As filed with the Securities and Exchange Commission on April 26, 1999
Registration No. 2-78931
File No. 811-3551
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECUTITIES ACT OF 1933 |__|
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Pre-Effective Amendment No. _______ |__|
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Post-Effective Amendment No. 36 |X_|
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |__|
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Amendment No. 36 |_X|
(Check appropriate box or boxes)
VONTOBEL FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
1500 Forest Avenue, Suite 223, Richmond, Virginia 23229
(Address of Principal Executive Offices)(Zip Code)
(800)-527-9500
(Registrant's Telephone Number, Including Area Code)
Steven M. Felsenstein, Esq.
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practical after this
post-effective amendment of this registration statement becomes effective.
It is proposed that this filing will become effective (check appropriate box)
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|__| immediately upon filing pursuant to paragraph (b)
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|X_| on April 30, 1999 pursuant to paragraph (b)
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|__| 60 days after filing pursuant to paragraph (a)(1)
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|__| on (date) pursuant to paragraph (a)(1)
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|__| 75 days after filing pursuant to paragraph (a)(2)
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|__| on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
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|__| This post-effective amendment designates a new effective date for
previously filed post-effective amendment.
TABLE OF CONTENTS
This filing of a post-effective amendment to the Registrant's registration
statement on Form N-1A consists of the following:
1. Part A revising the prospectuses of the Vontobel U.S. Value Fund series;
the Vontobel International Equity Fund series; the Vontobel International
Bond Fund series; the Vontobel Eastern European Equity Fund series; the
Vontobel Emerging Markets Fund series and the Vontobel Eastern European
Debt Fund series of Vontobel Funds, Inc.
2. Part B revising the statements of additional information of the Vontobel
U.S. Value Fund series; the Vontobel International Equity Fund series; the
Vontobel International Bond Fund series; the Vontobel Eastern European
Equity Fund series; the Vontobel Emerging Markets Equity Fund series
and the Vontobel Eastern European Debt Fund series of Vontobel Funds,
Inc.
3. Part C.
VONTOBEL FUNDS, INC.
A "Series" INVESTMENT COMPANY
1500 Forest Avenue PROSPECTUS
Suite 223 Dated May 1, 1999
Richmond, Virginia 23229
Telephone: 1-800-527-9500
986285175VONTOBEL U.S. VALUE FUND
VONTOBEL INTERNATIONAL EQUITY FUND
VONTOBEL EMERGING MARKETS EQUITY FUND
VONTOBEL EASTERN EUROPEAN EQUITY FUND
VONTOBEL INTERNATIONAL BOND FUND
VONTOBEL EASTERN EUROPEAN DEBT FUND
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The Securities and Exchange Commission has not approved or disapproved these
securities. The Commission does not guarantee the accuracy or completeness of
this Prospectus and does not determine whether an investment in any of the funds
contained in this Prospectus is a good investment. It is illegal to claim that
the Commission has done so.
<PAGE>
TABLE OF CONTENTS
RISK/RETURN SUMMARY...........................................................
VONTOBEL U.S. VALUE FUND................................................
VONTOBEL INTERNATIONAL EQUITY FUND......................................
VONTOBEL EMERGING MARKETS EQUITY FUND...................................
VONTOBEL EASTERN EUROPEAN EQUITY FUND...................................
VONTOBEL INTERNATIONAL BOND FUND........................................
VONTOBEL EASTERN EUROPEAN DEBT FUND.....................................
FUND FEES AND EXPENSES........................................................
INVESTMENT OBJECTIVES/STRATEGIES AND RISKS....................................
OTHER PRINCIPAL RISKS.........................................................
MANAGEMENT ORGANIZATION AND CAPITAL STRUCTURE.................................
SHAREHOLDER INFORMATION.......................................................
PURCHASING SHARES.............................................................
REDEEMING SHARES..............................................................
OTHER SHAREHOLDER SERVICES....................................................
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS.....................................
DISTRIBUTIONS AND TAXES.......................................................
DISTRIBUTION ARRANGEMENTS.....................................................
FINANCIAL HIGHLIGHTS..........................................................
<PAGE>
RISK/RETURN SUMMARY
Vontobel U.S. Value Fund ("Value Fund")
Investment Objective Long-Term Capital Return
Principal Investment Under normal circumstances, the Value Fund will
Strategies invest at least 65% of its assets in equity
securities that are traded on U.S. exchanges.
The Fund may also invest in fixed-income
securities and cash equivalents, such as
overnight repurchase agreements and short-term
U.S. Treasuries.
Principal Investment Risks The Value Fund's investments are subject to
market, economic and business risks. These risks
will cause the Value Fund's net asset value
("NAV") to fluctuate over time. Therefore, the
value of your investment in the Value Fund could
decline. Also, there is no assurance that the
Investment Advisor will achieve the Fund's
objective.
The Value Fund operates as a non-diversified fund
for purposes of the Investment Company Act of
1940, as amended (the "1940 Act"). As such, the
Fund may invest a larger portion of its assets in
fewer issuers. Consequently, adverse effects on
the Fund's security holdings may affect a larger
portion of the Fund's total assets and cause the
value of your investment to decline.
An investment in the Value Fund is not a bank
deposit and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any
other government agency.
Investor Profile You may want to invest in the Value Fund if you
are seeking long-term capital return, together
with relative safety of principal in the
long-term, and are willing to accept share prices
that may fluctuate, sometimes significantly, over
the short-term. You should not invest in the
Value Fund if you are seeking current income.
Performance Information
The bar chart below shows how the Value Fund's performance has varied from one
year to another. The table below the chart shows what the return would equal if
you averaged out actual performance over various lengths of time. Please keep in
mind that the Value Fund's past performance may not indicate how it will perform
in the future.
Graph goes here:
Vontobel U.S. Value Fund
Year........ Total Return
1990*....... - 9.90%
1990 37.29%
1991 16.30%
1992 6.00%
1993 0.02$
1994 40.36%
1995 21.28%
1996 34.31%
1997 14.70%
Best Calendar Quarter 1st Q 1991 up 21.90%
Worst Calendar Quarter 3rd Q 1990 down 21.80%
* Shows non-annualized return for the period from March 31, 1990, commencement
of operations, to December 31, 1990.
The following table compares the performance of the Value Fund and the S&P
500. The S&P 500 is an unmanaged index of the common stock of the 500 largest
publicly traded U.S. Companies. Returns include dividends and are expressed in
U.S. dollars.
Average Annual Total Returns
(for the periods ending December 31, 1998)
1 Year 5 Years Since Inception
(March 30, 1990)
Value Fund 14.70% 21.27% 17.12%
S&P 500 Index 28.38% 23.84% 18.70%
VONTOBEL INTERNATIONAL EQUITY FUND ("International Equity Fund")
Investment Objective Capital Appreciation
Principal Investment Under normal circumstances the International
Strategies Equity Fund will invest at least 65% of its
assets in equity securities of companies in
Europe and the Pacific Basin. The Fund intends
to diversify its investments broadly among
countries and normally to have represented in
the portfolio business activities of not less
than three different countries. The Fund will
primarily hold securities listed on a security
exchange or quoted on an established
over-the-the counter market.
Principal Investment Risks The International Equity Fund's investments are
subject to market, economic and business risks.
These risks may cause the International Equity
Fund's NAV to fluctuate over time. Therefore,
the value of your investment in the Fund could
decline. Also, there is no assurance that the
Investment Advisor will achieve the Fund's
objective.
The International Equity Fund will invest in
foreign countries. These investments may involve
financial, economic or political risks that are
not ordinarily associated with U.S. securities.
Hence, the International Equity Fund's NAV may
be affected by changes in exchange rates between
foreign currencies and the U.S. dollar,
different regulatory standards, less liquidity
and increased volatility, taxes and adverse
social or political developments.
The Fund may also invest in securities that
trade in newly developed markets. In addition to
the typical risks that are associated with
investing in foreign countries, companies in
developing countries generally do not have
lengthy operating histories. Consequently, these
markets may be subject to more substantial
volatility and price fluctuations than
securities traded on more developed markets.
An investment in the International Equity Fund
is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Investor Profile You may want to invest in the International
Equity Fund if you are seeking capital
appreciation and wish to diversify your existing
investments. The International Equity Fund may
be particularly suitable for you if you wish to
take advantage of opportunities in the
securities markets of Europe and the Pacific
Basin and are willing to accept the risks
associated with foreign investing.
Performance Information
The bar chart below shows how the International Equity Fund's performance has
varied from one year to another. The table below the chart shows what the return
would equal if you averaged out actual performance over various lengths of time.
Please keep in mind that the International Equity Fund's past performance may
not indicate how it will perform in the future.
Vontobel International Equity Fund
Graph goes here:
Year ...... Total Return
1990* ...... -12.42%
1990 18.74%
1991 - 2.37%
1992 40.80%
1993 - 5.28%
1994 10.91%
1995 16.98%
1996 9.19%
1997 16.77%
Best Calendar Quarter 4th Q 1998 up 18.60%
Worst Calendar Quarter 3rd Q 1990 down 19.40%
* Represents a period during which the Fund was advised by other investment
advisors. On July 6, 1990, the Fund's current investment advisor was
appointed and the Fund's investment objective was changed to its current
status.
The following table compares the performance of the International Equity Fund
and Morgan Stanley Capital International's Europe, Australia and Far East Index
("EAFE Index"). The EAFE Index is an unmanaged index of more than 1100 common
stock securities issued by Foreign companies. Returns include dividends and are
expressed in U.S. dollars.
Average Annual Total Returns
(for the periods ending December 31, 1998)
......
Since Inception
1 Year 5 Years (July 6, 1990)
International Equity Fund 16.77% 9.38% 9.89%
EAFE Index 20.00% 9.19% 6.75%
VONTOBEL EMERGING MARKETS EQUITY FUND ("Emerging Markets Fund")
Investment Objective Long-Term Capital Appreciation
Principal Investment Under normal circumstances the Emerging Markets
Strategies Fund will invest at least 65% of its total
assets in the equity securities of companies in
developing countries. The Fund intends to
diversify its investments broadly among
countries and normally to have represented in
the portfolio business activities of not less
than three different countries. The Fund will
primarily hold securities listed on a security
exchange or quoted on an established
over-the-counter market. The Emerging Markets
Fund may also invest in American Depositary
Receipts ("ADRs"), European Depositary Receipts
("EDRs"), Global Depositary Receipts ("GDRs")
and Registered Depositary Certificates ("RDCs").
Principal Investment Risks The Emerging Markets Fund's
investments are subject to market, economic and
business risks. These risks may cause the Fund's
NAV to fluctuate over time. Therefore, the value
of your investment in the Fund could decline.
Also, there is no assurance that the Investment
Advisor will achieve the Fund's objective.
The Emerging Markets Fund will invest in foreign
countries. These investments may involve
financial, economic or political risks that are
not ordinarily associated with U.S. securities.
Hence, the Fund's NAV may be affected by changes
in exchange rates between foreign currencies and
the U.S. dollar, different regulatory standards,
less liquidity and increased volatility, taxes
and adverse social or political developments.
The Fund also invests in securities that trade
in newly developed markets. In addition to the
typical risks that are associated with investing
in foreign countries, companies in developing
countries generally do not have lengthy
operating histories. Consequently, these markets
may be subject to more substantial volatility
and price fluctuations than securities traded on
more developed markets.
An investment in the Emerging Markets Fund is
not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Investor Profile You may wish to invest in the Emerging Markets
Fund if you are seeking long-term capital
appreciation and wish to diversify your current
investments beyond equities of companies in
developed markets. You should not invest in the
Fund if you are not willing to accept the risks
associated with foreign investing.
Performance Information
The bar chart below shows how the Emerging Markets Fund's performance has varied
from one year to another. The table below the chart shows what the return would
equal if you averaged out actual performance over various lengths of time.
Please keep in mind that the Emerging Markets Fund's past performance may not
indicate how it will perform in the future.
Vontobel Emerging Markets Fund
Year ...... Total Return
1997 - 5.80%
1998* ...... -22.40%
Best Calendar Quarter 4th Q 1998 up 14.04%
Worst Calendar Quarter 3rd Q 1998 down 24.77%
* Shows non-annualized return for the period from September 1, 1997,
commencement of operations, to December 31, 1997.
The following table compares the performance of the Emerging Markets Fund and
the Morgan Stanley Capital International Emerging Markets Free Index ("the EMF
Index"). The EMF Index is a market capitalization weighted aggregate index
comprised of equities traded on listed markets in 26 emerging countries. Index
returns do not include dividends and are expressed in U.S. dollars.
Average Annual Total Returns
(for the periods ending December 31, 1998)
1 Year Since Inception
(September 1, 1997)
Emerging Markets Fund -22.40% -20.97%
EMF Index -27.52% -30.91%
VONTOBEL EASTERN EUROPEAN EQUITY FUND ("E. European Equity Fund")
Investment Objective Capital Appreciation
Principal Investment Under normal circumstances, the E. European
Strategies Equity Fund will invest at least 65% of its
assets in equity securities of companies located
in Eastern Europe or which conduct a significant
portion of their business in countries which are
generally considered to comprise Eastern Europe.
The Fund normally will have represented in the
portfolio business activities of not less than
three different countries.
Principal Investment Risks The E. European Equity Fund's investments are
subject to market, economic and business risks.
These risks may cause the Fund's NAV to
fluctuate over time. Therefore, the value of
your investment in the Fund could decline.
Also, there is no assurance that the Investment
Advisor will achieve the E. European Equity
Fund's objective.
The E. European Equity Fund will invest in
foreign countries. These investments may involve
financial, economic or political risks that are
not ordinarily associated with U.S. securities.
Hence, the Fund's NAV may be affected by changes
in exchange rates between foreign currencies and
the U.S. dollar, different regulatory standards,
less liquidity and increased volatility, taxes
and adverse social or political developments.
The Fund also invests in securities that trade
in newly developed markets. In addition to the
typical risks that are associated with investing
in foreign countries, companies in developing
countries generally do not have lengthy
operating histories. Consequently, these markets
may be subject to more substantial volatility
and price fluctuations than securities traded on
more developed markets.
An investment in the E. European Equity Fund is
not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Investor Profile You may wish to invest in the E.
European Equity Fund if you seek to diversify
your current equity holdings and to take
advantage of opportunities in the newly
reorganized markets of Eastern Europe.
Performance Information
The bar chart below shows how the E. European Equity Fund's performance has
varied from one year to another. The table below the chart shows what the return
would equal if you averaged out actual performance over various lengths of time.
Please keep in mind that the E. European Equity Fund's past performance may not
indicate how it will perform in the future.
Vontobel E. European Equity Fund
Year ...... Total Return
1996 48.80%
1997* ...... 8.74%
1997 -46.62%
Best calendar quarter 2nd Q 1996 up 25.74%
Worst calendar quarter 3rd Q 1998 down 40.48%
* Shows non-annualized return for the period from February 15, 1996,
commencement of operations, to December 31, 1996.
The following table compares the performance of the E. European Equity Fund and
the Nomura Research Institute's Central and Eastern European Equity Index
("Nomura Composite-11 Index"). The Nomura Composite-11 Index is comprised of
equities traded on listed markets in Poland, the Czech Republic, Hungary,
Slovakia, Croatia, Romania, Slovenia, Estonia, Latvia, Lithuania and Russia.
Returns do not include dividends and are expressed in U.S. dollars.
Average Annual Total Returns
(for the periods ending December 31, 1998)
1 Year Since Inception
(February 15, 1996)
E. European Equity Fund -46.62% -4.95%
Nomura Composite-11 -21.84% 2.07%
Index
VONTOBEL INTERNATIONAL BOND FUND ("Bond Fund")
Investment Objective To Maximize Total Return from Capital Growth and
Income
Principal Investment Under normal circumstances the Bond Fund will
Strategies invest at least 65% of its total assets in high
grade bonds issued (i) in countries other than
the U.S.; (ii) by issuers which are organized in
a country other than the U.S. or have at least
50% of their assets or derive at least 50% of
their revenues in such country (notwithstanding
the currency in which such bonds are
denominated); or (iii) by national or
international authorities other than the U.S.
The Advisor actively manages currency, bond
market and maturity exposure. The Bond Fund will
normally invest at least 65% of its total assets
in bonds denominated in foreign currencies,
however, generally foreign currency denominated
bonds will constitute 90% of its portfolio. The
Fund normally has investments in securities of
issuers from a minimum of three different
countries.
Principal Investment Risks The Bond Fund's investments are
subject to interest rate risk. Interest rate
risk may cause the NAV to fluctuate over time
and the value of the Bond Fund could decline.
There is no assurance that the Bond
Fund will achieve its objective.
The Bond Fund's investments will be denominated
in foreign currencies. These investments may
involve financial, economic or political risks
that are not ordinarily associated with U.S.
securities. Hence, the Fund's investments may be
affected by changes in exchange rates between
foreign currencies and the U.S. dollar,
different regulatory standards, less liquidity,
taxes and adverse social or political
developments.
The Bond Fund operates as a non-diversified fund
for purposes of the 1940 Act. As such, the Fund
may invest a larger portion of its assets in
fewer issuers. Consequently, adverse effects on
the Fund's security holdings may affect a larger
portion of the Fund's total assets and cause the
value of your investment to decline.
An investment in the Bond Fund is not a bank
deposit and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any
other government agency.
Investor Profile You may wish to invest in the Bond Fund if you
are seeking to maximize your total return and
diversify your investments. The Bond Fund may
be particularly suited for you if you wish to
take advantage of opportunities in bond markets
outside the U.S. You should not invest in the
Bond Fund if you are not willing to accept the
risks associated with foreign investing.
Performance Information
The bar chart below shows how the Bond Fund's performance has varied from ne
year to another. The table below the chart shows what the return would equal if
you averaged out actual performance over various lengths of time. Please keep in
mind that the Bond Fund's past performance may not indicate how it will perform
in the future.
Graph goes here
Vontobel International Bond Fund
Year ...... Total Return
1994* ...... 1.98%
1995 17.60%
1996 7.51%
1997 -6.04%
1998 14.85%
Best calendar quarter 3rd Q 1998 up 10.00%
Worst calendar quarter 4th Q 1994 down 6.60%
* Shows non-annualized return from the period from March 1, 1994, commencement
of operations, to December 31, 1994.
The following table compares the performance of the Bond Fund and the J.P.
Morgan Government Bond Index ("J.P. Morgan Index"). The J.P. Morgan Index is an
unmanaged index of the world's 12 major government bond markets (Australia,
Belgium, Canada, Denmark, France, Germany, Italy, Japan, the Netherlands, Spain,
Sweden and the UK). Returns to not include dividends and are expressed in U.S.
dollars.
Average Annual Total Returns
(for the periods ending December 31, 1998)
1 Year Since Inception
(March 1, 1994)
Bond Fund 14.85% 7.07%
J.P. Morgan Index -3.73% .84%
VONTOBEL EASTERN EUROPEAN DEBT FUND ("E. European Debt Fund")
Investment Objective To Maximize Total Return from Capital Growth and
Income
Principal Investment Under normal circumstances the E. European Debt
Strategies Fund will invest at least 65% of its total
assets in fixed-income instruments that are
issued by borrowers located in Eastern European
countries. The Fund will normally invest at
least 65% of its total assets in debt
instruments denominated in foreign currencies.
Generally, however, foreign currency denominated
debt instruments will constitute 90% of its
portfolio.
The Fund will invest principally in instruments
that bear the rating of BBB- or better by S&P or
Baa3 or higher by Moody's, or unrated securities
that the Advisor believes to be of comparable
quality to such instruments with ratings of
BBB-or higher by S&P or Baa3 or higher by
Moody's. The Fund may invest substantial amounts
in issuers from one or more countries and will
normally have investments in securities of
issuers from a minimum of three different
countries.
Principal Investment Risks The E. European Debt Fund's
investments are subject to interest rate risk.
Interest rate risk may cause the NAV to
fluctuate over time and the value of the E.
European Debt Fund could decline. Thee is no
assurance that the E. European Debt Fund will
achieve its objective.
The E. European Debt Fund's investments will be
denominated in foreign currencies. These
investments may involve financial, economic or
political risks that are not ordinarily
associated with U.S. securities. Hence, the
Fund's investments may be affected by changes in
exchange rates between foreign currencies and
the U.S. dollar, different regulatory standards,
less liquidity, taxes and adverse social or
political developments.
The E. European Debt Fund operates as a
non-diversified fund for purposes of the 1940
Act. As such, the Fund may invest a larger
portion of its assets in fewer issuers.
Consequently, adverse effects on the Fund's
security holdings may affect a larger portion of
the Fund's total assets and cause the value of
your investment to decline.
An investment in the E. European Debt Fund is
not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
Investor Profile You may wish to invest in the E. European Debt
Fund if you are seeking to maximize your total
return and diversify your investments. The Fund
may be especially suitable for you if you are
willing to take advantage of opportunities in
the developing debt markets of Eastern Europe.
You should not invest in the E. European Debt
Fund if you are not willing to accept the risks
associated with foreign investing.
Performance Information
The bar chart below shows how the E. European Debt Fund's performance has varied
from one year to another. The table below the chart shows what the return would
equal if you averaged out actual performance over various lengths of time.
Please keep in mind that the E. European Debt Fund's past performance may not
indicate how it will perform in the future.
Vontobel E. European Debt Fund
Year ...... Total Return
1997* ...... - 0.55%
1997 24.54%
Best calendar quarter 4th Q 1998 up 6.72%
Worst calendar quarter 4th Q 1997 down 1.14%
* Shows non-annualized return for the period from September 1, 1997,
commencement of operations, to December 31, 1997.
The following table compares the performance of the E. European Debt Fund and
the Bank-Austria-Creditanstalt Eastern European Bond Index
("Bank-Austria-Creditanstalt Index"). The Bank Austria-Creditanstalt Index is a
market-weighted index of government and corporate debt instruments issued in
local currency and traded on exchanges in Hungary, Poland, Russia, the Czech
Republic and Slovakia. Returns do not include dividends and are expressed in
U.S. dollars.
Average Annual Total Returns
(for the periods ending December 31, 1998)
1 Year Since Inception
(September 1, 1997)
E. European Debt Fund 24.54% 17.43%
[Index] -27.78% -23.86%
FUND FEES AND EXPENSES
Costs are an important consideration in choosing a mutual fund. Shareholders
indirectly pay the costs of operating a fund, plus any transaction costs
associated with buying and selling the securities a fund holds. These costs will
reduce a portion of the gross income or capital appreciation a fund achieves.
Even small differences in the expenses can, over time, have a significant effect
on a Fund's performance.
The following table describes the fees and expenses that you will pay in
connection with purchases or redemptions of shares of the Value Fund, the
International Equity Fund, the Emerging Markets Fund, the E. European Equity
Fund, the Bond Fund and the E. European Debt Fund (collectively, the "Funds").
The annual operating expenses, which cover the cost of investment management,
administration, accounting and shareholder communications, are shown as a
percentage of the average daily net assets.
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__________________________________________________VALUE FUND___________________
Shareholder transaction Fees (fees paid directly from your investment)
Maximum Sales Charge (Load Imposed on Purchases None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None
Redemption Fees (1) None
Exchange Fees (3) None
Annual Fund Operating Expenses (Expenses that are deducted from Fund assets)
Management Fees 0.86%
Distribution (12b-1 Fees) None
Other Expenses 0.60%
Total Annual Fund Operating Expenses 1.46%
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________________________________________INTERNATIONAL EQUITY FuND______________
Shareholder transaction Fees (fees paid directly from your investment)
Maximum Sales Charge (Load Imposed on Purchases None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None
Redemption Fees (1) None
Exchange Fees (3) None
Annual Fund Operating Expenses (Expenses that are deducted from Fund assets)
Management Fees 0.90%
Distribution (12b-1 Fees) None
Other Expenses 0.50%
Total Annual Fund Operating Expenses 1.40%
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_________________________________________ EMERGING MARKETS EQUITYFUND___________
Shareholder transaction Fees (fees paid directly from your investment)
Maximum Sales Charge (Load Imposed on Purchases None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None
Redemption Fees (1) 2.0%(2)
Exchange Fees (3) None
Annual Fund Operating Expenses (Expenses that are deducted from Fund assets)
Management Fees 1.25%
Distribution (12b-1 Fees) None
Other Expenses 4.88%
Total Annual Fund Operating Expenses 6.13%*
*Management Fee waivers, expense reimbursements and expense credits reduced the
Total Annual Fund Operating Expenses to 2.07% during the year ended December 31,
1998.
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________________________________________E. EUROPEAN EQUITY FUND________________
Shareholder transaction Fees (fees paid directly from your investment)
Maximum Sales Charge (Load Imposed on Purchases None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None
Redemption Fees (1) 2.0%(2)
Exchange Fees (3) None
Annual Fund Operating Expenses (Expenses that are deducted from Fund assets)
Management Fees 1.25%
Distribution (12b-1 Fees) None
Other Expenses 1.32%
Total Annual Fund Operating Expenses 2.57%
- --------------------------------------------------------------------------------
__________________________________________BOND FUND____________________________
Shareholder transaction Fees (fees paid directly from your investment)
Maximum Sales Charge (Load Imposed on Purchases None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None
Redemption Fees (1) None
Exchange Fees (3) None
Annual Fund Operating Expenses (Expenses that are deducted from Fund assets)
Management Fees 1.00%
Distribution (12b-1 Fees) None
Other Expenses 0.86%
Total Annual Fund Operating Expenses 1.86%
- --------------------------------------------------------------------------------
________________________________________E. EUROPEAN DEBT FUND__________________
Shareholder transaction Fees (fees paid directly from your investment)
Maximum Sales Charge (Load Imposed on Purchases None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None
Redemption Fees (1) 2.0%(2)
Exchange Fees (3) None
Annual Fund Operating Expenses (Expenses that are deducted from Fund assets)
Management Fees 1.25%
Distribution (12b-1 Fees) None
Other Expenses 1.14%
Total Annual Fund Operating Expenses 2.39%
(1) A shareholder electing to redeem shares by telephone will be charged $10
for each such redemption request.
(2) A 2% redemption fee is charged on shares held less than six (6) months.
(3) A shareholder may be charged a $10 fee for each telephone exchange.
The purpose of these tables is to assist investors in understanding the
various costs and expenses that they will bear directly or indirectly.
Management expects that as each Fund increases in size, its annual operating
expenses stated as "Other Expenses" above will decline as an annual percentage
rate reflecting economies of scale.
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The following expense examples show the expenses that you could pay over time.
They will help you compare the costs of investing in the Funds with the costs of
investing in other mutual funds. Each example assumes that you invest $10,000 in
the Fund and then redeem all of your shares at the end of the periods indicated.
Each example assumes that you earn a 5% annual return, with no change in Fund
expense levels. Because actual return and expenses will be different, the
examples are for comparison only. Based on these assumptions, your costs would
be:
1 Year 3 Year 5 Year 10 Year
Value Fund.. $ 150 $ 465 $ 803 $1,757
Expenses - net(a) $ 148 $ 459 $ 792 $ 1,735
International Equity Fund $ 143 $ 443 $ 766 $ 1,680
Expenses - net(b) $ 138 $ 431 $ 745 $ 1,635
Emerging Markets Fund
With Redemption Fee $ 810 $2,008 $3,180 $5,995
W/O Redemption Fee $ 610 $1,808 $2,980 $5,795
Expenses - net(c) $ 210 $ 649 $1,114 $2,400
E. European Equity Fund
With Redemption Fee $ 460 $ 999 $1,565 $3,105
W/O Redemption Fee $ 260 $ 799 $1,365 $2,905
Expenses - net(b) $ 241 $ 751 $1,285 $2,746
Bond Fund... $ 189 $ 585 $1,006 $ 2,180
Expenses - net(d) $ 164 $ 508 $ 876 $ 1,911
E. European Debt Fund
With Redemption Fee $ 442 $ 945 $1,475 $2,926
W/O Redemption Fee $ 242 $ 745 $1,275 $2,726
Expenses - net(e) $ 201 $ 621 $1,068 $2,306
(a)Expenses reflect the effect of management fee waivers and custodian credits
to offset custodian fees.
(b)Expenses reflect the effect of custodian credits to offset custodian fees.
(c)Expenses reflect the effect of management fee waivers, reimbursed expenses
and custodian credits to offset custodian fees.
(d)Expenses reflect the effect of management fee waivers and reimbursed
expenses.
(e)Expenses reflect the effect of management fee waivers.
INVESTMENT OBJECTIVES/STRATEGIES AND RISKS
Value Fund
The Value Fund's investment objective is to achieve long-term capital returns in
excess of the broad market by investing in common stocks and securities that are
convertible into common stocks, such as warrants, convertible bonds, debentures
or convertible preferred stock. Under normal circumstances the Fund will invest
at least 65% of its assets in common stocks or securities that are convertible
into common stock. The Value Fund typically invests in securities that are
traded on U.S. exchanges. The Value Fund also invests in fixed-income
instruments and cash equivalents, such as overnight repurchase agreements and
short-term U.S. Treasuries. The Advisor uses the S&P 500 Index as the benchmark
for the broad market against which the performance of the Value Fund is
measured.
Vontobel USA Inc. (the "Advisor"), the investment adviser for each of the Funds,
employs a bottom-up approach to stockpicking, with an emphasis on qualitative
criteria in evaluating a company's potential as a prospective investment
opportunity. Although the Value Fund's return will be compared to that provided
by the broad market, the Advisor seeks to achieve attractive absolute returns
over the "risk-free" rate, defined as the rate of return available on 10-year
U.S. Government securities. The Advisor's utilization of an "absolute" rather
than a "relative" valuation yardstick is designed to achieve not only a
satisfactory return over the risk-free rate but at the same time ensure safety
of principal. The Advisor considers the riskiness of an investment to be a
function of the company's business rather than the volatility of its stock
price. Therefore the Advisor seeks to identify companies whose businesses are
predictable or that exhibit elements of a franchise. Ideally, such companies
must have a history of competitive returns on invested capital, reliable growth
in earnings growth and free cash flow, low debt and effective management.
The Value Fund is subject to stock market risk. Stock market risk is the
possibility that stock prices overall will decline over short or long periods.
Because stock market prices tend to fluctuate, the value of your investment in
the Value Fund may increase or decrease. The Value Fund's investment success
depends on the skill of the Advisor in evaluating, selecting and monitoring the
portfolio assets. If the Advisor's conclusions about growth rates or securities
values are incorrect, the Value Fund may not perform as anticipated.
As noted above, the Advisor seeks to achieve its investment objective by
investing principally in equity securities. Nonetheless, the Advisor may
construct, and in fact has at times constructed, a portfolio in which cash and
cash equivalents (including, but not limited to, overnight repurchase agreements
and short-term U.S. Treasuries), and/or fixed-income instruments, comprise a
significant portion of the Value Fund's total assets. The Advisor views its
"cash position" as a residual measure of the ability of its investment personnel
to identify enough stocks that meet their rigorous investment criteria.
The Value Fund is a "non-diversified" investment company under Federal
securities laws, and therefore may invest a larger portion of its assets in
certain issuers, including foreign governments and domestic issuers other than
the U.S. government. Consequently, adverse effects on the Fund's security
holdings may affect a larger portion of the Fund's assets and cause the value of
your investment to decline.
The Value Fund may invest more than 5% of its assets in government debt
securities of the U.S. However, because it intends to qualify as a "regulated
investment company" for purposes of Subchapter M of the Code, at least 50% of
its total assets must be invested in cash, U.S. government securities, and
securities of issuers (including foreign governments), in which it has invested
not more than 5% of its assets. A regulated investment company is also limited
in its purchases of voting securities of any issuer.
International Equity Fund
The International Equity Fund's investment objective is to achieve capital
appreciation by investing in common stocks and securities that are convertible
into common stocks. Under normal circumstances the Fund will invest at least 65%
of its assets in securities of companies in Europe and the Pacific Basin. The
International Equity Fund will invest most of its assets in equity securities of
countries which are generally considered to have developed markets, such as the
United Kingdom, the eleven euro-zone countries (France, Germany, Italy, Spain,
Portugal, Finland, Ireland, Belgium, the Netherlands, Luxembourg and Austria),
Switzerland, Norway, Japan, Hong Kong, Australia, and Singapore. The Advisor
will decide when and how much to invest in each of those markets. Investments
may also be made in equities issued by companies in "developing countries" or
"emerging markets," such as Taiwan, Malaysia, Indonesia, and Brazil, included in
Morgan Stanley Capital International's Emerging Markets Free Index ("EMF") . The
portfolio of the International Equity Fund will be diversified. The Fund
typically invests in the securities of medium to large capitalization companies,
but is not limited to investing in securities of companies of any size. Using a
bottom-up investment approach, the Advisor seeks to invest in companies that
have a long record of successful operations in their core business and earnings
growth through increasing market share and unit sales volumes. These companies
are typically among the leaders in their industry, having demonstrated
consistent growth in cash flow, sales, operating profits, returns on equity and
returns on invested capital, and little or no debt. The Fund generally holds its
core positions for at least two years.
The International Equity Fund may select its investments from companies which
are listed on a securities exchange or from companies whose securities have an
established over-the-counter market, and may make limited investments in "thinly
traded" securities.
Under normal circumstances the International Equity Fund will have at least 65%
of its assets invested in European and Pacific Basin equity securities. The
International Equity Fund intends to diversify broadly investments among
countries and normally to have represented in the portfolio business activities
of not less than three different countries. The securities the International
Equity Fund purchases may not always be purchased on the principal market. For
example, American Depository Receipts ("ADRs") may be purchased if trading
conditions make them more attractive than the underlying security.
The Fund's investments in foreign securities may involve risks that are not
ordinarily associated with U.S. securities. Foreign companies are not generally
subject to the same accounting, auditing and financial reporting standards as
are domestic companies. Therefore, there may be less information available about
a foreign company than there is about a domestic company. Certain countries do
not honor legal rights enjoyed in the U.S. In addition, there is the possibility
of expropriation or confiscatory taxation, political or social instability, or
diplomatic developments, which could affect U.S. investments in those countries.
Many foreign securities have substantially less trading volume than in the U.S.
market, and securities in some foreign issuers are less liquid and more volatile
than securities of domestic issuers. These factors make foreign investment more
expensive for U.S. investors. Mutual funds offer an efficient way for
individuals to invest abroad, but the overall expense ratios of mutual funds
that invest in foreign markets are usually higher than those of mutual funds
that invest only in U.S. securities.
The International Equity Fund is subject to stock market risk. Stock market risk
is the possibility that stock prices overall will decline over short or long
periods. Because stock prices tend to fluctuate, the value of your investment in
the International Equity Fund may increase or decrease. The Fund's investment
success depends on the skill of the Advisor in evaluating, selecting and
monitoring the portfolio assets. If the Advisor's conclusions about growth rates
or securities values are incorrect, the International Equity Fund may not
perform as anticipated.
In addition to common stocks and securities that are convertible into common
stocks, the International Equity Fund invests in shares of closed-end investment
companies. These investment companies invest in securities that are consistent
with the International Equity Fund's objective and strategies. By investing in
other investment companies the Fund indirectly pays a portion of the expenses
and brokerage costs of these companies as well as its own expenses. Also,
federal and state securities laws impose limits on such investments, which may
affect the ability of the Fund to purchase or sell these shares.
The International Equity Fund has the authority to enter into forward contracts
to purchase or sell foreign currencies, purchase and write covered call options
on foreign currencies and enter into contracts for the purchase or sale for
future delivery of foreign currencies ("foreign currency futures"). The
International Equity Fund may also assume a temporary defensive position in
response to extreme or adverse market, economic or other conditions.
Emerging Markets Fund
The Emerging Markets Fund's investment objective is to achieve long-term capital
appreciation by investing in common stocks and securities that are convertible
into common stock. Under normal circumstances the Emerging Markets Fund will
invest at least 65% of its total assets in securities of companies that are
located in developing countries. The Fund may acquire these securities directly
in their principal markets or through the use of Depositary Receipts. The
portfolio of the Fund will be diversified.
The Emerging Markets Fund considers countries having developing markets to be
all countries included in the EMF, generally considered to be developing or
emerging markets countries by the International Bank for Reconstruction and
Development (more commonly referred to as the World Bank) or the International
Finance Corporation, as well as countries that are classified by the United
Nations or otherwise regarded by their authorities as developing. In addition,
as used in this prospectus, emerging markets equity securities means (i) equity
securities of companies that the principal securities trading market for which
is an emerging market country, as defined above, (ii) equity securities traded
in any market, of companies that derive a substantial portion of their total
revenue or potential revenue from either goods or services produced in
developing countries or sales made in emerging market countries, or (iii) equity
securities of companies organized under the laws of, and with a principal office
in, an emerging market country.
The Emerging Markets Fund intends to diversify investments broadly among
countries and normally to have represented in the portfolio business activities
of not less than three different countries. It is anticipated that the Emerging
Markets Fund will invest in three or more of the countries in the following
list, which is meant to be representative and not exhaustive:
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Argentina Greece Pakistan South Africa
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Brazil Hong Kong Panama South Korea
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Chile Hungary Peru Sri Lanka
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China India Philippines Taiwan
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Colombia Indonesia Poland Thailand
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Czech Republic Israel Portugal Turkey
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Egypt Malaysia Russia Venezuela
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Ghana Mexico Singapore
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The securities the Emerging Markets Fund purchases may not always be purchased
on the principal market of the country. For example, ADRs, European Depository
Receipts ("EDRs"), Global Depository Receipts ("GDRs") or Registered Depository
Certificates ("RDC") may be purchased if trading conditions make them more
attractive than the underlying security. ADRs are described above in the
"Vontobel International Equity Fund" section. Similar to ADRs, EDRs, GDRs and
RDCs represent receipts for a foreign security issued in a location outside the
U.S., and may involve risks comparable to ADRs, as well as the fact that the
EDR, GDR or RDC is itself issued outside the U.S. RDCs involve risks associated
with Russian securities transactions. Please refer to the Statement of
Additional Information for more information on ADRs, EDRs, GDRs and RDCs.
The Fund typically invests in the securities of medium to large capitalization
companies, but is not limited to investing in securities of companies of any
size. Using a bottom-up investment approach, the Advisor seeks to invest in
companies that have a long record of successful operations in their core
businesses and earnings growth through increasng market share and unit sales
volumes. These companies are typically among the leaders of their industry,
having demonstrated consistent growth in cash flow, sales, operating profits,
returns on equity and returns on invested capital, and little or no debt. The
Advisor does not currently actively manage currency risk.
The Fund's investments in developing countries involve those same risks that are
associated with foreign investing in general (see "Other Principal Risks"
below). In addition to those risks, companies in developing countries generally
do not have lengthy operating histories. Consequently, theses markets may be
subject to more substantial volatility and price fluctuations than securities
that are traded on more developed markets. Also the value of your investment in
the Emerging Markets Fund may decline due to stock market risk. Stock market
risk is the possibility that stock prices overall will decline over short or
long periods. The Emerging Markets Fund's investment success depends on the
skill of the Advisor in evaluating, selecting and monitoring the portfolio
assets. If the Advisor's conclusions about growth rates or securities values are
incorrect, the Emerging Markets Fund may not perform as anticipated.
While the Emerging Markets Fund intends to remain substantially invested in
common stock and securities that are convertible into common stock, it also
invests in shares of closed-end investment companies. These investment companies
invest in securities that are consistent with the Emerging Market Fund's
objective and strategies. By investing in other investment companies the Fund
indirectly pays a portion of the expenses and brokerage costs of these companies
as well as its own expenses. Also, federal and state securities laws impose
limits on such investments, which may affect the ability of the Fund to purchase
or sell these shares.
The Emerging Markets Fund may also invest in unlisted securities. Unlisted
securities include securities that are neither listed on a stock exchange or
traded-over-the counter and privately placed securities. Investing in unlisted
securities may involve a higher degree risk than publicly traded securities and
may result in substantial losses. These securities may also be less liquid than
publicly traded securities because they are not traded publicly.
E. European Equity Fund
The E. European Equity's Fund investment objective is to achieve capital
appreciation by investing in common stocks and securities that are convertible
into common stock. Under normal market conditions the Fund will invest at least
65% of its assets in securities of companies that are located in or conduct a
significant portion of their business in Eastern Europe. The Advisor's
investment universe consists of companies that are located in, or listed on the
exchanges of, the former Soviet Bloc countries, as well as companies that derive
at least two-thirds of their sales from such countries. Not all these countries
have a functioning stock exchange and others still have an illiquid securities
market; consequently, the Advisor concentrates on the markets of Hungary,
Poland, Slovenia, the Czech Republic, Slovakia, Russia, Croatia and the Baltic
states (Estonia, Latvia and Lithuania). In Poland, Hungary, the Czech Republic
and Slovakia, the Advisor can invest in local shares. Elsewhere, due to the lack
of local subcustodians or liquidity, the Advisor currently invests only through
GDR or ADR programs.
Trading volume of the stock exchanges of these markets may be substantially
lower than that in developed markets, and the purchase and sale of portfolio
securities may not always be made at an advantageous price. The Advisor
generally will decide when and how much to invest in these developing markets
based upon its assessment of their continuing development. As stock markets in
the region develop and more investment opportunities emerge, the Fund will
broaden its portfolio to include securities of companies located in or which
conduct a significant portion of their business in countries in this region.
The portfolio of the E. European Equity Fund will be diversified. Management
expects that the Fund will have a low turnover ratio (not exceeding 100%
annually). The selection of the securities in which the Fund will invest will
not be limited to companies of any particular size, or to securities traded in
any particular marketplace, and will be based only upon the expected
contribution such security will make to its investment objective. Currently, the
Advisor considers only about 200 stocks as investable, based upon their market
capitalization and liquidity. The Advisor expects this number to increase
dramatically in the years to come. Together, these 200 stocks represent a market
capitalization of approximately US$ 50 billion.
The Fund faces those same risks that are associated with investing in foreign
and developing markets (see "Other Principal Risks" below). Also the value of
your investment in the E. European Equity Fund may decline due to stock market
risk. Stock market risk is the possibility that stock prices overall will
decline over short or long periods. The E. European Equity Fund's investment
success depends on the skill of the Advisor in evaluating, selecting and
monitoring the portfolio assets. If the Advisor's conclusions about growth rates
or securities values are incorrect, the E. European Equity Fund may not perform
as anticipated. Generally, the Fund holds core positions for longer than one
year.
The E. European Equity Fund also invests in shares of closed-end investment
companies. These investment companies invest in securities that are consistent
with the Emerging Market Fund's objective and strategies. By investing in other
investment companies the Fund indirectly pays a portion of the expenses and
brokerage costs of these companies in addition to its own expenses. Also,
federal and state securities laws impose limits on such investments, which may
affect the ability of the Fund to purchase or sell these shares. The Fund does
not actively manage currency risk.
Bond Fund
The Bond Fund's investment objective is to maximize total return from capital
growth and income. The Bond Fund seeks to achieve its objective by investing in
fixed-income securities that are traded in bond markets outside the U.S. Foreign
government, governmental agency and supranational agency obligations and foreign
currency Eurobond issues represent the most common types of investments used in
the Fund's portfolio.
The portfolio investments of the Bond Fund will be selected on the basis of,
among other things, yields, credit quality, and the fundamental outlooks for
currency and interest rate trends in different parts of the globe, taking into
account the ability to hedge a degree of currency or local bond price risk. The
Bond Fund will normally invest at least 65% of its total assets in bonds
denominated in foreign currencies, however, generally foreign currency
denominated bonds will constitute 90% of its portfolio.
Under normal market conditions, at least 65% of the Bond Fund's assets will be
invested in foreign securities that are rated A or higher by S&P or Moody's
Investors Service, Inc. ("Moody's") or unrated bonds which the Advisor believes
are comparable in quality; however, the Fund generally invests 90% of its total
assets in foreign debt securities. The Bond Fund may invest in lower rated
secuirties in order to take advantage of the higher yields available with these
securities. However, no more than 5% of the total assets may be invested in
securities that are rated below investment grade (i.e., below BBB by S&P or Baa
by Moody's) or which are unrated but are of comparable quality as determined by
the Advisor. Securities that are rated below investment grade entail greater
risk than investment grade debt securities. After purchase by the Bond Fund,
debt securities may cease to be rated or their rating may be reduced. Neither
event would require the Fund to dispose of the debt security.
The Bond Fund intends to select its investments from a number of country and
market sectors. It may invest substantial amounts in issuers from one or more
countries and would normally have investments in securities of issuers from a
minimum of three different countries; however, it may invest substantially all
of its assets in securities of issuers located in the U.S. for temporary or
emergency purposes. A non-governmental issuer will be considered to be "from" a
country in which it is organized, in which it has at least 50% of its assets, or
from which it derives at least 50% of its revenues.
To protect against adverse movements of interest rates and for liquidity, the
Bond Fund may also invest all or a portion of its net assets in short-term
obligations denominated in U.S. and foreign currencies such as, but not limited
to, bank deposits; bankers' acceptances; certificates of deposit; commercial
paper; short-term government, government agency, supranational agency and
corporate obligations; and repurchase agreements.
While the Bond Fund intends to invest primarily in foreign securities, it may
invest substantially all of its assets in securities of issuers located in the
U.S. for temporary or emergency purposes. Under normal circumstances the Bond
Fund will not invest more than 35% of its total assets in U.S. debt securities;
however, the Fund generally invests less than 10% of its total assets in U.S.
debt securities. The Fund may also hedge using U.S. dollars in certain
situations.
The selection of bonds for the Bond Fund is dependent upon the Advisor's
evaluation of those factors influencing interest rates. The Advisor considers
the rates of return available for any particular maturity and compares that to
the rates for other maturities in order to determine the relative and absolute
differences as they relate to income and the potential for market fluctuation.
The market values of fixed income securities tend to vary inversely with the
level of interest rates. When interest rates rise, the market values of such
securities tend to decline and vice versa. Although under normal market
conditions longer term securities yield more than short-term securities of
similar quality, longer term securities are subject to greater price
fluctuations. There are no restrictions on the maturity composition of the Bond
Fund. Fluctuations in the value of the investments will be reflected in the NAV
of the Bond Fund.
The Bond Fund is non-diversified for purposes of the 1940 Act. As a
non-diversified fund, the Bond Fund may invest a larger portion of its assets in
fewer issuers. Consequently, adverse effects on the Fund's security holdings may
affect a larger portion of the Fund's assets and cause the value of your
investment to decline.
Cash may be held in U.S. dollars and/or in any of the major trading currencies.
The Fund's cash position is first and foremost a function of the Advisor's
currency allocation decision and secondarily a function of the Advisor's
duration selection. If the outlook for U.S. dollar cash returns is more
attractive than that for cash and bond returns in all other currencies, the Fund
will hold a U.S. dollar cash position generally not in excess of 25% of its
total assets. Conversely, if the outlook for foreign currency cash returns is
more attractive, the Fund will hold foreign cash positions not in excess of
approximately 25% of its total assets.
Maturity selection is based on the Advisor's total return forecasts, i.e., the
Advisor focuses on investments that the Advisor expects to produce the highest
total return in local currency along the yield curve in each market in the
Advisor's universe for the planned holding period. Maturity selection or, more
precisely, duration selection, is the second most important factor in the
Advisor's process. Duration is the expected life of a fixed-income security,
taking into account its coupon yield, interest payments, maturity and call
features. Duration attempts to measure actual maturity, as opposed to final
maturity, by measuring the average time required to collect all payments of
principal and interest. The duration of a callable bond, also called its
effective duration, may be considerably shorter than its stated maturity in a
period of rising interest rates. Thus, as market interest rates rise, the
duration of a financial instrument decreases. For example, a 30-year
conventional mortgage may have an effective duration of only 11 to 12 years,
which means the loan will probably be paid off in about one-third of the time it
is supposedly carried by the originating lender as an earning asset. Duration
differs from other measurements such as average life and half life. Duration
measures the time required to recover a dollar of price in present value terms
(including principal and interest), whereas average life computes the average
time needed to collect one dollar of principal. The Advisor's selection of
duration is based on the Advisor's total return forecasts. Particular yield
curve shapes and/or anomalies are also taken into account. As indicated in the
preceding paragraph, U.S. dollar and/or foreign cash positions are a function of
both currency allocation and duration selection decisions.
Foreign government, governmental agency and supranational agency obligations and
foreign currency Eurobond issues represent the most common types of investment
used in the Fund's portfolio construction. Credit quality of most issuers in
these markets tends to be very high. Quality and sector management are therefore
not as complex as for domestic U.S. bonds. The Advisor focuses its issue
selection on the highest credit quality since opportunities to achieve
significant incremental returns in sector selection are limited.
E. European Debt Fund
The E. European Debt Fund's objective is to maximize total return from capital
growth and income. The Fund seeks to achieve its investment objective by
investing in fixed-income securities that are issued by borrowers in Eastern
European countries. The Fund will normally invest at least 65% of its total
assets in debt instruments denominated in foreign currencies. Generally,
however, foreign currency denominated debt instruments will constitute 90% of
its portfolio.
Under normal market conditions, the E. European Debt Fund will invest at least
65% of its assets in foreign securities that are rated BBB- or higher by S&P or
Baa3 by Moody's or unrated bonds which the Advisor believes are comparable in
quality; however, the Fund generally invests 90% of its total assets in foreign
debt securities. Due to the relative scarcity and small size of many securities
offerings in the Eastern European market, the number of securities that are
rated by S&P and Moody's is limited. The Advisor reserves the right to determine
that certain securities are of comparable quality where such securities have not
been rated due to the small size of the offering or other factors. After
purchase by the E. European Debt Fund, debt securities may cease to be rated or
their rating may be reduced. Neither event would require the Fund to dispose of
the debt security.
The Advisor's investment universe encompasses two distinct markets: (1) the
local currency debt markets of Eastern Europe, the Russian market and the
markets of the newly formed countries that belonged to the former Soviet Union,
and (2) the Eurocurrency markets that are used by public and private sector
borrowers in the Advisor's market universe to raise capital in the major trading
currencies, including the U.S. dollar. For investments in local currency debt
instruments, the Advisor's core markets are the Czech Republic, Slovakia,
Hungary, Poland, Slovenia, the Baltic states, Croatia, Romania and Russia.
