<PAGE>
Filed pursuant to Rule 497(c)
File Nos. 33-79742 and 811-8546
THE BRAMWELL GROWTH FUND
A No-Load Diversified Mutual Fund Whose Primary
Investment Objective is to Achieve
Long-Term Capital Growth.
- -------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1996
- -------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and should
be read in conjunction with the prospectus for The Bramwell Growth Fund dated
November 1, 1996, as amended from time to time, a copy of which may be obtained
without charge by calling 800- BRAMCAP or writing to Sunstone Financial Group,
Inc., 207 East Buffalo Street, Suite 400, Milwaukee, Wisconsin 53202.
<PAGE>
TABLE OF CONTENTS
INVESTMENT OBJECTIVES AND POLICIES........................................... 1
DIRECTORS AND OFFICERS....................................................... 9
INVESTMENT ADVISORY AND OTHER SERVICES....................................... 12
DISTRIBUTION PLAN.............................................................13
PORTFOLIO TURNOVER........................................................... 13
PORTFOLIO TRANSACTIONS AND BROKERAGE......................................... 14
PERFORMANCE INFORMATION...................................................... 15
TAX STATUS................................................................... 17
NET ASSET VALUE.............................................................. 20
CAPITAL STRUCTURE............................................................ 20
HOW TO REDEEM SHARES......................................................... 21
EXPERTS...................................................................... 22
FINANCIAL STATEMENTS......................................................... 22
APPENDIX.....................................................................A-1
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Investment Objectives and Policies
Long-term capital growth is the Fund's primary investment objective.
Current income is a secondary objective. Under normal circumstances the Fund's
assets are primarily invested in common stock and high grade securities
convertible into common stock, but the Fund may also hold cash or cash
equivalents and invest without limit in U.S. government obligations if its
investment adviser, Bramwell Capital Management, Inc. determines that a
temporary defensive position is advisable. The Fund may not purchase or retain
the securities of any issuer if those officers or directors of the Fund or its
investment adviser owning individually more than 1/2 of 1% of the securities of
such issuer together own more than 5% of the securities of such issuer.
Fundamental Investment Restrictions. The following restrictions are deemed to be
fundamental policies and may not be changed without the approval of a majority
of the Fund's outstanding voting securities. Except with respect to investment
restriction 4, the percentage limitations set forth below, as well as those
described elsewhere in the Prospectus and this Statement of Additional
Information, apply only at the time an investment is made or other relevant
action is taken by the Fund.
1. The Fund may not invest 25% or more of its net assets in one or more
issuers conducting their principal business in the same industry.
2. With respect to 75% of its assets, the Fund may not invest more than 5%
of the market value of its total assets in the securities of any single
issuer (other than obligations issued or guaranteed as to principal and
interest by the U.S. Government or any agency or instrumentality
thereof);
3. With respect to 75% of its assets, the Fund may not purchase more than
10% of the outstanding voting securities of any issuer (other than
obligations of the U.S.
Government);
4. The Fund may not issue senior securities or borrow money except for
temporary purposes in amounts up to 10% of its net assets (including the
amount borrowed) less liabilities (not including the amount borrowed) at
the time of such borrowing, provided that collateral arrangements with
respect to currency exchange contracts, futures contracts and other
permitted investments shall not be deemed to entail the issuance of
senior securities if appropriately covered. The Fund will not make any
investments while outstanding borrowings exceed 5% of the value of its
total assets.
5. The Fund may not make loans, although it may invest in debt securities,
enter into repurchase agreements and lend its portfolio securities.
6. The Fund may not invest in securities or other assets that the Board of
Directors determines to be illiquid if more than 15% of the Fund's net
assets would be invested in such securities.
<PAGE>
7. The Fund may not (a) purchase or sell commodities or commodity contracts
(other than financial futures and related options), (b) invest in oil,
gas, or mineral exploration or development programs or leases, or (c)
purchase securities on margin, except for such short-term credit as may
be necessary for the clearance of transactions and except for borrowings
in amounts not exceeding 10% of its net assets.
8. The Fund may not purchase or sell real estate or make real estate
mortgage loans or invest in real estate limited partnerships, except
that the Fund may purchase or sell securities issued by entities engaged
in the real estate industry or instruments backed by real estate.
9. The Fund may not act as an underwriter of securities issued by others,
except to the extent it may be deemed to be an underwriter in connection
with the disposition of portfolio securities of the Fund.
The foregoing restrictions are fundamental policies that may not be
changed without the approval of a majority of the Fund's outstanding voting
securities. As used in this Statement of Additional Information, a majority of
the Fund's outstanding voting securities means the lesser of (a) more than 50%
of its outstanding voting securities or (b) 67% or more of the voting securities
present at a meeting at which more than 50% of the outstanding voting securities
are present or represented by proxy. The Fund's investment objectives, as well
as those policies and restrictions which are not fundamental, may be modified by
the Board of Directors without shareholder approval if, in the reasonable
exercise of its business judgment, modification is determined to be necessary or
appropriate to carry out the Fund's objective. However, the Fund will not change
its investment policies or restrictions without written notice to shareholders.
Except as otherwise noted herein and in the Fund's prospectus, the
Fund's investment objectives and policies may be changed by a vote of the
Directors without a vote of shareholders. In order to permit the sale of the
Fund's shares in certain states, the Fund may make commitments with respect to
the Fund more restrictive than the investment policies listed above and in the
Prospectus. Should the Fund determine that any commitment made to permit the
sale of the Fund's shares in any state is no longer in the best interests of the
Fund, it will revoke the commitment by terminating sales of the Fund's shares in
the state involved.
Further Information on the Nature of the Fund's Investments
General Characteristics of Convertible Securities. The Fund may invest only in
high grade convertible securities; that is, bonds, notes, debentures, preferred
stocks and other securities which are convertible into common stocks. "High
grade" securities are those rated within the three highest ratings categories of
Standard & Poor's Corporation (S&P) or Moody's Investors Service, Inc. (Moody's)
or that are determined by the investment adviser to be of equivalent quality.
Investments in convertible securities may provide incidental income through
interest and dividend payments and/or an opportunity for capital appreciation by
virtue of their conversion or exchange features.
Convertible debt securities and convertible preferred stocks, until
converted, have general characteristics similar to both debt and equity
securities. Although to a lesser extent than with debt securities generally, the
market value of convertible securities tends to decline as interest
2
<PAGE>
rates increase and, conversely, tends to increase as interest rates decline. In
addition, because of the conversion or exchange feature, the market value of
convertible securities typically changes as the market value of the underlying
common stocks changes, and, therefore, also tends to follow movements in the
general market for equity securities. As the market price of the underlying
common stock declines, convertible securities tend to trade increasingly on a
yield basis, and so may not experience market value declines to the same extent
as the underlying common stock. When the market price of the underlying common
stock increases, the prices of the convertible securities tend to rise as a
reflection of the value of the underlying common stock, although typically not
as much as the underlying common stock. While no securities investments are
without risk, investments in convertible securities generally entail less risk
than investments in common stock of the same issuer.
