As filed with the Securities and Exchange Commission on February 29, 2000
File Nos. 333-53837 and 811-08793
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Post-Effective Amendment No. 2
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 3
The Winter Harbor Fund
511 Congress Street
Portland, Maine 04101
(207) 774-7455
Copies to:
Wayne E. Tumlin, Esquire
Bernstein, Shur, Sawyer and Nelson
100 Middle Street
Portland, Maine 04104-5029
It is proposed that this filing will become effective (check appropriate box)
/X/ immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)
/ / on _______ pursuant to paragraph (a) of Rule 485
Registrant has registered an indefinite number of shares of beneficial
interest under the Securities Act of 1933 pursuant to Rule 24f-2 under the
Investment Company Act of 1940.
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CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 481(A))
PART A
Form N-1A Registration Statement Caption Location in Prospectus
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Item No.
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Item 1. Front and Back Cover Pages Cover Pages
Item 2. Risk/Return Summary: Risk/Return Summary
Investments, Risks and
Performance
Item 3. Risk/Return Summary: Fee Table Fund Expenses
Item 4. Investment Objectives, Investment Objectives; Investment
Principal Investment Policies; Investment Risks
Strategies, Related Risks
Item 5. Management's Discussion of Inapplicable (Included in Annual
Fund Performance Report)
Item 6. Management, Organization, and Management of the Trust
Capital Structure
Item 7. Shareholder Information Size Limitations; Dividends,
Distributions and Taxes; Net
Asset Value Per Share; Opening an
Account and Purchasing Shares;
Choosing a Distribution Option;
Important Account Information;
Redeeming Your Shares;
Transferring Ownership; Other
Services
Item 8. Distribution Arrangements Inapplicable
Item 9. Financial Highlights Financial Highlights
Information
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CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 481(A))
PART B
Form N-1A Registration Statement Caption Location in Statement of
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Item No. Additional Information
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Item 10. Cover Page and Table of Cover Page; Table of Contents
Contents
Item 11. Fund History Description of the Trust
Item 12. Description of the Fund and Investment Policies and
Its Investments and Risks Limitations; Risk Factors and
Special Considerations
Item 13. Management of the Fund Management of the Trust
Item 14. Control Persons and Principal Principal Holders of Shares
Holders of Securities
Item 15. Investment Advisory and Other Management of the Trust;
Services Investment Advisory Services;
Countrywide Fund Services, Inc.;
Custodian; Independent Accountants
Item 16. Brokerage Allocation and Portfolio Transactions
Other Practices
Item 17. Capital Stock and Other Description of the Trust
Securities
Item 18. Purchase, Redemption and Pricing of Shares Being Offered;
Pricing of Shares Redemptions in Kind
Item 19. Taxation of the Fund Taxation
Item 20. Underwriters Distributor
Item 21. Calculation of Performance Historical Performance Information
Data
Item 22. Financial Statements Annual Report
PART C
The information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
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THE REVEST VALUE FUND [LOGO]
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PROSPECTUS - February 29, 2000
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NEW ACCOUNT AND GENERAL INFORMATION - Investor Information: (800) 277-5573
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SHAREHOLDER SERVICES - (877) 4REVEST (877-473-8378)
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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
that should, in the investment adviser's judgment, allow a company to build
future, incremental value for shareholders.
The Fund is a no-load series of The Winter Harbor Fund (the "Trust"), a
diversified open-end management investment company.
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ABOUT THIS
PROSPECTUS
This Prospectus has information you should know before you invest. Please read
it carefully and keep it with your investment records.
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
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TABLE OF CONTENTS
Page
Risk/Return Summary ....................................................... 1
Fund Expenses ............................................................. 2
Investment Objectives ..................................................... 2
Investment Policies ....................................................... 2
Investment Risks .......................................................... 3
Management Of The Trust ................................................... 3
Size Limitations .......................................................... 4
Dividends, Distributions And Taxes ........................................ 4
Net Asset Value Per Share ................................................. 4
Financial Highlights ...................................................... 5
Page
SHAREHOLDER GUIDE
Opening An Account And Purchasing Shares .................................. 5
Choosing A Distribution Option ............................................ 6
Important Account Information ............................................. 6
Redeeming Your Shares ..................................................... 7
Important Redemption Information .......................................... 8
Transferring Ownership .................................................... 8
Other Services ............................................................ 8
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RISK/RETURN SUMMARY
WHAT ARE THE FUND'S INVESTMENT OBJECTIVES?
The REvest Value Fund primarily seeks long-term growth and secondarily
current income.
WHAT ARE THE FUND'S PRINCIPAL INVESTMENT STRATEGIES?
The Fund invests primarily in a diversified portfolio of common stocks and
securities convertible into common stocks of small and medium-sized
companies. The fund selects companies viewed as having attractive financial
characteristics and/or "vitality factors." Vitality factors are those
factors that should, in the investment adviser's judgement, allow a company
to build future, incremental value for shareholders.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?
The return on and value of an investment in the Fund will fluctuate in
response to stock market movements. Stocks and other equity securities are
subject to market risks and fluctuations in value due to earnings, economic
conditions and other factors beyond the control of the Fund's investment
adviser. As a result, there is a risk that you may lose money by investing
in the Fund.
The Fund will typically invest a substantial portion of its assets in small
and medium-sized companies, which may be less liquid and more volatile than
investments in larger companies.
PERFORMANCE SUMMARY
The bar chart and performance table shown below provide an indication of
the risks of investing in the Fund by showing the changes in the
performance of the Fund from year to year and by showing how the average
annual returns of the Fund compare to those of broad-based securities
market indices. How the Fund has performed in the past is not necessarily
an indication of how the Fund will perform in the future.
1999 -3.32%
1998 -6.12%
1997 23.50%
1996 22.27%
1995 16.23%
During the period shown in the bar chart, the highest return for a quarter
was 11.94% during the quarter ended September 30, 1997 and the lowest
return for a quarter was -15.37% during the quarter ended September 30,
1998.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED DECEMBER 31, 1999:
Since Inception
1-Year 5-Year (August 1, 1994)
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The REvest Value Fund ............. -3.32% 9.76% 8.38%
S&P 500 Index1 .................... 21.04% 28.56% 26.45%
Russell 2000 Index2 ............... 21.26% 16.51% 23.97%
1 The Standard & Poor's 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.
1
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FUND EXPENSES
This table describes the fees and expenses that you will pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES
(fees paid directly from your investment)
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Redemption Fee:
1 Year or More After Account Opened None*
Early Redemption Fee:
Less Than 1 Year After Account Opened 1.00%*
* The Fund's Custodian charges a wire transfer fee in the case of redemptions
made by wire. Such fee is subject to change and is currently $9. See "How
to Redeem Shares."
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
Management Fees 1.00% a
Distribution (12b-1) Fees 0.00%
Other Expenses .59% b
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Total Annual Fund Operating Expenses 1.59% c
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a After waivers of management fees, such fees were .70% for the fiscal year
ended December 31, 1999.
b During the fiscal year ended December 31, 1999, the Fund did not pay or
accrue any service fees. However, pursuant to the Fund's Shareholder
Services Plan, service fees may be accrued at a rate of up to 0.25% of the
Fund's average net assets.
c After waivers of management fees, total Fund operating expenses were 1.29%
for the fiscal year ended December 31, 1999.
The Fund's investment adviser has agreed to waive fees in order to limit the
Fund's expense ratio to 1.50% through June 30, 2000. These waivers will
terminate on June 30, 2000, unless extended by the adviser.
EXAMPLE: This Example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. It assumes that you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
1 Year ................................. $ 169
3 Years ................................ 502
5 Years ................................ 866
10 Years ............................... 1,899
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 that should, in the
investment adviser's judgment, allow a company to build future, incremental
value for shareholders. Examples of such factors include an active acquisition
program, stock buy-back program and/or cost reduction program.
INVESTMENT POLICIES
Ebright Investments, Inc. ("EII"), the Fund's investment adviser, uses a value
method in managing the Fund's assets. EII uses a two-step evaluation process in
selecting equities for the Fund's portfolio. First, 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. Business worth is what a knowledgeable buyer would pay for the entire
company, based on an appraisal of its financial characteristics and/or growth
prospects.
In the second step of the selection process, EII 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.
2
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The resulting portfolio 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.
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 ("allowable securities"). 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.
The Fund may also 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 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 bank until repurchased. To the extent the Fund implements a
temporary defensive investment policy, its investment objectives may not be
achieved.
INVESTMENT RISKS
The Fund is designed for investors who are investing for the long term and
should not be used by market timers. It is not intended for investors seeking
assured income or preservation of capital. Changes in market prices can occur at
any time. Accordingly, there is no assurance that the Fund will achieve its
investment objectives. When you redeem your shares, they may be worth more or
less than what you paid for them.
Because the Fund normally invests most, or a substantial portion, of its assets
in stocks, the value of the Fund's portfolio will be affected by changes in the
stock markets. Stock markets and stock prices can be volatile. Market action
will affect the Fund's net asset value per share, which fluctuates as the values
of the Fund's portfolio securities change. Not all stock prices change uniformly
or at the same time and not all stock markets move in the same direction at the
same time. Various factors can affect a stock's price (for example, poor
earnings reports by an issuer, loss of major customers, major litigation against
an issuer, or changes in general economic conditions or in government
regulations affecting an industry). Not all of these factors can be predicted.
The Fund will typically invest a substantial portion of its assets in companies
with lower market capitalizations, which present higher near-term risks than
larger capitalization companies. Small and mid-capitalization stocks are more
likely to experience higher price volatility and may have limited liquidity
(which means that the Fund might have difficulty selling them at an acceptable
price when it wants to).
MANAGEMENT OF THE TRUST
The Trust's business and affairs are managed under the direction of its Board of
Trustees, for the benefit of the Trust's shareholders. The Trustee's names,
principal occupations and ownership of Fund shares as of February 1, 2000 are:
NAME PRINCIPAL OCCUPATION SHARES OWNED
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Jennifer E. Goff see "Investment Adviser" below 3,119.340
Judith D. Freyer Vice President - Investments, None
Board of Pensions of
the Presbyterian Church (U.S.A.)
Earl L. Mummert Vice President, Conrad M. 5,751.430
Siegel, Inc. (Actuarial Firm)
Vincent T. Phillips President, Phillips & Company, 2,136.985
Inc. (Registered Investment Adviser
and Business Consultant)
3
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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
is registered as an investment adviser with the Securities and Exchange
Commission. Jennifer E. Goff, President of EII, manages the Fund's portfolio.
She has been a director and a shareholder of EII since its inception. Prior to
assuming the office of President, Ms. Goff was Vice President and Assistant
Portfolio Manager from 1996 to 1997. Ms. Goff also worked full-time as a
security analyst at Royce & Associates, Inc. (formerly Quest Advisory Corp.)
from July, 1993 to August, 1994 and then completed her graduate studies in
Finance at Columbia University (M.B.A., 1994 - 1996).
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.
CW Fund Distributors, Inc., located at 312 Walnut Street, 21st Floor,
Cincinnati, Ohio 45202, acts as distributor of the Fund's shares.
SIZE LIMITATIONS
If the Fund's assets total $350 million or more on December 31 of any year, then
the Fund will, beginning on March 1 of the next year, cease selling shares to
any new investors. If the Fund's assets total $250 million or less on the last
day of any subsequent calendar quarter, 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.
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 you
choose otherwise.
Each year, you will receive information 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 you when declared, whether you received
them in cash or reinvested them in shares. Distributions paid from the Fund's
net investment income and short-term capital gains are taxable to you as
ordinary income dividends. A portion of the Fund's dividends may qualify for the
corporate dividends-received deduction, subject to certain limitations.
Distributions paid from long-term capital gains of the Fund are taxable to you
as capital gains, regardless of how long you have held your Fund shares.
The redemption of shares is a taxable event, on which you may realize a capital
gain or a capital loss. The Fund will report to you the proceeds of your
redemptions. Because the tax consequences of a redemption will also depend on
the value of your shares when initially purchased; you should retain a copy of
your account statements for use in determining your tax liability.
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 you. You may also be subject
to state and local taxes on your investment. You should consult your own tax
adviser concerning the tax consequences of an investment in the Fund.
NET ASSET VALUE PER SHARE
On each day that the Trust is open for business, the Fund's share price (net
asset value) is determined as of the close of the regular session of trading on
the New York Stock Exchange (normally 4:00 p.m., Eastern time). The Trust is
open for business on each day the New York Stock Exchange is open for business
and on any other day when there is sufficient trading in the Fund's investments
that its net asset value might be materially affected. The Fund's net asset
value per share is calculated by dividing the sum of the value of the securities
held by the Fund plus cash or other assets minus all liabilities (including
estimated accrued expenses) by the total number of shares outstanding of the
Fund, rounded to the nearest cent. The price at which a purchase or redemption
of Fund shares is effected is based on the next calculation of net asset value
after the order is received.
U.S. Government obligations are valued at their most recent bid prices as
obtained from one or more of the major market makers for such securities. Other
portfolio securities are valued as follows:
o securities which are traded on stock exchanges or are quoted by NASDAQ are
valued at the last reported sale price as of the close of the regular
session of trading on the New York Stock Exchange on the day the securities
are being valued, or, if not traded on a particular day;
o securities traded in the over-the-counter market, and which are not quoted
by NASDAQ, are valued at the last sale price (or, if the last sale price is
not readily available, at the last bid price as quoted by brokers that make
markets in the securities) as of the close of the regular session of
trading on the New York Stock Exchange on the day the securities are being
valued;
o securities which are traded both in the over-the-counter market and on a
stock exchange are valued according to the broadest and most representative
market; and
4
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o securities (and other assets) for which market quotations are not readily
available are valued at their fair value as determined in good faith in
accordance with consistently applied procedures established by and under
the general supervision of the Board of Trustees.
