As filed with the Securities and Exchange Commission on March 6, 1996.
File Nos. 33-66840, 811-7928
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No.8 X
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 11 X
AMT CAPITAL FUND, INC.
(Exact name of registrant as specified in charter)
600 FIFTH AVENUE, 26 FLOOR, NEW YORK, NEW YORK 10020
(Address of principal executive offices)
Registrant's telephone number: 212-332-5211
WILLIAM E. VASTARDIS, Senior Vice President
AMT Capital Services, Inc.
600 Fifth Avenue, 26th Floor
New York, New York 10020
(Name and address of agent for service)
With a copy to:
WILLIAM GOODWIN, Esq.
Dechert Price & Rhoads
477 Madison Avenue
New York, NY 10022
It is proposed that this filing will become effective (check appropriate box)
X immediately upon filing pursuant to paragraph (b) of Rule 485.
on __________(date) pursuant to paragraph (b) of Rule 485.
75 days after filing pursuant to paragraph (a) of Rule 485.
on __________(date) pursuant to paragraph (a) of Rule 485.
Registrant has registered an indefinite number of shares pursuant to Rule 24f-2
under the Investment Company Act of 1940. The Registrant filed the notice
required thereunder for the fiscal year ended December 31, 1995 on February
27, 1995.
CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
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Form N-1A Location in Prospectus and
Item No. Statement of Additional
Information
1 Cover Page Cover Page of Prospectus
2 Synopsis Prospectus Highlights; Fund Expenses
(in Prospectus)
3 Financial Highlights Financial Highlights (in Prospectus)
4 General Description of The Fund; Investment Objectives and
Registrant Policies; Descriptions of Investments; Risks Associated
with the Fund's Investment Policies and Investment Techniques;
Additional Investment Activities; Investment Restrictions;
Shareholder Information (in Prospectus)
5 Management of the Fund Fund Expenses; Management of the Fund; Transfer and
Dividend Disbursing Agent (in Prospectus)
5A. Management's Discussion of Not applicable
Fund Performance
6 Capital Stock and Other Shareholder Information;
Securities Purchases and Redemptions; Dividends;
Tax Considerations (in Prospectus)
7 Purchase of Securities Purchases and Redemptions; Dividends;
Being Offered Determination of Net Asset Value;
Distribution of Fund Shares; Shareholder
Inquiries (in Prospectus)
8 Redemption or Repurchase Purchases and Redemptions; Dividends (in
Prospectus)
9 Pending Legal Proceedings Not applicable
10 Cover Page Cover Page of Statement of Additional
Information
11 Table of Contents Statement of Additional Information Table of
Contents
12 General Information and Organization of the Fund (in Statement of
History Additional Information)
13 Investment Objectives Supplemental Descriptions of Investments;
and Policies Supplemental Investment Techniques;
Supplemental Discussion of Risks Associated
With the Fund's Investment Policies and
Investment Techniques; Investment
Restrictions (in Statement of Additional
Information)
14 Management of the Fund Management of the Fund (in Statement of
Additional Information)
15 Control Persons and Not applicable
Principal Holders of Securities
16 Investment Advisory and Distribution of Fund Shares;
Other Services Management of the Fund; Custodian and
Accounting Agent; Transfer and Dividend
Disbursing Agent; Legal Counsel; Independent
Auditors (in Prospectus); Management of the
Fund (in Statement of Additional
Information)
17 Brokerage Allocation and Portfolio Transactions (in Statement of
Other Practices Additional Information)
18 Capital Stock and Other Purchases and Redemptions; Dividends;
Securities Shareholder Information (in Prospectus);
Organization of Fund (in Statement of
Additional Information)
19 Purchase, Redemption and Purchases and Redemptions;
Pricing of Securities Being Determination of Net Asset Value (in
Offered Prospectus); Net Asset Value; Shareholder
Information (in Statement of Additional
Information)
20 Tax Status Tax Considerations (in Statement of
Additional Information)
21 Underwriters Distribution of Fund Shares (in Prospectus);
Distribution of Fund Shares (in Statement of
Additional Information)
22 Calculation of Performance Yields and Total Return (in Prospectus);
Data Calculation of Performance Data
(in Statement of Additional Information)
23 Financial Statements Financial Highlights (in Prospectus);
Financial Statements (in Statement of
Additional Information)
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AMT CAPITAL FUND, INC.
Prospectus - March 6, 1996
AMT Capital Fund, Inc. (the "Fund") is a no-load, open-end
management investment company (a "mutual fund") that currently has
three separate diversified portfolios (each a "Portfolio"), each of which
has distinct investment objectives and policies. The U.S. Selected
Growth Portfolio offers two classes of shares of which the Class A
shares are offered by this Prospectus. There is no sales charge for
purchase of shares. Shares of each Portfolio may be purchased through
AMT Capital Services, Inc. ("AMT Capital"), the exclusive distributor.
The minimum initial investment in any Portfolio is $100,000.
Additional investments or redemptions may be of any amount. The
Portfolios and their investment objectives are:
HLM International Equity Portfolio - to seek long-term capital
appreciation through investments in equity securities of
companies based outside the United States.
U.S. Selected Growth Portfolio - to seek long-term capital
appreciation 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.
Money Market Portfolio - to seek current income, liquidity, and
the maintenance of a stable net asset value per share through
investments in high quality, short-term obligations.
No assurance can be given that a Portfolio's investment objectives
will be attained. Investments in the Money Market Portfolio are
neither guaranteed nor insured by the United States Government.
There is also no assurance that the Money Market Portfolio will
maintain a stable net asset value of $1.00 per share.
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
March 6, 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.
TABLE OF CONTENTS
Prospectus Highlights 3
Fund Expenses 6
Financial Highlights 7
The Fund 11
Investment Objectives 11
Investment Policies 12
Descriptions of Investments and Investment Techniques 16
Risks Associated with the Fund's Investment Policies
and Investment Techniques 23
Investment Restrictions 25
Brokerage Practices 28
Yields and Total Return 28
Distribution of Fund Shares 29
Determination of Net Asset Value 29
Purchases and Redemptions 30
Dividends 32
Management of the Fund 33
Tax Considerations 39
Shareholder Information 41
Other Parties 42
Shareholder Inquiries 43
PROSPECTUS HIGHLIGHTS
AMT Capital Fund, Inc. is a no-load, open-end management
investment company that currently has three separate diversified
portfolios, each of which has distinct investment objectives and
policies. There is no assurance that a Portfolio will achieve its
investment objectives. For more information, refer to "Investment
Objectives."
Investment Objectives
Name of Portfolio Investment Objective
HLM International Equity Portfolio To seek long-term
capital appreciation
through investments in
equity securities of
companies based outside
the United States.
U.S. Selected Growth Portfolio To seek long-term
capital appreciation.
The Portfolio seeks to
achieve its objective
by investing in
equity securities of
small- and medium-
sized U.S. companies
which the sub-adviser
believes have the
potential for above-
average capital
appreciation.
Money Market Portfolio To seek current income,
liquidity, and the
maintenance of a stable
net asset value per share
through investments in
high quality, short-term
obligations.
The AMT Capital Concept
AMT Capital offers smaller institutions and substantial private
investors an opportunity to gain access to the money management
expertise of what AMT Capital believes are some of the top
investment advisers in the country at fees which, until now, have been
available only to larger institutions. AMT Capital believes that our
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 Advisers and Sub-Advisers
AMT Capital Advisers, Inc. (the "AMT Capital Advisers") serves as
investment adviser to the U.S. Selected Growth Portfolio and Money Market
Portfolios. AMT Capital Advisers provides the U.S. Selected Growth
Portfolio and Money Market Portfolio with business and asset
management services, including selection, evaluation, and monitoring
of the sub-advisers to the respective Portfolios.
Harding, Loevner Management, L.P. ("HLM") serves as investment adviser to
the HLM International Equity Portfolio. HLM provides the HLM International
Equity Portfolio with business and asset management services, including
investment research and advice and determining which portfolio securities shall
be purchased or sold on behalf of the Portfolio.
Delphi Asset Management ("Delphi") serves as sub-adviser to the
U.S. Selected Growth Portfolio. Delphi is employed and supervised
by AMT Capital Advisers, subject to approval by the Board of
Directors of the Fund and its shareholders.
Fischer Francis Trees & Watts, Inc. ("FFTW") serves as sub-adviser
to the Money Market Portfolio. FFTW is employed and supervised by
AMT Capital Advisers, subject to approval by the Board of Directors
of the Fund and its shareholders.
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. For more information, refer to
Management of the Fund.
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Investment Advisers Portfolios
Harding, Loevner Management, L.P. HLM International Equity Portfolio
Global equity specialist managing $650
million for private investors and institutions.
AMT Capital Advisers, Inc. U.S. Selected Growth Portfolio and
Manager selection, evaluation, Money Market Portfolio
and asset allocation specialist for
smaller institutional and substantial
private investors.
Sub-Advisers Portfolios
Delphi Asset Management U.S. Selected Growth Portfolio
Specializes in the identification of undervalued
securities through fundamental analysis, managing
over $950 million in assets for individuals, trusts,
pension plans and charitable organizations.
Fischer Francis Trees & Watts, Inc. Money Market Portfolio
Fixed income specialist with approximately
$21 billion in assets under management.
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Administrator and Distributor
AMT Capital serves as Administrator to the Fund, supervising the
general day-to-day business activities and operations of the Fund 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 Fund."
How to Invest
Shares of each Portfolio may be purchased without any sales charges at
their net asset value next determined after receipt of the order by
submitting an Account Application to AMT Capital and wiring federal
funds to AMT Capital's "Fund Purchase Account" at Investors Bank &
Trust Company (the "Transfer Agent"). The Portfolios are not
available for sale in all states. For information about the Fund's
availability, contact an account representative at AMT Capital.
The minimum initial investment per Portfolio is $100,000.
There is no minimum amount for subsequent
investments. There are no sales commissions (loads) or 12b-1 fees.
For more information, refer to "Purchase and Redemption of Shares."
How to Redeem Shares
Shares of each Portfolio may be redeemed, without charge, at their
next determined net asset value after receipt by either the Transfer
Agent or AMT Capital of the redemption request. For more
information, refer to "Purchase and Redemption of Shares."
Risks
Prospective investors should consider certain risks associated with an
investment in any Portfolio. There is no assurance that a Portfolio will
achieve its investment objective. The HLM International Equity
Portfolio invests primarily in equity securities of companies based
outside of the United States. Investments in foreign securities involve
risks not associated with investments in securities issued by United
States entities. 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. The returns that the Money Market
Portfolio provides to investors will be influenced by changes in
prevailing interest rates. The Money Market Portfolio may, at times,
concentrate its investments in bank obligations and may, therefore,
have greater exposure to certain risks associated with the banking
industry. For more information, refer to "Investment Objectives and
Policies", "Descriptions of Investments", "Risks Associated with the
Fund's Investment Policies and Investment Techniques", and
Additional Investment Activities.
FUND EXPENSES
The following table illustrates the expenses and fees that a shareholder
of the Fund can expect to incur. The purpose of this table is to assist
the investor in understanding the various expenses that an investor in
the Fund 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 Fund Operating Expenses (after expense
reimbursements, shown as a percentage of average net assets)
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Other Total Other
Expenses Expenses Total
Advisory 12b-1 Administration (after exp. (after exp. Operating
Fees Fees Fees reimbursements) reimbursements) Expenses
HLM International 0.75% None 0.15% 0.10% (a) 0.25%(a) 1.00% (a)
Equity Portfolio
U.S. Selected Growth 0.75% None 0.15% 0.10% (b) 0.25% (b) 1.00%
(b)
Portfolio -Class A Shares
Money MarketPortfolio 0.25% None 0.10% 0.05% (b) 0.15% (b) 0.40%
(b)
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(a) HLM has voluntarily agreed to cap the total operating expenses at 1.00%
(on an annualized basis) of the HLM International Equity Portfolio's average
daily net assets. Without such cap, the total operating expenses (on an
annualized basis) for HLM International Equity Portfolio are estimated to be
2.41% (of which 1.51% is "other expenses") of its average daily net assets.
(b) The Investment Adviser, Administrator and Sub-Adviser have voluntarily
agreed to cap the total operating expenses at 1.00% for U.S. Selected Growth
Portfolio - Class A Shares and 0.40% for the Money Market Portfolio (on an
annualized basis) of the Portfolio's average daily net assets. Without such
cap, the total operating expenses (on an annualized basis) for the Money Market
Portfolio are estimated to be 0.86% (of which 0.51% is "other expenses") of its
average daily net assets. Without such cap, the total operating expenses (on an
annualized basis) of the U.S. Selected Growth Portfolio - Class A Shares average
daily net assets are estimated to be 1.15% (of which 0.25% 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 Fund
charges no redemption fees of any kind.
Expenses Per $1,000 Investment
1 Year 3 Years 5 Years 10 Years
HLM International Equity Portfolio $10 $32 $55 $122
U.S. Selected Growth Portfolio
Class A Shares $10 $32 $55 $122
Money Market Portfolio $4 $13 $22 $ 51
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.
At the discretion of and until further notice from the Investment
Advisers, expenses of the HLM International Equity, U.S. Selected
Growth and Money Market Portfolios will not exceed 1.00%, 1.00%,
and 0.40%, respectively, of each such Portfolio's average daily net
assets for any fiscal year. The Money Market Portfolio's active
management approach could lead to higher portfolio transaction
expenses as a result of a higher volume of such transactions. Certain
portions of the transaction expenses (i.e., brokerage commissions) are
not included in the expenses subject to the cap described above. See
Investment Techniques - Portfolio Turnover.
FINANCIAL HIGHLIGHTS
The financial information for the year ended December 31, 1995 in
the following table has been audited in conjunction with the audit of the
financial statements of the Fund by Ernst & Young LLP, independent
auditors. The audited financial statements for the period ended
December 31, 1995 are incorporated by reference in the Statement of
Additional Information. The Money Market Portfolio
commenced operations on November 1, 1993 and the HLM
International Equity Portfolio commenced operations on May 11, 1994.
The U.S. Selected Growth Portfolio-Class A Shares has not yet commenced
operations. The financial information should be read in conjunction
with the financial statements which can be obtained upon request
without charge.
AMT Capital Fund, Inc.
Financial Highlights
HLM International Equity Portfolio
For the Year For the Period
Ended from 5/11/94*
12/31/95 12/31/94
Per Share Data
Net asset value, beginning of period $ 9.71 $ 10.000
Income From Investment Operations
Investment income, net 0.10 0.04
Net realized and unrealized gain (loss) on
investments and foreign currency-
related transactions 1.06 -0.29
Total from investment operat 1.16 -0.25
Less Distributions
From investment income, net 0.10 0.03
In excess of net realized gain on
investments - 0.01
Total distributions 0.10 0.04
Net asset value, end of period $ 10.77 $ 9.71
Total Return 11.99% -2.47%(b)
Ratios/Supplemental Data
Net assets, end of period $ 67,726,552 $ 8,903,878
Ratio of expenses to average net
assets 0.99% 0.95%(a)
Ratio of net investment income
to average net assets 1.30% 1.13%
Decrease reflected in above ratio
due to waiver of investment advisory
and administration services fees and
reimbursement of other expenses 0.54% 1.33%(a)
Portfolio turnover 27.71%(b) 27.49%
(a) Annualized.
(b) Not annualized.
* Commencement of Operations.
Money Market Portfolio
For the Six For the For the Period
Months Ended Year Ended from 11/1/93*
6/30/95 12/31/94 12/31/93
(Unaudited)
Per Share Data
Net asset value, beginning of period $ 1.000 $ 1.000 $ 1.000
Income From Investment Operations
Investment income, net 0.060 0.040 0.000**
Net realized and unrealized gain (loss) on
investments 0.000** 0.000(b) -
Total from investment operations 0.060 0.040 0.000
Less Distributions
From investment income, net 0.060 0.040 0.000**
Temporary overdistribution of net
realized gain on investment - 0.000** -
Total distributions 0.060 0.040 0.000
Net asset value, end of period $ 1.000 $ 1.000 $ 1.000
Total Return 5.74%(a) 4.13% 2.69%(a)
Ratios/Supplemental Data
Net assets, end of period $ 25,879,153 $ 22,006,141 $ 2,335,633
Ratio of expenses to average net assets 0.40%(a) 0.40% 0.40%(a)
Decrease in above ratio due to waiver
of investment advisory and administration
services fees and reimbursement of
other expenses 0.37%(a) 0.64% 25.54%(a)
Ratio of net investment income to
average net assets 5.58%(a) 4.16% 2.67%(a)
(a) Annaualized.
(b) Includes the effect of net realized gains prior to significant increases
in shares outstanding.
* Commencement of Operations.
** Rounds to less than $0.01.
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 OBJECTIVES
AMT Capital Fund, Inc. is a no-load, open-end management
investment company that currently has three separate diversified
portfolios, each of which has distinct investment objectives and
policies. There is no assurance that a Portfolio will achieve its
investment objectives.
