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Previous: LSC INC, S-1/A, EX-23.1, 2000-05-31 |
Next: KEMPER DEFINED FUNDS SERIES 13, 485BPOS, 2000-05-31 |
OLD WESTBURY FUNDS, INC.
Statement Of Additional Information
<R>
February 29, 2000
(REVISED MAY 31, 2000)
</R>
OLD WESTBURY CORE EQUITIES FUND
<R>
OLD WESTBURY CAPITAL OPPORTUNITY FUND
(FORMERLY OLD WESTBURY GROWTH OPPORTUNITY FUND)
</R>
OLD WESTBURY INTERNATIONAL FUND
OLD WESTBURY FIXED INCOME FUND
OLD WESTBURY MUNICIPAL BOND FUND
<R>
This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for the Funds dated February 29, 2000
(REVISED MAY 31, 2000). This SAI incorporates by reference the Funds' Annual
Report. You may obtain the prospectus or Annual Report without charge by calling
1-800-607-2200.
</R>
CONTENTS
How Are The Funds Organized?..........................2
Securities In Which The Funds Invest..................2
Securities Descriptions, Techniques And Risks.........3
Investment Restrictions.............................. 23
Who Manages And Provides Services To The Funds?...... 25
How Do The Funds Measure Performance?................ 31
Account Information And Pricing Of Shares............ 35
How Are The Funds Taxed?............................. 37
Financial Information................................ 41
Appendix............................................. 42
HOW ARE THE FUNDS ORGANIZED?
<R>
Old Westbury Funds, Inc. (Corporation) is an open-end, management investment
company that was established under the laws of the State of Maryland on August
26, 1993. OLD WESTBURY GROWTH OPPORTUNITY FUND CHANGED ITS NAME TO OLD WESTBURY
CAPITAL OPPORTUNITY FUND ON MAY 31, 2000.
</R>
The Funds are diversified portfolios of the Corporation. The Corporation may
offer separate series of shares representing interests in separate portfolios of
securities.
SECURITIES IN WHICH THE FUNDS INVEST
Following is a table that indicates which types of securities are a: o P =
PRINCIPAL investment of a Fund (shaded in chart); o A = ACCEPTABLE (but not
principal) investment of a Fund; or o N = NOT AN ACCEPTABLE investment of a
Fund.
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SECURITIES CORE CAPITAL INTERNATIONAL FIXED MUNICIPAL
EQUITIES OPPORTUNITY FUND INCOME BOND FUND
FUND FUND FUND
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----------------------------
AMERICAN DEPOSITARY N N A N N
RECEIPTS
----------------------------
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ASSET BACKED SECURITIES N N N A N
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----------------------------
BANK OBLIGATIONS A A A A A
----------------------------
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BORROWING A A A A A
----------------------------
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COMMERCIAL PAPER A A A A A
----------------------------
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COMMON STOCK OF DOMESTIC P P A N N
COMPANIES
--------------------------------------
---------------------------- ------------------------------------------------
COMMON STOCK OF FOREIGN N P P N N
COMPANIES
---------------------------- -----------------------------
-------------------------------------- -------------------
CONVERTIBLE SECURITIES A A A A N
----------------------------
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CORPORATE REORGANIZATIONS A A A A A
----------------------------
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DEBT OBLIGATIONS A A A P P
---------------------------- -------------------
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DERIVATIVE CONTRACTS AND A A A A N
SECURITIES
----------------------------
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EMERGING GROWTH COMPANIES N A N N N
----------------------------
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EUROPEAN DEPOSITARY N N A N N
RECEIPTS
----------------------------
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FIXED RATE DEBT OBLIGATIONS A A A A A
----------------------------
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FLOATING RATE DEBT A A A A A
OBLIGATIONS
----------------------------
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FOREIGN CURRENCY N N A N N
TRANSACTIONS
----------------------------
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FOREIGN SECURITIES A P P A N
---------------------------- -----------------------------
-------------------------------------- -------------------
FUTURES AND OPTIONS A A A A A
TRANSACTIONS
----------------------------
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GLOBAL DEPOSITARY RECEIPTS N N A N N
----------------------------
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HIGH YIELD SECURITIES A A A A N
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----------------------------
ILLIQUID AND RESTRICTED A A A A A
SECURITIES
----------------------------
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LENDING OF PORTFOLIO A A A A A
SECURITIES
----------------------------
--------------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS A A A A A
----------------------------
--------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES N N N A N
----------------------------
--------------------------------------------------------------------------------------
MUNICIPAL SECURITIES N N N N P
----------------------------
--------------------------------------------------------------------------------------
PARTICIPATION INTERESTS N N N N A
----------------------------
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PREFERRED STOCKS A A A N N
----------------------------
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REPURCHASE AGREEMENTS A A A A A
----------------------------
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SHARES OF OTHER INVESTMENT P A A P P
COMPANIES
---------------------------- -------------------
-------------------------------------------------------------------
SHORT-SALES A N N N N
----------------------------
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U.S. GOVERNMENT SECURITIES A A A A A
----------------------------
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TEMPORARY INVESTMENTS A A A A A
----------------------------
--------------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES A A A A A
----------------------------
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WARRANTS A A A N N
----------------------------
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WHEN-ISSUED AND DELAYED A A A A A
DELIVERY TRANSACTIONS
----------------------------
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ZERO COUPON BONDS N N N A N
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SECURITIES DESCRIPTIONS, TECHNIQUES AND RISKS
The following describes securities, techniques and risks used by the Funds in
addition to those described in the prospectus.
ASSET BACKED SECURITIES. Asset-Backed Securities are issued by non-governmental
entities and carry no direct or indirect government guarantee. Asset-Backed
Securities represent an interest in a pool of assets such as car loans and
credit card receivables. These securities may be in the form of pass-through
instruments or asset-backed bonds.
Payments on asset-backed securities depend upon assets held by the issuer and
collections of the underlying loans. The value of these securities depends on
many factors, including changing interest rates, the availability of information
about the pool and its structure, the credit quality of the underlying assets,
the market's perception of the servicer of the pool, and any credit enhancement
provided. Also, these securities may be subject to prepayment risk.
BANK OBLIGATIONS. Bank Obligations include negotiable certificates of deposit,
time deposits and bankers acceptances. The Funds will invest in bank instruments
(i) that have been issued by banks and savings and loans and savings banks that
have more than $2 billion in total assets and are organized under the laws of
the United States or any state; (ii) of foreign branches of these banks or of
foreign banks of equivalent size; and (iii) of U.S. branches of foreign banks of
equivalent size. The Funds will not invest in obligations for which the Adviser,
or any of its affiliated persons, is the ultimate obligor or accepting bank. The
Funds may also invest in obligations of the European Investment Bank, the
Inter-American Development Bank or the World Bank and other such similar
institutions.
BORROWING. The Funds may borrow money from banks or through reverse repurchase
agreements in amounts up to one-third of total assets and pledge some assets as
collateral. A Fund that borrows will pay interest on borrowed money and may
incur other transaction costs. These expenses can exceed the income received or
capital appreciation realized by the Fund from any securities purchased with
borrowed money. With respect to borrowings, the Funds are required to maintain
continuous asset coverage to 300% of the amount borrowed. If the coverage
declines to less than 300%, the Fund must sell sufficient portfolio securities,
even at a loss, to restore the coverage.
COMMERCIAL PAPER. The Funds may invest in commercial paper, including master
demand obligations. Master demand obligations provide for a periodic adjustment
in the interest rate paid and permit daily changes in the amount borrowed. The
commercial paper in which the Funds may invest must be rated A-1 or A-2 by
Standard & Poor's (S&P), Prime-1 or Prime-2 by Moody's Investors Service, Inc.
(Moody's), or F-1 or F-2 by Fitch IBCA, Inc. (Fitch). Master demand obligations
are governed by agreements between the issuer and Bessemer Trust Company, N.A.,
acting as agent, for no additional fee, in its capacity as investment adviser to
the Funds and as fiduciary for other clients for whom it exercises investment
discretion. The monies loaned to the borrower come from accounts managed by the
Adviser or its affiliates, pursuant to arrangements with such accounts. Interest
and principal payments are credited to such accounts. The Adviser, acting as a
fiduciary on behalf of its clients, has the right to increase or decrease the
amount provided to the borrower under an obligation. The borrower has the right
to pay without penalty all or any part of the principal amount then outstanding
on an obligation together with interest to the date of payment. Since these
obligations typically provide that the interest rate is tied to the Federal
Reserve commercial paper composite rate, the rate on master demand obligations
is subject to change. Repayment of a master demand obligation to participating
accounts depends on the ability of the borrower to pay the accrued interest and
principal of the obligation on demand which is continuously monitored by the
Adviser. Since master demand obligations typically are not rated by credit
rating agencies, the Funds may invest in such unrated obligations only if at the
time of an investment the obligation is determined by the Adviser to have a
credit quality which satisfies the Funds' quality restrictions. Although there
is no secondary market for master demand obligations, such obligations are
considered by the Funds to be liquid because they are payable upon demand. The
Funds do not have any specific percentage limitation on investments in master
demand obligations.
COMMON STOCKS. Common stocks are the most prevalent type of equity security.
Common stockholders receive the residual value of the issuer's earnings and
assets after the issuer pays its creditors and any preferred stockholders. As a
result, changes in an issuer's earnings directly influence the value of its
common stock.
CONVERTIBLE SECURITIES. Certain Funds may, as an interim alternative to
investment in common stocks, purchase investment grade convertible debt
securities having a rating of, or equivalent to, at least "BBB" by S&P or "Baa"
by Moody's, or if unrated, judged by the Adviser to be of comparable quality.
Securities rated BBB or Baa have speculative characteristics. Convertible
securities may include convertible preferred stock, convertible bonds and
convertible bonds of foreign issues. Although lower rated bonds generally have
higher yields, they are more speculative and subject to a greater risk of
default with respect to the issuer's capacity to pay interest and repay
principal than are higher rated debt securities.
In selecting convertible securities, the Adviser relies primarily on its own
evaluation of the issuer and the potential for capital appreciation through
conversion. It does not rely on the rating of the security or sell because of a
change in the rating absent a change in its own evaluation of the underlying
common stock and the ability of the issuer to pay principal and interest or
dividends when due without disrupting its business goals. Interest or dividend
yield is a factor only to the extent it is reasonably consistent with prevailing
rates for securities of similar quality and thereby provides a support level for
the market price of the security. The Funds will purchase the convertible
securities of highly leveraged issuers only when, in the judgment of the
Adviser, the risk of default is outweighed by the potential for capital
appreciation. The Funds do not intend to purchase convertible securities in
excess of 5% of the Fund's total assets.
CORPORATE REORGANIZATIONS. Each Fund may invest in securities for which a tender
or exchange offer has been made or announced and in securities of companies for
which a merger, consolidation, liquidation or reorganization proposal has been
announced if, in the judgment of the Adviser, there is reasonable prospect of
capital appreciation significantly greater than the brokerage and other
transaction expenses involved. The primary risk of such investments is that if
the contemplated transaction is abandoned, revised, delayed or becomes subject
to unanticipated uncertainties, the market price of the securities may decline
below the purchase price paid by the Funds.
In general, securities which are the subject of such an offer or proposal sell
at a premium to their historic market price immediately prior to the
announcement of the offer or proposal. However, the increased market price of
such securities may also discount what the stated or appraised value of the
security would be if the contemplated transaction were approved or consummated.
Such investments may be advantageous when the discount significantly overstates
the risk of the contingencies involved; significantly undervalues the
securities, assets or cash to be received by shareholders of the prospective
portfolio company as a result of the contemplated transaction; or fails
adequately to recognize the possibility that the offer or proposal may be
replaced or superseded by an offer or proposal of greater value. The evaluation
of such contingencies requires unusually broad knowledge and experience on the
part of the Adviser which must appraise not only the value of the issuer and its
component businesses as well as the assets or securities to be received as a
result of the contemplated transaction, but also the financial resources and
business motivation of the offerer as well as the dynamics of the business
climate when the offer or proposal is in process.
In making such investments, each Fund will not violate any of its
diversification requirements or investment restrictions (see "Investment
Restrictions") including the requirement that, with respect to 75% of its total
assets, not more than 5% of its total assets may be invested in the securities
of any one issuer. Since such investments are ordinarily short term in nature,
they will increase the turnover ratio of the Funds thereby increasing its
brokerage and other transaction expenses. The Adviser intends to select
investments of the type described which, in its view, have a reasonable prospect
of capital appreciation which is significant in relation to both the risk
involved and the potential of available alternate investments as well as monitor
the effect of such investments on the tax qualification tests of the Code. Each
Fund does not intend to purchase these securities in excess of 5% of that Fund's
total assets.
CREDIT QUALITY. The fixed income securities in which a Fund invests will be
rated at least investment grade by a nationally recognized statistical ratings
organization (NRSRO). Investment grade securities have received one of an
NRSRO's four highest ratings. Securities receiving the fourth highest rating
(Baa by Moody's or BBB by S&P or Fitch) have speculative characteristics and
changes in the market or the economy are more likely to affect the ability of
the issuer to repay its obligations when due. The Adviser will evaluate
downgraded securities and will sell any security determined not to be an
acceptable investment. International Fund, Core Equities Fund, Growth
Opportunity Fund and the Fixed Income Fund may invest up to 5% of their net
assets in securities rated below investment grade, but not below the sixth
highest rating category (commonly known as "junk bonds"). The Growth Opportunity
Fund, Core Equities Fund and Municipal Bond Fund will not invest in securities
rated below investment grade. (See "High Yield Securities")
DEBT OBLIGATIONS. The Funds may invest in the following type of debt
obligations, including bonds, notes, and debentures of corporate issuers or
governments, which may have fixed or floating rates of interest.
FIXED RATE DEBT OBLIGATIONS. Fixed rate debt obligations include fixed rate debt
securities with short-term characteristics. Fixed rate securities with
short-term characteristics are long-term debt obligations but are treated in the
market as having short maturities because call features of the securities may
make them callable within a short period of time. A fixed rate security with
short-term characteristics includes a fixed income security priced close to call
or redemption price or a fixed income security approaching maturity, where the
expectation of call or redemption is high.
Fixed rate securities exhibit more price volatility during times of rising or
falling interest rates than securities with floating rates of interest. This is
because floating rate securities, as described below, behave like short-term
instruments in that the rate of interest they pay is subject to periodic
adjustments based on a designated interest rate index. Fixed rate securities pay
a fixed rate of interest and are more sensitive to fluctuating interest rates.
In periods of rising interest rates the value of a fixed rate security is likely
to fall. Fixed rate securities with short-term characteristics are not subject
to the same price volatility as fixed rate securities without such
characteristics. Therefore, they behave more like floating rate securities with
respect to price volatility.
FLOATING RATE DEBT OBLIGATIONS. The Funds may invest in floating rate debt
obligations including increasing rate securities. Floating rate securities are
generally offered at an initial interest rate which is at or above prevailing
market rates. The interest rate paid on these securities is then reset
periodically (commonly every 90 days to an increment over some predetermined
interest rate index). Commonly utilized indices include the three-month Treasury
bill rate, the 180-day Treasury bill rate, the one-month or three-month London
Interbank Offered Rate (LIBOR), the prime rate of a bank, the commercial paper
rates, or the longer-term rates on U.S. Treasury securities. Increasing rate
securities' rates are reset periodically at different levels on a predetermined
scale. These levels of interest are ordinarily set at progressively higher
increments over time. Some increasing rate securities may, by agreement, revert
to a fixed rate status. These securities may also contain features which allow
the issuer the option to convert the increasing rate of interest to a fixed rate
under such terms, conditions, and limitations as are described in each issuer's
prospectus.