The Fund's net asset value per share will fluctuate with the value of the
securities it holds.
FINANCIAL HIGHLIGHTS
The Fund is the successor to The REvest Growth & Income Fund. The following
financial highlights represent the historical information of The REvest Growth &
Income Fund from August 1, 1994 (commencement of operations) to September 25,
1998 and the historical information of The REvest Value Fund subsequent to
September 25, 1998. The financial highlights table is intended to help you
understand the Fund's financial performance for the past 5 years. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned or
lost on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with the Fund's financial statements, are included in the
Fund's Annual Report to Shareholders and are incorporated by reference into the
Statement of Additional Information and this Prospectus. The Fund's Annual
Report to Shareholders and Statement of Additional Information may be obtained
without charge by calling Investor Information at 1-800-277-5573.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
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1999 1998 1997 1996 1995
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INVESTMENT
OPERATIONS:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ................... $ 10.88 $ 13.00 $ 12.21 $ 10.73 $ 9.66
---------- ---------- ---------- ---------- ----------
Net investment income ................................ 0.14 0.15 0.21 0.21 0.18
Net realized and unrealized gain (loss) on investments (0.51) (1.02) 2.64 2.16 1.38
---------- ---------- ---------- ---------- ----------
Total from investment operations ................ (0.37) (0.87) 2.85 2.37 1.56
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income ........................... (0.14) (0.15) (0.19) (0.21) (0.17)
---------- ---------- ---------- ---------- ----------
From net realized gain on investments ................ (0.50) (1.10) (1.87) (0.68) (0.32)
Total from distributions to shareholders ........ (0.64) (1.25) (2.06) (0.89) (0.49)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year ......................... $ 9.87 $ 10.88 $ 13.00 $ 12.21 $ 10.73
========== ========== ========== ========== ==========
RATIOS AND SUPPLEMENTAL DATA:
Total return ......................................... (3.32)% (6.12)% 23.50% 22.27% 16.23%
Net assets, end of period (000's) .................... $ 17,319 $ 24,730 $ 38,886 $ 42,099 $ 35,804
Ratio of net expenses to average net assets1 ......... 1.29% 1.30% 1.26% 1.29% 1.30%
Ratio of net investment income to average net assets . 1.22% 1.20% 1.60% 1.78% 1.73%
Portfolio turnover rate .............................. 41% 35% 54% 64% 53%
</TABLE>
1 Absent fee waivers by the Adviser, the ratios of expenses to average net
assets would have been 1.59% and 1.37% for the years ended December 31,
1999 and 1998, respectively.
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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, by mail, by wire or through broker-dealers,
simply complete and return the Account Application Form. 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.
The Fund may, in the Adviser's sole discretion, accept certain accounts with
less than the stated minimum initial investment. 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.
There is no minimum investment limit for subsequent investments.
PURCHASING BY MAIL:
1. Opening a New Account.
Complete and sign the enclosed Account Application Form. Please include the
amount of your initial investment on the Account Application Form, make
your check payable to "The REvest Value Fund", and send to:
REGULAR MAIL: EXPRESS OR REGISTERED MAIL:
The REvest Value Fund The REvest Value Fund
P.O. Box 5354 312 Walnut Street, 21st Floor
Cincinnati, OH 45201-5354 Cincinnati, OH 45202
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2. Making Additional Investments to an Existing Account
To make additional investments use 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 sent
to the addresses listed above 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 first call Shareholder Services to
obtain an account number, complete the Account Application Form and mail it
to the "New Account" address, provided above. Please note that Federal
Funds wire purchase orders can only be accepted 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
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 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.
To initiate a Direct Deposit Plan, you must provide ACH routing and account
numbers to your payroll administrator. Shareholder Services, at
1-877-4REvest, can provide you with this information.
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: Dividends from net investment income and short-term
capital gains will be paid in cash and long-term 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.
If you select the Cash Dividend Option or the All Cash Option and the U.S.
Postal Service cannot deliver your checks or if your checks remain uncashed for
six months, your dividends may be reinvested in your account at the then-current
net asset value and your account will be converted to the Automatic Reinvestment
Option. No interest will accrue on amounts represented by uncashed distribution
checks.
You may change your distribution 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 or change 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.
The Fund's account application contains provisions in favor of the Fund, EII,
Countrywide and certain of their affiliates, excluding such entities from
certain liabilities (including, among others, losses resulting from unauthorized
shareholder transactions) relating to the various services (for example,
telephone redemptions) made available to investors. These provisions include:
1. 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.
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2. 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.
3. NONPAYMENT. If your check or wire does not clear, the transaction will be
canceled and you will be responsible for any losses or fees the Fund or its
transfer agent 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.
4. 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 prior to the close of regular trading
on the New York Stock Exchange (normally 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.
5. FOREIGN CHECKS. 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.
6. RIGHTS. The Trust reserves the right to suspend the offering of Fund shares
to new investors. The Trust also reserves the right to limit the amount of
investments and to reject any specific purchase request.
REDEEMING YOUR SHARES
You may redeem any portion of your account on each day the Fund is open for
business. You may request a redemption in writing or by telephone. Redemption
proceeds normally will be sent within three business days after the receipt of
the request in "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, if the payment is to be sent to an address other than the
address of record, if the payment is to be made to a payee other than the
shareholder, or if the name(s) or the address on the account has been
changed within 30 days of the redemption request.
5. Other supporting legal documentation that might be required, in the case of
retirement plans, corporations, trusts, estates and certain other accounts.
If you have any questions about what is required, please call Shareholder
Services at 1-877-4REVEST.
REDEEMING YOUR SHARES
The redemption price of shares will be their net asset value next determined
after the Fund's transfer agent has received all required documents in Good
Order. Requests should be mailed to:
Regular Mail: Express or registered mail:
The REvest Value Fund The REvest Value Fund
P.O. Box 5354 312 Walnut Street, 21st Floor
Cincinnati, OH 45201-5354 Cincinnati, OH 45202
REDEEMING BY TELEPHONE
If you have not established Automatic Withdrawal, you may redeem up to
$25,000 of your Fund shares by telephone, provided the proceeds are mailed
to your address of record. Unless you have specifically notified the Fund's
transfer agent not to honor redemption requests by telephone, the telephone
redemption privilege is automatically available to your account. Telephone
redemptions will not be permitted for a period of thirty days after a
change in the name(s) on the account or the 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 (normally 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.
Neither the Fund, its transfer agent nor their respective affiliates, will
be liable for following instructions communicated by telephone that are
reasonably believed to be genuine or for any loss, damage, cost or expenses
incurred in acting on such instructions. The transfer agent uses certain
procedures to confirm that telephone instructions are genuine, which may
include
7
<PAGE>
- --------------------------------------------------------------------------------
requiring some form of personal identification prior to acting on the
instructions, providing written confirmation of the transaction and/or
recording incoming calls. 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.
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
domestic bank or brokerage account as designated on your Account
Application Form. 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 Fund's transfer agent and/or your bank for
this service.
IMPORTANT REDEMPTION INFORMATION
1. Possible Delays. 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
five business 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 the Fund's transfer agent receives your request
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.
2. 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 you redeem 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 to you and is used to offset the costs
associated with redemptions. No redemption fee will be payable by (1)
employees or representatives of the Trust or EII or members of their
immediate families or employee benefit plans established for their benefit,
(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.
3. 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") and be accompanied by a signature guarantee (see "
Important Account Information - Definition of Signature Guarantee"). 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.
1. Statements and Reports. A statement will be sent to you quarterly and each
time you have a transaction in your account. 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.
2. 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.
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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
DISTRIBUTOR
CW Fund Distributors, Inc.
312 Walnut Street
Cincinnati, Ohio 45202
TRANSFER AGENT
Countrywide Fund Services, Inc.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
CUSTODIAN
Firstar Bank, N.A.
425 Walnut Street
Cincinnati, Ohio 45202
OFFICERS OF THE TRUST
Jennifer E. Goff, President
Robert L. Bennett, Treasurer
Tina D. Hosking, Secretary
- --------------------------------------------------------------------------------
Additional information about the Fund is included in the Statement of Additional
Information ("SAI"), which is incorporated by reference in its entirety.
Additional information about the Fund's investments is available in the Fund's
annual and semiannual reports to shareholders. In the Fund's annual report, you
will find a discussion of the market conditions and strategies that
significantly affected the Fund's performance during its last fiscal year.
To obtain a free copy of the SAI, the annual and semiannual reports or other
information about the Fund, or to make inquiries about the Fund, please call
1-800-277-5573.
Information about the Fund, including the SAI, can be reviewed and copied at the
Securities and Exchange Commission's public reference room in Washington, D.C.
Information about the operation of the public reference room can be obtained by
calling the Commission at 1-202-942-8090. Reports and other information about
the Fund are available on the Commission's Internet site at http://www.sec.gov.
Copies of information on the Commission's Internet site may be obtained, upon
payment of a duplicating fee, by electronic request at the following e-mail
address: [email protected], or by writing to: Securities and Exchange
Commission, Public Reference Section, Washington, D.C. 20549-6009.
File No. 811-8793
- --------------------------------------------------------------------------------
9
<PAGE>
THE REvest VALUE FUND
STATEMENT OF ADDITIONAL INFORMATION FEBRUARY 29, 2000
- --------------------------------------------------------------------------------
The REvest Value Fund (the "Fund") is a professionally-managed series of
The Winter Harbor Fund (the "Trust"), a Delaware business trust and an open-end
registered investment company.
The Fund is designed for long-term investors, including those who wish to
use its shares as a funding vehicle for certain tax-deferred retirement plans
(including Individual Retirement Account ("IRA") plans), and not for investors
who intend to liquidate their investments after a short period of time.
This Statement of Additional Information is not a prospectus, but should be
read in conjunction with the Trust's current Prospectus for the Fund (dated
February 29, 2000). Please retain this document for future reference. The
audited financial statements included in the Annual Report to Shareholders of
the Fund for the fiscal year ended December 31, 1999 are incorporated herein by
reference. To obtain a copy of the Fund's Prospectus or Annual Report please
call Investor Information at 1-800-277-5573.
Investment Adviser Transfer Agent
- ------------------ --------------
Ebright Investments, Inc. ("EII") Countrywide Fund
Services, Inc.
Distributor Custodian
- ----------- ---------
CW Fund Distributors, Inc. Firstar Bank, N.A.
TABLE OF CONTENTS
- -----------------
PAGE
INVESTMENT POLICIES AND LIMITATIONS ...................................... 2
RISK FACTORS AND SPECIAL CONSIDERATIONS .................................. 3
MANAGEMENT OF THE TRUST .................................................. 6
PRINCIPAL HOLDERS OF SHARES .............................................. 8
INVESTMENT ADVISORY SERVICES ............................................. 8
DISTRIBUTOR .............................................................. 10
COUNTRYWIDE FUND SERVICES, INC ........................................... 11
CUSTODIAN ................................................................ 11
INDEPENDENT ACCOUNTANTS .................................................. 11
PORTFOLIO TRANSACTIONS ................................................... 11
PRICING OF SHARES BEING OFFERED .......................................... 12
REDEMPTIONS IN KIND ...................................................... 12
TAXATION ................................................................. 12
DESCRIPTION OF THE TRUST ................................................. 13
HISTORICAL PERFORMANCE INFORMATION ....................................... 14
ANNUAL REPORT ............................................................ 15
<PAGE>
INVESTMENT POLICIES AND LIMITATIONS
- -----------------------------------
The following investment policies and limitations supplement those set
forth in the Fund's Prospectus. Unless otherwise noted, whenever an investment
policy or limitation states a maximum percentage of the Fund's assets that may
be invested in any security or other asset or sets forth a policy regarding
quality standards, the percentage limitation or standard will be determined
immediately after giving effect to the Fund's acquisition of the security or
other asset. Accordingly, any subsequent change in values, net assets or other
circumstances will not be considered in determining whether the investment
complies with the Fund's investment policies and limitations.
The Fund's investment objectives, as stated in the Prospectus, and its
fundamental investment policies cannot be changed without the approval of a
"majority of the outstanding voting securities" of the Fund, as defined in the
Investment Company Act of 1940 (the "1940 Act"). Except for the fundamental
investment restrictions set forth below, the investment policies and limitations
described in this Statement of Additional Information are operating policies and
may be changed by the Board of Trustees without shareholder approval. However,
shareholders will be notified prior to a material change in an operating policy
affecting the Fund.
The Fund may not, as a matter of fundamental policy:
1. Issue any senior securities;
2. Purchase securities on margin or write call options on its portfolio
securities;
3. Sell securities short;
4. Borrow money, except from banks as a temporary measure for
extraordinary or emergency purposes in an amount not exceeding 5% of
its total assets;
5. Underwrite the securities of other issuers;
6. Invest more than 5% of its total assets in the securities of foreign
issuers;
7. Invest in restricted securities or in repurchase agreements which
mature in more than seven days;
8. Invest more than 10% of its net assets in securities without readily
available market quotations (i.e., illiquid securities);
9. Invest, with respect to 75% of its total assets, more than 5% of its
assets in the securities of any one issuer (except U.S. Government
securities);
10. Invest more than 25% of its assets in any one industry;
11. Acquire more than 10% of the outstanding voting securities of any one
issuer;
12. Purchase or sell real estate or real estate mortgage loans or invest
in the securities of real estate companies unless such securities are
publicly-traded;
13. Purchase or sell commodities or commodity contracts;
14. Make loans, except for purchases of portions of issues of
publicly-distributed bonds, debentures and other securities, whether
or not such purchases are made upon the original issuance of such
securities, and except that the Fund may loan up to 5% of its assets
to qualified brokers, dealers or institutions for their use relating
to short sales or other securities transactions (provided that such
loans are fully collateralized at all times);
15. Invest in companies for the purpose of exercising control of
management;
2
<PAGE>
16. Purchase portfolio securities from or sell such securities directly to
any of the Trust's Trustees, officers, employees or investment
adviser, as principal for their own accounts;
17. Invest in the securities of other investment companies; or
18. Purchase any warrants, rights or options, except that the Fund may, if
no value is assigned thereto, acquire warrants in units with or
attached to debt securities or non-convertible preferred stock.