The investment objectives and policies of each Portfolio are described
below. 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, each Portfolio's investment objectives
are 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 applicable 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
applicable Portfolio (hereinafter, "majority vote"). The investment
objective of each of the Portfolios are:
Portfolio Investment Objective
HLM International Equity Portfolio To seek long-term
capital appreciation
through investments in
equity securities of
companies based outside
the United States.
U.S. Selected Growth Portfolio To seek long-term
capital appreciation.
The Portfolio seeks to
achieve its objective
by investing in
equity securities of
small- and medium-
sized U.S. companies
which the sub-adviser
believes have the
potential for above-
average capital
appreciation.
Money Market Portfolio To seek current income,
liquidity, and the
maintenance of a stable
$1.00 net asset value per
share by investing in
high quality, short-term
obligations which are
determined to present
minimal credit risks.
Portfolio investments in the Money Market Portfolio are valued based
on the amortized cost valuation technique pursuant to Rule 2a-7 under
the Investment Company Act of 1940 (the "1940 Act"). See the
Statement of Additional Information for an explanation of the
amortized cost valuation method. All obligations in which the Money
Market Portfolio invests generally have remaining maturities of 397
days or less, although obligations subject to repurchase agreements and
certain variable and floating rate obligations may bear longer final
maturities.
INVESTMENT POLICIES
HLM International Equity Portfolio
The HLM International Equity Portfolio invests at least 65% of its total
assets in common stocks, securities convertible into such common
stocks [including American Depository Receipts ("ADRs") and
European Depository Receipts ("EDRs")], rights and warrants issued
by companies that are based outside the United States and securities of
investment companies (subject to Commission limits on such
investments). The Portfolio may invest in forward foreign currency
exchange contracts, equity derivative securities such as options on
common stocks and options, futures and options on futures on foreign
common stock indices. The Portfolio may also invest in securities of
U.S. companies which derive, or are expected to derive, a significant
portion of their revenues from their foreign operations, although under
normal circumstances not more than 15% of the Portfolio's assets will
be invested in securities of U.S. companies. The Portfolio may also
invest up to 35% of its assets in the types of short-term securities
described under the caption "Investment Policies - Money Market
Portfolio" and in other debt securities described under the caption
Description of Investments below.
The 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 Investors Service, Inc.
("Moody's") or below BBB by Standard & Poors Corporation
("Standard & Poors", or "S&P") ["junk bonds"] and in unrated
securities judged to be of equivalent quality as determined by HLM.
The Portfolio will invest broadly in the available universe of common
stocks of companies domiciled in one of at least three of the following:
(1) Europe, including Austria, Belgium, Denmark, Finland, France,
Germany, Ireland, Italy, Luxembourg, the Netherlands, Norway,
Spain, Sweden, Switzerland, and the United Kingdom; (2) the Pacific
Rim, including Australia, Hong Kong, Japan, Malaysia, New Zealand,
and Singapore; (3) Canada; and (4) countries with "emerging markets"
as defined by Morgan Stanley Capital International ("MSCI"). At least
65% of these securities will be denominated in one of at least three
currencies other than the U.S. dollar.
The HLM international equity investment approach is "bottom up".
The approach seeks to identify companies with excellent long-term
business prospects, and then to select from among them those whose
stocks appear to offer attractive absolute returns. HLM's investment
criteria include both growth and value considerations. HLM seeks
companies that it believes have strong balance sheets, sustainable
internal growth, superior financial returns and defensible business
franchises. Typically, the HLM will only invest in companies that it
has analyzed for a number of years. Country allocation and sector
weightings reflect the results of stock selection, which itself is strongly
influenced by HLM's cyclical and secular outlook for various
industries, sectors, and national economies. Explicit country or sector
allocation decisions are taken only when necessary to ensure that
portfolios are well-diversified. HLM hedges foreign currency
exposure infrequently, on those occasions when it has a strong view on
the prospects for a particular currency. Currency hedging is done
through the use of forward contracts or options.
Portfolio Turnover. Portfolio turnover will depend on factors such as
volatility in the markets that the Portfolio invests in, or the variability of
cash flows into and out of the Portfolio. Portfolio turnover is expected
to be low, generally below 50%, due to the emphasis on stock
selection.
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 and other
debt 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
investment 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. Delphi may select companies that do not satisfy all of the foregoing
fundamental criteria, however, if the overall mix of characteristics is deemed
favorable.
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%.
Money Market Portfolio
The Money Market Portfolio invests at least 80% of its assets in the
following high quality, short-term instruments:
(a) obligations issued or guaranteed by the U.S. Government
or its agencies or instrumentalities;
(b) commercial paper, loan participation interests, medium
term notes, asset-backed securities and other promissory
notes, including floating or variable rate obligations;
(c) domestic, Yankeedollar (U.S. branches or subsidiaries of
foreign depository institutions) and Eurodollar (foreign
branches or subsidiaries of U.S. depository institutions)
certificates of deposit, time deposits, bankers' acceptances,
commercial paper, bearer deposit notes and other promissory
notes including floating or variable rate obligations issued by
U.S. or foreign bank holding companies and their bank
subsidiaries, branches and agencies; and
(d) repurchase and reverse repurchase agreements.
The Money Market Portfolio will invest only in issuers or instruments
that at the time of purchase:
(a) are issued or guaranteed by the U.S. Government, its
agencies, or instrumentalities;
(b) have received the highest short-term rating by at least two
nationally recognized statistical rating organizations
("NRSROs") such as "A-1" by Standard & Poor's and "P-1"
by Moody's, or are single rated and have received the highest
short-term rating by the NRSRO ("First Tier Securities");
(c) are rated by two NRSROs in the second highest category,
or rated by one agency in the highest category and by another
agency in the second highest category or by one agency in the
second highest category ("Second Tier Securities"), provided
that Second Tier Securities are limited in total to 5% of a
Portfolio's total assets and on a per issuer basis, to no more
than the greater of 1% of a Portfolio's total assets or
$1,000,000; or
(d) are unrated, but are determined to be of comparable
quality by the Investment Adviser and sub-adviser pursuant to
guidelines approved by the Board of Directors.
Single rated and unrated securities are subject to ratification by the
Board of Directors. See "Descriptions of Investments" and the
Statement of Additional Information for definitions of the foregoing
instruments and rating systems.
Investments in foreign obligations involve additional risks. Most
notably, there generally is less publicly available information about
foreign companies; there may be less governmental regulation and
supervision; there may be different accounting and financial standards,
and the adoption of foreign governmental restrictions may adversely
affect the payment of principal and interest on foreign investments.
Further, the income associated with such obligations may be subject to
foreign taxes. To the extent that the Money Market Portfolio
purchases Eurodollar and Yankeedollar obligations, consideration will
be given to their marketability and possible restrictions on international
currency transactions. The Money Market Portfolio's investments in
foreign obligations will be limited to U.S. dollar denominated
obligations. In addition, not all foreign branches of U.S. banks are
supervised or examined by regulatory authorities as are U.S. banks,
and such branches may not be subject to reserve requirements.
Variable amount master demand notes in which the Money Market
Portfolio may invest are unsecured demand notes that permit the
indebtedness thereunder to vary, and provide for periodic adjustments
in the interest rate. Because master demand notes are direct lending
arrangements between the Money Market Portfolio and the issuer, they
are not normally traded. There is no secondary market for the notes;
however, the period of time remaining until payment of principal and
accrued interest can be recovered under a variable amount master
demand note generally shall not exceed seven days. To the extent this
period is exceeded, the note in question would be considered illiquid.
Issuers of variable amount master demand notes must satisfy the same
criteria as set forth for other promissory notes (e.g., commercial paper).
The Money Market Portfolio will invest in variable amount master
demand notes only when such notes are determined by the Investment
Adviser and/or sub-adviser, pursuant to guidelines established by the
Board of Directors, to be of comparable quality to rated issuers or
instruments eligible for investment by the Portfolio. In determining
average weighted portfolio maturity, a variable amount master demand
note will be deemed to have a maturity equal to the longer of the period
of time remaining until the next readjustment of the interest rate or the
period of time remaining until the principal amount can be recovered
from the issuer on demand.
Active trading is employed by the Money Market Portfolio when
consistent with its investment objective. Active trading involves 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. Such
techniques will be employed by the Money Market Portfolio only to the
extent that they are consistent with its investment objective.
DESCRIPTIONS OF INVESTMENTS
The following briefly describes some of the different types of securities
in which each Portfolio, unless otherwise specified, may invest and
investment techniques in which each Portfolio may engage, subject to
each Portfolio's investment objectives and policies. For a more
extensive description of these assets and the risks associated with
them, see the Statement of Additional Information.
U.S. Treasury and other U.S. Government and Government Agency Securities
Each 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"). Each 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.
Foreign Governments and International and Supranational Agency Securities
The HLM International Equity Portfolio may purchase, for temporary purposes,
debt obligations issued or guaranteed by foreign governments or their
subdivisions, agencies and instrumentalities, and debt obligations
issued or guaranteed by international agencies and supranational
entities.
Bank Obligations Each 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. The Money Market Portfolio may, from time to time,
concentrate more than 25% of its assets in Domestic Bank Obligations.
Domestic Bank Obligations are instruments: issued by U.S.
(domestic) banks; U.S. branches of foreign banks, if such branches are
subject to the same regulation as U.S. banks; and foreign branches of
U.S. banks, if the Investment Adviser or sub-adviser determines that
the investment risk associated with investing in instruments issued by
such branches is the same as that of investing in instruments issued by
the U.S. parent bank, in that the U.S. parent bank would be
unconditionally liable in the event that the foreign branch failed to pay
on its instruments.
Corporate Debt Instruments Each 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 Each 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 a 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 Company'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
Portfolios 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 Each 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 a 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 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, 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
Portfolios will engage in such transactions with parties selected on the
basis of such party's creditworthiness.
Convertible Securities. The HLM International Equity and U.S.
Selected Growth Portfolios may invest in convertible preferred and debt
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.
Dollar Roll Transactions The HLM International Equity
Portfolio may enter into dollar roll transactions with
selected banks and broker-dealers. Dollar roll transactions consist of
the sale by the Portfolio of mortgage-backed securities, together with a
commitment to purchase similar, but not identical, securities at a future
date. In addition, the Portfolio is paid a fee as consideration for entering
into the commitment to purchase. Dollar rolls may be renewed after
cash settlement and initially involve only a firm commitment agreement
by the Portfolio to buy a security. The Portfolio will record the dollar
roll transactions it enters into as a purchase and sale transaction and
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.
When-Issued Securities The HLM International Equity and U.S.
Selected Growth Portfolios 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 Portfolios
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 a 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.
Standby Commitments The HLM International
Portfolio may enter into standby commitments with
respect to securities held in its portfolio. Such transactions entitle the
Portfolio to "put" its securities at an agreed upon price within a specified
period prior to their maturity date.
Mortgage-Backed Securities The HLM International Equity
and Money Market Portfolios may purchase securities
that are secured or backed by mortgages or other mortgage-related
assets. Such securities may be issued by such entities as the
Government National Mortgage Association ("GNMA"), the Federal
National Mortgage Association ("FNMA"), the Federal Home Loan
Mortgage Corporation ("FHLMC"), commercial banks, savings and
loan associations, mortgage banks or by issuers that are affiliates of or
sponsored by such entities.
Other Asset-Backed Securities The HLM International Equity
and Money Market Portfolios may also purchase
securities that are secured or backed by assets other than mortgage-
related assets, such as automobile and credit card receivable, and that
are sponsored by such institutions as finance companies, finance
subsidiaries of industrial companies and investment banks. Each
Portfolio will only purchase asset-backed securities that the Investment
Adviser or sub-adviser determines to be liquid.
Loan Participations The HLM International Equity
and Money Market Portfolios may purchase loan participations.
Loan participations are interests in a loan to a U.S. corporation which is
administered and sold by an intermediary bank. Any participation
purchased by a Portfolio must be issued by a bank in the United States
with assets exceeding $1 billion. 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.
Equity Securities The HLM International Equity and U.S. Selected
Growth Portfolios will invest in various types of equity securities,
including common stocks, preferred stocks, convertible securities,
ADRs, rights and warrants. The stocks that the Portfolios 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. (See an explanation of ADRs below.)
Foreign Securities The HLM International Equity Portfolio will
invest in foreign securities.
Foreign securities include equity or derivative securities denominated
in currencies other than the U.S. dollar, including any single currency
or multi-currency units, plus sponsored and unsponsored ADRs and
EDRs. ADRs typically are issued by a U.S. bank or trust company
and evidence ownership of underlying securities issued by a foreign
corporation. EDRs, which are sometimes referred to as Continental
Depositary Receipts, are receipts issued in Europe, typically by foreign
banks and trust companies, that evidence ownership of either foreign or
domestic underlying securities. Unsponsored ADRs and EDRs differ
from sponsored ADRs and EDRs in that the establishment of
unsponsored ADRs and EDRs is not approved by the issuer of the
underlying securities. Risks associated with investing in foreign
securities are described under the caption "Risks Associated with the
Fund's Investment Policies and Investment Techniques -Foreign
Investments" below.
Emerging Markets Securities For purposes of its investment policies,
the HLM International Equity Portfolio defines an emerging market as
any country, the economy and market of which is generally considered
to be emerging or developing by MSCI or, in the absence of an MSCI
classification, by the World Bank. Under this definition, the Portfolio
considers emerging markets to include all markets except Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong
Kong, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway,
Singapore, Spain, Sweden, Switzerland, the United Kingdom, and the
United States.
Derivatives. The HLM International Equity and U.S. Selected Growth
Portfolios are authorized to use various hedging and investment
strategies described below to hedge broad or specific market
movements, or to seek to increase the Portfolios' income or gains.
The Portfolios 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
a Portfolio resulting from securities market to protect the Portfolio's
unrealized gains in the 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 Portfolios 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
Derivatives will be a function of numerous variables, including
market conditions. The ability of a Portfolio to utilize Derivatives
successfully will depend on, in addition to the factors described
above, HLM's or 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 Portfolios
are not "commodity pools" (i.e., pooled investment vehicles which
trade 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 a Portfolio may enter into such transactions
for purposes other than bona fide hedging if, immediately
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 option that is in-the-money, the in-the-money
amount may be excluded in calculating the 5% limitation. 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 HLM International Equity and U.S. Selected
Growth Portfolios 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, a 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 Portfolios 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 HLM International Equity and U.S. Selected
Growth Portfolios 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 Portfolios 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 HLM International Equity and
U.S. Selected Growth Portfolios 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 Portfolios 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.
Foreign Currency Transactions HLM International Equity Portfolio
hedges foreign currency exposure infrequently, on those occasions
when they have a strong view on the prospects for a particular
currency. The Portfolio will conduct its currency transactions either on
a spot (cash) basis at the rate prevailing in the currency exchange
market, or through entering into forward contracts to purchase or sell
currency. A forward currency contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. The use of forward
currency contracts does not eliminate fluctuations in the underlying
prices of the securities, but it does establish a rate of exchange that can
be achieved in the future. In addition, although forward currency
contracts limit the risk of loss due to a decline in the value of the
hedged currency, at the same time, they also limit any potential gain
that might result should the value of the currency increase. The
Portfolio will segregate cash, U.S. Government securities or other
high-grade liquid debt obligations with the custodian in an amount at
all times equal to or exceeding their commitment with respect to
contracts that are not part of a designated hedge.
Warrants. The HLM International Equity Portfolio may invest up to
10% and the U.S. Selected Growth Portfolio may invest up to 5%
of the value of their 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.
Securities Lending. Each 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 any Portfolio exceeds 33 1/3% of its
total assets. A 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, a 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. A 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
each Portfolio's investment policies and restrictions, collateral received
in connection with securities loans will not be deemed an asset of a
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 Portfolios appears in the
Statement of Additional Information.
Changes in Interest Rates The returns that the Money Market
Portfolio provides to investors will be influenced by changes in
prevailing interest rates.
Mortgage and Other Asset-Backed Securities The yield
characteristics of mortgage- and other asset-backed securities differ
from traditional debt securities. A major difference is that the principal
amount of the obligation generally may be prepaid at any time because
the underlying assets (i.e., loans) generally may be prepaid at any time.
As a result, if an asset-backed security is purchased at a premium, a
prepayment rate that is faster than expected will reduce yield to
maturity, while a prepayment rate that is slower than expected will
have the opposite effect of increasing yield to maturity. Conversely, if
an asset-backed security is purchased at a discount, faster than
expected prepayments will increase, while slower than expected
prepayments will decrease, yield to maturity.
These securities may not have the benefit of any security interest in the
underlying assets and recoveries on repossessed collateral may not, in
some cases, be available to support payments on these securities.