DERIVATIVE CONTRACTS AND SECURITIES. The term derivative has traditionally been
applied to certain contracts (futures, forward, option and swap contracts) that
derive their value from changes in the value of an underlying security,
currency, commodity or index. Derivatives also refer to securities that
incorporate the performance characteristics of these contracts and securities
derived from the cash flows from underlying securities, mortgages or other
obligations. While the response of certain derivatives to market changes may
differ from traditional investments like stocks and bonds, they do not
necessarily present greater market risks than traditional investments.
Derivative contracts and securities can be used to reduce or increase the
volatility of an investment portfolio's total performance.
Depending upon how a Fund uses derivative contracts and the relationships
between the market value of a derivative contract and the underlying asset,
derivative contracts may increase or decrease the Fund's exposure to market and
currency risks, and may also expose the Fund to liquidity and leverage risks.
Over-the-Counter contracts also expose the Fund to credit risks in the event
that a counterparty defaults on the contract. (See "Foreign Currency
Transactions" and "Futures and Options Transactions" herein for more
information.)
DEPOSITARY RECEIPTS. American Depositary Receipts (ADRs) are receipts, issued by
a U.S. bank, that represent an interest in shares of a foreign-based
corporation. ADRs provide a way to buy shares of foreign-based companies in the
U.S. rather than in overseas markets. European Depositary Receipts (EDRs) and
Global Depositary Receipts (GDRs) are receipts, issued by foreign banks or trust
companies, or foreign branches of U.S. banks, that represent an interest in
shares of either a foreign or U.S. corporation. Depositary Receipts may not be
denominated in the same currency as the underlying securities into which they
may be converted, and are subject to currency risks. Depositary Receipts involve
many of the same risks of investing directly in foreign securities.
EMERGING GROWTH COMPANIES. Emerging Growth Companies are companies that are
beyond their initial start-up periods but have not yet reached a state of
established growth or maturity. The nature of investing in emerging growth
companies involves a greater level of risk than would be associated when
investing in more established seasoned companies. The rate of growth of such
companies may at times be dramatic; such companies often provide new products or
services that enable them to capture a dominant or important market position, or
have a special area of expertise, or are able to take advantage of changes in
demographic factors in a more profitable way than other companies. These
companies may have limited product lines, markets or financial resources and may
lack management depth since they have not been tested by time or the
marketplace. The securities of emerging growth companies often have limited
marketability and may be subject to more volatile market movements than
securities of larger, more established growth companies or the market averages
in general. Shares of the Growth Opportunity Fund, therefore, may be subject to
greater fluctuation in value than funds investing entirely in proven growth
stocks.
FOREIGN CURRENCY TRANSACTIONS. Foreign currency transactions are generally used
to obtain foreign currencies to settle securities transactions. They can also be
used as a hedge to protect assets against adverse changes in foreign currency
exchange rates or regulations. When the Fund uses foreign currency exchanges as
a hedge, it may also limit potential gain that could result from an increase in
the value of such currencies. The Fund may be affected either favorably or
unfavorably by fluctuations in the relative rates of exchange between the
currencies of different nations.
FOREIGN CURRENCY HEDGING TRANSACTIONS. Foreign currency hedging transactions are
used to protect against foreign currency exchange rate risks. These transactions
include: forward foreign currency exchange contracts, foreign currency futures
contracts, and purchasing put or call options on foreign currencies.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. Forward Foreign Currency
Exchange Contracts (Forward Contracts) are used to minimize the risks
associated with changes in the relationship between the U.S. dollar and
foreign currencies. They are used to lock in the U.S. dollar price of a
foreign security. A Forward Contract is a commitment to purchase or sell a
specific currency for an agreed price at a future date.
If the Adviser believes a foreign currency will decline against the U.S. dollar,
a Forward Contract may be used to sell an amount of the foreign currency
approximating the value of a Fund's security that is denominated in the foreign
currency. The success of this hedging strategy is highly uncertain due to the
difficulties of predicting the values of foreign currencies, of precisely
matching Forward Contract amounts, and because of the constantly changing value
of the securities involved. The Fund will not enter into Forward Contracts for
hedging purposes in a particular currency in an amount in excess of the Fund's
assets denominated in that currency. Conversely, if the Adviser believes that
the U.S. dollar will decline against a foreign currency, a Forward Contract may
be used to buy that foreign currency for a fixed dollar amount, otherwise known
as cross-hedging.
In these transactions, the Fund will segregate assets with a market value equal
to the amount of the foreign currency purchased. Therefore, the Fund will always
have cash, cash equivalents or high quality debt securities available to cover
Forward Contracts or to limit any potential risk. The segregated assets will be
priced daily.
Forward Contracts may limit potential gain from a positive change in the
relationship between the U.S. dollar and foreign currencies. Unanticipated
changes in currency prices may result in poorer overall performance for a Fund
than if it had not engaged in such contracts.
PURCHASING AND WRITING PUT AND CALL OPTIONS. Purchasing and writing put and call
options on foreign currencies are used to protect the Fund's portfolio against
declines in the U.S. dollar value of foreign portfolio securities and against
increases in the dollar cost of foreign securities to be acquired. Writing an
option on foreign currency constitutes only a partial hedge, up to the amount of
the premium received. The Fund could lose money if it is required to purchase or
sell foreign currencies at disadvantageous exchange rates. If exchange rate
movements are adverse to the Fund's position, the Fund may forfeit the entire
amount of the premium plus related transaction costs. These options are traded
on U.S. and foreign exchanges or over-the-counter. The Fund may write (sell)
covered call options and secured put options on up to 25% of net assets and may
purchase put and call options provided that no more than 5% of net assets may be
invested in premiums on such options.
<R>
FOREIGN SECURITIES. The Funds, other than the Municipal Bond Fund, may invest in
certain foreign securities; however, the only foreign securities the CAPITAL
Opportunity Fund may invest in are securities of Canadian based companies.
Investment in securities of foreign issuers and in obligations of foreign
branches of domestic banks involves somewhat different investment risks from
those affecting securities of U.S. domestic issuers. There may be limited
publicly available information with respect to foreign issuers, and foreign
issuers are not generally subject to uniform accounting, auditing and financial
standards and requirements comparable to those applicable to domestic companies.
Dividends and interest paid by foreign issuers may be subject to withholding and
other foreign taxes which may decrease the net return on foreign investments as
compared to dividends and interest paid to the Funds by domestic companies.
</R>
Investors should realize that the value of the Funds' investments in foreign
securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation,
nationalization, limitation on the removal of funds or assets, or imposition of
(or change in) exchange control or tax regulations in those foreign countries.
In addition, changes in government administrations or economic or monetary
policies in the United States or abroad could result in appreciation or
depreciation of portfolio securities and could favorably or unfavorably affect
the Funds' operations. Furthermore, the economies of individual foreign nations
may differ from the U.S. economy, whether favorably or unfavorably, in areas
such as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position; it may
also be more difficult to obtain and enforce a judgment against a foreign
issuer. Any foreign investments made by the Funds must be made in compliance
with U.S. foreign currency restrictions and tax laws restricting the amounts and
types of foreign investments.
Investments are made primarily in those regions where, in the opinion of the
Funds' Adviser, there are opportunities to achieve superior investment returns
relative to other investment opportunities outside the United States. The
International Fund does not, however, generally invest in debt or equity
securities of U.S. issuers. The International Fund emphasizes those industrial
sectors of the world's market which, in the opinion of its Adviser, offer the
most attractive risk/reward relationships. Securities of any given issuer are
evaluated on the basis of such measures as price/earnings ratios, price/book
ratios, cash flows and dividend and interest income.
Since investments in foreign securities may involve foreign currencies, the
value of a Fund's assets as measured in U.S. dollars may be affected favorably
or unfavorably by changes in currency rates and exchange control regulations,
including currency blockage.
In addition, while the volume of transactions effected on foreign stock
exchanges has increased in recent years, in most cases it remains appreciably
below that of domestic security exchanges. Accordingly, the Funds' foreign
investments may be less liquid and their prices may be more volatile than
comparable investments in securities of U.S. companies. Moreover, the settlement
periods for foreign securities, which are often longer than those for securities
of U.S. issuers, may affect portfolio liquidity. In buying and selling
securities on foreign exchanges, purchasers normally pay fixed commissions that
are generally higher than the negotiated commissions charged in the United
States. In addition, there is generally less government supervision and
regulation of securities exchanges, brokers and issuers located in foreign
countries than in the United States.
<R>
CANADIAN COMPANIES. The CAPITAL Opportunity Fund may invest more than 10% of its
total assets in Canadian Securities. Canadian securities are sensitive to
conditions within Canada, but also tend to follow the U.S. market. The country's
economy relies strongly on the production and processing of natural resources.
Also, the government has attempted to reduce restrictions against foreign
investment, and its trade agreements with the U.S. and Mexico are expected to
increase trade. Also, demand by many citizens in the Province of Quebec for
secession from Canada may significantly impact the Canadian economy. In
addition, the value in U.S. dollars of the Fund's assets denominated in Canadian
currency may be affected by changes in exchange rates and regulations.
</R>
FUTURES AND OPTIONS TRANSACTIONS. As a means of reducing fluctuations in its net
asset value, a Fund may buy and sell futures contracts and options on futures
contracts, and buy put and call options on portfolio securities and securities
indices to hedge its portfolio. A Fund may also write covered put and call
options on portfolio securities to attempt to increase its current income or to
hedge its portfolio. There is no assurance that a liquid secondary market will
exist for any particular futures contract or option at any particular time. The
Fund's ability to establish and close out futures and options positions depends
on this secondary market.
FUTURES CONTRACTS. A futures contract is a commitment by two parties under which
one party agrees to make delivery of an asset (seller) and another party agrees
to take delivery of the asset at a certain time in the future. A futures
contract may involve a variety of assets including commodities (such as oil,
wheat, or corn) or a financial asset (such as a security). A Fund may purchase
and sell financial futures contracts to hedge against anticipated changes in the
value of its portfolio without necessarily buying or selling the securities.
Although some financial futures contracts call for making or taking delivery of
the underlying securities, in most cases these obligations are closed out before
the settlement date. The closing of a futures contract is accomplished by
purchasing or selling an identical offsetting futures contract. Other financial
futures contracts call for cash settlements.
A Fund may purchase and sell stock index futures contracts to hedge against
anticipated price changes with respect to any stock index traded on a recognized
stock exchange or board of trade. A stock index futures contract is an agreement
in which two parties agree to take or make delivery of an amount of cash equal
to the difference between the price of the original contract and the value of
the index at the close of the last trading day of the contract. No physical
delivery of the underlying securities in the index is made. Settlement is made
in cash upon termination of the contract.
MARGIN IN FUTURES TRANSACTIONS. Since a Fund does not pay or receive money upon
the purchase or sale of a futures contract, it is required to deposit an amount
of initial margin in cash, U.S. government securities or highly-liquid debt
securities as a good faith deposit. The margin is returned to the Fund upon
termination of the contract. Initial margin in futures transactions does not
involve borrowing to finance the transactions.
As the value of the underlying futures contract changes daily, the Fund pays or
receives cash, called variation margin, equal to the daily change in value of
the futures contract. This process is known as marking to market. Variation
margin does not represent a borrowing or loan by the Fund. It may be viewed as a
settlement between the Fund and the broker of the amount one would owe the other
if the futures contract expired. When the Fund purchases futures contracts, an
amount of cash and/or cash equivalents, equal to the underlying commodity value
of the futures contracts (less any related margin deposits), will be deposited
in a segregated account with the Fund's custodian to collateralize the position
and insure that the use of futures contracts is unleveraged. The Fund is also
required to deposit and maintain margin when it writes call options on futures
contracts.
A Fund will not enter into a futures contract or purchase an option thereon for
other than hedging purposes if immediately thereafter the initial margin
deposits for futures contracts held by it, plus premiums paid by it for open
options on futures contracts, would exceed 5% of the market value of its net
assets, after taking into account the unrealized profits and losses on those
contracts it has entered into. However, in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount may be excluded in
computing such 5%.
PUT OPTIONS ON FINANCIAL AND STOCK INDEX FUTURES CONTRACTS. A Fund may purchase
listed put options on financial and stock index futures contracts to protect
portfolio securities against decreases in value. Unlike entering directly into a
futures contract, which requires the purchaser to buy a financial instrument on
a set date at a specified price, the purchase of a put option on a futures
contract entitles (but does not obligate) its purchaser to decide on or before a
future date whether to assume a short position at the specified price.
Generally, if the hedged portfolio securities decrease in value during the term
of an option, the related futures contracts will also decrease in value and the
option will increase in value. In such an event, the Fund will normally close
out its option by selling an identical option. If the hedge is successful, the
proceeds received by the Fund upon the sale of the second option will be large
enough to offset both the premium paid by the Fund for the original option plus
the decrease in value of the hedged securities.
Alternatively, a Fund may exercise its put option to close out the position. To
do so, it would simultaneously enter into a futures contract of the type
underlying the option (for a price less than the strike price of the option) and
exercise the option. The Fund would then deliver the futures contract in return
for payment of the strike price. If the Fund neither closes out nor exercises an
option, the option will expire on the date provided in the option contract, and
only the premium paid for the contract will be lost.
A Fund may also write (sell) listed put options on financial or stock index
futures contracts to hedge its portfolio against a decrease in market interest
rates or an increase in stock prices. A Fund will use these transactions to
purchase portfolio securities in the future at price levels existing at the time
it enters into the transaction. When a Fund sells a put on a futures contract,
it receives a cash premium in exchange for granting to the buyer of the put the
right to receive from the Fund, at the strike price, a short position in such
futures contract. This is so even though the strike price upon exercise of the
option is greater than the value of the futures position received by such
holder. As market interest rates decrease or stock prices increase, the market
price of the underlying futures contract normally increases. When the underlying
futures contract increases, the buyer of the put option has less reason to
exercise the put because the buyer can sell the same futures contract at a
higher price in the market. If the value of the underlying futures position is
not such that exercise of the option would be profitable to the option holder,
the option will generally expire without being exercised. The premium received
by the Fund can then be used to offset the higher prices of portfolio securities
to be purchased in the future.
In order to avoid the exercise of an option sold by it, generally a Fund will
cancel its obligation under the option by entering into a closing purchase
transaction, unless it is determined to be in the Fund's interest to deliver the
underlying futures position. A closing purchase transaction consists of the
purchase by the Fund of an option having the same term as the option sold by the
Fund, and has the effect of canceling the Fund's position as a seller. The
premium which the Fund will pay in executing a closing purchase transaction may
be higher than the premium received when the option was sold, depending in large
part upon the relative price of the underlying futures position at the time of
each transaction. If the hedge is successful, the cost of buying the second
option will be less than the premium received by the Fund for the initial
option.