The Fund may not, as a matter of operating policy:
1. Invest more than 5% of its net assets in lower-rated (high-risk)
non-convertible debt securities; or
2. Enter into repurchase agreements with any counterparty other than the
custodian of the Fund's assets or having a term of more than seven
days.
RISK FACTORS AND SPECIAL CONSIDERATIONS
- ---------------------------------------
Fund's Rights as Stockholder
As noted above, the Fund may not invest in a company for the purpose of
exercising control of management. However, the Fund may exercise its rights as a
stockholder and communicate its views on important matters of policy to
management, the board of directors and/or stockholders if EII or the Board
determine that such matters could have a significant effect on the value of the
Fund's investment in the company. The activities that the Fund may engage in,
either individually or in conjunction with others, may include, among others,
supporting or opposing proposed changes in a company's corporate structure or
business activities; seeking changes in a company's board of directors or
management; seeking changes in a company's direction or policies; seeking the
sale or reorganization of a company or a portion of its assets; or supporting or
opposing third party takeover attempts. This area of corporate activity is
increasingly prone to litigation, and it is possible that the Fund could be
involved in lawsuits related to such activities. EII will monitor such
activities with a view to mitigating, to the extent possible, the risk of
litigation against the Fund and the risk of actual liability if the Fund is
involved in litigation. However, no guarantee can be made that litigation
against the Fund will not be undertaken or liabilities incurred.
The Fund may, at its expense or in conjunction with others, pursue
litigation or otherwise exercise its rights as a stockholder to seek to protect
the interests of stockholders if EII and the Trust's Board determine this to be
in the best interests of the Fund's shareholders.
Securities Lending
The Fund may lend up to 5% of its assets to brokers, dealers and other
financial institutions. Securities lending allows the Fund to retain ownership
of the securities loaned and, at the same time, to earn additional income. Since
there may be delays in the recovery of loaned securities or even a loss of
rights in collateral supplied should the borrower fail financially, such loans
will be made only if, in EII's judgment, the consideration to be earned from
such loans justifies the risk.
EII understands that it is the current view of the staff of the Securities
and Exchange Commission that the Fund may engage in such loan transactions only
under the following conditions: (1) the Fund must receive 100% collateral in the
form of cash or cash equivalents (e.g., U.S. Treasury bills or notes) from the
borrower; (2) the borrower must increase the collateral whenever the market
value of the securities loaned (determined on a daily basis) rises above the
value of the collateral; (3) after giving notice, the Fund must be able to
terminate the loan at any time; (4) the Fund must receive reasonable interest on
the loan or a flat fee from the borrower, as well as amounts equivalent to any
dividends, interest or other distributions on the securities loaned and to any
increase in
5
<PAGE>
market value; (5) the Fund may pay only reasonable custodian fees in connection
with the loan; and (6) the Fund must be able to vote proxies on the securities
loaned, either by terminating the loan or by entering into an alternative
arrangement with the borrower.
Borrowing
The Fund may borrow from banks or as may be necessary for the clearance of
securities transactions but only for emergency or extraordinary purposes in an
amount not exceeding 5% of the Fund's total assets. The Fund's policy on
borrowing is a fundamental policy which may not be changed without the approval
of a majority of its outstanding voting securities.
Lower-Rated (High-Risk) Debt Securities
The Fund may invest up to 5% of its net assets in lower-rated (high-risk)
non-convertible debt securities. They may be rated from Ba to Caa by Moody's
Investors Service, Inc. or from BB to CCC by Standard & Poor's Corporation or
may be unrated. These securities have poor protection with respect to the
payment of interest and repayment of principal and may be in default as to the
payment of principal or interest. These securities are often considered to be
speculative and involve greater risk of loss or price changes due to changes in
the issuer's capacity to pay. The market prices of lower-rated (high-risk) debt
securities may fluctuate more than those of higher-rated debt securities and may
decline significantly in periods of general economic difficulty, which may
follow periods of rising interest rates.
While the market for lower-rated (high-risk) corporate debt securities has
been in existence for many years and has weathered previous economic downturns,
the 1980s brought a dramatic increase in the use of such securities to fund
highly leveraged corporate acquisitions and restructurings. Past experience may
not provide an accurate indication of the future performance of the
high-yield/high-risk bond market, especially during periods of economic
recession. In fact, from 1989 to 1991, the percentage of lower-rated (high-risk)
debt securities that defaulted rose significantly above prior levels.
The market for lower-rated (high-risk) debt securities may be thinner and
less active than that for higher-rated debt securities, which can adversely
affect the prices at which the former are sold. If market quotations cease to be
readily available for a lower-rated (high-risk) debt security in which the Fund
has invested, the security will then be valued in accordance with procedures
established by the Board of Trustees of the Trust. Judgment plays a greater role
in valuing lower-rated (high-risk) debt securities than is the case for
securities for which more external sources for quotations and last sale
information are available. Adverse publicity and changing investor perceptions
may affect the Fund's ability to dispose of lower-rated (high-risk) debt
securities.
Since the risk of default is higher for lower-rated (high-risk) debt
securities, EII's research and credit analysis may play an important part in
managing securities of this type for the Fund. In considering such investments
for the Fund, EII will attempt to identify those issuers of lower-rated
(high-risk) debt securities whose financial condition is adequate to meet future
obligations, has improved or is expected to improve in the future. EII's
analysis may focus on relative values based on such factors as interest or
dividend coverage, asset coverage, earnings prospects and the experience and
managerial strength of the issuer.
Foreign Investments
The Fund may invest up to 5% of its total assets in the securities of
foreign issuers. Foreign investments can involve significant risks in addition
to the risks inherent in U.S. investments. The value of securities denominated
in or indexed to foreign currencies and of dividends and interest from such
securities can change significantly when foreign currencies strengthen or weaken
relative to the U.S. dollar. Foreign securities markets generally have less
trading volume and less liquidity than U.S. markets, and prices on some foreign
markets can be highly volatile. Many foreign countries lack uniform accounting
and disclosure standards comparable to those applicable to U.S. companies, and
it may be more difficult to obtain reliable information regarding an issuer's
financial condition and operations. In addition, the costs of foreign investing,
including withholding taxes, brokerage commissions and custodial costs, are
generally higher than for U.S. investments.
6
<PAGE>
Foreign markets may offer less protection to investors than U.S. markets.
Foreign issuers, brokers and securities markets may be subject to less
government supervision. Foreign security trading practices, including those
involving the release of assets in advance of payment, may involve increased
risks in the event of a failed trade or the insolvency of a broker-dealer, and
may involve substantial delays. It may also be difficult to enforce legal rights
in foreign countries.
Investing abroad also involves different political and economic risks.
Foreign investments may be affected by actions of foreign governments adverse to
the interests of U.S. investors, including the possibility of expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency into U.S.
dollars or other government intervention. There may be a greater possibility of
default by foreign governments or foreign government-sponsored enterprises.
Investments in foreign countries also involve a risk of local political,
economic or social instability, military action or unrest or adverse diplomatic
developments. There is no assurance that EII will be able to anticipate these
potential events or counter their effects.
The considerations noted above are generally intensified for investments in
developing countries. Developing countries may have relatively unstable
governments, economies based on only a few industries and securities markets
that trade a small number of securities.
American Depositary Receipts ("ADRs") are certificates held in trust by a
bank or similar financial institution evidencing ownership of shares of a
foreign-based issuer. Designed for use in U.S. securities markets, ADRs are
alternatives to the purchase of the underlying foreign securities in their
national markets and currencies.
ADR facilities may be established as either unsponsored or sponsored. While
ADRs issued under these two types of facilities are in some respects similar,
there are distinctions between them relating to the rights and obligations of
ADR holders and the practices of market participants. A depository may establish
an unsponsored facility without participation by (or even necessarily the
acquiescence of) the issuer of the deposited securities, although typically the
depository requests a letter of non-objection from such issuer prior to the
establishment of the facility. Holders of unsponsored ADRs generally bear all
the costs of such facilities. The depository usually charges fees upon the
deposit and withdrawal of the deposited securities, the conversion of dividends
into U.S. dollars, the disposition of non-cash distributions and the performance
of other services. The depository of an unsponsored facility frequently is under
no obligation to distribute shareholder communications received from the issuer
of the deposited securities or to pass through voting rights to ADR holders in
respect of the deposited securities. Sponsored ADR facilities are created in
generally the same manner as unsponsored facilities, except that the issuer of
the deposited securities enters into a deposit agreement with the depository.
The deposit agreement sets out the rights and responsibilities of the issuer,
the depository and the ADR holders. With sponsored facilities, the issuer of the
deposited securities generally will bear some of the costs relating to the
facility (such as deposit and withdrawal fees). Under the terms of most
sponsored arrangements, depositories agree to distribute notices of shareholder
meetings and voting instructions and to provide shareholder communications and
other information to the ADR holders at the request of the issuer of the
deposited securities.
Repurchase Agreements
In a repurchase agreement, the Fund in effect makes a loan by purchasing a
security and simultaneously committing to resell that security to the seller at
an agreed upon price on an agreed upon date within a number of days (usually not
more than seven) from the date of purchase. The resale price reflects the
purchase price plus an agreed upon incremental amount which is unrelated to the
coupon rate or maturity of the purchased security. A repurchase agreement
involves the obligation of the seller to pay the agreed upon price, which
obligation is in effect secured by the value (at least equal to the amount of
the agreed upon resale price and marked to market daily) of the underlying
security.
The Fund may engage in repurchase agreements with respect to any U.S.
Government security. While it does not presently appear possible to eliminate
all risks from these transactions (particularly the possibility of a decline in
the market value of the underlying securities, as well as delays and costs to
the Fund in connection with
7
<PAGE>
bankruptcy proceedings), it is the policy of the Trust to enter into repurchase
agreements only with its custodian and having a term of seven days or less.
Portfolio Turnover
The Fund will not trade in securities for short-term profits, but, when
circumstances warrant, securities may be sold without regard to the length of
time held. For the years ended December 31, 1999, 1998 and 1997, the Fund had
portfolio turnover rates of 41%, 35% and 54%, respectively. Higher portfolio
turnover rates would increase the Fund's transaction costs, including brokerage
commissions.
MANAGEMENT OF THE TRUST
- -----------------------
The following table sets forth certain information as to each Trustee and
executive officer of the Trust:
<TABLE>
<CAPTION>
Name, Address and Age Position Held with the Trust Principal Occupations During Past 5 Years
- --------------------- ---------------------------- -----------------------------------------
<S> <C> <C>
Jennifer E. Goff* (28) Trustee and President Ms. Goff has been the President of
511 Congress Street Ebright Investments, Inc., the Trust's
Portland, Maine 04101 investment adviser, since July 1997. She
was its Vice President from August 1994 to
1997. From 1993 to 1994, Ms. Goff was a
Research Analyst at Royce & Associates,
Inc. (formerly Quest Advisory Corp.) in
New York, New York.
Judith D. Freyer (50) Trustee Ms. Freyer has for the last five
2000 Market Street years been the Vice President of
Philadelphia, Pennsylvania 19103 Investments and Treasurer for the
Board of Pensions of the Presbyterian
Church (U.S.A.).
Earl L. Mummert (53) Trustee Mr. Mummert has for the last five
500 Nationwide Drive years been a Vice President for
Harrisburg, Pennsylvania 17110 Conrad M. Siegel, Inc. (an actuarial firm).
Vincent T. Phillips (53) Trustee Mr. Phillips has for the last five
6682 Clearbrook Drive years been the President of Phillips
Nashville, Tennessee 37205 & Company, Inc. (a registered investment
adviser).
Robert L. Bennett (58) Treasurer Mr. Bennett is First Vice President and
312 Walnut Street Chief Operations Officer of Countrywide
21st Floor Fund Services, Inc. ("CFSI")(a registered
Cincinnati, Ohio 45202 transfer agent). He is also Treasurer of
Albemarle Investment Trust, Atalanta/Sosnoff
Investment Trust, Dean Family of Funds, The
New York State Opportunity Funds, Profit
Funds Investment Trust, Wells Family of Real
Estate Funds, Williamsburg Investment Trust
and The Winter Harbor Fund and Assistant
Treasurer of Boyar Value Fund, Inc.,
Brundage, Story and Rose Investment Trust
and Schwartz Investment Trust (all of which
are registered investment companies).
8
<PAGE>
Tina D. Hosking (31) Secretary Ms. Hosking is Assistant Vice President
312 Walnut Street and Associate General Counsel of CFSI
21st Floor and CW Fund Distributors, Inc. (a Cincinnati,
Ohio 45202 registered broker-dealer). She is also
Secretary of Albemarle Investment Trust,
Atalanta/Sosnoff Investment Trust, The
Bjurman Funds, Brundage, Story and Rose
Investment Trust, Boyar Value Fund, Inc.,
Dean Family of Funds, The New York State
Opportunity Funds, Profit Funds Investment
Trust, The Thermo Opportunity Fund, Inc.,
UC Investment Trust, Wells Family of Real
Estate Funds, Williamsburg Investment Trust
and The Winter Harbor Fund and Assistant
Secretary of The Gannett Welsh & Kotler
Funds, The James Advantage Funds, Lake Shore
Family of Funds, Schwartz Investment Trust
and The Westport Funds.
</TABLE>
*An "interested person" of the Trust within the meaning of Section 2(a)(19) of
the 1940 Act.
The Board of Trustees has an Audit Committee, comprised of Judith D. Freyer
and Vincent T. Phillips. The Audit Committee is responsible for recommending the
selection and nomination of independent auditors for the Fund and for conducting
post-audit reviews of its financial condition with such auditors.
