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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1996
REGISTRATION NO. 33-70374
811-8082
________________________________________________________________________________
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. 4 [x]
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [x]
AMENDMENT NO. 6 [x]
(CHECK APPROPRIATE BOX OR BOXES)
------------------------------
FIRST EAGLE INTERNATIONAL FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
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45 BROADWAY, NEW YORK, NEW YORK 10006
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
------------------------------
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 943-9200
------------------------------
JOHN P. ARNHOLD
45 BROADWAY
NEW YORK, NEW YORK 10006
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
LEONARD M. LEIMAN, ESQ.
FULBRIGHT & JAWORSKI L.L.P.
666 FIFTH AVENUE
NEW YORK, NEW YORK 10103
------------------------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE
BOX):
[x] IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (b);
[ ] ON (DATE) PURSUANT TO PARAGRAPH (b);
[ ] 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(i);
[ ] ON (DATE) PURSUANT TO PARAGRAPH (a)(i);
[ ] 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(ii);
[ ] ON (DATE) PURSUANT TO PARAGRAPH (a)(ii) OF RULE 485.
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
[ ] THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE
AMENDMENT.
------------------------------
PURSUANT TO RULE 24f-2 UNDER THE INVESTMENT COMPANY ACT OF 1940, REGISTRANT
HAS PREVIOUSLY REGISTERED AN INDEFINITE NUMBER OF SHARES OF ITS COMMON STOCK,
PAR VALUE $.01 PER SHARE. THE REGISTRANT LAST FILED A RULE 24f-2 NOTICE ON
FEBRUARY 16, 1996.
________________________________________________________________________________
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FIRST EAGLE INTERNATIONAL FUND, INC.
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 495)
<TABLE>
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N-1A NO. LOCATION
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PART A
Item 1. Cover Page................................... Cover page
Item 2. Synopsis..................................... Summary of Fund Expenses; Highlights
Item 3. Condensed Financial Information.............. Not Applicable
Item 4. General Description of Registrant............ Cover Page; Investment Objective and
Policies and Risk Factors; Investment
Techniques; Description of Common Stock;
Investment Restrictions
Item 5. Management of the Fund....................... Management of the Fund; Custodian and
Transfer and Dividend Disbursing Agent
Item 5A. Management's Discussion of Fund
Performance................................ Not Applicable
Item 6. Capital Stock and Other Securities........... Dividends, Distributions and Taxes;
Description of Common Stock; Reports to
Stockholders
Item 7. Purchase of Securities Being Offered......... How to Purchase Shares; Stockholder
Investment Account; Net Asset Value
Item 8. Redemption or Repurchase..................... How to Redeem Shares; Description of
Common Stock
Item 9. Pending Legal Proceedings.................... Not Applicable
PART B
Item 10. Cover Page................................... Cover Page
Item 11. Table of Contents............................ Table of Contents
Item 12. General Information and History.............. Organization and History of the Fund
Item 13. Investment Objectives and Policies and Risk
Factors.................................... Additional Investment Information;
Investment Restrictions
Item 14. Management of the Fund....................... Directors, Officers and Principal
Stockholders; Adviser; Distributor
Item 15. Control Persons and Principal Holders of
Securities................................. Directors, Officers and Principal
Stockholders
Item 16. Investment Advisory and Other Services....... Adviser; Distributor; Custodian, Transfer
and Dividend Disbursing Agent;
Independent Accountants
Item 17. Brokerage Allocation and Other Practices..... Portfolio Transactions and Brokerage
Item 18. Capital Stock and Other Securities........... Not Applicable
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered................... Stockholder Investment Account
Item 20. Tax Status................................... Taxes
Item 21. Underwriters................................. Distributor
Item 22. Calculation of Performance Date.............. Not Applicable
Item 23. Financial Statements......................... Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
<PAGE>
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PROSPECTUS
Dated April 30, 1996
FIRST EAGLE INTERNATIONAL FUND, INC.
First Eagle International Fund, Inc. (the 'Fund') is an open-end,
non-diversified management investment company, or mutual fund, whose investment
objective is to achieve capital appreciation. The Fund believes that there is
substantial opportunity for capital appreciation from a professionally managed
portfolio of securities selected primarily from foreign, and to a lesser extent
domestic, equity and debt markets. Under normal circumstances, at least 65% of
the Fund's total assets will be invested in securities of foreign issuers. The
Fund's securities will be selected by the Fund's investment adviser, Arnhold and
S. Bleichroeder Advisers, Inc. (the 'Adviser'), on the basis of their appearing
to be undervalued in their respective trading markets relative to the issuer's
overall financial and managerial strength as measured by certain quantitative
and qualitative indicators. The Adviser believes that the Fund's exposure to
loss may be limited by investing in securities which, in the Adviser's opinion,
appear to be undervalued by the market relative to their 'intrinsic value' as
determined by the Adviser. The Fund also may invest in equity and debt
securities selected on other bases and engage in transactions involving other
types of investment instruments, including investment in high yield bonds,
borrowing for investment purposes, short sales and derivative transactions. See
'Highlights -- Risk Factors,' 'Investment Objective and Policies and Risk
Factors -- Debt Securities' and 'Investment Techniques' in the Prospectus and
'Additional Investment Information' in the Statement of Additional Information.
Investments in some of these other investment instruments and techniques are
considered speculative and investors should carefully read the Prospectus to
determine if an investment in the Fund meets their needs. There is no assurance
that the Fund's investment objective will be attained.
The Fund's shares are sold on a no-load basis. This Prospectus sets forth
concisely the information about the Fund that a prospective investor should know
before investing. Additional information about the Fund has been filed with the
Securities and Exchange Commission in a Statement of Additional Information,
dated April 30, 1996, which information is incorporated herein by reference and
may be obtained without charge by writing to the Fund's Distributor, Arnhold and
S. Bleichroeder, Inc., 45 Broadway, New York, New York 10006, or telephoning
Arnhold and S. Bleichroeder, Inc. at (212) 943-9200 or (800) 451-3623.
------------------------
Investors are urged to read this Prospectus and retain it for future reference.
------------------------
[Logo]
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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.
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HIGHLIGHTS
Investment Objective The Fund is an open-end, non-diversified management
investment company, or mutual fund, registered
under the Investment Company Act of 1940 (the
'Investment Company Act'). The Fund's investment
objective is to seek capital appreciation by
pursuing a flexible investment strategy
emphasizing investment in foreign, and to a
lesser extent domestic, equity and debt
securities believed by the Fund's investment
adviser to be undervalued in their respective
trading markets. There is no assurance that the
Fund's investment objective will be attained. See
'Investment Objective and Policies and Risk
Factors.'
Risk Factors Investing in securities of foreign companies and
governments may involve certain risks in addition
to those arising when investing in domestic
securities. These risks include the possibility
of currency exchange rate fluctuations and
revaluation of currencies which may adversely
affect the Fund's net asset value per share, the
existence of less publicly available information
about issuers, different accounting, auditing and
financial reporting standards, less stringent
securities regulation, non-negotiable brokerage
commissions, different tax provisions, political
or social instability, war or expropriation.
Moreover, foreign stock and bond markets
generally are not as developed and efficient as
those in the U.S. and, therefore, the volume and
liquidity in those markets may be less, and the
volatility of prices may be greater, than in U.S.
markets. Settlement of transactions on foreign
markets may be delayed beyond what is customary
in U.S. markets. These risks generally are of
greater concern in developing countries. See
'Investment Objective and Policies and Risk
Factors' in the Prospectus and 'Additional
Investment Information' in the Statement of
Additional Information. To attempt to limit these
risks, the Fund may use some of the hedging
opportunities described under 'Investment
Techniques.'
To augment its investment return and limit its
investment risk, the Fund may purchase and sell
financial and currency futures contracts and
related options as well as enter into other types
of derivative transactions. Similarly, the Fund
may purchase call and put options and sell
covered call and put options on equity and debt
securities and on stock indices. There are no
limitations on the percentage of the Fund's
assets that may be invested in such securities
and index options, provided applicable coverage
and collateral requirements are met. The Fund may
invest in securities on a when-issued basis, lend
its portfolio securities, enter into repurchase
as well as reverse repurchase agreements, and
engage in short sales of securities and arbitrage
transactions and may invest in high yield
('junk') bonds. All these investment techniques
and instruments involve special risks. See
'Investment Objective and Policies and Risk
Factors' and 'Investment Techniques' in the
Prospectus and 'Additional Investment
Information' in the Statement of Additional
Information.
The Fund may borrow for securities purchases and
for temporary or emergency purposes. The ability
to borrow for securities purchases is called
leveraging. Leveraging is a speculative
investment technique that carries certain risks
and advantages which are more fully disclosed in
'Investment Techniques.'
As a non-diversified investment company, the
Fund's assets may be invested in a limited number
of issues. In that case, an investment in the
Fund may present greater risks than an investment
in a diversified investment company. See
'Investment Objective and Policies and Risk
Factors.'
Management Arnhold and S. Bleichroeder Advisers, Inc. (the
'Adviser'), a registered investment adviser,
serves as the Fund's investment adviser and is
compensated for its services to the Fund at the
annual rate of 1.5% per annum of the Fund's
average daily net assets. The management fee is
payable promptly after the close of each fiscal
quarter. The management fee paid by the Fund may
be higher than the fees
2
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paid by most other funds. Pursuant to a separate
services agreement, Arnhold and S. Bleichroeder,
Inc., a registered broker-dealer, provides
administrative and fund accounting support
services and liaison services to shareholders,
including assistance with subscriptions,
redemptions and other shareholder questions, as
well as other services to shareholders and the
Fund for which it receives an annual fee of .25%
of the Fund's average daily net assets payable
quarterly. See 'Management of the Fund --
Management and Services Fees.' Arnhold and S.
Bleichroeder, Inc. also serves as the Fund's
Distributor and assumes the expenses related to
distributing the Fund's shares.
Purchase of Shares Shares of the Fund's common stock may be purchased
through Arnhold and S. Bleichroeder, Inc. at the
net asset value next determined after receipt of
an order with complete information and meeting
all the requirements discussed in this
Prospectus. There is no sales charge on purchases
of the Fund's shares. The current minimum initial
investment is $5,000, except for employees of
Arnhold and S. Bleichroeder, Inc. who are subject
to a $1,000 minimum initial investment, and
retirement plans which are subject to a $2,000
minimum initial investment. The minimum initial
investment amounts in certain states may be
higher. Subsequent investments are subject to a
$1,000 minimum other than reinvestment of
dividends. Shares of the Fund may be purchased by
submitting a completed Account Application and a
check or money order payable to First Eagle
International Fund, Inc. to: First Eagle Funds,
45 Broadway, New York, New York 10006 and/or to
BISYS Fund Services, Inc., 100 First Avenue,
Suite 300, Pittsburgh, Pennsylvania 15222. See
'How to Purchase Shares.'
Liquidity Shares of the Fund may be redeemed at the option of
the stockholder at any time at the net asset
value next determined after receipt of a
redemption request. See 'How to Redeem Shares.'
Dividends and Reinvestment The Fund plans to distribute annual dividends of
its net investment income and distribute annually
any net capital gains. All dividends and
distributions will be reinvested in full and
fractional shares of the Fund at net asset value,
unless the stockholder elects to receive
dividends and distributions in cash. See
'Stockholder Investment Account' and 'Dividends,
Distributions and Taxes.'
3
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SUMMARY OF FUND EXPENSES
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Annual Fund Operating Expenses
(as a percentage of average net assets)
Management fees........................................................................... 1.50%(2)
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Other Expenses:
Services fees........................................................................ 0.25%
All other expenses(1)................................................................ 1.50%
----
Total Other Expenses...................................................................... 1.75%
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Total Annual Fund Operating Expenses...................................................... 3.25%
----
----
</TABLE>
<TABLE>
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EXAMPLE 1 YEAR 3 YEARS 5 YEARS
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You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return and a redemption at the end of each time period..................... $32.49 $ 99.19 $168.25
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</TABLE>
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. See 'Management of the Fund -- Management and Services Fees' below
and 'Adviser' in the Statement of Additional Information. THE EXAMPLE SHOULD NOT
BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES WHICH MAY BE MORE OR LESS THAN
THOSE SHOWN.
- ------------------
(1) The percentages are based on the Fund's actual expenses (as a percentage of
average net assets) which were incurred by the Fund for the fiscal year
ended December 31, 1995.
(2) The Fund adopted a new fee structure effective January 1, 1996. For the
fiscal year ended December 31, 1995 the management fees were 1.6%, other
expenses were 1.5% and total operating expenses for the Fund were 3.1%.
4
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FINANCIAL HIGHLIGHTS
FOR A SHARE OF COMMON STOCK OUTSTANDING THROUGHOUT THE PERIODS INDICATED
The following financial highlights have been audited by KPMG Peat Marwick
LLP, the Fund's auditors and contain selected data for a share of common stock
outstanding, total return, ratio to average net assets and other supplemental
data for the period indicated. This information should be read in conjunction
with the financial statements and the notes thereto and the independent
auditors' report thereon which appears in the Statement of Additional
Information.
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FOR THE PERIOD FROM
FOR THE YEAR APRIL 4, 1994**
ENDED THROUGH
DECEMBER 31, 1995 DECEMBER 31, 1994
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Net asset value per share, beginning of period........................... $12.37 $12.50
INCOME FROM INVESTMENT OPERATIONS PER SHARE
Net investment loss.................................................... (0.13) (0.02)
Net gains (losses) on investments (both realized and unrealized)....... 1.57 (0.11)
------- -------
Total from investment operations.......................... 1.44 (0.13)
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LESS DISTRIBUTIONS
Dividends (from net investment income)................................. -- --
Distributions (from capital gains)..................................... (0.43) --
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Total distributions....................................... (0.43) --
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Net asset value per share, end of period................................. $ 13.38 $ 12.37
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Total Return*............................................................ 11.6% (1.0)%`D'`D'
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year.................................................. $22,420,889 $20,152,024
Ratio of expenses to average net assets.................................. 3.1% 2.0%`D'
Ratio of net investment loss to average net assets....................... (1.1)% (0.3)%`D'
Portfolio turnover rate.................................................. 166% 170%
</TABLE>
* Past performance is not predictive of future performance.
** Commencement of investment operations.
`D' Annualized.
`D'`D' Total return not annualized.
Further information regarding the Fund's performance is contained in the
annual report, a copy of which may be obtained without charge.
INVESTMENT OBJECTIVE AND POLICIES AND RISK FACTORS
The investment objective of the Fund is to seek capital appreciation. The
Fund believes that there is substantial opportunity for capital appreciation
from a professionally managed portfolio of securities selected primarily from
foreign, and to a lesser extent domestic, equity and debt markets. The Fund
offers investors access to a geographically diverse portfolio, professional
research and analysis of issuers, markets and countries worldwide, and the
ability to invest in foreign securities without having to make individual
arrangements for brokers, safekeeping of securities and foreign currency
dealings. The Fund will invest internationally wherever the greatest
opportunities exist in accordance with the Fund's objective and policies as
discussed in this section.
5
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The Fund will seek to achieve its investment objective by pursuing a
flexible investment strategy emphasizing investment in foreign, and to a lesser
extent domestic, equity and debt securities believed by the Adviser to be
undervalued in their respective trading markets relative to their 'intrinsic
value' as determined by the Adviser. The Adviser believes the Fund's exposure to
loss may be limited by investing part or all of its assets in undervalued
securities. The relative proportion of the Fund's assets invested in equity and
debt securities may vary depending on the Adviser's assessment of market
conditions and the market's relative valuations of such securities. The Fund may
also invest in permissible amounts of the other instruments described under
'Investment Techniques.' There is no assurance that the Fund's investment
objective will be achieved and that objective may be changed without the vote of
a majority of the Fund's outstanding voting securities.
A guiding principle in the Adviser's selection of investments for the
Fund's portfolio will be the consideration of common stocks as units of
ownership in a business. Debt securities will be considered if more attractive
than equity alternatives. The Adviser's evaluation of prospective equity and
debt investments generally will involve an analysis of the issuer's overall
financial and managerial strength as indicated by factors such as cash flow,
assets, earnings, market share, growth potential, stability and managerial
personnel. In addition to its analysis of a company's growth potential, the
Adviser also considers such factors as prospects for relative economic growth
among countries, regions, or geographic areas, expected levels of inflation,
government policies influencing business conditions and the outlook for currency
relationships. The Adviser will consider both large, well established and small,
unseasoned issuers. Investment income is of secondary importance in the
selection of investments for the Fund's portfolio but will be considered in
relation to the total expected return thereon. Under normal circumstances, at
least 65% of the Fund's total assets will be invested in securities of foreign
issuers.
The Fund is a non-diversified investment company and as such the Fund's
assets may be invested in a limited number of issues. An investment in the Fund
may therefore entail greater risks than an investment in a diversified
investment company.
INVESTMENT IN FOREIGN SECURITIES
Investing internationally provides the Fund with the flexibility to
diversify its portfolio geographically by analyzing the valuations of securities
in a variety of markets, including Europe, Latin America, the Pacific Basin and
to a lesser extent in the U.S., and investing wherever in the Adviser's opinion
the greatest opportunity for capital appreciation exists. Under normal
circumstances the Fund intends to invest in at least three different countries.
Although this investment flexibility may provide additional investment
opportunities for the Fund, investing in securities of foreign companies and
governments also presents certain risks in addition to those arising when
investing in domestic securities. These risks include the possibility of
currency exchange rate fluctuations and revaluation of currencies, the existence
of less publicly available information about issuers, different accounting,
auditing and financial reporting standards, less stringent securities
regulation, non-negotiable brokerage commissions, different tax provisions,
political or social instability, war or expropriation. Moreover, foreign stock
and bond markets generally are not as developed and efficient as those in the
U.S. and, therefore, the volume and liquidity in those markets may be less, and
the volatility of prices may be greater, than in U.S. markets. Settlement of
transactions on foreign markets may be delayed beyond what is customary in U.S.
markets. The Fund may invest in developing countries considered to be emerging
market countries by the World Bank. The risks associated with investment in
foreign securities are generally greater in developing countries which may be
subject to adverse political, social or diplomatic developments. To attempt to
limit the risks of investing in foreign securities, the Fund may use some of the
hedging opportunities described under 'Investment Techniques' below.
6
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DEBT SECURITIES
The Fund may invest in foreign and domestic money market instruments,
including commercial paper, certificates of deposit, bankers' acceptances and
other short-term debt obligations of foreign and domestic banks, provided those
obligations are of 'high quality' as determined by an unaffiliated nationally
recognized statistical rating service, or in the case of unrated obligations,
are of comparable quality as determined by the Fund's Board of Directors. The
Fund also may invest in corporate bonds of foreign and domestic issuers and
obligations issued or guaranteed by the United States Government, its
instrumentalities, or its agencies, or the government of any other nation
('fixed-income securities'). Various factors affect the price of fixed-income
securities. The rating (if any) which is associated with a particular issue may
cause price fluctuations and indicates generally the level of risk involved in
various rated fixed-income securities. Another factor which may cause price
fluctuations is the response of fixed-income securities to the general level of
interest rates. The price of fixed-income securities generally is inversely
correlated with interest rate movements. Additionally, the magnitude of the
effect of interest rate movements on the price of fixed-income securities is
positively correlated with the length of their maturities.
The Fund may invest in fixed-income securities rated below Baa by Moody's
Investors Service and BBB by Standard & Poor's Ratings Group, including those
rated C by Standard and Poor's and D by Moody's (the lowest rating categories),
only if in the opinion of the Adviser the financial condition of the issuer or
the protection afforded to the particular securities is stronger than would
otherwise be indicated by its lower rating. See 'Corporate Bond Ratings' in the
Appendix to the Prospectus. Since some issuers do not seek ratings for their
fixed-income securities, non-rated fixed-income securities will also be
considered for investment by the Fund, but only when the Adviser believes that
the financial condition of the issuer of those securities and/or the protection
afforded by the terms of the securities themselves limit the risk to the Fund to
a degree comparable to that of rated fixed-income securities which are
consistent with the Fund's investment objective and policies. Fixed-income
securities of the types described above are commonly referred to as 'high
yield,' 'high risk' or 'junk' bonds and generally are not meant for short-term
investing. The Fund has no current intention of investing more than 5% of its
net assets in high yield bonds.
Medium to lower rated and non-rated fixed-income securities are subject to
the risk of an issuer's inability to repay principal and interest payments on
the obligations. An economic downturn or a substantial period of rising interest
rates could severely affect the ability of certain highly leveraged issuers to
service their debt obligations or to repay their obligations upon maturity. The
risk of loss because of default by the issuers is significantly greater for
holders of these securities because such securities are generally unsecured and
often are subordinated to other creditors of the issuer. It is also possible
that the secondary market could contract, independent of any specific adverse
changes in the condition of a particular issuer. Prices realized upon the sale
of medium to lower rated or unrated securities, under those circumstances, may
be less than the prices used in calculating the Fund's net asset value. Certain
proposed and recently enacted federal laws could also adversely affect the
secondary market for these fixed-income securities as well as the financial
condition of issuers and the value of outstanding fixed-income securities. In
addition, overall credit quality of the Fund's portfolio may decline if the Fund
experiences unexpected net redemptions and is forced to sell its higher rated
securities. During the fiscal year ended December 31, 1995, the Fund did not
invest in debt obligations rated less than BBB/Baa or unrated by any recognized
statistical rating organizations.
The yields and prices of medium to lower rated and non-rated fixed-income
securities may fluctuate more than those for high rated fixed-income securities
because investors perceive greater risks to be associated with those securities.
In the lower quality and non-rated segments of the fixed-income securities
market, changes in perceptions of the issuers' creditworthiness may occur more
frequently and in a more pronounced manner
7
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<PAGE>
relative to the high quality segments of that market. This may result in greater
yield and price volatility for lower rated and non-rated fixed-income
securities. See 'Additional Investment Information' in the Statement of
Additional Information. For further information concerning debt securities in
which the Fund may invest, see 'Investment in Foreign Securities' above. The
Fund may acquire debt securities pending investment of proceeds from sales of
Fund shares, or under market conditions warranting a temporary defensive
posture. If the Fund assumes a temporary defensive posture, some of or all of
its assets may be retained in cash or cash equivalents.
WARRANTS
The Fund may invest in warrants (in addition to those that have been
acquired in units or attached to other securities) but does not currently intend
to invest more than 5% of the value of its net assets (at the time of
investment) in such warrants. A warrant is an option to purchase a specified
quantity of equity or debt securities at a set price within a specific period of
time. Warrants are speculative in nature because they have no voting rights, pay
no dividends and have no rights with respect to the assets of the corporation
issuing them. They do not represent ownership of the securities, but only the
right to buy them. The prices of warrants do not necessarily move parallel to
the prices of the underlying securities.
SPECIAL SITUATIONS
Many of the Fund's investments may be characterized as 'special
situations.' A special situation occurs when it appears that the market price of
a particular issue has the potential within an estimated time period to
appreciate significantly because of a development uniquely applicable to the
issuer, irrespective of general business conditions or market movements.
Special situations may arise from liquidations, reorganizations,
recapitalizations, or mergers, material litigation, technological breakthroughs,
new management or management policies, or other developments. Special situations
may, but do not necessarily, entail risks dissimilar to those involved in other
investment situations. Those risks are primarily attributable to the possibility
that the development anticipated in connection with the special situation may
occur later than expected or not at all, and that, even if it does occur, the
anticipated development may not have the desired effect on the market price of
the security involved in the special situation.
Special situations may also arise in connection with securities issued by
newly-formed or unseasoned companies without significant operating histories. It
may be more difficult to predict accurately the effect that certain developments
will have on the market prices for securities of those companies, and,
accordingly, to predict accurately when or whether special situations applicable
to their securities may come to fruition. The Fund's investments which may be
characterized as 'special situations' are not expected to exceed 10% of the
Fund's total assets.
PORTFOLIO TURNOVER
The portfolio turnover rate is, generally, the percentage computed by
dividing the lesser of portfolio purchases or sales (excluding all securities,
including options, whose maturities or expiration date at acquisition were one
year or less) by the monthly average value of the portfolio. The Fund's
portfolio turnover rates were 166% and 170%, respectively, in the fiscal year
ended December 31, 1995 and in the fiscal period from April 4, 1994 through
December 31, 1994. This rate of turnover is higher than that normally associated
with an investment company and is likely to result in higher brokerage
commissions and higher level of realized gains than if the turnover were lower.
In addition, investment in securities traded in non-U.S. markets may involve
8
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<PAGE>
higher brokerage, custody and settlement costs. See 'Dividends, Distributions
and Taxes' below, and 'Portfolio Transactions and Brokerage' in the Statement of
Additional Information.
ILLIQUID SECURITIES
The Fund may invest up to 15% of its net assets (determined at the time of
investment) in securities for which market quotations are not readily available,
in repurchase agreements which have a maturity longer than seven days and in
securities subject to restrictions on resale for which no adequate trading
market exists. For more information regarding repurchase agreements and
restricted securities, see 'Additional Investment Information -- Repurchase
Agreements' and ' -- Restricted Securities' in the Statement of Additional
Information.
INVESTMENT TECHNIQUES
At least 75% of the Fund's portfolio will ordinarily be comprised of equity
and debt securities as described above. To achieve its investment objective and
limit its exposure to risks, the Fund may also utilize the various investment
techniques described below.
CURRENCY FUTURES CONTRACTS/FORWARD CURRENCY CONTRACTS
The value in U.S. dollars of investments denominated in foreign currencies
will be affected by changes in currency exchange rates. Exchange rate
fluctuations may also affect the value of foreign government securities which
the Fund may hold pending investment in foreign securities. As one way of
managing currency exchange rate risk, the Fund may enter into currency futures
contracts, which are agreements to purchase or sell foreign currencies at a
specified price and date. Currency futures contracts are exchange-traded
contracts. The Fund may also engage in forward currency contracts, which are
agreements to purchase or sell foreign currencies at a specified price and date
in the over-the-counter market. The Fund will usually enter into these contracts
to fix the U.S. dollar value of a security it has agreed to buy or sell. The
Fund may also use these contracts to hedge the U.S. dollar value of a security
it already owns, particularly if it expects a decline in the value of the
currency in which the foreign security is denominated. The success of the Fund's
hedging strategy will depend on the Adviser's ability to predict accurately the
future exchange rate between foreign currencies and the U.S. dollar. The ability
to predict the direction of currency exchange rates involves skills different
from those used in selecting securities. See 'Futures Contracts' in the
Statement of Additional Information.
DERIVATIVE TRANSACTIONS
The Fund may invest in options, futures and swaps and related products
which are often referred to collectively as 'derivatives.' Derivatives may have
a return that is tied to a formula based upon an interest rate, index or other
measurement which may differ from the return of a simple security of the same
maturity. The Fund may use such investments in derivatives to augment its
investment return or to limit its investment risk, such as to hedge against,
among other things, declines in the prices of portfolio securities. The use of
derivatives for non-hedging purposes is speculative.
Derivative transactions require different investment skills of the Adviser
than is required when investing in individual stocks. For example, making an
investment in an option on a stock index requires consideration of possible
changes in the value of the entire index, which usually consists of many stocks,
as compared with the consideration of possible changes in the value of a
particular stock in which an investment is made. Derivative transactions also
subject the Fund to special considerations, such as the risk that the Fund will
not be able to cancel its derivative contract when it may be opportune to do so
and that the counterparty to the contract may not be able to fulfill its
obligation thereunder. For example, (i) should the Fund write (sell) a covered
option, the
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Fund may not be able to purchase an option in the same series so as to close out
its position when it would be opportune to do so, or (ii) should the Fund enter
into an interest rate swap contract, the Fund risks that the counterparty to the
transaction may become insolvent and unable to meet its obligations under the
contract. For more information regarding derivative transactions see 'Additional
Investment Information' in the Statement of Additional Information.
OTHER INVESTMENT TECHNIQUES
Other investment techniques available to the Fund, as noted below, are
expected to comprise a relatively small part of the Fund's investment program
when compared with its investment in equity and debt securities. These
techniques are described in greater detail in the Statement of Additional
Information under the caption 'Additional Investment Information.'
The Fund may lend its portfolio securities, invest in restricted
securities, acquire securities on a when-issued basis, engage in short sales and
in arbitrage transactions, and may enter into repurchase agreements and reverse
repurchase agreements. The Fund may borrow for temporary or emergency purposes
or to purchase portfolio securities. Borrowing to purchase portfolio securities
increases both investment opportunity and investment risk. As substantially all
the Fund's assets fluctuate in value, whereas the obligation resulting from the
borrowing is fixed, the net asset value per share of the Fund will tend to
increase more when portfolio assets increase in value, and decrease more when
portfolio assets decrease in value, than would otherwise be the case. This
factor is known as leverage.
INVESTMENT RESTRICTIONS
The Fund is subject to certain investment restrictions which constitute
fundamental policies. Its fundamental policies cannot be changed without the
approval of the holder of a majority of the Fund's outstanding voting securities
as defined in the Investment Company Act. See 'Investment Restrictions' in the
Statement of Additional Information.
MANAGEMENT OF THE FUND
BOARD OF DIRECTORS
The business and affairs of the Fund are managed under the direction of the
Fund's Board of Directors.
ADVISER
Arnhold and S. Bleichroeder Advisers, Inc. is a wholly owned subsidiary of
Arnhold and S. Bleichroeder, Inc. which is a successor corporation to two German
banking houses -- Gebr. Arnhold (Arnhold Brothers), founded in Dresden in 1864,
and S. Bleichroeder, founded in Berlin in 1803. Arnhold and S. Bleichroeder,
Inc. moved its operations to New York City in 1937 and since then has used its
experience and worldwide contacts to provide asset management, global securities
research and trading, and investment banking services to institutional clients
both in the United States and abroad.
The Adviser manages the Fund and is registered as an investment adviser
under the Investment Advisers Act of 1940. Incorporated in 1987 under the laws
of the State of Delaware, its corporate offices are located at 45 Broadway, New
York, New York 10006. The Adviser also acts as the investment adviser to First
Eagle Fund of America, Inc., a registered open-end investment company.
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TO REMOVE APPLICATION CAREFULLY REMOVE STAPLES
ACCOUNT APPLICATION
Please make check or money order payable to:
FIRST EAGLE INTERNATIONAL FUND, INC.
Mail the check with the application to:
First Eagle Funds
45 Broadway
New York, NY 10006
READ THE PROSPECTUS PRIOR TO MAKING AN INVESTMENT DECISION
[1] REGISTRATION PLEASE PRINT ALL ITEMS EXCEPT SIGNATURES.
TYPE OF ACCOUNT
(CHECK ONE ONLY)
<TABLE>
<S> <C> <C> <C> <C>
------------------------- --------------- ------------------------ ----------------------
[ ] INDIVIDUAL First Name Middle Initial Last Name Social Security Number
------------------------- --------------- ------------------------ ----------------------
[ ]PENSION/RETIREMENT First Name Middle Initial Last Name Social Security Number
To open IRA account directly with First Eagle Funds request an IRA Application.
------------------------- --------------- ------------------------ ----------------------
[ ] JOINT TENANT* First Name Middle Initial Last Name Social Security Number
(first individual only)
------------------------- --------------- -------------------------------------------------
Joint Tenant's First Name Middle Initial Last Name
*Right of survivorship presumed, unless tenancy in common is indicated here [ ] by check.
