AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 9, 2000
File No. 33-70958
File No. 811-8104
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 /X/
POST-EFFECTIVE AMENDMENT NO. 12
and
REGISTRATION STATEMENT UNDER
INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 13
ALPHA SELECT FUNDS
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
1235 Westlakes Drive, Suite 350
Berwyn, Pennsylvania 19312-2414
--------------------------------------------------
(Address of Principal Executive Offices, Zip Code)
STEPHEN KNEELEY
TURNER INVESTMENT PARTNERS, INC.
1235 WESTLAKES DRIVE, SUITE 350
BERWYN, PENNSYLVANIA 19312-2414
Copies to:
JAMES W. JENNINGS, ESQUIRE JOHN H. GRADY, JR., ESQUIRE
MORGAN, LEWIS & BOCKIUS LLP MORGAN, LEWIS & BOCKIUS LLP
1701 MARKET STREET 1701 MARKET STREET
PHILADELPHIA, PENNSYLVANIA 19103 PHILADELPHIA, PENNSYLVANIA 19103
Title of Securities Being Registered...Units of Beneficial Interest
It is proposed that this filing become effective (check appropriate box):
__ immediately upon filing pursuant to paragraph (b)
__ on [date], pursuant to paragraph (b)
__ 60 days after filing pursuant to paragraph (a)
__ on [date], pursuant to paragraph (a) of Rule 485
X 75 days after filing pursuant to paragraph (a)(2)
--
<PAGE>
ALPHA SELECT FUNDS
Class A Shares
Class C Shares
Class I Shares
PROSPECTUS
______, 2000
TARGET SELECT EQUITY FUND
Investment Adviser:
CONCENTRATED CAPITAL MANAGEMENT, LP
Investment Sub-Advisers:
EVERGREEN INVESTMENT MANAGEMENT COMPANY
MERCURY ADVISORS
TURNER INVESTMENT PARTNERS, INC.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
Page 1 of 24
<PAGE>
How to Read Your Prospectus
Alpha Select Funds is a mutual fund family that offers different classes of
shares in separate investment portfolios. At this time, the Funds offer only one
portfolio, the Target Select Equity Fund (the "Fund"). This prospectus gives you
important information about the Class A, Class C, and Class I Shares of the Fund
that you should know before investing. Please read this prospectus and keep it
for future reference.
Choosing Class A, Class C or Class I Shares
Class A, Class C and Class I Shares have different expenses and other
characteristics, allowing you to choose the class that best suits your needs.
You should consider the amount you want to invest, how long you plan to have it
invested, and whether you plan to make additional investments.
Class A Shares
o Front-end sales charge
o Lower annual expenses
o $1,000 minimum initial investment
Class C Shares
o Contingent deferred sales charge
o Higher distribution expenses
o $1,000 minimum initial investment
Class I Shares
o No sales charge
o No distribution expenses
o $500,000 minimum initial investment
Page 2 of 24
<PAGE>
This prospectus has been arranged into different sections so that you can easily
review this important information. On the next page, there is some general
information you should know about the Fund. For more detailed information about
the Fund, please see:
Page
----
FUND SUMMARY..........................................................XXX
INVESTMENTS AND PORTFOLIO MANAGEMENT..................................XXX
PURCHASING, SELLING AND EXCHANGING ALPHA SELECT FUNDS.................XXX
DIVIDENDS, DISTRIBUTIONS AND TAXES....................................XXX
FINANCIAL HIGHLIGHTS..................................................XXX
To obtain more information about Alpha Select Funds, please refer to the Back
Cover of the Prospectus.
Page 3 of 24
<PAGE>
Fund Summary
Investment Goal Long-term capital appreciation
Investment Focus Common stocks of U.S. and foreign issuers
Share Price Volatility High
Principal Investment Strategy Utilizing sub-advisers experienced in
selecting securities that have growth
potential or that are undervalued, the Fund
invests in U.S. and foreign companies
Investor Profile Investors seeking capital appreciation who
can withstand the share price volatility of
equity investing
Principal Strategy
The Target Select Equity Fund invests primarily in U.S. and foreign common
stocks and other equity securities of companies regardless of their market
capitalization. The Fund will invest in securities of companies operating in a
broad range of industries located in the U.S. and overseas.
The Fund uses a multi-manager approach, relying upon a number of sub-advisers
with differing investment philosophies to manage portions of the Fund's
portfolio under the general supervision of the Fund's adviser, Concentrated
Capital Management, LP ("CCM"). In selecting investments, the sub-advisers
employ different investment strategies: a growth strategy that emphasizes
above-average earnings potential; a global strategy that focuses on small
capitalization companies; a value strategy that is based on investing in all
capitalization companies; and a growth strategy that invests in mid-to large
capitalization companies. Other strategies may be introduced as additional or
replacement sub-advisers are hired.
Multi-Manager Approach
The Fund intends to employ a multi-manager approach to take advantage of the
best investment ideas of a number of sub-advisers. Each sub-adviser manages a
portion of the Fund's assets, and is expected to select a relatively small
number of securities, as few as 10, for its portion of the Fund per each
investment strategy. Such a focused security-selection process permits each
sub-adviser to act on only the investment ideas that it thinks have the greatest
return potential. CCM will ensure that the sub-advisers comply with the Fund's
investment policies and guidelines. CCM will also recommend the appointment of
additional or replacement sub-advisers to the Fund's Board of Trustees (the
"Board").
Risks
The Fund has its own investment goal and strategies for reaching that goal. The
Fund's advisers will invest Fund assets in a way that each believes will help
the Fund achieve its goal. Still, investing in the Fund involves risk and there
is no guarantee that the Fund will achieve its goal. The advisers' judgments
about the markets, the economy, or companies may not anticipate actual market
movements, economic conditions or company performance, and these judgments may
Page 4 of 24
<PAGE>
affect the return on your investment. In fact, no matter how good a job the
advisers do, you could lose money on your investment in the Fund, just as you
could with other investments. A Fund share is not a bank deposit and it is not
insured or guaranteed by the FDIC or any government agency.
The value of your investment in the Fund is based on the market prices of the
securities the Fund holds. Since it purchases equity securities, the Fund is
subject to the risk that stock prices will fall over short or extended periods
of time. Historically, the equity markets have moved in cycles, and the value of
the Fund's securities may fluctuate drastically from day to day. Individual
companies may report poor results or be negatively affected by industry and/or
economic trends and developments. The prices of securities issued by such
companies may suffer a decline in response. In addition, the Fund is subject to
the risk that equity securities generally may underperform compared to debt
securities and other asset classes. These factors contribute to price
volatility, which is the principal risk of investing in the Fund. The Fund is
non-diversified, which means that it may invest in the securities of fewer
issuers than a diversified fund. As a result, the Fund may be more susceptible
to a single adverse economic or political occurrence affecting one or more of
these issuers, and may experience increased volatility due to its investments in
those securities as compared to a diversified fund.
The Fund's investment approach seeks to generate positive returns from the
efforts of separate sub-advisers who each manage a portion of the Fund's assets
using a specific style. There is a risk, therefore, that the combined
performance of the Fund's various sub-advisers will lag that of funds that
employ a single strategy or style. There is also a risk that a sub-adviser's
performance in its chosen strategy will lag that of other advisers that utilize
a similar approach.
Investing in issuers located in foreign countries poses additional risks since
political and economic events unique to a country or region will affect those
markets and their issuers. These events will not necessarily affect the U.S.
economy or similar issuers located in the United States. In addition,
investments in foreign countries are generally denominated in a foreign
currency. As a result, changes in the value of those currencies compared to the
U.S. dollar may affect (positively or negatively) the value of a Fund's
investments. These currency movements may happen separately from and in response
to events that do not otherwise affect the value of the security in the issuer's
home country. While ADRs are denominated in U.S. dollars, they are subject to
currency risk to the extent the underlying stocks are denominated in foreign
currencies.
Any micro, small and medium capitalization companies the Fund invests in may be
more vulnerable to adverse business or economic events than larger, more
established companies. In particular, these micro, small and mid-sized companies
may have limited product lines, markets and financial resources, and may depend
upon a relatively small management group. In addition, the share prices of
micro-capitalization companies may be extremely volatile.
Performance Information
The Fund may engage in frequent and active trading of portfolio securities to
achieve its investment objective. A high portfolio turnover rate involves
greater expenses to the Fund, including brokerage commissions and other
transaction costs, and may generate more short-term gains for shareholders.
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
Page 5 of 24
<PAGE>
The performance shown is for the TIP Funds' TIP Target Select Equity Fund (the
"TIP Fund"), the Fund's predecessor. The Target Select Equity Fund became part
of the Alpha Select Funds on ______, 2000.
The performance information below reflects the performance of Turner Investment
Partners, Inc., ("Turner") the TIP Fund's principal investment adviser, and
several sub-advisers. Under the TIP Fund's multiple sub-adviser structure,
Turner was responsible for the continuous review, supervision and administration
of the TIP Fund's investment program, which included overseeing two other
sub-advisers. In addition, Turner was also responsible for making day-to-day
investment decisions for some of the assets of the TIP Fund. Because of this
dual role as day-to-day investment adviser and overall manager of the investment
program, Turner is essentially responsible for the TIP Fund's performance
reflected below. Under the Fund's multiple sub-adviser structure, CCM will
similarly be responsible for the continuous review, supervision and
administration of the Fund's investment program, which includes overseeing
Turner as one of three sub-advisers. However, CCM will not be responsible for
making day-to-day investment decisions for the Fund, and Turner will only manage
approximately 15-35% of the Fund's assets. In addition, Turner employed
sub-advisers that are different from those employed by CCM in managing the Fund.
As a result of these differences, this performance information represents some
indication of the risks and volatility of an investment in the Fund, and should
be reviewed recognizing these material differences.
This bar chart shows changes in the performance of the Fund's Shares from year
to year for two years.*
1998 25.45%
1999 113.07%**
* The performance information shown above is based on a calendar year. The
year-to-date return as of June 30, 2000 was 23.83%. Performance would have been
lower if Turner had not waived fees and reimbursed expenses in 1998 and 1999.
**The Fund's favorable performance in 1999 was affected by a number of factors
that may not have the same effect on the Fund's performance in the future. These
factors include participation in the initial public offerings, unusual market
conditions and the relatively small size of the fund compared with any one
investment.
Best Quarter Worst Quarter
43.45% -17.08%
(12/31/99) (9/30/98)
This table compares the Fund's average annual total returns for the periods
ended December 31, 1999, to those of the Russell 3000 Index.
Since Inception
1 Year (1/1/98)
------- ---------------
TIP Funds' Target Select Equity Fund 113.07% 63.50%
Russell 3000 Index 20.90% 22.51%
Page 6 of 24
<PAGE>
What is an Index?
An index measures the market price of a specific group of securities in a
particular market of securities in a market sector. You cannot invest directly
in an index. An index does not have an investment adviser and does not pay any
commissions or expenses. If an index had expenses, its performance would be
lower. The Russell 3000 Index is a widely-recognized, capitalization-weighted
(companies with larger market capitalizations have more influence than those
with smaller market capitalizations) index of the 3,000 largest U.S. companies.
Fund Fees and Expenses
This table describes the shareholder fees that you may pay if you buy and hold
Fund Shares. You would pay these fees directly from your investment in the Fund.
Shareholder Fees (fees paid directly from your investment)
<TABLE>
<CAPTION>
Class A Shares Class C Shares Class I Shares
-------------- -------------- --------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price)* 5.50% None None
Maximum Deferred Sales Charge (Load) (as a percentage of
net asset value)** None 1.00% None
</TABLE>
* This sales charge varies depending upon how much you invest. See
"Purchasing Fund Shares."
** This sales charge is imposed if you sell Class C Shares within one year of
your purchase. See "Selling Fund Shares."
This table describes the fees and expenses that you may pay if you buy and hold
Fund shares.
Annual Fund Operating Expenses (expenses deducted from Fund assets)
<TABLE>
<CAPTION>
Class A Shares Class C Shares Class I Shares
-------------- -------------- --------------
<S> <C> <C> <C>
Investment Advisory Fees 1.0625%* 1.0625%* 1.0625%*
Distribution (12b-1) Fees None 0.75% None
Other Expenses 1.789%** 1.789%** 1.539%**
------ ------ ------
Total Annual Fund Operating Expenses 2.8515%*** 3.6015%*** 2.6015%***
Fee Waivers and Expense Reimbursements (1.3815%) (1.3815%) (1.3815%)
------ ------ ------
Net Total Operating Expenses 1.47% 2.22% 1.22%
</TABLE>
* The advisory fee is subject to a performance adjustment based on the Fund's
performance relative to the performance of the Russell 3000 Index after the
Fund's first year of operations.
** Other Expenses are estimated for the current year.
*** The Fund's Adviser has contractually agreed to waive fees and to reimburse
expenses in order to keep total operating expenses of the Class A, Class C
and Class I Shares from exceeding 1.47%, 2.22% and 1.22%, respectively, for
a period of one year, or from exceeding 1.75%, 2.50% and 1.50%,
respectively, in any subsequent year.
For more information about these fees, see "Investment Adviser" and
"Distribution of Fund Shares."
Page 7 of 24
<PAGE>
Example
This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The Example assumes that you
invest $10,000 in the Fund for the time periods indicated and then redeem all of
your shares at the end of those periods. The Example also assumes that each year
your investment has a 5% return and Fund operating expenses remain the same.
Although your actual costs and returns might be different, your approximate
costs of investing $10,000 in the Fund would be:
If you sell your shares at the end of the period:
1 Year 3 Years
------ -------
Class A Shares $691 $1045
Class C Shares $325 $752
Class I Shares $124 $447
If you do not sell your shares at the end of the period:
1 Year 3 Years
------ -------
Class A Shares $691 $1045
Class C Shares $225 $752
Class I Shares $124 $447
Page 8 of 24
<PAGE>
The Fund's Other Investments
In addition to the investments and strategies described in this prospectus, the
Fund also may invest in other securities, use other strategies and engage in
other investment practices. These investments and strategies, as well as those
described in this prospectus, are described in detail in our Statement of
Additional Information (SAI). Of course, there is no guarantee that the Fund
will achieve its investment goal.
The investments and strategies described throughout this prospectus are those
that the Fund uses under normal conditions. During unusual economic or market
conditions, or for temporary defensive purposes, the Fund may invest up to 100%
of its assets in cash, repurchase agreements and short-term obligations that
would not ordinarily be consistent with the Fund's objectives. The Fund may also
invest a portion of its assets in cash for liquidity purposes as necessary. The
Fund will make investments inconsistent with its objectives only if the Adviser
believes that the risk of loss outweighs the opportunity for gains.
Investment Adviser
CCM, an SEC-registered adviser, serves as the Adviser to the Fund. CCM makes
recommendations to the Trustees with respect to the appropriate allocation of
assets to each of the Fund's Sub-Advisers. Also as the Fund's Adviser, CCM is
authorized to make investment decisions for the Fund and continuously review,
supervise and administer the Fund's investment program. The Adviser also ensures
compliance with the Fund's investment policies and guidelines. In the future,
the Trust expects to operate as a "manager of managers" fund under an SEC
exemptive order. This type of order will permit the Adviser to hire or replace
Sub-Advisers with Board (rather than shareholder) approval. We will notify you
if we make this change.
CCM was formed on May 19, 2000. For its services, CCM is entitled to base
investment advisory fees of 1.0625%. However, these fees may be higher or lower
depending on the Fund's performance relative to a benchmark. If the Fund
outperforms its benchmark by a set amount, CCM will receive higher advisory
fees. Conversely, if a Fund underperforms its benchmark by the same amount, CCM
will receive lower advisory fees. Accordingly, the overall fee may vary by 0.15%
either way. The Fund's SAI contains detailed information about the Fund's
benchmark, as well as any possible performance-based adjustments to CCM fees.
These performance-based adjustments will take effect after the Fund has been in
operation for more than one year.
Sub-Advisers
At the outset of operations, CCM will employ three sub-advisers who will use
approximately four investment styles to manage the Fund. Each style will be
employed with regards to approximately 15-35% of the Fund's total assets.
Periodically, the Fund will be rebalanced to preserve this approximate 15-35%
allocation. CCM will oversee the sub-advisers who manage the separate portfolios
of the Fund. The three sub-advisers will be Turner, Mercury Advisors, and
Evergreen Investment Management Company ("Evergreen").
Turner will employ a growth style that emphasizes investments in equities
securities in companies with above average earnings growth prospects. It will
employ an earnings momentum
Page 9 of 24
<PAGE>
strategy that concentrates on companies with more volatile and accelerating
growth rates. Turner will focus on a relatively small number of securities
issues without distinction as to capitalization. Robert E. Turner serves as
portfolio manager of the portion of the Fund's assets devoted to this strategy.
Mercury Advisors will employ two strategies. One strategy will adopt a global
approach by investing at least 66% of the assets in small capitalization equity
securities from at least three different countries, including the United States.
The securities will be small capitalization. The balance of the assets, if any,
may be invested in larger cap companies or debt securities. Kenneth L. Chiang
serves as the portfolio manager of the portion of the Fund's assets devoted to
this strategy.
The other strategy employed by Mercury will involve a value approach that seeks
capital appreciation by investing in a concentrated portfolio of undervalued
equity securities of companies that are believed by Mercury to be currently
mispriced in the marketplace relative to their future operating prospects. Often
these equities are experiencing some temporary operational difficulties that
have caused them to become out-of-favor. The portfolio is expected to have
valuation ratios, (i.e., price-to-earnings or price-to-book values) below those
of the broader market. Robert Martorelli serves as the Portfolio Manager of the
portion of the Fund's assets devoted to this strategy.
Evergreen will employ a growth style of investing and will invest in a
relatively small number of issuers of primarily mid to large-capitalizations.
Evergreen emphasizes earnings growth in its selection of issuers. It will select
companies that it believes have recorded a consistent record of earnings growth
and/or have the potential for an acceleration of earnings growth. Maureen
Cullinane serves as the portfolio manager of the portion of the Fund's assets
devoted to this strategy.
Page 10 of 24
<PAGE>
Purchasing, Selling and Exchanging Fund Shares
In order to open a new account, you must complete and mail the New Account
Application that you receive with this prospectus.
All trades must be received by the Fund's Transfer Agent by 4:00 PM EST. Your
check must be made payable to the Alpha Select Funds or wires must be sent to
the instructions below.
The minimum initial investment for Class A Shares is $1,000. The minimum initial
investment for Class C Shares is $1,000 ($500 for retirement plans). The minimum
subsequent investment for Class A and Class C Shares is $100. The minimum
initial investment for Class I Shares is $500,000. The minimum subsequent
investment for Class I Shares is $5,000.
--------------------------------------------------------------------------------
Once you are a shareholder of the Alpha Select Funds you may do the following:
--------------------------------------------------------------------------------
* Purchase, sell or exchange Fund shares by phone. Call 1-888-847-7654
between 9:00 AM and 4:00 PM EST Monday through Friday and press 3 to place
a trade.
--------------------------------------------------------------------------------
* Purchase, sell or exchange Fund shares by mail. Shareholders can mail trade
requests to:
By regular mail By express or overnight mail
Alpha Select Funds Alpha Select Funds
P.O. Box 219805 c/o DST Systems Inc.
Kansas City, MO 64121-6805 330 W. 9th Street
Kansas City, MO 64105
--------------------------------------------------------------------------------
* Purchase Fund shares by wiring funds to:
United Missouri Bank of Kansas NA
ABA #101000695
Account # 9870601168
Further Credit: Target Select Equity Fund, shareholder name and Alpha
Select Funds account number
Page 11 of 24
<PAGE>
The minimum initial investment for Class A Shares is $1,000. The minimum initial
investment for Class C Shares is $1,000 ($500 for retirement plans). The minimum
subsequent investment for Class A and Class C Shares is $100. The minimum
initial investment for Class I Shares is $500,000. The minimum subsequent
investment for Class I Shares is $5,000. The Fund reserves the right to waive
the minimum initial investment, and may do so for financial intermediaries who
purchase shares through a brokerage firm or a mutual fund marketplace.
This section tells you how to buy, sell (sometimes called "redeem") or exchange
shares of the Fund.
Purchasing Alpha Select Fund Shares
When Can You Purchase Shares?
You may purchase shares on any day that the New York Stock Exchange (NYSE) is
open for business (a Business Day).
We may reject any purchase order if we determine that accepting the order would
not be in the best interests of the Fund or its shareholders.
To open an account:
o By Mail Please send your completed application, with a check payable to
Alpha Select Funds, to the address listed on this page. Your check must be
in U.S. dollars and drawn on a bank located in the United States. We do not
accept third party checks, credit card checks or cash.
o By Wire Please call us at 1-888-847-7654 (option 3) to let us know that you
intend to make your initial investment by wire. You will be given an
account number and fax number to which you should send your completed New
Account Application. Once this is complete, you will need to instruct your
bank to wire money to: United Missouri Bank of Kansas, N.A.; ABA
#10-10-00695; for Account Number 98-7060-116-8; Further Credit: [Target
Select Equity Fund]. The shareholder's name and account number must be
specified in the wire.
Systematic Investment Plan
If you have a checking or savings account with a bank, you may purchase Class A
or Class C Shares automatically through regular deductions from your account.
Please call 1-888-847-7654 for information regarding participating banks. With a
$250 minimum initial investment, you may begin regularly scheduled investments
from $50 up to $250 once or twice a month.
Page 12 of 24
<PAGE>
Sales Charges
Front-End Sales Charges -- Class A Shares
The amount of any front-end sales charge included in your offering price varies,
depending on the amount of your investment:
<TABLE>
<CAPTION>
Your Sales Charge as a Percentage of Your Sales Charge as a Percentage
If Your Investment is: of Offering Price of Your Net Investment
--------------------------------- ------------------------------------ ---------------------------------
<S> <C> <C>
Less than $25,000 5.50% 5.82%
$25,000 but less than $50,000 5.25% 5.54%
$50,000 but less than $100,000 4.50% 4.71%
$100,000 but less than $250,000 3.50% 3.63%
$250,000 but less than $500,000 3.00% 3.10%
$500,000 but less than $1,000,000 2.00% 2.04%
$1,000,000 and over None
</TABLE>
Waiver of Front-End Sales Charge -- Class A Shares
The front-end sales charge will be waived on Class A Shares purchased: (1)
through reinvestment of dividends and distributions; (2) through an asset
allocation account opened by a financial intermediary; (3) by persons
repurchasing shares they redeemed within the last 60 days (see "Repurchase of
Class A Shares"); (4) by employees, affiliates, and members of the immediate
family, of firms that have entered into a selling agreement with the
Distributor; (5) by persons reinvesting distributions from qualified employee
benefit retirement plans and rollovers from individual retirement accounts
("IRAs") previously with firms that have entered into a selling agreement with
the Distributor; (6) by persons investing an amount less than or equal to the
value of an account distribution when an account for which a bank affiliated
with firms that have entered into a selling agreement with the Distributor acted
in a fiduciary, administrative, custodial or investment advisory capacity is
closed; or (7) through dealers, retirement plans, asset allocation programs and
financial institutions that, under their dealer agreements with the Distributor
or otherwise, do not receive any or receive a reduced portion of the front-end
sales charge. The Fund may also enter into waiver arrangements with various
other financial intermediaries who sell Class A Shares of the Fund.
Currently the only fund offered by the Alpha Select Funds is the Fund. If
additional Alpha Select funds are offered, purchases of Class A Shares of all
such funds will be aggregated for purposes of determining sales charge waivers.
Repurchase of Class A Shares
You may repurchase any amount of Class A Shares of any Alpha Select fund at net
asset value per share (NAV) (without the normal front-end sales charge), equal
to or less than the value of any amount of Class A Shares (for which you paid a
front-end sales charge) that you redeemed within the past 60 days. NAV for one
Fund share is the value of that share's portion of all of the net assets of the
Fund. In effect, this allows you to repurchase shares that you may have had to
redeem, without repaying the front-end sales charge. To exercise this privilege,
we must receive
Page 13 of 24
<PAGE>
your purchase order within 60 days of your redemption. In addition, you must
notify us when you send in your purchase order that you are repurchasing shares.
Reduced Sales Charges -- Class A Shares
Rights of Accumulation. In calculating the appropriate sales charge rate, this
right allows you to add the value of the Class A Shares you already own to the
amount that you are currently purchasing. We will combine the value of your
current purchases with the current value of any Class A Shares you purchased
previously for (i) your account, (ii) your spouse's account, (iii) a joint
account with your spouse, or (iv) your minor children's trust or custodial
accounts. A fiduciary purchasing shares for the same fiduciary account, trust or
estate may also use this right of accumulation. We will only consider the value
of Class A Shares purchased previously that were sold subject to a sales charge.