The Fund intends to select its investments from a number of country and market
sectors. The Fund may invest substantial amounts in issuers from one or more
countries and will normally have investments in securities of issuers from a
minimum of three different countries. While the E. European Debt Fund intends to
invest primarily in foreign securities, it may invest substantially all of its
assets in securities of issuers located in the U.S. for temporary or emergency
purposes. Under normal circumstances the E. European Debt Fund will not invest
more than 35% of its total assets in U.S. debt securities; however, the Fund
generally invests less than 10% of its total assets in U.S. debt securities. In
circumstances where the outlook for U.S. dollar is more attractive than that for
cash and bond returns in all other currencies, the Fund will hold a U.S. dollar
cash position of up to 35% of the Fund's total assets. Conversely, if the
outlook for Eastern European currency cash returns is more attractive, the Fund
will hold foreign cash positions of up to 25% of the Fund's total assets. From
time to time, the Advisor may hold up to 90% of the Fund's total assets in
securitized money market instruments, such as government short-term paper,
treasury bills issued by governments of Eastern European countries, commercial
paper and corporate short-term paper with maturities of up to one year.
The selection of bonds for the E. European Debt Fund is dependent upon the
Advisor's evaluation of those factors influencing interest rates. The Advisor
considers the rates of return available for any particular maturity and compares
that to the rates for other maturities in order to determine the relative and
absolute differences as they relate to income and the potential for market
fluctuation.
The Advisor focuses on issuers of the highest available credit quality and uses
international and supranational issuers with credit ratings at least equal to
those of local borrowers. Quality and sector management are therefore not as
complex as for domestic U.S. bonds. Because the Advisor focuses its issue
selection on the highest available credit quality, opportunities to achieve
significant incremental returns in sector selection are limited.
Issue selection within the quality constraints referred to above is principally
aimed at achieving duration and yield curve targets determined in accordance
with the Advisor's top-down market allocation decision. The Advisor is conscious
of the need for liquidity and therefore invests only in issues within a sector
which the Advisor deems to have the greatest future marketability.
The market values of fixed income securities tend to vary inversely with the
level of interest rates. When interest rates rise, the market values of such
securities tend to decline and vice versa. Although under normal market
conditions longer term securities yield more than short-term securities of
similar quality, longer term securities are subject to greater price
fluctuations. There are no restrictions on the maturity composition of the E.
European Debt Fund. Maturity selection is based on the Advisor's total return
forecasts. Currently, most local currency debt instruments tend to have
short-term maturities of one year or less. Eurocurrency instruments, on the
other hand, that have short- to intermediate-term maturities, generally are
priced at a spread over the interest rate applicable to the same-maturity
government bond of the country in whose currency the debt instrument is issued.
To protect against adverse movements of interest rates and for liquidity, the
Fund may also invest all or a portion of its net assets in short-term
obligations, such as bank deposits, bankers' acceptances, certificates of
deposit, commercial paper, short-term government, government agency,
supranational agency and corporate obligations and repurchase agreements. The
Advisor also attempts to protect the Fund from rising interest rates by selling
interest rate future contracts or purchasing put options on interest rate
futures contracts.
The E. European Debt Fund is non-diversified for purposes of the 1940 Act. As a
non-diversified fund, the E. European Debt Fund may invest a larger portion of
its assets in fewer issuers. Consequently, adverse effects on the Fund's
security holdings may affect a larger portion of the Fund's assets and cause the
value of your investment to decline.
OTHER PRINCIPAL RISKS
Year 2000 Issue
Like other mutual funds and financial or business organizations around the
world, Vontobel Funds, Inc. (the "Company") could be adversely affected if its
computer systems or the computer systems of its service providers do not
properly process and calculate date-related information and data as of and after
January 1, 2000. This is commonly known as the "Year 2000 Issue." The Company
has taken steps that it believes are reasonably designed to address the Year
2000 Issue with respect to computer systems that it uses and to obtain
reasonable assurances that comparable steps are being taken by its major service
providers. These steps include identifying system problems, remediation and
testing the system fixes. The Company and each of its major service providers
are in the stage of testing the system fixes that have been implemented. At this
time, however, there can be no assurance that these steps will be sufficient to
avoid any adverse impact on the Company.
European Currency
Several European countries are participating in the European Economic and
Monetary Union, which established a common European currency for participating
countries. This currency is commonly known as the "Euro." Each participating
country replaced its existing currency with the Euro as of January 1, 1999.
Additional European countries may elect to participate in the common currency in
the future. The conversion presents unique uncertainties, including, among
others: (1) whether the payment and operational systems of banks and other
financial institutions will function properly; (2) how certain outstanding
financial contracts that refer to existing currencies rather than the Euro will
be treated legally; (3) how exchange rates for existing currencies and the Euro
will be established; and (4) how suitable clearing and settlement payment
systems for the Euro will be managed. If any of the Funds invests in securities
of countries that have converted to the Euro or convert in the future, the Fund
could be adversely affected if these uncertainties cause adverse affects on
these securities. The Fund could also be adversely affected if the computer
systems used by its major service providers are not properly prepared to handle
the implementation. The Company has taken steps to obtain satisfactory
assurances that the major service providers of each of the Funds have taken
steps reasonably designed to address these matters. There can be no assurances
that these steps will be sufficient to avoid any adverse impact on the
operations and investment returns of the Funds. To date the conversion of the
Euro has had negligible impact on the operations and investment returns of the
Funds.
Foreign Investing
A Fund's investments in foreign securities may involve risks that are not
ordinarily associated with U.S. securities. Foreign companies are not generally
subject to the same accounting, auditing and financial reporting standards as
are domestic companies. Therefore, there may be less information available about
a foreign company than there is about a domestic company. Certain countries do
not honor legal rights enjoyed in the U.S. In addition, there is the possibility
of expropriation or confiscatory taxation, political or social instability, or
diplomatic developments, which could affect U.S. investments in those countries.
Many foreign securities have substantially less trading volume than in the U.S.
market, and securities in some foreign issuers are less liquid and more volatile
than securities of domestic issuers. These factors make foreign investment more
expensive for U.S. investors. Mutual funds offer an efficient way for
individuals to invest abroad, but the overall expense ratios of mutual funds
that invest in foreign markets are usually higher than those of mutual funds
that invest only in U.S. securities.
Emerging and Developing Markets
A Fund's investments in emerging and developing countries involve those same
risks that are associated with foreign investing in general (see above). In
addition to those risks, companies in such countries generally do not have
lengthy operating histories. Consequently, theses markets may be subject to more
substantial volatility and price fluctuations than securities that are traded on
more developed markets.
Depositary Receipts
ADRs are receipts typically issued in the U.S. by a bank or trust company
evidencing ownership of an underlying foreign security. The International Equity
Fund may invest in ADRs which are structured by a U.S. bank without the
sponsorship of the underlying foreign issuer. In addition to the risks of
foreign investment applicable to the underlying securities, such unsponsored
ADRs may also be subject to the risks that the foreign issuer may not be
obligated to cooperate with the U.S. bank, may not provide additional financial
and other information to the bank or the investor, or that such information in
the U.S. market may not be current. Please refer to the Statement of Additional
Information for more information on ADRs.
Temporary Defensive Positions
When the Advisor believes that investments should be deployed in a temporary
defensive posture because of economic or market conditions, each of the Funds
may invest up to 100% of its assets in U.S. Government securities (such as
bills, notes, or bonds of the U.S. Government and its agencies) or other forms
of indebtedness such as bonds, certificates of deposits or repurchase agreements
(for the risks involved in repurchase agreements see the Statement of Additional
Information). For temporary defensive or emergency purposes, however, the Bond
Fund may invest without limit in investment grade U.S. debt securities,
including short-term money market securities. For temporary defensive purposes,
each of the International Equity Fund, E. European Equity Fund and Bond Fund may
hold cash or debt obligations denominated in U.S. dollars or foreign currencies.
These debt obligations include U.S. and foreign government securities and
investment grade corporate debt securities, or bank deposits of major
international institutions. When a Fund is in a temporary defensive position, it
is not pursuing its stated investment policies. The Advisor decides when it is
appropriate to be in a defensive position. It is impossible to predict for how
long such alternative strategies will be utilized.
MANAGEMENT ORGANIZATION AND CAPITAL STRUCTURE
Investment Advisor - Vontobel USA Inc., 450 Park Avenue, New York, N.Y. 10022
(the "Advisor"), manages the investments of each Fund pursuant to separate
Investment Advisory Agreements (each, an "Advisory Agreement"). The Advisor is a
wholly owned and controlled subsidiary of Vontobel Holding Ltd., a Swiss bank
holding company, having its registered offices in Zurich, Switzerland. As of
December 31, 1998, the Advisor manages in excess of $1.9 billion. The Advisor
also acts as the advisor to three series of a Luxembourg fund organized by an
affiliate of the Advisor. That fund does not accept investments from the U.S.
The Advisor has provided investment advisory services to mutual fund clients
since 1990.
Pursuant to the Advisory Agreements, the Advisor provides the Funds with
investment management services and with office space. The Advisor pays the
office and clerical expenses that are associated with investment research,
statistical analysis, and the supervision of the Fund's portfolios. The Advisor
also pays the salaries (and other forms of compensation) of the Company's
directors and officers or employees of the Company who are also officers,
Directors or employees of the Advisor. Each Fund is responsible for all other
expenses that are not specifically assumed by the Advisor. Such expenses include
(but are not limited to) brokerage fees and commissions, legal fees, auditing
fees, bookeeping and record keeping fees, custodian and transfer agency fees and
registration fees.
As compensation for its service as investment advisor for each of the Funds, the
Advisor receives a fee. That fee is payable monthly an annualized rate that is
equal to a percentage of the Fund's average daily net assets. The percentages
are set forth below. These fees are higher than those charged to most other
investment companies, but are comparable to fees paid by investment companies
with investment objectives and policies similar to the Funds' investment
objectives and policies.
For the fiscal year ended December 31, 1998, the Advisor earned $1,903,694 for
the Value Fund, $1,505,510 for the International Equity Fund, $35,051 for the
Emerging Markets Fund, $1,003,342, for the E. European Equity Fund, $80,161 for
the Bond Fund and $154,111 for the E. European Debt Fund. The Advisor waived
fees of $22,500 for the Value Fund, $35,051 for the Emerging Market Fund,
$80,161 for the Bond Fund and $50,475 for the E. European Debt Fund.
E. Bond E.
Value InternatEmerging European Fund European
Fund Equity Markets Equity Debt
Fund Fund Fund Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Amount of Assets Managed
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$0-$100 million %1.00 1.25 1.25 1.00 1.25 1.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
More than $100 million to 0.75 0.75 1.25 1.25 1.00 1.25
$500 million
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
More than $500 million 0.75 0.75 1.00 1.00 1.00 1.00
Mr. Edwin Walczak is a Senior Vice President of the Advisor. Mr. Walczak
joined the Advisor in 1988 and has been the President and portfolio manager of
the Value Fund since its inception in March 1990. Mr. Mark Robertson, who is a
Vice President of the Advisor, is the associate portfolio manager of the Value
Fund. He joined the Advisor in September 1991.
Mr. Fabrizio Pierallini, who is a Senior Vice President of the Advisor, has been
the President and portfolio manager of the International Equity Fund since May
1994 and the Emerging Markets Fund since its inception on August 18, 1997. From
September 1988 to April 1991 Mr. Pierallini worked with Swiss Bank Corpoation
(now UBS), as a Vice President/Portfolio Manager in its Zurich office, and from
May 1991 to April 1994 as an Associate Director/Portfolio Manger in its New York
offfice. Mr. Rajiv Jain joined the Advisor in November 1994. He is a Vice
President of the Advisor and the associate portfolio manager of the
International Equity and Emerging Markets Funds. From 1993 to 1994 Mr. Jain
worked as an analyst with Swiss Bank Corporation, New York.
Mr. Luca Parmeggiani, who is a Vice President of the Advisor, has been the
portfolio manager of the E. European Equity Fund since October 1, 1997. Mr.
Parmeggiani is a First Vice President of Vontobel Asset Management, Switzerland,
which he joined in September 1997 as head of Eastern European equity research
and management. He was formerly a Vice President of Lombard Odier & Cie, Geneva,
which he joined as a quantitative analyst in 1992 and was the portfolio manager
of Lombard Odier's closed-end Polish Investment Fund and its Luxembourg-based
Eastern Europe Fund. He is an EFFAS certified financial analyst (European
Federation of Financial Analysts and Statisticians).
Dr. Monica Mastroberardino is a Vice President of the Advisor, and was
appointed the portfolio manager of the International Bond Fund in February
1999. She is also the Associate Fund Manager of the E. European Debt Fund.
Dr. Mastroberardino has been a macroeconomic analyst with Vontobel Asset
Management, Zurich, since February 1998 and is the Associate Fund Manger of its
Luxembourg-based Eastern European Debt Fund. From February 1995 to January
1998 she worked as a macroeconomic and financial analyst for Credit Suisse,
Zurich.
Mr. Volker Wehrle is a Vice President of the Advisor. He has been the
President and portfolio manager of the E. European Debt Fund since its
inception on August 18, 1997. Mr. Wehrle is also a Vice President and the
head of fixed income management of Vontobel Asset Management, Zurich, which he
joined in October 1994. From January 1989 to September 1994 he managed fixed
income investments for the Group Treasury Department of Sandoz AG in Basel,
Switzerland.
SHAREHOLDER INFORMATION
Each Fund's share price, called its NAV, is determined as of the close of
trading on the New York Stock Exchange ("NYSE") (currently 4:00 p.m., Eastern
Time) on each business day ("Valuation Time") that the NYSE is open; however,
the Company's management may compute the NAV more frequently in order to protect
shareholders' interests. As of the date of this prospectus, the Fund is informed
that the NYSE will be closed on the following holidays: New Year's Day, Martin
Luther King Jr. Day, Presidents Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. NAV per share is computed by
adding the total value of the investments and other assets, subtracting any
liabilities and then dividing by the total number of shares outstanding.
The Fund's securities are generally valued at current market prices. Investments
in securities traded on the national securities exchanges or included in the
NASDAQ National Market System are valued at the last reported sale price. Other
securities traded in the over-the-counter market and listed securities for which
no sales are reported on that date are valued at the last reported bid price.
Short-term debt securities (less than 60 days to maturity) are valued at their
fair market value using amortized cost pricing procedures. Other assets for
which market prices are not readily available are valued at their fair value as
determined in good faith under procedures set by the Board of Directors.
Depositary Receipts (i.e., ADRs, EDRs and GDRs) will be valued at the closing
price of the instrument last determined prior to the Valuation Time unless the
Company is aware of a material change in value. Securities for which such a
value cannot be readily determined on any day will be valued at the closing
price of the underlying security adjusted for the exchange rate.
PURCHASING SHARES
You may purchase shares of the Fund directly from Vontobel Fund Distributors
(the "Distributor") or through brokers or dealers who are members of the
National Association of Securities Dealers, Inc. When you acquire or redeem
shares through a securities broker or dealer, you may be charged a transaction
fee. The offering price per share is equal to the NAV next determined after the
Fund receives your purchase order.
The minimum initial investment for the Value Fund, Emerging Markets Fund, E.
European Equity Fund, Bond Fund and E. European Debt Fund is $1,000. The minimum
initial investment in the International Equity Fund is $200,000. Subsequent
investments for all Funds must be $50 or more. The Company may waive the minimum
initial investment requirement for purchases made by Directors, officers and
employees of the Company. The Company may also waive the minimum investment
requirement for purchases by its affiliated entities and certain related
advisory accounts and retirement accounts (such as IRAs).
Purchase by Mail - To purchase shares of a Fund by mail complete and sign the
attached application form (the "Account Application") and mail it together with
your check to Fund Services, Inc., (the "Transfer Agent"), at P.O. Box 26305,
Richmond, VA 23260. All checks should be made payable to the applicable Fund.
For subsequent purchases, include the tear-off stub from a prior purchase
confirmation with your check. Otherwise, identify the name(s) of the registered
owner(s) and social security number(s).
Investing by Wire - You may purchase shares by requesting your bank to wire
funds directly to the Transfer Agent. To invest by wire please call the Transfer
Agent for instructions, then notify the Distributor by calling 800-776-5455.
Your bank may charge you a small fee for this service. Once you have arranged to
purchase shares by wire, please complete and mail an Account Application
promptly to the Transfer Agent. This application is required to complete the
Funds' records. You will not have access to your shares until the Funds' records
are complete. Once your account is opened, you may make additional investments
using the wire procedure described above. Be sure to include your name and
account number in the wire instructions that you provide your bank.
The Transfer Agent will automatically establish and maintain an open account for
the Funds' shareholders. The open account reflects a shareholder's shares. This
service facilitates the purchase, redemption or transfer of shares, eliminates
the need to issue or safeguard certificates and reduces time delays in executing
transactions. Stock certificates are not required and are not normally issued.
Stock certificates for full shares will be issued by the Transfer Agent upon
written request but only after payment for the shares is collected by the
Transfer Agent.
REDEEMING SHARES
You may redeem shares of the Funds at any time and in any amount by mail or
telephone. For your protection, the Transfer Agent will not redeem your shares
until it has received all information and documents necessary for your request
to be considered in "proper order." (See "Signature Guarantees.") The Transfer
Agent promptly notify you if your redemption request is not in proper order.
The Company's procedure is to redeem shares at the NAV determined after the
Transfer Agent receives the redemption request in proper order. The Company
deducts a 2% redemption fee from proceeds of Emerging Markets Fund shares, E.
European Equity Fund shares or E. European Debt Fund shares redeemed less than
six months after purchase (including shares to be exchanged). The applicable
Fund retains this amount to offset the Fund's costs of purchasing or selling
securities.
After we receive your request in proper order, the Company will mail redemption
proceeds to your registered address within seven days. The Company will make
payments payable to the registered owner(s) unless you specify otherwise in your
redemption request.
Please note that (1) the Transfer Agent cannot accept redemption requests which
specify a particular date for redemption, or which specify any special
conditions; and (2) if the shares you are redeeming were purchased less than 15
days prior to the receipt of your redemption request, the Transfer Agent must
determine the check you used to pay for the shares you are redeeming has cleared
before it disburses the redemption proceeds. If you anticipate that you may make
a redemption within 15 days after you purchase shares, you should make your
purchase by wire, or by a certified, treasurer's or cashier's check.
The Company may suspend the right to redeem shares for any period during which
the NYSE is closed or the Securities and Exchange Commission determines that
there is an emergency. In such circumstances you may withdraw your redemption
request or permit your request to be held for processing at the net asset value
per share next computed after the suspension is terminated.
Redemption by Mail - To redeem shares by mail, send a written request for
redemption, signed by the registered owner(s) exactly as the account is
registered. Certain written requests to redeem shares may require signature
guarantees. For example, signature guarantees may be required if you sell a
large number of shares or if you ask that the proceeds be sent to a different
address or person. Signature guarantees are used to help protect you and the
Funds. You can obtain a signature guarantee from most banks or securities
dealers, but not from a Notary Public. Please call the Transfer Agent to learn
if a signature guarantee is needed or to make sure that it is completed
appropriately.
There is no charge to shareholders for redemptions by mail.
Redemption by Telephone - You may redeem your shares by telephone provided that
you requested this service on your initial Account Application. If you request
this service at a later date, you must send a written request along with a
signature guarantee to the Transfer Agent. Once your telephone authorization is
in effect, you may redeem shares by calling the Transfer Agent at (800)
628-4077. There is no charge for establishing this service, but the Transfer
Agent will charge your account a $10.00 service fee for each telephone
redemption. The Transfer Agent may change the amount of this service charge at
any time without prior notice.
You cannot redeem shares by telephone if you hold a stock certificate
representing the shares you are redeeming or if you paid for the shares with a
personal, corporate, or government check and your payment has been on the books
of the Company for less than 15 days.
If it should become difficult to reach the Transfer Agent by telephone during
periods when market or economic conditions lead to an unusually large volume of
telephone requests, a shareholder may send a redemption request to the Transfer
Agent by overnight mail.
The Company employs reasonable procedures designed to confirm the authenticity
of your instructions communicated by telephone and, if it does not, it may be
liable for any losses due to unauthorized or fraudulent transactions.
Redemption by Wire - If you request that your redemption proceeds be wired to
you, please call your bank for instructions prior to writing or calling the
Transfer Agent. Be sure to include your name, Fund account number, your account
number at your bank and wire information from your bank in your request to
redeem by wire.
Signature Guarantees - To help to protect you and the Company from fraud,
signature guarantees are required for: (1) all redemptions ordered by mail if
you require that the check be payable to another person or that the check be
mailed to an address other than the one indicated on the account registration;
(2) all requests to transfer the registration of shares to another owner; and
(3) all authorizations to establish or change telephone redemption service,
other than through your initial Account Application.
In the case of redemption by mail, signature guarantees must appear on either:
(a) the written request for redemption; or (b) a separate instrument of
assignment (usually referred to as a "stock power") specifying the total number
of shares being redeemed. The Company may waive these requirements in certain
instances.
The following institutions are acceptable signature guarantors: (a) participants
in good standing of the Securities Transfer Agents Medallion Program ("STAMP");
(b) commercial banks which are members of the Federal Deposit Insurance
Corporation ("FDIC"); (c) trust companies; (d) firms which are members of a
domestic stock exchange; (e) eligible guarantor institutions qualifying under
Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended, that are
authorized by charter to provide signature guarantees (e.g., credit unions,
securities dealers and brokers, clearing agencies and national securities
exchanges); and (f) foreign branches of any of the above. In addition, the
Company will guarantee your signature if you personally visit its offices at
1500 Forest Avenue, Suite 223, Richmond, VA 23229. The Transfer Agent cannot
honor guarantees from notaries public, savings and loan associations, or savings
banks.
Small Accounts - Due to the relatively higher cost of maintaining small
accounts, the Company may deduct $10 per year from your account or may redeem
the shares in your account, if it has a value of less than $1,000. The Company
will advise you in writing sixty (60) days prior to deducting the annual fee or
closing your account, during which time you may purchase additional shares in
any amount necessary to bring the account back to $1,000. The Company will not
close your account if it falls below $1,000 solely because of a market decline.
OTHER SHAREHOLDER SERVICES
Individual Retirement Accounts (IRA's) - IRA accounts are available. Please call
(800)-527-9500 for information and to request forms.
Invest-A-Matic Account - Existing shareholders, who wish to make regular monthly
investments in amounts of $50 or more, may do so through the Invest-A-Matic
Account.
Exchange Privileges Account - You may exchange all or a portion of your shares
in each Fund for the shares of certain other Funds having different investment
objectives, provided that the share of the Fund you are exchanging into are
registered for sale in your state of residence. Your account may be charged $10
for a telephone exchange. An exchange is treated as a redemption and purchase
and may result in realization of a gain or loss on the transaction.
How To Transfer Shares
If you wish to transfer shares to another owner, send a written request to the
Transfer Agent. Your request should include (1) the name of the Fund and
existing account registration; (2) signature(s) of the registered owner(s); (3)
the new account registration, address, Social Security Number or taxpayer
identification number and how dividends and capital gains are to be distributed;
(4) any stock certificates which have been issued for the shares being
transferred; (5) signature guarantees (See "Signature Guarantees"); and (6) any
additional documents which are required for transfer by corporations,
administrators, executors, trustees, guardians, etc. If you have any questions
about transferring shares, call the Transfer Agent at (800) 628-4077.
Account Statements And Shareholder Reports
Each time you purchase, redeem or transfer shares of a Fund, you will receive a
written confirmation. You will also receive a year-end statement of your account
if any dividends or capital gains have been distributed, and an annual and a
semi-annual report.
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Dividends from net investment income, if any, are declared annually by each
Fund. Each of the Funds intends to distribute annually any net capital gains.
Dividends will automatically be reinvested in additional shares, unless you
elect to have the distributions paid to you in cash. If you do not wish to have
your dividends reinvested in additional shares, you should send a written
request to that effect to the Transfer Agent. There are no sales charges or
transaction fees for reinvested dividends and all shares will be purchased at
NAV. If the investment in shares is made with an IRA, all dividends and capital
gain distributions must be reinvested.
Unless you are investing through a tax deferred retirement account, such as an
IRA, it is not to your advantage to buy shares of a Fund shortly before the next
distribution, because doing so can cost you money in taxes. This is known as
"buying a dividend." To avoid buying a dividend, check each Fund's distribution
schedule before you invest. Shareholders will be subject to tax on all dividends
and distributions whether paid to them or reinvested in shares of the Fund.
DISTRIBUTIONS AND TAXES
Tax Considerations
In general, Fund distributions are taxable to you as either ordinary income or
capital gains. This is true whether you reinvest your distributions in
additional shares of a Fund or receive them in cash. Any capital gains a Fund
distributes are taxable to you as long-term capital gains no matter how long you
have owned your shares.
Every January, you will receive a statement that shows the tax status of
distributions you received for the previous year. Distributions declared in
December but paid in January are taxable as if they were paid in December.
When you sell your Fund shares, you may have a capital gain or loss. For tax
purposes, an exchange of your Fund shares for shares of a different series of
the Company is the same as a sale. The individual tax rate on any gain from the
sale or exchange of your shares depends on how long you have held your shares.
Fund distributions and gains from the sale or exchange of your Fund shares will
generally be subject to state and local income tax. Any foreign taxes paid by a
Fund that invests more than 50% of its assets in foreign securities may be
passed through to you as a foreign tax credit. Non-U.S. investors may be subject
to U.S. withholding and estate tax. You should consult with your tax adviser
about the federal, state, local or foreign tax consequences of your investment
in a Fund.
By law, a Fund must withhold 31% of your taxable distributions and proceeds if
you do not provide your correct taxpayer identification number (TIN) or certify
that your TIN is correct, or if the IRS instructs a Fund to do so.
DISTRIBUTION ARRANGEMENTS
The Funds are offered through financial supermarkets, investment advisers and
consultants, financials planners, brokers, dealers and other investment
professionals, and directly through the Distributor. The shares are offered and
sold without any sales charges imposed by the Funds or the Distributor. However,
investment professionals who offer shares may request fees from their individual
clients. If you invest through a third party, the policies and fees may be
different than those described in the Prospectus. for example, third parties may
charge transaction fees or set different minimum investment amounts.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years [or, if shorter, the period of the
Fund's operations]. 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). The Funds' financial highlights for the
period presented have been audited by Tait, Weller and Baker, independent
auditors, whose unqualified report thereon is included in the SAI. The Funds'
financial statements, notes to financial statements and report of independent
accountants are included in the SAI as well as in the Funds' Annual Report to
Shareholders (the "Annual Report"). Additional performance information for the
Funds is included in the Annual Report. The Annual Report and the SAI are
available at no cost from the Fund at the address and telephone number noted on
the back card page of this Prospectus. The following information should be read
in conjunction with the financial statements and notes thereto.
Vontobel U.S. Value Fund
For a Share Outstanding Throughout Each Period
Years ended
December 31,
-----------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Per Share Operating
Performance
Net asset value, $16.51 $13.78 $13.25 $10.26 $12.64
beginning of year
------- ------- ------ ------ ------
Income from investment
operations
Net 0.22 0.10 0.17 0.05 0.09
investment income
Net realized and unrealized
gain (loss) on
investments 2.06 4.61 2.65 4.09 (0.08)
------- ------- ------ ------ ------
------- ------- ------ ------ ------
Total from investment 2.28 4.71 2.82 4.14 0.01
operations
------- ------- ------ ------ ------
Less
distributions
Distributions from net (0.16) (0.10) (0.19) (0.04) (0.23)
investment income
Distributions from realized (1.90) (1.88) (2.10) (1.11) (2.16)
gain on investments
------- ------- ------ ------ ------
------- ------- ------ ------ ------
Total (2.06) (1.98) (2.29) (1.15) (2.39)
distributions
------- ------- ------ ------ ------
======= ======= ====== ====== ======
Net asset value, end of $16.73 $16.51 $13.78 $13.25 $10.26
year
======= ======= ====== ====== ======
Total 14.70% 34.31% 21.28% 40.36% 0.02%
Return
Ratios/Supplemental
Data
Net assets, end of year $200,463 $203,120 $69,552 $55,103 $29,852
(000's)
Ratio to average net
assets - (A)
Expenses - (B) 1.46% 1.61% 1.48% 1.65% 1.62%
Expenses - 1.45% 1.58% 1.43% 1.50% 1.62%
net (C)
Net 0.93% 0.72% 0.63% 0.38% 0.76%
investment income
Portfolio 122.71% 89.76% 108.36% 95.93% 98.90%
turnover rate
(A) Management fee waivers reduced the expense ratios and increased net
investment income ratios by .01% in 1998, 0.02% in 1997,
0.04% in 1996 and
0.06% in 1995.
(B) Expense ratio has been increased to include additional custodian fees in
1998, 1997, 1996 and 1995 which were offset by
custodian fee credits; prior to 1995 custodian fee credits reduced expense
ratios. (C) Expense ratio-net reflects the effect of the custodian fee credits,
the Fund received.
Vontobel International Equity Fund
For a Share Outstanding Throughout Each Period
Years ended December 31,
-------------------------------------------------------------
1998 1997 1996 1995
---- ---- ---- ----
1994
Per Share Operating Performance
Net asset value, beginning of year $18.15 $18.22 $17.13 $16.23
$17.22
------ ------ ------ ------ ------
Income from investment
operations-
Net investment 0.01 (0.03) 0.03 0.16 0.01
income (loss)
Net realized and
unrealized
gain (loss) on 2.98 1.74 2.85 1.61 (0.92)
investments
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Total from investment 2.99 1.71 2.88 1.77 (0.91)
operations
------ ------ ------ ------ ------
Less distributions-
Distributions from net 0.00 0.00 (0.03) (0.17) (0.08)
investment income
Distributions from realized (0.96) (1.78) (1.76) (0.70) 0.00
gains
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Total distributions (0.96) (1.78) (1.79) (0.87) (0.08)
------ ------ ------ ------ ------
Net asset value, end of $20.18 $18.15 $18.22 $17.13 $16.23
year
====== ====== ====== ====== ======
Total Return 16.77% 9.19% 16.98% 10.91% (5.28)%
Ratios/Supplemental Data
Net assets, end of year $161,933 $160,821$151,71$130,505 $138,174
(000's)
Ratio to average net
assets-
Expenses (A) 1.40% 1.56% 1.60% 1.63% 1.54%
Expenses-net (B) 1.36% 1.50% 1.39% 1.53% 1.54%
Net investment income 0.06% (0.17)% 0.15% 0.41% 0.08%
(loss)
Portfolio turnover rate 41.51% 38.45% 54.58% 68.43% 34.04%
(A) Expense ratio has been increased to include additional custodian fees since
1995 which were offset
by custodian fee credits. Prior to 1995, custodian fee credits reduced
expense ratios. (B) Expense ratio-net reflects the effect of the custodian fee
credits the fund received.
Vontobel Eastern European Equity Fund
For a Share Outstanding Throughout Each Period
Years ended February 15, * to
December 31, to
1998 1997 December 31, 1996
-----------------
--------- --------
Per Share Operating
Performance
Net asset value,
beginning of period $15.25 $14.89 $10.00
--------- -------- ---------
Income from investment
operations-
Net investment loss (0.31) (0.19) (0.06)
Net realized and unrealized
gain (loss) on investments (6.80) 1.47 4.95
--------- -------- ---------
Total from investment
operations (7.11) 1.28 4.89
--------- -------- ---------
Less distributions-
Distributions from realized
gains on investments 0.00 (0.92) 0.00
--------- -------- ---------
Total distributions 0.00 (0.92) 0.00
--------- -------- ---------
Net asset value, end of period $8.14 $15.25 $14.89
========= ======== =========
Total Return (46.62)% 8.74% 48.90%
Ratios/Supplemental Data
Net assets, end of period (000's) $36,154 $139,408 $61,853
Ratio to average net assets-
Expenses (A) 2.57% 1.94% 2.02% **
Expenses-net (B) 2.41% 1.66% 1.71% **
Net investment loss (1.07)% **
(1.67)% (1.30)%
Portfolio turnover rate 135.35% 105.86% 38.69%
* Commencement of operations
** Annualized
(A) Expense ratio has been increased to include additional custodian fees which
were offset by custodian fee credits. (B) Expense ratio-net reflects the effect
of the custodian fee credits the fund received.
Vontobel International Bond Fund
For a Share Outstanding Throughout Each Period
March 1* to
Years ended December December
31,
1998 1997 1996 1995 1994
------- ----- ----- ----- -----
Per Share Operating
Performance
Net asset value,
Beginning of $9.89 $10.93 $10.60 $9.48 $10.00
period...
------- ----- ----- ----- -----
Income from investment
Operations-
Net investment 0.62 0.61 0.47 0.61 0.70
income...
Net realized and
unrealized
Gain (loss) on 0.85 (1.27) 0.32 1.06 (0.50)
investments
------- ----- ----- ----- -----
Total from
investment
Operations....... 1.47 (0.66) 0.79 1.67 0.20
------- ----- ----- ----- -----
Less distributions-
Distributions from
net
Investment income -- -- (0.40) (0.55) (0.70)
Distributions from
realized
Gains on investments (0.70) (0.38) (0.06) -- --
Distributions in
excess of
net investment income -- -- -- -- (0.02)
------- ----- ----- ----- -----
------- ----- ----- ----- -----
Total distributions (0.70) (0.38) (0.46) (0.55) (0.72)
------- ----- ----- ----- -----
Net asset value, end of $10.66 $9.89 $10.93 $10.60 $9.48
period
======= ===== ===== ===== =====
Total Return 14.85% (6.04)% 7.51% 17.60% 1.98%
======= ===== ===== ===== =====
Ratios/Supplemental Data
Net assets, end of $6,983 $10,793 $26,879 $16,253 $10,235
period (000's)
Ratio to average net
assets-(A)
Expenses 1.61% 1.60% 1.84% 1.76% 1.35%**
(B)....................
Expense ratio-net 1.61% 1.40% 1.52% 1.35% 1.35%**
(C).............
Net investment income 5.04% 5.92% 4.78% 5.38% 3.99%**
..........
Portfolio turnover 8.72% 0.00% 19.89% 18.63% 19.00%
rate.......
* Commencement of Operations
** Annualized
(A) Management fee waivers and expense reimbursements reduced the expense ratios
and increased the Ratios of net investment income by .25% in 1998
0.60% in 1997, 0.20% in 1996, 1.00% in 1995 and 0.19% in 1994.
(B) Expense ratio has been increased to include additional custodian fees in
1997, 1996 and 1995 that were offset by custodian fee credits; prior to 1995
custodian fee credits reduced the expense ratio.,
(C) Expense ratio-net reflects the effect of the custodian fee credits the fund
received.
Vontobel Emerging Markets Equity Fund
For a Share Outstanding Throughout Each Period
Year ended September 1, *
December 31, to
1998 December 31, 1997
Per Share Operating
Performance
Net asset value,
beginning of $9.42
period $10.00
----- --------
Income from
investment
operations-
Net investment 0.00 (0.04)
loss
Net realized and
unrealized
loss on (2.11) (0.54)
investments
----- --------
Total from
investment
operations (2.11) (0.58)
----- --------
Net asset value, end $7.31 $9.42
of period
===== ========
Total Return (22.40)% (5.80)%
Ratios/Supplemental
Data
Net assets, end of $1,611 $3,601
period (000's)
Ratio to average net
assets- (A)
Expenses (B) 2.38% 2.41% **
Expenses-net (C) 2.07% 2.20% **
Net investment loss (0.02)% (1.42)% **
Portfolio turnover 130.59% 16.36%
rate
(A) Management fee waivers and expense reimbursements reduced the expense ratio
and increased net investment income ratio by 3.75% and 1.25%, in 1998 and 1997,
respectively.
(B) Expense ratio has been increased to include additional
custodian fees which were offset by custodian fee credits.
(C) Expense ratio-net eflects the effect of the custodian fee credits the fund
received.
* Commencement of operations
** Annualized
Vontobel Eastern European Debt Fund
For a Share Outstanding Throughout Each Period
Year ended September 1*
December, 31 December 31,
1998 1997
------ -------
Per Share Operating Performance
Net asset value, beginning of $9.70 $10.00
period
------ -------
Income from investment operations
Net investment income 1.27 0.26
Net realized and unrealized
gain (loss) on
investments 1.09 (0.32)
------ -------
------ -------
Total from investment 2.36 (0.06)
operations
------ -------
Less
distributions
Distributions from net (1.64) (0.24)
investment income
Distributions from (0.21) 0.00
capital gains
------ -------
Total (1.85) (0.24)
Distributions
====== =======
Net asset value, end of $10.21 $9.70
period
====== =======
Total Return 24.54% (0.55)%
Ratios/Supplemental
Data
Net assets, end of $7,882 $14,438
period (000's)
Ratio to average net
assets -(A)
Expenses - (B) 1.98% 2.38% **
Expenses - 1.98% 2.19% **
net (C)
Net 12.03% 8.28% **
investment income
Portfolio 21.36% 0.00%
turnover rate
*Commencement of
operations
**Annualized
(A) Management fee waivers reduced the expense ratio and increased the ratio of
net investment income by .41% in 1998.
(B) Expense ratio has been increased to include additional custodian fees
which were offset by custodian fee credits.
(C) Expense ratio - net reflects the effect of the custodian fee credits the
Fund received.
<PAGE>
For investors who want more information about the Funds, the following documents
are available, free of charge, upon request:
Annual and Semi-Annual Reports:
Additional information about the Funds' investments is available in the Funds'
annual and semiannual reports to shareholders. In each Fund's annual report, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
Statement of Additional Information ("SAI")
The SAI provides more detailed information about the Funds and is incorporated
into this prospectus by reference.
You can receive free copies of the reports and the SAI, request other
information and discuss your questions about the Funds by the contacting the
Funds directly at:
VONTOBEL FUNDS, INC.
1500 Forest Avenue, Suite 223
Richmond, Virginia 23229
1-800-527-9500
You can review the Funds' reports and SAI at the Public Reference Room of the
SEC. You can receive text-only copies:
For a fee, by writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009 or call 1-800-SEC-0330
Free from the SEC's Internet Website at http://www.sec.gov.
(Investment Company Act File No. 811-_____)
VONTOBEL FUNDS, INC.
(THE "COMPANY")
1500 FOREST AVENUE, SUITE 223, RICHMOND, VA 23229
1-800-527-9525
STATEMENT OF ADDITIONAL INFORMATION
VONTOBEL U.S. VALUE FUND
VONTOBEL INTERNATIONAL EQUITY FUND
VONTOBEL EMERGING MARKETS EQUITY FUND
VONTOBEL EASTERN EUROPEAN EQUITY FUND
VONTOBEL INTERNATIONAL BOND FUND
VONTOBEL EASTERN EUROPEAN DEBT FUND
This Statement of Additional Information ("SAI") is not a prospectus. It should
be read in conjunction with the current Prospectus of the Vontobel U.S. Value
Fund, Vontobel International Equity Fund (formerly named Vontobel EuroPacific
Fund), Vontobel Emerging Markets Equity Fund, Vontobel Eastern European Equity
Fund, Vontobel International Bond Fund and Vontobel Eastern European Debt Fund
(collectively, the "Funds"), dated May 1, 1999. You may obtain the Prospectus of
the Funds, free of charge, by writing to Vontobel Funds, Inc. at 1500 Forest
Avenue, Suite 223, Richmond, VA 23229 or by calling 1-800-527-9525.
The Fund's audited financial statements and notes thereto for the year ended
December 31, 1998 and the unqualified report of Tait, Weller & Baker, on such
financial statements (the "Report") are incorporated by reference in this SAI
and are included in the Fund's 1998 annual report to shareholders (the "Annual
Report"). A copy of the Annual Report accompanies this SAI and an investor may
obtain a copy of the Annual Report by writing to the Fund or calling
(800)-527-9500.
The date of this SAI is May 1, 1999.
<PAGE>
TABLE OF CONTENTS
PAGE
General Information...........................................................
Investment Objectives.........................................................
Strategies and Risks..........................................................
Investment Programs...........................................................
Convertible Securities.................................................
Warrants...............................................................
Illiquid Securities....................................................
Debt Securities........................................................
International Bonds....................................................
Strategic Transactions.................................................
Options................................................................
Futures................................................................
Currency Transactions..................................................
Combined Transactions..................................................
Eurocurrency Instruments...............................................
Use of Segregated and Other Special Accounts...........................
Depositary Receipts....................................................
Temporary Defensive Positions..........................................
U.S. Government Securities.............................................
Repurchase Agreements..................................................
Reverse Repurchase Agreements..........................................
When-Issued Securities.................................................
Other Investments.............................................................
Restrictions..................................................................
Management of the Company....................................................
Principal Securities Holders.................................................
Investment Advisor and Advisory Agreement....................................
Management-Related Services..................................................
Portfolio Transactions......................................................
Portfolio Turnover..........................................................
Capital Stock and Dividends.................................................
Dividends and Distributions.................................................
Additional Information about Purchases and Sales...........................
Eligible Benefit Plans....................................................
Tax Status................................................................
Investment Performance....................................................
Financial Information.....................................................
<PAGE>
GENERAL INFORMATION
Vontobel Funds, Inc. (the "Company") was organized as a Maryland corporation on
February 28, 1997. The Company is an open-end, management investment company
(commonly known as a "mutual fund"), registered under the Investment Company Act
of 1940, as amended (the "1940 Act"). This SAI relates to the Vontobel U.S.
Value Fund ("Value Fund"), Vontobel International Equity Fund ("International
Equity Fund"), Vontobel Emerging Markets Equity Fund ("Emerging Markets Fund"),
Vontobel Eastern European Equity Fund ("E. European Equity Fund"), Vontobel
International Bond Fund (the "Bond Fund") and Vontobel Eastern European Debt
Fund ("E. European Debt Fund") (individually, a "Fund," collectively, the
"Funds"). Each Fund is a separate investment portfolio or series of the Company
(see "Capital Stock" below). Each of the International Equity, Emerging Markets
and E. European Equity Funds is a "diversified" series," as that term is defined
in the 1940 Act. The Value, Bond and E.
European Debt Funds are "non-diversified" series.
INVESTMENT OBJECTIVES
The Value Fund's investment objective is to achieve long-term capital returns in
excess of the broad market. The investment objective of each of the
International Equity and E. European Equity Funds is to achieve capital
appreciation and the investment objective of the Emerging Markets Fund is to
achieve long-term capital appreciation. The investment objective of each of the
Bond and E. European Debt Funds is to maximize total return from capital growth
and income.
All investments entail some market and other risks. For instance, there is no
assurance that a Fund will achieve its investment objective. You should not rely
on an investment in a Fund as a complete investment program.
STRATEGIES AND RISKS
The following discussion of investment techniques and instruments supplements,
and should be read in conjunction with, the investment information in the Funds'
Prospectus. In seeking to meet its investment objective, each Fund may invest in
any type of security whose characteristics are consistent with its investment
program described below.
INVESTMENT PROGRAMS
Convertible Securities: Each of the Value, International Equity, Emerging
Markets and E. European Equity Funds may invest in convertible securities.
Traditional convertible securities include corporate bonds, notes and preferred
stocks that may be converted into or exchanged for common stock, and other
securities that also provide an opportunity for equity participation. These
securities are convertible either at a stated price or a stated rate (that is,
for a specific number of shares of common stock or other security). As with
other fixed income securities, the price of a convertible security generally
varies inversely with interest rates. While providing a fixed income stream, a
convertible security also affords the investor an opportunity, through its
conversion feature, to participate in the capital appreciation of the common
stock into which it is convertible. As the market price of the underlying common
stock declines, convertible securities tend to trade increasingly on a yield
basis and so may not experience market value declines to the same extent as the
underlying common stock. When the market price of the underlying common stock
increases, the price of a convertible security tends to rise as a reflection of
higher yield or capital appreciation. In such situations, the Funds have to pay
more for a convertible security than the value of the underlying common stock.
Warrants: Each of the Value, International Equity, Emerging Markets and E.
European Equity Funds may invest in warrants. Warrants are options to purchase
equity securities at a specific price for a specific period of time. They do not
represent ownership of the securities, but only the right to buy them. Hence,
warrants have no voting rights, pay no dividends and have no rights with respect
to the assets of the corporation issuing them. The value of warrants is derived
solely from capital appreciation of the underlying equity securities. Warrants
differ from call options in that the underlying corporation issues warrants,
whereas call options may be written by anyone.
Illiquid Securities: Each Fund may invest up to 15% of its net assets in
illiquid securities. For this purpose, the term "illiquid securities" means
securities that cannot be disposed of within seven days in the ordinary course
of business at approximately the amount at which the Fund has valued the
securities. Illiquid securities include generally, among other things, certain
written over-the-counter options, securities or other liquid assets as cover for
such options, repurchase agreements with maturities in excess of seven days,
certain loan participation interests and other securities whose disposition is
restricted under the federal securities laws.
Debt Securities: Each of the Bond and E. European Debt Funds invest primarily in
debt securities. The Bond Fund will invest in securities rated A or higher by
Moody's Investors Service, Inc. ("Moody's"), or Standard & Poor's Rating Group
("S&P) at the time of purchase, or unrated securities which the Advisor believes
are of comparable quality. The Bond Fund may also invest in securities rated (at
the time of purchase): Baa or higher by Moody's; BBB or higher by S&P; or
foreign securities not subject to standard credit ratings, which the Advisor
believes are of comparable quality. Securities rated as BBB or Baa are generally
regarded as having adequate capacity to pay interest and repay principal. Under
normal circumstances, the Value Fund will have at least 65% of its assets
invested in common stocks or securities convertible into common stocks. The Fund
may also acquire fixed income investments where these fixed income securities
are convertible into equity securities. The fixed income securities in which the
Value Fund may invest will be rated at the time of purchase Baa or higher by
Moody's, or BBB or higher by S&P, or foreign securities not subject to standard
credit ratings, which the Adviser believes are of comparable quality.]
The E. European Debt Fund may purchase debt securities that are rated Baa3 or
higher by Moody's or BBB- or higher by S&P, or unrated securities which the
Advisor believes are of comparable quality. The Fund reserves the right,
however, to invest its assets in lower rated securities (including unrated
securities which the Advisor believes to be of such lower quality). The Fund
will invest no more than 5% of its assets in securities rated below BBB- by S&P
or Baa3 by Moody's or which are unrated but are of comparable quality as
determined by the Advisor. Bonds rated Baa3 or BBB- may have speculative
elements as well as investment-grade characteristics. The Fund may invest in
debt securities which are rated as low as C by Moody's or D by S&P. Such
securities may be in default with respect to payment of principal or interest.
International Bonds: International bonds are bonds issued in countries other
than the United States. The Bond Fund's investments in international bonds may
include debt securities issued or guaranteed by a foreign national government,
its agencies, instrumentalities or political subdivisions, debt securities
issued or guaranteed by supranational organizations, foreign corporate debt
securities, bank or holding company debt securities and other debt securities
including those convertible into common stock. The investments of the E.
European Debt Fund may include debt securities issued or guaranteed by an
Eastern European national government, its agencies, instrumentalities or
political subdivisions, corporate debt securities issued by borrowers in Eastern
European countries and Eastern European or bank holding company debt securities.
Strategic Transactions
Each of the Funds may utilize a variety of investment strategies to hedge
various market risks (such as interest rates, currency exchange rates, and broad
specific equity or fixed-income market movements), to manage the effective
maturity or duration of fixed-income securities, or to enhance potential gain
(strategies described in more detail below). Such strategies are generally
accepted as modern portfolio management and are regularly utilized by many
mutual funds and institutional investors. Techniques and instruments may change
over time as new instruments and strategies develop and regulatory changes
occur.
In the course of pursuing these investment strategies, each Fund may purchase
and sell exchange-listed and over-the-counter put and call options on
securities, fixed-income indices and other financial instruments, purchase and
sell financial futures contracts and options thereon, enter into various
interest rate transactions such as swaps, caps, floors or collars, and enter
into various currency transactions such as currency forward contracts, currency
futures contracts, currency swaps or options on currencies or currency futures
(collectively, all the above are called "Strategic Transactions").
When conducted outside the United States, Strategic Transactions may not be
regulated as rigorously as they are in the United States, may not involve a
clearing mechanism and related guarantees, and are subject to the risk of
governmental actions affecting trading in, or the prices of, foreign securities,
currencies and other instruments. The value of such positions could also be
adversely affected by: (i) other complex foreign political, legal and economic
factors, (ii) lesser availability than in the United States of data on which to
make trading decisions, (iii) delays in a Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the United
States, (iv) the imposition of different exercise and settlement terms and
procedures and margin requirements than in the United States, and (v) lower
trading volume and liquidity.
Options
Each of the Funds may purchase and sell options as described in the Prospectus
and herein.
Put and Call Options
A put option gives the purchaser of the option, upon payment of a premium, the
right to sell, and the writer the obligation to buy, the underlying security,
commodity, index, currency or other instrument at the exercise price. A Fund may
purchase a put option on a security to protect its holdings in the underlying
instrument (or, in some cases, a similar instrument) against a substantial
decline in market value by giving the Fund the right to sell such instrument at
the option exercise price. Such protection is, of course, only provided during
the life of the put option when the Fund is able to sell the underlying security
at the put exercise price regardless of any decline in the underlying security's
market price. By using put options in this manner, the Fund will reduce any
profit it might otherwise have realized in its underlying security by the
premium paid for the put option and by transaction costs.
A call option, upon payment of a premium, gives the purchaser of the option the
right to buy, and the seller the obligation to sell, the underlying instrument
at the exercise price. The Fund's purchase of a call option on a security,
financial future, index, currency or other instrument might be intended to
protect the Fund against an increase in the price of the underlying instrument.
When writing a covered call option, the Fund, in return for the premium, gives
up the opportunity to profit from a market increase in the underlying security
above the exercise price, but conversely retains the risk of loss should the
price of the security decline. If a call option which the Fund has written
expires, it will realize a gain in the amount of the premium; however, such gain
may be offset by a decline in the market value of the underlying security during
the option period. If the call option is exercised, the Fund will realize a gain
or loss from the sale of the underlying security.
The premium received is the market value of an option. The premium the Fund will
receive from writing a call option, or, which it will pay when purchasing a put
option, will reflect, among other things, the current market price of the
underlying security, the relationship of the exercise price to such market
price, the historical price volatility of the underlying security, the length of
the option period, the general supply and demand for credit conditions, and the
general interest rate environment. The premium received by the Fund for writing
covered call options will be recorded as a liability in its statement of assets
and liabilities. This liability will be adjusted daily to the option's current
market value, which will be the latest sale price at the time at which the
Fund's net asset value per share is computed (close of the New York Stock
Exchange ("NYSE")), or, in the absence of such sale, the latest asked price. The
liability will be extinguished upon expiration of the option, the purchase of an
identical option in a closing transaction, or delivery of the underlying
security upon the exercise of the option.
