As filed with the Securities and Exchange Commission on October 30, 1998
File No. 33-79742
811-8546
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 6 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 7 [X]
THE BRAMWELL FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
745 Fifth Avenue, New York, New York 10151
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 308-0505
Elizabeth R. Bramwell
The Bramwell Funds, Inc.
745 Fifth Avenue, New York, New
York 10151 (Name and address of agent
for service of process)
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
----
x on November 1, 1998 pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)
----
on (date) pursuant to paragraph (a) of Rule 485
----
75 days after filing pursuant to paragraph (a)(2) of Rule 485
----
on (date) pursuant to paragraph (a)(2) of Rule 485.
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Title of Securities Being Registered:
Bramwell Growth Fund - Common Stock
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THE BRAMWELL FUNDS, INC.
CROSS REFERENCE SHEET
(as required by 495(a))
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N-1A Item Caption in Prospectus
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PART A: INFORMATION REQUIRED IN A PROSPECTUS
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Item 1. Cover Page Cover Page
Item 2. Synopsis Expense Summary
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant General Description of the Fund; Investment Objectives;
Investment Policies; Risks; Investment Techniques
Item 5 Management of the Fund Management of the Fund; Custodian and Transfer and Dividend
Disbursing Agent
Item 5A. Management's Discussion of Fund Not Included
Performance
Item 6. Capital Stock and Other Capital Structure; Dividends and Distributions; Taxes;
Securities Information for Shareholders
Item 7. Purchase of Securities Being Investing in The Bramwell Growth Fund; How to Purchase The
Offered Bramwell Growth Fund Shares; Shareholder Services; Service and
Distribution Plan; Share Price and Determination of Value
Item 8. Redemption or Repurchase How to Sell (Redeem) The Bramwell Growth Fund Shares
Item 9. Pending Legal Proceedings Not Applicable
PART B: INFORMATION REQUIRED IN A
STATEMENT OF ADDITIONAL INFORMATION
Item 10. Cover Page Cover Page**
Item 11. Table of Contents Table of Contents**
Item 12. General Information and History Not Applicable
Item 13. Investment Objectives and Policies Investment Objectives and Policies**
Item 14. Management of the Fund Directors and Officers**
Item 15. Control Persons and Principal Directors and Officers**
Holders of Securities
Item 16. Investment Advisory and Other Management of the Fund*; Service and Distribution Plan*;
Services Custodian and Transfer and Dividend Disbursing Agent*; Counsel
and Independent Auditors*; Investment Advisory and Other
Services**; Distribution Plan
Item 17. Brokerage Allocation and Other Portfolio Turnover**; Portfolio Transactions and Brokerage**
Practices
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Item 18. Capital Stock and Other Securities Capital Structure**
Item 19. Purchase, Redemption and Pricing Investing in The Bramwell Growth Fund*; How to Purchase The
of Securities Being Offered Bramwell Growth Fund Shares*; Shareholder Services*; Share Price
and Determination of Net Value*; Net Asset Value**
Item 20. Tax Status Tax Status**
Item 21. Underwriters Not Applicable
Item 22. Calculation of Performance Data Performance Information**
Item 23. Financial Statements Financial Statements
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The Bramwell Growth Fund PROSPECTUS
----------------------------- November 1, 1998
Investment Adviser
Bramwell Capital Management, Inc.
Administrator
Sunstone Financial Group, Inc.
Counsel
Dechert Price & Rhoads
Independent Certified Public Accountants
PricewaterhouseCoopers LLP
Custodian
Firstar Bank Milwaukee
Transfer and Dividend Disbursing Agent
Firstar Mutual Fund Services, LLC
The Bramwell Growth Fund
------------------------------------
Elizabeth R. Bramwell, CFA
President and Chief Investment Officer
The Bramwell Funds, Inc.
745 Fifth Avenue
New York, New York 10151
1-800-272-6227
1-800-BRAMCAP
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Table of Contents
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Expense Summary 3
Financial Highlights 3
General Description of the Fund 5
Investment Objectives 5
Investment Policies 5
Risks 8
Investment Techniques 9
Management of the Fund 10
Investing in The Bramwell Growth Fund 14
How to Purchase
The Bramwell Growth Fund Shares 15
How to Sell (Redeem)
The Bramwell Growth Fund Shares 16
Shareholder Services 18
Service and Distribution Plan 19
Dividends and Distributions 19
Taxes 20
Fund Performance 21
Share Price and Determination
of Net Asset Value 21
Capital Structure 21
Counsel and Independent Certified
Public Accountants 22
Custodian and Transfer
and Dividend Disbursing Agent 22
Information for Shareholders 22
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The Bramwell Growth Fund
745 Fifth Avenue
New York, New York 10151
November 1, 1998
PROSPECTUS
The Bramwell Growth Fund (the "Fund") is a no-load, diversified mutual fund.
Long-term capital growth is the Fund's primary investment objective. Current
income is a secondary objective.
Bramwell Capital Management, Inc. ("BramCap") serves as the Fund's Investment
Adviser. The Fund is offered by The Bramwell Funds, Inc., an open-end, series
management investment company. Elizabeth R. Bramwell, CFA, founder and President
of BramCap, manages the investment program of the Fund. In selecting securities
for the Fund's portfolio, BramCap seeks to identify companies which, based on
such factors as company research, product development and opportunity for plant
or market expansion, are positioned to realize long-term unit and earnings
growth. Companies are analyzed within the context of a broad macroeconomic and
political framework.
Under normal circumstances, the Fund's assets are invested primarily in common
stock and high-grade securities convertible into common stock, but the Fund may
hold cash or cash equivalents and invest without limit in U.S. government
obligations if BramCap determines that a temporary defensive position is
advisable.
The Fund invests primarily in securities of companies domiciled in the United
States, but may invest up to 25% of its assets, measured at the time of
investment, in securities of foreign issuers. This Prospectus describes
concisely the information about the Fund that you ought to know before
investing.
Please read it carefully and retain it for future reference.
More information about the Fund is contained in a Statement of Additional
Information that has been filed electronically with the Securities and Exchange
Commission. To obtain a free copy, call 1-800-BRAMCAP (1-800-272-6227). The
Statement of Additional Information, which may be revised from time-to-time, is
dated November 1, 1998 and is hereby incorporated by reference into this
Prospectus.
The Securities and Exchange Commission maintains a Web site (http://www.sec.gov)
that contains the Statement of Additional Information, material incorporated by
reference, and other information regarding registrants that file electronically
with the Securities and Exchange Commission.
Shares of the Fund are not deposits or obligations of, or guaranteed or endorsed
by any bank and are not federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other governmental agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS IS PART OF A REGISTRATION STATEMENT THAT HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IN WASHINGTON, DC UNDER THE SECURITIES ACT OF
1933 AND THE INVESTMENT COMPANY ACT OF 1940.
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Expense Summary
Shareholder Transaction Expenses are charges that you pay when buying or selling
shares of the Fund. Annual Fund Operating Expenses are paid out of the Fund's
assets and include fees for portfolio management, maintenance of shareholder
accounts, general Fund administration, shareholder servicing, accounting and
other services.
Below is a summary of the shareholder transaction expenses imposed by the Fund
and its operating expenses incurred during the fiscal year ended June 30, 1998.
Future total operating expenses may be higher or lower than those indicated. An
example based on the summary is also shown.
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on
Reinvested Dividends None
Maximum Deferred Sales Load None
Redemption Fees (a) None
Exchange Fees (a) None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 1.00%
12b-1 Fees (b) 0.25%
Other Expenses (after reimbursement) (c) 0.41%
Total Fund Operating Expenses
(after expense reimbursement) (d) 1.66%
(a) A fee of $12.00 is charged for each wire redemption, and a fee of $5.00 is
charged for each ex-change requested by telephone.
(b) The maximum level of distribution expenses is 0.25% per annum of the Fund's
average net assets. See "Service and Distribution Plan" for further details. The
distribution expenses for long-term shareholders may total more than the maximum
sales charge that would have been permissible if imposed entirely as an initial
sales charge.
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(c) Such expenses include custodian, transfer agency and administration fees and
other customary Fund expenses.
(d) The Fund's investment adviser has voluntarily agreed to limit the total
expenses of the Fund (excluding interest, taxes, brokerage and extraordinary
expenses) to an annual rate of 1.75% of the Fund's average net assets until June
30, 1999. After such date, the expense limitation may be terminated or revised
at any time.
Example
An investor would pay the following expenses on a $1,000 investment, assuming a
5% annual return and redemption at the end of each period:
One Year Three Years Five Years Ten Years
$17 $53 $91 $199
The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear, directly or
indirectly. The preceding example should not be considered representative of
past or future investment returns and operating expenses which may be more or
less than those shown.
Financial Highlights
The "Financial Highlights" in the following table have been derived from the
financial records of the Fund which have been audited for the year ended June
30, 1998 by PricewaterhouseCoopers LLP, independent accountants, whose report
thereon was unqualified and is included in the Statement of Additional
Information. The table should be read in conjunction with the financial
statements and related notes included in the Statement of Additional
Information. Further information about the performance of the Fund is contained
in the Fund's Annual Report to shareholders, copies of which may be obtained
without charge upon request by calling 1-800-BRAMCAP (1-800-272-6227).