---------------------------------------------- ----------------------------------------------
[ ] GIFT/TRANSFER Custodian's Name (one only) Minor's Name (one only)
TO MINOR
-------------------------------------------------------------- ------------------------------
Under Uniform Gift/Transfers to Minors Act of (State) Minor's Social Security Number
----------------------------- ------------------------------ ------------------------------
[ ] GUARDIANSHIP/ Guardian/Conservator Ward/Incompetent or Minor's Ward/Incompetent or Minor's
CONSERVATOR- Name (one only) Social Security Number
SHIP
-------------------------------------------------------------- ------------------------------
[ ] CORPORATION, Exact Name of Corporation, Partnership or Organization Tax Identification
PARTNERSHIP, Number
TRUST OR OTHER
ORGANIZATION -----------------------------------------------------------------------------------------------
Trustee Accounts Only: Name of all Trustees required by trust agreement to sell/purchase shares
------------------------- --------------------------------- -------------------------------
Date of Trust Agreement Name of Trust Tax Identification Number
[ ] OTHER ____________________________________ [ ] CHECK HERE IF YOU ARE SUBJECT TO BACKUP WITHHOLDING
</TABLE>
<PAGE>
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
[2] ADDRESS
- ------------------------------------- ---------------- --------------------------- ---------------- -----------
Street Address Apartment Number City State Zip Code
( ) ( ) Citizenship
- ------------------------------------- ------------------------------------- [ ] U.S. [ ] Other ------------------
Business Phone Home Phone Indicate Country
- -----------------------------------------------------------------------------------------------------------------------
[3] INITIAL INVESTMENT -- MINIMUM $5,000 ($2,000 MINIMUM FOR RETIREMENT PLAN).
[ ] Enclosed is check payable to FIRST EAGLE INTERNATIONAL FUND, INC. FOR $_________________________
[ ] Funds were wired on__________________________________________ for $___________________________
(Date)
- -----------------------------------------------------------------------------------------------------------------------
[4] DIVIDENDS AND DISTRIBUTION PLANS -- (Check one box only)
[ ] FULL REINVESTMENT -- Reinvest all dividends and distributions at net asset value.
[ ] CAPITAL GAINS REINVESTMENT -- Reinvest distribution of realized
securities profits only, at net asset value; income dividends are to
be paid in cash.
[ ] CASH -- Payment of all income dividends and distributions of
realized securities profits, if any, in cash.
- -----------------------------------------------------------------------------------------------------------------------
[5] SIGNATURE
I (We) am (are) of legal age in the state of my residence and wish to
purchase shares of the Fund as described in the current Prospectus (a
copy of which I (we) have received). By the execution of the
Subscription Order Form, the undersigned, represents and warrants that
the investor has full right, power and authority to make this investment
and the undersigned is (are) duly authorized to sign this Subscription
and to purchase or redeem shares of the Fund on behalf of the Investor.
I (We) hereby appoint BISYS Fund Services, Inc. as agent to receive
dividends and distributions for automatic reinvestment in additional
shares of the Fund if I (we) made such election above.
TAXPAYER IDENTIFICATION NUMBER CERTIFICATION (CHECK APPROPRIATE BOX, IF APPLICABLE).
UNDER PENALTIES OF PERJURY. I (WE) CERTIFY:
[ ] THAT THE NUMBER SHOWN ON THIS FORM IS MY (OUR) CORRECT TAXPAYER
IDENTIFICATION NUMBER(S) AND THAT I (WE) AM (ARE) NOT SUBJECT TO
BACKUP WITHHOLDING BECAUSE (A) I (WE) HAVE NOT BEEN NOTIFIED THAT I
(WE) AM (ARE) SUBJECT TO BACKUP WITHHOLDING AS A RESULT OF A FAILURE
TO REPORT ALL INTEREST AND/OR DIVIDENDS, OR (B) THE INTERNAL REVENUE
SERVICE HAS NOTIFIED ME (US) THAT I (WE) AM (ARE) NO LONGER SUBJECT
TO BACKUP WITHHOLDING.
[ ] THAT I (WE) HAVE NOT PROVIDED A TAXPAYER IDENTIFICATION NUMBER
BECAUSE I (WE) HAVE NOT BEEN ISSUED A NUMBER, BUT I (WE) HAVE
APPLIED FOR ONE OR WILL DO SO IN THE NEAR FUTURE. I (WE) UNDERSTAND
THAT IF I (WE) DO NOT PROVIDE MY (OUR) NUMBER(S) TO THE FUND WITHIN
60 DAYS, THE FUND WILL BE REQUIRED TO WITHHOLD 31% OF ALL DIVIDENDS
PAYMENTS.
(A) _____________________________________________________ _________________ ____________________________________
Individual whose Taxpayer I.D. No. appears above Date Joint Registrant, if any
(B) _____________________________________________________ _________________ ____________________________________
Corporate Officer/Partner/Trustee/etc. Date Title
</TABLE>
<PAGE>
<PAGE>
The Investment Advisory Agreement between Arnhold and S. Bleichroeder, Inc.
and the Fund has been assigned pursuant to an assignment agreement to Arnhold
and S. Bleichroeder Advisers, Inc. effective April 30, 1996. The assignment was
approved by the Board of Directors of Arnhold and S. Bleichroeder, Inc. and by
unanimous vote of the Board of Directors of the Fund. The Investment Advisory
Agreement provides that, subject to the direction of the Fund's Board of
Directors, the Adviser is responsible for the management of the Fund's
portfolio. Accordingly, the Adviser will furnish advice and recommendations with
respect to the Fund's portfolio of investments.
The Adviser is not dependent upon any other party in providing the
investment advisory services required in the management of the Fund. The Adviser
may, however, consider analyses from various sources, including broker-dealers
and futures commission merchants with which the Adviser does business.
Arthur F. Lerner and Allan R. Raphael each serve as Senior Vice President
of Arnhold and S. Bleichroeder, Inc. and are Portfolio Managers of the Adviser
and have been the portfolio managers of the Fund since its inception. Together,
they are responsible for the day-to-day management of the Fund's portfolio. Mr.
Lerner has worked at Arnhold and S. Bleichroeder, Inc. since 1969 and manages
various global and international portfolios, including a portion of the Arnhold
and S. Bleichroeder, Inc.'s profit sharing plan and trust. Mr. Raphael worked as
a securities analyst for firms including Lehman Brothers and Cowen and Company
from 1967 until 1980 when he joined Arnhold and S. Bleichroeder, Inc. as a
securities analyst specializing in international securities. From 1984 to 1988
Mr. Raphael worked at Soros Fund Management as a portfolio manager and from 1988
to December of 1992, he managed portfolios of international stocks for both
Steinhardt Management and Caxton Corporation. In December of 1992 Mr. Raphael
returned to Arnhold and S. Bleichroeder, Inc. and currently manages other
international portfolios.
MANAGEMENT AND SERVICES FEES
On October 17, 1995, the Board of Directors and on December 12, 1995 the
shareholders approved an amended and restated Investment Advisory Agreement
between Arnhold and S. Bleichroeder, Inc. and the Fund effective January 1,
1996. The amended and restated Investment Advisory Agreement is substantially
the same as the prior agreement except for the terms of the advisory fee
arrangement.
For the advisory services provided by the Adviser, the fee arrangement
requires the Fund to pay an annual management fee of 1.5% of the Fund's average
daily net assets payable quarterly. The annual advisory fee is higher than that
paid by most other registered investment companies.
Arnhold and S. Bleichroeder, Inc. receives an annual services fee of 0.25%
of the Fund's average daily net assets payable quarterly, pursuant to a separate
services agreement which was approved by the Board of Directors, to cover
expenses incurred by Arnhold and S. Bleichroeder, Inc. for providing
administrative and fund accounting support services and shareholder liaison
services, including assistance with subscriptions, redemptions and other
shareholder questions. Arnhold and S. Bleichroeder, Inc. determined that the
volume and demand for shareholder liaison services required staffing in addition
to the personnel responsible for investment advisory services. Prior to January
1, 1996, Arnhold and S. Bleichroeder, Inc. was not being paid for such services.
Since the Adviser is a wholly owned subsidiary of Arnhold and S. Bleichroeder,
Inc., Arnhold and S. Bleichroeder, Inc. ultimately receives a combined annual
fee of 1.75% of the Fund's average daily net assets from the Investment Advisory
Agreement and the Services Agreement.
The combined advisory and services fees under the current agreement are
more than the advisory fees paid by the Fund since the Fund's inception. For the
fiscal period from April 4, 1994 through December 31, 1994 the fee paid by the
Fund to the Adviser was the minimum fee 0.7% of the average daily net asset
value of the Fund
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on an annualized basis. The basic fee of 1.6% was earned in the fiscal year
ended December 31, 1995. The management fees paid to Arnhold and S.
Bleichroeder, Inc. for the fiscal period from April 4, 1994 through December 31,
1994 and for the fiscal year ended December 31, 1995 were $112,270 and $338,062,
respectively. The new management fee is higher than the prior minimum fee of
0.7%, but less than the prior basic management fee of 1.6% and the prior maximum
fee of 2.5%.
DISTRIBUTOR
Arnhold and S. Bleichroeder, Inc., a registered broker-dealer, investment
adviser and a member of the New York Stock Exchange and the National Association
of Securities Dealers, Inc., serves as the distributor of the Fund's common
stock pursuant to a Distribution Agreement with the Fund. Arnhold and S.
Bleichroeder, Inc. is engaged in the investment advisory and securities
underwriting and brokerage businesses. The address of the principal executive
offices of Arnhold and S. Bleichroeder, Inc. is 45 Broadway, New York, New York
10006. The expenses related to distributing the Fund's shares are assumed by
Arnhold and S. Bleichroeder, Inc. Arnhold and S. Bleichroeder, Inc. may make
payments to dealers and other persons which distribute shares of the Fund. Such
payments may be calculated by reference to the net asset value of shares sold by
such persons or otherwise. Additionally, Arnhold and S. Bleichroeder, Inc.
provides the office space, facilities, equipment and personnel necessary to
perform the administrative duties provided for under the Services Agreement and
the Distribution Agreement.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser is responsible for the selection of brokers, dealers and
futures commission merchants to effect the Fund's portfolio transactions and the
negotiation of brokerage commissions, if any. The foregoing entities may receive
compensation in connection with the Fund's portfolio transactions in securities,
options and futures. Orders may be directed to any broker, dealer or futures
commission merchant, including, to the extent and in the manner permitted by
applicable law, Arnhold and S. Bleichroeder, Inc. Commissions are generally
negotiable in the case of U.S. securities exchange transactions but are
generally fixed in the case of foreign exchange transactions and may be higher
than prevailing U.S. rates.
The Adviser, in placing orders for securities, options and futures for the
Fund's portfolio, is required to give primary consideration to obtaining the
most favorable price and efficient execution. The Adviser, to the extent
consistent with the foregoing, will consider the research and investment
services provided by brokers, dealers or futures commission merchants who effect
or are parties to portfolio transactions of the Fund, the Adviser or the
Adviser's other clients. Commission rates are established pursuant to
negotiations with the executing party based on the quantity and quality of
execution services provided in light of generally prevailing rates. The Adviser
is permitted to effect portfolio transactions for the Fund only if the
commissions, fees or other remuneration received by Arnhold and S. Bleichroeder,
Inc. are reasonable and fair compared to the commissions, fees or other
remuneration paid to other brokers or dealers in connection with comparable
transactions involving similar securities or options being purchased or sold on
an exchange during a comparable time period. The Fund's Board of Directors,
including a majority of the directors who are not 'interested' directors, has
adopted procedures which are reasonably designed to assure that any commissions,
fees or other remuneration received by Arnhold and S. Bleichroeder, Inc. for
effecting portfolio transactions on the Fund's behalf are consistent with the
foregoing standard.
Portfolio securities may not be purchased from any underwriting or selling
group of which Arnhold and S. Bleichroeder, Inc., during the existence of the
group, is a member, except in accordance with rules of the Securities and
Exchange Commission (the 'Commission'). The Fund's Board of Directors, including
a majority
12
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<PAGE>
of the directors who are not 'interested' persons of the Fund, has adopted
procedures which are reasonably designed to assure compliance with those rules.
The limitations imposed by the foregoing procedures, in the opinion of the Fund,
will not significantly affect the Fund's ability to pursue its present
investment objective. However, in the future in other circumstances, the Fund
may be at a disadvantage because of those limitations in comparison to other
funds with similar objectives but not subject to such limitations.
NET ASSET VALUE
The net asset value per share is the net worth of the Fund (assets,
including securities at market value, minus liabilities) divided by the number
of shares outstanding. The Fund shall compute the net asset value of its shares
as of 15 minutes after the close of trading on the floor of the New York Stock
Exchange, which is currently 4:00 p.m., New York time, on each day the New York
Stock Exchange is open for business. The net asset value will not be computed on
days on which no orders to purchase, sell or redeem Fund shares have been
received or on days on which changes in the value of the Fund's portfolio
securities do not affect net asset value. The net asset value per share will not
be determined on such federal and non-federal holidays as are observed by the
New York Stock Exchange, which currently include: New Year's Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
Foreign securities are valued on the basis of quotations from the primary
market in which they are traded and translated from the local currency into U.S.
dollars using current exchange rates. Any security, foreign or domestic, for
which the primary market is on a U.S. exchange is valued at the last sale price
on such exchange on the day of valuation or, if there was no sale on such day,
the mean between the last bid and asked prices quoted on such day. NASDAQ
National Market System equity securities are valued at the last sale price or,
if there was no sale on such day, at the mean between the most recently quoted
bid and asked prices. Corporate bonds (other than convertible debt securities)
and U.S. Government securities that are actively traded in the over-the-counter
market, including listed securities for which the primary market is believed to
be over-the-counter, are valued on the basis of valuations provided by a pricing
service which uses information with respect to transactions in bonds, quotations
from bond dealers, market transactions in comparable securities and various
relationships between securities in determining value. Pricing based on market
transactions in comparable securities and various relationships between
securities is known as 'matrix' pricing. Other securities are valued at the mean
between the most recently quoted bid and asked prices. Short-term debt
instruments which mature in less than 60 days are valued at amortized cost,
unless the Board of Directors determines that such valuation does not represent
fair value. Securities which are otherwise not readily marketable or securities
for which market quotations are not readily available are valued in good faith
at fair value in accordance with procedures adopted by the Fund's Board of
Directors. The Board of Directors may, from time to time, use a pricing service
to value the Fund's holdings of illiquid securities, if any. See 'Investment
Objective and Policies and Risk Factors -- Illiquid Securities' above.
HOW TO PURCHASE SHARES
Shares of the Fund may be purchased through Arnhold and S. Bleichroeder,
Inc. at the net asset value next determined after receipt of an order with
complete information and meeting all the requirements discussed in this
Prospectus. The current minimum initial investment, other than for employees of
Arnhold and S. Bleichroeder, Inc. and retirement plans, is $5,000. The current
minimum initial investment for employees of Arnhold and S. Bleichroeder, Inc. is
$1,000. For retirement plans, the minimum initial investment is $2,000. The
current minimum initial investment amounts should be considered temporary, and
the Board of Directors may change the amounts at any time. The minimum initial
investment amounts in certain states may be higher. The
13
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minimum subsequent investment is $1,000 other than reinvestment of dividends. No
commission or sales charge is imposed upon the purchase of shares. Transactions
in Fund shares made through dealers other than Arnhold and S. Bleichroeder, Inc.
may be subject to service charges imposed by the dealer; Arnhold and S.
Bleichroeder, Inc. does not now impose such charges.
Investors should provide the information required by an IRS Form W-9 to
avoid backup withholding taxes. See 'Dividends, Distributions and Taxes.' Form
W-9 information is included as part of each application. Shares of the Fund may
be purchased by submitting a completed Account Application and a check or money
order payable to First Eagle International Fund, Inc. to: First Eagle Funds, 45
Broadway, New York, New York 10006 and/or to BISYS Fund Services, Inc., 100
First Avenue, Suite 300, Pittsburgh, Pennsylvania 15222. To purchase shares with
a Federal funds wire for a new account: telefax a completed signed application
to the Fund at (212) 248-8861 or to BISYS Fund Services, Inc. at (412) 471-3160
and contact First Eagle International Fund, Inc. at (800) 451-3623 to notify the
appropriate personnel of the account name, address and social security number,
the amount of funds to be wired and the approximate time of the wire; wire funds
to The Bank of New York, New York, New York, ABA: 021000018, FBO First Eagle
International Fund, Inc., Account # 8900075627; and immediately send the
original signed account application to First Eagle Funds, 45 Broadway, New York,
New York 10006. To purchase shares with a Federal funds wire for an existing
account: identify the First Eagle International Fund account number on the wire
and direct funds as indicated above.
STOCKHOLDER INVESTMENT ACCOUNT
Upon the initial purchase of shares of the Fund, a Stockholder Investment
Account (the 'Account') is established for each investor under which the shares
are held for the investor by the Transfer Agent, BISYS Fund Services, Inc.
Whenever a transaction takes place in the Account, the stockholder will be
mailed a statement showing the transaction and the status of the Account. No
certificates will be issued to a stockholder unless the Transfer Agent
specifically receives a request in writing from the stockholder.
Automatic reinvestment of dividends and/or distributions is available to
Fund stockholders. Information regarding this privilege is set forth under
'Stockholder Investment Account' in the Statement of Additional Information.
HOW TO REDEEM SHARES
REDEMPTION
Shares of the Fund can be redeemed at any time for cash at net asset value.
If shares are held in non-certificate form, a written request for redemption
signed by the stockholder(s) exactly as the account is registered is required.
If certificates are held by the stockholder(s), the certificates, signed in the
name(s) shown on the face of the certificates, must be returned to be redeemed.
The certificates may be signed either on their reverse side or on a separate
stock power. If redemption is requested by a corporation, partnership, trust or
fiduciary, written evidence of authority acceptable to the Fund's Transfer Agent
must be submitted before such request will be accepted. All correspondence and
documents concerning redemptions should be sent to the Fund and/or to BISYS Fund
Services, Inc.
Whether certificates are held or shares are held on deposit, the
signature(s) on the redemption request and on the certificates, if any, or stock
power must be guaranteed by a commercial bank, trust company, credit union,
savings association or qualified broker or dealer.
The redemption price is the net asset value per share next determined after
the request for redemption is received in good order by the Fund's Transfer
Agent. See 'Net Asset Value.' The Fund may change the
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signature guarantee requirements from time to time upon notice to stockholders,
which may be given by means of a new prospectus.
PAYMENT
Payment for shares presented for redemption will ordinarily be made by
check within seven days after receipt by the Fund's Transfer Agent of the
certificate and/or written request in proper order. Such payment may be
postponed or the right of redemption suspended at times (a) when the New York
Stock Exchange (the 'Exchange') is closed for other than customary weekends and
holidays, (b) when trading on the Exchange is restricted, (c) when an emergency
exists as a result of which disposal by the Fund of securities owned by it is
not reasonably practicable or it is not reasonably practicable for the Fund
fairly to determine the value of its net assets, or (d) during any other period
when the Commission, by order, so permits; provided that applicable rules and
regulations of the Commission shall govern as to whether the conditions
prescribed in (b), (c) or (d) exist. No shares purchased by check may be
redeemed until the check has cleared, which may take up to 15 days. The process
to determine that the check will be honored may be expedited by telephone or
written assurance to the Fund from the bank upon which the purchase check was
drawn, which must be arranged for by the stockholder requesting redemption.
INVOLUNTARY REDEMPTION
In order to reduce expenses, the Fund may redeem all the shares of any
stockholder, including a stockholder which is an IRA, Keogh or other
tax-sheltered retirement plan, or who is an employee of Arnhold and S.
Bleichroeder, Inc., whose account has a net asset value of $1,000 or less. The
Fund will give stockholders whose shares are being so redeemed 60 days' prior
written notice in which to purchase sufficient additional shares to avoid
redemption.
TELEPHONE PURCHASE AND REDEMPTION
An investment in First Eagle International Fund, Inc. automatically
entitles stockholders to purchase subsequent Fund shares, subject to the minimum
described in the section entitled 'How to Purchase Shares,' without charge, by
telephone after the Fund is in receipt of a completed Telephone Purchase and
Redemption Form. This form is supplied in the investment kit and is also
available from the Fund by calling (800) 451-3623 or BISYS Fund Services, Inc.
('BISYS') by calling (800) 824-3863.
TELEPHONE PURCHASE ORDERS may be made for subsequent investments in the
Fund by calling BISYS at (800) 824-3863, before 4:00 p.m. Eastern Time on each
day both The Bank of New York (the 'Custodian') and the New York Stock Exchange
are open for business (a 'Business Day'). The trade will be executed as of 4:00
p.m. Eastern Time on such Business Day if payment is received by such time on
that day. Orders received after the time specified, and orders for which payment
has not been received by 4:00 p.m. Eastern Time, will not be accepted. The Fund
may, in its discretion, reject any purchase order for shares. Payment for orders
which are not received in good order, paid for in a timely manner or are not
accepted by the Fund, will be returned after prompt notification to the sending
stockholder.
Payment for shares may be made only in Federal funds or other funds
immediately available to the Fund and should be wired to The Bank of New York,
as outlined in the section 'How To Purchase Shares.' The Fund reserves the right
to suspend the sale of shares to the public at any time, in response to
conditions in the securities markets or otherwise.
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REDEMPTION ORDERS for the Fund may also be made by calling BISYS'
Pittsburgh office at (800) 824-3863 before 4:00 p.m. Eastern Time on each
Business Day. The trade will be executed as of 4:00 p.m. Eastern Time on such
Business Day if notification is received by such time. Stockholders will be
required to provide proper identification, such as the stockholder's selected
personal identification number (a 'PIN#'). For redemptions over $100,000, it may
be necessary for BISYS to request other pertinent information to confirm the
identity of the stockholder.
Redemptions are effected at the net asset value per share next determined
after receipt of the order by BISYS. Payment for redeemed shares will normally
be wired in Federal funds on the next business day to the payment instructions
specified. Payment instructions may be given to the Fund either on the Telephone
Purchase and Redemption Form or in a letter to the Fund which is signature
guaranteed. If you do not provide payment instructions for the proceeds of a
redemption, a check will be sent to the address of record.
Telephone redemptions must be preceded by the establishment of a PIN#. You
may obtain a PIN# by calling BISYS at (800) 824-3863.
The Fund will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. Such procedures may include, among other
things, requiring a PIN# prior to acting upon telephone instructions. The Fund
reserves the right to refuse a telephone redemption if it believes it advisable
to do so. Assuming the Fund's security procedures are followed, neither the Fund
nor BISYS will be responsible for the authenticity of redemption instructions
received by telephone and believed to be genuine and any loss therefrom will be
borne by the investor. Please note that all telephone calls will be recorded for
your protection.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund expects to declare an annual dividend of net investment income and
an annual distribution of capital gains, but the Fund may make distributions on
a more frequent basis to comply with the distribution requirements of the
Internal Revenue Code of 1986, as amended (the 'Internal Revenue Code'), and in
all events in a manner consistent with the provisions of the Investment Company
Act of 1940. Dividends and distributions will be paid in additional Fund shares
based on the net asset value at the close of business on the record date, or
such other date as the Board of Directors may determine, unless the stockholder
elects in writing not less than five business days prior to the record date to
receive such distributions in cash. The Fund will notify each stockholder
annually as to both the dollar amount and the taxable status of that year's
dividends and distributions.
The Fund has elected to qualify and intends to remain qualified as a
regulated investment company under the Internal Revenue Code. If so qualified,
the Fund will not be subject to federal income tax to the extent its earnings
are distributed in accordance with applicable provisions of the Internal Revenue
Code. In order to satisfy the requirements for qualification, the Fund may have
to restrict the extent to which it engages in short-term trading, short sales
and transactions in options and futures contracts. See 'Taxes' in the Statement
of Additional Information.
All dividends from net investment income, together with distributions of
short-term capital gains, will be taxable as ordinary income to the stockholder
whether or not reinvested. Net capital gains of the Fund (i.e., the excess of
net long-term capital gains over net short-term capital losses) will be taxable
to stockholders as long-term capital gains when they are distributed as capital
gains dividends to stockholders and designated as such in a written notice to
stockholders mailed within 60 days after the close of the taxable year of the
Fund, whether or not reinvested, and regardless of the length of time a
stockholder has owned his or her shares. Currently, capital
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gains dividends to an individual shareholder are taxed at a maximum rate of 28%
and ordinary income is subject to a maximum rate of 39.6%.
Distributions of investment income will qualify for the 70% dividends
received deduction for corporate stockholders, to the extent that the Fund's
income is derived from qualified dividends received from domestic corporations.
The dividends received deduction for corporate stockholders of the Fund may be
reduced if the shares of the Fund with respect to which dividends are received
are treated as debt-financed or deemed to have been held for less than 46 days.
Tax-exempt stockholders generally will not be required to pay taxes on amounts
distributed to them.
Any gain or loss realized upon a a sale or redemption of Fund shares by a
stockholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the shares have been held more than one year and
otherwise as short-term capital gain or loss. Any such loss, however, will be
treated as long-term capital loss to the extent of any capital gain
distributions received by the stockholder with respect to such shares. Moreover,
any loss realized on a sale or exchange will be disallowed to the extent the
shares disposed of are replaced within a period of 61 days beginning 30 days
before and ending 30 days after the disposition, such as pursuant to a dividend
reinvestment in shares. In such a case the basis of the shares acquired will be
adjusted to reflect the disallowed loss.
The Fund will be subject to a non-deductible 4% excise tax in any calendar
year in which it does not distribute to its stockholders the sum of 98% of its
ordinary income for such calendar year and 98% of its capital gain net income
determined on the basis of a year ending on October 31 and 100% of any prior
undistributed amount from the previous excise tax reporting period. Dividends
and distributions generally are taxable to stockholders in the year in which
they are received or accrued. Dividends declared to stockholders of record on a
date in October, November or December are deemed to have been received on
December 31 of such year of declaration even though they are not paid until
January of the following calendar year.
Under U.S. Treasury Regulations, the Fund is required to withhold and remit
to the U.S. Treasury 31% of dividend, capital gain income and redemption
proceeds on the accounts of certain stockholders who fail to furnish their tax
identification numbers on IRS Form W-9 (or who fail to furnish IRS Form W-8 in
the case of certain foreign stockholders) with the required certifications
regarding the stockholder's status under the Internal Revenue Code.
The Fund may qualify for and may make an election permitted under Section
853 of the Internal Revenue Code so that shareholders may be eligible to claim a
credit or deduction on their federal income tax returns for, and will be
required to treat as part of the amounts distributed to them, their pro rata
portion of qualified taxes paid or incurred by the Fund to foreign countries
(which taxes relate primarily to investment income). The Fund may make an
election under Section 853, provided that more than 50% of the value of the
Fund's total assets at the close of the taxable year consists of securities in
foreign corporations, and the Fund satisfied the applicable distribution
provisions of the Internal Revenue Code. The foreign tax credit available to
shareholders is subject to certain limitations imposed by the Internal Revenue
Code.
If the Fund invests in an equity interest in a foreign entity which is
classified as a 'passive foreign investment company' ('PFIC') for federal income
tax purposes, the operation of certain provisions of the Internal Revenue Code
applying to PFICs could result in the imposition of certain federal income taxes
on the Fund. Under Proposed Treasury Regulation Section 1.1291-8(a), the Fund
may under certain circumstances elect to mark-to-market gains (but not losses)
from PFIC securities in lieu of paying taxes on gain or distributions therefrom.
Such gains will be treated as ordinary income under Proposed Treasury Regulation
Section 1.1291-8(b)(2).
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A stockholder who is a nonresident alien or foreign entity generally will
not be subject to federal income tax on capital distributions or on any capital
gain realized on a redemption of shares, provided that (i) such gains are not
effectively connected with the conduct by the stockholder of a trade or business
in the United States, (ii) in the case of an individual, the stockholder is not
physically present in the United States for 183 days or more during the taxable
year and (iii) the stockholder has furnished an IRS Form W-8 with the required
certifications regarding the stockholder's foreign status under the Internal
Revenue Code. Other distributions may be subject to United States tax. In
particular, other distributions which are not effectively connected with a trade
or business in the United States may be subject to a 30% United States
withholding tax under the existing provisions of the Internal Revenue Code
applicable to foreign individuals and entities unless a reduced rate of
withholding exemption is provided under an applicable treaty. Non-U.S.
stockholders are urged to consult their own tax advisers concerning the
applicability of United States tax. See 'Taxes' in the Statement of Additional
Information.
The foregoing discussion is intended only as a brief discussion of the
federal income tax consequences of an investment in shares of the Fund.
Distributions may also be subject to state and local taxes. Stockholders are
urged to consult their own tax advisers regarding specific questions as to
federal, state or local taxes.
DESCRIPTION OF COMMON STOCK
The Fund was incorporated in Maryland on October 7, 1993. The Fund is
authorized to issue one hundred million shares of its common stock. Shares of
the Fund, when issued, are fully paid, nonassessable, fully transferable and
redeemable at the option of the holder. Shares are also redeemable at the option
of the Fund under certain circumstances as described above under 'How to Redeem
Shares.' All Shares are equal as to earnings, assets and voting privileges.
There are no conversion, preemptive or other subscription rights. In the event
of liquidation each share of common stock of the Fund is entitled to its portion
of all the Fund's assets after all debt and expenses have been paid. The shares
of the Fund do not have cumulative voting rights for the election of directors.
HOW THE FUND CALCULATES PERFORMANCE
From time to time, the Fund may advertise its performance in terms of total
return. The Fund may further compare its performance to various published
indices which are widely used as benchmarks. The Fund may also compare its
performance to rankings prepared by Lipper Analytical Services, Inc. or
Morningstar, Inc., each a widely recognized independent service which monitors
and ranks the performance of mutual funds, and to rankings prepared by other
national financial publications. The Fund's total return shows how much an
investment in the Fund would have increased (decreased) over a specified period
of time assuming the reinvestment of all distributions and dividends on the
reinvestment dates during the period and deducting all recurring fees. The
aggregate total return reflects actual performance over a stated period of time.
The Fund's average annual total return demonstrates the hypothetical rate of
return of a hypothetical investment if performance had been constant over the
stated period of time. Total return information may be useful in reviewing the
Fund's performance and for providing a basis for comparison with other
investment alternatives. Fund performance figures are based upon historical
results and are not intended to indicate future performance. Further performance
information is contained in the Fund's annual report to stockholders, which may
be obtained without charge. See 'Reports to Stockholders' below and 'Performance
Information' in the Statement of Additional Information.
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REPORTS TO STOCKHOLDERS
The Fund will send its stockholders annual, semi-annual and quarterly
reports, without charge. The Fund's annual reports will contain performance
information of the Fund, as well as financial statements audited by the Fund's
independent accountants.
The Transfer Agent will send each stockholder of record a statement showing
transactions in the Account, the total number of shares owned and any dividends
or distributions paid. These statements will normally be mailed within five
business days after a transaction occurs. The Transfer Agent will also send each
stockholder of record a quarterly statement of the stockholder's account.
Stockholder inquiries should be addressed to First Eagle Funds, 45
Broadway, New York, New York 10006 or by telephone to (800) 451-3623 or to BISYS
Fund Services, Inc., 100 First Avenue, Suite 300, Pittsburgh, Pennsylvania 15222
at (800) 824-3863.
CUSTODIAN AND TRANSFER AND DIVIDEND DISBURSING AGENT
The Bank of New York, 48 Wall Street, New York, NY 10286, serves as
Custodian for the Fund's assets. BISYS Fund Services, Inc., 100 First Avenue,
Suite 300, Pittsburgh, Pennsylvania 15222 serves as Transfer and Disbursing
Agent. In those capacities, each of The Bank of New York and BISYS Fund
Services, Inc. maintains certain books and records pursuant to agreements with
the Fund.
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APPENDIX
CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE, INC.'S CORPORATE BOND RATINGS:
Aaa -- Bonds which are rated Aaa are judged to be of the best quality and
carry the smallest degree of investment risk. Interest payments are protected by
a large or by an exceptionally stable margin, and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
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.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and may have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
STANDARD & POOR'S RATINGS GROUP'S CORPORATE BOND RATINGS:
AAA -- This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA -- Capacity to pay principal and interest is very strong, and in the
majority of instances they differ from AAA issues only in a small degree.
A -- Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB -- Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in higher rated categories.
BB, B, CCC, CC, C -- Bonds rated BB, B, CCC, CC and C are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the
obligations. BB indicates the lowest degree of speculation and C the highest
degree of speculation.
Cl -- The rating Cl is reserved for income bonds on which no interest is
being paid.
D -- Bonds rated D are in default, and payment of interest and/or principal
is in arrears.
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NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE FUND, THE ADVISER OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER BY THE FUND, BY ITS INVESTMENT ADVISER
OR BY ITS DISTRIBUTOR TO SELL OR A SOLICITATION OF ANY OFFER TO BUY, ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION.