The premium paid by the Fund when purchasing a put option will be recorded as an
asset in its statement of assets and liabilities. This asset will be adjusted
daily to the option's current market value, which will be the latest sale price
at the time at which the Fund's net asset value per share ("NAV") is computed
(close of the NYSE), or, in the absence of such sale, the latest bid price. The
asset will be extinguished upon expiration of the option, the selling (writing)
of an identical option in a closing transaction, or the delivery of the
underlying security upon the exercise of the option.
The purchase of a put option will constitute a short sale for federal tax
purposes. The purchase of a put at a time when the substantially identical
security held long has not exceeded the long term capital gain holding period
could have adverse tax consequences. The holding period of the long position
will be cut off so that even if the security held long is delivered to close the
put, short term gain will be recognized. If substantially identical securities
are purchased to close the put, the holding period of the securities purchased
will not begin until the closing date. The holding period of the substantially
identical securities not delivered to close the short sale will commence on the
closing of the short sale.
The Fund will purchase a call option only to close out a covered call option it
has written. It will write a put option only to close out a put option it has
purchased. Such closing transactions will be effected in order to realize a
profit on an outstanding call or put option, to prevent an underlying security
from being called or put, or, to permit the sale of the underlying security.
Furthermore, effecting a closing transaction will permit the Fund to write
another call option, or purchase another put option, on the underlying security
with either a different exercise price or expiration date or both. If the Fund
desires to sell a particular security from its portfolio on which it has written
a call option, or purchased a put option, it will seek to effect a closing
transaction prior to, or concurrently with, the sale of the security. There is,
of course, no assurance that the Fund will be able to effect such closing
transactions at a favorable price. If it cannot enter into such a transaction,
it may be required to hold a security that it might otherwise have sold, in
which case it would continue to be at market risk on the security. This could
result in higher transaction costs, including brokerage commissions. The Fund
will pay brokerage commissions in connection with the writing or purchase of
options to close out previously written options. Such brokerage commissions are
normally higher than those applicable to purchases and sales of portfolio
securities.
Options written by the Fund will normally have expiration dates between three
and nine months from the date written. The exercise price of the options may be
below, equal to, or above the current market values of the underlying securities
at the time the options are written. From time to time, the Fund may purchase an
underlying security for delivery in accordance with an exercise notice of a call
option assigned to it, rather than delivering such security from its portfolio.
In such cases, additional brokerage commissions will be incurred.
The Fund will realize a profit or loss from a closing purchase transaction if
the cost of the transaction is less or more than the premium received from the
writing of the option; however, any loss so incurred in a closing purchase
transaction may be partially or entirely offset by the premium received from a
simultaneous or subsequent sale of a different call or put option. Also, because
increases in the market price of a call option will generally reflect increases
in the market price of the underlying security, any loss resulting from the
repurchase of a call option is likely to be offset in whole or in part by
appreciation of the underlying security owned by the Fund.
An American style put or call option may be exercised at any time during the
option period while a European style put or call option may be exercised only
upon expiration or during a fixed period prior thereto. The Fund is authorized
to purchase and sell exchange-listed options and over-the-counter options ("OTC
options"). Exchange-listed options are issued by a regulated intermediary such
as the Options Clearing Corporation ("OCC"), which guarantees the performance of
the obligations of the parties to such options. The discussion below uses the
OCC as an example, but is also applicable to other financial intermediaries.
With certain exceptions, OCC issued and exchange listed options generally settle
by physical delivery of the underlying security or currency, although cash
settlement may become available in the future. Index options and Eurocurrency
instruments are cash settled for the net amount, if any, by which the option is
"in-the-money" (i.e., where the value of the underlying instrument exceeds, in
the case of a call option, or is less than, in the case of a put option, the
exercise price of the option) at the time the option is exercised. Frequently,
rather than taking or making delivery of the underlying instrument through the
process of exercising the option, listed options are closed by entering into
offsetting purchase or sale transactions that do not result in ownership of the
new option.
The Fund's ability to close out its position as a purchaser or seller of an OCC
or exchange-listed put or call option is dependent, in part, upon liquidity of
the option market. Among the possible reasons for the absence of a liquid option
market on an exchange are: (i) insufficient trading interest in certain options;
(ii) restrictions on transactions imposed by an exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities including reaching daily price
limits; (iv) interruption of the normal operations of the OCC or an exchange;
(v) inadequacy of the facilities of an exchange or OCC to handle current trading
volume; or (vi) a decision by one or more exchanges to discontinue the trading
of options (or a particular class or series of options), in which event the
relevant market for that option on that exchange would cease to exist, although
outstanding options on that exchange would generally continue to be exercisable
in accordance with their terms.
The hours of trading for listed options may not coincide with the hours during
which the underlying financial instruments are traded. To the extent that the
option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through a direct bilateral
agreement with the Counterparty. In contrast to exchange-listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. The
Fund will only sell OTC options (other than OTC currency options) that are
subject to a buy-back provision permitting the Fund to require the Counterparty
to sell the option back to the Fund at a formula price within seven days.
Although it is not required to do so, the Fund generally expects to enter into
OTC options that have cash settlement provisions.
Unless the parties provide otherwise, there is no central clearing or guaranty
function in an OTC option. As a result, if the Counterparty fails to make or
take delivery of the security, currency or other instrument underlying an OTC
option it has entered into with the Fund or fails to make a cash settlement
payment due in accordance with the terms of that option, the Fund will lose any
premium it paid for the option as well as any anticipated benefit of the
transaction. Accordingly, the Advisor must assess the creditworthiness of each
such Counterparty or any guarantor or credit enhancement of the Counterparty's
credit to determine the likelihood that the terms of the OTC option will be
satisfied. The Fund will engage in OTC option transactions only with United
States government securities dealers recognized by the Federal Reserve Bank of
New York as "primary dealers," or broker dealers, domestic or foreign banks or
other financial institutions which have received (or the guarantors of the
obligation of which have received) a short-term credit rating of A-1 from S&P or
P-1 from Moody's or an equivalent rating from any other nationally recognized
statistical rating organization ("NRSRO"). The staff of the SEC currently takes
the position that OTC options purchased by a Fund and portfolio securities
"covering" the amount of a Fund's obligation pursuant to an OTC option sold by
it (the cost of the sell-back plus the in-the-money amount, if any) are
illiquid, and are subject to a fund's limitation on investing no more than 10%
of its assets in illiquid securities.
If the Fund sells a call option, the premium that it receives may serve as a
partial hedge against a decrease in the value of the underlying securities or
instruments in its portfolio. The premium may also increase the Fund's income.
The sale of put options can also provide income.
The Funds may purchase and sell call options on securities, including U.S.
Treasury and agency securities, mortgage-backed securities, corporate debt
securities, and Eurocurrency instruments (see "Eurocurrency Instruments" below
for a description of such instruments) that are traded in U.S. and foreign
securities exchanges and in the over-the-counter markets, and futures contracts.
Each of the International Equity, European Equity and Bond Funds (collectively,
the International Funds) may purchase and sell call options on currencies. All
calls sold by the Fund must be "covered" (i.e., the Fund must own the securities
or futures contract subject to the call) or must meet the asset segregation
requirements described below as long as the call is outstanding. Even though the
Fund will receive the option premium to help protect it against loss, a call
sold by the Fund exposes the Fund during the term of the option to possible loss
of opportunity to realize appreciation in the market price of the underlying
security or instrument and may require the Fund to hold a security or instrument
which it might otherwise have sold.
The Funds may purchase and sell put options on securities including U.S.
Treasury and agency securities, mortgage-backed securities, foreign sovereign
debt, corporate debt securities, convertible securities, and Eurocurrency
instruments (whether or not it holds the above securities in its portfolio), and
futures contracts (except each of the Bond and E. European Debt Funds may not
purchase or sell futures contracts on individual corporate debt securities.) The
International Funds may purchase and sell put options on currencies. The Fund
will not sell put options if, as a result, more than 50% of the Fund's assets
would be required to be segregated to cover its potential obligations under such
put options other than those with respect to futures and options thereon. In
selling put options, there is a risk that the Fund may be required to buy the
underlying security at a disadvantageous price above the market price. For tax
purposes, the purchase of a put is treated as a short sale, which may cut off
the holding period for the security. Consequently, the purchase of a put is
treated as generating gain on securities held less than three months or short
term capital gain (instead of long term) as the case may be.
Options on Securities Indices and Other Financial Indices
The Funds may also purchase and sell call and put options on securities indices
and other financial indices. By doing so, the Funds can achieve many of the same
objectives that they would achieve through the sale or purchase of options on
individual securities or other instruments. Options on securities indices and
other financial indices are similar to options on a security or other instrument
except that, rather than settling by physical delivery of the underlying
instrument, they settle by cash settlement. For example, an option on an index
gives the holder the right to receive, upon exercise of the option, an amount of
cash if the closing level of the index upon which the option is based exceeds,
in the case of a call, or is less than, in the case of a put, the exercise price
of the option. This amount of cash is equal to the excess of the closing price
of the index over the exercise price of the option, which also may be multiplied
by a formula value. The seller of the option is obligated, in return for the
premium received, to make delivery of this amount. The gain or loss on an option
on an index depends on price movements in the instruments making up the market,
market segment, industry or any other composite on which the underlying index is
based, rather than price movements in individual securities, as is the case with
respect to options on securities.
Futures
The International Funds may enter into financial futures contracts or purchases
or sell put and call options on such futures as a hedge against anticipated
interest rate or currency market changes and for risk management purposes. The
Bond and E. European Debt Funds, may enter into financial futures contracts or
purchases or sell put and call options on such futures for duration management.
The use of futures for hedging is intended to protect an International Fund from
(i) the risk that the value of its portfolio of investments in a foreign market
may decline before it can liquidate its interest, or (ii) the risk that a
foreign market in which it proposes to invest may have significant increases in
value before it actually invests in that market. In the first instance, the
International Fund will sell a future based upon a broad market index which it
is believed will move in a manner comparable to the overall value of securities
in that market. In the second instance, the International Fund will purchase the
appropriate index as an "anticipatory" hedge until it can otherwise acquire
suitable direct investments in that market. As with the hedging of foreign
currencies, the precise matching of financial futures on foreign indices and the
value of the cash or portfolio securities being hedged may not have a perfect
correlation. The projection of future market movement and the movement of
appropriate indices is difficult, and the successful execution of this
short-term hedging strategy is uncertain.
Regulatory policies governing the use of such hedging techniques require the
International Funds to provide for the deposit of initial margin and the
segregation of suitable assets to meet their obligations under futures
contracts. Futures are generally bought and sold on the commodities exchanges
where they are listed with payment of initial and variation margin as described
below. The sale of a futures contract creates a firm obligation by an
International Fund, as seller, to deliver to the buyer the specific type of
financial instrument called for in the contract at a specific future time for a
specified price (or, with respect to index futures and Eurocurrency instruments,
the net cash amount). Options on futures contracts are similar to options on
securities except that an option on a futures contract gives the purchaser the
right in return for the premium paid to assume a position in a futures contract
and obligates the seller to deliver such position.
The International Funds' use of financial futures and options thereon will in
all cases be consistent with applicable regulatory requirements, particularly
the rules and regulations of the Commodity Futures Trading Commission. The
International Funds will use such techniques only for bona fide hedging, risk
management (including duration management) or other portfolio management
purposes. Typically, maintaining a futures contract or selling an option thereon
requires the International Fund to deposit an amount of cash or other specified
assets (initial margin), which initially is typically 1% to 10% of the face
amount of the contract (but may be higher in some circumstances) with a
financial intermediary as security for its obligations. Additional cash or
assets (variation margin) may be required to be deposited thereafter on a daily
basis as the mark to market value of the contract fluctuates. The purchase of an
option on financial futures involves payment of a premium for the option without
any further obligation on the part of the International Fund. If the
International Fund exercises an option on a futures contract, it will be
obligated to post initial margin (and potential subsequent variation margin) for
the resulting futures position. Futures contracts and options thereon are
generally settled by entering into an offsetting transaction, but there can be
no assurance that the position can be offset prior to settlement at an advantage
price or that delivery will occur.
An International Fund will not enter into a futures contract or related option
(except for closing transactions) if immediately thereafter, the sum of the
amount of its initial margin and premiums on open futures contracts and options
thereon would exceed 5% of the International Fund's total assets (taken at
current value); however, in the case of an option that is in-the-money at the
time of the purchase, the in-the-money amount may be excluded in calculating the
5% limitation. The segregation requirements with respect to futures contracts
and options thereon are described below.
Currency Transactions
Each of the International Funds may engage in currency transactions with
Counterparties in order to hedge the value of portfolio holdings denominated in
particular currencies against fluctuations in relative value. Currency
transactions include forward currency contracts, exchange-listed currency
futures, exchange-listed and OTC options on currencies, and currency swaps. A
forward currency contract involves a privately negotiated obligation to purchase
or sell (with delivery generally required) a specific currency at a future date,
which may be any fixed number of days from the date of the contract between the
parties, at a specified price. These contracts are traded in the interbank
market and conducted directly between currency traders (usually large,
commercial banks) and their customers. A forward foreign currency contract
generally has no deposit requirement or commissions charges. A currency swap is
an agreement to exchange cash flows based on the notional difference among two
or more currencies. Currency swaps operate similarly to an interest rate swap
(described below). The International Funds may enter into currency transactions
with Counterparties which have received (or the guarantors of the obligations of
which have received) a credit rating of A-1 or P-1 by S&P or Moody's,
respectively, or that have an equivalent rating from a NRSRO, or (except for OTC
currency options) are determined to be of equivalent credit quality by the
Advisor.
The International Funds' dealings in forward currency contracts and other
currency transactions such as futures, options on futures, options on currencies
and swaps will be limited to hedging involving either specific transactions
("Transaction Hedging") or portfolio positions ("Position Hedging").
Currency hedging involves some of the same risks and considerations as other
transactions with similar instruments. Currency transactions can result in
losses to a fund if the currency being hedged fluctuates in value to a degree or
in a direction that is not anticipated. Furthermore, there is the risk that the
perceived linkage between various currencies may not be present or may not be
present during the particular time an International Fund is engaging in proxy
hedging (see "Proxy Hedging," below). If an International Fund enters into a
currency hedging transaction, it will comply with the asset segregation
requirements described below. Cross currency hedges may not be considered
"directly related" to the International Funds' principal business of investing
in stock or securities (or options and futures thereon), resulting in gains
therefrom not qualifying under the "less than 30% of gross income" test of
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
Currency transactions are also subject to risks different from those of other
portfolio transactions. Because currency control is of great importance to the
issuing governments and influences economic planning and policy, purchases and
sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to an
International Fund if it is unable to deliver or receive currency or funds in
settlement of obligations and could also cause hedges the International Fund has
entered into to be rendered useless, resulting in full currency exposure and
transaction costs. Buyers and sellers of currency futures are subject to the
same risks that apply to the use of futures generally. Furthermore, settlement
of a currency futures contract for the purchase of most currencies must occur at
a bank based in the issuing nation. Trading options on currency futures is
relatively new, and the ability to establish and close out positions on such
options is subject to the maintenance of a liquid market which may not always be
available. Currency exchange rates may fluctuate based on factors extrinsic to
that country's economy. Although forward foreign currency contracts and currency
futures tend to minimize the risk of loss due to a decline in the value of the
hedged currency, they tend to limit any potential gain which might result should
the value of such currency increase.
Transaction Hedging
Transaction Hedging occurs when a fund enters into a currency transaction with
respect to specific assets or liabilities. These specific assets or liabilities
generally arise in connection with the purchase or sale of a fund's portfolio
securities or the receipt of income therefrom. The International Funds may use
transaction hedging to preserve the United States dollar price of a security
when they enter into a contract for the purchase or sale of a security
denominated in a foreign currency. An International Fund will be able to protect
itself against possible losses resulting from changes in the relationship
between the United States dollar and foreign currencies during the period
between the date the security is purchased or sold and the date on which payment
is made or received by entering into a forward contract for the purchase or
sale, for a fixed amount of dollars, of the amount of the foreign currency
involved in the underlying security transactions.
Position Hedging
Position hedging is entering into a currency transaction with respect to
portfolio security positions denominated or generally quoted in that currency.
The International Funds may use position hedging when the Advisor believes that
the currency of a particular foreign country may suffer a substantial decline
against the United States dollar. The International Funds may enter into a
forward foreign currency contract to sell, for a fixed amount of dollars, the
amount of foreign currency approximating the value of some or all of its
portfolio securities denominated in such foreign currency. The precise matching
of the forward foreign currency contract amount and the value of the portfolio
securities involved may not have a perfect correlation since the future value of
the securities hedged will change as a consequence of market movements between
the date the forward contract is entered into and the date it matures. The
projection of short-term currency market movement is difficult, and the
successful execution of this short-term hedging strategy is uncertain.
The International Funds will not enter into a transaction to hedge currency
exposure to an extent greater, after netting all transactions intended wholly or
partially to offset other transactions, than the aggregate market value (at the
time of entering into the transaction) of the securities held in its portfolio
that are denominated or generally quoted in or currently convertible into such
currency, other than with respect to proxy hedging as described below.
Cross Hedging
The International Funds may also cross-hedge currencies by entering into
transactions to purchase or sell one or more currencies that are expected to
decline in value relative to other currencies to which the International Funds
have or expect to have portfolio exposure.
Proxy Hedging
To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings of portfolio securities, the International Funds may also
engage in proxy hedging. Proxy hedging is often used when the currency to which
a fund's portfolio is exposed is difficult to hedge or to hedge against the U.S.
dollar. Proxy hedging entails entering into a forward contract to sell a
currency whose changes in value are generally considered to be linked to a
currency or currencies in which some or all of the fund's portfolio securities
are or are expected to be denominated, and buying U.S. dollars. The amount of
the contract would not exceed the value of the International Fund's securities
denominated in linked currencies. For example, if the Advisor considers that the
Japanese yen is linked to the Euro, the International Funds hold securities
denominated in yen and the Advisor believes that the value of yen will decline
against the U.S. dollar, the Advisor may enter into a contract to sell Euros and
buy U.S. dollars.
Combined Transactions
The Funds may enter into multiple transactions, including multiple options
transactions, multiple futures transactions, multiple currency transactions
(including forward foreign currency contracts) and multiple interest rate
transactions and any combination of futures, options, currency and interest rate
transactions ("component" transactions), instead of a single Strategic
Transaction or when the Advisor believes that it is in the Fund's best interests
to do so. A combined transaction will usually contain elements of risk that are
present in each of its component transactions. Although combined transactions
are normally entered into based on the Advisor's judgment that the combined
strategies will reduce risk or otherwise more effectively achieve the desired
portfolio management goal, it is possible that the combination will instead
increase such risks or hinder achievement of the portfolio management objective.
Eurocurrency Instruments
The International Funds may make investments in Eurocurrency instruments.
Eurocurrency instruments are futures contracts or options thereon which are
linked to the London Interbank Offered Rate ("LIBOR") or to the interbank rates
offered in other financial centers. Eurocurrency futures contracts enable
purchasers to obtain a fixed rate for the lending of funds and sellers to obtain
a fixed rate for borrowings. The International Funds might use Eurocurrency
futures contracts and options thereon to hedge against changes in LIBOR and
other interbank rates, to which many interest rate swaps and fixed income
instruments are linked.
Segregated and Other Special Accounts
In addition to other requirements, many transactions require a Fund to segregate
liquid high grade assets with its custodian to the extent Fund obligations are
not otherwise "covered" through the ownership of the underlying security,
financial instruments or currency. In general, either the full amount of any
obligation by a Fund to pay or deliver securities or assets must be covered at
all times by the securities, instruments or currency required to be delivered,
or, subject to any regulatory restrictions, an amount of cash or liquid high
grade securities at least equal to the current amount of the obligation must be
segregated with the custodian. The segregated assets cannot be sold or
transferred unless equivalent assets are substituted in their place or it is no
longer necessary to segregate them. For example, a call option written by a Fund
will require the Fund to hold the securities subject to the call (or securities
convertible into the needed securities without additional consideration) or to
segregate liquid high grade securities sufficient to purchase and deliver the
securities if the call is exercised. A call option sold by a Fund on an index
will require the Fund to own portfolio securities which correlate with the index
or segregate liquid high grade assets equal to the excess of the index value
over the exercise price industry or other on a current basis. A put option
written by a Fund requires the Fund to segregate liquid, high grade assets equal
to the exercise price. A currency contract which obligates an International Fund
to buy or sell currency will generally require the Fund to hold an amount of
that currency or liquid securities denominated in that currency equal to the
Fund's obligations or to segregate liquid high grade assets equal to the amount
of the Fund's obligation.
OTC options entered into by a Fund, including those on securities, currency,
financial instruments or indices and OCC issued and exchange-listed index
options, will generally provide for cash settlement. As a result, when the Fund
sells these instruments it will only segregate an amount of assets equal to its
accrued net obligations, as there is no requirement for payment or delivery of
amounts in excess of the net amount. These amounts will equal 100% of the
exercise price in the case of a non cash-settled put, the same as an OCC
guaranteed listed option sold by the Fund, or in-the-money amount plus any
sell-back formula amount in the case of a cash-settled put or call. In addition,
when the Fund sells a call option on an index at a time when the in-the-money
amount exceeds the exercise price, the Fund will segregate, until the option
expires or is closed out, cash or cash equivalents equal in value to such
excess. OCC issued and exchange-listed options sold by the Fund other than those
generally settle with physical delivery, and the Fund will segregate an amount
of liquid assets equal to the full value of the option. OTC options settling
with physical delivery, or with an election of either physical delivery or cash
settlement will be treated the same as other options settling with physical
delivery.
In the case of a futures contract or an option thereon, the Fund must deposit
initial margin and possible daily variation margin in addition to segregating
sufficient liquid assets. Such assets may consist of cash, cash equivalents,
liquid debt securities or other liquid assets.
With respect to swaps, the Fund will accrue the net amount of the excess, if
any, of its obligations over its entitlements with respect to each swap on a
daily basis and will segregate an amount of cash or liquid high grade securities
having a value equal to the accrued excess. Caps, floors and collars require
segregation of assets with a value equal to the Fund's net obligation, if any.
Strategic Transactions may be covered by other means when consistent with
applicable regulatory policies. An International Fund may also enter into
offsetting transactions so that its combined position, coupled with any
segregated assets, equals its net outstanding obligation in related options and
Strategic Transactions. For example, the International Fund could purchase a put
option if the strike price of that option is the same or higher than the strike
price of a put option sold by the Fund. Moreover, instead of segregating assets,
if the International Fund held a futures or forward contract, it could purchase
a put option on the same futures or forward contract with a strike price as high
or higher than the price of the contract held. Other Strategic Transactions may
also be offered in combinations. If the offsetting transaction terminates at the
time of or after the primary transaction, no segregation is required, but if it
terminates prior to such time, liquid assets equal to any remaining obligation
would need to be segregated.
An International Fund's activities involving Strategic Transactions may be
limited by the requirements of Subchapter M of the Code for qualification as a
regulated investment company.
Depositary Receipts
American Depositary Receipts ("ADRs") are receipts typically issued in the U.S.
by a bank or trust company evidencing ownership of an underlying foreign
security. The International Equity Fund may invest in ADRs which are structured
by a U.S. bank without the sponsorship of the underlying foreign issuer. In
addition to the risks of foreign investment applicable to the underlying
securities, such unsponsored ADRs may also be subject to the risks that the
foreign issuer may not be obligated to cooperate with the U.S. bank, may not
provide additional financial and other information to the bank or the investor,
or that such information in the U.S. market may not be current.
Like ADRs, European Depositary Receipts ("EDRs"), Global Depositary Receipts
("GDRs"), and Registered Depositary Certificates ("RDCs") represent receipts for
a foreign security. However, they are issued outside of the U.S. The Emerging
Markets Fund may invest in ADRs, EDRs, GDRs or RDCs and the E. European Equity
Fund may invest in ADRs and GDRs. EDRs, GDRs and RDCs involve risks comparable
to ADRs, as well as the fact that they are issued outside of the U.S.
Furthermore, RDCs involve risks associated with securities transactions in
Russia.
Temporary Defensive Positions
When the Advisor believes that investments should be deployed in a temporary
defensive posture because of economic or market conditions, each of the Funds
may invest up to 100% of its assets in U.S. Government securities (such as
bills, notes, or bonds of the U.S. Government and its agencies) or other forms
of indebtedness such as bonds, certificates of deposits or repurchase
agreements. For temporary defensive or emergency purposes, however, the Bond
Fund may invest without limit in investment grade U.S. debt securities,
including short-term money market securities. For temporary defensive purposes,
each of the International Equity, E. European Equity and Bond Funds may hold
cash or debt obligations denominated in U.S. dollars or foreign currencies.
These debt obligations include U.S. and foreign government securities and
investment grade corporate debt securities, or bank deposits of major
international institutions. When a Fund is in a temporary defensive position, it
is not pursuing its stated investment policies. The Advisor decides when it is
appropriate to be in a defensive position. It is impossible to predict for how
long such alternative strategies will be utilized.
U.S. Government Securities
The Funds may invest in U.S. Government Securities. The term "U.S. Government
Securities" refers to a variety of securities which are issued or guaranteed by
the United States Treasury, by various agencies of the U.S. Government, and by
various instrumentalities which have been established or sponsored by the U.S.
Government. U.S. Treasury securities are backed by the full faith and credit of
the United States. Securities issued or guaranteed by U.S. Government agencies
or U.S. Government sponsored instrumentalities may or may not be backed by the
full faith and credit of the United States. In the case of securities not backed
by the full faith and credit of the United States, the investor must look
principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert a claim
directly against the United States in the event the agency or instrumentality
does not meet its commitment. An instrumentality of the U.S. Government is a
government agency organized under Federal charter with government supervision.
Repurchase Agreements
As a means of earning income for periods as short as overnight, the Funds may
enter into repurchase agreements that are collateralized by U.S. Government
Securities. The Funds may enter into repurchase commitments for investment
purposes for periods of 30 days or more. Such commitments involve investment
risks similar to those of the debt securities in which the Funds invest. Under a
repurchase agreement, a Fund acquires a security, subject to the seller's
agreement to repurchase that security at a specified time and price. A purchase
of securities under a repurchase agreement is considered to be a loan by a Fund.
The Advisor monitors the value of the collateral to ensure that its value always
equals or exceeds the repurchase price and also monitors the financial condition
of the seller of the repurchase agreement. If the seller becomes insolvent, a
Fund's right to dispose of the securities held as collateral may be impaired and
the Fund may incur extra costs. Repurchase agreements for periods in excess of
seven days may be deemed to be illiquid.
Reverse Repurchase Agreements
As a means of enhancing income, the Bond and E. European Debt Funds may enter
into reverse repurchase agreements with selected banks and broker/dealers. Under
a reverse repurchase agreement, a Fund sells securities subject to an obligation
to repurchase those securities at a specified time and price. In order to comply
with U.S. regulatory conditions applicable to investment companies, the Fund
will recognize gains or losses on such obligations each day, and will segregate
cash, U.S. government securities, or other high-grade debt instruments in an
amount sufficient to satisfy its repurchase obligation. The Fund will also mark
the value of the assets to market daily, and post additional collateral if
necessary. The Fund may invest the payment received for such securities prior to
fulfilling its obligation to repurchase the securities. Reverse repurchase
agreements are considered to be borrowings under the 1940 Act. Therefore, the
Fund's investment in reverse repurchase agreements is subject to the borrowing
limitations of the 1940 Act (See "Investment Restrictions").
If the buyer under a repurchase agreement becomes insolvent, the Fund's right to
reacquire its securities may be impaired. In the event of the commencement of
bankruptcy or insolvency proceedings with respect to the buyer of the securities
before repurchase of the securities under a reverse repurchase agreement, it may
encounter delay and incur costs before being able to apply the cash held to
purchase replacement securities. Also, the value of such securities may increase
before it is able to purchase them.
When-issued Securities
The Emerging Markets and Bond Funds may purchase securities on a when-issued or
forward delivery basis, for payment and delivery at a later date. The price and
yield of the securities are generally fixed on the date of commitment to
purchase. During the period between purchase and settlement, no interest accrues
to the Fund. At the time of settlement, the market value of the security may be
more or less than the purchase price. The Fund reflects gains or losses on such
commitments each day, and segregates assets sufficient to meet its obligation
pending payment for the securities.
OTHER INVESTMENTS
The Board of Directors may, in the future, authorize one or more of the Funds to
invest in securities other than those listed in this SAI and in the prospectus,
provided such investments would be consistent with Fund's investment objective
and that such investments would be consistent with the fund's investment
objective and that such investment would not violate the Fund's fundamental
investment policies or restrictions.
INVESTMENT RESTRICTIONS
Fundamental Investment Policies and Restrictions: The Funds have adopted the
following fundamental investment restrictions. The fundamental investment
restrictions cannot be changed without approval by the vote of a "majority of
the outstanding voting securities" of each Fund.
As a matter of fundamental policy, a Fund will not:
1) Except for the Value, Bond and E. European Debt Funds, as to 75% of its
assets, purchase the securities of any issuer (other than obligations
issued or guaranteed as to principal and interest by the Government of
the United States or any agency or instrumentality thereof) if, as a
result of such purchase, more than 5% of its total assets would be
invested in the securities of such issuer.
2) Except for the Value, Bond and E. European Debt Funds, purchase stock
or securities of an issuer (other than the obligations of the United
States or any agency or instrumentality thereof) if such purchase would
cause the Fund to own more than 10% of any class of the outstanding
voting securities of such issuer or, except for the Emerging Markets
Fund, more than 10% of any class of the outstanding stock or securities
of such issuer.
3) Act as an underwriter of securities of other issuers, except that each
of the International Equity and E. European Equity Funds may invest up
to 10% of the value of its total assets (at time of investment) in
portfolio securities which the Fund might not be free to sell to the
public without registration of such securities under the Securities Act
of 1933, as amended, or any foreign law restricting distribution of
securities in a country of a foreign issuer.
4) Buy or sell commodities or commodity contracts, provided that each of
the International Equity and E. European Equity Funds may utilize not
more than 1% of its assets for deposits or commissions required to
enter into, for the International Equity Fund, forward foreign currency
contracts, and for the E. European Equity Fund, financial futures
contracts, for hedging purposes as described under "Investment
Policies" and "Additional Information on Policies and Investments
Strategic Transactions." (Such deposits or commissions are not required
for forward foreign currency contracts.)
5) As to the International Equity and E. European Equity Funds, borrow
money except for temporary or emergency purposes and then only in an
amount not in excess of 5% of the lower of value or cost of its total
assets, in which case the Fund may pledge, mortgage or hypothecate any
of its assets as security for such borrowing but not to an extent
greater than 5% of its total assets. As to the Value, Emerging Markets,
Bond and E. European Debt Funds, borrow money, except as a temporary
measure for extraordinary or emergency purposes, or except in
connection with reverse repurchase agreements, provided that the Fund
maintains asset coverage of 300% in connection with the issuance of
senior securities. Notwithstanding the foregoing, to avoid the untimely
disposition of assets to meet redemptions, the Value, Emerging Markets
and E. European Debt Funds may borrow up to 33 1/3%, and the Bond Fund
may borrow up to 20%, of the value of the Fund's assets to meet
redemptions, provided that the Fund may not make other investments
while such borrowings are outstanding.
6) Make loans, except that a Fund may (1) lend portfolio securities; and
(2) enter into repurchase agreements secured by U.S. Government
securities and, with respect to the Bond and E. European Debt Funds,
except to the extent that the entry into repurchase agreements and the
purchase of debt securities in accordance with its investment objective
and policies may be deemed to be loans.
7) Invest more than 25% of a Fund's total assets in securities of one or
more issuers having their principal business activities in the same
industry, provided that, for the Emerging Markets Fund, Bond Fund and
E. European Debt Fund, there is no limitation with respect to
investments in obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities, and, for the Bond Fund and E.
European Debt Fund, for the purpose of this restriction: telephone
companies are considered to be in a separate industry from gas and
electric public utilities, and wholly owned finance companies are
considered to be in the industry of their parents if their activities
are primarily related to financing the activities of their parents.
8) Except for the Emerging Markets Fund, Bond Fund and E. European Debt
Fund, invest in securities of other investment companies except by
purchase in the open market involving only customary broker's
commissions, or as part of a merger, consolidation, or acquisition of
assets.
9) Invest in interests in oil, gas, or other mineral explorations or
development programs.
10)Issue senior securities.
11)Participate on a joint or a joint and several basis in any
securities trading account.
12)Purchase or sell real estate (except that the Fund may invest in (i)
securities of companies which deal in real estate or mortgages, and
(ii) securities secured by real estate or interests therein, and that
the Fund reserves freedom of action to hold and to sell real estate
acquired as a result of the Fund's ownership of securities).
13)Invest in companies for the purpose of exercising control.
14)Purchase securities on margin, except that it may utilize such
short-term credits as may be necessary for clearance of purchases or
sales of securities.
15)Engage in short sales.
Non-Fundamental Policies and Restrictions: In addition to the fundamental
policies and investment restrictions described above, and the various general
investment policies described in the Prospectus and elsewhere in the SAI, the
Funds will be subject to the following investment restrictions. Theses
restrictions are considered non-fundamental and may be changed by the Board of
Directors without shareholder approval.
As a matter of non-fundamental policy, a Fund may not:
1) Invest more than 15% of its net assets in illiquid securities.
In applying the fundamental investment policies and restrictions:
(a)Restrictions with respect to repurchase agreements shall be construed
to be for repurchase agreements entered into for the investment of
available cash consistent with the Fund's repurchase agreement
procedures, not repurchase commitments entered into for general
investment purposes.
(b)The Funds adhere to the percentage restrictions on investment or
utilization of assets set forth above at the time an investment is
made. A later change in percentage resulting from changes in the value
or the total cost of the Fund's assets will not be considered a
violation of the restriction.
MANAGEMENT OF THE COMPANY
Directors and Officers
The Company is governed by a Board of Directors, which is responsible for
protecting the interests of shareholders. The Directors are experienced
businesspersons who meet throughout the year to oversee the Company's
activities, review contractual arrangements with companies that provide services
to the Funds, and review performance. The names and addresses of the Directors
and officers of the Company, together with information as to their principal
occupations during the past five years, are listed below. The Directors who are
considered "interested persons" as defined in Section 2(a)(19) of the 1940 Act,
as well as those persons affiliated with the Advisor and principal underwriter,
and officers of the Company, are noted with an asterisk (*).
Name, Address and Birthdate Position(s) Held With Principal Occupation(s)
Company During the Past 5 Years
*John Pasco, III Chairman, Director and Mr. Pasco has served as
1500 Forest Ave, Suite 223 Treasurer Treasurer and Director of
Richmond, VA 23229 Commonwealth Shareholder
(4/10/45) Services, Inc. ("CSS"),
the Company's
Administrator, since
1985; Director, President
and Treasurer of
Commonwealth Capital
Management, Inc.(a
registered Investment
Advisor) since 1983;
Director and shareholder
of Fund Services, Inc.,
the Company's Transfer
and Disbursing Agent,
since 1987; shareholder
of Commonwealth Fund
Accounting, Inc., which
provides bookkeeping
services to Star Bank;
and Chairman, Director
and Treasurer of the
World Funds, Inc., a
registered investment
company, since May, 1997.
Mr. Pasco is also a
certified public
accountant.
*Henry Schlegel Director Mr. Schlegel has served
450 Park Avenue as a Director, the
New York, NY 10022 President and the Chief
(1/24/53) Executive Officer of
Vontobel USA Inc., a
registered investment
adviser, since 1988.
Samuel Boyd, Jr. Director Mr. Boyd has served as
10808 Hob Nail Court the Manager of the
Potomac, MD 20854 Customer Services
(9/18/40) Operations and Accounting
Division of the Potomac
Electric Power Company
since 1978 and as
Director of World Funds,
Inc., a registered
investment company, since
May, 1997. Mr. Boyd is
also a certified public
accountant.
William E. Poist Director Mr. Poist has served as a
5272 River Road financial and tax
Bethesda, MD 20816 consultant through his
(6/11/39) firm Management
Consulting for
Professionals since 1968
and as Director of World
Funds, Inc., a registered
investment company, since
May, 1997. Mr. Poist is
also a certified public
accountant.
Paul M. Dickinson Director Mr. Dickinson has served
8704 Berwickshire Drive as President of Alfred J.
Richmond, VA 23229 Dickinson, Inc., Realtors
(11/11/47) since April 1971 and as a
Director of World Funds,
Inc., a registered
investment company, since
May, 1997.
*Edwin D. Walczak Senior Vice President of Mr. Walczak has served as
450 Park Avenue the Company and Senior Vice President and
New York, NY 10022 President of the Vontobel Chief Investment Officer
(9/17/53) U.S. Value Fund of Vontobel USA Inc., a
registered investment
advisor, since 1988. From
1984 to 1988 Mr.Walczak
was an institutional
portfolio manager at
Lazard Freres Asset
Management, New York.
*Monica Mastroberardino Vice President of the Ms Mastroberardino has
450 Park Avenue Company and President of served as Vice President
New York, NY 10022 the Vontobel of Vontobel USA Inc.
(6/2/58) International Bond Fund since February, 1999.
She has been a
macroeconomic analyst
with Vontobel Asset
Management, Switzerland,
since February 1998, [and
is the Associate Fund
Manger of the Vontobel
group's Luxembourg-based
and SEC-based Eastern
European Debt Funds.]
From February 1995 to
January 1998 she was a
macroeconomic and
financial analyst with
Credit Suisse,
Switzerland.
*Fabrizio Pierallini Senior Vice President of Mr. Pierallini has served
450 Park Avenue the Company, President of as Senior Vice President
New York, NY 10022 the Vontobel and Portfolio Manager
(8/14/59) International Equity Fund (International Equities)
and the Vontobel Emerging of Vontobel USA Inc., a
Markets Equity Fund registered investment
adviser, since April
1994. From 1991 to 1994
Mr. Pierallini was
Associate-Director
/portfolio manager w/
Swiss Bank Corporation
in New York and from
1988 to 1991 he was a
Vice-President/Portfolio
Manager with SBC
Portfolio Management Ltd.
in Zurich, Switzerland.
He was an
Associate/Institutional
Consultant with Bank
Julius Baer in Zurich,
Switzerland from 1986 to
1988.
*Luca Parmeggiani Vice President of the Mr. Parmeggiani has
450 Park Avenue Company and President of served as Vice President
New York, NY 10022 the Vontobel Eastern of Vontobel USA Inc., a
(3/23/62) European Equity Fund registered investment
adviser, since October
1997. Mr. Parmeggiani is
a first Vice President of
Vontobel Asset Management
where he is responsible
for Eastern European
equity research and
management. Prior to
joining the Vontobel
group, he was Vice
President and manager of
Lombard Odier Cie's
Invest Eastern Europe
Fund. He is an EFAS
Certified financial
analyst (European
Federation of Financial
Analyst and
Statisticians).
*Volker Wehrle Vice President of the Mr. Wehrle has served as
450 Park Avenue Company and President of Vice President of
New York, NY 10022 the Vontobel Eastern Vontobel USA Inc. since
(3/29/58) European Debt Fund May 1997 and as Vice
President of Vontobel
Asset Management,
Switzerland since October
1994. He is the head of
fixed income investments
for Vontobel Asset
Management, Switzerland.
From January 1989 to
September 1994, he
managed fixed income
investments for the Group
Treasury Department of
Sandoz AG Switzerland.
F. Byron Parker, Jr. Secretary Mr. Parker has served as
810 Lindsay Court Secretary of Commonwealth
Richmond, VA 23229 Shareholder Services,
(1/26/43) Inc. since 1986. He is
also a Partner in the law
firm Mustian & Parker.
Compensation of Directors: The Company does not compensate the Directors who are
officers or employees of the Advisor. The "independent" Directors receive an
annual retainer of $1,000 and a fee of $200 for each meeting of the Directors
which they attend in person or by telephone. Directors are reimbursed for travel
and other out-of-pocket expenses. The Company does not offer any retirement
benefits for Directors. As of December 31, 1998 the officers and Directors,
individually and as a group, owned beneficially less than 1% of the outstanding
shares of the Funds. For the fiscal year ended December 31, 1998, the Directors
received the following compensation from the Company:
Name and Aggregate Pension or Total
Position Held Compensation Retirement Compensation
From the Funds Benefits from the
Fiscal Year Accrued as Part Company
Ended December of Fund Expenses
31, 19981
John Pasco, III N/A
Director
Henry Schlegel N/A
Director
Samuel Boyd, Jr. 10,050.00 N/A 10,050.00
Director
William E. Poist 10,050.00 N/A 10,050.00
Director
Paul M. 10,050.00 N/A 10,050.00
Dickinson
Director
1This amount represents the aggregate amount of compensation paid to the
Directors for: (a) service on the Board of Directors for the Funds for the
fiscal year ended December 31, 1998.
PRINCIPAL SECURITIES HOLDERS
As of March 31, 1999, the following persons owned of record or beneficially
shares of the Funds in the following amounts.
Value Fund
Charles Schwab Reinvestment, 101 Montgomery Street, San Francisco CA 94104,
owned of record 3,699,032.644 outstanding shares (or 40.847%); and Bank J.
Vontobel and its affiliates for the benefit of its customers, Zv-Kontrollen
Bahnhofstrasse #3 CH-8022 Zurich Switzerland, owned of record 1,172,282.468
outstanding shares (or 12.945%).
International Equity Fund
Bank J. Vontobel and its affiliates for the benefit of its customers,
Zv-Kontrollen Bahnhofstrasse #3 CH-8022 Zurich Switzerland, owned of record
3,139,026.644 shares (or 40.071%); Riggs Bank. P.O. Box 96211 Washington, D.C.
20090-6211, owned of record 458,518.362 outstanding shares (or 5.853%); and
Charles Schwab Reinvestment, 101 Montgomery Street, San Francisco, CA 94104,
owned of record 1,497,863.507 outstanding shares (or 19.121%).
E. European Equity Fund
Charles Schwab Reinvestment, 101 Montgomery Street, San Francisco, CA 94104,
owned of record 994,537.070 shares (or 24.77% and Bank J. Vontobel and its
affiliates for the benefit of its customers, Zv-Kontrollen Bahnhofstrasse #3
CH-8022 Zurich Switzerland, owned of record 574,658.584 outstanding shares (or
14.313%).
Bond Fund
Bank J. Vontobel and its affiliates for the benefit of its customers,
Zv-Kontrollen Bahnhofstrasse #3 CH-8022 Zurich Switzerland, owned of record
486,304.532 outstanding shares (or 69.273%); Charles Schwab Reinvestment, 101
Montgomery Street San Francisco, CA 94104, owned of record 75,059.966
outstanding shares (or 10.692%).
Emerging Markets Equity Fund
Charles Schwab Reinvestment 101 Montgomery Street, San Francisco, CA 94104,
owned of record 16,241.398 outstanding shares (or 8.372%); and Bank J. Vontobel
and its affiliates for the benefit of its customers ZV-Kontrollen Banhhofstrasse
#3 CH-8022 Zurich Switzerland, owned of record 54,666.501 outstanding shares (or
28.178%); and Vontobel USA Inc. 450 Park Avenue New York, N.Y. 10022 owned of
record 10,828.810 outstanding shares (or 5.582%).
E. European Debt Fund
Bank J. Vontobel and its affiliates for the benefit of its customers,
ZV-Kontrollen Bahnhofstrasse #3 CH-8022 Zurich Switzerland, owned of record
636,765.604 outstanding shares (or 85.996%) and Palenzona Ingeborg
Bahnhofstrasse 33 CH-8022 Zurich SZ owned 40,637.473 outstanding shares (or
5.488%).
INVESTMENT ADVISOR AND ADVISORY AGREEMENT
Vontobel USA Inc. (the "Advisor"), 450 Park Avenue, New York, N.Y. 10022, is
each Fund's investment adviser. The Advisor is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended, (the "Advisers
Act"). The Advisor is a wholly owned subsidiary of Vontobel Holding Ltd., a
Swiss bank holding company.
The Advisor serves as investment adviser to the Funds pursuant to separate
Investment Advisory Agreements with the Company for each Fund (each an "Advisory
Agreement"). The Advisory Agreements of the Emerging Markets and E. European
Debt Funds are effective for a period of two years from August 18, 1997, and may
be renewed annually thereafter. The Advisory Agreements for the Value Fund,
International Equity Fund, Bond Fund and E. European Equity Fund are dated July
14, 1992, July 14, 1992, February 10, 1994, and February 14, 1996, respectively.
The Advisory Agreement for each such Fund may be renewed annually provided such
renewal is approved annually by: 1) the Company's Board of Directors; or 2) by a
majority vote of the outstanding voting securities of the Company and a majority
of the Directors who are not "interested persons" of the Company. The Advisory
Agreements will automatically terminate in the event of their "assignment," as
that term is defined in the 1940 Act, and may be terminated without penalty at
any time upon 60 days' written notice to the other party by: (i) the majority
vote of all the Directors or by vote of a majority of the outstanding voting
securities of the Fund; or (ii) the Advisor.
Under the Advisory Agreements, the Advisor, subject to the supervision of the
Directors, provides investment management advice with respect to securities and
other instruments. The Advisor makes all decisions and performs all duties in
accordance with the Funds' investment objectives, policies, and investment
restrictions.
The Advisor is responsible for effecting all security transactions on behalf of
the Funds, including the allocation of principal business and portfolio
brokerage and negotiation of commissions. In placing orders with brokers or
dealers, the Advisor will attempt to obtain the best price and execution for the
Fund's orders. The Advisor may allocate brokerage to an affiliated dealer in
accordance with written policies adopted by the Company's Board of Directors.
The Advisor is also permitted to purchase and sell securities to and from
brokers and dealers who provide the Advisor with research advice and other
statistical services. In such instances, the Advisor may be authorized to pay a
commission, which is higher than the commission that would be charged by another
broker. From time to time, and subject to the Advisor obtaining the best price
and execution for each Fund, the Board of Directors may authorize the Advisor to
allocate brokerage transactions to a broker in consideration of: (1) the sale of
Fund shares; or (2) payment of an obligation otherwise payable by the Funds.
Each Fund is obligated to pay the Advisor an advisory fee. That fee is payable
monthly at an annual rate that is equal to a percentage of the Fund's average
daily net assets. Both the Value and International Equity Funds pay the Advisor
at a rate of 1.00% on the first $100 million and 0.75% on assets in excess of
$100 million. Each of the Emerging Markets, E. European Equity and E. European
Debt Funds pay the Advisor at a rate of 1.25% on the first $500 million and
1.00% on assets in excess of $500 million. The Bond Fund pays the Advisor a flat
fee of 1.00%. The table below shows the total amount of advisory fees that each
Fund paid the Advisor for the last three fiscal years. The table also shows the
amount of investment advisory fees that the Advisor waived during the last three
fiscal years.
Years Ended December 31,
Fund 1996 Fee 1997 Fee 1998 Fee
- ----
Payable/Waived Payable/Waived Payable/Waived
Value Fund $620,780/22,437 $986,164/22,500 $1,903,694/22,500
International Equity Fund 1,280,135/0 1,443,062/0 $1,505,510/0
Emerging Markets Fund* N/A 14,720/14,720 35,051/35psi
E. European Equity Fund** 302,021/0 2,113,314/0 1,003,342/0
Bond Fund 248,407/48,630 193,299/115,099 80,161/80,161
E. European Debt Fund* N/A 57,164/0 154,111/50,475
* Fees paid and/or waived in 1997 reflect payments for the period from September
1, 1997, the commencement of operations, to December 31, 1997.
** Fees paid and/or waived in 1996 reflect payments for the period from
February 15, 1996, the commencement of operations, to December 31, 1998.
Pursuant to the terms of the Advisory Agreements, the Advisor pays all expenses
it incurs in connection with rendering its management services. Each Fund is
responsible for all other expenses that are not specifically assumed by the
Advisor. Such expenses include (but are not limited to) brokerage fees and
commissions, legal fees, auditing fees, fees for bookkeeping and record keeping
services, custodian and transfer agency fees and registration fees. The services
furnished by the Advisor under the Advisory Agreements are not exclusive, and
the Advisor is free to perform similar services for others.
ADMINISTRATION
Pursuant to the Administrative Services Agreement with the Company, dated
January 7, 1999 (the "Service Agreements"), Commonwealth Shareholder Services,
Inc. ("CSS"), 1500 Forest Avenue, Suite 223, Richmond, Virginia 23229, serves as
the administrator of the Funds. CSS supervises all aspects of the operation of
the Funds, except those performed by the Advisor. John Pasco III, Chairman of
the Board of the Company, is the sole owner of CSS. CSS provides certain
administrative services and facilities for the Funds, including preparing and
maintaining certain books, records, and monitoring compliance with state and
federal regulatory requirements.
As administrator, CSS receives asset-based fees, computed daily and paid monthly
at annual rates of 0.20% of the average daily net assets of the Funds on the
first $500 million and 1.50% on assets in excess of $500 million (which includes
regulatory matters, backup of the pricing of shares of each Fund, administrative
duties in connection with execution of portfolio trades, and certain services in
connection with Fund accounting). CSS receives an hourly fee, plus certain
out-of-pocket expenses, for shareholder servicing and state securities law
matters.
<PAGE>
The table below shows the total amount of administrative fees that each Fund
paid CSS for the last three fiscal years.
Years Ended December 31,
Fund 1996 1997 1998
- ----
Value Fund $147,596 $318,571 $509,371
International Equity Fund 297,410 419,496 328,563
Emerging Markets Fund* N/A 11,074 18,245
E. European Equity Fund** 80,336 432,860 205,758
Bond Fund 58,468 59,783 28,517
E. European Debt Fund* N/A 14,359 36,769
* Fees paid in 1997 reflect payments for the period from September 1, 1997, the
commencement of operations, to December 31, 1997. ** Fees paid 1996 reflect
payments for the period from February 15, 1996, the commencement of operations,
to December 31, 1998.
