Debevoise & Plimpton
555 13th Street, N.W.
Washington, D.C. 30004
February 7, 1997
VIA EDGAR
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
THE HAVEN CAPITAL MANAGEMENT TRUST
Post-Effective Amendment No. 7 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. 7
under the 1933 Act and Amendment No. 8 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)
As filed with the Securities and Exchange Commission
February 7, 1997
1933 ACT FILE NO. 33-76670
1940 ACT FILE NO. 811-8428
===============================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM N-1A
(CHECK APPROPRIATE BOX OR BOXES)
REGISTRATION STATEMENT
UNDER
( ) THE SECURITIES ACT OF 1933
( ) PRE-EFFECTIVE AMENDMENT NO.
(x) POST-EFFECTIVE AMENDMENT NO. 7
AND/OR
REGISTRATION STATEMENT
UNDER
( ) THE INVESTMENT COMPANY ACT OF 1940
(x) AMENDMENT NO. 8
-----------------
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
( ) on (date) pursuant to paragraph (b), or
( ) 60 days after filing pursuant to paragraph (a)(1) of Rule 485, or
( ) on (date) pursuant to paragraph (a)(1)
( ) 75 days after filing pursuant to paragraph (a)(2), or
( ) on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
( ) this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
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 27, 1996.
===============================================================================
THE HAVEN CAPITAL MANAGEMENT TRUST
FORM N-1A
CROSS REFERENCE SHEET
---------------------
Part A
Item No. Prospectus Caption
- -------- ------------------
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 Additional/
Item No. Information Caption
- -------- ------------------------
10. Cover................................. Cover Page
11. Table of Contents..................... Contents
12. General Information and History....... See Prospectus - "The Exchange"
13. Investment Objectives and Policies.... Investment Objective; Investment
Restrictions; Investment Policies
14. Management of the Fund................ See Prospectus - "Management of
the Fund"; Management of the Fund
15. Control Persons and
Principal Holders of Securities.... Control Persons and Principal
Holders of Securities
16. Investment Advisory and Other
Services........................... Management of the Fund; Auditors
and Counsel; See Prospectus -
"Management of the Fund"
17. Brokerage Allocation and
Other Practices.................... Portfolio Transactions
18. Capital Stock and Other Securities.... Shares of Beneficial Interests and
Other Securities; See Prospectus -
"Dividends and Distributions,"
"How to Redeem Shares," "Taxes"
and "General Information."
19. Purchase, Redemption and
Pricing of Securities
Being Offered...................... Additional Purchase and Redemption
Information; See 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 Performance Data...... Determination of Performance Data
23. Financial Statements.................. Report of Independent Certified
Public Accountants; Statement of
Assets and Liabilities
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.............................................................11
Investing in the Fund....................................................14
How to Purchase Shares...............................................14
How to Redeem Shares.................................................15
Net Asset Value..........................................................17
Dividends and Distributions..............................................18
Taxes....................................................................18
General Information......................................................19
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 OFFICAL SALES LITERATURE IN CONNECTION
WITH THE OFFERING OF SHARES OF THE FUND, AND IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST 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.
PROSPECTUS
February 7, 1997
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
Prospectus 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 Distribution Services, LLC
("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 DISTRIBUTION SERVICES, LLC
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> 0.18%
Other Expenses (audit, legal, administration,
shareholder services, transfer agency, insurance,
custodian, miscellaneous and amortized
organizational expenses)<F2> 0.81%
Total Fund Operating Expenses 1.59%
<F1> 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> 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
1 Year 3 Years 5 Years 10 Years
---------------------------------------
A shareholder would pay the following
expenses on a $1,000 investment,
assuming: <F1> 5% annual return and
<F2> redemption at the end of each
period: $16 $50 $87 $189
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. The tables
are provided to assist an investor in understanding the various costs and
expenses that an investor in the Fund will bear directly and indirectly. 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 years ended October 31, 1996 and
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 Ended Year Ended Period Ended
October 31, October 31, October 31,
1996 1995 1994<F3>
------- ------- -------
NET ASSET VALUE AT
BEGINNING OF PERIOD $11.67 $10.65 $10.00
Increase from Investment Operations:
Net Investment Income 0.08 0.12 0.04
Net Realized and Unrealized Gains on
Investments and Foreign Currency
Transactions 3.07 1.28 0.61
Total Increase from
Investment Operations 3.15 1.40 0.65
Less Distributions:
Dividends Paid to Shareholders:
From Net Investment Income (0.08) (0.15) --
From Net Realized Gains (0.70) (0.23) --
Total Distributions to
Shareholders (0.78) (0.38) --
NET ASSET VALUE AT END OF PERIOD $14.04 $11.67 $10.65
TOTAL RETURN 28.25% 13.65% 6.50%
Supplemental Data and Ratios:
Net Assets at End of
Period (in 000s) $67,096 $55,579 $45,332
Ratios of Expenses to
Average Net Assets 1.59% 1.53%<F4> 1.20%<F4><F5>
Ratio of Net Investment Income
to Average Net Assets 0.58% 1.14%<F4> 1.10%<F4><F5>
Portfolio Turnover Rate 67% 77% 27%
Average Commission Rate Paid<F6> $0.0591 -- --
<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) for the periods ended
October 31, 1995 and 1994, respectively, 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> Annualized.
<F6> Computed by dividing the total amount of brokerage commissions paid by
the total shares of investment securities purchased and sold during the
period for which commissions were charged, as required by the SEC.
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, instrumentalities 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
investment 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, 1996, the portfolio turnover rate was 67%.
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. Managing Director
since 1982 and Chairman since 1997 of Haven. Formerly,
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).
STEPHEN ELY<F7> Treasurer, Secretary and Trustee of the Trust.
Managing Director since 1982 and Treasurer since 1997
of Haven. Formerly, 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).
ROBERT E. KAUFMANN Trustee of the Trust. Director, Spencer Stuart &
Associates (executive search consultants). Formerly,
Headmaster of Deerfield Academy, 1980-94; Director
of various mutual funds, 1985-92.
JOHN F. MCNIFF Trustee of the Trust. Director, Vice President-
Finance and Chief Financial Officer of Dover
Corporation (diversified manufacturing company);
Director of The Allen Group (manufacturer of
telecommunication products).
DENIS M. TURKO<F7> Vice President and Trustee of the Trust.
Managing Director since 1982 and Secretary since 1997
of Haven. Formerly, 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, 1996, Haven managed approximately $822
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 30 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).
DISTRIBUTOR AND PLAN OF DISTRIBUTION. Sunstone Distribution Services,
LLC ("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 benefits investors who acquire Shares in the continuous
offering after the exchange to the extent that the pro rata portion of expenses
borne by each investor decreases and certain economies are realized by spreading
costs over a larger asset base. The exchange generally has, however, adverse
tax consequences to those same investors insofar as the Fund holds securities
acquired from the Partnership that have appreciated in value from the date they
were acquired by the Partnership; 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 23, 1994 to
October 31, 1996 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, 1996 of the Fund appear in the Fund's
Annual Report to Shareholders for the year ended October 31, 1996, 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."
