<PAGE>
As filed with the Securities and Exchange Commission on June 6, 1997
Registration Nos. 33-22884
811-5577
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 21 /X/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 23 /X/
----------------------------
The Glenmede Fund, Inc.
(Exact Name of Registrant as Specified in Charter)
One South Street
Baltimore, Maryland 21202
(Address of Principal Executive Offices)
Registrant's Telephone Number:
1-800-442-8299
Michael P. Malloy, Esq.
Secretary
Drinker Biddle & Reath LLP
1100 Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[X] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has previously registered an indefinite number of securities
under the Securities Act of 1933 pursuant to Section (a)(1) of Rule 24f-
2 under the Investment Company Act of 1940, as amended. Registrant's Rule
24f-2 Notice for the fiscal year ended October 31, 1996 was filed with
the Securities and Exchange Commission on December 30, 1996.
==============================================================================
<PAGE>
THE GLENMEDE FUND, INC.
Institutional International Portfolio
Class A Shares
CROSS REFERENCE SHEET
Pursuant to Rule 485(a)
under the Securities Act of 1933
<TABLE>
<CAPTION>
Form N-1A Item Number Location
- ---------------------- -----------
Part A Prospectus Caption
- ------- ---------------------
<S> <C>
1. Cover Page.........................................Cover Page
2. Synopsis...........................................Expenses of the Portfolios
3. Condensed Financial Information....................Financial Highlights;
Performance Calculations
4. General Description of Registrant..................Cover Page; Investment
Objectives and Policies;
Investment Techniques; Risk Factors;
Investment Limitations;
General Information
5. Management of the Fund.............................Investment Advisor; Administrative,
Transfer Agency and Dividend Paying
Services; How to Invest in Class A Shares;
How to Redeem Class A Shares
6. Capital Stock and Other Securities.................How to Invest in Class A Shares;
How to Redeem Class A Shares; Dividends,
Capital Gains Distributions and Taxes;
General Information
7. Purchase of Securities Being Offered...............How to Invest in Class A Shares;
How to Redeem Class A Shares
8. Redemption or Repurchase...........................How to Invest in Class A Shares;
How to Redeem Class A Shares
9. Pending Legal Proceedings..........................Not Applicable
</TABLE>
<PAGE>
THE GLENMEDE FUND, INC.
One South Street, Baltimore, Maryland 21202
- --------------------------------------------------------------------------------
(800) 553-8080
- --------------------------------------------------------------------------------
Prospectus - ___________, 1997
INVESTMENT OBJECTIVES
The Glenmede Fund, Inc., a Maryland corporation (the "Fund"), is an open-end
management investment company. The Fund consists of nine series of shares, each
of which has different investment objectives and policies. The securities
offered hereby are shares of one class of one of these series, Flag Investors
Series Class A Shares of the Institutional International Portfolio (the
"Portfolio").
The objective of the Portfolio is to provide maximum long-term total return
consistent with reasonable risk to principal. The Portfolio seeks to achieve its
objective by investing primarily in common stocks and other equity securities of
companies located outside the United States. The net asset value of the Flag
Investors Series Class A Shares will fluctuate.
Total return consists of income (dividend and/or interest income from
portfolio securities) and capital gains and losses, both realized and
unrealized, from portfolio securities.
Shares of the Portfolio are subject to investment risks, including the
possible loss of principal, are not bank deposits and are not endorsed by,
insured by, guaranteed by, obligations of or otherwise supported by the U.S.
Government, the Federal Deposit Insurance Corporation, the Federal Reserve
Board, The Glenmede Corporation or any of its affiliates or any other
governmental agency or bank.
Flag Investors Series Class A Shares of the Portfolio ("Class A Shares") are
available through Alex. Brown & Sons Incorporated ("Alex. Brown" or the
"Distributor"), as well as through Participating Dealers and Shareholder
Servicing Agents. (See "How to Invest in Class A Shares.")
ABOUT THIS PROSPECTUS
This Prospectus, which should be retained for future reference, sets
forth certain information that you should know before you invest. A Statement of
Additional Information ("SAI") containing additional information about the Class
A Shares of the Portfolio has been filed with the Securities and Exchange
Commission (the "SEC"). The SAI dated _____________, 1997, as amended or
supplemented from time to time, is incorporated by
<PAGE>
reference into this Prospectus. The 1996 Annual Report to Shareholders contains
additional investment and performance information about the Portfolio. A copy of
the SAI and the 1996 Annual Report may be obtained, without charge, by writing
to the Fund at the address shown above or by calling the Fund at the telephone
number shown above.
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.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
FEE TABLE.............................................................................................. 1
PERFORMANCE CALCULATIONS............................................................................... 2
INVESTMENT OBJECTIVES AND POLICIES..................................................................... 3
INVESTMENT TECHNIQUES.................................................................................. 4
RISK FACTORS........................................................................................... 7
INVESTMENT LIMITATIONS................................................................................. 9
HOW TO INVEST IN CLASS A SHARES........................................................................ 11
HOW TO REDEEM CLASS A SHARES........................................................................... 17
TELEPHONE TRANSACTIONS................................................................................. 18
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES....................................................... 19
INVESTMENT ADVISOR..................................................................................... 22
GENERAL INFORMATION.................................................................................... 23
DISTRIBUTOR............................................................................................ 24
ADMINISTRATIVE, TRANSFER AGENCY AND DIVIDEND PAYING SERVICES........................................... 26
APPLICATION........................................................................................... A-1
</TABLE>
-2-
<PAGE>
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES FOR FLAG INVESTORS SERIES CLASS
A SHARES:
<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a
percentage of offering price).................................................................... 4.50%*
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price).............................................................. None
Maximum Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds,
whichever is lower).............................................................................. .50%*
ANNUAL PORTFOLIO OPERATING EXPENSES: (as a percentage of average
daily net assets)
Investment Advisory Fees........................................................................... .75%
Administration Fees................................................................................ .14%
12b-1 Fees......................................................................................... .25%
Other Expenses..................................................................................... .34%
----
Total Portfolio Operating Expenses................................................................. 1.48%
=====
- ---------------------
* Purchases of $1 million or more by persons not otherwise
eligible for sales load waivers are not subject to an
initial sales charge; however, a contingent deferred sales
charge of .50% may be imposed upon redemption. (See "How To
Invest in Class A Shares - Offering Price.")
Example: 1 year 3 years 5 years 10 years
- ------- ------ ------- ------- --------
You would pay the following expenses on a $1,000
investment assuming (1) 5% annual return and
(2) redemption at the end of each time period:*............................... $59 $90 $122 $214
--- --- ---- ----
- ---------------
</TABLE>
*THE EXAMPLE IS BASED ON TOTAL PORTFOLIO OPERATING EXPENSES.
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of the foregoing table is to describe the various costs and
expenses that an investor in Class A Shares of the Portfolio will bear directly
and indirectly. A person who purchases Class A Shares through a financial
institution may be charged separate fees by the financial institution. (For more
complete descriptions of the various costs and expenses, see "How
<PAGE>
To Invest in Class A Shares -- Offering Price," "Investment Advisor," and
"Distributor.")
The rules of the SEC require that the maximum sales charge (in the
Class A Shares' case, 4.50% of the offering price) be reflected in the above
table. However, certain investors may qualify for reduced sales charges. (See
"How To Invest in Class A Shares - Offering Price.") Due to the continuous
nature of Rule 12b-1 fees, long-term holders of Class A Shares may pay more than
the equivalent of the maximum front-end sales charges permitted by the Current
Rules of the National Association of Securities Dealers, Inc. ("NASD Rules").
The foregoing table has not been audited by ___________, the Fund's independent
auditors.
PERFORMANCE CALCULATIONS
The Portfolio may advertise or quote total return data from time to
time for the Class A Shares. Total return will be calculated on an average
annual total return basis, and may also be calculated on an aggregate total
return basis, for various periods. Average annual total return reflects the
average annual percentage change in value of an investment in the Portfolio over
the measuring period. Aggregate total return reflects the total percentage
change in value over the measuring period. Both methods of calculating total
return assume that dividends and capital gains distributions made by the
Portfolio with respect to Class A Shares during the period are reinvested in
Class A Shares.
On ________ 1997, the Portfolio began to offer Class A Shares. Class A
Shares, unlike the Institutional Shares, the other class of shares issued by the
Portfolio, have a 4.50% maximum sales load and are subject to an annual .25% fee
payable pursuant to the distribution plan. Performance of the Class A Shares
prior to ____, 1997 is represented by performance of the Institutional Shares
and has been restated to reflect the impact of the sales charge, but not the
.25% distribution plan fees or any other differences in expenses. If
distribution plan fees and those other expeneses had been reflected, performance
would be reduced.
The Portfolio may compare its total return of the Class A Shares to
that of other investment companies with similar investment objectives and to
stock and other relevant indices or to rankings prepared by independent services
or other financial or industry publications that monitor the performance of
mutual funds. For example, the total return of the Portfolio may be compared to
data prepared by Lipper Analytical Services, Inc.
-2-
<PAGE>
("Lipper") and the Morgan Stanley Capital International EAFE Index. Total return
and other performance data as reported in national financial publications such
as Money Magazine, Forbes, Barron's, The Wall Street Journal and The New York
Times, or in publications of a local or regional nature, may also be used in
comparing the performance of the Portfolio.
Performance quotations will represent past performance and should not
be considered as representative of future results. Since performance will
fluctuate, performance data for the Portfolio should not be used to compare an
investment in the Portfolio's shares with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield/return for a stated period of time. Shareholders should remember
that performance is generally a function of the kind and quality of the
instruments held in the Portfolio, portfolio maturity, operating expenses and
market conditions. Any management fees charged by The Glenmede Trust Company
(the "Advisor") or institutions to their clients will not be included in the
Portfolio's calculations of total return.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of the Portfolio is not fundamental and may be
changed by the Board members without shareholder approval.
The objective of the Portfolio is to provide maximum, long-term total
return consistent with reasonable risk to principal. The Portfolio seeks to
achieve its objective by investing primarily in common stocks and other equity
securities of companies located outside the United States. The Portfolio is
expected to diversify its investments across companies located in a number of
foreign countries, which may include, but are not limited to, Japan, the United
Kingdom, Germany, France, Switzerland, the Netherlands, Sweden, Australia, Hong
Kong and Singapore. The Portfolio will invest an aggregate of at least 65% of
its total assets in the securities of companies (other than investment
companies) in at least three different countries, other than the United States.
The securities which the Portfolio may purchase include the following:
common stocks of companies located outside the U.S.; shares of closed-end
investment companies which invest chiefly in the shares of companies located
outside the U.S. (such shares will be purchased by the Portfolio within the
limits prescribed by the Investment Company Act of 1940 (the "1940 Act")); U.S.
or foreign securities convertible into foreign common stock; and American
Depositary Receipts ("ADRs") which are U.S. domestic securities representing
ownership rights in foreign companies.
-3-
<PAGE>
The Portfolio also may enter into forward currency exchange contracts
only in order to hedge against uncertainty in the level of future foreign
exchange rates in the purchase and sale of investment securities; it may not
enter into such contracts for speculative purposes. See "Investment
Techniques--Forward Foreign Currency Exchange Contracts."
The Portfolio intends to remain, for the most part, fully invested in
equity securities of companies located outside of the United States. However,
the Portfolio may invest a portion of its assets (up to 20% under normal
circumstances) in the following fixed income and money market securities:
obligations of the U.S. Government and its guaranteed or sponsored agencies,
including shares of open-end or closed-end investment companies which invest in
such obligations (such shares will be purchased within the limits prescribed by
the 1940 Act and would subject a shareholder of the Portfolio to expenses of the
other investment company in addition to the expenses of the Portfolio);
short-term money market instruments issued in the U.S. or abroad, denominated in
dollars or any foreign currency, including short-term certificates of deposit
(including variable rate certificates of deposit), time deposits with a maturity
no greater than 180 days, bankers acceptances, commercial paper rated A-1 by
Standard & Poor's Ratings Group, Division of McGraw Hill ("S&P") or Prime-1 by
Moody's Investors Service, Inc. ("Moody's"), or in equivalent money market
securities; and high quality fixed income securities denominated in U.S.
dollars, any foreign currency, or a multi-national currency unit such as the
European Currency Unit.
INVESTMENT TECHNIQUES
Repurchase Agreements. The Portfolio may enter into repurchase
agreements with qualified brokers, dealers, banks and other financial
institutions deemed creditworthy by the Advisor. Under normal circumstances,
however, the Portfolio will not enter into repurchase agreements if entering
into such agreements would cause, at the time of entering into such agreements,
more than 20% of the value of its total assets to be subject to repurchase
agreements. The Portfolio would generally enter into repurchase transactions to
invest cash reserves and for temporary defensive purposes.
In a repurchase agreement, the Portfolio purchases a security and
simultaneously commits to resell that security at a future date to the seller (a
qualified bank or securities dealer) at an agreed upon price plus an agreed upon
market rate of interest (itself unrelated to the coupon rate or date of maturity
of the purchased security). The securities held subject to a repurchase
agreement may have stated maturities exceeding 13 months, but the Advisor
currently expects that repurchase
-4-
<PAGE>
agreements will mature in less than 13 months. The seller under a repurchase
agreement will be required to maintain the value of the securities subject to
the agreement at not less than 101% of the repurchase price including accrued
interest. The Fund's administrator and the Advisor will mark-to-market daily the
value of the securities purchased, and the Advisor will, if necessary, require
the seller to deposit additional securities to ensure that the value is in
compliance with the 101% requirement stated above. The Advisor will consider the
creditworthiness of a seller in determining whether the Portfolio should enter
into a repurchase agreement, and the Portfolio will only enter into repurchase
agreements with banks and dealers which are determined to present minimal credit
risk by the Advisor under procedures adopted by the Board of Directors.
In effect, by entering into a repurchase agreement, the Portfolio is
lending its funds to the seller at the agreed upon interest rate and receiving
securities as collateral for the loan. Such agreements can be entered into for
periods of one day (overnight repo) or for a fixed term (term repo). Repurchase
agreements are a common way to earn interest income on short-term funds.
The use of repurchase agreements involves certain risks. For example,
if the seller of a repurchase agreement defaults on its obligation to repurchase
the underlying securities at a time when the value of these securities has
declined, the Portfolio may incur a loss upon disposition of them. Default by
the seller would also expose the Portfolio to possible loss because of delays in
connection with the disposition of the underlying obligations. If the seller of
an agreement becomes insolvent and subject to liquidation or reorganization
under the Bankruptcy Code or other laws, a bankruptcy court may determine that
the underlying securities are collateral not within the control of the Portfolio
and therefore subject to sale by the trustee in bankruptcy. Further, it is
possible that the Portfolio may not be able to substantiate its interest in the
underlying securities.
Lending of Securities. The Portfolio may lend its portfolio securities
with a value up to one-third of its total assets to qualified brokers, dealers,
banks and other financial institutions for the purpose of realizing additional
net investment income through the receipt of interest on the loan. Such loans
would involve risks of delay in receiving additional collateral in the event the
value of the collateral decreased below the value of the securities loaned or of
delay in recovering the securities loaned or even loss of rights in the
collateral should the borrower of the securities fail financially. Loans will be
made only to borrowers deemed by the Advisor to be of good standing.
-5-
<PAGE>
"When Issued," "Delayed Settlement," and "Forward Delivery" Securities.
The Portfolio may purchase and sell securities on a "when issued," "delayed
settlement" or "forward delivery" basis. "When issued" or "forward delivery"
refer to securities whose terms and indenture are available and for which a
market exists, but which are not available for immediate delivery. When issued
or forward delivery transactions may be expected to occur one month or more
before delivery is due. Delayed settlement is a term used to describe settlement
of a securities transaction in the secondary market which will occur sometime in
the future. No payment or delivery is made by the Portfolio in a when issued,
delayed settlement or forward delivery transaction until the Portfolio receives
payment or delivery from the other party to the transaction. The Portfolio will
maintain a separate account of cash, U.S. Government securities or other high
grade debt obligations at least equal to the value of purchase commitments until
payment is made. Such segregated securities will either mature or, if necessary,
be sold on or before the settlement date. Although the Portfolio receives no
income from the above described securities prior to delivery, the market value
of such securities is still subject to change.
The Portfolio will engage in when issued transactions to obtain what is
considered to be an advantageous price and yield at the time of the transaction.
When the Portfolio engages in when issued, delayed settlement or forward
delivery transactions, it will do so for the purpose of acquiring securities
consistent with its investment objective and policies and not for the purposes
of speculation. The Portfolio's when issued, delayed settlement and forward
delivery commitments are not expected to exceed 25% of its total assets absent
unusual market circumstances, and the Portfolio will only sell securities on
such a basis to offset securities purchased on such a basis.
Borrowing. As a temporary measure for extraordinary or emergency
purposes, the Portfolio may borrow money from banks. However, the Portfolio will
not borrow money for speculative purposes.
Forward Foreign Currency Exchange Contracts. The Portfolio may enter
into forward foreign currency exchange contracts in connection with the purchase
and sale of investment securities; such contracts may not be used for
speculative purposes. A forward foreign currency exchange contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts may be
bought or sold to protect the Portfolio, to some degree, against a possible loss
resulting from an adverse change in the relationship between foreign currencies
and the U.S. dollar. This method of protecting the value of
-6-
<PAGE>
the Portfolio's investment securities against a decline in the value of a
currency does not eliminate fluctuations in the underlying prices of the
securities. It simply establishes a rate of exchange at some future point in
time. Additionally, although such contracts tend to minimize the risk of loss
due to a decline in the value of the hedged currency, at the same time they tend
to limit any potential gain which might result should the value of such currency
increase.
Depositary Receipts. The Portfolio may purchase sponsored or
unsponsored ADRs. ADRs are depositary receipts typically issued by a U.S. bank
or trust company which evidence ownership of underlying securities issued by a
foreign corporation. Generally, depositary receipts in registered form are
designed for use in the U.S. securities market and depositary receipts in bearer
form are designed for use in securities markets outside the United States.
Depositary receipts may not necessarily be denominated in the same currency as
the underlying securities into which they may be converted. Depositary receipts
may be issued pursuant to sponsored or unsponsored programs. In sponsored
programs, an issuer has made arrangements to have its securities traded in the
form of depositary receipts. In unsponsored programs, the issuer may not be
directly involved in the creation of the program. Although regulatory
requirements with respect to sponsored and unsponsored programs are generally
similar, in some cases it may be easier to obtain financial information from an
issuer that has participated in the creation of a sponsored program.
Accordingly, there may be less information available regarding issuers of
securities underlying unsponsored programs and there may not be a correlation
between such information and the market value of the depositary receipts.
Depositary receipts also involve the risks of other investments in foreign
securities, as discussed below. For purposes of the Portfolio's investment
policies, the Portfolio's investments in Depositary receipts will be deemed to
be investments in the underlying securities.
Illiquid Securities. The Portfolio will not invest more than 10% of net
assets in securities that are illiquid. Illiquid securities are difficult to
sell promptly at an acceptable price.
Unless specified above and except as described under "Investment
Limitations," the foregoing investment policies are not fundamental and the
Board may change such policies without shareholder approval.
RISK FACTORS
All investments involve risk and there can be no guarantee against loss
resulting from an investment in the Portfolio, nor
-7-
<PAGE>
can there be any assurance that the Portfolio's investment objective will be
attained. As with any investment in securities, the value of, and income from,
an investment in the Portfolio can decrease as well as increase, depending on a
variety of factors which may affect the values and income generated by the
Portfolio's securities, including general economic conditions, market factors
and currency exchange rates. An investment in the Portfolio is not intended as a
complete investment program.
