<PAGE>
As filed with the Securities and Exchange Commission on August 5, 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. 23 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
--
Amendment No. 25 [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)
[X] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 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 495(b)
under the Securities Act of 1933
<TABLE>
<CAPTION>
Form N-1A Item Number Location
- --------------------- --------
Part A Prospectus Caption
- ------ ------------------
<S> <C> <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 - August 5, 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 August 5, 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 OF CONTENTS
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................................... 10
HOW TO REDEEM CLASS A SHARES...................................... 16
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.......................................................... 25
APPLICATION...................................................... A-1
-2-
<PAGE>
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES FOR FLAG INVESTORS SERIES CLASS
A SHARES:
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
- ---------------
*THE EXAMPLE IS BASED ON ESTIMATED 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").
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 expenses 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. ("Lipper") and the Morgan
Stanley Capital International EAFE Index. Total return and other performance
data as reported in
-2-
<PAGE>
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 the Portfolio's
investment securities against a decline in the value
-6-
<PAGE>
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 can there be any assurance
that the Portfolio's investment objective will be attained. As with any
investment in
-7-
<PAGE>
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 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
-8-
<PAGE>
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 pledges of
the Portfolio's assets or the purchase of any securities on
margin for purposes of this investment limitation;
-9-
<PAGE>
(e) Issue senior securities, except that the Portfolio may borrow
money in accordance with investment limitation (f), 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.
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
-10-
<PAGE>
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 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
-11-
<PAGE>
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>
Sales Charge
as Percentage of Dealer
-------------------------- Retention as
Offering Net Amount Percentage of
Amount of Purchase Price Invested Offering Price
- --------------------------------------------------------------------------------
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*
- --------------------------
* 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 Class A Shares of any other mutual fund in the Flag Investors
-14-
<PAGE>
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 with evidence of the payment of a sales charge and the source of such
proceeds. Class A Shares issued pursuant to this offer will
-15-
<PAGE>
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.
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
-16-
<PAGE>
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.
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
-17-
<PAGE>
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 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
-18-
<PAGE>
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 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
-19-
<PAGE>
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 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
-20-
<PAGE>
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.
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
-21-
<PAGE>
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 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
-22-
<PAGE>
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
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
-23-
<PAGE>
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 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
-24-
<PAGE>
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.
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
-25-
<PAGE>
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
Coopers & Lybrand LLP 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.
----------
Shareholder inquiries regarding Class A Shares should be addressed to
the Fund at the address or telephone number stated on the cover page. Inquiries
and requests for a prospectus regarding the Institutional class, which have
different class expenses and fees, should be addressed to the Fund at (800)
442-8299.
-1-
<PAGE>
THE GLENMEDE FUND, INC.
(800) 553-8080
STATEMENT OF ADDITIONAL INFORMATION
INSTITUTIONAL INTERNATIONAL PORTFOLIO
FLAG INVESTORS SERIES CLASS A SHARES
August 5, 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 August 5, 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 of Contents Page
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.............................................. 11
ADDITIONAL INFORMATION CONCERNING TAXES............................. 12
PERFORMANCE CALCULATIONS............................................ 18
GENERAL INFORMATION................................................. 20
EXPENSES............................................................ 21
FINANCIAL STATEMENTS................................................ 22
OTHER INFORMATION................................................... 22
BOARD MEMBERS AND OFFICERS.......................................... 23
APPENDIX -- DESCRIPTION OF SECURITIES AND RATINGS.................. A-1
<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 agreements, subject
to the limitation described in investment limitation (10)
below, and money market instruments, including bankers
acceptances and
-3-
<PAGE>
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 Portfolio's assets
or the purchase of any securities on margin for
purposes of this investment limitation;
-4-
<PAGE>
(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; 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, 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
-5-
<PAGE>
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.
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>
- ----------
1 Includes total compensation from the Fund and The Glenmede Portfolios, both
of which are advised by the Advisor.
-7-
<PAGE>
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%
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.
-8-
<PAGE>
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 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.
-9-
<PAGE>
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 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
-10-
<PAGE>
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 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
-11-
<PAGE>
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.
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
-12-
<PAGE>
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 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
-13-
<PAGE>
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 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.
-14-
<PAGE>
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 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
-15-
<PAGE>
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 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
-16-
<PAGE>
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 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
-17-
<PAGE>
or loss on the underlying transaction. It is anticipated that 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:
-18-
<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 taking into
account the sales charge).
-19-
<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 (with fee waivers not taking into
account the sales charge).
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 taking into
account the sales charge) was _____% and (with fee waivers not taking into
account the sales charge) 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 July 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 the Class A Shares of the Portfolio. It is contemplated that the
public offering of the Class A Shares of the Portfolio will
-20-
<PAGE>
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 as 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.
