Filed electronically with the Securities and Exchange Commission
on February 25, 2000
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.
Post-Effective Amendment No. 11
and/or
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 12
----------------
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 previous
filed post-effective amendment.
<PAGE>
[Cover]
Prospectus
February 25, 2000
Haven Capital Management, Inc.
Investment Adviser
THE HAVEN FUND
This prospectus contains information you should know before investing in The
Haven Fund. For your own benefit, please read it before you invest and keep it
for future reference.
As with all mutual fund shares the Securities and Exchange Commission has
neither approved nor disapproved the Fund's shares nor passed upon the adequacy
or accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
Page
----
Key Facts..............................4
Goal and Approach......................4
Main Risks.............................6
Past Performance.......................9
Expenses..............................11
Financial Highlights..................13
Management of the Fund................14
Your Investment.......................15
How To Purchase Shares................15
How To Redeem Shares..................16
About Your Account....................17
Shareholder Services..................20
Distributions and Taxes...............21
More About the Fund...................22
The Exchange..........................22
About the Year 2000...................24
For More Information..................25
<PAGE>
KEY FACTS
GOAL AND APPROACH
WHAT IS THE FUND'S GOAL?
The Fund seeks long-term growth of capital.
WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
Under normal market conditions, the Fund invests at least 65% of its assets in
the equity securities of U.S. companies.
- - DOMESTIC EQUITY SECURITIES. The Fund has the ability to invest in the equity
securities of both large, well-known U.S. companies and smaller, less well-
known U.S. companies. These domestic equity securities may include common
stocks, preferred stocks, convertible securities, warrants, and equity
interests in trusts, partnerships, joint ventures and real estate investment
trusts. Convertible securities are corporate bonds and notes, or preferred
stock, that may be converted into common stock within a set time period.
The Fund may invest the remaining 35% of its assets in foreign equity
securities, in investment-grade U.S. and foreign fixed income securities of
corporate or governmental issuers or in other investments.
- - FOREIGN EQUITY SECURITIES. The Fund's foreign equity investments are
generally equity securities of better-known companies with a relatively large
market capitalization, although the Fund has the ability to invest in foreign
companies of any size. These companies may be publicly traded in the U.S. or
on a foreign securities exchange in a foreign currency.
- - INVESTMENT-GRADE FIXED INCOME SECURITIES. The Fund may invest in investment-
grade fixed income securities of a variety of issuers, including domestic or
foreign corporations or other entities and U.S. or foreign governments or
their agencies, instrumentalities or sponsored enterprises. 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.
<PAGE>
- - OTHER INVESTMENTS. In order to protect the value of its foreign securities
from unfavorable currency changes relative to the U.S. dollar, the Fund may,
but is not obligated to, purchase forward foreign currency contracts. This
allows the Fund to exchange a foreign currency for U.S. dollars on a future
date at a specified exchange rate. Although not principal investment
strategies, the Fund may also:
- lend portfolio securities;
- invest in restricted securities;
- invest in other investment companies;
- purchase or sell securities on a when-issued or delayed delivery
basis;
- purchase put and call options on securities and stock indexes;
- write call options on securities and put and call options on stock
indexes;
- purchase or write interest rate and stock index futures contracts;
and
- engage in repurchase agreement transactions with respect to any
securities in which it invests.
When the Fund's investment adviser believes that a defensive position is
warranted, the Fund may temporarily invest without limit in cash or investment-
grade short-term fixed income securities. In doing so, the Fund would not fully
benefit from any broad increase in the market price of common stocks, and the
Fund may not achieve its investment objective.
More information about the Fund's investment strategies is provided in the
Statement of Additional Information (see back cover). Of course the Fund cannot
guarantee that by following these strategies it will meet its goal.
HOW ARE THE FUND'S INVESTMENTS SELECTED?
In selecting equity securities, the Fund's investment adviser, Haven Capital
Management, Inc. (Haven), focuses on the stocks of undervalued U.S. and foreign
companies that, in its view:
- have superior financial and operating characteristics;
- have long-term prospects for growth; and
- are underpriced by the securities markets.
<PAGE>
Haven uses fundamental analysis, in-depth field research and research and
information provided by others to identify companies that appear both
underpriced and positioned to benefit from the current market and economic
environment. In doing so, Haven considers a variety of factors, such as:
- a company's financial resources;
- the value of its assets;
- its sales and earnings growth;
- the quality of its management; and
- its overall business prospects.
Haven generally sells a security when its market price equals or exceeds Haven's
expected valuation of the security or when the risk of holding the security
reaches levels believed unacceptable by Haven.
Haven may select investments in fixed income securities for defensive or
offensive reasons. When buying for defensive reasons Haven selects fixed income
securities that may reduce the overall risks of the Fund's portfolio. When
buying for offensive reasons Haven selects fixed income securities based upon
their potential to appreciate in value. Fixed-income securities that have the
potential to appreciate in value also have the potential to depreciate in value.
In making such investments Haven bases its judgement on factors such as the
future trend of long-term interest rates and/or foreign currency movements.
The Fund may only purchase investment-grade fixed income securities, as stated
above.
MAIN RISKS
Because the Fund invests mainly in equity securities, the Fund is exposed to
stock market risk and stock selection risk.
- STOCK MARKET RISK is the risk that the value of the Fund's investments will
be adversely impacted when stock markets decline in value. While stocks
have historically provided attractive long-term returns, their markets move
in cycles. As a result, there are periods when prices rise and periods when
prices decline.
Generally speaking, stocks experience more price volatility than bonds. Also,
small- and mid-capitalization stocks have historically experienced more price
volatility than large-capitalization stocks. These stocks may be subject to
greater volatility because:
<PAGE>
- there is sometimes a lower degree of liquidity (trading volume) in the
market for these stocks;
- they may face less certain growth prospects; and
- their cost structures may have greater sensitivity to changing economic
conditions.
Therefore, the Fund's value will increase and decrease along with stock markets
in general, and this movement may be accentuated to the extent the Fund has
significant holdings in small- and mid-capitalization stocks.
- - STOCK SELECTION RISK is the risk that the Fund's investments will
underperform the market or other funds with similar investment objectives and
investment strategies. Many factors affect the performance of a company's
equity securities, including the demand for its products or services, the
nature of its cost structure and the quality of the company's management.
Stock selection risk is usually greater for equity securities of smaller,
less established companies than those of larger, more established companies.
This is because smaller companies typically have a narrower base of products
and revenues than larger companies and may not have the depth of management
necessary to address changing conditions.
In addition to these factors, different types of stocks tend to shift in and
out of favor depending on market and economic conditions. The Fund's
approach to selecting undervalued securities includes the risk that the
market will not recognize a security's inherent value or that a stock, which
was identified as undervalued, is actually appropriately priced in the
marketplace. As a result, the Fund's performance may be sometimes lower
or higher than that of other types of funds, including portfolios that
emphasize growth stocks.
The Fund may also invest a significant portion of its assets in foreign
securities and fixed income investments, which are subject to the following
risks.
- FOREIGN INVESTMENT RISK. Due to its investments in foreign securities, the
Fund is exposed to the risks of currency exchange rate fluctuations,
adverse political or economic developments in foreign countries, reduced or
unavailable public disclosure, and the lack of uniform accounting
standards.
<PAGE>
Investments in foreign securities may also result in higher expenses due to
the costs of converting foreign currencies into U.S. dollars, the payment
of fixed brokerage commissions on foreign exchanges, and the expense of
maintaining securities with foreign custodians.
- INTEREST RATE RISK AND CREDIT RISK. Due to its investments in fixed income
securities and preferred stocks, the Fund is exposed to interest rate risk
and credit risk. Generally, interest rates and bond prices move inversely
(that is, bond prices decline when interest rates rise and bond prices rise
when interest rates decline). Therefore, the value of these investments
may be expected to decline when interest rates rise.
These investments are also subject to the risk that a decline in an
issuer's creditworthiness or the credit rating of its securities during the
Fund's holding periods will affect the value of the issuer's bonds and the
Fund's portfolio as a whole. In order to reduce the risk of non-payment of
principal or interest, the Fund invests only in fixed income securities
rated "A" or better at the time of purchase by Standard & Poor's
Corporation or Moody's Investor Services, Inc. or, if unrated, fixed income
securities that are determined by the Fund's investment adviser to be of
comparable quality.
The Fund tries to limit its exposure to risk by diversifying its investments.
However, as with any mutual fund, the Fund cannot guarantee that it will meet
its goals or that its performance will be positive over any period of time. As
a result, you could lose money investing in this Fund. More information about
the Fund's principal risks and strategies and other risks and strategies
is provided in the Fund's Statement of Additional Information (see back cover).
<PAGE>
PAST PERFORMANCE
The chart and table below are designed to help you better understand the risk of
investing in the Fund. The chart shows how the performance of the Fund and its
predecessor has varied from year to year. The table compares the performance of
the Fund and its predecessor over time to that of:
- the S&P 500R Index, a widely-recognized, unmanaged index of U.S. common
stocks;
- the Lipper Multi-Cap Value Fund Index, an unmanaged index comprised of the
largest 30 funds in the Lipper Multi-Cap Value Fund category; and
- the Wilshire 4500 Index, an unmanaged index of all U.S. equity securities
with readily available price data not included in the S&P 500R.
Unlike the returns of the Fund and its predecessor, the total returns of the S&P
500R Index and the Wilshire 4500 Index do not include the effects of any
brokerage commissions, transaction fees or other costs of investing (these costs
are reflected in the Lipper Multi-Cap Value Fund Index). The chart and table
assume that all dividends and distributions are reinvested.
The Fund began operations on June 23, 1994. Results for the period prior to
that date reflect the performance of HCM Partners, L.P., a limited partnership
that was managed by Haven from 1984 to 1994. The Partnership was not registered
under the Investment Company Act of 1940 and therefore was not subject to
certain investment restrictions that are imposed by that Act. If the
Partnership had been registered, its performance might have been adversely
affected. In addition, the expenses borne by the Fund are higher than those
borne by the Partnership. Thus, the performance of the Partnership would have
been lower had it borne the same level of expenses as the Fund bears. See "More
About the Fund-The Exchange."
<PAGE>
TOTAL RETURNS ARE BASED ON PAST RESULTS AND ARE NOT NECESSARILY AN INDICATION OF
FUTURE PERFORMANCE.
<PAGE>
- --------------------------------------------------------------------------------
YEAR-BY-YEAR TOTAL RETURN
OF THE FUND AND PARTNERSHIP
(AS OF DECEMBER 31, 1999) <Bar chart showing year-by-year total return>
(2.38)% 31.01% 13.14% 12.71% (0.62)% 26.78% 27.36% 18.87% 4.85% 18.19%
90 91 92 93 94 95 96 97 98 99
BEST QUARTER: 3/31/98, up 22.79% WORST QUARTER: 9/30/98, down 16.44%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
OF THE FUND AND PARTNERSHIP
(AS OF DECEMBER 31, 1999) 1 YEAR 5 YEAR 10 YEARS
----- ------ --------
Fund 18.19% 18.92% 14.45%
S&P 500R Index 21.04% 28.51% 18.17%
Lipper Multi-Cap Value Fund Index<F1> 5.94% 17.82% 13.03%
Wilshire 4500 Index 35.49% 23.67% 16.17%
- -------------------------------------------------------------------------------
<F1> In the past the Fund compared its performance to the Lipper Growth Fund
Index, which was replaced by Lipper in 1999 with the Lipper Large-Cap Growth
Fund Index. Because the Fund emphasizes a "value" style of investing rather
than a "growth" style, and because it invests in companies with a wide range of
market capitalizations, it no longer compares itself to the Lipper Large-Cap
Growth Fund Index. The average annual total return for the Lipper Large-Cap
Growth Fund Index as of December 31, 1999 was 34.82% for 1 year, 30.73% for 5
years and 19.70% for 10 years.
