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THE ADVISORS' INNER CIRCLE FUND
[LOGO]
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GLB NEW OPPORTUNITY
GROWTH FUND
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PROSPECTUS
OCTOBER 1, 2000
INVESTMENT ADVISOR:
GLB FUND MANAGEMENT INC.
(An Affiliate of Goodwyn, Long & Black
Investment Management, Inc.)
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus.
Any representation to the contrary is a criminal offense.
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ABOUT THIS PROSPECTUS
The GLB New Opportunity Growth Fund (Fund) is a separate series of The
Advisors'Inner Circle Fund (Trust), a mutual fund family that offers shares in
separate investment portfolios (Funds). The Funds have individual investment
goals and strategies. This prospectus gives you important information about the
Fund that you should know before investing. Please read this prospectus and keep
it for future reference.
THIS PROSPECTUS HAS BEEN ARRANGED INTO DIFFERENT SECTIONS SO THAT YOU CAN
EASILY REVIEW THIS IMPORTANT INFORMATION. ON THE NEXT PAGE, THERE IS SOME
GENERAL INFORMATION YOU SHOULD KNOW ABOUT RISK AND RETURN. FOR MORE DETAILED
INFORMATION ABOUT THE FUND, PLEASE SEE:
PAGE
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PRINCIPAL INVESTMENT STRATEGIES AND RISKS,
PERFORMANCE INFORMATION AND EXPENSES .............................. 2
MORE INFORMATION ABOUT RISK .......................................... 4
MORE INFORMATION ABOUT FUND INVESTMENTS .............................. 4
THE INVESTMENT ADVISOR AND PORTFOLIO MANAGEMENT ...................... 4
PURCHASING AND SELLING FUND SHARES ................................... 6
DIVIDENDS AND DISTRIBUTIONS .......................................... 9
TAXES ................................................................ 9
HOW TO OBTAIN MORE INFORMATION ABOUT THE
GLB NEW OPPORTUNITY GROWTH FUND ...................................Back Cover
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GLB NEW OPPORTUNITY GROWTH FUND
FUND SUMMARY
INVESTMENT GOAL Achieve long-term capital appreciation while
attempting to minimize capital gains
distributions and tax exposure
INVESTMENT FOCUS U.S. common stocks
SHARE PRICE VOLATILITY High
PRINCIPAL INVESTMENT STRATEGY Investing in common stocks which the Advisor
believes have substantial potential for
growth
INVESTOR PROFILE Investors who seek long-term capital
appreciation and who are willing to bear the
risks of investing in a focused portfolio of
common stocks of technology companies
INVESTMENT STRATEGY OF THE GLB NEW OPPORTUNITY GROWTH FUND
The Fund invests primarily (at least 65% of its assets) in common stocks of U.S.
companies with medium to large capitalizations that the Advisor believes have
above-average potential for growth in revenues, earnings or cash flow.
The Advisor makes investments in these companies based on its fundamental
research and analysis of various characteristics, including financial
statements, capitalization, sales and expense trends, earnings estimates,
market position of the company and its product lines and the industry
outlook. Emphasis is placed on companies with unique franchises or product
lines that contribute to above-average revenue growth. The Advisor believes
that above-average growth characteristics can be found in various technology
oriented industries such as the Internet, computers, networking and
internetworking software, computer-aided design, telecommunications,
fiber-optics, wireless, media and information services, advanced medical
devices, biotechnology, genomics and pharmaceuticals, as well as other
industries that the Advisor believes may have potential for rapid growth. The
Advisor may sell a security when it achieves a designated price target, a
company's growth prospects change, or the opportunity for a better investment
arises.
The Fund will use strategies generally designed to minimize taxes to the extent
consistent with its overall investment objective and strategies including
minimizing short term gains, offsetting gains with realized losses, holding
investments to minimize turnover, and emphasizing companies that pay no or small
dividends.
PRINCIPAL RISKS OF INVESTING IN THE GLB NEW OPPORTUNITY GROWTH FUND
Since it purchases common stocks, the Fund is subject to the risk that stock
prices will fall over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the Fund's securities may
fluctuate drastically from day to day. Individual companies may report poor
results or be negatively affected by industry and/or economic trends and
developments. The prices of securities issued by such companies may suffer a
decline in response. These factors contribute to price volatility, which is the
principal risk of investing in the Fund.
The Fund is subject to the risk that the securities of issuers in the technology
sector that the Fund purchases will underperform the market as a whole. To the
extent that the Fund's investments are focused in issuers conducting business in
technology areas, the Fund is subject to legislative or regulatory changes,
adverse market conditions and/or increased competition affecting technology
issuers.
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The medium capitalization companies the Fund invests in may be more
vulnerable to adverse business or economic events than larger, more
established companies. In particular, these medium sized companies may have
limited product lines, markets and financial resources, and may depend upon a
relatively small management group. Therefore, medium capitalization stocks
may be more volatile than those of larger companies.
The Fund is also subject to the risk that its investment approach, which
involves investing in a focused portfolio of growth-oriented technology
companies, may underperform other investment strategies that focus on other
segments of the equity market or the equity market as a whole.
PERFORMANCE INFORMATION
As of October 1, 2000, the Fund had not commenced operations, and did not have a
performance history.
FUND FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
FUND SHARES.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM FUND ASSETS)
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<S> <C>
Investment Advisory Fees ................................................. 0.75%
Distribution and Service (12b-1) Fees .................................... 0.25%
Other Expenses ........................................................... 0.75%
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Total Annual Fund Operating Expenses 1.75%*
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</TABLE>
* The Advisor intends to waive a portion of its fees in order to keep total
operating expenses from exceeding 1.75%. This fee waiver remains in place as of
the date of this prospectus, but the Advisor may discontinue all or part of its
waiver at any time. In addition, the Fund may enter into arrangements with
certain broker-dealers who have agreed to pay certain Fund expenses in return
for the direction of a percentage of the Fund's brokerage transactions. The
Fund anticipates that these arrangements will reduce operating expenses.
For more information about these fees, see "Investment Advisor."
EXAMPLE
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell your
shares at the end of the period.
The Example also assumes that each year your investment has a 5% return, Fund
operating expenses remain the same and you reinvest all dividends and
distributions. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
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<S> <C> <C>
$178 $551
</TABLE>
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MORE INFORMATION ABOUT RISK
The Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities.
The Fund has an investment goal and strategies for reaching that goal. The
investment managers invest Fund assets in a way that they believe will help a
Fund achieve its goal. Still, investing in the Fund involves risk and there is
no guarantee that the Fund will achieve its goal. An investment manager's
judgments about the markets, the economy, or companies may not anticipate actual
market movements, economic conditions or company performance, and these
judgments may affect the return on your investment. In fact, no matter how good
a job an investment manager does, you could lose money on your investment in the
Fund, just as you could with other investments.
The value of your investment in the Fund is based on the market prices of the
securities the Fund holds. These prices change daily due to economic and other
events that affect particular companies and other issuers. These price
movements, sometimes called volatility, may be greater or lesser depending on
the types of securities a Fund owns and the markets in which they trade. The
effect on the Fund of a change in the value of a single security will depend on
how widely the Fund diversifies its holdings.
While the Fund will principally invest in common stocks, equity securities
include public and privately issued equity securities, common and preferred
stocks, warrants, rights to subscribe to common stock and convertible
securities. Investments in equity securities in general are subject to market
risks that may cause their prices to fluctuate over time. The value of
securities convertible into equity securities, such as warrants or
convertible debt, is also affected by prevailing interest rates, the credit
quality of the issuer and any call provision. Fluctuations in the value of
equity securities in which a mutual fund invests will cause a fund's net
asset value to fluctuate. An investment in a portfolio of equity securities
may be more suitable for long-term investors who can bear the risk of these
share price fluctuations.
MORE INFORMATION ABOUT FUND INVESTMENTS
In addition to the investments and strategies described in this prospectus, the
Fund also may invest in other securities, use other strategies and engage in
other investment practices. These investments and strategies, as well as those
described in this prospectus, are described in detail in our Statement of
Additional Information.
The investments and strategies described in this prospectus are those that we
use under normal conditions. During unusual economic or market conditions or for
temporary defensive or liquidity purposes, the Fund may invest up to 100% of its
assets in money market instruments that would not ordinarily be consistent with
the Fund's objectives. The Fund will do so only if the Advisor believes that the
risk of loss outweighs the opportunity for capital gains or higher income. Of
course, we cannot guarantee that the Fund will achieve its investment goal.
INVESTMENT ADVISOR
GLB Fund Management, Inc. (the "Advisor"), an affiliate of Goodwyn, Long & Black
Investment Management, Inc. serves as the investment advisor to the Fund. The
Advisor is majority owned by the principals of Goodwyn, Long & Black Investment
Management, Inc. ("GLB") and was established in July 2000 for the purpose of
acting as investment advisor to the Fund. GLB was established in 1997 and
provides investment management services to individual and institutional
investors. As of July 31, 2000, GLB and its principals had approximately $185
million in assets under management.
The Advisor makes investment decisions for the Fund and continuously reviews,
supervises and administers the Fund's investment program. The Board of Trustees
of The Advisors'Inner Circle Fund supervises the Advisor and establishes
policies that the Advisor must follow in its management activities.
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PORTFOLIO MANAGEMENT
The Portfolio Manager is responsible for the day-to-day investment decisions for
the Fund. The Portfolio Manager relies on the Investment Committee, established
by the Advisor, to provide investment strategy and policy. The members of the
Committee, listed below, have significant experience in investment management
and in business administration.
PORTFOLIO MANAGER AND CHAIRMAN OF THE INVESTMENT COMMITTEE
Robert Black is Executive Vice President of the Advisor, and serves as the
Fund's Portfolio Manager and Chairman of the Investment Committee. He is the
Chief Investment Officer and President of GLB since January 1999. Mr. Black
served as the investment manager and co-owner of Mercury Capital Management,
LLC, an investment management and research firm from 1995 to 1996, and a
member of the management team of Mendes Enterprises Management Services from
1991 to 1996. He acts as program host for the Business Talk Radio Network, a
national financial news network, where he has been a stock market analyst
since 1988. Mr. Black has published his market commentary and strategies on
the Internet at 2020insight.com since 1996. He has a BS degree from George
Mason University.