-21-
<PAGE>
FINANCIAL STATEMENTS
Those portions of Glenmede Fund's Financial Statements relating to the
Institutional International Portfolio appearing in the 1996 Annual Report to
Shareholders (and the report thereon of Coopers & Lybrand, L.L.P., independent
accountants, also appearing therein) and the 1997 unaudited Semi-Annual Report
to Shareholders are incorporated by reference in this Statement of Additional
Information. No other part of the Annual or Semi-Annual Report is incorporated
by reference. Copies of the Annual and Semi-Annual Report may be obtained by
writing to Glenmede Fund at 1 South Street, Baltimore, Maryland 21202 or by
calling Glenmede Fund at 1-800-442-8299.
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.
-22-
<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 Economics;
The Wharton School Professor of Finance and Economics from 1990-1996; Vice Dean and
University of Pennsylvania Director of Wharton Doctoral Programs from 1990-1993. He has
Philadelphia, PA 19104-6367 been employed by The University of Pennsylvania since 1980.
Willard S. Boothsby, Jr. 75 Director of Glenmede Fund; Trustee of The Glenmede
600 East Gravers Lane Portfolios; Director of Penn Engineering & Manufacturing Corp.;
Wyndmoor, PA 19118 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 Glenmede Trust Company.
One Liberty Plaza She has been employed by The Glenmede Trust Company since 1993. From
1650 Market Street, Suite 1200 1992-1993, she was a Client Service Manager with Mutual Funds Service Company
Philadelphia, PA 19103 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 Drinker Biddle &
Philadelphia National Bank Building Reath LLP.
1345 Chestnut Street
Philadelphia, PA 19107-3496
Edward J. Veilleux 53 Assistant Secretary of Glenmede Fund; Principal, Alex. Brown; Executive Vice
One South Street President, ICC; Vice President, Armata.
Baltimore, MD 21202
Joseph A. Finelli 40 Treasurer of Glenmede Fund. He has been a Vice President of Alex. Brown since
One South Street 1995. Prior thereto, he was Vice President and Treasurer of The Delaware
Baltimore, MD 21202 Group.
</TABLE>
-23-
<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.
-24-
<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:
Incorporated by reference in Part B hereof:
The audited financial statements and related notes thereto
as well as the auditor's reports thereon included as a part
of the Annual Report to Shareholders for the year or period
ended October 31, 1996 with respect to the Institutional
International Fund are incorporated herein by reference to
such Annual Report as filed with the Securities and Exchange
Commission ("SEC") on December 30, 1996 pursuant to Rule
30b2-1 of the Investment Company Act of 1940 (Nos.
33-22884/811-5577).
The Financial statements and related notes thereto included
as a part of the Semi-Annual Report to Shareholders for the
period ended April 30, 1997 with respect to the
Institutional International Fund are incorporated herein by
reference to such Semi-Annual Report as filed with the SEC
on July 2, 1997 pursuant to Rule 30b2-1 of the Investment
Company Act of 1940 (Nos. 33-22884/811-5577).
(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.
-1-
<PAGE>
(h) Articles Supplementary dated February 26, 1997 to Articles of
Incorporation is hereby incorporated by reference to exhibit 1(h) to
Post-Effective Amendment No. 21.
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; 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.
-2-
<PAGE>
(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 is hereby incorporated by reference to
Exhibit 5(h) to Post-Effective Amendment No. 21.
(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 is hereby incorporated by reference to Exhibit 5(i)
to Post-Effective Amendment No. 21.
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 is
hereby incorporated by reference to Exhibit 6(b) to Post-Effective
Amendment No. 21.
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 is
incorporated herein by reference to Exhibit 9(b) to Post-Effective
Amendment No. 21.
(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.
(b) Consent of Coopers & Lybrand 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.
-3-
<PAGE>
(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 is hereby incorporated by reference to Exhibit 15 to
Post-Effective Amendment No. 21.
16. Not Applicable.
17. Not Applicable.
18. Form of Plan Pursuant to Rule 18f-3 for Operation of a Multi-Class System
is incorporated by reference to Exhibit 18 to Post-Effective Amendment No.
21.
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,
-4-
<PAGE>
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.
-5-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
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 Retired Director of
Railroad Administration,
Purchasing & Material
Management Department
Minnesota Transportation Board Member
Museum
Museum of Transportation Chairman of the
Development Corporation, Board
St. Paul
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
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
</TABLE>
(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.
-7-
<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)
-8-
<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.
-9-
<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.
certifies that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment No. 23 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
5th day of August, 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. 23 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, August 5, 1997
- -------------------------- Chief Executive
John W. Church, Jr. Officer
* H. Franklin Allen, Ph.D. Director August 5, 1997
- --------------------------
H. Franklin Allen, Ph.D.
* Willard S. Boothby, Jr. Director August 5, 1997
- --------------------------
Willard S. Boothby, Jr.
