As Filed With the Securities And Exchange Commission on November 14, 1995
Registration No. (none)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.___
Post-Effective Amendment No.___
AMT CAPITAL FUND, INC.
(Exact Name of Registrant as Specified in Charter)
430 Park Avenue New York, New York 10022
(Address of Principal Executive Offices) (Zip Code)
(212) 308-4848
(Registrant's Telephone Number, Including Area Code)
William E. Vastardis, Treasurer
AMT Capital Fund, Inc.
430 Park Avenue
New York, New York 10022
(Name and Address of Agent for Service of Process)
Copies to: Andrew D. Gordon
Lehman Brothers Funds, Inc.
3 World Financial Center
New York, New York 10285
William Goodwin, Esq. Gary S. Schpero, Esq.
Dechert Price & Rhoads Simpson Thacher & Bartlett
477 Madison Avenue 425 Lexington Avenue
New York, New York 10022 New York, New York 10022
Approximate Date of Proposed Public Offering: As soon as practicable after
this Registration Statement becomes effective.
It is proposed that this filing will become effective thirty days after filing
pursuant to paragraph (a) of Rule 488.
The Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Section 24(f) under the Investment Company
Act of 1940; accordingly no fee is payable herewith. The Registrant filed a
Rule 24f-2 Notice for its most recent fiscal year ended December 31, 1994 on
February 28, 1995.
AMT CAPITAL FUND, INC.
FORM N-14
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following pages and documents:
Front Cover
Contents Page
Cross-Reference Sheet
Letters to Shareholders
Notice of Special Meeting
PART A
Combined Prospectus/Proxy Statement
PART B
Statement of Additional Information
PART C
Other Information
Signatures
Exhibit
AMT CAPITAL FUND, INC.
REGISTRATION STATEMENT OF FORM N-14
CROSS REFERENCE SHEET
N-14 Location in
Item No. Registration Statement
Part A: Information Required In
Prospectus/Proxy Statement
1. Beginning of Registration Cover Page; Cross Reference Sheet
Statement and Outside Front
Cover Page of Prospectus
2. Beginning and Outside Back Table of Contents
Cover Page of Prospectus
3. Synopsis Information and Risk Synopsis; Principal Risk Factors
Factors
4. Information About the Synopsis; Proposal 1 and Comparative
Transaction Expense Table
5. Information About the Registrant Synopsis; Principal Risk Factors;
Additional Information About
AMT Capital Fund, Inc. and Its Shares;
Miscellaneous; Current Prospectus of
Class B shares of U.S. Selected Growth
Portfolio, a portfolio of AMT
Capital Fund, Inc.
6. Information About the Company Synopsis; Principal Risk Factors;
Being Acquired Additional Information About Lehman
Brothers Funds, Inc. and Its Shares;
Miscellaneous; Current Prospectus of
Lehman Selected Growth Stock Portfolio, a
portfolio of Lehman Brothers Funds, Inc.
7. Voting Information Introduction and Voting Information;
Synopsis
8. Interest of Certain Persons and Introduction and Voting
Expenses Information: Proposal 1 The Plan of
Reorganization
9. Additional Information Required Not Applicable
Reoffering by Persons Deemed to
be Underwriters
Part B: Information Required In
Statement of Additional Information
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. Additional Information About Preliminary Statement of Addition
the Registrant Additional of Class B shares
of U.S. Selected Growth Portfolio, a
portfolio of AMT Capital Fund, Inc.
12. Additional Information About Current Statement of Additional
the Company Being Acquired Information of Lehman Selected Growth
Stock Portfolio a series of Lehman
Brothers Funds, Inc.
14. Financial Statements Current Annual Report
of Lehman Brothers Funds, Inc.
Part C. Other Information
15. Indemnification Indemnification
16. Exhibits Exhibits
17. Undertakings Undertakings
Lehman Selected Growth Stock Portfolio January 18, 1996
A Series of
Lehman Brothers Funds, Inc.
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of the
Lehman Selected Growth Stock Portfolio (the "SGS Portfolio"), an investment
portfolio of Lehman Brothers Funds, Inc. ("Lehman Fund"), to be held on
January 18, 1996 at 10:00 a.m. Eastern time at the offices of Lehman Brothers
Funds, Inc. on the 26th floor, conference room #4, located at 3 World Financial
Center New York, New York 10285.
At this meeting, shareholders will be asked to consider and take action on the
proposed reorganization (the "Reorganization") of the SGS Portfolio as the new
Class B shares of the U.S. Selected Growth Portfolio ("USG Portfolio") of AMT
Capital Fund, Inc. ("AMT Capital Fund"). The formal Notice of Special
Meeting of the Shareholders and the Proxy Statement setting forth in detail the
matters to come before the meeting are attached, and a Proxy Card is enclosed
for you to complete and return in the pre-addressed, postage-paid envelope that
provided.
IT IS IMPORTANT
THAT YOU RETURN THE PROXY WHETHER OR NOT
YOU PLAN TO ATTEND THIS MEETING.
The proposed Reorganization provides that each shareholder of the SGS
Portfolio will receive a number of Class B shares of common stock in the new
USG Portfolio equal to the number of shares in the SGS Portfolio each such
shareholders held. Also, as a part of the Reorganization, the SGS Portfolio
will transfer all of its assets to the USG Portfolio. The investment
objective, policies, restrictions, risk factors, and investment approach of the
USG Portfolio are substantially similar to those of the SGS Portfolio. The new
Advisory Agreement is similar to the current Advisory Agreement, except that
AMT Capital Advisers, Inc. ("AMT Capital Advisers") replaces Lehman
Brothers Global Asset Management Inc. ("LGBAM") as investment adviser and the
other differences described herein. Pursuant to the new Advisory Agreement,
AMT Capital Advisers has delegated a portion of its duties to Delphi Asset
Management ("Delphi") which will act as sub-adviser to the USG Portfolio
pursuant to a Sub-Advisory Agreement between AMT Capital Advisers and Delphi. As
sub-adviser Delphi will provide investment research and advice and will
determine which portfolio securities shall be purchased or sold on behalf of
the USG Portfolio. AMT Capital Advisers' duties as investment adviser extend
to selecting, evaluating, and monitoring the sub-adviser.
Susan Hirsch, the portfolio manager at LBGAM primarily responsible for the
day-to-day management of the SGS Portfolio, will serve as portfolio manager of
the USG Portfolio, a position in which she will have the same discretion and
decision-making authority over the new USG Portfolio as she exercised over the
SGS Portfolio. Subsequent to the Reorganization, however, her services will be
retained by Delphi instead of LGBAM. AMT Capital Services, Inc. will serve as
administrator and Distributor to the USG Portfolio.
The Board of Directors of Lehman Funds believes that the proposed
Reorganization is in the best interests of the shareholders. The Reorganization
also will allow shareholders to continue to access the portfolio management
skills of Ms. Hirsch in spite of the fact that the SGS Portfolio will cease
operations. The investment advisory fee to be paid by the USG Portfolio will
be the same as that currently paid by the SGS Portfolio, and total Portfolio
expenses will not exceed the expense of the SGS Portfolio during its last
fiscal year.
At its meeting on November 1, 1995, the Directors approved the proposed
Reorganization.
Again, whether or not you expect to attend the meeting, it is important that
your shares be represented. Therefore, we urge you to vote FOR each of the
proposals contained in the Combined Prospectus/Proxy Statement.
Sincerely,
/S
Andrew D. Gordon
President
Lehman Selected Growth Stock Portfolio
A Series of
Lehman Brothers Funds, Inc.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on January 18, 1996
A Special Meeting (the "Meeting") of the Shareholders of
Lehman Selected Growth Stock Portfolio (the "SGS Portfolio"), a
series of Lehman Brothers Funds, Inc., a Maryland corporation
("Lehman Funds"), will be held on January 18, 1996, at 10:00 a.m.
Eastern time, at the offices of Lehman Brothers Funds, Inc. on the 26th floor,
conference room #4, located at 3 World Financial Center New York, New York
10285, or at such adjourned time as may be necessary for the holders of a
majority of SGS Portfolio's outstanding shares to vote for the following
purposes:
(1) To approve or disapprove the proposed Agreement and Plan
of Reorganization by and between Lehman Funds, on behalf of
its SGS Portfolio, and AMT Capital Fund, Inc. ("AMT Capital
Fund"), on behalf of its newly-created U.S. Selected Growth
Portfolio (the "USG Portfolio"), providing for the transfer of all
of the assets, subject to all of the liabilities, of SGS Portfolio in
exchange for Class B shares of the USG Portfolio (the "USG Shares"),
and the distribution of such USG Shares to the shareholders of
SGS Portfolio in complete liquidation of SGS Portfolio, as more
fully described in the accompanying Combined Prospectus/Proxy
Statement; and
(2) To consider and act upon any other matters that may properly
come before the meeting and any adjournments thereof.
The Agreement and Plan of Reorganization, the transactions
contemplated thereby and related matters are described in the
attached Combined Prospectus/Proxy Statement. A copy of the
Agreement and Plan of Reorganization is attached as Appendix
A to this Combined Prospectus/Proxy Statement.
THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
PROPOSAL
Only shareholders of record as of the close of business on
December 11, 1995 will be entitled to vote at the meeting and any
adjournments thereof.
YOUR COOPERATION IN PROMPTLY COMPLETING,
SIGNING AND RETURNING THE ENCLOSED PROXY
WILL BE APPRECIATED.
By order of the Board of Directors,
James A. Carbone
Chairman of the Board
Place: 3 World Financial Center, New York, New York 10285
Date: January 18, 1996
IMPORTANT: We urge you to sign, date and return your proxy
in the enclosed envelope which requires no postage and is
intended for your convenience. If you attend the meeting, you
may vote your shares in person.
LEHMAN SELECTED GROWTH STOCK PORTFOLIO
A Series of
LEHMAN BROTHERS FUNDS, INC.
3 World Financial Center
New York, NY 10285
(212) 526-7000
AMT CAPITAL FUND, INC.
430 Park Avenue
New York, NY 10022
(212) 308-4848
COMBINED PROSPECTUS/PROXY STATEMENT
____________________________
SOLICITATION OF PROXIES
This Combined Prospectus/Proxy Statement is furnished in
connection with the solicitation of proxies by the Board of
Directors of Lehman Brothers Funds, Inc. (the "Lehman Funds")
to be voted at a Special Meeting of Shareholders of the Lehman
Selected Growth Stock Portfolio (the "SGS Portfolio") to be held
on January 18, 1996 at 10:00 a.m. Eastern time, at the offices of
Lehman Brothers Funds, Inc. located at 3 World Financial Center, New York, New
York 10285, at any adjournment(s) thereof (the "Meeting").
The purpose of the Meeting is to consider an Agreement and
Plan of Reorganization (the "Reorganization Plan") among the
Lehman Funds, on behalf of the Lehman Selected Growth Stock
Portfolio ("SGS Portfolio"), an investment portfolio of Lehman
Funds, and AMT Capital Fund, Inc. (the "AMT Capital Fund"),
on behalf of the U.S. Selected Growth Portfolio (the "USG
Portfolio"), an investment portfolio of AMT Capital Fund, that
would effect the reorganization of the SGS Portfolio into the
USG Portfolio and certain transactions and other actions
contemplated thereby, as described below (the "Reorganization"
or "Proposal 1"). Pursuant to the Reorganization Plan, which
has been approved by the Board of Directors of Lehman Funds,
all of the assets of the SGS Portfolio would be acquired by the
USG Portfolio in exchange for Class B shares of common stock
(the "USG Shares") in the new USG Portfolio and the
assumption by USG Portfolio of all of the liabilities of the SGS
Portfolio. Such USG Shares then would be distributed to SGS
Portfolio shareholders at the rate of one new USG Share (or
fraction thereof) for each share (or fraction thereof) of common
stock in the SGS Portfolio. As a result of the proposed
transactions, each shareholder of the SGS Portfolio would receive
a number of full or fractional new USG Shares equal to the
number of SGS Portfolio shares owned by such SGS Portfolio
shareholder at the time of the Reorganization. Such new USG
Shares would have an aggregate net asset value on the effective
date of the Reorganization equal to the aggregate net asset value
of the SGS Portfolio shares. A copy of the form of the
Reorganization Plan is set forth in Appendix A to this Combined
Prospectus/Proxy Statement.
Lehman Funds and AMT Capital Fund are both open-end,
diversified investment companies (i.e., mutual funds)
incorporated in the state of Maryland. The investment policies
and restrictions of the new USG Portfolio will be substantially
similar to those of the SGS Portfolio. Each of the SGS Portfolio
and USG Portfolio has the primary investment objective of
seeking long-term capital appreciation. Each seeks to achieve
this investment objective through investments in equity securities
of small- and medium- sized U.S. companies which the adviser
or in the case of the USG Portfolio, the sub-adviser, believes have
the potential for above-average capital appreciation.
This Combined Prospectus/Proxy Statement, which should be
retained for future reference, sets forth concisely the information
about USG Portfolio, AMT Capital Fund, SGS Portfolio and
Lehman Funds, and the transactions contemplated by the
proposed Reorganization Plan, that an investor should know
before voting on the proposed Reorganization Plan. A copy of the
preliminary prospectus of the Class B shares of the USG
Portfolio, dated October 20, 1995, is included with this
Combined Prospectus/Proxy Statement and is incorporated by
reference herein.
A preliminary statement of additional information regarding the
new USG Portfolio, dated October 20, 1995, has been filed
with the Securities and Exchange Commission (the
"Commission"). Copies of this document may be obtained
without charge by contacting AMT Capital Services, Inc. at 430
Park Avenue, New York, New York 10022 or by telephoning
AMT Capital Services, Inc. at 1-800-762-4848.
The current prospectus and statement of additional information
regarding the SGS Portfolio, each dated November 29, 1995, are
incorporated by reference herein. A copy of the current
prospectus of the SGS Portfolio and a copy of the current statement of
additional information of the SGS Portfolio each may be obtained
without charge by contacting AMT Capital Services, Inc. at 430
Park Avenue, New York, New York 10022, or by telephoning
AMT Capital Services, Inc. at 1-800-762-4848.
A statement of additional information, dated December 14, 1995
relating to the proposed transactions and other actions described
in this Combined Prospectus/Proxy Statement, including
historical financial statements, has been filed with the
Commission and is incorporated by reference herein. Copies of
this statement of additional information may be obtained without
charge by contacting AMT Capital Services at 430 Park Avenue,
New York, New York 10022, or by telephoning AMT Capital
Services at 1-800-762-4848.
_______________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
__________________________
The date of this Combined Prospectus/Proxy Statement is
December 14, 1995.
COMBINED PROSPECTUS/PROXY STATEMENT
TABLE OF CONTENTS
Page
Introduction and Voting Information
Special Meeting: Voting of Proxies; Adjournment
Revocation of Proxies
Proxy Solicitation
Synopsis
Proposal 1- Approval or Disapproval of Agreement and
Plan of Reorganization
The Proposed Reorganization
Costs and Expenses of the Reorganization
Continuation of Shareholder Accounts; Share Certificates
Forms of Organization of Lehman Funds and AMT
Capital Fund
Operation of the USG Portfolio Following the
Reorganization
Purchases of USG Shares
Redemptions
Exchanges
Dividends and Distributions
Advisory and Distribution Fees and Expenses
Investment Objective and Policies
Federal Income Tax Consequences of the Proposed
Reorganization
Principal Risk Factors
Proposal 1- Approval or Disapproval of Agreement and Plan of
Reorganization
Reasons for the Proposed Reorganization
Continuity of Portfolio Management
Constant Investment Advisory Fees
Comparative Expense Table
Table of Expenses per $1,000 Investment
Federal Income Tax Consequences of the Proposed
Reorganization
Pro Forma Capitalization and Ratios
Summation
Description of AMT Capital Fund and the New USG Portfolio
Description of Administrator
Description of Distributor and Distribution Arrangements
Comparative Information on Shareholder Rights
General
Shares
Management of the Affairs of AMT Capital Fund, Inc.
Shareholder Meetings
Liability and Indemnification of Directors and Officers
Removal of Directors
Comparative Information on Investment Advisory Agreements
Additional Information about AMT Capital Fund, Inc. and the
U.S. Selected Growth Portfolio
Additional Information About Lehman Brothers Funds, Inc. and
the Lehman Selected Growth Stock Portfolio
Miscellaneous
Available Information
Legal Matters
Financial Statements and Experts
Other Business
Proposals for Future Meetings
Proxy for a Special Meeting of Shareholders
Part B
Statement of Additional Information for the U.S. Selected Growth Portfolio
Statement of Additional Information Table of Contents
Part C. Other Information
Indemnification
Exhibits
Signatures
Index to Exhibits Included in Part C
Appendix A: Agreement and Plan of Reorganization
LEHMAN SELECTED GROWTH STOCK PORTFOLIO
A Series of
LEHMAN BROTHERS FUNDS, INC.
3 World Financial Center
New York, NY 10285
COMBINED PROSPECTUS/PROXY STATEMENT
Special Meeting of Shareholders to be
held on January 18, 1996.
____________________________
INTRODUCTION AND VOTING INFORMATION
Special Meeting: Voting of Proxies: Adjournment
This Combined Prospectus/Proxy Statement is being furnished to
the shareholders of the SGS Portfolio in connection with the
solicitation by the Board of Directors of Lehman Funds of proxies
to be voted at a Special Meeting of Shareholders of the SGS
Portfolio to be held on January 18, 1996 at 10:00 a.m. Eastern time, at the
offices of Lehman Brothers Funds, Inc. located at 3 World Financial Center New
York, New York 10285, and at any adjournment(s) thereof. The purpose of the
Meeting is to approve or disapprove the Reorganization Plan by and between
Lehman Funds, on behalf of the SGS Portfolio, and AMT Capital
Fund, on behalf of the USG Portfolio, providing for the transfer
of all of the assets, subject to all of the liabilities, of SGS
Portfolio to the USG Portfolio in exchange for USG Shares, and
the distribution of such USG Shares to the shareholders of SGS
Portfolio in complete liquidation of the SGS Portfolio, as fully
described hereafter in this Combined Prospectus/Proxy
Statement; and to consider and act upon any other matters that
may properly come before the meeting and any adjournments
thereof.
Record holders of shares of common stock of the SGS Portfolio at
the close of business on December 11, 1995, the record date, will be
entitled to one vote per share and proportionate fractional votes
for fractional shares on all business to be presented at the
Meeting. On the record date, _______ shares of common stock
of the SGS Portfolio were outstanding and entitled to be voted at
the meeting. These shares were held of record on Lehman
Funds' books primarily by The Shareholder Services Group
("TSSG"), Lehman Funds' administrator and a subsidiary of
First Data Corporation, Lehman Funds' transfer agent. As of the
record date there were two 5% beneficial shareholders. Lehman
Brothers Treasury Department ("LBTD") holds ____ shares
(___%) of the SGS Portfolio, and Lehman Brothers Incorporated
is the record holder of ___ shares (___%) of the SGS Portfolio
held for the benefit of ____________as of the record date.
Lehman Funds and _____________, as record holders of ___%
of the outstanding shares of the SGS Portfolio, may be deemed a
control person of the SGS Portfolio. It has been Lehman Funds'
practice to invest seed capital in certain of the mutual funds
advised by its affiliates to assist the funds in getting established.
Lehman Brothers Funds continually assesses its needs for capital,
and in connection therewith redeems seed capital in the ordinary
course after a fund is established. In that connection, Lehman
Funds intends to redeem its current shares in the SGS Portfolio
in an orderly manner.
The enclosed form of proxy, if properly executed and returned,
will be voted in accordance with the choices specified thereon. If
no choice is specified with respect to a proposal, the proxy will be
voted in favor of the proposal being considered, and, in the
discretion of the proxies named in the proxy card, on any other
matter properly brought before the Meeting. The representation
in person or by proxy of a majority of the outstanding voting
securities of SGS Portfolio is necessary to constitute a quorum for
voting on the proposals herein. If a quorum is present at the
meeting, the approval of the Reorganization Plan will require the
affirmative vote of at least a majority of the outstanding voting
securities of the SGS Portfolio. As defined in the Investment Act of 1940 (the
"1940 Act"), the term "majority of the outstanding voting securities" means the
vote of the lesser of (i) 67% of the voting shares of the SGS
Portfolio present in person or by proxy at a meeting where more
than 50% of the outstanding voting shares are present in person
or by proxy; or (ii) more than 50% of the outstanding voting
shares of the Fund (a "1940 Act Majority"). In the event that a
quorum is present at the meeting but sufficient votes to approve a
proposal are not received, or if a quorum is not present, an
affirmative vote of the majority of shares represented at the
meeting for adjournment will cause the meeting to be adjourned
to permit the further solicitation of proxies. For purposes of
establishing a quorum, abstentions and broker non-votes will be
treated as shares that are present. Broker "non-votes" are proxies
received by the SGS Portfolio from brokers or nominees when the
broker or nominee has neither received instructions from the
beneficial owner or other persons entitled to vote on a particular
matter. Abstentions and broker "non-votes" are equivalent to a
vote against the proposals.
The Reorganization Plan provides that the expenses of the
Reorganization including the costs and expenses incurred in the
preparation and mailing of the notice, this Combined
Prospectus/Proxy Statement and the proxy, and solicitation of
proxies, other than the legal expenses of LBGAM, will be borne
by AMT Capital Advisers, Inc. ("AMT Capital Advisers").
The enclosed proxy is revocable by you at any time prior to the
exercise thereof by submitting a written notice of revocation or
subsequently executed proxy. Signing and mailing the proxy will
not affect your right to give a later proxy or to attend the Meeting
and vote your shares in person.
This Proxy Statement, the Notice of Special Meeting of
Shareholders and the form of proxy are being first mailed to
shareholders on or about December 19, 1995.
The Board of Directors of Lehman Funds has unanimously
approved, and recommends that shareholders vote FOR,
Proposal 1, Approval of the Agreement and Plan of
Reorganization and the transactions contemplated thereby described below.
SYNOPSIS
The following is a summary of certain information contained
elsewhere in this Combined Prospectus/Proxy Statement, the
prospectuses of Lehman Funds and AMT Capital Fund, and the
Reorganization Plan. Lehman Funds shareholders should read this
entire Combined Prospectus/Proxy Statement carefully.
PROPOSAL 1
APPROVAL OF THE PROPOSED AGREEMENT AND PLAN OF REORGANIZATION AND THE
TRANSACTIONS CONTEMPLATED THEREBY.
The Proposed Reorganization
SGS Portfolio shareholders will be asked at the Meeting to vote upon
and approve the Reorganization Plan. The Reorganization Plan is set
forth in Appendix A to this Combined Prospectus/Proxy Statement.
Pursuant to the Reorganization Plan, the SGS Portfolio, a series of
Lehman Funds, would effectively be reorganized into the new Class B
shares (the "USG Shares") of the USG Portfolio, a series of AMT
Capital Fund. The Reorganization Plan sets forth the terms and
conditions under which the proposed transactions contemplated by the
Reorganization are to be consummated. The Board of Directors of
Lehman Funds, including the "non-interested persons" of Lehman
Funds, as that term is defined in Section 2(a)(19) of the 1940 Act (the
"Lehman Independent Directors"), and the Board of Directors of AMT
Capital Fund including the "non-interested persons" of AMT Capital
Fund, as that term is defined in Section 2(a)(19) of the 1940 Act (the
"AMT Capital Fund Independent Directors"), have unanimously
approved the Reorganization Plan.
The consummation of the transactions contemplated by the
proposed Reorganization is subject to a number of conditions set
forth in the Reorganization Plan, some of which conditions may
be waived by Lehman Funds (see "The Proposed Reorganization-
- - - Agreement and Plan of Reorganization" under Proposal 1
below). Among the significant conditions (which may not be
waived) are (i) the receipt by Lehman Funds and AMT Capital
Fund of an opinion of counsel as to certain Federal income tax
aspects of the Reorganization (see "The Proposed
Reorganization--Federal Income Tax Consequences of the
Proposed Reorganization" under Proposal 1, below) and (ii) the
approval of the Reorganization Plan by the affirmative vote of the
holders of at least a 1940 Act Majority of the outstanding shares
of the SGS Portfolio. The Reorganization Plan provides for the
acquisition of all of the assets of the SGS Portfolio by the USG
Portfolio in exchange for USG Shares and the assumption by
USG Portfolio of all of the liabilities of the SGS Portfolio. The
USG Shares then would be distributed to the SGS Portfolio
shareholders at a rate of one new USG Share (or fraction thereof)
for each SGS Portfolio share (or fraction thereof ) held. The
aggregate net asset value of a USG Share received by an SGS
Portfolio shareholder would be equal to the aggregate net asset
value of a share of the SGS Portfolio immediately prior to the
closing of the Reorganization. The Reorganization is anticipated
to occur on January 19, 1996, or such later date as the parties may
agree (the 'Reorganization Closing Date").
For the reasons set forth below under "The Proposed
Reorganization--Reasons for the Proposed Reorganization" under
"Proposal 1", Lehman Funds' Board, including all of the
Lehman Independent Directors, has unanimously concluded that
the Reorganization would be in the. best interest of the SGS
Portfolio and its shareholders and the interests of the existing
SGS Portfolio shareholders would not be diluted as a result of the
transactions contemplated by the Reorganization. Lehman
Funds' Board, therefore, has submitted the Reorganization Plan
effecting the Reorganization for approval by the SGS Portfolio
shareholders at the Meeting, and recommends the approval of the
Reorganization Plan.
Costs and Expenses of the Reorganization
The Reorganization Plan provides that AMT Capital Advisers
will bear all the costs and expenses of the Reorganization of the
SGS Portfolio, including professional fees and the costs of the
Meeting, such as the costs and expenses incurred in the
preparation and mailing of the notice, this Combined
Prospectus/Proxy Statement, and the solicitation of proxies,
which may include reimbursement to broker-dealers and others
who forward proxy materials to their clients. Such costs and
expenses to be paid by AMT Capital Advisers will not result in
an increase in management or distribution fees payable
by the SGS Portfolio or the USG Portfolio (see "Advisory and
Distribution Fees and Expenses" below).
Continuation of Shareholder Accounts; Share Certificates
As a result of the proposed transactions contemplated by the
Reorganization, each SGS Portfolio shareholder will cease to be a
shareholder of the SGS Portfolio and, as described below, will
receive USG Shares at the rate of one USG Share (or fraction
thereof) for each SGS Portfolio share (or fraction thereof) held on
the Reorganization Closing Date, and the USG Shares
will have an aggregate net asset value equal to the aggregate net
asset value of such shareholder's SGS Portfolio shares as of the
close of business on the Reorganization Closing Date.
The USG Portfolio will establish accounts for all SGS Portfolio
shareholders containing the appropriate number of USG
Shares. Receipt of USG Shares by an SGS Portfolio shareholder
will be deemed to authorize the USG Portfolio and its agents to
establish for the SGS Portfolio shareholder, with respect to the
USG Portfolio, all of the same (i) account options, including
telephone redemptions, if any, (ii) dividend and distribution
options, and (iii) options for payment that SGS Portfolio
shareholders had elected previously with respect to the SGS
Portfolio. Similarly, no further action will be necessary in order
to continue any retirement plan currently maintained by a SGS
Portfolio shareholder, with respect to USG Shares.
SGS Portfolio shareholders to whom certificates have been issued
will be required to surrender their certificates in order to receive
USG Shares.
No sales charge will be imposed in connection with the issuance
of USG Shares to the SGS Portfolio shareholders
pursuant to the Reorganization.
Forms of Organization of Lehman Funds and AMT Capital Fund
The USG Portfolio is a newly-created series of AMT Capital
Fund, a Maryland corporation organized on August 3, 1993, and
an open-end management investment company registered under
the 1940 Act. In addition, AMT Capital Fund has two other
series of shares outstanding: the Money Market Portfolio and the
HLM International Equity Portfolio. The operations of the AMT
Capital Fund and of the USG Portfolio are governed by the
Articles of Incorporation and the By-Laws of AMT Capital Fund;
and by Maryland Law, as applicable.
SGS Portfolio is an investment portfolio of Lehman Funds, a
Maryland corporation and an open-end management investment
company registered under the 1940 Act. The operations of
Lehman Funds and the SGS Portfolio are governed by the
Articles of Incorporation and the By-Laws of Lehman Funds, and
by Maryland Law, as applicable.
The Lehman Funds (including the SGS Portfolio) and AMT
Capital Fund (including the USG Portfolio) are also subject to the
provisions of the 1940 Act, and the rules and regulations of the
Securities and Exchange Commission (the "Commission")
thereunder.
Operation of the USG Portfolio Following the Reorganization
Upon consummation of the Reorganization, USG Portfolio will
operate in a manner that is substantially similar to the current
operation of the SGS Portfolio. The USG Portfolio will be
governed by the Board of Directors and officers of AMT Capital
Fund. Background information with respect to AMT Capital
Fund's directors and officers is set forth in USG Portfolio's
statement of additional information, which is available upon
request from AMT Capital Services. The responsibilities,
powers, and fiduciary duties of the directors of AMT Capital
Fund are substantially similar to those of the directors of Lehman
Funds. AMT Capital Fund's directors supervise the business
affairs and investments of the USG Portfolio, which will be
managed on a daily basis by AMT Capital Advisers, the adviser,
and Delphi Asset Management ("Delphi"), the sub-adviser, to the
USG Portfolio. Susan Hirsch, the portfolio manager at LBGAM
primarily responsible for the day-to-day management of the SGS
Portfolio, will serve as portfolio manager of the USG Portfolio, a
position in which she will have the same discretion and decision-
making authority over the new USG Portfolio as she exercised
over the SGS Portfolio. Subsequent to the Reorganization,
however, her services will be retained by Delphi instead of
LGBAM. AMT Capital Services Inc. ("AMT Capital Services")
will serve as administrator and distributor to the USG Portfolio.
The investment objective, policies, and restrictions of the new
USG Portfolio will be substantially similar to those of the SGS
Portfolio.
Purchases of USG Shares
The USG Shares have rights that are substantially similar to the
shares currently offered by SGS Portfolio; however, the USG
Shares will have no contingent deferred sales charges
("CDSC"), and the CDSC that is currently applicable to shares of
the SGS Portfolio will be waived in connection with the disposal
of SGS Portfolio shares as part of the Reorganization. In
addition, the USG Portfolio has designated a class of its shares as
Class A shares, none of which have been offered to the public. For
information regarding the terms under which shares of the USG
Portfolio are offered and applicable distribution charges, see
"Purchase of Shares" in the preliminary prospectus of the USG
Portfolio.
The SGS Portfolio has Lehman Brothers Inc. ("LBI") serve as its
distributor. The new USG Portfolio will have AMT Capital
Services as the distributor pursuant to a Distribution Agreement (the
"Distribution Agreement")
with AMT Capital Fund. The Distribution Agreement between AMT Capital Fund and
AMT Capital Services is substantially similar to the distribution agreement
between LBI and the SGS Portfolio. Under the Distribution Agreement and the
Services and Distribution Plan (the "New Services and Distribution Plan", AMT
Capital Services may have selling agreements with several dealers which may
allow for greater portfolio share distribution opportunities whereas SGS Shares
are only sold by LBI. LBI will serve as a dealer in USG Shares under a new
Dealer Agreement between AMT Capital Services and LBI.
The New Services and Distribution
Plan to be in effect with respect to the USG Shares,
pursuant to Rule 12b-1 of the 1940 Act , will be substantially similar in all
material respects to the Services and Distribution Plan currently in place
for the SGS Portfolio (the "Current Services and Distribution Plan").
Redemptions
USG Portfolio offers the same redemption rights and privileges
currently offered by the SGS Portfolio, and such rights and
privileges are subject to the same restrictions and procedures
currently prescribed by the SGS Portfolio, except that the USG
Portfolio does not impose any CDSC, whereas the SGS Portfolio imposes a
maximum CDSC of 2.00% of the redemption proceeds. The CDSC will be waived
for all SGS shareholders in connection with the Reorganization. For information
regarding redemption of USG Portfolio shares, see "Redemption of Shares" in the
preliminary prospectus of the USG Portfolio.
Exchanges
The USG Portfolio does not allow for the exchange of its shares.
Dividends and Distributions
As is SGS Portfolio's practice, USG Portfolio will distribute its
investment income and net realized capital gains, if any, once a
year, normally either at the end of the year in which they are earned or at
the beginning of the next year. Unless a shareholder instructs
AMT Capital Fund to pay dividends or capital gains distributions
in cash and to credit them to the shareholder's account, dividends
and distributions will be reinvested automatically in additional
USG Shares at their net asset value, except that for SGS
shareholders who become USG shareholders in connection with
the Reorganization, the elections with respect to payments of
dividends and distributions that such shareholders previously
made with respect to their shares of the SGS Portfolio will
remain the same. Shares redeemed during a given month are
entitled to dividends and distributions declared up to and
including the date of redemption.
Similar to SGS Portfolio's practice, each USG Portfolio
shareholder or its authorized representative will receive an
annual statement designating the amount of any dividends and
distributions made during the year and their federal tax
qualification.
Advisory and Distribution Fees and Expenses
The SGS Portfolio is advised by LGBAM. The new USG
Portfolio will be advised by its investment adviser, AMT Capital
Advisers, and sub-adviser, Delphi. The new Advisory
Agreement is similar to the current Advisory Agreement, except
for the following differences: (1) AMT Capital Advisers replaces
LGBAM as investment adviser; (2) the new Advisory Agreement
permits AMT Capital Advisers to engage a sub-adviser; and (3)
the new Advisory Agreement provides for indemnification of the
adviser in certain circumstances (as described below). AMT
Capital Advisers has selected Delphi to serve as sub-adviser to
the USG Portfolio pursuant to a Sub-Advisory Agreement. The
sub-adviser will provide investment research and advice and will
determine which portfolio securities shall be purchased or sold on
behalf of the Portfolio. AMT Capital Advisers' duties as
investment adviser include selecting, evaluating, and monitoring
the sub-adviser.
As described below under Proposal 1, the respective terms of the
new Advisory Agreement, Distribution Agreement, and New Services and
Distribution Plan with respect to the USG Portfolio are substantially similar
to those of the current Advisory Agreement, Distribution Agreement, and Current
Services and Distribution Plan for the SGS Portfolio. Accordingly, the
aggregate contractual rates payable by the USG Portfolio for investment
advisory services and distribution services will remain the same under the
new Advisory Agreement, Distribution Agreement, and New Services and
Distribution Plan, respectively.
Investment Objective and Policies
Upon consummation of the Reorganization, the investment objective,
policies and restrictions of the USG Portfolio will be substantially
similar to those of the SGS Portfolio. Accordingly, the primary
objective of the USG Portfolio is to seek long-term capital
appreciation. It will seek to achieve this investment objective through
investments in equity securities of small- and medium-sized U.S.
companies which the sub-adviser believes have the potential for
above-average capital appreciation. The investment objective of the
USG Portfolio is a fundamental policy and may not be changed
without the approval of vote of at least a 1940 Act Majority of the
outstanding voting securities of the USG Portfolio. The investment
objective, policies, and restrictions of the USG Portfolio and the
investment risks are described under "Investment Objective and
Policies" in the preliminary prospectus of the USG Portfolio and
under "Investment Objective and Policies" in the preliminary
statement of additional information of the USG Portfolio.
Federal Income Tax Consequences of the Proposed
Reorganization
The USG Portfolio and the SGS Portfolio will receive, as a
condition to the Reorganization, an opinion from Dechert Price
& Rhoads, counsel to the USG Portfolio, to the effect that the
proposed Reorganization will constitute a tax-free reorganization
within the meaning of Section 368(a) of the U.S. Internal
Revenue Code of 1986, as amended (the "Code"). Accordingly,
no gain or loss generally will be recognized by the USG Portfolio,
the SGS Portfolio or their respective shareholders. For additional
information regarding the Federal income tax consequences of
the Proposed Reorganization, see 'The Proposed Reorganization-
Federal Income Tax Considerations of the Proposed
Reorganization" under Proposal 1, below.
PRINCIPAL RISK FACTORS
Because the investment objective, policies, and restrictions of the
USG Portfolio are substantially similar to those of the SGS
Portfolio, the risks associated with the particular investment
policies and strategies that the USG Portfolio and the SGS
Portfolio are authorized to employ also are substantially similar.
Investment in the USG Portfolio may involve an above-average risk,
as the securities of the kinds of companies in which the USG
Portfolio invests may be subject to significant price fluctuation.
Furthermore, the USG Portfolio may engage in the use of derivatives which may
entail certain risks. For additional information regarding the principal risk
factors of investing in the USG Portfolio, see "Risk Factors and Special
Considerations" in the preliminary prospectus of the USG Portfolio.
PROPOSAL 1
APPROVAL OF THE PROPOSED AGREEMENT AND
PLAN OF REORGANIZATION AND THE TRANSACTIONS CONTEMPLATED THEREBY.
On November 1, 1995, the Board of Directors of Lehman Funds,
including all of the Lehman Independent Directors, approved the
Reorganization Plan which is subject to approval by the
shareholders of SGS Portfolio. The Reorganization Plan
provides for (a) the transfer of all of the assets and liabilities of
the SGS Portfolio to the newly formed USG Portfolio, subject to
all of the liabilities of USG Shares, in exchange solely for USG
Shares, and (b) the distribution by the SGS Portfolio to its
shareholders of USG Shares in complete liquidation of the SGS
Portfolio.
As a result of the Reorganization, each shareholder of the SGS
Portfolio will become a shareholder of the USG Portfolio
and will hold, immediately after the Reorganization Closing Date, the same
number of USG Shares that such shareholder held in the SGS Portfolio
immediately before the Closing. The investment objective,
policies, restrictions, risk factors, and investment approach of the
USG Portfolio will be substantially similar to those of the SGS
Portfolio. The new Advisory Agreement is substantially similar
to the current Advisory Agreement, except for the following
differences: AMT Capital Advisers replaces LGBAM as the
investment adviser, the new Advisory Agreement permits AMT
Capital Advisers to engage a sub-adviser, and the new Advisory
Agreement provides that the USG Portfolio will indemnify AMT
Capital Advisers in certain circumstances. AMT Capital
Advisers has selected Delphi to serve as sub-adviser to the USG
Portfolio pursuant to a Sub-Advisory Agreement between AMT
Capital Advisers and Delphi. The sub-adviser will provide
investment research and advice and will determine which
portfolio securities shall be purchased or sold on behalf of the
Portfolio. AMT Capital Advisers' duties as investment adviser
include selecting, evaluating, and monitoring the sub-adviser.