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For the period
Year Year Year Aug. 1, 1994(1)
Ended Ended Ended to
Selected Per-Share Data(2) June 30, 1998 June 30, 1997 June 30, 1996 June 30, 1995
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Net asset value, beginning of period $17.53 $14.60 $ 12.30 $10.00
Income from investment operations:
Net investment loss (0.13) (0.15) (0.08) (3)
Net realized and unrealized gains
on securities 6.82 3.35 2.42 2.31
Total from investment operations 6.69 3.20 2.34 2.31
Less distributions:
Distributions from capital gains (1.17) (0.27) (0.04) (0.01)
Net asset value, end of period $23.05 $17.53 $14.60 $12.30
Total return 39.5% 22.2% 19.0% 23.1%(4)
Supplemental data and ratios:
Net assets, end of period (in 000s) $205,922 $125,924 $141,455 $62,241
Ratio of expenses to average
net assets(5) 1.66% 1.75% 1.75% 1.75%(6)
Ratio of net investment loss to average
net assets(5) (0.75)% (0.85)% (0.66)% (0.11)%(6)
Portfolio turnover rate 49% 82% 118% 80%(4)
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3
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1 Commencement of operations
2 Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
3 Less than $(0.01)
4 Not annualized
5 Net of reimbursements and waivers. Absent reimbursements and waivers of
expenses by the adviser, except for the year ended June 30, 1998 where
there were no reimbursements or waivers, the ratios of expenses and net
investment loss to average net assets for the years ended June 30, 1997 and
1996 and the period August 1, 1994 to June 30, 1995, would have been 1.77%
and (0.87)%; 1.79% and (0.70)%; and 2.68% and (1.04)%, respectively.
6 Annualized
General Description of the Fund
The Bramwell Growth Fund (the "Fund") is a no-load, diversified mutual fund.
Shares in the Fund are offered by The Bramwell Funds, Inc. (the "Company"), a
Mary-land corporation organized on June 3, 1994, which is registered as an
open-end management investment company under the Investment Company Act of 1940
(the "1940 Act").
The Company is organized as a series fund which permits it to issue one or more
series of common stock, each representing an investment portfolio with its own
investment objectives. The first of these series is the Fund. Prior to the sale
of Fund shares hereunder, the Company had no operations other than matters
relating to its organization and the creation of the Fund.
Bramwell Capital Management, Inc. ("BramCap") serves as the Fund's Investment
Adviser. Elizabeth R. Bramwell, founder and President of BramCap, manages the
investment program of the Fund and is primarily responsible for the day-to-day
management of the Fund's portfolio. Ms. Bramwell, a Chartered Financial Analyst,
has had more than twenty-five years of experience as a securities
analyst/portfolio manager and was previously President, Chief Investment
Officer, Portfolio Manager and a Trustee of The Gabelli Growth Fund. See
"Management of the Fund."
The Fund combines the resources of many investors, with each individual investor
having an interest in every one of the securities owned by the Fund, thereby
providing diversification in a variety of industries and issuers. The Fund's
Investment Adviser furnishes continuous professional portfolio management to
select and watch over the Fund's investments. The Fund's ability to buy and sell
larger blocks of securities generally reduces transaction costs. As an open-end
fund, the Fund will redeem any of its outstanding shares on demand of the owner
at the next determined net asset value. Registration of the Company under the
1940 Act does not involve supervision of the Fund's management or policies by
the Securities and Exchange Commission.
Investment Objectives
Long-term capital growth is the Fund's primary investment objective. Current
income is a secondary objective. Given the Fund's objective to achieve long-term
growth of capital, investment in the Fund may be best suited to investors who
are not concerned with current income. The Fund is not intended by itself to
constitute a balanced investment program.
The Fund seeks to invest in companies that are expected to benefit from the
long-term payoff from investment in research, development, capital spending and
market expansion, which may not be reflected in a one-year period in the equity
market, and seeks to invest in companies that are perceived to be attractively
valued relative to their future growth prospects. The Investment Adviser's most
recent outlook is available in the latest report to shareholders which is
available upon request.
4
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Investment Policies
General
Investments may be in equity securities of well-known, established companies as
well as smaller, less well known companies. In selecting securities for the
Fund's portfolio, BramCap seeks to identify companies which, based on such
factors as company research, product development and opportunity for plant or
market expansion, are positioned to realize long-term unit and earnings growth.
The Fund may invest an amount not in excess of 5% of its net assets in
securities of issuers with a record of less than three years of continuous
operation, including the operation of any predecessor business. Companies are
analyzed within the context of a broad macroeconomic and political framework.
The Investment Adviser utilizes a blended "top-down" and "bottom-up" approach.
In top-down analysis, focus is on such macroeconomic factors as inflation,
interest, currency, and tax rates; in bottom-up analysis, focus is on
company-specific variables such as competitive industry dynamics, market
leadership, proprietary products and services, and management expertise, as well
as on financial characteristics such as returns on sales and equity, debt/equity
ratios and earnings and cash flow growth. Primary fundamental research largely
determines investments. Information sources include periodic corporate financial
reports and press releases, corporate financial presentations and meetings with
managements, general economic and industry data as supplied by government
agencies and trade associations, and research reports by broker/dealers.
Under normal circumstances, the Fund's assets are invested primarily 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 BramCap determines that a temporary defensive position is
advisable when, for example, economic or market conditions are believed to be
adverse, company or industry conditions are deteriorating or valuations appear
excessive relative to future growth rates.
Cash and Cash Equivalents
The cash equivalents in which the Fund may invest include fixed-income
securities, such as certificates of deposit of U.S. banks, commercial paper and
commercial paper master notes if the bank or commercial paper issuer has been
rated within the two highest grades assigned by Standard & Poor's Corporation
("S&P") or Moody's Investors Service, Inc. ("Moody's") or has been determined by
the Investment Adviser to be of equivalent quality or, in the case of banks,
provided the bank has capital, surplus and undivided profits, as of the date of
its most recently published annual financial statements, with a value in excess
of $100,000,000 at the date of investment. Commercial paper master notes are
unsecured promissory notes issued by corporations to finance short-term credit
needs. They permit a series of short-term borrowings under a single note.
Borrowings under commercial paper master notes are payable in whole or in part
at any time, may be prepaid in whole or in part at any time, and bear interest
at rates which are fixed to known lending rates and automatically adjusted when
such known lending rates change. There is no secondary market for commercial
paper master notes. BramCap will monitor the creditworthiness of the issuer of
the commercial paper master notes while any borrowings are outstanding.
U.S. Government Obligations
Examples of the types of U.S. government obligations that may be held by the
Fund include, in addition to U.S. Treasury bonds, notes and bills, the
obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land
Banks, the Federal Housing Administration, Farmers Home Administration,
Export-Import Bank of the United States, Small Business Administration,
Government National Mortgage Association, Federal National Mortgage Association,
General Services Administration, Student Loan Marketing Association, Central
Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal
Intermediate Credit Banks, Tennessee Valley Authority, Resolution Funding
Corporation and Maritime Administration. Obligations of certain agencies and
instrumentalities of the U.S. government,
5
<PAGE>
such as those of the Government National Mortgage Association, are supported by
the full faith and credit of the U.S. Treasury; others, such as the
Export-Import Bank of the United States, are supported by the right of the
issuer to borrow from the Treasury; others, such as those of the Federal
National Mortgage Association, are supported by the discretionary authority of
the U.S. government to purchase the agency's obligations; still others, such as
those of the Student Loan Marketing Association, are supported only by the
credit of the instrumentality. No assurance can be given that the U.S.
government would provide financial support to U.S. government-sponsored
instrumentalities if it is not obligated to do so by law.
Investments in Foreign Issuers
The Fund invests primarily in securities of companies domiciled in the United
States, but the Fund may also invest up to 25% of its assets, measured at the
time of investment, in securities of foreign issuers. Such investments may be
made either directly in such issuers or indirectly through American Depositary
Receipts ("ADRs") or closed-end investment companies. It is possible that some
material information about unsponsored ADRs will be unavailable. Investments in
investment companies will not make up more than 10% of the Fund's net assets.
See "Other Investment Companies."
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, changes in foreign currency and exchange rates and the
possibility of adverse changes in investment or exchange control regulations.
Currency fluctuations will affect the net asset value of the Fund irrespective
of the performance of the underlying investments in foreign issuers. Typically,
there is less 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. 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. Foreign governments
can also levy confiscatory taxes, expropriate assets and limit repatriations of
assets. 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.
Illiquid or Restricted Securities
The Fund may invest up to 15% of its net assets in illiquid securities, for
which there is a limited trading market and for which a low trading volume of a
particular security may result in abrupt and erratic price movements. The Fund
may be unable to dispose of its holdings in illiquid securities at acceptable
prices and may have to dispose of such securities over extended periods of time.
The Fund may invest in (i) securities that are sold in private placement
transactions between their issuers and their purchasers and that are neither
listed on an exchange nor traded over-the-counter, and (ii) securities that are
sold in transactions between qualified institutional buyers pursuant to Rule
144A under the Securities Act of 1933, as amended. Such securities are subject
to contractual or legal restrictions on subsequent transfer. As a result of the
absence of a public trading market, such restricted securities may in turn be
less liquid and more difficult to value than publicly traded securities.
