998,
through the date of the Reorganization, Schwab has redeemed [ ] shares of the
Selling Fund and Carlisle has redeemed [ ] shares of the Selling Fund, each in
the ordinary course of their respective businesses as open-end investment
companies as required by section 22(e) of the Investment Company Act of 1940. In
addition, we have assumed, with your permission, that there is no plan or
intention by Schwab or Carlisle to redeem, sell, exchange, or otherwise dispose
of any shares of Acquiring Fund stock received in the Reorganization.
Based on and subject to the foregoing, we are of the opinion that:
<PAGE>
Board of Trustees, The Winter Harbor Fund
Board of Trustees, The Royce Fund
[DATE]
Page 3
(1) The transfer of all of the assets of the Selling Fund to the Acquiring
Fund in exchange for the assumption of all the liabilities of the Selling Fund
by the Acquiring Fund and the delivery to the Selling Fund of shares of the
Acquiring Fund, followed by the distribution by the Selling Fund pro rata to its
shareholders of such shares of the Acquiring Fund and the liquidation of the
Selling Fund, pursuant to the Plan, will constitute a "reorganization" within
the meaning of Section 368(a)(1)(F) of the Code, and the Selling Fund and the
Acquiring Fund will each be "a party to a reorganization" within the meaning of
Code Section 368(b);
(2) Pursuant to Code Sections 357(a) and 361(a) and (c), the Selling Fund
will not recognize any gain or loss solely as a result of the Reorganization;
(3) Pursuant to Code Section 1032(a), the Acquiring Fund will not recognize
any gain or loss solely due to the receipt of the assets of the Selling Fund in
exchange for shares of the Acquiring Fund;
(4) Pursuant to Code Section 354(a)(1), the shareholders of the Selling
Fund will not recognize any gain or loss solely on the exchange of their shares
of the Selling Fund for shares of the Acquiring Fund;
(5) Pursuant to Code Section 358(a)(1), the aggregate tax basis of shares
of the Acquiring Fund received by each shareholder of the Selling Fund will be
the same as the aggregate tax basis of the shares of the Selling Fund exchanged
therefor;
(6) Pursuant to Code Section 362(b), the Acquiring Fund's adjusted tax
basis in the assets received from the Selling Fund in the Reorganization will be
the same as the adjusted tax basis of such assets in the hands of the Selling
Fund immediately prior to the Reorganization;
(7) Pursuant to Code Section 1223(l), the holding period of each former
shareholder of the Selling Fund in the shares of the Acquiring Fund received in
the Reorganization will include the period during which such shareholder held
his, her or its shares of the Selling Fund as a capital asset; and
(8) Pursuant to Code Section 1223(2), the Acquiring Fund's holding periods
in the assets received from the Selling Fund in the Reorganization will include
the holding periods of such assets in the hands of the Selling Fund immediately
prior to the Reorganization.
Insofar as opinions expressed herein relate to factual matters, such
opinions are given on the basis of the actual knowledge of those attorneys in
this firm who have been principally involved in representing the Trust in
connection with the transactions contemplated by the Plan.
<PAGE>
Board of Trustees, The Winter Harbor Fund
Board of Trustees, The Royce Fund
[DATE]
Page 4
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement on Form N-14 and to use of our name and any reference to
our firm in the Registration Statement or in the Combined Prospectus/Proxy
Statement constituting a part thereof. In giving this consent, we do not thereby
admit that we are within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the general rules and
regulations of the Securities and Exchange Commission.
No opinion is expressed as to any matter addressed in this letter other
than as set forth above. This opinion is given as of the date hereof and we do
not undertake, and hereby disclaim any obligation, to advise you of any changes
in any matters on which the opinions set forth herein are based.
Very truly yours,
The REvest Growth & Income Fund
A Series of The Royce Fund
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS
DATE: SEPTEMBER 14, 1998
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF THE ROYCE FUND for use
at a special meeting of the shareholders of The REvest Growth & Income Fund
("RGI"), a series of The Royce Fund, which meeting will be held on September 14,
1998, at 2 p.m., at the offices of The Royce Fund, at 1414 Avenue of the
Americas, New York, New York 10019, and any adjournments or postponements
thereof (the "Meeting").
The undersigned shareholder of RGI, revoking any and all previous proxies
heretofore given for shares of RGI held by the undersigned ("Shares"), does
hereby appoint Jennifer E. Goff and John E. Denneen, or any of them, with full
power of substitution to each, to be the attorneys and proxies of the
undersigned (the "Proxies"), to attend the Meeting of the shareholders of RGI,
and to represent and direct the voting interest represented by the undersigned
as of the record date for said Meeting for the Proposal specified below.
This proxy, if properly executed, will be voted in the manner as directed
herein by the undersigned shareholder. Unless otherwise specified below in the
squares provided, the undersigned's vote will be cast "FOR" the Proposal. If no
direction is made for the Proposal, this proxy will be voted "FOR" such
Proposal. In their discretion, the proxies listed above are authorized to
transact and vote upon such other matters and business as may properly come
before the meeting or any adjournments or postponements thereof.
Proposal: To approve or disapprove the proposed Agreement and Plan of
Reorganization by and between The Royce Fund, with respect to RGI, and The
Winter Harbor Fund, a newly-created Delaware business trust with respect to its
one series, RVF, providing for the transfer of all or substantially all of the
assets, and the assumption of all or substantially all of the liabilities, of
RGI in exchange for shares of RVF issued by The Winter Harbor Fund (the "RVF
Shares"), and the distribution of such RVF Shares to the shareholders of RGI in
complete liquidation of RGI.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
To avoid adjourning or postponing the Meeting to a subsequent date, please
return this proxy in the enclosed self-addressed, postage-paid envelope.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE ROYCE
FUND, WHICH RECOMMENDS A VOTE FOR THE PROPOSAL.
<PAGE>
Dated:_________________________, 19___
------------------------------
Signature of Shareholder
------------------------------
Signature of Shareholder
This proxy may be revoked by the shareholder(s) at any time prior to the
special meeting.
NOTE: Please sign exactly as your name appears on this proxy card. If
shares are registered in more than one name, all registered shareholders should
sign this proxy; but if one shareholder signs, this signature binds the other
shareholder. When signing as an attorney, executor, administrator, agent,
trustee, or guardian, or custodian for a minor, please give full title as such.
If a business trust, please sign in full corporate name by an authorized person.
If a partnership, please sign in partnership name by an authorized person.