Susan Hirsch, the portfolio manager at LBGAM primarily
responsible for the day-to-day management of the SGS Portfolio,
will serve as portfolio manager of the USG Portfolio, a position
in which she will have the same discretion and decision-making
authority over the new USG Portfolio as she exercises over the
SGS Portfolio. Subsequent to the Reorganization, however, her
services will be retained by Delphi instead of LGBAM. AMT
Capital Services will serve as administrator and distributor to the
USG Portfolio.
AMT Capital Fund is a registered investment company,
organized as a corporation under the laws of Maryland in 1992,
with its principal place of business at 430 Park Avenue, New
York, New York 10022. AMT Capital Fund offers two other
existing portfolios, the HLM International Equity Portfolio and
the Money Market Portfolio, neither of which is involved in the
Reorganization. AMT Capital Fund recently created the USG
Portfolio into which it is proposed that the SGS Portfolio will be
reorganized. In the event that shareholders of SGS Portfolio do
not approve the Reorganization Plan, the Directors of Lehman
Funds will consider the alternatives available to them.
A copy of the Reorganization Plan is attached to this Combined
Prospectus/Proxy Statement as Appendix A, and the description
of the Reorganization Plan therein is qualified in its entirety by
reference to Appendix A.
Reasons for the Proposed Reorganization
Continuity of Portfolio Management. Susan Hirsch has served as
the portfolio manager of the SGS Portfolio since its inception in
May, 1994, and has been primarily responsible for the day-to-day
management of the SGS Portfolio and thus responsible for its
current track record. Prior to joining LBGAM as portfolio
manager in 1994, Ms. Hirsch was a Senior Vice President at
Lehman Funds, where she had primary responsibility for the
selection of investments for the Lehman Brother Selected Growth
Stock List. Ms. Hirsch is a member of Institutional Investor
Magazine's 1991, 1992 and 1993 All American Research Team
small growth stocks.
In light of the recent decision by LBGAM to exit certain of its
mutual fund businesses, the Reorganization allows current
shareholders to continue to access the investment expertise of
Ms. Hirsch. Ms. Hirsch has agreed to terminate her employment
at LBGAM effective upon the Closing Date and join Delphi, the
sub-adviser to the USG Portfolio. Consequently, the transition of
Ms. Hirsch from managing the SGS Portfolio to managing the
USG Portfolio will be uninterrupted.
Constant Investment Advisory Fees. Under the current Advisory
Agreement between Lehman Funds and LBGAM, SGS Portfolio
pays LGBAM a monthly base fee at the annual rate of 0.75% of
the average daily net assets of the SGS Portfolio. Under the new
Advisory Agreement between AMT Capital Fund and AMT
Capital Advisers, the USG Portfolio will pay AMT Capital
Advisers a monthly base fee at the annual rate of 0.75% of the
average daily net assets of the USG Portfolio. AMT Capital
Advisers will pay Delphi, the sub-adviser, its sub-advisory fee
pursuant to the Sub-Advisory Agreement out of AMT Capital
Advisers' investment advisory fee.
LBGAM and TSSG have voluntarily agreed to reimburse the
SGS Portfolio for "Total Fund Operating Expenses," in excess of
2.10% of its average net assets. AMT Capital Advisers, Delphi
and AMT Capital Services have similarly voluntarily agreed to
reimburse the USG Portfolio for "Total Fund Operating
Expenses," in excess of 2.10% of its average net assets, the total
expense ratio of the USG Portfolio through the end of its most
recent fiscal year will not be greater than that of the SGS
Portfolio for its most recent fiscal year.
The following table and example provide a comparison of the
annual operating expenses (as a percentage of average net assets)
the SGS Portfolio currently pays and the estimated amounts the
USG Portfolio would pay following consummation of the
Reorganization:
Comparative Expense Table
Shareholder Transaction Expenses
SGS Portfolio USG Portfolio
Existing Shareholder Expense Est. Shareholder Expense
Contingent Deferred 2.00% (a) 0%
Sales Charge
(maximum charge as
a percentage of
redemption proceeds)
(a) The CDSC will be waived for shareholders of the SGS Portfolio in connection
with Reorganization.
Annual Fund Operating Expenses
SGS Portfolio USG Portfolio
Existing Expense Estimated Expense
Investment Advisory Fees 0.75% 0.75% (b)
Other Expenses- including 0.35% (c) 0.35% (c)
Administratioon Fees
(after reimbursement).
Other Expenses-including 0.35% (b) 0.35% (b)
Administration Fees
Rule 12b-1 Fees 1.00% (c) 1.00% (d)
Total Operating Expenses 2.10% (e) 2.10% (f)
(after reimbursement)
Rule 12b-1 Fees 1.00% (d) 1.00% (e)
Maximum CDSC 2.00% None
(as a percentage of
redemption proceeds)
Total Operating Expenses 2.10% (f) 2.10% (g)
(after reimbursement)
(a) The SGS Portfolio will waive the CDSC for shareholders of the SGS
Portfolio in connection with the Reorganization.
(b) This amount includes advisory fees and sub-advisory fees.
(c) This amount reflects voluntary expense
reimbursements as explained hereinafter. Absent these
voluntary expense reimbursements, the ratio of "Other
Expenses" to average net assets would have been 0.46%
for the SGS Portfolio, and is estimated to be 0.75% for the
USG Portfolio.
(d) LBI receives an annual 12b-1 fee of 1.00% of the value
of the Fund's average daily net assets, consisting of a .75%
distribution fee and a .25% service fee. Under the rules of
the National Association of Securities Dealers, Inc. (the
"NASD") a 12b-1 fee may be treated as a sales charge for
certain purposes. Because a 12b-1 fee is an annual fee
charged against the assets of a fund, long-term
shareholders may indirectly pay more in total sales
charges than the economic equivalent of the maximum
front-end sales charge permitted by rules of the NASD.
(e) USG Portfolio has adopted the same 12b-1 fee as
described in (c) which fee is paid to AMT Capital
Services.
(f) This amount reflects the agreement by LBGAM and
the SGS Portfolio's administrator to reimburse the SGS
Portfolio for "Total Fund Operating Expenses" in excess
of 2.10% average net assets for a period of at least one
year from the date of the Prospectus dated November 28,
1994. Absent these voluntary expense reimbursements,
the ratio of "Total Fund Operating Expenses" to average
net assets would be 2.21%.
(g) The amount set forth for "Total Operating Expenses"
reflects the agreement by AMT Capital Advisers, Delphi
and AMT Capital Services to reimburse the USG Portfolio
for "Total Fund Operating Expenses" in excess of 2.10%
of its average net assets for an indefinite time period.
Absent these voluntary expense reimbursements, the ratio
of "Total Fund Operating Expenses" is estimated to be
2.5%.
Example
You would pay the following expenses on a $1,000 investment
in each of the SGS Portfolio and the USG Portfolio, assuming
(1) 5% annual return and (2) redemption at the end of each
time period.
1 Year 3 Years 5 Years 10 Years
SGS Portfolio $21 $66 $113 $243
USG Portfolio $21 $66 $113 $243
These examples should not be considered a representation of
future expenses or performance. Actual operating expenses and
annual returns may be greater or less than those shown.
Federal Income Tax Consequences of the Proposed
Reorganization The SGS Portfolio and Lehman Funds will
receive, as a condition to the Reorganization, an opinion from
Dechert Price & Rhoads, counsel to the USG Portfolio, to the
effect that, based on the facts, assumptions and representations of
the parties, for federal income tax purposes: (i) the acquisition
by the USG Portfolio of substantially all of the assets of the SGS
Portfolio in exchange solely for USG Shares and the assumption
by the USG Portfolio of the liabilities of the SGS Portfolio,
followed by the distribution of such USG Shares to the SGS
Portfolio shareholders in exchange for their shares of the SGS
Portfolio in complete liquidation of the SGS Portfolio, will
constitute a "reorganization" within the meaning of Section
368(a) of the U.S. Internal Revenue Code of 1986, as amended
(the "Code"), and the USG Portfolio and the SGS Portfolio will
each be "a party to a reorganization" within the meaning of
Section 368(b) of the Code; (ii) no gain or loss will be recognized
to the SGS Portfolio upon the transfer of substantially all of its
assets to the USG Portfolio in exchange solely for USG Shares
and the assumption by the USG Portfolio of the liabilities of the
SGS Portfolio, or upon the distribution to the target shareholders
of such USG Shares; (iii) the basis of the assets of the SGS
Portfolio in the hands of the USG Portfolio will be, in each
instance, the same as the basis of those assets in the hands of the
SGS Portfolio immediately prior to the Reorganization; (iv) the
holding period of the assets of the SGS Portfolio in the hands of
the USG Portfolio will include the period during which the assets
were held by the SGS Portfolio; (v) no gain or loss will be
recognized by the USG Portfolio upon the receipt of the assets of
the SGS Portfolio in exchange for USG Shares; (vi) no gain or
loss will be recognized by the shareholders of the SGS Portfolio
upon the receipt of USG Shares solely in exchange for their
shares of the SGS Portfolio; (vii) the basis of the USG Shares
received by the shareholders of the SGS Portfolio will be the
same as the basis of the shares of the SGS Portfolio surrendered
in exchange therefor; and (viii) the holding period of the USG
Shares received by the shareholders of the SGS Portfolio will
include the holding period of the shares of the SGS Portfolio
surrendered in exchange therefore, provided that on the date of
the exchange the shares of the SGS Portfolio were held as capital
assets in the hands of the shareholders of the SGS Portfolio.
The foregoing is only intended to be a summary of the principal
Federal income tax consequences of the Reorganization and
should not be considered to be tax advice. In addition, while it is
believed that the foregoing is correct, it is not certain that the
U.S. Internal Revenue Service will agree with the conclusions
stated above. Shareholders of the SGS Portfolio may wish to
consult their own tax advisers regarding the Federal, state and
local tax consequences with respect to the foregoing matters and
any other considerations which may be applicable to the
shareholders of the SGS Portfolio.
Pro Forma Capitalization and Ratios. The following table shows
the capitalization of the SGS Portfolio and the USG Portfolio
separately as of October 31, 1995 (unaudited), and combined
in the aggregate on a pro forma basis (unaudited), as of that date
giving effect to the Reorganization:
SGS Portfolio USG Portfolio Pro Forma Combined
Net Assets: $39,307,059 $0 $39,307,059
NetAssetValue $13.51 $0 $13.51
("NAV") Per Share:
Shares Outstanding $2,904,618 $0 $2,904,618
The following table shows the ratio of expenses to average net assets
and the ratio of net investment income to average net assets of the SGS
Portfolio and the USG Portfolio separately for the year ended
October 31, 1995 (unaudited), and combined in the aggregate on a
pro forma basis (unaudited), as of that date, giving effect to the
Reorganization:
SGS Portfolio USG Portfolio Pro Forma Combined
Ratio of Expenses to 2.10% (a) 0% 2.10% (a)
Average Net Assets
Ratio of Net Investment
Income to -1.67% 0% -1.67%
Average Net Assets
(a) This amount reflects the agreement by LBGAM and the SGS Portfolio's
administrator to reimburse the SGS Portfolio for "Total Fund Operating
Expenses" in excess of 2.10% average net assets for a period of at least one
year from the date of the Prospectus dated November 28, 1994. Absent these
voluntary expense reimbursements, the ratio of "Total Fund Operating
Expenses" to average net assets would be 2.21%. AMT Capital Advisers,
Delphi and AMT Capital Services have agreed to reimburse the USG Portfolio f
Expenses" in excess of 2.10% of its average net assets for an indefinite time
period. Absent these voluntary expense reimbursements, the ratio of "Total
Fund Operating Expenses" is estimated to be 2.5%.
Summation Based upon the foregoing, Lehman Fund's Board of Directors
has determined that the Reorganization is in the best interests of the
shareholders of the SGS Portfolio, and has determined further that the
interests of the shareholders will not be diluted as a result of the
Reorganization.
In reaching this conclusion, the Board of Directors of Lehman Funds
considered many factors, including without limitation the following: the
compatibility of the investment objective, policies and restrictions, as well
as the service features available to shareholders, of the SGS Portfolio and
the USG Portfolio; the capabilities and resources of AMT Capital Advisers,
Delphi and the other proposed service providers in the areas of investment,
administration, fund accounting, transfer agency, custody, marketing and
shareholder servicing, as applicable; expense ratios and available
information regarding the fees and expenses of the SGS Portfolio and the
USG Portfolio as well as similar funds; the terms and conditions of the
Reorganization and whether the Reorganization would result in a dilution
of shareholder interests; costs to be incurred by the SGS Portfolio and the
USG Portfolio in connection with the Reorganization; tax consequences of
the Reorganization; possible alternatives to the Reorganization; and the
commitment of AMT Capital Advisers and its affiliates to maintain and
enhance the business of the USG Portfolio for the benefit of shareholders of
the USG Portfolio, including former shareholders of the SGS Portfolio.
Description of AMT Capital Fund and the New USG Portfolio
The USG Portfolio has been organized specifically for the purpose of
effectuating the Reorganization of the SGS Portfolio. Prior to the Closing,
the USG Portfolio will have no assets (other than a nominal investment by
Alan M. Trager, President of AMT Capital Services, as the sole initial
shareholder of the USG Portfolio) and no liabilities. The investment
objective, policies, restrictions, risk factors, and investment approach of
USG Portfolio will be substantially similar to those of the SGS Portfolio at
the Reorganization Closing Date, except that the USG Portfolio is prohibited
from borrowing money for leveraging purposes. Although the SGS Portfolio is
permitted to borrow for leveraging purposes, in practice, it does not do so.
The USG Portfolio will be advised by a new investment adviser, AMT Capital
Advisers, with Delphi serving as the sub-adviser. However, Susan Hirsch has
agreed to continue to serve as portfolio manager since Delphi has retained
her services to manage the new portfolio. AMT Capital Services will serve as
the administrator and distributor to the new portfolio.
The manner in which USG Shares are distributed and the distribution
system will be substantially the same as for the SGS Portfolio, except for
differences discussed in the section "Distributor." In addition, dividends on
USG Shares will be declared and paid on the same basis and at the same
times as dividends are paid to shareholders of the SGS Portfolio. Further,
all rights, privileges and obligations of shareholders existing immediately
prior to the reorganization are substantially similar in all material
respects to those which shareholders will be entitled as shareholders of the
USG Portfolio, except for the differences discussed below under "Comparative
Information on Shareholder Rights".
Description of Administrator
AMT Capital Services will serve as the administrator to the USG Portfolio
pursuant to an Administration Agreement with AMT Capital Fund, on
behalf of the USG Portfolio, which is substantially similar in all material
respects to the current Administration Agreement except that AMT Capital
Services will serve as administrator.
AMT Capital Services provides administrative services to, and assists in
managing and supervising all aspects of, the general day-to-day business
activities and operations of the USG Portfolio other than investment
advisory activities, including oversight of custodial, transfer agency,
dividend disbursing, accounting, auditing, compliance and related services.
AMT Capital Services acts as an administrator responsible for managing
all aspects of the USG Portfolio's operations. It focuses on selecting,
managing, and replacing, if necessary, the other service providers to secure
the best services at the best prices available on the market.
Founded in early 1992, AMT Capital Services is a registered broker-dealer
whose senior managers are former officers of Morgan Stanley and The
Vanguard Group, where they were responsible for the administration and
distribution of The Pierpont Funds, a $5 billion fund complex now owned
by J.P. Morgan, and the private label administration group of Vanguard,
which administered over $10 billion in assets in the aggregate for 45
portfolios.
Description of Distributor and Distribution Arrangements
AMT Capital Services will also serve as the distributor to the USG Portfolio
under the Distribution Agreement with AMT Capital Fund. LBI will serve as a
dealer in USG Shares under a new Dealer Agreement between AMT Capital
Services and LBI. AMT Capital Fund's Distribution Agreement relating to the
USG Shares is substantially similar in all material respects to Lehman Funds'
Distribution Agreement currently in place for the SGS Portfolio, In addition,
the New Services and Distribution Plan will be substantially similar in all
material respects to the Services and Distribution Plan currently in place
for the SGS Portfolio. Under the Distribution Agreement and the New Services
and Distribution Plan, AMT Capital Services may have selling agreements with
several dealers which may allow for greater portfolio share distribution
opportunities, whereas SGS Shares are sold only by LBI.
Comparative Information on Shareholder Rights
General. Lehman Funds and AMT Capital Fund are Maryland
corporations. Lehman Funds is an open-end registered investment company
governed by its Articles of Incorporation dated May 5, 1993, as amended
and restated, its By-Laws and applicable Maryland law. AMT Capital Fund
is governed by its Articles of Incorporation dated August 3, 1993, as
amended and restated, its By-Laws, and applicable Maryland law. The
business and affairs of each of the SGS Portfolio and the USG Portfolio are
managed under the direction of their respective Boards of Directors.
Shares. The number of authorized shares of common stock of Lehman
Funds is Ten Billion (10,000,000,000). The number of authorized shares
of common stock of the AMT Capital Fund is Two Billion Five Hundred
Million (2,500,000,000). Under the Articles of Incorporation of both the
AMT Capital Fund and Lehman Funds the Board of Directors may, without
shareholder approval, provide for the issuance of additional sub-classes of
Common Stock of a particular class or portfolio with such preferences,
conversions or other rights and characteristics as shall be determined by
resolution of the Board of Directors.
The distribution system for the USG Shares will be
substantially similar to that currently in place for the SGS Shares except
that the USG Portfolio will also have an additional class of shares (its Class
A shares) and will not have a contingent deferred sales charges with respect
to either class of shares.
Management of the Affairs of AMT Capital Fund
AMT Capital Fund's Board of Directors has the power to determine a minimum
net asset value of a shareholder account or minimum investment which may be
made by a shareholder. The Board of Directors may authorize the closing of
those shareholder accounts not meeting the specified minimum amounts by
redeeming all of the shares in such accounts upon notice to the affected
shareholders.
AMT Capital Fund and Lehman Funds may suspend redemptions in such manner
as may be approved from time to time by or pursuant to the discretion of the
Board of Directors during any period (i) during which the New York Stock
Exchange is closed other than customary weekend and holiday closing, (ii)
during which trading on the New York Stock Exchange is restricted, (iii)
during which an emergency exists as a result of which disposal by the
applicable Fund of securities owned by such class is not reasonably
practicable or it is not reasonably practicable for the applicable Fund fairly
to determine the value for the net assets of such class, or (iv) during any
other period when the Securities and Exchange Commission (or any succeeding
governmental authority) may for the protection of security holders of the
applicable Fund by order permit suspension of the right of redemption or
postponement of the date of payment on redemption.
Shareholder Meetings. Neither Lehman Funds nor AMT Capital Fund is
required to hold annual meetings of shareholders, but are required to hold
meetings of shareholders for purposes of voting on certain matters as
required under the 1940 Act.
Liability and Indemnification of Directors and Officers. Both Lehman
Funds and AMT Capital Fund provide for the indemnification of their
directors and officers to the full extent permitted by Maryland General
Corporation Law.
Removal of Directors. The AMT Capital Fund may, subject to the limits of
the 1940 Act and unless otherwise prohibited by
the by-laws, remove a director with or without cause, by the affirmative vote
of a majority of (a) the Board of Directors, (b) a committee of the Board of
Directors appointed for such purpose, or (c) the shareholders by vote of a
majority of the outstanding shares of AMT Capital Fund. Lehman Funds has no
similar provision for (a) and (b), but does have an identical provision for
(c).
The foregoing is only a summary of certain characteristics of the operations
of Lehman Funds and AMT Capital Fund, their Articles of Incorporation,
By-Laws and Maryland law. The foregoing is not a complete description of
the documents cited. Shareholders should refer to the provisions of
Maryland law directly for a more thorough description.
Comparative Information on Investment Advisory Agreements
The duties and obligations of the adviser outlined under the current and
new Advisory Agreements are substantially similar, except for the following
differences: (1) AMT Capital Advisers replaces LBGAM as investment adviser;
(2) the new Advisory Agreement permits AMT Capital Advisers to engage a
sub-adviser; and (3) the new Advisory Agreement provides for indemnification
of the adviser in certain circumstances (as described below). The current
Advisory Agreement continues from year to year, so long as ically approved at
least annually (a) by vote of a majority of the Board of Directors who are
not parties to the Advisory Agreement or "interested persons" of any party
thereto and (b) by the Board of Directors or by vote of a majority of the
outstanding securities (as defined in the 1940 Act) of the SGS Portfolio.
The new Advisory Agreement was approved by the Board of Directors of
the AMT Capital Fund, including a majority of AMT Capital Fund's
Independent Directors on December 12, 1995 on behalf of the USG
Portfolio, and by the sole shareholder of the USG Portfolio on
December 12, 1995. The new Advisory Agreement will continue until January
1, 1998 and from year to year thereafter provided that such continuance is
specifically approved at least annually in the same manner as the current
Advisory Agreement. The new Advisory Agreement is terminable at any
time without penalty by a majority of AMT Capital Fund's Independent
Directors or by vote of a majority of the outstanding shares (as defined in
the 1940 Act) of the USG Portfolio on 60 days' written notice to AMT
Capital Advisers and by AMT Capital Advisers on 60 days' written notice
to the AMT Capital Fund.
Under the new Advisory Agreement, AMT Capital Advisers, subject to the
general supervision of the Board of Directors of the AMT Capital Fund,
manages the investment operations of the USG Portfolio and the
composition of its assets and is responsible for performing certain other
obligations. In this regard, AMT Capital Advisers provides performance
reporting, portfolio analysis, and other support to the Fund's Board of
Directors relating to the selection, evaluation, and monitoring of the
sub-adviser of the USG Portfolio, Delphi.
The new Advisory Agreement provides that AMT Capital Advisers is not
liable to the USG Portfolio for any error of judgment but shall be liable to
the Fund for any loss resulting from willful misfeasance, bad faith or gross
negligence by AMT Capital Advisers in providing services under the
Advisory Agreement or from reckless disregard by AMT Capital Advisers
of its obligations and duties under the Advisory Agreement. In addition,
the USG Portfolio will indemnify AMT Capital Advisers against losses
arising out of its performance under the new Advisory Agreement except for
losses resulting from AMT Capital Advisers' bad faith, willful misfeasance
or gross negligence, or by reason of its reckless disregard of its obligations
and duties under that Agreement.
Under the current Advisory Agreement, LBGAM serves as the investment
adviser to the SGS Portfolio subject to the supervision and direction of
Lehman Fund's Board of Directors. The current Advisory Agreement
further provides for LBGAM to manage the SGS Portfolio in accordance
with SGS Portfolio's investment objective and policies, to make investment
decisions for the SGS Portfolio and to place orders to purchase and sell
securities. The current Advisory Agreement does not provide for any
limitation of LBGAM's liability to the SGS Portfolio, or for any
indemnification of LBGAM by the SGS Portfolio.
Pursuant to the Sub-Advisory Agreement between
AMT Capital Advisers and Delphi, Delphi will serve as sub-adviser to the
USG Portfolio. Susan Hirsch has agreed to serve as portfolio manager of
USG Portfolio in her capacity as portfolio manager for Delphi. AMT
Capital Advisers would be responsible for the management of the
investment portfolio of the USG Portfolio and the supervision of Delphi the
sub-adviser. Delphi has retained the services of and has appointed Susan
Hirsch the portfolio manager (effective as of the Reorganization Closing
Date). In that capacity, Ms. Hirsch will be responsible, on behalf of
Delphi, for providing investment research and advice, determining which
portfolio securities are to be purchased or sold by the USG Portfolio,
purchasing and selling securities on behalf of the USG Portfolio and
determining how voting and other rights with respect to the portfolio
securities of the USG Portfolio are exercised in accordance with the USG
Portfolio's investment objective, policies and restrictions. Thus, the USG
Portfolio would be managed in substantially the same manner as the SGS
Portfolio, except that AMT Capital Advisers will serve as investment adviser,
and Susan Hirsch will serve as portfolio manager with the sub-adviser,
Delphi, instead of LBGAM.
Under the current Advisory Agreement as
described above Lehman Funds appointed LBGAM as its investment
adviser; Lehman Funds pays the adviser on the first business day of each
month a fee for the previous month; the adviser exercises its responsibility
as investment adviser in accordance with the Articles of Incorporation and
the Investment Advisers Act of 1940; the adviser keeps Lehman Funds
informed of developments materially affecting the SGS Portfolio, and on its
own initiative, furnishes Lehman Funds from time to time with whatever
information the adviser believes is appropriate for this purpose; and the
adviser exercises its best judgment in the rendering of its services.
Under the new Advisory Agreement, AMT Capital Fund appoints the
adviser as its attorney-in-fact; the USG Portfolio pays to the adviser
promptly at the end of each calendar month, a fee, calculated on each day
during such month; the adviser must notify AMT Capital Fund of any
changes in the membership of the adviser within a reasonable time after the
change; the adviser must indemnify the Directors of AMT Capital Fund for
all of its expenses arising out of the performance and obligations of the
adviser under the Advisory Agreement and the adviser has no
responsibility or liability for the accuracy or completeness of AMT Capital
Fund's registration statement under the 1940 Act
and the Securities Act of 1933 except for information supplied by the
adviser for inclusion therein about the adviser.
Under the new Advisory Agreement; the adviser represents that it has
adopted a code of ethics governing personal trading that complies in all
material respects with the recommendations contained in the Investment
Company Institute "Report of the Advisory Group on Personal Investing,"
dated May 9, 1994. While LBGAM has similarly adopted a revised code of
ethics, the current Advisory Agreement does not contain a representation to
that effect.
THE DIRECTORS, INCLUDING THE INDEPENDENT LEHMAN
DIRECTORS, RECOMMEND THAT SHAREHOLDERS VOTE
FOR PROPOSAL ONE AND ANY UNMARKED PROXIES WILL
BE SO VOTED.
Additional Information About AMT Capital Fund, Inc. and the U.S.
Selected Growth Portfolio
Additional information about AMT Capital Fund is included in the
preliminary prospectus of the U.S. Selected Growth Portfolio dated
October 20, 1995 (the "USG Portfolio Prospectus"). A copy of the USG
Portfolio prospectus has been filed with the Securities and Exchange
Commission (the "Commission") and is enclosed herewith and is incorporated
by reference. Additional copies may be obtained without charge by
contacting AMT Capital Services at 430 Park Avenue, New York, New York 10022
or by telephoning AMT Capital Services at 1-800-762-4848. Further
information about AMT Capital Fund is included in the preliminary statement
of additional information for the USG Portfolio, dated October 20, 1995,
which also has been filed with the Commission and may be obtained without
charge by contacting AMT Capital Services at 430 Park Avenue, New York,
New York 10022 or by telephoning AMT Capital Services at 1-800-762-4848 and
is incorporated by reference herein.
Additional Information About Lehman Brothers Funds, Inc. and the
Lehman Selected Growth Stock Portfolio
Additional information about Lehman Brothers Funds, Inc. is included in
the current prospectus of the Lehman Selected Growth Stock Portfolio
and statement of additional information each dated November 29, 1995. A
copy of the Lehman Selected Growth Stock Portfolio prospectus may be
obtained without charge by contacting AMT Capital Services at 430 Park
Avenue, New York, New York 10022 or by telephoning AMT Capital
Services at 1-800-762-4848 and is incorporated by reference herein.
Further information about Lehman Brothers Funds, Inc. is included in the
current statement of additional information of the SGS Portfolio, dated
November 29, 1995, relating to the proposed transactions and other
actions described in this Combined Prospectus/Proxy Statement, including
financial statements and has been filed with the Commission. This statement
of additional information may be obtained without charge by
contacting AMT Capital Services at 430 Park Avenue, New York, New
York 10022 or by telephoning AMT Capital Services at 1-800-762-4848
and is incorporated by reference herein.
Miscellaneous
Available Information
AMT Capital Fund, and Lehman Funds are each registered under the 1940 Act
and are subject to the informational requirements of the 1940 Act and, in
accordance therewith, each files reports, proxy materials, and other
information with the Commission. The U.S. Select Growth Portfolio is
registered under the 1940 Act and is required to file reports under the 1940
Act. Such reports, proxy materials and other information may be inspected at
the Securities and Exchange Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549.
Copies of such material also may be obtained from the Public Reference
Branch, Office of Consumer Affairs and Information Services, Securities
and Exchange Commission, 450 Fifth Street, N.W., Washington D.C.
20549, at prescribed rates.
Legal Matters
Certain legal matters in connection with the issuance of the shares of the
U.S. Selected Growth Portfolio will be passed upon by Dechert Price &
Rhoads, 477 Madison Avenue, New York, New York 10022. Dechert Price
& Rhoads will render an opinion as to certain Federal income tax
consequences of the Reorganization.
Financial Statements and Experts
The audited financial statements of the Lehman Funds included in the
statement of additional information related to this Combined
Prospectus/Proxy Statement (the "SAI") have been audited by Ernst &
Young LLP, independent auditors, for the period indicated in the report of
independent auditors thereon which appears in the SAI. Copies of these
financial statements as included in the SAI may be obtained without charge
by contacting AMT Capital Services, Inc. at 430 Park Avenue, New York,
New York 10022 or by telephoning AMT Capital Services at 1-800-762-4848.
There are no financial statements for the USG Portfolio since it has not yet
commenced operations.
OTHER BUSINESS
The Directors know of no other business to be brought before the Meeting.
However, if any other matters properly come before the Meeting, proxies
will be voted in accordance with the judgment of the Board of Directors.
Proposals for Future Meetings
As a Maryland corporation, AMT Capital Fund is not required to hold
annual Shareholder meetings in any year in which no meeting is required
under the 1940 Act. Consequently, AMT Capital Fund does not intend to
hold annual shareholder meetings each year, but meetings may be called by
the Directors from time to time. Proposals of shareholders that are intended
to be presented at a future shareholder meeting must be received by AMT
Capital Fund by a reasonable time prior to AMT Capital Fund's mailing of
information statements relating to such meeting.
By Order of the Board of Directors
/S/
Patricia L. Bickimer, Secretary
Lehman Selected Growth Stock Portfolio
A Series of
Lehman Brothers Funds, Inc.
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS
DATE: January 18, 1996
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
OF LEHMAN BROTHERS FUNDS, INC. ("Lehman Funds") for use at a special
meeting of the shareholders of Lehman Selected Growth Stock Portfolio ("SGS
Portfolio") a series of Lehman Funds, which meeting will be held at
10:00 a.m. at the offices of Lehman Brothers Funds, Inc. located at 3 World
Financial Center New York, New York 10285, and any adjournments thereof
(the"Meeting").
The undersigned shareholder of SGS Portfolio, revoking any and all
previous proxies heretofore given for shares of SGS Portfolio held by the
undersigned ("Shares"), does hereby appoint _____________________________
and ______________________, or any of them, with full power of substitution to
each, to be the attorneys and proxies of the undersigned (the "Proxies"), to
attend the Meeting of the shareholders of SGS Portfolio, and to represent and
direct the voting interest represented by the undersigned as of the record date
for said Meeting for the Proposals specified below.
This proxy, if properly executed, will be voted in the manner as
directed herein by the undersigned shareholder. Unless otherwise specified
below in the squares provided, the undersigned's vote will be cast "FOR" each
Proposal. If no direction is made for any Proposals, this proxy will be voted
"FOR" any and all such Proposals. In their discretion, the Proxies are
authorized to transact and vote upon such other matters and business as may
come before the meeting or any adjournments thereof.
Proposal To approve or disapprove the Agreement and Plan of
Reorganization by and between Lehman Funds, on behalf of its
SGS Portfolio, and AMT Capital Fund Inc. ("AMT Capital
Fund"), on behalf of its newly-created U.S. Selected Growth
Portfolio (the "USG Portfolio"), providing for the transfer of all
of the assets, subject to all of the liabilities, of SGS Portfolio in
exchange for shares of the USG Portfolio (the "USG Shares"),
and the distribution of such USG Shares to the shareholders of
SGS Portfolio in complete liquidation of SGS Portfolio.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Proposal Two. To transact such other business as properly may come before
the Meeting or any adjournment(s) thereof.
To avoid adjourning the Meeting to a subsequent
date, please return this proxy in the enclosed self-addressed, postage-paid
envelope. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF LEHMAN FUND, WHICH RECOMMENDS A VOTE FOR PROPOSAL ONE.
Dated:_________________________, 199
______________________________
Signature of Shareholder
______________________________
Signature of Shareholder
This proxy may be revoked by the shareholder(s) at any time prior to the special
meeting.
NOTE: Please sign exactly as your name appears hereon. If shares are
registered in more than one name, all registered shareholders should sign
this proxy; but if one shareholder signs, this signature binds the other
shareholder. When signing as an attorney, executor, administrator, agent,
trustee, or guardian, or custodian for a minor, please give full title as
such. If a corporation, please sign in full corporate name by an authorized
person. If a partnership, please sign in partnership name by an authorized
person.
PART B
U.S. Selected Growth Portfolio
A Series of
AMT Capital Fund, Inc.
430 Park Avenue, 17th Floor
New York, NY 10022
(212) 308-4848
________________
STATEMENT OF ADDITIONAL INFORMATION
This statement of additional information is not a prospectus and should be
read in conjunction with the Combined Prospectus/Proxy Statement dated
December 14, 1995 (the "Combined Prospectus/Proxy Statement"), for the
special meeting of shareholders of the SGS Portfolio, a series of Lehman
Funds, an open-end management investment company, to be held on
January 18, 1996 (the "Meeting").
The Combined Prospectus/Proxy Statement describes certain transactions
and other actions contemplated by the Reorganization Plan pursuant to
which all of the assets of SGS Portfolio, a series of Lehman Funds would be
acquired by USG Portfolio, a portfolio of AMT Capital Fund in exchange
for Class B shares of the USG Portfolio and the assumption by the USG Portfolio
of all of the liabilities of the SGS Portfolio. As
described in the Combined Prospectus/Proxy Statement, USG Portfolio has
an investment objective and investment policies that are substantially similar
to the SGS Portfolio. The Combined Prospectus/Proxy Statement also
describes a new Advisory Agreement between USG Portfolio and AMT
Capital Fund, a new Distribution Agreement between the USG Portfolio and AMT
Capital Services, Inc. and a new Services and Distribution Plan. The
shareholders of SGS Portfolio are being requested to approve the
Reorganization Plan at the Meeting.
Pro Forma financial statements are not presented herewith inasmuch as the
Reorganization Plan does not involve a change in the net assets of SGS
Portfolio or the net asset value of SGS Portfolio shares. Pursuant to the
Reorganization Plan shares will be exchanged at the same net asset value and
the number of outstanding USG Shares immediately following the Reorganization
will be the same as the number of SGS Shares outstanding immediately prior to
the Reorganization. The capitalization of the USG Portfolio will be the same
as the SGS Portfolio and USG Portfolio will report its financial highlights
and per share data in the same form as SGS Portfolio. The annual report of
the SGS Portfolio for its fiscal year ended July 31, 1995, which was filed on
October 16, 1995 with the Securities and Exchange Commission electronically
on Form N30B-2, and is incorporated by reference into this Statement of
Additional Information.
The Combined Prospectus/Proxy Statement may be obtained without charge
from AMT Capital Services, the Distributor for the USG Portfolio at 430
Park Avenue, New York, New York 10022 or by telephoning AMT Capital
Services at 800-762-4848. This statement of additional information
contains additional and more detailed information about the operations and
activities of Lehman Funds and AMT Capital Fund and the operations and
activities of SGS Portfolio and USG Portfolio.
The date of this statement of additional information is December 14, 1995.
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Preliminary Statement of Additional Information of
AMT Capital Fund, Inc.
dated October 20, 1995
Current Statement of Additional Information of
SGS Portfolio, a series of
Lehman Brothers Funds, Inc.
dated November 29, 1995
Current Annual Report of
several series of Lehman Brothers Funds, Inc., including the
SGS Portfolio, dated July 31, 1995
PART C
AMT CAPITAL FUND, INC.
USG PORTFOLIO
PART C. OTHER INFORMATION
Item 15.Indemnification
The Registrant shall indemnify directors, officers,
employees and agents of the Registrant against judgments,
fines, settlements and expenses to the fullest extent
allowed, and in the manner provided, by applicable
federal and Maryland law, including Section 17(h) and (i)
of the Investment Company Act of 1940. In this regard,
the Registrant undertakes to abide by the provisions of
Investment Company Act Releases No. 11330 and 7221
until amended or superseded by subsequent interpretation
of legislative or judicial action.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to
directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against
public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
Item 16.Exhibits
(1)(a)(b) Articles of Incorporation, dated August 3, 1993 (previously
filed as Exhibit (1) to Pre-Effective Amendment No. 1 to Registrant's
Registration Statement on Form N-1A, File Nos. 33-66840, 811-7928).
Articles of Amendment to Articles of Incorporation, dated October 28, 1993
(previously filed as Exhibit (1b) to Pre-Effective Amendment No. 3 to
Registrant's Registration Statement on Form N-1A, File Nos. 33-66840,
811-7928).
(1)(c) Form of Articles Supplementary of Registrant filed as Exhibit (1c) to
the Registrant's Registration Statement on Form N-14, filed on November 14,
1995, File No.__ ).
(2) By-laws (previously filed as Exhibit (2) to Pre-Effective Amendment No.
2 to Registrant's Registration Statement on Form N-1A, File Nos. 33-66840,
811-7928).
(3) Not Applicable.
(4) Form of Agreement and Plan of Reorganization annexed hereto as
Appendix A.
(5) Specimen of Stock Certificates (previously filed as Exhibit (4) to Pre-
Effective Amendment No. 3 to Registrant's Registration Statement on Form
N-1A, File Nos. 33-66840, 811-7928).
(6) Form of Investment Advisory Agreement between the Registrant and
AMT Capital Advisers, Inc. (previously filed as Exhibit (6) to the
Registrant's Registration Statement on Form N-14, filed on November 14, 1995,
File No. __ ). (b) Form of Sub-Advisory Agreement between AMT Capital
Advisers, Inc. and Delphi Asset Management, filed herewith.
