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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 30, 1997
REGISTRATION NO. 33-10675 AND 811-4935
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 15 [x]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
AMENDMENT NO. 18 [x]
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FIRST EAGLE FUND OF AMERICA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
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1345 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10105
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(212) 698-3000
------------------------
ROBERT BRUNO
1345 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10105
(NAME AND ADDRESS OF AGENT FOR SERVICE)
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COPY TO:
PAUL S. SCHREIBER, ESQ.
SHEARMAN & STERLING
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
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It is proposed that this filing will become effective (check appropriate
box):
[ ] immediately upon filing pursuant to paragraph (b);
[ ] on (date) pursuant to paragraph (b);
[x] 60 days after filing pursuant to paragraph (a)(i);
[ ] on (date) pursuant to paragraph (a)(i);
[ ] 75 days after filing pursuant to paragraph (a)(ii);
[ ] on (date) pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
------------------------
PURSUANT TO RULE 24f-2 UNDER THE INVESTMENT COMPANY ACT OF 1940, REGISTRANT
HAS PREVIOUSLY REGISTERED AN INDEFINITE NUMBER OF SHARES OF ITS COMMON STOCK,
PAR VALUE $.01 PER SHARE. THE REGISTRANT LAST FILED A RULE 24f-2 NOTICE ON
DECEMBER 30, 1997.
________________________________________________________________________________
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PROSPECTUS
Dated March 1, 1998
FIRST EAGLE TRUST
First Eagle Trust (the 'Trust') is a registered investment company, a
'mutual fund,' that offers investors two investment alternatives, First Eagle
Fund of America and First Eagle International Fund, each a separate series or
portfolio of the Trust.
First Eagle Fund of America ('Fund of America') is an open-end,
non-diversified mutual fund whose investment objective is to achieve capital
appreciation. Fund of America will seek to achieve its objective by investing
primarily in domestic stocks and to a lesser extent in debt and foreign equity
securities.
First Eagle International Fund ('International Fund') is an open-end,
non-diversified mutual fund whose investment objective is to achieve capital
appreciation. International Fund will seek to achieve its objective by investing
primarily in foreign stocks and to a lesser extent in debt and domestic equity
securities.
Fund of America and International Fund (the 'Funds') invest in securities
of companies that appear to be undervalued relative to their overall financial
and managerial strength. There can be no assurance that the Funds' objectives
will be achieved.
This Prospectus provides information about the Funds that a prospective
investor should know before investing. Additional information has been filed
with the Securities and Exchange Commission in a Statement of Additional
Information, dated March 1, 1998, which information is incorporated herein by
reference and may be obtained without charge by writing to the Funds' Transfer
Agent, BISYS Fund Services, Inc., P.O. Box 182497, Columbus, Ohio 43218-2497, or
by calling (800) 451-3623.
------------------------
Investors are urged to read this Prospectus and retain it for future reference.
------------------------
[Logo]
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
<PAGE>
HIGHLIGHTS
<TABLE>
<S> <C>
Investment Objectives Fund of America is an open-end, non-diversified mutual fund whose investment objective
is to achieve capital appreciation. It seeks to achieve its objective by investing
primarily in domestic stocks and to a lesser extent in debt and foreign equity
securities.
International Fund is an open-end, non-diversified mutual fund whose investment
objective is to achieve capital appreciation. It seeks to achieve its objective by
investing primarily in foreign stocks and to a lesser extent in debt and domestic
equity securities. Under normal circumstances at least 65% of International Fund's
assets will be invested in foreign securities.
Arnhold and S. Bleichroeder Advisers, Inc. (the 'Adviser') invests the assets of the
Funds in securities of companies that appear to be undervalued relative to their
overall financial and managerial strength. The Adviser follows the investment
strategy of investing in securities with 'intrinsic values' which are not generally
recognized by the market. There can be no assurance that the Funds' objectives will
be achieved. See 'Investment Objectives and Policies and Risk Factors.'
Risk Factors International Fund invests in securities of foreign companies and governments which
involve certain risks including the possibility of currency exchange rate
fluctuations, revaluation of currencies, less publicly available information about
foreign companies, different accounting, auditing and financial reporting standards,
less stringent securities regulation, non-negotiable brokerage commissions,
different tax provisions, political or social instability and war or expropriation.
Moreover, foreign stock and bond markets generally are not as developed or efficient
as those in the United States, and securities trading volume and liquidity can be
less and price volatility greater than in U.S. markets. Settlement of securities
trades on foreign markets often takes longer than in U.S. markets. These risks
generally are of greater concern in developing countries.
Fund of America and International Fund may purchase or sell put and call options and
may use financial and currency futures contracts and other types of derivative
transactions for hedging purposes. The Funds may invest in securities on a
when-issued basis, lend their portfolio securities, enter into repurchase
agreements, and engage in short sales and arbitrage transactions. All these
investment techniques and instruments involve risks associated with such
investments. The Funds may borrow for securities purchases and for temporary or
emergency purposes. The ability to borrow for securities purchases is called
leveraging. As non-diversified mutual funds, the Funds may have a greater investment
concentration in some securities than a diversified mutual fund. See 'Investment
Objective and Policies and Risk Factors' in the Prospectus and 'Additional
Investment Information' in the Statement of Additional Information.
Management The Adviser serves as the Funds' investment adviser and is compensated for its
services. Fund of America pays the Adviser a monthly fee at the annual rate of 1.00%
of its average daily net assets for its services. International Fund pays the
Adviser a monthly fee at the annual rate of 1.00% of its average daily net assets
for its services. Arnhold and S. Bleichroeder, Inc. also provides shareholder
liaison services to shareholders of both Funds, which includes assistance with
subscriptions, redemptions and other shareholder questions and other services for
which it receives an annual fee
</TABLE>
2
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<PAGE>
<TABLE>
<S> <C>
of .25% of each Fund's average daily net assets payable quarterly. Arnhold and S.
Bleichroeder, Inc. also serves as the Funds' Distributor. See 'Management of the
Funds.'
Purchase of Shares Shares of the Funds may be purchased at their net asset value next determined after
receipt of an order in proper form with complete information. Each of the Funds
provides investors with the option of purchasing either Class Y or Class C shares.
CLASS Y shares may be purchased at net asset value. There is no sales charge on
purchases of Class Y shares.
CLASS C shares may be purchased at net asset value and are subject to a .75% Rule
12b-1 distribution fee and a one year contingent deferred sales charge of 1 1/4%.
The current minimum initial investment is $2,500, except for retirement plans and
employees of the Adviser and its affiliates who are subject to a $1,000 minimum
initial investment. Existing shareholders may establish or direct new accounts with
a minimum initial investment amount of $1,000. Subsequent investments are subject to
a $1,000 minimum, except retirement accounts with no minimum subsequent investment
amount. Automatic Investment Plan accounts have a $100 minimum investment
requirement. All minimum investment amounts may be changed or waived by the Trust.
Shares of the Funds may be purchased by submitting a completed Account Application
and a check or money order payable to First Eagle Fund of America or First Eagle
International Fund to: First Eagle Trust, P.O. Box 182497, Columbus, OH 43218-2497.
See 'How to Purchase Shares.'
Liquidity Shares of the Funds may be redeemed at the net asset value next determined after
receipt of a redemption request. See 'How to Redeem Shares.'
Dividends and Reinvestment The Funds plan to distribute dividends and any net capital gains annually. All
dividends and distributions will be reinvested in Shares of the respective Fund at
net asset value, unless the stockholder elects to receive dividends and
distributions in cash. See 'Distributions and Taxes.'
</TABLE>
3
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SUMMARY OF EXPENSES
<TABLE>
<CAPTION>
CLASS Y CLASS C
------------------------ ------------------------
FUND OF INTERNATIONAL FUND OF INTERNATIONAL
AMERICA FUND AMERICA FUND
------- ------------- ------- -------------
<S> <C> <C> <C> <C>
Annual Operating Expenses (as a percentage of average net
assets)
Management fees............................................ 1.00% 1.00% 1.00% 1.00%
12b-1 fees................................................. None None .75% .75%
Service fees............................................... .25% .25% .25% .25%
Other operating expenses................................... .17% 1.05% .17% 1.05%
------- ------ ------- -----
Total annual operating expenses............................ 1.42% 2.30% 2.17% 3.05%
------- ------ ------- -----
------- ------ ------- -----
</TABLE>
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return and a redemption at the end of each time period.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Fund of America -- Class Y................................................. $ 14 $45 $ 78 $170
Fund of America -- Class C................................................. $ 35 $68 $ 116 $250
International Fund -- Class Y.............................................. $ 23 $72 $ 123 $264
International Fund -- Class C.............................................. $ 43 $94 $ 160 $336
</TABLE>
The purpose of these tables is to assist the investor in understanding the
various costs and expenses that an investor in the Funds will bear directly or
indirectly. The percentages are based on the Funds' actual expenses for the
fiscal period ended October 31, 1997 adjusted for the lower investment
management fees currently in effect. See 'Management of the Funds' below and
'Adviser' in the Statement of Additional Information. The example should not be
considered a representation of future expenses which may be more or less than
those shown.
4
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FINANCIAL HIGHLIGHTS
The following financial highlights have been audited by the Trust's
auditors, and contain selected data for a share of common stock outstanding,
total return, ratio to average net assets and other supplemental data for the
periods indicated. This information should be read in conjunction with the
financial statements, the notes thereto and the independent auditors' report
which appears in the Statement of Additional Information.
FUND OF AMERICA
FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT THE PERIODS INDICATED
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
OCTOBER 31,
--------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value per share, beginning of
year................................... $17.97 $16.28 $15.45 $16.53 $13.36 $12.35 $10.35 $14.04 $11.65
INCOME FROM INVESTMENT OPERATIONS PER
SHARE
Net investment income (loss)............. (0.06) (0.04) (0.04) (0.12) (0.22) (0.15) 0.09 0.16 0.16
Net gains (losses) on securities (both
realized and unrealized)............... 5.31 4.08 2.87 0.66 4.56 1.98 2.20 (2.34) 2.57
------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations......... 5.25 4.04 2.83 0.54 4.34 1.83 2.29 (2.18) 2.73
------ ------ ------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS PER SHARE
Dividends (from net investment income)... -- -- -- -- -- (0.08) (0.29) (0.11) --
Distributions (from capital gains)....... (2.36) (2.35) (2.00) (1.62) (1.17) (0.74) -- (1.40) (0.34)
------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions...................... (2.36) (2.35) (2.00) (1.62) (1.17) (0.82) (0.29) (1.51) (0.34)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value per share, end of
period................................. $20.49 $17.97 $16.28 $15.45 $16.53 $13.36 $12.35 $10.35 $14.04
------ ------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------ ------
Total return*............................ 31.0% 27.1% 21.6% 3.8% 35.2% 16.0% 22.7% (17.7)% 24.2%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000
omitted)............................... $254,438 $163,403 $134,350 $120,516 $107,344 $76,599 $74,279 $66,730 $83,620
Ratio of expenses to average assets(1)... 1.7% 1.8% 1.9% 1.9% 2.9% 3.0% 2.0% 1.1% 2.0%
Ratio of net investment income (loss) to
average net assets..................... (0.3)% (0.2)% (0.3)% (0.7)% (1.5)% (1.0)% 0.8% 1.3% 1.3%
Portfolio turnover rate.................. 72% 93% 81% 125% 141% 145% 92% 72% 52%
Average commission rate paid on portfolio
security purchases and sales
transactions(2)........................ $0.05 $0.04 -- -- -- -- -- -- --
<CAPTION>
1988
------
<S> <C>
Net asset value per share, beginning of
year................................... $ 9.17
INCOME FROM INVESTMENT OPERATIONS PER
SHARE
Net investment income (loss)............. (0.03)
Net gains (losses) on securities (both
realized and unrealized)............... 2.58
------
Total from investment operations......... 2.55
------
LESS DISTRIBUTIONS PER SHARE
Dividends (from net investment income)... (0.07)
Distributions (from capital gains)....... --
------
Total distributions...................... (0.07)
------
Net asset value per share, end of
period................................. $11.65
------
------
Total return*............................ 28.0%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000
omitted)............................... $54,271
Ratio of expenses to average assets(1)... 3.3%
Ratio of net investment income (loss) to
average net assets..................... (0.2)%
Portfolio turnover rate.................. 55%
Average commission rate paid on portfolio
security purchases and sales
transactions(2)........................ --
</TABLE>
* Past performance is not predictive of future performance.
'D' Annualized.
(1) During the years ended October 31, 1997 and October 31, 1996, Fund of
America earned credits from the Custodian which reduced custodian fees
incurred. If the credits are taken into consideration, the ratio of expenses
to average net assets would remain at 1.7% and 1.8%, respectively.
(2) For fiscal years beginning on or after September 1, 1995, Fund of America is
required to disclose the average commission rate per share for portfolio
security trades on which commissions are charged.
Further information regarding Fund of America's performance is contained in
the annual report, a copy of which may be obtained without charge.
5
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<PAGE>
INTERNATIONAL FUND
FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT THE PERIODS INDICATED
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE YEARS ENDED APRIL 4, 1994**
ENDED DECEMBER 31, THROUGH
OCTOBER 31, ----------------------- DECEMBER 31,
1997 1996 1995 1994
-------------- ---------- --------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year.................... $15.04 $13.38 $ 12.37 $ 12.50
INCOME FROM INVESTMENT OPERATIONS
Net investment loss.............................. (0.12) (0.16) (0.13) (0.02)
Net gains (losses) on investments (both realized
and unrealized)................................ 1.25 2.29 1.57 (0.11)
------- ---------- --------- -------
Total from investment operations............ 1.13 2.13 1.44 (0.13)
------- ---------- --------- -------
LESS DISTRIBUTIONS
Dividends (from net investment income)........... -- -- -- --
Distributions (from capital gains)............... -- (0.47) (0.43) --
------- ---------- --------- -------
Total distributions......................... -- (0.47) (0.43) --
------- ---------- --------- -------
Net asset value, end of year.......................... $16.17 $15.04 $ 13.38 $ 12.37
------- ---------- --------- -------
------- ---------- --------- -------
Total return*......................................... 7.5% 15.9% 11.6% (1.0)%'D'D'
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year (000 omitted)................. $36,320 $32,105 $22,421 $20,152
Ratio of expenses to average net assets(1)............ 2.25% 2.90% 3.10% 2.00%
Ratio of net investment loss to average net assets.... (1.0)% (1.1)% (1.1)% (0.3)%
Portfolio turnover rate............................... 54% 101% 166% 170%
Average commission rate paid on portfolio security
purchases and sales transactions(2)................. $0.04 $0.03 -- --
</TABLE>
* Past performance is not predictive of future performance.
** Commencement of investment operations.
'D' Annualized.
'D'D' Total return not annualized.
(1) The Adviser has waived part of his fee for the period from January 1, 1997
to October 31, 1997. If such fees were not waived, the net investment loss
and expense ratios would have been (.18)% and 2.80%, respectively. In
addition, during the period from January 1, 1997 to October 31, 1997 and for
the year ended December 31, 1996, International Fund earned credits from the
Custodian which reduced custodian fees incurred. If the credits are taken
into consideration, the expense ratios are 2.25% and 2.9%, respectively.
(2) For fiscal years beginning on or after September 1, 1995, International Fund
is required to disclose the average commission rate per share for portfolio
security trades on which commissions are charged.
Further information regarding International Fund's performance is contained
in the annual report, a copy of which may be obtained without charge.
6
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<PAGE>
INVESTMENT OBJECTIVES AND POLICIES AND RISK FACTORS
FUND OF AMERICA
The investment objective of Fund of America is to seek capital
appreciation. Fund of America seeks to achieve its investment objective by
pursuing a flexible investment strategy emphasizing investment in domestic
stocks and to a lesser extent debt and foreign equity securities. Fund of
America intends to invest in equity securities, including common stocks,
preferred stocks, convertible securities and warrants, and in debt securities of
any maturity. Fund of America may acquire debt securities when the Adviser
believes that those securities present significant appreciation possibilities,
pending investment in equity securities, or when market conditions warrant a
defensive strategy. Fund of America may purchase call and put options and sell
covered call and covered put options on equity or debt securities and on stock
indices, and, solely for bona fide hedging purposes, acquire positions in
futures contracts and related options traded on a commodities exchange or board
of trade. Fund of America may under certain circumstances invest in securities
issued by other investment companies. If Fund of America invests in such
securities, investors may be subject to duplicate investment management or
distribution fees.
INTERNATIONAL FUND
The investment objective of International Fund is to seek capital
appreciation. International Fund seeks capital appreciation from a
professionally managed portfolio of foreign stocks and to a lesser extent debt
and domestic equity instruments. The amount of International Fund's assets
invested in equity and debt securities will vary depending on the Adviser's
assessment of market conditions. International Fund offers investors access to a
geographically diverse portfolio, professional research and analysis of issuers
and worldwide markets, and the ability to invest in foreign securities without
having to make individual arrangements for brokers, safekeeping of securities
and foreign currency dealings. International Fund invests globally wherever the
greatest opportunities exist in a variety of markets, including Europe, Latin
America, the Pacific Basin and to a lesser extent the United States. Under
normal circumstances, at least 65% of the International Fund's total assets will
be invested in securities of foreign issuers, in at least three different
countries.
THE FUNDS
Each of the Funds seeks to achieve its investment objective by investing in
securities that are undervalued in their respective trading markets relative to
their 'intrinsic value' as determined by the Adviser. The Adviser believes each
Fund's exposure to loss may be limited by investing part or all of its assets in
undervalued securities. A guiding principle in the Adviser's selection of
investments for the Funds' portfolios is the consideration of common stocks as
units of ownership in a business. Debt securities are considered if they are
thought to be more attractive than equity alternatives. The Adviser's evaluation
of prospective equity and debt investments generally will involve an analysis of
the issuer's overall financial and managerial strength as indicated by factors
such as cash flow, assets, earnings, market share, growth potential, stability
and managerial personnel. In addition to its analysis of a company's growth
potential, the Adviser also considers such factors as prospects for relative
economic growth among geographic areas, expected levels of inflation and
government policies influencing business conditions. The Adviser will consider
both large, well established and small,
7
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<PAGE>
unseasoned issuers. Investment income is of secondary importance in the
selection of investments for the portfolios of the Funds but will be considered
in relation to the total return expected thereon.
The Funds are non-diversified investment companies, and as such each Fund's
assets may be invested in a limited number of issues. An investment in either
Fund may therefore entail greater risks than an investment in a diversified
investment company. There is no assurance that either Fund's investment
objective will be achieved, and the investment objective may be changed by the
Board of Trustees without the vote of a majority of each Fund's outstanding
voting securities.
SPECIAL SITUATIONS
Many investments of the Funds may be characterized as 'special situations.'
A special situation occurs when it appears that the market price of a particular
security has the potential to appreciate significantly because of a development
uniquely applicable to the issuer of that security, irrespective of general
business conditions or market movements. Special situations may arise from
liquidations, reorganizations, mergers, material litigation, technological
breakthroughs, new management, policy changes or other developments. Special
situations may involve the risk that the anticipated development may occur later
than expected or not at all, and may not have the desired effect on the market
price of the security.
DEBT SECURITIES
The Funds may invest in foreign and domestic money market instruments,
including commercial paper, certificates of deposit, bankers' acceptances and
other short-term debt obligations of foreign and domestic banks, provided those
obligations are of 'high quality,' as determined by an unaffiliated nationally
recognized statistical rating service, or are of comparable quality. The Funds
also may invest in corporate bonds of foreign and domestic issuers and
obligations issued or guaranteed by the U.S. Government, its instrumentalities,
or its agencies, or the government of any other nation ('fixed-income
securities'). Various factors affect the price of fixed-income securities,
including the rating associated with a particular issue, the level of risk
involved in various rated fixed-income securities, and the general level of
interest rates. The price of fixed-income securities generally fluctuates
inversely with interest rate movements.
The risk of loss because of default by issuers of high yield bonds is
significantly greater than other fixed-income securities because high yield
bonds are generally unsecured and often are subordinated to other creditors of
the issuer. Each Fund has no current intention of investing more than 5% of its
net assets in high yield bonds. An economic downturn or a sustained period of
rising interest rates could affect the ability of certain highly leveraged
issuers to service their debt obligations or to repay their obligations upon
maturity.
INVESTMENT IN FOREIGN SECURITIES
Investing in securities of foreign equity and debt securities presents
certain risks in addition to those arising when investing in domestic
securities. These risks include the possibility of currency exchange rate
fluctuations, revaluation of currencies, less publicly available information
about issuers, different accounting, auditing and financial reporting standards,
less stringent securities regulation, non-negotiable brokerage commissions,
different tax provisions, political or social instability and war or
expropriation. Moreover, foreign stock and bond markets generally are not as
developed and efficient as
8
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<PAGE>
those in the United States, and, therefore, the volume and liquidity in those
markets may be less, and the volatility of prices may be greater, than in U.S.
markets. Settlement of transactions on foreign markets may be delayed beyond
what is customary in U.S. markets. The Funds may invest in developing countries
considered to be emerging market countries by the World Bank. The risks
associated with investment in foreign securities are generally greater in
developing countries which may be subject to adverse political, social or
diplomatic developments. To attempt to limit the risks of investing in foreign
securities, the Funds may use some of the hedging techniques.