The Fund has a Valuation Committee, comprised of Jennifer E. Goff, Judith
D. Freyer, Vincent T. Phillips and Brian J. Manley. The Valuation Committee
assures that securities are valued in accordance with the valuation procedures
of the Fund.
Each Trustee of the Trust (other than Jennifer E. Goff, who is an
interested person of the Trust) is paid $500 for each meeting of the Board of
Trustees attended. Disinterested Trustees are also reimbursed for travel and
related expenses incurred in attending meetings of the Board of Trustees. No
officer of the Trust is compensated by the Trust. The Trust has not adopted any
form of retirement plan covering Trustees or officers.
The following table provides the estimated aggregate compensation paid by
the Trust to each Trustee for the fiscal year ended December 31, 1999.
9
<PAGE>
Pension or
Retirement
Benefits Accrued
as Part of Trust Total Compensation
Expenses from the Trust
-------- --------------
Jennifer E. Goff 0 0
Trustee
Judith D. Freyer 0 $2,000
Trustee
Earl L. Mummert 0 $2,000
Trustee
Vincent T. Phillips 0 $2,000
Trustee
PRINCIPAL HOLDERS OF SHARES
- ---------------------------
As of February 11, 2000, the following persons were known to the Trust to be the
record or beneficial owners of 5% or more of the outstanding shares of the Fund:
Number Type of Percentage of
Name and Address of Shares Ownership Outstanding Shares
- ---------------- --------- --------- ------------------
Bankers Trust Company Trustee 562,779.138 Beneficial 33.01%
FBO Carlisle Companies, Inc.
Master Retirement Trust
100 Plaza One, MS 3048
Jersey City, NJ 07311-3902
Charles M. Royce 93,833.54 Beneficial 5.50%
C/O Royce Management Company
8 Sound Shore Dr # 140
Greenwich, CT 06830-7242
As of the same date, the Trustees and officers of the Trust as a group
owned of record or beneficially less than 1% of the outstanding shares of the
Fund.
INVESTMENT ADVISORY SERVICES
- ----------------------------
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 is 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
September 25, 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 inexchange solely for shares of beneficial
interest of the Fund, the assumption of all of the liabilities of The REvest
Growth & Income Fund and
10
<PAGE>
the distribution of shares of the Fund to shareholders of The REvest Growth &
Income Fund upon liquidation of The REvest Growth & Income Fund.
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. Ms. Goff also worked full-time as a
security analyst at Royce & Associates, Inc. (formerly Quest Advisory Corp.)
from July, 1993 to August, 1994 and then completed her graduate studies in
Finance at Columbia University (M.B.A. 1996).
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.
Under the Investment Advisory Agreement, EII (1) determines the composition
of the Fund's portfolio, the nature and timing of the changes in it and the
manner of implementing such changes, subject to any directions it may receive
from the Trust's Board of Trustees; (2) provides the Fund with investment
advisory, research and related services; (3) furnishes, without expense to the
Trust, the services of such members of its organization as may be duly elected
executive officers or Trustees of the Trust; and (4) pays all executive
officers' salaries and expenses and all expenses incurred in performing its
investment advisory duties under the Investment Advisory Agreement.
EII furnishes at its own expense all services, facilities and personnel
necessary to perform its duties under the Investment Advisory Agreement between
the Trust and EII. The Investment Advisory Agreement provides for an initial
term of two years from September 25, 1998, its effective date, and for its
continuance in effect for successive twelve-month periods thereafter, provided
the agreement is specifically approved at least annually by either the vote of a
majority of the disinterested Trustees or by vote of a majority of the
outstanding voting securities of the Fund.
The Investment Advisory Agreement is terminable without penalty on 60 days'
written notice when authorized either by vote of a majority of the outstanding
voting securities of the Fund, by a vote of a majority of the Board or by EII
and will automatically terminate in the event of its assignment. The Investment
Advisory Agreement also provides that EII shall not be liable for any error of
judgment or mistake of law except for willful misfeasance, bad faith, gross
negligence or reckless disregard in the performance of its duties and
obligations under the Investment Advisory Agreement and applicable law. The
Investment Advisory Agreement provides that EII may render services to others.
The Trust pays all administrative and other costs and expenses attributable
to its operations and transactions, including, without limitation, transfer
agent and custodian fees; legal, administrative and clerical services; rent for
its office space and facilities; auditing; preparation, printing and
distribution of its prospectuses, proxy statements, shareholders reports and
notices; supplies and postage; Federal and state registration fees; Federal,
state and local taxes; non-affiliated trustees' fees; and brokerage commissions.
For the fiscal year ended December 31, 1999, the Fund accrued advisory fees
of $210,541; however, in order to reduce the operating expenses of the Fund, EII
voluntarily waived $62,525 of its advisory fees. And, for the fiscal year ended
December 31, 1998, the Fund accrued advisory fees of $315,903; however, in order
to reduce the operating expenses of the Fund, EII voluntarily waived $21,200 of
its advisory fees. For the fiscal years ended December 31, 1997 and 1996, EII
received advisory fees from the Fund of $447,437 and $375,493 respectively.
DISTRIBUTOR
- -----------
CW Fund Distributors, Inc. (the "Distributor") located at 312 Walnut
Street, 21st Floor, Cincinnati, Ohio 45202, is the Fund's principal underwriter
and, as such, is the exclusive agent for distribution of shares of the Fund. The
Distributor is obligated to sell the shares on a best efforts basis only against
purchase orders for the shares. Shares of the Fund are offered to the public on
a continuous basis.
11
<PAGE>
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. Certain shareholder servicing
features of the Fund may not be available or may be modified in connection with
the program of services offered.
COUNTRYWIDE FUND SERVICES, INC.
- -------------------------------
The Trust's transfer agent, Countrywide Fund Services, Inc.
("Countrywide"), maintains the records of each shareholder's account, answers
shareholders' inquiries concerning their accounts, processes purchases and
redemptions of the Fund's shares, acts as dividend and distribution disbursing
agent and performs other shareholder service functions. Countrywide is an
affiliate of the Distributor by reason of common ownership. Countrywide receives
for its services as transfer agent a fee payable by the Fund monthly at an
annual rate of $20 per account; provided, however, that the minimum fee is
$1,250 per month. In addition, the Fund pays out-of-pocket expenses, including
but not limited to, postage, envelopes, checks, drafts, forms, reports, record
storage and communication lines.
Countrywide also provides accounting and pricing services to the Fund. For
calculating daily net asset value per share and maintaining such books and
records as are necessary to enable Countrywide to perform its duties, the Fund
pays Countrywide a fee in accordance with the following schedule:
Average Monthly Net Assets Monthly Fee
-------------------------- -----------
$ 0 - $ 50,000,000 $2,000
50 - 100,000,000 2,500
100 - 200,000,000 3,000
Over 200,000,000 4,000 + .001% of
average monthly net assets
over $200,000,000
In addition, the Fund pays all costs of external pricing services. For the
fiscal years ended December 31, 1999 and 1998, the Fund paid Countrywide $24,000
and $6,000, respectively.
In addition, Countrywide is retained to provide administrative services to
the Fund. In this capacity, Countrywide supplies non-investment related
statistical and research data, internal regulatory compliance services and
executive and administrative services. Countrywide supervises the preparation of
tax returns, reports to shareholders of the Fund, reports to and filings with
the Securities and Exchange Commission and state securities commissions, and
materials for meetings of the Board of Trustees. For the performance of these
administrative services, the Fund pays Countrywide a fee at the annual rate of
.09% of the average value of its daily net assets up to $100,000,000, .075% of
such assets from $100,000,000 to $200,000,000 and .05% of such assets in excess
of $100,000,000; provided, however, that the minimum fee is $2,000 per month.
For the fiscal years ended December 31, 1999 and 1998, the Fund paid Countrywide
$24,000 and $6,000, respectively.
CUSTODIAN
- ---------
Firstar Bank, N.A. ("Firstar Bank") is the custodian for the securities,
cash and other assets of the Fund. The Trust has authorized Firstar Bank to
deposit certain domestic and foreign portfolio securities in several central
depository systems and to use foreign sub-custodians for certain foreign
portfolio securities, as allowed by Federal law. Firstar Bank's main office is
at 425 Walnut Street, Cincinnati, Ohio 45202.
12
<PAGE>
INDEPENDENT ACCOUNTANTS
- -----------------------
The firm of PricewaterhouseCoopers LLP, whose address is 100 East Broad
Street, Ste. 2100, Columbus, Ohio 43215-3671, have been selected as the
independent accountants for the Trust.
PORTFOLIO TRANSACTIONS
- ----------------------
EII is responsible for selecting the brokers who, as agents for the Fund,
effect the purchases and sales of the Fund's portfolio securities. No broker is
selected to effect a securities transaction for the Fund unless such broker is
believed by EII to be capable of obtaining the best price and execution for the
security involved in the transaction. In addition to considering a broker's
execution capability, EII generally considers the brokerage and research
services which the broker has provided to it, including any research relating to
the security involved in the transaction and/or to other securities. Such
services may include general economic research, market and statistical
information, industry and technical research, strategy and company research, and
may be written or oral. EII determines the overall reasonableness of brokerage
commissions paid, after considering the amount another broker might have charged
for effecting the transaction and the value placed by EII upon the brokerage
and/or research services provided by such broker.
EII is authorized, under Section 28(e) of the Securities Exchange Act of
1934 and under its respective advisory agreement for the Fund, to pay a
brokerage commission in excess of that which another broker might have charged
for effecting the same transaction, in recognition of the value of brokerage and
research services provided by the broker.
EII may also direct that the Fund's brokerage business be placed with firms
which promote the sale of the Fund's shares, consistent with achieving the best
price and execution. In no event will the Fund's brokerage business be placed
with the Distributor.
For the fiscal years ended December 31, 1999, 1998, 1997 and 1996, the Fund
paid brokerage commissions of $33,303, $46,730, $95,045, and $87,201
respectively.
PRICING OF SHARES BEING OFFERED
- -------------------------------
The share price (net asset value) of the shares of each fund is determined
as of the close of the regular session of trading on the New York Stock Exchange
(normally 4:00 p.m., Eastern time) on each day the Trust is open for business.
The Trust is open for business on every day except Saturdays, Sundays and the
following holidays: New Year's Day, Martin Luther King, Jr. Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas. The Trust may also be open for business on other days in which there
is sufficient trading in either Fund's portfolio securities that its net asset
value might be materially affected. For a description of the methods used to
determine the share price, see "Net Asset Value Per Share" in the Prospectus.
REDEMPTIONS IN KIND
- -------------------
It is possible that conditions may arise in the future which would, in the
judgment of the Board of Trustees or management, make it undesirable for the
Fund to pay for all redemptions in cash. In such cases, payment may be made in
portfolio securities or other property of the Fund. However, the Trust has
obligated itself under the 1940 Act to redeem for cash all shares presented for
redemption by any one shareholder up to $250,000 (or 1% of the Trust's net
assets if that is less) in any 90-day period. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share for purposes of such redemption. Shareholders
receiving such securities would incur brokerage costs when these securities are
sold.
13
<PAGE>
TAXATION
- --------
The Prospectus describes generally the tax treatment of distributions by
the Fund. This section of the Statement of Additional Information includes
additional information concerning federal taxes.
The Fund has qualified and intends to qualify annually for the special tax
treatment afforded a "regulated investment company" under Subchapter M of the
Internal Revenue Code so that it does not pay federal taxes on income and
capital gains distributed to shareholders. To so qualify the Fund must, among
other things, (i) derive at least 90% of its gross income in each taxable year
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock, securities or foreign currency, or
certain other income (including but not limited to gains from options, futures
and forward contracts) derived with respect to its business of investing in
stock, securities or currencies; and (ii) diversify its holdings so that at the
end of each quarter of its taxable year the following two conditions are met:
(a) at least 50% of the value of the Fund's total assets is represented by cash,
U.S. Government securities, securities of other regulated investment companies
and other securities (for this purpose such other securities will qualify only
if the Fund's investment is limited in respect to any issuer to an amount not
greater than 5% of the Fund's assets and 10% of the outstanding voting
securities of such issuer) and (b) not more than 25% of the value of the Fund's
assets is invested in securities of any one issuer (other than U.S. Government
securities or securities of other regulated investment companies).
The Fund's net realized capital gains from securities transactions will be
distributed only after reducing such gains by the amount of any available
capital loss carryforwards. Capital losses may be carried forward to offset any
capital gains for eight years, after which any undeducted capital loss remaining
is lost as a deduction.
A federal excise tax at the rate of 4% will be imposed on the excess, if
any, of the Fund's "required distribution" over actual distributions in any
calendar year. Generally, the "required distribution" is 98% of the Fund's
ordinary income for the calendar year plus 98% of its net capital gains
recognized during the one year period ending on October 31 of the calendar year
plus undistributed amounts from prior years. The Fund intends to make
distributions sufficient to avoid imposition of the excise tax.
The Trust is required to withhold and remit to the U.S. Treasury a portion
(31%) of dividend income on any account unless the shareholder provides a
taxpayer identification number and certifies that such number is correct and
that the shareholder is not subject to backup withholding.
DESCRIPTION OF THE TRUST
- ------------------------
Trust Organization
The Trust, an open-end, diversified management investment company, was
organized on June 25, 1997 as a Delaware business trust. The Fund is a successor
by reorganization to The REvest Growth & Income Fund, which was a series of The
Royce Fund, a Delaware business trust. The reorganization was effected on
September 25, 1998 under an Agreement and Plan of Reorganization pursuant to
which the assets and liabilities of The REvest Growth & Income Fund were
transferred into the Trust, with the Fund becoming the sole series of the Trust
and Ebright Investments, Inc. (formerly Royce, Ebright & Associates, Inc.)
continuing as investment adviser. A copy of the Trust's Certificate of Trust is
on file with the Secretary of State of Delaware, and a copy of the Trust
Instrument, its principal governing document, is available for inspection by
shareholders at the Trust's offices at 511 Congress Street, Portland, Maine
04101.