CUSTODIAN AND ACCOUNTING SERVICES
Pursuant to the Custodian Agreement and Accounting Agency Agreement with the
Company dated November 1,1998, Brown Brothers Harriman & Co. ("BBH"), 40 Water
Street, Boston Massachusetts, 02109, acts as the custodian of the Funds'
securities and cash and as the Funds' accounting services agent. With the
consent of the Company, BBH has designated The Depository Trust Company of New
York, as its agent to secure a portion of the assets of the International Funds.
BBH is authorized to appoint other entities to act as sub-custodians to provide
for the custody of foreign securities which may be acquired and held by the
International Funds outside the U.S. Such appointments are subject to
appropriate review by the Company's Board of Directors. As the accounting
services agent of the International Funds, BBH maintains and keeps current the
books, accounts, records, journals or other records of original entry relating
to such Funds' business.
TRANSFER AGENT
Pursuant to a Transfer Agent Agreement with the Company dated September 1, 1987,
Fund Services, Inc. ("FSI") acts as the Company's transfer and disbursing agent.
FSI is located at 1500 Forest Avenue, Suite 111, Richmond, VA 23229. John Pasco,
III, Chairman of the Board of the Company and an officer and shareholder of CSS
(the Administrator of the Funds), owns one-third of the stock of FSI; therefore,
FSI may be deemed to be an affiliate of the Company and CSS.
FSI provides certain shareholder and other services to the Company, including
furnishing account and transaction information and maintaining shareholder
account records. FSI is responsible for processing orders and payments for share
purchases. FSI mails proxy materials (and receives and tabulates proxies),
shareholder reports, confirmation forms for purchases and redemptions and
prospectuses to shareholders. FSI disburses income dividends and capital
distributions and prepares and files appropriate tax-related information
concerning dividends and distributions to shareholders.
DISTRIBUTOR
Vontobel Fund Distributors, a division of First Dominion Capital Corp. (the
"Distributor"), 1500 Forest Avenue, Suite 223, Richmond, VA 23229, serves as the
principal underwriter of the Funds' shares pursuant to a Distribution Agreement
dated August 18, 1997. John Pasco, III, Chairman of the Board of the Company,
owns 100% of the Distributor, and is its President, Treasurer and a Director.
INDEPENDENT ACCOUNTANTS
The Company's independent accountants, Tait, Weller & Baker, audit the Company's
annual financial statements, assists in the preparation of certain reports to
the U.S. Securities and Exchange Commission (the "SEC"), and prepares the
Company's tax returns. Tait, Weller & Baker is located at 8 Penn Center Plaza,
Suite 800, Philadelphia, PA 19103.
PORTFOLIO TRANSACTIONS
It is the policy of the Advisor, in placing orders for the purchase and sale of
each Fund's securities, to seek to obtain the best price and execution for
securities transactions, taking into account such factors as price, commission,
where applicable, (which is negotiable in the case of U.S. national securities
exchange transactions but which is generally fixed in the case of foreign
exchange transactions), size of order, difficulty of execution and the skill
required of the executing broker/dealer. After a purchase or sale decision is
made by the Advisor, the Advisor arranges for execution of the transaction in a
manner deemed to provide the best price and execution for the Fund.
Exchange-listed securities are generally traded on their principal exchange,
unless another market offers a better result. Securities traded only in the
over-the-counter market may be executed on a principal basis with primary market
makers in such securities, except for fixed price offerings and except where the
Fund may obtain better prices or executions on a commission basis or by dealing
with other than a primary market maker.
The Advisor, when placing transactions, may allocate a portion of a Fund's
brokerage to persons or firms providing the Advisor with investment
recommendations, statistical, research or similar services useful to the
Advisor's investment decision-making process. The term "investment
recommendations or statistical, research or similar services" means (1) advice
as to the value of securities, the advisability of investing in, purchasing or
selling securities, and the availability of securities or purchasers or sellers
of securities, and (2) furnishing analyses and reports concerning issuers,
industries, securities, economic factors and trends, and portfolio strategy.
Such services are one of the many ways the Advisor can keep abreast of the
information generally circulated among institutional investors by
broker-dealers. While this information is useful in varying degrees, its value
is indeterminable. Such services received on the basis of transactions for a
Fund may be used by the Advisor for the benefit of other clients, and the Fund
may benefit from such transactions effected for the benefit of other clients.
While there is no formula, agreement or undertaking to do so, and when it can be
done consistent with the policy of obtaining best price and execution, a Fund
may consider sales of its shares as a factor in the selection of brokers to
execute portfolio transactions. The Advisor may be authorized, when placing
portfolio transactions for a Fund, to pay a brokerage commission in excess of
that which another broker might have charged for executing the same transaction
solely on account of the receipt of research, market or statistical information.
Except for implementing the policy stated above, there is no intention to place
portfolio transactions with particular brokers or dealers or groups thereof.
The Board of Directors of the Company has adopted policies and procedures
governing the allocation of brokerage to affiliated brokers. The Advisor has
been instructed not to place transactions with an affiliated broker-dealer,
unless that broker-dealer can demonstrate to the Company that the Fund will
receive (1) a price and execution no less favorable than that available from
unaffiliated persons, and (2) a price and execution equivalent to that which
that broker-dealer would offer to unaffiliated persons in a similar transaction.
The Board reviews all transactions which have been placed pursuant to those
policies and procedures at its Board meetings.
When two or more Funds that are managed by the Advisor are simultaneously
engaged in the purchase or sale of the same security, the transactions are
allocated in a manner deemed equitable to each Fund. In some cases this
procedure could have a detrimental effect on the price or volume of the security
as far as a Fund is concerned. In other cases, however, the ability of such Fund
to participate in volume transactions will be beneficial for the Fund. The Board
of Directors of the Company believes that these advantages, when combined with
the other benefits available because of the Advisor's organization, outweigh the
disadvantages that may exist from this treatment of transactions.
The Funds paid brokerage commissions as follows:
Years Ended December 31,
Fund 1996 1997 1998
- ---- ---- ---- ----
Value Fund $ 198,787 290,165 $496,553
International Equity Fund 1,185,252 292,194 146,822
Emerging Markets Fund N/A 4,604 17,928
E. European Equity Fund 344,275 932,733 374,114
Bond Fund 0 0 0
E. European Debt Fund N/A 0 0
The Funds paid brokerage commissions to Vontobel Securities, Ltd. (an
affiliated broker-dealer) as follows:
Years ended December 31,
Fund 1996 1997 1998
Emerging Markets Fund N/A 0 0
E. European Equity Fund N/A 0 0
Bond Fund 0 0 0
E. European Debt Fund N/A 0 0
International Equity Fund 0
PORTFOLIO TURNOVER
Average annual portfolio turnover rate is the ratio of the lesser of sales or
purchases to the monthly average value of the portfolio securities owned during
the year, excluding from both the numerator and the denominator all securities
with maturities at the time of acquisition of one year or less. A higher
portfolio turnover rate involves greater transaction expenses to a Fund and may
result in the realization of net capital gains, which would be taxable to
shareholders when distributed. The Advisor makes purchases and sales for a
Fund's portfolio whenever necessary, in the Advisor's opinion, to meet the
Fund's objective. The Advisor anticipates that the average annual portfolio
turnover rate of each of the Funds will be less than 100%.
CAPITAL STOCK AND DIVIDENDS
The Company is a series investment company that currently offers one class of
shares. The Company is authorized to issue 500,000,000 shares of common stock,
with a par value of $0.01 per share. The Company has presently allocated
50,000,000 shares to each of the Funds. Each share has equal dividend, voting,
liquidation and redemption rights and there are no conversion or preemptive
rights. Shares of the Funds do not have cumulative voting rights, which means
that the holders of more than 50% of the shares voting for the election of
Directors can elect all of the directors if they choose to do so. In such event,
the holders of the remaining shares will not be able to elect any person to the
Board of Directors. Shares will be maintained in open accounts on the books of
FSI.
If they deem it advisable and in the best interests of shareholders, the
Directors may create additional series of shares, each of which represents
interests in a separate portfolio of investments and is subject to separate
liabilities, and may create multiple classes of shares of such series, which may
differ from each other as to expenses and dividends. If the Directors create
additional series or classes of shares, shares of each series or class are
entitled to vote as a series or class only to the extent required by the 1940
Act or as permitted by the Directors. Upon the Company's liquidation, all
shareholders of a series would share pro-rata in the net assets of such series
available for distribution to shareholders of the series, but, as shareholders
of such series, would not be entitled to share in the distribution of assets
belonging to any other series.
A shareholder will automatically receive all income dividends and capital gain
distributions in additional full and fractional shares of the applicable Fund at
its net asset value as of the date of payment unless the shareholder elects to
receive such dividends or distributions in cash. The reinvestment date normally
precedes the payment date by about seven days although the exact timing is
subject to change. Shareholders will receive a confirmation of each new
transaction in their account. The Company will confirm all account activity,
transactions made as a result of the Automatic Investment Plan described below.
Shareholders may rely on these statements in lieu of stock certificates.
ADDITIONAL INFORMATION ABOUT PURCHASES AND SALES
Each Fund's share price, called its NAV, is determined as of the close of
trading on the New York Stock Exchange ("NYSE") (currently 4:00 p.m., Eastern
Time) on each business day ("Valuation Time") that the NYSE is open; however,
the Company's management may compute the NAV more frequently in order to protect
shareholders' interests. As of the date of this prospectus, the Fund is informed
that the NYSE will be closed on the following holidays: New Year's Day, Martin
Luther King Jr. Day, Presidents Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. NAV per share is computed by
adding the total value of the investments and other assets, subtracting any
liabilities and then dividing by the total number of shares outstanding.
The Fund's securities are generally valued at current market prices. Investments
in securities traded on the national securities exchanges or included in the
NASDAQ National Market System are valued at the last reported sale price. Other
securities traded in the over-the-counter market and listed securities for which
no sales are reported on that date are valued at the last reported bid price.
Short-term debt securities (less than 60 days to maturity) are valued at their
fair market value using amortized cost pricing procedures. Other assets for
which market prices are not readily available are valued at their fair value as
determined in good faith under procedures set by the Board of Directors.
Depositary Receipts (i.e., ADRs, EDRs and GDRs) will be valued at the closing
price of the instrument last determined prior to the Valuation Time unless the
Company is aware of a material change in value. Securities for which such a
value cannot be readily determined on any day will be valued at the closing
price of the underlying security adjusted for the exchange rate.
PURCHASING SHARES
You may purchase shares of the Funds directly from the Distributor or through
brokers or dealers who are members of the National Association of Securities
Dealers, Inc. When you acquire or redeem shares through a securities broker or
dealer, you may be charged a transaction fee. The offering price per share is
equal to the NAV next determined after the Fund receives your purchase order.
The minimum initial investment for the Value Fund, Bond Fund, E. European Equity
Fund, Emerging Markets Fund and E. European Debt Fund is $1,000. The minimum
initial investment in the International Equity Fund is 4200,000. Subsequent
investments for all Funds must be $50 or more. The Company may waive the minimum
initial investment requirement for purchases made by Directors, officers and
employees of the Company. The Company may also waive the minimum investment
requirement for purchases by its affiliated entities and certain related
advisory accounts and retirement accounts (such as IRAs). You may purchase
shares of a Fund by mail or wire.
ELIGIBLE BENEFIT PLANS
An eligible benefit plan is an arrangement available to the (1) employees of an
employer (or two or more affiliated employers) having not less than ten
employees at the plan's inception (2) or such an employer on behalf of employees
of a trust or plan for such employees, their spouses and their children under
the age of 21 or a trust or plan for such employees, which provides for
purchases through periodic payroll deductions or otherwise. There must be at
least five initial participants with accounts investing or invested in shares of
one or more of the Funds and/or certain other funds.
The initial purchase by the eligible benefit plan along with prior purchases by
or for the benefit of the initial participants of the plan must aggregate not
less than $5,000. Subsequent purchases must be at least $50 per account and must
aggregate at least $250. The eligible benefit plan must make purchases using a
single order and a single check or federal funds wire. The eligible benefit plan
may not make purchases more often than monthly. The Company will establish a
separate account for each employee, spouse or child for which purchases are
made. The Company may modify the requirements for initiating or continuing
purchases or stop offering shares to such a plan at any time without prior
notice.
SELLING SHARES
You may redeem shares of the Funds at any time and in any amount by mail or
telephone. The Funds will use reasonable procedures to confirm that instructions
communicated by telephone are genuine and, if the procedures are followed, will
not be liable for any losses due to unauthorized or fraudulent telephone
transactions.
The Company's procedure is to redeem shares at the NAV determined after FSI
receives the redemption request in proper order. The Company deducts a 2%
redemption fee from proceeds of Emerging Markets Fund shares, E. European Equity
Fund shares or E. European Debt Fund shares redeemed less than six months after
purchase (including shares to be exchanged). The applicable Fund retains this
amount to offset the Fund's costs of purchasing or selling securities.
The Company may suspend the right to redeem shares for any period during which
the NYSE is closed or the SEC determines that there is an emergency. In such
circumstances you may withdraw your redemption request or permit your request to
be held for processing at the NAV next computed after the suspension is
terminated.
SMALL ACCOUNTS
Due to the relatively higher cost of maintaining small accounts, the Company may
deduct $10 per year from your account or may redeem the shares in your account,
if it has a value of less than $1,000. The Company will advise you in writing
sixty (60) days prior to deducting the annual fee or closing your account,
during which time you may purchase additional shares in any amount necessary to
bring the account back to $1,000. The Company will not close your account if it
falls below $1,000 solely because of a market decline.
SPECIAL SHAREHOLDER SERVICES
As described briefly in the Prospectus, each Fund offers the following
shareholder services:
Regular Account: A regular account allows a shareholder to make voluntary
investments and/or withdrawals at any time. Regular accounts are available to
individuals, custodians, corporations, trusts, estates, corporate retirement
plans and others. You may use the Account Application provided with the
Prospectus to open a regular account.
Telephone Transactions: You may redeem shares or transfer into another fund if
you request this service on your initial Account Application. If you do not
elect this service at that time, you may do so at a later date by sending a
written request and signature guarantee to FSI.
Each Fund employs reasonable procedures designed to confirm the authenticity of
your telephone instructions and, if it does not, it may be liable for any losses
caused by unauthorized or fraudulent transactions. As a result of this policy, a
shareholder that authorizes telephone redemption bears the risk of losses, which
may result from unauthorized or fraudulent transactions which the Fund believes
to be genuine. When you request a telephone redemption or transfer, you will be
asked to respond to certain questions. The Company has designed these questions
to confirm your identity as a shareholder of record. Your cooperation with these
procedures will protect your account and the Fund from unauthorized
transactions.
Invest-A-Matic Account: Invest-A-Matic Accounts allow shareholders to make
automatic monthly investments into their account. Upon request, FSI will
withdraw a fixed amount each month from a shareholder's checking account and
apply that amount to additional shares. This feature does not require you to
make a commitment for a fixed period of time. You may change the monthly
investment, skip a month or discontinue your Invest-A-Matic Plan as desired by
notifying FSI. In order to open an Invest-A-Matic Account, you must complete a
separate application. To obtain an application, or to receive more information,
please call the offices of the Company at 1-800-527-9500. Any shareholder may
utilize this feature.
Individual Retirement Account ("IRA"): All wage earners under 70-1/2, even those
who participate in a company sponsored or government retirement plan, may
establish their own IRA. You can contribute 100% of your earnings up to $2,000
(or $2,250 with a spouse who is not a wage earner, for years prior to 1997). A
spouse who does not earn compensation can contribute up to $2,000 per year to
his or her own IRA. The deductibility of such contributions will be determined
under the same rules that govern contributions made by individuals with earned
income. A special IRA program is available for corporate employers under which
the employers may establish IRA accounts for their employees in lieu of
establishing corporate retirement plans. Known as SEP-IRA's (Simplified Employee
Pension-IRA), they free the corporate employer of many of the recordkeeping
requirements of establishing and maintaining a corporate retirement plan trust.
If you have received a lump sum distribution from another qualified retirement
plan, you may rollover all or part of that distribution into your Fund IRA. A
rollover contribution is not subject to the limits on annual IRA contributions.
By acting within applicable time limits of the distribution you can continue to
defer Federal Income Taxes on your rollover contribution and on any income that
is earned on that contribution.
Roth IRA: A Roth IRA permits certain taxpayers to make a non-deductible
investment of up to $2,000 per year. Provided an investor does not withdraw
money from his or her Roth IRA for a 5 year period, beginning with the first tax
year for which contribution was made, deductions from the investor's Roth IRA
would be tax free after the investor reaches the age of 59-1/2. Tax free
withdrawals may also be made before reaching the age of 59-1/2 under certain
circumstances. Please consult your financial and/or tax professional as to your
eligibility to invest in a Roth IRA. An investor may not make a contribution to
both a Roth IRA and a regular IRA in any given year.
An annual limit of $2,000 applies to contributions to regular and Roth IRAs. For
example, if a taxpayer contributes $2,000 to a regular IRA for a year, he or she
may not make any contribution to a Roth IRA for that year.
How to Establish Retirement Accounts: Please call the Company to obtain
information regarding the establishment of individual retirement plan accounts.
Each plan's custodian charges nominal fees in connection with plan establishment
and maintenance. These fees are detailed in the plan documents. You may wish to
consult with your attorney or other tax advisor for specific advice concerning
your tax status and plans.
Exchange Privilege: Shareholders may exchange their shares for shares of any
other series of the Company, provided the shares of the fund the shareholder is
exchanging into are noticed for sale in the shareholder's state of residence.
Each account must meet the minimum investment requirements (currently $1,000).
You must complete an Exchange Privilege Authorization Form to make an exchange.
Also, to make an exchange, an exchange order must comply with the requirements
for a redemption or repurchase order and must specify the value or the number of
shares to be exchanged. Your exchange will take effect as of the next
determination of the Fund's NAV per share (usually at the close of business on
the same day). FSI will charge your account a $10.00 service fee each time you
make such an exchange. The Company reserves the right to limit the number of
exchanges or to otherwise prohibit or restrict shareholders from making
exchanges at any time, without notice, should the Company determine that it
would be in the best interest of its shareholders to do so. For tax purposes, an
exchange constitutes the sale of the shares of the Fund from which you are
exchanging and the purchase of shares of the Fund into which you are exchanging.
Consequently, the sale may involve either a capital gain or loss to the
shareholder for federal income tax purposes. The exchange privilege is available
only in states where it is legally permissible to do so. You may obtain Exchange
Privilege Authorization Forms by calling the Company at 1-800-527-9525.
TAX STATUS
DISTRIBUTIONS AND TAXES
Distributions of net investment income
The Funds receive income generally in the form of dividends and interest on
their investments. This income, less expenses incurred in the operation of a
Fund, constitutes a Fund's net investment income from which dividends may be
paid to you. Any distributions by a Fund from such income will be taxable to you
as ordinary income, whether you take them in cash or in additional shares.
Distributions of capital gains
The Funds may derive capital gains and losses in connection with sales or other
dispositions of their portfolio securities. Distributions from net short-term
capital gains will be taxable to you as ordinary income. Distributions from net
long-term capital gains will be taxable to you as long-term capital gain,
regardless of how long you have held your shares in a Fund. Any net capital
gains realized by a Fund generally will be distributed once each year, and may
be distributed more frequently, if necessary, in order to reduce or eliminate
excise or income taxes on the Fund.
Effect of foreign investments on distributions
Most foreign exchange gains realized on the sale of debt securities are treated
as ordinary income by a Fund. Similarly, foreign exchange losses realized by a
Fund on the sale of debt securities are generally treated as ordinary losses by
the Fund. These gains when distributed will be taxable to you as ordinary
dividends, and any losses will reduce a Fund's ordinary income otherwise
available for distribution to you. This treatment could increase or reduce a
Fund's ordinary income distributions to you, and may cause some or all of a
Fund's previously distributed income to be classified as a return of capital.
A Fund may be subject to foreign withholding taxes on income from certain of its
foreign securities. If more than 50% of a Fund's total assets at the end of the
fiscal year are invested in securities of foreign corporations, a Fund may elect
to pass-through to you your pro rata share of foreign taxes paid by the Fund. If
this election is made, the year-end statement you receive from a Fund will show
more taxable income than was actually distributed to you. However, you will be
entitled to either deduct your share of such taxes in computing your taxable
income or (subject to limitations) claim a foreign tax credit for such taxes
against your U.S. federal income tax. A Fund will provide you with the
information necessary to complete your individual income tax return if it makes
this election.
Information on the tax character of distributions
The Funds will inform you of the amount of your ordinary income dividends and
capital gains distributions at the time they are paid, and will advise you of
their tax status for federal income tax purposes shortly after the close of each
calendar year. If you have not held Fund shares for a full year, a Fund may
designate and distribute to you, as ordinary income or capital gain, a
percentage of income that is not equal to the actual amount of such income
earned during the period of your investment in the Fund.
Election to be taxed as a regulated investment company
Each Fund has elected to be treated as a regulated investment company under
Subchapter M of the Internal Revenue Code, has qualified as such for its most
recent fiscal year, and intends to so qualify during the current fiscal year. As
regulated investment companies, the Funds generally pay no federal income tax on
the income and gains they distribute to you. The board reserves the right not to
maintain the qualification of a Fund as a regulated investment company if it
determines such course of action to be beneficial to shareholders. In such case,
a Fund will be subject to federal, and possibly state, corporate taxes on its
taxable income and gains, and distributions to you will be taxed as ordinary
dividend income to the extent of such Fund's earnings and profits.
Excise tax distribution requirements
To avoid federal excise taxes, the Internal Revenue Code requires a Fund to
distribute to you by December 31 of each year, at a minimum, the following
amounts: 98% of its taxable ordinary income earned during the calendar year; 98%
of its capital gain net income earned during the twelve month period ending
October 31; and 100% of any undistributed amounts from the prior year. Each Fund
intends to declare and pay these amounts in December (or in January that are
treated by you as received in December) to avoid these excise taxes, but can
give no assurances that its distributions will be sufficient to eliminate all
taxes.
Redemption of Fund shares
Redemptions and exchanges of Fund shares are taxable transactions for federal
and state income tax purposes. If you redeem your Fund shares, or exchange your
Fund shares for shares of a different series of the Company, the IRS will
require that you report a gain or loss on your redemption or exchange. If you
hold your shares as a capital asset, the gain or loss that you realize will be
capital gain or loss and will be long-term or short-term, generally depending on
how long you hold your shares. Any loss incurred on the redemption or exchange
of shares held for six months or less will be treated as a long-term capital
loss to the extent of any long-term capital gains distributed to you by the Fund
on those shares.
All or a portion of any loss that you realize upon the redemption of your Fund
shares will be disallowed to the extent that you buy other shares in such Fund
(through reinvestment of dividends or otherwise) within 30 days before or after
your share redemption. Any loss disallowed under these rules will be added to
your tax basis in the new shares you purchase.
U.S. Government Obligations
Many states grant tax-free status to dividends paid to you from interest earned
on direct obligations of the U.S. government, subject in some states to minimum
investment requirements that must be met by the Fund. Investments in Government
National Mortgage Association or Federal National Mortgage Association
securities, bankers' acceptances, commercial paper and repurchase agreements
collateralized by U.S. government securities do not generally qualify for
tax-free treatment. The rules on exclusion of this income are different for
corporations.
Dividends-received deduction for corporations
If you are a corporate shareholder, you should note that 10% of the dividends
paid by the Value Fund for the most recent fiscal year qualified for the
dividends-received deduction. In some circumstances, you will be allowed to
deduct these qualified dividends, thereby reducing the tax that you would
otherwise be required to pay on these dividends. The dividends-received
deduction will be available only with respect to dividends designated by the
Value Fund as eligible for such treatment. All dividends (including the deducted
portion) must be included in your alternative minimum taxable income
calculation.
Because the income of the International Equity Fund, E. European Equity Fund,
Bond Fund, Emerging Markets Equity Fund and E. European Debt Fund is derived
primarily from investments in foreign rather than domestic U.S securities, no
portion of its distributions will generally be eligible for the intercorporate
dividends-received deduction. None of the dividends paid by such Funds for the
most recent calendar year qualified for such deduction, and it is anticipated
that none of the current year's dividends will so qualify.
Investment in complex securities
The Funds may invest in complex securities. These investments may be subject to
numerous special and complex tax rules. These rules could affect whether gains
and losses recognized by a Fund are treated as ordinary income or capital gain,
accelerate the recognition of income to a Fund and/or defer a Fund's ability to
recognize losses, and, in limited cases, subject a Fund to U.S. federal income
tax on income from certain of its foreign securities. In turn, these rules may
affect the amount, timing or character of the income distributed to you by a
Fund.
INVESTMENT PERFORMANCE
For purposes of quoting and comparing the performance of the Funds to that of
other mutual funds and to relevant indices in advertisements or in reports to
shareholders, performance will be stated in terms of total return or yield. Both
"total return" and "yield" figures are based on the historical performance of a
Fund, show the performance of a hypothetical investment and are not intended to
indicate future performance.
YIELD INFORMATION
From time to time, the Funds may advertise a yield figure. A portfolio's yield
is a way of showing the rate of income the portfolio earns on its investments as
a percentage of the portfolio's share price. Under the rules of the SEC, yield
must be calculated according to the following formula:
Yield = 2[(a-b +1)-1]6
cd
where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period that
were entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
A Fund's yield, as used in advertising, is computed by dividing the Fund's
interest and dividend income for a given 30-day period, net of expenses, by the
average number of shares entitled to receive distributions during the period
dividing this figure by a Fund's NAV at the end of the period and annualizing
the result (assuming compounding of income) in order to arrive at an annual
percentage rate. Income is calculated for purposes of yield quotations in
accordance with standardized methods applicable to all stock and bond mutual
funds. Dividends from equity investments are treated as if they were accrued on
a daily basis solely for the purposes of yield calculations. In general,
interest income is reduced with respect to bonds trading at a premium over their
par value by subtracting a portion of the premium from income on a daily basis,
and is increased with respect to bonds trading at a discount by adding a portion
of the discount to daily income. Capital gains and losses generally are excluded
from the calculation. Income calculated for the purpose of calculating a Fund's
yield differs from income as determined for other accounting purposes. Because
of the different accounting methods used, and because of the compounding assumed
in yield calculations, the yield quoted for a Fund may differ from the rate of
distributions the fund paid over the same period or the rate of income reported
in the Fund's financial statements.
TOTAL RETURN PERFORMANCE
Under the rules of the SEC, fund advertising performance must include total
return quotes, "T" below, calculated according to the following formula:
P(1+T)n= ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1,5 or 10)
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5 or 10 year periods (or fractional portion
thereof).
The average annual total return will be calculated under the foregoing formula
and the time periods used in advertising will be based on rolling calendar
quarters, updated to the last day of the most recent quarter prior to submission
of the advertising for publication, and will cover prescribed periods. When the
period since inception is less than one year, the total return quoted will be
the aggregate return for the period. In calculating the ending redeemable value,
all dividends and distributions by a Fund are assumed to have been reinvested at
NAV as described in the prospectus on the reinvestment dates during the period.
Total return, or "T" in the formula above, is computed by finding the average
annual compounded rates of return over the prescribed periods (or fractional
portions thereof) that would equate the initial amount invested to the ending
redeemable value.
Fund Name One-Year Five-Year Ten-Year From
Period Ended Period Ended Period Ended Inception
12/31/98 12/31/98 12/31/98 12/31/98
Value Fund 14.70% 21.27% N/A 17.12%
International Equity Fund 16.77% 9.38% N/A 9.89%
Emerging Markets Fund (22.20%) N/A N/A (20.97%)
E. European Equity Fund (46.62%) N/A N/A ( 4.95%)
Bond Fund 14.85% N/A N/A 7.07%
E. European Debt Fund 24.54% N/A N/A 17.43%
The Funds may also from time to time include in such advertising an aggregate
total return figure or an average annual total return figure that is not
calculated according to the formula set forth above in order to compare more
accurately each Fund's performance with other measures of investment return. The
Funds may quote an aggregate total return figure in comparing each Fund's total
return with data published by Lipper Analytical Services, Inc. or with the
performance of various indices including, but not limited to, the Dow Jones
Industrial Average, the Standard & Poor's 500 Stock Index, Russell Indices, the
Value Line Composite Index, the Lehman Brothers Bond, Government Corporate,
Corporate and Aggregate Indices, Merrill Lynch Government & Agency Index,
Merrill Lynch Intermediate Agency Index, Morgan Stanley Capital International
Europe, Australia, Far East Index or the Morgan Stanley Capital International
World Index. For such purposes, each Fund calculates its aggregate total return
for the specific periods of time by assuming the investment of $1,000 in shares
of the applicable Fund and assuming the reinvestment of each dividend or other
distribution at NAV on the reinvestment date. Percentage increases are
determined by subtracting the initial value of the investment from the ending
value and by dividing the remainder by the beginning value. To calculate its
average annual total return, the aggregate return is then annualized according
to the SEC's formula for total return quotes outlined above.
The Funds may also advertise the performance rankings assigned by the various
publications and statistical services, including but not limited to, SEI, Lipper
Mutual Performance Analysis, Intersec Research Survey of non-U.S. Equity Fund
Returns, Frank Russell International Universe, and any other data which may be
reported from time to time by Dow Jones & Company, Morningstar, Inc., Chase
Investment Performance, Wilson Associates, Stanger, CDA Investment Technologies,
Inc., the Consumer Price Index ("CPI"), The Bank Rate Monitor National Index, or
IBC/Donaghue's Average U.S. Government and Agency, or as appears in various
publications, including but not limited to, The Wall Street Journal, Forbes,
Barron's, Fortune, Money Magazine, The New York Times, Financial World,
Financial Services Week, USA Today and other national or regional publications.
FINANCIAL INFORMATION
Financial Highlights, Statements and Reports of Independent Accountants. You can
receive free copies of reports, request other information and discuss your
questions about the Funds by contacting the Funds directly at:
VONTOBEL FUNDS, INC.
1500 Forest Avenue, Suite 223
Richmond, VA 23229
The books of each Fund will be audited at least once each year by Tait, Weller
and Baker, of Philadelphia, PA, independent public accountants.
The Fund's audited financial statements and notes thereto for the year ended
December 31, 1998 and the unqualified report of Tait, Weller & Baker, on such
financial statements (the "Report") are incorporated by reference in this SAI
and are included in the Fund's 1998 annual report to shareholders (the "Annual
Report"). A copy of the Annual Report accompanies this SAI and an investor may
obtain a copy of the Annual Report by writing to the Fund or calling
(800)-527-9500.
<PAGE>
PART C - OTHER INFORMATION
ITEM 23. EXHIBITS
(a) (1) Articles of Incorporation of the Registrant are filed herewith as
Exhibit 23(a)(1).
(2) Articles Supplementary of the Registrant dissolving Commonwealth
Emerging Growth Fund series and designating Nicholson Growth Fund
series and Newport Far East series dated October, 1984 are filed
herewith as Exhibit 23(a)(2).
(3) Articles Supplementary of the Registrant dissolving Commonwealth
Emerging Growth Fund series and creating Nicholson Growth Fund series
and Newport Far East series dated November, 1984 are filed herewith as
Exhibit 23(a)(3).
(4) Articles Supplementary of the Registrant creating the Vontobel U.S.
Value Fund series dated January 12, 1990 are filed herewith as
Exhibit 23(a)(4).
(5) Articles Supplementary of the Registrant creating the Vontobel
International Bond Fund series dated October, 1993 are filed herewith
as Exhibit 23(1)(5).
(6) Articles Supplementary of the Registrant designating shares of each
series dated December, 1993 are filed herewith as Exhibit 23(a)(6).
(7) Articles Supplementary of the Registrant creating the Sand Hill
Portfolio Manager Fund series dated August, 1994 are filed herewith as
Exhibit 23(1)(7).
(8) Articles Supplementary of the Registrant are herein incorporated by
reference from Post-Effective Amendment No. 30 to the Registrant's
Registration Statement on Form N-1A (File Nos. 2-78931 and 811-3551)
as filed with the SEC on November 9, 1995.
(9) Articles Supplementary of the Registrant are herein incorporated by
reference from Post-Effective Amendment No. 34 to Registrant's
Registration Statement on Form N-1A (File Nos. 2-78931 and 811-3551)
as filed with the SEC on June 3, 1997.
(10) Articles of Amendment of the Registrant changing the name of the
Corporation to Tyndall-Newport Fund and deleting all references to the
Bowser Growth Fund series dated December, 1988 are filed herewith as
Exhibit 23(a)(10).
(11) Articles of Amendment of the Registrant deleting all references to
Tyndall Fund dated January, 1991 are filed herewith as Exhibit
23(a)(11).
(12) Articles of Amendment of the Registrant renaming the Sand Hill
Portfolio Manager Fund dated October, 1994 are filed herewith as
Exhibit 23(a)(12).
(13) Articles of Amendment of the Registrant dated February, 1997 are
herein incorporated by reference to Post-Effective Amendment No. 33 to
the Registrant's Registration Statement on Form N-1A (File Nos. 2-78931
and 811-3551) as filed with the SEC on March 14, 1997.
(14) Articles of Amendment of the Registrant dated May 13, 1997 are
incorporated herein by reference to Post-Effective Amendment No. 34 to
the Registrant's Registration Statement on Form N-1A (File Nos. 2-78931
and 811-3551) as filed with the SEC on June 3, 1997.
(b) By-Laws of the Registrant are filed herewith as Exhibit 23(b).
(1) Amendment to By-Laws of the Registrant are filed herewith as Exhibit
23(b)(1).
(c) Not Applicable.
(d) Investment Advisory Agreements between Vontobel USA Inc. and the
Registrant on behalf of the:
(1) Vontobel International Equity Fund dated July 14, 1992 is herewith
filed as Exhibit 23(d)(1).
(2) Vontobel U.S. Value Fund dated July 14, 1992 is herewith filed
as Exhibit 23(d)(2).
(3) Vontobel International Bond Fund dated February 10, 1994 is
herewith filed as Exhibit 23(d)(3).
(4) Vontobel Eastern European Equity Fund dated February 14, 1997 is
incorporated by reference to Post-Effective Amendment No. 34 to
Registrant's Registration Statement on Form N-1A(File Nos. 2-78931
and 811-3551) as filed with the SEC on April 29, 1997.
(5) Vontobel Eastern European Debt Fund dated August 18, 1997 is
incorporated by reference to Post-Effective Amendment No. 34 to
Registrant's Registration Statement on Form N-1A (File Nos.
2-78931 and 811-3551) as filed with the SEC on June 3, 1997.
(6) Vontobel Emerging Markets Equity Fund dated August 18, 1997 is
incorporated by reference to Post-Effective Amendment No. 34 to
Registrant's Registration Statement on Form N-1A (File Nos.
2-78931 and 811-3551) as filed with the SEC on June 3, 1997.
(e) Distribution Agreement between Vontobel Funds, Inc. and First
Dominion Capital Corp. dated August 18, 1998 is filed herewith as
Exhibit 23(e).
(f) Not applicable.
(g) Custodian Agreement between Brown Brothers Harriman & Co. and the
Registrant dated November 1, 1998 is filed herewith as Exhibit
23(g).
(h) (1) Transfer Agency Agreement between Fund Services, Inc. and the
Registrant dated January 1, 1999 is filed herewith as Exhibit
23(h)(1).
(2) Administrative Services Agreement between CSS and the Registrant dated
January 7, 1999 is filed herewith as Exhibit 23(h)(2).
(3) Administrative Services Agreement dated July 14, 1992 between CSS and
the Registrant (on behalf of the Vontobel International Equity Fund and
the Vontobel U.S. Value Fund) is deleted and no longer filed.
(4) Administrative Services Agreement dated February 10, 1994 between CSS
and the Registrant (on behalf of the Vontobel International Bond Fund)
is deleted and no longer filed.
(5) Administrative Services Agreement dated February 14, 1996 between CSS
and the Registrant (on behalf of the Vontobel Eastern European Equity
Fund)is deleted and no longer filed.
(6) Administrative Services Agreement dated August 18, 1997 between CSS and
the Registrant (on behalf of the Vontobel Eastern European Debt Fund)
is deleted and no longer filed.
(7) Administrative Services Agreement dated August 18, 1997 between CSS and
the Registrant (on behalf of the Vontobel Emerging Markets Equity Fund)
is deleted and no longer filed.
(8) Accounting Agency Agreement between Brown Brothers Harriman & Co. and
the Registrant dated November 1, 1998 is filed herewith as Exhibit
23(h)(8)
(i) Not Applicable.
(j) Auditor's Consent is attached hereto as Exhibit 23(j).
(k) Not Applicable.
(l) Not Applicable.
(m) Not Applicable.
(n) Financial Data Schedule of the:
(1) Vontobel International Equity Fund is filed herewith as
Exhibit 23(n)(1).
(2) Vontobel U.S. Value Fund is filed herewith as Exhibit
23(n)(2).
(3) Vontobel International Bond Fund is filed herewith as
Exhibit 23(n)(3).
(4) Vontobel Eastern European Equity Fund is filed herewith as Exhibit
23(n)(4).
(5) Vontobel Eastern European Debt Fund is filed herewith as Exhibit
23(n)(5).
(6) Vontobel Emerging Markets Equity Fund is filed herewith as Exhibit
23(n)(6).
(o) Not Applicable.
(p) Powers of Attorney for:
(1) Samuel Boyd, Jr. is incorporated herein by reference to Post-
Effective Amendment No. 34 to Registrant's Registration Statement
on Form N-1A (File Nos. 2-78931 and 811-3551) as filed with the SEC
on June 3, 1997.
(2) Paul M. Dickinson is incorporated herein by reference to Post-
Effective Amendment No. 34 to Registrant's Registration Statement
on Form N-1A (File Nos. 2-78931 and 811-3551) as filed with the SEC
on June 3, 1997.
(3) Henry Schlegel is incorporated herein by reference to Post-
Effective Amendment No. 34 to Registrant's Registration Statement
on Form N-1A (File Nos. 2-78931 and 811-3551) as filed with the SEC
on June 3, 1997.
(4) William E. Poist is incorporated herein by reference to Post-
Effective Amendment No. 34 to Registrant's Registration Statement
on Form N-1A (File Nos. 2-78931 and 811-3551) as filed with the SEC
on June 3, 1997.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 25. INDEMNIFICATION.
The Registrant is incorporated under the General Corporation Law (the
"GCL") of the State of Maryland. The Registrant's Articles of
Incorporation provide the indemnification of directors, officers and
other agents of the corporation to the fullest extent permitted under
the GCL. The Articles limit such indemnification so as to comply with
the prohibition against indemnifying such persons under Section 17 of
the Investment Company Act of 1940, as amended, for certain conduct set
forth in that section ("Disabling Conduct"). Contracts between the
Registrant and various service providers include provisions for
indemnification, but also forbid the Registrant to indemnify affiliates
for Disabling Conduct.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISOR.
Vontobel USA Inc., the Investment Advisor to the Vontobel U.S. Value
Fund series, the Vontobel International Equity Fund series, the
Vontobel International Bond Fund series, the Vontobel Eastern European
Equity Fund series, the Vontobel Eastern European Debt Fund series
and the Vontobel Emerging Markets Equity Fund series provides
investment advisory services consisting of portfolio management for
a variety of individual and institutions and as of December
31, 1998 had approximately $416 million in assets under management.
For information as to any other business, profession, vocation or
employment of a substantial nature in which each director, officer
or partner of Vontobel USA Inc. (the "Advisor") is or has been at any
time during the past two fiscal years, engaged for his own accord or in
his capacity of director, officer, employee, partner or trustee,
reference is made to the Advisor's Form ADV (File #801-21953),
currently on file with the SEC as required by the Investment Advisers
Act of 1940, as amended.
ITEM 27 PRINCIPAL UNDERWRITERS
(a) The World Funds, Inc.
(b)
Name and Principal Position and Office Positions and
Business Address with Underwriter Offices with Fund
John Pasco, III President, Chief Chairman, President
1500 Forest Avenue Financial Officer, and Treasurer
Suite 223 Treasurer and
Richmond VA 23229 Director
Mary T. Pasco Director Assistant Secretary
1500 Forest Avenue
Suite 223
Richmond, VA 23229
Darryl S. Peay Vice President Assistant Secretary
1500 Forest Avenue Assistant Compliance
Suite 223 Officer
Richmond, VA 23229
Lori J. Martin Vice President and None
1500 Forest Avenue Assistant Secretary
Suite 223
Richmond, VA 23229
F. Byron Parker, Jr. Secretary Secretary
Mustian & Parker
8002 Discovery Drive
Suite 101
Richmond, VA 23229
(c) Not Applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
The accounts, books or other documents of the Registrant required to be
maintained by Section 31 (a) of the Investment Company Act of 1940, as
amended, and the rules promulgated thereunder are kept in several
locations:
(a) Shareholder account records (including share ledgers,
duplicate confirmations, duplicate account statements and
applications forms) of the Registrant are maintained by its
transfer agent, Fund Services, Inc., at 1500 Forest Avenue,
Suite 111, Richmond, VA. 23229.
(b) Investment records including research information, records
relating to the placement of brokerage transactions,
memorandums regarding investment recommendations for
supporting and/or authorizing the purchase or sale of assets,
information relating to the placement of securities
transactions, and certain records concerning investment
recommendations of the Vontobel International Equity Fund,
Vontobel U.S. Value Fund, Vontobel International Bond Fund,
Vontobel Eastern European Equity Fund, Vontobel Eastern
European Debt Fund and Vontobel Emerging Markets Equity Fund
series of the Registrant are maintained at each series'
investment advisor, Vontobel USA Inc., at 450 Park Avenue,
New York, N.Y. 10022.
(c) Accounts and records for portfolio securities and
other investment assets, including cash of the Vontobel
International Equity Fund, Vontobel U.S. Value Fund, Vontobel
International Bond Fund, Vontobel Eastern European Equity
Fund, Vontobel Eastern European Debt Fund and Vontobel
Emerging Markets Equity Fund series are maintained in the
custody of the Registrant's custodian bank, Brown Brothers
Harriman & Co., at 40 Water Street., Boston, MA 02109.
(d) Accounting records, including general ledgers, supporting
ledgers, pricing computations, etc. of the Vontobel
International Equity Fund, Vontobel U.S. Value Fund, Vontobel
International Bond Fund, Vontobel Eastern European Equity
Fund, Vontobel Eastern European Debt Fund and Vontobel
Emerging Markets Equity Fund series are maintained by the
Registrant's accounting services agent, Brown Brothers
Harriman & Co., at 40 Water Street, Boston, MA 02109.
(e) Administrative records, including copies of the charter,
by-laws, minute books, agreements, compliance records and
reports, certain shareholder communications, etc., are kept at
the Registrant's principal office, at 1500 Forest Avenue,
Suite 223, Richmond, VA 23229, by the Registrant's
Administrator, Commonwealth Shareholder Services, Inc., whose
address is the same as Registrant's.
(f) Records relating to distribution of shares of the Registrant
are maintained by the Registrant's distributor, First Dominion
Capital Corp. at 1500 Forest Avenue, Suite 223, Richmond, VA
23229.
ITEM 29. MANAGEMENT SERVICES
There are no management-related service contracts not discussed in
Parts A or B of this Form.
ITEM 30. UNDERTAKINGS.
(a) Not Applicable.
(b) Not Applicable.
(c) The Registrant undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without
charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of the registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized in the City of Richmond, and the Commonwealth of Virginia on
the _____ day of April 1999.
VONTOBEL FUNDS, INC.
Registrant
By /s/John Pasco, III
John Pasco, III, Chairman and
Chief Executive Officer
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 date indicated below.
(Signature) (Title) (Date)
/s/John Pasco, III Director, Chairman __________, 1999
John Pasco, III Chief Executive
Officer and Chief
Financial officer
/s/ Henry Schlegel* Director _________, 1999
Henry Schlegel
/s/ Samuel Boyd, Jr.* Director __________, 1999
Samuel Boyd, Jr.
/s/ Paul M. Dickinson* Director __________, 1999
Paul M. Dickinson
/s/ William E. Poist* Director __________, 1999
William E. Poist
/s/ John Pasco, III
John Pasco, III
* Pursuant to Powers-of-Attorney on File
Exhibit No. EXHIBIT INDEX EDGAR EXHIBIT #
23(a)(1) Articles of Incorporation 1- Ex-99.B.1
23(a)(2) Articles Supplementary 2- Ex-99.B1.1
23(a)(3) Articles Supplementary 3- Ex-99.B1.2
23(a)(4) Articles Supplementary 4- Ex-99.B1.3
23(a)(5) Articles Supplementary 5- Ex-99.B1.4
23(1)(6) Articles Supplementary 6- Ex-99.B1.5
23(1)(7) Articles Supplementary 7- Ex-99.B1.6
23(1)(10) Articles of Amendment 8- Ex-99.B1.7
23(1)(11) Articles of Amendment 9- Ex-99.B1.8
23(a)(12) Articles of Amendment 10-Ex-99.B1.9
23(b) By Laws 11-Ex-99.B2
23(b)(1) Amendment to By-Laws 12-Ex-99.B2.1
23(d)(1) Investment Advisory Agreement 13-Ex-99.B5.1
23(d)(2) Investment Advisory Agreement 14-Ex-99.B5.2
23(d)(3) Investment Advisory Agreement 15-Ex-99.B5.3
23(e) Distribution Agreement 16-Ex-99.B6
23(g) Custodian Agreement 17-Ex-99.B8
23(h)(1) Transfer Agent Agreement 18-Ex-99.B9.1
23(h)(2) Administrative Services Agreement 19-Ex-99.B9.1
23(j) Auditors Consent 20-Ex-99.B11
23(n)(1) Financial Data Schedule 21-Ex-99.B12.1
23(n)(2) Financial Data Schedule 22-Ex-99.B12.2
24(n)(3) Financial Data Schedule 23-Ex-99.B12.3
24(n)(4) Financial Data Schedule 24-Ex-99.B12.4
24(n)(5) Financial Data Schedule 25-Ex-99.B12.5
24(n)(6) Financial Data Schedule 26-Ex-99.B12.6
EXHIBIT 1
COMMONWEALTH GROUP, INC.
(NOW VONTOBEL FUNDS, INC.)
ARTICLES OF INCORPORATION
FIRST: The undersigned Michael Vario, whose post office address is 107
North Adams Street, Rockville, Maryland 20850, being at least eighteen years of
age, does hereby form a corporation under the General Laws of the State of
Maryland.
SECOND: The name of the Corporation is: THE COMMONWEALTH GROUP, INC.
(now Vontobel Funds, Inc.)
THIRD: The purpose for which the Corporation is formed is to operate as an
open-end management investment company, and to exercise and enjoy all the
powers, rights and privileges granted to, conferred on or otherwise exercised by
corporations of a similar character under the general laws of the State of
Maryland now or hereafter in force including, without limitation and not in
derogation of the general purposes and powers so stated, the following:
(a) To acquire, hold or dispose of any assets, including securities and
property of all types, and any rights and privileges pertaining
thereto, wheresoever located;
(b) To conduct researches, investigations, and analyses of enterprises
of every kind and description in the United States and elsewhere
throughout the world;
(c) To ender into, make and perform contracts of every kind and
description relating to or useful in connection with the business of
the Corporation;
(d) To engage in any merger or reorganization approved by shareholders
and assume assets or obligations pursuant thereto;
(e) To borrow, pledge against, or lend the assets of the corporation;
(f) To issue, repurchase or redeem its securities;
(g) To maintain one or more offices within or without the State, and
to conduct its business and maintain its assets and records
wheresoever directed by the Board of Directors; and Notwithstanding
the foregoing, to have and exercise all the powers conferred by
the laws of Maryland upon corporations formed under the General
Corporation Law of Maryland, and to do any or all of things to
the same extent as natural persons might or could do.
FOURTH: The post office address of the principal office of the
Corporation in the State of Maryland is:
107 North Adams Street
Rockville, Maryland, 20850
FIFTH: The resident agent of the Corporation in this State is
Michael Vario, whose post office address is 107 North Adams Street, Rockville,
Maryland 20850.
SIXTH: The total number of shares of capital stock of all classes or
series which the Corporation shall have authority to issue is Five Hundred
Million (500,000,000) shares of Common Stock of the par value of One Cent ($.01)
per share, having an aggregate par value for all such shares of Five Million
Dollars ($5,000,000,000). Pursuant to Section 2-105 of the Maryland General
Corporation Law the Board of Directors may classify or reclassify any authorized
but unissued share of such Common Stock into any class or series, may designate
the name, rights and privileges of any such class or series and (subject to any
applicable rule, regulation or order of the Securities and Exchange Commission
or other applicable law or regulation) such shares shall have such preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, terms and conditions of redemption and other
characteristics as the Board may determine in the absence of contrary
determination set forth herein. Subject to further action of the Board of
Directors, the corporation initially will be deemed to have a Bowser Growth Fund
Series and a Commonwealth Emerging Growth Fund Series, and will classify and
allocate 100,000,000 shares of Common Stock to each. At any time when there are
no shares outstanding or subscribed for a particular class or series previously
established and designated herein or by the Board of Directors, the class or
series may be liquidated by similar means. Each share of a class or series shall
have equal rights with each other share of that class or series of stock with
respect to the assets of the Corporation pertaining to that class or series. Any
fractional shares of capital stock issued by the corporation shall be
proportionately, all the rights of full shares. Except as otherwise provided
herein, all references in these Articles of Incorporation to capital stock or
class or series of stock shall apply without discrimination to the shares of
each class or series of stock.
(A)The holder of each share of stock of the Corporation shall be entitled
to one vote for each full share, and a fractional vote for each fractional share
of stock, irrespective of the class or series then standing in his or her name
in the books of the Corporation. On any matter submitted to a vote of
shareholders, all shares of the Corporation then issued and outstanding and
entitled to vote, regardless of the class or series, shall be voted in the
aggregate and not by class or series except (1) when otherwise expressly
provided by the Maryland General Corporation Law or (2) when required by the
Investment Company Act of 1940, as amended, shares shall be voted by individual
class or series; and (3) when the matter does not affect any interest of a
particular class or series,, then only shareholders of each affected class or
series shall be entitled to vote thereon.