Foreign Securities. The Portfolio has the right to purchase securities
in any foreign country, developed or underdeveloped. Investors should consider
carefully the substantial risks involved in investing in securities issued by
companies and governments of foreign nations, which are in addition to the usual
risks inherent in domestic investments. Investing in the securities of foreign
companies involve special risks and considerations not typically associated with
investing in U.S. companies. These risks and considerations include differences
in accounting, auditing and financial reporting standards, generally higher
commission rates on foreign portfolio transactions, the possibility of
expropriation or confiscatory taxation, adverse changes in investment or
exchange control regulations, political instability which could affect U.S.
investment in foreign countries, and potential restrictions on the flow of
international capital. Moreover, the dividends payable on the Portfolio's
foreign portfolio securities may be subject to foreign withholding taxes, thus
reducing the net amount of income available for distribution to the Portfolio's
shareholders. Further, foreign securities often trade with less frequency and
volume than domestic securities and, therefore, may exhibit greater price
volatility. Also, changes in foreign exchange rates will affect, favorably or
unfavorably, the value of those securities in the Portfolio which are
denominated or quoted in currencies other than the U.S. dollar. In addition, in
many countries there is less publicly available information about issuers than
is available in reports about companies in the United States. Foreign companies
are not generally subject to uniform accounting, auditing and financial
reporting standards, and auditing practices and requirements may not be
comparable to those applicable to U.S. companies. Further, the Portfolio may
encounter difficulties or be unable to pursue legal remedies and obtain
judgments in foreign courts.
Brokerage commissions, custodial services, and other costs relating to
investment in foreign securities markets are generally more expensive than in
the United States. Foreign securities markets also have different clearance and
settlement procedures, and in certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such
-8-
<PAGE>
transactions. Delays in settlement could result in temporary periods when assets
of the Portfolio are uninvested and no return is earned thereon. The inability
of the Portfolio to make intended security purchases due to settlement problems
could cause the Portfolio to miss attractive investment opportunities. Inability
to dispose of portfolio securities due to settlement problems could result
either in losses to the Portfolio due to subsequent declines in value of the
portfolio security or, if the Portfolio has entered into a contract to sell the
security, could result in possible liability to the purchaser.
There are further risk factors, including possible losses through the
holding of securities in domestic and foreign custodian banks and depositories.
INVESTMENT LIMITATIONS
The Portfolio will not:
(a) With respect to 75% of its total assets, invest more than 5%
of its total assets at the time of purchase in the securities
of any single issuer (other than obligations issued or
guaranteed by the U.S. Government, its agencies, enterprises
or instrumentalities);
(b) Purchase more than 10% of any class of the outstanding voting
securities of any issuer;
(c) Acquire any securities of companies within one industry if, as
a result of such acquisition, more than 25% of the value of
its total assets would be invested in securities of companies
within such industry; provided, however, that there shall be
no limitation on the purchase of obligations issued or
guaranteed by the U.S. Government, its agencies, enterprises
or instrumentalities;
(d) Pledge, mortgage, or hypothecate any of its assets to an
extent greater than 10% of the Portfolio's total assets, at
fair market value, except as described in this Prospectus and
the SAI and in connection with entering into futures
contracts, but the deposit of assets in a segregated account
in connection with the writing of covered put and call options
and the purchase of securities on a when issued, delayed
settlement or forward delivery basis and collateral
arrangements with respect to initial or variation margin for
futures contracts will not be deemed to be
9
<PAGE>
pledges of the Portfolio's assets or the purchase of any
securities on margin for purposes of this investment
limitation;
(e) Issue senior securities, except that the Portfolio may borrow
money in accordance with investment limitation purchase
securities on a when issued, delayed settlement or forward
delivery basis and enter into reverse repurchase agreements;
and
(f) Borrow money, except that the Portfolio may borrow
money as a temporary measure for extraordinary or
emergency purposes, and then not in excess of 10% of
its total assets at the time of borrowing (entering
into reverse repurchase agreements and purchasing
securities on a when issued, delayed settlement or
forward delivery basis are not subject to this
investment limitation).
With respect to investment limitation (c), (a) there is no limitation
with respect to (i) instruments issued or guaranteed by the United States, any
state, territory or possession of the United States, the District of Columbia or
any of their authorities, agencies, instrumentalities or political subdivisions,
and (ii) repurchase agreements secured by the instruments described in clause
(i); (b) wholly-owned finance companies will be considered to be in the
industries of their parents if their activities are primarily related to
financing the activities of the parents; and (c) utilities will be divided
according to their services; for example, gas, gas transmission, electric and
gas, electric and telephone will each be considered a separate industry.
If a percentage restriction is adhered to at the time an investment is
made, a later increase in percentage resulting from a change in value of assets
will not constitute a violation of such restriction. If the Portfolio's
borrowings are in excess of 5% (excluding overdrafts) of its total net assets,
additional portfolio purchases will not be made until the amount of such
borrowing is reduced to 5% or less. The Portfolio's borrowings including reverse
repurchase agreements and securities purchased on a when-issued, delayed
settlement or forward delivery basis may not exceed 33 1/3% of its total net
assets.
The investment limitations described here and in the SAI are
fundamental policies and may be changed only with the approval of the holders of
a majority of the outstanding shares (as defined in the 1940 Act) of the
Portfolio.
10
<PAGE>
HOW TO INVEST IN CLASS A SHARES
Class A Shares may be purchased from the Distributor through any
securities dealer that has entered into a dealer agreement with the Distributor
("Participating Dealer") or through any financial institution that has entered
into a shareholder servicing agreement with the Fund ("Shareholder Servicing
Agent"). Class A Shares may also be purchased by completing the Application Form
attached to this Prospectus and returning it, together with payment of the
purchase price, to the address shown on the Application Form.
The minimum initial investment is $2,000, and the minimum initial
investment for participants in the Fund's Automatic Investing Plan for Class A
Shares is $250. Each subsequent investment must be at least $100, except that
the minimum subsequent investment under the Fund's Automatic Investing Plan for
Class A Shares is $250 for quarterly investments and $100 for monthly
investments. (See "Purchases Through Automatic Investing Plan" below.) There is
no minimum investment requirement for qualified retirement plans (i.e., 401(k)
plans or pension and profit sharing plans). IRA accounts are, however, subject
to the $2,000 minimum initial investment requirement. There is no minimum
investment requirement for spousal IRA accounts.
The Fund reserves the right to suspend the sale of Class A Shares at
any time at the discretion of the Distributor and the Advisor. Purchase orders
for Class A Shares will be executed at a per share purchase price equal to the
net asset value next determined after receipt of the purchase order by the
Fund's transfer agent (the "Transfer Agent") plus any applicable front-end sales
charge (the "Offering Price") on the date such net asset value is determined
(the "Purchase Date"). Purchases made by mail must be accompanied by payment of
the Offering Price. Purchases made through the Distributor, a Participating
Dealer or Shareholder Servicing Agent must be in proper order in accordance with
such entity's payment procedures. The Distributor may, in its sole discretion,
refuse to accept any purchase order.
The net asset value per Class A Share is calculated by dividing the
total value of all assets held by the Portfolio attributable to Class A Shares,
less liabilities attributable to Class A Shares, by the number of then
outstanding Class A Shares. The Class A Shares' net asset value per share is
determined as of the close of regular trading hours of the Exchange on each day
that the Exchange is open for business and the Portfolio receives an order to
purchase or redeem its shares ("Business Day"). Currently the Exchange is closed
on weekends
-11-
<PAGE>
and the customary national business holidays of New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day (or the days on which they are observed). One or more pricing
services may be used to provide securities valuations in connection with the
determination of the net asset value of the Class A Shares.
Equity securities listed on a U.S. securities exchange for which market
quotations are available are valued at the last quoted sale price as of the
close of that exchange's regular trading hours on the day the valuation is made.
Securities listed on a foreign exchange and unlisted foreign securities are
valued at the latest quoted sales price available before the time when assets
are valued. Price information on listed securities is taken from the exchange
where the security is primarily traded. Unlisted U.S. equity securities and
listed securities not traded on the valuation date for which market quotations
are readily available are valued not in excess of the asked prices or less than
the bid prices. The value of securities for which no quotations are readily
available (including restricted securities) is determined in good faith at fair
value using methods determined by the Board. Foreign currency amounts are
translated into U.S. dollars at the bid prices of such currencies against U.S.
dollars last quoted by a major bank.
The Fund reserves the right, in its sole discretion, to suspend the
offering of Class A Shares or reject purchase orders when, in the judgment of
management, such suspension or rejection is in the best interests of the Fund.
Purchases of Class A Shares will be made in full and fractional shares
of the Portfolio calculated to three decimal places.
OFFERING PRICE
Class A Shares may be purchased from the Distributor, Participating
Dealers or Shareholder Servicing Agents at the Offering Price, which includes a
sales charge which is calculated as a percentage of the Offering Price and
decreases as the amount of the purchase increases, as shown below:
-12-
<PAGE>
<TABLE>
<CAPTION>
Sales Charge
as Percentage of Dealer
---------------- Retention as
Offering Net Amount Percentage of
Amount of Purchase Price Invested Offering Price
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $ 50,000............................ 4.50% 4.71% 4.00%
$50,000 - $ 99,999............................ 3.50% 3.63% 3.00%
$100,000 - $249,999............................ 2.50% 2.56% 2.00%
$250,000 - $499,999............................ 2.00% 2.04% 1.50%
$500,000 - $999,999............................ 1.50% 1.52% 1.25%
$1,000,000 and over............................ None* None* None*
- --------------------------
</TABLE>
* Purchases of $1 million or more may be subject to a
contingent deferred sales charge. (See below). The
Distributor may make payments to dealers in the amount of
.50% of the Offering Price.
A shareholder who purchases additional Class A Shares may obtain
reduced sales charges, as set forth in the table above, through a right of
accumulation. In addition, an investor may obtain reduced sales charges as set
forth above through a right of accumulation of purchases of Class A Shares and
purchases of Class A Shares of other Flag Investors funds with the same sales
charge and purchases of Class A Shares of Flag Investors Short-Intermediate
Income Fund, Inc. (formerly Flag Investors Intermediate-Term Income Fund, Inc.)
and Flag Investors Maryland Intermediate Tax-Free Income Fund, Inc. (the
"Intermediate Funds"). The applicable sales charge will be determined based on
the total of (a) the shareholder's current purchase plus (b) an amount equal to
the then current net asset value or cost, whichever is higher, of all Class A
Shares and of all Flag Investors shares described above and any Flag Investors
Class D shares held by the shareholder. To obtain the reduced sales charge
through a right of accumulation, the shareholder must provide the Distributor,
either directly or through a Participating Dealer or Shareholder Servicing
Agent, as applicable, with sufficient information to verify that the shareholder
has such a right. The Fund may amend or terminate this right of accumulation at
any time as to subsequent purchases.
The term "purchase" refers to an individual purchase by a single
purchaser, or to concurrent purchases which will be aggregated, by a purchaser,
the purchaser's spouse and their
-13-
<PAGE>
children under the age of 21 years purchasing Class A Shares for their own
account.
An investor may also obtain the reduced sales charges shown above by
executing a written Letter of Intent, which states the investor's intention to
invest at least $50,000 within a 13-month period in Class A Shares. Each
purchase of Class A Shares under a Letter of Intent will be made at the Offering
Price applicable at the time of such purchase to the full amount indicated on
the Letter of Intent. A Letter of Intent is not a binding obligation upon the
investor to purchase the full amount indicated. The minimum initial investment
under a Letter of Intent is 5% of the full amount. Shares purchased with the
first 5% of the full amount will be held in escrow (while remaining registered
in the name of the investor) to secure payment of the higher sales charge
applicable to the Class A Shares actually purchased if the full amount indicated
is not invested. Such escrowed shares will be involuntarily redeemed to pay the
additional sales charge, if necessary. When the full amount indicated has been
purchased, the escrowed shares will be released. An investor who wishes to enter
into a Letter of Intent in conjunction with an investment in Class A Shares may
do so by completing the appropriate section of the Application Form attached to
this Prospectus.
No sales charge will be payable at the time of purchase on investments
of $1 million or more of Class A Shares. However, a contingent deferred sales
charge may be imposed on such investments in the event of a redemption within 24
months following the purchase, at the rate of .50% on the lesser of the value of
the Class A Shares redeemed or the total cost of such shares. No contingent
deferred sales charge will be imposed on purchases of $3 million or more of
Class A Shares redeemed within 24 months of purchase if the Participating Dealer
and the Distributor have entered into an agreement under which the Participating
Dealer agrees to return any payments received on the sale of such shares. In
determining whether a contingent deferred sales charge is payable, and, if so,
the amount of the charge, it is assumed that Class A Shares not subject to such
charge are the first redeemed followed by other Class A Shares held for the
longest period of time.
The Fund may sell Class A Shares at net asset value (without sales
charge) to the following: (i) banks, bank trust departments, registered
investment advisory companies, financial planners and broker-dealers purchasing
shares on behalf of their fiduciary and advisory clients, provided such clients
have paid an account management fee for these services (investors may be charged
a fee if they effect transactions in Class A Shares through a broker or agent);
(ii) qualified retirement plans; (iii) participants in a Flag Investors fund
payroll savings plan program; (iv) investors who have redeemed Class A Shares,
or
-14-
<PAGE>
Class A Shares of any other mutual fund in the Flag Investors family of funds
with the same sales charges, or who have redeemed Class A Shares of the
Intermediate Funds which they had held for at least 24 months prior to
redemption, in an amount that is not more than the total redemption proceeds,
provided that the purchase is within 90 days after the redemption; and (v)
current or retired Directors of other Flag Investors Funds and directors and
employees (and their immediate families) of the Distributor, Participating
Dealers and their respective affiliates.
Class A Shares may also be purchased through a Systematic Purchase
Plan. An investor who wishes to take advantage of such a plan should contact the
Distributor or a Participating Dealer or Shareholder Servicing Agent.
PURCHASES BY EXCHANGE
As permitted pursuant to any rule, regulation or order promulgated by
the SEC, shareholders of other Flag Investors funds that have the same sales
load structure may exchange their Class A Shares of those funds for an equal
dollar amount of Class A Shares. Except as provided below, Class A Shares issued
pursuant to this offer will not be subject to the sales charges described above
or any other charge. In addition, shareholders of Class A Shares of the
Intermediate Funds may exchange into Class A Shares upon payment of the
difference in sales charges, as applicable, except that the exchange will be
made at net asset value if the shares of such funds have been held for more than
24 months. Shareholders of Flag Investors Cash Reserve Prime Class A Shares may
also exchange into Class A Shares upon payment of the difference in sales
charges, as applicable.
When a shareholder acquires Class A Shares through an exchange from
another fund in the Flag Investors family of funds, the Fund will combine the
period for which the original shares were held prior to the exchange with the
holding period of the Class A Shares acquired in the exchange for purposes of
determining what, if any, contingent deferred sales charge is applicable upon a
redemption of any such shares.
The net asset value per share purchased and redeemed in an exchange
request will be equal to the net asset value of the shares purchased and
redeemed, respectively, after receipt of the exchange request.
Shareholders of any mutual fund not affiliated with the Fund who have
paid a sales charge may exchange shares of such fund for an equal dollar amount
of Class A Shares by submitting to the Distributor or a Participating Dealer or
Shareholder Servicing Agent the proceeds of the redemption of such shares,
together
-15-
<PAGE>
with evidence of the payment of a sales charge and the source of such
proceeds. Class A Shares issued pursuant to this offer will not be subject to
the sales charges described above or any other charge.
The exchange privilege with respect to other Flag Investors funds may
also be exercised by telephone. (See "Telephone Transactions" below). The Fund
may modify or terminate this offer of exchange at any time on 60 days' prior
written notice to shareholders.
PURCHASES THROUGH AUTOMATIC INVESTING PLAN
Shareholders may purchase Class A Shares regularly by means of an
Automatic Investing Plan with a pre-authorized check drawn on their checking
accounts. Under this Plan, the shareholder may elect to have a specified amount
invested monthly or quarterly in Class A Shares. The amount specified will be
withdrawn from the shareholder's checking account using the pre-authorized check
and will be invested in Class A Shares at the applicable Offering Price
determined on the date the amount is available for investment. Participation in
the Automatic Investing Plan may be discontinued either by the Fund or the
shareholder upon 30 days' prior written notice to the other party. A shareholder
who wishes to enroll in the Automatic Investing Plan or who wishes to obtain
additional purchase information may do so by completing the appropriate section
of the Application Form attached to this Prospectus.
PURCHASES THROUGH DIVIDEND REINVESTMENT
Shareholders may elect to have their distributions (capital gains
and/or dividend income) paid by check or reinvested in additional Class A
Shares. Unless the shareholder elects otherwise, all income dividends and
capital gains distributions will be reinvested in additional Class A Shares at
net asset value, without a sales charge. Shareholders may elect to terminate
automatic reinvestment by giving written notice to the Fund's Transfer Agent
(see "Administrative Transfer Agency and Dividend Paying Services"), either
directly or through their Participating Dealer or Shareholder Servicing Agent,
at least five days before the next date on which dividends or distributions will
be paid.
Alternately, shareholders may have their distributions invested in
Class A Shares of other funds in the Flag Investors family of funds.
Shareholders who are interested in this option should call the Fund's Transfer
Agent for additional information.
16
<PAGE>
HOW TO REDEEM CLASS A SHARES
Shareholders may redeem all or part of their investment on any Business
Day by transmitting a redemption order through the Distributor, a Participating
Dealer, a Shareholder Servicing Agent or by regular or express mail to the
Transfer Agent. It is the responsibility of such Distributor, Participating
Dealer or Shareholder Servicing Agent to properly transmit redemption orders to
the Transfer Agent. Shareholders may also redeem Class A Shares by telephone (in
amounts up to $50,000). (See "Telephone Transactions" below). A redemption order
is effected at the net asset value per share (reduced by any applicable
contingent deferred sales charge) next determined after receipt of the order by
the Transfer Agent (or, if stock certificates have been issued for the Class A
Shares to be redeemed, after the tender of the stock certificates for redemption
to the Transfer Agent). The Fund may suspend the right of redemption or postpone
the date of payment at times when the New York Stock Exchange (the "Exchange")
is closed, or under any emergency circumstances as determined by the SEC.
Payment for redeemed Class A Shares will be made by check and will be mailed
within seven days after receipt of a duly authorized telephone redemption
request or of a redemption order fully completed and, as applicable, accompanied
by the documents described below:
1) A letter of instructions, specifying the shareholder's account number
with a Participating Dealer, if applicable, and the number of Class A
Shares or dollar amount to be redeemed, signed by all owners of the
Class A Shares in the exact names in which their account is maintained;
2) For redemptions in excess of $50,000, a guarantee of the signature of
each registered owner by a member of the Federal Deposit Insurance
Corporation, a trust company, broker, dealer, credit union (if
authorized under state law), securities exchange or association,
clearing agency, or savings association;
3) If Class A Shares are held in certificate form, stock certificates
either properly endorsed or accompanied by a duly executed stock power
for Class A Shares to be redeemed; and
4) Any additional documents required for redemption by corporations,
partnerships, trusts or fiduciaries.
Dividends payable up to the date of redemption of Class A Shares will
be paid on the next dividend payable date. If all of the Class A Shares in a
shareholder's account have been redeemed on a dividend payable date, the
dividend will be remitted by check to the shareholder.
-17-
<PAGE>
If the Fund's Board determines that it would be detrimental to the best
interests of the remaining shareholders of the Portfolio to make payment wholly
or partly in cash, the Fund may pay the redemption proceeds in whole or in part
by a distribution in-kind of securities held by the Portfolio in lieu of cash in
conformity with applicable rules of the SEC. Investors may incur brokerage
charges on the sale of portfolio securities received as a redemption in kind.
The Fund reserves the right, upon 30 days' written notice, to redeem an
account in the Portfolio if the net asset value of the account's shares falls
below $100 and is not increased to at least such amount within such 30-day
period.
