[LOGO]
- --------------------------------------------------------------------------------
Mail this completed application to MUTUAL
the Fund's transfer agent: SERIES
Mutual Series Fund Inc. FUND
c/o PFPC Inc. INC.
P.O. Box 8901
Wilmington, DE 19899-8901
If using an overnight express delivery service
send to:
Mutual Series Fund Inc.
c/o PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809-3710
- ----------------------------------------------
PROSPECTUS
AND
APPLICATION
-----------
PROSPECTUS
Dated June 25, 1996
- ---------------------------------------
If you have any questions after reading As Supplemented
this prospectus, please call the FUND August 1, 1996
1-800-448-FUND
- --------------------------------------- Mutual European Fund
will begin operations
on July 3, 1996.
<PAGE>
Transfer Agent and Fund Addresses
Please mail new account applications, redemption requests and all
other correspondence to:
Mutual Series Fund
c/o PFPC Inc.
P.O. Box 8901
Wilmington, DE 19899-8901
Please mail additional investments for existing accounts to:
Mutual Series Fund
c/o PFPC Inc.
P.O. Box 8906
Wilmington, DE 19899-8906
All mail sent by any overnight carrier or priority mail should be
addressed to:
Mutual Series Fund
c/o PFPC Inc.
400 Bellevue Parkway -- Suite 108
Wilmington, DE 19809-3710
Any correspondence directed to the Fund's office rather than its
transfer agent should be sent to:
Mutual Series Fund
51 John F. Kennedy Parkway
Short Hills, NJ 07078
Important Phone Numbers
1-800-858-3013
Mutual Series Fund Automated Telephone Inquiry System
Call this number 24 hours a day, 7 days a week.
It's the fastest way to receive net asset value, account balance and
distribution information, order duplicate statements, and confirm
your last purchase or redemption transaction.
1-800-448-FUND
Mutual Series Shareholder Services Department
Call this number Monday-Friday, 8:00 a.m. to 6:00 p.m. EST
A shareholder service representative will be happy to answer you
questions or perform purchase transactions for existing
shareholders (see page 17).
1-800-553-3014
Mutual Series Fund Prospectus/Document Requests
Call this number 24 hours a day, 7 days a week.
A representative will be happy to send you prospectus, applications,
annual reports or retirement account documents.
Wire Instructions
To wire an investment into an existing account, wire funds to:
PNC Bank
PHL/ABA #0310-0005-3
Attention: Mutual Series Fund
Purchase Account DDA 8551030376
[Series Name]
[Shareholder Account Number]
[Order/Confirm Number]
<PAGE>
PROSPECTUS
Dated June 25, 1996
As Supplemented
August 1, 1996
MUTUAL SERIES FUND INC. Mutual European Fund
51 John F. Kennedy Parkway will begin operations
Short Hills, NJ 07078 on July 3, 1996.
Mutual Series Fund Inc. (the "Fund") is a no-load, diversified, open-end
management investment company organized as a series fund with five series
currently available. Each of Mutual Shares Fund ("Mutual Shares") originally
organized in 1949, Mutual Qualified Fund ("Qualified") and Mutual Beacon Fund
("Beacon") and Mutual European Fund ("European"), has capital appreciation,
which occasionally may be short term, as its principal investment objective and
income as its secondary objective. Mutual Discovery Fund ("Discovery") has
long-term capital appreciation as its objective which it will seek to achieve by
including investments in small capitalization companies. European anticipates
having at least 65% of its invested assets invested in European investments.
Each series may invest in the securities of companies involved in prospective
mergers, consolidations, liquidations and reorganizations, or as to which there
exist tender or exchange offers. The series may also invest in other debt and
equity securities including junk bonds as described on page 9. Each series may
invest up to 15% of its net assets in illiquid securities; this could result in
more risk as well as higher transaction costs than investing in more liquid
assets.
This Prospectus sets forth concisely the information that a prospective
investor should know before investing in any series of the Fund. Please retain
this Prospectus for future reference. A Statement of Additional Information,
dated June 25, 1996, containing additional and more detailed information about
the Fund and its series has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. The Statement of Additional
Information and the most recent Annual Report of each series which contains
additional performance information can be obtained without charge by calling the
Fund at 1-800-553-3014, or writing to the Fund at its above address, Attention:
Shareholder Services.
If you have any questions after reading the prospectus please call the Fund
at 1-800-448-FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
----------
Investment Adviser
HEINE SECURITIES CORPORATION
Investors should be aware that the Adviser has entered into a definitive
agreement to sell its assets to an affiliate of Franklin Resources, Inc. (the
"Transaction"). The investment personnel currently involved in managing each
series, including Michael F. Price, will continue in their present capacities
and the investment objectives and policies of each series will remain intact.
The substantive terms of the advisory agreements and the advisory fees will
remain unchanged, but the Transaction will change the ownership of the
investment adviser. The Transaction was unanimously approved by the Fund's Board
of Directors and is conditioned upon the approval of the new advisory agreements
by shareholders. The Board of Directors has determined that shareholders of
record as of the close of business on July 31, 1996 will be entitled to vote on
the new advisory agreements at a shareholders meeting to be held on October 25,
1996 and any adjournments thereof.
<PAGE>
ANNUAL EXPENSE TABLES
Annual Mutual Shares Fund Operating Expenses
(as a percentage of average net assets)
Management Fees ................... .60%
Other Expenses .................... .09%
----
Total Fund Operating Expenses .69%
Example* 1 year 3 years 5 years 10 years
$7 $23 $39 $88
-----------------------------------------------
Annual Mutual Qualified Fund Operating Expenses
(as a percentage of average net assets)
Management Fees ................... .60%
Other Expenses .................... .12%
----
Total Fund Operating Expenses .72%
Example* 1 year 3 years 5 years 10 years
$8 $24 $41 $92
-----------------------------------------------
Annual Mutual Beacon Fund Operating Expenses
(as a percentage of average net assets)
Management Fees ................... .60%
Other Expenses .................... .12%
----
Total Fund Operating Expenses .72%
Example* 1 year 3 years 5 years 10 years
$8 $24 $41 $92
-----------------------------------------------
Annual Mutual Discovery Fund Operating Expenses
(as a percentage of average net assets)
Management Fees .................. .80%
Other Expenses ................... .19%
----
Total Fund Operating Expenses .99%
Example* 1 year 3 years 5 years 10 years
$10 $32 $56 $125
-----------------------------------------------
Annual Mutual European Fund Operating Expenses
(estimated as a percentage of average net assets)
Management Fees ................... .80%
Other Expenses .................... .20%
----
Total Fund Operating Expenses 1.00%
Example* 1 year 3 years 5 years 10 years
$11 $33 $57 $126
-----------------------------------------------
* You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return before expenses and (2) redemption at the end of each time
period.
2
<PAGE>
The purpose of the table on the prior page is to assist an investor in
understanding the various direct and indirect costs and expenses that are borne
by an investor in each of the Fund's series. The table should not be considered
a representation of past or future expenses or return. Actual expenses and
return of each of the Fund's series vary from year to year and may be higher or
lower than those shown. There are presently no sales charges, no deferred sales
charges, no redemption fees and no contingent charges which an investor is
required to pay. The Fund does not contemplate that any such charges will be
imposed in the future, but the Fund, in its discretion, is permitted to assess
such charges. The only fees and expenses presently incurred are the advisory
fees paid to Heine Securities Corporation (the "Adviser") pursuant to an
investment advisory agreement with each series and the expenses of operating the
Fund and the series, most of which are borne by the series pro rata according to
each series' total assets, either directly or through reimbursement of the
Adviser for expenses paid by the Adviser on behalf of the series. The Trustee of
Fund sponsored retirement accounts currently waives but retains the right to
charge a $9 per account annual maintenance fee for all or any portion of the
year that each retirement account is open.
PERFORMANCE INFORMATION
From time to time the Fund may include in its communications to current or
prospective shareholders figures reflecting total return over various time
periods. "Total return" is the rate of return on an amount invested in one of
the series of the Fund from the beginning until the end of the stated period.
"Average annual total return" is the annual compounded percentage change in the
value of an amount invested in one of the series of the Fund from the beginning
until the end of the stated period. Both rates of return assume the reinvestment
of all dividends and distributions. The Fund does not have a sales load or other
charges paid by all shareholders that affect its calculation of total or average
annual total return.
The Fund's average annual total return for the 1, 5 and 10 year periods
ended December 31, 1995, respectively, are as follows:
1 Year 5 Years 10 Years
------ ------- --------
Mutual Shares .................. 29.11% 19.11% 14.98%
Qualified ...................... 26.60% 19.54% 15.26%
Beacon ......................... 25.89% 18.76% 15.64%
Discovery ...................... 28.63% 21.88%* N/A
European** ..................... N/A N/A N/A
* Mutual Discovery Fund commenced operations on December 31, 1992. The average
annual return for the three year period ended December 31, 1995 was 21.88%.
** Mutual European Fund commenced operations on July 3, 1996.
The Fund's total return is a historical measure of past
performance and is not intended to indicate future
performance. Because investment return and principal value
will fluctuate, the Fund's shares may become worth more or
less than their original cost.
3
<PAGE>
CONDENSED FINANCIAL INFORMATION
MUTUAL SHARES FUND
FINANCIAL HIGHLIGHTS
(Selected data for a share of capital stock outstanding throughout each year)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year ...... $78.69 $80.97 $73.36 $64.49 $56.39 $67.16 $67.77 $57.83 $60.43 $57.57
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Investment
Operations:
Net Investment
Income ................. 1.99 1.34 1.41 1.55 2.04 3.32 4.03 2.64 2.23 2.43
Net Gains or Losses on
Securities (realized and
unrealized) .......... 20.51 2.28 13.89 12.07 9.69 (9.86) 6.00 14.98 1.78 7.29
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from Investment
Operations ......... 22.50 3.62 15.30 13.62 11.73 (6.54) 10.03 17.62 4.01 9.72
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less Distributions:
Dividends (from net
investment income) ... 1.93 1.34 1.38 1.59 2.00 3.34 4.09 2.63 2.52 2.34
Distributions
(from capital gains) . 12.81 4.56 6.31 3.16 1.63 .89 6.55 5.05 4.09 4.52
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions .. 14.74 5.90 7.69 4.75 3.63 4.23 10.64 7.68 6.61 6.86
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value,
End of Year ............ $86.45 $78.69 $80.97 $73.36 $64.49 $56.39 $67.16 $67.77 $57.83 $60.43
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return* ............ 29.11% 4.53% 21.00% 21.33% 20.99% (9.82)% 14.93 30.69% 6.34% 16.99%
===== ==== ===== ===== ===== ===== ===== ===== ==== =====
Ratios/Supplemental Data:
Net Assets,
End of Year (millions) . $5,230 $3,746 $3,527 $2,913 $2,640 $2,521 $3,403 $2,551 $1,685 $1,403
Ratio of Expenses to
Average Net Assets ..... .69% .72% .74% .78% .82% .85% .65%+ .67%+ .69% .70%
Ratio of Net Investment
Income to Average Net
Assets ................. 2.47% 1.80% 1.90% 2.18% 3.08% 4.88% 5.57%+ 4.16%+ 3.32% 4.07%
Portfolio Turnover Rate .. 79.32% 66.55% 48.78% 41.06% 47.89% 43.41% 71.54% 89.67% 77.72% 122.30%
</TABLE>
* Total Return includes changes in share price and reinvestment of dividends and
capital gain distributions. The Fund's total return is a historical measure of
past performance and is not intended to indicate future performance. Investment
return and principal value will fluctuate; therefore the Fund's shares may
become worth more or less than their original cost.