(B) Each class of stock of the Corporation shall have the following powers,
preferences and participating, voting or other special rights and the
qualifications, restrictions, and limitations thereof shall be as follows:
(1)All consideration received by the Corporation for the issue or sale of
stock of each class or series, together with all income, earnings, profits, and
proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation thereof, and any funds or payments derived from any reinvestment of
such proceeds in whatever form the same may e, shall belong to the class or
series of shares of stock with respect to which such assets, payments or funds
were received by the Corporation for all purposes, subject only to the rights of
creditors, and shall be so handled upon the books of account of the Corporation.
Such assets, income, earnings, profits and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation thereof and any assets
derived from any reinvestment of such proceeds, in whatever form the same may
be, are herein referred to as "assets belonging to" such class.
(2) The Board of Directors may from time to time declare and pay dividends
or distributions, in stock or in cash, on any or all classes or series stock,
the amount of such dividends and the payment of them being wholly in the
discretion of the Board of Directors.
(I) Dividends or distributions on shares of any class or series of
stock shall be paid only out of earnings, surplus, or other lawfully available
assets belonging to such class or series.
(II) Inasmuch as one goal of the corporation is to qualify as a "regulated
investment company" under the Internal revenue Code of 1954, as amended, or any
successor or comparable statute thereto, and regulations promulgated thereunder;
and inasmuch as the computation of net income and gains for federal income tax
purposes may vary from the computation thereof on the books of the Corporation,
the Board of Directors shall have the power in its discretion to distribute in
any fiscal year as dividends, including those designated in whole or in part as
capital gain distributions, amounts sufficient, in the opinion of the Board of
Directors, to enable the Corporation to qualify as a regulated investment
company and to avoid liability for the Corporation for federal income tax in
respect of that year. In furtherance, and not in limitation of the foregoing, in
the event that a class or series of shares has a net capital loss for a fiscal
year, and to the extent that the net capital loss offsets net capital gains from
another class or series, the amounts to be deemed available for distribution to
the class or series with the net capital gain shall be reduced by the amount of
offset. The shareholders of the class or series with the net capital gain shall
be entitled to a full distribution of the net income and the net capital gain to
the extent earned or realized. If the net capital loss of a class or series
exceeds the net capital gain from another class or series, the excess loss shall
not reduce the net investment income available for distribution to the class or
series with the loss, but shall be carried forward.
(3) In the event of the liquidation or dissolution of the Corporation,
shareholders of each class or series shall be entitled to receive, as a class or
series, out of the assets of the Corporation available for distribution to
shareholders, but other than general assets not belonging to any particular
class or series of stock, the assets belonging to such class or series; and the
assets so distributable to the shareholders of any class or series shall be
distributed among such shareholders in proportion to the number of shares of
such class or series held by them and recorded on the books of the Corporation.
In the event that there are any general assets not belonging to any particular
class or series of stock and available for distribution, such distribution shall
be made to the holders of stock of all classes or series in proportion to the
asset value of the respective classes or series determined as hereinafter
provided.
(4) The assets belonging to any class or series of stock shall be charged
with the liabilities in respect to such class or series, and shall also be
charged with its share of the general liabilities of the Corporation, in
proportion to the assets value of the respective classes or series determined as
hereinafter set out. The determination of the Board of Directors shall be
conclusive as to the amount of liabilities, including accrued expenses and
reserves, as to the allocation of the same to a given class or series, and as to
whether the same or general assets of the Corporation are allocable to one or
more classes or series.
(C)`Each holder of any class or series of stock of the Corporation, who
shall surrender his certificate in good delivery form to the Corporation or who,
if the shares in question are not represented by certificates, shall deliver to
the Corporation a written request in good order signed by the shareholder, shall
be entitled to require the Corporation, to the extent that the class or series
of stock in question has assets lawfully available therefor and out of such
assets, but not otherwise, to redeem all or any part of the shares of such stock
standing in the name of such holder on the books of the Corporation, at the net
asset value of such shares, determined in the manner and as of the time, and
payable as provided in the Investment Company Act of 1940, as amended. The
Corporation shall make payment for any such shares to be redeemed as aforesaid,
in cash, or if in the opinion of the Board of Directors, which shall be
conclusive, conditions exist which make payment wholly in cash unwise or
undesirable, the Corporation may make payment wholly or partly in securities
belonging to the class or series to provide for such redemption by it of the
shares of such class or series.
(1) The Board of Directors of the Corporation may, in accordance with the
Investment Company Act of 1940, as amended, suspend the right of the holders of
any class or series of stock of the Corporation to require the Corporation to
redeem shares of such class or series.
(2) The Board of Directors, in the economic best interest of the
Corporation and in order to reduce disproportionately burdensome expenses in
servicing shareholder accounts, may from time to time, establish uniform
standards with respect to the minimum value of a stockholder account or a
minimum investment which may be made by a stockholder. The Board of Directors,
by resolution and without the vote or consent of stockholders, may require that
the aggregate net asset value of a stockholder account shall not be less than
the minimum initial investment requirement of the Corporation at the time of the
resolution. The resolution may authorize the Corporation to close those
stockholder accounts not meeting the specified minimum standards of value by
redeeming all of the shares in such accounts, at least sixty (60) days prior to
the planned redemption date, a notice setting forth the minimum account size
requirement and the date on which the account will be closed if the minimum size
requirement is not met prior to said closing date.
(3) The Corporation reserves the right to deduct from the proceeds of any
redemption an amount, not in excess of 2% of the principal amount of any
redemption, such amount to be retained by the Corporation in the class or series
of the shares so redeemed. Such power may be exercised by the Board of Directors
after shareholders have been given thirty (30) days notice of the imposition of
such redemption charge.
(D) The holder of any class or series of the capital stock of this
Corporation shall have no preemptive or preferential rights to subscribe for;
purchase or receive any part of such class or series, or of any new or
additional issues of any class or series, or any bonds or other obligations of
this Corporation convertible into stock whether now or hereafter authorized.
(E) The shares of any class or series of the capital stock of the
Corporation may be issued to such persons and at such prices as the Board of
Directors may determine from time to time. Such issuance shall be on a
non-assessable basis and, unless it be pro rated on the then existing
stockholders of such class or series as a stock or optional dividend, stock
split, or stock combination thereon, shall be only in exchange for cash or for
such other property as the Board of Directors may deem proper, which shall in no
event be less than the market value of such shares defined in these Articles or
the par value of such shares, whichever is greater. The value of property
received in exchange for the issuance of shares of any class or series shall be
that resulting from an appraisal of such property by the Board of Directors in
such manner as shall be deemed by it to reflect its fair value and when so
determined in good faith shall be conclusive. Any excess received by the
Corporation upon the issuance and sale of the shares of the capital stock of any
class or series over the then per value thereof shall be carried on the books of
the Corporation as paid-in surplus or such class or series.
SEVENTH: The number of directors of the Corporation shall be at least three
(3), or such number, of directors, not more than fifteen (15), as may be
specified by the By-Laws of the Corporation. The names of the directors who
shall serve as such until the first annual meeting of stockholders or until
their successors are duly chosen and qualified are as follows:
John Pasco, III Samuel Boyd, Jr.
R. Max Bowser John Siddall
William E. Poist
EIGHTH: This Corporation shall have perpetual existence.
NINTH: The private property of the stockholders shall not be subject to the
payment of corporate debts to any extent whatever.
TENTH: In furtherance and not in limitation of the powers conferred by the
laws of the State of Maryland or otherwise set forth herein, the Board of
Directors is expressly authorized:
(a) To make, alter or repeal the By-Laws of the Corporation except where
such power is reserved by the By-Laws to the stockholders and subject to the
powers of the stockholder to adopt, alter, or repeal any of the By-Laws of the
Corporation.
(b) To establish, and specify the powers of, any committee of the Board of
Directors, and designate the members thereof.
(c) If there be a vacancy on the Board of Directors by reason of death,
resignation or otherwise, to fill such vacancy for the unexpired term by
majority vote of the remaining directors, provided that after filling any such
vacancy, at least two-thirds of the directors shall have been elected by the
stockholders, and provided further that if at any time less than a majority of
the directors then holding offices were elected by the stockholders, a
stockholders' meeting shall be called for the purpose of electing directors to
fill existing vacancies.
(d) From time to time to determine whether and to what extent and at what
times and places and under what conditions and regulations the books and
accounts of this Corporation, or any of them other than the stock ledger, shall
be open to the inspection of the stockholders. No9 stockholder shall have any
right to inspect any account or document of the Corporation, except as conferred
by law or authorized by resolution of the directors or of the stockholders.
(e) This Corporation may in its By-Laws confer powers additional to the
foregoing upon the directors, in addition to the powers and authorities
expressly conferred upon them by law.
(f) The directors in their discretion may submit any contract or act for
approval or ratification of the stockholders. Subject to the Investment Company
Act of 1940, and notwithstanding any provision of the Maryland General
Corporation Law, such approval, if given by a majority of all the votes entitled
to be cast on the matter by the shareholders or any class or series thereof,
shall be valid and as binding upon the Corporation and upon all the
stockholders, or upon the affected class or series, as though it had been
approved or ratified by every stockholder of the Corporation, or of such class
or series, whether or not the contract or act would otherwise by open to legal
attach because of any director's interest or for any other reason, and
notwithstanding any provision of Maryland law requiring approval by a greater
proportion of shareholders.
(g) In addition to the powers and authorities hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation.
ELEVENTH:
(a) The current net asset value of a share of any class or series of the
capital stock of the Corporation ordinarily shall be determined once each
business day on which the New York Stock Exchange is open for trading. unless
otherwise provided by the Board of Directors, such valuation shall be made as of
the close of trading on said Exchange. The net asset value so determined shall
immediately thereafter become effective for all orders to redeem and (when added
to the sales charge, if applicable) to orders to purchase shares of such class
or series of stock of the Corporation. The market value of a share of any class
or series of the capital stock of the Corporation shall be the net asset value
thereof, and each of the aforesaid determinations shall be made as set forth in
Section (d) of this Article ELEVENTH. In addition, in its discretion, the Board
of Directors may make or cause to be made a more frequent determination of the
current net asset value per share of any class or series of shares when it deems
necessary, which determination shall become effective at the time established by
the Board of Directors; the foregoing determinations of the current net asset
value of a share of the Corporation's tock shall, at the discretion of the Board
of Directors, be based on the calculation as set forth in Section (d) of this
Article ELEVENTH or on an adjustment thereof to be made in such manner as the
Board of Directors shall deem reasonable to reflect any material changes in the
assets or liabilities of the Corporation and the number of its outstanding
shares which shall have taken place since the immediate preceding determination.
(b) So long as it has assets legally available to do so and such right is
not suspended under the provisions of the Investment Company Act of 1940, the
Corporation agrees to redeem any share of any class or series of its capital
stock tendered to it. The redemption price shall be determined as hereinafter
defined in Section (c) of this Article ELEVENTH. Payment for such shares shall
be made within seven (7) days after the date upon which such shares are
deposited. If the determination of the redemption price is postponed beyond the
date on which it would normally occur by reason of declaration by the Board of
Directors suspending determination of the current net asset value of any class
or series of shares of the Corporation's stock pursuant to Section (e) of this
Article ELEVENTH, the right of the stockholder to have his shares redeemed by
the Corporation shall be similarly suspended, and he may withdraw the tender of
his certificate or certificates for redemption if he so elects; or, if he does
not so elect, the shares tendered for redemption shall be redeemed at the
current net asset value per share next determined after the suspension shall
have ended. Payment for such shares may, at the option of the Board of
Directors, or such officer or officers as they may duly authorize for the
purpose in their complete discretion, be made from the assets of that class or
series in cash, or in kind, or partially in cash and partially in kind. In case
of payment in kind the Board of Directors, or their delegate, shall have
absolute discretion as to what security or securities of such class or series
shall be distributed in kind and the amount of the same; and the securities
shall be value for purposes of distribution at the value at which they were
appraised in computing the current net asset value of the class or series of the
Fund's shares, provided that any stockholder who cannot legally acquire
securities so distributed in kind by reason of the prohibitions of the
Investment Company Act of 1940 shall receive cash. Shares so redeemed by the
Corporation shall become authorized but unissued shares and may be issued and
resold by the Corporation.
(c) The redemption price of a share of the capital stock of any class or
series of the Corporation shall be determined and become effective each time the
market value of such share is determined and becomes effective under the
provisions of Section (a) of the Article ELEVENTH. Such redemption rice shall be
the net asset value thereof, determined as set forth in Section (d) of this
Article ELEVENTH.
(d) The current net asset value of a share of any class or series of the
Corporation shall be the quotient resulting from dividing the current value of
the net assets of the Corporation attributable to such class or series as of the
time of such valuation by the number of the then outstanding shares of such
class or series, including shares properly tendered for redemption at that time.
The current value of the net assets of the Corporation shall be calculated in
compliance with the Investment Company Act of 1940, and in the manner specified
in the By-Laws.
(e) The Board of Directors may declare a suspension of the determination of
the current net asset value of any class or series of the shares of the
Corporation's stock for the whole or any part of any period (i) during which the
New York Stock Exchange is closed other than customary weekend and holiday
closings (ii) during which trading on the New York Stock Exchange is restricted,
(iii) during which an emergency exists as a result of which disposal by the
Corporation of securities owned by such class or series is not reasonably
practicable or it is not reasonably practicable for the Corporation fairly to
determine the value of the net assets of such class or series, or (iv) during
any other period when the Securities and Exchange Commission (or any succeeding
governmental authority) may for the protection of security holders of the
Corporation by order permit suspension of the right of redemption or
postponement of the date of payment on redemption; provided that applicable
rules and regulations of the Securities and Exchange Commission (or any
succeeding governmental authority) shall govern as to whether the conditions
prescribed in(ii), (iii), or (iv) exist. Such suspension shall take effect at
such time as the Board of Directors shall specify but not later than the close
of business on the business day next following the declaration, and thereafter
there shall be no determination of the current net asset value per share of such
class or series until the Board of Directors shall declare the suspension is at
an end, except that the suspension shall terminate in any event on the first
business day on which said Stock Exchange shall have reopened or the period
specified in (ii) or (iii) shall have expired (as to which in the absence of an
official ruling by said Commission or succeeding authority, the determination of
the Board of Directors shall be conclusive:.
TWELFTH: The Corporation is further empowered and limited as follows:
(a) The Corporation may enter into a written contract with any person,
including any firm, corporation, trust or association in which any officer,
other employee, director or stockholder may be interested, to act as investment
advisers and managers of this Corporation, or of any class or series thereof,
and to provide such advice and management, research and statistical services,
office space, and/or bookkeeping services for this Corporation as the Board of
Directors may deem necessary or desirable. Any such contract shall in all
respects be considered with and subject to the requirements of the Investment
Company Act of 1940 as then in effect and the regulations of the Securities and
Exchange Commission promulgated thereunder.
(b) The Corporation may appoint one or more distributors or agents or both
for the sale of the shares of the Corporation or any class or series thereof,
may allow such person or persons a commission on the sale of such shares and may
enter into such contract or contracts with such person or persons as the Board
of Directors of this Corporation in its discretion may deem reasonable and
proper. Any such contract or contracts for the sale of the shares of this
Corporation may b e made with any person even though such person may be an
officers, employee, director or stockholder of this Corporation or a
corporation, partnership, trust or association in which any such officers, other
employee, director or stockholder may be interested, or such person may be the
investment adviser and manager retained pursuant to the powers granted in
Section (a) of this Article TWELFTH.
Such contract or contracts shall in all respects be consistent with and
subject to the requirements of the Investment Company Act of 1940 as then in
effect and the regulations of the Securities and Exchange Commission promulgated
thereunder and shall specify that any such person shall offer shares of the
Corporation for sale and shall purchase shares from anyone else as agent of the
Corporation.
(c) The Corporation may employ such custodian or custodians for the
safekeeping of the property of the Corporation and of its shares, such dividend
disbursing agent or agents, and such transfer agent or agents and registrar or
registrars for its shares, and may make and perform such contracts for the
aforesaid purposes as in the opinion of the Board of Directors of this
Corporation may be reasonable, necessary, or proper for the conduct of the
affairs of the Corporation, and may pay the fees and disbursements of such
custodian, dividend disbursing agents, transfer agents, and registrars out of
the income and/or any other property of the Corporation. Notwithstanding any
other provisions of the Charter or the By-Laws of the Corporation, the Board of
Directors may cause any or all of the property of the Corporation to be
transferred or to be acquired and or held in the name of a custodian so
appointed or in the name of any nominee thereof. ]
(d) The Corporation may, by resolution of its Board of Directors adopted at
a meeting thereof within thirty days before or after the beginning of any fiscal
year or within thirty days before annual meeting of stockholders, appoint any
reputable certified public accountant or firm of certified public accountants to
act as the independent auditor of the books and records of the Corporation for
such fiscal year, provided that such resolution is adopted both by a majority
vote of the directors and of those directors who are neither officers of the
Corporation nor officers, directors, principal owners or otherwise affiliated
with any investment adviser, selling or distributing agent or principal broker
of the Corporation. Such auditor or firm shall not directly or indirectly be
financially interested in the Corporation as owner or otherwise, and such
appointment shall be subject to ratification by a majority vote of the
stockholders of the Corporation at the next annual meeting thereof if such
meeting be held.
(e) Provided that reasonable care has been exercised in the selection of
the officers, other employees, investment advisers and managers, distributors,
selling agents, custodians, dividend disbursing agents, transfer agents and
registrars, legal counsel, auditors, and other agents of the Corporation, no
director of the Corporation shall be responsible or liable in any event for any
neglect or wrongdoing of any of the same, nor shall any director be responsible
or liable for the act or omission to act of any other directors, provided,
however, that nothing contained in the Charter or By-Laws of this Corporation
shall protect any director against any liability to which he would otherwise be
subject by reason of his own willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties involved in the conduct of his office.
(f) Each director and officer of the Corporation shall be indemnified by
the Corporation to the full extent permitted by the General Corporation Law of
Maryland and the Investment Company Act of 1940.
THIRTEENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in the Charter, in the manner prescribed by the
General Corporation Law of Maryland, and all rights conferred upon stockholders
herein are granted subject to this reservation.
IN WITNESS THEREOF, the undersigned incorporator has signed his name this
14th day of October, 1983, and acknowledges that these Articles of Incorporation
are his act and, under the penalties of perjury, that the matters and facts set
forth herein are true in all material respects to the best of his knowledge,
information and belief.
INCORPORATOR
/s/ Michael Vario
Michael Vario
WITNESS: /s/ Linda Caligan
EXHIBIT 2
THE COMMONWEALTH GROUP, INC.
Articles Supplementary
Pursuant to authority granted under Section 2-105 of the Maryland General
Corporation Law, the Board of Directors of The Commonwealth Group, Inc. (the
"Corporation"), at a meeting called for such purpose, it being determined in
accordance with Section 2-105(9) that no shares of the Commonwealth Emerging
Growth Fund have been issued, hereby supplement Article SIXTH of the Articles of
Incorporation of the Corporation as follows:
The Commonwealth Emerging Growth Fund Series is dissolved and the
100,000,000 shares of common stock allocated to the fund are cancelled;
To designate the Nicholson Growth Fund Series of the Corporation and
allocated 50,000,000 of the authorized but unissued shares thereto; and
To designate the Newport Far East Fund Series of the Corporation and
allocate 50,000,000 of the authorized but unissued shares thereto.
IN WITNESS WHEREOF, the undersigned has signed his name this 24\9th day of
October, 1984 and acknowledges that these Articles Supplementary are the act of
the Corporation and, under the penalties of perjury, that the matters and facts
set forth herein are true in all material respects to the best of his knowledge,
information and belief.
THE COMMONWEALTH GROUP, INC.
By /s/ John Pasco, III
John Pasco, III, President
Witness: /s/ Mary T. Pasco
Secretary
EXHIBIT 3
THE COMMONWEALTH GROUP, INC.
Articles Supplementary
Pursuant to action duly authorized under Section 2-105 of the Maryland
General Corporation Law, taken by the Board of Directors of the Commonwealth
Group, Inc., a Maryland corporation (the "Corporation"), at a meeting called for
such purpose, in accordance with the requirements of Section 2-105(9), there
being no shares of the Commonwealth Emerging Growth Fund issued and outstanding,
Article SIXTH of the Commonwealth Group, Inc. Articles of Incorporation is
hereby supplemented with the following:
The Commonwealth Emerging Growth Fund Series is dissolved and the 100,000
shares of common stock allocated thereto are cancelled;
The Corporation is deemed to have a Nicholson Growth Fund Series and
50,000,000 shares of the authorized but unissued common stock are
allocated thereto; and
The Corporation is deemed to have a Newport Far East Series and 50,000,000
shares of the authorized but unissued common stock are allocated thereto.
IN WITNESS WHEREOF I have hereunto signed and acknowledged that these
Articles Supplementary are the act of the Corporation and under the penalties of
perjury, that, to the best of my knowledge, information, and belief these
matters and facts are true in all material respects.
/s/ John Pasco, III
President
WITNESS:
/s/Nell G. Pasco
Secretary
EXHIBIT 4
TYNDALL-NEWPORT FUND, INC.
Articles Supplementary
Pursuant to action duly authorized under the Section 2-105 of the Maryland
General Corporation Law, taken by the Board of Directors of the Tyndall-Newport
Fund, Inc., a Maryland corporation (the "Corporation"), at a meeting called for
such purpose on January 12,1990, in accordance with the requirements of Section
2-105(9), Article SIXTH of the Corporation's Articles of Incorporation is hereby
supplemented with the following:
The Corporation is deemed to have a Vontobel U.S. Value Fund series and
50,000,000 shares of the authorized but unissued common stock are allocated
thereto
IN WITNESS WHEREOF I have hereunto signed and acknowledged that
these Articles Supplementary are the act of the corporation and under the
penalties of perjury, that, to the best of my knowledge, information and belief
these matters and facts are true in all material respects.
/s/ John M. Mussey
President
WITNESS:
/s/ Mary T. Pasco
Assistant Secretary
THE UNDERSIGNED, President of Tyndall-Newport Fund, Inc. who executed on
behalf of said Corporation the foregoing Articles Supplementary of which this
certificate is made a part, hereby acknowledges, in the name and on behalf of
said corporation, the foregoing Articles to be the corporate act of said
Corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth herein with respect to
the approval thereof are true in all material respects, under the penalties for
perjury.
/s/ John M. Mussey
President
Attest:
/s/ Mary T. Pasco
Assistant Secretary
EXHIBIT 5
THE WORLD FUNDS, INC.
Articles Supplementary
The World Funds, Inc., a Maryland corporation having its principal offices
in Baltimore, Maryland (the "Corporation") and an open-end investment company
registered under the Investment Company Act of 1940, hereby certifies, in
accordance with Section 2-105 of the Maryland General Corporation Law, to the
State Department of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, at a meeting held on
August 27, 1993, adopted resolutions classifying and allocating unallocated and
unissued commons tock of the Corporation as follows: Fifty Million (50,000,000)
shares of common stock with a par value of One Cent ($.01) per share to a new
series of shares designated as Vontobel International Bond Fund series.
SECOND: The shares of the Vontobel International Bond Fund series shall
have such preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, terms and conditions of redemption
and other characteristics as are stated in Article SIXTH of the Articles of
Incorporation of the Corporation.
THIRD: The aforesaid shares have been duly classified and
allocated by the Board of Directors pursuant to the authority and power
contained in the charter of the Corporation.
IN WITNESS WHEREOF, I have hereunto signed and acknowledged that these
Articles Supplementary are the act of the Corporation and under the penalties of
perjury, that, to the best of my knowledge, information and belief these matters
and facts are true in all material respects.
/s/ John Pasco, III
Chairman and Chief Executive Officer
WITNESS:
/s/ Mary T. Pasco
Assistant Secretary
THE UNDERSIGNED, Chairman and Chief Executive Officer of The World Funds, Inc.,
who executed on behalf of said Corporation the foregoing Articles Supplementary
of which this certificate is made a part, hereby acknowledges, in the name and
on behalf of said Corporation, the foregoing Articles to be the corporate act of
said Corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth herein with respect to
the approval thereof are true in all material respects, under the penalties for
perjury.
/s/ John Pasco, III
Chairman and Chief Executive Officer
Attest:
/s/ Mary T. Pasco
Assistant Secretary
EXHIBIT 6
THE WORLD FUNDS, INC.
Articles Supplementary
The World Funds, Inc., a Maryland corporation having its principal office
in Baltimore, Maryland (the "Corporation" and an open-end investment company
registered under the Investment Company Act of 1940, hereby certifies, in
accordance with Section 2-208 of the Maryland General Corporation Law, to the
State Department of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, at a meeting held on
October 29, 1993, adopted resolutions classifying and allocating unallocated and
unissued common stock of the Corporation as follows: Fifty Million (50,000,000)
shares of Common Stock with a par value of One Cent ($.01) per share to the
Newport Tiger Fund series of the Corporation.
SECOND: (a) The Total number of shares of stock which the Corporation was
authorized to issue prior to the aforesaid action was Five Hundred Million
(500,000,000) shares, with a par value of One Cent ($.01) per share, having an
aggregate par value of Five Million Dollars ($5,000,000):
One series of shares was designated as the Vontobel EuroPacific Fund
series and Fifty Million (50,000,000) shares of Common Stock (par value $.01 per
share) were classified and allocated to such series, with an aggregate par value
of Five Hundred Thousand Dollars ($500,000);
One series of shares was designated as the Newport Tiger Fund series and
Fifty Million (50,000,000) shares of Common Stock (par value $.01 per share)
were classified and allocated to such series, with an aggregate par value of
Five Hundred Thousand Dollars ($500,000);
One series of shares was designated as the Vontobel U.S. Value Fund series
and Fifty Million (50,000,000) shares of Common Stock (par value $.01 per share)
were classified and allocated to such series, with an aggregate par value of
Five Hundred Thousand Dollars ($500,000);
One series of shares was designated as the Vontobel International Bond
Fund series and Fifty Million (50,000,000) shares of Common Stock (par value
$.01 per share) were classified and allocated to such series, with an aggregate
par value of Five Hundred Thousand Dollars ($500,000);
(b) The Total number of shares of stock which the Corporation is authorized
to issue, following the aforesaid actions, is Five Hundred Million (500,000,000)
shares, with a part value of One Cent ($.01) per share, having an aggregate par
value of Five Hundred Million Dollars ($5,000,000);
One series of shares is designated as the Vontobel EuroPacific Fund series
and Fifty Million (50,000,000) shares of Common Stock (par value $.01 per share)
are classified and allocated to such series, with an aggregate par value of Five
Hundred Thousand Dollars (500,000);
One series of shares is designated as the Newport Tiger Fund series and One
Hundred Million (100,000,000) shares of Common Stock (par value $.01 per share)
are classified and allocated to such series, with an aggregate par value of One
Million Dollars (500,000);
One series of shares is designated as the Vontobel U.S. Value Fund series
and Fifty Million (50,000,000) shares of Common Stock (par value $.01 per share)
are classified and allocated to such series, with an aggregate par value of Five
Hundred Thousand Dollars (500,000); and
One series of shares is designated as the Vontobel International Bond Fund
series and Fifty Million (50,000,000) shares of Common Stock (par value $.01 per
share) are classified and allocated to such series, with an aggregate par value
of Five Hundred Thousand Dollars ($500,000).
THIRD: The shares of the Newport Tiger Fund series shall have such
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, terms and conditions of redemption
and other characteristics as are stated in Article SIXTH of the Articles of
Incorporation of the Corporation.
FOURTH: The aforesaid shares of the Newport Tiger Fund series have been
duly classified and allocated by the Board of Directors pursuant to the
authority and power contained in the charter of the Corporation.
IN WITNESS WHEREOF, I have hereunto signed and acknowledged that these
Articles Supplementary are the act of the Corporation and under the penalties of
perjury, that, to the best of my knowledge, information and belief these matters
and facts are true in all material respects.
/s/ John Pasco, III
Chairman and Chief Executive Officer
WITNESS:
/s/ Mary T. Pasco
Assistant Secretary
THE WORLD FUNDS,
Articles Supplementary
The World Funds, Inc., a Maryland corporation having its principal office
in Baltimore, Maryland (the "Corporation") and an open-end investment company
registered under the Investment Company Act of 1940, hereby certifies, in
accordance with Section 2-105 of the Maryland General Corporation Law, to the
State Department of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, at a meeting held on
July 7, 1994, adopted resolutions classifying and allocating unallocated and
unissued common stock of the Corporation as follows: Fifty Million (50,000,000)
shares of common stock with a par value of One Cent ($.01) per share to a new
series of shares designated as the Sand Hill Allocated Growth Fund series.
SECOND: The shares of the Sand Hill Allocated Growth Fund series shall
have such preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, terms and conditions of redemption
and other characteristics as are stated in Article SIXTH of the Articles of
Incorporation of the Corporation.
THIRD: The aforesaid shares have been duly classified and
allocated by the Board of Directors pursuant to the authority and powers
contained in the charter of the Corporation.
IN WITNESS WHEREOF, I have hereunto signed and acknowledged that these
Articles Supplementary are the act of the Corporation and under the penalties of
perjury, that, to the best of my knowledge, information and belief these matters
and facts are true in all material respects.
/s/ John Pasco, III
John Pasco, III
Chairman and Chief Executive Officer
WITNESS: /s/ Mary T. Pasco
Assistant Secretary
THE UNDERSIGNED, Chairman and Chief Executive Officer of The World Funds,
Inc., who executed on behalf of said Corporation the foregoing Articles
Supplementary of which this certificate is made a part, hereby acknowledges, in
the name and on behalf of said Corporation, the foregoing Articles to be the
corporate act of said Corporation and further certifies that, to the best of his
knowledge, information and belief, the matters and facts set forth herein with
respect to the approval thereof are true in all material respects, under the
penalties for perjury.
/s/ John Pasco, III
John Pasco, III
Chairman and Chief Executive Officer
ATTEST: /s/ Mary T. Pasco
Assistant Secretary
EXHIBIT 8
THE COMMONWEALTH GROUP, INC.
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
THE COMMONWEALTH GROUP, INC., a Maryland corporation having its principal office
in Rockville, Maryland (the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: The charter of the Corporation, filed by the Maryland Department of
Assessments and Taxation on October 28,1983, and amended on December 22, 1986 is
hereby further amended as authorized under Section 2-602 of the Maryland General
Corporation Law by: (1) changing the name of the Corporation to Tyndall-Newport
Fund, Inc., (b) deleting all reference to the Bowser Growth Fund Series
("Bowser") in Article Sixth of the charter, liquidating such series and
reclassifying as authorized and unissued shares of the Corporation on the shares
of common stock originally classified and allocated to Bowser; (c) changing the
name of the series known as the Newport Far Each Fund to the Tyndall-Newport Far
East Fund; and (d) changing the name of the series known as the Newport Global
Growth Fund ("Newport") to the Tyndall-Newport Global Growth Fund.
SECOND: These Articles of Amendment shall be effective upon the close
of business of the day of filing with the Maryland Department of Assessments
and taxation ("Effective Time").
THIRD: On or before the Effective Time, substantially all of the assets of
Bowser shall be transferred to Newport in exchange for shares of Newport having
the same aggregate net asset value as said assets (the "Newport Shares"), and
upon the Effective Time, each outstanding share of Bowser will be converted into
Newport Shares based on their respective net asset values.
FOURTH: The Board of Directors, on (i) October 10, 1988, duly adopted
resolutions setting forth the amendment to the charter set forth above in
Articles FIRST, subarticle (1); (ii) November 20, 1988, duly adopted the
resolutions setting forth the amendment to the charter set forth above in
Article FIRST, subarticle (b); and (iii) August 25, 1988, duly adopted the
resolutions setting forth the amendments to the charter set forth above in
Article FIRST, subarticles (c) and (d); declaring that all of the foregoing
amendments to the charter were advisable and directing that they be submitted to
action thereon by the stockholders of the Corporation at the annual meeting to
be held on December 29, 1988.
Notice setting forth a summary of the change to be effected by said
amendments of the charter and stating that a purpose of the meeting of the
stockholders would be to take action thereon, was given, as required by law, to
all stockholders entitled to vote thereon. The amendments of the charter of the
Corporation were approved at said meeting as follows: (i) the amendment to the
charter set forth in Article FIRST, subarticle (a) was approved by the
affirmative vote of a majority of the outstanding shares of the Corporation
(which fulfills the requirement under the Corporation's charter that such
amendment be approved by a majority of votes entitled to be cast on the matter);
and (ii) the amendments to the charter set forth in Article FIRST, subarticles
(b) (c) and (d) were each approved by the affirmative vote of a majority of the
outstanding shares of the Corporation entitled to vote thereon (which fulfills
the requirement under the Corporation's charter that such amendment be approved
by a majority of all votes entitled to be cast on the matter).
FIFTH: The amendments of the charter of the Corporation as
hereinabove set forth have been duly advised by the Board of Directors and
approved by the stockholders of the Corporation.
IN WITNESS WHEREOF, the Commonwealth Group, Inc. has caused these Articles
of Amendment to be signed in its name and on its behalf by its President and
attested by its Secretary on December 29, 1988.
THE COMMONWEALTH GROUP, INC.
By: /s/ John Pasco, III
John Pasco, III, President
Attest:
/s/ F. Byron Parker, Jr.
Secretary
The Undersigned, President of The Commonwealth Group, Inc., who executed
on behalf of said Corporation the foregoing Articles of Amendment to the charter
of which this certificate is made a part, hereby acknowledges, in the name and
on behalf of said Corporation, the foregoing Articles of Amendment to the
charter to be the corporate act of said Corporation and further certifies that,
to the best of his knowledge, information and belief, the matters and facts set
forth herein with respect to the approval thereof are true in all material
aspects, under the penalties for perjury.
/s/ John Pasco, III
John Pasco, III, President
EXHIBIT 9
TYNDALL WORLD FUNDS, INC.
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
TYNDALL WORLD FUNDS, INC., a Maryland corporation having its principal
Maryland office in the city of Baltimore, Maryland (the "Corporation") hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: The charter of the Corporation, filed by the Maryland Department of
Assessments and Taxation on October 28, 1983, and amended on December 22, 1986,
December 30, 1988 and July 10, 1990, is hereby further amended as authorized
under Section 2-602 of the Maryland General Corporation Law by deleting all
references to the Tyndall Far Each Fund ("Far East") in Article SIXTH of the
charter, liquidating such Fund and reclassifying as authorized and unissued
shares of the Corporation the shares of common stock originally classified and
allocated to Far East.
SECOND: These Articles of Amendment shall be effective upon the close
or business of the day of filing with the Maryland Department of Assessments
and taxation ("Effective Time)".
THIRD: Pursuant to an Agreement and Plan of Reorganization approved by the
shareholders of Far East, on or before the Effective Time, substantially all of
the assets of Far East shall be transferred to Tyndall Tiger Fund ("Tiger") in
exchange for shares of Tiger (the "Tiger Shares") having the same aggregate net
asset value as said shares. Such Tiger Shares will be distributed to the holders
of shares of Far East and, upon the Effective Time, each outstanding share of
Far East will be cancelled in consideration of the delivery of such Tiger Shares
based on their respective net asset values.
FOURTH: The Board of Directors, on December 2, 1990, duly adopted
resolutions setting forth the amendment to the charter set forth above in
Article FIRST, declaring that the foregoing amendment to the charter was
advisable and directing that it be submitted to action thereon by the
stockholders of the affected series of the Corporation at a special meeting held
on December 29, 1990.
Notice setting forth a summary of the change to be effected by said
articles of amendment and stating that a purpose of the meeting of the
stockholders of the affected series would be to take action thereon, was given,
as required by law, to all stockholders entitled to vote thereon. The amendment
of the charter was approved at said meeting by the affirmative vote of a
majority of the outstanding shares of the affected series of the Corporation
entitled to vote thereon (which fulfills the requirement under the Corporation's
charter that such amendment be approved by a majority of all votes entitled to
be cast on the matter).
FIFTH: The amendment of the charter of the Corporation as herein above set
forth has been duly advised by the Board of Directors and approved by the
stockholders of the affected series of the Corporation required and authorized
to vote thereon.
IN WITNESS WHEREOF, Tyndall World Funds, Inc. has caused these
Articles of Amendment to be signed in its name and on its behalf by its Chairman
and attested by its Secretary on January 8, 1991.
TYNDALL WORLD FUNDS, INC.
By: /s/ John Pasco, III
John Pasco, III, President
Attest:
/s/ F. Byron Parker, Jr.
Secretary
The undersigned, Chairman of the Board of Tyndall World Funds, Inc.,
who executed on behalf of said Corporation the foregoing Articles of Amendment
to the charter of which this certificate is made a part, hereby acknowledges, in
the name and on behalf of said Corporation, the foregoing Articles of Amendment
to the charter to be the corporate act of said Corporation and further certifies
that, to the best of his knowledge, information and belief, the matters and
facts set forth herein with respect to the approval thereof are true in all
material aspects, under the penalties for perjury.
/s/ John Pasco, III
John Pasco, III
Chairman
EXHIBIT 10
THE WORLD FUNDS, INC.
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
(to change the name of a series)
The World Funds, Inc. a Maryland corporation having its principal office
in Baltimore, Maryland (the "Corporation", hereby certifies, in accordance with
Section 2-6603 of the Maryland General Corporation Law Corporation Law (the
"GCL"), to the State Department of Assessments and taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, at a meeting on July 7,
1994, adopted resolution creating the Sand Hill Allocated Growth Fund series of
the Corporation, (the "Series"), and reclassified Fifty Million (50,000,000)
shares of common stock of the Corporation ($.01 par value per share) to such
Series, and Articles Supplementary were filed for such purpose.
SECOND: The Board of Directors of the Corporation at a meeting on October
9, 1994, adopted resolutions renaming the Sand Hill Allocated Growth Fund series
of the Corporation as the Sand Hill Portfolio Manager Fund series of the
Corporation.
THIRD: The change of the name of the Series of the Corporation
has been approved by a majority of the Board of Directors pursuant to authority
contained in the Articles of Incorporation of the Corporation and Section 2-603
of the GCL.
FOURTH: No shares of the series have been issued, and there are no
shareholders of the Corporation entitled to vote on the change of the name of
the Series.
IN WITNESS WHEREOF, The World Funds, Inc. has caused these Articles of
Amendment to be signed on its name and on its behalf this 12th day of October,
1994.
THE WORLD FUNDS, INC.
By: /s/John Pasco, III
John Pasco, III
Chairman and Chief Executive Officer
ATTEST: /s/ Mary T. Pasco
Assistant Secretary
THE UNDERSIGNED, Chairman and Chief Executive Officer of THE WORLD FUNDS,
INC., who executed on behalf of the said Corporation the foregoing Articles of
Amendment, of which this instrument is made a part, hereby acknowledges, in the
name of and on behalf of said Corporation, said Articles of Amendment to be the
corporate act of said Corporation and further certifies that, to the best of his
knowledge, information and belief, the matters and facts set forth therein with
respect to the approval thereof are true in all material respects, under the
penalties of perjury.
/s/ John Pasco, III
John Pasco, III
1
EXHIBIT 11
THE COMMONWEALTH GROUP, INC.
(Name Changed to: THE WORLD FUNDS, INC.)
BY-LAWS
ARTICLE I
OFFICES
Section 1. The principal office of the Corporation shall be in the City of
Richmond, State of Virginia. The Corporation may also have offices at such other
places within or without the State as the Board of Directors may from time to
time determine or the business of the Corporation may require.
ARTICLE II
STOCKHOLDERS AND STOCK CERTIFICATES
Section 1. Every stockholder of record shall be entitled to receive, upon
request, a stock certificate representing any number of whole shares owned by
him. Certificates shall not be issued for fractional shares. Stock certificates
shall be in such form as may be required by law and as the Board of Directors
shall prescribe. Every stock certificate shall be signed by the Chairman or the
President or a Vice President and by the treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary, and sealed with the corporate seal,
which may be a facsimile, either engraved or printed. Whenever permitted by law,
the Board of Directors may authorize the issuance of stock certificates bearing
the facsimile signatures of the officers authorized to sign such certificates.
Section 2. Shares of the capital stock of the Corporation shall be
transferable only on the books of the Corporation by the person in whose name
such shares are registered, or by his duly authorized attorney or
representative. In all cases of transfer by an attorney, the original letter of
attorney, or an official copy thereof duly certified, shall be deposited and
remain with the Corporation or its duly authorized transfer agent. In case of
transfers by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited and remain with the Corporation or
its duly authorized transfer agent. No transfer shall be made unless and until
any outstanding certificate pertaining to such shares issued to the transferor
shall be delivered to the Corporation or its duly authorized transfer agent,
properly endorsed.
Section 3. Any person desiring a certificate for shares of the capital
stock of the Corporation to be issued in lieu of one lost or destroyed shall
make an affidavit or affirmation setting forth the loss or destruction of such
stock certificate, and shall advertise such loss or destruction in such manner
as the Board of Directors may require, and shall, if the Board of Directors
shall so require, give the Corporation a bond of indemnity, in such form and
with such security as may be satisfactory to the Board, indemnifying the
Corporation against any loss that may result upon the issuance of a new stock
certificate. Upon receipt of such affidavit and proof of publication of the
advertisement of such loss or destruction, and the bond, if any, required by the
Board of Directors, a new stock certificate may be issued of the same character
and for the number of shares as the one alleged to have been lost or destroyed.
Section 4. The Corporation shall be entitled to treat the holder of record
of any share or shares of its capital stock as the owner thereof and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
the Corporation shall have express or other notice thereof except as otherwise
provided by the laws of the State of Maryland.
ARTICLE III
MEETINGS OF STOCKHOLDERS
Section 1. The annual meeting of the stockholders of the Corporation shall
be held at the principal office of the Corporation, or at such other place
within or without the State of Maryland as the Board of Directors may from time
to time prescribe. The Board of Directors may determine, in its discretion, not
to hold an annual meeting of the stockholders in any year in which none of the
following is required to be acted on by stockholders under the Investment
Company Act of 1940; (i) election of directors; (ii) approval of an Investment
Advisory Agreement; (iii) ratification of the selection of independent public
accountants; and (iv) approval of a Distribution Agreement.
Section 2. Special meetings of the stockholders may be called at any time
by the Chairman or the Board of Directors and shall be called at any time by the
Chairman, or by the Secretary, upon the written request of holders of at least
25% of the shares of the capital stock of the Corporation issued and outstanding
and entitled to vote at such meeting. Upon receipt of a written request from any
person or persons entitled to call a special meeting, which written request
shall state the purpose of the meeting and the matters proposed to be acted on,
it shall be the duty of the Chairman, or, in his absence, the Secretary, to call
such meeting to be held not less than ten days nor more than sixty days after
the receipt of such request. Special meetings of the stockholders shall be held
at the principal office of the Corporation if so specified in the request for
the meeting, or at such other place within or without the State of Maryland as
the Board of Directors may from time to time direct if not otherwise specified
in the request for such meeting.
Section 3. Notice of the time and place of the annual or any special
meeting of the stockholders shall be given to each stockholder entitled to
notice of such meeting at least ten days and not more than ninety days prior to
the date of such meeting. In the case of special meetings of the stockholders,
the notice shall specify the purpose or purposes of such meeting and the
matter(s) proposed to be acted on, and no business shall be transacted at such
meeting other than that mentioned in the call.
Section 4. The Board of Directors may close the stock transfer books of
the Corporation for a period not exceeding twenty days preceding the date of any
meeting of stockholders, or the date for payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or for a period of not exceeding
twenty days in connection with the obtaining of the consent of the stockholders,
or any other similar purpose; provided, however, that in lieu of closing the
stock transfer books as aforesaid, the Board of Directors may fix in advance a
date, not exceeding ninety days preceding the date of any meeting of
stockholders (and in the case of a meeting of stockholders, at least ten days
preceding the date of such meeting), or the date for the payment of any
dividend, or the date for the allotment of rights, or the date when any change
or conversion or exchange of capital stock shall go into effect, or a date in
connection with obtaining such consent, as a record date for the determination
of the stockholders entitled to notice of, and to vote any such meting and any
adjournment thereof, or entitled to receive payment of any such dividend, or to
any such allotment of rights, or to exercise the rights in respect of any such
change, conversion or exchange of capital stock or to give such consent, and in
such case such stockholders and only such stockholders as shall be stockholders
of record on the date so fixed shall be entitled to such notice of, and to vote
at, such meeting and any adjournment thereof, or to receive payment of such
dividend or to receive such allotment of rights or to exercise such rights, or
to give such consent, as the case may be, notwithstanding any transfer of any
stock on the books of the Corporation after any such record date fixed as
aforesaid.
Section 5. At all meetings of the stockholders a quorum shall consist of
the persons representing a majority of the outstanding shares of the capital
stock of the Corporation entitled to vote at such meeting. In the absence of a
quorum no business shall be transacted except that the stockholders present in
person or by proxy and entitled to vote at such meeting shall have power to
adjourn the meeting from time to time without notice other than announcement at
the meeting until a quorum shall be present. At any such adjourned meeting at
which a quorum shall be present any business may be transacted which might have
been transacted at the meeting on the date specified in the original notice. If
a quorum is present at any meeting, the holders of a majority of the shares of
capital stock of the Corporation issued and outstanding and entitled to vote at
the meeting who shall be present in person or by proxy at the meeting shall have
power to act upon all matters properly before the meeting, and shall also have
power to adjourn the meeting to any specific time or times, and no notice of any
such adjourned meeting need be given to stockholders absent or otherwise.
Section 6. At any meeting of the stockholders of the Corporation every
stockholder having the right to vote shall be entitled, in person or by proxy
appointed by an instrument in writing signed by such stockholder and bearing a
date not more than eleven months prior to said meeting unless such instrument
provides for a longer period, to one full or fractional vote for each full or
fractional share of stock having voting rights registered in his name on the
books of the Corporation.
ARTICLE IV
DIRECTORS
Section 1. The Board of Directors shall consist of not less than three nor
more than fifteen members, who need not hold any shares of the capital stock of
the Corporation to qualify.
Section 2. The directors shall be elected annually by the stockholders of
the Corporation at their annual meeting, and shall hold office for the term of
one year and until their successors shall be duly elected and shall qualify.
Section 3. The Board of Directors shall have the control and management of
the business of the Corporation, and in addition to the powers and authority by
these By-laws expressly conferred upon them may, subject to the provisions of
the laws of the State of Maryland and of the Articles of Incorporation of the
Corporation, exercise all such powers of the Corporation and do all such acts
and things as are not required by law or by the Articles of Incorporation to be
exercised or done by the stockholders.
Section 4. The Board of Directors shall have power to fill vacancies
occurring on the Board, whether by death, resignation or otherwise. A vacancy on
the Board of Directors may be filled by a vote of the majority of the remaining
members of the Board, though less than a quorum, but such election shall be
deemed to be only for the balance of the unexpired term.
Section 5. The Board of Directors shall have power to appoint, and at its
discretion to remove or suspend, any officer, officers, manager,
superintendents, subordinates, assistants, clerks, agents and employees,
permanently or temporarily, as the Board may deem appropriate, and to determine
their duties and to fix, and from time to time to change, their salaries, and to
require security in such instances and in such amounts as it may deem proper.
Section 6. In case of the absence of an officer of the Corporation, or for
any other reason which may seem sufficient to the Board of Directors, the Board
may delegate his powers and duties for the time being to any other officer of
the Corporation or to any director.
Section 7. The Board of Directors may, by resolution or resolutions passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of two or more of the directors of the Corporation which,
to the extent provided in such resolution or resolutions and subject to the
provisions of the laws of the State of Maryland, and of the Articles of
Incorporation of the Corporation, shall have and may exercise the powers of the
Board of Directors in the management of the business and affairs of the
Corporation. Such committee or committees shall have such name or names as may
be determined from time to time by resolution adopted by the Board of Directors.
Any such committee shall keep regular minutes of its proceedings, and shall
report the same to the Board when required.
Section 8. The Board of Directors may hold their meetings within or
without the State of Maryland.
Section 9. The Board of Directors shall have power to fix, and from time
to time to change the compensation, if any, of the directors of the Corporation.
ARTICLE V
DIRECTORS MEETINGS
Section 1. The first regular meetings of the Board of Directors shall
occur each year within seven business days following the annual meeting of
stockholders at which the directors are elected. Regular meetings of the Board
of Directors shall also be held without notice at such times and places as may
be from time to time prescribed by the Board.
Section 2. Special meetings of the Board of Directors may be called at any
time by the Chairman, and shall be called by the Chairman upon the written
request of a majority of the members of the Board of Directors. Unless notice is
waived, notice of any special meeting shall be sent to each director at least
twenty-four hours prior to the date of such meeting, and such notice shall state
the time, place and purpose of such special meeting.
Section 3. One-third of the entire Board of Directors shall constitute a
quorum for the transaction of business at any meeting. The act of a majority of
the directors present at any meeting where there is a quorum shall be the act of
the Board of Directors except as may be otherwise specifically provided by
statute or by the Certificate of Incorporation or by these By-Laws.
Section 4. Except as may be otherwise specified by law, a director may
attend any meeting of the Board, or of any committee established by the Board,
by any telephonic or other means enabling such director to hear or be heard by
each other director otherwise participating in such meeting.
ARTICLE VI
OFFICERS AND AGENTS
Section 1. At the first meeting of the Board of Directors after the
election of directors in each year, the Board shall elect a Chairman, a
President, a Secretary and a Treasurer, and may elect or appoint one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
and agents as the Board may deem necessary and as the business of the
Corporation may require.
Section 2. No officer need be a member of the Board of Directors. Any two
or more offices may be held by the same person except the offices of President
and Vice President. All officers of the Corporation shall serve for one year and
until their successors shall have been duly elected and shall have qualified;
provided, however, that any officer may be removed at any time either with or
without cause, by action by the Board of Directors.
ARTICLE VII
DUTIES OF OFFICERS
CHAIRMAN OF THE BOARD
Section 1. The Chairman of the Board shall be the Chief Executive Officer
and head of the Corporation, and during the recess of the Board of Directors
shall have the general control and management of its business and affairs,
subject, however, to the regulations of the Board of Directors. He shall,
preside at all meetings of the stockholders and the Board of Directors and shall
be a member ex officio of all standing committees.
PRESIDENT
Section 2. The President shall have those duties and responsibilities as
shall be assigned to him by the Chairman or the Board of Directors, and those
not specifically reserved to the Chairman by law or by the Board of Directors.