CALL OPTIONS ON FINANCIAL AND STOCK INDEX FUTURES CONTRACTS. A Fund may write
(sell) listed and over-the-counter call options on financial and stock index
futures contracts to hedge its portfolio. When the Fund writes a call option on
a futures contract, it undertakes to sell a futures contract at the fixed price
at any time during the life of the option. As stock prices fall or market
interest rates rise, causing the prices of futures to go down, the Fund's
obligation to sell a futures contract costs less to fulfill, causing the value
of the Fund's call option position to increase. In other words, as the
underlying futures price goes down below the strike price, the buyer of the
option has no reason to exercise the call, so that the Fund keeps the premium
received for the option. This premium can substantially offset the drop in value
of the Fund's portfolio securities.
Prior to the expiration of a call written by a Fund, or exercise of it by the
buyer, the Fund may close out the option by buying an identical option. If the
hedge is successful, the cost of the second option will be less than the premium
received by the Fund for the initial option. The net premium income of the Fund
will then substantially offset the decrease in value of the hedged securities.
A Fund may buy a listed call option on a financial or stock index futures
contract to hedge against decreases in market interest rates or increases in
stock price. A Fund will use these transactions to purchase portfolio securities
in the future at price levels existing at the time it enters into the
transaction. When a Fund purchases a call on a financial futures contract, it
receives in exchange for the payment of a cash premium the right, but not the
obligation, to enter into the underlying futures contract at a strike price
determined at the time the call was purchased, regardless of the comparative
market value of such futures position at the time the option is exercised. The
holder of a call option has the right to receive a long (or buyer's) position in
the underlying futures contract. As market interest rates fall or stock prices
increase, the value of the underlying futures contract will normally increase,
resulting in an increase in value of the Fund's option position. When the market
price of the underlying futures contract increases above the strike price plus
premium paid, the Fund could exercise its option and buy the futures contract
below market price. Prior to the exercise or expiration of the call option, the
Fund could sell an identical call option and close out its position. If the
premium received upon selling the offsetting call is greater than the premium
originally paid, the Fund has completed a successful hedge.
LIMITATION ON OPEN FUTURES POSITIONS. A Fund will not maintain open positions in
futures contracts it has sold or call options it has written on futures
contracts if together the value of the open positions exceeds the current market
value of the Fund's portfolio plus or minus the unrealized gain or loss on those
open positions, adjusted for the correlation of volatility between the hedged
securities and the futures contracts. If this limitation is exceeded at any
time, the Fund will take prompt action to close out a sufficient number of open
contracts to bring its open futures and options positions within this
limitation.
PURCHASING PUT AND CALL OPTIONS ON SECURITIES. A Fund may purchase put options
on portfolio securities to protect against price movements in the Fund's
portfolio. A put option gives the Fund, in return for a premium, the right to
sell the underlying security to the writer (seller) at a specified price during
the term of the option. A Fund may purchase call options on securities
acceptable for purchase to protect against price movements by locking in on a
purchase price for the underlying security. A call option gives the Fund, in
return for a premium, the right to buy the underlying security from the seller
at a specified price during the term of the option.
WRITING COVERED CALL AND PUT OPTIONS ON SECURITIES. A Fund may write covered
call and put options to generate income and thereby protect against price
movements in the Fund's portfolio securities. As writer of a call option, the
Fund has the obligation, upon exercise of the option during the option period,
to deliver the underlying security upon payment of the exercise price. The Fund
may only sell call options either on securities held in its portfolio or on
securities which it has the right to obtain without payment of further
consideration (or has segregated cash or U.S. government securities in the
amount of any additional consideration). As a writer of a put option, the Fund
has the obligation to purchase a security from the purchaser of the option upon
the exercise of the option. In the case of put options, the Fund will segregate
cash or U.S. Treasury obligations with a value equal to or greater than the
exercise price of the underlying securities.
STOCK INDEX OPTIONS. A Fund may purchase or sell put or call options on stock
indices listed on national securities exchanges or traded in the
over-the-counter market. A stock index fluctuates with changes in the market
values of the stocks included in the index. Upon the exercise of the option, the
holder of a call option has the right to receive, and the writer of a put option
has the obligation to deliver, a cash payment equal to the difference between
the closing price of the index and the exercise price of the option. The
effectiveness of purchasing stock index options will depend upon the extent to
which price movements in the Fund's portfolio correlate with price movements of
the stock index selected. The value of an index option depends upon movements in
the level of the index rather than the price of a particular stock. Accordingly,
successful use by a Fund of options on stock indices will be subject to the
Adviser correctly predicting movements in the directions of the stock market
generally or of a particular industry. This requires different skills and
techniques than predicting changes in the price of individual stocks.
OVER-THE-COUNTER OPTIONS. Over-the-counter options are two-party contracts with
price and terms negotiated between buyer and seller. In contrast,
exchange-traded options are third-party contracts with standardized strike
prices and expiration dates and are purchased from a clearing corporation.
Exchange-traded options have a continuous liquid market while over-the-counter
options may not. A Fund may generally purchase and write over-the-counter
options on portfolio securities or securities indices in negotiated transactions
with the buyers or writers of the options when options on the Fund's portfolio
securities or securities indices are not traded on an exchange. The Fund
purchases and writes options only with investment dealers and other financial
institutions deemed creditworthy by the Adviser.
RISKS. When a Fund uses futures and options on futures as hedging devices, there
is a risk that the prices of the securities or foreign currency subject to the
futures contracts may not correlate perfectly with the prices of the securities
or currency in the Fund's portfolio. This may cause the futures contract and any
related options to react differently to market changes than the portfolio
securities or foreign currency. In addition, the Adviser could be incorrect in
its expectations about the direction or extent of market factors such as stock
price movements or foreign currency exchange rate fluctuations. In these events,
the Fund may lose money on the futures contract or option.
When a Fund purchases futures contracts, an amount of cash and cash equivalents,
equal to the underlying commodity value of the futures contracts (less any
related margin deposits), will be deposited in a segregated account with the
Fund's custodian or the broker, to collateralize the position and thereby insure
that the use of such futures contract is unleveraged. When the Fund sells
futures contracts, it will either own or have the right to receive the
underlying future or security, or will make deposits to collateralize the
position as discussed above.
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HIGH YIELD SECURITIES. The issuers of debt obligations having speculative
characteristics may experience difficulty in paying principal and interest when
due in the event of a downturn in the economy or unanticipated corporate
developments. The market prices of such securities (commonly known as "junk
bonds") may become increasingly volatile in periods of economic uncertainty.
Moreover, adverse publicity or the perceptions of investors over which the
Adviser has no control, whether or not based on fundamental analysis, may
decrease the market price and liquidity of such investments. Although the
Adviser will attempt to avoid exposing each Fund to such risks, there is no
assurance that it will be successful or that a liquid secondary market will
continue to be available for the disposition of such securities. International
Fund, Core Equities Fund and Fixed Income Fund may purchase or hold not more
than 5% of its net assets in securities rated below investment grade (but not
lower than the sixth highest rating). CAPITAL Opportunity Fund may purchase or
hold not more than 5% or its assets in convertible debt securities regardless of
their ratings. Municipal Bond Fund will not invest in securities rated below
investment grade.
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The market for unrated securities may not be as liquid as the market for rated
securities, which may result in depressed prices for the Funds in the disposal
of such nonrated securities. There is no established secondary market for many
of these securities. The Adviser cannot anticipate whether these securities
could be sold other than to institutional investors. There is frequently no
secondary market for the resale of those debt obligations that are in default.
The limited market for these securities may affect the amount actually realized
by each Fund upon such sale. Such sale may result in a loss to each Fund. There
are certain risks involved in applying credit ratings as a method of evaluating
high yield securities. For example, while credit rating agencies evaluate the
safety of principal and interest payments, they do not evaluate the market risk
of the securities and the securities may decrease in value as a result of credit
developments.
Lower rated and nonrated securities tend to offer higher yields than higher
rated securities with the same maturities because the creditworthiness of the
obligors of lower rated securities may not have been as strong as that of other
issuers. Since there is a general perception that there are greater risks
associated with the lower-rated securities in each Fund, the yields and prices
of such securities tend to fluctuate more with changes in the perceived quality
of the credit of their obligors. In addition, the market value of high yield
securities may fluctuate more than the market value of higher rated securities
since high yield securities tend to reflect short-term market developments to a
greater extent than higher rated securities, which fluctuate primarily in
response to the general level of interest rates, assuming that there has been no
change in the fundamental credit quality of such securities. High yield
securities are also more sensitive to adverse economic changes and events
affecting specific issuers than are higher rated securities. Periods of economic
uncertainty can be expected to result in increased market price volatility of
the high yield securities. High yield securities may also be directly and
adversely affected by variables such as interest rates, unemployment rates,
inflation rates and real growth in the economy and may be more susceptible to
variables such as adverse publicity and negative investor perception than are
more highly rated securities, particularly in a limited secondary market. Lower
rated securities generally involve greater risks of loss of income and principal
than higher rated securities. The obligors of lower rated securities possess
less creditworthy characteristics than the obligors of higher rated securities,
as is evidenced by those securities that have experienced a downgrading in
rating or that are in default. The evaluation of the price of such securities is
highly speculative and volatile. As such, these evaluations are very sensitive
to the latest available public information relating to developments concerning
such securities.
ILLIQUID AND RESTRICTED SECURITIES. The Funds may purchase securities which are
subject to legal or contractual delays, restrictions, and costs on resale.
Because of time limitations, the Funds might not be able to dispose of these
securities at reasonable prices or at times advantageous to the Fund. The Fund
intends to limit the purchase of restricted securities which have not been
determined by the Adviser to be liquid, together with other securities
considered to be illiquid, including repurchase agreements providing for
settlement in more than seven days after notice, to not more than 15% of its
assets.
INVERSE FLOATERS. Certain securities issued by agencies of the U.S. government
(agency securities) that include a class bearing a floating rate of interest
also may include a class whose yield floats inversely against a specified index
rate. These "inverse floaters" are more volatile than conventional fixed income
or floating rate classes of an agency security and the yield thereon, as well as
the value thereof, will fluctuate in inverse proportion to changes in the index
on which interest rate adjustments are based. As a result, the yield on an
inverse floater class of an agency security will generally increase when market
yields (as reflected by the index) decrease and decrease when market yields
increase. The extent of the volatility of inverse floaters depends on the extent
of anticipated changes in market rates of interest. Generally, inverse floaters
provide for interest rate adjustments based upon a multiple of the specified
interest index, which further increases their volatility. The degree of
additional volatility will be directly proportional to the size of the multiple
used in determining interest rate adjustments.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, a Fund
may lend portfolio securities to securities broker-dealers or financial
institutions if: (1) the loan is collateralized in accordance with applicable
regulatory requirements including collateralization continuously at no less than
100% by marking to market daily, (2) the loan is subject to termination by a
Fund at any time, (3) a Fund receives reasonable interest or fee payments on the
loan, (4) a Fund is able to exercise all voting rights with respect to the
loaned securities and (5) the loan will not cause the value of all loaned
securities to exceed one-third of the value of a Fund's assets.
If the borrower fails to maintain the requisite amount of collateral, the loan
automatically terminates and a Fund can use the collateral to replace the
securities while holding the borrower liable for any excess of replacement cost
over the value of the collateral. As with any extension of credit, there are
risks of delay in recovery and in some cases even loss of rights in collateral
should the borrower of the securities fail financially. In addition, if a Fund
is unable to get the securities back on a timely basis, the Fund may lose
certain investment opportunities. The Funds are also subject to the risks
associated with the investment of cash collateral, usually fixed-income
securities risk. The International Fund does not currently intend to lend
portfolio securities in excess of 5% of its total assets. The Core Equities
Fund, Capital Opportunity Fund, Fixed Income Fund and Municipal Bond Fund do not
currently intend to lend portfolio securities.
MONEY MARKET INSTRUMENTS. The Funds may invest in money market instruments
including obligations of the U.S. government and its agencies and
instrumentalities, other short-term debt securities, commercial paper, bank
obligations and money market mutual funds.
MORTGAGE-BACKED SECURITIES. Fixed Income Fund may invest in mortgage-backed
securities. Generally, homeowners have the option to prepay their mortgages at
any time without penalty. Homeowners frequently refinance high rate mortgages
when mortgage rates fall. This results in the prepayment of mortgage backed
securities, which deprives holders of the securities of the higher yields.
Conversely, when mortgage rates increase, prepayments due to refinancings
decline. This extends the life of mortgage backed securities with lower yields.
As a result, increases in prepayments of premium mortgage backed securities, or
decreases in prepayments of discount mortgage backed securities, may reduce
their yield and price.
This relationship between interest rates and mortgage prepayments makes the
price of mortgage backed securities more volatile than most other types of fixed
income securities with comparable credit risks. Mortgage backed securities tend
to pay higher yields to compensate for this volatility.
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS). The following example illustrates
how mortgage cash flows are prioritized in the case of CMOs - most of the CMOs
in which the Fixed Income Fund invests use the same basic structure: (1) Several
classes of securities are issued against a pool of mortgage collateral. A common
structure may contain four classes of securities. The first three (A, B, and C
bonds) pay interest at their stated rates beginning with the issue date, and the
final class (Z bond) typically receives any excess income from the underlying
investments after payments are made to the other classes and receives no
principal or interest payments until the shorter maturity classes have been
retired, but then receives all remaining principal and interest payments; (2)
The cash flows from the underlying mortgages are applied first to pay interest
and then to retire securities; (3) The classes of securities are retired
sequentially. All principal payments are directed first to the shortest-maturity
class (or A bond). When those securities are completely retired, all principal
payments are then directed to the next shortest-maturity security (or B bond).
This process continues until all of the classes have been paid off.
Because the cash flow is distributed sequentially instead of pro rata, as with
pass-through securities, the cash flows and average lives of CMOs are more
predictable, and there is a period of time during which the investors in the
longer-maturity classes receive no principal paydowns. The interest portion of
these payments is distributed by the Funds as income, and the capital portion is
reinvested.
MUNICIPAL SECURITIES. Municipal Securities are generally issued to finance
public works such as airports, bridges, highways, housing, hospitals, mass
transpiration projects, schools, streets, and water and sewer works. They are
also issued to repay outstanding obligations, to raise funds for general
operating expenses, and to make loans to other public institutions and
facilities.
Municipal securities include industrial development bonds issued by or on behalf
of public authorities to provide financing aid to acquire sites or construct and
equip facilities for privately or publicly owned corporations. The availability
of this financing encourages these corporations to locate within the sponsoring
communities and thereby increases local employment.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and local
governments or authorities to finance the acquisition of equipment and
facilities and may be considered illiquid. They may take the form of a lease, an
installment purchase contract, or a conditional sales contract.
Lease obligations may be limited by municipal charter or the nature of the
appropriation for the lease. In particular, lease obligations may be subject to
periodic appropriation. If the entity does not appropriate funds for future
lease payments, the entity cannot be compelled to make such payments.
Furthermore, a lease may provide that the participants cannot accelerate lease
obligations upon default. The participant can only enforce lease payments as
they became due. In the event of a default or failure of appropriation, unless
the participation interests are credit enhanced, it is unlikely that the
participants will be able to obtain an acceptable substitute source of payment.