+ After reduction of expenses by the Investment Adviser. Had the Investment
Adviser not undertaken such action, the ratios of operating expenses and net
investment income would have been .67% and 5.55% in 1989 and .74% and 4.09% in
1988.
4
<PAGE>
CONDENSED FINANCIAL INFORMATION
MUTUAL QUALIFIED FUND
FINANCIAL HIGHLIGHTS
(Selected data for a share of capital stock outstanding throughout each year)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Year ...... $26.67 $27.00 $24.43 $21.18 $18.37 $22.21 $22.71 $19.37 $20.06 $19.15
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Investment
Operations:
Net Investment
Income ................. .66 .43 .38 .49 .67 1.22 1.34 .84 .77 .90
Net Gains or Losses on
Securities (realized and
unrealized) .......... 6.33 1.10 5.12 4.27 3.18 (3.45) 1.91 4.95 .86 2.42
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from Investment
Operations ......... 6.99 1.53 5.50 4.76 3.85 (2.23) 3.25 5.79 1.63 3.32
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less Distributions:
Dividends (from net
investment income) ... .65 .43 .37 .49 .67 1.23 1.36 .83 .88 .85
Distributions
(from capital gains) . 3.27 1.43 2.56 1.02 .37 .38 2.39 1.62 1.44 1.56
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Distributions .. 3.92 1.86 2.93 1.51 1.04 1.61 3.75 2.45 2.32 2.41
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value,
End of Year ............ $29.74 $26.67 $27.00 $24.43 $21.18 $18.37 $22.21 $22.71 $19.37 $20.06
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return* ............ 26.60% 5.73% 22.71% 22.70% 21.13% (10.12)% 14.44 30.15% 7.72% 17.51%
===== ==== ===== ===== ===== ====== ===== ===== ==== =====
Ratios/Supplemental Data:
Net Assets,
End of Year (millions) . $3,002 $1,792 $1,511 $1,251 $1,110 $1,075 $1,470 $1,094 $686 $561
Ratio of Expenses to
Average Net Assets ..... .72% .73% .78% .82% .87% .89% .70%+ .62%+ .71% .68%
Ratio of Net Investment
Income to Average Net
Assets ................. 2.71% 1.91% 1.65% 2.10% 3.09% 5.40% 5.61%+ 3.96%+ 3.43% 4.55%
Portfolio Turnover Rate .. 75.59% 67.65% 56.22% 47.39% 51.99% 46.12% 73.41% 85.05% 73.50% 123.50%
</TABLE>
* Total return includes changes in share price and reinvestment of dividends
and capital gain distributions. The Fund's total return is a historical
measure of past performance and is not intended to indicate future
performance. Investment return and principal value will fluctuate;
therefore the Fund's shares may become worth more or less than their
original cost.
+ After reduction of expenses by the Investment Adviser. Had the Investment
Adviser not undertaken such action, the ratios of operating expenses and
net investment income would have been .71% and 5.60% in 1989 and .69% and
3.89% in 1988.
5
<PAGE>
CONDENSED FINANCIAL INFORMATION
MUTUAL BEACON FUND
FINANCIAL HIGHLIGHTS
(Selected data for a share of capital stock outstanding throughout each period)
<TABLE>
<CAPTION>
Sept. 1, Year Ended
Year Ended December 31, 1987 to August 31,
------------------------------------------------------------------------ Dec. 31, ---------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1987 1986
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period ................. $31.03 $31.09 $27.10 $23.36 $20.80 $24.09 $22.85 $19.49 $24.78 $19.27 $15.73
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Investment
Operations:
Net Investment
Income ............... .87 .46 .37 .45 .75 1.08 1.12 .77 .22 .37 .28
Net Gains or Losses on
Securities (realized
and unrealized) ...... 7.09 1.28 5.81 4.85 2.88 (3.03) 2.84 4.80 (3.96) 6.39 3.51
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from Investment
Operations ......... 7.96 1.74 6.18 5.30 3.63 (1.95) 3.96 5.57 (3.74) 6.76 3.79
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less Distributions:
Dividends (from net
investment income) ... .84 .44 .37 .46 .74 1.08 1.17 .80 .51 .31 .25
Distributions (from
capital gains) ....... 2.21 1.36 1.82 1.10 .33 .26 1.55 1.41 1.04 .94 -0-
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total
Distributions ...... 3.05 1.80 2.19 1.56 1.07 1.34 2.72 2.21 1.55 1.25 .25
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value,
End of Period .......... $35.94 $31.03 $31.09 $27.10 $23.36 $20.80 $24.09 $22.85 $19.49 $24.78 $19.27
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return** ........... 25.89% 5.61% 22.93% 22.92% 17.60% (8.17)% 17.46% 28.79% (15.12)% 37.33% 24.34%
===== ==== ===== ===== ===== ===== ===== ===== ====== ===== =====
Ratios/Supplemental Data:
Net Assets, End of
Period (millions) ...... $3,573 $2,060 $1,062 $534 $398 $388 $409 $214 $131 $159 $65
Ratio of Expenses to
Average Net Assets ..... .72% .75% .73% .81% .85% .85% .67%+ .59%+ .87%* .85% 1.16%
Ratio of Net Income to
Average Net Assets ..... 2.89% 1.96% 1.53% 1.90% 3.07% 4.59% 4.98%+ 3.64%+ 2.86%* 2.50% 2.86%
Portfolio Turnover Rate .. 73.18% 70.63% 52.88% 57.52% 56.63% 57.74% 67.18% 86.79% 28.07% 73.41% 112.91%
</TABLE>
* Annualized.
** Total return includes changes in share price and reinvestment of dividends
and capital gain distributions. The Fund's total return is a historical
measure of past performance and is not intended to indicate future
performance. Investment return and principal value will fluctuate;
therefore the Fund's shares may become worth more or less than their
original cost.
+ After reduction of expenses by the Investment Adviser. Had the Investment
Adviser not undertaken such action, the ratios of operating expenses and
net investment income would have been .68% and 4.97% in 1989 and .66% and
3.57% in 1988.
6
<PAGE>
CONDENSED FINANCIAL INFORMATION
MUTUAL DISCOVERY FUND
FINANCIAL HIGHLIGHTS
(Selected data for a share of capital stock outstanding throughout each year)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Net Asset Value, Beginning of Year ................... $ 12.55 $ 13.05 $ 10.00
--------- --------- ---------
Income from Investment Operations:
Net Investment Income ............................... .17 .15 .10
Net Gains on Securities (realized and unrealized) ... 3.40 .32 3.48
--------- --------- ---------
Total from Investment Operations ................... 3.57 .47 3.58
--------- --------- ---------
Less Distributions:
Dividends (from net investment income) .............. .14 .16 .09
Distributions (from capital gains) .................. .82 .81 .44
--------- --------- ---------
Total Distributions ................................ .96 .97 .53
--------- --------- ---------
Net Asset Value, End of Year ......................... $ 15.16 $ 12.55 $ 13.05
========= ========= =========
Total Return* ........................................ 28.63% 3.62% 35.85%
========= ========= =========
Ratios/Supplemental Data:
Net Assets, End of Year (millions) ................... $ 1,370 $ 725 $ 548
Ratio of Expenses to Average Net Assets .............. .99% .99% 1.07%
Ratio of Net Investment Income to Average Net Assets . 2.00% 1.64% 1.17%
Portfolio Turnover Rate .............................. 73.23% 72.70% 90.37%
</TABLE>
* Total Return includes changes in share price and reinvestment of dividends
and capital gain distributions. The Fund's total return is a historical
measure of past performance and is not intended to indicate future
performance. Investment return and principal value will fluctuate;
therefore the Fund's shares may become worth more or less than their
original cost.
The preceding tables set forth information regarding financial highlights
for each series of the Fund. Prior to February 19, 1988 Mutual Shares, Qualified
and Beacon were separate entities; as series of the Fund they continue their
separate economic identities. Beacon's fiscal year end was changed from August
31 to December 31 in connection with the merger into the Fund.
The tables on the preceding pages should be read in conjunction with each
of the Fund's financial statements and related notes included in their Annual
Reports (incorporated by reference into the Statement of Additional Information)
which have been audited by Ernst & Young LLP, the Fund's independent auditors,
since January 1, 1987 for Mutual Shares and Mutual Qualified, since September 1,
1987 for Mutual Beacon and for Mutual Discovery since its inception. Further
information regarding performance is contained in the Fund's Annual Reports to
Shareholders, which is available upon request and without charge by calling
1-800-553-3014.
7
<PAGE>
THE FUND
Mutual Series Fund Inc. (the "Fund") is a no-load, diversified, open-end
management investment company registered under the Investment Company Act of
1940 (the "1940 Act") organized as a series fund with five separate series
currently outstanding, each of which is designed to provide investors with
participation in diversified investments under the supervision of experienced
investment counsel. This type of investment company is commonly called a mutual
fund. The Fund was organized as a Maryland corporation on November 12, 1987.
Mutual Shares Corporation, Mutual Qualified Income Fund Inc. and Mutual Beacon
Fund, Inc. (the "predecessor funds" or "Funds") were merged into the Fund on
February 19, 1988 and became Mutual Shares, Qualified and Beacon, respectively.
Discovery was added on December 31, 1992. European commenced operations on July
3, 1996. The Fund may add additional series from time to time. Each of the
series should be perceived as being only a portion of a balanced investment
strategy.
Investment Objectives and Policies and Risks
Mutual Shares, Qualified, Beacon and European each has as its principal
objective capital appreciation, which may occasionally be short term. A
secondary objective is income. These objectives are fundamental. Discovery has
long-term capital appreciation as its objective, which it will seek to achieve
by including investments in small capitalization companies. European will
normally invest at least 65% of its invested assets in the securities of issuers
organized under the laws of or whose principal business operations or at least
50% of whose revenue is earned from European countries. European countries are
given a broad definition which includes all of the countries that are members of
the European Union, United Kingdom, Scandinavia, Eastern and Western Europe, and
those regions of Russia and the former Soviet Union that are considered part of
Europe. European may also invest up to 35% of its invested assets in U.S.
securities as well as in securities of issuers from the Levant, Middle East and
the rest of the world. European is currently expected to invest primarily in
Western Europe and Scandinavia but may also include other countries'
investments. European will normally invest in at least 5 countries although it
may invest all of its assets in a single country. However, European may include
securities of issuers from outside of Europe and the U.S. For short term
purposes, European anticipates that it generally will buy short term securities
denominated in U.S. dollars. European will normally attempt to maintain at least
50% of the value of its assets invested in stocks or securities of foreign
corporations at the close of each taxable year. Each series pursues these
objectives primarily through investments in common stock and preferred stock as
well as debt securities and securities convertible into common stock (including
convertible preferred and convertible debt securities). An investor should bear
in mind that since every investment carries risk, the value of the assets of
each series of the Fund fluctuates with changes in the market value of its
investments. Therefore, there is no assurance that the Fund's objectives will be
achieved. Except for the Fund's primary and secondary investment objectives,
these objectives are not fundamental and the Board of Directors of the Fund
reserves the right to change them without shareholder approval, which may result
in the Fund having an investment objective different from that which an investor
deemed appropriate at the time of investment.