(7) (a) Distribution Agreement, dated October 29, 1993 between the Registrant
and AMT Capital Services, Inc. (previously filed as Exhibit (6) to Pre-
Effective Amendment No. 3 to the Registrant's Registration Statement on Form
N-1A, File Nos., 33-66840, 8h-7928.
(8) Not Applicable.
(9) Custodian Agreement, dated October 29, 1993 between the Registrant
and Investors Bank & Trust Company (previously filed as Exhibit (8) to
Post-Effective Amendment No. 2 to Registrant's Registration Statement on
Form N-1A File Nos. 33- 66840, 811-7928).
(10) (a) Form of Services and Distribution Plan pursuant to Rule 12b-1 Plan
between Registrant and Lehman Funds Incorporated previously filed as Exhibit
(10) to the Registrant's Registration Statement on Form N-14 filed on
November 14, 1995, File No. ____ ).
(10) (b) Form of Multiclass Plan, filed herewith.
(11) Opinion and Consent of Dechert Price & Rhoads (previously filed as
Exhibit (11) to the Registrant's Statement on Form N-14, filed on November
14, 1995, File No. ____ ).
(12) Opinion of Dechert Price & Rhoads regarding certain tax matters and
consequences to shareholders filed herewith.
(13) Transfer Agency and Service Agreement, dated October 29, 1993
between the Registrant and Investors Bank & Trust Company (previously
filed as Exhibit (9a) to Pre-Effective Amendment No. 3 to the Registrant's
Registration Statement on Form N-1A, File Nos. 33-66840, 811-7928).
(14) Consents of Ernst & Young LLP independent auditors for the SGS
Portfolio and the AMT Capital Fund, Inc. previously filed as Exhibit (14) to
the Registrant's Statement on Form N-14, filed on November 14, 1995, File No.
____ ).
(15) There are no financial statements omitted pursuant to Item 14(a)(1).
(16) Not applicable.
(17) Rule 24f-2 Notice of Registrant previously filed as Exhibit (17) to the
Registrant's Statement on Form N-14, filed on November 14, 1995,
File No. ____ ).
Item 17 Undertakings
(a) The undersigned Registrant agrees that prior to
any public reoffering of the securities registered
through the use of a prospectus which is a part of
this Registration Statement by any person or
party who is deemed to be an underwriter within
the meaning of Rule 145(c) under the Securities
Act of 1933, as amended, the reoffering
prospectus will contain the information called for
by the applicable registration form for reofferings
by persons who may be deemed underwriters, in
addition to the information called for by the other
items if the applicable form.
(b) The undersigned Registrant agrees that every
prospectus that is filed under paragraph (a),
above, will be filed as part of an amendment to
this Registration Statement and will not be used
until the amendment is effective, and that, in
determining any liability under the Securities Act
of 1933, as amended, each post-effective
amendment shall be deemed to be a new
registration statement for the securities offered
therein, and the offering of the securities at that
time shall be deemed to be the initial bona fide
offering of them.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, State of New York on the 13th day of November, 1995
AMT CAPITAL FUND, INC.
By: s\Alan M. Trager
Alan M. Trager, President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement had been signed
below by the following persons in the capacities and on the dates
indicated.
Signature Title Date
\s\ Robert B. Allardice, III Director November 13, 1995
Robert B. Allardice, III
\s\ Patricia M. Gammon Director November 13, 1995
Patricia M. Gammon
\s\ Alan M. Trager President and November 13, 1995
Alan M. Trager Director
\s\ Carla E. Dearing Vice President November 13, 1995
Carla E. Dearing
\s\ William E. Vastardis Secretary and November 13, 1995
William Treasurer
INDEX TO EXHIBITS INCLUDED IN PART C
Exhibit 1(c) Articles Supplementary of Registrant
Exhibit 6 Form of Investment Advisory Agreement between Registrant and
AMT Capital Advisers, Inc. filed herewith
Exhibit 6(b) Form of Sub-Advisory Agreement between AMT Capital Advisers,
Inc. and Delphi Asset Management
Exhibit 7(b) Form of Dealer Agreement to be used by AMT Capital Services,
Inc.
Exhibit 10 Form of Services and Distribution Plan pursuant to Rule 12b-1
Plan between Registrant and Lehman Brothers Incorporated filed
herewith.
Exhibit 10(b) Form of Multiclass Plan
Exhibit 11 Opinion and Consent of Dechert Price & Rhoads
Exhibit 12 Opinion of Dechert Price & Rhoashareholders
Exhibit 14 Consent of Ernst & Young LLP, independent auditors for SGS
Portfolio
Exhibit 17 Rule 24f-2 Notice of Registrant
AMT CAPITAL FUND, INC.
ARTICLES SUPPLEMENTARY
TO THE ARTICLES OF INCORPORATION
AMT Capital Fund, Inc., a Maryland Corporation (the
"Corporation") having a principal office in New York, New
York and having the Corporation Trust Incorporated as its
resident agent located at 32 South Street, Baltimore
Maryland 21202, hereby certifies to the State Department of
Assessments and Taxation of Maryland as follows:
FIRST: Pursuant to the authority vested in the Board
of Directors in Article FIFTH of the Articles of Incorporation
of the Corporation (the "Charter"), the Board of Directors may,
without shareholder approval, designate one or more classes of
shares of common stock, to fix the number of shares in any
such class and to reclassify any unissued shares with respect to
such class (subject to any applicable rule, regulation or order of
the Securities and Exchange Commission or other applicable
law or regulation) shall have such preferences, conversion or
other rights, voting powers, restrictions, limitations as to
dividends, qualifications, terms and conditions of redemption
and other characteristics as the Board may determine in the
absence of contrary determination set forth herein. The
aforesaid power shall include the power to create, by
classifying unissued shares in the aforesaid manner, one or
more classes in addition to those initially designated in the
Charter;
SECOND: Pursuant to the foregoing authority , the Board
of Directors has reclassified and designated: (a) 125,000,000
authorized but unissued shares of the U.S. Market Index
Portfolio common stock, par value $.001 per share, as U.S.
Selected Growth Portfolio Class A common stock, par value
$.001 per share (the "Class A shares"), and (b) 125,000,000
authorized but unissued shares of the U.S. Market Index
Portfolio common stock, par value $.001 per share, as U.S.
Selected Growth Portfolio Class B common stock (the "Class
B shares"), par value $.001 per share. The Class A shares and
the Class B shares represent interests in the same investment
portfolio of the Corporation and together shall be subject to all
provisions of Article FIFTH of the Charter relating to stock of
the Corporation generally and shall have identical preferences,
conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and
conditions of redemption, except as follows:
(a) The dividends and distributions of investment
income and capital gains with respect to the Class A
shares and the Class B shares, respectively, shall be in
such amount as may be declared from time to time by
the Board of Directors, and such dividends and
distributions may vary as between the Class A shares
and the Class B shares to reflect differing allocations of
the expenses of the Corporation between the holders of
the Class A shares and the holders of the Class B
shares to such extent and for such purposes as the
Board of Directors may deem appropriate;
(b) The holders of the Class A shares shall have the
exclusive voting rights with respect to provisions of any
distribution plan adopted by the Corporation pursuant
to Rule 12b-1 under the Investment Company Act of
1940 (a "Plan") applicable to the Class A shares and no
voting rights with respect to the provisions of any Plan
applicable to the Class B shares and the holders of the
Class B shares shall have exclusive voting rights with
respect to the provisions of any Plan applicable to the
Class B shares and no voting rights with respect to the
provisions of any Plan applicable to the Class A shares;
and
(c) The net asset value of a Class A share and the net
asset value of a Class B share shall be separately
computed, and may vary from one another, in order to
reflect any differences in the undistributed investment
income or capital gains allocated to each such class, or
in the capital account of each such class, resulting from
differing allocations of the expenses of the Corporation
between the holders of the Class A shares and the
holders of the Class B shares.
THIRD: The shares aforesaid have been duly classified
or reclassified by the Board of Directors pursuant to the
authority and power contained in the Corporation's Charter.
FOURTH: These Articles of Supplementary to the Articles
of Incorporation do not increase the capital stock of the
Corporation.
IN WITNESS WHEREOF, AMT Capital Fund, Inc.
has caused these presents to be signed in its name and on its
behalf by its President and witnessed by its Secretary on
November 1995.
ATTESTED: AMT CAPITAL
FUND, INC.
_________________________
___________________________
William E. Vastardis, Secretary Alan M. Trager,
President
THE UNDERSIGNED, Alan M. Trager, President of
AMT CAPITAL FUND, INC., who executed on behalf of the
Corporation the foregoing Articles of Supplementary to the
Articles of Incorporation of which this certificate is made a
part, hereby acknowledges in the name and on behalf of said
Corporation and hereby certifies that to the best of his
knowledge, information and belief the matters and facts set
forth therein with respect to the authorization and approval
thereof are true in all material respects under the penalties of
perjury.
_____________________________
Agreement and Plan of Reorganization
THIS AGREEMENT AND PLAN OF REORGANIZATION made this __th day of
_____________, 199_, by and between the Lehman
Brothers Funds, Inc., a Maryland corporation ("Lehman
Fund"), on behalf of Lehman Selected Growth Stock
Portfolio, a separate series of the Lehman Fund (the "SGS
Portfolio"), and AMT Capital Fund, Inc., a Maryland
corporation ("AMT Capital Fund"), on behalf of U.S.
Selected Growth Portfolio, a separate series of the AMT
Capital Fund (the "USG Portfolio").
WITNESSETH:
WHEREAS, the Lehman Fund and the AMT Capital
Fund are open-end, registered investment companies of the
management type;
WHEREAS, the Lehman Fund is authorized to issue
its shares of common stock, and the AMT Capital Fund is
authorized to issue its shares of common stock, in separate
series, each of which maintains a separate and distinct
portfolio of assets;
WHEREAS, the SGS Portfolio is one separate
series of the Lehman Fund and the USG Portfolio is one
separate series of the AMT Capital Fund, each of which is
diversified;
WHEREAS, the SGS Portfolio owns securities
which are assets of the character in which the USG
Portfolio is permitted to invest;
WHEREAS, Lehman Fund wishes to effect a
transfer of all of the assets and liabilities of the SGS
Portfolio to the USG Portfolio;
WHEREAS, the Board of Directors of the Lehman
Fund has (a) pursuant to Section 3-105(b) of the Maryland
General Corporation Law of the State of Maryland,
declared that the transfer of all of the assets and liabilities of
the SGS Portfolio to the USG Portfolio is advisable on
substantially the terms and conditions set forth herein and
has directed that such proposed transaction be submitted for
consideration at either an annual or special meeting of the
SGS Portfolio's shareholders, (b) determined that such
transaction is in the best interests of the SGS Portfolio and
its shareholders, and that the interests of the existing
shareholders of the SGS Portfolio would not be diluted as a
result of this transaction, and (c) determined that subsequent to the
consummation of the transaction, contemplated by this Agreement
the SGS Portfolio will cease operations;
WHEREAS, the Board of Directors of the AMT
Capital Fund has determined that the transfer of all of the
assets and liabilities of the SGS Portfolio to the USG
Portfolio is in the best interest of the USG Portfolio and its
shareholders (it being understood that Alan M. Trager is the
sole shareholder of the USG Portfolio prior to the
consummation of the reorganization); and
WHEREAS, the parties hereto
intend to provide for the reorganization of the SGS
Portfolio through the transfer to the USG Portfolio of all of
the assets, subject to all of the liabilities, of the SGS
Portfolio in exchange for voting shares of common stock,
$0.001 par value, of the USG Portfolio (the "USG
Portfolio Class B Shares"), the dissolution of the SGS
Portfolio and the distribution to the SGS Portfolio
shareholders of such USG Portfolio Shares, all pursuant to
the provisions of Section 368(a)(1) of the Internal Revenue
Code of 1986, as amended (the "Code");
NOW THEREFORE, in consideration of the mutual
promises herein contained, the parties hereto agree as
follows:
1. Plan of Reorganization and Liquidation
(a) the Lehman Fund, on behalf of the SGS
Portfolio, shall transfer to the USG Portfolio at the closing
provided for in Section 2 (the "Closing") all of the then
existing assets of the SGS Portfolio of every kind and
nature. In consideration therefore, the USG Portfolio shall
at the Closing (i) assume all of the SGS Portfolio's liabilities
then existing, whether absolute, accrued, contingent or
otherwise and (ii) deliver to the SGS Portfolio that number
of full and fractional USG Portfolio Class B shares equal to the
number of full and fractional shares of the SGS Portfolio
then outstanding. The number of shares of the SGS
Portfolio issued and outstanding and the number of USG
Portfolio Class B Shares to be issued to the SGS Portfolio shall be
determined by TSSG, the fund accounting agent to the SGS
Portfolio, at 4:00 p.m., Eastern Time, on the Closing
Date (as defined in Section 2 herein) after the declaration of
any dividends on that date. SSG's determination shall be
conclusive and binding on the SGS Portfolio, the USG Portfolio
and their respective shareholders.
(b) Upon consummation of the transactions
described in paragraph (a) of this Section 1, the SGS
Portfolio shall distribute in complete liquidation to its
shareholders of record as of the Closing Date (on a pro rata
basis) the USG Portfolio Class B Shares that were received by the
SGS Portfolio. Such distribution and liquidation shall be
accomplished by the establishment of an open account on
the share records of the USG Portfolio in the name of each
shareholder of the SGS Portfolio representing a number of
USG Portfolio Shares equal to the number of shares of the
SGS Portfolio owned of record by the shareholder at the
Closing Date. Certificates for shares of the SGS Portfolio
issued prior to the reorganization, if any, shall represent
outstanding USG Portfolio Class B Shares following the
reorganization. In the interest of economy and
convenience, certificates representing the USG Portfolio
Class B Shares will not be physically issued.
(c) After the Closing Date, the SGS Portfolio shall
not conduct any business except in connection with its
liquidation.
(d) Any reporting responsibility of the Lehman
Fund including (but not limited to) the responsibility for any
periods ending on or before the Closing Date for filing of
regulatory reports, tax returns, or other documents with the
Securities and Exchange Commission (the "SEC"), any
state securities commission, and any federal, state, or local
tax authorities or any other relevant regulatory authority, is
and shall remain the responsibility of the Lehman Fund.
2. Closing and Closing Date. The Closing shall
occur at the offices of Simpson Thacher & Bartlett, 425
Lexington Avenue, New York, NY, 10017 at 4:00 p.m.,
Eastern Time, on _____________, 1996 or at such later
time and date, or at such other location, as the parties may
mutually agree (the "Closing Date"). All acts taking place
at the Closing shall be deemed to take place simultaneously
as of the close of business on the Closing Date unless
otherwise provided.
2.1 Portfolio securities held by the SGS Portfolio
and represented by a certificate or written instrument shall
be made available by the Lehman Fund or on its behalf to
the custodian of the USG Portfolio for examination no later
than five (5) business days preceding the Closing date.
Such portfolio securities (together with any cash or other
assets) shall be delivered by the SGS Portfolio to the
custodian for the account of the USG Portfolio on or before
the Closing Date in conformity with applicable custody
provisions under the Investment Company Act of 1940 (the
"1940 Act") and duly endorsed in proper form for transfer
in such condition as to constitute good delivery thereof.
Portfolio securities and instruments deposited with a
securities depository shall be delivered by book entry in
accordance with customary practices of such depositories
and the custodian. All necessary taxes including without
limitation all necessary federal and state stock transfer
stamps shall have been paid prior to delivery. The cash
delivered shall be in the form of a Federal Funds wire,
payable to the order of "Investors Bank & Trust Company,
Custodian for the AMT Capital Fund: U.S. Selected
Growth Portfolio."
3. Representations and Warranties.
3.1 The Lehman Fund represents and warrants to
the AMT Capital Fund as follows:
(a) The Lehman Fund is a corporation duly
organized, validly existing, and in good standing under the
laws of the State of Maryland and the SGS Portfolio is a
series of the Lehman Fund;
(b) The Lehman Fund is a registered open-end
investment company and its registration with the SEC as an
investment company under the 1940 Act and the
registration of its shares under the Securities Act of 1933
(the "1933 Act") are in full force and effect
(c) The Lehman Fund is not, and the execution,
delivery and performance of the Agreement will not result,
in a material violation of the Lehman Fund's Articles of
Incorporation or By-Laws or of any material agreement,
indenture, instrument, contract, lease or other undertaking
to which the Lehman Fund is a party or by which it is
bound;
(d) The Lehman Fund has no material contracts or
other commitments (other than this Agreement) which will
be terminated prior to the Closing Date where such
termination will result in any liability to the SGS Portfolio
not reflected on the SGS Portfolio's balance sheet other
than liabilities in the ordinary course of business
incurred subsequent to July 31, 1995 or otherwise disclosed
to the AMT Capital Fund;
(e) No material litigation or administrative
proceeding or investigation of or before any court or
governmental body is presently pending or to its knowledge
threatened against the Lehman Fund or any properties or
assets held by it. The Lehman Fund knows of no facts
which might form the basis for the institution of any such
proceedings which would materially and adversely affect its
business and is not a party to or subject to the provisions of
any order, decree or judgment of any court or governmental
body which materially and adversely affects its business or
its ability to consummate the transactions herein
contemplated;
(f) The Statement of Assets and Liabilities of the
SGS Portfolio at July 31, 1995 has been audited by Ernst &
Young LLP and is in accordance with generally accepted
accounting principles ("GAAP") consistently applied, and
such statement (a copy of which has been furnished to the
AMT Capital Fund) presents fairly, in all material respects,
the financial position of the SGS Portfolio as of such date in
accordance with GAAP, and there are no known contingent
liabilities of the SGS Portfolio required to be reflected on
the balance sheet (including the notes thereto) in accordance
with GAAP as of such date not disclosed therein;
(g) Since July 31, 1995, there has not been any
material adverse change in the financial condition of the
SGS Portfolio assets, liabilities or business other than
changes occurring in the ordinary course of business, or any
incurrence by the SGS Portfolio of indebtedness maturing
more than one year from the date such indebtedness was
incurred, except as otherwise disclosed to and accepted by
the USG Portfolio;
(h) At the Closing Date, to the best of the Lehman
Fund's knowledge, all material federal and other tax returns
and reports of the SGS Portfolio required by law to have
been filed by such date shall have been filed and are or will
be correct and, to the best of the Company's knowledge, all
federal and other taxes shown as due or required to be
shown as due on said returns and reports shall have been
paid or provision shall have been made for the payment
thereof, and, to the best of the Lehman Fund's knowledge,
no such return is currently under audit and no assessment
has been asserted with respect to such returns;
(i) For each taxable year of operation since
inception the SGS Portfolio has met the requirement of
Subchapter M of the Code for qualification as a regulated
investment company and has elected to be treated as such
and has met the diversification requirements under Section
817(h) of the Code and the rules thereunder;
(j) No facts have come to the attention of the
Lehman Fund which have led the Lehman Fund to conclude
that the SGS Portfolio will fail to qualify as a regulated
investment company under Subchapter M for the taxable
year that includes the Closing Date;
(k) All issued and outstanding shares of the SGS
Portfolio are, and at the Closing Date will be, duly and
validly issued and outstanding, fully paid and non-
assessable. All of the issued and outstanding shares of the
SGS Portfolio, will, at the time of Closing, be held by the
persons and in the amounts set forth in the records of the
transfer agent. The SGS Portfolio does not have
outstanding any options, warrants or other rights to
subscribe for or purchase any shares of the SGS Portfolio,
nor is there outstanding any security convertible into any
shares of the SGS Portfolio;
(l) At the Closing Date, the Lehman Fund will have
good and valid title to the SGS Portfolio's assets to be
transferred to the USG Portfolio and full right, power, and
authority to sell, assign, transfer and deliver such assets
hereunder, and upon delivery and payment for such assets,
the AMT Capital Fund will acquire good and valid title
thereto, subject to no restrictions on the full transfer
thereof, including such restrictions as might arise under the
1933 Act, other than as disclosed to the AMT Capital Fund;
(m) The execution, delivery and performance of this
Agreement has been duly authorized prior to the Closing
Date by all necessary action on the part of the Lehman
Fund's Board of Directors, and, subject to the approval of
the shareholders of the SGS Portfolio, this Agreement
constitutes a valid and binding obligation of the Lehman
Fund, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent, transfer, reorganization,
moratorium and similar laws relating to or affecting
creditors' rights and to general equity principles; and
(n) The information to be furnished by the Lehman
Fund for use in registration statements or proxy materials or
for use in any other document filed or to be filed with any
federal, state or local regulatory authority (including the
National Association of Securities Dealers, Inc.) which may
be necessary in connection with the transaction
contemplated hereby shall be accurate and complete in all
material respects and shall comply in all material respects
with Federal securities and the laws and regulations
thereunder applicable thereto.
3.2 The AMT Capital Fund represents and warrants to the
Lehman Fund as follows:
(a) The AMT Capital Fund is a corporation duly
formed, validly existing and in good standing under the laws
of the State of Maryland and the USG Portfolio is a series
of the AMT Capital Fund;
(b) The AMT Capital Fund is a registered open-end
investment company and its registration with the SEC as an
investment company under the 1940 Act, and the
registration of its shares under the 1933 Act, are in full
force and effect;
(c) The current prospectus and statement of
additional information of the AMT Capital Fund conform in
all material respects to the applicable requirements of the
1933 Act and the 1940 Act and the rules and regulations of
the SEC thereunder and do not include any untrue statement
of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were
made, not materially misleading;
(d) At the Closing Date, the AMT Capital Fund will
have good and marketable title to its assets;
(e) The AMT Capital Fund is not, and the
execution, delivery and performance of this Agreement will
not result, in a material violation of the AMT Capital Fund's
Articles of Incorporation or By-Laws or any material
agreement, indenture, instrument, contract, lease or other
undertaking to which the AMT Capital Fund is a party or by
which it is bound;
(f) The information to be furnished by the AMT
Capital Fund for use in proxy materials and other
documents which may be necessary in connection with the
transactions contemplated hereby shall be accurate and
complete in all material respects and shall comply in all
material respects with federal securities and other laws and
regulations applicable thereto;
(g) AMT Capital Fund has no material contracts or
other commitments (other than this Agreement) which will be
terminated prior to the Closing Date where such termination will
result in any liability to the USG Portfolio other than liabilities in
the ordinary course of business incurred subsequent to December
31, 1994 or otherwise disclosed to the Lehman Fund;
(h) No material litigation or administrative proceeding
or investigation of or before any court or governmental body is
presently pending or to its knowledge threatened against the AMT
Capital Fund or any such proceedings which would materially and
adversely affect its business and is not a party to or subject to the
provisions of any order, decree or judgment of any court or
governmental body which materially and adversely affects its business
or its ability to consummate the transactions herein contemplated;
(i) Any and all issued and outstanding shares of the USG
Portfolio are, and at the Closing Date will be, duly and validly issued
and outstanding, fully paid and non-assessable. The USG Portfolio does
not have outstanding any options, warrants or other rights to subscribe for
or purchase any shares of the USG Portfolio, nor is there outstanding any
security convertible into any shares of the USG Portfolio;
(j) The execution, delivery and performance of this Agreement have
been duly authorized prior to the Closing Date by all necessary action on the
part of the AMT Capital Fund's Board of Directors, and this Agreement
constitutes a valid and binding obligations of the AMT Capital Fund,
enforceable in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws relating
to or affecting creditors' rights and to general equity principles; and
(k) At the Closing Date, to the best of the AMT Capital Fund's
knowledge, no material federal and other tax returns and reports of the
USG Portfolio are or will be required to have been filed.
4. Conditions Precedent. The obligations
of the Lehman Fund and the AMT Capital Fund to effect
the transactions contemplated hereunder shall be subject to
the satisfaction of each of the following conditions:
(a) All filings shall have been made with, and all
authority and orders shall have been received from, the SEC
and state securities commissions as may be necessary in the
opinion of Dechert Price & Rhoads, counsel to the USG
Portfolio and Simpson Thacher & Bartlett, counsel to the
SGS Portfolio to permit the parties to carry out the
transactions contemplated by this Agreement;
(b) The investment objectives and permitted
investments of the USG Portfolio are substantially the same
as those of the SGS Portfolio and the rate of investment
management fees and rate of the fees payable pursuant to a
Rule 12b-1 plan of distribution for the USG Portfolio shares
are identical to those of the SGS Portfolio;
(c) The Lehman Fund and the AMT Capital Fund
shall have received an opinion of Dechert Price & Rhoads
substantially to the effect that, based on the facts,
assumptions and representations of the parties, for federal
income tax purposes: (i) the transfer to the USG Portfolio
of all of the assets of the SGS Portfolio in exchange solely
for USG Portfolio Shares and the assumption by the USG
Portfolio of the liabilities of the SGS Portfolio, followed by
the distribution of such USG Portfolio Shares to the SGS
Portfolio shareholders in exchange for the shares of the SGS
Portfolio in complete liquidation of the SGS Portfolio, will
constitute a "reorganization": within the meaning of
Section 368(a)(1) of the Code, and the USG Portfolio and
the SGS Portfolio will each be "a party to a reorganization:
within the meaning of the Section 368(b) of the Code; (ii)
no gain or loss will be recognized by the SGS Portfolio
upon the transfer of all of its assets to the USG Portfolio in
exchange solely for USG Portfolio Shares and the
assumption by the USG Portfolio of the liabilities of the
SGS Portfolio; (iii) the basis of the assets of the SGS
Portfolio in the hands of the USG Portfolio will be the same
as the basis of such assets in the hands of the SGS Portfolio
immediately prior to the transfer; (iv) the holding period of
the assets of the SGS Portfolio in the hands of the USG
Portion will include the period during which such assets
were held by the SGS Portfolio; (v) no gain or loss will be
recognized by the USG Portfolio upon the receipt of the
assets of the SGS Portfolio in exchange for USG Portfolio
Shares and the assumption by the USG Portfolio of the
liabilities of the SGS Portfolio; (vi) no gain or loss will be
recognized by the shareholders of the SGS Portfolio upon
the receipt of USG Portfolio Shares solely in exchange for
their shares of the SGS Portfolio as part of the transaction;
(vii) the basis of the USG Portfolio Shares received by the
shareholders of the SGS Portfolio will be the same as the
basis of the shares of the SGS Portfolio exchanged therefor;
and (viii) the holding period of the USG Portfolio Shares
received by the shareholders of the SGS Portfolio will
include the holding period during which the shares of the
SGS Portfolio exchanged therefore were held, provided that
at the time of the exchange the shares of the SGS Portfolio
were held as capital assets in the hands of the shareholders
of the SGS Portfolio;
(d) This Agreement and Plan of Reorganization and
the reorganization contemplated hereby shall have been
approved by the Board of Directors of the Lehman Fund
and by the Board of Directors of the AMT Capital Fund and
shall have been recommended for approval to the
shareholders of the SGS Portfolio by the Lehman Fund's
Board of Directors;
(e) This Agreement and Plan of Reorganization and
the reorganization contemplated hereby shall have been
approved by the affirmative vote of holders of
the outstanding shares of common stock of the SGS
Portfolio representing at least a majority of all of the
outstanding voting securities (as defined in the 1940 Act) of
the SGS Portfolio;
(f) The AMT Capital Fund, on behalf of the USG
Portfolio, shall have entered into an Investment Advisory
Agreement with AMT Capital Advisers, Inc. and a
Distribution Agreement with AMT Capital Services, Inc.,
such Agreements to be in each case substantially similar in
form and substance to the respective Agreement in effect at
the Closing Date between the Lehman Fund, on behalf of
the SGS Portfolio, and LBGAM (in the case of the
Investment Advisory Agreement) or Lehman Brothers (in
the case of the Distribution Agreement), which
Agreements have been approved by the Board of
Directors of the AMT Capital Fund and, to the extent
required by law, by the members of the Board of Directors
who are not "interested persons" of the AMT Capital Fund
as defined in the 1940 Act as well as by the shareholders of
the USG Portfolio (it being understood that Alan M. Trager
as sole shareholder of the USG Portfolio prior to the
consummation of the reorganization, will vote for such
ratification);
(g) AMT Capital Advisers shall have entered into a
Sub-Advisory Agreement with Delphi Asset Management,
which Agreement has been approved by the Board
of Directors of the AMT Capital Fund and, to the extent
required by law, by the members of the Board of Directors
who are not "interested Persons" of the AMT Capital Fund
as defined in the 1940 Act as well as by the shareholders of
the USG Portfolio (it being understood that Alan M.
Trager, as sole shareholder of the USG Portfolio prior to
the consummation of the reorganization, will vote for such
ratification);
(h) AMT Capital Fund shall have filed with the
SEC a Registration Statement Form N-14
complying in all material respects with the
requirements of the 1933 Act, the Securities Exchange Act
of 1934, as amended, the 1940 Act, and applicable rules and
regulations thereunder, relating to a meeting of the
shareholders of the SGS Portfolio to be called to consider
and act upon the transactions contemplated herein, and such
Registration Statement shall have been declared effective. The
AMT Capital Fund agrees to provide the AMT Capital Fund with
information applicable to the Lehman Fund required under
such Acts, rules and regulations for inclusion in the
Registration Statement in Form N-14;
(i) All securities owned by the SGS Portfolio at the time of
the Closing will be owned by the SGS portfolio free and
clear of any liens, claims, charges, options and
encumbrances, and none of such securities is or, after the
reorganization as contemplated hereby, will be subject to
any restrictions, legal or contractual, on the disposition
thereof, including restrictions as to the public offering or
sale thereof under the 1933 Act, as amended, and all such
securities are or will be readily marketable (except that
certain of such securities may not be readily marketable
after such reorganization but only to the extent that they
will not cause the USG Portfolio to be in violation of any
applicable investment restriction); and
(j) The Lehman Fund, on behalf of the SGS
Portfolio, shall have filed Articles of Transfer with the
Maryland Department of Assessments and Taxation in
accordance with Section 3-109 of the Maryland General
Corporation Law and such Articles of Transfer shall have
been accepted by such agency.
(k) Susan Hirsch shall have entered into an agreement
with Delphi Asset Management, Inc. pursuant to which she will
be employed, subject to the closing of the transactions contemplated
hereby, as a portfolio manager.
5. Amendment. This Agreement and Plan
of Reorganization may be amended at any time by the
mutual agreement of the Lehman Fund and
the AMT Capital Fund, notwithstanding
approval thereof by the shareholders of the SGS Portfolio,
provided that no amendment shall have a material adverse
effect on the interests of the shareholders of the SGS
Portfolio or the USG Portfolio.
6. Termination. The Lehman
Fund and the AMT Capital Fund may by
mutual consent terminate this Agreement and Plan of
Reorganization and abandon the reorganization
contemplated hereby, notwithstanding approval thereof by
the shareholders of the SGS Portfolio, at any time prior to
the Closing, if circumstances should develop that, in their
judgment, making proceeding with the Agreement
inadvisable.
7. No Broker's or Finder's Fee. The Lehman
Fund and the AMT Capital Fund each represents that there
is no person with whom it has dealt, who by reason of such
dealings is entitled to any broker's or finder's or other
similar fee or commission arising out of the transactions
contemplated by this Agreement and Plan of
Reorganization.
8. No Survival of Representations, etc. The
representations, warranties, covenants and agreements of
the parties contained herein shall not survive the Closing
Date, except for the provisions of Section 1(c).
9. Waiver. The Lehman Fund or the AMT Capital
Fund, after consultation with its counsel and by consent of
its Board of Directors, Executive Committee or an officer
authorized by such Board of Directors, may waive any
condition to its obligations hereunder if in its judgment such
waiver will not have a material adverse affect of the
interests of its shareholders. If the transactions
contemplated by this Agreement and Plan of Reorganization
have not been substantially completed by January 31, 1996,
the Agreement shall automatically terminate on that date
unless a later date is agreed to by both the Lehman Fund
and the AMT Capital Fund.
10. Reliance. All covenants, agreements,
representations and warranties made under this Agreement
and Plan of Reorganization shall be deemed to have been
material and relied upon by each of the parties
notwithstanding any investigation made by such party or on
its behalf.
11. Notices. All notices required or permitted
under this Agreement and Plan of Reorganization shall be
given in writing:
To the Lehman Fund at: ______________________
______________________
______________________
Attn:__________________
To the AMT Capital AMT Capital Fund, Inc.
Fund at: 430 Park Avenue
New York, NY _________
Attn: William E. Vastardis
12. Expenses. In view of the fact that AMT
Capital Advisers, Inc. will be responsible for effecting the
reorganization contemplated hereby primarily for the benefit
of the USG Portfolio, expenses of the reorganization, other
than the legal expenses of LBGAM, will be borne by
AMT Capital Advisers, Inc..
13. Miscellaneous Provisions. This Agreement
and Plan of Reorganization shall bind and inure to the
benefit of the parties and their respective successors and
assigns. It shall be governed by and carried out in
accordance with the laws of the State of New York.
The name "Lehman Brothers Funds, Inc." is the
designation of the Directors for the time being under the
Articles of Incorporation dated May 5, 1993, and all
persons dealing with the Lehman Fund must look solely to
the Lehman Fund property for the enforcement of any claim
against the Lehman Fund, as neither the Directors, officers,
agents or shareholders assume any personal liability for
obligations entered into on behalf of the Lehman Fund. No
series of the Lehman Fund shall be liable for claims against
any other series of the Lehman Fund.
The name "AMT Capital Fund, Inc." is the
designation of the Directors for the time being under the
Articles of Incorporation dated August 3, 1993, and all
persons dealing with the AMT Capital Fund must look
solely to the AMT Capital Fund property for the
enforcement of any claim against the AMT Capital Fund, as
neither the Directors, officers, agents or shareholders assume
any personal liability for obligations entered into on behalf
of the AMT Capital Fund. No series of the AMT Capital
Fund shall be liable for claims against any other series of the
AMT Capital Fund.
IN WITNESS WHEREOF, the parties have
hereunto caused this Agreement and Plan of Reorganization
to be executed and delivered by their duly authorized
officers as of the day and year first written above.
LEHMAN BROTHERS FUNDS, INC. (on behalf
of the Lehman Selected Growth Stock Portfolio)
Attest: (Seal)
By:______________________ By:____________________________________
Title:_____________________ Title:___________________________________
AMT CAPITAL FUND, INC. (on behalf of the
U.S. Selected Growth Portfolio)
Attest: (Seal)
By:______________________ By:____________________________________
Title:_____________________ Title:____________________________________
ADVISORY AGREEMENT
ADVISORY AGREEMENT, dated _______, 1995,
between AMT Capital Fund, Inc., a Maryland corporation (the
"Fund") and AMT Capital Advisers, Inc., a Delaware
corporation (the "Adviser").
In consideration of the mutual agreements herein made,
the parties hereto agree as follows:
1. Attorney-in-Fact. The Fund appoints the
Adviser as its attorney-in-fact to invest and reinvest the assets
of the U.S. Selected Growth (the "Portfolio"), as fully as the
Fund itself could do. The Adviser hereby accepts this
appointment.
2. Duties of the Adviser. (a) The Adviser shall
be responsible for, or engage a third party (the "Sub-Adviser")
for the purpose of, managing the investment portfolio of the
Portfolio, including, without limitation, providing investment
research, advice and supervision, determining which portfolio
securities shall be purchased or sold by the Portfolio,
purchasing and selling securities on behalf of the Portfolio and
determining how voting and other rights with respect to
portfolio securities of the Portfolio shall be exercised, subject in
each case to the control of the Board of Directors of the Fund
(the "Board") and in accordance with the objectives, policies
and principles of the Portfolio set forth in the Registration
Statement, as amended, of the Fund, the requirements of the
Investment Company Act of 1940, as amended, (the "Act")
and other applicable law. In performing such duties, the
Adviser shall provide such office space, and such executive and
other personnel as shall be necessary for the investment
operations of the Portfolio. In managing the Portfolio in
accordance with the requirements set forth in this paragraph 2,
the Adviser and/or a Sub-Adviser shall be entitled to act upon
advice of counsel to the Fund or counsel to the Adviser.
(b) Subject to Section 36 of the Act, the Adviser shall
not be liable to the Fund for any error of judgment or mistake
of law or for any loss arising out of any investment or for any
act or omission in the management of the Portfolio and the
performance of its duties under this Agreement except for
losses arising out of the Adviser's bad faith, willful misfeasance
or gross negligence in the performance of its duties or by
reason of its reckless disregard of its obligations and duties
under this Agreement. It is agreed that the Adviser shall have
no responsibility or liability for the accuracy or completeness of
the Fund's Registration Statement under the Act and the
Securities Act of 1933 except for information supplied by the
Adviser for inclusion therein about the Adviser. The Fund
agrees to indemnify the Adviser for any claims, losses, costs,
damages, or expenses (including fees and disbursements of
counsel, but excluding the ordinary expenses of the Adviser
arising from the performance of its duties and obligations under
this Agreement) whatsoever arising out of the performance of
this Agreement except for those claims, losses, costs, damages
and expenses resulting from the Adviser's bad faith, willful
misfeasance or gross negligence in the performance of its duties
or by reason of its reckless disregard of its obligations and
duties under this Agreement.
(c) The Adviser and its officers may act and continue
to act as investment advisers and managers for others
(including, without limitation, other investment companies),
and nothing in this Agreement will in any way be deemed to
restrict the right of the Adviser to perform investment
management or other services for any other person or entity,
and the performance of such services for others will not be
deemed to violate or give rise to any duty or obligation to the
Fund.
(d) Except as provided in Paragraph 5, nothing in this
Agreement will limit or restrict the Adviser or any of its
officers, affiliates or employees from buying, selling or trading
in any securities for its or their own account or accounts. The
Fund acknowledges that the Adviser and its officers, affiliates
or employees, and its other clients may at any time have,
acquire, increase, decrease or dispose of positions in
investments which are at the same time being acquired or
disposed of for the account of the Portfolio. The Adviser will
have no obligation to acquire for the Portfolio a position in any
investment which the Adviser, its officers, affiliates or
employees may acquire for its or their own accounts or for the
account of another client, if in the sole discretion of the
Adviser, it is not feasible or desirable to acquire a position in
such investment for the account of the Portfolio. The Adviser
represents that it has adopted a code of ethics governing
personal trading that complies in all material respects with the
recommendations contained in the Investment Company
Institute "Report of the Advisory Group on Personal
Investing," dated May 9, 1994, and the Adviser agrees to
furnish a copy of such code of ethics to the Directors of the
Fund.