FOR A FUND SHARE OUTSTANDING THROUGHOUT THE PERIOD<F13>
- --------------------------------------------------
Nov. 1, 1995 Nov. 1, 1994 June 23, Jan. 1, 1994
to Oct. 31, to Oct. 31, 1994 to Oct. to June 22,
1996<F10> 1995<F10> 31, 1994<F10> 1994<F11>
---------- --------- ----------- ----------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 11.67 $ 10.65 $ 10.00 $ 10.29
Income from
investment
operations:
Net investment
income 0.08 0.12 0.04 0.06
Net realized and
unrealized gains
and (losses) on
investments 3.07 1.28 0.61 (0.35)
------- ------- ------- -------
Total from investment
operations 3.15 1.40 0.65 (0.29)
------- ------- ------- -------
Less distributions (0.78) (0.38) - -
NET ASSET VALUE,
END OF PERIOD $ 14.04 $ 11.67 $ 10.65 $ 10.00
======= ======= ======= =======
TOTAL RETURN 28.25% 13.7% 6.5% (2.8)%
SUPPLEMENTAL DATA
AND RATIOS:
Net assets at end
of period (in 000s) $67,096 $55,579 $45,332 $41,141
Ratio of expenses
to average net assets 1.59% 1.53%<F9> 1.20%<F8><F9> 1.19%<F13>
Ratio of net
investment income to
average net assets 0.58% 1.14%<F9> 1.10%<F8><F9> 1.17%<F8>
Portfolio turnover rate 67% 77% 27% 78%
Average commission
rate paid<F14> $0.0591 -- -- --
FOR A FUND SHARE OUTSTANDING THROUGHOUT THE PERIOD (continued)<F13>
- --------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1993<F11> 1992<F11> 1991<F11> 1990<F11> 1989<F11><F12>
------- ------- ------- ------- -----------
NET ASSET VALUE,
BEGINNING
OF PERIOD $ 9.13 $ 8.06 $ 6.16 $ 6.31 $ 5.22
Income from investment
operations:
Net investment
income 0.16 0.16 0.19 0.21 0.20
Net realized and
unrealized gains
and (losses) on
investments 1.00 0.91 1.71 (0.36) 0.89
------- ------- ------- ------- -------
Total from
investment
operations 1.16 1.07 1.90 (0.15) 1.09
------- ------- ------- ------- -------
Less distributions - - - - -
NET ASSET VALUE,
END OF PERIOD $ 10.29 $ 9.13 $ 8.06 $ 6.16 $ 6.31
======= ======= ======= ======= =======
TOTAL RETURN 12.7% 13.3% 30.8% (2.4)% 20.9%
SUPPLEMENTAL
DATA AND RATIOS:
Net assets at end
of period
(in 000s) $44,104 $38,243 $34,024 $24,282 $27,426
Ratio of expenses
to average net
assets 0.67% 0.71% 0.72% 0.67% 0.75%
Ratio of net
investment income
to average
net assets 1.64% 1.90% 2.57% 3.32% 3.37%
Portfolio turnover
rate 72% 60% 68% 67% 48%
Average commission
rate paid<F14> -- -- -- -- --
FOR A FUND SHARE OUTSTANDING THROUGHOUT THE PERIOD (continued)<F13>
- --------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, June 27, 1984
------------------------------------------- to Dec. 31,
1988<F11><F12>1987<F11><F12>1986<F11><F12>1985<F11><F12>1984<F11><F12>
------------ ----------- --------- ----------- -----------
NET ASSET VALUE,
BEGINNING
OF PERIOD $ 4.49 $ 4.61 $ 4.20 $ 3.07 $ 2.83
Income from investment
operations:
Net investment
income 0.16 0.13 0.12 0.10 0.08
Net realized and
unrealized gains
and (losses) on
investments 0.57 (0.25) 0.29 1.03 0.16
------- ------- ------- ------- --------
Total from investment
operations 0.73 (0.12) 0.41 1.13 0.24
------- ------- ------- ------- -------
Less distributions - - - - -
NET ASSET VALUE,
END OF PERIOD $ 5.22 $ 4.49 $ 4.61 $ 4.20 $ 3.07
======= ======= ======= ======= =======
TOTAL RETURN 16.9% (2.6)% 9.8% 36.8% 8.5%
SUPPLEMENTAL DATA
AND RATIOS:
Net assets at
end of period
(in 000s) $22,683 $19,317 $16,029 $11,076 $ 3,060
Ratio of expenses
to average net
assets 0.74% 0.77% 0.78% 0.92% 1.03%<F8>
Ratio of net
investment income
to average
net assets 3.18% 2.56% 2.48% 2.64% 4.98%<F8>
Portfolio turnover
rate 38% 61% 48% 34% 1%
Average commission
rate paid<F14> -- -- -- -- --
<F8> Annualized
<F9> Without fee waivers, the ratio of operating expenses to average net
assets would have been 1.59% and 1.43% (annualized) for the periods ended
October 31, 1995 ad 1994, respectively, 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.
<F10> Represents the results of operations of The Haven Fund.
<F11> Represents the results of operations of HCM Partners, L.P.
<F12> Unaudited.
<F13> 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.
<F14> Computed by dividing the total amount of brokerage commissions paid by
the total shares of investment securities purchased and sold during the
period for which commissions were charged, as required by the SEC.
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, Suite 108, Wilmington, Delaware 19809-3710). Shares
may not be purchased with a check issued by a third party and endosed over to
the Fund. Checks for investment must be made payable to The Haven Fund. Checks
must be drawn on U.S. banks and be payable in U.S. dollars. 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
19899-8903 (or, for overnight delivery, to The Haven Fund, 400 Bellevue Parkway,
Suite 108, 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
signature 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
distributions 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 15, 1997, based on
the unaudited financial statements of the Fund as of such date, the net assets
of the Fund were approximately $71,811,923 and the net unrealized appreciation
of the assets of the Fund was approximately $21,901,804. 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
capital 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
Services, 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 8903, Wilmington, Delaware 19899-8903, 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 DISTRIBUTION SERVICES, LLC
Distributor
===============================================================================
STATEMENT OF ADDITIONAL INFORMATION
February 6, 1997
---------------------
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
6, 1997 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 Distribution Services, LLC
("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
Standard & 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
Cooperatives, 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
continuing 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
securities 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
secondary 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%
limitations 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 or maintain a short position
(except short sales against-the-box).
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
limited 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 Section
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.
For the fiscal years ended October 31, 1996 and 1995 and the fiscal
period ended October 31, 1994, the Fund paid total commissions to independent
brokers of $127,474, $125,227 and $26,872, respectively. During the year ended
October 31, 1996, pursuant to agreements or understandings with certain
independent brokers, Haven directed to such brokers Fund brokerage transactions
with aggregate net proceeds and related commissions of approximately $10.8
million and $40,000, respectively.
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
decline) 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 (age 63), Stephen Ely (age 57) and Denis M. Turko (age 58) each has a
business address at 655 Third Avenue, New York, New York 10017. The ages and
business addresses of the remaining Trustees are as follows: D. Euan Baird (age
59), Schlumberger Ltd., 277 Park Avenue, New York, New York 10172; William F.
Indoe (age 54), Sullivan & Cromwell, 125 Broad Street, New York, New York 10004;
Robert E. Kaufmann (age 55), Spencer Stuart & Associates, Financial Center, 695
East Main Street, Stamford, Connecticut 06901; and John F. McNiff (age 54),
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, 1996. 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<F15>
----------------------------------------------------
D. Euan Baird $7,000
William F. Indoe $7,000
Robert E. Kaufmann $7,000
John F. McNiff $6,500
<F15> Fiscal year ended October 31, 1996.
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
Prospectus.
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.
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, 1996, the Fund paid distribution fees totaling $92,071 to
Sunstone Financial Group, Inc., the Fund's prior distributor (an affiliate of
Sunstone), and it paid commissions totaling $0 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 May 20, 1996 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
continuance 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 15, 1997, 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.
4332 Belclaire
Dallas, Texas 75205 18.6% 18.6%
George E. Doty
61 Park Drive South
Rye, New York 10580 5.5% 5.5%
Donald R. Gant
Young's Road
New Vernon, New Jersey 07976 8.5% 8.5%
J. Fred Weintz, Jr.
43 Jones Park Drive
Riverside, Connecticut 06878 6.1% 6.1%
Peter G. Sachs
443 Webbs Hill Road
Stamford, Connecticut 06903 6.4% 6.4%
All current Trustees and
executive officers as a group
(7 persons) 1.2% 1.3%
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
obligations 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
shareholder 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
investment 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. Proposed 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
contracts, 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
withholding. 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
shareholder 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
hypothetical 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 reinvestment dates during the period.
For the period from June 23, 1994 (the date of the Fund's
commencement) through October 31, 1996, the Fund had a cumulative total return
of 55.2%. 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, 1996:
One Five Ten
Year Years Years
---- ---- ----
The Haven Fund and
HCM Partners, L.P. 28.3% 15.2% 12.5%
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
appropriateness 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, 1996
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, 1996 (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
overwhelming 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
related 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
attributes and are to be considered as upper medium-grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be 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, 1996.
Part B - Statement of Net Assets as of October 31, 1996;
Statement of Operations for the year then ended; and Statement of
Changes in Net Assets for each of the period ended October 31,
1995 and the year ended October 31, 1996.
(b) Exhibits:
Exhibit No. Description of Exhibit
- ---------- ----------------------
1<F16> Agreement and Declaration of Trust of the Registrant
2<F16> By-Laws of the Registrant
3 Not Applicable
4 Not Applicable
5<F16> Form of Investment Advisory Agreement
6(a) Distribution Agreement
(b)<F16> Service Agreement between Sunstone, on behalf of the Fund,
and Jack White & Company
7 Not Applicable
8(a)<F16> Form of Custodian Services Agreement
(b)<F16> Sub-Custodian Agreement
9(a)<F16> Form of Transfer Agency Services Agreement
(b)<F16> Form of Administration and Accounting Services Agreement
10<F16> (a)<F16> Opinion and consent of Debevoise & Plimpton
(b)<F16> Opinion and consent of Richards, Layton & Finger
11 Consent of Coopers & Lybrand L.L.P.
12 Not Applicable
13<F16> Form of Subscription Agreement
14 IRA Disclosure Statement and Custodial Account Agreement
15<F16> Distribution Plan
16 Cumulative Total Return Computation
17 Financial Data Schedule
18 Not Applicable
<F16> 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 15, 1997
-------------- ------------------------
Shares of beneficial interest 176
(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
indemnifications 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)
independent 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
indemnification 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
conflict 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 regulations, 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
indemnification 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<F17> Business, etc.
- ---- --------------- --------------
Stephen Ely Managing Director and General Partner of HCM
Treasurer Partners, L.P.
Colin C. Ferenbach Managing Director and General Partner of HCM
Chairman Partners, L.P.
Denis M. Turko Managing Director and General Partner of HCM
Secretary Partners, L.P.
<F17> Address: 655 Third Avenue, New York, New York 10017.
Item 29. Principal Underwriters
----------------------
(a) Sunstone Distribution Services, LLC ("Sunstone") serves as
principal underwriter for Registrant. Sunstone acts as an underwriter for:
Northern Funds
First Omaha Funds, Inc.
The Purisima Funds
(b) To the best of Registrant's knowledge, the 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 Member
207 E. Buffalo Street
Suite 400
Milwaukee, WI 53202
Daniel S. Allison Secretary
1241 N. Franklin Place
Milwaukee, WI 53202
Mary M. Tenwinkel 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, 1996 were as
follows:
(1) (2) (3) (4) (5)
Net Underwriting Compensation on
Name of Principal Discounts and Redemption and Brokerage Other
Underwriter Commissions Repurchase Commissions Compensation
- ---------------- --------------- -------------- ----------- ------------
Sunstone Financial
Group, Inc. $0 $0 $0 $92,071 <F18>
<F18> Compensation pursuant to Rule 12b-1 distribution plan paid to the Fund's
prior distributor.