The general investment policy of each existing series is to invest in
common stock, preferred stock and corporate debt securities, which may be
convertible into common stock and the other investments described below which,
in the opinion of the series' investment adviser, Heine Securities Corporation
(the "Adviser"), are available at prices less than their intrinsic value. (See
"Non-U.S. Securities," "Repurchase Agreements and Loans of Securities" and
"Hedging.") The Adviser also has no pre-set limits as to the percentage of each
series' portfolio which may be invested in equity securities, debt securities
(including "junk bonds" as described below), or cash equivalents. The Adviser's
opinions are based upon analysis and research, taking into account, among other
factors, the relationship of book value to market value of the securities, cash
flow, and multiples of earnings of comparable securities. These factors are not
8
<PAGE>
applied formulaically, as the Adviser examines each security separately; the
Adviser has no general criteria as to asset size, earnings or industry type
which would make a security unsuitable for purchase by a series. Although the
Fund may invest in securities from any size issuer, Mutual Shares, Qualified and
Beacon will tend to invest in securities of issuers with market capitalizations
in excess of $500 million due to the larger size of these series. Each series
may invest in securities that are traded on U.S. or foreign exchanges, NASDAQ
national market or in the over-the-counter market. The series may invest in any
industry sector although no series will be concentrated in any one industry.
Debt securities in which the Fund invests (such as corporate and U.S. government
bonds, debentures and notes) may or may not be rated by rating agencies such as
Moody's Investors Service, Inc. or Standard & Poor's Corporation, and, if rated,
such rating may range from the very highest to the very lowest, currently C for
Moody's and D for Standard & Poor's. Medium and lower-rated debt securities in
which each series expects to invest are commonly known as "junk bonds." The
series may be subject to investment risks as to these unrated or lower rated
securities that are greater in some respects than the investment risks incurred
by a fund which invests only in securities rated in higher categories. In
addition, the secondary market for such securities may be less liquid and market
quotations less readily available than higher rated securities, thereby
increasing the degree to which judgment plays a role in valuing such securities.
The general policy of each series is to invest in debt instruments, including
junk bonds, for the same reasons underlying investments in equities, i.e.,
whenever such instruments are available, in the Adviser's opinion, at prices
less than their intrinsic value. Consequently, the Adviser's own analysis of a
debt instrument exercises a greater influence over the investment decision than
the stated coupon rate or credit rating. The series have historically invested
in debt instruments issued by reorganizing or restructuring companies, or
companies which recently emerged from, or are facing the prospect of a financial
restructuring. It is under these circumstances, which usually involve unrated or
low rated securities that are often in, or about to default, that the Adviser
identifies securities which are sometimes available at prices which it believes
are less than their intrinsic value. Although such debt securities may pose a
greater risk than higher rated debt securities of loss of principal, the debt
securities of reorganizing or restructuring companies typically rank senior to
the equity securities of such companies. See "Statement of Additional
Information -- Medium and Lower Rated Corporate Debt Securities."
Each series also seeks to invest in the securities of domestic and foreign
companies involved in mergers, consolidations, liquidations and reorganizations
or as to which there exist tender or exchange offers, and may participate in
such transactions. Although there are no restrictions limiting the extent to
which each series may invest in such transactions, no series presently
anticipates investing more than 50% of its portfolio in such investments. There
can be no assurance that any merger, consolidation, liquidation, reorganization
or tender or exchange offer proposed at the time a series makes its investment
will be consummated or will be consummated on the terms and within the time
period contemplated. The series from time to time may also purchase indebtedness
and participations therein, both secured and unsecured, of debtor companies in
reorganization or financial restructuring ("Indebtedness"). Such Indebtedness
may be in the form of loans, notes, bonds or debentures. Participations normally
are made available only on a nonrecourse basis by financial institutions, such
as banks or insurance companies, or by governmental institutions, such as the
Resolution Trust Corporation or the Federal Deposit Insurance Corporation or the
Pension Benefit Guaranty Corporation or may include supranational organizations
such as World Bank. When a series purchases a participation interest it assumes
the credit risk associated with the bank or other financial intermediary as well
as the credit risk associated with the issuer of any underlying debt instrument.
The series may also purchase trade and other claims against, and other unsecured
obligations of, such debtor companies, which generally represent money due a
supplier of goods or services to such company. Some corporate debt securities,
including Indebtedness, purchased by the Fund may have very long maturities. The
length of time remaining until maturity is one factor the Adviser considers in
purchasing a particular Indebtedness. The purchase of Indebtedness of a troubled
9
<PAGE>
company always involves a risk as to the creditworthiness of the issuer and the
possibility that the investment may be lost. The Adviser believes that the
difference between perceived risk and actual risk creates the opportunity for
profit which can be realized through proper analysis. There are no established
markets for some of this Indebtedness and thus it is less liquid than more
heavily traded securities. Indebtedness which represents indebtedness of the
debtor company to a bank are not securities of the banks issuing or selling
them. The series purchase loans from national and state chartered banks as well
as foreign ones. The series normally invest in senior indebtedness of the debtor
companies, although on occasion subordinated indebtedness may also be acquired.
Each series does not invest more than 15% of its portfolio in assets which are
illiquid, including Indebtedness which are not readily marketable. The series
may invest in securities considered illiquid such as those described above as
well as restricted securities not registered under the Securities Act of 1933,
OTC options and securities that are otherwise considered illiquid as a result of
market or other factors. The series may invest in securities eligible for resale
under Rule 144A of the Securities Act ("144A securities"). The Board of
Directors of the Fund has adopted procedures in accordance with Rule 144A
whereby specific 144A securities held in the Fund may be deemed to be liquid.
Nevertheless, due to changing market or other factors 144A securities may be
subject to a greater possibility of becoming illiquid than registered
securities. Fund purchases of 144A securities may increase the level of
illiquidy and institutional buyers may become disinterested in purchasing such
securities. The series may also invest in cash equivalents such as Treasury
bills and high quality commercial paper. The series generally purchases
securities for investment purposes and not for the purpose of influencing or
controlling management of the issuer. However, in certain circumstances when the
Adviser perceives that one or more of the series may benefit, the Fund may
itself seek to influence or control management or may invest in other entities
that purchase securities for the purpose of influencing or controlling
management, such as investing in a potential takeover or leveraged buyout or
investing in other entities engaged in such activities. The series may also
invest in distressed mortgage obligations and other debt secured by real
property and may sell short securities it does not own up to 5% of its assets.
Short sales have risks of loss if the price of the security sold short increases
after the sale, but the series can profit if the price decreases. The series may
also sell securities "short against the box" without limit. See "Statement of
Additional Information -- Short Sales" for further discussion of these
practices.
Discovery expects to invest to a greater degree than the other series in
smaller capitalized companies which may involve greater risks than investing in
securities of larger companies. The smaller companies in which Discovery invests
are often not well known, may often trade at a discount and may not be followed
by institutions.
Each series may invest in common stock, preferred stock and corporate debt
securities in such proportions as the Adviser deems advisable. The Adviser
typically keeps a portion of the assets of each series invested in short-term
debt securities and preferred stocks although it may choose not do so when
circumstances dictate. In addition, while no series may purchase securities of
registered open-end investment companies or affiliated investment companies,
they may invest from time to time in other investment company securities,
subject to the limitation that each series will not purchase more than 3% of the
voting securities of another investment company. In addition, no series will
invest more than 5% of its assets in the securities of any single investment
company and no series will invest more than 10% of its assets in investment
company securities. Investors should recognize that a series' purchase of the
securities of such investment companies results in layering of expenses such
that investors indirectly bear a proportionate share of the expenses of such
investment companies, including operating costs, and investment advisory and
administrative fees.
Non-U.S. Securities
The series may purchase securities of non-U.S. issuers and Discovery
expects that up to approximately 50% of its assets may be so invested. European
10
<PAGE>
will normally invest at least 65% of its invested assets in European countries
(as defined above). The series may purchase securities denominated in any
currency and generally expects that it will hedge against currency risks to the
extent that hedging is available. Investments in securities of non-U.S. issuers
involve certain risks not ordinarily associated with investments in securities
of domestic issuers. Such risks include fluctuations in foreign exchange rates,
volatile political and economic developments, and the possible imposition of
exchange controls or other foreign governmental laws or restrictions. Since each
series may invest in securities denominated or quoted in currencies other than
the U.S. dollar, changes in foreign currency exchange rates will affect the
value of securities in the portfolio and the unrealized appreciation or
depreciation of investments although the Adviser generally attempts to reduce
such risks through hedging transactions. In addition, with respect to certain
countries, there is the possibility of expropriation of assets, confiscatory
taxation, political or social instability or diplomatic developments which could
adversely affect investments in those countries.
There may be less publicly available information about a foreign company
than about a U.S. company. Foreign companies may not be subject to accounting,
auditing and financial reporting standards and requirements comparable to or as
uniform as those of U.S. companies. Non-U.S. securities markets, while growing
in volume, have, for the most part, substantially less volume than U.S. markets,
and securities of many foreign companies are less liquid and their prices more
volatile than securities of comparable U.S. companies. Transaction costs on
non-U.S. securities markets are generally higher than in the U.S. There is
generally less government supervision and regulation of exchanges, brokers and
issuers than there is in the U.S. Each series foreign investments may include
both voting and non voting securities, sovereign debt and participations in
foreign government deals. The Fund might have greater difficulty taking
appropriate legal action with respect to foreign investments in non-U.S. courts
than with respect to domestic issuers in U.S. courts.
Each series of the fund may invest in securities commonly known as
Depository Receipts of non-U.S. issuers which have certain risks, including
trading for a lower price, having less liquidity than their underlying
securities and risks relating to the issuing bank or trust company. Depository
Receipts can be sponsored by the issuing bank or trust company or unsponsored.
Holders of unsponsored Depository Receipts have a greater risk that receipt of
corporate information and proxy disclosure will be untimely, information may be
incomplete and costs may be higher.
Dividend and interest income from non-U.S. securities will generally be
subject to withholding taxes by the country in which the issuer is located,
which may not be recoverable, either directly or indirectly, as a foreign tax
credit or deduction by the Fund or its shareholders. See "Statement of
Additional Information."
Repurchase Agreements and Loans of Securities
Each series may invest up to 10% of its assets in repurchase agreements.
Each series may also loan its portfolio securities in order to realize
additional income. Repurchase and tri-party agreements are generally agreements
under which the series obtains money market instruments subject to resale to the
seller at an agreed upon price and date. Any loans of portfolio securities which
the series may make must be fully collateralized at all times by securities with
a value at least equal to 100% of the current market value of the loaned
securities. The series presently do not anticipate loaning more than 5% of their
respective portfolio securities. There are certain risks associated with such
transactions which are described in the Statement of Additional Information.