EXPENSES
This section describes the fees and expenses that you may bear indirectly if you
buy and hold shares of the Fund. These may include:
<PAGE>
- SHAREHOLDER FEES. The Fund is "no-load," which means that you don't pay
any fees to buy or sell shares. As a result, all of the money you invest in
the Fund goes to work immediately for you.
- ANNUAL OPERATING EXPENSES. These cover the costs of operating the Fund and
include:
- INVESTMENT ADVISORY FEES, which are paid to the investment adviser for
managing the Fund;
- DISTRIBUTION (12B-1) FEES AND EXPENSES, which are used to support the
Fund's marketing and distribution efforts; and
- OTHER EXPENSES, which are paid by the Fund for miscellaneous items such as
accounting, transfer agency, custody, administration, professional and
registration fees.
Annual operating expenses are deducted from the Fund's total assets, before
the daily share price is calculated and before dividends and other
distributions are paid to shareholders. As a result, annual operating
expenses are reflected in the Fund's share price and are not charged directly
to shareholder accounts.
The Fund has adopted a distribution plan under Rule 12b-1 that allows it to
pay fees for the sale of Fund shares. Because these fees are paid on an
ongoing basis, account holders may pay more over the long term than if they
had paid a sales charge when buying shares initially.
The table below is designed to help you better understand the various costs and
expenses you will bear indirectly as an investor in the Fund.
ANNUAL FUND OPERATING EXPENSES
- ----------------------------------------------
Shareholder fees
None
Investment advisory fees 0.60%
Distribution (12b-1) fees and expenses 0.20%
Other expenses 0.54%
Total 1.34%
<PAGE>
EXAMPLE
This example shows what you could pay in expenses over time. It is intended to
help you compare the costs of investing in the Fund with the cost of investing
in other mutual funds.
The example uses the same hypothetical conditions that all mutual funds are
required to use in their prospectuses: $10,000 initial investment, 5% total
return each year and no changes in expenses. The figures shown would be the
same whether you sold your shares at the end of the period or kept them. Because
actual returns and expenses will be different, the example should be used for
comparison purposes only.
1 year 3 years 5 years 10 years
------ ------- ------- --------
$136 $425 $734 $1,613
<PAGE>
FINANCIAL HIGHLIGHTS
The following table describes the Fund's financial history and is based on a
single share outstanding for the fiscal years indicated. The total returns in
the table show how an investment in the Fund would have performed over each
year, assuming all dividends and distributions were reinvested. The figures in
this table have been audited by PricewaterhouseCoopers LLP, the Fund's
independent public accountants. Their report, along with full financial
statements, appears in the Fund's most recent Annual Report (see back cover).
YEAR ENDED OCTOBER 31, 1999 1998 1997 1996 1995
- ---------------------- ---- ---- ---- ---- ----
NET ASSET VALUE,
BEGINNING OF PERIOD $14.29 $15.83 $14.04 $11.67 $10.65
------ ------ ------ ------ ------
INCREASE FROM
INVESTMENT OPERATIONS:
Net investment income 0.03 0.08 0.06 0.08 0.12
Net realized and
unrealized gains (losses)
on investments and foreign
currency transactions 1.64 (0.02) 3.13 3.07 1.28
------ ------ ------ ------ ------
Total from investment
operations 1.67 0.06 3.19 3.15 1.40
LESS DISTRIBUTIONS:
Dividends paid to shareholders:
From net investment income (0.05) (0.08) (0.05) (0.08) (0.15)
From net realized gains (1.49) (1.52) (1.35) (0.70) (0.23)
------ ------ ------ ------ ------
Total distributions to
shareholders (1.54) (1.60) (1.40) (0.78) (0.38)
NET ASSET VALUE,
END OF PERIOD $14.42 $14.29 $15.83 $14.04 $11.67
====== ====== ====== ====== ======
TOTAL RETURN 12.29% 0.29% 24.90% 28.25% 13.65%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of
period (in 000's) $72,068 $77,690 $84,769 $67,096 $55,579
Ratios of expenses to
average net assets 1.34% 1.26% 1.33% 1.59% 1.53%<F1>
Ratios of net investment
income to average
net assets 0.20% 0.50% 0.78% 0.58% 1.14%<F1>
Portfolio turnover rate 31% 59% 57% 67% 77%
------ ------ ------ ------ ------
<F1> Without fee waivers, the ratio of expenses to average daily net assets
would have been 1.59%, and the ratio of net investment income to average daily
net assets would have been 1.08%, for the year ended October 31, 1995.
<PAGE>
MANAGEMENT OF THE FUND
The Fund is managed by Haven Capital Management, Inc. which chooses the Fund's
investments and handles its business affairs. Located at 655 Third Avenue, New
York, New York 10017, Haven is an independent investment organization that
provides investment services to a variety of institutional and individual
investors. Founded in 1982, Haven manages approximately $703 million in assets
for its clients (as of December 31, 1999). From 1984 to 1994, Haven managed the
investments of HCM Partners, L.P., the predecessor of the Fund. For the 12-
months ended October 31, 1998, the management fees paid to Haven were 0.60% of
average net assets.
Colin C. Ferenbach, managing director of Haven, has served as the Fund's
portfolio manager since its inception. He has more than 30 years of experience
as a portfolio manager and managed the portfolio of HCM Partners, L.P. since its
inception in 1984. Denis M. Turko, managing director of Haven, has served as
the Fund's deputy portfolio manager since its inception. He has been employed
as a portfolio manager at Haven and elsewhere since 1972.
<PAGE>
YOUR INVESTMENT
HOW TO PURCHASE SHARES
- -------------------------------------------------------------------------------
BY MAIL <ICON>
The Haven Fund
P.O. Box 8903
Wilmington, DE 19899-8903
FOR OVERNIGHT DELIVERY:
The Haven Fund
400 Bellevue Parkway
Suite 108
Wilmington, DE 19809-3710
- --------------------------
TO OPEN AN ACCOUNT
- --------------------------
- - Read the prospectus carefully
- - Complete and sign the application
- - Make your check or money order payable to "The Haven Fund"
- - Minimum initial investment is $2,500 ($2,000 for IRAs)
- --------------------------
TO ADD TO AN ACCOUNT
- --------------------------
- - Make check payable to "The Haven Fund"
- - Include written instructions indicating:
- - Account holder's name
- - Account number
- - Minimum subsequent investment is $100..
- -------------------------------------------------------------------------------
BY WIRE <ICON>
- --------------------------
TO ADD TO AN ACCOUNT
- --------------------------
- - Call the wire desk at PFPC (1-800-850-7163) so that they can expect to
receive your federal funds
- - Have your bank wire federal funds to PNC Bank, Philadelphia, PA with these
instructions:
- ABA # 031000053
- Purchase Concentration Account # 855-1033-470
- Your name
- Your account number
- -------------------------------------------------------------------------------
AUTOMATICALLY <ICON>
- --------------------------
TO OPEN AN ACCOUNT
- --------------------------
- - Read the prospectus carefully
- - Complete and sign the application, including the Automatic Investment Plan
section
- - Make your check or money order payable to "The Haven Fund"
- - The minimum initial investment is $1,000
- --------------------------
TO ADD TO AN ACCOUNT
- --------------------------
- - Call 1-800-844-4836 to request a form to add the Automatic Investment Plan
service
- - Complete and return the form along with any other required materials
- - Minimum subsequent investment is $100
- -------------------------------------------------------------------------------
<PAGE>
HOW TO REDEEM SHARES
BY MAIL <ICON>
The Haven Fund
P.O. Box 8903
Wilmington, DE 19899-8903
FOR OVERNIGHT DELIVERY:
The Haven Fund
400 Bellevue Parkway
Suite 108
Wilmington, DE 19809-3710
- - Write a letter of instruction that includes:
- The name and signatures of all account holders. All account holders need to
sign the request exactly as their names appear on the account
- The dollar amount or shares to be redeemed
- Your redemption proceeds will be sent to the address or bank of record on
your account
- - Signatures must be guaranteed if:
- Your redemption request is greater than $25,000;
- The proceeds are to be paid to someone other than the account holder;
- The proceeds are to be sent to an address other than the record address; or
- The account holder is a corporation, partnership, trust or fiduciary.
- See "About Your Account" for more information about signature guarantee
requirements
- -------------------------------------------------------------------------------
BY TELEPHONE <ICON>
Call 1-800-850-7163
- - To redeem shares by phone, you must first select the Telephone Redemption
Privilege on your Purchase Application
- To add this feature, call 1-800-850-7163 for an account option form
- - You will be asked to provide:
- Your name
- Account number
- Dollar amount or number of shares to be redeemed
- The minimum amount that may be redeemed by telephone is $500
- Proceeds will be sent to you at the address or bank of record on your
account
- -------------------------------------------------------------------------------
BY WIRE <ICON>
Call 1-800-850-7163
- - To redeem shares by wire, you must first authorize the Wire Redemption
Privilege on your Purchase Application
- To add this feature, call 1-800-850-7163 for an account option form
- - You will be asked to provide:
- Your name
- Account number
- Dollar amount or number of shares to be redeemed
- - The minimum amount that may be redeemed by wire is $10,000
- - Proceeds will be sent to you at the bank account of record on your account
- -------------------------------------------------------------------------------
<PAGE>
ABOUT YOUR ACCOUNT
HOW SHARES ARE PRICED
The Haven Fund is no-load, which means you can buy or sell shares at net asset
value without any sales charge.
The Fund is open for business every day the New York Stock Exchange is open. It
calculates its net asset value at the close of trading on that Exchange
(generally 4:00 p.m. Eastern Time). The Fund's share price is determined by
dividing its net assets (the value of the Fund's investments, cash and other
assets minus its liabilities) by the total number of shares outstanding.
The Fund's investments are valued based on market quotations. When market
quotations are not readily available, investments will be based on fair value as
determined in good faith according to methods approved by the Fund's Trustees.
Foreign markets may be open on days when the New York Stock Exchange is closed.
As a result, the value of foreign securities owned by the Fund could change on
days when you cannot buy or sell Fund shares. The Fund's share price, however,
will not change until the next time it is calculated.
TIMING OF PURCHASE AND SALE ORDERS
When you purchase or sell shares, your order will be executed and the shares
will be priced according to when your order is received in "good order":
- - If your order is received before 4:00 p.m. Eastern Time (on a day when the
New York Stock Exchange is open), it will be executed the same day, at that
day's closing share price.
- - If your order is received after 4:00 p.m. Eastern Time (on a day when the New
York Stock Exchange is open), it will be executed the following day, at that
day's closing share price.
We consider requests to be in "good order" when all required documents are
properly completed, signed and received. Generally, a properly signed written
request with any required signature guarantee is all that is required for
redemption. In some cases, however, other documents may be necessary. Additional
documentary evidence of authority is
<PAGE>
required by PFPC Inc. (PFPC) in the event a redemption is requested by a
corporation, partnership, trust, fiduciary, executor or administrator.
You may purchase Fund shares with a check drawn on either a U.S. or foreign bank
payable in U.S. dollars. You may not purchase shares with a check issued by a
third party and endorsed over to the Fund.
All redemption proceeds will be sent by check or wire transfer within seven days
after acceptance by PFPC of the request and any other necessary documents in
"good order." If you are redeeming shares that were recently purchased by
check, the Fund may delay the payment of your redemption proceeds until your
check or electronic transaction has cleared. This may delay your payment of
redemption proceeds for as many as 15 days from the purchase date.