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TABLE OF CONTENTS
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PAGE
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Highlights...................................... 2
Summary of Fund Expenses........................ 4
Financial Highlights............................ 5
Investment Objective and Policies and
Risk Factors.................................. 5
Investment Techniques........................... 9
Investment Restrictions......................... 10
Management of the Fund.......................... 10
Portfolio Transactions and Brokerage............ 12
Net Asset Value................................. 13
How to Purchase Shares.......................... 13
Stockholder Investment Account.................. 14
How to Redeem Shares............................ 14
Dividends, Distributions and Taxes.............. 16
Description of Common Stock..................... 18
How the Fund Calculates Performance............. 18
Reports to Stockholders......................... 19
Custodian and Transfer and Dividend Disbursing
Agent......................................... 19
Appendix........................................ A-1
</TABLE>
[LOGO]
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PROSPECTUS
--------------------
APRIL 30, 1996
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FIRST EAGLE INTERNATIONAL FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
DATED APRIL 30, 1996
First Eagle International Fund, Inc. (the 'Fund') is an open-end,
non-diversified management investment company, or mutual fund, whose investment
objective is to achieve capital appreciation. The Fund will seek to achieve that
objective by pursuing a flexible investment strategy emphasizing investment in
foreign, and to a lesser extent domestic, equity and debt securities in varying
proportions. Under normal circumstances at least 65% of the Fund's total assets
will be invested in securities of foreign issuers. The Fund's securities will be
selected by the Fund's investment adviser, Arnhold and S. Bleichroeder Advisers,
Inc. (the 'Adviser'), on the basis of their appearing to be undervalued in their
respective trading markets relative to the issuer's overall financial and
managerial strength as measured by certain quantative indicators. The Adviser
believes that the Fund's exposure to loss may be limited by investing in
securities which, in the Adviser's opinion, appear to be undervalued by the
market relative to their 'intrinsic value' as determined by the Adviser. The
Fund also may invest in equity and debt securities selected on other bases and
engage in transactions involving other types of investment instruments.
The Fund's address is 45 Broadway, New York, New York 10006, and its
telephone number is (212) 943-9200 or (800) 451-3623.
This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Fund's Prospectus, dated April 30, 1996, a copy of
which may be obtained from Arnhold and S. Bleichroeder, Inc., the Fund's
Distributor, upon request by writing to 45 Broadway, New York, New York 10006,
or telephoning (212) 943-9200 or (800) 451-3623.
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TABLE OF CONTENTS
<TABLE>
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CROSS REFERENCE
TO PAGE IN
PAGE PROSPECTUS
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<S> <C> <C>
Additional Investment Information......................................................... 2 2
Investment Restrictions................................................................... 17 10
Directors, Officers and Principal Stockholders............................................ 20 10
Adviser................................................................................... 22 10
Distributor............................................................................... 23 12
Portfolio Transactions and Brokerage...................................................... 23 12
Stockholder Investment Account............................................................ 25 14
Taxes..................................................................................... 26 16
Performance Information................................................................... 28 18
Custodian, Transfer and Dividend Disbursing Agent and Independent Accountants............. 28 19
Organization and History of the Fund...................................................... 28
Statement of Assets and Liabilities.......................................................
Independent Auditors' Report..............................................................
</TABLE>
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ADDITIONAL INVESTMENT INFORMATION
The Fund's investment objective is to achieve capital appreciation by
pursuing a flexible investment strategy emphasizing investment in foreign, and
to a lesser extent domestic, equity and debt securities believed by the Adviser
to be undervalued in their respective trading markets. The Adviser believes the
Fund's exposure to loss may be limited by investing part or all of its assets in
securities believed by the Adviser to be undervalued by the market. The Fund is
a non-diversified investment company and as such the Fund's assets may be
invested in a limited number of issues; thus, there may be a greater risk in an
investment in the Fund when compared with an investment in a diversified
investment company. See 'Highlights -- Risk Factors' and 'Investment Objective
and Policies and Risk Factors' in the Prospectus.
FOREIGN SECURITIES
The Fund may invest in foreign securities issued by companies of any nation
regardless of its level of development. The risks involved in investing in
foreign securities include political or economic instability in the country of
issue, the difficulty of predicting international trade patterns, the
possibility of imposition of exchange controls and the risk of currency
fluctuations. Foreign securities may be subject to greater fluctuations in price
than securities issued by U.S. corporations or issued or guaranteed by the U.S.
Government, its instrumentalities or agencies. Additionally, there may be less
publicly available information about a foreign company than about a domestic
company. Foreign companies generally are not subject to uniform accounting,
auditing and financial reporting standards comparable to those applicable to
domestic companies. There is generally less government regulation of securities
exchanges, brokers and listed companies abroad than in the U.S., and, with
respect to certain foreign countries, there is a possibility of expropriation,
confiscatory taxation or diplomatic developments which could affect investment
in those countries. Investment in securities subject to a foreign country's
repatriation restrictions of more than seven days will be considered illiquid
securities and will be subject to the Fund's overall 15% limitation on
investment in illiquid securities. See 'Illiquid Securities' below. Finally, in
the event of a default of any foreign debt obligation, it may be more difficult
for the Fund to obtain or to enforce a judgment against the issuers of those
securities. Foreign currency denominated securities may be affected favorably or
unfavorably by changes in currency rates and in exchange control regulations,
and costs may be incurred in connection with conversions between currencies.
Foreign currency held by the Fund for foreign denominated securities purchases
also may be subject to similar risks. The Fund's foreign securities and
currencies will be held by its Custodian, an 'eligible foreign custodian' or a
'qualified U.S. bank,' as those terms are defined in the Investment Company Act
and the rules and regulations thereunder. The Custodian will hold the Fund's
foreign securities pursuant to such arrangements as are permitted by applicable
foreign and domestic law.
HIGH YIELD SECURITIES
The economy and interest rates affect high yield securities differently
from other securities. The prices of high yield bonds, sometimes called 'junk
bonds,' have been found to be less sensitive to interest rate changes than
higher-rated investments, but more sensitive to adverse economic changes or
individual corporate developments. During an economic downturn or substantial
period of rising interest rates, highly leveraged issuers will likely experience
financial stress which would adversely affect their ability to service their
principal and interest payment obligations, to meet projected business goals,
and to obtain additional financing. If the issuer of a bond owned by the Fund
defaults, the Fund may incur additional expenses in seeking recovery.
Additionally, periods of economic uncertainty and changes can be expected to
result in increased volatility of market prices of high yield bonds and the
Fund's net asset value. Furthermore, to the extent the Fund purchases
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high yield bonds structured as zero coupon or pay-in-kind securities, their
market prices are affected to a greater extent by interest rate changes and
thereby are more volatile than securities which pay interest periodically and in
cash.
High yield bonds present risks based on payment expectations. For example,
high yield bonds may contain redemption or call provisions. If an issuer
exercises those provisions in a declining interest rate market and the Fund
replaces the security with a lower yielding security, the Fund's income will be
reduced. Also, if interest rates increase, declines in the value of high yield
bonds held by the Fund will decrease its net asset value. If the Fund
experiences unexpected net redemptions, it may be forced to sell its high yield
bonds when independent investment judgment may indicate otherwise. In that case,
the asset base upon which the Fund's expenses can be spread will be decreased,
the Fund's expense ratio will be increased and its rate of return decreased.
It is likely that there will be thin trading markets for high yield bonds.
It may, therefore, be difficult to value accurately the high yield bonds, if
any, in the Fund's portfolio and judgment will play a greater role in valuation
because there may be less reliable objective data available. The Fund also may
have difficulty selling the high yield bonds. Adverse publicity and investor
perceptions may decrease the values and liquidity of high yield bonds,
especially in a thinly traded market. If the Fund acquires illiquid or
restricted high yield bonds, those securities may involve special registration
requirements, liabilities, costs, and liquidity and valuation difficulties.
Federal laws require the divestiture by federally insured savings and loan
associations of their investments in high yield bonds and limit the
deductibility of interest by certain corporate issuers of high yield bonds.
These laws could adversely affect the Fund's net asset value and investment
practices, the secondary market for high yield securities, the financial
condition of issuers of these securities and the value of outstanding high yield
securities.
If the Fund invests in zero coupon or pay-in-kind securities, it will be
subject to special tax considerations related to those securities. The Fund will
have to report the interest on those securities as income even though it
receives no cash interest until the security's maturity or payment date.
Shareholders will be taxed on that interest even if the Fund does not distribute
cash to them. In order to pay taxes on that interest, shareholders may have to
redeem some of their shares to pay tax or the Fund may have to sell some of its
assets to distribute cash to shareholders or borrow to satisfy distribution
requirements. Those actions would be likely to reduce the Fund's assets and
thereby increase its expense ratio and decrease its rate of return.
Certain risks are associated with using credit ratings as a method for
evaluating high yield bonds. As credit agencies may fail to timely change the
credit ratings to reflect subsequent events, the Adviser continuously monitors
the issuers of high yield bonds in its portfolio to determine if the issuers, in
the Adviser's opinion, will have sufficient cash flow and profits to meet
required principal and interest payments, and to attempt to assure the bonds'
liquidity so the Fund can meet redemption requests. Achievement of the Fund's
investment objective may be more dependent on the Adviser's own credit analysis
than in the case of higher quality bonds. The Fund may retain a portfolio
security whose rating has been changed.
OPTIONS TRANSACTIONS
INTRODUCTION
The Adviser believes that certain transactions in options on securities and
on stock indices may be useful in limiting the Fund's investment risk and
augmenting its investment return. The Adviser expects, however, the amount of
Fund assets to be involved in options transactions to be small relative to the
Fund's investment in
3
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equity and/or debt securities. Accordingly, it is expected that only a
relatively small portion of the Fund's investment return will be attributable to
transactions in options on securities and on stock indices. The Fund may invest
in options transactions involving options on securities and on stock indices
that are traded on U.S. and foreign exchanges or in the over-the-counter
markets.
The following discussion sets forth the principal characteristics of, and
risks associated with, certain transactions involving options on securities and
on stock indices. Investors in the Fund should carefully read the following
discussion because the information set forth therein is important to an
understanding of certain of the techniques which the Fund may use in seeking to
limit its investment risk and enhance its investment return.
GENERAL CHARACTERISTICS OF AND LIMITATIONS APPLICABLE TO OPTIONS
A call option is a contract pursuant to which the purchaser, in return for
a premium paid, has the right to buy the equity or debt security underlying the
option at a specified exercise price at any time during the term of the option.
With respect to a call option on a stock index, the purchaser is entitled to
receive cash if the underlying stock index rises sufficiently above its level at
the time the option was purchased. The writer of the call option, who receives
the premium, has the obligation, upon exercise of the option, to deliver the
underlying equity or debt security against payment of the exercise price. With
respect to a call option on a stock index, the writer has the obligation to
deliver cash if the underlying index rises sufficiently above its level when the
option was purchased.
A put option is a similar contract. It gives the purchaser, in return for a
premium, the right to sell the underlying equity or debt security at a specified
exercise price during the term of the option. With respect to a put option on a
stock index, the purchaser is entitled to receive cash if the underlying index
falls sufficiently below its level at the time the option was purchased. The
writer of the put, who receives the premium, has the obligation to buy the
underlying equity or debt security upon exercise at the exercise price. With
respect to a put option on a stock index, the writer has the obligation to
deliver cash if the underlying index falls sufficiently below its level when the
option was purchased. The price of an option will reflect, among other things,
the relationship of the exercise price to the market price of the underlying
financial instrument, the price volatility of the underlying financial
instrument, the remaining term of the option, supply and demand of such options
and interest rates.
Securities exchanges have established limitations on the maximum number of
options that an investor or group of investors acting in concert may write. It
is possible that the Fund and other clients of the Adviser may be considered
such a group. Position limits may restrict the Fund's ability to purchase or
sell options on particular securities and on stock indices. Additionally, the
extent to which the Fund may engage in call option transactions may be limited
by the Internal Revenue Code's requirements for qualification as a regulated
investment company and the Fund's intention to qualify as such. See 'Taxes'
below.
COVERED OPTION WRITING
The Fund may write 'covered' call and put options on equity or debt
securities and on stock indices in seeking to enhance investment return or to
hedge against declines in the prices of portfolio securities or increases in the
prices of securities which the Fund intends to purchase. A call option on an
equity or debt security written by the Fund is 'covered' if the Fund owns the
security underlying the option or has an absolute and immediate right to acquire
that security without additional cash consideration (or for additional cash
consideration held in a segregated account by its Custodian) upon conversion or
exchange of other securities held in its portfolio. A call option on an equity
or debt security written by the Fund is also covered if the Fund
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holds, on a share-for-share basis, a call on the same security as the call
written where the exercise price of the call held is equal to or less than the
exercise price of the call written, or greater than the exercise price of the
call written if the difference is maintained by the Fund in cash. Treasury bills
or other high grade short-term obligations in a segregated account with the
Fund's Custodian. A call option which the Fund writes on a stock index is
covered if the Fund owns a portfolio of securities which correlates with the
stock index or segregates in an account with its Custodian cash, or cash
equivalents, equal to the total market value of the call option. A call option
written by the Fund on a futures contract is covered if the Fund owns a long
position in the underlying futures contract or segregates in an account with its
Custodian cash, or cash equivalents, equal to the then current market value of
the underlying futures contract.
A put option written by the Fund on an equity or debt security is 'covered'
if the Fund maintains cash, Treasury bills or other high grade short-term
obligations with a value equal to the exercise price in a segregated account
with its Custodian, or holds on a share-for-share basis a put on the same equity
or debt security as the put written where the exercise price of the put held is
equal to or greater than the exercise price of the put written or lower than the
exercise price of the put written if the difference is maintained in a
segregated account with the Fund's Custodian. A put option written by the Fund
on a stock index is covered if the Fund maintains in a segregated account with
its Custodian cash, or cash equivalents, equal to the total market value of the
put option. A put option written on a futures contract is covered if the Fund
owns a short position in the underlying contract or segregates, in an account
with its Custodian, cash or cash equivalents equal to the then current market
value of the underlying futures contract.
One reason for writing options on a securities portfolio of equity and debt
securities or on stock indices is to attempt to realize, through the receipt of
premiums, a greater return than would be realized on the securities alone. In
the case of a securities call, the writer receives the premium, but has given up
the opportunity for profit from a price increase in the underlying security
above the exercise price during the option period. In the case of a stock index
call, the writer receives the premium, but is obligated to deliver cash if the
underlying index rises sufficiently during the option period. Conversely, the
put option writer has, in the form of the premium, gained a profit as long as
the price of the underlying security or stock index remains above the exercise
price, but has assumed an obligation to purchase the underlying security at the
exercise price from or deliver cash to the buyer of the put option during the
option period.
Another reason for writing options on a securities portfolio or on stock
indices is to hedge against a moderate decline in the value of securities owned
by the Fund in the case of a call option, or a moderate increase in the value of
securities the Fund intends to purchase, in the case of a put option. If the
security or stock index underlying a covered call option written by the Fund
declines, or fails to appreciate sufficiently to result in the call being
exercised, the Fund will realize income equal to the amount of the premium it
received for the option. That income may wholly or partially offset any decline
in the value of the Fund's portfolio securities. If the value of the security or
stock index underlying a covered put option written by the Fund increases and
the covered put expires unexercised, the Fund may realize income equal to the
amount of the premium it received for the option. That income may offset
increases in the prices of securities which the Fund purchases subsequent to its
writing of the put option.
Options written by the Fund will normally have expiration dates not more
than nine months from the date written. The exercise price of call options may
be below ('in-the-money'), equal to ('at-the-money') or above
('out-of-the-money') the current market values of the underlying securities at
the times options are written by the Fund.
If an increase occurs in the underlying security or stock index sufficient
to result in the exercise of a call written by the Fund, the Fund may be
required to deliver securities or cash and may thereby forego some of or
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all the gain that otherwise may have been realized on the securities underlying
the call option. This 'opportunity cost' may be partially or wholly offset by
the premium received for the covered call written by the Fund. The Fund may
purchase an underlying security for delivery in accordance with an exercise
notice of a call option assigned to it, rather than delivering that security
from its existing portfolio, in which case additional brokerage commissions or
other transaction costs will be incurred. Under those circumstances, the market
price of the security to be delivered in accordance with the exercise notice may
have increased above the exercise price of the call option. If a decrease occurs
in the security or stock index underlying a put option written by the Fund and
it is exercised, the Fund may incur a loss. The Fund also may incur brokerage
commissions in connection with its purchase of the security underlying the put
option.
So long as the obligation of an option writer continues, the writer may be
assigned an exercise notice requiring in the case of a call, delivery of, or in
the case of a put, purchase of the underlying security against payment of the
exercise price. This obligation terminates upon expiration of the option, or
such earlier time as the writer effects a closing purchase transaction by
purchasing an option of the same series as was previously sold. However, a
writer may not effect a closing purchase transaction after notification of the
exercise of an option. Further, there is no assurance that the writer will be
able to effect a closing purchase transaction for particular options. See
'Closing Purchase and Sale Transactions.' To secure its obligation to deliver
the underlying security in the case of a call option traded on an exchange, or
to pay for the underlying security in the case of a put option traded on an
exchange, a writer of a covered option is required to deposit in escrow the
underlying security or other assets in accordance with rules of The Options
Clearing Corporation (the 'Clearing Corporation'), of the national securities
exchanges (the 'Exchanges'), and of the National Association of Securities
Dealers.
PURCHASING PUT AND CALL OPTIONS ON EQUITY OR DEBT SECURITIES, CURRENCIES AND ON
STOCK INDICES
The Fund may purchase put options on equity or debt securities, currencies
and on stock indices. One purpose of the Fund's purchase of such options is to
hedge against declines in the value of its portfolio securities. When the Fund
purchases an equity or debt security because the Adviser believes the market
price of that security may rise, the Adviser may nonetheless wish to protect the
Fund's holdings of the security against a decline in market value by purchasing
a put option on that security, currency or on a stock index. Such protection is
provided during the life of the put by entitling the Fund to sell the underlying
security at the exercise price of the put or to receive cash if the underlying
index falls below the exercise price. Additionally, when the Adviser anticipates
a general market or market sector decline, or a decline in the market prices of
specific equity or debt securities, the Adviser may seek to increase the Fund's
investment return by purchasing a put on a currency, stock index or on those
equity or debt securities. An increase in investment return may be achieved by
exercising the put when the market price of the underlying instrument has
sufficiently declined. However, if the value of a security or currency
underlying a put option or the general market or a market sector does not
decline sufficiently when the Fund has purchased a put option on the underlying
instrument that option may result in a loss to the Fund. See 'Risks of Options
on Indices' below.
The Fund also may purchase call options on equity or debt securities,
currencies and on stock indices. One purpose of the Fund's purchase of such
options is to hedge against an increase in the price of securities that the Fund
intends ultimately to buy. Hedge protection is provided during the life of the
call because the Fund, as the holder of the call, is able to buy the underlying
security at the exercise price, and, in the case of a call on a stock index, is
entitled to receive cash if the underlying index rises sufficiently. However, if
the value of a security underlying a call option or the general market or a
market sector does not rise sufficiently when the Fund has
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purchased a call option on the underlying instrument, that option may result in
a loss to the Fund. See 'Risks of Options on Indices' below.
CLOSING PURCHASE AND SALE TRANSACTIONS ON AN EXCHANGE
If the writer of an option contract wishes to terminate the obligation
under that contract, a 'closing purchase transaction' may be effected. This is
accomplished by buying an option of the same series as the option previously
written. The effect of the purchase is that the writer's position in an option
will be cancelled by the options exchange on which the option is traded.
However, an option writer may not effect a closing purchase transaction after
receiving notification of the exercise of an option. Likewise, an investor who
is the holder of an option contract may liquidate his or her position by
effecting a 'closing sales transaction.' This is accomplished by selling an
option of the same series as the option previously purchased. There is no
guarantee that either a closing purchase or a closing sale transaction can be
effected.
An option position may be closed out only on an Exchange which provides a
secondary market for an option of the same series. Although the Fund generally
will purchase or write only those options for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market on
an Exchange will exist for any particular option, or at any particular time, and
for some options no secondary market may exist. In any such event it might not
be possible to effect closing transactions in particular options, with the
result that the Fund would have to exercise its options in order to realize any
profit and would incur brokerage commissions both upon the exercise of the
options and upon the subsequent disposition or acquisition of securities
underlying the exercised call or put options, respectively. If the Fund as a
covered call option writer is unable to effect a closing purchase transaction in
a secondary market, it will not be able to sell the underlying security until
the option expires or it delivers the underlying security upon exercise.
Reasons for the absence of a liquid secondary market on an Exchange include
the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an Exchange on opening transactions
or closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an Exchange; (v) the facilities of an Exchange or
a clearing corporation may not be adequate at all times to handle current
trading volume; or (vi) one or more Exchanges could, for economic or other
reasons, decide or be compelled at some future date to discontinue the trading
of options (or a particular class or series of options) in which event the
secondary market on that Exchange (or in the class or series of options) would
cease to exist, although outstanding options on that Exchange that had been
issued by a clearing corporation as a result of trades on that Exchange would
continue to be exercisable in accordance with their terms. There is no assurance
that higher than anticipated trading activity or other unforeseen events might
not, at times, render certain of the facilities of any of the clearing
corporations inadequate, and thereby result in the institution by an Exchange of
special procedures which may interfere with the timely execution of customer's
orders. However, the Clearing Corporation, based on forecasts provided by the
Exchanges, believes that its facilities are adequate to handle the volume of
reasonably anticipated options transactions, and the Exchanges have advised that
clearing corporation that they believe their facilities will also be adequate to
handle reasonably anticipated volume.
The Fund will realize a gain or loss on a closing transaction corresponding
to the difference between the price of that transaction and the price of the
original transaction. Because increases in the market price of a call option
will generally reflect increases in the market price of the underlying financial
instrument, any loss resulting from a closing purchase or sale transaction is
likely to be offset in whole or in part by appreciation of the underlying
financial instrument if it is owned by the Fund.
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OPTIONS ON STOCK INDICES
LIMITATIONS ON THE WRITING OF CALL OPTIONS ON STOCK INDICES
Except as described below, the Fund will write call options on indices only
if on such date it holds a portfolio of stocks at least equal to the value of
the index times the multiplier times the number of contracts. When the Fund
writes a call option on a broadly based stock market index, the Fund will
segregate or put into escrow with its Custodian any combination of cash, cash
equivalents or 'qualified securities' with a market value at the time the option
is written of not less than 100% of the current index value times the multiplier
times the number of contracts. The Fund will write call options on broadly based
stock market indices only if at the time of writing it holds a diversified
portfolio of stocks.
If the Fund has written an option on an industry or market segment index,
it will segregate or put into escrow with its Custodian, or pledge to a broker
as collateral for the option, at least ten 'qualified securities,' all of which
are stocks of issuers in such industry or market segment, with a market value at
the time the option is written of not less than 100% of the current index value
times the multiplier times the number of contracts. Such stocks will include
stocks which represent at least 50% of the weighting of the industry or market
segment index and will represent at least 50% of the Fund's holdings in that
industry or market segment. No individual security will represent more than 25%
of the amount so segregated, pledged or escrowed. If at the close of business on
any day the market value of such qualified securities so segregated, escrowed or
pledged falls below 100% of the current index value times the multiplier times
the number of contracts, the Fund will so segregate, escrow or pledge an amount
in cash, Treasury bills or other high grade short-term obligations equal in
value to the difference. In addition, when the Fund writes a call option on an
index whose exercise price is below the level of the stock index ('in the
money') at the time the call is written, the Fund will segregate with its
Custodian or pledge to the broker as collateral cash, U.S. Government or other
high grade short-term debt obligations equal in value to the amount by which the
call option is in-the-money times the multipler times the number of contracts.
Any amount segregated pursuant to the foregoing sentence may be applied to the
Fund's obligation to segregate additional amounts in the event that the market
value of the qualified securities falls below 100% of the current index value
times the multiplier times the number of contracts. A 'qualified security' is an
equity security which is listed on an Exchange or on NASDAQ against which the
Fund has not written a stock call option and which has not been hedged by the
Fund by the sale of stock index futures. However, if the Fund holds a call
option on the same index as the call option written where the exercise price of
the call option held is equal to or less than the exercise price of the call
option written, or greater than the exercise price of the call options written
if the difference is maintained by the Fund in cash, Treasury bills or other
high grade short-term obligations in a segregated account with its Custodian, it
will not be subject to the requirements described in this paragraph.
RISKS OF OPTIONS ON INDICES
In addition to the risks generally associated with options, the distinctive
characteristics of options on indices create certain risks that are not present
with stock options.
Because the value of an index option depends upon movements in the level of
the index rather than the price of a particular stock, successful use by the
Fund of options on indices would be subject to the Adviser's ability correctly
to predict movements in the direction of the stock market generally or of a
particular industry. This requires different skills and techniques than those
used in predicting changes in the prices of individual stocks. The Fund's
ability to hedge effectively through the use of options on stock indices also
depends on the degree to which price movements in the underlying index correlate
with price movements in the hedged securities. The Fund therefore bears the risk
that prices of hedged securities will not move in the same amount
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as the prices of options. It is also possible that there may be a negative
correlation between the index and the hedged securities, which could result in a
loss on both such securities and the option.
Index prices may be distorted if trading in certain stocks included in the
index is interrupted. Trading in the index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number of
stocks included in the index. If this occurred, the Fund would not be able to
close out options which it had purchased or written and, if restrictions on
exercise were imposed, might be unable to exercise an option it held, which
could result in substantial losses to the Fund. However, it is the Fund's policy
to purchase or write options only on indices which include a sufficient number
of stocks so that the likelihood of a trading halt in the index is minimized.
Trading in index options commenced in April 1983 with the S&P 100 option
(formerly called the 'CBOE 100'). Since that time a number of additional index
option contracts have been introduced including options on industry indices.
Although the markets for certain index option contracts have developed rapidly,
the markets for other index options are still relatively illiquid. The ability
to establish and close out positions on index options will be subject to the
development and maintenance of a liquid secondary market. It is not certain that
this market will develop in all index option contracts. The Fund will not
purchase or sell any index option contract unless and until, in the Adviser's
opinion, the market for such options has developed sufficiently so that risks in
accordance with such transactions are not greater than risks generally expected
in connection with options on stocks.
SPECIAL RISKS OF WRITING CALLS ON INDICES
If the Fund is assigned an exercise notice on a call it has written, the
Fund would be required to liquidate portfolio securities in order to satisfy the
exercise, unless it has other liquid assets that are sufficient to satisfy the
exercise of the call. Because an exercise must be settled within hours after
receiving the notice of exercise, if the Fund fails to anticipate an exercise,
it may have to borrow from a bank pending settlement of the sale of securities
in its portfolio and would incur interest charges thereon.
When the Fund has written a call, there is also a risk that the market may
decline between the time the Fund has a call exercised against it, at a price
which is fixed as of the closing level of the index on the date of exercise, and
the time the Fund is able to sell securities in its portfolio. As with stock
options, the Fund will not learn that an index option has been exercised until
the day following the exercise date but, unlike a call on stock where the Fund
would be able to deliver the underlying securities in settlement, the Fund may
have to sell part of its securities portfolio in order to make settlement in
cash, and the price of such securities might decline before they can be sold.
For example, even if an index call which the Fund has written is 'covered' by an
index call held by the Fund with the same strike price, the Fund will bear the
risk that the level of the index may decline between the close of trading on the
date the exercise notice is filed with the Clearing Corporation and the close of
trading on the date the Fund exercises the call it holds or the time the Fund
sells the call, which in either case would occur no earlier than the day
following the day the exercise notice was filed.
FUTURES CONTRACTS
FINANCIAL AND CURRENCY FUTURES
An interest rate futures contract is an agreement to purchase or sell an
agreed amount of debt securities at a set price for delivery on a future date.
Interest rate futures contracts can be purchased and sold with respect to
government debt of nations of Europe, Japan and the U.S. Similarly, a currency
futures contract calls for the
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purchase or sale of a fixed amount of a specific currency at a set price for
delivery on a future date. Currency futures contracts are traded with respect to
the currencies of most of the nations of Western Europe and Japan. Unlike
interest rate and currency futures contracts, a stock index futures contract
does not contemplate the purchase or delivery of the underlying financial
instrument (interest rate and stock index futures contracts are collectively
herein referred to as 'financial futures contracts'). Instead, one party agrees
to deliver to the other an amount of cash equal to a specific dollar amount
times the difference between the value of a specific stock index at the close of
the last trading day of the contract. Stock index futures contracts can be
purchased or sold in Europe, Japan and the U.S.
In contrast to the purchase or sale of a security, nothing is paid or
received by the Fund upon purchase or sale of a financial or currency futures
contract. Instead, the Fund will be required initially to deposit with the
futures commission merchant an amount of cash or U.S. Treasury bills equal to a
percentage of the contract amount. Initial margin in futures transactions
differs from margin in securities transactions in that futures contract initial
margin does not involve the borrowing of funds by the customer to finance the
transactions. Rather, initial margin is in the nature of a good faith deposit on
the contract which is returned to the Fund upon termination of the futures
contract, assuming all contractual obligations have been met. Subsequent
payments, called variation margin, to and from the futures commission merchant
are made on a daily basis as the market price of the futures contract
fluctuates. This process is known as 'marking to market.' At any time prior to
expiration of the futures contract, the Fund may elect to close a position by
taking an offsetting position which will terminate the Fund's position in the
futures contract. Although interest rate futures and currency futures contracts
(other than those relating to Eurodollar time deposits) generally provide for
delivery and acceptance of the underlying financial instrument, the Fund expects
most financial or currency futures contracts to be terminated by offsetting
transactions.
OPTIONS ON FUTURES CONTRACTS
An option on a financial or currency futures contract gives the purchaser
the right, but not the obligation, to assume a position in a financial or
currency futures contract (a long position if the option is a call and a short
position if the option is a put) at a specified exercise price at any time
during the option exercise period. The writer of the option is required upon
exercise to assume an offsetting futures position (a short position if the
option is a call and a long position if the option is a put). Options currently
can be purchased or sold with respect to interest rate futures contracts on U.S.
Treasury Bonds, and with respect to stock index futures contracts on the
Standard & Poor's 500 Stock Index. Options also currently can be purchased or
sold with respect to currency futures contracts on the British Pound,
Deutschemark, Swiss Franc, Japanese Yen, U.S. Dollar, Australian Dollar and the
Canadian Dollar. An option on a currency or financial futures contract can be
purchased and sold on the same exchanges or boards of trade as the underlying
futures contract.
REGULATION OF FUTURES CONTRACTS AND RELATED OPTIONS
In purchasing and selling futures contracts and related options, the Fund
will comply with the rules and interpretations of the Commodity Futures Trading
Commission ('CFTC'), under which the Fund is exempted from regulation as a
'commodity pool operator.' The Fund will acquire futures and related options for
'bona fide hedging' within the meaning and intent of the Commodity Exchange Act
and Regulations promulgated thereunder by the CFTC. The Fund may also acquire
futures and related options for other than bona fide hedging purposes provided
that the aggregate initial margin and premiums required to establish such
positions are in an amount not exceeding 5% of the liquidation value of the
Fund's portfolio after taking into account unrealized profits and unrealized
losses on any such contracts it has entered into. When options are in-the-
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money at the time of purchase, the in-the-money amount will be excluded from the
computation of such 5% limitation.
The Fund will only sell futures contracts or purchase puts and write calls
thereon to offset expected declines in the value of specific portfolio holdings,
provided the aggregate contract amount of such futures and related options does
not exceed the total market value of those holdings, as adjusted for the
historic volatility of the instruments being hedged. The Fund will only purchase
futures contracts or write puts and purchase calls thereon, provided it creates
a segregated account with its Custodian consisting of cash, U.S. Government
securities or other appropriate high-grade debt obligations in an amount equal
to the total market value of any such futures contracts and related options,
less the amount of premium and/or initial margin for such contracts. Such
segregated account will be marked-to-market on a daily basis to reflect the
current value of any such futures contracts and related options, less the amount
of premium and/or initial margin for such contracts and related options.