(e) If the purchase or sale of securities consistent with
the investment policies of the Portfolio and one or more other
clients serviced by the Adviser is considered at or about the
same time, transactions in such securities will be allocated
among the Portfolio and clients in a manner deemed fair and
reasonable by the Adviser. Although there is no specified
formula for allocating such transactions, the various allocation
methods used by the Adviser, and the results of such
allocations, are subject to periodic review by the Board.
3. Expenses. The Adviser shall pay all of its
expenses arising from the performance of its obligations under
this Agreement including fees payable to the Sub-Adviser, if
appointed, for the purpose of managing the Portfolio, and shall
pay any salaries, fees and expenses of the Directors and officers
of the Fund who are employees of the Adviser or its affiliates.
Except as provided below, the Adviser shall not be required to
pay any other expenses of the Fund, (including out-of-pocket
expenses, but not including the Adviser's overhead or employee
costs), including without limitation, organization expenses of
the Fund; brokerage commissions; maintenance of books and
records which are required to be maintained by the Fund's
custodian or other agents of the Fund; telephone, telex,
facsimile, postage and other communications expenses;
expenses relating to investor and public relations; freight,
insurance and other charges in connection with the shipment of
the Fund's portfolio securities; indemnification of Directors and
officers of the Fund; travel expenses (or an appropriate portion
thereof) of Directors and officers of the Fund who are
directors, officers or employees of the Adviser to the extent
that such expenses relate to attendance at meetings of the
Board of Directors of the Fund or any committee thereof or
advisors thereto held outside of New York, New York;
interest, fees and expenses of independent attorneys, auditors,
custodians, accounting agents, transfer agents, dividend
disbursing agents and registrars; payment for portfolio pricing
or valuation service to pricing agents, accountants, bankers and
other specialists, if any; taxes and government fees; cost of
stock certificates and any other expenses (including clerical
expenses) of issue, sale, repurchase or redemption of shares;
expenses of registering and qualifying shares of the Fund under
Federal and state laws and regulations; expenses of printing and
distributing reports, notices, dividends and proxy materials to
existing stockholders; expenses of printing and filing reports
and other documents filed with governmental agencies,
expenses of printing and distributing prospectuses; expenses of
annual and special stockholders' meetings; costs of stationery,
fees and expenses (specifically including travel expenses
relating to Fund business) of Directors of the Fund who are not
employees of the Adviser or its affiliates; membership dues in
the Investment Company Institute; insurance premiums and
extraordinary expenses such as litigation expenses.
4. Compensation. (a) As compensation for the
services performed and the facilities and personnel provided by
the Adviser pursuant to this Agreement, the Fund will pay to
the Adviser promptly by the tenth of each month following the
relevant month, a fee, calculated on each day during such
relevant month, at an annual rate of 0.75% of the Portfolio's
average daily net assets.
(b) If the Adviser shall serve hereunder for less than
the whole of any month, the fee payable hereunder shall be
prorated.
(c) For purposes of this Section 4, the "average daily
net assets" of the Portfolio shall mean the average of the values
placed on the Portfolio's net assets on each day pursuant to the
applicable provisions of the Fund's Registration Statement, as
amended.
5. Purchase and Sale of Securities. The
Adviser and/or the Sub-Adviser, if any, shall purchase
securities from or through and sell securities to or through such
persons, brokers or dealers as the Adviser and/or Sub-Adviser
shall deem appropriate in order to carry out the policy with
respect to the allocation of portfolio transactions as set forth in
the Registration Statement of the Fund, as amended, or as the
Board may direct from time to time. The Adviser and/or Sub-
Adviser will use its reasonable best efforts to execute all
purchases and sales with dealers and banks on a best net price
basis. Neither the Adviser nor any of its officers, affiliates, or
employees will act as principal or receive any compensation
from the Portfolio in connection with the purchase or sale of
investments for the Portfolio other than the fee referred to in
Paragraph 4 hereof.
6. Term of Agreement. This Agreement shall
continue in full force and effect until two years from the date
hereof, and will continue in effect from year to year thereafter if
such continuance is approved in the manner required by the
Act, provided that this Agreement is not otherwise terminated.
The Adviser may terminate this Agreement at any time,
without payment of penalty, upon 60 days' written notice to the
Fund. The Fund may terminate this Agreement with respect to
the Portfolio at any time, without payment of penalty, on 60
days' written notice to the Adviser by vote of either the
majority of the non-interested members of the Board or a
majority of the outstanding stockholders of the Portfolio. This
Agreement will automatically terminate in the event of its
assignment (as defined by the Act).
7. Miscellaneous. This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York. Anything herein to the contrary
notwithstanding, this Agreement shall not be construed to
require or to impose any duty upon either of the parties to do
anything in violation of any applicable laws or regulations.
8. Right of Adviser In Corporate Name. The
Adviser and the Fund each agree that the phrase "AMT
Capital", which comprises a component of the Fund's corporate
name, is a property right of the Adviser. The Fund agrees and
consents that (i) it will only use the phrase "AMT Capital" as a
component of its corporate name and for no other purpose; (ii)
it will not purport to grant to any third party the right to use the
phrase "AMT Capital" for any purpose; (iii) the Adviser or any
corporate affiliate of the Adviser may use or grant to others the
right to use the phrase "AMT Capital" or any combination or
abbreviation thereof, as all or a portion of a corporate or
business name or for any commercial purpose, including a
grant of such right to any other investment company, and at the
request of the Adviser, the Fund will take such action as may
be required to provide its consent to such use or grant; and (iv)
upon the termination of any investment advisory agreement
into which the Adviser and the Fund may enter, the Fund shall,
upon request by the Adviser, promptly take such action, at its
own expense, as may be necessary to change its corporate
name to one not containing the phrase "AMT Capital" and
following such a change, shall not use the phrase "AMT
Capital" or any combination thereof, as part of its corporate
name or for any other commercial purpose, and shall use its
best efforts to cause its officers, directors and stockholders to
take any and all actions which the Adviser may request to
effect the foregoing and recovery to the Adviser any and all
rights to such phrase.
IN WITNESS WHEREOF, the Fund and the Adviser
have caused this Agreement to be executed by their duly
authorized officers as of the date first written above.
ATTEST AMT CAPITAL FUND, INC.
By:_______________________ By:_______________________
Carla E. Dearing, Assistant Treasurer William E. Vastardis, Treasurer
ATTEST AMT CAPITAL ADVISERS, INC.
By:_______________________ By:_______________________
Alan M. Trager, President
AMT CAPITAL FUND, INC.
SERVICES AND DISTRIBUTION PLAN
The following Services and Distribution Plan (the
"Plan") has been adopted in accordance with Rule 12b-1
(the "Rule") under the Investment Company Act of 1940, as
amended (the "1940 Act"), for the Class B shares of the
U.S. Selected Growth Portfolio (the "Shares", or the
"Portfolio"), a portfolio of AMT Capital Fund, Inc., a
corporation organized under the laws of the State of
Maryland operating as an open-end management investment
company (the "Fund"). The Plan has been approved by a
majority of the Fund's directors, including a majority of the
directors who are not interested persons of the Fund and
who have no direct or indirect financial interest in the
operation of the Plan (the "non-interested directors"), cast
in person at a meeting called for the purpose of voting on
such Plan. Such approval included a determination that in
the exercise of reasonable business judgment and in light of
their fiduciary duties, there is a reasonable likelihood that
the Plan will benefit the shareholders of the Shares. The
Plan has been approved by a vote of at least a majority of
the Shares's outstanding voting securities, as defined in the
1940 Act.
The provisions of the Plan are:
Section 1. Annual Fees.
(a) Service Fee. The Portfolio will pay to the
distributor of its shares, Lehman Brothers Incorporated, a
corporation organized under the laws of the State of
Delaware (the "distributor"), on behalf of MCG, a service
fee under the Plan at the annual rate of 0.25% of the
average daily net assets of the Shares (the "Service Fee").
(b) Distribution Fee. In addition to the Service Fee,
the Portfolio will pay to the distributor, on behalf of the
Shares, a distribution fee under the Plan at the annual rate of
0.75% of the average daily net assets of the Shares (the
"Distribution Fee").
(c) Payment of Fees. The Service Fee and
Distribution Fee will be calculated daily and paid monthly by
the Portfolio at the annual rates indicated above. The
distributor may make payments to assist in the distribution
of the Shares out of any portion of any fee paid to the
distributor or any of its affiliates by the Portfolio, its past
profits or any other sources available to it.
Section 2. Expenses Covered by the Plan.
(a) The Service Fee payable with respect to the
Shares is in return for certain administrative and shareholder
services provided by the distributor to the institutional
investors that purchase the Shares. Such administrative and
shareholder services may include processing purchase,
exchange and redemption requests from customers and
placing orders with the Share's transfer agent; processing
dividend and distribution payments from the Shares on
behalf of customers; providing information periodically to
customers showing their positions in the Shares; responding
to inquiries from customers concerning their investment in
the Shares; arranging for bank wires; and providing such
other similar services as may be reasonably requested.
The distributor may retain all or a portion of the
payments made to it pursuant to the Plan for the provision
of services to holders of the Shares pursuant to Dealer
Agreements entered into by the distributor in its
sole discretion and may make payments to third parties to
assist in providing the services provided to the Shares. The
distributor may waive receipt of fees under the Plan for a
period of time. All expenses incurred by the Fund in
connection with the Shareholder Servicing Agreements and
the implementation of this Plan with respect to the Shares
shall be borne entirely by the holders of the Shares.
(b) The Distribution Fee with respect to the Shares
may be used by the distributor to cover advertising,
marketing and distribution expenses intended to result in the
sale of the Shares, including, without limitation,
compensation for the distributor's initial expense of paying
its investment representatives or introducing brokers a
commission upon the sale of the Shares and accruals for
interest on the amount of the foregoing expenses that
exceed the Distribution Fee. In addition, the Service Fee
with respect to the Shares may be used by the distributor
primarily to pay its financial consultants or introducing
brokers for servicing shareholder accounts, including a
continuing fee to each such financial consultant or
introducing broker, which fee shall begin to accrue
immediately after the sale of such shares.
(c) The amount of the Distribution Fee and Service
Fee payable by the Portfolio under Section 1 hereof is not
related directly to expenses incurred by the distributor and
this Section 2 does not obligate the Portfolio to reimburse
the distributor for such expenses. The Distribution Fee and
Service Fee set forth in Section 1 will be paid by the
Portfolio to the distributor unless and until the Plan is
terminated or not renewed with respect to the Portfolio or
Class thereof, and any distribution or service expenses
incurred by the distributor on behalf of the Shares in excess
of payments of the Distribution and Service Fees specified
in Section 1 hereof which the distributor has accrued
through the termination date are the sole responsibility and
liability of the distributor and not an obligation of the
Portfolio.
Section 3. Approval of Shareholders.
The Plan will not take effect with respect to the
Shares, and no fee will be payable in accordance with
Section 1 of the Plan, until the Plan has been approved by a
vote of at least a majority of the outstanding voting
securities of the Shares.
Section 4. Approval of Directors.
Neither the Plan nor any related agreements will
take effect with respect to the Shares until approved by a
majority of both (a) the full Board of Directors of the Fund
and (b) those Directors who are not interested persons of
the Fund and who have no direct or indirect financial
interest in the operation of the Plan or in any agreements
related to it (the "Independent Directors"), cast in person at
a meeting called for the purpose of voting on the Plan and
the related agreements.
Section 5. Continuance of the Plan.
The Plan will continue in effect from year to year
with respect to the Shares, so long as its continuance is
specifically approved at least annually by the vote of the
Fund's Board of Directors in the manner described in
Section 4 above.
Section 6. Termination.
The Plan may be terminated with respect to the
Shares at any time, without the payment of any penalty, by
the vote of a majority of the outstanding voting securities
(as so defined) of the USG Portfolio or by a vote of the
Independent Directors, in any such event on sixty days'
notice to the distributor.
Section 7. Amendments.
The Plan may not be amended with respect to the
Shares so as to increase materially the amounts of the fees
described in Section 1 above, unless the amendment is
approved by a vote of the holders of at least a majority of
the outstanding voting securities of the Shares. No material
amendment to the Plan may be made unless approved by the
Fund's Board of Directors in the manner described in
Section 4 above.
Section 8. Selection of Certain Directors.
While the Plan is in effect, the selection and
nomination of the Fund's Directors who are not interested
persons of the Fund will be committed to the discretion of
the Directors then in office who are not interested persons
of the Fund.
Section 9. Written Reports.
In each year during which the Plan remains in effect,
any person authorized to direct the disposition of monies paid
or payable by the Portfolio pursuant to the Plan or any
related agreement will prepare and furnish to the Fund's
Board of Directors, and the Board will review, at least
quarterly, written reports complying with the requirements
of the Rule which set out the amounts expended under the
Plan and the purposes for which those expenditures were
made.
Section 10. Preservation of Materials.
The Fund will preserve copies of the Plan, any
agreement relating to the Plan and any report made pursuant
to Section 9 above, for a period of not less than six years
(the first two years in an easily accessible place) from the
date of the Plan, agreement or report.
Section 11. Meanings of Certain Terms.
As used in the Plan, the terms "interested person"
and "majority of the outstanding voting securities" will be
deemed to have the same meaning that those terms have
under the 1940 Act and the rules and regulations under the
1940 Act, subject to any exemption that may be granted to
the Fund under the 1940 Act by the Securities and
Exchange Commission.
Section 12. Filing of Articles of Incorporation.
The Fund represents that a copy of its Articles of
Incorporation, as amended from time to time (the "Articles
of Incorporation"), is on file with the Secretary of the State
of Maryland.
Section 13. Limitation of Liability.
The obligations of the Fund under this Plan will not
be binding upon any of the Directors of the Fund,
shareholders of the Shares, nominees, officers, employees or
agents, whether past, present or future, of the Fund,
individually, but are binding only upon the assets and
property of the Shares, as provided in the Articles of
Incorporation. The execution and delivery of this Plan have
been authorized by the Directors of the Fund, and signed by
an authorized officer of the Fund, acting as such, and
neither the authorization by the Directors nor the execution
and delivery by the officer will be deemed to have been
made by any of them individually or to impose any liability
on any of them personally, but will bind only the property of
the Shares as provided in the Articles of Incorporation. No
other portfolios or classes of shares of the Fund will be
liable for any claims against the Shares.
Section 14. Effective Dates.
The Plan will become effective with respect to the
Shares upon the date the Shares first commence its
investment operations.
Section 15. Governing Law.
This Plan shall be governed by, and construed and
interpreted in accordance with, the law of the State of New
York.
This Plan and the terms and provisions thereof are
hereby accepted and agreed to by the undersigned, as
evidenced by their execution thereof.
Dated: October , 1995
AMT CAPITAL FUND, INC.
By:_________________________
Name:
Title:
LEHMAN BROTHERS INCORPORATED
By:_________________________
Name:
Title:
November 10, 1995
AMT Capital Fund, Inc.
in respect of
U.S. Selected Growth Portfolio
430 Park Avenue
New York, New York 10022
Re: Registration Statement on Form N-14
Dear Sirs:
We refer to the Registration Statement on Form N-14
(the "Registration Statement") relating to the issuance of Class B shares
of Common Stock, par value $0.001 per share (the "USG Shares"), of
U.S. Selected Growth Portfolio (the "USG Portfolio"), a series of AMT
Capital Fund, Inc. (the "Company"), a Maryland corporation, in
connection with the proposed Agreement and Plan of Reorganization
(the "Agreement"), which provides for all of the assets of the Lehman
Selected Growth Stock Portfolio (the "SGS Portfolio"), a series of
Lehman Brothers Funds, Inc., to be transferred to the USG Portfolio in
exchange for a number of USG Shares equal to the number of
outstanding shares of the SGS Portfolio, and the distribution of such
USG Shares to the shareholders of the SGS Portfolio in complete
liquidation of the SGS Portfolio on the basis of one USG Share (or
fraction thereof) for each share (or fraction thereof) of the SGS
Portfolio. We have examined the Company's Articles of Incorporation
and Bylaws, the relevant proceedings of the Board of Directors of the
Company, and such other certificates, instruments, documents and
matters of law relating to the Company as we deem necessary in
connection with rendering this opinion. In such examination, we have
assumed the genuineness of all signatures, the conformity of final
documents in all material respects to the versions that were submitted
to us in draft form, the authenticity of all the documents submitted to
us as originals, and the conformity with originals of all documents
submitted to us as copies.
On the basis of the foregoing, it is our opinion that
the USG Shares have been duly authorized and, when issued in
accordance with the terms of the Agreement and as contemplated by
the Registration Statement, will be validly issued, fully paid and
nonassessable.
We hereby consent to filing of this opinion as an
exhibit to the Registration Statement and to all references to our firm
therein.
Very truly yours,
AMT Capital Fund, Inc.
in respect of U.S. Selected Growth Portfolio
November 10, 1995
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions
"Independent Auditors" and "Financial Statements" and to
the incorporation by reference of our report dated February
27, 1995 in the Prospectus and Statement of Additional
Information (Form N-1A No. 33-66840 Post Effective
Amendment No. 7) which has been incorporated by
reference in this Registration Statement (Form N-14 No.
33-66840) of AMT Capital Fund, Inc.
by: S\Ernst & Young LLP\
ERNST & YOUNG LLP
New York, New York
November 9, 1995
Filing N30B-2
File #: 033-62312
Filing Date: 12/08/95
Accesson number: 0000927405-94-000012
SUBJECT TO COMPLETION - October 20, 1995
AMT CAPITAL FUND, INC.
U.S. Selected Growth Portfolio - Class B Shares
Prospectus - January ___, 1996
AMT Capital Fund, Inc. (the "Fund") is an open-end management
investment company (a "mutual fund") that currently has three portfolios,
of which the U.S. Selected Growth Portfolio - Class B shares ("U.S.
Selected Growth" or the "Portfolio") is offered by this Prospectus.
Class A shares of U.S. Selected Growth are available through a
separate Prospectus. Shares of the Portfolio may be purchased through
AMT Capital Services, Inc. ("AMT Capital"), the exclusive distributor.
The U.S. Selected Growth Portfolio's investment objective is to seek
long-term capital appreciation. The Portfolio seeks to achieve its
objective by investing primarily in equity securities of
small- and medium-sized U.S. companies which the sub-adviser believes
have the potential for above-average capital appreciation. No assurance
can be given that the Portfolio's investment objective will be attained.
This Prospectus sets forth concisely the information that a prospective
investor should know before investing. It should be read and retained for
future reference. A Statement of Additional Information dated January
__, 1996, containing additional information about the Fund (the
Statement of Additional Information), has been filed with the Securities
and Exchange Commission (the "Commission") and is incorporated by
reference into this Prospectus. It is available without charge and can be
obtained by calling or writing AMT Capital Services, Inc. at the
telephone numbers or address listed on the cover of this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
No person has been authorized to give any information or make
any representations not contained in this Prospectus, or in the
Statement of Additional Information incorporated herein by
reference, in connection with the offering made by this Prospectus
and, if given or made, such information or representations must not
be relied upon as having been authorized by the Portfolio or its
Distributor. This Prospectus does not constitute an offering by the
Portfolio or by the Distributor in any jurisdiction in which such
offering may not lawfully be made.
TABLE OF CONTENTS
Prospectus Highlights 3
Portfolio Expenses 4
Financial Highlights 5
The Fund 5
Investment Objective 5
Investment Policies 6
Descriptions of Investments and
Investment Techniques 7
Risks Associated with the Portfolio's Investment
Policies and Investment Techniques 12
Investment Restrictions 15
Brokerage Practices 16
Yields and Total Return 16
Distribution of Portfolio Shares 16
Determination of Net Asset Value 17
Purchases and Redemptions 18
Dividends 20
Management of the Portfolio 21
Tax Considerations 23
Shareholder Information 25
Other Parties 26
Shareholder Inquiries 27
Control Person 27
PROSPECTUS HIGHLIGHTS
The U.S. Selected Growth Portfolio's investment objective is to seek
long-term capital appreciation. The Portfolio seeks to achieve its
objective by investing primarily in equity securities of
small- and medium- sized U.S. companies which the sub-adviser
believes have the potential for above-average capital appreciation. There
is no assurance that the Portfolio will achieve its investment objective.
Investment Advisers and Sub-Advisers
AMT Capital Advisers, Inc. (the "AMT Capital Advisers") serves as
investment adviser to U.S. Selected Growth Portfolio, providing the
Portfolio with business and asset management services, including
selection, evaluation, and monitoring of the sub-adviser to the Portfolio.
AMT Capital Advisers also provides performance reporting, portfolio
analytics, and other support to the Fund's Board of Directors relating to
the selection, evaluation, and monitoring of the investment advisers and
sub-advisers of the Fund.
Delphi Asset Management ("Delphi") serves as sub-adviser to U.S.
Selected Growth. Delphi is employed and supervised by AMT Capital
Advisers, subject to approval by the Board of Directors of the Fund and
its shareholders. For more information, refer to "Management of the
Portfolio."
Administrator and Distributor
AMT Capital serves as Administrator to the Fund, supervising the
general day-to-day business activities and operations of the Portfolio
other than investment advisory activities. AMT Capital also serves as the
exclusive distributor of shares of the Fund's Portfolios. For more
information, refer to "Management of the Portfolio."
How to Invest
Class B Shares of the Portfolio may be purchased through any broker
which has a dealer agreement with AMT Capital, the principal
underwriter for the shares of the Portfolio. Class B Shares of the
Portfolio are available without any sales charges at their net asset value
next determined after receipt of the order. Investors are subject to a
minimum initial investment requirement of $5,000, and a minimum
subsequent investment requirement of $1,000. However, for Individual
Retirement Accounts ("IRA's") and Self-Employed Retirement Plans,
the minimum initial investment requirement is $2,000 and the minimum
subsequent investment requirement is $1,000 and for certain qualified
retirement plans, the minimum initial and subsequent investment
requirement is $500. The Portfolio also offers shareholders a Systematic
Investment Plan under which they may authorize the automatic
placement of a purchase order each month or quarter for Class B shares
in an amount not less than $100. For more information, refer to
Purchase and Redemption of Shares.
How to Redeem Shares
Shares of the Portfolio may be redeemed, without charge, at their next
determined net asset value after receipt by the Transfer Agent of the
redemption request from the shareholder or a broker that has a dealer
agreement with AMT Capital.
Risks
Prospective investors should consider certain risks associated with an
investment in the Portfolio. There is no assurance that the Portfolio will
achieve its investment objective. The U.S. Selected Growth Portfolio
invests mostly in equity securities of small-and medium-sized
companies. Securities of small- and medium-sized companies may be
subject to significant price fluctuation and above-average risks relative to
investments in securities of larger companies. See "Investment
Objectives and Policies", "Descriptions of Investments", "Risks
Associated with the Portfolio's Investment Policies and Investment
Techniques", and "Additional Investment Activities" .
PORTFOLIO EXPENSES
The following table illustrates the expenses and fees that an investor in
the Portfolio can expect to incur. The purpose of this table is to assist the
investor in understanding the various expenses that an investor in the
Portfolio will bear directly or indirectly.
Shareholder Transaction Expenses
Sales Load Imposed on Purchases None
Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fees None
Annual Portfolio Operating Expenses (shown as a percentage of average
daily net assets)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Other Expenses
Advisory 12b-1 Administration Other Total Other Total Operating
Fees Fees Fees Expenses Expenses Expenses
(After (After (After
reimbursement) reimbursement) (reimbursement)
U.S. Selected 0.75% 1.00% 0.15% 0.20%(a) 0.35% (a) 2.10% (a)
Growth Portfolio
Class B
</TABLE>
(a) Per an agreement with the Investment Adviser, sub-adviser and the
administrator, the total operating expenses (on an annualized basis) of the
U.S. Selected Growth Portfolio Class B share's average daily net assets are
capped at 2.1%. Without such cap, the total operating expenses (on an
annualized basis) are estimated to be 2.25% (of which 0.35% is "other
expenses").
The following table illustrates the expenses that an investor would pay on
each $1,000 increment of its investment over various time periods,
assuming a 5% annual return. As noted in the table above, the Portfolio
charges no redemption fees of any kind. Long-term shareholders in mutual
funds with Rule 12b-1 fees, such as the Portfolio, may pay more than the
economic equivalent of the maximum fron-end sales charge permitted by rules
of the National Association of Securities Dealers, Inc.
Expenses Per $1,000 Investment
1 Year 3 Years 5 Years 10 Years
U.S. Selected Growth Portfolio $21 $66 $113 $243
These examples should not be considered a representation of future
expenses or performance. Actual operating expenses and annual returns
may be greater or less than those shown.
FINANCIAL HIGHLIGHTS
The U.S. Selected Growth Portfolio has not yet commenced operations.
AMT CAPITAL FUND, INC.
AMT Capital offers smaller institutions and substantial private investors
an opportunity to gain access to the money management expertise of
some of the top investment advisers in the country at fees which, until
now, have been available only to larger institutions.
Prior to founding AMT Capital in early 1992, its senior managers were
former officers of Morgan Stanley and The Vanguard Group. Having
worked with top investment advisers for many years, AMT Capital has
now been able to assemble those advisers' products in a format that is
accessible to and inexpensive for smaller institutions and substantial
private investors. AMT Capital believes its advisers have strong track
records of competing successfully in domestic and global markets and
have created some of the most innovative products currently available.
AMT Capital Fund, Inc. provides three Portfolios managed by these
investment advisers and sub-advisers, and other, similar investment
funds are available through AMT Capital. For more information on the
fund products we offer, please contact your AMT Capital account
executive.
INVESTMENT OBJECTIVE
The investment objective of the U.S. Selected Growth Portfolio is to
seek long-term capital appreciation. The Portfolio seeks to achieve
its objective by investing primarily in equity
securities of small- and medium-sized U.S. companies which the sub-
adviser believes have the potential for above-average capital
appreciation.
Except as otherwise indicated, the investment policies may be changed at
any time by the Fund's Board of Directors to the extent that such changes
are consistent with the investment objectives of the applicable Portfolio.
However, the Portfolio's investment objective is fundamental and
may not be changed without a majority vote of the Portfolio's outstanding
shares, which is defined as the lesser of (a) 67% of the shares of the
Portfolio present or represented if the holders of more than
50% of the shares are present or represented at the shareholders' meeting,
or (b) more than 50% of the shares of the Portfolio
(hereinafter, "majority vote").
INVESTMENT POLICIES
U.S. Selected Growth Portfolio
The U.S. Selected Growth Portfolio will, under normal market
conditions, invest primarily in equity securities of companies which
the sub-adviser believes have the potential for above-average capital
appreciation. Such securities will be primarily those of small- and
medium-sized companies. Although the Portfolio may receive
current income from dividends, interest and other sources, income is
only an incidental consideration of the Portfolio. The Portfolio may
invest up to 20% of its total assets in equity securities of larger
companies (i.e., those with total annual revenues in excess of
$1 billion or a market capitalization in excess of $2.5 billion).
For temporary defensive purposes, the Portfolio may invest, without
limit (except for the limitations described under "Investment
Restrictions"), in U.S. government and agency securities and in
the types of high-quality short-term securities described under
the caption "Description of Investments" below.
In selecting equity securities of companies with above-average
growth potential, the sub-adviser employs a disciplined investment
methodology under which (i) a fundamental analysis is performed on
specific issuers, (ii) quantitative models are applied to assess the
relative attractiveness of issuers with fundamental characteristics
deemed to be favorable, (iii) investments are selected in a manner
intended to achieve diversification across broad industry sectors, and
(iv) investments are monitored on an ongoing basis with respect to
fundamental characteristics and quantitative projections.
Fundamental Analysis. In selecting equity securities, the sub-
adviser, Delphi Asset Management initially applies a fundamental
analysis on specific issuers. The Portfolio focuses on companies
which have relatively unleveraged capital structures (generally where
debt represents less than one-third of total capitalization), small- and
medium-sized companies which have total annual revenues of less
than $1 billion and a market capitalization of less than $2.5 billion,
companies which satisfy certain benchmarks with respect to their
internal rates of return, and companies with high cash flows relative
to market capitalization. Delphi also seeks to identify companies
with certain business characteristics which it deems favorable, such
as strong brand name recognition, a franchise or service that can be
easily replicated but is expensive to duplicate in a defined market
niche, and service companies which compete based primarily on
quality of service rather than price. Delphi also seeks companies
where a significant proportion of revenues is derived from reorder
activity as opposed to companies which are dependent on product life
cycles. Companies may not satisfy all of the foregoing fundamental
criteria, however, if the overall mix of characteristics is deemed
favorable by Delphi.
Quantitative Models. After selecting equity securities with
fundamental characteristics deemed by Delphi to be favorable,
Delphi applies three distinct quantitative models to assess the relative
attractiveness of the securities identified as having favorable
fundamental characteristics. In applying the quantitative models,
Delphi seeks to select securities with projected earnings growth rates
of 15% or higher over the following three years. In addition, Delphi
seeks to use the models to identify securities with favorable
risk/reward characteristics. Among the models employed by Delphi
are a valuation model which places a value on growth relative to the
long-term interest rate environment, an earnings momentum model,
which seeks to identify companies most likely to experience an
upward revision in earnings targets, and an earnings stability model,
which emphasizes the consistency of growth. There can of course be
no assurance that the models will predict accurately the performance
of particular securities.
Industry Diversification. Once equity securities are identified by
Delphi as having favorable fundamental and quantitative
characteristics, Delphi selects stocks in a manner intended to achieve
diversification across broad industry sectors. Delphi divides
companies into four broad industry classifications:
Business/Industrial Service, Consumer Service, Health Care and
Technology. Delphi expects that a substantial proportion of its
investments will be comprised of companies in each of these sectors.
However, Delphi does not seek an equal balance among sectors but
instead allocates investments in each of these sectors based upon its
expectations as to the relative future performance of each sector.
Although the Portfolio is subject to an investment limitation which
generally prohibits it from investing 25% or more of its total assets in
a single industry, the four industry classifications employed by Delphi
are substantially broader than the term "industry" as used in the
foregoing investment limitation and as interpreted by the staff of the
Securities and Exchange Commission (the "SEC"). See "Investment
Objective and Policies - Investment Limitations."
Ongoing Monitoring. Delphi will monitor its investments on an
ongoing basis with respect to, among other things, the continuing
presence of favorable fundamental characteristics, the performance of
investments compared with projections of the quantitative models,
and changing prospects for the industry sectors. Delphi will also
review other investment opportunities on an ongoing basis and will
alter its investment portfolio as it deems appropriate.
Portfolio Turnover. The Portfolio's annual turnover rate generally will
not exceed 100%.
DESCRIPTIONS OF INVESTMENTS
The following briefly describes some of the different types of securities in
which the Portfolio may invest and investment techniques in which the
Portfolio may engage, subject to its investment objectives and policies.
For a more extensive description of these assets and the risks associated
with them, see the Statement of Additional Information.
Equity Securities. The Portfolio will invest in various types of equity
securities, including common stocks, preferred stocks, convertible securities,
American Depository Receipts ("ADRs"), rights and warrants.
The stocks that the Portfolio will invest in may be either growth-oriented
or value-oriented. Growth-oriented stocks are the stocks of companies that are
believed to have internal strengths, such as good financial resources, a
satisfactory rate of return on capital, a favorable industry position, and
superior management. Value-oriented stocks have lower price multiples (either
price/earnings or price/book) than other stocks in their industry and can
sometimes also display weaker fundamentals such as growth of earnings
and dividends. Rights and warrants are instruments which give the
holder the right to purchase the issuer's securities at a stated price during
a stated term.
ADRs typically are issued by a U.S. bank or trust company and evidence
ownership of underlying securities issued by a foreign corporation.
Unsponsored ADRs differ from sponsored ADRs in that the establishment
of unsponsored ADRs is not approved by the issuer of the underlying
securities.
U.S. Treasury and other U.S. Government and Government Agency
Securities The Portfolio may purchase securities issued by or
guaranteed as to principal and interest by the U.S. Government, its
agencies or instrumentalities and supported by the full faith and credit of
the United States ("U.S. Government Securities"). The Portfolio may
also purchase securities issued by a U.S. Government-sponsored
enterprise or federal agency that is supported either by its ability to
borrow from the U.S. Treasury (e.g., Student Loan Marketing
Association) or by its own credit standing (e.g., Federal National
Mortgage Association). Such securities do not constitute direct
obligations of the United States but are issued, in general, under the
authority of an Act of Congress.
Bank Obligations The Portfolio may invest in obligations of domestic
and foreign banks, including time deposits, certificates of deposit,
bankers' acceptances, letters of credit, bank notes, deposit notes,
Eurodollar or Yankeedollar time deposits, Eurodollar or Yankeedollar
certificates of deposit, variable rate notes, loan participations, variable
amount master demand notes and custodial receipts.
Corporate Debt Instruments The Portfolio may purchase commercial
paper, short-term notes and other obligations of U.S. and foreign corporate
issuers meeting the Portfolio's credit quality standards (including variable
rate notes).
Repurchase Agreements The Portfolio may enter into repurchase
agreements under which a bank or securities firm (that is a dealer in U.S.
Government Securities reporting to the Federal Reserve Bank of New
York) agrees, upon entering into the contract, to sell U.S. Government
Securities to the Portfolio and repurchase such securities from the
Portfolio at a mutually agreed-upon price and date. Repurchase
agreements will generally be restricted to those that mature within seven
days. Securities subject to repurchase agreements will be held by the
Portfolio's custodian, sub-custodian or in the Federal Reserve/Treasury
book-entry system. Repurchase agreements are considered to be loans
by the Portfolio under the 1940 Act. The Portfolio will engage in such
transactions with parties selected on the basis of such party's
creditworthiness and will enter into repurchase agreements only with
financial institutions which are deemed by the Investment Adviser and
sub-adviser to be in good financial standing and which have been
approved by the Board of Directors.
Reverse Repurchase Agreements The Portfolio may enter into reverse
repurchase agreements under which a primary or reporting dealer in U.S.
Government Securities purchases U.S. Government Securities from a
Portfolio and the Portfolio agrees to repurchase the securities at an
agreed-upon price and date.
Commission rules require either that securities sold by the Portfolio
under a reverse repurchase agreement be segregated pending repurchase
or that the proceeds be segregated on that Portfolio's books and records
pending repurchase. The Portfolio will maintain a segregated custodial
account containing cash, U.S. Government Securities or other
appropriate high-grade debt securities having an aggregate value at least
equal to the amount of such commitments to repurchase, including
accrued interest, and will subsequently monitor the account to ensure
such equivalent value is maintained until payment is made. Reverse
repurchase agreements will generally be restricted to those that mature
within seven days. The Portfolio will engage in such transactions with
parties selected on the basis of such party's creditworthiness.
Convertible Securities. The Portfolio may invest in convertible
preferred or dept securities which are securities that may be converted
into or exchanged for, at either a stated price or stated rate,
underlying shares of common stock. Convertible securities have
general characteristics similar to both fixed-income and equity
securities. Although to a lesser extent than with fixed-income
securities generally, the market value of convertible fixed income securities
tends to decline as interest rates increase and, conversely, tends to increase
as interest rates decline. In addition, because of the conversion
feature, the market value of convertible securities tends to vary with
fluctuations in the market value of the underlying common stocks and
therefore also will react to variations in the general market for equity
securities. A unique feature of convertible securities is that as the
market price of the underlying common stock declines, convertible
securities tend to trade increasingly on a yield basis, and so may not
experience market value declines to the same extent as the underlying
common stock. When the market price of the underlying common
stock increases, the prices of the convertible securities tend to rise as
a reflection of the value of the underlying common stock. While no
securities investments are without risk, investments in convertible
securities generally entail less risk than investments in common stock
of the same issuer.
When-Issued Securities. The Portfolio may purchase securities on a
firm commitment basis, including when-issued securities. Securities
purchased on a firm commitment basis are purchased for delivery
beyond the normal settlement date at a stated price and yield. Such
securities are recorded as an asset and are subject to changes in value
based upon changes in the general level of interest rates. The Portfolio
will only make commitments to purchase securities on a firm
commitment basis with the intention of actually acquiring the securities
but may sell them before the settlement date if it is deemed advisable.
When the Portfolio purchases securities on a when-issued or forward
commitment basis, the Portfolio's custodian will maintain in a segregated
account cash and liquid high-grade debt securities having a value
(determined daily) at least equal to the amount of the Portfolio's purchase
commitments. In the case of a forward commitment to sell portfolio
securities, the custodian will hold the portfolio securities themselves in a
segregated account while the commitment is outstanding. These
procedures are designed to ensure that the Portfolio will maintain
sufficient assets at all times to cover its obligations under when-issued
purchases and forward commitments.
Derivatives. The Portfolio is authorized to use various hedging and
investment strategies described below to hedge broad or specific market
movements, or to seek to increase the Portfolio's income or gains.
The Portfolio may purchase and sell (or write) exchange-listed and over-
the-counter put and call options on securities, financial futures contracts,
equity indices and other financial instruments and enter into financial
futures contracts (collectively, these transactions are referred to in this
Prospectus as "Derivatives").
Derivatives may be used to attempt to protect against possible changes
in the market value of securities held or to be purchased by the Portfolio
resulting from securities market to protect the Portfolio's unrealized gains in
value of its securities, to facilitate the sale of those securities for
investment purposes, to establish a position in the derivatives markets as a
temporary substitute for purchasing or selling particular securities or to
seek to enhance the Portfolio's income or gain. The Portfolio may use any or
all types of Derivatives at any time; no particular strategy will dictate the
use of one type of transaction rather than another, as use of any Derivates will
be a function of numerous variables, including market conditions. The ability
of the Portfolio to utilize Derivatives successfullly will depend on, in
addition to the factors described above, Delphi's ability to predict pertinent
market movements, which cannot be assured. These skills are different from
those needed to select the Portfolio's securities. The Portfolio is not a
"commodity pool" (i.e., a pooled investment vehicle which trades in commodity
futures contracts and options thereon and the operator of which is registered
with the Commodity Futures Trading Commission (the "CFTC")) and Derivatives
involving futures contracts and options on futures contracts will be purchased,
sold or entered into only for bona fide hedging purposes, provided that the
Portfolio may enter into such transactions for purposes other than bona fide
hedging if, immediatley thereafter, the sum of the amount of its initial
margin and premiums on open contracts and options would not exceed 5% of the
liquidation value of the Portfolio's portfolio, provided, further, that, in
the case of an otpion that is in-the-money, the in-the-money amount may be
exclulded in calculating the 5% limitaiton. The use of certain Derivatives
will require that the Portfolio segregate cash, liquid high grade debt
obligations or other assets to the extent the Portfolio's obligations are
not otherwise "covered" through ownership of the underlying security or
financial instrument.