SHARE CERTIFICATES
In the interest of economy and convenience, the Fund does not issue share
certificates. Instead, you will receive confirmation of purchase and redemption
orders from the Fund's transfer agent. Shares and any dividends and distri-
butions paid by the Fund are also reflected in your account statements.
SIGNATURE GUARANTEES
The purpose of a signature guarantee is to protect you and the Fund from fraud
by verifying your signature. As a result, you may be required to have your
signature guaranteed in certain situations, including when:
- - The proceeds of the redemption are greater than $25,000;
- - The proceeds are to be paid to someone other than account owner;
- - The proceeds are to be sent to an address other than the record address for
the account;
- - The account holder is a corporation, partnership, trust or fiduciary; or
- - The account holder wishes to change the name of the single designated bank
account to receive wire redemption proceeds.
You can obtain a signature guarantee from most banks, savings institutions and
broker-dealers. These guarantors must be participants in a medallion program
recognized by the Securities Transfer Association. Signature guarantees that
are not a part of these programs will not be accepted.
<PAGE>
TELEPHONE AND WIRE TRANSACTIONS
During times of unusual market activity, you may have trouble placing a request
by telephone. In this event, consider sending your order by overnight delivery.
The Fund is not responsible for the efficiency of the federal wire system or
your firm or bank. The Fund does not currently charge for wire transfers. You
are responsible for any charges imposed by your bank. To change the name of the
single designated bank account to receive wire redemption proceeds, you must
send a written request (with a guaranteed signature) to the Fund at the address
listed above under "How to Redeem Shares _ By Mail."
The Fund reserves the right to refuse a telephone redemption if it believes it
advisable to do so. The Fund's transfer agent, PFPC will take reasonable steps
to confirm that instructions communicated by telephone are genuine. However,
neither the Fund nor PFPC will be liable for following instructions communicated
by telephone that PFPC reasonably believes are genuine.
SMALL ACCOUNT BALANCES
Maintaining small accounts is costly to the Fund and its shareholders. If your
account balance falls below $1,000 due to a redemption, the Fund may ask you to
increase your balance. If it is still below $1,000 after 30 days, the Fund may
close your account and send you the proceeds.
OTHER POLICIES
Under certain circumstances, the Fund reserves the right to:
- - Reject any order to purchase Fund shares;
- - Change its investment minimums or other requirements for buying and selling
(including minimum amounts for check or wire redemptions) or waive any
minimums or requirements for certain investors;
- - Satisfy an order to sell Fund shares with securities rather than cash, for
certain very large orders;
- - Terminate telephone and wire redemption privileges; and
- - Suspend redemptions or postpone payments when trading on the New York Stock
Exchange is restricted or as otherwise permitted by the SEC.
<PAGE>
SHAREHOLDER SERVICES
INDIVIDUAL RETIREMENT ACCOUNTS. The Fund offers Individual Retirement Plans,
including Traditional IRAs and Roth IRAs. Any adult may contribute a total of
$2,000 (or 100% of compensation, whichever is less) to a Traditional IRA and/or
a Roth IRA each tax year.
- - TRADITIONAL IRA. Any adult under age 70 / who has earned income, even if
they are active participants in a qualified retirement plan (or certain
similar retirement plans), may contribute to an IRA. Contributions may be
tax deductible, depending on your income and eligibility to participate in an
employer-sponsored retirement plan.
- - ROTH IRA. Any adult who has earned income below certain income limits may
also contribute to a Roth IRA. Contributions to a Roth IRA are not tax
deductible, but distributions, including earnings, may be withdrawn tax-free
after five years for qualified events, such as retirement.
There is currently no charge for establishing a retirement account, although
there is an annual maintenance fee. For further information or to obtain an
application, please call 1-800-844-4836.
AUTOMATIC INVESTMENT PLAN. The Haven Fund's Automatic Investment Plan allows
you to automatically purchase shares on a regular, convenient basis from your
bank or other investment account. You determine the frequency and amount of
your investments, subject to a $100 minimum per transaction. The plan may be
established with any financial institution that is a member of the Automated
Clearing House.
You can set up an Automatic Investment Plan by completing the appropriate
section on the Purchase Application when opening your account or by calling 1-
800-844-4836. There is a $1,000 minimum initial investment.
No service fee is currently charged by the Fund for participation in the
Automatic Investment Plan. A $20 fee will be imposed by the transfer agent if
sufficient funds are not available in your account at the time of the automatic
transaction. If you discontinue participation in the plan, the Fund reserves the
right to redeem your account involuntarily, upon sixty days' written notice, if
your account's net asset value is $2,000 or less.
<PAGE>
DISTRIBUTIONS AND TAXES
The Fund distributes to shareholders:
- - Net investment income, if any, semi-annually; and
- - Net realized capital gains, if any, annually.
All distributions are reinvested in the Fund unless you instruct the Fund in
writing that you would like to receive them in cash. There are no fees or sales
charges on reinvestments. When you redeem Fund shares, you will realize a
taxable gain or loss depending upon the amount you realize and your tax basis in
the shares.
Fund dividends and other distributions are taxable to most investors (unless
your investment is in an IRA or other tax-advantaged account) whether they are
received in cash or reinvested in the Fund. In general:
_ Dividends and short-term capital gains received from the Fund are taxable as
ordinary income; and
_ Distributions of long-term capital gains are taxable as capital gains,
regardless of how long you have owned your shares.
Each year, the Fund will send you detailed information about the amount of
ordinary income and capital gains distributed to your account for the previous
year. In most cases, distributions you receive in January are taxable as if they
had been paid in the previous year. Because everyone's tax situation is
different, you should consult with your tax adviser about federal, state and
local tax consequences.
BUYING SHARES BEFORE A DISTRIBUTION. All income and capital gains earned by the
Fund are reflected in its share price until the Fund makes a distribution. At
the time of a distribution, the share price is reduced by the amount distributed
per share. If you purchase shares when the Fund has realized but not yet
distributed income or capital gains, you will pay the full price for the shares.
However, you will have a portion of your investment returned to you in the form
of a taxable distribution. Unless you are investing through an IRA or other tax-
advantaged account, you may want to consider waiting to invest until after the
distribution has been made to avoid "buying" a taxable distribution.
<PAGE>
MORE ABOUT THE FUND
THE EXCHANGE
On June 23, 1994, the Fund acquired the portfolio securities, cash and cash
equivalents of HCM Partners, L.P. (the "Partnership"), a limited partnership for
which Haven acted as investment adviser, in exchange for shares of the Fund.
These securities had a market value on June 22, 1994 of approximately $41.1
million. At the completion of the exchange, the Fund began operations.
The following is a summary of key financial information relating to the
Partnership and the Fund. The information for the period June 23, 1994 to
October 31, 1999 for the Fund and the period January 1, 1990 to June 22, 1994
for the Partnership has been audited by PricewaterhouseCoopers LLP, independent
public accountants. The financial statements for the year ended October 31,
1999 for the Fund can be found in the Fund's Annual Report to Shareholders (see
back cover to request a copy).
The following table includes information about the Partnership's operations for
periods prior to the formation of the Fund. Although the Fund is managed by the
same individuals who managed the Partnership and in a manner that is in all
material respects equivalent to the management of the Partnership, the following
table should not be viewed as an indication of future performance by the Fund.
The Partnership was not registered under the Investment Company Act of 1940. As
a result, it was not subject to certain investment restrictions that are imposed
by the Investment Company Act. If the Partnership had been subject to those
restrictions, its performance might have been adversely affected. In addition,
the expenses borne by the Fund (described above, under the heading "Key Facts-
Expenses") are higher than those borne by the Partnership. Thus, the
performance of the Partnership would have been lower had it borne the same level
of expenses as the Fund bears.
<PAGE>
For A Fund Share Outstanding Throughout the Period<F6>
Nov. 1, Nov. 1, Nov. 1, Nov. 1, Nov. 1, June 23, Jan.1,
1988 1997 1996 1995 1994 1994 1994
to to to to to to to
Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31 Oct. 31 June 22
1999 1998 1997 1996 1995 1994 1994
<F1> <F1> <F1> <F1> <F1> <F1> <F2>
----- ----- ----- ----- ----- ----- -----
NET ASSET VALUE AT
BEGINNING OF
PERIOD $14.29 $15.83 $14.04 $11.67 $10.65 $10.00 $10.29
----------------------------------------------------------
Income from Investment
Operations:
Net investment
income 0.03 0.08 0.06 0.08 0.12 0.04 0.06
Net realized and
unrealized Gains
and (Losses) on
Investments 1.64 (0.02) 3.13 3.07 1.28 0.61 (0.35)
----------------------------------------------------------
Total from investment
operations 1.67 0.06 3.19 3.15 1.40 0.65 (0.29)
----------------------------------------------------------
Less Distributions (1.54) (1.60) (1.40) (0.78) (0.38) -- --
----------------------------------------------------------
NET ASSET VALUE
END OF PERIOD $14.42 $14.29 $15.83 $14.04 $11.67 $10.65 $10.00
==========================================================
TOTAL RETURN 12.3% 0.3% 24.9% 28.3% 13.7% 6.5% (2.8%)
<F7> <F7>
SUPPLEMENTAL DATA
AND RATIOS
Net Assets at End
of period
(in 000s) $72,068 $77,690 $84,769 $67,096 $55,579 $45,332 $41,141
Ratio of Expenses
to Average
Net Assets 1.34% 1.26% 1.33% 1.59% 1.53% 1.20% 1.19%
<F4><F4><F5> <F6>
Ratio of Income
to Average
Net Assets 0.20% 0.50% 0.78% 0.58% 1.14% 1.10% 1.17%
<F4><F4><F5> <F5>
Portfolio Turnover
Rate 31% 59% 57% 67% 77% 27% 78%
FOR THE YEAR ENDED DECEMBER 31,
1993 1992 1991 1990 1989 1988 1987
<F2> <F2> <F2> <F2> <F2><F3> <F2><F3><F2><F3>
----- ----- ----- ----- ----- ----- -----
NET ASSET VALUE AT
BEGINNING OF
PERIOD $9.13 $8.06 $6.16 $6.31 $5.22 $4.49 $4.61
---------------------------------------------------------
Income from Investment
Operations:
Net investment
income 0.16 0.16 0.19 0.21 0.20 0.16 0.13
Net realized and
unrealized Gains
and (Losses) on
Investments 1.00 0.91 1.71 (0.36) 0.89 0.57 (0.25)
---------------------------------------------------------
Total from investment
operations 1.16 1.07 1.90 (0.15) 1.09 0.73 (0.12)
---------------------------------------------------------
Less Distributions -- -- -- -- -- -- --
---------------------------------------------------------
NET ASSET VALUE
END OF PERIOD $10.29 $9.13 $8.06 $6.16 $6.31 $5.22 $4.49
==========================================================
TOTAL RETURN 12.7 13.3% 30.8% (2.4)% 20.9% 16.3% (2.6)%
SUPPLEMENTAL DATA
AND RATIOS
Net Assets at End
of period
(in 000s) $44,104 $38,243 $34,024 $24,282 $27,426 $22,683 $19,317
Ratio of Expenses
to Average
Net Assets 0.67% 0.71% 0.72% 0.67% 0.75% 0.74% 0.77%
Ratio of Income
to Average
Net Assets 1.64% 1.90% 2.57% 3.32% 3.37% 3.18% 2.56%
Portfolio Turnover
Rate 72% 60% 68% 67% 48% 38% 61%
FOR THE
YEAR ENDED June 27
DECEMBER 31, 1984 to
------------ Dec. 31
1986 1985 1984
<F2><F3> <F2><F3><F2><F3>
----- ----- -----
NET ASSET VALUE AT
BEGINNING OF
PERIOD $4.20 $3.07 $2.83
-----------------------
Income from Investment
Operations:
Net investment
income 0.12 0.10 0.08
Net realized and
unrealized Gains
and (Losses) on
Investments 0.29 1.03 0.16
-----------------------
Total from investment
operations 0.41 1.13 0.24
-----------------------
Less Distributions -- -- --
-----------------------
NET ASSET VALUE
END OF PERIOD $4.61 $4.20 $3.07
=======================
TOTAL RETURN 9.8% 36.8% 8.5%<F7>
SUPPLEMENTAL DATA
AND RATIOS
net assets at end
of period
(in 000s) $16,029 $11,076 $3,060
Ratio of Expenses
to Average
Net Assets 0.78% 0.92% 1.03%<F5>
Ratio of Income
to Average
Net Assets 2.48% 2.64% 4.98%<F3>
Portfolio Turnover
Rate 48% 34% 1%
<F1> Represents the results of operations of The Haven Fund.