CURRENCY FUTURES CONTRACTS/FORWARD CURRENCY CONTRACTS
The value of foreign investments denominated in their local foreign
currencies will fluctuate in comparison to the U.S. dollar. As a way of managing
currency exchange rate risk, the Funds may enter into currency futures contracts
or forward currency contracts, which are agreements to purchase or sell foreign
currencies at a specified price and date. The Funds will usually enter into
these contracts to fix the U.S. dollar value of a security they have agreed to
buy or sell. The Funds may also use these contracts to hedge the U.S. dollar
value of a security they already own, particularly if they expect a decline in
the value of the currency in which the foreign security is denominated. The
success of a Fund's hedging strategy will depend on the Adviser's ability to
predict the future exchange rates between foreign currencies and the U.S.
dollar.
DERIVATIVE TRANSACTIONS
The Funds may invest in options, futures and swaps and related products
which are often referred to as 'derivatives.' Derivatives may have a return that
is tied to a formula based upon an interest rate, index, price of a security or
other measurement. The Funds may use derivatives to augment their investment
returns or to limit their investment risks, such as to hedge against, among
other things, declines in the prices of portfolio securities. The use of
derivatives for non-hedging purposes is speculative. Derivative transactions
also subject a mutual fund to special considerations, such as the risk that a
mutual fund will not be able to cancel its derivative contract when it may be
opportune to do so and that the counterparty to the contract may not be able to
fulfill its obligation thereunder.
WARRANTS
Each Fund may invest in warrants (in addition to those that have been
acquired in units or attached to other securities) but does not currently intend
to invest more than 5% of the value of its net assets (at the time of
investment) in such warrants. A warrant is an option to purchase a specified
quantity of equity or debt securities at a set price within a specific period of
time.
ILLIQUID SECURITIES
The Funds may invest up to 15% of their net assets (determined at the time
of investment) in securities for which market quotations are not readily
available, in repurchase agreements which have a maturity longer than seven days
and in securities subject to restrictions on resale for which no adequate
trading market exists.
9
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<PAGE>
OTHER INVESTMENT TECHNIQUES
The Funds may lend their portfolio securities, invest in restricted
securities, acquire securities on a when-issued basis, engage in short sales and
in arbitrage transactions, and may enter into repurchase agreements and reverse
repurchase agreements. The Funds may borrow for temporary or emergency purposes
or to purchase portfolio securities. Borrowing to purchase portfolio securities
increases both investment opportunity and investment risk. Each Fund is subject
to certain investment restrictions which constitute non-fundamental policies.
Such policies may be changed by the Board of Trustees upon notice to
shareholders.
PORTFOLIO TURNOVER
The portfolio turnover rate is, generally, the percentage computed by
dividing the lesser of portfolio purchases and sales (excluding all securities,
including options, whose maturities or expiration date at acquisition were one
year or less) by the monthly average value of the portfolio. The portfolio
turnover rates for Fund of America were 72%, 93% and 81%, respectively, in the
fiscal years ended October 31, 1997, 1996 and 1995. The portfolio turnover rates
for International Fund were 54%, 101% and 166%, respectively, in the fiscal
period ended October 31, 1997, and the fiscal years ended December 31, 1996 and
1995. Higher portfolio turnover rates are likely to result in higher brokerage
commissions and higher levels of realized capital gains than lower portfolio
turnover rates.
MANAGEMENT OF THE FUNDS
BOARD OF TRUSTEES
The business and affairs of the Funds are managed under the direction of
the Trust's Board of Trustees. The Funds have made inquiries of their Adviser,
Distributor, Custodian, and Transfer and Dividend Disbursing Agent regarding
whether they expected to have their computer systems adjusted for the year 2000
transition. The Funds were informed that all these service providers expected
that their systems would be compliant with the year 2000 issue prior to that
time.
ADVISER
The Adviser, Arnhold and S. Bleichroeder Advisers, Inc., is a wholly owned
subsidiary of Arnhold and S. Bleichroeder, Inc., which is a successor
corporation to two German banking houses -- Gebr. Arnhold (Arnhold Brothers),
founded in Dresden in 1864, and S. Bleichroeder, founded in Berlin in 1803.
Arnhold and S. Bleichroeder, Inc. moved its operations to New York City in 1937
and since then has used its experience and worldwide contacts to provide asset
management, global securities research and trading, and investment banking
services to institutional clients both in the United States and abroad.
The Adviser manages the Funds and is registered as an investment adviser
under the Investment Advisers Act of 1940. Incorporated in 1987 under the laws
of the State of Delaware, its corporate offices are located at 1345 Avenue of
the Americas, New York, New York 10105.
The Investment Advisory Agreement between the Trust and the Adviser
effective February 28, 1998 was approved by the shareholders and Board of
Trustees of the Trust. Subject to the direction of the Trust's Board of
Trustees, the Adviser is responsible for the management of each Fund's
portfolio. The portfolio managers are responsible for the day-to-day management
of the Funds portfolios. The
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Adviser may consider analyses from various sources, including broker-dealers and
futures commission merchants with which the Adviser does business.
The Adviser is responsible for the continuous supervision of Fund of
America's portfolio. The Adviser has employment agreements with Harold J. Levy
and David L. Cohen to serve as portfolio managers for Fund of America. Messrs.
Levy and Cohen are also the principal owners of Iridian Asset Management LLC
('Iridian'). Arnhold and S. Bleichroeder, Inc. owns 27.5% of Iridian and
pursuant to an operating agreement with Iridian does not direct or control the
management, affairs or policies of Iridian. Harold J. Levy has been a portfolio
manager of Fund of America since its inception, and David L. Cohen has been a
portfolio manager of Fund of America since 1989.
The Adviser is responsible for the continuous supervision of International
Fund's portfolio. Arthur F. Lerner is a Senior Vice President of Arnhold and S.
Bleichroeder, Inc., a Portfolio Manager of the Adviser and has been portfolio
manager of International Fund since its inception. Mr. Lerner has worked at
Arnhold and S. Bleichroeder, Inc. since 1969 and manages various institutional
global and international portfolios and off-shore funds, including a portion of
the Arnhold and S. Bleichroeder, Inc.'s profit sharing plan and trust. He is
supported by a team of investment professionals.
MANAGEMENT FEES
Pursuant to the Investment Advisory Agreement, Fund of America pays the
Adviser a monthly investment management fee at the annual rate of 1.00% of its
average daily net assets. International Fund pays the Adviser a monthly
investment management fee at the annual rate of 1.00% of its average daily net
assets.
SERVICES FEES
Arnhold and S. Bleichroeder, Inc. receives a services fee at the annual
rate of 0.25% of each Fund's average daily net assets, payable quarterly,
pursuant to a Services Agreement to cover expenses incurred by Arnhold and S.
Bleichroeder, Inc. for providing shareholder liaison services, including
assistance with subscriptions, redemptions and other shareholder questions. The
Trust and Arnhold and S. Bleichroeder, Inc. also have separate services
agreements by which this services fee may be paid to other broker-dealers and
qualified financial intermediaries for shareholder liaison services.
DISTRIBUTOR
Arnhold and S. Bleichroeder, Inc., a registered broker-dealer, investment
adviser and a member of the New York Stock Exchange and the National Association
of Securities Dealers, Inc., serves as the distributor of the Funds' Class Y
shares pursuant to a Distribution Agreement with the Funds. The expenses related
to distributing the Funds' Class Y shares are assumed by Arnhold and S.
Bleichroeder, Inc. Arnhold and S. Bleichroeder, Inc. may make payments to
dealers and other persons which distribute shares of the Funds. Such payments
may be calculated by reference to the net asset value of shares sold by such
persons or otherwise. Arnhold and S. Bleichroeder, Inc. also serves as the
distributor of the Funds' Class C shares which are sold with a Rule 12b-1
distribution fee. For its services under the Rule 12b-1 distribution agreement,
each Fund pays a fee at the annual rate of 0.75% of its average daily net
assets. Arnhold and S. Bleichroeder, Inc. pays broker-dealers and other
financial services firms a distribution fee for sales of Class C share at the
annual rate of 0.75% of net assets attributable to Class C shares. Arnhold and
S. Bleichroeder, Inc., 1345 Avenue of the Americas, New
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York, New York 10105, is engaged in the investment advisory and securities
underwriting and brokerage businesses.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser is responsible for the selection of brokers, dealers and
futures commission merchants to effect the Funds' portfolio transactions and the
negotiation of brokerage commissions, if any. Orders may be directed to any
broker, dealer or futures commission merchant, including, to the extent and in
the manner permitted by applicable law, Arnhold and S. Bleichroeder, Inc.
Commissions are generally negotiable in the case of U.S. securities exchange
transactions but are generally fixed in the case of foreign exchange
transactions and higher than prevailing U.S. rates.
The Adviser, in placing orders for securities, options and futures for the
Funds' portfolios, is required to give primary consideration to obtaining the
most favorable price and efficient execution. The Adviser, to the extent
consistent with the foregoing, will consider the research and investment
services provided by brokers, dealers or futures commission merchants who effect
or are parties to portfolio transactions of the Funds, the Adviser or the
Adviser's other clients. Commission rates are established pursuant to
negotiations with the executing party based on the quantity and quality of
execution services provided in light of generally prevailing rates. The Adviser
is permitted to effect portfolio transactions for the Funds only if the
commissions, fees or other remuneration received by Arnhold and S. Bleichroeder,
Inc. is reasonable and fair compared to the commissions, fees or other
remuneration paid to other brokers or dealers in connection with comparable
transactions. The Board of Trustees has adopted procedures which are reasonably
designed to assure that any commissions, fees or other remuneration received by
Arnhold and S. Bleichroeder, Inc. for effecting portfolio transactions on the
Fund's behalf is consistent with the foregoing standard. Portfolio securities
may be purchased from any underwriting or selling group in which Arnhold and S.
Bleichroeder, Inc. is a member, if the purchase is made in accordance with rules
of the Securities and Exchange Commission (the 'Commission'). The Board of
Trustees has adopted procedures which are reasonably designed to assure
compliance with those rules.
NET ASSET VALUE
The net asset value per share is the net worth of each Fund (assets,
including securities at market value, minus liabilities) divided by the number
of shares outstanding. Each Fund shall compute the net asset value of its shares
as of 15 minutes after the close of trading on the floor of the New York Stock
Exchange, which is normally 4:00 p.m., New York time, on each day the New York
Stock Exchange is open for business. The net asset value will not be computed on
days on which no orders to purchase, sell or redeem a Fund's shares have been
received or on days on which changes in the value of the Fund's portfolio
securities do not affect net asset value.
The net asset value per share will not be determined on such federal and
non-federal holidays as are observed by the New York Stock Exchange, which
currently include New Year's Day, Martin Luther King's Birthday, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
Any security for which the primary market is on a U.S. exchange is valued
at the last sale price on such exchange on the day of valuation or, if there was
no sale on such day, the mean between the last bid and asked prices quoted on
such day. Foreign securities are valued on the basis of quotations from
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the primary market in which they are traded and translated from the local
currency into U.S. dollars using current exchange rates. NASDAQ National Market
System equity securities are valued at the last sale price or, if there was no
sale on such day, at the mean between the most recently quoted bid and asked
prices. Corporate bonds (other than convertible debt securities) and U.S.
Government securities that are actively traded in the over-the-counter market,
including listed securities for which the primary market is believed to be
over-the-counter, are valued on the basis of valuations provided by a pricing
service which uses information with respect to transactions in bonds, quotations
from bond dealers, market transactions in comparable securities and various
relationships between securities in determining value. Pricing based on market
transactions in comparable securities and various relationships between
securities is known as 'matrix' pricing. Other securities are valued at the mean
between the most recently quoted bid and asked prices. Short-term debt
instruments which mature in less than 60 days are valued at amortized cost,
unless the Board of Trustees determines that such valuation does not represent
fair value. Securities which are otherwise not readily marketable or securities
for which market quotations are not readily available are valued in good faith
at fair value in accordance with procedures adopted by the Trust's Board of
Trustees. The Board of Trustees may use a pricing service to value the Funds'
holdings of illiquid securities, if any.
HOW TO PURCHASE SHARES
The current minimum initial investment is $2,500, except for retirement
plans for employees of the Adviser or Arnhold and S. Bleichroeder, Inc. whose
minimum initial investment is $1,000. Existing shareholders may establish or
direct new accounts with a minimum initial investment of $1,000. Subsequent
investments are subject to a $1,000 minimum, except retirement accounts which
have no minimum and the Automatic Investment Plan which has a $100 minimum
investment requirement. The current minimum initial and subsequent investment
amounts may be changed by the Board of Trustees at any time. Transactions in
shares of the Funds made through brokers and qualified financial intermediaries
may be subject to service charges imposed by the brokers and financial
intermediaries. Investors should provide the information required by an IRS Form
W-9 to avoid backup withholding taxes.
Shares of each Fund may be purchased by submitting a signed and completed
Account Application and a check or money order payable to First Eagle Fund of
America or First Eagle International Fund to: First Eagle Trust, P.O. Box
182497, Columbus, OH 43218-2497. To purchase shares with a Federal funds wire,
fax a completed and signed application to the Trust at (614) 470-8702 and
telephone (800) 451-3623 for wire instructions. When purchases are made by
check, redemptions will not be allowed until the purchase check has cleared,
which may take up to ten business days. In the event a check used to pay for
shares of a Fund is not honored by a bank, the purchase order will be cancelled
and the shareholder will be liable for any losses or expenses incurred by the
Fund.
Investors may purchase either Class Y or Class C shares of the Funds. Class
Y shares are offered at net asset value after receipt of an order in proper form
with complete information. Class C shares are offered at net asset value and are
subject to a 0.75% Rule 12b-1 distribution fee and a contingent deferred sales
charge of 1 1/4% if the shares are redeemed within the first year after
purchase. Neither Class Y nor Class C shares are subject to an initial sales
charge. Both Class Y and C are subject to a 0.25% services fee. When placing
orders, investors should request Class Y or Class C shares. Shares of the Funds
may be purchased directly from the Trust or through broker-dealers or financial
services intermediaries. Broker-dealers and other financial services
intermediaries that distribute Class C shares
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receive an annual payment for services of 1% the average daily net assets of the
Class C accounts for which they provide services.
Investments in the Funds may be made on each day the New York Stock
Exchange is open for business (a 'Business Day'). Shares are purchased at the
net asset value per share next determined after receipt of an order by or on
behalf of the Funds with complete information and meeting all the requirements
discussed in this Prospectus. The Funds may reject any purchase order for
shares. Purchase orders which are not received in good order or paid for in a
timely manner will not be accepted by the Funds and will be returned. The Trust
reserves the right to suspend the sale of shares of the Funds to the public at
any time in response to unusual or adverse conditions in the securities markets
or otherwise.
Orders for the purchase of shares of a Fund will be confirmed at a price
based on the net asset value of that Fund next determined after receipt by the
distributor, Arnhold and S. Bleichroeder, Inc., of an order accompanied by
payment. However, orders received by dealers or other firms prior to the
determination of net asset value and received by the distributor prior to the
close of that day will be confirmed at a price based on the net asset value on
that day ('trade day'). Dealers and other financial services firms are obligated
to transmit orders promptly. Collection may take significantly longer for a
check drawn on a foreign bank than for a check drawn on a domestic bank.
Therefore, if an order is accompanied by a check drawn on a foreign bank, funds
must normally be collected before shares will be purchased.
AUTOMATIC INVESTMENT PLAN. With the required minimum initial investment,
regular investments of $100 or more per transaction may be made through
automatic periodic deduction from payroll, bank savings or checking accounts.
New shareholders electing to start this plan should complete Section 6 of the
account application. Current shareholders may begin an automatic investment plan
by sending a signed letter with a signature guarantee and a deposit slip or a
voided check to First Eagle Trust, P.O. Box 182497, Columbus, OH 43218-2497.
HOW TO REDEEM SHARES
REDEMPTION
Shares of the Funds can be redeemed for cash at the next determined net
asset value. Class C shares redeemed within the first year after purchase are
subject to a contingent deferred sales charge of 1 1/4%. If shares are held in
non-certificate form, a written request for redemption signed by the
stockholder(s) exactly as the account is registered is required unless the
telephone redemption privilege has been established. If certificates are held by
the stockholder(s), the certificates, signed in the name(s) shown on the face of
the certificates, must be returned to be redeemed. The certificates may be
signed either on their reverse side or on a separate stock power. If redemption
is requested by a corporation, partnership, trust or fiduciary, written evidence
of authority acceptable to the Funds' Transfer Agent must be submitted before
such request will be accepted.
The redemption price is the net asset value per share next determined after
the request for redemption is received in good order by the Funds' Transfer
Agent. Shares purchased by check or the Automatic Investment Plan will not be
allowed until the purchase payment has cleared, which may take ten Business
Days. Signature(s) on redemption requests, certificates or stock powers must be
guaranteed by a commercial bank, trust company, credit union, savings
association or qualified broker or dealer. The Funds may change the signature
guarantee requirements from time to time.
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Payment instructions may be given to the Funds either on the account
application, Telephone Purchase and Redemption Form or in a letter to the Funds
which is signature guaranteed for all redemptions of $5,000 or more. If you do
not provide payment instructions for the proceeds of a redemption, a check will
be sent to the address of record.
TELEPHONE REDEMPTION ORDERS. Shareholders may redeem shares of the Funds by
calling (800) 451-3623 on any Business Day. The redemption will be executed at
the net asset value per share next determined after receipt of instructions by
or on behalf of the Funds with complete information and meeting all the
requirements discussed in this prospectus. Stockholders will be required to
provide proper identification and verification of account information. For
redemptions over $100,000, it may be necessary for other pertinent information
to be verified to confirm the identity of the stockholder. Payment for redeemed
shares will normally be wired in Federal funds on the next Business Day in
accordance with pre-authorized payment instructions.
The Funds will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. Neither the Funds nor the Transfer Agent
will be responsible for the authenticity of redemption instructions received by
telephone and believed to be genuine, and any loss therefrom will be borne by
the investor. Telephone calls will be recorded for your protection.
REDEMPTION PAYMENTS
Payment for shares presented for redemption will ordinarily be made by
check within seven days after receipt by the Transfer Agent of the certificate
and/or written request in proper order. Payment may be postponed or the right of
redemption suspended at times (a) when the New York Stock Exchange (the
'Exchange') is closed for other than customary weekends and holidays, (b) when
trading on the Exchange is restricted, (c) when an emergency exists as a result
of which disposal by either Fund of its securities is not reasonably practicable
or it is not reasonably practicable to determine the Funds' net asset value or
(d) during any other period when the Commission, by order, so permits, provided
that applicable rules and regulations of the Commission shall govern as to
whether the conditions prescribed in (b), (c) or (d) exist.
INVOLUNTARY REDEMPTION
In order to reduce expenses, the Funds may redeem all the shares of any
stockholder whose account has a net asset value of $1,000 or less. The Fund will
give stockholders whose shares are being so redeemed 60 days' prior written
notice in which to purchase sufficient additional shares to avoid redemption.
EXCHANGE PRIVILEGE
Shareholders of Class Y and Class C shares may exchange their shares for
the corresponding class of the other series of First Eagle Trust. Thus, Class Y
shares of Fund of America and International Fund may be exchanged for each other
at their relative net asset values, and Class C shares of Fund of America and
International Fund may be exchanged for each other at relative net asset values
without a contingent deferred sales charge. However, Class C shares are still
subject to a contingent deferred sales for a one year period from the date of
the original purchase. The exchange privilege is limited to six exchanges within
any twelve month period.
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DISTRIBUTIONS AND TAXES
Each Fund expects to declare an annual dividend of net investment income
and an annual distribution of capital gains, but each Fund may make
distributions on a more frequent basis to comply with the distribution
requirements of the Internal Revenue Code of 1986, as amended (the 'Internal
Revenue Code'), and in all events in a manner consistent with the provisions of
the Investment Company Act of 1940. Dividends and distributions will be paid in
additional shares based on the net asset value at the close of business on the
record date, or such other date as the Board of Trustees may determine, unless
the stockholder elects in writing not less than five full business days prior to
the record date to receive such distributions in cash. The Funds will notify
stockholders annually as to both the dollar amount and the taxable status of
that year's dividends and distributions. Because Class C Shares have 12b-1 fees,
dividends on Class Y Shares will be higher than dividends on Class C Shares.
Each Fund intends to qualify as a regulated investment company for federal
income tax purposes so long as, in management's view, such qualification is in
the shareholders' interest. Each Fund intends to distribute all of its net
investment income and net capital gains so as to be relieved of corporate
federal taxes. Distributions of net investment income and short-term capital
gains are taxed as dividends, subject to a maximum federal rate of 39.6% for
noncorporate taxpayers. For noncorporate taxpayers, distributions of gains
realized upon the sale of capital assets held more than 18 months are subject to
a maximum tax rate of 20% (10% for individuals in the 15% tax bracket).