Hedging and Income Transactions
The series may utilize various investment strategies as described below to
hedge various market risks (such as interest rates, currency exchange rates, and
broad or specific equity market movements), to manage the effective maturity or
duration of fixed-income securities or for gain. Such strategies are generally
accepted by modern portfolio managers and are regularly utilized by many mutual
funds and other institutional investors. Techniques and instruments may change
11
<PAGE>
over time as new instruments and strategies are developed or regulatory changes
occur and the Fund will describe any such techniques in its registration
statement before using them. In the course of pursuing these investment
strategies, the series may purchase and sell exchange-listed and
over-the-counter put and call options on securities, equity and fixed-income
indices and other financial instruments, purchase and sell financial futures
contracts and options thereon, and enter into various currency transactions such
as currency forward contracts, currency futures contracts, currency swaps or
options on currencies or currency futures (collectively, all of the above are
called "Hedging Transactions"). Hedging Transactions may be used to attempt to
protect against possible changes in the market value of securities held in or to
be purchased for a series' portfolio resulting from securities markets or
currency exchange rate fluctuations, to protect the series' unrealized gains in
the value of its portfolio securities, to facilitate the sale of such securities
for investment purposes, or to establish a position in the derivatives markets
as a temporary substitute for purchasing or selling particular securities. Any
or all of these investment techniques may be used at any time and there is no
particular strategy that dictates the use of one technique rather than another,
as use of any Hedging Transaction is a function of numerous variables including
market conditions. The ability of a series to utilize these Hedging Transactions
successfully will depend on the Adviser's ability to predict pertinent market
movements, which cannot be assured. The Fund will comply with applicable
regulatory requirements when implementing these strategies, techniques and
instruments. Each series generally hedges the foreign currency risk associated
with its investments in foreign securities. European expects to hedge for gain
on market risks including broad movements in markets in addition to the specific
currency risk of its portfolio securities. No more than 5% of the series' assets
will be at risk in such types of instruments entered into for non-hedging
purposes. Hedging Transactions involving financial futures and options thereon
will be purchased, sold or entered into generally for bona fide hedging, risk
management or portfolio management purposes.
Hedging Transactions, whether entered into as a hedge or for gain, have
risks associated with them including possible default by the other party to the
transaction, illiquidity and, to the extent the Adviser's view as to certain
market movements is incorrect, the risk that the use of such Hedging
Transactions could result in losses greater than if they had not been used. Use
of put and call options may result in losses to a series, force the sale or
purchase of portfolio securities at inopportune times or for prices higher than
(in the case of put options) or lower than (in the case of call options) current
market values, limit the amount of appreciation the Fund can realize on its
investments, increase the cost of holding a security and reduce the returns on
securities or cause a series to hold a security it might otherwise sell. The use
of currency transactions can result in a series incurring losses as a result of
a number of factors including the imposition of exchange controls, suspension of
settlements, or the inability to deliver or receive a specified currency. The
use of options and futures transactions entails certain other risks. In
particular, the variable degree of correlation between price movements of
futures contracts and price movements in the related portfolio position of the
Fund creates the possibility that losses on the hedging instrument may be
greater than gains in the value of the Fund's position. In addition, futures and
options markets may not be liquid in all circumstances and certain
over-the-counter options may have no markets. As a result, in certain markets, a
series might not be able to close out a transaction without incurring
substantial losses, if at all. Although the use of futures and options
transactions for hedging should tend to minimize the risk of loss due to a
decline in the value of the hedged position, at the same time they tend to limit
any potential gain which might result from an increase in value of such
position. Finally, the daily variation margin requirements for futures contracts
would create a greater ongoing potential financial risk than would purchases of
options, where the exposure is limited to the cost of the initial premium.
Losses resulting from the use of Hedging Transactions would reduce net asset
value, and possibly income, and such losses can be greater than if the Hedging
Transactions had not been utilized. The cost of entering into hedging
transactions may also reduce the series' total return to investors.
12
<PAGE>
Fundamental Restrictions
Each series has adopted a number of fundamental investment restrictions,
which may not be changed for a particular series without the approval of that
series' shareholders. These restrictions are set forth in the Statement of
Additional Information. Other than such restrictions, no series has any
investment policies which it considers fundamental.
Among other things, each series may not purchase the securities of any one
issuer, other than the U.S. Government or any of its agencies or
instrumentalities, if immediately after such purchase more than 5% of the value
of its total assets would be invested in such issuer, or such series would own
more than 10% of the outstanding voting securities of such issuer, except that
up to 25% of the value of such series' total assets may be invested without
regard to such 5% and 10% limitations; make loans, except to the extent the
purchase of debt obligations of any type are considered loans and except that
the series may lend portfolio securities to qualified institutional investors in
compliance with requirements established from time to time by the Securities and
Exchange Commission and the securities exchanges on which such securities are
traded; invest more than 25% of the value of its assets in a particular industry
(except that U.S. Government securities are not considered an industry); or
issue securities senior to its stock or borrow money or utilize leverage in
excess of the maximum permitted by the 1940 Act which is currently 33 1/3% of
total assets (plus 5% for emergency or other short-term purposes). Such
borrowing has special risks. The Fund will not engage in investment transactions
when borrowing exceeds 5% of its assets.
While Mutual Shares, Qualified, Beacon, Discovery and European have
identical basic investment restrictions, and Mutual Shares, Qualified, Beacon
and European have identical investment objectives, the Adviser seeks to retain
certain historical differences among the series on an informal basis. Mutual
Shares, Qualified and Beacon have generally invested in larger and medium sized
companies with large share trading volume. Discovery, in comparison to the other
series, has tended to invest proportionately more of its portfolio in smaller
companies (see "Investment Objectives and Policies") and in foreign companies
(see "Non-U.S. Securities"). Qualified was originally intended for purchase by
pension plans, profit sharing plans and other nontaxpaying entities and the
portfolio was able to have greater flexibility due to reduced concerns about the
tax effects on shareholders. Depending on market conditions, and any future
changes in tax laws, the Adviser expects that it will purchase securities for
Qualified which satisfy such a goal, although currently Qualified operates in
the same fashion as Mutual Shares and Beacon. European will utilize the same
investment philosophy but will apply it in the context of European investing.
Allocation of investments among the series will also depend upon, among other
things, the amount of cash in, and relative size of each series' portfolio. In
addition, the factors outlined above are not mutually exclusive and a particular
security may be owned by more than one of the series.
MANAGEMENT OF THE FUND
The management and affairs of the Fund are supervised by the Fund's Board
of Directors.
The Investment Adviser
Heine Securities Corporation (the "Adviser"), 51 John F. Kennedy Parkway,
Short Hills, New Jersey 07078 serves as each series' investment adviser. The
Adviser manages their investments, provides various administrative services and
supervises their daily business affairs, subject to supervision by the Fund's
Board of Directors. Portfolio Manager Michael F. Price has been responsible for
the day to day management of the Fund for more than five years.
Mr. Michael F. Price, President, Chief Operating Officer, Chairman and sole
shareholder of the Adviser, is director and sole shareholder of Clearwater
Securities Inc. ("Clearwater"), a broker, and is Chairman of the Board and
President of the Fund. Mr. Edward J. Bradley is Treasurer of Clearwater and is
13
<PAGE>
Treasurer and Chief Financial and Accounting Officer of the Adviser and of the
Fund. Mr. Peter A. Langerman is a Research Analyst with the Adviser as well as a
Director and Executive Vice President of the Fund. Ms. Elizabeth N. Cohernour is
General Counsel and Secretary of the Adviser, Clearwater and the Fund. Mr. Eric
Le Goff is Vice President of the Adviser. Messrs. Jeffrey A. Altman, Robert L.
Friedman, Raymond Garea and Lawrence N. Sondike, Research Analysts with the
Adviser, are Vice Presidents of the Fund.
Code of Ethics
The Adviser and the Fund have adopted Codes of Ethics and related internal
procedures (together referred to as the "Code") which govern the personal
investing practices of the Adviser's employees. The Code generally incorporates
the recommendation of the Investment Company Institute contained in the Report
of the Advisory Group on Personal Investing dated May 9, 1994. Specifically,
employees of the Adviser may buy and sell securities for themselves as long as
their trades have been pre-cleared in accordance with the Code. Transactions by
Adviser employees which comply with the substantive and procedural provisions of
the Code are permitted even if the security being purchased is one of limited
availability (such as investments in private placements), and is one in which
any particular series would be financially and legally able to invest.
Investment Advisory Agreements
The Adviser serves as investment adviser to each of Mutual Shares,
Qualified and Beacon pursuant to separate investment advisory agreements which
were approved by the shareholders of each such series at a meeting held on
November 17, 1989. The Board of Directors approved the Advisory Agreement with
Discovery on September 18, 1992. The Board of Directors approved the Advisory
Agreement with European on May 30, 1996. The Advisory Agreement with each series
("the Advisory Agreements" or the "Advisory Agreement" if individually) are
identical in all material respects, except that under each Advisory Agreement
the Adviser is paid a fee at an annual rate of .60% of the average daily net
assets of Mutual Shares, Qualified and Beacon, .80% of the average daily net
assets of Discovery and .80% of the average daily net assets of European, which
accrues daily and is payable on the first business day of the next month for the
number of days the Advisory Agreement was in effect during the preceding month.
The advisory fee paid by Discovery and European are higher than that paid by
most investment companies although the Adviser believes they are comparable to
that paid by similar funds. In addition, the Advisory Agreements provide that
the Adviser is to be reimbursed on a dollar-for-dollar basis for administrative
services as described below.
The Adviser has complete discretion in the investment and management
(including the voting of securities) of each series' assets in accordance with
their respective investment objectives and policies and subject to general
review and direction by the Board of Directors of the Fund. The Adviser is
responsible for administering or arranging for administration of the Fund's
business affairs and operations, including maintenance of all required records,
employment of sufficient personnel, and maintenance of sufficient equipment and
facilities to perform its obligations under the Advisory Agreements. Under these
Agreements each series acknowledges that the Adviser may and does perform
advisory services for others, that officers and employees of the Adviser act as
broker or dealer for others and invest for their own account and that the Fund
does not expect, subject always to the good faith of the Adviser, to obtain the
benefit of investment opportunities developed by the Adviser, or such officers
and employees, but in which the Adviser does not cause such series to invest.
The Fund on behalf of each series pays for the cost of its operations or
reimburses the Adviser for expenses and costs the Adviser incurs on behalf of
the Fund including organizational costs, compensation of directors who are not
interested persons (as defined in the 1940 Act) of the Adviser, reimbursement of
a pro rata portion of the salaries, bonuses, benefits and other employment costs
of all personnel of the Adviser who spend substantial time on series operations,
and all other costs such as rent for office space, costs of equipment and office
supplies, charges of the independent auditors, of legal counsel, of the transfer
14
<PAGE>
and dividend disbursing agent and of the custodian, preparation and maintenance
of the books and records of the series, all direct and indirect costs, charges
and expenses of acquiring and disposing of portfolio securities (including the
placement of orders therefor), interest (if any) on obligations incurred by the
series, costs of share certificates, membership dues in the Investment Company
Institute or any similar organization, preparation and furnishing reports,
prospectuses, proxy statements and other communications to stockholders,
preparation of amendments to the Fund's registration statements and registration
of shares of the Fund under the federal and state securities laws, miscellaneous
expenses and all taxes and fees to federal, state or other governmental agencies
on account of the registration of securities issued by the Fund, filing of
corporate documents or otherwise associated with Fund business excluding costs
related to research or the provision of investment advice (with certain
exceptions related to soft dollars) and marketing of shares of the series.