<F2> Represents the results of operations of HCM Partners, L.P.
<F3> Unaudited.
<F4> Without fee waivers, the ratio of expenses to average 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
net assets would have been 1.08% and 0.87% (annualized) for the periods
ended October 31, 1995 and 1994, respectively.
<F5> Annualized.
<F6> 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.
<F7> Total returns for the periods less than one year are not annualized.
<PAGE>
ABOUT THE YEAR 2000
Although the Fund has not experienced any material system disruptions resulting
from the transition to the year 2000, the possibility remains that system
failures by Haven, PFPC or the Fund's other service providers could affect the
Fund. The Fund expects any problems of this nature to make themselves known
during the first quarter of 2000.
<PAGE>
[Back page]
FOR MORE INFORMATION
You can find additional information about the Fund in the following documents:
- - ACCOUNT STATEMENTS. You will receive a quarterly statement of your account
as well as an account statement after any transaction that affects your share
balance or share registration.
- - ANNUAL/SEMI-ANNUAL REPORT TO SHAREHOLDERS. These reports detail the Fund's
actual investments (as of the report date) and performance information. They
also include a discussion by Haven of the market conditions and investment
strategies that significantly affected the Fund's performance during the
period covered by the report.
- - STATEMENT OF ADDITIONAL INFORMATION (SAI). The SAI contains more detailed
information on all aspects of the Fund. A current SAI has been filed with the
Securities and Exchange Commission (SEC) and is incorporated by reference
into this prospectus (that is, it is legally considered to be part of this
prospectus).
To request a free copy of the current annual/semi-annual report or the SAI or
for Fund information, please call 1-800-844-4836 or send your request in writing
to the Fund's distributor: Sunstone Distribution Services, LLC, 207 E. Buffalo
Street, Suite 400, Milwaukee, WI 53202.
You may also obtain information about the Fund (including the SAI) directly from
the SEC by visiting its Public Reference Room in Washington, DC, by sending your
request along with a duplicating fee to the SEC's Public Reference Section,
Washington, DC 20549_0102, by e-mailing your request along with a duplicating
fee to "[email protected]" or by visiting the SEC's Internet website
(www.sec.gov). You may obtain information regarding the operation of the SEC's
Public Reference Room by calling the SEC at 1-202-942-8090.
For information about your Haven Fund account, including account balances, call
1-800-850-7163.
The Haven Fund
P.O. Box 8903
Wilmington, DE 19899-8903
1940 Act File No.: 811-8428
<PAGE>
Statement of Additional Information
February 25, 2000
-----------------------
THE HAVEN CAPITAL MANAGEMENT TRUST
-----------------------
This Statement of Additional Information is meant to be read in conjunction with
the Prospectus of The Haven Fund (the "Fund") dated February 25, 2000 and is
incorporated by reference in its entirety into that Prospectus. The Fund is the
initial series of The Haven Capital Management 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.
The financial statements for the fiscal year ended October 31, 1998 and the
report of PricewaterhouseCoopers LLP on such annual financial statements
contained in the Fund's Annual Report to Shareholders for the year ended October
31, 1998 (the "Annual Report") are incorporated herein by reference to such
financial statements and report in reliance upon the authority of
PricewaterhouseCoopers LLP as experts in auditing and accounting. Additional
copies of the Fund's Annual Report may be obtained at no charge by telephoning
Sunstone at (800) 844-4836.
CONTENTS
PAGE
Fund History 2
The Fund and Its Investments and Risks 3
Management of the Fund 22
Control Persons and Principal Holders of Securities 24
Investment Advisory and Other Services 25
Brokerage Allocation and Other Practices 30
Shares of Beneficial Interest 32
<PAGE>
Additional Purchase and Redemption Information 33
Additional Information Concerning Taxes 34
Calculation of Performance Data 38
Appendix 41
FUND HISTORY
The Fund is the initial series of the Trust, which was formed on March 17, 1994
as a Delaware business trust. Haven Capital Management, Inc. ("Haven") serves
as the Fund's investment adviser.
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 "Predecessor 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 Predecessor 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 Predecessor Partnership that have appreciated in value from
the date they were acquired by the Predecessor Partnership; the same potential
for adverse tax consequences is present, however, whenever an investor purchases
shares in any regulated investment company owning appreciated assets. When the
Fund sells appreciated securities, the amount of any net gain will be taxable to
shareholders, including new shareholders as well as former partners of the
Predecessor 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 "Additional Information Concerning
Taxes" with respect to the foregoing and regarding a private letter ruling
obtained from the Internal Revenue Service with respect to the exchange.
<PAGE>
THE FUND AND ITS INVESTMENTS AND RISKS
CLASSIFICATION
- --------------
The Fund is an open-end, diversified management investment company.
INVESTMENT STRATEGIES AND RISKS
- -------------------------------
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
principal investment strategies of the Fund, and the principal risks of those
strategies, are described in the Prospectus. Additional investment strategies
and risks are described below.
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 fluctuations in currency
exchange rates, revaluation of
<PAGE>
currencies, future adverse political and economic developments and the possible
imposition of currency exchange blockages or other foreign governmental laws or
restrictions. The yield of the Fund may be adversely affected by fluctuations
in value of one or more currencies relative to the U.S. dollar. 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. Foreign
securities may be subject to foreign government taxes that would reduce the
net yield on such securities. 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.
In addition, 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 com-
parable domestic companies. 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'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 gener-
ally.
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, have at times nationalized or expropriated the assets
of private companies and have at times imposed confiscatory taxation and/or
limitations on the use or removal of funds or other assets of international
<PAGE>
investors. 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 addi-
tional 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
<PAGE>
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.
The Fund will enter into such forward contracts only 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 formally 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.
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.
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.
<PAGE>
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 include
obligations issued by the U.S. government or by any agency, instrumentality or
sponsored enterprise thereof supported by the full faith and credit of the U.S.
government, the authority of the issuer to borrow from the U.S. Treasury, or the
discretionary authority of the U.S. government to purchase the obligations of
the agency, instrumentality or enterprise; obligations fully guaranteed as to
principal and interest by an agency, instrumentality or sponsored enterprise of
the U.S. government; and obligations of U.S. government agencies, instrumentali-
ties or sponsored enterprises which are not guaranteed. Such securities may be
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 Na-
tional 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
<PAGE>
with respect to the instrumentality does not make its securities unsuitable
for investment by the Fund.
OTHER INVESTMENT STRATEGIES AND RISKS
- -------------------------------------
CONVERTIBLE SECURITIES. 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.
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 or of another company. 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 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.
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.
RESTRICTED SECURITIES. The Fund may invest up to 5% of its net assets in
securities that, at the time of purchase by 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. While such purchases may offer attractive opportunities for
investment not otherwise available to the Fund, the securities cannot be
<PAGE>
sold to the public without registration under the Securities Act of 1933
(the "1933 Act") or under an exemption from registration (such as Rules
144 or 144A).
Generally speaking, restricted securities may be sold only to qualified
institutional buyers, in a privately negotiated transaction to a limited number
of purchasers, in limited quantities after they have been held for a specified
period of time and other conditions are met pursuant to an exemption from
registration, or in a public offering for which a registration statement is in
effect under the 1933 Act. The Fund may be deemed to be an "underwriter" for
purposes of the 1933 Act when selling restricted securities to the public, and
in such event the Fund may be liable to purchasers of such securities if the
registration statement prepared by the issuer, or the prospectus forming a part
of it, is materially inaccurate or misleading.
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. 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 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
<PAGE>
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.
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.
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 simulta-
neously 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
<PAGE>
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 repre-
sented 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 fu-
tures 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 con-
tract 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
<PAGE>
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.
<PAGE>
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.
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
<PAGE>
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. securi-
ties 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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
<PAGE>
(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 "The Fund and Its Investment Risks_Investment
Strategies and Risks."
<PAGE>
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).
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.
<PAGE>
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.
TEMPORARY DEFENSIVE POSITION
- ----------------------------
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).
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. 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.
<PAGE>
Certain practices which may be employed by the Fund could result in high
portfolio turnover. For example, options on securities may be sold in anticipa-
tion 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
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:
Positions Held with the Fund;
Name Age Principal Occupation(s) During Past 5 Years
- ---- --- -------------------------------------------
Colin C. Ferenbach<F1> 66 President and Trustee of the Trust. Managing
Director since 1982 of Haven. Formerly, Gen-
eral 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.
Euan Baird 62 Trustee of the Trust. Chairman, President
and Chief Executive Officer of Schlumberger
Ltd. (oil field services, measurements and
systems).
Stephen Ely<F1> 60 Treasurer, Secretary and Trustee of the
Trust. Managing Director since 1982 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.
<PAGE>
William F. Indoe 57 Trustee of the Trust. Partner, Sullivan &
Cromwell (attorneys-at-law).
Robert E. Kaufmann 59 Trustee of the Trust. Executive Director,
The Hole in the Wall Gang (private
foundation). Formerly, Director, Spencer
Stuart & Associates (executive search
consultants), 1995-1998; Headmaster of
Deerfield Academy, 1980-94; Director of
various mutual funds, 1985-92.
John F. McNiff 57 Trustee of the Trust. Director, Vice Presi-
dent-Finance and Chief Financial Officer of
Dover Corporation (diversified manufacturing
company); Director of The Allen Group
(manufacturer of telecommunication
products).
Denis M. Turko* 61 Vice President and Trustee of the Trust.
Managing Director since 1982 of Haven.
Formerly, General Partner of HCM Part-
ners, L.P., 1984-94; Principal, McCowan
Associates, Inc., 1980-83; Principal,
Kleinwort Benson McCowan Inc., 1977-80;
Vice President, Goldman, Sachs & Co.,
1970-76.
<F1> Each of these Trustees and Officers is an "interested person" as defined
by the 1940 Act.
Messrs. Ferenbach, Ely and Turko each has a business address at 655 Third
Avenue, New York, New York 10017. The business addresses of the remaining
Trustees are as follows: Euan Baird, Schlumberger Ltd., 277 Park Avenue,
New York, New York 10172; William F. Indoe, Sullivan & Cromwell, 125 Broad
Street, New York, New York 10004; Robert E. Kaufmann, 555 Long Wharf Drive, New
Haven, Connecticut 06511; and John F. McNiff, Dover Corporation, 280 Park
Avenue, New York, New York 10017.