Futures Contracts The Portfolio may use stock index futures contracts
("futures contracts") as a hedge against the effects of changes in the
market value of the stocks comprising the relevant index. In managing
its cash flows, the Portfolio may also use futures contracts as a substitute
for holding the designated securities underlying the futures contract. A
futures contract is an agreement to purchase or sell a specified amount of
designated securities for a set price at a specified future time. At the time
the Portfolio enters into a futures transaction, it is required to make a
performance deposit ("initial margin") of cash or liquid securities in a
segregated account in the name of the futures broker. Subsequent
payments of "variation margin" are then made on a daily basis, depending
on the value of the futures position which is continually marked to
market. The Portfolio will segregate cash, U.S. Government securities or
other high grade debt obligations in an amount sufficient to meet its
obligations under these transactions.
If the Portfolio enters into a short position in a futures contract as a
hedge against anticipated adverse market movements and the market then rises,
the increase in the value of the hedged securities will be offset in whole
or in part, by a loss on the futures contract. If instead the Portfolio
purchases a futures contract as a substitute for investing in the designated
underlying securities, the Portfolio will experience gains or losses that
correspond generally to gains or losses in the underlying securities. The
latter type of futures contract transactions permits the Portfolio to
experience the results of being fully invested in a particular asset class,
while maintaining the liquidity needed to manage cash flows into or out
of the Portfolio (e.g., purchases and redemptions of Portfolio shares).
Under normal market conditions, futures contracts positions may be
closed out on a daily basis.
Stock Index Options The Portfolio may purchase or sell options on
stock indices on U.S. and foreign exchanges or in the over-the-counter
markets. An option on a stock index permits the purchaser of the option,
in return for the premium paid, the right to receive from the seller cash
equal to the difference between the closing price of the index and the
exercise price of the option. The Portfolio will segregate cash, U.S.
Government securities or other high grade debt obligations in an amount
sufficient to meet its obligations under these transactions.
Options on Futures Contracts The Portfolio may purchase or sell
options on futures contracts as an alternative to buying or selling futures
contracts. Options on futures contracts are similar to options on the
security underlying the futures contracts except that options on stock
index futures contracts give the purchaser the right to assume a position
at a specified price in a stock index futures contract at any time during
the life of the option. The Portfolio will segregate cash, U.S.
Government securities or other high grade debt obligations in an amount
sufficient to meet its obligations under these transactions.
A detailed discussion of Derivatives, including applicable
requirements of the CFTC, and special risks associated with such
strategies, appears in the Statement of Additional Information.
Warrants. The Portfolio may invest up to 5% of the value of its net
assets (valued at the lower of cost or market) in warrants for equity
securities, which are securities permitting, but not obligating, their
holder to subscribe for other equity securities. Warrants do not carry
with them the right to dividends or voting rights with respect to the
securities that they entitle their holder to purchase, and they do not
represent any rights in the assets of the issuer. As a result, an
investment in warrants may be considered more speculative than
certain other types of investments. In addition, the value of a warrant
does not necessarily change with the value of the underlying
securities and a warrant ceases to have value if it is not exercised
prior to its expiration date. The Portfolio will not invest more than
2% of the value of its net assets (valued as described above) in
warrants which are not listed on the New York or American Stock
Exchanges.
Securities Lending. The Portfolio may lend securities to banks,
broker-dealers or other institutional investors pursuant to agreements
requiring that the loans be continuously secured by any combination of
cash, securities of the U.S. government and its agencies, other high
quality liquid investments, and approved bank letters of credit that at all
times equal at least 100% of the market value of the loaned securities.
Such loans will not be made if, as a result, the aggregate amount of all
outstanding securities loans for the Portfolio exceeds 33 1/3% of its total
assets. The Portfolio continues to receive interest on the securities loaned
and simultaneously earns either interest on the investment of the cash
collateral or fee income if the loan is otherwise collateralized. However,
the Portfolio normally pays lending fees and related expenses from the
interest earned on invested collateral. Should the borrower of the
securities fail financially, there is a risk of delay in recovery of the
securities or loss of rights in the collateral. However, loans are made only
to borrowers which are deemed by the Investment Advisers and/or sub-
advisers to be of good financial standing. The Portfolio may invest cash
collateral it receives in connection with a loan of securities in securities of
the U.S. Government and its agencies and other high quality short-term
debt instruments. For purposes of complying with the Portfolio's
investment policies and restrictions, collateral received in connection with
securities loans will not be deemed an asset of the Portfolio unless
otherwise required by law. See the Statement of Additional Information
for further information regarding loan transactions.
RISKS ASSOCIATED WITH THE FUND'S INVESTMENT
POLICIES AND INVESTMENT TECHNIQUES
A more detailed discussion of the risks associated with the investment
policies and investment techniques of the Portfolio appears in the
Statement of Additional Information.
Small-and Medium Sized Companies Securities. Securities of the
kinds of companies in which the Portfolio invests may be subject to
significant price fluctuation and above-average risk. Stocks of small-
and medium-sized companies are more volatile than stocks of larger
companies. The Portfolio may invest in relatively new or unseasoned
companies which are in their early states of development, or small
companies positioned in new and emerging industries. Securities of
small and unseasoned companies present greater risks than securities
of larger, more established companies. The companies in which the
Portfolio may invest may have relatively small revenues and limited
product lines, and may have a small share of the market for their
products or services. Smaller companies may lack depth of
management. They may be unable internally to generate funds
necessary for growth or potential development or to generate such
funds through external financing on favorable terms. They may be
developing or marketing new products or services for which markets
are not yet established and may never become established. Due to
these and other factors, smaller companies may incur significant
losses.
Derivatives and Hedging. The Portfolio may engage in hedging
and other strategic transactions and certain other investment practices
may entail certain risks.
Derivatives involve special risks, including possible default by the
other party to the transaction, illiquidity and, to the extent Delphi's
view as to certain market movements is incorrect, the risk that the
use of Derivatives could result in greater losses than if they had not
been used. Use of put and call options could result in losses to the
Portfolio, force the purchase or sale of portfolio securities at
inopportune times or for prices higher or lower than current market
values or cause the Portfolio to hold a security it might otherwise
sell. The use of options and futures transactions entails certain
special risks. In particular, the variable degree of correlation
between price movements of futures contracts and price
movements in the related portfolio position of the Portfolio could
create the possibility that losses on the Derivative will be greater
than gains in the value of the Portfolio's position. In addition,
futures and options markets could be illiquid in some
circumstances and certain over-the-counter options could have no
markets. The Portfolio might not be able to close out certain
positions without incurring substantial losses. To the extent the
Portfolio utilizes futures and options transactions for hedging, such
transactions should tend to minimize the risk of loss due to a
decline in the value of the hedged position and, at the same time,
limit any potential gain to the Portfolio that might result form an
increase in value of the position. Finally, the daily variation margin
requirements for futures contracts create a greater ongoing
potential financial risk than would purchases of options, in which
case the exposure is limited to the cost of the initial premium and
transaction costs. Losses resulting from the use of Derivatives will
reduce the Portfolio's net asset value, and possibly income, and the
losses may be greater than if Derivatives had not been used.
Additional information regarding the risks and special
considerations associated with Derivatives appears in the Statement
of Additional Information.
Illiquid and Restricted Securities. The Portfolio will not invest
more than 15% of the value of its total assets in illiquid securities.
Illiquid securities are securities which may not be sold or disposed
of in the ordinary course of business within seven days at
approximately the value at which the Portfolio has valued the
investments, and include securities with legal or contractual
restrictions on resale, time deposits, repurchase agreements having
maturities longer than seven days and securities that do not have
readily available market quotations. In addition, the Portfolio may
invest in securities that are sold in private placement transactions
between their issuers and their purchasers and that are neither
listed on an exchange nor traded over-the counter. These factors
may have an adverse effect on the Portfolio's ability to dispose of
particular securities and may limit the Portfolio's ability to obtain
accurate market quotations for purposes of valuing securities and
calculating net asset value and to sell securities at fair value. If any
privately placed securities held by the Portfolio are required to be
registered under the securities laws of one or more jurisdictions
before being resold, the Portfolio may be required to bear the
expenses of registration. The Portfolio may also purchase securities
that are not registered under the Securities Act of 1933, as
amended (the "1933 Act"), but which can be sold to qualified
institutional buyers in accordance with Rule 144A under that Act
("Rule 144A securities"). Rule 144A securities generally must be
sold to other qualified institutional buyers. The Portfolio may also
invest in commercial obligations issued in reliance on the so-called
"private placement" exemption from registration afforded by
Section 4(2) of the 1933 Act ("Section 4(2) paper"). Section 4(2)
paper is restricted as to disposition under the federal securities
laws, and generally is sold to institutional investors such as the
Portfolio who agree that they are purchasing the paper for
investment and not with a view to public distribution. Any resale
by the purchaser must be in an exempt transaction. Section 4(2)
paper normally is resold to other institutional investors like the
Portfolio through or with the assistance of the issuer or investment
dealers who make a market in the Section 4(2) paper, thus
providing liquidity. If a particular investment in Rule 144A
securities, Section 4(2) paper or private placement securities is not
determined to be liquid, that investment will be included within the
15% limitation on investment in illiquid securities. The ability to
sell Rule 144A securities to qualified institutional buyers is a recent
development and it is not possible to predict how this market will
mature. Delphi will monitor the liquidity of such restricted
securities under the supervision of the Board of Directors.
Repurchase and Reverse Repurchase Agreements. In the event the
other party to a repurchase agreement or a reverse repurchase
agreement becomes subject to a bankruptcy or other insolvency
proceeding or such party fails to satisfy its obligations thereunder, the
Portfolio could (i) experience delays in recovering cash or the securities
sold (and during such delay the value of the underlying securities may
change in a manner adverse to the Portfolio) or (ii) lose all or part of the
income, proceeds or rights in the securities to which the Portfolio
would otherwise be entitled. Reverse repurchase agreements involve
the risk that the market value of the portfolio securities sold by the
Portfolio may decline below the price of the securities the Portfolio is
obligated to repurchase.
INVESTMENT RESTRICTIONS
The following investment restrictions apply to the Portfolio and may be
changed only by the majority vote of the Portfolio's outstanding shares.
Accordingly, the Portfolio may not:
(a) invest more than 5% of its total assets in securities of any
one issuer, other than securities issued by the U.S. Government,
its agencies and instrumentalities, or purchase more than 10% of
the voting securities of any one issuer, with respect to 75% of a
Portfolio's total assets.
(b) invest more than 25% of its total assets in the securities of
companies primarily engaged in any one industry other than the
U.S. Government, its agencies and instrumentalities.
(c) borrow money, except through reverse repurchase
agreements or dollar roll transactions or from a bank for
temporary or emergency purposes in an amount not exceeding
one third of the value of its total assets nor will the Portfolio
borrow for leveraging purposes. In addition, although not a
fundamental policy, the Portfolio will repay any money borrowed
before any additional portfolio securities are purchased. See the
Statement of Additional Information for a further description
regarding reverse repurchase agreements.
(d) purchase or sell real estate (other than marketable securities
representing interests in, or backed by, real estate and securities
of companies that deal in real estate or mortgages) or real estate
limited partnerships, or purchase or sell physical commodities or
contracts relating to physical commodities.
The above percentage limits are based upon current asset values at the
time of the applicable transaction; accordingly, a subsequent change in
asset values will not affect a transaction which was in compliance with
the investment restrictions at the time such transaction was effected. See
the Statement of Additional Information for other investment limitations.
BROKERAGE PRACTICES
Delphi will place its own orders to execute the securities transactions
which are designed to implement the applicable investment objective and
policies of the Portfolio. The adviser and sub-adviser will use their
reasonable efforts to execute all purchases and sales with brokers, dealers
and banks on a best available price and most favorable execution basis.
The full range and quality of services offered by the executing broker or
dealer is considered when making these determinations. Neither the
adviser, the sub-adviser nor any of its officers, affiliates, or employees
will act as principal or receive any compensation from the Portfolio in
connection with the purchase or sale of investments for the Portfolio.
Consistent with the foregoing, the sub-adviser to the Portfolio may, at
times, place orders with brokers that have sold shares of the Portfolio.
YIELDS AND TOTAL RETURN
The Portfolio's yield for any 30-day (or one month) period is computed
by dividing the net investment income per share earned during such
period by the maximum public offering price per share on the last day of
the period, and then annualizing such 30-day (or one month) yield in
accordance with a formula prescribed by the Commission which
provides for compounding on a semiannual basis.
The Portfolio may from time to time advertise its total return. Any total
return quotations advertised will reflect the average annual compounded
rate of return during the designated time period based on a hypothetical
initial investment and the redeemable value of that investment at the end
of the period.
The Portfolio will at times compare its performance to applicable
published indices, and may also disclose its performance as ranked by
certain analytical services. See the Statement of Additional Information
for more information about the calculation of yields and total returns.
Performance figures are based upon historical earnings and are not
intended to indicate future performance.
DISTRIBUTION OF FUND SHARES
Shares of the Portfolio are distributed by AMT Capital pursuant to a
Distribution Agreement (the "Distribution Agreement") dated as of June
13, 1995 between the Fund and AMT Capital.
The Fund has adopted a services and distribution plan with respect to the
Class B shares of the Portfolio (the "Plan") pursuant to Rule 12b-1
under the 1940 Act. Under the Plan, the Portfolio has agreed to pay
AMT Capital a service fee, at an annual rate of 0.25% of the average
daily net asset value of the Class B shares outstanding, and a distribution
fee, accrued daily and paid monthly, at an annual rate of 0.75% of the
average daily net asset value of the Class B shares outstanding. The
service fee is used by AMT Capital to pay dealers in the Class B shares
for servicing shareholder accounts. The distribution fee is paid to AMT
Capital for advertising, marketing and distributing Class B shares,
including making payments to dealers in Class B shares for distribution
assistance based upon the average daily average net asset value of the
Class B shares sold that remain outstanding. The Plan also provides that
AMT Capital may make payments to assist in the distribution of the
Class B shares out of the other fees received by it or its affiliates from the
Fund, its past profits or any other sources available to it.
DETERMINATION OF NET ASSET VALUE
The "net asset value" per share of the Portfolio is calculated as of the
close of business on days when the New York Stock Exchange
("NYSE") is open for business, which is Monday through Friday,
except for holidays (hereinafter, "Business Day"). The Portfolio
determines its net asset value per share of each class by subtracting its
liabilities (including accrued expenses and dividends payable)
attributable to that class from the total value of the Portfolio's investments
and other assets attributable to that class and dividing the result by the
total outstanding shares of that class.
For purposes of calculating the Portfolio's net asset value, securities are
valued as follows: (1) all portfolio securities for which over-the-counter
market quotations are readily available are valued at the latest bid price; (2)
deposits and repurchase agreements are valued at their cost plus accrued
interest unless Delphi determines in good faith, under procedures established
by and under the general supervision of the Fund's Board of Directors, that
such value does not approximate the fair value of such assets; (3) securities
listed or traded on an exchange are valued at their last sale price on that
exchange; (4) securities which are traded both in the OTC market and on a
stock exchange will be valued according to the broadest and most
representative market; (5) short-term obligations with maturities of
60 days or less are valued at amortized cost, which constitutes fair
value as determined by the Fund's Board of Directors. Amortized
cost involves valuing an instrument at its original cost to the Portfolio
and thereafter assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating interest
rates on the market value of the instrument; and (6) the value of other
assets for which market quotations are not readily available will be
determined in good faith by Delphi at fair value under procedures
established by and under the general supervision of the Fund's Board of
Directors.
PURCHASES AND REDEMPTIONS
Purchases
Class B shares of the Portfolio are available without any sales charges at
their net asset value next determined after receipt of the order. Class B
shares of the Portfolio may be purchased through any broker which has a
dealer agreement with AMT Capital, the principal underwriter for the
shares of the Portfolio.
Purchase orders received by a broker prior to the close of regular trading
on the NYSE, (normally 4:00 p.m. Eastern time), may be made on any
Business Day. Purchase orders received after the close of regular trading
on the NYSE are priced as of the next Business Day. Payment is
generally due to the broker on the third business day (the "Settlement
Date") after the trade date. Investors who make payment prior to a
Settlement Date may permit the payment to be held in their brokerage
accounts or may designate a temporary investment for such payment
until the Settlement Date. The Portfolio reserves the right to reject any
purchase order and to suspend the offering of shares for a period of time.
Systematic Investment Plan
The Portfolio offers shareholders a Systematic Investment Plan under
which shareholders may authorize the certain brokers to place a purchase
order each month or quarter for Class B shares of the Portfolio in an
amount not less than $100. The purchase price is paid automatically from
cash held in the shareholder's brokerage account. Investors should
inquire whether their broker offers this service.
Minimum Investments
The minimum initial investment in the Portfolio is $5,000, and a
minimum subsequent investment requirement of $1,000. However, for
Individual Retirement Accounts ("IRA's") and Self-Employed
Retirement Plans, the minimum initial investment requirement is $2,000
and the minimum subsequent investment requirement if $1,000 and for
retirement plans qualified under Section 403(b)(7) of the Code
("Qualified Retirement Plan"), the minimum initial and subsequent
investment requirement is $500. For the Systematic Investment Plan
(described above), the minimum initial and subsequent investment
requirement is $100. The Portfolio reserves the right at any time to vary
the initial and subsequent investment minimums.
Redemptions
The Portfolio will redeem all full and fractional shares of the Portfolio
upon request of shareholders. The redemption price is the net asset value
per share next determined after receipt by the Transfer Agent of proper
notice of redemption as described below. Redemption requests received
after the close of regular trading on the NYSE are priced at the net asset
value as next determined. The Portfolio normally transmits redemption
proceeds for credit to the shareholder's account at its broker at no charge
within three business days after receipt of a redemption request.
Generally, these funds will not be invested for the shareholder's benefit
without specific instruction, and the broker will benefit from the use of
temporarily uninvested funds. A shareholder who pays for Class B
shares by personal check will be credited with the proceeds of a
redemption of those shares only after the purchase check has been
collected, which may take up to 15 days or more. A shareholder who
anticipates the need for more immediate access to his or her investment
should purchase shares with federal funds, by bank wire or with a
certified or cashier's check.
A Portfolio account that is reduced by a shareholder to a value of $1,000
or less ($500 for IRAs and Self-Employed Retirement Plans) may be
subject to redemption by the Portfolio, but only after the shareholder has
been given at least 30 days in which to increase the account balance to
more than $100 ($500 for IRAs, Self-Employed Retirement Plans, and
Qualified Retirement Plans). In addition, the Portfolio may redeem
shares involuntarily or suspend the right of redemption as permitted
under the 1940 Act.
Class B shares may be redeemed through a redemption request made to
the shareholder's broker or by mail. With respect to redemption requests
made by mail, shares held by the broker as custodian must be redeemed
by submitting a written request to the broker. All other shares may be
redeemed by submitting a written request for redemption to the
Portfolio's Transfer Agent:
The Shareholder Services Group, Inc.
P.O. Box 9184
Boston, MA 02009-9184
Attn: AMT Capital Fund, Inc. - U.S. Selected Growth Portfolio
A written redemption request to the Portfolio's Transfer Agent or the
shareholder's broker must (i) state the number or dollar amount of shares
to be redeemed, (ii) identify the shareholder's account number and (iii)
be signed by each registered owner exactly as the shares are registered.
Any signature appearing on a redemption request must be guaranteed by
a domestic bank, a savings and loan institution, a domestic credit union, a
member bank of the Federal Reserve System or a member firm of a
national securities exchange. The Portfolio's transfer agent may require
additional supporting documents for redemptions made by corporations,
executors, administrators, trustees and guardians. A redemption request
will not be deemed to be properly received until the Portfolio's Transfer
Agent receives all required documents in proper form.
DIVIDENDS
The Portfolio will declare and pay a dividend from its net investment
income on an annual basis. The Portfolio will distribute its net short-
term and net long-term realized capital gains at least annually by
automatically reinvesting (unless a shareholder has elected to receive
cash) such short-term or long-term capital gains in additional shares of
the Portfolio at the net asset value on the ex-date of the distribution.
MANAGEMENT OF THE PORTFOLIO
Board of Directors
The Board of Directors of the Fund are responsible for the overall
management and supervision of the Fund. The Fund's Directors are:
Director Profile
Robert B. Allardice, IIIFormer Managing Director,
Morgan Stanley & Co.,
Incorporated (retired)
Patricia M. Gammon Director of Investments, Yale
University.
Alan M. Trager President of the Fund;
President and Director of
AMT Capital Advisers, Inc.
and AMT Capital Services,
Inc.; former Managing
Director, Morgan Stanley &
Co., Incorporated.
Additional information about the Directors and the Fund's executive
officers may be found in the Statement of Additional Information under
the heading "Management of the Portfolio - Board of Directors".
Investment Adviser and Sub-Adviser
Subject to the direction and authority of the Fund's Board of Directors,
AMT Capital Advisers provides investment advisory services to the
Portfolio pursuant to the Investment Advisory Agreement dated
__________ __,1995. In addition to providing the office space,
equipment and personnel necessary to manage the Portfolio, AMT
Capital Advisers monitors the investment programs and results of the
sub-adviser, coordinates its investment activities to ensure compliance
with regulatory restrictions, and provides analytics and general
investment consulting services to the Board of Directors of the Fund.
AMT Capital Advisers recommends sub-advisers to the Fund's Board of
Directors based upon its continuing quantitative and qualitative
evaluation of the sub-adviser's skill in managing assets using specific
investment styles and strategies.
Founded in late 1991 and organized as a Delaware corporation, AMT
Capital Advisers, Inc., is a private investment and financial services firm,
providing financial advisory and transaction execution services. The
firm's clients are exclusively in the financial services industry and
primarily include asset management firms, mutual funds, banks and
brokerage firms. AMT Capital Advisers is registered with the Securities
and Exchange Commission as an investment adviser. Its principals are
former officers of Morgan Stanley. Its business address is 430 Park
Avenue, New York, New York 10022.
The role of selecting, monitoring and evaluating any investment advisers
or sub-adviser of the Fund for its Board of Directors is carried out by
Eleanor T.M. Hoagland, Chief Portfolio Strategist and Senior Vice
President of AMT Capital Advisers. Ms. Hoagland is a former portfolio
manager from J.P. Morgan. As a Managing Director for J.P. Morgan's
International Mutual Funds group, Ms. Hoagland was responsible for
strategic direction of the firm's approximately $9 billion in non-U.S.-
based mutual funds, as well as overseeing the day-to-day operations of
the group. During her 17 years with J.P. Morgan, she also served as a
portfolio manager for domestic and international fixed income portfolios,
and as a trader in municipal notes. Prior to joining J.P. Morgan, Ms.
Hoagland was with the Federal Reserve Bank of New York as a market
analyst and assistant economist.
AMT Capital Advisers bears the expense of providing the above services
and pays the fees of the sub-adviser of the Portfolio. For its services, the
Portfolio pays AMT Capital Advisers a monthly fee at an annual rate of
0.75% of its average daily net assets. The advisory fee paid by the
Portfolio is higher than that charged by most funds which invest primarily
in U.S. securities, but not necessarily higher than the fees charged to
funds with investment objectives similar to those of the Portfolio.
Delphi serves as sub-adviser for the U.S. Selected Growth Portfolio.
The sub-adviser is employed by AMT Capital Advisers, subject to
approval by the Board of Directors and the shareholders of the Portfolio.
Delphi has discretion to purchase and sell securities for the assets of the
U.S. Selected Growth Portfolio in accordance with the Portfolio's
objective, policies and restrictions and the more specific strategies
provided by the Investment Adviser. Although the sub-adviser is subject
to general supervision by the Fund's Board, officers and Investment
Adviser, these parties do not evaluate the investment merits of specific
securities transactions. As compensation for its services, Delphi will
receive a monthly fee at an annual rate of 0.65% on the first $50 million
of the Portfolio's average daily net assets and 0.60% of the Portfolio's
average daily net assets thereafter by AMT Capital Advisers out of the
proceeds of the investment advisory fee described above.
Established in 1980, Delphi specializes in the identification of
undervalued securities through the application of fundamental
analysis. Delphi currently manages over $950 million in investment
portfolios for a diverse group of clients which includes individuals,
trusts and pension plans. Delphi's address is 485 Madison Ave., 20th
Floor, New York, NY 10022.
Portfolio Manager
Susan Hirsch is the portfolio manager of U.S. Selected Growth. She
joined Delphi in 1996 from Lehman Brothers Global Asset Management
Inc. where she was the Portfolio manager for the Lehman Selected
Growth Stock Portfolio since its inception in May, 1994. Prior to that,
Ms. Hirsch was a Senior Vice President at Lehman Brothers, where
she had primary responsibility for the selection of investments for
the Lehman Brothers Selected Growth Stock List. Ms. Hirsch holds
a B.S. in accounting from Brooklyn College and is a member of the
Financial Analysts Federation and the New York Society of Securities
Analysts. Ms. Hirsch is a member of the Institutional Investor
Magazine's 1993, 1992 and 1991 All-American Research Team
for Small Growth Stocks.
Administrator
Pursuant to an Administration Agreement between the Fund and AMT
Capital Services, Inc., dated as of June 13, 1995, AMT Capital provides
for administrative services to, and assists in managing and supervising all
aspects of, the general day-to-day business activities and operations of
the Fund other than investment advisory activities, including custodial,
transfer agency, dividend disbursing, accounting, auditing, compliance
and related services. The Portfolio pays AMT Capital a monthly fee at
an annual rate of 0.15%, of its average daily net assets.
Founded in early 1992, AMT Capital Services is a registered broker-
dealer whose senior managers are former officers of Morgan Stanley and
The Vanguard Group, where they were responsible for the
administration and distribution of The Pierpont Funds, a $5 billion fund
complex now owned by J.P. Morgan, and the private label administration
group of Vanguard, which administered nearly $10 billion in assets for
45 portfolios, respectively.
AMT Capital acts as an independent, third-party administrator
responsible for managing all aspects of the Fund's operations. It focuses
on selecting, managing, and replacing, if necessary, the other service
providers to the Fund to secure the best service at the best prices
available on the market.
Direct Expenses
Those fees and expenses paid directly by the Portfolio may include the
fees of independent auditors, transfer agent and dividend disbursing
agent, and custodian; the expense of obtaining quotations for calculating
the value of each Portfolio's net assets; taxes, if any, and the preparation
of each Portfolio's tax returns; brokerage fees and commissions; interest;
costs of Board of Director and shareholder meetings; the expense of
printing and mailing prospectuses and reports to existing shareholders;
fees for filing reports with regulatory bodies and the maintenance of the
Portfolio's existence; legal fees; fees to federal and state authorities for
the registration of shares; fees and expenses of members of the Board of
Directors who are not directors, officers, employees or stockholders of
the Investment Adviser or its affiliates; insurance and fidelity bond
premiums; and any extraordinary expenses of a nonrecurring nature.
TAX CONSIDERATIONS
The following discussion is for general information only. An investor
should consult with his or her own tax adviser as to the tax consequences
of an investment in the Portfolio, including the status of distributions
from each Portfolio under applicable state or local law.
Federal Income Taxes
The Portfolio intends to qualify for and to elect to be treated as a
regulated investment company ("RIC") under the Internal Revenue Code
of 1986, as amended. To qualify, the Portfolio must meet certain
income, distribution and diversification requirements. In any year in
which the Portfolio qualifies as a RIC and distributes all of its taxable
income and substantially all of its net tax-exempt interest income on a
timely basis, the Portfolio will not pay U.S. federal income or excise tax.
If in any year the Portfolio should fail to qualify as a regulated
investment company, the Portfolio would be subject to federal
income tax in the same manner as an ordinary corporation, and
distributions to shareholders would be taxable to such holders as
ordinary income to the extent of the earnings and profits of the
Portfolio. Distributions in excess of earnings and profits will be
treated as a tax-free return of capital, to the extent of a holder's basis
in its shares, and any excess, as a long- or short-term capital gain.
The Portfolio intends to distribute all of its taxable income and net tax-
exempt interest income by automatically reinvesting such amount in
additional shares of the Portfolio and distributing those shares to its
shareholders, unless a shareholder elects, on the Account Application
Form, to receive cash payments for such distributions. Shareholders
receiving distributions from the Portfolio in the form of additional
shares will be treated for federal income tax purposes as receiving a
distribution in an amount equal to the fair market value of the
additional shares on the date of such a distribution.
Dividends paid by the Portfolio from its investment company taxable
income (including interest and net short-term capital gains) will be
taxable to a U.S. shareholder as ordinary income, whether received in
cash or in additional Portfolio shares. Distributions of net capital gains
(the excess of net long-term capital gains over net short-term capital
losses) are generally taxable to shareholders as long-term capital gain,
regardless of how long they have held their Portfolio shares. If a portion
of the Portfolio's income consists of dividends paid by U.S. corporations,
a portion of the dividends paid by the Portfolio may be eligible for the
corporate dividends-received deduction.
A distribution will be treated as paid on December 31 of the current
calendar year if it is declared by the Portfolio in October, November or
December with a record date in any such month and paid by the Portfolio
during January of the following calendar year. Such distributions will be
taxable to shareholders in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are
received. The Portfolio will inform shareholders of the amount and tax
status of all amounts treated as distributed to them not later than 60 days
after the close of each calendar year.
A loss realized on a sale or exchange of shares may be disallowed if
other shares are acquired within a 61-day period beginning 30 days
before the ending 30 days after the date that the shares are disposed
of.
The Portfolio may be required to withhold U.S. federal income tax at the
rate of 31% of all taxable distributions payable to shareholders who fail
to provide the Portfolio with their correct taxpayer identification number
or to make required certifications, or who have been notified by the IRS
that they are subject to backup withholding. Backup withholding is not
an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. federal income tax liability.
Ordinary income dividends paid by the Portfolio to shareholders who
are non-resident aliens or foreign entities will be subject to a 30%
withholding tax unless a reduced rate of withholding or a withholding
exemption is provided under applicable treaty law or the income is
effectively connected with a U.S. trade or business. Generally,
subject to certain exceptions, capital gain dividends paid to non-
resident shareholders or foreign entities will not be subject to U.S.
tax. Non-resident shareholders are urged to consult their own tax
advisers concerning the applicability of the U.S. withholding tax.
The foregoing discussion is only a brief summary of the important
federal tax considerations generally affecting the Portfolio and its
shareholders. As noted above, IRAs receive special tax treatment.
No attempt is made to present a detailed explanation of the federal,
state or local income tax treatment of the Portfolio or its shareholders,
and this discussion is not intended as a substitute for careful tax
planning. Accordingly, potential investors in the Portfolio should
consult their tax advisers with specific reference to their own tax
situation.
State and Local Taxes
The Portfolio may be subject to state, local or foreign taxation in any
jurisdiction in which the Portfolio may be deemed to be doing business.
Portfolio distributions may be subject to state and local taxes.
Distributions of the Portfolio which are derived from interest on
obligations of the U.S. Government and certain of its agencies,
authorities and instrumentalities may be exempt from state and local
taxes in certain states. Shareholders should consult their own tax
advisers regarding the particular tax consequences of an investment in
the Portfolio.
SHAREHOLDER INFORMATION
Description of the Fund
The Fund was established under Maryland law by the filing of its
Articles of Incorporation on August 3, 1993. The Fund's Articles of
Incorporation permit the Directors to authorize the creation of additional
Portfolios, each of which may issue separate classes of shares. Currently,
the Fund has three separate Portfolios.
In addition to the Class B shares offered in this Prospectus, the Portfolio
offers another class of shares, Class A shares, in a separate prospectus.
Both classes represent proportionate interests in the Portfolio, but the
Class A shares may have different sales charges and other expenses than
the Class B shares, which may affect investment returns. Investors may
obtain information concerning the Class A shares of the Portfolio by
contacting AMT Capital at the address or telephone number set forth
below under "Shareholder Inquiries."
Voting Rights
Each share of common stock of a Portfolio or class is entitled to one vote
for each dollar of net asset value and a proportionate fraction of a vote for
each fraction of a dollar of net asset value. Generally, shares of each
Portfolio and class vote together on any matter submitted to shareholders,
except when otherwise required by the Investment Company Act of
1940 or when a matter affects the interests of each Portfolio or class in a
different way, in which case the shareholders of each Portfolio or class
vote separately. If the directors determine that a matter does not affect
the interests of a Portfolio or class, then the shareholders of that Portfolio
or class will not be entitled to vote on that matter. Approval of the
investment advisory agreements are matters to be determined separately
by each Portfolio (but not by each class of a Portfolio).
The election of the Fund's Board of Directors and the approval of the
Fund's independent auditors are voted upon by shareholders on a Fund-
wide basis. As a Maryland corporation, the Fund is not required to hold
annual shareholder meetings. Shareholder approval will be sought only
for certain changes in the Fund's or a Portfolio's operation and for the
election of Directors under certain circumstances.
Directors may be removed by shareholders at a special meeting. A
special meeting of the Fund shall be called by the Directors upon written
request of shareholders owning at least 10% of the Fund's outstanding
shares. Shareholders will be assisted in communicating with other
shareholders in connection with removing a Director as if Section 16(c)
of the 1940 Act were applicable.
OTHER PARTIES
Custodian and Accounting Agent
Investors Bank & Trust Company, P.O. Box 1537, Boston,
Massachusetts 02205-1537, is Custodian for the securities and cash of
the Fund and Accounting Agent for the Fund.
Transfer and Dividend Disbursing Agent
The Shareholder Services Group, Inc., P.O. Box 9184, Boston, MA
02009-9184, is Transfer and Dividend Disbursing Agent for the
Portfolio's Class B Shares.
Legal Counsel
Dechert Price & Rhoads, 1500 K Street, N.W., Washington, D.C.
20005-1208, are legal counsel for the Fund.
Independent Auditors
Ernst & Young LLP, 787 Seventh Avenue, New York, New York
10019 are the independent auditors for the Fund.
SHAREHOLDER INQUIRIES
Inquiries concerning the Portfolio may be made by writing to AMT
Capital Services, Inc., 430 Park Avenue, 17th Floor, New York, New
York 10022 or by calling AMT Capital at (800) 762-4848 [or (212)
308-4848, if within New York City].
CONTROL PERSON
As of September 29, 1995, the following shareholder is deemed a
control person of the Fund as such term is defined in the 1940 Act
and held 27.1% of the outstanding shares of Common Stock $.001
par value):
Cooper Industries, Inc.
1001 Fannin Street
First City Tower, Suite 3900
Houston, TX 77210
STATEMENT OF ADDITIONAL INFORMATION
AMT Capital Fund, Inc.
Distributed By: AMT Capital Services, Inc.
430 Park Avenue
17th Floor
New York, NY 10022
(212) 308-4848
(800) 762-4848
AMT Capital Fund, Inc. (the "Fund") is an open-end management investment
company consisting of three diversified portfolios: Money Market Portfolio, HLM
International Equity Portfolio and U.S. Selected Growth Portfolio (each a
Portfolio). The U.S. Selected Growth Portfolio offers two classes. There is no
sales charge for purchase of shares. The Money Market and U.S. Selected Growth
Portfolios are managed by AMT Capital Advisers, Inc. ("AMT Capital Advisers")
and the HLM International Equity Portfolio is managed by Harding, Loevner
Management, L.P. ("HLM"). Shares of each Portfolio may be purchased through
AMT Capital Services, Inc. ("AMT Capital").
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the prospectus of the Fund, dated January ____, 1996
(the Prospectus), which has been filed with the Securities and Exchange
Commission (the "Commission") and can be obtained, without charge, by calling
or writing AMT Capital at the telephone number or address stated above. This
Statement of Additional Information incorporates by reference the Prospectus.
January ____, 1996
TABLE OF CONTENTS
Page
Organization of the Fund 3
Management of the Fund 3
Board of Directors and Officers 3
Investment Advisers and Sub-Advisers 4
Administrator 6
Distribution of Fund Shares 6
Principal Holders of Securities 8
Supplemental Descriptions of Investments 9
Municipal Obligations 12
Supplemental Investment Techniques 14
Supplemental Discussion of Risks Associated With the
Fund's Investment Policies and Investment Techniq 17
Investment Restrictions 24
Portfolio Transactions 26
Net Asset Value 26
Tax Considerations 27
Shareholder Information 33
Calculation of Performance Data 33
Rating Descriptions 35
Financial Statements 37
ORGANIZATION OF THE FUND
The authorized capital stock of the Fund consists of 2,500,000,000 shares
with $.001 par value, allocated as follows: (i) 1,000,000,000 shares to the
Money Market Portfolio; (ii) 250,000,000 shares to the HLM International Equity
Portfolio; (iii) 100,000,000 shares to the U.S. Selected Growth Portfolio Class
A Shares and 100,000,000 shares to the U.S. Selected Growth Portfolio Class B
Shares and (iv) 1,150,000,000 shares not yet allocated to any Portfolio. Holders
of shares of a Portfolio have one vote for each dollar, and a proportionate
fraction of a vote for each fraction of a dollar, of net asset value held by
a shareholder. All shares issued and outstanding are fully paid and non-
assessable, transferable, and redeemable at net asset value at the option of
the shareholder. Shares have no preemptive or conversion rights.
The shares of the Fund have non-cumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of Directors can
elect 100% of the Directors if they choose to do so, and, in such event, the
holders of the remaining less than 50% of the shares voting for the election
of Directors will not be able to elect any person or persons to the Board of
Directors.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS AND OFFICERS
The Fund is managed by its Board of Directors. The individuals listed below are
the officers and directors of the Fund. An asterisk (*) has been placed next to
the name of each director who is an "interested person" of the Fund, as such
term is defined in the Investment Company Act of 1940, as amended (the "1940
Act"), by virtue of his affiliation with the Fund or the Investment Adviser.