Although these securities may be resold in privately negotiated transactions,
the prices realized from the sales could, due to illiquidity, be less than those
originally paid by the Fund or less than their fair value and in some instances,
it may be difficult to locate any purchaser. In addition, issuers whose
securities are not publicly traded may not be subject to the disclosure and
other investor protection requirements that may be applicable if their
securities were publicly traded. If any privately placed or Rule 144A securities
held by the Fund are required to be registered under the securities laws of one
or more jurisdictions before being resold, the Fund may be required to bear the
expenses of registration. Securities which are freely tradable under Rule 144A
may be treated as liquid if the Board of Directors of the Fund is satisfied that
there is sufficient trading activity and reliable price information. Investing
in Rule 144A securities could have the effect of increasing the level of
illiquidity of the Fund's portfolio to the extent that qualified institutional
buyers become, for a time, uninterested in purchasing such 144A securities.
6
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Other Investment Companies
In seeking to attain its investment objectives, the Fund may invest in
securities issued by other investment companies within the limits prescribed by
the 1940 Act. The Fund intends to limit its investments so that, as determined
immediately after a securities purchase is made: (i) not more than 5% of the
value of its net assets will be invested in the securities of any one investment
company; (ii) not more than 10% of the value of its net assets will be invested
in the aggregate in securities of investment companies as a group; and (iii) not
more than 3% in the aggregate of the outstanding voting stock of any one
investment company will be owned by the Fund and/or by any series of The
Bramwell Funds, Inc. As a shareholder of another investment company, the Fund
would bear, along with other shareholders, its pro rata portion of the other
investment company's expenses, including advisory fees. These expenses would be
in addition to the advisory and other expenses that a Fund bears in connection
with its own operations.
Warrants and Rights
The Fund may invest up to 5% of its net assets in warrants or rights, valued at
the lower of cost or market, which entitle the holder to buy equity securities
during a specific period of time. The Fund will make such investments only if
the underlying equity securities are deemed appropriate by BramCap for inclusion
in the Fund's portfolio. Included in the 5% amount, but not to exceed 2% of net
assets, are warrants and rights whose underlying securities are not traded on
principal domestic or foreign exchanges. Warrants and rights acquired by the
Fund in units or attached to securities are not subject to these restrictions.
Fundamental Investment Restrictions and Policies
The Fund has adopted certain investment restrictions that are characterized as
fundamental policies which cannot be changed without a shareholder vote.
To maintain portfolio diversification and reduce investment risk, as a
matter of fundamental policy, the Fund may not:
o invest 25% or more of its net assets in issuers conducting their
principal business in the same industry;
o borrow money except for temporary purposes in amounts up to 10% of
its net assets;
o make loans, other than by way of lending portfolio securities,
buying debt securities for its portfolio or entering into repurchase
agreements; or
o invest more than 15% of its net assets in illiquid securities.
A list of the Fund's objectives, policies and restrictions, both
fundamental and nonfundamental, is set forth in the Statement of Additional
Information. In order to provide a degree of flexibility, the Fund's investment
objectives, as well as other policies which are not deemed fundamental, may be
modified by the Board of Directors without shareholder approval. Any change in
the Fund's investment objectives may result in the Fund having investment
objectives different from the objectives which the shareholder considered
appropriate at the time of investment in the Fund. However, the Fund will not
change any of its investment objectives, policies or investment restrictions
without written notice to shareholders sent at least 30 days in advance of any
such change.
Risks
Investment in any mutual fund has inherent risks. There can be no assurance that
the investment objectives of the Fund will be realized or that the Fund's
portfolio will not decline in value. Economic
7
<PAGE>
conditions change and stock markets are volatile. If BramCap judges market
conditions incorrectly, the Fund's portfolio may decline in value. Moreover,
investors should be aware that certain investment policies of the Fund, such as
investing in illiquid and foreign securities, and certain investment techniques
of the Fund, such as investments in options, futures and foreign currency
contracts or engaging in short sales or securities lending as described below,
can entail greater than average risk to the extent such policies and techniques
are implemented. These policies and techniques are described under the headings
"Investment Policies" above and "Investment Techniques" below.
Options and futures may fail as hedging techniques in cases where the price
movements of the securities underlying the options and futures do not follow the
price movements of the portfolio securities subject to the hedge and the loss
from investing in futures transactions is theoretically potentially unlimited.
Moreover, gains and losses on investments in options and futures depend on the
Investment Adviser's ability to predict correctly the direction of stock prices,
interest rates and other economic factors.
Securities lending involves risks of delay in receiving additional collateral or
in recovering the loaned securities, and possibly a loss of rights in the
collateral if the borrower of the securities becomes insolvent.
Investment Techniques
Although not normally anticipated to be widely employed, the Fund may use
various techniques to increase or decrease its exposure to the effects of
possible changes in security prices, currency exchange rates or other factors
that affect the value of the Fund's portfolio. These techniques are used by the
Fund for risk or portfolio management purposes or, in the case of securities
lending and repurchase agreements, for incidental income and not for
speculation. See "Risks" for a discussion of risks relating to these techniques.
Options on Securities or Indices
The Fund may write (i.e., sell) covered put and call options and purchase put
and call options on securities or securities indices that are traded on United
States and foreign exchanges or in the over-the-counter markets. Such options
can include long-term options with durations of up to three years. The value of
the underlying securities on which options may be written at any one time will
not exceed 15% of the net assets of the Fund. The Fund will not purchase put or
call options if the aggregate premium paid for such options would exceed 5% of
its net assets at the time of purchase.
Futures
The Fund may enter into financial futures contracts or purchase or sell put and
call options on such futures. Futures are generally bought and sold on
commodities exchanges. The sale of a futures contract creates a firm obligation
by the Fund, as seller, to deliver to the buyer the specific type of financial
instrument called for in the contract at a specific future time for a specified
price (or the net cash amount). Options on futures contracts are similar to
options on securities except that an option on a futures contract gives the
purchaser the right in return for the premium paid to assume a position in a
futures contract and obligates the seller to deliver such position.
Forward Foreign Currency Exchange Contracts and Options on Foreign Currencies
When the Fund holds portfolio securities denominated in a foreign currency, the
Fund may enter into forward foreign currency exchange contracts to attempt to
minimize the risk to the Fund from adverse changes in the relationship between
the U.S. dollar and those foreign currencies. The Fund has no specific
limitation on the percentage of assets it may commit to forward foreign currency
exchange contracts, subject to its stated investment objective and policies,
except that the Fund will not enter into such contracts if the amount of assets
set aside to cover such contracts would impede portfolio management or the
Fund's ability to meet redemption requests. Although forward foreign currency
exchange contracts
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will be used to protect the Fund from adverse currency movements, they also
involve the risk that anticipated currency movements will not be accurately
predicted.
When the Fund enters into a forward foreign currency exchange contract, it
relies on the other party to consummate the trade. Failure of such party to do
so may result in the Fund's incurring a loss or missing an opportunity to obtain
a price considered to be advantageous.
The Fund may also purchase put and call options and write covered put and call
options on foreign currencies for the purpose of protecting against declines in
the U.S. dollar value of foreign currency denominated portfolio securities and
against increases in the U.S. dollar cost of such securities to be acquired. As
in the case of other kinds of options, however, the writing of an option on a
foreign currency constitutes only a partial hedge, up to the amount of the
premium received, and the Fund could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses.
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.
Short Sales
The Fund may make limited short sales of securities. A short sale is a
transaction in which the Fund sells a security it does not own in anticipation
that the market price of that security will decline. The market value of the
securities sold short will not exceed either 5% of the Fund's net assets or 5%
of each issuer's voting securities. The Fund may also make short sales "against
the box" without respect to such limitations. In this type of short sale, at the
time of the sale, the Fund owns or has the immediate and unconditional right to
acquire at no additional cost the identical security.
Securities Lending
For incremental income purposes, the Fund may lend its portfolio securities
constituting up to 30% of its net assets to U.S. or foreign banks or
broker/dealers which have been rated within the two highest grades assigned by
S&P or Moody's, or which have been determined by BramCap to be of equivalent
quality. BramCap is responsible for monitoring compliance with this rating
standard during the term of any securities lending agreement. With any loan of
portfolio securities, there is a risk that the borrowing institution will fail
to redeliver the securities when due. However, loans of securities by the Fund
will be fully collateralized at all times by at least 100% of the current market
value of the lent securities.
Repurchase Agreements
Repurchase agreements may also be entered into by the Fund for incremental
income purposes.
The Fund may enter into repurchase agreements with any foreign or domestic bank
or broker/dealer if the bank or broker/dealer has been 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. BramCap is responsible for
monitoring compliance with this rating standard during the term of any
repurchase agreement. The Fund will not enter into repurchase agreements with
entities other than banks or broker/dealers or invest over 5% of its assets in
repurchase agreements with maturities of more than seven days.
A repurchase agreement provides a means for the Fund to earn income on funds for
periods as short as overnight. It is an arrangement under which the Fund
acquires a security and the seller agrees, at the time of sale, to repurchase
the security at a specified time and price. Securities subject to a repurchase
agreement are held in a segregated account and the value of such securities is
kept at least equal to the repurchase price on a daily basis. The repurchase
price may be higher than the purchase price, the
9
<PAGE>
difference being income to the Fund, or the purchase and repurchase price may be
the same, with interest at a stated rate. In either case, the income to the Fund
is unrelated to the interest rate on the security itself.