INVESTMENT COMMITTEE MEMBERS
Robert E. Long, C.F.A. is the President and Chief Executive Officer of the
Advisor, and is a member of the Investment Committee. Mr. Long served as Vice
President of GLB from January 1999 to September 2000 and as Chief Executive
Officer thereafter. He has almost 40 years of experience in the securities
industry serving as a financial analyst, investment manager and in other
professional capacities. Prior to establishing GLB, Mr. Long served first as
Executive Vice President, then President of Potomac Asset Management, Inc.
from 1983 to 1997, then as Chairman of Goodwyn & Long Investment Management,
Inc. from 1997 to 1999. He has served as a principal, officer and director of
two New York Stock Exchange member firms and as Secretary of Washington
Mutual Investors Fund, one of the largest equity mutual funds in the nation.
Mr. Long is a director of AMBASE, Inc. and Allied Capital, Inc. and serves on
the Board of Visitors of the American University School of Business. He has a
JD degree from George Washington University School of Law and is a Chartered
Financial Analyst.
Wilfred L. Goodwyn is a Director of the Advisor, a member of its Investment
Committee, and has served as Chairman of GLB since 1999. Mr. Goodwyn has also
served as Chairman and Chief Executive Officer Designate of WestBourne
Investments, Inc. since August 2000. He has almost 30 years of experience in
the securities industry serving as a financial analyst, investment manager
and in other professional capacities. Prior to establishing the Advisor and
GLB, Mr. Goodwyn served as the Executive Vice President and Treasurer of
Potomac Asset Management, Inc. from 1981 to 1997 and as President of Goodwyn
& Long Investment Management, Inc. from 1997 to 1999. He has served as Board
Chairman of Columbia Hospital for Women and also as the Chairman of the
Finance Committee on the Board of Blue Cross Blue Shield of the National
Capital Area. He has an MBA from Columbia University Business School.
Joseph R. Muglia is Executive Vice President and Chief Operating Officer of
the Advisor and a member of its Investment Committee. He is also the founder
and principal of JRM/Associates, a financial consulting firm. Prior to
establishing JRM/Associates, he served as Director of the Nicholas-Applegate
Global Umbrella Fund p.l.c. (Dublin), the Nicholas-Applegate Securities
International Fund LLC (B.V.I.), the Nicholas-Applegate Strategic
Opportunities Fund Ltd. and was the Director of Offshore Marketing and
Distribution for Nicholas-Applegate Inc., the U.S. based parent firm from
1997 to 1999. From 1991 to 1997, he was Senior Vice President and Director of
Paine Webber's International Private Accounts Group in charge of strategic
planning, development and marketing of offshore financial products, including
offshore mutual funds. He served as a Director of Paine Webber Offshore Funds
p.l.c., Paine Webber International Bank Ltd. (London) and Paine Webber Trust
Company Ltd. (Guernsey). He has a BS degree from St. John's University and
attended the Securities Industry Association Institute at the Wharton School,
University of Pennsylvania.
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Vincent P. Dole III is Treasurer and Secretary of the Advisor and a member of
the Investment Committee. Mr. Dole has served as President of Dolefam II
Inc., a private venture capital firm of which he is the founder, since 1995.
From 1980 to 1995, Mr. Dole was the Chairman of Dolefam Corporation, an
international food manufacturing company. Prior to that, Mr. Dole served as
Vice President in the International Department of the Chase Manhattan Bank.
Mr. Dole serves as Director of Cardel Hotel Development, JMC Investments and
the Foundation for the National Archives of the United States. He has a BA
degree fom the University of Pennsylvania and an MBA degree from New York
University.
PURCHASING AND SELLING FUND SHARES
This section tells you how to purchase and sell (sometimes called "redeem")
shares of the Fund.
The shares are for retail and institutional investors.
HOW TO PURCHASE FUND SHARES
You may purchase shares directly by:
- Mail
- Telephone
- Wire, or
- Automated Clearing House (ACH).
To purchase shares directly from us, complete and send in the enclosed
application. If you need an application or have questions, please call
866-GLB-FUND (452-3863). Unless you arrange to pay by wire or ACH, write your
check, payable in U.S. dollars, to "GLB New Opportunity Growth Fund." The Fund
cannot accept third-party checks, credit cards, credit card checks, travelers
checks or cash.
You may also purchase shares through accounts with brokers and other
institutions that are authorized to place trades in Fund shares for their
customers. If you invest through an authorized institution, you will have to
follow its procedures, which may be different from the procedures for investing
directly. Your broker or institution may charge a fee for its services, in
addition to the fees charged by the Fund. You will also generally have to
address your correspondence or questions regarding the Fund to your institution.
GENERAL INFORMATION
You may purchase shares on any day that the New York Stock Exchange is open for
business (a Business Day). Shares cannot be purchased by Federal Reserve Wire on
days when either the New York Stock Exchange or the Federal Reserve is closed.
The Fund reserves the right to refuse any purchase requests, particularly those
that would not be in the best interests of the Fund or its shareholders and
could adversely affect the Fund or its operations. This includes those from any
individual or group who, in the Fund's view, are likely to engage in excessive
trading (usually defined as more than four transactions out of the Fund within a
calendar year.)
The price per share (the offering price) will be the net asset value per share
(NAV) next determined after the Fund receives your purchase order.
The Fund calculates its NAV once each Business Day at the regularly scheduled
close of normal trading on the New York Stock Exchange (normally, 4:00 p.m.,
Eastern time). The time at which the NAV is calculated may change in case of an
emergency or, if the New York Stock Exchange closes early. So, for you to
receive the current Business Day's NAV, generally the Fund must receive your
purchase order before 4:00 p.m. Eastern time. The Fund will not accept orders
that request a particular day or price for the transaction or any other special
conditions.
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HOW WE CALCULATE NAV
NAV for one Fund share is the value of that share's portion of the net assets of
the Fund.
In calculating NAV, the Fund generally values its investment portfolio at market
price. If market prices are unavailable or the Fund thinks that they are
unreliable, fair value prices may be determined in good faith using methods
approved by the Board of Trustees.
MINIMUM PURCHASES
To purchase shares for the first time, you must invest at least $10,000 in the
Fund. Your subsequent investments in the Fund must be made in amounts of at
least $500. To purchase shares for an individual retirement account (IRA) or
other tax qualified account only, you must invest at least $2,000. The Fund may
accept investments of smaller amounts at its discretion.
SYSTEMATIC INVESTMENT PLAN
If you have a checking or savings account with a bank, you may purchase shares
automatically through regular deductions via Automated Clearing House (ACH) from
your account in amounts of at least $500 per month. Please complete the
Systematic Investment section of the account application and include complete
banking instructions.
HOW TO SELL YOUR FUND SHARES
If you own your shares directly, you may sell (sometimes called "redeem") your
shares on any Business Day by contacting the Fund directly by mail or telephone
at: GLB New Opportunity Growth Fund, P.O. Box 446, Portland, ME 04112 or
telephone at 866-GLB-FUND (452-3863) if you have elected telephone redemption
privileges on your account application.
If you own your shares through an account with a broker or other institution,
contact that broker or institution to sell your shares. Your broker or
institution may charge a fee for its services, in addition to the fees charged
by the Fund.
If you would like to sell $50,000 or more of your shares, please notify the Fund
in writing and include a signature guarantee by a bank or other financial
institution (a notarized signature is not sufficient).
The sale price of each share will be the next NAV determined after the Fund
receives your request.
SYSTEMATIC WITHDRAWAL PLAN
If you have at least $10,000 in your account ($2,000 in the case of an IRA or
other tax qualified account), you may use the systematic withdrawal plan. Under
the plan you may arrange monthly, quarterly, semi-annual or annual automatic
withdrawals of at least $100 from the Fund. The proceeds of each withdrawal will
be mailed to your address of record by check or, to a designated bank account by
ACH payment.
Systematic withdrawals from IRAs and other tax qualified retirement plans may
have adverse tax consequences. You should consult your tax advisor before
redeeming shares from your IRA or other tax qualified account.
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RECEIVING YOUR MONEY
Normally, we will send your sale proceeds within seven Business Days after we
receive your request. Your proceeds can be sent to you by check or wired to your
bank account provided the wire is for more than $10,000 ($2,000 in the case of
an IRA or other tax qualified account) and you have elected wire privileges on
your application, or your request is in writing and signature guaranteed. IF YOU
RECENTLY PURCHASED YOUR SHARES BY CHECK OR THROUGH ACH, REDEMPTION PROCEEDS MAY
NOT BE AVAILABLE UNTIL YOUR CHECK HAS CLEARED (WHICH MAY TAKE UP TO 15 DAYS FROM
YOUR DATE OF PURCHASE).
REDEMPTIONS IN KIND
We generally pay sale (redemption) proceeds in cash. However, under unusual
conditions that make the payment of cash unwise (and for the protection of the
Fund's remaining shareholders) we might pay all or part of your redemption
proceeds in liquid securities with a market value equal to the redemption price
(redemption in kind). It is highly unlikely that your shares would ever be
redeemed in kind, but if they were you would probably have to pay transaction
costs to sell the securities distributed to you, as well as taxes on any capital
gains from the sale as with any redemption.
INVOLUNTARY SALES OF YOUR SHARES
If your account balance drops below $10,000 because of redemptions ($2,000 in
the case of an IRA or other tax qualified account) you may be required to sell
your shares. But, we will always give you at least 60 days'written notice to
give you time to add to your account and avoid the sale of your shares.
SUSPENSION OF YOUR RIGHT TO SELL YOUR SHARES
The Fund may suspend your right to sell your shares when trading on the NYSE is
restricted or halted, or otherwise as permitted by the SEC. More information
about this is in our Statement of Additional Information.
TELEPHONE TRANSACTIONS
Purchasing and selling Fund shares over the telephone is extremely convenient,
but not without risk. If you have elected telephone privileges on your
application you may purchase and sell shares via the telephone. Although the
Fund has certain safeguards and procedures to confirm the identity of callers
and the authenticity of instructions, the Fund is not responsible for any losses
or costs incurred by following telephone instructions we reasonably believe to
be genuine. If you or your financial institution transact with the Fund over the
telephone, you will generally bear the risk of any loss.
SIGNATURE GUARANTEE REQUIREMENTS
To protect you and the Fund against fraud, signatures on certain requests must
have a "signature guarantee." A signature guarantee verifies the authenticity of
your signature. You can obtain one from most banking institutions or securities
brokers but not from a notary public. Signature guarantees are required for
requests made in writing for any of the following:
- Sales over $50,000
- Changes to a shareholder name of record
- Redemption on an account for which the address or registration has been
changed within the last 30 days
- Sending proceeds from a redemption to a payee other than on record
- Sending proceeds from a redemption to an account with a different
registration
- Changes to systematic investment, withdrawal, distribution, telephone
redemption, or any other election in connection with your account.