SYSTEMATIC WITHDRAWAL PLAN
Shareholders who hold Class A Shares having a value of $10,000 or more
may arrange to have a portion of their Class A Shares redeemed monthly or
quarterly under the Fund's Systematic Withdrawal Plan. If redemptions continue,
a shareholder's account may eventually be exhausted. Because share purchases
include a sales charge that will not be recovered at the time of redemption, a
shareholder should not have a withdrawal plan in effect at the same time he is
making recurring purchases of Class A Shares. A shareholder who wishes to
participate in the Systematic Withdrawal Plan may do so by completing the
appropriate section of the Application Form attached to this Prospectus.
TELEPHONE TRANSACTIONS
Shareholders may exercise the exchange privilege with respect to other
Flag Investors funds, or redeem Class A Shares in amounts up to $50,000, by
notifying the Transfer Agent by telephone on any Business Day between the hours
of 8:30 a.m. and 5:30 p.m. (Eastern Time) or by regular or express mail at its
address listed under "Administrative, Transfer Agency and Dividend Paying
Services." Telephone transaction privileges are automatic. Shareholders may
specifically request that no telephone redemptions or exchanges be accepted for
their accounts. This election may be made on the Application Form or at any time
thereafter by completing and returning appropriate documentation supplied by the
Transfer Agent.
A telephone exchange or redemption placed by the close of regular
trading hours of the Exchange is effective that day. Telephone orders placed
after the close of regular trading hours will be effected at the net asset value
(less any applicable
-18-
<PAGE>
contingent deferred sales charge on redemptions) as determined on the next
Business Day.
The Fund and the Transfer Agent will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. These
procedures include requiring the investor to provide certain personal
identification information at the time an account is opened and prior to
effecting each transaction requested by telephone. In addition, telephone
transaction requests will be recorded and investors may be required to provide
additional telecopied instructions of such transaction requests. If these
procedures are employed, neither the Fund nor the Transfer Agent will be
responsible for any loss, liability, cost or expense for following instructions
received by telephone that either of them reasonably believes to be genuine.
During periods of extreme economic or market changes, shareholders may
experience difficulty in effecting telephone transactions. In such event,
requests should be made by regular or express mail. Class A Shares held in
certificate form may not be exchanged or redeemed by telephone. (See "How To
Invest in Class A Shares--Purchases by Exchange" and "How to Redeem Class A
Shares.")
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS
The Portfolio normally distributes substantially all of its net
investment income to shareholders in the form of a quarterly dividend. If any
net capital gains are realized, the Portfolio normally distributes such gains at
least once a year. However, see "Dividends, Capital Gains Distributions and
Taxes-Federal Taxes-Miscellaneous," for a discussion of the Federal excise tax
applicable to certain regulated investment companies.
Undistributed net investment income is included in the Portfolio's net
assets for the purpose of calculating net asset value per share. Therefore, on
the Portfolio's "ex-dividend" date, the net asset value per share excludes the
dividend (i.e., is reduced by the per share amount of the dividend).
FEDERAL TAXES
The Portfolio intends to qualify as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"). Such
qualification generally relieves the Portfolio of liability for Federal income
taxes to the extent its earnings are distributed in accordance with the Code.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that the
-19-
<PAGE>
Portfolio distribute to its shareholders an amount at least equal to 90% of its
investment company taxable income and 90% of its net exempt interest income, if
any, for such taxable year. In general, the Portfolio's investment company
taxable income will be the sum of its net investment income, including interest
and dividends, subject to certain adjustments, and net short-term capital gain
over net long-term capital loss, if any, for such year. The Portfolio intends to
distribute as dividends substantially all of its investment company taxable
income each year. Such dividends will be taxable as ordinary income to the
Portfolio's shareholders who are not currently exempt from Federal income taxes,
whether such income or gain is received in cash or reinvested in additional
shares. The dividends received deduction for corporations will apply to such
ordinary income distributions to the extent the total qualifying dividends
received by the Portfolio are from domestic corporations for the taxable year.
It is anticipated that only a small part, if any, of the dividends paid by the
Portfolio will be eligible for the dividends received deduction.
Substantially all of the Portfolio's net realized long-term capital
gains, if any, will be distributed at least annually to its shareholders. The
Portfolio generally will have no tax liability with respect to such gains and
the distributions will be taxable as long-term capital gains to the shareholders
who are not currently exempt from Federal income taxes, regardless of how long
the shareholders have held the shares and whether such gains are received in
cash or reinvested in additional shares.
A shareholder considering buying shares of the Portfolio on or just
before the record date of a dividend should be aware that the amount of the
forthcoming dividend payment, although in effect a return of capital, will be
taxable.
A taxable gain or loss may be realized by a shareholder upon his
redemption, transfer or exchange of shares of the Portfolio, depending upon the
tax basis of such shares and their price at the time of redemption, transfer or
exchange. If a shareholder has held shares for six months or less and during
that time received a distribution taxable as a long-term capital gain, then any
loss the shareholder might realize on the sale of those shares will be treated
as a long-term loss to the extent of the earlier capital gain distribution.
Generally, a shareholder may include sales charges incurred upon the purchase of
Portfolio shares in his tax basis for such shares for the purpose of determining
gain or loss on a redemption, transfer or exchange of such shares. However, if
the shareholder effects an exchange of such shares for shares of another
portfolio within 90 days of the purchase and is able to reduce the sales charges
applicable to the new shares (by virtue of the Fund's exchange privilege), the
amount equal to such reduction may not be included in the tax
-20-
<PAGE>
basis of the shareholder's exchanged shares but may be included under certain
circumstances in the tax basis of the new shares.
It is expected that dividends and certain interest income earned by the
Portfolio from foreign securities will be subject to foreign withholding taxes
or other taxes. So long as more than 50% of the value of the Portfolio's total
assets at the close of any taxable year consists of stock or securities of
foreign corporations, the Portfolio may elect, for U.S. Federal income tax
purposes, to treat certain foreign taxes paid by it, including generally any
withholding taxes and other foreign income taxes, as paid by its shareholders.
If the Portfolio makes this election, the amount of such foreign taxes paid by
the Portfolio will be included in its shareholders' income pro rata (in addition
to taxable distributions actually received by them), and each shareholder will
be entitled (a) to credit his proportionate amount of such taxes against his
U.S. federal income tax liabilities, or (b) if he itemizes his deductions, to
deduct such proportionate amount from his U.S. income, should he so choose.
Miscellaneous. Dividends declared in October, November or December of
any year payable to shareholders of record on a specified date in such months
will be deemed to have been received by the shareholders and paid by the
Portfolio on December 31, in the event such dividends are paid during January of
the following year.
A 4% nondeductible excise tax is imposed on regulated investment
companies that fail to currently distribute specified percentages of their
ordinary taxable income and net capital gain (excess of capital gains over
capital losses). The Portfolio intends to make sufficient distributions or
deemed distributions of its ordinary taxable income and any net capital gain
prior to the end of each calendar year to avoid liability for this excise tax.
The foregoing summarizes some of the important tax considerations
generally affecting the Portfolio and its shareholders and is not intended as a
substitute for careful tax planning. Accordingly, potential investors in the
Portfolio should consult their tax advisers with specific reference to their own
tax situation.
The foregoing discussion of tax consequences is based on tax laws and
regulations in effect on the date of this Prospectus, which are subject to
change by legislative or administrative action.
Shareholders will be advised at least annually as to the federal income
tax consequences of distributions made each year.
-21-
<PAGE>
The Portfolio will be required in certain cases to withhold and remit
to the United States Treasury 31% of taxable dividends or gross proceeds
realized upon sale paid to shareholders who have failed to provide a correct tax
identification number in the manner required, who are subject to withholding by
the IRS for failure properly to include on their return payments of taxable
interest or dividends, or who have failed to certify to the Portfolio that they
are not subject to backup withholding when required to do so or that they are
"exempt recipients."
STATE AND LOCAL TAXES
Shareholders may also be subject to state and local taxes on
distributions from the Portfolio. A shareholder should consult with his tax
adviser with respect to the tax status of distributions from the Portfolio in a
particular state and locality.
The Portfolio has obtained a Certificate of Authority to do business as
a foreign corporation in Pennsylvania, and currently does business in that
state. Accordingly, the shares of the Portfolio will be exempt from Pennsylvania
Personal Property Taxes.
INVESTMENT ADVISOR
The Glenmede Trust Company is the Advisor (the "Advisor") to the Fund.
The Advisor, a limited purpose trust company chartered in 1956, provides
fiduciary and investment services to endowment funds, foundations, employee
benefit plans and other institutions and individuals. The Advisor is a
wholly-owned subsidiary of The Glenmede Corporation and is located at One
Liberty Place, 1650 Market Street, Suite 1200, Philadelphia, Pennsylvania 19103.
At March 31, 1997, the Advisor had over $10.3 billion in assets in the accounts
for which it serves in various capacities including as executor, trustee or
investment advisor.
Under its Investment Advisory Agreement with the Fund with respect to
the Portfolio, the Advisor, subject to the control and supervision of the Fund's
Board and in conformance with the stated investment objective and policies of
the Portfolio, manages the investment and reinvestment of the Portfolio's
assets. It is the responsibility of the Advisor to make investment decisions for
the Portfolio and to place the Portfolio's purchase and sales orders.
The Advisor is entitled to receive a fee from the Portfolio for its
investment services computed daily and payable monthly, at the annual rate of
.75% of the Portfolio's average daily net assets. Although the advisory fee rate
payable by the Portfolio
-22-
<PAGE>
is higher than the rates paid by most mutual funds, the Fund's Board of
Directors believes it is comparable to the rates paid by other similar funds.
For the fiscal year ended October 31, 1996, the Advisor received a fee of .75%
of the Portfolio's average net assets.
Andrew Williams, Senior Vice President of the Advisor, is the portfolio
manager for the Portfolio, and has been primarily responsible for its management
since that Portfolio commenced operations. Mr. Williams has been employed by the
Advisor since May 1985.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Fund was organized as a Maryland corporation on June 30, 1988. The
Fund's Articles of Incorporation authorize the Board members to issue
2,500,000,000 shares of common stock, with a $.001 par value. The Board has the
power to designate one or more classes ("Portfolios") of shares of common stock
and to classify or reclassify any unissued shares with respect to such
Portfolios. The Board also has the power to designate separate classes of shares
within the same Portfolio. Currently, the Fund is offering shares of nine
Portfolios. The Fund has classified Flag Investors Series Class A Shares ("Class
A Shares") and a class of Institutional shares of the Portfolio.
The shares of the Portfolio have no preference as to conversion,
exchange, dividends, retirement or other rights, and, when issued and paid for
as provided in this Prospectus, will be fully paid and non-assessable. The
shares of the Portfolio have no pre-emptive rights and do not have cumulative
voting rights, which means that the holders of more than 50% of the shares of
the Fund voting for the election of its Board members can elect 100% of the
Board of the Fund if they choose to do so. A shareholder is entitled to one vote
for each full share held (and a fractional vote for each fractional share held)
then standing in his name on the books of the Fund. The Fund's shareholders will
vote in the aggregate and not by class or series except as otherwise required by
the 1940 Act or other applicable law or when permitted by the 1940 Act or other
applicable law or when permitted by the Board of Directors. The Fund will not
hold annual meetings of shareholders except as required by the 1940 Act, the
next sentence and other applicable law. The Fund has undertaken that its Board
will call a meeting of shareholders for the purpose of voting upon the question
of removal of a Board member or members if such a meeting is requested in
writing by the holders of not less than 10% of the outstanding shares of the
-23-
<PAGE>
Fund. To the extent required by the undertaking, the Fund will assist
shareholder communication in such matters.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Fund shall not be deemed to have been effectively acted upon
unless approved by a majority of the outstanding shares of each Portfolio or
class affected by the matter. A Portfolio or class is affected by a matter
unless it is clear that the interests of each Portfolio or class in the matter
are substantially identical or that the matter does not affect any interest of
the Portfolio or class. Under Rule 18f-2, the approval of an investment advisory
agreement or any change in a fundamental investment policy would be effectively
acted upon with respect to a Portfolio only if approved by a majority of the
outstanding shares of such Portfolio. However, the rule also provides that the
ratification of independent public accountants and the election of directors may
be effectively acted upon by shareholders of the Fund voting without regard to
particular Portfolios.
Notwithstanding any provision of Maryland law requiring a greater vote
of the Fund's common stock (or of the shares of a Portfolio or class voting
separately as a class) in connection with any corporate action, unless otherwise
provided by law (for example by Rule 18f-2 discussed above) or by the Fund's
Articles of Amendment and Restatement, the Fund may take or authorize such
action upon the favorable vote of the holders of more than 50% of the
outstanding common stock of the Fund entitled to vote thereon.
Certain Record Holders
As of April 30, 1997, the Advisor held of record substantially all of
the outstanding Institutional Shares of the Portfolio. As of the date of this
Prospectus, the Distributor owned all the outstanding shares of the Class A
Shares of the Portfolio. It is contemplated that the public offering of the
Class A Shares will reduce the Distributor's holdings to less than 5% of the
total Class A Shares outstanding.
DISTRIBUTOR
Alex. Brown & Sons Incorporated ("Alex. Brown" or the "Distributor"),
One South Street, Baltimore, Maryland 21202, serves as the Fund's distributor.
Alex. Brown is an investment banking firm which offers a broad range of
investment services to individual, institutional, corporate and municipal
clients. It is a subsidiary of Alex. Brown Incorporated which has engaged
directly and through subsidiaries and affiliates in
-24-
<PAGE>
the investment business since 1800. Alex. Brown is a member of the New York
Stock Exchange and other leading securities exchanges. Headquartered in
Baltimore, Maryland, Alex. Brown has offices throughout the United States and,
through subsidiaries, maintains offices in London, England, Geneva, Switzerland
and Tokyo, Japan.
The Fund has adopted a Distribution Plan for the Class A Shares (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act. As compensation for providing
distribution services to the Class A Shares, Alex. Brown receives a fee equal to
.25% of the Class A Shares' average daily net assets. This fee may be more or
less than Alex. Brown's actual expenses. Alex. Brown expects to allocate on a
proportional basis most of its annual distribution fee to its investment
representatives or up to all of its fee to Participating Dealers as compensation
for their ongoing shareholder services, including processing purchase and
redemption requests and responding to shareholder inquiries.
In addition, the Fund may enter into Shareholder Servicing Agreements
with certain financial institutions such as banks, to act as Shareholder
Servicing Agents, pursuant to which Alex. Brown will allocate a portion of its
distribution fee as compensation for such financial institutions' ongoing
shareholder services. Such financial institutions may impose separate fees in
connection with these services and investors should review this Prospectus in
conjunction with any such institution's fee schedule. Amounts allocated to
Participating Dealers and Shareholder Servicing Agents may not exceed amounts
payable to Alex. Brown under the Plan.
Payments under the Plan are made as described above, regardless of
Alex. Brown's actual cost of providing distribution services. If the cost of
providing distribution services to the Fund in connection with the sale of the
Class A Shares is less than .25% of the Class A Shares' average daily net assets
for any period, the unexpended portion of the distribution fee may be retained
by Alex. Brown. Alex. Brown will from time to time and from its own resources
pay or allow additional discounts or promotional incentives in the form of cash
or other compensation (including merchandise or travel) to Participating
Dealers.
SHAREHOLDER INQUIRIES
Shareholders with inquiries concerning their shares should contact the
Transfer Agent at (800) 553-8080, or a Participating Dealer or Shareholder
Servicing Agent, as appropriate.
-25-
<PAGE>
ADMINISTRATIVE, TRANSFER AGENCY AND DIVIDEND PAYING SERVICES
Investment Company Capital Corp. ("ICC") serves as the Fund's
administrator, Transfer Agent and dividend paying agent pursuant to a Master
Services Agreement and in those capacities supervises all aspects of the Fund's
day-to-day operations, other than the management of the Fund's investments. ICC
is a wholly-owned subsidiary of Alex. Brown. For its services as administrator,
Transfer Agent and dividend paying agent, ICC is entitled to receive fees from
the Fund equal to .12% of the first $100 million of the combined net assets of
the Fund and The Glenmede Portfolios, an investment company with the same
officers, Board and service providers as the Fund (collectively, the "Funds");
.08% of the next $150 million of the combined net assets of the Funds; .04% of
the next $500 million of the combined net assets of the Funds; and .03% of the
combined net assets of the Funds over $750 million. An additional .10% of the
net assets of the Class A Shares shall be added to the fee for Class A Shares.
For fiscal year ended October 31, 1996, ICC received fees at the rate of .04% of
the Portfolio's average net assets.
CUSTODIAN
The Chase Manhattan Bank, N.A., Brooklyn, New York, serves as the
custodian of the Fund's assets.
TRANSFER AGENT
ICC, located at One South Street, Baltimore, Maryland 21202, serves as
the Fund's Transfer Agent.
INDEPENDENT ACCOUNTANTS
____________ serves as independent accountants for the Fund and will
audit its financial statements annually.
REPORTS
Shareholders receive unaudited semi-annual financial statements and
audited annual financial statements.
COUNSEL
Drinker Biddle & Reath LLP, Philadelphia, Pennsylvania, serves as
counsel to the Fund.
_________________________
-26-
<PAGE>
Shareholder inquiries should be addressed to the Fund at the address or
telephone number stated on the cover page.
-1-
<PAGE>
THE GLENMEDE FUND, INC.
(800) 553-8080
STATEMENT OF ADDITIONAL INFORMATION
INSTITUTIONAL INTERNATIONAL PORTFOLIO
FLAG INVESTORS SERIES CLASS A SHARES
____________, 1997
This Statement of Additional Information is not a prospectus but should
be read in conjunction with The Glenmede Fund, Inc.'s (the "Fund") Prospectus
for the Institutional International Portfolio's Flag Investors Series Class A
Shares ("Class A Shares") dated ____________, 1997. To obtain the Prospectus,
please call the Fund at the above telephone number.
Capitalized terms used in this Statement of Additional Information and
not otherwise defined have the same meanings given to them in the Fund's
Prospectus.
<TABLE>
<CAPTION>
Table of Contents Page
<S> <C>
INVESTMENT OBJECTIVES AND POLICIES..................................................................... 2
PURCHASE OF SHARES..................................................................................... 2
REDEMPTION OF SHARES................................................................................... 3
PORTFOLIO TURNOVER..................................................................................... 3
INVESTMENT LIMITATIONS................................................................................. 3
MANAGEMENT OF THE FUND................................................................................. 7
INVESTMENT ADVISORY AND OTHER SERVICES................................................................. 8
DISTRIBUTOR............................................................................................ 9
PORTFOLIO TRANSACTIONS................................................................................. 12
ADDITIONAL INFORMATION CONCERNING TAXES................................................................ 13
PERFORMANCE CALCULATIONS............................................................................... 19
GENERAL INFORMATION.................................................................................... 21
EXPENSES............................................................................................... 22
FINANCIAL STATEMENTS................................................................................... 23
OTHER INFORMATION...................................................................................... 23
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
BOARD MEMBERS AND OFFICERS............................................................................. 24
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS...................................................... A-1
</TABLE>
-2-
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The following policies supplement the investment objectives and
policies set forth in the Fund's Prospectus relating to the Class A Shares of
the Institutional International Portfolio (the "Portfolio"):
Repurchase Agreements
Repurchase agreements that do not provide for payment to the Portfolio
within seven days after notice without taking a reduced price are considered
illiquid securities.
Securities Lending
The Portfolio may lend its investment securities to qualified
institutional investors who need to borrow securities in order to complete
certain transactions, such as covering short sales, avoiding failures to deliver
securities or completing arbitrage operations. By lending its investment
securities, the Portfolio attempts to increase its income through the receipt of
interest on the loan. Any gain or loss in the market price of the securities
loaned that might occur during the term of the loan would be for the account of
the Portfolio. The Portfolio may lend its investment securities to qualified
brokers, dealers, domestic and foreign banks or other financial institutions, so
long as the terms, the structure and the aggregate amount of such loans are not
inconsistent with the Investment Company Act of 1940 (the "1940 Act") or the
rules and regulations or interpretations of the Securities and Exchange
Commission (the "SEC") thereunder. All relevant facts and circumstances,
including the creditworthiness of the broker, dealer or institution, will be
considered by the Advisor in making decisions with respect to the lending of
securities, subject to review by the Fund's Board.