The following table sets forth the compensation paid or payable to the outside
Trustees of the Fund and Trust for the fiscal year ended October 31, 1998. 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
<PAGE>
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<F1>
--------------- -----------------
D. Euan Baird $8,000
William F. Indoe $8,000
Robert E. Kaufmann $8,000
John F. McNiff $8,000
<F1> Fiscal year ended October 31, 1999.
Beginning in November 1998, a portion of the fees payable by the Fund to its
outside Trustees has been deferred under a plan that deems the deferred amounts
to be invested in shares of the Fund for later distribution to the Trustees.
CODE OF ETHICS
Pursuant to Rule 17j-1 under the 1940 Act, the Fund and Haven have adopted a
Code of Ethics governing, among other things, personal investments in securities
(including securities that may be purchased or held by the Fund) by the Fund's
portfolio manager and deputy portfolio manager and by other employees of Haven.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The table below sets forth the percentage of outstanding Shares owned of record
and beneficially, as of January 31, 2000, 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.
<PAGE>
SHARES OWNED SHARES OWNED
SHARES OWNED BENEFICIALLY BENEFICIALLY OR
OF RECORD BUT NOT OF RECORD OF RECORD
--------- ----------------- ----------
Anton Ranch Family
Partnership
4332 Belclaire
Dallas, Texas 75205 16.3% 0.0% 16.3%
Saxon & Co.
c/o PNC Bank, NA
Box 7780
Philadelphia,
Pennsylvania 19182 13.7% 0.0% 13.7%
Donald R. Gant
Young's Road
New Vernon,
New Jersey 07976 11.4% 0.0% 11.4%
Peter G. Sachs
443 Webbs Hill Road
Stamford, Connecticut
06903 7.8% 0.0% 7.8%
J. Fred Weintz, Jr.
43 Jones Park Drive
Riverside, Connecticut
06878 5.0% 0.0% 5.0%
All current Trustees and
executive officers as a group
(7 persons) 1.9% 0.1% 2.0%
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
- ------------------
Haven serves as investment adviser to the Fund. Haven is controlled by its
managing directors, Messrs. Stephen Ely (who serves as Trustee, Treasurer and
Secretary of the Trust) , Colin C. Ferenbach (who serves as Trustee and
President of the Trust) and Denis M. Turko (who serves as Trustee and Vice
President of the Trust).
Pursuant to the Investment Advisory Agreement between the Fund and Haven, Haven
receives a monthly fee as compensation for its services as investment adviser,
<PAGE>
payable in arrears, calculated at an annual rate of 0.60% of the Fund's average
daily net assets. During the fiscal years ended October 31, 1999, 1998 and
1997, the Fund paid investment advisory fees to Haven of $458,464, $491,740 and
$463,570, respectively.
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. The
Investment Advisory Agreement provides that Haven will reduce its management fee
and, if necessary, reimburse the Fund to the extent
<PAGE>
operating expenses of the Fund exceed the expense limitations applicable to the
Fund imposed by applicable state securities laws or regulations thereunder.
PRINCIPAL UNDERWRITER
- ---------------------
Sunstone Distribution Services, LLC, 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.
Sunstone acts as agent in selling Shares, through a continuous offering at net
asset value without a sales charge, under the distribution agreement with the
Trust, on behalf of the Fund. Pursuant to the Distribution Agreement between
Sunstone and the Fund, 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. 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, 1999, the
Fund paid distribution fees to Sunstone of $93,715.
RULE 12B-1 PLAN
- ---------------
The Trust, on behalf of the Fund, has adopted a Plan of Distribution (the
"Plan") pursuant to Rule 12b-1 under 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
was last approved on May 18, 1999 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
<PAGE>
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.
The Fund and/or Sunstone have entered into agreements with Charles Schwab & Co.,
Inc., Jack White & Company, Fidelity Brokerage Services, Inc. and National
Investor Services Corp. (the "Other Distribution Plan Parties") pursuant to
which the Other Distribution Plan Parties (i) engage in activities intended to
result in the sales of the Fund's Shares and (ii) provide certain shareholder
services. Through October 31, 1999, the Fund also paid Hewes Communications,
Inc. ("Hewes") a monthly fee of $3,500 (exclusive of out-of-pocket expenses) as
compensation for the media relations services that Hewes provides to the Fund
under the Plan. Under an agreement dated December 1, 1999, the Fund pays
Mount&Nadler Inc. a monthly fee of $4,000 (exclusive of out-of-pocket expenses)
as compensation for the media relations services that Mount&Nadler Inc. provides
to the Fund under the Plan.
The Fund does not participate in any joint distribution activities with other
investment companies. No interested person of the Fund and no Trustee has had a
direct or indirect interest in the operation of the Plan or related agreements.
<PAGE>
During the fiscal year ended October 31, 1999, the Fund paid distribution fees
totaling $93,715 to Sunstone pursuant to the Distribution Agreement, commissions
totaling $10,391 to selected broker-dealers, fees related to the printing and
mailing of prospectuses and other materials to other than current shareholders
totaling $3,262, payments totaling $45,625 to Hewes, and payments totaling $247
to Other Distribution Plan Parties.
ADMINISTRATOR
- -------------
PFPC Inc., 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 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 first $200 million of average
net assets, 0.075% of the next $200 million of average net assets, 0.05% of the
next $200 million of average net assets, and 0.03% of the average net assets in
excess of $600 million, with a minimum monthly fee of $8,333 (exclusive of out-
of-pocket expenses).
TRANSFER AGENT
- --------------
PFPC also 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.
CUSTODIAN
- ---------
PNC Bank, National Association ("PNC Bank") is custodian of the Fund's assets
pursuant to a custodian agreement (the "Custodian Services Agreement"). 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. In accordance with the provisions of the 1940 Act, PNC Bank may employ
subcustodians outside the United States approved by the Trustees or the Trustees
may delegate to Haven, officers of the
<PAGE>
Trust or custodians the duties to select foreign custodians and monitor foreign
custody arrangements.
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.
INDEPENDENT PUBLIC ACCOUNTANTS
- ------------------------------
The Fund's independent public accountants are PricewaterhouseCoopers LLP, with
principal offices at 2400 Eleven Penn Center, Philadelphia, Pennsylvania 19103.
PricewaterhouseCoopers LLP provides audit services and consultation with respect
to the preparation of filings with the SEC.
COUNSEL
- -------
Debevoise & Plimpton serves as counsel to the Fund and to Haven.
BROKERAGE ALLOCATION AND OTHER PRACTICES
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
<PAGE>
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, 1999, 1998 and 1997, the Fund paid total
commissions to brokers of $96,632, $134,376 and $102,965, respectively.
Pursuant to agreements with certain brokers, Haven directed brokerage
transactions for the Fund during the year ended October 31, 1999 with aggregate
net
<PAGE>
values and commissions of approximately $823,700 and $1,020, respectively,
in exchange for specific research services. The balance of the commissions the
Fund paid was to other brokers who provide research services to Haven from time
to time. While Haven has no specific agreement or understanding with such other
brokers, Haven believes that such brokers would not continue to provide research
services if Haven does not continue to direct brokerage transactions to such
other brokers. The research services provided to Haven by brokers assists Haven
in managing the assets of Haven's other client accounts as well as the assets of
the Fund.
SHARES OF BENEFICIAL INTEREST
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 out-
standing, 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
<PAGE>
affecting their right to vote, any amendment required by law or the Trust's
registration statement, or any matter submitted to shareholders by the Trustees.
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 share-
holder is remote.
No action may be brought by a shareholder on behalf of the Trust or the Fund
unless shareholders owning not less than 20% of the Trust or Fund, as the case
may be, join in the bringing of the action.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Information on how to purchase and redeem Shares and how such Shares are priced
is included in the Prospectus. In confirming that redemption instructions
communicated by telephone are genuine, PFPC will require the caller to provide
caller identification information that must match the account's registration
information.
<PAGE>
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, Martin Luther King, Jr.'s Birthday, President's Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. 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.
Under circumstances described in the Prospectus, shareholders must have
signatures guaranteed in a medallion program recognized by the Securities
Transfer Association. The three recognized medallion programs are: Securities
Transfer Agents Medallion (STAMP), Stock Exchanges Medallion Program (SEMP) and
New York Stock Exchange, Inc. Medallion Signature Program (MSP).
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, provided that the Fund will pay in cash all requests for
redemptions in cash by any shareholder of record, limited in amount with respect
to each shareholder during any ninety-day period to the lesser of (i) $250,000
and (ii) one percent of the net asset value of the Fund at the beginning of such
period. 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.
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 treatment as a "regulated investment company"
within the meaning of the Internal Revenue Code of 1986, as amended (the
"Code"). By
<PAGE>
so qualifying, the Fund will not be subject to U.S. federal income tax on
income and gains distributed 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 as a "regulated investment company" 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); and (2) 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).
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.
<PAGE>
Dividends paid from net investment income (including distributions of net
realized short-term capital gains) are taxable to shareholders as ordinary
income whether received in cash or reinvested in additional Shares. All dis-
tributions derived from net realized long-term capital gains will be taxable to
shareholders as long-term capital gains, regardless of how long shareholders
have held Shares and regardless of whether received in cash or additional
Shares. Pursuant to a ruling obtained from the Internal Revenue Service, the
Fund expects to be treated as succeeding to the tax bases of the Predecessor
Partnership in the assets transferred by it to the Fund. As of January 31,
2000, based on the unaudited financial statements of the Fund as of such date,
the net assets of the Fund were approximately $72.4 million and the net
unrealized appreciation of the assets of the Fund was approximately $23.8
million. 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.
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.
Statements as to the tax status of each shareholder's dividends and dis-
tributions 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.
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
<PAGE>
receiving cash with which to pay dividends or make distributions in amounts
necessary to satisfy the distribution requirements for avoiding income and
excise taxes.
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.
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 return of capital. See also the discussion of "Buying
Shares before a Distribution" under "Your Investment-Distributions and Taxes" in
the Prospectus.
A gain or loss realized upon a redemption of Shares 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.
If a shareholder enters into one of certain derivative contracts (a
"constructive ownership transaction") with respect to any Shares of the Fund,
all or a portion of the gain from such constructive ownership transaction may be
treated as ordinary income and subject to an interest charge.
The Fund may be required to withhold for U.S. Federal income taxes 31% of all
distributions and redemption proceeds payable to shareholders who fail to
provide the Fund with their correct taxpayer identification number or to make
required certifications, or who have been notified by the Internal Revenue
Service that they are subject to backup withholding. Corporate shareholders and
other shareholders specified in the Code are or may be exempt from backup with-
holding. The backup withholding tax is not an additional tax and may be
credited against a taxpayer's federal income tax liability.
<PAGE>
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.
CALCULATION OF 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 the Predecessor Partnership. Furthermore, in reports or other
communications to shareholders and in
<PAGE>
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.
The average annual total return of the Fund is determined by multiplying a hypo-
thetical initial purchase order of $1,000 by the average annual compound rate of
return (including capital appreciation/depreciation, and distributions paid and
reinvested) for the stated period and analyzing the result. The calculation
assumes that all distributions are reinvested at net asset value on the rein-
vestment dates during the period.
For the period from June 23, 1994 (the date of the Fund's commencement) through
October 31, 1999, the Fund had a cumulative total return of 118.34%. The
following table shows the combined average annual total returns of the Fund and
the Predecessor Partnership for which Haven acted as investment adviser and
three of the Fund's Trustees acted as general partners, for the periods ended
October 31, 1999:
One Year Five Years Ten Years
-------- ---------- ---------
The Haven Fund and
HCM Partners, L.P. 12.29% 15.44% 13.64%
Although the Predecessor 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 Predecessor Partnership, the above
table should not be viewed as an indication of future performance by the Fund.
