Debevoise & Plimpton
555 13th Street, N.W.
Washington, D.C. 20004
February 28, 1996
VIA EDGAR
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
THE HAVEN CAPITAL MANAGEMENT TRUST
Post-Effective Amendment No. 6 to
Registration Statement on Form N-1A
(Registration Nos. 33-76670 and 811-8428)
Ladies and Gentlemen:
On behalf of The Haven Capital Management Trust (the "Trust"), pursuant
to Rule 485(b) under the Securities Act of 1933, as amended (the "1933 Act"),
we transmit herewith in electronic form Post-Effective Amendment No. 6
under the 1933 Act and Amendment No. 7 under the Investment Company
Act of 1940, as amended, to the Trust's Registration Statement on Form N-1A (the
"Amendment"), together with exhibits thereto.
As indicated on the facing sheet of this Amendment, Registrant proposes
that the amendment shall be effective pursuant to subparagraph (b) of Rule
485 under the 1933 Act and has made the required certification on the
signature page. In our capacity as counsel to the Registrant, we have
reviewed the Amendment and, in our view, such amendment does not contain
disclosures that would render it ineligible to become effective under
subparagraph (b) of Rule 485.
No registration fee is required to be paid by the Trust. The original
signature page to the Amendment has been manually executed and will be retained
by the Trust.
Please telephone the undersigned at (202) 383-8058 with any questions about
this Amendment.
Very truly yours,
/s/ Marcia L. MacHarg
Marcia L. MacHarg
Enclosure
cc: Kevin C. Rupert (w/enclosure)
THE HAVEN CAPITAL MANAGEMENT TRUST
FORM N-1A
CROSS REFERENCE SHEET
Part A Prospectus Caption
Item No. ------------------
--------
1. Cover Page ....................... Cover Page
2. Synopsis ......................... Shareholder and Fund
Expenses
3. Condensed Financial Information .. Financial Highlights
4. General Description of Registrant Cover Page; The Fund and
Its Investment Objectives;
General Information
5. Management of the Fund ........... Management of the Fund
5A. Management's Discussion of Fund
Performance ...................... Not applicable
6. Capital Stock and Other Securities General Information;
Dividends and
Distributions; Taxes;
Management of the Fund
7. Purchase of Securities Being Offered How to Purchase Shares;
Management of the Fund;
Net Asset Value
8. Redemption or Repurchase ......... How to Redeem Shares
9. Pending Legal Proceedings ........ Not applicable
Part B Statement of
Item No. Additional/Information
- -------- Caption
-------
10. Cover ............................ Cover Page
11. Table of Contents ................ Contents
12. General Information and History... See Prospectus - "The
Exchange"
13. Investment Objectives Investment Objective;
and Policies...................... Investment Restrictions;
Investment Policies
14. Management of the Fund ........... See Prospectus - "Management
of the Fund"; Management of
the Fund
15. Control Persons and Principal Control Persons and Principal
Holders of Securities ............ Holders of Securities
16. Investment Advisory and Management of the Fund;
Other Services ................... Auditors and Counsel; See
Prospectus - "Management of
the Fund"
17. Brokerage Allocation
and Other Practices .............. Portfolio Transactions
18. Capital Stock and Shares of Beneficial
Other Securities ................. Interests and Other
Securities; See Prospectus -
"Dividends and
Distributions," "How to
Redeem Shares," "Taxes" and
"General Information."
19. Purchase, Redemption and Additional Purchase and
Pricing of Securities Redemption Information; See
Being Offered .................... Prospectus - "How to
Purchase Shares," "How to
Redeem Shares" and "Net Asset
Value"
20. Tax Status ....................... See Prospectus -
"Dividends" and "Taxes";
Additional Information
Concerning Taxes
21. Underwriters ..................... See Prospectus -
"Management of the Fund" and
"The Fund and Its Investment
Objective"
22. Calculations of Determination of Performance
Performance Data ................. Data
23. Financial Statements ............. Report of Independent
Certified Public Accountants;
Statement of Assets and
Liabilities
As filed with the Securities and Exchange Commission
February 28, 1996
1933 ACT FILE NO. 33-76670
1940 ACT FILE NO. 811-8428 [CONFORMED COPY]
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
(CHECK APPROPRIATE BOX OR BOXES)
REGISTRATION STATEMENT
UNDER
o THE SECURITIES ACT OF 1933
o PRE-EFFECTIVE AMENDMENT NO.
x POST-EFFECTIVE AMENDMENT NO. 6
AND/OR
REGISTRATION STATEMENT
UNDER
o THE INVESTMENT COMPANY ACT OF 1940
x AMENDMENT NO. 7
THE HAVEN CAPITAL MANAGEMENT TRUST
(Exact Name of Registrant as Specified in Charter)
C/O HAVEN CAPITAL MANAGEMENT, INC.
655 THIRD AVENUE
NEW YORK, NEW YORK 10017
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 953-2322
COLIN C. FERENBACH
C/O HAVEN CAPITAL MANAGEMENT, INC.
655 THIRD AVENUE
NEW YORK, NEW YORK 10017
(Name and Address of Agent for Service)
WITH COPIES TO:
MARCIA L. MACHARG, ESQ.
DEBEVOISE & PLIMPTON
555 13TH STREET, N.W.
WASHINGTON, D.C. 20004
It is proposed that this filing will become effective (check appropriate box):
x immediately upon filing pursuant to paragraph (b), or
o on (date) pursuant to paragraph (b), or
o 60 days after filing pursuant to paragraph (a)(1) of Rule 485, or
o on (date) pursuant to paragraph (a)(1)
o 75 days after filing pursuant to paragraph (a)(2), or
o on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
o this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Rule 24f-2(a)(1) and a Rule 24f-2 Notice for
Registrant's most recent fiscal year was filed with the Commission on or about
December 28, 1995.
PROSPECTUS
February 28, 1996
THE HAVEN FUND
The Haven Fund (the "Fund"), constituting the initial series of The Haven
Capital Management Trust (the "Trust"), is an open-end, diversified management
investment company. The investment objective of the Fund is long-term growth of
capital. The Fund seeks to achieve this objective by investing in a portfolio
consisting primarily of equity securities of domestic companies. Under normal
market conditions, the Fund will invest at least 65% of its total assets in such
securities. The Fund may invest the balance of its assets in equity securities
of foreign issuers or companies whose securities are traded principally outside
the United States and, to the extent consistent with its investment objective,
in investment grade fixed income securities of domestic and foreign issuers.
The production of current income is incidental to this investment objective.
Prior to the continuous offering of shares of the Fund, the Fund acquired
portfolio securities of a limited partnership for which the Fund's adviser,
Haven Capital Management, Inc. ("Haven"), served as investment adviser and for
which three of the Fund's trustees served as general partners. For a
description of the potential tax consequences to investors, see "The Exchange."
This Prospectus briefly sets forth certain information about the Fund that
investors should know before investing. Investors are advised to read this Pro-
spectus and retain it for future reference. Additional information about the
Fund, contained in a Statement of Additional Information, has been filed with
the Securities and Exchange Commission (the "SEC") and is available to investors
without charge by calling Sunstone Financial Group, Inc. ("Sunstone"), the
Fund's distributor, at 1-800-844-4836. The Statement of Additional Information
bears the same date as this Prospectus and is incorporated by reference in its
entirety into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
HAVEN CAPITAL MANAGEMENT, INC.
Investment Adviser
SUNSTONE FINANCIAL GROUP, INC.
Distributor
SHAREHOLDER AND FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) ....... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) ....... None
Deferred Sales Load
(as a percentage of original purchase price or
redemption proceeds, as applicable)........... None
Redemption Fees
(as a percentage of redemption proceeds,
if applicable) ............................ None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Advisory Fees .............................. 0.60%
12b-1 Fees and Expenses<F1> ................ 0.20%
Other Expenses (audit, legal, administration,
shareholder services, transfer agency, insurance,
custodian, miscellaneous and amortized organizational 0.89%
expenses)<F2>.................................
Total Fund Operating Expenses .............. 1.69%
<F1>The 12b-1 Fees and Expenses have been restated to reflect fees and
estimated distribution-related expenses to be paid by the Fund under its
distribution agreement, dated as of August 1, 1995. Long-term shareholders
may pay more than the economic equivalent of the maximum front end sales
charge permitted by the rules of the National Association of Securities
Dealers, Inc. for investment companies without 12b-1 fees.
<F2>The Other Expenses have been restated to reflect the termination of
certain fee waivers in effect prior to June 23, 1995. Certain of the fees
reflected in the table may be paid on a fixed-fee basis, which, depending on
the net assets of the Fund, would cause these estimated percentages to vary.
For additional information about these fees and expenses, refer to the
discussion under the caption "Management of the Fund."
EXAMPLE
A shareholder would pay the following expenses on a $1,000 investment, assuming:
(1) 5% annual return and (2) redemption at the end of each period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
$17 $53 $92 $200
This example assumes that all dividends and other distributions are reinvested
at net asset value and that the percentage amounts listed under Annual Fund
Operating Expenses will remain the same in the years shown. The above tables
and assumptions in the example of a 5% annual return are required by regulations
of the SEC applicable to open-end investment companies. THE ASSUMED 5% ANNUAL
RETURN AND ANNUAL EXPENSES SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF ACTUAL
OR EXPECTED FUND PERFORMANCE OR EXPENSES, BOTH OF WHICH MAY VARY. For a
description of Advisory Fees, 12b-1 Fees and Other Expenses, see "Management of
the Fund."
FINANCIAL HIGHLIGHTS
The following information for the fiscal year ended October 31, 1995
and the fiscal period ended October 31, 1994 has been derived from financial
statements audited by Coopers & Lybrand L.L.P., independent accountants. Their
opinion and the Fund's financial statements and notes thereto are incorporated
by reference in the Statement of Additional Information. The Statement of
Additional Information and the Fund's most recent Annual Report (which contains
a discussion of the Fund's performance) are available at no charge upon request
by calling 1-800-844-4836.
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Period
Year Period
Ended Ended
October 31, October 31,
1995 1994<F3>
NET ASSET VALUE AT
BEGINNING OF PERIOD $10.65 $10.00
Increase from Investment Operations:
Net Investment Income 0.12 0.04
Net Realized and Unrealized Gains on
Investments and Foreign
Currency Transactions 1.28 0.61
Total Increase from
Investment Operations 1.40 0.65
Less Distributions:
Dividends Paid to Shareholders:
From Net Investment Income (0.15) - -
From Net Realized Gains (0.23) - -
Total Distributions to Shareholders (0.38) - -
NET ASSET VALUE AT END OF PERIOD $11.67 $10.65
TOTAL RETURN 13.65% 6.50%<F5>
Supplemental Data and Ratios:
Net Assets at End of Period (in 000s) $55,579 $45,332
Ratios of Expenses to
Average Net Assets 1.53%<F4><F6> 1.20% <F4><F6>
Ratio of Net Investment
Income to Average Net Assets 1.14%<F4><F6> 1.10% <F4><F6>
Portfolio Turnover Rate 77% 27%
<F3>The Haven Fund commenced operations on June 23, 1994.
<F4>Without fee waivers, the ratio of operating expenses to average daily net
assets would have been 1.59% and 1.43% (annualized), and the ratio of net
investment income to average daily net assets would have been 1.08% and 0.87%
(annualized) for the periods ended October 31, 1995 and 1994, respectively.
<F5>Not annualized.
<F6>Annualized.
THE FUND AND ITS INVESTMENT OBJECTIVE
The Fund is a diversified mutual fund with an investment objective of
long-term growth of capital. It seeks to achieve this objective by investing in
a portfolio consisting primarily of equity securities of domestic companies.
Under normal market conditions and as a matter of fundamental policy, the Fund
will invest at least 65% of its total assets in such securities. The Fund may
invest the balance of its assets in equity securities of foreign issuers or
companies whose securities are traded principally outside the United States and,
to the extent consistent with its investment objective, in investment grade
fixed income securities of domestic or foreign issuers. Any investment involves
risk and, therefore, there can be no assurance that the Fund will achieve its
investment objective.
Shares of beneficial interest of the Fund ("Shares") are sold in a
continuous offering at net asset value without a sales charge. The minimum
initial investment is $2,500 and the minimum subsequent investment is $100.
These minimum investment requirements may be waived at the discretion of Haven
Capital Management, Inc. ("Haven"), the Fund's investment adviser. Prior to the
continuous offering, Shares were exchanged for portfolio securities of a limited
partnership for which Haven served as investment manager. See "The Exchange."
SELECTION OF INVESTMENTS
The Fund invests in domestic and foreign companies that, in Haven's
view, have superior financial and operating characteristics with long-term
prospects for growth and are not sufficiently valued by the securities markets.
Haven evaluates investments for the Fund using fundamental analysis and through
its own field research. In addition, Haven draws upon the research and
information provided by investment brokers and other independent providers of
economic and research data.
Domestic investments are in both large, well-known companies and in
smaller, less well-known companies. Foreign investments are generally in
better-known companies with a relatively large market capitalization, although
the Fund will not be limited to investments in companies with a minimum market
capitalization. The Fund generally invests in domestic securities listed on a
securities exchange or traded through The Nasdaq Stock Market ("Nasdaq") and in
those foreign securities traded on principal trading markets for such
securities. The Fund may invest in the following types of securities:
EQUITY SECURITIES. The Fund invests in equity securities, including
common stock; preferred stock; convertible securities (including convertible
preferred stock, bonds, notes and debentures convertible into common or
preferred stock); warrants; equity interests in trusts, partnerships, joint
ventures and real estate investment trusts ("REITs"); and American, Global and
other types of Depositary Receipts.
INVESTMENT GRADE FIXED INCOME SECURITIES. The Fund has the ability to
invest in investment grade fixed income securities issued by domestic or foreign
corporations or other entities or by the U.S. or foreign governments or their
agencies, instrumentalities or sponsored enterprises, if such securities, in the
opinion of Haven, offer the potential to further the Fund's investment
objective. Because the market value of fixed income securities can be expected
to vary inversely to changes in prevailing interest rates, investing in fixed
income securities may provide an opportunity for long-term growth of capital
when interest rates are expected to decline.
In order to reduce the risk of nonpayment of principal or interest on
fixed income securities, the Fund invests in such securities, whether domestic
or foreign, only if they are rated, at the time of investment, "A" or better by
Standard & Poor's Corporation ("S&P") or Moody's Investors Services, Inc.
("Moody's") or, if unrated, are determined to be of comparable quality by Haven.
The Fund is not required to dispose of securities whose ratings are downgraded
except when considered appropriate by Haven. See the Appendix attached to the
Statement of Additional Information for a description of the corporate bond
ratings assigned by S&P and Moody's.
Fixed income securities in which the Fund may invest include
obligations issued by the U.S. government or by any agency, instrumentality or
sponsored enterprise thereof supported by the full faith and credit of the U.S.
government, the authority of the issuer to borrow from the U.S. Treasury, or the
discretionary authority of the U.S. government to purchase the obligations of
the agency, instrumentality or enterprise; obligations fully guaranteed as to
principal and interest by an agency, instrumentality or sponsored enterprise of
the U.S. government; and obligations of U.S. government agencies, instrumentali-
ties or sponsored enterprises which are not guaranteed. The Fund may also
invest in zero coupon U.S. Treasury securities and in zero coupon securities
issued by financial institutions, which represent a proportionate interest in
underlying U.S. Treasury securities. The Fund will invest only in such U.S.
Treasury securities that are part of the STRIPS program.
TEMPORARY INVESTMENTS. When Haven believes that a defensive posture
is warranted, the Fund may invest temporarily without limit in cash or fixed
income securities which are temporary investments. Temporary investments are
short-term high-quality debt securities (rated AA or above by S&P, Aa or above
by Moody's or with an equivalent rating by other nationally recognized
securities rating organizations) denominated in U.S. dollars or other freely
convertible currency, including short-term obligations issued or guaranteed by
the U.S. government, its agencies or instrumentalities, U.S. finance company
obligations, corporate commercial paper, obligations of banks and repurchase
agreements (not to exceed 5% of the Fund's net assets) with respect to the
securities in which the Fund may invest.
Portfolio securities are generally sold when Haven believes their
market price fully reflects or exceeds their fundamental valuation or due to an
increase in risk beyond levels deemed acceptable by Haven. Under normal market
conditions, consistent with the Fund's fundamental policy of investing at least
65% of its total assets in equity securities of domestic companies, the Fund's
cash position is a reflection of Haven's assessment of the availability of
attractive investment alternatives.
INVESTMENT PRACTICES AND RELATED RISK FACTORS
In attempting to achieve its investment objective, the Fund may make
investments and may engage in certain investment techniques that entail special
risks and considerations.
FOREIGN SECURITIES. There are certain risks involved in investing in
securities of companies and governments of foreign nations which are in addition
to the usual risks inherent in U.S. investments. These risks include those
resulting from fluctuations in currency exchange rates, revaluation of
currencies, future adverse political and economic developments and the possible
imposition of currency exchange blockages or other foreign governmental laws or
restrictions, reduced availability of public information concerning issuers and
the lack of uniform accounting, auditing and financial reporting standards or of
other regulatory practices and requirements comparable to those applicable to
domestic companies. The yield of the Fund may be adversely affected by
fluctuations in value of one or more currencies relative to the U.S. dollar.
Moreover, securities of many foreign companies may be less liquid and their
prices more volatile than those of securities of comparable U.S. companies. In
addition, with respect to certain foreign countries, there is the possibility of
expropriation, nationalization, confiscatory taxation and limitations on the use
or removal of funds of other assets of the Fund, including the withholding of
dividends. Foreign securities may be subject to foreign government taxes that
would reduce the net yield on such securities. To the extent the Fund invests
in securities denominated or quoted in currencies other than the U.S. dollar,
changes in foreign currency exchange rates will affect the value of portfolio
securities and the appreciation or depreciation of investments, as well as the
Fund's net asset value, which also will be affected irrespective of the
performance of the underlying investments. Investment in foreign securities may
also result in higher expenses due to the cost of converting foreign currency
into U.S. dollars; the payment of fixed brokerage commissions on foreign
exchanges, which generally are higher than commissions on U.S. exchanges; and
the expense of maintaining securities with foreign custodians. The Fund's
investments in foreign government securities are subject to special risks which
may include the inability or unwillingness of a foreign government to repay
principal and interest, currency fluctuations and other similar risks of
investing in foreign securities generally.
CONVERTIBLE SECURITIES. Convertible securities may include corporate
notes or preferred stock but are ordinarily long-term debt obligations of the
issuer convertible at a stated exchange rate into common stock of the issuer.
The Fund will invest in convertible securities of corporations that meet the
criteria for investment by the Fund in equity securities of domestic and foreign
issuers in which the Fund can invest. In evaluating a convertible security,
Haven gives primary emphasis to the attractiveness of the underlying common
stock. The Fund may not purchase or hold more than 5% of its net assets in
convertible securities rated below BBB by S&P, Baa by Moody's or, if unrated,
determined by Haven to be of comparable quality. Securities rated BBB, Baa or
below have speculative characteristics. The market value of convertible
securities tends to decline as interest rates increase and, conversely, to
increase as interest rates decline. Convertible securities generally offer
lower interest or dividend yields than nonconvertible securities of similar
quality. When, however, the market price of the common stock underlying the
convertible security exceeds the conversion price, the price of the convertible
security reflects the value of the underlying common stock. As the market price
of the underlying common stock declines, the convertible security tends to trade
increasingly on a yield basis, and thus may not decline in price to the same
extent as the underlying common stock. Convertible securities rank senior to
common stocks in an issuer's capital structure and are consequently of higher
quality and entail less risk of decline in market value than the issuer's common
stock. The extent to which such risk is less depends in large measure, however,
upon the degree to which the convertible security sells above its value as a
fixed income security.
OTHER INVESTMENT COMPANIES. The Fund may invest up to 10% of its
total assets in the securities of closed-end investment companies. The Fund
will bear its proportionate share of any fees and expenses paid by investment
companies in which it invests in addition to the advisory and other fees paid by
the Fund.