PURCHASE OF SHARES
The purchase price of Class A Shares of the Portfolio is the net asset
value next determined after receipt of the purchase order by the Portfolio.
The Portfolio reserves the right in its sole discretion (i) to suspend
the offering of its shares, (ii) to reject purchase orders when in the judgment
of management such rejection is in the best interest of the Portfolio, and (iii)
to reduce or waive the minimum for initial and subsequent investments from time
to time.
-2-
<PAGE>
REDEMPTION OF SHARES
The Portfolio may suspend redemption privileges or postpone the date of
payment (i) during any period that the New York Stock Exchange (the "Exchange")
is closed, or trading on the Exchange is restricted as determined by the SEC,
(ii) during any period when an emergency exists as defined by the rules of the
SEC as a result of which it is not reasonably practicable for a Portfolio to
dispose of securities owned by it, or fairly to determine the value of its
assets, and (iii) for such other periods as the SEC may permit.
No charge is made by the Portfolio for redemptions. Any redemption may
be more or less than the shareholder's initial cost depending on the market
value of the securities held by the Portfolio.
PORTFOLIO TURNOVER
A high portfolio turnover rate can result in corresponding increases in
brokerage commissions; however, the Advisor will not consider portfolio turnover
rate a limiting factor in making investment decisions consistent with the
Portfolio's investment objectives and policies. The portfolio turnover rates of
the Portfolio for the fiscal years ended October 31, 1996 and 1995 were 10% and
25%, respectively.
INVESTMENT LIMITATIONS
The Portfolio is subject to the following restrictions which are
fundamental policies and may not be changed without the approval of the lesser
of: (1) 67% of the voting securities of the Portfolio present at a meeting if
the holders of more than 50% of the outstanding voting securities of the
Portfolio are present or represented by proxy, or (2) more than 50% of the
outstanding voting securities of the Portfolio. The Portfolio will not:
(1) invest in commodities or commodity contracts, except that the
Portfolio may invest in futures contracts and options;
(2) purchase or sell real estate, although it may purchase and
sell securities of companies which deal in real estate and may
purchase and sell securities which are secured by interests in
real estate;
(3) make loans, except (i) by purchasing bonds, debentures or
similar obligations (including repurchase
-3-
<PAGE>
agreements, subject to the limitation described in investment
limitation (10) below, and money market instruments, including
bankers acceptances and commercial paper, and selling
securities on a when issued, delayed settlement or forward
delivery basis) which are publicly or privately distributed,
and (ii) by lending its portfolio securities to banks,
brokers, dealers and other financial institutions so long as
such loans are not inconsistent with the 1940 Act or the rules
and regulations or interpretations of the SEC thereunder;
(4) purchase on margin or sell short, except as specified above in
investment limitation (1);
(5) purchase more than 10% of any class of the outstanding voting
securities of any issuer;
(6) with respect to 75% of its total assets, invest more than 5%
of its total assets at the time of purchase in the securities
of any single issuer (other than obligations issued or
guaranteed by the U.S. Government, its agencies, enterprises
or instrumentalities);
(7) issue senior securities, except that the Portfolio may borrow
money in accordance with investment limitation (8) below,
purchase securities on a when issued, delayed settlement or
forward delivery basis and enter into reverse repurchase
agreements;
(8) borrow money, except that the Portfolio may borrow money as a
temporary measure for extraordinary or emergency purposes, and
then not in excess of 10% of its total assets at the time of
the borrowing (entering into reverse repurchase agreements and
purchasing securities on a when issued, delayed settlement or
forward delivery basis are not subject to this investment
limitation);
(9) pledge, mortgage, or hypothecate any of its assets to an
extent greater than 10% of its total assets at fair market
value, except as described in the Prospectus and this SAI and
in connection with entering into futures contracts, but the
deposit of assets in a segregated account in connection with
the writing of covered put and call options and the purchase
of securities on a when issued, delayed settlement or forward
delivery basis and collateral arrangements with respect to
initial or variation margin for futures contracts will not be
deemed to be pledges of the
-4-
<PAGE>
Portfolio's assets or the purchase of any securities on margin
for purposes of this investment limitation;
(10) underwrite the securities of other issuers or invest more than
an aggregate of 10% of the total assets of the Portfolio at
the time of purchase, in securities for which there are no
readily available markets, including repurchase agreements
which have maturities of more than seven days or securities
subject to legal or contractual restrictions on resale;
(11) invest for the purpose of exercising control over management
of any company;
(12) invest its assets in securities of any investment company,
except in connection with mergers, acquisitions of assets or
consolidations and except as may otherwise be permitted by the
1940 Act;
(13) acquire any securities of companies within one industry if, as
a result of such acquisition, more than 25% of the value of
the Portfolio's total assets would be invested in securities
of companies within such industry; provided, however, that
there shall be no limitation on the purchase of obligations
issued or guaranteed by the U.S. Government, its agencies,
enterprises or instrumentalities, or instruments issued by
U.S. banks; and
(14) write or acquire options or interests in oil, gas or other
mineral exploration or development programs.
If a percentage restriction is adhered to at the time an investment is
made, a later increase in percentage resulting from a change in value or assets
will not constitute a violation of such restriction.
With regard to limitations (8) and (9), the Portfolio may borrow money
as a temporary measure for extraordinary or emergency purposes, enter into
reverse repurchase agreements and purchase securities on a when-issued, delayed
settlement or forward delivery basis, which activities may involve a borrowing,
provided that the aggregate of such borrowings shall not exceed 33 1/3% of the
value of the Portfolio's total assets (including the amount borrowed) less
liabilities (other than borrowings) and may pledge up to 33 1/3% of the value of
its total assets to secure borrowings.
With regard to limitation (12), the 1940 Act currently prohibits an
investment company from acquiring securities of another investment company if,
as a result of the transaction,
-5-
<PAGE>
the acquiring company and any company or companies controlled by it would own in
the aggregate: (i) more than 3% of the total outstanding voting stock of the
acquired company, (ii) securities issued by the acquired company having an
aggregate value in excess of 5% of the value of the total assets of the
acquiring company, or (iii) securities issued by the acquired company and all
other investment companies (other than treasury stock of the acquired company)
having an aggregate value in excess of 10% of the value of the total assets of
the acquiring company. The 1940 Act also currently prohibits an investment
company from acquiring securities of a registered closed-end investment company,
if as a result of the transaction, the acquiring company, other investment
companies having the same investment adviser, and companies controlled by such
investment companies, own more than 10% of the total outstanding voting stock of
such closed-end company. In addition to the advisory fees and other expenses
that the Portfolio bears directly in connection with its own operations, as a
shareholder of another investment company, the Portfolio would bear its "pro
rata" portion of the other investment company's advisory fees and other
expenses. Therefore, to the extent that the Portfolio is invested in shares of
other investment companies, the Portfolio's shareholders will be subject to
expenses of such other investment companies, in addition to expenses of the
Portfolio.
With respect to investment limitation (13), (a) there is no limitation
with respect to (i) instruments issued or guaranteed by the United States, any
state, territory or possession of the United States, the District of Columbia or
any of their authorities, agencies, instrumentalities or political subdivisions,
and (ii) repurchase agreements secured by the instruments described in clause
(i); (b) wholly-owned finance companies will be considered to be in the
industries of their parents if their activities are primarily related to
financing the activities of the parents; and (c) utilities will be divided
according to their services; for example, gas, gas transaction, electric and
gas, electric and telephone will each be considered a separate industry.
With regard to limitation (14), the purchase of securities of a
corporation, a subsidiary of which has an interest in oil, gas or other mineral
exploration or development programs, shall not be deemed to be prohibited by the
limitation.
-6-
<PAGE>
MANAGEMENT OF THE FUND
The Fund's officers, under the supervision of the Board, manage the
day-to-day operations of the Fund. The Board members set broad policies for the
Fund and choose its officers. A list of the Board members and officers and a
brief statement of their current positions and principal occupations during the
past five years is set forth below.
Remuneration of Board Members
Effective June 12, 1996, the Fund pays each Board member, other than
Mr. Church, an annual fee of $8,000 plus $1,250 for each Board meeting attended
and each Board Valuation Committee meeting attended (unless such meeting was
held in conjunction with a Board meeting) and out-of-pocket expenses incurred in
attending Board meetings. Prior to June 12, 1996, the Fund paid each Board
member, other than Mr. Church, an annual fee of $6,000 plus $1,250 for each
Board meeting attended and out-of-pocket expenses incurred in attending Board
meetings. Officers of the Fund receive no compensation as officers from the
Fund.
-7-
<PAGE>
Set forth in the table below is the compensation received by each Board
member for the fiscal year ended October 31, 1996.
<TABLE>
<CAPTION>
=======================================================================================================================
Pension or
Retirement Total
Benefits Compensation from
Aggregate accrued as Estimated the Fund
Compensation part of Annual and Fund Complex(1)
Name of from the Fund's Benefits paid to
Person, Position the Fund expenses Upon Retirement Directors
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dr. H. Franklin Allen, Ph.D., $14,441 None None $15,500
Director
- -----------------------------------------------------------------------------------------------------------------------
Willard S. Boothby, Jr., $11,941 None None $13,000
Director
- -----------------------------------------------------------------------------------------------------------------------
John W. Church, Jr. None None None None
Director
- -----------------------------------------------------------------------------------------------------------------------
Francis J. Palamara, $11,941 None None $13,000
Director
- -----------------------------------------------------------------------------------------------------------------------
G. Thompson Pew, Jr., $14,441 None None $15,500
Director
=======================================================================================================================
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
The Advisor, The Glenmede Trust Company, is the wholly-owned subsidiary
of The Glenmede Corporation (the "Corporation") whose shares are closely held by
73 shareholders. The Corporation has a nine person Board of Directors which, at
January 31, 1997, collectively, owned 98.67% of the Corporation's voting shares
and 35.70% of the Corporation's total outstanding shares. The members of the
Board and their respective interests in the Corporation at January 31, 1997 are
as follows:
The Glenmede Corporation Percent of Percent of
Board of Directors Voting Shares Total Shares
- ------------------------ ------------- -------------
Susan W. Catherwood...................... 10.83% 1.17%
Richard F. Pew........................... 10.83% 1.03%
Thomas W. Langfitt, M.D.................. 11.07% 7.59%
Arthur E. Pew, III....................... 10.83% 1.03%
J. Howard Pew, II........................ 10.83% 1.37%
- ----------------
1 Includes total compensation from the Fund and The Glenmede
Portfolios, both of which are advised by the Advisor.
-8-
<PAGE>
J. N. Pew, III........................... 11.07% 5.25%
J. N. Pew, IV............................ 11.07% 1.37%
R. Anderson Pew.......................... 11.07% 5.82%
Ethel Benson Wister...................... 11.07% 11.07%
------ ------
98.67% 35.70%
The Advisor is entitled to receive a fee from the Portfolio for its
services, calculated daily and payable monthly, at the annual rate of .75% of
the Portfolio's average daily net assets. During the fiscal years ended October
31, 1996, 1995 and 1994, the Portfolio paid the Advisor advisory fees of
$382,491, $155,065 and $114,956, respectively, and the Advisor waived fees in
the amounts of $0, $0 and $1,110, respectively.
Since July 1, 1995, administrative, transfer agency and dividend paying
services have been provided to the Fund by ICC pursuant to a Master Services
Agreement. See "Administrative, Transfer Agency and Dividend Paying Services" in
the Prospectus for information concerning the substantive provisions of the
Master Services Agreement. For the fiscal year ended October 31, 1996 and for
the period July 1, 1995 to October 31, 1995, the Fund paid ICC fees of $20,500
and $3,798, respectively, for the Portfolio.
For the period May 7, 1994 to June 30, 1995, administrative services
were provided to the Fund by The Shareholder Services Group, Inc. ("TSSG"),
pursuant to an Administration Agreement. For the periods November 1, 1994 to
June 30, 1995 and May 7, 1994 to October 31, 1994, the Fund paid TSSG
administrative fees of $10,092 and $7,519, respectively, for the Portfolio.
Prior to May 6, 1994, The Boston Company Advisors, Inc. ("Boston
Advisors"), an indirect wholly owned subsidiary of Mellon Bank Corporation,
served as the Fund's administrator. For the period November 1, 1993 to May 5,
1994, the Fund paid Boston Advisors administrative fees of $6,453 for the
Portfolio.
Custody services are provided to the Portfolio by The Chase Manhattan
Bank, N.A., Brooklyn, New York.
DISTRIBUTOR
Class A Shares of the Portfolio are distributed continuously and are
offered by Alex. Brown & Sons Incorporated ("Alex. Brown" or the "Distributor"),
pursuant to a Distribution Agreement between the Fund and Alex. Brown.
The Distribution Agreement provides that Alex. Brown has the exclusive
right to distribute Class A Shares either directly or
-9-
<PAGE>
through other broker-dealers and further provides that Alex. Brown will: solicit
and receive orders for the purchase of Class A Shares, accept or reject such
orders on behalf of the Portfolio in accordance with the Portfolio's currently
effective Prospectus and Statement of Additional Information and transmit such
orders as are accepted to the Portfolio's transfer agent as promptly as
possible, receive requests for redemption and transmit such redemption requests
to the Portfolio's transfer agent as promptly as possible, respond to inquiries
from the Portfolio's shareholders concerning the status of their accounts with
the Portfolio, provide the Fund's Board of Directors with quarterly reports
required by Rule 12b-1, and take all actions deemed necessary to carry into
effect the distribution of the Shares. Alex. Brown has not undertaken to sell
any specific number of Shares. The Distribution Agreement further provides that,
in connection with the distribution of Shares, Alex. Brown will be responsible
for all of the promotional expenses. The services by Alex. Brown to the
Portfolio are not exclusive, and Alex. Brown shall not be liable to the
Portfolio or its shareholders for any act or omission by Alex. Brown or any
losses sustained by the Portfolio or its shareholders except in the case of
willful misfeasance, bad faith, gross negligence or reckless disregard of duty.
Alex. Brown and certain broker-dealers ("Participating Dealers") have
entered into Sub-Distribution Agreements with respect to the Portfolio's Class A
Shares ("Sub-Distribution Agreements") pursuant to which Participating Dealers
have agreed to process investor purchase and redemption orders and to respond to
inquiries from shareholders concerning the status of their accounts and the
operations of the Portfolio.
Pursuant to Rule 12b-1 under the 1940 Act, which provides that
investment companies may pay distribution expenses, directly or indirectly, only
pursuant to a plan adopted by the investment company's Board of Directors and
approved by its shareholders, the Fund has adopted a Plan of Distribution (the
"Plan"). The maximum amount payable under the Plan to Alex. Brown for
distribution and other shareholder servicing assistance is an amount calculated
on an average net asset basis and paid monthly, equal to .25% of the Class A
Shares' average daily net assets, unless and until a change in payment is
authorized and approved by the Board of Directors. Alex. Brown is authorized to
make payments out of its fee to its investment representatives, Participating
Dealers and Shareholder Servicing Agents. Payments to Participating Dealers and
Shareholder Servicing Agents may not exceed fees payable to Alex. Brown under
the Plan.
As compensation for providing distribution services for the Class A
Shares as described above, Alex. Brown receives an annual fee, paid monthly,
equal to .25% of the average daily net assets
-10-
<PAGE>
of the Class A Shares. Alex. Brown expects to allocate a substantial portion of
the annual distribution fee to its investment representatives and up to all of
its fee to Participating Dealers. In return for such fees, Alex. Brown will pay
the distribution-related expenses of the Fund including one or more of the
following: advertising expenses; printing and mailing of prospectuses to other
than current shareholders; compensation to dealers and sales personnel; and
interest, carrying or other financing charges.
The Distribution Agreement, including the form of Sub-Distribution
Agreement, and the Plan has been approved by the Fund's Board of Directors,
including a majority of the Non-Interested Directors. The Distribution Agreement
and the Plan will remain in effect from year to year as specifically approved
(a) at least annually by the Fund's Board of Directors or by a vote of a
majority of the outstanding Class A Shares and (b) by the affirmative vote of a
majority of the Non-Interested Directors, by votes cast in person at a meeting
called for such purpose.
In approving the Plan, the Directors concluded, in the exercise of
reasonable business judgment, that there was a reasonable likelihood that the
Plan would benefit the Fund and its shareholders. The Plan will be renewed only
if the Directors make a similar determination in each subsequent year. The Plan
may not be amended to increase materially the fee to be paid pursuant to the
Distribution Agreement without the approval of the shareholders of the Fund. The
Plan may be terminated at any time and the Distribution Agreement may be
terminated at any time upon 60 days' notice, in either case without penalty, by
a vote of a majority of the Fund's Non-Interested Directors or by a vote of a
majority of the outstanding Class A Shares. Any Shareholder Servicing Agreement
may be terminated at any time, without penalty, upon ten days' notice. Any
Sub-Distribution Agreement may be terminated at any time, without penalty, upon
10 days' notice or by the vote of a majority of the Fund's Non-Interested
Directors. The Distribution Agreement, the Plan, any Sub-Distribution Agreement
and any Shareholder Servicing Agreement shall automatically terminate in the
event of assignment.
During the continuance of the Plan, the Fund's Board of Directors will
be provided for their review, at least quarterly, a written report concerning
the payments made under the Plan to Alex. Brown pursuant to the Distribution
Agreement, to any Participating Dealers pursuant to Sub-Distribution Agreements
and to any Shareholder Servicing Agents pursuant to Shareholder Servicing
Agreements. Such reports shall be made by the persons authorized to make such
payments. In addition, during the continuance of the Plan, the selection and
nomination of the
-11-
<PAGE>
Fund's Non-Interested Directors shall be committed to the discretion of the
Non-Interested Directors then in office.
In addition, the Fund may enter into Shareholder Servicing Agreements
with certain financial institutions, such as banks, to act as Shareholder
Servicing Agents, pursuant to which Alex. Brown will allocate a portion of its
distribution fee as compensation for such financial institutions' ongoing
shareholder services. Should future legislative, judicial or administrative
action prohibit or restrict the activities of the Shareholder Servicing Agents
in connection with the Shareholder Servicing Agreements, the Fund may be
required to alter materially or discontinue its arrangements with the
Shareholder Servicing Agents. Such financial institutions may impose separate
fees in connection with these services and investors should review the
Prospectus and this Statement of Additional Information in conjunction with any
such institution's fee schedule.
PORTFOLIO TRANSACTIONS
The Investment Advisory Agreement authorizes the Advisor to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Portfolio and direct the Advisor to use its best efforts to
obtain the best available price and most favorable execution with respect to all
transactions for the Portfolio. The Advisor may, however, consistent with the
interests of the Portfolio, select brokers on the basis of the research,
statistical and pricing services it provides to the Portfolio. Information and
research received from such brokers will be in addition to, and not in lieu of,
the services required to be performed by the Advisor under the Investment
Advisory Agreement. A commission paid to such brokers may be higher than that
which another qualified broker would have charged for effecting the same
transaction, provided that such commissions are paid in compliance with the
Securities Exchange Act of 1934, as amended, and that the Advisor determines in
good faith that such commission is reasonable in terms either of the transaction
or the overall responsibility of the Advisor to the Portfolio and the Advisor's
other clients.
During the fiscal years ended October 31, 1996, 1995 and 1994, the
Portfolio paid $40,839, $122,396 and $33,893, respectively, in brokerage
commissions.
-12-
<PAGE>
Class A Shares of the Portfolio are marketed through intermediary
brokers and dealers, and the Fund may allocate brokerage and effect principal
transactions with dealers on the basis of sales of shares which may be made
through such firms. The Advisor may place portfolio orders with qualified
broker-dealers who refer clients to the Advisor and the other Institutions.