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LOST ACCOUNTS
The Transfer Agent will consider your account lost if correspondence to your
address of record is returned as undeliverable, unless the Transfer Agent
determines your new address.
When an account is lost, all distributions on the account will be reinvested in
additional shares of the Fund. In addition, the amount of any outstanding
(unpaid for six months or more) checks for distributions that have been returned
to the Transfer Agent will be reinvested and the checks will be canceled.
DISTRIBUTION OF FUND SHARES
The Fund has adopted a distribution plan that allows the Fund to pay
distribution and service fees for the sale and distribution of its shares, and
for services provided to shareholders. Because these fees are paid out of the
Fund's assets continuously, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
The Fund pays distribution fees at an annual rate of 0.25% based on the average
daily net assets of the Fund.
DIVIDENDS AND DISTRIBUTIONS
The Fund distributes its income and capital gains, if any, at least annually. If
you own Fund shares on a Fund's record date, you will be entitled to receive the
distribution.
You will receive dividends and distributions in the form of additional Fund
shares unless you elect to receive payment in cash. To change your election to a
cash payment, you must notify the Fund in writing prior to the date of the
distribution. Your election will be effective for dividends and distributions
paid after the Fund receives your written notice. To cancel your election,
simply send the Fund written notice.
TAXES
PLEASE CONSULT YOUR TAX ADVISOR REGARDING YOUR SPECIFIC QUESTIONS ABOUT FEDERAL,
STATE AND LOCAL INCOME TAXES. Below we have summarized some important tax issues
that affect the Fund and its shareholders. This summary is based on current tax
laws, which may change.
The Fund will distribute substantially all of its income and capital gains, if
any. The dividends and distributions you receive may be subject to federal,
state and local taxation, depending upon your tax situation. Distributions you
receive from the Fund may be taxable whether or not you reinvest them. Income
distributions are generally taxable at ordinary income tax rates. Capital gains
distributions are generally taxable at the rates applicable to long-term capital
gains. EACH SALE OR EXCHANGE OF FUND SHARES IS A TAXABLE EVENT.
MORE INFORMATION ABOUT TAXES IS IN THE STATEMENT OF ADDITIONAL INFORMATION.
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THE ADVISORS' INNER CIRCLE FUND
GLB NEW OPPORTUNITY GROWTH FUND
INVESTMENT ADVISOR
GLB Fund Management, LLC
510 King Street, Suite 315A
Alexandria, Virginia 22314
DISTRIBUTOR
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, Pennsylvania 19456
TRANSFER AGENT
Forum Shareholder Services, LLC
Two Portland Square
Portland, Maine 04101
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
More information about the Fund is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI dated October 1, 2000 includes detailed information about The
Advisors' Inner Circle Fund. The SAI is on file with the SEC and is
incorporated by reference into this prospectus. This means that the SAI, for
legal purposes, is a part of this prospectus.
ANNUAL AND SEMI-ANNUAL REPORTS
These reports list the Fund's holdings and contain information from the
Fund's managers about strategies, and recent market conditions and trends and
their impact on Fund performance. The reports also contain detailed financial
information about the Fund.
TO OBTAIN AN SAI, ANNUAL OR SEMI-ANNUAL REPORT,
OR MORE INFORMATION:
BY TELEPHONE: Call 866-GLB-FUND (452-3863)
BY MAIL: Write to
GLB Fund
P.O. Box 446
Portland, ME 04112
BY E-MAIL: [email protected]
FROM THE SEC: You can also obtain the SAI or the Annual and Semi-Annual reports,
as well as other information about The Advisors' Inner Circle Fund, from the
EDGAR Database on the SEC's website ("http://www.sec.gov"). You may review and
copy documents at the SEC Public Reference Room in Washington, DC (for
information on the operation of the Public Reference Room, call 202-942-8090).
You may request documents by mail from the SEC, upon payment of a duplicating
fee, by writing to: Securities and Exchange Commission, Public Reference
Section, Washington, DC 20549-0102. You may also obtain this information, upon
payment of a duplicating fee, by e-mailing the SEC at the following
address:[email protected]. The Fund's Investment Company Act registration
number is 811-6400.
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Trust:
The Advisors' Inner Circle Fund
Fund:
GLB New Opportunity Growth Fund
October 1, 2000
Investment Advisor:
GLB Fund Management, Inc.
(An Affiliate Of Goodwyn, Long & Black Investment Management, Inc.)
This Statement of Additional Information is not a prospectus. It is intended to
provide additional information regarding the activities and operations of the
GLB New Opportunity Growth Fund (the "Fund"), a separate series of The Advisors'
Inner Circle Fund (the "Trust") and should be read in conjunction with the
Fund's prospectus dated October 1, 2000. This Statement of Additional
Information is incorporated by reference into the Fund's Prospectus.
Prospectuses may be obtained by writing to the Trust or by calling toll-free
866-GLB-FUND (452-3863).
TABLE OF CONTENTS
THE FUND AND THE TRUST.....................................................S-2
INVESTMENT OBJECTIVES AND POLICIES.........................................S-2
DESCRIPTION OF PERMITTED INVESTMENTS.......................................S-3
INVESTMENT LIMITATIONS....................................................S-10
THE ADVISOR...............................................................S-12
THE ADMINISTRATOR.........................................................S-13
THE DISTRIBUTOR...........................................................S-14
THE TRANSFER AGENT........................................................S-14
THE CUSTODIAN.............................................................S-15
CODE OF ETHICS............................................................S-15
INDEPENDENT PUBLIC ACCOUNTANTS............................................S-15
LEGAL COUNSEL.............................................................S-15
TRUSTEES AND OFFICERS OF THE TRUST........................................S-15
PERFORMANCE INFORMATION...................................................S-18
COMPUTATION OF YIELD......................................................S-19
CALCULATION OF TOTAL RETURN...............................................S-19
PURCHASING SHARES.........................................................S-19
REDEEMING SHARES..........................................................S-20
DETERMINATION OF NET ASSET VALUE..........................................S-20
TAXES ....................................................................S-20
FUND TRANSACTIONS.........................................................S-23
DESCRIPTION OF SHARES.....................................................S-24
SHAREHOLDER LIABILITY.....................................................S-24
LIMITATION OF TRUSTEES' LIABILITY.........................................S-24
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THE FUND AND THE TRUST
This Statement of Additional Information relates to the GLB New Opportunity
Growth Fund (the "Fund"). The Fund is a separate series of The Advisors' Inner
Circle Fund (the "Trust"), which offers a number of mutual fund series in
addition to the Fund. The Trust is an open-end investment management company
established under Massachusetts law as a Massachusetts business trust under a
Declaration of Trust dated July 18, 1991. The Declaration of Trust permits the
Trust to offer separate series ("funds") of shares of beneficial interest
("shares"). Each fund is a separate mutual fund, and each share of each fund
represents an equal proportionate interest in that fund. See "Description of
Shares." No investment in shares of a fund should be made without first reading
that fund's prospectus. Capitalized terms not defined herein are defined in the
Prospectus offering shares of the Fund.
The Trust pays its (i) operating expenses, including fees of its service
providers, expenses of preparing prospectuses, proxy solicitation material and
reports to shareholders, costs of custodial services and registering its shares
under federal and state securities laws, pricing and insurance expenses,
brokerage costs, interest charges, taxes and organization expenses and (ii) pro
rata share of the Trust's other expenses, including audit and legal expenses.
Expenses not attributable to a specific fund are allocated across all of the
funds on the basis of relative net assets.
The management and affairs of the Trust are supervised by the Trustees under the
laws of the Commonwealth of Massachusetts. The Trustees have approved contracts
under which, as described above, certain companies provide essential management
services to the Trust.
INVESTMENT OBJECTIVES AND POLICIES
The Fund seeks long-term capital appreciation while minimizing capital gains and
tax exposure. This investment objective is fundamental and cannot be changed
without the consent of shareholders. There can be no assurance that the Fund
will be able to achieve this investment objective.
The Fund invests primarily (at least 65% of its assets) in common stocks of U.S.
companies with medium to large capitalizations that the Advisor believes have a
potential for above-average growth in earnings or cash flow. The Advisor makes
investments in these companies based on its fundamental research and analysis of
various characteristics, including financial statements, capitalization, sales
and expense trends, earnings estimates, market position of the company and the
industry outlook. Emphasis is placed on companies with unique franchises or
product lines that contribute to above-average revenue growth. The Advisor
believes that above-average growth characteristics can be found in various
industries such as the Internet, computers, networking and internetworking
software, computer-aided design, telecommunications, fiber-optics, wireless,
media and information services, advanced medical devices, biotechnology,
genomics and pharmaceuticals, as well as other industries that the Advisor
believes may have potential for rapid growth.
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The Fund will use strategies generally designed to minimize taxes to the extent
consistent with the Fund's investment objective and strategies, including
minimizing short-term gains, offsetting gains with realized losses, holding
investments to minimize turnover, and emphasizing companies that pay no or small
dividends.
Although not primary strategies employed by the Advisor in managing the Fund,
the Fund may engage in a number of investment practices in order to meet its
investment objectives. While the Fund generally invests in larger capitalization
companies, the Advisor maintains the flexibility to invest in companies with any
market capitalization, including small capitalization issuers. The Fund may
invest in variable and floating rate obligations, enter into forward
commitments, purchase securities on a when-issued basis and sell securities
short against the box. Further, it may also purchase put and call options and
write covered call options on fixed income and equity securities, and may enter
into futures contracts (including index futures contracts), purchase options on
futures contracts, and lend its securities. Moreover, the Fund may also purchase
warrants, rights to purchase common stocks, debt securities convertible to
common stocks and preferred stocks (together, "equity securities"), as well as
invest in money market securities for liquidity purposes. The Fund may invest in
equity securities of foreign issuers traded in the United States, including
ADRs.
For additional information regarding the permitted investment and investment
practices discussed above and the associated risks, see "Description of
Permitted Investments and Risk Factors."
The Fund's portfolio turnover will be generally moderate and most likely below
50%, however, turnover may be influenced by specific company fundamentals,
market environments and investment opportunities.
DESCRIPTION OF PERMITTED INVESTMENTS
The following are descriptions of the permitted investments and investment
practices discussed in the Fund's "Investment Objectives and Policies" section
and the associated risk factors. The Advisor will only invest in any of the
following instruments or engage in any of the following investment practices if
such investment or activity is consistent with and permitted by the Fund's
stated investment policies.