LENDING OF PORTFOLIO SECURITIES. The Fund may seek income by lending
portfolio securities. Under present regulatory policies, such loans may be made
to institutions, such as certain domestic broker-dealers, and are required to be
secured continuously by collateral in cash, cash equivalents, or U.S. government
securities maintained on a current basis at an amount at least equal to the
market value of the securities loaned. If Haven determines to make securities
loans, the value of the securities loaned may not exceed 33 1/3% of the value of
the total assets of the Fund. The Fund may experience a loss or delay in the
recovery of its securities if the institution with which it has engaged in a
portfolio loan transaction breaches its agreement with the Fund.
FOREIGN CURRENCY HEDGING. In connection with specific portfolio
transactions or with respect to portfolio positions, the Fund may use forward
foreign currency exchange contracts to hedge against movements in the value of
foreign currencies relative to the U.S. dollar. If the Fund enters into a
forward foreign currency exchange contract to buy foreign currency, the Fund
will be required to place cash or high-grade liquid debt securities in a
segregated account with the Fund's custodian in an amount equal to the value of
the assets committed to the consummation of the forward contract. The Fund will
enter into such forward contracts with counterparties that have received (or the
guarantors of their obligations have received) a credit rating of Prime-1 or A-1
by Moody's or S&P, respectively, or that have an equivalent rating from a
nationally recognized securities rating organization or are determined to be of
equivalent credit quality by Haven. Haven will monitor the credit status of the
counterparties or guarantors, as appropriate, on an on-going basis. Forward
foreign currency contracts are privately negotiated transactions, and there is
no established trading market for such investments. Accordingly, there may be
no market for such investments and they may be illiquid. Under normal market
conditions, however, offsetting contracts may be readily entered into in the
major internationally traded currencies.
CERTAIN OTHER INVESTMENT TECHNIQUES. Although the Fund has no current
intention of doing so during the coming year, it is authorized to engage in the
following investment strategies: (1) purchasing securities on a when-issued
basis and purchasing or selling securities for delayed delivery; (2) purchasing
put and call options on securities and stock indexes and writing call options on
securities and put and call options on stock indexes; and (3) purchasing and
writing interest rate and stock index futures contracts. The Fund will enter
into such transactions for hedging purposes, in accordance with the rules and
regulations of the Commodity Futures Trading Commission and the SEC. The Fund
may also engage in repurchase agreement transactions with respect to any
securities in which it invests. Detailed information concerning these
strategies and their related risks is contained in the Statement of Additional
Information.
PORTFOLIO TURNOVER
Haven purchases securities with the intent of holding them for invest-
ment but may purchase and sell portfolio securities whenever Haven believes it
to be in the best interests of the Fund. The Fund will not consider portfolio
turnover rate a limiting factor in making investment decisions consistent with
its investment objective and policies. For the fiscal year ended October 31,
1995, the portfolio turnover rate was 77%.
ADDITIONAL INVESTMENT INFORMATION
The Fund's investment objective and its intention to invest, under
normal market conditions, at least 65% of its total assets in equity securities
of domestic companies are fundamental policies of the Fund and cannot be changed
without the approval of a "majority of the Fund's outstanding voting
securities." As used in this Prospectus, a "majority of the Fund's outstanding
voting securities" means the lesser of (1) 67% of the Shares represented at a
meeting at which more than 50% of the outstanding Shares are represented, and
(2) more than 50% of the outstanding Shares.
As described in the Statement of Additional Information, the Fund has
adopted certain investment restrictions as fundamental policies. Among other
restrictions, as a diversified fund, the Fund may not, with respect to 75% of
its total assets, purchase the securities of any one issuer (except U.S.
government securities) if more than 5% of the value of the Fund's assets would
be invested in such issuer. In addition, the Fund may not invest 25% or more of
its total assets in securities of issuers in any one industry, except that this
limitation does not apply to investments in or obligations of the U.S.
government or any of its agencies or instrumentalities. The Fund may borrow
money from banks only for temporary or emergency purposes in an aggregate amount
not exceeding 10% of the value of its total assets (including the amount
borrowed). The Fund has also adopted nonfundamental policies that may be
changed without a vote of shareholders. For example, the Fund may invest up to
5% of its net assets in companies which, including predecessors, have operated
less than three years, and it may invest up to 5% of its net assets in warrants.
For a more complete description of the investment restrictions to which the
Fund is subject, see the Statement of Additional Information.
MANAGEMENT OF THE FUND
TRUSTEES AND OFFICERS. The Trustees of the Trust (the "Trustees")
decide matters of general policy of the Fund and review the actions of Haven,
the Fund's investment adviser, and the Fund's service providers, i.e., its
administrator, distributor, transfer agent and custodian. The Fund's daily
business operations are conducted and supervised by the officers of the Trust
(the "Officers"). The Trustees and Officers are:
COLIN C. FERENBACH<F7> President and Trustee of the Trust, 1994-present;
Managing Director of Haven, 1982-present; General Partner of HCM Partners, L.P.,
1984-94; Principal, McCowan Associates, Inc., 1980-83; Principal, Kleinwort
Benson McCowan Inc., 1977-80; Vice President, Goldman, Sachs & Co., 1957-76.
D. EUAN BAIRD Trustee of the Trust. Chairman, President and Chief
Executive Officer of Schlumberger Ltd. (oil field services, measurements and
systems), 1986-present.
STEPHEN ELY<F7> Treasurer, Secretary and Trustee of the Trust, 1994-
present; Managing Director of Haven, 1982-present; General Partner of HCM
Partners, L.P., 1984-94; Principal, McCowan Associates, Inc., 1980-83;
Principal, Kleinwort Benson McCowan Inc., 1978-80; Corporate Vice President,
Lehman Bros. Kuhn Loeb, Inc., 1977-78; First Vice President and Partner, Kuhn,
Loeb & Co., 1972-77.
WILLIAM F. INDOE Trustee of the Trust. Partner, Sullivan & Cromwell
(attorneys-at-law), 1968-present.
ROBERT E. KAUFMANN Trustee of the Trust. Director, Spencer Stuart &
Associates (executive search consultants), 1995-present; Headmaster of Deerfield
Academy, 1980-94; Director of various mutual funds, 1985-92.
JOHN F. MCNIFF Trustee of the Trust. Vice President-Finance and Chief
Financial Officer of Dover Corporation (diversified manufacturing company),
1983-present; Director of The Allen Group (manufacturer of telecommunication
products), 1995-present; Director of Technimetrics, Inc. (database publishing
company), 1975-93; Director of Barclays Bank of New York, 1983-91.
DENIS M. TURKO<F7> Vice President and Trustee of the Trust, 1994-present;
Managing Director of Haven, 1982-present; General Partner of HCM Partners, L.P.,
1984-94; Principal, McCowan Associates, Inc., 1980-83; Principal, Kleinwort
Benson McCowan Inc., 1977-80; Vice President, Goldman, Sachs & Co., 1970-76.
<F7> Each of these Trustees and Officers is an "interested person" as defined
by the Investment Company Act of 1940.
INVESTMENT ADVISER. Haven Capital Management, Inc., 655 Third Avenue,
New York, New York 10017, acts as the Fund's investment adviser. Haven is an
independent investment organization that provides investment services to a
variety of institutional and individual investors and, from 1984 to 1994,
managed the investments of HCM Partners, L.P., the predecessor of the Fund. See
"The Exchange." As of December 31, 1995, Haven managed approximately $775
million in assets for its clients but, prior to the Fund's commencement, had not
previously advised a registered management investment company. The firm,
incorporated in Delaware in 1982, is managed jointly and controlled by its
managing directors, Messrs. Stephen Ely, Colin C. Ferenbach and Denis M. Turko.
The managing directors have worked together for more than 15 years, and each
has more than 20 years of experience managing investment portfolios.
Under an Investment Advisory Agreement with the Fund and subject to
the control of the Trustees, Haven manages the investment and reinvestment of
the assets of the Fund in accordance with the Fund's investment objective and
stated investment policies. Mr. Ferenbach serves as the Fund's portfolio
manager. He has been employed by a registered investment adviser as a portfolio
manager since 1973 and has managed the portfolio of HCM Partners, L.P. since its
inception in 1984. Mr. Turko, who has been employed as a portfolio manager
since 1972, serves as the Fund's deputy portfolio manager. The Fund pays Haven
a monthly fee as compensation for its services, payable in arrears, calculated
at an annual rate of 0.60% of the Fund's average daily net assets.
ADMINISTRATOR AND TRANSFER AGENT. PFPC Inc. ("PFPC"), 103 Bellevue
Parkway, Wilmington, Delaware 19809, an indirect, wholly owned subsidiary of PNC
Bank Corp. (a multi-bank holding company with its principal offices in
Pittsburgh, Pennsylvania), serves as the administrator and transfer agent of the
Fund. As administrator, PFPC provides administrative and accounting services to
the Fund, including determination of the Fund's net asset value and assistance
in the Fund's administrative operations.
The Fund pays PFPC a fee as compensation for its administrative and
accounting services, payable monthly in arrears, at the annual rate of 0.10% of
the Fund's average daily net assets, with a minimum monthly fee of $8,333
(exclusive of out-of-pocket expenses). A portion of this fee was waived during
the Fund's first 12 months of operations, which ended June 22, 1995.
DISTRIBUTOR AND PLAN OF DISTRIBUTION. Sunstone Financial Group, Inc.
("Sunstone"), 207 East Buffalo Street, Suite 400, Milwaukee, Wisconsin 53202,
serves as the distributor of Shares of the Fund. Shares also may be sold by
authorized dealers who have entered into dealer agreements with Sunstone or the
Fund.
The Trust, on behalf of the Fund, has adopted a Plan of Distribution
(the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, as
amended (the "1940 Act"). Under the Plan, the Fund may spend no more each year
than 0.25% of its average daily net assets to finance activity primarily
intended to result in the sale of Shares. Such sales activities include
compensation paid to Sunstone, the printing and mailing of prospectuses to
persons other than then-current shareholders, the printing and mailing of sales
literature and compensation to authorized dealers. The Plan may not be amended
to increase materially the amount to be spent on such sales activity without
shareholder approval.
Pursuant to a Distribution Agreement, the Fund will (1) pay Sunstone a
fee, payable monthly in arrears, at the annual rate of 0.10% per annum of the
Fund's average daily net assets, with a minimum monthly fee of $7,083 and (2)
reimburse Sunstone (or pay directly) for (a) Sunstone's out-of-pocket expenses
in connection with its distribution and marketing services and (b) payments to
authorized dealers; provided, however, that if, during any annual period, such
compensation and reimbursement payments for services exceed 0.25% of the Fund's
average daily net assets, Sunstone will rebate such excess to the Fund.
CUSTODIAN. PNC Bank, National Association ("PNC Bank") serves as
custodian of the Fund's assets. PNC Bank is an indirect, wholly owned
subsidiary of PNC Bank Corp. and its principal business address is Broad and
Chestnut Streets, Philadelphia, Pennsylvania 19101. PNC Bank may employ
subcustodians outside the United States, approved by the Trustees in accordance
with the provisions of the 1940 Act.
OTHER EXPENSES OF THE FUND. In addition to advisory, administration
and distribution fees, the Fund's operating expenses generally consist of fees
for professional and brokerage services, costs of regulatory compliance,
including the payment of applicable federal and state filing fees, and costs
associated with maintaining corporate existence, safekeeping of its assets,
recording ownership of its Shares and shareholder relations. The Investment
Advisory Agreement between the Fund and Haven provides that Haven will reduce
its management fee and, if necessary, reimburse the Fund to the extent certain
expenses described in the Statement of Additional Information would otherwise
exceed the expense limitations applicable to the Fund imposed by applicable
state securities laws or regulations thereunder.
THE EXCHANGE
On June 23, 1994, pursuant to an Agreement and Plan of Exchange among
the Fund, Haven and HCM Partners, L.P., a limited partnership for which Haven
acted as investment adviser and three of the Fund's Trustees acted as general
partners (the "Partnership"), the Fund acquired portfolio securities, cash and
cash equivalents having a market value on June 22, 1994 of approximately
$41,141,033 owned by the Partnership in exchange for Shares of the Fund. The
Fund commenced a continuous offering of its Shares after the exchange.
The exchange will benefit investors who acquire Shares in the contin-
uous offering after the exchange to the extent that the pro rata portion of ex-
penses borne by each investor decreases and certain economies are realized by
spreading costs over a larger asset base. The exchange generally will, however,
have adverse tax consequences to those same investors insofar as the Fund
acquired from the Partnership securities that appreciated in value from the date
they were acquired; the same potential for adverse tax consequences is present,
however, whenever an investor purchases shares in a regulated investment company
owning appreciated assets. When the Fund sells appreciated securities, the
amount of any gain will be taxable to shareholders, including new shareholders
as well as former partners of the Partnership. The effect of this will be to
tax new shareholders on a distribution that economically represents a return of
the purchase price of their Shares rather than on an increase in the value of
their investment, to the extent the gain represented appreciation in the
securities at the time the Shares of the Fund were purchased. See "Taxes" with
respect to the foregoing and regarding a private letter ruling obtained from the
Internal Revenue Service with respect to the exchange.
The following is a summary of key financial information relating to
the Partnership and the Fund. The information for the periods June 22, 1994 to
October 31, 1995 for the Fund and January 1, 1994 to June 22, 1994 for the
Partnership and the four years in the period ended December 31, 1993 for the
Partnership has been audited by Coopers & Lybrand L.L.P., independent auditors.
The financial statements as of October 31, 1995 of the Fund appear in the
Fund's Annual Report to Shareholders for the year ended October 31, 1995, which
can be obtained by shareholders at no charge by calling 1-800-844-4836 or by
writing to the Fund at the address on the back cover of this Prospectus.
Although the Partnership was managed by the same individuals who
manage the Fund and the Fund is managed in a manner that is in all material
respects equivalent to the management of the Partnership, the information should
not be viewed as an indication of future performance by the Fund. The
information includes information regarding the Partnership's operations for
periods before the Fund's registration statement became effective. The
Partnership was not registered under the 1940 Act and therefore was not subject
to certain investment restrictions that are imposed by that Act. If the
Partnership had been registered under the 1940 Act, its performance might have
been adversely affected. In addition, the expenses borne by the Fund are higher
than those borne by the Partnership. For a description of the expenses borne by
the Fund, see "Shareholder and Fund Expenses."
<TABLE>
<CAPTION>
FOR A FUND SHARE OUTSTANDING THROUGHOUT THE PERIOD<F8>
- --------------------------------------------------
NOV. 1, JUNE 22, JAN. 1, JUNE 27,
1994 TO 1994 TO 1994 TO 1984 TO
OCT. 31, OCT. 31, JUNE 22, FOR THE YEAR ENDED DECEMBER 31, DEC. 31,
1995 1994 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
<F9> <F9> <F10> <F10> <F10> <F10> <F10> <F10> <F10> <F10> <F10> <F10> <F10>
<F11> <F11> <F11> <F11> <F11> <F11>
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE AT
BEGINNING OF PERIOD $10.65 $10.00 $10.29 $9.13 $8.06 $6.16 $6.31 $5.22 $4.49 $4.61 $4.20 $3.07 $2.83
- -------------------
INCOME FROM INVESTMENT OPERATIONS:
NET INVESTMENT
INCOME 0.12 0.06 0.16 0.16 0.19 0.21 0.20 0.16 0.13 0.12 0.10 0.08
NET REALIZED AND
UNREALIZED GAINS
AND (LOSSES) ON
INVESTMENTS 1.28 0.61 (0.35) 1.00 0.91 1.72 (0.36) 0.89 0.57 (0.25) 0.29 1.03 0.16
----- ----- ------ ---- ---- ---- ------ ---- ---- ------ ---- ---- ----
TOTAL FROM
INVESTMENT
OPERATIONS 1.40 0.65 (0.29) 1.16 1.07 1.91 (0.15) 1.09 0.73 (0.12) 0.41 1.13 0.24
----- ----- ------ ---- ---- ---- ------ ---- ---- ------ ---- ---- ----
LESS DISTRIBUTIONS 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
NET ASSET VALUE,
END OF PERIOD $10.65 $10.00 $10.29 $9.13 $8.07 $6.16 $6.31 $5.22 $4.49 $4.61 $4.20 $3.07
===== ===== ===== ==== ==== ==== ==== ==== ==== ==== ==== ====
TOTAL RETURN 6.5% (2.8)% 12.7% 13.3% 30.8% (2.4)% 20.9% 16.9% (2.6)% 9.8% 36.8% 8.5%
SUPPLEMENTAL DATA AND RATIOS:
NET ASSETS AT
END OF PERIOD
(IN 000'S) $55,579 $45,332 $41,141 $44,104 $38,243 $34,024 $24,282 $27,426 $22,683 $19,317 $16,029 $11,076 $3,060
RATIO OF EXPENSES
TO AVERAGE NET
ASSETS 1.53%<F12> 1.20%<F12> 1.19%<F8> 0.67% 0.71% 0.72% 0.67% 0.75% 0.74% 0.77% 0.78% 0.92%1.03%<F13>
<F13>
RATIO OF NET
INVESTMENT
INCOME TO AVERAGE
NET ASSETS 1.14%<F12> 1.10%<F12> 1.17%<F13> 1.64% 1.90% 2.57% 3.32% 3.37% 3.18% 2.56% 2.48% 2.64%4.98%<F13>
<F13>
PORTFOLIO TURNOVER
RATE 77% 27% 78% 72% 60% 68% 67% 48% 38% 61% 48% 34% 1%
--- --- --- --- --- --- --- --- --- --- --- --- ---
<FN>
<F8> Per share amounts for the results of operations of HCM Partners, L.P. have been calculated using the average number of
interests outstanding during each period.
<F9> Represents the results of operations of The Haven Fund.
<F10> Represents the results of operations of HCM Partners, L.P.
<F11> Unaudited.
<F12> Without fee waivers, the ratio of operating expenses to average net assets would have been 1.59 and 1.43% (annualized), and
the ratio of net investment income to average net assets would have been 1.08% and 0.87% (annualized) for the periods ended October
31, 1995 and 1994 respectively.
<F13> Annualized
</TABLE>
INVESTING IN THE FUND
HOW TO PURCHASE SHARES
An investor may initially purchase Shares by completing and forwarding
a Purchase Application available from the Fund's distributor, together with a
check payable to the order of "The Haven Fund," to The Haven Fund, P.O. Box
8903, Wilmington, Delaware 19899-8903 (or, for overnight delivery, to The Haven
Fund, 400 Bellevue Parkway, Wilmington, Delaware 19809-3710). A shareholder may
subsequently purchase Shares by mailing a check payable to the order of "The
Haven Fund," together with written instructions indicating the shareholder's
name and Fund account number, to the Fund at the same address. Initial
investments in the Fund must be at least $2,500 ($2,000 for IRAs and $1,000 when
establishing an Automatic Investment Plan at the time of the initial investment)
and subsequent investments must be at least $100. Haven in its sole discretion
may waive minimum investment requirements. The Fund reserves the right to
reject any purchase order.
An existing shareholder may purchase additional Shares by using a
federal funds wire. To do so, the shareholder should first call PFPC at 1-800-
850-7163, ask to speak with the wire desk and explain that federal funds are
being wired that day. The shareholder should next direct his or her bank to
wire federal funds to PNC Bank, Philadelphia, Pennsylvania, ABA No. 031000053
for credit to "Purchase Concentration Account No. 855-1033-470," with the wire
indicating the investor's name and Fund account number. If PFPC and PNC receive
the required telephone notification and the federal funds wire with proper
instructions by 4:00 p.m. (Eastern Time) the purchase order for Shares will be
processed that day.
Shares may be purchased on any Business Day. A "Business Day" is any
weekday that the New York Stock Exchange (the "NYSE") is open for business.
Shares are sold at the public offering price (i.e., net asset value for the
Shares) next computed after an order is received by the Fund's transfer agent.
Orders received by the Fund's transfer agent after 4:00 p.m. (Eastern Time) are
priced at the public offering price on the following Business Day.