Distributions of gains realized upon the sale of capital assets held more than
12 months but not more than 18 months are subject to a maximum tax rate of 28%
(15% for individuals in the 15% tax bracket). Distributions are taxable when
paid, whether taken in cash or reinvested except that distributions declared in
November and December and paid in January are taxable as if paid on December
31st. Any loss realized by a shareholder upon the disposition of Fund shares
held for six months or less will be treated as long-term capital loss to the
extent of any amounts treated as distributions of long-term capital gain during
such six-month period.
To the extend attributable to fluctuations in foreign currency exchange
rates, gains or losses arising from (i) acquiring or incurring debt denominated
in foreign currencies, (ii) accruing receivables or payables denominated in
foreign currency prior to receipt or payment, and (iii) disposing of certain
options, futures or forward contracts, will be treated as ordinary income or
loss rather than capital gain or loss.
You should receive by January 31 of each year, a statement showing the tax
status of your distributions for the prior year and the proceeds of your
redemptions (including exchanges), if any. When you sell your shares, their tax
basis is the total of your cash investments plus distributions that have been
reinvested, less any return of capital distributions. To assist you in
determining your tax basis, please keep your year-end account statements with
your other tax records.
The foregoing is a summary of certain federal income tax consequences. Be
sure to consult your own tax adviser to determine the precise effect of your
investment in the fund on your particular tax situation, and any state and local
tax consequences.
Under U.S. Treasury Regulations, the Funds are required to withhold and
remit to the U.S. Treasury 31% of dividend, capital gain income and redemption
proceeds on the accounts of certain stockholders who fail to furnish their tax
identification numbers on IRS Form W-9 (or who fail to furnish IRS Form W-8 in
the case of certain foreign stockholders) with the required certifications
regarding the stockholder's status under the Internal Revenue Code.
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Either Fund, particularly International Fund, may qualify for and may make
an election permitted under Section 853 of the Internal Revenue Code so that
shareholders may be eligible to claim a credit or deduction on their federal
income tax returns for, and will be required to treat as part of the amounts
distributed to them, their pro rata portion of qualified taxes paid or incurred
by either Fund to foreign countries (which taxes relate primarily to investment
income). A Fund may make an election under Section 853, provided that more than
50% of the value of such Fund's total assets at the close of the taxable year
consists of securities in foreign corporations, and such Fund satisfied the
applicable distribution provisions of the Internal Revenue Code for the taxable
year. The foreign tax credit available to shareholders is subject to certain
limitations imposed by the Internal Revenue Code.
If a Fund purchases the stock of 'passive foreign investment companies'
('PFICs'), such Fund will be subject to tax under one of three regimes. Under
the default regime, gain on the sale of PFIC stock and certain 'excess
distributions' are treated as ordinary income and subject to an interest charge.
If the PFIC provides certain information and such Fund makes an election, it may
elect to include its pro rata share of the PFIC's capital gains and ordinary
income currently even if not distributed. In taxable years beginning after
December 31, 1997, a Fund may mark to market its PFIC shares if it is eligible
to do so and elects to do so; any resulting gain will be ordinary income and
losses will be ordinary losses to the extent or prior ordinary income.
A stockholder who is a nonresident alien or foreign entity generally will
not be subject to federal income tax on capital gain distributions or on any
capital gain realized on a redemption of shares, provided that (i) such gains
are not effectively connected with the conduct by the stockholder of a trade or
business in the United States, (ii) in the case of an individual, the
stockholder is not physically present in the United States for 183 days or more
during the taxable year and (iii) the stockholder has furnished an IRS Form W-8
with the required certifications regarding the stockholder's foreign status
under the Internal Revenue Code. Other distributions may be subject to U.S. tax.
In particular, dividend distributions which are not effectively connected with a
trade or business in the United States will be subject to a 30% U.S. withholding
tax under the existing provisions of the Internal Revenue Code applicable to
foreign individuals and entities unless a reduced rate of withholding exemption
is provided under an applicable treaty. Non-U.S. stockholders are urged to
consult their own tax advisers concerning the applicability of U.S. tax. See
'Taxes' in the Statement of Additional Information.
The foregoing discussion is intended only as a brief discussion of the
federal income tax consequences of an investment in shares of a Fund.
Distributions may also be subject to state, local or foreign taxes. Stockholders
are urged to consult their own tax advisers regarding specific questions as to
federal, state, local or foreign taxes.
DESCRIPTION OF COMMON STOCK
Fund of America was incorporated in Maryland on December 11, 1986.
International Fund was incorporated in Maryland on October 7, 1993. The Funds
were reorganized as Series of the Trust on February 28, 1998. The Trust is
authorized to issue an unlimited number of shares in separate Series and
Classes. Shares of the Funds, when issued, are fully paid, nonassessable, fully
transferable and redeemable at the option of the stockholder. Shares are also
redeemable at the option of the Funds under certain circumstances as described
above under 'How to Redeem Shares.' There are no conversion, preemptive or other
subscription rights. In the event of liquidation, each share of a Fund is
entitled to its portion of that Fund's assets after all debt and expenses have
been paid. The shares of the Funds do not have cumulative voting rights for the
election of Trustees.
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HOW THE FUNDS CALCULATE PERFORMANCE
From time to time, the Funds may advertise investment performance in terms
of total return. Each Fund may further compare its performance to various
published indices which are widely used as benchmarks. Each Fund may also
compare its performance to rankings prepared by Lipper Analytical Services, Inc.
or Morningstar, Inc., each a widely recognized independent service which
monitors and ranks the performance of mutual funds, and to rankings prepared by
other national financial publications. A Fund's total return shows how much an
investment in such Fund would have increased (or decreased) over a specified
period of time assuming the reinvestment of all distributions and dividends on
the reinvestment dates during the period and deducting all recurring fees. The
aggregate total return reflects actual performance over a stated period of time.
A Fund's average annual total return demonstrates the hypothetical rate of
return of a hypothetical investment if performance had been constant over the
stated period of time. Total return information may be useful in reviewing
investment performance and for providing a basis for comparison with other
investment alternatives. Performance figures are based upon historical results
and are not intended to indicate future performance. Further performance
information is contained in the annual report to stockholders.
REPORTS TO STOCKHOLDERS
The Funds will send stockholders annual, semiannual and quarterly reports,
without charge. The Trust's annual reports will contain performance information
about each Fund, as well as financial statements audited by the Trust's
independent accountants.
The Transfer Agent will send each stockholder of record a statement showing
transactions in the stockholder's account, the total number of shares owned and
any dividends or distributions paid. These statements will normally be mailed
within five business days after a transaction occurs. The Transfer Agent will
also send each stockholder of record a quarterly statement of the stockholder's
account.
Stockholder inquiries should be addressed to First Eagle Trust, P.O. Box
182497, Columbus, OH 43218-2497, or by telephoning (800) 451-3623.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
The Bank of New York, 48 Wall Street, New York, NY 10286, serves as
Custodian for the Trust and each of the Funds. BISYS Fund Services, Inc., 3435
Stelzer Road, Columbus, OH 43219 serves as Transfer and Dividend Disbursing
Agent for the Trust. In those capacities, both The Bank of New York and BISYS
Fund Services, Inc. maintain certain books and records pursuant to agreements
with the Trust.
ORGANIZATION AND HISTORY
Fund of America was incorporated in Maryland on December 11, 1986.
International Fund was incorporated in Maryland on October 7, 1993. The Trust
was organized as a Delaware business trust on December 24, 1997 and may have
multiple series and classes of shares. Fund of America and International Fund
were converted into separate Series of the Trust on February 27, 1998.
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NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION WITH THE OFFER
CONTAINED HEREIN, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
TRUST, THE ADVISER OR THE DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER BY THE TRUST, BY ITS ADVISER OR BY ITS DISTRIBUTOR TO SELL, OR A
SOLICITATION OF ANY OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY IN
ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
IN SUCH JURISDICTION.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Highlights...................................... 2
Summary of Expenses............................. 4
Financial Highlights............................ 5
Investment Objectives and Policies and Risk
Factors....................................... 7
Management of the Funds......................... 10
Net Asset Value................................. 12
How to Purchase Shares.......................... 13
How to Redeem Shares............................ 14
Distributions and Taxes......................... 16
Description of Common Stock..................... 17
How the Funds Calculate Performance............. 18
Reports to Stockholders......................... 18
Custodian and Transfer and Dividend Disbursing
Agent......................................... 18
Organization and History........................ 18
</TABLE>
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PROSPECTUS
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MARCH 1, 1998
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FIRST EAGLE TRUST
STATEMENT OF ADDITIONAL INFORMATION
DATED MARCH 1, 1998
FIRST EAGLE TRUST (the 'Trust') is a registered investment company, a
'mutual fund,' that offers investors two investment alternatives, First Eagle
Fund of America and First Eagle International Fund.
FIRST EAGLE FUND OF AMERICA ('Fund of America') is an open-end,
non-diversified mutual fund whose investment objective is to achieve capital
appreciation. Fund of America will seek to achieve its objective by investing
primarily in domestic stocks and to a lesser extent in debt and foreign equity
securities.
FIRST EAGLE INTERNATIONAL FUND ('International Fund') is an open-end,
non-diversified mutual fund whose investment objective is to achieve capital
appreciation. International Fund will seek to achieve its objective by investing
primarily in foreign stocks and to a lesser extent in debt and domestic equity
securities. Under normal circumstances at least 65% of International Fund's
assets will be invested in foreign securities.
Arnhold and S. Bleichroeder Advisers, Inc. (the 'Adviser') invests the
assets of Fund of America and International Fund (collectively, the 'Funds' and
individually, a 'Fund') in securities of companies that appear to be undervalued
relative to their overall financial and managerial strength. The Adviser's
investment strategy is to invest in securities with 'intrinsic values' which are
not generally recognized by the market. There can be no assurance that the
Funds' objectives will be achieved.
The Trust's address is 1345 Avenue of the Americas, New York, New York
10105, and its telephone number is (212) 698-3000 or (888) 482-5667.
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Trust's Prospectus, dated March 1, 1998, a copy of
which may be obtained from the Trust's Transfer and Dividend Disbursing Agent,
BISYS Fund Services Inc., by writing to P.O. Box 182497, Columbus, OH
43218-2497, or by telephoning (800) 451-3623.
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Additional Investment Information............................................. 2 7
Investment Restrictions....................................................... 11 7
Trustees, Officers and Principal Stockholders................................. 12 10
Adviser....................................................................... 15 10
Distributor................................................................... 16 11
Portfolio Transactions and Brokerage.......................................... 16 12
Stockholder Investment Account................................................ 19 13
Taxes......................................................................... 19 16
Performance Information....................................................... 22 18
Custodian, Transfer and Dividend Disbursing Agent and
Independent Auditors........................................................ 23 18
Organization and History...................................................... 23 18
Fund of America Financial Statements.......................................... F-1
International Fund Financial Statements....................................... F-13
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ADDITIONAL INVESTMENT INFORMATION
Fund of America is an open-end, non-diversified mutual fund whose
investment objective is to achieve capital appreciation. It seeks to achieve its
objective by investing primarily in domestic stocks and to a lesser extent in
debt and foreign equity securities.
International Fund is an open-end, non-diversified mutual fund whose
investment objective is to achieve capital appreciation. It seeks to achieve its
objective by investing primarily in foreign stocks and to a lesser extent in
debt and domestic equity securities.
The Adviser invests the assets of the Funds in securities of companies that
appear to be undervalued relative to their overall financial and managerial
strength. The Adviser's investment strategy is to invest in securities with
'intrinsic values' which are not generally recognized by the market. As
non-diversified mutual funds, the Funds may have a greater investment
concentration in some securities than a diversified mutual fund. There can be no
assurance that the Funds' objectives will be achieved.
FOREIGN SECURITIES
The Funds may invest in foreign securities issued by companies of any
nation regardless of its level of development. The risks involved in investing
in foreign securities include political or economic instability in the country
of issue, the difficulty of predicting international trade patterns, the
possibility of imposition of exchange controls and the risk of currency
fluctuations. Foreign securities may be subject to greater fluctuations in price
than securities issued by U.S. corporations or issued or guaranteed by the U.S.
Government, its instrumentalities or agencies. Additionally, there may be less
publicly available information about a foreign company than about a domestic
company. Foreign companies generally are not subject to uniform accounting,
auditing and financial reporting standards comparable to those applicable to
domestic companies. There is generally less government regulation of securities
exchanges, brokers and listed companies abroad than in the United States. In
some foreign countries, there is a possibility of expropriation, confiscatory
taxation or diplomatic developments which could affect investment in those
countries. In the event of a default of any foreign debt obligation, it may be
more difficult to obtain or enforce a judgment against the issuers of those
securities. Foreign currency denominated securities may be affected favorably or
unfavorably by changes in currency rates and in exchange control regulations,
and costs may be incurred in connection with conversions between currencies.
Foreign currency is also subject to similar risks. Foreign securities and
currencies will be held by the Funds' Custodian, an 'eligible foreign custodian'
or a 'qualified U.S. bank,' as those terms are defined in the Investment Company
Act and the rules and regulations thereunder.
HIGH YIELD SECURITIES
Changes in the economy and interest rates affect high yield securities.
During an economic downturn or substantial period of rising interest rates,
highly leveraged issuers will likely experience financial stress which would
adversely affect their ability to service their principal and interest payment
obligations, to meet projected business goals and to obtain additional
financing. If the issuer of a bond owned by a Fund defaults, such Fund may incur
additional expenses in seeking recovery of its investment. Additionally, periods
of economic uncertainty and changes can result in increased volatility of market
prices of high yield bonds. Furthermore, the market prices of high yield bonds
structured as zero coupon or pay-in-kind securities are affected to a greater
extent by interest rate changes and are
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more volatile than securities which pay interest periodically and in cash. If
the Funds invest in zero coupon or pay-in-kind securities, they will be subject
to special tax considerations related to those securities. The Funds will have
to report the interest on those securities as income even though they receive no
interest until the security's maturity or payment date.
High yield bonds present risks based on payment expectations. For example,
high yield bonds may contain redemption or call provisions. If an issuer
exercises those provisions in a declining interest rate market and a Fund
replaces the security with a lower yielding security, that Fund's income will be
reduced.
At times, there will be thin trading markets for high yield bonds and it
may be difficult to value accurately the high yield bonds. Adverse publicity and
investor perceptions may decrease the values and ability to sell high yield
bonds, especially in a thinly traded market.
Certain risks are associated with using credit ratings as a method for
evaluating high yield bonds. As credit agencies may fail to timely change the
credit ratings to reflect subsequent events, the Adviser continuously monitors
the issuers of high yield bonds in each Fund's portfolio to determine if the
issuers, in the Adviser's opinion, will have sufficient cash flow and profits to
meet required principal and interest payments, and to attempt to assure the
bonds' liquidity so the Funds can meet redemption requests.
OPTIONS TRANSACTIONS
The Adviser believes that certain transactions in options on securities and
on stock indices may be useful in limiting a Fund's investment risk and
augmenting its investment return. The Adviser expects, however, the amount of a
Fund's assets that will be involved in options transactions to be small relative
to that Fund's assets. Accordingly, it is expected that only a relatively small
portion of a Fund's investment return will be attributable to transactions in
options on securities and on stock indices. The Funds may invest in options
transactions involving options on securities and on stock indices that are
traded on U.S. and foreign exchanges or in the over-the-counter markets. The
following discussion sets forth the principal characteristics of, and risks
associated with, certain transactions involving options on securities and on
stock indices.
A call option is a contract pursuant to which the purchaser, in return for
a premium paid, has the right to buy the equity or debt security underlying the
option at a specified exercise price at any time during the term of the option.
With respect to a call option on a stock index, the purchaser is entitled to
receive cash if the underlying stock index rises sufficiently above its level at
the time the option was purchased. The writer of the call option, who receives
the premium, has the obligation, upon exercise of the option, to deliver the
underlying equity or debt security against payment of the exercise price. With
respect to a call option on a stock index, the writer has the obligation to
deliver cash if the underlying index rises sufficiently above its level when the
option was purchased.
A put option gives the purchaser, in return for a premium, the right to
sell the underlying equity or debt security at a specified exercise price during
the term of the option. With respect to a put option on a stock index, the
purchaser is entitled to receive cash if the underlying index falls sufficiently
below its level at the time the option was purchased. The writer of the put, who
receives the premium, has the obligation to buy the underlying equity or debt
security upon exercise at the exercise price. With respect to a put option on a
stock index, the writer has the obligation to deliver cash if the underlying
index falls sufficiently below its level when the option was purchased. The
price of an option will reflect,
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among other things, the relationship of the exercise price to the market price
of the underlying financial instrument, the price volatility of the underlying
financial instrument, the remaining term of the option, supply and demand of
such options and interest rates.
One purpose of purchasing options is to hedge against an increase in the
price of securities that a Fund intends ultimately to buy. Hedge protection is
provided during the life of the call because that Fund, as the holder of the
call, is able to buy the underlying security at the exercise price, and, in the
case of a call on a stock index, is entitled to receive cash if the underlying
index rises sufficiently. However, if the value of a security underlying a call
option or the general market or a market sector does not rise sufficiently when
that Fund has purchased a call option on the underlying instrument, that option
may result in a loss.
Securities and options exchanges have established limitations on the
maximum number of options that an investor or group of investors acting in
concert may write. It is possible that a Fund and other clients of the Adviser
may be considered such a group. Position limits may restrict a Fund's ability to
purchase or sell options on particular securities and on stock indices.
COVERED OPTION WRITING
A Fund may write 'covered' call options on equity or debt securities and on
stock indices in seeking to enhance investment return or to hedge against
declines in the prices of portfolio securities or may write put options to hedge
against increases in the prices of securities which it intends to purchase. A
call option is covered if a Fund holds, on a share-for-share basis, a call on
the same security as the call written where the exercise price of the call held
is equal to or less than the exercise price of the call written, or greater than
the exercise price of the call written if the difference is maintained by that
Fund in cash, Treasury bills or other high grade short-term obligations in a
segregated account with its Custodian.
A put option is 'covered' if a Fund maintains cash, Treasury bills or other
high grade short-term obligations with a value equal to the exercise price in a
segregated account with its Custodian, or holds on a share-for-share basis a put
on the same equity or debt security as the put written where the exercise price
of the put held is equal to or greater than the exercise price of the put
written, or lower than the exercise price of the put written if the difference
is maintained in a segregated account with its Custodian.
One reason for writing options is to attempt to realize, through the
receipt of premiums, a greater return than would be realized on the securities
alone. In the case of a securities call, the writer receives the premium, but
has given up the opportunity for profit from a price increase in the underlying
security above the exercise price during the option period. In the case of a
stock index call, the writer receives the premium, but is obligated to deliver
cash if the underlying index rises sufficiently during the option period.
Conversely, the put option writer has, in the form of the premium, gained a
profit as long as the price of the underlying security or stock index remains
above the exercise price, but has assumed an obligation to purchase the
underlying security at the exercise price from or deliver cash to the buyer of
the put option during the option period.
Another reason for writing options is to hedge against a moderate decline
in the value of securities owned by a Fund in the case of a call option, or a
moderate increase in the value of securities a Fund intends to purchase in the
case of a put option. If a covered option written by a Fund expires
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unexercised, that Fund will realize income equal to the amount of the premium it
received for the option.
If an increase occurs in the underlying security or stock index sufficient
to result in the exercise of a call written by a Fund, that Fund may be required
to deliver securities or cash and may thereby forego some or all of the gain
that otherwise may have been realized on the securities underlying the call
option. This 'opportunity cost' may be partially or wholly offset by the premium
received for the covered call written by that Fund.
OPTIONS ON STOCK INDICES
A Fund will write call options on broadly based stock market indices only
if at the time of writing it holds a diversified portfolio of stocks. When a
Fund writes a call option on a broadly based stock market index, that Fund will
segregate or put into escrow with its Custodian any combination of cash, cash
equivalents or 'qualified securities' with a market value at the time the option
is written of not less than 100% of the current index value times the multiplier
times the number of contracts. A 'qualified security' is an equity security
which is listed on an Exchange or on NASDAQ against which a Fund has not written
a call option and which has not been hedged by the sale of stock index futures.
Index prices may be distorted if trading in certain stocks included in the
index is interrupted. Trading in the index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number of
stocks included in the index. If this occurred, a Fund would not be able to
close out options which it had purchased or written and, if restrictions on
exercise were imposed, might be unable to exercise an option it held, which
could result in substantial losses to that Fund.
