1933 Act File No. File No. 33-14604
1940 Act File No. File No. 811-04963
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 16 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 18 [X]
(Check appropriate box or boxes.)
THE BERWYN FUNDS
(Exact Name of Registrant as Specified in Charter)
1189 Lancaster Avenue, Berwyn, PA 19312
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code (610) 296-7222
Kevin M. Ryan, Secretary and Treasurer
The Berwyn Funds
1189 Lancaster Avenue, Berwyn, PA 19312
(Name and Address of Agent for Service)
Please send copies of all communications to:
Merrill R. Steiner, Esquire
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
(215) 564-8039
Approximate date of proposed public offering: May 1, 2000
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b).
[X] on May 1, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
The Trustees and principal officers of The Berwyn Funds also have executed this
registration statement.
Title of Securities Being Registered
........................................................................
Berwyn Income Fund
Berwyn Fund
<PAGE>
THE BERWYN FUNDS
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BERWYN FUND
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PROSPECTUS
May 1, 2000
This Prospectus describes shares of the Berwyn Fund, one of the
series of The Berwyn Funds (the "Trust"). Shares of Berwyn Fund
are sold on a no-load basis.
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
Page
Risk/Return Summary 3
Carefully review these
sections which summarize Performance 4
the Fund's investments,
risks, performance and fees Fees and Expenses of the Fund 5
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This section contains Investment Objective, 6
important additional Principal Investment
information, including the Strategies and Related Risks
Fund's principal
investment strategies and
risks
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This section contains Management and Organization 9
details on the management
of the Fund
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Shareholder Information 10
Turn to these sections for
information on how to open Distribution and Taxes 12
and maintain your account,
including how to purchase, Distributor 12
sell and exchange Fund
shares
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This section contains Financial Highlights 13
important financial
information on the Fund
<PAGE>
RISK/RETURN SUMMARY
Investment Objective of the Fund
The Berwyn Fund (the "Fund") seeks to achieve long-term capital appreciation;
current income is a secondary consideration.
Principal Investment Strategies of the Fund
The Fund invests in common stocks and fixed income securities that offer a
potential for capital appreciation. Under normal market conditions at least 80%
of the value of the Fund's net assets will be invested in common stocks. The
principal strategy of the Fund is to achieve long term growth through
investments in equities that the Fund's investment adviser (the "Adviser")
believes are undervalued. However, during periods of stock market adversity the
Fund may take a more defensive position through investment grade and/or junk
bonds, as well as preferred stocks. The use of higher yielding securities also
serves to offset the normal operating expenses of the Fund. Up to 20% of the
value of the Fund's net assets may be invested in fixed income securities.
Principal Risks of Investing in the Fund
* Although the Fund will strive to achieve its goal, there is no assurance
that it will. Market, economic and business risks affect common stock prices
and cause them to fluctuate over time. While common stocks have historically
been a leading choice of long term investors, stock prices may decline over
short or even extended periods. Therefore, the value of your investment in
the Fund may go down and you could lose money.
* The Fund's investment approach may result in investments in securities that
are not in favor with other investment advisers or brokers or securities of
lesser-known companies. The Fund's investment success depends on the skill of
the Adviser in evaluating, selecting, and monitoring the Fund's investments.
If the Adviser's conclusions about growth rates or stock values are
incorrect, the Fund may not perform as anticipated.
* High yield bonds ("junk bonds") entail greater risks than those found in
higher rated bonds. High yield bonds are considered to be below investment
grade based on significant risk of issuer default. High yield bonds and other
fixed income securities are sensitive to interest rate changes. Generally,
when interest rates rise, the prices of fixed income securities fall. The
longer the maturity of fixed income securities, the greater is the impact
from interest rate changes. The value of the Fund's investments will also
vary with bond market conditions.
* Other risks of high yield bonds include the market's relative youth, price
volatility, sensitivity to economic changes, limited liquidity, valuation
difficulties and special tax considerations.
* Lastly, the Fund is considered "non-diversified" under federal laws and
regulations. This means that the Fund may invest a greater portion of its net
assets in the shares of individual companies than a diversified fund could.
Changes in the financial condition or market assessment of these companies
may cause greater fluctuations in the share value of the Fund than in the
share value of a diversified fund.
An investment in the Fund is not a deposit of any bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation
(FDIC) or any other government agency.
<PAGE>
PERFORMANCE
The bar chart and table can help you evaluate the potential risks of investing
in the Berwyn Fund. They show changes in the yearly performance of the Fund (and
its predecessor) over the last ten years and compare the average annual returns
for the past one-year, five-year, and ten-year periods with the average annual
returns of the Russell 2000 for the same periods. Investment performance also
often reflects the risks associated with the Fund's investment objective and
policies. You should keep in mind that the Fund's past performance is not
necessarily an indication of the Fund's future performance.
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Average Annual Total Return as of 12/31/99
1 Year 5 Years 10 Years
Fund -4.60% 5.85% 8.38%
Russell 2000 Index* 21.35% 16.69% 13.40%
* The Russell 2000 Index is an unmanaged index of equity securities of
small capitalization companies and does not include the actual costs
of fund operations or management expenses.
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<PAGE>
FEES AND EXPENSES OF THE FUND
As an investor, you pay certain fees and expenses in connection with the Fund,
which are described in the table below.
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Shareholder Transaction Fees+
(Fees paid directly from your investment)
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Maximum Sales Charge (load) on None
Purchases ( as a percentage of
offering price)
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Sales Charge on Reinvested Dividends None
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Redemption Fees* 1.00%
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Exchange Fees None
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Annual Fund Operating Expenses
(Expenses that are deducted from Fund assets)
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Management Fee 1.00%
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Distribution and Service (12b-1) Fees 0.00%
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Other Expenses 0.39%
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Total Fund Operating Expenses 1.39%
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+ Shareholder transaction fees are paid from your account. Annual fund
operating expenses are paid out of Fund assets, so that their effect is
included in the share price. The Fund has no sales charges (loads) or Rule
12b-1 distribution fees and minimal shareholder transaction fees.
* A redemption fee of 1.00% is assessed if shares are redeemed in less than
one year from the date of purchase.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Berwyn
Fund with the cost of investing in other mutual funds. The Example assumes that
you invest $10,000 in the Fund for the time periods indicated and then redeem
all of your shares at the end of those periods. The Example also assumes that
your investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
One Year Three Years Five Years Ten Years
Berwyn Fund $139 $438 $768 $1,748
<PAGE>
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES
AND RELATED RISKS
The Fund's investment objective of the Berwyn Fund is to seek long-term (i.e.,
greater than one year) capital appreciation; current income is a secondary
consideration. The Fund is a non-diversified, open-end management investment
company. Being non-diversified means that the Fund may invest a greater portion
of its net assets in the shares of individual issuers.
The Adviser is a "value" manager. Where value is found in the marketplace is
dependent upon many factors, including the level of inflation, price-to-earnings
ratios, interest rates, stock market psychology and political factors. Over its
history, the Adviser has, more often than not, found small-capitalization stocks
to offer more value than large-capitalization stocks. Consequently, the
performance of the Fund has been typified by the Russell 2000 composite stock
index, a smaller capitalization index. At the present time the average weighted
market capitalization for the Fund is under $400 million, which is considerably
less than that of the Russell 2000.
The Fund invests in what it believes to be undervalued common stock and fixed
income securities that offer a potential for long-term capital appreciation.
This approach can often result in selecting securities that are not being
recommended by other investment advisers and/or brokerage firms. In addition,
this approach can often result in the selection of securities of lesser-known
companies. The Fund, however, invests only in securities listed on national
securities exchanges or quoted on the over-the-counter market.
Even though the Fund is considered non-diversified, it has placed restrictions
on its investment policy for purposes of diversification. Two particularly
significant restrictions are: (1) with respect to 50% of the value of its total
assets, the Fund will not, at the time of purchase, invest more than 5% of the
value of its total assets, at market value, in the securities of any one issuer,
except the securities of the U.S. government, and (2) with respect to the other
50% of the market value of its total assets, the Fund will not invest at the
time of purchase more than 15% of the market value of its total assets in any
single issuer. With these two restrictions, hypothetically, the Fund could hold
a portfolio with investments in as few as 14 issuers. The Fund does not
anticipate having a portfolio with as few as 14 issuers. The investment policy
of the Adviser has been to use two basic guidelines in the management of
investment portfolios: (1) the initial investment in any single issuer must
comprise less than 5% of the total value of the assets in a portfolio, including
the Fund, and (2) the initial investment in any one industry must comprise less
than 20% of the total value of the assets in a portfolio, including the Fund.
(The maximum that the Fund will invest in any industry will be 25% of the value
of its total assets). Under normal market conditions, the Fund follows the 5%
and 20% guidelines of the Adviser. The Fund will always adhere to this 25%
limitation.
Common Stocks -- Under normal market conditions, the Fund invests at least 80%
of the value of its net assets in common stocks. The Fund selects common stock
investments from three broad areas: (1) companies selling substantially below
their book value; (2) companies selling at a low valuation to their present
earnings level; and (3) companies judged by the Adviser to have above-average
growth prospects over the next three-to-five year period and to be selling, in
the opinion of the Adviser, at small premiums to their book value, or at modest
valuations to their present earnings level.
The Adviser believes that (i) its strategy of investing in undervalued common
stock offers the potential for long-term capital appreciation above that of the
leading stock market indices (i.e., Dow Jones Industrial Average, Standard &
Poor 500 Index, Russell 2000 and the Value Line Composite), and (ii) use of the
guidelines of the Adviser for portfolio management together with the investment
restrictions previously described will lessen the risks in this investment
approach.
Corporate Bonds -- A corporate bond is an interest-bearing debt security issued
by a corporation. The issuer has a contractual obligation to pay interest at a
stated rate on specific dates and to repay principal (the bond's face value) on
a specified date. An issuer may have the right to redeem ("call") a bond before
maturity.
While the bond's annual interest income established by the coupon rate may be
fixed for the life of the bond, its yield (income as a percent of current price)
will reflect current interest rate levels. The bond's price rises and falls so
that its yield remains reflective of current market conditions. Bond prices
usually rise when interest rates fall and conversely, bond prices fall when
interest rates rise.
While the portfolio of the Fund emphasizes investment in common stock, the Fund
may invest up to 20% of the value of its net assets in fixed income securities
(corporate bonds and preferred stocks.) The Fund invests in fixed income
securities when the Adviser believes prevailing interest rates offer long-term
capital appreciation. The fixed income securities selected may include
securities with any of the ratings listed by Standard & Poor's Ratings Group
("S&P") and Moody's Investors Service, Inc. ("Moody's"), including securities
with a S&P D rating, a Moody's C rating and unrated securities that are
determined by the Adviser to be of equivalent quality. (See Appendices A and B
in the Statement of Additional Information for S&P's and Moody's definitions of
bond ratings.) Fixed income corporate debt securities that are rated BBB (S&P's
rating) or Baa (Moody's rating) have speculative characteristics and are riskier
investments than debt securities rated A (S&P's or Moody's rating) and higher.
Fixed income securities that have credit ratings lower than BBB (S&P's rating)
or Baa (Moody's rating) are commonly referred to as "junk bonds." These lower
rated securities are speculative investments and investment in them is riskier
than an investment in a fixed income security with a rating of BBB or Baa or
higher. The ability of the issuer of a lower rated security to pay income or
repay principal in accordance with the terms of the obligation may be impacted
more severely by adverse economic conditions or a business downturn than the
ability of an issuer of higher rated securities. Unrated securities may or may
not be considered more creditworthy than lower rated securities.
Temporary Defensive Positions -- Although the Fund will normally invest
according to its objective as outlined above, the Fund may at times, for
temporary defensive purposes, invest all or a portion of its assets in no-load
money market funds, savings accounts and certificates of deposit of domestic
banks with assets in excess of $1,000,000, commercial paper with the highest
investment grade rating (A-1 by S & P and P-1 by Moody's Commercial Paper
Ratings), repurchase agreements, U.S. treasury bills, treasury notes or treasury
bonds backed by the "full faith and credit" of the U.S. Government, or the Fund
may hold cash. Investment in a no-load money market fund will result in the Fund
paying a management fee on the money invested in such fund in addition to the
operating expenses of the Fund. When the Fund invests for temporary defensive
purposes, the Fund may not achieve its investment objective.
Risks of Investing in the Fund
Investing in any mutual fund such as the Fund involves risk, including the risk
that you may receive little or no return on your investment, and the risk that
you may lose part or all of the money you invest. Before you invest in the Fund
you should carefully evaluate the risks. Because of the nature of the Fund, you
should consider an investment to be a long-term investment that typically
provides the best results when held for a number of years. The following are the
chief risks you assume when investing in the Fund.
Because the Fund is a non-diversified fund, an investment in the Fund may be a
greater risk than an investment in a diversified fund. Bond prices usually rise
when interest rates fall and conversely, bond prices fall when interest rates
rise. If a bond is subject to a call and is called before maturity, the Fund may
have to reinvest the proceeds at lower market rates.
The following table highlights other risks associated with investing in the
Fund.
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Risks How the Fund Manages These Risks
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Market Risk is the risk that all The Fund maintains a long-term
or a majority of the securities in investment approach and focus on
a certain market - like the stock stocks we believe can appreciate
or bond market - will decline in over an extended time frame
value because of factors such as regardless of interim market
economic conditions, future fluctuations. The Fund does not
expectations or investor try to predict overall stock
confidence. If the value of the market movements and does not
majority of common stocks held by trade for short-term purposes.
the Fund increases in value, then
the net assets of the Fund and an
investment in the Fund would
normally increase in value. If
there is a decline in the value of
a majority of the common stocks of
the Fund, then the net assets of
the Fund and investment in the
Fund would normally decline in
value.
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Industry and Security Risk is the The Adviser follows a rigorous
risk that the value of securities selection process before choosing
in a particular industry or the securities for the Fund.
value of an individual stock or
bond will decline because of
changing expectations for the
performance of that industry or
for the individual company issuing
the stock or bond.
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Lower Rated, High Yield, High Risk The Fund may invest in fixed
Fixed Income Securities include income securities that are listed
those securities rated lower than on national securities exchanges
BBB by S&P and Baa by Moody's. or quoted on the over-the-counter
Securities of this type are market. The Adviser will attempt
considered to be of poor standing to minimize the risks of investing
and predominantly speculative as in medium grade and high yield,
to their ability to repay interest high risk bonds by doing a credit
and principal. analysis of the issuer and
monitoring the Fund's investments and the
investment environment in general. The
credit rating is not the only criterion
for selection. The Adviser examines the
financial structure of each issuer and
with regard to these securities, makes a
determination as to the issuer's
ability to meet its debt obligations.
Achievement of the Fund's investment
objective is more dependent on the
Adviser's credit analysis in selecting
high yield, high risk bonds than is the
case in selecting higher quality
securities. However, there can be no
guarantee that the issuer of the bonds in
which the Fund invests will not default
or that the securities will not decline in
value.
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------------------------------------------------------------------------
Portfolio Turnover rates reflect The Fund normally will not invest
the amount of securities that are for short-term trading purposes.
replaced from the beginning of the However, the Fund may sell
year to the end of the year by the securities without regard to the
Fund. The degree of portfolio length of time they have been
activity may affect brokerage held. The Fund anticipates that
costs and other transaction costs the portfolio turnover rate of the
of the Fund, as well as taxes Fund will not exceed 100%.
payable by shareholders.
------------------------------------------------------------------------
<PAGE>
------------------------------------------------------------------------
Risks How the Fund Manages These Risks
------------------------------------------------------------------------
------------------------------------------------------------------------
Small Company Investment Risk The securities of companies with
includes the general risks of small revenues and capitalizations,
investing in common stocks such as in which the Fund invests, may
market, economic and business risk offer greater opportunity for
that cause their prices to capital appreciation than larger
fluctuate over time. companies. In addition to using
Historically, smaller the Adviser's credit analysis as
capitalization stocks have been described above, the Adviser may
more volatile in price than larger diversify its holdings to some
capitalization stocks. Among the extent among various industry
reasons for the greater price sectors.
volatility of these securities are
the lower degree of liquidity in
the markets for such stocks, and
the potentially greater
sensitivity of such small
companies to changes in or failure
of management, and to many other
changes in competitive, business,
industry and economic conditions,
including risks associated with
limited production, markets,
management depth, or financial
resources.
------------------------------------------------------------------------
For additional information about the Fund's investment policies, please see the
Statement of Additional Information.
MANAGEMENT AND ORGANIZATION
The Fund commenced operations as a series of shares of The Berwyn Funds, a
Delaware business trust, on April 30, 1999 in a reorganization of the
predecessor of the Fund, The Berwyn Fund, Inc. In the reorganization, the Fund
succeeded to all the business, assets and liabilities of its predecessor. The
predecessor of the Fund was a registered investment company, which had
substantially the same investment objective and policies as the Fund has.
The Killen Group, Inc. (the "Adviser") is the investment adviser to the
Fund. The Adviser is a Pennsylvania corporation that was formed in September
1982. Its address is 1189 Lancaster Avenue, Berwyn, Pennsylvania 19312.
Robert E. Killen is Chairman, Chief Executive Officer and sole shareholder of
the Adviser.
Robert E. Killen is also the President and Chairman of the Board of the Trust.
He is the person primarily responsible for the day-to-day management of the
Berwyn Fund's portfolio. He managed the portfolio of the Berwyn Fund, Inc., the
predecessor of the Berwyn Fund, from May 4, 1984, the date of that Fund's public
offering, until April 30, 1999. Robert E. Killen has over twenty-five years of
experience as an investment adviser. In 1969, Robert E. Killen cofounded
Compu-Val Management Associates, an investment advisory firm and was a 50%
partner until February 1983. At that time, The Killen Group, Inc., replaced him
as the 50% partner. The partnership of Compu-Val Management Associates was
dissolved on December 31, 1983 and The Killen Group, Inc. continued its advisory
business as a separate entity.
As of December 31, 1999, The Killen Group, Inc. was managing 234 individual
investment portfolios worth approximately $227 million. On December 31,
1999, the Fund had over $39 million in net assets.
Investment Management Fees
Under the contract between the Fund and the Adviser, the Adviser provides the
Fund with investment management services. These services include advice and
recommendations with respect to investments, investment policies, the purchase
and sale of securities and the management of the Fund's resources. In addition,
employees of the Adviser manage the daily operations of the Fund under the
supervision of the Board of Trustees. For the advisory services it provides, the
Adviser receives a fee at the annual rate of 1.00% of the Fund's average daily
net assets. The advisory fee payable to the Adviser by the Berwyn Fund is higher
than that of many mutual funds.
Subject to the policies established by the Trust's Board of Trustees, the
Adviser is responsible for the Fund's portfolio decisions. When buying and
selling securities, the Adviser gives consideration to brokers who have assisted
in the distribution of the Fund's shares. The Fund may also pay brokerage
commissions to brokers who are affiliated with the Adviser or the Funds.
SHAREHOLDER INFORMATION
Buying Shares
You may buy shares of the Fund without a sales charge. Your price for Fund
shares is the Fund's net asset value per share (NAV). Your order will be priced
at the next NAV calculated after the Fund's Transfer Agent receives your order.
The Fund also has arrangements that permit third parties to accept orders on the
Fund's behalf, so that investors can receive the NAV calculated after the order
is received in good order by the third party.
The NAV is calculated as of the close of trading on the New York Stock Exchange
(the "Exchange") (4:00 p.m. Eastern Time) every day the Exchange is open. If we
receive your order after the close of trading, you will pay the next business
day's price. Currently, the Exchange is closed when the following holidays are
observed: New Year's Day, Martin Luther King, Jr.'s Birthday, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
The NAV is determined by dividing the value of the Fund's securities, cash and
other assets, minus all expense and liabilities, by the number of shares
outstanding. The Fund's securities are valued each day at their market value,
which usually means the last quoted sale price on the security's principal
exchange. If market quotes are not readily available, securities will be priced
at their fair value as determined in good faith by the Fund's Board of Trustees.
Minimum Investment
* The minimum initial investment for the Fund is $3,000 per investor. This
investment may be divided by a single investor among different investment
accounts in the Fund or between accounts in the Berwyn Fund and Berwyn Income
Fund, another series of the Trust, that total $3,000 in the aggregate.
Subsequent investments must be at least $250.
* For an Individual Retirement Account (IRA), the minimal initial investment
is $1,000. The minimum initial investment for a spousal IRA is $250.
Subsequent investments in IRA accounts must be at least $250. There are no
minimum investment requirements for an investment by pension or profit
sharing plan or a custodial account established for the benefit of a minor.
The Fund has an Automatic Investment Plan under which an investor may have money
transferred from the investor's checking account to the investor's account in
the Fund. If you wish to use this Plan, please contact the Fund for further
information and an application.
In-Kind Purchases
An investor may exchange securities for shares of the Fund. Generally, an
exchange of securities for shares of the Fund will be a taxable exchange. This
means that an investor may have to recognize any gain or loss for federal and
state income tax purposes. The securities must meet the Fund's investment
objectives and policies. The securities will be valued in the same way that the
Fund's portfolio is valued for purposes of calculating the NAV. Please contact
the Adviser for further information.
Exchange of Shares
* You may exchange your shares of one Fund for shares of Berwyn Income Fund,
another series of the Trust. The initial minimum of $3,000 for the Funds must
be met ($1,000 for IRAs and no minimum initial investment for pension or
profit sharing plans or custodial accounts for minors).
* Shares may also be exchanged for shares in the Rodney Square Fund or the
Rodney Square Tax-Exempt Fund. These funds are money market funds managed by
Rodney Square Management Corporation and distributed by Rodney Square
Distributors, Inc. Exchanges will be made on the basis of the next NAV of the
funds involved that is determined after a request for an exchange has been
received. The minimum initial investment for each of the Rodney Square Funds
is $1,000. A shareholder may request an exchange by calling (800) 992-6757
between (9:00 a.m. and 4:00 p.m. Eastern Time) on any business day or by
writing to the Fund's Transfer Agent.
* A shareholder in the Fund, however, will only be permitted to exchange
shares in his or her account for shares of one of the other funds four times
in any twelve-month period. A shareholder in a Rodney Square Fund may
exchange shares of the Rodney Square Fund for shares of the Fund as often as
he or she wishes. The Fund reserves the right to amend or change the exchange
privilege upon 60 days' notice to shareholders.
Redeeming Shares
* You may redeem your shares at any time. The shares will be redeemed at the
next NAV calculated after the Fund's Transfer Agent has received the
redemption request. You may redeem your shares by sending a written request
to the Fund's Transfer Agent. If you have selected the telephone redemption
option on your application, you may redeem up to $5,000 worth of shares by
calling the Transfer Agent at (800) 992-6757 on any business day between the
hours of 9:00 a.m. and 4:00 p.m. Eastern Time. The Fund will use reasonable
procedures to confirm that instructions communicated by telephone are genuine
and, if the procedures are followed, will not be liable for any losses due to
unauthorized or fraudulent telephone transactions.
* The Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, as amended, under which the Fund is obligated to redeem
the shares of any shareholder solely in cash up to the lesser of 1% of the
net asset value of the Fund or $250,000 during any 90-day period. Should any
shareholder's redemption exceed this limitation, the Fund can, at its option,
redeem the excess in cash or in portfolio securities selected solely by the
Fund (and valued as in computing NAV). In such a redemption in portfolio
securities, an investor selling such securities received in the redemption
would probably incur brokerage charges and there can be no assurance that the
prices realized by an investor upon the sale of such securities will not be
less than the values used in computing NAV for the purpose of such
redemption.
* Generally, there is no sales charge for redeeming shares. The Fund, however,
does charge a 1% redemption fee on shares held for less than one year. The
fee is charged on the proceeds of the redemption. The fee is paid to the Fund
and included in its net assets for the benefit of the remaining shares. This
fee is waived for those who buy and sell shares of the Fund through third
parties.
Shareholders may buy and sell shares of the Fund through broker dealers who may
charge a fee for such service. In addition, if a shareholder redeems shares
through the Transfer Agent and requests that the proceeds be wired to the
shareholder, the Transfer Agent may charge the shareholder a wiring fee.
DISTRIBUTION AND TAXES
The Fund distributes annually all of its net investment income and any net
realized capital gains. It is not ordinarily to your advantage to buy shares in
the Fund shortly before the Fund makes a distribution because part of your
investment will come back to you as a taxable distribution. Unless a shareholder
requests otherwise in the account application, dividends and capital gains
distributions will be automatically reinvested in shares of the Fund at the NAV
on the Fund's ex-dividend date.
In general, Fund distributions are taxable to you as either ordinary income or
capital gains. This is true whether you reinvest your distributions in
additional Fund shares or receive them in cash. Any capital gains the Fund
distributes are taxable to you as long-term capital gains no matter how long you
have owned your shares. The Advisor expects that the majority of distributions
from the Fund will be long-term capital gain distributions.
Every January, you will receive a statement that shows the tax status of
distributions you received for the previous year. Distributions declared in
December but paid in January are taxable as if they were paid in December.
When you sell or redeem your shares of the Fund, you may have a capital gain or
loss. For tax purposes, an exchange of your Fund shares for shares of the Berwyn
Income Fund, the Rodney Square Fund or the Rodney Square Tax-Exempt Fund is the
same as a sale.
Fund distributions and gains from the sale or exchange of your shares
generally will be subject to state and local taxes. Non-U.S. investors may
be subject to U.S. withholding and estate tax. You should consult your tax
advisor about the federal, state, local or foreign tax consequences of your
investment in the Fund.
By law, the Fund must withhold 31% of your taxable distributions and redemption
proceeds if you do not provide your correct social security or taxpayer
identification number and certify that you are not subject to backup
withholding, or if the IRS instructs the Fund to do so.
DISTRIBUTOR
Berwyn Financial Services Corp. ("Berwyn Financial"), located at 1189 Lancaster
Avenue, Berwyn, Pennsylvania 19312, serves as a non-exclusive distributor of the
Fund's shares pursuant to a selling agreement between Berwyn Financial and the
Trust. Under the terms of the agreement, Berwyn Financial is a selling agent for
the Fund in certain jurisdictions in order to facilitate the registration of
shares of the Fund under state securities laws and to assist in the sale of
shares. Berwyn Financial does not charge a fee for the services provided under
the selling agreement with the Fund. The Fund continues to bear the expenses of
all filing or notification fees incurred in connection with the registration of
shares under state securities laws.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance and reflects the financial performance of the Fund and its
predecessor for the fiscal year ended December 31, 1999 and the financial
performance of the predecessor of the Fund, for the previous four fiscal years.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that an investor would have earned
or lost on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with the Fund's financial statements, are included in the
Fund's Annual Report to Shareholders, which is available without charge on
request by calling 1-800-992-6757.
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
Net Asset Value, Beginning $16.96 $22.01 $19.69 $19.43 $17.55
of Year
------ ------ ------ ------ ------
Income from Investment
Operations: (0.08) (0.09) 0.00 (0.02) 0.00
Net Investment
Income (Loss) (0.70) (4.11) 5.06 2.78 3.34
Net Realized and
Unrealized Gains
(Losses) on Securities
------ ------ ------ ------ ------
Total from Investment (0.78) (4.20) 5.06 2.76 3.34
Operations
------ ------ ------ ------ ------
Less Distributions:
Dividends from Net 0.00 0.00 0.00 0.00 (0.01)
Investment Income
Distributions from 0.00 (0.85) (2.74) (2.50) (1.45)
Net Realized Gains
------ ------ ------ ------ ------
Total Distributions 0.00 (0.85) (2.74) (2.50) (1.46)
------ ------ ------ ------ ------
Net Asset Value, End of Year $16.18 $16.96 $22.01 $19.69 $19.43
------ ------ ------ ------ ------
Total Return (4.60%) (18.90%) 26.05% 14.35% 19.18%
Ratios/Supplemental Data:
Net Assets, End of Period $39,310 $62,862 $100,406 $94,056 $97,234
(000)
Ratio of Expenses to 1.39% 1.20% 1.20% 1.21% 1.23%
Average Net Assets
Ratio of Net Investment
Income (Loss) to (0.39%) (0.45%) (0.02%) (0.10%) 0.04%
Average Net Assets
Portfolio Turnover Rate 6% 19% 26% 32% 32%
<PAGE>
Berwyn Fund
More information about the Fund's investments is available in the Fund's Annual
and Semi-Annual Reports to Shareholders. In the Fund's Annual Report to
Shareholders, you will find a discussion of the market conditions and investment
strategies that significantly affected the performance of the Fund and the
Fund's predecessor during the last fiscal year. You can find more detailed
information about the Fund in the current Statement of Additional Information
("SAI"), which we have filed with the U.S. Securities and Exchange Commission
(the "SEC") and which is legally a part of this prospectus. If you want a free
copy of the SAI, the Annual or Semi-Annual Report, or if you have any questions
about investing in the Fund, you can write to us at the Berwyn Fund, Shareholder
Services, c/o PFPC, P. O. Box 8987, Wilmington, DE 19899 or call us toll free at
1-800-992-6757.
You can find reports and other information about the Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information after payment of
a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, DC 20549-0102 or by electronic request to the SEC's e-mail address:
[email protected]. Information about the Fund, including the SAI, can be
reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can
get information on the public reference room by calling the SEC at
1-202-942-8090.
Shareholder Services
PFPC Inc.
P.O. Box 8987
Wilmington, Delaware 19899
800-992-6757 (toll-free)
(Investment Company Act File Number 811-04963)
<PAGE>
THE BERWYN FUNDS
- -------------------------------------------------------------------------------
BERWYN INCOME FUND
- -------------------------------------------------------------------------------
PROSPECTUS
May 1, 2000
This Prospectus describes shares of Berwyn Income Fund, one of
the series of The Berwyn Funds (the "Trust"). Shares of Berwyn
Income Fund are sold on a no-load basis.