Some securities considered for investment by the Portfolio may also be
appropriate for other clients served by the Advisor. If purchase or sale of
securities is consistent with the investment policies of the Portfolio and one
or more of these other clients served by the Advisor and is considered at or
about the same time, transactions in such securities will be allocated among the
Portfolio and clients in a manner deemed fair and reasonable by the Advisor.
While in some cases this practice could have a detrimental effect on the price,
value or quantity of the security as far as the Portfolio is concerned, in other
cases it is believed to be beneficial to the Portfolio.
ADDITIONAL INFORMATION CONCERNING TAXES
General. The following summarizes certain additional tax considerations
generally affecting the Portfolio and its shareholders that are not described in
the Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Portfolio or its shareholders, and the discussion here and in
the Prospectus is not intended as a substitute for careful tax planning.
Potential investors should consult their tax advisers with specific reference to
their own tax situation.
The Portfolio is treated as a separate corporate entity under the
Internal Revenue Code of 1986, as amended (the "Code"), and intends to qualify
as a regulated investment company. Qualification as a regulated investment
company under the Code requires, among other things, that the Portfolio
distribute to its shareholders an amount equal to at least the sum of 90% of its
investment company taxable income and 90% of its tax-exempt income (if any) net
of certain deductions for a taxable year. In addition, the Portfolio must
satisfy certain requirements with respect to the source of its income during a
taxable year. At least 90% of the gross income of the Portfolio must be derived
from dividends, interest, payments with respect to securities loans, gains from
the sale or other disposition of stock, securities or foreign currencies, and
other income (including, but not limited to, gains from options, futures, or
forward contracts) derived with respect to the Portfolio's business of investing
in such stock, securities or currencies. The Treasury Department may by
regulation exclude from qualifying income
-13-
<PAGE>
foreign currency gains which are not directly related to the Portfolio's
principal business of investing in stock or securities, or options and futures
with respect to stock or securities. Any income derived by the Portfolio from a
partnership or trust is treated for this purpose as derived with respect to the
Portfolio's business of investing in stock, securities or currencies only to the
extent that such income is attributable to items of income which would have been
qualifying income if realized by the Portfolio in the same manner as by the
partnership or trust.
The Portfolio will not be treated as a regulated investment company
under the Code if 30% or more of its gross income for a taxable year is derived
from gains realized on the sale or other disposition of the following
investments held for less than three months: (1) stock and securities (as
defined in section 2(a)(36) of the 1940 Act); (2) options, futures and forward
contracts other than those on foreign currencies; and (3) foreign currencies
(and options, futures and forward contracts on foreign currencies) that are not
directly related to the Portfolio's principal business of investing in stock and
securities (and options and futures with respect to stocks and securities).
Interest (including original issue discount and accrued market discount)
received by the Portfolio upon maturity or disposition of a security held for
less than three months will not be treated as gross income derived from the sale
or other disposition of such security within the meaning of this requirement.
However, income which is attributable to realized market appreciation will be
treated as gross income from the sale or other disposition of securities for
this purpose. With respect to covered call options, if the call is exercised by
the holder, the premium and the price received on exercise constitute the
proceeds of sale, and the difference between the proceeds and the cost of the
securities subject to the call is capital gain or loss. Premiums from expired
call options written by the Portfolio and net gains from closing purchase
transactions are treated as short-term capital gains for Federal income tax
purposes, and losses on closing purchase transactions are short-term capital
losses.
Any distribution of the excess of net long-term capital gain over net
short-term capital loss is taxable to shareholders as long-term capital gain,
regardless of how long the shareholder has held the Portfolio's shares and
whether such distribution is received in cash or additional Portfolio shares.
The Portfolio will designate such distributions as capital gain dividends in a
written notice mailed to shareholders within 60 days after the close of the
Fund's taxable year. Shareholders should note that, upon the sale of Portfolio
shares, if the shareholder has not held such shares for more than six months,
any loss on the sale of those shares will be treated as long-term
-14-
<PAGE>
capital loss to the extent of the capital gain dividends received with respect
to the shares.
An individual's net capital gains are taxable at a maximum rate of 28%.
Ordinary income of individuals is taxable at a maximum marginal rate of 39.6%,
but because of limitations on itemized deductions otherwise allowable and the
phase-out of personal exemptions, the maximum effective marginal rate of tax for
some taxpayers may be higher. For corporations, long-term capital gains and
ordinary income are both taxable at a maximum nominal rate of 35% (although
surtax provisions apply at certain income levels to result in marginal rates as
high as 39%).
If for any taxable year the Portfolio does not qualify for the special
Federal income tax treatment afforded regulated investment companies, all of its
taxable income will be subject to Federal income tax at regular corporate rates
(without any deduction for distributions to its shareholders). In such event,
dividend distributions would be taxable as ordinary income to shareholders to
the extent of the Portfolio's current and accumulated earnings and profits and
would be eligible for the dividends received deduction for corporations.
Foreign Taxes. Income received from sources within foreign countries
may be subject to withholding and other income or similar taxes imposed by such
countries. If more than 50% of the value of the Portfolio's total assets at the
close of its taxable year consists of stock or securities of foreign
corporations, the Portfolio will be eligible and intends to elect to
"pass-through" to its shareholders the amount of foreign taxes paid by it.
Pursuant to this election, each shareholder will be required to include in gross
income (in addition to taxable dividends actually received) his pro rata share
of the foreign taxes paid by the Portfolio, and will be entitled either to
deduct (as an itemized deduction) his pro rata share of foreign taxes in
computing his taxable income or to use it as a foreign tax credit against his
U.S. Federal income tax liability, subject to limitations. No deduction for
foreign taxes may be claimed by a shareholder who does not itemize deductions,
but such a shareholder may be eligible to claim the foreign tax credit (see
below). Each shareholder will be notified within 60 days after the close of the
Portfolio's taxable year whether the foreign taxes paid by the Portfolio will
"pass-through" for that year.
Generally, a credit for foreign taxes is subject to the limitation that
it may not exceed the shareholder's U.S. tax attributable to his foreign source
taxable income. For this purpose, if the pass-through election is made, the
source of the
-15-
<PAGE>
Portfolio's income flows through to its shareholders with respect
to a Portfolio, gains from the sale of securities will be treated as derived
from U.S. sources and certain currency fluctuation gains, including fluctuation
gains from foreign currency denominated debt securities, receivables and
payables, will be treated as ordinary income derived from U.S. sources. The
limitation on the foreign tax credit is applied separately to foreign source
passive income (as defined for purposes of the foreign tax credit), including
the foreign source passive income passed through by the Portfolio. Shareholders
may be unable to claim a credit for the full amount of their proportionate share
of the foreign taxes paid by the Portfolio. Foreign taxes may not be deducted in
computing alternative minimum taxable income and the foreign tax credit can be
used to offset only 90% of the alternative minimum tax (as computed under the
Code for purposes of this limitation) imposed on corporations and individuals.
If the Portfolio is not eligible to make the election to "pass through" to its
shareholders its foreign taxes, the foreign taxes it pays will reduce investment
company taxable income and the distributions by the Portfolio will be treated as
United States source income.
Federal Taxation of Certain Financial Instruments. Generally, futures
contracts held by the Portfolio at the close of its taxable year will be treated
for Federal income tax purposes as sold for their fair market value on the last
business day of such year, a process known as "mark-to-market." Forty percent of
any gain or loss resulting from such constructive sale will be treated as
short-term capital gain or loss and sixty percent of such gain or loss will be
treated as long-term capital gain or loss without regard to the length of time
the Portfolio holds the futures contract ("the 40-60 rule"). The amount of any
capital gain or loss actually realized by the Portfolio in a subsequent sale or
other disposition of those futures contracts will be adjusted to reflect any
capital gain or loss taken into account by the Portfolio in a prior year as a
result of the constructive sale of the contracts. With respect to futures
contracts to sell, which will be regarded as parts of a "mixed straddle" because
their values fluctuate inversely to the values of specific securities held by
the Portfolio, losses as to such contracts to sell will be subject to certain
loss deferral rules which limit the amount of loss currently deductible on
either part of the straddle to the amount thereof which exceeds the unrecognized
gain, if any, with respect to the other part of the straddle, and to certain
wash sales regulations. Under short sales rules, which also will be applicable,
the holding period of the securities forming part of the straddle will (if they
have not been held for the long term holding period) be deemed not to begin
prior to termination of the straddle. With respect to certain futures contracts,
deductions for interest and carrying charges will not be allowed.
Notwithstanding the rules described
-16-
<PAGE>
above, with respect to futures contracts to sell which are properly identified
as such, the Portfolio may make an election which will exempt (in whole or in
part) those identified futures contracts from being treated for Federal income
tax purposes as sold on the last business day of its taxable year, but gains and
losses will be subject to such short sales, wash sales and loss deferral rules
and the requirement to capitalize interest and carrying charges. Under Temporary
Regulations, the Portfolio would be allowed (in lieu of the foregoing) to elect
either (1) to offset gains or losses from portions which are part of a mixed
straddle by separately identifying each mixed straddle to which such treatment
applies, or (2) to establish a mixed straddle account for which gains and losses
would be recognized and offset on a periodic basis during the taxable year.
Under either election, the 40-60 rule will apply to the net gain or loss
attributable to the futures contracts, but in the case of a mixed straddle
account election, no more than 50% of any net gain may be treated as long term
and no more than 40% of any net loss may be treated as short term. Options on
futures contracts generally receive Federal tax treatment similar to that
described above.
Certain foreign currency contracts entered into by the Portfolio may be
subject to the "mark-to-market" process and the 40-60 rule in a manner similar
to that described in the preceding paragraph for futures contracts. To receive
such Federal income tax treatment, a foreign currency contract must meet the
following conditions: (1) the contract must require delivery of a foreign
currency of a type in which regulated futures contracts are traded or upon which
the settlement value of the contract depends; (2) the contract must be entered
into at arm's length at a price determined by reference to the price in the
interbank market; and (3) the contract must be traded in the interbank market.
The Treasury has broad authority to issue regulations under the provisions
respecting foreign currency contracts. As of the date of this Statement of
Additional Information, the Treasury has not issued any such regulations. Other
foreign currency contracts entered into by the Portfolio may result in the
creation of one or more straddles for Federal income tax purposes, in which case
certain loss deferral, short sales, and wash sales rules and the requirement to
capitalize interest and carrying charges may apply.
As described more fully above, in order to qualify as a regulated
investment company under the Code, the Portfolio must derive less than 30% of
its gross income from the sale or other disposition of securities and certain
other investments held for less than three months. With respect to futures
contracts and other financial instruments subject to the mark-to-market rules,
the Internal Revenue Service has ruled in private letter rulings that a gain
realized from such a futures contract or financial instrument will be treated as
being derived from a security held for three months or more (regardless of the
actual period for which the contract or instrument is held) if the gain arises
as a result of a constructive sale under the mark-to-market rules, and will be
treated as being derived from a security held
-17-
<PAGE>
for less than three months only if the contract or instrument is terminated (or
transferred) during the taxable year (other than by reason of mark-to-market)
and less than three months have elapsed between the date the contract or
instrument is acquired and the termination date. In determining whether the 30%
test is met for a taxable year, increases and decreases in the value of the
Portfolio's futures contracts and other investments that qualify as part of a
"designated hedge," as defined in the Code, may be netted.
Other Tax Matters. Special rules govern the Federal income tax
treatment of certain transactions denominated in terms of a currency other than
the U.S. dollar or determined by reference to the value of one or more
currencies other than the U.S. dollar. The types of transactions covered by the
special rules include the following: (i) the acquisition of, or becoming the
obligor under, a bond or other debt instrument (including, to the extent
provided in Treasury regulations, preferred stock); (ii) the accruing of certain
trade receivables and payables; and (iii) the entering into or acquisition of
any forward contract, futures contract, option and similar financial instrument
if such instrument is not marked to market. The disposition of a currency other
than the U.S. dollar by a U.S. taxpayer also is treated as a transaction subject
to the special currency rules. However, foreign currency-related regulated
futures contracts and nonequity options generally are not subject to the special
currency rules if they are or would be treated as sold for their fair market
value at year-end under the mark-to-market rules, unless an election is made to
have such currency rules apply. With respect to transactions covered by the
special rules, foreign currency gain or loss is calculated separately from any
gain or loss on the underlying transaction and is normally taxable as ordinary
gain or loss. A taxpayer may elect to treat as capital gain or loss foreign
currency gain or loss arising from certain identified forward contracts, futures
contracts and options that are capital assets in the hands of the taxpayer and
which are not part of a straddle. In accordance with Treasury regulations under
which certain transactions that are part of a "section 988 hedging transaction"
(as defined in the Code and the Treasury regulations) will be integrated and
treated as a single transaction or otherwise treated consistently for purposes
of the Code. Any gain or loss attributable to the foreign currency component of
a transaction engaged in by the Portfolio which is not subject to the special
currency rules (such as foreign equity investments other than certain preferred
stocks) will be treated as capital gain or loss and will not be segregated from
the gain or loss on the underlying transaction. It is anticipated that
-18-
<PAGE>
some of the non-U.S. dollar denominated investments and foreign currency
contracts the Portfolio may make or enter into will be subject to the special
currency rules described above.
The Portfolio may recognize income currently for Federal income tax
purposes in the amount of the unpaid, accrued interest with respect to bonds
structured as zero coupon bonds or pay-in-kind securities, even though it
receives no cash interest until the security's maturity or payment date. As
discussed above, in order to qualify for beneficial tax treatment, the Portfolio
must distribute substantially all of its income to shareholders. Thus, the
Portfolio may have to dispose of its portfolio securities under disadvantageous
circumstances to generate cash or leverage itself by borrowing cash, in order to
satisfy the distribution requirement.
Some of the debt securities may be purchased by the Portfolio at a
discount which exceeds the original issue discount on such debt securities, if
any. This additional discount represents market discount for Federal income tax
purposes. The gain realized on the disposition of any taxable debt security
having market discount will be treated as ordinary income to the extent it does
not exceed the accrued market discount on such debt security. Generally, market
discount accrues on a daily basis for each day the debt security is held by the
Portfolio at a constant rate over the time remaining to the debt security's
maturity or, at the election of the Portfolio, at a constant yield to maturity
which takes into account the semi-annual compounding of interest.
Exchange control regulations that may restrict repatriation of
investment income, capital, or the proceeds of securities sales by foreign
investors may limit a Portfolio's ability to make sufficient distributions to
satisfy the 90% and calendar year distribution requirements.
PERFORMANCE CALCULATIONS
The Portfolio computes its average annual total returns separately for
its separate share classes by determining the average annual compounded rates of
return during specified periods that equate the initial amount invested in a
particular share class to the ending redeemable value of such investment in such
class. This is done by dividing the ending redeemable value of a hypothetical
$1,000 initial payment by $1,000 and raising the quotient to a power equal to
one divided by the number of years (or fractional portion thereof) covered by
the computation and subtracting one from the result. This calculation can be
expressed as follows:
-19-
<PAGE>
T = [( ERV )1/n - 1]
---
P
Where: T = average annual total return.
ERV = ending redeemable value at the end of the period
covered by the computation of a hypothetical
$1,000 payment made at the beginning of the
period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in
terms of years.
The Portfolio computes its aggregate total returns separately for its
separate share class by determining the aggregate rates of return during
specified periods that likewise equate the initial amount invested in a
particular share class to the ending redeemable value of such investment in such
class. The formula for calculating aggregate total return is as follows:
T = [( ERV ) - 1]
---
P
The calculations of average annual total return and aggregate total
return assume the reinvestment of all dividends and capital gain distributions.
The ending redeemable value (variable "ERV" in each formula) is determined by
assuming complete redemption of the hypothetical investment and the deduction of
all nonrecurring charges at the end of the period covered by the computations.
The Portfolio's average annual total return and aggregate total return
quotations reflect the deduction of the maximum front-end sales load charged in
connection with the purchase of Class A Shares.
On ________ 1997, the Portfolio began to offer Class A Shares. Class A
Shares, unlike the Institutional shares (the other class in the Portfolio), have
a 4.50% maximum sales load and are subject to an annual .25% fee payable
pursuant to the distribution plan. Performance of the Class A Shares prior to
____, 1997 is represented by performance of the Institutional Shares and has
been restated to reflect the impact of the sales charge, but not the .25%
distribution plan fees or any other differences in expenses. If distribution
plan fees and those other expenses had been reflected, performance would be
reduced.
Set forth below are the average annual total return figures for Class A
Shares of the Portfolio since inception of the Portfolio (August 1, 1992) and
for the one year period ended April 30, 1997 (with fee waivers).
-20-
<PAGE>
1 Year Ended 04/30/97: ______%
Inception to 04/30/97: ______%
Set forth below are the average annual total return figures for Class A
Shares of the Portfolio since inception of the Portfolio (August 1, 1992) and
for the one year period ended April 30, 1997 (without fee waivers).
1 Year Ended 04/30/97: ______%
Inception to 04/30/97: ______%
The aggregate total return figure for Class A Shares of the Portfolio
from inception (August 1, 1992) to April 30, 1997 with fee waivers was ______%
and without fee waivers was ______%.
GENERAL INFORMATION
Dividends and Capital Gains Distributions
The Portfolio's policy is to distribute substantially all of its net
investment income, if any, together with any net realized capital gains in the
amount and at the times that will avoid both income (including capital gains)
taxes on it and the imposition of the Federal excise tax on undistributed income
and gains (see discussion under "Dividends, Capital Gains Distributions and
Taxes" in the Prospectus). As set forth in the Prospectus, the Portfolio
normally distributes substantially all of its net investment income to
shareholders in the form of a quarterly dividend. If any net capital gains are
realized by the Portfolio, the Portfolio normally distributes such gains at
least once a year. The amounts of any income dividends or capital gains
distributions for the Portfolio cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares
of the Portfolio by an investor may have the effect of reducing the per share
net asset value of the Portfolio by the per share amount of the dividend or
distribution. Furthermore, such dividends or distributions, although in effect a
return of capital, are subject to income taxes as set forth in the Prospectus.
Certain Record Holders
As of May 31, 1997, the Advisor held of record substantially all of the
outstanding Institutional Shares of the Portfolio. As of the date of this
Statement of Additional Information, the Distributor owned all the outstanding
shares of
-21-
<PAGE>
the Class A Shares of the Portfolio. It is contemplated that the public offering
of the Class A Shares of the Portfolio will reduce the Distributor's holdings to
less than 5% of the total shares outstanding of the Class A Shares of the
Portfolio. For more information about the Advisor, see "Investment Advisor" in
the Prospectus. As of January 31, 1997, the directors and officers of the Fund
collectively owned less than 1% of the outstanding shares of the Portfolio.
Supplementary Purchase Information
On April 30, 1997, no Class A Shares of the Portfolio were issued and
outstanding. The computation of the hypothetical offering price per share of a
Class A Share of the Portfolio is based on the value of the Portfolio's net
assets on April 30, 1997 and the number of the Portfolio's Institutional Shares
outstanding on such date are is follows:
Institutional International Fund
Class A Shares
Net Asset.........................................................$ 73,829,911
Outstanding Shares................................................ 5,070,612
===========
Net Asset Value Per Share.........................................$ 14.56
Sales Load, 4.50 percent
of offering price (4.74 percent
of net asset value per share).....................................$ .69
Maximum Offering Price to Public..................................$ 15.25
===========
EXPENSES
The Fund bears its own expenses incurred in its operations including:
taxes; interest; miscellaneous fees (including fees paid to Board members); SEC
fees; costs of preparing and printing prospectuses for regulatory purposes and
for distribution to existing shareholders; administration fees; certain
insurance premiums; outside auditing and legal expenses; costs of shareholders'
reports and meetings; and any extraordinary expenses. The Portfolio also pays
for brokerage fees and commissions, if any, in connection with the purchase and
sale of its portfolio securities.