To be entitled to a reduced sales charge based on shares already owned, you must
ask us for the reduction at the time of purchase. You must provide us with your
account number(s) and, if applicable, the account numbers for your spouse and/or
children (and provide the children's ages). We may amend or terminate this right
of accumulation at any time.
Letter of Intent. You may purchase Class A Shares at the sales charge rate
applicable to the total amount of the purchases you intend to make over a
13-month period. In other words, a Letter of Intent allows you to purchase Class
A Shares of a Fund over a 13-month period and receive the same sales charge as
if you had purchased all the shares at the same time. We will only consider the
value of Class A Shares sold subject to a sales charge. To be entitled to a
reduced sales charge based on shares you intend to purchase over the 13-month
period, you must send us a Letter of Intent. Class A Shares purchased with
dividends or distributions will not be included in the calculation. In
calculating the total amount of purchases you may include in your letter
purchases made up to 90 days before the date of the Letter. The 13-month period
begins on the date of the first purchase, including those purchases made in the
90-day period before the date of the Letter. Please note that the purchase price
of these prior purchases will not be adjusted.
You are not legally bound by the terms of your Letter of Intent to purchase the
amount of your shares stated in the Letter. The Letter does, however, authorize
us to hold in escrow [5]% of the total amount you intend to purchase. If you do
not complete the total intended purchase at the end of the 13-month period, the
transfer agent will redeem the necessary portion of the escrowed shares to make
up the difference between the reduced rate sales charge (based on the amount you
intended to purchase) and the sales charge that would normally apply (based on
the actual amount you purchased).
Combined Purchase/Quantity Discount Privilege. When calculating the appropriate
sales charge rate, we will combine same day purchases of Class A Shares (that
are subject to a sales charge) made by you, your spouse and your minor children
(under age 21). This combination also applies to Class A Shares you purchase
with a Letter of Intent.
Page 14 of 24
<PAGE>
Contingent Deferred Sales Charges -Class C Shares
If you sell your Class C Shares within the first year after your purchase, you
will pay a contingent deferred sales charge equal to Class C Shares of either
(1) the NAV of the shares at the time of purchase, or (2) NAV of the shares next
calculated after we receive your sale request, whichever is less. The maximum
deferred sales charge as a percentage of the net amount invested is 1.00%. The
sales charge does not apply to Class C Shares you purchase through reinvestment
of dividends or distributions. So you never pay a deferred sales charge on any
increase in your investment above the initial offering price. The sales charge
does not apply to exchanges of Class C Shares of the Fund for Class C Shares of
another Alpha Select Fund. Currently, the only fund offered by Alpha Select
Funds is the Fund.
The contingent deferred sales charge will be waived if you sell your Class C
Shares for the following reasons: (1) to make certain withdrawals from a
retirement plan (not including IRAs); (2) because of death or disability; or (3)
for certain payments under the Systematic Withdrawal Plan (discussed below).
How Fund Prices are Calculated
The price per share (the offering price) will be the NAV next determined after
the Fund receives your purchase order plus, in the case of Class A Shares, the
applicable front-end sales charge. The Fund's NAV is calculated once each
Business Day at the regularly-scheduled close of normal trading on the NYSE
(normally, 4:00 p.m., Eastern time). So, for you to receive the current Business
Day's NAV, generally we must receive your purchase order before 4:00 p.m.,
Eastern time.
In calculating NAV, the Fund generally values its investment portfolio at market
price. If market prices are unavailable or the Fund thinks that they are
unreliable, fair value prices may be determined in good faith using methods
approved by the Board.
Purchasing Additional Shares
o By Mail Please send your check payable to Alpha Select Funds along with a
signed letter stating the name of the Target Select Equity Fund and your
account number.
o By Phone Current shareholders are eligible to purchase shares by phone if
they have requested that privilege by checking the appropriate box on the
New Account Application. Shareholders who have requested telephone
privileges can call 1-888-847-7654 (option 3) and give the Fund and account
number they would like to make a subsequent purchase into. They must then
instruct their bank to wire the money by following the instructions listed
on page 11.
Page 15 of 24
<PAGE>
Additional Information
You may also buy shares through accounts with brokers and other institutions
that are authorized to place trades in Fund shares for customers. If you invest
through an authorized institution, you will have to follow its procedures, which
may be different from the procedures for investing directly. Your institution
may charge a fee for its services, in addition to the fees charged by the Fund.
You will also generally have to address your correspondence or questions
regarding the Fund to your institution.
Selling Alpha Select Funds
If you own shares directly, you may sell your shares on any Business Day by
contacting us directly by mail or telephone. You may also sell your shares by
contacting your financial institution by mail or telephone. The sale price of
each share will be the next NAV determined after we receive your request less,
in the case of Class C Shares, any applicable deferred sales charge.
If you are a holder of Class A and/or Class C Shares, you may sell shares by
following procedures established when you opened your account or accounts. If
you have questions, you should call 1-888-847-7654. If you own shares through an
account with a broker or other institution, you should contact that broker or
institution to sell your shares. If you would like to sell $50,000 or more of
your shares, you should notify us in writing and include a signature guarantee.
o By Mail If you wish to redeem shares of the Fund, you should send us a
letter with your name, Fund name and account number and the amount of your
request. All letters must be signed by the owner(s) of the account. All
proceeds will be mailed or wired (depending on instructions given) to the
address or instructions given to us when the account was established. If
you would like the proceeds sent to either a different bank account or
address, a signature guarantee is required.
o By Phone When filling out a New Account Application shareholders are given
the opportunity to establish telephone redemption privileges. If
shareholders elect to take advantage of this privilege they will be able to
redeem shares of the Alpha Select Funds by calling 1-888-847-7654 (option
3) and informing one of our representatives.
Systematic Withdrawal Plan
If you have at least $10,000 in your account, you may use the Systematic
Withdrawal Plan. Under the plan you may arrange monthly, quarterly, semi-annual
or annual automatic withdrawals of at least $50 from the Fund. The proceeds of
each withdrawal will be mailed to you by check or, if you have a checking or
savings account with a bank, electronically transferred to your account. Please
call 1-888-847-7654 for information regarding banks that participate in the
Systematic Withdrawal Plan.
Page 16 of 24
<PAGE>
Signature Guarantees
A signature guarantee is a widely accepted way to protect shareholders by
verifying the signature in certain circumstances including, (1) written requests
for redemptions in excess of $50,000; (2) all written requests to wire
redemption proceeds to a bank other than the bank previously designated on the
account application; and (3) redemption requests that provide that the
redemption proceeds should be sent to an address other than the address of
record or to a person other than the registered shareholder(s) for the account.
Signature guarantees can be obtained from any of the following institutions: a
national or state bank, a trust company, a credit union, a federal savings and
loan association, or a broker-dealer that is a member of a national securities
exchange. A notarized signature is not sufficient.
Redemptions in Kind
The Fund generally pays sale (redemption) proceeds in cash. However, under
unusual conditions that make the payment of cash unwise (and for the protection
of the Fund's remaining shareholders) the Fund might pay all or part of your
redemption proceeds in liquid securities with a market value equal to the
redemption price (redemption in kind). Although it is highly unlikely that your
shares would ever be redeemed in kind, you would probably have to pay brokerage
costs to sell the securities distributed to you, as well as taxes on any capital
gains from the sale as with any redemption.
Receiving Your Money
Normally, the Fund will send your sale proceeds within three Business Days after
they receive your request, but it may take up to seven days. Your proceeds can
be wired to your bank account (subject to a $10 wire fee) or sent to you by
check. If you recently purchased your shares by check or through ACH, proceeds
from the redemption may not be available until your check has cleared (which may
take up to 15 days from your date of purchase).
Exchanging Fund Shares
When you exchange shares, you are really selling your shares and buying other
Alpha Select Fund shares. So, your sale price and purchase price will be based
on the NAV next calculated after we receive your exchange request. You should
recognize, however, that the Alpha Select Funds currently offer no other funds.
You may exchange your shares on any Business Day by contacting the Alpha Select
Funds directly by mail or telephone. You may also exchange shares through your
financial institution by mail or telephone. If you recently purchased shares by
check or through ACH, you may not be able to exchange your shares until your
check has cleared (which may take up to 15 days from your date of purchase).
This exchange privilege may be changed or canceled at any time upon 60 days'
notice.
Page 17 of 24
<PAGE>
Class A Shares
You may exchange Class A Shares of the Fund for Class A Shares of any other
Alpha Select Fund. If you exchange shares that you purchased without a sales
charge or with a lower sales charge into a fund with a sales charge or with a
higher sales charge, the exchange is subject to an incremental sales charge
(e.g., the difference between the lower and higher applicable sales charges). If
you exchange shares into a fund with the same, lower or no sales charge there is
no incremental sales charge for the exchange.
Class C Shares
You may exchange Class C Shares of the Fund for Class C Shares of any other
Alpha Select Fund. You will not pay a contingent deferred sales charge on
exchanges of Class C Shares.
Class I Shares
You may exchange Class I Shares of the Fund for Class I Shares of any other
Alpha Select Fund.
Presently, only the Fund exists as a series of the Alpha Select Funds.
Other Policies
For Customers of Financial Institutions
If you purchase, sell or exchange Fund shares through a financial institution
(rather than directly from us), you may have to transmit your purchase, sale and
exchange requests to your financial institution at an earlier time for your
transaction to become effective that day. This allows the financial institution
time to process your request and transmit it to us. For more information about
how to purchase, sell or exchange Fund shares through your financial
institution, you should contact your financial institution directly.
Telephone Transactions
Purchasing, selling and exchanging Fund shares over the telephone is extremely
convenient, but not without risk. Although we have certain safeguards and
procedures to confirm the identity of callers and the authenticity of
instructions, we are not responsible for any losses or costs incurred by
following telephone instructions we reasonably believe to be genuine. If you or
your financial institution transact with us over the telephone, you will
generally bear the risk of any loss.
Suspension of Your Right to Sell Your Shares
The Fund may suspend your right to sell your shares if the NYSE restricts
trading, the SEC declares an emergency or for other reasons. More information
about this is in the Fund's SAI.
Page 18 of 24
<PAGE>
Involuntary Sales of Your Shares
If your account balance drops below the required minimum of $1,000 for Class A
or Class C Shares because of redemptions, you may be required to sell your
shares. You will always be given at least 60 days' written notice to give you
time to add to your account and avoid selling your shares.
Distribution and Shareholder Servicing of Fund Shares
SEI Investments Distribution Co. (SIDCO.) is the distributor of the Fund. SIDCO.
receives no compensation for distributing the Fund's shares.
The Fund has adopted a plan for its Class C Shares that allows the Fund to pay
distribution and shareholder service fees for the servicing of shareholder
accounts, and the sale and distribution of its shares. In addition, the Fund has
adopted a plan for its Class A and C Shares that allows the Fund to pay
shareholder servicing fees for provision of a broad range of shareholder and
administrative services. Because these fees are paid out of the Fund's assets
continuously, over time these fees will increase the cost of your investment and
may cost you more than paying other types of sales charges.
For Class C Shares, the distribution fee, as adopted pursuant to Rule 12b-1, is
0.75% of the average daily net assets of the Fund. In addition, Class C Shares
pay a shareholder servicing fee of 0.25% of average daily net assets.
For Class A Shares, shareholder servicing fees, as a percentage of average daily
net assets, are 0.25%.
Class I Shares do not pay distribution or shareholder servicing fees.
The Distributor may, from time to time in its sole discretion, institute one or
more promotional incentive programs from dealers, which will be paid for by the
Distributor. Under any such program, the Distributor may provide incentives, in
the form of cash or other compensation, including merchandise, airline vouchers,
trips and vacation packages, to dealers selling shares of the Fund.
Dividends and Distributions
The Fund distributes its investment income annually as a dividend to
shareholders (the "Distributor"). The Fund makes distributions of capital gains,
if any, at least annually.
If you own Fund shares on the Fund's record date, you will be entitled to
receive the distribution.
You will receive dividends and distributions in the form of additional Fund
shares unless you elect to receive payment in cash. To elect cash payment, you
must notify the Fund in writing prior to the date of the distribution. Your
election will be effective for dividends and distributions paid after we receive
your written notice. To cancel your election, simply send the Fund written
notice.
Page 19 of 24
<PAGE>
Taxes
Please consult your tax advisor regarding your specific questions about federal,
state and local income taxes. Summarized below are some important tax issues
that affect the Fund and its shareholders. This summary is based on current tax
laws, which may change.
The Fund will distribute substantially all of its income and capital gains, if
any. The dividends and distributions you receive may be subject to federal,
state and local taxation, depending upon your tax situation. Income
distributions are generally taxable at ordinary income tax rates. Capital gains
distributions are generally taxable at the rates applicable to long-term capital
gains. Distributions you receive from the Fund may be taxable whether or not you
reinvest them. Each sale or exchange of Fund shares is a taxable event.
More information about taxes is in the SAI.
Page 20 of 24
<PAGE>
Financial Highlights
The table that follows presents performance information about shares of the TIP
Funds' TIP Target Select Equity Fund, the Fund's predecessor. The Fund became
part of the Alpha Select Funds in _______, 2000. This information is intended to
help you understand the Fund's financial performance for the period of the
Fund's operations. Some of this information reflects financial information for a
single Fund share. The total returns in the table represent the rate that you
would have earned (or lost) on an investment in the Fund, assuming you
reinvested all of your dividends and distributions. The Financial Highlights for
each period ended September 30, have been audited by Ernst & Young LLP,
independent auditors whose report, along with the Fund's financial statements,
appears in the TIP Funds' TIP Target Select Equity Fund annual report that
accompanies our SAI. The Financial Highlights for the period ended March 31,
2000 are unaudited and appear in the TIP Funds' TIP Target Select Equity Fund
semi-annual report. You can obtain the TIP Funds' TIP Target Select Equity Fund
semi-annual and annual reports, which contain more performance information, at
no charge by calling 1-888-847-7654.
Page 21 of 24
<PAGE>
Financial Highlights
TIP Funds
For a Share Outstanding Throughout each Period Ended September 30;
<TABLE>
<CAPTION>
Ratio of Net
Net Realized Net Net Investment
Asset Net and Distributions Distributions Asset Assets Ratio Income
Value Investment Unrealized from Net from Value End of Expenses (Loss)
Beginning Income Gains on Investment Capital End Total of Period to Average to Average
of Period (Loss) Investments Income Gains of Period Return(1) (000) Net Assets Net Assets
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TIP Target Select Equity Fund*
Interim $17.17 (0.01) 11.10 -- (6.01) $22.25 77.72% $4,058 1.30% (0.30)%
6-month
2000
financial
highlights
(unaudited)
1999 $10.34 (0.07) 7.80 -- (0.90) $17.17 80.04% $1,839 1.30% (0.56)%
1998(2) $10.00 -- 0.35 (0.01) -- $10.34 3.50% $ 966 1.30%** 0.02%**
</TABLE>
<TABLE>
<CAPTION>
Ratio of Net
Ratio of Investment
Expenses Income (Loss)
to Average to Average
Net Assets Net Assets Portfolio
(Excluding (Excluding Turnover
Waivers) Waivers) Rate
---------------------------------------------------
<S> <C> <C> <C>
TIP Target Select Equity Fund*
Interim 5.89% (4.89)% 525.82%
6-month
2000
financial
highlights
(unaudited)
1999 10.19% (9.45)% 1,279.40%
1998(2) 18.76%** (17.44)%** 803.02%
</TABLE>
* The Fund was managed by Turner Investment Partners, Inc. under a manager of
managers approach and used several sub-advisers. Turner managed
substantially all the assets of the Fund under this approach.
** Annualized
(1) Returns are for the period indicated and have not been annualized.
(2) Commenced operations on January 1, 1998.
Amounts designated as "--" are either $0 or have been rounded to $0.
Page 22 of 24
<PAGE>
ALPHA SELECT FUNDS
Investment Adviser
Concentrated Capital Management
1150 First Avenue
Park View Tower, Suite 600
King of Prussia, PA 19406-2816
Investment Sub-Advisers
Evergreen Investment Management Company
200 Berkeley Street
Boston, MA 02116
Mercury Advisors
800 Scudders Mill Road
Plainsboro, NJ 08536
Turner Investment Partners, Inc.
1235 Westlakes Drive, Suite 350
Berwyn, PA 19312
Distributor
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, Pennsylvania 19456
Legal Counsel
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
More information about the Fund is available without charge through the
following:
Statement of Additional Information (SAI)
The SAI dated ____, 2000, includes detailed information about the Fund. The SAI
is on file with the SEC and is incorporated by reference into this prospectus.
This means that the SAI, for legal purposes, is a part of this prospectus.
Page 23 of 24
<PAGE>
Annual and Semi-Annual Reports
These reports contain the Fund's holdings and contain information from the
Fund's managers about strategies, and recent market conditions and trends and
their impact on Fund performance. The reports also contain detailed financial
information about the Fund.
To Obtain an SAI, Annual or Semi-Annual Report, or More Information, Including
Responses to Shareholder Inquiries:
By Telephone: Call 1-888-847-7654
By Mail: Write to Alpha Select Funds
P.O. Box 219805
Kansas City, Missouri 64121-6805
From the SEC: You can also obtain the SAI or the Annual and Semi-Annual reports
of the TIP Funds, TIP Target Select Equity Fund, the Fund's predecessor as well
as other information about Alpha Select Funds, from the EDGAR Database on the
SEC's website ("http://www.sec.gov"). You may review and copy documents at the
SEC Public Reference Room in Washington, DC (for information on the operation of
the Public Reference Room, call 1-202-942-8090). You may request documents by
mail from the SEC, upon payment of a duplicating fee, by writing to: Securities
and Exchange Commission, Public Reference Section, Washington, DC 20549-0102.
You may also obtain this information, upon payment of a duplicating fee, by
e-mailing the SEC at the following address: [email protected].
Alpha Select Funds' Investment Company Act registration number is 811-8104.
Page 24 of 24
<PAGE>
ALPHA SELECT FUNDS
TARGET SELECT EQUITY FUND
INVESTMENT ADVISER:
CONCENTRATED CAPITAL MANAGEMENT
INVESTMENT SUB-ADVISERS:
EVERGREEN INVESTMENT MANAGEMENT COMPANY
MERCURY ADVISORS
TURNER INVESTMENT PARTNERS, INC.
This Statement of Additional Information is not a prospectus and relates only to
the Target Select Equity Fund (the "Fund"). It is intended to provide additional
information regarding the activities and operations of the Alpha Select Funds
(the "Trust"), and should be read in conjunction with the Fund's Prospectus
dated [ ], 2000. The Prospectus may be obtained without charge by calling
1-888-847-7654.
[ ], 2000
<PAGE>
TABLE OF CONTENTS
THE TRUST....................................................................S-2
INVESTMENT OBJECTIVES........................................................S-2
INVESTMENT POLICIES..........................................................S-2
DESCRIPTION OF PERMITTED INVESTMENTS.........................................S-3
INVESTMENT LIMITATIONS......................................................S-27
PORTFOLIO TURNOVER..........................................................S-30
THE ADVISER.................................................................S-31
THE SUB-ADVISERS............................................................S-33
THE ADMINISTRATOR...........................................................S-35
THE DISTRIBUTOR.............................................................S-36
CODE OF ETHICS..............................................................S-37
TRUSTEES AND OFFICERS OF THE TRUST..........................................S-37
COMPUTATION OF YIELD AND TOTAL RETURN.......................................S-40
PURCHASE AND REDEMPTION OF SHARES...........................................S-41
DETERMINATION OF NET ASSET VALUE............................................S-41
TAXES.......................................................................S-42
PORTFOLIO TRANSACTIONS......................................................S-45
VOTING......................................................................S-47
DESCRIPTION OF SHARES.......................................................S-48
SHAREHOLDER LIABILITY.......................................................S-48
LIMITATION OF TRUSTEES' LIABILITY...........................................S-49
INDEPENDENT AUDITORS........................................................S-49
CUSTODIAN...................................................................S-49
LEGAL COUNSEL...............................................................S-49
APPENDIX.....................................................................A-1
<PAGE>
THE TRUST
This Statement of Additional Information relates only to Class A, Class C, and
Class I shares of the Target Select Equity Fund (the "Fund"). The Fund is a
non-diversified separate series of the Alpha Select Funds (the "Trust"), an
open-end management investment company established as a Delaware business trust
under a Declaration of Trust dated October 25, 1993, and amended on December 10,
1998. The Declaration of Trust permits the Trust to offer separate series
("portfolios") of shares of beneficial interest ("shares"). Each portfolio is a
separate mutual fund, and each share of that Fund represents an equal
proportionate interest in that portfolio. See "Description of Shares."
Currently, only the Fund exists as a portfolio of the Trust.
On [ ], 2000, the Fund acquired all the assets and liabilities of the TIP Funds'
TIP Target Select Equity Fund. Capitalized terms not defined herein are defined
in the Prospectus offering shares of the Fund.
INVESTMENT OBJECTIVES
Target Select Equity Fund -- The Fund seeks long term growth of capital
primarily from investment in U.S. and foreign equity securities.
INVESTMENT POLICIES
Target Select Equity Fund -- Under the general supervision of the Adviser, and
for each investment strategy, the Sub-Advisers will invest in a minimum of 10
equity securities that it believes have the greatest return potential. Such a
focused security-selection process permits each manager to act on only the
investment ideas that they think are their strongest ones. The intent is to
avoid diluting performance by owning too many securities, so that the positive
contributions of winning investments will prove substantial.
The Fund is designed to provide an investment that combines the investment
expertise and best investment ideas of the initial three outstanding
money-management firms. The Sub-Advisers will manage a portion of the Fund's
portfolio on a day-to-day basis. Assets for investment will be allocated to each
Sub-Adviser by the Fund's Board of Trustees, based on the recommendation of the
Adviser. The expectation is that the allocations will result in a portfolio
invested in a variety of equity securities with differing capitalizations and
valuations, chosen by differing investment strategies.
The Fund intends to invest primarily (and, under normal circumstances, at least
65% of its total assets) in equity securities of both U.S. and foreign issuers.
Selection of equity securities will not be restricted by market capitalization,
and the Fund's Sub-Advisers will employ their own proprietary investment
processes in managing assets.
S-2
<PAGE>
Assets of the Fund may also be invested in shares of other investment companies,
ADRs and real estate investment trusts ("REITs"). The Fund may also invest up to
15% of its net assets in illiquid securities, invest up to 25% of its total
assets in convertible securities, including convertible securities rated below
investment grade, purchase unregistered securities that are eligible for re-sale
pursuant to Rule 144A under the Securities Act of 1933, as amended, and purchase
fixed income securities, including securities rated below investment grade. In
addition, the Fund may effect short sales, purchase securities on a when-issued
basis, and may enter into futures and options transactions. Debt securities
rated below investment grade, i.e., rated lower than BBB by S&P and/or Baa by
Moody's or unrated securities of comparable quality, are also known as "junk
bonds." The maximum percentage of the Fund's assets that may be invested in
securities rated below investment grade is 25%, although Fund management
currently does not expect its investment in junk bonds to be significant.
Under normal circumstances, each of the Sub-Advisers may invest a portion of the
assets under its management in the money market instruments described below in
order to maintain liquidity, or if securities meeting the Fund's investment
objective and policies are not otherwise reasonably available for purchase,
provided that such instruments do not exceed 25% of the Fund's total assets. For
temporary defensive purposes or during periods when the Adviser determines that
market conditions warrant, each Sub-Adviser may invest up to 100% of the assets
under its management in cash, repurchase agreements and short-term obligations
that would not ordinarily be consistent with the Fund's objectives.
DESCRIPTION OF PERMITTED INVESTMENTS
Small and Mid-Capitalization Companies. The Fund may invest some of its assets
in equity securities of small and mid-capitalization companies, which involves
greater risk than is customarily associated with investments in more established
companies. The securities of smaller companies may be subject to more abrupt or
erratic market movements than larger, more established companies or the market
average in general. These companies may have limited product lines, markets or
financial resources, or they may be dependent on a limited management group. In
addition, these companies may be more vulnerable to adverse business or economic
events than larger, more established companies. Because of these factors, the
Fund believes that its shares may be suitable for investment by persons who can
invest without concern for current income and who are in a financial position to
assume above-average investment risk in search of above-average long-term
reward. It is not intended as a complete investment program but is designed for
those long-term investors who are prepared to experience above-average
fluctuations in net asset value.