The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
Page
Risk/Return Summary 3
Carefully review these
sections which summarize Performance 4
the Fund's investments,
risks, performance and fees Fees and Expenses of the Fund 5
- ---------------------------------------------------------------------
This section contains Investment Objective, 6
important additional Principal Investment
information, including the Strategies and
Fund's principal Related Risks
investment strategies and
risks
- ---------------------------------------------------------------------
This section contains Management and Organization 10
details on the management
of the Fund
- ---------------------------------------------------------------------
Shareholder Information 10
Turn to these sections for
information on how to open Distribution and Taxes 12
and maintain your account,
including how to purchase, Distributor 13
sell and exchange Fund
shares
- ---------------------------------------------------------------------
This section contains Financial Highlights 14
important financial
information on the Fund
<PAGE>
RISK/RETURN SUMMARY
Investment Objective of the Fund
Berwyn Income Fund's (the "Fund") investment objective is to provide investors
with current income while seeking to preserve capital by taking what the Fund
considers reasonable risks.
Principal Investment Strategies of the Fund
The Fund intends to achieve its objective through investment in corporate bonds,
preferred stocks, U.S. Treasury bonds and notes, debt securities issued by U.S.
Government agencies and dividend paying common stocks. The Fund's investment
adviser (the "Adviser") determines the percentage of each category of security
to hold based upon the prevailing economic and market conditions. The Fund,
however, does allow investment in common stocks when the value of the common
stocks in the Fund's portfolio is less than 30% of the value of the Fund's net
assets. The Fund uses value criteria as a strategy in selecting the Fund's
investments.
Normally, the Fund will invest in a diversified portfolio consisting of a mix of
securities, such as corporate bonds, preferred stocks and common stocks. The
Adviser may invest 100% of the Fund's net assets in corporate bonds or preferred
stocks. If the Adviser decides it is appropriate, the Adviser may invest all of
the Fund's net assets in lower rated, high yield, high risk bonds or "junk
bonds." The Adviser has the discretion to vary the average duration of the bond
portfolio in order to take advantage of prevailing trends in interest rates. The
current average maturity of the bonds in the Fund is 11.1 years and the average
duration is 6 years.
Principal Risks of Investing in the Fund
* Although the Fund will strive to achieve its goal, there is no assurance
that it will. The value of the Fund's investments will fluctuate with market
conditions and, as a result, the value of your investment in the Fund will
fluctuate. You could lose money on your investment in the Fund, or the Fund
could underperform other investments.
* High yield bonds entail greater risks than those found in higher rated
bonds. High yield bonds are considered to be below investment grade based on
significant risk of issuer default. High yield bonds and other fixed income
securities are sensitive to interest rate changes. Generally, when interest
rates rise, the prices of fixed income securities fall. The longer the
maturity of fixed income securities, the greater is the impact from interest
rate changes. The value of the Fund's investment will also vary with bond
market conditions.
* Other risks of high yield bonds include the market's relative youth, price
volatility, sensitivity to economic changes, limited liquidity, valuation
difficulties and special tax considerations.
* The prices of common stocks and preferred stocks are subject to market,
economic and business risks that will cause their prices to fluctuate over
time. The Fund may invest in preferred and common stocks with limited
liquidity. The Fund can invest in the preferred or common stock of companies
with small market capitalizations. Such preferred or common stocks tend to
have less liquidity than the stock of companies with large market
capitalizations. The preferred stock of large companies, however, may also
have limited liquidity, particularly if the size of the issue of such stock
is small.
An investment in the Fund is not a deposit of any bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation
(FDIC) or any other government agency.
PERFORMANCE
The bar chart and table below can help you evaluate the potential risks of
investing in Berwyn Income Fund. They show changes in the yearly performance of
the Fund (and its predecessor) over the last ten years and compare the average
annual returns for the past one-year, five-year, and ten-year periods with the
returns of the various indices listed. Investment performance also often
reflects the risks associated with the Fund's investment objective and policies.
You should keep in mind that the Fund's past performance is not necessarily an
indication of the Fund's future performance.
--------------------------------------------------
Average Annual Total Return as of 12/31/99
1 Year 5 Years 10 Years
Fund 0.83% 8.51% 10.05%
BIG* -0.83% 7.74% 7.75%
HYC** 1.24% 10.38% 11.35%
LII+ 4.43% 13.23% 10.82%
* Salomon Smith Barney Broad Investment
Grade Bond Index ("BIG") is an
unmanaged index of investment grade
bonds and does not include the costs
of fund operating or management expenses.
** Salomon Smith Barney High Yield Composite
Index ("HYC") is a widely
recognized unmanaged index of high yield
securities, and does not include
the costs of fund operating or management
expenses.
+ Lipper Income Fund Index ("LII") is an
unmanaged composite of the
performance of income funds, funds that
invest primarily in fixed income
securities and does include the costs of
fund operating or management expenses.
--------------------------------------------------
<PAGE>
FEES AND EXPENSES OF THE FUND
As an investor, you pay certain fees and expenses in connection with the Fund,
which are described in the table below.
-----------------------------------------------------
Shareholder Transaction Fees*
(Fees paid directly from your investment)
-----------------------------------------------------
-----------------------------------------------------
Maximum Sales Charge (load) on None
Purchases (as a percentage of
offering price)
-----------------------------------------------------
Sales Charge on Reinvested None
Dividends
-----------------------------------------------------
Exchange Fees None
-----------------------------------------------------
Annual Fund Operating Expenses
(Expenses that are deducted from Fund assets)
-----------------------------------------------------
-----------------------------------------------------
Management Fee 0.50%
-----------------------------------------------------
Distribution and Service 0.00%
(12b-1) Fees
-----------------------------------------------------
Other Expenses 0.27%
-----------------------------------------------------
Total Fund Operating Expenses 0.77%
-----------------------------------------------------
* Shareholder transaction fees are paid from your account. Annual fund
operating expenses are paid out of Fund assets, so that their effect is
included in the share price. The Fund has no sales charges (loads) or Plan
12b-1 distribution fees and minimal shareholder transaction fees.
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
One Year Three Years Five Years Ten Years
Berwyn Income Fund $77 $243 $425 $968
<PAGE>
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND
RELATED RISKS
The Fund's investment objective is to provide investors with current income
while seeking to preserve capital by taking what the Fund considers reasonable
risks. The Fund invests in corporate bonds, U.S. Treasury bonds and notes, debt
securities issued by U.S. Government Agencies, preferred stocks, and dividend
paying common stocks. The Fund may invest any percentage of its net assets in
the foregoing securities the Adviser deems appropriate, except common stocks.
The Adviser may not purchase common stocks when the value of the common stocks
that the Fund owns is equal to 30% or more of the Fund's net assets. The Adviser
would not be required to sell any common stocks owned if the value of the common
stocks exceeded 30% of net assets due to appreciation of the common stocks or
depreciation in the Fund's other securities.
The Adviser uses value criteria in selecting the Fund's investments. The value
criteria can lead the Adviser to invest a significant portion of the portfolio
in securities of companies with smaller capitalizations.
Corporate Bonds -- The Fund seeks to achieve its objective by investing in the
corporate bonds of only those issuers that, in the opinion of the Adviser, have
sufficient net worth and operating cash flow to repay principal and make timely
interest payments. A corporate bond is an interest-bearing debt security issued
by a corporation. For fixed rate bonds, the issuer has a contractual obligation
to pay interest at a stated rate on specific dates and to repay principal (the
bond's face value) on a specified date. An issuer may have the right to redeem
("call") a bond before maturity.
While the bond's annual interest income established by the coupon rate may be
fixed for the life of the bond, its yield (income as a percent of current price)
will reflect current interest rate levels. The bond's price rises and falls so
that its yield remains reflective of current market conditions.
The Adviser will select corporate bonds primarily on the basis of current yield
and secondarily on the basis of anticipated long term return. The duration of
bonds purchased by the Fund will typically vary from three to seven years. The
Adviser has the discretion to vary the average duration of the bond portfolio in
order to take advantage of prevailing trends in interest rates.
When selecting corporate bonds, the Adviser will take into account the rating
the bond has received from Standard and Poor's Ratings Group ("S&P") and Moody's
Investor's Service, Inc. ("Moody's"). The Adviser has the discretion to invest
in bonds with any rating as long as the issuer is not in default in the payment
of interest or principal. The Adviser may also invest in unrated bonds and may
purchase bonds in private transactions.
Bonds rated A or higher by S&P and Moody's are considered high grade securities
and have the three highest ratings for creditworthiness. Bonds rated BBB by S&P
or Baa by Moody's are defined as medium grade securities. These securities are
considered creditworthy and of investment quality, but there is a possibility
that the ability of the issuer of the securities to pay interest or repay the
principal in the future may be impaired by adverse economic conditions or
changing circumstances. Bonds rated lower than BBB (S&P's rating) or Baa
(Moody's rating) are less creditworthy than investment grade securities with the
same maturity and, as a consequence, may pay higher income. Bond securities
rated BB, B, CCC or CC by S & P or Ba, B or Caa by Moody's are regarded on
balance as predominantly speculative with respect to capacity to pay interest
and repay principal.
At December 31, 1999, the Fund's portfolio was invested in investment grade and
high yield, high risk corporate bonds, preferred and common stocks and
closed-end mutual funds. Listed below are the percentages of the portfolio
invested at December 31, 1999, in securities with various bond ratings published
by Moody's and S&P as well as the percentages invested in unrated bonds,
preferred and common stocks and closed end mutual funds:
Moody's Ratings:
A: 16.6%; Baa: 6.1%; Ba: 4.6%; B: 19.4%; Unrated: 9.9%
S&P Ratings:
A: 12.1%; BBB: 14.3%; BB: 4.0%; B: 10.7%; Unrated: 15.5%
Preferred and Common Stocks and Closed-End Investment Companies:
Preferred Stocks: 16.3%; Common Stocks: 26.8%;
Closed-End Investment Companies: 0.2%
The Fund will not invest in corporate bonds issued to finance a leveraged
buyout. The Fund will also diversify its portfolio and do a credit analysis of
the issuers in which it invests.
Preferred and Common Stocks -- The Fund also invests in preferred stocks and may
invest in common stocks, subject to the 30% limit described above, when the
Adviser deems it appropriate. The Adviser uses value criteria in selecting
preferred and common stock. The portfolio allocations to preferred and common
stock are determined by the Adviser based upon the market valuation of these
securities relative to corporate bonds. The outlook for the economy is also a
consideration. During periods of economic strength, greater emphasis is placed
on preferred and common stock. Preferred stocks are selected from two
categories: (1) preferred stocks offering an above average yield, in the opinion
of the Adviser, in comparison to preferred stocks of the same quality; and (2)
preferred stocks offering a potential for capital appreciation due to the
business prospects of the issuer. The Fund may also purchase preferred stocks in
transactions that qualify under Rule 144A.
Common stocks are selected from three categories: (1) stocks selling
substantially below their book value; (2) stocks selling at low valuations to
their present earnings level; and (3) stocks judged by the Adviser to have above
average growth prospects and to be selling at small premiums to their book value
or at modest valuations to their present earnings level.
The Fund purchases only common stocks that have been paying cash dividends.
Preferred stocks that have a cumulative feature do not have to be paying current
dividends in order to be purchased. If a dividend on a stock is canceled, the
Fund would not be required to sell the stock.
The method of stock selection used by the Fund may result in the Fund selecting
stocks that are not being recommended by other investment advisers or brokerage
firms. The Fund may invest in the securities of lesser known companies. The
Adviser believes, however, that any risks involved in the stocks selected for
the Fund will be minimized by diversification of the Fund's portfolio and daily
monitoring of the stock selection. In addition, the Fund invests only in stocks
listed on national securities exchanges or quoted on the over-the-counter
market.
Temporary Defensive Positions -- Although the Fund will normally invest
according to its objective as outlined above, the Fund may at times, for
temporary defensive purposes, invest all or a portion of its assets in no-load
money market funds, savings accounts and certificates of deposit of domestic
banks with assets in excess of $1,000,000, commercial paper with the highest
investment grade rating (A-1 by S & P and P-1 by Moody's Commercial Paper
Ratings), repurchase agreements, U.S. treasury bills, or treasury notes and
treasury bonds backed by the "full faith and credit" of the U.S. Government, or
the Fund may hold cash. Investment in a no-load money market fund will result in
the Fund paying a management fee on the money invested in such fund in addition
to the operating expenses of the Fund. When the Fund invests for temporary
defensive purposes, the Fund may not achieve its investment objective.
Risks of Investing in the Fund
Investing in any mutual fund such as the Fund involves risk, including the risk
that you may receive little or no return on your investment, and the risk that
you may lose part or all of the money you invest. Before you invest in the Fund
you should carefully evaluate the risks. Because of the nature of the Fund, you
should consider an investment in the Fund to be a long-term investment that
typically provides the best results when held for a number of years. The
following are the chief risks you assume when investing in the Fund.
Bond prices usually rise when interest rates fall and conversely, bond prices
fall when interest rates rise. If the bond is subject to a call and is called
before maturity, the Fund may have to reinvest the proceeds at lower market
rates.
Issuers of high yield, high risk bonds are generally smaller, less creditworthy
companies or highly leveraged companies which are generally less able than more
financially stable companies to make scheduled payments of interest and
principal. The risks posed by bonds issued under such circumstances are
substantial. For example, during an economic downturn or a sustained period of
rising interest rates, highly leveraged companies or smaller, less creditworthy
companies may experience financial stress. During these periods, such companies
may not have sufficient cash flows to meet their interest payment obligations. A
company's ability to service its debt obligations may also be adversely affected
by specific corporate developments, the company's inability to meet specific
projected business forecasts, or the unavailability of additional financing. The
risk of loss due to default by the issuer may be significantly greater for the
holders of high yield, high risk bonds because such securities are unsecured and
are often subordinated to other creditors of the issuer.
In addition to the risk of default, holders of high yield, high risk bonds also
face the risk of greater market volatility than the holders of investment grade
bonds. Changes in the general level of interest rates normally affect the market
value and yield of corporate bonds. As a general rule if the level of interest
rates were to decline, these securities would increase in value and the yield
would decline. Conversely, if the interest rate level rose, bonds would decline
in value and the yield would increase. Fluctuations in the general level of
interest rates would therefore affect the value of the Fund's investments and
the value of an investment in the Fund. However, the market value of high yield,
high risk bonds may be affected not only by changing interest rates, but also by
investors' perception of credit quality and the outlook for economic growth.
When economic conditions appear to be deteriorating, lower rated bonds may
decline due to investors' heightened concern over credit quality, regardless of
prevailing interest rates. Especially at such times, trading in high yield, high
risk bonds may become thin and market liquidity may be significantly reduced.
Even under normal conditions, the market for high yield, high risk bonds may be
less liquid than the market for investment grade bonds. In periods of reduced
market liquidity, the prices of high yield, high risk bonds may become more
volatile and these securities may experience sudden and substantial price
declines.
In addition to bonds that are rated, the Fund also invests in unrated bonds.
These securities may or may not be more speculative than investment grade
securities. The risks of investing in unrated bonds depend upon the
creditworthiness of the issuer, changes in interest rates and economic and
market factors. The Adviser will determine the creditworthiness of an unrated
debt security and the issuer's ability to meet the interest and principal
obligations of such security.
The following table highlights other risks associated with investing in the
Fund.
--------------------------------------------------------------------------
Risks How The Fund Manage These Risks
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Market Risk is the risk that all The fund maintains a long term
or a majority of the securities in investment approach. It manages a
a certain market - like the stock market risk, primarily through
or bond market - will decline in diversification - of asset classes,
value because of factors such as of industry sectors, of company
economic conditions, future names and, in relation to bonds, of
expectations or investor maturities. The Fund does not try
confidence. to predict overall market movements
and does not trade for short-term
purposes.
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Industry and Security Risk is the The Berwyn Income Fund limits its
risk that the value of securities assets invested in any one industry
in a particular industry or the and in any individual security. The
value of an individual stock or Adviser also follows a rigorous
bond will decline because of selection process before choosing
changing expectations for the securities for the Fund.
performance of that industry or
for the individual company issuing
the stock or bond.
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Lower Rated, High Yield, High Risk The Fund may invest in fixed income
Fixed Income Securities include securities that are listed on
those securities rated lower than national securities exchanges or
BBB by S&P or Baa by Moody's. quoted on the over-the-counter
Securities of this type are market. The Adviser will attempt to
considered to be of poor standing minimize the risks of investing in
and predominantly speculative as medium grade and high yield, high
to their ability to repay interest risk bonds by doing a credit
and principal. analysis of the issuer and
monitoring the Fund's investments and the
investment environment in general. The
credit rating is not the only criterion
for selection. The Adviser examines the
financial structure of each issuer and
with regard to these securities, makes a
determination as to the issuer's ability
to meet its debt obligations.
Achievement of the Fund's investment
objective is more dependent on the
Adviser's credit analysis in selecting
high yield, high risk bonds than is the
case in selecting higher quality
securities. However, there can be no
guarantee that the issuer of the bonds
in which the Fund invests will not
default or that the securities will not
decline in value.
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Portfolio Turnover rates reflect The Fund normally will not invest
the amount of securities that are for short-term trading purposes.
replaced from the beginning of the However, the Fund may sell
year to the end of the year by the securities without regard to the
Fund. The degree of portfolio length of time they have been held.
activity may affect brokerage The Fund anticipates that the
costs and other transaction costs portfolio turnover rate will not
of the Fund, as well as taxes exceed 100%.
payable by shareholders.
--------------------------------------------------------------------------
Small Company Investment Risk The securities of companies with
includes the general risks of small revenues and capitalizations,
investing in common stocks such as in which the Fund invests, may offer
market, economic and business risk greater opportunity for capital
that cause their prices to appreciation than larger companies.
fluctuate over time. In addition to using the Adviser's
Historically, smaller credit analysis as described above,
capitalization stocks have been the Adviser may diversify its
more volatile in price than larger holdings to some extent among various
capitalization stocks. Among the industry sectors.
reasons for the greater price
volatility of these securities are
the lower degree of liquidity in
the markets for such stocks, and
the potentially greater
sensitivity of such small
companies to changes in or failure
of management, and to many other
changes in competitive, business,
industry and economic conditions,
including risks associated with
limited production, markets,
management depth, or financial
resources.
--------------------------------------------------------------------------
For additional information about the Fund's investment policies, please see the
Statement of Additional Information.
MANAGEMENT AND ORGANIZATION
The Fund commenced operations as a series of shares of The Berwyn Funds, a
Delaware business trust, on April 30, 1999 in a reorganization of the
predecessor of the Fund, the Berwyn Income Fund, Inc. In the reorganization, the
Fund succeeded to all the business, assets and liabilities of its predecessor.
The predecessor of the Fund was a registered investment company, which had
substantially the same investment objective and policies as the Fund has.
The Killen Group, Inc. (the "Adviser") is the investment adviser to the
Fund. The Adviser is a Pennsylvania corporation that was formed in September
1982. Its address is 1189 Lancaster Avenue, Berwyn, Pennsylvania 19312.
Robert E. Killen is Chairman, Chief Executive Officer and sole shareholder of
the Adviser. Robert Killen is also the President and Chairman of the Board
of Trustees of the Trust.
Edward A. Killen, II is primarily responsible for the day-to-day management of
the Berwyn Income Fund. He managed the portfolio of the Berwyn Income Fund,
Inc., the predecessor of the Berwyn Income Fund, from July 1, 1994 to April 30,
1999. He has managed the Berwyn Income Fund since April 30, 1999. Edward Killen
has over twenty year's investment management experience. In 1978 he started work
at Compu-Val Management Associates as a portfolio manager. In February 1983, he
assumed his current position as Vice President and Secretary of the Adviser.
As of December 31, 1999, The Killen Group, Inc. was managing 234 individual
investment portfolios worth approximately $227 million. On December 31,
1999, the Fund had net assets of over $57 million.
Investment Management Fees
Under the contract between the Fund and the Adviser, the Adviser provides the
Fund with investment management services. These services include advice and
recommendations with respect to investments, investment policies, the purchase
and sale of securities and the management of the Fund's resources. In addition,
employees of the Adviser manage the daily operations of the Fund under the
supervision of the Board of Trustees. For its investment advisory services, the
Adviser receives a fee at the annual rate of 0.50% of the Fund's average daily
net assets.
Subject to the policies established by the Trust's Board of Trustees, the
Adviser is responsible for the Fund's portfolio decisions. When buying and
selling securities, the Adviser gives consideration to brokers who have assisted
in the distribution of the Fund's shares. The Fund may also pay brokerage
commissions to brokers who are affiliated with the Adviser or the Fund.
SHAREHOLDER INFORMATION
Buying Shares
You may buy shares of the Fund without a sales charge. Your price for Fund
shares is the Fund's net asset value per share (NAV). Your order will be priced
at the next NAV calculated after your order is received by the Fund's Transfer
Agent. The Fund also has arrangements that permit third parties to accept orders
on the Fund's behalf, so that investors can receive the NAV calculated after the
order is received in good order by the third party.
The NAV is calculated as of the close of trading on the New York Stock Exchange
(the "Exchange") (4:00 p.m. Eastern Time) every day the Exchange is open. If we
receive your order after the close of trading, you will pay the next business
day's price. Currently, the Exchange is closed when the following holidays are
observed: New Year's Day, Martin Luther King, Jr.'s Birthday, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
The NAV is determined by dividing the value of the Fund's securities, cash and
other assets, minus all liabilities, by the number of shares outstanding. The
Fund's securities are valued each day at their market value, which usually means
the last quoted sale price on the security's principal exchange. If market
quotes are not readily available, securities will be priced at their fair value
as determined in good faith by the Board of Trustees.
Minimum Investment
* The minimum initial investment for each Fund is $3,000 per investor. This
investment may be divided by a single investor among different investment
accounts in each Fund or between accounts in the Berwyn Income Fund and
Berwyn Fund, another series of the Trust, that total $3,000 in the aggregate.
Subsequent investment must be at least $250.
* For an Individual Retirement Account (IRA), the minimum initial investment
is $1,000. The minimum initial investment for a spousal IRA is $250.
Subsequent investments in IRA accounts must be at least $250. There are no
minimum investment requirements for an investment by pension or profit
sharing plan or a custodial account established for the benefit of a minor.
The Fund has an Automatic Investment Plan under which an investor may have money
transferred from the investor's checking account to the investor's account in
the Fund. If you wish to use this Plan, please contact the Fund for further
information and an application.
In-Kind Purchases
An investor may exchange securities for shares of the Fund. Generally, an
exchange of securities for shares of the Fund will be a taxable exchange. This
means that an investor may have to recognize any gain or loss for federal and
state income tax purposes. The securities must meet the Fund's investment
objectives and policies. The securities will be valued in the same way that the
Fund's portfolio is valued for purposes of calculating the NAV. Please contact
the Adviser for further information.
Exchange of Shares
* You may exchange your shares of the Fund for shares of another fund managed
by the Adviser. The initial minimum of $3,000 for the Fund must be met
($1,000 for IRAs and no minimum initial investment for pension or profit
sharing plans or custodial accounts for minors).
* Shares may also be exchanged for shares in the Rodney Square Fund or the
Rodney Square Tax-Exempt Fund. These funds are money market funds managed by
Rodney Square Management Corporation and distributed by Rodney Square
Distributors, Inc. Exchanges will be made on the basis of the next NAV of the
funds involved that is determined after a request for an exchange has been
received. The minimum initial investment for each of the Rodney Square Funds
is $1,000. A shareholder may request an exchange by calling 1 (800) 992-6757
between (9:00 a.m. and 4:00 p.m. Eastern Time) on any business day or by
writing to the Fund's Transfer Agent.
* A shareholder in the Fund, however, will only be permitted to exchange
shares in his or her account for shares of one of the other funds four times
in any twelve-month period. A shareholder in a Rodney Square Fund may
exchange shares of the Rodney Square Fund for shares of the Fund as often as
he or she wishes. The Fund reserves the right to amend or change the exchange
privilege upon 60 days' notice to shareholders.
Redeeming Shares
* You may redeem your shares at any time. The shares will be redeemed at the
next NAV calculated after the redemption request has been received by the
Fund's Transfer Agent. You may redeem your shares by sending a written
request to the Fund's Transfer Agent. If you have selected the telephone
redemption option on your application, you may redeem up to $5,000 worth of
shares by calling the Transfer Agent at 1 (800) 992-6757 on any business day
between the hours of 9:00 a.m. and 4:00 p.m. Eastern Time. The Fund will use
reasonable procedures to confirm that instructions communicated by telephone
are genuine and, if the procedures are followed, will not be liable for any
losses due to unauthorized or fraudulent telephone transactions.
* The Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, as amended, under which the Fund is obligated to redeem
the shares of any shareholder solely in cash up to the lesser of 1% of the
net asset value of the Fund or $250,000 during any 90-day period. Should any
shareholder's redemption exceed this limitation, the Fund can, at its option,
redeem the excess in cash or in portfolio securities selected solely by the
Fund (and valued as in computing NAV). In such a redemption in portfolio
securities, an investor selling such securities received in the redemption
would probably incur brokerage charges and there can be no assurance that the
prices realized by an investor upon the sale of such securities will not be
less than the values used in computing NAV for the purpose of such
redemption.
* Generally, there is no sales charge for redeeming shares.
Shareholders may buy and sell shares of the Fund through broker dealers who may
charge a fee for such service. In addition, if a shareholder redeems shares
through the Transfer Agent and requests that the proceeds be wired to the
shareholder, the Transfer Agent may charge the shareholder a wiring fee.
DISTRIBUTION AND TAXES
The Fund distributes annually substantially all of its net investment income and
any net realized capital gains. Dividends from net investment income will be
paid quarterly. It is not ordinarily to your advantage to buy shares in the Fund
shortly before the Fund makes a distribution because part of your investment
will come back to you as a taxable distribution. Unless a shareholder requests
otherwise in the account application, dividends and capital gains distributions
will be automatically reinvested in shares of the Fund at the NAV on the Fund's
ex-dividend date.
In general, Fund distributions are taxable to you as either ordinary income or
capital gains. This is true whether you reinvest your distributions in
additional Fund shares or receive them in cash. Any capital gains the Fund
distributes are taxable to you as long-term capital gains no matter how long you
have owned your shares.
Every January, you will receive a statement that shows the tax status of
distributions you received for the previous year. Distributions declared in
December but paid in January are taxable as if they were paid in December.
When you sell or redeem your shares of the Fund, you may have a capital gain or
loss. For tax purposes, an exchange of your Fund shares for shares of the Berwyn
Fund, the Rodney Square Fund or the Rodney Square Tax-Exempt Fund is the same as
a sale.
Fund distributions and gains from the sale or exchange of your shares
generally will be subject to state and local taxes. Non-U.S. investors may
be subject to U.S. withholding and estate tax. You should consult your tax
advisor about the federal, state, local or foreign tax consequences of your
investment in the Fund.
By law, the Fund must withhold 31% of your taxable distributions and redemption
proceeds if you do not provide your correct social security or taxpayer
identification number and certify that you are not subject to backup
withholding, or if the IRS instructs the Fund to do so.
DISTRIBUTOR
Berwyn Financial Services Corp. ("Berwyn Financial"), located at 1189 Lancaster
Avenue, Berwyn, Pennsylvania 19312, serves as a non-exclusive distributor of the
Fund's shares pursuant to a selling agreement between Berwyn Financial and the
Trust. Under the terms of the agreement, Berwyn Financial is a selling agent for
the Fund in certain jurisdictions in order to facilitate the registration of
shares of the Fund under state securities laws and to assist in the sale of
shares. Berwyn Financial does not charge a fee for the services provided under
the selling agreement with the Fund. The Fund continues to bear the expenses of
all filing or notification fees incurred in connection with the registration of
shares under state securities laws.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand Fund's
financial performance and reflects the financial performance of the Fund and its
predecessor for the fiscal year ended December 31, 1999 and the financial
performance of the predecessor of the Fund for the previous four fiscal years.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that an investor would have earned
or lost on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with the Fund's financial statements, are included in the
Fund's Annual Report to Shareholders, which is available without charge on
request by calling 1-800-992-6757.
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED
12/31/99 12/31/98(1) 12/31/97 12/31/96 12/31/95
Net Asset Value, Beginning $10.72 $12.51 $12.31 $11.95 $10.75
of Year
------ ------ ------ ------ ------
Income from Investment
Operations: 0.91 0.90 0.77 0.76 0.73
Net Investment Income
Net Realized and (0.81) (1.44) 0.84 0.87 1.48
Unrealized Gains
(Losses) on Securities
------ ------ ------ ------ ------
Total from Investment 0.10 (0.54) 1.61 1.63 2.21
Operations
------ ------ ------ ------ ------
Less Distributions:
From Net Investment (0.82) (0.92) (0.77) (0.80) (0.70)
Income
From Net Realized 0.00 (0.15) (0.64) (0.47) (0.31)
Gains
From Capital 0.00 (0.18) 0.00 0.00 0.00
------ ------ ------ ------ ------
Total Distributions (0.82) (1.25) (1.41) (1.27) (1.01)
------ ------ ------ ------ ------
Net Asset Value, End of Year $10.0 $10.72 $12.51 $12.3 $11.95
------ ------ ------ ------ ------
Total Return 0.83% (4.57%) 13.36% 13.99% 21.00%
Ratios/Supplemental Data:
Net Assets, End of Period $57,341 $103,624 $180,82 $137,166 $119,552
(000)
Ratio of Expenses to 0.77% 0.66% 0.65% 0.68% 0.73%
Average Net Assets
Ratio of Net Investment
Income to 6.92% 6.27% 6.15% 6.35% 6.78%
Average Net Assets
Portfolio Turnover Rate 7% 31% 53% 38% 39%
(1) Effective January 1, 1998, the Fund began to amortize premiums and accrete
discounts to interest income over the life of the bonds. The effect of this
change in accounting principle for the year ended December 31, 1998 is to
increase per share net income by $0.04 and ratio of net investment income to
average net assets by 0.3%.