If a Fund is assigned an exercise notice on a call it has written, that
Fund would be required to liquidate portfolio securities in order to satisfy the
exercise, unless it has other liquid assets that are sufficient to satisfy the
exercise of the call. When a Fund has written a call, there is also a risk that
the market may decline between the time that Fund has a call exercised against
it, at a price which is fixed as of the closing level of the index on the date
of exercise, and the time it is able to sell securities in its portfolio. As
with stock options, a Fund will not learn that an index option has been
exercised until the day following the exercise date but, unlike a call on stock
where such Fund would be able to deliver the underlying securities in
settlement, such Fund may have to sell part of its securities portfolio in order
to make settlement in cash, and the price of such securities might decline
before they can be sold. For example, even if an index call which a Fund has
written is 'covered' by an index call held by such Fund with the same strike
price, such Fund will bear the risk that the level of the index may decline
between the close of trading on the date the exercise notice is filed with the
Clearing Corporation and the close of trading on the date such Fund exercises
the call it holds or the time it sells the call, which in either case would
occur no earlier than the day following the day the exercise notice was filed.
FUTURES CONTRACTS
An interest rate futures contract is an agreement to purchase or sell an
agreed amount of debt securities at a set price for delivery on a future date.
Similarly, a currency futures contract calls for the purchase or sale of a fixed
amount of a specific currency at a set price for delivery on a future date.
Unlike interest rate and currency futures contracts, a stock index futures
contract does not contemplate the purchase or delivery of the underlying
financial instrument (interest rate and stock index futures contracts are
collectively herein referred to as 'financial futures contracts'). Instead, one
party agrees to
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deliver to the other an amount of cash equal to a specific dollar amount times
the difference between the value of a specific stock index at the close of the
last trading day of the contract.
A Fund is required initially to deposit with the futures commission
merchant margin in an amount of cash or U.S. Treasury bills equal to a
percentage of the contract amount. Initial margin in futures transactions is in
the nature of a good faith deposit on the contract which is returned to such
Fund upon termination of the futures contract, assuming all contractual
obligations have been met. Subsequent payments, called variation margin, to and
from the futures commission merchant are made on a daily basis as the market
price of the futures contract fluctuates. This process is known as 'marking to
market.' At any time prior to expiration of the futures contract, a Fund may
elect to close a position by taking an offsetting position which will terminate
that Fund's position in the futures contract. Although interest rate futures and
currency futures contracts (other than those relating to Eurodollar time
deposits) generally provide for delivery and acceptance of the underlying
financial instrument, the Funds expect most financial or currency futures
contracts to be terminated by offsetting transactions.
An option on a financial or currency futures contract gives the purchaser
the right, but not the obligation, to assume a position in a financial or
currency futures contract (a long position if the option is a call and a short
position if the option is a put) at a specified exercise price at any time
during the option exercise period. The writer of the option is required upon
exercise to assume an offsetting futures position (a short position if the
option is a call and a long position if the option is a put).
HEDGING WITH FUTURES CONTRACTS AND RELATED OPTIONS
A Fund may acquire futures and related options for 'bona fide hedging'
within the meaning and intent of the Commodity Exchange Act and Regulations
promulgated thereunder by the Commodity Futures Trading Commission. A Fund may
also acquire futures and related options for other than bona fide hedging
purposes, provided that the aggregate initial margin and premiums required to
establish such positions are in an amount not exceeding 5% of the liquidation
value of that Fund's portfolio after taking into account unrealized profits and
unrealized losses on any such contracts it has entered into. When options are
in-the-money at the time of purchase, the in-the-money amount will be excluded
from the computation of such 5% limitation.
A Fund may purchase an interest rate futures contract as a hedge against an
anticipated decline in interest rates and a resulting increase in the market
price of debt securities it intends to acquire. A Fund may sell an interest rate
futures contract as a hedge against an anticipated increase in interest rates
and a resulting decline in the market price of debt securities it owns. A Fund
may purchase a currency futures contract to hedge against anticipated increases
in the value of currency it intends to acquire for prospective securities
purchases relative to the value of currency it is holding. A Fund may also sell
a currency futures contract in anticipation of a decrease in the value of
currency it is holding or in anticipation of the sale of a portfolio security. A
Fund may purchase a stock index futures contract as a hedge against an
anticipated general market or market sector advance which may increase the
market price of equity securities it intends to buy. A Fund may sell stock index
futures contracts in anticipation of or in a general market or market sector
decline that may adversely affect the market value of its portfolio of equity
securities.
A Fund may use options on financial and currency futures contracts in
connection with its hedging strategies in lieu of purchasing or selling
financial and currency futures contracts. To hedge against a possible decrease
in the value of equity or debt securities or currency held in its portfolio, a
Fund may purchase put options and write call options on stock index, interest
rate or currency futures contracts,
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respectively. Similarly, in anticipation of an increase in the prices of equity
or debt securities or currency it intends to purchase, a Fund may purchase call
options or write put options on stock index or interest rate or currency futures
contracts, respectively.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS
There are several risks associated with a Fund's use of financial and
currency futures and related options as hedging devices. One risk arises because
of imperfect correlation in the movement of prices of financial and currency
futures contracts and related options and the securities or currency subject to
the hedge. In the case of stock index futures and related options, the risk of
imperfect correlation increases as the composition of a Fund's portfolio of
equity securities diverges from the securities included in the applicable stock
index. In the case of interest rate or currency futures contracts and related
options, the risk of imperfect correlation presents the possibility that a
correct forecast of interest or exchange rate trends by the Adviser may still
not result in a successful hedging transaction. If the price of a financial or
currency futures contract or related option moves more than the price of the
hedged financial instrument, a Fund may experience either a loss or a gain on
the contract which will not be completely offset by movements in the price of
the hedged instrument.
Successful use of financial futures contracts and related options is
subject to the Adviser's ability to predict correctly movements in the direction
of the market. Similarly, successful use of currency futures and related options
depends, in part, on the Adviser's ability to predict changes in exchange rates.
Commodities exchanges and boards of trade have established limitations on the
maximum number of options that an investor or group of investors acting in
concert may write. It is possible that a Fund and other clients of the Adviser
may be considered such a group. Position limits may restrict a Fund's ability to
purchase or sell options on futures contracts.
OVER-THE-COUNTER DERIVATIVE TRANSACTIONS
A Fund may invest in options, futures and swaps and related products which
are often referred to as 'derivatives.' Derivatives may have a return that is
tied to a formula based upon an interest rate, index or other measurement which
may differ from the return of a simple security of the same maturity. A formula
may have a cap or other limitation on the rate of interest to be paid.
Derivatives may have varying degrees of volatility at different times, or under
different market conditions.
A Fund may enter into interest rate, currency and index swaps and the
purchase or sale of related caps, floors and collars. A Fund may enter into
these transactions to preserve a return or spread on a particular investment or
portion of its portfolio, to protect against currency fluctuations or to protect
against any increase in the price of securities it anticipates purchasing at a
later date. Interest rate swaps involve the exchange by a Fund with another
party of their respective commitments to pay or receive interest, such as an
exchange of floating rate payments for fixed rate payments with respect to a
notional amount of principal. A currency swap is an agreement to exchange cash
flows on a notional amount of two or more currencies based on the relative value
differential between them and an index swap is an agreement to swap cash flows
on a notional amount based on changes in values of the reference indices. Swaps
may be used in conjunction with other derivative instruments to offset interest
rate, currency or other underlying risks. For example, interest rate swaps may
be offset with 'caps,' 'floors' or 'collars.' A 'cap' is essentially a call
option which places a limit on the amount of floating rate interest that must be
paid on a certain principal amount. A 'floor' is essentially a put option which
places a limit on the
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minimum amount that would be paid on a certain principal amount. A 'collar' is
essentially a combination of a long cap and a short floor where the limits are
set at different levels.
A Fund will usually enter into swaps on a net basis; that is, the two
payment streams will be netted out in a cash settlement on the payment date or
dates specified in the instrument, with that Fund receiving or paying, as the
case may be, only the net amount of the two payments. To the extent obligations
created thereby may be deemed to constitute senior securities under the
Investment Company Act of 1940, that Fund will maintain required collateral in a
segregated account consisting of U.S. Government securities or cash or cash
equivalents.
SPECIAL RISKS OF OVER-THE-COUNTER DERIVATIVE TRANSACTIONS
Over-the-Counter ('OTC') derivative transactions differ from
exchange-traded derivative transactions in several respects. OTC derivatives are
transacted directly with dealers and not with a clearing corporation. Without
the availability of a clearing corporation, OTC derivative pricing is normally
done by reference to information from market makers, which information is
carefully monitored by the Adviser and verified in appropriate cases.
As OTC derivatives are transacted directly with dealers, there is a risk of
nonperformance by the dealer as a result of the insolvency of such dealer or
otherwise. An OTC derivative may only be terminated voluntarily by entering into
a closing transaction with the dealer with whom the Fund originally dealt. Any
such cancellation may require the Fund to pay a premium to that dealer. In those
cases in which a Fund has entered into a covered derivative transaction and
cannot voluntarily terminate the derivative, that Fund will not be able to sell
the underlying security until the derivative expires or is exercised or
different cover is substituted. The Funds intend to enter into OTC derivative
transactions only with dealers which agree to, and which are expected to be
capable of, entering into derivative closing transactions with such Fund. There
is also no assurance that a Fund will be able to liquidate an OTC derivative at
any time prior to expiration.
BORROWING
A Fund may from time to time increase its ownership of securities above the
amounts otherwise possible by borrowing from banks (other than those affiliated
with the Trust or any of its affiliates) and investing the borrowed funds. A
Fund also may borrow from those banks to facilitate the meeting of redemption
requests or for temporary or emergency purposes and may pledge its assets to
secure those borrowings. Any borrowings by a Fund will be made only to the
extent that the value of its assets, less its liabilities other than borrowings,
is equal to at least 300% of all of its borrowings (including reverse repurchase
agreements) computed at the time a loan is made. If the value of that Fund's
assets at any time should fail to meet the 300% asset coverage described above,
that Fund, within three days, is required to reduce its aggregate borrowings
(including reverse repurchase agreements) to the extent necessary to meet such
asset coverage and may have to sell a portion of its investments at a time when
independent investment judgment would not indicate such action.
RESTRICTED SECURITIES
Each Fund may invest up to 15% of its net assets in securities which are
considered to be illiquid, such as those subject to legal or contractual
restrictions on resale ('Restricted Securities') including securities that
cannot be sold unless registered under the Securities Act of 1933, as amended
(the
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'Securities Act'), and securities which are not readily marketable, such as
repurchase agreements maturing in more than seven days. Generally, Restricted
Securities cannot be sold without the expense and time required to register the
securities under the Securities Act. Certain Restricted Securities may be sold
to institutional investors without registration pursuant to rules under the
Securities Act. The institutional trading market is relatively new and provides
liquidity for some Restricted Securities. Restricted Securities for which no
adequate trading market exists may be deemed illiquid securities. The Funds
currently do not invest in real estate which is considered to be an illiquid
investment.
REPURCHASE AGREEMENTS
A Fund may purchase securities and concurrently enter into 'repurchase
agreements.' A repurchase agreement typically involves a purchase of an
investment contract from a selling financial institution such as a bank or
broker-dealer, which contract is fully secured by government obligations or
other debt securities. The agreement provides that the purchase will sell the
underlying securities back to the institution at a specified price and at a
fixed time in the future, usually not more than seven days from the date of
purchase. The difference between the purchase price and the resale price
represents the interest earned by the purchase, which is unrelated to the coupon
rate or maturity of the purchased security. In the event of the bankruptcy or
insolvency of the financial institution, the purchaser may be delayed in
realizing upon the collateral underlying the repurchase agreement. Further, the
law is unsettled regarding the rights of the purchaser if the financial
institution which is a party to the repurchase agreement petitions for
bankruptcy or otherwise becomes subject to the U.S. Bankruptcy Code. Each Fund
intends to invest no more than 5% of its net assets in repurchase agreements.
Repurchase agreements of greater than seven days' maturity may be deemed to be
illiquid.
REVERSE REPURCHASE AGREEMENTS
A reverse repurchase agreement involves the sale of a debt security held by
a Fund coupled with an agreement by that Fund to repurchase the instrument at a
stated price, date and interest payment. A Fund will use the proceeds of a
reverse repurchase agreement to purchase other debt securities or to enter into
repurchase agreements maturing not later than the expiration of the prior
reverse repurchase agreement.
A Fund will enter into a reverse repurchase agreement only when the
interest income to be earned from the investment of the proceeds of the
transaction is greater than the interest expense of the transaction. Under the
Investment Company Act, reverse repurchase agreements will be considered to be
borrowings by a Fund and, therefore, may be subject to the same risks involved
in any borrowing. A Fund may not enter into a reverse repurchase agreement if as
a result its current obligations under such agreements would exceed one-third
the value of its net assets computed at the time the reverse repurchase
agreement is entered into. Each Fund does not intend to invest more than 5% of
the value of its net assets in reverse repurchase agreements.
LENDING OF SECURITIES
A Fund may lend its portfolio securities to brokers, dealers and financial
institutions, provided outstanding loans do not exceed in the aggregate
one-third the value of its net assets and provided that such loans are callable
at any time by that Fund and are at all times secured by cash or equivalent
collateral that is equal to at least the market value, determined daily, of the
loaned securities. A Fund,
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however, may not enter into portfolio lending arrangements with the Adviser or
any of its affiliates absent appropriate regulatory relief from applicable
prohibitions contained in the Investment Company Act. Each Fund intends to
invest no more than 5% of the value of its net assets to portfolio loans. The
advantage of portfolio lending is that a Fund continues to receive payments in
lieu of the interest and dividends of the loaned securities, while at the same
time earning interest either directly from the borrower or on the collateral,
which may be invested in short-term obligations.
As voting or consent rights which accompany loaned securities pass to the
borrower, a Fund will follow the policy of calling the loan, in whole or in part
as may be appropriate, to permit the exercise of such rights if the matters
involved would have a material effect on its investment in the securities which
are subject to the loan. A Fund will pay reasonable finders', administrative and
custodial fees in connection with a loan of its securities or may share the
interest earned on collateral with the borrower.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
From time to time, in the ordinary course of business, a Fund may purchase
securities on a when-issued or delayed delivery basis -- i.e., delivery and
payment can take place a month or more after the date of the transaction. The
purchase price, or the interest rate payable on debt securities, is fixed on the
transaction date. The securities so purchased are subject to market fluctuation,
and no interest or dividend accrues to such Fund until delivery and payment take
place. At the time a Fund makes the commitment to purchase securities on a
when-issued or delayed delivery basis, it will record the transaction and
thereafter reflect the value of such securities in determining its net asset
value each day. Each Fund currently intends to invest no more than 5% of the
value of its net assets in such transactions.
SHORT SALES
The Funds may make short sales and short sales against-the-box. Each Fund
currently intends to invest no more than 5% of the value of its net assets in
such transactions. A 'short sale' is a transaction in which a Fund sells a
security it does not own in anticipation of a decline in market price. In order
to deliver the security to the buyer, that Fund must arrange through a broker to
borrow the security. That borrowing arrangement, which may subject that Fund to
payment of a premium, obligates it to replace the borrowed security at its
market price. A Fund may incur a loss with respect to a short sale transaction,
if the market price of the security increases between the date of the short sale
and the date on which it replaces the borrowed security. A 'short sale
against-the-box' is a short sale where, at the time of the short sale, a Fund
owns or has the immediate and unconditional right to obtain securities identical
to those subject to the short sale.
A Fund may make a short sale only if, at the time the short sale is made
and after giving effect thereto, the market value of all securities sold short
is one-third or less of the value of its net assets and the market value of
securities sold short which are not listed on a national securities exchange
does not exceed 10% of its net assets. A Fund's obligation to replace the
security borrowed in connection with a short sale will be secured by collateral
consisting of cash or U.S. Government securities or liquid securities that are
marked-to-market on a daily basis.
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ARBITRAGE TRANSACTIONS
A Fund also may engage in arbitrage transactions involving near
contemporaneous purchase of securities on one market and sale of those
securities on another market to take advantage of pricing differences between
markets. A Fund will incur a gain to the extent that proceeds exceed costs and a
loss to the extent that costs exceed proceeds. The risk of an arbitrage
transaction, therefore, is that such Fund may not be able to sell securities
subject to an arbitrage at prices exceeding the costs of purchasing those
securities. A Fund will attempt to limit that risk by effecting arbitrage
transactions only when the prices of the securities are confirmed in advance of
the trade. Each Fund currently intends to invest no more than 5% of the value of
its net assets in such transactions.
INVESTMENT RESTRICTIONS
The following investment restrictions are non-fundamental policies, which
may be changed at the discretion of the Board of Trustees after giving the
Shareholders at least 30 days' prior notice of the change.
Neither Fund of America nor International Fund may:
1. With respect to 50% of the value of its total assets, invest more
than 25% of the value of its total assets in the securities of one issuer,
and with respect to the other 50% of the value of its total assets, invest
more than 5% of the value of its total assets in the securities of one
issuer or acquire more than 10% of the outstanding voting securities of a
single issuer. This restriction shall not apply to U.S. Government
securities.
2. Invest more than 25% of its assets in the securities of issuers
engaged in specific industries or industry groups.
3. Change its sub-classification under the Investment Company Act of
1940 from non-diversified to diversified.
4. Issue senior securities, borrow money or pledge its assets, except
that the Fund may borrow money from a bank (and may pledge its assets to
secure such borrowings) directly or through reverse repurchase agreements
for securities purchases, or temporarily to facilitate meeting redemption
requests or for emergency purposes, and by engaging in reverse repurchase
agreements with broker-dealers. The Fund may not, however, borrow money in
an aggregate amount exceeding 33 1/3% of the Fund's net assets. The
purchase or sale of securities on a when-issued or delayed delivery basis
and collateral arrangements with respect to futures contracts are not
deemed to be a pledge of assets; and neither such arrangements nor
investment in over-the-counter derivative transactions or the purchase or
sale of options on futures contracts on an exchange are deemed to be the
issuance of a senior security.
5. Buy or sell commodities or commodity contracts which under the
Commodity Exchange Act and Regulations promulgated thereunder would require
the Fund to register as a 'commodity pool operator' as that term is defined
under the Commodity Exchange Act.
6. Act as underwriter except to the extent that, in connection with
the disposition of portfolio securities, it may be deemed to be an
underwriter under certain federal securities laws.
7. Purchase securities of any other investment companies, except (i)
by purchase in the open market involving only customary brokers'
commissions, (ii) in connection with a merger,
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consolidation, reorganization or acquisition of assets or (iii) as
otherwise permitted by applicable law.
8. Make loans, except through (i) repurchase agreements (repurchase
agreements with a maturity of longer than 7 days together with illiquid
assets being limited to 15% of the Fund's net assets) and (ii) loans of
portfolio securities.
9. Pledge, mortgage, or hypothecate its assets in an amount exceeding
33 1/3% of its total assets.
10. Invest in securities of any issuer if, to the knowledge of the
Fund, any officer or director of the Fund or the Fund's investment adviser
owns more than 1/2 of 1% of the outstanding securities of such issuer, and
such officers and directors who own more than 1/2 of 1% own in the
aggregate more than 5% of the outstanding securities of such issuer.
11. Purchase securities of any issuer if such purchase at the time
thereof would cause more than 10% of the voting securities of such issuer
to be held by the Fund.
TRUSTEES, OFFICERS AND PRINCIPAL STOCKHOLDERS
Pertinent information concerning the trustees and officers of the Trust is
set forth below. Some of the Trust's trustees and officers are employees of the
Adviser and its affiliates. At least a majority of the Trust's Board of Trustees
are not 'interested persons' of the Trust as that term is defined in the
Investment Company Act.
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION
NAME AND ADDRESS(1) THE TRUST DURING PAST 5 YEARS
- ------------------------------------- ----------------------- --------------------------------------------------
<S> <C> <C>
*John P. Arnhold..................... Trustee and Co-President and Director, Arnhold and S.
Co-President Bleichroeder, Inc.; President and Director,
Arnhold and S. Bleichroeder Advisers, Inc.;
Director, Aquila International Fund Ltd., The
Global Beverage Fund Ltd; President, Worldvest,
Inc.
Candace K. Beinecke ................. Trustee Partner, Hughes Hubbard & Reed; Director, Jacob's
One Battery Park Plaza Pillow Dance Festival, Inc., Historic Preservation
New York, NY 10004 Projects, Inc. and Merce Cunningham Dance
Foundation, Inc.
Edwin J. Ehrlich .................... Trustee President, Ehrlich Capital Management; Director,
2976 Lonni Lane Pension Fund Trusts -- ITT Corp.; Advisory Board
Merrick, NY 11566 Member, Emerging World Investors Limited
K. Georg Gabriel .................... Trustee Senior Advisor, Strategic Investment Partners,
2401 Tracy Place, N.W. Inc.; Member, Investment Committee, Eugene and
Washington, D.C. 20008 Agnes Meyer Foundation
</TABLE>
(table continued on next page)
12
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<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION
NAME AND ADDRESS(1) THE TRUST DURING PAST 5 YEARS
- ------------------------------------- ----------------------- --------------------------------------------------
<S> <C> <C>
Robert J. Gellert ................... Trustee Manager, United Continental Corporation; General
122 East 42nd Street Partner, Windcrest Partners
New York, NY 10168
*Michael M. Kellen................... Trustee and Vice Director and Senior Vice President, Arnhold and S.