AMERICAN DEPOSITARY RECEIPTS ("ADRS") - ADRs are securities typically issued by
a U.S. financial institution. ADRs evidence ownership interests in a pool of
securities issued by a foreign issuer and deposited with the depositary.
Generally, ADRs are designed for trading in the U.S. securities market. ADRs may
be available for investment through "sponsored" or "unsponsored" facilities. A
sponsored facility is established jointly by the issuer of the security
underlying the receipt and a depositary, whereas an unsponsored facility may be
established by a depositary without participation by the issuer of the
underlying security. Holders of unsponsored depositary receipts generally bear
all the costs of the unsponsored facility. The depositary of an unsponsored
facility frequently is under no obligation to distribute shareholder
communications received from the issuer of the deposited security or to pass
through, to the holders of the receipts, voting rights with respect to the
deposited securities.
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BANKERS' ACCEPTANCES
Bankers' acceptances are bills of exchange or time drafts drawn on and accepted
by a commercial bank. Bankers' acceptances are used by corporations to finance
the shipment and storage of goods. Maturities are generally six months or less.
CERTIFICATES OF DEPOSIT
Certificates of deposit are interest bearing instruments with a specific
maturity. They are issued by banks and savings and loan institutions in exchange
for the deposit of funds and normally can be traded in the secondary market
prior to maturity. Certificates of deposit with penalties for early withdrawal
will be considered illiquid.
COMMERCIAL PAPER
Commercial paper is a term used to describe unsecured short-term promissory
notes issued by banks, municipalities, corporations and other entities.
Maturities on these issues vary from a few days to 270 days.
CONVERTIBLE SECURITIES
Convertible securities are corporate securities that are exchangeable for a set
number of another security at a prestated price. Convertible securities
typically have characteristics of both fixed income and equity securities.
Because of the conversion feature, the market value of a convertible security
tends to move with the market value of the underlying stock. The value of a
convertible security is also affected by prevailing interest rates, the credit
quality of the issuer and any call provisions.
FUTURES AND OPTIONS ON FUTURES
As consistent with the Fund's investment objectives, the Fund may enter into
futures contracts and options on futures contracts traded on an exchange
regulated by the Commodities Futures Trading Commission ("CFTC"), either for
"bona fide hedging purposes" (as defined by the CFTC), or for non-hedging
purposes to the extent that the aggregate initial margin and premiums on such
positions (excluding the amount by which options are in the money) do not exceed
5% of the Fund's net assets.
The Fund may buy and sell futures contracts and related options to manage its
exposure to changing interest rates and security prices. Some futures
strategies, including selling futures, buying puts and writing calls, reduce the
Fund's exposure to price fluctuations. Other strategies, including buying
futures, writing puts and buying calls, tend to increase market exposure.
Futures and options may be combined with each other in order to adjust the risk
and return characteristics of the overall portfolio. The Fund may invest in
futures and related options based on any type of security or index traded on
U.S. or foreign exchanges or over-the-counter, as long
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as the underlying securities, or securities represented by an index, are
permitted investments of the Fund.
Options and futures can be volatile instruments, and involve certain risks. If
the Advisor applies a hedge at an inappropriate time or judges market movements
incorrectly, options and futures strategies may lower the Fund's return. The
Fund could also experience losses if the prices of its options and futures
positions were poorly correlated with its other instruments, or if it could not
close out its positions because of an illiquid secondary market.
In order to cover any obligations it may have under options or futures
contracts, the Fund will either own the underlying asset, have a contract to
acquire such an asset without additional cost or set aside, in a segregated
account, high quality liquid assets in an amount at least equal in value to such
obligations.
ILLIQUID SECURITIES
Illiquid securities are securities that cannot be disposed of within seven days
at approximately the price at which they are being carried on the Fund's books.
An illiquid security includes a demand instrument with a demand notice period
exceeding seven days, where there is no secondary market for such security, and
repurchase agreements with a remaining term to maturity in excess of seven days.
INVESTMENT COMPANY SHARES
The Fund may invest in shares of other investment companies, to the extent
permitted by applicable law and subject to certain restrictions. These
investment companies typically incur fees that are separate from those fees
incurred directly by the Fund. The Fund's purchase of such investment company
securities results in the layering of expenses, such that shareholders would
indirectly bear a proportionate share of the operating expenses of such
investment companies, including advisory fees, in addition to paying Fund
expenses. Under applicable regulations, the Fund is prohibited from acquiring
the securities of another investment company if, as a result of such
acquisition: (1) the Fund owns more than 3% of the total voting stock of the
other company; (2) securities issued by any one investment company represent
more than 5% of the Fund's total assets; or (3) securities (other than treasury
stock) issued by all investment companies represent more than 10% of the total
assets of the Fund. See also "Investment Limitations."
It is the position of the staff of the Securities and Exchange Commission
("SEC") that certain non-governmental issuers of collateralized mortgage
obligations ("CMOs") constitute investment companies pursuant to the Investment
Company Act of 1940, as amended (the "1940 Act"), and either (a) investments in
such instruments are subject to the limitations set forth above or (b) the
issuers of such instruments have received orders from the SEC exempting such
instruments from the definition of investment company.
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OPTIONS
Put and call options for various securities and indices are traded on national
securities exchanges. As consistent with the Fund's investment objectives,
options may be used by the Fund from time to time as the Advisor deems to be
appropriate. Options will generally be used for hedging purposes, but also may
be used for other purposes consistent with the Fund's investment objectives.
A put option gives the purchaser of the option the right to sell, and the writer
the obligation to buy, the underlying security at any time during the option
period. A call option gives the purchaser of the option the right to buy, and
the writer of the option the obligation to sell, the underlying security at any
time during the option period. The premium paid to the writer is the
consideration for undertaking the obligations under the option contract. The
initial purchase (sale) of an option contract is an "opening transaction." In
order to close out an option position, the Fund may enter into a "closing
transaction" - the sale (purchase) of an option contract on the same security
with the same exercise price and expiration date as the option contract
originally opened.
Although the Fund may engage in option transactions as hedging transactions and
for other purposes consistent with its investment objectives, there are risks
associated with such investments including the following: (i) the success of a
hedging strategy may depend on the ability of the Advisor to predict movements
in the prices of the individual securities, fluctuations in markets and
movements in interest rates; (ii) there may be an imperfect or no correlation
between the changes in market value of the securities held by the Fund and the
prices of options; (iii) there may not be a liquid secondary market for options;
and (iv) while the Fund will receive a premium when it writes covered call
options, it may not participate fully in a rise in the market value of the
underlying security. The Fund is permitted to engage in option transactions with
respect to securities that are permitted investments and related indices.
Insofar as the Fund writes call options, it will write only covered call
options.
REPURCHASE AGREEMENTS
Repurchase Agreements are agreements by which a person (E.G., the Fund) obtains
a security and simultaneously commits to return the security to the seller (a
member bank of the Federal Reserve System or primary securities dealer as
recognized by the Federal Reserve Bank of New York) at an agreed upon price
(including principal and interest) on an agreed upon date within a number of
days (usually not more than seven) from the date of purchase. The resale price
reflects the purchase price plus an agreed upon market rate of interest which is
unrelated to the coupon rate or maturity of the underlying security. A
repurchase agreement involves the obligation of the seller to pay the agreed
upon price, which obligation is in effect secured by the value of the underlying
security.
Repurchase agreements are considered to be loans by the Fund for purposes of its
investment limitations. The repurchase agreements entered into by a Fund will
provide that the underlying security at all times shall have a value at least
equal to 102% of the resale price stated in the agreement (the Advisor monitors
compliance with this requirement). Under all repurchase
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agreements entered into by the Fund, the custodian or its agent must take
possession of the underlying collateral. However, if the seller defaults, the
Fund could realize a loss on the sale of the underlying security to the extent
that the proceeds of the sale, including accrued interest, are less than the
resale price provided in the agreement including interest. In addition, even
though the Bankruptcy Code provides protection for most repurchase agreements,
if the seller should be involved in bankruptcy or insolvency proceedings, the
Fund may incur delay and costs in selling the underlying security or may suffer
a loss of principal and interest if the Fund is treated as an unsecured creditor
and is required to return the underlying security to the seller's estate.
SECURITIES OF FOREIGN ISSUERS
Investments in the securities of foreign issuers may subject the Fund to
investment risks that differ in some respects from those related to investments
in securities of U.S. issuers. Such risks include future adverse political and
economic developments, possible imposition of withholding taxes on income,
possible seizure, nationalization or expropriation of foreign deposits, possible
establishment of exchange controls or taxation at the source or greater
fluctuation in value due to changes in exchange rates. Foreign issuers of
securities often engage in business practices different from those of domestic
issuers of similar securities, and there may be less information publicly
available about foreign issuers. In addition, foreign issuers are, generally
speaking, subject to less government supervision and regulation and different
accounting treatment than are those in the United States.
SECURITIES LENDING
As consistent with the Fund's investment objectives, the Fund may engage in
securities lending, under which securities are loaned pursuant to agreements
requiring that the loan be continuously secured by collateral consisting of cash
or securities of the U.S. government equal to at least 100% of the market value
of the securities lent. The Fund will continue to receive interest on the
securities lent while simultaneously earning interest on the investment of cash
collateral. Collateral is marked to market daily to provide a level of
collateral at least equal to the value of the securities lent. There may be
risks of delay in recovery of the securities or even loss of rights in the
collateral should the borrower of the securities fail financially or become
insolvent.
SECURITIES OF SMALL- AND MID-CAPITALIZATION ISSUERS
The Fund may invest in common stocks of U.S. companies with small to medium
market capitalizations. Investing in smaller capitalization companies involves
greater risk than is customarily associated with investments in larger, more
established companies. This increased risk may be due to the greater business
risks of smaller size, limited markets and financial resources, narrow product
lines and frequent lack of depth of management. The securities of smaller
companies are often traded in the over-the-counter market and even if listed on
a national securities exchange may not be traded in volumes typical for that
exchange. Consequently, the securities of smaller companies are less likely to
be liquid, may have limited market stability, and may be subject to more abrupt
or erratic market movements than securities of larger, more established growth
companies or the market averages in general. As a result, the value of the
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shares of the Fund can be expected to fluctuate more than the value of shares of
an investment company investing solely in larger, more established companies.