Expenses which are not directly attributable in full to a particular series will
generally be allocated pro rata among the series according to their relative net
assets.
The Adviser and its agents, officers and directors are generally
indemnified under these agreements against liabilities and expenses reasonably
incurred in connection with acts taken while acting in the capacities enumerated
in the Agreement, except no indemnity is provided for willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties of a position. Such
indemnification will be made pursuant to procedures which comply with the
requirements of the 1940 Act and applicable state law.
The Advisory Agreements of Mutual Shares, Qualified, Beacon, Discovery and
European continue in effect until June 30, 1997. The Advisory Agreements may be
terminated at any time, without penalty, by the Fund's Board of Directors, or by
the vote of a majority of the outstanding voting securities of the Fund or by
the Adviser, each on 60 days' written notice to the other. The Advisory
Agreements automatically terminate upon assignment.
The Adviser will reimburse a series for any expenses incurred in excess of
that permitted by the most restrictive jurisdiction in which the Fund is
qualified to sell shares up to the total fee payable to the Adviser as to such
series. Total expenses of each of Mutual Shares, Qualified, Beacon and Discovery
for fiscal 1995 amounted to 0.69%, 0.72%, 0.72% and 0.99%, respectively, of
their average daily net assets during such year.
HOW TO PURCHASE SHARES
Shares of the Fund's existing series are sold in a continuous offering at
the public offering price, which is equal to the net asset value per share of
the series being purchased next determined (see "Net Asset Value") after a
purchase order is received by the Fund or PFPC Inc. ("transfer agent"). For
assistance in completing the application and for additional information about
the shareholder services listed herein, call the Fund at 1-800-448-FUND.
<TABLE>
<CAPTION>
Minimum All Retirement Account
Minimum Initial Subsequent Purchase Minimum Initial
Purchase (for All Accounts) Purchase
-------- ------------------ --------
<S> <C> <C> <C>
Beacon $5,000 $100 $2,000
Discovery $1,000 $50 $1,000
European $1,000 $50 $1,000
Mutual Shares $5,000 $100 $2,000
Qualified $1,000 $50 $1,000
</TABLE>
In exceptional cases the Fund may, in its sole discretion, waive these
amounts.
All orders for shares of a series which are accepted by the Fund will be
priced at the net asset value per share of that series next computed after
receipt of the order by the Fund's transfer agent, or by the Fund, subject to
collection of funds. In order to receive that day's price an order must be
received and accepted prior to the time that the series' net asset value is
15
<PAGE>
calculated which is the earlier of 4:00 p.m. or the close of the New York Stock
Exchange (the "Exchange") on that day. Placement and acceptance of an order
results in the obligation on the part of an investor to pay for the shares.
Monies used to purchase shares of the Fund must be drawn on U.S. banks and be
payable in U.S. dollars. No third party checks will be accepted by the Fund
except with respect to shareholders who are rolling over money to a retirement
account from another retirement account. If for any reason funds for a purchase
are not collectible, the Fund may redeem the shares and hold the investor liable
for any amount by which the purchase price exceeds the net asset value of the
shares redeemed. Shareholders may not receive the proceeds from a redemption of
shares until funds covering such purchases have been collected; however,
shareholders who have existing accounts with a value equal to or greater than
the value of the securities to be redeemed may redeem shares up to the value of
the account at the time the request for redemption is received. Payment made by
certified check or wired funds is considered to be collected upon receipt. (See
"How to Redeem Shares".)
Unless a shareholder includes his taxpayer identification number (social
security number for individuals) on the Fund's Application and certifies that he
is not subject to backup withholding, no new account will be opened. For
existing accounts with no certification the Fund is required to withhold and
remit to the Internal Revenue Service ("IRS") 31% of all taxable distributions
to the shareholder.
The Fund reserves the right, in its sole discretion, to refuse at any time
to accept orders for the purchase of any series (from existing shareholders as
well as new investors) and to suspend the reinvestment of income dividends and
capital gains distributions. Without limiting the foregoing, the Adviser will
consider exercising such refusal right as to a series when it determines that it
cannot effectively invest the available funds on hand in accordance with that
series' investment policies.
Written Subscriptions
Written subscriptions for shares are accepted on any business day at Mutual
Series Fund Inc. All written subscriptions must specify the series to be
purchased, and must be accompanied by payment.
New account applications should be sent to:
Mutual Series Fund Inc.
c/o PFPC Inc.
P.O. Box 8901
Wilmington, DE 19899-8901.
Existing shareholders should mail additional investments to:
Mutual Series Fund Inc.
c/o PFPC Inc.
P.O. Box 8906
Wilmington, DE 19899-8906.
If an overnight delivery service is used, subscriptions should be sent to:
Mutual Series Fund Inc.
c/o PFPC Inc.
400 Bellevue Parkway - Suite 108
Wilmington, DE 19809-3710.
Written subscriptions are also accepted at the Fund's offices at
51 John F. Kennedy Parkway, Short Hills, New Jersey 07078.
16
<PAGE>
Purchase by Telephone
Purchases, except for retirement accounts, may be made orally by Fund
shareholders who telephone the Fund at 1-800-448-FUND prior to the earlier of
4:00 p.m. or the close of the Exchange. Such orders are accepted or rejected in
the sole discretion of the Adviser. Telephone purchases must be for at least
$1,000 and must be made in an account that has an existing balance equal to at
least one half of the telephone purchase.
Automated Transfers:
An Automated Transfers application must be completed
and effective prior to making telephone purchases.
Please call 1-800-553-3014 for an application or,
complete section 6 of the application attached to this
prospectus.
All telephone purchases will be processed through the Automated Transfers
process except for certain institutional investors who have established (via the
Fund's recorded telephone line) the ability to wire such purchase payments to
the Fund.
If for any reason funds are not received in a timely manner and the Fund
redeems the shares, the shareholder will be responsible for any amount by which
the purchase price exceeds the net asset value of the shares on the day the
shares are redeemed. As authorized by the shareholder's purchase application,
such amounts will be deducted from the shareholder's account and PFPC Inc. will
redeem a processing fee of $20 for any transfer not honored by your bank. This
feature will only apply to those persons who have completed an application
containing such authorization.
Brokers and Dealers and Plan Administrators
Purchases and redemptions of any series shares may be effected through
registered broker-dealers. There is no sales or service charge imposed by the
Fund as to any series, but such broker-dealers may charge the investor a
transaction fee. Such transaction fees and services may vary among
broker-dealers, and such broker-dealers may impose higher initial or subsequent
investment requirements than those established by the Fund. Services provided by
broker-dealers may include allowing the investor to establish a margin account
and to borrow on the value of the Fund's shares in that account. If a broker
receives an order prior to pricing on a given day, the broker is required to
forward such order to the Fund on that day prior to pricing. A broker's failure
to timely forward an order may give rise to a claim by the investor against the
broker.
Third party plan administrators of tax-qualified retirement plans and other
entities may provide sub-transfer agent services to the Fund. In such cases the
Fund may pay the third party an annual sub-transfer agency fee that is not
greater than the Fund otherwise would have paid for such services.
Share Certificates
All accounts will be maintained in book entry form; no share certificate
will be issued unless the shareholder specifically requests such issuance in
writing. Upon written request certificates for any number of full shares, except
for shares held in retirement accounts, will be issued and sent to the
shareholder of record. The shareholder may incur an expense in replacing any
lost share certificates. The Fund recommends that its transfer agent retain all
certificates at no cost to the shareholder.
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<PAGE>
HOW TO REDEEM SHARES
Shareholders may redeem all or a portion of their shares in a series by
executing and mailing a written request for redemption, as described below.
The written request for redemption should be mailed to:
Mutual Series Fund Inc.
c/o PFPC Inc.
P.O. Box 8901
Wilmington, DE 19899-8901.
If an overnight delivery service is used, redemption requests should be
sent to:
Mutual Series Fund Inc.
c/o PFPC Inc.
400 Bellevue Parkway - Suite 108
Wilmington, DE 19809-3710.
Redemption requests will be executed at the net asset value per share next
computed after receipt of the redemption request, in good order, by the Fund or
by its transfer agent (see "Net Asset Value"). In order to receive that day's
price a redemption request in good order with an original signature must be
received by the earlier of 4:00 p.m. or the close of the Exchange on that day.
Neither the Fund nor the transfer agent will accept redemption requests made by
telephone or by fax. Payment of monies will be made within seven days after
receipt by the transfer agent of the redemption request in good order and
accompanied by the appropriate documents as described below. Mailing of the
proceeds of a redemption may be delayed up to 15 days from the day of a purchase
to allow the purchase to clear. This potential 15 day delay applies to payment
by personal or bank check. If payment is made by certified check or wire,
proceeds from the redemption request will not be subject to this potential 15
day delay. If the shareholder has an existing account, the redemption request
will be satisfied up to the value of collected funds in such account. The Fund
reserves the right to redeem shares in kind although it is not likely to do so.
Conditional, ambiguous or vague requests cannot be honored.
If you have completed item 6 on the enclosed application to authorize
automated transfers to your bank account (retirement accounts have separate
form), and if your bank has authorized such transfers, then you can request that
a redemption be automatically deposited into your bank account. Proceeds will be
calculated at the net asset value next computed after receipt of your redemption
request in good order and will be automatically deposited in your bank account
approximately two business days after receipt of your redemption request. To
request an application for automated transfers for a regular account or a
retirement account, call 1-800-553-3014. Automated transfer capabilities
normally become effective twenty business days after the Fund receives the
completed application.
If the account is in the form of a book entry, or if certificates for the
shares to be redeemed have been retained by the transfer agent for safekeeping,
to be in good order the written redemption request must identify the account
from which shares are to be redeemed, the dollar value or number of shares to be
redeemed, the address the redemption should be mailed to, the shareholder's
daytime phone number and the request must be signed exactly as the account is
registered, with the signature(s) thereon guaranteed by a bank, broker-dealer,
credit union, national securities exchange or a savings association. Guarantee
by a notary public is not acceptable. The authorized officer who guarantees the
signature(s) must sign in official capacity to bind the guarantor and the words
"Signature Guaranteed" must appear with the required stamp. The signature
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<PAGE>
guarantee will generally be waived for redemptions of $25,000 or less provided
payment is made to the holder of record and forwarded to the address of record.
However, a signature guarantee will be required for all redemptions where the
address of record has changed within ten days of the redemption request.
If the certificates for the shares to be redeemed are held by any one other
than the transfer agent, to be in good order the redemption request must be
accompanied by such stock certificates, properly endorsed for transfer, or if
not so endorsed, by the stock certificates and appropriate properly endorsed
stock powers, and, in either case, the signatures must be guaranteed in proper
form by a bank, broker dealer, credit union, national securities exchange or a
savings association.