Chairman of the Board Bleichroeder, Inc.
William M. Kelly .................... Trustee Manager, Lingold Association; Independent General
40 Wall Street Partner, ML Venture Partners I L.P. and ML Venture
Suite 4201 Partners II, L.P.; Trustee, New York Foundation;
New York, NY 10005 Treasurer and Trustee, Black Rock Forest
Conservation
*Stanford S. Warshawsky.............. Trustee and Chairman of Co-President since 1994, Director and Secretary,
the Board previously Vice Chairman of the Board, Arnhold and
S. Bleichroeder, Inc.; Director, German-American
Chamber of Commerce
Harold J. Levy....................... Co-President Portfolio Manager, Arnhold and S. Bleichroeder
Advisers, Inc.; Principal, Iridian Asset
Management L.L.C.; Senior Vice President until
1996, Arnhold and S. Bleichroeder, Inc.; Director
since 1993, American Buildings Company
David L. Cohen....................... Senior Vice Portfolio Manager, Arnhold and S. Bleichroeder
President Advisers, Inc.; Principal Iridian Asset Management
L.L.C.; Senior Vice President until 1996, Arnhold
and S. Bleichroeder, Inc.
Arthur F. Lerner..................... Senior Vice Portfolio Manager, Arnhold and S. Bleichroeder
President Advisers, Inc.; Senior Vice President, Arnhold and
S. Bleichroeder, Inc.
Robert Miller........................ Treasurer Senior Vice President, Arnhold and S.
Bleichroeder, Inc.; Vice President, Arnhold and S.
Bleichroeder Advisers, Inc.
</TABLE>
(table continued on next page)
13
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION
NAME AND ADDRESS(1) THE TRUST DURING PAST 5 YEARS
- ------------------------------------- ----------------------- --------------------------------------------------
<S> <C> <C>
Robert Bruno......................... Vice President and Vice President, Arnhold and S. Bleichroeder, Inc.;
Secretary prior to 1997, President and Chief Operating
Officer, Coelho Associates LLC; and Senior Vice
President and Chief Admin. Officer, Schroeder
Wertheim Investment Services, Inc.
Martha B. Pierce..................... Vice President Vice President since 1997, previously Assistant
Vice President and Fund Administrator, Arnhold and
S. Bleichroeder, Inc.
Tracy LaPointe Saltwick.............. Vice President Senior Vice President since 1997 and prior thereto
Vice President, Arnhold and S. Bleichroeder, Inc.
Cari Levine.......................... Assistant Treasurer Fund Administrator, Arnhold and S. Bleichroeder,
Inc.
Suzan J. Afifi....................... Assistant Secretary Fund Administration, Arnhold and S. Bleichroeder,
Inc. since 1997; prior thereto, Managing Director
Effectinvest Bank, Vienna, Austria
</TABLE>
- ------------
* 'Interested' trustee, as defined in the Investment Company Act, by reason of
his affiliation with Arnhold and S. Bleichroeder, Inc. and Arnhold and S.
Bleichroeder Advisers, Inc.
(1) Unless otherwise stated, the address is: Arnhold and S. Bleichroeder, Inc.,
1345 Avenue of the Americas, New York, NY 10105.
The officers conduct and supervise the daily business operations of the
Trust, while the Trustees, in addition to the functions set forth under
'Distributor,' review such actions and decide on general policy.
Each Fund paid each of its trustees who are not interested persons annual
compensation of $5,000 plus $500 per meeting of the Board and certain
out-of-pocket expenses. The following table sets out the compensation received
by each of the trustees from Fund of America for its most recently completed
fiscal year ended October 31, 1997 and from International Fund for its most
recent ten-month fiscal period ended October 31, 1997.
14
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<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
COMPENSATION
----------------------------------------
FUND OF INTERNATIONAL
NOMINEE AMERICA FUND TOTAL
- -------------------------------------------------------------- ------- -------------- -------
<S> <C> <C> <C>
John P. Arnhold*.............................................. 0 0 0
Candace K. Beinecke........................................... $8,750 0 $ 8,750
Edwin J. Ehrlich.............................................. 0 $5,250 $ 5,250
K. Georg Gabriel.............................................. $8,750 $5,250 $14,000
Robert J. Gellert............................................. 0 $5,250 $ 5,250
Michael M. Kellen*............................................ 0 0 0
William M. Kelly.............................................. 0 $5,250 $ 5,250
Stanford S. Warshawsky*....................................... 0 0 0
</TABLE>
- ------------
* Interested person by reason of affiliation with the Trust's Adviser or
principal underwriter.
The Funds do not pay any compensation to interested trustees of the Fund or
any retirement or pension benefits to trustees.
As of January 1, 1998, the trustees and officers of Fund of America, as a
group, owned approximately shares or % of the outstanding common stock of
Fund of America. The trustees and officers of International Fund, as a group,
owned approximately shares or % of the outstanding common stock of
International Fund.
As of January 1, 1998, Arnhold and S. Bleichroeder, Inc. Profit Sharing
Plan, 1345 Avenue of the Americas, New York, NY 10105, owned beneficially and of
record approximately % of Fund of America's outstanding shares and %
of International Fund 's outstanding shares.
Directors and employees of the Trust, Arnhold and S. Bleichroeder, Inc. and
the Adviser are permitted to engage in personal securities transactions subject
to the restrictions and procedures contained in the Trust's Code of Ethics,
which was approved by the Board of Trustees of the Trust and by the Board of
Directors of Arnhold and S. Bleichroeder, Inc.
ADVISER
The Adviser, Arnhold and S. Bleichroeder Advisers, Inc., provides
investment advisory services as the investment adviser of Fund of America and
International Fund. For its services, the Adviser receives, pursuant to an
Investment Advisory Agreement between the Trust and the Adviser (the 'Advisory
Agreement'), an annual advisory fee of 1.0% of the average daily net assets of
each Fund. These fees, described in the Prospectus under 'Adviser -- Management
and Services Fees,' are accrued daily and paid monthly. For the fiscal years
ended October 31, 1995, 1996 and 1997, Fund of America paid the Adviser an
advisory fee of $1,868,672, $1,838,840 and $2,672,362, respectively. For the
years ended December 31, 1995 and 1996 and for the fiscal period ended October
31, 1997, International Fund paid the Adviser an advisory fee of $338,062,
$446,932 and $452,626, respectively.
MANAGEMENT AND SERVICES FEES
On February , 1998, the Board of Trustees and the shareholders approved
an Advisory Agreement between the Trust and the Adviser effective February 27,
1998. The Advisory Agreement is
15
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<PAGE>
substantially the same as the prior agreement except the new Advisory Agreement
provides for monthly advisory fee payments and reduces the rate of the advisory
fees.
The Advisory Agreement will continue in effect for a period of more than
two years from the date of execution only so long as such continuance is
specifically approved at least annually in conformity with the Investment
Company Act. The Advisory Agreement provides that the Adviser will not be liable
for any error of judgment or for any loss suffered by the Funds in connection
with the matters to which the Advisory Agreement relates, except a loss
resulting from willful misfeasance, bad faith, gross negligence or reckless
disregard of duty. The Advisory Agreement provides that it will terminate
automatically if assigned, within the meaning of the Investment Company Act, and
that it may be terminated without penalty by either party upon not more than 60
days' nor less than 30 days' written notice.
Arnhold and S. Bleichroeder, Inc. receives an annual service fee of up to
0.25% of each Fund's average daily net assets payable quarterly, pursuant to a
separate Services Agreement which was approved by the Board, to cover expenses
incurred by Arnhold and S. Bleichroeder, Inc. for providing administrative and
fund accounting support services and shareholder liaison services, including
assistance with subscriptions, redemptions and other shareholder questions.
DISTRIBUTOR
Arnhold and S. Bleichroeder, Inc. (the 'Distributor'), a registered
broker-dealer, investment adviser and a member of the New York Stock Exchange
and the National Association of Securities Dealers ('NASD'), serves as the
distributor of the Funds' Class Y and Class C shares. The Distributor is engaged
in the investment advisory, securities brokerage and underwriting businesses.
The Funds' shares will be continuously offered on an agency basis on behalf of
the Funds, at the net asset value next determined after receipt of payment by
the Distributor, pursuant to a Distribution Agreement with the Trust (the
'Distribution Agreement'). The Distributor assumes the expenses related to
distributing the Funds' shares. Sales of the Funds' shares are not subject to an
initial sales charge. The Funds' pay the Distributor a Rule 12b-1 fee on Class C
shares at the annual rate of 0.75% of the average net assets of each Fund's
outstanding Class C shares. Pursuant to the Distribution Agreement, the Funds
agreed to indemnify the Distributor against certain liabilities under the
Securities Act of 1933, as amended (the 'Securities Act').
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser is responsible for decisions to buy and sell securities,
futures and options on securities, on indices and on futures for the Fund, the
selection of brokers, dealers and futures commission merchants to effect those
transactions and the negotiation of brokerage commissions, if any. Broker-
dealers and futures commission merchants may receive brokerage commissions on
Fund portfolio transactions, including options and the purchase and sale of
underlying securities or futures positions upon the exercise of options. Orders
may be directed to any broker or futures commission merchant including, to the
extent and in the manner permitted by applicable law, the Adviser.
The Adviser has employment agreements with Harold J. Levy and David L.
Cohen to serve as portfolio managers for Fund of America. Messrs. Levy and Cohen
are also the principal owners of Iridian Asset Management LLC ('Iridian'). The
Distributor owns 27.5% of Iridian and pursuant to an operating agreement with
Iridian does not direct or control the management, affairs or policies of
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Iridian. Harold J. Levy has been a portfolio manager of Fund of America since
its inception, and David L. Cohen has been a portfolio manager of Fund of
America since 1989. Portfolio trades for Fund of America are placed at Iridian
and may be executed with similar trades for other clients.
Equity securities traded in the over-the-counter market and bonds,
including convertible bonds, are generally traded on a 'net' basis with dealers
acting as principal for their own accounts without a stated commission, although
the price of the security usually includes a profit to the dealer. In
underwritten offerings, securities are purchased at a fixed price which includes
an amount of compensation to the underwriters, generally referred to as the
underwriter's concession or discount. On occasion, certain money market
instruments and U.S. Government agency securities may be purchased directly from
the issuer, in which case no commissions or discounts are paid. Each Fund will
not deal with the Distributor in any transaction in which the Distributor acts
as principal. Thus, it will not deal with the Distributor acting as market
maker, and it will not execute a negotiated trade with Distributor if execution
involves the Distributor acting as principal with respect to any part of a
Fund's order.
Portfolio securities may not be purchased from any underwriting or selling
group of which the Distributor, during the existence of the group, is a member,
except in accordance with rules of the Securities and Exchange Commission. This
limitation, in the opinion of the Trust, will not significantly affect a Fund's
ability to pursue its present investment objective.
In placing orders for portfolio securities or futures, the Adviser is
required to give primary consideration to obtaining the most favorable price and
efficient execution. Within the framework of this policy, the Adviser will
consider the research and investment services provided by brokers, dealers or
futures commission merchants who effect or are parties to portfolio transactions
of a Fund, the Adviser or the Adviser's other clients. Such research and
investment services are those which brokerage houses customarily provide to
institutional investors and include statistical and economic data and research
reports on particular companies and industries. Such services are used by the
Adviser in connection with all of its investment activities, and some of such
services obtained in connection with the execution of transactions for a Fund
may be used in managing other investment accounts. Conversely, brokers, dealers
or futures commission merchants furnishing such services may be selected for the
execution of transactions of such other accounts, whose aggregate assets are far
larger than either Fund, and the services furnished by such brokers, dealers or
futures commission merchants may be used by the Adviser in providing investment
management for a Fund. Commission rates are established pursuant to negotiations
with the broker, dealer or futures commission merchant based on the quality and
quantity of execution services provided by the executing party in the light of
generally prevailing rates. In addition, the Adviser is authorized to pay higher
commissions on brokerage transactions for the Fund to brokers other than the
Distributor in order to secure the research and investment services described
above, subject to review by the Board of Trustees from time to time as to the
extent and continuation of this practice. The allocation of orders among brokers
and the commission rates paid are reviewed periodically by the Board of
Trustees.
Subject to the above considerations, the Distributor may act as a
securities broker for a Fund. In order for the Distributor to effect any
portfolio transactions for a Fund, the commissions, fees or other remuneration
received by the Distributor must be reasonable and fair compared to the
commissions, fees or other remuneration paid to other brokers in connection with
comparable transactions involving similar securities being purchased or sold on
an Exchange during a comparable period of time. This standard would allow the
Distributor to receive no more than the remuneration which would be expected to
be received by an unaffiliated broker in a commensurate arm's-length
transaction.
17
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Furthermore, the Board of Trustees, including a majority of the trustees who are
not 'interested' directors, has adopted procedures which are reasonably designed
to provide that any commissions, fees or other remuneration paid to the
Distributor is consistent with the foregoing standard. Brokerage transactions
with the Distributor also are subject to such fiduciary standards as may be
imposed by applicable law. From time to time a Fund may engage in agency cross
transactions with respect to securities that meet its investment objective and
policies. An agency cross transaction occurs when a broker sells securities from
one client's account to another client's account. Cross transactions are
executed with written permission from a Fund. This authorization permits cross
transactions only between a Fund on one side and clients for which the
Distributor acts as broker, but does not act as investment adviser, on the other
side. The authorization can be terminated at any time by written notice to the
Distributor. The Fund will not engage in cross transactions with investment
advisory clients of the Adviser or the Distributor.
A Fund may from time to time sell or purchase securities to or from
companies or persons who are considered to be affiliated with that Fund solely
because they are investment advisory clients of the Distributor, the Adviser or
Iridian. No consideration other than cash payment against prompt delivery at the
then current market price of the securities will be paid to any person involved
in those transactions. Additionally, all such transactions will be consistent
with procedures adopted by the Board of Trustees.
In accordance with Section 11(a) under the Securities Exchange Act of 1934,
the Distributor may not retain compensation for effecting transactions on a
national securities exchange for a Fund unless that Fund has expressly
authorized the retention of such compensation in a written agreement executed by
a Fund and the Distributor. Each Fund has provided the Distributor with such
authorization. Section 11(a) provides that the Distributor must furnish to each
Fund at least annually a statement disclosing the aggregate compensation
received by the exchange member in effecting such transactions.
For the years ended October 31, 1995, 1996 and 1997, Fund of America paid
total brokerage commissions of $300,859, $438,434 and $453,073, respectively, of
which $81,744, $77,996 and $26,580, respectively, were paid to the Distributor
For the year ended October 31, 1997, brokerage commissions paid to the
Distributor constituted % of the total brokerage commissions paid by Fund of
America. For the year ended October 31, 1997, Fund of America effected % of
the aggregate dollar amount of its portfolio transactions involving the payment
of commissions through the Distributor. Of the total brokerage commissions paid
during the fiscal year ended October 31, 1997, $ (or %) were paid to
firms which provided research, statistical or other services. The Distributor
has not separately identified a portion of such brokerage commissions as
applicable to the provision of such research, statistical or other services.
For the years ended December 31, 1995 and 1996 and the fiscal period ended
October 31, 1997, International Fund paid total brokerage commissions of
$136,574, $82,550 and $53,846, respectively, of which $38,565, $31,964 and
$7,709, respectively, were paid to the Distributor. For the fiscal period ended
October 31, 1997, brokerage commissions paid to the Distributor constituted %
of the total brokerage commissions paid by International Fund. For the fiscal
period ended October 31, 1997, International Fund effected 12% of the aggregate
dollar amount of its portfolio transactions involving the payment of commissions
through the Distributor. Of the total brokerage commissions paid during the
fiscal period ended October 31, 1997, $ (or %) were paid to firms
which provided research, statistical or other services. The Distributor has not
separately identified a portion of such brokerage commissions as applicable to
the provision of such research, statistical or other services.
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STOCKHOLDER INVESTMENT ACCOUNT
Upon the initial purchase of shares of a Fund, an account is established
for each investor of record and maintained by the Transfer Agent. If a stock
certificate is desired, it must be requested in writing for each transaction.
Certificates are issued only for full shares and may be redeposited in the
stockholder's account at any time. There is no charge to the investor for
issuance of a certificate. Whenever a transaction takes place in the account,
the stockholder will be mailed a statement showing the transaction and the
status of the account. Additionally, the Transfer Agent will mail each
stockholder of record a quarterly statement of the stockholder's account.
Certain financial institutions maintain omnibus Accounts with the Transfer
Agent, and, in such cases, the investor's records are maintained by that
financial institution.
For the convenience of investors, all dividends and distributions of each
Fund are automatically reinvested in full and fractional shares of that Fund at
the net asset value per share at the close of business on the record date. An
investor may direct the Transfer Agent in writing not less than ten full
business days prior to the record date to have subsequent dividends and/or
distributions sent in cash rather than reinvested. In the case of recently
purchased shares for which registration instructions have not been received on
the record date, cash payment will be automatically reinvested. Any stockholder
who receives a cash payment representing a dividend or distribution may reinvest
such dividend or distribution by returning the check or the proceeds to the
Transfer Agent. Such investment will be made at the net asset value per share
next determined after receipt of the check or proceeds by the Transfer Agent.
TAXES
Each of the Funds will be treated as a separate corporation for purposes of
the Internal Revenue Code of 1986, as amended (the Code) (except for purposes of
the definitional requirements for regulated investment companies under Code
Section 851(a). By paying dividends representing its investment company taxable
income within the time periods specified in the Code and by meeting certain
other requirements, the Fund intends to qualify as a regulated investment
company under the Code. Since each Fund will distribute annually its investment
company taxable income, net capital gains, and capital gain net income, it will
not be subject to income or excise taxes otherwise applicable to undistributed
income of a regulated investment company. If a Fund were to fail to distribute
all its income and gains, it would be subject to income tax and, in certain
circumstances, a 4% excise tax.
Qualification as a regulated investment company requires, among other
things, that (a) at least 90% of the Fund's annual gross income, without offset
for losses from the sale or other disposition of securities, consist of certain
types of qualifying income (the '90% test'); and (b) the Fund diversify its
holdings so that, at the end of each quarter of the taxable year, (i) at least
50% of the market value of the Fund's assets is represented by cash, cash items,
government securities, securities of other regulated investment companies and
other securities limited in respect of any one issuer to an amount not greater
than 5% of the Fund's assets and 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its assets is invested
in the securities of any one issuer (other than government securities and
securities of other regulated investment companies). Qualifying income for
purposes of the 90% test consists of income derived from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of securities, gains on the sale or exchange of foreign currencies
and other income (including gains from options, futures, or forward contracts)
derived from the business of investing in securities or currencies.
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TAXATION OF SHAREHOLDERS
Dividends from net investment income and distributions from net short-term
capital gains are taxable to shareholders as ordinary income. For noncorporate
taxpayers, distributions of gains realized upon the sale of capital assets held
more than 18 months are subject to a maximum tax rate of 20% (10% for
individuals in the 15% tax bracket). Distributions of gains realized upon the
sale of capital assets held more than 12 months but not more than 18 months are
subject to a maximum tax rate of 28% (15% for individuals in the 15% tax
bracket). Any loss realized by a shareholder upon the disposition of Fund shares
held for six months or less will be treated as long-term capital loss to the
extent of any amounts treated as distributions of long-term capital gain during
such six-month period.
Investors who purchase shares shortly before the record date for a
distribution will pay a share price that includes the value of the anticipated
distribution and will be taxed on the distribution when it is received even
though with respect to them the distribution represents in effect a return of a
portion of their purchase price. Any loss realized on a sale or exchange or
shares will be disallowed if the shares disposed of are replaced within a period
of 61 days beginning 30 days before the shares are sold or exchanged. If
disallowed, the loss will be reflected in a adjustment to the basis of the share
acquired.
Individuals and certain other non-exempt payees will be subject to a 31%
backup Federal withholding tax on dividends and other distributions from a Fund,
as well as on the proceeds of redemptions of a Fund, if such Fund is not
provided with the shareholder's correct taxpayer identification number and
certification that the shareholder is not subject to such backup withholding, or
if the Internal Revenue Service notifies a Fund that the shareholder has failed
to report proper interest or dividends. For most individuals, the taxpayer
identification number is the taxpayer's social security number.