* Francis J. Palamara Director August 5, 1997
- --------------------------
Francis J. Palamara
* G. Thompson Pew, Jr. Director August 5, 1997
- --------------------------
G. Thompson Pew, Jr.
/s/ Joseph A. Finelli Treasurer August 5, 1997
- -----------------------------
Joseph A. Finelli
*By: /s/ Michael P. Malloy
- ----------------------------------
Michael P. Malloy, Attorney-in-fact
<PAGE>
EXHIBIT INDEX
Exhibit Page
- ------- ----
11(a) Consent of Drinker Biddle & Reath, LLP
(b) Consent of Coopers & Lybrand, LLP
27 Financial Data Schedules
<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. 23 to the Registration Statement (No. 33-22884) on
Form N-1A under the Securities Act of 1933, as amended, and Post-Effective
Amendment No. 25 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
August 5, 1997
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
--------------------
To the Board of Directors
of The Glenmede Fund, Inc.:
We consent to the incorporation by reference in Post-
Effective Amendment No. 23 to the Registration Statement of The Glenmede Fund,
Inc. (the "Fund") on Form N-1A (File Number 33-22884) of our report dated
December 9, 1996 on our audit of the financial statements and financial
highlights of the Fund for the year ended October 31, 1996, which report is
included in the Annual Report to Shareholders for the year ended October 31,
1996, which is incorporated by reference in the Registration Statement. We also
consent to the reference of our firm under the caption "Financial Statements" in
the Statement of Additional Information.
/s/ Coopers & Lybrand LLP
- -------------------------
COOPERS & LYBRAND LLP
Philadelphia, Pennsylvania
August 5, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000835663
<NAME> INSTITUTIONAL INTERNATIONAL PORTFOLIO THE GLENMEDE FUND
<SERIES>
<NUMBER> 001
<NAME> THE GLENMEDE FUND
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> APR-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 64,470,254
<INVESTMENTS-AT-VALUE> 78,563,595
<RECEIVABLES> 591,285
<ASSETS-OTHER> 7,174
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 79,162,054
<PAYABLE-FOR-SECURITIES> 702,934
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 98,357
<TOTAL-LIABILITIES> 801,291
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 63,803,129
<SHARES-COMMON-STOCK> 5,070,612
<SHARES-COMMON-PRIOR> 4,272,552
<ACCUMULATED-NII-CURRENT> (237,914)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 452,635
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,812,061
<NET-ASSETS> 73,829,911
<DIVIDEND-INCOME> 692,057
<INTEREST-INCOME> 97,767
<OTHER-INCOME> 6,167
<EXPENSES-NET> 322,151
<NET-INVESTMENT-INCOME> 473,840
<REALIZED-GAINS-CURRENT> 454,991
<APPREC-INCREASE-CURRENT> 3,353,341
<NET-CHANGE-FROM-OPS> 4,282,172
<EQUALIZATION> 441,739
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,415,989
<NUMBER-OF-SHARES-REDEEMED> 626,115
<SHARES-REINVESTED> 8,187
<NET-CHANGE-IN-ASSETS> 15,439,762
<ACCUMULATED-NII-PRIOR> (270,015)
<ACCUMULATED-GAINS-PRIOR> (2,356)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 255,296
<INTEREST-EXPENSE> 322,151
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 68,643,202
<PER-SHARE-NAV-BEGIN> 13.67
<PER-SHARE-NII> 0.11
<PER-SHARE-GAIN-APPREC> 0.87
<PER-SHARE-DIVIDEND> 0.09
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 14.56
<EXPENSE-RATIO> 0.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000835663
<NAME> FLAG INVESTORS INTERNATIONAL FUND
<SERIES>
<NUMBER> 002
<NAME> THE GLENMEDE FUND
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> APR-30-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 11,091,304
<INVESTMENTS-AT-VALUE> 13,425,958
<RECEIVABLES> 75,839
<ASSETS-OTHER> 54,500
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 13,556,297
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 43,842
<TOTAL-LIABILITIES> 43,842
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,223,256
<SHARES-COMMON-STOCK> 909,197
<SHARES-COMMON-PRIOR> 910,571
<ACCUMULATED-NII-CURRENT> 8,083
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 436,230
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,332,205
<NET-ASSETS> 13,512,455
<DIVIDEND-INCOME> 102,662
<INTEREST-INCOME> 7,946
<OTHER-INCOME> 0
<EXPENSES-NET> 99,954
<NET-INVESTMENT-INCOME> 10,654
<REALIZED-GAINS-CURRENT> 433,658
<APPREC-INCREASE-CURRENT> 428,632
<NET-CHANGE-FROM-OPS> 872,944
<EQUALIZATION> 260,229
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 69,202
<NUMBER-OF-SHARES-REDEEMED> 85,731
<SHARES-REINVESTED> 15,155
<NET-CHANGE-IN-ASSETS> 582,199
<ACCUMULATED-NII-PRIOR> 625,259
<ACCUMULATED-GAINS-PRIOR> (4,852,349)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 49,701
<INTEREST-EXPENSE> 148,769
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 13,363,878
<PER-SHARE-NAV-BEGIN> 14.20
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 0.93
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (0.29)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 14.86
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