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
(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 Distribution Services, LLC
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. 7 pursuant
to Rule 485(b) under the Securities Act of 1993 and has duly caused this Post-
Effective Amendment No. 7 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 7th day of February, 1997.
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 February 7, 1997
- ---------------------- (Chief Executive Officer)
Colin C. Ferenbach
/s/ Stephen Ely Treasurer, Secretary and February 7, 1997
- ---------------------- Trustee (Chief Financial
Stephen Ely Officer)
/s/ Denis M. Turko Vice President and Trustee February 7, 1997
- ----------------------
Denis M. Turko
/s/ D. Euan Baird<F19> Trustee February 7, 1997
- ----------------------
D. Euan Baird
/s/ William F. Indoe<F19> Trustee February 7, 1997
- ----------------------
William F. Indoe
/s/ Robert E. Kaufmann<F19> Trustee February 7, 1997
- ----------------------
Robert E. Kaufmann
/s/ John F. McNiff<F19> Trustee February 7, 1997
- ----------------------
John F. McNiff
<F19> By: /s/ Colin C. Ferenbach
----------------------
Colin C. Ferenbach
Attorney-in-fact<F20>
<F20> 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
Page Number
Exhibit in Sequential
No. Description Numbering System
- ------- ----------- ----------------
1<F21> Agreement and Declaration of Trust of the
Registrant
2<F21> By-Laws of the Registrant
5<F21> Form of Investment Advisory Agreement
6(a) Distribution Agreement
6(b)<F21> Service Agreement between Sunstone Financial
Group, Inc., on behalf of the Fund, and Jack
White & Company
8(a)<F21> Form of Custodian Services Agreement
(b)<F21> Sub-Custodian Custody Agreement
9(a)<F21> Form of Transfer Agency Services Agreement
(b)<F21> Form of Administration and Accounting
Services Agreement
10(a)<F21> Opinion and consent of Debevoise & Plimpton
(b)<F21> Opinion and consent of Richards, Layton &
Finger
11 Consent of Coopers & Lybrand L.L.P.
13<F21> Form of Subscription Agreement
14 IRA Disclosure Statement and Custodial
Account Agreement
15<F21> Distribution Plan
16 Cumulative Total Return Computation
17 Financial Data Schedule
<F21> Previously filed.
EXHIBIT 6(a)
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of January 1st, 1997, by and between The Haven
Capital Management Trust (the "Company"), a Delaware business trust on behalf
of The Haven Fund, a diversified portfolio of the Company and Sunstone
Distribution Services, LLC, a Wisconsin limited liability company (the
"Distributor").
W I T N E S S E T H
WHEREAS, the Company is an open-end, diversified management investment
company and is so registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Company desires to retain the Distributor as its distributor to
provide for the sale and distribution of units of beneficial interest
("shares") in the Company's investment portfolio known as The Haven Fund (the
"Fund"), and the Distributor is willing to render such services.
NOW, THEREFORE, in consideration of the mutual premises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties hereto, intending to be legally bound, do
hereby agree as follows:
1. APPOINTMENT OF THE DISTRIBUTOR.
------------------------------
The Company hereby appoints the Distributor as distributor of the shares of
the Fund on the terms and for the period set forth in this Agreement. The
Distributor hereby accepts such appointment and agrees to render the services
and duties on the terms and for the period set forth in this Agreement.
2. DELIVERY OF DOCUMENTS.
---------------------
The Company has furnished the Distributor with copies, properly certified or
authenticated, of each of the following documents and will deliver to it all
future amendments and supplements thereto, if any:
a. The Company's Agreement and Declaration of Trust dated as of March 17,
1994 (the "Declaration of Trust");
b. The Company's By-Laws;
c. Resolutions of the Company's Board of Trustees authorizing the execution
and delivery of this Agreement;
d. The Company's most recent amendment to its Registration Statement under
the Securities Act of 1933, as amended (the "1933 Act"), and the 1940 Act on
Form N-1A as filed with the Securities and Exchange Commission (the
"Commission") relating to the Fund (the Registration Statement, as presently
in effect and as, from time to time, amended or supplemented is herein called
the "Registration Statement");
e. The Company's most recent Prospectus and Statement of Additional
Information and all amendments and supplements thereto (such Prospectus and
Statement of Additional Information and supplements thereto, as presently in
effect and as from time to time amended and supplemented, are herein called the
"Prospectuses");
f. Minutes of the meetings of the Company's Board of Trustees since the
Company's inception;
g. Copies of all non-routine correspondence between the Commission or its
staff and the Company or its agents or representatives; and
h. Copies of all correspondence from PFPC Inc. to the officers of the
Company disclosing actual or potential blue sky violations and information
regarding any other actual or potential blue sky violations which have come to
the attention of the Company.
3. SERVICES AND DUTIES OF THE DISTRIBUTOR.
--------------------------------------
The Distributor enters into the following covenants with respect to its
services and duties:
a. The Distributor agrees to sell, as agent, from time to time during the
term of this Agreement, shares of the Fund upon the terms and at the current
offering price as described in the Prospectuses. The Distributor will act only
in its own behalf as principal in entering into agreements with selected
dealers. No broker-dealer or other person which enters into a selling or
servicing agreement with the Distributor shall be authorized to act as agent for
the Company or the Fund in connection with the offering or sale of shares of the
Fund to the public or otherwise. The Distributor shall use reasonable efforts
to sell shares of the Fund but shall not be obligated to sell any certain number
of shares.
b. The Distributor shall prepare and, after review by the Company, file
with the federal and state agencies or other organization as required by
federal, state, or other applicable securities laws and regulations, all sales
literature (advertisements, brochures and shareholder communications) for the
Fund. The Company will not permit the use of any sales literature unless (i) it
has been so reviewed and filed, and (ii) its final version has been approved by
the Distributor.
c. In performing all of its services and duties as the Distributor, the
Distributor will act in conformity with the Declaration of Trust, By-Laws,
Prospectuses and resolutions and other instructions of the Company's Board of
Trustees and will comply with the requirements of the 1933 Act, the Securities
Exchange Act of 1934 (the "1934 Act"), the 1940 Act and all other applicable
federal or state laws.
d. The Distributor shall provide such written reports, describing its
expenditures with respect to its services and duties and the purposes for which
such expenditures were made, as the Company may reasonably request.
4. DUTIES AND REPRESENTATIONS OF THE COMPANY.
-----------------------------------------
The Company enters into the following covenants and makes the following
representations:
a. The Company represents that it is registered as an open-end management
investment company under the 1940 Act and that it has and will continue to act
in conformity with the Declaration of Trust, By-Laws, Prospectuses and
resolutions and other instructions of its Board of Trustees and has and will
continue to comply with all applicable laws, rules and regulations including
without limitation the 1933 Act, the 1934 Act, the 1940 Act, the laws of the
states in which shares of the Fund are offered and sold, and the rules and
regulations thereunder;
b. The Company shall take all necessary action to maintain the registration
of the shares of the Fund under the 1933 Act for sale as herein contemplated and
shall pay all costs and expenses in connection with the registration of shares
under the 1933 Act, and be responsible for all expenses in connection with
maintaining facilities for the issue and transfer of shares and for supplying
information, prices and other data to be furnished by the Company;
c. The Company shall qualify and maintain the qualification of an
appropriate number of shares of the Fund and otherwise take all actions which
may be reasonably necessary in the discretion of the Company's officers in
connection with the qualification of the shares of the Fund for sale in such
states as the Distributor and the Company may approve, and the Company shall pay
all expenses which may be incurred in connection with such qualification. The
Distributor shall pay all expenses connected with its own qualification as a
broker under State or Federal laws;
d. The Company represents and warrants to the Distributor that the
Registration Statement contains, and that the Prospectuses at all times will
contain, all statements required by the 1933 Act, the 1940 Act and the rules and
regulations of the Commission, and are in conformity with and will in all
material respects conform to the applicable requirements of the 1933 Act, the
1940 Act and the rules and regulations of the Commission, and will not include
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that no representation or warranty in this Section 4 shall apply to statements
made in reliance upon and in conformity with written information furnished to
the Company by or on behalf of the Distributor specifically for inclusion in the
Registration Statement or Prospectuses.
e. The Company agrees to file from time to time such amendments,
supplements, reports and other documents as may be necessary in order to comply
with the 1933 Act, the 1940 Act and applicable state securities laws and in
order that there may be no untrue statement of a material fact in the
Registration Statement or Prospectuses, or necessary in order that there may be
no omission to state a material fact in the Registration Statement or
Prospectuses which omission would make the statements therein misleading. If
the Company shall not propose an amendment or amendments and/or supplement or
supplements within fifteen days after receipt by the Company of a written
request from the Distributor to do so, the Distributor may, at its option,
terminate this Agreement. The Company shall give the Distributor notice and
copies within a reasonable period of time prior to the filing of any amendment
to the Registration Statement or supplement to the Prospectuses; provided,
however, that nothing contained in this Agreement shall in any way limit the
Company's right to file at any time such amendments to the Registration
Statement and/or supplements to the Prospectuses, of whatever character, as the
Company may deem advisable, such right being in all respects absolute and
unconditional;
f. The Company shall, at its expense, keep the Distributor fully informed
with regard to its affairs including, without limitation, all material
communications with the Commission or its staff and state securities regulators
by or on behalf of the Company, and in connection therewith shall furnish the
Distributor from time to time such information as the Distributor may reasonably
request, and the Company warrants that the statements contained in any such
information shall be true and correct. The Company shall also furnish the
Distributor with: (a) annual audited reports of the Company's books and
accounts with respect to the Fund, made by independent public accountants
regularly retained by the Company; (b) semi-annual reports with respect to the
Fund prepared by or on behalf of the Company; (c) materials submitted to the
Company's Board of Trustees and minutes of meetings of the Company's Board of
Trustees; and (d) copies of any correspondence between the Commission or its
staff and the Company or its agents or representatives.