During an economic downturn or period of rising interest rates,
mortgagees may experience financial stress which would adversely
affect their ability to service their principal and interest payment
obligations. Such situations would result in a downward trend in
the prices of these securities, resulting in volatility that may
adversely affect the Portfolio's net asset value. The Portfolios will
only invest in asset-backed securities that the Investment Adviser or
sub-adviser believes are liquid.
Foreign Investments Securities issued by foreign governments,
foreign corporations, international agencies and obligations of foreign
banks involve risks not associated with securities issued by U.S.
entities. With respect to certain foreign countries, there is the
possibility of expropriation of assets, confiscatory taxation and political
or social instability or diplomatic developments that could affect
investment in those countries. There may be less publicly available
information about a foreign financial instrument than about a United
States instrument and foreign entities may not be subject to accounting,
auditing and financial reporting standards and requirements
comparable to those of United States entities. The HLM International
Equity Portfolio could encounter difficulties in obtaining or enforcing a
judgment against the issuer in certain foreign countries. In addition,
certain foreign investments may be subject to foreign withholding or
other taxes, although the Portfolio will seek to minimize such
withholding taxes whenever practical. Investors may be able to deduct
such taxes in computing their taxable income or to use such amounts
as credits against their United States income taxes if more than 50% of
the Portfolio's total assets at the close of any taxable year consist of
stock or securities of foreign corporations. Ownership of unsponsored
ADRs may not entitle the Portfolio to financial or other reports from
the issuer to which it would be entitled as the owner of sponsored
ADRs. See "Tax Considerations".
Emerging Markets Securities The risks of investing in foreign
securities may be intensified in the case of investments in issuers
domiciled or doing substantial business in emerging markets or
countries with limited or developing capital markets. Security prices in
emerging markets can be significantly more volatile than in the more
developed nations of the world, reflecting the greater uncertainties of
investing in less established markets and economies. In particular,
countries with emerging markets may have relatively unstable
governments, present the risk of sudden adverse government action
and even nationalization of businesses, restrictions on foreign
ownership, or prohibitions of repatriation of assets, and may have less
protection of property rights than more developed countries. The
economies of countries with emerging markets may be predominantly
based on only a few industries, may be highly vulnerable to changes in
local or global trade conditions, and may suffer from extreme and
volatile debt burdens or inflation rates. Local securities markets may
trade a small number of securities and may be unable to respond
effectively to increases in trading volume, potentially making prompt
liquidation of substantial holdings difficult or impossible at times.
Transaction settlement and dividend collection procedures may be less
reliable in emerging markets than in developed markets. Securities of
issuers located in countries with emerging markets may have limited
marketability and may be subject to more abrupt or erratic price
movements.
High Yield/High Risk Securities The HLM International Equity
Portfolio may invest up to 20% of its net assets in convertible securities
and debt securities rated lower than Baa by Moody's or BBB by S&P,
or of equivalent quality as determined by HLM (commonly referred to
as "junk bonds"). The lower the ratings of such debt securities, the
greater their risks render them like equity securities. The Portfolio will
invest no more than 10% of its net assets in securities rated B or lower
by Moody's or S&P, or of equivalent quality, but may invest in
securities rated C by Moody's or D by S&P, or the equivalent, which
may be in default with respect to payment of principal or interest.
Dollar Roll Transactions If the broker-dealer to whom a Portfolio
sells the security underlying a dollar roll transaction becomes insolvent,
the Portfolio's right to purchase or repurchase the security may be
restricted, the value of the security may change adversely over the term
of the dollar roll, the security which the Portfolio is required to
repurchase may be worth less than a security which the Portfolio
originally held, and the return earned by the Portfolio with the proceeds
of a dollar roll may not exceed transaction costs.
Zero Coupon Securities Because they do not pay interest until
maturity, zero coupon securities tend to be subject to greater interim
fluctuation of market value in response to changes in interest rates than
interest-paying securities of similar maturities. Additionally, for tax
purposes, zero coupon securities accrue income daily even though no
cash payments are received which may require a Portfolio to sell
securities that would not ordinarily be sold to provide cash for the
Portfolio's required distributions.
Concentration in Bank Obligations The Money Market Portfolio
may, at times, invest in excess of 25% of its assets in Domestic Bank
Obligations, as defined above. By concentrating investments in the
banking industry, the Portfolio may have a greater exposure to certain
risks associated with the banking industry. In particular, economic or
regulatory developments in or related to the banking industry will affect
the value of and investment return on the Portfolio's shares. As
discussed above, the Portfolio will seek to minimize its exposure to
such risks by investing only in debt securities that are determined by
the Investment Adviser or sub-adviser to be of high quality.
Derivatives and Hedging. The HLM International Equity and U.S.
Selected Growth Portfolios may engage in hedging and other
strategic transactions and certain other investment practices which
may entail certain risks.
Derivatives involve special risks, including possible default by the
other party to the transaction, illiquidity and, to the extent HLM's
or 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 a 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 a Portfolio could
create the possibility that losses on the Derivative will be greater
than gains in the value of the Portfolio's position. The loss from
investing in futures transactions which are unhedged or uncovered, is
potentially unlimited. In addition, futures and options markets could be
illiquid in some circumstances and certain over-the-counter options could have
no markets. A Portfolio might not be able to close out certain
positions without incurring substantial losses. To the extent a
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 HLM International Equity
and U.S. Selected Growth Portfolios will not invest more than 15%
of the value of its net assets in illiquid securities, while the Money Market
Portfolio will not invest more than 10% of the value of its net assets in
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 a 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, a 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 a
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 a
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. A 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. A 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. HLM or 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, a
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 a
Portfolio may decline below the price of the securities the Portfolio is
obligated to repurchase.
Small-and Medium Sized Companies Securities. Securities of
the kinds of companies in which the U.S. Selected Growth
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.
INVESTMENT RESTRICTIONS
The following investment restrictions apply to each Portfolio and may
be changed with respect to a particular Portfolio only by the majority
vote of that Portfolio's outstanding shares. Accordingly, no Portfolio
may:
(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 or,
with respect to the Money Market Portfolio, domestic bank
obligations. Finance companies as a group are not considered
a single industry for purposes of this policy.
(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 Portfolios
borrow for leveraging purposes. In addition, although not a
fundamental policy, the Portfolios 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) with respect to the HLM International Equity Portfolio,
invest more than 10% of the value of its total assets in
warrants in accordance with Texas Rule 123.2(8);.
(e) 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
HLM, Delphi and FFTW will place their own orders to execute the
securities transactions which are designed to implement the applicable
investment objective and policies of the HLM International Equity,
U.S. Selected Growth and Money Market Portfolios, respectively.
Each investment adviser and sub-adviser will use its 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 investment
advisers, the sub-advisers nor any of their officers, affiliates, or
employees will act as principal or receive any compensation from the
Portfolios in connection with the purchase or sale of investments for the
Portfolios. Consistent with the foregoing, the sub-adviser to the U.S.
Selected Growth Portfolio may, at times, place orders with brokers
who have sold shares of that Portfolio.
The Money Market Portfolio normally will not incur any brokerage
commissions on its transactions because money market and debt
instruments are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission. The
price of the security, however, usually includes a profit to the dealer.
Securities purchased in underwritten offerings include a fixed amount
of compensation to the underwriter, generally referred to as the
underwriter's concession or discount. No commissions or discounts
are paid when securities are purchased directly from an issuer.
YIELDS AND TOTAL RETURN
From time to time the Money Market Portfolio may advertise its
current yield and "effective yield." Both yield figures are based on
historical earnings and are not intended to indicate future performance.
The "current yield" refers to the income generated by an investment in
a Portfolio over a seven calendar-day period (which period will be
stated in the advertisement). This income is then "annualized." That
is, the amount of income generated by the investment during that week
is assumed to be generated each week over a one-year period and is
shown as a percentage of the investment. The "effective yield" is
calculated similarly but, when annualized, the income earned by an
investment in the Portfolio is assumed to be reinvested. The "effective
yield" will be slightly higher than the "current yield" because of the
compounding effect of this assumed reinvestment.
The HLM International Equity and U.S. Selected Growth Portfolios'
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 Portfolios may from time to time advertise their 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 Portfolios will at times compare their performance to applicable
published indices, and may also disclose their 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 Fund 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. No fees are
payable by the Fund pursuant to the Distribution Agreement.
Under a sales incentive fee agreement dated June 13, 1995 between
AMT Capital Advisers and HLM, HLM has agreed to pay AMT
Capital Advisers a monthly sales incentive fee at an annual rate of
0.25% of the average daily value of shares of the HLM International
Equity Portfolio purchased as a result of the efforts of AMT Capital.
Under a sales incentive fee agreement dated October 29, 1993
between AMT Capital Advisers and FFTW, AMT Capital Advisers
has agreed to pay FFTW a monthly sales incentive fee at an annual rate
of 0.05% of the average daily value of shares of the Money Market
Portfolio purchased as a result of the efforts of FFTW.
DETERMINATION OF NET ASSET VALUE
The "net asset value" per share of the Money Market Portfolio is
calculated as of 12:00 noon Eastern Time on days when the Federal
Reserve Bank of New York is open for business, which is Monday
through Friday, except for holidays (hereinafter, "Business Day"). The
net asset value per shares of the HLM International Equity Portfolio
and U.S. Selected Growth Portfolio are calculated as of the close of
business on days when the New York Stock Exchange is open for
business, also a Business Day. Each Portfolio determines its net asset
value per share by subtracting that Portfolio's liabilities (including
accrued expenses and dividends payable) from the total value of the
Portfolio's investments and other assets and dividing the result by the
total outstanding shares of the Portfolio. The Money Market Portfolio
seeks to maintain a stable net asset value per share of $1.00.
For purposes of calculating the Money Market Portfolio's net asset
values, securities are valued by the "amortized cost" method of
valuation, which does not take into account unrealized gains or losses.
This involves valuing an instrument at its cost 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. While this method provides certainty in
valuation, it may result in periods during which value based on
amortized cost is higher or lower than the price a Portfolio would
receive if it sold the instrument.
The use of amortized cost and the maintenance of the Portfolio's per
share net asset value at $1.00 is based on its election to operate under
the provisions of Rule 2a-7 under the 1940 Act. As conditions of
operating under Rule 2a-7, the Money Market Portfolio must maintain
a dollar-weighted average portfolio maturity of 90 days of less,
purchase only instruments having remaining maturities of thirteen
months or less and invest only in U.S. dollar-denominated securities
which are determined by the Board of Directors to present minimal
credit risks and which are of eligible quality as determined under the
Rule.
For purposes of calculating HLM International Equity and U.S. Mid-
Cap Growth Portfolios' 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 their last sale price, or
if there are no trades, at the latest bid price; (2) deposits and repurchase
agreements are valued at their cost plus accrued interest unless HLM and Delphi
determine 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, or if there are no trades, at the mean between the latest bid and ask
prices; (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
HLM and Delphi at fair value under procedures established by and
under the general supervision of the Fund's Board of Directors.
Quotations of foreign securities denominated in a foreign currency are
converted to a U.S. dollar-equivalent at exchange rates obtained from
an automated pricing service at the bid price except for the Royal
Currencies (United Kingdom, Ireland, European Currency Unit,
Australia and New Zealand), which are valued at the ask price.
PURCHASES AND REDEMPTIONS
Purchases
There is no sales charge imposed by the Fund. The minimum initial
investment in any Portfolio of the Fund is $100,000; additional
purchases or redemptions may be of any amount.
With respect to purchases of fund shares through brokers: 1) a broker
may charge transaction fees, and 2) duplicate mailings of Fund
material to shareholders who reside at the same address may be
eliminated.
The offering of shares of the Fund is continuous and purchases of
shares of the Fund may be made on any Business Day. The Fund
offers shares at a public offering price equal to the net asset value next
determined after receipt of a purchase order.
Purchases of shares must be made by wire transfer of Federal funds.
Share purchase orders are effective on the date when AMT Capital
receives a completed Account Application Form (and other required
documents) and Federal funds become available to the Fund in the
Fund's account with the Transfer Agent as set forth below. The
shareholder's bank may impose a charge to execute the wire transfer.
The wiring instructions are:
Investors Bank & Trust Company, Boston, MA
ABA#: 011-001-438
Account Name: AMT Capital Services, Inc.
- Fund Purchase Account
Account #: 933333333
Reference: AMT Capital Fund - (designate Portfolio and Class)
In order to purchase shares on a particular Business Day, a purchaser
must call AMT Capital at (800) 762-4848 or (212) 332-5211 prior to
12:00 noon Eastern time for the Money Market Portfolio and prior to
the close of business (normally 4:00 p.m. Eastern time) for the HLM
International Equity and U.S. Selected Growth Portfolios to inform the
Fund of the incoming wire transfer and must clearly indicate which
Portfolio is to be purchased. If Federal funds are received by the Fund
that same day, the order will be effective on that day. If the Fund
receives notification after the above-mentioned cut-off times, or if
Federal funds are not received by the Transfer Agent, such purchase
order shall be executed as of the date that Federal funds are received.
Shares purchased in the Money Market Portfolio will begin accruing
dividends on the day Federal funds are received.
Redemptions
The Fund will redeem all full and fractional shares of the Fund 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. If such notice is received by
the Transfer Agent by 12:00 noon Eastern time for the Money Market
Portfolio and the close of business (normally 4:00 p.m. Eastern time)
for the HLM International Equity and U.S. Selected Growth Portfolios
on any Business Day, the redemption will be effective on the date of
receipt. Payment will ordinarily be made by wire the same day for the
Money Market Portfolio and on the next Business Day for the HLM
International Equity and U.S. Selected Growth Portfolios but within
no more than seven business days from the date of receipt. If the
notice is received on a day that is not a Business Day or after the
above-mentioned cut-off times, the redemption notice will be deemed
received as of the next Business Day.
There is no charge imposed by the Fund to redeem shares of the Fund;
however, a shareholder's bank may impose its own wire transfer fee for
receipt of the wire. Redemptions may be executed in any amount
requested by the shareholder up to the amount such shareholder has
invested in the Fund.
To redeem shares, a shareholder or any authorized agent (so
designated on the Account Application Form) must provide the
Transfer Agent with the dollar or share amount to be redeemed, the
account to which the redemption proceeds should be wired (which
account shall have been previously designated by the shareholder on its
Account Application Form), the name of the shareholder and the
shareholder's account number. Shares redeemed receive dividends up
to and including the day preceding the day the redemption proceeds are
wired.
A shareholder may change its authorized agent or the account
designated to receive redemption proceeds at any time by writing to the
Transfer Agent with an appropriate signature guarantee. Further
documentation may be required when deemed appropriate by the
Transfer Agent.
A shareholder may request redemption by calling the Transfer Agent at
(800) 247-0473. Telephone redemption is made available to
shareholders of the Fund on the Account Application Form. The Fund
or the Transfer Agent employ reasonable procedures designed to
confirm that instructions communicated by telephone are genuine. If
either the Fund or the Transfer Agent does not employ such
procedures, it may be liable for losses due to unauthorized or
fraudulent instructions. The Fund or the Transfer Agent may require
personal identification codes and will only wire funds through pre-
existing bank account instructions. No bank instruction changes will
be accepted via telephone.
Exchange Privilege
Shares of each Portfolio may be exchanged for shares of the other
Portfolio or for other funds distributed by AMT Capital based on the
respective net asset values of the shares involved in the exchange,
assuming that shareholders wishing to exchange shares reside in states
where these mutual funds are qualified for sale. The Fund's Portfolio
minimum amounts of $100,000 would still apply. An exchange order
is treated the same as a redemption followed by a purchase. Investors
who wish to make exchange requests should telephone AMT Capital
or the Transfer Agent.
DIVIDENDS
HLM International Equity Portfolio
HLM International Equity Portfolio will declare and pay a dividend
from its net investment income on an annual basis.
HLM International Equity Portfolio will distribute its realized net short-
term capital gains (i.e. with respect to assets held one year or less) and
net long-term capital gains (i.e. with respect to assets held more than
one year) 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.
U.S. Selected Growth Portfolio
The U.S. Selected Growth Portfolio will declare and pay a dividend
from its net investment income on an annual basis.
The U.S. Selected Growth 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.
Money Market Portfolio
Money Market Portfolio will declare a dividend of its net investment
income (which is composed of interest income, less expenses) daily
and distribute such dividends monthly.
The Portfolio will distribute its realized net short-term capital gains (i.e.
with respect to assets held one year or less) at least annually by
automatically reinvesting (unless a shareholder has elected to receive
cash) such short-term capital gains in additional shares of the Portfolio
at the net asset value on the date the distribution is declared.
In the unlikely event that the Portfolio realizes net long-term capital
gains (i.e. with respect to assets held more than one year), it will
distribute them at least annually by automatically reinvesting (unless a
shareholder has elected to receive cash) such long-term capital gains in
additional shares of the Portfolio at the net asset value on the date the
ex-date of the distribution.