While the small and mid-capitalization issuers may offer greater
opportunities for capital appreciation than large capitalization issuers,
investments in smaller companies may involve greater risks and thus may be
considered speculative. Fund management believes that properly selected
companies of this type have the potential to increase their
S-3
<PAGE>
earnings or market valuation at a rate substantially in excess of the general
growth of the economy. Full development of these companies and trends frequently
takes time and, for this reason, the Fund should be considered as a long-term
investment and not as a vehicle for seeking short-term profits.
The securities of small and mid-capitalization companies may be traded only
in the over-the-counter market or on a regional securities exchange and may not
be traded every day or in the volume typical of trading on a national securities
exchange. As a result, the disposition by the Fund of portfolio securities to
meet redemptions or otherwise may require the Fund to sell these securities at a
discount from market prices or during periods when in management's judgment such
disposition is not desirable or to make many small sales over a lengthy period
of time.
While the process of selection and continuous supervision by Fund
management does not, of course, guarantee successful investment results, it does
provide access to an asset class not available to the average individual due to
the time and cost involved. Careful initial selection is particularly important
in this area as many new enterprises have promise but lack certain of the
fundamental factors necessary to prosper. Investing in small companies requires
specialized research and analysis. In addition, many investors cannot invest
sufficient assets in such companies to provide wide diversification.
Small companies are generally little known to most individual investors
although some may be dominant in their respective industries. Fund management
believes that relatively small companies will continue to have the opportunity
to develop into significant business enterprises. The Fund may invest in
securities of small issuers in the relatively early stages of business
development that have a new technology, a unique or proprietary product or
service, or a favorable market position. Such companies may not be counted upon
to develop into major industrial companies, but management believes that
eventual recognition of their special value characteristics by the investment
community can provide above-average long-term growth to the portfolio.
Equity securities of specific small and mid-capitalization issuers may
present different opportunities for long-term capital appreciation during
varying portions of economic or securities markets cycles, as well as during
varying stages of their business development. The market valuation of small and
mid-capitalization issuers tends to fluctuate during economic or market cycles,
presenting attractive investment opportunities at various points during these
cycles.
Smaller companies, due to the size and kinds of markets that they serve,
may be less susceptible than large companies to intervention from the Federal
government by means of price controls, regulations or litigation.
S-4
<PAGE>
Foreign Investment Risks
Foreign Market Risk. Since the Fund may invest in foreign securities, it
offers the potential for more diversification than an investment only in the
United States. This is because securities traded on foreign markets have often
(though not always) performed differently than securities in the United States.
However, such investments involve special risks not present in U.S. investments
that can increase the chances that the Fund will lose money. In particular, the
Fund is subject to the risk that because there are generally fewer investors on
foreign exchanges and a smaller number of shares traded each day, it may make it
difficult for the Fund to buy and sell securities on those exchanges. In
addition, prices of foreign securities may fluctuate more than prices of
securities traded in the United States.
Foreign Economy Risk. The economies of certain foreign markets often do not
compare favorably with that of the United States with respect to such issues as
growth of gross national product, reinvestment of capital, resources, and
balance of payments position. Certain such economies may rely heavily on
particular industries or foreign capital and are more vulnerable to diplomatic
developments, the imposition of economic sanctions against a particular country
or countries, changes in international trading patterns, trade barriers, and
other protectionist or retaliatory measures. Investments in foreign markets may
also be adversely affected by governmental actions such as the imposition of
capital controls, nationalization of companies or industries, expropriation of
assets, or the imposition of punitive taxes. In addition, the governments of
certain countries may prohibit or impose substantial restrictions on foreign
investing in their capital markets or in certain industries. Any of these
actions could severely affect security prices, impair the Fund's ability to
purchase or sell foreign securities or transfer the Fund's assets or income back
into the United States, or otherwise adversely affect the Fund's operations.
Other foreign market risks include foreign exchange controls, difficulties in
pricing securities, defaults on foreign government securities, difficulties in
enforcing favorable legal judgments in foreign courts, and political and social
instability. Legal remedies available to investors in certain foreign countries
may be less extensive than those available to investors in the United States or
other foreign countries.
Currency Risk and Exchange Risk. Securities in which the Fund invests may
be denominated or quoted in currencies other than the U.S. dollar. Changes in
foreign currency exchange rates will affect the value of the Fund's portfolio.
Generally, when the U.S. dollar rises in value against a foreign currency, a
security denominated in that currency loses value because the currency is worth
fewer U.S. dollars. Conversely, when the U.S. dollar decreases in value against
a foreign currency, a security denominated in that currency gains value because
the currency is worth more U.S. dollars. This risk, generally known as "currency
risk," means that a stronger U.S. dollar will reduce returns for U.S. investors
investing overseas while a weak U.S. dollar will increase those returns.
European Economic and Monetary Union. For a number of years, certain
European countries have been seeking economic unification that would, among
other things, reduce barriers between countries, increase competition among
companies, reduce
S-5
<PAGE>
government subsidies in certain industries, and reduce or eliminate currency
fluctuations among these European countries. The Treaty on European Union (the
"Maastricht Treaty") sets out a framework for the European Economic and Monetary
Union ("EMU") among the countries that comprise the European Union ("EU"). EMU
established a single common European currency (the "euro") that was introduced
on January 1, 1999 and is expected to replace the existing national currencies
of all EMU participants by July 1, 2002.Certain securities issued in
participating EU countries (beginning with government and corporate bonds) were
redenominated in the euro, and are listed, traded and make dividend and other
payments only in euros.
No assurance can be given that EMU will take full effect, that all of the
changes planned for the EU can be successfully implemented, or that these
changes will result in the economic and monetary unity and stability intended.
There is a possibility that EMU will not be completed, or will be completed but
then partially or completely unwound. Because any participating country may opt
out of EMU within the first three years, it is possible that a significant
participant could choose to abandon EMU, which would diminish its credibility
and influence. Any of these occurrences could have adverse effects on the
markets of both participating and non-participating countries, including sharp
appreciation or depreciation of the participants' national currencies and a
significant increase in exchange rate volatility, a resurgence in economic
protectionism, an undermining of confidence in the European markets, an
undermining of European economic stability, the collapse or slowdown of the
drive toward European economic unity, and/or reversion of the attempts to lower
government debt and inflation rates that were introduced in anticipation of EMU.
Also, withdrawal from EMU by an initial participant could cause disruption of
the financial markets as securities that have been redenominated in euros are
transferred back into that country's national currency, particularly if the
withdrawing country is a major economic power. Such developments could have an
adverse impact on the Fund's investments in Europe generally or in specific
countries participating in EMU. Gains or losses resulting from the euro
conversion may be taxable to Fund shareholders under foreign or, in certain
limited circumstances, U.S. tax laws.
Governmental Supervision and Regulation/Accounting Standards. Many foreign
governments supervise and regulate stock exchanges, brokers and the sale of
securities less than the United States does. Some countries may not have laws to
protect investors the way that the U.S. securities laws do. For example, some
foreign countries may have no laws or rules against insider trading. Insider
trading occurs when a person buys or sells a company's securities based on
non-public information about that company. Accounting standards in other
countries are not necessarily the same as in the United States. If the
accounting standards in another country do not require as much detail as U.S.
accounting standards, it may be harder for the Fund management to completely and
accurately determine a company's financial condition. Also, brokerage
commissions and other costs of buying or selling securities often are higher in
foreign countries than they are in the United States. This reduces the amount
the Fund can earn on its investments.
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Certain Risks of Holding Fund Assets Outside the United States. The Fund
generally holds its foreign securities and cash in foreign banks and securities
depositories. Some foreign banks and securities depositories may be recently
organized or new to the foreign custody business. In addition, there may be
limited or no regulatory oversight over their operations. Also, the laws of
certain countries may put limits on the Fund's ability to recover its assets if
a foreign bank or depository or issuer of a security or any of their agents goes
bankrupt. In addition, it is often more expensive for the Fund to buy, sell and
hold securities in certain foreign markets than it is in the U.S. The increased
expense of investing in foreign markets reduces the amount the Fund can earn on
its investments and typically results in higher operating expense ratio for the
Fund than investment companies invested only in the U.S.
Settlement Risk. Settlement and clearance procedures in certain foreign
markets differ significantly from those in the United States. Foreign settlement
procedures and trade regulations also may involve certain risks (such as delays
in payment for or delivery of securities) not typically generated by the
settlement of U.S. investments. Communications between the United States and
emerging market countries may be unreliable, increasing the risk of delayed
settlements or losses of security certificates. Settlements in certain foreign
countries at times have not kept pace with the number of securities
transactions; these problems may make it difficult for the Fund to carry out
transactions. If the Fund cannot settle or is delayed in settling a purchase of
securities, it may miss attractive investment opportunities and certain of its
assets may be uninvested with no return earned thereon for some period. If the
Fund cannot settle or is delayed in settling a sale of securities, it may lose
money if the value of the security then declines or, if it has contracted to
sell the security to another party, the Fund could be liable to that party for
any losses incurred.
Portfolio Turnover. An annual portfolio turnover rate in excess of 100% may
result from the Fund's investment strategy. Portfolio turnover rates in excess
of 100% may result in higher transaction costs, including increased brokerage
commissions, and higher levels of taxable capital gain.
Convertible Securities. Convertible securities entitle the holder to
receive interest payments paid on corporate debt securities or the dividend
preference on a preferred stock until such time as the convertible security
matures or is redeemed or until the holder elects to exercise the conversion
privilege.
The characteristics of convertible securities include the potential for
capital appreciation as the value of the underlying common stock increases, the
relatively high yield received from dividend or interest payments as compared to
common stock dividends and decreased risks of decline in value relative to the
underlying common stock due to their fixed-income nature. As a result of the
conversion feature, however, the interest rate or dividend preference on a
convertible security is generally less than would be the case if the securities
were issued in non-convertible form.
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In analyzing convertible securities, the Investment Adviser will consider
both the yield on the convertible security relative to its credit quality and
the potential capital appreciation that is offered by the underlying common
stock, among other things.
Convertible securities are issued and traded in a number of securities
markets. Even in cases where a substantial portion of the convertible securities
held by the Fund are denominated in United States dollars, the underlying equity
securities may be quoted in the currency of the country where the issuer is
domiciled. With respect to convertible securities denominated in a currency
different from that of the underlying equity securities, the conversion price
may be based on a fixed exchange rate established at the time the security is
issued. As a result, fluctuations in the exchange rate between the currency in
which the debt security is denominated and the currency in which the share price
is quoted will affect the value of the convertible security.
Apart from currency considerations, the value of convertible securities is
influenced by both the yield of nonconvertible securities of comparable issuers
and by the value of the underlying common stock. The value of a convertible
security viewed without regard to its conversion feature (i.e., strictly on the
basis of its yield) is sometimes referred to as its "investment value." To the
extent interest rates change, the investment value of the convertible security
typically will fluctuate. However, at the same time, the value of the
convertible security will be influenced by its "conversion value," which is the
market value of the underlying common stock that would be obtained if the
convertible security were converted. Conversion value fluctuates directly with
the price of the underlying common stock. If, because of a low price of the
common stock the conversion value is substantially below the investment value of
the convertible security, the price of the convertible security is governed
principally by its investment value.
To the extent the conversion value of a convertible security increases to a
point that approximates or exceeds its investment value, the price of the
convertible security will be influenced principally by its conversion value. A
convertible security will sell at a premium over the conversion value to the
extent investors place value on the right to acquire the underlying common stock
while holding a fixed-income security.
Holders of convertible securities generally have a claim on the assets of
the issuer prior to the common stockholders but may be subordinated to other
debt securities of the same issuer. A convertible security may be subject to
redemption at the option of the issuer at a price established in the charter
provision, indenture or other governing instrument pursuant to which the
convertible security was issued. If a convertible security held by the Fund is
called for redemption, the Fund will be required to redeem the security, convert
it into the underlying common stock or sell it to a third party. Certain
convertible debt securities may provide a put option to the holder which
entitles the holder to cause the security to be redeemed by the issuer at a
premium over the stated principal amount of the debt security under certain
circumstances.
Debt Securities. The Fund may hold convertible and nonconvertible debt
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securities and preferred securities. The Fund has established no rating criteria
for the debt securities in which it may invest and such securities may not be
rated at all for creditworthiness. In purchasing such securities, the Fund will
rely on the Investment Adviser's judgment, analysis and experience in evaluating
the creditworthiness of an issuer of such securities. The Investment Adviser
will take into consideration, among other things, the issuer's financial
resources, its sensitivity to economic conditions and trends, its operating
history, the quality of the issuer's management and regulatory matters.
Junk Bonds. Junk bonds are debt securities that are rated below investment
grade by the major rating agencies or are unrated securities that Fund
management believes are of comparable quality. Although junk bonds generally pay
higher rates of interest than investment grade bonds, they are high risk
investments that may cause income and principal losses for the Fund. The major
risks in junk bond investments include the following:
Junk bonds may be issued by less creditworthy companies. These securities
are vulnerable to adverse changes in the issuer's industry and to general
economic conditions. Issuers of junk bonds may be unable to meet their interest
or principal payment obligations because of an economic downturn, specific
issuer developments or the unavailability of additional financing.
The issuers of junk bonds may have a larger amount of outstanding debt
relative to their assets than issuers of investment grade bonds. If the issuer
experiences financial stress, it may be unable to meet its debt obligations. The
issuer's ability to pay its debt obligations also may be lessened by specific
issuer developments, or the unavailability of additional financing.
Junk bonds are frequently ranked junior to claims by other creditors. If
the issuer cannot meet its obligations, the senior obligations are generally
paid off before the junior obligations. Junk bonds frequently have redemption
features that permit an issuer to repurchase the security from the Fund before
it matures. If an issuer redeems the junk bonds, the Fund may have to invest the
proceeds in bonds with lower yields and may lose income.
Prices of junk bonds are subject to extreme price fluctuations. Negative
economic developments may have a greater impact on the prices of junk bonds than
on other higher rated fixed income securities.
Junk bonds may be less liquid than higher rated fixed income securities
even under normal economic conditions. There are fewer dealers in the junk bond
market, and there may be significant differences in the prices quoted for junk
bonds by the dealers. Because they are less liquid, judgment may play a greater
role in valuing certain of the Fund's portfolio securities than in the case of
securities trading in a more liquid market.
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The Fund may incur expenses to the extent necessary to seek recovery upon
default or to negotiate new terms with a defaulting issuer.
Illiquid or Restricted Securities. The Fund may invest up to 15% of its net
assets in securities that lack an established secondary trading market or
otherwise are considered illiquid. Liquidity of a security relates to the
ability to dispose easily of the security and the price to be obtained upon
disposition of the security, which may be less than would be obtained for a
comparable more liquid security. Illiquid securities may trade at a discount
from comparable, more liquid investments. Investment of the Fund's assets in
illiquid securities may restrict the ability of the Fund to dispose of its
investments in a timely fashion and for a fair price as well as its ability to
take advantage of market opportunities. The risks associated with illiquidity
will be particularly acute where the Fund's operations require cash, such as
when the Fund redeems shares or pays dividends, and could result in the Fund
borrowing to meet short-term cash requirements or incurring capital losses on
the sale of illiquid investments.
The Fund may invest in securities that are not registered ("restricted
securities") under the Securities Act. Restricted securities may be sold in
private placement transactions between issuers and their purchasers and may be
neither listed on an exchange nor traded in other established markets. In many
cases, privately placed securities may not be freely transferable under the laws
of the applicable jurisdiction or due to contractual restrictions on resale. As
a result of the absence of a public trading market, privately placed securities
may be less liquid and more difficult to value than publicly traded securities.
To the extent that privately placed securities may be resold in privately
negotiated transactions, the prices realized from the sales, due to illiquidity,
could be less than those originally paid by the Fund or less than their fair
market value. In addition, issuers whose securities are not publicly traded may
not be subject to the disclosure and other investor protection requirements that
may be applicable if their securities were publicly traded. If any privately
placed securities held by the Fund are required to be registered under the
securities laws of one or more jurisdictions before being resold, the Fund may
be required to bear the expenses of registration. Certain of the Fund's
investments in private placements may consist of direct investments and may
include investments in smaller, less seasoned issuers, which may involve greater
risks. These issuers may have limited product lines, markets or financial
resources, or they may be dependent on a limited management group. In making
investments in such securities, the Fund may obtain access to material nonpublic
information which may restrict the Fund's ability to conduct portfolio
transactions in such securities.
144A Securities. The Fund may purchase restricted securities that can be
offered and sold to "qualified institutional buyers" under Rule 144A under the
Securities Act. The Board of Trustees has determined to treat as liquid Rule
144A securities that are either freely tradable in their primary markets
offshore or have been determined to be liquid in accordance with the policies
and procedures adopted by the Board of Trustees. The Board of Trustees has
adopted guidelines and delegated to the [Investment Adviser] the daily function
of determining and monitoring liquidity of restricted securities. The
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Board of Trustees, however, will retain sufficient oversight and be ultimately
responsible for the determinations. Since it is not possible to predict with
assurance exactly how this market for restricted securities sold and offered
under Rule 144A will continue to develop, the Board of Trustees will carefully
monitor the Fund's investments in these securities. This investment practice
could have the effect of increasing the level of illiquidity in the Fund to the
extent that qualified institutional buyers become for a time uninterested in
purchasing these securities.
Investment Company Shares. The Fund may invest in shares of other
investment companies to the extent permitted by applicable law and subject to
certain restrictions. The Fund's purchase of such investment company securities
results in the layering of expenses, such that shareholders would indirectly
bear a proportionate share of the operating expenses of such investment
companies, including advisory fees, in addition to paying Fund expenses. Under
applicable regulations, the Fund is prohibited from acquiring the securities of
another investment company if, as a result of such acquisition: (1) the Fund
owns more than 3% of the total voting stock of the other company; (2) securities
issued by any one investment company represent more than 5% of the Fund's total
assets; or (3) securities (other than treasury stock) issued by all investment
companies represent more than 10% of the total assets of the Fund.
American Depositary Receipts ("ADRs"). The Fund may invest up to 10% of its
total assets in the securities of non-U.S. issuers in the form of ADRs. ADRs are
receipts issued by a U.S. bank or trust company that evidence ownership of
underlying securities issued by a non-U.S. corporation. The Fund may invest in
unsponsored ADRs.
Holders of an unsponsored depositary receipt generally bear all the costs
of the unsponsored facility. The depositary of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited security or to pass through to the
holders of the receipts voting rights with respect to the deposited securities.
Real Estate Investment Trusts ("REITs"). REITs are a type of pooled
investment vehicle that invests primarily in income producing real estate or
real estate related loans or interests. REITs are generally classified as equity
REITs, mortgage REITs or a combination of equity and mortgage REITs. Equity
REITs invest the majority of their assets directly or indirectly in real
property and derive income primarily from the collection of rents. Equity REITs
can also realize capital gains by selling properties that have appreciated in
value. Mortgage REITs invest the majority of their assets in real estate
mortgages and derive income from the collection of interest payments. Like RICs
such as the Fund, REITs are not taxed on income distributed to shareholders
provided they comply with certain requirements of the Internal Revenue Code of
1986, as amended (the "Code"). The Fund will indirectly bear its proportionate
share of expenses incurred by the REITs in which the Fund invests in addition to
the expenses incurred directly by the Fund.
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Investing in REITs involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. Equity REITs
may be affected by changes in the value of the underlying property owned by the
REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, may not be diversified
geographically or by property type, and are subject to heavy cash flow
dependency, default by borrowers and self-liquidation. REITs must also meet
certain requirements under the Code in order to avoid entity level tax and to
pass-through certain tax attributes of their income to shareholders. REITs are
consequently subject to the risk of failing to meet these requirements for
favorable tax treatment and failing to maintain their exemptions from
registration under the Investment Company Act. REITs are also subject to changes
in the Code, including changes involving their tax status.
REITs (especially mortgage REITS) are also subject to interest rate risks.
When interest rates decline, the value of a REIT's investment in fixed rate
obligations can be expected to rise. Conversely, when interest rates rise, the
value of a REIT's investment in fixed rate obligations can be expected to
decline. In contrast, as interest rates on adjustable rate mortgage loans are
reset periodically, yields on a REIT's investments in such loans will gradually
align themselves to reflect changes in market interest rates, causing the value
of such investments to fluctuate less dramatically in response to interest rate
fluctuations than would investments in fixed rate obligations.
Investing in REITs involves risks similar to those associated with
investing in small capitalization companies. REITs may have limited financial
resources, may trade less frequently and in limited volume and may be subject to
more abrupt or erratic price movements than larger company securities.
Historically, small capitalization stocks, such as REITs, have been more
volatile in price than the larger capitalization stocks included in the Standard
& Poor's 500 Index. The management of a REIT may be subject to conflicts of
interest with respect to the operation of the business of the REIT and may be
involved in real estate activities competitive with the REIT. REITs may own
properties through joint ventures or in other circumstances in which the REIT
may not have control over its investments. REITs may incur significant amounts
of leverage.
When Issued Securities, Delayed Delivery Securities and Forward
Commitments. The Fund may purchase or sell securities that it is entitled to
receive on a when issued basis. The Fund may also purchase or sell securities on
a delayed delivery basis. The Fund may also purchase or sell securities through
a forward commitment. These transactions involve the purchase or sale of
securities by the Fund at an established price with payment and delivery taking
place in the future. The Fund enters into these transactions to obtain what is
considered an advantageous price to the Fund at the time of entering into the
transaction. The Fund has not established any limit on the percentage of its
assets that may be committed in connection with these transactions. When the
Fund purchases securities in these transactions, the Fund segregates an account
with its custodian of cash, cash equivalents, U.S. Government securities or
other liquid securities in an amount equal to the amount of its purchase
commitments.
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There can be no assurance that a security purchased on a when issued basis
will be issued or that a security purchased or sold through a forward commitment
will be delivered. The value of securities in these transactions on the delivery
date may be more or less than the Fund's purchase price. The Fund may bear the
risk of a decline in the value of the security in these transactions and may not
benefit from an appreciation in the value of the security during the commitment
period.
Derivatives. The Fund may use instruments referred to as Derivatives.
Derivatives are financial instruments the value of which is derived from another
security, a commodity (such as gold or oil) or an index (a measure of value or
rates, such as the Standard & Poor's 500 Index or the prime lending rate).
Derivatives allow the Fund to increase or decrease the level of risk to which
the Fund is exposed more quickly and efficiently than transactions in other
types of instruments.
Hedging. The Fund may use Derivatives for hedging purposes including
participatory hedges. Hedging is a strategy in which a Derivative is used to
offset the risk that other fund holdings may decrease in value. Losses on the
other investment may be substantially reduced by gains on a Derivative that
reacts in an opposite manner to market movements. While hedging can reduce
losses, it can also reduce or eliminate gains if the market moves in a different
manner than anticipated by the Fund or if the cost of the Derivative outweighs
the benefit of the hedge. Hedging also involves the risk that changes in the
value of the Derivative will not match those of the holdings being hedged as
expected by the Fund, in which case any losses on the holdings being hedged may
not be reduced.
The Fund may use Derivative instruments and trading strategies including
the following:
Indexed and Inverse Securities. The Fund may invest in securities the
potential return of which is based on an index. As an illustration, the Fund may
invest in a debt security that pays interest based on the current value of an
interest rate index, such as the prime rate. The Fund may also invest in a debt
security which returns principal at maturity based on the level of a securities
index or a basket of securities, or based on the relative changes of two
indices. In addition, the Fund may invest in securities the potential return of
which is based inversely on the change in an index (that is, a security the
value of which will move in the opposite direction of changes to an index). For
example, the Fund may invest in securities that pay a higher rate of interest
when a particular index decreases and pay a lower rate of interest (or do not
fully return principal) when the value of the index increases. If the Fund
invests in such securities, it may be subject to reduced or eliminated interest
payments or loss of principal in the event of an adverse movement in the
relevant index or indices. Indexed and inverse securities involve credit risk,
and certain indexed and inverse securities may involve currency risk, leverage
risk and liquidity risk. The Fund may invest in indexed and inverse securities
for hedging purposes only. When used for hedging purposes, indexed and inverse
securities involve correlation risk.
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Options on Securities and Securities Indices.