g. The Company shall cause the Company's other service providers to provide
such information and reports as the Distributor may reasonably request
including, without limitation, certifications and supporting documentation
regarding compliance with applicable federal and state laws, rules and
regulations;
h. In addition to the information and reports provided in Section (2) above
and without limiting the reports that may be requested under paragraph 4(g)
above, the Company shall (1) cause the Company's other service providers to
provide (i) promptly after the end of each month a report created by the Price
Waterhouse Blue II blue sky computer system known as the "Registration Period
Sales Report" (the "PW Report") or a report providing substantially the same
information as the PW Report, together with current exemption codes being used,
(ii) copies of all non-routine correspondence from or to state securities
regulators and (2) promptly inform Sunstone of each instance of non-compliance
with applicable blue sky laws which comes to the attention of the Company.
i. The Company shall have the right to suspend the sale of shares at any
time in response to conditions in the securities markets or otherwise, and to
suspend the redemption of shares of the Fund at any time permitted by the 1940
Act or the rules and regulations of the Commission, and the Company shall advise
the Distributor promptly of any such suspension;
j. The Company reserves the right to reject any order for shares but will
not do so arbitrarily or without reasonable cause; and
k. The Company agrees to advise the Distributor promptly in writing:
(i) of any request by the Commission for amendments to the
Registration Statement or Prospectuses;
(ii) in the event of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or Prospectuses then
in effect or the initiation of any proceeding for that purpose; and
(iii) of the happening of any event which makes untrue any statement of
a material fact made in the Registration Statement or Prospectuses or which
requires the making of a change in such Registration Statement or Prospectuses
in order to make the statements therein not misleading.
5. EXPENSES.
--------
a. The Distributor will bear all expenses incurred by it or its employees
in performing its duties hereunder, subject to the terms of Section 6(b).
b. The Fund will bear all expenses not specifically borne by the
Distributor hereunder including without limitation responsibility for the
following:
(i) legal, accounting and auditing expenses, including legal fees of
special counsel at any time retained for those members of the Board who are not
interested persons of the Fund and expenses relating to the use of consulting
services by the Fund provided that the use of such services is approved by the
Fund's trustees;
(ii) charges of custodians, transfer agents, administrators, fund
accountants and other agents;
(iii) costs of preparing share certificates;
(iv) expenses of setting in type and printing prospectuses, statements
of additional information and supplements thereto, shareholder reports and proxy
materials;
(v) costs of mailing prospectuses, statements of additional
information and supplements thereto to all shareholders as well as shareholder
reports and proxy material;
(vi) any extraordinary expenses (including fees and disbursements of
counsel) incurred by the Fund;
(vii) fees, voluntary assessments and other expenses incurred in
connection with membership in investment company organizations;
(viii) costs of mailing and tabulating proxies and costs of shareholders
and directors meetings; and
(ix) except as expressly agreed to by the Distributor, preparing,
printing and distributing any literature, advertisement or material which is
primarily intended to result in the sale of shares.
6. COMPENSATION.
------------
a. For the services provided pursuant to this Agreement, and subject to the
limitations contained in subsection 5(c) below, the Fund will pay to the
Distributor a fee, payable monthly in arrears, at the annual rate of 0.10% per
annum of the Fund's average daily net assets; provided, however, that such
compensation shall be subject to a minimum monthly fee of $7,083.
b. In addition to the compensation payable pursuant to subsection 6(a)
above, the Fund will reimburse the Distributor or pay directly, at the
Distributor's discretion, the Distributor's (i) out-of-pocket expenses
including, without limitation, typesetting, printing and distribution of
prospectuses and shareholder reports, production, printing and distribution of
sales materials and forms, placement of media advertising, engagement of
designers, free lance writers and public relations firms, long distance
telephone lines, services and charges, postage, overnight delivery charges,
storage of inventory, regulatory filing fees and travel, lodging and meals and
(ii) amounts paid by Distributor to dealers or other persons entering into a
selling or servicing agreement with Distributor.
c. Subject to and calculated in accordance with the Rules of Fair Practice
of the National Association of Securities Dealers, Inc., if during any annual
period the total of
(i) the compensation payable under paragraphs (a) and (b) of
this Section 6 to the Distributor when added to
(ii) any amount paid by the Fund, which payment was primarily
intended to result in the sale of shares pursuant to the
Fund's distribution plan adopted under Rule 12b-1 of the
1940 Act and which was approved by the Distributor,
exceeds .25% of the Fund's average daily net assets, the Distributor will rebate
that portion of its fee necessary to result in the total of (i) and (ii) above
not exceeding .25% of the Fund's average daily net assets.
7. LIMITATIONS OF LIABILITY.
------------------------
The Distributor shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Company in connection with the matters to
which this Agreement relates, except a loss resulting from willful misfeasance,
bad faith or gross negligence on its part in the performance of its duties or
from reckless disregard by it of its obligations and duties under this
Agreement.
8. PROPRIETARY AND CONFIDENTIAL INFORMATION.
----------------------------------------
The Distributor agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of the Company all records and
other information relative to the Company and prior, present or potential
shareholders, and not to use such records and information for any purpose other
than performance of its responsibilities and duties hereunder, except after
prior notification to and approval in writing by the Company, which approval
shall not be unreasonably withheld and may not be withheld where the Distributor
may be exposed to civil or criminal contempt proceedings for failure to comply,
when requested to divulge such information by duly constituted authorities, or
when so requested by the Company.
9. INDEMNIFICATION.
---------------
a. The Company on behalf of the Fund agrees that the Fund will indemnify,
defend and hold harmless the Distributor, and each of its present or former
directors, officers, employees or representatives and any person who controls or
previously controlled the Distributor within the meaning of Section 15 of the
1933 Act, from and against any and all losses, claims, demands, liabilities,
damages and expenses (including the costs of investigating, defending or
preparing to defend any alleged losses, claims, demands, liabilities, damages or
expenses and any legal or other expenses incurred in connection therewith) which
Distributor, each of its present and former directors, officers, employees or
representatives or any such controlling person, may incur or become subject
under the 1933 Act, the 1934 Act, any other statute (including Blue Sky laws) or
any rule or regulation thereunder, or under common law or otherwise, arising out
of or based upon any untrue statement, or alleged untrue statement, of a
material fact contained in the Registration Statement, the Prospectuses, any
annual or interim report to shareholders, any application or other document
executed by or on behalf of the Company with respect to the Fund, or are based
upon information furnished by or on behalf of the Company with respect to such
Fund filed in any state or jurisdiction in order to qualify the shares under the
securities or blue sky laws thereof ("Blue Sky application"), or arising out
of or based upon any omission, or alleged omission, to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading; provided, however, that the Company's obligation to indemnify
Distributor and any of the foregoing indemnitees, shall not be deemed to cover
any losses, claims, demands, liabilities, damages or expenses arising out of any
untrue statement or alleged untrue statement or omission or alleged omission
made in the Registration Statement, the Prospectuses, annual or interim report
or Blue Sky application with respect to the Fund in reliance upon and in
conformity with written information furnished to the Company or its counsel by
the Distributor specifically for inclusion therein; and provided further that
this indemnity agreement shall not inure to the benefit of any person unless a
court of competent jurisdiction shall determine in a final decision on the
merits, that the person to be indemnified was not liable by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by reason of its reckless disregard of its obligations under this Agreement
("disabling conduct"), or, in the absence of such a decision and without
limiting the Distributor's ability subsequently to seek a final decision on the
merits by a court of competent jurisdiction as to whether the person to be
indemnified was not liable by reason of disabling conduct, a reasonable
determination, based upon a review of the facts, that the indemnified person was
not liable by reason of disabling conduct, by (a) a vote of a majority of a
quorum of directors who are neither "interested persons" of the Fund as
defined in Section 2(a)(19) of the Investment Company Act nor parties to the
proceeding, or (b) an independent legal counsel in a written opinion.
Notwithstanding anything herein to the contrary, any indemnity under this
Section 9 shall be paid only out of the assets of the Fund.
b. The Distributor will indemnify, defend and hold harmless the Company and
the Fund, and each of its present or former trustees, officers, employees or
representatives and any person who controls the Company within the meaning of
Section 15 of the 1933 Act, from and against any and all losses, claims,
demands, liabilities, damages or expenses (including the costs of investigating,
defending or preparing to defend any alleged losses, claims, demands,
liabilities, damages or expenses and any legal or other expenses incurred in
connection therewith), to which any of them may become subject under the 1933
Act, the 1934 Act, any other statute (including Blue Sky laws) or any rule or
regulation thereunder, or under common law or otherwise, arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, the Prospectuses, any annual or interim
report to shareholders or any Blue Sky application, or arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
which statement or omissions was made in reliance upon and in conformity with
written information furnished to the Company or its counsel by the Distributor
specifically for inclusion therein.