In the interest of economy and convenience, the Fund does not issue
certificates representing the Shares. Instead, the transfer agent maintains a
record of each shareholder's ownership. Each shareholder receives confirmation
of purchase and redemption orders from the transfer agent. Shares and any
dividends and distributions paid by the Fund are reflected in account statements
from the transfer agent.
INDIVIDUAL RETIREMENT ACCOUNTS. Individuals who receive compensation
or earned income, even if they are active participants in a qualified retirement
plan (or certain similar retirement plans), may establish their own tax-
sheltered Individual Retirement Account ("IRA"). The Fund offers a prototype
IRA plan which may be adopted by individuals. There is currently no charge for
establishing an account, although there is an annual maintenance fee.
Earnings on amounts held in an IRA are not taxed until withdrawal.
However, the amount of deduction, if any, allowed for IRA contributions is
limited for individuals who are active participants in an employer-maintained
retirement plan and whose incomes exceed specific limits.
A description of applicable service fees and certain limitations on
contributions and withdrawals, as well as application forms, are available from
the Fund upon request. Because a retirement program involves commitments
covering future years, it is important that the investment objective of the Fund
be consistent with the participant's retirement objectives. Premature
withdrawals from a retirement plan will result in adverse tax consequences.
AUTOMATIC INVESTMENT PLAN. The Fund offers an Automatic Investment
Plan that allows an investor to automatically purchase shares on a regular,
convenient basis ($100 minimum per transaction). Under this plan, an investor's
designated bank or other financial institution debits a pre-authorized amount on
the investor's account and applies the amount to the purchase of Fund shares.
The plan may be established with any financial institution that is a member of
the Automated Clearing House.
The plan may be established by completing the appropriate section on
the Purchase Application when opening an account. A $1,000 minimum initial
investment must be met before establishing the plan when opening an account.
The plan may also be established after an account is opened by completing an
Automatic Investment Plan Application which may be obtained by calling 1-800-
844-4836. No service fee is currently charged by the Fund for participation in
the plan. A $20 fee will be imposed by the transfer agent if sufficient funds
are not available in the investor's account at the time of the automatic
transaction. If an investor discontinues participation in the plan, the Fund
reserves the right to redeem the investor's account involuntarily, upon sixty
days' written notice, if the account's net asset value is $2,000 or less.
HOW TO REDEEM SHARES
REDEMPTIONS. Shareholders may redeem for cash some or all of their
Shares at any time. To do so, a written request in the form described below
must be sent directly to The Haven Fund, P.O. Box 8903, Wilmington, Delaware
19885-8903 (or, for overnight delivery, to The Haven Fund, 400 Bellevue Parkway,
Wilmington, Delaware 19809-3710). There is no charge for a redemption.
Except as noted below, a request for redemption must be signed by all
persons in whose names the Shares are registered. Signatures must conform
exactly to the account registration. If the proceeds of the redemption exceed
$25,000, if the proceeds are not to be paid to the record owner at the record
address, or if the shareholder is a corporation, partnership, trust or
fiduciary, signature(s) must be guaranteed by a bank, a securities broker-
dealer, a credit union having authority to issue signature guarantees, a savings
and loan association, a building and loan association, a cooperative bank, a
federal savings bank or association, a national securities exchange, a
registered securities association or a clearing agency, provided that such
institution satisfies the standards established by the Fund's transfer agent.
Generally, a properly signed written request with any required signa-
ture guarantee is all that is required for a redemption. In some cases,
however, other documents may be necessary. Additional documentary evidence of
authority is required by PFPC in the event redemption is requested by a
corporation, partnership, trust, fiduciary, executor or administrator.
EXPEDITED REDEMPTIONS. If a shareholder has given authorization for
expedited redemption, Shares can be redeemed by telephone and the proceeds sent
by federal wire transfer to a single previously designated bank account or
mailed by check to the address of record or other designated address. Once
authorization is on file, PFPC will honor requests by any person by telephone at
1-800-850-7163. The minimum amount that may be sent by check is $500, while the
minimum amount that may be wired is $10,000. The Fund reserves the right to
change these minimums or to terminate these redemption privileges.
During periods of substantial economic or market change, telephone
redemptions may be difficult to complete. If a shareholder is unable to contact
the transfer agent by telephone, the shareholder may also deliver the redemption
request to the transfer agent by mail at the address stated above.
The Fund is not responsible for the efficiency of the federal wire
system or the shareholder's firm or bank. The Fund does not currently charge
for wire transfers. The shareholder is responsible for any charges imposed by
the shareholder's bank. To change the name of the single designated bank
account to receive wire redemption proceeds, it is necessary to send a written
request (with a guaranteed signature as described under "How to Redeem Shares-
Redemptions") to The Haven Fund at the address stated above.
The Fund reserves the right to refuse a telephone redemption if it
believes it advisable to do so. PFPC will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, but neither the
Fund nor PFPC will be liable for following instructions communicated by
telephone that PFPC reasonably believes to be genuine.
ACCOUNTS WITH LOW BALANCES. The Fund reserves the right to redeem a
shareholder's account in the Fund at any time the net asset value of the account
in the Fund falls below $1,000 as the result of a redemption. A shareholder
will be notified in writing that the value of the shareholder's account in the
Fund is less than the required amount and will be allowed 30 days to make
additional investments before the redemption is processed.
PAYMENT OF REDEMPTION PROCEEDS. In all cases, the redemption price is
the net asset value per share of the Shares next determined after the request
for redemption is received in proper form. Payment for Shares redeemed is made
by check mailed or by wire transfer transmitted within seven days after
acceptance by PFPC of the request and any other necessary documents in proper
order. Such payment may be postponed or the right of redemption suspended as
provided by the rules of the SEC. If the Shares to be redeemed have been
recently purchased by check, the Fund's transfer agent may delay the payment of
redemption proceeds, which may be a period of up to 15 days after the purchase
date, pending a determination that the check has cleared.
NET ASSET VALUE
The net asset value for each Share of the Fund is calculated as of the
close of regular trading hours on the NYSE (currently 4:00 p.m. Eastern Time) on
each Business Day by adding the value of all its securities, cash and other
assets allocable to its Shares, subtracting the liabilities allocable to its
Shares and dividing the result by the total number of Shares outstanding.
Valuation of securities held by the Fund other than foreign securities
is as follows: securities traded on a national securities exchange or through
the Nasdaq National Market are valued at the last reported sale price that day;
securities traded on a national securities exchange or through the Nasdaq
National Market for which there were no sales on that day and securities traded
on other over-the-counter markets for which market quotations are readily
available are valued at the mean of the bid and asked prices; and an option or
futures contract is valued at the last sales price prior to 4:00 p.m. (Eastern
Time), as quoted on the principal exchange or board of trade on which such
option or contract is traded, or in the absence of a sale, the mean between the
last bid and asked prices prior to 4:00 p.m. (Eastern Time); and securities for
which market quotations are not readily available are valued at fair market
value as determined in good faith by or under the direction of the Trustees.
Valuation of securities of foreign issuers is as follows: to the
extent sale prices are available, securities which are traded on a recognized
stock exchange are valued at the latest sale price on that exchange prior to the
time when assets are valued or prior to the close of regular trading hours on
the NYSE. In the event that there are no sales, the mean between the last
available bid and asked prices will be used. If a security is traded on more
than one exchange, the latest sale price on the exchange where the stock is
primarily traded is used. An option or futures contract is valued at the last
sales price prior to 4:00 p.m. (Eastern Time), as quoted on the principal
exchange or board of trade on which such option or contract is traded, or in the
absence of a sale, the mean between the last bid and asked prices prior to 4:00
p.m. (Eastern Time). In the event that application of these methods of
valuation results in a price for a security which is deemed not to be
representative of the market value of such security, the security will be valued
by, under the direction of or in accordance with, a method specified by the
Trustees as reflecting fair value.
The amortized cost method of valuation will be used with respect to
debt obligations with 60 days or less remaining to maturity unless Haven, under
the supervision of the Trustees, determines such method does not represent fair
value. All other assets and securities held by the Fund (including restricted
securities, if any) are valued at fair value as determined in good faith by the
Trustees or by someone under their direction. Any assets which are denominated
in a foreign currency are translated into U.S. dollars at the prevailing market
rates as of the time of valuation. The Fund may use a pricing service, bank or
broker-dealer experienced in such matters, other than PFPC, to value the Fund's
securities.
DIVIDENDS AND DISTRIBUTIONS
The Fund distributes to shareholders semiannually substantially all of
its net investment income and distributes to shareholders annually substantially
all of its net realized capital gains, if any. All distributions are reinvested
at net asset value in the form of additional full and fractional Shares unless a
shareholder elects to receive them in cash. Such election, or any revocation
thereof, must be made in writing to PFPC, and will become effective with respect
to dividends with a record date after the receipt by PFPC of such election or
revocation, as the case may be.
TAXES
The Fund intends to qualify for treatment as a "regulated investment
company" within the meaning of the Internal Revenue Code of 1986, as amended
(the "Code"). By so qualifying, the Fund will not be subject to U.S. federal
income tax on income and gains distributed to shareholders. The Fund intends to
distribute to shareholders each year an amount adequate to avoid the imposition
of a 4% nondeductible excise tax, which is applied to certain amounts not
distributed (and not treated as having been distributed) on a timely basis in
accordance with a calendar year distribution requirement. The Fund may be
subject to foreign withholding taxes which would reduce the yield on its
investments. Tax treaties between certain countries and the United States may
reduce or eliminate such taxes. It is expected that Fund shareholders will not
be able to claim a federal income tax credit or deduction for such foreign
taxes, in which event such taxes will ordinarily be deductible by the Fund. The
Fund believes that it may constitute a personal holding company; as such, it
would be subject to additional taxes with respect to its net investment income
not distributed to shareholders within applicable time periods. The Fund
intends to distribute all of its net investment income within such time periods
so as not to be subject to such taxes.
Dividends paid from net investment income (including distributions of
net realized short-term capital gains) are taxable to shareholders as ordinary
income whether received in cash or reinvested in additional Shares. All dis-
tributions derived from net realized long-term capital gains will be taxable to
shareholders as long-term capital gains, regardless of how long shareholders
have held Shares and regardless of whether received in cash or additional
Shares. Pursuant to a ruling obtained from the Internal Revenue Service, the
Fund expects to be treated as succeeding to the tax bases of HCM Partners, L.P.
in the assets transferred by it to the Fund. As of January 31, 1996, based on
the unaudited financial statements of the Fund as of such date, the net assets
of the Fund were approximately $59,075,676 and the net unrealized appreciation
of the assets of the Fund was approximately $13,490,641. If such appreciation
were realized and distributed to the Fund's shareholders, the distribution would
be taxable to them.
Dividends declared in October, November or December of any year to
shareholders of record as of a date in such a month will be treated for federal
income tax purposes as having been received by shareholders in that year if they
are paid before February 1 of the following year.
Statements as to the tax status of each shareholder's dividends and
distributions are mailed annually. Shareholders should consult their own tax
advisers about the status of dividends and distributions from the Fund in their
own states and localities and about the tax consequences of gains and losses
from the redemption or sale of Shares. Non-U.S. shareholders should consult
their tax advisers as to the U.S. and non-U.S. tax consequences of an investment
in the Fund.
GENERAL INFORMATION
DESCRIPTION OF SHARES. The Fund is the initial series of the Trust, a
Delaware business trust formed in 1994. The Agreement and Declaration of Trust
of the Trust (the "Declaration") authorizes the Trustees to issue an unlimited
number of full and fractional transferable shares of beneficial interest, with
or without par value. The number of shares authorized is unlimited, and all
shares issued shall be fully paid and nonassessable. No shares shall have any
appraisal, conversion, or preemptive rights. The Declaration designates one
series of shares, $0.001 par value per share, which represents the Shares of the
Fund. The Trustees may establish additional series of shares of the Trust, each
of which would be a separate regulated investment company under the Code.
The Fund's shareholders are entitled to one vote for each full Share
held and a proportionate fractional vote for each fractional Share held. They
have the power to vote at special meetings with respect to, among other things,
the selection of Trustees; the merger, consolidation or sale of all or
substantially all Trust or Fund assets; and such additional matters relating to
the Trust or Fund as may be required by law or by regulation or order of the SEC
(including changes in fundamental investment policies and certain other
limitations on investment of the assets of the Trust or the Fund, as the case
may be), or which the Trustees consider desirable. A special meeting may be
called upon the written request of a holder or holders of not less than 10% of
all Shares outstanding, provided that the reasonable expenses for preparing and
mailing such notice be paid by such holder or holders. The Trust does not
intend to hold annual meetings of shareholders of the Fund. Any Trustee may be
removed by the vote of at least two-thirds of the outstanding Shares. The
Trustees shall promptly call a meeting of shareholders for such purpose when
requested in writing to do so by the record holders of not less than 10% of the
outstanding shares of the Trust. The Trustees will assist any group of ten or
more shareholders, meeting requirements set forth in the 1940 Act, that wishes
to communicate with other shareholders in order to obtain sufficient signatures
to request a meeting for the purpose of removing a Trustee. The Trustees may
amend the Declaration without a shareholder vote, except that shareholders have
the right to vote on any amendment affecting their right to vote, any amendment
required by law of the Trust's registration statement, or any matter submitted
to shareholders by the Trustees.
PERFORMANCE DATA. From time to time the Fund may advertise its capi-
tal appreciation or total return showing the current value of an investment in
the Fund if all dividends and distributions paid by the Fund had been reinvested
in additional Shares at the time of payment. Such advertisements or
descriptions may include the performance of HCM Partners, L.P., the predecessor
of the Fund. Furthermore, in reports or other communications to shareholders
and in advertising material, the Fund may compare its performance with that of
other mutual funds as listed in the rankings prepared by Lipper Analytical Ser-
vices, Inc. or similar independent services that monitor the performance of
mutual funds or with other appropriate indexes of investment securities.
Performance computed for purposes of advertisements should not be considered
representative of the future performance of the Fund. For a description of the
method used to determine performance, see the Statement of Additional
Information - "Determination of Performance Data."
REPORTS AND INQUIRIES. Each shareholder will receive a quarterly
statement of his or her account as well as a statement of the account after any
transaction that affects the Share balance or Share registration. The Fund will
also send to its shareholders an unaudited semiannual report and an audited
annual report, each of which will include a list of the investment securities
held by the Fund and a statement of the performance of the Fund. General
inquiries regarding the Fund may be directed to PFPC, the Fund's transfer agent,
at P.O. Box 8950, Wilmington, Delaware 19885-9628, or 1-800-850-7163.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, the Statement
of Additional Information or the Fund's official sales literature in
connection with the offering of Shares of the Fund, and if given or made,
such other information or representations must not be relied upon as having
been authorized by the Fund. This Prospectus does not constitute an offer of
the Shares in any state in which, or to any person to whom, such offer may
not lawfully be made.
TABLE OF CONTENTS
Shareholder and Fund Expenses..............................2
Financial Highlights.......................................3
The Fund and Its Investment Objective......................4
Selection of Investments ................................4
Investment Practices and Related Risk Factors ...........6
Portfolio Turnover ......................................8
Additional Investment Information .......................8
Management of the Fund.....................................9
The Exchange..............................................12
Investing in the Fund.....................................15
How to Purchase Shares .................................15
How to Redeem Shares ...................................16
Net Asset Value...........................................18
Dividends and Distributions...............................19
Taxes.....................................................19
General Information.......................................20
HAVEN CAPITAL MANAGEMENT, INC.
Investment Adviser
SUNSTONE FINANCIAL GROUP, INC.
Distributor
FUND PROFILE
The Haven Fund
P.O. Box 8903
Wilmington, DE 19899-8903
February 28, 1996
Haven Capital Management, Inc.
Investment Adviser
Important telephone numbers for The Haven Fund:
- For Fund information, call 1-800-844-4836
- For account balances, call 1-800-850-7163
1. WHAT IS THE FUND'S GOAL?
The Fund's primary objective is long-term growth of capital. It seeks to
achieve this objective by investing primarily in equity securities and at least
65% of its total assets in the equity securities of domestic companies. The
balance of the Fund may be invested in foreign equities and in investment-grade
fixed-income securities of domestic and foreign issuers.
2. HOW IS THE PORTFOLIO INVESTED?
The Fund invests in domestic and foreign companies that, in the opinion of Haven
Capital Management, its investment adviser, have superior financial and
operating characteristics, long-term prospects for growth, and are not
sufficiently valued by the securities markets. Haven Capital evaluates
investments for the Fund using fundamental analysis and through its own field
research. In addition, it uses economic and investment data provided by
independent sources.
3. WHAT ARE THE RISKS OF INVESTING IN THE FUND?
The performance of the Fund depends on the market value of its holdings.
Securities prices fluctuate in response to general political, economic and
market conditions as well as to the performance of individual companies. Common
stock prices can fluctuate dramatically in response to these factors.
Investment-grade bond prices fluctuate primarily in response to changes in
interest rates. The Fund's emphasis on fundamental analysis may cause its
performance to vary from that of broad measures of the market. Shares in the
Fund may at any time be worth more or less than you paid for them.
4. IS THE FUND APPROPRIATE FOR YOU?
The Haven Fund is appropriate for investors who are willing to risk stock market
fluctuations in pursuit of long-term growth.
5. WHAT ARE THE FUND'S EXPENSES?
The Fund has no sales charge or fee for initial purchases, reinvestment of
distributions or redemptions. Fund operating expenses are paid out of the Fund's
assets and are not charged directly to the shareholder. For the 1995 fiscal
year (restated to reflect a change in 12b-1 fees and the termination of certain
fee waivers), the operating expenses were as follows:
Investment advisory fees 0.60%
12b-1 fees 0.20%
Other expenses 0.89%
-----
Total fund operating expenses 1.69%
EXAMPLE 1 Year 3 Year 5 Year 10 Year
------ ------ ------ -------
$17 $53 $92 $200
For every $1,000 you invested, you would pay this much in total expenses if you
closed your account after the number of years indicated. The example assumes
the Fund's annual return was 5% and expenses were as described above. The
example should not be considered as representative of future expenses or
returns. Mutual fund expenses and returns vary from year to year.
6. HOW HAS THE FUND PERFORMED?
This chart shows how the Fund and its predecessor partnership have performed.
The Fund began operations on June 23, 1994. Results for the period prior to
that date reflect the performance of HCM Partners, L.P., a limited partnership
that was managed by Haven Capital from 1984 to 1994. On June 23, 1994 the Fund
acquired the assets of the Partnership in exchange for shares of the Fund.
Total Return
For the Year Ended December 31,
-------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
26.8% (0.6%) 12.7% 13.1% 31.0% (2.4%) 20.9% 16.9% (3.4%) 10.7%
AVERAGE ANNUAL TOTAL RETURN
OF THE FUND FOR THE PERIODS
ENDED 12/31/95
Past 1 Since Inception of
Year the Fund (6/23/94)
---- ------------------
26.8% 18.6%
AVERAGE ANNUAL TOTAL RETURN
OF THE FUND AND PARTNERSHIP
FOR THE PERIODS ENDED 12/31/95
Since Inception
of the
Past 1 Past 5 Past 10 Partnership
Year Years Years (6/27/84)
---- ----- ----- ---------
26.8.% 16.1% 16.4% 14.1%
Although the Partnership was managed by the same individuals who manage the
Fund, and the Fund is managed in a manner that is in all material respects
equivalent to the management of the Partnership, the above information should
not be viewed as an indication of the future performance of the Fund. It
includes information regarding the Partnership's operations for periods before
the Fund's registration statement became effective. The Partnership was not
registered under the Investment Company Act of 1940 and therefore was not
subject to certain investment restrictions that are imposed by that Act. If the
Partnership had been registered, its performance might have been adversely
affected. In addition, the expenses borne by the Fund are higher than those
borne by the Partnership.
7. WHO MANAGES THE FUND?
Haven Capital Management acts as the Fund's investment adviser. Haven Capital
is an independent organization that provides investment advice to various
institutional and individual clients for whom it managed approximately $775
million in assets at December 31, 1995. Haven Capital's principals have been
with the organization since its founding in 1982.