Purchasing Put Options. The Fund may purchase put options on securities
held in its portfolio or on securities or interest rate indices which are
correlated with securities held in its portfolio. When the Fund purchases a put
option, in consideration for an up front payment (the "option premium") the Fund
acquires a right to sell to another party specified securities owned by the Fund
at a specified price (the "exercise price") on or before a specified date (the
"expiration date"), in the case of an option on securities, or to receive from
another party a payment based on the amount a specified securities index
declines below a specified level on or before the expiration date, in the case
of an option on a securities index. The purchase of a put option limits the
Fund's risk of loss in the event of a decline in the market value of the
portfolio holdings underlying the put option prior to the option's expiration
date. If the market value of the portfolio holdings associated with the put
option increases rather than decreases, however, the Fund will lose the option
premium and will consequently realize a lower return on the portfolio holdings
than would have been realized without the purchase of the put. Purchasing a put
option may involve correlation risk, and may also involve liquidity and credit
risk. The Fund will not purchase put options on securities if, as a result of
such purchase, the aggregate cost of all outstanding options on securities held
by the Fund would exceed 5% of the market value of the Fund's total assets.
Purchasing Call Options. The Fund may also purchase call options on
securities it intends to purchase or securities or interest rate indices, which
are correlated with the types of securities it intends to purchase. When the
Fund purchases a call option, in consideration for the option premium the Fund
acquires a right to purchase from another party specified securities at the
exercise price on or before the expiration date, in the case of an option on
securities, or to receive from another party a payment based on the amount a
specified securities index increases beyond a specified level on or before the
expiration date, in the case of an option on a securities index. The purchase of
a call option may protect the Fund from having to pay more for a security as a
consequence of increases in the market value for the security during a period
when the Fund is contemplating its purchase, in the case of an option on a
security, or attempting to identify specific securities in which to invest in a
market the Fund believes to be attractive, in the case of an option on an index
(an "anticipatory hedge"). In the event the Fund determines not to purchase a
security underlying a call option, however, the Fund may lose the entire option
premium. Purchasing a call option involves correlation risk, and may also
involve liquidity and credit risk.
The Fund is also authorized to purchase put or call options in connection
with closing out put or call options it has previously sold.
Writing Call Options. The Fund may write (i.e., sell) call options on
securities
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held in its portfolio or securities indices the performance of which
correlates with securities held in its portfolio. When the Fund writes a call
option, in return for an option premium, the Fund gives another party the right
to buy specified securities owned by the Fund at the exercise price on or before
the expiration date, in the case of an option on securities, or agrees to pay to
another party an amount based on any gain in a specified securities index beyond
a specified level on or before the expiration date, in the case of an option on
a securities index. In the event the party to which the Fund has written an
option fails to exercise its rights under the option because the value of the
underlying securities is less than the exercise price, the Fund will partially
offset any decline in the value of the underlying securities through the receipt
of the option premium. By writing a call option, however, the Fund limits its
ability to sell the underlying securities, and gives up the opportunity to
profit from any increase in the value of the underlying securities beyond the
exercise price, while the option remains outstanding. Writing a call option may
involve correlation risk.
Writing Put Options. The Fund may also write put options on securities or
securities indices. When the Fund writes a put option, in return for an option
premium the Fund gives another party the right to sell to the Fund a specified
security at the exercise price on or before the expiration date, in the case of
an option on a security, or agrees to pay to another party an amount based on
any decline in a specified securities index below a specified level on or before
the expiration date, in the case of an option on a securities index. In the
event the party to which the Fund has written an option fails to exercise its
rights under the option because the value of the underlying securities is
greater than the exercise price, the Fund will profit by the amount of the
option premium. By writing a put option, however, the Fund will be obligated to
purchase the underlying security at a price that may be higher than the market
value of the security at the time of exercise as long as the put option is
outstanding, in the case of an option on a security, or make a cash payment
reflecting any decline in the index, in the case of an option on an index.
Accordingly, when the Fund writes a put option it is exposed to a risk of loss
in the event the value of the underlying securities falls below the exercise
price, which loss potentially may substantially exceed the amount of option
premium received by the Fund for writing the put option. The Fund will write a
put option on a security or a securities index only if the Fund would be willing
to purchase the security at the exercise price for investment purposes (in the
case of an option on a security) or is writing the put in connection with
trading strategies involving combinations of options -- for example, the sale
and purchase of options with identical expiration dates on the same security or
index but different exercise prices (a technique called a "spread"). Writing a
put option may involve substantial leverage risk.
The Fund is also authorized to sell put or call options in connection with
closing out call or put options it has previously purchased.
Other than with respect to closing transactions, the Fund will write only
call or put options that are "covered." A call or put option will be considered
covered if the Fund has segregated assets with respect to such option in the
manner described in "Risk Factors in
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Derivatives" below. A call option will also be considered covered if the Fund
owns the securities it would be required to deliver upon exercise of the option
(or, in the case of an option on a securities index, securities that
substantially correlate with the performance of such index) or owns a call
option, warrant or convertible instrument which is immediately exercisable for,
or convertible into, such security.
Types of Options. The Fund may engage in transactions in options on
securities or securities indices on exchanges and in the over-the-counter
("OTC") markets. In general, exchange-traded options have standardized exercise
prices and expiration dates and require the parties to post margin against their
obligations, and the performance of the parties' obligations in connection with
such options is guaranteed by the exchange or a related clearing corporation.
OTC options have more flexible terms negotiated between the buyer and the
seller, but generally do not require the parties to post margin and are subject
to greater credit risk. OTC options also involve greater liquidity risk. See
"Additional Risk Factors of OTC Transactions; Limitations on the Use of OTC
Derivatives" below.
Futures. The Fund may engage in transactions in futures and options
thereon. Futures are standardized, exchange-traded contracts which obligate a
purchaser to take delivery, and a seller to make delivery, of a specific amount
of an asset at a specified future date at a specified price. No price is paid
upon entering into a futures contract. Rather, upon purchasing or selling a
futures contract the Fund is required to deposit collateral ("margin") equal to
a percentage (generally less than 10%) of the contract value. Each day
thereafter until the futures position is closed, the Fund will pay additional
margin representing any loss experienced as a result of the futures position the
prior day or be entitled to a payment representing any profit experienced as a
result of the futures position the prior day. Futures involve substantial
leverage risk.
The sale of a futures contract limits the Fund's risk of loss through a
decline in the market value of portfolio holdings correlated with the futures
contract prior to the futures contract's expiration date. In the event the
market value of the portfolio holdings correlated with the futures contract
increases rather than decreases, however, the Fund will realize a loss on the
futures position and a lower return on the portfolio holdings than would have
been realized without the purchase of the futures contract.
The purchase of a futures contract may protect the Fund from having to pay
more for securities as a consequence of increases in the market value for such
securities during a period when the Fund was attempting to identify specific
securities in which to invest in a market the Fund believes to be attractive. In
the event that such securities decline in value or the Fund determines not to
complete an anticipatory hedge transaction relating to a futures contract,
however, the Fund may realize a loss relating to the futures position.
The Fund will limit transactions in futures and options on futures to
financial futures contracts (i.e., contracts for which the underlying asset is a
currency or securities or interest rate index) purchased or sold for hedging
purposes (including anticipatory
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hedges). The Fund will further limit transactions in futures and options on
futures to the extent necessary to prevent the Fund from being deemed a
"commodity pool" under regulations of the Commodity Futures Trading Commission.
Swaps. The Fund is authorized to enter into equity swap agreements, which
are OTC contracts in which one party agrees to make periodic payments based on
the change in market value of a specified equity security, basket of equity
securities or equity index in return for periodic payments based on a fixed or
variable interest rate or the change in market value of a different equity
security, basket of equity securities or equity index. Swap agreements may be
used to obtain exposure to an equity or market without owning or taking physical
custody of securities in circumstances in which direct investment is restricted
by local law or is otherwise impractical.
The Fund will enter into an equity swap transaction only if, immediately
following the time the Fund enters into the transaction, the aggregate notional
principal amount of equity swap transactions to which the Fund is a party would
not exceed 5% of the Fund's net assets.
Swap agreements entail the risk that a party will default on its payment
obligations to the Fund thereunder. The Fund will seek to lessen the risk to
some extent by entering into a transaction only if the counterparty meets the
current credit requirement for OTC option counterparties. Swap agreements also
bear the risk that the Fund will not be able to meet its obligations to the
counterparty. The Fund, however, will deposit in a segregated account with its
custodian, liquid securities or cash or cash equivalents or other assets
permitted to be so segregated by the Commission in an amount equal to or greater
than the market value of the liabilities under the swap agreement or the amount
it would cost the Fund initially to make an equivalent direct investment, plus
or minus any amount the Fund is obligated to pay or is to receive under the swap
agreement.
In a typical cap or floor agreement, the buyer of an interest rate cap
obtains the right to receive payments to the extent that a specific interest
rate exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate falls
below an agreed-upon level. An interest rate collar combines elements of buying
a cap and selling a floor. In swap agreements, if the Fund agrees to exchange
payments in dollars for payments in foreign currency, the swap agreement would
tend to decrease the Fund's exposure to U.S. interest rates and increase its
exposure to foreign currency and interest rates. Caps and floors have an effect
similar to buying or writing options. Depending on how they are used, swap
agreements may increase or decrease the overall volatility of the Fund's
investment and their share price and yield.
Foreign Exchange Transactions.
The Fund may engage in spot and forward foreign exchange transactions and
currency swaps, purchase and sell options on currencies and purchase and sell
currency
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futures and related options thereon (collectively, "Currency Instruments") for
purposes of hedging against the decline in the value of currencies in which its
portfolio holdings are denominated against the U.S. dollar.
Forward Foreign Exchange Transactions. Forward foreign exchange
transactions are OTC contracts to purchase or sell a specified amount of a
specified currency or multinational currency unit at a price and future date set
at the time of the contract. Spot foreign exchange transactions are similar but
require current, rather than future, settlement. The Fund will enter into
foreign exchange transactions only for purposes of hedging either a specific
transaction or a portfolio position. The Fund may enter into a forward foreign
exchange transaction for purposes of hedging a specific transaction by, for
example, purchasing a currency needed to settle a security transaction at a
future date or selling a currency in which the Fund has received or anticipates
receiving a dividend or distribution. The Fund may enter into a foreign exchange
transaction for purposes of hedging a portfolio position by selling forward a
currency in which a portfolio position of the Fund is denominated or by
purchasing a currency in which the Fund anticipates acquiring a portfolio
position in the near future. The Fund may also hedge portfolio positions through
currency swaps, which are transactions in which one currency is simultaneously
bought for a second currency on a spot basis and sold for the second currency on
a forward basis. Forward foreign exchange transactions involve substantial
currency risk, and also involve credit and liquidity risk.
Currency Futures. The Fund may also hedge against the decline in the value
of a currency against the U.S. dollar through use of currency futures or options
thereon. Currency futures are similar to forward foreign exchange transactions
except that futures are standardized, exchange-traded contracts. See "Futures"
above. Currency futures involve substantial currency risk, and also involve
leverage risk.
Currency Options. The Fund may also hedge against the decline in the value
of a currency against the U.S. dollar through the use of currency options.
Currency options are similar to options on securities, but in consideration for
an option premium the writer of a currency option is obligated to sell (in the
case of a call option) or purchase (in the case of a put option) a specified
amount of a specified currency on or before the expiration date for a specified
amount of another currency. The Fund may engage in transactions in options on
currencies either on exchanges or OTC markets. See "Types of Options" above and
"Additional Risk Factors of OTC Transactions; Limitations on the Use of OTC
Derivatives" below. Currency options involve substantial currency risk, and may
also involve credit, leverage or liquidity risk.
Limitations on Currency Hedging. The Fund will not speculate in Currency
Instruments. Accordingly, the Fund will not hedge a currency in excess of the
aggregate market value of the securities which it owns (including receivables
for unsettled securities sales), or has committed to or anticipates purchasing,
which are denominated in such currency. The Fund may, however, hedge a currency
by entering into a transaction in a Currency Instrument denominated in a
currency other than the currency being hedged (a
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"cross-hedge"). The Fund will only enter into a cross-hedge if the Investment
Adviser believes that (i) there is a demonstrable high correlation between the
currency in which the cross-hedge is denominated and the currency being hedged,
and (ii) executing a cross-hedge through the currency in which the cross-hedge
is denominated will be significantly more cost-effective or provide
substantially greater liquidity than executing a similar hedging transaction by
means of the currency being hedged.
Risk Factors in Hedging Foreign Currency. Hedging transactions involving
Currency Instruments involve substantial risks, including correlation risk.
While the Fund's use of Currency Instruments to effect hedging strategies is
intended to reduce the volatility of the net asset value of the Fund's shares,
the net asset value of the Fund's shares will fluctuate. Moreover, although
Currency Instruments will be used with the intention of hedging against adverse
currency movements, transactions in Currency Instruments involve the risk that
anticipated currency movements will not be accurately predicted and that the
Fund's hedging strategies will be ineffective. To the extent that the Fund
hedges against anticipated currency movements which do not occur, the Fund may
realize losses, and decrease its total return, as the result of its hedging
transactions. Furthermore, the Fund will only engage in hedging activities from
time to time and may not be engaging in hedging activities when movements in
currency exchange rates occur.
It may not be possible for the Fund to hedge against currency exchange rate
movements, even if correctly anticipated, in the event that (i) the currency
exchange rate movement is so generally anticipated that the Fund is not able to
enter into a hedging transaction at an effective price, or (ii) the currency
exchange rate movement relates to a market with respect to which Currency
Instruments are not available and it is not possible to engage in effective
foreign currency hedging.
Risk Factors in Derivatives
Derivatives are volatile and involve significant risks, including:
o Credit risk -- the risk that the counterparty on a derivative
transaction will be unable to honor its financial obligation to the
Fund.
o Currency risk -- the risk that changes in the exchange rate between
two currencies will adversely affect the value (in U.S. dollar terms)
of an investment.
o Leverage risk -- the risk associated with certain types of investments
or trading strategies (such as borrowing money to increase the amount
of investments) that relatively small market movements may result in
large changes in the value of an investment. Certain investments or
trading strategies that involve leverage can result in losses that
greatly exceed the amount originally invested.
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o Liquidity risk -- the risk that certain securities may be difficult or
impossible to sell at the time that the seller would like or at the
price that the seller believes the security is currently worth.
Use of derivatives for hedging purposes involves correlation risk. If the
value of the derivative moves more or less than the value of the hedged
instruments, the Fund will experience a gain or loss which will not be
completely offset by movements in the value of the hedged instruments.
The Fund intends to enter into transactions involving derivatives only if
there appears to be a liquid secondary market for such instruments or, in the
case of illiquid instruments traded in OTC transactions, such instruments
satisfy the criteria set forth below under "Additional Risk Factors of OTC
Transactions; Limitations on the Use of OTC Derivatives." However, there can be
no assurance that, at any specific time, either a liquid secondary market will
exist for a derivative or the Fund will otherwise be able to sell such
instrument at an acceptable price. It may therefore not be possible to close a
position in a derivative without incurring substantial losses, if at all.
Certain transactions in derivatives (such as futures transactions or sales
of put options) involve substantial leverage risk and may expose the Fund to
potential losses, which exceed the amount originally invested by the Fund. When
the Fund engages in such a transaction, the Fund will deposit in a segregated
account at its custodian liquid securities with a value at least equal to the
Fund's exposure, on a marked-to-market basis, to the transaction (as calculated
pursuant to requirements of the Commission). Such segregation will ensure that
the Fund has assets available to satisfy its obligations with respect to the
transaction, but will not limit the Fund's exposure to loss.
Additional Risk Factors of OTC Transactions; Limitations on the Use of
OTC Derivatives
Certain derivatives traded in OTC markets, including indexed securities,
swaps and OTC options, involve substantial liquidity risk. The absence of
liquidity may make it difficult or impossible for the Fund to sell such
instruments promptly at an acceptable price. The absence of liquidity may also
make it more difficult for the Fund to ascertain a market value for such
instruments. The Fund will therefore acquire illiquid OTC instruments (i) if the
agreement pursuant to which the instrument is purchased contains a formula price
at which the instrument may be terminated or sold, or (ii) for which the
Investment Adviser anticipates the Fund can receive on each business day at
least two independent bids or offers, unless a quotation from only one dealer is
available, in which case that dealer's quotation may be used.
Because derivatives traded in OTC markets are not guaranteed by an exchange
or clearing corporation and generally do not require payment of margin, to the
extent that the Fund has unrealized gains in such instruments or has deposited
collateral with its counterparty, the Fund is at risk that its counterparty will
become bankrupt or otherwise
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fail to honor its obligations. The Fund will attempt to minimize the risk that a
counterparty will become bankrupt or otherwise fail to honor its obligations by
engaging in transactions in Derivatives traded in OTC markets only with
financial institutions which have substantial capital or which have provided the
Fund with a third-party guaranty or other credit enhancement.
Securities Lending. The Fund may lend securities with a value not exceeding
33 1/3 % of its total assets to banks, brokers and other financial institutions.
In return, the Fund receives collateral in cash or securities issued or
guaranteed by the U.S. Government which will be maintained at all times in an
amount equal to at least 100% of the current market value of the loaned
securities. During the period of such a loan, the Fund typically receives the
income on both the loaned securities and the collateral and thereby increases
its yield. In certain circumstances, the Fund may receive a flat fee for its
loans. Such loans are terminable at any time and the borrower, after notice, is
required to return borrowed securities within five business days. The Fund may
pay reasonable finder's, administrative and custodial fees in connection with
its loans. In the event that the borrower defaults on its obligation to return
borrowed securities because of insolvency or for any other reason, the Fund
could experience delays and costs in gaining access to the collateral and could
suffer a loss to the extent the value of the collateral falls below the market
value of the borrowed securities.
Repurchase Agreements. The Fund may invest in securities pursuant to
repurchase agreements. Repurchase agreements may be entered into only with a
member bank of the Federal Reserve System or primary dealer in U.S. Government
securities or an affiliate thereof. Under such agreements, the bank or primary
dealer or an affiliate thereof agrees, upon entering into the contract, to
repurchase the security at a mutually agreed upon time and price, thereby
determining the yield during the term of the agreement. This insulates the Fund
from fluctuations in the market value of the underlying security during such
period, although, to the extent the repurchase agreement is not denominated in
U.S. dollars, the Fund's return may be affected by currency fluctuations. The
Fund may not invest more than 15% of its net assets in repurchase agreements
maturing in more than seven days (together with other illiquid securities).
Repurchase agreements may be construed to be collateralized loans by the
purchaser to the seller secured by the securities transferred to the purchaser.
The Fund will require the seller to provide additional collateral if the market
value of the securities falls below the repurchase price at any time during the
term of the repurchase agreement. In the event of default by the seller under a
repurchase agreement construed to be a collateralized loan, the underlying
securities are not owned by the Fund but only constitute collateral for the
seller's obligation to pay the repurchase price. Therefore, the Fund may suffer
time delays and incur costs or possible losses in connection with the
disposition of the collateral. In the event of a default under such a repurchase
agreement, instead of the contractual fixed rate of return, the rate of return
to the Fund shall be dependent upon intervening fluctuations of the market value
of such security and the accrued interest on the security. In such event, the
Fund would have rights against the seller for breach of contract with respect to
any losses arising from market fluctuations following the failure of the seller
to perform.
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Reverse Repurchase Agreements. The Fund may enter into reverse repurchase
agreements. The Fund typically will invest the proceeds of a reverse repurchase
agreement in money market instruments or repurchase agreements maturing not
later than the expiration of the reverse repurchase agreement. This use of
proceeds involves leverage. The Fund will enter into a reverse repurchase
agreement for leveraging purposes only when the Investment Adviser believes that
the interest income to be earned from the investment of the proceeds or the gain
for the security to be obtained by effecting the transaction would be greater
than the interest expense of the transaction. The Fund also may use the proceeds
of reverse repurchase agreements to provide liquidity to meet redemption
requests when the sale of the Fund's securities is considered to be
disadvantageous.
Borrowing and Leverage. The use of leverage by the Fund creates an
opportunity for greater total return, but, at the same time, creates special
risks. For example, leveraging may exaggerate changes in the net asset value of
Fund shares and in the yield on the Fund's portfolio. Although the principal of
such borrowings will be fixed, the Fund's assets may change in value during the
time the borrowings are outstanding. Borrowings will create interest expenses of
the Fund that can exceed the income from the assets purchased with the
borrowings. To the extent the income or capital appreciation derived from
securities purchased with borrowed funds exceeds the interest the Fund will have
to pay on the borrowings, the Fund's return will be greater than if leverage had
not been used. Conversely, if the income or capital appreciation from the
securities purchased with such borrowed funds is not sufficient to cover the
cost of borrowing, the return to the Fund will be less than if leverage had not
been used, and therefore the amount available for distribution to shareholders
as dividends and other distributions will be reduced. In the latter case, the
Investment Adviser in its best judgment nevertheless may determine to maintain
the Fund's leveraged position if it expects that the benefits to the Fund's
shareholders of maintaining the leveraged position will outweigh the current
reduced return.
Certain types of borrowings by the Fund may result in the Fund being
subject to covenants in credit agreements relating to asset coverage, portfolio
composition requirements and other matters. It is not anticipated that
observance of such covenants would impede the Investment Adviser from managing
the Fund's portfolio in accordance with the Fund's investment objectives and
policies. However, a breach of any such covenants not cured within the specified
cure period may result in acceleration of outstanding indebtedness and require
the Fund to dispose of portfolio investments at a time when it maybe
disadvantageous to do so.
The Fund at times may borrow, including from affiliates, provided that the
terms of such borrowings are no less favorable than those available from
comparable sources of funds in the marketplace.
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Warrants. The Fund may invest in warrants, which are securities permitting,
but not obligating, the warrant holder to subscribe for other securities. Buying
a warrant does not make the Fund a shareholder of the underlying stock. The
warrant holder has no right to dividends or votes on the underlying stock. A
warrant does not carry any right to assets of the issuer, and for this reason
investment in warrants may be more speculative than other equity-based
investments.
Global Depository Receipts ("GDRs"). GDRs are issued globally and evidence
a similar ownership interest in a security or a pool of securities issued by
either a U.S. or foreign issuer. GDRs are designed for trading in non-U.S.
securities markets. GDRs may be available for investment through "sponsored" or
"unsponsored" facilities. A sponsored facility is established jointly by the
issuer of the security underlying the receipt and a depository, whereas an
unsponsored facility may be established by a depository without participation by
the issuer of the receipt's underlying security.
Money Market Instruments. Money market securities are high-quality,
dollar-denominated, short-term debt instruments. They consist of: (i) bankers'
acceptances, certificates of deposits, notes and time deposits of highly-rated
U.S. banks and U.S. branches of foreign banks; (ii) U.S. Treasury obligations
and obligations issued or guaranteed by the agencies and instrumentalities of
the U.S. Government; (iii) high-quality commercial paper issued by U.S. and
foreign corporations; (iv) debt obligations with a maturity of one year or less
issued by corporations with outstanding high-quality commercial paper ratings;
and (v) repurchase agreements involving any of the foregoing obligations entered
into with highly-rated banks and broker-dealers.
Asset-Backed Securities. Asset-backed securities are "pass-through"
securities, meaning that principal and interest payments made by the borrower on
the underlying assets (such as credit card receivables) are passed through to
the Fund. The value of asset-backed securities, like that of traditional fixed
income securities, typically increases when interest rates fall and decreases
when interest rates rise. However, asset-backed securities differ from
traditional fixed income securities because of their potential for prepayment.
The price paid by the Fund for its asset-backed securities, the yield the Fund
expects to receive from such securities and the average life of the securities
are based on a number of factors, including the anticipated rate of prepayment
of the underlying assets. In a period of declining interest rates, borrowers may
prepay the underlying assets more quickly than anticipated, thereby reducing the
yield to maturity and the average life of the asset-backed securities. Moreover,
when the Fund reinvests the proceeds of a prepayment in these circumstances, it
will likely receive a rate of interest that is lower than the rate on the
security that was prepaid. To the extent that the Fund purchases asset-backed
securities at a premium, prepayments may result in a loss to the extent of the
premium paid. If the Fund buys such securities at a discount, both scheduled
payments and unscheduled prepayments will increase current and total returns and
will accelerate the recognition of income which, when distributed to
shareholders, will be taxable as ordinary income. In a period of rising interest
rates, prepayments of the underlying assets may occur at a slower than expected
rate, creating maturity extension risk. This particular
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risk may effectively change a security that was considered short or intermediate
term at the time of purchase into a longer term security. Since longer term
securities generally fluctuate more widely in response to changes in interest
rates than shorter term securities, maturity extension risk could increase the
inherent volatility of the Fund.