BERWYN INCOME FUND
More information about the Fund's investments is available in the Fund's Annual
and Semi-Annual Reports to Shareholders. In the Fund's Annual Report to
Shareholders, you will find a discussion of the market conditions and investment
strategies that significantly affected the performance of the Fund and the
Fund's predecessor during the last fiscal year. You can find more detailed
information about the Fund in the current Statement of Additional Information
("SAI"), which we have filed with the U.S. Securities and Exchange (the "SEC")
and which is legally a part of this prospectus. If you want a free copy of the
SAI, the Annual or Semi-Annual Report, or if you have any questions about
investing in the Fund, you can write to us at Berwyn Income Fund, Shareholder
Services, c/o PFPC, P. O. Box 8987, Wilmington, DE 19899 or call us toll free at
1-800-992-6757.
You can find reports and other information about the Fund on the SEC web site
(http://www.sec.gov), or you can get copies of this information after payment of
a duplicating fee, by writing to the Public Reference Section of the SEC,
Washington, DC 20549-0102 or by electronic request to the SEC's e-mail address:
[email protected]. Information about the Fund, including the SAI, can be
reviewed and copied at the SEC Public Reference Room in Washington, D.C. You can
get information on the public reference room by calling the SEC at
1-202-942-8090.
Shareholder Services
PFPC Inc.
P.O. Box 8987
Wilmington, Delaware 19899
800-992-6757 (toll-free)
(Investment Company Act File Number 811-04963)
<PAGE>
THE BERWYN FUNDS
Berwyn Fund, a Series of The Berwyn Funds
Shareholders Services
c/o PFPC Inc.
P. O. Box 8987
Wilmington, DE 19899
1 (800) 992-6757
STATEMENT OF ADDITIONAL INFORMATION
May 1, 2000
This Statement of Additional Information ("SAI") is not a Prospectus. The
SAI is a document that relates to the Prospectus of the Berwyn Fund series (the
"Fund") of The Berwyn Funds (the "Trust") dated May 1, 2000 and contains
additional information regarding the Fund. This SAI should be read in
conjunction with the Prospectus. The Prospectus may be obtained by writing to
the Fund at the above address or calling the 800 number. The audited financial
statements of the Fund and notes thereto for the year ended December 31, 1999,
and the unqualified report of PricewaterhouseCoopers LLP, the Fund's independent
accountants, on such financial statements (the "Report"), included in the Fund's
1999 Annual Report to Shareholders are incorporated by reference in this SAI by
amendment to the Trust's registration statement.
<PAGE>
TABLE OF CONTENTS
Investment Policies and Risk Factors..........................1
Investment Restrictions.......................................2
Investment Advisory Arrangements..............................4
Expense Limitation............................................5
Trustees and Officers.........................................5
Code of Ethics................................................7
Ownership of the Fund.........................................7
Portfolio Transactions and Brokerage Commissions..............7
Computation of Net Asset Value................................9
Share Purchases...............................................9
Distributor...................................................9
Redemption of Shares.........................................10
Calculation of Performance Data..............................10
General Information..........................................11
Distribution and Taxes.......................................12
Financial Statements.........................................15
Appendix A - Standard & Poor's Bond Ratings
Appendix B - Moody's Bond Ratings
<PAGE>
INVESTMENT POLICIES AND RISK FACTORS
(See also "Investment Objective, Principal Investment Strategies and Related
Risks " in the Fund's Prospectus.)
The Fund is a no-load, non-diversified series of shares of The Berwyn
Funds, an open-end management investment company that seeks long term (i.e.,
greater than one year) capital appreciation by investing in common stocks and
fixed income securities that offer a potential for capital appreciation.
Current income is a secondary consideration.
Under normal market conditions, the Fund invests at least 80% of the value
of its net assets in common stocks. The Fund invests in common stocks that The
Killen Group, Inc. (the "Adviser") considers to be selling at undervalued
prices. These are stocks selling substantially below their book value or at a
low valuation to present earnings or are stocks of companies, judged by the
Adviser, to have above average growth prospects and to be selling at a small
premium to book value or at modest valuation to their present earnings level.
The investment approach of the Fund may be deemed "contrarian" in that it
may lead the Fund to select stocks not recommended by other investment advisers
or brokerage firms.
While the portfolio of the Fund emphasizes common stocks, the Fund may
also invest up to 20% of the value of its net assets in fixed income securities.
The fixed income securities in which the Fund invests are corporate bonds and
preferred stocks. The Fund selects fixed income securities that have a potential
for capital appreciation due to prevailing interest rates.
There are no restrictions on the Adviser as to the investment rating a
fixed income security must have in order to be purchased. The Fund may purchase
fixed income securities in any rating listed by Standard & Poor's Ratings Group
("Standard & Poor's") and Moody's Investors Service, Inc. ("Moody's). (See
Appendices A and B for Standard & Poor's and Moody's definitions of Bond
ratings.) This means that the Fund may invest up to 20% of the value of its net
assets in high yield, high risk corporate debt securities that are commonly
referred to as "junk bonds." These are corporate debt securities that are rated
lower than BBB by Standard & Poor's and Baa by Moody's. These securities have a
low rating due to the fact that the issuers of the securities are not considered
as creditworthy as the issuers of investment grade bonds. There is the risk that
the issuer of a lower rated security may default in the payment of interest and
principal. On the whole, these lower rated securities are considered speculative
investments.
As of December 31, 1999, 0.70% of the Fund's net assets were invested in
lower rated corporate debt securities.
The Fund may at times, for temporary defensive purposes, invest all or a
portion of its assets in no-load money market funds, savings accounts or
certificates of deposit of domestic banks with assets in excess of $1,000,000,
commercial paper with the highest investment grade rating (i.e., A-l and P-1, as
defined in Standard & Poor's and Moody's Commercial Paper Ratings,
respectively), repurchase agreements, U.S. Treasury bills, notes and bonds, or
cash.
Investment by the Fund in a no-load money market fund will result in the
Fund paying a management fee and other fund expenses on the money invested in
such fund in addition to the operating expenses of the Fund.
The Fund's investment in securities issued by the U. S. Government does
not mean the U.S. Government is required to provide financial support to the
Fund.
The Fund may also invest in Real Estate Investment Trusts ("REITs"). REITs
are companies that invest in real estate. REITs normally do not pay federal
income tax but distribute their income to their shareholders who become liable
for the tax. Some REITs own properties and earn income from leases and rents.
These types of REITs are termed "Equity" REITs. Other REITs hold mortgages and
earn income from interest payments. These REITs are termed "Mortgage" REITs.
Finally, there are "Hybrid" REITs that own properties and hold mortgages. The
Fund may invest in any of the three types of REITs and may purchase the common
stocks, preferred stocks or bonds issued by REITs. The Fund invests in REITs
that generate income and have a potential for capital appreciation. There are
risks in investing in REITs. The property owned by a REIT could decrease in
value and the mortgages and loans held by a REIT could become worthless. The
Adviser, however, monitors the investment environment and the Fund's investments
as a means of lessening risks. As of December 31, 1999, the Fund was not
invested in any REITs.
In a repurchase agreement, a seller of a security, usually a banking
institution or securities dealer, sells securities to the Fund and agrees with
the Fund at the time of sale to repurchase the securities from the Fund at a
mutually agreed upon time and price. The Fund intends to enter into repurchase
agreements only with established banking institutions that deal in treasury
bills and notes. The Fund intends to invest mostly in overnight repurchase
agreements. The Fund will only invest up to 5% of its net assets in repurchase
agreements. In the event of the bankruptcy of the seller of a repurchase
agreement or the failure of a seller to repurchase the underlying securities as
agreed upon, the Fund could experience losses. Such losses could include a
possible decline in the value of the underlying securities during the period
while the Fund seeks to enforce its rights thereto and a possible loss of all or
part of the income from such securities. The Fund would also incur additional
expenses enforcing its rights. As of December 31, 1999, the Fund had no assets
invested in repurchase agreements.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental policies of
the Fund. Fundamental policies may not be changed without approval by vote of a
majority of the Fund's outstanding voting securities. Under the Investment
Company Act of 1940, as amended (the "1940 Act"), such approval requires the
affirmative vote at a meeting of shareholders of the lesser of (a) more than 50%
of the Fund's outstanding shares, or (b) at least 67% of shares present or
represented by proxy at the meeting, provided that the holders of more than 50%
of the Fund's outstanding shares are present in person or represented by proxy.
When investing its assets, the Fund will not:
(1) purchase more than 10% of the outstanding voting securities of
a single issuer;
(2) invest more than 25% of the value of its total assets in any
one industry;
(3) lend money, provided that for purposes of this restriction,
the acquisition of publicly distributed corporate bonds, and investment in
U.S. government obligations, short-term commercial paper, certificates of
deposit and repurchase agreements shall not be deemed to be making of a
loan;
(4) buy or sell real estate, real estate mortgage loans, commodities,
commodity futures contracts, puts, calls and straddles;
(5) underwrite securities of other issuers, except as the Fund may be
deemed to be an underwriter under the Securities Act of 1933, as amended
(the "1933 Act") in connection with the purchase and sale of portfolio
securities in accordance with its objectives and policies;
(6) make short sales or purchase securities on margin;
(7) borrow money, except that the Fund may borrow up to 5% of the
value of its total assets at the time of such borrowing from banks for
temporary or emergency purposes (the proceeds of such loans will not
be used for investment or to purchase securities, but will be used to pay
expenses);
(8) invest for the purposes of exercising control or management;
(9) invest in restricted securities (securities that must be
registered under the 1933 Act before they may be offered and sold to the
public);
(10) participate in a joint investment account; and
(11) issue senior securities.
In addition, the Fund has the following restrictions:
(1) With respect to 50% of its assets, the Fund will not at time of
purchase invest more than 5% of its gross assets, at market value, in the
securities of any one issuer (except the securities of the United States
government); and
(2) With respect to the other 50% of its assets, the Fund will not
invest at the time of purchase more than 15% of the market value of its
total assets in any single issuer.
The Fund has also adopted certain investment restrictions that are not
fundamental policies. These restrictions are that (i) the Fund will not invest
in real estate limited partnerships or in oil, gas or other mineral leases, and
(ii) the Fund's investments in warrants will not exceed 5% of the Fund's net
assets. Restrictions that are not fundamental may be changed by a vote of the
majority of the Board of Trustees. But if any of these nonfundamental
restrictions are changed, the Fund will give shareholders at least 60 days'
written notice.
<PAGE>
INVESTMENT ADVISORY ARRANGEMENTS
(See also "Management and Organization" in the Fund's Prospectus)
The Killen Group, Inc. is the investment adviser (the "Adviser") to the
Fund. Robert E. Killen is Chairman, Chief Executive Officer ("CEO") and sole
shareholder of the Adviser. Edward A. Killen, II is Vice President,
Secretary of the Adviser. Both Robert E. Killen and Edward A. Killen, II are
Directors of the Adviser and Robert E. Killen is a Trustee of the Trust. In
addition, Robert E. Killen is President and Chairman of the Board of Trustees
of the Trust.
The Adviser provides the Fund with investment management services. Under
the Contract for Investment Advisory Services between the Trust, on behalf of
the Fund, and the Adviser (the "Contract"), dated April 28, 1999, the Adviser
provides the Fund with advice and recommendations with respect to investments,
investment policies, the purchase and sale of securities and the management of
the Fund's resources. In addition, employees of the Adviser administer the
operation of the Fund. These employees prepare and maintain the accounts, books
and records of the Fund, calculate the daily net asset value per share each day
the New York Stock Exchange is open, prepare and file the documents required of
the Fund under Federal and state laws and prepare all shareholder reports.
The Contract provides that it will continue in effect, after the initial
two-year term of the Contract, from year to year if continuation is specifically
approved annually by either a majority of the Board of Trustees or a vote of a
majority of the outstanding voting securities of the Fund. Continuance of the
Contract must also be approved annually by a majority of Trustees who are not
parties to the Contract or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval. The Fund may
terminate the Contract on sixty days' written notice to the Adviser, without
payment of any penalty, provided such termination is authorized by the Board of
Trustees or by a vote of a majority of the outstanding voting securities of the
Fund. The Adviser may terminate the Contract on sixty days' written notice to
the Fund without payment of any penalty. The Contract will be automatically and
immediately terminated in the event of its assignment by the Adviser.
As compensation for its investment management services to the Fund under
the Contract, the Adviser is entitled to receive monthly compensation at the
annual rate of 1% of the average daily net assets of the Fund. The fee is
computed daily by multiplying the net assets for a day by 1% and dividing the
result by 365. At the end of the month, the daily fees are added and the
resulting sum is paid to the Adviser.
The Fund paid the Adviser $302,721 in fees in 1999. TBF, the Fund's
predecessor, paid the Adviser $173,873 in fees in 1999, $843,125 in fees in 1998
and $947,981 in 1997.
<PAGE>
EXPENSE LIMITATION
The Contract provides that the Adviser's fee payable by the Fund will be reduced
in any fiscal year by any amount necessary to prevent Fund expenses and
liabilities (excluding taxes, interest, brokerage commissions and extraordinary
expenses, determined by the Fund or the Adviser, but inclusive of the Adviser's
fee payable by the Fund) from exceeding 2% of the average daily net assets of
the Fund. In any month that the Fund expenses and liabilities exceed 2%, the
Adviser's fee will be reduced so that expenses and liabilities will be 2%.
Although the Fund expects to maintain expenses within 2% of its average daily
net assets, the Adviser will not be responsible for additional expenses
exceeding its advisory fee payable by the Fund. Once the net assets of the Fund
exceed $100 million, the expense limitation will be reduced to 1.5% of the
average daily net assets of the Fund. The expense limitation has not reduced the
Adviser's fee since 1985. In 1999, the Fund's ratio of total annual operating
expenses to average net assets was 1.39%
TRUSTEES AND OFFICERS
The Board of Trustees oversees the management of the business of the Trust
and the Fund. The Board is elected initially by shareholders and thereafter
Trustees are elected by the Board or the shareholders from time to time in
accordance with the Trust's Agreement and Declaration of Trust and By-Laws. The
Board of Trustees sets broad policies for the Fund and has responsibility for
supervision of the operations of the Fund. The daily operations of the Fund are
administered by employees of the Adviser under the Board's supervision.
The Trustees and executive officers of the Trust and their principal
occupations for the past five years are set forth below:
Name, Age, Position
and Address Principal Occupation for the Past Five Year
*Robert E. Killen Director of Westmoreland Coal Co. (a mining
(59) company) since
President & Trustee July 1996. Director and shareholder, Berwyn
1199 Lancaster Financial Services
Avenue Corp. ("BFS"), a financial services company
Berwyn, Pennsylvania (registered as a broker-dealer with the SEC
since December 1993 and a member of the National
Association of Securities Dealers, Inc. (the "NASD") since
July 1994) since October 1991. President and Director of
the Berwyn Income Fund, Inc. ("BIF"), the predecessor of
the Fund, and The Berwyn Fund, Inc. ("TBF") (both
registered investment companies managed by the Adviser)
from December 1986 to April 1999 and from February 1983 to
April 1999, respectively. Chairman, Chief Executive Officer
and sole shareholder of the Adviser (an investment advisory
firm) since April 1996. President, Treasurer, Director and
sole shareholder of the Adviser from September 1982 to
March 1996.
<PAGE>
Denis P. Conlon (52) Director of BIF and TBF from June 1992 to April
Trustee 1999. President and Chief Executive Officer of
1282 Farm Road CRC Industries (a worldwide manufacturer) since
Berwyn, Pennsylvania September 1996. Vice President, Corporate
Development, Berwind Corporation (diversified manufacturing
and financial company) from 1990 to September 1996.
Deborah D. Dorsi Director of BIF and TBF from April 1998 to
(44) April 1999. Retired industry executive since
Trustee 1994. Director Worldwide Customer Support,
1801 Stanbridge Kulick Soffa Industries, Inc. (Semi Conductor
Street Equipment Manufacturer) from 1993 to 1994.
Norristown, Corporate Account Manager for Kulick & Soffa
Pennsylvania Industries, Inc. prior to 1993.
*Kevin M. Ryan (52) President, Treasurer, Director and shareholder of BFS since
Secretary-Treasurer October 1991. Director of BIF from December 1986
1199 Lancaster to January 1995. Secretary and Treasurer of TBF from
Avenue February 1983 to April 1999 and BIF from December 1986 to
Berwyn, Pennsylvania April 1999. Director of TBF from February 1983 to
March 1999. Legal counsel to the Adviser since
September 1985.
* Robert E. Killen and Kevin M. Ryan are "interested persons" of the Fund as
defined in the 1940 Act.
Robert E. Killen is an Officer, Director and sole shareholder of the Adviser.
Robert E. Killen is also a Director of BFS, a registered broker-dealer, and owns
one-third of its outstanding shares. Edward A. Killen, II is an officer and
Director of the Adviser. He is also an officer, Director and the owner of one
third of the outstanding shares of BFS. Kevin M. Ryan is legal counsel to the
Adviser and an officer, Director and owner of one-third of the outstanding
shares of BFS. In addition, Robert E. Killen and Edward A. Killen, II are
brothers and Kevin M. Ryan is brother-in-law to both. BFS serves as the
distributor for the Fund's shares in certain jurisdictions.
Mr. Conlon and Ms. Dorsi are the Trustees of the Trust who are not "interested
persons" of the Trust as defined in the 1940 Act (the "Independent Trustees")
and are paid a fee of $800 for each Board or Committee meeting attended and are
reimbursed for any travel expenses by the Trust. If a Board and Committee
meetings are held on the same day, the Independent Trustees receive only one
$800 fee for all meetings on the same day. The Trust has not adopted a pension
or retirement plan or any other plan that would afford benefits to its Trustees.
The Trust paid Ms. Dorsi and Mr. Conlon each $3,200 for the Trust's initial
fiscal year ending December 31, 1999. The Trust is not a part of any fund
complex.
Officers of the Trust are not paid compensation by the Trust or any fund complex
for their work as officers. No fees are paid by the Trust or any fund complex to
the Trustees that are not Independent Trustees for the performance of their
duties. (See "Management and Organization" in the Prospectus for a discussion of
management responsibilities of the Board and officers.)
<PAGE>
CODE OF ETHICS
The Fund and its Adviser have adopted Codes of Ethics ("Codes") that apply
to the personal securities transactions of the Trustees and Officers of the Fund
and to the personal securities transactions of the Directors, Officers and
employees of the Adviser. The Codes allow these individuals to invest in
securities, even securities purchased and held by the Fund, if certain
restrictions are met.
The Fund's and the Adviser's Codes of Ethics have been filed as part of a
registration statement with the SEC. The Codes may be reviewed and copied at the
SEC's Public Reference Room in Washington, D.C. Anyone who is interested may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-202-942-8090. These Codes of Ethics are available on the EDGAR Database
on the SEC's Internet site at http:\\www.sec.gov and copies of them may be
obtained, after paying a duplicating fee, by writing to the SEC's Public
Reference Section, Washington, D.C. 20549-0102 or sending a request to the
following e-mail address: [email protected].
OWNERSHIP OF THE FUND
As of March 31, 2000, there were 2,037,543 shares of the Fund outstanding.
Robert E. Killen, a Trustee and Officer of the Fund, whose address is 1189
Lancaster Avenue, Berwyn, PA, owned 15% of the outstanding shares beneficially
and of record. National Financial Services Corp. ("National"), One World Trade
Center, 200 Liberty Street, New York, NY was the record owner of 13% of the
outstanding shares. National holds the shares in nominee name for its customers
and does not have the power to vote or sell the shares. Charles Schwab & Co.
("Schwab"), 101 Montgomery Street, San Francisco, CA was the record owner of 11%
of the outstanding shares. Schwab holds the shares in nominee name for its
customers and does not have the power to vote or sell the shares. As of March
31, 2000, the Trustees and Officers of the Fund, as a group, owned beneficially
and of record 330,435 shares. This amount constituted 16% of the outstanding
shares and includes the shares owned by Robert E. Killen.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
Subject to policy established by the Trust's Board of Trustees, the
Adviser is responsible for the Fund's portfolio decisions and the buying and
selling of the Fund's portfolio securities. In executing such transactions, the
Adviser seeks to obtain the best net results for the Fund, taking into account
such factors as price (including the applicable brokerage commission or dealer
spread), size of order, difficulty of execution and operational facilities and
capabilities of the firm involved. While the Adviser generally seeks reasonably
competitive commission rates, the Adviser is authorized to pay a broker a
brokerage commission in excess of that which another broker might have charged
for effecting the same transaction, in recognition of the value of brokerage and
research services provided by the broker that effects the transaction.
<PAGE>
The Adviser may select brokers who, in addition to meeting the primary
requirements of execution and price, have furnished statistical or other factual
information and services, which in the opinion of the Board, are reasonable and
necessary to the decision making responsibilities of the Adviser for the Fund.
The services provided by these brokerage firms may also be used in dealing with
the portfolio transactions of the Adviser's other clients and not all such
services may be used by the Adviser in connection with the Fund. Those services
may include economic studies, industry studies, security analysis or reports,
sales literature of the Fund's portfolio securities and statistical services
furnished either directly to the Fund or to the Adviser. No effort is made in
any given circumstance to determine the value of these materials or services or
the amount by which they might have reduced expenses of the Adviser. The Fund
considers giving brokerage business to brokers who have assisted in the
distribution of shares of the Fund.
The Board has adopted procedures pursuant to Rule 17e-1 under the 1940 Act
that permit portfolio transactions to be executed through affiliated brokers. In
1997, 1998, and 1999 TBF used an affiliated broker, BFS, pursuant to
substantially the same procedures, and the Fund used BFS pursuant to its Rule
17e-1 procedures in 1999.
BFS is affiliated with the Fund because officers and Trustees of the Fund
and the Adviser are officers, Directors and shareholders of BFS. In addition,
BFS serves as the distributor for the Fund's shares in various jurisdictions
pursuant to a written agreement.
In 1997, 1998 and 1999 respectively, TBF paid a total of $115,779,
$109,726 and $36,059 in commissions to BFS. These figures represents 50%, 53%
and 57% of the total commissions paid by TBF, respectively. The percentage of
TBF's aggregate dollar amount of transactions involving the payment of
commissions effected through BFS was 74%, 72% and 75% respectively.
TBF paid brokerage Commissions of $131,155 in 1999, $207,140 in 1998 and
$231,239 in 1997. The level of trading in 1998 was similar to the level in 1997.
In 1999, the Fund paid $45,693 in commissions to BFS. This figure represents 67%
of the total commissions paid by the Fund. The percentage of the Fund's
aggregate dollar amount of transactions involving the payment of commissions
effected through BFS was 73%. The Fund paid $68,145 in brokerage commissions in
1999.
The aggregate amounts paid by TBF and the Fund was lower than the
commissions paid by the Fund's predecessor in the previous two years. The
decline was due to the fact that the net assets of TBF and the Fund declined
during the year and the amount of the trading by TBF and the Fund decreased.
The Adviser has other advisory clients which include individuals, trusts
and pension and profit sharing funds, some of which have similar investment
objectives to the Fund. As such, there will be times when the Adviser may
recommend purchases and/or sales of the same portfolio securities for the Fund
and its other clients. In such circumstances, it will be the policy of the
Adviser to allocate purchases and sales as well as expenses incurred in the
transactions among the Fund and its other clients in a manner which the Adviser
deems equitable, taking into consideration such factors as size of account,
concentration of holdings, investment objectives, tax status, cash availability,
purchase cost, holding period and other pertinent factors relative to each
account. Simultaneous transactions could adversely affect the ability of the
Fund to obtain or dispose of the full amount of a security which it seeks to
purchase or sell or the price at which such security can be purchased or sold.
<PAGE>
COMPUTATION OF NET ASSET VALUE
(See also "Shareholder Information Buying Shares" in the Prospectus). The
net asset value per share of the Fund is determined by dividing the total value
of the Fund's investments and other assets, less any liabilities, by the total
number of outstanding shares of the Fund. Net asset value per share is
determined at the close of regular trading on the New York Stock Exchange (the
"Exchange") (ordinarily 4:00 p.m. Eastern Time) on each day that the Exchange is
open and is effective as of the time of computation.
SHARE PURCHASES
(See also "Shareholder Information" in the Prospectus)
The Fund offers shares for sale on a continuous basis. The Fund does not
impose a sales charge (load) on the purchase of the Fund's shares. The offering
price of shares of the Fund is the net asset value per share next determined
after receipt by the Transfer Agent or a broker authorized by the Fund to
receive orders for the purchase of shares. The net asset value of shares can be
expected to fluctuate daily.
The minimum initial investment is $3,000 per investor. This investment may
be divided by a single investor among different investment accounts in the Fund
that total $3,000 in the aggregate or between accounts in the Fund and the
Berwyn Income Fund series of the Trust. Subsequent investments must be at least
$250 per account. The minimum initial investment for Individual Retirement
Accounts ("IRAs") is $1,000. The minimum is $250 for a spousal IRA. Subsequent
investments in IRAs must be at least $250. There are no minimum requirements for
pension and profit sharing plans or custodial accounts for minors.
The Fund reserves the right to reduce or waive the minimum purchase
requirements in certain cases where subsequent and continuing purchases are
contemplated.
DISTRIBUTOR
Shares of the Fund are offered to the public at net asset value, without
the imposition of a sales load. The Fund does not have a principal underwriter.
BFS, a broker-dealer registered with the SEC and a member of the NASD, is
a current distributor of the Fund's shares, pursuant to a selling agreement
which became effective on April 30, 1999 (the "Selling Agreement"). Under the
Selling Agreement, BFS is the non-exclusive agent in certain jurisdictions for
the Fund's continuous offering of shares and does not receive any compensation
from the Fund. The jurisdictions in which BFS is the distributor are Arizona,
Arkansas, Florida, Maryland, North Dakota, Nebraska, Texas, Vermont and West
Virginia.
<PAGE>
The Selling Agreement provides that it will continue in effect from year
to year only so long as such continuance is approved at least annually by the
Trust's Board of Trustees and by the vote of a majority of the Trustees who are
not parties to the agreement or interested persons of any such party by vote
cast in person at a meeting called for the purpose of voting on such approval.
The Selling Agreement will terminate automatically in the event of its
assignment.
REDEMPTION OF SHARES
(See "Redeeming of Shares" in the Prospectus).
The Fund will redeem all full and fractional shares of the Fund upon
receipt of a written request in proper form. The redemption price is the net
asset value per share next determined after receipt of proper notice of
redemption. In certain circumstances described in the Prospectus, the
shareholder could receive, upon redemption of Fund shares, portfolio securities
that were held by the Fund rather than cash. Shareholders liquidating their
holdings will receive upon redemption all dividends reinvested through the date
of redemption.
CALCULATION OF PERFORMANCE DATA
The average annual total returns of the Fund for one year, five years and
ten years ended December 31, 1999 are listed below:
One Year: -4.60%
Five Years: 5.85%
Ten Years: 8.38%
The one-year performance is for the period January 1, 1999 to December 31,
1999. The five-year period runs from January 1, 1995 to December 31, 1999 and
the ten year-period runs from January 1, l990 to December 31, 1999. To obtain
the performance listed above, the Fund computed its average total return for
each period of time. The Fund made this calculation by first determining the
total return for a period and then using an exponential function based upon the
number of years involved to obtain an average.
The total return for a period is calculated by determining the redeemable
value of a $1,000 initial investment made at the beginning of the period, with
dividends and capital gains reinvested on the reinvestment date, on the last day
of the period and dividing the value by $1,000. The average annual total return
for the period is calculated by taking the total return for the period and
determining the annual average by using an exponential function based upon the
number of years and any fraction thereof in the period.
<PAGE>
In addition to an average annual total return, the Fund calculates its
total returns on a calendar year basis. Listed below are the Fund's total
returns for each calendar year from 1985 through 1998:
January 1, 1985 - December 31, l985 23.6%
January 1, 1986 - December 31, l986 14.6%
January 1, 1987 - December 31, l987 2.9%
January 1, 1988 - December 31, l988 21.6%
January 1, 1989 - December 31, l989 16.5%
January 1, 1990 - December 31, 1990 -23.9%
January 1, 1991 - December 31, 1991 43.7%
January 1, 1992 - December 31, 1992 20.6%
January 1, 1993 - December 31, 1993 22.9%
January 1, 1994 - December 31, 1994 3.9%
January 1, 1995 - December 31, 1995 19.2%
January 1, 1996 - December 31, 1996 14.4%
January 1, 1997 - December 31, 1997 26.1%
January 1, 1998 - December 31, 1998 -18.90%
January 1, 1999 - December 31, 1999 -4.60%
The Fund calculates the total return for a calendar year by determining
the redeemable value of $1,000 investment made at the beginning of the year with
dividends and capital gains reinvested on the reinvestment date, on last day of
the year and dividing that value by $1,000.
Annual average total return and the total returns for calendar year are
based on historical performance and are not intended as an indication of future
performance.
GENERAL INFORMATION
History and Capital Structure
The Fund is a series of shares of The Berwyn Funds, a Delaware business
trust formed under the laws of the State of Delaware on February 4, 1999. The
Fund is the successor to TBF, a corporation organized under the laws of the
Commonwealth of Pennsylvania in February, 1983, which was a no-load,
non-diversified, open-end management investment company. In a reorganization
approved by vote of the shareholders of TBF and accomplished on April 30, 1999,
all the assets and liabilities of TBF were transferred to the Fund and the
shareholders of TBF became the shareholders of the Fund. Thereafter the Fund has
carried on the business of TBF.
The Fund has authorized an unlimited number of shares of beneficial
interest, without par value per share. Each share has equal voting, dividend,
distribution and liquidation rights. There are no conversion or preemptive
rights applicable to any shares of the Fund. All shares issued are fully paid
and nonassessable. Fund shares do not have cumulative voting rights.