8. HOW CAN YOU BUY SHARES?
You may purchase shares by completing an application and mailing a check payable
to "The Haven Fund" for at least $2,500. The minimum investment for IRAs is
$2,000, and for Automatic Investment Plans is $1,000. Subsequent investments of
at least $100 may be made at any time.
9. HOW CAN YOU SELL SHARES?
Shares may be redeemed on any business day by either calling or sending a letter
directly to the Fund.
10. WHEN WILL YOU RECEIVE DISTRIBUTIONS?
The Fund distributes to its shareholders virtually all of its net investment
income twice a year in the form of dividends. Net realized capital gains, if
any, are paid annually. Shareholders may reinvest dividends and capital gains
with no sales charge or may elect to receive them in cash.
11. WHAT INVESTOR SERVICES ARE AVAILABLE?
The Haven Fund provides a number of convenient investor services including:
- Periodic Statement and Reports
- Individual Retirement Accounts
- Wire Transfer and Redemptions
- Automatic Investment Plan
- Automatic Reinvestment of Distributions
- Toll-Free Access to Investor Service Center
This Profile contains key information about the Fund. More details appear in
the Fund's accompanying Prospectus.
STATEMENT OF ADDITIONAL INFORMATION
February 28, 1996
THE HAVEN CAPITAL MANAGEMENT TRUST
CONTENTS
PAGE
Investment Objective and Policies......................... 2
Investment Restrictions...................................14
Portfolio Valuation.......................................17
Portfolio Transactions....................................17
Management of the Fund....................................18
Control Persons and Principal Holders of Securities...... 22
Shares of Beneficial Interests and Other Securities.......23
Additional Purchase and Redemption Information............24
Additional Information Concerning Taxes...................24
Determination of Performance Data.........................27
Auditors and Counsel......................................29
Financial Statements......................................29
Appendix -- Description of Ratings........................30
This Statement of Additional Information is meant to be read in
conjunction with the Prospectus of The Haven Fund (the "Fund") dated February
28, 1996 and is incorporated by reference in its entirety into that Prospectus.
The Fund is the initial series of The Haven Capital Management Trust, a
Delaware business trust (the "Trust").
Because this Statement of Additional Information is not itself a
prospectus, no investment in shares of beneficial interest of the Fund
("Shares") should be made solely upon the information contained herein. Copies
of the Fund's Prospectus and information regarding the Fund's current
performance may be obtained by calling Sunstone Financial Group, Inc.
("Sunstone"), the Fund's distributor, at (800) 844-4836. Information regarding
the status of shareholder accounts may be obtained by calling PFPC Inc.
("PFPC"), the Fund's transfer agent, at (800) 850-7163 or by writing to PFPC
Inc., P.O. 8903, Wilmington, Delaware 19899. Haven Capital Management, Inc.
("Haven") serves as the Fund's investment adviser.
INVESTMENT OBJECTIVE AND POLICIES
The following policies supplement the descriptions of the Fund's
investment objective and policies in the Prospectus.
FOREIGN TRANSACTIONS
Foreign Securities. The Fund may invest up to 35% of its total
------------------
assets, calculated at the time of purchase, in foreign securities, including
American Depository Receipts ("ADRs"). ADRs are receipts issued by a U.S. bank
or trust company which evidence ownership of underlying securities of foreign
corporations. ADRs are traded on domestic exchanges or in the U.S. over-the-
counter market and, generally, are in registered form. To the extent the Fund
acquires unsponsored ADRs through banks which do not have a contractual
relationship with the foreign issuer of the security underlying the ADR to issue
and service such ADRs, there may be an increased possibility that the Fund would
not become aware of certain material information or be able to respond to
corporate actions such as stock splits or rights offerings involving the foreign
issuer in a timely manner. In addition, the lack of information may result in
inefficiencies in the valuation of such instruments.
Investments in foreign securities may offer potential benefits not
available from investments solely in securities of domestic issuers. Such
benefits may include the opportunity to invest in foreign issuers that appear,
in the opinion of Haven, to offer better opportunity for long-term growth of
capital than investments in domestic securities, the opportunity to invest in
foreign countries with economic policies or business cycles different from those
of the United States and the opportunity to reduce fluctuations in portfolio
value by taking advantage of foreign stock markets that do not necessarily move
in a manner parallel to U.S. markets.
Investing in securities of foreign companies involves certain
considerations that are not typically associated with investing in securities of
domestic companies. Such investments may be affected by changes in currency
rates and in exchange control regulations (e.g., currency blockage). There may
be less publicly available information about a foreign company than about a
domestic company. Foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards comparable to those
applicable to domestic companies. Some foreign stock markets may have
substantially less volume than the New York Stock Exchange and securities of
some foreign companies may be less liquid than securities of comparable domestic
companies. Also, commissions on transactions in foreign securities may be
higher than for similar transactions on domestic stock markets. There is
generally less government regulation of stock exchanges, brokers, and listed and
unlisted companies in foreign countries than in the United States.
The Fund generally invests in foreign securities traded on the
principal trading markets for such securities. In most cases, the markets will
be foreign stock exchanges, although they may also be over-the-counter markets.
The Fund anticipates that the principal trading markets for the foreign
securities in which it will invest will be relatively liquid compared to the
stock exchanges or over-the-counter markets in the United States.
The Fund may invest up to 5% of its assets in countries with emerging
economies or securities markets, including certain countries in Asia and Latin
America. Political and economic structures in many of such countries may be
undergoing significant evolution and rapid development, and such countries may
lack the social, political and economic stability characteristic of more
developed countries. Certain of such countries have in the past failed to
recognize private property rights and have at times nationalized or expropriated
the assets of private companies. As a result, the risks described above,
including the risks of nationalization or expropriation of assets, may be
heightened. In addition, unanticipated political or social developments may
affect the values of the Fund's investments in those countries and the
availability to the Fund of additional investments in those countries. The
small size and inexperience of the securities markets in certain of such
countries and the limited volume of trading in securities in those countries may
make the Fund's investments in such countries illiquid and more volatile than
investments in more developed countries, and the Fund may be required to
establish special custodial or other arrangements before making certain
investments in those countries. There may be little financial or accounting
information available with respect to issuers located in certain of such
countries, and it may be difficult as a result to assess the value or prospects
of an investment in such issuers.
Foreign Currency Transactions. The Fund may, to the extent it invests
-----------------------------
in foreign securities, enter into forward foreign currency exchange contracts in
order to protect against adverse changes in future foreign currency exchange
rates. Because investment in foreign issuers will usually involve currencies of
foreign countries, the value of the assets of the Fund as measured in U.S.
dollars will be affected by changes in foreign currency exchange rates. The
Fund may incur costs in connection with conversions between various currencies.
The Fund may enter, solely for hedging purposes, into contracts to
purchase foreign currencies to protect against an anticipated rise in the U.S.
dollar price of securities it intends to purchase. The Fund may enter into
contracts to sell foreign currencies to protect against the decline in value of
its foreign currency denominated portfolio securities, or a decline in the value
of anticipated dividends from such securities, due to a decline in the value of
foreign currencies against the U.S. dollar. The Fund will not engage in cross-
hedging transactions. Contracts to sell foreign currency could limit any
potential gain which might be realized by the Fund if the value of the hedged
currency increased.
Currency exchange rates may fluctuate significantly over short periods
of time. They generally are determined by the forces of supply and demand in
the foreign exchange markets and the relative merits of investments in different
countries, actual or anticipated changes in interest rates and other complex
factors, as seen from an international perspective. Currency exchange rates
also can be affected unpredictably by intervention by U.S. or foreign
governments or central banks or the failure to intervene or by currency controls
or political developments in the U.S. or abroad. Markets for trading foreign
currency forward contracts offer less protection against defaults than is
available when trading in currency instruments on an exchange. Since a forward
foreign currency exchange contract is not guaranteed by an exchange or
clearinghouse, a default on the contract would deprive the Fund of unrealized
profits or force the Fund to cover its commitments for purchase or resale, if
any, at the current market price.
If the Fund enters into a forward foreign currency exchange contract
to buy foreign currency, the Fund will be required to place cash or liquid high-
grade debt securities in a segregated account with the Fund's custodian in an
amount equal to the value of the assets committed to the consummation of the
forward contract. If the value of the securities placed in the segregated
account declines, additional cash or liquid high-grade debt securities will be
placed in the account so that the value of the account will equal the amount of
the Fund's commitment with respect to the contract. If the Fund sells a forward
foreign currency contract, it will be appropriately covered.
FIXED INCOME SECURITIES
The prices of fixed income securities fluctuate in response to the
general level of interest rates as well as supply and demand for similarly rated
securities. Another factor which causes fluctuations in the prices of fixed
income securities is the supply and demand for similarly rated securities.
Fluctuations in the prices of portfolio securities subsequent to their
acquisition by the Fund will not affect cash income from such securities but
will be reflected in the Fund's net asset value.
CORPORATE DEBT OBLIGATIONS. As described in the Prospectus, the Fund
may invest in a variety of fixed income securities issued by domestic and
foreign issuers, including corporate debt obligations which are rated AAA, AA or
A by Standard & Poor's Corporation ("Standard & Poor's") or Aaa, Aa or A by
Moody's Investors Service, Inc. ("Moody's") or, if unrated, determined by Haven
to be of comparable credit quality. The Fund can hold no more than 5% of its
net assets in corporate debt obligations downgraded to a rating below A. See
Appendix A for a description of these corporate bond ratings assigned by Stan-
dard & Poor's and Moody's. The Fund will limit its investments in corporate
debt obligations and other non-equity investments to no more than 35% of the
value of its total assets.
ZERO COUPON BONDS. The Fund may invest up to 5% of its net assets in
zero coupon U.S. Treasuries and in zero coupon securities issued by financial
institutions, which represent a proportionate interest in underlying U.S.
Treasury securities. Such bonds do not entitle the holder to any periodic
payments of interest prior to maturity or provide for a specified cash payment
date when the bonds begin paying current interest. As a result, zero coupon
bonds are generally issued and traded at a significant discount from their face
value. The discount approximates the present value amount of interest the bonds
would have accrued and compounded over the period until maturity. The market
price of zero coupon bonds generally is more volatile than the market prices of
securities that provide for the periodic payment of interest and is likely to
fluctuate more in response to changes in interest rates than those of interest-
bearing securities having similar maturities and credit quality. Zero coupon
bonds carry the additional risk that, unlike securities that periodically pay
interest to maturity, the Fund will realize no cash until a specified future
payment date unless a portion of such securities is sold. In addition, the
Fund's investments in zero coupon bonds may require the Fund to sell certain of
its portfolio securities to generate sufficient cash to satisfy certain income
distribution requirements. The Fund will invest only in zero coupon U.S.
Treasury securities that are part of the STRIPS program.
GOVERNMENT SECURITIES. The Fund may invest in debt obligations of
varying maturities issued or guaranteed by the United States or foreign
governments or their agencies or sponsored instrumentalities. Direct
obligations of the U.S. Treasury include a variety of securities that differ in
their interest rates, maturities and dates of issuance. U.S. government
securities also include securities issued or guaranteed by the Federal Housing
Administration, Farmers Home Loan Administration, Export-Import Bank of the
United States, Small Business Administration, Government National Mortgage
Association ("GNMA"), General Services Administration, Central Bank for Coopera-
tives, Federal Farm Credit Banks, Federal Home Loan Banks, Federal Home Loan
Mortgage Corporation ("FHLMC"), Federal Intermediate Credit Banks, Federal Land
Banks, Federal National Mortgage Association ("FNMA"), Maritime Administration,
Tennessee Valley Authority, District of Columbia Armory Board and Student Loan
Marketing Association. Because the U.S. and foreign governments are not
generally obligated by law to provide support to a sponsored instrumentality,
the Fund will invest in obligations issued by such an instrumentality only if
Haven determines that the credit risk with respect to the instrumentality does
not make its securities unsuitable for investment by the Fund.
OTHER INVESTMENT POLICIES
CONVERTIBLE SECURITIES. The Fund may not purchase or hold more than
5% of its net assets in convertible securities rated below BBB by S&P, Baa by
Moody's or, if unrated, determined by Haven to be of comparable quality. Such
lower rated securities involve greater risk of loss of income and principal than
higher rated securities, are speculative in nature, and are commonly known as
"high yield" securities or "junk bonds." Although high risk, low rated debt
securities and comparable unrated debt securities may offer higher yields than
do higher rated securities, they generally involve greater volatility of price
and risk of principal and income.
SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest in
securities of closed-end investment companies to the extent permitted under the
Investment Company Act of 1940, as amended (the "1940 Act"). Presently, under
the 1940 Act, the Fund may hold securities of another investment company in
amounts which (a) do not exceed 3% of the total outstanding voting stock of such
company, (b) do not exceed 5% of the value of the Fund's total assets and
(c) when added to all other investment company securities held by the Fund, do
not exceed 10% of the value of the Fund's total assets. The Fund does not
intend to invest in the securities of other investment companies except by
purchase in the open securities market where no commission or profit to a
sponsor or dealer results from the purchase other than the customary broker's
commission, or except when the purchase is part of a plan of merger,
consolidation, reorganization, or acquisition.
LENDING OF PORTFOLIO SECURITIES. The Fund may lend portfolio
securities to brokers, dealers and other financial organizations that meet
capital and other credit requirements or other criteria established by the
trustees of the Trust (the "Trustees"). Haven will be responsible for
monitoring the Fund's portfolio lending activities and for compliance with the
capital and other credit criteria established by the Trustees. These loans, if
and when made, may not exceed 33 1/3% of the Fund's total assets taken at value.
The Fund will not lend portfolio securities to Haven or its affiliates unless
it has applied for and received specific authority to do so from the Securities
and Exchange Commission (the "SEC"). Loans of portfolio securities will be
collateralized by cash, letters of credit or U.S. government securities, which
are maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. Any gain or loss in the market price of
the securities loaned that might occur during the term of the loan would be for
the account of the Fund. From time to time, the Fund may return a part of the
interest earned from the investment of collateral received for securities loaned
to the borrower and/or a third party that is unaffiliated with the Fund and that
is acting as a "finder."
By lending its securities, the Fund can increase its income by contin-
uing to receive interest on the loaned securities as well as by either investing
the cash collateral in short-term high-grade liquid debt securities instruments
or obtaining yield in the form of interest paid by the borrower when U.S.
government securities are used as collateral. When the Fund invests cash
collateral received for the loan of portfolio securities, a leveraging effect is
obtained. The Fund will adhere to the following conditions whenever its
portfolio securities are loaned: (a) the Fund must receive at least 100% cash
collateral or equivalent securities from the borrower; (b) the borrower must
increase such collateral whenever the market value of the securities rises above
the level of such collateral; (c) the Fund must be able to terminate the loan at
any time; (d) the Fund must receive reasonable interest on the loan, as well as
payments in the amount of any dividends, interest or other distributions on the
loaned securities and any increase in market value; (e) the Fund may pay only
reasonable custodian fees in connection with the loan; and (f) voting rights on
the loaned securities may pass to the borrower, PROVIDED, HOWEVER, that if a
material event adversely affecting the investment occurs, the Fund must
terminate the loan and regain the right to vote the securities.
REPURCHASE AGREEMENTS. The Fund may utilize up to 5% of its net
assets to engage in repurchase agreement transactions with respect to any secu-
rities in which it invests. The Fund will enter into repurchase agreements with
member banks of the Federal Reserve System or certain domestic non-bank dealers.
Repurchase agreements are contracts under which the buyer of a security
simultaneously commits to resell the security to the seller at an agreed-upon
price and date. Under each repurchase agreement, the selling institution will
be required to maintain the value of the securities subject to the repurchase
agreement at not less than their repurchase price. Repurchase agreements could
involve certain risks in the event of default or insolvency of the other party,
including possible delays or restrictions upon the Fund's ability to dispose of
the underlying securities. The investment adviser of the Fund, acting under the
supervision of the Trustees, reviews the creditworthiness of those bank and non-
bank dealers with which the Fund enters into repurchase agreements to evaluate
these risks.
FUTURES ACTIVITIES. The Fund may utilize up to 5% of its net assets
to enter into interest rate and stock index futures contracts and may utilize up
to 5% of its net assets to purchase or write related options that are traded on
an exchange designated by the Commodity Futures Trading Commission (the "CFTC")
or consistent with CFTC regulations on foreign exchanges. These investments may
be made solely for bona fide hedging as defined in CFTC regulations. The
ability of the Fund to trade in futures contracts may be limited by the
requirements of the Internal Revenue Code of 1986, as amended (the "Code"),
applicable to a regulated investment company.
The Fund will not engage in futures activities generally if the sum of
the amount of initial margin deposits and premiums paid for unexpired options
required to establish positions other than those considered to be "bona fide
hedging" by the CFTC would exceed 5% of the Fund's net asset value, after taking
into account unrealized profits and unrealized losses on commodity contracts it
has entered into. The Fund's long positions in futures contracts or options
thereon written by it must be collateralized with cash or high-grade liquid
assets held in a segregated account.
FUTURES CONTRACTS. An interest rate futures contract provides for the
future sale by one party and the purchase by the other party of a certain amount
of a specific financial instrument (debt security) at a specified price, date,
time and place. A stock index futures contract is an agreement between seller
and buyer to respectively deliver and take delivery of a commodity which is
represented by a stock price index at a future specified date. The delivery is
a cash settlement of the difference between the original transaction price and
the final price of the index at the termination of the contract. Stock index
futures are capitalization weighted indices which reflect the market value of
the firms listed on the indices.
The purpose of entering into a futures contract is to protect the Fund
from fluctuations in value without its actually buying or selling the
securities. Of course, since the value of portfolio securities will far exceed
the value of the futures contracts sold by the Fund, an increase in the value of
the futures contracts could only mitigate -- but not totally offset -- the
decline in the value of the Fund's assets. No consideration is paid or received
by the Fund upon the purchase or sale of a futures contract. Upon entering into
a futures contract, the Fund will be required to deposit in a segregated account
with its custodian an amount of cash or cash equivalents equal to 1 to 10% of
the contract amount (this amount is subject to change by the board of trade on
which the contract is traded and members of such board of trade may charge a
higher amount). This amount is known as "initial margin" and is in the nature
of a performance bond or good faith deposit on the contract which is returned to
the Fund upon termination of the futures contract, assuming all contractual
obligations have been satisfied. The broker will have access to amounts in the
margin account if the Fund fails to meet its contractual obligations.
Subsequent payments, known as "variation margin," to and from the broker, will
be made daily as the price of the index or securities underlying the futures
contract fluctuates, making the long and short positions in the futures contract
more or less valuable, a process known as "marking-to-market." At any time
prior to the expiration of a futures contract, the Fund may elect to close the
position by taking an opposite position, which will operate to terminate the
Fund's existing position in the contract.
There are several risks in connection with the use of futures
contracts as a hedging device. Successful use of futures contracts is subject
to the ability of the Fund's investment adviser to predict correctly movements
in the direction of interest rates and stock indices. These predictions involve
skills and techniques that may be different from those involved in the
management of the portfolio securities being hedged. In addition, there can be
no assurance that there will be a correlation between movements in the price of
the underlying securities or index and movements in the price of the securities
which are the subject of the hedge. A decision concerning whether, when and how
to hedge involves the exercise of skill and judgment and even a well-conceived
hedge may be unsuccessful to some degree because of market behavior or
unexpected trends in interest rates or stock indices. The potential loss the
Fund may experience as a result of its investments in any futures transaction is
unlimited.
Positions in futures contracts and options in futures contracts may be
closed out only on the exchange on which they were entered into (or through a
linked exchange). No secondary market for such contracts exists. Although the
Fund intends to purchase or sell futures contracts only if there is an active
market for such contracts, there is no assurance that a liquid market will exist
for the contracts at any particular time. Most U.S. futures exchanges and
boards of trade limit the amount of fluctuation permitted in futures contract
prices during a single trading day. Once the daily limit has been reached in a
particular contract, no trades may be made that day at a price beyond that
limit. It is possible that futures contract prices could move to the daily
limit for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and subjecting some futures
traders to substantial losses. In such event, and in the event of adverse price
movements, the Fund would be required to make daily cash payments of variation
margin. In such circumstances, an increase in the value of the portion of the
Fund's securities being hedged, if any, may partially or completely offset
losses on the futures contract. However, as described above, there is no
guarantee that the price of the securities being hedged will, in fact, correlate
with the price movements in a futures contract and thus provide an offset to
losses on the futures contract.