Shares of the Fund have equal voting rights and liquidation rights. When
matters are submitted to shareholders for a vote, each shareholder is entitled
to one vote for each full share owned and fractional votes for fractional shares
owned. The Fund is not required to hold annual meetings of shareholders. The
Trustees shall promptly call and give notice of a meeting of shareholders for
the purpose of voting upon removal of any Trustee when requested to do so in
writing by shareholders holding 10% or more of the Fund's outstanding shares.
The Fund will comply with the provisions of Section 16(c) of the 1940 Act in
order to facilitate communications among shareholders.
14
<PAGE>
Each share of the Fund represents an equal proportionate interest in the
assets and liabilities belonging to the Fund with each other share of the Fund
and is entitled to such dividends and distributions out of the income belonging
to the Fund as are declared by the Trustees. The shares do not have cumulative
voting rights or any preemptive or conversion rights, and the Trustees have the
authority from time to time to divide or combine the shares of the Fund into a
greater or lesser number of shares of the Fund so long as the proportionate
beneficial interest in the assets belonging to the Fund are in no way affected.
In case of any liquidation of the Fund, the holders of shares of the Fund will
be entitled to receive as a class a distribution out of the assets, net of the
liabilities, belonging to the Fund. No shareholder is liable to further calls or
to assessment by the Fund without his express consent.
Shareholder Liability
Generally, shareholders will not be personally liable for the obligations
of the Fund or of the Trust under Delaware law. The Delaware Business Trust Act
provides that a shareholder of a Delaware business trust is entitled to the same
limited liability extended to shareholders of private corporations for profit
organized under the Delaware General Corporation Law. No similar statutory or
other authority limiting business trust shareholder liability exists in many
other states. As a result, to the extent that the Trust or a shareholder of the
Trust is subject to the jurisdiction of courts in those states, the courts may
not apply Delaware law and may thereby subject Trust shareholders to liability.
To guard against this possibility, the Trust Instrument (1) requires that every
written obligation of the Trust contain a statement that such obligation may be
enforced only against the Trust's assets (however, the omission of this
disclaimer will not operate to create personal liability for any shareholder);
and (2) provides for indemnification out of Trust property of any Trust
shareholder held personally liable for the Trust's obligations. Thus, the risk
of a Trust shareholder incurring financial loss beyond his investment because of
shareholder liability is limited to circumstances in which: (1) a court refuses
to apply Delaware law; (2) no contractual limitation of liability was in effect;
and (3) the Trust itself would be unable to meet its obligations. In light of
Delaware law, the nature of the Trust's business and the nature of its assets,
management believes that the risk of personal liability to a Trust shareholder
is extremely remote.
HISTORICAL PERFORMANCE INFORMATION
- ----------------------------------
From time to time, the Fund may advertise average annual total return.
Average annual total return quotations will be computed by finding the average
annual compounded rates of return over 1, 5 and 10 year periods that would
equate the initial amount invested to the ending redeemable value, according to
the following formula:
n
P (1 + T) = ERV
Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5 and 10 year periods at the end of the 1, 5 or 10
year periods (or fractional portion thereof)
The calculation of average annual total return assumes the reinvestment of all
dividends and distributions and will include performance of the Fund's
predecessor, The REvest Growth & Income Fund, a series of The Royce Fund, prior
to August 1, 1994. The average annual total returns of the Fund for the periods
ended December 31, 1999 are as follows:
1 Year -3.32%
5 Year 9.76%
Since Inception (August 1, 1994) 8.38%
The Fund may also advertise total return (a "nonstandardized quotation")
which is calculated differently from average annual total return. A
nonstandardized quotation of total return may be a cumulative return which
15
<PAGE>
measures the percentage change in the value of an account between the beginning
and end of a period, assuming no activity in the account other than reinvestment
of dividends and capital gains distributions. The Fund may also show, for
comparative purposes and as information to Fund shareholders who previously were
shareholders in The REvest Growth & Income Fund, the return data for the in The
REvest Growth & Income Fund, and may combine such data for the year of
reorganization. If so, such depiction will be clearly noted in text accompanying
such depiction. The Fund's total returns as calculated in this manner for each
year since inception are as follows:
August 1 - December 31, 1994 -2.9%
Year Ended December 31, 1995 16.2%
Year Ended December 31, 1996 22.3%
Year Ended December 31, 1997 23.5%
Year Ended December 31, 1998 -6.1%
Year Ended December 31, 1999 -3.32%
A nonstandardized quotation may also indicate average annual rates of return
over periods other than those specified for average annual total return. For
example, the Fund's average annual compounded rate of return for the five years
ended December 31, 1999 was 9.76%. A nonstandardized quotation of total return
will always be accompanied by the Fund's average annual total return as
described above.
The performance quotations described above are based on historical earnings
and are not intended to indicate future performance.
From time to time the Fund may advertise its performance rankings as
published by recognized independent mutual fund statistical services such as
Lipper Analytical Services, Inc. ("Lipper"), or by publications of general
interest such as FORBES, MONEY, THE WALL STREET JOURNAL, BUSINESS WEEK,
BARRON'S, FORTUNE or MORNINGSTAR MUTUAL FUND VALUES. The Fund may also compare
its performance to that of other selected mutual funds, averages of the other
mutual funds within their categories as determined by Lipper, or recognized
indicators such as the Dow Jones Industrial Average, the Standard & Poor's 500
Stock Index, the Russell 2000 Index, the NASDAQ Composite Index and the Value
Line Composite Index. In connection with a ranking, the Fund may provide
additional information, such as the particular category of funds to which the
ranking relates, the number of funds in the category, the criteria upon which
the ranking is based, and the effect of fee waivers and/or expense
reimbursements, if any. The Fund may also present its performance and other
investment characteristics, such as volatility or a temporary defensive posture,
in light of the Adviser's view of current or past market conditions or
historical trends.
In assessing such comparisons of performance an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the Fund's portfolio, that the averages are
generally unmanaged and that the items included in the calculations of such
averages may not be identical to the formula used by the Fund to calculate its
performance. In addition, there can be no assurance that the Fund will continue
this performance as compared to such other averages.
Advertising for the Fund may contain examples of the effects of periodic
investment plans, including the principle of dollar cost averaging. In such a
program, an investor invests a fixed dollar amount in a fund at periodic
intervals, thereby purchasing fewer shares when prices are high and more shares
when prices are low. While such a strategy does not assure a profit or guard
against loss in a declining market, the investor's average cost per share can be
lower than if fixed numbers of shares are purchased at the same intervals. In
evaluating such a plan, investors should consider their ability to continue
purchasing shares during periods of low price levels.
ANNUAL REPORT
- -------------
The audited financial statements required to be included herein are
incorporated by reference to the Annual Report to Shareholders of the Fund for
the fiscal year ended December 31, 1999
16
<PAGE>
ANNUAL REPORT
DECEMBER 31, 1999
[GRAPHIC]
The REvest
Value Fund
A No-Load Mutual Fund
Managed in Maine
A Value-Oriented
Investment In Small and
Medium-Sized Company Equities
A Series of The Winter Harbor Fund
<PAGE>
PROFILE OF THE FUND
- --------------------------------------------------------------------------------
The REvest Value Fund ("REvest" or the "Fund") is a no-load series of The Winter
Harbor Fund, an open-end, diversified management investment company. Jennifer E.
Goff, President of Ebright Investments, Inc. ("EII" or the "Adviser"), a
registered investment adviser, is responsible for the management of the Fund's
portfolio, subject to the authority of the Fund's Board of Trustees.
REvest 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. By combining the prospect of vitality with a
value-oriented selection process, we believe we are able to buy Great Companies
at Great Prices. These tenets are elaborated upon in the following outline:
SMALL AND
MID-CAP STOCKS
We believe these securities have more potential for capital appreciation because
they have historically generated higher returns for investors, and because they
are generally less well-known, making them more likely to be improperly priced
by the marketplace. 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% will
be issued by companies with market capitalizations between $200 million and $2
billion at the time of investment.
VALUE-ORIENTATION,
PLUS VITALITY
We look for companies with "value discrepancies," or market prices below our
assessment of their "real" business worth. From that group, we select companies
with vitality or ongoing programs that should allow them to increase their
long-term value. We believe profits can come from both the continued success and
growth of each portfolio company, as well as the eventual elimination of any
value discrepancy we believe was present at the time of purchase.
CONSISTENT
PORTFOLIO
CHARACTER
We will automatically close the Fund to new investors beginning on March 1 after
the end of any calendar year during which its assets reach $350 million. Since
we specialize in small and medium-size companies, we believe a larger asset base
could limit our flexibility in buying and selling for the Fund, or force us to
invest in more companies than we can closely follow. By placing practical limits
on our size, we believe we can make it possible for the Fund's investment
adviser to actively manage the portfolio, and enable the Fund to maintain a
constant character over its lifetime.
Please keep in mind, however, that this is a "fixed" style of money management.
REvest does not change from year-to-year, or attempt in any way to anticipate
market trends. Because of this, the Fund is often out-of-sync with the general
equity markets, and short-term performance may be better or worse than either
the "market" or other less specialized funds. Management follows this very
disciplined and consistent path because it believes that in the long run, this
"fixed" characteristic can lead to premium long-term returns.
<PAGE>
MANAGER'S LETTER [LOGO]
- --------------------------------------------------------------------------------
Dear Friends and Fellow Shareholders:
I should be happy to report to you that finally, after five years, small-cap
stocks outperformed large-cap stocks in 1999. For the year, the Russell 2000
Index was up 21.3%, as compared to up 21.1% for the S&P 500 Index.
Unfortunately, the entire outperformance of the Russell 2000 was the result of
its growth components. Breaking the Russell 2000 down into its lesser indices,
the Russell Growth Index was up 43.1% for the year, while the Russell 2000 Value
Index was down 1.5%. In this environment, REvest, with its small-cap, value
orientation, was down 3.3%.
The year had many crosscurrents for the fundamental investor. On the one hand,
the domestic economy continued to expand, bringing us to within two months of
being the longest economic expansion in history. Low unemployment and inflation
prevailed, leading to increased consumer confidence and robust spending. A
favorable interest rate environment, combined with improving productivity,
enabled companies to extend the remarkable earnings growth that has marked the
decade. In addition, it appears likely that these same fundamentals, which aided
performance in 1999, will remain intact into the new year.
On the other hand, this "goldilocks" economy spawned a dangerous "new paradigm"
mentality where past performance guarantees future results. The rationale goes
something like this: during a period of declining interest rates, growth stocks
tend to outperform all other styles and asset classes because of the discount
rate impact on securities valuation. Therefore, if one wants the best
performance, buy those stocks with the highest current or potential sales
growth, disregarding all other considerations. In this day and age, that means
one would buy technology, telecommunications and Internet issues.
While almost all of the leading averages scored larger gains than they had in
the preceding twelve months as a result of the growth influence, the NASDAQ
Composite, home to the technology, telecommunications and Internet giants,
outshone them all. The NASDAQ was up 86.9% for the year, the largest gain for
any major market index in U.S. stock market history.
The contribution of rampant speculation to such a move was readily apparent.
More than eight hundred stocks in the NASDAQ, or one in six, doubled in value in
1999. An incredible thirty-seven gained 1,000%. Companies in the S&P 500 with no
earnings were up an average of 52%, while companies with earnings were down an
average of 2%! Similar statistics exist for the Russell 2000, although companies
losing money were up only 45%. Given the mandate of our Fund, which limits us to
buying equities with measurable earnings and at least a three-year operating
history, it was difficult to compete.
The speculative binge can not continue forever. As the stock market has come to
represent a larger percentage of Gross Domestic Product (the sum of all U.S.
goods and services) than ever before, the Federal Reserve has begun watching it
more closely. The Fed raised rates three times last year, restoring the 1998
cuts that were put in place at the time of the Asian financial crisis, and the
likelihood is that there will be more rate hikes this year. The combination of
rising rates and accelerating earnings growth historically has been the
fundamental catalyst for a rotation from growth to value.
As mentioned, REvest was down 3.3% last year. While we benefited from some
exposure to the technology sector, our commitments to financial and industrial
cyclical concerns more than offset those gains. In a departure from years past,
we have saved more detailed discussion of the Fund's performance for the
Portfolio Summary and Performance Discussion sections of this Annual Report (pp.
2-5). The new format allows us to elaborate more on the specific holdings and
market forces that impacted our performance. We hope you will read these
sections.
In closing, I also want to mention that the Adviser has agreed to limit the
Fund's expense ratio to 1.50% until June 30, 2000. This new limit is effective
as of January 1, 2000 and replaces the cap that expired December 31, 1999.
As always, we want to thank you for your confidence. Your continued support of
our work through the ownership of your shares is much appreciated.
Sincerely,
Jennifer Ebright Goff
Portfolio Manager
President, Ebright Investments, Inc.
January 27, 2000
Note: The S&P 500 and the Russell 2000 are unmanaged indices and include the
reinvestment of dividends.
1
<PAGE>
PORTFOLIO SUMMARY
- --------------------------------------------------------------------------------
The following (unaudited) information provides a "bird's eye" view of the REvest
portfolio as of December 31, 1999. For a more complete picture, the Performance
Discussion, Portfolio of Investments and accompanying financial statements
should be read in their entirety.