As debt securities, convertible securities are investments which provide
for a stream of income (or in the case of zero coupon securities, accretion of
income) with generally higher yields than common stocks. Convertible securities
generally offer lower yields than nonconvertible securities of similar quality
because of their conversion or exchange features.
Convertible securities are generally subordinated to other similar but
non-convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock, of the
same issuer. However, because of the subordination feature, convertible bonds
and convertible preferred stock typically have lower ratings than similar
nonconvertible securities.
General Characteristics of Foreign Securities. Foreign securities involve
certain inherent risks that are different from those of domestic issuers,
including political or economic instability of the issuer or the country of
issue, diplomatic developments which could affect U.S. investments in those
countries, changes in foreign currency and exchange rates and the possibility of
adverse changes in investment or exchange control regulations. As a result of
these and other factors, foreign securities purchased by the Fund may be subject
to greater price fluctuation than securities of U.S. companies.
Most foreign stock markets are not as large or liquid as in the United
States, fixed commissions on foreign stock exchanges are generally higher than
the negotiated commissions on U.S. exchanges, and there is generally less
government supervision and regulation of foreign stock exchanges, brokers and
companies than in the United States. Investors should recognize that foreign
markets have different clearance and settlement procedures and in certain
markets there have been times when settlements have been unable to keep pace
with the volume of securities transactions, making it difficult to conduct such
transactions. Delays in settlement could result in temporary periods when assets
of the Fund are uninvested and no return is earned thereon. The inability of the
Fund to make intended security purchases due to settlement problems could cause
the Fund to miss attractive investment opportunities. Inability to dispose of
portfolio securities due to settlement problems either could result in losses to
the Fund due to subsequent declines in value of the portfolio security or, if
the Fund has entered into a contract to sell the security, could result in a
possible liability to the purchaser. Payment for securities without delivery may
be required in certain foreign markets. Further, the Fund may encounter
difficulties or be unable to pursue legal remedies and obtain judgments in
foreign courts. Foreign governments can also levy confiscatory taxes,
expropriate assets, and limit repatriations of assets. Typically, there is less
3
<PAGE>
publicly available information about a foreign company than about a U.S.
company, and foreign companies may be subject to less stringent reserve,
auditing and reporting requirements. It may be more difficult for the Fund's
agents to keep currently informed about corporate actions such as stock
dividends or other matters which may affect the prices of portfolio securities.
Communications between the United States and foreign countries may be less
reliable than within the United States, thus increasing the risk of delayed
settlements of portfolio transactions or loss of certificates for portfolio
securities. Individual foreign economies may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross national product, rate
of inflation, capital reinvestment, resource self-sufficiency and balance of
payments position.
Because investments in foreign securities will usually involve
currencies of foreign countries, and because the Fund may hold foreign
currencies, the value of the assets of the Fund as measured in U.S. dollars may
be affected favorably or unfavorably by changes in foreign currency exchange
rates and exchange control regulations, and the Fund may incur costs in
connection with conversions between various currencies. Although the Fund values
its assets daily in terms of U.S. dollars, it does not intend to convert its
holdings of foreign currencies into U.S. dollars on a daily basis. It will do so
from time to time, and investors should be aware of the costs of currency
conversion. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference (the "spread")
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Fund at one rate,
while offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer. The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign currency exchange market, or through entering into forward foreign
currency exchange contracts or purchase or writing put or call options on
foreign currencies.
General Characteristics of Securities Lending. In compliance with Securities and
Exchange Commission guidelines, any loans by the Fund of securities in its
portfolio would be required to be secured with collateral (consisting of any
combination of U.S. currency, securities issued or guaranteed by the United
States Government or any agency thereof, or irrevocable letters of credit or
other debt securities issued by entities rated within the two highest grades
assigned by S&P or Moody's or has been determined by the investment adviser to
be of equivalent quality).
The borrower must agree to add to such collateral to cover increases in
the market value of the loaned securities and the Fund must be entitled to
terminate any loan at any time, with the borrower obligated to redeliver
borrowed securities within five trading days. The borrower must agree that the
Fund will receive all dividends, interest or other distributions on loaned
securities and the Fund must be able to vote loaned securities whenever the
right to vote is material to the Fund's performance.
General Characteristics of Options. An option on a security is a contract that
permits the purchaser of the option, in return for the premium paid, the right
to buy a specified security, index or currency (in the case of a call option) or
to sell a specified security, index or currency (in the case of a put option)
from or to the writer of the option at a designated price during the term of the
option. An option on a securities index permits the purchaser of the option, in
return for the premium paid, the right to receive from the seller cash equal to
the difference between the closing price of the index and the exercise price of
the option. The gain or loss on an option on an index depends on price movements
in the instruments making up the market, market segment,
4
<PAGE>
industry or other composite on which the underlying index is based, rather than
price movements in individual securities, as is the case with respect to options
on securities. The Fund may write a call or put option only if the option is
"covered." This means that so long as the Fund is obligated as the writer of a
call option, it will own the underlying securities subject to the call, or hold
a call at the same or lower exercise price, for the same exercise period, and on
the same securities as the written call. A put is covered if the Fund maintains
liquid assets with a value equal to the exercise price in a segregated account,
or holds a put on the same underlying securities at an equal or greater exercise
price. Put options and call options typically have similar structural
characteristics and operational mechanics regardless of the underlying
instrument on which they are purchased or sold.
The Fund may invest in both conventional options which generally have a
maximum life of 9 months or less as well as longer term options which may be
exercised for longer periods of up to two or three years. Premiums paid (or
received) upon the purchase (or sale) of these long term options may be two to
three times the price of a short-term option.
The Fund's purchase of a put option on a security might be designed to
protect its holdings in the underlying instrument (or, in some cases, a similar
instrument) against a substantial decline in the market value by giving the Fund
the right to sell such instrument at the option exercise price. The Fund's
purchase of a call option on a security, index or currency might be intended to
protect the Fund against an increase in the price of the underlying instrument
that it intends to purchase in the future by fixing the price at which it may
purchase such instrument. If the Fund sells a call option, the premium that it
receives may serve as a partial hedge, to the extent of the option premium,
against a decrease in the value of the underlying securities or instruments in
its portfolio or will increase the Fund's income. The sale of put options can
also provide income.