SHORT SALES
As consistent with the Fund's investment objectives, the Fund may engage in
short sales that are either "uncovered" or "against the box." A short sale is
"against the box" if at all times during which the short position is open, the
Fund owns at least an equal amount of the securities or securities convertible
into, or exchangeable without further consideration for, securities of the same
issue as the securities that are sold short.
Uncovered short sales are transactions under which the Fund sells a security it
does not own. To complete such a transaction, the Fund must borrow the security
to make delivery to the buyer. The Fund then is obligated to replace the
security borrowed by purchasing the security at the market price at the time of
the replacement. The price at such time may be more or less than the price at
which the security was sold by the Fund. Until the security is replaced, the
Fund is required to pay the lender amounts equal to any dividends or interest
that accrue during the period of the loan. To borrow the security, the Fund also
may be required to pay a premium, which would increase the cost of the security
sold. The proceeds of the short sale will be retained by the broker, to the
extent necessary to meet margin requirements, until the short position is closed
out.
Until the Fund closes its short position or replaces the borrowed security, the
Fund will: (a) maintain a segregated account containing cash or liquid
securities at such a level that (i) the amount deposited in the account plus the
amount deposited with the broker as collateral will equal the current value of
the security sold short; and (ii) the amount deposited in the segregated account
plus the amount deposited with the broker as collateral will not be less than
the market value of the security at the time the security was sold short, or (b)
otherwise cover the Fund's short position.
TECHNOLOGY SECTOR FOCUS
To the extent that the Fund focuses on issuers conducting business in the
technology sector, the Fund's investments in those issuers are subject to
legislative or regulatory changes, adverse market conditions and/or increased
competition affecting that economic sector. The prices of the securities of
technology companies may fluctuate widely due to competitive pressures,
increased sensitivity to short product cycles and aggressive pricing, problems
relating to bringing their products to market, very high price/earnings ratios
and high personnel turnover due to severe shortages for skilled technology
professionals.
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TIME DEPOSITS
Time deposits are non-negotiable receipts issued by a bank in exchange for the
deposit of funds. Like a certificate of deposit, it earns a specified rate of
interest over a definite period of time; however, it cannot be traded in the
secondary market. Time deposits with a withdrawal penalty or that mature in more
than seven days are considered to be illiquid securities.
U.S. GOVERNMENT AGENCY OBLIGATIONS
These include obligations issued or guaranteed by agencies of the U.S.
government, including, among others, the Federal Farm Credit Bank, the Federal
Housing Administration and the Small Business Administration, and obligations
issued or guaranteed by instrumentalities of the U.S. government, including,
among others, the Federal Home Loan Mortgage Corporation, the Federal Land Banks
and the U.S. Postal Service. Some of these securities are supported by the full
faith and credit of the U.S. Treasury, others are supported by the right of the
issuer to borrow from the Treasury, while still others are supported only by the
credit of the instrumentality. Guarantees of principal by agencies or
instrumentalities of the U.S. government may be a guarantee of payment at the
maturity of the obligation so that in the event of a default prior to maturity
there might not be a market and thus no means of realizing on the obligation
prior to maturity. Guarantees as to the timely payment of principal and interest
do not extend to the value or yield of these securities nor to the value of the
Fund's shares.
U.S. GOVERNMENT DIRECT OBLIGATIONS
U.S. Treasury obligations consist of bills, notes and bonds issued by the U.S.
Treasury and separately traded interest and principal component parts of such
obligations that are transferable through the federal book-entry system known as
Separately Traded Registered Interest and Principal Securities ("STRIPS").
VARIABLE AND FLOATING RATE INSTRUMENTS
Certain of the obligations purchased by the Fund may carry variable or floating
rates of interest, may involve a conditional or unconditional demand feature and
may include variable amount master demand notes. Such instruments bear interest
at rates that are not fixed, but which vary with changes in specified market
rates or indices. The interest rates on these securities may be reset daily,
weekly, quarterly or some other reset period, and may have a floor or ceiling on
interest rate changes. There is a risk that the current interest rate on such
obligations may not accurately reflect existing market interest rates. A demand
instrument with a demand notice exceeding seven days may be considered illiquid
if there is no secondary market for such securities.
WARRANTS
Warrants are instruments giving the Fund the right, but not the obligation, to
buy shares of a company at a given price during a specified period.
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WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
When-issued or delayed delivery basis transactions involve the purchase of an
instrument with payment and delivery taking place in the future. Delivery of and
payment for these securities may occur a month or more after the date of the
purchase commitment. To the extent required by the 1940 Act, the Fund will
maintain with the custodian a separate account with liquid high-grade debt
securities or cash in an amount at least equal to these commitments. The
interest rate realized on these securities is fixed as of the purchase date and
no interest accrues to the Fund before settlement. These securities are subject
to market fluctuation due to changes in market interest rates and it is possible
that the market value at the time of settlement could be higher or lower than
the purchase price if the general level of interest rates has changed. Although
the Fund generally purchases securities on a when-issued or forward commitment
basis with the intention of actually acquiring securities for its portfolio, the
Fund may dispose of a when-issued security or forward commitment prior to
settlement if deems it appropriate.
INVESTMENT LIMITATIONS
FUNDAMENTAL POLICIES
The following investment limitations are fundamental policies of the Fund.
Fundamental policies cannot be changed without the consent of the holders of a
majority of the Fund's outstanding shares. The term "majority of the outstanding
shares" means the vote of (i) 67% or more of the Fund's shares present at a
meeting, if more than 50% of the outstanding shares of the Fund are present or
represented by proxy, or (ii) more than 50% of the Fund's outstanding shares,
whichever is less.
The Fund may not:
1. Purchase securities of any issuer (except securities issued or guaranteed
by the United States, its agencies or instrumentalities and repurchase
agreements involving such securities) if, as a result, more than 5% of the
total assets of the Fund would be invested in the securities of such issuer
or more than 10% of the outstanding voting securities of such issuer would
be owned by the Fund on the last day of each fiscal quarter. This
restriction applies to 75% of the Fund's assets.
2. Purchase any securities that would cause more than 25% of the total assets
of the Fund to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry. This
limitation does not apply to (i) investments in the obligations issued or
guaranteed by the U.S. government or its agencies and instrumentalities,
and (ii) repurchase agreements involving such securities.
For purposes of this limitation (i) utility companies will be divided
according to their services, for example, gas, gas transmission, electric
and telephone will each be considered a separate industry; (ii) financial
service companies will be classified according to the end users of their
services, for example, automobile finance, bank finance and diversified
finance will each be considered a separate industry; technology
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companies will be divided according to their respective product lines and
services; (iii) supranational entities will be considered a separate
industry; and (iv) asset-backed securities secured by distinct types of
assets, such as truck and auto loan leases, credit card receivables and
home equity loans, will each be considered a separate industry.
3. Borrow money in an amount exceeding 33 1/3% of the value of its total
assets, provided that, for purposes of this limitation, investment
strategies that either obligate the Fund to purchase securities or require
the Fund to segregate assets are not considered to be borrowing. Asset
coverage of at least 300% is required for all borrowing, except where the
Fund has borrowed money for temporary purposes in an amount not exceeding
5% of its total assets.
4. Make loans if, as a result, more than 33 1/3% of its total assets would be
lent to other parties, except that the Fund may (i) purchase or hold debt
instruments in accordance with its investment objectives and policies; (ii)
enter into repurchase agreements; and (iii) lend its securities.
5. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a portfolio security.
6. Issue senior securities (as defined in the 1940 Act) except as permitted by
rule, regulation or order of the SEC.
NON-FUNDAMENTAL POLICIES
The following investment policies are non-fundamental policies of the Fund and
may be changed by the Fund's Board of Trustees.
The Fund may not:
1. Invest in illiquid securities in an amount exceeding, in the aggregate, 15%
of the Fund's net assets.
2. Purchase securities on margin or effect short sales, except that the Fund
may (i) obtain short-term credits as necessary for the clearance of
security transactions; (ii) provide initial and variation margin payments
in connection with transactions involving futures contracts and options on
such contracts; and (iii) make short sales "against the box" or in
compliance with the SEC's position regarding the asset segregation
requirements imposed by Section 18 of the 1940 Act.
3. Purchase securities of other investment companies except as permitted by
the 1940 Act, the rules and regulations thereunder or pursuant to an
exemption therefrom.
4. The Fund will not purchase securities while its borrowing exceeds 5% of its
total assets.
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5. Purchase or sell real estate, real estate limited partnership interests,
physical commodities or commodities contracts except that a Fund may
purchase commodities contracts relating to financial instruments, such as
financial futures contracts and options on such contracts.
The foregoing percentages are: (i) based on total assets (except for the
limitation on illiquid securities which is based on net assets); (ii) will apply
at the time of purchase of a security; and (iii) shall not be considered
violated unless an excess or deficiency occurs or exists immediately after as a
result of a purchase of a security.
THE ADVISOR
GLB Fund Management, Inc. (the "Advisor") serves as the advisor to the Fund. The
principal business address of the Advisor is 510 King Street, Suite 315A,
Alexandria, Virginia 22314. The Advisor, an affiliate of Goodwyn, Long & Black
Investment Management, Inc. ("GLB"), was established in 1997 for the purpose of
acting as investment advisor to the Fund. The Trust and the Advisor have entered
into an advisory agreement (the "Advisory Agreement") dated as of October 1,
2000 with respect to the Fund. The Advisory Agreement provides that the Advisor
shall not be protected against any liability to the Trust or its shareholders by
reason of willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard of its obligations or
duties thereunder.
The continuance of the Advisory Agreement, after the first two years, must be
specifically approved at least annually (i) by the vote of the Trustees and (ii)
by the vote of a majority of the Trustees who are not parties to the Advisory
Agreement or "interested persons" of any party thereto, cast in person at a
meeting called for the purpose of voting on such approval. The Advisory
Agreement will terminate automatically in the event of its assignment, and is
terminable at any time without penalty by the Trustees of the Trust or, with
respect to the Fund, by a majority of the outstanding shares of the Fund, on not
less than 30 days' nor more than 60 days' written notice to the Advisor, or by
the Advisor on 90 days' written notice to the Trust.
The Advisor is majority owned by the principals of its affiliate, GLB. GLB is a
professional investment management firm and registered investment advisor formed
in 1997 as Goodwyn & Long Investment Management. In 1998, Goodwyn & Long
Investment Management entered into a joint marketing program through radio with
Mercury Capital. The relationship led to a merger between the two companies on
December 31, 1998. GLB manages individual high net worth portfolios, association
and corporate pension funds, as well as money for charitable institutions and
group practice retirement funds. As of June 30, 2000, GLB and its principals had
discretionary management authority with respect to approximately $185 million of
assets under management.