If the Fund has hedged against the possibility of an event adversely
affecting the value of securities held in its portfolio and that event does not
occur, the Fund will lose part or all of the benefit of the increased value of
securities which it has hedged because it will have offsetting losses in its
futures positions. Losses incurred in hedging transactions and the costs of
these transactions will affect the Fund's performance. In addition, in such
situations, if the Fund had insufficient cash, it may have to sell securities to
meet daily variation margin requirements at a time when it may be
disadvantageous to do so. These sales of securities may, but will not
necessarily, be at increased prices which reflect the decline in interest rates.
WHEN-ISSUED SECURITIES AND DELAYED DELIVERY TRANSACTIONS. The Fund
may utilize up to 5% of its net assets to purchase securities on a "when-issued"
basis or purchase or sell securities for delayed delivery (i.e., payment or
delivery occur beyond the normal settlement date at a stated price and yield).
In these transactions, payment for and delivery of the securities occurs beyond
the regular settlement dates. When-issued transactions normally settle within
30-45 days. The Fund will enter into a when-issued transaction for the purpose
of acquiring portfolio securities and not for the purpose of leverage, but may
sell the securities before the settlement date if Haven deems it advantageous to
do so. The payment obligation and the interest rate that will be received on
when-issued securities are fixed at the time the buyer enters into the
commitment, and the right to acquire such security must be exercisable without
additional cost to the Fund. Due to fluctuations in the value of securities
purchased or sold on a when-issued or delayed-delivery basis, the yields
obtained on such securities may be higher or lower than the yields available in
the market on the dates when the investments are actually delivered to the
buyers.
When the Fund agrees to purchase when-issued or delayed delivery
securities, its custodian will set aside cash, U.S. government securities or
liquid high-grade debt obligations equal to the amount of the commitment in a
separate account. Normally, the custodian will set aside portfolio securities
to satisfy a purchase commitment, and in such a case the Fund may be required
subsequently to place additional assets in the separate account in order to
ensure that the value of the account remains equal to the amount of the Fund's
commitment. It may be expected that the Fund's net assets will fluctuate to a
greater degree when it sets aside portfolio securities to cover such purchase
commitments than when it sets aside cash. Because the Fund will set aside cash
and liquid assets to satisfy its purchase commitments in the manner described,
the Fund's liquidity and ability to manage its portfolio might be affected by
reason of its commitments to purchase when-issued or sell delayed delivery
securities.
When the Fund engages in when-issued or delayed delivery transactions,
it relies on the other party to consummate the trade. Failure of the seller to
do so may result in the Fund's incurring a loss or missing an opportunity to
obtain a price considered to be advantageous.
OPTIONS ON SECURITIES. In order to hedge against adverse market
shifts, the Fund may utilize up to 5% of its net assets to purchase put and call
options on securities. In addition, the Fund may write covered call options on
securities. The Fund realizes fees (referred to as "premiums") for granting the
rights evidenced by the call options it has written. A put option embodies the
right of its purchaser to compel the writer of the option to purchase from the
option holder an underlying security at a specified price at any time during the
option period. In contrast, a call option embodies the right of its purchaser
to compel the writer of the option to sell to the option holder an underlying
security at a specified price at any time during the option period. Thus, the
purchaser of a call option written by the Fund has the right to purchase from
the Fund the underlying security owned by the Fund at the agreed-upon price for
a specified time period. The Fund may write only covered call options.
Accordingly, whenever the Fund writes a call option it will continue to own or
have the present right to acquire the underlying security for as long as it
remains obligated as the writer of the option. Requirements of the Code may
restrict the Fund's ability to engage in options transactions.
The principal reason for writing covered call options on a security is
to attempt to realize, through the receipt of premiums, a greater return than
would be realized on the securities alone. In return for a premium, the writer
of a covered call option forfeits the right to any appreciation in the value of
the underlying security above the strike price for the life of the option (or
until a closing purchase transaction can be effected). Nevertheless, the call
writer retains the risk of a decline in the price of the underlying security.
The size of the premiums that the Fund may receive may be adversely affected as
new or existing institutions, including other investment companies, engage in or
increase their option-writing activities.
Options written by the Fund will normally have expiration dates
between one and nine months from the date written. The exercise price of the
options may be below, equal to or above the market values of the underlying
securities at the times the options are written. In the case of call options,
these exercise prices are referred to as "in-the-money," "at-the-money" and
"out-of-the-money," respectively. The Fund may write (a) in-the-money call
options when Haven expects that the price of the underlying security will remain
flat or decline moderately during the option period, (b) at-the-money call
options when Haven expects that the price of the underlying security will remain
flat or advance moderately during the option period and (c) out-of-the-money
call options when Haven expects that the premiums received from writing the call
option plus the appreciation in market price of the underlying security up to
the exercise price will be greater than the appreciation in the price of the
underlying security alone. In any of the preceding situations, if the market
price of the underlying security declines and the security is sold at this lower
price, the amount of any realized loss will be offset wholly or in part by the
premium received.
So long as the obligation of the Fund as the writer of an option
continues, the Fund may be assigned an exercise notice by the broker-dealer
through which the option was sold, requiring the Fund to deliver the underlying
security against payment of the exercise price. This obligation terminates when
the option expires or the Fund effects a closing purchase transaction. The Fund
can no longer effect a closing purchase transaction with respect to an option
once it has been assigned an exercise notice. To secure its obligation to
deliver the underlying security when it writes a call option, the Fund will be
required to deposit in escrow the underlying security or other assets in
accordance with the rules of the Options Clearing Corporation (the "Clearing
Corporation") and of the securities exchange on which the option is written.
An option position may be closed out only where there exists a secon-
dary market for an option of the same series on a recognized securities exchange
or in the over-the-counter market. The Fund expects to write options only on
U.S. securities exchanges.
The Fund may realize a profit or loss upon entering into a closing
transaction. In cases where the Fund has written an option, it will realize a
profit if the cost of the closing purchase transaction is less than the premium
received upon writing the original option and will incur a loss if the cost of
the closing purchase transaction exceeds the premium received upon writing the
original option. Similarly, when the Fund has purchased an option and engages
in a closing sale transaction, whether the Fund realizes a profit or loss will
depend upon whether the amount received in the closing sale transaction is more
or less than the premium the Fund initially paid for the original option plus
the related transaction costs.
Although the Fund will generally purchase or write only those options
for which Haven believes there is an active secondary market so as to facilitate
closing transactions, there is no assurance that sufficient trading interest
will exist to create a liquid secondary market on a securities exchange for any
particular option or at any particular time, and for some options no such
secondary market may exist. A liquid secondary market in an option may cease to
exist for a variety of reasons. In the past, for example, higher than
anticipated trading activity or order flow or other unforeseen events have at
times rendered certain of the facilities of the Clearing Corporation and various
securities exchanges inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain types of orders
or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such event, it might
not be possible to effect closing transactions in particular options. If, as a
covered call option writer, the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise.
Securities exchanges generally have established limitations governing
the maximum number of calls and puts of each class which may be held or written,
or exercised within certain time periods by an investor or group of investors
acting in concert (regardless of whether the options are written on the same or
different securities exchanges or are held, written or exercised in one or more
accounts or through one or more brokers). It is possible that the Fund and
other clients of Haven may be considered to be such a group. A securities
exchange may order the liquidation of positions found to be in violation of
these limits and it may impose certain other sanctions. These limits may
restrict the number of options the Fund will be able to purchase on a particular
security.
Additional risks exist with respect to certain of the U.S. government
securities for which the Fund may write covered call options. If the Fund
writes covered call options on mortgage-back securities issued by GNMA, FNMA or
FHLMC, the mortgaged-backed securities that it holds as cover may, because of
scheduled amortization or unscheduled prepayments, cease to be sufficient cover.
If this occurs, the Fund will compensate for the decline in the value of the
cover by purchasing an appropriate additional amount of mortgage-backed
securities. The required cover will be marked-to-market daily.
In addition to writing covered options for other purposes, the Fund
may enter into options transactions as hedges to reduce investment risk,
generally by making an investment expected to move in the opposite direction of
a portfolio position. A hedge is designed to offset a loss on a portfolio
position with a gain on the hedge position; at the same time, however, a
properly correlated hedge will result in a gain on the portfolio position being
offset by a loss on the hedge position. The Fund bears the risk that the prices
of the securities being hedged will not move in the same amount as the hedge.
The Fund will engage in hedging transactions only when deemed advisable by
Haven. Successful use by the Fund of options will be subject to Haven's ability
to predict correctly movements in the direction of the stock underlying the
option used as a hedge. Losses incurred in hedging transactions and the costs
of these transactions will affect the Fund's performance.
STOCK INDEX OPTIONS. The Fund may utilize up to 5% of its net assets
to purchase exchange-listed put and call options on stock indexes, and may write
options on such indexes to hedge against the effects of market-wide price
movements. A stock index measures the movement of a certain group of stocks by
assigning relative values to the common stocks included in the index. A stock
index fluctuates with changes in the market values of the stocks included in the
index. Some stock index options are based on a broad market index such as the
NYSE Composite index, or a narrower market index such as the Standard & Poor's
100. Indexes are also based on an industry or market segment such as the AMEX
Oil and Gas Index or the Computer and Business Equipment Index.
Options on stock indexes are similar to options on stock except that
(a) the expiration cycles of stock index options are monthly, while those of
stock options are currently quarterly, and (b) the delivery requirements are
different. Instead of giving the right to take or make delivery of stock at a
specified price, an option on a stock index gives the holder the right to
receive a cash "exercise settlement amount" equal to (i) the amount, if any, by
which the fixed exercise price of the option exceeds (in the case of a put) or
is less than (in the case of a call) the closing value of the underlying index
on the date of exercise, multiplied by (ii) a fixed "index multiplier." Receipt
of this cash amount will depend upon the closing level of the stock index upon
which the option is based being greater than, in the case of a call, or less
than, in the case of a put, the exercise price of the index and the exercise
price of the option expressed in dollars times a specified multiple. The writer
of the option is obligated, in return for the premium received, to make delivery
of this amount. The writer may offset its position in stock index options prior
to expiration by entering into a closing transaction on an exchange or it may
let the option expire unexercised.
The effectiveness of purchasing or writing stock index options as a
hedging technique will depend upon the extent to which price movements in the
portion of a securities portfolio being hedged correlate with price movements of
the stock index selected. Because the value of an index option depends upon
movements in the level of the index rather than the price of a particular stock,
whether the Fund will realize a gain or loss from the purchase or writing of
options on an index depends upon movements in the level of stock prices in the
stock market generally or, in the case of certain indexes, in an industry or
market segment, rather than movements in the price of a particular stock.
Accordingly, successful use by the Fund of options on stock indexes will be
subject to Haven's ability to predict correctly movements in the direction of
the stock market generally or of a particular industry. This requires different
skills and techniques than predicting changes in the price of individual stocks.
The Fund will engage in stock index options transactions only when
determined by Haven to be consistent with the Fund's efforts to control risk.
There can be no assurance that such judgment will be accurate or that the use of
these portfolio strategies will be successful. When the Fund writes an option
on a stock index, the Fund will establish a segregated account consisting of
cash or high-grade liquid debt securities in an amount equal in value to the
full amount the Fund has at risk and will maintain the account while the option
is open. The aggregate value of the securities underlying the calls or puts on
stock indexes written by the Fund, determined as of the date the options are
sold, when added to the securities underlying the calls on securities written by
the Fund, may not exceed 25% of the Fund's net assets. Requirements of the Code
may limit the Fund's ability to engage in stock index transactions.
WARRANTS. Up to 5% of the net assets of the Fund may be invested in
warrants. A warrant does not carry with it the right to dividends or voting
rights with respect to the securities which it entitles a holder to purchase,
and it does not represent any rights in the assets of the issuer. For these
reasons, warrants may be considered more speculative than certain other types of
investments. In addition, the value of a warrant does not necessarily change
with the value of the underlying securities and a warrant ceases to have value
if it is not exercised prior to its expiration date.
INVESTMENT IN UNSEASONED COMPANIES. The Fund may invest up to 5% of
its net assets, calculated at the time of purchase, in companies which
(including predecessors) have operated less than three years. The securities of
such companies may have limited liquidity which can result in their being priced
lower than might otherwise be the case. In addition, investments in unseasoned
companies are more speculative and entail greater risk than investments in
companies with an established operating record.
INVESTMENT RESTRICTIONS
The Fund's investment objective and its intention to invest, under
normal market conditions, at least 65% of its total assets in equity securities
of domestic issuers are fundamental policies of the Fund and cannot be changed
without the approval of a "majority of the Fund's outstanding voting
securities." As used in the Prospectus and this Statement of Additional
Information, a "majority of the Fund's outstanding voting securities" means the
lesser of (i) 67% of the Shares represented at a meeting at which more than 50%
of the outstanding Shares are represented, and (ii) more than 50% of the
outstanding Shares.
In addition, the following investment restrictions have been adopted
by the Fund as fundamental policies and cannot be changed without the approval
of a majority of the Fund's outstanding voting securities. The Fund may not:
1. Borrow money, except from banks on a temporary or emergency basis
in an aggregate amount not exceeding 10% of the value of the Fund's total assets
(including the amount borrowed), provided that the Fund is required to maintain
asset coverage of at least 300% for all borrowings. For purposes of this
investment restriction, forward contracts, swaps, options, futures contracts and
options on futures contracts, and forward commitment transactions shall not
constitute borrowing, if appropriately covered.
2. Purchase the securities of any one issuer, other than the United
States Government or any of its agencies or instrumentalities, if immediately
after such purchase more than 5% of the value of its total assets would be
invested in such issuer or the Fund would own more than 10% of the outstanding
voting securities of such issuer, except that (a) up to 25% of the value of the
Fund's total assets may be invested without regard to such 5% and 10% limita-
tions and (b) such 5% limitation shall not apply to repurchase agreements
collateralized by obligations of the United States Government, its agencies or
instrumentalities.
3. Invest 25% or more of the value of its total assets in the
securities of one or more issuers conducting their principal business activities
in the same industry. This limitation does not apply to investments or
obligations of the U.S. Government or any of its agencies or instrumentalities.
4. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
deposit of assets in escrow in connection with the writing of covered put and
call options and the purchase of securities on a forward commitment or delayed-
delivery basis and collateral and initial or variation margin arrangements with
respect to currency transactions, options, futures contracts, including those
relating to indices, and options on futures contracts or indices.
5. Purchase securities on margin, except for such short-term credits
as are necessary for the clearance of transactions, but the Fund may make margin
deposits in connection with transactions in currencies, options, futures
contracts and options on futures.
6. Make short sales of securities (except short sales, against-the-
box, or maintain a short position).
7. Underwrite any issue of securities issued by others, except to
the extent that the sale of securities acquired by the Fund directly from an
issuer, underwriter or dealer may be deemed to be an underwriting.
8. Purchase, hold or deal in real estate (including real estate lim-
ited partnerships) or oil, gas or mineral leases, although the Fund may purchase
and sell securities that are secured by real estate or interests therein,
securities of real estate investment trusts and mortgage-related securities and
may hold and sell real estate acquired for the Fund as a result of the ownership
of securities.
9. Invest in commodities except that the Fund may purchase and sell
futures contracts, including those relating to securities, currencies and
indices, and options on futures contracts, securities, currencies or indices,
and purchase and sell currencies or securities on a forward commitment or
delayed delivery basis as described under "Investment Policies."
10. Lend any funds or other assets except through the purchase of all
or a portion of an issue of securities or obligations of the type in which it
may invest; however, the Fund may lend its portfolio securities in an amount not
to exceed 33-1/3% of the value of its total assets.
11. Issue any senior security (as such term is defined in Sec-
tion 18(f) of the 1940 Act) except as permitted in Investment Restriction No. 1.
In addition to the investment restrictions mentioned above, the
Trustees of the Fund have voluntarily adopted the following policies and
restrictions which are observed in the conduct of its affairs. These represent
intentions of the Trustees based upon current circumstances. They differ from
fundamental investment restrictions in that they may be changed or amended by
action of the Trustees of the Fund without prior notice to or approval of
shareholders. Accordingly, the Fund may not:
1. Purchase the securities of any issuers if the officers or
Trustees of the Fund, its investment advisers or managers owning beneficially
more than one-half of 1% of the securities of such issuer, together own
beneficially more than 5% of such securities.
2. Write covered calls or put options with respect to more than 5%
of the value of its net assets, invest more than 5% of its net assets in
protective put options or more than 5% of its total assets in puts, call,
spreads or straddles, or any combination thereof other than protective put
options. The aggregate value of premiums paid on all options other than
protective put options, held by the Fund at any time will not exceed 5% of the
Fund's total net assets.
3. Invest more than 15% of its net assets in securities that are not
liquid (i.e., securities that may not be sold or disposed of in the ordinary
course of business within seven days at approximately the value at which the
Fund has valued the investment), and the Fund may not invest in securities that,
at the time of purchase by or transfer to the Fund, are subject to restrictions
on transfer, including, without limitation, legends as to applicable federal or
state securities laws or other legal or contractual restrictions.
4. Purchase any security if as a result the Fund would then have
more than 5% of its total assets invested in securities of companies (including
predecessors) that have been in continuous operation for fewer than three years.
5. Invest in warrants (other than warrants acquired by the Fund as
part of a unit or attached to securities at the time of purchase) if, as a
result, the investments (valued at the lower of cost or market) would exceed 5%
of the value of the Fund's net assets of which not more than 2% of the Fund's
net assets may be invested in warrants not listed on a recognized U.S. or
foreign stock exchange to the extent permitted by applicable state securities
laws.
6. Purchase securities while the Fund's borrowings exceed 5% of its
total assets.
For purposes of the foregoing limitations, any limitation which
involves a maximum percentage will not be violated unless an excess over the
percentage occurs immediately after, and is caused by, an acquisition or
encumbrance of securities or assets of, or borrowings by the Fund. With respect
to fundamental Investment Restriction No. 1, the Fund must maintain asset
coverage of at least 300% (as defined in the 1940 Act), inclusive of any amounts
borrowed.
The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Shares in certain states. Should the
Fund determine that any such commitment is no longer in the best interest of the
Fund and its shareholders, the Fund will revoke the commitment by terminating
the sale of Shares in the state involved. The Fund is also subject to
diversification requirements imposed by the 1940 Act and the Code.
PORTFOLIO VALUATION
The Prospectus discusses the manner in which and the time at which the
net asset value of the Fund is determined for purposes of sales and redemptions.
The net asset value of the Fund is determined on every business day that the
New York Stock Exchange (the "NYSE") is open for business. The NYSE is not open
for business on New Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
PORTFOLIO TRANSACTIONS
Haven is responsible for decisions to buy and sell securities for the
Fund, the selection of brokers and dealers to effect the transactions and the
negotiation of brokerage commissions, if any. Purchases and sales of securities
on a securities exchange are effected through brokers who charge a negotiated
commission for their services. Orders may be directed to any broker.
In the over-the-counter market, debt and equity securities are
generally traded on a "net" basis with dealers acting as principal for their own
accounts without a stated commission, although the price of a security usually
includes a profit to the dealer. The Fund may also pay a mark-up (sometimes
referred to as a dealer's turn) in principal transactions and in transactions in
the over-the-counter market. In underwritten offerings, securities are
purchased at a fixed price which includes an amount of compensation to the
underwriter, generally referred to as the underwriter's concession or discount.
On occasion, certain money market instruments may be purchased directly from an
issuer, in which case no commissions or discounts are paid.