Mortgage-Related Securities. Mortgage-backed securities are "pass-through"
securities, meaning that principal and interest payments made by the borrower on
the underlying mortgages are passed through to the Fund. The value of
mortgage-backed securities, like that of traditional fixed-income securities,
typically increases when interest rates fall and decreases when interest rates
rise. However, mortgage-backed securities differ from traditional fixed-income
securities because of their potential for prepayment without penalty. The price
paid by the Fund for its mortgage-backed securities, the yield the Fund expects
to receive from such securities and the average life of the securities are based
on a number of factors, including the anticipated rate of prepayment of the
underlying mortgages. In a period of declining interest rates, borrowers may
prepay the underlying mortgages more quickly than anticipated, thereby reducing
the yield to maturity and the average life of the mortgage-backed securities.
Moreover, when the Fund reinvests the proceeds of a prepayment in these
circumstances, it will likely receive a rate of interest that is lower than the
rate on the security that was prepaid.
To the extent that the Fund purchases mortgage-backed securities at a
premium, mortgage foreclosures and principal prepayments may result in a loss to
the extent of the premium paid. If the Fund buys such securities at a discount,
both scheduled payments of principal and unscheduled prepayments will increase
current and total returns and will accelerate the recognition of income which,
when distributed to shareholders, will be taxable as ordinary income. In a
period of rising interest rates, prepayments of the underlying mortgages may
occur at a slower than expected rate, creating maturity extension risk. This
particular risk may effectively change a security that was considered short or
intermediate-term at the time of purchase into a long-term security. Since
long-term securities generally fluctuate more widely in response to changes in
interest rates than shorter-term securities, maturity extension risk could
increase the inherent volatility of the Fund.
Obligations of Supranational Entities. Supranational entities are entities
established through the joint participation of several governments, including
the Asian Development Bank, the Inter-American Development Bank, International
Bank for Reconstruction and Development (World Bank), African Development Bank,
European Economic Community, European Investment Bank and the Nordic Investment
Bank. The governmental members, or "stock holders" usually make initial capital
contributions to the supranational entity and, in many cases, are committed to
make additional capital contributions if the supranational entity is unable to
repay its borrowings.
Receipts. Receipts are sold as zero coupon securities, which means that
they are sold at a substantial discount and redeemed at face value at their
maturity date without interim cash payments of interest or principal. This
discount is accredited over the life of
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the security, and such accretion will constitute the income earned on a security
for both accounting and tax purposes. Because of these features, such securities
may be subject to greater interest rate volatility than interest paying
investments.
Rights. Rights give existing shareholders of a corporation the right, but
not the obligation, to buy shares of the corporation at a given price, usually
below the offering price, during a specified period.
Short-Term Obligations. Commercial paper (including variable amount master
demand notes), bankers' acceptances, certificates of deposit, repurchase
agreements, obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, and demand and time deposits of domestic and
foreign banks and savings and loan associations.
U.S. Government Securities. U.S. Government securities in which the Fund
may invest include debt obligations of varying maturities issued by the U.S.
Treasury or issued or guaranteed by certain agencies or instrumentalities of the
U.S. Government, including GNMA, Fannie Mae, FHLMC, Federal Farm Credit Bank,
Farm Credit System Financial Assistance Corporation, Federal Home Loan Banks,
Financing Corporation, Federal Home Loan Bank, Maritime Administration,
Resolution Funding Corporation, Small Business Administration (SBA loan pools
and the guaranteed portions of single loan sales), Student Loan Marketing
Association and Washington Metropolitan Area Transit Authority. Direct
obligations of the U.S. Treasury include a variety of securities that differ
primarily in their interest rates, maturities and dates of issuance. Because the
U.S. Government is not obligated by law to provide support to an instrumentality
that it sponsors, the Fund will not invest in obligations issued by an
instrumentality of the U.S. Government unless the Investment Adviser determines
that the instrumentality's credit risk makes its securities suitable for
investment by the Fund.
U.S. Treasury Obligations. U.S. Treasury Obligations are bills, notes and
bonds issued by the U.S. Treasury, and separately traded interest and principal
component parts of such obligations that are transferable through the Federal
book-entry system known as Separately Traded Registered Interested and Principal
Securities ("STRIPS") and Coupon Under Book Entry Safekeeping ("CUBES").
Variable and Floating Rate Instruments. Certain obligations may carry
variable or floating rates of interest, and may involve a conditional or
unconditional demand feature. Such instruments bear interest at rates which are
not fixed, but which vary with changes in specified market rates or indices. The
interest rates on these securities may be reset daily, weekly, quarterly or some
other reset period, and may have a floor or ceiling on interest rate changes.
There is a risk that the current interest rate on such obligations may not
accurately reflect existing market interest rates. A demand instrument with a
demand notice exceeding seven days may be considered illiquid if there is no
secondary market for such security.
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Yankee Obligations. Yankee Obligations ("Yankees") are U.S.
dollar-denominated instruments of foreign issuers who either register with the
SEC or issue under Rule 144A under the Securities Act of 1933. These obligations
consist of debt securities (including preferred or preference stock of
non-governmental issuers), certificates of deposit, fixed time deposits and
bankers' acceptances issued by foreign banks, and debt obligations of foreign
governments or their subdivisions, agencies and instrumentalities, international
agencies and supranational entities. Some securities issued by foreign
governments or their subdivisions, agencies and instrumentalities may not be
backed by the full faith and credit of the foreign government.
The Yankee obligations selected for the Fund will adhere to the same
quality standards as those utilized or the selection of domestic debt
obligations.
Zero Coupon Securities. STRIPS and Receipts (TRs, TIGRs, LYONS and CATS)
are sold as zero coupon securities, that is, fixed income securities that have
been stripped of their unmatured interest coupons. Zero coupon securities are
sold at a (usually substantial) discount and redeemed at face value at their
maturity date without interim cash payments of interest or principal. The amount
of this discount is accredited over the life of the security, and the accretion
constitutes the income earned on the security for both accounting and tax
purposes. Because of these features, the market prices of zero coupon securities
are generally more volatile than the market prices of securities that have
similar maturity but that pay interest periodically. Zero coupon securities are
likely to respond to a greater degree to interest rate changes that are non-zero
coupon securities with similar maturity and credit qualities. The Fund may have
to dispose of its portfolio securities under disadvantageous circumstances to
generate cash, or may have to leverage itself by borrowing cash to satisfy
income distribution requirements. The Fund accrues income with respect to the
securities prior to the receipt of cash payments. Pay-in-kind securities are
securities that have interest payable by delivery of additional securities.
Deferred payment securities are securities that remain zero coupon securities
until a predetermined date, at which time the stated coupon rate becomes
effective and interest becomes payable at regular intervals.
Corporate Zero Coupon Securities - Corporate zero coupon securities are:
(i) notes or debentures which do not pay current interest and are issued at
substantial discounts from par value, or (ii) notes or debentures that pay no
current interest until a stated date one or more years into the future, after
which date the issuer is obligated to pay interest until maturity, usually at a
higher rate than if interest were payable from the date of issuance, and may
also make interest payments in kind (e.g., with identical zero coupon
securities). Such corporate zero coupon securities, in addition to the risks
identified above, are subject to the risk of the issuer's failure to pay
interest and repay principal in accordance with the terms of the obligation.
Suitability. The economic benefit of an investment in the Fund depends upon
many factors beyond the control of the Fund, the Investment Adviser, the
Sub-Advisers and their affiliates. The Fund should be considered a vehicle for
diversification and not
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as a balanced investment program. The suitability for any particular investor of
a purchase of shares in the Fund will depend upon, among other things, such
investor's investment objectives and such investor's ability to accept the risks
associated with investing in equity securities, including the risk of loss of
principal.
Other Special Considerations. During unusual economic or market conditions,
or for temporary defensive or liquidity purposes, the Fund may invest up to 100%
of its assets in cash, repurchase agreements and short-term obligations that
would not ordinarily be consistent with the Fund's objectives. Short-term
investments and temporary defensive positions may limit the potential for growth
in the value of shares of the Fund.
Non-Diversification
The Fund is a non-diversified company, as defined in the Investment Company Act
of 1940, as amended (the "1940 Act"), which means that a relatively high
percentage of assets of the Fund may be invested in the obligations of a limited
number of issuers. Although the Adviser and the Sub-Advisers generally do not
intend to invest more than 5% of the Fund's assets in any single issuer (with
the exception of securities which are issued or guaranteed by a national
government), as a non-diversified investment company, it may make more
investments of that type than a diversified investment company is permitted to
make, and the value of the shares of the Fund may be more susceptible to any
single economic, political or regulatory occurrence than the shares of a
diversified investment company would be. The Fund intends to satisfy the
diversification requirements necessary to qualify as a regulated investment
company under the Code, which requires that the Fund be diversified (i.e., not
invest more than 5% of its assets in the securities in any one issuer) as to 50%
of its assets.
INVESTMENT LIMITATIONS
Fundamental Policies
The following investment limitations (and those set forth in the Prospectus) are
fundamental policies of each Fund which cannot be changed with respect to the
Fund without the consent of the holders of a majority of that Fund's outstanding
shares. The term "majority of the outstanding shares" means the vote of (i) 67%
or more of the Fund's shares present at a meeting, if more than 50% of the
outstanding shares of the Fund are present or represented by proxy, or (ii) more
than 50% of the Fund's outstanding shares, whichever is less.
The Fund may not:
1. Make any investment inconsistent with the diversification requirement
under the Code necessary to qualify as a regulated investment company.
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2. Invest more than 25% of its total assets, taken at market value, in
the securities of issuers in any particular industry (excluding the
U.S. Government and its agencies and instrumentalities).
3. Make investments for the purpose of exercising control or management.
Investments by the Fund in wholly-owned investment entities created
under the laws of certain countries will not be deemed the making of
investments for the purpose of exercising control or management.
4. Purchase or sell real estate, except that, to the extent permitted by
applicable law, the Fund may invest in securities directly or
indirectly secured by real estate or interests therein or issued by
companies that invest in real estate or interests therein (including
real estate investment trusts).
5. Make loans to other persons, except that the acquisition of bonds,
debentures or other corporate debt securities and investment in
governmental obligations, commercial paper, pass-through instruments,
certificates of deposit, bankers' acceptances, repurchase agreements
or any similar instruments shall not be deemed to be the making of a
loan, and except further that the Fund may lend its portfolio
securities, provided that the lending of portfolio securities may be
made only in accordance with applicable law and the guidelines set
forth in the Fund's Prospectus and Statement of Additional
Information, as they may be amended from time to time.
6. Issue senior securities to the extent such issuance would violate
applicable law.
7. Borrow money, except that (i) the Fund may borrow from banks (as
defined in the Investment Company Act) in amounts up to 33 1/3 % of
its total assets (including the amount borrowed), (ii) the Fund may
borrow up to an additional 5% of its total assets for temporary
purposes, (iii) the Fund may obtain such short-term credit as may be
necessary for the clearance of purchases and sales of portfolio
securities and (iv) the Fund may purchase securities on margin to the
extent permitted by applicable law. The Fund may not pledge its assets
other than to secure such borrowings or, to the extent permitted by
the Fund's investment policies as set forth in its Prospectus and
Statement of Additional Information, as they may be amended from time
to time, in connection with hedging transactions, short sales,
when-issued and forward commitment transactions and similar investment
strategies.
8. Underwrite securities of other issuers except insofar as the Fund
technically may be deemed an underwriter under the Securities Act, in
selling portfolio securities.
9. Purchase or sell commodities or contracts on commodities, except to
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the extent that the Fund may do so in accordance with applicable law
and the Fund's Prospectus and Statement of Additional Information, as
they may be amended from time to time, and without registering as a
commodity pool operator under the Commodity Exchange Act.
For purposes of fundamental investment policy (2), "industry: is determined
by reference to the Standard Industrial Classification ("SIC") codes, as defined
by the Department of Commerce and published by the Securities and Exchange
Commission (and as amended from time to time). Each defined SIC code is
identified by a four-digit number. For purposes of this investment policy,
companies are considered to be in the same industry if they have the same
four-digit SIC code.
In addition, although the Fund is classified as a non-diversified fund
under the Investment Company Act and is not subject to the diversification
requirements of the Investment Company Act, the Fund is required to comply with
certain requirements under the Code.
In addition, the Trust has adopted non-fundamental restrictions that may be
changed by the Board of Trustees without shareholder approval. Under the non
fundamental restrictions, the Fund may not:
a. Purchase securities of other investment companies, except to the
extent such purchases are permitted by applicable law.
b. Invest in securities that cannot be readily resold because of legal or
contractual restrictions or that cannot otherwise be marketed,
redeemed or put to the issuer or a third party, if at the time of
acquisition more than 15% of its net assets would be invested in such
securities. This restriction shall not apply to securities that mature
within seven days or securities that the Trustees of the Trust have
otherwise determined to be liquid pursuant to applicable law.
Securities purchased in accordance with Rule 144A under the Securities
Act (which are restricted securities that can be resold to qualified
institutional buyers, but not to the general public) and determined to
be liquid by the Trustees of the Trust are not subject to the
limitations set forth in this investment restriction.
c. Make any additional investments if the amount of its borrowings
exceeds 5% of its total assets. Borrowings do not include the use of
investment techniques that may be deemed to create leverage,
including, but not limited to, such techniques as dollar rolls,
when-issued securities, options and futures.
d. Lend its portfolio securities, if, as a result, more than 33% of its
total assets would be lent to other parties.
If a percentage restriction on the investment or use of assets set forth
above is adhered to at the time a transaction is effected, later changes in
percentages resulting from
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changing values will not be considered a violation.
The staff of the Commission has taken the position that purchased
over-the-counter ("OTC") options and the assets used as cover for written OTC
options are illiquid securities. Therefore, the Trust has adopted an investment
policy pursuant to which it will not purchase or sell OTC options (including OTC
options on futures contracts) if, as a result of such transactions, the sum of
the market value of OTC options currently outstanding which are held by the
Fund, the market value of the underlying securities covered by OTC call options
currently outstanding which were sold by the Fund and margin deposits on the
Fund's existing OTC options on futures contracts exceed 15% of the net assets of
the Fund, taken at market value, together with all other assets of the Fund
which are illiquid or are not otherwise readily marketable. However, if an OTC
option is sold by the Fund or Portfolio to a primary U.S. Government securities
dealer recognized by the Federal Reserve Bank of New York and if the Fund has
the unconditional contractual right to repurchase such OTC option from the
dealer at a predetermined price, then the Fund will treat as illiquid such
amount of the underlying securities as is equal to the repurchase price less the
amount by which the option is "in-the-money" (i.e., current market value of the
underlying securities minus the option's strike price). The repurchase price
with the primary dealers is typically a formula price that is generally based on
a multiple of the premium received for the option, plus the amount by which the
option is "in-the-money." This policy as to OTC options is not a fundamental
policy of the Fund and may be amended by the Trustees without the approval of
the shareholders. However, the Trustees will not change or modify this policy
prior to the change or modification by the Commission staff of its position.
Portfolio securities of the Fund generally may not be purchased from, sold
or loaned to the Adviser or its affiliates or any of their trustees, directors,
general partners, officers or employees, acting as principal, unless pursuant to
a rule or exemptive order under the Investment Company Act.
Portfolio Turnover
The fund will effect portfolio transactions without regard to holding
period only if, in its management's judgment, such transactions are advisable in
light of a change in circumstances of a particular company or within a
particular industry or in general marker, economic of financial conditions. As a
result of the Fund's investment policies, under certain market conditions, the
Fund's portfolio turnover may be higher than that of other investment companies.
Accordingly, it is impossible to predict portfolio turnover rates.
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The portfolio turnover rate is calculated by dividing the lesser of the
Fund's annual sales or purchases of portfolio securities (exclusive of purchases
or sales of securities whose maturities at the time of acquisition were one year
or less) by the monthly average value of the securities in the portfolio during
the year. A high rate of portfolio turnover results in correspondingly higher
brokerage commission expenses and may also result in negative tax consequences,
such as an increase in capital gains dividends or in ordinary income dividends.
For the fiscal years ended September 30, 1998, and 1999 the portfolio
turnover rates of the Fund's predecessor, the TIP Funds' TIP Target Select
Equity Fund, were 803.02% and 1,279.4%, respectively.
THE ADVISER
The Trust and Concentrated Capital Management (the "Adviser"), have entered into
an advisory agreement (the "Advisory Agreement"). Concentrated Capital
Management, LP is a professional investment management firm founded on May 19,
2000. Greg Berlacher is the Chairman and a shareholder of the Adviser. Under the
Advisory Agreement, the Adviser continuously reviews, supervises and administers
the Fund's investment program, subject to the supervision of, and policies
established by, the Board of Trustees of the Trust (the "Trustees"). The Adviser
makes recommendations to the Trustees with respect to the appropriate allocation
of assets to each of the Fund's Sub-Advisers. The Advisory Agreement provides
that the Adviser shall not be liable for any error of judgment or mistake of law
or for any loss arising out of any investment or for any act or omission in
carrying out its duties, but shall not be protected against any liability to the
Trust or its shareholders by reason of willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard of its obligations or duties thereunder.
The continuance of the Advisory Agreement as to the Fund after the first two
years must be specifically approved at least annually (i) by the vote of the
Trustees or by a vote of the shareholders of the Fund, and (ii) by the vote of a
majority of the Trustees who are not parties to the Advisory Agreement or
"interested persons" of any party thereto, cast in person at a meeting called
for the purpose of voting on such approval. The Advisory Agreement will
terminate automatically in the event of its assignment, and is terminable at any
time without penalty by the Trustees or, with respect to the Fund, by a majority
of the outstanding shares of the Fund, on not less than 30 days' nor more than
60 days' written notice to the Adviser, or by the Adviser on 90 days' written
notice to the Trust.
The Adviser's investment advisory fee may be adjusted based on the Fund's total
return performance as compared to the Fund's benchmark, the Russell 3000 Index.
Under the schedule set forth below, the Adviser's base advisory fee for the Fund
will be increased or decreased if the Fund outperforms or under performs its
stated benchmark. The Fund will pay the Adviser its base fee on a monthly basis.
The Adviser pays the
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Sub-Advisers (quarterly) out of the advisory fees it receives from the Fund.
Commencing one year from the Funds beginning of operations, the Adviser's fee
will be paid by including an increase or decrease in the basic fee based on the
Fund's performance.
For purposes of the performance adjustments, the investment performance of the
Fund for any period is expressed as a percentage of the Fund's net asset value
per share at the beginning of the period. This percentage is equal to the sum of
(i) the change in the Fund's net asset value per share during the period; (ii)
the value of the Fund's cash distributions per share having an ex-dividend date
occurring within the period; and (iii) the per share amount of capital gains
taxes paid or accrued during the period by the Fund for undistributed realized
long-term capital gains. The investment record for a specific index is expressed
as a percentage of the starting level of that index at the beginning of the
period, as modified by the change in the level of the index during the period
and by the value computed consistently with the index, of cash distributions
having an ex-dividend date occurring within the period made by issuers whose
securities are included in the index.
--------------------------------------------------------------------------------
Advisory Fee
Fund Name
-----------------------------------------------
Low Base High
--------------------------------------------------------------------------------
Target Select Equity 0.9125% 1.0625% 1.2125%
--------------------------------------------------------------------------------
For fiscal years ended September 30, 1998 and 1999, the Turner Investment
Partners, Inc. (adviser to the Fund's predecessor, the TIP Funds' TIP Target
Select Equity Fund) reimbursed advisory fees of $47,875 and $104,563,
respectively, and waived advisory fees of $6,656 and $13,999, respectively.
Expenses were voluntarily reimbursed and fees were voluntarily waived in order
to keep total operating expenses of the TIP Funds Target Select Equity Fund from
exceeding _______.
Special Considerations Regarding the Multi-Adviser Approach
The Adviser oversees the portfolio management services provided to the Fund by
each of its Sub-Advisers. Subject to the review of the Trustees, the Adviser
monitors each Sub-Adviser to assure that the Sub-Adviser is managing its segment
of the Fund consistently with the Fund's investment objective and restrictions
and applicable laws and guidelines, including, but not limited to, compliance
with the diversification requirements set forth in Subchapter M of the Code. The
Adviser also provides the Fund with certain administrative services, including
maintenance of certain Fund records and assistance in the preparation of the
Fund's registration statement under federal and state laws. Because each
Sub-Adviser will be managing its segment of the Fund independently from the
other Sub-Advisers, the same security may be held in two different segments of
the Fund, or may be acquired for one segment of the Fund at a time when the
Sub-Adviser of another segment deems it appropriate to dispose of the security
from that other segment. Similarly, under some market conditions, one or more of
the Sub-Advisers may believe that temporary, defensive investments in short-term
instruments or cash are appropriate when another Sub-Adviser believes continued
exposure to the equity markets is appropriate for their segments of the Fund.
Because each Sub-Adviser directs the trading for its own segment of the Fund,
and does not aggregate its transactions
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with those of the other Sub-Advisers, the Fund may incur higher brokerage costs
than would be the case if a single Sub-Adviser were managing the entire Fund.
Because each segment of the Fund may perform differently from the other segments
depending upon the investment style employed, the investments held and changing
market conditions, one segment may be larger or smaller at various times than
the other segments. Periodically, capital activity will be apportioned to
preserve the initial allocation designated for each segment's investment style.
However, the Adviser may, subject to review by the Trustees, allocate new
investment capital differently. This action may be necessary, if for example, a
Sub-Adviser determined that it desires no additional investment capital for a
segment or if an investment style becomes out of favor or more profitable than
other investment styles.
Manager of Managers Option
The Trust may, in the future, seek to achieve its investment objective by using
a "manager of managers" structure. Under a manager of managers structure,
Concentrated Capital Management would act as investment adviser in much the same
way as is currently contemplated. However, as manager of managers, the Adviser
would be permitted, subject to direction from and oversight by the Board of
Trustees, to allocate and reallocate the Fund's assets among sub-advisers, and
to recommend that the Board of Trustees hire, terminate or replace sub-advisers
without shareholder approval. By reducing the number of shareholder meetings
that may have to be held to approve new or additional sub-advisers for the Fund,
the Fund anticipates that there will be substantial potential cost savings, as
well as the opportunity to achieve certain management efficiencies.
Before it can operate using a manager of managers structure, the Trust and the
Adviser will have to obtain exemptive relief from the SEC to permit such an
arrangement. The Trust has requested this relief from the SEC. There is no
assurance that such an order will be granted by the SEC. The initial shareholder
of the Fund voted to vest authority to implement a manager of managers structure
with the Trustees, and such a structure may be adopted without shareholder
approval. However, shareholders of the Fund will be given at least 30 days'
prior written notice of any such change, and any such change would only be made
if the Trustees determine that it would be in the best interests of the Fund and
its shareholders. In making that determination, the Trustees will consider,
among other factors, the benefits to shareholders and/or the opportunity to
reduce costs and achieve operational efficiencies.
THE SUB-ADVISERS
The Sub-Advisory Agreements provide that a Sub-Adviser shall not be protected
against any liability to the Trust or its shareholders by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties, or from reckless disregard of its obligations or duties thereunder.
After the first two years, the continuance of each Sub-Advisory Agreement must
be specifically approved at least annually (i) by the vote of a majority of the
outstanding shares of the Fund or by the
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Trustees, and (ii) by the vote of a majority of the Trustees who are not parties
to such Agreement or "interested persons" of any party thereto, cast in person
at a meeting called for the purpose of voting on such approval. Each
Sub-Advisory Agreement will terminate automatically in the event of its
assignment, and is terminable at any time without penalty by the Trustees or,
with respect to the Fund, by a majority of the outstanding shares of the Fund,
on not less than 30 days' nor more than 60 days' written notice to the
Sub-Adviser on 90 days' written notice to the Trust.
The Fund currently has three Sub-Advisers -- Evergreen Asset Management, Mercury
Advisors, and Turner Investment Partners, Inc. (each a "Sub-Adviser" and
collectively, the "Sub-Advisers").
EVERGREEN INVESTMENT MANAGEMENT COMPANY -- Evergreen Investment Management
Company ("Evergreen"), 200 Berkeley Street, Charlotte, North Carolina, serves as
a Sub-Adviser for a portion of the assets of the Fund. As of May 31, 2000,
Evergreen had over $11.7 billion in client assets under management.