HEDGING WITH FUTURES CONTRACTS AND RELATED OPTIONS
The Fund may purchase an interest rate futures contract as a hedge against
an anticipated decline in interest rates and resulting increase in the market
price of debt securities the Fund intends to acquire. The Fund may sell an
interest rate futures contract as a hedge against an anticipated increase in
interest rates and resulting decline in the market price of debt securities the
Fund owns. The Fund may purchase a currency futures contract to hedge against
anticipated increases in the value of currency the Fund intends to acquire for
prospective securities purchases relative to the value of currency the Fund is
holding. The Fund may also sell a currency futures contract in anticipation of a
decrease in the value of currency the Fund is holding or in anticipation of the
sale of a portfolio security. The Fund may purchase a stock index futures
contract as a hedge against an anticipated general market or market sector
advance which may increase the market price of equity securities the Fund
intends to buy. The Fund may sell stock index futures contracts in anticipation
of or in a general market or market sector decline that may adversely affect the
market value of the Fund's portfolio of equity securities.
The Fund may use options on financial and currency futures contracts in
connection with its hedging strategies in lieu of purchasing or selling
financial and currency futures contracts. To hedge against a possible decrease
in the value of equity or debt securities or currency held in its portfolio, the
Fund may purchase put options and write call options on stock index, interest
rate or currency futures contracts, respectively. Similarly, in anticipation of
an increase in the prices of equity or debt securities or currency the Fund
intends to purchase, the Fund may purchase call options or write put options on
stock index or interest rate or currency futures contracts, respectively.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS
There are several risks associated with the Fund's use of financial and
currency futures and related options as hedging devices. One risk arises because
of imperfect correlation in the movement of prices of financial and currency
futures contracts and related options and the securities or currency subject to
the hedge. In the case of stock index futures and related options, the risks of
imperfect correlation increases as the composition of the Fund's portfolio of
equity securities diverges from the securities included in the applicable stock
index. In the case of interest rate or currency futures contracts and related
options, the risk of imperfect correlation presents the possibility that a
correct forecast of interest or exchange rate trends by the Adviser may still
not result in a successful hedging transaction. If the price of a financial or
currency futures contract or related option moves more than the price of the
hedged financial instrument, the Fund may experience either a loss or a gain on
the contract which will not be completely offset by movements in the price of
the hedged instrument. To
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compensate for the imperfect correlation of movements in the price of securities
or currency being hedged and movements in the price of financial or currency
futures contracts and related options, the Fund may buy or sell financial or
currency futures contracts and related options in a greater dollar amount than
the dollar amount of the securities or currency being hedged if the historical
volatility of the prices of such securities or currency has been greater than
the historical volatility, respectively, of the index, debt securities or
currency underlying financial or currency futures contracts or related options.
Conversely, the Fund may buy or sell fewer financial or currency futures
contracts and related options if the historical volatility of the price of
hedged securities or currency is less than the volatility of the index, debt
securities or currency underlying futures contracts or related options. It is
also possible that, where the Fund has sold financial futures or currency
contracts or sold calls or purchased puts thereon to hedge its portfolio against
a decline in the equity or debt securities or currency, the price may advance
and the value of securities or currency held in the Fund's portfolio may
decline.
Where financial or currency futures contracts or related options are
purchased to hedge against possible increases in the price of equity or debt
securities or currency before the Fund is able to acquire such securities or
currency in an orderly fashion, it is possible that the prices of the securities
or currency may instead decline. If the Fund at that time decides not to acquire
the securities or currency because of concern as to further market decline or
for other reasons, the Fund will realize a loss on the futures contract or
related option that is not offset by a reduction in the price of securities or
currency purchased.
Successful use of financial futures contracts and related options by the
Fund is also subject to the Adviser's ability to predict correctly movements in
the direction of the market. Similarly, successful use of currency futures and
related options depends, in part, on the Adviser's ability to predict changes in
exchange rates. For example, if the Fund has hedged against the possibility of a
decline in the price of securities or the relative value of currency held in its
portfolio and the aggregate price of those securities or the relative value of
currencies increases instead, the Fund will lose part or all the benefit of the
increased value of the hedged securities or currency because it will have
offsetting losses on its futures or options positions. Additionally, in such
situations, if the Fund has insufficient cash, it may have to sell securities or
currency to meet daily variation margin payments. Sales of securities or
currency under those conditions may, but will not necessarily, be at increased
prices which reflect the rising market. The Fund may have to sell securities or
currency at a time when it may be disadvantageous to do so.
A financial or currency futures position may be closed by the sale of an
identical contract where the Fund has previously purchased a futures contract
and by the purchase of an identical contract where the Fund has previously sold
a futures contract. Gain or loss to the Fund will correspond to the difference
in the price of the original transaction and that of the closing transaction.
Positions in financial and currency futures and related options may be closed
out only on an exchange or board of trade which provides a secondary market for
such futures. Although the Fund intends to purchase or sell futures and related
options only on commodities exchanges or boards of trade where there appears to
be an active secondary market, there is no assurance that a liquid secondary
market on an exchange or board of trade will exist for any particular futures or
related option contract at any particular time. In such event, it may not be
possible to close a futures position, and in the event of adverse price
movements, the Fund would continue to be required to make daily cash payments of
variation margin. However, in the event futures contracts or related options
have been used to hedge securities or currency held in the Fund's portfolio,
such securities or currency will not be sold until the futures contract or
related option can be terminated. In those circumstances, an increase in the
price of the securities or currency, if any, may partially or completely offset
losses on the futures contract or related option. However, as described above,
there is no guarantee that the price of the securities or currency will, in
fact, correlate with the price movements in futures contracts or related options
and thereby offset losses on futures contracts or related options.
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The Fund intends, to the extent consistent with its bona fide hedging
strategies, to purchase and sell financial or currency futures contracts and
related options on the stock index or debt security or currency for which it can
obtain the best price, with consideration also given to liquidity. Commodities
exchanges and boards of trade have established limitations on the maximum number
of options that an investor or group of investors acting in concert may write.
It is possible that the Fund and other clients of the Adviser may be considered
such a group. Position limits may restrict the Fund's ability to purchase or
sell options on futures contracts. Additionally, the extent to which the Fund
may engage in call option transactions may be limited by the Internal Revenue
Code's requirements for qualification as a regulated investment company and the
Fund's intention to qualify as such. See 'Taxes' below.
OVER-THE-COUNTER DERIVATIVE TRANSACTIONS
The Fund may invest in options, futures and swaps and related products
which are often referred to as 'derivatives.' Derivatives may have a return that
is tied to a formula based upon an interest rate, index or other measurement
which may differ from the return of a simple security of the same maturity. A
formula may have a cap or other limitation on the rate of interest to be paid.
Derivatives may have varying degrees of volatility at different times, or under
different market conditions. See 'Options Transactions,' 'Options on Stock
Indices' and 'Futures Contracts' above.
The Fund may enter into interest rate, currency and index swaps and the
purchase or sale of related caps, floors and collars. The Fund expects to enter
into these transactions to preserve a return or spread on a particular
investment or portion of its portfolio, to protect against currency fluctuations
or to protect against any increase in the price of securities the Fund
anticipates purchasing at a later date. Interest rate swaps involve the exchange
by the Fund with another party of their respective commitments to pay or receive
interest, such as an exchange of floating rate payments for fixed rate payments
with respect to a notional amount of principal. A currency swap is an agreement
to exchange cash flows on a notional amount of two or more currencies based on
the relative value differential between them and an index swap is an agreement
to swap cash flows on a notional amount based on changes in values of the
reference indices. Swaps may be used in conjunction with other derivative
instruments to offset interest rate, currency or other underlying risks. For
example, interest rate swaps may be offset with 'caps,' 'floors' or 'collars.' A
'cap' is essentially a call option which places a limit on the amount of
floating rate interest that must be paid on a certain principal amount. A
'floor' is essentially a put option which places a limit on the minimum amount
that would be paid on a certain principal amount. A 'collar' is essentially a
combination of a long cap and a short floor where the limits are set at
different levels.
The Fund will usually enter into swaps on a net basis, that is, the two
payment streams will be netted out in a cash settlement on the payment date or
dates specified in the instrument, with the Fund receiving or paying, as the
case may be, only the net amount of the two payments. To the extent obligations
created thereby may be deemed to constitute senior securities under the
Investment Company Act of 1940, the Fund will maintain required collateral in a
segregated account consisting of U.S. Government securities or cash or cash
equivalents. See 'Investment Restrictions' below.
SPECIAL RISKS OF OVER-THE-COUNTER DERIVATIVE TRANSACTIONS
OTC derivative transactions differ from exchange-traded derivative
transactions in several respects. OTC derivatives are transacted directly with
dealers and not with a clearing corporation. Without the availability of a
clearing corporation, OTC derivative pricing is normally done by reference to
information from market makers, which information is carefully monitored by the
Adviser and verified in appropriate cases.
13
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<PAGE>
As OTC derivatives are transacted directly with dealers, there is a risk of
nonperformance by the dealer as a result of the insolvency of such dealer or
otherwise, in which event the Fund may experience a loss. An OTC derivative may
only be terminated voluntarily by entering into a closing transaction with the
dealer with whom the Fund originally dealt. Any such cancellation, if agreed to,
may require the Fund to pay a premium to that dealer. In those cases in which
the Fund has entered into a covered derivative transaction and cannot
voluntarily terminate the derivative, the Fund will not be able to sell the
underlying security until the derivative expires or is exercised or different
cover is substituted. In such cases, the Fund may not be able to sell an
underlying security even though it might otherwise be advantageous to do so.
It is the Fund's intention to enter into OTC derivative transactions only
with dealers which agree to, and which are expected to be capable of, entering
into derivative closing transactions with the Fund, although there is no
assurance that a dealer will voluntarily agree to terminate the derivative.
There is also no assurance that the Fund will be able to liquidate an OTC
derivative at any time prior to expiration. OTC derivatives for which there is
no adequate secondary market will be considered illiquid. See 'Investment
Objective and Policies and Risk Factors -- Illiquid Securities' in the
Prospectus.
BORROWING
The Fund may from time to time increase its ownership of securities above
the amounts otherwise possible by borrowing from banks (other than those
affiliated with the Fund or any of its affiliates) and investing the borrowed
funds. The Fund also may borrow from those banks to facilitate the meeting of
redemption requests or for temporary or emergency purposes. The Fund may pledge
its assets to secure those borrowings. Any borrowings by the Fund will be made
only to the extent that the value of the Fund's assets, less its liabilities
other than borrowings, is equal to at least 300% of all of its borrowings
(including reverse repurchase agreements) computed at the time a loan is made.
If the value of the Fund's assets at any time should fail to meet the 300% asset
coverage described above, the Fund, within three days, is required to reduce its
aggregate borrowings (including reverse repurchase agreements) to the extent
necessary to meet such asset coverage and may have to sell a portion of its
investments at a time when independent investment judgment would not indicate
such action. Interest on money borrowed is an expense of the Fund which it would
not otherwise incur so that it may have little or no net investment income
during periods when its borrowings are substantial.
RESTRICTED SECURITIES
The Fund may invest up to 15% of its net assets in securities which are
subject to legal or contractual restrictions on resale ('Restricted
Securities'), such as securities that cannot be sold unless registered under the
Securities Act of 1933, as amended (the 'Securities Act'), but the Fund has no
current intention of investing more than 5% of its net assets in Restricted
Securities. Generally the Fund cannot sell Restricted Securities without the
expense and time required to register the securities under the Securities Act.
The Fund ordinarily will acquire the right to have Restricted Securities
registered within a specified time period, with the payment of expenses of such
registration to be subject to negotiation at the time such Restricted Securities
are purchased. Certain Restricted Securities may be sold to institutional
investors without registration pursuant to rules under the Securities Act. The
institutional trading market is relatively new and liquidity of the Fund's
investments in these Restricted Securities could be impaired if trading does not
develop or declines. Restricted Securities for which no adequate trading market
exists may be deemed illiquid securities. See 'Investment Objective and Policies
and Risk Factors -- Illiquid Securities' in the Prospectus.
14
<PAGE>
<PAGE>
REVERSE REPURCHASE AGREEMENTS
A reverse repurchase agreement involves the sale of a debt security held by
the Fund coupled with an agreement by the Fund to repurchase the instrument at a
stated price, date and interest payment. The Fund will use the proceeds of a
reverse repurchase agreement to purchase other debt securities or to enter into
repurchase agreements maturing not later than the expiration of the prior
reverse repurchase agreement.
The Fund will enter into a reverse repurchase agreement only when the
interest income to be earned from the investment of the proceeds of the
transaction is greater than the interest expense of the transaction. Under the
Investment Company Act, reverse repurchase agreements will be considered to be
borrowings by the Fund and, therefore, may be subject to the same risks involved
in any borrowing in which the Fund might be involved. See 'Borrowing' above. The
Fund may not enter into a reverse repurchase agreement if as a result its
current obligations under such agreements would exceed one third of the value of
the Fund's net assets computed at the time the reverse repurchase agreement is
entered into. The Fund may invest up to 25% of its net assets in reverse
repurchase agreements, but has no current intention of investing more than 5% of
the value of its net assets in reverse repurchase agreements.
The Fund may enter into reverse repurchase agreements with banks or
broker-dealers. Entry into such agreements with broker-dealers requires the
creation and maintenance of a segregated account with the Fund's Custodian
consisting of U.S. Government securities or cash or cash equivalents.
REPURCHASE AGREEMENTS
The Fund may purchase securities and concurrently enter into 'repurchase
agreements.' A repurchase agreement typically involves a purchase by the Fund of
an investment contract from a selling financial institution such as a bank or
broker-dealer, which contract is fully secured by government obligations or
other debt securities. The agreement provides that the Fund will sell the
underlying securities back to the institution at a specified price and at a
fixed time in the future, usually not more than seven days from the date of
purchase. The collateral will be held by the Fund's Custodian, either physically
or in a book entry account. The difference between the purchase price and the
resale price represents the interest earned by the Fund, which is unrelated to
the coupon rate or maturity of the purchased security. Should the value of the
underlying security decline below the resale price or the financial institution
default in its obligation to repurchase the securities, the Fund might sustain a
loss. In the event of the bankruptcy or insolvency of the financial institution,
the Fund may be delayed in realizing upon the collateral underlying the
repurchase agreement. Further, the law is unsettled regarding the rights of the
Fund if the financial institution which is a party to the repurchase agreement
petitions for bankruptcy or otherwise becomes subject to the United States
Bankruptcy Code. The Fund may invest up to 25% of its net assets in repurchase
agreements, but has no current intention of investing more than 5% of its net
assets in repurchase agreements. Repurchase agreements of greater than seven
days' maturity may be deemed to be illiquid. See 'Investment Objective and
Policies and Risk Factors -- Illiquid Securities' in the Prospectus.
LENDING OF SECURITIES
Consistent with applicable regulatory requirements, the Fund may lend its
portfolio securities to brokers, dealers and financial institutions, provided
outstanding loans do not exceed in the aggregate 33 1/3% of the value of the
Fund's net assets and provided that such loans are callable at any time by the
Fund and are at all times secured by cash or equivalent collateral that is equal
to at least the market value, determined daily, of the loaned securities. The
Fund, however, may not enter into portfolio lending arrangements with the
Adviser or any of its affiliates absent appropriate regulatory relief from
applicable prohibitions contained in the Investment Company
15
<PAGE>
<PAGE>
Act. The Fund may lend up to 25% of its net assets, but has no current intention
of committing more than 5% of the value of its net assets to portfolio loans.
The advantage of portfolio lending is that the Fund continues to receive
payments in lieu of the interest and dividends of the loaned securities, while
at the same time earning interest either directly from the borrower or on the
collateral, which may be invested in short-term obligations.
Loans of portfolio securities will only be made to firms determined to be
creditworthy pursuant to procedures approved by the Board of Directors of the
Fund. A loan may be terminated by the borrower on one business day's notice or
by the Fund at any time. If the borrower fails to maintain the requisite amount
of collateral, the loan automatically terminates, and the Fund may use the
collateral to replace the securities while holding the borrower liable for any
excess of replacement cost over collateral. On termination of the loan, the
borrower is required to return the securities to the Fund, and any gain or loss
in the market price during the loan would inure to the Fund.
As voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loan, in whole or in
part as may be appropriate, to permit the exercise of such rights if the matters
involved would have a material effect on the Fund's investment in the securities
which are subject to the loan. The Fund will pay reasonable finders',
administrative and custodial fees in connection with a loan of its securities or
may share the interest earned on collateral with the borrower.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
From time to time, in the ordinary course of business, the Fund may
purchase securities on a when-issued or delayed delivery basis -- i.e.,
delivery and payment can take place a month or more after the date of the
transaction. The purchase price, or the interest rate payable on debt
securities, is fixed on the transaction date. The securities so purchased are
subject to market fluctuation, and no interest or dividend accrues to the Fund
until delivery and payment take place. At the time the Fund makes the commitment
to purchase securities on a when-issued or delayed delivery basis, it will
record the transaction and thereafter reflect the value of such securities in
determining its net asset value each day. The Fund will make commitments for
such when-issued transactions only with the intention of actually acquiring the
securities. The Fund's Custodian will maintain, in a separate account of the
Fund, cash, U.S. Government securities or other high grade debt obligations
having value equal to or greater than such commitments. On delivery dates for
such transactions, the Fund may meet its obligations from maturities or sales of
the securities held in the separate account and/or from then-available cash
flow. If the Fund chooses to dispose of the right to acquire a when-issued
security prior to its acquisition, it could, as with the disposition of other
portfolio acquisitions, incur a gain or loss due to market fluctuation. The Fund
currently intends to invest no more than 5% of the value of its net assets in
such transactions.
SHORT SALES
The Fund may make short sales and short sales against-the-box but currently
intends to invest no more than 5% of the value of its net assets in such
transactions. A short sale is a transaction in which the Fund sells a security
it does not own in anticipation of a decline in market price. In order to
deliver the security to the buyer, the Fund must arrange through a broker to
borrow the security. That borrowing arrangement, which may subject the Fund to
payment of a premium, obligates the Fund to replace the borrowed security at its
market price. The Fund may incur a loss with respect to a short sale
transaction, if the market price of the security increases between the date of
the short sale and the date on which the Fund replaces the borrowed security.
16
<PAGE>
<PAGE>
A short sale against-the-box is a short sale where, at the time of the
short sale, the Fund owns, or has the immediate and unconditional right, at no
extra cost, to obtain securities identical to those subject to the short sale.
The Fund may make a short sale only if, at the time the short sale is made
and after giving effect thereto, the market values of all securities sold short
is one-third or less of the value of its net assets and the market value of
securities sold short which are not listed on a national securities exchange
does not exceed 10% of the Fund's net assets. The Fund's obligation to replace
the security borrowed in connection with a short sale will be secured by
collateral consisting of cash or U.S. Government securities. Additionally, the
Fund will be required to deposit similar collateral in a segregated account with
its Custodian in an amount such that the value of both collateral deposits is at
all times equal to at least 100% of the current market value of the securities
sold short. The Fund ordinarily will not receive interest on cash collateral
although the Fund will be entitled to receive interest on collateral represented
by U.S. Government securities.
If the price of the security sold short increases between the time of the
short sale and the time the Fund replaces the borrowed security, the Fund will
incur a loss, and if the price declines during this period, the Fund will
realize a gain. Any realized gain will be decreased, and any incurred loss
increased, by the amount of the transaction costs and any premium, dividend or
interest which the Fund may have to pay in connection with the short sale.
ARBITRAGE TRANSACTIONS
The Fund also may engage in arbitrage transactions involving near
contemporaneous purchase of securities on one market and sale of those
securities on another market to take advantage of pricing differences between
markets. The Fund will incur a gain to the extent that proceeds exceed costs,
and a loss to the extent that costs exceed proceeds. The risk of an arbitrage
transaction, therefore, is that the Fund may not be able to sell securities
subject to an arbitrage at prices exceeding the costs of purchasing those
securities. The Fund will attempt to limit that risk by effecting arbitrage
transactions only when the prices of the securities are confirmed in advance of
the trade. The Fund currently intends to invest no more than 5% of the value of
its net assets in such transactions.
INVESTMENT IN OTHER INVESTMENT COMPANIES
The Fund may under certain circumstances invest in securities issued by
other investment companies. See 'Investment Restrictions.' If the Fund invests
in such securities, investors may be subject to duplicate management, advisory
or distribution fees.
INVESTMENT RESTRICTIONS
The following restrictions are fundamental policies. Fundamental polices
are those which cannot be changed without the approval of the holders of a
majority of the Fund's outstanding voting securities. A 'majority of the Fund's
outstanding voting securities,' when used in this Statement of Additional
Information, means the lesser of (i) 67% of the shares represented at a meeting
at which more than 50% of the outstanding shares are present in person or
represented by proxy or (ii) more than 50% of the outstanding shares.
Restrictions or limits not included in the following list, but described
elsewhere in this document and the Fund's Prospectus, are not fundamental
policies of the Fund and may be changed at the discretion of the Fund's Board of
Directors.
17
<PAGE>
<PAGE>
The Fund may not:
1. With respect to 50% of the value of its total assets, invest more
than 25% of the value of its total assets in the securities of one issuer,
and with respect to the other 50% of the value of its total assets, invest
more than 5% of the value of its total assets in the securities of one
issuer or acquire more than 10% of the outstanding voting securities of a
single issuer. This restriction shall not apply to U.S. Government
securities.
2. Concentrate its assets in the securities of issuers engaged in
specific industries or industry groups.
3. Change its sub-classification under the Investment Company Act of
1940 from non-diversified to diversified.
4. Purchase securities on margin (but the Fund may obtain such
short-term credits as may be necessary for the clearance of transactions);
the deposit or payment by the Fund of initial or maintenance margin in
connection with futures contracts is not considered the purchase of a
security on margin.
5. Issue senior securities, borrow money or pledge its assets, except
that the Fund may borrow money from a bank (and may pledge its assets to
secure such borrowings) directly or through reverse repurchase agreements
for securities purchases, or temporarily to facilitate meeting redemption
requests or for emergency purposes, and by engaging in reverse repurchase
agreements with broker-dealers. The Fund may not, however, borrow money in
an aggregate amount exceeding 33 1/3% of the Fund's net assets. The
purchase or sale of securities on a when-issued or delayed delivery basis
and collateral arrangements with respect to futures contracts are not
deemed to be a pledge of assets; and neither such arrangements nor
investment in over-the-counter derivative transactions or the purchase or
sale of options on futures contracts on an exchange are deemed to be the
issuance of a senior security.
6. Buy or sell real estate or interests in real estate, except that
the Fund may purchase and sell securities which are secured by real estate,
securities of companies which invest or deal in real estate and publicly
traded securities of real estate investment trusts.
7. Buy or sell commodities or commodity contracts which under the
Commodity Exchange Act and Regulations promulgated thereunder would require
the Fund to register as a 'commodity pool operator' as that term is defined
under the Commodity Exchange Act.
8. Act as underwriter except to the extent that, in connection with
the disposition of portfolio securities, it may be deemed to be an
underwriter under certain federal securities laws.
9. Make investments for the purpose of exercising control.
10. Invest in securities of other investment companies, except in
accordance with the Investment Company Act and the rules and regulations
thereunder.
11. Invest in interests in oil, gas or other mineral exploration or
development programs, except that the Fund may invest in the securities of
companies which invest in or sponsor such programs.
12. Make loans, except through (i) repurchase agreements (repurchase
agreements with a maturity of longer than 7 days together with illiquid
assets being limited to 15% of the Fund's net assets) and (ii) loans of
portfolio securities.
13. Pledge, mortgage, or hypothecate its assets in an amount exceeding
33 1/3% of its total assets.
14. Invest more than 10% of its total assets in the securities of
issuers which together with any predecessors have a record of less than
three years continuous operation or securities of issuers which are
restricted as to disposition.
18
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<PAGE>
The following restrictions are not considered fundamental policies of the
Fund.
1. The Fund may not invest in securities of any issuer if, to the
knowledge of the Fund, any officer or director of the Fund or the Fund's
investment adviser owns more than 1/2 of 1% of the outstanding securities
of such issuer, and such officers and directors who own more than 1/2 of 1%
own in the aggregate more than 5% of the outstanding securities of such
issuer.
2. The Fund may not purchase securities of any issuer if, as to 75% of
the assets of the Fund at the time of purchase, more than 10% of the voting
securities of any issuer would be held by the Fund.
3. The Fund may not effect a change in its investment objective
without giving 30 days' prior notice to shareholders.
19
<PAGE>
<PAGE>
DIRECTORS, OFFICERS AND PRINCIPAL STOCKHOLDERS
Pertinent information concerning the Fund's directors and officers is set
forth below. Some of the Fund's directors and officers are employees of the
Adviser and its affiliates. At least a majority of the Fund's Board of Directors
will not be 'interested persons' of the Fund as that term is defined in the
Investment Company Act.
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION
NAME AND ADDRESS(1) THE FUND DURING PAST 5 YEARS*
- ------------------------------------ ---------------------- ------------------------------------------------
<S> <C> <C>
Henry H. Arnhold ................... Director Co-Chairman of the Board since 1994, previously
Chairman of the Board, Arnhold and S.
Bleichroeder, Inc.; Director, Aquila
International Fund Ltd., First Eagle Fund of
America, Inc. and Conservation International;
Trustee, The New School for Social Research.
Edwin J. Ehrlich ................... Director Director, Pension Fund Trusts -- ITT Corp.;
2976 Lonni Lane Advisory Board Member, Emerging World
Merrick, New York 11566 Investors Limited Partnership.
K. Georg Gabriel ................... Director Senior Advisor, Strategic Investment Partners,
2401 Tracy Place, N.W. Inc.; Member, Investment Committee, Eugene and
Washington, D.C. 20008 Agnes Meyer Foundation; Director, First Eagle
Fund of America, Inc.
Robert J. Gellert .................. Director Manager, United Continental Corporation; General
122 East 42nd Street Partner, Windcrest Partners.
New York, New York 10168
Larry D. Horner .................... Director Chairman, WinWin International Corp. and Laidlaw
Pacific USA Holdings Corp. Holdings, Inc. and Director, Atlantis Plastics
100 Park Avenue, 28th Floor Corp. since 1995; Chairman, Pacific Capital
New York, New York 10017 Financial Services Group since 1994; Chairman
of the Board of Directors of Pacific USA
Holdings Corp. and Director of its
subsidiaries since 1994; previously Managing
Director since 1991, Arnhold and S.
Bleichroeder, Inc.; Chairman and Chief
Executive Officer, KPMG Peat Marwick (New
York, New York) from 1984-1990; Chairman and
Chief Executive Officer KPMG Peat
Marwick-Worldwide (New York and Amsterdam)
from 1987-1990; Advisory Director and
Consultant since 1991, Charterhouse Group
International, Inc; Director, Phillips
Petroleum Company; Director, American General
Corporation; Director, The China Light
Industry Fund.
*Michael M. Kellen ................. Director and Vice Director and Senior Vice President, Arnhold and
Chairman of the Board S. Bleichroeder, Inc.; Director and Vice
Chairman of the Board, First Eagle Fund of
America, Inc.
*Stephen M. Kellen ................. Director Co-Chairman of the Board since 1994, previously
President, Arnhold and S. Bleichroeder, Inc.;
Director, First Eagle Fund of America, Inc.
and The American Council on Germany; Trustee,
The Carnegie Hall Society and WNET/Thirteen;
Trustees Council of The National Gallery of
Art.
</TABLE>
20
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<PAGE>
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION
NAME AND ADDRESS(1) THE FUND DURING PAST 5 YEARS*
- ------------------------------------ ---------------------- ------------------------------------------------
<S> <C> <C>
William M. Kelly ................... Director Manager, Lingold Associates; Independent General
40 Wall Street -- Suite 4201 Partner, ML Venture Partners I, L.P. and ML
New York, New York 10005 Venture Partners II, L.P.; Trustee, New York
Foundation; Treasurer and Trustee, Black Rock
Forrest Consortium.
*Stanford S. Warshawsky ............ Director and Chairman Co-President since 1994, Director and Secretary,
of the Board previously Vice Chairman of the Board, Arnhold
and S. Bleichroeder, Inc.; Director, First
Eagle Fund of America, Inc.; Director,
German-American Chamber of Commerce.
J. Frank Wiedeman .................. Director Executive Director, American Capital Management
324 Deermeadow Lane Inc.; Investment Adviser, to a major offshore
Chatham, Massachusetts 02633 bank.
John P. Arnhold .................... President, Chief President, Arnhold and S. Bleichroeder,
Executive Officer, Advisers, Inc.; Co-President since 1994 and
and Chief Financial Director, previously Senior Vice President,
Officer Arnhold and S. Bleichroeder, Inc.; Director,
Aquila International Fund Ltd.; Director, The
Global Beverage Fund Ltd.; Co-President of
First Eagle Fund of America, Inc.
Arthur F. Lerner ................... Vice President Portfolio Manager, Arnhold and S. Bleichroeder
Advisers, Inc.; Senior Vice President, Arnhold
and S. Bleichroeder, Inc.
Allan R. Raphael ................... Vice President Portfolio Manager, Arnhold and S. Bleichroeder
Advisers, Inc.; Senior Vice President, Arnhold
and S. Bleichroeder, Inc., 1992; Portfolio
Manager Caxton Corporation, Sept. 1990-Nov.
1992; Director, Harvey Entertainment.
Robert Miller ...................... Treasurer and Chief Senior Vice President, Arnhold and S.
Accounting Officer Bleichroeder, Inc.; Treasurer, Chief
Accounting Officer and Chief Financial
Officer, First Eagle Fund of America, Inc.
Martha B. Pierce ................... Secretary and Assistant Vice President since 1994, previously
Assistant Treasurer Fund Administrator, Arnhold and S.
Bleichroeder, Inc.; Secretary and Assistant
Treasurer, First Eagle Fund of America, Inc.
Tracy L. LaPointe .................. Assistant Vice Vice President, Arnhold and S. Bleichroeder,
President Inc.; Assistant Vice President, First Eagle
Fund of America, Inc.
Charles J. Rodriguez ............... Assistant Vice Senior Vice President, Arnhold and S.
President Bleichroeder, Inc.; Assistant Vice President,
First Eagle Fund of America, Inc.
Richard Peterfreund ................ Assistant Secretary Fund Administrator since 1992, previously
Operations Liaison, Arnhold and S.
Bleichroeder, Inc.; Assistant Secretary, First
Eagle Fund of America, Inc.
</TABLE>
- ------------------
* 'Interested' director, as defined in the Investment Company Act, by reason of
his affiliation with Arnhold and S. Bleichroeder, Inc. and Arnhold and S.
Bleichroeder Advisers, Inc.
(1) Unless otherwise stated the address is: Arnhold and S. Bleichroeder, Inc.,
45 Broadway, New York, New York 10006.
21
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<PAGE>
Henry H. Arnhold is the father of John P. Arnhold. Stephen M. Kellen is the
father of Michael M. Kellen. Henry H. Arnhold and Stephen M. Kellen are first
cousins by marriage.
The officers conduct and supervise the daily business operations of the
Fund, while the directors, in addition to the functions set forth under
'Distributor,' review such actions and decide on general policy.
The Fund pays each of its directors who is not an interested person of the
Fund annual compensation of $5,000 plus $500 per meeting of the Board of
Directors and certain out-of-pocket expenses. Mr. Fribourg served and Mr.
Gabriel serves as directors for an affiliated investment company, First Eagle
Fund of America, Inc. The following table sets out the compensation received by
each of the Directors from the Fund and an affiliated fund, First Eagle Fund of
America, Inc. for the fiscal year ended December 31, 1995.
<TABLE>
<CAPTION>
TOTAL AGGREGATE
COMPENSATION FROM THE
AGGREGATE COMPENSATION FUND AND FIRST EAGLE
NAME FROM THE FUND FUND OF AMERICA, INC.