<PAGE>
Custodian
PNC Bank, 400 Bellevue Parkway, Suite 108, Wilmington, DE 19809 is the
custodian for the Fund. The custodian holds all securities and cash owned by the
Fund and collects all dividends and interest due on the securities.
Independent Accountants
PricewaterhouseCoopers LLP, 30 South 17th Street, Philadelphia,
Pennsylvania are the independent accountants for the Fund.
PricewaterhouseCoopers LLP performs an annual audit of the financial statements
of the Fund.
Litigation
The Fund is not involved in any litigation or other legal proceedings.
DISTRIBUTION AND TAXES
Distributions of Net Investment Income
The Fund receives income generally in the form of dividends and interest on its
investments. This income, less expenses incurred in the operation of the Fund,
constitutes the Fund's net investment income from which dividends may be paid to
you. Any distributions by the Fund from such income will be taxable to you as
ordinary income, whether you receive them in cash or in additional shares.
Distributions of Capital Gains
The Fund may derive capital gains and losses in connection with sales or other
dispositions of its portfolio securities. Distributions from net short-term
capital gains will be taxable to you as ordinary income. Distributions from net
long-term capital gains will be taxable to you as long-term capital gain,
regardless of how long you have held your shares in the Fund. Any net capital
gains realized by the Fund generally will be distributed once each year, and may
be distributed more frequently, if necessary, to reduce or eliminate excise or
income taxes on the Fund.
Beginning in the year 2001 for shareholders in the 15% federal income tax
bracket (or in the year 2006 for shareholders in the 28% or higher bracket),
capital gain distributions from the Fund's sale of securities held for more than
five years may be subject to a reduced rate of tax.
Effect of Foreign Investments on Distributions
Most foreign exchange gains realized on the sale of debt securities are treated
as ordinary income by the Fund. Similarly, foreign exchange losses realized on
the sale of debt securities generally are treated as ordinary losses. These
gains when distributed will be taxable to you as ordinary income, and any losses
will reduce the Fund's ordinary income otherwise available for distribution to
you. This treatment could increase or decrease the Fund's ordinary income
distributions to you, and may cause some or all of the Fund's previously
distributed income to be classified as a return of capital.
<PAGE>
The Fund may be subject to foreign withholding taxes on income from certain
foreign securities. This, in turn, could reduce ordinary income distributions to
you.
Information on the Tax Character of Distributions
The Fund will inform you of the amount of your ordinary income dividends and
capital gain distributions at the time they are paid, and will advise you of
their tax status for federal income tax purposes shortly after the close of each
calendar year. If you have not held Fund shares for a full year, the Fund may
designate and distribute to you, as ordinary income or capital gain, a
percentage of income that is not equal to the actual amount of such income
earned during the period of your investment in the Fund.
Election to be Taxed as a Regulated Investment Company
Each series of the Trust is treated as a separate entity for federal income tax
purposes. The Fund has elected to be treated as a regulated investment company
under Subchapter M of the Internal Revenue Code (the "Code"). The Fund has
qualified as a regulated investment company for its most recent fiscal year, and
intends to continue to qualify during the current fiscal year. As a regulated
investment company, the Fund generally pays no federal income tax on the income
and gains it distributes to you. The board reserves the right not to maintain
the qualification of the Fund as a regulated investment company if it determines
such course of action to be beneficial to shareholders. In such case, the Fund
will be subject to federal, and possibly state, corporate taxes on its taxable
income and gains, and distributions to you will be taxed as ordinary dividend
income to the extent of the Fund's earnings and profits.
Excise Tax Distribution Requirements
To avoid federal excise taxes, the Code requires the Fund to distribute to you
by December 31 of each year, at a minimum, the following amounts: 98% of its
taxable ordinary income earned during the calendar year; 98% of its capital gain
net income earned during the twelve month period ending October 31; and 100% of
any undistributed amounts from the prior year. As permitted by the Code, the
Fund has elected to use its taxable year ending December 31, rather than October
31, to meet the requirement to distribute to you 98% of its capital net
incomeduring the year. The Fund intends to declare and pay these distributions
in December (or to pay them in January, in which case you must treat them as
received in December) but can give no assurances that its distributions will be
sufficient to eliminate all taxes.
Redemption of Fund Shares
Redemptions (including redemptions in kind) and exchanges of Fund shares are
taxable transactions for federal and state income tax purposes. If you redeem
your Fund shares, or exchange your Fund shares for shares of the Berwyn Income
Fund, Rodney Square Fund, or the Rodney Square Tax-Exempt Fund, the IRS will
require that you report any gain or loss on your redemption or exchange. If you
hold your shares as a capital asset, the gain or loss that you realize will be
capital gain or loss and will be long-term or short-term, generally depending on
how long you hold your shares.
<PAGE>
Beginning in the year 2001 for shareholders in the 15% federal income tax
bracket (or in the year 2006 for shareholders in the 28% or higher bracket),
gain from the sale of Fund shares held for more than five years may be subject
to a reduced rate of tax.
Any loss incurred on the redemption or exchange of shares held for six months or
less will be treated as a long-term capital loss to the extent of any long-term
capital gains distributed to you by the Fund on those shares.
All or a portion of any loss that you realize upon the redemption of your Fund
shares will be disallowed to the extent that you buy other shares in the Fund
(through reinvestment of dividends or otherwise) within 30 days before or after
your share redemption. Any loss disallowed under these rules will be added to
your tax basis in the new shares you buy.
U.S. Government Securities
States grant tax-free status to dividends paid to you from interest earned on
certain U.S. government securities, subject in some states to minimum investment
or reporting requirements that must be met by the Fund. Investments in
Government National Mortgage Association or Federal National Mortgage
Association securities, bankers' acceptances, commercial paper and repurchase
agreements collateralized by U.S. government securities generally do not qualify
for tax-free treatment. The rules on exclusion of this income are different for
corporations.
Dividends-Received Deduction for Corporations
If you are a corporate shareholder, you should note that no dividends were paid
out by the Fund for the most recent fiscal year and accordingly none that
qualified for the dividends-received deduction. You may be allowed to deduct
these qualified dividends, thereby reducing the tax that you would otherwise be
required to pay on these dividends. The dividends-received deduction will be
available only with respect to dividends designated by the Fund as eligible for
such treatment. All dividends (including the deducted portion) must be included
in your alternative minimum taxable income calculation.
Investment in Complex Securities
The Fund may invest in complex securities. These investments may be subject to
numerous special and complex tax rules. These rules could affect whether gains
and losses recognized by the Fund are treated as ordinary income or capital
gain, accelerate the recognition of income to the Fund (possibly causing the
Fund to sell securities to raise the cash for necessary distributions) and/or
defer the Fund's ability to recognize losses and, in limited cases, subject the
Fund to U.S. federal income tax on income from certain foreign securities. These
rules may affect the amount, timing or character of the income distributed to
you by the Fund.
<PAGE>
FINANCIAL STATEMENTS
The Fund's audited financial statements and notes thereto for the year
ended December 31, 1999 and the report of PricewaterhouseCoopers LLP, the Fund's
independent accountants, on such financial statements (the "Report") which are
included in the Fund's 1999 Annual Report to Shareholders (the "Annual Report")
are incorporated by reference in this SAI by amendment to the Trust's
registration statement. A copy of the Annual Report accompanies this SAI and an
investor may obtain a copy of the Annual Report by writing to the Fund at the
address on the cover of this SAI or calling (800) 992-6757.
<PAGE>
APPENDIX A
STANDARD & POOR'S BOND RATINGS
Standard & Poor's Ratings Group gives ratings to bonds that range from AAA
to D. Definitions of these ratings are set forth below. The Fund may invest in
bonds with any of these ratings.
AAA Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A Debt rated A has a strong capacity to pay interest and principal although
it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories.
BB, B, CCC, CC
Debt rated BB, B, CCC and CC is regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. BB indicates the lowest degree
of speculation and CC the highest degree to speculation. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse
conditions.
C The rating C is reserved for income bonds on which no interest is being
paid.
D Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
<PAGE>
APPENDIX B
MOODY'S BOND RATINGS
Moody's Investor's Service, Inc. gives ratings to bonds that range from
Aaa to D. Definitions of these ratings are set forth below. The Fund may
invest in bonds with any of these ratings.
Aaa These bonds are judged to be of the best quality. They carry the smallest
degree of investment risk. Interest payments are protected by a large or
by an exceptionally stable margin and principal is secure.
Aa These bonds are judged to be of high quality by all standards. They are
rated lower than the best bonds because margins of protection may not be
as large as in Aaa securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A These are bonds which possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
Baa These bonds are considered as medium grade obligations, i.e., they are
neither highly protected nor poorly secured. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba These are bonds judged to have speculative elements; their future cannot
be considered as well assured. Uncertainty of position characterizes bonds
in this class.
B These bonds generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other
terms of the contract over any long period of time may be small.
Caa These are bonds of poor standing. Such issues may be in default or there
may be present elements of danger with respect to principal or interest.
Ca These bonds represent obligations which are speculative in a high degree.
Such issues are often in default or have other market shortcomings.
C These are the lowest rated class of bonds and issues so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.
<PAGE>
THE BERWYN FUNDS
Berwyn Income Fund, a Series of The Berwyn Funds
Shareholder Services
c/o PFPC Inc.
P.O. Box 8987
Wilmington, DE 19899
1 (800) 992-6757
STATEMENT OF ADDITIONAL INFORMATION
May 1, 2000
This Statement of Additional Information ("SAI") is not a Prospectus. The
SAI is a document that relates to the Prospectus of the Berwyn Income Fund
series (the "Fund") of The Berwyn Funds (the "Trust") dated May 1, 2000 and
contains additional information regarding the Fund. This SAI should be read in
conjunction with the Prospectus. The Prospectus may be obtained by writing to
the Fund at the above address or calling the 800 number. The audited financial
statements of the Fund and notes thereto for the year ended December 31, 1999,
and the unqualified report of PricewaterhouseCoopers LLP, the Fund's independent
accountants, on such financial statements (the "Report"), included in the Fund's
1999 Annual Report to Shareholders are incorporated by reference in this SAI by
amendment to the Trust's registration statement.
<PAGE>
TABLE OF CONTENTS
Investment Policies and Risk Factors..................................... 1
Investment Restrictions.................................................. 3
Investment Advisory Arrangements......................................... 5
Expense Limitation....................................................... 5
Trustees and Officers.................................................... 6
Code of Ethics........................................................... 8
Ownership of the Fund.................................................... 8
Portfolio Transactions and Brokerage Commissions......................... 8
Computation of Net Asset Value........................................... 9
Share Purchases.......................................................... 10
Distributor.............................................................. 10
Redemption of Shares..................................................... 11
Calculation of Performance Data.......................................... 11
General Information...................................................... 12
Distribution and Taxes................................................... 13
Financial Statements..................................................... 16
Appendix A - Standards & Poor's Bond Ratings
Appendix B - Moody's Bond Ratings
<PAGE>
INVESTMENT POLICIES AND RISK FACTORS
(See also "Investment Objectives, Principal Investment Strategies and Related
Risks" in the Fund's Prospectus.)
The Fund is a no-load, diversified series of shares of The Berwyn Funds,
an open-end, management investment company. Its investment objective is to
provide investors with current income while seeking to preserve capital by
taking what the Fund considers to be reasonable risks. In pursuing its
investment objective, the Fund may also offer, as a secondary consideration, the
potential for capital appreciation. To achieve its objective, the Fund invests
in investment grade corporate debt securities, securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities, high yield, high risk
corporate debt securities (also known as "junk bonds"), unrated corporate debt
securities, and preferred and common stocks. The Adviser determines the
percentage of each category of securities to purchase and hold based upon the
prevailing economic and market conditions. This means, that the Fund may invest
up to 100% of its net assets in high yield, high risk corporate debt securities.
The Fund, however, may not invest in common stock when the value of the common
stock in the Fund's portfolio equals or exceeds 30% of the value of the Fund's
net assets.
Securities rated BBB or higher by Standard & Poor's Rating Group ("S&P")
or Baa or higher by Moody's Investors Service, Inc. ("Moody's") are considered
investment grade corporate debt securities. Securities rated lower than BBB or
Baa by these services are considered high yield securities. Appendices A and B
list the definitions of the S&P and Moody's bond ratings.
The Fund may invest in fixed income securities that are not rated. The
Fund will invest only in unrated securities that have a creditworthiness, in the
opinion of the Adviser, that is equal to or better than the creditworthiness of
fixed income securities with S&P ratings of CC or Moody's ratings of Caa.
The Fund may also purchase certain debt securities that have not been
registered with the U.S. Securities and Exchange Commission (the "SEC") under
the Securities Act of 1933, as amended ("1933 Act"), and are restricted from
sale to the general public. The Fund will purchase these restricted securities
from the issuer or qualified institutional buyers, and will sell these
restricted securities, exclusively in transactions that are exempt pursuant to
Rule 144A under the 1933 Act. The Fund will limit its investment in such
restricted securities to no more than 10% of the value of its net asset.
There are risks associated with investing in Rule 144A Securities. The
securities may become illiquid if qualified institutional buyers are not
interested in acquiring the securities. Although the Rule 144A Securities may be
resold in negotiated transactions, the price realized from these sales could be
less than the price originally paid by the Fund or less than what may be
considered the fair value of such securities. Furthermore, if such securities
are required to be registered under the securities laws of one or more
jurisdictions before being resold, the Fund may be required to bear the expense
of registration.
<PAGE>
In an effort to minimize the risks associated with these securities, the
Fund will purchase only Rule 144A Securities of companies that have publicly
traded securities outstanding, have been in business a minimum of five years,
and have a market capitalization of at least $100 million. Finally, the Fund
will purchase Rule 144A Securities only in situations where the Adviser has a
reasonable expectation that the securities will be registered with the SEC
within six months.
In addition to corporate debt securities, the Fund may invest in the
securities issued or guaranteed by the U.S. Government and its agencies and in
preferred and common stocks. The securities of the U.S. Government in which the
Fund invests are U.S. Treasury bonds and notes. The Fund may also purchase debt
securities issued by U.S. Government agencies or by an instrumentality of the
U.S. Government. Some of the U.S. Government agencies that issue or guarantee
securities include, among others, the Export-Import Bank of the United States,
Farmers Home Administration, Federal Housing Administration, Maritime
Administration, Small Business Administration and the Tennessee Valley
Authority. An instrumentality of the U. S. Government is a government agency
organized under Federal charter with government supervision. Instrumentalities
issuing or guaranteeing securities include, among others, the Federal Home Loan
Banks, the Federal Land Banks, Central Bank for Cooperatives, Federal
Intermediate Credit Banks and the Federal National Mortgage Association.
U.S. Treasury bonds and notes are backed by the full faith and credit of
the U.S. Government. Securities issued by U.S. Government agencies or
instrumentalities may or may not be backed by the full faith and credit of
the United States. In the case of securities not backed by the full faith
and credit of the United States, an investor must look principally to the
agency or instrumentality for repayment.
The Fund invests in preferred stocks that, in the opinion of the Adviser,
are offering an above average yield in comparison to preferred stocks of the
same quality or in preferred stocks offering a potential for capital
appreciation. The Fund may also purchase preferred stocks that are restricted
securities subject to the limitations under Rule 144A described above.
The Fund invests in common stocks that it considers to be selling at
undervalued prices. The investment approach of the Fund may be deemed
"contrarian" in its selection of common stocks due to the fact that this
approach may lead the Fund to select stocks not recommended by other investment
advisers or brokerage firms. The Fund, however, will purchase only common stocks
that pay cash dividends and will not purchase additional common stocks when
common stocks comprise 30% or more of the Fund's net assets.
Aside from the investments listed above, the Fund may at times, for
temporary defensive purposes, invest all or a portion of its assets in no-load
money market funds, savings accounts and certificates of deposit of domestic
banks with assets in excess of $1,000,000, commercial paper rated A-1,
repurchase agreements or Treasury bills, and may hold cash.
<PAGE>
Investment by the Fund in a no-load money market fund will result in the
Fund paying a management fee and other fund expenses on the money invested in
such fund in addition to the operating expenses of the Fund.
The Fund may invest in real estate investment trusts ("REITs") and
repurchase agreements. The Fund limits investment in REITs to 10% of its net
assets and investment in repurchase agreements to 5% of its net assets.
REITs are companies that invest their capital in real estate, long and
short term mortgages and construction loans. These companies normally do not pay
federal income tax but distribute their income to their shareholders who become
liable for the tax. The Fund invests in REITs that generate income and have a
potential for capital appreciation. Some REITs own properties and earn income
from leases and rents. These types of REITs are termed "Equity" REITs. Other
REITs hold mortgages and earn income from interest payments. These REITs are
termed "Mortgage" REITs. Finally, there are "Hybrid" REITs that own properties
and hold mortgages. The Fund may invest in any of the three types of REITs and
may purchase the common stocks, preferred stocks or bonds issued by REITs.
There are risks in investing in REITs. The property owned by a REIT could
decrease in value and the mortgages and loans held by a REIT could become
worthless. The Adviser, however, monitors the investment environment and the
Fund's investments as a means of lessening risks. As of December 31, 1999, 6.7%
of the Fund's net assets were invested in REITs.
In a repurchase agreement, a seller of securities, usually a banking
institution or securities dealer, sells securities to the Fund and agrees with
the Fund at the time of sale to repurchase the securities from the Fund at a
mutually agreed upon time and price. The Fund intends to enter into repurchase
agreements only with established banking institutions that deal in U.S. Treasury
bills and notes. The Fund intends to invest mostly in overnight repurchase
agreements. In the event of bankruptcy of the seller of a repurchase agreement
or the failure of the seller to repurchase the underlying securities as agreed
upon, the Fund could experience losses. Such losses could include a possible
decline in the value of the underlying securities during the period the Fund
seeks to enforce its rights thereto and a possible loss of all or part of the
income from such securities. The Fund would also incur additional expenses
enforcing its rights. As of December 31, 1999, the Fund had no assets invested
in repurchase agreements.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental policies of
the Fund. Fundamental policies may not be changed without approval by vote of a
majority of the Fund's outstanding voting securities. As used in this SAI and in
the Prospectus, "a majority of the Fund's outstanding voting securities" means
the lesser of (a) more than 50% of the Fund's outstanding shares, or (b) at
least 67% of the shares present or represented by proxy at a meeting of
shareholders provided that the holders of more than 50% of the Fund's
outstanding shares are present in person or represented by proxy.
<PAGE>
When investing its assets, the Fund will not:
(1) invest more than 5% of the value of its total assets in the securities
of any one issuer or purchase more than 10% of the outstanding voting
securities, debt or preferred stock of any one issuer. This restriction
does not apply to obligations issued or guaranteed by the U. S.
Government, its agencies or instrumentalities;
(2) invest more than 25% of the value of its total assets in the
securities of issuers in any one industry;
(3) lend money, provided that for purposes of this restriction, the
acquisition of publicly distributed corporate bonds, and investment in
U.S. government obligations, short-term commercial paper, certificates of
deposit and repurchase agreements shall not be deemed to be the making of
a loan;
(4) buy or sell real estate and real estate mortgage loans, commodities,
commodity futures contracts, puts and calls and straddles;
(5) underwrite securities of other issuers, except as the Fund may be
deemed to be an underwriter under the Securities Act of 1933, as amended,
in connection with the purchase and sale of portfolio securities in
accordance with its objectives and policies;
(6) make short sales or purchase securities on margin;
(7) borrow money, except that the Fund may borrow up to 5% of the value of
its total assets at the time of such borrowing from banks for temporary or
emergency purposes (the proceeds of such loans will not be used for
investment or to purchase securities, but will be used to pay expenses);
(8) invest for the purposes of exercising control or management;
(9) invest in restricted securities (securities that must be registered
under the Securities Act of 1933, as amended, before they may be offered
and sold to the public, except that the Fund will be permitted to purchase
restricted securities that are eligible for resale pursuant to Rule 144A
under the Securities Act of 1933, as amended);
(10) participate in a joint investment account; and
(11) issue senior securities.
The Fund has also adopted certain investment restrictions that are not
fundamental policies. These restrictions are that the Fund will not invest in
real estate limited partnerships or oil, gas or other mineral leases and any
investments in warrants will not exceed 5% of the Fund's net assets.
Restrictions that are not fundamental policies may be changed by a vote of the
majority of the Board of Trustees. If any of these non-fundamental restrictions
are changed, however, the Fund will give shareholders at least 60 days' written
notice.
<PAGE>
INVESTMENT ADVISORY ARRANGEMENTS
(See also "Management and Organization" in the Fund's Prospectus)
The Killen Group, Inc., is the investment adviser (the "Adviser") to the
Fund. Robert E. Killen is Chairman, CEO and sole shareholder of the Adviser. He
is also President and Chairman of the Board of Trustees of the Trust. Edward A.
Killen, II, the portfolio manager of the Fund, is Vice President, Secretary and
a Director of the Adviser.
The Adviser provides the Fund with investment management services. Under
the Contract for Investment Advisory Services between the Trust, on behalf of
the Fund, and the Adviser (the "Contract"), dated April 28, 1999, the Adviser
provides the Fund with advice and recommendations with respect to investments,
investment policies, the purchase and sale of securities and the management of
the Fund's resources. In addition, employees of the Adviser administer the
operation of the Fund. These employees prepare and maintain the accounts, books
and records of the Fund, calculate the daily net asset value per share each day
the New York Stock Exchange is open, prepare and file the documents required of
the Fund under Federal and state laws and prepare all shareholder reports.
The Contract provides that it will continue in effect, after the initial
two-year term of the Contract, from year to year if continuation is specifically
approved annually by either a majority of the Board of Trustees or a vote of a
majority of the outstanding voting securities of the Fund. Continuance of the
Contract must also be approved annually by a majority of Trustees who are not
parties to the Contract or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval. The Fund may
terminate the Contract on sixty days' written notice to the Adviser, without
payment of any penalty, provided such termination is authorized by the Board of
Trustees or by a vote of a majority of the outstanding voting securities of the
Fund. The Adviser may terminate the Contract on sixty days' written notice to
the Fund without payment of any penalty. The Contract will be automatically and
immediately terminated in the event of its assignment by the Adviser.
As compensation for its investment management services to the Fund under
the Contract, the Adviser is entitled to receive monthly compensation at the
annual rate of 0.50% of the average daily net assets of the Fund. The fee is
computed daily by multiplying the net assets for a day by the appropriate
percentage and dividing the result by 365. At the end of the month, the daily
fees are added and the sum is paid to the Adviser.
The Fund paid the Adviser $233,125 in fees in 1999. BIF, the predecessor
of the Fund, paid the Adviser $148,403 in fees in 1999, $789,024 in fees in 1998
and $806,425 in 1997.
EXPENSE LIMITATION
The Contract provides that the Adviser's fee payable by the Fund will be
reduced in any fiscal year by any amount necessary to prevent Fund expenses and
liabilities (excluding taxes, interest, brokerage commissions and extraordinary
expenses, determined by the Fund or the Adviser, but inclusive of the Adviser's
fee payable by the Fund) from exceeding 2% of the average daily net assets of
the Fund. In any month that the Fund expenses and liabilities exceed 2%, the
Adviser's fee will be reduced so that expenses and liabilities will be 2%.
Although the Fund expects to maintain expenses within 2% of its average daily
net assets, the Adviser will not be responsible for additional expenses
exceeding its advisory fee payable by the Fund.
<PAGE>
Once the net assets of the Fund
exceed $100 million, the expense limitation will be reduced to 1.5% of the
average daily net assets of the Fund. The expense limitation has not reduced the
Adviser's fee since 1988. In 1999 the Fund's total annual operating expenses
amounted to 0.77% the average daily net assets of the Fund.
TRUSTEES AND OFFICERS
The Board of Trustees oversees the management of the business of the Trust
and the Fund. The Board is elected initially by shareholders and thereafter
Trustees are elected by the Board or the shareholders from time to time in
accordance with the Trust's Agreement and Declaration of Trust and By-Laws. The
Board of Trustees sets broad policies for the Fund and has responsibility for
supervision of the operations of the Fund. The daily operations of the Fund are
administered by employees of the Adviser under the Board's supervision.
The Trustees and executive officers of the Trust and their ages and
principal occupations for the past five years are set forth below:
Name, Age, Position
and Address Principal Occupation for the Past Five Years
*Robert E. Killen Director of Westmoreland Coal Co. (a mining
(59) company) since
President & Trustee July 1996. Director and shareholder, Berwyn
1199 Lancaster Financial Services
Avenue Corp. ("BFS"), a financial services company
Berwyn, Pennsylvania (registered as a broker-dealer with the SEC
since December 1993 and a member of the National
Association of Securities Dealers, Inc. (the "NASD") since
July 1994) since October 1991. President and Director of
the Berwyn Income Fund, Inc. ("BIF"), the predecessor of
the Fund, and The Berwyn Fund, Inc. ("TBF") (both
registered investment companies managed by the Adviser)
from December 1986 to April 1999 and from February 1983 to
April 1999, respectively. Chairman, Chief Executive Officer
and sole shareholder of the Adviser (an investment advisory
firm) since April 1996. President, Treasurer, Director and
sole shareholder of the Adviser from September 1982 to
March 1996.
Denis P. Conlon (52) Director of BIF and TBF from June 1992 to April
Trustee 1999. President and Chief Executive Officer of
1282 Farm Road CRC Industries (a worldwide manufacturer) since
Berwyn, Pennsylvania September 1996. Vice President, Corporate
Development, Berwind Corporation (diversified manufacturing
and financial company) from 1990 to September 1996.
<PAGE>
Deborah D. Dorsi Director of BIF and TBF from April 1998 to
(44) April 1999. Retired industry executive since
Trustee 1994. Director Worldwide Customer Support,
1801 Stanbridge Kulick Soffa Industries, Inc. (Semi Conductor
Street Equipment Manufacturer) from 1993 to 1994.
Norristown, Corporate Account Manager for Kulick & Soffa
Pennsylvania Industries, Inc. prior to 1993.
*Kevin M. Ryan (52) President, Treasurer, Director and shareholder of BFS since
Secretary-Treasurer October 1991. Director of BIF from December 1986
1199 Lancaster to January 1995. Secretary and Treasurer of TBF from
Avenue February 1983 to April 1999 and BIF from December 1986 to
Berwyn, Pennsylvania April 1999. Director of TBF from February 1983 to
March 1999. Legal counsel to the Adviser since
September 1985.
* Robert E. Killen and Kevin M. Ryan are "interested persons" of the Fund as
defined in the Investment Company Act of 1940, as amended (the "1940 Act").
Robert E. Killen is an Officer, Director and sole shareholder of the Advisor.
Robert E. Killen is also a Director of BFS, a registered broker-dealer, and owns
one-third of its outstanding shares. Edward A. Killen, II, the portfolio manager
of the Fund, is an officer and Director of the Adviser. He is also an officer ,
Director and the owner of one third of the outstanding shares of BFS. Kevin M.
Ryan is legal counsel to the Adviser and an officer, Director and owner of
one-third of the outstanding shares of BFS. In addition, Robert E. Killen and
Edward A. Killen, II, are brothers and Kevin M. Ryan is brother-in-law to both.
BFS serves as the distributor for the Fund's shares in certain jurisdictions.
Mr. Conlon and Ms. Dorsi are the Trustees of the Trust who are not "interested
persons" of the Trust as defined in the 1940 Act (the "Independent Trustees")
and are paid a fee of $800 for each Board or Committee meeting attended and are
reimbursed for any travel expenses by the Trust. If a Board and Committee
meetings are held on the same day, the Independent Trustees receive only one
$800 fee for all meetings on the same day. The Trust has not adopted a pension
or retirement plan or any other plan that would afford benefits to its Trustees.
The Trust paid Ms. Dorsi and Mr. Conlon each $3,200 for the Trust's initial
fiscal year ending December 31, 1999. The Trust is not a part of any fund
complex.
Officers of the Trust are not paid compensation by the Trust or any fund complex
for their work as officers and no fees are paid by the Trust or any fund complex
to the Trustees that are not Independent Trustees for the performance of their
duties. (See "Management and Organization" in the Prospectus for a discussion of
management responsibilities of the Board and officers.)
<PAGE>
CODE OF ETHICS
The Fund and its Adviser have adopted Codes of Ethics ("Codes") that apply
to the personal securities transactions of the Trustees and Officers of the Fund
and to the personal securities transactions of the Directors, Officers and
employees of the Adviser. The Codes allow these individuals to invest in
securities, even securities purchased and held by the Fund, if certain
restrictions are met.
The Fund's and the Adviser's Codes of Ethics have been filed as part of a
registration statement with the SEC. The Codes may be reviewed and copied at the
SEC's Public Reference Room in Washington, D.C. Anyone who is interested may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-202-942-8090. These Codes of Ethics are available on the EDGAR Database
on the SEC's Internet site at http:\\www.sec.gov and copies of them may be
obtained, after paying a duplicating fee, by writing to the SEC's Public
Reference Section, Washington, D.C. 20549-0102 or sending a request to the
following e-mail address: [email protected].
OWNERSHIP OF THE FUND
As of March 31, 2000, there were 4,938,593 shares of the Fund outstanding.
Charles Schwab & Co. ("Schwab"), 101 Montgomery Street, San Francisco, CA was
the record owner of 38% of the outstanding shares. Although Schwab is the record
owner of more than 25% of the outstanding shares of the Fund, Schwab cannot be
considered to control the Fund. Schwab holds the shares in nominee name for its
customers and does not have the power to vote the shares or to sell them.
National Financial Services Corp. ("National"), One World Trade Center, 200
Liberty Street, New York, NY was the record owner of 11% of the outstanding
shares. National holds the shares in nominee name for its customers and does not
have the power to vote or sell the shares. The records of the Fund do not
indicate that any individual owns more than 5% of the Fund's outstanding shares.