VARIABLE RATE MUNICIPAL SECURITIES. The Fund may purchase municipal securities
that have variable interest rates. Variable interest rates are ordinarily stated
as a percentage of a published interest rate, interest rate index, or some
similar standard, such as the 91-day U.S. Treasury bill rate.
Many variable rate municipal securities are subject to payment of principal on
demand by the Fund usually in not more than seven days. All variable rate
municipal securities will meet the quality standards for the Fund.
MUNICIPAL BOND INSURANCE. The Municipal Bond Fund may purchase municipal
securities covered by insurance which guarantees the timely payment of principal
at maturity and interest on such securities. These insured municipal securities
are either (1) covered by an insurance policy applicable to a particular
security, whether obtained by the issuer of the security or by a third party
(Issuer-Obtained Insurance) or (2) insured under master insurance policies
issued by municipal bond insurers, which may be purchased by the Fund. The
premiums for the Policies may be paid by the Fund and the yield on the Fund's
investments may be reduced thereby.
The Fund may require or obtain municipal bond insurance when purchasing
municipal securities which would not otherwise meet the Fund's quality
standards. The Fund may also require or obtain municipal bond insurance when
purchasing or holding specific municipal securities, when, in the opinion of the
Fund's Adviser, such insurance would benefit the Fund (for example, through
improvement of portfolio quality or increased liquidity of certain securities).
Issuer-Obtained Insurance policies are noncancellable and continue in force as
long as the municipal securities are outstanding and their respective insurers
remain in business. If a municipal security is covered by Issuer-Obtained
Insurance, then such security need not be insured by the Policies purchased by
the Fund.
PARTICIPATION INTERESTS. The Municipal Bond Fund may purchase participation
interests from financial institutions such as commercial banks, savings
associations, and insurance companies. These participation interests give the
Fund an undivided interest in municipal securities. The financial institutions
from which the Fund purchases participation interests frequently provide or
secure irrevocable letters of credit or guarantees to assure that the
participation interests are of high quality. The Directors will determine that
participation interests meet the prescribed quality standards of the Fund.
PREFERRED STOCKS. Preferred stocks have the right to receive specified dividends
or distributions before the payment of dividends or distributions on common
stock. Some preferred stocks also participate in dividends and distributions
paid on common stock. Preferred stocks may provide for the issuer to redeem the
stock on a specified date. The Fund may treat such redeemable preferred stock as
a fixed income security.
REPURCHASE AGREEMENTS. A repurchase agreement is an instrument under which the
purchaser (i.e., a Fund) acquires a debt security and the seller agrees, at the
time of the sale, to repurchase the obligation at a mutually agreed upon time
and price, thereby determining the yield during the purchaser's holding period.
This results in a fixed rate of return insulated from market fluctuations during
such period. The underlying securities are ordinarily U.S. Treasury or other
government obligations or high quality money market instruments. A Fund will
require that the value of such underlying securities, together with any other
collateral held by the Fund, always equals or exceeds the amount of the
repurchase obligations of the vendor. While the maturities of the underlying
securities in repurchase agreement transactions may be more than one year, the
term of such repurchase agreement will always be less than one year. A Fund's
risk is primarily that, if the seller defaults, the proceeds from the
disposition of underlying securities and other collateral for the seller's
obligation are less than the repurchase price. If the seller becomes bankrupt,
the Fund might be delayed in selling the collateral. Under the Investment
Company Act of 1940, as amended (the "1940 Act"), repurchase agreements are
considered loans. Repurchase agreements usually are for short periods, such as
one week or less, but could be longer. The Funds will not enter into repurchase
agreements of a duration of more than seven days if, taken together with other
illiquid securities, more than 15% of that Fund's net assets would be so
invested. Under normal market conditions, the Funds do not intend to purchase
repurchase agreements in excess of 5% of that Fund's net assets.
SHARES OF OTHER INVESTMENT COMPANIES. The Funds may invest their assets in
securities of other investment companies as an efficient means of carrying out
their investment policies. Investment companies incur certain expenses, such as
management fees, and, therefore, any investment by the Funds in shares of other
investment companies may be subject to such duplicate expenses.
SMALL AND MID CAPITALIZATION STOCKS. Small market companies (Small-Cap
Companies) are those with market capitalizations of $4 billion or less at the
time of Capital Opportunity Fund's investment. Many Small-Cap Companies will
have had their securities publicly traded, if at all, for only a short period of
time and will not have had the opportunity to establish a reliable trading
pattern through economic cycles. Investing in small and mid capitalization
stocks may involve greater risk than investing in large capitalization stocks
and more established companies, since they can be subject to greater volatility.
The price volatility of Small-Cap Companies is relatively higher than larger,
more mature companies. The greater price volatility of Small-Cap Companies may
result from the fact that there may be less market liquidity, less information
publicly available or few investors who monitor the activities of these
companies. Further, in addition to exhibiting greater volatility, the stocks of
Small-Cap Companies may, to some degree, fluctuate independently of the stocks
of large companies. That is, the stocks of Small-Cap Companies may decline in
price as the price of large company stocks rise or vice versa. In addition, the
market prices of these securities may exhibit more sensitivity to changes in
industry or general economic conditions. Some Small-Cap Companies will not have
been in existence long enough to experience economic cycles or to know whether
they are sufficiently well managed to survive downturns or inflationary periods.
Further, a variety of factors may affect the success of a company's business
beyond the ability of its management to prepare or compensate for them,
including domestic and international political developments, government trade
and fiscal policies, patterns of trade and war or other military conflict which
may affect particular industries or markets or the economy generally.
Mid capitalization companies (Mid-Cap Companies) are those with market
capitalizations between $1 billion and $4 billion. The risks associated with
investments in Mid-Cap Companies are similar to those associated with Small-Cap
Companies as discussed above.
SHORT SALES. Core Equities Fund may make short sales. A short sale occurs when a
borrowed security is sold in anticipation of a decline in its price. If the
decline occurs, shares equal in number to those sold short can be purchased at
the lower price. If the price increases, the higher price must be paid. The
purchased shares are then returned to the original lender. Risk arises because
no loss limit can be placed on the transaction. When the Fund enters into a
short sale, assets equal to the market price of the securities sold short or any
lesser price at which the Fund can obtain such securities, are segregated on the
Fund's records and maintained until the Fund meets its obligations under the
short sale.
The Fund will not sell securities short unless it (1) owns, or has a right to
acquire, an equal amount of such securities, or (2) has segregated an amount of
its other assets equal to the lesser of the market value of the securities sold
short or the amount required to acquire such securities. The segregated amount
will not exceed 25% of the Fund's net assets. While in a short position, the
Fund will retain the securities, rights, or segregated assets. Short selling may
accelerate the recognition of gains.
U.S. GOVERNMENT SECURITIES. The Funds may invest in U.S. government
securities which include:
o direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds;
o notes, bonds, and discount notes issued or guaranteed by U.S.
government agencies and instrumentalities supported by the full faith and
credit of the United States;
o notes bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding; and
o notes, bonds and discount notes of other U.S. government
instrumentalities supported by the credit of the instrumentalities.
Some obligations issued or guaranteed by agencies or instrumentalities of the
U.S. government are backed by the full faith and credit of the U.S. Treasury.
No assurances can be given that the U.S. government will provide financial
support to other agencies or instrumentalities, since it is not obligated to
do so. These instrumentalities are supported by:
o the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;
o the discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or
o the credit of the agency or instrumentality.
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TEMPORARY INVESTMENTS. Each Fund may maintain up to 100% of its assets in Money
Market Instruments for temporary, defensive purposes. This reserve position
provides flexibility in meeting redemptions, expenses, and the timing of new
investments, and serves as a short-term defense during periods of unusual market
volatility. The Money Market Instruments for the Core Equities, CAPITAL
Opportunity and Fixed Income Funds include obligations of the U.S. government
and its agencies and instrumentalities, other short-term debt securities which
are rated in the two top categories by Moody's or S&P or, if unrated, are of
comparable quality as determined by the Adviser, commercial paper, bank
obligations and money market mutual funds. The Money Market Instruments for
International Fund include domestic and foreign government obligations, bank
obligations, commercial paper and short-term securities which are rated in the
top two categories by Moody's or S&P or, if unrated, are of comparable quality
as determined by the Adviser. The Money Market Instruments for Municipal Bond
Fund include taxable or tax-exempt obligations of the U.S. government and its
agencies and instrumentalities, short-term debt securities of municipal or
corporate issuers, domestic and foreign government obligations, bank
obligations, commercial paper and short-term securities which are rated in the
two top categories by Moody's or S&P or, if unrated, of comparable quality as
determined by the Adviser. Although Municipal Bond Fund is permitted to take
temporary, taxable investments, there is no current intention of generating
income subject to Federal regular income tax.
</R>
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term corporate
debt instruments that have variable or floating interest rates and provide a
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear interest
at a rate that is intended to cause the securities to trade at par. The interest
rate may float or be adjusted at regular intervals (ranging from daily to
annually), and is normally based on an interest rate index or a published
interest rate. Many variable rate demand notes allow a Fund to demand the
repurchase of the security on not more than seven days prior notice. Other notes
only permit a Fund to tender the security at the time of each interest rate
adjustment or at other fixed intervals.
WARRANTS. Warrants give a Fund the option to buy the issuer's stock or other
equity securities at a specified price. The Fund may buy the designated shares
by paying the exercise price before the warrant expires. Warrants may become
worthless if the price of the stock does not rise above the exercise price by
the expiration date. Rights are the same as warrants, except they are typically
issued to existing stockholders. The Fund's do not intend to purchase warrants
and rights in excess of 5% of each Fund's total assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. These transactions are made to
secure what is considered to be an advantageous price or yield. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices. Other than
normal transaction costs, no fees or expenses are incurred. However, liquid
assets of a Fund are segregated on a Fund's records at the trade date in an
amount sufficient to make payment for the securities to be purchased. These
assets are marked to market daily and are maintained until the transaction has
been settled.
ZERO COUPON BONDS. Fixed Income Fund may invest in zero coupon bonds. These
are bonds which are sold at a discount to their stated value and do not pay
any periodic interest.
INVESTMENT RESTRICTIONS
FUNDAMENTAL LIMITATIONS
The following investment limitations are fundamental and cannot be changedunless
approved by a majority of the outstanding shares of the Corporation. The term
"majority of outstanding shares" means the vote of the lesser of (i) 67% or more
of the shares of the Corporation present at a meeting, if the holders of more
than 50% of the outstanding shares of the Corporation are present or represented
by proxy, or (ii) more than 50% of the outstanding shares of the Corporation.
The Funds may not:
1. Purchase securities on margin or borrow money, except (a) from banks for
extraordinary or emergency purposes (not for leveraging or investment) or (b) by
engaging in reverse repurchase agreements, provided that (a) and (b) in the
aggregate do not exceed an amount equal to one-third of the value of the total
assets of a Fund less its liabilities (not including the amount borrowed) at the
time of the borrowing, and further provided that 300% asset coverage is
maintained at all times, and except that a deposit or payment by such Fund of
initial or variation margin in connection with futures contracts or related
options transactions is not considered the purchase of a security on margin.
2. Lend portfolio securities of value exceeding in the aggregate one-third
of the market value of a Fund's total assets less liabilities other than
obligations created by these transactions;
3. Mortgage, pledge or hypothecate any assets except that a Fund may pledge not
more than one-third of its total assets to secure borrowings made in accordance
with paragraph 1 above. With respect to Core Equities Fund, Capital Opportunity
Fund, Fixed Income Fund and Municipal Bond Fund, initial or variation margin for
futures contracts will not be deemed to be pledges of a Fund's assets.
4. Act as an underwriter of securities of other issuers, except insofar as a
Fund may be deemed an underwriter under the 1933 Act in disposing of a portfolio
security.
5. Purchase or otherwise acquire interests in real estate, real estate mortgage
loans or interests, including limited partnership interests, in oil, gas or
other mineral exploration, leasing or development programs.
<R>
6. Purchase or acquire commodities, commodity contracts or futures except for
International Fund which may purchase and write options on foreign currencies or
enter into forward delivery contracts for foreign currencies and may also
purchase foreign index contracts, and Core Equities Fund, Capital Opportunity
Fund, Fixed Income Fund and Municipal Bond Fund may enter into financial futures
contracts.
</R>
7. Issue senior securities, except insofar as the Funds may be deemed to have
issued a senior security in connection with any permitted borrowing.
<R>
8. With respect to Core Equities Fund, CAPITAL Opportunity Fund, International
Fund, and Fixed Income Fund, will not invest 25% or more of the value of its
total assets in any particular industry or groups of related industries; and
Municipal Bond Fund will not invest 25% or more of its total assets in any one
industry or in industrial development bonds or other securities, the interest on
which is paid from reverse as of similar type projects.
</R>
9. Participate on a joint, or a joint and several, basis in any securities
trading account.
10. With respect to 75% of a Fund's total assets, invest more than 5% of the
Fund's total assets in any one issuer; and no Fund may own 10% or more of the
outstanding voting securities of any one issuer.
NON-FUNDAMENTAL LIMITATIONS
The following are investment restrictions that may be changed by a vote of the
majority of the Board of Directors. The Funds will not:
1. Invest more than 15% of the market value of the Funds' net assets in illiquid
investments including repurchase agreements maturing in more than seven days.
2. Invest in securities of other investment companies, except that (i) not more
than 5% of the value of a Fund's total assets will be invested in the securities
of any one investment company, (ii) not more than 10% of the value of its total
assets will be invested in the aggregate in securities of investment companies
as a group, and (iii) not more than 3% of the outstanding voting stock of any
one investment company will be owned by the Fund, except as such securities may
be acquired as part of a merger, consolidation or acquisition of assets and
further, except as may be permitted by Section 12(d) of the 1940 Act or except
as may be permitted by the Securities and Exchange Commission. Each Fund will
limit its investments in securities of other investment companies consistent
with the Fund's investment policies.
3. Purchase securities while borrowings exceed 5% of its total assets.
4. Invest in companies for the purpose of exercising control.
If a percentage restriction (except paragraph 3 of the fundamental restrictions)
is adhered to at the time an investment is made, a later change in percentage
resulting from changes in the value of a Fund's investment securities will not
be considered a violation of a Fund's restrictions.
WHO MANAGES AND PROVIDES SERVICES TO THE FUNDS?
OFFICERS AND DIRECTORS
The Board of Directors is responsible for managing the Corporation's business
affairs and for exercising all the Corporation's powers except those reserved
for the shareholders. Information about each Board member is provided below and
includes the following: name, address, birth date, present position(s) held with
the Corporation, principal occupations for the past five years and total
compensation received as a Director of the Corporation for its most recent
fiscal year. The Corporation is comprised of five funds and is the only
investment company in the Fund Complex. Unless otherwise indicated, the address
of each Director and officer is Old Westbury Funds, Inc., c/o Federated Services
Company, 1001 Federated Investors Tower, Pittsburgh, PA 15222-3779.
As of February 15, 2000, all Directors and officers as a group owned less than
1% of each Fund's outstanding shares.