VALUE % OF NET ASSETS
----- ---------------
PORTFOLIO
COMPOSITION
Common Stocks:
Micro-Caps (under $200M) ................. $ 1,615,313 9.3%
Small-Caps ($200M - $1B) ................. 10,617,453 61.3%
Mid-Caps ($1B - $2B) ..................... 4,122,343 23.8%
Convertible Bonds ........................... 781,875 4.5%
Assets in Excess of Liabilities ............. 181,611 1.1%
----------- ------
Net Assets .................................. $17,318,595 100.0%
=========== ======
% of net assets
---------------
INDUSTRY
CONCENTRATION
Industrial Cyclicals .................................. 17.4%
Energy ................................................ 12.9%
Financial ............................................. 12.4%
Health ................................................ 11.2%
Technology ............................................ 11.1%
Consumer Products ..................................... 9.4%
Services .............................................. 9.1%
Retail ................................................ 8.6%
Real Estate ........................................... 6.8%
Assets in Excess of Liabilities ....................... 1.1%
AVERAGE FINANCIAL
CHARACTERISTICS
OF PORTFOLIO
COMPANIES
Market Capitalization ................................. $588.4M
P/E Ratio ............................................. 17.6x
P/B Ratio ............................................. 2.2x
Return on Assets ...................................... 6.4%
Return on Equity ...................................... 12.0%
Compound 5-Year EPS Growth Rate ....................... 15.2%
Gross Portfolio Yield ................................. 2.7%
value % of net assets
----- ---------------
TOP TEN EQUITY
POSITIONS
1. The Toro Corporation ..................... $ 559,687 3.2%
2. Berry Petroleum Company .................. 529,375 3.1%
3. Russ Berrie and Company, Inc. ............ 525,000 3.0%
4. Cousins Properties, Inc. ................. 509,062 2.9%
5. Arrow International, Inc. ................ 507,500 2.9%
6. St. Mary Land & Exploration Company ...... 495,000 2.9%
7. Teleflex, Inc. ........................... 469,688 2.7%
8. Peoples Heritage Financial Group, Inc. ... 451,875 2.6%
9. CLARCOR, Inc. ............................ 450,000 2.6%
10. Helix Technology Corporation ............. 448,125 2.6%
2
<PAGE>
PORTFOLIO SUMMARY (Continued) [LOGO]
- --------------------------------------------------------------------------------
As part of our portfolio management philosophy, REvest tries to remain broadly
diversified across nine industry sectors. We believe we are able to identify
undervalued companies and sectors, but we concede we are unable to accurately
determine when that value will be realized. This fundamental approach leads to
better long-term returns, with lower risk.
Only three sectors in the Russell 2000 Value Index were up in 1999: Technology
(+66.3%), Energy (+21.4%) and Healthcare (+6.9%). Finance, the largest sector,
was down 16.9%. All in all, finance stocks contributed negative 5.5 percentage
points to the Index, more than offsetting the positive contribution of the other
three sectors.
REvest's performance paralleled that of the Value Index. The following chart
highlights the year's top ten contributors to the Fund's net realized and
unrealized gain on investment (shown on a per share basis):
TOP TEN EQUITY CONTRIBUTOR'S TO THE FUND'S NET REALIZED AND UNREALIZED GAIN ON
INVESTMENT (PER SHARE)
[GRAPHIC OMITTED]
Not surprisingly, the three largest contributors to the Fund's returns were
technology issues. Helix Technology and Kulicke & Soffa are both semiconductor
capital equipment manufacturers. Each company was bought when the industry was
depressed, they rebounded sharply as chip demand improved. For the year, they
were up 245% and 140%, respectively.
In Focus is the worldwide leader in developing, manufacturing and marketing
multimedia projection products that project information from a personal computer
onto a larger screen. It was added to the portfolio for a second time after
distribution problems in early 1998 caused the stock to slide from $20.00 to
$3.50. Once we were comfortable that the problems were temporary, we established
a position. The stock was up 161% last year.
Rounding out the top five are our two biggest losers last year, Cavalier Homes
and Donegal. Cavalier designs and produces manufactured homes. After reporting
top-line progress of 30% and bottom-line growth of 48% in the first quarter of
1999, the industry rapidly deteriorated in the second quarter. Oversupply led to
price competition, which negatively impacted both revenues and margins for the
remainder of the year. For 1999, Cavalier was down 65%.
We expect that it will take at least a couple more quarters for the industry to
rationalize excess supply and begin to turn around. In the meantime, the
downside risk seems low as the stock is trading at 7 times earnings and 50% of
book value. Cavalier, in our opinion, is a good company. It has a strong balance
sheet, with minimal debt and $22 million in cash, a four million share buyback
program authorized (only 1.5 million shares remain), and a 4% dividend yield. We
plan to continue holding it, for now.
Donegal, a holding company offering property and casualty insurance in the
Mid-Atlantic and Southeast, is similarly plagued by industry overcapacity.
Overcapitalization has led to a difficult pricing environment. Despite moderate
but steady premium growth and a statutory underwriting profit for the previous
ten years, the stock declined 59%.
Not content to wait for a change in the environment, Donegal undertook a
restructuring that is expected to reduce expenses and improve efficiency and
profitability significantly. Estimates for 2000 anticipate earnings of $1.00 per
share, up from $0.45 in 1999. Applying the current multiple of 11 produces a
target price of $11.00, up from the current $6.50, essentially recouping last
year's losses. Once again, downside risk seems low, and there is the benefit of
a 6.4% yield* while we wait.
*Based on December 31, 1999 closing share price and dividend level.
3
<PAGE>
PERFORMANCE DISCUSSION
- --------------------------------------------------------------------------------
The Market
Inflation, interest rates, the Federal Reserve and an understanding of
speculative psychology were crucial in understanding the market's performance in
1999.
The year started off quietly, with large-company issues once again outperforming
small-company equities. Concerns over the health of certain overseas markets
were still prominent, and thus, the "flight to quality" mentality prevailed. By
the end of March, the S&P 500 was up 5.0%, while the Russell 2000 was down 5.4%.
Early in the second quarter, scattered reports began to suggest that the
situation overseas had bottomed, bringing about one of the most dramatic shifts
in sentiment in the current bull market. Investors started to rediscover the
merits of investing in cyclical and small-cap stocks, and a general broadening
of the market followed.
The party did not last long, unfortunately, as the April Consumer Price Index
came in above expectations. This chilling information led to increased
volatility in late May and June, as investors began to speculate about the June
29th Fed meeting and the potential for one or more rate hikes. In the end, the
Fed voted to increase the discount rate 0.25%.
Nevertheless, small-cap stocks were able to make considerable advances in the
second quarter, with the Russell 2000 ending up 15.6%, as compared to 7.0% for
the S&P 500. Unfortunately, this surge was not enough to fully offset the damage
of the first quarter, leaving small companies lagging their larger brethren,
9.3% versus 12.4%, at the half.
The "Fed Watch" mindset continued through much of the Summer and into the Fall.
Each new piece of economic news was scrutinized to see whether it was now more
or less likely that the Fed would raise rates. The answer was a major
determinant in how the market subsequently behaved. While the Fed elected to
raise rates another quarter point on August 24th, it passed on the opportunity
in October. By that time, disappointing corporate earnings and Y2K fears had
already taken much of the air out of the stock market "bubble", much to the
Fed's satisfaction. For the quarter, the S&P 500 was down 6.2%. The Russell 2000
was down 6.3%.
The market swooned the week of October 15th, but upbeat earnings and the revival
of financial-reform legislation enabled the averages to regain most of their
losses the next week. The change in sentiment put the Fed on guard again, and it
raised rates for a third time on November 16th. It had little impact on the
market. The Fed had already indicated that its number one priority on the eve of
the new millennium was maintaining liquidity, so a rate hike at the December
meeting was deemed unlikely. With that in mind, the S&P 500 gained 14.9% and the
Russell 2000 returned 18.4% in the quarter.
For the year, the S&P 500 and the Russell 2000 ended up 21.1% and 21.3%,
respectively. It was the fifth year in a row that the S&P 500 returned greater
than 20%, and the first time in six years that it was outperformed by the
Russell 2000.
The combination of rising rates and accelerating earnings growth is typically
the fundamental catalyst for a rotation from growth to value. We saw a hint of
that in April. In 1999, however, a speculative bubble formed around the
technology and Internet issues, squelching the shift in investor focus. The
effect can be seen most clearly in the style divergence within the Russell 2000.
Breaking the Index down into its two components, the Russell Growth Index was up
43.1% for the year, while the Russell 2000 Value Index was actually down 1.5%.
The 44.6% spread between the two is the widest in history. Similar divergences
were obvious in the other major indices.
Not surprisingly, market breadth, the ratio of advancing versus declining
issues, continued to deteriorate last year. Progressively fewer companies were
responsible for the market's ongoing gains. As illustration, only 45% of the
stocks in the Russell 2000 and 48% of the stocks in the S&P 500 ended the year
in positive territory. The median stock in the Russell 2000 was down 4.9%, and
in the S&P 500, down 1.7%. In both indices, only 7% of stocks ended the year
with new highs. Clearly, the majority of companies were not participating.
It will be interesting to see whether these trends are sustainable into the new
year. There have been many such periods of investor infatuation in the past:
radio in the 1920s, technology in the early and late 1960s, the original "Nifty
Fifty" in the early 1970s, oil and gold in the late 1970s, PCs in the 1980s and
biotech in the early 1990s. In each case, inflated expectations were
disappointed, market prices corrected and more realistic valuations prevailed.
The same is likely to be true of the dazzling stocks in today's market as some
of the hot Internet stocks of a year ago have already experienced significant
declines.
The REvest Value Fund
We at REvest continued to do our best in a market climate that was inhospitable
to our style. While our return in 1999 was on par with both the Russell 2000
Value Index and our peers, we significantly underperformed our primary
benchmark, the Russell 2000. Style divergence was the primary cause. The
exceptional returns of the Growth Index made the Russell 2000 an almost
impossible target to beat without abandoning our methodology.
4
<PAGE>
PERFORMANCE DISCUSSION [LOGO]
- --------------------------------------------------------------------------------
Early in the year, the Adviser's emphasis on yield was a notable benefit to Fund
performance. In the difficult first quarter, yield support held the Fund's loss
to 4.6%, versus the Russell 2000's decline of 5.4%. Unfortunately, it also
served to moderate performance on the upside. For the three months ended June
30, 1999, REvest gained 11.7%, as compared to 15.6% for the Russell 2000. At the
half, the Russell 2000 was up 9.3% and REvest was up 6.5%.
In the second half, however, carefully laid strategies did not work. Technology
was the only place to be. While exposure to energy helped the Fund early on,
above-normal temperatures late in the year, did not. Given increased global
demand for petroleum products and slim inventories, we expect eventually to be
rewarded for our patience.
Similar comments apply to financial and industrial cyclical stocks. Both have
traditionally led the market when it rallies. With concerns surrounding interest
rates ever present and the global economy recovering slower than forecast, both
groups underperformed last year. We expect both concerns to moderate in the new
year. For the third and fourth quarters, REvest was down 9.1% and 0.1%,
respectively.
While we are disappointed with our 1999 performance, we remain committed to our
discipline. Our thoughts on this topic are summed up well by Seth Klarman of the
Baupost Fund: "We underperformed in 1999 not because we abandoned our strict
investment criteria, but because we adhered to them; not because we ignored
fundamental analysis, but because we practiced it; not because we shunned value,
but because we sought it; and not because we speculated, but because we refused
to speculate."
COMPARISON OF CHANGE IN VALUE OF A $10,000 INITIAL INVESTMENT ON AUGUST 1, 1994*
IN THE REVEST VALUE FUND, S&P 500 AND RUSSELL 2000
---------------------------
[GRAPHIC OMITTED]
12/31/99
--------
REvest $15,469
S&P 500 $35,543
Russell 2000 $22,025
---------------------------
FOR PERIODS ENDED DECEMBER 31, 1999
SINCE
1-YEAR 5-YEAR INCEPTION*
------ ------ ----------
REvest Value Fund average annual total return .... -3.32% 9.76% 8.38%
S&P 500 Index average annual total return ........ 21.04% 28.56% 26.45%
Russell 2000 Index average annual total return ... 21.26% 16.51% 23.97%
The above table and preceding narrative depict the historical returns of REvest,
the S&P 500, an unmanaged index representative of large-company stocks, and the
Russell 2000, an unmanaged index representative of small-company stocks. The
Fund's present investment philosophy was followed in each of the periods
identified. All results presented in this Report are on a "total return" basis,
which assumes that all dividends and distributions were reinvested.
The results presented in this Report represent past performance and should not
be considered representative of the "total return" from an investment in the
Fund today. They are provided only to give an historical perspective of the
Fund. The investment return and principal value of the Fund's shares will
fluctuate so that the shares may be worth more or less than their original cost
when redeemed.