The table includes information regarding the Predecessor Partnership's
operations for periods before the Fund's registration statement became
effective. The Predecessor 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 Predecessor 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 Predecessor
Partnership. For a description of the expenses borne by the Fund, see "Key
Facts-Expenses" in the Prospectus.
The Fund's total return, and the combined total return of the Fund and the
Predecessor 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
<PAGE>
Dow Jones Industrial Average. The Fund's total return, and the combined total
return of the Fund and the Predecessor 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, The New York Times, 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 Predecessor 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 Predecessor 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.
<PAGE>
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 character-
istics are denoted A-1+. Capacity for timely payment on commercial paper rated
A-2 is strong, but the relative degree of safety is not as high as for issues
designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's
Investors Service, Inc. ("Moody's"). Issuers rated Prime-1 (or related
supporting institutions) are considered to have a superior capacity for
repayment of short-term promissory obligations. Issuers rated Prime-2 (or re-
lated supporting institutions) are considered to have a strong capacity for
repayment of short-term promissory obligations. This will normally be evidenced
by many of the characteristics of issuers rated Prime-1 but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternative liquidity is maintained.
CORPORATE BOND RATINGS
The following summarizes the ratings used by S&P for corporate bonds:
AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from AAA issues only in small degree.
A - Principal and interest payments on bonds in this category are regarded as
safe. Debt rated A has a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
To provide more detailed indications of credit quality, the ratings of "AA" and
"A" may be modified by the addition of a plus or minus sign to show relative
standing within this major rating category.
<PAGE>
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.
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits
DESCRIPTION OF EXHIBIT
(a)<F3> Agreement and Declaration of Trust of the Registrant
(b)<F3> By-Laws of the Registrant
(c) Not Applicable
(d)<F3> Form of Investment Advisory Agreement
(e) (1)<F1> Distribution Agreement
(2)<F3> Form of Standard-Broker Dealer Agreement for the Sale of
Shares of Registrant
(f) Not Applicable
(g) (1)<F3> Form of Custodian Services Agreement
(2)<F3> Fee Letter regarding Custodian Services Fees
(3)<F3> Sub-Custodian Agreement
(h) (1)<F1> IRA Disclosure Statement and Custodial Account Agreement
(2)<F3> Form of Transfer Agency Services Agreement
(3)<F3> Fee Letter regarding Transfer Agency Services Fees
(4)<F3> Form of Administration and Accounting Services Agreement
(5)<F3> Fee Letter regarding Administration and Accounting Services Fees
(6)<F4> Equity-Based Plan for Non-Interested Person Trustees of the Trust
<PAGE>
(i) (1) Opinion and consent of Debevoise & Plimpton
(2)<F3> Opinion and consent of Richards, Layton & Finger
(j) Consent of PricewaterhouseCoopers LLP
(k) Not Applicable
(l)<F3> Form of Subscription Agreement
(m) (1)<F3> Distribution Plan
(2)<F2> Service Agreement between Sunstone, on behalf of the Fund, and
Jack White & Company
(3)<F3> Services Agreement with Fidelity Brokerage Services, Inc.
(4)<F3> Retail Services Agreement with Charles Schwab & Co., Inc.
(5)<F3> No Transaction Fee Fund Servicing Agreement with National
Investor Services Corp.
(6)<F3> Letter Agreement between Hewes Communications, Inc. and
Registrant
(7) Letter Agreement between Mount&Nadler Inc. and the Fund
(n) Not Applicable
(p) Code of Ethics of Haven and the Fund
<F1> Previously filed on February 7, 1997.
<F2> Previously filed on February 28, 1996.
<F3> Previously filed on February 26, 1998.
<F4> Previously filed on December 23, 1998.
<PAGE>
Item 24. Persons Controlled by or Under Common Control
with Registrant.ADVANCE \x282.
Not applicable.
Item 25. INDEMNIFICATION
---------------
The Agreement and Declaration of Trust of The Haven Capital Management Trust
(the "Trust") provides the following limitations on liability and indemni-
fications to Trustees and shareholders (including shareholders who may, as a
result of holding more than 5% of the shares of beneficial interest of the Fund
(the "Shares"), be deemed to be "affiliated persons"):
Section 1.2(d). "Covered Person" shall mean each Trustee, officer, employee,
agent (including, without limitation, any Investment Adviser, Distributor,
custodian or transfer agent or any director, officer or employee thereof) of the
Trust or any Series, when acting in such capacity;
Section 3.13. STANDARD OF CARE OF TRUSTEES. The exercise by the Trustees of
their powers and discretion hereunder and the construction in good faith by the
Trustees of the meaning or effect of any provision of this Declaration shall be
binding upon everyone interested. No Covered Person shall be liable to the
Trust or the Shareholders except for its own willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
its office.
To the extent that, at law or in equity, a Covered Person has duties (including
fiduciary duties) and liabilities relating thereto to the Trust, a Shareholder
or a Trustee, any such Covered Person acting under this Declaration or By-Laws
shall not be liable to the Trust, any Shareholder or any Trustee for such
Covered Person's good faith reliance on the provisions of this Declaration or
By-Laws. The provisions of this Declaration or By-Laws, to the extent that they
restrict the duties and liabilities of any such Covered Person otherwise
existing at law or in equity, are agreed by the Trustees and the Shareholders to
replace such other duties and liabilities of such Covered Person.
Whenever in this Declaration or By-Laws, the Trustees are permitted or required
to make a decision (i) in their "sole discretion" or under a similar grant of
authority or latitude, the Trustees shall be entitled to consider only such
inter-
<PAGE>
ests 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
<PAGE>
threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (including any action by or in the right of the
Trust) by reason of any action or omission, or any alleged act or omission,
arising out of such Covered Person's activities as a Covered Person if such
activities were performed in good faith and were reasonably believed by such
Covered Person to be in or not opposed to the best interests of the Trust,
against losses, damages, or expenses for which such Covered Person has not
otherwise been reimbursed (including attorneys' fees, judgments, fines and
amounts paid in settlement) actually and reasonably incurred by such Covered
Person in connection with such action, suit or proceeding, so long as such
Covered Person was not liable for or guilty of gross negligence, willful
misfeasance, bad faith or reckless disregard of such Covered Person's duties
with respect to such acts or omissions and, with respect to any criminal
proceeding, had not reasonable cause to believe his conduct was unlawful.
Notwithstanding the foregoing, absent a judicial or administrative determination
that a Covered Person seeking indemnification was not liable on the merits or
guilty of disabling conduct within the meaning of Section 17(h) of the 1940 Act
("Disabling Conduct"), all determinations that a Covered Person did not engage
in Disabling Conduct shall be based upon a review of the facts, by (a) indepen-
dent legal counsel in a written opinion or (b) if a quorum of Trustees who are
neither "interested persons" of the Trust or Series, as the case may be, as
defined in Section 2(a)(19) of the 1940 Act, nor parties to the proceeding
("Disinterested, Non-Party Trustees") may be obtained, a vote of a majority of
such quorum. Notwithstanding anything herein to the contrary, if any matter
that is the subject of indemnification hereunder relates only to one Series (or
to more than one but not all of the Series of the Trust), then the indemnity
shall be paid only out of the assets of the affected Series.
The Trustees may make advance payments out of the assets of the Trust or, if
appropriate, of the affected Series in connection with the expense of defending
any action with respect to which indemnification might be sought under this
Section 5.3. The indemnified Covered Person shall give a written undertaking to
reimburse the Trust or the Series, as the case may be, in the event it is
subsequently determined that it is not entitled to such 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
<PAGE>
not exclude any other right to which it may be lawfully entitled and shall
inure to the benefit of its heirs, executors, administrators or other legal
representatives.
Section 5.4. INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder or former
Shareholder shall be held to be personally liable solely by reason of his or her
being or having been a Shareholder and not because of acts or omissions or for
some other reason, the Shareholder or former Shareholder (or his or her heirs,
executors, administrators or other legal representatives or in the case of a
corporation or other entity, its corporate or other general successor) shall be
entitled out of the assets of the Series of which such Shareholder held Shares,
to be held harmless from and indemnified against all loss and expense, including
legal expenses reasonably incurred, arising from such liability. The rights
accruing to a Shareholder under this Section 5.4 shall not exclude any other
right to which such Shareholder may be lawfully entitled, nor shall anything
contained herein restrict the right of the Trust or any Series thereof to
indemnify or reimburse a Shareholder in any appropriate situation even though
not specifically provided herein.
Section 11.5. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS. (a) The
provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in con-
flict with requirements of the 1940 Act, would be inconsistent with any of the
conditions necessary for qualification of the Trust as a regulated investment
company under the Code or is inconsistent with other applicable laws and regu-
lations, such provision shall be deemed never to have constituted a part of this
Declaration, provided that such determination shall not affect any of the
remaining provisions of this Declaration or render invalid or improper any
action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or unenforceable
in any jurisdiction, such invalidity or unenforceability shall attach only to
such provision in such jurisdiction and shall not in any manner affect such
provision in any other jurisdiction or any other provision of this Declaration
in any jurisdiction.
The By-Laws of Haven Capital Management, Inc., the Fund's investment adviser,
provides the following indemnification in its Section 6.01:
The Corporation shall, to the fullest extent permitted by applicable law from
time to time in effect, indemnify any and all persons who may serve or who have
<PAGE>
served at any time as Directors or officers of the Corporation, or who at the
request of the Corporation may serve or at any time have served as Directors or
officers of another corporation (including subsidiaries of the Corporation) or
of any partnership, joint venture, trust or other enterprise, from and against
any and all of the expenses, liabilities or other matters referred to in or
covered by said law. Such indemnification shall continue as to a person who has
ceased to be Director or officer and shall inure to the benefit of the heirs,
executors and administrators of such a person. The Corporation may also
indemnify any and all other person whom it shall have power to indemnify under
any applicable law from time to time in effect to the extent authorized by the
Board of Directors and permitted by such law. The indemnification provided by
this Article shall not be deemed exclusive of any other rights to which any
person may be entitled under any provision of the Certificate of Incorporation,
other By-Law, agreement, vote of stockholders or disinterested Directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office. [Section 145.]
Insofar as indemnification for liability arising under the Securities Act of
1933, as amended (the "1933 Act"), may be permitted to Trustees, officers and
controlling persons of Registrant pursuant to the foregoing provisions, or
otherwise, Registrant has been advised that in the opinion of the Securities and
Exchange Commission ("SEC") such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by Trustee, officer or controlling
person of Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer or controlling person in
connection with the securities being registered, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such indemni-
fication by it is against public policy as expressed in the 1933 Act and will be
governed by the final adjudication of such issue.
Item 26. 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.
<PAGE>
Position/Office Other
Name with Haven<F1> Business, etc.
- ---- -------------- --------------
Stephen Ely Managing Director and None
Secretary
Colin C. Ferenbach Managing Director and None
Treasurer
Denis M. Turko Managing Director and None
Chairman
<F1> Address: 655 Third Avenue, New York, New York 10017.
Item 27. Principal Underwriters
----------------------
(a) Sunstone Distribution Services, LLC ("Sunstone") serves as principal
underwriter for Registrant. Sunstone acts as an underwriter for:
Choice Funds
First Omaha Funds, Inc.