In placing orders for portfolio securities of the Fund, Haven is
required to give primary consideration to obtaining the most favorable price and
efficient execution. This means that Haven will seek to execute each
transaction at a price and commission, if any, which provide the most favorable
total cost or proceeds reasonably attainable in the circumstances. While Haven
generally seeks reasonably competitive spreads or commissions, the Fund will not
necessarily be paying the lowest spread or commission available. Within the
framework of this policy, Haven will consider research and investment services
provided by brokers or dealers who effect or are parties to portfolio
transactions of the Fund or other clients of Haven. Such research and
investment services are those which brokerage houses customarily provide to
institutional investors and include statistical and economic data and research
reports on particular companies and industries. Such services are used by Haven
in connection with all of its investment activities, and some of such services
obtained in connection with the execution of transactions for the Fund may be
used in managing other investment accounts. Conversely, brokers furnishing such
services may be selected for the execution of transactions of such other
accounts, whose aggregate assets are far larger than those of the Fund, and the
services furnished by such brokers may be used by Haven in providing investment
advisory services for the Fund. On occasions when Haven deems the purchase or
sale of a security to be in the best interest of the Fund as well as its other
customers (including any other fund or other investment company or advisory
account for which Haven or an affiliate acts as investment adviser), Haven, to
the extent permitted by applicable laws and regulations, may aggregate the
securities to be sold or purchased for the Fund with those to be sold or
purchased for such other customers in order to obtain the best net price and
most favorable execution. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction, will be
made by Haven in the manner it considers to be most equitable and consistent
with its fiduciary obligations to the Fund and such other customers. In some
instances, this procedure may adversely affect the price and size of the
position obtainable for the Fund.
Commission rates are established pursuant to negotiations with the
broker based on the quality and quantity of execution services provided by the
broker in the light of generally prevailing rates. The allocation of orders
among brokers and the commission rates paid are reviewed periodically by the
Trustees.
Portfolio Turnover
- ------------------
The Fund does not intend to seek profits through short-term trading,
but the rate of turnover will not be a limiting factor when the Fund deems it
desirable to sell or purchase securities. The Fund's portfolio turnover rate is
calculated by dividing the lesser of purchases or sales of its portfolio
securities for the year by the monthly average value of the portfolio
securities. Securities with remaining maturities of one year or less at the
date of acquisition are excluded from the calculation.
Certain practices which may be employed by the Fund could result in
high portfolio turnover. For example, options on securities may be sold in
anticipation of a decline in the price of the underlying security (market de-
cline) or purchased in anticipation of a rise in the price of the underlying
security (market rise) and later sold.
MANAGEMENT OF THE FUND
Trustees
- --------
The Trustees and officers of the Trust are described in the Prospectus
under the caption "Management of the Fund -- Trustees and Officers." Colin C.
Ferenbach, Stephen Ely and Denis M. Turko each has a business address at 655
Third Avenue, New York, New York 10017. The business addresses of the remaining
Trustees are as follows: D. Euan Baird, Schlumberger Ltd., 277 Park Avenue, New
York, New York 10172; William F. Indoe, Sullivan & Cromwell, 125 Broad Street,
New York, New York 10004; Robert E. Kaufmann, Spencer Stuart & Associates,
Financial Center, 695 East Main Street, Stamford, Connecticut 06901; and John F.
McNiff, Dover Corporation, 280 Park Avenue, New York, New York 10017.
The following table sets forth the compensation paid to the outside
Trustees of the Fund and Trust for the fiscal year ended October 31, 1995 (the
Trust's first full fiscal year since its organization). No employee of Haven or
Sunstone or any of their affiliates receives any compensation from the Fund or
Trust for acting as an officer, Trustee or employee of the Trust. Each Trustee
who is not a director, officer or employee of Haven, Sunstone or any of their
affiliates receives an annual fee of $5,000, and $500 for each meeting of the
Trustees attended by the Trustee for services as Trustee and is reimbursed for
expenses incurred in connection with attendance at meetings of Trustees.
Trustees receive no pension or retirement benefits from the Fund or Trust nor
any compensation from any fund that (i) holds itself out to investors as related
to the Fund for purposes of investment and investor services or (ii) has Haven,
or an affiliated person of Haven, as its investment adviser.
Aggregate
Compensation
Name of Trustee from the Fund<F14>
--------------- ------------------
D. Euan Baird $6,000
William F. Indoe $7,000
Robert E. Kaufmann $7,000
John F. McNiff $7,000
<F14>Fiscal year ended October 31, 1995.
Investment Adviser and Administrator
- ------------------------------------
Haven serves as investment adviser to the Fund and PFPC serves as
administrator to the Fund pursuant to separate written agreements (the
"Investment Advisory Agreement" and the "Administration and Accounting Services
Agreement," respectively). The services provided by, and the fees payable by
the Fund to, Haven under the Investment Advisory Agreement and PFPC under the
Administration and Accounting Services Agreement are summarized in the Prospec-
tus.
Pursuant to the Investment Advisory Agreement, Haven will use its best
efforts to provide to the Fund continuing and suitable investment programs
consistent with the investment objectives, policies and restrictions of the
Fund. It will (i) determine from time to time which securities shall be
purchased, sold or exchanged and what portion of the assets of the Fund shall be
held in the various securities and assets in which the Fund invests or in cash;
(ii) make decisions for the Fund with respect to foreign currency matters and
foreign exchange contracts, having regard to foreign exchange controls, if any;
(iii) make determinations as to the manner in which voting rights, subscription
rights, rights to consent to corporate action and any other rights pertaining to
the Fund's assets shall be exercised; (iv) advise the Trust in connection with
policy decisions to be made by the Trustees or any committee thereof with
respect to the Fund's investments and, as requested, furnish the Fund with
research, economic and statistical data in connection with its investments and
investment policies; (v) submit such reports relating to the valuation of the
Fund's securities as the Trustees or the administrator of the Fund may
reasonably request; (vi) place orders for the purchase, sale or exchange of
portfolio assets for the Fund's accounts with brokers or dealers selected by
Haven; provided, however, that in connection with the placing of such orders and
the selection of such brokers or dealers Haven shall seek to obtain execution
and pricing within the policy guidelines established by the Trustees and set
forth in the N-1A Registration Statement as in effect from time to time; (vii)
provide information in Haven's possession to the administrator of the Fund as
such administrator may request to maintain and preserve the records required by
the 1940 Act; (viii) obtain and evaluate such information relating to economies,
industries, businesses, securities markets and securities as Haven may deem
necessary or useful in the discharge of Haven's duties hereunder; (ix) from time
to time, or at any time requested by the Trustees, make reports to the Trustees
concerning Haven's performance of the foregoing services and furnish advice and
recommendations with respect to other aspects of the business and affairs of the
Fund; and (x) cooperate generally with the Trust and the Fund to provide
information necessary for the preparation of registration statements and
periodic reports to be filed with the Securities and Exchange Commission,
including post-effective amendments to the Form N-1A Registration Statement,
filings on Form N-SAR, periodic statements, reports to shareholders, shareholder
communications and proxy material furnished to holders of the Shares, filings
with state "blue sky" authorities and with the United States agencies
responsible for tax matters, and other reports and filings of like nature.
Haven further agrees that if, in any fiscal year, the expenses borne
by the Fund exceed the applicable expense limitations imposed by the securities
regulations of any state in which Shares are registered or qualified for sale to
the public, it will reduce its management fee and, if necessary, reimburse the
Fund to the extent required by such regulations. Unless otherwise required by
law, such fee reductions and reimbursement would be accrued and paid on a
monthly basis. At the date of this Statement of Additional Information, the
most restrictive annual expense limitation applicable to the Fund is 2.5% of the
first $30 million of the average net assets of the Fund, 2% of the next $70
million of the average net assets and 1.5% of the remaining average net assets
of the Fund.
Custodian and Transfer Agent
- ----------------------------
PNC Bank, National Association ("PNC Bank") is custodian of the Fund's
assets pursuant to a custodian agreement (the "Custodian Services Agreement").
Under the Custodian Services Agreement, PNC Bank (a) maintains a separate
account or accounts in the name of the Fund, (b) holds and transfers portfolio
securities on account of the Fund, (c) makes receipts and disbursements of money
on behalf of the Fund, (d) collects and receives all income and other payments
and distributions on account of the Fund's portfolio securities and (e) makes
periodic reports to the Trustees concerning the Fund's operations. PNC Bank is
authorized to select one or more banks or trust companies to serve as sub-
custodian on behalf of the Fund, provided that PNC Bank remains responsible for
the performance of all its duties under the Custodian Agreement and holds the
Fund harmless from the acts and omissions of any sub-custodian chosen by PNC
Bank.
PFPC serves as the Fund's transfer and dividend disbursing agent
pursuant to a Transfer Agency Services Agreement, under which PFPC (a) issues
and redeems Shares, (b) addresses and mails all communications by the Fund to
record owners of Shares, including reports to shareholders, dividend and
distribution notices and proxy material for its meetings of shareholders,
(c) maintains shareholder accounts, and (d) makes periodic reports to the Fund
concerning the Fund's operations. PFPC may, on 30 days' notice to the Fund,
assign its duties thereunder to any other affiliate of PNC Bank or PNC Bank
Corp.
Distributor
- -----------
Sunstone acts as the distributor of the Fund's Shares. Sunstone acts
as agent in selling Shares under the distribution agreement with the Trust, on
behalf of the Fund. The distribution agreement is renewable annually by the
Trustees (including a majority of its Trustees who are not interested persons of
the Trust or Sunstone), may be terminated on 60 days' notice by the Fund or by
Sunstone, and is automatically terminated upon assignment. During the fiscal
year ended October 31, 1995, the Fund paid distribution fees totaling $22,634 to
Provident Distributors, Inc., the Fund's prior distributor, and $15,968 to
Sunstone; and it paid commissions totaling $24 to selected broker-dealers.
Distribution Plan
- -----------------
As described in the Prospectus, the Fund has adopted a distribution
plan (the "Plan") pursuant to Rule 12b-1 under the Act. See "Management of the
Fund - Distributor and Distribution Plan" in the Prospectus. The Plan was
last approved on June 22, 1995 by the affirmative vote of the Trustees and of
the non-interested Trustees who have no direct or indirect financial interest in
the Plan, cast in person at a meeting called for the purpose of approving the
Plan.
The Plan provides for both the payment of a specified fee for
distribution and marketing services and the reimbursement of payments to
authorized selected broker-dealers and of out-of-pocket expenses incurred by
Sunstone. If the Plan were terminated by the Trustees and no successor plan
were adopted, the Fund would cease to make payments under the Plan to Sunstone
and Sunstone would be able to recover only the amount of any of its unreimbursed
expenditures.
Under the Plan, the officers will provide to the Trustees for their
review, and the Trustees will review at least quarterly, a written report of the
services provided and amounts expended under the Plan and the purposes for which
such services were performed and expenditures were made.
The Plan will continue in effect indefinitely, provided such contin-
uance is approved annually by a majority vote of the Trustees, including a
majority of the non-interested Trustees who have no direct or indirect financial
interest in the Plan. The Plan may not be amended to increase materially the
amount to be spent for the services described therein as to the Fund without
approval of a majority of the outstanding voting securities of the Fund. All
material amendments of the Plan must also be approved by the Trustees in the
manner described above. The Plan may be terminated at any time without payment
of any penalty by a vote of a majority of the non-interested Trustees or by vote
of a majority of the outstanding voting securities of the Fund. So long as the
Plan is in effect, the selection and nomination of non-interested Trustees shall
be committed to the discretion of the non-interested Trustees. The Trustees
have determined that in their judgment there is a reasonable likelihood that the
Plan will benefit the Fund and its shareholders.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
Prior to the consummation of the exchange described in the Prospectus
described under the caption, "The Exchange", Haven, a Delaware corporation,
owned beneficially and of record all of the Shares. Haven is controlled by its
managing directors, Messrs. Stephen Ely, Colin C. Ferenbach and Denis M. Turko.
The table below sets forth the percentage of outstanding Shares owned
of record and beneficially, as of January 31, 1996, by (i) each person known to
the Trust to own beneficially or of record more than 5% of the Shares and
(ii) all Trustees and executive officers as a group.
SHARES OWNED SHARES OWNED
OF RECORD BENEFICIALLY
Thomas B. Walker, Jr. 19.15% 19.15%
4332 Belclaire
Dallas, Texas 75205
George E. Doty 8.15% 8.15%
61 Park Drive South
Rye, New York 10580
Donald R. Gant 7.94% 7.94%
Young's Road
New Vernon, New Jersey 07976
J. Fred Weintz, Jr. 5.71% 5.71%
43 Jones Park Drive
Riverside, Connecticut 06878
Peter G. Sachs 5.81% 5.81%
443 Webbs Hill Road
Stamford, Connecticut 06903
All current Trustees and 1.10% 1.22%
executive officers as a group
(7 persons)
SHARES OF BENEFICIAL INTERESTS AND OTHER SECURITIES
The Fund has one class of securities, i.e., shares of beneficial
interest with par value of $0.001, all of one class and having equal voting
rights. See "Additional Information - A Description of Shares" in the
Prospectus. The following description supplements information contained in the
Prospectus.
Generally, the Fund's shareholders are not personally liable for obli-
gations of the Trust or Fund under Delaware law. The Delaware Business Trust
Act (the "Delaware Act") provides that a shareholder of a Delaware business
trust shall be entitled to the same limitation of liability extended to
shareholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware. However, no similar statutory or
other authority limiting business trust shareholder liability exists in many
other states. As a result, to the extent that the Fund or a shareholder is
subject to the jurisdiction of courts in those states, the courts may not apply
Delaware law, and may thereby subject the Fund's shareholders to liability. To
guard against this risk, the Declaration of Trust (i) contains a statement that
the Fund's shareholders shall be entitled to the same limitation of personal
liability extended to shareholders of private Delaware corporations for profit,
(ii) contains an express disclaimer of shareholder liability to third parties
extending credit to, contracting with or having any claim against the Trust or
any Series thereof, for acts or obligations of the Fund and requires that notice
of such disclaimer be given in each agreement, obligation, and instrument
entered into as executed by the Fund or its Trustees and (iii) provides for
indemnification out of Fund property of any shareholder held personally liable
for the obligations of the Fund. Thus, the risk of a Fund shareholder incurring
financial loss beyond his or her investment because of shareholder liability is
limited to circumstances in which (1) a shareholder of a Delaware corporation
for profit would incur financial loss beyond his or her investment or (2)(a) a
court refused to apply Delaware law, (b) no contractual limitation of liability
was in effect and (c) the Fund itself would be unable to meet its obligations.
In light of Delaware law, the nature of the Fund's business, and the nature of
its assets, Haven believes that the risk of personal liability to a Fund share-
holder is remote.
No action may be brought by a shareholder on behalf of the Trust or
the Fund unless shareholders owning not less than 20% of the Trust or Fund, as
the case may be, join in the bringing of the action.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Information on how to purchase and redeem Shares and how such Shares
are priced is included in the Prospectus.
In confirming that redemption instructions communicated by telephone
are genuine, PFPC will require the caller to provide caller identification
information that must match the account's registration information.
Under the 1940 Act, the Fund may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed, other than customary weekend and holiday closings, or during
which trading on the NYSE is restricted, or during which disposal or valuation
of portfolio securities is not reasonably practicable, or for such other periods
as the SEC may permit.
Although the Fund does not intend to make payment of redemption
proceeds in securities or other property (rather than cash), the Trustees have
reserved the right to make such in-kind payments when a shareholder elects to
redeem shares in-kind and when, in the Trustees' judgment and in light of their
fiduciary duties to all shareholders, the overall interests of the Fund's
shareholders would not be harmed. If a redemption is paid wholly or partly in
securities or other property, a shareholder would incur transaction costs in
disposing of the redemption proceeds. If the Fund were to make payment of
redemption proceeds in foreign securities, the redeeming Shareholder may
experience risks and costs due to, among other things, currency risk, market
risk, and added disposal costs. See "Investment Practices and Related Risk
Factors -- Foreign Securities" in the Prospectus.
ADDITIONAL INFORMATION CONCERNING TAXES
The discussion set out below of tax considerations generally affecting
the Fund and its shareholders is intended to be only a summary supplementing the
Prospectus and is not intended as a substitute for careful tax planning by
prospective shareholders.
The Fund intends to qualify for each fiscal year as a "regulated in-
vestment company" under Subchapter M of the Code. As a regulated investment
company, the Fund will not be subject to U.S. Federal income tax on its income
and capital gains, if any, that it distributes to shareholders, provided it
distributes each taxable year at least 90% of its "investment company taxable
income," calculated without the deduction for dividends paid, as determined for
U.S. Federal income tax purposes ("net investment income"). Net investment
income includes dividends, interest, net short-term capital gains in excess of
net long-term capital losses and any capital loss carryovers from prior years,
net of expenses, and net gain or loss on debt securities and futures contracts
on debt securities, to the extent attributable to fluctuations in currency
exchange rates, and, in certain circumstances, net gain or loss on foreign
currencies and foreign currency forward contracts. Dividend income derived by a
regulated investment company from its investments is required to be taken into
account for U.S. Federal income tax purposes as of the ex-dividend date (rather
than the payment date, which generally is later). Accordingly, the Fund, in
order to satisfy its distribution requirements, may be required to make
distributions based on accrued but not yet received earnings.
To qualify under Subchapter M, the Fund must, among other things:
(1) derive at least 90% of its gross income from dividends, interest, payments
with respect to stock or securities loans, gains from the sale or other
disposition of stock or securities, and certain other related income, including,
generally, gains from options, futures and forward contracts and foreign
currency gains (under regulations which may be promulgated, foreign currency
gains which are not directly related to the Fund's principal business of
investing in stocks or securities may not be treated as qualifying income for
this purpose); (2) derive in each taxable year less than 30% of its gross income
from the sale or other disposition of stock, securities, options, futures,
forward contracts and foreign currencies held less than three months (excluding,
for this purpose, gains from foreign currencies (and options, futures and
forward contracts on foreign currencies) that are directly related to the Fund's
principal business of investing in stocks or securities or options or futures
thereon); and (3) diversify its holdings so that, at the end of each fiscal
quarter of the Fund (a) at least 50% of the market value of the Fund's assets is
represented by cash, U.S. government securities, securities of other regulated
investment companies, and other securities, with such other securities of any
one issuer qualifying, for purposes of this calculation, only if the Fund's
investment is limited to an amount not greater than 5% of the value of the
Fund's total assets and 10% of the outstanding voting securities of such issuer;
and (b) not more than 25% of the market value of the Fund's assets is invested
in the securities of any one issuer (other than U.S. government securities or
securities of other regulated investment companies). In meeting these
requirements, the Fund may be restricted in the selling of securities held by
the Fund for less than three months and in the utilization of certain of the
investment techniques described above and in the Fund's Prospectus. Pending
legislation would, however, repeal the restriction on income from securities
held less than three months; it is unclear whether, and to what extent, such
legislation might be enacted.
The Fund's transactions, if any, in foreign currencies, forward con-
tracts, options and futures contracts (including options and forward contracts
on foreign currencies) and stock of "passive foreign investment companies" will
be subject to special provisions of the Code that, among other things, may
affect the character of gains and losses recognized by the Fund (i.e., may
affect whether gains or losses are ordinary or capital), accelerate recognition
of income to the Fund, defer Fund losses, cause the Fund to be subject to
hyperinflationary currency rules and impose additional charges in the nature of
interest. These rules could therefore affect the character, amount and timing
of distributions to shareholders. These provisions also (1) will require the
Fund to mark-to-market certain types of its positions (i.e., treat them as if
they were closed out at the end of the Fund's fiscal year) and (2) may cause the
Fund to recognize income without receiving cash with which to pay dividends or
make distributions in amounts necessary to satisfy the distribution requirements
for avoiding income and excise taxes.
Shareholders electing to receive distributions in the form of
additional Shares will have a cost basis for federal income tax purposes in each
Share so received equal to the net asset value of a Share on the reinvestment
date.
Dividends paid by the Fund will ordinarily qualify for the dividends-
received deduction for corporations to the extent that they are derived from
dividends paid by domestic corporations. Distributions to corporations of long-
term capital gains are not eligible for the dividends-received deduction.