TAX TREATMENT CERTAIN TRANSACTIONS
Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gain or loss. However, all or a portion of the gain or loss
from the disposition of non-U.S. dollar denominated securities (including debt
instruments, certain financial forward, futures and option contracts, and
certain preferred stock) may be treated as ordinary income or loss under Section
988 of the Internal Revenue Code. In addition and absent any election by the
Fund to accrue market discount daily, all or a portion of the gain realized from
the disposition of market discount bonds will be treated as ordinary income
under Section 1276 of the Internal Revenue Code. Finally, all or a portion of
the gain realized from engaging in 'conversion transactions' may be treated as
ordinary income under Section 1258 of the Internal Revenue Code. 'Conversion
transactions' are defined to include certain forward, futures, option and
straddle transactions, transactions marketed or sold to produce capital gains,
or transactions described in Treasury regulations to be issued in the future,
where substantially all of the expected return is attributable to the time value
of the investment. In addition, a 'short against the box' and other constructive
sales of appreciated financial positions will give rise to gain as if there were
an actual sale.
If a Fund enters into combinations of investment positions by virtue of
which its risk of loss from holding an investment position is reduced on account
of one (or more) other positions (i) losses realized on one position may be
deferred to the extent of any unrecognized gain on another position and (ii)
long-term capital gains or short-term capital losses may be recharacterized,
respectively, as short-term gains and long-term losses. The Federal income tax
treatment of gains and losses realized from transactions involving options on
stock or securities entered into a Fund will be as follows: Gain or loss
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from a closing transaction with respect to options written by such Fund, or gain
from the lapse of any such option, will be treated as short-term capital gain or
loss. Gain or loss from the sale of put and call options that a Fund purchases,
and loss attributable to the lapse of such options, will be treated as capital
gain or loss. Whether, in the case of individual shareholders, distributions of
such gain or loss is subject to the 20% rate (10% for individuals in the 15% tax
bracket), 28% rate, or 39.6% rate depends upon whether the affected option has
been held for more than 18 months, more than 12 months but not more than 18
months, or not more than 12 months, respectively. For this purpose, an
unexercised option will be deemed to have been sold on the date it expired. It
should be noted, however, that if a put is acquired at a time when the
underlying stock or security are acquired while such put is held, any gain on
the subsequent exercise, sale or expiration of the put will generally be
short-term gain.
Any regulated futures contract or listed non-equity option held by a Fund
at the close of its taxable year will be treated as sold for its fair market
value on the last business day of such taxable year. Sixty percent of any gain
or loss with respect to such deemed sales, as well as the gain or loss from the
termination during the taxable year of such Fund's obligation (or rights) with
respect to such contracts by offsetting, by taking or making delivery, by
exercise or being exercised, by assignment or being assigned, by lapse, or
otherwise, will be treated as long-term capital gain or loss and the remaining
forty percent will be treated as short term capital gain or loss. A Fund may
make certain elections that modify the above tax treatment with respect to
regulated futures contracts or listed non-equity options that are part of a
mixed straddle, as defined by the Code.
A Fund may invest in certain investments that may cause it to realize
income prior to the receipt of cash distributions, including securities bearing
original issue discount. The level of such investments is not expected to affect
the Fund's ability to distribute adequate income to qualify as a regulated
investment company.
Treasury Regulations pursuant to Section 1092 provide for the coordination
of the wash sale rules and the short sale rules with the straddle rules.
Generally, the wash sale rules prevent the recognition of loss where a position
is sold at a loss and a substantially identical position is acquired within a
prescribed period. The short sale rules generally prevent the use of short sales
to convert short-term capital gain to long-term capital gain and long-term
capital loss to short-term capital loss.
In addition to the Federal income tax consequences described above relating
to an investment in a Fund, there may be other Federal, state, local or foreign
tax considerations that depend upon the circumstances of each particular
investor. Prospective shareholders are therefore urged to consult their tax
advisers with respect to the effects of this investment of their specific
situations.
Dividends and interest received by the Fund on foreign securities as well
as capital gains realized upon the sale of such securities, may give rise to
withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the U.S. may reduce or eliminate taxes. Foreign
taxes paid by the Fund will reduce its dividends. If more than 50% of the value
of a Fund's total assets at the end of each quarter of any fiscal year consists
of stock or other securities of foreign corporations, such Fund may elect to
treat certain foreign taxes paid by it, including withholding taxes, as paid by
its shareholders. If a Fund makes this election, the amount of foreign taxes
paid by such Fund will be included in its shareholders' pro rata share of such
Fund's income (in addition to taxable distributions actually received by them),
and the shareholders would be entitled (a) to credit their share of such taxes
against their U.S. federal income taxes (subject to generally applicable
limitations), or (b) if they itemize their deductions, to deduct their share of
such taxes from their gross income.
21
<PAGE>
<PAGE>
If a Fund purchases the stock of 'passive foreign investment companies'
('PFICs'), such Fund will be subject to tax under one of three regimes. Under
the default regime, gain on the sale of PFIC stock and certain 'excess
distributions' are treated as ordinary income and subject to an interest charge.
If the PFIC provides certain information and such Fund makes an election, it may
elect to include its pro rata share of the PFIC's capital gains and ordinary
income currently even if not distributed. In taxable years beginning after
December 31, 1997, a Fund may mark to market its PFIC shares if it is eligible
to do so and elects to do so; any resulting gain will be ordinary income and
losses will be ordinary losses to the extent or prior ordinary income.
PERFORMANCE INFORMATION
Each Fund may advertise its performance in terms of average annual total
return for 1, 5 and 10 year periods, or for such lesser periods as such Fund has
been in existence. Average annual total return is computed by finding the
average annual compounded rates of return over the 1, 5 and 10 year periods that
would equate the initial amount invested to the ending redeemable value,
according to the following formula:
P(1 + T)'pp'n = ERV
<TABLE>
<C> <C> <S>
Where: P = A hypothetical initial payment of $1,000
T = Average annual total return
n = Number of years
ERV = Ending redeemable value of hypothetical $1,000 payment made at the beginning of
the 1, 5 or 10 year periods at the end of the 1, 5 or 10 year periods (or
fractional portion thereof).
</TABLE>
The calculation (i) assumes all dividends and distributions by the Fund are
reinvested at the price stated in the Prospectus on the reinvestment dates
during the period, (ii) includes all recurring fees that are charged to all
shareholder accounts, (iii) assumes complete redemption at the end of the 1, 5
or 10 year periods to determine the ending redeemable value and (iv) does not
take into account any federal or state income taxes that may be payable upon
redemption.
Each Fund may also advertise aggregate total return, which represents the
cumulative change in the value of a hypothetical initial investment of $1,000 in
such Fund assuming a constant rate of performance over a stated period of time.
Aggregate total return is computed according to the following formula:
ERV-P
-------
P
<TABLE>
<C> <C> <S>
Where: P = A hypothetical initial payment of $1,000
ERV = Ending redeemable value of hypothetical $1,000 payment made at the beginning of
the 1, 5 or 10 year periods at the end of the 1, 5 or 10 year periods (or
fractional portion thereof).
</TABLE>
22
<PAGE>
<PAGE>
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
AND INDEPENDENT AUDITORS
The Bank of New York serves as Custodian for the Fund's assets. BISYS Fund
Services, Inc. serves as Transfer and Dividend Disbursing Agent. In those
capacities, both The Bank of New York and BISYS Fund Services, Inc. maintain
certain financial and accounting books and records pursuant to agreements with
the Trust.
KPMG Peat Marwick LLP, 345 Park Avenue, New York, NY 10154 serves as the
Trust's independent auditors and in that capacity audits and reports on the
Trust's annual financial statements and financial highlights.
ORGANIZATION AND HISTORY
Fund of America was incorporated in Maryland on December 11, 1986.
International Fund was incorporated in Maryland on October 7, 1993. The Trust
was organized as a business trust under the laws of the State of Delaware on
December 24, 1997. The Trust may have multiple series and classes of shares.
Fund of America and International Fund were converted into separate Series of
the Trust on February 27, 1998.
23
<PAGE>
<PAGE>
FIRST EAGLE FUND OF AMERICA, INC.
SCHEDULE OF INVESTMENTS
October 31,1997
<TABLE>
<CAPTION>
Shares COMMON STOCK (92.61%) Value
<C> <S> <C>
Aerospace/Defense (10.37%)
54,700 Alliant Techsystems Inc.* $ 3,254,650
103,700 General Dynamics Corp. 8,419,144
32,000 Litton Industries Inc.* 1,624,000
71,100 Lockheed Martin Corp. 6,758,944
301,600 Loral Space & Communications Ltd.* 6,333,600
------------
26,390,338
Banking/Financial (17.83%)
126,340 BankBoston Corp. 10,241,436
121,100 Block H&R Inc. 4,480,700
184,700 Dun & Bradstreet Corp. 5,275,494
182,600 Finova Group Inc. 8,022,987
31,000 Greenpoint Financial Corp. 1,995,625
82,300 Mellon Bank Corp. 4,243,594
66,946 NationsBank Corp. 4,008,392
8,100 PNC Bank Corp. 384,750
20,600 SLM Holdings Corp. 2,891,725
89,700 Summit Bancorp 3,829,069
------------
45,373,772
Consumer Products (4.13%)
59,500 Black & Decker Corp. 2,264,719
119,100 Coca-Cola Enterprises Inc. 3,349,687
147,600 Fortune Brands Inc. 4,880,025
------------
10,494,431
Energy (1.22%)
51,878 Tejas Gas Corp.* 3,109,438
Gaming (3.78%)
46,900 G Tech Holdings Corp.* 1,512,525
168,100 International Game Technology 4,297,056
152,000 Mirage Resorts Inc. 3,800,000
------------
9,609,581
Industrial Products (12.86%)
106,200 Cooper Industries Inc. 5,535,675
72,700 Dana Corp. 3,403,269
146,800 General Signal Corp. 5,890,350
81,200 Meritor Automotive Inc. 1,811,775
146,900 Millenium Chemicals Inc. 3,452,150
8,000 Triacq Corp.'D' 10,000
61,100 UCAR International Inc. 2,291,250
111,300 USG Corp. 5,251,969
58,200 U.S. Industries Inc. 1,564,125
59,900 Varian Associates Inc. 3,504,150
------------
32,714,713
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-1
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Shares COMMON STOCK (CONTINUED) Value
<C> <S> <C>
Insurance (5.35%)
74,500 Allstate Corp. $ 6,178,844
83,450 Aon Corp. 4,501,084
86,800 TIG Holdings Inc. 2,940,350
------------
13,620,278
Medical (11.40%)
180,740 Allegiance Corp. 5,015,535
100,900 Amgen Inc. 4,969,325
176,800 Biogen Inc. 5,922,800
225,300 St. Jude Medical Inc.* 7,041,594
225,300 U.S. Surgical Corp. 6,069,019
------------
29,018,273
Paper Products (1.04%)
63,500 Bowater Inc. 2,655,094
Technology (23.01%)
350,031 Aavid Thermal Technologies Inc.* 10,413,422
77,600 AMP Inc. 3,492,000
187,900 Ceridian Corp. 7,339,844
132,200 Cognizant Corp. 5,180,587
254,600 Comcast Corp Special Cl. A 7,001,500
74,500 Data General Corp. 1,434,125
47,100 International Business Machines Corp. 4,618,744
43,100 Quantum Corp. 1,363,037
122,700 Storage Technology Corp.* 7,200,956
270,800 Telecommunications Cl. A 6,211,475
149,100 Wang Laboratories Inc.* 3,447,937
28,200 Western Digital Corp. 844,237
------------
58,547,864
Transportation (1.62%)
16,600 CSX Corp. 907,813
90,000 Illinois Central Corp. 3,206,250
------------
4,114,063
------------
Total Common Stock (cost $192,275,508) 235,647,845
<CAPTION>
PREFERRED STOCK (1.58%)
<C> <S> <C>
698 Assistive Technology Project Inc. Ser. A'D' 500,000
250 Assistive Technology Project Inc. Ser. C'D' 250,000
232,140 PAS Research Inc. Ser. B'D' 669,492
59,040 Shape Technology Inc. Ser. A Conv.'D' 300,000
1,200 Tidewater Holdings Inc. Ser. A Conv.'D' 1,200,000
10,900 Triacq Corp. Ser. A 10% Cum.'D' 1,090,000
------------
4,009,492
Total Preferred Stock (cost $4,709,492)
Units OTHER INVESTMENTS (.43%)
16.16162 Euro Outlet Malls, L.P.'D' (cost $1,100,000) 1,100,000
Contracts CALL OPTIONS (3.16%)
1,500 IBM Call @ 45 Exp. Jan. 1998 (cost $2,487,063) 8,025,000
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-2
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Principal NOTES (.02%) Value
<C> <S> <C>
$ 50,000 Assistive Technology Project Inc. @ 8% due 9/1/99'D'
(cost $50,000) $ 50,000
SHORT TERM INVESTMENTS (1.34%)
650,000 United States Treasury Bill due 11/28/97 647,628
2,800,000 United States Treasury Bill due 1/15/98 2,771,384
------------
Total Short Term Investments ($3,418,905) 3,419,012
------------
Total Investments** (cost $204,040,968) 252,251,349
OTHER ASSETS IN EXCESS OF OTHER LIABILITIES (.86%) 2,186,976
------------
NET ASSETS (100.00%) $254,438,325
------------
------------
</TABLE>
<TABLE>
<C> <S> <C>
* Non-income producing security.
** Aggregate cost for federal income tax purposes is substantially the same.
'D' Restricted security priced at fair value by the Board of Directors. Represents
ownership interest in a security which has not been registered with the Securities and
Exchange Commission under the Securities Act of 1933. Information concerning each
restricted security holding on October 31, 1997 is shown below:
</TABLE>
<TABLE>
<CAPTION>
Security Acquisition Date Cost
-------------------------------------------------------------------------- ----------
<C> <S> <C> <C>
Assistive Technology Project Inc. Ser. A Pfd. Stock 10/3/95 $ 500,000
Assistive Technology Project Inc. Ser. C Pfd. Stock 12/19/96 $ 250,000
Assistive Technology Project Inc. Note @ 8% due 9/1/99 7/9/97 $ 50,000
Euro Outlet Malls, L.P. 12/30/94 $1,100,000
PAS Research Inc. Ser B Pfd. Stock 4/10/96 $ 669,492
Shape Technology Inc. Ser. A Conv. Pfd. Stock 11/29/94 $1,000,000
Tidewater Holdings Inc. Ser. A Conv. Pfd. Stock 7/9/96 $1,200,000
Triacq Corp. Common Stock 7/27/95 $ 10,000
Triacq Corp. Ser. A 10% Cum. Pfd. Stock 7/27/95 $1,090,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
<PAGE>
FIRST EAGLE FUND OF AMERICA, INC.
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (cost $204,040,968) $252,251,349
Cash 353,772
Dividends and interest receivable 210,276
Receivable for fund shares sold 6,995
Receivable for investments sold 3,556,064
------------
TOTAL ASSETS 256,378,456
------------
LIABILITIES:
Payable for investments purchased 879,735
Payable for fund shares redeemed 20,281
Management fee payable 807,918
Services fee payable 158,217
Accrued operating expenses 73,980
------------
TOTAL LIABILITIES 1,940,131
------------
NET ASSETS $254,438,325
------------
------------
Net Assets were comprised of:
Common stock (par $0.01) authorized 1,000,000,000 shares,
outstanding 12,356,370 shares (Note 6) $ 123,564
Paid-in-surplus 173,892,448
------------
174,016,012
Net unrealized appreciation on investments 48,210,381
Accumulated net realized gain on investments 32,207,528
Undistributed net investment income 4,404
------------
NET ASSETS, October 31, 1997 $254,438,325
------------
------------
Net Asset Value per share:
($254,438,325[div]12,356,370 shares of common stock issued and outstanding)
$20.59
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-4
<PAGE>
<PAGE>
FIRST EAGLE FUND OF AMERICA, INC.
STATEMENT OF OPERATIONS
October 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend income $ 2,542,127
Interest income 386,996
-----------
TOTAL INCOME 2,929,123
-----------
EXPENSES:
Management fee (note 2) 2,672,362
Services fee (note 2) 534,472
Transfer agent fees 81,319
Legal fees 63,203
Custodian fees 61,197
Registration expenses 44,536
Audit fees 43,250
Accounting fees 42,000
Directors' fees 41,750
Printing expenses 20,845
Miscellaneous expenses 14,130
-----------
TOTAL EXPENSES 3,619,064
Less: Custody earnings credits (note 3) (29,758)
-----------
NET EXPENSES 3,589,306
-----------
NET INVESTMENT LOSS (660,183)
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 49,926,578
Change in unrealized appreciation on investments 5,949,601
-----------
NET GAIN ON INVESTMENTS 55,876,179
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $55,215,996
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<PAGE>
FIRST EAGLE FUND OF AMERICA, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the year For the year
ended ended
October 31, October 31,
------------ ------------
1997 1996
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment loss $ (660,183 ) $ (342,449 )
Net realized gain on investments 49,926,578 26,760,910
Net change in unrealized appreciation on investments 5,949,601 8,542,201
------------ ------------
Net increase in net assets resulting from operations 55,215,996 34,960,662
Dividends and distributions to shareholders:
Dividends from net investment income -- --
Distributions from net realized gains (27,243,648 ) (19,111,177 )
Transactions in fund shares-net 63,063,130 13,203,182
------------ ------------
Total increase 91,035,478 29,052,667
NET ASSETS:
Beginning of year 163,402,847 134,350,180
------------ ------------
End of year $254,438,325 $163,402,847
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of common stock outstanding throughout each period:
<TABLE>
<CAPTION>
For the year ended
October 31,
--------------------------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $17.97 $16.28 $15.45 $16.53 $13.36
INCOME FROM INVESTMENT
OPERATIONS
Net investment income (loss) (0.06) (0.04) (0.04) (0.12) (0.22)
Net gains (losses) on
securities (both realized
and unrealized) 5.31 4.08 2.87 0.66 4.56
------ ------ ------ ------ ------
Total from investment
operations 5.25 4.04 2.83 0.54 4.34
------ ------ ------ ------ ------
LESS DISTRIBUTIONS
Dividends (from net
investment income) -- -- -- -- --
Distributions (from capital
gains) (2.63) (2.35) (2.00) (1.62) (1.17)
------ ------ ------ ------ ------
Total distributions (2.63) (2.35) (2.00) (1.62) (1.17)
------ ------ ------ ------ ------
Net asset value, end of year $20.59 $17.97 $16.28 $15.45 $16.53
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Total Return* 31.0% 27.1% 21.6% 3.8% 35.2%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period $254,438,325 $163,402,847 $134,350,180 $120,515,968 $107,344,171
Ratio of expenses to average
net assets(1) 1.7% 1.8% 1.9% 1.9% 2.9%
Ratio of net investment income
(loss) to average net assets (0.3)% (0.2)% (0.3)% (0.7)% (1.5)%
Portfolio turnover rate 98% 93% 81% 125% 141%
Average commission rate paid
on portfolio security
purchases and sales
transactions(2) $ 0.05 $ 0.04 -- -- --
<CAPTION>
April 10, 1987**
through
October 31,
----------------
1992 1991 1990 1989 1988 1987
------ ------ ------ ------ ------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $12.35 $10.35 $14.04 $11.65 $9.17 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income (loss) (0.15) 0.09 0.16 0.16 (0.03) 0.07
Net gains (losses) on
securities (both realized
and unrealized) 1.98 2.20 (2.34) 2.57 2.58 (0.90)
------ ------ ------ ------ ------ -------
Total from investment
operations 1.83 2.29 (2.18) 2.73 2.55 (0.83)
------ ------ ------ ------ ------ -------
LESS DISTRIBUTIONS
Dividends (from net
investment income) (0.08) (0.29) (0.11) -- (0.07) --
Distributions (from capital
gains) (0.74) -- (1.40) (0.34) -- --
------ ------ ------ ------ ------ -------
Total distributions (0.82) (0.29) (1.51) (0.34) (0.07) --
------ ------ ------ ------ ------ -------
Net asset value, end of year $13.36 $12.35 $10.35 $14.04 $11.65 $ 9.17
------ ------ ------ ------ ------ -------
------ ------ ------ ------ ------ -------
Total Return* 16.0% 22.7% (17.7)% 24.2% 28.0% (8.3)%'D'D'
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period $76,599,310 $74,279,164 $66,729,536 $83,619,552 $54,271,271 $27,194,056
Ratio of expenses to average
net assets(1) 3.0% 2.0% 1.1% 2.0% 3.3% 2.5%'D'
Ratio of net investment income
(loss) to average net assets (1.0)% 0.8% 1.3% 1.3% (0.2)% 1.2%'D'
Portfolio turnover rate 145% 92% 72% 52% 55% 84%
Average commission rate paid
on portfolio security
purchases and sales
transactions(2) -- -- -- -- -- --
</TABLE>
* Past performance is not predictive of future performance.
** Commencement of investment operations
'D' Annualized
'D'D' Total return not annualized
(1) During the years ended October 31, 1997 and October 31, 1996, the Fund has
earned credits from the custodian which reduce service fees incurred. If
the credits are taken into consideration, the ratio of expenses to average
net assets would be 1.7% and 1.8% respectively.
(2) For fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose the average commission rate per share for trades on
which commissions are charged.
The accompanying notes are in integral part of these financial statements.