Certain accounts, such as corporate accounts, trust accounts and custodial
accounts, generally require additional documentation in addition to the written
request. Certain institutional accounts may be eligible for redemption
procedures other than as described above. Contact the Fund at 1-800-448-FUND for
the specific documentation required for your account.
If the owner of any IRS recognized retirement account who is at least
59 1/2 years old wants to redeem shares from the account, the written
redemption request must state the account owner's birthdate. If the owner of any
IRS recognized retirement account who is less than 59 1/2 years old wants to
redeem shares from the account, the written redemption request must state: 1)
that the owner is aware of the tax consequences and penalties that may be
associated with the redemption and 2) whether or not the 10% tax is to be
withheld on the redemption. The signature on the letter of instruction must be
guaranteed in the same manner as described above.
If a redemption request is sent to the Fund's office, rather than to the
transfer agent's office, the request will be promptly forwarded by the Fund to
the transfer agent. If the Fund has not collected payment on the purchase of
shares which are to be redeemed, no redemption payment will be made until the
purchase has cleared.
The transfer agent reserves the right to charge a nominal fee of
approximately $7, for the wiring of funds. Your bank may charge you for
accepting the wire transfer. The Fund should be contacted at 1-800-448-FUND for
additional information on how to wire funds. If a shareholder requests delivery
of a redemption check via overnight delivery service, the transfer agent will
charge a nominal fee, currently approximately $15, for the overnight delivery
service.
The net asset value of shares, on redemption, may be more or less than the
investor's cost, depending upon the market value of the series' securities at
the time of redemption. Redemptions of the predecessor funds always were made in
cash and the Fund intends to continue this policy as to the series.
The Fund reserves the right, upon 30 days' prior notice, to redeem shares
in any account if the total value of the shares in the account is less than a
specified minimum (currently $300, or $100 for IRA accounts), which minimum may
be lowered from time to time by the Board of Directors but will not be raised.
An account will be subject to involuntary redemption if the account value
becomes less than the specified minimum because of a stockholder redemption and
not from market action. The Fund further reserves the right upon 30 days prior
notice and Board approval to redeem the account of any shareholder who has
failed to furnish a certified social security or tax identification number to
the Fund.
SHAREHOLDER SERVICES
Mutual Series Fund Inc.
c/o PFPC Inc.
P.O. Box 8901
Wilmington, DE 19899-8901.
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<PAGE>
A. Reinvestment of Distributions. Shareholders may elect to (a) have all capital
gain distributions and income dividends on a series' shares held by them
automatically reinvested in additional shares of the series, or (b) have all
capital gain distributions automatically reinvested, but receive all income
dividends in cash, or (c) receive all capital gains distributions and income
dividends in cash. Unless an election is made, dividends and distributions will
be automatically reinvested in additional shares or fractions thereof of the
same series by the transfer agent at the net asset value in effect at the close
of the New York Stock Exchange on the date of distribution. If one of the cash
options above is selected, money can be automatically transferred to the
shareholder's bank account on the payable date by completing an Automated
Transfers application. Please call 1-800-553-3014 for an application or complete
item 6 on the application attached to this prospectus.
B. Automatic Investment Plan. The Automatic Investing Plan permits an investor
to automatically purchase shares of the Fund on a monthly basis through an
arrangement with the investor's bank and the transfer agent. The transfer agent
will arrange for a predetermined amount of money, selected by the investor (the
minimum per month for Mutual Shares and Beacon is $100 and is $50 for Qualified,
Discovery and European), to be deducted on various dates of the month from the
investor's bank account to purchase shares of the designated series. The
investor will receive a confirmation from the transfer agent and his bank
account will reflect the amount charged. An investor may utilize this service by
completing an Automated Transfer application with the transfer agent. Please
call 1-800-553-3014 to request an application. The investor's bank must be a
member of Automated Clearing House (ACH). The Automatic Investment Plan normally
becomes effective 20 business days after the application is received.
C. Individual Retirement Account Plan. All persons eligible may establish an
Individual Retirement Account ("IRA") to invest in the Fund. Mutual Shares and
Beacon require a $2,000 minimum initial deposit to an IRA. Qualified, Discovery
and European have a minimum initial deposit of $1,000. All dividends and
distributions on shares held in IRAs are reinvested in additional shares of the
Fund and are not taxed until withdrawn. Please call the Fund at 1-800-553-3014
for an IRA application. Please consult your tax advisor regarding the tax
treatment of IRAs under the Internal Revenue Code of 1986 as amended (the
"Code").
D. Qualified Retirement Plans. The Fund offers four qualified retirement plans:
the Simplified Standardized Profit Sharing Plan, the Simplified Standardized
Money Purchase Plan, the Standardized Profit Sharing Plan and the Standardized
Money Purchase Plan. For copies of the plan documents, plan administrators guide
and summary plan description booklets call 1-800-553-3014. PNC Bank acts as
trustee/custodian, but neither PNC Bank nor the Fund administers the qualified
retirement plans and therefore no assurance can be given that a particular
qualified retirement plan is properly administered. Please consult your employer
or tax advisor if you have any questions.
E. SEP-IRA. Eligible individuals may establish a SEP-IRA with their employers.
An application form may be obtained from the Fund by calling 1-800-553-3014. If
the SEP-IRA is properly established and administered by the employer,
contributions will be tax deductible and income and capital gain will be tax
deferred. PNC Bank acts as trustee/custodian, but neither PNC Bank nor the Fund
administers the SEP-IRA and therefore no assurance can be given that a
particular SEP-IRA is properly administered. Please consult your employer or tax
advisor if you have any questions.
F. Section 403(b)(7) Retirement Plan. Persons who are full or part-time
employees of non-profit tax-exempt organizations or public educational
organizations, such as hospitals, educational institutions, and other religious,
charitable, scientific or literary organizations, are eligible to establish a
retirement plan under Section 403(b)(7) of the Code. An investor's employer may
make direct contributions to the investor's 403(b)(7) Plan account or
contributions may be made pursuant to the investor's agreement to take a
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reduction in salary or to forego an increase in salary. Such contributions will
be excluded from the investor's gross income for Federal income tax purposes up
to specified limits provided they do not exceed the investor's "excludable
amount" for the taxable year.
Shareholders may call the Fund at 1-800-553-3014 to request an application
and a model 403(b)(7) Plan. The 403(b)(7) Plan was submitted to the IRS National
Office on behalf of a participant and it ruled to the effect that (i) amounts
contributed by an employer (whether or not under a salary reduction agreement)
will be excludible from the participant's gross income to the extent of his
"exclusion allowance" (as defined in Section 403(b) of the Code) and (ii) the
dividends and other income and gains on such account will be tax-exempt until
distribution to the participant and/or his beneficiary. While this ruling may
not be used as precedent by other participants, it indicates that the form of
the 403(b)(7) Plan satisfies the requirements of Section 403(b) of the Code.
Participants who desire the assurance of a favorable ruling should similarly
file a request for a ruling.
G. Systematic Withdrawal Plan. A shareholder owning or purchasing Fund shares
with a current account value of at least $10,000 may open a Systematic
Withdrawal Plan (a "Plan") under which a specified dollar amount (not less than
$50) will be paid to the shareholder from the shareholder's Fund account on a
monthly, quarterly or annual basis on various dates of that month. Systematic
Withdrawal Plan payments can be made automatically into the shareholder's bank
account by completing an Automated Transfers application. Please call
1-800-553-3014 for an application, and specify if you want an automated transfer
application for a regular or retirement account. A shareholder may open a
Systematic Withdrawal Plan by filing with the transfer agent an application,
together with any certificates for series shares held by the shareholder. Please
call the Fund at 1-800-553-3014 to request a Systematic Withdrawal Plan
application. The Plan will normally become active within 20 business days after
the application is received. Systematic withdrawals are expected to result in a
decrease in aggregate value of the investment.
H. Fees. As of January 1996 PNC Bank has agreed to waive its annual maintenance
fee (for all or any portion of a year) of $9 per shareholder account for IRA,
Qualified Retirement Plan, SEP-IRA and 403(b)(7) Plans. The fee and its waiver
are subject to adjustment by PNC Bank as trustee/custodian for the Plans.
I. Transfer of Shares. A shareholder may transfer shares of any series to
another person by writing to the Fund's transfer agent. The shareholder should
clearly identify the series, the account and the number of shares to be
transferred, and include the signature of all registered owners, and all stock
certificates, if any, which are the subject of transfer. The signature on the
letter of instructions, the stock certificates or any stock power must be
guaranteed in the same manner as described under "How to Redeem Shares." As in
the case of redemptions, the written request must be received in good order
before any transfer can be made.
NET ASSET VALUE
For purposes of pricing purchases and redemptions, the net asset value of
each series of the Fund is separately determined by State Street Bank and Trust
Company, the Fund's custodian ("State Street") as of the earlier of 4:00 p.m. or
the close of regular trading on the New York Stock Exchange on each day that the
Exchange is open for business but in no event less often than once each week.
Net asset value per share of each series of the Fund is calculated by adding the
value of all securities and other assets of such series, subtracting all of the
liabilities of such series and dividing the remainder by the number of shares of
such series outstanding at the time the determination is made.
Securities, including options, and futures traded on an exchange or on
NASDAQ or in the over the counter market are valued at the last reported sales
price on the day of valuation, but if there are no sales on that day, or if the
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Adviser determines that the last sale fails to reflect the current market value,
such securities are valued at the mean between the closing bid and asked prices.
Other securities and assets, including restricted and illiquid securities, are
valued at their fair value as determined in good faith under procedures
determined by the Board of Directors. To the extent consistent with the
foregoing fair value standard, securities which are traded for which market
quotations are not readily available are valued at the mean of the bid and asked
prices quoted to the Fund by the principal market makers of such security. All
foreign securities are valued on the date net asset value is calculated as of
the close of each country's respective exchanges. Foreign currencies are priced
at New York market closing prices. Temporary investments in short-term debt
securities are valued at market, or at amortized cost, which approximates market
value.
The net asset value per share of each series appears daily in the The Wall
Street Journal and other newspapers. Shareholders may also call the Fund's
Automated Telephone Inquiry System at 1-800-858-3013 to receive the most recent
net asset value information.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each series of the Fund intends to qualify for treatment under Subchapter M
of the Code. Since each series intends to continue to so qualify and to
distribute all of its net investment income and capital gain to shareholders at
least annually, it is expected that each series will not be required to pay any
Federal income taxes. Shareholders generally will have to pay Federal income
taxes on the dividends and distributions they receive from a series and on gains
realized upon redemption of their shares.
Following each calendar year, each shareholder will receive information for
tax purposes on the dividends and capital gain distributions received during the
previous year. The Fund may make distributions from net investment income or
capital gain and may also make distributions in kind. Dividends from net
investment income and any net short-term capital gain will be taxable as
ordinary income whether received in cash or in kind. Any distributions
designated as realized net capital gain (the excess of net long-term capital
gain over net short-term capital loss) will be taxable as long-term capital
gain, regardless of the holding period of the shareholder's shares of such
series. All or a portion of any dividends paid by the Fund to corporate
shareholders may, under certain circumstances, be eligible for the dividends
received deduction. Credit for foreign taxes paid by the Fund have generally not
been available to shareholders.