Distributions by the Fund result in a reduction in the net asset value
of the Fund's Shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain, even though, from an investment
standpoint, it may constitute a partial return of capital. In particular,
investors should be careful to consider the tax implications of buying Shares
just prior to a distribution. The price of Shares purchased at that time
includes the amount of the forthcoming distribution. Those purchasing just
prior to a distribution will then receive a partial return of capital upon the
distribution, which will nevertheless be taxable to them. Also, to the extent
securities of the Fund have appreciated when an investor purchases Shares of the
Fund, a future realization and distribution of such appreciation will be taxable
to the shareholders even though it may constitute, from an investor's
standpoint, a partial return of capital.
Upon the redemption, sale or exchange of Shares, a shareholder will
realize a taxable gain or loss depending upon the amount realized and the basis
in the Shares. Such gain or loss will be treated as capital gain or loss if the
Shares are capital assets in the shareholder's hands, and will be long-term or
short-term depending upon the shareholder's holding period for the Shares. Any
loss realized on a redemption or sale of Shares will be disallowed to the extent
new Shares are purchased, or received through reinvesting dividends and capital
gains distributions in the Fund, within the 61-day period beginning 30 days
before and ending 30 days after the date of the redemption or sale. In such a
case, the basis of the Shares acquired will be increased to reflect the
disallowed loss. Any loss realized by a shareholder on the sale of a Share held
by the shareholder for six months or less will be treated for federal income tax
purposes as a long-term capital loss to the extent of any distributions or
deemed distributions of long-term capital gains received by the shareholder with
respect to such Share.
The Fund may be required to withhold for U.S. Federal income taxes 31%
of all distributions and redemption proceeds payable to shareholders who fail to
provide the Fund with their correct taxpayer identification number or to make
required certifications, or who have been notified by the Internal Revenue
Service that they are subject to backup withholding. Corporate shareholders and
other shareholders specified in the Code are or may be exempt from backup with-
holding. The backup withholding tax is not an additional tax and may be
credited against a taxpayer's federal income tax liability.
Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund accrues interest or other
receivables, or accrues expenses or other liabilities, denominated in a foreign
currency, and the time the Fund actually collects such receivables, or pays such
liabilities, generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of debt securities denominated in a foreign currency,
gains or losses attributable to fluctuations in the value of foreign currency
between the date of acquisition of the security and the date of disposition are
also treated as ordinary gain or loss. These gains or losses may increase or
decrease the amount of the Fund's income to be distributed to its shareholders
as ordinary income.
The Fund believes that it may constitute a personal holding company;
as such, it would be subject to additional taxes with respect to its net
investment income not distributed to shareholders within applicable time
periods. The Fund intends to distribute all of its net investment income within
such time periods so as not to be subject to such taxes. With respect to any
such income not so distributed, it would be subject to corporate taxation at the
highest rate, currently 35%, generally applicable to income of corporations,
rather than at the graduated corporate tax rates that would otherwise apply; it
would also be subject to an additional tax, at the rate of 39.6%, on its
"undistributed personal holding company income," which, in general, would be its
undistributed net investment income (not including any short-term capital gains)
reduced by the federal corporate tax paid thereon.
The foregoing discussion of U.S. Federal income tax law relates solely
to the application of that law to U.S. persons, i.e., U.S. citizens and
residents and U.S. corporations, partnerships, trusts and estates. Each share-
holder who is not a U.S. person should consider the U.S. and foreign tax
consequences of ownership of Shares, including the likelihood that such a
shareholder may be subject to a U.S. withholding tax at a rate of 30% (or at a
lower rate under an applicable income tax treaty) on distributions constituting
ordinary income.
Shareholders are advised to consult their own tax advisers with
respect to the particular federal, state, and local tax consequences to them of
an investment in the Fund.
DETERMINATION OF PERFORMANCE DATA
The average annual total return is determined by multiplying a hypo-
thetical initial purchase order of $1,000 by the average annual compound rate of
return (including capital appreciation/depreciation, and distributions paid and
reinvested) for the stated period and analyzing the result. The calculation
assumes that all distributions are reinvested at net asset value on the rein-
vestment dates during the period.
For the period from June 23, 1994 (the date of the Fund's
commencement) through October 31, 1995, the Fund had a cumulative total return
of 21.04%. The following table shows the combined average annual total returns
of the Fund and HCM Partners, L.P., a limited partnership for which Haven acted
as investment adviser and three of the Fund's Trustees acted as general partners
(the "Partnership"), for the periods ended October 31, 1995:
One Five Ten
Year Years Years
----- ----- -----
The Haven Fund and
HCM Partners, L.P. 13.65% 16.37% 12.25%
The Fund's total return, and the combined total return of the Fund and
the Partnership, may be compared to the Consumer Price Index and various
domestic and foreign securities and mutual fund indices, for example: Standard &
Poor's Index of 400 Common Stocks, Standard & Poor's Index of 500 Common Stocks,
Lipper Growth Fund Index, Morningstar Growth Average, the Wilshire 4500 Stock
Index and the Dow Jones Industrial Average. The Fund's total return, and the
combined total return of the Fund and the Partnership, and comparisons with
these indices may be used in advertisements and in information furnished to
present or prospective shareholders.
Information used in advertisements and in materials furnished to
present or prospective shareholders may include statistics, data and performance
studies prepared by independent organizations (e.g., Lipper Analytical Services,
Inc., Morningstar, Inc., Value Line, Ibbotson Associates, Standard & Poor's
Corporation, Merrill Lynch, Pierce, Fenner & Smith, Inc., Bloomberg, L.P., Dow
Jones & Company, Inc. and The Federal Reserve Board) or included in various
publications (e.g., The Wall Street Journal, Barron's and The Decade: Wealth of
Investments in U.S. Stocks, Bonds, Bills & Inflation) reflecting the investment
performance or return achieved by various classes and types of investments
(e.g., common stocks, small company stocks, long-term corporate bonds, long-term
government bonds, intermediate-term government bonds, U.S. Treasury bills) over
various periods of time. This information may be used to illustrate the
benefits of long-term investments in common stocks.
From time to time, information about the allocation and holdings of
investments in the Fund may be included in advertisements and other material
furnished to present and prospective shareholders.
From time to time, evaluations of the Fund's performance and the
combined performance of the Fund and the Partnership made by independent
sources, such as Lipper Analytical Services, Inc., CDA/Weisenberger and
Morningstar, Inc. may be used in advertisements and in information furnished to
present or prospective shareholders.
Information used in advertisements and materials furnished to present
or prospective shareholders may include examples and performance illustrations
of the cumulative change in various levels of investments in the Fund, and in
the Fund and the Partnership, for various periods of time and at various prices
per share. Such examples and illustrations may assume that all dividends and
capital gain distributions are reinvested in additional Shares and may also show
separately the value of Shares acquired from such reinvestments as well as the
total value of all Shares acquired for such investments and reinvestments. Such
information may also include statements or illustrations relating to the appro-
priateness of types of securities and/or mutual funds which may be employed to
meet specific financial goals, such as (1) funding retirement, (2) paying for
children's education, and (3) financially supporting aging parents.
AUDITORS AND COUNSEL
The Fund's independent public accountants are Coopers & Lybrand
L.L.P., with principal offices at 2400 Eleven Penn Center, Philadelphia,
Pennsylvania 19103. Coopers & Lybrand L.L.P. provides audit services, tax
return assistance and consultation with respect to the preparation of filings
with the SEC.
Debevoise & Plimpton serves as counsel to the Fund and to Haven.
FINANCIAL STATEMENTS
The financial statements for the fiscal year ended October 31, 1995
and the report of Coopers & Lybrand L.L.P. on such annual financial statements
contained in the Fund's Annual Report to Shareholders for the year ended October
31, 1995 (the "Annual Report") are incorporated herein by reference to such
financial statements and report in reliance upon the authority of Coopers &
Lybrand L.L.P. as experts in auditing and accounting. Additional copies of the
Fund's Annual Report may be obtained at no charge by telephoning Sunstone at the
telephone number appearing on the front page of this Statement of Additional
Information.
APPENDIX
DESCRIPTION OF RATINGS
Commercial Paper Ratings
- ------------------------
Commercial paper rated A-1 by Standard and Poor's Corporation ("S&P")
indicates that the degree of safety regarding timely payment is either over-
whelming or very strong. Those issues determined to possess overwhelming safety
characteristics are denoted A-1+. Capacity for timely payment on commercial
paper rated A-2 is strong, but the relative degree of safety is not as high as
for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's Investors Service, Inc. ("Moody's"). Issuers rated Prime-1 (or related
supporting institutions) are considered to have a superior capacity for
repayment of short-term promissory obligations. Issuers rated Prime-2 (or re-
lated supporting institutions) are considered to have a strong capacity for
repayment of short-term promissory obligations. This will normally be evidenced
by many of the characteristics of issuers rated Prime-1 but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternative liquidity is maintained.
Corporate Bond Ratings
- ----------------------
The following summarizes the ratings used by S&P for corporate bonds:
AAA - This is the highest rating assigned by S&P to a debt obligation
and indicates an extremely strong capacity to pay interest and repay principal.
AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from AAA issues only in small degree.
A - Principal and interest payments on bonds in this category are
regarded as safe. Debt rated A has a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher-rated
categories.
To provide more detailed indications of credit quality, the ratings of
"AA" and "A" may be modified by the addition of a plus or minus sign to show
relative standing within this major rating category.
The following summarizes the ratings used by Moody's for corporate
bonds:
Aaa - Bonds that 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 edge." Interest payments are protected by a large or 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 that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
Securities.
A - Bonds which are rated A possess many favorable investment attri-
butes and are to be considered as upper medium-grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be preset which suggest a susceptibility to impairment sometime in the
future.
Moody's applies numerical modifiers (1, 2 and 3) with respect to the
bonds rated "Aa" and "A". The modifier 1 indicates that the bond being rated
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the bond ranks in the
lower end of its generic rating category.
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements
Part A - Financial Highlights for the period June 23, 1994
(commencement of operations) to October 31, 1995.
Part B - Statement of Net Assets as of October 31, 1995; Statement of
Operations for the year then ended; and Statement of Changes in Net Assets for
each of the period ended October 31, 1994 and the year ended October 31, 1995.
(b) Exhibits:
Exhibit No. Description of Exhibit
- ---------- ----------------------
1<F15> Agreement and Declaration of Trust of the Registrant
2<F15> By-Laws of the Registrant
3 Not Applicable
4 Not Applicable
5<F15> Form of Investment Advisory Agreement
6(a)<F15> Distribution Agreement
(b) Service Agreement between Sunstone, on behalf of the Fund, and Jack
White & Company
7 Not Applicable
8(a)<F15> Form of Custodian Services Agreement
(b)<F15> Sub-Custodian Agreement
9(a)<F15> Form of Transfer Agency Services Agreement
(b)<F15> Form of Administration and Accounting Services Agreement
10<F15>
(a)<F15> Opinion and consent of Debevoise & Plimpton
(b)<F15> Opinion and consent of Richards, Layton & Finger
11 Consent of Coopers & Lybrand L.L.P.
12 Not Applicable
13<F15> Form of Subscription Agreement
14 Not Applicable
15<F15> Distribution Plan
16 Cumulative Total Return Computation
17 Financial Data Schedule
18 Not Applicable
<F15> Previously filed.
Item 25. Persons Controlled by or Under Common Control
with Registrant
---------------
Not applicable.
Item 26. Number of Holders of Securities
-------------------------------
Number of Record Holders
Title of Class as of January 31, 1996
- -------------- ----------------------
Shares of beneficial interest 106
(Par value $0.001)
Item 27. Indemnification
---------------
The Agreement and Declaration of Trust of The Haven Capital Management Trust
(the "Trust") provides the following limitations on liability and indemni-
fications to Trustees and shareholders (including shareholders who may, as a
result of holding more than 5% of the shares of beneficial interest of the Fund
(the "Shares"), be deemed to be "affiliated persons"):
Section 1.2(d). "Covered Person" shall mean each Trustee, officer,
employee, agent (including, without limitation, any Investment Adviser,
Distributor, custodian or transfer agent or any director, officer or employee
thereof) of the Trust or any Series, when acting in such capacity;
Section 3.13. Standard of Care of Trustees. The exercise by the Trustees
----------------------------
of their powers and discretion hereunder and the construction in good faith by
the Trustees of the meaning or effect of any provision of this Declaration shall
be binding upon everyone interested. No Covered Person shall be liable to the
Trust or the Shareholders except for its own willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
its office.
To the extent that, at law or in equity, a Covered Person has duties
(including fiduciary duties) and liabilities relating thereto to the Trust, a
Shareholder or a Trustee, any such Covered Person acting under this Declaration
or By-Laws shall not be liable to the Trust, any Shareholder or any Trustee for
such Covered Person's good faith reliance on the provisions of this Declaration
or By-Laws. The provisions of this Declaration or By-Laws, to the extent that
they restrict the duties and liabilities of any such Covered Person otherwise
existing at law or in equity, are agreed by the Trustees and the Shareholders to
replace such other duties and liabilities of such Covered Person.
Whenever in this Declaration or By-Laws, the Trustees are permitted or
required to make a decision (i) in their "sole discretion" or under a similar
grant of authority or latitude, the Trustees shall be entitled to consider only
such interests and factors as they desire, whether reasonable or unreasonable,
and, except as otherwise prohibited under the 1940 Act, may consider their own
interests or (ii) in their "good faith" or under another express standard, the
Trustees shall act under such express standard and shall not be subject to any
other or different standards imposed by this Declaration, the By-laws, law or
any other agreement contemplated herein, except as otherwise required under the
1940 Act. Each Shareholder and Trustee hereby agrees that any standard of care
or duty imposed in this Declaration or the By-Laws or any other agreement
contemplated herein or under the Delaware Act or any other applicable law, rule
or regulation shall be modified, waived or limited in each case as required to
permit the Trustees to act under this Declaration or the By-Laws or any other
agreement contemplated herein and to make any decision pursuant to the authority
prescribed in this Declaration or the By-Laws.
Section 5.1. No Personal Liability of Shareholders or Covered Persons.
--------------------------------------------------------
The Shareholders shall be entitled to the same limitation of personal liability
extended to stockholders of private corporations for profit organized under the
General Corporation Law of the State of Delaware. No Covered Person shall have
any power to bind personally any Shareholder or to call upon any Shareholder for
the payment of any sum of money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay by way of subscription for
any Shares or otherwise. All Persons extending credit to, contracting with or
having any claim against the Trust or any Series thereof shall look only to the
assets of the Trust or of such Series, as the case may be, for payment under
such credit, contract or claim, and neither the Shareholders nor the Trustees,
nor any of the Trust's officers, employees or agents, whether past, present or
future, shall be personally liable therefor. No Covered Person shall be subject
to any personal liability whatsoever to any person other than the Trust or the
Shareholders in connection with the Trust Property or the acts, obligations or
affairs of the Trust or any Series thereof. The Trustees shall not be
responsible or liable to the Trust or the Shareholders for any neglect or
wrongdoing of any officer, employee or agent (including, without limitation, any
Investment Adviser, Distributor, custodian, or transfer agent) of the Trust or
any Series thereof, nor shall any Trustee be responsible or liable for the act
or omission of any other Trustee.
Section 5.3. Indemnification of Covered Persons. To the fullest
----------------------------------
extent permitted by law, the Trust shall indemnify and hold harmless any Covered
Person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (including any action by or in the
right of the Trust) by reason of any action or omission, or any alleged act or
omission, arising out of such Covered Person's activities as a Covered Person if
such activities were performed in good faith and were reasonably believed by
such Covered Person to be in or not opposed to the best interests of the Trust,
against losses, damages, or expenses for which such Covered Person has not
otherwise been reimbursed (including attorneys' fees, judgments, fines and
amounts paid in settlement) actually and reasonably incurred by such Covered
Person in connection with such action, suit or proceeding, so long as such
Covered Person was not liable for or guilty of gross negligence, willful
misfeasance, bad faith or reckless disregard of such Covered Person's duties
with respect to such acts or omissions and, with respect to any criminal
proceeding, had not reasonable cause to believe his conduct was unlawful.
Notwithstanding the foregoing, absent a judicial or administrative determination
that a Covered Person seeking indemnification was not liable on the merits or
guilty of disabling conduct within the meaning of Section 17(h) of the 1940 Act
("Disabling Conduct"), all determinations that a Covered Person did not engage
in Disabling Conduct shall be based upon a review of the facts, by (a) indepen-
dent legal counsel in a written opinion or (b) if a quorum of Trustees who are
neither "interested persons" of the Trust or Series, as the case may be, as
defined in Section 2(a)(19) of the 1940 Act, nor parties to the proceeding
("Disinterested, Non-Party Trustees") may be obtained, a vote of a majority of
such quorum. Notwithstanding anything herein to the contrary, if any matter
that is the subject of indemnification hereunder relates only to one Series (or
to more than one but not all of the Series of the Trust), then the indemnity
shall be paid only out of the assets of the affected Series.
The Trustees may make advance payments out of the assets of the Trust
or, if appropriate, of the affected Series in connection with the expense of
defending any action with respect to which indemnification might be sought under
this Section 5.3. The indemnified Covered Person shall give a written
undertaking to reimburse the Trust or the Series, as the case may be, in the
event it is subsequently determined that it is not entitled to such indem-
nification and (A) the indemnified Covered Person shall provide security for its
undertaking, (B) the Trust shall be insured against losses arising by reason of
lawful advances, or (C) a majority of a quorum of Disinterested, Non-Party
Trustees or an independent legal counsel in a written opinion shall determine,
based on a review of readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the indemnitee ultimately will be
found entitled to indemnification. The rights accruing to any Covered Person
under these provisions shall not exclude any other right to which it may be
lawfully entitled and shall inure to the benefit of its heirs, executors,
administrators or other legal representatives.
Section 5.4. Indemnification of Shareholders. In case any
-------------------------------
Shareholder or former Shareholder shall be held to be personally liable solely
by reason of his or her being or having been a Shareholder and not because of
acts or omissions or for some other reason, the Shareholder or former
Shareholder (or his or her heirs, executors, administrators or other legal
representatives or in the case of a corporation or other entity, its corporate
or other general successor) shall be entitled out of the assets of the Series of
which such Shareholder held Shares, to be held harmless from and indemnified
against all loss and expense, including legal expenses reasonably incurred,
arising from such liability. The rights accruing to a Shareholder under this
Section 5.4 shall not exclude any other right to which such Shareholder may be
lawfully entitled, nor shall anything contained herein restrict the right of the
Trust or any Series thereof to indemnify or reimburse a Shareholder in any
appropriate situation even though not specifically provided herein.
Section 11.5. Provisions in Conflict with Law or Regulations.
----------------------------------------------
(a) The provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in con-
flict with requirements of the 1940 Act, would be inconsistent with any of the
conditions necessary for qualification of the Trust as a regulated investment
company under the Code or is inconsistent with other applicable laws and regu-
lations, such provision shall be deemed never to have constituted a part of this
Declaration, provided that such determination shall not affect any of the
--------
remaining provisions of this Declaration or render invalid or improper any
action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
The By-Laws of Haven Capital Management, Inc., the Fund's investment adviser,
provides the following indemnification in its Section 6.01:
The Corporation shall, to the fullest extent permitted by applicable law from
time to time in effect, indemnify any and all persons who may serve or who have
served at any time as Directors or officers of the Corporation, or who at the
request of the Corporation may serve or at any time have served as Directors or
officers of another corporation (including subsidiaries of the Corporation) or
of any partnership, joint venture, trust or other enterprise, from and against
any and all of the expenses, liabilities or other matters referred to in or
covered by said law. Such indemnification shall continue as to a person who has
ceased to be Director or officer and shall inure to the benefit of the heirs,
executors and administrators of such a person. The Corporation may also
indemnify any and all other person whom it shall have power to indemnify under
any applicable law from time to time in effect to the extent authorized by the
Board of Directors and permitted by such law. The indemnification provided by
this Article shall not be deemed exclusive of any other rights to which any
person may be entitled under any provision of the Certificate of Incorporation,
other By-Law, agreement, vote of stockholders or disinterested Directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office. [Section 145.]