- ------------------------------------------------------------ ---------------------- ---------------------
<S> <C> <C>
Henry H. Arnhold............................................ 0 0
Edwin J. Ehrlich............................................ $7,000 $ 7,000
Paul Fribourg*.............................................. $5,500 $11,000
K. Georg Gabriel............................................ $7,000 $13,500
Robert J. Gellert........................................... $7,000 $ 7,000
Larry D. Horner............................................. $7,000 $ 7,000
Michael M. Kellen........................................... 0 0
Stephen M. Kellen........................................... 0 0
William M. Kelly............................................ $7,000 $ 7,000
Stanford S. Warshawsky...................................... 0 0
J. Frank Wiedeman........................................... $7,000 $ 7,000
</TABLE>
* Resigned as of March 21, 1996 from the Fund and First Eagle Fund of America,
Inc.
The Fund does not pay any compensation to interested directors of the Fund.
As of April 1, 1996 the directors and officers of the Fund, as a group,
owned approximately 137,445 shares or 6.96% of the outstanding common stock of
the Fund.
As of April 1, 1996, Arnhold and S. Bleichroeder, Inc. Profit Sharing Plan,
45 Broadway, New York, NY 10006, owned beneficially and of record approximately
16.45% of the Fund's outstanding shares.
Directors and employees of the Fund, Arnhold and S. Bleichroeder, Inc. and
Arnhold and S. Bleichroeder Advisers, Inc. are permitted to engage in personal
securities transactions subject to the restrictions and procedures contained in
the Fund's Code of Ethics, which was approved by the Boards of Directors of the
Fund and Arnhold and S. Bleichroeder, Inc.
ADVISER
Arnhold and S. Bleichroeder Advisers, Inc. provides investment advisory
services as the Fund's investment adviser. For its services, the Adviser
receives, pursuant to an Investment Advisory Agreement between the Fund and the
Adviser (the 'Advisory Agreement'), an annual advisory fee of 1.5% of the Fund's
average daily net assets. This fee described in the Prospectus under
'Adviser -- Management and Services Fees' is accrued daily and is payable
quarterly. For the fiscal period ended December 31, 1994, and for the year ended
December 31, 1995, Arnhold and S. Bleichroeder, Inc. earned an advisory fee of
$112,270 and $338,062, respectively, pursuant to the prior advisory agreement.
22
<PAGE>
<PAGE>
The Advisory Agreement further provides that the Adviser will not be liable
for any error of judgment or for any loss suffered by the Fund in connection
with the matters to which the Advisory Agreement relates, except a loss
resulting from willful misfeasance, bad faith, gross negligence or reckless
disregard of duty. The Advisory Agreement provides that it will terminate
automatically if assigned, and that it may be terminated without penalty by
either party upon not more than 60 days' nor less than 30 days' written notice.
The Advisory Agreement will continue in effect for a period of more than two
years from the date of execution only so long as such continuance is
specifically approved at least annually in conformity with the Investment
Company Act. The Advisory Agreement was last approved by the Board of Directors
of the Fund, including all of the directors who are not interested persons as
defined in the Investment Company Act on October 17, 1995 and by the
shareholders on December 12, 1995. Additionally by unanimous vote, the Directors
approved the assignment of the Advisory Agreement from Arnhold and S.
Bleichroeder, Inc. to Arnhold and S. Bleichroeder Advisers, Inc.
Arnhold and S. Bleichroeder, Inc. pays compensation of and furnishes office
space for officers and employees connected with investment management of the
Fund, as well as the fees of all Directors of the Fund who are affiliated
persons of the Advisers or any of its affiliates. Arnhold and S. Bleichroeder,
Inc. receives a services fee of .25% of the Fund's average net assets pursuant
to a services agreement approved by the Board of Directors. This fee covers
expenses incurred for shareholder communications and other services to the Fund.
In addition to the avisory fee, the Adviser receives a services fee of .25%
of the Fund's average daily net assets pursuant to a services agreement approved
by the Board of Directors. This fee covers expenses incurred by the Adviser for
shareholder communications and other services provided in addition to advisory
services.
DISTRIBUTOR
Arnhold and S. Bleichroeder, Inc., a registered broker-dealer, investment
adviser and a member of the New York Stock Exchange and the National Association
of Securities Dealers ('NASD'), serves as the distributor of the Fund's common
stock. Arnhold and S. Bleichroeder, Inc. is engaged in the investment advisory,
securities brokerage and underwriting businesses. The Fund's shares will be
continuously offered on an agency basis on behalf of the Fund, at the net asset
value next determined after receipt of payment by Arnhold and S. Bleichroeder,
Inc., pursuant to a Distribution Agreement with the Fund (the 'Distribution
Agreement'). See 'Net Asset Value' in the Prospectus. Arnhold and S.
Bleichroeder, Inc. assumes the expenses related to distributing the Fund's
shares. Sales of the Fund's shares are not subject to an initial sales charge.
Pursuant to the Distribution Agreement, the Fund has agreed to indemnify Arnhold
and S. Bleichroeder, Inc. against certain liabilities under the Securities Act
of 1933, as amended (the 'Securities Act').
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser is responsible for decisions to buy and sell securities,
futures and options on securities, on indices and on futures for the Fund, the
selection of brokers, dealers and futures commission merchants to effect those
transactions and the negotiation of brokerage commissions, if any.
Broker-dealers and futures commission merchants may receive brokerage
commissions on Fund portfolio transactions, including options and the purchase
and sale of underlying securities or futures positions upon the exercise of
options. Orders may be directed to any broker or futures commission merchant
including, to the extent and in the manner permitted by applicable law, the
Adviser.
Equity securities traded in the over-the-counter market and bonds,
including convertible bonds, are generally traded on a 'net' basis with dealers
acting as principal for their own accounts without a stated commission, although
the price of the security usually includes a profit to the dealer. In
underwritten offerings,
23
<PAGE>
<PAGE>
securities are purchased at a fixed price which includes an amount of
compensation to the underwriters, generally referred to as the underwriter's
concession or discount. On occasion, certain money market instruments and U.S.
Government agency securities may be purchased directly from the issuer, in which
case no commissions or discounts are paid. The Fund will not deal with Arnhold
and S. Bleichroeder, Inc. in any transaction in which Arnhold and S.
Bleichroeder, Inc. acts as principal. Thus, it will not deal with Arnhold and S.
Bleichroeder, Inc. acting as market maker, and it will not execute a negotiated
trade with Arnhold and S. Bleichroeder, Inc. if execution involves Arnhold and
S. Bleichroeder, Inc. acting as principal with respect to any part of the Fund's
order.
Portfolio securities may not be purchased from any underwriting or selling
group of which Arnhold and S. Bleichroeder, Inc., during the existence of the
group, is a member, except in accordance with rules of the Securities and
Exchange Commission. This limitation, in the opinion of the Fund, will not
significantly affect the Fund's ability to pursue its present investment
objective. However, in the future in other circumstances, the Fund may be at a
disadvantage because of this limitation in comparison to other funds with
similar objectives but not subject to such limitations.
In placing orders for portfolio securities or futures of the Fund, the
Adviser is required to give primary consideration to obtaining the most
favorable price and efficient execution. Within the framework of this policy,
the Adviser will consider the research and investment services provided by
brokers, dealers or futures commission merchants who effect or are parties to
portfolio transactions of the Fund, the Adviser or the Adviser's other clients.
Such research and investment services are those which brokerage houses
customarily provide to institutional investors and include statistical and
economic data and research reports on particular companies and industries. Such
services are used by the Adviser in connection with all of its investment
activities, and some of such services obtained in connection with the execution
of transactions for the Fund may be used in managing other investment accounts.
Conversely, brokers, dealers or futures commission merchants furnishing such
services may be selected for the execution of transactions of such other
accounts, whose aggregate assets are far larger than the Fund, and the services
furnished by such brokers, dealers or futures commission merchants may be used
by the Adviser in providing investment management for the Fund. Commission rates
are established pursuant to negotiations with the broker, dealer or futures
commission merchant based on the quality and quantity of execution services
provided by the executing party in the light of generally prevailing rates. In
addition, the Adviser is authorized to pay higher commissions on brokerage
transactions for the Fund to brokers other than Arnhold and S. Bleichroeder,
Inc. in order to secure the research and investment services described above,
subject to review by the Fund's Board of Directors from time to time as to the
extent and continuation of this practice. The allocation of orders among brokers
and the commission rates paid are reviewed periodically by the Fund's Board of
Directors.
Subject to the above considerations, Arnhold and S. Bleichroeder, Inc. may
act as a securities broker for the Fund. In order for Arnhold and S.
Bleichroeder, Inc. to effect any portfolio transactions for the Fund, the
commissions, fees or other remuneration received by Arnhold and S. Bleichroeder,
Inc. must be reasonable and fair compared to the commissions, fees or other
remuneration paid to other brokers in connection with comparable transactions
involving similar securities being purchased or sold on an Exchange during a
comparable period of time. This standard would allow Arnhold and S.
Bleichroeder, Inc. to receive no more than the remuneration which would be
expected to be received by an unaffiliated broker in a commensurate arm's-length
transaction. Furthermore, the Board of Directors of the Fund, including a
majority of the directors who are not 'interested' directors, has adopted
procedures which are reasonably designed to provide that any commissions, fees
or other remuneration paid to Arnhold and S. Bleichroeder, Inc. are consistent
with the foregoing standard. Brokerage transactions with Arnhold and S.
Bleichroeder, Inc. also are subject to such fiduciary standards as may be
imposed by applicable law.
24
<PAGE>
<PAGE>
From time to time the Fund may engage in agency cross transactions with
respect to securities that meet its investment objective and policies. An agency
cross transaction occurs when a broker sells securities from one client's
account to another client's account. Cross transactions are executed with
written permission from the Fund. This authorization permits cross transactions
only between the Fund on one side and clients for which Arnhold and S.
Bleichroeder, Inc. acts as broker, but does not act as investment adviser, on
the other side. The authorization can be terminated at any time by written
notice to Arnhold and S. Bleichroeder, Inc. The Fund will not engage in cross
transactions with investment advisory clients of the Adviser or Arnhold and S.
Bleichroeder, Inc.
Purchase or sale confirmations for cross transactions, in addition to
indicating the entire amount of transaction charges incurred by the Fund, will
indicate the entire amounts of transaction charges incurred by all clients on
the other side of the transaction. The Fund will be notified annually of the
total number of, and transaction charges, applicable to cross transactions
undertaken for the previous year and the total amount incurred for all such
trades with the Fund by the clients on the other side of the transactions.
The Fund may from time to time sell or purchase securities to or from
companies or persons who are considered to be affiliated with the Fund solely
because they are investment advisory clients of Arnhold and S. Bleichroeder,
Inc. or the Adviser. No consideration other than cash payment against prompt
delivery at the then current market price of the securities will be paid to any
person involved in those transactions. Additionally, all such transactions will
be consistent with procedures adopted by the Board of Directors of the Fund,
including a majority of the directors who are not interested persons thereof, to
assure their conformance with the requirements of the Investment Company Act.
In accordance with Section 11(a) under the Securities Exchange Act of 1934,
Arnhold and S. Bleichroeder, Inc. may not retain compensation for effecting
transactions on a national securities exchange for the Fund unless the Fund has
expressly authorized the retention of such compensation in a written agreement
executed by the Fund and Arnhold and S. Bleichroeder, Inc. The Fund has provided
Arnhold and S. Bleichroeder, Inc. with such authorization. Section 11(a)
provides that Arnhold and S. Bleichroeder, Inc. must furnish to the Fund at
least annually a statement disclosing the aggregate compensation received by the
exchange member in effecting such transactions.
For the fiscal year ended December 31, 1995 and for the fiscal period ended
December 31, 1994 the Fund paid total brokerage commissions of $82,550 and
$136,574, respectively, of which $31,964 and $38,565, respectively, were paid to
Arnhold and S. Bleichroeder, Inc. For the fiscal year ended December 31, 1995,
brokerage commissions paid by the Fund to Arnhold and S. Bleichroeder, Inc.
constituted 39% of the total brokerage commissions paid by the Fund. For the
fiscal period ended December 31, 1995, the Fund effected 38% of the aggregate
dollar amount of its portfolio transactions involving the payment of commissions
through Arnhold and S. Bleichroeder, Inc. Of the total brokerage commissions
paid during the fiscal year ended December 31, 1995, $50,586 (or 61%) were paid
to firms which provided research, statistical or other services. Arnhold and S.
Bleichroeder, Inc. has not separately identified a portion of such brokerage
commissions as applicable to the provision of such research, statistical or
other services.
STOCKHOLDER INVESTMENT ACCOUNT
Upon the initial purchase of shares of the Fund, a Stockholder Investment
Account is established for each investor under which a record of the shares held
is maintained by the Transfer Agent. If a stock certificate is desired, it must
be requested in writing for each transaction. Certificates are issued only for
full shares and may be redeposited in the Stockholder Investment Account at any
time. There is no charge to the investor for issuance of a certificate. Whenever
a transaction takes place in the Stockholder Investment Account, the
25
<PAGE>
<PAGE>
stockholder will be mailed a statement showing the transaction and the status of
the account. Additionally, the Transfer Agent will mail each stockholder of
record a quarterly statement of the stockholder's account.
AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR DISTRIBUTIONS
For the convenience of investors, all dividends and distributions are
automatically reinvested in full and fractional shares of the Fund at the net
asset value per share at the close of business on the record date. An investor
may direct the Transfer Agent in writing not less than 5 full business days
prior to the record date to have subsequent dividends and/or distributions sent
in cash rather than reinvested. In the case of recently purchased shares for
which registration instructions have not been received on the record date, cash
payment will be automatically reinvested. Any stockholder who receives a cash
payment representing a dividend or distribution may reinvest such dividend or
distribution by returning the check or the proceeds to the Transfer Agent. Such
investment will be made at the net asset value per share next determined after
receipt of the check or proceeds by the Transfer Agent.
TAXES
The Fund has elected to qualify and intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code and
intends to distribute all but a de minimis amount of its income and capital
gains to its stockholders within time periods prescribed by the Internal Revenue
Code. This relieves the Fund (but not its stockholders) from paying federal
income tax on income which is distributed to stockholders, and permits net
capital gains of the Fund (i.e., the excess of net long-term capital gains over
net short-term capital losses) to be treated as long-term capital gains of the
stockholders, regardless of how long shares in the Fund are held.
Qualification as a regulated investment company requires, among other
things, that (a) at least 90% of the Fund's annual gross income, without offset
for losses from the sale or other disposition of securities, consist of certain
types of qualifying income (the '90% test'); (b) the Fund derive less than 30%
of its gross income from gains (without offset for losses) from the sale or
other disposition of securities, certain options, futures or forward contracts,
or from certain transactions in foreign currencies, held for less than three
months (the '30% test'); and (c) the Fund diversify its holdings so that, at the
end of each quarter of the taxable year, (i) at least 50% of the market value of
the Fund's assets is represented by cash, cash items, government securities,
securities of other regulated investment companies and other securities limited
in respect of any one issuer to an amount not greater than 5% of the Fund's
assets and 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of its assets is invested in the securities of any
one issuer (other than government securities and securities of other regulated
investment companies). Qualifying income for purposes of the 90% test consists
of income derived from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of securities, gains on the sale
or exchange of foreign currencies and other income (including gains from
options, futures, or forward contracts) derived from the business of investing
in securities or currencies. For purposes of satisfying the 30% test, offsetting
positions in certain hedging transactions may be treated as a single investment,
with increases and decreases in the value of the positions which are part of the
hedge being netted together.
In order not to be subject to the regular federal corporate income tax, the
Fund must, in addition to the above requirements, distribute to its stockholders
at least 90% of its net investment income other than net capital gains earned in
each year. In addition, a regulated investment company will be subject to a
non-deductible 4% excise tax in any calendar year in which the company does not
distribute to its stockholders the sum of 98% of its ordinary income for such
calendar year, 98% of its capital gain net income determined on an October 31
year basis and 100% any prior undistributed amount from the previous excise tax
reporting period. In light of this
26
<PAGE>
<PAGE>
provision, the Fund intends to distribute all of its income and capital gains
(except a de minimis amount) to its stockholders during the calendar year in
which such income is earned and such gains are realized.
Dividends on stock owned by the Fund will be included in its gross income
no later than the date on which the stock becomes ex-dividend with respect to
the dividend. If the Fund acquires stock after it becomes ex-dividend and
acquires the right to receive the dividend, it must include the dividend in its
gross income on the date of acquisition.
Gains or losses on sales of securities by the Fund will be treated as
long-term capital gains or losses if the securities have been held by it for
more than one year. Other gains or losses on the sale of stock or securities
will be short-term capital gains or losses. Certain of the Fund's transactions
may be subject to wash sale and short sale provisions of the Internal Revenue
Code. In addition, debt securities acquired by the Fund may be subject to
original issue discount and market discount rules.
Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gain or loss. However, all or a portion of the gain or loss
from the disposition of non-U.S. dollar denominated securities (including debt
instruments, certain financial forward, futures and option contracts, and
certain preferred stock) may be treated as ordinary income or loss under Section
988 of the Internal Revenue Code. In addition and absent any election by the
Fund to accrue market discount daily, all or a portion of the gain realized from
the disposition of market discount bonds will be treated as ordinary income
under Section 1276 of the Internal Revenue Code. Generally, a market discount
bond is defined as any bond bought by the Fund after its original issuance at a
price below its face or accreted value. Finally, all or a portion of the gain
realized from engaging in 'conversion transactions' may be treated as ordinary
income under Section 1258 of the Internal Revenue Code. 'Conversion
transactions' are defined to include certain forward, futures, option and
straddle transactions, transactions marketed or sold to produce capital gains,
or transactions described in Treasury regulations to be issued in the future.
Under the Internal Revenue Code, special rules apply to the treatment of
certain options and futures contracts ('Section 1256 Contracts') held by a
regulated investment company. At the end of each year Section 1256 Contracts
held by the Fund will be required to be 'marked to market' for federal income
tax purposes; that is, they will be treated as having been sold at market value.
Sixty percent of any gain or loss recognized on these 'deemed sales' and on
actual disposition will be treated as long-term capital gain or loss, and the
remainder will be treated as short-term gain or loss.
Offsetting positions held by the Fund involving certain financial forward,
futures or options contracts (including certain foreign currency forward
contracts or options) may constitute 'straddles.' Straddles are defined to
include 'offsetting positions' in actively traded personal property. The tax
treatment of straddles is governed by Sections 1092 and 1258 of the Internal
Revenue Code, which, in certain circumstances, override or modify the provisions
of Sections 1256 and 988. If the Fund were treated as entering into straddles by
reason of its engaging in certain forward contracts or options transactions,
such straddles would be characterized as 'mixed straddles' if the forward
contracts or options transactions comprising a part of such straddles were
governed by Section 1256. The Fund may make one or more elections with respect
to mixed straddles. Depending on which election is made, if any, the results to
the Fund may differ. If no election is made to positions established by the Fund
which constitute a straddle, losses realized by the Fund on one end of the
straddle will be deferred to the extent of unrealized gain in the offsetting
position. Moreover, as a result of the straddle rules, short-term capital loss
on straddle positions may be recharacterized as long-term capital loss, and
long-term capital gains may be treated as short-term capital gains.
Any dividends or distributions paid shortly after a purchase by an investor
may have the effect of reducing the per share net value of the investor's shares
by the per share amount of the dividends or distributions. Furthermore, such
dividends or distributions, although in effect a return of capital, are subject
to federal income
27
<PAGE>
<PAGE>
taxes. Therefore, prior to purchasing shares of the Fund, the investor should
carefully consider the impact of dividends or capital gains distributions which
are expected to be or have been announced.
PERFORMANCE INFORMATION
The Fund may advertise its performance in terms of average annual total
return for 1, 5, and 10 year periods, or for such lesser periods as the Fund has
been in existence. Average annual total return is computed by finding the
average annual compounded rates of return over the 1, 5, and 10 year periods
that would equate the initial amount invested to the ending redeemable value,
according to the following formula:
P(1 +T)`pp'n = ERV
<TABLE>
<S> <C> <C>
Where: P = A hypothetical initial payment of $1,000
T = Average annual total return
n = Number of years
ERV = Ending redeemable value of hypothetical $1,000 payment made at the beginning of the 1, 5, or
10 year periods at the end of the 1, 5, or 10 year periods (or fractional portion thereof)
</TABLE>
The calculation (i) assumes all dividends and distributions by the Fund are
reinvested at the price stated in the Prospectus on the reinvestment dates
during the period, (ii) includes all recurring fees that are charged to all
shareholder accounts, (iii) assumes complete redemption at the end of the 1, 5,
or 10 year periods to determine the ending redeemable value and (iv) does not
take into account any federal or state income taxes that may be payable upon
redemption.
The Fund may also advertise aggregate total return, which represents the
cumulative change in the value of a hypothetical initial investment of $1,000 in
the Fund assuming a constant rate of performance over a stated period of time.
Aggregate total return is computed according to the following formula:
ERV-P
-----
P
<TABLE>
<S> <C> <C>
Where: P = A hypothetical initial payment of $1,000
ERV = Ending redeemable value of hypothetical $1,000 payment made at the beginning of the 1, 5, or
10 year periods at the end of the 1, 5, or 10 year periods (or fractional portion thereof)
</TABLE>
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
AND INDEPENDENT ACCOUNTANTS
The Bank of New York serves as Custodian for the Fund's assets. BISYS Fund
Services, Inc. serves as Transfer and Dividend Disbursing Agent. In those
capacities, each of The Bank of New York and BISYS Fund Services, Inc. maintains
certain financial and accounting books and records pursuant to agreements with
the Fund.
KPMG Peat Marwick LLP, New York, New York, serves as the Fund's independent
accountants and in that capacity audits the Fund's annual financial statements.
ORGANIZATION AND HISTORY OF THE FUND
The Fund was incorporated in Maryland on October 7, 1993.
28
<PAGE>
<PAGE>
FIRST EAGLE INTERNATIONAL FUND, INC.
SCHEDULE OF INVESTMENTS
December 31, 1995
<TABLE>
<CAPTION>
Shares STOCK (92.25%) Value
<C> <S> <C>
Austria (1.62%)
2,300 Wolford AG US$ 363,148
Denmark (5.11%)
20,000 Scandinavian Mobility International 479,988
24,100 Tele-Danmark ADS 665,763
-------------
1,145,751
France (4.68%)
3,500 Brioche Pasquier SA 425,836
2,000 Sidel SA 624,083
-------------
1,049,919
Germany (23.24%)
15,000 Adidas AG 793,347
400 ASKO Deutsche Kaufhaus AG 207,926
14,500 Fielmann AG Pfd. 751,706
10,000 Kiekert AG 597,368
1,000 Siemens AG 550,557
25,000 SKW Trostberg AG 531,343
20,000 Tarkett AG 433,178
4,000 Volkswagen AG 1,344,254
-------------
5,209,679
Italy (21.22%)
82,000 Brembo SPA 952,635
32,000 De Rigo ADR 728,000
25,000 Gucci Group NV 971,875
34,700 Industrie Natuzzi ADR 1,574,513
300,000 Olivetti Ing & Co. SPA 240,720
65,000 Pagnossin SPA 290,700
-------------
4,758,443
Netherlands (15.24%)
15,000 Elsevier NV 200,250
20,000 Gist-Brocade NV 596,386
10,000 Hunter Douglas NV 464,133
15,000 IHC Caland NV 505,305
10,500 Philips Electronics NV 379,915
13,421 Wolters Kluwer NV 1,270,943
-------------
3,416,932
</TABLE>
F-1
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Shares STOCK (92.25%) Value
United Kingdom (10.30%)
<C> <S> <C>
56,700 Bio Compatibles PLC US$ 418,151
66,000 Bluebird Toys PLC 329,954
125,000 Filtronic Comtek PLC 962,600
60,000 J.D. Wetherspoon PLC 598,056
-------------
2,308,761
United States (10.84%)
6,000 Estee Lauder Co. 209,250
25,000 Harvey Entertainment Co.* 187,500
46,500 Nautica Enterprises Inc. 2,034,375
-------------
2,431,125
-------------
Total Stock (cost $18,561,299) 20,683,758
<CAPTION>
Principal SHORT TERM INVESTMENTS (12.71%)
<C> <S> <C>
Grand Cayman (12.71%)
US$2,850,000 Bank of New York Grand Cayman Time Deposit
@ 5.50% Due 1/2/96 (cost $2,850,000) 2,850,000
-------------
Total Investments (cost $21,411,299) 23,533,758
OTHER LIABILITIES IN EXCESS OF OTHER ASSETS (4.96%) (1,112,869)
-------------
NET ASSETS (100.00%) US$22,420,889
-------------
-------------
</TABLE>
* Non-income producing security.
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
<PAGE>
FIRST EAGLE INTERNATIONAL FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (cost $21,411,299) $23,533,758
Cash 72,414
Dividends and interest receivable 14,740
Deferred organization expenses 95,040
-----------
TOTAL ASSETS 23,715,952
-----------
LIABILITIES:
Payable for investments purchased 298,650
Management fee payable 229,208
Long term capital gain distribution payable 717,832
Accrued operating expenses 49,373
-----------
TOTAL LIABILITIES 1,295,063
-----------
NET ASSETS $22,420,889
-----------
-----------
Net Assets were comprised of:
Common stock (par $0.01) authorized 100,000,000 shares, outstanding
1,675,613 shares (Note 5) $ 16,756
Paid in surplus (Note 5) 20,281,674
-----------
20,298,430
Net unrealized appreciation on investments 2,122,459
-----------
NET ASSETS, December 31, 1995 $22,420,889
-----------
-----------
Net Asset Value per share:
($22,420,889 [div] 1,675,613 shares of common stock issued and outstanding) $13.38
------
------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
<PAGE>
FIRST EAGLE INTERNATIONAL FUND, INC.
STATEMENT OF OPERATIONS
For the year ended December 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend income (net of $34,529 foreign tax withheld) $ 225,429
Interest income 203,303
-----------
TOTAL INCOME 428,732
-----------
EXPENSES:
Management fee (note 2) 338,062
Accounting fees 66,000
Directors' fees 45,750
Transfer agent fees 39,757
Legal fees 36,218
Audit fees 34,000
Organizational expense amortization 29,200
Registration expenses 21,075
Custodian fees 19,086
Printing expenses 16,018
Miscellaneous expenses 6,028
Short sale dividend expense 5,240
-----------
TOTAL EXPENSES 656,434
-----------
NET INVESTMENT LOSS (227,702)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Realized gain (loss):
Investments 3,235,683
Forward contracts (1,312,187)
-----------
Net realized gain on investments 1,923,496
Change in unrealized appreciation on:
Investments 653,758
Forward contracts 90,439
-----------
Change in unrealized appreciation 744,197
NET GAIN ON INVESTMENTS 2,667,693
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 2,439,991
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<PAGE>
FIRST EAGLE INTERNATIONAL FUND, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the period from
For the year April 4, 1994**
ended to
December 31, 1995 December 31, 1994
----------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment loss $ (227,702) $ (63,542)
Net realized gain (loss) on investments 1,923,496 (1,664,247)
Net change in unrealized appreciation on investments 744,197 1,378,262
----------- -----------
Net increase (decrease) in net assets resulting from
operations 2,439,991 (349,527)
Distribution from net realized gains (717,832) --
Transactions in fund shares-net 546,706 20,401,551
----------- -----------
Total increase 2,268,865 20,052,024
NET ASSETS:
Beginning of year 20,152,024 100,000
----------- -----------
End of year $22,420,889 $20,152,024
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS
Selected data for a share of common stock outstanding throughout the period:
<TABLE>
<CAPTION>
For the period from
For the year April 4, 1994**
ended through
December 31, 1995 December 31, 1994
----------------- -------------------
<S> <C> <C>
Net asset value, beginning of year $12.37 $12.50
INCOME FROM INVESTMENT OPERATIONS
Net investment loss (0.13) (0.02)
Net gains (losses) on investments (both realized and
unrealized) 1.57 (0.11)
------- -------
Total from investment operations 1.44 (0.13)
------- -------
LESS DISTRIBUTIONS
Dividends (from net investment income) -- --
Distributions (from capital gains) (0.43) --
------- -------
Total distributions (0.43) --
------- -------
Net asset value, end of year $ 13.38 $ 12.37
------- -------
------- -------
Total Return* 11.6% (1.0)%`D'`D'
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year $22,420,889 $20,152,024
Ratio of expenses to average net assets 3.1% 2.0%`D'
Ratio of net investment loss to average net assets (1.1)% (0.3)%`D'
Portfolio turnover rate 166% 170%
</TABLE>
* Past performance is not predictive of future performance
** Commencement of investment operations
`D' Annualized
`D'`D' Total return not annualized
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<PAGE>
FIRST EAGLE INTERNATIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES -- First Eagle International Fund,
Inc. (the 'Fund') is registered under the Investment Company Act of 1940, as
amended (the 'Act'), as a non-diversified, open end management investment
company and was incorporated in Maryland on October 7, 1993. On March 3, 1994,
Arnhold and S. Bleichroeder, Inc. (the 'Adviser' or 'ASB') purchased 8,000
shares of the Fund's common stock for $100,000. The investment operations
commenced on April 4, 1994.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- Any security for which the primary market is on
an exchange is valued at the last sale price on such exchange on the day of
valuation or, if there was no sale on such day, the mean between the last bid
and asked prices quoted on such day. Equity securities listed on the NASDAQ
National Market System are valued at the last sale price or, if there was no
sale on such day, at the mean between the most recently quoted bid and asked
prices. Corporate bonds (other than convertible debt securities) and U.S.
Government Securities that are actively traded in the over-the-counter market,
including listed securities for which the primary market is believed to be
over-the-counter, are valued on the basis of valuations provided by a pricing
service which uses information with respect to transactions in bonds, quotations
from bond dealers, market transactions in comparable securities and various
relationships between securities in determining value. Other securities are
valued at the mean between the most recently quoted bid and asked prices.
Short-term debt instruments which mature in less than 60 days are valued at
amortized cost, unless the Board of Directors determines that such valuation
does not represent fair value. Securities which are not readily marketable or
securities for which market quotations otherwise are not readily available are
valued in good faith at fair value in accordance with procedures adopted by the
Fund's Board of Directors.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains or losses
on security transactions are determined based on the first-in, first-out method.
Discounts and premiums on purchases of investments are accreted and amortized,
respectively, as adjustments to interest income and cost of securities on a
level yield basis. Dividend income is recorded on the ex-dividend date. Interest
income is recorded on an accrual basis.
SHORT SALES: The Fund may make short sales of securities. A short sale is a
transaction in which the Fund sells a security it does not own in anticipation
of a decline in market price. To enter a short sale, the Fund needs to borrow
the security for delivery to the buyer. The proceeds received are retained by
the executing broker until the Fund replaces the borrowed security. If the price
of the security sold short increases between the time of the short sale and the
time the Fund replaces the borrowed security, the Fund will incur a loss, and if
the price declines during this period, the Fund will realize a gain. Any gain
will be decreased, and any incurred loss increased by the amount of
F-6
<PAGE>
<PAGE>
transaction costs, and any dividends or interest which the Fund may have to pay
in connection with such short sale are recorded as expenses.
FORWARD CURRENCY CONTRACTS: In connection with purchases and sales of securities
denominated in foreign currencies, the Fund may enter into forward currency
contracts. Additionally, the Fund may enter into such contracts to hedge certain
other foreign currency denominated investments. These contracts are recorded at
market value, and the related realized and unrealized foreign exchange gains and
losses are included in the statement of operations. The Fund will realize a gain
or loss upon the closing or settlement of the forward transaction. Such realized
gains or losses are included in the statement of operations. In the event that
counterparties fail to settle these currency contracts or the related foreign
security trades, the Fund could be exposed to foreign currency fluctuations.
There were no open forward currency contracts at December 31, 1995.
C. FOREIGN CURRENCY TRANSLATION: The market values of securities which are not
traded in United States currency are recorded in the financial statements after
translation to U.S. dollars based on the applicable exchange rates at the end of
the period. The costs of such securities are translated at exchange rates
prevailing when acquired. Related dividends, interest and withholding taxes are
accrued at the rates of exchange prevailing on the respective dates of such
transactions.