Robert B. Allardice, III, 66 South Drive, Plandome, NY 11030, Director of the
Fund. Private Investor. Prior to February 1993, Mr. Allardice served as a
Managing Director of Morgan Stanley & Co., Incorporated, and as chief operating
officer of the Worldwide Equity Division with overall responsibility for risk
management.
Patricia M. Gammon, 230 Prospect Street, New Haven, CT 06511, Director of the
Fund. Ms. Gammon is the Director of Investments for Yale University, where she
has served for over five years. She also serves as an Advisory Director for the
Farm and Home Savings and Loan located in Nevada, Missouri.
*Alan M. Trager, 430 Park Avenue, New York, NY 10022, Director and
President of the Fund. Mr. Trager has been President and Director of AMT
Capital Services, Inc., a mutual fund distribution and administration company,
since its March 1992 inception, and AMT Capital Advisers, Inc., a registered
investment advisory firm that serves as adviser and investor for its clients in
the financial services industry, since November 1991. Prior to founding these
two businesses, Mr. Trager served as a Managing Director of Morgan Stanley &
Co., Inc. where he created and/or managed a number of businesses such as The
Pierpont Funds, Execution Services, Inc. (institutional broker), and Morgan
Stanley Global Securities Services.
Carla E. Dearing, 430 Park Avenue, New York, NY 10022, Vice President and
Assistant Treasurer of the Fund. Ms. Dearing is Managing Director, Principal,
and Director of AMT Capital Services. Ms. Dearing is also Managing Director
and Principal of AMT Capital Advisers, Inc. Ms. Dearing was a former Vice
President of Morgan Stanley & Co., where she worked from June 1984 to August
1986 and from November 1988 to January 1992. Ms. Dearing's responsibilities
included new product and market development for Morgan Stanley Capital
International ("MSCI"), while serving as an Associate in MSCI's London office,
and assisting Mr. Trager with the launch of several Pierpont Funds, while
serving as a member of Morgan Stanley's Financial Planning and Analysis staff
in New York.
William E. Vastardis, 430 Park Avenue, New York, NY 10022, Secretary and
Treasurer of the Fund. Mr. Vastardis is a Senior Vice President of AMT Capital
Services and has been with the firm since July 1992. Prior to April 1992, Mr.
Vastardis served as Vice President and head of the Vanguard Group Inc.'s private
label administration unit for seven years, after six years in Vanguard's fund
accounting operations.
INVESTMENT ADVISERS AND SUB-ADVISERS
AMT Capital Advisers provides investment advisory services to the Money Market
and U.S. Selected Growth Portfolios and HLM provides investment advisory
services to the HLM International Equity Portfolio. The terms of the investment
advisory agreements between the Fund on behalf of a Portfolio and each
Investment Adviser (the "Advisory Agreements" and each an "Advisory
Agreement") obligate (a) AMT Capital Advisers to provide or oversee the
provision of all investment advisory and portfolio management services for the
Money Market and U.S. Selected Growth Portfolios; and (b) HLM to provide
investment advisory and portfolio management services to the HLM International
Equity Portfolio. AMT Capital Advisers is a registered investment adviser
founded in November, 1991. Mr. Trager owns a controlling interest in AMT
Capital Advisers. AMT Capital Advisers selects and employs investment
advisers to serve as sub-advisers for the Money Market and U.S. Selected
Growth Portfolios, monitors the sub-advisers' investment programs and results,
and coordinates the investment activities of the sub-advisers to ensure
compliance with regulatory restrictions. HLM is a registered investment
adviser organized in 1989. HLM provides investment advisory services to
private investors, foundations and endowments.
AMT Capital Advisers has entered into contracts with Delphi Asset Management
("Delphi") and Fischer Francis Trees & Watts, Inc. ("FFTW"), (the "Sub-Advisory
Agreements") to provide sub-investment advisory services to the U.S. Selected
Growth and Money Market Portfolios, of the Fund, respectively. AMT Capital
Advisers selects the sub-adviser based upon its continuing quantitative and
qualitative evaluation of the sub-adviser's skill in managing assets using
specific investment styles and strategies. Each of the sub-advisers has
discretion to purchase and sell securities for their respective portfolio in
accordance with the Portfolio's objectives, policies and restrictions.
Although the sub-adviser is subject to general supervision by AMT Capital
Advisers, AMT Capital Advisers does not evaluate the investment merits of
specific securities transactions.
Delphi is a registered investment adviser founded in 1980. Delphi currently
manages over $950 million in investment portfolios for a diverse group of
clients which include individuals, trusts, estates, pension plans and family
and charitable organizations. Delphi specializes in the identification of
undervalued securities through the application of fundamental analysis. FFTW
was organized in 1972 and is a registered investment adviser and a New York
corporation that specializes in managing fixed income portfolios for major
institutional clients. In addition to the portfolio managers mentioned in the
Prospectus, the following manager is also responsible for management of the
Money Market Portfolio: Adnan Akant, Managing Director. Mr. Akant is
responsible for management of the Money Market Portfolio. He joined FFTW in
1984 after serving as senior investment officer of the World Bank, where he
was responsible for the investment and trading of the Bank's actively-managed
liquidity portfolio and a member of the investment
strategy committee. At the Massachusetts Institute of Technology, Mr. Akant
earned a Ph.D. in systems science, and M.S. degrees in finance and international
management and engineering.
The Advisory and Sub-Advisory Agreements will remain in effect for two years
following their date of execution and thereafter will automatically continue for
successive annual periods, so long as such continuance is specifically approved
at least annually by (a) the Board of Directors or (b) the vote of a "majority"
(as defined in the 1940 Act) of a Portfolio's outstanding shares voting as a
single class; provided, that in either event the continuance is also approved
by at least a majority of the Board of Directors who are not "interested persons
" (as defined in the 1940 Act) of the Fund, or any Investment Adviser or sub-
adviser by vote cast in person at a meeting called for the purpose of voting
on such approval.
The Advisory and Sub-Advisory Agreements are terminable without penalty on not
less than 60 days' notice by the Board of Directors or by a vote of the holders
of a majority of the relevant Portfolio's outstanding shares voting as a single
class, or upon not less than 60 days' notice by any Investment Adviser or the
sub-adviser. Each of the Advisory and Sub-Advisory Agreements will terminate
automatically in the event of its "assignment" (as defined in the 1940 Act).
The Investment Advisers pay all of their expenses arising from the
performance of their obligations under the Advisory Agreements. Under its
Advisory Agreement, AMT Capital Advisers also pays all fees payable to the
sub-advisers, executive salaries and expenses of the Directors and Officers
of the Fund who are employees of AMT Capital Advisers or its affiliates and
office rent of the Fund. Delphi and FFTW pay all of their expenses arising
from the performance of their obligations under the Sub-Advisory Agreements.
Subject to the expense reimbursement provisions described in the Prospectus
under "Fund Expenses", other expenses incurred in the operation of the Fund
are borne by the Fund, including, without limitation, investment advisory fees,
brokerage commissions, interest, fees and expenses of independent attorneys,
auditors, custodians, accounting agents, transfer agents, taxes, cost of stock
certificates and any other expenses (including clerical expenses) of issue,
sale, repurchase or redemption of shares, expenses of registering and
qualifying shares of the Fund under federal and state laws and regulations,
expenses of printing and distributing reports, notices and proxy materials to
existing shareholders, expenses of printing and filing reports and other
documents filed with governmental agencies, expenses of annual and special
shareholders' meetings, expense of printing and distributing prospectuses,
fees and expenses of Directors of the Fund who are not employees of AMT
Capital Advisers or its affiliates, membership dues in the Investment Company
Institute, insurance premiums and extraordinary expenses such as litigation
expenses. Fund expenses directly attributable to a Portfolio are charged to
that Portfolio; other expenses are allocated proportionately among all the
Portfolios in relation to the net assets of each Portfolio.
AMT Capital Advisers, which previously served as investment adviser to both
Portfolios, waived its entire fee and reimbursed the Money Market and HLM
International Equity Portfolios for other expenses exceeding the voluntary
expense cap (on an annualized basis) of 0.40% and 0.95%, respectively, for the
period ended June 30, 1995.
ADMINISTRATOR
Pursuant to its terms, the administration agreement (the "Administration
Agreement") between the Fund and AMT Capital Services, Inc. ("AMT
Capital"), a Delaware corporation, and an affiliate of AMT Capital Advisers,
obligates the Administrator to manage and supervise all aspects of the
general day-to-day business activities and operations of the Fund other than
investment advisory activities, including custodial, transfer agency, dividend
disbursing, accounting, auditing, compliance and related services. The
Administration Agreement will remain in effect for three years following the
date of execution and thereafter will automatically continue for successive
annual periods.
DISTRIBUTION OF FUND SHARES
Shares of the Fund are distributed by AMT Capital pursuant to a Distribution
Agreement (the "Distribution Agreement") between the Fund and AMT
Capital. The Distribution Agreement requires AMT Capital to use its best
efforts on a continuing basis to solicit purchases of shares of the Fund. No
fees are payable by the Fund pursuant to the Distribution Agreement. The
Fund and AMT Capital have agreed to indemnify one another against certain
liabilities. The Distribution Agreement will remain in effect until October
29, 1995 and from year to year only if its continuance is approved annually
by a majority of the Board of Directors who are not parties to such
agreements or "interested persons" of any such party and either by votes of a
majority of the Directors or a majority of the outstanding voting securities of
the Fund.
Rule 12b-1 (the "Rule") adopted by the SEC under the 1940 Act provides,
among other things, that an investment company may bear expenses of
distributing its shares pursuant to a plan adopted in accordance with the Rule.
The Fund's Board of Directors has adopted a services and distribution plan
with respect to the Class B shares of the U.S. Selected Growth Portfolio
pursuant to Rule 12b-1 (the "Plan"). The Board of Directors has determined
that there is a reasonable likelihood that a Plan will benefit the Portfolio
and its shareholders.
A quarterly report of the amounts expended with respect to the Class B shares
under the Plan, and the purposes for which such expenditures were incurred,
must be made to the Board of Directors for its review. In addition, the Plan
provides that it may not amended with respect to the Class B shares to
increase materially the costs which may be borne for distribution pursuant to
the Plan without the approval of the Class B shareholders of the Portfolio,
and that other material amendments of the Plan must be approved by the
Board of Directors, and by the Directors who are neither "interested persons"
(as defined in the 1940 Act) of the Fund nor have any direct or indirect
financial interest in the operation of the Plan or any related agreements, by
vote cast in person at a meeting called for the purpose of considering such
amendments. The Plan and any related agreements are subject to annual
approval by such vote cast in person at a meeting called for the purpose of
voting on the Plan. The Plan may be terminated with respect to the Class B
shares at any time by vote of a majority of the Directors who are not
"interested persons" and have no direct or indirect financial interest in the
operation of the Plan or in any related agreement or by vote of a majority of
the Class B shares of the Portfolio.
PRINCIPAL HOLDERS OF SECURITIES
As of September 29, 1995, the following persons held 5
percent or more of the outstanding shares of the HLM International Equity
Portfolio:
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Portfolio
Common Stock, The Bank of New York Direct Ownership 31.46%
$.001 per Share (nominee) Mutual Fund/
Reorg. Dept., P.O. Box
1066, Wall Street Station,
New York, New York, 10268
Common Stock State Street Bank & Trust Co., Direct Owner 19.03%
$.001 per Share trustee for Turlock
Irrigation District, P.O. Box
949, Turlock, CA 95381
Common Stock Public Welfare Found Direct Ownership 15.78%
$.001 per Share Inc., 2600 Virginia Ave., NW,
Suite 505, Washington, DC
20037-1977
Common Stock Children's Hospital Direct Ownership 9.32%
$.001 per Share Philadelphia, 34th and
Civic Center Blvd.,
Philadelphia, PA 19104
Common Stock (Various) Hillman Fo Direct Ownership 6.70%
$.001 per Share 2000 Grant Building, Pittsburgh,
PA, 15219
As of September 29, 1995, the following persons held 5
percent or more of the outstanding shares of the HLM International Equity
Portfolio:
Name and Address of Amount and Nature Percent
Type of Class Beneficial Owner of Beneficial Ownership of Portfolio
Common Stock Cooper Industries InDirect Ownership 84.29%
$.001 per Share 1001 Fannin Street, First
City Tower, Suite 3900,
P.O. Box 446, Houston,
TX, 77210
Common Stock American Stock TransDirect Ownership 7.91%
$.001 per Share & Trust Co., 40 Wall St.,
New York, NY 10005
SUPPLEMENTAL DESCRIPTIONS OF INVESTMENTS
The different types of securities in which the Portfolios may invest, subject to
their respective investment objectives, policies and restrictions, are described
in the Prospectus under "Descriptions of Investments". Additional
information concerning the characteristics of certain of the Portfolios'
investments are set forth below.
U.S. Treasury and U.S. Government Agency Securities. U.S. Government
Securities include instruments issued by the U.S. Treasury, including bills,
notes and bonds. These instruments are direct obligations of the U.S.
Government and, as such, are backed by the full faith and credit of the United
States. They differ primarily in their interest rates, the lengths of their
maturities and the dates of their issuances. In addition, U.S. Government
Securities include securities issued by instrumentalities of the U.S.
Government, such as the Government National Mortgage Association
("GNMA"), which are also backed by the full faith and credit of the United
States. U.S. Government Agency Securities include instruments issued by
instrumentalities established or sponsored by the U.S. Government, such as
the Student Loan Marketing Association ("SLMA"), the Federal National
Mortgage Association ("FNMA") and the Federal Home Loan Mortgage
Corporation ("FHLMC"). While these securities are issued, in general,
under the authority of an Act of Congress, the U.S. Government is not
obligated to provide financial support to the issuing instrumentalities.
Bank Obligations. The Fund limits its investments in U.S. bank obligations
to obligations of U.S. banks that in the Investment Advisers' or sub-adviser's
opinion meet sufficient creditworthiness criteria. The Fund limits its
investments in foreign bank obligations to obligations of foreign banks
(including U.S. branches of foreign banks) that, in the opinion of the
Investment Advisers or the sub-adviser, are of an investment quality
comparable to obligations of U.S. banks in which each Portfolio may invest.
The Money Market Portfolio may invest more than 25% of its total assets in
Domestic Bank Obligations, as described in the Fund's Prospectus.
Corporate Debt Instruments. Corporate debt securities of domestic and
foreign issuers include such instruments as corporate bonds, debentures,
notes, commercial paper, medium-term notes, variable rate notes and other
similar corporate debt instruments. As described in the Fund's Prospectus,
each Portfolio will only invest in securities rated in the two highest rating
categories or of comparable creditworthiness in the opinion of the Investment
Advisers or sub-adviser. See "Ratings Information." Bonds rated in these
categories are generally described as high-grade debt obligations with a very
strong capacity to pay principal and interest on a timely basis.
Repurchase Agreements. When participating in repurchase agreements, a
Portfolio buys securities from a vendor (e.g., a bank or securities firm) with
the agreement that the vendor will repurchase the securities at the same price
plus interest at a later date. Repurchase agreements may be characterized as
loans secured by the underlying securities. Such transactions afford an
opportunity for the Portfolio to earn a return on available cash at minimal
market risk, although the Portfolio may be subject to various delays and risks
of loss if the vendor becomes subject to a proceeding under the U.S.
Bankruptcy Code or is otherwise unable to meet its obligation to repurchase.
The securities underlying a repurchase agreement will be marked to market
every business day so that the value of such securities is at least equal to the
value of the repurchase price thereof, including the accrued interest thereon.
Reverse Repurchase Agreements. When participating in reverse repurchase
agreements, a Portfolio sells U.S. Government securities and simultaneously
agrees to repurchase them at an agreed upon price and date. The difference
between the amount the Portfolio receives for the securities and the amount it
pays on repurchase is deemed to be a payment of interest. The Fund will
maintain for each Portfolio a segregated custodial account containing cash,
U.S. Government securities or other appropriate high-grade debt securities
having an aggregate value at least equal to the amount of such commitments
to repurchase, including accrued interest, until payment is made. Reverse
repurchase agreements create leverage, a speculative factor, but will be not
considered as borrowings for the purposes of limitations on borrowings.
Dollar Roll Transactions. "Dollar roll" transactions consist of the sale by a
Portfolio to a bank or broker-dealer (the "counterparty") of GNMA certificates
or other mortgage-backed securities together with a commitment to purchase from
the counterparty similar, but not identical, securities at a future date. The
counterparty receives all principal and interest payments, including
prepayments, made on the security while it is the holder. The Portfolio
receives a fee from the counterparty as consideration for entering into the
commitment to purchase. Dollar rolls may be renewed over a period of several
months with a new purchase and repurchase price fixed and a cash settlement
made at each renewal without physical delivery of securities. Moreover, the
transaction may be preceded by a firm commitment agreement pursuant to which
the Portfolio agrees to buy a security on a future date.
A Portfolio will not use such transactions for leverage purposes and,
accordingly, will segregate cash, U.S. Government securities or other high
grade debt obligations in an amount sufficient to meet its purchase obligations
under the transactions.
Dollar rolls are similar to reverse repurchase agreements because they involve
the sale of a security coupled with an agreement to repurchase. Like all
borrowings, a dollar roll involves costs to a Portfolio. For example, while
a Portfolio receives a fee as consideration for agreeing to repurchase the
security, the Portfolio may forgo the right to receive all principal and
interest payments while the counterparty holds the security. These payments
to the counterparty may exceed the fee received by the Portfolio, thereby
effectively charging the Portfolio interest on its borrowing.
Further, although the Portfolio can estimate the amount of expected principal
prepayment over the term of the dollar roll, a variation in the actual amount of
prepayment could increase or decrease the cost of the Portfolio's borrowing.
Mortgage-Backed Securities. Mortgage-backed securities are securities which
represent ownership interests in, or are debt obligations secured entirely or
primarily by, "pools" of residential or commercial mortgage loans or other
mortgage-backed securities (the "Underlying Assets"). In the case of mortgage-
backed securities representing ownership interests in the Underlying Assets, the
principal and interest payments on the underlying mortgage loans are distributed
monthly to the holders of the mortgage-backed securities. In the case of
mortgage-backed securities representing debt obligations secured by the
Underlying Assets, the principal and interest payments on the underlying
mortgage loans, and any reinvestment income thereon, provide the funds to
pay debt service on such mortgage-backed securities. Mortgage-backed
securities may take a variety of forms, but the two most common are mortgage
pass-through securities, which represent ownership interests in the Underlying
Assets, and collateralized mortgage obligations ("CMOs"), which are debt
obligations collateralized by the Underlying Assets.
Certain mortgaged-backed securities are issues that represent an undivided
fractional interest in the entirety of the Underlying Assets (or in a
substantial portion of the Underlying Assets, with additional interests
junior to that of the mortgage-backed security), and thus have payment terms
that closely resemble the payment terms of the Underlying Assets.
In addition, many mortgage-backed securities are issued in multiple classes.
Each class of such multi-class mortgage-backed securities ("MBS"), often
referred to as a tranche, is issued at a specific fixed or floating coupon
rate and has a stated maturity or final distribution date. Principal prepayment
on the Underlying Assets may cause the MBSs to be retired substantially earlier
than their stated maturities or final distribution dates. Interest is paid or
accrues on all or most classes of the MBSs on a periodic basis, typically
monthly or quarterly. The principal of and interest on the Underlying Assets
may be allocated among the several classes of a series of a MBS in many
different ways. In a relatively common structure, payments of principal
(including any principal prepayments) on the Underlying Assets are applied
to the classes of a series of a MBS in the order of their respective stated
maturities so that no payment of principal will be made on any class of
MBSs until all other classes having an earlier stated maturity have been paid in
full.
Mortgage-backed securities are often backed by a pool of Underlying Assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on Underlying Assets to make payments, such
securities may contain elements of credit support. Such credit support falls
into two categories: (i) liquidity protection; and (ii) protection against
losses resulting from ultimate default by an obligor on the Underlying Assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
on the underlying pool occurs in a timely fashion. Protection against losses
resulting from ultimate default ensures ultimate payment of obligations on at
least a portion of the assets in the pool. Such protection may be provided
through guarantees, insurance policies or letters of credit obtained by the
issuer or sponsor from third parties, through various means of structuring the
transaction or through a combination of such approaches. A Portfolio will not
pay any additional fees for such credit support, although the existence of
credit support may increase the price of a security.
Other Asset-Backed Securities. The Investment Advisers or sub-adviser expect
that other asset-backed securities (unrelated to mortgage loans) will be
developed and offered to investors in the future. Several types of such
asset-backed securities have already been offered to investors, including
securities backed by automobile loans and credit card receivables.
Loan Participations. A loan participation is an interest in a loan to a U.S.
corporation (the "corporate borrower") which is administered and sold by an
intermediary bank. The borrower of the underlying loan will be deemed to be the
issuer of the participation interest except to the extent the Portfolio derives
its rights from the intermediary bank who sold the loan participation. Such
loans must be to issuers in whose obligations a Portfolio may invest. Any
participation purchased by a Portfolio must be issued by a bank in the United
States with assets exceeding $1 billion. See "Supplemental Discussion of Risks
Associated With the Fund's Investment Policies and Investment Techniques".
Variable Amount Master Demand Notes. Variable amount master demand notes
permit the investment of fluctuating amounts at varying rates of interest
pursuant to direct arrangements between a Portfolio (as lender) and the
borrower. These notes are direct lending arrangements between lenders and
borrowers, and are generally not transferable, nor are they ordinarily rated
by either Moody's or S&P.
MUNICIPAL OBLIGATIONS
Municipal obligations are issued to raise money for various public purposes,
including general purpose financing for specific projects or public facilities.
Municipal obligations may be backed by the full taxing power of a municipality
(by or on behalf of states, cities, municipalities and other public
authorities). The two principal classifications of municipal obligations that
may be purchased on behalf of a Portfolio are "general obligation" securities
and "revenue" securities. General obligation securities are secured by the
issuer's pledge of its full faith, credit and taxing power for the payment of
principal and interest. Revenue securities are
payable only from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax or other
specific revenue source such as the user of a facility being financed.
Municipal Commercial Paper that is rated "P-1" or "P-2" by Moody's Investors
Service, Inc. ("Moody's") or "A-1" or "A-2" or better by Standard & Poor's
Corporation ("S&P") or, if not rated, is, in the opinion of the sub-adviser
based on guidelines established by the Fund's Board of Directors, of investment
quality comparable to rated municipal commercial paper in which a Portfolio may
invest. Municipal commercial paper is a debt obligation with a stated maturity
of 270 days or less that is issued by a municipality to finance seasonal working
capital needs or as short-term financing in anticipation of longer-term debt.
Municipal Notes that are rated "MIG 1," "MIG 2" (or "VMIG 1" or "VMIG 2" in
the case of variable rate demand notes), "P-1", "P-2" or "Aa" or better by
Moody's or "SP-1," "SP-2", "A-1", "A-2" or "AA" or better by S&P or, if not
rated, are, in the opinion of the sub-adviser based on the guidelines
established by the Fund's Board of Directors, of investment quality
comparable to rated municipal notes in which a Portfolio may invest
(a) Tax Anticipation Notes. Tax anticipation notes ("TANs") are sold as
interim financing in anticipation of collection of taxes. An uncertainty in
a municipal issuer's capacity to raise taxes as a result of such things as a
decline in its tax base or a rise in delinquencies could adversely affect the
issuer's ability to meet its obligations on outstanding TANs.
(b) Bond Anticipation Notes. Bond anticipation notes ("BANs") are sold
as interim financing in anticipation of a bond sale. The ability of a
municipal issuer to meet its obligations on its BANs is primarily
dependent on the issuer's adequate access to the longer term municipal
market.
(c) Revenue Anticipation Notes. Revenue anticipation notes ("RANs")
are sold as interim financing in anticipation of receipt of other revenues.
A decline in the receipt of certain revenues, such as anticipated revenues
from another level of government, could adversely affect an issuer's ability
to meet its obligations on outstanding RANs.
Municipal notes also include construction loan notes and project notes. TANs,
BANs, and RANs are usually general obligations of the issuer. Project notes are
issued by local housing authorities to finance urban renewal and public housing
projects and are secured by the full faith and credit of the U.S. Government.
Private Activity Bonds which include obligations that finance student loans,
residential rental projects, and solid waste disposal facilities. To the extent
a Portfolio invests in private activity obligations, shareholders are required
to report a portion of that Portfolio's distributions attributable to these
obligations as a "tax preference item" for purposes of determining their
liability for the federal alternative minimum tax and, as a result, may
become subject to (or increase their liability for) the alternative minimum
tax. Shareholders should consult with their own tax advisors to determine
whether they may be subject to the alternative minimum tax. Interest on
private activity bonds is exempt from regular federal income tax.
"Moral Obligation" Securities which are normally issued by special purpose
public authorities. If the issuer of moral obligation securities is unable to
meet its debt service obligations from current revenues, it may draw on a
reserve fund, the restoration of which is a moral commitment but not a legal
obligation of the state or municipality that created the issuer.
Floating or Variable Rate Obligations
which bear interest at rates that are not fixed,
but vary with changes in specified market rates
or indices, such as the prime rate,
and at specified intervals. Certain of
the floating or variable rate obligations that
may be purchased by a Portfolio may carry a
demand feature that would permit the
holder to tender them back to the issuer of
the underlying instrument or to a third
party at par value prior to maturity.
Such obligations include variable rate demand
notes, which are instruments issued pursuant
to an agreement between the issuer
and the holder that permit the indebtedness
thereunder to vary and provide for
periodic adjustments in the interest rate.
The Investment Advisers or sub-adviser
will monitor on an ongoing basis the ability of
an issuer of a demand instrument or
of the entity providing credit support
for the demand feature to pay principal and
interest on demand. Obligations coupled with
a demand feature present tax issues.
Each Portfolio intends to take the position
that it is the owner of any obligations
acquired with a demand feature, and that
tax-exempt interest earned with respect to
the obligation will be tax-exempt in its hands.
There is no assurance that the
Internal Revenue Service will agree with this
position in any particular case. Also,
the federal income tax treatment of certain
other features of these investments is
unclear. Each Portfolio will manage its
assets to minimize any adverse impact
from these investments.
Participation Certificates which are issued by a bank, insurance company or
other financial institution. A participation certificate gives the Portfolio
an undivided interest in the underlying obligations in the proportion that the
Portfolio's interest bears to the total principal amount of such obligations.
Certain of such participation certificates may carry a demand feature that
would permit the holder to tender them back to the issuer or to a third party
prior to maturity.
Lease Obligations are participation certificates in a lease, an installment
purchase contract or a conditional sales contract (hereinafter collectively
called "lease obligations") entered into by a State or a political subdivision
to finance the acquisition or construction of equipment, land or facilities.
Although lease obligations do not constitute general obligations of the issuer
for which the lessee's unlimited taxing power is pledged, a lease obligation
is frequently backed by the lessee's covenant to budget for, appropriate and
make the payments due under the lease obligation. However, certain lease
obligations contain "nonappropriation" clauses which provide that the lessee
has no obligation to make lease or installment purchase payments in future
years unless money is appropriated for such purpose on a yearly basis.
Although "nonappropriation" lease obligations are secured by the leased
property, disposition of the property in the event of foreclosure might prove
difficult. These securities represent a relatively new type of financing
that has not yet developed the depth of marketability associated with more
conventional securities.
SUPPLEMENTAL INVESTMENT TECHNIQUES
Borrowing. Each Portfolio may borrow money temporarily from banks when
(i) it is advantageous to do so in order to meet redemption requests, (ii) a
Portfolio fails to receive transmitted funds from a shareholder on a timely
basis, (iii) the custodian of the Fund fails to complete delivery of securities
sold or (iv) a Portfolio needs cash to facilitate the settlement of trades made
by the Portfolio. In addition, each Portfolio may, in effect, lend securities
by engaging in reverse repurchase agreements and/or dollar roll transactions
and may, in effect, borrow money by doing so. Securities may be borrowed
by engaging in repurchase agreements. See "Investment Restrictions" and
"Supplemental Descriptions of Investments".
Securities Lending. Each Portfolio is authorized to lend securities from its
investment portfolios, with a value not exceeding 33 1/3% of its total assets,
to banks, brokers and other financial institutions if it receives collateral in
cash, U.S. Government Securities, other high grade liquid investments or
irrevocable bank stand-by letters of credit which will be maintained at all
times in an amount equal to at least 100% of the current market value of the
loaned securities. The loans will be terminable at any time by the Fund and
the relevant Portfolio will then receive the loaned securities within five
days. During the period of such a loan, the Portfolio receives the income
on the loaned securities and a loan fee and may thereby increase its total
return.
Foreign Currency Hedging. The HLM International Equity Portfolio may
enter into forward foreign currency contracts (a "forward contract") and may
purchase and write (on a covered basis) exchange-traded or over-the-counter
("OTC") options on currencies, foreign currency futures contracts, and
options on foreign currency futures contracts primarily to protect against a
decrease in the U.S. Dollar equivalent value of its foreign currency portfolio
securities or the payments thereon that may result from an adverse change in
foreign currency exchange rates. The Portfolio may at times hedge all or
some portion of their currency exchange risk. Conditions in the securities,
futures, options, and foreign currency markets will determine whether and
under what circumstances the Portfolio will employ any of the techniques or
strategies described below and in the section of the Prospectus entitled
"Descriptions of Investments". The Portfolio's ability to pursue certain of
these strategies may be limited by applicable regulations of the Commodity
Futures Trading Commission ("CFTC") and the federal tax requirements
applicable to regulated investment companies (see "Tax Considerations").
Forward Contracts. Sale of currency for dollars under such a contract
establishes a price for the currency in dollars. Such a sale insulates returns
from securities denominated in that currency from exchange rate fluctuations
to the extent of the contract while the contract is in effect. A sale contract
will be advantageous if the currency falls in value against the dollar and
disadvantageous if it increases in value against the dollar. A purchase
contract will be advantageous if the currency increases in value against the
dollar and disadvantageous if it falls in value against the dollar.
The HLM International Equity Portfolio may use forward contracts to
insulate existing security positions against exchange rate movement
("position hedges") or to insulate proposed transactions against such
movement ("transaction hedges"). For example, to establish a position
hedge, a forward contract on a foreign currency might be sold to protect
against the decline in the value of that currency against the dollar. To
establish a transaction hedge, a foreign currency might be purchased on a
forward basis to protect against an anticipated increase in the value of that
currency against the dollar.
Futures Contracts. The HLM International Equity and U.S. Selected Growth
Portfolios may enter into contracts for the purchase or sale for future delivery
(a "futures contract") of contracts based on financial indices including any
index of common stocks. The Portfolios may also enter into futures contracts
based on foreign currencies. U.S. futures contracts have been designed by
exchanges which have been designated as "contracts markets" by the CFTC,
and must be executed through a futures commission merchant, or brokerage
firm, that is a member of the relevant contract market. Futures contracts
trade on a number of exchange markets and, through their clearing
corporations, the exchanges guarantee performance of the contracts as
between the clearing members of the exchange. The Portfolios may also enter
into futures contracts that are based on securities that would be eligible
investments for the Portfolios. The Portfolios may enter into contracts that
are denominated in currencies other than the U.S. dollar.
Although futures contracts by their terms call for the actual delivery or
acquisition of securities or currency, in most cases the contractual obligation
is fulfilled before the date of the contract without having to make or take
delivery of the securities or currency. The offsetting of a contractual
obligation is accomplished by buying (or selling, as the case may be) on a
commodities exchange an identical futures contract calling for delivery in the
same month. Such a transaction, which is effected through a member of an
exchange, cancels the obligation to make or take delivery of the securities or
currency. Since all transactions in the futures market are made, offset, or
fulfilled through a clearinghouse associated with the exchange on which the
contracts are traded, a Portfolio will incur brokerage fees when it purchases
or sells futures contracts.
At the time a futures contract is purchased or sold, the Portfolio must allocate
cash or securities as a deposit payment ("initial margin"). It is expected that
the initial margin on U.S. exchanges may range from approximately 3% to
approximately 15% of the value of the securities or commodities underlying
the contract. Under certain circumstances, however, such as periods of high
volatility, the Portfolio may be required by an exchange to increase the level
of its initial margin payment. Additionally, initial margin requirements may
be increased generally in the future by regulatory action. An outstanding
futures contract is valued daily and the payment in cash of ("variation
margin") generally will be required, a process known as "marking to the
market". Each day the Portfolio will be required to provide (or will be
entitled to receive) variation margin in an amount equal to any decline (in the
case of a long futures position) or increase (in the case of a short futures
position) in the contract's value since the preceding day.
Options on Foreign Currencies. The HLM International Equity Portfolio
may purchase and sell (or write) put and call options on foreign currencies to
protect against a decline in the U.S. dollar-equivalent value of their portfolio
securities or payments due thereon or a rise in the U.S. dollar-equivalent cost
of securities that they intend to purchase. A foreign currency put option
grants the holder the right, but not the obligation, at a future date to sell a
specified amount of a foreign currency to its counterparty at a predetermined
price. Conversely, a foreign currency call option grants the holder the right,
but not the obligation, to purchase at a future date a specified amount of a
foreign currency at a predetermined price.
Options on Futures Contracts. The purchase of a call option on a futures
contract is similar in some respects to the purchase of a call option on an
individual security or currency. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based or
the price of the underlying securities or currency, it may or may not be less
risky than ownership of the futures contract or the underlying securities or
currency. As with the purchase of futures contracts, when a Portfolio is not
fully invested it may purchase a call option on a futures contract to hedge
against a market advance due to declining interest rates or a change in
foreign exchange rates.
The writing of a call option on a futures contract constitutes a partial hedge
against declining prices of the security or foreign currency which is
deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is below the exercise price, the Portfolio will retain
the full amount of the option premium which provides a partial hedge against
any decline that may have occurred in the Portfolio's portfolio holdings. The
writing of a put option on a futures contract constitutes a partial hedge
against increasing prices of the security or foreign currency which is
deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is higher than the exercise price, the Portfolio will
retain the full amount of the option premium which provides a partial hedge
against any increase in the price of securities which the Portfolio intends to
purchase. If a put or call option the Portfolio has written is exercised, the
Portfolio will incur a loss that will be reduced by the amount of the premium
it receives. Depending on the degree of correlation between changes in the
value of its portfolio securities and changes in the value of its futures
positions, the Portfolio's losses from existing options on futures may to some
extent be reduced or increased by changes in the value of portfolio securities.
The purchase of a put option on a futures contract is similar in some respects
to the purchase of protective put options on portfolio securities.
Restrictions on the Use of Futures Contracts and Options on Futures
Contracts. Regulations of the CFTC applicable to the HLM International
Equity and U.S. Selected Growth Portfolios require that all of the Portfolios'
futures and options on futures transactions constitute bona fide hedging
transactions, except that a transaction may not constitute a bona fide hedging
transaction entered into for other purposes if, immediately thereafter, the sum
of the amount of initial margin deposits on a Portfolio's existing futures
positions and premiums paid for related options would not exceed 5% of the
value of the Portfolio's total assets.
Portfolio Turnover When consistent with its investment objective, the
Money Market Portfolio may employ a number of professional money
management techniques in anticipation of or response to changing economic
and market conditions and shifts in fiscal and monetary policy. These
techniques include varying the composition of the Money Market Portfolio's
investments and the average maturity of the Money Market Portfolio's
portfolio based upon an assessment of the relative values of various money
market instruments and future interest rate patterns. As a result of the
implementation of these techniques, the Money Market Portfolio may engage
in more active portfolio trading and experience more volatility in its
distributions than many other money market funds.
Illiquid Securities Although each Portfolio may invest up to 15% of the
value of its net assets in illiquid assets, it is not expected that any
Portfolio will invest a significant portion of its assets in illiquid
securities. All repurchase agreements, time deposits and dollar roll
transactions maturing in more than seven days are treated as illiquid
assets. Further, loan participations will be treated as illiquid assets
until the Board of Directors determines that a liquid market exists for
such participations.
SUPPLEMENTAL DISCUSSION OF RISKS
ASSOCIATED WITH THE FUND'S INVESTMENT
POLICIES AND INVESTMENT TECHNIQUES
Additional information concerning risks associated with certain of the
Portfolios' investments is set forth below.
Creditworthiness. In general, certain obligations which the Portfolios may
invest in are subject to credit risks such as the loss of credit ratings or
possible default. After purchase by a Portfolio of the Fund, a security may
cease to be rated or its rating may be reduced below the minimum required for
purchase by the Fund. Neither event will require a sale of such security by
the Portfolio. However, HLM, Delphi and FFTW will consider such event in its
determination of whether a Portfolio should hold the security. To the extent
that the ratings given by S&P or Moody's may change as a result of changes
in such organizations or their rating systems, the Fund will attempt to use
comparable ratings as standards for investments in accordance with the
investment policies contained in the Prospectus and in this Statement of
Additional Information.
Foreign Bank Obligations. Obligations of foreign banks involve somewhat
different investment risks than those affecting obligations of United States
banks, including the possibilities that their liquidity could be impaired
because of future political and economic developments, that their obligations
may be less marketable than comparable obligations of United States banks,
that a foreign jurisdiction might impose withholding taxes on interest income
payable on those obligations, that foreign deposits may be seized or
nationalized, that foreign governmental restrictions such as exchange
controls may be adopted that might adversely affect the payment of principal
and interest on those obligations and that the selection of those obligations
may be more difficult because there may be less publicly available
information concerning foreign banks or the accounting, auditing and
financial reporting standards, practices and requirements applicable to
foreign banks may differ from those applicable to United States banks.
Foreign banks are not generally subject to examination by any United States
government agency or instrumentality. Also, investments in commercial
banks located in several foreign countries are subject to additional risks due
to the combination in such banks of commercial banking and diversified
securities activities.
Dollar Roll Transactions. The entry into dollar rolls involves potential risks
of loss which are different from those related to the securities underlying the
transactions. For example, if the counterparty becomes insolvent, a
Portfolio's right to purchase from the counterparty might be restricted.
Additionally, the value of such securities may change adversely before the
Portfolio is able to purchase them. Similarly, a Portfolio may be required to
purchase securities in connection with a dollar roll at a higher price than may
otherwise be available on the open market. Since, as noted above under
"Supplemental Descriptions of Investments", the counterparty is required to
deliver a similar, but not identical, security to a Portfolio, the security
which the Portfolio is required to buy under the dollar roll may be worth
less than an identical security. Finally, there can be no assurance that a
Portfolio's use of cash that it receives from a dollar roll will provide a
return that exceeds borrowing costs.