The President shall, in the absence of the Chairman, preside at all
meetings of the stockholders and the Board of Directors. In the event of the
absence, resignation, disability or death of the Chairman, the President shall
exercise all powers and perform all duties of the Chairman until his return, or
until such disability shall have been removed or until a new Chairman shall have
been elected.
VICE PRESIDENTS
Section 3. A Vice President shall have those duties and responsibilities
as shall be assigned to him by the Chairman or the President. In the event of
the absence, resignation, disability or death of the President, the Vice
President shall exercise all the powers and perform all the duties of the
President until his return, or until such disability shall be removed or until a
new President shall have been elected.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 4. The Secretary shall attend all meetings of the stockholders and
shall record all the proceedings thereof in a book to be kept for that purpose,
and he shall be the custodian of the corporate seal of the Corporation. In the
absence of the Secretary, an Assistant Secretary or any other person appointed
or elected by the Board of Directors, as is elsewhere in these By-Laws provided,
may exercise the rights and perform the duties of the Secretary.
Section 5. The Assistant Secretary, or if there be more than one Assistant
Secretary, then the Assistant Secretaries in the order of their seniority,
shall, in the absence or disability of the Secretary, perform the duties and
exercise the powers of the Secretary. Any Assistant Secretary elected by the
Board shall also perform such other duties and exercise such other powers as the
Board of Directors shall form time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 6. The Treasurer shall keep full and correct accounts of the
receipts and expenditures of the Corporation in books belonging to the
Corporation, and shall deposit all monies and valuation effects in the name and
to the credit of the Corporation and in such depositories as may be designated
by the Board of Directors, and shall, if the Board shall so direct, give bond
with sufficient security and in such amount as may be required by the Board of
Directors for the faithful performance of his duties.
He shall disburse funds of the Corporation as may be ordered by the Board
of Directors, taking proper vouchers for such disbursement, and shall render to
the President and Board of Directors at the regular meetings of the Board, or
whenever they may require it, an account of all his transactions as the chief
fiscal officer of the Corporation and of the financial condition of the
Corporation.
Section 7. The Assistant Treasurer, or, if there be more than one
Assistant Treasurer, then the Assistant Treasurers in the order of their
seniority, shall, in the absence or disability of the Treasurer, perform the
duties and exercise the powers of the Treasurer. Any Assistant Treasurer elected
by the Board shall also perform such duties and exercise such powers as the
Board of Directors shall from time to time prescribe.
ARTICLE VIII
CHECKS, DRAFTS, NOTES, ETC.
Section 1. All checks shall bear the signature of such person or persons
as the Board of Directors may from time to time direct.
Section 2. Any officer of the Corporation or any other employee, as the
Board of Directors may from time to time direct, shall have full power to
endorse for deposit all checks and negotiable paper drawn payable to his or
their order or to the order of the Corporation.
ARTICLE IX
CORPORATE SEAL
Section 1. The corporate seal of the Corporation shall have inscribed
thereon the name of the Corporation, the year of its organization, and the words
"Corporate Seal, Maryland". Such seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE X
DIVIDENDS
Section 1. Dividends upon the shares of the capital stock of the
Corporation may, subject to the provisions of the Articles of Incorporation of
the Corporation, if any, be declared by the Board of Directors at any regular or
special meeting, pursuant to law. Dividends may be paid in cash, in property, or
in shares of the capital stock of the Corporation.
Section 2. Before payment of any dividend there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
Board of Directors may, from time to time, in their absolute discretion, think
proper as a reserve fund to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Corporation, or for such other
purpose as the Board of Directors shall deem to be for the best interests of the
Corporation, and the Board of Directors may abolish any such reserve in the
manner in which it was created.
ARTICLE XI
FISCAL YEAR
Section 1. The fiscal year of the Corporation shall begin on January 1 of
each year, and end of December 31 of each year.
ARTICLE XII
NOTICES
Section 1. Whenever under the provisions of these By-Laws notice is
required to be given to any director or stockholder, it shall not be construed
to mean personal notice, and such notice may be given in writing, by mail, by
depositing the same in the post office or letter box, in a post paid sealed
wrapper, addressed to such director or stockholder at such address as shall
appear on the books of the Corporation, or if the address of such director or
stockholder does not appear on the books of the Corporation, to such director or
stockholder by personal delivery or left at his residence or usual place of
business. In the case of directors, such notice may also be given by telephone,
telegraph, telex or cable.
Section 2. Any notice required to be given under these By-Laws may be
waived by a writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein.
ARTICLE XIII
AMENDMENTS
Section 1. These By-Laws may be amended, altered, repealed or added to at
the annual meeting of the stockholders of the Corporation or of the Board of
Directors, or at any special meeting of the stockholders or of the Board of
Directors called for that purpose, by the affirmative vote of the holders of a
majority of the shares of capital stock of the Corporation then issued and
outstanding and entitled to vote, or by a majority of the whole Board of
Directors, as the case may be.
Amended: August 3, 1988
EXHIBIT 12
AMENDMENT TO BY-LAWS
RESOLVED, that pursuant to Article XIII of the By-Laws of the Corporation,
the Board of Directors hereby amends such By-Laws as follows:
(1) Article VI, Sections 1 and 2, are amended to reach (new materials is
underlined for identification only): Section 1, At the first meeting of
the Board of Directors after the election of directors in each year,
the Board shall elect a Chairman, a President of the Corporation, a Secretary
and a Treasurer and may elect or appoint one or more Vice Presidents, one or
more Assistant Secretaries, one or more Assistant Treasurers, and such other
officers and agents as the Board may deem necessary and as the business of the
Corporation may require. The Board may designate the President or a Vice
President of the Corporation to serve as President of a series of the
Corporation.
Section 2. No officer need be a member of the Board of Directors. Any two
or more offices may be held by the same person except the offices of President
of the Corporation and Vice President of the Corporation. All officers of the
Corporation shall serve for one year and until their successors shall have been
duly elected and shall have qualified; provided, however, that any officer may
be removed at any time, either with or without cause, by action by the Board of
Directors.
(2) Article VII shall be amended at Section 2 and the heading thereof to read
(new material is underlined for identification only):
PRESIDENT OF THE CORPORATION
Section 2. The President of the Corporation shall have those duties and
responsibilities as shall be assigned to him by the Chairman or the Board of
Directors, and those not specifically reserved to the Chairman by law or by the
Board of Directors.
The President shall, in the absence of the Chairman, preside at all
meetings of the stockholders and the Board of Directors. In the event of the
absence, resignation, disability or death of the Chairman, the President shall
exercise all powers and perform all duties of the Chairman until his return, or
until such disability shall have been removed or until a new Chairman shall have
been elected.
EXHIBIT 13
INVESTMENT ADVISORY AGREEMENT
Investment Advisory Agreement (the "Agreement") dated July 14, 1992 by and
between VONTOBEL FUNDS, INC. (formerly, The World Funds, Inc.), a Maryland
corporation (herein called the "Fund"), and VONTOBEL USA INC., a New York
corporation (the "Advisor"), a registered investment adviser under the
Investment Advisers Act of 1940, as amended.
WHEREAS, the Fund is registered as a diversified, open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), consisting of several series of shares, each having its own
investment policies; and
WHEREAS, the Fund desires to retain the Advisor to furnish investment
advisory and management services to certain portfolios of the Fund, subject to
the control of the fund's Board of Directors, and the Advisor is willing to so
furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be bound, it is agreed between the parties
hereto as follows:
1. Appointment. The Fund hereby appoints the Advisor to act as the advisor
to the VONTOBEL INTERNATIONAL EQUITY FUND series of the Fund (the "Portfolio")
for the period and on the terms set forth in this Agreement. The Advisor accepts
such appointment and agrees to furnish the services herein set forth, for the
compensation herein provided.
2. Duties of the Advisor. The Fund employs the Advisor to manage the
investments and reinvestment of the Assets of the Portfolio, and to continuously
review, supervise, and administer the investment program of the Portfolio, to
determine in its discretion the securities to be purchased or sold, to provide
the Fund and Commonwealth Shareholder Services, Inc. (the "Administrative
Services Agent") with records concerning the Advisor's activities which the Fund
is required to maintain, and to render regular reports to the Fund's Officers
and Board of Directors and to the Administrator concerning the Advisor's
discharge of the foregoing responsibilities.
The Advisor shall discharge the foregoing responsibilities subject
to the control of the fund's Board of Directors and in compliance with such
policies as the Board may from time to time establish, and in compliance with
the objectives, policies, and limitations for the Portfolio as set forth in the
Fund's Prospectuses and Statement of Additional Information, as amended from
time to time, and applicable laws and regulations.
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The Fund will instruct each of its agents and contractors to cooperate in the
conduct of the business of the Portfolio.
The Advisor accepts such employment and agrees, at its own expense,
to render the services and to provide the office space, furnishings, and
equipment and the personnel required by it to perform the services on the terms
and for the compensation provided herein.
3. Portfolio Transactions. The Advisor is authorized to select the brokers
and dealers that will execute the purchases and sales of portfolio securities
for the Portfolio and is directed to use its best efforts to obtain the best
price and execution for the Portfolio's transactions in accordance with the
policies of the Fund as set forth from time to time in the Prospectus and
Statement of Additional Information. The Advisor will promptly communicate to
the Fund and to the Administrative Services Agent such information relating to
portfolio transactions as they may reasonably request.
It is understood that the Advisor will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the fund or be in breach of
any obligation owing to the fund under this Agreement, or otherwise, by reason
of its having directed a securities transaction on behalf of the fund to an
unaffiliated broker-dealer in compliance with the provisions of Section 28(e) of
the Securities Exchange Act of 1934 or as described from time to time by the
Prospectuses and Statement of Additional Information. Subject to the foregoing,
the Advisor may direct any transaction of the Portfolio to a broker which is
affiliated with the Advisor in accordance with, and subject to, the policies and
procedures approved by the board of Directors of the Fund pursuant to Rule 17e-1
under the 1940 Act. Such brokerage services are not deemed to be provided under
this Agreement.
4. Compensation of the Advisor. For the services to be rendered by the
Advisor under this Agreement, the Fund shall pay to the Advisor compensation at
the rate specified in the Schedule attached hereto and made a part of this
Agreement. Such compensation shall be paid to the Advisor within five (5)
business days after the last business day of each month, and calculated by
applying a daily rate, based on the annual percentage rates as specified in the
attached Schedule, to the assets. The fee shall be based on the average daily
net assets for the month involved.
All rights of compensation under this Agreement for services
performed as of the termination date shall survive the termination of this
Agreement.
5. Expenses. During the term of this Agreement, the Advisor
will pay all expenses incurred by it in connection with the
management of the Fund. Notwithstanding the foregoing, the
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Portfolio shall pay the expenses and costs of the Portfolio for the following:
(1) Taxes;
(2) Brokerage fees and commissions with regard to
portfolio transactions;
(3) Interest charges, fees and expenses of the
custodian of the securities;
(4) Fees and expenses of the Fund's transfer agent and
the Administrative Services Agent;
(5) Its proportionate share of auditing and legal
expenses;
(6) Its proportionate share of the cost of maintenance
of corporate existence;
(7) Its proportionate share of compensation of directors of the
Fund who are not interested persons of the Advisor as that
term is defined by law;
(8) Its proportionate share of the costs of corporate
meetings;
(9) Federal and State registration fees and expenses
incident to the sale of shares of the Portfolio;
(10) Costs of printing and mailing Prospectuses for the
Portfolio's shares, reports and notices to existing
shareholders;
(11) The Advisory fee payable to the Advisor, as
provided in paragraph 4 herein;
(12) Costs of recordkeeping (other than investment
records required to be maintained by the Advisor),
and daily pricing;
(13) Distribution expenses in accordance with any
Distribution Plan as and if approved by the
shareholders of the Portfolio; and
(14) Expenses and taxes incident to the failure of the
Portfolio to qualify as a regulated investment
company under the provisions of the Internal
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Revenue Code of 1986, as amended, unless such expenses and/or
taxes arise from the negligence of another party.
If the expenses projected to be borne by the Portfolio (exclusive of
interest, brokerage commissions, taxes and extraordinary items, but inclusive of
Advisory fees) in any fiscal year are expected to exceed any applicable state
expense limitation provision to which the Fund is subject, the Advisory fee
payable to the Portfolio to the Advisor shall be reduced on each day such fee is
accrued to the extent of that day's portion of such excess expenses. The amount
of such reduction shall not exceed the actual amount of the Advisory fee
otherwise payable in such year. Accruals of expenses and adjustment to advisory
fees otherwise payable under this Agreement, and the amounts payable monthly in
accordance with this Agreement, shall be adjusted as required from month to
month.
It is understood that the Fund will register its shares in states
which impose expense limitations on mutual funds only with the prior written
consent of the Advisor and, if consent is granted, the Advisor agrees to
reimburse the Fund for any excess expenses incurred over such states' limitation
up to a maximum of its Advisory fee.
6. Reports. The Fund and the Advisor agree to furnish to each other, if
applicable, current information required for the preparation by such parties of
prospectuses, statements of additional information, proxy statements, reports to
shareholders, certified copies of their financial statements, and to furnish to
each other such other information and documents with regard to their affairs as
each may reasonably request.
u. State of the Advisor. The services of the Advisor to the Fund are not
to be deemed exclusive, and the Advisor shall be free to render similar services
to others so long as its services to the Fund are not impaired thereby.
Pursuant to comparable agreements, the Fund may also retain the
services of the Advisor to serve as the investment advisor of other series of
the Fund.
8. Books and Records. In compliance with the requirements
of the 1940 Act, the Advisor hereby agrees that all records which
it maintains for the Fund are the property of the Fund, and further
agrees to surrender promptly to the Fund any of such records upon
the Fund's request. The Advisor further agrees to preserve for the
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periods prescribed by the 1940 Act, and the rules or orders thereunder, the
records required to be maintained by the 1940 Act.
9. Limitation of Liability of Advisor. The duties of the Advisor shall be
confined to those expressly set forth herein, and no implied duties are assumed
by or may be asserted against the Advisor hereunder. The Advisor shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or negligence on the part of the Advisor in the performance of its duties
or from reckless disregard by it of its obligations and duties under this
Agreement (as used in this paragraph 9, the term "advisor" shall include
directors, officers, employees and other corporate agents of the Advisor as well
as that corporation itself).
10. Permissible Interest. Directors, agents, and shareholders of the Fund
are or may be interested in the Advisor (or any successor thereof) as directors,
officers, or shareholders, or otherwise; directors, officers, agents and
shareholders of the Advisor are or may be interested in the Fund as directors,
officers, shareholders or otherwise; and the Advisor (or any successor) is or
may be interested in the Fund as a shareholder or otherwise. In addition,
brokerage transactions for the Fund may be effected through affiliates of the
Advisor if approved by the Fund's Board of Directors subject to the rules and
regulations of the Securities and Exchange Commission, and the policies and
procedures adopted by the Fund.
11. License of Advisor's Name. The Advisor hereby authorizes the Fund to
use the name "Vontobel" for the Portfolio. The Fund agrees that if this
Agreement is terminated it will promptly redesignate the name of the Portfolio
to eliminate any reference to the name "Vontobel" or any derivation thereof
unless the Advisor waives this requirement in writing.
12. Duties and Termination. This Agreement shall become effective on the
date first above written subject to its approval by the shareholders of the
Portfolio and unless sooner terminated as provided herein, shall continue in
effect for two (2) years from that date. Thereafter, this Agreement shall be
renewable for successive periods of one year each, provided such continuance is
specifically approved annually (a) by the vote of a majority of those members of
the Fund's Board of Directors who are not parties to this Agreement or
interested persons of any such party (as that term is defined in the 1940 Act),
cast in person at a meeting called for the purpose of voting on such approval,
and (b) by vote of either the Board of Directors or of a majority of the
outstanding voting securities (as that term is defined in the 1940 Act) of the
Portfolio. Notwithstanding the foregoing, this
5
<PAGE>
Agreement may be terminated by the Portfolio or by the Fund at any time on sixty
(60) days written notice, without the payment of any penalty, provided that
termination must be authorized either by vote of the Fund's Board of Directors
or by vote of a majority of the outstanding voting securities of the Portfolio
or by the Advisor on sixty (60) days written notice. This Agreement will
automatically terminate in the event of its assignment (as that term in defined
in the 1940 Act).
13. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. No material amendment of this Agreement
shall be effective until approved by vote of the holders of a majority of the
Portfolio's outstanding voting securities (as defined in the 1940 Act).
14. Notice. Any notice required or permitted to be given by either party
to the other shall be deemed sufficient if sent by registered or certified mail,
postage prepaid, addressed by the party giving notice to the other party at the
address stated below:
(a) To the Fund at: 1500 Forest Avenue
Suite 223
Richmond, VA 23229
(b) To the Advisor at: 450 Park Avenue
New York, N.Y. 10022
15. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of the Agreement shall not be affected
thereby. This Agreement shall be binding and shall inure to the benefit of the
parties hereto and their respective successors.
16. Applicable Law. This Agreement shall be construed in accordance with,
and governed by, the laws of the State of Maryland, and the applicable
provisions of the 1940 Act. To the extent that the applicable laws of the State
of Maryland, or any of the provisions herein, conflict with the applicable
provisions of the 1940 Act, the latter shall control.
17. This Agreement may be executed in two or more counterparts, each of
which, when so executed, shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
VONTOBEL USA INC.
BY:
Heinrich Schlegel
Chief Executive Officer
VONTOBEL USA INC.
BY:
Thomas P. Wittwer
Vice President
VONTOBEL FUNDS, INC.
BY;
John Pasco, III
President
7
<PAGE>
SCHEDULE A TO
INVESTMENT ADVISORY AGREEMENT
BY AND BETWEEN
VONTOBEL FUNDS, INC AND VONTOBEL USA INC.
AND THE
VONTOBEL INTERNATIONAL EQUITY FUND
Pursuant to Paragraph 4 of the Investment Advisory Agreement, dated
July 14, 1992, between Vontobel Funds, Inc. (the "Fund") and Vontobel USA Inc.
(the Advisor") for the Vontobel International Equity Fund series of the Fund,
the Fund shall pay to the Advisor compensation at an annual rate as follows:
Portfolio Fee
Vontobel International Equity Fund 1.00% per
annum on the first $100 million of the
aggregate net assets of the Portfolio
and 3/4 of 1% on the Portfolio's net
assets over $100 million payable
monthly.
8
<PAGE>
EXHIBIT 14
INVESTMENT ADVISORY AGREEMENT
Investment Advisory Agreement (the "Agreement") dated July 14, 1992 by and
between VONTOBEL FUNDS, INC.(formerly, The World Funds, Inc.), a Maryland
corporation (herein called the "Fund"), and VONTOBEL USA INC., a New York
corporation (the "Advisor"), a registered investment adviser under the
Investment Advisers Act of 1940, as amended.
WHEREAS, the Fund is registered as a diversified, open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), consisting of several series of shares, each having its own
investment policies; and
WHEREAS, the Fund desires to retain the Advisor to furnish investment
advisory and management services to certain portfolios of the Fund, subject to
the control of the fund's Board of Directors, and the Advisor is willing to so
furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be bound, it is agreed between the parties
hereto as follows:
1. Appointment. The Fund hereby appoints the Advisor to act
as the advisor to the VONTOBEL U.S. VALUE FUND series of the Fund
(the "Portfolio") for the period and on the terms set forth in this
Agreement. The Advisor accepts such appointment and agrees to
furnish the services herein set forth, for the compensation herein
provided.
2. Duties of the Advisor. The Fund employs the Advisor to manage the
investments and reinvestment of the Assets of the Portfolio, and to continuously
review, supervise, and administer the investment program of the Portfolio, to
determine in its discretion the securities to be purchased or sold, to provide
the Fund and Commonwealth Shareholder Services, Inc. (the "Administrative
Services Agent") with records concerning the Advisor's activities which the Fund
is required to maintain, and to render regular reports to the Fund's Officers
and Board of Directors and to the Administrator concerning the Advisor's
discharge of the foregoing responsibilities.
The Advisor shall discharge the foregoing responsibilities subject
to the control of the fund's Board of Directors and in compliance with such
policies as the Board may from time to time establish, and in compliance with
the objectives, policies, and limitations for the Portfolio as set forth in the
Fund's Prospectuses and Statement of Additional Information, as amended from
time to time, and applicable laws and regulations. The Fund will instruct each
of its agents and contractors to cooperate in the conduct of the business of the
Portfolio.
<PAGE>
The Advisor accepts such employment and agrees, at its own expense,
to render the services and to provide the office space, furnishings, and
equipment and the personnel required by it to perform the services on the terms
and for the compensation provided herein.
3. Portfolio Transactions. The Advisor is authorized to select the brokers
and dealers that will execute the purchases and sales of portfolio securities
for the Portfolio and is directed to use its best efforts to obtain the best
price and execution for the Portfolio's transactions in accordance with the
policies of the Fund as set forth from time to time in the Prospectus and
Statement of Additional Information. The Advisor will promptly communicate to
the Fund and to the Administrative Services Agent such information relating to
portfolio transactions as they may reasonably request.
It is understood that the Advisor will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the fund or be in breach of
any obligation owing to the fund under this Agreement, or otherwise, by reason
of its having directed a securities transaction on behalf of the fund to an
unaffiliated broker-dealer in compliance with the provisions of Section 28(e) of
the Securities Exchange Act of 1934 or as described from time to time by the
Prospectuses and Statement of Additional Information. Subject to the foregoing,
the Advisor may direct any transaction of the Portfolio to a broker which is
affiliated with the Advisor in accordance with, and subject to, the policies and
procedures approved by the board of Directors of the Fund pursuant to Rule 17e-1
under the 1940 Act. Such brokerage services are not deemed to be provided under
this Agreement.
4. Compensation of the Advisor. For the services to be rendered by the
Advisor under this Agreement, the Fund shall pay to the Advisor compensation at
the rate specified in the Schedule attached hereto and made a part of this
Agreement. Such compensation shall be paid to the Advisor within five (5)
business days after the last business day of each month, and calculated by
applying a daily rate, based on the annual percentage rates as specified in the
attached Schedule, to the assets. The fee shall be based on the average daily
net assets for the month involved.
All rights of compensation under this Agreement for services
performed as of the termination date shall survive the termination of this
Agreement.
5. Expenses. During the term of this Agreement, the Advisor
will pay all expenses incurred by it in connection with the
management of the Fund. Notwithstanding the foregoing, the
Portfolio shall pay the expenses and costs of the Portfolio for the
following:
<PAGE>
(1) Taxes;
(2) Brokerage fees and commissions with regard to
portfolio transactions;
(3) Interest charges, fees and expenses of the
custodian of the securities;
(4) Fees and expenses of the Fund's transfer agent and
the Administrative Services Agent;
(5) Its proportionate share of auditing and legal
expenses;
(6) Its proportionate share of the cost of maintenance
of corporate existence;
(7) Its proportionate share of compensation of directors of the
Fund who are not interested persons of the Advisor as that
term is defined by law;
(8) Its proportionate share of the costs of corporate
meetings;
(9) Federal and State registration fees and expenses
incident to the sale of shares of the Portfolio;
(10) Costs of printing and mailing Prospectuses for the
Portfolio's shares, reports and notices to existing
shareholders;
(11) The Advisory fee payable to the Advisor, as
provided in paragraph 4 herein;
(12) Costs of recordkeeping (other than investment
records required to be maintained by the Advisor),
and daily pricing;
(13) Distribution expenses in accordance with any
Distribution Plan as and if approved by the
shareholders of the Portfolio; and
(14) Expenses and taxes incident to the failure of the Portfolio to
qualify as a regulated investment company under the provisions
of the Internal Revenue Code of 1986, as amended, unless such
expenses and/or taxes arise from the negligence of another
party.
<PAGE>
If the expenses projected to be borne by the Portfolio (exclusive of
interest, brokerage commissions, taxes and extraordinary items, but inclusive of
Advisory fees) in any fiscal year are expected to exceed any applicable state
expense limitation provision to which the Fund is subject, the Advisory fee
payable to the Portfolio to the Advisor shall be reduced on each day such fee is
accrued to the extent of that day's portion of such excess expenses. The amount
of such reduction shall not exceed the actual amount of the Advisory fee
otherwise payable in such year. Accruals of expenses and adjustment to advisory
fees otherwise payable under this Agreement, and the amounts payable monthly in
accordance with this Agreement, shall be adjusted as required from month to
month.
It is understood that the Fund will register its shares in states
which impose expense limitations on mutual funds only with the prior written
consent of the Advisor and, if consent is granted, the Advisor agrees to
reimburse the Fund for any excess expenses incurred over such states' limitation
up to a maximum of its Advisory fee.
6. Reports. The Fund and the Advisor agree to furnish to each other, if
applicable, current information required for the preparation by such parties of
prospectuses, statements of additional information, proxy statements, reports to
shareholders, certified copies of their financial statements, and to furnish to
each other such other information and documents with regard to their affairs as
each may reasonably request.
u. State of the Advisor. The services of the Advisor to the Fund are not
to be deemed exclusive, and the Advisor shall be free to render similar services
to others so long as its services to the Fund are not impaired thereby.
Pursuant to comparable agreements, the Fund may also retain the
services of the Advisor to serve as the investment advisor of other series of
the Fund.
8. Books and Records. In compliance with the requirements of the 1940 Act,
the Advisor hereby agrees that all records which it maintains for the Fund are
the property of the Fund, and further agrees to surrender promptly to the Fund
any of such records upon the Fund's request. The Advisor further agrees to
preserve for the periods prescribed by the 1940 Act, and the rules or orders
thereunder, the records required to be maintained by the 1940 Act.
9. Limitation of Liability of Advisor. The duties of the Advisor shall be
confined to those expressly set forth herein, and no implied duties are assumed
by or may be asserted against the Advisor hereunder. The Advisor shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from
<PAGE>
willful misfeasance, bad faith or negligence on the part of the Advisor in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement (as used in this paragraph 9, the term "advisor"
shall include directors, officers, employees and other corporate agents of the
Advisor as well as that corporation itself).
10. Permissible Interest. Directors, agents, and shareholders of the Fund
are or may be interested in the Advisor (or any successor thereof) as directors,
officers, or shareholders, or otherwise; directors, officers, agents and
shareholders of the Advisor are or may be interested in the Fund as directors,
officers, shareholders or otherwise; and the Advisor (or any successor) is or
may be interested in the Fund as a shareholder or otherwise. In addition,
brokerage transactions for the Fund may be effected through affiliates of the
Advisor if approved by the Fund's Board of Directors subject to the rules and
regulations of the Securities and Exchange Commission, and the policies and
procedures adopted by the Fund.
11. License of Advisor's Name. The Advisor hereby authorizes the Fund to
use the name "Vontobel" for the Portfolio. The Fund agrees that if this
Agreement is terminated it will promptly redesignate the name of the Portfolio
to eliminate any reference to the name "Vontobel" or any derivation thereof
unless the Advisor waives this requirement in writing.
12. Duties and Termination. This Agreement shall become effective on the
date first above written subject to its approval by the shareholders of the
Portfolio and unless sooner terminated as provided herein, shall continue in
effect for two (2) years from that date. Thereafter, this Agreement shall be
renewable for successive periods of one year each, provided such continuance is
specifically approved annually (a) by the vote of a majority of those members of
the Fund's Board of Directors who are not parties to this Agreement or
interested persons of any such party (as that term is defined in the 1940 Act),
cast in person at a meeting called for the purpose of voting on such approval,
and (b) by vote of either the Board of Directors or of a majority of the
outstanding voting securities (as that term is defined in the 1940 Act) of the
Portfolio. Notwithstanding the foregoing, this Agreement may be terminated by
the Portfolio or by the Fund at any time on sixty (60) days written notice,
without the payment of any penalty, provided that termination must be authorized
either by vote of the Fund's Board of Directors or by vote of a majority of the
outstanding voting securities of the Portfolio or by the Advisor on sixty (60)
days written notice. This Agreement will automatically terminate in the event of
its assignment (as that term in defined in the 1940 Act).
13. Amendment of this Agreement. No provision of this
Agreement may be changed, waived, discharged or terminated orally,
but only by an instrument in writing signed by the party against
which enforcement of the change, waiver, discharge or termination
<PAGE>
is sought. No material amendment of this Agreement shall be effective until
approved by vote of the holders of a majority of the Portfolio's outstanding
voting securities (as defined in the 1940 Act).
14. Notice. Any notice required or permitted to be given by either party
to the other shall be deemed sufficient if sent by registered or certified mail,
postage prepaid, addressed by the party giving notice to the other party at the
address stated below:
(a) To the Fund at: 1500 Forest Avenue
Suite 223
Richmond, VA 23229
(b) To the Advisor at: 450 Park Avenue
New York, N.Y. 10022
15. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of the Agreement shall not be affected
thereby. This Agreement shall be binding and shall inure to the benefit of the
parties hereto and their respective successors.
16. Applicable Law. This Agreement shall be construed in accordance with,
and governed by, the laws of the State of Maryland, and the applicable
provisions of the 1940 Act. To the extent that the applicable laws of the State
of Maryland, or any of the provisions herein, conflict with the applicable
provisions of the 1940 Act, the latter shall control.
17. This Agreement may be executed in two or more counterparts, each of
which, when so executed, shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
VONTOBEL USA INC.
BY:
Heinrich Schlegel
Chief Executive Officer
VONTOBEL USA INC.
BY:
Thomas P. Wittwer
Vice President
VONTOBEL FUNDS, INC.
BY;
John Pasco, III
President
<PAGE>
SCHEDULE A TO
INVESTMENT ADVISORY AGREEMENT
BY AND BETWEEN
VONTOBEL FUNDS, INC AND VONTOBEL USA INC.
AND THE
VONTOBEL U. S. VALUE FUND
Pursuant to Paragraph 4 of the Investment Advisory
Agreement, dated July 14, 1992, between Vontobel Funds, Inc. (the
"Fund") and Vontobel USA Inc. (the Advisor") for the Vontobel U. S.
Value Fund series of the Fund, the Fund shall pay to the Advisor
compensation at an annual rate as follows:
Portfolio Fee
Vontobel U.S. Value Fund 1.00% per annum on the first
$100 million of the aggregate net assets of
the Portfolio and 3/4 of 1% on the
Portfolio's net assets over $100 million
payable monthly.
<PAGE>
EXHIBIT 15
INVESTMENT ADVISORY AGREEMENT
Investment Advisory Agreement (the "Agreement") dated February 10, 1994 by
and between VONTOBEL FUNDS, INC. (formerly, The World Funds, Inc.), a Maryland
corporation (herein called the "Fund"), and VONTOBEL USA INC., a New York
corporation (the "Advisor"), a registered investment adviser under the
Investment Advisers Act of 1940, as amended.
WHEREAS, the Fund is registered as a diversified, open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), consisting of several series of shares, each having its own
investment policies; and
WHEREAS, the Fund desires to retain the Advisor to furnish investment
advisory and management services to certain portfolios of the Fund, subject to
the control of the fund's Board of Directors, and the Advisor is willing to so
furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be bound, it is agreed between the parties
hereto as follows:
1. Appointment. The Fund hereby appoints the Advisor to act as the advisor
to the VONTOBEL INTERNATIONAL BOND FUND series of the Fund (the "Portfolio") for
the period and on the terms set forth in this Agreement. The Advisor accepts
such appointment and agrees to furnish the services herein set forth, for the
compensation herein provided.
2. Duties of the Advisor. The Fund employs the Advisor to manage the
investments and reinvestment of the Assets of the Portfolio, and to continuously
review, supervise, and administer the investment program of the Portfolio, to
determine in its discretion the securities to be purchased or sold, to provide
the Fund and Commonwealth Shareholder Services, Inc. (the "Administror") with
records concerning the Advisor's activities which the Fund is required to
maintain, and to render regular reports to the Fund's Officers and Board of
Directors and to the Administrator concerning the Advisor's discharge of the
foregoing responsibilities.
The Advisor shall discharge the foregoing responsibilities subject
to the control of the fund's Board of Directors and in compliance with such
policies as the Board may from time to time establish, and in compliance with
the objectives, policies, and limitations for the Portfolio as set forth in the
Fund's Prospectuses and Statement of Additional Information, as amended from
time to time, and applicable laws and regulations.
1
<PAGE>
The Fund will instruct each of its agents and contractors to cooperate in the
conduct of the business of the Portfolio.
The Advisor accepts such employment and agrees, at its own expense,
to render the services and to provide the office space, furnishings, and
equipment and the personnel required by it to perform the services on the terms
and for the compensation provided herein.
3. Portfolio Transactions. The Advisor is authorized to select the brokers
and dealers that will execute the purchases and sales of portfolio securities
for the Portfolio and is directed to use its best efforts to obtain the best
price and execution for the Portfolio's transactions in accordance with the
policies of the Fund as set forth from time to time in the Portfolio's
Prospectus and Statement of Additional Information. The Advisor will promptly
communicate to the Fund and to the Administor such information relating to
portfolio transactions as they may reasonably request.
It is understood that the Advisor will not be deemed to have acted
unlawfully, or to have breached a fiduciary duty to the fund or be in breach of
any obligation owing to the fund under this Agreement, or otherwise, by reason
of its having directed a securities transaction on behalf of the fund to an
unaffiliated broker-dealer in compliance with the provisions of Section 28(e) of
the Securities Exchange Act of 1934 or as described from time to time by the
Portfolio's Prospectuses and Statement of Additional Information. Subject to the
foregoing, the Advisor may direct any transaction of the Portfolio to a broker
which is affiliated with the Advisor in accordance with, and subject to, the
policies and procedures approved by the board of Directors of the Fund pursuant
to Rule 17e-1 under the 1940 Act. Such brokerage services are not deemed to be
provided under this Agreement.
4. Compensation of the Advisor. For the services to be rendered by the
Advisor under this Agreement, the Portfolio shall pay to the Advisor, and the
Advisor will accept as full compensation a fee, accrued daily and payable within
five (5) business days after the last business day of each month, at an annual
rate of 1% of the aggregate net assets of the Portfolio.
All rights of compensation under this Agreement for services
performed as of the termination date shall survive the termination of this
Agreement.
5. Expenses. During the term of this Agreement, the Advisor
will pay all expenses incurred by it in connection with the
management of the Fund. Notwithstanding the foregoing, the
Portfolio shall pay the expenses and costs of the Portfolio for the
following:
2
<PAGE>
(1) Taxes;
(2) Brokerage fees and commissions with regard to
portfolio transactions;
(3) Interest charges, fees and expenses of the
custodian of the securities;
(4) Fees and expenses of the Fund's transfer agent and
the Administrative Services Agent;
(5) Its proportionate share of auditing and legal
expenses;
(6) Its proportionate share of the cost of maintenance
of corporate existence;
(7) Its proportionate share of compensation of directors of the
Fund who are not interested persons of the Advisor as that
term is defined by law;
(8) Its proportionate share of the costs of corporate
meetings;
(9) Federal and State registration fees and expenses
incident to the sale of shares of the Portfolio;
(10) Costs of printing and mailing Prospectuses for the
Portfolio's shares, reports and notices to existing
shareholders;
(11) The Advisory fee payable to the Advisor, as
provided in paragraph 4 herein;
(12) Costs of recordkeeping (other than investment
records required to be maintained by the Advisor),
and daily pricing;
(13) Distribution expenses in accordance with any
Distribution Plan as and if approved by the
shareholders of the Portfolio; and
(14) Expenses and taxes incident to the failure of the Portfolio to
qualify as a regulated investment company under the provisions
of the Internal Revenue Code of 1986, as amended, unless such
expenses and/or taxes arise from the negligence of another
party.
If the expenses projected to be borne by the Portfolio
3
<PAGE>
(exclusive of interest, brokerage commissions, taxes and extraordinary items,
but inclusive of Advisory fees) in any fiscal year are expected to exceed any
applicable state expense limitation provision to which the Fund is subject, the
Advisory fee payable to the Portfolio to the Advisor shall be reduced on each
day such fee is accrued to the extent of that day's portion of such excess
expenses. The amount of such reduction shall not exceed the actual amount of the
Advisory fee otherwise payable in such year. Accruals of expenses and adjustment
to advisory fees otherwise payable under this Agreement, and the amounts payable
monthly in accordance with this Agreement, shall be adjusted as required from
month to month.
It is understood that the Fund will register its shares in states
which impose expense limitations on mutual funds only with the prior written
consent of the Advisor and, if consent is granted, the Advisor agrees to
reimburse the Fund for any excess expenses incurred over such states' limitation
up to a maximum of its Advisory fee.
6. Reports. The Fund and the Advisor agree to furnish to each other, if
applicable, current information required for the preparation by such parties of
prospectuses, statements of additional information, proxy statements, reports to
shareholders, certified copies of their financial statements, and to furnish to
each other such other information and documents with regard to their affairs as
each may reasonably request.
u. State of the Advisor. The services of the Advisor to the Fund are not
to be deemed exclusive, and the Advisor shall be free to render similar services
to others so long as its services to the Fund are not impaired thereby.
Pursuant to comparable agreements, the Fund may also retain the
services of the Advisor to serve as the investment advisor of other series of
the Fund.
8. Books and Records. In compliance with the requirements of the 1940 Act,
the Advisor hereby agrees that all records which it maintains for the Fund are
the property of the Fund, and further agrees to surrender promptly to the Fund
any of such records upon the Fund's request. The Advisor further agrees to
preserve for the periods prescribed by the 1940 Act, and the rules or orders
thereunder, the records required to be maintained by the 1940 Act.
9. Limitation of Liability of Advisor. The duties of the Advisor shall be
confined to those expressly set forth herein, and no implied duties are assumed
by or may be asserted against the Advisor hereunder. The Advisor shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the performance of this Agreement, except a loss
resulting from a breach of fiduciary duty with respect to the
4
<PAGE>
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or negligence on the part of the Advisor in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement (as used in this paragraph 9, the term "advisor"
shall include directors, officers, employees and other corporate agents of the
Advisor as well as that corporation itself).
10. Permissible Interest. Directors, agents, and shareholders of the Fund
are or may be interested in the Advisor (or any successor thereof) as directors,
officers, or shareholders, or otherwise; directors, officers, agents and
shareholders of the Advisor are or may be interested in the Fund as directors,
officers, shareholders or otherwise; and the Advisor (or any successor) is or
may be interested in the Fund as a shareholder or otherwise. In addition,
brokerage transactions for the Fund may be effected through affiliates of the
Advisor if approved by the Fund's Board of Directors subject to the rules and
regulations of the Securities and Exchange Commission, and the policies and
procedures adopted by the Fund.
11. License of Advisor's Name. The Advisor hereby authorizes the Fund to
use the name "Vontobel" for the Portfolio. The Fund agrees that if this
Agreement is terminated it will promptly redesignate the name of the Portfolio
to eliminate any reference to the name "Vontobel" or any derivation thereof
unless the Advisor waives this requirement in writing.
12. Duties and Termination. This Agreement shall become effective on the
date first above written subject to its approval by the shareholders of the
Portfolio and unless sooner terminated as provided herein, shall continue in
effect for two (2) years from that date. Thereafter, this Agreement shall be
renewable for successive periods of one year each, provided such continuance is
specifically approved annually (a) by the vote of a majority of those members of
the Fund's Board of Directors who are not parties to this Agreement or
interested persons of any such party (as that term is defined in the 1940 Act),
cast in person at a meeting called for the purpose of voting on such approval,
and (b) by vote of either the Board of Directors or of a majority of the
outstanding voting securities (as that term is defined in the 1940 Act) of the
Portfolio. Notwithstanding the foregoing, this Agreement may be terminated by
the Portfolio or by the Fund at any time on sixty (60) days written notice,
without the payment of any penalty, provided that termination must be authorized
either by vote of the Fund's Board of Directors or by vote of a majority of the
outstanding voting securities of the Portfolio or by the Advisor on sixty (60)
days written notice. This Agreement will automatically terminate in the event of
its assignment (as that term in defined in the 1940 Act).
5
<PAGE>
13. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. No material amendment of this Agreement
shall be effective until approved by vote of the holders of a majority of the
Portfolio's outstanding voting securities (as defined in the 1940 Act).
14. Notice. Any notice required or permitted to be given by either party
to the other shall be deemed sufficient if sent by registered or certified mail,
postage prepaid, addressed by the party giving notice to the other party at the
address stated below:
(a) To the Fund at: 1500 Forest Avenue
Suite 223
Richmond, VA 23229
(b) To the Advisor at: 450 Park Avenue
New York, N.Y. 10022
15. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of the Agreement shall not be affected
thereby. This Agreement shall be binding and shall inure to the benefit of the
parties hereto and their respective successors.
16. Applicable Law. This Agreement shall be construed in accordance with,
and governed by, the laws of the State of Maryland, and the applicable
provisions of the 1940 Act. To the extent that the applicable laws of the State
of Maryland, or any of the provisions herein, conflict with the applicable
provisions of the 1940 Act, the latter shall control.
17. This Agreement may be executed in two or more counterparts, each of
which, when so executed, shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
VONTOBEL USA INC.
BY:
Heinrich Schlegel
Chief Executive Officer
VONTOBEL FUNDS, INC.
BY;
John Pasco, III
President
7
<PAGE>
SCHEDULE A TO
INVESTMENT ADVISORY AGREEMENT
BY AND BETWEEN
VONTOBEL FUNDS, INC AND VONTOBEL USA INC.
AND THE
VONTOBEL INTERNATIONAL BOND FUND
Pursuant to Paragraph 4 of the Investment Advisory Agreement, dated
February 10, 1994, between Vontobel Funds, Inc. (the "Fund") and Vontobel USA
Inc. (the Advisor") for the Vontobel International Bond series of the Fund, the
Fund shall pay to the Advisor compensation at an annual rate as follows:
Portfolio Fee
Vontobel International Bond 1.25% per annum on the
first $500 million of the aggregate net
assets of the Portfolio and 1% on the
Portfolio's net assets over $500 million
payable monthly.
8
<PAGE>
EXHIBIT 16
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT, made this 18th day of August, 1997, by and between
Vontobel Funds, Inc., a Maryland corporation (the "Fund") and First Dominion
Capital Corporation ("FDCC"), a Virginia corporation.
WITNESSETH:
1. DISTRIBUTION SERVICES
The Fund hereby engages FDCC as national distributor to assist the Fund in
promoting the sale and distribution to investors of shares of common stock of
each series of the Fund ("Shares"). In connection therewith, FDCC shall (i)
promote the sale of shares, (ii) act as principal underwriter of shares of
various series of the Fund, (iii) otherwise assist the Fund in the distribution
of shares directly to investors through dealers or otherwise. For this purpose
the Fund agrees to offer shares for sale at all times when, and in such places
as, such shares are to be made available for sale and may lawfully be offered
for sale and sold. As and when necessary in connection therewith FDCC may act as
principal or agent for the sale of such shares.
2. SALE OF FUND SHARES
Such shares are to be sold only on the following terms:
(a) All subscriptions, offers, or sales shall be subject to acceptance or
rejection by the Fund. Any offer or sale shall be conclusively presumed to
have been accepted by the Fund if the Fund shall fail to notify FDCC of
the rejection of such offer or sale prior to the computation of the net
asset value of the Fund's shares next following receipt by the Fund of
notice of such offer or sale.
(b) No share of the Fund shall be sold for any consideration other than cash
or, except in instances otherwise provided for by the Fund's currently
effective Prospectus, for any amount less than the public offering price
per share, which shall be determined in accordance with the Fund's
currently effective Prospectus. No shares may be sold for less than the
net asset value thereof.
3. REGISTRATION OF SHARES
The Fund agrees to make prompt and reasonable efforts to effect and to
keep in effect the registration or qualification of its shares for sale in such
jurisdictions as the Fund may designate. FDCC may serve as dealer of record to
assist the Fund in connection with any such registration or qualification. The
Fund acknowledges that FDCC may incur expenses in connection with
<PAGE>
-2-
assisting in the registration or qualification of Fund shares which are sold at
net asset value and the Fund will pay or reimburse expenses of FDCC which are
incurred in connection with such registration or qualification.
4. INFORMATION TO BE FURNISHED TO FDCC
The Fund agrees that it will furnish FDCC with such information with
respect to the affairs and accounts of the Fund as FDCC may from time to time
reasonably require, and further agrees that FDCC, at all reasonable times, shall
be permitted to inspect the books and records of the Fund.
5. ALLOCATION OF EXPENSES
During the period of this contract, the Fund shall pay or cause to be paid
all expenses, costs, and fees incurred by the Fund which are not assumed by FDCC
or any investment manager or investment advisor to the Fund. FDCC shall pay
advertising and promotional expenses incurred by FDCC in connection with the
distribution of the Fund's shares which are sold subject to the imposition of a
sales charge including paying for prospectuses for delivery to prospective
shareholders.
6. COMPENSATION TO FDCC
It is understood and agreed by the parties hereto that FDCC will receive
compensation for services it performs hereunder in accordance with Schedule A
hereto.
7. LIMITATION OF FDCC'S AUTHORITY
FDCC shall be deemed to be an independent contractor and, except as
specifically provided or authorized herein, shall have no authority to act for
or represent the Fund. In the performance of its duties hereunder, FDCC may
solicit and enter into selling dealer agreements with other broker-dealers in a
form approved by the Fund. Such selling dealer agreements shall provide for the
sale of shares of the Fund (or any series of the Fund) on terms consistent with
the registration statement of the Fund as then if effect. Unless otherwise
provided in a selling dealer agreement, any selling dealer agreement of FDCC in
effect as of the date of this agreement shall be deemed to continue hereunder
upon delivery to the selling dealer of any amendment required by the terms of
the Fund's action eliminating the sales load on sales of affected Fund shares.
<PAGE>
-3-
8. SUBSCRIPTION FOR SHARES - REFUND FOR CANCELED ORDERS
If FDCC elects to act as a principal, and not as agent, for a sale of Fund
shares, FDCC shall subscribe for the shares of the Fund only for the purpose of
covering purchase orders already received by it or for the purpose of investment
for its own account. Whether acting as principal or agent, in the event that an
order for the purchase of shares of the Fund is placed with FDCC by a customer
or dealer and subsequently canceled, FDCC shall forthwith cancel the
subscription for such shares entered on the books of the Fund, and, if FDCC has
paid the Fund for such shares, shall be entitled to receive from the Fund in
refund of such payments the lesser of:
(a) the consideration received by the Fund for said shares; or
(b) the net asset value of such shares at the time of
cancellation by FDCC.
9. INDEMNIFICATION OF THE FUND
FDCC agrees to indemnify the Fund against any and all litigation and other
legal proceedings of any kind or nature and against any liability, judgment,
cost, or penalty imposed as a result of such litigation or proceedings in any
way arising out of or in connection with the sale or distribution of the shares
of the Fund by FDCC. In the event of the threat or institution of any such
litigation or legal proceedings against the Fund, FDCC shall defend such action
on behalf of the Fund at its own expense, and shall pay any such liability,
judgment, cost, or penalty resulting therefrom, whether imposed by legal
authority on agreed upon by way of compromise and settlement; provided, however,
FDCC shall not be required to pay or reimburse the Fund for any liability,
judgment, cost, or penalty incurred as a result of information supplied by, or
as the result of the omission to supply information by, the Fund to FDCC or to
FDCC by a director, officer, or employee of the Fund who is not an interested
person of FDCC, unless the information so supplied or omitted was available to
FDCC or the Fund's investment adviser without recourse to the Fund or any such
person referred to above.
10. FREEDOM TO DEAL WITH THIRD PARTIES
FDCC shall be free to render to others services of a nature either similar
to or different from those rendered under this contract, except such as may
impair its performance of the services and duties to be rendered by it
hereunder.
<PAGE>
-4-
11. EFFECTIVE DATE, DURATION AND TERMINATION OF AGREEMENT
The effective date of this Agreement shall be the date first set forth
above. Wherever referred to in this Agreement, the vote or approval of the
holders of a majority of the outstanding voting securities of the Fund (or of
any series of the Fund) shall mean the vote of 67% or more of the securities of
the Fund (or of any affected series of the Fund) if the holders of more than 50%
of such securities are present in person or by proxy or the vote of more than
50% of the securities of the Fund (or an affected series of the Fund) whichever
is the lesser.
Unless sooner terminated as hereinafter provided, this Agreement shall
continue in effect from year to year but only so long as such continuance is
specifically approved at least annually by the Board of Directors of the Fund,
including the specific approval of a majority of the directors who are not
interested person of FDCC as defined by the Investment Company Act of 1940, as
amended, cast in person at a meeting called for the purpose of voting on such
approval, or by the vote of the holders of a majority of the outstanding voting
securities of the Fund or an affected series of the Fund.
This Agreement may be terminated at any time without the payment of any
penalty by the vote of the Board of Directors of the Fund or by the vote of the
holders of a majority of the outstanding voting securities of the Fund, or by
FDCC, upon 60 days' written notice to the other party.
This Agreement shall automatically terminate in the event of its
assignment (as defined by the provisions of the Investment Company Act of 1940,
as amended).
12. AMENDMENTS TO AGREEMENT
No material amendment to this Agreement shall be effective until approved
by FDCC and by the affirmative vote of a majority of the Board of Directors of
the Fund (including a majority of the directors who are not interested persons
of FDCC or any affiliate of FDCC).
13. NOTICES
Any notice under this Agreement shall be in writing, addressed, delivered,
or mailed, postage prepaid, to the other party at such address as such other
party may designate in writing for receipt of such notice.
<PAGE>
-5-
IN WITNESS WHEREOF, the Fund and FDCC have caused this Agreement to be
executed by their duly authorized officers affixed hereto all as of the day and
year first above written.
VONTOBEL FUNDS, INC.
By
John Pasco, III
Chairman
Attested by
FIRST DOMINION CAPITAL CORP.
By
John Pasco, III
President
Attested by
<PAGE>
-6-
SCHEDULE A
FDCC shall receive, as compensation for its services pursuant to this
Distribution Agreement:
(a) With respect to any shares of the Fund sold subject to a sales charge, FDCC
shall be entitled to retain the underwriter's portion of the sales charge for
each investment in the Fund's shares, computed as a percentage of the offering
price determined in accordance with the Fund's currently effective Prospectus
and as otherwise provided in the Fund's registration statement.
(b) With respect to sales of shares of the Fund sold subject to a sales charge
for which FDCC is the selling dealer, FDCC shall retain the dealer's sales
charge for each investment in the Fund's shares, computed as a percentage of the
offering price determined in accordance with the Fund's currently effective
Prospectus and as otherwise provided in the Fund's registration statement.