MANAGEMENT OF THE FUND
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,III Former Managing Director,
Morgan Stanley & Co.,
Incorporated (retired)
Patricia M. Gammon Vice President, Blackstone Group; former 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 Fund - Board of Directors".
Investment Advisers and Sub-Advisers
Subject to the direction and authority of the Fund's Board of Directors,
AMT Capital Advisers provides investment advisory services to the
Money Market Portfolio pursuant to the Investment Advisory
Agreement dated October 28, 1993, and the U.S. Selected Growth
Portfolio pursuant to the Investment Advisory Agreement dated
December 14, 1995. In addition to providing the office space, equipment
and personnel necessary to manage the Money Market and U.S. Mid-
Cap Growth Portfolios, AMT Capital Advisers monitors the
investment programs and results of the advisers and sub-advisers,
coordinates their 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 600 Fifth Avenue, New York, New York 10020.
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-advisers to the Money Market
and U.S. Selected Growth Portfolios. For its services, the U.S. Mid-
Cap Growth and Money Market Portfolios separately pay AMT
Capital Advisers a monthly fee at an annual rate of 0.75% and 0.25%
respectively of its average daily net assets. The advisory fee paid by the
U.S. Selected Growth 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.
Subject to the direction and authority of the Fund's Board of Directors,
HLM provides investment advisory services to the HLM International
Equity Portfolio pursuant to the Investment Advisory Agreement dated
June 13, 1995. Under the Investment Advisory Agreement, HLM is
responsible for providing investment research and advice, 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 the portfolio
securities of the Portfolio are exercised in accordance with the
Portfolio's investment objective, policies, and restrictions. HLM also
provides office space, equipment, and personnel necessary to manage
the Portfolio.
HLM, established in 1989, is a registered investment adviser that
specializes in global investment management for private investors and
institutions. HLM currently has $650 million under management.
HLM bears the expense of providing the above services to the
Portfolio. For its services, the HLM International Equity Portfolio pays
HLM a monthly fee at an annual rate of 0.75% of its average daily net
assets. The advisory fee paid by the HLM International Equity
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.
FFTW serves as sub-adviser for the Money Market Portfolio. The
sub-adviser is employed by AMT Capital Advisers, subject to approval
by the Board of Directors and the shareholders of the Portfolio. 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.
FFTW has discretion to purchase and sell securities for the assets of
the Money Market 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,
FFTW is paid a monthly fee at an annual rate of 0.10% of the average
daily net assets of the Money Market Portfolio by AMT Capital
Advisers out of the proceeds of the investment advisory fee described
above.
Founded in 1972, FFTW specializes in managing large portfolios of
marketable fixed income securities for large pension funds, central
banks, and other institutional investors. FFTW currently manages
investment portfolios of approximately $21 billion.
Portfolio Managers
Adviser/ Portfolio/
Address/ Background
Portfolio Manger(s)
Harding, Loevner HLM International Equity Portfolio
Management, L.P. HLM, established in 1989, is a
50 Division Street registered investment adviser
Somerville, NJ 08876 that specialized in global
management for private investors
institutions. HLM currently has $650
million under management.
Portfolio Managers: (a) Daniel D. Harding,
Chief Investment Officer of
Harding, Loevner
Management, L.P. Prior to
founding the firm, Mr.
Harding served for ten
years as a senior
investment manager with
Rockefeller Financial
Services, Inc., the private
investment firm that
advises the Rockefeller
family and related charities.
At Rockefeller, he set
equity and fixed income
investment strategy and
spearheaded the
international diversification
of the firm's investments.
Mr. Harding graduated
with honors from Colgate
University and is a
Chartered Financial
Analyst.
(b) Simon Hallett, Senior
Portfolio Manager and
Principal of Harding,
Loevner Management, L.P.
Prior to joining the firm in
1991, Mr. Hallett served
seven years with Jardine
Fleming Investment
Management where he was
director in charge of a team
of six portfolio managers
investing in the markets of
Southeast and North Asia.
Mr. Hallett graduated with
honors from Oxford
University.
(c) David R. Loevner,
Chief Executive Officer of
Harding, Loevner
Management, L.P.
Mr. Loevner's prior
experience includes nine
years with the Rockefeller
family office, where he
managed equity portfolios
and developed new
financial planning and asset
allocation techniques. In
1987, he relocated to Hong
Kong to open Rockefeller's
first Asian office and
manage a regional
investment program
comprising both quoted
and private venture
investments. Before
joining Rockefeller,
Mr. Loevner was an
economist with the World
Bank. He graduated
summa cum laude from
Princeton University and,
as a Sachs scholar,
received graduate degrees
from Oxford University.
Delphi Asset Management U.S. Selected Growth Portfolio
485 Madison Ave., Delphi, founded in 1980, is a
20th Floor registered investment adviser
New York, NY 10022 which offers investment
management services.
Presently the firm manages
more than $950 million in
assets for a diverse group of
clients which includes
individuals, trusts, estates,
pension plans and family and
charitable organizations.
Portfolio Manager: Susan Hirsch, Portfolio
Manager. Ms. Hirsch is
responsible for the
management of the U.S.
Selected Growth Portfolio.
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 Instituional Investor
Magazine's 1993, 1992, and 1991
All -America Research Team for Small
Growth Stocks.
Fischer Francis Trees Money Market Portfolio
& Watts, Inc. Organized in 1972, FFTW is
200 Park Avenue a registered investment
New York, NY 10166 adviser and a New York
corporation that currently
manages approximately $21
billion in assets entirely in
fixed-income portfolios for
65 major institutional clients
including banks, central
banks, pension funds and
other institutional clients.
Portfolio Managers: (a) David J. Marmon,
Portfolio Manager. Mr.
Marmon is responsible for
management of the U.S.
short-term portfolios. He
joined FFTW in 1990 from
Yamaichi HLM
International (America)
where he was head of
futures and options
research. Mr. Marmon was
previously a financial
analyst and strategist at the
First Boston Corporation,
where he developed
hedging programs for
financial institutions and
industrial firms. Mr.
Marmon has a B.A. summa
cum laude in economics
from Alma College and an
M.A. in economics from
Duke University.
(b) Stewart M. Russell,
Portfolio Manager. Mr.
Russell is also responsible
for management of the U.S.
short-term portfolios.
He joined FFTW in 1992
from the short-term
proprietary trading desk in
the global markets area of
J.P. Morgan, where he was
responsible for proprietary
positioning of U.S. and
non-U.S. government
obligations, corporate
bonds, and asset-backed
securities. Earlier at the
bank, Mr. Russell managed
the short-term interest rate
risk group, coordinating a
$10 billion book of assets
and liabilities. Mr. Russell
holds a B.A. in government
from Cornell University
and an M.B.A. in finance
from New York University.
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 HLM International Equity, U.S. Selected Growth and Money
Market Portfolios pay AMT Capital a monthly fee at an annual rate of
0.15%, 0.15%, and 0.10% respectively, of their 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 Fund 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 Fund'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 a Portfolio, including the status of
distributions from each Portfolio under applicable state or local law.
Federal Income Taxes
Each 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, a Portfolio must meet certain
income, distribution and diversification requirements. In any year in
which a 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 a 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.
Each 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 Fund 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 a 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 Fund 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 HLM International Equity and U.S. Selected Growth
Portfolios' 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. None of the amounts treated
as distributed by 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 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. 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.
Any gain or loss realized by a shareholder upon the sale or other
disposal of shares of a Portfolio, or upon receipt of a distribution in a
complete liquidation of the Portfolio, generally will be a capital gain or
loss which will be long-term or short-term, generally depending upon
the shareholder's holding period for the shares. 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.
Each 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.
Income received by HLM International Equity Portfolio from sources
within foreign countries may be subject to withholding and other taxes
imposed by such countries. Tax conventions between certain countries
and the United States may reduce or eliminate such taxes. In certain
circumstances, the Portfolio may be eligible and may elect to "pass
through" to the Portfolio's shareholders the amount of foreign income
and similar taxes paid by the Portfolio. Each shareholder will be
notified within 60 days after the close of a Portfolio's taxable year
whether the foreign taxes paid by the Portfolio will "pass through" for
the year. Further information relating to tax consequences is contained
in the Statement of Additional Information.
Ordinary income dividends paid by the Fund 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 Fund 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 Fund or its shareholders,
and this discussion is not intended as a substitute for careful tax
planning. Accordingly, potential investors in the Fund should
consult their tax advisers with specific reference to their own
tax situation.
State and Local Taxes
A 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 a 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
a 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.
Each of the HLM International Equity Portfolio and the Money Market
Portfolio issues a single class of shares. The U.S. Selected Portfolio,
in addition to the Class A shares offered in this Prospectus, offers
another class of shares, Class B shares, in a separate Prospectus. Both
classes represent proportionate interests in the U.S. Selected Growth
Portfolio, but the Class B shares may have different sales charges and
other expenses than the Class A shares, which may affect investment
returns. Investors may obtain information concerning the Class B
shares of the U.S. Selected Growth 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
Investors Bank & Trust Company, P.O. Box 1537, Boston,
Massachusetts 02205-1537, is Transfer Agent for the shares of the
Fund, and Dividend Disbursing Agent for the Fund.
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 Fund may be made by writing to AMT
Capital Services, Inc., 600 Fifth Avenue, 26th Floor, New York, New
York 10020 or by calling AMT Capital at (800) 762-4848 [or (212)
332-5211, if within New York City].
AMT CAPITAL FUND, INC.
U.S. Selected Growth Portfolio - Class B Shares
Prospectus - March 6, 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 or
through brokers which have dealer agreements with AMT Capital.
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 March 6, 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
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 ("IRAs") 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".
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 Total Other Total Operating
Advisory 12b-1 Adminis- Expenses Expenses Expenses
tration (After (After (After
Fees Fees Fees reimbursement reimbursement reimbursement
U.S. 0.75% 1.00% 0.15% 0.20%(a) 0.35% (a) 2.10% (a)
Selected
Growth
Portfolio
- - Class B
Shares
</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 Shares' average daily net assets are
capped at 2.10%. Without such cap, the total operating expenses (on an
annualized basis) are estimated to be 2.27% (of which 0.37% is "other
expenses"). Other expenses include approximately 0.10% (on an annualized basis)
of shareholder-related 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
- - Class B Shares $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 commenced operations on March 6, 1996.
Prior to that date the Portfolio's operating history was that of Lehman
Brothers Funds, Inc. - Lehman Selected Growth Stock Portfolio (the "Lehman
Portfolio"). Shareholders of the Lehman Portfolio approved a reorganization
of the Lehman Portfolio into U.S. Selected Growth Portfolio on January 23,
1996. The financial information for the period ended December 31, 1995 in the
following table has been audited in conjunction with the audit of the financial
statements of the Lehman Portfolio by Ernst & Young LLP, independent auditors.
The audited financial statements for the period ended December 31, 1995 are
incorporated by reference in the Statement of Additional Information. The
financial information should be read in conjunction with the financial
statements which can be obtained upon request without charge.
The following financial highlights are from the Lehman Portfolio.
For the For the For the Period
Period Ended Year Ended from 5/20/94*
12/31/95** 7/31/95 to 7/31/94
_____________________________________________________________________
Per Share Data
Net asset value,
beginning of period $ 13.34 $ 9.73 $ 10.00
Income From Investment
Operations
Investment income (loss), net+ (0.10) (0.15) 0.01
Net realized and unrealized gain
(loss) on investments 1.51 3.77 (0.28)
Total from investment operations 1.41 3.62 (0.27)
Dividends from
net investment income - 0.01 -
Dividende from net realized gain
investments 1.28 -## -
Total dividends 1.28 0.01 -
Net asset value, end of period $ 13.47 $ 13.34 $ 9.73
Total Return++ 10.82% 37.27% (2.70%)
Ratios/Supplemental Data
Net assets, end of period
(in 000s) $44,193 $39,124 $26,341
Ratio of operating expenses
to average net assets+++ 2.09%*** 2.10% 2.04%***
Ratio of net investment income
(loss) to average net assets (1.85%)*** (1.32%) (1.06%)***
Portfolio turnover rate 93% 192% 33%
*Commenced operations on May 20, 1994.
**The Portfolio's fiscal year end was changed from July 31 to December 31.
**Annualized.
+ Net investment income (loss) per share before waiver of fees and/or
expenses reimbursed by Investment Adviser and Administrator for the fiscal
period ended December 31, 1995, for the year ended July 31, 1995 and the
period ended July 31, 1994 was ($0.10), ($0.19) and $0.00, respectively.
++Total return represents aggregate total return for the periods indicated
and does not reflect any applicable sales charges. Total return for the period
of less than one year is not annualized.
+++ Annualized operating expense ratios before waiver of fees and/or
expenses reimbursed by Investment Adviser and Administrator for the fiscal
period ended December 31, 1995, for the year ended July 31, 1995 and the
period ended July 31, 1994 were 2.26% 2.46% and 3.42%, respectively.
## Amount is less than $0.01 per share.
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. Delphi may select companies that do not satisfy all of the foregoing
fundamental criteria, however, if the overall mix of characteristics is deemed
favorable.
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 the
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 the 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.
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. The loss from investing
in futures transactions which are unhedged or uncovered, is potentially
unlimited. In addition, futures and options markets could be illiquid in some
circumstances and 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 net 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 their last sale price, or
if there no trades, 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,
or if there are no trades, at the mean between the latest bid and ask prices;
(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
IRAs 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:
First Data Investor 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, III Former Managing Director,
Morgan Stanley & Co.,
Incorporated (retired)
Patricia M. Gammon Vice President, Blackstone Group;
former 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
December 14, 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 600 Fifth
Avenue, New York, New York 10020.
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.
Any gain or loss realized by a shareholder upon the sale or other disposal
of shares of a Portfolio, or upon receipt of a distribution in a complete
liquidation of the Portfolio, generally will be a capital gain or loss which
will be long-term or short-term, generally depending upon the shareholder's
holding period for the shares. 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
First Data Investor 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., 600 Fifth Avenue, 26th Floor, New York, New
York 10020 or by calling AMT Capital at (800) 762-4848 [or (212)
332-5211, if within New York City].
STATEMENT OF ADDITIONAL INFORMATION
AMT Capital Fund, Inc.
Distributed By: AMT Capital Services, Inc.
600 Fifth Avenue
26th Floor
New York, NY 10020
(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 March 6, 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.
March 6, 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 Techniques 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, Edgehill Terrace, Hamden, CT 06517, Director of the
Fund. Ms. Gammon is the Vice President of the Blackstone Group. From 1978 to
1995, Ms. gammon served as the Director of Investment for Yale University.
She also serves as an Advisory Director for the Farm and Home Savings and
Loan located in Nevada, Missouri.
*Alan M. Trager, 600 Fifth Avenue, New York, NY 10020, 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, 600 Fifth Avenue, New York, NY 10020, 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, 600 Fifth 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.
No employee of AMT Capital Advisers and AMT Capital Services receives any
compensation from the Fund for acting as an officer or director of the Fund.
The Fund pays each director who is not a director, officer or employee of
AMT Capital Advisers and AMT Capital Services or any of their affiliates, a
fee of $1,000 for each meeting attended, and each of the Directors receive an
annual retainer of $5,000 which is paid in quarterly installments at the
end of each quarter.
Director's Compensation Table
Fiscal Year Ended December 31, 1994
Director Aggregate Pension or Estimated Total Compensation
Compensation Retirement Annual From Registrant
From Registrant Benefits benefits and Fund Complex
Accrued as Upon Paid to Directors
Part of Fund Retirement
Expenses
Alan M. Trager $0 $0 $0 $0
Patrica M. Gammon $4,000.00 $0 $0 $4000.00
Robert B. AlardiceIII $4,000.00 $0 $0 $0
By virtue of the responsibilities assumed by AMT Capital Advisers and AMT
Capital Services and their affiliates under their respective agreements with
the Fund, The Fund itself requires no employees in addition to its officers.
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.
As compenstaion (subject to expense caps as described under "Fund Expense"
in the Prospectus) for the services rendered by the Investment Adviser under
the Advisory Agreements, each Portfolio pays the Investment Adviser an monthly
advisory fee calculated by applying the following annual percentage rates to
such Portfolio's average daily net assets for the month (quarter):
Rate
U.S. Portfolios
Money Market 0.25%
U.S. Selected Growth Class A 0.75%
U.S. Selected Growth Class B 0.75%
International Portfolios
HLM International 0.75%
For the fiscal year ended December 31, 1994 and the period ended December 31,
1993, the amount of advisory fees (net of waivers and reimbursment) paid by
each Portfolio were as follows:
Portfolio Year Ended Period Ended
December 31, December 31,
1994 1993
Money Market Portfolio (1) $0 $0
HLM International Equity Portfolio (2) N/A N/A
U.S. Selected Growth Portfolio Class A (3) N/A N/A
U.S. Selected Growth Portfolio Class B (4) N/A N/A
(1) Commencement of Operations was November 1, 1993.