*Commencement of Operations - August 1, 1994
5
<PAGE>
PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
December 31, 1999
COMMON STOCKS - 94.4%
SHARES COST VALUE
------ ---- -----
CONSUMER PRODUCTS - 9.4%
30,000 *Helen of Troy Ltd. ............... $ 372,125 $ 217,500
20,000 Russ Berrie and Company, Inc. .... 322,025 525,000
15,000 The Toro Company ................. 390,900 559,687
30,000 Wolverine World Wide, Inc. ....... 388,362 328,125
------------ ------------
1,473,412 1,630,312
------------ ------------
ENERGY - 12.9%
15,000 *Barrett Resources Corporation .... 394,879 441,563
35,000 Berry Petroleum Company, Class A . 355,155 529,375
20,000 Helmerich & Payne, Inc. .......... 396,284 436,250
20,000 Penn Virginia Corporation ........ 334,052 335,000
20,000 St. Mary Land & Exploration Company 374,532 495,000
------------ ------------
1,854,902 2,237,188
------------ ------------
FINANCIAL - 12.4%
15,000 Chittenden Corporation ........... 405,900 444,375
30,000 Donegal Group, Inc. .............. 308,986 191,250
30,000 Peoples Heritage Financial Group, Inc. 209,263 451,875
10,000 Protective Life Corporation ...... 319,600 318,125
25,000 Susquehanna Bancshares, Inc. ..... 287,536 396,875
15,000 Webster Financial Corporation .... 384,375 353,438
------------ ------------
1,915,660 2,155,938
------------ ------------
HEALTH - 11.2%
10,000 Analogic Corporation ............. 290,000 330,000
17,500 Arrow International, Inc. ........ 337,148 507,500
12,500 Diagnostic Products Corporation .. 347,488 306,250
25,000 *IDEXX Laboratories, Inc. ......... 340,222 403,125
20,000 Invacare Corporation ............. 387,383 401,250
------------ ------------
1,702,241 1,948,125
------------ ------------
INDUSTRIAL CYCLICALS - 17.4%
25,000 CLARCOR, Inc. .................... 333,583 450,000
10,000 Greif Bros. Corporation, Class A . 216,950 297,500
12,500 Kaydon Corporation ............... 362,681 335,156
15,000 LSI Industries, Inc. ............. 340,000 324,375
12,500 M.A. Hanna Company ............... 188,250 136,719
11,200 Matthews International Corporation 257,178 308,000
12,500 Oil-Dri Corporation of America ... 192,688 179,688
17,500 Regal-Beloit Corporation ......... 361,444 360,938
15,000 Teleflex, Inc. ................... 298,188 469,688
12,500 Wausau-Mosinee Paper Corporation . 213,531 146,094
------------ ------------
2,764,493 3,008,158
------------ ------------
REAL ESTATE - 5.2%
30,000 Cavalier Homes, Inc. ............. 172,051 118,125
15,000 Cousins Properties, Inc. ......... 311,717 509,062
17,500 New Plan Excel Realty Trust ...... 347,400 276,718
------------ ------------
831,168 903,905
------------ ------------
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
PORTFOLIO OF INVESTMENTS (Continued) [LOGO]
- --------------------------------------------------------------------------------
December 31, 1999
COMMON STOCKS - 94.4% (Continued)
SHARES COST VALUE
RETAIL - 8.6%
15,000 Applebee's International, Inc. ... $ 341,436 $ 442,500
15,000 CBRL Group, Inc. ................. 212,813 145,546
20,000 Claire's Stores, Inc. ............ 374,794 447,500
35,000 *Stein Mart, Inc. ................. 327,500 199,062
30,000 *West Marine, Inc. ................ 309,062 247,500
------------ ------------
1,565,605 1,482,108
------------ ------------
SERVICES - 9.1%
10,000 Chemed Corporation ............... 323,247 286,250
25,000 *Computer Horizons Corporation .... 369,062 404,688
10,000 National Data Corporation ........ 326,900 339,375
30,000 *Right Management Consultants, Inc. 391,375 345,000
10,000 The Standard Register Company .... 167,862 193,750
------------ ------------
1,578,446 1,569,063
------------ ------------
TECHNOLOGY - 8.2%
10,000 Helix Technology Corporation ..... 164,375 448,125
15,000 *In Focus Systems, Inc. ........... 138,750 347,812
10,000 *Kulicke & Soffa Industries, Inc. . 192,542 425,625
30,000 *Planar Systems, Inc. ............. 206,750 198,750
------------ ------------
702,417 1,420,312
------------ ------------
TOTAL COMMON STOCKS ........................ $ 14,388,344 $ 16,355,109
------------ ------------
CORPORATE BONDS - 4.5%
PAR COST VALUE
$ 300,000 MSC.Software Corporation 7.875%
Conv. Sub. Deb. due 8/18/04 ..... $ 289,611 $ 267,375
300,000 Richardson Electronics, Ltd. 8.25%
Conv. Sub. Deb. due 6/15/06 ...... 259,500 243,750
300,000 Sizeler Property Investors, Inc.
8.00% Conv. Sub. Deb. due 7/15/03 278,250 270,750
------------ ------------
TOTAL CORPORATE BONDS ....................... $ 827,361 $ 781,875
------------ ------------
TOTAL INVESTMENTS AT VALUE - 98.9% .......... $ 15,215,705 $ 17,136,984
------------ ============
OTHER ASSETS IN EXCESS OF LIABILITIES - 1.1% 181,611
------------
NET ASSETS - 100.0% ......................... $ 17,318,595
============
* Non-income producing.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
December 31, 1999
ASSETS:
Investments, at value (acquisition cost: $15,215,705) (Note 2) .. $ 17,136,984
Cash ............................................................ 166,010
Receivable for capital shares sold .............................. 50
Interest receivable ............................................. 19,123
Dividends receivable ............................................ 16,375
Receivable from Adviser ......................................... 6,954
Other assets .................................................... 15,680
------------
Total assets ................................................. 17,361,176
------------
LIABILITIES:
Payable to affiliates (Note 5) .................................. 5,250
Payable for capital shares redeemed ............................. 26,931
Other accrued expenses and liabilities .......................... 10,400
------------
Total liabilities ............................................ 42,581
------------
Net assets ................................................... $ 17,318,595
============
NET ASSETS:
Paid-in capital ................................................. $ 15,384,616
Undistributed net investment income ............................. 8,414
Accumulated net realized gains from security transactions ....... 4,286
Net unrealized appreciation on investments ...................... 1,921,279
------------
Net assets ................................................... $ 17,318,595
============
PRICE PER
SHARE:
Net asset value, offering and redemption price per share (Note 2)
($17,318,595/1,755,056 shares outstanding) ...................... $ 9.87
============
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
1999 1998
------------ ------------
INVESTMENT
OPERATIONS:
<S> <C> <C>
Net investment income .......................................... $ 257,303 $ 378,008
Net realized gains from security transactions .................. 1,202,089 3,193,187
Net change in unrealized appreciation/depreciation
on investments .............................................. (2,126,314) (5,641,998)
------------ ------------
Net decrease in net assets from operations .................. (666,922) (2,070,803)
------------ ------------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income ..................................... (261,710) (371,064)
From net realized gains on investments ......................... (841,632) (2,560,610)
------------ ------------
Net decrease in net assets from distributions to shareholders (1,103,342) (2,931,674)
------------ ------------
CAPITAL SHARE
TRANSACTIONS
(NOTE 4):
Proceeds from shares sold ...................................... 748,290 2,095,317
Reinvestment of distributions in shares ........................ 978,647 2,687,414
Payments for shares redeemed ................................... (7,368,201) (13,935,671)
------------ ------------
Net decrease in net assets from capital share transactions .. (5,641,264) (9,152,940)
------------ ------------
Total decrease in net assets ................................ (7,411,528) (14,155,417)
------------ ------------
NET ASSETS:
Beginning of year .............................................. 24,730,123 38,885,540
------------ ------------
End of year .................................................... $ 17,318,595 $ 24,730,123
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME ............................ $ 8,414 $ 12,821
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STATEMENT OF OPERATIONS [LOGO]
- --------------------------------------------------------------------------------
For the Year Ended December 31, 1999
INVESTMENT
INCOME:
Interest ........................................................ $ 170,756
Dividends ....................................................... 360,250
-----------
Total investment income ...................................... 531,006
-----------
EXPENSES:
Investment advisory fees (Note 5) ............................... 210,541
Accounting services fees (Note 5) ............................... 24,000
Administrative services fees (Note 5) ........................... 24,000
Professional fees ............................................... 17,416
Transfer agent fees (Note 5) .................................... 15,000
Custodian fees .................................................. 13,273
Trustees' fees and expenses ..................................... 8,768
Postage and supplies ............................................ 7,571
Printing of shareholder reports ................................. 5,240
Insurance expense ............................................... 4,900
Registration fees ............................................... 3,980
Pricing costs ................................................... 1,539
-----------
Total expenses ............................................... 336,228
Fees waived by the Adviser (Note 5) ............................. (62,525)
-----------
Net expenses ................................................. 273,703
-----------
NET INVESTMENT INCOME ........................................... 257,303
-----------
REALIZED AND
UNREALIZED GAIN
(LOSS) ON
INVESTMENTS:
Net realized gains from security transactions ................... 1,202,089
Net change in unrealized appreciation/depreciation on investments (2,126,314)
-----------
Net realized and unrealized loss on investments ................. $ (924,225)
-----------
NET DECREASE IN NET ASSETS FROM INVESTMENT OPERATIONS ........... $ (666,922)
===========
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
This table is presented to show selected data for a share outstanding through
each period, and to assist shareholders in evaluating the Fund's performance.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
INVESTMENT
OPERATIONS:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ......... $ 10.88 $ 13.00 $ 12.21 $ 10.73 $ 9.66
---------- ---------- ---------- ---------- ----------
Net investment income ...................... 0.14 0.15 0.21 0.21 0.18
Net realized and unrealized gain (loss)
on investments .......................... (0.51) (1.02) 2.64 2.16 1.38
---------- ---------- ---------- ---------- ----------
Total from investment operations ........ (0.37) (0.87) 2.85 2.37 1.56
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income ................. (0.14) (0.15) (0.19) (0.21) (0.17)
From net realized gain on investments ...... (0.50) (1.10) (1.87) (0.68) (0.32)
---------- ---------- ---------- ---------- ----------
Total from distributions to shareholders (0.64) (1.25) (2.06) (0.89) (0.49)
---------- ---------- ---------- ---------- ----------
Net asset value, end of year ............... $ 9.87 $ 10.88 $ 13.00 $ 12.21 $ 10.73
========== ========== ========== ========== ==========
RATIOS AND
SUPPLEMENTAL
DATA:
Total return ............................... (3.32)% (6.12)% 23.50% 22.27% 16.23%
Net assets, end of period (000's) .......... $ 17,319 $ 24,730 $ 38,886 $ 42,099 $ 35,804
Ratio of net expenses to average net assets1 1.29% 1.30% 1.26% 1.29% 1.30%
Ratio of net investment income to
average net assets ...................... 1.22% 1.20% 1.60% 1.78% 1.73%
Portfolio turnover rate .................... 41% 35% 54% 64% 53%
</TABLE>
1 Absent fee waivers by the Adviser, the ratios of expenses to average net
assets would have been 1.59% and 1.37% for the years ended December 31,
1999 and 1998, respectively (Note 5).
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION.
The REvest Value Fund (the "Fund") is a no-load series of The Winter Harbor Fund
(the "Trust"), a diversified open-end investment management company organized as
a Delaware business trust.
The Fund primarily seeks long-term growth and secondarily current income by
investing in a broadly diversified portfolio of common stocks and convertible
securities of small and medium-sized companies.
2. SIGNIFICANT ACCOUNTING POLICIES.
The following is a summary of the Trust's significant accounting policies:
Security Valuation. The Fund's portfolio securities are valued as of the close
of business of the regular session of trading on the New York Stock Exchange
(normally 4:00 p.m., Eastern Time). Securities traded on a national stock
exchange or quoted by NASDAQ are valued based upon the closing price on the
principal exchange where the security is traded, or, if not traded on a
particular day, at the closing bid price. U.S. Government obligations are valued
at their most recent bid prices as obtained from one or more of the major market
makers for such securities. 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.
Share Valuation. The net asset value per share of the Fund is calculated daily
by dividing the total value of the Fund's assets, less liabilities, by the
number of shares outstanding. The offering price and redemption price per share
of the Fund is equal to the net asset value per share.
Investment Income and Distributions to Shareholders. Dividends arising from net
investment income are declared and paid quarterly and distributions from net
realized gains, if any, are paid annually in December. These dividends and
distributions are recorded on the ex-date and are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles.
Securities Transactions. Security transactions are accounted for on the trade
date. Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. Realized gains and losses from security
transactions and unrealized appreciation and depreciation on investments are
determined on the basis of identified cost for book and tax purposes.
Repurchase Agreements. The Fund enters into repurchase agreements with respect
to its portfolio securities solely with Firstar, N.A. ("Firstar"), the custodian
of its assets. The Fund restricts repurchase agreements to maturities of no more
than seven days. Securities pledged as collateral for repurchase agreements are
held by Firstar until maturity of the repurchase agreements. Repurchase
agreements could involve certain risks in the event of default or insolvency of
Firstar, including possible delays or restrictions upon the ability of the Fund
to dispose of the underlying securities.
Estimates. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
Federal Income Tax. It is the Fund's policy to comply with the special
provisions of the Internal Revenue Code available to regulated investment
companies. As provided therein, in any fiscal year in which the Fund so
qualifies and distributes at least 90% of its taxable net income, the Fund (but
not the shareholders) will be relieved of federal income tax on the income
distributed. Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as dividends in
each calendar year at least 98% of its net investment income (earned during the
calendar year) and 98% of its net realized capital gains (earned during the
twelve months ended October 31) plus undistributed amounts from prior years.
Based upon the federal income tax cost of portfolio investments of $15,208,036
as of December 31, 1999, the Fund had net unrealized appreciation of $1,874,947,
consisting of gross unrealized appreciation of $3,039,326 and $1,164,379 of
gross unrealized depreciation.
3. INVESTMENT TRANSACTIONS.
For the year ended December 31, 1999, cost of purchases and proceeds from sales
of portfolio securities, other than short-term investments, amounted to
$8,192,281 and $14,621,190, respectively.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued) [LOGO]
- --------------------------------------------------------------------------------
4. CAPITAL SHARES.
The Board of Trustees has authority to issue an unlimited number of shares of
beneficial interest of the Fund, with a par value of $.001. Share transactions
were as follows:
YEAR ENDED
DECEMBER 31,
1999 1998
---------- ----------
Sold ................................... 69,802 175,492
Reinvested ............................. 99,773 256,185
Redeemed ............................... (687,422) (1,150,578)
---------- ----------
Net decrease in shares outstanding ..... (517,847) (718,901)
Shares outstanding, beginning of year .. 2,272,903 2,991,804
---------- ----------
Shares outstanding, end of year ........ 1,755,056 2,272,903
========== ==========
Shares redeemed within one year of opening a shareholder account are subject to
a 1.0% redemption fee.