MERCURY ADVISORS -- Fund Asset Management, L.P., doing business as Mercury
Advisors ("Mercury Advisors"), 800 Scudders Mill Road, Plainsboro, New Jersey
serves as a Sub-Adviser for a portion of the assets of the Fund. As of May 31,
2000, Mercury had over $556 billion in client assets under management.
TURNER INVESTMENT PARTNERS, INC.-- Turner Investment Partners, Inc. ("Turner"),
1235 Westlakes Drive, Suite 350, Berwyn, Pennsylvania serves as a Sub-Adviser
for a portion of the assets of the Fund. As of May 31, 2000, Turner had $8
billion in client assets under management.
Each Sub-Adviser will manage a portion of the Fund's assets, which allocation is
determined by the Trustees upon the recommendation of the Adviser. Each
Sub-Adviser makes the investment decisions for the assets of the Fund allocated
to it, and continuously reviews, supervises and administers a separate
investment program, subject to the supervision of, and policies established by,
the Trustees. For its services, each of the Sub-Advisers is entitled to receive
a base fee from Concentrated Capital Management, which is calculated daily and
paid quarterly, at an annual rate of 0.65% for Turner, 0.65% for Evergreen, and
1.00% and 0.75% for the two segments, respectively, of the fund that Mercury
Advisors will manage of the average daily net assets of the Fund allocated to
it. For its services as Adviser to the Fund, CCM is entitled to receive base
investment advisory fees of 1.0625%. This fee may be higher or lower depending
on the Fund's performance relative to a benchmark. Currently, the Adviser and
each Sub-Adviser has been allocated assets in the range of 15-35% of the Fund's
total assets.
In addition, the Adviser may, at its discretion, contribute to a bonus pool out
of the revenues it receives as investment adviser to the Fund. This bonus pool
may be used to provide additional compensation to a Sub-Adviser that outperforms
the benchmark index designated for a particular investment style. The Adviser
may discontinue these arrangements at any time.
For the fiscal year ended September 30, 1999, Clover Capital Management, Inc.
and Penn Capital Management Company, Inc. (sub-advisers to the Fund's
predecessor, the TIP Funds' TIP Target
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Select Equity Fund) received net advisory fees of 0%.
For purposes of the performance adjustments, the investment performance of the
Fund for any period is expressed as a percentage of the Fund's net asset value
per share at the beginning of the period. This percentage is equal to the sum of
(i) the change in the Fund's net asset value per share during the period; (ii)
the value of the Fund's cash distributions per share having an ex-dividend date
occurring within the period; and (iii) the per share amount of capital gains
taxes paid or accrued during the period by the Fund for undistributed realized
long-term capital gains. The investment record for a specific index is expressed
as a percentage of the starting level of that index at the beginning of the
period, as modified by the change in the level of the index during the period
and by the value computed consistently with the index, of cash distributions
having an ex-dividend date occurring within the period made by issuers whose
securities are included in the index.
THE ADMINISTRATOR
The Trust and SEI Investments Fund Resources (the "Administrator") have entered
into an administration agreement (the "Administration Agreement"). The
Administration Agreement provides that the Administrator shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Trust in
connection with the matters to which the Administration Agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross negligence
on the part of the Administrator in the performance of its duties or from
reckless disregard by it of its duties and obligations thereunder. The
Administration Agreement shall remain in effect for a period of three (3) years
after the effective date of the agreement and shall continue in effect for
successive periods of three (3) years unless terminated by either party on not
less than 90 days' prior written notice to the other party.
The Administrator, a Delaware business trust, has its principal business offices
at Oaks, Pennsylvania 19456. SEI Investments Management Corporation ("SIMC"), a
wholly owned subsidiary of SEI Investments Company ("SEI Investments"), is the
owner of all beneficial interest in the Administrator. SEI Investments and its
subsidiaries and affiliates, including the Administrator, are leading providers
of funds evaluation services, trust accounting systems, and brokerage and
information services to financial institutions, institutional investors, and
money managers. The Administrator and its affiliates also serve as administrator
or sub-administrator to the following other mutual funds: The Achievement Funds
Trust, The Advisors' Inner Circle Fund, Amerindo Funds, Inc., The Arbor Fund,
ARK Funds, Armada Funds, The Armada Advantage Fund, Bishop Street Funds, CNI
Charter Funds, CUFUND, The Expedition Funds, First American Funds, Inc., First
American Investment Funds, Inc., First American Strategy Funds, Inc., Friends
Ivory Funds, HighMark Funds, Huntington Funds, Huntington VA Funds, The Nevis
Fund, Inc., Oak Associates Funds, The PBHG Funds, Inc., PBHG Insurance Series
Fund, Inc., The Pillar Funds, SEI Asset Allocation Trust, SEI Daily Income
Trust, SEI Index Funds, SEI Institutional International Trust, SEI Institutional
Investments Trust, SEI Institutional Managed Trust, SEI Insurance Products
Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI Classic Funds, STI
Classic Variable Trust, TIP Funds, UAM Funds Trust, UAM Funds, Inc. and UAM
Funds, Inc. II.
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For the fiscal years ended September 30, 1998 and 1999, the Fund's predecessor,
the TIP Funds' TIP Target Select Equity Fund paid SIMC administration fees of $0
and $85,433, respectively.
THE DISTRIBUTOR
SEI Investments Distribution Co. (the "Distributor"), a wholly-owned subsidiary
of SEI Investments, and the Trust are parties to a distribution agreement (the
"Distribution Agreement") with respect to shares of the Fund. The Distributor
receives no compensation for distribution of shares of the Fund.
The Distribution Agreement shall remain in effect for a period of two years
after the effective date of the agreement and is renewable annually. The
Distribution Agreement may be terminated by the Distributor, by a majority vote
of the Trustees who are not interested persons and have no financial interest in
the Distribution Agreement or by a majority vote of the outstanding securities
of the Trust upon not more than 60 days' written notice by either party or upon
assignment by the Distributor.
The Trust has adopted a distribution plan pursuant to Rule 12b-1 under the 1940
Act for its Class C Shares.
The distribution plan for Class C shares provides for payments to the
Distributor at an annual rate of .75% of the Fund's average daily net assets.
These payments are characterized as "Compensation," and are not directly tied to
expenses incurred by the Distributor; the payments the Distributor receives
during any year may, therefore, be higher or lower than its actual expenses.
These payments may be used to compensate the Distributor for its services in
connection with distribution assistance or provision of shareholder services,
and some or all of it may be used to pay financial institutions and
intermediaries such as banks, savings and loan associations, insurance
companies, and investment counselors, broker-dealers and the Distributor's
affiliates and subsidiaries for services or reimbursement of expenses incurred
in connection with distribution assistance or provision of shareholder services.
If the Distributor's expenses are less than its fee under a plan, the Trust will
still pay the full fee and the Distributor will realize a profit, but the Trust
will not be obligated to pay in excess of the full fee, even if the
Distributor's actual expenses are higher.
The Trust has adopted a shareholder servicing plan for its Class A and Class C
Shares.
Under the shareholder service plan applicable to Class A and Class C, the
Distributor may provide those services itself, or may enter into arrangements
under which third parties provide such services and are compensated by the
Distributor. Under such arrangements, the Distributor may retain as profit any
difference between the fee it receives and the amount it pays such third
parties. In addition, the Fund may pay the Distributor a fee at a negotiated
rate of up to .25% annually of the average daily net assets of the Fund
attributable to Class A or Class C shares that are subject to the arrangement in
return for provision of a broad range of shareholder and administrative
services, including: maintaining client accounts; arranging for bank wires;
responding to client inquiries concerning services provided for investments;
changing dividend options; account designations and addresses; providing
sub-accounting; providing information on share positions to clients; forwarding
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shareholder communications to clients; processing purchase, exchange and
redemption orders; and processing dividend payments.
CODE OF ETHICS
The Board of Trustees of the Trust has adopted a Code of Ethics pursuant to Rule
17j-1 under the Investment Company Act. In addition, the Investment Adviser,
Sub-Advisers and Distributor have adopted Codes of Ethics pursuant to Rule
17j-1. These Codes of Ethics apply to the personal investing activities of
trustees, officers and certain employees ("access persons"). Rule 17j-1 and the
Codes of Ethics are designed to prevent unlawful practices in connection with
the purchase or sale of securities by access persons. Under each Code of Ethics,
access persons are permitted to engage in personal securities transactions, but
are required to report their personal securities transactions for monitoring
purposes. In addition, certain access persons are required to obtain approval
before investing in initial public offerings or private placements. Copies of
these Codes of Ethics are on file with the Securities and Exchange Commission,
and are available to the public.
TRUSTEES AND OFFICERS OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under the
laws of the State of Delaware. The Trustees have approved contracts under which,
as described above, certain companies provide essential management services to
the Trust. The Trustees and executive officers of the Trust and their principal
occupations for the last five years are set forth below. Each may have held
other positions with the named companies during that period. The Trust pays the
fees for unaffiliated Trustees.
The Trustees and Executive Officers of the Trust, their respective dates of
birth, and their principal occupations for the last five years are set forth
below. Each may have held other positions with the named companies during that
period. Unless otherwise noted, the business address of each Trustee and each
Executive Officer is SEI Investments Company, Oaks, Pennsylvania 19456. Certain
officers of the Trust also serve as officers of some or all of the following:
The Achievement Funds Trust, The Advisors' Inner Circle Fund, The Arbor Fund,
ARK Funds, Armada Funds, The Armada Advantage Fund, Bishop Street Funds, CNI
Charter Funds, CUFUND, The Expedition Funds, First American Funds, Inc., First
American Investment Funds, Inc., First American Strategy Funds, Inc., Friends
Ivory Funds, HighMark Funds, Huntington Funds, Huntington VA Funds, The Nevis
Fund, Inc., Oak Associates Funds, The PBHG Funds, Inc., PBHG Insurance Series
Fund, Inc., The Pillar Funds, SEI Asset Allocation Trust, SEI Daily Income
Trust, SEI Index Funds, SEI Institutional International Trust, SEI Institutional
Investments Trust, SEI Institutional Managed Trust, SEI Insurance Products
Trust, SEI Liquid Asset Trust, SEI Tax Exempt Trust, STI Classic Funds, STI
Classic Variable Trust, TIP Funds, UAM Funds Trust, UAM Funds, Inc. and UAM
Funds, Inc. II each of which is an open-end management investment company
managed by SEI Investments Mutual Funds Services or its affiliates and
distributed by SEI Investments Distribution Co.
ROBERT E. TURNER (DOB 11/26/56) - Trustee* - Chairman and Chief Investment
Officer of Turner Investment Partners, Inc. since 1990.
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ALFRED C. SALVATO (DOB 01/09/58) - Trustee** - Treasurer, Thomas Jefferson
University, since 1995, and Assistant Treasurer, 1988-1995.
RONALD FILANTE (DOB 11/19/45) - Trustee** - Associate Professor of Finance, Pace
University, since 1987.
KATHERINE GRISWOLD (DOB 10/28/56) - Trustee** - Director of Benefits Trusts,
Southern New England Telephone Company since 1993.
STEPHEN J. KNEELEY (DOB 02/09/63) - Vice President and Assistant Secretary -
Chief Operating Officer of Turner Investment Partners, Inc., since 1990.
TODD B. CIPPERMAN (DOB 02/14/66) - Vice President and Assistant Secretary -
Senior Vice President and General Counsel of SEI Investments; Senior Vice
President, General Counsel and Secretary of the Administrator and the
Distributor since 2000. Vice President and Assistant Secretary of SEI
Investments, the Administrator and the Distributor, 1995-2000. Associate, Dewey
Ballantine (law firm), 1994-1995. Associate, Winston & Strawn (law firm),
1991-1994.
JAMES R. FOGGO (DOB 06/30/64) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of SEI Investments since January 1998. Vice
President and Secretary of the Adviser, Administrator and Distributor since May
1999. Associate, Paul Weiss, Rifkind, Wharton & Garrison (law firm), 1998.
Associate, Baker & McKenzie (law firm), 1995-1998. Associate, Battle Fowler
L.L.P. (law firm), 1993-1995. Operations Manager, The Shareholder Services
Group, Inc., 1986-1990.
JANET RADER ROTE (DOB 08/24/60) - Vice President and Assistant Secretary -
Director of Compliance of Turner Investment Partners, Inc., since 1992.
TIMOTHY D. BARTO (DOB 3/28/68) - Vice President and Assistant Secretary -
Employed by SEI Investments since October 1999. Vice President and Assistant
Secretary of the Adviser, Administrator and Distributor since December 1999.
Associate at Dechert Price & Rhoads (1997-1999). Associate at Richter, Miller &
Finn (1994-1997).
CHRISTINE M. MCCULLOUGH (DOB 12/2/60) - Vice President and Assistant
Secretary-Employed by SEI Investments since November 1, 1999. Vice President and
Assistant Secretary of the Adviser, Administrator, and Distributor since
December 1999. Associate at White and Williams LLP (1991-1999). Associate at
Montgomery, McCracken, Walker & Rhoads (1990-1991).
LYDIA A. GAVALIS (DOB 06/05/64) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of SEI Investments, the Administrator and the
Distributor since 1998. Assistant General Counsel and Director of Arbitration,
Philadelphia Stock Exchange from 1989-1998.
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ROBERT DELLACROCE (DOB 12/17/63) - Controller and Chief Accounting Officer -
Director, Funds Administration and Accounting - Director, Funds Administration
and Accounting of SEI since 1994.
JAMES W. JENNINGS (DOB 01/15/37) - Secretary - 1701 Market Street, Philadelphia,
PA 19103. Partner, Morgan, Lewis & Bockius LLP (law firm), counsel to the Trust,
the Adviser, the Administrator and Distributor.
JOHN H. GRADY, JR. (DOB 06/01/61) - Assistant Secretary - 1701 Market Street,
Philadelphia, PA 19103. Partner, Morgan, Lewis & Bockius LLP (law firm), counsel
to the Trust, the Adviser, the Administrator and the Distributor.
The following table exhibits Trustee compensation for the fiscal year ended
September 30, 1999.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Name of Person, Aggregate Pension or Estimated Annual Total Compensation
Position Compensation From Retirement Benefits Benefits Upon From Registrant and
Registrant for the Accrued as Part of Retirement Fund Complex Paid to
Fiscal Year Ended Fund Expenses Trustees for the
September 30, 1999 Fiscal Year Ended
September 30, 1999
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robert Turner* $0 N/A N/A $0 for service on
two Boards
-------------------------------------------------------------------------------------------------------------
Ronald Filante** $______ N/A N/A $_____ for service
on one Board
-------------------------------------------------------------------------------------------------------------
Katherine Griswold** $______ N/A N/A $_____ for service
on one Board
-------------------------------------------------------------------------------------------------------------
Alfred Salvato** $______ N/A N/A $_____ for service
on two Boards
-------------------------------------------------------------------------------------------------------------
</TABLE>
* Mr. Turner is a Trustee who may be deemed to be an "interested person" of
the Trust as the term is defined in the 1940 Act.
** Member of the Audit Committee.
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<PAGE>
The Trustees and Officers of the Trust own less than 1% of the outstanding
shares of the Trust. The Trust pays fees only to the non-interested Trustees of
the Trust. Compensation of Officers and interested Trustees of the Trust is paid
by the Adviser or the Administrator.
COMPUTATION OF YIELD AND TOTAL RETURN
From time to time the Trust may advertise yield and total return of the Fund.
These figures will be based on historical earnings and are not intended to
indicate future performance. No representation can be made concerning actual
future yields or returns. The yield of the Fund refers to the annualized income
generated by an investment in the Fund over a specified 30-day period. The yield
is calculated by assuming that the income generated by the investment during
that 30-day period is generated in each period over one year and is shown as a
percentage of the investment. In particular, yield will be calculated according
to the following formula:
Yield = 2[((a-b)/cd + 1)(6) - 1] where a = dividends and interest earned during
the period; b = expenses accrued for the period (net of reimbursement); c = the
current daily number of shares outstanding during the period that were entitled
to receive dividends; and d = the maximum offering price per share on the last
day of the period.
Based on the foregoing, the 30-day yield for Class I shares of the Fund's
predecessor, the TIP Funds TIP Target Select Equity Fund for the 30-day period
ended September 30, 1999 was 0.00%.
The total return of the Fund refers to the average compounded rate of return to
a hypothetical investment for designated time periods (including but not limited
to, the period from which the Fund commenced operations through the specified
date), assuming that the entire investment is redeemed at the end of each
period. In particular, total return will be calculated according to the
following formula: P (1 + T)(n) = ERV, where P = a hypothetical initial payment
of $1,000; T = average annual total return; n = number of years; and ERV =
ending redeemable value, as of the end of the designated time period, of a
hypothetical $1,000 payment made at the beginning of the designated time period.
Based on the foregoing, the average annual total return for Class I shares of
the Fund's predecessor, the TIP Funds TIP Target Select Equity Fund, from
inception through September 30, 1999, and for the one year period ended
September 30, 1999, were 80.04%, and 42.77%, respectively.
PURCHASE AND REDEMPTION OF SHARES
Purchases and redemptions may be made through DST, 330 West 9th Street, Kansas
City, Missouri 64105, (the "Transfer Agent") on days when the New York Stock
Exchange is open for business. Currently, the weekdays on which the Fund is
closed for business are: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. Shares of the Fund are offered on a
continuous basis.
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<PAGE>
It is currently the Trust's policy to pay all redemptions in cash. The Trust
retains the right, however, to alter this policy to provide for redemptions in
whole or in part by a distribution in-kind of securities held by a Fund in lieu
of cash. Shareholders may incur brokerage charges on the sale of any such
securities so received in payment of redemptions.
The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the SEC by rule or regulation) as a result of which
disposal or valuation of a Fund's securities is not reasonably practicable, or
for such other periods as the SEC has by order permitted. The Trust also
reserves the right to suspend sales of shares of any Fund for any period during
which the New York Stock Exchange, the Adviser, the Administrator, the Transfer
Agent and/or the Custodian are not open for business.
DETERMINATION OF NET ASSET VALUE
The securities of the Fund are valued by the Administrator. The Administrator
may use an independent pricing service to obtain valuations of securities. The
pricing service relies primarily on prices of actual market transactions as well
as on trade quotations obtained from third parties. The procedures of the
pricing service and its valuations are reviewed by the officers of the Trust
under the general supervision of the Trustees.
Corporate debt securities and mortgage-related securities held by the Fund are
valued on the basis of valuations provided by dealers in those instruments or by
an independent pricing service, approved by the Trustees. Any such pricing
service, in determining value, will use information with respect to transactions
in the securities being valued, quotations from dealers, market transactions in
comparable securities, analyses and evaluations of various relationships between
securities and yield to maturity information.
An option that is written by the Fund is generally valued at the last sale price
or, in the absence of the last sale price, the last offer price. An option that
is purchased by the Fund is generally valued at the last bid price. The value of
a futures contract equals the unrealized gain or loss on the contract that is
determined by marking the contract to the current settlement price for a like
contract on the valuation date of the futures contract. When a settlement price
cannot be used, futures contracts will be valued at their fair market value as
determined by or under the direction of the Trustees.
If any securities held by the Fund are restricted as to resale or do not have
readily available market quotations, the Adviser determines their fair value for
purposes of determining market-based value, following procedures approved by the
Trustees. The Trustees periodically review such procedures. The fair value of
such securities is generally determined as the amount which the Fund could
reasonably expect to realize from an orderly disposition of such securities over
a reasonable period of time. The valuation procedures applied in any specific
instance are likely to vary from case to case. However, consideration is
generally given to the financial position of the issuer and other fundamental
analytical data relating to the investment and to the nature of the restrictions
on disposition of the securities (including any registration expenses that might
be borne by the Fund in
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<PAGE>
connection with disposition). In addition, specific factors are also generally
considered, such as the cost of the investment, the market value of any
unrestricted securities of the same class (both at the time of purchase and at
the time of valuation), the size of the holding, the prices of any recent
transactions or offers with respect to such securities and any available
analysts' reports regarding the issuer.
Securities with remaining maturities of 60 days or less will be valued by the
amortized cost method, which involves valuing a security at its cost on the date
of purchase and thereafter (absent unusual circumstances) assuming a constant
amortization of maturity of any discount or premium, regardless of the impact of
fluctuations in general market rates of interest on the value of the instrument.
While this method provides certainty in valuation, it may result in periods
during which value, as determined by this method, is higher or lower than the
price the Trust would receive if it sold the instrument.
All other assets of the Fund are valued in such manner as the Board of Trustees
in good faith deems appropriate to reflect their fair value.
TAXES
The following is only a summary of certain tax considerations generally
affecting the Fund and its shareholders, and is not intended as a substitute
for careful tax planning. Shareholders are urged to consult their tax advisors
with specific reference to their own tax situations, including their state and
local tax liabilities.
Federal Income Tax
The following is only a summary of certain additional federal tax considerations
generally affecting the Fund and its shareholders that are not discussed in the
Fund's Prospectus. No attempt is made to present a detailed explanation of the
federal, state or local tax treatment of the Fund or its shareholders and the
discussion here and in the Fund's Prospectus is not intended as a substitute for
careful tax planning.
The discussion of federal income tax consequences is based on the Code and the
regulations issued thereunder as in effect on the date of this Statement of
Additional Information. New legislation, as well as administrative changes or
court decisions, may significantly change the conclusions expressed herein, and
may have a retroactive effect with respect to the transactions contemplated
herein.
The Fund intends to qualify as a "regulated investment company" ("RIC") as
defined under Subchapter M of the Code. By following such a policy, the Fund
expects to eliminate or reduce to a nominal amount the federal taxes to which it
may be subject.
In order to qualify for treatment as a RIC under the Code, the Fund must
distribute annually to its shareholders at least the sum of 90% of its net
interest income excludable from gross income plus
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<PAGE>
90% of its investment company taxable income (generally, net investment income
plus net short-term capital gain) ("Distribution Requirement") and also must
meet several additional requirements. Among these requirements are the
following: (i) at least 90% of the Fund's gross income each taxable year must be
derived from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stock or securities, or certain
other income (including gains from options, futures or forward contracts); (ii)
at the close of each quarter of the Fund's taxable year, at least 50% of the
value of its total assets must be represented by cash and cash items, U.S.
Government securities, securities of other RICs and other securities, with such
other securities limited, in respect to any one issuer, to an amount that does
not exceed 5% of the value of the Fund's assets and that does not represent more
than 10% of the outstanding voting securities of such issuer; and (iii) at the
close of each quarter of the Fund's taxable year, not more than 25% of the value
of its assets may be invested in securities (other than U.S. Government
securities or the securities of other RICs) of any one issuer, or of two or more
issuers which are engaged in the same, similar or related trades or business if
the Fund owns at least 20% of the voting power of such issuer.
Notwithstanding the Distribution Requirement described above, which requires
only that the Fund distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital gain
(the excess of net long-term capital gain over net short-term capital loss), the
Fund will be subject to a nondeductible 4% federal excise tax to the extent it
fails to distribute by the end of any calendar year 98% of its ordinary income
for that year and 98% of its capital gain net income (the excess of short- and
long-term capital gains over short-and long-term capital losses) for the
one-year period ending on October 31 of that year, plus certain other amounts.
The Fund intends to make sufficient distributions to avoid liability for the
federal excise tax. The Fund may in certain circumstances be required to
liquidate Fund investments in order to make sufficient distributions to avoid
federal excise tax liability at a time when the Investment Adviser might not
otherwise have chosen to do so, and liquidation of investments in such
circumstances may affect the ability of the Fund to satisfy the requirements for
qualification as a RIC.
Any gain or loss recognized on a sale, exchange or redemption of shares of the
Fund by a shareholder who is not a dealer in securities will generally, for
individual shareholders, be treated as a long-term capital gain or loss if the
shares have been held for more than twelve months, and otherwise will be treated
as short-term capital gain or loss. However, if shares on which a shareholder
has received a net capital gain distribution are subsequently sold, exchanged or
redeemed and such shares have been held for six months or less, any loss
recognized will be treated as a long-term capital loss to the extent of the net
capital gain distribution. Long-term capital gains are currently taxed at a
maximum rate of 20% and short-term capital gains are currently taxed at ordinary
income tax rates.
In certain cases, the Fund will be required to withhold, and remit to the United
States Treasury, 31% of any distributions paid to a shareholder who (1) has
failed to provide a correct taxpayer identification number, (2) is subject to
backup withholding by the Internal Revenue Service, or (3) has not certified to
the Fund that such shareholder is not subject to backup withholding.