----------------------------------------------------------------------------
NAME AGGREGATE
(BIRTH DATE) COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS FROM
POSITION WITH FOR PAST FIVE YEARS CORPORATION
CORPORATION
---------------------
ROBERT M. KAUFMAN
November 11, 1929 Chairman of the Board and Director; $21,000
1585 Broadway Partner, Proskauer Rose LLP, Attorneys
New York, NY 10036 at Law.
Director
---------------------
HOWARD D. GRAVES Chancellor, Texas A&M University $21,000
August 15, 1939 System (Since 1999); Visiting
One Reed Drive Professor, Lyndon B. Johnson School of
College Station, TX Public Affairs, University of Texas at
77840-2884 Austin (1998-1999); Director of
Military Education Programs,
Director University of Texas as Austin
(1997-1998); Associate, The
International Foundation, Washington,
DC (1997-2000); Adviser, Voyager
Extended Learning, Inc. (Since 1997);
Director; Chairman of Board, Recycling
Holdings, Inc. (1995-1996); and
Superintendent, United States Military
Academy, West Point, New York,
Lieutenant General, U.S. Army (1991 to
1996).
---------------------
EDWARD C. GONZALES President, Executive Vice President $0
October 22, 1930 and Treasurer of some of the Funds in
the Federated Fund Complex; Vice
President, Chairman, Federated Investors, Inc.;
Treasurer and Trustee, Federated Administrative
Principal Services; formerly, Trustee or
Financial Officer Director of some of the Funds in the
Federated Fund Complex; Vice
President, Federated Financial
Services, Inc., CEO and Chairman,
Federated Administrative Services;
Director, Vice President and
Treasurer, Federated Investors
Management Company; Federated
Investment Management Company,
Federated Investment Counseling,
Federated Global Investment Management
Corp. and Passport Research, Ltd.;
Director and Executive Vice President,
Federated Securities Corp.; Director,
Federated Services Company; Trustee,
Federated Shareholder Services Company.
---------------------
EUGENE P. BEARD Vice Chairman - Finance and $21,000
March 17, 1937 Operations, The Interpublic Group of
Companies, Inc.
Director
---------------------
Senior Adviser, Bessemer Trust
JOHN R. WHITMORE* Company, N.A.; President and Chief $21,000
November 19, 1933 Executive Officer of Bessemer Group,
Inc. and subsidiaries of Bessemer
Director Trust Company, N.A. (1975-1998).
---------------------
C. CHRISTINE THOMSON Vice President and Assistant Treasurer $0
September 1, 1957 of funds distributed by Federated
Securities Corp. and Edgewood
Vice President and Services, Inc.
Assistant
Treasurer
---------------------
JOSEPH S. MACHI Vice President, Federated $0
May 22, 1962 Administrative Services; Director,
Private Label Management, Federated
Vice President and Investors; Vice President and
Assistant Assistant Treasurer of certain funds
Treasurer for which Federated Securities Corp.
and Edgewood Services, Inc. are the
principal distributors.
---------------------
C. GRANT ANDERSON Corporate Counsel, Federated Investors. $0
November 6, 1940
Secretary
----------------------------------------------------------------------------
* JOHN R. WHITMORE MAY BE AN "INTERESTED PERSON" AS DEFINED IN THE INVESTMENT
COMPANY ACT OF 1940.
As of February 15, 2000, Nadoit & Co., acting in various capacities for
numerous accounts, was the owner of record of 5% or more of the following
Fund's outstanding shares:
----------------------------------------------------------------------------
Nadoit & Co. c/o Core Equities Fund 93.92%
Bessemer Trust
Company Capital Opportunity Fund 97.34%
100 Woodbridge International Fund 96.40%
Center Drive
Fixed Income Fund 95.53%
Woodbridge , NJ
07095 Municipal Bond Fund 99.95%
----------------------------------------------------------------------------
INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Funds. The Funds' investment adviser is Bessemer Trust Company, N.A., a national
banking association. See "Fees Paid By the Funds for Services" for payments to
the Adviser over the last three fiscal years.
The Adviser shall not be liable to the Corporation, the Funds, or any Fund
shareholder for any losses that may be sustained in the purchase, holding, or
sale of any security or for anything done or omitted by it, except acts or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with the
Corporation.
ADMINISTRATOR
Federated Administrative Services (FAS), a subsidiary of Federated Investors,
Inc., provides all management and administrative services reasonably necessary
for each Fund, other than those provided by the Adviser, subject to the
supervision of the Board of Directors for a fee at an annual rate as specified
below:
MAXIMUM AVERAGE AGGREGATE DAILY NET ASSETS OF THE ADMINISTRATIVE FEE FEDERATED
FUNDS 0.150 of 1% on the first $250 million 0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million 0.075 of 1% on assets in excess of $750
million
The administrative fee received during any fiscal year shall be at least $75,000
per Fund. Federated Administrative Services may choose voluntarily to reimburse
a portion of its fee at any time.
The functions performed by FAS as administrator include, but are not limited to
the following:
o preparation, filing and maintenance of the Corporation's governing
documents, minutes of Directors' meetings and shareholder meetings;
o preparation and filing with the SEC and state regulatory authorities the
Corporation's registration statement and all amendments, and any other
documents required for the Funds to make a continuous offering of their
shares;
o preparation, negotiation and administration of contracts on behalf of
the Fund;
o supervision of the preparation of financial reports; o preparation and filing
of federal and state tax returns; o assistance with the design, development and
operation of a Fund; and o providing advice to the Funds and Corporation's
Directors.
CUSTODIAN
Bessemer Trust Company (New Jersey) is the Funds' custodian. Pursuant to its
agreement with the Funds, it is responsible for maintaining the books and
records of each Fund's securities and cash and marketing each Fund's accounting
and portfolio transaction records.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Bisys Fund Services Ohio, Inc. is the Funds' transfer and dividend disbursing
agent.
INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP are the independent public accountants for the Funds.
BROKERAGE TRANSACTIONS
The Adviser makes each Fund's portfolio decisions and determines the broker to
be used in each specific transaction with the objective of negotiating a
combination of the most favorable commission and the best price obtainable on
each transaction (generally defined as best execution). When consistent with the
objective of obtaining best execution, brokerage may be directed to persons or
firms supplying investment information to the Adviser or portfolio transactions
may be effected by the Adviser. To the extent that such persons or firms supply
investment information to the Adviser for use in rendering investment advice to
a Fund, such information may be supplied at no cost to the Adviser and,
therefore, may have the effect of reducing the expenses of the Adviser in
rendering advice to that Fund. While it is impossible to place an actual dollar
value on such investment information, its receipt by the Adviser probably does
not reduce the overall expenses of the Adviser to any material extent.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to seeking best execution, the Adviser may
consider sales of shares of a Fund as a factor in the selection of brokers to
execute portfolio transactions for the Funds.
The investment information provided to the Adviser is of the type described in
Section 28(e) of the Securities Exchange Act of 1934 and is designed to augment
the Adviser's own internal research and investment strategy capabilities.
Research services furnished by brokers through which each Fund effects
securities transactions are used by the Adviser in carrying out its investment
management responsibilities with respect to all its clients' accounts. There may
be occasions where the transaction cost charged by a broker may be greater than
that which another broker may charge if the Adviser determines in good faith
that the amount of such transaction cost is reasonable in relation to the value
of brokerage and research services provided by the executing broker. The Adviser
may consider the sale of shares of a Fund by brokers including the Distributor
as a factor in its selection of brokers of Fund transactions.
A Fund may deal in some instances in securities which are not listed on a
national securities exchange but are traded in the over-the-counter market. It
may also purchase listed securities through the third market. Where transactions
are executed in the over-the-counter market or third market, that Fund will seek
to deal with the primary market makers; but when necessary in order to obtain
best execution, it will utilize the services of others. In all cases, each Fund
will attempt to negotiate best execution.
For the fiscal year ended, October 31, 1999, the Fund's Adviser directed
brokerage transactions to certain brokers due to research services they
provided. The Fund paid $95,843 in brokerage commissions for these transactions.
Although investment decisions for the Funds are made independently from those of
the other accounts managed by the Adviser, investments of the type the Funds may
make may also be made by those other accounts. When the Funds and one or more
other accounts managed by the Adviser are prepared to invest in, or desire to
dispose of, the same security, available investments or opportunities for sales
will be allocated in a manner believed by the Adviser to be equitable to each.
In some cases, this procedure may adversely affect the price paid or received by
the Funds or the size of the position obtained or disposed of by the Funds. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to benefit the Funds.
DISTRIBUTION AND SERVICE PLAN
The Corporation has adopted a distribution and service plan (the Plan) for the
Funds pursuant to Rule 12b-1 of the Investment Company Act of 1940. Pursuant to
the Plan, the Funds entered into a distribution agreement and a shareholder
servicing agreement with the Funds' distributor, Edgewood Services, Inc.
(Edgewood) and a shareholder servicing agreement with Bessemer Trust Company,
N.A. (Bessemer). Under the shareholder servicing agreement, Bessemer may receive
payments from the Funds to permit it to make payments to broker-dealers for
providing shareholder services. Bessemer is permitted (i) to receive a payment
from the Funds attributable to Bessemer's clients (and its affiliates) for
providing shareholder services to such clients and (ii) to receive payments to
permit it to make payments to other financial institutions as shareholder
servicing agents. Under its shareholder servicing agreement, Edgewood receives
payments from the Funds to permit it to make payments to broker-dealers for
providing shareholder services.
The distribution agreement with Edgewood provides for reimbursement to Edgewood
by the Funds for its distribution, promotional and advertising costs incurred in
connection with the distribution of the Funds' shares.
In addition, each Fund will pay for telecommunications expenses incurred by the
distributor in carrying out its obligations under the distribution agreement and
shareholder servicing agreement and for costs incurred for preparing, printing
and delivering the Funds' prospectus to existing shareholders and preparing and
printing subscription application forms for shareholder accounts.
FEES PAID BY THE FUNDS FOR SERVICES
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1999
----------------------------------------------------------------------------------------
12B-1 FEES
----------------
-------------------------------------------- ----------------------------
FUND NAME ADVISORY BROKERAGE ADMINISTRATIVE DISTRIBUTION SHAREHOLDER
FEE/FEE COMMISSIONS FEE/FEE WAIVED PLAN FEE SERVICING
WAIVED FEE
-------------------------------------------- ---------------
----------------------------------------------------------------------------------------
CORE EQUITIES FUND $425,799 $187,921 $88,449/$0 $0 $151,058
/$112,848
-------------------------------------------- ---------------
----------------------------------------------------------------------------------------
CAPITAL $1,242,474/$617,162 $225,228/$23,618$0 $400,197
-------
OPPORTUNITY FUND
-------------------------------------------- ---------------
----------------------------------------------------------------------------------------
INTERNATIONAL FUND $1,179,724/$1,138,163 $212,271/$40,276$0 $376,690
-------------------------------------------- ---------------
----------------------------------------------------------------------------------------
FIXED INCOME FUND $35,407 $0 $75,000/$63,556 $0 $19,670
/$35,407
----------------------------------------------------------------------------------------
-------------------------------------------- ---------------
MUNICIPAL BOND FUND $69,408 $0 $75,000/$52,636 $0 $38,560
/$69,408
----------------------------------------------------------------------------------------
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1998
-----------------------------------------------------------------------------------------
12B-1 FEES
-----------------
-------------------------------------- ----------------------------------
FUND NAME ADVISORY BROKERAGE ADMINISTRATIVE DISTRIBUTION SHAREHOLDER OTHER
FEE/FEE COMMISSIONS FEE/FEE WAIVED PLAN FEE 4 SERVICING SERVICES
WAIVED FEE FEE
-------------------------------------- -------------
-----------------------------------------------------------------------------------------
CORE EQUITIES $86,185/ $94,504 $18,469/$1,343 $6,330 $30,785 $0
FUND 1 $86,185
-------------------------------------- -------------
-----------------------------------------------------------------------------------------
CAPITAL $800,868/ $446,604 $150,174/$30,043 $4,134 $250,274 $362
-------
OPPORTUNITY $64,114
FUND
-------------------------------------- -------------
-----------------------------------------------------------------------------------------
INTERNATIONAL $1,207,447/$814,629 $231,936/$52,373 $13,988 $386,545 $1,279
FUND
-------------------------------------- -------------
-----------------------------------------------------------------------------------------
FIXED INCOME $8,353/ $0 $2,784/$158 $6,240 $4,641 $0
FUND 2 $8,353
--------------------------------------------------------------------------------
-------------------------------------- ------------- ---------
MUNICIPAL $17,420/ $0 $5,807/$408 $5,550 $9,681 $0
BOND FUND 3 $17,420
-----------------------------------------------------------------------------------------
1 For the period from March 2, 1998 (commencement of operations).
2 For the period from March 12, 1998 (commencement of operations).
3 For the period from March 6, 1998 (commencement of operations).
4 These fees were incurred for the printing and delivery of the Fund's
advertising
materials.
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1997
<R>
---------------------------------------------------------------------------------
FUND NAME ADVISORY FEE/FEE BROKERAGE ADMINISTRATIVE
WAIVED COMMISSIONS FEE/FEE WAIVED
---------------------------------------------------------------------------------
CAPITAL OPPORTUNITY $82,117/$82,117 $187,672 $15,397/$2,533
-------
FUND 1
---------------------------------------------------------------------------------
INTERNATIONAL FUND $1,381,951/$1,978 $678,497 $266,388/$40,776
---------------------------------------------------------------------------------
</R>
1 For the period from February 28, 1997 (commencement of operations).
HOW DO THE FUNDS MEASURE PERFORMANCE?
The Funds may advertise each Fund's share performance by using the Security and
Exchange Commission's (SEC) standard method for calculating performance
applicable to all mutual funds. The SEC also permits this standard performance
information to be accompanied by non-standard performance information.
Unless otherwise stated, any quoted share performance reflects the effect of
non-recurring charges, such as maximum sales charges, which, if excluded would
increase the total return and yield. The performance of shares depends upon such
variables as: portfolio quality; average portfolio maturity; type and value of
portfolio securities; changes in interest rates; changes or differences in the
Fund's expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings and
offering price per share fluctuate daily. Both net earnings and offering price
per share are factors in the computation of yield and total return.
The performance of the Fund may be compared in various financial and news
publications to the performance of various indices and investments for which
reliable performance data is available. The performance of the Fund may be
compared in publications to averages, performance rankings, or other information
prepared by nationally recognized mutual fund ranking and statistical services.
As with other performance data, performance comparisons should not be considered
representative of the Fund's relative performance for any future period.
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for a Fund's shares is the average compounded
rate of return for a given period that would equate a $1,000 initial investment
to the ending redeemable value of that investment. The ending redeemable value
is computed by multiplying the number of Shares owned at the end of the period
by the NAV per Share at the end of the period. The number of Shares owned at the
end of the period is based on the number of Shares purchased at the beginning of
the period with $1,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.
When shares of a Fund are in existence for less than a year, the Fund may
advertise cumulative total return for that specific period of time, rather than
annualizing the total return.