The net assets of the Fund are presented at the foreign exchange rates and
market values at the close of the period. The Fund does not isolate that portion
of gains and losses on investments which is due to change in foreign exchange
rates from that which is due to changes in market prices of the equity
securities.
D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to shareholders.
Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net investment
income, if any, and distribution of net realized gain from investment
transactions, if any, will be made annually. The Fund records dividends and
distributions to its shareholders on the record date.
Capital gain distributions are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles
primarily due to the recognition of certain foreign currency gains (losses) as
ordinary income (loss) for federal income tax purposes and net investment losses
which for federal income tax purposes cannot be used to offset future net
investment income. Accordingly, a permanent book and tax basis difference of
$94,602 was reclassified by the Fund to paid in surplus.
F. DEFERRED ORGANIZATION EXPENSES -- A total of $146,000 was incurred in
connection with the organization of the Fund. The costs have been deferred and
are being amortized by the Fund over the period of benefit not to exceed 60
months from the date the Fund commenced operations. The Adviser has agreed that
if any of the initial shares purchased by the Adviser are redeemed during the
amortization period, the redemption proceeds will be reduced by any unamortized
organizational expenses in the same proportion as the number of initial shares
being redeemed bears to the number of shares outstanding at the time of
redemption.
F-7
<PAGE>
<PAGE>
G. ESTIMATES AND ASSUMPTIONS -- Estimates and assumptions are required to be
made regarding assets, liabilities and changes in net assets resulting from
operations when financial statements are prepared. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ from these amounts.
NOTE 2. INVESTMENT ADVISORY AGREEMENT -- On October 17, 1995, the Board of
Directors and on December 12, 1995, the shareholders approved an amended and
restated Investment Advisory Agreement between the Adviser and the Fund
effective January 1, 1996. The amended and restated Investment Advisory
Agreement is substantially the same as the prior agreement except for the terms
of the advisory fee arrangement.
Under the new agreement for the advisory services provided by the Adviser, the
fee arrangement requires the Fund to pay an annual advisory fee of 1.5% of the
Fund's average daily net assets payable quarterly. As of January 1, 1996, in
addition to the advisory fee, the Adviser will receive an annual services fee of
0.25% of the Fund's average daily net assets payable quarterly, pursuant to a
separate services agreement which was approved by the Board of Directors, to
cover expenses incurred by the Adviser for shareholder communications and other
services provided in addition to the advisory services. Prior to January 1,
1996, the Adviser was not being paid for such services provided for in the new
services agreement. The new Investment Advisory Agreement and Services Agreement
together provide for a combined annual fee paid to the Adviser of 1.75% of the
Fund's average daily net assets.
From April 4, 1994 through December 31, 1995, the Fund had entered into an
Investment Advisory Agreement with ASB which provided for a basic fee of 1.6%
computed daily subject to adjustment to a minimum fee of 0.7% and a maximum fee
of 2.5%.
The basic fee was subject to an incentive adjustment determined on an annual
basis, depending upon the performance of the Fund, adjusted for distributions,
relative to the Europe, Australia, Far East (EAFE) Index (the 'Index'), adjusted
for distributions. The incentive adjustment, if any, was added to or subtracted
from the basic fee and any amount due was payable promptly after the close of
the Fund's fiscal year.
If the percentage increase in the net asset value of a Fund share exceeded the
percentage increase (if any) in the Index by at least 10% of the percentage
increase (if any) in the Index, or in the event that the Index did not increase
during a period in which the net asset value of a Fund share did increase, the
basic fee would be increased by 0.9%.
If the percentage decrease in the net asset value of a Fund share exceeded the
percentage decrease (if any) in the Index by at least 10% of the percentage
decrease (if any) in the Index, or in the event the Index did not decrease
during a period in which the net asset value of a Fund share did decrease, the
basic fee would be decreased by 0.9%.
The minimum fee would be paid in quarterly installments promptly after the close
of each fiscal quarter; and the balance, if any, would be paid promptly after
the close of the Fund's fiscal year. For the year ended December 31, 1995, the
basic fee was accrued.
Pursuant to both the Investment Advisory Agreements, the Adviser is responsible
for the continuous supervision of the Fund's portfolio. The Adviser also
performs certain administrative and
F-8
<PAGE>
<PAGE>
management services for the Fund and provides office facilities and personnel
necessary to perform its duties under the agreements.
NOTE 3. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and proceeds from sales of portfolio securities for the year ended
December 31, 1995, excluding short-term investments, were $30,339,368 and
$29,526,138, respectively.
For the year ended December 31, 1995, the Fund paid brokerage commissions on
securities transactions of $82,550 of which $31,964 was paid to ASB.
NOTE 4. FEDERAL INCOME TAXES -- The United States federal income tax basis of
the Fund's investments at December 31, 1995 was substantially the same as the
basis for financial reporting purposes and accordingly, the aggregate gross
unrealized appreciation on investments was $2,661,458 and the aggregate gross
unrealized depreciation was $538,999, resulting in net unrealized appreciation
for United States federal income tax purposes of $2,122,459.
NOTE 5. COMMON STOCK -- Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
For the year ended For the year ended
December 31, 1995 December 31, 1994
------------------------ ------------------------
Shares Amount Shares Amount
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Beginning of period.......................... 1,629,447 $19,846,326 8,000 $ 100,000
--------- ----------- --------- -----------
Shares sold.................................. 200,161 2,452,762 1,758,794 22,071,020
Shares redeemed.............................. (153,995) (1,906,056) (137,347) (1,669,469)
--------- ----------- --------- -----------
1,675,613 20,393,032 1,629,447 20,501,551
Adjustment representing other-than temporary
book-tax difference........................ -- (94,602) -- (655,225)
--------- ----------- --------- -----------
--------- ----------- --------- -----------
End of period................................ 1,675,613 $20,298,430 1,629,447 $19,846,326
--------- ----------- --------- -----------
--------- ----------- --------- -----------
</TABLE>
Of the 1,675,613 shares outstanding at December 31, 1995, ASB owned 8,000 shares
and the ASB Profit Sharing Plan owned 103,851 shares. The directors and officers
of the Fund, as a group, owned approximately 132,834 shares at December 31,
1995.
F-9
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and
Board of Directors
First Eagle International Fund, Inc.
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of First Eagle International Fund, Inc.
as of December 31, 1995, the related statements of operations for the year then
ended, and changes in net assets and the financial highlights for the year then
ended and the period from April 4, 1994 (commencement of operations) to December
31, 1994. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1995 by correspondence with
the custodian. As to securities purchased and sold but not received or
delivered, we verified settlement of trades to subsequent cash disbursements or
receipts. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
First Eagle International Fund, Inc. as of December 31, 1995, the results of its
operations for the year then ended, the changes in its net assets and the
financial highlights for the year then ended and for the period from April 4,
1994 to December 31, 1994, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
New York, New York
January 26, 1996
F-10
<PAGE>
<PAGE>
FIRST EAGLE INTERNATIONAL FUND, INC.
PART C
OTHER INFORMATION
APRIL 30, 1996
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
A. Financial Statements
<TABLE>
<C> <S>
1. -- Schedule of Investments dated December 31, 1995.
2. -- Statement of Assets and Liabilities dated December 31, 1995.
3. -- Statement of Operations for the fiscal period ended December 31, 1995.
4. -- Statement of Changes in Net Assets for the fiscal period ended December 31, 1995.
5. -- Financial highlights for the fiscal period ended December 31, 1995.
6. -- Notes to Financial Statements.
7. -- Independent Auditors' Report -- KPMG Peat Marwick LLP dated January 26, 1996.
8. -- Notes to Financial Statements.
</TABLE>
B. Exhibits
<TABLE>
<C> <S>
1.(a) -- Articles of Incorporation of the Registrant.*
(b) -- Amended Articles of Incorporation of the Registrant.*
2. -- By-laws of the Registrant.*
4. -- Specimen certificate for shares of common stock of the Registrant.
5.(a) -- Investment Advisory Agreement between the Registrant and Arnhold and S. Bleichroeder,
Inc.*
(b) -- Investment Advisory Agreement dated January 1, 1996.
(c) -- Assignment Agreement between the Registrant, Arnhold and S. Bleichroeder, Inc. and
Arnhold and S. Bleichroeder Advisers, Inc.
6.(a) -- Distribution Agreement between the Registrant and Arnhold and S. Bleichroeder, Inc.*
(b) -- Subscription Offering Agreement between the Registrant and Arnhold and S. Bleichroeder,
Inc.*
8.(a) -- Custody Agreement between the Registrant and The Bank of New York.*
(b) -- Fund Accounting Agreement.*
(c) -- Special Custody Agreement between Registrant, The Bank of New York and Arnhold and S.
Bleichroeder, Inc.*
(d) -- Amendment to Custody Agreement for ACCESS between Registrant and The Bank of New York.
9.(a) -- Transfer Agency Agreement.
(b) -- Services Agreement.
10. -- Opinion of Fulbright & Jaworski L.L.P.*
11. -- Consent of Independent Accountants.
13. -- Subscription Agreement.*
17. -- Financial Data Schedule.
19. -- Power of Attorney.*
</TABLE>
- ------------
* Previously filed and incorporated by reference.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
No persons are controlled by or under common control with the Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
TITLE OF CLASS NUMBER OF RECORD HOLDERS
- ------------------------------------------------------- ----------------------------
<S> <C>
Common Stock........................................... 366 (as of April 1, 1996)
</TABLE>
II-1
<PAGE>
<PAGE>
ITEM 27. INDEMNIFICATION
The Registrant shall indemnify directors, officers, employees and agents of
the Registrant against judgments, fines, penalties, settlements and expenses to
the fullest extent authorized, and in the manner permitted, by applicable
federal and state law.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Arnhold and S. Bleichroeder Advisers, Inc. (the 'Adviser') is a wholly
owned subsidiary of Arnhold and S. Bleichroeder, Inc. which has a substantial
quantity of assets under management in the form of individual and fund accounts.
Arnhold and S. Bleichroeder, Inc. is a registered broker-dealer and maintains a
substantial involvement in the securities brokerage and underwriting businesses.
The business and other connections of the Adviser's directors and officers are
as follows:
<TABLE>
<CAPTION>
NAME POSITION WITH THE ADVISER BUSINESS AND OTHER CONNECTIONS
- ------------------------------ -------------------------------- -----------------------------------------------
<S> <C> <C>
Henry H. Arnhold.............. Director Co-Chairman of the Board of Arnhold and S.
Bleichroeder, Inc.; Director, Aquila
International Fund Limited, First Eagle Fund
of America, Inc. and Conservation
International; Trustee, The New School for
Social Research.
John P. Arnhold............... President and Chief Executive Co-President and Director, Arnhold and S.
Officer Bleichroeder, Inc.; Director, Aquila
International Fund Limited and The Global
Beverage Fund Limited; Co-President, First
Eagle Fund of America, Inc.
Gary L. Fuhrman............... Director Director and Senior Vice President, Arnhold and
S. Bleichroeder Inc.; Director, National R.V.
Holdings, Inc. and Medical Resources, Inc.
Stephen M. Kellen............. Director Co-Chairman of the Board of Arnhold and S.
Bleichroeder Inc.; Director, First Eagle Fund
of America, Inc. and The American Council on
Germany; Trustee, The Carnegie Hall Society
and WNET/Thirteen; Trustees Council of The
National Gallery of Art.
Robert Miller................. Vice President, Secretary and Senior Vice President, Arnhold and S.
Treasurer Bleichroeder, Inc.; Treasurer, Chief Accounting
Officer and Chief Financial Officer, First
Eagle Fund of America, Inc.
Stanford S. Warshawsky........ Director Co-President, Director and Secretary, Arnhold
and S. Bleichroeder, Inc.; Director, First
Eagle Fund of America and German-American
Chamber of Commerce.
</TABLE>
ITEM 29. PRINCIPAL UNDERWRITER
(a) Arnhold and S. Bleichroeder, Inc. acts as an investment adviser to
First Eagle Fund, N.V., Aquila International Fund Limited, Aetos Corporation,
DEF Associates, N.V. and The Global Beverage Fund Limited.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION AND OFFICES POSITIONS AND OFFICES
(b) BUSINESS ADDRESS* WITH UNDERWRITER WITH REGISTRANT
------------------------------ ------------------------------ --------------------------------------------
<S> <C> <C>
Henry H. Arnhold.............. Co-Chairman of the Board Director
John P. Arnhold............... Co-President and Director President, Chief Executive Officer and Chief
Financial Officer
Michael M. Kellen............. Senior Vice President and Director and Vice Chairman of the Board
Director
Stephen M. Kellen............. Co-Chairman of the Board Director
Tracy L. LaPointe............. Vice President Assistant Vice President
Arthur F. Lerner.............. Senior Vice President Vice President
Robert Miller................. Senior Vice President Treasurer and Chief Accounting Officer
Martha B. Pierce.............. Assistant Vice President Secretary and Assistant Treasurer
Allan R. Raphael.............. Senior Vice President Vice President
Charles J. Rodriguez.......... Senior Vice President Assistant Vice President
Stanford S. Warshawsky........ Co-President, Director and Director and Chairman of the Board
Secretary
</TABLE>
- ------------
* The Address of each person named is 45 Broadway, New York, New York 10006.
II-2
<PAGE>
<PAGE>
(c) The Registrant has no principal underwriter which is not an affiliated
person of the Registrant.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The Registrant's accounts and records will be maintained at The Bank of New
York, 48 Wall Street, New York, New York 10005. Records of shareholders'
accounts will be maintained at BISYS Fund Services, Inc., 100 First Avenue,
Suite 300, Pittsburgh, Pennsylvania 15222.
ITEM 31. MANAGEMENT SERVICES
The Registrant is not a party to any management-related service contract
not discussed in the Prospectus or Statement of Additional Information of this
Registration Statement.
ITEM 32. UNDERTAKINGS
The Registrant hereby undertakes to provide each person to whom a copy of
the Prospectus is given with a copy of the Fund's annual report, which contains
the information required by item 5A of Form N-1A, upon request by such person
and free of charge.
The Registrant hereby undertakes to call a meeting of shareholders for the
purpose of voting upon the question of removal of a director, if requested to do
so by the holders of at least 10% of the Fund's outstanding shares, and that it
will assist in communication with other shareholders as required by Section
16(c) of the Investment Company Act of 1940.
II-3
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 (the 'Securities
Act') and the Investment Company Act of 1940 (the 'Investment Company Act'), 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, and State of New York, on the 26th day of
April 1996.
FIRST EAGLE INTERNATIONAL FUND, INC.
By: /s/ JOHN P. ARNHOLD
----------------------------------
JOHN P. ARNHOLD
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------------ --------------------------------------------- -------------------
<S> <C> <C>
/s/ HENRY H. ARNHOLD Director April 26, 1996
- ------------------------------------------
(HENRY H. ARNHOLD)
/s/ EDWIN J. EHRLICH Director April 26, 1996
- ------------------------------------------
(EDWIN J. EHRLICH)
/s/ K. GEORG GABRIEL Director April 26, 1996
- ------------------------------------------
(K. GEORG GABRIEL)
/s/ ROBERT J. GELLERT Director April 26, 1996
- ------------------------------------------
(ROBERT J. GELLERT)
/s/ LARRY D. HORNER Director April 26, 1996
- ------------------------------------------
(LARRY D. HORNER)
/s/ MICHAEL M. KELLEN Director April 26, 1996
- ------------------------------------------
(MICHAEL M. KELLEN)
/s/ STEPHEN M. KELLEN Director April 26, 1996
- ------------------------------------------
(STEPHEN M. KELLEN)
/s/ WILLIAM M. KELLY Director April 26, 1996
- ------------------------------------------
(WILLIAM M. KELLY)
/s/ STANFORD S. WARSHAWSKY Director April 26, 1996
- ------------------------------------------
(STANFORD S. WARSHAWSKY)
/s/ J. FRANK WIEDEMAN Director April 26, 1996
- ------------------------------------------
(J. FRANK WIEDEMAN)
/s/ JOHN P. ARNHOLD President, Chief Executive Officer and Chief April 26, 1996
- ------------------------------------------ Financial Officer
(JOHN P. ARNHOLD)
/s/ ROBERT MILLER Treasurer and Chief Accounting Officer April 26, 1996
- ------------------------------------------
(ROBERT MILLER)
</TABLE>
II-4
STATEMENT OF DIFFERENCES
The dagger symbol shall be expressed as.............. `D'
Mathematical powers normally expressed as
superscript shall be preceded by................... `pp'
The division sign symbol shall be expressed as....... [div]
<PAGE>
<PAGE>
NUMBER SHARES
SEE REVERSE FOR
CERTAIN DEFINITIONS
ASB
FIRST EAGLE INTERNATIONAL FUND, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
COMMON STOCK CUSIP 32007R 10 6
This is to Certify that
_______________________________________________________________________________
is the owner of
_______________________________________________________________________________
FULLY PAID NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.01 PAR VALUE, OF
=====================FIRST EAGLE INTERNATIONAL FUND, INC.=======================
(hereinafter called the "Corporation"), transferable on the books of the
Corporation by the holder hereof in person or by duly authorized attorney upon
surrender of this certificate properly endorsed. This Certificate and the shares
represented hereby are issued and shall be held subject to all of the provisions
of the Articles of Incorporation of the Corporation to all which the holder by
acceptance hereof asserts. This Certificate is not valid until countersigned
by the Transfer Agent.
WITNESS the facsimile seal of the Corporation and the signatures of its
duly authorized officers.
Dated:
/s/ Martha B. Pierce /s/ John P. Arnhold
- -------------------------- [SEAL} -------------------------
SECRETARY PRESIDENT
COUNTERSIGNED:
BISYS FUND SERVICES, INC.
(PITTSBURGH, PA)
BY TRANSFER AGENT
AUTHORIZED SIGNATURE
<PAGE>
<PAGE>
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT --...Custodian....
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act
JT TEN - as joint tenants with right of ....................................
survivorship and not as tenants (State)
in common
Additional abbreviations may also be used though not in the above list.
A full statement of the designations and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemptions of the stock of each class which the
Corporation is authorized to issue will be furnished to any shareholder on
request and without charge.
For Value Received,_______________hereby sell, assign and transfer, unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
| |
|______________________________________|
- -------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- -----------------------------------------------------------------------Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated____________________________________
_________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR WITHOUT ALTERATION OR ENLARGEMENT OR ANY
CHANGE WHATEVER.
Signature(s) Guaranteed:
______________________________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WTH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
<PAGE>
<PAGE>
FIRST EAGLE INTERNATIONAL FUND, INC.
INVESTMENT ADVISORY AGREEMENT
Agreement, as amended and restated as of January 1, 1996, between FIRST
EAGLE INTERNATIONAL FUND, INC., a Maryland corporation (the "Fund"), and ARNHOLD
and S. BLEICHROEDER, INC., a registered investment adviser organized under the
laws of the State of New York (the "Adviser").
WITNESSETH:
WHEREAS, the Fund is a non-diversified, open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Fund desires to retain the Adviser to render investment
advisory services to the Fund, and the Adviser is willing to render such
services;
NOW, THEREFORE, the parties agree as follows:
1. The Fund hereby appoints the Adviser to act as investment adviser to the
Fund for the period and on the terms set forth in this Agreement. The Adviser
accepts such appointment and agrees to render the services herein described, for
the compensation herein provided.
2. Subject to the supervision of the Board of Directors of the Fund, the
Adviser shall manage the investment operations of the Fund and the composition
of the Fund's portfolio, including the purchase, retention and disposition
thereof, in accordance with the Fund's investment objectives, policies and
restrictions as stated in its Prospectus and Statement of Additional Information
and subject to the following understandings:
(a) The Adviser shall provide supervision of the Fund's investments
and determine from time to time what investments, securities or commodity
futures contracts and options thereon ("futures") will be purchased,
retained, sold or loaned by the Fund, and what portion of the assets will
be invested or held uninvested as cash.
(b) The Adviser shall use its best judgment in the performance of its
duties under this Agreement.
(c) The Adviser, in the performance of its duties and obligations
under this Agreement, shall act in conformity with the Articles of
Incorporation, By-Laws, Prospectus and Statement of Additional Information
of the Fund and with the instructions and directions of the Board of
<PAGE>
<PAGE>
Directors of the Fund and will conform to and comply with the requirements
of the 1940 Act and all other applicable federal and state laws and
regulations.
(d) The Adviser shall determine the securities and futures to be
purchased or sold by the Fund and will place orders pursuant to its
determinations with or through such persons, brokers, dealers or futures
commission merchants (including the Adviser) in conformity with the policy
with respect to brokerage as set forth in the Fund's Prospectus and
Statement of Additional Information or as the Board of Directors may direct
from time to time. In providing the Fund with investment supervision, it is
recognized that the Adviser will give primary consideration to securing
most favorable price and efficient execution. Consistent with this policy,
the Adviser may consider the financial responsibility, research and
investment information and other services provided by brokers, dealers or
futures commission merchants who may effect or be a party to any such
transaction or other transactions to which other clients of the Adviser may
be a party. It is understood that neither the Fund nor the Adviser has
adopted a formula for allocation of the Fund's investment business. It is
also understood that it is desirable for the Fund that the Adviser have
access to supplemental investment and market research and security and
economic analysis provided by brokers or futures commission merchants who
may execute brokerage transactions at a higher cost to the Fund than may
result when allocating brokerage to other brokers or futures commission
merchants on the basis of seeking the most favorable price and efficient
execution. Therefore, the Adviser is authorized to place orders for the
purchase and sale of securities or futures for the Fund with such brokers
or futures commission merchants, subject to review by the Fund's Board of
Directors from time to time with respect to the extent and continuation of
this practice. It is understood that the services provided by such brokers
or futures commission merchants may be useful to the Adviser in connection
with its services to other clients.
On occasions when the Adviser deems the purchase or sale of a security
or a futures contract to be in the best interest of the Fund as well as
other clients, the Adviser, to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the
securities or futures contract to be so sold or purchased in order to
obtain the most favorable price or lower brokerage commissions and
efficient execution. In such event, allocation of the securities or futures
contract so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Adviser in the manner it considers to be
the most equitable and consistent with its fiduciary obligations to the
Fund and to such other clients.
(e) The Adviser shall maintain all books and records with respect to
the Fund's portfolio transactions the Fund is required to keep under Rule
31a-1 under the 1940 Act.
(f) The Adviser shall provide the Fund's Custodian and the Fund on
each business day with information relating to all transactions concerning
the Fund's assets.
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(g) The investment management services provided by the Adviser
hereunder are not to be deemed exclusive, and the Adviser shall be free to
render similar services to others.
3. The Fund has delivered to the Adviser copies of each of the following
documents and will deliver to it all future amendments and supplements, if any:
(a) Articles of Incorporation of the Fund, filed with the State
Department of Assessments and Taxation of Maryland (such Articles of
Incorporation, as in effect on the date hereof and as amended from time to
time, are herein called the "Articles of Incorporation");
(b) By-Laws of the Fund (such By-Laws, as in effect on the date hereof
and as amended from time to time, are herein called the "By-Laws");
(c) Certified resolutions of the Board of Directors of the Fund
authorizing the appointment of the Adviser and approving the form of this
Agreement;
(d) Registration Statement under the 1940 Act and the Securities Act
of 1933, as amended, on Form N-1A (the "Registration Statement"), as filed
with the Securities and Exchange Commission (the "Commission") relating to
the Fund and shares of the Fund's Common Stock and all amendments thereto:
(e) Notification of Registration of the Fund under the 1940 Act on
Form N-8A as filed with the Commission and all amendments thereto; and
(f) Prospectus and Statement of Additional Information of the Fund
(such Prospectus and Statement of Additional Information, as currently in
effect and as amended or supplemented from time to time, being herein
called the "Prospectus").
4. The Adviser shall authorize and permit any of its directors, officers
and employees who may be elected as directors or officers of the Fund to serve
in the capacities in which they are elected. Services to be furnished by the
Adviser under this Agreement may be furnished through the medium of any of such
directors, officers or employees.
5. Pursuant to paragraph 2 hereof, the Adviser shall keep the Fund's books
and records required to be maintained by it. The Adviser agrees that all
records which it maintains for the Fund are the property of the Fund and it will
surrender promptly to the Fund any of such records upon the Fund's request. The
Adviser further agrees to preserve for the periods prescribed by Rule 31a-2 of
the Commission under the 1940 Act any such records as are required to be
maintained by the Adviser pursuant to paragraph 2 hereof.
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6. For the services provided pursuant to this Agreement by the Investment
Adviser, the Fund will pay an annual management fee of 1.5% of the average
daily net asset value of the Fund payable quarterly. Net asset value shall be
computed on such days and at such time or times as described in the Fund's
then-current Prospectus and Statement of Additional Information. Upon any
termination of this Agreement before the end of any quarter, the fee for such
part of a quarter shall be pro-rated according to the proportion which such
period bears to the full quarterly period and shall be payable upon the date of
termination of this Agreement.
7. The Adviser shall not be liable for any error of judgment or for any
loss suffered by the Fund in connection with the matters to which this Agreement
relates, except a loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services (in which case any award of damages
shall be limited to the period and the amount set forth in Section 36(b)(3) of
the 1940 Act) or a loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.
8. This Agreement shall continue in effect for a period of more than two
years from the date hereof only so long as such continuance is specifically
approved at least annually in conformity with the requirements of the 1940 Act;
provided, however, that this Agreement may be terminated by the Fund at any
time, without the payment of any penalty, by the Board of Directors of the Fund
or by vote of a majority of the outstanding voting securities (as defined in the
1940 Act) of the Fund, or by the Adviser at any time, without the payment of any
penalty, on not more than 60 days' nor less than 30 days' written notice to the
other party. This Agreement shall terminate automatically in the event of its
assignment (as defined in the 1940 Act).
9. Nothing in this Agreement shall limit or restrict the right of any of
the Adviser's directors, officers, or employees who may also be a director,
officer or employee of the Fund to engage in any other business or to devote
time and attention in part to the management or other aspects of any business,
whether of a similar or a dissimilar nature, nor limit or restrict the Adviser's
right to engage in any other business or to render services of any kind to any
other corporation, firm, individual or association.
10. Except as otherwise provided herein or authorized by the Board of
Directors of the Fund from time to time, the Adviser shall for all purposes
herein be deemed to be an independent contractor and shall have no authority to
act for or represent the Fund in any way or otherwise be deemed an agent of the
Fund.
11. During the term of this Agreement, the Fund agrees to furnish the
Adviser at its principal office all prospectuses, proxy statements, reports to
stockholders, sale literature, or other material prepared for distribution to
stockholders of the Fund or the public, which refer to the Adviser in any way,
prior to use thereof and not to use such material if the Adviser reasonably
objects in writing within five business days (or such other time as may be
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mutually agreed) after receipt thereof. In the event of termination of this
Agreement, the Fund will continue to furnish to the Adviser copies of any of the
above-mentioned materials which refer in any way to the Adviser. Sales
literature may be furnished to the Adviser hereunder by first class or overnight
mail, facsimile transmission equipment or hand delivery. The Fund shall furnish
or otherwise make available to the Adviser such other information relating to
the business affairs of the Fund as the Adviser at any time, or from time to
time, reasonably requests in order to discharge its obligations hereunder.
12. This Agreement constitutes the entire Agreement between the parties
with respect to the subject matter hereof. This Agreement may be amended by
mutual consent, but the consent of the Fund must be approved in conformity with
the requirements of the 1940 Act.
13. Any notice or other communication required to be given pursuant to
this Agreement shall be deemed duly given if delivered or mailed by registered
mail, postage prepaid, (1) to the Adviser at 45 Broadway, New York, N.Y. 10006,
Attention: President; or (2) to the Fund at 45 Broadway, New York, N.Y. 10006,
Attention: President.
14. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
15. The Fund may use the name "First Eagle International Fund, Inc." or any
name including Arnhold and S. Bleichroeder or any variant thereof, such names
being tradenames of Arnhold and S. Bleichroeder, Inc., only for so long as this
Agreement or any extension, renewal or amendment hereof remain in effect,
including any similar agreement with any organization which shall have succeeded
to the Adviser's business as investment adviser, or the Distribution Agreement
between the Fund and Arnhold and S. Bleichroeder, Inc. (the "Distributor") or
any extension, renewal or amendment thereof, remains in effect, including any
similar agreement with any organization which shall have succeeded to the
Distributor's business as distributor. At such time as such Agreement shall no
longer be in effect, the Fund will (to the extent that it lawfully can) cease to
use such a name or any other name indicating that it is advised by, managed by
or otherwise connected with the Adviser, the Distributor or any organization
which shall have so succeeded to such businesses. In no event shall the Fund use
the name "First Eagle International Fund, Inc." or any name including "Arnhold
and S. Bleichroeder" or any variant thereof if the Adviser's or Distributor's
functions are transferred or assigned to a company of which Arnhold and S.
Bleichroeder, Inc. does not have control. In the event that such Agreement shall
no longer be in effect or the Adviser's or Distributor's functions are
transferred or assigned to a company of which Arnhold and S. Bleichroeder, Inc.
does not have control. In the event that such Agreement shall no longer be in
effect or the Adviser's or Distributor's functions are transferred or assigned
to a company of which Arnhold and S. Bleichroeder, Inc. does not have control,
the Fund shall use its best efforts to legally change its name by filing
the required documentation with appropriate state and federal agencies.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
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FIRST EAGLE INTERNATIONAL FUND, INC.
By: /s/ John P. Arnhold
--------------------------------------------
John P. Arnhold, President
ARNHOLD and S. BLEICHROEDER, INC.
By: /s/ Ronald A. Bendelius
--------------------------------------------
Ronald A. Bendelius, Senior Vice President
By: /s/ Charles J. Rodriguez
--------------------------------------------
Charles J. Rodriquez, Senior Vice President
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ASSIGNMENT AGREEMENT
ASSIGNMENT AGREEMENT, dated as of April 30, 1996, by and among
FIRST EAGLE INTERNATIONAL FUND, INC., a Maryland corporation (the "Fund"),
ARNHOLD and S. BLEICHROEDER, INC., a registered investment adviser organized
under the laws of the State of New York (the "Adviser") and ARNHOLD and
S. BLEICHROEDER ADVISERS, INC., a registered investment adviser organized under
the laws of the State of Delaware (the "New Adviser").
W I T N E S S E T H:
WHEREAS, the Fund and the Adviser entered into an Investment Advisory
Agreement, as amended and restated as of January 1, 1996 (the "Investment
Advisory Agreement");
WHEREAS, the Adviser wishes to make an assignment of its interest in
the Investment Advisory Agreement to the New Adviser, which is a wholly owned
subsidiary of the Adviser, and transfer all of its right and title to and
interest in the Investment Advisory Agreement to the New Adviser, and the New
Adviser wishes to assume all of the Investment Adviser's right and title to and
interest in the Investment Advisory Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Assignment. The Adviser hereby assigns to the New Adviser all of
its right and title to and interest in the Investment Advisory Agreement.
2. Assumption. The New Adviser ("Assignee") hereby agrees to be
bound by all of the terms and conditions of the Investment Advisory Agreement,
and assumes all obligations thereby imposed on it.
3. Acknowledgement. The Assignee hereby acknowledges that the
Assignee has received and read a copy of the Investment Advisory Agreement.
4. Restatement and Amendment. The parties hereto agree that the
Investment Advisory Agreement may be restated and re-executed to reflect the
assignment made herein.
5. Counterparts. This Agreement may be executed in counterparts
and all counterparts together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first set forth above.
FIRST EAGLE INTERNATIONAL FUND, INC.
By: /s/ Martha B. Pierce
--------------------------------------
Name: Martha B. Pierce
Title: Secretary
.
ARNHOLD AND S. BLEICHROEDER, INC.
By: /s/ Henry H. Arnhold
--------------------------------------
Name: Henry H. Arnhold
Title: Co-Chairman
ARNHOLD AND S. BLEICHROEDER ADVISERS, INC.
By: /s/ John P. Arnhold
---------------------------------------
Name: John P. Arnhold
Title: President
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CASH MANAGEMENT AND RELATED SERVICES AGREEMENT dated as of
January 9, 1996 between each mutual fund and/or portfolio series of
each mutual fund listed on Schedule A hereto (each a "Fund",
collectively the "Funds"), and The Bank of New York (the "Bank").