-22-
<PAGE>
FINANCIAL STATEMENTS
[To be Provided]
----------------
OTHER INFORMATION
The Prospectus and this Statement of Additional Information do not
contain all the information included in the Registration Statement filed with
the SEC under the 1933 Act with respect to the securities offered by the
Prospectus. Certain portions of the Registration Statement have been omitted
from the Prospectus and this Statement of Additional Information pursuant to the
rules and regulations of the SEC. The Registration Statement, including the
exhibits filed therewith, may be examined at the office of the SEC in
Washington, D.C.
Statements contained in the Prospectus or in this Statement of
Additional Information as to the contents of any contract or other documents
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 the Prospectus and this Statement of Additional
Information form a part, each such statement being qualified in all respects by
such reference.
-23-
<PAGE>
BOARD MEMBERS AND OFFICERS
The business and affairs of the Fund are managed under the direction of
its Board. The following is a list of the Board members and officers of the Fund
and a brief statement of their principal occupations during the past five years:
<TABLE>
<CAPTION>
Name and Address Age Principal Occupation During Past Five Years
------------------ ----- ---------------------------------------------
<S> <C> <C>
H. Franklin Allen, Ph.D. 40 Director of Glenmede Fund; Trustee of The Glenmede
Finance Department Portfolios; Nippon Life Professor of Finance and
The Wharton School Economics; Professor of Finance and Economics from 1990-
University of Pennsylvania 1996; Vice Dean and Director of Wharton Doctoral Programs
Philadelphia, PA 19104-6367 from 1990-1993. He has been employed by The University of
Pennsylvania since 1980.
Willard S. Boothby, Jr. 75 Director of Glenmede Fund; Trustee of The Glenmede
600 East Gravers Lane Portfolios; Director of Penn Engineering & Manufacturing
Wyndmoor, PA 19118 Corp.; Former Director of Georgia-Pacific Corp.; Former
Managing Director of Paine Webber, Inc.
John W. Church, Jr.* 64 Chairman, President and Director of Glenmede Fund;
One Liberty Place Chairman, President and Director of The Glenmede
1650 Market Street, Suite 1200 Portfolios; Executive Vice President and Chief Investment
Philadelphia, PA 19103 Officer of The Glenmede Trust Company. He has been
employed by The Glenmede Trust Company since 1979.
Francis J. Palamara 71 Director of Glenmede Fund; Trustee of The Glenmede
P.O. Box 44024 Portfolios; Trustee of Gintel Fund;
Phoenix, AZ 85064-4024 Director of XTRA Corporation; Former Executive Vice
President--Finance of ARAMARK, Inc.
G. Thompson Pew, Jr.* 54 Director of Glenmede Fund; Trustee of The Glenmede
310 Caversham Road Portfolios; Director of The Glenmede Trust Company;
Bryn Mawr, PA 19010 Former Director of Brown & Glenmede Holdings,
Inc.; Former Co-Director, Principal and Officer of
Philadelphia Investment Banking Co.; Former
Director and Officer of Valley Forge Administrative Services
Company.
Mary Ann B. Wirts 44 Executive Vice President of Glenmede Fund; Vice President
One Liberty Place and Manager of The Fixed Income Division of The
1650 Market Street, Suite 1200 Glenmede Trust Company. She has been employed by
Philadelphia, PA 19103 The Glenmede Trust Company since 1982.
Kimberly C. Osborne 31 Vice President of Glenmede Fund; Vice President of The
One Liberty Plaza Glenmede Trust Company. She has been employed by The
1650 Market Street, Suite 1200 Glenmede Trust Company since 1993. From 1992-1993, she
Philadelphia, PA 19103 was a Client Service Manager with Mutual Funds Service
Company and from 1987-1992, she was a Client Administrator with
The Vanguard Group, Inc.
Michael P. Malloy 37 Secretary of Glenmede Fund; Partner in the law firm of
Philadelphia National Bank Building Drinker Biddle & Reath LLP.
1345 Chestnut Street
Philadelphia, PA 19107-3496
Edward J. Veilleux 53 Assistant Secretary of Glenmede Fund; Principal, Alex.
One South Street Brown; Executive Vice President, ICC; Vice President,
Baltimore, MD 21202 Armata.
Joseph A. Finelli 40 Treasurer of Glenmede Fund. He has been a Vice President
One South Street of Alex. Brown since 1995. Prior thereto, he was Vice
Baltimore, MD 21202 President and Treasurer of The Delaware Group.
- --------------
</TABLE>
-24-
<PAGE>
*Board members Church and Pew are "interested persons" of Glenmede Fund as that
term is defined in the 1940 Act.
For additional information concerning remuneration of Board members see
"Management of the Fund" above.
-25-
<PAGE>
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS
I. Description of Commercial Paper Ratings
Description of Moody's highest commercial paper rating:
Prime-1 ("P-1") --judged to be of the best quality. Issuers rated P-1
(or related supporting institutions) are considered to have a superior
capacity for repayment of short-term promissory obligations.
Description of S&P highest commercial paper ratings:
A-1+ -- this designation indicates the degree of safety regarding
timely payment is overwhelming. A-1 -- this designation indicates the
degree of safety regarding timely payment is either overwhelming or
very strong.
Description of Bond Ratings
The following summarizes the ratings used by S&P for corporate and
municipal debt:
AAA - Debt rated AAA has the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small
degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
Plus (+) or Minus (-): The ratings from AA to BBB may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:
A-1
<PAGE>
Aaa - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
A - Bonds that are rated A possess many favorable investment attributes
and are to be considered upper-medium grade obligations. Factors giving
security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa - Bonds that are rated Baa are considered medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Moody's applies numerical modifiers (1, 2 and 3) with respect to
corporate bonds rated Aa, A and Baa. The modifier 1 indicates that the bond
being rated ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates that the bond
ranks in the lower end of its generic rating category. Those bonds in the Aa, A
and Baa categories which Moody's believes possess the strongest investment
attributes, within those categories are designated by the symbols Aa1, A1 and
Baa1, respectively.
II. Description of U.S. Government Securities and Certain Other
Securities
The term "U.S. Government securities" refers to a variety of
securities which are issued or guaranteed by the United States
A-2
<PAGE>
Government, and by various instrumentalities which have been established or
sponsored by the United States Government.
U.S. Treasury securities are backed by the "full faith and credit" of
the United States Government. Securities issued or guaranteed by Federal
agencies and U.S. Government sponsored enterprises or instrumentalities may or
may not be backed by the full faith and credit of the United States. In the case
of securities not backed by the full faith and credit of the United States, an
investor must look principally to the agency, enterprise or instrumentality
issuing or guaranteeing the obligation for ultimate repayment, and may not be
able to assert a claim against the United States itself in the event the agency,
enterprise or instrumentality does not meet its commitment. Agencies which are
backed by the full faith and credit of the United States include the Export
Import Bank, Farmers Home Administration, Federal Financing Bank and others.
Certain agencies, enterprises and instrumentalities, such as the Government
National Mortgage Association are, in effect, backed by the full faith and
credit of the United States through provisions in their charters that they may
make "indefinite and unlimited" drawings on the Treasury, if needed, to service
its debt. Debt from certain other agencies, enterprises and instrumentalities,
including the Federal Home Loan Bank and Federal National Mortgage Association,
are not guaranteed by the United States, but those institutions are protected by
the discretionary authority for the U.S. Treasury to purchase certain amounts of
their securities to assist the institution in meeting its debt obligations.
Finally, other agencies, enterprises and instrumentalities, such as the Farm
Credit System and the Federal Home Loan Mortgage Corporation, are federally
chartered institutions under Government supervision, but their debt securities
are backed only by the creditworthiness of those institutions, not the U.S.
Government.
Some of the U.S. Government agencies that issue or guarantee securities
include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration and The Tennessee Valley Authority.
An instrumentality of the U.S. Government is a Government agency
organized under Federal charter with Government supervision. Instrumentalities
issuing or guaranteeing securities include, among others, Overseas Private
Investment Corporation, Federal Home Loan Banks, the Federal Land Banks, Central
Bank for Cooperatives, Federal Intermediate Credit Banks and the Federal
National Mortgage Association.
A-3
<PAGE>
III. Foreign Investments
Investors should recognize that investing in foreign companies involves
certain special considerations which are not typically associated with investing
in U.S. companies. Because the stocks of foreign companies are frequently
denominated in foreign currencies, and because the Portfolio may temporarily
hold uninvested reserves in bank deposits in foreign currencies, the Portfolio
may be affected favorably or unfavorably by changes in currency rates and in
exchange control regulations, and may incur costs in connection with conversions
between various currencies. The investment policies of the Portfolio permit the
Portfolio to enter into forward foreign currency exchange contracts in order to
hedge the Portfolio's holdings and commitments against changes in the level of
future currency rates. Such contracts involve an obligation to purchase or sell
a specific currency at a future date at a price set at the time of the contract.
As foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards and they may have policies that are
not comparable to those of domestic companies, there may be less information
available about certain foreign companies than about domestic companies.
Securities of some foreign companies are generally less liquid and more volatile
than securities of comparable domestic companies. There is generally less
government supervision and regulation of stock exchanges, brokers and listed
companies than in the U.S. In addition, there is the possibility of
expropriation or confiscatory taxation, political or social instability, or
diplomatic developments which could affect U.S. investments in foreign
countries.
Although the Portfolio will endeavor to achieve most favorable
execution costs in its portfolio transactions, fixed commissions on many foreign
stock exchanges are generally higher than negotiated commissions on U.S.
exchanges.
Certain foreign governments levy withholding taxes on dividend and
interest income. Although in some countries a portion of these taxes are
recoverable, the non-recovered portion of foreign withholding taxes will reduce
the income received from the foreign companies comprising the Portfolio.
A-4
<PAGE>
THE GLENMEDE FUND, INC.
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
Included in Part A:
None.
Included in Part B:
None.
(b) Exhibits
1. (a) Articles of Amendment and Restatement dated October 12, 1988 is
hereby incorporated by reference to Exhibit 1(a) to
Post-Effective Amendment No. 17 to the Registration Statement
("Post-Effective Amendment No. 17").
(b) Articles Supplementary dated August 16, 1989 to Articles of
Incorporation is hereby incorporated by reference to Exhibit
1(b) to Post-Effective Amendment No. 17.
(c) Articles Supplementary dated February 28, 1991 to Articles of
Incorporation is hereby incorporated by reference to Exhibit
1(c) to Post-Effective Amendment No. 17.
(d) Articles Supplementary dated March 3, 1992 to Articles of
Incorporation is hereby incorporated by reference to Exhibit
1(d) to Post-Effective Amendment No. 17.
(e) Articles Supplementary dated June 2, 1992 to Articles of
Incorporation is hereby incorporated by reference to Exhibit
1(e) to Post-Effective Amendment No. 17.
(f) Articles Supplementary dated September 30, 1994 to Articles of
Incorporation is hereby incorporated by reference to Exhibit
1(f) to Post-Effective Amendment No. 17.
(g) Articles Supplementary dated December 30, 1994 to Articles of
Incorporation is hereby incorporated by reference to Exhibit
1(g) to Post-Effective Amendment No. 17.
(h) Articles Supplementary dated February 26, 1997 to Articles of
Incorporation.
2. By-Laws of Registrant is hereby incorporated by reference to
Exhibit 2 to Post-Effective Amendment No. 17.
3. Not applicable.
4. See: Article Fifth, Articles of Amendment and Restatement dated
October 12, 1988 which are incorporated by reference to Exhibit
1(a) to Post-Effective Amendment No. 17; Articles Supplementary
dated August 16, 1989 to Articles of Incorporation which are
incorporated by reference to 1(b) to Post-Effective Amendment No.
17; Articles Supplementary dated February 28, 1991 to Articles of
Incorporation which are incorporated by reference to 1(c) to
Post-Effective Amendment No. 17;
<PAGE>
Articles Supplementary dated March 3, 1992 to Articles of
Incorporation which are incorporated by reference to 1(d) to
Post-Effective Amendment No. 17; Articles Supplementary dated June
2, 1992 to Articles of Incorporation which are incorporated by
reference to Exhibit 1(e) to Post-Effective Amendment No. 17;
Articles Supplementary dated September 30, 1994 to Articles of
Incorporation which are incorporated by reference to Exhibit 1(f)
to Post-Effective Amendment No. 17; Articles Supplementary dated
December 30, 1994 to Articles of Incorporation which are
incorporated by reference to Exhibit 1(g) to Post-Effective
Amendment No. 17; and Sections (7) and (11) of Article II, Article
VII and Section (3) of Article VIII of By-Laws which are
incorporated by reference to Exhibit 2 to Post-Effective Amendment
No. 17.
5. (a) Investment Advisory Agreement between Registrant and The
Glenmede Trust Company dated October 25, 1988 is hereby
incorporated by reference to Exhibit 5(a) to Post-Effective
Amendment No. 17.
(b) Investment Advisory Agreement between Registrant and The
Glenmede Trust Company dated July 31, 1992 is hereby
incorporated by reference to Exhibit 5(b) to Post-Effective
Amendment No. 17.
(c) Amendment No. 1, dated September 13, 1994, to Investment
Advisory Agreement between Registrant and The Glenmede Trust
Company is hereby incorporated by reference to Exhibit 5(c) to
Post-Effective Amendment No. 17.
(d) Supplement dated November 1, 1992, to Investment Advisory
Agreement between Registrant and The Glenmede Trust Company,
relating to the International Fixed Income and Large Cap Value
(formerly, the Model Equity Portfolio) Portfolios is hereby
incorporated by reference to Exhibit 5(d) to Post-Effective
Amendment No. 17.
(e) Investment Advisory Agreement between Registrant and The
Glenmede Trust Company relating to Emerging Markets Portfolio
dated December 12, 1994 is hereby incorporated by reference to
Exhibit 5(e) to Post-Effective Amendment No. 17.
(f) Sub-Investment Advisory Agreement among the Registrant, The
Glenmede Trust Company and Pictet International Management
Limited relating to the Emerging Markets Portfolio dated
December 12, 1994 is hereby incorporated by reference to
Exhibit 5(f) to Post-Effective Amendment No. 17.
(g) Amendment No. 1, dated December 12, 1994, to the Investment
Advisory Agreement for the Emerging Markets Portfolio between
the Registrant and the Glenmede Trust Company is hereby
incorporated by reference to Exhibit 5(g) to Post-Effective
Amendment No. 18.
(h) Amendment No. 1, dated September 11, 1996, to the Investment
Advisory Agreement for the Emerging Markets Portfolio between
Registrant and the Glenmede Trust Company.
(i) Amendment No. 1, dated September 11, 1996, to the
Sub-Investment Advisory Agreement among the Registrant, The
Glenmede Trust Company and Pictet International Management
Limited relating to the Emerging Markets Portfolio.
6. (a) Distribution Agreement between Registrant and Armata Financial
Corp. dated July 1, 1995 is hereby incorporated by reference to
Exhibit 6(a) to Post-Effective Amendment No. 17.
(b) Form of Distribution Agreement between Registrant and Alex.
Brown & Sons Incorporated relating to the Flag Investors Series
Class A Shares ("Class A Shares") of the Institutional
International Portfolio.
-2-
<PAGE>
7. Not Applicable.
8. (a) Custody Agreement dated December 13, 1994, as amended and
restated May 1, 1995 between Registrant and The Chase Manhattan
Bank, N.A. is hereby incorporated by reference to Exhibit 8(a)
to Post-Effective Amendment No. 17.
(b) Amendment dated May 1, 1995 to Custody Agreement between
Registrant and The Chase Manhattan Bank, N.A. dated May 1, 1995
is hereby incorporated by reference to Exhibit 8(b) to
Post-Effective Amendment No. 17.
9. (a) Master Services Agreement between Registrant and Investment
Company Capital Corp. dated July 1, 1995 is hereby incorporated
by reference to Exhibit 9(a) to Post-Effective Amendment No.
17.
(b) Form of Amended Fee Schedule to the Master Services Agreement.
(c) Amended and Restated Shareholder Servicing Plan dated December
5, 1995 is hereby incorporated by reference to Exhibit 9(b) to
Post-Effective Amendment No. 17.
(d) Amended and Restated Shareholder Servicing Agreement dated
December 5, 1995 is hereby incorporated by reference to Exhibit
9(c) to Post-Effective Amendment No. 17.
10. Opinion of Counsel as to Legality of Securities Being Registered to
be filed pursuant to Rule 24f-2 as part of Registrant's Rule 24f-2
Notice on Form 24f-4.
11. (a) Consent of Drinker Biddle & Reath LLP.
12. Not Applicable.
13. (a) Purchase Agreement between Registrant and The Glenmede
Trust Company relating to the Institutional International
Portfolio is hereby incorporated by reference to Exhibit 13 to
Post-Effective Amendment No. 7 to the Registration Statement.
(b) Purchase Agreement between Registrant and The Glenmede Trust
Company relating to the International Fixed Income Portfolio
dated October 21, 1992 is hereby incorporated by reference to
Exhibit 13(b) to Post-Effective Amendment No. 17.
(c) Purchase Agreement between Registrant and The Glenmede Trust
Company relating to the Large Cap Value Portfolio (formerly,
the Model Equity Portfolio) is hereby incorporated by reference
to Exhibit 13 to Post-Effective Amendment No. 9 to the
Registration Statement.
(d) Purchase Agreement between Registrant and The Glenmede Trust
Company relating to the Emerging Markets Portfolio dated
December 12, 1994 is hereby incorporated by reference to
Exhibit 13(d) to Post-Effective Amendment No. 17.
(e) Form of Purchase Agreement between Registrant and Alex. Brown &
Sons Incorporated relating to Class A Shares of the
Institutional International Portfolio.
14. Not Applicable.
15. Form of Distribution Plan between Registrant and Alex. Brown & Sons
Incorporated relating to Class A Shares of the Institutional
International Portfolio.
-3-
<PAGE>
16. Not Applicable.
17. Not Applicable.
18. Form of Plan Pursuant to Rule 18f-3 for Operation of a Multi-Class
System.
Item 25. Persons Controlled by or Under Common Control with Registrant
Registrant is not controlled by or under common control with any
person. Registrant is controlled by its Board of Directors.
Item 26. Number of Holders of Securities
As of April 30, 1997, the number of record holders of securities
was:
Government Cash Portfolio - 1
Emerging Markets Portfolio - 3
Intermediate Government Portfolio - 2
Equity Portfolio - 1
Large Cap Value Portfolio (formerly,
the Model Equity Portfolio) - 1
Small Capitalization Portfolio - 3
Institutional International Portfolio - 3
International Portfolio - 5
Tax-Exempt Cash Portfolio - 2
Item 27. Indemnification
Reference is made to Article Ten of the Registrant's Amended
and Restated Article of Incorporation herein by reference to
Exhibit 1. Insofar as indemnification for liability arising under
the Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of
counsel the matter has been settled by controlling precedent,
submit to court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Item 28 Business and Other Connections of Investment Advisor
(a) The Glenmede Trust Company
Reference is made to the caption of "Investment Advisor" in the
Prospectus and in Part A of this Registration Statement and
"Investment Advisory and Other Services" in Part B of this
Registration Statement.
Set forth below is a list of all of the directors, senior officers
and those officers primarily responsible for Registrant's affairs
and, with respect to each such person, the name and business
address of the Company (if any) with which such person has been
connected at any time since May 31, 1995, as well as the capacity
in which such person was connected.