10. DURATION AND TERMINATION.
------------------------
This Agreement shall become effective upon its execution as of the date
first written above and, unless sooner terminated as provided herein, shall
continue until the second anniversary thereof. Thereafter, if not terminated,
this Agreement shall continue automatically for successive terms of one year,
provided that such continuance is specifically approved at least annually (a) by
a vote of a majority of those members of the Company's Board of Trustees who are
not parties to this Agreement or "interested persons" of any such party, cast
in person at a meeting called for the purpose of voting on such approval, and
(b) by the Company's Board of Trustees or by vote of a "majority of the
outstanding voting securities" of the Company; PROVIDED, HOWEVER, that this
Agreement may be terminated, at any time, without the payment of any penalty,
upon 60 days' written notice, by the Company by vote of a majority of the
members of the Board of Trustees who are not interested persons of the Company
and have no direct or indirect financial interest in the operation of the
Company's distribution plan or in any agreement related to such plan, by a vote
of a "majority of the outstanding voting securities" of the Company, or by the
Distributor. This Agreement will automatically and immediately terminate in the
event of its "assignment." (As used in this Agreement, the terms "majority
of the outstanding voting securities," "interested persons" and "assignment"
shall have the same meanings as such terms have in the 1940 Act.)
11. AMENDMENT OF THIS AGREEMENT.
---------------------------
No provisions of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which an enforcement of the change, waiver, discharge or termination is
sought.
12. NOTICES.
-------
Notices of any kind to be given to the Company hereunder by the Distributor
shall be in writing and shall be duly given if mailed or delivered to the
Company c/o Haven Capital Management, Inc., 655 Third Avenue, New York, New
York, 10017, Attention: Colin C. Ferenbach, with a copy to Debevoise &
Plimpton, 555 13th Street, N.W., Washington, D.C., 20004, Attention: Marcia L.
MacHarg, or at such other address or to such individual as shall be so specified
by the Company to the Distributor.
Notices of any kind to be given to the Distributor hereunder by the Company
shall be in writing and shall be duly given if mailed or delivered to Sunstone
Distribution Services, LLC, 207 East Buffalo Street, Suite 400, Milwaukee,
Wisconsin, 53202, Attention: Miriam M. Allison or at such other address or to
such other individual as shall be so specified by the Distributor to the
Company.
13. GOVERNING LAW.
-------------
This Agreement shall be construed in accordance with the laws of the State
of New York and the applicable provisions of the Investment Company Act. To the
extent the applicable laws of the State of New York, or any provisions herein,
conflict with the applicable provisions of the 1940 Act, the latter shall
control.
14. MISCELLANEOUS.
-------------
a. The services of the Distributor rendered to the Fund are not deemed to
be exclusive. The Distributor may render such services and any other services
to others, including other investment companies. The Company recognizes that
from time to time directors, officers, and employees of the Distributor may
serve as directors, trustees, officers and employees of other corporations or
trusts (including other investment companies), that such other entities may
include the name of the Distributor as part of their name and that the
Distributor or its affiliates may enter into distribution, administration, fund
accounting or other agreements with other corporations or trusts.
b. The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors.
c. The names "The Haven Capital Management Trust" and "Trustees of The
Haven Capital Management Trust" refer specifically to the trust created and the
Trustees, as trustees but not individually or personally, acting from time to
time under the Declaration of Trust, which is hereby referred to and a copy of
which is on file at the principal office of the Company. The obligations of the
Company and the Fund under this Agreement are not binding upon any of the
trustees, shareholders, officers, employees or agents of the Company
individually but are binding only upon the assets and property of the Fund (as
such assets and property are delineated by the Declaration of Trust).
15. COUNTERPARTS.
------------
This Agreement may be executed in counterparts, all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
THE HAVEN CAPITAL MANAGEMENT TRUST
By:
-----------------------------
Colin C. Ferenbach
President
SUNSTONE DISTRIBUTION SERVICES, LLC
By:
-----------------------------
Miriam M. Allison
President
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Post-Effective Amendment
No. 7 under the Securities Act of 1933, as amended, to this Registration
Statement on Form N-1A (File No. 33-76670) of our report dated December 3, 1996
on our audit of the financial statements and financial highlights of The Haven
Capital Management Trust comprised of The Haven Fund. We also consent to 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.
/s/ Coopers & Lybrand L.L.P.
- ----------------------------
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 6, 1997
EXHIBIT 14
IRA
DISCLOSURE STATEMENT AND
CUSTODIAL ACCOUNT AGREEMENT
THE HAVEN FUND
INDIVIDUAL RETIREMENT ACCOUNT
DISCLOSURE STATEMENT
- -----------------------------
The following information is the Disclosure Statement required by federal tax
regulations. You should read this Disclosure Statement, the Custodial Account
Agreement, and the prospectus for The Haven Fund in which your Individual
Retirement Account (IRA) contributions will be invested.
REVOCATION OF YOUR INDIVIDUAL RETIREMENT ACCOUNT
You have the right to revoke your Haven Fund IRA and receive the entire amount
of your contribution by notifying PNC Bank, National Association, the Custodian
of your Haven Fund IRA, in writing within seven (7) days of establishment of
your IRA. If you revoke your IRA within seven days, you are entitled to a return
of the entire amount paid by you, without adjustment for such items as sales
commission, administrative expenses, or fluctuations in market value. If you
decide to revoke your IRA, notice should be delivered or mailed to:
FIRST CLASS MAIL:
PNC Bank, National Association
c/o PFPC Inc.
Attn: Haven Fund IRA
P.O. Box 8903
Wilmington, DE 19899-8903
OVERNIGHT EXPRESS:
PNC Bank, National Association
c/o PFPC Inc.
Attn: Haven Fund IRA
400 Bellevue Parkway, Suite 108
Wilmington, DE 19809-3710
1-800-850-7163
This notice should be signed by you and include the
following:
1. the date;
2. a statement that you elect to revoke your Haven Fund IRA;
3. your Haven Fund IRA account number;
4. the date your Haven Fund IRA was established; and
5. your signature and your printed or typed name.
Mailed notice will be deemed given on the date that it is postmarked, if it is
deposited in the United States mail, first class postage prepaid and properly
addressed. This means that if you mail your notice it must be postmarked on or
before the seventh day after your Haven Fund IRA was opened. A revoked IRA will
be reported to the Internal Revenue Service and the Depositor on Forms 1099-R
and 5498.
YOUR INDIVIDUAL RETIREMENT ACCOUNT (IRA)
You have opened a Haven Fund Individual Retirement Account which is an account
for the exclusive benefit of you and your beneficiaries, created by a written
instrument (the Custodial Account Agreement). The following requirements apply
to your Haven Fund IRA:
1. contributions, transfers, and rollovers may be made only in "cash" by
check, draft, wire transfer, or other form acceptable to the Custodian;
2. the Custodian must be a bank;
3. no part may be invested in life insurance;
4. your interest must be nonforfeitable (not subject to escheat laws);
5. the assets of the custodial account may not be mixed with other property
except in a common investment fund; and
6. you must begin receiving distributions from your account no later than April
1 of the year following the year in which you become 70 1/2 years old; and
distribution must be completed over a period that is not longer than the
joint life expectancy of you and your beneficiary(ies).
CONTRIBUTIONS
You may not contribute more than 100% of your compensation or earnings from
self-employment, and the maximum contribution is $2,000 per tax year. If your
spouse is not employed or earns less than you earn, you may also contribute to a
Spousal IRA. The maximum contribution to the Spousal IRA is the lesser of (a)
$2,000, or (b) the combined compensation of both spouses, minus the dollar
amount of the IRA contribution made by the compensated (or more highly
compensated) spouse.
EXCESS CONTRIBUTIONS
Amounts contributed to your Haven Fund IRA in excess of the allowable limit will
be subject to a nondeductible excise tax of 6% for each year until the excess is
used up as an allowable contribution (in a subsequent year) or returned to you.
A distribution of excess contributions must be included in your taxable income
when distributed, and may also be subject to the 10% excise tax on early
distributions discussed below. The 6% excise tax will not apply if the excess
contribution and earnings applicable to it are distributed by the due date for
your federal income tax return, including extensions. If such a distribution is
made by the due date of your tax return, only the earnings are taxable.
INCOME TAX DEDUCTION
Your contribution may be deductible on your federal income tax return. However,
there is a phase-out of the IRA deduction if either you or your spouse (if you
file a joint return) is an active participant in an employer-sponsored
retirement plan. The IRA deduction is reduced proportionately as adjusted gross
income increases from $25,000 to $35,000 for a single individual, $40,000 to
$50,000 for a married couple filing a joint return, or from $0 to $10,000 for a
married individual who is an active participant and files a separate return. The
amount of the reduction is equal to 20% of the amount by which your adjusted
gross income exceeds the $25,000, $40,000, and $0 amounts, respectively. Your
contributions in excess of the permitted deduction will be nondeductible
contributions.
TAXATION OF DISTRIBUTIONS
The income of your Haven Fund IRA is not taxed until the money is distributed to
you. Distributions are taxable as ordinary income when received except that the
amount of any distribution representing nondeductible contributions is not
taxed.