WITNESSETH:
That in consideration of the mutual agreements and covenants
herein contained, the Bank and each Fund hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, unless the context otherwise
requires, the following words shall have the meanings set forth below:
1. "Account Available Balance" shall mean with respect to an
Account for any given day during a calendar month a positive or
negative dollar amount equal to (A) if such day is a Business Day, the
Account Available Balance as of the close of the last preceding
Business Day plus a positive or negative dollar amount equal to the
difference, if any, between the Chargeable Credits with respect to such
day and such Account and the Chargeable Debits with respect to such day
and such Account, and (B) if such day is not a Business Day, the
Account Available Balance as of close of the last preceding Business
Day, except that both (A) and (B) shall be reduced by the United States
Federal Reserve reserve requirements then applicable to the Bank with
respect to such Account. The Account Available Balance of an Account
shall be zero on the date immediately preceding the first date on which
an entry, consisting of either a Chargeable Credit or Chargeable Debit,
is first made to such Account hereunder.
2. "ACCESS" shall mean any on-line communication system
provided by the Bank hereunder whereby either the receiver of such
communication is able to verify by codes or otherwise with a reasonable
degree of certainty the identity of the sender of such communication,
or the sender is required to provide password or other identification
code.
3. "Authorized Person" shall mean either (A) any person duly
authorized by corporate resolutions of the board of directors or board
of trustees of a Fund, as appropriate, to give Oral and/or Written
Instructions on behalf of such Fund, such persons to be designated in a
certificate, substantially in the form of Exhibit A, which contains a
specimen signature of such person, or (B) any person sending or
transmitting any instruction or direction through ACCESS.
4. "Business Day" shall mean any day on which the Federal
Reserve Bank of New York is open for business, except for any such day
on which the Bank is required by law or regulation to be closed, or
elects to be closed.
5. "Calendar Month Earnings Credit" shall mean with respect to
an Account for any calendar month the dollar amount, whether positive
or negative, equal to the sum of the Gross Calendar Month Earnings
Credit with respect to such Account for such calendar month and the
Monthly Overdraft Charges with respect to such Account for such
calendar month.
6. "Chargeable Credits" shall mean with respect to an Account
for any given day during a calendar month a positive amount of dollars
equal to the sum, if any, of (A) the aggregate dollar amount of Federal
Funds credited to such Account by the Bank in accordance with the then
applicable availability schedule of the Federal Reserve Bank of New
York, and (B) the aggregate dollar amount of Bank internal transfers of
Federal Funds to such Account.
7. "Chargeable Debits" shall mean with respect to an Account
for any given day during a calendar month a negative dollar amount
equal to the sum, if any, of (A) the aggregate dollar amount of Federal
Funds relating to such Account charged against the Bank by the Federal
Reserve Bank of New York on or as of such day, and (B) the aggregate
dollar amount of drafts drawn on such Account which are deposited in
the Bank by customers of the Bank on such day, or Bank internal
transfers from, or charges to, such Account.
8. "Daily Earnings" shall mean with respect to an Account for
any day during a calendar month a positive dollar amount equal to the
product of (A) the positive Account Available Balance, if any, of such
Account for such day, multiplied by (B) the Daily Earnings Rate for
such day. The Daily Earnings with respect to an Account for any day
during a calendar month on which the Account Available Balance of such
Account is negative shall be zero.
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9. "Daily Earnings Rate" shall mean for any day during a
calendar month one three hundred and sixty-fifth of the 91 day U.S.
Treasury Bill discount rate of the Monday auction first preceding such
day (whether or not such day is a Monday, and whether or not such
Monday auction was in the immediately prior month), as such Monday
auction 91 day U.S. Treasury Bill discount rate is reported in The Wall
Street Journal.
10. "Daily Overdraft Charges" shall mean with respect to an
Account for any day during any calendar month a negative dollar amount
equal to the product, if any, of (A) the negative Account Available
Balances, if any, with respect to such Account for such day during such
calendar month, multiplied by (B) the Overdraft Rate.
11. "Federal Funds" shall mean immediately available same day
funds.
12. "Gross Calendar Month Earnings Credit" shall mean with
respect to an Account for any calendar month a positive dollar amount
equal to the aggregate sum of the Dally Earnings of such Account for
such calendar month.
13. "Monthly Overdraft Charges" shall mean with respect to an
Account for any calendar month a negative dollar amount equal to the
aggregate sum of the Daily Overdraft Charges with respect to such
Account for such calendar month which have not been previously paid to
the Bank by the Fund to which such Account relates.
14. "Oral Instructions" shall mean verbal instructions actually
received by the Bank from an Authorized Person or from a person
reasonably believed by the Bank to be an Authorized Person.
15. "Overdraft Rate" shall mean with respect to an Account for
any calendar day during any calendar month a rate equal to one three
hundred and sixtieth of the sum of (A) one-half percent, and (B) the
greater of (i) the prime commercial lending rate of The Bank of New
York, as publicly announced to be in effect from time to time, in
effect on such calendar day, and (ii) 6%.
16. "Shareholder" shall mean any record holder of any Shares,
as identified to the Bank from time to time pursuant to this Agreement.
17. "Shares" shall mean all or any part of each class of the
shares of capital stock, beneficial interest, or limited partnership
interest of a Fund, as the case may be, which are authorized and/or
issued from time to time.
18. "Written Instructions" shall mean written instructions
actually received by the Bank from an Authorized Person or from a
person reasonably believed by the Bank to be an Authorized Person by
letter, memorandum, telegram, cable, telex, telecopy facsimie or
through ACCESS.
ARTICLE II
APPOINTMENTS OF BANK REPRESENTATIONS AND WARRANTIES
1. Appointment; Establishment of Accounts. Each Fund hereby
appoints the Bank as its agent for the term of this Agreement to
perform the cash management services set forth herein and in Schedules
I and II attached hereto and made a part hereof (as such Schedules may
be amended or supplemented from time to time by mutual agreement). The
Bank hereby accepts appointment as such agent for each appointing Fund
and agrees to establish and maintain one or more separate accounts with
respect to each Fund (each, an "Account"; collectively, the "Accounts")
in order to receive and disburse money for the purposes set forth in
this Agreement.
2. Representations and Warranties. Each Fund hereby represents
and warrants only as to itself, and not jointly, to the Bank, which
representations and warranties shall be deemed to be continuing and to
be reaffirmed upon delivery to the Bank of any Oral or Written
Instructions, that:
(a) It is duly organized and existing under the laws of the
jurisdiction of its organization, with full power to carry on its
business as now conducted, to enter into this Agreement and to perform
its obligations hereunder,
(b) This Agreement has been duly authorized, executed and
delivered by the Fund in accordance with all requisite corporate action
and constitutes a valid and legally binding obligation of the Fund
enforceable in accordance with its terms, except to the extent such
enforcement may be limited by general equity principles or bankruptcy
principles; and
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(c) It is conducting its business in compliance with all
applicable laws and regulations, both state and federal, and has
obtained all regulatory licenses, approvals and consents necessary to
carry on its business as now conducted; there is no statute,
regulation, rule, order or judgment binding on it and no provision of
its charter or by-laws, nor of any mortgage, indenture, credit
agreement or other contract binding on it or affecting its property
which would prohibit its execution or performance of this Agreement
3. Board Resolutions. Each Fund shall provide the Bank with a
certified copy of a resolution of the board of directors or board of
trustees of such Fund, as appropriate, appointing the Bank as its agent
to act hereunder and providing for the creation of such Fund's
Account(s) and the execution by such Fund of this Agreement, it being
understood that receipt of the same by the Bank shall be a condition
precedent to the Bank's establishing an Account for such Fund.
ARTICLE III
CASH MANAGEMENT SERVICES
1. Receipt of Money. The Bank shall receive money for credit to
an Account only:
(i) by personal presentment of drafts by a Fund, but not by
a Shareholder of such Fund, at the branch or branches
in Manhattan identified from time to time by the Bank
to such Fund, provided such presentment is in
accordance with the time frames specified by the Bank
to such Fund;
(ii) by mailing of drafts to a post office box designated by
the Bank for such purpose, provided such drafts are
accompanied by a properly completed investment stub;
(iii) by wire transfer to an account maintained at the
Federal Reserve Bank of New York as identified in
writing by the Bank to a Fund;
(iv) by transfer to an account identified in writing by the
Bank to a Fund through the New York Automated Clearing
House;
(v) by transfer from another Account maintained by such
Fund with the Bank under this Agreement;
(vi) by transfer from another account maintained by such
Fund with the Bank, including such Fund's custodian
account under its Custody Agreement with the Bank as
Custodian; and
(vii) by transfer from any other account maintained with the
Bank.
All money received by the Bank shall be credited upon receipt, but
subject to final payment and receipt by the Bank of immediately
available funds, and receipt by the Bank of such forms, documents and
information as are required by the Bank from time to time and received
in the appropriate time frames. The Bank shall be entitled to reverse
any credits previously made to a Fund's Account where money is not
finally collected or where a credit to such Fund's Account was in
error.
2. Disbursement of Money. The Bank shall disburse money
credited to an Account only:
(i) pursuant to Written Instructions of such Fund
transmitted through ACCESS (except as otherwise
provided in Article V, Section 7 hereof), to transfer
funds as directed by such Fund (including transfers
through the Federal Reserve Bank of New York transfer
wire and the New York Automated Clearing House);
(ii) in payment of drafts drawn by an Authorized Person or
Shareholder (as appropriate for the particular
Account), subject to the terms hereof; and
(iii) in payment of charges to such Account representing
amounts payable to the Bank, and chargeable against
such Account, as provided in this Agreement
The Bank shall be required to disburse money in accordance with the
foregoing only insofar as such money is immediately available and on
deposit with the Bank. All instructions directing the disbursement of
money credited to an Account under this Agreement (whether through
ACCESS or by Oral Instructions pursuant to Article V hereof) must
identify an account to which such money shall be transferred, and
include all other information reasonably required by the Bank from time
to time. It is understood and agreed that with respect to any such
instructions, when instructed to credit or pay a party by both name and
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a unique numeric or alpha-numeric identifier (e.g., ABA number or
account number), the Bank and any other financial institution
participating in the funds transfer may rely solely on the unique
identifier, even if it identifies a party different than the party
named. Such reliance on a unique identifier shall apply to
beneficiaries named in such instructions as well as any financial
institution which is designated in such instruction to act as an
intermediary in a funds transfer.
3. Redemption Drafts; Shareholder Information. (a) Each Fund
shall be entitled to supply its Shareholders with redemption drafts,
but only in a form and substance agreed to by the Bank. The Bank agrees
to give each Fund sixty (60) days prior notice of any changes to the
form or substance of redemption drafts required by the Bank, provided
that if such change is required by applicable rules or procedures of
the Federal Reserve or any clearinghouse through which such drafts may
be presented, the Bank may as promptly as practicable give such notice
which may be less than sixty (60) days.
(b) Each Fund will promptly furnish to the Bank (i) the name,
mailing address and telephone number of each Shareholder of such Fund,
and (ii) specimen signatures for all individuals authorized to draw
redemption drafts (whether on their own behalf or on behalf of third
parties). Each Fund will promptly advise the Bank of individuals no
longer authorized to draw redemption drafts, and those individuals
newly authorized. Such information shall be provided to the Bank in a
mutually agreed upon format.
4. Redemption Draft Returns. A Fund may give the Bank Oral or
Written Instructions from time to time to return unpaid redemption
drafts of the Fund to the presenting financial institution for any
reason, and the Bank shall use reasonable efforts to comply with such
Oral or Written Instructions provided that any such compliance would
not prejudice or impair any rights or privileges of the Bank under
prevailing draft return procedures and would not be contrary to
prevailing industry rules, procedures, customs or practices.
Notwithstanding the foregoing, or any other provision in this Agreement
or the Schedules hereto, the Bank (i) may return redemption drafts with
unauthorized or missing signatures to the presenting financial
institution in accordance with prevailing banking industry draft return
procedures, and (ii) shall have no obligation to request Oral or
Written Instructions from a Fund with respect to any redemption drafts.
ARTICLE IV
OVERDRAFTS OR INDEBTEDNESS
If the Bank in its sole discretion advances funds, or if there
shall arise for whatever reason an overdraft or other indebtedness in
connection with any Account, such advancement of funds or overdraft
with respect to such Account shall be deemed a loan made by the Bank to
the Fund to which the Account relates payable on demand, and bearing
interest from the date incurred at the Overdraft Rate, such Overdraft
Rate to be adjusted on the effective date of any change in the prime
commercial lending rate constituting a part thereof. Upon any advance
or overdraft in connection with an omnibus Account maintained for the
benefit of more than one Fund, the Bank shall be furnished promptly
with Written Instructions identifying each Fund to which such advance
or overdraft relates, and the amount allocable thereto. Each Fund
hereby agrees with respect to its Account(s) and any advancement of
funds or overdraft that the Bank shall have a continuing lien and
security interest in and to any property at any time held by it for the
benefit of the Fund either hereunder or under such Fund's Custody
Agreement with the Bank, or in which the Fund may have an interest
which is then in the Bank's possession or control or in possession or
control of any third party acting in the Bank's behalf, including in
its behalf as Custodian under the Fund's Custody Agreement with the
Bank. Each Fund authorizes the Bank, in its sole discretion, at any
time to charge any such overdraft or indebtedness together with
interest due thereon at the Overdraft Rate against any balance of
accounts standing to the Fund's credit on the books of the Bank,
including those books maintained by the Bank in its capacity as
Custodian for the Fund under its Custody Agreement with the Fund. In
addition, each Fund hereby covenants that on each Business Day on which
either it intends to enter a reverse repurchase agreement and/or
otherwise borrow from a third party, or which next succeeds a Business
Day on which at the close of business the Fund had outstanding a
reverse repurchase agreement or such a borrowing, it shall prior to
9:00 a.m. (New York City time) advise the Bank, in writing, of each
such borrowing, shall specify the portfolio or series to which the same
relates, and shall not incur any indebtedness not so specified other
than from the Bank.
ARTICLE V
ACCESS: CALL-BACK SECURITY PROCEDURE
1. Services Generally. Each Fund shall be permitted to utilize
ACCESS to obtain direct on-line access to its Accounts. ACCESS shall
permit each Fund at the times mutually agreed upon by the Bank and such
Fund to receive reports, make inquiries, instruct the Bank to disburse
money in accordance with Article III, and perform such other functions
as are more fully set forth in Schedule I hereto.
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2. Permitted Use; Proprietary Information. (a) Each Fund shall
use ACCESS and the services available thereby only for its own internal
and proper business purposes and shall not sell, lease or otherwise
provide, directly or indirectly, ACCESS or any of such services or any
portion thereof to any other person or entity. Each Fund shall obtain
and maintain at its own cost and expense all equipment and services,
including but not limited to communications services, necessary for it
to utilize ACCESS and receive the services thereby, and the Bank shall
not be responsible for the reliability or availability of any such
equipment or any services used in connection with ACCESS.
(b) Each Fund acknowledges that all data bases made available
as part of, or through ACCESS, and any proprietary data, processes,
information and documentation (other than any such which are or become
part of the public domain or are legally required to be made available
to the public) (collectively, the "Information"), are the exclusive and
confidential property of the Bank. Each Fund shall keep the Information
confidential by using the same care and discretion that each Fund uses
with respect to its own confidential property and trade secrets, and
shall neither make nor permit any disclosure without the express prior
written consent of the Bank.
(c) Upon termination of this Agreement for any reason, each
Fund shall return to the Bank any and all copies of the Information
which are in such Fund's possession or under its control, or
distributed to third parties. The provisions of this Article shall not
affect the copyright status of any of the Information which may be
copyrighted and shall apply to all Information whether or not
copyrighted.
3. Modifications. The Bank reserves the right to modify ACCESS
from time to time without notice to any Fund. Each Fund agrees not to
modify or attempt to modify ACCESS without the Bank's prior written
consent. Each Fund acknowledges that ACCESS is the property of the Bank
and, accordingly, each Fund agrees that any modifications to ACCESS,
whether by such Fund or the Bank and whether with or without the Bank's
consent, shall become the property of the Bank.
4. No Representations or Warranties. Neither the Bank nor any
manufacturers or suppliers it utilizes or any Fund utilizes in
obtaining ACCESS makes any warranties or representations, express or
implied, in fact or in law, including but not limited to warranties of
merchantability and fitness for a particular purpose.
5. Security; Reliance; Unauthorized Use. Each Fund will, and
will cause all persons utilizing ACCESS to, treat the user and
authorization codes, passwords and authentication keys applicable to
ACCESS with extreme care. The Bank is hereby irrevocably authorized to
act in accordance with and rely on Written Instructions received by it
through ACCESS. Each Fund acknowledges that it is its sole
responsibility to assure that only authorized persons use ACCESS and
that the Bank shall not be responsible nor liable for any unauthorized
use thereof.
6. Limitations of Liability. (a) Except as otherwise
specifically provided in Section 6(b) below, the Bank shall have no
liability for any losses, damages, injuries, claims, costs or expenses
of a Fund arising out of or in connection with any failure, malfunction
or other problem relating to any Fund's use of ACCESS, except for money
damages suffered as the direct result of the negligence of the Bank in
an amount not exceeding, in the aggregate for all such losses, damages,
injuries, claims, costs and expenses of a Fund arising during any
month, the total charges paid by such Fund to the Bank for ACCESS and
services hereunder which caused such loss, damage, injury, claim, cost
or expense during the 12 months preceding the month in question, or
such lesser number of months as a Fund has used ACCESS if such Fund has
not received 12 months use of ACCESS; provided however, that the Bank
shall have no liability under this Section 6(a) if a Fund fails to
comply with the provisions of Section 6(d).
(b) The Bank's liability for its negligence in executing or
failing to execute a Fund's Written Instructions received through
ACCESS shall be only with respect to a transfer, or failure to
transfer, funds not in accordance with such Written Instructions after
such instructions have been duly acknowledged by the Bank, and shall be
contingent upon the Fund complying with the provisions of Section 6(d)
below, and shall be limited to (i) restoration of the principal amount
mistransferred, if and to the extent that the Bank would be required to
make such restoration under applicable law, and (ii) the lesser of (A)
a Fund's actual pecuniary loss incurred by reason of its loss of use of
the mistransferred funds or the funds which were not transferred, as
the case may be, or (B) compensation for the loss of the use of the
mistransferred funds or the funds which were not transferred, as the
case may be, at a rate per annum equal to the average federal funds
rate as computed from the Federal Reserve Bank of New York's daily
determination of the effective rate for federal funds, for the period
during which a Fund has lost use of such funds. In no event shall the
Bank have any liability for failing to execute Written Instructions for
the transfer of funds which are received by it through ACCESS other
than through the applicable transfer module for the particular
instructions.
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<PAGE>
(c) Without limiting the generality of the foregoing, it is
hereby agreed that in no event shall the Bank or any manufacturer or
supplier of its computer equipment, software or services be responsible
for any special, indirect, incidental or consequential damages which a
Fund may incur arising out of or in connection with ACCESS or the
services provided thereby, even if the Bank or such manufacturer or
supplier has been advised of the possibility of such damages and
regardless of the form of action.
(d) Each Fund shall notify the Bank of any errors, omissions or
interruptions in, or delay or unavailability of, ACCESS as promptly as
practicable, and in any event within one Business Day after the
earliest of (i) discovery thereof, (ii) the date discovery should have
occurred through the exercise of reasonable care, and (iii) in the case
of any error, the date of the earliest notice to such Fund which
reflects such error.
7. Funds Transfer Back-Up Procedure. (a) In the event ACCESS is
inoperable and a Fund is unable to utilize ACCESS for the transmission
of Written Instructions to the Bank to transfer funds, the Fund may
give Oral Instructions regarding funds transfers, it being expressly
understood and agreed that the Bank's acting pursuant to such Oral
Instructions shall be contingent upon the Bank's verification of the
authenticity thereof pursuant to the Call-Back Security Procedure set
forth on Schedule III hereto (the "Procedure"). In this regard, each
Fund shall deliver to the Bank a Funds Transfer Telephone Instruction
Authorization in the form of Schedule III-A hereto, identifying the
individuals authorized to deliver and/or confirm all such Oral
Instructions. Each Fund understands and agrees that the Procedure is
intended to determine whether Oral Instructions received pursuant to
this Section are authorized but is not intended to detect any errors
contained in such instructions. Each Fund hereby accepts the Procedure
and confirms its belief that the Procedure is commercially reasonable.
(b) The Bank shall have no liability whatsoever for any funds
transfer executed in accordance with Oral Instructions delivered and
confirmed pursuant to this Section 7 and Schedule III hereto. The
Bank's liability for its negligence in executing or failing to execute
any such Oral Instructions shall be determined by reference to Section
6(b) of this Article.
(c) The Bank reserves the right to suspend acceptance of Oral
Instructions pursuant to this Section 7 if conditions exist which the
Bank, in its sole discretion, believes have created an unacceptable
security risk.
ARTICLE VI
CONCERNING THE BANK
1. Standard of Care; Presentment of Claims. Except as otherwise
provided herein, the Bank shall not be liable for any costs, expenses,
damages, liabilities or claims (including attorney's fees) incurred by
a Fund, except those costs, expenses, damages, liabilities or claims
arising out of the Bank's own negligence, bad faith or willful
misconduct. Notwithstanding the foregoing or anything contained in the
Schedules hereto, the Bank shall not be liable for any loss or damage,
including attorney's fees, resulting from the Bank paying any
redemption draft containing a forged drawer signature, unless such loss
or damage arises out of the Bank's gross negligence, bad faith or
willful misconduct. All claims against the Bank hereunder shall be made
by the respective Fund as promptly as practicable, and in any event
within 6 months from the date of the action or inaction on which such
claim is based, and shall include documentation evidencing such claim
and loss.
2. No Liability. The Bank shall have no obligation hereunder
for costs, expenses, damages, liabilities or claims, including
attorney's fees, which are sustained or incurred by reason of any
action or inaction by the Federal Reserve wire transfer system or the
New York Automated Clearing House. Notwithstanding any other provision
elsewhere contained in this Agreement, in no event shall the Bank be
liable to any Fund or any third party for special, indirect or
consequential damages, or lost profits or loss of business, arising
under or in connection with this Agreement, even if previously informed
of the possibility of such damages and regardless of the form of
action.
3. Indemnification. Each Fund shall indemnify and exonerate,
save and hold harmless the Bank from and against any and all costs,
expenses, damages, liabilities or claims, including reasonable
attorney's fees and expenses, which the Bank may sustain or incur or
which may be asserted against the Bank by reason of or as a result of
any action taken or omitted by the Bank in connection with its
performance under this Agreement, except those costs, expenses,
damages, liabilities or claims arising out of the Bank's own
negligence, bad faith or willful misconduct. This indemnity shall be a
continuing obligation of each Fund notwithstanding the termination of
this Agreement, or any Account, with respect to a Fund.
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<PAGE>
4. No Obligation to Inquire. Without limiting the generality of
the foregoing, the Bank shall in no event be under any obligation to
inquire into, and shall not be liable for:
(a) the due authority of any Authorized Person acting on behalf
of a Fund in connection with this Agreement;
(b) the genuineness of any drawer signature on any draft
deposited in any Account, or whether such signature is a forgery,
other than the signature of the drawer of any draft drawn on the Bank;
(c) the existence or genuineness of any endorsement or any
marking purporting to be an endorsement on any draft deposited in any
Account, or whether such endorsement or marking is a forgery, it being
expressly understood that all risks associated with the acceptance by
the Bank of any draft payable to a payee other than a Fund for deposit
in any Account pursuant to Oral or Written Instructions by the Fund
shall be borne by such Fund.
(d) any discrepancy between the pre-printed investment stub
(other than a substitute stub created by the Bank) and the payee either
named on a draft or written on the face thereof, provided the Bank has
acted in accordance with the investment stub;
(e) any discrepancy between the written amount for which any
draft is drawn and the Magnetic Incription Character Recognition
("MICR") code enscribed thereon by any bank other than the Bank on any
draft presented, provided the Bank has acted in accordance with the
MICR code;
(f) any disbursement directed by any Fund, regardless of the
purpose therefor;
(g) any determination of the Share balance of any Shareholder
whose name is signed on any redemption draft;
(h) any determination of length of time any Shares have been
owned by any Shareholder or the method of payment utilized to purchase
such Shares by such Shareholder;
(i) any claims, liens, attachments, stays or stop orders with
respect to any Shares, proceeds, or money, other than a stop payment
placed by a Fund on a draft drawn by such Fund on its Account;
(j) the propriety and/or legality of any transaction in any
Account;
(k) the lack of authority of any person signing as a drawer of
a draft, provided such person and his specimen signature is specified
in the certificate of authorized signatures last received by the Bank;
or
(l) whether any redemption draft equals or exceeds any minimum
amount.
5. Reliance Upon Instructions. The Bank shall be entitled to
rely upon any Written or Oral Instructions received by the Bank. Each
Fund agrees to forward to the Bank Written Instructions confirming Oral
Instructions in such manner so that such Written Instructions are
received by the Bank by the close of business of the same day that such
Oral Instructions are given to the Bank. Each Fund agrees that the fact
that such confirming Written Instructions are not timely received or
that contrary Written Instructions are received by the Bank shall in no
way affect the validity or enforceability of the transactions
previously authorized.
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<PAGE>
6. Force Majeure. The Bank shall not be responsible or liable
for any failure or delay in the performance of its obligations under
this Agreement arising out of or caused, directly or indirectly, by
circumstances beyond its control, including acts of God; earthquakes;
fires; floods; wars; civil or military disturbances; sabotage;
epidemics; riots; interruptions, loss or malfunctions of utilities,
computers (hardware or software), transportation, or communications
service; mechanical breakdowns; interruption or loss of ACCESS (except
as otherwise provided in Section 7 of Article V); accidents; acts of
civil or military authority; governmental actions; labor disputes; or
inability to obtain labor, material, equipment or transportation.
7. No Implied Duties; Performance According To Applicable Law.
The Bank shall have no duties or responsibilities except such duties
and responsibilities as are specifically set forth in this Agreement
and Schedules I and II hereto, and no covenant or obligation shall be
implied in this Agreement against the Bank. The Bank's duties and
responsibilities hereunder shall be performed in accordance with
applicable laws, regulations and rules, including but not limited to
Federal Reserve Regulation CC and the Operating Rules of the New York
Automated Clearing House, and the Bank shall have no obligation to take
actions which in the reasonable opinion of the Bank are either
inconsistent with, or prejudice or impair the Bank's rights under, any
such laws, regulations and rules.
8. Requests for Instructions. At any time the Bank may apply to
an officer of a Fund for Oral or Written Instructions with respect to
any matter arising in connection with the Bank's duties and obligations
with respect to an Account of such Fund, and the Bank shall not be
liable for any action taken or permitted by it in good faith in
accordance with such Oral or Written Instructions. Such application for
Oral or Written Instructions may, at the option of the Bank, set forth
in writing any action proposed to be taken or omitted by the Bank with
respect to its duties or obligations under this Agreement and the date
on and/or after which such action shall be taken, and the Bank shall
not be liable for any action taken or omitted in accordance with a
proposal included in any such application on or after the date
specified therein (which shall be at least 5 days after the date of
such Fund's receipt of such application) unless, prior to taking or
omitting any such action, the Bank has received Oral or Written
Instructions in response to such application specifying the action to
be taken or omitted. The Bank may apply for and obtain the advice and
opinion of counsel to each Fund or of its own counsel, at the expense
of a Fund, and shall be fully protected with respect to anything done
or omitted by it in good faith in conformity with such advice or
opinion.
9. Delegation of Duties. The Bank may delegate any of its
duties and obligations hereunder to any delegee and may employ agents
or attorneys-in-fact; provided however, that no such delegation or
employment by the Bank shall discharge the Bank from its obligations
hereunder. The Bank shall have no liability or responsibility
whatsoever if any delegee, agent or attorney-in-fact shall have been
selected or approved by a Fund. Notwithstanding the foregoing, nothing
contained in this paragraph shall obligate the Bank to effect any
delegation or to employ any agent or attorney-in-fact.
10. Fees; Invoices. (a) For its services hereunder, each Fund
agrees to pay the Bank (i) its out-of-pocket expenses, (ii) the monthly
fees and compensation set forth on Schedules I and II attached hereto,
and (iii) any negative Calendar Month Earnings Credits, and such other
amounts as may be mutually agreed upon from time to time. The Bank
shall provide each Fund with a monthly activity analysis detailing
service volumes, and including average Account Available Balances and
average ledger balances, and all fees owing for such month.
(b) The Bank shall submit periodic invoices specifying the
amount of all out-of-pocket expenses, fees, compensation and negative
Calendar Month Earnings Credits then due hereunder. The Bank may, and
is hereby authorized by each Fund, to charge such amounts to the
appropriate Fund's Account(s), but only if such amounts remain unpaid
for fifteen (15) days after the end of the period to which such amounts
relate.
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<PAGE>
11. Application of Calendar Month Earnings Credits. (a) Any
positive Calendar Month Earnings Credit for a calendar month shall be
applied only as follows and only in the specified order:
(i) First, applied against such compensation, fees, but not
out-of-pocket expenses, payable by such Fund to the
Bank under this Agreement for such month; and
(ii) Second, applied against such compensation, fees, and
negative Calendar Month Earnings Credits, but not
out-of-pocket expenses, payable by such Fund to the
Bank under this Agreement for any subsequent month in
the same calendar year.
(b) Except as provided above, in no event may any Calendar
Month Earnings Credit be applied to any month other than the month in
which it was earned. Calendar Month Earnings Credits may not be
transferred to, or utilized by, any other Fund, person or entity. The
portion, if any, of any Calendar Month Earnings Credit not used by a
Fund may be carried, but only forward; provided, however, that in no
event may any Calendar Month Earnings Credit, including those earned
during the fourth calendar quarter, be carried beyond the end of the
calendar year in which earned.
ARTICLE VII
TERMINATION
1. Prior Notice. This Agreement may be terminated by either the
Bank giving to any Fund, or any Fund giving to the Bank, a notice in
writing specifying the date of such termination, which date shall be
not less than 90 days after the date of the giving of such notice.
Notwithstanding the foregoing, the Bank reserves the right to terminate
this Agreement at any time upon 30 days prior written notice if any of
the conditions precedent set forth in Article II, paragraph 3 are
unfulfilled.
2. Obligations Upon Termination. Upon any termination, the
Bank's sole obligations, which shall arise only after, and not before,
each Fund which is the subject of such termination has paid to the Bank
all out-of-pocket expenses, fees, compensation, negative Calendar Month
Earnings Credits and other amounts owed by such Fund to the Bank, shall
be (i) to deliver to such Fund such records, if any, as may be owned by
such Fund, in the form and manner kept by the Bank on such date of
termination, and (ii) to pay any funds held hereunder for such Fund to
such Fund.
ARTICLE VIII
MISCELLANEOUS
1. Certificates of Authorized Persons. Each Fund agrees to
furnish to the Bank a new certificate of Authorized Persons in the
event that any present Authorized Person of such Fund ceases to be an
Authorized Person or in the event that any other Authorized Persons are
appointed and authorized. Until such new certificate is received, the
Bank shall be fully protected in acting under the provisions of this
Agreement upon Oral or Written Instructions or signatures of the
present Authorized Persons as set forth in the last delivered
certificate.
2. Notices. (a) Any notice or other instrument in writing,
authorized or required by this Agreement to be given to the Bank, shall
be sufficiently given if addressed to the Bank and received by it at
its offices at 90 Washington Street, 22nd Floor, New York, New York
10286, Attention: Division Manager - Mutual Funds, or at such other
place as the Bank may from time to time designate in writing.
(b) Any notice or other instrument in writing, authorized or
required by this Agreement to be given to a Fund shall be sufficiently
given if addressed to a Fund and received by it at 45 Broadway, New
York, New York 10006, or at such other place as such Fund may from time
to time designate in writing.