(2) Commencement of Operations was May 11, 1994.
(3) Has not commenced operations yet.
(4) Has not commenced operations yet.
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 for two years
following the execution and thereafter will continue for successive annual
periods 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 February, 29 1996, no shareholder is deemed a "control persons"
of the Fund as such term is defined in the 1940 Act.
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 26.63%
$.001 per Share (nominee) Mutual Fund/
Reorg. Dept., P.O. Box
1066, Wall Street Station,
New York, New York, 10268
Common Stock Public Welfare Found Direct Ownership 10.35%
$.001 per Share Inc., 2600 Virginia Ave., NW,
Suite 505, Washington, DC
20037-1977
Common Stock John Hopkins University Direct Ownership 6.70%
$.001 per Share 3400 N. Charles St.
Room 303, Garland Hall
Baltimore, MD 21218
Common Stock Children's Hospital Direct Ownership 14.49%
$.001 per Share trustee for Turlock
Philadelphia, 34th and
Civic Center Blvd.,
Philadelphia, PA 19104
As of Maech 5, 1996. no persons held 5 percent or more of the outstanding
shares of the U. S. Selected Growth Portfolio - Class A Shares.
As of March 5, 1996, the following persons held 5 percent or more of the
outstanding shares in the U.S. Selected Growth Portfolio - Class B Shares:
Name and Address of Amount and Nature Percent
Type of Class Beneficial Owner of Beneficial Ownership of Portfolio
Common Stock Prudential Securities Broker Nominee 46.17%
&.001 per Share FBO
Credit Suisse, Dept.
XWF14 CH-8070
Zurich, Switzerland
As of February 29, 1995, the following persons held 5
percent or more of the outstanding shares of the Money Market Portfolio:
Name and Address of Amount and Nature Percent
Type of Class Beneficial Owner of Beneficial Ownership of Portfolio
Common Stock Cooper Industries In Direct Ownership 84.18%
$.001 per Share 1001 Fannin Street, First
City Tower, Suite 3900,
P.O. Box 446, Houston,
TX, 77210
Common Stock American Stock Transfer Direct Ownership 7.74%
$.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, at times, invest in excess of 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, and will be
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
ipalities and other public
to repurchase, including accrued interest, until payment is made. Reverse
repurchase agreements create leverage, a speculative factor, but will be not
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 RISKSASSOCIATED 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.
Brokers are selected on a basis of thier overall assistance in terms of
execution capabilities and research services, provided that their commision
scheduled are competitive with other firms providing similar services.
No trades will be executed with the Investment Adviser, the Sub-Adviser,
their affiliates, officers or employees acting as principal or agent for others,
although such entities and persons may be trading contemporaneously in the same
or similar securities. To the extent an investment that may be appropriate for
one of the Portfolios is considered for purchase by the Investment Adviser
and/0r Sub-Adviser for the account of another Portfolio, client or fund, the
investment opportunity, as well as the expense incurred in the transaction,
will be allocated in a manner deemed equitable by the Investment Adviser.
The Money Market Portfolio normally will not incur any brokerage commission
on its transactions because money market and debt instruments are generally
traded on a "net" basis with dealers acting as principal for their own accounts
without a stated commission. The price of the security, however, usually
includes a profit to the dealer. Securities purchased in underwritten offerings
include a fixed amount of compensation to the underwriter, generally referred
to as the underwriter's concession or discount. No commission or discounts are
paid when securities are purchased directly from an issuer.
For the fiscal year ended December 31, 1994, the International Equity paid
brokerage commissions of $242,975. For the period ended December 31, 1994, the
HLM International Equity Portfolio paid brokerage comissions of $39,000.
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 Company and
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 December 31, 1995, the Money Market Portfolio's
yield and effective yield were 5.13% and 5.26%, 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 December 31, 1995, HLM International Equity Portfolio
had a total return of 11.99%. On an annualized basis since its inception of
May 11, 1994, the Portfolio had a total return of 5.53% through December 31,
1995.
For the 12 months ended December 31, 1995, Lehman Brothers Funds, Inc. -
Lehman Selected Growth Stock Portfolio, the predecessor tpo U.S. Selected
Growth Portfolio had a total return of 44.80%. On an annualized basis since
inception of May 20, 1994, the Portfolio had a total return of 27.53%
through December 31, 1995.
For the 12 months ended December 31, 1995, Money Market Portfolio had a total
return of 5.74%. On an annualized basis since its inception of November 1,
1993, the Portfolio had a total return of 4.76% through December 31, 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, 1995 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.
Additionally, the Lehman Brothers Funds, Inc. Lehman Brothers selected
Growth Stock Portfolio's audited Financial Statements, including the Financial
Highlights, for the period ended December 31, 1995 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. Both Reports to Shareholders are delivered
with this Statement of Additional Information to share holders requesting
this Statement.
Part C OTHER INFORMATION
Item 24.Financial Statements and Exhibits
(a) Financial Statements and Schedules:
Part A -Financial Highlights.
Part B: The financial statements, notes to financial statements and
reports set forth below are filed herewith by the Registrant,
and are specifically incorporated by reference in Part B.
- Report of Independent Auditors dated February 9, 1996.
- Report of Independent Auditors dated February 15, 1996 for the
Lehman Brothers Funds, Inc. - Lehman Selected Growth Stock
Portfolio.
- Statements of Net Assets dated December 31, 1995.
- Statement of Assets and Liabilities dated December 31, 1995 for
the Lehman Brothers Funds, Inc. - Lehman Selected Growth Stock
Portfolio.
- Statements of Operations for the year ended December 31, 1995.
- Statements of Operations for the period ended December 31, 1995.
for the Lehman Brothers Funds, Inc. - Lehman Selected Growth
Stock Portfolio.
- Statements of Changes in Net Assets for the years ended December
31, 1995 and December 31, 1994.
- Statement of Changes in Net Assets for the period ended
December 31, 1995 and the years ended July 31, 1995 and July
31, 1994 for the Lehman Brothers Funds, Inc. - Lehman Selected
Growth Stock Portfolio.
- Financial Highlights for the years ended December 31, 1995,
December 31, 1994 and December 31, 1993.
- Financial Highlights for the period ended December 31, 1994,
and for the years ended July 31, 1995 and July 31, 1994 for
the Lehman Brothers Funds, Inc. - Lehman Selected Growth Stock
Portfolio.
(b) Exhibits
(1a) Articles of Incorporation, dated August 3, 1993 (previously
filed as Exhibit (1) to Pre-Effective Amendment No. 1 to
Registration Statement on Form N-1A, File Nos. 33-66840,
811-7928).
(1b) 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).
(1c) Articles Supplementary to Articles of Incorporation, dated
October 6, 1994 (filed herewith).
(1d) Articles of Amendment to Articles of Incorporation, dated
June 1, 1995 (filed herewith).
(1e) Articles Supplementary to Articles of Incorporation, dated
November 14, 1995 (filed herewith).
(2) By-laws (previwusly 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) 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).
(5a) Advisory Agreement, dated October 28, 1993 between the
Registrant (Money Market Portfolio) and AMT Capital Advisers,
Inc. (previously filed as Exhibit (5a) to Pre-Effective
Amendment No. 3 to Registrant's Registration Statement on
Form N-1A, File Nos. 33-66840, 811-7928).
(5c) Sub-Advisory Agreement, dated October 29, 1993 between AMT
Capital Advisers, Inc. and Fischer Francis Trees and Watts,
Inc. (previously filed as Exhibit (5c) to Pre-Effective
Amendment No. 3 to Registrant's Registration Statement on
Form N-1A, File Nos. 33-66840, 811-7928).
(5g) Advisory Agreement, dated June 13, 1995, between the Registrant
(HLM International Equity Portfolio) and Harding, Loevner
Management, L.P. (previwusly filed as Exhibit (5g) to Post-
Effective Amendment No. 7 to Registrant's Registration
Statement on Form N-1A, File Nos. 33-66840, 811-7928).
(5h) Advisory Agreement, dated December 14, 1995 between the
Registrant (U.S. Selected Growth Portfolio) and AMT Capital
Advisers, Inc. (filed herewith).
(5i) Sub-Advisory Agreement, dated December 14, 1995 between AMT
Capital Advisers, Inc. and Delphi Asset Management (filed
herewith).
(6) Distribution Agreement, dated October 29, 1993 between
Registrant and AMT Capital Services, Inc. (previously files as
Exhibit (6) to Pre-Effective Amendment No. 3 to Registrant's
Registration Statement on Form N-1A, File Nos. 33-66840,
811-7928).
(6a) Form of Dealer Agreement, dated March 5, 1996 between AMT
Capital Services, Inc. and Lehman Brothers, Inc. (filed
herewith).
(7) Not Applicable.
(8) 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).
(9a) 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 Registrant's Registration Statement on Form N-1A,
File Nos. 33-66840, 811-7928).
(9b) Administration Agreement, dated October 28, 1993 between the
Registrant and AMT Capital Services, Inc. (previously filed as
Exhibit (9b) to Pre-Effective Amendment No. 3 to Registrant's
Registration Statement on Form N-1A, File Nos. 33-66840,
811-7928).
(9c) Sales Incentive Fee Agreement, dated October 29, 1993 between
AMT Capital Advisers, Inc. and Fischer Francis Trees & Watts,
Inc. (previously filed as Exhibit (9c) to Pre-Effective
Amendment No. 3 to Registrant's Registration Statement on Form
N-1A, File Nos. 33-66840, 811-7928).
(9e) Sales Incentive Fee Agreement, dated June 13, 1995 between AMT
Capital Advisers, Inc. and Harding, Loevner Management, L.P.
(previously filed as Exhibit (9e) to Post-Effective Amendment
No. 7 to Registrant's Registration Statement on Form N-1A, File
Nos. 33-66840, 811-7928).
(9f) Form of Transfer Agency and Services Agreement, dated January
19, 1996 between the Registrant First Data Investor Services
Group Inc. (filed herewith).
(10) Opinion and Consent of Counsel, dated October 29, 1993
(previously filed as Exhibit (10) to Pre-Effective Amendment
No. 3 to Registrant's Registration Statement on Form N-1A, File
Nos. 33-66840, 811-7928).
(11) Consent of Independent Auditors (filed herewith).
(12) Not Applicable.
(13a) Purchase Agreement for Initial Capital, dated October 29, 1993
between the Registrant and Fischer Francis Trees & Watts, Inc.
(previously filed as Exhibit (13a) to Pre-Effective Amendment
No. 3 to Registrant's Registration Statement on Form N-1A, File
Nos. 33-66840, 811-7928).
(13c) Purchase Agreement for Initial Capital, dated May 2, 1994
between the Registrant and AMT Capital Advisers, Inc.
(previously filed as Exhibit (13c) to Post-Effective
Amendment No. 2 to Registrant's Registration Statement on
Form N-1A, File Nos. 33-66840, 811-7928).
(13d) Purchase Agreement for Initial Capital, dated December 12, 1996
between the Registrant and Alan M. Trager (filed herewith).
(14) Not Applicable.
(15) Form of Services and Distribution Plan, dated December,
1996 between the Registrant and AMT Capital Services, Inc.
(filed herewith).
(16) Performance Information Schedule (filed herewith).
(17) Not Applicable.
(18) Multiple Class Plan (filed herewith).
Item 25. Persons Controlled by or Under Common Control with Registrant
None.
Item 26. Number of Holders of Securities
As of February 29, 1996, there were 102 record holders
of the Capital Stock of the HLM International Equity Portfolio
and 13 record holders of the Capital Stock of the Money
Market Portfolio and no record holders of the Class A Capital
Stock of the U.S. Selected Growth Portfolio. As of March 5, 1996
there were 869 record holders of the Class B Capital Stock of
the U.S. Selected Growth Portfolio.
Item 27. 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 28. Business and Other Connections of Investment Advisor
The business and other connections of AMT Capital Advisers, Inc.
(an Investment Adviser), Delphi Asset Management (a Sub-Adviser),
Fischer Francis Trees & Watts, Inc. (a Sub-Adviser), and Harding,
Loevner Management, L.P. (an Investment Adviser), are on the
Uniform Application for Investment Adviser Registration ("Form
ADV") of each as currently on file with the Commission (File
Nos. 801-42426, 801-14998, 801-10577, and 801-36845, respectively)
the texts of which are hereby incorporated by reference.
Item 29. Principal Underwriters
(a) AMT Capital Services, Inc. acts as principal underwriter for
FFTW Funds, Inc., TIFF Investment Program, Inc., Holland Series
Fund, Inc. and AMT Capital Fund, Inc.
(b) For each director or officer of AMT Capital Services, Inc.:
Name and Principal Positions and Offices Positions and Offices with
Business Address with Underwriter Registrant
Alan M. Trager Director, President President
600 Fifth Avenue and Treasurer
26th Floor
New York, NY 10020
Carla E. Dearing Director, Managing Vice President
600 Fifth Avenue Director Assistant Treasurer
26th Floor
New York, NY 10020
Ruth L. Lansner Secretary None
Gilbert, Segall & Young
430 Park Avenue
11th Floor
New York, NY 10022
William E. Vastardis Senior Vice President Secretary
600 Fifth Avenue Treasurer
26th Floor
New York, NY 10020
(c) No commissions or other compensation was paid to the principal
underwriter during the registrant's last fiscal year.
Item 30. Location of Accounts and Records
All accounts, book and other documents required to be maintained
by Section 31(a) of an Investment Company Act of 1940 and the
Rules (17 CFR 270.32a-l to 3la-3) promulgated thereunder will
be maintained by the following:
Accounting and Custodial Records - Investors Bank & Trust Company,
P.O. Box 1537, Boston, Massachusetts 02205-1537.
Dividend Disbursing Agent and Transfer Agent - Investors Bank & Trust
Company, P.O. Box 1537, Boston, Massachusetts 02205-1537.
Dividend Disbursing Agent and Transfer Agent (U.S. Selected Growth
Portfolio - Class B Shares) - First Data Investor Services Group, Inc., 53
State Street, Boston, Massachusetts 02109
Balance of Accounts and Records: AMT Capital Advisers, Inc. and AMT
Capital Services, Inc., 600 Fifth Avenue, 26th Floor, New York, New
York 10020, Delphi Asset Management, 485 Madison Avenue, 20th
Floor, New York, NY 10022, Fischer Francis Trees & Watts, Inc., 200
Park Avenue, 46th Floor, New York, New York 10166, and Harding,
Loevner Management, L.P., 50 Division Street, Suite 401, Somerville, N.J.
08876.
Item 31. Management Services
None.
Item 32. Undertakings
The Registrant undertakes to call a meeting of shareholders for the purpose
of voting upon the question of removal of a director or directors when
requested in writing to do so by the holders of at least 10% of the
Registrant's outstanding shares and in connection with such meeting to
comply with the provisions of Section 16(c) of the Investment Company
Act of 1940 relating to shareholder communications.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement pursuant to Rule 485 (b) under the Securities Act of
1933. 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 6th day of March, 1996 .
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
*
Robert B. Allardice, III Director March 6, 1996
* Director March 6, 1996
Patricia M. Gammon
s\Alan M. Trager\ President and March 6, 1996
Alan M. Trager Director
s\Carla E. Dearing\ Vice President March 6, 1996
Carla E. Dearing and Assistant
Treasurer
s\William E. Vastardis\ Secretary and January 18, 1996
William E. Vastardis Treasurer
*Attorney -in-Fact s\William E. Vastardis\
EXHIBIT INDEX
Exhibit No.
(1c) Articles Supplementary dated October 4, 1994
(1d) Articles of Amendment dated June 1, 1995
(1e) Articles Supplementary dated November 14, 1995
(5h) Advisory Agreement
(5i) Sub-Advisory Agreement
(6a) Form of Dealer Agreement
(9) Form of Transfer Agency and Services Agreement
(11) Consent of Independent Auditors
(13d) Purchase Agreement for Initial Capital
(15) Form of Services and Distribution Plan
(16) Performance Information Schedule
(18) Multiple Class Plan
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<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (3,686,624)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 632,402
<NUMBER-OF-SHARES-REDEEMED> (516,545)
<SHARES-REINVESTED> 232,532
<NET-CHANGE-IN-ASSETS> 5,068,789
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,643,242
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 127,576
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 385,613
<AVERAGE-NET-ASSETS> 40,690,866
<PER-SHARE-NAV-BEGIN> 13.34
<PER-SHARE-NII> (0.10)
<PER-SHARE-GAIN-APPREC> 1.51
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1.28)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 13.47
<EXPENSE-RATIO> 2.09
<AVG-DEBT-OUTSTANDING> 0
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</TABLE>
ARTICLES SUPPLEMENTARY OF
AMT CAPITAL FUND, INC.