Even though the Fund will receive the option premium to help protect it
against loss, a call sold by the Fund exposes the Fund during the term of the
option to possible loss of opportunity to realize appreciation in the market
price of the underlying security or instrument and may require the Fund to hold
a security or instrument which it might otherwise have sold.
The Fund's ability to close out its position as a purchaser or seller of
a put or call option is dependent, in part, upon the liquidity of the option
market. Among the possible reasons for the absence of a liquid option market on
an exchange are: (i) insufficient trading interest in certain options; (ii)
restrictions on transactions imposed by an exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities including reaching daily price
limits; (iv) interruption of the normal operations of an exchange; (v)
inadequacy of the facilities of an exchange to handle current trading volume; or
(vi) a decision by one or more exchanges to discontinue the trading of options
(or a particular class or series of options), in which event the relevant market
for that option on that exchange would cease to exist, although outstanding
options on that exchange would generally continue to be exercisable in
accordance with their terms.
The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
5
<PAGE>
General Characteristics of Futures. The Fund's use of financial futures and
options thereon will in all cases be consistent with applicable regulatory
requirements and in particular the rules and regulations of the Commodity
Futures Trading Commission and will be entered into only for bona fide hedging,
risk management (including duration management) or other portfolio management
purposes. Typically, maintaining a futures contract or selling an option thereon
requires the Fund to deposit with a financial intermediary as security for its
obligations an amount of cash or other specified assets (initial margin) which
initially is typically 1% to 10% of the face amount of the contract (but may be
higher in some circumstances). Additional cash or assets (variation margin) may
be required to be deposited thereafter on a daily basis as the mark to market
value of the contract fluctuates. The purchase of an option on financial futures
involves payment of a premium for the option without any further obligation on
the part of the Fund. If the Fund exercises an option on a futures contract it
will be obligated to post initial margin (and potential subsequent variation
margin) for the resulting futures position just as it would for any position.
Futures contracts and options thereon are generally settled by entering into an
offsetting transaction but there can be no assurance that the position can be
offset prior to settlement at an advantageous price, nor that delivery will
occur.
The Fund will not enter into a futures contract or related option
(except for closing transactions) if, immediately thereafter, the sum of the
amount of its initial margin and premiums on open futures contracts and options
thereon would exceed 5% of the Fund's total assets (taken at current value);
however, in the case of an option that is in-the-money at the time of the
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation.
There can be no assurance that a liquid market will exist at a time when
the Fund seeks to close out a futures or futures option position. The Fund would
be exposed to possible loss on the position during the interval of inability to
close, and would continue to be required to meet margin requirements until the
position is closed, which could result in a decrease in the Fund's net asset
value. The liquidity of a secondary market in a futures contract may be
adversely affected by "daily price fluctuation limits" established by commodity
exchanges which limit the amount of fluctuation in a futures contract price
during a single trading day. Once the daily limit has been reached in the
contract, no trades may be entered into at a price beyond the limit, thus
preventing the liquidation of open futures positions. The trading of futures
contracts is also subject to the risk of trading halts, suspensions, exchange or
clearing house equipment failures, government intervention, insolvency of a
brokerage firm or clearing house or other disruptions of normal trading
activity, which could at times make it difficult or impossible to liquidate
existing positions or to recover excess variation margin payments.
General Characteristics of Currency Transactions. A forward foreign currency
exchange contract involves a privately negotiated obligation to purchase or sell
(with delivery generally required) a specific currency at a future date, which
may be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. A currency swap is an
agreement to exchange cash flows based on the notional difference among two or
more currencies. The Fund may enter into currency transactions with
counterparties which have received (or the guarantors of the obligations which
have received) a rating within the two highest grades assigned by S&P or Moody's
or that are determined by the investment adviser to be of equivalent quality.
6
<PAGE>
The Fund's dealings in currency transactions will be limited to hedging
involving either specific transactions or portfolio positions. Transaction
hedging is entering into a currency transaction with respect to specific assets
or liabilities of the Fund, which will generally arise in connection with the
purchase or sale of its portfolio securities or the receipt of income therefrom.
Position hedging is entering into a currency transaction with respect to
portfolio security positions denominated or generally quoted in that currency.
The Fund will not enter into a transaction to hedge currency exposure to
an extent greater, after netting all transactions intended wholly or partially
to offset other transactions, than the aggregate market value (at the time of
entering into the transaction) of the securities held in its portfolio that are
denominated or generally quoted in or currently convertible into such currency,
other than with respect to cross hedging as described below.
The Fund may cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to decline in value
relative to other currencies to which the Fund has or in which the Fund expects
to have portfolio exposure.
Currency transactions can result in losses to the Fund if the currency
being hedged fluctuates in value to a degree or in a direction that is not
anticipated. Further, there is the risk that the perceived correlation between
various currencies may not be present or may not be present during the
particular time that the Fund is engaging in proxy hedging.
Currency transactions are subject to risks different from those of other
portfolio transactions. Because currency control is of great importance to the
issuing governments and influences economic planning and policy, purchases and
sales of currency and related instruments can be negatively affected by
government exchange controls, blockages, and manipulations or exchange
restrictions imposed by governments. These can result in losses to the Fund if
it is unable to deliver or receive currency or funds in settlement of
obligations and could also cause hedges it has entered into to be rendered
useless, resulting in full currency exposure as well as incurring transaction
costs. Currency exchange rates may fluctuate based on factors extrinsic to that
country's economy.
Use of Segregated Accounts. Futures contracts, options, options on futures
contracts, foreign forward currency contracts and foreign currency contracts
require the Fund to segregate liquid high grade assets with its custodian to the
extent Fund obligations are not otherwise "covered" through ownership of the
underlying security, financial instrument or currency. In general, either the
full amount of any obligation by the Fund to pay or deliver securities or assets
must be covered at all times by the securities, instruments or currency required
to be delivered, or, subject to any regulatory restrictions, an amount of cash
or liquid high grade securities at least equal to the current amount of the
obligation must be segregated with the custodian. The segregated assets cannot
be sold or transferred unless equivalent assets are substituted in their place
or it is no longer necessary to segregate them.
7
<PAGE>
Investment in Unseasoned Issuers. The Fund may invest in securities of issuers
which have a record of less than three (3) years of continuous operation,
including the operation of any predecessor business of a company which came into
existence as a result of a merger, consolidation, reorganization or purchase of
substantially all of the assets of such predecessor business, if such purchase
would not cause the value of the Fund's investments in all such companies to
exceed 5% of the value of its net assets.
8
<PAGE>
<TABLE>
<CAPTION>
DIRECTORS AND OFFICERS
The Directors and Officers of the Fund and their principal occupations during
the past five years are set forth below.