Dividends or distributions have the effect of reducing the per share value
of shares owned by the shareholder by the per share amount of the dividends or
distributions. Furthermore, such dividends and distributions paid shortly after
the purchase of shares by an investor, although in effect a return of capital,
are subject to income taxes. The Board presently intends to declare such
dividends and distributions from net investment income semi-annually.
The IRS requires backup withholding of Federal income tax of 31% of the
gross amount of dividends, capital gain distributions, and redemption proceeds
paid or credited to shareholders who do not furnish a valid social security or
taxpayer identification number. Shareholders using the Fund as a medium for tax
qualified retirement plans may be subject to a 20% mandatory withholding upon
withdrawal under certain circumstances.
Redemptions of shares of a series will be taxable transactions for Federal
income tax purposes. Generally, gain or loss will be recognized in an amount
equal to the difference between the shareholder's basis in his shares and the
amount received. Assuming that such shares are held as a capital asset, such
gain or loss will be a capital gain or loss and will be a long-term capital gain
or loss if the shareholder has held his shares for a period of more than one
year. If a shareholder redeems shares of any series at a loss and makes an
additional investment in the same series 30 days before or after such
redemption, the loss may be disallowed under the wash sale rules.
Income received by European from sources outside the United States may be
subject to withholding and other foreign taxes. As long as more than 50% of the
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value of European's assets at the close of any taxable year consists of stocks
or securities of foreign corporations, European intends to elect to treat any
foreign income taxes paid by the series as if it were paid by shareholders.
Accordingly, the amount of foreign income taxes paid by European will be
included in the income of its shareholders and the European shareholders will be
entitled to credit their portions of those amounts against their United States
federal income taxes, if any, or to deduct such portions from their taxable
income. No deduction for foreign taxes may be claimed by a shareholder who does
not itemize deductions. In addition, certain individual shareholders may be
subject to rules that limit or reduce their ability to deduct fully their pro
rata share of foreign taxes. Shortly after any year for which it makes such an
election, European will report to its shareholders, in writing, the amount per
share of any foreign tax that must be included in each shareholder's gross
income and the amount that will be available for deduction or credit.
In general, a credit for foreign taxes may not exceed the United States
shareholder's United States federal income tax attributable to its foreign
source taxable income. If European elects to treat foreign taxes paid by the
series as paid by the shareholders as described in the preceding paragraph, the
source of European's income will flow through to its shareholders for purposes
of calculating the limitation on foreign tax credits. Dividends and interest
received by the Fund in respect of non-U.S. securities will give rise to foreign
source income to shareholders. Fund shareholders are advised to consult their
tax advisers with respect to the federal, state, local or foreign tax
consequences of the pass-through of foreign tax credits described above.
The foregoing summary of Federal income tax consequences is included herein
for general informational purposes only. It does not address the tax
consequences to all investors and does not address the tax consequences under
state, local, foreign and other tax laws. Prospective investors are urged to
consult their own tax advisors with respect to the tax consequences of an
investment in a series of the Fund.
FUND OPERATIONS
Portfolio Transactions
The Adviser effects portfolio transactions through brokers and dealers who
in its judgment will provide the Fund with the best combination of price
(including brokerage commissions, if any) and execution. The Adviser may also
give consideration to research services in its selection of brokers and may
cause the series to pay higher commissions than might be charged by some other
broker who does not furnish research services if the Adviser determines in good
faith that the commissions being paid are reasonable in relation to the value of
the brokerage and research services provided. Research services provided by
brokers who execute Fund portfolio brokerage transactions for a series may be
utilized by the Adviser for the benefit of the other series or clients advised
by it, just as research services provided by brokers who execute brokerage
transactions for such other series (or clients) advised by the Adviser may be
utilized for the benefit of the other series (and clients). The Adviser does not
know of any way of determining the value of brokerage and research services
provided by such brokers, except to the extent such services have a determined
market value. To the extent such services are used by the Adviser in advising
the Fund, they tend to reduce the Adviser's expenses. The Adviser may
occasionally also take into account sale of Fund shares when allocating
brokerage.
The Adviser generally effects transactions in exchange traded securities
through members of the exchange although it may also effect such transactions
privately or in the so-called "third market." Transactions in over-the-counter
securities will be executed on a principal basis with market makers unless, in
the judgment of the Adviser, the best combination of price and execution is
available by other arrangements including dealing with a market maker on an
agency basis and paying a brokerage commission. Transactions in unregistered
securities are effectuated with broker-dealers on a principal or agency basis or
directly with the issuers or holders of such securities.
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The Adviser will effect portfolio transactions for a series through a
broker which is an affiliated person of the Fund or the Adviser only if in the
Adviser's judgment such broker is able to obtain the best combination of price
and execution. Currently the only broker affiliated with the Fund or the Adviser
is Clearwater Securities Inc. ("Clearwater"). Although an affiliated broker such
as Clearwater is entitled to and is paid a commission for executing brokerage
transactions for the Fund, Clearwater does not act as a principal for its own
account in any portfolio transactions with the Fund.
The Adviser makes its portfolio decisions for each series based on its
judgment as to the best interests of such series, taking into account factors
such as relative size, cash position, investment restrictions and tax
consequences to the client. Securities considered for purchase or sale by a
series are often also appropriate for purchase or sale by the other series
advised by the Adviser. When more than one of such series is purchasing or
selling the same securities at or about the same time, the transactions are
averaged as to price.
The 1995 portfolio turnover rate for Mutual Shares, Qualified, Beacon and
Discovery was 79.32%, 75.59%, 73.18% and 73.23%, respectively.
SHARES OF THE FUND
The Fund has an authorized capital of 1.3 billion shares of stock, par
value $.001 per share, 200 million of which have been allocated to the Mutual
Shares Fund, 200 million of which have been allocated to the Mutual Qualified
Fund, 200 million of which have been allocated to the Mutual Beacon Fund, 300
million of which have been allocated to Mutual Discovery Fund and 400 million of
which have been allocated to Mutual European Fund. Pursuant to Maryland law and
the Fund's charter, the Board of Directors may increase the authorized capital
and reclassify unissued shares of any class (series) to create additional
classes of stock with specified rights, preferences and limitations. Each share
is entitled to one vote per share on all matters subject to shareholder vote.
Shares of all classes vote together as a single class except that where a matter
being voted on affects only a particular class it will be voted on only by that
class and where a matter affects a particular class differently from other
classes, that class will vote separately on such matter. The Fund is not
required to hold annual meetings and does not expect to hold meetings of
shareholders as long as two-thirds of the directors then in office have been
elected by the shareholders. Section 16(c) of the 1940 Act provides certain
rights to shareholders which the Fund will honor regarding the ability to call
meetings of shareholders and to communicate with shareholders. If less than a
majority of the directors have been elected by shareholders, a meeting of
shareholders will be held within sixty days to fill any existing vacancies.
Directors may be removed only for cause by a vote of sixty-seven percent of the
outstanding shares of the Fund. A meeting of shareholders shall be called if the
record holders of ten percent of the shares of the Fund so request in writing.
Each share is entitled to participate equally in dividends and distributions
declared by the Directors with respect to shares of the same class, and in the
net distributable assets allocated to such class on liquidation. When issued,
the shares are fully paid and nonassessable, and have no preemptive, conversion
or exchange rights. Shareholders are entitled to require the Fund to redeem
their shares. The shares are transferable without restriction.
COUNSEL AND INDEPENDENT AUDITORS
Skadden, Arps, Slate, Meagher and Flom, New York, New York are counsel to
the Fund. Wolf, Block, Schorr and Solis-Cohen of Philadelphia, Pennsylvania are
special counsel to the directors who are not interested persons of the Adviser
or the Fund. Miles & Stockbridge, Baltimore, Maryland are special counsel to the
Fund and pass upon the legality of the shares. Ernst & Young LLP, Boston,
Massachusetts, are the independent auditors of the Fund.
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ADDITIONAL INFORMATION
Custodian, Transfer and Dividend Disbursing Agent. State Street Bank and
Trust Company, Atlantic Division, 225 Franklin Street, Boston, MA 02110 is the
principal custodian for the assets of all the series of the Fund. The transfer
and dividend disbursing agent of the Fund is PFPC Inc., 400 Bellevue Parkway,
Wilmington, Delaware 19809-3710. PNC Bank, Wilmington, Delaware acts as the
trustee/custodian for all Fund sponsored retirement accounts.
Shareholder Inquiries. Shareholder inquiries should be directed to the Fund
at the telephone number or address set forth on the cover page of this
Prospectus.
Reports. The Fund will issue to its shareholders semiannual reports
containing unaudited financial statements and annual reports containing
financial statements examined by auditors which have been approved by the
shareholders.
Information. This Prospectus does not contain all the information included
in the Registration Statement filed with the Securities and Exchange Commission
under the Securities Act of 1933 with respect to the securities offered hereby,
certain portions of which have been omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The Registration
Statement including the exhibits filed therewith may be examined at the office
of the Securities and Exchange Commission in Washington, D.C.
Statements contained in this Prospectus as to the contents of any contract
or other document referred to are not necessarily complete, and, in each
instance, reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part, each such statement being qualified in all respects by such reference.
25
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<TABLE>
<CAPTION>
<S> <C> <C>
New Account Application - Mutual Series Fund Inc.
PLEASE FOLLOW INSTRUCTIONS FOR THIS APPLICATION LOCATED ON BACK PAGE.
If you have any questions on how to complete this application, please call: 1-800-448-FUND
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1 Investment and Establishing Your Account
- ------------------------------------------------------------------------------------------------------------------------------------
Check Series in which you are investing:
|_| 076 Mutual Beacon ($5,000 minimum) $_________ |_| 077 Mutual Discovery ($1,000 minimum) $_________
|_| 078 Mutual European ($1,000 minimum) $_________ |_| 075 Mutual Qualified ($1,000 minimum) $_________
|_| 074 Mutual Shares ($5,000 minimum) $_________
Enclosed is a check made payable to MUTUAL SERIES FUND INC. for the total amount of $__________________
- ------------------------------------------------------------------------------------------------------------------------------------
2 Your Account Registration
- ------------------------------------------------------------------------------------------------------------------------------------
Individual ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
First Name Middle Initial Last Name
- ------- ------ -----------------
Social Security Number (Required to open your account)
and (if any) Joint Tenant (will be rights of survivorship unless otherwise indicated)
- ------------------------------------------------------------------------------------------------------------------------------------
First Name Middle Initial Last Name
Gift/Transfer To A Minor ----------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- ---------------------------------------
Custodian's Name (Only one permitted) Minor's Birthdate
- ------------------------------------------------------------------------------ under the
Minor's Name (Only one permitted)
Uniform Gifts/Transfers to Minors Act. _______________ ______________________________________________________________
(Minor's State) Minor's Social Security Number (Required to open your account)
Trust -----------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Name of Trust
- ------------------------------------------------------------------------------------------------------------------------------------
Name of Trust (Continued)
- ------------------------------------------------------------------------------------------------------------------------------------
Name of Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
Name of Second Trustee (if any)
- -------------------------- ----------------------------------------------
Date of Trust Agreement Taxpayer Identification Number |_| Tax Identification Number
You must provide a Trust Date to qualify as a legal trust. |_| Social Security Number
Corporation, Partnership Or Other Entity ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Name of Corporation or Other Entity
- ------------------------------------------------------------------------------------------------------------------------------------
Authorized Officer
- -------- --------------------------------------------------
Taxpayer Identification Number (required to open your account)
- ------------------------------------------------------------------------------------------------------------------------------------
3 Your Mailing Address
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Street Address
- ------------------------------------------------------------------------------------------------------------------------------------
City State Zip Code
____________ __________________________ If US citizen living abroad, please indicate state of residence _________
Area Code Daytime Phone Number State
- ------------------------------------------------------------------------------------------------------------------------------------
4 Receiving Distributions
- ------------------------------------------------------------------------------------------------------------------------------------
All income, dividends and capital gain distributions will be reinvested in your Mutual Series account unless you select another
option in item 6 of this application.