AMT Capital Fund, Inc. (the "Fund"), hereby certifies to the State Department
of Assessments and Taxation of Maryland as follows:
FIRST: Pursuant to the authority expressly vested in the Board
of Directors of the Fund by Article FIFTH of the Articles of
Incorporation, as amended, the Board of Directors has
reclassified and designated 250,000,000 shares each of the
authorized but unissued shares of the Money Market Portfolio and
the National Municipal Money Market Portfolio, par value $.001
per share, as 250,000,000 shares each of the U.S. Market Index
Portfolio and the International Equity Portfolio, each with a par
value of $.001 per share.
SECOND: Pursuant to the authority expressly vested in the Board
of Directors of the Fund by Article FIFTH of the Articles of
Incorporation, as amended, the Board of Directors has
reclassified and designated the 250,000,000 shares of the
authorized but unissued shares of the U.S. Market Index
Portfolio, par value $.001 per share, as 150,000,000 shares of
the Large Cap Index Portfolio and 100,000,000 shares of the
Small/Mid Cap Index Portfolio, each with a par value of $.001 per
share.
THIRD: The International Equity Portfolio, Large Cap Index
Portfolio, and Small/Mid Cap Index Portfolio shall have the same
preferences, conversions, and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemptions as were afforded to the Money
market Portfolio and National Municipal Money Market Portfolio as
set forth in Article FIFTH of the Articles of Incorporation of
the Fund, as amended.
IN WITNESS THEREOF, the Fund has caused there Articles
Supplementary to be signed in its name and on its behalf on this
6th day of October, 1994, by its President who acknowledges that
to the best of his knowledge, information and belief and under
penalties of perjury, all matters and facts contained in these
Articles Supplementary are true in all material respects.
ATTEST: AMT CAPITAL FUND, INC.
/s/ William E. Vastardis /s/ Alan M. Trager
William E. Vastardis Alan M. Trager
Secretary President
ARTICLES OF AMENDMENT TO
THE ARTICLES OF INCORPORATION OF
AMT CAPITAL FUND, INC.
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: Paragraph (c) of Article FIFTH of the Articles of Incorporation of the
Corporation is hereby amended to change the name of the Corporation's
International Equity Portfolio class of common stock to HLM International
Equity Portfolio.
SECOND: The board of directors of the Corporation on February 22, 1995, duly
adopted a resolution in which was set forth the foregoing amendment to the
charter, declaring that the said amendment of the charter as proposed was
advisable and directing that it be submitted for action thereon by the
stockholders of the Corporation at a special meeting to be held on May 17, 1995.
THIRD: Notice setting forth the said amendment of the charter and stating that
a purpose of the meeting of the stockholders would be to take action thereon,
was given, as required by law, to all stockholders entitled to vote thereon.
The amendment of the charter of the Corporation as hereinabove set forth was
approved by the stockholders of the Corporation at said meeting by the
affirmative vote of at least a majority of the class of stockholders entitled to
vote thereon.
FOURTH: The amendment of the charter of the Corporation as hereinabove set forth
has been duly advised by the board of directors and approved by the stockholders
of the Corporation.
FIFTH: The amendment is limited to a change expressly permitted by Section
2-605(4) of the Maryland General Corporation Law and the Corporation is
registered as an open-end company under the Investment Company Act of 1940.
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 witnesses by its
Secretary on the 1st day of June, 1995.
AMT Capital Fund, Inc.
By /s/ Alan M. Trager
Alan M. Trager
President
Witness: (Attest)
/s/ William E. Vastardis
William E. Vastardis
Secretary
THE UNDERSIGNED, President of AMT Capital Fund, Inc., who executed on behalf of
said corporation the foregoing Articles of Amendment, of which the certificate
is made a part, hereby acknowledges, in the name and on behalf of said
corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect
to the approval thereof are true in all material respects, under the penalties
of perjury.
AMT CAPITAL FUND, INC.
By: /s/ Alan M. Trager
Alan M. Trager
President
SEAL
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 a distribution plan, if any, 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 14, 1995.
ATTESTED: AMT CAPITAL FUND, INC.
/s/ William E. Vastardis /s/ Alan M. Trager
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.
/s/ Alan M. Trager
Alan M. Trager, President
ADVISORY AGREEMENT
ADVISORY AGREEMENT, dated December 14, 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:/s/ Eric P Nachimovsky By: /s/ Carla E. Dearing
Eric P. Nachimovsky Carla E. Dearing, Assistant
Treasurer
ATTEST AMT CAPITAL ADVISERS, INC.
By:_______________________ By: /s /Alan M. Trager
Alan M. Trager, President
SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT, dated December 14, 1995, 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: /s/ Jonathan Smith
Title: General Partner
ATTEST AMT CAPITAL ADVISERS, INC.
By:_______________________ By: /s/ Alan M. Trager
Alan M. Trager
President
AMT Capital Fund, Inc.
U.S. Selected Growth Portfolio - Class B Shares
Dealer Agreement
AGREEMENT made this 5th day of March, 1996, by and between the AMT
Capital Services, Inc., (the "Distributor"), a Delaware corporation, and Lehman
Brothers Inc. (the "Dealer"), a Delaware 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, the Portfolio or from Dealer's
customers.
(c) To enter orders for the purchase of Shares of the Portfolio only with
Distributor or 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) That if payment for the shares purchased is not received within the time
customary or the time required by law for such payment, the sale may be
canceled without any responsibility or liability on the Distributor's part
or on the part of the Protfolio, or at the Distribution's option, the
Distributor may sell the shares which Dealer ordered back to the
Portfolio, in which latter case Distributor may hold you responsible for
any loss or profit suffered by the Distributor resulting from Dealer's
failure to make payment as aforesaid. Distributor shall have no liability
for any check or item returned unpaid to Dealer after Dealer has paid the
Distributor on behalf of the purchaser. Distributor may refuse to liquidate
investment unless Distributor receives the purchaser's signed authorization
for the liquidation.
(g) That Dealer shall assume responsibility for any loss to the Portfolio
caused by a correction made subsequent to trade date, provided such correction
was not based on any error, omission or negligence on Distributor's part and
that the Dealer will immediately pay such loss to the Portfolio upon
notification.
(h) That if on a redemption which the Dealer has ordered, instructions in
proper form, including outstanding certificates, are not received within the
time customary or the time required by law, the redemption may be canceled
forthwith without any responsibility or liability on the Distributor's part
or on the part of the Portfolio or at the Distributor's option, it may buy
the shares redeemed on behalf of the Portfolio, in which latter case
Distributor may hold Dealer responsible for any loss to the Portfolio or
loss of profit suffered by Distributor resulting from your failure to
settle the redemption.
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. If payment for the Shares purchased is not
received within the time customary for such payments, the sale may be canceled
forthwith without any responsibility or liability on our part or on the part of
the Fund (in which case you will be responsible for any loss, including loss of
profit suffered by the Fund resulting from your failure to make payment as
aforesaid), or, at our option, we may sell the Shares ordered back to the Fund
(in which case we may hold you responsible for any loss, including loss of
profit suffered by us resulting from your failure to make payment as aforesaid).
Termination or cancellation of this Agreement will not relieve you or us from
the requirements of this paragraph.
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 any Shares from
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 accompanied by payment in 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 by AMT Capital
Services, Inc.
AMT Capital Services, Inc.
By: /s/ Alan M. Trager
Alan M. Trager, President
Lehman Brothers, Inc.
Address:
By:____________________________ _____________________________
(Signature) _____________________________
Name:__________________________ Telephone:______________________
Title:_________________________ NASD CRD#____________________
TRANSFER AGENCY AND SERVICES AGREEMENT
THIS AGREEMENT, dated as of this 19th day of January, 1996 between AMT
Capital Fund, Inc. (the "Fund"), a Maryland corporation having its principal
place of business at 600 Fifth Avenue-Twenty-Sixth Floor, New York, New York
10020 and FIRST DATA INVESTOR SERVICES GROUP, INC. ("FDISG"), a Massachusetts
corporation with principal offices at One Exchange Place, 53 State
Street, Boston, Massachusetts 02109.
WITNESSETH
WHEREAS, the Fund is authorized to issue shares in separate
series, with each such series representing interests in a separate
portfolio of securities and other assets;
WHEREAS, the Fund offers shares in the U.S. Selected
Growth Portfolio (the "Portfolio");
WHEREAS, the Fund on behalf of the Portfolio, desires to
appoint FDISG as its transfer agent, dividend disbursing agent and
agent in connection with certain other activities with respect to the
Class B shares of the Portfolio and FDISG desires to accept such
appointment;
NOW, THEREFORE, in consideration of the mutual covenants
and promises hereinafter set forth, the Fund and FDISG agree as
follows:
Article 1 Definitions.
1.1 Whenever used in this Agreement, the following words
and phrases, unless the context otherwise requires, shall have the
following meanings:
(a) "Articles of Incorporation" shall mean the
Articles of Incorporation of the Fund as the same may be
amended from time to time;
(b) "Authorized Person" shall be deemed to include
(i) any authorized officer of the Fund; or (ii) any person,
whether or not such person is an officer or employee of the
Fund, duly authorized to give Oral Instructions or Written
Instructions on behalf of the Fund as indicated in writing to
FDISG from time to time;
(c) "Board of Directors" shall mean the Board of
Directors of the Fund;
(d) "Commission" shall mean the Securities and
Exchange Commission;
(e) "Custodian" refers to any custodian or
subcustodian of securities and other property which the Fund
may from time to time deposit, or cause to be deposited or held
under the name or account of such a custodian pursuant to a
Custodian Agreement;
(f) "1934 Act" shall mean the Securities Exchange
Act of 1934 and the rules and regulations promulgated thereunder,
all as amended from time to time;
(g) "1940 Act" shall mean the Investment Company
Act of 1940 and the rules and regulations promulgated
thereunder, all as amended from time to time;
(h) "Oral Instructions" shall mean instructions, other
than Written Instructions, actually received by FDISG from a
person reasonably believed by FDISG to be an Authorized
Person;
(i) "Portfolio" shall mean the U.S. Selected Growth
Portfolio;
(j) "Prospectus" shall mean the most recently dated
Fund Prospectus and Statement of Additional Information,
including any supplements thereto if any, which has become
effective under the Securities Act of 1933 and the 1940 Act;
(k) "Shares" refers to the Class B shares of the U.S.
Selected Growth Portfolio;
(l) "Shareholder" shall mean a record owner of
Shares of the Portfolio; and
(m) "Written Instructions" shall mean a written
communication signed by a person reasonably believed by
FDISG to be an Authorized Person and actually received by
FDISG. Written Instructions shall include manually executed
originals and authorized electronic transmissions, including
telefacsimile of a manually executed original or other process.
Article 2 Appointment of FDISG.
The Fund, on behalf of the Portfolio, hereby appoints and
constitutes FDISG as transfer agent and dividend disbursing agent for
the Shares of the Portfolio and as Shareholder servicing agent for the
Fund and FDISG hereby accepts such appointments and agrees to
perform the duties hereinafter set forth.
Article 3 Duties of FDISG.
3.1 FDISG shall be responsible for:
(a) Administering and/or performing the customary
services of a transfer agent; acting as service agent in
connection with dividend and distribution functions; and for
performing shareholder account and administrative agent
functions in connection with the issuance, transfer and
redemption or repurchase (including coordination with the
Custodian) of Shares of the Portfolio, as more fully described
in the written schedule of Duties of FDISG annexed hereto as
Schedule A and incorporated herein, and in accordance with the
terms of the Prospectus of the Fund on behalf of the Portfolio,
applicable law and the procedures established from time to time
between FDISG and the Fund.
(b) Recording the issuance of Shares and
maintaining pursuant to Rule 17Ad-10(e) of the 1934 Act a
record of the total number of Shares of the Portfolio which are
authorized, based upon data provided to it by the Fund, and
issued and outstanding. FDISG shall provide the Fund on a
regular basis with the total number of Shares of the Portfolio
which are authorized and issued and outstanding and shall have
no obligation, when recording the issuance of Shares, to
monitor the issuance of such Shares or to take cognizance of
any laws relating to the issue or sale of such Shares, which
functions shall be the sole responsibility of the Fund.
(c) Notwithstanding any of the foregoing provisions
of this Agreement, FDISG shall be under no duty or obligation
to inquire into, and shall not be liable for: (i) the legality of the
issuance or sale of any Shares or the sufficiency of the amount
to be received therefor; (ii) the legality of the redemption of
any Shares, or the propriety of the amount to be paid therefor;
(iii) the legality of the declaration of any dividend by the Board
of Directors, or the legality of the issuance of any Shares in
payment of any dividend; or (iv) the legality of any recapitalization
or readjustment of the Shares.
3.2 In addition, the Fund shall (i) identify to FDISG in writing those
transactions and assets to be treated as exempt from blue sky reporting for
each State and (ii) verify the establishment of transactions for each State
on the system prior to activation and thereafter monitor the daily activity
for each State. The responsibility of FDISG for the Fund's blue sky State
registration status is solely limited to the initial establishment of
transactions subject to blue sky compliance by the Fund and the reporting of
such transactions to the Fund as provided above.
3.3 In addition to the duties set forth herein, FDISG shall perform such
other duties and functions, and shall be paid such amounts therefor, as may
from time to time be agreed upon in writing between the Fund and FDISG.
Article 4 Recordkeeping and Other Information.
4.1 FDISG shall create and maintain all records required of it pursuant to
its duties hereunder and as set forth in Schedule A in accordance with all
applicable laws, rules and regulations, including records required by Section
31(a) of the 1940 Act. Where applicable, such records shall be maintained
by FDISG for the periods and in the places required by Rule 31a-2 under the
1940 Act.
4.2 To the extent required by Section 31 of the 1940 Act, FDISG agrees that all
such records prepared or maintained by FDISG relating to the services to be
performed by FDISG hereunder are the property of the Fund and will be
preserved, maintained and made available in accordance with such section, and
will be surrendered promptly to the Fund on and in accordance with the Fund's
request.
4.3 In case of any requests or demands for the inspection of Shareholder
records of the Fund, FDISG will endeavor to notify the Fund of such request
and secure Written Instructions as to the handling of such request. FDISG
reserves the right, however, to exhibit the Shareholder records to any person
whenever it is advised by its counsel that it may be held liable for the
failure to comply with such request.
Article 5 Fund Instructions.
5.1 FDISG will have no liability when acting upon Written
or Oral Instructions believed to have been executed or orally
communicated by an Authorized Person and will not be held to have
any notice of any change of authority of any person until receipt of a
Written Instruction thereof from the Fund. FDISG will also have no
liability when processing Share certificates which it reasonably
believes to bear the proper manual or facsimile signatures of the
officers of the Fund and the proper countersignature of FDISG.
5.2 At any time, FDISG may request Written Instructions
from the Fund and may seek advice from legal counsel for the Fund,
or its own legal counsel, with respect to any matter arising in
connection with this Agreement, and it shall not be liable for any
action taken or not taken or suffered by it in good faith in accordance
with such Written Instructions or in accordance with the opinion of
counsel for the Fund or for FDISG. Written Instructions requested by
FDISG will be provided by the Fund within a reasonable period of
time.
5.3 FDISG, its officers, agents or employees, shall accept
Oral Instructions or Written Instructions given to them by any person
representing or acting on behalf of the Fund only if said representative
is an Authorized Person. The Fund agrees that all Oral Instructions
shall be followed within one business day by confirming Written
Instructions, and that the Fund's failure to so confirm shall not impair
in any respect FDISG's right to rely on Oral Instructions.
Article 6 Compensation.
6.1 The Fund on behalf of the Portfolio will compensate
FDISG for the performance of its obligations hereunder in accordance
with the fees set forth in the written Fee Schedule annexed hereto as
Schedule B and incorporated herein.
6.2 In addition to those fees set forth in Section 6.1 above,
the Fund on behalf of the Portfolio agrees to pay, and will be billed
separately for, out-of-pocket expenses incurred by FDISG in the
performance of its duties hereunder. Out-of-pocket expenses shall
include, but shall not be limited to, the items specified in the written
schedule of out-of-pocket charges annexed hereto as Schedule C and
incorporated herein. Schedule C may be modified by written agreement between
the parties. Unspecified out-of-pocket expenses shall be limited to those
out-of-pocket expenses reasonably incurred by FDISG in the performance of its
obligations hereunder.
6.3 The Fund on behalf of the Portfolio agrees to pay all fees and out-of-
pocket expenses within fifteen (15) days following the receipt of the
respective invoice.
6.4 Any compensation agreed to hereunder may be adjusted from time to time
by attaching to Schedule B, a revised Fee Schedule executed and dated by the
parties hereto.
6.5 The Fund acknowledges that the fees that FDISG charges the Fund under
this Agreement reflect the allocation of risk between the parties, including
the disclaimer of warranties in Section 9.3 and the limitations on liability
and exclusion of remedies in Section 11.2 and Article 12. Modifying the
allocation of risk from what is stated here would affect the fees that FDISG
charges, and in consideration of those fees, the Fund agrees to the stated
allocation of risk.