<PAGE>
<PAGE>
3. Cumulative Rights and No Waiver. Each and every right
granted to the Bank hereunder or under any other document delivered
hereunder or in connection herewith, or allowed it by law or equity,
shall be cumulative and may be exercised from time to time. No failure
on the part of the Bank to exercise, and no delay in exercising, any
right will operate as a waiver thereof, nor will any single or partial
exercise by the Bank of any right preclude any other or future exercise
thereof or the exercise of any other right.
4. Severability. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the
remaining provisions or obligations shall not in any way be affected or
impaired thereby, and if any provision is inapplicable to any person or
circumstances, it shall nevertheless remain applicable to all other
persons and circumstances.
5. Amendments. This Agreement may not be amended or modified in
any manner except by a written agreement executed by the Bank and each
Fund to be bound thereby, and, except in the case of an amendment to
Schedules I and II hereto, authorized or approved by a resolution of
each Fund's board of directors or board of trustees, as appropriate.
6. Headings. The headings in this Agreement are inserted for
convenience and identification only and are in no way intended to
describe, interpret, define or limit the scope, extent or intent of
this Agreement or any provisions hereof.
7. Applicable Law; Consent to Jurisdiction Jury Trial Waiver.
This Agreement shall be construed in accordance with the laws of the
State of New York without giving effect to conflict of laws principles
thereof. Each party hereby consents to the jurisdiction of a state or
federal court situated in New York City, New York in connection with
any dispute arising hereunder and hereby waives its right to trial by
jury.
8. No Third Party Beneficiaries. The provisions of this
Agreement are intended to benefit only the Bank and each Fund and their
respective permitted successors and assigns, and no right shall be
granted to any other person by virtue of this Agreement.
9. Successors and Assigns. 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 assignable by any Fund without the written consent of the Bank
and authorized or approved by a resolution of such Fund's board of
directors, or board of trustees, as appropriate.
10. 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.
11. Several Obligations. The parties acknowledge that the
obligations of the Funds are several and not joint, that no Fund shall
be liable for any amount owing by another Fund and that the Funds have
executed one instrument for convenience only.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective corporate officers,
thereunto duly authorized, as of the day and year first above written.
By: John P. Arnhold, President
-----------------------------------
on behalf of each Fund identified
on Schedule A attached hereto
THE BANK OF NEW YORK
By: Joseph Melillo
-----------------------------------
Title: Vice President
<PAGE>
<PAGE>
SCHEDULE A
Name of Fund
First Eagle International Fund, Inc.
<PAGE>
<PAGE>
EXHIBIT A
I, Martha B. Pierce of First Eagle International Fund, Inc.
(the "Fund"), a Maryland corporation do hereby certify that:
The following individuals have been duly authorized by the
Board of Directors of the Fund in conformity with the Fund's Articles
of Incorporation and By-Laws to give Oral Instructions and Written
Instructions on behalf of the Fund, for purposes of the Fund's Cash
Management and Related Services Agreement, and the signatures set forth
opposite their respective names are their true and correct signatures.
Name Signature
MARY GAMBLE MARY GAMBLE
----------------- -------------
LINDA ZERBE LINDA ZERBE
----------------- -------------
LISA BURKE LISA BURKE
----------------- -------------
SUE SHANNON SUE SHANNON
----------------- -------------
JUNE POPIO JUNE POPIO
----------------- -------------
ALEX INSLEY ALEX INSLEY
----------------- -------------
Martha B. Pierce
-----------------------------
[Title of Officer]
Martha B. Pierce, Secretary
<PAGE>
<PAGE>
TRANSFER AGENCY AGREEMENT
AGREEMENT made this 5th day of February, 1996, between
FIRST EAGLE INTERNATIONAL FUND OF AMERICA, INC. (the "Company"),
a Maryland corporation having its principal place of business
at 45 Broadway, New York, New York 10006, and BISYS FUND
SERVICES, INC. ("BISYS"), a Delaware corporation having its
principal place of business at 3435 Stelzer Road, Columbus,
Ohio 43219.
WHEREAS, the Company desires that BISYS perform certain
services for the Company; and
WHEREAS, BISYS is willing to perform such services on
the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises
and covenants herein set forth, the parties agree as follows:
1. Services.
BISYS shall perform for the Company the transfer
agent services set forth in Schedule A hereto.
BISYS also agrees to perform for the Company
such special services incidental to the performance of the
services enumerated herein as agreed to by the parties from time
to time. BISYS shall perform such additional services as are
provided on an amendment to Schedule A hereof, in consideration
of such fees as the parties hereto may agree.
BISYS may, in its discretion, appoint in writing
other parties qualified to perform transfer agency services
reasonably acceptable to the Company (individually, a
"Sub-transfer Agent") to carry out some or all of its
responsibilities under this Agreement; provided, however, that
the Sub-transfer Agent shall be the agent of BISYS and not the
agent of the Company, and that BISYS shall be fully responsible
for the acts of such Sub-transfer Agent and shall not be
relieved of any of its responsibilities hereunder by the
appointment of such Sub-transfer Agent.
2. Fees.
The Company shall pay BISYS for the services to
be provided by BISYS under this Agreement in accordance with,
and in the manner set forth in, Schedule B hereto. BISYS may
increase the fees it charges pursuant to the fee schedule;
provided, however, that BISYS may not increase such fees until
the expiration of the Initial Term of this Agreement (as defined
below), unless the Company otherwise agrees to such change in
writing. Fees for any additional services to be provided by
BISYS pursuant to an amendment to Schedule A hereto shall be
subject to mutual agreement at the time such amendment to
Schedule A is proposed.
<PAGE>
<PAGE>
3. Reimbursement of Expenses.
In addition to paying BISYS the fees described
in Section 2 hereof, the Company agrees to reimburse BISYS for
BISYS' out-of-pocket expenses in providing services hereunder,
including without limitation, the following:
(a) All freight and other delivery and
bonding charges incurred by BISYS
in delivering materials to and from
the Company and in delivering all
materials to shareholders;
(b) All direct telephone, telephone
transmission and telecopy or other
electronic transmission expenses
incurred by BISYS in communication
with the Company, the Company's
investment adviser or custodian,
dealers, shareholders or others as
required for BISYS to perform the
services to be provided hereunder;
(c) Costs of postage, couriers, stock
computer paper, statements, labels,
envelopes, checks, reports, letters,
tax forms, proxies, notices or other
form of printed material which shall
be required by BISYS for the
performance of the services to be
provided hereunder;
(d) The cost of microfilm or microfiche of
records or other materials; and
(e) Any expenses BISYS shall incur at the
written direction of an officer of
the Company thereunto duly authorized.
4. Effective Date.
This Agreement shall become effective as of the
date first written above (the "Effective Date").
5. Term.
This Agreement shall continue in effect, unless
earlier terminated by either party hereto as provided
hereunder, until February 4, 1997. Thereafter, it shall be
renewed automatically for successive one-year terms unless
written notice not to renew is given by the non-renewing party
to the other party at least 60 days prior to the expiration of
the then-current term; provided, however, that after such
termination, for so long as BISYS, with the written consent of
the Company, in fact continues to perform any one or more of
the services contemplated by this Agreement or any Schedule or
exhibit hereto, the provisions of this Agreement, including
without limitation the provisions dealing with indemnification,
shall continue in full force and effect. Fees and out-of-pocket
expenses incurred by BISYS but unpaid by the Company upon such
termination shall be immediately due and payable upon and
notwithstanding such termination. BISYS shall be entitled
2
<PAGE>
<PAGE>
to collect from the Company, in addition to the fees and
disbursements provided by Sections 2 and 3 hereof, the amount
of all of BISYS' cash disbursements and a reasonable fee
(which fee shall be not less than one hundred and two percent
(102%) of the sum of the actual costs incurred by BISYS in
performing such service) for services in connection with
BISYS' activities in effecting such termination, including
without limitation, the delivery to the Company and/or its
distributor or investment adviser and/or other parties, of the
Company's property, records, instruments and documents, or any
copies thereof. Subsequent to such termination, BISYS, for a
reasonable fee, will provide the Company with reasonable
access to any Company documents or records remaining in its
possession.
6. Uncontrollable Events.
BISYS assumes no responsibility hereunder, and
shall not be liable for any damage, loss of data, delay or any
other loss whatsoever caused by events beyond its reasonable
control.
7. Legal Advice.
BISYS shall notify the Company at any time
BISYS believes that it is in need of the advice of counsel
(other than counsel in the regular employ of BISYS or any
affiliated companies) with regard to BISYS' responsibilities
and duties pursuant to this Agreement; and after so notifying
the Company, BISYS, at its discretion, shall be entitled to
seek, receive and act upon advice of legal counsel of its
choosing, such advice to be at the expense of the Company
unless relating to a matter involving BISYS' willful
misfeasance, bad faith, gross negligence or reckless disregard
with respect to BISYS' responsibilities and duties hereunder
and BISYS shall in no event be liable to the Company or any
shareholder or beneficial owner of the Company for any action
reasonably taken pursuant to such advice.
8. Instructions.
Whenever BISYS is requested or authorized to
take action hereunder pursuant to instructions from a
shareholder, or a properly authorized agent of a shareholder
("shareholder's agent"), concerning an account, BISYS shall be
entitled to rely upon any certificate, letter or other
instrument or communication, believed by BISYS to be genuine
and to have been properly made, signed or authorized by an
officer or other authorized agent of the Company or by the
shareholder or shareholder's agent, as the case may be, and
shall be entitled to receive as conclusive proof of any fact
or matter required to be ascertained by it hereunder a
certificate signed by an officer of the Company or any other
person authorized by the Company's Board of Directors or by
the shareholder or shareholder's agent, as the case may be.
As to the services to be provided hereunder,
BISYS may rely conclusively upon the terms of the Prospectuses
and Statement of Additional Information of the Company to the
extent that such services are described therein unless BISYS
receives written instructions to the contrary in a timely
manner from the Company.
3
<PAGE>
<PAGE>
9. Standard of Care; Reliance on Records and
Instructions; Indemnification.
BISYS shall use its best efforts to ensure the
accuracy of all services performed under this Agreement, but
shall not be liable to the Company for any action taken or
omitted by BISYS in the absence of bad faith, willful
misfeasance, gross negligence or from reckless disregard by it
of its obligations and duties. The Company agrees to indemnify
and hold harmless BISYS, its employees, agents, directors,
officers and nominees from and against any and all claims,
demands, actions and suits, whether groundless or otherwise,
and from and against any and all judgments, liabilities,
losses, damages, costs, charges, counsel fees and other
expenses of every nature and character arising out of or in
any way relating to BISYS' actions taken or nonactions with
respect to the performance of services under this Agreement or
based, if applicable, upon reasonable reliance on information,
records, instructions or requests given or made to BISYS by
the Company, the investment adviser and on any records
provided by any fund accountant or custodian thereof;
provided that this indemnification shall not apply to actions
or omissions of BISYS in cases of its own bad faith, willful
misfeasance, gross negligence or from reckless disregard by it
of its obligations and duties; and further provided that prior
to confessing any claim against it which may be the subject of
this indemnification, BISYS shall give the Company written
notice of and reasonable opportunity to defend against said
claim in its own name or in the name of BISYS.
10. Record Retention and Confidentiality.
BISYS shall keep and maintain on behalf of the
Company all books and records which the Company or BISYS is,
or may be, required to keep and maintain pursuant to any
applicable statutes, rules and regulations, including without
limitation Rules 31a-1 and 31a-2 under the Investment
Company Act of 1940, as amended (the "1940 Act"), relating
to the maintenance of books and records in connection with the
services to be provided hereunder. BISYS further agrees that
all such books and records shall be the property of the
Company and to make such books and records available for
inspection by the Company or by the Securities and Exchange
Commission (the "Commission") at reasonable times and
otherwise to keep confidential all books and records and other
information relative to the Company and its shareholders,
except when requested to divulge such information by
duly-constituted authorities or court process, or requested by
a shareholder or shareholder's agent with respect to
information concerning an account as to which such shareholder
has either a legal or beneficial interest or when requested by
the Company, the shareholder, or shareholder's agent, or the
dealer of record as to such account.
11. Reports.
BISYS will furnish to the Company and to its
properly-authorized auditors, investment advisers, examiners,
distributors, dealers, underwriters, salesmen, insurance
companies and others designated by the Company in writing,
such reports at such times as are prescribed in Schedule C
attached hereto, or as subsequently agreed upon by the parties
pursuant to an amendment to Schedule C. The Company agrees to
examine each such report or copy promptly and will report or
cause to be reported any errors or discrepancies therein not
later than three business days from the receipt thereof. In
4
<PAGE>
<PAGE>
the event that errors or discrepancies, except such errors and
discrepancies as may not reasonably be expected to be discovered
by the recipient within three days after conducting a diligent
examination, are not so reported within the aforesaid period of
time, a report will for all purposes be accepted by and be
binding upon the Company and any other recipient, and BISYS
shall have no liability for errors or discrepancies therein and
shall have no further responsibility with respect to such report
except to perform reasonable corrections of such errors and
discrepancies within a reasonable time after requested to do so
by the Company.
12. Rights of Ownership.
All computer programs and procedures developed
to perform services required to be provided by BISYS under this
Agreement are the property of BISYS. All records and other data
except such computer programs and procedures are the exclusive
property of the Company and all such other records and data will
be furnished to the Company in appropriate form as soon as
practicable after termination of this Agreement for any reason.
13. Return of Records.
BISYS may at its option at any time, and shall
promptly upon the Company's demand, turn over to the Company and
cease to retain BISYS' files, records and documents created and
maintained by BISYS pursuant to this Agreement which are no
longer needed by BISYS in the performance of its services or for
its legal protection. If not so turned over to the Company, such
documents and records will be retained by BISYS for six years
from the year of creation. At the end of such six-year period,
such records and documents will be turned over to the Company
unless the Company authorizes in writing the destruction of such
records and documents.
14. Bank Accounts.
The Company shall establish and maintain such
bank accounts with such bank or banks as are selected by the
Company, as are necessary in order that BISYS may perform the
services required to be performed hereunder. To the extent that
the performance of such services shall require BISYS directly to
disburse amounts for payment of dividends, redemption proceeds
or other purposes, the Company shall provide such bank or banks
with all instructions and authorizations necessary for BISYS to
effect such disbursements.
15. Representations of the Company.
The Company certifies to BISYS that: (a) as of
the close of business on the Effective Date, the Company has
authorized unlimited shares, and (b) by virtue of its
Certificate of Incorporation, shares which are redeemed by the
Company may be sold by the Company from its treasury, and (c)
this Agreement has been duly authorized by the Company and, when
executed and delivered by the Company, will constitute a legal,
valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, subject to bankruptcy,
insolvency, reorganization, moratoritun and other laws of
5
<PAGE>
<PAGE>
general application affecting the rights and remedies of
creditors and secured parties.
16. Representations of BISYS.
BISYS represents and warrants that: (a) BISYS
has been in, and shall continue to be in, substantial
compliance with all provisions of law, including Section 17A(c)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), required in connection with the performance of
its duties under this Agreement; and (b) the various procedures
and systems which BISYS has implemented with regard to
safekeeping from loss or damage attributable to fire, theft or
any other cause of the blank checks, records, and other data of
the Company and BISYS' records, data, equipment, facilities and
other property used in the performance of its obligations
hereunder are adequate and that it will make such changes
therein from time to time as are required for the secure
performance of its obligations hereunder.
17. Insurance.
BISYS shall notify the Company should its
insurance coverage with respect to professional liability or
errors and omissions coverage be canceled or reduced. Such
notification shall include the date of change and the reasons
therefor. BISYS shall notify the Company of any material claims
against it with respect to services performed under this
Agreement, whether or not they may be covered by insurance, and
shall notify the Company from time to time as may be
appropriate of the total outstanding claims made by BISYS under
its insurance coverage.
18. Information to be furnished by the Company.
The Company has furnished to BISYS the
following:
(a) Copies of the Certificate of
Incorporation of the Company and of
any amendments thereto, certified by
the proper official of the state in
which such Certificate has been filed.
(b) Copies of the following documents:
1. The Company's By-Laws and any
amendments thereto;
2. Certified copies of resolutions of
the Board of Directors covering the
following matters:
A. Approval of this Agreement and
authorization of a specified
officer of the Company to
execute and deliver this
Agreement and authorization for
specified officers of the
Company to instruct BISYS
hereunder; and
6
<PAGE>
<PAGE>
B. Authorization of BISYS to
act as Transfer Agent for
the Company.
(c) A list of all officers of the Company,
together with specimen signatures of
those officers, who are authorized to
instruct BISYS in all matters.
(d) Two copies of the following (if such
documents are employed by the
Company):
1. Prospectuses and Statement of
Additional Information;
2. Distribution Agreement; and
3. All other forms commonly used
by the Company or its Distributor
with regard to their relationships
and transactions with shareholders.
(e) A certificate as to shares of
beneficial interest of the Company
authorized, issued, and outstanding as
of the Effective Date of BISYS'
appointment as Transfer Agent (or as of
the date on which BISYS' services are
commenced, whichever is the later date)
and as to receipt of full consideration
by the Company for all shares
outstanding, such statement to be
certified by the Treasurer of the
Company.
19. Information Furnished by BISYS.
BISYS has furnished to the Company the following:
(a) BISYS' Articles of Incorporation.
(b) BISYS' Bylaws and any amendments thereto.
(c) Certified copies of actions of BISYS covering
the following matters:
1. Approval of this Agreement, and authoriza-
tion of a specified officer of BISYS to
execute and deliver this Agreement;
2. Authorization of BISYS to act as Transfer
Agent for the Company.
(d) A copy of the most recent independent
accountants' report relating to
internal accounting control systems as
filed with the Commission pursuant to
Rule 17Ad-13 under the Exchange Act.
7
<PAGE>
<PAGE>
20. Amendments to Documents.
The Company shall furnish BISYS written copies
of any amendments to, or changes in, any of the items referred
to in Section 18 hereof forthwith upon such amendments or
changes becoming effective. In addition, the Company agrees
that no amendments will be made to the Prospectuses or
Statement of Additional Information of the Company which might
have the effect of changing the procedures employed by BISYS in
providing the services agreed to hereunder or which amendment
might affect the duties of BISYS hereunder unless the Company
first obtains BISYS' approval of such amendments or changes.
21. Reliance on Amendments.
BISYS may rely on any amendments to or changes
in any of the documents and other items to be provided by the
Company pursuant to Sections 18 and 20 of this Agreement and
the Company hereby indemnifies and holds harmless BISYS from
and against any and all claims, demands, actions, suits,
judgments, liabilities, losses, damages, costs, charges,
counsel fees and other expenses of every nature and character
which may result from actions or omissions on the part of BISYS
in reasonable reliance upon such amendments and/or changes.
Although BISYS is authorized to rely on the above-mentioned
amendments to and changes in the documents and other items to
be provided pursuant to Sections 18 and 20 hereof, BISYS shall
be under no duty to comply with or take any action as a result
of any of such amendments or changes unless the Company first
obtains BISYS' written consent to and approval of such
amendments or changes.
22. Compliance with Law.
Except for the obligations of BISYS set forth
in Section 10 hereof, the Company assumes full responsibility
for the preparation, contents, and distribution of each
prospectus of the Company as to compliance with all applicable
requirements of the Securities Act of 1933, as amended (the
"1933 Act"), the 1940 Act, and any other laws, rules and
regulations of governmental authorities having jurisdiction.
BISYS shall have no obligation to take cognizance of any laws
relating to the sale of the Company's shares. The Company
represents and warrants that no shares of the Company will be
offered to the public until the Company's registration
statement under the 1933 Act and the 1940 Act has been declared
or becomes effective.
23. Notices.
Any notice provided hereunder shall be
sufficiently given when sent by registered or certified mail to
the party required to be served with such notice at the
following address: 3435 Stelzer Road, Columbus, Ohio 43219, or
at such other address as such party may from time to time
specify in writing to the other party pursuant to this Section.
8
<PAGE>
<PAGE>
24. Headings.
Paragraph headings in this Agreement are
included for convenience only and are not to be used to
construe or interpret this Agreement.
25. Assigmnent.
This Agreement and the rights and duties
hereunder shall not be assignable by either of the parties
hereto except by the specific written consent of the other
party. This Section 25 shall not limit or in any way affect
BISYS' right to appoint a Sub-transfer Agent pursuant to
Section 1 hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed all as of the day and year first
above written.
FIRST EAGLE INTERNATIONAL FUND, INC.
By: /s/ John P. Arnhold
---------------------------------
John P. Arnhold, President
BISYS FUND SERVICES, INC.
By: /s/ Steve Mintos
---------------------------------
Steve Mintos, Executive
Vice President
<PAGE>
<PAGE>
SCHEDULE A
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
FIRST EAGLE INTERNATIONAL FUND, INC.
AND
BISYS FUND SERVICES, INC.
TRANSFER AGENCY SERVICES
1. Shareholder Transactions
a. Process shareholder purchase and redemption orders.
b. Set up account information, including address, dividend
option, taxpayer identification numbers and wire instructions.
c. Issue confirmations in compliance with Rule 10 under the
Securities Exchange Act of 1934, as amended.
d. Issue periodic statements for shareholders.
e. Process transfers and exchanges.
f. Process dividend payments, including the purchase of new
shares, through dividend reimbursement.
2. Shareholder Information Services
a. Make information available to shareholder
servicing unit and other remote access units
regarding trade date, share price, current
holdings, yields, and dividend information.
b. Produce detailed history of transactions through duplicate or
special order statements upon request.
c. Provide mailing labels for distribution of financial reports,
prospectuses, proxy statements or marketing material to
current shareholders.
A-1
<PAGE>
<PAGE>
3. Compliance Reporting.
a. Provide reports to the Securities and Exchange Commission,
the National Association of Securities Dealers and the States
in which the Company is registered.
b. Prepare and distribute appropriate Internal Revenue Service
forms for the Company and shareholder income and capital
gains.
c. Issue tax withholding reports to the Internal Revenue
Service.
4. Dealer/Load Processing (if applicable)
a. Provide reports for tracking rights of accumulation and
purchases made under a Letter of Intent.
b. Account for separation of shareholder investments from
transaction sale charges for purchase of Company shares.
c. Calculate fees due under 12b-1 plans for distribution and
marketing expenses.
d. Track sales and commission statistics by dealer and provide
for payment of commissions on direct shareholder purchases
in the Company.
5. Shareholder Account Maintenance
a. Maintain all shareholder records for each account in the
Company.
b. Issue customer statements on scheduled cycle, providing
duplicate second and third party copies if required.
c. Record shareholder account information changes.
d. Maintain account documentation files for each shareholder.
A-2
<PAGE>
<PAGE>
SCHEDULE B
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
FIRST EAGLE INTERNATIONAL FUND, INC.
AND
BISYS FUND SERVICES, INC.
TRANSFER AGENT FEES
Annual Fee:
$20,000.00
Annual Per Account Fee:
Open Accounts $19.00
Closed Accounts $ 5.00
Multiple Classes of Shares:
Classes of shares which have different net asset values or pay
different daily dividends will be treated as separate classes,
and the fee schedule above, including the appropriate minimums,
will be charged for each separate class.
Additional Services:
Additional services such as IRA processing, development of
interface capabilities, servicing of 403(b) and 408(c)
accounts, management of cash sweeps between DDAs and mutual
fund accounts and coordination of the printing and distribution
of prospectuses, annual reports and semi-annual reports are
subject to additional fees which will be quoted upon request.
Programming costs or database management fees for special
reports or specialized processing will be quoted upon request.
Out-of-pocket Expenses:
BISYS shall be entitled to be reimbursed for all reasonable
out-of-pocket expenses including, but not limited to, the
expenses set forth in Section 3 of the Transfer Agency
Agreement to which this Schedule B is attached.
B-1
<PAGE>
<PAGE>
SCHEDULE C
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
FIRST EAGLE INTERNATIONAL FUND, INC.
AND
BISYS FUND SERVICES, INC.
REPORTS
1 . Daily Shareholder Activity Journal
2. Daily Fund Activity Summary Report
a. Beginning Balance
b. Dealer Transactions
c. Shareholder Transactions
d. Reinvested Dividends
e. Exchanges
f Adjustments
g. Ending Balance
3. Daily Wire and Check Registers
4. Monthly Dealer Processing Reports
5. Monthly Dividend Reports
6. Sales Data Reports for Blue Sky Registration
7. Annual report by independent public accountants concerning
BISYS' shareholder system and internal accounting control
systems to be filed with the Securities and Exchange
Commission pursuant to Rule 17Ad-13 of the Securities
Exchange Act of 1934, as amended.
C-1
<PAGE>
<PAGE>
8. Monthly Discretionary Account Summary
* This report will list all accounts identified as
discretionary and will show their balances.
9. Monthly Statistical Report
* This report will include statistical data such
as share range analysis, account type analysis,
social code analysis, resident code analysis and
such other items that may be agreed upon by the
parties.
10. Monthly Customer Analysis Report
* This report will include various types of account
information including account size, tax-related
information, retirement plan/fees analysis and
such other items that may be agreed upon by the
parties.
C-2
<PAGE>
<PAGE>
FIRST EAGLE INTERNATIONAL FUND, INC.
SERVICES AGREEMENT
This Agreement is made as of January 1, 1996, between Arnhold and S.
Bleichroeder, Inc. ("A&SB"), a New York corporation, each registered investment
company ("Fund Company") that has executed Schedule I, on its own behalf and on
behalf of each of the series or classes of shares, if any, listed on Schedule I,
as amended from time to time (such series or classes being referred to as the
"Fund(s)") has executed this Agreement. In the event that there are no series or
classes of shares listed on Schedule I, the term "Fund(s)" shall mean "Fund
Company."
WHEREAS the Fund Company wishes to have A&SB perform certain shareholder
communication and other services for each Fund; and
WHEREAS A&SB is willing to perform such services on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
set forth below, the parties agree as follows:
1. SERVICES
A. During the term of this Agreement, A&SB shall perform the services set
forth on Exhibit A hereto, as such exhibit may be amended from time to time by
the mutual consent of the parties (the "Services").
B. The parties acknowledge and agree that the Services under this Agreement
are not the services of an underwriter or a principal underwriter of any Fund
within the meaning of the Securities Act of 1933, as amended, or the Investment
Company Act of 1940, as amended.
2. FEES
For the Services, A&SB shall receive a fee (the "Fee") which shall be
calculated and paid in accordance with Exhibit B hereto. Should Exhibit A be
amended to revise the Services, the parties shall also amend Exhibit B, if
necessary, in order to reflect any changes in the Fee.
3. INDEMNIFICATION
A. A&SB shall indemnify and hold harmless the Fund Company and their
directors, officers, employees and agents (the "Indemnified Parties") from and
against any and all losses, claims, liabilities and expenses (including
reasonable attorney's fees) ("Losses") incurred by any of them arising out of
A&SB's willful misfeasance, bad faith or gross negligence in the performance of,
<PAGE>
<PAGE>
or failure to perform, its obligations under this Agreement, except to the
extent such Losses result from the willful misconduct, negligence or breach of
this Agreement by an Indemnified Party.
B. No party shall be liable for any special, consequential or incidental
damages.
4. INFORMATION TO BE SUPPLIED
The Funds shall provide to A&SB:
(i) Certified resolutions of the Board of Directors of each Fund
authorizing the Fund to enter into this Agreement; and
(ii) A copy of the then-current prospectus and statement of additional
information of each Fund and any amendments to or changes in the Fund's
prospectus or statement of additional information as soon as practicable after
such amendments or changes become available.
5. NONEXCLUSIVITY
Each Party acknowledges that the other may enter into agreements similar to
this Agreement with other parties for the performance of services similar to
those to be provided under this Agreement, unless otherwise agreed to in writing
by the parties.
6. ASSIGNABILITY
This Agreement is not assignable by any party without the other parties'
prior written consent and any attempted assignment in contravention hereof shall
be null and void.
7. EXHIBITS AND SCHEDULES
All Exhibits and Schedules attached to this Agreement, as they may be
amended from time to time, are by this reference incorporated into and made a
part of this Agreement.
8. GOVERNING LAW
This Agreement will be governed by the laws of the State of New York.
9. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
will be deemed an original, but all of which together shall constitute one and
the same instrument.
<PAGE>
<PAGE>
10. EFFECTIVENESS AND TERMINATION OF THE AGREEMENT
A. This Agreement will become effective as to a Fund as of the later of (i)
the date set forth on Schedule I opposite the name of the Fund or (ii) such
later date as A&SB may in its discretion designate.
B. This Agreement may be terminated as to a Fund by any party (i) upon
60 days' written notice to the other parties.
IN WITNESS WHEREOF, the parties have executed this Agreement by a duly
authorized representative of the parties hereto.
ARNHOLD AND S. BLEICHROEDER, INC.
/s/ Stephen M. Kellen
-----------------------------------
By: Stephen M. Kellen, Co-Chairman
FIRST EAGLE INTERNATIONAL FUND, INC.
/s/ John P. Arnhold
-----------------------------------
By: John P. Arnhold, President
<PAGE>
<PAGE>
EXHIBIT A
SERVICES
Respond to customer inquiries regarding, among other things, share prices,
account balances, dividend amounts and dividend payment dates and perform any
other shareholder communication and liaison services.
Coordinate custodial and transfer agency services.
Monitor Fund compliance with state and federal requirements and the Fund's
investment restrictions.
<PAGE>
<PAGE>
SCHEDULE I
Fund Company hereby agrees to become a party to this Agreement, on its own
behalf and on behalf of each fund listed on Schedule I hereto, as amended from
time to time.
Fund Date
- ---- ----
FIRST EAGLE INTERNATIONAL FUND, INC.
/s/ John P. Arnhold
---------------------------------------
By: John P. Arnhold, President
Accepted by Arnhold and S. Bleichroeder, Inc.
/s/ Stephen M. Kellen
- ---------------------------------------------
By: Stephen M. Kellen, Co-Chairman
<PAGE>
<PAGE>
EXHIBIT B
CALCULATION OF FEE
The fee paid for the services provided shall be .25% per annum of the
average daily net asset value of the Fund, payable quarterly.
<PAGE>
<PAGE>
INDEPENDENT ACCOUNTANTS' CONSENT
To the Shareholders and Board of Directors of
First Eagle International Fund, Inc.:
We consent to the use of our report dated January 26, 1996 with respect to the
First Eagle Intrnational Fund, Inc., incorporated herein by reference and to the
references to our Firm under the headings "Financial Highlights" in the N-1A
and "Custodian, Transfer and Dividend Disbursing Agent and Independent
Accountants" in the Statement of Additional Information.
KPMG PEAT MARWICK LLP
----------------------------
KPMG Peat Marwick LLP
New York, New York
April 30, 1996
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 21,411,299
<INVESTMENTS-AT-VALUE> 23,533,758
<RECEIVABLES> 14,740
<ASSETS-OTHER> 95,040
<OTHER-ITEMS-ASSETS> 72,414
<TOTAL-ASSETS> 23,715,952
<PAYABLE-FOR-SECURITIES> 298,650
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 996,413
<TOTAL-LIABILITIES> 1,295,063
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,281,674
<SHARES-COMMON-STOCK> 1,675,613
<SHARES-COMMON-PRIOR> 1,629,447
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,122,459
<NET-ASSETS> 22,420,889
<DIVIDEND-INCOME> 225,429
<INTEREST-INCOME> 203,303
<OTHER-INCOME> 0
<EXPENSES-NET> 656,434
<NET-INVESTMENT-INCOME> (227,702)
<REALIZED-GAINS-CURRENT> 1,923,496
<APPREC-INCREASE-CURRENT> 744,197
<NET-CHANGE-FROM-OPS> 2,439,991
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 717,832
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 200,161
<NUMBER-OF-SHARES-REDEEMED> 153,995
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,268,865
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 338,062
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 656,434
<AVERAGE-NET-ASSETS> 21,159,600
<PER-SHARE-NAV-BEGIN> 12.37
<PER-SHARE-NII> (.13)
<PER-SHARE-GAIN-APPREC> 1.57
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (.43)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.38
<EXPENSE-RATIO> 3.1
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<PAGE>