In general, you may "roll over" a distribution from another IRA, an eligible
rollover distribution from your employer's qualified plan, or distributions from
certain tax-deferred annuities or accounts. If a distribution is rolled over,
i.e., deposited to your Haven Fund IRA within 60 calendar days of receipt, the
amount rolled over is not taxable. The IRS enforces the 60-day time limit
strictly. You may roll over a portion of a distribution, in which case the
remainder will be subject to tax. The IRS requires that distributions from your
employer's qualified plan have 20% of the distribution withheld for income tax
unless your money is transferred in a direct asset transfer to an eligible
retirement plan such as another qualified plan or IRA. The rules regarding
rollovers are complex, and you should consult your tax adviser prior to rolling
over all or part of a distribution.
Distributions under $10 will not be reported to you on IRS Form 1099-R after
December 31, 1996, as allowed under IRS regulations. However, you must still
report these distributions to the IRS on IRS Form 1040 as well as other forms
which may be required to properly file your tax return.
PENALTY TAX ON CERTAIN TRANSACTIONS
EXCESS CONTRIBUTIONS. If you make an excess contribution to your IRA and it is
not corrected on a timely basis, an excise tax of 6% is imposed on the excess
amount. This tax will apply each year to any part or all of the excess which
remains in your account.
EARLY DISTRIBUTIONS. Your receipt or use of any portion of your account before
you attain age 59 1/2 is considered an early distribution unless the
distribution is a result of death or disability or is rolled over, or if it is
used specifically for deductible medical expenses which exceed 7.5% of your
adjusted gross income, or if it is used for health insurance cost due to your
unemployment (consult IRS Publication 590 for specifics on these exceptions).
The amount of any early taxable distribution (excluding any amount representing
a return of nondeductible contributions) is subject to a penalty tax equal to
10% of the distribution. A pre-age 59 1/2 taxable distribution will be exempt
from the 10% penalty tax if it is part of a scheduled series of substantially
equal payments over your life, or over the joint life expectancy of you and a
beneficiary, or if it was made because you became disabled. If you request a
distribution in the form of a series of substantially equal payments, and you
modify the payments before 5 years have elapsed and before attaining age 59 1/2,
the 10% additional income tax will apply retroactively to the year payments
began through the year of such modification. This 10% penalty is in addition to
any federal income tax that is owed at distribution.
REQUIRED DISTRIBUTIONS. You are required to begin receiving minimum
distributions from your IRA no later than April 1 following the calendar year in
which you reach the age of 70 1/2. The distribution may be paid either in
installments, or in a lump sum. The installments may be paid over your life, or
over the joint and last survivor life expectancy of you and your designated
beneficiary. If the amount distributed during a taxable year is less than the
minimum amount required to be distributed, the recipient is subject to a penalty
tax equal to 50% of the difference between the amount distributed and the amount
required to be distributed.
EXCESS DISTRIBUTIONS. If you receive more than the greater of $112,500 (subject
to annual cost-of-living adjustments) or $150,000 in a calendar year from
certain retirement plans, a 15% tax is imposed on the amount in excess of that
amount. (Special rules may apply to benefits accumulated prior to August 1,
1986.) All distributions from IRAs, qualified retirement plans, and tax-
sheltered annuities must be added together for purposes of this excise tax.
There are several possible favorable elections that may reduce or eliminate this
tax. The rules are very complicated. You should consult a competent tax adviser.
THE 15% EXCESS DISTRIBUTION TAX HAS BEEN SUSPENDED FOR DISTRIBUTIONS RECEIVED IN
1997, 1998, AND 1999.
ADDITIONAL INFORMATION ON DISTRIBUTIONS
An IRA distribution request form is available from the Custodian, and should be
obtained and used to request any distribution from your IRA.
PROHIBITED TRANSACTIONS
If you or your beneficiary(ies) engage in any prohibited transaction (such as
any sale, exchange, borrowing, or leasing of any property between you and the
account; or any other interference with the independent status of the account),
the account will lose its exemption from tax and be treated as having been
distributed to you. The value of the entire account will be includable in your
gross income. If you are under age 59 1/2, you would also be subject to the 10%
penalty tax on early distributions.
If you or your beneficiary(ies) use (pledge) all or any part of your IRA as
security for a loan, then the portion so pledged will be treated as if
distributed to you, and will be taxable to you as ordinary income, and subject
to a 10% penalty tax if you have not attained age 59 1/2 during the year in
which you make such a pledge.
INCOME TAX WITHHOLDING
The Custodian is required to withhold income tax from any distribution from your
IRA to you at the rate of 10% unless you choose not to have tax withheld. You
may elect out of withholding by advising the Custodian in writing, prior to the
distribution, that you do not want tax withheld from the distribution. This
election may be made on IRS Form W-4P, or any other form acceptable to the
Custodian. If you do not elect out of tax withholding, you may direct the
Custodian to withhold an additional amount of tax in excess of 10%.
ADDITIONAL INFORMATION
For more detailed information, you may obtain Publication 590, Individual
Retirement Arrangements (IRAs) from any district office of the Internal Revenue
Service or by calling 1-800-TAX-FORM.
Any IRA transaction may have tax consequences; consult your tax adviser to
obtain information about the tax consequences in connection with your particular
circumstances.
INFORMATION ABOUT YOUR INVESTMENTS
A mutual fund investment involves investment risks, including possible loss of
principal. In addition, growth in the value of your account is neither
guaranteed nor protected due to the characteristics of a mutual fund investment.
Detailed information about The Haven Fund must be furnished to you in the form
of a prospectus. The method for computing and allocating annual earnings
is set forth in the prospectus. (See the prospectus, "Dividends and
Distributions.") If you made an initial contribution of $1,000 on the first day
of a calendar year and no further investment during that year, your contribution
would also be subject to certain costs and expenses which would reduce any yield
you might obtain from your investment. (See the prospectus, "Shareholder and
Fund Expenses.") For further information regarding expenses, earnings, and
distributions, see the Fund's financial statements, prospectus and/or Statement
of Additional Information.
FEES AND CHARGES
The charges in connection with your Haven Fund IRA are set forth in the IRA
Application. The Custodian may also charge a service fee in connection with any
distribution from your IRA.
IRS APPROVED FORM
Your Haven Fund IRA is the Internal Revenue Service's model custodial account
contained in IRS Form 5305-A. Certain additions have been added in Article VIII
of the form. By following this form, your Haven Fund IRA meets the requirements
of the Internal Revenue Code. However, the IRS has not endorsed the merits of
the investments allowed under the IRA. Form 5305-A may also be used by
qualifying employers in conjunction with Form 5305-SEP to establish a Simplified
Employee Pension plan (SEP) on behalf of employees. If your IRA is part of a
SEP, details regarding SEPs should also be provided by your employer.
CUSTODIAL ACCOUNT AGREEMENT
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(UNDER SECTION 408(A) OF THE INTERNAL REVENUE CODE - FORM 5305-A (REVISED
OCTOBER 1992))
The Depositor (Contributor) whose name appears in the accompanying Application
is establishing an Individual Retirement Account (IRA) (under Section 408(a) of
the Internal Revenue Code of 1986, as amended, the "Code") to provide for his
or her retirement and for the support of his or her beneficiary(ies) after
death. The Custodian, PNC Bank, National Association, has given the Depositor
the Disclosure Statement required under Treasury Regulations section 1.408-6.
The Depositor and the Custodian make the following agreement:
ARTICLE I
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a simplified
employee pension plan as described in section 408(k). Rollover contributions
before January 1, 1993, include rollovers described in section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an employer
contribution to a simplified employee pension plan as described in section
408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III
1. No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the custodial account be commingled with other property
except in a common trust fund or common investment fund (within the meaning of
section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within the
meaning of section 408(m)) except as otherwise permitted by section 408(m)(3)
which provides an exception for certain gold and silver coins and coins issued
under the laws of any state.
ARTICLE IV
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be made
in accordance with the following requirements and shall otherwise comply with
section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section 1.401(a)(9)-
2, the provisions of which are incorporated by reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Depositor under paragraph 3, or to the surviving spouse under paragraph 4,
other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the Depositor
and the surviving spouse and shall apply to all subsequent years. The life
expectancy of a nonspouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the custodial account must be, or begin
to be, distributed by the Depositor's required beginning date (April 1 following
the calendar year end in which the Depositor reaches age 70 1/2). By that date,
the Depositor may elect, in a manner acceptable to the Custodian, to have the
balance in the custodial account distributed in:
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of the
Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period that
may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period that
may not be longer than the joint life and last survivor expectancy of the
Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her interest has
begun, distribution must continue to be made in accordance with paragraph 3.
(b) If the Depositor dies before distribution of his or her interest has begun,
the entire remaining interest will, at the election of the Depositor or, if the
Depositor has not so elected, at the election of the beneficiary or
beneficiaries, either
(i) Be distributed by the December 31 of the year containing the fifth
anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the life or
life expectancy of the designated beneficiary or beneficiaries starting by
December 31 of the year following the year of the Depositor's death. If,
however, the beneficiary is the Depositor's surviving spouse, then this
distribution is not required to begin before December 31 of the year in which
the Depositor would have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the requirements
of section 408(b)(3) and its related regulations has irrevocably commenced,
distributions are treated as having begun on the Depositor's required beginning
date, even though payments may actually have been made before that date.
(d) If the Depositor dies before his or her entire interest has been distributed
and if the beneficiary is other than the surviving spouse, no additional cash
contributions or rollover contributions may be accepted in the account.