As of March 31, 2000, the Trustees and Officers of the Fund, as a group, owned
beneficially and of record 136,682 shares of the Fund, which constituted 3% of
the outstanding shares of the Fund.
PORTFOLIO TRANSACTIONS AND BROKERAGE COMMISSIONS
Subject to policy established by the Trust's Board of Trustees, the
Adviser is responsible for the Fund's portfolio decisions and the buying and
selling of the Fund's portfolio securities. In executing such transactions, the
Adviser will seek to obtain the best net results for the Fund, taking into
account such factors as price (including the applicable brokerage commission or
dealer spread), size of order, difficulty of execution and operational
facilities and capabilities of the firm involved. While the Adviser generally
seeks reasonably competitive commission rates, the Adviser is authorized to pay
a broker a brokerage commission in excess of that which another broker might
have charged for effecting the same transaction, in recognition of the value of
brokerage and research services provided by the broker that effects the
transaction.
<PAGE>
The Adviser may select brokers who, in addition to meeting the primary
requirements of execution and price, have furnished statistical or other factual
information and services which, in the opinion of the Board, are reasonable and
necessary to the Fund's normal operations. The services provided by these
brokerage firms may also be used in dealing with the portfolio transactions of
the Adviser's other clients, and not all such services may be used by the
Adviser in connection with the Fund. Those services may include economic
studies, industry studies, security analysis or reports, sales literature and
statistical services furnished either directly to the Fund or to the Adviser.
The Adviser makes no effort in any given circumstance to determine the value of
these materials or services or the amount they might have reduced expenses of
the Adviser. The Fund considers giving brokerage business to brokers who have
assisted in the distribution of shares of the Fund.
The Board has adopted procedures pursuant to Rule 17e-1 under the 1940 Act
that permit portfolio transactions to be executed through affiliated brokers. In
1997, 1998 and 1999 BIF used an affiliated broker, BFS, pursuant to
substantially the same procedures, and the Fund used BFS pursuant to its Rule
17e-1 procedures in 1999.
BFS is affiliated with the Fund because officers and a Trustee of the Fund
and the Adviser are officers, Directors and shareholders of BFS. In addition,
BFS serves as the distributor for the Fund's shares in various jurisdictions
pursuant to a written agreement.
In 1997, 1998 and 1999 BIF paid a total of $193,023, $185,795 and $30,194
in commissions to BFS, respectively. These figures represent 77%, 85% and 94% of
the total commissions paid by BIF, respectively. The percentage of BIF's
aggregate dollar amount of transactions involving the payment of commissions
effected through BFS was 74%, 88% and 82% respectively.
BIF paid brokerage commissions of $31,992 in 1999, $217,957 in 1998 and
$247,987 in 1997.
In 1999, the Fund paid $53,558 in commissions to BFS. This figure
represents 88% of the commissions paid by the Fund. The percentage of the Fund's
aggregate dollar amount of transactions involving the payment of commissions
effected through BFS was 65%.
The Fund paid commissions of $93,074 in 1999. The aggregate amounts paid
by BIF and the Fund was lower than the commissions paid by the Fund's
predecessor in the previous two years. The decline was due to the fact that the
net assets of BIF and the Fund declined during the year and the amount of the
trading by BIF and the Fund decreased.
The Adviser has other advisory clients which include individuals, trusts
and pension and profit sharing funds, and an investment company, some of which
have similar investment objectives to the Fund. As such, there will be times
when the Adviser may recommend purchases and/or sales of the same portfolio
securities for the Fund and its other clients. In such circumstances, it will be
the policy of the Adviser to allocate purchases and sales as well as expenses
incurred in the transactions among the Fund and its other clients in a manner
which the Adviser deems equitable, taking into consideration such factors as
size of account, concentration of holdings, investment objectives, tax status,
cash availability, purchase cost, holding period and other pertinent factors
relative to each account.
<PAGE>
Simultaneous transactions could adversely affect the
ability of the Fund to obtain or dispose of the full amount of a security which
it seeks to purchase or sell or the price at which such security can be
purchased or sold.
COMPUTATION OF NET ASSET VALUE
(See also "Shareholder Information - Buying Shares" in the Prospectus.)
The net asset value per share of the Fund is determined by dividing the
total value of the Fund's investments and other assets, less any liabilities, by
the total number of outstanding shares of the Fund. Net asset value per share is
determined as of the close of regular trading on the New York Stock Exchange
(the "Exchange") (ordinarily 4:00 p.m. Eastern Time) on each day that the
Exchange is open and is effective as of the time of computation.
SHARE PURCHASES
(See also "Shareholder Information" in the Prospectus.)
The Fund offers shares for sale on a continuous basis. The Fund does not
impose a sales charge (load) on the purchase of the Fund's shares. The offering
price of shares of the Fund is the net asset value per share next determined
after receipt by the Transfer Agent or a broker authorized by the Fund to
receive orders for the purchase of shares. The net asset value of shares can be
expected to fluctuate daily.
The minimum initial investment is $3,000 per investor. This investment may
be divided by a single investor among different investment accounts in the Fund
that total $3,000 in the aggregate or between accounts in the Fund and the
Berwyn Fund series of the Trust. Subsequent investments must be at least $250
per account. The minimum initial investment for Individual Retirement Accounts
("IRAs") is $1,000. The minimum is $250 for a spousal IRA. Subsequent
investments in IRAs must be at least $250. There are no minimum requirements for
pension and profit sharing plans or custodial accounts for minors.
The Fund reserves the right to reduce or waive the minimum purchase
requirements in certain cases where subsequent and continuing purchases are
contemplated.
DISTRIBUTOR
(See also "Distributor" in the Prospectus.)
Shares of the Fund are offered to the public at net asset value, without
the imposition of a sales load. The Fund does not have a principal underwriter.
BFS, a broker-dealer registered with the SEC and a member of the NASD, is
a current distributor of the Fund's shares, pursuant to a selling agreement
<PAGE>
which became effective April 30, 1999 (the "Selling Agreement"). Under the
Selling Agreement, BFS is the non-exclusive agent in certain jurisdictions for
the Fund's continuous offering of shares and does not receive any compensation
from the Fund. The jurisdictions in which BFS is the distributor are Arizona,
Arkansas, Florida, Maryland, North Dakota, Nebraska, Texas, Vermont and West
Virginia.
The Selling Agreement provides that it will continue in effect from year
to year only so long as such continuance is approved at least annually by the
Trust's Board of Trustees and by the vote of a majority of the Trustees who are
not parties to the agreement or interested persons of any such party by vote
cast in person at a meeting called for the purpose of voting on such approval.
The Selling Agreement will terminate automatically in the event of its
assignment.
REDEMPTION OF SHARES
(See also "Redeeming Shares" in the Fund's Prospectus.)
The Fund will redeem all full and fractional shares of the Fund upon
receipt of a written request in proper form. The redemption price is the net
asset value per share next determined after receipt of proper notice of
redemption. In certain circumstances described in the Prospectus, the
shareholder could receive, upon redemption of Fund shares, portfolio securities
that were held by the Fund rather than cash. Shareholders liquidating their
holdings will receive upon redemption all dividends reinvested through the date
of redemption.
CALCULATION OF PERFORMANCE DATA
Yield
The Fund's yield for the month ended December 31, 1999 was 8.92%.
The yield was determined based upon the net investment income per share
for the period December 1 to December 31, 1999. Expenses accrued for the period
were subtracted from the interest and dividends accrued and the remainder was
divided by daily average number of shares multiplied by maximum offering price
per share. The number then obtained was annualized.
Total Return
The average annual total return of the Fund for one year, five years and
ten years ended December 31, 1999 are listed below:
One Year: 0.83%
Five Years: 8.51%
Ten Years: 10.05%
The period of time for one year's performance is from January 1, 1999 to
December 31, 1999. The dates for the five-year period are January 1, 1995 to
December 31, 1999 and for the ten year period are from January 1, 1990 to
December 31, 1999. To obtain the performance listed above, the Fund computed its
average total return for each period of time. The Fund made this calculation by
first determining the total return for a period and then using an exponential
function based upon the number of years involved to obtain an average.
<PAGE>
The total return for a period is calculated by determining the redeemable
value of $1,000 initial investment made at the beginning of the period, with
dividends and capital gains reinvested on the reinvestment date, on the last day
of the period and dividing that value by $1,000. The average annual total return
for the period is calculated by taking the total return for the period and
determining the annual average by using an exponential function based upon the
number of years and any fraction thereof in the period.
In addition to an average annual total return, the Fund calculates its
total returns on a calendar year basis. Listed below are the Fund's total
returns for the calendar years 1988 through 1999:
January 1, 1988 - December 31, l988 11.3%
January 1, 1989 - December 31, l989 11.9%
January 1, 1990 - December 31, 1990 -0.13%
January 1, 1991 - December 31, 1991 23.0%
January 1, 1992 - December 31, 1992 21.7%
January 1, 1993 - December 31, 1993 16.9%
January 1, 1994 - December 31, 1994 -1.1%
January 1, 1995 - December 31, 1995 21.0%
January 1, 1996 - December 31, 1996 14.0%
January 1, 1997 - December 31, 1997 13.4%
January 1, 1998 - December 31, 1998 -4.57%
January 1, 1999 - December 31, 1999 0.83%
The Fund calculates the total return for a calendar year by determining
the redeemable value of $1,000 investment made at the beginning of the year with
dividends and capital gains reinvested on the reinvestment date, on last day of
the year and dividing that value by $1,000.
Annual average total return and the total returns for calendar year are
based on historical performance and are not intended as an indication of future
performance.
GENERAL INFORMATION
History and Capital Structure
The Fund is a series of shares of The Berwyn Funds, a Delaware business
trust formed under the laws of the State of Delaware on February 4, 1999. The
Fund is the successor to BIF, a corporation organized under the laws of the
Commonwealth of Pennsylvania on December 26, 1986, which was a no-load,
diversified, open-end management investment company. In a reorganization
approved by vote of the shareholders of BIF and accomplished on April 30, 1999,
all the assets and liabilities of BIF were transferred to the Fund and the
shareholders of BIF became the shareholders of the Fund. Thereafter the Fund has
carried on the business of BIF.
<PAGE>
The Fund has authorized an unlimited number of shares of beneficial
interest, without par value per share. Each share has equal voting, dividend,
distribution and liquidation rights. There are no conversion or preemptive
rights applicable to any shares of the Fund. All shares issued are fully paid
and nonassessable. Fund shares do not have cumulative voting rights.
Custodian
PFPC Trust Company, 400 Bellevue Parkway, Suite 108, Wilmington, DE 19809
is the custodian of the Fund. The custodian holds all securities and cash owned
by the Fund and collects all dividends and interest due on the securities.
Independent Accountants
PricewaterhouseCoopers LLP, 30 South 17th Street, Philadelphia,
Pennsylvania are the independent accountants for the Fund.
PricewaterhouseCoopers LLP performs an annual audit of the financial statements
of the Fund.
Litigation
The Fund is not involved in any litigation or other legal proceedings.
DISTRIBUTION AND TAXES
Distributions of Net Investment Income
The Fund receives income generally in the form of dividends and interest on its
investments. This income, less expenses incurred in the operation of the Fund,
constitutes the Fund's net investment income from which dividends may be paid to
you. Any distributions by the Fund from such income will be taxable to you as
ordinary income, whether you receive them in cash or in additional shares.
Distributions of Capital Gains
The Fund may derive capital gains and losses in connection with sales or other
dispositions of its portfolio securities. Distributions from net short-term
capital gains will be taxable to you as ordinary income. Distributions from net
long-term capital gains will be taxable to you as long-term capital gain,
regardless of how long you have held your shares in the Fund. Any net capital
gains realized by the Fund generally will be distributed once each year, and may
be distributed more frequently, if necessary, to reduce or eliminate excise or
income taxes on the Fund.
Beginning in the year 2001 for shareholders in the 15% federal income tax
bracket (or in the year 2006 for shareholders in the 28% or higher bracket),
capital gain distributions from the Fund's sale of securities held for more than
five years may be subject to a reduced rate of tax.
<PAGE>
Effect of Foreign Investments on Distributions
Most foreign exchange gains realized on the sale of debt securities are treated
as ordinary income by the Fund. Similarly, foreign exchange losses realized on
the sale of debt securities generally are treated as ordinary losses. These
gains when distributed will be taxable to you as ordinary income, and any losses
will reduce the Fund's ordinary income otherwise available for distribution to
you. This treatment could increase or decrease the Fund's ordinary income
distributions to you, and may cause some or all of the Fund's previously
distributed income to be classified as a return of capital.
The Fund may be subject to foreign withholding taxes on income from certain
foreign securities. This, in turn, could reduce ordinary income distributions to
you.
Information on the Tax Character of Distributions
The Fund will inform you of the amount of your ordinary income dividends and
capital gain distributions at the time they are paid, and will advise you of
their tax status for federal income tax purposes shortly after the close of each
calendar year. If you have not held Fund shares for a full year, the Fund may
designate and distribute to you, as ordinary income or capital gain, a
percentage of income that is not equal to the actual amount of such income
earned during the period of your investment in the Fund.
Election to be Taxed as a Regulated Investment Company
Each series of the Trust is treated as a separate entity for federal income tax
purposes. The Fund has elected to be treated as a regulated investment company
under Subchapter M of the Internal Revenue Code (the "Code"). The Fund has
qualified as a regulated investment company for its most recent fiscal year, and
intends to continue to qualify during the current fiscal year. As a regulated
investment company, the Fund generally pays no federal income tax on the income
and gains it distributes to you. The Board reserves the right not to maintain
the qualification of the Fund as a regulated investment company if it determines
such course of action to be beneficial to shareholders. In such case, the Fund
will be subject to federal, and possibly state, corporate taxes on its taxable
income and gains, and distributions to you will be taxed as ordinary dividend
income to the extent of the Fund's earnings and profits.
Excise Tax Distribution Requirements
To avoid federal excise taxes, the Code requires the Fund to distribute to you
by December 31 of each year, at a minimum, the following amounts: 98% of its
taxable ordinary income earned during the calendar year; 98% of its capital gain
net income earned during the twelve month period ending October 31; and 100% of
any undistributed amounts from the prior year. The Fund intends to declare and
pay these distributions in December (or to pay them in January, in which case
you must treat them as received in December) but can give no assurances that its
distributions will be sufficient to eliminate all taxes.
<PAGE>
Redemption of Fund Shares
Redemptions (including redemptions in kind) and exchanges of Fund shares are
taxable transactions for federal and state income tax purposes. If you redeem
your Fund shares, or exchange your Fund shares for shares of the Berwyn Fund,
the Rodney Square Fund or the Rodney Square Tax-Exempt Fund, the IRS will
require that you report any gain or loss on your redemption or exchange. If you
hold your shares as a capital asset, the gain or loss that you realize will be
capital gain or loss and will be long-term or short-term, generally depending on
how long you hold your shares.
Beginning in the year 2001 for shareholders in the 15% federal income tax
bracket (or in the year 2006 for shareholders in the 28% or higher bracket),
gain from the sale of Fund shares held for more than five years may be subject
to a reduced rate of tax.
Any loss incurred on the redemption or exchange of shares held for six months or
less will be treated as a long-term capital loss to the extent of any long-term
capital gains distributed to you by the Fund on those shares.
All or a portion of any loss that you realize upon the redemption of your Fund
shares will be disallowed to the extent that you buy other shares in the Fund
(through reinvestment of dividends or otherwise) within 30 days before or after
your share redemption. Any loss disallowed under these rules will be added to
your tax basis in the new shares you buy.
U.S. Government Securities
States grant tax-free status to dividends paid to you from interest earned on
certain U.S. government securities, subject in some states to minimum investment
or reporting requirements that must be met by the Fund. Investments in
Government National Mortgage Association or Federal National Mortgage
Association securities, bankers' acceptances, commercial paper and repurchase
agreements collateralized by U.S. government securities generally do not qualify
for tax-free treatment. The rules on exclusion of this income are different for
corporations.
Dividends-Received Deduction for Corporations
If you are a corporate shareholder, you should note that 26.1% of the dividends
paid by the Fund for the most recent fiscal year qualified for the
dividends-received deduction. You may be allowed to deduct these qualified
dividends, thereby reducing the tax that you would otherwise be required to pay
on these dividends. The dividends-received deduction will be available only with
respect to dividends designated by the Fund as eligible for such treatment. All
dividends (including the deducted portion) must be included in your alternative
minimum taxable income calculation.
<PAGE>
Investment in Complex Securities
The Fund may invest in complex securities. These investments may be subject to
numerous special and complex tax rules. These rules could affect whether gains
and losses recognized by the Fund are treated as ordinary income or capital
gain, accelerate the recognition of income to the Fund (possibly causing the
Fund to sell securities to raise the cash for necessary distributions) and/or
defer the Fund's ability to recognize losses and, in limited cases, subject the
Fund to U.S. federal income tax on income from certain foreign securities. These
rules may affect the amount, timing or character of the income distributed to
you by the Fund.
FINANCIAL STATEMENTS
The Fund's audited financial statements and notes thereto for the year
ended December 31, 1999 and the report of PricewaterhouseCoopers LLP, the Fund's
independent accountants, on such financial statements (the "Report") which are
included in the Fund's 1999 Annual Report to Shareholders (the "Annual Report")
are incorporated by reference in this SAI by amendment to the Trust's
registration statement. A copy of the Annual Report accompanies this SAI and an
investor may obtain a copy of the Annual Report without charge by writing to the
Fund at the address on the cover of this SAI or calling (800) 992-6757.
<PAGE>
APPENDIX A
STANDARD & POOR'S BOND RATINGS
Standard & Poor's Ratings Group gives ratings to bonds that range from AAA
to D. The Fund may invest in bonds with ratings of CC above.
Definitions of these ratings are set forth below.
AAA Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only in
small degree.
A Debt rated A has a strong capacity to pay interest and principal
although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher
rated categories.
BBB Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in
higher rated categories.
BB,B, CCC, CC
Debt rated BB, B, CCC and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and C the highest
degree of speculation. While such debt will likely have some quality
and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
D Debt rated D is in default, and payment of interest and/or repayment
of principal is in arrears.
<PAGE>
APPENDIX B
MOODY'S BOND RATINGS
Moody's Investors Service, Inc. gives ratings to bonds that range
from Aaa to D. Definitions of these ratings are set forth below. The Fund
may invest in bonds with any ratings of Caa or better.
Aaa - These bonds are judged to be of the best quality. They carry the
smallest degree of investment risk. Interest payments are protected by
a large or by an exceptionally stable margin and principal is secure.
Aa - These bonds are judged to be of high quality by all standards. They
are rated lower than the best bonds because margins of protection may
not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in
Aaa securities.
A - These are bonds which possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - These bonds are considered as medium grade obligations, i.e., they
are neither highly protected nor poorly secured. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba - These are bonds judged to have speculative elements; their future
cannot be considered as well assured. Uncertainty of position
characterizes bonds in this class.
B - These bonds generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa - These are bonds of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or
interest.
Ca - These bonds represent obligations which are speculative in a high
degree. Such issues are often in default or have other market
shortcomings.
C - These are the lowest rated class of bonds and issues so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.
<PAGE>
THE BERWYN FUNDS (16/18)
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Articles of Incorporation [or corresponding instruments].
(1) Registrant's Agreement and Declaration of Trustdated
February 4, 1999.
Incorporated herein by reference to:
Filing: Post-Effective Amendment No. 14/16 to Registrant's
Registration Statement on Form N-1A.
File Nos. 33-14604 and 811-04963.
Filing Date: February 12, 1999.
(2) Registrant's Certificate of Trust dated February 4, 1999.
Incorporated herein by reference to:
Filing: Post-Effective Amendment No. 14/16 to Registrant's
Registration Statement on Form N-1A.
File Nos. 33-14604 and 811-04963.
Filing Date: February 12, 1999.
(b) By-Laws.
ELECTRONICALLY FILED HEREWITH AS Exhibit No. EX-99.b.
(c) Instrument Defining Rights of Security Holders.
Not Applicable.
(d) Investment Advisory Contracts.
(1) Investment Advisory Services Agreement between Registrant and the
Killen Group, Inc. on behalf of the Berwyn Fund.
ELECTRONICALLY FILED HEREWITH AS Exhibit No. EX-99.d.1.
(2) Investment Advisory Services Agreement between Registrant and the
Killen Group, Inc. on behalf of the Berwyn Income Fund.
ELECTRONICALLY FILED HEREWITH AS Exhibit No. EX-99.d.2.
(e) Underwriting Contracts.
Selling Agreement between Registrant and Berwyn Financial Services, Inc.
Incorporated herein by reference to:
Filing: Post-Effective Amendment No. 14/16 to Registrant's
Registration Statement on Form N-1A.
File Nos. 33-14604 and 811-04963.
Filing Date: February 12, 1999.
<PAGE>
(f) Bonus or Profit Sharing Contracts.
Not Applicable.
(g) Custodian Agreements.
Custodian Servicing Agreement between Registrant and PFPC Trust Co.
Incorporated herein by reference to:
Filing: Post-Effective Amendment No. 15/17 to Registrant's
Registration Statement on Form N-1A.
File Nos. 33-14604 and 811-04963.
Filing Date: April 27, 1999.
(h) Other Material Contracts.
Transfer Agency Agreement between Registrant and PFPC, Inc.
Incorporated herein by reference to:
Filing: Post-Effective Amendment No. 15/17 to Registrant's
Registration Statement on Form N-1A.
File Nos. 33-14604 and 811-04963.
Filing Date: April 27, 1999.
(i) Legal Opinion.
Opinion and Consent of Counsel as to the legality of the securities
issued by the Registrant.
ELECTRONICALLY FILED HEREWITH AS EXHIBIT No. EX-99.i.
(j) Other Opinions.
Consent of PricewaterhouseCoopers LLP.
ELECTRONICALLY FILED HEREWITH AS EXHIBIT No. EX-99.j.
(k) Omitted Financial Statements.
Not Applicable.
(l) Initial Capital Agreements.
Not Applicable.
(m) Rule 12b-1 Plan.
Not Applicable.
(n) Rule 18f-3 Plan.
<PAGE>
Not Applicable.
(o) Powers-of-Attorney.
(1) Power-of-Attorney dated February 4, 1999, appointing Edward A.
Killen, II and Kevin M. Ryan, Esquire as attorney-in-fact for the
Registrant.
Incorporated herein by reference to:
Filing: Post-Effective Amendment No. 14/16 to Registrant's
Registration Statement on Form N-1A.
File Nos. 33-14604 and 811-04963.
Filing Date: February 12, 1999.
(2) Power-of-Attorney dated February 4, 1999, appointing Robert E.
Killen and Kevin M. Ryan, Esquire as attorney-in-fact for the
Registrant.
Incorporated herein by reference to:
Filing: Post-Effective Amendment No. 14/16 to Registrant's
Registration Statement on Form N-1A.
File Nos. 33-14604 and 811-04963.
Filing Date: February 12, 1999.
(p) Codes of Ethics.
(1) Code of Ethics of Registrant.
ELECTRONICALLY FILED HEREWITH AS EXHIBIT EX-99.p.1.
(2) Code of Ethics of Adviser.
ELECTRONICALLY FILED HEREWITH AS EXHIBIT EX-99.p.2.
(3) Code of Ethics of Underwriter.
ELECTRONICALLY FILED HEREWITH AS EXHIBIT EX-99.p.3.
Item 24. Persons Controlled by or Under Common Control with the Fund.
The Fund is not under common control with any person and does not control
directly or indirectly any person.
Item 25. Indemnification.
Article VII, Section 2 of the Registrant's Agreement and Declaration of
Trust incorporated herein by reference, which provides for indemnification, as
set forth below, with respect to Officers and Trustees of the Trust:
(a) To the fullest extent that limitations on the liability of Trustees
and officers are permitted by the DBTA, the Officers and Trustees shall
not be responsible or liable in any event for any act or omission of any
<PAGE>
agent, employee, Investment Adviser or Principal Underwriter of the Trust;
or with respect to each Trustee and officer, the act or omission of any
other Trustee or officer, respectively. The Trust, out of the Trust
Property, shall indemnify and hold harmless each and every officer and
Trustee from and against any and all claims and demands whatsoever arising
out of or related to such officer's or Trustee's performance of his or her
duties as an officer or Trustee of the Trust. This limitation on liability
applies to events occurring at the time a Person serves as a Trustee or
officer of the Trust whether or not such Person is a Trustee or officer at
the time of any proceeding in which liability is asserted. Nothing herein
contained shall indemnify, hold harmless or protect any officer or Trustee
from or against any liability to the Trust or any Shareholder to which
such Person would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved
in the conduct of such Person's office.
(b) Every note, bond, contract, instrument, certificate or undertaking and
every other act or document whatsoever issued, executed or done by or on
behalf of the Trust, the officers or the Trustees or any of them in
connection with the Trust shall be conclusively deemed to have been
issued, executed or done only in such Person's capacity as Trustee and/or
as officer, and such Trustee or officer, as applicable, shall not be
personally liable therefore, except as described in the last sentence of
the first paragraph of this Section 2 of this Article VII.
Registrant's By-Laws, filed herewith, provide the following under Article VI:
Section 2. ACTIONS OTHER THAN BY TRUST. The Trust shall indemnify any person
who was or is a party or is threatened to be made a party to any
proceeding (other than an action by or in the right of the Trust) by
reason of the fact that such person is or was an agent of the Trust,
against expenses, judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with such proceeding
if such person acted in good faith and in a manner that such person
reasonably believed to be in the best interests of the Trust and in
the case of a criminal proceeding, had no reasonable cause to believe
the conduct of such person was unlawful. The termination of any
proceeding by judgment, order, settlement, conviction or plea of nolo
contendere or its equivalent shall not of itself create a presumption
that the person did not act in good faith or in a manner which the
person reasonably believed to be in the best interests of the Trust
or that the person had reasonable cause to believe that the person's
conduct was unlawful.
Section 3. ACTIONS BY TRUST. The Trust shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened,
pending or completed action by or in the right of the Trust to
procure a judgment in its favor by reason of the fact that the person
is or was an agent of the Trust, against expenses actually and
reasonably incurred by that person in connection with the defense or
settlement of that action if that person acted in good faith, in a
manner that person believed to be in the best interests of the Trust
and with such care, including reasonable inquiry, as an ordinarily
prudent person in a like position would use under similar
circumstances.
<PAGE>
Section 4. EXCLUSION OF INDEMNIFICATION. Notwithstanding any provision to the
contrary contained herein, there shall be no right to indemnification
for any liability arising by reason of willful misfeasance, bad
faith, gross negligence, or the reckless disregard of the duties
involved in the conduct of the agent's office with the Trust.
No indemnification shall be made under Sections 2 or 3 of this Article:
(a) In respect of any claim, issue or matter as to which that person shall
have been adjudged to be liable in the performance of that person's duty to the
Trust, unless and only to the extent that the court in which that action was
brought shall determine upon application that in view of all the circumstances
of the case, that person was not liable by reason of the disabling conduct set
forth in the preceding paragraph and is fairly and reasonably entitled to
indemnity for the expenses which the court shall determine; or
(b) In respect of any claim, issue, or matter as to which that person
shall have been adjudged to be liable on the basis that personal benefit was
improperly received by him, whether or not the benefit resulted from an action
taken in the person's official capacity; or
(c) Of amounts paid in settling or otherwise disposing of a threatened or
pending action, with or without court approval, or of expenses incurred in
defending a threatened or pending action which is settled or otherwise disposed
of without court approval, unless the required approval set forth in Section 6
of this Article is obtained.
Section 5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of the Trust
has been successful on the merits in defense of any proceeding referred
to in Sections 2 or 3 of this Article or in defense of any claim, issue
or matter therein, before the court or other body before whom the
proceeding was brought, the agent shall be indemnified against expenses
actually and reasonably incurred by the agent in connection therewith,
provided that the Board, including a majority who are Disinterested
Trustees and not parties to such proceeding, also determines that based
upon a review of the facts, the agent was not liable by reason of the
disabling conduct referred to in Section 4 of this Article.
Section 6. REQUIRED APPROVAL. Except as provided in Section 5 of this Article,
any indemnification under this Article shall be made by the Trust only
if authorized in the specific case on a determination that
indemnification of the agent is proper in the circumstances because the
agent has met the applicable standard of conduct set forth in Sections 2
or 3 of this Article and is not prohibited from indemnification because
of the disabling conduct set forth in Section 4 of this Article, by:
(a) A majority vote of a quorum consisting of trustees who are not parties
to the proceeding and are Disinterested Trustees; or
(b) A written opinion by an independent legal counsel.
<PAGE>
Section 7. ADVANCEMENT OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by the Trust before the final disposition of
the proceeding on receipt of an undertaking by or on behalf of the agent
to repay the amount of the advance unless it shall be determined
ultimately that the agent is entitled to be indemnified as authorized in
this Article, provided the agent provides a security for his
undertaking, or a majority of a quorum of the Disinterested Trustees who
are not parties to such proceeding, or an independent legal counsel in a
written opinion, determine that based on a review of readily available
facts, there is reason to believe that said agent ultimately will be
found entitled to indemnification.
Item 26. Business and Other Connections of the Investment Adviser.
Robert E. Killen, President and a Trustee of the Fund, is Chairman and
Chief Executive Officer of The Killen Group, Inc., the investment adviser (the
"Adviser") to each series of shares of Registrant. He is a Director and
shareholder of Berwyn Financial Services Corp. ("BFS"), a registered
broker-dealer and a distributor of the Registrant's shares.
Edward A. Killen, II is Vice President and a Director of the Adviser. He
is also a Director, officer and shareholder of BFS.
For information as to any other business, profession, vocation or
employment of a substantial nature in which each Director or officer of the
Adviser is or has been engaged for his own account or in the capacity of
Director, officer, employee, partner or trustee within the last two fiscal years
of the Registrant, reference is made to the Adviser's Form ADV (File #801-18770)
currently on file with the U.S. Securities and Exchange Commission as required
by the Investment Advisers Act of 1940, as amended.