Principal Occupations During
Positions held the Past Five
Name, Address and Age with the Fund Years
- --------------------- ------------- ----------------------------
<S> <C> <C>
Elizabeth R. Bramwell* Director, President and President and Chief Executive
745 Fifth Avenue Chief Executive Officer, Officer, Bramwell Capital
New York, NY 10151 Chief Financial Officer Management (February 1994-
Age: 56 and Chief Investment present); President, Chief
Officer Investment Officer, Portfolio
Manager and Trustee, The
Gabelli Growth Fund (April
1987-February 1994).
J. Sinclair Armstrong Director Partner (1980-1984) and
200 Park Avenue Counsel (1984-1995),
New York, NY 10166 Whitman Breed Abbott &
Age: 81 Morgan (formerly Whitman
Ransom) (law firm);
Director and
Secretary, The Reed
Foundation,
(1986-present)
(philanthropy);
Executive Vice
President, U.S.
Trust Co. of New
York (1959-1980);
Assistant Secretary
of the Navy for
Financial Management
and Comptroller,
Department of the
Navy (1957-1959);
Chairman (1955-
1957) and
Commissioner
(1953-1957) of the
Securities and
Exchange Commission.
Isabel H. Benham Director Treasurer (1995-present) and
745 Fifth Avenue former President (1992-1995),
New York, NY 10151 Board of Trustees of the John
Age: 87 W. Barringer III National
Railroad Library; Director,
Executive Committee, Finance
Committee, St. Louis
Mercantile Library (1993-
1995); President, Printon
Kane Research Inc. (1978-
1991) (railroad analysis and
valuations); Senior Vice
President, Shearson Haydon
Stone Corp. (1968-1978).
9
<PAGE>
George F. Keane Director President Emeritus and Senior
450 Post Road East Investment Advisor (1993-
Westport, CT 06880 present) and founding Chief
Age: 67 Executive Officer (1971-1992),
The Common Fund (investment
management); President Emeritus
and Senior
Investment Advisor
(1993- present) and
Founding Chief
Executive Officer
(1988-1992),
Endowment Advisers,
Inc. (investment
management);
Director and
Chairman of
Investment
Committee, United
Negro College Fund
(1982-present);
Trustee,
Nicholas-Applegate
Investment Trust
(1993- present);
Member, Investment
Advisory Committee,
New York State
Common Retirement
Fund (1982-
present); Director,
School, College and
University
Underwriters Ltd.,
Bermuda
(1986-present);
Director, United
Educators Risk
Retention Group
(1989- present);
Director, RCB Trust
Company
(1991-present);
Director, National
Association of
College & University
Business Officers
(1993- present);
Chairman of the
Board, Trigen Energy
Corporation
(1994-present);
Director, Universal
Stainless & Alloy
Products (1994-
present).
James C. Sargent Director Counsel, Opton, Handler,
52 Vanderbilt Avenue Gottlieb, Feiler & Katz (1995-
New York, NY 10017 present) (law firm); Director,
Age: 80 Scan-Graphics (1992-present);
Director, Austin's
International
(1992-present);
Partner, Whitman
Breed Abbott &
Morgan (formerly
Whitman Ransom)
(1964- 1994) (law
firm); Assistant
General Counsel, CIT
Finance Corporation
(1960-1964);
Regional
Administrator, New
York City
(1955-1956) and
Commissioner
(1956-1960),
Securities and
Exchange Commission.
10
<PAGE>
Martha R. Seger, Ph.D. Director Chairman, Martha Seger &
220 Park Avenue Associates (1992-present);
Birmingham, MI 40889 Current Director, Amerisure,
Age: 64 Amoco, Providian, Fluor,
Johnson Controls,
Kroger, Tucson
Electric Power and
Xerox; Governor,
Federal Reserve
Board (1984-1991);
Commissioner of
Financial
Institutions, State
of Michigan
(1981-1982); Chief
Economist, Detroit
Bank & Trust
(Comerica)(1967-1974).
Mary F. McCollum Secretary and Treasurer Executive Vice President,
745 Fifth Avenue Bramwell Capital
New York, NY 10151 Management (May 1994-
Age: 50 present);
Vice President,
Operations and
Corporate Secretary
(1985-1993),
Assistant Treasurer/
Assistant Secretary
(1983-1985) and
Financial
Administrator
(1982-1983), The
Common Fund
(investment
management).
Margaret Bancroft Assistant Secretary Partner, Dechert Price &
477 Madison Avenue Rhoads (law firm and counsel
New York, NY 10022 to the Fund).
Age: 58
<FN>
_________________________
* Directors who are "interested persons" of the Fund, as defined in the
Investment Company Act of 1940 (the 1940 Act). The Directors of the Fund
who are officers or employees of the investment adviser receive no
remuneration from the Fund. Each of the other Directors is paid an
annual retainer of $3,000 and a fee of $500 for each meeting attended
and is reimbursed for the expenses of attending meetings.
</FN>
</TABLE>
11
<PAGE>
The following table sets forth information regarding compensation of the
Directors by the Fund for the fiscal year ended June 30, 1996. Officers of the
Fund and Directors who are interested persons of the Fund do not receive any
compensation from the Fund.
<TABLE>
<CAPTION>
Compensation Table*
(Fiscal Period ended June 30, 1996)
Total
Pension or Compensation
Aggregate Retirement From Registrant
Compensation Benefits Accrued Estimated and Fund
From as Part of Annual Benefits Complex Paid**
Name of Director Registrant Fund Expenses Upon Retirement to Directors
---------------- ------------ ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
Elizabeth R. Bramwell 0 0 0 0
J. Sinclair Armstrong $5,000 None N/A $5,000
Isabel H. Benham $5,000 None N/A $5,000
George F. Keane $5,000 None N/A $5,000
James C. Sargent $5,000 None N/A $5,000
Martha R. Seger $5,000 None N/A $5,000
<FN>
______________________
* Compensation is for the fiscal year ended June 30, 1996.
** The Fund is not part of any fund complex because it is not related to
any registered investment company and its investment adviser does not
act as investment adviser to any other registered investment company
(although it does act as subadviser with respect to the assets of such a
company); accordingly, the compensation reported in column (5) includes
only compensation paid by the Fund.
</FN>
</TABLE>
As of October 16, 1996, the officers and Directors of the Fund owned
1.5% of the outstanding shares of capital stock of the Fund. The Fund knows of
no person who owns beneficially more than 5% of the capital stock of the Fund.