F-7
<PAGE>
<PAGE>
FIRST EAGLE FUND OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES -- First Eagle Fund of America,
Inc. (the 'Fund') is registered under the Investment Company Act of 1940, as
amended (the 'Act') as a non-diversified, open-end management investment company
and was incorporated in Maryland on December 11, 1986. The Fund had no
operations until the sale to Arnhold and S. Bleichroeder, Inc. ('ASB') of 10,000
shares of its common stock for $100,000 on February 12, 1987. Investment
operations commenced April 10, 1987.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Any security for which the primary market is on
an exchange is valued at the last sale price on such exchange on the day of
valuation or, if there was no sale on such day, the mean between the last bid
and asked prices quoted on such day. Equity securities listed on the NASDAQ
National Market System are valued at the last sale price or, if there was no
sale on such day, at the mean between the most recently quoted bid and asked
prices. Corporate bonds (other than convertible debt securities) and U.S.
Government Securities that are actively traded in the over-the-counter market,
including listed securities for which the primary market is believed to be
over-the-counter, are valued on the basis of valuations provided by a pricing
service which uses information with respect to transactions in bonds, quotations
from bond dealers, market transactions in comparable securities and various
relationships between securities in determining value. Other securities are
valued at the mean between the most recently quoted bid and asked prices.
Short-term debt instruments which mature in less than 60 days are valued at
amortized cost, unless the Board of Directors determines that such valuation
does not represent fair value. Securities which are otherwise not readily
marketable or securities for which market quotations are not readily available
are valued in good faith at fair value in accordance with procedures adopted by
the Fund's Board of Directors. A Valuation Committee of the Board of Directors
has been established to determine the value of such securities after
consultation with the Fund's investment adviser.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains or losses
on security transactions are determined based on the first-in, first-out method.
Discounts and premiums on purchases of investments are accreted and amortized,
respectively, as adjustments to interest income and cost of securities. Dividend
income is recorded on the ex-dividend date. Interest income is recorded on the
accrual basis.
OPTIONS: In order to produce incremental earnings or protect against changes in
the value of portfolio securities, the Fund may buy and sell put and call
options, write covered call options on portfolio securities and write
cash-secured put options.
The Fund generally purchases put options or writes covered call options to hedge
against adverse movements in the value of portfolio holdings. The Fund may also
use options for speculative purposes, although it does not employ options for
this purpose at the present time. The Fund will segregate assets to cover its
obligations under option contracts.
F-8
<PAGE>
<PAGE>
Options contracts are valued daily based upon the last sale price on the
principal exchange on which the option is traded and unrealized appreciation or
depreciation is recorded. The Fund will realize a gain or loss upon the
expiration or closing of the option transaction. When an option is exercised,
the proceeds on the sales of a written call option, the purchase cost of a
written put option, or the cost of the security for a purchased put or call
option is adjusted by the amount of premium received or paid.
The risk in writing a call option is that the Fund gives up the opportunity for
profit if the market price of the security increases and the option is
exercised. The risk in writing a put option is that the Fund may incur a loss if
the market price of the security decreases and the option is exercised. The risk
of buying an option is that the Fund pays a premium whether or not the option is
exercised. The Fund also has the additional risk of not being able to enter into
a closing transaction if a liquid secondary market does not exist. The Fund may
also write over-the-counter options where the completion of the obligation is
dependent upon the credit standing of the counterparty.
SHORT SALES: The Fund may make short sales of securities. A short sale is a
transaction in which the Fund sells a security it does not own in anticipation
of a decline in market price. When the Fund makes a short sale, the proceeds it
receives are retained by the broker until the Fund replaces the borrowed
security. If the price of the security sold short increases between the time of
the short sale and the time the Fund replaces the borrowed security, the Fund
will incur a loss, and if the price declines during this period, the Fund will
realize a gain. Any gain will be decreased, and any incurred loss increased by
the amount of transaction costs and any dividends or interest which the Fund may
have to pay in connection with such short sale are recorded as expenses.
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to shareholders.
Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net investment
income, if any, and distribution of net realized gain from investment
transactions, if any, will be made annually. The Fund records dividends and
distributions to its shareholders on the record date.
Income and capital gain distributions are determined in accordance with federal
income tax regulations which may differ from generally accepted accounting
principles primarily due to the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for federal income tax purposes and net
investment losses which for federal income tax purposes cannot be used to offset
future net investment income. Accordingly, a permanent book and tax basis
difference of $38,746 was reclassified by the Fund to paid in surplus.
E. ESTIMATES AND ASSUMPTIONS -- Estimates and assumptions are required to be
made regarding assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes in economic
environment, financial markets and any other parameters used in determining
these estimates could cause results to differ from these amounts.
F-9
<PAGE>
<PAGE>
NOTE 2. INVESTMENT ADVISORY AGREEMENT AND SERVICES AGREEMENT -- Arnhold and S.
Bleichroeder Advisers, Inc. (the 'Adviser',) a wholly owned subsidiary of ASB,
manages the Fund. The Investment Advisory Agreement provides that, subject to
the direction of the Fund's Board of Directors, the Adviser is responsible for
the management of the Fund's portfolio. Accordingly, the Adviser will furnish
advice and recommendations with respect to the Fund's portfolio of investments.
The Adviser is responsible for the continuous supervision of the Fund's
portfolio. Harold J. Levy, a Portfolio Manager of the Adviser, has been a
portfolio manager of the Fund since its inception and David L. Cohen, also a
Portfolio Manager of the Adviser, has been a portfolio manager of the Fund since
1989. Together, they are responsible for the day-to-day management of the Fund's
portfolio.
For the advisory services provided by the Adviser, the fee arrangement requires
the Fund to pay an annual management fee of 1.25% of the Fund's average daily
net assets payable quarterly. The annual advisory fee may be higher than that
paid by most other registered investment companies.
ASB receives an annual services fee of up to 0.25% of the Fund's average daily
net assets payable quarterly, pursuant to a separate services agreement which
was approved by the Board of Directors, to cover expenses incurred by ASB for
providing administrative and fund accounting support services and shareholder
liaison services, including assistance with subscriptions, redemptions and other
shareholder questions. ASB determined that the volume and demand for shareholder
liaison services required staffing in addition to the personnel responsible for
investment advisory services.
NOTE 3. CUSTODIAN FEES -- The Fund has entered into an expense offset agreement
with its custodian wherein it receives credit toward the reduction of custodian
fees whenever there are uninvested cash balances. As of October 31, 1997 the
Fund's custodian fees and related offset were $61,197 and $29,758, respectively.
NOTE 4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and proceeds from sales of portfolio securities for the year ended
October 31, 1997 excluding short-term investments, were $234,902,341 and
$202,248,713, respectively.
Transactions in options written for the year ended October 31, 1997 were as
follows:
<TABLE>
<CAPTION>
Number of Contracts Premiums
------------------- --------
<S> <C> <C>
Options outstanding at October 31, 1996............................. 0 $ 0
Options written..................................................... 3,000 740,975
Options exercised................................................... 0 0
Options expired/closed.............................................. 3,000 740,975
------ --------
Options outstanding at October 31, 1997............................. 0 $ 0
------ --------
------ --------
</TABLE>
For the year ended October 31, 1997, the Fund paid brokerage commissions on
securities transactions of $453,073 of which $26,580 was paid to ASB.
F-10
<PAGE>
<PAGE>
NOTE 5. FEDERAL INCOME TAXES -- The United States federal income tax basis of
the Fund's investments at October 31, 1997 was substantially the same as the
basis for financial reporting purposes and accordingly, the aggregage gross
unrealized appreciation on investments was $55,633,165 and the aggregate
unrealized gross depreciation was $7,422,784, resulting in net unrealized
appreciation for United States federal income tax purposes of $48,210,381.
NOTE 6. COMMON STOCK -- Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
For the year For the year
ended October 31, 1997 ended October 31, 1996
-------------------------- --------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Beginning of year......................... 9,094,649 $110,991,628 8,252,291 $ 97,782,887
---------- ------------ ---------- ------------
Shares sold............................... 3,081,544 59,873,730 1,051,596 18,615,595
Shares redeemed........................... (1,095,568) (21,261,845) (1,210,439) (21,223,575)
Reinvested distributions.................. 1,275,745 24,451,245 1,001,201 15,811,162
---------- ------------ ---------- ------------
Net increase.............................. 3,261,721 63,063,130 842,358 13,203,182
---------- ------------ ---------- ------------
Adjustment representing
other-than-temporary book-tax
differences............................. -- (38,746) -- 5,559
---------- ------------ ---------- ------------
End of year............................... 12,356,370 $174,016,012 9,094,649 $110,991,628
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
</TABLE>
Of the 12,356,370 shares of common stock outstanding at October 31, 1997, ASB
owned 23,542 shares and the ASB Profit Sharing Plan owned 464,909 shares. The
directors and officers of the Fund, as a group, owned approximately 403,065
shares at October 31, 1997.
F-11
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and
Board of Directors
First Eagle Fund of America, Inc.
We have audited the accompanying statement of assets and liabilities and
the schedule of investments of First Eagle Fund of America, Inc. as of October
31, 1997, the related statement of operations for the year then ended, the
statement of changes in net assets for each of the years in the two-year period
then ended, and the financial highlights for each of the years in the five-year
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Investment securities
held in custody are confirmed to us by the custodian. As to securities purchased
and sold but not received or delivered, we performed other appropriate auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
First Eagle Fund of America as of October 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the years in the two-year period then ended, and financial highlights for the
five-year period then ended, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
New York, New York
December 8, 1997
F-12
<PAGE>
<PAGE>
FIRST EAGLE INTERNATIONAL FUND, INC.
SCHEDULE OF INVESTMENTS
October 31, 1997
<TABLE>
<CAPTION>
Shares STOCK (83.66%) Value
<C> <S> <C>
Finland (3.01%)
29,000 KCI Konecranes International (building cranes) US$ 1,094,388
France (8.25%)
7,700 Atos SA* (information technology) 866,846
12,000 AXA-UAP (insurance) 823,483
5,500 Elf Aquitaine SA (oil exploration and production) 682,240
1,792 Lambert Dodard Chancereul (food processing) 289,533
6,500 Michelin (tires) 334,145
-------------
2,996,247
Germany (21.60%)
9,000 Adidas AG (sporting goods) 1,304,649
10,000 Boewe Systec AG (electronics) 296,313
7,000 Deutsch Pfandbrief AG (mortgage bank) 395,723
13,000 Deutsche Lufthansa AG (airlines) 227,348
11,000 Fresenius Medical Care AG (dialysis centers) 776,515
5,078 Hannover Rueckversicherungs AG (insurance) 379,710
22,400 Leica Camera AG (cameras) 520,582
15,600 Metro AG (retail department stores) 687,028
5,000 Siemens AG (conglomerate) 308,224
35,000 SKW Trostberg AG (specialty chemicals) 1,203,845
2,950 Volkswagen AG (automobiles) 1,746,534
-------------
7,846,471
Italy (5.94%)
50,000 Aeroporti Di Roma SpA (Rome airport) 454,250
250,000 Credito Italiano (insurance) 667,840
46,200 Industrie Natuzzi SpA ADR (leather furniture) 1,033,725
-------------
2,155,815
Japan (1.73%)
50,000 Kirin Brewing Ltd. (brewery) 419,889
58,000 Nikko Securities Company (financial) 209,778
-------------
629,667
Mexico (1.72%)
14,400 Telefonos de Mexico ADR (telecommunications) 622,800
Netherlands (20.24%)
33,500 Aalberts Industries NV (specialty valves) 878,616
36,000 Ahrend NV (office furniture) 1,200,171
32,000 Hunter Douglas NV (window treatments) 1,319,096
23,000 IHC Caland NV (dredging & offshore equipment) 1,415,040
10,000 Nedcon Group NV (warehouse infrastructures) 561,646
15,000 Samas-Group NV (office supplies) 684,023
10,521 Wolters Kluwer NV (publishing) 1,292,408
-------------
7,351,000
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-13
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Shares STOCK (CONTINUED) Value
<C> <S> <C>
Russia (0.71%)
7,500 Lukoil Holdings Pfd. ADR (oil) US$ 256,409
Spain (1.21%)
4,000 Azkoyen SA (vending machines) 440,561
Sweden (0.72%)
10,000 Volvo AB 'B' (automobiles) 261,884
Switzerland (4.25%)
625 Novartis AG Basel (pharmacuticals) 981,552
4,000 Selecta Group AG* (vending machines) 561,449
-------------
1,543,001
United Kingdom (7.40%)
205,000 American Port Services (seaport services) 654,872
41,237 J.D. Wetherspoon Plc. (pubs) 1,116,779
200,000 WPP Group (advertising) 915,588
-------------
2,687,239
United States (6.88%)
35,000 Hirsch International Corp. (embroidery machines) 660,625
39,000 Nautica Enterprises Inc.* (retail sportswear) 1,038,375
40,000 Walter Industries Inc.* (housing) 800,000
-------------
2,499,000
-------------
Total Stock (cost $24,889,559) 30,384,482
<CAPTION>
WARRANTS (4.98%)
<C> <S> <C>
Germany (4.59%)
9,000 Allianz Exp. 2/23/98 (insurance) 977,833
30,000 Robert Fleming Commerzbank Exp. 12/1/98 (banking) 404,380
25,000 Deutsche Bank Exp. 6/25/98 (banking) 283,241
-------------
1,665,454
Italy (0.39%)
1,700,000 ENI SpA Exp. 1/4/99 (energy) 143,431
-------------
Total Warrants (cost $1,297,015) 1,808,885
<CAPTION>
Principal SHORT TERM INVESTMENTS (12.28%)
<C> <S> <C>
US$ 500,000 US Treasury Bill due 12/11/97 497,428
4,000,000 US Treasury Bill due 1/8/98 3,963,040
-------------
Total Short Term Investments (cost $4,460,044) 4,460,468
-------------
Total Investments (cost $30,646,618) 36,653,835
-------------
OTHER LIABILITIES IN EXCESS OF OTHER ASSETS (-0.92%) (333,625)
-------------
NET ASSETS (100.00%) $36,320,210
-------------
-------------
</TABLE>
<TABLE>
<C> <S> <C>
* Non-income producing security.
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-14
<PAGE>
<PAGE>
FIRST EAGLE INTERNATIONAL FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (cost $30,646,618) $36,653,835
Cash 764,301
Receivable for fund shares sold 1,402
Dividends and interest receivable 45,095
Receivable from Adviser (note 2) 134,696
Deferred organization expenses 41,440
-----------
TOTAL ASSETS $37,640,769
-----------
LIABILITIES:
Payable for fund shares redeemed 1,878
Payable for open forward foreign
currency contracts (note 7) 1,150,366
Payable for closed forward foreign
currency contracts 31,781
Management fee payable 49,276
Accrued operating expenses 87,258
-----------
TOTAL LIABILITIES 1,320,559
-----------
NET ASSETS $36,320,210
-----------
-----------
Net Assets were comprised of:
Common stock (par $0.01) authorized 1,000,000,000 shares,
outstanding 2,246,039 shares (note 6) $ 22,460
Paid-in-surplus (note 6) 28,510,248
-----------
28,532,708
Net unrealized appreciation (depreciation) on:
Investments and translation of assets and liabilities in
foreign currencies 6,007,966
Forward foreign currency contracts (1,150,366)
Accumulated net realized gain on investments 2,929,902
-----------
NET ASSETS, October 31, 1997 $36,320,210
-----------
-----------
Net Asset Value per share:
($36,320,210 [div] 2,246,039 shares of common stock issued and outstanding) $16.17
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-15
<PAGE>
<PAGE>
FIRST EAGLE INTERNATIONAL FUND, INC.
STATEMENT OF OPERATIONS
For the period from January 1, 1997 to October 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend income (net of $62,858 foreign taxes withheld) $ 317,488
Interest income 101,045
-----------
TOTAL INCOME 418,533
-----------
EXPENSES:
Management fee (note 2) 452,626
Services fee (note 2) 75,438
Accounting fees 55,000
Audit fees 43,125
Legal fees 38,000
Transfer agent fees 37,168
Custodian fees 32,693
Directors' fees 26,250
Organizational expense amortization 24,320
Printing expenses 20,172
Registration expenses 18,914
Miscellaneous expenses 3,668
-----------
TOTAL EXPENSES 827,374
-----------
Less: Custody earnings credits (note 3) (13,739)
Management fee waiver (note 2) (134,696)
-----------
NET EXPENSES 678,939
-----------
NET INVESTMENT LOSS (260,406)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain:
Investments 2,017,726
Forward foreign currency contracts 1,143,707
-----------
Net realized gain on investments 3,161,433
Change in unrealized appreciation (depreciation) on:
Investments and translation of assets and liabilities in foreign currencies 660,681
Forward foreign currency contracts (1,150,366)
-----------
Net change in unrealized appreciation (depreciation) on investments (489,685)
NET GAIN ON INVESTMENTS 2,671,748
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 2,411,342
-----------
-----------
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-16
<PAGE>
<PAGE>
FIRST EAGLE INTERNATIONAL FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the period from For the year
January 1, 1997 to ended
October 31, 1997 December 31, 1996
------------------- -----------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment loss $ (260,406) $ (330,345)
Net realized gain on investments 3,161,433 1,310,638
Net change in unrealized appreciation (depreciation) on
investments (489,685) 3,224,827
------------------- -----------------
Net increase in net assets resulting from operations 2,411,342 4,205,120
Dividends and distributions to shareholders:
Distributions from net realized gains -- (1,003,040)
Transactions in fund shares-net 1,803,588 6,482,311
------------------- -----------------
Total increase 4,214,930 9,684,391
NET ASSETS:
Beginning of period 32,105,280 22,420,889
------------------- -----------------
End of period $36,320,210 $32,105,280
------------------- -----------------
------------------- -----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-17
<PAGE>
<PAGE>
FINANCIAL HIGHLIGHTS
Selected data for a share of common stock outstanding throughout each period:
<TABLE>
<CAPTION>
For the year ended
For the period from December 31, April 4, 1994**
January 1, 1997 --------------------- through
October 31, 1997 1996 1995 December 31, 1994
------------------- ------ ------ -------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $ 15.04 $13.38 $12.37 $ 12.50
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (0.12) (0.16) (0.13) (0.02)
Net gains (losses) on securities
(both realized and unrealized) 1.25 2.29 1.57 (0.11)
------- ------ ------ -------
Total from investment
operations 1.13 2.13 1.44 (0.13)
------- ------ ------ -------
LESS DISTRIBUTIONS
Dividends (from net investment
income) -- -- -- --
Distributions (from capital
gains) -- (0.47) (0.43) --
------- ------ ------ -------
Total distributions -- (0.47) (0.43) --
------- ------ ------ -------
Net asset value, end of period $ 16.17 $15.04 $13.38 $ 12.37
------- ------ ------ -------
------- ------ ------ -------
Total Return* 7.5%'D'D' 15.9% 11.6% (1.0)%'D'D'
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period $36,320,210 $32,105,280 $22,420,889 $20,152,024
Ratio of expenses to average net
assets(1) 2.25%'D' 2.90% 3.10% 2.00%'D'
Ratio of net investment loss to
average net assets (1.0)%'D' (1.1)% (1.1)% (0.3)%'D'
Portfolio turnover rate 54% 101% 166% 170%
Average commission rate paid on
portfolio security purchases and
sales transactions(2) $ 0.04 $ 0.03 -- --
</TABLE>
* Past performance is not predictive of future performance.
** Commencement of investment operations
'D' Annualized
'D'D' Total return not annualized
(1) The Adviser has waived part of its fee for the period from January 1, 1997
to October 31, 1997. If such fees were not waived, the net investment loss
and expense ratio would have been $(.18) and 2.80%'D', respectively.
In addition, during the period from January 1, 1997 to October 31, 1997 and
for the year ended December 31, 1996 the Fund earned credits from the
custodian which reduce service fees incurred. If the credits are taken into
consideration the expense ratios are 2.25%'D' and 2.90%, respectively.
(2) For fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose the average commission rate per share for trades on
which commissions are charged.
The accompanying notes are an integral part of these financial statements.
F-18
<PAGE>
<PAGE>
FIRST EAGLE INTERNATIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES -- First Eagle International Fund,
Inc. (the 'Fund') is registered under the Investment Company Act of 1940, as
amended, (the 'Act') as a non-diversified, open-end management investment
company and was incorporated in Maryland on October 7, 1993. The Fund had no
operations other than the sale to Arnhold and S. Bleichroeder, Inc. ('ASB') of
8,000 shares of its common stock for $100,000 on March 3, 1994. Investment
operations commenced April 4, 1994. Effective October 2, 1997, the Fund's fiscal
year has been changed and will end on October 31 of each year instead of
December 31.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Any security for which the primary market is on
an exchange is valued at the last sale price on such exchange on the day of
valuation or, if there was no sale on such day, the mean between the last bid
and asked prices quoted on such day. Equity securities listed on the NASDAQ
National Market System are valued at the last sale price or, if there was no
sale on such day, at the mean between the most recently quoted bid and asked
prices. Corporate bonds (other than convertible debt securities) and U.S.