The Green Century Funds
Johnson Family Funds
La Crosse Funds
Lend Lease Funds
The Marsico Investment Fund
RREEF Securities Trust
(b) To the best of Registrant's knowledge, the executive officers of Sunstone,
distributor for Registrant, are as follows:
Name and Principal Positions and Offices Positions and Offices
Business Address with Sunstone with Fund
- ---------------- ------------- ---------
Miriam M. Allison President and Member None
207 E. Buffalo Street
Suite 400
Milwaukee, WI 53202
<PAGE>
Daniel S. Allison Secretary and Member None
207 E. Buffalo Street
Suite 400
Milwaukee, WI 53202
Peter J. Hammond Vice President None
207 E. Buffalo Street
Suite 400
Milwaukee, WI 53202
Terry Ladwig Vice President None
207 E. Buffalo Street
Suite 400
Milwaukee, WI 53202
(c) Commissions and compensation paid, directly or indirectly, 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,
1999 were as follows:
(1)
Name of Principal
Underwriter
- --------------------
Sunstone Distribution
Services, LLC
(2)
Net Underwriting
Discounts and
Commissions
- --------------------
$0
(3)
Compensation on
Redemption and
Repurchase
- --------------------
$0
(4)
Brokerage
Commissions
- --------------------
$0
(5)
Other
Compensation
- --------------------
$93,715
<F1> For distribution services pursuant to the Distribution Agreement between
the Fund and Sunstone.
Item 28. 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)
<PAGE>
(2) PFPC Inc.
103 Bellevue Parkway
Wilmington, Delaware 19809
(records relating to its functions as administrator)
(3) PFPC Inc.
400 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 29. Management Services
-------------------
Not applicable.
Item 30. 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.
<PAGE>
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. 11 pursuant to Rule 485(b)
under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment No. 11 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 25th day of February, 2000.
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 25, 2000
Colin C. Ferenbach (Chief Executive Officer)
/s/ Stephen Ely Treasurer, Secretary and February 25, 2000
Stephen Ely Trustee (Chief Financial
Officer)
/s/ Denis M. Turko Vice President and Trustee February 25, 2000
Denis M. Turko
/s/ D. Euan Baird<F1> Trustee February 25, 2000
D. Euan Baird
/s/ William F. Indoe<F1> Trustee February 25, 2000
William F. Indoe
/s/ Robert E. Kaufmann<F1>Trustee February 25, 2000
Robert E. Kaufmann
<PAGE>
/s/ John F. McNiff<F1> Trustee February 25, 2000
John F. McNiff
<F1> By:/s/ Colin C. Ferenbach
Colin C. Ferenbach
Attorney-in-fact<F2>
<F2> Pursuant to the power of attorney filed as part of the signature page to
Pre-Effective Amendment No. 1 to the Registration Statement on Form N-1A,
No. 33-76670, filed May 25, 1994.
<PAGE>
INDEX TO EXHIBITS
-----------------
Exhibit No. Description
- ----------- -----------
(i)(1) Opinion and consent of Debevoise & Plimpton
(j) Consent of PricewaterhouseCoopers LLP
(m)(7) Letter agreement between Mount & Nadler Inc. and Registrant
(p) Code of Ethics of Haven and the Fund
<PAGE>
Exhibit (i)(1)
[Letterhead of Debevoise & Plimpton]
February 25, 2000
The Haven Capital Management Trust
655 Third Avenue
New York, New York 10017
Dear Sirs:
You have requested our opinion in connection with your filing of Post-Effective
Amendment No. 11 to the Registration Statement on Form N-1A (the "Post-Effective
Amendment") under the Securities Act of 1933, as amended (the "Act"), of The
Haven Capital Management Trust, a Delaware business trust (the "Trust"), and in
connection therewith your registration of shares of beneficial interest, par
value of $.001, of the Trust that have been classified as a series relating to
the Haven Fund (the "Shares").
We have examined and relied upon originals, or copies certified to our
satisfaction, of such company records, documents, certificates and other
instruments as in our judgment are necessary or appropriate to enable us to
render the opinion set forth below.
We are of the opinion that:
1. The Shares issued in the continuous offering have been duly authorized and,
assuming the issuance of the Shares for cash at net asset value and receipt by
the Trust of the consideration therefor as set forth in the Post-Effective
Amendment and to the extent such Shares remain outstanding, the Shares have been
and will be validly issued, fully paid and nonassessable.
We express no opinion as to matters governed by any laws other than Chapter 38
of Title 12 of the Delaware Code entitled "Treatment of Delaware Business
Trusts" and the federal laws of the United States. We consent to the filing of
this opinion solely in connection with the Post-Effective Amendment. In giving
such consent, we do not hereby admit that we come within the category of persons
whose consent is required under Section 7 of the Act or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Debevoise & Plimpton
<PAGE>
Exhibit (j)
[Letterhead of PricewaterhouseCoopers LLP]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement on
Form N-1A of our report dated November 30, 1999, relating to the financial
statements and financial highlights which appears in the October 31, 1999 Annual
Report to Shareholders of The Haven Capital Management Trust which is also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the headings "Financial Highlights" and under "More
About the Fund-The Exchange" and under "Investment Advisory and Other Services-
Independent Public Accountants" and in the paragraph describing financial
statements on the first page of the Statement of Additional Information.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Philadelphia, PA
February 18, 2000
<PAGE>
Exhibit (m)(7)
December 1, 1999
Colin Ferenbach
Haven Capital Management Trust
655 Third Avenue
New York, NY 10017
Dear Colin:
This letter constitutes an agreement between The Haven Capital Management Trust
and Mount&Nadler Inc., to cover the media relations program that Mount&Nadler
will conduct on behalf of The Haven Fund.
Beginning December 1, 1999, Mount&Nadler will conduct an ongoing media relations
program and serve as public relations counsel for The Haven Fund. The Haven
Fund will pay a monthly retainer fee of $4,000 to Mount&Nadler and reimburse
expenses (including messenger and overnight delivery, phone, fax, publications,
photocopying, postage, travel and entertainment, and subcontracted services)
incurred by Mount&Nadler in the course of conducting the program.
This agreement may be canceled by either party at any time. This agreement may
also be terminated at any time, without the payment of any penalty, by vote of a
majority of the members of the trustees of The Haven Capital Management Trust
who are not interested persons of the Trust and have no direct or indirect
financial interest in the operation of the Trust's distribution plan or in any
agreements related to the plan or by vote of a majority of the outstanding
voting securities of The Haven Fund on not more than sixty days' written notice
to any other party to the agreement. 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 Investment Advisers Act of 1940.)
If these terms are acceptable to Haven Capital Management Trust, please indicate
your consent to this agreement by signing below and returning an executed copy
of this letter to Mount&Nadler.
Sincerely,
/s/ Hedda Nadler-Hurvich /s/ Colin Ferenbach
Hedda Nadler-Hurvich Colin Ferenbach
Executive Vice President President
Mount & Nadler Inc. The Haven Capital Management Trust
<PAGE>
Exhibit (p)
THE HAVEN CAPITAL MANAGEMENT TRUST
and
HAVEN CAPITAL MANAGEMENT, INC.
AMENDED
CODE OF ETHICS
CONCERNING PERSONAL SECURITIES TRANSACTIONS
ARTICLE I
STATEMENT OF GENERAL PRINCIPLES
As an investment adviser it is imperative that Haven Capital Management, Inc.
("Haven") preserve its reputation for fiduciary responsibility, and unswerving
dedication to its client's best interests. No action that might tarnish Haven's
corporate character can be tolerated.
At all times, the officers, directors and employees of Haven must place the
interests of The Haven Capital Management Trust (the "Trust") and Haven's other
investment advisory clients ("Clients") ahead of their personal interests, and
the officers and trustees of the Trust must place the interests of the Trust
ahead of their personal interests. All such persons must never take
inappropriate advantage of their positions with respect to Haven and the Trust.
Their personal securities transactions must be conducted in a manner, consistent
with principles and procedures enunciated in this Code of Ethics ("Code"), to
avoid any actual or potential conflict of interest and any abuse of such
person's position of trust and responsibilities. Where possible, Haven and the
Trust intend to eliminate even the appearance of impropriety in personal
securities trades.
ARTICLE II
APPLICABILITY OF THE CODE
(a) Persons to Whom This Code is Applicable. This Code applies to all
directors, officers, and employees of Haven and to those trustees, officers and
employees of the Trust who make, participate in or receive current information
concerning decisions as to purchases or sales of securities for the Trust. Such
persons, referred to as "access persons," will be provided with a copy of this
Code and informed of their duty to comply with its provisions. The Trust
intends to conduct its affairs in a manner such that the Independent Trustees
(as defined in Article VIII) will not be access persons.
<PAGE>
Certain provisions of this Code apply only to persons who, in connection with
their regular functions or duties, make or participate in making recommendations
regarding the purchase or sale of securities by the Trust or by Haven's clients.
Such persons, referred to as "investment personnel," shall include without
limitation all Haven portfolio managers, analysts and traders. The Independent
Trustees shall not be deemed to be "investment personnel."
(b) Covered Securities. The restrictions on personal investing activities set
forth in Article III and the compliance procedures set forth in Article V shall
apply only to "Covered Securities", which are all securities other than direct
obligations of the U.S. government, bankers' acceptances, bank certificates of
deposit, commercial paper, high quality short-term debt instruments (including
repurchase agreements) and shares of registered open-end investment companies.
ARTICLE III
RESTRICTIONS ON
PERSONAL INVESTING ACTIVITIES
(a) Restrictions. Access persons and investment personnel shall not take
unfair advantage of their knowledge of purchases or sales of securities by the
Trust or Clients, or the consideration or recommendation of such purchases or
sales. To implement this policy the following restrictions are established:
(1) Initial Public Offerings. No investment personnel shall directly or
indirectly purchase or acquire any direct or indirect beneficial ownership (as
defined in Article VIII) in any security offered pursuant to an initial public
offering.
(2) Private Placements. No investment personnel shall acquire securities in a
private placement without receiving prior written approval from the Compliance
Officer (as defined in Article VIII). In determining whether to approve such
proposed acquisition, the Compliance Officer will consider, among other factors,
whether the investment opportunity should be reserved for the Trust or Clients
and whether the opportunity is being offered to an individual by virtue of his
or her position with the Trust or Haven.
Investment personnel who have been authorized to acquire securities in a private
placement are required to disclose that investment if and when that person plays
a part in the subsequent recommendation to the Trust or a Client of any
investment in the issuer. In such a circumstance, any such recommendation to
<PAGE>
purchase securities of the issuer will be subject to an independent review by
investment personnel with no personal interest in the issuer.
(3) Blackout Periods. No access person shall knowingly purchase or sell any
securities in which he or she has or will acquire any direct or indirect
beneficial ownership if such securities are being (i) recommended by Haven to
the Trust or Clients for purchase or sale or (ii) actively considered by Haven
for recommendation to the Trust or Clients. Securities will be deemed to be
under active consideration for recommendation during the time when serious
discussions or investigations are being conducted within Haven concerning the
advisability of such recommendation.
No access person may sell a security in which he or she has a direct or indirect
beneficial ownership interest within 7 calendar days after Haven has recommended
the purchase of such security to the Trust or a Client. No access person may
acquire a direct or indirect beneficial ownership interest in a security within
7 calendar days after Haven has recommended the sale of such security to the
Trust or a Client.
(4) Ban on Short-Term Trading Profits. Haven and the Trust discourage
investment personnel from profiting in the purchase and sale, or sale and
purchase, of the same (or equivalent) securities within 60 calendar days.
Except with the prior written consent of the Compliance Officer, investment
personnel shall not profit from the purchase and sale, or sale and purchase, of
the same (or equivalent) securities within 60 calendar days if, during such
intervening period, the same (or equivalent) securities were held by the Trust
or a Client.