(c) With respect to any shares of the Fund sold at net asset value (without a
sales charge), FDCC shall receive from the Fund reimbursement at the rate of $30
per hour for the cost of personnel involved with assistance in the promotion of
sale of such shares and for out-of-pocket costs incurred by FDCC.
<PAGE>
EXHIBIT 17
CUSTODIAN AGREEMENT
THIS AGREEMENT, dated as of this 11th day of November, 1998, between
VONTOBEL FUNDS, INC., an open-end management investment company incorporated in
Maryland and registered with the Commission under the 1940 Act (the Fund), on
behalf of each of the series listed on the attached Appendix C as the same may
from time to time be updated (each a Series), and BROWN BROTHERS HARRIMAN & CO.,
a limited partnership formed under the laws of the State of New York (BBH&Co. or
the Custodian),
W I T N E S S E T H:
WHEREAS, the Fund wishes to employ BBH&Co. to act as custodian
for the Fund and to provide related services, all as provided herein,
and BBH&Co. is willing to accept such employment, subject to the terms
and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the Fund and BBH&Co. hereby agree, as
follows:
1. Appointment of Custodian. The Fund hereby appoints BBH&Co. as the Fund's
custodian, and BBH&Co. hereby accepts such appointment. All Investments of the
Fund delivered to the Custodian or its agents or Subcustodians shall be dealt
with as provided in this Agreement. The duties of the Custodian with respect to
the Fund's Investments shall be only as set forth expressly in this Agreement
which duties are generally comprised of safekeeping and various administrative
duties that will be performed in accordance with Instructions and as reasonably
required to effect Instructions.
2. Representations, Warranties and Covenants of the Fund. The Fund hereby
represents, warrants and covenants each of the following: 2.1 This
Agreement has been, and at the time of delivery of each Instruction
such Instruction will have been, duly authorized, executed and
delivered by the Fund. This Agreement does not violate any Applicable
Law or conflict with or constitute a default under the Fund's
prospectus or other organic document, agreement, judgment, order or
decree to which the Fund is a party or by which it or its Investments
is bound.
2.2 By providing an Instruction with respect to the first acquisition of
an Investment in a jurisdiction other than the United States of
America, the Fund shall be deemed to have confirmed to the Custodian
that the Fund has (a) assessed and accepted all material Country or
Sovereign Risks and accepted responsibility for their occurrence, (b)
made all determinations required to be made by the Fund under the 1940
Act, and (iii) appropriately and adequately disclosed to its
shareholders, other investors and all persons who have rights in or to
such Investments, all material investment risks, including those
relating to the custody and settlement infrastructure or the servicing
of securities in such jurisdictions.
2.3 The Fund shall safeguard and shall solely be responsible for the
safekeeping of any testkeys, identification codes, passwords, other
security devices or statements of account with which the Custodian
provides it. In furtherance and not limitation of the foregoing, in
the event the Fund utilizes any on-line service offered by the
Custodian, the Fund and the Custodian shall be fully responsible for
the security of its respective connecting terminal, access thereto and
the proper and authorized use thereof and the initiation and
application of continuing effective safeguards in respect thereof.
3. Representation and Warranty of BBH&Co. BBH&Co. hereby represents and
warrants that this Agreement has been duly authorized, executed and
delivered by BBH&Co. and does not and will not violate any Applicable
Law or conflict with or constitute a default under BBH&Co.'s limited
partnership agreement or any agreement, instrument, judgment, order or
decree to which BBH&Co. is a party or by which it is bound.
4. Instructions. Unless otherwise explicitly indicated herein, the
Custodian shall perform its duties pursuant to Instructions. As used
herein, the term Instruction shall mean a directive initiated by the
Fund, acting directly or through its board of directors, officers or
other Authorized Persons, which directive shall conform to the
requirements of this Section 4.
4.1 Authorized Persons. For purposes hereof, an Authorized Person shall be
a person or entity authorized to give Instructions for or on behalf of
the Fund by written notices to the Custodian or otherwise in
accordance with procedures delivered to and acknowledged by the
Custodian, including without limitation the Fund's Investment Adviser
or Foreign Custody Manager. The Custodian may treat any Authorized
Person as having full authority of the Fund to issue Instructions
hereunder unless the notice of authorization contains explicit
limitations as to said authority. The Custodian shall be entitled to
rely upon the authority of Authorized Persons until it receives
appropriate written notice from the Fund to the contrary. 4.2 Form of
Instruction. Each Instruction shall be transmitted by such secured or
authenticated electro-mechanical means as the Custodian shall make
available to the Fund from time to time unless the Fund shall elect to
transmit such Instruction in accordance with Subsections 4.2.1 through
4.2.3 of this Section.
4.2.1Fund Designated Secured-Transmission Method. Instructions may be
transmitted from time to time through a secured or tested
electro-mechanical means which has been previously approved by the
parties, it being understood that such acknowledgment shall authorize
the Custodian to receive and process Instructions received by such
means of delivery but shall not represent a judgment by the Custodian
as to the reasonableness or security of the method determined by the
Authorized Person.
4.2.2Written Instructions. Instructions may be transmitted in a writing
that bears the manual signature of Authorized Persons.
4.2.3Other Forms of Instruction. Instructions may also be transmitted by
another means determined by the Fund or Authorized Persons and
acknowledged and accepted by the Custodian (subject to the same limits
as to acknowledgements as is contained in Subsection 4.2.1, above)
including Instructions given orally or by SWIFT, telex or telefax
(whether tested or untested).
When an Instruction is given by means established under Subsections 4.2.1
through 4.2.3, it shall be the responsibility of the Custodian to use reasonable
care to adhere to any security or other procedures established in writing
between the Custodian and the Authorized Person with respect to such means of
Instruction, but such Authorized Person shall be solely responsible for
determining that the particular means chosen is reasonable under the
circumstances. Oral Instructions shall be binding upon the Custodian only if and
when the Custodian takes action with respect thereto. With respect to telefax
instructions, the parties agree and acknowledge that receipt of legible
instructions cannot be assured, that the Custodian cannot verify that authorized
signatures on telefax instructions are original or properly affixed, and that
the Custodian shall not be liable for losses or expenses incurred through
actions taken in reliance on inaccurately stated, illegible or unauthorized
telefax instructions. The provisions of Section 4A of the Uniform Commercial
Code shall apply to funds transfers performed in accordance with Instructions.
In the event that a Funds Transfer Services Agreement is executed between the
Fund or an Authorized Person and the Custodian, such an agreement shall comprise
a designation of form of a means of delivering Instructions for purposes of this
Section 4.2.
4.3 Completeness and Contents of Instructions. The Authorized Person shall
be responsible for assuring the adequacy and accuracy of Instructions.
Particularly, upon any acquisition or disposition or other dealing in
the Fund's Investments and upon any delivery and transfer of any
Investment or moneys, the person initiating such Instruction shall
give the Custodian an Instruction with appropriate detail, including,
without limitation:
4.3.1 The transaction date and the date and location of settlement;
4.3.2 The specification of the type of transaction;
4.3.4A description of the Investments or moneys in question, including, as
appropriate, quantity, price per unit, amount of money to be received
or delivered and currency information. Where an Instruction is
communicated by electronic means, or otherwise where an Instruction
contains an identifying number such as a CUSIP, SEDOL or ISIN number,
the Custodian shall be entitled to rely on such number as controlling
notwithstanding any inconsistency contained in such Instruction,
particularly with respect to Investment description;
4.3.5The name of the broker or similar entity concerned with execution of
the transaction.
If the Custodian shall determine that an Instruction is either unclear or
incomplete, the Custodian may give prompt notice of such determination to the
Fund, and the Fund shall thereupon amend or otherwise reform such Instruction.
In such event, the Custodian shall have no obligation to take any action in
response to the Instruction initially delivered until the redelivery of an
amended or reformed Instruction.
4.4 Timeliness of Instructions. In giving an Instruction, the Fund shall
take into consideration delays which may occur due to the involvement
of a Subcustodian or agent, differences in time zones, and other
factors particular to a given market, exchange or issuer. When the
Custodian has established specific timing requirements or deadlines
with respect to particular classes of Instruction, or when an
Instruction is received by the Custodian at such a time that it could
not reasonably be expected to have acted on such instruction due to
time zone differences or other factors beyond its reasonable control,
the execution of any Instruction received by the Custodian after such
deadline or at such time (including any modification or revocation of
a previous Instruction) shall be at the risk of the Fund.
5. Safekeeping of Fund Assets. The Custodian shall hold Investments
delivered to it or Subcustodians for the Fund in accordance with the
provisions of this Section. The Custodian shall not be responsible for
(a) the safekeeping of Investments not delivered or that are not
caused to be issued to it or its Subcustodians; or, (b) pre-existing
faults or defects in Investments that are delivered to the Custodian,
or its Subcustodians. The Custodian is hereby authorized to hold with
itself or a Subcustodian, and to record in one or more accounts, all
Investments delivered to and accepted by the Custodian, any
Subcustodian or their respective agents pursuant to an Instruction or
in consequence of any corporate action. The Custodian shall hold
Investments for the account of the Fund and shall segregate
Investments from assets belonging to the Custodian and shall cause its
Subcustodians to segregate Investments from assets belonging to the
Subcustodian in an account held for the Fund or in an account
maintained by the Subcustodian generally for non-proprietary assets of
the Custodian.
5.1 Use of Securities Depositories. The Custodian may deposit and maintain
Investments in any Securities Depository approved on Appendix A,
either directly or through one or more Subcustodians appointed by the
Custodian. Investments held in a Securities Depository shall be held
(a) subject to the agreement, rules, statement of terms and conditions
or other document or conditions effective between the Securities
Depository and the Custodian or the Subcustodian, as the case may be,
and (b) in an account for the Fund or in bulk segregation in an
account maintained for the non-proprietary assets of the entity
holding such Investments in the Depository. If market practice or the
rules and regulations of the Securities Depository prevent the
Custodian, the Subcustodian or (any agent of either) from holding its
client assets in such a separate account, the Custodian, the
Subcustodian or other agent shall as appropriate segregate such
Investments for benefit of the Fund or for benefit of clients of the
Custodian generally on its own books.
5.2 Certificated Assets. Investments which are certificated may be held in
registered or bearer form: (a) in the Custodian's vault; (b) in the
vault of a Subcustodian or agent of the Custodian or a Subcustodian;
or (c) in an account maintained by the Custodian, Subcustodian or
agent at a Securities Depository; all in accordance with customary
market practice in the jurisdiction in which any Investments are held.
5.3 Registered Assets. Investments which are registered may be
registered in the name of the Custodian, a Subcustodian, or in the
name of the Fund or a nominee for any of the foregoing, and may be
held in any manner set forth in paragraph 5.2 above with or without
any identification of fiduciary capacity in such registration. 5.4
Book Entry Assets. Investments which are represented by book-entry may
be so held in an account maintained by the Book-Entry Agent on behalf
of the Custodian, a Subcustodian or another agent of the Custodian, or
a Securities Depository. 5.5 Replacement of Lost Investments. In the
event of a loss of Investments for which the Custodian is responsible
under the terms of this Agreement, the Custodian shall replace such
Investment, or in the event that such replacement cannot be effected,
the Custodian shall pay to the Fund the fair market value of such
Investment based on the last available price as of the close of
business in the relevant market on the date that a claim was first
made to the Custodian with respect to such loss, or, if less, such
other amount as shall be agreed by the parties as the date for
settlement.
6. Administrative Duties of the Custodian. The Custodian shall perform
the following administrative duties with respect to Investments of the
Fund.
6.1 Purchase of Investments. Pursuant to Instruction, Investments
purchased for the account of the Fund shall be paid for (a) against
delivery thereof to the Custodian or a Subcustodian, as the case may
be, either directly or through a Clearing Corporation or a Securities
Depository (in accordance with the rules of such Securities Depository
or such Clearing Corporation), or (b) otherwise in accordance with an
Instruction, Applicable Law, generally accepted trade practices, or
the terms of the instrument representing such Investment. 6.2 Sale of
Investments. Pursuant to Instruction, Investments sold for the account
of the Fund shall be delivered (a) against payment therefor in cash,
by check or by bank wire transfer, (b) by credit to the account of the
Custodian or the applicable Subcustodian, as the case may be, with a
Clearing Corporation or a Securities Depository (in accordance with
the rules of such Securities Depository or such Clearing Corporation),
or (c) otherwise in accordance with an Instruction, Applicable Law,
generally accepted trade practices, or the terms of the instrument
representing such Investment.
6.3 Delivery in Connection with Borrowings of the Fund or other Collateral
and Margin Requirements. Pursuant to Instruction, the Custodian may
deliver Investments or cash of the Fund in connection with borrowings
and other collateral and margin requirements, provided that the Fund
shall give no instructions that would result in the Fund, or an
affiliate of the Fund known to the custodian, obtaining custody of
Fund assets. The Fund shall be responsible for (i) notifying its
investment advisor or any party authorized to give instructions on
behalf of the Fund that deliveries to an affiliate of the Fund are
prohibited, and (ii) notifying any such party as to entities which may
be considered affiliates of the Fund.
6.4 Futures and Options. If, pursuant to an Instruction, the Custodian
shall become a party to an agreement with the Fund and a futures
commission merchant regarding margin (Tri-Party Agreement), the
Custodian shall (a) receive and retain, to the extent the same are
provided to the Custodian, confirmations or other documents evidencing
the purchase or sale by the Fund of exchange-traded futures contracts
and commodity options, (b) when required by such Tri-Party Agreement,
deposit and maintain in an account opened pursuant to such Agreement
(Margin Account), segregated either physically or by book-entry in a
Securities Depository for the benefit of any futures commission
merchant, such Investments as the Fund shall have designated as
initial, maintenance or variation "margin" deposits or other
collateral intended to secure the Fund's performance of its
obligations under the terms of any exchange-traded futures contracts
and commodity options; and (c) thereafter pay, release or transfer
Investments into or out of the margin account in accordance with the
provisions of the such Agreement. Alternatively, the Custodian may
deliver Investments, in accordance with an Instruction, to a futures
commission merchant for purposes of margin requirements in accordance
with Rule 17f-6 under the 1940 Act. The Custodian shall in no event be
responsible for the acts and omissions of any futures commission
merchant to whom Investments are delivered pursuant to this Section;
for the sufficiency of Investments held in any Margin Account; or, for
the performance of any terms of any exchange-traded futures contracts
and commodity options.
6.5 Contractual Obligations and Similar
Investments. From time to time, the Fund's Investments may include
Investments that are not ownership interests as may be represented by
certificate (whether registered or bearer), by entry in a Securities
Depository or by book entry agent, registrar or similar agent for
recording ownership interests in the relevant Investment. If the Fund
shall at any time acquire such Investments, including without
limitation deposit obligations, loan participations, repurchase
agreements and derivative arrangements, the Custodian shall (a)
receive and retain, to the extent the same are provided to the
Custodian, confirmations or other documents evidencing the
arrangement; and (b) perform on the Fund's account in accordance with
the terms of the applicable arrangement, but only to the extent
directed to do so by Instruction. The Custodian shall have no
responsibility for agreements running to the Fund as to which it is
not a party other than to retain, to the extent the same are provided
to the Custodian, documents or copies of documents evidencing the
arrangement and, in accordance with Instruction, to include such
arrangements in reports made to the Fund.
6.6 Exchange of Securities. Unless otherwise directed by Instruction, the
Custodian shall: (a) exchange securities held for the account of the
Fund for other securities in connection with any reorganization,
recapitalization, conversion, split-up, change of par value of shares
or similar event, and (b) deposit any such securities in accordance
with the terms of any reorganization or protective plan.
6.7 Surrender of Securities. Unless otherwise directed by Instruction, the
Custodian may surrender securities: (a) in temporary form for
definitive securities; (b) for transfer into the name of an entity
allowable under Section 5.3; and (c) for a different number of
certificates or instruments representing the same number of shares or
the same principal amount of indebtedness.
6.8 Rights, Warrants, Etc. Pursuant to Instruction, the Custodian shall
(a) deliver warrants, puts, calls, rights or similar securities to the
issuer or trustee thereof, or to any agent of such issuer or trustee,
for purposes of exercising such rights or selling such securities, and
(b) deposit securities in response to any invitation for the tender
thereof.
6.9 Mandatory Corporate Actions. Unless otherwise directed by Instruction,
the Custodian shall: (a) comply with the terms of all mandatory or
compulsory exchanges, calls, tenders, redemptions or similar rights of
securities ownership affecting securities held on the Fund's account
and promptly notify the Fund of such action, and (b) collect all stock
dividends, rights and other items of like nature with respect to such
securities.
6.10 Income Collection. Unless otherwise directed by Instruction, the
Custodian shall collect any amount due and payable to the Fund with
respect to Investments and promptly credit the amount collected to a
Principal or Agency Account; provided, however, that the Custodian
shall not be responsible for: (a) the collection of amounts due and
payable with respect to Investments that are in default, or (b) the
collection of cash or share entitlements with respect to Investments
that are not registered in the name of the Custodian or its
Subcustodians. The Custodian is hereby authorized to endorse and
deliver any instrument required to be so endorsed and delivered to
effect collection of any amount due and payable to the Fund with
respect to Investments.
6.11 Ownership Certificates and Disclosure of the Fund's Interest. The
Custodian is hereby authorized to execute on behalf of the Fund
ownership certificates, affidavits or other disclosure required under
Applicable Law or established market practice in connection with the
receipt of income, capital gains or other payments by the Fund with
respect to Investments, or in connection with the sale, purchase or
ownership of Investments.
6.12 Proxy Materials. The Custodian shall deliver, or cause to be
delivered, to the Fund proxy forms, notices of meeting, and any other
notices or announcements materially affecting or relating to
Investments received by the Custodian or any nominee.
6.13.Taxes. The Custodian shall, where applicable, assist the Fund in the
reclamation of taxes withheld on dividends and interest payments
received by the Fund. In the performance of its duties with respect to
tax withholding and reclamation, the Custodian shall be entitled to
rely on the advice of counsel and upon information and advice
regarding the Fund's tax status that is received from or on behalf of
the Fund without duty of separate inquiry.
6.14 Other Dealings. The Custodian shall otherwise act as directed by
Instruction, including without limitation effecting the free payments
of moneys or the free delivery of securities, provided that such
Instruction shall indicate the purpose of such payment or delivery and
that the Custodian shall record the party to whom such payment or
delivery is made.
The Custodian shall attend to all nondiscretionary details in connection
with the sale or purchase or other administration of Investments, except as
otherwise directed by an Instruction, and may make payments to itself or others
for minor expenses of administering Investments under this Agreement; provided
that the Fund shall have the right to request an accounting with respect to such
expenses.
In fulfilling the duties set forth in Sections 6.6 through 6.10 above, the
Custodian shall provide to the Fund all material information pertaining to a
corporate action which the Custodian actually receives; provided that the
Custodian shall not be responsible for the completeness or accuracy of such
information. Any advance credit of cash or shares expected to be received as a
result of any corporate action shall be subject to actual collection and may,
when the Custodian deems collection unlikely, be reversed by the Custodian.
The Custodian may at any time or times in its discretion appoint (and may
at any time remove) agents (other than Subcustodians) to carry out some or all
of the administrative provisions of this Agreement (Agents), provided, however,
that the appointment of such agent shall not relieve the Custodian of its
administrative obligations under this Agreement.
7. Cash Accounts, Deposits and Money Movements. Subject to the terms and
conditions set forth in this Section 7, the Fund hereby authorizes the
Custodian to open and maintain, with itself or with Subcustodians,
cash accounts in United States Dollars, in such other currencies as
are the currencies of the countries in which the Fund maintains
Investments or in such other currencies as the Fund shall from time to
time request by Instruction.
7.1 Types of Cash Accounts. Cash accounts opened on the books of the
Custodian (Principal Accounts) shall be opened in the name of the
Fund. Such accounts collectively shall be a deposit obligation of the
Custodian and shall be subject to the terms of this Section 7 and the
general liability provisions contained in Section 9. Cash accounts
opened on the books of a Subcustodian may be opened in the name of the
Fund or the Custodian or in the name of the Custodian for its
customers generally (Agency Accounts). Such deposits shall be
obligations of the Subcustodian and shall be treated as an Investment
of the Fund. Accordingly, the Custodian shall be responsible for
exercising reasonable care in the administration of such accounts but
shall not be liable for their repayment in the event such
Subcustodian, by reason of its bankruptcy, insolvency or otherwise,
fails to make repayment.
7.2 Payments and Credits with Respect to the Cash Accounts. The Custodian
shall make payments from or deposits to any of said accounts in the
course of carrying out its administrative duties, including but not
limited to income collection with respect to the Fund's Investments,
and otherwise in accordance with Instructions. The Custodian and its
Subcustodians shall be required to credit amounts to the cash accounts
only when moneys are actually received in cleared funds in accordance
with banking practice in the country and currency of deposit. Any
credit made to any Principal or Agency Account before actual receipt
of cleared funds shall be provisional and may be reversed by the
Custodian in the event such payment is not actually collected. Unless
otherwise specifically agreed in writing by the Custodian or any
Subcustodian, all deposits shall be payable only at the branch of the
Custodian or Subcustodian where the deposit is made or carried.
7.3 Currency and Related Risks. The Fund bears risks of holding or
transacting in any currency. The Custodian shall not be liable for any
loss or damage arising from the applicability of any law or regulation
now or hereafter in effect, or from the occurrence of any event, which
may delay or affect the transferability, convertibility or
availability of any currency in the country (a) in which such
Principal or Agency Accounts are maintained or (b) in which such
currency is issued, and in no event shall the Custodian be obligated
to make payment of a deposit denominated in a currency during the
period during which its transferability, convertibility or
availability has been affected by any such law, regulation or event.
Without limiting the generality of the foregoing, neither the
Custodian nor any Subcustodian shall be required to repay any deposit
made at a foreign branch of either the Custodian or Subcustodian if
such branch cannot repay the deposit due to a cause for which the
Custodian would not be responsible in accordance with the terms of
Section 9 of this Agreement unless the Custodian or such Subcustodian
expressly agrees in writing to repay the deposit under such
circumstances. All currency transactions in any account opened
pursuant to this Agreement are subject to exchange control regulations
of the United States and of the country where such currency is the
lawful currency or where the account is maintained. Any taxes, costs,
charges or fees imposed on the convertibility of a currency held by
the Fund shall be for the account of the Fund.
7.4 Foreign Exchange Transactions. The Custodian shall, subject to the
terms of this Section, settle foreign exchange transactions (including
contracts, futures, options and options on futures) on behalf and for
the account of the Fund with such currency brokers or banking
institutions, including Subcustodians, as the Fund may direct pursuant
to Instructions. The Custodian may act as principal in any foreign
exchange transaction with the Fund in accordance with Section 7.4.2 of
this Agreement. The obligations of the Custodian in respect of all
foreign exchange transactions (whether or not the Custodian shall act
as principal in such transaction) shall be contingent on the free,
unencumbered transferability of the currency transacted on the actual
settlement date of the transaction.
7.4.1Third Party Foreign Exchange Transactions. The Custodian shall
process foreign exchange transactions (including without limitation
contracts, futures, options, and options on futures), where any third
party acts as principal counterparty to the Fund on the same basis it
performs duties as agent for the Fund with respect to any other of the
Fund's Investments. Accordingly the Custodian shall only be
responsible for delivering or receiving currency on behalf of the Fund
in respect of such contracts pursuant to Instructions. The Custodian
shall not be responsible for the failure of any counterparty
(including any Subcustodian) in such agency transaction to perform its
obligations thereunder. The Custodian (a) shall transmit cash and
Instructions to and from the currency broker or banking institution
with which a foreign exchange contract or option has been executed
pursuant hereto, (b) may make free outgoing payments of cash in the
form of United States Dollars or foreign currency without receiving
confirmation of a foreign exchange contract or option or confirmation
that the countervalue currency completing the foreign exchange
contract has been delivered or received or that the option has been
delivered or received, and (c) shall hold all confirmations,
certificates and other documents and agreements received by the
Custodian and evidencing or relating to such foreign exchange
transactions in safekeeping. The Fund accepts full responsibility for
its use of third-party foreign exchange dealers and for execution of
said foreign exchange contracts and options and understands that the
Fund shall be responsible for any and all costs and interest charges
which may be incurred by the Fund or the Custodian as a result of the
failure or delay of third parties to deliver foreign exchange.
7.4.2Foreign Exchange with the Custodian as Principal. The Custodian may
undertake foreign exchange transactions with the Fund as principal as
the Custodian and the Fund may agree from time to time. In such event,
the foreign exchange transaction will be performed in accordance with
the particular agreement of the parties, or in the event a principal
foreign exchange transaction is initiated by Instruction in the
absence of specific agreement, such transaction will be performed in
accordance with the usual commercial terms of the Custodian.
7.5 Delays. If no event of Force Majeure shall have occurred and be
continuing and in the event that a delay shall have been caused by the
negligence or willful misconduct of the Custodian in carrying out an
Instruction to credit or transfer cash, the Custodian shall be liable
to the Fund: (a) with respect to Principal Accounts, for interest to
be calculated at the rate customarily paid on such deposit and
currency by the Custodian on overnight deposits at the time the delay
occurs for the period from the day when the transfer should have been
effected until the day it is in fact effected; and, (b) with respect
to Agency Accounts, for interest to be calculated at the rate
customarily paid on such deposit and currency by the Subcustodian on
overnight deposits at the time the delay occurs for the period from
the day when the transfer should have been effected until the day it
is in fact effected. The Custodian shall not be liable for delays in
carrying out such Instructions to transfer cash which are not due to
the Custodian's own negligence or willful misconduct.
7.6 Advances. If, for any reason in the conduct of its safekeeping duties
pursuant to Section 5 hereof or its administration of the Fund's
assets pursuant to Section 6 hereof, the Custodian or any Subcustodian
advances monies to facilitate settlement or otherwise for benefit of
the Fund (whether or not any Principal or Agency Account shall be
overdrawn either during, or at the end of, any Business Day), the Fund
hereby does:
7.6.1acknowledge that the Fund shall have no right or title to any
Investments purchased with such Advance save a right to receive such
Investments upon: (a) the debit of the Principal or Agency Account;
or, (b) if such debit would produce an overdraft in such account,
other reimbursement of the associated Advance;
7.6.2 grant to the Custodian a security interest in all Investments; and,
7.6.3agree that the Custodian may secure the resulting Advance by
perfecting a security interest in all Investments under Applicable
Law. With respect to obligations and liabilities which occur to each
series under the Fund, such obligations and liabilities shall apply
only to the respective series and not to any other series under the
Fund .
Neither the Custodian nor any Subcustodian shall be obligated to advance
monies to the Fund, and in the event that such Advance occurs, any
transaction giving rise to an Advance shall be for the account and
risk of the Fund and shall not be deemed to be a transaction
undertaken by the Custodian for its own account and risk. If such
Advance shall have been made by a Subcustodian or any other person,
the Custodian may assign the security interest and any other rights
granted to the Custodian hereunder to such Subcustodian or other
person. If the Fund shall fail to repay when due the principal balance
of an Advance and accrued and unpaid interest thereon, the Custodian
or its assignee, as the case may be, shall be entitled to utilize the
available cash balance in any Agency or Principal Account and to
dispose of any Investments to the extent necessary to recover payment
of all principal of, and interest on, such Advance in full. The
Custodian may assign any rights it has hereunder to a Subcustodian or
third party. Any security interest in Investments taken hereunder
shall be treated as financial assets credited to securities accounts
under Articles 8 and 9 of the Uniform Commercial Code as currently in
effect in New York. Accordingly, the Custodian shall have the rights
and benefits of a secured creditor that is a securities intermediary
under such Articles 8 and 9.
7.7 Integrated Account. For purposes hereof, deposits maintained in all
Principal Accounts (whether or not denominated in United States
Dollars) shall collectively constitute a single and indivisible
current account with respect to the Fund's obligations to the
Custodian, or its assignee, and balances in such Principal Accounts
shall be available for satisfaction of the Fund's obligations under
this Section 7. The Custodian shall further have a right of offset
against the balances in any Agency Account maintained hereunder to the
extent that the aggregate of all Principal Accounts is overdrawn. With
respect to obligations and liabilities which occur to each series
under the Fund, such obligations and liabilities shall apply only to
the respective series and not to any other series under the Fund . 8.
Subcustodians and Securities Depositories. Subject to the provisions
hereinafter set forth in this Section 8, the Fund hereby authorizes
the Custodian to utilize Securities Depositories to act on behalf of
the Fund and to appoint from time to time and to utilize
Subcustodians. With respect to securities and funds held by a
Subcustodian, either directly or indirectly (including by a Securities
Depository or Clearing Corporation), notwithstanding any provisions of
this Agreement to the contrary, payment for securities purchased and
delivery of securities sold may be made prior to receipt of securities
or payment, respectively, and securities or payment may be received in
a form, in accordance with (a) governmental regulations, (b) rules of
Securities Depositories and clearing agencies, (c) generally accepted
trade practice in the applicable local market, (d) the terms and
characteristics of the particular Investment, or (e) the terms of
Instructions. 8.1 Domestic Subcustodians and Securities Depositories.
The Custodian may deposit and/or maintain, either directly or through
one or more agents appointed by the Custodian, Investments of the Fund
in any Securities Depository in the United States, including The
Depository Trust Company, provided such Depository meets applicable
requirements of the Federal Reserve Bank or of the Securities and
Exchange Commission. The Custodian may, at any time and from time to
time, appoint any bank as defined in Section 2(a)(5) of the 1940 Act
meeting the requirements of a custodian under Section 17(f) of the
1940 Act and the rules and regulations thereunder, to act on behalf of
the Fund as a Subcustodian for purposes of holding Investments of the
Fund in the United States.
8.2 Foreign Subcustodians and Securities Depositories. The Custodian may
deposit and/or maintain non-U.S. Investments of the Fund in any
non-U.S. Securities Depository provided such Securities Depository
meets the requirements of an "eligible foreign custodian" under Rule
17f-5 promulgated under the 1940 Act, or any successor rule or
regulation ("Rule 17f-5") or which by order of the Securities and
Exchange Commission is exempted therefrom. Additionally, the Custodian
may, at any time and from time to time, appoint (a) any bank, trust
company or other entity meeting the requirements of an Eligible
Foreign Custodian under Rule 17f-5 or which by order of the Securities
and Exchange Commission is exempted therefrom, or (b) any bank as
defined in Section 2(a)(5) of the 1940 Act meeting the requirements of
a custodian under Section 17(f) of the 1940 Act and the rules and
regulations thereunder, to act on behalf of the Fund as a Subcustodian
for purposes of holding Investments of the Fund outside the United
States. Such appointment of foreign Subcustodians shall be subject to
approval of the Fund in accordance with Subsections 8.2.1 and 8.2.2.
8.2.1Board Approval of Foreign Subcustodians. Unless and except to the
extent that review of certain matters concerning the appointment of
Subcustodians shall have been delegated to the Custodian pursuant to
Subsection 8.2.2, the Custodian shall, prior to the appointment of any
Subcustodian for purposes of holding Investments of the Fund outside
the United States, obtain written confirmation of the approval of the
Board of Trustees or Directors of the Fund with respect to (a) the
identity of a Subcustodian, (b) the country or countries in which, and
the Securities Depositories, if any, through which, any proposed
Subcustodian is authorized to hold Investments of the Fund, and (c)
the Subcustodian agreement which shall govern such appointment. Each
such duly approved country, Subcustodian and Securities Depository
shall be listed on Appendix A attached hereto as the same may from
time to time be amended.
8.2.2Delegation of Board Review of Subcustodians. From time to time, the
Custodian may offer to perform, and the Fund may accept to perform,
that the Custodian perform certain reviews of Subcustodians and of
Subcustodian Contracts as delegate of the Fund's Board. Any such
duties shall be established by separate agreement.
8.3 Responsibility for Subcustodians. Except as set forth in the following
sentence, the Custodian shall be liable to the Fund for any loss or
damage to the Fund caused by or resulting from the acts or omissions
of any Subcustodian to the extent that such acts or omissions would be
deemed to be negligence, gross negligence or willful misconduct in
accordance with the terms of the relevant subcustodian agreement under
the laws, circumstances and practices prevailing in the place where
the act or omission occurred. In the countries indicated in Appendix
A-1 to this Agreement, the liability of the Custodian shall be subject
to the additional condition that the Custodian actually recovers such
loss or damage from the Subcustodian and shall be limited to the
amount of such recovery.
8.4 New Countries. The Fund shall be responsible for informing the
Custodian sufficiently in advance of a proposed investment which is to
be held in a country in which no Subcustodian is authorized to act in
order that the Custodian shall, if it deems appropriate to do so, have
sufficient time to establish a subcustodial arrangement in accordance
herewith. In the event, however, the Custodian is unable to establish
such arrangements prior to the time such investment is to be acquired,
the Custodian is authorized to designate at its discretion a local
safekeeping agent, and the use of such local safekeeping agent shall
be at the sole risk of the Fund, and accordingly the Custodian shall
be responsible to the Fund for the actions of such agent if and only
to the extent the Custodian shall have recovered from such agent for
any damages caused the Fund by such agent.
9. Responsibility of the Custodian. In performing its duties and
obligations hereunder, the Custodian shall use reasonable care under
the facts and circumstances prevailing in the market where performance
is effected. Subject to the specific provisions of this Section, the
Custodian shall be liable for any direct damage incurred by the Fund
in consequence of the Custodian's negligence, bad faith or willful
misconduct. In no event shall the Custodian be liable hereunder for
any special, indirect, punitive or consequential damages arising out
of, pursuant to or in connection with this Agreement even if the
Custodian has been advised of the possibility of such damages. It is
agreed that the Custodian shall have no duty to assess the risks
inherent in the Fund's Investments or to provide investment advice
with respect to such Investments and that the Fund as principal shall
bear any risks attendant to particular Investments such as failure of
counterparty or issuer.
9.1 Limitations of Performance. The Custodian shall not be responsible
under this Agreement for any failure to perform its duties, and shall
not liable hereunder for any loss or damage in association with such
failure to perform, for or in consequence of the following causes:
9.1.1Force Majeure. Force Majeure shall mean any circumstance or event
which is beyond the reasonable control of the Custodian, a
Subcustodian or any agent of the Custodian or a Subcustodian and which
adversely affects the performance by the Custodian of its obligations
hereunder, by the Subcustodian of its obligations under its Subcustody
Agreement or by any other agent of the Custodian or the Subcustodian,
including any event caused by, arising out of or involving (a) an act
of God, (b) accident, fire, water damage or explosion, (c) any
computer, system or other equipment failure or malfunction caused by
any computer virus or the malfunction or failure of any communications
medium, provided that the Custodian shall take reasonable actions to
prevent the occurrence of failures or malfunctions within its
reasonable control, (d) any interruption of the power supply or other
utility service, (e) any strike or other work stoppage, whether
partial or total, (f) any delay or disruption resulting from or
reflecting the occurrence of any Sovereign Risk, (g) any disruption
of, or suspension of trading in, the securities, commodities or
foreign exchange markets, whether or not resulting from or reflecting
the occurrence of any Sovereign Risk, (h) any encumbrance on the
transferability of a currency or a currency position on the actual
settlement date of a foreign exchange transaction, whether or not
resulting from or reflecting the occurrence of any Sovereign Risk, or
(i) any other cause similarly beyond the reasonable control of the
Custodian.
9.1.2Country Risk. Country Risk shall mean, with respect to the
acquisition, ownership, settlement or custody of Investments in a
jurisdiction, all risks relating to, or arising in consequence of,
systemic and market factors affecting the acquisition, payment for or
ownership of Investments including (a) the prevalence of crime and
corruption, (b) the inaccuracy or unreliability of business and
financial information, (c) the instability or volatility of banking
and financial systems, or the absence or inadequacy of an
infrastructure to support such systems, (d) custody and settlement
infrastructure of the market in which such Investments are transacted
and held, (e) the acts, omissions and operation of any Securities
Depository, (f) the risk of the bankruptcy or insolvency of banking
agents, counterparties to cash and securities transactions, registrars
or transfer agents, and (g) the existence of market conditions which
prevent the orderly execution or settlement of transactions or which
affect the value of assets.
9.1.3Sovereign Risk. Sovereign Risk shall mean, in respect of any
jurisdiction, including the United States of America, where
Investments is acquired or held hereunder or under a Subcustody
Agreement, (a) any act of war, terrorism, riot, insurrection or civil
commotion, (b) the imposition of any investment, repatriation or
exchange control restrictions by any Governmental Authority, (c) the
confiscation, expropriation or nationalization of any Investments by
any Governmental Authority, whether de facto or de jure, (iv) any
devaluation or revaluation of the currency, (d) the imposition of
taxes, levies or other charges affecting Investments, (vi) any change
in the Applicable Law, or (e) any other economic or political risk
incurred or experienced.
9.2. Limitations on Liability. The Custodian shall not be liable for any
loss, claim, damage or other liability arising from the following
causes:
9.2.1Failure of Third Parties. The failure of any third party including:
(a) any issuer of Investments or book-entry or other agent of any
issuer; (b) any counterparty with respect to any Investment, including
any issuer of exchange-traded or other futures, option, derivative or
commodities contract; (c) failure of an Investment Advisor, Foreign
Custody Manager or other agent of the Fund; or (d) failure of other
third parties similarly beyond the control or choice of the Custodian.
9.2.2Information Sources. The Custodian may rely upon information received
from issuers of Investments or agents of such issuers, information
received from Subcustodians and from other commercially reasonable
sources such as commercial data bases and the like, but shall not be
responsible for specific inaccuracies in such information, provided
that the Custodian has relied upon such information in good faith, or
for the failure of any commercially reasonable information provider.
9.2.3Reliance on Instruction. Action by the Custodian or the Subcustodian
in accordance with an Instruction, even when such action conflicts
with, or is contrary to any provision of, the Fund's declaration of
trust, certificate of incorporation or by-laws, Applicable Law, or
actions by the trustees, directors or shareholders of the Fund.
9.2.4Restricted Securities. The limitations inherent in the rights,
transferability or similar investment characteristics of a given
Investment of the Fund.
10. Indemnification. The Fund hereby indemnifies the Custodian and each
Subcustodian, and their respective agents, nominees and their
partners, employees, officers and directors, and agrees to hold each
of them harmless from and against all claims and liabilities,
including counsel fees and taxes, incurred or assessed against any of
them in connection with the performance of this Agreement and any
Instruction. If a Subcustodian or any other person indemnified under
the preceding sentence, gives written notice of claim to the
Custodian, the Custodian shall promptly give written notice to the
Fund. Not more than thirty days following the date of such notice,
unless the Custodian shall be liable under Section 8 hereof in respect
of such claim, the Fund will pay the amount of such claim or reimburse
the Custodian for any payment made by the Custodian in respect
thereof. The custodian shall consult with the Fund prior to making
payments under this section.
11. Reports and Records. The Custodian shall:
11.1 create and maintain records relating to the performance of its
obligations under this Agreement;
11.2 make available to the Fund, its auditors, agents and employees, during
regular business hours of the Custodian, upon reasonable request and
during normal business hours of the Custodian, all records maintained
by the Custodian pursuant to paragraph (a) above, subject, however, to
all reasonable security requirements of the Custodian then applicable
to the records of its custody customers generally; and
11.3 make available to the Fund all electronic reports; it being understood
that the Custodian shall not be liable hereunder for the inaccuracy or
incompleteness thereof or for errors in any information included
therein.
The Fund shall examine all records, howsoever produced or transmitted,
promptly upon receipt thereof and notify the Custodian promptly of any
discrepancy or error therein. Unless the Fund delivers written notice of any
such discrepancy or error within a reasonable time after its receipt thereof,
such records shall be deemed to be true and accurate. It is understood that the
Custodian now obtains and will in the future obtain information on the value of
assets from outside sources which may be utilized in certain reports made
available to the Fund. The Custodian deems such sources to be reliable but it is
acknowledged and agreed that the Custodian does not verify nor represent nor
warrant as to the accuracy or completeness of such information and accordingly
shall be without liability in selecting and using such sources and furnishing
such information.
12. Miscellaneous.
12.1 Proxies, etc. The Fund will promptly execute and deliver, upon
request, such proxies, powers of attorney or other instruments as may
be necessary or desirable for the Custodian to provide, or to cause
any Subcustodian to provide, custody services.
12.2 Entire Agreement. Except as specifically provided herein, this
Agreement constitutes the entire agreement between the Fund and the
Custodian with respect to the subject matter hereof. Accordingly, this
Agreement supersedes any custody agreement or other oral or written
agreements heretofore in effect between the Fund and the Custodian
with respect to the custody of the Fund's Investments.
12.3 Waiver and Amendment. No provision of this Agreement may be waived,
amended or modified, and no addendum to this Agreement shall be or
become effective, or be waived, amended or modified, except by an
instrument in writing executed by the party against which enforcement
of such waiver, amendment or modification is sought; provided,
however, that an Instruction shall, whether or not such Instruction
shall constitute a waiver, amendment or modification for purposes
hereof, shall be deemed to have been accepted by the Custodian when it
commences actions pursuant thereto or in accordance therewith.
12.4 GOVERNING LAW AND JURISDICTION. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND BE GOVERNED BY THE LAWS OF, THE STATE OF NEW
YORK, WITHOUT GIVING EFFECT TO THE LAWS OF CONFLICT OF SUCH STATE. THE
PARTIES HERETO IRREVOCABLY CONSENT TO THE EXCLUSIVE JURISDICTION OF
THE COURTS OF THE STATE OF NEW YORK AND THE FEDERAL COURTS LOCATED IN
NEW YORK CITY IN THE BOROUGH OF MANHATTAN. 12.5 Notices. Notices and
other writings contemplated by this Agreement, other than
Instructions, shall be delivered (a) by hand, (b) by first class
registered or certified mail, postage prepaid, return receipt
requested, (c) by a nationally recognized overnight courier or (d) by
facsimile transmission, provided that any notice or other writing sent
by facsimile transmission shall also be mailed, postage prepaid, to
the party to whom such notice is addressed. All such notices shall be
addressed, as follows:
If to the Fund:
John Pasco III
Commonwealth Shareholder Services, Inc.
1500 Forest Avenue, Suite 223
Richmond, VA 23226
Telephone: 1-800-527-9500
Facsimile: 1-804-285-8251
If to the Custodian:
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
Attn: Manager, Securities Department
Telephone: (617) 772-1818
Facsimile: (617) 772-2263,
or such other address as the Fund or the Custodian may from time to time
designate in writing to the other.
12.6 Headings. Paragraph headings included herein are for convenience of
reference only and shall not modify, define, expand or limit any of
the terms or provisions hereof.
12.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original. This
Agreement shall become effective when one or more counterparts have
been signed and delivered by the Fund and the Custodian. 12.8
Confidentiality. The parties hereto agree that each shall treat
confidentially the terms and conditions of this Agreement and all
information provided by each party to the other regarding its business
and operations. All confidential information provided by a party
hereto shall be used by any other party hereto solely for the purpose
of rendering or obtaining services pursuant to this Agreement and,
except as may be required in carrying out this Agreement, shall not be
disclosed to any third party without the prior consent of such
providing party. The foregoing shall not be applicable to any
information that is publicly available when provided or thereafter
becomes publicly available other than through a breach of this
Agreement, or that is required to be disclosed by or to any bank
examiner of the Custodian or any Subcustodian, any regulatory
authority, any auditor of the parties hereto, or by judicial or
administrative process or otherwise by Applicable Law.
13. Definitions. The following defined terms will have the respective
meanings set forth below.
13.1 Advance shall mean any extension of credit by or through the Custodian
or by or through any Subcustodian and shall include amounts paid to
third parties for account of the Fund or in discharge of any expense,
tax or other item payable by the Fund.
13.2 Agency Account shall mean any deposit account opened on the books of a
Subcustodian or other banking institution in accordance with Section
7.1.
13.3 Agent shall have the meaning set forth in the last system of Section
6.
13.4 Applicable Law shall mean with respect to each jurisdiction, all (a)
laws, statutes, treaties, regulations, guidelines (or their
equivalents); (b) orders, interpretations licenses and permits; and
(c) judgments, decrees, injunctions writs, orders and similar actions
by a court of competent jurisdiction; compliance with which is
required or customarily observed in such jurisdiction.
13.5 Authorized Person shall mean any person or entity authorized to give
Instructions on behalf of the Fund in accordance with Section 4.1.
13.6 Book-entry Agent shall mean an entity acting as agent for the issuer
of Investments for purposes of recording ownership or similar
entitlement to Investments, including without limitation a transfer
agent or registrar.
13.7 Clearing Corporation shall mean any entity or system established for
purposes of providing securities settlement and movement and
associated functions for a given market.
13.8 Delegation Agreement shall mean any separate agreement entered into
between the Custodian and the Fund or its authorized representative
with respect to certain matters concerning the appointment and
administration of Subcustodians delegated to the Custodian pursuant to
Rule 17f-5.
13.9 Foreign Custody Manager shall mean the Fund's foreign custody manager
appointed pursuant to Rule 17f-5 of the 1940 Act.
13.10Funds Transfer Services Agreement shall mean any separate agreement
entered into between the Custodian and the Fund or its authorized
representative with respect to certain matters concerning the
processing of payment orders from Principal Accounts of the Fund.
13.11 Instruction(s) shall have the meaning assigned in Section 4.
13.12Investment Advisor shall mean any person or entity who is an
Authorized Person to give Instructions with respect to the investment
and reinvestment of the Fund's Investments.
13.13Investments shall mean any investment asset of the Fund, including
without limitation securities, bonds, notes, and debentures as well as
receivables, derivatives, contractual rights or entitlements and other
intangible assets.
13.14Margin Account shall have the meaning set forth in Section 6.4
hereof.
13.15Principal Account shall mean deposit accounts of the Fund carried on
the books of BBH&Co. as principal in accordance with Section 7.
13.16Safekeeping Account shall mean an account established on the books of
the Custodian or any Subcustodian for purposes of segregating the
interests of the Fund (or clients of the Custodian or Subcustodian)
from the assets of the Custodian or any Subcustodian.
13.17Securities Depository shall mean a central or book entry system or
agency established under Applicable Law for purposes of recording the
ownership and/or entitlement to investment securities for a given
market.
13.18Subcustodian shall mean each foreign bank appointed by the Custodian
pursuant to Section 8, but shall not include Securities Depositories.
13.19Tri-Party Agreement shall have the meaning set forth in Section 6.4
hereof.
13.20 1940 Act shall mean the Investment Company Act of 1940, as amended.
14. Compensation. The Fund agrees to pay to the Custodian (a) a fee in an
amount set forth in the fee letter between the Fund and the Custodian
in effect on the date hereof or as amended from time to time, and (b)
all authorized, customary or reasonable out-of-pocket expenses
incurred by the Custodian, including the fees and expenses of all
Subcustodians, and payable from time to time. Amounts payable by the
Fund under and pursuant to this Section 14 shall be payable by wire
transfer to the Custodian at BBH&Co. in New York, New York.
15. Termination. This Agreement may be terminated by either party in
accordance with the provisions of this Section. The provisions of this
Agreement and any other rights or obligations incurred or accrued by
any party hereto prior to termination of this Agreement shall survive
any termination of this Agreement.
15.1 Notice and Effect. This Agreement may be terminated by either party by
written notice effective no sooner than seventy-five days following
the date that notice to such effect shall be delivered to other party
at its address set forth in paragraph 12.5 hereof.
15.2 Successor Custodian. In the event of the appointment of a successor
custodian, it is agreed that the Investments of the Fund held by the
Custodian or any Subcustodian shall be delivered to the successor
custodian in accordance with reasonable Instructions. The Custodian
agrees to cooperate with the Fund in the execution of documents and
performance of other actions necessary or desirable in order to
facilitate the succession of the new custodian. If no successor
custodian shall be appointed, the Custodian shall in like manner
transfer the Fund's Investments in accordance with Instructions.
15.3 Delayed Succession. If no Instruction has been given as of the
effective date of termination, Custodian may at any time on or after
such termination date and upon ten days written notice to the Fund
either (a) deliver the Investments of the Fund held hereunder to the
Fund at the address designated for receipt of notices hereunder; or
(b) deliver any investments held hereunder to a bank or trust company
having a capitalization of $2 million United States Dollars equivalent
and operating under the Applicable law of the jurisdiction where such
Investments are located, such delivery to be at the risk of the Fund.
In the event that Investments or moneys of the Fund remain in the
custody of the Custodian or its Subcustodians after the date of
termination owing to the failure of the Fund to issue Instructions
with respect to their disposition or owing to the fact that such
disposition could not be accomplished in accordance with such
Instructions despite diligent efforts of the Custodian, the Custodian
shall be entitled to compensation for its services with respect to
such Investments and moneys during such period as the Custodian or its
Subcustodians retain possession of such items and the provisions of
this Agreement shall remain in full force and effect until disposition
in accordance with this Section is accomplished.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
duly executed as of the date first above written.
VONTOBEL FUNDS, INC.
By:_______________________________
By: BROWN BROTHERS HARRIMAN & CO.
By: ________________________________
EXHIBIT 18
FUND SERVICES, INC.
TRANSFER AGENT AGREEMENT
THIS AGREEMENT, dated January 1, 1999 between VONTOBEL FUNDS, INC. (the
"Fund"), a corporation operating as an open-end investment company under the
Investment Company Act of 1940, duly organized and existing under the laws of
the State of Maryland, and FUND SERVICES, INC. ("FSI"), a corporation organized
under the laws of the State of Virginia, provides as follows:
WHEREAS, FSI has agreed to act as transfer agent for the purpose of
recording the transfer, issuance and redemption of Shares of the Fund,
transferring the Shares of the Fund, disbursing dividends and other
distributions to Shareholders, filing various tax forms, mailing shareholder
information and receiving and responding to various shareholder inquiries;
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, the parties do hereby agree as follows:
SECTION 1. The Fund hereby appoints FSI as its transfer agent and FSI
agrees to act in such capacity upon the terms set forth in this Agreement.
SECTION 2. The Fund shall furnish to FSI a supply of blank Share
Certificates of each Series and, from time to time, will renew such supply upon
FSI's request. Blank Share Certificates shall be signed manually or by facsimile
signatures of officers of the Fund and, if required by FSI, shall bear the
Fund's seal or a facsimile thereof.