INVESTMENT ADVISORY AND OTHER SERVICES
For the Fund's first fiscal period (the period from August 1, 1994
through June 30, 1995), the Fund paid the investment adviser an investment
advisory fee of $15,615. During that period, the investment adviser earned an
investment advisory fee of $211,052 pursuant to its investment advisory
agreement with the Fund, but voluntarily waived $195,437 of such fee in order to
limit the Fund's expenses to an annual rate of 1.75% of its average net assets
during such period.
For the fiscal period ended June 30, 1996, the Fund paid the investment
adviser an investment advisory fee of $1,195,114. During that period, the
investment adviser earned an investment advisory fee of $1,238,851 pursuant to
its investment advisory agreement with the
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Fund, but voluntarily waived $43,737 of such fee in order to limit the Fund's
expenses to an annual rate of 1.75% of its average net assets during such
period. The investment adviser has voluntarily agreed to so limit the Fund's
total expenses (excluding interest, taxes, brokerage and extraordinary expenses)
until June 30, 1997. After such date, the expense limitation may be terminated
or revised at any time.
For the Fund's fiscal period from August 1, 1994 through June 30, 1995,
the Fund paid the administrator a fee of $58,607. For the fiscal year ended June
30, 1996, the Fund paid the administrator a fee of $155,413.
DISTRIBUTION PLAN
The Fund has adopted a Service and Distribution Plan (the Plan) pursuant
to Rule 12b-1 under the 1940 Act. The Plan authorizes payments by the Fund in
connection with the distribution of its shares at an annual rate, as determined
from time-to-time by the Board of Directors, or up to 0.25% of the Fund's
average daily net assets.
Payments may be made by the Fund under the Plan for the purpose of
financing any activity primarily intended to result in the sales of shares of
the Fund as determined by the Board of Directors. Such activities typically
include advertising; compensation for sales and sales marketing activities of
Financial Service Agents and others, such as dealers or distributors;
shareholder account servicing; production and dissemination of prospectuses and
sales and marketing materials; and capital or other expenses of associated
equipment, rent, salaries, bonuses, interest and other overhead. To the extent
any activity is one which the Fund may finance without a Plan, the Fund may also
make payments to finance such activity outside of the Plan and not subject to
its limitations. Payments under the Plan are not tied exclusively to actual
distribution and service expenses, and the payments may exceed distribution and
service expenses actually incurred.
For the fiscal year ended June 30, 1996, the distribution expenses
related to the Fund were $67,888 for Fund literature and materials, $82,896 for
advertising, $191,129 for broker fees, and $136,348 for Fund reports and
materials for current shareholders and administration of current accounts. The
Fund paid BramCap $309,708 of the total $478,261 as reimbursement for these
costs under the Plan, with the balance being borne by BramCap.
Administration of the Plan is regulated by Rule 12b-1 under the 1940
Act, which includes requirements that the Board of Directors receive and review
at least quarterly reports concerning the nature and qualification of expenses
which are made, that the Board of Directors approve all agreements implementing
the Plan and that the Plan may be continued from year-to-year only if the Board
of Directors concludes at least annually that continuation of the Plan is likely
to benefit shareholders.
PORTFOLIO TURNOVER
While it is difficult to predict, the investment adviser expects that
the annual portfolio turnover rate of the Fund will not exceed 100%. A greater
rate may be experienced during periods of marketplace volatility which
necessitate more active trading, as was the case in the 1996 fiscal year. A
higher portfolio turnover rate involves greater transaction costs to the Fund
and
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may result in the realization of net capital gains which would be taxable to
shareholders when distributed. The Fund's portfolio turnover rate for the
fiscal year ended June 30, 1996 was 118%.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to the supervision of the Directors, decisions to buy and sell
securities for the Fund and negotiation of its brokerage commission rates are
made by the investment adviser. Transactions on United States stock exchanges
involve the payment by the Fund of negotiated brokerage commissions. There is
generally no stated commission in the case of securities traded in the
over-the-counter market but the price paid by the Fund usually includes an
undisclosed dealer commission or mark-up. In certain instances, the Fund may
make purchases of underwritten issues at prices which include underwriting fees.
In selecting a broker to execute each particular transaction, the
investment adviser takes the following into consideration: the best net price
available; the reliability, integrity and financial condition of the broker; the
size and difficulty in executing the order; and the value of the expected
contribution of the broker to the investment performance of the Fund on a
continuing basis. Accordingly, the cost of the brokerage commissions to the Fund
in any transaction may be greater than that available from other brokers if the
difference is reasonably justified by other aspects of the portfolio execution
services offered. For example, the investment adviser will consider the research
and investment services provided by brokers or dealers who effect or are parties
to portfolio transactions of the Fund or the investment adviser's other clients.
Such research and investment services include statistical and economic data and
research reports on particular companies and industries as well as research
software. Subject to such policies and procedures as the Directors may
determine, the investment adviser shall not be deemed to have acted unlawfully
or to have breached any duty solely by reason of its having caused the Fund to
pay a broker that provides research services to the investment adviser an amount
of commission for effecting a portfolio investment transaction in excess of the
amount another broker would have charged for effecting that transaction, if the
investment adviser determines in good faith that such amount of commission was
reasonable in relation to the value of the research service provided by such
broker viewed in terms of either that particular transaction or the investment
adviser's ongoing responsibilities with respect to the Fund.
Research and investment information is provided by these and other
brokers at no cost to the investment adviser and is available for the benefit of
other accounts advised by the investment adviser and its affiliates, and not all
of the information will be used in connection with the Fund. While this
information may be useful in varying degrees and may tend to reduce the
investment adviser's expenses, it is not possible to estimate its value and in
the opinion of the investment adviser it does not reduce the investment
adviser's expenses in a determinable amount. The extent to which the investment
adviser makes use of statistical, research and other services furnished by
brokers is considered by the investment adviser in the allocation of brokerage
business but there is no formula by which such business is allocated. The
investment adviser does so in accordance with its judgment of the best interests
of the Fund and its shareholders.
For the Fund's fiscal year ended June 30, 1996, the Fund paid a total of
$332,163 in brokerage commissions with respect to portfolio transactions
aggregating $334,485,691. Of such
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amount, $6,342 in brokerage commissions with respect to portfolio transactions
aggregating $21,976,864 was placed with brokers or dealers who provide research
and investment information.
From commencement of the Fund's business activities on August 1, 1994
through the end of its first fiscal period on June 30, 1995, the Fund paid a
total of $95,724 in brokerage commissions with respect to portfolio transactions
aggregating $58,653,636. Of such amount, $6,342 in brokerage commissions with
respect to portfolio transactions aggregating $3,884,929 was placed with brokers
or dealers who provide research and investment information.