Mortgage and Other Asset-Backed Securities. Prepayments on securitized
assets such as mortgages, automobile loans and credit card receivables
("Securitized Assets") generally increase with falling interest rates and
decrease with rising interest rates; furthermore, prepayment rates are
influenced by a variety of economic and social factors. In general, the
collateral supporting non-mortgage asset-backed securities is of shorter
maturity than mortgage loans and is less likely to experience substantial
prepayments. In addition to prepayment risk, borrowers on the underlying
Securitized Assets may default in their payments creating delays or loss of
principal.
Non-mortgage asset-backed securities involve certain risks that are not
presented by mortgage-backed securities. Primarily, these securities do not
have the benefit of a security interest in assets underlying the related
mortgage collateral. Credit card receivables are generally unsecured and the
debtors are entitled to the protection of a number of state and federal
consumer credit laws, many of which give such debtors the right to set off
certain amounts owed on the credit cards, thereby reducing the balance due.
Most issuers of automobile receivables permit the servicers to retain
possession of the underlying obligations. If the servicer were to sell these
obligations to another party, there is a risk that the purchaser would acquire
an interest superior to that of the holders of the related automobile
receivables. In addition, because of the large number of vehicles involved in
a typical issuance and technical requirements under state laws, the trustee for
the holders of the automobile receivables may not have an effective security
interest in all of the obligations backing such receivables. Therefore, there
is a possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on these securities.
Some forms of asset-backed securities are relatively new forms of
investments. Although each Portfolio will only invest in asset-backed
securities that its Investment Adviser or sub-adviser believes are liquid,
because the market experience in certain of these securities is limited, the
market's ability to sustain liquidity through all phases of a market cycle may
not have been tested.
Loan Participations. Because the issuing bank of a loan participation does
not guarantee the participation in any way, it is subject to the credit risks
generally associated with the underlying corporate borrower. In addition,
because it may be necessary under the terms of the loan participation for a
Portfolio to assert through the issuing bank such rights as may exist against
the underlying corporate borrower, in the event that the underlying corporate
borrower should fail to pay principal and interest when due, the Portfolio
could be subject to delays, expenses and risks which are greater than those
which would have been involved if the Portfolio had purchased a direct
obligation (such as commercial paper) of the borrower. Moreover, under the
terms of the loan participation, the purchasing Portfolio may be regarded as a
creditor of the issuing bank (rather than of the underlying corporate
borrower), so that the Portfolio also may be subject to the risk that the
issuing bank may become insolvent. Further, in the event of the bankruptcy or
insolvency of the corporate borrower, the loan participation might be subject
to certain defenses that can be asserted by a borrower as a result of improper
conduct by the issuing bank. The secondary market, if any, for these loan
participation interests is limited, and any such participation purchased by a
Portfolio will be treated as illiquid, until the Board of Directors determines
that a liquid market exists for such participations. Loan participations will
be valued at their fair market value, as determined by procedures approved by
the Board of Directors.
Illiquidity of the Municipal Market. The taxable market is a broader and
more liquid market with a greater number of investors, issuers and market
makers than the market for municipal obligations. The more limited
marketability of tax-exempt municipal obligations may make it difficult in
certain circumstances to dispose of large investments advantageously.
Regulatory Changes. Interest on certain tax-exempt municipal obligations
might lose its tax-exempt status in the event of a change in the tax laws.
Lease Obligations. Lease Obligations containing "nonappropriation" clauses
provide that the lessee has no obligation to make lease or installment
purchase payments in future years unless money is appropriated for such
purpose on a yearly basis. Although "nonappropriation" lease obligations are
secured by the leased property, disposition of the property in the event of
foreclosure might prove difficult. These securities represent a relatively new
type of financing that has not yet developed the depth of marketability
associated with more conventional securities. Each Portfolio may not invest
in illiquid or unrated lease obligations.
High Yield/High Risk Debt Securities. HLM International Equity Portfolio
may invest up to 20% of its net assets in convertible securities and debt
securities which are rated below investment-grade - that is, rated below Baa
by Moody's or BBB by S&P and in unrated securities judged to be of
equivalent quality by HLM. Below investment grade securities carry a high
degree of risk (including the possibility of default or bankruptcy of the
issuers of such securities), generally involve greater volatility of price
and risk of principal and income, and may be less liquid, than securities in
the higher rating categories and are considered speculative. The lower the
ratings of such debt securities, the greater their risks render them like
equity securities. See "Ratings Descriptions" in this Statement of Additional
Information for a more complete description of the ratings assigned by ratings
organizations and their respective characteristics.
Economic downturns have in the past, and could in the future, disrupted the
high yield market and impaired the ability of issuers to repay principal and
interest. Also, an increase in interest rates would have a greater adverse
impact on the value of such obligations than on comparable higher quality
debt securities. During an economic downturn or period of rising interest
rates, highly leveraged issues may experience financial stress which would
adversely affect their ability to service their principal and interest payment
obligations. Prices and yields of high yield securities will fluctuate over
time and, during periods of economic uncertainty, volatility of high yield
securities may adversely affect the Portfolio's net asset value. In addition,
investments in high yield zero coupon or pay-in-kind bonds, rather than income-
bearing high yield securities, may be more speculative and may be subject to
greater fluctuations in value due to changes in interest rates.
The trading market for high yield securities may be thin to the extent that
there is no established retail secondary market or because of a decline in the
value of such securities. A thin trading market may limit the ability of the
Portfolio to accurately value high yield securities in the Portfolio's portfolio
and to dispose of those securities. Adverse publicity and investor perceptions
may decrease the values and liquidity of high yield securities. These
securities may also involve special registration responsibilities, liabilities
and costs.
Credit quality in the high yield securities market can change suddenly and
unexpectedly, and even recently issued credit ratings may not fully reflect the
actual risks posed by a particular high-yield security. For these reasons, it
is the policy of HLM not to rely exclusively on ratings issued by established
credit rating agencies, but to supplement such ratings with its own
independent and on-going review of credit quality. The achievement of the
Portfolio's investment objective by investment in such securities may be more
dependent on HLM's credit analysis than is the case for higher quality bonds.
Should the rating of a portfolio security be downgraded, HLM will determine
whether it is in the best interest of the Portfolio to retain or dispose of
such security.
Prices for below investment-grade securities may be affected by legislative
and regulatory developments.
.
Foreign Securities. Foreign financial markets, while growing in volume,
have, for the most part, substantially less volume than United States markets,
and securities of many foreign companies are less liquid and their prices
more volatile than securities of comparable domestic companies. The foreign
markets also have different clearance and settlement procedures, and in
certain markets there have been times when settlements have been unable to
keep pace with the volume of securities transactions, making it difficult to
conduct such transactions. Delivery of securities may not occur at the same
time as payment in some foreign markets. Delays in settlement could result
in temporary periods when a portion of the assets of the HLM International
Equity Portfolio is uninvested and no return is earned thereon. The inability
of the Portfolio to make intended security purchases due to settlement
problems could cause the Portfolio to miss attractive investment
opportunities. Inability to dispose of portfolio securities due to settlement
problems could result either in losses to the Portfolio due to subsequent
declines in value of the portfolio security or, if the Portfolio has entered
into a contract to sell the security, could result in possible liability to
the purchaser.
As foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards and practices comparable to those
applicable to domestic companies, there may be less publicly available
information about certain foreign companies than about domestic companies.
There is generally less government supervision and regulation of exchanges,
financial institutions and issuers in foreign countries than there is in the
United States. A foreign government may impose exchange control
regulations which may have an impact on currency exchange rates, and there
is the possibility of expropriation or confiscatory taxation, political or
social instability, or diplomatic developments which could affect U.S.
investments in those countries.
Although the HLM International Equity Portfolio will use reasonable efforts
to obtain the best available price and the most favorable execution with
respect to all transactions and HLM will consider the full range and quality of
services offered by the executing broker or dealer when making these
determinations, fixed commissions on many foreign stock exchanges are
generally higher than negotiated commissions on U.S. exchanges. Certain
foreign governments levy withholding taxes against dividend and interest
income. Although in some countries a portion of these taxes are recoverable,
the non-recovered portion of foreign withholding taxes will reduce the
income received by the Portfolio on these investments. However, these
foreign withholding taxes are not expected to have a significant impact on the
Portfolio, since the Portfolio's investment objective is to seek long-term
capital appreciation and any income should be considered incidental.
Foreign Currency Hedging. The success of currency hedging will depend on
the ability of HLM to predict exchange rate fluctuations. Predicting such
fluctuations is extremely difficult and thus the successful execution of a
hedging strategy is highly uncertain. An incorrect prediction will cause
poorer Portfolio performance than would otherwise be the case. Forward
contracts that protect against anticipated losses have the corresponding
effect of canceling possible gains if the currency movement prediction is
incorrect.
Precise matching of forward contract amounts and the value of portfolio
securities is generally not possible because the market value of the protected
securities will fluctuate while forward contracts are in effect. Adjustment
transactions are theoretically possible but time consuming and expensive, so
contract positions are likely to be approximate hedges, not perfect.
The cost to the Portfolio of engaging in foreign currency forward contracts
will vary with factors such as the foreign currency involved, the length of the
contract period, and the market conditions then prevailing, including general
market expectations as to the direction of the movement of various foreign
currencies against the U.S. dollar. Furthermore, HLM may not be able to
purchase forward contracts with respect to all of the foreign currencies in
which the Portfolio's portfolio securities may be denominated. In those
circumstances the correlation between the movements in the exchange rates
of the subject currency and the currency in which the portfolio security is
denominated may not be precise. Moreover, if the forward contract is entered
into in an over-the-counter transaction, as will usually be the case, the
Portfolio generally will be exposed to the credit risk of its counterparty. If
the Portfolio enters into such contracts on a foreign exchange, the contract
will be subject to the rules of that foreign exchange. Foreign exchanges may
impose significant restrictions on the purchase, sale, or trading of such
contracts, including the imposition of limits on price moves. Such limits
may significantly affect the ability to trade such a contract or otherwise to
close out the position and could create potentially significant discrepancies
between the cash and market value of the position in the forward contract.
Finally, the cost of purchasing forward contracts in a particular currency
will reflect, in part, the rate of return available on instruments denominated
in that currency. The cost of purchasing forward contracts to hedge portfolio
securities that are denominated in currencies that in general yield high rates
of return may thus tend to reduce that rate of return toward the rate of return
that would be earned on assets denominated in U.S. dollars.
Futures Contracts. Futures contracts entail special risks. Among other
things, the ordinary spreads between values in the cash and futures markets,
due to differences in the character of these markets, are subject to distortions
relating to: (1) investors' obligations to meet additional variation margin
requirements; (2) decisions to make or take delivery, rather than entering into
offsetting transactions; and (3) the difference between margin requirements
in the securities markets and margin deposit requirements in the futures
market. The possibility of such distortion means that a correct forecast of
general market or foreign exchange rate trends may still not result in a
successful transaction.
Although the Fund believes that use of such contracts and options thereon
will benefit the HLM International Equity or U.S. Selected Growth Portfolio,
if predictions about the general direction of securities market movements or
foreign exchange rates is incorrect, a Portfolio's overall performance would
be poorer than if it had not entered into any such contracts or purchased or
written options thereon.
A Portfolio's ability to establish and close out positions in futures
contracts and options on futures contracts will be subject to the development
and maintenance of a liquid market. Although the Portfolio generally will
purchase or sell only those futures contracts and options thereon for which
there appears to be a liquid market, there is no assurance that a liquid market
on an exchange will exist for any particular futures contract or option thereon
at any particular time. Where it is not possible to effect a closing
transaction in a contract to do so at a satisfactory price, the Portfolio
would have to make or take delivery under the futures contract or, in the
case of a purchased option, exercise the option. In the case of a futures
contract that the Portfolio has sold and is unable to close out, the Portfolio
would be required to maintain margin deposits on the futures contract and to
make variation margin payments until the contract is closed.
Under certain circumstances, exchanges may establish daily limits in the
amount that the price of a futures contract or related option contract may vary
either up or down from the previous day's settlement price. Once the daily
limit has been reached in a particular contract, no trades may be made that
day at a price beyond that limit. The daily limit governs only price
movements during a particular trading day and therefore does not limit
potential losses because the limit may prevent the liquidation of unfavorable
positions. Futures or options contract prices could move to the daily limit
for several consecutive trading days with little or no trading and thereby
prevent prompt liquidation of positions and subject some traders to
substantial losses.
Buyers and sellers of foreign currency futures contracts are subject to the
same risks that apply to the use of futures generally. In addition, there are
risks associated with foreign currency futures contracts and their use as
hedging devices similar to those associated with forward contracts on foreign
currencies. Further, settlement of a foreign currency futures contract must
occur within the country issuing the underlying currency. Thus, a Portfolio
must accept or make delivery of the underlying foreign currency in
accordance with any U.S. or foreign restrictions or regulations regarding the
maintenance of foreign banking arrangements by U.S. residents and may be
required to pay any fees, taxes or charges associated with such delivery that
are assessed in the country of the underlying currency.
Options on Foreign Currency. As in the case of other types of options, the
benefit to the HLM International Equity Portfolio deriving from the purchase
of foreign currency options will be reduced by the amount of the premium
and related transaction costs. In addition, where currency exchange rates do
not move in the direction or to the extent anticipated, the Portfolio could
sustain losses on transactions in foreign currency options that would require
them to forego a portion or all of the benefits of advantageous changes in
such rates.
The Portfolio may write options on foreign currencies for hedging purposes.
For example, where the Portfolio anticipates a decline in the dollar value of
foreign currency denominated securities due to adverse fluctuations in
exchange rates it could, instead of purchasing a put option, write a call
option on the relevant currency. If the expected decline occurs, the option
will most likely not be exercised, and the decrease in value of portfolio
securities will be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an anticipated
increase in the dollar costs of securities to be acquired, a Portfolio could
write a put option on the relevant currency which, if rates move in the manner
projected, will expire unexercised and allow the Portfolio to hedge such
increased costs up to the amount of the premium. As in the case of other
types of options, however, the writing of a foreign currency option will
constitute only a partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this movement does not occur, the
option may be exercised and the Portfolio would be required to purchase or
sell the underlying currency at a loss which may not be fully offset by the
amount of the premium. Through the writing of options on foreign
currencies, the Portfolio also may be required to forego all or a portion of
the benefits that might otherwise have been obtained from favorable movements
in exchange rates.
Options on Futures Contracts. The amount of risk the HLM International
Equity or U.S. Selected Growth Portfolio assumes when it purchases an
option on a futures contract is the premium paid for the option plus related
transaction costs. In addition to the correlation risks discussed above, the
purchase of an option also entails the risk that changes in the value of the
underlying futures contract will not be fully reflected in the value of the
option purchased. Options on foreign currency futures contracts may involve
certain additional risks. Trading options on foreign currency futures contracts
is relatively new. The ability to establish and close out positions in such
options is subject to the maintenance of a liquid secondary market. To
mitigate this problem, the HLM International Equity or U.S. Selected Growth
Portfolio will not purchase or write options on foreign currency futures
contracts unless and until, in HLM's or Delphi's opinion, the market for such
options has developed sufficiently that the risks in connection with such
options are not greater than the risks in connection with transactions in the
underlying foreign currency futures contracts. Compared to the purchase or
sale of foreign currency futures contracts, the purchase of call or put options
thereon involves less potential risk to the Portfolio because the maximum
amount at risk is the premium paid for the option (plus transaction costs).
However, there may be circumstances when the purchase of a call or put
option on a foreign currency futures contract would result in a loss, such as
when there is no movement in the price of the underlying currency or futures
contract, when use of the underlying futures contract would not result in a
loss.
Lower-Rated Debt Securities ("Junk Bonds"). The market value of lower-
rated debt securities tend to reflect individual corporate developments to a
greater extent than do higher-rated securities, which react primarily to
fluctuations in the general level of interest rates. Lower-rated debt
securities also tend to be more sensitive to general economic conditions
than are higher-rated debt securities.
INVESTMENT RESTRICTIONS
The Fund has adopted the investment restrictions listed below
relating to the investment of each Portfolio's assets and its activities.
These are fundamental policies that may not be changed without the approval of
the holders of a majority of the outstanding voting securities of a Portfolio
(which for this purpose and under the 1940 Act means the lesser of (i) 67% of
the shares represented at a meeting at which more than 50% of the outstanding
shares are represented or (ii) more than 50% of the outstanding shares).
None of the Portfolios may:
(1) invest more than 5% of its total assets (taken at market value) in
securities of any one issuer, other than securities issued by the U.S.
Government, its agencies and instrumentalities, or purchase more than 10%
of the voting securities of any issuer, with respect to 75% of a Portfolio's
total assets;
(2) invest more than 25% of its total assets in the securities of companies
primarily engaged in any one industry other than the U.S. Government, its
agencies and instrumentalities or, with respect to the Money Market
Portfolio, Domestic Bank Obligations as defined in the Prospectus. Finance
companies as a group are not considered a single industry for purposes of this
policy;
(3) borrow money, except through reverse repurchase agreements or dollar
roll transactions or from a bank for temporary or emergency purposes in an
amount not exceeding one third of the value of its total assets nor will it
borrow for leveraging purposes;
(4) issue senior securities (other than as specified in clause (3));
(5) make loans, except (a) through the purchase of all or a portion of an issue
of debt securities in accordance with its investment objective, policies and
limitations, or (b) by engaging in repurchase agreements with respect to
portfolio securities, or (c) by lending securities to other parties, provided
that no securities loan may be made, if, as a result, more than 33 1/3% of the
value of its total assets would be lent to other parties;
(6) underwrite securities of other issuers;
(7) invest in companies for the purpose of exercising control or management;
(8) purchase or sell real estate (other than marketable securities representing
interests in, or backed by, real estate or securities of companies which deal
in real estate or mortgages);
(9) purchase or sell physical commodities or related commodity contracts; or
(10) invest directly in interests in oil, gas or other mineral exploration or
development programs or mineral leases.
(11) the HLM International Equity Portfolio may not invest more than 10%
of its total assets in warrants.
Whenever an investment policy or limitation states a maximum percentage of
a Portfolio's assets that may be invested in any security or other asset or
sets forth a policy regarding quality standards, such standard or percentage
limitation shall be determined immediately after and as a result of the
Portfolio's acquisition of such security or other asset. Accordingly, any
later increase or decrease in a percentage resulting from a change in values,
net assets or other circumstances will not be considered when determining
whether that investment complies with the Portfolio's investment policies and
limitations.
Each Portfolio's investment objectives and other investment policies not
designated as fundamental in this Statement of Additional Information are
non-fundamental and may be changed at any time by action of the Board of
Directors. Although a non-fundamental policy, each Portfolio may not
purchase securities on margin or make short sales, unless, by virtue of its
ownership of other securities, it has the right to obtain securities equivalent
in kind and amount to the securities sold and, if the right is conditional, the
sale is made upon the same conditions, except that the Fund may obtain such
short-term credits as may be necessary for the clearance of purchases and
sales of securities.
The Money Market Portfolio (although not as a fundamental policy) may not:
(1) invest more than 5% of its total assets in the securities of any one issuer
or subject to puts from any one issuer, except U.S. Government securities,
provided that the Portfolio may invest more than 5% of its total assets in
first tier securities of any one issuer for a period of up to three business
days or, in unrated securities that have been determined to be of comparable
quality by the Investment Adviser or sub-adviser;
(2) invest more than 5% of its total assets in second tier securities, or in
unrated securities determined by the Investment Adviser or sub-adviser to be
of comparable quality.
The U.S. Selected Growth Portfolio (although not as a fundamental policy)
may not invest more than 5% of its total assets in warrants.
PORTFOLIO TRANSACTIONS
The Advisory and Sub-Advisory Agreements authorize the Investment
Advisers and sub-advisers to select the brokers or dealers that will execute
the purchases and sales of investment securities for each of the Fund's
Portfolios and directs the Investment Advisers and sub-adviser to use
reasonable efforts to obtain the best available price and the most favorable
execution with respect to all transactions for the Portfolios. The Investment
Adviser or sub-adviser will consider the full range and quality of services
offered by the executing broker or dealer when making these determinations.
Some securities considered for investment by each of the Fund's Portfolios
may also be appropriate for other clients served by either the Investment
Advisers or the sub-advisers. If the purchase or sale of securities consistent
with the investment policies of a Portfolio and one or more of these other
clients serviced by the Investment Advisers or the sub-advisers is considered
at or about the same time, transactions in such securities will be allocated
among the Portfolio and clients in a manner deemed fair and reasonable by
the Investment Advisers or the sub-advisers, as the case may be. Although
there is no specified formula for allocating such transactions, the various
allocation methods used by the Investment Advisers or sub-advisers, and the
results of such allocations, are subject to periodic review by the Board of
Directors.
NET ASSET VALUE
As stated in the Prospectus, the Money Market Portfolio seeks to maintain a
net asset value of $1.00 per share and, in this connection, instruments are
valued on the basis of amortized cost pursuant to Rule 2a-7 under the 1940
Act. While this method provides certainty in valuation, it may result in
periods during which value, as determined by amortized cost, is higher or
lower than the price the Portfolio would receive if it sold the instrument.
During such periods the yield to investors in the Portfolio may differ
somewhat from that obtained in a similar fund which uses market values for
all its portfolio securities. For example, if the use of amortized cost
resulted in a lower (higher) aggregate portfolio value on a particular day, a
prospective investor in the Portfolio would be able to obtain a somewhat
higher (lower) yield than would result from investment in such a similar
fund, and existing investors would receive less (more) investment income.
The purpose of using the amortized cost method of calculation is to attempt to
maintain a stable net asset value per share of $1.00.
The Board of Directors has established procedures reasonably designed,
taking into account current market conditions and the Money Market
Portfolio's investment objectives, to stabilize the net asset value per share
as computed for the purposes of sales and redemptions at $1.00. These
procedures include periodic review, as the Board of Directors deems
appropriate and at such intervals as are reasonable in light of current market
conditions, of the relationship between the amortized cost value per share and
net asset value per share based upon available indications of market value.
In the event of a deviation of 1/2 of 1% between the Money Market Portfolio's
net asset value based upon available market quotations or market equivalents
and $1.00 per share based on amortized cost, the Board of Directors will
promptly consider what action, if any, should be taken. The Board of
Directors will also take such action as it deems appropriate to eliminate or to
reduce to the extent reasonably practicable any material dilution or other
unfair result which might arise from differences between the two. Such
action may include redemption in kind, selling instruments prior to maturity
to realize capital gains or losses or to shorten the average maturity,
withholding dividends, or utilizing a net asset value per share as determined
by using available market quotations.
As used in the Prospectus, with respect to the Money Market Portfolio,
"Business Day" refers to those days when the Federal Reserve Bank of New
York is open for business, which is Monday through Friday except for
holidays. As of the date of this Statement of Additional Information, such
holidays are: New Year's Day, Martin Luther King Day, Presidents' Day,
Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans
Day, Thanksgiving and Christmas. As used in the Prospectus, with respect
to the HLM International Equity and U.S. Selected Growth Portfolios,
"Business Day" refers to those days when the New York Stock Exchange is
open for business, which is Monday through Friday except for holidays. As
of the date of this Statement of Additional Information, such holidays are:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas Day.
TAX CONSIDERATIONS
The following summary of tax consequences, which does not purport to be
complete, is based on U.S. federal tax laws and regulations in effect on the
date of this Statement of Additional Information, which are subject to change
by legislative or administrative action.
Qualification as a Regulated Investment Company. Each Portfolio intends to
qualify for and to elect to be treated as, and the Money Market and HLM
International Equity Portfolios did qualify in 1994 as, a regulated investment
company ("RIC") under the Internal Revenue Code of 1986, as amended (the
"Code"). To qualify as a RIC, a Portfolio must, among other things, (a)
derive at least 90% of its gross income each taxable year from dividends,
interest, payments with respect to securities loans and gains from the sale or
other disposition of securities or foreign currencies, or other income derived
from its business of investing in securities (the "Qualifying Income
Requirement"); (b) derive less than 30% of its gross income each taxable year
from sales or other dispositions of certain assets (namely, (i) securities;
(ii) options, futures and forward contracts (other than those on foreign
currencies); and (iii) foreign currencies (including options, futures and
forward contracts on such currencies) not directly related to the Portfolio's
principal business of investing in stocks or securities (or options and futures
with respect to stocks or securities)) held less than three months (the "30%
Limitation"); (c) diversify its holdings so that, at the end of each quarter of
the Portfolio's taxable year, (i) at least 50% of the market value of the
Portfolio's assets is represented by cash and cash items (including
receivables), U.S. Government securities, securities of other RICs and other
securities, with such other securities of any one issuer limited to an amount
not greater than 5% of the value of the Portfolio's total assets and not
greater than 10% of the outstanding voting securities of such issuer and
(ii) not more than 25% of the value of the Portfolio's total assets is
invested in the securities of any one issuer (other than U.S. Government
securities or the securities of other RICs); and (d) distribute at least 90%
of its investment company taxable income (which includes, among other items,
interest and net short-term capital gains in excess of net long-term capital
losses) and its net tax-exempt interest income each taxable year.
If for any taxable year a Portfolio does not qualify as a RIC, all of its
taxable income will be taxed to the Portfolio at corporate rates. For each
taxable year that the Portfolio qualifies as a RIC, it will not be subject to
federal income tax on that part of its investment company taxable income and
net capital gains (the excess of net long-term capital gain over net short-term
capital loss) that it distributes to its shareholders. In addition, to avoid a
nondeductible 4% federal excise tax, the Portfolio must distribute during each
calendar year an amount at least equal to the sum of 98% of its ordinary
income (not taking into account any capital gains or losses) determined on a
calendar year basis, 98% of its capital gains in excess of capital losses
determined in general on an October 31 year-end basis, and any undistributed
amounts from previous years. Each Portfolio intends to distribute all of its
net income and gains by automatically reinvesting such income and gains in
additional shares of the Portfolio. The 30% Limitation may require that a
Portfolio defer closing out certain positions beyond the time when it
otherwise would be advantageous to do so, in order not to be disqualified as a
RIC. Each Portfolio will monitor its compliance with all of the rules set
forth in the preceding paragraph.
Distributions. Each Portfolio's automatic reinvestment of its taxable
investment income, net short-term capital gains and net long-term capital
gains in additional shares of the Portfolio and distribution of such shares to
shareholders will be taxable to the Portfolio's shareholders. In general, such
shareholders will be treated as if such income and gains had been distributed
to them by the Portfolio and then reinvested by them in shares of the
Portfolio, even though no cash distributions have been made to shareholders.
The automatic reinvestment of taxable investment income and net realized
short-term capital gains of the Portfolio will be taxable to the Portfolio's
shareholders as ordinary income. Each Portfolio's automatic reinvestment of
any net long-term capital gains designated by the Portfolio as capital gain
dividends will be taxable to the shareholders as long-term capital gain,
regardless of how long they have held their Portfolio shares. If a portion of
a Portfolio's income consists of dividends paid by U.S. corporations, a portion
of the dividends paid by the Portfolio may be eligible for the corporate
dividend-received deduction. None of the amounts treated as distributed to
shareholders of the Money Market Portfolio are expected to be eligible for the
corporate dividends received deduction. A distribution will be treated as paid
on December 31 of the current calendar year if it is declared by a Portfolio in
October, November or December with a record date in such a month and paid
by the Portfolio during January of the following calendar year. Such
distributions will be taxable to shareholders in the calendar year in which the
distributions are declared, rather than in the calendar year in which the
distributions are received. Each Portfolio will inform shareholders of the
amount and tax status of all amounts treated as distributed to them not later
than 60 days after the close of each calendar year.
Sale of Shares. Upon the sale or other disposition of shares of a Portfolio,
or upon receipt of a distribution in complete liquidation of a Portfolio, a
shareholder generally will realize a capital gain or loss which will be long-
term or short-term, generally depending upon the shareholder's holding
period for the shares. Any loss realized on the sale or exchange will be
disallowed to the extent the shares disposed of are replaced (including shares
acquired pursuant to a dividend reinvestment plan) within a period of 61
days beginning 30 days before and ending 30 days after disposition of the
shares. In such a case, the basis of the shares acquired will be adjusted to
reflect the disallowed loss. Any loss realized by the shareholder on a
disposition of Portfolio shares held by the shareholder for six months or less
will be treated as a long-term capital loss to the extent of any distributions
of net capital gains deemed received by the shareholder with respect to such
shares.
Under the Code, a shareholder may not deduct that portion of interest on
indebtedness incurred or continued to purchase or carry shares of an
investment company paying exempt-interest dividends which bears the same
ratio to the total of such interest as the exempt-interest dividends bear to
the total dividends (excluding net capital gain dividends) received by the
shareholder. In addition, under rules issued by the Internal Revenue Service
for determining when borrowed funds are considered to be used to purchase
or carry particular assets, the purchase of such shares may be considered to
have been made with borrowed funds even though the borrowed funds are not
directly traceable to such purchase.
Zero Coupon Securities. Investments by a Portfolio in zero coupon securities
(other than tax-exempt zero coupon securities) will result in income to the
Portfolio equal to a portion of the excess of the face value of the securities
over their issue price (the "original issue discount") each year that the
securities are held, even though the Portfolio receives no cash interest
payments. This income is included in determining the amount of income
which the Portfolio must distribute to maintain its status as a RIC and to
avoid the payment of federal income tax and the 4% excise tax. Similarly,
investments in tax-exempt zero coupon securities will result in a Portfolio
accruing tax-exempt income each year that the securities are held, even
though the Portfolio receives no cash payments of tax-exempt interest. This
tax-exempt income is included in determining the amount of net tax-exempt
interest income which a Portfolio must distribute to maintain its status as a
regulated investment company.
Backup Withholding. A Portfolio may be required to withhold U.S. federal
income tax at the rate of 31% of all amounts deemed to be distributed as a
result of the automatic reinvestment by the Portfolio of its income and gains
in additional shares of the Portfolio and, except in the case of the Money
Market Portfolio, provided that they maintain a constant net asset value per
share, all redemption payments made to shareholders who fail to provide the
Portfolio with their correct taxpayer identification number or to make
required certifications, or who have been notified by the Internal Revenue
Service that they are subject to backup withholding. Backup withholding is
not an additional tax. Any amounts withheld will be credited against a
shareholder's U.S. federal income tax liability. Corporate shareholders and
certain other shareholders are exempt from such backup withholding.
Tax Treatment of Hedging Transactions. The taxation of equity options and
over-the-counter options on debt securities is governed by the Code section
1234. Pursuant to Code section 1234, the premium received by the HLM
International Equity or U.S. Selected Growth Portfolio for selling a put or
call option is not included in income at the time of receipt. If the option
expires, the premium is short-term capital gain to the Portfolio. If the
Portfolio enters into a closing transaction, the difference between the amount
paid to close out its position and the premium received is short-term capital
gain or loss. If a call option written by the Portfolio is exercised, thereby
requiring the Portfolio to sell the underlying security, the premium will
increase the amount realized upon the sale of such security and any resulting
gain or loss will be a capital gain or loss, and will be long-term or short-
term depending upon the holding period of the security. With respect to a
put or call option that is purchased by the Portfolio, if the option is sold,
any resulting gain or loss will be a capital gain or loss, and will be long-
term or short-term, depending upon the holding period of the option. If the
option expires, the resulting loss is a capital loss and is long-term or short-
term, depending upon the holding period of the option. If the option is
exercised, the cost of the option, in the case of a call option, is added to
the basis of the purchased security and, in the case of a put option, reduces
the amount realized on the underlying security in determining gain or loss.
Certain options, futures, and forward contracts in which the Portfolio may
invest are "section 1256 contracts." Gains and losses on section 1256
contracts are generally treated as 60% long-term and 40% short-term capital
gains or losses ("60/40 treatment"), regardless of the Portfolio's actual
holding period for the contract. Also, a section 1256 contract held by the
Portfolio at the end of each taxable year (and generally, for the purposes of
the 4% excise tax, on October 31 of each year) must be treated as if the
contract had been sold at its fair market value on that day ("mark to market
treatment"), and any deemed gain or loss on the contract is subject to 60/40
treatment. Foreign currency gain or loss (discussed below) arising from
section 1256 contracts may, however, be treated as ordinary income or loss.
The hedging transactions undertaken by the Portfolio may result in
"straddles" for federal income tax purposes. The straddle rules may affect the
character of gains or losses realized by the Portfolio. In addition, losses
realized by the Portfolio on positions that are part of a straddle may be
deferred under the straddle rules rather than being taken into account in
calculating the taxable income for the taxable year in which such losses are
realized. Further, the Portfolio may be required to capitalize, rather than
deduct currently, any interest expense on indebtedness incurred or continued
to purchase or carry any positions that are part of a straddle. Because only a
few regulations implementing the straddle rules have been implemented, the
tax consequences to the Portfolio of engaging in hedging transactions are not
entirely clear. Hedging transactions may increase the amount of short-term
capital gain realized by the Portfolio which is taxed as ordinary income when
distributed to members.
The Portfolio may make one or more of the elections available under the
Code that are applicable to straddles. If the Portfolio makes any of the
elections, the amount, character, and timing of the recognition of gains or
losses from the affected straddle positions will be determined under rules that
vary according to the election(s) made. The rules applicable under certain of
the elections may accelerate the recognition of gains or losses from the
affected straddle positions.
Because the straddle rules may affect the amount, character, and timing of
gains or losses from the positions that are part of a straddle, the amount of
Portfolio income that is distributed to members and that is taxed to them as
ordinary income or long-term capital gain may be increased or decreased as
compared to a fund that did not engage in such hedging transactions.
Tax Treatment of Foreign Currency-Related Transactions. Gains or losses
attributable to fluctuations in exchange rates that occur between the time the
HLM International Equity Portfolio accrues receivables or liabilities
denominated in a foreign currency and the time the Portfolio actually collects
such receivables, or pays such liabilities, generally are treated as ordinary
income or ordinary loss. Similarly, on disposition of certain options, futures,
and forward contracts and on disposition of debt securities denominated in a
foreign currency, gains or losses attributable to fluctuations in the value of
foreign currency between the date of acquisition of the security or contract
and the date of disposition also are treated as ordinary gain or loss. These
gains or losses, referred to under the Code as "section 988" gains or losses,
may increase or decrease the amount of the Portfolio's investment company
taxable income to be distributed to members as ordinary income.
Tax Treatment of Passive Foreign Investment Companies. If the HLM
International Equity Portfolio invests in stock of certain foreign investment
companies, the Portfolio may be subject to U.S. federal income taxation on a
portion of any "excess distribution" with respect to, or gain from the
disposition of, such stock. The tax would be determined by allocating on a
pro rata basis such distribution or gain to each day of the Portfolio's holding
period for the stock. The distribution or gain so allocated to any taxable
year of the Portfolio, other than the taxable year of the excess distribution
or disposition, would be taxed to the Portfolio at the highest ordinary income
rate in effect for such year, and the tax would be further increased by an
interest charge to reflect the value of the tax deferral deemed to have
resulted from the ownership of the foreign company's stock. Any amount of
distribution or gain allocated to the taxable year of the distribution or
disposition would be included in the Portfolio's investment company taxable
income and, accordingly, would not be taxable to the Portfolio to the extent
distributed by the Portfolio as a dividend to its shareholders.
The HLM International Equity Portfolio may be able to make an election, in
lieu of being taxable in the manner described above, to include annually in
income its pro rata share of the ordinary earnings and net capital gain of any
foreign investment company in which it invests, regardless of whether it
actually received any distributions from the foreign company. These amounts
would be included in the Portfolio's investment company taxable income and
net capital gain which, to the extent distributed by the Portfolio as ordinary
or capital gain dividends, as the case may be, would not be taxable to the
Portfolio. In order to make this election, the Portfolio would be required to
obtain certain annual information from the foreign investment companies in
which it invests, which in many cases may be difficult to obtain. Other
elections may become available to the Portfolio that would provide alternative
tax treatment for investments in foreign investment companies.
Foreign Shareholders. U.S. taxation of a shareholder who, as to the United
States, is a non-resident alien individual, a foreign trust or estate, foreign
corporation, or foreign partnership ("foreign shareholder") depends on
whether the income from the Portfolio is "effectively connected" with a U.S.
trade or business carried on by such shareholder.
If the income from a Portfolio is not "effectively connected" with a U.S. trade
or business carried on by the foreign shareholder, deemed distributions by the
Portfolio of investment company taxable income will be subject to a U.S. tax
of 30% (or lower treaty rate), which tax is generally withheld from such
distributions. Deemed distributions of capital gain dividends and any gain
realized upon redemption, sale or exchange of shares will not be subject to
U.S. tax at the rate of 30% (or lower treaty rate) unless the foreign
shareholder is a nonresident alien individual who is physically present in the
U.S. for more than 182 days during the taxable year and meets certain other
requirements. However, this 30% tax on capital gains of non-resident alien
individuals who are physically present in the United States for more than the
182-day period only applies in exceptional cases because any individual
present in the United States for more than 182 days during the taxable year is
generally treated as a resident for U.S. federal income tax purposes. In that
case, he or she would be subject to U.S. federal income tax on his or her
worldwide income at the graduated rates applicable to U.S. citizens, rather
than the 30% U.S. tax. In the case of a foreign shareholder who is a non-
resident alien individual, the Portfolio may be required to withhold U.S.
federal income tax at a rate of 31% of deemed distributions of net capital
gains and redemption payments unless the foreign shareholder certifies his or
her non-U.S. status under penalties of perjury or otherwise establishes an
exemption. See "Backup Withholding" above.
If the income from a Portfolio is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then deemed distributions of
investment company taxable income and capital gain dividends and any gain
realized upon the redemption, sale or exchange of shares of the Portfolio will
be subject to U.S. federal income tax at the graduated rates applicable to U.S.
citizens or domestic corporations. Foreign corporate shareholders may also
be subject to the branch profits tax at a 30% rate.
The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty may be different from those described herein.
Foreign shareholders are advised to consult their own advisers with respect to
the particular tax consequences to them of an investment in a Portfolio.