-4-
<PAGE>
Name and Principal
Name and Position Business Address Connection with
with Investment Adviser of other Company other Company
- ------------------------ -------------------- ------------------
Susan W. Catherwood Trustee Board of Chairman
the Medical Center
of the University
of Pennsylvania
The Philadelphia Board Member
Electric Company
Richard F. Pew North Ridge Owner/Operator
Ranches, Montana
and Wyoming
Yellowstone Center Board Member
for Mountain Environments
Thomas W. Langfitt, M.D. Management Department, Senior Fellow
The Wharton School of
the University of
Pennsylvania
New York Life Insurance Board Member
Company
Committee on Automotive Chairman
Safety, General Motors
Corporation
University of Pennsylvania Board Member
Medical Center Trustee Board
Institute of Medicine Member
of the National Academy
of Sciences
Sun Company Former Board
Member
SmithKline Beecham Former Board
Corporation Member
Princeton University Former Member,
Board of Trustees
Harvard Medical Former Member,
Board of Overseers
The American Philosophical Former Secretary
Society
Arthur E. Pew, III Burlington Northern Railroad Retired Director
of Administration,
Purchasing & Material
Management Department
Minnesota Transportation Board Member
Museum
Museum of Transportation Chairman of the
Development Corporation, Board
St. Paul
-5-
<PAGE>
Name and Principal
Name and Position Business Address Connection with
with Investment Adviser of other Company other Company
- ------------------------ -------------------- ------------------
J. Howard Pew, II None None
J.N. Pew, III None None
J.N. Pew, IV, M.D. Private Practice None
of Internal Medicine
R. Anderson Pew Radnor Corp., a Sun Retired Chief
Company subsidiary Executive Officer
Bryn Mawr College Vice Chairman
Children's Hospital of Vice Chairman of
Philadelphia the Board of Trustees
Alex. Brown Advisory & Chairman of the Audit
Trust Company, Baltimore Committee
Development Committee, Trustee & Chairman
Curtis Institute of
Music, Philadelphia
AOPA (a private pilot's Chairman
association)
Ethel Benson Wister None None
(b) Sub-Investment Advisor - Pictet International Management
Limited
Pictet International Management Limited (the "Sub-Advisor") is an
affiliate of Pictet & Cie (the "Bank"), a Swiss private bank, which was founded
in 1805. The Bank manages the accounts for institutional and private clients and
is owned by seven partners. The Sub-Advisor, established in 1980, manages the
investment needs of clients seeking to invest in the international fixed revenue
and equity markets.
The list required by this Item 28 of officers and directors of
Pictet International Management Limited, together with the information as to any
other business, profession, vocation or employment of a substantial nature
engaged in by such officers and directors during the past two years, is
incorporated by reference to Schedules A and D of Form ADV filed by Pictet
International Management Limited pursuant to the Investment Advisers Act of 1940
(SEC File No. 801-15143).
Item 29. Principal Underwriters
(a) In addition to The Glenmede Fund, Inc., Armata Financial Corp.
("Armata") currently acts as distributor for The Glenmede Portfolios, Total
Return U.S. Treasury Fund, Inc., Managed Municipal Fund, Inc. and North American
Government Bond Fund, Inc. Armata is registered with the Securities and
Exchange Commission as a broker-dealer and is a member of the National
Association of Securities Dealers. Armata is a subsidiary of Alex. Brown & Sons
Incorporated ("Alex. Brown"). Alex. Brown is a registered broker-dealer and a
member of the New York Stock Exchange.
-6-
<PAGE>
(b)
Name and Principal Offices with Offices with
Business Address Armata Registrant
-------------------- -------------- -------------
Jack S. Griswold Chairman and None
Director
F. Barton Harvey, Jr. Director None
John M. Prugh President and None
Director
E. Robert Kent Director None
Peter E. Bancroft Secretary None
Timothy M. Gisriel Treasurer None
(c) Not Applicable.
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder
will be maintained at the offices of:
The Glenmede Trust Company
One Liberty Place
1650 Market Street, Suite 1200
Philadelphia, Pennsylvania 19103
(records relating to its function as investment advisor)
Pictet International Management Limited
Cutlers Garden
5 Devonshire Square
London, United Kingdom EC2M 4LD
(records relating to its function as sub-investment
advisor of Emerging Market Portfolio)
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10081
(records relating to its function as custodian)
Investment Company Capital Corp.
One South Street
Baltimore, Maryland 21202
(records relating to its functions as administrator, transfer
agent and dividend disbursing agent)
Armata Financial Corp.
One South Street
Baltimore, Maryland 21202
(records relating to its functions as distributor)
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
(Registrant's minute books)
-7-
<PAGE>
Item 31. Management Services
Not applicable.
Item 32. Undertakings.
(a) Registrant undertakes to comply with the provisions of Section
16(c) of the 1940 Act in regard to shareholders' rights to call
a meeting of shareholders for the purpose of voting on the
removal of directors and to assist in shareholder
communications in such matters, to the extent required by law.
Specifically, the Registrant will, if requested to do so by the
holders of at least 10% of the Registrant's outstanding shares,
call a meeting of shareholders for the purpose of voting upon
the question of the removal of directors, and the Registrant
will assist in shareholder communications as required by
Section 16(c) of the Act.
(b) Registrant undertakes to furnish to each person to whom a
prospectus is delivered, a copy of Registrant's latest annual
report to shareholders, upon request and without charge.
-8-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, The Glenmede Fund,
Inc. has duly caused this Post-Effective Amendment No. 21 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Philadelphia, and Commonwealth of Pennsylvania on the
6th day of June, 1997.
THE GLENMEDE FUND, INC.
By * John W. Church, Jr.
------------------------
John W. Church, Jr.
Chairman and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Post-Effective Amendment No. 21 to the Registration Statement of
The Glenmede Fund, Inc. has been signed by the following persons in the
capacities and on the date indicated.
Signature Title Date
----------- --------- ------
* John W. Church, Jr. Chairman, June 6, 1997
- -------------------------- Chief Executive
John W. Church, Jr. Officer
* H. Franklin Allen, Ph.D. Director June 6, 1997
- --------------------------
H. Franklin Allen, Ph.D.
* Willard S. Boothby, Jr. Director June 6, 1997
- --------------------------
Willard S. Boothby, Jr.
* Francis J. Palamara Director June 6, 1997
- --------------------------
Francis J. Palamara
* G. Thompson Pew, Jr. Director June 6, 1997
- --------------------------
G. Thompson Pew, Jr.
/s/ Joseph A. Finelli Treasurer June 6, 1997
- --------------------------
Joseph A. Finelli
*By: /s/ Michael P. Malloy
------------------------------------------
Michael P. Malloy, Attorney-in-fact
<PAGE>
EXHIBIT INDEX
Exhibit
1(h) Articles of Amendment dated February 26, 1997 to Articles of
Incorporation.
6(b) Form of Distribution Agreement between Registrant and Alex. Brown &
Sons Incorporated relating to Class A Shares of the Institutional
International Portfolio.
9(b) Form of Fee Schedule for Services Provided to Registrant for Class A
Shares of the Institutional International Portfolio pursuant to the
Master Services Agreement and the Appendices Thereto.
11 Consent of Drinker Biddle & Reath LLP.
13(e) Form of Purchase Agreement between Registrant and Alex. Brown & Sons
Incorporated relating to Class A Shares of the Institutional
International Portfolio.
15 Form of Distribution Plan between Registrant and Alex. Brown & Sons
Incorporated relating to Class A Shares of the Institutional
International Portfolio.
<PAGE>
THE GLENMEDE FUND, INC.
ARTICLES OF AMENDMENT TO
ARTICLES OF INCORPORATION
THE GLENMEDE FUND, INC., a Maryland corporation having its
principal office in Baltimore City, Maryland (the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: In accordance with the requirements of Section 2-605 of
the Maryland General Corporation Law, the Board of Directors of the Corporation,
by unanimous written consent dated as of February 24, 1997, has amended the
Charter of the Corporation, as previously amended and restated, as follows:
All authorized issued and unissued shares of the Corporation
classified as the "Model Equity Portfolio" are hereby renamed to shares of the
"Large Cap Value Portfolio" of the Corporation.
SECOND: The foregoing amendment to the Charter has been duly
approved by a majority of the entire Board of Directors of the Corporation. The
amendment is limited to a change expressly permitted to be made without action
of the stockholders under Section 2-605(a)(4) of the Maryland General
Corporation Law and the Corporation is an open-end company under the Investment
Company Act of 1940.
THIRD: The Articles of Amendment will become effective at
12:01 a.m. on February 27, 1997.
IN WITNESS WHEREOF, The Glenmede Fund, Inc. has caused these
Articles of Amendment to be signed in its name and on its behalf as of this 26th
day of February, 1997.
THE GLENMEDE FUND, INC.
Attest:
/s/ Michael P. Malloy /s/ John W. Church, Jr.
- ------------------------- -----------------------------
Michael P. Malloy John W. Church, Jr.
Secretary President
<PAGE>
THE UNDERSIGNED, President of The Glenmede Fund Inc., who
executed on behalf of said Corporation the foregoing Articles of Amendment to
the Articles of Incorporation, of which this certificate is made a part, hereby
acknowledges, in the name and on behalf of said Corporation, the foregoing
Articles of Amendment to the Articles of Incorporation to be the corporate act
of said Corporation and further certifies that, to the best of his knowledge,
information and belief, the matters in fact set forth herein with respect to the
approval thereof are true in all material respects, under the penalties of
perjury.
/s/ John W. Church, Jr.
---------------------------
John W. Church, Jr.
President
<PAGE>
THE GLENMEDE FUND, INC.
DISTRIBUTION AGREEMENT
AGREEMENT made as of ___________, 1997, by and between THE
GLENMEDE FUND, INC., a Maryland corporation (the "Fund"), and ALEX. BROWN & SONS
INCORPORATED, a Maryland corporation ("Alex. Brown").
W I T N E S S E T H
WHEREAS, the Fund is registered as an open-end, diversified,
management investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Fund wishes to appoint Alex. Brown as its
exclusive distributor for the Flag Investors Series Class A Shares ("Shares") of
the Institutional International Portfolio (the "Portfolio") and Alex. Brown
wishes to become the distributor; and
WHEREAS, the compensation to Alex. Brown hereunder and the
payments contemplated by paragraph 9 constitute the financing of activities
intended to result in the sale of Shares, and this Agreement is entered into
pursuant to a "written plan" pursuant to Rule 12b-1 under the 1940 Act (the
"Plan") allowing the Fund to make such payments.
NOW, THEREFORE, in consideration of the premises, and of other
good and valuable consideration by each of the agreements, covenants and
obligations herein contained, the parties hereto agree as follows:
1. Appointment. The Fund appoints Alex. Brown as Distributor
for the Shares for the period and on the terms set forth in this Agreement.
Alex. Brown accepts such appointment and agrees to render the services herein
set forth, for the compensation herein provided.
2. Delivery of Documents. The Fund has furnished Alex. Brown
with copies, properly certified or authenticated, of each of the following:
(a) The Fund's Articles of Incorporation and all
amendments thereto (the "Articles of Incorporation");
(b) The Fund's By-Laws and all amendments thereto
(such By-Laws, as presently in effect and as they shall from time to time be
amended, are herein called the "By-Laws");
<PAGE>
(c) Resolutions of the Fund's Board of Directors
authorizing the appointment of Alex. Brown as the Fund's Distributor and
approving this Agreement;
(d) The Fund's notification of Registration filed
pursuant to Section 8(a) of the 1940 Act on Form N-1A under the 1940 Act, as
filed with the Securities and Exchange Commission (the "SEC");
(e) Post-Effective Amendment No. 21 to the Fund's
Registration Statement on Form N-1A under the Securities Act of 1933, as amended
(the "1933 Act") and under the 1940 Act as filed with the SEC and all amendments
thereto; and
(f) The Fund's most recent prospectus for the Shares
(such prospectus and all amendments and supplements thereto are herein called
"Prospectus").
The Fund will furnish Alex. Brown from time to time with
copies, properly certified or authenticated, of all amendments or supplements to
the foregoing, if any, and all documents, notices and reports filed with the
SEC.
3. Duties as Distributor. Alex. Brown agrees that all
solicitations for subscriptions for Shares of the Fund shall be made in
accordance with the Fund's Articles of Incorporation and By-Laws, and its then
current Registration Statement, Prospectus and Statement of Additional
Information, and shall not at any time or in any manner violate any provisions
of the laws of the United States or of any State or other jurisdiction in which
solicitations are then being made. In carrying out its obligations hereunder,
Alex. Brown shall undertake the following actions and responsibilities:
(a) receive orders for purchase of Fund Shares,
accept or reject such orders on behalf of the Fund in accordance with the
currently effective Prospectus and Statement of Additional Information and
transmit such orders as are so accepted to the Fund's transfer agent as promptly
as possible;
(b) receive requests for redemption from holders of
Fund Shares and transmit such redemption requests to the Fund's transfer agent
as promptly as possible;
(c) respond to inquires from the Fund's shareholders
concerning the status of their accounts with the Fund;
(d) provide the Board of Directors of the Fund with
quarterly reports as required by Rule 12b-1 under the 1940 Act; and
-2-
<PAGE>
(e) take, on behalf of the Fund, all actions which
appear to the Fund necessary to carry into effect the distribution of the Shares
and perform such other administrative duties with respect to the Fund Shares as
the Fund's Board of Directors may require.
4. Distribution of Shares. Alex. Brown shall be the exclusive
distributor of the Shares of the Portfolio. It is mutually understood and agreed
that Alex. Brown does not undertake to sell all or any specific portion of the
Fund Shares. The Fund shall not sell any of the Fund Shares except through Alex.
Brown and securities dealers who have valid Agency Distribution Agreements with
Alex. Brown. Notwithstanding the provisions of the foregoing sentence, the Fund
may issue its shares at their net asset value to any shareholder of the Fund
purchasing such Shares with dividends or other cash distributions received from
the Fund pursuant to an offer made to all shareholders.
5. Control by Board of Directors. Any distribution activities
undertaken by Alex. Brown pursuant to this Agreement, as well as any other
activities undertaken by Alex. Brown on behalf of the Fund pursuant hereto,
shall at all times be subject to any directives of the Board of Directors of the
Fund. The Board of Directors may agree, on behalf of the Fund, to amendments to
this Agreement, provided that the Fund must obtain prior approval of the
shareholders of the Fund to any amendment which would result in a material
increase in the amount expended by the Fund.
6. Compliance with Applicable Requirements. In carrying out
its obligations under this Agreement, Alex. Brown shall at all times conform to:
(a) all applicable provisions of the 1940 Act and any
rules and regulations adopted thereunder as amended;
(b) the provisions of the Registration Statement of
the Fund under the 1933 Act and the 1940 Act, and any amendments and supplements
thereto;
(c) the provisions of the Articles of Incorporation
of the Fund, and any amendments thereto;
(d) the provisions of the By-Laws of the Fund;
(e) the rules and regulations of the NASD
Regulations, Inc. ("NASD") and all other self-regulatory organizations
applicable to the sale of investment company shares; and
-3-
<PAGE>
(f) any other applicable provisions of state and
federal law.
7. Expenses. The expenses connected with the Fund shall be
allocable between the Fund and Alex. Brown as follows:
(a) Alex. Brown shall furnish, at its expense and
without cost to the Fund, the services of personnel to the extent that such
services are required to carry out their obligations under this Agreement;
(b) Alex. Brown shall, at its own expense and without
cost to the Fund, finance appropriate activities which it deems reasonable that
are primarily intended to result in the sale of the shares, including, but not
limited to, advertising, compensation of underwriters, dealers and sales
personnel, the printing and mailing of prospectuses to other than current
shareholders, and the printing and mailing of sales literature;
(c) the Fund assumes and shall pay or cause to be
paid all other expenses of the Fund, including, without limitation: the fees of
the Fund's investment advisor; the charges and expenses of any registrar, any
custodian or depository appointed by the Fund for the safekeeping of its cash,
portfolio securities and other property, and any stock transfer, dividend or
accounting agent or agents appointed by the Fund; brokers' commissions
chargeable to the Fund in connection with portfolio securities transactions to
which the Fund is a party; all taxes, including securities issuance and transfer
taxes, and corporate fees payable by the Fund to federal, state or other
governmental agencies; the cost and expense of engraving or printing of stock
certificates representing Shares; all costs and expenses in connection with
maintenance of registration of the Fund and its Shares with the SEC and various
states and other jurisdictions (including filing fees and legal fees and
disbursements of Fund counsel); the expenses of printing, including typesetting,
and distributing prospectuses of the Fund and supplements thereto to the Fund's
then current shareholders; all expenses of shareholders' and directors' meetings
(except expenses relating to the materials sent by ICC and its affiliates to the
Board) and of preparing, printing and mailing of proxy statements and reports to
shareholders; fees and travel expenses of directors or members of any advisory
board or committee; all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in Shares or in cash; charges
and expenses of any outside service used for pricing of the Fund's Shares;
charges and expenses of the Fund's legal counsel, including counsel to the
directors of the Fund who are not "interested persons" of the Fund (as defined
in Section 2(a)(19) of the 1940 Act), and of independent accountants, in
connection with any matter relating to the Fund (except expenses relating to tax
returns); a portion of membership dues of industry
-4-
<PAGE>
associations; interest payable on Fund borrowings; postage; insurance premiums
on property or personnel (including, but not limited to, legal claims and
liabilities and litigation costs and any indemnification related thereto); and
all other charges and costs of the Fund's operations unless otherwise explicitly
provided herein.
8. Delegation of Responsibilities. Alex. Brown may, but shall
be under no duty to, perform services on behalf of the Fund which are not
required by this Agreement upon the request of the Fund's Board of Directors.
Payment or assumption by Alex. Brown of any Fund expense that Alex. Brown is not
required to pay or assume under this Agreement shall not relieve Alex. Brown of
any of its obligations to the Fund or obligate Alex. Brown to pay or assume any
similar Fund expense on any subsequent occasions.
9. Compensation. For the services to be rendered and the
expenses assumed by Alex. Brown, the Fund shall pay to Alex. Brown, compensation
at the annual rate of .25% of the average daily net asset value of the
outstanding Shares. Except as hereinafter set forth, continuing compensation
under this Agreement shall be calculated and accrued daily and the amounts of
the daily accruals shall be paid monthly. If this Agreement becomes effective
subsequent to the first day of a month or shall terminate before the last day of
a month compensation for that part of the month this Agreement is in effect
shall be prorated in a manner consistent with the calculations of the fees as
set forth above. Payment of Alex. Brown's compensation for the preceding month
shall be made as promptly as possible.
10. Compensation for Servicing Shareholder Accounts. The Fund
acknowledges that Alex. Brown may compensate its investment representatives for
opening accounts, processing investor letters of transmittals and applications
and withdrawal and redemption orders, responding to inquiries from holders of
Shares concerning the status of their accounts and the operations of the
Portfolio, and communicating with the Fund and its transfer agent on behalf of
holders of Shares.
11. Sub-Distribution Agreements. Alex. Brown may enter into
Sub-Distribution Agreements (the "Sub-Distribution Agreements") with any
securities dealer who is registered under the Securities Exchange Act of 1934
and a member in good standing of the NASD, who may wish to act as a
Participating Dealer in connection with the proposed offering. All
Sub-Distribution Agreements shall be in substantially the form of the agreement
attached hereto as Exhibit "A." For processing Share redemption orders,
responding to the inquiries from holders of Shares concerning the status of
their accounts and the operations of the Portfolio and communication with the
Fund, its transfer agent and Alex. Brown, Alex. Brown may pay
-5-
<PAGE>
each such Participating Dealer an amount not to exceed that portion of the
compensation paid to Alex. Brown hereunder that is attributable to accounts of
holders of Shares who are customers of such Participating Dealer.
12. Non-Exclusivity. The services of Alex. Brown to the Fund
are not to be deemed exclusive and Alex. Brown shall be free to render
distribution or other services to others (including other investment companies)
and to engage in other activities. It is understood and agreed that officers or
directors of Alex. Brown may serve as officers or directors of the Fund, and
that officers or directors of the Fund may serve as officers or directors of
Alex. Brown to the extent permitted by law; and that officers or directors of
Alex. Brown are not prohibited from engaging in any other business activity or
from rendering services to any other person, or from serving as partners,
officers or directors of any other person, or from serving as partners, officers
or directors of any other firm or corporation, including other investment
companies.