Management of the Fund
The business and affairs of the Fund are managed under the direction of the
Board of Directors.
Background of Investment Adviser
Elizabeth R. Bramwell, founder and Chief Executive Officer of BramCap, as well
as President and Chief Investment Officer of the Fund, manages the investment
program of the Fund and is primarily responsible for the day-to-day management
of the Fund's portfolio. Ms. Bramwell, a Chartered Financial Analyst, has had
more than twenty-five years of experience as a securities analyst/portfolio
manager. She was President, Chief Investment Officer, Portfolio Manager and a
Trustee of The Gabelli Growth Fund from its inception on April 10, 1987 through
February 9, 1994. The cumulative total return for The Gabelli Growth Fund from
its inception through December 31, 1993 was 184%. At December 31, 1993, that
fund had $695 million in net assets. As President and Chief Investment Officer
of The Gabelli Growth Fund, Ms. Bramwell had full discretionary authority over
the selection of investments for that fund. Average annual returns for the
one-year, three-year and five-year periods ended December 31, 1993 and for the
entire period during which Ms. Bramwell managed that fund compared with the
performance of the Standard & Poor's 500 Composite Stock Total Return Index
were:
The Gabelli S&P 500
Growth Fund (a,b) Index (c)
----------------- ---------
One Year 11.3% 10.1%
Three Years 16.0% 15.6%
Five Years 16.5% 14.6%
Inception through
February 9, 1994 16.6% 10.8%
(a) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses. (b) The
expense ratio of The Gabelli Growth Fund was capped at 2.00% for the period
April 10, 1987 to December 31, 1987 (reflecting annualized reimbursement of
expenses of 4.45%) and was capped at 2.30% for the 1988 calendar year,
reflecting reimbursement of expenses of 2.08%. Thereafter, the expense ratio
declined from 1.85% to 1.41%, reflecting, in general, economies of scale
associated with an increase in assets under management. (c) The Standard &
Poor's 500 Composite Stock Total Return Index is an unmanaged index of common
stocks that is considered to be generally representative of the United States
stock market. The Index is adjusted to reflect reinvestment of dividends.
Historical performance is not indicative of future performance. The Gabelli
Growth Fund is a separate fund and its historical performance is not indicative
of the potential performance of the Fund. Share prices and investment returns
will fluctuate reflecting market conditions, as well as changes in
company-specific fundamentals of portfolio securities.
Ms. Bramwell is a graduate of Bryn Mawr College and Columbia University Graduate
School of Business. She began her career as an analyst with Morgan Guaranty
Trust Company from 1967 through 1973 (Assistant Vice President 1972-1973), was a
securities analyst and Vice President of William D. Witter, Inc. from 1974 to
1976 and a Vice President and group head in the Investment Research Department
of Bankers Trust Company from 1976 to 1978. Ms. Bramwell was a Limited Partner
of and/or securities analyst with Kenneth S. Davidson Partners, a private
investment partnership from 1979 to 1985, Director of Research of Gabelli &
Company from 1985 through 1989, and President, Chief Investment Officer,
10
<PAGE>
Portfolio Manager and a Trustee of The Gabelli Growth Fund from inception on
April 10, 1987 through February 9, 1994. Ms. Bramwell founded Bramwell Capital
Management, Inc. on February 23, 1994.
Directors
In addition to Ms. Bramwell, the Fund's Directors are:
J. Sinclair Armstrong
444 Madison Avenue
New York, NY 10022
Director, Secretary and Treasurer, The Reed Foundation (1986-present)
(philanthropy); Partner (1980-1984) and Counsel (1984-1995), Whitman Breed
Abbott & Morgan (formerly Whitman Ransom) (law firm); 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, Securities and Exchange Commission
(1953-1957).
Isabel H. Benham
745 Fifth Avenue
New York, NY 10151
Trustee Emeritus and former President (1992-1995), Board of Trustees of the John
W. Barringer III National Railroad Library; Director, 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).
George F. Keane
745 Fifth Avenue
New York, NY 10151
Chairman of the Board, Trigen Energy Corporation (1994-present); President
Emeritus and founding Chief Executive Officer (1971-1992), The Common Fund
(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, Northern Trust of Connecticut
(1991-present), Universal Stainless & Alloy Products (1994-present), Global
Pharmaceutical Corporation (1995-present) and Security Capital Real Estate Funds
(1997-present).
James C. Sargent
745 Fifth Avenue
New York, NY 10151
Counsel, Opton, Handler, Gottlieb, Feiler & Katz (1995-present) (law firm);
Director, Scan-Graphics (1992-present), Austin's International (1992-present);
Former 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.
Martha R. Seger, Ph.D.
220 Park Avenue
Birmingham, MI 40889
Chairman, Martha Seger & Associates (1992-present); Current Director, Amerisure,
Amoco, Fluor, 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).
11
<PAGE>
Additional information about the Fund's Officers and Directors is contained in
the Statement of Additional Information.
Investment Adviser
Bramwell Capital Management, Inc. ("BramCap"), located at 745 Fifth Avenue, New
York, NY 10151, serves as the Investment Adviser pursuant to an Investment
Advisory Agreement (the "Agreement"), which provides that the Investment Adviser
will furnish continuous investment advisory services and management to the Fund.
In addition to the Fund, BramCap is the adviser to individual and institutional
accounts. Prior to forming BramCap in February 1994, Ms. Bramwell, who owns all
of the outstanding capital stock of BramCap, and who is the founder and Chief
Executive Officer of BramCap, had twenty-five years of experience as a
securities analyst/portfolio manager, including seven years in which she served
as President, Chief Investment Officer, Portfolio Manager and a Trustee of The
Gabelli Growth Fund.
The Investment Adviser supervises and manages the investment portfolio of the
Fund, and subject to such policies as the Board of Directors of the Fund may
determine, directs the purchase or sale of investment securities in the
day-to-day management of the Fund's investment portfolio. Under the Agreement,
the Investment Adviser, at its own expense and without reimbursement from the
Fund, furnishes office space and all necessary office facilities, equipment and
executive personnel for making the investment decisions necessary for managing
the Fund and maintaining its organization, and will pay the salaries and fees of
all officers and directors of the Fund (except the fees paid to disinterested
directors). For the foregoing, BramCap receives a monthly fee of 1/12 of 1% (1%
per annum) on the average daily net assets of the Fund. The rate of the advisory
fee is higher than that paid by most mutual funds.
Administration
Pursuant to an Administration and Fund Accounting Agreement (the "Administration
Agreement"), Sunstone Financial Group, Inc. (the "Administrator"), 207 East
Buffalo Street, Suite 400, Milwaukee, WI 53202, prepares and files all federal
income and excise tax returns and state income tax returns (other than those
required to be made by the Fund's Custodian or Transfer Agent), oversees the
Fund's insurance relationships, reviews drafts of the Fund's registration
statement and proxy statements, prepares securities registration compliance
filings pursuant to state securities laws, compiles data for and prepares
required notices and reports to the Securities and Exchange Commission, prepares
financial statements for annual and semiannual reports to investors, monitors
compliance with the Fund's investment policies and restrictions, performs
securities valuations, calculates daily net asset values of the Fund, maintains
all general ledger accounts and related subledgers, prepares and monitors the
Fund's expense accruals and causes all appropriate expenses to be paid from Fund
assets, monitors the Fund's status as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended, maintains and/or
coordinates with the other service providers the maintenance of the accounts,
books and other documents required pursuant to Rule 31a-1 under the 1940 Act,
and generally assists in the Fund's administrative operations. The
Administrator, at its own expense and without reimbursement from the Fund,
furnishes office space and all necessary office facilities, equipment, supplies
and clerical and executive personnel for performing the services required to be
performed by it under the Administration Agreement. For the foregoing, the
Administrator receives from the Fund a fee, computed daily and payable monthly,
based on the Fund's average net assets at an annual rate beginning at 0.15 of 1%
and decreasing as the assets of the Fund reach certain levels subject to an
annual minimum of $60,000 per year, plus out-of-pocket expenses.
The Fund pays all of its own expenses, including, without limitation, the cost
of preparing and printing its registration statements required under the
Securities Act of 1933 and the 1940 Act and any amendments thereto, the expense
of registering its shares with the Securities and Exchange Commission and in the
various states, advisory and administration fees, costs of organization and
maintenance of corporate existence, the printing and distribution costs of
prospectuses mailed to existing investors, reports to
12
<PAGE>
investors, reports to government authorities and proxy statements, costs of
meetings of shareholders, fees paid to directors who are not interested persons
of the Investment Adviser, interest charges, taxes, legal expenses, association
membership dues, auditing services, insurance premiums, brokerage commissions
and expenses in connection with portfolio transactions, fees and expenses of the
custodian of the Fund's assets, charges of securities pricing services, printing
and mailing expenses and charges and expenses of dividend disbursing agents,
accounting services agents, registrars and stock transfer agents. For the fiscal
period ended June 30, 1998, the Fund's expenses, including the advisory fee,
equaled 1.66% (annualized) of the Fund's average net assets.