PERFORMANCE INFORMATION
From time to time, quotations of the Fund's performance may be included
in advertisements, sales literature or reports to shareholders or prospective
investors. These performance figures are calculated in the following manner.
Average Annual Total Return
Average annual total return is the average annual compound rate of
return for periods of one year, five years and ten years, all ended on the last
day of a recent calendar quarter. Average annual total return quotations reflect
changes in the price of the Fund's shares and assume that all dividends and
capital gains distributions during the respective periods were reinvested in
Fund shares. Average annual total return is calculated by computing the average
annual compound rates of return of a hypothetical investment over such periods,
according to the following formula (average annual total return is then
expressed as a percentage):
T = (ERV/P)1/n - 1
Where:
T = average annual total return
P = a hypothetical initial investment of $1,000
n = number of years
ERV = ending redeemable value: ERV is the value, at the
end of the applicable period, of a hypothetical
$1,000 investment made at the beginning of the
applicable period.
It should be noted that average annual total return is based on
historical earnings and is not intended to indicate future performance. Average
annual total return for the Fund will vary based on changes in market conditions
and the level of the Fund's expenses. The average annual returns for the fiscal
year ended June 30, 1996 and since inception (August 1, 1994) through June 30,
1996 were 19.0% and 22.1%, respectively.
In connection with communicating its average annual total return to
current or prospective shareholders, the Fund also may compare these figures to
the performance of other mutual funds tracked by mutual fund rating services or
to unmanaged indices which may assume
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reinvestment of dividends but generally do not reflect deductions for
administrative and management costs.
Comparison of Portfolio Performance
Comparison of the quoted non-standardized performance of various
investments is valid only if performance is calculated in the same manner. Since
there are different methods of calculating performance, investors should
consider the effect of the methods used to calculate performance when comparing
performance of the Fund with performance quoted with respect to other investment
companies or types of investments.
In connection with communicating its performance to current or
prospective shareholders, the Fund also may compare these figures to the
performance of unmanaged indices which may assume reinvestment of dividends or
interest but generally do not reflect deductions for administrative and
management costs. Examples include, but are not limited to the Dow Jones
Industrial Average, the Consumer Price Index, Standard & Poor's 500 Composite
Stock Price Index (S&P 500), the NASDAQ OTC Composite Index, the NASDAQ
Industrials Index, and the Russell 2000 Index.
From time to time, in advertising, marketing and other Fund literature,
the performance of the Fund may be compared to the performance of broad groups
of mutual funds with similar investment goals, as tracked by independent
organizations such as Investment Company Data, Inc., Lipper Analytical Services,
Inc., CDA Investment Technologies, Inc., Morningstar, Inc., Value Line Mutual
Fund Survey and other independent organizations. When these organizations'
tracking results are used, the Fund will be compared to the appropriate fund
category, that is, by fund objective and portfolio holdings or the appropriate
volatility grouping, where volatility is a measure of a Fund's risk. From time
to time, the average price-earnings ratio and other attributes of the Fund's or
the model portfolio's securities, may be compared to the average price-earnings
ratio and other attributes of the securities that comprise the S&P 500.
Statistical and other information, as provided by the Social Security
Administration, may be used in marketing materials pertaining to retirement
planning in order to estimate future payouts of social security benefits.
Estimates may be used on demographic and economic data.
Marketing and other Fund literature may include a description of the
potential risks and rewards associated with an investment in the Fund. The
description may include a "risk/return spectrum" which compares the Fund to
other Bramwell Capital funds or broad categories of funds, such as money market,
bond or equity funds, in terms of potential risks and returns. Money market
funds are designed to maintain a constant $1.00 share price and have a
fluctuating yield. Share price, yield and total return of a bond fund will
fluctuate. The share price and return of an equity fund also will fluctuate. The
description may also compare the Fund to bank products, such as certificates of
deposit. Unlike mutual funds, certificates of deposit are insured up to $100,000
by the U.S. government and offer a fixed rate of return.
Risk/return spectrums also may depict funds that invest in both domestic
and foreign securities or a combination of bond and equity securities.
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TAX STATUS
The Fund intends to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
Accordingly, the Fund generally must, among other things, (a) derive in each
taxable year at least 90% of its gross income from dividends, interest, payments
with respect to certain securities loans, and gains from the sale or other
disposition of stock, securities or foreign currencies, or other income derived
with respect to its business of investing in such stock, securities or
currencies; (b) derive in each taxable year less than 30% of its gross income
from the sale or other disposition of certain assets held less than three
months, namely: (i) stock or securities; (ii) options, futures, or forward
contracts (other than those on foreign currencies); or (iii) foreign currencies
(or options, futures, or forward contracts on foreign currencies) that are not
directly related to the Fund's principal business of investing in stock or
securities (or options and futures with respect to stock or securities) (the
"30% Limitation"); and (c) diversify its holdings so that, at the end of each
fiscal quarter, (i) at least 50% of the market value of the Fund's assets is
represented by cash, U.S. Government securities, the securities of other
regulated investment companies and other securities, with such other securities
limited, in respect of any one issuer, 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 (ii) not more than 25% of the value of its total assets is
invested in the securities of any one issuer (other than U.S. Government
securities and the securities of other regulated investment companies).
As a regulated investment company, the Fund generally will not be
subject to U.S. federal income tax on income and gains that it distributes to
shareholders, if at least 90% of the Fund's investment company taxable income
(which includes, among other items, dividends, interest and the excess of any
net short-term capital gains over net long-term capital losses) for the taxable
year is distributed. The Fund intends to distribute substantially all of such
income.
Amounts not distributed on a timely basis in accordance with a calendar
year distribution requirement are subject to a nondeductible 4% excise tax at
the Fund level. To avoid the tax, the Fund must distribute during each calendar
year an amount equal to the sum of (1) at least 98% of its ordinary income (not
taking into account any capital gains or losses) for the calendar year, (2) at
least 98% of its capital gains in excess of its capital losses (adjusted for
certain ordinary losses) for a one-year period generally ending on October 31 of
the calendar year, and (3) all ordinary income and capital gains for previous
years that were not distributed during such years. To avoid application of the
excise tax, the Fund intends to make distributions in accordance with the
calendar year distribution requirement. A distribution will be treated as paid
on December 31 of the current calendar year if it is declared by the Fund in
October, November or December of that year with a record date in such a month
and paid by the Fund during January of the following year. Such distributions
will be taxable to shareholders in the calendar year in which the distributions
are declared, rather than the calendar year in which the distributions are
received.
Options, Futures and Foreign Currency Forward Contracts
Some of the options, futures and foreign currency forward contracts in
which the Fund may invest may be "section 1256 contracts." Gains (or losses) on
these contracts generally are considered to be 60% long-term and 40% short-term
capital gains or losses; however foreign currency gains or losses arising from
certain section 1256 contracts are ordinary in character.