YIELD AND TAX EQUIVALENT YIELD
The yield of a Fund's shares is calculated by dividing: (i) the net investment
income per share earned by the shares over a thirty-day period by (ii) the
maximum offering price per share on the last day of the period. This number is
then annualized using semi-annual compounding. This means that the amount of
income generated during the thirty-day period is assumed to be generated each
month over a 12-month period and is reinvested every six months. The
tax-equivalent yield of Municipal Income Fund's shares is calculated similarly
to the yield, but is adjusted to reflect the taxable yield that shares would
have had to earn to equal the actual yield, assuming a specific tax rate. The
yield and tax-equivalent yield do not necessarily reflect income actually earned
by shares because of certain adjustments required by the SEC and, therefore, may
not correlate to the dividends or other distributions paid to shareholders.
To the extent financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in a Fund's
shares, the Fund's share performance is lower for shareholders paying those
fees.
AVERAGE ANNUAL TOTAL RETURNS
Total returns are given for the one-year, five-year or Start of Performance
periods ended October 31, 1999.
<R>
----------------------------------------------------------------------------------
FUND CORE INTERNATIONAL CAPITAL FIXED MUNICIPAL
-------
EQUITIES FUND OPPORTUNITY INCOME BOND FUND
FUND FUND FUND
(INCEPTION DATE) (MARCH 2, (OCTOBER 22, (FEBRUARY (MARCH (MARCH 6,
1998) 1993) 28, 1997) 12, 1998)
1998)
----------------------------------------------------------------------------------
------------ -------------- -----------
One Year Return 29.89% 28.82% 6.40% (2.74)% (3.33)%
Five Year Return N/A 5.51% N/A N/A N/A
Since Inception 17.21% 5.91% 4.72% 3.80% 1.60%
Return
----------------------------------------------------------------------------------
</R>
TAX EQUIVALENCY TABLE
Set forth below is a sample of a tax-equivalency table that may be used in
advertising and sales literature for the Municipal Bond Fund. This table is for
illustrative purposes only and is not representative of past or future
performance of the Fund. The interest earned by the municipal securities owned
by the Fund generally remains free from regular Federal income tax and is often
free from state and local taxes as well. However, some of the Fund's income may
be subject to the Federal alternative minimum tax and state and/or local taxes.
TAXABLE YIELD EQUIVALENT FOR 2000 MUNICIPAL BOND FUND
FEDERAL INCOME TAX 15.00% 28.00% 31.00% 36.00% 39.60%
BRACKET:
Joint Return $1-43,85$43,851-105,$105,951-161,$161,451-288Over
288,350
Single Return $1-26,25$26,251-63,5$63,551-132,6$132,601-288Over
288,350
TAX EXEMPT YIELD: TAXABLE YIELD EQUIVALENT:
1.00% 1.18% 1.39% 1.45% 1.56% 1.66%
1.50% 1.76% 2.08% 2.17% 2.34% 2.48%
2.00% 2.35% 2.78% 2.90% 3.13% 3.31%
2.50% 2.94% 3.47% 3.62% 3.91% 4.14%
3.00% 3.53% 4.17% 4.35% 4.69% 4.97%
3.50% 4.12% 4.86% 5.07% 5.47% 5.79%
4.00% 4.71% 5.56% 5.80% 6.25% 6.62%
4.50% 5.29% 6.25% 6.52% 7.03% 7.45%
5.00% 5.88% 6.94% 7.25% 7.81% 8.28%
5.50% 6.47% 7.64% 7.97% 8.59% 9.11%
6.00% 7.06% 8.33% 8.70% 9.38% 9.93%
6.50% 7.65% 9.03% 9.42% 10.16% 10.76%
7.00% 8.24% 9.72% 10.14% 10.94% 11.59%
7.50% 8.82% 10.42% 10.87% 11.72% 12.42%
8.00% 9.41% 11.11% 11.59% 12.50% 13.25%
8.50% 10.00% 11.81% 12.32% 13.28% 14.07%
9.00% 10.59% 12.50% 13.04% 14.06% 14.90%
NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN CALCULATING
THE TAXABLE YIELD EQUIVALENT.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Funds; and
o information about the mutual fund industry from sources such as the
Investment Company Institute.
Each Fund may compare its performance, or performance for the types of
securities in which it invests, to a variety of other investments, including
federally insured bank products such as bank savings accounts, certificates of
deposit, and Treasury bills.
Each Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of share performance. When comparing performance, you should consider all
relevant factors such as the composition of the index used, prevailing market
conditions, portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial publications
and/or indices which the Funds use in advertising may include:
CDA/WIESENBERGER INVESTMENT COMPANY SERVICES. Mutual fund rankings and data that
ranks and/or compares mutual funds by overall performance, investment
objectives, assets, expense levels, periods of existence and/or other factors.
DOW JONES INDUSTRIAL AVERAGE (DJIA). Represents share prices of selected
blue-chip industrial corporations. The DJIA indicates daily changes in the
average price of stock of these corporations. Because it represents the top
corporations of America, the DJIA index is a leading economic indicator for the
stock market as a whole.
EUROPE, AUSTRALIA, AND FAR EAST INDEX. A standard unmanaged foreign
securities index representing major non-U.S. stock markets, as monitored by
Morgan Stanley Capital International. EAFE returns are in U.S. dollars.
FINANCIAL PUBLICATIONS. The Wall Street Journal, Business Week, Changing Times,
Financial World, Forbes, Fortune and Money magazines, among others--provide
performance statistics over specified time periods.
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX. Composed of all bonds that are
investment grade (rated Baa or higher by Moody's or BBB or higher by S&P, if
unrated by Moody's). Issues must have at least one year to maturity. Total
return comprises price appreciation/depreciation and income as a percentage of
the original investment.
LIPPER ANALYTICAL SERVICES, INC. Ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in net asset value over a specified period of time.
MOODY'S INVESTORS SERVICE, INC., FITCH IBCA, INC. AND STANDARD & POOR'S.
Various publications.
MORNINGSTAR, INC. An independent rating service, is the publisher of the
bi-weekly MUTUAL FUND VALUES, which rates more than 1,000 NASDAQ-listed mutual
funds of all types, according to their risk-adjusted returns. The maximum rating
is five stars, and ratings are effective for two weeks.
RUSSELL 2500 INDEX. Measures the performance of the 2,500 smallest companies in
the Russell 3000 Index, which represents approximately 23% of the total market
capitalization of the Russell 3000 Index.
STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS (S&P 500).
Composite index of common stocks in industry, transportation, and financial and
public utility companies. Can be used to compare to the total returns of funds
whose portfolios are invested primarily in common stocks. In addition, the S & P
500 assumes reinvestments of all dividends paid by stocks listed on its index.
Taxes due on any of these distributions are not included, nor are brokerage or
other fees calculated in the S & P figures.
WILSHIRE ASSOCIATES. An on-line database for international financial and
economic data including performance measures for a wide range of securities.
WILSHIRE 2000 EQUITY INDEX. Consists of nearly 2,000 common equity securities,
covering all stocks in the U.S. for which daily pricing is available, and can be
used to compare to the total returns of funds whose portfolios are invested
primarily in common stocks.
The Adviser may also include performance information in such advertisements or
information furnished to current or prospective shareholders not only regarding
the Adviser's performance since Hermoine Davies, the International Fund's
portfolio manager, joined the Adviser in 1986, but also regarding Ms. Davies'
personal investment performance when she was responsible for Japanese
investments and management of the offshore unit trust Pacific Fund of Guinness
Mahon and Co. Ltd. In addition, the Adviser may also include performance
information regarding the Adviser's performance since Timothy Morris, the Growth
Opportunity Fund's portfolio manager, joined the Adviser in 1995, but also
regarding Mr. Morris' personal investment performance since 1988 when he managed
the Portfolio Group, a subsidiary of Chemical Banking Corporation. Also, the
Adviser may include performance information regarding the Adviser's performance
since John D. Chadwick, the Core Equities Fund's portfolio manager, Harold S.
Woolley, the Fixed Income Fund's portfolio manager and Bruce A. Whiteford, the
Municipal Bond Fund's portfolio manager joined the Adviser, but also regarding
Mr. Chadwick's personal investment performance while at Kidder Peabody & Co.,
Mr. Woolley's personal investment performance while at Equitable Investment
Management Corp., and Mr. Whiteford's personal investment performance while at
Chase Manhattan Bank, N.A.
ACCOUNT INFORMATION AND PRICING OF SHARES
NET ASSET VALUE
For purposes of determining each Fund's net asset value per share, readily
marketable portfolio securities listed on an exchange are valued, except as
indicated below, at the last sale price reflected at the close of the regular
trading session of the exchange on the business day as of which such value is
being determined. If there has been no sale on such day, the securities are
valued at the mean of the closing bid and asked prices on such day. If no bid or
asked prices are quoted on such day, then the security is valued by such method
as the Board of Directors shall determine in good faith to reflect its fair
market value. Fund securities traded on more than one national securities
exchange are valued at the last sale price on the business day as of which such
value is being determined as reflected on the tape at the close of the exchange
representing the principal market for such securities.
Readily marketable securities traded in the over-the-counter market, including
listed securities whose primary market is believed by the Adviser to be
over-the-counter are valued at the mean of the current bid and asked prices from
such sources as the Board of Directors deems appropriate to reflect their fair
value.
United States government obligations and other debt instruments having sixty
days or less remaining until maturity are stated at amortized cost. Debt
instruments having a greater remaining maturity will be valued at the highest
bid price obtained from a dealer maintaining an active market in that security
or on the basis of prices obtained from a pricing service approved as reliable
by the Board of Directors. All other investment assets, including restricted and
not readily marketable securities, are valued under procedures established by
and under the general supervision and responsibility of the Fund's Board of
Directors designed to reflect in good faith the fair value of such securities.
As indicated in the prospectus, the net asset value per share of each Fund's
shares will be determined as of the close of the regular trading session of the
New York Stock Exchange (the "NYSE") on each day that the NYSE is open for
trading. The NYSE annually announces the days on which it will not be open for
trading; the most recent announcement indicates that it will not be open on the
following days: New Year's Day, Martin Luther King Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day. However, the NYSE may close on days not included in that
announcement.
TRADING IN FOREIGN SECURITIES
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange (NYSE). In computing its net asset value,
the International Fund values foreign securities at the latest closing price on
the exchange on which they are traded immediately prior to the closing of the
NYSE. Certain foreign currency exchange rates may also be determined at the
latest rate prior to the closing of the NYSE. Foreign securities quoted in
foreign currencies are translated into U.S. dollars at current rates.
Occasionally, events that affect these values and exchange rates may occur
between the times at which they are determined and the closing of the NYSE. If
such events materially affect the value of portfolio securities, these
securities may be valued at their fair value as determined in good faith by the
Directors, although the actual calculation may be done by others.
VOTING RIGHTS
Each share of a Fund gives the shareholder one vote in Director elections and
other matters submitted to shareholders for vote. All Shares of the Corporation
have equal voting rights, except that in matters affecting only a particular
Fund, only shares of that Fund or class are entitled to vote.
Directors may be removed by the Directors or by shareholders at a special
meeting. A special meeting of shareholders will be called by the Directors upon
the written request of shareholders who own at least 10% of the Corporation's
outstanding shares of all series entitled to vote.
HOW ARE THE FUNDS TAXED?
FEDERAL INCOME TAX
Each Fund will be treated as a single, separate entity for Federal income tax
purposes so that income earned and capital gains and losses realized by the
Corporation's other portfolios will be separate from those realized by each
Fund.
Each Fund has elected to be treated as and intends to qualify annually as a
regulated investment company pursuant to the provisions of Subchapter M of the
Internal Revenue Code (the "Code"). The Funds did so qualify for the previous
taxable year. By so qualifying, each Fund generally will not be subject to
Federal income tax to the extent that it distributes its investment company
taxable income and net capital gains in the manner required under the Code. In
addition, the Code subjects regulated investment companies, such as the Funds,
to a non-deductible 4% excise tax in each calendar year to the extent that such
investment companies do not distribute 98% of their ordinary income and capital
gain net income, generally determined on a calendar year basis and the one year
period ending October 31 of each calendar year, respectively.
Each Fund intends to distribute to its shareholders substantially all of its
investment company taxable income (which includes, among other items, dividends
and interest and the excess, if any, of the net short-term capital gains
(generally including any net option premium income) over net long-term capital
losses). Investment company taxable income will be distributed annually by the
Funds. Each Fund intends to distribute, at least annually, substantially all net
capital gains (the excess of net long-term capital gains over net short-term
capital losses). Shareholders will be advised as to the amount of the capital
gains distribution, which are generally taxable at a maximum rate of 20% for
non-corporate shareholders. In determining amounts of capital gains to be
distributed, any capital loss carryovers from prior years will be applied
against capital gains to reduce the amount of distributions paid. In addition,
any losses incurred in the taxable year subsequent to October 31 will be
deferred to the next taxable year and used to reduce subsequent year
distributions. You may choose whether to receive dividends and distributions in
cash or to reinvest in additional shares of the class in which you are invested
at the next determined net asset value without a sales load, but you will be
subject to tax in the manner described herein even if you choose to have your
dividends and distributions reinvested in additional shares.
Dividends from net investment income or distributions of net realized short-term
securities gains to shareholders generally are taxable as ordinary income
whether received in cash or reinvested in additional shares. Distributions of
net capital gains to shareholders are taxable as capital gains whether received
in cash or reinvested in additional shares.
Special tax rules may apply to a Fund's acquisition of futures contracts,
forward contracts, and options on futures contracts. Such rules may, among other
things, affect whether gains and losses from such transactions are considered to
be short-term or long-term, may have the effect of deferring losses and/or
accelerating the recognition of gains or losses.
It is anticipated that a portion of the ordinary income dividends paid by the
Funds will qualify for the dividends-received deduction available to
corporations. Shareholders will be notified at the end of the year as to the
amount of the dividends that qualify for the dividends received deduction.
The Funds may be required to withhold for Federal income tax ("backup
withholding") 31% of the distributions and the proceeds of redemptions payable
to shareholders who fail to provide a correct taxpayer identification number or
to make required certifications, or where a Fund or shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Corporate shareholders and certain other shareholders
specified in the Code are exempt from backup withholding.
Notice as to the tax status of your dividends and distributions is mailed to you
annually. You also will receive periodic summaries of your account. Dividends
and distributions may be subject to state and local taxes. Dividends paid or
credited to accounts maintained by non-resident shareholders may also be subject
to U.S. non-resident withholding taxes. You should consult your tax adviser
regarding specific questions as to Federal, state and local income and
withholding taxes.
FOR MUNICIPAL BOND FUND ONLY
The Fund's policy is to distribute as exempt-interest dividends each year 100%
of its tax-exempt interest income, net of certain deductions. Exempt-interest
dividends are dividends paid by the Fund that are attributable to interest that
is exempt from regular Federal income tax, and are designated by the Fund as
exempt-interest dividends in a written notice mailed to the Fund's shareholders
not later than 60 days after the close of its taxable year. The percentage of
the total dividends paid by the Fund during any taxable year that qualifies as
exempt-interest dividends will be the same for all shareholders receiving
dividends during the year.
Exempt-interest dividends are to be treated by the Fund's shareholders as items
of interest excludable from their gross income under Section 103(a) of the Code.