The Fund's transactions in certain futures contracts, options, forward
contracts, foreign currencies,
S-43
<PAGE>
foreign debt securities, and certain other investment and hedging activities
will be subject to special tax rules. In a given case, these rules may
accelerate income to the Fund, defer losses to the Fund, cause adjustments in
the holding periods of the Fund's assets, convert short-term capital losses into
long-term capital losses, or otherwise affect the character of the Fund's
income. These rules could therefore affect the amount, timing, and character of
distributions to shareholders. The Fund will endeavor to make any available
elections pertaining to such transactions in a manner believed to be in the best
interest of the Fund.
If the Fund fails to qualify as a RIC for any taxable year, it will be taxable
at regular corporate rates. In such an event, all distributions (including
capital gains distributions) will be taxable as ordinary dividends to the extent
of the Fund's current and accumulated earnings and profits, and such
distributions will generally be eligible for the corporate dividends-received
deduction.
The Fund may, in certain circumstances involving tax-free reorganizations,
accept securities that are appropriate investments as payment for Fund shares
(an "In-Kind Purchase"). An In-Kind Purchase may result in adverse tax
consequences under certain circumstances to either the investors transferring
securities for shares ("In-Kind Investors") or to investors who acquire shares
of the Fund after a transfer ("new shareholders"). As a result of an In-Kind
Purchase, the Fund may acquire securities that have appreciated in value or
depreciated in value from the date they were acquired. If appreciated securities
were to be sold after an In-Kind Purchase, the amount of the gain would be
taxable to new shareholders as well as to In-Kind Investors. The effect of this
for new shareholders would be to tax them on a distribution that represents a
return of the purchase price of their shares rather than an increase in the
value of their investment. The effect on In-Kind Investors would be to reduce
their potential liability for tax on capital gains by spreading it over a larger
asset base. The opposite may occur if the Fund acquires securities having an
unrealized capital loss. In that case, In-Kind Investors will be unable to
utilize the loss to offset gains, but, because an In-Kind Purchase will not
result in any gains, the inability of In-Kind Investors to utilize unrealized
losses will have no immediate tax effect. For new shareholders, to the extent
that unrealized losses are realized by the Fund, new shareholders may benefit by
any reduction in net tax liability attributable to the losses. The Adviser
cannot predict whether securities acquired in any In-Kind Purchase will have
unrealized gains or losses on the date of the In-Kind Purchase. Consistent with
its duties as investment adviser, the Adviser will, however, take tax
consequences to investors into account when making decisions to sell portfolio
assets, including the impact of realized capital gains on shareholders of the
Fund.
The Fund may use a tax management technique known as "highest in, first out."
Using this technique, the portfolio holdings that have experienced the smallest
gain or largest loss are sold first in an effort to minimize capital gains and
enhance after-tax returns.
State Taxes
The Fund is not is liable for any income or franchise tax in Delaware if it
qualifies as a RIC for federal income tax purposes. Distributions by the Fund to
shareholders and the ownership of shares may be subject to state and local
taxes.
S-44
<PAGE>
PORTFOLIO TRANSACTIONS
Under the general supervision of the Adviser, the Sub-Advisers are authorized to
select brokers and dealers to effect securities transactions for the Fund. The
Sub-Advisers will seek to obtain the most favorable net results by taking into
account various factors, including price, commission, if any, size of the
transactions and difficulty of executions, the firm's general execution and
operational facilities and the firm's risk in positioning the securities
involved. While the Sub-Advisers generally seek reasonably competitive spreads
or commissions, the Fund will not necessarily be paying the lowest spread or
commission available. The Sub-Advisers seek to select brokers or dealers that
offer the Fund best price and execution or other services which are of benefit
to the Fund.
Purchases of portfolio securities for the Fund may be made directly from issuers
or from underwriters. Where possible, purchase and sale transactions will be
effected through dealers (including banks) which specialize in the types of
securities which the Fund will be holding, unless better executions are
available elsewhere. Dealers and underwriters usually act as principals for
their own accounts. Purchases from underwriters will include a commission paid
by the issuer to the underwriter and purchases from dealers will include the
spread between the bid and the asked price. If the execution and price offered
by more than one dealer or underwriter are comparable, the order may be
allocated to a dealer or underwriter that has provided research or other
services as discussed below.
In placing portfolio transactions, the Sub-Advisers will use their best efforts
to choose a broker-dealer capable of providing the services necessary to obtain
the most favorable price and execution available. The full range and quality of
services available will be considered in making these determinations, such as
the size of the order, the difficulty of execution, the operational facilities
of the firm involved, the firm's risk in positioning a block of securities, and
other factors.
In those instances where it is reasonably determined that more than one
broker-dealer can offer the services needed to obtain the most favorable price
and execution available and the transaction involves a brokerage commission,
consideration may be given to those broker-dealers which furnish or supply
research and statistical information to the Sub-Advisers or their affiliates
that they may lawfully and appropriately use in their investment advisory
capacity for the Fund and for other accounts, as well as provide other services
in addition to execution services. The Sub-Advisers consider such information,
which is in addition to, and not in lieu of, the services required to be
performed by their under the agreements, to be useful in varying degrees, but of
indeterminable value. The Adviser and Sub-Advisers anticipate that these
opportunities will arise infrequently if at all.
The placement of portfolio transactions with broker-dealers who sell shares of
the Fund is subject to rules adopted by the National Association of Securities
Dealers, Inc. ("NASD"). Provided the Trust's officers are satisfied that the
Fund is receiving the most favorable price and execution available, the
Sub-Advisers may also consider the sale of the Fund's shares as a factor in the
selection of broker-dealers to execute their portfolio transactions.
While the Fund's general policy is to seek first to obtain the most favorable
price and execution
S-45
<PAGE>
available, in selecting a broker-dealer to execute portfolio transactions,
weight may also be given to the ability of a broker-dealer to furnish brokerage,
research and statistical services to the Fund or to the Sub-Advisers, even if
the specific services were not imputed just to the Fund and may be lawfully and
appropriately used by Sub-Advisers in advising other clients. The Sub-Advisers
consider such information, which is in addition to, and not in lieu of, the
services required to be performed by their under the agreements, to be useful in
varying degrees, but of indeterminable value. In negotiating any commissions
with a broker, the Fund may therefore pay a higher commission than would be the
case if no weight were given to the furnishing of these supplemental services,
provided that the amount of such commission has been determined in good faith by
the Fund and the Sub-Advisers to be reasonable in relation to the value of the
brokerage and/or research services provided by such broker-dealer, which
services either produce a direct benefit to the Fund or assist the Sub-Advisers
in carrying out their responsibilities to the Fund. The standard of
reasonableness is to be measured in light of the Sub-Advisers and their overall
responsibilities to the Fund.
Investment decisions for the Fund are made independently from those of other
client accounts of the Sub-Advisers. Nevertheless, it is possible that at times
the same securities will be acceptable for the Fund and for one or more of such
client accounts. To the extent any of these client accounts and the Fund seeks
to acquire the same security at the same time, the Fund may not be able to
acquire as large a portion of such security as it desires, or it may have to pay
a higher price or obtain a lower yield for such security. Similarly, the Fund
may not be able to obtain as high a price for, or as large an execution of, an
order to sell any particular security at the same time. If one or more of such
client accounts simultaneously purchases or sells the same security the Fund is
purchasing or selling, each day's transactions in such security will be
allocated between the Fund and all such client accounts in a manner deemed
equitable by the Sub-Advisers, taking into account the respective sizes of the
accounts, the amount being purchased or sold and other factors deemed relevant
by the Sub-Advisers. It is recognized that in some cases this system could have
a detrimental effect on the price or value of the security insofar as the Funds
are concerned. In other cases, however, it is believed that the ability of the
Fund to participate in volume transactions may produce better trade execution
for the Fund.
The Fund may use the Distributor and other affiliated brokers as a broker to
execute portfolio transactions. In accordance with the Investment Company Act,
the Trust has adopted certain procedures which are designed to provide that
commissions payable to affiliated brokers are reasonable and fair as compared to
the commissions received by other brokers in connection with comparable
transactions involving similar securities being purchased or sold on securities
or options exchanges during a comparable period of time. The Fund does not deem
it practicable and in its best interest to solicit competitive bids for
commission rates on each transaction. However, consideration is regularly given
to information concerning the prevailing level of commissions charged on
comparable transactions by other qualified brokers. The Board of Trustees
reviews the procedures adopted by the Trust with respect to the payment of
brokerage commissions at least annually to ensure their continuing
appropriateness, and determines, on at least a quarterly basis, that all such
transactions during the preceding quarter were effected in compliance with such
procedures.
Depending on the Sub-Advisers' view of market conditions, the Fund may or may
not purchase debt
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<PAGE>
securities with the expectation of holding them to maturity. The Fund may,
however, sell securities prior to maturity to meet redemptions or as a result of
a revised evaluation of market conditions or of the issuer.
For the fiscal years ended September 30, 1998 and 1999 the portfolio turnover
rates of the Fund's predecessor, the TIP Funds' TIP Target Select Equity Fund,
were 803.02% and 1,279.40%, respectively.
For the fiscal years ended September 30, 1998 and 1999, the Fund's predecessor,
the TIP Funds' TIP Target Select Equity Fund, paid brokerage commissions of
$13,856 and $28,450, respectively.
VOTING
Each share held entitles the shareholder of record to one vote for each dollar
invested. In other words, each shareholder of record is entitled to one vote for
each dollar of net asset value of the shares held on the record date for the
meeting. Shares issued by the Fund have no preemptive, conversion, or
subscription rights. The whole share shall be entitled to one vote and each
fractional share shall be entitled to a proportionate fractional vote.
Currently, only the Fund exists as a portfolio of the Trust. However, if
additional portfolios are added, each fund, as a separate series of the Trust,
will vote separately on matters affecting only that fund. Voting rights are not
cumulative. Shareholders of each Class of the Fund will vote separately on
matters pertaining solely to that Fund or that Class. As a Delaware business
trust, the Trust is not required to hold annual meetings of shareholders, but
approval will be sought for certain changes in the operation of the Trust and
for the election of Trustees under certain circumstances.
In addition, a Trustee may be removed by the remaining Trustees or by
shareholders at a special meeting called upon written request of shareholders
owning at least 10% of the outstanding shares of the Trust. In the event that
such a meeting is requested, the Trust will provide appropriate assistance and
information to the shareholders requesting the meeting.
Where the Trust's Prospectus or Statement of Additional Information state that
an investment limitation or a fundamental policy may not be changed without
shareholder approval, such approval means the vote of (1) 67% or more of the
affected Fund's shares present at a meeting if the holders of more than 50% of
the outstanding shares of the Fund are present or represented by proxy, or (ii)
more than 50% of the affected Fund's outstanding shares, whichever is less.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of
portfolios and shares of each portfolio. Each share of a portfolio represents an
equal proportionate interest in that portfolio with each other share. Shares are
entitled upon liquidation to a pro rata share in the net assets of the
portfolio. Shareholders have no preemptive rights. The Declaration of Trust
provides that the Trustees of the Trust may create additional series of shares
or separate classes of the Fund. All consideration received by the Trust for
shares of any portfolio or separate class and all assets in
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<PAGE>
which such consideration is invested would belong to that portfolio or separate
class and would be subject to the liabilities related thereto. Share
certificates representing shares will not be issued.
The Class I Shares have no 12b-1 plan and no sales charges. Class A Shares are
identical to Class I Shares, except that Class A Shares have a shareholder
servicing plan and a front-end sales charge. Class C Shares are identical to
Class I Shares, except that Class C Shares have a Rule 12b-1 plan, a shareholder
service plan and a contingent-deferred sales charge.
SHAREHOLDER LIABILITY
The Trust is an entity of the type commonly known as a "Delaware business
trust." The Trust's Declaration of Trust contains an express disclaimer of
shareholder liability for obligations of the Trust, and requires that notice of
such disclaimer be given in each agreement, obligation or instrument entered
into or executed by or on behalf of the Trust or the Trustees, and because the
Declaration of Trust provides for indemnification out of the Trust's property
for any shareholder held personally liable for the obligations of the Trust.
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee shall be liable only for his
own willful defaults and, if reasonable care has been exercised in the selection
of officers, agents, employees or investment advisers, shall not be liable for
any neglect or wrongdoing of any such person. The Declaration of Trust also
provides that the Trust will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with actual or threatened
litigation in which they may be involved because of their offices with the Trust
unless it is determined in the manner provided in the Declaration of Trust that
they have not acted in good faith in the reasonable belief that their actions
were in the best interests of the Trust. However, nothing in the Declaration of
Trust shall protect or indemnify a Trustee against any liability for his willful
misfeasance, bad faith, gross negligence or reckless disregard of his duties.
INDEPENDENT AUDITORS
Ernst & Young LLP, 2001 Market Street, Philadelphia, Pennsylvania 19103, serves
as independent auditors to the Trust.
CUSTODIAN
First Union National Bank, an affiliate of Evergreen, located at Broad and
Chestnut Streets, P.O. Box 7618, Philadelphia, Pennsylvania 19101 acts as the
custodian (the "Custodian") of the Trust. The Custodian holds cash, securities
and other assets of the Trust as required by the 1940 Act.
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<PAGE>
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP, 1701 Market Street, Philadelphia, Pennsylvania
19103, serves as counsel to the Trust.
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<PAGE>
APPENDIX
DESCRIPTION OF CORPORATE BOND RATINGS
DESCRIPTION OF MOODY'S LONG-TERM RATINGS
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than the Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa Bonds which are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba Bonds which are 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 the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
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<PAGE>
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.
DESCRIPTION OF STANDARD & POOR'S LONG-TERM RATINGS
Investment Grade
AAA Debt rated 'AAA' has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rated 'AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated debt only in small degree.
A Debt rated 'A' has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to adverse effects
of changes in circumstances and economic conditions than debt in
higher-rated categories.
BBB Debt rated 'BBB' is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
Speculative Grade
Debt rated 'BB', 'B', 'CCC', 'CC', and 'C' is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. 'BB' indicates the least degree of speculation and 'C' the highest
degree of speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
BB Debt rated 'BB' has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions that
could lead to inadequate capacity to meet timely interest and principal
payments. The 'BB' rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied 'BBB-' rating.
B Debt rate 'B' has greater vulnerability to default but presently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions would likely impair capacity
or willingness to pay interest and repay principal. The 'B' rating
category also is used for debt subordinated to senior debt that is
assigned an actual or implied 'BB' or 'BB-' rating.
A-2
<PAGE>
CCC Debt rated 'CCC' has a current identifiable vulnerability to default,
and is dependent on favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of
principal. In the event of adverse business, financial, or economic
conditions, it is not likely to have the capacity to pay interest and
repay principal. The 'CCC' rating category also is used for debt
subordinated to senior debt that is assigned an actual or implied 'B' or
'B-' rating.
CC The rating 'CC' is typically applied to debt subordinated to senior debt
which is assigned an actual or implied 'CCC' rating.
C The rating 'C' is typically applied to debt subordinated to senior debt
which is assigned an actual or implied 'CCC-' debt rating. The 'C'
rating may be used to cover a situation where a bankruptcy petition has
been filed, but debt service payments are continued.
CI Debt rated 'CI' is reserved for income bonds on which no interest is
being paid.
D Debt is rated 'D' when the issue is in payment default, or the obligor
has filed for bankruptcy. The 'D' rating is used when interest or
principal payments are not made on the date due, even if the applicable
grace period has not expired, unless S&P believes that such payments
will be made during such grace period.
DESCRIPTION OF DUFF & PHELPS' LONG-TERM DEBT RATINGS
AAA Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is modest but
AA- may vary slightly from time to time because of economic conditions.
A+ Protection factors are average but adequate. However, risk factors are
A- more variable and greater in periods of economic stress.
BBB+ Below average protection factors but still considered sufficient for
BBB- prudent investment.Considerable variability in risk during economic
cycles.
BB+ Below investment grade but deemed likely to meet obligations when due.
BB Present or prospective financial protection factors fluctuate according
BB- to industry conditions or company fortunes. Overall quality may move up
or down frequently within this category.
A-3
<PAGE>
B+ Below investment grade and possessing risk that obligations will not be
B met when due.
B- Financial protection factors will fluctuate widely according to
economic cycles, industry conditions and/or company fortunes. Potential
exists for frequent changes in the rating within this category or into
a higher or lower rating grade.
CCC Well below investment grade securities. Considerable uncertainty exists
as to timely payment of principal, interest or preferred dividends.
Protection factors are narrow and risk can be substantial with
unfavorable economic/industry conditions, and/or with unfavorable
company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
DP Preferred stock with dividend arrearages.
A-4
<PAGE>
DESCRIPTION OF FITCH'S LONG-TERM RATINGS
Investment Grade Bond
AAA Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated 'AAA'. Because
bonds rated in the 'AAA' and 'AA' categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these
issuers is generally rated 'F-1+'.
A Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to
be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an adverse impact on
these bonds, and therefore impair timely payment. The likelihood that
the ratings of these bonds will fall below investment grade is higher
than for bonds with higher ratings.
Speculative grade bond
BB Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified
which could assist the obligor in satisfying its debt service
requirements.
B Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable business
and economic activity throughout the life of the issue.
CCC Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
A-5
<PAGE>
C Bonds are in imminent default in payment of interest or principal.
DDD, DD,
and D Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of
their ultimate recovery value in liquidation or reorganization of the
obligor. 'DDD' represents the highest potential for recovery on these
bonds, and 'D' represents the lowest potential for recovery.
DESCRIPTION OF IBCA'S LONG-TERM RATINGS
AAA Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial, such that adverse changes in business, economic or
financial conditions are unlikely to increase investment risk
substantially.
AA Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial. Adverse changes in business, economic or financial
conditions may increase investment risk, albeit not very significantly.
A Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong,
although adverse changes in business, economic or financial conditions
may lead to increased investment risk.
BBB Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and
interest is adequate, although adverse changes in business, economic or
financial conditions are more likely to lead to increased investment
risk than for obligations in other categories.
BB Obligations for which there is a possibility of investment risk
developing. Capacity for timely repayment of principal and interest
exists, but is susceptible over time to adverse changes in business,
economic or financial conditions.
B Obligations for which investment risk exists. Timely repayment of
principal and interest is not sufficiently protected against adverse
changes in business, economic or financial conditions.
CCC Obligations for which there is a current perceived possibility of
default. Timely repayment of principal and interest is dependent on
favorable business, economic or financial conditions.
CC Obligations which are highly speculative or which have a high risk of
default.
C Obligations which are currently in default.
A-6
<PAGE>
DESCRIPTION OF THOMSON BANKWATCH'S LONG-TERM DEBT RATINGS
Investment Grade
AAA The highest category; indicates that the ability to repay principal and
interest on a timely basis is very high.
AA The second-highest category; indicates a superior ability to repay
principal and interest on a timely basis, with limited incremental risk
compared to issues rated in the highest category.
A The third-highest category; indicates the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to
adverse developments (both internal and external) than obligations with
higher ratings.
BBB The lowest investment-grade category; indicates an acceptable capacity
to repay principal and interest. Issues rated "BBB" are, however, more
vulnerable to adverse developments (both internal and external) than
obligations with higher ratings.
Non-Investment Grade
BB While not investment grade, the "BB" rating suggests that the
likelihood of default is considerably less than for lower-rated issues.
However, there are significant uncertainties that could affect the
ability to adequately service debt obligations.
B Issues rated "B" show a higher degree of uncertainty and therefore
greater likelihood of default than higher-rated issues. Adverse
developments could well negatively affect the payment of interest and
principal on a timely basis.
CCC Issues rated "CCC" clearly have a high likelihood of default, with
little capacity to address further adverse changes in financial
circumstances.
CC "CC" is applied to issues that are subordinate to other obligations
rated "CCC" and are afforded less protection in the event of bankruptcy
or reorganization.
D Default
A-7
<PAGE>
PART C: OTHER INFORMATION
Item 23. Exhibits:
(a)(1) Registrant's Agreement and Declaration of Trust dated October 25,
1993, is incorporated by reference to Exhibit a(1) of the
Registrant's Post-Effective Amendment No. 9 as filed with the
Securities and Exchange Commission ("SEC") on November 24, 1998.
(a)(2) Certificate of Amendment of Agreement and Declaration of Trust of
Corona Investment Trust dated December 11, 1993, is incorporated
by reference to Exhibit a(2) of the Registrant's Post-Effective
Amendment No. 9 as filed with the SEC on November 24, 1998.
(a)(3) Certificate of Amendment of Agreement and Declaration of Trust and
Certificate of Trust of the Solon Funds dated June 13, 1994, is
incorporated by reference to Exhibit a(3) of the Registrant's
Post-Effective Amendment No. 9 as filed with the SEC on November
24, 1998.
(a)(4) Certificate of Amendment of Agreement and Declaration of Trust
dated November 10, 1997, incorporated by reference to Exhibit 1(d)
of the Registrant's Registration Statement as filed with the SEC
on December 16, 1997.
(a)(5) Amended and Restated Agreement and Declaration of Trust dated
October 8, 1998, is incorporated by reference to Exhibit a(5) of
the Registrant's Post-Effective Amendment No. 9 as filed with the
SEC on November 24, 1998.
(a)(6) Certificate of Amendment and Declaration of Trust dated December
10, 1998 is incorporated by reference to Exhibit a(6) of the
Registrant's Post-Effective Amendment No. 10 as filed with the SEC
on January 27, 1999.
(b) Registrant's By-Laws are incorporated by reference to Exhibit b of
the Registrant's Post-Effective Amendment No. 9 as filed with the
SEC on November 24, 1998.
(c) Not applicable.
(d)(1) Investment Management Agreement, is incorporated by reference to
Exhibit 5(a) of the Registrant's Post-Effective Amendment No. 3 as
filed with the SEC on June 28, 1996.
(d)(2) Sub-Advisory Agreement, is incorporated by reference to Exhibit
5(b) of the Registrant's Post-Effective Amendment No. 3 as filed
with the SEC on June 28, 1996.
C-1
<PAGE>
(d)(3) Investment Advisory Agreement between the Registrant and Turner
Investment Partners, Inc., on behalf of the Short Duration Funds -
One Year Portfolio and the Short Duration Funds - Three Year
Portfolio, is incorporated by reference to the Registrant's
Post-Effective Amendment No. 7 as filed with the SEC on October 1,
1998.
(d)(4) Investment Advisory Agreement between the Registrant and Turner
Investment Partners, Inc., is incorporated by reference to the
Registrant's Post-Effective Amendment No. 7 as filed with the SEC
on October 1, 1998.
(d)(5) Investment Advisory Agreement between the Registrant and Penn
Capital Management Company, Inc., is incorporated by reference to
the Registrant's Post-Effective Amendment No. 7 as filed with the
SEC on October 1, 1998.
(d)(6) Form of Investment Advisory Agreement between the Registrant and
Concentrated Capital Management, LP with respect to the Target
Select Equity Fund, is filed herewith.
(d)(7) Form of Sub-Advisory Agreement between Concentrated Capital
Management, LP and Turner Investment Partners, Inc., with respect
to the Target Select Equity Fund, is filed herewith.
(d)(8) Form of Sub-Advisory Agreement between Concentrated Capital
Management, LP and Merrill Lynch Asset Management with respect to
the Target Select Equity Fund, is filed herewith.
(d)(9) Form of Sub-Advisory Agreement between Concentrated Capital
Management, LP and Evergreen Investment Management Company with
respect to the Target Select Equity Fund, is filed herewith.
(e)(1) Underwriting Agreement, is incorporated by reference to Exhibit
6(a) of the Registrant's Post-Effective Amendment No. 3 as filed
with the SEC on June 28, 1996.
(e)(2) Distribution Agreement between the Registrant and SEI Investments
Distribution Co., is incorporated by reference to the Registrant's
Post-Effective Amendment No. 7 as filed with the SEC on October 1,
1998.
(f) Not applicable.
(g)(1) Custodian Agreement, is incorporated by reference to Exhibit 8 of
the Registrant's Post-Effective Amendment No. 2 as filed with the
SEC on June 30, 1995.
(g)(2) Form of Custodian Agreement by and between the Registrant and
First Union
C-2
<PAGE>
National Bank, is incorporated by reference to the Registrant's
Post-Effective Amendment No. 8 as filed with the SEC on November
24, 1998.
(h)(1) Administrative Services Contract, is incorporated by reference to
Exhibit 9(a) of the Registrant's Post-Effective Amendment No. 3 as
filed with the SEC on June 28, 1996.