For its services, the Advisor is entitled to a fee, which is calculated daily
and paid monthly, at an annual rate of 0.75% of the average daily net assets of
the Fund. The Advisor has voluntarily agreed to waive all or a portion of its
fee and to reimburse expenses of the Fund in order to limit the Fund's total
operating expenses to an annual rate of not more than 1.75% of average daily net
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assets. The Advisor may discontinue all or part of its waiver at any time. The
Advisor may, from its own resources, compensate broker-dealers whose clients
purchase shares of the Funds.
The Fund commenced its initial operations as of the prospectus date and
consequently has not yet paid advisory fees.
THE ADMINISTRATOR
The Administrator, a Delaware business trust, has its principal business offices
at Oaks, Pennsylvania 19456. SEI Investments Management Corporation ("SIMC"), a
wholly owned subsidiary of SEI Investments Company ("SEI Investments"), is the
owner of all beneficial interest in the Administrator. SEI Investments and its
subsidiaries and affiliates, including the Administrator, are leading providers
of funds evaluation services, trust accounting systems, and brokerage and
information services to financial institutions, institutional investors, and
money managers. The Administrator and its affiliates also serve as administrator
or sub-administrator to the other mutual funds including, but without
limitation: The Achievement Funds Trust, The Advisors' Inner Circle Fund, Alpha
Select Funds, Amerindo Funds Inc., The Arbor Fund, ARK Funds, Armada Funds, The
Armada Advantage Fund, Bishop Street Funds, CNI Charter Funds, CUFUND, The
Expedition Funds, First American Funds, Inc., First American Investment Funds,
Inc., First American Strategy Funds, Inc., Friends Ivory Funds, HighMark Funds,
Huntington Funds, Huntington VA Funds, The Nevis Fund, Inc., Oak Associates
Funds, The PBHG Funds, Inc., PBHG Insurance Series Fund, Inc., The Pillar Funds,
SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index Funds, SEI
Institutional International Trust, SEI Institutional Investments Trust, SEI
Institutional Managed Trust, SEI Insurance Products Trust, SEI Liquid Asset
Trust, SEI Tax Exempt Trust, STI Classic Funds, STI Classic Variable Trust, TIP
Funds, UAM Funds Trust, UAM Funds, Inc. and UAM Funds, Inc. II.
The Trust and the Administrator have entered into an administration agreement
(the "Administration Agreement"). Under the Administration Agreement, the
Administrator provides the Trust with administrative services, including
regulatory reporting and all necessary office space, equipment, personnel and
facilities. For these administrative services, The Administrator is entitled to
a fee from the Fund, which is calculated daily and paid monthly, at an annual
rate of 0.15% on the first $250 million of average daily net assets; 0.12% on
the next $200 million; 0.10% on the next $200 million; and 0.08% on average
daily net assets over $650 million. However, the Fund pays the Administrator a
minimum annual fee of $95,000.
The Administration Agreement provides that the Administrator shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Trust in connection with the matters to which the Administration Agreement
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Administrator in the performance of its duties or
from reckless disregard by it of its duties and obligations thereunder. The
Administration Agreement shall remain in effect for a period of five years after
the effective date of the agreement and shall continue in effect for successive
periods of two years unless terminated by either party on not less than 90 days'
prior written notice to the other party.
S-13
<PAGE>
The Fund commenced its initial operations as of the date of the Prospectus and
has not yet paid fees to the Administrator.
THE DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor"), a wholly owned subsidiary
of SEI Investments, and the Trust are parties to a distribution agreement (the
"Distribution Agreement"). The Distributor will not receive compensation for
distribution of shares of the Fund.
The Distribution Agreement is renewable annually. The Distribution Agreement may
be terminated by the Distributor, by a majority vote of the Trustees who are not
interested persons and have no financial interest in the Distribution Agreement
or by a majority vote of the outstanding securities of the Trust upon not more
than 60 days' written notice by either party or upon assignment by the
Distributor.
THE DISTRIBUTION PLAN
The Distribution Plan (the "Plan") provides that the Fund will pay the
Distributor a fee of .25% of the average daily net assets of the shares. Under
the Plan, the Distributor may make payments pursuant to written agreements to
financial institutions and intermediaries such as banks, savings and loan
associations, insurance companies including, without limit, investment
counselors, broker-dealers and the Distributor's affiliates and subsidiaries
(collectively, "Agents") as compensation for services, reimbursement of expenses
incurred in connection with distribution assistance. The Plan is characterized
as a compensation plan since the distribution fee will be paid to the
Distributor without regard to the distribution expenses incurred by the
Distributor or the amount of payments made to other financial institutions and
intermediaries. The Trust intends to operate the Plan in accordance with its
terms and with the NASD rules concerning sales charges.
The Trust has adopted the Plan in accordance with the provisions of Rule 12b-1
under the 1940 Act, which regulates circumstances under which an investment
company may directly or indirectly bear expenses relating to the distribution of
its shares. Continuance of the Plan must be approved annually by a majority of
the Trustees of the Trust and by a majority of the Trustees who are not parties
to the Distribution Agreement or interested persons (as defined by the 1940 Act)
of any party to the Distribution Agreement ("Qualified Trustees"). The Plan
requires that quarterly written reports of amounts spent under the Plan and the
purposes of such expenditures be furnished to and reviewed by the Trustees. The
Plan may not be amended to increase materially the amount that may be spent
thereunder without approval by a majority of the outstanding shares of the Fund.
All material amendments of the Plan will require approval by a majority of the
Trustees of the Trust and of the Qualified Trustees.
THE TRANSFER AGENT
Forum Shareholder Services, LLC, Two Portland Square, Portland, ME 04101 serves
as the Fund's transfer agent.
S-14
<PAGE>
THE CUSTODIAN
First Union National Bank, 123 South Broad Street, Philadelphia, Pennsylvania
19109 acts as custodian (the "Custodian") of the Trust. The Custodian holds
cash, securities and other assets of the Trust as required by the 1940 Act.
CODE OF ETHICS
The Board of Trustees of the Trust has adopted a Code of Ethics pursuant to Rule
17j-1 under the Investment Company Act of 1940. In addition, the Advisor and
Distributor have adopted Codes of Ethics pursuant to Rule 17j-1. These Codes of
Ethics (each a "Code" and together the "Codes") apply to the personal investing
activities of trustees, officers and certain employees ("access persons"). Rule
17j-1 and the Codes are designed to prevent unlawful practices in connection
with the purchase or sale of securities by access persons. Under each Code,
access persons are permitted to engage in personal securities transactions, but
are required to report their personal securities transactions for monitoring
purposes. The Codes further require certain access persons to obtain approval
before investing in initial public offerings and limited offerings. Copies of
these Codes of Ethics are on file with the Securities and Exchange Commission,
and are available to the public.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen, LLP serves as the independent public accountants of the Trust.
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP serves as counsel to the Trust.
TRUSTEES AND OFFICERS OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under the
laws of the Commonwealth of Massachusetts. The Trustees have approved contracts
under which, as described above, certain companies provide essential management
services to the Trust. The Trust pays the fees for unaffiliated Trustees.
Under the Agreement and Declaration of Trust, the Trustees have the power to
liquidate the Fund without shareholder approval. While the Trustees have no
present intention of exercising this power, they may do so if the Fund fails to
reach a viable size within a reasonable amount of time or for some other
extraordinary reason.
The Trustees and Executive Officers of the Trust, their respective dates of
birth, and their principal occupations for the last five years are set forth
below. Each may have held other positions with the named companies during that
period. Unless otherwise noted, the business address of each Trustee and each
Executive Officer is SEI Investments Company, Oaks, Pennsylvania 19456. Certain
officers of the Trust also serve as officers to one or more mutual
S-15
<PAGE>
funds for which SEI Investments Company or its affiliates act as investment
manager, administrator or distributor.
ROBERT A. NESHER (DOB 08/17/46) -- Chairman of the Board of Trustees*
--Currently performs various services on behalf of SEI Investments for which
Mr. Nesher is compensated. Executive Vice President of SEI Investments,
1986-1994. Director and Executive Vice President of the Administrator and the
Distributor, 1981-1994. Trustee of The Advisors' Inner Circle Fund, The Arbor
Fund, Bishop Street Funds, Boston 1784 Funds-Registered trademark-, The
Expedition Funds, Oak Associates Funds, Pillar Funds, SEI Asset Allocation
Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional
International Trust, SEI Institutional Investments Trust, SEI Institutional
Managed Trust, SEI Insurance Products Trust, SEI Liquid Asset Trust and SEI
Tax Exempt Trust.
JOHN T. COONEY (DOB 01/20/27) -- Trustee** -- Vice Chairman of Ameritrust Texas
N.A., 1989-1992, and MTrust Corp., 1985-1989. Trustee of The Advisors' Inner
Circle Fund, The Arbor Fund, The Expedition Funds and Oak Associates Funds.
WILLIAM M. DORAN (DOB 05/26/40) -- Trustee* -- 1701 Market Street, Philadelphia,
PA 19103. Partner, Morgan, Lewis & Bockius LLP (law firm), counsel to the Trust,
SEI Investments, the Administrator and the Distributor. Director of SEI
Investments since 1974; Secretary of SEI Investments since 1978. Trustee of The
Advisors' Inner Circle Fund, The Arbor Fund, The Expedition Funds, Oak
Associates Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index
Funds, SEI Institutional International Trust, SEI Institutional Investments
Trust, SEI Institutional Managed Trust, SEI Insurance Products Trust, SEI Liquid
Asset Trust and SEI Tax Exempt Trust.
ROBERT A. PATTERSON (DOB 11/05/27) -- Trustee** -- Pennsylvania State
University, Senior Vice President, Treasurer (Emeritus); Financial and
Investment Consultant, Professor of Transportation since 1984; Vice
President-Investments, Treasurer, Senior Vice President (Emeritus), 1982-1984.
Director, Pennsylvania Research Corp.; Member and Treasurer, Board of Trustees
of Grove City College. Trustee of The Advisors' Inner Circle Fund, The Arbor
Fund, The Expedition Funds and Oak Associates Funds.