- ------------------------------------------------------------------------------------------------------------------------------------
5 Your Signatures
- ------------------------------------------------------------------------------------------------------------------------------------
Please be sure you have signed this form. Your signature and social security or tax identification number are required to
establish your account.
This application cannot be used for an IRA or other MUTUAL SERIES FUND Retirement Plans
Under the Federal Income Tax Law, you are subject to certain penalties as well as withholding of tax at a 31 percent rate if you do
not complete the following section.
Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number; and
(2) I am not subject to backup withholding because (a) I am exempt from backup withholding, or (b) I have not been notified by
the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or
dividends or (c) the IRS has notified me that I am no longer subject to backup withholding (does not apply to real estate
transactions, mortgage interest paid, the acquisition or abandonment of secured property, contributions to an individual
retirement arrangement (IRA), and payments other than interest and dividends).
Instructions- You must cross out item (2) above if you have been notified by IRS that you are currently subject to backup
withholding because of underreporting interest or dividends on your tax return.
To the extent that this investment represents pension plan assets, I verify that this is an appropriate investment under the
plan.
I (we) have full right, power, authority, and legal capacity and am (are) of legal age in my state of residence to purchase
shares of the Fund. I (we) affirm that I (we) have received and read the current prospectus of the Fund and agree to its terms. I
(we) understand and agree that if I (we) hereafter order any additional shares and do not pay for such shares in a timely manner as
described in the Prospectus, the Fund may cancel the order and deduct any losses to the Fund incurred as a result of such
cancellation from dividends or redemptions of our remaining shares.
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Signature (as registered) Date
Check one: |_| Owner |_| Trustee |_| Custodian |_| Authorized Signatory |_| Other
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Signature (as registered) Joint Owner, Trustee, etc. Date
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<S> <C>
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6 Automated Transfer
- ------------------------------------------------------------------------------------------------------------------------------------
Please complete this section to authorize convenient transfers between your bank account and your Mutual Series Account via
Automated Clearing House (ACH). Attach a voided, unsigned, personal check, or savings deposit slip for the bank account you will be
using for transfers. The Fund cannot require your bank to accept this service, but we will work with your bank to establish this
service. Please complete an application for each of your Mutual Series Fund accounts that you wish to have this transfer capability.
Telephone Purchases -- You must complete this section if you wish to make telephone purchases. Telephone purchases must be for at
least $1,000, and the existing account balance has to equal at least half the amount of the telephone purchase. Telephone
Purchases
can not be made on retirement accounts.
Automatic Investment Plan -- Convenient automatic transfer into your fund account. This transfer will occur on or about one of the
following days
(Please check only one): |_| 1st |_| 10th |_| 15th |_| 20th |_| 25th
A minimum of $100 for Mutual Beacon and Mutual Shares, $50 for Mutual Discovery, Mutual European and Mutual Qualified.
I wish to make: |_| MONTHLY investments of $_________ or |_| QUARTERLY investments of $_________ with the first payment made
in the month of __________________.
Distributions -- All income, dividends and capital gains distributions will be reinvested in your Mutual Series account unless you
select one of the following options.
|_| Deposit all income and capital gains in my bank account. |_| Deposit income in my bank account and reinvest all capital
gains.
Written Redemptions -- Redemption proceeds will be automatically deposited into your bank account approximately two business days
after your written request is received in good order. Proceeds will be calculated at the net asset value next computed after
receipt of your redemption request. Please refer to the Funds' Prospectus for redemption procedures.
Systematic Withdrawal Plan -- Convenient automatic transfers into your bank account. This transfer will occur on or about the
(Please check only one): |_| 10th or |_| 25th of the month.
Available for accounts with a value of at least $10,000. Please refer to the Fund's prospectus for the redemption procedures.
Retirement accounts require a different application for this service. Call 1-800-553-3014 for the correct withdrawal form.
I wish to make (Minimum of $50): |_| MONTHLY withdrawals of $_________ or |_| QUARTERLY withdrawals of $__________
with the first withdrawal made in the month of _________________.
Bank Information: _______________________________________________
ABA Routing Number
- -------------------------------------------------------------------------- Note: This routing number can usually be found
Name and Address of Bank at the bottom, on the left hand side of your
personal check.
Note: To participate in this kind of transfer, your bank must be a member of the
Automated Clearing House (ACH). Please contact your bank to make sure that your _______________________________________________
bank is a member of ACH before you complete this application. Bank Account Number
____ |_| checking ____ |_| savings
- --------------------------------------------------------
Account Name
Note: One common name must appear on both your Mutual Series Fund account registration and bank registration.
Please Note: Automated transfers with respect to Telephone Purchases and written Redemptions normally become effective 20 business
days after we receive this completed application. Automated Transfers with respect to Distributions, Automatic
Investment Plans and Systematic Withdrawal Plans normally become effective on the processing cycle that follows the 20
business day activation period. The one bank account identified above will be utilized for all automated transactions
to or from this Mutual Series Account. Please refer to the Funds' prospectus for more details.
By completing this section of the application I request and authorize credits/debits to/from the above referenced bank account in
conjunction with this service. This authority is to remain in effect until you receive written notice to the contrary from me. I
agree that if a transfer from my bank account to Mutual Series is not honored by my banking institution, PFPC Inc. (the Funds'
transfer agent) will not be held responsible for items not honored and PFPC is authorized to redeem a $20 processing fee from this
Mutual Series account. If your account is charged the processing fee, Mutual Series will discontinue transfers via ACH from that
bank account until we receive further written instructions from you.
- ------------------------------------------------------------------------------------------------------------------------------------
7 Duplicate Statements
- ------------------------------------------------------------------------------------------------------------------------------------
A. Please send a duplicate account statement to
- ------------------------------------------------------------------------------------------------------------------------------------
Name
- ------------------------------------------------------------------------------------------------------------------------------------
Street Address City State Zip Code
____________ __________________________
Area Code Daytime Phone Number
B. If the person identified in this section has a Fund assigned adviser number, that number is _______________________.
- ------------------------------------------------------------------------------------------------------------------------------------
8 New Account Application Instructions
- ------------------------------------------------------------------------------------------------------------------------------------
1. Investment and Establishing Your Account. You may not use this application to
open an IRA or other MSF Retirement Account. Please call toll-free 1-800
553-3014 if you need an IRA or other Retirement Plan application. Your check(s)
should be made payable to Mutual Series Fund Inc. Be sure to enclose your check
with this application.
2. Your Account Registration
An account can be registered only as one of the following:
o individual
o joint tenants
o custodial account under the Uniform Gifts or Transfers to Minors Act
o a trust
o a corporation, partnership, organization, fiduciary, etc.
Please complete the section that corresponds with the type of account you are
opening and fill in the required information exactly as you wish it to appear on
the account registration.
Supply the Social Security number of the registered account owner who will be
responsible for tax related matters.
Supply the Employer Identification Number of the legal entity or organization.
If you are opening a trust, please supply the name(s) of the trustee(s) that
have authority to act for the trust.
If you are opening an account for a corporation, partnership, organization, etc.
please supply the name of an authorized officer who has the authority to act for
the account.
It is the sole responsibility of the account owners to inform the Fund of any
changes in trustees, or authorized officers. Documentation will be required to
make any changes. Please call for information.
3. Your Mailing Address Provide your complete address at which you wish to
receive mail.
4. Receiving Distributions Unless marked otherwise, all income, dividends and
capital gain distributions will be automatically reinvested.
5. Your Signature(s) Please make sure to sign this application. If the account
is registered in the name of:.
o an individual, the individual should sign;
o joint tenants, both should sign;
o a custodian for a minor, the custodian should sign;
o a trustee or other fiduciary, the fiduciary or fiduciaries should sign (please
indicate capacity);
o a corporation or other organization, an officer should sign (please indicate
corporate office or title)
6. The Automated Transfers Section of this application must be completed before
we can accept any transfers to or from your bank account and before you request
a telephone purchase.
7. Existing Accounts If you have additional accounts within the same fund with
identical mailing addresses, and you would like us to consolidate your
informational mailings, (Annual and Semi-annual reports), please provide us with
the account numbers, and indicate the primary account which will receive our
mailings.
8. Duplicate Statements Please complete this section is you wish a dealer,
investment adviser or other interested party to receive duplicate statements for
this account. If the person identified in this section has multiple Fund
advisory clients, the adviser can have all client activity reports coordinated
into one mailing by calling 1-800-448-FUND to arrange for an adviser number.
- --------------------------------------------------------------------------------
If you have any questions on how to complete this application, please call
1-800-448-FUND
Mail your completed application and check to
Mutual Series Fund Inc.
c/o PFPC Inc.,
PO Box 8901
Wilmington, DE 19899-8901
All mail sent by an overnight carrier or priority mail, should be addressed to:
Mutual Series Fund Inc.
c/o PFPC Inc.,
400 Bellevue Parkway -- Suite 108
Wilmington, DE 19899-3710
- --------------------------------------------------------------------------------
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<PAGE>
================================================================================
This Prospectus omits certain information contained in the registration
statement on file with the Securities and Exchange Commission. Information
omitted may be obtained from such Commission in Washington, D.C., upon payment
of the fee prescribed by the rules and regulations of the Commission.
----------
Contents Page
Series Annual Expense Tables .............................................. 2
Performance Information ................................................... 3
Condensed Financial Information ........................................... 4
The Fund .................................................................. 8
Management of the Fund .................................................... 13
How to Purchase Shares .................................................... 15
How to Redeem Shares ...................................................... 18
Shareholder Services ...................................................... 19
Net Asset Value ........................................................... 21
Dividends, Distributions and Taxes ........................................ 22
Fund Operations ........................................................... 23
Shares of the Fund ........................................................ 24
Counsel and Independent Auditors .......................................... 24
Additional Information .................................................... 25
----------
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offer made by this Prospectus, and, if given or made, such other
information or representations must not be relied upon as having been authorized
by the Fund. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy by the Fund in any jurisdiction in which such
offer to sell or solicitation of an offer to buy may not lawfully be made.
================================================================================
================================================================================
MUTUAL
SERIES
FUND
INC.
An Investment Company Organized in Diversified
Series
----------
Investment Adviser
HEINE SECURITIES CORPORATION
MICHAEL F. PRICE
President
Portfolio Manager
----------
[LOGO]
----------
PROSPECTUS
June 25, 1996
================================================================================