(5) Gifts. Investment personnel shall not accept any gift or other thing of
more than de minimis value from any person or entity that does business with or
on behalf of the Trust or Haven.
(6) Service as a Director. Investment personnel may not serve on the board of
directors of a publicly traded company, absent prior authorization by the
Compliance Officer based upon a determination that board service would be
consistent with the interests of the Trust and Clients. In instances in which
board service is authorized, investment personnel serving as directors normally
should be isolated from persons making investment decisions through "Chinese
Wall" or other procedures.
<PAGE>
(b) Exceptions. The Compliance Officer may in rare instances grant exceptions
from the specific procedures of this Article III upon written request explaining
the circumstances or financial emergency, provided that the Compliance Officer
determines that the exception is otherwise consistent with this Code. All
exceptions granted will be reported to the Trustees of the Trust no less
frequently than annually.
ARTICLE IV
MATERIAL CONFIDENTIAL INFORMATION
Each access person is reminded that it constitutes a violation of the federal
securities laws for any person to trade in or recommend trading in the
securities of a company while in possession of material confidential information
concerning that company, or to disclose such information to any person not
entitled to receive it if there is reason to believe that such information will
be used in connection with a trade in the securities of that company. Tippees
can also be liable in certain circumstances.
Material confidential information is any information about a company or the
market for the company's securities which has not come directly or indirectly
from the company and which has not been disclosed generally to the marketplace,
the dissemination of which is likely to affect the market value of any of the
company's securities or is likely to be considered important by reasonable
investors, including reasonable speculative investors, in determining whether to
trade in such securities. Advance information that a company is about to issue
a new product or issue a surprise earnings report are the kinds of information
often deemed material.
Any officer, director, trustee or employee of Haven or the Trust who engages in
insider trading will be dismissed immediately.
Article V
COMPLIANCE PROCEDURES
In order to implement the general principles, restrictions and prohibitions
contained in this Code, the Trust and Haven adopt the following compliance
procedures:
(a) Preclearance. All transactions in which officers, directors and employees
of Haven have a direct or indirect beneficial ownership interest ("House
Accounts") must be handled through Haven. Haven's trader is responsible for
preclearing and monitoring all transactions.
<PAGE>
(b) Pricing of House Account Transactions. Haven has consistently had a policy
designed to insure that the Trust and Clients always receive the most beneficial
prices. On any given day, House Accounts may not trade in securities
recommended to the Clients unless all orders in hand have been completed.
Likewise, no transactions in securities subject to review and probable purchase
or sale by Haven for its Client accounts will be allowed (in addition, no
transactions in securities subject to the blackout periods relating to Trust
transactions, as specified in Article III, Section (a)(3), will be allowed). If
a trade for the Trust or a Client is executed on the same day subsequent to the
execution of a trade for a House Account, the Trust or Client must always
receive the most beneficial price. Transactions for House Accounts are not
included in average price calculations for the Trust and Client accounts.
(c) Records of Securities Transactions by Persons Other Than Independent
Trustees. Each access person must report to Haven:
(1) Initial Holdings Period. No later than 10 days after such person becomes an
access person, the following information:
(A) The title, number of shares and principal amount of each Covered Security in
which such access person had any direct or indirect beneficial ownership when
such person became an access person;
(B) The name of any broker, dealer or bank with whom such access person
maintained an account in which any securities were held for the direct or
indirect benefit of such access person as of the date the person became an
access person; and
(C) The date that the report is submitted by such access person.
(2) Quarterly Transaction Reports. No later than 10 days after the end of a
calendar quarter, the following information:
(A) With respect to any transaction during the quarter in a Covered Security in
which such access person had any direct or indirect beneficial ownership;
(i) The date of the transaction, the title, the interest date and maturity date
(if applicable), the number of shares and principal amount of each Covered
Security involved;
<PAGE>
(ii) The nature of the transaction (i.e., purchase, sale or any other type of
acquisition or disposition);
(iii) The price of the Covered Security at which the transaction was effected;
(iv) The name of the broker, dealer or bank with or through which the
transaction was effected; and
(v) The date that the report is submitted by such access person.
(B) With respect to any account established by such access person in which any
securities were held during the quarter for the direct or indirect benefit of
such access person:
(i) The name of the broker, dealer or bank with whom such access person
established the account;
(ii) The date the account was established; and
(iii) The date that the report is submitted by such access person.
Such access person need not submit a Quarterly Transaction Report under this
sub-section (c)(2) if the report would duplicate information contained in broker
trade confirmations or account statements received by the Trust or Haven with
respect to such access person in the time period required by this sub-section,
if all of the information required by this sub-section is contained in the
broker trade confirmations or account statements, or in the records of the Trust
or Haven.
(3) Annual Holdings Reports. Annually, the following information (which
information must be current as of a date no more than 30 days before the report
is submitted):
(a) The title, number of shares and principal amount of each Covered Security in
which such access person had a direct or indirect beneficial ownership;
<PAGE>
(b) The name of any broker, dealer or bank with whom the access person maintains
an account in which any securities are held for the direct or indirect benefit
of such access person; and
(c) The date that the report is submitted by such access person.
(d) Initial and Annual Certification. Within 10 day after the commencement of
employment, and within 30 days after the end of each calendar year thereafter,
each access person other than Independent Trustees shall acknowledge, on the
form attached as Appendix B, that he or she is subject to this Code and shall
certify that he or she (i) has read and understood it, (ii) has complied with
each of its requirements and (iii) has disclosed or reported all personal
securities transactions required to be disclosed or reported pursuant to the
requirements of the Code.
(e) Records of Securities Transactions by Independent Trustees. Each
Independent Trustee shall report to the Compliance Officer within 10 days after
the end of each quarter the information described in Section (c)(2) of this
Article V with respect to transactions in Covered Securities in which such
Independent Trustee has, or by reason of such transaction has acquired, any
direct or indirect beneficial ownership; provided, however, that an Independent
Trustee need only report a transaction if such Independent Trustee, at the time
of that transaction, knew or, in the ordinary course of fulfilling his or her
official duties as a trustee of the Trust, should have known that, during the
15-day period immediately preceding or after the date of the transaction by the
Independent Trustee, such Covered Security is or was purchased or sold by the
Trust or such Covered Security was being considered for purchase or sale by the
Trust, its investment adviser or other accounts managed by Haven. An
Independent Trustee shall have no affirmative duty to inquire about purchases or
sales.
(f) Review of Reports. The Trust and Haven shall institute procedures by which
appropriate management or compliance personnel of Haven review the reports
required to be submitted under this Article V.
(g) Recordkeeping Requirements. The Trust and Haven shall maintain records in
the manner and to the extent required pursuant to Rule 17j-1 under the
Investment Company Act of 1940, as amended, including (i) reports required under
this Code and (ii) a record of any decision, and the reasons supporting the
decision, to approve the acquisition by any investment personnel of Covered
Securities offered in an initial public offering or a private placement.
ARTICLE VI
<PAGE>
ANNUAL REVIEW BY THE TRUSTEES
At least once a year, the management of the Trust shall prepare a written report
to the Trustees that, among other things:
(a) describes any issues arising under the Code or procedures related to the
Code since the last annual report to the Trustees, including information about
material violations of the Code and procedures and sanctions imposed in response
to material violations;
(b) certifies that the Trust and Haven have adopted procedures reasonably
necessary to prevent access persons from violating this Code; and
(c) identifies any recommended changes in existing restrictions or procedures
based upon the Trust's experience under this Code, evolving industry practices
or developments in applicable laws or regulations.
ARTICLE VII
ADOPTION AND AMENDMENT
This Code shall be adopted, and may be amended, by the Trustees of the Trust,
including a majority of the Independent Trustees, based upon a determination
that the Code contains provisions reasonably necessary to prevent access persons
from engaging in Unlawful Actions (as defined in Article VIII). In addition,
prior to approving this Code and any amendment to it, the Trustees must receive
a certification from Haven that Haven has adopted procedures reasonably
necessary to prevent access persons from violating this Code.
ARTICLE VIII
DEFINITIONS, MISCELLANEOUS
(a) Definitions. Certain terms used in this Code shall have the meaning set
forth below:
"Beneficial ownership" shall have the meaning set forth in Appendix A.
The "Compliance Officer" shall be Stephen Ely.
The term "Independent Trustee" shall mean a Trustee of the Trust who is not an
interested person of the Trust within the meaning of Section 2(a)(19) of the
Act.
<PAGE>
"Unlawful Actions" shall mean any action by an affiliated person of the Trust or
Haven, in connection with the purchase or sale, directly or indirectly, by such
person of a Covered Security held, or to be acquired, by the Trust (including
(i) any Covered Security that, within the most recent 15 days, is or has been
held by the Trust, is being or has been considered by Haven for purchase by the
Trust and (ii) any option to purchase or sell, and any security convertible into
or exchangeable for, a Covered Security described in (i)):
(1) To employ any device, scheme or artifice to defraud the Trust;
(2) To make any untrue statement of a material fact to the Trust or omit to
state a material fact necessary in order to make the statements made to the
Trust, in light of the circumstances under which they are made, not misleading;
(3) To engage in any act, practice or course of business that operates or would
operate as a fraud or deceit on the Trust; or
(4) To engage in any manipulative practice with respect to the Trust.
(b) Interpretation. The provisions of this Code will be interpreted by counsel
to the Trust. Questions of interpretation may be directed to the Compliance
Officer who may refer such questions to counsel to the Trust.
(c) Sanctions. If advised of a violation of this Code by a trustee, officer or
employee of the Trust, the trustees may impose such sanctions as they deem
appropriate. If advised of a violation of this Code by any other access person,
the Compliance Officer may impose such sanctions as he deems appropriate, and
any such violations of this Code and sanctions therefor will be reported to the
trustees quarterly.
(d) Effective Date. This Code shall become effective as of September 21, 1994,
as amended on February 15, 2000.
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APPENDIX A
Beneficial Ownership
As a general rule, a person is regarded as the beneficial owner of securities
held in the name of his or her spouse or their minor children. These
relationships, in the absence of special circumstances, ordinarily confer
benefits substantially equivalent to ownership (i.e., application of the income
derived from the securities to maintain a common home, to meet expenses which
would otherwise be met from other sources, or the ability to exercise a
controlling influence over the purchase, sale or voting of such securities). A
person is also regarded as the beneficial owner of securities held in the name
of a spouse or minor children even though he or she does not obtain any of the
above benefits if he or she can vest or revest title in himself or herself at
once or at some future time.
A person is the beneficial owner of securities held in the name of another
person if by reason of any contract, understanding, relationship, agreement or
other arrangement, he or she obtains benefits substantially equivalent to those
of ownership. Moreover, the fact that the other person is a relative or
relative of a spouse and sharing the same home may indicate the existence of
benefits substantially equivalent to ownership of the securities held in the
name of such relative.
A person is also regarded as the beneficial owner of securities held by a
partnership of which he or she is a partner, a corporation of which he or she is
a controlling person or which is used alone or with a small group as a medium
for investing or trading in securities, or a trust over which he or she has any
direct or indirect influence or control and of which such person or any member
of his or her immediate family (spouse, children, grandchildren and parents) is
a beneficiary.
Any questions concerning the applicability of the above considerations may be
directed to the Compliance Officer who will refer such questions to counsel as
appropriate.
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APPENDIX B
CERTIFICATION OF COMPLIANCE WITH CODE
The undersigned hereby acknowledges that he or she is subject to the Code and
certifies that he or she (i) has read and understood it, (ii) has complied its
requirements and (iii) has disclosed or reported all personal securities
transactions required to be disclosed or reported pursuant to the requirements
of the Code.
Signed:
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Date:
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