Year 2000
Computer users around the world are faced with the dilemma of the Year 2000
issue, which stems from the use of two digits in most computer systems to
designate the year. When the year advances from 1999 to 2000, many computers
will not recognize "00" as the Year 2000. This issue could potentially affect
every aspect of computer-related activity, on an individual and corporate level.
The Fund could be adversely impacted if the computer systems used by the Adviser
and Administrator and other service providers have not been converted to meet
the requirements of the new century. The Fund's Adviser and Administrator have
evaluated their internal systems and expect them to be fully capable to handle
the change of millennium. The Adviser and Administrator are working with the
providers of the software they use to address the Year 2000 issue, and are
monitoring on an ongoing basis the progress of the Fund's other service
providers to convert their systems to comply with the requirements of Year 2000.
The Adviser and Administrator currently have no reason to believe that these
service providers will not be fully and timely compliant. However, investors
should be aware that there can be no assurance that all systems will be
successfully converted prior to January 1, 2000, in which case it would become
necessary for the Fund to enter into agreements with new service providers or to
make other arrangements.
Investing in The Bramwell Growth Fund
Shares of the Fund may be purchased directly from The Bramwell Funds, Inc. They
may also be purchased through an account that you maintain with a securities
broker or other financial institution ("Financial Service Agents"). See
"Investing in The Bramwell Growth Fund -- Purchases Through Financial Service
Agents."
If you wish to purchase shares of The Bramwell Growth Fund directly, please
refer to the purchase instructions described under "How to Purchase The Bramwell
Growth Fund Shares."
All purchases must be made in U.S. dollars and checks must be drawn on U.S.
banks. No cash will be accepted. A $20 fee will be charged against an investor's
account for any payment check returned to the Transfer Agent for insufficient
funds, stop payment, closed account or other reasons. The investor will also be
responsible for any losses suffered by the Fund as a result. The Fund management
reserves the right to reject any purchase order for Fund shares.
If you have any questions, a Fund telephone representative will be pleased to
provide the information that you need. Please call the following toll-free
number: 1-800-BRAMCAP (1-800-272-6227).
The minimum purchase requirements, which may be altered in certain
circumstances, are:
Initial Additional
Investment Investment
---------- ----------
Regular Accounts $1,000 $100
IRAs and IRA Rollovers 500 100
Non-Earning Spousal IRAs 250 100
SEP/IRAs 500 100
Gifts to Minors 500 50
Automatic Investment Plans 50 50
13
<PAGE>
Purchases by Mail
Your Purchase Application, if properly filled out and accompanied by payment in
the form of a check made payable to The Bramwell Growth Fund, will be processed
upon receipt by the Transfer Agent. If the Transfer Agent receives your order
and payment by the close of regular trading (currently 4:00 p.m. New York City
time) on the New York Stock Exchange, your shares will be purchased at the net
asset value calculated at the close of regular trading on that day. If received
after that time, your shares will be purchased at the net asset value determined
as of the close of regular trading on the next business day.
Purchases Through Financial Service Agents
If you are investing through a Financial Service Agent, please refer to their
program materials for any additional special provisions or conditions that may
be different from those described in this Prospectus. Financial Service Agents
have the responsibility of transmitting purchase orders and funds, and of
crediting their customers' accounts following redemptions, in a timely manner in
accordance with their customer agreements and this Prospectus.
If you place an order for Fund shares through a Financial Service Agent, in
accordance with such Financial Service Agent's procedures and such Financial
Service Agent then transmits your order to the Transfer Agent before 4:00 p.m.,
New York City time on that day, then your purchase will be processed at the net
asset value calculated at 4:00 p.m. New York City time on that day. The
Financial Service Agent must promise to send to the Transfer Agent immediately
available funds in the amount of the purchase price within five business days
for the order.
How to Purchase The Bramwell Growth Fund Shares
<TABLE>
<CAPTION>
<S> <C> <C>
By Mail or Courier To Open an Account To Add to an Account
Complete and sign the Purchase Make your check payable to The Bram-
Application. Make your check well Growth Fund and mail it to the
payable to The Bramwell Growth Fund. address at the left. Put your account
By Mail, send to: name, address and Bramwell
The Bramwell Funds, Inc. account number on your check. Sub-
Firstar Mutual Fund Services, LLC sequent investment forms will be
P.O. Box 701 included with each shareholder state
Milwaukee, WI 53201-0701 ment. A shareholder wishing to add to
By Overnight Courier, send to: an account should complete this form
The Bramwell Funds, Inc. and include it with the check. Alter-
Firstar Mutual Fund Services, LLC natively, include with your check a
615 East Michigan Street,Third Floor note indicating your Bramwell
Milwaukee, WI 53202 account number, your name and your address.
By Telephone Telephone transactions may not be used Call 1-800-BRAMCAP to make your
for initial purchases. If you want to purchase from a bank checking or money
make subsequent telephone transactions, market account by electronic funds
please select this service transfer. Specify account name, address
on your Purchase Application and Bramwell account number. This service
or call 1-800- BRAMCAP must be established by you in advance
(1-800-272-6227) to set up the account. by following the instructions at the left.
By Wire Call Firstar Mutual Fund Services, LLC Follow instructions at the left. Please
at 1-800-BRAMCAP (1-800-272-6227) note that wires may be rejected if they
to notify them that you intend to pur- do not contain complete account in-
chase shares by wire and to verify formation.
instructions. Then, wire funds care of:
Firstar Bank Milwaukee
Milwaukee, WI
ABA #: 075000022
Credit:
14
<PAGE>
Firstar Mutual Fund Services, LLC
Account #: 112-952-137
Further credit: Bramwell Growth Fund
Shareholder Account #:
Shareholder Name/
Registration:
Include your name, address and Tax-
payer Identification Number.
</TABLE>
Purchases by Telephone
Only bank accounts held at domestic financial institutions that are Automated
Clearing House ("ACH") members can be used for telephone transactions. Telephone
transactions may not be used for initial purchases. Your account must already be
established prior to initiating telephone purchases. Your shares will be
purchased at the net asset value determined as of the close of regular trading
on the date that the Transfer Agent receives payment for shares purchased by
electronic funds transfer through the ACH system. Most transfers are completed
within three business days after your call to place the order. To preserve
flexibility, the Fund may revise or remove the ability to purchase shares by
phone, or may charge a fee for such service, although currently, the Fund does
not expect to charge a fee. Investors in the Fund may also request by telephone
a change of address, a change in investments made through an Automatic
Investment Plan (see page 18), and a change in the manner in which dividends are
received (see page 19). The Fund will employ reasonable procedures to confirm
that instructions communicated by telephone are genuine. Such procedures may
include, among others, requiring some form of personal identification prior to
acting upon telephone instructions, providing written confirmations of all such
transactions, and/or tape recording all telephone instructions. Assuming
procedures such as the above have been followed, the Fund will not be liable for
any loss, cost, or expense for acting upon an investor's telephone instructions
or for any unauthorized telephone redemption. As a result of this policy, the
investor will bear the risk of any loss unless the Fund has failed to follow
such procedure(s).
Purchases by Wire
If you purchase your initial shares by wire, you must prepare and file a
Purchase Application, marked "follow-up," with the Transfer Agent. The Transfer
Agent must receive the Purchase Application before any of the shares purchased
can be redeemed. You should contact your bank (which will need to be a
commercial bank that is a member of the Federal Reserve System) for information
on sending funds by wire, including any charges that your bank may make for
these services. Wiring instructions are listed on page 15 of this Prospectus.
Miscellaneous Purchase Information
Federal regulations require that you provide a certified Taxpayer Identification
Number whenever you open or reopen an account. Congress has mandated that if any
shareholder fails to provide and certify to the accuracy of the shareholder's
Social Security Number or other Taxpayer Identification Number, the Fund will be
required to withhold 31% of all dividends, distributions and payments, including
redemption proceeds, from such shareholder as a backup withholding procedure.
For reasons of economy and convenience, the Fund will not issue certificates for
shares purchased. The Fund understands that some Financial Service Agents may
impose certain conditions on their clients which are in addition to or different
from those described in this Prospectus, and, to the extent permitted by
applicable regulatory authorities, may charge their clients direct fees. Certain
Financial Service Agents may receive compensation from the Fund. Certain
Financial Service Agents may enter into agreements with the Fund which permit
them to confirm purchase orders on behalf of customers by phone, with payment to
follow no later than the Fund's pricing on the following business day. If
payment is not received by such time, the Financial Service Agent could be held
liable for resulting fees or losses.
15
<PAGE>
How to Sell (Redeem) The Bramwell Growth Fund Shares
You may sell (redeem) your shares at any time. Ordinarily, the Fund makes
payment by check for the shares redeemed within three business days after it
receives your properly completed request. However, the right of redemption may
be suspended or payment may be postponed under unusual circumstances such as
when trading on the New York Stock Exchange is restricted or when it is not
reasonably practical for the Fund to determine the fair market value of its net
assets. Payment of redemption proceeds with respect to shares purchased by check
will not be made until the check or payment received for investment has cleared,
which may take up to 15 calendar days from the purchase date.