The amount of such interest received will have to be disclosed on the
shareholders' Federal income tax returns. A shareholder is advised to consult
its tax advisors with respect to whether exempt-interest dividends retain the
exclusion under Section 103 of the Code is such shareholder would be treated as
a "substantial user" or "related person" under Section 147(a) of the Code with
respect to some or all of the "private activity" bonds, if any, held by the
Fund. If a shareholder receives an exempt-interest dividend with respect to any
share an such share has been held for six months or less, then any loss on the
sale or exchange of such share will be disallowed to the extent of the amount of
such exempt-interest dividend. The Code provides that interest on indebtedness
incurred, or continued, to purchase or carry certain tax-exempt securities such
as shares of the Fund is not deductible. Therefore, among other consequences, a
certain proportion of interest on indebtedness incurred, or continued, to
purchase or carry securities on margin may not be deductible during the period
an investor holds shares of the Fund. For Social Security recipients, interest
on tax-exempt bonds, including exempt-interest dividends paid by the Fund, is to
be added to adjusted gross income for purposes of computing the amount of social
security benefits includible in gross income. Taxpayers are required to include
as an item of tax preference for purposes of the Federal alternative minimum tax
all tax-exempt interest on "private activity" bonds issued after August 7, 1986
(generally, a bond issue in which more than 10% of the proceeds are used in a
non-governmental trade or business other than Section 501(c)(3) bonds). This
provision will apply to the portion of the exempt-interest dividends from the
Fund's assets that are attributable to such post-August 7, 1986 private activity
bonds. Corporations are required to increase their alternative minimum taxable
income for purposes of calculating their alternative minimum tax liability by
75% of the amount by which the adjusted current earnings (which will include
tax-exempt interest) of the corporation exceeds the alternative minimum taxable
income (determined without this item). In addition, in certain cases, Subchapter
S corporations with accumulated earnings and profits from Subchapter C years are
subject to a tax on tax-exempt interest.
The Fund may realize short-term or long-term capital gains or losses from its
portfolio transactions. The Fund may also realize short-term or long-term
capital gains or accrued market discount upon the maturity or disposition of
securities acquired at discounts resulting from market fluctuations. Short-term
capital gains and accrued market discount will be taxable to shareholders as
ordinary income. Any net capital gains (the excess of its net realized long-term
capital gain over its net realized short-term capital loss) will be distributed
annually to shareholders. The Fund will have no tax liability with respect to
distributed net capital gains and the distributions will be taxable to
shareholders as long-term capital gains regardless of how long the shareholders
have held their shares. However, shareholders who at the time of such as net
capital gain distribution have not held their shares for more than 6 months, and
who subsequently dispose of those shares at a loss, will be required to treat
such loss as a long-term capital loss to the extent of the net capital gain
distribution. Distributions of net capital gain will be designated as a "capital
gain dividend" in a written notice mailed to the Fund's shareholders within 60
days after the close of the Fund's taxable year. Capital gains realized by
corporations are generally taxed at the same rate as ordinary income. However,
long-term capital gains that have a holding period of more than 12 months
realized by non-corporate shareholders are taxable at a maximum rate of 20%.
Corresponding maximum rate and holding period rules apply with respect to
capital gains distributed by the Fund without regard to the length of time
shares have been held by the holder.
The Fund intends to distribute at least 90% of its investment company taxable
income (taxable income subject to certain adjustments exclusive of the excess of
its net long-term capital gain over its net short-term capital loss) for each
taxable year. These distributions will be taxable to shareholders as ordinary
income. The Fund will be subject to Federal income tax on any undistributed
investment company taxable income. Expenses paid or incurred by the Fund will be
allocated between tax-exempt and taxable income in the same proportion as the
amount of the Fund's tax-exempt income bears to the total of such exempt income
and its gross income (excluding from gross income the excess of capital gains
over capital losses). If the Fund does not distribute at least 98% of its
ordinary income for the one year period ending October 31 and 98% of its capital
gain net income for the one year period ending October 31, the Fund will be
subject to a nondeductible 4% excise tax on the excess of such amounts over the
amounts actually distributed.
From time to time, proposals have been introduced before Congress to restrict or
eliminate the Federal income tax exemption for interest on Municipal
Obligations. If such a proposal were introduced and enacted in the future, the
ability of the Fund to pay exempt-interest dividends would be adversely affected
and the Fund would reevaluate its investment objective and policies and consider
changes in the structure.
In South Carolina v. Baker, the United States Supreme Court held that the
Federal government may constitutionally require states to register bonds they
issued and may subject the interest on such bonds to Federal tax if not
registered, and that there is no constitutional prohibition against the Federal
government's taxing the interest earned on state or other municipal bonds. The
Supreme Court's decision affirms the authority of the Federal government to
regulate and control bonds such as the Municipal Obligations and to tax such
bonds in the future. The decision does not, however, affect the current
exemption from regular income taxation of the interest earned on the Municipal
Obligations in accordance with Section 103 of the Code.
FOREIGN INVESTMENTS
Investment income on certain foreign securities purchased by the Funds may be
subject to foreign withholding or other taxes that could reduce the return on
these securities. Tax treaties between the United States and foreign countries,
however, may reduce or eliminate the amount of foreign taxes to which the Funds
would be subject. The effective rate of foreign tax cannot be predicted since
the amount of the Funds' assets to be invested within various countries is
uncertain. However, the Funds intend to operate so as to qualify for
treaty-reduced tax rates when applicable.
Distributions from the Funds may be based on estimates of book income for the
year. Book income generally consists solely of the coupon income generated by
the portfolio, whereas tax basis income includes gains or losses attributable to
currency fluctuation. Due to differences in the book and tax treatment of fixed
income securities denominated in foreign currencies, it is difficult to project
currency effects on an interim basis. Therefore, to the extent that currency
fluctuations cannot be anticipated, a portion of distributions to shareholders
could later be designated as a return of capital, rather than income, for income
tax purposes, which may be of particular concern to simple trusts.
The Funds may invest in the stock of certain foreign corporations which would
constitute a Passive Foreign Investment Company (PFIC). The Funds may be subject
to federal income taxes upon disposition of PFIC investments.
If more than 50% of the total value of the Funds' assets at the end of the tax
year is represented by stock or securities of foreign corporations, the Funds
may qualify for certain Code stipulations that would allow shareholders to claim
a foreign tax credit or deduction on their U.S. income tax returns. The Code may
limit a shareholder's ability to claim a foreign tax credit. Shareholders who
elect to deduct their portion of the Funds' foreign taxes rather than take the
foreign tax credit must itemize deductions on their income tax returns.
FINANCIAL INFORMATION
The Financial Statements for the fiscal year ended October 31, 1999, are
incorporated herein by reference to the Funds' Annual Report to shareholders
dated October 31, 1999.
APPENDIX
STANDARD AND POOR'S LONG-TERM DEBT RATING DEFINITIONS
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degrees.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB--Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB-rating.
B--Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or
BB-rating.
CCC--Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B-rating.
CC--The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC debt rating.
C--The rating C typically is applied to debt subordinated to senior debt which
is assigned an actual or implied CCC-debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
MOODY'S INVESTORS SERVICE, INC. LONG-TERM BOND RATING DEFINITIONS
AAA--Bonds which are rated AAA are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as gilt
edged. Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA--Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in AAA securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
BAA--Bonds which are rated BAA are considered as medium grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA--Bonds which are BA are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA--Bonds which are rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA--Bonds which are rated CA represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
FITCH IBCA, INC. LONG-TERM DEBT RATING DEFINITIONS
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have adverse impact on these bonds, and therefore impair timely
payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.
BB--Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.
B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC--Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C--Bonds are imminent default in payment of interest or principal.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS
PRIME-1--Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
o Leading market positions in well established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
o Broad margins in earning coverage of fixed financial charges and high
internal cash generation.
o Well established access to a range of financial markets and assured sources
of alternate liquidity.
PRIME-2--Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
STANDARD AND POOR'S COMMERCIAL PAPER RATINGS
A-1--This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
FITCH IBCA, INC. COMMERCIAL PAPER RATING DEFINITIONS
FITCH-1--(Highest Grade) Commercial paper assigned this rating is regarded as
having the strongest degree of assurance for timely payment.
FITCH-2--(Very Good Grade) Issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.
ADDRESSES
OLD WESTBURY FUNDS, INC. 5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010
DISTRIBUTOR
EDGEWOOD SERVICES, INC. 5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-5829
INVESTMENT ADVISER
BESSEMER TRUST COMPANY, N.A. 630 Fifth Avenue
New York, New York 10111
CUSTODIAN
BESSEMER TRUST COMPANY (NEW JERSEY) 100 Woodbridge Center Drive
Woodbridge, New Jersey 07095
TRANSFER AGENT
Bisys Fund Services Ohio, Inc. 3435 Stelzer Road
Columbus, OH 43219
INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP Two World Financial Center
New York, New York 10281
Cusip 680414307 Cusip 680414208 Cusip 680414109 Cusip 680414406 Cusip 680414505
<R> G02009-06 (5/00) </R>
OLD WESTBURY
FUNDS, INC.
Prospectus
February 29, 2000
<R>
(Revised May 31, 2000)
</R>
Bessemer Trust
<R>
</R>
<R>
</R>
| Fund Goals, Strategies, Risks and Performance | 1 | |
| Summary of Fund Expenses | 11 | |
| Principal Securities in Which the Funds Invest | 12 | |
| Specific Risks of Investing in the Funds | 22 | |
| What Do Shares Cost? | 25 | |
| How Do I Purchase Shares? | 25 | |
| How Do I Redeem Shares? | 27 | |
| How Do I Exchange Shares? | 29 | |
| Account and Share Information | 29 | |
| Who Manages the Funds? | 30 | |
| Distribution of Fund Shares | 32 | |
| Financial Information | 32 |
| Old Westbury
Core Equities Fund
|
<R>
| Old Westbury
Capital Opportunity Fund
|
</R>
<R>
</R>
<R>
</R>
<R>
</R>
| Old Westbury
International Fund
|
| Old Westbury
Fixed Income Fund
|
| Old Westbury
Municipal Bond Fund
|
<R>
| Core
Equities Fund |
Capital
Opportunity Fund |
International
Fund |
Fixed
Income Fund |
Municipal
Bond Fund |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Stock Market Risks(1) | x | x | x | ||||||||
| Risks
Related to
Company
Size(2) |
x | ||||||||||
| Risks of Foreign Investing(3) | x | x | |||||||||
| Emerging Markets Risks(4) | x | ||||||||||
| Interest Rate Risks(5) | x | x | |||||||||
| Tax Risks(6) | x | ||||||||||
| Prepayment Risks(7) | x | ||||||||||
| Futures and Options Risks(8) | x | x | x | x | |||||||
| Currency Risks(9) | x | ||||||||||
</R>
(1)
|
The value of equity
securities rise and fall.
|
(2)
|
The smaller the
capitalization of a company, generally, the less liquid its stock and
the
more volatile its price. Companies with smaller market capitalizations
also tend to have unproven track records and are more likely to fail
than
companies with larger market capitalizations.
|
(3)
|
Foreign economic,
political or regulatory conditions may be less favorable than those of
the
United States.
|
(4)
|
Investments in
developing or emerging market securities are subject to higher risks
than
those in developed market countries because there is greater uncertainty
in less established markets and economies.
|
(5)
|
Prices of fixed
income securities rise and fall in response to interest rate changes.
Interest rate changes have a greater effect on the price of fixed income
securities with longer durations.
|
(6)
|
Any failure of
municipal securities invested in by a Fund to meet certain applicable
legal requirements, or any proposed or actual changes in the federal or
a
state’s tax law, could cause the interest received and distributed
by
the Fund to Shareholders to be taxable.
|
(7)
|
When interest rates
decline, unscheduled prepayments of principal could accelerate and
require
the Fund to reinvest the proceeds of the prepayments at lower interest
rates.
|
(8)
|
The use of futures
and options as hedging devices will not eliminate risk even if they work
as intended. In addition, hedging strategies are not always successful,
and could result in increased expenses to a Fund.
|
(9)
|
Exchange rates for
currencies fluctuate daily.
|
<R>
</R>
| Average Annual Total Returns
(for the calendar year ended 12/31/99) |
Past
One Year |
Since
Inception* |
|||
|---|---|---|---|---|---|
| Core Equities Fund | 28.15% | 26.94% | |||
| S&P 500 Index | 21.05% | 21.71% | |||
<R>
</R>
<R>
</R>
<R>
</R>
<R>
| Average Annual Total Returns
(for the calendar year ended 12/31/99) |
Past
One Year |
Since
Inception* |
|||
|---|---|---|---|---|---|
| Capital Opportunity Fund | 13.61% | 11.23% | |||
| Russell 2500 Index | 24.15% | 16.22% | |||
</R>
<R>
</R>
<R>
| Average Annual Total Returns
(for the calendar year ended 12/31/99) |
Past
One Year |
Past
5 Years |
Since
Inception* |
||||
|---|---|---|---|---|---|---|---|
| International Fund | 29.20% | 9.26% | 7.10% | ||||
| MSCI EAFE Index | 26.96% | 12.83% | 11.17% | ||||
</R>
<R>
</R>
| Average Annual Total Returns
(for the calendar year ended 12/31/99) |
Past
One Year |
Since
Inception* |
|||
|---|---|---|---|---|---|
| Fixed Income Fund | (2.75)% | 3.27% | |||
| Lehman Brothers Government/Corporate Bond Total Index | (2.15)% | 2.90% | |||
<R>
</R>
| Average Annual Total Returns
(for the calendar year ended 12/31/99) |
Past
One Year |
Since
Inception* |
|||
|---|---|---|---|---|---|
| Municipal Bond Fund | (3.47)% | 1.73% | |||
| Lehman Brothers Municipal Bond Index | (2.06)% | 1.70% | |||
<R>
| Core
Equities Fund |
Capital
Opportunity Fund |
Inter-
national Fund |
Fixed
Income Fund |
Municipal
Bond Fund |
|||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Shareholder Fees
Fees Paid Directly From Your Investment |
|||||||||||||||||||||||||||||||
| Maximum
Sales
Charge (Load)
Imposed on Purchases (as a percentage of offering price) |
None | None | None | None | None | ||||||||||||||||||||||||||
| Annual Fund
Operating Expenses (1)
Expenses That are Deducted From Fund Assets |
|||||||||||||||||||||||||||||||
| Management Fee (2) | 0.70 | % | 0.78 | % | 0.78 | % | 0.45 | % | 0.45 | % | |||||||||||||||||||||
| Distribution (12b-1) Fee | 0.25 | % | 0.25 | % | 0.25 | % | 0.25 | % | 0.25 | % | |||||||||||||||||||||
| Other Expenses (3) | 0.47 | % | 0.36 | % | 0.43 | % | 2.46 | % | 1.35 | % | |||||||||||||||||||||
| Total
Annual Fund
Operating Expenses |
1.42 | % | 1.39 | % | 1.46 | % | 3.16 | % | 2.05 | % | |||||||||||||||||||||
| (1) Although not contractually obligated to do so, the Adviser and Administrator waived and reimbursed certain amounts. These are shown below along with the net expenses the Funds actually paid for the fiscal year ended October 31, 1999. The Adviser and Administrator can terminate this voluntary waiver and/or reimbursement at any time. | |||||||||||||||||||||||||||||||
|
Waiver/Reimbursement of Fund
Expenses |
0.19 | % | 0.01 | % | 0.03 | % | 2.11 | % | 1.00 | % | |||||||||||||||||||||
| Total Actual
Annual Fund Operating
Expenses (After Waivers and Reimbursements) |
1.23 | % | 1.38 | % | 1.43 | % | 1.05 | % | 1.05 | % | |||||||||||||||||||||
</R>
<R>
(2)
|
The Adviser
voluntarily waived a portion of the management fee. The Adviser can
terminate this voluntary waiver at any time. The management fees paid
(after the voluntary waiver) were 0.51%, 0.78%, 0.78%, 0.00% and 0.00%
for the Core Equities, Capital Opportunity, International, Fixed
Income
and Municipal Bond Funds, respectively, for the year ended October 31,
1999.