13. Confidentiality. Alex. Brown agrees on behalf of itself
and its employees to treat confidentially and as proprietary information of the
Fund all records and other information or data relative to the Fund, its prior,
present or potential shareholders and/or customers of The Glenmede Trust
Company, except after approval in writing by the Fund, which approval shall not
be unreasonably withheld where Alex. Brown may be exposed to civil or criminal
contempt proceedings for failure to comply, when requested to divulge such
information by duly constituted authorities, or when so requested by the Fund.
Alex. Brown further agrees not to use such records, information or data for any
purpose other than the performance of its responsibilities and duties hereunder.
14. Term and Approval. This Agreement shall become effective
at the close of business on the date hereof and shall remain in force and effect
until October 31, 1998 and from year to year thereafter, provided that such
continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Directors or (ii) by
the vote of a majority of the outstanding voting securities (as defined in
Section 2(a)(42) of the 1940 Act), and
(b) by the affirmative vote of a majority of the
directors who are not "interested persons" of the Fund (as defined in Section
2(a)(19) of the 1940 Act) and who do not have a financial interest in the
operation of this Agreement, by votes cast in person at a meeting specifically
called for such purpose.
15. Termination. This Agreement may be terminated at any time,
on sixty (60) days' written notice to the other party
-6-
<PAGE>
without the payment of any penalty, (i) by vote of the Fund's Board of
Directors, (ii) by vote of a majority of the directors who are not "interested
persons" of the Fund (as defined in Section 2(a)(19) of the 1940 Act) and who do
not have a financial interest in the operation of this Agreement, (iii) by vote
of a majority of the Fund's outstanding voting securities (as defined in Section
2(a)(42) of the 1940 Act) or (iv) by Alex. Brown. The notice provided for herein
may be waived by each party. This Agreement shall automatically terminate in the
event of its assignment as defined in Section 2(a)(4) of the 1940 Act.
16. Liability. In the performance of its duties hereunder,
Alex. Brown shall be obligated to exercise care and diligence and to act in good
faith and to use its best efforts within reasonable limits in performing all
services provided for under this Agreement, but shall not be liable for any act
or omission which does not constitute willful misfeasance, bad faith or gross
negligence on the part of Alex. Brown or reckless disregard by Alex. Brown of
its duties under this Agreement.
17. Notices. Any notices under this Agreement shall be in
writing, addressed and delivered or mailed postage-paid to the other parties at
such address as such other party may designate for the receipt of such notice.
Until further notice to the other parties, the addresses of the Fund and Alex.
Brown are as follows:
If to Alex. Brown:
------------------
Alex. Brown & Sons Incorporated
One South Street
Baltimore, Maryland 21202
If to the Fund:
---------------
The Glenmede Trust Co.
One Liberty Place
1650 Market Square
Suite 1200
Philadelphia, Pennsylvania 19103
Attention: The Fund's President
With a copy to:
---------------
Mr. Michael P. Malloy
Drinker, Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
18. Questions of Interpretation. Any question of
interpretation of any term or provision of this Agreement having a counterpart
in or otherwise derived from a term or provision of the 1940 Act shall be
resolved by reference to such term or provision of the 1940 Act and to
interpretations thereof if any,
-7-
<PAGE>
by the United States courts or in the absence of any controlling decision of any
such court, by rules, regulations or orders of the SEC issued pursuant to the
1940 Act. In addition, where the effect of a requirement of the 1940 Act
reflected in any provision of this Agreement is revised by rule, regulation or
order of the SEC, such provision shall be deemed to incorporate the effect of
such rule, regulation or order. Otherwise the provisions of this Agreement shall
be interpreted in accordance with the laws of Maryland.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in duplicate by their respective officers as of the day
and year first above written.
[SEAL] THE GLENMEDE FUND INC.
Attest:____________________ By:_______________________________
[SEAL] ALEX. BROWN & SONS INCORPORATED
Attest:____________________ By:_______________________________
-8-
<PAGE>
Exhibit A
THE GLENMEDE FUND, INC.
One Liberty Place
1650 Market Square, Suite 1200
Philadelphia, PA 19103
SUB-DISTRIBUTION AGREEMENT
______________, 19__
Gentlemen:
Alex. Brown & Sons Incorporated ("Alex. Brown"), a Maryland
corporation, serves as distributor (the "Distributor") of Flag Investors Series
Class A Shares ("Shares") of the Institutional International Portfolio of The
Glenmede Fund, Inc. (the "Fund"). The Fund is an open-end investment company
registered under the Investment Company Act of 1940, as amended (the "Investment
Company Act"). The Fund offers its Shares to the public in accordance with the
terms and conditions contained in its Prospectus. The term "Prospectus" used
herein refers to the prospectus on file with the Securities and Exchange
Commission which is part of the Fund's registration statement under the
Securities Act of 1933 (the "Securities Act"). In connection with the foregoing
you may serve as a participating dealer (and, therefore, accept orders for the
purchase or redemption of Shares, respond to shareholder inquiries and perform
other related functions) on the following terms and conditions:
1. Participating Dealer. You are hereby designated a
Participating Dealer and as such are authorized (i) to accept orders for the
purchase of Shares and to transmit to the Fund such orders and the payment made
therefore, (ii) to accept orders for the redemption of Shares and to transmit to
the Fund such orders and all additional material, including any certificates for
Shares, as may be required to complete the redemption and (iii) to assist
shareholders with the foregoing and other matters relating to their investments
in the Fund, in each case subject to the terms and conditions set forth in the
Fund's Prospectus. You are to review each Share purchase or redemption order
submitted through you or with your assistance for completeness and accuracy. You
further agree to undertake from time to time certain shareholder servicing
activities for customers of yours who have purchased Shares and who use your
facilities to
<PAGE>
communicate with the Fund or to effect redemptions or additional purchases of
Shares.
2. Limitation of Authority. No person is authorized to make
any representations concerning the Fund or the Shares except those contained in
the Fund's Prospectus and in such printed information as the Distributor may
subsequently prepare. No person is authorized to distribute any sales material
relating to the Fund without the prior written approval of the Distributor.
3. Compensation. As compensation for such services, you will
look solely to the Distributor, and you acknowledge that the Fund shall have no
direct responsibility for any compensation. In addition to any sales charge
payable to you by your customer pursuant to a Prospectus, the Distributor will
pay you no less often than annually a shareholder processing and service fee (as
we may determine from time to time in writing) computed as a percentage of the
average daily net asset value of Shares maintained during the preceding period
by shareholders who purchase their Shares through you or with your assistance,
provided that said net asset value is at least $250,000 for which you are to be
compensated, and provided that in all cases your name is transmitted with each
shareholder's purchase order.
4. Prospectus and Reports. You agree to comply with the
provisions contained in the Securities Act governing the distribution of
prospectuses to persons to whom you offer Shares. You further agree to deliver,
upon our request, copies of any amended Prospectus of the Fund to purchasers
whose Shares you are holding as record owner and to deliver to such persons
copies of the annual interim reports and proxy solicitation materials of the
Fund. We agree to furnish to you as many copies of the Fund's Prospectus, annual
and interim reports and proxy solicitation materials as you may reasonably
request.
5. Qualifications to Act. You represent that you are a member
in good standing of NASD Regulations, Inc. (the "NASD"). Your expulsion or
suspension from the NASD will automatically terminate this Agreement on the
effective date of such expulsion or suspension. You agree that you will not
offer Shares to persons in any jurisdiction in which you may not lawfully make
such offer due to the fact that you have not registered under, or are not exempt
from, the applicable registration or licensing requirements of such
jurisdiction. You agree that in performing the services under this Agreement,
you at all times will comply with the Rules of Fair Practice of the NASD,
including, without limitation, the provisions of Section 26 of such Rules. You
agree that you will not combine customer orders to reach breakpoints in
commissions for any purposes whatsoever unless authorized by the then current
Prospectus in respect of Shares of a particular class or by us in writing. You
also agree that you
-2-
<PAGE>
will place orders immediately upon their receipt and will not withhold any order
so as to profit therefrom. In determining the amount payable to you hereunder,
we reserve the right to exclude any sales which we reasonably determine are not
made in accordance with the terms of the Prospectus and provisions of the
Agreement.
6. Blue Sky. The Fund has registered an indefinite number of
Shares under the Securities Act. The Fund intends to register or qualify in
certain states where registration or qualification is required. We will inform
you as to the states or other jurisdictions in which we believe the Shares have
been qualified for sale under, or are exempt from the requirements of, the
respective securities laws of such states. You agree that you will offer Shares
to your customers only in those states where such Shares have been registered,
qualified, or an exemption is available. We assume no responsibility or
obligation as to your right to sell Shares in any jurisdiction. We will file
with the Department of State in New York a State Notice and a Further State
Notice with respect to the Shares, if necessary.
7. Authority of Fund. The Fund shall have full authority to
take such action as it deems advisable in respect of all matters pertaining to
the offering of its Shares, including the right not to accept any order for the
purchase of Shares.
8. Record Keeping. You will (i) maintain all records required
by law to be kept by you relating to transactions in Shares and, upon request by
the Fund, promptly make such of these records available to the Fund as the Fund
may reasonably request in connection with its operations and (ii) promptly
notify the Fund if you experience any difficulty in maintaining the records
described in the foregoing clauses in an accurate and complete manner.
9. Liability. The Distributor shall be under no liability to
you except for lack of good faith and for obligations expressly assumed by them
hereunder, and the Fund shall have no liability to you in connection with the
matters to which this Agreement relates. In carrying out your obligations, you
agree to act in good faith and without negligence. Nothing contained in this
Agreement is intended to operate as a waiver by the Distributor or you of
compliance with any provision of the Investment Company Act, the Securities Act,
the Securities and Exchange Act of 1934, as amended, or the rules and
regulations promulgated by the Securities and Exchange Commission thereunder.
10. Term and Termination. This Agreement will become effective
on the date first above written. Unless sooner terminated, this Agreement will
continue until October 31, 199_, and thereafter will continue automatically for
successive annual
-3-
<PAGE>
periods provided such continuance is approved at least annually by a majority of
(i) the Fund's Board of Directors and (ii) those Disinterested Directors (as
defined in the last sentence of this Section). This Agreement may be terminated
by either party, without penalty, upon ten days' notice to the other party and
shall automatically terminate in the event of its assignment (as defined in the
Investment Company Act). This Agreement may also be terminated at any time
without penalty by the vote of a majority of the members ("Disinterested
Members") of the Board of Directors of the Fund who are not "interested persons"
(as defined in the Investment Company Act) and who have no direct or indirect
financial interest in the operation of the Distribution Agreement between the
Fund and the Distributor or by the vote of a majority of the outstanding voting
securities of the Fund.
11. Communications. All communications to us should be sent to
One South Street, Baltimore, Maryland 21202. Any notice to you shall be duly
given if mailed or telegraphed to you at the address specified by you below.
If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us one copy of this agreement.
ALEX. BROWN & SONS INCORPORATED
(Authorized Signature)
____________________________________
Confirmed and Accepted:
Firm Name: _____________________
By: _____________________
Address: _____________________
Date: _____________________
-4-
<PAGE>
Date: June 9, 1997
FEE SCHEDULE FOR SERVICES PROVIDED TO
THE GLENMEDE FUND, INC. AND
THE GLENMEDE PORTFOLIOS
PURSUANT TO THE MASTER SERVICES AGREEMENT
AND THE APPENDICES THERETO
Investment Company Capital Corp.
- Administrative Services
- Accounting Services
- Transfer Agency Services
For the combined services listed above, Investment Company
Capital Corp. will charge the following fees to the Glenmede Fund, Inc. and The
Glenmede Portfolios based upon their combined net assets.
Combined Net Assets Incremental Fee
------------------- ---------------
$0 - $100,000,000 .12%
over $100,000,000 - $250,000,000 .08%
over $250,000,000 - $750,000,000 .04%
Over $750,000,000 .03%
With respect to the Institutional International Portfolio --
Flag Investors Series Class A Shares ("Class A Shares"), an additional .10% of
the net assets of the Class A Shares shall be added to the fee.
GLENMEDE FUND, INC. INVESTMENT COMPANY CAPITAL CORP.
GLENMEDE PORTFOLIOS
By:____________________________ By: ____________________________
its: its:
<PAGE>
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the reference
to our Firm under the caption "Counsel" in the Prospectus that is included in
Post-Effective Amendment No. 21 to the Registration Statement (No. 33-22884) on
Form N-1A under the Securities Act of 1933, as amended, and Post-Effective
Amendment No. 23 to the Registration Statement (No. 811-5577) on Form N-1A under
the Investment Company Act of 1940, as amended, of The Glenmede Fund, Inc. This
consent does not constitute a consent under section 7 of the Securities Act of
1933, and in consenting to the use of our name and the references to our Firm
under such caption we have not certified any part of the Registration Statement
and do not otherwise come within the categories of persons whose consent is
required under said section 7 or the rules and regulations of the Securities and
Exchange Commission thereunder.
/s/ DRINKER BIDDLE & REATH LLP
---------------------------------
DRINKER BIDDLE & REATH LLP
Philadelphia, Pennsylvania
June 6, 1997
<PAGE>
PURCHASE AGREEMENT
The Glenmede Fund, Inc., a Maryland corporation (the
"Company") and Alex. Brown & Sons Incorporated ("Alex. Brown"), hereby agree
with each other as follows:
1. The Company hereby offers Alex. Brown and Alex. Brown
hereby purchases one share (the "Share") of the Company's Institutional
International Portfolio - Flag Investors Series Class A Shares for an amount
equal to the net asset value per share of the Institutional International
Portfolio on the date below. The Company hereby acknowledges receipt from Alex.
Brown of funds in such amount in full payment for such Share.
2. Alex. Brown represents and warrants to the Company that the
Share is being acquired for investment purposes and not with a view to the
distribution thereof.
IN AGREEMENT WHEREOF, and intending to be legally bound
hereby, the parties hereto have executed this Agreement as of the __th day of
June, 1997.
THE GLENMEDE FUND, INC.
ATTEST:
__________________________________ By: _______________________________
its: Executive Vice President its: President
ALEX. BROWN & SONS
INCORPORATED
ATTEST:
__________________________________ By: _______________________________
its: Assistant Vice President its: Vice President
<PAGE>
THE GLENMEDE FUND, INC.
FLAG INVESTORS CLASS A SHARES OF THE
INSTITUTIONAL INTERNATIONAL PORTFOLIO
DISTRIBUTION PLAN
1. The Plan. This Plan (the "Plan") is a written plan as
described in Rule 12b-1 (the "Rule") under the Investment Company Act of 1940,
as amended (the "1940 Act") for Flag Investors Series Class A Shares ("Class A
Shares") of the Institutional International Portfolio ("Portfolio") of The
Glenmede Fund, Inc. (the "Fund"). Other capitalized terms herein have the
meaning given to them in the Portfolio's prospectus.
2. Payments Authorized. (a) Alex. Brown & Sons Incorporated
("Alex. Brown") is authorized, pursuant to the Plan, to make payments to any
Participating Dealer under a Sub-Distribution Agreement, to accept payments made
to it under the Distribution Agreement and to make payments on behalf of the
Class A Shares to Shareholder Servicing Agents under Shareholder Servicing
Agreements.
(b) Alex. Brown may make payments in any amount,
provided that the total amount of all payments made during a fiscal year of the
Class A Shares do not exceed, in any fiscal year of the Portfolio, the amount
paid to Alex. Brown under the Distribution Agreement which is an annual fee,
calculated on an average daily net basis and paid monthly, equal to .25% of the
average daily net asset value of the Class A Shares.
3. Expenses Authorized. Alex. Brown is authorized, pursuant to
the Plan, from sums paid to it under the Distribution Agreement, to purchase
advertising for the Class A Shares, to pay for promotional or sales literature
and to make payments to sales personnel affiliated with it for their efforts in
connection with sales of Class A Shares. Any such advertising and sales material
may include references to other open-end investment companies or other
investments, provided that expenses relating to such advertising and sales
material will be allocated among such other investment companies or investments
in an equitable manner, and any sales personnel so paid are not required to
devote their time solely to the sale of Class A Shares.
4. Certain Other Payments Authorized. As set forth in the
Distribution Agreement, the Class A Shares assume certain expenses, which Alex.
Brown and the Fund's Advisor are authorized to pay or cause to be paid on its
behalf and such payments shall not be included in the limitations contained in
this Plan. These expenses include: the fees of the Fund's Advisor and Alex.
Brown; the charges and expenses of any registrar, any custodian or
<PAGE>
depository appointed by the Fund for the safekeeping of its cash, portfolio
securities and other property, and any transfer, dividend or accounting agent or
agents appointed by the Fund; brokers' commissions chargeable to the Fund in
connection with portfolio securities transactions to which the Fund is a party;
all taxes, including securities issuance and transfer taxes, and fees payable by
the Fund to federal, state or other governmental agencies; the costs and
expenses of engraving or printing of certificates representing shares of the
Class A Shares; all costs and expenses in connection with maintenance of
registration of the Class A Shares with the Securities and Exchange Commission
(the "SEC") and various states and other jurisdictions (including filing fees
and legal fees and disbursement of counsel); the costs and expenses of printing,
including typesetting and distributing prospectuses and statements of additional
information of the Class A Shares and supplements thereto to the Class A Share's
shareholders; all expenses of shareholders' and Directors' meetings and of
preparing, printing and mailing of proxy statements and reports to shareholders;
fees and travel expenses of Directors or Director members of any advisory board
or committee; all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption, whether in shares or in cash; charges
and expenses of any outside service used for pricing of the Class A Shares;
charges and expenses of legal counsel including counsel to the Directors of the
Fund who are not interested persons (as defined in the 1940 Act) of the Fund and
of independent certified public accountants, in connection with any matter
relating to the Fund; membership dues of industry associations; interest payable
on Fund borrowings; postage; insurance premiums on property or personnel
(including officers and Directors) of the Fund which inure to its benefit;
extraordinary expenses (including, but not limited to, legal claims and
liabilities and litigation costs and any indemnification related thereto); and
all other charges and costs of the Fund's operation unless otherwise explicitly
provided herein.
5. Other Distribution Resources. Alex. Brown and Participating
Dealers may expend their own resources separate and apart from amounts payable
under the Plan to support the Class A Shares's distribution effort. Alex. Brown
will report to the Board of Directors on any such expenditures as part of its
regular reports pursuant to Section 6 of this Plan.
6. Reports. While this Plan is in effect, Alex. Brown shall
report in writing at least quarterly to the Fund's Board of Directors, and the
Board shall review, the following: (i) the amounts of all payments under the
Plan, the identity of the recipients of each such payment; (ii) the basis on
which the amount of the payment to such recipient was made; (iii) the amounts of
expenses authorized under this Plan and the purpose of each such expense; and
(iv) all costs of each item specified in
-2-
<PAGE>
Section 4 of this Plan (making estimates of such costs where necessary or
desirable), in each case during the preceding calendar or fiscal quarter.
7. Effectiveness, Continuation, Termination and Amendment.
This Plan has been approved (i) by a vote of the Board of Directors of the Fund
and of a majority of the Directors who are not interested persons (as defined in
the 1940 Act), cast in person at a meeting called for the purpose of voting on
this Plan; and (ii) by a vote of holders of at least a majority of the Fund's
outstanding voting securities (as defined in the 1940 Act). This Plan shall
unless terminated as hereinafter provided, continue in effect from year to year
only so long as such continuance is specifically approved at least annually by
the vote of the Fund's Board of Directors and by the vote of a majority of the
Directors of the Fund who are not interested persons (as defined in the 1940
Act), cast in person at a meeting called for the purpose of voting on such
continuance. This Plan may be terminated at any time by a vote of a majority of
the Directors who are not interested persons (as defined in the 1940 Act) or by
the vote of the holders of a majority of the Fund's outstanding voting
securities (as defined in the 1940 Act). This Plan may not be amended to
increase materially the amount of payments to be made without shareholder
approval, as set forth in (ii) above, and all amendments must be approved in the
manner set forth under (i) above.
-3-