Payment of the redemption proceeds for shares of the Fund where an investor
requests wire payment will normally be made in federal funds on the next
business day. The Transfer Agent will wire redemption proceeds only to the bank
and account designated on the Purchase Application or in written instructions
subsequently received by the Transfer Agent, and only if the bank is a
commercial bank that is a member of the Federal Reserve System. The Transfer
Agent currently charges a $12.00 fee for each payment made by wire of redemption
proceeds, which fee will be deducted from the investor's account.
Procedure for Requesting Redemption
You may request the sale of your shares either by mail or courier or by
telephone as described below.
By Mail:
Sale requests should be mailed to:
The Bramwell Funds, Inc.
Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
By Overnight Courier:
The requests should be sent to:
The Bramwell Funds, Inc.
Firstar Mutual Fund Services, LLC
615 East Michigan Street, Third Floor
Milwaukee, WI 53202
The selling price of each share being redeemed will be the Fund's per share net
asset value next calculated after receipt of all required documents in good
order.
Good order means that the request must include:
o Your Bramwell account number
o The number of shares or dollar amount to be sold (redeemed)
o The signatures of all account owners exactly as they are registered
on the account
o Any required signature guarantees
o Any supporting legal documentation that is required in the case of
estates, trusts, corporations or partnerships
o In the case of shares being redeemed from an IRA or SEP/IRA Plan,
a statement of whether or not federal incom tax should be withheld
(in the absence of any statement, federal tax will be withheld)
16
<PAGE>
A signature guarantee of each owner is required to redeem shares in the
following situations: (i) if you change ownership on your account; (ii) when you
want the redemption proceeds sent to a different address from that registered on
the account; (iii) if the proceeds are to be made payable to someone other than
the account's owner(s); (iv) any redemption transmitted by federal wire transfer
to your bank; and (v) if a change of address request has been received by the
Fund or the Transfer Agent within the last 15 days. In addition, signature
guarantees are required for all redemptions of $25,000 or more from any
shareholder account.
Signature guarantees are designed to protect both you and the Fund from fraud.
Signature guarantees can be obtained from most banks, credit unions or savings
associations, or from broker/dealers, municipal securities broker/dealers,
government securities broker/dealers, national securities exchanges, registered
securities associations or clearing agencies deemed eligible by the Securities
and Exchange Commission. Notaries public cannot provide signature guarantees.
By Telephone:
Shares of the Fund may also be sold by calling the Transfer Agent at
1-800-BRAMCAP. In order to utilize this procedure for telephone redemption, a
shareholder must have previously elected this procedure in writing, which
election will be reflected in the records of the Transfer Agent, and the
redemption proceeds must be mailed directly to the investor or transmitted to
the investor's predesignated account at a domestic bank. To change the
designated account, send a written request with signature(s) guaranteed to the
Transfer Agent. To change the address, call the Transfer Agent at 1-800-BRAMCAP
or send a written request with signature(s) guaranteed to the Transfer Agent.
Any written redemption requests received within 15 days after an address change
must be accompanied by a signature guarantee and no telephone redemptions will
be allowed within 15 days of such a change. The Fund reserves the right to limit
the number of telephone redemptions by an investor. Once made, telephone
redemption requests may not be modified or canceled. The selling price of each
share being redeemed will be the Fund's per share net asset value next
calculated after receipt by the Transfer Agent of the telephone redemption
request.
The Fund will not be liable for following instructions communicated by telephone
that it reasonably believes to be genuine. See "Purchases by Telephone" for
discussion of liability for telephone errors.
During periods of substantial economic or market changes, telephone redemptions
may be difficult to implement. If an investor is unable to contact the Transfer
Agent by telephone, shares may also be redeemed by delivering the redemption
request to the Transfer Agent by mail as previously described.
Redemption at the Option of the Fund
The Fund reserves the right to redeem shares held in any account if the net
asset value remains below $500 in order to relieve the Fund of the cost of
maintaining very small accounts. Before such involuntary redemption, the Fund
will give the shareholder 30 days' written notice to bring the account up to
$500 before any action is taken. This minimum balance requirement does not apply
to IRAs and other tax-sheltered investment accounts. The right of redemption
shall not apply if the value of a shareholder's account drops below $500 as the
result of market action.
Shareholder Services
Money Market Exchange Privilege
Shareholders of The Bramwell Growth Fund may exchange shares (having a value of
$1,000 or more) for shares of the Firstar Money Market Fund ("Firstar"). Firstar
is described in a separate prospectus which contains more complete information
about such fund. Investors may obtain a copy of the prospectus for the Firstar
Money Market Fund by calling 1-800-BRAMCAP (1-800-272-6227) and are advised to
read it
17
<PAGE>
carefully before authorizing any investment in shares of such fund. Investors
may subsequently exchange such shares and shares purchased with reinvested
dividends for shares of the Fund. Firstar Investment Research & Management
Company ("FIRMCO") serves as the investment adviser to Firstar. To make a
telephone exchange, the Telephone Exchange option must have been selected on the
Purchase Application when the account was opened. Otherwise, a written request,
including signature guarantees, must be completed and sent to the Transfer Agent
prior to making telephone exchanges. Currently, a $5.00 fee is charged to the
investor's account for each telephone exchange transacted by the investor. The
fee will be charged to the account from which the funds are being withdrawn
prior to effecting the exchange. There is no fee for a written exchange request.
To make a telephone exchange, call the Transfer Agent at 1-800-BRAMCAP or to
make a written exchange, write to The Bramwell Funds, Inc., Firstar Mutual Fund
Services, LLC, P.O. Box 701, Milwaukee, WI 53201-0701, or for overnight
delivery, The Bramwell Funds, Inc., Firstar Mutual Fund Services, LLC, 615 East
Michigan Street, Third Floor, Milwaukee, WI 53202. The exchange will be made at
the per share net asset value of the shares to be redeemed, and the per share
net asset value of the shares to be purchased, in both cases as next determined
after the exchange request is received. Once an exchange request is made, either
by telephone or in writing, it may not be modified or canceled. Although there
are currently no such limitations, both the Fund and Firstar reserve the right
to limit the frequency of exchanges or to otherwise restrict exchanges in order
to ensure that exchanges do not disadvantage the Fund or its investors (or in
the case of Firstar, Firstar and its investors). Investors will be notified at
least 60 days in advance of any changes in such limitations. The exchange
privilege is only available in states where the shares to be purchased may
legally be sold.
For federal income tax purposes, an exchange of Fund shares is a taxable event
and accordingly, the investor may realize a capital gain or loss. Before making
an exchange request, the investor should determine the tax consequences of a
particular exchange.
Automatic Investment Plan
The Fund offers an Automatic Investment Plan whereby an investor may
automatically purchase shares of the Fund on a regular basis ($50 minimum per
transaction). Under the Automatic Investment Plan, an investor's designated bank
or other financial institution debits a preauthorized amount on the investor's
account each month or quarter and applies the amount to the purchase of Fund
shares. The Automatic Investment Plan must be implemented with a financial
institution that is a member of the ACH. Also, the Fund must have a currently
effective registration in those states in which it is required. Applications to
establish the Automatic Investment Plan are available from the Fund.
Using an Automatic Investment Plan facilitates dollar-cost averaging whereby
investing equal dollar amounts periodically in a fluctuating market leads to
buying more shares at lows and fewer shares at highs. Of course, dollar-cost
averaging cannot assure a profit or protect the investor against losses in a
declining market.
Retirement Plans
The Fund offers a variety of retirement plans including IRAs and SEP/IRAs that
may allow investors to shelter a portion of their income from taxes. Complete
information including application forms, descriptions of applicable service fees
and certain limitations on contributions and withdrawals, are available from the
Transfer Agent or the Fund upon request by calling 1-800-BRAMCAP
(1-800-272-6227).
Service and 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, of up to 0.25% of the Fund's
average daily net assets.
18
<PAGE>
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.
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.
In approving the Plan, the Directors determined, in the exercise of their
business judgment and in light of their fiduciary duties, that there is a
reasonable likelihood that the Plan will benefit the Fund and its shareholders.
Dividends and Distributions
The Fund intends to pay dividends from net investment income and net realized
capital gains (not offset by capital loss carryovers) on an annual basis in
December. Investors may elect to reinvest all income dividends and capital gains
distributions in shares of the Fund or in cash as designated on the Purchase
Application. If the investor does not specify an election, all income dividends
and capital gains distributions will automatically be reinvested in full and
fractional shares of the Fund calculated to the nearest 1,000th of a share.
Shares will be purchased at the net asset value in effect on the business day
after the dividend record date and will be credited to the investor's account on
such date. Reinvested dividends and distributions receive the same tax treatment
as those paid in cash.
An investor may change his or her election at any time by calling the Transfer
Agent at 1-800-BRAMCAP or by sending written notification to The Bramwell Funds,
Inc., Firstar Mutual Fund Services, LLC, P.O. Box 701, Milwaukee, WI 53201-0701.
The election is effective for distributions with a dividend record date on or
after the date that the Transfer Agent receives notice of the election.
Taxes
Federal Taxes
The following is a brief summary of certain U.S. federal tax and foreign income
tax issues. Please see the Statement of Additional Information for a more
detailed discussion of these topics. Prospective shareholders should consult
their own tax advisors with regard to the federal tax consequences of the
purchase, ownership or disposition of shares of the Fund, as well as the tax
consequences arising under the laws of any state, foreign country or other
taxing jurisdiction.