EUGENE B. PETERS (DOB 06/03/29) -- Trustee** -- Private investor from 1987 to
present. Vice President and Chief Financial Officer, Western Company of North
America (petroleum service company), 1980-1986. President of Gene Peters and
Associates (import company), 1978-1980. President and Chief Executive Officer of
Jos. Schlitz Brewing Company before 1978. Trustee of The Advisors' Inner Circle
Fund, The Arbor Fund, The Expedition Funds and Oak Associates Funds.
JAMES M. STOREY (DOB 04/12/31) -- Trustee** -- Partner, Dechert Price & Rhoads,
September 1987 - December 1993; Trustee of The Advisors' Inner Circle Fund, The
Arbor Fund, The Expedition Funds, Oak Associates Funds, SEI Asset Allocation
Trust, SEI Daily Income Trust, SEI Index Funds, SEI Institutional International
Trust, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI
Insurance Products Trust, SEI Liquid Asset Trust and SEI Tax Exempt Trust.
S-16
<PAGE>
GEORGE J. SULLIVAN, JR. (DOB 11/13/42) -- Trustee**-- Chief Executive Officer,
Newfound Consultants Inc. since April 1997. General Partner, Teton Partners,
L.P., June 1991-December 1996; Chief Financial Officer, Noble Partners, L.P.,
March 1991-December 1996; Treasurer and Clerk, Peak Asset Management, Inc.,
since 1991; Trustee, Navigator Securities Lending Trust, since 1995. Trustee of
The Advisors' Inner Circle Fund, The Arbor Fund, The Expedition Funds, Oak
Associates Funds, SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Index
Funds, SEI Institutional International Trust, SEI Institutional Investments
Trust, SEI Institutional Managed Trust, SEI Insurance Products Trust, SEI Liquid
Asset Trust and SEI Tax Exempt Trust.
MARK E. NAGLE (DOB 10/20/59) -- President, Controller and Chief Financial
Officer -- President of the Administrator and Senior Vice President of SEI
Investments Mutual Funds Services Operations Group since 1998. Vice President of
the Administrator and Vice President of Fund Accounting and Administration of
SEI Investments Mutual Funds Services, 1996-1998. Vice President of the
Distributor since December 1997. Senior Vice President, Fund Administration,
BISYS Fund Services, September 1995 - November 1996. Senior Vice President and
Site Manager, Fidelity Investments 1981- September 1995.
TIMOTHY D. BARTO (DOB 03/28/68) -- Vice President and Assistant Secretary
-- Employed by SEI Investments since October 1999. Vice President and Assistant
Secretary of the Administrator and Distributor since December 1999. Associate at
Dechert Price & Rhoads, 1997-1999. Associate, at Richter, Miller & Finn,
1994-1997.
TODD B. CIPPERMAN (DOB 02/14/66) -- Vice President and Assistant Secretary --
Senior Vice President and General Counsel of SEI Investments; Senior Vice
President, General Counsel and Secretary of the Administrator and the
Distributor since 2000. Vice President and Assistant Secretary of SEI
Investments, the Administrator and the Distributor, 1995-2000. Associate, Dewey
Ballantine (law firm), 1994-1995. Associate, Winston & Strawn (law firm),
1991-1994.
JAMES R. FOGGO (DOB 06/30/64) -- Vice President and Assistant Secretary -- Vice
President and Assistant Secretary of SEI Investments since 1998. Vice President
and Assistant Secretary of the Administrator and the Distributor since May 1999.
Associate, Paul Weiss, Rifkind, Wharton & Garrison (law firm), 1998. Associate,
Baker & McKenzie (law firm), 1995-1998. Associate, Battle Fowler L.L.P. (law
firm), 1993-1995. Operations Manager, The Shareholder Services Group, Inc.,
1986-1990.
LYDIA A. GAVALIS (DOB 06/05/64) -- Vice President and Assistant Secretary --
Vice President and Assistant Secretary of SEI Investments, the Administrator and
the Distributor since 1998. Assistant General Counsel and Director of
Arbitration, Philadelphia Stock Exchange, 1989-1998.
S-17
<PAGE>
CHRISTINE M. MCCULLOUGH (DOB 12/02/60) -- Vice President and Assistant Secretary
-- Employed by SEI Investments since November 1, 1999. Vice President and
Assistant Secretary of the Administrator and the Distributor since December
1999. Associate at White and Williams LLP, 1991-1999. Associate at Montgomery,
McCracken, Walker & Rhoads, 1990-1991.
JOHN H. GRADY, JR. (DOB 06/01/61) -- Secretary -- 1701 Market Street,
Philadelphia, PA 19103, Partner since 1995, Morgan, Lewis & Bockius LLP (law
firm), counsel to the Trust, SEI Investments, the Administrator and the
Distributor.
*Messrs. Nesher and Doran are Trustees who may be deemed to be "interested"
persons of the Fund as that term is defined in the 1940 Act.
**Messrs. Cooney, Patterson, Peters and Storey serve as members of the Audit
Committee of the Fund.
The Trustees and officers of the Trust own less than 1% of the outstanding
shares of the Trust. The Trust pays the fees for unaffiliated Trustees.
The following table exhibits Trustee compensation for the fiscal period ended
October 31, 1999.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
Aggregate
Compensation From Total Compensation From
Registrant for the Pension or Retirement Estimated Annual Registrant and Fund Complex Paid
Fiscal Year Ended Benefits Accrued as Part Benefits Upon to Trustees for the Fiscal Year
Name of Person 10/31/99 of Fund Expenses Retirement Ended 10/31/99*
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John T. Cooney $9,571.48 N/A N/A $9,571.48 for service on one
board
--------------------------------------------------------------------------------------------------------------------------------
Robert Patterson $9,571.48 N/A N/A $9,571.48 for service on one
board
--------------------------------------------------------------------------------------------------------------------------------
Eugene B. Peters $9,571.48 N/A N/A $9,571.48 for service on one
board
--------------------------------------------------------------------------------------------------------------------------------
James M. Storey $9,571.48 N/A N/A $9,571.48 for service on one
board
--------------------------------------------------------------------------------------------------------------------------------
George J. Sullivan $7,123.67 N/A N/A $7,123.67 for service on one
board
--------------------------------------------------------------------------------------------------------------------------------
William M. Doran $0 N/A N/A $0 for service on one board
--------------------------------------------------------------------------------------------------------------------------------
Robert A. Nesher $0 N/A N/A $0 for service on one board
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*For the purposes of this table, the Trust is the only investment company in the
Fund Complex.
PERFORMANCE INFORMATION
From time to time, the Trust may advertise yield, effective yield and total
return of the Fund. These figures will be based on historical earnings and are
not intended to indicate future performance. No representation can be made
concerning actual future yields or returns.
S-18
<PAGE>
The Fund may periodically compare its performance to other mutual funds tracked
by mutual fund rating services, to broad groups of comparable mutual funds, or
to unmanaged indices. These comparisons may assume reinvestment of dividends but
generally do not reflect deductions for administrative and management costs.
COMPUTATION OF YIELD
The yield of the Fund refers to the annualized income generated by an investment
in the Fund over a specified 30-day period. The yield is calculated by assuming
that the income generated by the investment during that 30-day period is
generated in each period over one year and is shown as a percentage of the
investment. In particular, yield will be calculated according to the following
formula:
Yield = 2 [((a-b)/cd + 1)TO THE POWER OF 6 - 1] where a = dividends and
interest earned during the period; b = expenses accrued for the period (net
of reimbursement); c = the average daily number of shares outstanding during
the period that were entitled to receive dividends; and d = the maximum
offering price per share on the last day of the period.
CALCULATION OF TOTAL RETURN
From time to time the Trust may advertise total return of the Funds. These
figures will be based on historical earnings and are not intended to indicate
future performance.
The total return of a Fund refers to the average annual compounded rate of
return to a hypothetical investment for designated time periods (including but
not limited to, the period from which that Fund commenced operations through the
specified date), assuming that the entire investment is redeemed at the end of
each period. In particular, total return will be calculated according to the
following formula: P (1 + T)n = ERV, where P = a hypothetical initial payment of
$1,000; T = average annual total return; n = number of years; and ERV = ending
redeemable value, as of the end of the designated time period, of a hypothetical
$1,000 payment made at the beginning of the designated time period.
PURCHASING SHARES
Purchases and redemptions may be made through the Transfer Agent on any day the
New York Stock Exchange is open for business. Shares of each Fund are offered on
a continuous basis. Currently, the Trust is closed for business when the
following holidays are observed: New Year's Day, Martin Luther King Jr. Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
S-19
<PAGE>
REDEEMING SHARES
It is currently the Trust's policy to pay all redemptions in cash. The Trust
retains the right however, to alter this policy to provide for redemptions in
whole or in part by a distribution in-kind of securities held by the Fund in
lieu of cash. Shareholders may incur brokerage charges on the sale of any such
securities so received in payment of redemptions. The Trust has obtained an
exemptive order from the SEC that permits the Trust to make in-kind redemptions
to those shareholders of the Trust that are affiliated with the Trust solely by
their ownership of a certain percentage of the Trust's investment portfolios.
A Shareholder will at all times be entitled to aggregate cash redemptions from
the Fund during any 90-day period of up to the lesser of $250,000 or 1% of the
Fund's net assets.
The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the SEC by rule or regulation) as a result of which
the disposal or valuation of the Fund's securities is not reasonably
practicable, or for such other periods as the SEC has by order permitted. The
Trust also reserves the right to suspend sales of shares of any Fund for any
period during which the New York Stock Exchange, the Advisor, the Administrator,
the Transfer Agent and/or the Custodian are not open for business.
Trading takes place in various markets on days that are not Business Days and
the Fund's net asset value is not calculated. As a result, events affecting the
values of the Fund's securities that occur between the time their prices are
determined and the close of the NYSE will not be reflected in a Fund's
calculation of net asset values unless the Advisor determines that the
particular event may materially affect net asset value, in which case an
adjustment will be made.
DETERMINATION OF NET ASSET VALUE
The Administrator values the securities of the Fund. The Administrator will use
an independent pricing service to obtain valuations of securities. The pricing
service relies primarily on prices of actual market transactions as well as
trade quotations. However, the service may also use a matrix system to determine
valuations of certain securities, which system considers such factors as
security prices, yields, maturities, call features, ratings and developments
relating to specific securities. The procedures of the pricing service and its
valuations are reviewed by the officers of the Trust under the general
supervision of the Trustees.