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Also, section 1256 contracts held by the Fund at the end of each taxable year
(and on certain other dates prescribed in the Code) are "marked to market" with
the result that unrealized gains or losses are treated as though they were
realized.
The transactions in options, futures and forward contracts undertaken by
the Fund may result in "straddles" for federal income tax purposes. The straddle
rules may affect the character of gains or losses realized by the Fund. In
addition, losses realized by the Fund on positions that are part of a straddle
may be deferred under the straddle rules, rather than being taken into account
in calculating the taxable income for the taxable year in which such losses are
realized. Because only a few regulations implementing the straddle rules have
been promulgated, the consequences of such transactions to the Fund are not
entirely clear. The straddle rules may increase the amount of short-term capital
gain realized by the Fund, which is taxed as ordinary income when distributed to
shareholders.
The Fund may make one or more of the elections available under the Code
which are applicable to straddles. If the Fund makes any of the elections, the
amount, character and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because application of the straddle rules may affect the character of
gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to shareholders as ordinary income or long-term capital gain may be
increased or decreased substantially as compared to a fund that did not engage
in such transactions.
The 30% Limitation and the diversification requirements applicable to
the Fund's assets may limit the extent to which the Fund will be able to engage
in transactions in options, futures and forward contracts.
Currency Fluctuations -- "Section 988" Gains or Losses
Gains or losses attributable to fluctuations in exchange rates which
occur between the time the Fund accrues income 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 some
investments, including debt securities and certain forward contracts denominated
in a foreign currency, gains or losses attributable to fluctuations in the value
of the foreign currency between the acquisition and disposition of the position
also are treated as ordinary gain or loss. These gains and losses, referred to
under the Code as "section 988" gains or losses, increase or decrease the amount
of the Fund's investment company taxable income available to be distributed to
its shareholders as ordinary income. If section 988 losses exceed other
investment company taxable income during a taxable year, the Fund would not be
able to make any ordinary dividend distributions, or distributions made before
the losses were realized would be recharacterized as a return of capital to
shareholders, rather than as an ordinary dividend, reducing each shareholder's
basis in his or her Fund shares.
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Distributions
Distributions of investment company taxable income are taxable to a U.S.
shareholder as ordinary income, whether paid in cash or shares. Dividends paid
by the Fund to a corporate shareholder, to the extent such dividends are
attributable to dividends received from U.S. corporations by the Fund, may
qualify for the dividends received deduction. However, the revised alternative
minimum tax applicable to corporations may reduce the value of the dividends
received deduction. Distributions of net capital gains (the excess of net
long-term capital gains over net short-term capital losses), if any, designated
by the Fund as capital gain dividends, are taxable as long-term capital gains,
whether paid in cash or in shares, regardless of how long the shareholder has
held the Fund's shares and are not eligible for the dividends received
deduction. Shareholders will be notified annually as to the U.S. federal tax
status of distributions and shareholders receiving distributions in the form of
newly issued shares will receive a report as to the net asset value of the
shares received.
If the net asset value of shares is reduced below a shareholder's cost
as a result of a distribution by the Fund, such distribution generally will be
taxable even though it represents a return of invested capital. Investors should
be careful to consider the tax implications of buying shares of the Fund just
prior to a distribution. The price of shares purchased at this time may reflect
the amount of the forthcoming distribution. Those purchasing just prior to a
distribution will receive a distribution which generally will be taxable to
them.
Disposition of Shares
Upon a redemption, sale or exchange of his or her shares of the Fund, a
shareholder will realize a taxable gain or loss depending upon his or her basis
in the shares. A gain or loss will be treated as capital gain or loss if the
shares are capital assets in the shareholder's hands and generally will be
long-term or short-term, depending upon the shareholder's holding period for the
shares. Any loss realized on a redemption, sale or exchange will be disallowed
to the extent the shares disposed of are replaced (including through
reinvestment of dividends) within a period of 61 days beginning 30 days before
and ending 30 days after the shares are disposed of. In such a case, the basis
of the shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by a shareholder on the disposition of the Fund's shares held by the
shareholder for six months or less will be treated for tax purposes as a
long-term capital loss to the extent of any distributions of capital gain
dividends received or treated as having been received by the shareholder with
respect to such shares.
Backup Withholding
The Fund will be required to report to the Internal Revenue Service (the
"IRS") all distributions and gross proceeds from the redemption of the Fund's
shares, except in the case of certain exempt shareholders. All distributions and
proceeds from the redemption of Fund shares will be subject to withholding of
federal income tax at a rate of 31% ("backup withholding") in the case of
non-exempt shareholders if (1) the shareholder fails to furnish the Fund with
and to certify the shareholder's correct taxpayer identification number or
social security number, (2) the IRS notifies the shareholder or the Fund that
the shareholder has failed to report properly certain interest and dividend
income to the IRS and to respond to notices to that effect, or (3) when required
to do so, the shareholder fails to certify that he or she is not subject to
backup
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withholding. If the withholding provisions are applicable, any such
distributions or proceeds, whether reinvested in additional shares or taken in
cash, will be reduced by the amounts required to be withheld.
Other Taxation
Distributions may also be subject to additional state, local and foreign
taxes depending on each shareholder's particular situation. Non-U.S.
shareholders may be subject to U.S. tax rules that differ significantly from
those summarized above. This discussion does not purport to deal with all of the
tax consequences applicable to the Funds or shareholders. Shareholders are
advised to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in a Fund.
NET ASSET VALUE
The Fund's net asset value per share will be calculated separately from
the per share net asset value of any other fund of the Company. "Assets
belonging to" a fund consist of the consideration received upon the issuance of
shares of the particular fund together with all net investment income, earnings,
profits, realized gains/losses and proceeds derived from the investment thereof,
including any proceeds from the sale of such investments, any funds or payments
derived from any reinvestment of such proceeds, and a portion of any general
assets of the Company not belonging to a particular series. Each fund will be
charged with the direct liabilities of that fund and with a share of the general
liabilities of the Company's funds. Subject to the provisions of the Charter,
determinations by the Directors as to the direct and allocable expenses, and the
allocable portion of any general assets, with respect to a particular fund are
conclusive.
CAPITAL STRUCTURE
Description of Shares
The Company is an open-end management investment company organized as a
Maryland corporation on June 3, 1994. The Company's Charter authorizes the Board
of Directors to issue up to 500 million shares of common stock, par value $.0001
per share. Two hundred million shares of the Company's authorized common stock
have been initially allocated to the Fund. Each share of the Fund has equal
voting, dividend, distribution and liquidation rights.