Item 27. Principal Underwriters.
(a) None.
<PAGE>
(b)
Name & Principal Position & Offices Positions & Offices
Business Address with BFS with the Registrant
Director President and Trustee
Robert E. Killen
1199 Lancaster Avenue
Berwyn, PA 19132
Edward A. Killen, II Secretary and Director Portfolio Manager of
1189 Lancaster Avenue the Berwyn Income Fund
Berwyn, PA 19132
Kevin M. Ryan President, Treasurer Secretary and
1199 Lancaster Avenue and Director Treasurer
Berwyn, PA 19132
- ----------------------------------------------------------------------
- -------------------------------------------------------------------------------
(c) None.
Item 28. Location of Accounts and Records
Accounts, books and other documents that are required to be
maintained under Section 31(a) of the Investment Company Act of 1940, as
amended, and the regulations thereunder are maintained as follows:
1) Journals detailing the purchase and sale of securities, the
receipt and delivery of securities, receipt and disbursement of cash and
all other debits and credits will be in the physical possession of Kevin
M. Ryan at 1189 Lancaster Avenue, Berwyn, PA 19312.
2) Ledgers reflecting all asset, liability, reserve, capital, income
and expense accounts as well as ledgers containing the information
required for each portfolio security, for each broker-dealer, bank or
other person through whom transactions in portfolio securities are
effected and for each shareholder of record in the investment company will
be maintained in the physical possession of Kevin M. Ryan, 1189 Lancaster
Avenue, Berwyn, PA 19312.
3) The Agreement and Declaration of Trust, the By-Laws, the minutes
of shareholders and Trustees' meetings will be maintained under the
control of Kevin M. Ryan, 1189 Lancaster Avenue, Berwyn, PA 19312.
4) A record of all brokerage orders and a record of all portfolio
purchases and sales will be maintained under the control of Kevin M.
Ryan, 1189 Lancaster Avenue, Berwyn, PA 19312.
5) Monthly trial balances for all ledger accounts, a quarterly record
of broker commissions, a record identifying persons authorizing the
purchase or sale of portfolio securities and files of all advisory
material received from the Adviser will be under the control of Kevin M.
Ryan, 1189 Lancaster Avenue, Berwyn, PA 19312.
<PAGE>
6) Records required to be maintained by the Adviser will be under the
control of Robert E. Killen, 1189 Lancaster Avenue, Berwyn, PA 19312.
Item 29. Management Services.
None.
Item 30. Undertakings.
The Fund has placed information required by Item 5 of the Form N-1A in
the latest annual report to shareholders and undertakes to furnish each
person to whom a prospectus is delivered with a copy of the Fund's latest
annual report to shareholders upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment
Company Act, the Fund certifies that it meets all of the requirements for
effectiveness of this registration statement under Rule 485(b) under the
Securities Act and has duly caused this registration statement to be signed on
its behalf by the undersigned, duly authorized, in the City of Berwyn, and the
Commonwealth of Pennsylvania on the 28th day of April, 2000.
THE BERWYN FUNDS
By: /S/ ROBERT E. KILLEN
Robert E. Killen, President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the date indicated.
Signature Title Date
/S/ ROBERT E. KILLEN President and Trustee April 28, 2000
ROBERT E. KILLEN
/S/ KEVIN M. RYAN Treasurer (Chief Financial April 28, 2000
KEVIN M. RYAN Officer)
/S/ DENIS P. CONLON* Trustee April 28, 2000
DENIS P. CONLON
/S/ DEBORAH D. DORSI* Trustee April 28, 2000
DEBORAH D. DORSI
* By /S/ KEVIN M. RYAN
Kevin M. Ryan, as attorney-in-fact for such person, pursuant to a Power
of Attorney filed herewith with the U.S. Securities and Exchange
Commission
<PAGE>
EXHIBIT INDEX
Form N-1A Exhibit Edgar Exhibit
Number Number Description
23(b) EX-99.b By-Laws
23(d)(1) EX-99.d.1 Investment Advisory Services
Agreement for Berwyn Fund
23(d)(2) EX-99.d.2 Investment Advisory Services
Agreement for Berwyn Income Fund
23(i) EX-99.i Legal Opinion
23(j) EX-99.j Consent of PricewaterhouseCoopers
LLP
23(p)(1) EX-99.p.1 Code of Ethics of Registrant
23(p)(2) EX-99.p.2 Code of Ethics of Adviser
23(p)(3) EX-99.p.3 Code of Ethics of Underwriter
Exhibit No. EX-99.b
BY-LAWS
of
The Berwyn Funds
A Delaware Business Trust
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal executive office of The Berwyn
Funds (the "Trust") shall be 1189 Lancaster Avenue, Berwyn, Pennsylvania, 19312.
The board of trustees (the "Board") may, from time to time, change the location
of the principal executive office of the Trust to any place within or outside
the State of Delaware.
Section 2. OTHER OFFICES. The Board may at any time establish branch or
subordinate offices at any place or places where the Trust intends to do
business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of shareholders shall be held at
any place within or outside the State of Delaware designated by the Board. In
the absence of any such designation by the Board, shareholders' meetings shall
be held at the principal executive office of the Trust. For purposes of these
By-Laws, the term "shareholder" shall mean a record owner of shares of the
Trust.
Section 2. CALL OF MEETING. A meeting of the shareholders may be called at
any time by the Board or by the chairperson of the Board or by the president. If
the Trust is required under the Investment Company Act of 1940, as amended (the
"1940 Act"), to hold a shareholders' meeting to elect trustees, the meeting
shall be deemed an "annual meeting" for that year for purposes of the 1940 Act.
Section 3. NOTICE OF SHAREHOLDERS' MEETING. All notices of meetings of
shareholders shall be sent or otherwise given in accordance with Section 4 of
this Article II not less than seven (7) nor more than ninety-three (93) days
before the date of the meeting. The notice shall specify (i) the place, date and
hour of the meeting, and (ii) the general nature of the business to be
transacted. The notice of any meeting at which trustees are to be elected also
shall include the name of any nominee or nominees who at the time of the notice
are intended to be presented for election. Except with respect to adjournments
as provided herein, no business shall be transacted at such meeting other than
that specified in the notice.
<PAGE>
Section 4. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any
meeting of shareholders shall be given either personally or by first-class mail,
courier, telegraphic, facsimile or electronic mail, or other written
communication, charges prepaid, addressed to the shareholder at the address of
that shareholder appearing on the books of the Trust or its transfer agent or
given by the shareholder to the Trust for the purpose of notice. If no such
address appears on the Trust's books or is given, notice shall be deemed to have
been given if sent to that shareholder by first-class mail, courier,
telegraphic, facsimile or electronic mail, or other written communication to the
Trust's principal executive office. Notice shall be deemed to have been given at
the time when delivered personally, deposited in the mail or with a courier, or
sent by telegram, facsimile, electronic mail or other means of written
communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the Trust is returned to the Trust marked
to indicate that the notice to the shareholder cannot be delivered at that
address, all future notices or reports shall be deemed to have been duly given
without further mailing, or substantial equivalent thereof, if such notices
shall be available to the shareholder on written demand of the shareholder at
the principal executive office of the Trust for a period of one year from the
date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting shall be executed by the secretary, assistant secretary or
any transfer agent of the Trust giving the notice and shall be filed and
maintained in the records of the Trust. Such affidavit shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.
Section 5. ADJOURNED MEETING; NOTICE. Any shareholders' meeting, whether
or not a quorum is present, may be adjourned from time to time (and at any time
during the course of the meeting) by a majority of the votes cast by those
shareholders present in person or by proxy, or by the chairperson of the
meeting. Any adjournment may be with respect to one or more proposals, but not
necessarily all proposals, to be voted or acted upon at such meeting and any
adjournment will not delay or otherwise affect the effectiveness and validity of
a vote or other action taken at a shareholders' meeting prior to adjournment.
When any shareholders' meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting at which the adjournment is
taken, unless a new record date of the adjourned meeting is fixed or unless the
adjournment is for more than one hundred eighty (180) days from the record date
set for the original meeting, in which case the Board shall set a new record
date. If notice of any such adjourned meeting is required pursuant to the
preceding sentence, it shall be given to each shareholder of record entitled to
vote at the adjourned meeting in accordance with the provisions of Sections 3
and 4 of this Article II. At any adjourned meeting, the Trust may transact any
business that might have been transacted at the original meeting.
Section 6. VOTING. The shareholders entitled to vote at any meeting of
shareholders shall be determined in accordance with the provisions of the
Declaration of Trust, as in effect at such time. The shareholders' vote may be
by voice vote or by ballot; provided, however, that any election of trustees
must be by ballot if demanded by any shareholder before the voting has begun. On
any matter other than elections of trustees, any shareholder may vote part of
the shares in favor of the proposal and refrain from voting the remaining shares
or vote them against the proposal, but if the shareholder fails to specify the
<PAGE>
number of shares which the shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is with respect to
the total shares that the shareholder is entitled to vote on such proposal.
Abstentions and broker non-votes will be included for purposes of
determining whether a quorum is present at a shareholders' meeting. Abstentions
and broker non-votes will be treated as votes present at a shareholders'
meeting, but will not be treated as votes cast. Abstentions and broker
non-votes, therefore, will have no effect on proposals which require a plurality
or majority of votes cast for approval, but will have the same effect as a vote
"against" on proposals requiring a majority of outstanding voting securities for
approval.
Section 7. WAIVER OF NOTICE BY CONSENT OF ABSENT SHAREHOLDERS. The
transactions of a meeting of shareholders, however called and noticed and
wherever held, shall be valid as though transacted at a meeting duly held after
regular call and notice if a quorum is present either in person or by proxy.
Attendance by a person at a meeting shall also constitute a waiver of notice of
that meeting with respect to that person, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened and except that such attendance is not a
waiver of any right to object to the consideration of matters not included in
the notice of the meeting if that objection is expressly made at the beginning
of the meeting. Whenever notice of a meeting is required to be given to a
shareholder under the Declaration of Trust or these By-Laws, a written waiver
thereof, executed before or after the meeting by such shareholder or his or her
attorney thereunto authorized and filed with the records of the meeting, shall
be deemed equivalent to such notice.
Section 8. PROXIES. Every shareholder entitled to vote for trustees or on
any other matter shall have the right to do so either in person or by one or
more agents authorized by a written proxy signed by the shareholder and filed
with the secretary of the Trust; provided, that an alternative to the execution
of a written proxy may be permitted as provided in the second paragraph of this
Section 8. A proxy shall be deemed signed if the shareholder's name is placed on
the proxy (whether by manual signature, typewriting, telegraphic transmission or
otherwise) by the shareholder or the shareholder's attorney-in-fact. A validly
executed proxy which does not state that it is irrevocable shall continue in
full force and effect unless (i) revoked by the shareholder executing it by a
written notice delivered to the Trust prior to the exercise of the proxy or by
the shareholder's execution of a subsequent proxy or attendance and vote in
person at the meeting; or (ii) written notice of the death or incapacity of the
shareholder is received by the Trust before the proxy's vote is counted;
provided, however, that no proxy shall be valid after the expiration of eleven
(11) months from the date of the proxy unless otherwise provided in the proxy.
The revocability of a proxy that states on its face that it is irrevocable shall
be governed by the provisions of the General Corporation Law of the State of
Delaware.
With respect to any shareholders' meeting, the Board may act to permit the
Trust to accept proxies by any electronic, telephonic, computerized,
telecommunications or other reasonable alternative to the execution of a written
instrument authorizing the proxy to act, provided the shareholder's
authorization is received within eleven (11) months before the meeting. A proxy
with respect to shares held in the name of two or more Persons shall be valid if
executed by any one of them unless at or prior to exercise of the proxy the
Trust receives a specific written notice to the contrary from any one of them. A
proxy purporting to be executed by or on behalf of a shareholder shall be deemed
valid unless challenged at or prior to its exercise and the burden of proving
invalidity shall rest with the challenger.
<PAGE>
Section 9. INSPECTORS OF ELECTION. Before any meeting of shareholders, the
Board may appoint any person other than nominees for office to act as inspector
of election at the meeting or its adjournment. If no inspector of election is so
appointed, the chairperson of the meeting may, and on the request of any
shareholder or a shareholder's proxy shall, appoint an inspector of election at
the meeting. If any person appointed as inspector fails to appear or fails or
refuses to act, the chairperson of the meeting may, and on the request of any
shareholder or a shareholder's proxy shall, appoint a person to fill the
vacancy.
The inspector shall:
(a) determine the number of shares outstanding and the voting power of
each, the shares represented at the meeting, the existence of a quorum and the
authenticity, validity and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way arising
in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result of voting or consents; and
(g) do any other acts that may be proper to conduct the election or vote
with fairness to all shareholders.
ARTICLE III
TRUSTEES
Section 1. POWERS. Subject to the applicable provisions of the Declaration
of Trust and these By-Laws relating to action required to be approved by the
shareholders, the business and affairs of the Trust shall be managed and all
powers shall be exercised by or under the direction of the Board.
Section 2. NUMBER OF TRUSTEES. The number of trustees constituting the
Board shall be determined as set forth in the Declaration of Trust.
Section 3. VACANCIES. Vacancies in the Board may be filled by a majority
of the remaining trustees, though less than a quorum, or by a sole remaining
trustee, unless the Board calls a meeting of shareholders for the purpose of
filling such vacancies. Notwithstanding the above, whenever and for so long as
the Trust is a participant in or otherwise has in effect a plan under which the
Trust may be deemed to bear expenses of distributing its shares as that practice
is described in Rule 12b-1 under the 1940 Act, then the selection and nomination
<PAGE>
of the trustees who are not "interested persons" of the Trust, as that term is
defined in the 1940 Act (such trustees are referred to herein as "Disinterested
Trustees"), shall be, and is, committed to the discretion of the Disinterested
Trustees remaining in office.
Section 4. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. All meetings of
the Board may be held at any place within or outside the State of Delaware that
has been designated from time to time by the Board. In the absence of such a
designation, regular meetings shall be held at the principal executive office of
the Trust. Any meeting, regular or special, may be held by conference telephone
or similar communication equipment, so long as all trustees participating in the
meeting can hear one another, and all such trustees shall be deemed to be
present in person at such meeting.
Section 5. REGULAR MEETINGS. Regular meetings of the Board shall be held
without call at such time as shall from time to time be fixed by the Board.
Such regular meetings may be held without notice.
Section 6. SPECIAL MEETINGS. Special meetings of the Board for any
purpose or purposes may be called at any time by the chairperson of the
Board, the president, any vice president, the secretary or any two (2)
trustees.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each trustee or sent by first-class mail, courier
or telegram, charges prepaid, or by facsimile or electronic mail, addressed to
each trustee at that trustee's address as it is shown on the records of the
Trust. In case the notice is mailed, it shall be deposited in the United States
mail at least seven (7) days before the time of the holding of the meeting. In
case the notice is delivered personally, by telephone, by courier, to the
telegraph company, or by express mail, facsimile, electronic mail or similar
service, it shall be delivered at least forty-eight (48) hours before the time
of the holding of the meeting. Any oral notice given personally or by telephone
may be communicated either to the trustee or to a person at the office of the
trustee who the person giving the notice has reason to believe will promptly
communicate it to the trustee. The notice need not specify the purpose of the
meeting or the place if the meeting is to be held at the principal executive
office of the Trust.
Section 7. QUORUM. A majority of the authorized number of trustees shall
constitute a quorum for the transaction of business, except to adjourn as
provided in Sections 9 and 10 of this Article III. Every act or decision done or
made by a majority of the trustees present at a meeting duly held at which a
quorum is present shall be regarded as the act of the Board, subject to the
provisions of the Declaration of Trust. A meeting at which a quorum is initially
present may continue to transact business notwithstanding the withdrawal of
trustees if any action taken is approved by at least a majority of the required
quorum for that meeting.
Section 8. WAIVER OF NOTICE. Notice of any meeting need not be given to
any trustee who either before or after the meeting signs a written waiver of
notice, a consent to holding the meeting, or an approval of the minutes. The
waiver of notice or consent need not specify the purpose of the meeting. All
such waivers, consents, and approvals shall be filed with the records of the
Trust or made a part of the minutes of the meeting. Notice of a meeting shall
also be deemed given to any trustee who attends the meeting without protesting
before or at its commencement about the lack of notice to that trustee.
<PAGE>
Section 9. ADJOURNMENT. A majority of the trustees present, whether or
not constituting a quorum, may adjourn any matter at any meeting to another
time and place.
Section 10. NOTICE OF ADJOURNMENT. Notice of the time and place of holding
an adjourned meeting need not be given unless the meeting is adjourned for more
than seven (7) days, in which case notice of the time and place shall be given
before the time of the recommencement of an adjourned meeting to the trustees
who were present at the time of the adjournment.
Section 11. FEES AND COMPENSATION OF TRUSTEES. Trustees and members of
committees may receive such compensation, if any, for their services and such
reimbursement of expenses as may be fixed or determined by resolution of the
Board. This Section 11 shall not be construed to preclude any trustee from
serving the Trust in any other capacity as an officer, agent, employee, or
otherwise and receiving compensation for those services.
Section 12. TRUSTEE EMERITUS. Upon retirement of a trustee, the Board may
elect him or her to the position of Trustee Emeritus. A Trustee Emeritus shall
serve for one year and may be reelected by the Board from year to year
thereafter. A Trustee Emeritus shall not vote at meetings of trustees and shall
not be held responsible for actions of the Board but shall receive fees paid to
trustees for serving as such.
ARTICLE IV
COMMITTEES
Section 1. COMMITTEES OF TRUSTEES. The Board may, by resolution adopted by
a majority of the authorized number of trustees, designate one or more
committees, each consisting of two (2) or more trustees, to serve at the
pleasure of the Board. The Board may designate one or more trustees as alternate
members of any committee who may replace any absent member at any meeting of the
committee. Any committee to the extent provided in the resolution of the Board,
shall have the authority of the Board, except with respect to:
(a) the approval of any action which under the Declaration of Trust or
applicable law also requires shareholders' approval or requires approval by a
majority of the entire Board or certain members of the Board;
(b) the filling of vacancies on the Board or in any committee;
(c) the fixing of compensation of the trustees for serving on the Board
or on any committee;
(d) the amendment or repeal of the Declaration of Trust or of the
By-Laws or the adoption of a new Declaration of Trust or new By-Laws;
(e) the amendment or repeal of any resolution of the Board which by its
express terms is not so amendable or repealable; or
(f) the appointment of any other committees of the Board or the members of
these committees.
<PAGE>
Section 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and action of any
committee shall be governed by and held and taken in accordance with the
provisions of Article III of these By-Laws, with such changes in the context
thereof as are necessary to substitute the committee and its members for the
Board and its members, except that the time of regular meetings of any committee
may be determined either by the Board or by the committee. Special meetings of
any committee may also be called by resolution of the Board, and notice of
special meetings of any committee shall also be given to all alternate members
who shall have the right to attend all meetings of the committee. The Board may
adopt rules for the government of any committee not inconsistent with the
provisions of these By-Laws.
ARTICLE V
OFFICERS
Section 1. OFFICERS. The officers of the Trust shall be a chairperson of
the Board, a president and chief executive officer, a secretary, and a
treasurer. The Trust may also have, at the discretion of the Board, one or more
vice presidents, one or more assistant vice presidents, one or more assistant
secretaries, one or more assistant treasurers, and such other officers as may be
appointed in accordance with the provisions of Section 3 of this Article V. Any
number of offices may be held by the same person, except the offices of
president and vice president.
Section 2. ELECTION OF OFFICERS. The officers of the Trust shall be chosen
by the Board, and each shall serve at the pleasure of the Board, subject to the
rights, if any, of an officer under any contract of employment.
Section 3. SUBORDINATE OFFICERS. The Board may appoint and may empower the
president to appoint such other officers as the business of the Trust may
require, each of whom shall hold office for such period, have such authority and
perform such duties as are provided in these By-Laws or as the Board may from
time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights, if
any, of an officer under any contract of employment, any officer may be removed,
either with or without cause, by the Board at any regular or special meeting of
the Board, or by an officer upon whom such power of removal may be conferred by
the Board.
Any officer may resign at any time by giving written notice to the Trust.
Any resignation shall take effect at the date of the receipt of that notice or
at any later time specified in such notice. Unless otherwise specified in such
notice, the acceptance of the resignation shall not be necessary to make it
effective. Any resignation is without prejudice to the rights, if any, of the
Trust under any contract to which the officer is a party.
Section 5. VACANCIES IN OFFICES. A vacancy in any office because of death,
resignation, removal, disqualification or other cause shall be filled in the
manner prescribed in these By-Laws for regular appointment to that office.
Section 6. CHAIRPERSON OF THE BOARD. The chairperson of the Board shall,
if present, preside at meetings of the Board and exercise and perform such other
powers and duties as may be from time to time assigned to the chairperson by the
Board or prescribed by the By-Laws. The chairperson of the Board shall be a
member ex officio of all standing committees. In the absence, resignation,
<PAGE>
disability or death of the president, the chairperson shall exercise all the
powers and perform all the duties of the president until his or her return, such
disability shall be removed or a new president shall have been elected.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as may
be given by the Board to the chairperson of the Board, the president shall be
the chief executive officer of the Trust and shall, subject to the control of
the Board, have general supervision, direction and control of the business and
the officers of the Trust. In the absence of the chairperson of the Board, he
shall preside at all meetings of the shareholders and at all meetings of the
Board. He shall have the general powers and duties of management usually vested
in the office of president of a corporation and shall have such other powers and
duties as may be prescribed by the Board or these By-Laws.
Section 8. VICE PRESIDENTS. In the absence or disability of the president,
the vice presidents, if any, in order of their rank as fixed by the Board or if
not ranked, a vice president designated by the Board, shall perform all the
duties of the president and when so acting shall have all powers of, and be
subject to all the restrictions upon, the president. The vice presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the Board, these By-Laws, the president or
the chairperson of the Board.
Section 9. SECRETARY. The secretary shall keep or cause to be kept at the
principal executive office of the Trust or such other place as the Board may
direct a book of minutes of all meetings and actions of trustees, committees of
trustees and shareholders with the time and place of holding, whether regular or
special, and if special, how authorized, the notice given, the names of those
present at trustees' meetings or committee meetings, the number of shares
present or represented at shareholders' meetings, and the proceedings.
The secretary shall cause to be kept at the principal executive office of
the Trust or at the office of the Trust's transfer agent or registrar, as
determined by resolution of the Board, a share register or a duplicate share
register showing the names of all shareholders and their addresses, the number,
series and classes of shares held by each, the number and date of certificates
issued for the same and the number and date of cancellation of every certificate
surrendered for cancellation.
The secretary shall give or cause to be given notice of all meetings of
the shareholders and of the Board required by these By-Laws or by applicable law
to be given and shall have such other powers and perform such other duties as
may be prescribed by the Board or by these By-Laws.
Section 10. TREASURER. The treasurer shall be the chief financial officer
of the Trust and shall keep and maintain or cause to be kept and maintained
adequate and correct books and records of accounts of the properties and
business transactions of the Trust, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained earnings
and shares. The books of account shall at all reasonable times be open to
inspection by any trustee.
The treasurer shall deposit all monies and other valuables in the name and
to the credit of the Trust with such depositories as may be designated by the
Board. He shall disburse the funds of the Trust as may be ordered by the Board,
shall render to the president and trustees, whenever they request it, an account
of all of his transactions as chief financial officer and of the financial
condition of the Trust and shall have other powers and perform such other duties
as may be prescribed by the Board or these By-Laws.
<PAGE>
ARTICLE VI
INDEMNIFICATION OF TRUSTEES, OFFICERS,
EMPLOYEES AND OTHER AGENTS
Section 1. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of this
Article, "agent" means any person who is or was a trustee, officer, employee or
other agent of this Trust or is or was serving at the request of the Trust as a
trustee, director, officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise; "proceeding"
means any threatened, pending or completed action or proceeding, whether civil,
criminal, administrative or investigative; and "expenses" include without
limitation attorneys' fees and any expenses of establishing a right to
indemnification under this Article.
Section 2. ACTIONS OTHER THAN BY TRUST. The Trust shall indemnify any
person who was or is a party or is threatened to be made a party to any
proceeding (other than an action by or in the right of the Trust) by reason of
the fact that such person is or was an agent of the Trust, against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in connection with such proceeding if such person acted in good faith and in a
manner that such person reasonably believed to be in the best interests of the
Trust and in the case of a criminal proceeding, had no reasonable cause to
believe the conduct of such person was unlawful. The termination of any
proceeding by judgment, order, settlement, conviction or plea of nolo contendere
or its equivalent shall not of itself create a presumption that the person did
not act in good faith or in a manner which the person reasonably believed to be
in the best interests of the Trust or that the person had reasonable cause to
believe that the person's conduct was unlawful.
Section 3. ACTIONS BY TRUST. The Trust shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action by or in the right of the Trust to procure a judgment in its
favor by reason of the fact that the person is or was an agent of the Trust,
against expenses actually and reasonably incurred by that person in connection
with the defense or settlement of that action if that person acted in good
faith, in a manner that person believed to be in the best interests of the Trust
and with such care, including reasonable inquiry, as an ordinarily prudent
person in a like position would use under similar circumstances.
Section 4. EXCLUSION OF INDEMNIFICATION. Notwithstanding any provision to
the contrary contained herein, there shall be no right to indemnification for
any liability arising by reason of willful misfeasance, bad faith, gross
negligence, or the reckless disregard of the duties involved in the conduct of
the agent's office with the Trust.
No indemnification shall be made under Sections 2 or 3 of this Article:
(a) In respect of any claim, issue or matter as to which that person shall
have been adjudged to be liable in the performance of that person's duty to the
Trust, unless and only to the extent that the court in which that action was
brought shall determine upon application that in view of all the circumstances
of the case, that person was not liable by reason of the disabling conduct set
forth in the preceding paragraph and is fairly and reasonably entitled to
indemnity for the expenses which the court shall determine; or
<PAGE>
(b) In respect of any claim, issue, or matter as to which that person
shall have been adjudged to be liable on the basis that personal benefit was
improperly received by him, whether or not the benefit resulted from an action
taken in the person's official capacity; or
(c) Of amounts paid in settling or otherwise disposing of a threatened or
pending action, with or without court approval, or of expenses incurred in
defending a threatened or pending action which is settled or otherwise disposed
of without court approval, unless the required approval set forth in Section 6
of this Article is obtained.
Section 5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of the
Trust has been successful on the merits in defense of any proceeding referred to
in Sections 2 or 3 of this Article or in defense of any claim, issue or matter
therein, before the court or other body before whom the proceeding was brought,
the agent shall be indemnified against expenses actually and reasonably incurred
by the agent in connection therewith, provided that the Board, including a
majority who are Disinterested Trustees and not parties to such proceeding, also
determines that based upon a review of the facts, the agent was not liable by
reason of the disabling conduct referred to in Section 4 of this Article.
Section 6. REQUIRED APPROVAL. Except as provided in Section 5 of this
Article, any indemnification under this Article shall be made by the Trust only
if authorized in the specific case on a determination that indemnification of
the agent is proper in the circumstances because the agent has met the
applicable standard of conduct set forth in Sections 2 or 3 of this Article and
is not prohibited from indemnification because of the disabling conduct set
forth in Section 4 of this Article, by:
(a) A majority vote of a quorum consisting of trustees who are not parties
to the proceeding and are Disinterested Trustees; or
(b) A written opinion by an independent legal counsel.
Section 7. ADVANCEMENT OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by the Trust before the final disposition of the
proceeding on receipt of an undertaking by or on behalf of the agent to repay
the amount of the advance unless it shall be determined ultimately that the
agent is entitled to be indemnified as authorized in this Article, provided the
agent provides a security for his undertaking, or a majority of a quorum of the
Disinterested Trustees who are not parties to such proceeding, or an independent
legal counsel in a written opinion, determine that based on a review of readily
available facts, there is reason to believe that said agent ultimately will be
found entitled to indemnification.
Section 8. OTHER CONTRACTUAL RIGHTS. Nothing contained in this Article
shall affect any right to indemnification to which persons other than trustees
and officers of the Trust or any subsidiary thereof may be entitled by contract
or otherwise.
Section 9. LIMITATIONS. No indemnification or advance shall be made
under this Article, except as provided in Sections 5 or 6, in any
circumstances where it appears:
<PAGE>
(a) That it would be inconsistent with a provision of the Declaration of
Trust, a resolution of the shareholders, or an agreement which prohibits or
otherwise limits indemnification that was in effect at the time of accrual of
the alleged cause of action asserted in the proceeding in which the expenses
were incurred or other amounts were paid; or
(b) That it would be inconsistent with any condition expressly imposed by
a court in approving a settlement.
Section 10. INSURANCE. Upon and in the event of a determination by the
Board to purchase such insurance, the Trust shall purchase and maintain
insurance on behalf of any agent of the Trust against any liability asserted
against or incurred by the agent in such capacity or arising out of the agent's
status as such, but only to the extent that the Trust would have the power to
indemnify the agent against that liability under the provisions of this Article.
Section 11. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN. This Article does not
apply to any proceeding against any trustee, investment manager or other
fiduciary of an employee benefit plan in that person's capacity as such, even
though that person may also be an agent of the Trust as defined in Section 1 of
this Article. Nothing contained in this Article shall limit any right to
indemnification to which such a trustee, investment manager, or other fiduciary
may be entitled by contract or otherwise which shall be enforceable to the
extent permitted by applicable law other than this Article.
ARTICLE VII
RECORDS AND REPORTS
Section 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. The Trust shall
keep at its principal executive office or at the office of its transfer agent or
registrar a record of its shareholders, providing the names and addresses of all
shareholders and the number, series and classes of shares held by each
shareholder.