|
</R>
<R>
(3)
|
The Administrator
voluntarily waived a portion of the administrative fee and the Adviser
waived and reimbursed certain other operating expenses. Other Expenses
(after the voluntary waiver and reimbursements) were 0.47%, 0.35%,
0.40%, 0.80% and 0.80% for the Core Equities, Capital Opportunity,
International, Fixed Income and Municipal Bond Funds, respectively,
for
the year ended October 31, 1999. The Adviser and Administrator can
terminate this voluntary waiver and/or reimbursement at any
time.
|
</R>
<R>
| Core
Equities Fund |
Capital
Opportunity Fund |
Inter-
national Fund |
Fixed
Income Fund |
Municipal
Bond Fund |
||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 1 Year | $ 145 | $ 142 | $ 149 | $ 319 | $ 208 | |||||
| 3 Years | $ 449 | $ 440 | $ 462 | $ 974 | $ 643 | |||||
| 5 Years | $ 776 | $ 761 | $ 797 | $1,654 | $1,103 | |||||
| 10 Years | $1,702 | $1,669 | $1,746 | $3,467 | $2,379 |
</R>
| Common
Stocks
|
| Treasury
Securities
|
| Agency
Securities
|
| Corporate
Debt Securities
|
| Commercial
Paper
|
|
Commercial paper is an issuer’s obligation with a maturity
of
less than nine months. Companies typically issue commercial paper to
pay
for current expenditures. Most issuers constantly reissue their
commercial paper and use the proceeds (or bank loans) to repay
maturing
paper. If the issuer cannot continue to obtain liquidity in this
fashion, its commercial paper may default. The short maturity of
commercial paper reduces both the market and credit risks as compared
to
other debt securities of the same issuer.
|
| Demand
Instruments
|
|
Demand instruments are corporate debt securities that the issuer
must repay upon demand. Other demand instruments require a third
party,
such as a dealer or bank, to repurchase the security for its face
value
upon demand. A Fund treats demand instruments as short-term
securities,
even though their stated maturity may extend beyond one
year.
|
| Mortgage
Backed Securities
|
| Collateralized Mortgage Obligations
(CMOs)
|
| Floaters
and Inverse Floaters
|
|
Floaters and inverse floaters allocate interest payments between
two classes of CMOs. One class (Floaters) receives a share of interest
payments based upon a market index such as LIBOR. The other class
(Inverse Floaters) receives any remaining interest payments from the
underlying mortgages. Floater classes receive more interest (and
Inverse
Floater classes receive correspondingly less interest) as interest
rates
rise. This shifts prepayment and interest rate risks from the Floater
to
the Inverse Floater class, reducing the price volatility of the
Floater
class and increasing the price volatility of the Inverse Floater
class.
|
| Bank
Instruments
|
| Bank
instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of
deposit and banker’s acceptances. Yankee instruments are
denominated in U.S. dollars and issued by U.S. branches of foreign
banks. Eurodollar instruments are denominated in U.S. dollars and
issued
by non-U.S. branches of U.S. or foreign banks.
|
| General
Obligation Bonds
|
| Special
Revenue Bonds
|
| Private
Activity Bonds
|
| Tax
Increment Financing Bonds
|
| Municipal
Notes
|
| Variable
Rate Demand Instruments
|
| Municipal
Leases
|
| Depositary
Receipts
|
| Options
|
| A Fund may also
write call options on individual securities and futures contracts to
generate income from premiums, and in anticipation of a decrease or
only
limited increase in the value of the underlying asset. If a call
written
by a Fund is exercised, a Fund foregoes any possible profit from an
increase in the market price of the underlying asset over the exercise
price plus the premium received.
|
| A Fund may also
write put options on individual securities and futures contracts to
generate income from premiums, and in anticipation of an increase or
only limited decrease in the value of the underlying asset. In writing
puts, there is a risk that the Fund may be required to take delivery
of
the underlying asset when its current market price is lower than the
exercise price.
|
| When a Fund
writes options on futures contracts, it will be subject to margin
requirements similar to those applied to futures
contracts.
|
<R>
</R>
<R>
</R>
<R>
</R>
<R>
</R>
<R>
</R>
<R>
</R>
| By
Mail
|
| Through an
Authorized Dealer
|
| Through the
Distributor
|
| Old
Westbury Funds, Inc.
|
| P.O.
Box 180267
|
|
Columbus, OH 43218-2067
|
| By
Wire
|
| Through an
Authorized Dealer
|
| Through the
Distributor
|
| Old Westbury
Funds, Inc.
|
| P.O Box
180267
|
| Columbus, OH
43218-2067
|
| By
Telephone
|
| Through your
Authorized Dealer
|
| Through the
Transfer Agent
|
| By
Mail
|
| Through your
Authorized Dealer
|
| Through the
Transfer Agent
|
| Old Westbury
Funds, Inc.
|
| P.O. Box
180267
|
| Columbus, OH
43218-2067
|
| Additional
Conditions
|
<R>
</R>
| Municipal
Bond Fund
|
<R>
| First $100
million of average net assets |
Second $100
million of average net assets |
Average
net assets exceeding $200 million |
||||
|---|---|---|---|---|---|---|
| Core Equities Fund | 0.70% | 0.65% | 0.60% | |||
| Capital Opportunity Fund | 0.80% | 0.75% | 0.70% | |||
| International Fund | 0.80% | 0.75% | 0.70% | |||
| Fixed Income Fund | 0.45% | 0.40% | 0.35% | |||
| Municipal Bond Fund | 0.45% | 0.40% | 0.35% |
</R>
<R>
</R>
<R>
| Period
ended October 31, |
Net asset
value, beginning of period |
Net
investment income/ (loss) |
Net realized
and unrealized gain/(loss) on investments, and foreign currencies |
Total from
investment operations |
Distributions
from net investment income |
Distributions
from capital gains |
||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Core Equities Fund | ||||||||||||||||||
| 1999 | $10.01 | (0.03 | ) | 3.02 | 2.99 | (0.01 | ) | — | ||||||||||
| 1998 (a)(e) | $10.00 | (0.01 | ) | 0.02 | 0.01 | — | — | |||||||||||
| Capital Opportunity Fund | ||||||||||||||||||
| 1999 | $10.63 | 0.04 | 0.64 | 0.68 | — | — | ||||||||||||
| 1998 | $11.82 | (0.07 | ) | (1.12 | ) | (1.19 | ) | — | — | |||||||||
| 1997 (b)(e) | $10.00 | (0.06 | ) | 1.88 | 1.82 | — | — | |||||||||||
| International Fund | ||||||||||||||||||
| 1999 | $ 9.74 | 0.14 | 2.61 | 2.75 | (0.25 | ) | — | |||||||||||
| 1998 | $11.75 | 0.14 | (1.25 | ) | (1.11 | ) | (0.18 | ) | (0.72 | ) | ||||||||
| 1997 | $11.16 | 0.12 | 0.62 | 0.74 | (0.15 | ) | — | |||||||||||
| 1996 | $ 9.80 | 0.13 | 1.37 | 1.50 | (0.14 | ) | — | |||||||||||
| 1995 | $10.81 | 0.14 | (1.07 | ) | (0.93 | ) | (0.08 | ) | — | |||||||||
| Fixed Income Fund | ||||||||||||||||||
| 1999 | $10.93 | 0.48 | (0.75 | ) | (0.27 | ) | (0.51 | ) | (0.08 | ) | ||||||||
| 1998 (c)(e) | $10.00 | 0.28 | 0.65 | 0.93 | — | — | ||||||||||||
| Municipal Bond Fund | ||||||||||||||||||
| 1999 | $10.62 | 0.31 | (0.65 | ) | (0.34 | ) | (0.32 | ) | (0.04 | ) | ||||||||
| 1998 (d)(e) | $10.00 | 0.21 | 0.41 | 0.62 | — | — | ||||||||||||
</R>
*
|
Total return is
calculated without a sales charge assuming a purchase of shares on the
first day and a sale on the last day of the period.
|
**
|
Annualized.
|
(a)
|
For the period
from March 2, 1998 (commencement of operations) to October 31,
1998.
|
(b)
|
For the period
from February 28, 1997 (commencement of operations) to October 31,
1997.
|
(c)
|
For the period
from March 12, 1998 (commencement of operations) to October 31,
1998.
|
(d)
|
For the period
from March 6, 1998 (commencement of operations) to October 31,
1998.
|
(e)
|
Per share values
calculated using average shares outstanding.
|
| Ratios to Average Net
Assets |
Net assets,
end of period (000 omitted) |
Portfolio
turnover rate |
|||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Total
distributions |
Net asset
value, end of period |
Total
return* |
Net
Expenses |
Net
investment income/(loss) |
|||||||||||||
| (0.01 | ) | $12.99 | 29.9% | 1.23% | (0.41% | ) | $ 84,566 | 116% | |||||||||
| — | $10.01 | 0.1% | 1.25% | ** | (0.03% | )** | $ 33,164 | 56% | |||||||||
| — | $11.31 | 6.4% | 1.38% | 0.12% | $205,919 | 102% | |||||||||||
| — | $10.63 | (10.1% | ) | 1.48% | (0.57% | ) | $113,825 | 140% | |||||||||
| — | $11.82 | 18.2% | 1.50% | ** | (0.79% | )** | $ 51,528 | 46% | |||||||||
| (0.25 | ) | $12.24 | 28.8% | 1.43% | 0.80% | $226,072 | 160% | ||||||||||
| (0.90 | ) | $ 9.74 | (10.2% | ) | 1.49% | 1.27% | ** | $123,232 | 129% | ||||||||
| (0.15 | ) | $11.75 | 6.6% | 1.50% | 0.98% | $173,793 | 58% | ||||||||||
| (0.14 | ) | $11.16 | 15.5% | 1.50% | 1.19% | $135,794 | 55% | ||||||||||
| (0.08 | ) | $ 9.80 | (8.6% | ) | 1.50% | 1.40% | $104,194 | 32% | |||||||||
| (0.59 | ) | $10.07 | (2.7% | ) | 1.05% | 4.96% | $ 9,208 | 83% | |||||||||
| — | $10.93 | 9.3% | 1.05% | ** | 4.48% | ** | $ 5,599 | 30% | |||||||||
| (0.36 | ) | $ 9.92 | (3.3% | ) | 1.05% | 3.50% | $ 19,484 | 96% | |||||||||
| — | $10.62 | 6.2% | 1.05% | ** | 3.40% | ** | $ 11,050 | 40% | |||||||||
<R>
</R>
<R>
</R>
<R>
Distributor:
</R>
Edgewood Services, Inc.
5800 Corporate Drive
Pittsburgh, PA
15237-5829
Administrator:
Federated Administrative
Services
Federated Investors Tower
Pittsburgh, PA 15222-3779
Cusip 680414307
Cusip 680414208
Cusip 680414109
Cusip 680414406
Cusip 680414505
<R>
G02009-05 (5/00)
</R>
OLD WESTBURY GRAPHIC RISK/RETURN BAR CHART OLD WESTBURY CORE EQUITIES FUND The graphic presentation displayed here consists of a bar chart representing the annual total return of the Old Westbury Core Equities Fund as of the calendar year-ended December 31, 1999. The `y' axis reflects the "% Total Return" beginning with "0" and increasing in increments of 5% up to 30%. The `x' axis represents calculation periods from the earliest first full calendar year-end of the Fund's start of business through the calendar year ended 1999. The light gray shaded chart features one distinct vertical bar, shaded in charcoal, and is visually represented by height with the total return percentage for the calendar year stated directly at its base. The calculated total return percentage for the Fund for the calendar year is stated directly at the top of the respective bar, for the calendar year 1999, The percentage noted is: 28.15%. OLD WESTBURY CAPITAL OPPORTUNITY FUND The graphic presentation displayed here consists of a bar chart representing the annual total returns of the Old Westbury Capital Opportunity Fund as of the calendar year-ended December 31, 1999. The `y' axis reflects the "% Total Return" beginning with "-2%" and increasing in increments of 2% up to 14%. The `x' axis represents calculation periods from the earliest first full calendar year-end of the Fund's start of business through the calendar year ended 1999. The light gray shaded chart features two distinct vertical bars, shaded in charcoal, and each visually representing by height the total return percentage for the calendar year stated directly at its base. The calculated total return percentage for the Fund for the calendar year is stated directly at the top of each respective bar, for the calendar years 1998 through 1999, The percentages noted are: -1.65% and 13.61% respectively. OLD WESTBURY INTERNATIONAL FUND The graphic presentation displayed here consists of a bar chart representing the annual total returns of the Old Westbury International Fund as of the calendar year-ended December 31, 1999. The `y' axis reflects the "% Total Return" beginning with "-15%" and increasing in increments of 5% up to 30%. The `x' axis represents calculation periods from the earliest first full calendar year-end of the Fund's start of business through the calendar year ended 1999. The light gray shaded chart features six distinct vertical bars, shaded in charcoal, and each visually representing by height the total return percentage for the calendar year stated directly at its base. The calculated total return percentage for the Fund for the calendar year is stated directly at the top of each respective bar, for the calendar years 1994 through 1999, The percentages noted are: -11.26%, 2.37%, 21.29%, -1.45%, -1.14% and 29.20% respectively. OLD WESTBURY FIXED INCOME FUND The graphic presentation displayed here consists of a bar chart representing the annual total return of the Old Westbury Fixed Income Fund as of the calendar year-ended December 31, 1999. The `y' axis reflects the "% Total Return" beginning with "-3%" and increasing in increments of .5% up to 0%. The `x' axis represents calculation periods from the earliest first full calendar year-end of the Fund's start of business through the calendar year ended 1999. The light gray shaded chart features one distinct vertical bar, shaded in charcoal, and is visually represented by height with the total return percentage for the calendar year stated directly at its base. The calculated total return percentage for the Fund for the calendar year is stated directly at the bottom of the respective bar, for the calendar year 1999, The percentage noted is: -2.75%. OLD WESTBURY MUNICIPAL BOND FUND The graphic presentation displayed here consists of a bar chart representing the annual total return of the Old Westbury Municipal Bond Fund as of the calendar year-ended December 31, 1999. The `y' axis reflects the "% Total Return" beginning with "-3.5%" and increasing in increments of .5% up to 0%. The `x' axis represents calculation periods from the earliest first full calendar year-end of the Fund's start of business through the calendar year ended 1999. The light gray shaded chart features one distinct vertical bar, shaded in charcoal, and is visually represented by height with the total return percentage for the calendar year stated directly at its base. The calculated total return percentage for the Fund for the calendar year is stated directly at the bottom of the respective bar, for the calendar year 1999. The percentage noted is: -3.47%.
|
|