Shares of the Company have no preemptive rights and only such conversion
or exchange rights as the Board may grant in its discretion. When issued for
payment as described in the Prospectus, the Company's shares will be fully paid
and non-assessable.
Shareholders are entitled to one vote for each full share held, and
fractional votes for fractional shares held, and will vote in the aggregate and
not by class or series except as otherwise required by the 1940 Act or the
Maryland General Corporation Law.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Company shall not be deemed to have been effectively acted
upon unless approved by a majority of the
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outstanding shares of each fund affected by the matter. A fund is affected by a
matter unless it is clear that the interests of each Fund in the matter are
substantially identical or that the matter does not affect any interest of the
Fund. Under Rule 18f-2 the approval of an investment advisory agreement or 12b-1
distribution plan or any change in a fundamental investment policy would be
effectively acted upon with respect to a fund only if approved by a majority of
the outstanding shares of such Fund. However, the rule also provides that the
ratification of independent public accountants, the approval of principal
underwriting contracts and the election of directors may be effectively acted
upon by shareholders of the Company voting without regard to particular funds.
Notwithstanding any provision of the Maryland General Corporation Law
requiring for any purpose the concurrence of a proportion greater than a
majority of all votes entitled to be cast at a meeting at which a quorum is
present, the affirmative vote of the holders of a majority of the total number
of shares of the Company outstanding (or of a class or series of the Company, as
applicable) will be effective, except to the extent otherwise required by the
1940 Act and rules thereunder. In addition, the Charter provides that, to the
extent consistent with the General Corporation Law of Maryland and other
applicable law, the By-Laws may provide for authorization to be given by the
affirmative vote of the holders of less than a majority of the total number of
shares of the Company outstanding (or of a class or series).
HOW TO REDEEM SHARES
The right of redemption may be suspended, or the date of payment
postponed beyond the normal seven-day period by the Fund, under the following
conditions authorized by the 1940 Act: (1) for any period (a) during which the
New York Stock Exchange is closed, other than customary weekend or holiday
closing, or (b) during which trading on the New York Stock Exchange is
restricted; (2) for any period during which an emergency exists as a result of
which (a) disposal by the Fund of securities owned by it is not reasonably
practical, or (b) it is not reasonably practical for the Fund to determine the
fair value of its net assets; and (3) for such other periods as the Securities
and Exchange Commission may by order permit for the protection of the Fund's
shareholders.
The value of shares of the Fund on redemption may be more or less than
the shareholder's cost, depending upon the market value of the Fund's assets at
the time. Shareholders should note that if a loss has been realized on the sale
of shares of the Fund, the loss may be disallowed for tax purposes if shares of
the same Fund are purchased within (before or after) 30 days of the sale.
It is possible that conditions may exist in the future which would, in
the opinion of the Board of Directors, make it undesirable for the Fund to pay
for redemptions in cash. In such cases the Board may authorize payment to be
made in portfolio securities of the Fund. However, the Fund has obligated itself
under the 1940 Act to redeem for cash all shares presented for redemption by any
one shareholder up to $250,000 (or 1% of the Fund's net assets if that is less)
in any 90-day period. Securities delivered in payment of redemptions are valued
at the same value assigned to them in computing the net asset value per share.
Shareholders receiving such securities generally will incur brokerage costs on
their sales.
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EXPERTS
The Financial Statements of the Fund as of June 30, 1996 incorporated
by reference in this Statement of Additional Information have been so
incorporated by reference in reliance on the report of Coopers & Lybrand
L.L.P., independent certified public accountants, given on the authority of
said firm as experts in accounting and auditing.
FINANCIAL STATEMENTS
The Fund's financial statements and notes thereto appearing in the
June 30, 1996 Annual Report to Shareholders and the report thereon of Coopers &
Lybrand L.L.P., independent certified public accountants, appearing therein,
are incorporated by reference in this Staetment of Additional Information. The
Fund will furnish, without charge, a copy of such Annual Report to Sharehodlers
on request. Requests should be made by calling 1-800-BRAMCAP or writing to
Sunstone Financial Group, Inc., 207 East Buffalo Street, Suite 400, Milwaukee,
Wisconsin 53202.
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APPENDIX
RATINGS OF INVESTMENT SECURITIES
A rating of a rating service represents the service's opinion as to the
credit quality of the security being rated. However, the ratings are general and
are not absolute standards of quality or guarantees as to the creditworthiness
of an issuer. Consequently, the Fund's investment adviser believes that the
quality of debt securities in which the Fund invests should be continuously
reviewed. A rating is not a recommendation to purchase, sell or hold a security,
because it does not take into account market value or suitability for a
particular investor. When a security has received a rating from more than one
service, each rating should be evaluated independently. Ratings are based on
current information furnished by the issuer or obtained by the ratings services
from other sources which they consider reliable. Ratings may be changed,
suspended or withdrawn as a result of changes in or unavailability of such
information, or for other reasons.
The following is a description of the characteristics of ratings used
by Moody's Investors Service, Inc. and Standard & Poor's Corporation.
Moody's Investors Service, Inc. Ratings.
Aaa--Bonds rated Aaa are judged to be 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 by an exceptionally stable margin
and principal is secure. Although 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 bonds.
Aa--Bonds rated Aa are judged to be 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 bonds or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the long
term risk appear somewhat larger than in Aaa bonds.
A--Bonds rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa--Bonds rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
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B--Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds rated Caa are of poor standing. Such bonds may be in default
or there may be present elements of danger with respect to principal or
interest.
Ca--Bonds rated Ca represent obligations which are speculative in a high
degree. Such bonds are often in default or have other marked shortcomings.
Standard & Poor's Corporation Rating.
AAA--Bonds rated AAA have the highest rating. Capacity to pay principal
and interest is extremely strong.
AA--Bonds rated AA have a very strong capacity to pay principal and
interest and differ from AAA bonds only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this capacity
than for bonds in higher rated categories.
BB--B--CCC--CC--Bonds rated BB, B, CCC and CC are regarded, on balance,
as predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation among such bonds and CC the highest
degree of speculation. Although such bonds will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
A-2
<PAGE>
Cover Letter
November 5, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: The Bramwwell Funds, Inc.
Securities Act File No. 33-79742
Investment Company Act File No. 811-8546
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Ladies and Gentlemen:
Pursuant to Rule 497(c) promulgated under the Securities Act of 1933
(the "1933 Act"), please find attached for electronic filing the Statement of
Additional Information of The Bramwell Funds, Inc. used after the effective
date of the Registration Statement in the exact form in which it was used.
Sincerely,
\s\ Jennifer A. Olvey
Attachment
<PAGE>