Section 2. MAINTENANCE AND INSPECTION OF BY-LAWS. The Trust shall keep at
its principal executive office the original or a copy of these By-Laws as
amended from time to time, which shall be open to inspection by the shareholders
at all reasonable times during office hours.
Section 3. MAINTENANCE AND INSPECTION OF OTHER RECORDS. The accounting
books and records and minutes of proceedings of the shareholders and the Board
and any committee or committees of the Board shall be kept at such place or
places designated by the Board or in the absence of such designation, at the
principal executive office of the Trust. The minutes shall be kept in written
form and the accounting books and records shall be kept either in written form
or in any other form capable of being converted into written form. The minutes,
accounting books and records shall be open to inspection upon the written demand
of any shareholder or holder of a voting trust certificate at any reasonable
time during usual business hours for a purpose reasonably related to the
holder's interests as a shareholder or as the holder of a voting trust
certificate. The inspection may be made in person or by an agent or attorney and
shall include the right to copy and make extracts.
Section 4. INSPECTION BY TRUSTEES. Every trustee shall have the absolute
right at any reasonable time to inspect all books, records, and documents of
every kind and the physical properties of the Trust. This inspection by a
trustee may be made in person or by an agent or attorney and the right of
inspection includes the right to copy and make extracts of documents.
<PAGE>
ARTICLE VIII
DIVIDENDS
Section 1. DECLARATION OF DIVIDENDS. Dividends upon the shares of
beneficial interest of the Trust may, subject to the provisions of the
Declaration of Trust, if any, be declared by the Board at any regular or special
meeting, pursuant to applicable law. Dividends may be paid in cash, in property,
or in shares of the Trust.
Section 2. RESERVES. Before payment of any dividend there may be set aside
out of any funds of the Trust available for dividends such sum or sums as the
Board may, from time to time, in its absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Trust, or for such other purpose as
the Board shall deem to be in the best interests of the Trust, and the Board may
abolish any such reserve in the manner in which it was created.
ARTICLE IX
GENERAL MATTERS
Section 1. CHECKS, DRAFTS, EVIDENCE OF INDEBTEDNESS. All checks, drafts,
or other orders for payment of money, notes or other evidences of indebtedness
issued in the name of or payable to the Trust shall be signed or endorsed by
such person or persons and in such manner as from time to time shall be
determined by resolution of the Board.
Section 2. CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The Board, except as
otherwise provided in these By-Laws, may authorize any officer or officers or
agent or agents, to enter into any contract or execute any instrument in the
name of and on behalf of the Trust and this authority may be general or confined
to specific instances; and unless so authorized or ratified by the Board or
within the agency power of an officer, no officer, agent, or employee shall have
any power or authority to bind the Trust by any contract or engagement or to
pledge its credit or to render it liable for any purpose or for any amount.
Section 3. CERTIFICATES FOR SHARES. A certificate or certificates for
shares of beneficial interest in any series of the Trust may be issued to a
shareholder upon his request when such shares are fully paid. All certificates
shall be signed in the name of the Trust by the chairperson of the Board or the
president or vice president and by the treasurer or an assistant treasurer or
the secretary or any assistant secretary, certifying the number of shares and
the series and class of shares owned by the shareholders. Any or all of the
signatures on the certificate may be facsimile. In case any officer, transfer
agent, or registrar who has signed or whose facsimile signature has been placed
on a certificate shall have ceased to be such officer, transfer agent, or
registrar before such certificate is issued, it may be issued by the Trust with
the same effect as if such person were an officer, transfer agent or registrar
at the date of issue. Notwithstanding the foregoing, the Trust may adopt and use
a system of issuance, recordation and transfer of its shares by electronic or
other means.
<PAGE>
Section 4. LOST CERTIFICATES. Except as provided in this Section 4, no new
certificates for shares shall be issued to replace an old certificate unless the
latter is surrendered to the Trust and cancelled at the same time. The Board
may, in case any share certificate or certificate for any other security is
lost, stolen, or destroyed, authorize the issuance of a replacement certificate
on such terms and conditions as the Board may require, including a provision for
indemnification of the Trust secured by a bond or other adequate security
sufficient to protect the Trust against any claim that may be made against it,
including any expense or liability on account of the alleged loss, theft, or
destruction of the certificate or the issuance of the replacement certificate.
Section 5. REPRESENTATION OF SHARES OF OTHER ENTITIES HELD BY TRUST. The
chairperson of the Board, the president or any vice president or any other
person authorized by resolution of the Board or by any of the foregoing
designated officers, is authorized to vote or represent on behalf of the Trust
any and all shares of any corporation, partnership, trust, or other entity,
foreign or domestic, standing in the name of the Trust. The authority granted
may be exercised in person or by a proxy duly executed by such designated
person.
Section 6. TRANSFER OF SHARES. Shares of the Trust shall be transferable
only on the record books of the Trust by the Person in whose name such shares
are registered, or by his or her duly authorized attorney or representative. In
all cases of transfer by an attorney-in-fact, the original power of attorney, or
an official copy thereof duly certified, shall be deposited and remain with the
Trust, its transfer agent or other duly authorized agent. In case of transfers
by executors, administrators, guardians or other legal representatives, duly
authenticated evidence of their authority shall be presented to the Trust,
transfer agent or other duly authorized agent, and may be required to be
deposited and remain with the Trust, its transfer agent or other duly authorized
agent. No transfer shall be made unless and until the certificate issued to the
transferor, if any, shall be delivered to the Trust, its transfer agent or other
duly authorized agent, properly endorsed.
Section 7. HOLDERS OF RECORD. The Trust shall be entitled to treat the
holder of record of any share or shares of the Trust as the owner thereof and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
the Trust shall have express or other notice thereof.
Section 8. FISCAL YEAR. The fiscal year of the Trust and each series
thereof shall end on the last day of December each year. The fiscal year of the
Trust or any series thereof may be refixed or changed from time to time by
resolution of the Board. The fiscal year of the Trust shall be the taxable year
of each series of the Trust.
ARTICLE X
AMENDMENTS
Section 1. AMENDMENT. These By-laws may be restated and/or amended at
any time, without the approval of the shareholders, by an instrument in
writing signed by, or a resolution of, a majority of the then Board.
Exhibit No. EX-99.d.1
CONTRACT FOR
INVESTMENT ADVISORY SERVICES
Agreement made April 28, 1999 between The Berwyn Funds, a Delaware business
trust, having its principal place of business at 1189 Lancaster Avenue, Berwyn,
Pennsylvania, herein referred to as the Fund, on behalf of the Berwyn Fund
series of the Fund, herein referred to as the Series, and The Killen Group,
Inc., a Pennsylvania corporation, having its principal place of business at 1189
Lancaster Avenue, Berwyn, Pennsylvania, herein referred to as the Adviser.
1. The Fund is registered with the U.S. Securities and Exchange
Commission as an open-end management investment company under the
provisions of the Investment Company Act of 1940, as amended (the
"Act"), and is qualified to engage in business under the Act and
other applicable federal and state statutes.
2. The Adviser is registered under the Investment Advisers Act of 1940,
as amended (the "Advisers Act") and is engaged in the business of
acting as an investment adviser and rendering research and advisory
services.
3. The Fund desires to retain the Adviser to render such services to the
Fund with respect to the Series in the manner and on the terms and
conditions hereinafter set forth.
4. Nothing contained herein shall be deemed to require the Fund to take
any action contrary to its Certificate of Trust, Agreement and
Declaration of Trust or any applicable statute or regulation, or to
relieve or deprive the Board of Trustees of the Fund of its
responsibility for, and control of, the conduct of the affairs of the
Fund.
For the reasons recited above, and in consideration of the mutual promises
contained herein, the Fund and Adviser agree as follows:
SECTION ONE
INVESTMENT ADVICE AND OTHER SERVICES
a. Adviser shall to the extent reasonably required in the conduct of the
business of the Fund with respect to the Series, place at the disposal of the
Series, its judgment and experience and furnish to the Series advice and
recommendations with respect to investments, investment policies, the purchase
and sale of securities, and the management of the resources of the Series.
Adviser shall also, from time to time, furnish to or place at the disposal of
the Series such reports and information relating to industries, businesses,
corporations or securities as may be reasonably required by the Series or as
Adviser may deem to be helpful to the Series in the administration of its
investments.
b. Adviser agrees to use its best efforts in the furnishing of such advice
and recommendations and in the preparation of such reports and information, and
for this purpose Adviser shall at all times maintain a staff of officers and
other trained personnel for the performance of its obligations under this
agreement. Adviser, may at its expense, employ other persons to furnish to
Adviser statistical and other factual information, advice regarding economic
factors and trends, information with respect to technical and scientific
developments and such other information, advice and assistance as Adviser may
desire.
<PAGE>
c. The Fund will from time to time furnish to Adviser detailed statements
of the investments and resources of the Series and information as to its
investment strategies and problems, and will make available to Adviser such
registration statements, financial reports, proxy statements, and legal and
other information relating to the investments of the Series as may be in
possession of the Fund or available to it.
SECTION TWO
COMPENSATION TO INVESTMENT ADVISER
a. The Fund agrees to pay to Adviser and Adviser agrees to accept, as full
compensation for all services rendered by Adviser hereunder, a fee at an annual
rate equal to 1.00% of the average daily net assets of the Series.
The fee will be paid monthly in arrears.
b. Adviser agrees that neither it nor any of its officers or trustees
shall take any long or short position in the shares of beneficial interest in
the Fund; provided that the Adviser or any of its officers or Trustees may
purchase shares of beneficial interest in the Fund at the price at which such
shares are available to the public at the moment of purchase; and provided
further that (1) such purchase is made for investment purposes only and (2) if
any shares of beneficial interest in the Fund so purchased are resold within two
months after the date of purchase, such fact will be immediately reported to the
Fund.
SECTION THREE
PAYMENT OF EXPENSES
a. The Adviser shall provide and furnish office space to the Fund and
provide personnel to administer the operations of the Fund with respect to the
Series. The Adviser shall pay all expenses associated with the sales promotion
of shares of the Series. The Fund will pay all other expenses incurred in the
operation of the Fund with respect to the Series.
b. The Adviser hereby agrees to reduce its fee hereunder in any fiscal
year of the Fund by any amount necessary to prevent expenses and liabilities of
the Series (excluding taxes, interest, brokerage commissions and extraordinary
expenses, determined by the Fund or Adviser for the Series, but inclusive of the
Adviser's fee for the Series) from exceeding an annual rate of 2.00% of the
average daily net assets of the Series. When the average daily net assets of the
Series exceed $100 million, the Adviser hereby agrees to reduce its fee for the
Series in any fiscal year by any amount necessary to prevent expenses and
liabilities of the Series (excluding taxes, interest, brokerage commissions and
extraordinary expenses, determined by the Fund or Adviser for the Series, but
inclusive of the Adviser's fee for the Series) from exceeding an annual rate of
1.50% of the average daily net assets of the Series.
<PAGE>
SECTION FOUR
DURATION; TERMINATION
a. This agreement shall begin on the day and year first above written and
shall continue in effect for a period of two years, if approved by vote of a
majority of the outstanding voting securities of the Series. After the initial
two years of this agreement, this agreement shall continue in effect from year
to year, subject to the provisions for termination and all of the other terms
and conditions hereof; provided that such continuation shall be specifically
approved at least annually (i) by vote of a majority of the Board of Trustees of
the Fund or by vote of a majority of the outstanding voting securities of the
Series, and (ii) by vote of a majority of the trustees of the Fund who are not
parties to this agreement or "interested persons" of any such party, cast in
person at a meeting called for the purpose of voting on such approval.
b. This agreement may be terminated by the Fund or the Adviser on sixty
days' notice in writing to the other party hereto, without the payment of any
penalty; provided that such termination on the part of the Fund is authorized by
resolution of the Board of Trustees of the Fund or by vote of a majority of the
outstanding voting securities of the Series.
c. This agreement shall automatically and immediately terminate in the
event of its assignment.
d. For the purposes of this agreement, the terms "interested persons,"
"vote of a majority of the outstanding voting securities," and "assignment"
shall have the meanings as provided in the Act and the rules and regulations
thereunder.
SECTION FIVE
AMENDMENT OF AGREEMENT
This agreement may be amended or modified to the extent, and in the manner,
permitted by the Act and the rules and regulations adopted thereunder; provided
that no amendment or modification of this agreement shall be effective unless
the same shall be in writing and signed by all of the parties hereto.
In witness whereof, the parties hereto have caused this agreement to be
signed by their respective officers thereunto duly authorized and their
respective corporate seals to be hereunto affixed, the day and year first above
written.
THE BERWYN FUNDS, THE KILLEN GROUP, INC.
on behalf of its Berwyn Fund series
By /s/Kevin M. Ryan By /s/Robert E. Killen
Name: Kevin M. Ryan Name: Robert E. Killen
Title: Secretary and Treasurer Title: President
Exhibit No. EX-99.d.2
CONTRACT FOR
INVESTMENT ADVISORY SERVICES
Agreement made April 28, 1999 between The Berwyn Funds, a Delaware business
trust, having its principal place of business at 1189 Lancaster Avenue, Berwyn,
Pennsylvania, herein referred to as the Fund, on behalf of the Berwyn Income
Fund series of the Fund, herein referred to as the Series, and The Killen Group,
Inc., a Pennsylvania corporation, having its principal place of business at 1189
Lancaster Avenue, Berwyn, Pennsylvania, herein referred to as the Adviser.
1. The Fund is registered with the U.S. Securities and Exchange
Commission as an open-end management investment company under the
provisions of the Investment Company Act of 1940, as amended (the
"Act"), and is qualified to engage in business under the Act and
other applicable federal and state statutes.
2. The Adviser is registered under the Investment Advisers Act of 1940,
as amended (the "Advisers Act") and is engaged in the business of
acting as an investment adviser and rendering research and advisory
services.
3. The Fund desires to retain the Adviser to render such services to the
Fund with respect to the Series in the manner and on the terms and
conditions hereinafter set forth.
4. Nothing contained herein shall be deemed to require the Fund to take
any action contrary to its Certificate of Trust, Agreement and
Declaration of Trust or any applicable statute or regulation, or to
relieve or deprive the Board of Trustees of the Fund of its
responsibility for, and control of, the conduct of the affairs of the
Fund.
For the reasons recited above, and in consideration of the mutual promises
contained herein, the Fund and Adviser agree as follows:
SECTION ONE
INVESTMENT ADVICE AND OTHER SERVICES
a. Adviser shall to the extent reasonably required in the conduct of the
business of the Fund with respect to the Series, place at the disposal of the
Series, its judgment and experience and furnish to the Series advice and
recommendations with respect to investments, investment policies, the purchase
and sale of securities, and the management of the resources of the Series.
Adviser shall also, from time to time, furnish to or place at the disposal of
the Series such reports and information relating to industries, businesses,
corporations or securities as may be reasonably required by the Series or as
Adviser may deem to be helpful to the Series in the administration of its
investments.
b. Adviser agrees to use its best efforts in the furnishing of such advice
and recommendations and in the preparation of such reports and information, and
for this purpose Adviser shall at all times maintain a staff of officers and
other trained personnel for the performance of its obligations under this
agreement. Adviser, may at its expense, employ other persons to furnish to
Adviser statistical and other factual information, advice regarding economic
factors and trends, information with respect to technical and scientific
developments and such other information, advice and assistance as Adviser may
desire.
<PAGE>
c. The Fund will from time to time furnish to Adviser detailed statements
of the investments and resources of the Series and information as to its
investment strategies and problems, and will make available to Adviser such
registration statements, financial reports, proxy statements, and legal and
other information relating to the investments of the Series as may be in
possession of the Fund or available to it.
SECTION TWO
COMPENSATION TO INVESTMENT ADVISER
a. The Fund agrees to pay to Adviser and Adviser agrees to accept, as full
compensation for all services rendered by Adviser hereunder, a fee at an annual
rate equal to 0.50% of the average daily net assets of the Series.
The fee will be paid monthly in arrears.
b. Adviser agrees that neither it nor any of its officers or trustees
shall take any long or short position in the shares of beneficial interest in
the Fund; provided that the Adviser or any of its officers or Trustees may
purchase shares of beneficial interest in the Fund at the price at which such
shares are available to the public at the moment of purchase; and provided
further that (1) such purchase is made for investment purposes only and (2) if
any shares of beneficial interest in the Fund so purchased are resold within two
months after the date of purchase, such fact will be immediately reported to the
Fund.
SECTION THREE
PAYMENT OF EXPENSES
a. The Adviser shall provide and furnish office space to the Fund and
provide personnel to administer the operations of the Fund with respect to the
Series. The Adviser shall pay all expenses associated with the sales promotion
of shares of the Series. The Fund will pay all other expenses incurred in the
operation of the Fund with respect to the Series.
b. The Adviser hereby agrees to reduce its fee hereunder in any fiscal
year of the Fund by any amount necessary to prevent expenses and liabilities of
the Series (excluding taxes, interest, brokerage commissions and extraordinary
expenses, determined by the Fund or Adviser for the Series, but inclusive of the
Adviser's fee for the Series) from exceeding an annual rate of 2.00% of the
average daily net assets of the Series. When the average daily net assets of the
Series exceed $100 million, the Adviser hereby agrees to reduce its fee for the
Series in any fiscal year by any amount necessary to prevent expenses and
liabilities of the Series (excluding taxes, interest, brokerage commissions and
extraordinary expenses, determined by the Fund or Adviser for the Series, but
inclusive of the Adviser's fee for the Series) from exceeding an annual rate of
1.50% of the average daily net assets of the Series.
<PAGE>
SECTION FOUR
DURATION; TERMINATION
a. This agreement shall begin on the day and year first above written and
shall continue in effect for a period of two years, if approved by vote of a
majority of the outstanding voting securities of the Series. After the initial
two years of this agreement, this agreement shall continue in effect from year
to year, subject to the provisions for termination and all of the other terms
and conditions hereof; provided that such continuation shall be specifically
approved at least annually (i) by vote of a majority of the Board of Trustees of
the Fund or by vote of a majority of the outstanding voting securities of the
Series, and (ii) by vote of a majority of the trustees of the Fund who are not
parties to this agreement or "interested persons" of any such party, cast in
person at a meeting called for the purpose of voting on such approval.
b. This agreement may be terminated by the Fund or the Adviser on sixty
days' notice in writing to the other party hereto, without the payment of any
penalty; provided that such termination on the part of the Fund is authorized by
resolution of the Board of Trustees of the Fund or by vote of a majority of the
outstanding voting securities of the Series.
c. This agreement shall automatically and immediately terminate in the
event of its assignment.
d. For the purposes of this agreement, the terms "interested persons,"
"vote of a majority of the outstanding voting securities," and "assignment"
shall have the meanings as provided in the Act and the rules and regulations
thereunder.
SECTION FIVE
AMENDMENT OF AGREEMENT
This agreement may be amended or modified to the extent, and in the manner,
permitted by the Act and the rules and regulations adopted thereunder; provided
that no amendment or modification of this agreement shall be effective unless
the same shall be in writing and signed by all of the parties hereto.
In witness whereof, the parties hereto have caused this agreement to be
signed by their respective officers thereunto duly authorized and their
respective corporate seals to be hereunto affixed, the day and year first above
written.
THE BERWYN FUNDS, THE KILLEN GROUP, INC.
on behalf of its Berwyn Income
Fund series
By /s/Kevin M. Ryan By /s/Robert E. Killen
Name: Kevin M. Ryan Name: Robert E. Killen
Title: Secretary and Treasurer Title: President
Exhibit No. EX-99.i
THE BERWYN FUNDS
1189 LANCASTER AVE FAX (610) 296-5057
BERWYN, PA 19312
(800) 992-6757
April 28, 2000
OPINION OF COUNSEL
I have examined the Agreement and Declaration of Trust (the
"Declaration of Trust") of the Berwyn Funds (the "Trust"), a business trust
organized under the laws of the State of Delaware on February 4, 1999, the
By-Laws of the Trust, and the resolutions adopted by the Trust's Board of
Trustees organizing the business of the Trust, all as amended to date, and the
various pertinent proceedings we deem material. I have also examined the
Notification of Registration and the Registration Statements filed under the
Investment Company Act of 1940 (the "Investment Company Act") and the Securities
Act of 1933 (the "Securities Act"), all as amended to date, as well as other
items we deem material to this opinion.
The Trust is authorized by its Declaration of Trust to issue an
unlimited number of shares of beneficial interest without a par value. The Trust
issues shares of the Berwyn Fund Series and the Berwyn Income Fund Series. The
Declaration of Trust designates, or authorizes the Trustees to designate, one or
more series or classes of shares of the Trust, and allocates, or authorizes the
Trustees to allocate, shares of beneficial interest to each such series or
class. The Declaration of Trust also empowers the Trustees to designate any
additional series or classes and allocate shares to such series or classes.
The Trust has filed with the U.S. Securities and Exchange Commission
(the "Commission"), a Registration Statement under the Securities Act, which
Registration Statement is deemed to register an indefinite number of shares of
the Trust pursuant to the provisions of Rule 24f-2 under the Investment Company
Act. The Trust has filed, and each year hereafter will timely file, a Notice
pursuant to Rule 24f-2 perfecting the registration of the shares sold by the
Trust during each fiscal year during which such registration of an indefinite
number of shares remains in effect.
The shares of the Trust have been, and will continue to be, sold in
accordance with the Trust's usual method of distributing its registered shares,
under which prospectuses are made available for delivery to offerees and
purchasers of such shares in accordance with Section 5(b) of the Securities Act.
Based upon the foregoing information and examination, so long as the
Trust remains a valid and subsisting trust under the laws of the State of
Delaware, and the registration of an indefinite number of shares of the Trust
remains effective, the authorized shares of the Trust when issued for the
consideration set by the Board of Trustees pursuant to the Declaration of Trust,
and subject to compliance with Rule 24f-2, will be legally outstanding,
fully-paid, and non-assessable shares, and the holders of such shares will have
all the rights provided for with respect to such holding by the Declaration of
Trust and the laws of the State of Delaware.
I hereby consent to the use of this opinion as an exhibit to the
Registration Statement of the Trust, and any amendments thereto, covering the
registration of the shares of the Trust under the Securities Act and the
applications, registration statements or notice filings, and amendments thereto,
filed in accordance with the securities laws of the several states in which
shares of the Trust are offered, and I further consent to reference in the
registration statement of the Trust to the fact that this opinion concerning the
legality of the issue has been rendered.
Very truly yours,
BY: /s/ Kevin M. Ryan
Kevin M. Ryan
Exhibit No. EX-99.j
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses and
Statements of Additional Information constituting parts of this
Post-Effective Amendment No. 16 to the registration statement on Form N-1A
(the "Registration Statement") of our reports dated February 16, 2000,
relating to the financial statements and financial highlights appearing in
the December 31, 1999 Annual Reports to Shareholders of Berwyn Fund and
Berwyn Income Fund and also consent to the references to us under the heading
"Financial Highlights" in the Prospectuses and under the headings "General
Information- Independent Accountants" and "Financial Statements" in the
Statements of Additional Information.
PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Philadelphia, PA
April 27, 2000
Exhibit No. EX-99.p.1
CODE OF ETHICS
OF
THE BERWYN FUNDS
PREAMBLE
This Code of Ethics is being adopted in compliance with the requirements of
Rule 17j-1 (the Rule) adopted by the United States Securities and Exchange
Commission under the Investment Company Act of 1940 (the Act) to effectuate the
purposes and objectives of that Rule. The Rule makes it unlawful for certain
persons, including any officer or trustee of The Berwyn Funds, in connection
with the purchase or sale by such person of a security held or to be acquired by
any portfolio series of The Berwyn Funds (The Berwyn Funds Trust has 2 portfolio
series, The Berwyn Fund and Berwyn Income Fund, and the Trust and its series
shall be termed the Fund):
1. To employ a device, scheme or artifice to defraud the Fund;
2. To make to the Fund any untrue statement of a material fact, or
omit to state to the Fund a material fact, necessary in order to
make the statements made, in light of the circumstances in which
they are made, not misleading;
3. To engage in any act, practice or course of business which operates,
or would operate, as a fraud or deception upon the Fund; or
4. To engage in a manipulative practice with respect to the Fund.
This Rule also requires that the Fund and The Killen Group adopt a
written code of ethics containing provisions reasonably necessary to
prevent persons from engaging in acts in violation of the above
standard and shall use reasonable diligence, and institute procedures
reasonably necessary, to prevent violation of the code.
Set forth below is the Code of Ethics adopted by the Board of Trustees of
the Fund in compliance with the Rule. This Code of Ethics is based upon the
principle that the trustees and officers of the Fund owe a fiduciary duty to,
among others, the shareholders of the Fund, to conduct their affairs,
including their personal securities transactions, in such manner to avoid (i)
serving their own personal interests ahead of investment clients;
<PAGE>
(ii) taking inappropriate advantage of their position with the Fund; and
(iii) any actual or potential conflicts of interest or any abuse of their
position of trust and responsibility.
1. DEFINITIONS
a. A security is "being considered for purchase or sale" or is "being
purchased or sold" when a recommendation to purchase or sell the security
has been made by the investment committee of the Adviser and communicated to
the trading desk, which includes when the Fund has a pending "buy" or "sell"
order with respect to a security, and, a recommendation includes when a
security is under consideration by the investment committee of the Adviser
as a candidate for purchase or sale. b."Beneficial ownership" shall be as
defined in, and interpreted in the same manner as it would be in,
determining whether a person is subject to the provisions of Section 16 of
the Securities Exchange Act of 1934 and the rules and regulations thereunder
which, generally speaking, encompasses those situations where the beneficial
owner has the right to enjoy some economic benefit from the ownership of the
security. A person is normally regarded as the beneficial owner of
securities held in the name of his or her spouse or minor children living in
his or her household. c."Control" shall have the same meaning as that set
forth in Section 2(a)(9) of the Act. d."Purchase or sale of a security"
includes the writing of an option to purchase or sell a security.
e."Security" shall have the meaning set forth in Section 2(a)(36) of the
Act, except that it shall not include securities issued by the government of
the United States or by federal agencies and which are direct obligations of
the United States, banker's acceptances, bank certificates of deposit,
commercial paper and shares of registered open-end investment companies.
f."Disinterested Trustee" means a Trustee of the Fund who is not an
"interested person" of the Fund within the meaning of Section 2(a)(19) of
the Act. g."Actual Knowledge" means knowledge that an individual possesses
or knowledge that an individual may reasonably be expected to acquire in the
performance of their duties.
2. PROHIBITED TRANSACTIONS
a. No trustee or officer of the Fund shall engage in any act, practice or
course of conduct, which would violate the provisions of Rule 17j-1 set
forth above. b.No trustee or officer of the Fund shall:
<PAGE>
(1)purchase or sell, directly or indirectly, any security in which he or
she has, or by reason of such transaction acquires, any direct or indirect
beneficial ownership and which to his or her actual knowledge at the time
of such purchase or sale, such security was being considered for purchase
or sale or was purchased or sold by the Fund during the seven calendar
days prior to or after the transaction of the trustee or officer.
(2)disclose to other persons the securities activities engaged in or
contemplated for the Fund; (3)seek or accept anything of value, either
directly or indirectly, from broker-dealers or other persons providing
services to the Fund because of such person's association with the Fund.
For the purposes of this provision, the following gifts from
broker-dealers or other persons providing services to the Fund will not be
considered to be in violation of this section:
(i) an occasional meal;
(ii) an occasional ticket to a sporting event, the theater or
comparable entertainment; (iii) a holiday gift of fruit or other foods,
provided, however, that such gift is made available to all members of
the recipient's department.
(4)acquire any securities in an initial public offering. (5)purchase any
securities in a private placement without prior approval of the Compliance
Officer or other officer designated by the Board of Trustees. Any person
authorized to purchase securities in a private placement shall disclose
that investment when they play a part in any subsequent consideration by
the Fund of an investment in the issuer. In such circumstances, the Fund's
decision to purchase securities of the issuer shall be subject to
independent review by the Fund's officers with no personal interest in the
issuer.
(6) serve on the board of directors of any publicly traded company
without prior authorization of the Chairman and/or President of the Fund.
Any such authorization shall be based upon a determination that the board
service would be consistent with the interest of the Fund and its
shareholders.
<PAGE>
3. EXEMPTED TRANSACTIONS
a.The prohibitions of Section 2(b) shall not apply to: (1) purchases or
sales effected in any account over which the employee has no direct or
indirect influence or control; (2) purchases or sales which are
non-volitional on the part of either the officer or trustee of the Fund;
(3) purchases which are part of an automatic dividend reinvestment plan;
and (4) purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its securities, to the extent such
rights were acquired from such issuer, and sales of such rights so
acquired.
4. COMPLIANCE PROCEDURES
a.Disclosure of Personal Holdings
All officers and trustees, with the exception of the Disinterested
Trustees, shall disclose to the Compliance Officer all personal securities
holdings upon commencement of employment. This initial report shall be made
on the form attached as Exhibit A. All officers and trustees, with the
exception of the Disinterested Trustees, shall be required to follow the
procedures listed in this paragraph. If an officer or trustee has a
brokerage account, copies of trade confirmations and monthly statements
shall be sent to the Compliance Officer. An officer or trustee shall be
required to obtain pre-clearance for all securities transactions from the
Compliance Officer. The officer or trustee shall submit a request for
clearance in writing listing the details of the proposed transaction, such
as the name of the security, type of transaction, amount of the security
involved in the transactions, and the broker-dealer that will be used. The
Compliance Officer will respond in writing within 24 hours of receipt of the
request. In the absence of the Compliance Officer, the request is to be
submitted to the Chief Operating Officer of the Fund's adviser.
b.Certification of Compliance with Code of Ethics
(1) Every officer and trustee, with the exception of Disinterested
Trustees, shall certify annually that:
<PAGE>
(i) they have read and understand the Code of Ethics and recognize
that they are subject thereto;
(ii) they have complied with the requirements of the Code of
Ethics; and
(iii) they have reported all personal securities transactions
required to be reported pursuant to the requirements of the Code of
Ethics.