Article 7 Documents.
In connection with the appointment of FDISG, the Fund shall,
on or before the date this Agreement goes into effect, but in any case
within a reasonable period of time for FDISG to prepare to perform its
duties hereunder, deliver or caused to be delivered to FDISG the
documents set forth in the written schedule of Fund Documents
annexed hereto as Schedule D.
Article 8 Transfer Agent System.
8.1 FDISG shall retain title to and ownership of any and all
data bases, computer programs, screen formats, report formats,
interactive design techniques, derivative works, inventions,
discoveries, patentable or copyrightable matters, concepts, expertise,
patents, copyrights, trade secrets, and other related legal rights utilized
by FDISG in connection with the services provided by FDISG to the
Fund herein (the "FDISG System").
8.2 FDISG hereby grants to the Fund a limited license to
the FDISG System for the sole and limited purpose of having FDISG
provide the services contemplated hereunder and nothing contained in
this Agreement shall be construed or interpreted otherwise and such
license shall immediately terminate with the termination of this
Agreement.
Article 9 Representations and Warranties.
9.1 FDISG represents and warrants to the Fund that:
(a) it is a corporation duly organized an existing and
in good standing under the laws of the Commonwealth of
Massachusetts;
(b) it is empowered under applicable laws and by its
Articles of Incorporation and By-Laws to enter into and
perform this Agreement;
(c) all requisite corporate proceedings have been
taken to authorized it to enter into this Agreement;
(d) it is duly registered with its appropriate
regulatory agency as a transfer agent and such registration will
remain in effect for the duration of this Agreement; and
(e) it has and will continue to have access to the
necessary facilities, equipment and personnel to perform its
duties and obligations under this Agreement.
9.2 The Fund represents and warrants to FDISG that:
(a) it is duly organized and existing and in good
standing under the laws of the jurisdiction in which it is
organized;
(b) it is empowered under applicable laws and by its
Article of Incorporation and By-Laws to enter into this
Agreement;
(c) all corporate proceedings required by said
Articles of Incorporation, By-Laws and applicable laws have
been taken to authorized it to enter into this Agreement;
(d) a registration statement under the Securities Act
of 1933, as amended, and the 1940 Act on behalf of the
Portfolio is currently effective and will remain effective, and all
appropriate state securities law filings have been made and will
continue to be made, with respect to all Shares of the Fund
being offered for sale; and
(e) all outstanding Shares are validly issued, fully
paid and non-assessable and when Shares are hereafter issued
in accordance with the terms of the Fund's Articles of
Incorporation and its Prospectus with respect to the Portfolio,
such Shares shall be validly issued, fully paid and
non-assessable.
9.3 THIS IS A SERVICE AGREEMENT. EXCEPT AS
EXPRESSLY PROVIDED IN THIS AGREEMENT, FDISG
DISCLAIMS ALL OTHER REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, MADE TO THE FUND
OR ANY OTHER PERSON, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTIES REGARDING QUALITY,
SUITABILITY, MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE OR OTHERWISE (IRRESPECTIVE OF
ANY COURSE OF DEALING, CUSTOM OR USAGE OF TRADE)
OF ANY SERVICES OR ANY GOODS PROVIDED INCIDENTAL
TO SERVICES PROVIDED UNDER THIS AGREEMENT. FDISG
DISCLAIMS ANY WARRANTY OF TITLE OR NON-
INFRINGEMENT EXCEPT AS OTHERWISE SET FORTH IN THIS
AGREEMENT.
Article 10 Indemnification.
10.1 FDISG shall not be responsible for and the Fund on
behalf of the Portfolio shall indemnify and hold FDISG harmless from
and against any and all claims, costs, expenses (including reasonable
attorneys' fees), losses, damages, charges, payments and liabilities of
any sort or kind which may be asserted against FDISG or for which
FDISG may be held to be liable (a "Claim") arising out of or
attributable to any of the following:
(a) any actions of FDISG required to be taken
pursuant to this Agreement unless such Claim resulted from a
negligent act or omission to act or bad faith by FDISG in the
performance of its duties hereunder;
(b) FDISG's reasonable reliance on, or reasonable
use of information, data, records and documents (including but
not limited to magnetic tapes, computer printouts, hard copies
and microfilm copies) received by FDISG from the Fund, or
any authorized third party acting on behalf of the Fund,
including but not limited the prior transfer agent for the Fund,
in the performance of FDISG's duties and obligations
hereunder;
(c) the reliance on, or the implementation of, any
Written or Oral Instructions or any other instructions or
requests of the Fund on behalf of the Portfolio;
(d) the offer or sale of Shares in violation of any
requirement under the securities laws or regulations of any state
that such shares be registered in such state or in violation of
any stop order or other determination or ruling by any state
with respect to the offer or sale of such Shares in such state;
and
(e) the Fund's refusal or failure to comply with the
terms of this Agreement, or any Claim which arises out of the
Fund's negligence or misconduct or the breach of any
representation or warranty of the Fund made herein.
10.2 In any case in which the Fund may be asked to indemnify
or hold FDISG harmless, FDISG will notify the Fund promptly after
identifying any situation which it believes presents or appears likely to
present a claim for indemnification against the Fund although the
failure to do so shall not prevent recovery by FDISG and shall keep
the Fund advised with respect to all developments concerning such
situation. The Fund shall have the option to defend FDISG against
any Claim which may be the subject of this indemnification, and, in
the event that the Fund so elects, such defense shall be conducted by
counsel chosen by the Fund and satisfactory to FDISG, and thereupon
the Fund shall take over complete defense of the Claim and FDISG
shall sustain no further legal or other expenses in respect of such
Claim. FDISG will not confess any Claim or make any compromise in
any case in which the Fund will be asked to provide indemnification,
except with the Fund's prior written consent. The obligations of the
parties hereto under this Article 10 shall survive the termination of this
Agreement.
10.3 Any claim for indemnification under this Agreement
must be made prior to the earlier of:
(a) one year after the Fund becomes aware of the
event for which indemnification is claimed; or
(b) one year after the earlier of the termination of
this Agreement or the expiration of the term of this Agreement.
10.4 Except for remedies that cannot be waived as a matter
of law (and injunctive or provisional relief), the provisions of this
Article 10 shall be FDISG's sole and exclusive remedy for claims or
other actions or proceedings to which the Fund's indemnification
obligations pursuant to this Article 10 may apply.
Article 11 Standard of Care.
11.1 FDISG shall at all times act in good faith and agrees to
use its best efforts within commercially reasonable limits to ensure the
accuracy of all services performed under this Agreement, but assumes
no responsibility for loss or damage to the Fund unless said errors are
caused by FDISG's own negligence, bad faith or willful misconduct or
that of its employees.
11.2 Notwithstanding any provision in this Agreement to the
contrary, FDISG's cumulative liability (to the Fund) for all losses,
claims, suits, controversies, breaches, or damages for any cause
whatsoever (including but not limited to those arising out of or related
to this Agreement) and regardless of the form of action or legal theory
shall not exceed the lesser of (i) $500,000 or (ii) the fees received by
FDISG for services provided under this Agreement during the twelve
months immediately prior to the date of such loss or damage. Fund
understands the limitation on FDISG's damages to be a reasonable
allocation of risk and Fund expressly consents with respect to such
allocation of risk. In allocating risk under the Agreement, the parties
agree that the damage limitation set forth above shall apply to any
alternative remedy ordered by a court in the event such court
determines that sole and exclusive remedy provided for in the
Agreement fails of its essential purpose.
11.3 Neither party may assert any cause of action against the
other party under this Agreement that accrued more than two (2) years
prior to the filing of the suit (or commencement of arbitration
proceedings) alleging such cause of action.
11.4 Each party shall have the duty to mitigate damages for
which the other party may become responsible.
Article 12 Consequential Damages.
NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL
FDISG, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS OR SUBCONTRACTORS BE LIABLE UNDER ANY THEORY OF TORT, CONTRACT, STRICT
LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR LOST PROFITS, EXEMPLARY,
PUNITIVE, SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES, EACH OF
WHICH IS HEREBY EXCLUDED BY AGREEMENT OF THE PARTIES REGARDLESS OF WHETHER
SUCH DAMAGES WERE FORESEEABLE OR WHETHER EITHER PARTY OR ANY ENTITY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Article 13 Term and Termination.
13.1 This Agreement shall be effective on the date first written
above and shall continue for a period of five (5) years (the "Initial
Term"), unless earlier terminated pursuant to the terms of this Agreement.
Thereafter, this Agreement shall automatically be renewed for successive terms
of three (3) years ("Renewal Terms") each.
13.2 Either party may terminate this Agreement at the end of the Initial
Term or any subsequent Renewal Term upon not less than ninety (90) days or
more than one-hundred eighty (180) days prior written notice to the other
party.
13.3 In the event a termination notice is given by the Fund, all
expenses associated with movement of records and materials and conversion
thereof to a successor transfer agent will be borne by the Fund.
13.4 If a party hereto is guilty of a material failure to perform
its duties and obligations hereunder (a "Defaulting Party") the other
party (the "Non-Defaulting Party") may give written notice thereof to
the Defaulting Party, and if such material breach shall not have been
remedied within thirty (30) days after such written notice is given, then
the Non-Defaulting Party may terminate this Agreement by giving
thirty (30) days written notice of such termination to the Defaulting
Party. If FDISG is the Non-Defaulting Party, its termination of this
Agreement shall not constitute a waiver of any other rights or remedies
of FDISG with respect to services performed prior to such termination
or rights of FDISG to be reimbursed for out-of-pocket expenses. In all
cases, termination by the Non-Defaulting Party shall not constitute a
waiver by the Non-Defaulting Party of any other rights it might have
under this Agreement or otherwise against the Defaulting Party.
Article 14 Confidentiality.
14.1 The parties agree that the Proprietary Information
(defined below) and the contents of this Agreement (collectively
"Confidential Information") are confidential information of the parties
and their respective licensors. The Fund and FDISG shall exercise at
least the same degree of care, but not less than reasonable care, to
safeguard the confidentiality of the Confidential Information of the
other as it would exercise to protect it's own confidential information
of a similar nature. The Fund and FDISG may use the Confidential
Information only to exercise its rights under this Agreement. The
Fund and FDISG shall not duplicate, sell or disclose to others the
Confidential Information of the other, in whole or in part, without the
prior written permission of the other party. The Fund and FDISG
may, however, disclose Confidential Information to its employees who
have a need to know the Confidential Information to perform work for
the other, provided that each shall use reasonable efforts to ensure that
the Confidential Information is not duplicated or disclosed by its
employees in breach of this Agreement. The Fund and FDISG may
also disclose the Confidential Information to independent contractors,
auditors, and professional advisors, provided they first agree in writing
to be bound by the confidentiality obligations substantially similar to
this Section 14.1. Notwithstanding the previous sentence, in no event
shall either the Fund or FDISG disclose the Confidential Information
to any competitor of the other without specific, prior written consent.
14.2 Proprietary Information means:
(a) any data or information that is competitively
sensitive material, and not generally known to the public,
including, but not limited to, information about product plans,
marketing strategies, finance, operations, customer relation-
ships, customer profiles, sales estimates, business plans, and
internal performance results relating to the past, present or
future business activities of the Fund or FDISG, their
respective subsidiaries and affiliated companies and the
customers, clients and suppliers of any of them;
(b) any scientific or technical information, design,
process, procedure, formula, or improvement that is commer-
cially valuable and secret in the sense that its confidentiality
affords the Fund or FDISG a competitive advantage over its
competitors; and
(c) all confidential or proprietary concepts,
documentation, reports, data, specifications, computer
software, source code, object code, flow charts, databases,
inventions, know-how, show-how and trade secrets, whether or
not patentable or copyrightable.
14.3 Confidential Information includes, without limitation, all
documents, inventions, substances, engineering and laboratory
notebooks, drawings, diagrams, specifications, bills of material,
equipment, prototypes and models, and any other tangible manifes-
tation of the foregoing of either party which now exist or come into the
control or possession of the other.
Article 15 Force Majeure.
No party shall be liable for any default or delay in the
performance of its obligations under this Agreement if and to the
extent such default or delay is caused, directly or indirectly, by (i) fire,
flood, elements of nature or other acts of God; (ii) any outbreak or
escalation of hostilities, war, riots or civil disorders in any country,
(iii) any act or omission of the other party or any governmental
authority; (iv) any labor disputes (whether or not the employees'
demands are reasonable or within the party's power to satisfy); or (v)
nonperformance by a third party or any similar cause beyond the
reasonable control of such party, including without limitation, failures
or fluctuations in telecommunications or other equipment. In any such
event, the non-performing party shall be excused from any further
performance and observance of the obligations so affected only for as
long as such circumstances prevail and such party continues to use
commercially reasonable efforts to recommence performance or
observance as soon as practicable.
Article 16 Assignment and Subcontracting.
This Agreement, its benefits and obligations shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. This Agreement may not be
assigned or otherwise transferred by either party hereto, without the
prior written consent of the other party, which consent shall not be
unreasonably withheld; provided, however, that FDISG may, in its
sole discretion, assign all its right, title and interest in this Agreement
to an affiliate, parent or subsidiary, or to the purchaser of substantially
all of its business. FDISG may, in its sole discretion, engage subcontractors
to perform any of the obligations contained in this Agreement to be performed
by FDISG.
Article 17 Arbitration.
17.1 Any claim or controversy arising out of or relating to this Agreement,
or breach hereof, shall be settled by arbitration administered by the American
Arbitration Association in Boston, Massachusetts in accordance with its
applicable rules, except that the Federal Rules of Evidence and the Federal
Rules of Civil Procedure with respect to the discovery process shall apply.
17.2 The parties hereby agree that judgment upon the award
rendered by the arbitrator may be entered in any court having
jurisdiction.
17.3 The parties acknowledge and agree that the performance
of the obligations under this Agreement necessitates the use of
instrumentalities of interstate commerce and, notwithstanding other
general choice of law provisions in this Agreement, the parties agree
that the Federal Arbitration Act shall govern and control with respect
to the provisions of this Article 17.
Article 18 Notice.
Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Fund or FDISG, shall be
sufficiently given if addressed to that party and received by it at its
office set forth below or at such other place as it may from time to
time designate in writing.
To the Fund:
AMT Capital Services, Inc.
600 Fifth Avenue-Twenty-Sixth Floor
New York, New York 10020
Attention: William E. Vastardis
Senior Vice President
To FDISG:
First Data Investor Services Group, Inc.
One Exchange Place
53 State Street
Boston, Massachusetts 02109
Attention: President
with a copy to FDISG's General Counsel
Article 19 Successors.
This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns, provided,
however, that this Agreement shall not be assigned to any person other
than a person controlling, controlled by or under common control with
the assignor without the written consent of the other party, which
consent shall not be unreasonably withheld.
Article 20 Governing Law/Venue.
The laws of the Commonwealth of Massachusetts, excluding
the laws on conflicts of laws, shall govern the interpretation, validity,
and enforcement of this agreement. All actions arising from or
related to this Agreement shall be brought in the state and federal
courts sitting in the City of Boston, and FDISG and Client hereby
submit themselves to the exclusive jurisdiction of those courts.
Article 21 Counterparts.
This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original; but such
counterparts shall, together, constitute only one instrument.
Article 22 Captions.
The captions of this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions
hereof or otherwise affect their construction or effect.
Article 23 Publicity.
Neither FDISG nor the Fund shall release or publish news
releases, public announcements, advertising or other publicity relating
to this Agreement or to the transactions contemplated by it without the
prior review and written approval of the other party; provided,
however, that either party may make such disclosures as are required
by legal, accounting or regulatory requirements after making
reasonable efforts in the circumstances to consult in advance with the
other party.
Article 24 Relationship of Parties.
The parties agree that they are independent contractors and not
partners or co-venturers and nothing contained herein shall be
interpreted or construed otherwise.
Article 25 Entire Agreement; Severability.
25.1 This Agreement, including Schedules, Addenda, and
Exhibits hereto, constitutes the entire Agreement between the parties
with respect to the subject matter hereof and supersedes all prior and
contemporaneous proposals, agreements, contracts, representations,
and understandings, whether written or oral, between the parties with
respect to the subject matter hereof. No change, termination,
modification, or waiver of any term or condition of the Agreement
shall be valid unless in writing signed by each party. No such writing
shall be effective as against FDISG unless said writing is executed by a
Senior Vice President, Executive Vice President, or President of
FDISG. A party's waiver of a breach of any term or condition in the
Agreement shall not be deemed a waiver of any subsequent breach of
the same or another term or condition.