5. TRANSACTIONS WITH AFFILIATES.
Certain trustees and officers of the Trust are also officers of Ebright
Investments, Inc. (the "Adviser"), or of Countrywide Fund Services, Inc.
("CFS"), the administrative services agent, shareholder servicing and transfer
agent, and accounting services agent for the Trust.
Investment Advisory Agreement. The Fund's investments are managed by the Adviser
pursuant to the terms of an Advisory Agreement. The Fund pays the Adviser an
investment advisory fee, computed and accrued daily and paid monthly, at an
annual rate of 1.00% of its average daily net assets.
In order to voluntarily reduce operating expenses of the Fund during the year
ended December 31, 1999, the Adviser waived $62,525 of its investment advisory
fees.
Administration Agreement. Under the terms of an Administration Agreement, CFS
supplies non-investment related administrative and compliance services for the
Fund. CFS supervises the preparation of reports to shareholders, reports to and
filings with the Securities and Exchange Commission and state securities
commissions, and materials for meetings of the Board of Trustees. For these
services, CFS receives a monthly fee from the Fund at an annual rate of 0.09% on
the Fund's average daily net assets up to $100 million; 0.075% on the next $100
million; and 0.05% on such net assets in excess of $200 million, subject to a
$2,000 minimum monthly fee.
Transfer Agent Agreement. Under the terms of a Transfer, Dividend Disbursing,
Shareholder Service and Plan Agency Agreement, CFS maintains the records of each
shareholder's account, answers shareholders' inquiries concerning their
accounts, processes purchases and redemptions of the Fund's shares, acts as
dividend and distribution disbursing agent and performs other shareholder
service functions. For these services, CFS receives a monthly fee based on the
number of shareholder accounts, subject to a $1,250 minimum monthly fee. In
addition, the Fund pays CFS out-of-pocket expenses including, but not limited
to, postage and supplies.
Accounting Services Agreement. Under the terms of an Accounting Services
Agreement, CFS calculates the daily net asset value per share and maintains the
financial books and records of the Fund. For these services, CFS receives a
monthly fee, based on current net assets, of $2,000 from the Fund. In addition,
the Fund pays CFS certain out-of-pocket expenses incurred by CFS in obtaining
valuations of the Fund's portfolio securities.
Underwriting Agreement. Under the terms of an Underwriting Agreement, CW Fund
Distributors, Inc. (the "Underwriter") serves as the exclusive agent for the
distribution of the Fund's shares. The Underwriter is an affiliate of CFS by
reason of common ownership.
Shareholder Service Plan. The Trust has adopted a Shareholder Service Plan (the
"Plan"). Under the Plan, the Trust may enter into shareholder service agreements
pursuant to which a shareholder service provider performs certain shareholder
services not otherwise provided by the transfer agent. For these services, the
Adviser pays the shareholder service provider a fee at an annual rate of up to
0.25% of the average daily net assets attributable to shares owned by investors
for which the shareholder service provider maintains a servicing relationship.
The Fund may reimburse the Adviser such payments in an amount not to exceed
0.25% per annum of the average daily net assets of the Fund. For the year ended
December 31, 1999, no shareholder servicing fees were paid by the Adviser or
reimbursed or accrued by the Fund.
6. FEDERAL TAX INFORMATION FOR SHAREHOLDERS (Unaudited).
On December 17, 1999, the Fund declared and paid a long-term capital gain of
$1,204,508 or $0.69 per share. In January 2000, shareholders were provided with
Form 1099-DIV which reported the amount and tax status of the capital gain
distributions paid during the calendar year 1999.
11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Trustees of The Winter Harbor Fund and Shareholders of The
REvest Value Fund:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of changes in net assets
and of operations and the financial highlights present fairly, in all material
respects, the financial position of The REvest Value Fund (the "Fund") at
December 31, 1999, the changes in its net assets for each of the two years in
the period then ended, the results of its operations for the year then ended and
the financial highlights for each of the five years in the period then ended, in
conformity with accounting principles generally accepted in the United States.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at December 31, 1999 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
Columbus, Ohio
February 18, 2000
12
<PAGE>
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
INVESTMENTS
Questions concerning the Fund's investments can be directed to Jennifer Goff,
the Fund's portfolio manager, by calling (800) 277-5573. We are one of a small
number of funds where the manager is available to talk directly to investors. If
Ms. Goff is traveling she will return your call when she returns to the office.
We consider our shareholders as true partners with us in the Fund.
GENERAL
Cornelia Morin, EII's Customer Service Officer, is available to answer questions
about the Fund or provide you with the Fund's current literature. Ms. Morin can
also be reached at (800) 277-5573. Ms. Morin maintains a mailing list of
shareholders and other interested parties for Fund mailings such as our
financial reports and special interim shareholder letters. If you are not on the
mailing list and would like to be included, please contact Ms. Morin.
E-MAIL
Electronic correspondence for the Adviser can now be sent to:
[email protected]
DISTRIBUTION SUMMARY
- --------------------------------------------------------------------------------
QUARTER PAYDATE INCOME ST GAINS LT GAINS REINVEST PRICE
- --------------------------------------------------------------------------------
1994
- --------------------------------------------------------------------------------
3RD Quarter --
4TH Quarter 12/30/94 $ 0.050 -- -- $ 9.66
- --------------------------------------------------------------------------------
1995
- --------------------------------------------------------------------------------
1ST Quarter 03/24/95 0.045 -- -- 9.91
2ND Quarter 06/30/95 0.045 -- -- 10.55
3RD Quarter 09/25/95 0.040 -- -- 11.20
4TH Quarter 12/29/95 0.040 $ 0.160 $ 0.160 10.73
- --------------------------------------------------------------------------------
1996
- --------------------------------------------------------------------------------
1ST Quarter 03/15/96 0.050 -- -- 11.06
2ND Quarter 06/14/96 0.050 -- -- 11.90
3RD Quarter 09/13/96 0.060 -- -- 11.77
4TH Quarter 12/31/96 0.050 0.160 0.520 12.21
- --------------------------------------------------------------------------------
1997
- --------------------------------------------------------------------------------
1ST Quarter 03/14/97 0.055 -- -- 12.64
2ND Quarter 06/13/97 0.055 -- -- 13.09
3RD Quarter 09/12/97 0.060 -- -- 14.68
4TH Quarter 12/31/97 0.020 0.760 1.110 13.00
- --------------------------------------------------------------------------------
1998
- --------------------------------------------------------------------------------
1ST Quarter 03/14/98 0.050 -- -- 13.43
2ND Quarter 06/13/98 0.030 -- -- 12.93
3RD Quarter 09/21/98 0.040 -- 0.930 10.22
4TH Quarter 12/31/98 0.025 -- 0.175 10.88
- --------------------------------------------------------------------------------
1999
- --------------------------------------------------------------------------------
1ST Quarter 03/31/99 0.045 -- -- 10.33
2ND Quarter 06/30/99 0.030 -- -- 11.51
3RD Quarter 09/30/99 0.030 -- -- 10.43
4TH Quarter 12/17/99 0.033 -- 0.500 9.63
- --------------------------------------------------------------------------------
13
<PAGE>
This report must be accompanied or preceded by a current Prospectus of the Fund.
Ebright Investments, Inc.
Investment Adviser
511 Congress Street, 9th Floor
Portland, ME 04101
(207) 774-7455 o (800) 277-5573
Fax (207) 772-7370
REvest
Value Fund
P.O. Box 5354
Cincinnati, OH 45201-5354
(877) 473-8378
A Series of The Winter Harbor Fund
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Trust Instrument of Registrant, dated June 25, 1997, as amended
July 10, 1997*
(b) None
(c) 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 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 preferences, voting powers,
rights and privileges of such Series or Classes as the Trustees
may from time to
1
<PAGE>
time determine, to divide or combine the Shares or 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.
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."
(d)(1) Investment Advisory Agreement between Registrant and Ebright
Investments, Inc.*
(e) Underwriting Agreement between Registrant and CW Fund
Distributors, Inc.*
(f) None
(g) Custody Agreement between Registrant and Firstar Bank, N.A.*
(h)(1) Transfer, Dividend Disbursing, Shareholder Service and Plan
Agency Agreement between Registrant and Countrywide Fund
Services, Inc.*
(h)(2) Administration Agreement between Registrant and Countrywide Fund
Services, Inc.*
(h)(3) Accounting Services Agreement between Registrant and Countrywide
Fund Services, Inc.*
(i) Opinion of Counsel to Registrant*
(j) Consent of PricewaterhouseCoopers LLP
(k) None
(l) None
(m) Shareholder's Services Plan*
(n) Not Applicable
(o) None
- ---------------
* Incorporated by reference to the Registrant's registration statement on Form
N-1A previously filed.
2
<PAGE>
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
There are no persons directly or indirectly controlled by or under
common control with the Registrant.
ITEM 25. 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 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
3
<PAGE>
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 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
4
<PAGE>
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."
(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 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 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
(a) Ebright Investments, Inc.
5
<PAGE>
The descriptions of Ebright Investments, Inc. under the caption "Management
of the Trust" in the Prospectus and "Investment Advisory Services" in the
Statement of Additional Information are incorporated by reference herein.
- --------------------------------------------------------------------------------
Name Title Business Connection
- --------------------------------------------------------------------------------
Jennifer E. Goff President, Director Ebright Investments, Inc.
- --------------------------------------------------------------------------------
Ellen E. Carlton Vice President, Director Ebright Investments, Inc.
-----------------------------------------------------
Auditor O'Neil Hagaman
1025 16th Avenue South,
Ste 202
Nashville, Tennessee
37212
- --------------------------------------------------------------------------------
Joyce Marie Ebright Director Ebright Investments, Inc.
-----------------------------------------------------
Manager Ebright Properties
Limited
50 Portland Pier
Portland, Maine 04101
- --------------------------------------------------------------------------------
Johann Hendrikus Gouws Director Ebright Investments, Inc.
-----------------------------------------------------
President Gouws Capital
Management, Inc.
Chairman Acadia Trust, N.A.
511 Congress Street
Portland, Maine 04101
- --------------------------------------------------------------------------------
Richard E. Curran, Jr. Director Ebright Investments, Inc.
-----------------------------------------------------
Senior Vice President Gouws Capital
Management, Inc.
President Acadia Trust, N.A.
511 Congress Street
Portland, Maine 04101
- --------------------------------------------------------------------------------
ITEM 27. PRINCIPAL UNDERWRITERS
(a) CW Fund Distributors, Inc. also acts as underwriter for the
following open-end investment companies: The Bjurman Funds,
Brundage, Story and Rose Investment Trust, The Caldwell & Orkin
Funds, Inc., The James Advantage Funds, Profit Funds Investment
Trust, Firsthand Funds, Lake Shore Family of Funds, UC Investment
Trust and The Westport Funds.
(b) The following list sets forth the directors and executive
officers of the Distributor. Unless otherwise noted with an
asterisk(*), the address of the persons named below is 312 Walnut
Street, Cincinnati, Ohio 45202.
*The address is 420 East Fourth Street, Cincinnati, Ohio 45202.
6
<PAGE>
Position Position
with with
Name Distributor Registrant
-----------------------------------------------------------------
*William F. Ledwin Director None
*Jill T. McGruder Director None
Maryellen Peretzky Senior Vice President - None
Administration and Secretary
Robert L. Bennett First Vice President Treasurer
and Chief Operations Officer
Terrie A. Wiedenheft First Vice President, None
Chief Financial
Officer and Treasurer
Theresa M. Samocki Vice President- Assistant
Fund Accounting Manager Treasurer
Elizabeth A. Santen Assistant Vice President None
Steven F. Nienhaus Assistant Vice President None
Michele M. Hawkins Assistant Vice President None
Brian J. Manley Assistant Vice President Assistant
Secretary
(c) Inapplicable
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents required to be maintained by
the Registrant pursuant to the Investment Company Act of 1940, are
maintained at the following locations:
The Winter Harbor Fund
511 Congress Street
Portland, Maine 04101
Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, OH 45202
ITEM 29. MANAGEMENT SERVICES NOT DISCUSSED IN PARTS A OR B
Inapplicable
ITEM 30. UNDERTAKINGS
Inapplicable
7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, 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, and State of Maine on the 29th day of
February, 2000.
The Winter Harbor Fund
By: /s/ Jennifer E. Goff
--------------------
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Jennifer E. Goff President February 29, 2000
- --------------------------- and Trustee
Jennifer E. Goff
/s/ Robert L. Bennett Treasurer February 29, 2000
- ---------------------------
Robert L. Bennett
Trustee
- ---------------------------
Judith D. Freyer*
Trustee
- ---------------------------
Earl L. Mummert*
Trustee By: /s/ Tina D. Hosking
- --------------------------- -------------------
Vincent T. Phillips* Tina D. Hosking
Attorney in Fact*
February 29, 2000
8
<PAGE>
INDEX TO EXHIBITS
(a) Trust Instrument of Registrant*
(b) None
(c) See Item 23(c) herein
(d)(1) Investment Advisory Agreement*
(e) Underwriting Agreement*
(f) None
(g) Custody Agreement*
(h)(1) Transfer, Dividend Disbursing, Shareholder Service and Plan Agency
Agreement*
(h)(2) Administration Agreement*
(h)(3) Accounting Services Agreement*
(i) Opinion of Counsel*
(j) Consent of Independent Auditors
(k) None
(l) None
(m) None
(n) Not Applicable
(o) None
- ----------------------------
* Incorporated by reference to Registrant's registration statement on Form N-1A
previously filed.
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in this Post-Effective Amendment No. 2 to the
registration statement on Form N-1A ("Registration Statement") of our report
dated February 18, 2000, relating to the financial statements and financial
highlights of the REvest Value Fund, which appears in such Registration
Statement. We also consent to the references to us under the headings "Financial
Highlights" and "Independent Accountants", in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Columbus, Ohio
February 29, 2000