The annual report shall be made on the form attached as Exhibit B.
c.Reporting Requirements - Disinterested Trustees (1) Each trustee who is
not an "interested person" of the Fund as defined in the Act shall report
a transaction in a security if the trustee knew or may reasonably be
expected to know that the security was in the portfolios of the Fund. A
disinterested trustee shall obtain clearance for a transaction in a
security if such trustee knew or may reasonably be expected to know that
such security was being considered for purchase or sale or was being
purchased or sold by the Fund. The procedure for obtaining clearance of a
transaction shall be the same as the procedure outlined in 4(a) of this
Code for officers and interested trustees. Reports under this paragraph
will include the information described in sub-paragraph (2) of this
section. (2) Reports required to be made under this Paragraph (c) shall be
made not later than 10 days after the end of the calendar quarter in which
the transaction to which the report relates was effected. Every officer
and trustee shall be required to submit a report for all periods,
including those periods in which no securities transactions were effected.
A report shall be made on the form attached hereto as Exhibit C or on any
other form containing the following information:
(i) the date of the transaction, the title and the number of
shares, and the principal amount of each security involved;
(ii) the nature of the transaction (i.e., purchase, sale or
any other type of acquisition or disposition);
(iii) the price at which the transaction was effected; and
(iv) the name of the broker, dealer or bank with or through whom the
transaction was effected.
<PAGE>
d.Conflict of Interest
Every officer and trustee shall notify the Compliance Officer of any
personal conflict of interest relationship which may involve the Fund, such
as the existence of any economic relationship between their transactions and
securities held or to be acquired by any client of the Fund. Such
notification shall occur in the pre-clearance process.
5. REPORTING OF VIOLATIONS TO THE BOARD OF TRUSTEES
a.The Compliance Officer shall promptly report to the Board of Trustees:
(1)all apparent violations of this Code of Ethics and the reporting
requirements thereunder; and (2)any reported transaction in a security
which was purchased or sold by the Fund or is being considered for
purchase or sale.
b.The Board of Trustees, or a Committee of Trustees created by the Board of
Trustees for that purpose, shall consider reports made to the Board of
Trustees hereunder and shall determine whether or not this Code of Ethics
has been violated and what sanctions, if any, should be imposed.
6. SANCTIONS
Upon discovering a violation of this Code, the Board of Trustees may impose
such sanctions as they deem appropriate, including, among other things, a letter
of censure or suspension or termination of the employment of the violator.
7. RETENTION OF RECORDS
This Code of Ethics, a copy of each report made by an officer or trustee
hereunder, each memorandum made by the Compliance Officer hereunder and a record
of any violation hereof and any action taken as a result of such violation,
shall be maintained by the Fund as required under Rule 17j-1.
<PAGE>
Exhibit A
THE BERWYN FUNDS
CODE OF ETHICS
INITIAL REPORT
To the Compliance Officer of The Berwyn Funds (the Fund) :
1.I have read and understand the Code and recognize that I am subject to
it.
2.Except as noted below, I hereby certify that I have no knowledge of the
existence of any personal conflict of interest relationship which may involve
the Fund such as any economic relationship between my transactions and
securities held or to be acquired by the Fund.
3.As of the date below I have a direct or indirect beneficial ownership in
the securities which are listed below or in the attached brokerage statement(s).
(If not applicable, please state in the space below.):
Type of Interest
Name of Security Number of shares (Direct or
indirect)
4.I have direct or indirect ownership of a brokerage account(s) maintained
at ________________________________________( insert name of brokerage firm). I
understand that in compliance with the Code I must have copies of my brokerage
trade confirmations and monthly statements sent to the Compliance Officer.
Date:_____________________ ____________________________________
Signature
------------------------------------
Print Name
------------------------------------
Title
Note: Please use reverse side if more space is needed for any answer.
<PAGE>
Exhibit B
THE BERWYN FUNDS
CODE OF ETHICS
ANNUAL REPORT
To the Compliance Officer of The Berwyn Funds (the Fund):
1.I have read and understand the Code and recognize that I am subject to
it.
2.I hereby certify that, during the year ended December 31, 19___, I have
complied with the requirements of the Code. I have supplied reports of all
securities transactions required to be reported pursuant to the Code and have
reported any new brokerage accounts required by the Code.
3.Except as noted below, I hereby certify that I have no knowledge of the
existence of any personal conflict of interest relationship which may involve
the Fund such as any economic relationship between my transactions and
securities held or to be acquired by the Fund.
Date:_____________________ ____________________________________
Signature
------------------------------------
Print Name
------------------------------------
Title
Exhibit C
THE BERWYN FUNDS
SECURITIES TRANSACTIONS REPORT
FOR THE CALENDAR QUARTER ENDED ___________________
To the Compliance Officer of The Berwyn Funds (the Fund):
During the quarter I had no transactions, either direct or indirect,
required to be reported pursuant to the Code of Ethics. I also have opened no
brokerage accounts required to be reported that have not heretofore been
reported to the Compliance Officer.
The foregoing excludes transactions with respect to which I had no direct
or indirect influence or control and other transactions not required to be
reported.
Except as noted on the reverse side of this report, I hereby certify that
I have no knowledge of the existence of any personal conflict of interest
relationship which may involve the Fund, such as the existence of any economic
relationship between my transactions and securities held or to be acquired by
the Fund.
Date:_____________________ ____________________________________
Signature
------------------------------------
Print Name
------------------------------------
Title
Exhibit No. EX-99.p.2
CODE OF ETHICS
OF
THE KILLEN GROUP
PREAMBLE
This Code of Ethics is being adopted in compliance with the requirements of
Rule 17j-1 (the Rule) adopted by the United States Securities and Exchange
Commission under the Investment Company Act of 1940 (the Act) to effectuate the
purposes and objectives of that Rule. The Rule requires Investment Advisers to
mutual funds to adopt Codes of Ethics that contain provisions reasonably
necessary to prevent employees of the adviser from engaging in acts in violation
of the Rule, and to use reasonable diligence and institute procedures reasonably
necessary to prevent violations of the Code. The Rule applies to The Killen
Group (TKG), since it is a registered investment adviser and is the adviser to
two mutual funds, The Berwyn Fund and Berwyn Income Fund ("Funds"). The Rule
makes it unlawful for certain persons, including certain employees of the
Adviser to a Fund, in connection with the purchase or sale by such person of a
security held or to be acquired by the Funds: 1. To employ a device, scheme or
artifice to defraud the Funds; 2. To make to the Funds any untrue statement of a
material fact, or omit to
state to the Funds a material fact, necessary in order to make the
statements made, in light of the circumstances in which they are made,
not misleading;
3. To engage in any act, practice or course of business which operates, or
would operate, as a fraud or deception upon the Funds; or
4. To engage in a manipulative practice with respect to the Funds. Set forth
below is the Code of Ethics adopted by the Board of Directors of TKG in
compliance with the Rule. It is the intention of the board that this Code will
not only regulate the conduct of employees of TKG in regard to the Funds but in
regard to all investment clients of TKG. This Code of Ethics is based upon the
principle that the employees of TKG owe a fiduciary duty to the investment
clients of TKG to conduct their affairs, including their personal securities
transactions, in such manner to avoid
<PAGE>
(i) serving their own personal interests
ahead of investment clients; (ii) taking inappropriate advantage of their
position with TKG; and (iii) any actual or potential conflicts of interest or
any abuse of their position of trust and responsibility.
1. DEFINITIONS
a.A security is "being considered for purchase or sale" or is "being
purchased or sold" when a recommendation to purchase or sell the security
has been made by the investment committee and communicated to the traders or
portfolio managers, which includes when TKG has a pending "buy" or "sell"
order with respect to a security, and, a recommendation includes when a
security is under consideration by the investment committee as a candidate
for purchase or sale. b."Beneficial ownership" shall be as defined in, and
interpreted in the same manner as it would be in, determining whether a
person is subject to the provisions of Section 16 of the Securities Exchange
Act of 1934 and the rules and regulations thereunder which, generally
speaking, encompasses those situations where the beneficial owner has the
right to enjoy some economic benefit from the ownership of the security. A
person is normally regarded as the beneficial owner of securities held in
the name of his or her spouse or minor children living in his or her
household. c."Control" shall have the same meaning as that set forth in
Section 2(a)(9) of the Act. d."Purchase or sale of a security" includes the
writing of an option to purchase or sell a security. e."Security" shall have
the meaning set forth in Section 2(a)(36) of the Act, except that it shall
not include securities issued by the government of the United States or by
federal agencies and which are direct obligations of the United States,
banker's acceptances, bank certificates of deposit, commercial paper and
shares of registered open-end investment companies.
2. PROHIBITED TRANSACTIONS
a.No employee shall engage in any act, practice or course of conduct, which
would violate the provisions of Rule 17j-1 set forth above.
b.No employee shall:
<PAGE>
(1)purchase or sell, directly or indirectly, any security in which he or
she has, or by reason of such transaction acquires, any direct or indirect
beneficial ownership and which to his or her actual knowledge at the time
of such purchase or sale, such security was being considered for purchase
or sale by TKG or was purchased or sold by TKG during the seven calendar
days prior to or after the transaction of the employee. (2)disclose to
other persons the securities activities engaged in or contemplated for the
various portfolios of TKG; (3)seek or accept anything of value, either
directly or indirectly, from broker-dealers or other persons providing
services to TKG because of such person's association with TKG. For the
purposes of this provision, the following gifts from broker-dealers or
other persons providing services to TKG will not be considered to be in
violation of this section:
(i) an occasional meal;
(ii) an occasional ticket to a sporting event, the theater or
comparable entertainment, for which the employee will reimburse the
host; (iii) a holiday gift of fruit or other foods, provided, however,
that such gift is made available to all members of the recipient's
department.
(4)acquire any securities in an initial public offering. (5)purchase any
securities in a private placement without prior approval of the Compliance
Officer or other officer designated by the Board of Directors. Any person
authorized to purchase securities in a private placement shall disclose
that investment when they play a part in any subsequent consideration of
an investment in the issuer. In such circumstances, TKG's decision to
purchase securities of the issuer shall be subject to independent review
by TKG's officers with no personal interest in the issuer. (6) serve on
the board of directors of any publicly traded company without prior
authorization of the Chairman and/or President of TKG. Any such
authorization shall be based upon a determination that the board service
would be consistent with the interest of TKG and its clients.
3. EXEMPTED TRANSACTIONS
a.The prohibitions of Section 2(b) shall not apply to:
<PAGE>
(1) purchases or
sales effected in any account over which the employee has no direct or
indirect influence or control; (2) purchases or sales which are
non-volitional on the part of either the employee or TKG; (3) purchases
which are part of an automatic dividend reinvestment plan; and (4)
purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities, to the extent such
rights were acquired from such issuer, and sales of such rights so
acquired.
4. COMPLIANCE PROCEDURES
a.Disclosure of Personal Holdings
All employees shall disclose to the Compliance Officer all personal
securities holdings upon commencement of employment. This initial report
shall be made on the form attached as Exhibit A. If an employee has a
brokerage account, copies of trade confirmations and monthly statements
shall be sent to the Compliance Officer.
b. Pre-Clearance of Trade
An employee shall be required to obtain pre-clearance for all securities
transactions from the Compliance Officer. The employee shall submit a
request for clearance (Exhibit B) in writing listing the details of the
proposed transaction, such as the name of the security, type of transaction,
amount of the security involved in the transaction, and the broker-dealer
that will be used. The Compliance Officer will respond in writing within 24
hours of receipt of the request. In the absence of the Compliance Officer,
the request is to be submitted to the Chief Operating Officer.
c.Quarterly Securities Transaction Report
All employees who do not submit copies of trade confirmations and monthly
brokerage statements to the Compliance Officer shall be required to complete
a Quarterly Securities Transactions Report (Exhibit C) within 10 days of the
close of each calendar quarter.
d.Certification of Compliance with Code of Ethics (1) Every employee shall
certify annually that:
<PAGE>
(i) they have read and understand the Code of Ethics and recognize
that they are subject thereto;
(ii) they have complied with the requirements of the code of Ethics;
and (iii) they have reported all personal securities transactions
required to be reported pursuant to the requirements of the Code of
Ethics.
The annual report shall be made on the form attached as Exhibit D.
e.Conflict of Interest
Every employee shall notify the Compliance Officer of any personal
conflict of interest relationship which may involve TKG, such as the
existence of any economic relationship between their transactions and
securities held or to be acquired by any client of TKG. Such notification
shall occur in the pre-clearance process.
a.The Compliance Officer shall promptly report to the Board of Directors:
(1)all apparent violations of this Code of Ethics and the reporting
requirements thereunder; and (2)any reported transaction in a security
which was purchased or sold by TKG or is being considered for purchase or
sale.
b.When the Compliance Officer finds that a transaction otherwise reportable
to the Board of Directors under Paragraph (a) of this section could not
reasonably be found to have resulted in a fraud, deceit or manipulative
practice in violation of Rule 17j-1(a), he or she may, in his or her
discretion, lodge a written memorandum of such finding and the reasons
therefor with the reports made pursuant to this Code of Ethics, in lieu of
reporting the transaction to the Board of Directors.
c.The Board of Directors, or a Committee of Directors created by the Board
of Directors for that purpose, shall consider reports made to the
Board of Directors hereunder and shall determine whether or not this
Code of Ethics has been violated and what sanctions, if any, should be
imposed.
<PAGE>
6. SANCTIONS
Upon discovering a violation of this Code, the Board of Directors may impose
such sanctions as they deem appropriate, including, among other things, a letter
of censure or suspension or termination of the employment of the violator.
7. RETENTION OF RECORDS
This Code of Ethics, a copy of each report made by an employee hereunder,
each memorandum made by the Compliance Officer hereunder and a record of any
violation hereof and any action taken as a result of such violation, shall be
maintained by TKG as required under Rule 17j-1.
<PAGE>
Exhibit A
THE KILLEN GROUP
CODE OF ETHICS
INITIAL REPORT
To the Compliance Officer of The Killen Group, Inc. (TKG):
1.I have read and understand the Code and recognize that I am subject to
it.
2.Except as noted below, I hereby certify that I have no knowledge of the
existence of any personal conflict of interest relationship which may involve
TKG, such as any economic relationship between my transactions and securities
held or to be acquired by TKG.
3.As of the date below I have a direct or indirect beneficial ownership in
the securities which are listed below or in the attached brokerage statement(s).
(If not applicable, please state in the space below.):
Type of Interest
Name of Security Number of shares (Direct or
indirect)
4.I have direct or indirect ownership of a brokerage account(s) maintained
at ________________________________________( insert name of brokerage firm). I
understand that in compliance with the Code I must have copies of my brokerage
trade confirmations and monthly statements sent to the Compliance Officer.
Date:_____________________ ____________________________________
Employee Signature
------------------------------------
Print Name
------------------------------------
Title
Note: Please use reverse side if more space is needed for any answer.
<PAGE>
Exhibit B
REQUEST for CLEARANCE
of
SECURITY TRANSACTON
Name of Employee: Date:
Name of Security:
Transaction: Buy _____ Sell _____ Amount:
------------
Broker/Dealer:
<PAGE>
Exhibit C
THE KILLEN GROUP, INC.
SECURITIES TRANSACTIONS REPORT
FOR THE CALENDAR QUARTER ENDED ___________________
To the Compliance Officer of The Killen Group, Inc. (TKG):
During the quarter I had no transactions, either direct or indirect,
required to be reported pursuant to the Code of Ethics. I also have opened no
brokerage accounts required to be reported that have not heretofore been
reported to the Compliance Officer.
The foregoing excludes transactions with respect to which I had no direct
or indirect influence or control and other transactions not required to be
reported.
Except as noted on the reverse side of this report, I hereby certify that
I have no knowledge of the existence of any personal conflict of interest
relationship which may involve TKG, such as the existence of any economic
relationship between my transactions and securities held or to be acquired by
TKG.
Date:_____________________ ____________________________________
Employee Signature
------------------------------------
Print Name
------------------------------------
Title
<PAGE>
Exhibit D
THE KILLEN GROUP
CODE OF ETHICS
ANNUAL REPORT
To the Compliance Officer of The Killen Group, Inc. (TKG):
1.I have read and understand the Code and recognize that I am subject to
it.
2.I hereby certify that, during the year ended December 31, 19___, I have
complied with the requirements of the Code. I have supplied reports of all
securities transactions required to be reported pursuant to the Code and have
reported any new brokerage accounts required by the Code.
3.Except as noted below, I hereby certify that I have no knowledge of the
existence of any personal conflict of interest relationship, which may involve
TKG, such as any economic relationship between my transactions and securities
held or to be acquired by TKG.
Date:_____________________ ____________________________________
Employee Signature
------------------------------------
Print Name
------------------------------------
Title
EXHIBIT No. EX-99.p.3
CODE OF ETHICS
OF
THE BERWYN FUNDS
BERWYN FINANCIAL SERVICES CORP.
PREAMBLE
This Code of Ethics is being adopted for The Berwyn Funds and Berwyn
Financial Services Corp., the distributor of shares of the series of The Berwyn
Funds (the "Distributor"), in compliance with the requirements of Rule 17j-1
(the Rule) adopted by the United States Securities and Exchange Commission under
the Investment Company Act of 1940 (the Act) to effectuate the purposes and
objectives of that Rule. The Rule makes it unlawful for certain persons,
including any officer or trustee of The Berwyn Funds or any officer or director
of the Distributor, in connection with the purchase or sale by such person of a
security held or to be acquired by any portfolio series of The Berwyn Funds (The
Berwyn Funds is a Delaware business trust (the "Trust") that has 2 portfolio
series, the Berwyn Fund and Berwyn Income Fund, and the Trust and its series
shall be termed the Fund):
1. To employ a device, scheme or artifice to defraud the Fund;
2. To make to the Fund any untrue statement of a material fact, or
omit to
state to the Fund a material fact, necessary in order to make the
statements made, in light of the circumstances in which they are made,
not misleading;
3. To engage in any act, practice or course of business which operates, or
would operate, as a fraud or deception upon the Fund; or
4. To engage in a manipulative practice with respect to the Fund.
This Rule also requires that the Fund, The Killen Group, Inc. (the adviser
to the Fund), and the Distributor adopt a written code of ethics containing
provisions reasonably necessary to prevent persons from engaging in acts in
violation of the above standard and shall use reasonable diligence, and
institute procedures reasonably necessary, to prevent violation of the code.
Set forth herein is the Code of Ethics for the Fund, approved by the Board
of Trustees of the Fund, and for the Distributor, approved by the Board of
Directors of the Distributor, in compliance with the Rule. This Code of Ethics
is based upon the principle that the trustees and officers of the Fund, and the
directors and officers of the Distributor, owe a fiduciary duty to, among
others, the shareholders of the Fund, to conduct their affairs, including their
personal securities transactions, in such manner to avoid (i) serving their own
personal interests ahead of investment clients; (ii) taking inappropriate
advantage of their position with the Fund; and (iii) any actual or potential
conflicts of interest or any abuse of their position of trust and
responsibility.
1. DEFINITIONS
a."Access Person" means any trustee or officer of the Fund or any director
or officer of the Distributor who, in the ordinary course of business,
makes, participates in or obtains information regarding the purchase of
securities by the Fund for which the Distributor acts, or whose functions or
duties in the ordinary course of business relate to the making of any
recommendation to the Fund regarding the purchase or sale of securities.
b.A
security is "being considered for purchase or sale" or is "being purchased
or sold" when a recommendation to purchase or sell the security has been
made by the investment committee of the Adviser and communicated to the
trading desk, which includes when the Fund has a pending "buy" or "sell"
order with respect to a security, and, a recommendation includes when a
security is under consideration by the investment committee of the Adviser
as a candidate for purchase or sale.
c."Beneficial ownership" shall be as
defined in, and interpreted in the same manner as it would be in,
determining whether a person is subject to the provisions of Section 16 of
the Securities Exchange Act of 1934 and the rules and regulations thereunder
which, generally speaking, encompasses those situations where the beneficial
owner has the right to enjoy some economic benefit from the ownership of the
security. A person is normally regarded as the beneficial owner of
securities held in the name of his or her spouse or minor children living in
his or her household.
d."Control" shall have the same meaning as that set
forth in Section 2(a)(9) of the Act.
e."Purchase or sale of a security"
includes the writing of an option to purchase or sell a security.
f."Security" shall have the meaning set forth in Section 2(a)(36) of the
Act, except that it shall not include securities issued by the government of
the United States or by federal agencies and which are direct obligations of
the United States, banker's acceptances, bank certificates of deposit,
commercial paper and shares of registered open-end investment companies.
g."Disinterested Trustee" means a Trustee of the Fund who is not an
"interested person" of the Fund within the meaning of Section 2(a)(19) of
the Act. h."Actual Knowledge" means knowledge that an individual possesses
or knowledge that an individual may reasonably be expected to acquire in the
performance of their duties.
2. PROHIBITED TRANSACTIONS
a.No Access Person shall engage in any act, practice or course of conduct,
which would violate the provisions of Rule 17j-1 set forth above.
b.No Access Person shall:
(1)purchase or sell, directly or indirectly, any security in which he or
she has, or by reason of such transaction acquires, any direct or indirect
beneficial ownership and which to his or her actual knowledge at the time
of such purchase or sale, such security was being considered for purchase
or sale or was purchased or sold by the Fund during the seven calendar
days prior to or after the transaction of the Access Person.
(2)disclose to other persons the securities activities engaged
in or contemplated for the Fund; (3)seek or accept anything of value,
either directly
or indirectly, from broker-dealers or other persons providing services
to the Fund because of such person's association with the Fund. For the
purposes of this provision, the following gifts from broker-dealers
or other persons providing services to the Fund will not be considered to
be in violation of this section:
(i) an occasional meal;
(ii) an occasional ticket to a sporting event, the theater or
comparable entertainment;
(iii) a holiday gift of fruit or other foods,
provided, however, that such gift is made available to all members of
the recipient's department.
(4)acquire any securities in an initial public offering.
(5)purchase any
securities in a private placement without prior approval of the Compliance
Officer or other officer designated by the Board of Trustees. Any person
authorized to purchase securities in a private placement shall disclose
that investment when they play a part in any subsequent consideration by
the Fund of an investment in the issuer. In such circumstances, the Fund's
decision to purchase securities of the issuer shall be subject to
independent review by the Fund's officers with no personal interest in the
issuer.
(6) serve on the board of directors of any publicly traded company
without prior authorization of the Chairman and/or President of the Fund.
Any such authorization shall be based upon a determination that the board
service would be consistent with the interest of the Fund and its
shareholders.
3. EXEMPTED TRANSACTIONS
a.The prohibitions of Section 2(b) shall not apply to:
(1) purchases or
sales effected in any account over which the employee has no direct or
indirect influence or control;
(2) purchases or sales which are
non-volitional on the part of the Access Person;
(3) purchases which are
part of an automatic dividend reinvestment plan; and
(4) purchases
effected upon the exercise of rights issued by an issuer pro rata to all
holders of a class of its securities, to the extent such rights were
acquired from such issuer, and sales of such rights so acquired.
4. COMPLIANCE PROCEDURES
a.Disclosure of Personal Holdings
All Access Persons, with the exception of the Disinterested Trustees,
shall disclose to the Compliance Officer of the Fund or Distributor, as
applicable, all personal securities holdings upon commencement of
employment. This initial report shall be made on the form attached as
Exhibit A. All Access Persons, with the exception of the Disinterested
Trustees, shall be required to follow the procedures listed in this
paragraph. If an Access Person has a brokerage account, copies of trade
confirmations and monthly statements shall be sent to the appropriate
Compliance Officer. An Access Person shall be required to obtain
pre-clearance for all securities transactions from the appropriate
Compliance Officer. The Access Person shall submit a request for clearance
in writing listing the details of the proposed transaction, such as the name
of the security, type of transaction, amount of the security involved in the
transactions, and the broker-dealer that will be used. The Compliance
Officer will respond in writing within 24 hours of receipt of the request.
In the absence of the Compliance Officer, the request is to be submitted to
the Chief Operating Officer of the Fund's adviser.
b.Certification of Compliance with Code of Ethics
(1) Every Access Person, with the exception of Disinterested Trustees,
shall certify annually that:
(i) they have read and understand the Code of Ethics and recognize
that they are subject thereto;
(ii) they have complied with the requirements of the Code of Ethics;
and (iii) they have reported all personal securities transactions
required to be reported pursuant to the requirements of the Code of
Ethics.
The annual report shall be made on the form attached as Exhibit B.
c.Reporting Requirements
(1) Disinterested Trustee - Each trustee who is not an "interested person"
of the Fund as defined in the Act shall report a transaction in a security
if the trustee knew or may reasonably be expected to know that the
security was in the portfolios of the Fund. A disinterested trustee shall
obtain clearance for a transaction in a security if such trustee knew or
may reasonably be expected to know that such security was being considered
for purchase or sale or was being purchased or sold by the Fund. The
procedure for obtaining clearance of a transaction shall be the same as
the procedure outlined in 4(a) of this Code for other Access Persons.
Reports under this paragraph will include the information described in
sub-paragraph (2) of this section. (2) Reports required to be made under
this Paragraph (c) shall be made not later than 10 days after the end of
the calendar quarter in which the transaction to which the report relates
was effected. Every Access Person shall be required to submit a report for
all periods, including those periods in which no securities transactions
were effected. A report shall be made on the form attached hereto as
Exhibit C or on any other form containing the following information:
(i) the date of the transaction, the title and the number of
shares, and the principal amount of each security involved;
(ii) the nature of the transaction (i.e., purchase, sale or
any other type of acquisition or disposition);
(iii) the price at which the transaction was effected; and
(iv) the name of the broker, dealer or bank with or through whom the
transaction was effected.
d.Conflict of Interest
Every Access Person shall notify the appropriate Compliance Officer of any
personal conflict of interest relationship which may involve the Fund, such
as the existence of any economic relationship between their transactions and
securities held or to be acquired by any client of the Fund. Such
notification shall occur in the pre-clearance process.
5. REPORTING OF VIOLATIONS TO THE BOARD OF TRUSTEES
a.The Compliance Officer shall promptly report to the Board of Trustees:
(1)all apparent violations of this Code of Ethics and the reporting
requirements thereunder; and (2)any reported transaction in a security
which was purchased or sold by the Fund or is being considered for
purchase or sale.
b The Board of Trustees, or a Committee of Trustees created by the Board of
Trustees for that purpose, shall consider reports made to the Board of
Trustees hereunder and shall determine whether or not this Code of Ethics
has been violated and what sanctions, if any, should be imposed.
6. SANCTIONS
Upon discovering a violation of this Code, the Board of Trustees may impose
such sanctions as they deem appropriate, including, among other things, a letter
of censure or suspension or termination of the employment of the violator.
7. RETENTION OF RECORDS
This Code of Ethics, a copy of each report made by an Access Person
hereunder, each memorandum made by the Compliance Officer hereunder and a record
of any violation hereof and any action taken as a result of such violation,
shall be maintained by the Fund and Distributor as required under Rule 17j-1.
<PAGE>
Exhibit A
THE BERWYN FUNDS
BERWYN FINANCIAL SERVICES CORP.
CODE OF ETHICS
INITIAL REPORT
To the Compliance Officer:
1.I have read and understand the Code and recognize that I am subject to
it.
2.Except as noted below, I hereby certify that I have no knowledge of the
existence of any personal conflict of interest relationship which may involve
the Fund such as any economic relationship between my transactions and
securities held or to be acquired by the Fund.
3.As of the date below I have a direct or indirect beneficial ownership in
the securities which are listed below or in the attached brokerage statement(s).
(If not applicable, please state in the space below.):
Type of Interest
Name of Security Number of shares (Direct or
indirect)
4.I have direct or indirect ownership of a brokerage account(s) maintained
at ________________________________________( insert name of brokerage firm). I
understand that in compliance with the Code I must have copies of my brokerage
trade confirmations and monthly statements sent to the Compliance Officer.
Date:_____________________ ____________________________________
Signature
------------------------------------
Print Name
------------------------------------
Title
Note: Please use reverse side if more space is needed for any answer.
<PAGE>
Exhibit B
THE BERWYN FUNDS
BERWYN FINANCIAL SERVICES CORP.
CODE OF ETHICS
ANNUAL REPORT
To the Compliance Officer:
1.I have read and understand the Code and recognize that I am subject to
it.
2.I hereby certify that, during the year ended December 31, 20___, I have
complied with the requirements of the Code. I have supplied reports of all
securities transactions required to be reported pursuant to the Code and have
reported any new brokerage accounts required by the Code.
3.Except as noted below, I hereby certify that I have no knowledge of the
existence of any personal conflict of interest relationship which may involve
the Fund such as any economic relationship between my transactions and
securities held or to be acquired by the Fund.
Date:_____________________ ____________________________________
Signature
------------------------------------
Print Name
------------------------------------
Title
<PAGE>
Exhibit C
THE BERWYN FUNDS
BERWYN FINANCIAL SERVICES CORP.
SECURITIES TRANSACTIONS REPORT
FOR THE CALENDAR QUARTER ENDED ___________________
To the Compliance Officer:
During the quarter I had no transactions, either direct or indirect,
required to be reported pursuant to the Code of Ethics. I also have opened no
brokerage accounts required to be reported that have not heretofore been
reported to the Compliance Officer.
The foregoing excludes transactions with respect to which I had no direct
or indirect influence or control and other transactions not required to be
reported.
Except as noted on the reverse side of this report, I hereby certify that
I have no knowledge of the existence of any personal conflict of interest
relationship which may involve the Fund, such as the existence of any economic
relationship between my transactions and securities held or to be acquired by
the Fund.
Date:_____________________ ____________________________________
Signature
------------------------------------
Print Name
------------------------------------
Title