(h)(2) Services Agreement, is incorporated by reference to Exhibit 9(b)
of the Registrant's Post-Effective Amendment No. 3 as filed with
the SEC on June 28, 1996.
(h)(3) Administration Agreement between the Registrant and SEI Fund
Resources, is incorporated by reference to the Registrant's
Post-Effective Amendment No. 7 as filed with the SEC on October 1,
1998.
(h)(4) Transfer Agency Agreement between the Registrant and DST Systems,
Inc., is incorporated by reference to the Registrant's
Post-Effective Amendment No. 7 as filed with the SEC on October 1,
1998.
(h)(5) Shareholder Service Plan with respect to the Class A and Class C
shares is filed herewith.
(i) Opinion and Consent of Counsel is filed herewith.
(j) Consent of Independent Public Accountants (Ernst & Young) is filed
herewith.
(k) Not applicable.
(l) Not applicable.
(m) Distribution Plan with respect to the Class C shares is filed
herewith.
(n) Not applicable.
(o) Amended Rule 18f-3 Plan is filed herewith.
(p)(1) Code of Ethics for the Registrant, is filed herewith.
(p)(2) Code of Ethics for Concentrated Capital Management, LP, is filed
herewith.
(p)(3) Code of Ethics for Turner Investment Partners, Inc., was filed as
Exhibit (p)(2) with the TIP Fund's Post-Effective Amendment No. 16
on Form N-1A (File No. 333-00641) filed with the SEC on March 31,
2000.
(p)(4) Code of Ethics for Merrill Lynch Asset Management, is filed
herewith.
(p)(5) Code of Ethics for Evergreen Investment Management Company, is
filed
C-3
<PAGE>
herewith.
(p)(6) Code of Ethics for SEI Investments Distribution Co., was filed as
Exhibit (p)(3) with the TIP Fund's Post-Effective Amendment No. 16
on Form N-1A (File No. 333-00641) filed with the SEC on March 31,
2000.
(q) Powers of Attorney for Robert E. Turner, Alfred C. Salvato,
Katherine R. Griswold, Ronald W. Filante, Stephen J. Kneeley, and
Robert DellaCroce are incorporated by reference to the
Registrant's Post-Effective Amendment No. 10 as filed with the SEC
on January 27, 1999.
Item 24. Persons Controlled by or Under Common Control with Registrant:
See the Prospectus and the Statement of Additional Information regarding
the Registrant's control relationships. SEI Investments Management Corporation
(formerly, SEI Financial Management Corporation) is the owner of all beneficial
interest in the Administrator and is a subsidiary of SEI Investments Company,
which also controls the distributor of the Registrant, SEI Investments
Distribution Co. (formerly, SEI Financial Services Company), as well as to other
corporations engaged in providing various financial and record keeping services,
primarily to bank trust departments, pension plan sponsors, and investment
managers.
Item 25. Indemnification:
Article VII of the Agreement and Declaration of Trust empowers the Trustees
of the Trust, to the full extent permitted by law, to purchase with Trust assets
insurance for indemnification from liability and to pay for all expenses
reasonably incurred or paid or expected to be paid by a Trustee or officer in
connection with any claim, action, suit or proceeding in which he or she becomes
involved by virtue of his or her capacity or former capacity with the Trust.
Article VI of the By-Laws of the Trust provides that the Trust shall
indemnify any person who was or is a party or is threatened to be made a party
to any proceeding by reason of the fact that such person is and other amounts or
was an agent of the Trust, against expenses, judgments, fines, settlement and
other amounts actually and reasonable incurred in connection with such
proceeding if that person acted in good faith and reasonably believed his or her
conduct to be in the best interests of the Trust. Indemnification will not be
provided in certain circumstances, however, including instances of willful
misfeasance, bad faith, gross negligence, and reckless disregard of the duties
involved in the conduct of the particular office involved.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to the Trustees, officers and controlling persons of
the Registrant pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable in the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer or
C-4
<PAGE>
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
Item 26. Business and Other Connections of Investment Adviser:
ADVISERS
Turner Investment Partners, Inc.
Turner Investment Partners, Inc. ("Turner") is the investment adviser for the
Select Large Cap Growth, Select Large Cap Value, Select Small Cap Growth, Select
Small Cap Value, Select International Small Cap, Select Premier Global Equity,
Select Global Financial Services, Select Global Technology, Select Balanced
Capital Appreciation, Select Balanced Growth and Income, Select Balanced Income
and Growth, and Select Strategic Fixed Income Funds, and is the sub-adviser for
the Target Select Equity Fund. The principal address of Turner is 1235 Westlakes
Drive, Suite 350, Berwyn, PA 19312. Turner is an investment adviser registered
under the Advisers Act.
<TABLE>
<CAPTION>
Name and Position With Position With Other
Company Other Company Company
---------------------- ------------- -------------------
<S> <C> <C>
Stephen J. Kneeley -- --
Chief Operating Officer, Secretary,
Treasurer
James I. Midanek -- --
CIO-Fixed Income
Janet Rader Rote -- --
Director of Compliance
Michael R. Thompson -- --
Marketing Director, Assistant Secretary
Thomas R. Trala
Director of Finance -- --
Mark D. Turner
President, Director of Fixed Income -- --
Robert E. Turner, Jr.
Chairman, CIO -- --
</TABLE>
Concentrated Capital Management, LP
Concentrated Capital Management, LP ("CCM") is investment adviser for the Target
Select Equity Fund. The principal address for CCM is 1150 First Avenue, Park
View Tower, Suite 600, King of Prussia, PA 19406-2816. CCM is an investment
adviser registered under the Advisers Act.
C-5
<PAGE>
<TABLE>
<CAPTION>
Name and Position With Position With Other
Company Other Company Company
---------------------- ------------- -------------------
<S> <C> <C>
Gregory J. Bertacher Emerging Growth Equities, Ltd. CEO
Owner, President
Mark D. Turner Turner Investment Partners, Inc. Senior Portfolio Manager, Vice
Owner of Turner Investment Partners Chairman, Board
Robert E. Turner, Jr. Turner Investment Partners, Inc. Chairman, CIO
Owner of Turner Investment Partners
Stephen J. Kneeley Turner Investment Partners, Inc. President and Secretary, Chief
Owner of Turner Investment Partners Operating Officer
SEI Investments Distribution Co. Registered Representative
Peter James Moran, III -- --
Managing Director
Janet Rader Rote -- --
Director of Compliance
Edward G. Clark Turner Investment Partners, Inc. National Sales Manager
Limited Partner
Stephen C. Marcus Emerging Growth Equities, Ltd. Chairman
Limited Partner
</TABLE>
Merrill Lynch Asset Management
Merrill Lynch Asset Management ("Merrill") is a sub-adviser to the Target Select
Equity Fund. The principal address for Merrill is 800 Scudders Mill Road,
Plainsboro, NJ 08536. Merrill is an investment adviser registered under the
Advisers Act.
<TABLE>
<CAPTION>
Name and Position With Position With Other
Company Other Company Company
---------------------- ------------- -------------------
<S> <C> <C>
Jeffrey M. Peek Fund Asset Management, LP President
President
Princeton Services President & Director
Merrill Lynch & Co., Executive Vice-President
Terry K. Glenn Fund Asset Management, LP Executive Vice President
Executive Vice President
Princeton Services Executive Vice President & Director
President & Director
Princeton Funds Distributor, Inc.
Director
Financial Data Services, Inc.
</TABLE>
C-6
<PAGE>
<TABLE>
<CAPTION>
Name and Position With Position With Other
Company Other Company Company
---------------------- ------------- -------------------
<S> <C> <C>
Princeton Administrators President
Donald C. Burke Fund Asset Management, LP Senior Vice President & Treasurer
President, Treasurer & Director of
Taxation Princeton Services Senior Vice President & Treasurer
Princeton Funds Distributor, Inc. Vice President
Michael G. Clark Fund Asset Management, LP Senior Vice President
Senior Vice President
Princeton Services Senior Vice President
Princeton Funds Distributor, Inc. Treasurer & Director
Robert C. Doll, Jr. Fund Asset Management, LP Senior Vice President
Senior Vice President
Princeton Services Senior Vice President
Oppenheimer Funds, Inc. Chief Investment Officer
Linda L. Federici Fund Asset Management, LP Senior Vice President
Senior Vice President
Princeton Services Senior Vice President
Vincent R. Giordano Fund Asset Management, LP Senior Vice President
Senior Vice President
Princeton Services Senior Vice President
Michael J. Hennewinkel Fund Asset Management, LP Senior Vice President, Secretary
Senior Vice President, Secretary and and General Counsel
General Counsel
Princeton Services Senior Vice President
Philip L. Kirstein Fund Asset Management, LP Senior Vice President
Senior Vice President
Princeton Services Senior Vice President, General
Counsel, Director and Secretary
Debra W. Landsman-Yaros Fund Asset Management, LP Senior Vice President
Senior Vice President
Princeton Services Senior Vice President
Princeton Funds Distributor, Inc. Vice President
Stephen M.M. Miller Princeton Administrators Executive Vice President
Senior Vice President
Princeton Services Senior Vice President
Joseph T. Monagle, Jr. Fund Asset Management, LP Senior Vice President
Senior Vice President
Princeton Services Senior Vice President
Gregory D. Upah Fund Asset Management, LP Senior Vice President
</TABLE>
C-7
<PAGE>
<TABLE>
<CAPTION>
Name and Position With Position With Other
Company Other Company Company
---------------------- ------------- -------------------
<S> <C> <C>
Senior Vice President
Princeton Services Senior Vice President and Treasurer
</TABLE>
Evergreen Investment Management Company
Evergreen Investment Management Company ("Evergreen"), is a sub-adviser to the
Target Select Equity Fund. The principal address for Evergreen is 401 South
Tyron Street, Charlotte, NC 28288. Evergreen is an investment adviser registered
under the Advisers Act.
<TABLE>
<CAPTION>
Name and Position With Position With Other
Company Other Company Company
---------------------- ------------- -------------------
<S> <C> <C>
Christopher P. Conkey -- --
President
James F. Angelos
Chief Compliance Officer, Senior Vice -- --
President
J. Gray Craven
Chief Investment Officer, Senior Vice -- --
President
Matthew D. Finn
Chief Investment Officer, Senior Vice -- --
President
Gilman C. Gunn, III
Chief Investment Officer, Senior Vice -- --
President
William D. Munn
Director, CFO, Senior Vice President, -- --
Treasurer
Michael Koonce
Secretary & Chief Legal Counsel -- --
Donald A. McMullen, Jr. -- --
Director
William M. Ennis, III -- --
Director
</TABLE>
Item 27. Principal Underwriters:
(a) Furnish the name of each investment company (other than the Registrant)
for which each principal underwriter currently distributing the
securities of the Registrant also acts as a principal underwriter,
distributor or investment adviser.
C-8
<PAGE>
Registrant's distributor, SEI Investments Distribution Co. (the
"Distributor"), acts as distributor for:
SEI Daily Income Trust July 15, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Index Funds July 10, 1985
SEI Institutional Managed Trust January 22, 1987
SEI Institutional International Trust August 30, 1988
The Advisors' Inner Circle Fund November 14, 1991
The Pillar Funds February 28, 1992
CUFUND May 1, 1992
STI Classic Funds May 29, 1992
First American Funds, Inc. November 1, 1992
First American Investment Funds, Inc. November 1, 1992
The Arbor Fund January 28, 1993
Boston 1784 Funds(R) June 1, 1993
The PBHG Funds, Inc. July 16, 1993
The Achievement Funds Trust December 27, 1994
Bishop Street Funds January 27, 1995
STI Classic Variable Trust August 18, 1995
ARK Funds November 1, 1995
Huntington Funds January 11, 1996
SEI Asset Allocation Trust April 1, 1996
TIP Funds April 28, 1996
SEI Institutional Investments Trust June 14, 1996
First American Strategy Funds, Inc. October 1, 1996
HighMark Funds February 15, 1997
Armada Funds March 8, 1997
PBHG Insurance Series Fund, Inc. April 1, 1997
The Expedition Funds June 9, 1997
Alpha Select Funds January 1, 1998
Oak Associates Funds February 27, 1998
The Nevis Fund, Inc. June 29, 1998
The Parkstone Group of Funds September 14, 1998
CNI Charter Funds April 1, 1999
Armada Advantage Fund May 1, 1999
Amerindo Funds, Inc. July 13, 1999
Huntington VA Fund October 15, 1999
Friends Ivory Funds December 16, 1999
SEI Insurance Products Trust March 29, 2000
The Distributor provides numerous financial services to investment
managers, pension plan sponsors, and bank trust departments. These
services include portfolio evaluation, performance measurement and
consulting services ("Funds Evaluation") and automated execution,
clearing and settlement of securities transactions ("MarketLink").
(b) Furnish the Information required by the following table with respect to each
director, officer or partner of each principal underwriter named in the answer
to Item 21 of Part B. Unless otherwise noted, the business address of each
director or officer is Oaks, PA 19456.
C-9
<PAGE>
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name with Underwriter with Registrant
---- ------------------- ---------------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman of the Board of Directors --
Richard B. Lieb Director, Executive Vice President --
Carmen V. Romeo Director --
Mark J. Held President & Chief Operating Officer --
Gilbert L. Beebower Executive Vice President --
Dennis J. McGonigle Executive Vice President --
Robert M. Silvestri Chief Financial Officer & Treasurer --
Leo J. Dolan, Jr. Senior Vice President --
Carl A. Guarino Senior Vice President --
Jack May Senior Vice President --
Hartland J. McKeown Senior Vice President --
Kevin P. Robins Senior Vice President --
Patrick K. Walsh Senior Vice President --
Todd Cipperman Senior Vice President & General Counsel Vice President &
Assistant Secretary
Wayne M. Withrow Senior Vice President --
Robert Aller Vice President --
S. Courtney E. Collier Vice President & Assistant Secretary --
Robert Crudup Vice President & Managing Director --
Richard A. Deak Vice President & Assistant Secretary --
Barbara Doyne Vice President --
Jeff Drennen Vice President --
James R. Foggo Vice President & Assistant Secretary --
Vic Galef Vice President & Managing Director --
Lydia A. Gavalis Vice President & Assistant Secretary --
Greg Gettinger Vice President & Assistant Secretary Vice President &
Assistant Secretary
Kathy Heilig Vice President --
Jeff Jacobs Vice President --
Samuel King Vice President --
Kim Kirk Vice President & Managing Director --
John Krzeminski Vice President & Managing Director --
Christine M. McCullough Vice President & Assistant Secretary --
Carolyn McLaurin Vice President & Managing Director --
Mark Nagle Vice President --
Joanne Nelson Vice President --
Cynthia M. Parrish Vice President & Assistant Secretary --
Rob Redican Vice President --
Maria Rinehart Vice President --
</TABLE>
C-10
<PAGE>
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name with Underwriter with Registrant
---- ------------------- ---------------------
<S> <C> <C>
Steve Smith Vice President --
Daniel Spaventa Vice President --
Kathryn L. Stanton Vice President & Assistant Secretary --
Lynda J. Striegel Vice President & Assistant Secretary Vice President &
Assistant Secretary
Lori L. White Vice President & Assistant Secretary --
</TABLE>
The Distributor provides numerous financial services to investment managers,
pension plan sponsors, and bank trust departments. These services include
portfolio evaluation, performance measurement and consulting services ("Funds
Evaluation") and automated execution, clearing and settlement of securities
transactions ("MarketLink").
Item 28. Location of Accounts and Records.
Books or other documents required to be maintained by Section 31(a) of the
Investment Company Act of 1940, and the rules promulgated thereunder, are
maintained as follows:
(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3); (6);
(8); (12); and 31a-1(d), the required books and records will be maintained
at the offices of Registrant's Custodian:
First Union National Bank
Broad & Chestnut Streets
P.O. Box 7618
Philadelphia, Pennsylvania 19101
(b)/(c) With respect to Rules 31a-1(a); 31a-1(b)(1),(4); (2)(C) and (D);
(4); (5); (6); (8); (9); (10); (11); and 31a-1(f), the required books and
records are maintained at the offices of Registrant's Administrator:
SEI Investments Mutual Funds Services
Oaks, Pennsylvania 19456
(c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f), the
required books and records are maintained at the principal offices of the
Registrant's Advisers:
Turner Investment Partners, Inc.
1235 Westlakes Drive, Suite 350
Berwyn, Pennsylvania 19312
Concentrated Capital Management, LP
1150 First Avenue,
Park View Tower, Suite 600
King of Prussia, PA 19406-2816.
Item 29. Management Services: None
Item 30. Undertakings: None
C-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
Post-Effective Amendment No. 12 to Registration Statement No. 33-70958 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Oaks, Commonwealth of Pennsylvania on the 9th day of August, 2000.
ALPHA SELECT FUNDS
By: /s/ Stephen J. Kneeley
-----------------------------------
Stephen J. Kneeley
President & Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
* Trustee August 9, 2000
-------------------------------------------
Robert E. Turner
* Trustee August 9, 2000
-------------------------------------------
Alfred C. Salvato
* Trustee August 9, 2000
-------------------------------------------
Ronald W. Filante
* Trustee August 9, 2000
-------------------------------------------
Katherine R. Griswold
/s/ Stephen J. Kneeley President & Chief August 9, 2000
------------------------------------------- Executive Officer
Stephen J. Kneeley
/s/ Robert DellaCroce Controller and August 9, 2000
------------------------------------------- Chief Financial
Robert DellaCroce Officer
</TABLE>
* By: /s/ Stephen J. Kneeley
-------------------------------
Stephen J. Kneeley
Attorney-in-Fact
C-12
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Name Exhibit
---- -------
<S> <C>
Registrant's Agreement and Declaration of Trust of the Ex-99.a(1)
Registrant, dated October 25, 1993, (incorporated
herein by reference to Exhibit a(1) of the Post-Effective
Amendment No. 9 filed on November 24, 1998).
Certificate Amendment to the Agreement and Ex-99.a(2)
Declaration of Trust of the Registrant, dated December 11,
1993, (incorporated herein by reference to Exhibit a(2) of the
Post-Effective Amendment No. 9 filed on November 24, 1998).
Certificate Amendment to the Agreement and Ex-99.a(3)
Declaration of Trust of the Registrant, dated June 13, 1994,
(incorporated herein by reference to Exhibit a(3) of the
Post-Effective Amendment No. 9 filed on November 24, 1998).
Certificate Amendment to the Agreement and Ex-99.a(4)
Declaration of Trust of the Registrant, dated November 10,
1997, (incorporated by reference to Exhibit 1(d) of the
Registrant's Registration Statement as filed on December 16,
1997).
Amended and Restated Agreement and Declaration of Ex-99.a(5)
Trust dated October 8, 1998, (incorporated herein by reference
to Exhibit a(5) of the Post-Effective Amendment No. 9 filed on
November 24, 1998).
Certificate Amendment to the Agreement and Declaration Ex-99.a(6)
of Trust of the Registrant, dated December 10,
1998, (incorporated herein by reference to Exhibit a(2) of the
Registrant's Post-Effective Amendment No. 10 filed on January
27, 1999).
Registrant's By-Laws of the Registrant, (incorporated Ex-99.b
herein by reference to Exhibit b of the Post-Effective
Amendment No. 9 filed on November 24, 1998).
Not Applicable Ex-99.c
Investment Management Agreement (incorporated Ex-99.d(1)
herein by reference to Exhibit 5(a) of the Post-Effective
Amendment No. 3 filed on June 28, 1996).
Investment Sub-Advisory Agreement (incorporated Ex-99.d(2)
herein by reference to Exhibit 5(b) of the Post-Effective
Amendment No. 3 filed on June 28, 1996).
Investment Advisory Agreement between Ex-99.d(3)
the Registrant and Turner Investment Partners, Inc.,
on behalf of the Short Duration Funds - One Year
Portfolio and the Short Duration Funds - Three Year
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Name Exhibit
---- -------
<S> <C>
Portfolio, (incorporated herein by reference to Exhibit d(3)
of the Post-Effective Amendment No. 7 filed
on October 1, 1998).
Investment Advisory Agreement between Ex-99.d(4)
the Registrant and Turner Investment Partners, Inc.,
(incorporated herein by reference to Exhibit d(4)
of the Post-Effective Amendment No. 7 filed
on October 1, 1998).
Investment Advisory Agreement between Ex-99.d(5)
the Registrant and Penn Capital Management
Company, Inc., (incorporated herein by reference
to Exhibit d(5) of the Post-Effective Amendment No. 7
filed on October 1, 1998).
Form of Investment Advisory Agreement between the Registrant Ex-99.d(6)
and Concentrated Capital Management, LP with respect to
the Target Select Equity Fund, is filed herewith.
Form of Sub-Advisory Agreement between Concentrated Capital Ex-99.d(7)
Management, LP and Turner Investment Partners, Inc., with
respect to the Target Select Equity Fund, is filed herewith.
Form of Sub-Advisory Agreement between Concentrated Capital Ex-99.d(8)
Management, LP and Merrill Lynch Asset Management with respect
to the Target Select Equity Fund, is filed herewith.
Form of Sub-Advisory Agreement between Concentrated Capital Ex-99.d(9)
Management, LP and Evergreen Investment Management Company
with respect to the Target Select Equity Fund, is filed
herewith.
Underwriting Agreement, Ex-99.e(1)
(incorporated herein by reference to Exhibit 6(a) of the
Post-Effective Amendment No. 3 filed on June 28, 1996).
Distribution Agreement between the Ex-99.e(2)
Registrant and SEI Investments Distribution Co.,
(incorporated herein by reference to Exhibit e(2)
of the Post-Effective Amendment No. 7 filed
on October 1, 1998).
Not Applicable Ex-99(f)
Custodian Agreement, (incorporated herein Ex-99.g(1)
by reference to Exhibit 8 of the Post-Effective
Amendment No. 2 filed on June 30, 1995).
Form of Custodian Agreement by and between the Ex-99.g(2)
Registrant and First Union National Bank, (incorporated by
reference to the Registrant's Post-Effective Amendment No. 8
as filed on November 24, 1998).
Administration Services Contract, (incorporated Ex-99.h(1)
herein by reference to Exhibit 9(a) of Post-Effective
Amendment No. 3 filed on June 28, 1996).
Services Agreement, (incorporated herein by reference Ex-99.h(2)
to Exhibit 9(b) of Post-Effective Amendment No. 3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Name Exhibit
---- -------
<S> <C>
filed on June 28, 1996).
Administration Agreement between the Registrant and Ex-99.h(3)
SEI Fund Resources, (incorporated herein by reference to
Exhibit h(3) of the Post-Effective Amendment No. 7 filed on
October 1, 1998).
Transfer Agency Agreement between the Registrant and DST Ex-99.h(4)
Systems, Inc., is incorporated by reference to the Registrant's
Post-Effective Amendment No. 7 filed on October 1, 1998.
Shareholder Service Plan with respect to the Class A and
Class C Shares is filed herewith. Ex-99.h(5)
Opinion and Consent of Counsel, filed herewith Ex-99.i
Consent of Independent Public Accountants (Ernst & Young) Ex-99.j
is filed herewith.
Not Applicable Ex-99.k
Not Applicable Ex-99.l
Distribution Plan with respect to the Class C Shares
is filed herewith Ex-99.m
Not Applicable Ex-99.n
Amended Rule 18f-3 Plan, is filed herewith Ex-99.o
Code of Ethics for the Registrant, is filed herewith. Ex-99.p(1)
Code of Ethics for Concentrated Capital Management, LP, Ex-99.p(2)
is filed herewith.
Code of Ethics for Turner Investment Partners, Inc., was Ex-99.p(3)
filed as Exhibit (p)(2) with the TIP Fund's Post-Effective
Amendment No. 16 on Form N-1A (File No. 333-00641)
filed with the SEC on March 31, 2000.
Code of Ethics for Merrill Lynch Asset Management, is filed Ex-99.p(4)
herewith.
Code of Ethics for Evergreen Investment Management Ex-99.p(5)
Company, is filed herewith.
Code of Ethics for SEI Investments Distribution Co., was Ex-99.p(6)
filed as Exhibit (p)(3) with the TIP Fund's Post-Effective
Amendment No. 16 on Form N-1A (File No. 333-00641)
filed with the SEC on March 31, 2000.
Powers of Attorney for Robert E. Turner, Alfred C. Salvato, Ex-99.q
Katherine R. Griswold, Ronald W. Filante, Stephen J. Kneeley,
and Robert DellaCroce (incorporated herein by reference to
Exhibit p of the Post-Effective Amendment No. 10 filed on
January 27, 1999).
</TABLE>