SECTION 3. FSI shall make original issues of Shares of
<PAGE>
each Series in accordance with SECTIONS 13 and 14 below and the Fund's then
current prospectus, upon receipt of (i) Written Instructions requesting the
issuance, (ii) a certified copy of a resolution of the Fund's Board of Directors
authorizing the issuance, (iii) necessary funds for the payment of any original
issue tax applicable to such additional Shares, (iv) an opinion of the Fund's
counsel as to the legality and validity of the issuance, which opinion may
provide that it is contingent upon the filing by the Fund of an appropriate
notice with the Securities and Exchange Commission, as required by Rule 24f-2 of
the Investment Company Act of 1940, as amended from time to time. If the opinion
described in (iv) above is contingent upon a filing under such rule, the Fund
shall fully indemnify FSI for any liability arising from the failure of the Fund
to comply with such rule.
SECTION 4. Transfers of Shares of each Series shall be registered and,
subject to the provisions of SECTION 10, new Share Certificates shall be issued
by FSI upon surrender of outstanding Share Certificates in the form deemed by
FSI to be properly endorsed for transfer, which form shall include (i) all
necessary endorsers' signatures guaranteed by a member firm of a national
securities exchange or a domestic commercial bank, (ii) such assurances as FSI
may deem necessary to evidence the genuineness and effectiveness of each
endorsement and (iii) satisfactory evidence of compliance with all applicable
laws
<PAGE>
relating to the payment or collection of taxes. FSI shall take reasonable
measures as instructed by the Fund and agreed upon by FSI to enable the Fund to
identify proposed transfers that, if effected, will likely cause the Fund to
fall within the Internal Revenue Code definitions of a personal holding company
and shall not make such transfers contrary to the Fund's instructions without
the prior written approval of the Fund and its counsel.
SECTION 5. FSI shall forward Share Certificates in "non-negotiable" form
by first-class or registered mail, or by whatever means FSI deems equally
reliable and expeditious. While in transit to the addressee, all deliveries of
Share Certificates shall be insured by FSI as it deems appropriate. FSI shall
not mail Share Certificates in "negotiable" form, unless requested in writing by
the Fund and fully indemnified by the Fund to FSI's satisfaction.
SECTION 6. In registering transfers of Shares of each Series, FSI may rely
upon the Uniform Commercial Code or any other statutes that, in the opinion of
FSI's counsel, protect FSI and the Fund from liability arising from (i) not
requiring complete documentation, (ii) registering a transfer without an adverse
claim inquiry, (iii) delaying registration for purposes of such inquiry, or (iv)
refusing registration whenever an adverse claim requires such refusal.
SECTION 7. FSI may issue new Share Certificates in place
of those lost, destroyed or stolen, upon receiving indemnity
<PAGE>
satisfactory to FSI and may issue new Share Certificates in exchange for, and
upon surrender of, mutilated Share Certificates as FSI deems appropriate.
SECTION 8. Unless otherwise directed by the Fund, FSI may issue or
register Share Certificates reflecting the signature, or facsimile thereof, of
an officer who has died, resigned or been removed by the Fund. The Fund shall
file promptly with FSI any approvals, adoptions, or ratifications of such
actions as may be required by law or FSI.
SECTION 9. FSI shall maintain customary stock registry records for each
Series in the Fund, noting the issuance, transfer or redemption of Shares and
the issuance and transfer of Share Certificates. FSI may also maintain for each
Series an account entitled "Unissued Certificate Account," in which it will
record the Shares, and fractions thereof, issued and outstanding from time to
time for which issuance of Share Certificates has not been requested. FSI is
authorized to keep records for each Series, containing the names and last known
addresses of Shareholders and Planholders, and the number of Shares, and
fractions thereof, from time to time owned by them for which no Share
Certificates are outstanding. Each Shareholder or Planholder will be assigned a
single account number for each Series, even though Shares held under each Plan
and Shares for which Certificates have been issued will be accounted for
separately. Whenever a Shareholder deposits Shares represented
<PAGE>
by Share Certificates in a Plan that permits the deposit of Shares thereunder,
FSI upon receipt of the Share Certificates registered in the name of the
Shareholder (or if not registered, in proper form for transfer), shall cancel
such Share Certificates, debit the Shareholder's individual account, credit the
Shares to the Unissued Share Certificate Account pursuant to SECTION 10 below
and credit the deposited Shares to the proper Plan account.
SECTION 10. FSI shall issue Share Certificates for Shares of each Series
only upon receipt of a written request from a Shareholder. If Shares are
purchased without such request, FSI shall merely note on its stock registry
records the issuance of the Shares and fractions thereof and credit the Unissued
Certificate Account and the respective Shareholders' accounts with the Shares.
Whenever Shares, and fractions thereof, owned by Shareholders are surrendered
for redemption, FSI may process the transactions by making appropriate entries
in the stock transfer records, and debiting the Unissued Certificate Account and
the record of issued Shares outstanding; it shall be unnecessary for FSI to
reissue Share Certificates in the name of the Fund.
SECTION 11. FSI shall also perform the usual duties and functions required
of a stock transfer agent for a corporation, including but not limited to (i)
issuing Share Certificates as Treasury Shares, as directed by Written
Instructions, and (ii)
<PAGE>
transferring Share Certificates from one Shareholder to another in the usual
manner. FSI may rely conclusively and act without further investigation upon any
list, instruction, certification, authorization, Share Certificate or other
instrument or paper reasonably believed by it in good faith to be genuine and
unaltered, and to have been signed, countersigned or executed or authorized by a
duly-authorized person or persons, or by the Fund, upon the advice of counsel
for the Fund or for FSI, or upon the net asset value quotation of the Service
Agent, as hereinafter defined. FSI may record any transfer of Share Certificates
which it reasonably believes in good faith to have been duly-authorized, or may
refuse to record any transfer of Share Certificates if, in good faith, it deems
such refusal necessary in order to avoid any liability on the part of either the
Fund or FSI. The Fund agrees to indemnify and hold harmless FSI from and against
any and all losses, costs, claims, and liability that it may suffer or incur by
reason of such good faith reliance, action or failure to act.
SECTION 12. FSI shall notify the Fund of any request or demand for the
inspection of the Fund's share records. FSI shall abide by the Fund's
instructions for granting or denying the inspection; provided, however, FSI may
grant the inspection without such instructions if it is advised by its counsel
that failure to do so will result in liability to FSI.
SECTION 13. For purposes of this Section, the Fund hereby
<PAGE>
instructs FSI to consider Shareholder and Planholder payments as federal funds
on the day indicated below:
(a) for a wire received prior to 12:00 noon Eastern time,
on the same day;
(b) for a wire received on or after 12:00 noon Eastern
time, on the next business day;
(c) for a check received prior to 12:00 noon Eastern time,
on the second business day following receipt; and
(d) for a check received on or after 12:00 noon Eastern time,
on the third business day following receipt.
Immediately after 4:00 p.m. Eastern time or such other time as the Fund may
reasonably specify for any Series (the "Valuation Time") on each day that the
Fund and FSI are open for business, FSI shall obtain from the Fund's service
agent, as specified by the Fund in writing to FSI (the "Service Agent"), a
quotation (on which it may conclusively rely) of the net asset value, determined
as of the Valuation Time on that day. On each day FSI is open for business, it
shall use the net asset value determined by the Service Agent to compute the
number of Shares and fractional Shares to be purchased and the aggregate
purchase proceeds to be deposited with the Custodian. As necessary but no more
frequently than daily (unless a more frequent basis is agreed to by FSI), FSI
shall place a purchase order with the Custodian for the proper number of Shares
and fractional Shares to be purchased and promptly thereafter shall send written
<PAGE>
confirmation of such purchase to the Custodian and the Fund.
SECTION 14. Having made the calculations required by
SECTION 13, FSI shall thereupon pay the Custodian the aggregate net asset value
of Shares of each Series purchased. The aggregate number of Shares and
fractional Shares purchased shall then be issued daily and credited by FSI to
the Unissued Certificate Account. FSI shall also credit each Shareholder's
separate account with the number of shares purchased by such Shareholder. FSI
shall promptly thereafter mail written confirmation of the purchase to each
Shareholder or Planholder, and if requested, to a specified broker-dealer and
the Fund. Each confirmation shall indicate the prior Share balance, the new
Share balance, the Shares held under a Plan (if any), the Shares for which Share
Certificates are outstanding (if any), the amount invested and the price paid
for the newly-purchased Shares.
SECTION 15. Prior to the Valuation Time on each business day, as specified
in accordance with SECTION 13 above, FSI shall process all requests to redeem
Shares of each Series and advise the Custodian of (i) the total number of Shares
of each Series available for redemption and (ii) the number of Shares and
fractional Shares of each Series requested to be redeemed. Upon confirmation of
the net asset value, FSI shall notify the Fund and the Custodian of the
redemption, apply the redemption proceeds in accordance with SECTION 16 and the
Fund's prospectus, record the redemption in the stock registry books, and debit
the
<PAGE>
redeemed Shares from the Unissued Certificate Account and the individual account
of the Shareholder or Planholder.
In lieu of carrying out the redemption procedures described in the
preceding paragraph, FSI may, at the request of the Fund, sell Shares of each
Series to the Fund as repurchases from Shareholders and/or Planholders, provided
that the sales price is not less than the applicable redemption price. The
redemption procedures shall then be appropriately modified.
SECTION 16. The proceeds of redemption shall be remitted by FSI in
accordance with the Fund's then current prospectus as follows:
(a) By check mailed to the Shareholder or Planholder at his last known
address. The request and stock certificates, if any, for Shares being redeemed
must reflect a guarantee of the owner's signature by a domestic commercial bank
or trust company or a member firm of a national securities exchange. If Share
Certificates have not been issued to the redeeming Shareholder or Planholder,
the signature of the Shareholder or Planholder on the redemption request must be
similarly guaranteed. The Fund may authorize FSI in writing to waive the
signature guarantee for any specific transaction or classes of transactions;
(b) By wire to a designated bank or broker upon telephone request, without
signature guarantee, if such redemption procedure has been elected on the
Shareholder's or Planholder's account information form. Any change in the
designated bank or
<PAGE>
broker account will be acted upon by FSI only if made in writing by the
Planholder or Shareholder, with signature guaranteed as required by paragraph
(a) above;
(c) In case of an expedited telephone redemption, by check payable to the
Shareholder or Planholder of record and mailed for deposit to the bank account
designated in the Shareholder account information form;
(d) By other procedures commonly followed by mutual funds, as set forth in
Written Instructions from the Fund and mutually agreed upon by the Fund and FSI.
For purposes of redemption of shares of any Series that have been
purchased by check within fifteen (15) days prior to receipt of the redemption
request, the Fund shall provide FSI with Written Instructions concerning the
time within which such requests may be honored.
The authority of FSI to perform its responsibilities under SECTIONS 15 and
16 shall be suspended if FSI receives notice of the suspension of the
determination of the Fund's net asset value.
SECTION 17. Upon the declaration of each dividend and each capital gains
distribution by the Fund's Board of Directors, the Fund shall notify FSI of the
date of such declaration, the amount payable per share, the record date for
determining the Shareholders entitled to payment, the payment and the
reinvestment date price.
<PAGE>
SECTION 18. On or before each payment date the Fund will transfer, or
cause the Custodian to transfer, to FSI the total amount of the dividend or
distribution currently payable. FSI will, on the designated payment date,
reinvest all dividends in additional shares and shall thereupon pay the
Custodian the aggregate net asset value of the additional shares and shall
promptly mail to each Shareholder or Planholder at his last known address, a
statement showing the number of full and fractional shares (rounded to three
decimal places) then owned by the Shareholder or Planholder and the net asset
value of such shares; provided, however, that if a Shareholder or Planholder
elects to receive dividends in cash, FSI shall prepare a check in the
appropriate amount and mail it to him at his last known address within five (5)
business days after the designated payment date.
SECTION 19. FSI shall maintain records regarding the issuance and
redemption of Shares of each Series and dividend reinvestments. Such records
will list the transactions effected for each Shareholder and Planholder and the
number of Shares and fractional Shares owned by each for which no Share
Certificates are outstanding. FSI agrees to make available upon request and to
preserve for the periods prescribed in Rule 31a-2 of the Investment Company Act
of 1940 any records related to services provided under this Agreement and
required to be maintained by Rule 31a-1 of such Act. FSI acknowledges that these
records are the property of the Fund and will surrender same to the Fund
<PAGE>
promptly on request.
SECTION 20. FSI shall maintain those records necessary to enable the Fund
to file, in a timely manner, Form N-SAR (Semiannual report) or any successor
monthly, quarterly or annual report required by the Investment Company Act of
1940, or rules and regulations thereunder.
SECTION 21. FSI shall cooperate with the Fund's independent public
accountants and shall take reasonable action to make all necessary information
available to such accountants for the performance of their duties.
SECTION 22. In addition to the services described above, FSI will perform
other services for the Fund as mutually agreed upon in writing from time to
time, including but not limited to preparing and filing federal tax forms with
the Internal Revenue Service, mailing federal tax information to Shareholders,
mailing semi-annual Shareholder reports, preparing the annual list of
Shareholders and mailing notices of Shareholders' meetings, proxies and proxy
statements. FSI shall answer Shareholder inquiries related to their share
accounts and other correspondence requiring an answer from the Fund. FSI shall
maintain dated copies of written communications from Shareholders, and replies
thereto.
SECTION 23. Nothing contained in this Agreement is
intended to or shall require FSI, in any capacity hereunder, to
perform any functions or duties on any holiday, weekend or
<PAGE>
weekday on which day FSI or the New York Stock Exchange is closed. Functions or
duties normally scheduled to be performed on such days shall be performed on,
and as of, the next business day on which both the New York Stock Exchange and
FSI are open, unless otherwise required by law; provided, however, that all
purchase or redemption requests received by the Fund for a date on which the
Exchange is open but FSI is not shall be priced and executed "as of" such date
on the next business day FSI is open, unless otherwise required by law.
SECTION 24. The Fund agrees to pay FSI compensation for its services as
set forth in Schedule A attached hereto, or as shall be set forth in written
amendments to such Schedule approved by the Fund and FSI from time to time.
SECTION 25. FSI shall not be liable for any taxes, assessments or
governmental charges that may be levied or assessed on any basis whatsoever in
connection with the Fund, or any Plan thereof, Shareholder or Planholder,
excluding taxes assessed against FSI for compensation received by it hereunder.
SECTION 26. FSI shall not be liable for any non-negligent action taken in
good faith and reasonably believed by FSI to be within the powers conferred upon
it by this Agreement. The Fund shall indemnify FSI and hold it harmless from and
against any and all losses, claims, damages, liabilities or expenses (including
reasonable expenses for legal counsel) arising directly or indirectly out of or
in connection with this Agreement; provided
<PAGE>
such loss, claim, damage, liability or expense is not the direct result of FSI's
negligence or willful misconduct, and provided further that FSI shall give the
Fund notice and reasonable opportunity to defend any such loss, claim, etc. in
the name of the Fund or FSI, or both. Without limiting the foregoing:
(a) FSI may rely upon the advice of the Fund or counsel to the Fund or
FSI, and upon statements of accountants, brokers and other persons believed by
FSI in good faith to be experts in the matters upon which they are consulted.
FSI shall not be liable for any action taken in good faith reliance upon such
advice or statements;
(b) FSI shall not be liable for any action reasonably taken in good faith
reliance upon any Written Instructions, Oral Instructions, including the Service
Agent's net asset value quotation, or certified copy of any resolution of the
Fund's Board of Directors; provided, however, that upon receipt of a Written
Instruction countermanding a prior Written or Oral Instruction that has not been
fully executed by FSI, FSI shall verify the content of the second Written
Instruction and honor it, to the extent possible. FSI may rely upon the
genuineness of any such document, or copy thereof, reasonably believed by FSI in
good faith to have been validly executed; and
(c) FSI may rely, and shall be protected by the Fund in acting upon any
signature, instruction, request, letter of transmittal, certificate, opinion of
counsel, statement,
<PAGE>
instrument, report, notice, consent, order, or other paper or document
reasonably believed by it in good faith to be genuine and to have been signed or
presented by the purchaser, Fund or other proper party or parties.
(d) The Fund shall, as soon as possible, amend its prospectus to conform
with the provisions of this Agreement and make all necessary filings of the
amended prospectus, and shall indemnify FSI for any loss, claim or expense
resulting from FSI's reliance upon the Fund's representations in this Agreement,
notwithstanding a contrary representation in its prospectus.
SECTION 27. Upon receipt of Written Instructions, FSI is authorized to
make payment upon redemption of Shares without a signature guarantee. The Fund
hereby agrees to indemnify and hold FSI harmless from any and all expenses,
damages, claims, suits, liabilities, action, demands or losses whatsoever
arising out of or in connection with a payment by FSI for redemption of Shares
without a signature guarantee. Upon the request of FSI, the Fund shall assume
the entire defense of any such action, suit or claim. FSI shall notify the Fund
in a timely manner of any such action, suit or claim.
SECTION 28. The Fund shall deliver or cause to be delivered over to FSI
(i) an accurate list of Shareholders of the Fund, showing each Shareholder's
last known address, number of Shares owned and whether such shares are
represented by outstanding Share Certificates or by non-certificated share
<PAGE>
accounts, (ii) all records relating to Plans of the Fund, including original
applications signed by the Planholders and original plan accounts recording
payment, deductions, reinvestments, withdrawals and liquidations and (iii) all
shareholder records, files, and other materials necessary or appropriate for
proper performance of the functions assumed by FSI under this Agreement
(collectively referred to as the "Materials"). The Fund shall indemnify and hold
FSI harmless from any and all expenses, damages, claims, suits, liabilities,
actions, demands and losses arising out of or in connection with any error,
omission, inaccuracy or other deficiency of such Materials, or out of the
failure of the Fund to provide any portion of the Materials or to provide any
information needed by FSI to knowledgeably perform its functions.
SECTION 29. FSI shall, at all times, act in good faith and shall use
whatever methods it deems appropriate to ensure the accuracy of all services
performed under this Agreement. FSI shall be liable only for loss or damage due
to errors caused by FSI's negligence, bad faith or willful misconduct or that of
its employees.
SECTION 30. This Agreement may be amended from time to time by a written
supplemental agreement executed by the Fund and FSI and without notice to or
approval of the Shareholders or Planholders; provided the intent and purposes of
any Plan, as stated from time to time in the Fund's prospectus, are observed.
<PAGE>
The parties hereto may adopt procedures as may be appropriate or practical under
the circumstances, and FSI may conclusively rely on the determination of the
Fund that any procedure that has been approved by the Fund does not conflict
with or violate any requirement of its Articles of Incorporation, By-Laws or
prospectus, or any rule, regulation or requirement of any regulatory body.
SECTION 31. The Fund shall file with FSI a certified copy of the operative
resolution of its Board of Directors authorizing the execution of Written
Instructions or the transmittal of Oral Instructions.
SECTION 32. The terms, as defined in this Section, whenever used in this
Agreement or in any amendment or supplement hereto, shall have the meanings
specified below, insofar as the context will allow:
(a) The Fund: The term Fund shall mean Vontobel Funds,
Inc.
(b) Custodian: The term Custodian shall mean Star Bank, NA
(c) Series: The term Series shall mean the Vontobel
International Equity Fund, the Vontobel U.S. Value Fund, the Vontobel
International Bond Fund, the Vontobel Eastern European Equity Fund, the Vontobel
Emerging Markets Equity Fund and the Vontobel Eastern European Debt Fund series
and any series that the Fund shall subsequently establish.
(d) Securities: The term Securities shall mean bonds,
<PAGE>
debentures, notes, stocks, shares, evidences of indebtedness, and other
securities and investments from time to time owned by the Fund.
(e) Share Certificates: The term Share Certificates shall
mean the stock certificates for the Shares of the Fund.
(f) Shareholders: The term Shareholders shall mean the registered owners
from time to time of the Shares of the Fund, as reflected on the stock registry
records of the Fund.
(g) Shares: The term Shares shall mean the issued and
outstanding shares of common stock of the Fund.
(h) Oral Instructions: The term Oral Instructions shall mean an
authorization, instruction, approval, item or set of data, or information of any
kind transmitted to FSI in person or by telephone, vocal telegram or other
electronic means, by a person or person reasonably believed in good faith by FSI
to be a person or person authorized by a resolution of the Board of Directors of
the Fund to give Oral Instructions on behalf of the Fund. Each Oral Instruction
shall specify whether it is applicable to the entire Fund or a specific Series
of the Fund.
(i) Written Instructions: The term Written Instructions shall mean an
authorization, instruction, approval, item or set of data, or information of any
kind transmitted to FSI in original writing containing original signatures, or a
copy of such document transmitted by telecopy, including transmission of such
signature, or other mechanical or documentary means, at the
<PAGE>
request of a person or persons reasonably believed in good faith by FSI to be a
person or persons authorized by a resolution of the Board of Directors of the
Fund to give Written Instructions on behalf of the Fund. Each Written
Instruction shall specify whether it is applicable to the entire Fund or a
specific Series of the Fund.
(j) Plan: The term Plan shall include such investment plan, dividends or
capital gains reinvestment plans, systematic withdrawal plans or other types of
plans set forth in the then current prospectus of the Fund (excluding any
qualified retirement plan that is a Shareholder of the Fund) in form acceptable
to FSI, adopted by the Fund from time to time and made available to its
Shareholders, including plans or accounts by self-employed individuals or
partnerships.
(k) Planholder: The term Planholder shall mean a Shareholder who, at the
time of reference, is participating in a Plan, including any underwriter,
representative or broker-dealer.
SECTION 33. In the event that any check or other order for the payment of
money is returned unpaid for any reason, FSI shall promptly notify the Fund of
the non-payment.
SECTION 34. Either party may give sixty (60) days written notice to the
other of the termination of this Agreement, such termination to take effect at
the time specified in the notice.
SECTION 35. Any notice or other communication required by
or permitted to be given in connection with this Agreement shall
<PAGE>
be in writing, and shall be delivered in person or sent by first-class mail,
postage prepaid, to the respective parties.
Notice to the Fund shall be given as follows until further notice:
VONTOBEL FUNDS, INC.
1500 Forest Avenue, Suite 223
Richmond, Virginia 23229
Attention: Mr. John Pasco, III, Chairman
Notice to FSI shall be given as follows until further notice:
FUND SERVICES, INC.
1500 Forest Avenue, Suite 111
Richmond, Virginia 23229
Attention: Mr. William R. Carmichael, Jr., President
SECTION 36. The Fund represents and warrants to FSI that
the execution and delivery of this Transfer Agent Agreement by the undersigned
officer of the Fund has been duly and validly authorized by resolution of the
Fund's Board of Directors. FSI represents and warrants to the Fund that the
execution and delivery of this Agreement by the undersigned officer of FSI has
also been duly and validly authorized.
SECTION 37. This Agreement may be executed in more than one counterpart,
each of which shall be deemed to be an original.
SECTION 38. This Agreement shall extend to and shall bind
the parties hereto and their respective successors and assigns;
<PAGE>
provided, however, that this Agreement shall not be assignable by the Fund
without the written consent of FSI or by FSI without the written consent of the
Fund, authorized or approved by a resolution of the Fund's Board of Directors.
SECTION 39. This Agreement shall be governed by the laws
of the State of Virginia.
WITNESS the following signatures:
VONTOBEL FUNDS, INC.
By:
Title:
Date:
FUND SERVICES, INC.
By:
Title:
Date:
<PAGE>
ATTACHMENT A
FEE SCHEDULE
I. Account Maintenance Fees - Per Series:
0 - 5,000 Accounts - $11.00 per account per year
5,001 - 15,000 Accounts - $10.00 per account per year
Over 15,000 Accounts - $ 9.50 per account per year
Applicable fees billed monthly at 1/12 the annual rate for each
month the account is open.
II. Transaction/Processing Fees:
Open New Account - $2.50
Partial or Total Redemption - $2.50
Tax Statement or other Transaction - $1.00
Addition to Account - $1.00
Dividend/Distribution - $1.00
(In excess of two per year)
(Plus statement charges)
Fees incurred will be billed monthly
III. Other Specified Charges:
Blue Sky Reports (Under 1,000 S/H) - $10.00 Blue Sky Reports (Under
5,000 S/H) - $15.00 Blue Sky Reports (Over 5,000 S/H) - $25.00
Shareholder List (Under 2,500 S/H) - $15.00 Shareholder List (Over
2,500 S/H) - $25.00
IV. Minimum Fee:
The minimum annual fee is $16,500.00 per series and is payable at
the rate $1,375.00 per month. The minimum covers account maintenance fees and
regular purchase/redemption transaction fees only. Any new series started by
Vontobel Funds, Inc., will receive a reduced minimum of $12,000.00 for the first
twelve months of operation.
V. Conversion Fees:
Conversion Fees for acquired funds will be billed at the new account
rate per account converted plus programming and out-of-pocket costs.
VI. Out-of-Pocket Costs:
The cost of forms, postage, stationery, outside mailing services,
microfilm or magnetic tape data transfer etc. will be in addition to the fees
listed above.
<PAGE>
VII. Transfer/De-Installation of a Series
Base Charge - $4.50 per account transferred plus necessary
programming costs and other out-of-pocket expenses.
Additional Charges - Time and materials for all functions/processing
not included in the Base Charge.
Items included in the Base Charge:
. Initial meeting to determine data exchange requirements
set tentative milestones.
. Furnish file layouts and specifications of data
formats.
. Periodic conference calls/program upgrades (up to 1
hour/week)
. Reasonable telephone access to discuss/solve unexpected
items.
. Initial set of test data files (partial or complete).
. Complete set of data files for parallel test.
. Complete set of date files for final data transfer.
. Reasonable staff availability up to 30 days after
transfer to address problems/resolve conflicts.
Items covered under Time and Materials:
. Excessive meetings/telephone conferences (more than 1
hour/week
. Production of test/data files beyond those included in
the Base Charge
. Packing/shipping shareholder files.
. Hard copy production of test/data files.
. Rerouting of fund materials and shareholder
transactions received after the transfer date.
. Problem resolution/adjustments performed beyond 30 days
after transfer.
<PAGE>
Charges for materials and/or equipment acquired specifically for the transfer
will be passed through at cost. Staff time will be at the following rates:
Administrative Staff - $30.00/hr. Managerial Staff -
$50.00/hr.
Programmer/Analyst - $50.00-$75.00/hr.
Officer - $100.00/hr.
Principal - $250.00/hr.
Staff time will be rounded to the nearest hour with a one hour minimum for each
project.
Responsibility for transfer agent charges (transferring or receiving entity) is
to be determined in advance and agreed in writing before planning and data
transfer commence.
VIII. Term of Agreement
Notwithstanding the Notice of Termination provisions of SECTION 34 of
the Basic Agreement, the Initial term of this contract will be 12
months from the date of execution. The above fees are guaranteed for
the initial term. This contract may be extended beyond such initial
term upon mutual agreement of the Funds and FSI.
<PAGE>
EXHIBIT 19
ADMINISTRATIVE SERVICES AGREEMENT
Administrative Services Agreement (the "Agreement") dated January 1, 1999
by and between VONTOBEL FUNDS, INC. (the "Fund"), a diversified, open-end
management investment company, duly organized as a corporation in accordance
with the laws of the State of Maryland, and COMMONWEALTH SHAREHOLDER SERVICES,
INC. ("CSS"), a corporation duly organized as a corporation in accordance with
the laws of the Commonwealth of Virginia.
WITNESSETH THAT:
WHEREAS, the Fund desires to appoint CSS as its Administrative Services
Agent, for and on behalf of the VONTOBEL INTERNATIONAL EQUITY FUND, THE VONTOBEL
U.S. VALUE FUND, THE VONTOBEL INTERNATIONAL BOND FUND, THE EASTERN EUROPEAN
EQUITY FUND, THE VONTOBEL EMERGING MARKETS EQUITY FUND AND THE VONTOBELL EASTERN
EUROPEAN DEBT FUND (the "Portfolios"), to perform certain recordkeeping and
shareholder servicing functions required of a duly registered investment company
to comply with certain provisions of federal, state and local law, rules and
regulations, and, as is required, to assist the Fund in preparing and filing
certain financial reports, and further to perform certain daily functions in
connection with on-going operations of the Fund and the Portfolios, and provide
ministerial services to implement the investment decisions of the Fund and the
investment advisor of the Portfolios, Vontobel USA Inc. (the "Advisor"); and
WHEREAS, CSS is willing to perform such functions upon the
terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto, intending to be legally bound,
agree as follows:
Section 1. CSS shall examine and review all records and documents of the
Portfolios pertaining to its duties under this Agreement in order to determine
and/or recommend how such records and documents shall be maintained.
Section 2. CSS shall, as necessary for such purposes, advise the Fund and
its agents of the information which is deemed to be "necessary" for the
performance of its duties under this Agreement, and upon receipt of necessary
information and Written or Oral Instructions from the Fund, shall maintain and
keep current such shareholder relations records.
Unless the information necessary to perform the above functions is
furnished in writing to CSS by the Fund or its agents (such as Custodians,
Transfer Agents, etc.), CSS shall incur no
1
<PAGE>
liability and the Fund shall indemnify and hold harmless CSS from and against
any liability arising from any discrepancy in the information received by CSS
and used in the performance by CSS of its duties.
It shall be the responsibility of the Fund to furnish CSS with the net
asset value per share, declaration, record and payment dates and amounts of any
dividends or income and any other special actions required concerning each of
its securities.
CSS shall maintain such shareholder records above mentioned as required by
regulation and as agreed upon between the Fund and CSS.
Section 3. The Fund shall confirm to the Fund's Transfer Agent all
purchases and redemptions of shares of the Portfolios effected through the Fund
or its distributor, as and when such orders are accepted by the Fund or an
authorized agent of the Fund designated for that purpose. CSS shall receive from
the Fund's Transfer Agent daily reports of share purchases, redemptions, and
total shares outstanding, and shall be accountable for the information contained
in such reports of purchases and redemptions when received. It is agreed by the
parties that the net asset value per share of the Fund will be calculated in
accordance with Rule 22c-1 under the Investment Company Act of 1940 and as
otherwise directed by the Board of Directors of the Fund.
CSS shall reconcile its records of outstanding shares and shareholder
accounts with the Fund's Transfer Agent periodically, and not less frequently
than monthly.
Section 4. CSS shall provide assistance to the Fund in the servicing of
shareholder accounts, which may include telephone and written conversations,
assistance in redemptions, exchanges, transfers and opening accounts as may be
required from time to time. CSS shall, in addition, provide such additional
administrative non-advisory management services as CSS and the Fund may from
time to time agree.
Section 5. The accounts and records maintained by CSS shall be the
property of the Fund, and shall be made available to the Fund, within a
reasonable period of time, upon demand. CSS shall assist the Fund's independent
auditors, or any other person authorized by the Fund or, upon demand, any
regulatory body as authorized by law or regulation, in any requested review of
the Fund's accounts and records but shall be reimbursed for all reasonable and
documented expenses and employee time invested in any such review outside of
routine and normal periodic reviews. Upon receipt from the Fund of any necessary
information, CSS shall assist the Fund in organizing necessary data for the
Fund's completion of any necessary tax returns, questionnaires, periodic reports
to shareholders and such other reports and information requests as the Fund and
CSS shall agree upon from time to time.
2
<PAGE>
Section 6. CSS and the Fund may from time to time adopt procedures they
agree upon, and, absent knowledge to the contrary, CSS may conclusively assume
that any procedure approved by the Fund or directed by the Fund, does not
conflict with or violate any requirements of Fund's Prospectuses, Articles of
Incorporation, By-Laws, registration statements, orders, or any rule or
regulation of any regulatory body or governmental agency. The Fund (acting
through its officers or other agents) shall be responsible for notifying CSS of
any changes in regulations or rules which might necessitate changes in the
Fund's procedures.
Section 7. CSS may rely upon the advice of the Fund and upon statements of
the Fund's lawyers, accountants and other persons believed by it in good faith
to be expert in matters upon which they are consulted, and CSS shall not be
liable for any actions taken in good faith upon such statements.
Section 8. CSS shall not be liable for any actions taken in good faith
reliance upon any authorized Oral Instructions, any Written Instructions, and
certified copy of any resolution of the Board of Directors of the Fund or any
other document reasonably believed by CSS to be genuine and to have been
executed or signed by the proper person or persons.
CSS shall not be held to have notice of any change of authority of any
officer, employee or agent of the Fund until receipt of notification thereof by
the Fund.
The Fund shall indemnify and hold CSS harmless from any and all expenses,
damages, claims, suits, liabilities, actions, demands and losses whatsoever
arising out of or in connection with any error, omission, inaccuracy or other
deficiency of any information provided to CSS by the Fund, or the failure of the
Fund to provide any information needed by CSS knowledgeably to perform its
functions hereunder. Also, the Fund shall indemnify and hold harmless CSS from
all claims and liabilities (including reasonable documented expenses for legal
counsel) incurred by or assessed against CSS in connection with the performance
of this Agreement, except such as may arise from CSS's own negligent action,
omission or willful misconduct; provided, however, that before confessing any
claim against it, CSS shall give the Fund reasonable opportunity to defend
against such claim in the name of the Fund or CSS or both.
Section 9. The Fund agrees to pay CSS compensation for its services and to
reimburse it for expenses, as set forth in the Schedule attached hereto, or as
shall be set forth in amendments
3
<PAGE>
to such schedule approved by the Fund's Board of Directors and CSS.
Section 10. Except as required by laws and regulations governing
investment companies, nothing contained in this Agreement is intended to or
shall require CSS, in any capacity hereunder, to perform any functions or duties
on any holiday or other day of special observance on which CSS is closed.
Functions or duties normally scheduled to be performed on such days shall be
performed on, and as of, the next business day on which both the Fund and CSS
are open. CSS will be open for business on days when the Fund is open for
business and/or as otherwise set forth in the Fund's Prospectuses and Statements
of Additional Information.
Section 11. Either the Fund or CSS may give written notice to the other of
the termination of this Agreement, such termination to take effect at the time
specified in the notice, which time shall be not less than 90 days from the
giving of such notice. Such termination shall be without penalty.
Section 12. Any notice or other communication required by or permitted to
be given in connection with this Agreement shall be in writing, and shall be
delivered in person or sent by first-class mail, postage prepaid, to the
respective parties at their last known address, except that Oral Instructions
may be given if authorized by the Board of the Fund and preceded by a
certificate from the Fund's secretary so attesting.
Notices to the Fund shall be directed to:
1500 Forest Ave.
Suite 223
Richmond, VA 23229
Notices to CSS shall be directed to:
1500 Forest Ave.
Suite 223
Richmond, VA 23229
Section 13. This Agreement may be executed in two or more counterparts,
each of which, when so executed, shall be deemed to be an original, but such
counterparts shall together constitute but one and the same instrument.
Section 14. This Agreement shall extend to and shall be
binding upon the parties hereto and their respective successors and
4
<PAGE>
assigns; provided, however, that this Agreement shall not be assignable by the
Fund without the written consent of CSS, or by CSS without the written consent
of the Fund, authorized or approved by a resolution of its Board of Directors.
Section 15. For purposes of this Agreement, the terms Oral Instructions
and Written Instructions shall mean:
Oral Instructions: The term Oral Instruction shall mean an authorization,
instruction, approval, item or set of data, or information of any kind
transmitted to CSS in person or by telephone, telegram, telecopy, or other
mechanical or documentary means lacking a signature, by a person or persons
believed in good faith by CSS to be a person or persons authorized by a
resolution of the Board of Directors of the Fund, to give Oral Instructions on
behalf of the Fund.
Written Instructions: The term Written Instruction shall mean an
authorization, instruction, approval, item or set of data, or information of any
kind transmitted to CSS in original writing containing original signatures or a
copy of such document transmitted by telecopy including transmission of such
signature believed in good faith by CSS to be the signature of a person
authorized by a resolution of the Board of Directors of the Fund to give Written
Instructions on behalf of the Fund.
The Fund shall file with CSS a certified copy of each resolution of its
Board of Directors authorizing execution of Written Instructions or the
transmittal of Oral Instructions as provided above.
Section 16. This Agreement shall be governed by the laws of the State of
Maryland.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers as of the day and year first above
written.
VONTOBEL FUNDS, INC.
By:
John Pasco, III
Chairman & President
COMMONWEALTH SHAREHOLDER SERVICES, INC.
By:
John Pasco, III
Chief Executive Officer
6
<PAGE>
SCHEDULE A TO
ADMINISTRATIVE SERVICES AGREEMENT
FOR THE
VONTOBEL INTERNATIONAL EQUITY FUND
VONTOBEL U.S. VALUE FUND
VONTOBEL INTERNATIONAL BOND FUND
VONTOBEL EASTERN EUROPEAN EQUITY FUND
VONTOBEL EMERGING MARKETS EQUITY FUND
VONTOBEL EASTERN EUROPEAN DEBT FUND
Pursuant to Section 9 of the Administrative Services
Agreement, dated January 1, 1999, by and between Vontobel Funds,
Inc. (the "Fund"), and Commonwealth Shareholder Services, Inc.
("CSS"), each portfolio of the Fund shall pay CSS a fee calculated
and paid monthly as follows:
A. For the performance of Blue Sky matters, CSS shall be paid at
the rate of $30 per hour of actual time used.
B. For shareholder servicing, CSS shall be paid at the rate of
$30 per hour of actual time used.
C. For all other administration, CSS shall be paid a fee at the rate of 0.2%
on the first $500 million per Portfolio per annum of the average daily net
assets and 0.15% on the average daily net assets in excess of $500
million.
D. In addition to the foregoing, the Fund shall reimburse CSS,
from the assets of the Portfolios, for the Portfolios'
proportionate share of general expenses incurred for the Fund
and for all expenses incurred by the Portfolios individually.
Such out-of-pocket expenses shall include, but not be limited
to: documented fees and costs of obtaining advice of counsel
or accountants in connection with its services to the Fund;
postage; long distance telephone; special forms required by
the Fund; any travel which may be required in the performance
of its duties to the Fund; and any other extraordinary
expenses it may incur in connection with its services to the
Fund.
7
<PAGE>
EXHIBIT 20
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the references to our firm in the Post-Effective Amendment to
the Registration Statement on Form N-1A of the Vontobel Funds, Inc. and to the
use of our reports each dated January 22, 1999 on the financial statements and
financial highlights of Vontobel U.S. Value Fund, Vontobel International Equity
Fund, Vontobel Eastern European Equity Fund, Vontobel International Bond Fund,
Vontobel Emerging Markets Equity Fund, and Vontobel Eastern European Debt Fund,
each a series of Vontobel Funds, Inc. Such financial statements, financial
highlights and reports of independent certified public accountants appear in the
1998 Annual Report to Shareholders and are incorporated by reference in the
Registration Statement and Prospectus.
TAIT, WELLER &
BAKER
Philadelphia, Pennsylvania
April 22, 1999
<PAGE>
<PAGE>
EXHIBIT 21
[ARTICLE] 6
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 6,280,880
[INVESTMENTS-AT-VALUE] 6,202,969
[RECEIVABLES] 493,766
[ASSETS-OTHER] 0
[OTHER-ITEMS-ASSETS] 52,060
[TOTAL-ASSETS] 7,891,273
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 9,388
[TOTAL-LIABILITIES] 9,388
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 7,994,587
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (112,702)
[NET-ASSETS] 7,881,885
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 1,727,388
[OTHER-INCOME] 0
[EXPENSES-NET] 244,469
[NET-INVESTMENT-INCOME] 1,482,919
[REALIZED-GAINS-CURRENT] 182,598
[APPREC-INCREASE-CURRENT] 443,033
[NET-CHANGE-FROM-OPS] 2,108,550
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 1,089,508
[DISTRIBUTIONS-OF-GAINS] 139,510
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2,052,642
[NUMBER-OF-SHARES-REDEEMED] 10,636,534
[SHARES-REINVESTED] 1,148,320
[NET-CHANGE-IN-ASSETS] (7,435,572)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 154,111
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 294,944
[AVERAGE-NET-ASSETS] 0
[PER-SHARE-NAV-BEGIN] 9.70
[PER-SHARE-NII] 1.27
[PER-SHARE-GAIN-APPREC] 1.09
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 1.85
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.21
[EXPENSE-RATIO] 1.98
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
2
EX-99
[ARTICLE] 6
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 62,292,300
[INVESTMENTS-AT-VALUE] 36,419,523
[RECEIVABLES] 1,151,198
[ASSETS-OTHER] 29,955
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 37,830,657
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 1,676,715
[TOTAL-LIABILITIES] 1,676,715
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 88,072,835
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (26,042,513)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (25,876,380)
[NET-ASSETS] 36,153,942
[DIVIDEND-INCOME] 594,796
[INTEREST-INCOME] 0
[OTHER-INCOME] 0
[EXPENSES-NET] 1,934,068
[NET-INVESTMENT-INCOME] (1,339,272)
[REALIZED-GAINS-CURRENT] (24,016,438)
[APPREC-INCREASE-CURRENT] (18.220.110)
[NET-CHANGE-FROM-OPS] (43,575,820)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 68,491,154
[NUMBER-OF-SHARES-REDEEMED] 128,169,797
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] (59,678,643)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,003,342
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2,060,649
[AVERAGE-NET-ASSETS] 0
[PER-SHARE-NAV-BEGIN] 15.25
[PER-SHARE-NII] (.31)
[PER-SHARE-GAIN-APPREC] (6.80)
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 8.14
[EXPENSE-RATIO] 2.41
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
[TYPE] EX-99
[ARTICLE] 6
</TABLE>
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 1,795,928
[INVESTMENTS-AT-VALUE] 1,548,712
[RECEIVABLES] 36,179
[ASSETS-OTHER] 4,439
[OTHER-ITEMS-ASSETS] 51,076
[TOTAL-ASSETS] 1,640,406
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 29,675
[TOTAL-LIABILITIES] 29,675
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 2,574,350
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (720,383)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (246,619)
[NET-ASSETS] 1,610,731
[DIVIDEND-INCOME] 57,464
[INTEREST-INCOME] 0
[OTHER-INCOME] 0
[EXPENSES-NET] 58,038
[NET-INVESTMENT-INCOME] (574)
[REALIZED-GAINS-CURRENT] (625,068)
[APPREC-INCREASE-CURRENT] (139,157)
[NET-CHANGE-FROM-OPS] (764,799)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 469,477
[NUMBER-OF-SHARES-REDEEMED] 1,994,489
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 1,225,012
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 35,051
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 172,007
[AVERAGE-NET-ASSETS] 0
[PER-SHARE-NAV-BEGIN] 9.42
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] (2.11)
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 7.31
[EXPENSE-RATIO] 2.07
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 6,350,250
[INVESTMENTS-AT-VALUE] 6,457,255
[RECEIVABLES] 231,958
[ASSETS-OTHER] 24,911
[OTHER-ITEMS-ASSETS] 5,513
[TOTAL-ASSETS] 7,013,389
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 30,000
[TOTAL-LIABILITIES] 30,000
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 6,870,146
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 113,243
[NET-ASSETS] 6,983,389
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 532,645
[OTHER-INCOME] 0
[EXPENSES-NET] 128,978
[NET-INVESTMENT-INCOME] 403,667
[REALIZED-GAINS-CURRENT] 396,734
[APPREC-INCREASE-CURRENT] 967,732
[NET-CHANGE-FROM-OPS] 1,045,826
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 428,263
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 1,980,560
[NUMBER-OF-SHARES-REDEEMED] 6,734,117
[SHARES-REINVESTED] 397,700
[NET-CHANGE-IN-ASSETS] 4,355,857
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 80,161
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 229,139
[AVERAGE-NET-ASSETS] 0
[PER-SHARE-NAV-BEGIN] 9.89
[PER-SHARE-NII] .62
[PER-SHARE-GAIN-APPREC] .85
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] .70
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.66
[EXPENSE-RATIO] 1.61
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
EX-99
[ARTICLE]
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 111,246,362
[INVESTMENTS-AT-VALUE] 154,824,646
[RECEIVABLES] 1,460,045
[ASSETS-OTHER] 23,998
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 162,521,538
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 588,445
[TOTAL-LIABILITIES] 588,445
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 118,352,723
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 43,580,370
[NET-ASSETS] 161,933,093
[DIVIDEND-INCOME] 2,122,995
[INTEREST-INCOME] 253,915
[OTHER-INCOME] 0
[EXPENSES-NET] 2,270,093
[NET-INVESTMENT-INCOME] 106,817
[REALIZED-GAINS-CURRENT] 16,174,584
[APPREC-INCREASE-CURRENT] 10,265,830
[NET-CHANGE-FROM-OPS] 26,547,231
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 7,487,285
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 205,066,242
[NUMBER-OF-SHARES-REDEEMED] 230,004,112
[SHARES-REINVESTED] 6,999,999
[NET-CHANGE-IN-ASSETS] 17,937,871
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,505,510
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 2,334,883
[AVERAGE-NET-ASSETS] 0
[PER-SHARE-NAV-BEGIN] 18.15
[PER-SHARE-NII] .01
[PER-SHARE-GAIN-APPREC] 2.98
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] .96
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 20.18
[EXPENSE-RATIO] 1.36
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
EX-99
[ARTICLE] 6
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] DEC-31-1998
[INVESTMENTS-AT-COST] 151,511,157
[INVESTMENTS-AT-VALUE] 162,753,281
[RECEIVABLES] 702,265
[ASSETS-OTHER] 182,104
[OTHER-ITEMS-ASSETS] 18,282
[TOTAL-ASSETS] 201,044,861
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 581,993
[TOTAL-LIABILITIES] 581,993
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 188,834,750
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 385,994
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 11,242,124
[NET-ASSETS] 200,462,868
[DIVIDEND-INCOME] 1,988,339
[INTEREST-INCOME] 3,254,406
[OTHER-INCOME] 0
[EXPENSES-NET] 3,186,432
[NET-INVESTMENT-INCOME] 2,056,313
[REALIZED-GAINS-CURRENT] 29,341209
[APPREC-INCREASE-CURRENT] (4,007,234)
[NET-CHANGE-FROM-OPS] 27,390,288
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 1,357,295
[DISTRIBUTIONS-OF-GAINS] 16,117,877
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 270,442,839
[NUMBER-OF-SHARES-REDEEMED] 299,297,987
[SHARES-REINVESTED] 16,283,273
[NET-CHANGE-IN-ASSETS] (12,571,875)
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 1,903,694
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 3,235,891
[AVERAGE-NET-ASSETS] 0
[PER-SHARE-NAV-BEGIN] 16.51
[PER-SHARE-NII] .22
[PER-SHARE-GAIN-APPREC] 2.06
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 2.06
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 16.73
[EXPENSE-RATIO] 1.45
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
STRADLEY
RONON
STEVENS
& YOUNG, LLP
Attorneys At Law 2600 One Commerce Square Malvern, Pennsylvania
Philadelphia, PA 19103-7098 Cherry Hill, New Jersey
Merrill R. Steiner Fax: (215) 564-8120 Wilmington, Delaware
(215) 564-8039
[email protected] Limited Liability Partnership
April 26, 1999
VIA EDGAR
Filing Desk
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Vontobel Funds, Inc. (formerly, The World Funds, Inc.)
File Numbers: 2-78931 and 811-3551
Post-Effective Amendment to Registration Statement
Gentlemen:
Transmitted herewith for electronic filing with the U.S. Securities and
Exchange Commission (the Commission) on behalf of Vontobel Funds, Inc. (the
Registrant), pursuant to Rule 485(b) under the Securities Act of 1933, as
amended (the 1933 Act), is Post-Effective Amendment No. 36 (Amendment No. 36
under the Investment Company Act of 1940, as amended (the 1940 Act), referred
to herein as the 485(b) Amendment to the registration statement of the
Registrant).
The 485(b) Amendment contains the revised prospectus and statement of
additional information (Vontobel Prospectus/SAI) of the Vontobel U.S. Value
Fund, Vontobel International Equity Fund, Vontobel Emerging Markets Equity Fund,
Vontobel Eastern European Equity Fund, Vontobel International Bond Fund and
Vontobel Eastern European Debt Fund (the Funds) intended to comply with the
new Form N-1A simplified prospectus requirements and the plain English
requirements. The Vontobel Prospectus/SAI are modeled after the prospectuses and
statements of additional information of the CSI Fixed Income Fund series and CSI
Equity Fund series (together
<PAGE>
Filing Desk
U.S. Securities and Exchange Commission
April 26, 1999
Page 2
the CSI Funds) and the Sand Hill Portfolio Manager Fund series of The
World Funds, Inc. (TW Funds), which were previously filed and are now
effective. The prospectus and statement of additional information of the CSI
Funds (the CSI Prospectus/SAI) were filed in a Rule 485(a) post-effective
amendment of TW Funds on January 29, 1999 (File Nos. 811-8255 and 333-29289),
permitting a 60-day SEC staff review and comments, and in a Rule 485(b)
post-effective amendment of TW Funds filed on March 30, 1999 that incorporated
the responses to the SEC staffs comments.
The Vontobel Prospectus/SAI filed in this 485(b) Amendment are
substantially similar to the CSI Prospectus/SAI with respect to the new Form
N-1A simplified prospectus requirements and the plain English requirements and
with the intention of incorporating the SEC staffs comments on the CSI
Prospectus/SAI that are applicable to the Vontobel Prospectus/SAI. The Fund
requests that, due to this substantial similarity, the 485(b) Amendment receive
selective review to permit the 485(b) Amendment to be effective on April 30,
1999, in time to meet the 1933 Act, Section 10(a) requirement for the Funds.
The 485(b) Amendment also contains updated financial information and
financial statements for purposes of the annual post-effective amendment of the
Funds.
As counsel to the Registrant, we have assisted in preparing the 485(b)
Amendment, and, in our judgment, the 485(b) Amendment does not contain
disclosures that would render it ineligible to become effective pursuant to
paragraph (b) of Rule 485.
Should you have any questions regarding the filing of the foregoing
documents, please feel free to call or e-mail the undersigned or Duane L.
Lassiter (215-564-8010).
Sincerely,
/s/ Merrill R. Steiner
Merrill R. Steiner
cc: Carolyn Gail Gilheany, Esq.
John Pasco, III
Darryl Peay
Steven M. Felsenstein, Esq.
Duane L. Lassiter, Esq.
</TABLE>