25.2 The parties intend every provision of this Agreement to
be severable. If a court of competent jurisdiction determines that any
term or provision is illegal or invalid for any reason, the illegality or
invalidity shall not affect the validity of the remainder of this
Agreement. In such case, the parties shall in good faith modify or
substitute such provision consistent with the original intent of the
parties. Without limiting the generality of this paragraph, if a court
determines that any remedy stated in this Agreement has failed of its
essential purpose, then all other provisions of this Agreement,
including the limitations on liability and exclusion of damages, shall
remain fully effective.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers, as of the
day and year first above written.
AMT CAPITAL FUND, INC.
By:
Title:
FIRST DATA INVESTOR SERVICES GROUP, INC.
By:
Title:
Schedule A
DUTIES OF FDISG
1. Shareholder Information. FDISG shall maintain a record of the number of
Shares held by each Shareholder of record which shall include name, address,
taxpayer identification and which shall indicate whether such Shares are held
in certificates or uncertificated form.
2. Shareholder Services. FDISG shall respond as appropriate to all inquiries
and communications from Shareholders relating to Shareholder accounts with
respect to its duties hereunder and as may be from time to time mutually
agreed upon between FDISG and the Fund.
3. Share Certificates.
(a) At the expense of the Fund, the Fund shall
supply FDISG with an adequate supply of blank share certificates to
meet FDISG requirements therefor. Such Share certificates shall be
properly signed by facsimile. The Fund agrees that, notwithstanding
the death, resignation, or removal of any officer of the Fund whose
signature appears on such certificates, FDISG or its agent may
continue to countersign certificates which bear such signatures until
otherwise directed by Written Instructions.
(b) FDISG shall issue replacement Share certificates in
lieu of certificates which have been lost, stolen or destroyed, upon
receipt by FDISG of properly executed affidavits and lost certificate
bonds, in form satisfactory to FDISG, with the Fund and FDISG as
obligees under the bond.
(c) FDISG shall also maintain a record of each
certificate issued, the number of Shares represented thereby and the
Shareholder of record. With respect to Shares held in open accounts
or uncertificated form (i.e., no certificate being issued with respect
thereto) FDISG shall maintain comparable records of the Shareholders
thereof, including their names, addresses and taxpayer identification.
FDISG shall further maintain a stop transfer record on lost and/or
replaced certificates.
4. Mailing Communications to Shareholders; Proxy
Materials. FDISG will address and mail to Shareholders of the Fund,
all reports to Shareholders, dividend and distribution notices and proxy
material for the Fund's meetings of Shareholders. In connection with
meetings of Shareholders, FDISG will prepare Shareholder lists, mail
and certify as to the mailing of proxy materials, process and tabulate
returned proxy cards, report on proxies voted prior to meetings, act as
inspector of election at meetings and certify Shares voted at meetings.
5. Sales of Shares
(a) FDISG shall not be required to issue any Shares of
the Fund where it has received a Written Instruction from the Fund or
official notice from any appropriate authority that the sale of the
Shares of the Fund has been suspended or discontinued. The existence
of such Written Instructions or such official notice shall be conclusive
evidence of the right of FDISG to rely on such Written Instructions or
official notice.
(b) In the event that any check or other order for the
payment of money is returned unpaid for any reason, FDISG will
endeavor to: (i) give prompt notice of such return to the Fund or its
designee; (ii) place a stop transfer order against all Shares issued as a
result of such check or order; and (iii) take such actions as FDISG may
from time to time deem appropriate.
6. Transfer and Repurchase.
(a) FDISG shall process all requests to transfer or
redeem Shares in accordance with the transfer or repurchase
procedures set forth in the Fund's Prospectus.
(b) FDISG will transfer or repurchase Shares upon
receipt of Oral or Written Instructions or otherwise pursuant to the
Prospectus and Share certificates, if any, properly endorsed for
transfer or redemption, accompanied by such documents as FDISG
reasonably may deem necessary.
(c) FDISG reserves the right to refuse to transfer or
repurchase Shares until it is satisfied that the endorsement on the
instructions is valid and genuine. FDISG also reserves the right to
refuse to transfer or repurchase Shares until it is satisfied that the
requested transfer or repurchase is legally authorized, and it shall incur
no liability for the refusal, in good faith, to make transfers or
repurchases which FDISG, in its good judgement, deems improper or
unauthorized, or until it is reasonably satisfied that there is no basis to
any claims adverse to such transfer or repurchase.
(d) When Shares are redeemed, FDISG shall, upon
receipt of the instructions and documents in proper form, deliver to the
Custodian and the Fund or its designee a notification setting forth the
number of Shares to be repurchased. Such repurchased shares shall be
reflected on appropriate accounts maintained by FDISG reflecting
outstanding Shares of the Fund and Shares attributed to individual
accounts.
(e) FDISG, upon receipt of the monies paid to it by the
Custodian for the repurchase of Shares, pay such monies as are
received from the Custodian, all in accordance with the procedures
described in the written instruction received by FDISG from the Fund.
(f) FDISG shall not process or effect any repurchase
with respect to Shares of the Fund after receipt by FDISG or its agent
of notification of the suspension of the determination of the net asset
value of the Fund.
7. Dividends.
(a) Upon the declaration of each dividend and each
capital gains distribution by the Board of Directors of the Fund with
respect to Shares of the Fund, the Fund shall furnish or cause to be
furnished to FDISG Written Instructions setting forth the date of the
declaration of such dividend or distribution, the ex-dividend date, the
date of payment thereof, the record date as of which Shareholders
entitled to payment shall be determined, the amount payable per Share
to the Shareholders of record as of that date, the total amount payable
to FDISG on the payment date and whether such dividend or
distribution is to be paid in Shares at net asset value.
(b) On or before the payment date specified in such
resolution of the Board of Directors, the Fund will pay to FDISG
sufficient cash to make payment to the Shareholders of record as of
such payment date.
(c) If FDISG does not receive sufficient cash from
the Fund to make total dividend and/or distribution payments to all
Shareholders of the Fund as of the record date, FDISG will, upon
notifying the Fund, withhold payment to all Shareholders of record as
of the record date until sufficient cash is provided to FDISG.
8. In addition to and neither in lieu nor in contravention of
the services set forth above, FDISG shall: (i) perform all the
customary services of a transfer agent, registrar, dividend disbursing
agent and agent of the dividend reinvestment and cash purchase plan as
described herein consistent with those requirements in effect as at the
date of this Agreement. The detailed definition, frequency, limitations
and associated costs (if any) set out in the attached fee schedule,
include but are not limited to: maintaining all Shareholder accounts,
preparing Shareholder meeting lists, mailing proxies, tabulating
proxies, mailing Shareholder reports to current Shareholders,
withholding taxes on U.S. resident and non-resident alien accounts
where applicable, preparing and filing U.S. Treasury Department
Forms 1099 and other appropriate forms required with respect to
dividends and distributions by federal authorities for all Shareholders.
Schedule B
Fee Schedule
The Fund shall pay FDISG an annualized fee of $15.00 per
account that is open during any monthly period. Such fee shall be
billed by FDISG monthly in arrears on a prorated basis of 1/12 of the
annualized fee for all accounts that are open during such a month.
The Fund shall pay FDISG an additional fee of $.125 per
closed account per month applicable to those shareholder accounts
which close in a given month and remain closed through the following
month-end billing cycle. Such fee shall be billed by FDISG monthly
in arrears.
Schedule C
OUT-OF-POCKET EXPENSES
Out-of-pocket expenses are limited to the following items:
- Microfiche/microfilm production
- Magnetic media tapes and freight
- Printing costs, including certificates, envelopes, checks and stationery
- Postage (bulk, pre-sort, ZIP+4, barcoding, first class) direct pass through
to the Fund
- Due diligence mailings
- Telephone and telecommunication costs, including all lease, maintenance and
line costs
- Ad hoc reports
- Proxy solicitations, mailings and tabulations
- Daily & Distribution advice mailings
- Shipping, Certified and Overnight mail and insurance
- Year-end form production and mailings
- Terminals, communication lines, printers and other equipment and any expenses
incurred in connection with such terminals and lines
- Duplicating services
- Courier services
- Incoming and outgoing wire charges
- Federal Reserve charges for check clearance
- Overtime, as approved by the Fund
- Temporary staff, as approved by the Fund
- Travel and entertainment, as approved by the
Fund
- Record retention, retrieval and destruction costs, including, but not limited
to exit fees charged by third party record keeping vendors
- Third party audit reviews
- All Systems enhancements at the rate of $95.00 per hour pursuant to written
agreement with the Fund
- Such other miscellaneous expenses reasonably incurred by the Transfer Agent
in performing its duties and responsibilities under this Agreement as agreed
to by the Fund and the Transfer Agent.
The Fund agrees that postage and mailing expenses will be paid
on the day of or prior to mailing as agreed with the Transfer Agent.
In addition, the Fund will promptly reimburse the Transfer Agent for
any other unscheduled expenses incurred by the Transfer Agent
whenever the Fund and the Transfer Agent mutually agree that such
expenses are not otherwise properly borne by the Transfer Agent as
part of its duties and obligations under the Agreement.
Schedule D
Fund Documents
- Certified copy of the Articles of Incorporation of
the Fund, as amended
- Certified copy of the By-laws of the Fund, as
amended,
- Copy of the resolution of the Board of Directors
authorizing the execution and delivery of this
Agreement
- Specimens of the certificates for Shares of the
Fund, if applicable, in the form approved by the Board
of Directors of the Fund, with a certificate of the
Secretary of the Fund as to such approval
- All account application forms and other
documents relating to Shareholder accounts or to any
plan, program or service offered by the Fund
- Certified list of Shareholders of the Fund with
the name, address and taxpayer identification number of
each Shareholder, and the number of Shares of the Fund
held by each, certificate numbers and denominations (if
any certificates have been issued), lists of any accounts
against which stop transfer orders have been placed,
together with the reasons therefore, and the number of
Shares redeemed by the Fund
- All notices issued by the Fund with respect to
the Shares in accordance with and pursuant to the
Articles of Incorporation or By-laws of the Fund or as
required by law and shall perform such other specific
duties as are set forth in the Articles of Incorporation
including the giving of notice of any special or annual
meetings of shareholders and any other notices required
thereby.
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions
"Financial Highlights," and "Financial Statements" and to the
incorporation by reference of our report dated February 15, 1996
with respect to the Lehman Selected Growth Stock Portfolio of
Lehman Brothers Funds, Inc. in this Registration Statement (Form
N-1A No. 33-66840 Post Effective Amendment No. 8) of AMT Capital
Fund, Inc.
/s/ Enrst & Young LLP
Ernst & Young LLP
Boston, Massachusetts
March 5, 1996
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions
"Financial Highlights," "Independent Auditors" and "Financial
Statements" and to the incorporation by reference of our report
dated February 9, 1996 in this Registration Statement (Form N-1A
No. 33-66840 Post Effective Amendment No. 8) of AMT Capital Fund,
Inc.
/s/ Enrst & Young LLP
Ernst & Young LLP
New York, New York
March 5, 1996
PURCHASE AGREEMENT
AMT CAPITAL FUND, INC.
AMT Capital Fund, Inc. (the "Fund"), an open-end management
investment company, and Alan M. Trager ("Purchaser"), intending
to be legally bound, hereby agree as follows:
1. In order to provide the Fund on behalf of its U.S.
Selected Growth Portfolio (the "Portfolio") with its initial
capital, the Fund hereby sells to Purchaser and Purchaser
purchases 2 shares of the Class A Common Stock (the "Class A
Shares") of the Portfolio, par value $.001 per share, at a price
of $10.00 per share. The Fund hereby acknowledges receipt from
Purchaser of funds in the amount of $20.00 in full payment for
the Class A Shares of the Portfolio.
2. In order to provide the Fund on behalf of its U.S.
Selected Growth Portfolio (the "Portfolio") with its initial
capital, the Fund hereby sells to Purchaser and Purchaser
purchases 1.604 shares of the Class B Common Stock (the "Class B
Shares") of the Portfolio, par value $.001 per share, at a price
of $12.47 per share. The Fund hereby acknowledges receipt from
Purchaser of funds in the amount of $20.00 in full payment for
the Class B Shares of the Portfolio.
3. Purchaser represents and warrants to the Fund that the
shares are being acquired for investment and not with a view to
distribution thereof.
IN WITNESS WHEREOF, the parties have executed this
agreement as of the 12th day of December, 1995.
AMT CAPITAL FUND, INC.
By: _/s/ William E. Vastardis
William E. Vastardis
Secretary and Treasurer
ALAN M. TRAGER
/s/ Alan M. Trager .
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 "USG 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 USG Portfolio's outstanding voting securities, as
defined in the 1940 Act.
The provisions of the Plan are:
Section 1. Annual Fees.
(a) Service Fee. The USG Portfolio will pay to the distributor of its shares,
AMT Capital Services, Inc. ("AMT Capital Services"), a corporation organized
under the laws of the State of Maryland (the "distributor"), on behalf of the
USG Portfolio, 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 USG 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 USG 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 USG 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 investors that purchase the Shares. Such administrative and shareholder
services may include processing purchase, exchange and redemption requests from
customers and placing orders with USG Portfolio'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. All expenses incurred by the Fund in connection
with the Dealer 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 USG
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 USG
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: December , 1995
AMT CAPITAL FUND, INC.
By: ______________________________
Name:
Title:
AMT CAPITAL SERVICES, INC.
By: ______________________________
Name:
Title:
Performance Information Schedule
Calculation of Current Yield and Effective Yield for the Money Market Portfolio
for the Seven Days Ended December 31, 1995
Base Period Return June 30, 1995: .0009842441
Current Yield
(Base Period Return/7) x 365 x 100
(.0009842441/7) x 365 x 100 = 5.13%
Effective Yield
[(Base Period Return + 1)^(365/7)] - 1
[(.0009842441 + 1)^(365/7)] - 1 = 5.26%
Performance Information Schedule
Total Return
Date of Net Cap. Shares Returns
Distribution Income Gains. Reinvested NAV Inception 1 Year
HLM International Equity Portfolio
5/11/94 10.00 1,000.00
12/31/94 0.03158 0.01167 0.445 9.71 975.32 1,000.00
4/25/95 0.01500 0.00000 0.152 10.32 1,038.16 1,064.37
7/25/95 0.05500 0.00000 0.529 10.46 1,057.78 1,084.48
10/23/95 0.01880 0.00000 0.183 10.41 1,054.63 1,081.25
12/29/95 0.01166 0.00000 0.110 10.77 1,092.28 1,119.84
Lehman Select Growth Stock Portfolio
5/20/94 10.00 1,000.00
12/23/94 0.01280 0.00000 0.129 9.95 996.28 1,000.00
11/30/95 0.0000 1.28100 9.839 13.02 1,431.78 1,400.68
12/31/95 13.47 1,481.27 1,449.09
Money Market Portfolio
11/1/93 1.00 1,000.00
11/30/93 0.00211 0.00000 2.106 1.00 1,002.11
12/31/93 0.00227 0.00000 2.274 1.00 1,004.38
1/31/94 0.00222 0.00000 2.234 1.00 1,006.61
2/28/94 0.00221 0.00000 2.221 1.00 1,008.84
3/31/94 0.00268 0.00000 2.701 1.00 1,011.54
4/30/94 0.00281 0.00000 2.845 1.00 1,014.38
5/31/94 0.00311 0.00000 3.159 1.00 1,017.54
6/30/94 0.00341 0.00000 3.467 1.00 1,021.01
7/31/94 0.00336 0.00000 3.435 1.00 1,024.44
8/31/94 0.00361 0.00000 3.699 1.00 1,028.14
9/30/94 0.00376 0.00000 3.862 1.00 1,032.00
10/31/94 0.00409 0.00000 4.222 1.00 1,036.23
11/30/94 0.00420 0.00000 4.351 1.00 1,040.58
12/31/94 0.00506 0.00000 5.267 1.00 1,045.84 1,000.00
1/31/95 0.00471 0.00000 4.924 1.00 1,050.77 1,004.71
2/28/95 0.00447 0.00000 4.693 1.00 1,055.46 1,009.20
3/31/95 0.00489 0.00000 5.166 1.00 1,060.63 1,014.14
4/30/95 0.00475 0.00000 5.035 1.00 1,065.66 1,018.95
5/31/95 0.00488 0.00000 5.203 1.00 1,070.86 1,023.93
6/30/95 0.00468 0.00000 5.008 1.00 1,075.87 1,028.72
7/31/95 0.00476 0.00000 5.126 1.00 1,081.00 1,033.61
8/31/95 0.00469 0.00000 5.068 1.00 1,086.07 1,038.46
9/30/95 0.00452 0.00000 4.911 1.00 1,090.98 1,043.16
10/31/95 0.00465 0.00000 5.068 1.00 1,096.05 1,048.01
11/30/95 0.00437 0.00000 4.786 1.00 1,100.83 1,052.59
12/31/95 0.00454 0.00000 4.994 1.00 1,105.83 1,057.58
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 fot the Fund.
The provisions for the Plan are:
The Fund shall offer two classes of shares 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 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.