Government Securities that are actively traded in the over-the-counter market,
including listed securities for which the primary market is believed to be
over-the-counter, are valued on the basis of valuations provided by a pricing
service which uses information with respect to transactions in bonds, quotations
from bond dealers, market transactions in comparable securities and various
relationships between securities in determining value. Other securities are
valued at the mean between the most recently quoted bid and asked prices.
Short-term debt instruments which mature in less than 60 days are valued at
amortized cost, unless the Board of Directors determines that such valuation
does not represent fair value. Securities which are otherwise not readily
marketable or securities for which market quotations are not readily available
are valued in good faith at fair value in accordance with procedures adopted by
the Fund's Board of Directors.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains or losses
on security transactions are determined based on the first-in, first-out basis.
Discounts and premiums on purchases of investments are accreted and amortized,
respectively, as adjustments to interest income and cost of securities on a
level yield basis. Dividend income is recorded on the ex-dividend date. Interest
income is recorded on an accrual basis.
SHORT SALES: The Fund may make short sales of securities. A short sale is a
transaction in which the Fund sells a security it does not own in anticipation
of a decline in market price. To enter a short sale, the Fund needs to borrow
the security for delivery to the buyer. The proceeds received are retained by
the executing broker until the Fund replaces the borrowed security. If the price
of the security sold short increases between the time of the short sale and the
time the Fund replaces the borrowed security, the Fund will incur a loss, and if
the price declines during this period, the Fund will realize a gain. Any gain
will be decreased, and any incurred loss increased by the amount of transaction
costs and any dividends or
F-19
<PAGE>
<PAGE>
interest which the Fund may have to pay in connection with such short sale are
recorded as expenses.
FORWARD CURRENCY CONTRACTS: In connection with purchases and sales of securities
denominated in foreign currencies, the Fund may enter into forward currency
contracts. Additionally, the Fund may enter into such contracts to hedge certain
other foreign currency denominated investments. These contracts are recorded at
market value, and the related realized and unrealized foreign exchange gains and
losses are included in the statement of operations. The Fund will realize a gain
or loss upon the closing or settlement of the forward transaction. Such realized
gains or losses are included in the statement of operations. In the event that
counterparties fail to settle these currency contracts or the related foreign
security trades, the Fund could be exposed to foreign currency fluctuations.
C. FOREIGN CURRENCY TRANSLATION -- The market values of securities which are not
traded in United States currency are recorded in the financial statements after
translation to U.S. dollars based on the applicable exchange rates at the end of
the period. The costs of such securities are translated at exchange rates
prevailing when acquired. Related dividends, interest and withholding taxes are
accrued at the rates of exchange prevailing on the respective dates of such
transactions.
The net assets of the Fund are presented at the foreign exchange rates and
market values at the close of the period. The Fund does not isolate that portion
of gains and losses on investments which is due to change in foreign exchange
rates from that which is due to changes in market prices of the equity
securities.
D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to shareholders.
Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net investment
income, if any, and distribution of net realized gain from investment
transactions, if any, will be made annually. The Fund records dividends and
distributions to its shareholders on the record date.
Income and capital gain distributions are determined in accordance with federal
income tax regulations which may differ from generally accepted accounting
principles primarily due to the recognition of certain foreign currency gains
(losses) as ordinary income (loss) for federal income tax purposes and net
investment losses which for federal income tax purposes cannot be used to offset
future net investment income. Accordingly, a permanent book and tax basis
difference of $23,464 was reclassified by the Fund to paid in surplus.
F. DEFERRED ORGANIZATION EXPENSES -- A total of $146,000 was incurred in
connection with the organization of the Fund. The costs have been deferred and
are being amortized by the Fund over the period of benefit not to exceed 60
months from the date the Fund commenced operations. The Adviser has agreed that
if any of the initial shares purchased by the Adviser are redeemed during the
amortization period, the redemption proceeds will be reduced by any unamortized
organizational expenses in the same proportion as the number of initial shares
being redeemed bears to the number of shares outstanding at the time of
redemption.
F-20
<PAGE>
<PAGE>
G. ESTIMATES AND ASSUMPTIONS -- Estimates and assumptions are required to be
made regarding assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes in economic
environment, financial markets and any other parameters used in determining
these estimates could cause results to differ from these amounts.
NOTE 2. INVESTMENT ADVISORY AGREEMENT AND SERVICES AGREEMENT -- Arnhold and S.
Bleichroeder Advisers, Inc. (the 'Adviser',) a wholly owned subsidiary of ASB,
manages the Fund. The Investment Advisory Agreement provides that, subject to
the direction of the Fund's Board of Directors, the Adviser is responsible for
the management of the Fund's portfolio. Accordingly, the Adviser will furnish
advice and recommendations with respect to the Fund's portfolio of investments.
For the advisory services provided by the Adviser, the fee arrangement requires
the Fund to pay an annual management fee of 1.50% of the Fund's average daily
net assets payable quarterly. The annual advisory fee may be higher than that
paid by most other registered investment companies. For the fiscal year
beginning January 1, 1997, the Fund's Adviser has agreed to waive its advisory
fee for, and to reimburse expenses of, the Fund in an amount that operates to
limit annual operating expenses of the Fund to not more than 2.25% of daily net
assets.
ASB receives an annual services fee of up to 0.25% of the Fund's average daily
net assets payable quarterly, pursuant to a separate services agreement which
was approved by the Board of Directors, to cover expenses incurred by ASB for
providing administrative and fund accounting support services and shareholder
liaison services, including assistance with subscriptions, redemptions and other
shareholder questions. ASB determined that the volume and demand for shareholder
liaison services required staffing in addition to the personnel responsible for
investment advisory services.
NOTE 3. CUSTODIAN FEES -- The Fund has entered into an expense offset agreement
with its custodian wherein it receives credit toward the reduction of custodian
fees whenever there are uninvested cash balances. As of October 31, 1997 the
Fund's custodian fees and related offset were $32,693 and $13,739, respectively.
NOTE 4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and proceeds from sales of portfolio securities for the period from
January 1, 1997 to October 31, 1997, excluding short-term investments, were
$17,797,136 and $18,143,833, respectively.
For the period from January 1, 1997 to October 31, 1997, the Fund paid brokerage
commissions on securities transactions of $53,846 of which $7,709 was paid to
ASB.
NOTE 5. FEDERAL INCOME TAXES -- The United States federal income tax basis of
the Fund's investments at October 31, 1997 was substantially the same as the
basis for financial reporting purposes and accordingly, the aggregate gross
unrealized appreciation on investments was $7,418,105 and the aggregate gross
unrealized depreciation was $1,410,888, resulting in net unrealized appreciation
for United States federal income tax purposes of $6,007,217.
F-21
<PAGE>
<PAGE>
NOTE 6. COMMON STOCK -- Transactions in Fund shares were as follows:
Of the 2,246,039 shares outstanding at October 31, 1997, ASB owned 8,514 shares
and the ASB Profit Sharing Plan owned 335,054 shares. The directors and officers
of the Fund, as a group, owned approximately 104,174 shares at October 31, 1997.
<TABLE>
<CAPTION>
For the
year
ended
For the period from January 1, December
1997 to October 31,1997 31, 1996
-------------------------------------- ---------
Shares Amount Shares
----------------- ----------------- ---------
<S> <C> <C> <C>
Beginning of period..................... 2,134,166 $26,752,584 1,675,613
------------ --------------- ---------
Shares sold............................. 254,815 4,235,374 429,455
Shares redeemed......................... (197,199) (3,247,813) (23,211)
Reinvested distributions................ 54,257 816,027 52,309
------------ --------------- ---------
Net increase............................ 111,873 1,803,588 458,553
------------ --------------- ---------
Adjustment representing other-than
temporary book-tax difference......... -- (23,464) --
------------ --------------- ---------
End of year............................. 2,246,039 $28,532,708 2,134,166
------------ --------------- ---------
------------ --------------- ---------
<CAPTION>
Amount
-----------
<S> <C>
Beginning of period..................... $20,298,430
-----------
Shares sold............................. 6,119,768
Shares redeemed......................... (337,352)
Reinvested distributions................ 699,895
-----------
Net increase............................ 6,482,311
-----------
Adjustment representing other-than
temporary book-tax difference......... (28,157)
-----------
End of year............................. $26,752,584
-----------
-----------
</TABLE>
NOTE 7. FORWARDS -- At October 31, 1997, the Fund had the following open forward
foreign currency contracts. The Fund bears the market risk that arises from
changes in the foreign currency exchange rates. The unrealized gain on the
contracts reflected in the accompanying financial statements was as follows:
<TABLE>
<CAPTION>
Local Market Settlement Unrealized
Foreign Currency Currency Value Date Gain (Loss)
- ------------------------------------------ ------------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
British Pound............................. 1,200,000 $ 2,007,807 12/22/97 $ (101,877)
Finnish Marka............................. 4,800,000 931,965 12/22/97 (45,866)
French Franc.............................. 14,700,000 2,562,045 12/22/97 (129,141)
German Mark............................... 14,760,000 8,602,102 12/22/97 (429,345)
Italian Lira.............................. 1,800,000,000 1,063,357 12/22/97 (44,725)
Netherlands Guilder....................... 11,600,000 5,996,200 12/22/97 (298,754)
Spanish Peseta............................ 55,000,000 378,685 12/22/97 (19,208)
Swiss Franc............................... 1,800,000 1,296,353 12/22/97 (81,450)
----------- -----------
$22,838,514 $(1,150,366)
----------- -----------
----------- -----------
</TABLE>
F-22
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and
Board of Directors
First Eagle International Fund, Inc.
We have audited the accompanying statement of assets and liabilities and
the schedule of investments of First Eagle International Fund, Inc. as of
October 31, 1997, the related statement of operations for the period from
January 1, 1997 to October 31, 1997, the statement of changes in net assets for
the period from January 1, 1997 to October 31, 1997 and the year ended December
31, 1996, and the financial highlights for the period from January 1, 1997 to
October 31, 1997, the years ended December 31, 1996 and December 31, 1995, and
for the period from April 4, 1994 (commencement of operations) to December 31,
1994. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and the financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Investment securities
held in custody are confirmed to us by the custodian. As to securities purchased
and sold but not received or delivered, we performed other appropriate auditing
procedures. An audit also included assessing the accounting principles used and
significants estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
First Eagle International Fund, Inc. as of October 31, 1997, the results of its
operations for the period from January 1, 1997 to October 31, 1997, the changes
in its net assets for the period from January 1, 1997 to October 31, 1997 and
the year ended December 31, 1996, and the financial highlights for the period
from January 1, 1997 to October 31, 1997, the years ended December 31, 1996 and
December 31, 1995, and for the period from April 4, 1994 (commencement of
operations) to December 31, 1994, in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK LLP
New York, New York
December 8, 1997
F-23
<PAGE>
<PAGE>
FIRST EAGLE TRUST
PART C
OTHER INFORMATION
DECEMBER 30, 1997
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
A. Financial Statements
<TABLE>
<C> <S> <C>
For First Eagle Fund of America, Inc.:
1. Schedule of Investments dated October 31, 1997.
2. Statement of Assets and Liabilities dated October 31, 1997.
3. Statement of Operations for the year ended October 31, 1997.
4. Statement of Changes in Net Assets for the years ended October 31, 1997.
5. Financial highlights for the fiscal years ended October 31, 1995, 1996 and 1997.
6. Notes to Financial Statements.
7. Independent Auditors' Report -- KPMG Peat Marwick LLP dated December 8, 1997.
For First Eagle International Fund, Inc.:
1. Schedule of Investments dated October 31, 1997.
2. Statement of Assets and Liabilities dated October 31, 1997.
3. Statement of Operations for the year ended October 31, 1997.
4. Statement of Changes in Net Assets for the years ended October 31, 1997.
5. Financial highlights for the fiscal years ended December 31, 1995 and 1996 and for the fiscal
period ended October 31, 1997.
6. Notes to Financial Statements.
7. Independent Auditors' Report -- KPMG Peat Marwick LLP dated December 8, 1997.
B. Exhibits
1. Agreement and Declaration of Trust of the Registrant.*
2. By-laws of the Registrant.*
4. Specimen certificates for shares of beneficial interests of the Registrant.*
5. Investment Advisory Agreement between the Registrant and Arnhold and S. Bleichroeder Advisers,
Inc.*
6. Distribution Agreement between the Registrant and Arnhold and S. Bleichroeder, Inc.*
8. (a) Custody Agreement between the Registrant and The Bank of New York.**
(b) Fund Accounting Agreement.**
(c) Special Custody Agreement between Registrant, The Bank of New York and Arnhold and S.
Bleichroeder, Inc.**
(d) Amendment to Custody Agreement for ACCESS between Registrant and The Bank of New York.**
9. (a) Transfer Agency Agreement.**
(b) Services Agreement.*
10. Opinion of Counsel.*
11. Consent of Independent Auditors.*
13. Subscription Agreement.**
17. Financial Data Schedule.
19. Power of Attorney.**
</TABLE>
- ------------
* To be filed by amendment.
** Previously filed and incorporated by reference.
C-1
<PAGE>
<PAGE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
No persons are controlled by or under common control with the Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
TITLE OF CLASS NUMBER OF RECORD HOLDERS
- ---------------------------------------------- ----------------------------------------------
<S> <C>
Common Stock
First Eagle Fund of America, Inc. (as of November 30, 1997)
First Eagle International Fund, Inc. (as of November 30, 1997)
</TABLE>
ITEM 27. INDEMNIFICATION
The Registrant shall indemnify directors, officers, employees and agents of
the Registrant against judgments, fines, penalties, settlements and expenses to
the fullest extent authorized, and in the manner permitted, by applicable
federal and state law.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Arnhold and S. Bleichroeder Advisers, Inc. (the 'Adviser') is a wholly
owned subsidiary of Arnhold and S. Bleichroeder, Inc. which has a substantial
quantity of assets under management in the form of individual and fund accounts.
Arnhold and S. Bleichroeder, Inc. is a registered broker-dealer and maintains a
substantial involvement in the securities brokerage and underwriting businesses.
The business and other connections of the Adviser's directors and officers are
as follows:
<TABLE>
<CAPTION>
POSITION WITH THE
NAME ADVISER BUSINESS AND OTHER CONNECTIONS
- ------------------------------- ---------------------- ------------------------------------------------------
<S> <C> <C>
Henry H. Arnhold............... Director Co-Chairman of the Board of Arnhold and S.
Bleichroeder, Inc.; Director, Aquila International
Fund Limited; Trustee, The New School for Social
Research; Director, Conservation International
John P. Arnhold................ President, Chief Co-President and Director, Arnhold and S.
Executive Officer Bleichroeder, Inc.; Director, Aquila International
and Director Fund Limited and The Global Beverage Fund Limited;
Co-President and Trustee, First Eagle Trust
Stanford S. Warshawsky......... Director Co-President, Director and Secretary, Arnhold and S.
Bleichroeder, Inc.; Director, German-American
Chamber of Commerce; Chairman of the Board and
Trustee, First Eagle Trust
Stephen M. Kellen.............. Director Co-Chairman of the Board of Arnhold and S.
Bleichroeder Inc.; Trustee, The Carnegie Hall
Society and WNET/Thirteen; Trustees Council of The
National Gallery of Art
Robert Miller.................. Vice President, Senior Vice President, Arnhold and S. Bleichroeder,
Secretary and Inc.; Treasurer, First Eagle Trust
Treasurer
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITER
(a) Arnhold and S. Bleichroeder, Inc. acts as an investment adviser to
First Eagle Fund, N.V., Aquila International Fund Limited, Aetos Corporation,
DEF Associates, N.V., Eagle Select Fund Limited and The Global Beverage Fund
Limited.
C-2
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL
POSITIONS AND OFFICES
BUSINESS* ADDRESS POSITION AND OFFICES WITH UNDERWRITER POSITION AND OFFICES WITH REGISTRANT
- ---------------------------------- -------------------------------------- --------------------------------------
<S> <C> <C>
Stanford S. Warshawsky............ Co-President, Director and Secretary Chairman of the Board and Trustee
John P. Arnhold................... Co-President and Director Co-President and Trustee
Michael M. Kellen................. Senior Vice President and Director Vice Chairman of the Board and Trustee
Arthur F. Lerner.................. Senior Vice President Senior Vice President
Tracy L. LaPointe................. Senior Vice President Vice President
Robert Miller..................... Senior Vice President Treasurer
Robert Bruno...................... Vice President Vice President and Secretary
Martha B. Pierce.................. Vice President Vice President
Cari Levine....................... Fund Administrator Assistant Treasurer
Suzan Afifi....................... Fund Administrator Assistant Secretary
</TABLE>
- ------------
* The address of each person named above is 1345 Avenue of the Americas, New
York, New York 10105.
(c) The Registrant has no principal underwriter which is not an affiliated
person of the Registrant.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The Registrant's accounts and records will be maintained at The Bank of New
York, 48 Wall Street, New York, New York 10005. Records of shareholders'
accounts will be maintained at BISYS Fund Services, Inc., 3435 Stelzer Road,
Columbus Ohio 43219.
ITEM 31. MANAGEMENT SERVICES
The Registrant is not a party to any management-related service contract
not discussed in the Prospectus or Statement of Additional Information of this
Registration Statement.
ITEM 32. UNDERTAKINGS
The Registrant hereby undertakes to provide each person to whom a copy of
the Prospectus is given with a copy of the Fund's annual report, which contains
the information required by item 5A of Form N-1A, upon request by such person
and free of charge.
The Registrant hereby undertakes to call a meeting of shareholders for the
purpose of voting upon the question of removal of a director, if requested to do
so by the holders of at least 10% of the Fund's outstanding shares, and that it
will assist in communication with other shareholders as required by Section
16(c) of the Investment Company Act of 1940.
C-3
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 (the 'Securities
Act') and the Investment Company Act of 1940 (the 'Investment Company Act'), the
Registrant has duly caused this Post-Effective Amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, and State of New York, as of the 30th day
of December 1997.
FIRST EAGLE FUND OF AMERICA, INC.
By: /S/ JOHN P. ARNHOLD
...
JOHN P. ARNHOLD,
CO-PRESIDENT
By: /S/ HAROLD J. LEVY
...
HAROLD J. LEVY,
CO-PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
/s/ HENRY H. ARNHOLD Director December 30, 1997
.........................................
HENRY H. ARNHOLD
/s/ CANDACE K. BEINECKE Director December 30, 1997
.........................................
CANDACE K. BEINECKE
Director December 30, 1997
.........................................
K. GEORG GABRIEL
Director December 30, 1997
.........................................
RALPH E. HANSMANN
/s/ MICHAEL M. KELLEN Director December 30, 1997
.........................................
MICHAEL M. KELLEN
/s/ STEPHEN M. KELLEN Director December 30, 1997
.........................................
STEPHEN M. KELLEN
Director December 30, 1997
.........................................
WALTER OECHSLE
/s/ STANFORD S. WARSHAWSKY Director December 30, 1997
.........................................
STANFORD S. WARSHAWSKY
/s/ KEITH WELLIN Director December 30, 1997
.........................................
KEITH WELLIN
/s/ ROBERT MILLER Treasurer, Chief Accounting Officer and December 30, 1997
......................................... Chief Financial Officer
ROBERT MILLER
</TABLE>
<PAGE>
<PAGE>
EXHIBIT INDEX
B. Exhibits
<TABLE>
<C> <S>
1. Agreement and Declaration of Trust of the Registrant.*.....................................................
2. By-laws of the Registrant.*................................................................................
4. Specimen certificates for shares of beneficial interests of the Registrant.*...............................
5. Investment Advisory Agreement between the Registrant and Arnhold and S. Bleichroeder Advisers, Inc.*.......
6. Distribution Agreement between the Registrant and Arnhold and S. Bleichroeder, Inc.*.......................
8.(a) Custody Agreement between the Registrant and The Bank of New York.**.......................................
(b) Fund Accounting Agreement.**...............................................................................
(c) Special Custody Agreement between Registrant, The Bank of New York and Arnhold and S. Bleichroeder,
Inc.**...................................................................................................
(d) Amendment to Custody Agreement for ACCESS between Registrant and The Bank of New York.**...................
9.(a) Transfer Agency Agreement.**...............................................................................
(b) Services Agreement.*.......................................................................................
10. Opinion of Counsel.*.......................................................................................
11. Consent of Independent Auditors.*..........................................................................
13. Subscription Agreement.**..................................................................................
17. Financial Data Schedule....................................................................................
19. Power of Attorney.**.......................................................................................
</TABLE>
- ------------
* To be filed by amendment.
** Previously filed and incorporated by reference.
<PAGE>
<PAGE>
STATEMENT OF DIFFERENCES
------------------------
The dagger symbol shall be expressed as................................ 'D'
The division sign shall be expressed as................................ [div]
Characters normally expressed as superscript shall be preceded by...... 'pp'