TAXES
The following is only a summary of certain federal income tax considerations
generally affecting the Fund and its shareholders that are not described in the
Fund's prospectus. No attempt is made to present a detailed explanation of the
tax treatment of the Fund or its shareholders, and the discussion here and in
the Fund's prospectus is not intended as a substitute for careful tax planning.
Shareholders are urged to consult their tax adviser with specific reference to
their own tax situations, including their state and local tax liabilities.
S-20
<PAGE>
FEDERAL INCOME TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS
The following general discussion of certain federal income tax consequences is
based on the Internal Revenue Code of 1986, as amended (the "Code") and the
regulations issued thereunder as in effect on the date of this Statement of
Additional Information. New legislation, as well as administrative changes or
court decisions, may significantly change the conclusions expressed herein, and
may have a retroactive effect with respect to the transactions contemplated
herein.
QUALIFICATIONS AS A REGULATED INVESTMENT COMPANY
In order to qualify for treatment as a regulated investment company ("RIC")
under the Code, the Fund must distribute annually to its shareholders at least
the sum of 90% of its net interest income excludable from gross income plus 90%
of its investment company taxable income (generally, net investment income,
including net short-term capital gain) ("Distribution Requirement") and must
meet several additional requirements. Among these requirements are the
following: (i) at least 90% of the Fund's gross income each taxable year must be
derived from dividends, interest, payments with respect to securities loans and
gains from the sale or other disposition of stocks or securities or foreign
currencies or other income (including gains from forward contracts) derived with
respect to its business of investing in stocks or securities; (ii) at the close
of each quarter of the Fund's taxable year, at least 50% of the value of its
total assets must be represented by cash and cash items, U.S. government
securities, securities of other RICs and other securities, with such other
securities limited, in respect of any one issuer, to an amount that does not
exceed 5% of the value of the Fund's total assets and that does not represent
more than 10% of the outstanding voting securities of the issuer; and (iii) at
the close of each quarter of the Fund's taxable year, not more than 25% of the
value of its total assets may be invested in securities (other than U.S.
government securities or the securities of other RICs) of any one issuer or of
two or more issuers engaged in the same, similar, or related trades or
businesses if the Fund owns at least 20% of the voting power of such issuers.
Notwithstanding the Distribution Requirement described above, which only
requires the Fund to distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital
gain, the Fund will be subject to a nondeductible 4% federal excise tax to the
extent it fails to distribute by the end of any calendar year at least 98% of
its ordinary income for that year and 98% of its capital gain net income for the
one-year period ending on October 31, of that year, plus certain other amounts.
The Fund intends to make sufficient distributions to avoid liability for the
federal excise tax applicable to RICs.
If the Fund fails to qualify as a RIC for any year, all of its taxable income
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and its distributions (including capital gains
distributions) generally will be taxable as ordinary income dividends to its
shareholders, subject to the dividends received deduction for corporate
shareholders. The board reserves the right not to maintain the qualification of
the Fund as a regulated investment company if it determines such course of
action to be beneficial to shareholders.
S-21
<PAGE>
FUND DISTRIBUTIONS
Distributions of investment company taxable income will be taxable to
shareholders as ordinary income, regardless of whether such distributions are
paid in cash or are reinvested in additional shares, to the extent of the Fund's
earnings and profits. The Fund anticipates that it will distribute substantially
all its investment company taxable income for each taxable year.
The Fund may either retain or distribute to shareholders its excess of net
long-term capital gains over net short-term capital losses ("net capital
gains"). If such gains are distributed as a capital gains distribution, they are
taxable to shareholders that are individuals at a maximum rate of 20%,
regardless of the length of time the shareholder has held the shares. If any
such gains are retained, the Fund will pay federal income tax thereon, and, if
the Fund makes an election, the shareholders will include such undistributed
gains in their income, will increase their basis in Fund shares by the
difference between the amount of such includable gains and the tax deemed paid
by such shareholder and will be able to claim their share of the tax paid by the
Fund as a refundable credit.
If the Fund's distributions exceed its taxable income and capital gains realized
during a taxable year, all or a portion of the distributions made in the same
taxable year may be recharacterized as a return of capital to shareholders. A
return of capital distribution will generally not be taxable, but will reduce
each shareholder's cost basis in the Fund and result in a higher reported
capital gain or lower reported capital loss when those shares on which the
distribution was received are sold.
Investors should be careful to consider the tax implications of purchasing
shares of the Fund just prior to the ex-dividend date of any ordinary income
dividend or capital gains distribution. Those investors will be taxed on the
entire amount of the dividend or distributions received, even though some or all
of the amount distributed may have been realized by the Fund prior to the
investor's purchase.
Ordinarily, investors should include all dividends as income in the year of
payment. However, dividends declared payable to shareholders of record in
December of one year, but paid in January of the following year, will be deemed
for tax purposes to have been received by the shareholder and paid by the Fund
in the year in which the dividends were declared.
In the case of corporate shareholders, Fund distributions (other than capital
gains distributions) may qualify for the dividends-received deduction to the
extent of the gross amount of qualifying dividends received by the Fund for the
year. Generally, and subject to certain limitations (including certain holding
period limitations), a dividend will be treated as a qualifying dividend if it
has been received from a domestic corporation. All dividends (including the
deducted portion) must be included in your alternative minimum taxable income
calculation.
The Fund will provide an annual statement to shareholders describing the federal
tax status of distributions paid (or deemed to be paid) by the Fund during the
year, including the amount of dividends eligible for the corporate
dividends-received deduction.
S-22
<PAGE>
STATE TAXES
The Fund is not liable for any income or franchise tax in Massachusetts if it
qualifies as a RIC for federal income tax purposes. Distributions by the Fund to
shareholders and the ownership of shares may be subject to state and local
taxes.
FUND TRANSACTIONS
The Advisor is authorized to select brokers and dealers to effect securities
transactions for the Fund. The Fund will seek to obtain the most favorable net
results by taking into account various factors, including: price, commission, if
any, size of the transactions and difficulty of executions, the firm's general
execution and operational facilities and the firm's risk in positioning the
securities involved. While the Advisor generally seeks reasonably competitive
spreads or commissions, the Fund will not necessarily be paying the lowest
spread or commission available. The Advisor seeks to select brokers or dealers
that offer the Fund the best price and execution or other services, which are of
benefit to the Fund.
The Advisor may, consistent with the interests of the Fund, select brokers on
the basis of the research services they provide to the Advisor. Such services
may include: analyses of the business or prospects of a company, industry or
economic sector, or statistical and pricing services. Information so received by
the Advisor will be in addition to, and not in lieu of, the services required to
be performed by the Advisor under the Advisory Agreement. If, in the judgment of
the Advisor, the Fund or other accounts managed by the Advisor will be benefited
by supplemental research services, the Advisor is authorized to pay brokerage
commissions to a broker furnishing such services which are in excess of
commissions which another broker may have charged for effecting the same
transaction. These research services include: advice, either directly or through
publications or writings, as to the value of securities, the advisability of
investing in, purchasing or selling securities, and the availability of
securities or purchasers or sellers of securities; furnishing of analyses and
reports concerning issuers, securities or industries; providing information on
economic factors and trends; assisting in determining portfolio strategy;
providing computer software used in security analyses; and providing portfolio
performance evaluation and technical market analyses. The expenses of the
Advisor will not necessarily be reduced as a result of the receipt of such
supplemental information, such services may not be used exclusively with respect
to the Fund or account generating the brokerage, and there can be no guarantee
that the Advisor will find all of such services of value in advising the Fund.
It is expected that the Fund may execute brokerage or other agency transactions
through the Distributor, which is a registered broker-dealer, for a commission
in conformity with the 1940 Act, the Securities Exchange Act of 1934, as
amended, (the "1934 Act") and rules promulgated by the SEC. The Distributor is
not an affiliate of the Fund, but falls under the definition of "affiliated
broker" of the Fund for purposes of Item 16 of Form N-1A under the 1933 Act.
Under the 1940 Act and the 1934 Act, the Distributor is permitted to receive and
retain compensation for effecting portfolio transactions for the Fund on an
exchange if a written contract is in effect between the Distributor and the Fund
expressly permitting the Distributor to receive and retain such compensation.
These rules further require that commissions paid to the
S-23
<PAGE>
Distributor by the Fund for exchange transactions not exceed "usual and
customary" brokerage commissions. The rules define "usual and customary"
commissions to include amounts which are "reasonable and fair compared to the
commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable period of
time." The Trustees, including those who are not "interested persons" of the
Fund, have adopted procedures for evaluating the reasonableness of commissions
paid to the Distributor and will review these procedures periodically.
The Advisor may place portfolio orders with qualified broker-dealers who
recommend a Fund's shares to clients, and may, when a number of brokers and
dealers can provide best net results on a particular transaction, consider such
recommendations by a broker or dealer in selecting among broker-dealers.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of
portfolios and shares of the Fund. Each share of the Fund represents an equal
proportionate interest in the Fund with each other share. Shares are entitled
upon liquidation to a pro rata share in the net assets of the Fund. Shareholders
have no preemptive rights. All consideration received by the Fund for shares of
the Fund and all assets in which such consideration is invested would belong to
the Fund and would be subject to the liabilities related thereto. Share
certificates representing shares will not be issued.
SHAREHOLDER LIABILITY
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust could, under
certain circumstances, be held personally liable as partners for the obligations
of the trust. Even if, however, the Trust were held to be a partnership, the
possibility of the shareholders incurring financial loss for that reason appears
remote because the Trust's Declaration of Trust contains an express disclaimer
of shareholder liability for obligations of the Trust and requires that notice
of such disclaimer be given in each agreement, obligation or instrument entered
into or executed by or on behalf of the Trust or the Trustees, and because the
Declaration of Trust provides for indemnification out of the Trust property for
any shareholder held personally liable for the obligations of the Trust.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee shall be liable only for his or
her own willful defaults and, if reasonable care has been exercised in the
selection of officers, agents, employees or investment advisers, shall not be
liable for any neglect or wrongdoing of any such person. The Declaration of
Trust also provides that the Trust will indemnify its Trustees and officers
against liabilities and expenses incurred in connection with actual or
threatened litigation in which they may be involved because of their offices
with the Trust unless it is determined in the manner provided in the Declaration
of Trust that they have not acted in good faith in the reasonable belief that
their actions were in the best interests of the Trust. However, nothing in
S-24
<PAGE>
the Declaration of Trust shall protect or indemnify a Trustee against any
liability for his or her willful misfeasance, bad faith, gross negligence or
reckless disregard of his or her duties.
S-25