5. In the case of a distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each year,
divide the Depositor's entire interest in the Custodial account as of the close
of business on December 31 of the preceding year by the life expectancy of the
Depositor (or the joint life and last survivor expectancy of the Depositor and
the Depositor's designated beneficiary, or the life expectancy of the designated
beneficiary, whichever applies). In the case of distributions under paragraph 3,
determine the initial life expectancy (or joint life and last survivor
expectancy) using the attained ages of the Depositor and designated beneficiary
as of their birthdays in the year the Depositor reaches age 70 1/2. In the case
of a distribution in accordance with paragraph 4(b)(ii), determine life
expectancy using the attained age of the designated beneficiary as of the
beneficiary's birthday in the year distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy
the minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
ARTICLE V
1. The Depositor agrees to provide the Custodian with information necessary for
the Custodian to prepare any reports required under section 408(i) and
Regulations section 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) and the related
regulations will be invalid.
ARTICLE VII
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the Depositor and the Custodian.
ARTICLE VIII
1. All funds in the custodial account (including earnings) shall be invested in
shares of beneficial interest of The Haven Fund ("Fund Shares"). Fund Shares
shall be purchased at the public offering value for Fund Shares next to be
determined after receipt of the contribution by the Custodian or its agent.
2. The shareholder of record of all Fund Shares shall be the Custodian or its
nominee.
3. The Depositor shall, from time to time, direct the Custodian to invest the
funds of his/her custodian account in Fund Shares. Any funds which are not
directed as to investment will be returned to the Depositor without being deemed
to have been contributed to his/her custodial account. The Depositor shall be
the beneficial owner of all Fund Shares held in the custodial account, and the
Custodian shall not vote any such shares except upon written direction of the
Depositor.
4. The Custodian agrees to forward, or to cause to be forwarded, to every
Depositor the then-current prospectus of the Fund, which has been designated by
the Custodian as eligible for investment under the custodial account and
selected by the Depositor for such investment, and all notices, proxies and
related proxy soliciting materials applicable to said Fund Shares received by
it.
5. Each Depositor shall have the right by written notice to the Custodian to
designate or to change a beneficiary to receive any benefit to which such
Depositor may be entitled in the event of his/her death prior to the complete
distribution of such benefit. If no such designation is in effect on the
Depositor's death, or if the designated beneficiary has predeceased the
Depositor, the beneficiary shall be the Depositor's estate.
6. (a) The Custodian shall have the right to receive rollover contributions as
described in Article I of this Agreement. The Custodian reserves the right to
refuse to accept any property which is not in the form of cash.
6. (b) The Custodian, upon written direction of the Depositor and after
submission to the Custodian of such documents as it may reasonably require,
shall transfer the assets held under this Agreement (reduced by (i) any amounts
referred to in paragraph 8 of this Article VIII and (ii) any amounts required to
be distributed during the calendar year of transfer) to a qualified retirement
plan, to a successor individual retirement account, to an individual retirement
annuity for the Depositor's benefit, or directly to the Depositor. Any amounts
received or transferred by the Custodian under this paragraph 6 shall be
accompanied by such records and other documents as the Custodian deems necessary
to establish the nature, value and extent of the assets and of the various
interests therein.
7. Without in any way limiting the foregoing, the Depositor hereby irrevocably
delegates to the Custodian the right and power to amend at any time and from
time to time the terms and provisions of this Agreement and hereby consents to
such amendments, provided they shall comply with all applicable provisions of
the Code, the Treasury regulations thereunder and with any other governmental
law, regulation or ruling. Any such amendments shall be effective when the
notice of such amendments is mailed to the address of the Depositor indicated by
the Custodian's records.
8. Any income taxes or other taxes of any kind whatsoever levied or assessed
upon or in respect of the assets of the custodial account or the income arising
therefrom, any transfer taxes incurred, all other administrative expenses
incurred, all other administrative expenses incurred by the Custodian in the
performance of its duties including fees for legal services rendered to the
Custodian, and the Custodian's compensation may be paid by the Depositor and,
unless so paid within such time period as the Custodian may establish, shall be
paid from the Depositor's custodial account. The Custodian reserves
the right to change or adjust its compensation upon 30 days advance notice to
the Depositor.
9. The benefits provided hereunder shall not be subject to alienation,
assignment, garnishment, attachment, execution or levy of any kind, and any
attempt to cause such benefits to be so subjected shall not be recognized,
except to such extent as may be required by law.
10. The Custodian may rely upon any statement by the Depositor when taking any
action or determining any fact or question which may arise under this custodial
agreement. The Depositor hereby agrees that the Custodian will not be liable for
any loss or expense resulting from any action taken or determination made in
reliance on such statement. The Depositor assumes sole responsibility for
assuring that contributions to the custodial account satisfy the limits
specified in the appropriate provisions of the Code.
11. The Custodian may resign at any time upon 30 days written notice to the
Depositor and may be removed by the Depositor at any time upon 30 days written
notice to the Custodian. Upon the resignation or removal of the Custodian, a
successor Custodian shall be appointed within 30 days of such resignation notice
and in the absence of such appointment, the Custodian shall appoint a successor
unless the Agreement be sooner terminated. Any successor Custodian shall be a
bank (as defined in section 408(n) of the Code) or such other person found
qualified to act as a Custodian under an individual account plan by the
Secretary of the Treasury or his delegate. The appointment of a successor
Custodian shall be effective upon receipt by the Custodian of such successor's
written acceptance which shall be submitted to the Custodian and the Depositor.
Within 30 days of the effective date of a successor Custodian's appointment, the
Custodian shall transfer and deliver to the successor Custodian applicable
account records and assets of the custodial account (reduced by any unpaid
amounts referred to in paragraph 8 of this Article VIII). The successor
Custodian shall be subject to the provisions of this Agreement (or any successor
thereto) on the effective date of its appointment.
12. Notwithstanding any provision hereof to the contrary, for taxable years in
which contributions to the custodial account are to qualify as contributions to
a Spousal Individual Retirement Account, the provisions of this Paragraph (12)
of Article VIII shall apply. In addition to the Depositor's contribution as set
forth in Article I, the Depositor may also contribute to a Spousal Individual
Retirement Account if the Depositor's spouse is not employed or earns less than
the Depositor earns. A separate custodial account shall be established under
this Agreement in the name of the spouse, who shall thereafter be deemed to be
the Depositor with respect to such separate custodial account. The maximum
contribution to the Spousal Individual Retirement Account for a given tax year
shall not exceed the lesser of:
(i) $2,000; or
(ii) the combined compensation of both spouses, minus the dollar amount of the
IRA contribution made by the compensated (or more highly compensated) spouse.
13. The Custodian shall, from time to time, in accordance with instructions in
writing from the Depositor, make distributions out of the custodial account to
the Depositor in the manner and amounts as may be specified in such instructions
(reduced by any amounts referred to in Article VIII, paragraph 8). An IRA
distribution request form is available from the Custodian, and should be
obtained and used to request any distribution from your IRA. Notwithstanding the
provisions of Article IV above, the Custodian assumes (and shall have) no
responsibility to make any distribution to the Depositor (or the Depositor's
beneficiary if the Depositor is deceased) unless and until such written
instructions specify the occasion for such distribution and the elected manner
of distribution, except as set forth in the second part of this paragraph (13)
below, with respect to age 70 1/2 distributions. Prior to making any such
distribution from the custodial account, the Custodian shall be furnished with
any and all applications, certificates, tax waivers, signature guarantees, and
other documents (including proof of any legal representative's authority) deemed
necessary or advisable by the Custodian, but the Custodian shall not be liable
for complying with written instructions which appear on their face to be
genuine, or for refusing to comply if not satisfied such instructions are
genuine, and assumes no duty of further inquiry. Upon receipt of proper written
instructions as required above, the Custodian shall cause the assets of the
custodial account to be distributed in cash and/or in kind, as specified in such
written order.
The Depositor may select as a method of distribution under Article IV, paragraph
3, option (a), (d), or (e); but may not select option (b) or (c),
notwithstanding description of such in Article IV. If the Depositor requests age
70 1/2 distribution by timely written instruction but does not choose any of the
methods of distribution described above by the April 1st following the calendar
year in which he or she reaches age 70 1/2, distribution to the Depositor will
be made in accordance with Article IV, paragraph 3, option (d). If the Depositor
does not request age 70 1/2 distribution from the custodial account by timely
written instruction, or does not specify a method of calculating the amount of
the age 70 1/2 distribution which the Depositor will be taking from another
IRA(s), calculation of the current year Required Minimum Distribution amount
which cannot be transferred or rolled over to another IRA will be made in
accordance with Article IV, paragraph 3, option (d).
14. Distribution of the assets of the custodial account shall be made in
accordance with the provisions of Article IV as the Depositor (or the
Depositor's beneficiary if the Depositor is deceased) shall elect by written
instructions to the Custodian subject, however, to the provisions of sections
401(a)(9), 408(a)(6) and 403(b)(10) of the Code, the regulations promulgated
thereunder, and the following:
(i) The recalculation of life expectancy of the Depositor and/or the
Depositor's spouse may be made only at the written election of the Depositor.
The recalculation of life expectancy of the surviving spouse shall only be made
at the written election of the surviving spouse.