Dividends out of net investment income and distributions of net short-term
capital gains are taxable to the recipient U.S. shareholders as ordinary income.
Dividends from net investment income and net short-term capital gains may be
eligible for the corporate dividends-received deduction.
19
<PAGE>
The excess of net long-term capital gains over net short-term capital losses
realized and distributed by the Fund to its U.S. shareholders as capital gains
distributions is taxable to the shareholders as long-term capital gain,
regardless of the length of time a shareholder has held his or her Fund shares.
An income dividend or capital gains distribution declared by the Fund during
October, November or December of a year to shareholders of record as of a
specified date in such a month that is paid during January of the following year
is includable in the prior year's taxable income of shareholders that are
calendar year taxpayers.
Any dividend or distribution received by a shareholder on shares of the Fund
shortly after the purchase of such shares by him or her will have the effect of
reducing the net asset value of such shares by the amount of such dividend or
distribution. Furthermore, such dividend or distribution, although in effect a
return of capital, is subject to applicable taxes to the extent that the
investor is subject to such taxes regardless of the length of time he or she may
have held his or her shares.
Upon a sale or other disposition of Fund shares which are held as a capital
asset, a shareholder may realize a capital gain or loss which may be long-term
or short-term, depending on the shareholder's holding period for the shares.
The Fund may be required to withhold U.S. federal income tax at the rate of 31%
of all taxable distributions 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 IRS that they are subject to
backup withholding. Backup withholding is not an additional tax. Any amounts
withheld may be credited against the shareholder's U.S. federal income tax
liability.
Shareholders will be advised annually as to the federal tax status of dividends
and capital gains distributions made by the Fund for the preceding year.
Distributions by the Fund generally will be subject to state and local taxes.
Foreign Income Taxes
Investment income received by the Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. It is not expected
that the Fund will be able to "pass through" these taxes to shareholders but
such taxes generally will be deductible by the Fund.
Fund Performance
From time-to-time, the Fund may advertise its "average annual total return" over
various periods of time. This total return figure shows the average percentage
change in value of an investment in the Fund from the beginning date of the
measuring period to the ending date of the measuring period. The figure reflects
changes in the price of the Fund's shares and assumes that any income dividends
and/or capital gains distributions made by the Fund during the period are
reinvested in shares of the Fund. Figures will be given for recent one-, five-
and ten-year periods (when applicable), and may be given for other periods as
well (such as from commencement of the Fund's operations, or on a year-by-year
basis). When considering "average" total return figures for periods longer than
one year, investors should note that the Fund's annual total return for any one
year in the period might have been greater or less than the average for the
entire period. The Fund also may use "aggregate" total return figures for
various periods, representing the cumulative change in value of an investment in
the Fund for the specific period (again reflecting changes in the Fund's share
price and assuming reinvestment of dividends and distributions). Aggregate total
returns may be shown by means of schedules, charts or graphs, and may indicate
subtotals of the various components of total return (that is, the change in
value of initial investment, income dividends and capital gains distributions).
The Fund may quote the Fund's average annual total and/or aggregate total return
for various time periods in advertisements or communications to shareholders.
The Fund may also compare its
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performance to that of other mutual funds with similar investment objectives and
to stock and other relevant indices or to rankings prepared by independent
services or industry publications. For example, the Fund's total return may be
compared to data prepared by Lipper Analytical Services, Inc., Morningstar,
Value Line Mutual Fund Survey and CDA Investment Technologies, Inc. Total return
data as reported in such national financial publications as The Wall Street
Journal, The New York Times, Investor's Business Daily, USA Today, Barron's,
Money and Forbes as well as in publications of a local or regional nature, may
be used in comparing Fund performance.
The Fund's total return may also be compared to such indices as the:
o Dow Jones Industrial Average
o Standard & Poor's 500 Composite Stock Total Return Index
o Nasdaq Composite OTC Index or Nasdaq Industries Index
o Consumer Price Index
o Russell 2000 Index
Further information on performance measurement may be found in the Statement of
Additional Information.
Share Price and Determination of Net Asset Value
Shares are purchased at their net asset value per share. The Fund calculates its
net asset value (NAV) as follows:
(Value of Fund Assets) - (Fund Liabilities)
NAV = ----------------------------------------------------
Number of Outstanding Shares
Net asset value is determined as of the end of regular trading hours on the New
York Stock Exchange (currently 4:00 p.m. New York City time) on days that the
New York Stock Exchange is open.
Portfolio securities are valued based on market quotations or, if not readily
available, at fair value as determined in good faith under procedures
established by the Fund's Board of Directors. See "Net Asset Value" in the
Statement of Additional Information.
Capital Structure
Description of Shares
The Company is organized as a series fund which permits it to issue its
authorized capital stock in one or more series, each such series representing a
separate investment portfolio.
The Company's authorized capital stock consists of 500 million shares of common
stock, $.0001 par value per share, of which there have been initially allocated
200 million shares to the Fund. The Board of Directors may, at its discretion,
classify and allocate shares to additional series within the Company or classify
and allocate additional shares to the Fund without further action by the
shareholders. Each share outstanding entitles the holder to one vote. Generally,
shares of all series will be voted together as one class, except where voting by
a series is required by law. There will normally be no meetings of the
shareholders for the purpose of electing Directors unless and until such time as
less than a majority of the Directors holding office have been elected by
shareholders.
21
<PAGE>
Counsel and Independent Certified Public Accountants
Dechert Price & Rhoads, 30 Rockefeller Plaza, New York, NY 10112, has passed
upon the validity of the shares offered by this Prospectus and also acts as
outside counsel to the Fund. Margaret A. Bancroft, a member of Dechert Price &
Rhoads, serves as Assistant Secretary of the Fund.
PricewaterhouseCoopers LLP, 411 East Wisconsin Avenue, Milwaukee, WI 53202, has
been selected to serve as independent certified public accountants of the
Company for the fiscal year ending June 30, 1999.
Custodian and Transfer and Dividend Disbursing Agent
Firstar Bank Milwaukee, 777 East Wisconsin Avenue, Eleventh Floor, Milwaukee, WI
53202, has been retained to act as Custodian of the Fund's investments.
Firstar Mutual Fund Services, LLC, which has its principal business address at
615 East Michigan Street, Third Floor, Milwaukee, WI 53202, serves as the Fund's
Transfer and Dividend Disbursing Agent. Neither the Custodian nor the Transfer
and Dividend Disbursing Agent has any part in deciding the Fund's investment
policies or which securities are to be purchased or sold for the Fund's
portfolio.
Information for Shareholders
The Fund will provide the following statements and reports to keep the investor
current regarding the status of his or her investment account:
Confirmation After each transaction that affects
Statements the account balance or account
registration.
Account
Statements Quarterly.
Financial Reports At least semiannually. Annual
reports will include audited financial
statements. To reduce Fund expenses,
one copy of each report will be mailed
to each Taxpayer Identification Number
even though the investor may have more
than one account in the Fund.
Investors who have questions about their specific accounts, have general
questions or wish to have additional information should call the Fund at:
1-800-BRAMCAP (1-800-272-6227). In addition, investors who wish to make a change
in their address of record, a change in investments made through an Automatic
Investment Plan or a change in the manner in which dividends are received may
also do so by calling the Fund at that number. This Prospectus, including the
Statement of Additional Information which has been incorporated by reference
herein, does not contain all the information set forth in the Registration
Statement filed by the Fund with the SEC under the Securities Act of 1933.
Copies of the Registration Statement may be obtained at a reasonable charge at
the offices of the SEC in Washington, DC (http://www.sec.gov).
21
<PAGE>
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, 1998
- - --------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus for The Bramwell Growth Fund (the "Fund")
dated November 1, 1998, as amended from time to time, a copy of which may be
obtained without charge by calling 1-800-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
FURTHER INFORMATION ON THE NATURE OF THE FUND'S INVESTMENTS....................2
DIRECTORS AND OFFICERS.........................................................9
INVESTMENT ADVISORY AND OTHER SERVICES........................................12
DISTRIBUTION PLAN.............................................................12
PORTFOLIO TURNOVER............................................................13
PORTFOLIO TRANSACTIONS AND BROKERAGE..........................................13
PERFORMANCE INFORMATION.......................................................14
TAX STATUS....................................................................16
NET ASSET VALUE...............................................................21
CAPITAL STRUCTURE.............................................................21
HOW TO REDEEM SHARES..........................................................22
EXPERTS.......................................................................22
FINANCIAL STATEMENTS..........................................................23
APPENDIX......................................................................24
<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. ("BramCap") 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.
<PAGE>
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.
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
2
<PAGE>
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 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
3
<PAGE>
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
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 by
purchasing 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
4
<PAGE>
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, 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 nine 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,
5
<PAGE>
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.
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, or that delivery will occur.
6
<PAGE>
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.
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.
7
<PAGE>
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.
Investment in Unseasoned Issuers
The Fund may invest in securities of issuers which have a record of less than
three 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>
Directors and Officers
- - --------------------------------------------------------------------------------
The Directors and Officers of the Fund and their principal occupations during
the past five years are set forth below.