Insofar as indemnification for liability arising under the Securities Act of
1933, as amended (the "1933 Act"), may be permitted to Trustees, officers and
controlling persons of Registrant pursuant to the foregoing provisions, or
otherwise, Registrant has been advised that in the opinion of the Securities and
Exchange Commission ("SEC") such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by Trustee, officer or controlling
person of Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer or controlling person in
connection with the securities being registered, 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 indemni-
fication by it is against public policy as expressed in the 1933 Act and will be
governed by the final adjudication of such issue.
Item 28. Business and Other Connections of
Investment Adviser
------------------
Haven acts as investment adviser to Registrant. Haven renders investment
advice to a variety of individual and institutional clients. Set forth below is
a list of officers and directors of Haven, together with information as to their
other business, profession, vocation or employment of a substantial nature
during the past two years.
Position/Office Other
Name with Haven<F16> Business, etc.
- ---- ---------- --------------
Stephen Ely Managing Director and General Partner of HCM
Chairman Partners, L.P.
Colin C. Ferenbach Managing Director and General Partner of HCM
Secretary Partners, L.P.
Denis M. Turko Managing Director and General Partner of HCM
Treasurer Partners, L.P.
<F16>Address: 655 Third Avenue, New York, New York 10017.
Item 29. Principal Underwriters
----------------------
(a) Sunstone Financial Group, Inc. ("Sunstone") serves as principal
underwriter for Registrant. Sunstone acts as an underwriter for:
Northern Funds
First Omaha Funds, Inc.
(b) To the best of Registrant's knowledge, the directors and
executive officers of Sunstone, distributor for Registrant, are as follows:
Name and Principal Business Address Positions and Offices with Sunstone
- ----------------------------------- -----------------------------------
Miriam M. Allison President and Director
207 E. Buffalo Street
Suite 400
Milwaukee, WI 53202
Daniel S. Allison Secretary and Director
1241 N. Franklin Place
Milwaukee, WI 53202
Theresa A. Ladwig Vice President
207 E. Buffalo Street
Suite 400
Milwaukee, WI 53202
Mary M. Tenwinkel Senior Vice President
207 E. Buffalo Street
Suite 400
Milwaukee, WI 53202
Randy M. Pavlick Vice President
207 E. Buffalo Street
Suite 400
Milwaukee, WI 53202
Anita M. Zagrodnik Vice President
207 E. Buffalo Street
Suite 400
Milwaukee, WI 53202
Fayez Akhras Vice President
207 E. Buffalo Street
Suite 400
Milwaukee, WI 53202
(c) Commissions and compensation paid to principal underwriters who
were not affiliated persons of the Registrant, or affiliated persons of such an
affiliated person, during the fiscal year ended October 31, 1995 were as
follows:
(1) (2) (3) (4) (5)
Net
Underwriting
Name of Discounts Compensation on
Principal and Redemption and Brokerage Other
Underwriter Commissions Repurchase Commissions Compensation
Provident
Distributor, $0 $0 $0 $ 22,634 <F17>
Inc.
Sunstone $0 $0 $0 $ 15,968 <F18>
Item 30. Location of Accounts and Records
--------------------------------
(1) The Haven Capital Management Trust
c/o Haven Capital Management, Inc.
655 Third Avenue
New York, New York 10017
(Agreement and Declaration of Trust,
By-Laws and minute books of the Trust)
(2) PFPC Inc.
103 Bellevue Parkway
Wilmington, Delaware 19809
<F17> Compensation pursuant to Rule 12b-1 distribution plan paid to the
Fund's prior distributor
<F18> Compensation pursuant to Rule 12b-1 distribution plan paid to the
Fund's current distributor
(records relating to its functions as administrator)
(3) PFPC Inc.
103 Bellevue Parkway
Wilmington, Delaware 19809
(records relating to its functions as transfer and dividend
disbursing agent)
(4) PNC Bank, National Association
Broad and Chestnut Streets
Philadelphia, Pennsylvania 19101
(records relating to its functions as custodian)
(5) Sunstone Financial Group, Inc.
207 East Buffalo Street, Suite 400
Milwaukee, Wisconsin 53202
(records relating to its functions as principal underwriter)
(6) Haven Capital Management, Inc.
655 Third Avenue
New York, New York 10017
(records relating to its functions as investment adviser)
Item 31. Management Services
-------------------
Not applicable.
Item 32. Undertaking
-----------
(a) Since the Registrant does not intend to hold annual shareholder
meetings, Registrant hereby undertakes to assist in shareholder communications
in a manner consistent with the requirements of Section 16(c) of the Investment
Company Act of 1940, as amended.
(b) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, Registrant certifies that it meets all the
requirements for effectiveness of this Post-Effective Amendment No. 6 pursuant
to Rule 485(b) under the Securities Act of 1993 and has duly caused this Post-
Effective Amendment No. 6 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on the 28th day of February, 1996.
THE HAVEN CAPITAL
MANAGEMENT TRUST
By: /s/ Colin C. Ferenbach
------------------------
Colin C. Ferenbach
President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
Signature Title Date
- --------- ----- ----
/s/ Colin C. Ferenbach President and Trustee (Chief February 28, 1996
- ---------------------- Executive Officer)
Colin C. Ferenbach
/s/ Stephen Ely Treasurer, Secretary and February 28, 1996
- -------------------- Trustee (Chief Financial
Stephen Ely Officer)
/s/ Denis M. Turko Vice President and Trustee February 28, 1996
- --------------------
Denis M. Turko
/s/ D. Euan Baird* Trustee February 28, 1996
- --------------------
D. Euan Baird
/s/ William F. Indoe* Trustee February 28, 1996
- ---------------------
William F. Indoe
/s/ Robert E. Kaufmann* Trustee February 28, 1996
- -----------------------
Robert E. Kaufmann
/s/ John F. McNiff* Trustee February 28, 1996
- --------------------
John F. McNiff
* By:/s/ Colin C. Ferenbach
----------------------
Colin C. Ferenbach
Attorney-in-fact<F19>
<F19>Pursuant to the power of attorney filed as part of the signature page to
Post-Effective Amendment No. 1 to the Registration Statement on Form N-1A, No.
33-76670, filed May 25, 1994.
INDEX TO EXHIBITS
Exhibit Page Number
No. Description in Sequential
--- ----------- Numbering System
----------------
1<F20> Agreement and Declaration of Trust of the
Registrant
2<F20> By-Laws of the Registrant
5<F20> Form of Investment Advisory Agreement
6(a)<F20> Distribution Agreement
6(b) Service Agreement between Sunstone Financial
Group, Inc., on behalf of the Fund, and
Jack White & Company
8(a)<F20> Form of Custodian Services Agreement
(b)<F20> Sub-Custodian Custody Agreement
9(a)<F20> Form of Transfer Agency Services Agreement
(b)<F20> Form of Administration and Accounting
Services Agreement
10(a)<F20> Opinion and consent of Debevoise & Plimpton
(b)<F20> Opinion and consent of Richards, Layton &
Finger
11 Consent of Coopers & Lybrand L.L.P.
13<F20> Form of Subscription Agreement
15<F20> Distribution Plan
16 Cumulative Total Return Computation
17 Financial Data Schedule
<F20>Previously filed.
Exhibit 6(b)
SERVICE AGREEMENT
NOFEE NETWORK MUTUAL FUND SERVICE
Sunstone Financial Group, Inc., on behalf of The Haven Fund (the "Funds") and
Jack White & Company hereby agree as follows:
1. Jack White & Company will provide or arrange for the provision to the Funds
of certain shareholder Services described herein as part of its NoFee Network
(No Transaction Fee) Service. In consideration of such services, SFG, Inc. on
behalf of The Haven Fund, agrees to pay to Jack White & Company a shareholder
service fee as set forth herein.
2. Services. Jack White & Company agrees to perform or arrange for the
--------
performance of the following Services:
Order Processing
----------------
Jack White & Company shall:
Process all purchase, redemption and exchange orders by investors; transmit
or arrange for the transmission to each Fund each Business Day by 4:00 P.M.
(eastern time) purchase or redemption orders reflecting purchase, redemption and
exchange orders received by it that business day with respect to subaccounts.
Record Maintenance
------------------
Jack White & Company shall:
Maintain records for each customer who holds shares of a participating fund
in an account with us, which records shall include: number of shares; date and
price of purchases and redemptions (including dividend reinvestments) and dates
and amounts of dividends paid for at least the current year to date; name and
address of such customers; records of distributions and dividend payments; any
transfers of shares; and overall control records.
Shareholder Communications
--------------------------
Jack White & Company shall:
Mail Fund prospectuses, statements of additional information, and any
supplements thereto, upon customer request and, as applicable, upon confirmation
of customer purchases;
Mail statements to customers on a monthly basis (or, as to accounts in which
there has been no activity in particular month, no less frequently than
quarterly) showing, among other things, the number of shares of each fund owned
by such customers and the net asset values of such shares as of a recent date.
Produce and mail to customers confirmation statements reflecting purchases
and redemptions of shares of each fund in a customer's account.
Respond to customer inquiries regarding, among other things, share prices,
account balances, dividend amounts and dividend payment dates.
Tax Information Returns and Reports
-----------------------------------
Jack White & Company will arrange for the preparation and filing with the
appropriate governmental agencies such information returns and reports as are
required to be so filed for reporting (i) dividends and other distributions
made, (ii) amounts withheld on dividends and other distributions and payments
under applicable federal and state laws, rules and regulations, and (iii) gross
proceeds of sales transactions as required.
3. Fees. Payment due to Jack White & Company for its services will be based on
----
the average monthly market value of Eligible Fund Share Balances for each fund
held in Jack White & Company accounts. Eligible Fund Share Balances held in
Jack White & Company accounts will be monitored and updated on a daily basis.
Eligible Fund Share Balances on which service fees shall be paid are the
following: (i) Fund shares purchased through subaccounts held with Jack White &
Company; (ii) additional Fund shares received through dividends reinvested in
the same fund; and (iii) Fund shares transferred into Jack White & Company
accounts from other brokerage firms, the Funds, its transfer agent, or other
service agents.
The annual service fee rate is .25%.
4.All fund positions are held in book entry form our clearing agent, Donaldson,
Lufkin & Jenrette, Pershing Division. Operations procedures are established
between the Funds and Donaldson Lufkin & Jenrette, Pershing Division.
5.Jack White & Company maintains a policy that, in order for customers to avoid
transaction fees, customers shall adhere to a limitation on short-term
redemptions. The limitation currently states as follows:
A "Short-term redemption" is defined as any redemption of shares purchased
within 90 days (60 days for accounts controlled by financial advisors) of the
redemption trade date. A transaction fee will apply to short term redemptions.
If a customer makes 15 short-term redemptions in a calendar year, transaction
fees will apply on all of the customer's transactions for the remainder of the
year.
Jack White & Company reserves the right to modify at any time its policies and
limitations regarding short-term redemptions.
6. Jack White & Company agrees to monitor customer activity in the No
Transaction Fee Service to control short-term trading activity, according to the
Fund management's policies or the Fund's prospectus. Jack White & Company
requests that each fund participating in the program provide written guidelines
to be communicated with prospective shareholders regarding the size, number, and
frequency of transactions each customer shall be allowed to make within a
specified time period. If no policies are communicated to Jack White & Company
by the Funds it will be assumed that the Funds have no additional restrictions
that need be considered by Jack White & Company or by its customers.
7. Jack White & Company is registered as a broker-dealer under the Securities
Exchange Act of 1934 in all 50 states and in the District of Columbia and is
qualified to act as a broker-dealer in the states or other jurisdictions where
we transact business, and is a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD"). Representatives of Jack White
& Company do not solicit orders to buy or sell mutual fund shares. All orders
to buy or sell mutual funds are unsolicited.
8. Each Fund understands that upon the addition of a fund to the NoFee Network,
Jack White & Company will update its listing of participating funds to indicate
their availability in the service. Such listings are sent to existing and
prospective clients. Participating funds may also be named on a "messages"
section of customer account statements. Funds participating in the program will
be highlighted in Jack White & Company's regularly published mutual fund list,
the Mutual Fund Network. Each Fund consents to such references to it.
-------------------
9.Each Fund acknowledges that Jack White & Company intends to market its NoFee
Network to its current and prospective customers via direct mailing and regular
advertising in regional and national financial publications, trade conferences,
and other media and that Jack White & Company may include reference in its
advertising to the Funds' participation in the NoFee Network, and each Fund
consents to such references to it.
10.Participation in the No Transaction Fee Service may be terminated upon no
less than 30 days' advance notification in writing either by the Funds or by
Jack White & Company.
11.Other funds sponsored or distributed by the sponsor or distributor of the
Funds, whose registration may not currently be effective or whose operations
commence after the date of this agreement may be included under the terms of
this agreement without written amendment.
See Addendum attached hereto.
IN WITNESS WHEREOF the parties hereto have delivered and executed this
Agreement.
By:
--------------------------------------
Authorized Signature Date
Print Name Title
Send Invoices for Service Fees to ATTN:
--------------------
Address
- -------------------------------------------
Telephone FAX
Name of Operations Contact Person: Mr. Colin Ferenbach
Address: The Haven Capital Management Trust, 655 Third Avenue, NY, NY 10017
Telephone: (212) 953-2322 FAX: (212) 818-9044
Accepted by:
Jack White & Company, Authorized Officer
ADDENDUM TO THE
SERVICE AGREEMENT - NO FEE NETWORK MUTUAL FUND SERVICE
The Service Agreement - No Fee Network Mutual Fund Service by and between Jack
White & Company and Sunstone Financial Group, Inc. on behalf of The Haven Fund
is hereby amended as follows:
1. The phrase "average monthly market value" in the first sentence of Section 3
shall be changed to "average daily market value."
2. Sections 8 and 9 shall be contingent upon the following:
Neither Jack White & Company nor any of its officers, employees or
agents are authorized to make any representations concerning the Fund except
those contained in the Fund's then current prospectus and statement of
additional information, copies of which will be supplied by the Fund to Jack
White & Company, or in such supplemental literature or advertising as may be
authorized by the Fund or its distributor in writing.
3. Jack White & Company will furnish the Fund or its designees with such
information as it or they may reasonably request (including, without limitation,
periodic certifications confirming the provision to Jack White & Company
customers of the services described in the Service Agreement, as amended, and
blue sky reports at least monthly), and will otherwise cooperate with the Fund
and its designees (including, without limitation, any auditors designated by the
Fund), in connection with the preparation of reports to its Board of Trustees
concerning the Service Agreement, as amended, and the monies paid or payable by
the Fund pursuant hereto, as well as any other reports or filings that may be
required by law.
4. Jack White & Company represents, warrants and agrees that Jack White &
Company will comply, at all times, with all applicable federal and state laws,
rules and regulations. You will be informed as to the states in which shares of
the Fund have been qualified for sale under, or are exempt from the requirements
of, the respective securities laws of such states. Attached is the current list
of such states.
5. The Service Agreement, as amended, hereby is executed by or on behalf of the
Fund and the obligations thereunder are not binding upon any of the trustees,
officers or shareholders of the Fund individually but are binding only upon the
Fund and its assets and property. All obligations under the Service Agreement,
as amended, shall apply only on a fund by fund basis, and the assets of one fund
shall not be liable for the obligations of another fund. Haven Funds' Agreement
and Declaration of Trust is on file with the Secretary of State of Delaware.
SUNSTONE FINANCIAL GROUP, INC.
on behalf of The Haven Fund
Date: By:
------------ ------------------------
(Authorized Officer)
JACK WHITE & COMPANY
Date: By:
------------ ------------------------
(Authorized Officer)
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference of our report dated November 30,
1995 accompanying the financial statements of The Haven Capital Management
Trust comprised of The Haven Fund and the reference to our Firm under the
headings "Financial Highlights" and "The Exchange" in the Prospectus and
"Auditors and Counsel" and "Financial Statements" in the Statement of Additional
Information in this Post-Effective Amendment No. 6 under the Securities Act of
1933, as amended, to this Registration Statement on Form N-1A (File No.
33-76670) of the Haven Capital Management Trust.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 28, 1996
Exhibit 16
CUMULATIVE TOTAL RETURN (assuming NO SALES LOAD)
June 23, 1994 (Inception) through October 31, 1995
-----------------------------
ERV
Formula:T = (--------) - 1
P
Where:
P =a hypothetical initial payment of $1,000 made on June 23,
1994, commencement of the Fund
T =Cumulative total return
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period, assuming NO sales load.
P = $1,000
ERV = $1,210
CUMULATIVE TOTAL RETURN = 21.04%
AVERAGE ANNUAL TOTAL RETURNS FOR THE FUND
AND THE PARTNERSHIP (assuming NO SALES LOAD)
----------------------------
For the year ended October 31, 1995
ERV
Formula:T = (--------) - 1
P
Where:
P = a hypothetical initial payment of $1,000 made on November 1,
1994
T = Average annual total return
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period, assuming NO sales load.
P = $1,000
ERV = $1,137
AVERAGE ANNUAL TOTAL RETURN = 13.65%
AVERAGE ANNUAL TOTAL RETURNS FOR THE FUND
AND THE PARTNERSHIP (assuming NO SALES LOAD)
--------------------------------------
For the five years ended October 31, 1995
Formula: P(1 + T)5 = ERV
Where:
P = a hypothetical initial payment of $1,000 made on November 1,
1990
T = Average annual total return
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period, assuming NO sales load.
P = $1,000
ERV = $2,134
AVERAGE ANNUAL TOTAL RETURN = 16.37%
AVERAGE ANNUAL TOTAL RETURNS FOR THE FUND
AND THE PARTNERSHIP (assuming NO SALES LOAD)
---------------------------
For the ten years ended October 31, 1995
Formula: P(1 + T)10 = ERV
Where:
P = a hypothetical initial payment of $1,000 made on November 1,
1985
T = Average annual total return
ERV = Ending Redeemable Value of a hypothetical $1,000
payment made at the beginning of the period, assuming NO sales load.
P = $1,000
ERV = $3,176
AVERAGE ANNUAL TOTAL RETURN = 12.25%
Exhibit 17
[ARTICLE] 6
[CIK] 0000920699
[NAME] THE HAVEN FUND
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] OCT-31-1995
[PERIOD-END] OCT-31-1995
[INVESTMENTS-AT-COST] 44401467
[INVESTMENTS-AT-VALUE] 54642829
[RECEIVABLES] 723672
[ASSETS-OTHER] 283218
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 55649719
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 71101
[TOTAL-LIABILITIES] 71101
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 44938113
[SHARES-COMMON-STOCK] 4761489
[SHARES-COMMON-PRIOR] 4256375
[ACCUMULATED-NII-CURRENT] 560954
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 3393743
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 10241362
[NET-ASSETS] 55578618
[DIVIDEND-INCOME] 771448
[INTEREST-INCOME] 346130
[OTHER-INCOME] 199022
[EXPENSES-NET] 755646
[NET-INVESTMENT-INCOME] 560954
[REALIZED-GAINS-CURRENT] 3393743
[APPREC-INCREASE-CURRENT] 2592806
[NET-CHANGE-FROM-OPS] 6547503
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 685149
[DISTRIBUTIONS-OF-GAINS] 961624
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 424112
[NUMBER-OF-SHARES-REDEEMED] 60964
[SHARES-REINVESTED] 141967
[NET-CHANGE-IN-ASSETS] 10246763
[ACCUMULATED-NII-PRIOR] 172203
[ACCUMULATED-GAINS-PRIOR] 953748
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 297723
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 784397
[AVERAGE-NET-ASSETS] 49620477
[PER-SHARE-NAV-BEGIN] 10.65
[PER-SHARE-NII] .12
[PER-SHARE-GAIN-APPREC] 1.28
[PER-SHARE-DIVIDEND] (.15)
[PER-SHARE-DISTRIBUTIONS] (.23)
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 11.67
[EXPENSE-RATIO] 1.53
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