Foreign Withholding Taxes. Income received by a Portfolio from sources
within foreign countries may be subject to withholding and other taxes
imposed by such countries. If more than 50% of the value of the Portfolio's
total assets at the close of its taxable year consists of securities of foreign
corporations, the Portfolio will be eligible and may elect to "pass through" to
the Portfolio's shareholders the amount of foreign taxes paid by the Portfolio.
Pursuant to this election, a shareholder will be required to include in gross
income (in addition to dividends actually received) its pro rata share of the
foreign taxes paid by the Portfolio, and may be entitled either to deduct its
pro rata share of the foreign taxes in computing its taxable income or to use
the amount as a foreign tax credit against its U.S. federal income tax
liability, subject to limitations. Each shareholder will be notified
within 60 days after the close of the Portfolio's taxable year whether the
foreign taxes paid by the Portfolio will "pass through" for that year. With
the possible exception of the HLM International Equity Portfolio, it is not
anticipated that the Portfolios will be eligible to make this "pass-through"
election. If a Portfolio is not eligible to make the election to
"pass through" to its shareholders its foreign taxes, the foreign taxes it
pays will reduce its investment company taxable income and distributions by
the Portfolio will be treated as U.S. source income.
Generally, a credit for foreign taxes is subject to the limitation that it may
not exceed the shareholder's U.S. tax attributable to its foreign source taxable
income. For this purpose, if the pass-through election is made, the source of
the Portfolio's income flows through to its shareholders. With respect to the
Portfolios, gains from the sale of securities will be treated as derived from
U.S. sources and certain currency fluctuation gains, including fluctuation
gains from foreign currency denominated debt securities, receivables and
payables, will be treated as ordinary income derived from U.S. sources. The
limitation on the foreign tax credit is applied separately to foreign source
passive income (as defined for purposes of the foreign tax credit), including
the foreign source passive income passed through by the Portfolios.
Shareholders who are not liable for federal income taxes will not be affected
by any such "pass through" of foreign tax credits.
Other Taxes A Portfolio may be subject to state, local or foreign taxes in any
jurisdiction in which the Portfolio may be deemed to be doing business. In
addition, shareholders of a Portfolio may be subject to state, local or foreign
taxes on distributions from the Portfolio. In many states, Portfolio
distributions which are derived from interest on certain U.S. Government
obligations may be exempt from taxation.
Shareholders are advised to consult their own tax advisers with respect to the
particular tax consequences to them of an investment in a Portfolio.
SHAREHOLDER INFORMATION
Certificates representing shares of a particular Portfolio or Class will not
normally be issued to shareholders. Investors Bank & Trust Companyand
The Shareholder Services Group, Inc. the Fund's Transfer Agents, will
maintain an account for each shareholder upon which the registration and
transfer of shares are recorded, and any transfers shall be reflected by
bookkeeping entry, without physical delivery. Detailed confirmations of each
purchase or redemption are sent to each shareholder. Monthly statements of
account are sent which include shares purchased as a result of a reinvestment
of Portfolio distributions.
The Transfer Agents will require that a shareholder provide requests in
writing, accompanied by a valid signature guarantee form, when changing
certain information in an account (i.e., wiring instructions, telephone
privileges, etc.).
Fund management reserves the right to waive the minimum initial
investment in any Portfolio.
The Fund reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase order with
respect to shares of a Portfolio by making payment in whole or in part in
readily marketable securities chosen by the Fund and valued as they are for
purposes of computing the Portfolio's net asset value (redemption-in-kind). If
payment is made in securities, a shareholder may incur transaction expenses
in converting theses securities to cash. The Fund has elected, however, to be
governed by Rule 18f-1 under the 1940 Act as a result of which the Fund is
obligated to redeem shares with respect to any one shareholder during any
90-day period, solely in cash up to the lesser of $250,000 or 1% of the net
asset value of a Portfolio at the beginning of the period.
CALCULATION OF PERFORMANCE DATA
The Money Market Portfolio may, from time to time, include the "yield" and
"effective yield" in advertisements or reports to shareholders or prospective
investors.
The yield is calculated by determining the net change over a 7-calendar day
period, exclusive of capital changes, in the value of a hypothetical preexisting
account having a balance of one share at the beginning of the period, divided
by the value of the account at the beginning of the base period to obtain the
base period return. The yield is annualized by multiplying the base period
return by 365/7. The yield is stated to the nearest hundredth of one percent.
The effective yield is calculated by the same method as yield except that the
base period return is compounded by adding 1, raising the sum to a power
equal to 365/7, and subtracting 1 from the result, according to the following
formula:
Effective Yield = [(Base Period Return + 1)365/7] - 1
For the seven-day period ended June 30, 1995, the Money Market Portfolio's
yield and effective yield were 5.64% and 5.80%, respectively.
The HLM International Equity and U.S. Selected Growth Portfolios may,
from time to time, include the 30-day yield in advertisements or reports to
shareholders or prospective investors. Quotations of yield for will be based
on all investment income per share during a particular 30-day (or one month)
period (including dividends and interest), less expenses accrued during the
period ("net investment income"), and are computed by dividing net
investment income by the maximum offering price per share on the last day
of the period, according to the following formula which is prescribed by the
Commission:
YIELD = 2 x { [ ((a - b) / (c x d)) + 1]6 - 1 }
Where: a = dividends and interest earned during the
period;
b = expenses accrued for the period (net of
reimbursements);
c = the average daily number of shares of a
Portfolio outstanding during the period
that were entitled to receive dividends;
and
d = the maximum offering price per share on the
last day of the period.
Each of the Portfolios may, from time to time, include "total return" in
advertisements or reports to shareholders or prospective investors. Quotations
of average annual total return will be expressed in terms of the average
annual compounded rate of return of a hypothetical investment in a Portfolio
of the Fund over periods of 1, 5 and 10 years (up to the life of the Portfolio),
calculated pursuant to the following formula which is prescribed by the SEC:
P(1 + T)n = ERV
Where:
P = a hypothetical initial payment of $1,000,
T = the average annual total return,
n = the number of years, and
ERV = the ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period.
All total return figures assume that all dividends are reinvested when paid.
For the 12 months ended June 30, 1995, HLM International Equity Portfolio
had a total return of 6.48%. On an annualized basis since its inception of
May 11, 1994, the Portfolio had a total return of 3.35% through June 30,
1995.
For the 12 months ended June 30, 1995, Money Market Portfolio had a total
return of 5.49%. On an annualized basis since its inception of November 1,
1993, the Portfolio had a total return of 4.50% through June 30, 1995.
RATING DESCRIPTIONS
Standard & Poors Corporation
AAA. Bonds rated AAA are highest grade debt obligations. This rating
indicates an extremely strong capacity to pay principal and interest.
AA. Bonds rated AA also qualify as high-quality obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
A. Bonds rated A have a strong capacity to pay principal and interest,
although they are more susceptible to the adverse effects of changes in
circumstances and economic conditions.
The ratings AA and A may be modified by the addition of a plus or minus
sign to show relative standing within the major rating categories.
Municipal notes issued since July 29, 1984 are designated "SP-1", "SP-2",
and "SP-3". The designation SP-1 indicates a very strong capacity to pay
principal and interest. A "+" is added to those issues determined to possess
overwhelming safety characteristics.
A-1. Standard & Poor's Commercial Paper ratings are current assessments of
the likelihood of timely payments of debts having original maturity of no
more than 365 days. The A-1 designation indicates the degree of safety
regarding timely payment is very strong.
A-2. Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues designated
A-1.
Moody's Investors Service, Inc.
Aaa. Bonds 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
fluctuations 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 the Aaa securities.
A. Bonds which are rated A possess many favorable investment attributes
and may 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.
Moody's applies numerical modifiers, 1, 2, and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end of its generic
rating category.
Moody's ratings for state and municipal and other short-term obligations will
be designated Moody's Investment Grade ("MIG"). This distinction is in
recognition of the differences between short-term credit risk and long-term
risk. Factors affecting the liquidity of the borrower are uppermost in
importance in short-term borrowing, while various factors of the first
importance in long-term borrowing risk are of lesser importance in the short
run.
MIG-1. Notes bearing this designation are of the best quality enjoying strong
protection from established cash flows of funds for their servicing or from
established and broad-based access to the market for refinancing, or both.
MIG-2. Notes bearing this designation are of favorable quality, with all
security elements accounted for, but lacking the undeniable strength of the
previous grade. Market access for refinancing, in particular, is likely to be
less well established.
P-1. Moody's Commercial Paper ratings are opinions of the ability of issuers
to repay punctually promissory obligations not having an original maturity in
excess of nine months. The designation "Prime-1" or "P-1" indicates the
highest quality repayment capacity of the rated issue.
P-2. Issuers have a strong capacity for repayment of short-term promissory
obligations.
Thomson Bankwatch, Inc.
A. Company possess an exceptionally strong balance sheet and earnings
record, translating into an excellent reputation and unquestioned access to its
natural money markets. If weakness or vulnerability exists in any aspect of
the company's business, it is entirely mitigated by the strengths of the
organization.
A/B. Company is financially very solid with a favorable track record and no
readily apparent weakness. Its overall risk profile, while low, is not quite
as favorable as companies in the highest rating category.
IBCA Limited
A1. Short-term obligations rated A1 are supported by a very strong capacity
for timely repayment. A plus sign is added to those issues determined to
possess the highest capacity for timely payment
Fitch Investors Service, Inc.
F-1. The rating F-1 is the highest rating assigned by Fitch. Among the
factors considered by Fitch in assigning this rating are: (1) the issuer's
liquidity; (2) its standing in the industry; (3) the size of its debt; (4) its
ability to service its debt; (5) its profitability; (6) its return on equity;
(7) its alternative sources of financing; and (8) its ability to access the
capital markets. Analysis of the relative strength or weakness of these
factors and others determines whether an issuer's commercial paper is rated F-1.
FINANCIAL STATEMENTS
The Fund's audited Financial Statements, including the Financial Highlights,
for the period ended December 31, 1994 appearing in the Annual Report to
Shareholders and the report thereon of Ernst & Young LLP, independent
auditors, appearing therein are hereby incorporated by reference in this
Statement of Additional Information. The Fund's unaudited Financial
Statements, including the Financial Highlights, for the period ended June 30,
1995 appearing in the Semi-Annual Report to Shareholders are hereby
incorporated by reference in this Statement of Additional Information. The
Annual and Semi-Annual Reports to Shareholders are delivered with this
Statement of Additional Information to shareholders requesting this
Statement.
This document is incorporated by reference.
Filing 24F-2NT
File #: 033-66840
Date of filing: 02/28/95
Accession number: 0000950130-95-000370
This document is incorporated by reference.
Filing N30B-2
File #: 811-07706
Date of filing: 10/16/95
Accession number: 0000927405-95-000093
CONSENT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Financial Statements and Experts" in the Combined
Prospectus/Proxy Statement in the Registration Statement
on Form N-14 (No. 33-66840) of AMT Capital Fund, Inc.
to the references under the captions "Financial Highlights"
in the preliminary Form N-1A (No. 33-62312, Post
Effective Amendment No. 11) of the Lehman Brothers
Selected Growth Stock Portfolio, a portfolio of the Lehman
Brothers Funds, Inc., incorporated by reference into this
Form N-14, and to the incorporation by reference of our
report, dated September 1, 1995, on the financial statements
and financial highlights of the Lehman Brothers Selected
Growth Stock Portfolio, a portfolio of the Lehman Brothers
Funds, Inc..
by: s\Ernst & Young LLP\
ERNST & YOUNG LLP
Boston, Massachusetts
November 9, 1995
AMT CAPITAL SERVICES, INC.
430 Park Avenue
New York, New York 10022
212-308-4848 Telephone
212-308-5190 Fax
December 13, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: AMT Capital Fund, Inc.
Registration Statement on Form N-14
File No. 33-66840
Dear Sir or Madam:
Pursuant to Rule 488(a) under the Securities Act of 1933 and on behalf of AMT
Capital Fund, Inc. (the "Registrant"), we attach for electronic filing a
pre-effective amendmend to the Registrant's Registration on Form N-14,
including exhibits. The attached filing is marked to show changes from the
Registrant's Registration Statement on Form N-14 as filed with the Securities
and Exchange Commission on November 14, 1995.
No fee is payable because the Registrant has previously filed a declaration
of indefinite registration of its shares pursuant to Rule 24f-2 under the
Investment Company Act of 1940. This Registration Statement is being
submitted in connection with the proposed Reorganization of the Lehman
Selected Growth Stock Portfolio, a series of Lehman Brothers Funds, Inc.,
into the Class B shares of the U.S. Selected Growth Portfolio, a series of
the Registrant.
This will confirm that, after the closing of the aforementioned
Reorganization, the Fund undertakes to file a Post-Effective Amendment to its
Registration Statement on Form N-14 that includes an executed opinion of
counsel as to the tax effects of the Reorganization.
We hereby respectfully request acceleration of the effectiveness of the
Registration Statement filed herewith to December 14, 1995.
Should you have any questions or comments regarding the foregoing, please do
not hesitate to contact the undersigned at (800) 762-4848 or our outside
counsel, Will Goodwin, at (212) 326-3550.
Very truly yours,
/s/ Eric P. Nachimovsky
- - ---------------------
Eric P. Nachimovsky
Enclosures: As Stated
AMT Capital Fund, Inc.
U.S. Selected Growth Portfolio - Class B Shares
Dealer Agreement
AGREEMENT made this ___ day of_____________, 199_, by and between the
AMT Capital Services, Inc., (the "Distributor"), a Delaware corporation, and
Lehman Brothers, Inc. (the "Dealer"), a ___________corporation.
In consideration of the agreements hereinafter contained, Distributor
has agreed that Dealer for the period of this Agreement shall distribute the
Class B shares (the "Shares") of the U.S. Selected Growth Portfolio (the
"Portfolio"), a separate series of the AMT Capital Fund, Inc. (the "Fund")
for which the Distributor serves as principal underwriter. The parties
hereto, intending to be legally bound hereby, agree as follows:
1. Licensing.
(a) Dealer represents that it is a member in good standing of the
National Association of Securities Dealers, Inc. ("NASD") and is presently
licensed to the extent necessary by the appropriate regulatory agency of each
state in which it will offer and sell Shares of the Portfolio. Dealer agrees
that termination or suspension of such membership with the NASD, or of its
license to do business by any state or federal regulatory agency, at any time
shall terminate or suspend this Agreement forthwith and shall require Dealer
to notify Distributor in writing of such action. This Agreement is in all
respects subject to Rule 26 of the Rules of Fair Practice of the NASD which
shall control any provision to the contrary in this Agreement.
(b) Dealer agrees to notify Distributor immediately in writing if at any
time Dealer is not in good standing with the Securities Investor Protection
Corporation ("SIPC").
2. Sales of Portfolio Shares. Dealer may offer and sell Shares of the
Portfolio only at the public offering price which shall be applicable to, and
in effect at the time of, each transaction. The procedures relating to all
orders and the handling of them shall be subject to the terms of the then
current prospectus and statement of additional information (hereafter, the
"prospectus") and new account application, including amendments, for the
Portfolio, and Distributor's written instructions furnished to Dealer from
time to time. This Agreement is not exclusive and either party may enter
into similar agreements with third parties.
3. Duties of Dealer : In General, Dealer agrees:
(a) To act as principal, or agent on behalf of Dealer's customers, in all
transactions in Shares of the Portfolio except as provided in paragraph 4
hereof. Dealer shall not have any authority to act as agent for the issuer
(the Portfolio), for the Distributor, or for any other dealer in any respect,
nor will Dealer represent to any third party that Dealer has such authority
or is acting in such capacity.
(b) To purchase Shares only from Distributor or from Dealer's customers.
(c) To enter orders for the purchase of Shares of the Portfolio only with
Distribution of the Portfolio and only for the purpose of covering purchase
orders Dealer has already received from Dealer's Customers or for Dealers
own bona fide investment.
(d) To maintain records of all sales and redemptions of Shares made through
Dealer and to furnish the Distributor with copies of such records on request.
(e) To distribute prospectuses and reports to Dealer's customers in
compliance with applicable legal requirements, except to the extent that the
Distributor expressly undertakes to do so on Dealer's behalf.
(f) All orders are subject to acceptance or rejection by the Distributor or
the Portfolio in the sole discretion of either.
4. Duties of Dealer: Retirement Accounts. In connection with orders for
the purchase of Shares on behalf of an Individual Retirement Account, Self-
Employed Retirement Plan or other retirement accounts, by mail, telephone, or
wire, Dealer shall act as agent for the custodian or trustee of such plans
(solely with respect to the time of receipt of the application and payments),
and Dealer shall not place such an order until the Dealer has received from the
Dealer's customer payment for such purchase and if such purchase represents the
first contribution to such a plan, the completed documents necessary to
establish the plan. Dealer agrees to indemnify Distributor and AMT Capital Fund
as applicable for any claim, loss or liability resulting from incorrect
investment instructions received from the Dealer which cause a tax liability
or other tax penalty.
5. Conditional Orders. Distributor will not accept from Dealer any
conditional orders for Shares of the Portfolio.
6. Redemptions. Redemptions or repurchases of Shares will be made at
the net asset value of such in accordance with the applicable prospectus.
Except as permitted by applicable law, Dealer agrees not to purchase
Distributor's customers at a price lower than the redemption or repurchase
prices then computed by the Portfolio.
7. Transaction Processing. All orders are subject to acceptance by the
Distributor and by the Portfolio or its transfer agent, and become effective
only upon confirmation by the Distributor. Distributor reserves the right in
its discretion, without notice, to suspend the sale of Shares or withdraw the
offering of Shares entirely. Orders will be affected at the price(s) next
computed on the day they are received from Dealer, as set forth in the
Portfolio's current prospectus, if they are received prior to the time the
price of its Shares is calculated. Orders received after that time will be
effected at the price(s) computed on the next business day. All orders must
be accompanin U.S. dollars.
8. Rule 12b-1 Plans. To the extent Dealer provides administrative and
other services, including, but not limited to, furnishing personal and other
services and assistance to Dealer's customers who own Shares of the Portfolio
pursuant to Rule 12b-1 under the 1940 Act, answering routine inquiries
regarding the Portfolio, assisting in changing account designations and
addresses, maintaining such accounts or such other services as the Portfolio
may require, to the extent permitted by applicable statutes, rules, or
regulations, Distributor shall pay the Dealer a Rule 12b-1 servicing fee. To
the extent that Dealer participates in the distribution of Portfolio Shares
which are eligible for Rule 12b-1 distribution fee, Distributor shall also
pay Dealer a Rule 12b-1 distribution fee. All Rule 12b-1 servicing and
distribution fees shall be based on the value of Shares attributable to
customers of Dealer's firm and eligible for such payment, and shall be
calculated on the basis and at the rates set forth in the compensation
schedule then in effect. Without prior approval by a majority of the
outstanding Shares of the Portfolio, the aggregate annual fees paid to the
Dealer pursuant to each Plan shall not exceed the amounts stated as the
"annual maximums" in the Portfolio's prospectus, which amount shall be a
specified percent of the value of the Portfolio's net assets held in
Dealer's customers' accounts which are eligible for payment pursuant to this
Agreement (determined in the same manner as the Portfolio uses to compute its
net assets as set forth in its effective Prospectus).
Dealer shall furnish Distributor and the Portfolio with such information as
shall reasonably be requested by the Board of Directors (herein after
referred to as "Directors") of the Fund with respect to the fees paid to
Dealer pursuant to this Agreement.
The Plan and provisions of any agreement relating to the Plan must be
approved annually by a vote of the Fund's Directors, including such persons
who are not interested persons of the Fund and who have no financial interest
in the Plan or any related agreement ("Rule 12b-1 Directors"). The Plan or
the provisions of this Agreement relating to the Plan may be terminated at
any time by the vote of a majority of the Fund's Board of Directors, including
Rule 12b-1 Directors, or by a vote of a majority of the outstanding Shares
of the Portfolio, on sixty (60) days written notice, without payment of any
penalty. The Plan or the provisions of this Agreement may also be terminated
by any act that terminates the Distribution Agreement between AMT Capital
Services, Inc. and the Portfolio. In the event of the termination of the
Plan for any reason, the provisions of this Agreement relating to the Plan
will also terminate.
Continuation of the Plan and provisions of this Agreement relating to the
Plan are conditioned on compliance with Rule 12b-1. Under Rule 12b-1,
Directors of the Fund have a duty to request and evaluate, and persons who
are party to any agreement related to a plan have a duty to furnish, such
information as may reasonably be necessary to an informed determination of
whether the Plan or any agreement should be implemented or continued. Under
Rule 12b-1, the Portfolio is permitted to implement or continue the Plan or
the provisions of this Agreement relating to such Plan from year-to-year only
if, based on certain legal considerations, the Board of Directors is able to
conclude that the Plan may be continued as set forth above. In addition, any
obligation assumed by the Portfolio pursuant to this Agreement shall be
limited in all cases to the assets of the Portfolio and no person shall seek
satisfaction thereof from shareholders of the Portfolio.
The provisions of the Rule 12b-1 Plan between the Portfolio and the
Distributor shall control over the provisions of this Agreement in the event
of any inconsistency.
9. Registration of Shares. Upon request, Distributor shall notify
Dealer of the States or other jurisdictions in which the Portfolio's Shares
are currently registered or qualified for sale to the public. Distributor
shall have no obligation to register or qualify, or to maintain registration
or qualification of the Portfolio Shares in any state or other jurisdiction.
Distributor shall have no responsibility, under the laws regulating the sale
of securities in any U.S. or foreign jurisdiction, for the qualification or
status of persons selling Portfolio Shares or for the manner of sale of
Portfolio Shares. Except as stated in this paragraph, Distributor shall not,
in any event, be liable or responsible for the issue, form, validity,
enforceability and value of such Shares or for any matter in connection
therewith, and no obligation not expressly assumed by the Distributor in this
agreement shall be implied. Nothing in this Agreement, however, shall be
deemed to be a condition, stipulation or provision binding any person
acquiring any security to waive compliance with any provision of the
securities Act of 1933, or of the rules and regulations of Securities and
Exchange Commission, or to relieve the parties hereto from any liability
arising under the Securities Act of 1933.
10. Fund information. No person is authorized to give any information or
make any representations concerning Shares of any Portfolio except those
contained in the Portfolio's current prospectus or in materials issued by the
Distributor as information supplemental to such prospectus. Distributor will
supply prospectuses and additional information as issued. Dealer agrees not
to use other advertising or sales material relating to the Portfolio except that
which (a) conforms to the requirements of any applicable laws or regulations
of any government or authorized agency in the U.S. having jurisdiction over
the offering or sale of Shares of the Portfolio, and (b) is approved in
writing by Distributor in advance of such use. Such approval may be
withdrawn by Distributor in whole or in part upon notice to Dealer, and
Dealer shall, upon receipt of such notice, immediately discontinue the use of
such sales literature, sales material and advertising. The Dealer is not
authorized to modify or translate any such materials without dealers prior
written consent.
11. Indemnification. Dealer further agrees to indemnify, defend and hold
harmless the Distributor, the Portfolio, their officers, directors and
employees from any and all losses, claims, liabilities and expenses arising
out of (1) any alleged violation by Dealer of any state or regulation
(including without limitation the securities laws and regulations of the
United States or any state or foreign country) or any alleged tort or breach
of contract, in or related to the offer and sale by Dealer of Shares of the
Portfolio pursuant to this Agreement (except to the extent that Dealer's
negligence or failure to follow correct instructions received from
Distributor is the cause of such loss, claim, liability or expense) provided
that Distributor has notified Dealer that the Portfolio or its Shares were
not properly registered or qualified in that state, (2) any redemption or
exchange pursuant to telephone instructions received from Dealer or Dealer's
agent or employees, or (3) the breach by Dealer of any of the terms and
conditions of this Agreement.
Distributor further agrees to indemnify, defend and hold harmless the Dealer,
its officers, directors and employees from any and all losses, claims,
liabilities and expenses arising out of the breach by Distributor of any of
the terms and conditions of this Agreement.
12. Termination; Succession; Amendment. Each party to this Agreement may
cancel its participation in this Agreement by giving written notice to the
other parties. Such notice shall be deemed to have been given and to be
effective on the date on which it was either delivered personally to the
other parties or any officer or member thereof, or was mailed postpaid or
delivered to a telegraph office for transmission to the other parties Chief
Legal Officers at the addresses shown herein or in the most recent NASD
Manual. This Agreement shall terminate immediately upon the appointment of a
Trustee under the Securities Investor Protection Act or any other act of
insolvency by Dealer. The termination of this Agreement by any of the
foregoing means shall have no effect upon transactions entered into prior to
the effective date of termination or Distributor's obligation to pay Dealer
Rule 12b-1 Servicing and Distribution fees under Section 8 of this Agreement
relating to Shares of the Portfolio sold prior to the termination of this
Agreement. A trade placed by Dealer subsequent to Dealer's voluntary
termination of this Agreement will not serve to reinstate this Agreement.
Reinstatement, except in the case of a temporary suspension of a dealer, will
only be effective upon written notification by us. This Agreement shall be
automatically terminated in the event of its assignment (as defined in the
Investment Company Act of 1940). Unless terminated as provided in the
preceding sentence, this Agreement shall be binding upon each party's
successors or assigns. This Agreement may be amended by Distributor at any
time by written notice to the Dealer and Dealer's placing of an order or
acceptance of payments of any kind after the affective date and receipt of
notice of any such Amendment shall constitute Dealer's acceptance of such
Amendment.
13. Setoff; Dispute Resolution. In the event of a dispute concerning any
provision of this Agreement, either party may require the dispute to be
submitted to binding arbitration under the commercial arbitration rules of
the NASD or the American Arbitration Association. Judgment upon any
arbitration award may be entered by any state or Federal court having
jurisdiction. This Agreement shall be construed in accordance with the
laws of the State of New York, not including any provision which would
require the general application of the law of another jurisdiction.
14. Acceptance; Cumulative Effect. This Agreement is cumulative and
supersedes any agreement previously in effect. It shall be binding upon the
parties hereto when signed by Lehman Brothers, Inc. and accepted Services, Inc.
AMT Capital Services, Inc.
By:____________________________
Alan M. Trager, President
Lehman Brothers, Inc. Address:
By:_____________________________ _____________________________
(Signature) _____________________________
Name:___________________________
Telephone:______________________
Title:__________________________ NASD CRD#____________________
AMT CAPITAL FUND, INC.
MULTIPLE CLASS PLAN
This Multiple Class Plan (the "Plan") has been adopted by a majority of
the Board of Directors of AMT Capital Fund, Inc. The Board has
determined that the Plan is in the best interests of each class and the Fund
as a whole. The Plan sets forth the provisions relating to the
establishment of multiple classes of shares for the Fund.
The provisions of the Plan are:
The Fund shall offer two classes of shares to be known as AMT Capital
Fund, Inc.- Class A shares of the U.S. Selected Growth Portfolio (the
"Portfolio") ("Class A") and Class B shares of the Portfolio ("Class B").
Class A shares shall be a no-load portfolio and have no front-end sales
charge. The Class A shares will be marketed to institutional shareholders
and high net worth individuals.
Class B shares shall have a charge per Rule 12b-1 of 1.00% of the
average daily net assets of the Portfolio. The Class B shares will be
marketed to individual shareholders.
The Rule 12b-1 plan associated with Class B shares may be used to
reimburse Lehman Brothers Incorporated (the "distributor") or others for
expenses incurred in the promotion and distribution of the shares of Class
B shares.
The Rule 12b-1 Plan associated with Class B shares has two components,
the Service Fee and the Distribution Fee. The Service Fee payable to the
distributor with respect to the Portfolio is in return for certain
administrative and shareholder services provided by the distributor to the
investors that purchase the Class B shares. Such administrative and
shareholder services may include processing purchase, exchange and
redemption requests from customers and placing orders with the
Portfolio's Class B transfer agent; processing dividend and distribution
payments from Class B shares of the Portfolio on behalf of customers;
providing information periodically to customers showing their positions
in shares; responding to inquiries from customers concerning their
investment in shares; arranging for bank wires; and providing such other
similar services as may be reasonably requested. The distributor may
retain all or a portion of the payments made to it pursuant to the Plan for
the provision of services to holders of each the Class B shares pursuant
to Shareholder Servicing Agreements entered into by the distributor in its
sole discretion and may make payments to third parties to assist in
providing the services provided to the the Class B shares. The distributor
may waive receipt of fees under the Plan for a period of time. All
expenses incurred by the distributor in connection with the Shareholder
Servicing Agreements and the implementation of this Plan with respect to
the Class B shares shall be borne entirely by the holders of the Class B
shares.
The Distribution Fee payable to the distributor with respect to the Class
B shares may be used by the distributor to cover advertising, marketing
and distribution expenses intended to result in the sale of the Class B
shares, including, without limitation, compensation for the distributor's
initial expense of paying its investment representatives or introducing
brokers a commission upon the sale of the Class B shares and accruals
for interest on the amount of the foregoing expenses that exceed the
Distribution Fee. In addition, the Service Fee with respect to the Class B
shares may be used by the distributor primarily to pay its financial
consultants or introducing brokers for servicing shareholder accounts,
including a continuing fee to each such financial consultant or introducing
broker, which fee shall begin to accrue immediately after the sale of such
shares.
The Plan shall operate in accordance with the Rules of Fair Practice of
the National Association of Securities Dealers, Inc., Article III, section
26(d).
The shareholders of Class B shares are only to vote on the Rule 12b-1
Plan related to that class.
On an ongoing basis, the directors, pursuant to their fiduciary
responsibilities under the 1940 Act and otherwise, will monitor the
Portfolio for the existence of any material conflicts between the interests
of the two classes of shares. The directors, including a majority of the
independent directors, shall take such action as is reasonably necessary to
eliminate any such conflict that may develop. Lehman Brothers
Incorporated shall be responsible for alerting the Board of any material
conflicts that arise.
All material amendments to this Plan must be approved by a majority of
the directors of the Fund, including a majority of the directors who are
not interested persons of the Fund.
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT, dated ________,
199_, between AMT Capital Advisers, Inc., a Delaware
corporation (the "Adviser") and Delphi Asset Management, a
New York partnership (the "Sub-Adviser").
In consideration of the mutual agreements herein made,
the parties hereto agree as follows:
1. Attorney-in-Fact. The Adviser appoints the
Sub-Adviser as its attorney-in-fact to invest and reinvest the
assets of the U.S. Selected Growth Portfolio (the "Portfolio")
of AMT Capital Fund, Inc. (the "Fund"), as fully as the Adviser
itself could do. The Sub-Adviser hereby accepts this
appointment.
2. Duties of the Sub-Adviser. (a) The Sub-
Adviser shall be responsible for coordinating with the Adviser
in managing the investment portfolio of the Portfolio,
including, without limitation, providing investment research,
advice and supervision, determining with the Adviser which
portfolio securities shall be purchased or sold by the Portfolio,
purchasing and selling securities on behalf of the Portfolio and
determining with the Adviser how voting and other rights with
respect to portfolio securities of the Portfolio shall be exercised
subject in each case to the control of the Board of Directors of
the Fund (the "Board") and in accordance with the objectives,
policies and principles of the Portfolio set forth in the
Prospectus as delineated in the section entitled "Investment
Objectives and Policies" and in the Statement of Additional
Information, as amended, of the Fund, the requirements of the
Investment Company Act of 1940, as amended, (the "Act")
and other applicable law. In performing such duties, the Sub-
Adviser shall provide such office space, and such executive and
other personnel as shall be necessary for the operations of the
Portfolio. In managing the Portfolio in accordance with the
requirements set forth in this paragraph 2, the Sub-Adviser
shall be entitled to act upon advice of counsel to the Fund,
counsel to the Adviser or counsel to the Sub-Adviser.
(b) Subject to Section 36 of the Act (relating to breach
of fiduciary authority), the Sub-Adviser shall not be liable to
the Adviser or the Fund for any error of judgment or mistake
of law or for any loss arising out of any investment or for any
act or omission in the management of the Portfolio and the
performance of its duties under this Agreement except for
losses arising out of the Sub-Adviser's fraud, willful
misfeasance or gross negligence in the performance of its duties
or by reason of its reckless disregard of its obligations and
duties under this Agreement. It is agreed that the Sub-Adviser
shall have no responsibility or liability for the accuracy or
completeness of the Fund's Registration Statement under the
Act and the Securities Act of 1933 except for information
about the Sub-Adviser contained in the Prospectus included as
part of such Registration Statement supplied by the Sub-
Adviser for inclusion therein. The Adviser agrees to indemnify
the Sub-Adviser for any claims, losses, costs, damages, or
expenses (including fees and disbursements of counsel, but
excluding the ordinary expenses of the Sub-Adviser arising
from the performance of its duties and obligations under this
Agreement) whatsoever arising out of the performance of this
Agreement except for those claims, losses, costs, damages and
expenses resulting from the Sub-Adviser's fraud, willful
misfeasance or gross negligence in the performance of its duties
or by reason of its reckless disregard of its obligations and
duties under this Agreement.
(c) The Sub-Adviser and its officers may act and
continue to act as investment advisers and managers for others
(including, without limitation, other investment companies),
and nothing in this Agreement will in any way be deemed to
restrict the right of the Sub-Adviser to perform investment
management or other services for any other person or entity,
and the performance of such services for others will not be
deemed to violate or give rise to any duty or obligation to the
Fund.
(d) Except as provided in Paragraph 5, nothing in this
Agreement will limit or restrict the Sub-Adviser or any of its
officers, affiliates or employees from buying, selling or trading
in any securities for its or their own account or accounts. The
Adviser acknowledges that the Sub-Adviser and its officers,
affiliates or employees, and its other clients may at any time
have, acquire, increase, decrease or dispose of positions in
investments which are at the same time being acquired or
disposed of for the account of the Portfolio subject to the
requirements of the Act, and the rules thereunder. The Sub-
Adviser will have no obligation to acquire for the Portfolio a
position in any investment which the Sub-Adviser, its officers,
affiliates or employees may acquire for its or their own
accounts or for the account of another client, if in the sole
discretion of the Sub-Adviser, it is not feasible or desirable to
acquire a position in such investment for the account of the
Portfolio. The Sub-Adviser represents that it has adopted a
code of ethics governing personal trading that complies in all
material respects with the recommendations contained in the
Investment Company Institute "Report of the Advisory Group
on Personal Investing," dated May 9, 1994, and the Adviser
agrees to furnish a copy of such code of ethics to the Directors
of the Fund.
(e) If the purchase or sale of securities consistent with
the investment policies of the Portfolio and one or more other
clients serviced by the Sub-Adviser is considered at or about
the same time, transactions in such securities will be allocated
among the Portfolio and clients in a manner deemed fair and
reasonable by the Sub-Adviser. Although there is no specified
formula for allocating such transactions, the various allocation
methods used by the Sub-Adviser, and the results of such
allocations, are subject to periodic review by the Board.
3. Expenses. The Sub-Adviser shall pay all of its
expenses arising from the performance of its obligations under
this Agreement except as provided in Section 2(b) of this
Agreement.
4. Compensation. (a) As compensation for
the services performed and the facilities and personnel provided
by the Sub-Adviser pursuant to this Agreement, the Adviser
will pay to the Sub-Adviser promptly by the tenth of each
month following the relevant month, a fee, calculated on each
day during such relevant month, at an annual rate of 0.65% of
the Portfolio's average daily net assets on the first $50 million
of assets and 0.60 % of the Portfolio's average daily net assets
for all amounts over $50 million.
(b) If the Sub-Adviser shall serve hereunder for less
than the whole of any month, the fee payable hereunder shall be
prorated.
(c) For purposes of this Section 4, the "average daily
net assets" of the Portfolio shall mean the average of the values
placed on the Portfolio's net assets on each day pursuant to the
applicable provisions of the Fund's Registration Statement, as
amended.
5. Purchase and Sale of Securities. The Sub-
Adviser shall purchase securities from or through and sell
securities to or through such persons, brokers or dealers as the
Sub-Adviser shall deem appropriate in order to carry out the
policy with respect to the allocation of portfolio transactions as
set forth in the Registration Statement of the Fund, as
amended, or as the Board may direct from time to time. The
Sub-Adviser will use reasonable efforts to execute all purchases
and sales with dealers and banks on a best available price and
most favorable execution basis. The Sub-Adviser will consider
the full range and quality of services offered by the executing
broker or dealer when making these determinations. Neither
the Sub-Adviser nor any of its officers, affiliates, or employees
will act as principal or receive any compensation from the
Portfolio in connection with the purchase or sale of investments
for the Portfolio other than the fee referred to in Paragraph 4
hereof.
6. Term of Agreement. This Agreement shall
continue in full force and effect until two years from the date
hereof, and will continue in effect from year to year thereafter if
such continuance is approved in the manner required by the
Act, provided that this Agreement is not otherwise terminated.
The Sub-Adviser and the Adviser may terminate this
Agreement at any time, without payment of penalty, upon 60
days' written notice to any other party hereto. The Fund may
terminate this Agreement with respect to the Portfolio at any
time, without payment of penalty, on 60 days' written notice to
the Sub-Adviser by vote of either the majority of the non-
interested members of the Board or a majority of the
outstanding stockholders of the Portfolio. This Agreement will
automatically terminate in the event of its assignment (as
defined by the Act).
7. Fee Waivers. The Sub-Adviser agrees to
waive all or a portion of its fee to the extent necessary to meet
the voluntary expense cap stated in the Fund's Registration
Statement, as amended, based on a formula whereby the
Adviser, Sub-Adviser, and Administrator share in the waiving
of their respective fees on a pro rata basis so long as the
Adviser and Administrator continue to waive their fees.
8. Changes in Membership. The Sub-Adviser
is a partnership and, pursuant to the New York State Law and
the Investment Advisers Act of 1940, shall notify the Fund of
any change in the membership of such partnership within a
reasonable time after the change.
9. Miscellaneous. This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York. Anything herein to the contrary
notwithstanding, this Agreement shall not be construed to
require or to impose any duty upon either of the parties to do
anything in violation of any applicable laws or regulations.
IN WITNESS WHEREOF, the Adviser and the Sub-
Adviser have caused this Agreement to be executed by their
duly authorized officers as of the date first written above.
ATTEST DELPHI ASSET MANAGEMENT
By:_______________________ By:_______________________
Title:______________________
ATTEST AMT CAPITAL ADVISERS, INC.
By:_______________________ By:_______________________
Alan M. Trager
President