(ii) If the Depositor dies before his/her entire interest in the custodial
account has been distributed, and if the designated beneficiary of the Depositor
is the Depositor's surviving spouse, the spouse may treat the custodial account
as his/her own individual retirement arrangement. This election will be deemed
to have been made if the surviving spouse makes a regular IRA contribution to
the custodial account, makes a rollover to or from such custodial account, or
fails to receive a payment from the custodial account within the appropriate
time period applicable to the deceased Depositor under section 401(a)(9)(B) of
the Code.
(iii) With respect to distributions in calendar years beginning in or after
1989, if the Depositor's designated beneficiary is not his/her spouse, then
distributions to the Depositor and his/her beneficiary commencing with the
Depositor's required beginning date shall comply with the minimum distribution
incidental benefit requirement.
The provisions of this paragraph (14) of Article VIII shall prevail over the
provisions of Article IV to the extent the provisions of this paragraph (14) are
permissible under proposed and/or final regulations promulgated by the Internal
Revenue Service.
15. In the event any amounts remain in the custodial account after the death of
the Depositor, the rights of the Depositor hereunder shall thereafter be
exercised by his or her beneficiary.
16. The Custodian is authorized to hire agents (including any transfer agent for
Fund Shares) to perform certain duties hereunder.
17. This Agreement shall terminate coincident with the complete distribution of
the assets of the Depositor's account.
18. All notices to be given by the Custodian to the Depositor shall be deemed to
have been given when mailed to the address of the Depositor indicated by the
Custodian's records.
19. The Custodian shall not be responsible for any losses, penalties or other
consequences to the Depositor or any other person arising out of the making of,
or the failure to make, any contribution or withdrawal.
20. In addition to the reports required by paragraph (2) of Article V, the
Custodian shall periodically cause to be mailed to the Depositor in respect of
each such period an account of all transactions affecting the custodial account
during such period and a statement showing the custodial account as of the end
of such period. If, within 60 days after such mailing, the Depositor has not
given the Custodian written notice of any exception or objection thereto, the
periodic accounting shall be deemed to have been approved and, in such case or
upon the written approval of the Depositor, the Custodian shall be released,
relieved and discharged with respect to all matters and statements set forth in
such accounting as though the account had been settled by judgment or decree of
a court of competent jurisdiction.
21. In performing the duties conferred upon the Custodian by the Depositor
hereunder, the Custodian shall act as the agent of the Depositor. The parties do
not intend to confer any fiduciary duties on the Custodian and none shall be
implied. The Custodian shall not be liable (and does not assume any
responsibility) for the collection of contributions, the deductibility or the
propriety of any contribution under this Agreement, the selection of any Fund
Shares for this custodial account, or the purpose or propriety of any
distribution made in accordance with Article IV and Paragraphs 13, 14 or 15 of
Article VIII, which matters are the sole responsibility of the Depositor or the
Depositor's beneficiary, as the case may be.
22. The Custodian shall be responsible solely for the performance of those
duties expressly assigned to it in this Agreement and by operation of law. The
Custodian shall have no duty to account for deductible contributions separately
from nondeductible contributions, unless required to do so by applicable law. In
determining the taxable amount of a distribution, the Depositor shall rely only
on his or her federal tax records, and the Custodian shall withhold federal
income tax from any distribution from the custodial account as if the total
amount of the distribution is includable in the Depositor's income.
23. Except to the extent superseded by federal law, this Agreement shall be
governed by, and construed, administered and enforced according to, the laws of
the Commonwealth of Pennsylvania, and all contributions shall be deemed made in
Pennsylvania.
GENERAL INSTRUCTIONS
Section references are to the Internal Revenue Code unless otherwise noted.
PURPOSE OF FORM. Form 5305-A is a model custodial account agreement that meets
the requirements of section 408(a) and has been automatically approved by the
IRS. An individual retirement account (IRA) is established after the form is
fully executed by both the individual (Depositor) and the Custodian and must be
completed no later than the due date of the individual's income tax return for
the tax year (without regard to extensions). This account must be created in the
United States for the exclusive benefit of the Depositor or his or her
beneficiaries.
Individuals may rely on regulations for the Tax Reform Act of 1986 to the extent
specified in those regulations.
Do not file Form 5305-A with the IRS. Instead, keep it for your records.
For more information on IRAs, including the required disclosure you can get from
your Custodian, get Publication 590, Individual Retirement Arrangements (IRAs).
DEFINITIONS
CUSTODIAN. The Custodian must be a bank or savings and loan association, as
defined in section 408(n), or any person who has the approval of the IRS to act
as custodian.
DEPOSITOR. The Depositor is the person who establishes the custodial account.
IDENTIFYING NUMBER. The Depositor's social security number will serve as the
identification number of his or her IRA. An employer identification number is
required only for an IRA for which a return is to be filed to report unrelated
business taxable income. An employer identification number is required for a
common fund created for IRAs.
IRA FOR NONWORKING SPOUSE. Form 5305-A may be used to establish the IRA
custodial account for a nonworking spouse.
Contributions to an IRA custodial account for a nonworking spouse must be made
to a separate IRA custodial account established by the nonworking spouse.
SPECIFIC INSTRUCTIONS
ARTICLE IV. Distributions made under this article may be made in a single sum,
periodic payment, or a combination of both. The distribution option should be
reviewed in the year the Depositor reaches age 70 1/2 to ensure that the
requirements of section 408(a)(6) have been met.
ARTICLE VIII. Article VIII and any that follow it may incorporate additional
provisions that are agreed to by the Depositor and Custodian to complete the
agreement. They may include, for example, definitions, investment powers, voting
rights, exculpatory provisions, amendment and termination, removal of the
Custodian, Custodian's fees, state law requirements, beginning date of
distributions, accepting only cash, treatment of excess contributions,
prohibited transactions with the Depositor, etc. Use additional pages if
necessary and attach them to this form.
THE HAVEN FUND
P.O. BOX 8903
WILMINGTON, DE 19899-8903
FOR FUND INFORMATION,
PRICES AND LITERATURE, CALL
1-800-844-4836
FOR ACCOUNT BALANCES AND
OTHER INFORMATION ABOUT YOUR
HAVEN FUND ACCOUNT, CALL
1-800-850-7163
EXHIBIT 16
CUMULATIVE TOTAL RETURN (assuming NO SALES LOAD)
June 23, 1994 (Inception) through October 31, 1996
---------------
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 = $1,552.31
CUMULATIVE TOTAL RETURN = 55.23%
AVERAGE ANNUAL TOTAL RETURNS FOR THE FUND
AND THE PARTNERSHIP (assuming NO SALES LOAD)
--------------
For the year ended October 31, 1996
ERV
Formula: T = (----) - 1
P
Where:
P = a hypothetical initial payment of $1,000 made on November 1, 1995
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 = $1,282.51
AVERAGE ANNUAL TOTAL RETURN = 28.25%
AVERAGE ANNUAL TOTAL RETURNS FOR THE FUND
AND THE PARTNERSHIP (assuming NO SALES LOAD)
-------------------
For the five years ended October 31, 1996
5
Formula: P(1 + T) = ERV
Where:
P = a hypothetical initial payment of $1,000 made on November 1, 1991
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 = $2,026.52
AVERAGE ANNUAL TOTAL RETURN = 15.17%
AVERAGE ANNUAL TOTAL RETURNS FOR THE FUND
AND THE PARTNERSHIP (assuming NO SALES LOAD)
--------------
For the ten years ended October 31, 1996
10
Formula: P(1 + T) = ERV
Where:
P = a hypothetical initial payment of $1,000 made on November 1, 1986
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 = $3,254.32
AVERAGE ANNUAL TOTAL RETURN = 12.52%
EXHIBIT 17
[ARTICLE] 6
[CIK] 0000920699
[NAME] THE HAVEN CAPITAL MANAGEMENT TRUST
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-END] OCT-31-1996
[INVESTMENTS-AT-COST] 48559723
[INVESTMENTS-AT-VALUE] 67074843
[RECEIVABLES] 173266
[ASSETS-OTHER] 261335
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 67509444
[PAYABLE-FOR-SECURITIES] 348990
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 64753
[TOTAL-LIABILITIES] 413743
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 42058112
[SHARES-COMMON-STOCK] 4778502
[SHARES-COMMON-PRIOR] 4700113
[ACCUMULATED-NII-CURRENT] 351886
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 6478208
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 18516970
[NET-ASSETS] 67095701
[DIVIDEND-INCOME] 911991
[INTEREST-INCOME] 196573
[OTHER-INCOME] 210120
[EXPENSES-NET] 966798
[NET-INVESTMENT-INCOME] 351886
[REALIZED-GAINS-CURRENT] 6413120
[APPREC-INCREASE-CURRENT] 8310343
[NET-CHANGE-FROM-OPS] 15075349
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 369791
[DISTRIBUTIONS-OF-GAINS] 3308473
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 212897
[NUMBER-OF-SHARES-REDEEMED] 421494
[SHARES-REINVESTED] 225609
[NET-CHANGE-IN-ASSETS] 11517083
[ACCUMULATED-NII-PRIOR] 182775
[ACCUMULATED-GAINS-PRIOR] 4535387
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 365916
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 966798
[AVERAGE-NET-ASSETS] 60986097
[PER-SHARE-NAV-BEGIN] 11.67
[PER-SHARE-NII] .08
[PER-SHARE-GAIN-APPREC] 3.07
[PER-SHARE-DIVIDEND] .08
[PER-SHARE-DISTRIBUTIONS] .70
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 14.04
[EXPENSE-RATIO] 1.59
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