<TABLE>
<CAPTION>
Positions held Principal Occupations
Name, Address and Age with the Fund During the Past Five Years
- - --------------------- -------------- --------------------------
<S> <C> <C>
Elizabeth R. Bramwell* Director, President President and Chief Executive Officer, Bramwell
745 Fifth Avenue and Chief Executive Capital Management (February 1994-present);
New York, NY 10151 Officer, Chief President, Chief Investment Officer, Portfolio
Age: 58 Financial Officer and Manager and Trustee, The Gabelli Growth Fund
Chief Investment (April 1987-February 1994).
Officer
J. Sinclair Armstrong Director Director, Secretary and Treasurer, The Reed
444 Madison Avenue Foundation, (1986-present) (philanthropy);
New York, NY 10022 Partner (1980-1984) and Counsel (1984-1995),
Age: 83 Whitman Breed Abbott & Morgan (formerly Whitman
Ransom) (law firm); 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, Securities and Exchange Commission
(1953-1957).
Isabel H. Benham Director Trustee Emeritus and former President
745 Fifth Avenue (1992-1995), Board of Trustees of the John W.
New York, NY 10151 Age: 89 Barringer III National Railroad Library;
Director, 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).
George F. Keane Director Chairman of the Board, Trigen Energy Corporation
745 Fifth Avenue (1994-present); President Emeritus and founding
New York, NY 10151 Chief Executive Officer (1971-1992), The Common
Age: 69 Fund (investment management); Director and
Chairman of Investment Committee, United
Negro College Fund (1982-
9
<PAGE>
Positions held Principal Occupations
Name, Address and Age with the Fund During the Past Five Years
- - --------------------- -------------- --------------------------
present); Trustee, Nicholas-Applegate
Investment Trust (1993-present);
Member, Investment Advisory
Committee, New York State Common
Retirement Fund (1982-present);
Director, Northern Trust of
Connecticut (1991-present),
Universal Stainless & Alloy
Products (1994-present), Global
Pharmaceutical Corporation (1995-present)
and Security Capital Real Estate
Funds (1997-present).
James C. Sargent Director Counsel, Opton, Handler, Gottlieb, Feiler & Katz
745 Fifth Avenue (1995-present) (law firm); Director,
New York, NY 10151 Scan-Graphics (1992-present), Austin's
Age: 82 International (1992-present); Former 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.
Martha R. Seger, Ph.D. Director Chairman, Martha Seger & Associates
220 Park Avenue (1992-present); Current Director, Amerisure,
Birmingham, MI 40889 Amoco, Fluor, Kroger, Tucson Electric Power and
Age: 66 Xerox; Governor, Federal Reserve Board
(1984-1991); Commissioner of Financial
Institutions, State of Michigan (1981-1982);
Chief Economist, Detroit Bank & Trust
(Comerica)(1967-1974).
10
<PAGE>
Positions held Principal Occupations
Name, Address and Age with the Fund During the Past Five Years
- - --------------------- -------------- --------------------------
Mary F. McCollum Secretary and Treasurer Executive Vice President, Bramwell Capital
745 Fifth Avenue Management (May 1994-present); Vice President,
New York, NY 10151 Operations and Corporate Secretary (1985-1993),
Age: 52 Assistant Treasurer/ Assistant Secretary
(1983-1985) and Financial Administrator
(1982-1983), The Common Fund (investment
management).
Margaret A. Bancroft Assistant Secretary Partner, Dechert Price & Rhoads (law firm and
30 Rockefeller Plaza counsel to the Fund).
New York, NY 10112 Age: 60
- - ---------------------
* 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.
</TABLE>
The following table sets forth information regarding compensation of the
Directors by the Fund for the fiscal year ended June 30, 1998. Officers of the
Fund and Directors who are interested persons of the Fund do not receive any
compensation from the Fund.
COMPENSATION TABLE
(FISCAL YEAR ENDED JUNE 30, 1998)
<TABLE>
<CAPTION>
Total
Pension or Compensation
Retirement From
Aggregate Benefits Estimated Registrant
Compensation Accrued Annual Benefits and Fund
From as Part of Upon Complex Paid*
Name of Director Registrant Fund Expenses Retirement to Directors
---------------- ---------- -------------- ---------- ------------
<S> <C> <C> <C>
Elizabeth R. Bramwell $0 None N/A $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 $4,500 None N/A $4,500
Martha R. Seger $4,500 None N/A $4,500
(footnote on following page)
11
<PAGE>
- - --------------------------
* 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.
</TABLE>
As of September 30, 1998, the officers and Directors of the Fund owned 1.8% 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 fiscal years ended June 30, 1998, 1997 and 1996, the Fund paid the
investment adviser investment advisory fees of $1,587,601, $1,249,859 and
$1,195,114, respectively. During those periods, the investment adviser earned
investment advisory fees of $1,587,601, $1,274,930 and $1,238,851, respectively,
pursuant to its investment advisory agreement with the Fund, but voluntarily
waived $0, $25,071 and $43,737, respectively, 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
periods. The investment adviser has voluntarily agreed to so limit the Fund's
total expenses (excluding interest, taxes, brokerage and extraordinary expenses)
until June 30, 1999. After such date, the expense limitation may be terminated
or revised at any time.
For the fiscal years ended June 30, 1998, 1997 and 1996, the Fund paid the
administrator fees of $184,829, $158,120 and $159,329, respectively.
Distribution Plan
- - -----------------
The Fund has adopted a Service and Distribution Plan (the "Plan") pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended (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.
12
<PAGE>
For the fiscal year ended June 30, 1998, the distribution expenses related to
the Fund were $50,371 for Fund literature and materials, $139,138 for
advertising, $203,142 for broker fees, $28,832 for Fund reports and materials
for current shareholders and administration of current accounts, and $17,443 for
conferences and seminars. The Fund paid BramCap $396,900 of the total $438,926
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 may necessitate more
active trading. A higher portfolio turnover rate involves greater transaction
costs to the Fund and may result in the realization of net capital gains which
would be taxable to shareholders when distributed. The Fund's annualized
portfolio turnover rate for the fiscal period ended June 30, 1998 was 49%.
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
13
<PAGE>
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 years ended June 30, 1998, 1997 and 1996, the Fund paid a
total of $147,519, $218,193 and $332,163, respectively, in brokerage commissions
with respect to portfolio transactions aggregating $127,016,890, $168,611,661
and $334,485,691, respectively. Of such amount for the fiscal year ended June
30, 1998, $121,302 in brokerage commissions with respect to portfolio
transactions aggregating $106,519,157 was placed with brokers or dealers who
provide research and investment information.
During the fiscal year ended June 30, 1998, the Fund held securities issued by
Merrill Lynch & Co., Inc. ("Merrill"). Merrill was one of the ten brokers that
received the greatest dollar amount of brokerage commissions for portfolio
transactions for the Fund during the fiscal year ended June 30, 1998. The Fund
held $3,690,000 of Merrill's stock on June 30, 1998 as an investment.
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
14
<PAGE>
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, 1998 and since inception (August 1, 1994) through June 30, 1998
were 39.5% and 26.3%, 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 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 Total Return 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,
15
<PAGE>
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.
Tax Status
- - ----------
Set forth below is a discussion of certain U.S. federal income tax issues
concerning the Fund and the purchase, ownership, and disposition of Fund shares.
This discussion does not purport to be complete or to deal with all aspects of
federal income taxation that may be relevant to shareholders in light of their
particular circumstances, nor to certain types of shareholders subject to
special treatment under the federal income tax laws (for example, banks and life
insurance companies). This discussion is based upon present provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), the regulations
promulgated thereunder, and judicial and administrative ruling authorities, all
of which are subject to change, which change may be retroactive. Prospective
investors should consult their own tax advisors with regard to the federal tax
consequences of the purchase, ownership, or disposition of Fund shares, as well
as the tax consequences arising under the laws of any state, foreign country, or
other taxing jurisdiction.
The Fund intends to be taxed as a regulated investment company under Subchapter
M of 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,
16
<PAGE>
securities or currencies; and (b) diversify its holdings so that, at the end of
each fiscal quarter, (i) at least 50% of the value of the Fund's total assets is
represented by cash and cash items, 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 a 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
Any regulated futures contracts, any foreign currency contracts, and certain
options (namely, nonequity options and dealer equity options) 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. 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
17
<PAGE>
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.
Constructive Sales
Recently enacted rules will affect the timing and character of gain if the Fund
engages in certain transactions that reduce or eliminate the Fund's risk of loss
with respect to appreciated financial positions, including stock and securities.
For example, if the Fund enters into a short sale of property while holding
property substantially identical to that sold short, the entry into the contract
will generally constitute a constructive sale and the Fund will recognize gain
(but not loss) as if the property it held had been sold. The character of gain
from a constructive sale will depend upon the Fund's holding period in the
property. If a short sale results in loss, the loss will be recognized at the
time of the closing of the short sale, and its character may be affected by the
straddle rules described above.
Passive Foreign Investment Companies
The Fund may invest in shares of foreign corporations that may be classified
under the Code as passive foreign investment companies ("PFICs"). In general, a
foreign corporation is classified as a PFIC if at least one-half of its assets
constitute investment-type assets, or 75% or more of its gross income is
investment-type income. If the Fund receives a so-called "excess distribution"
with respect to PFIC stock, the Fund itself may be subject to a tax on a portion
of the excess distribution, whether or not the corresponding income is
distributed by the Fund to shareholders. In general, under the PFIC rules, an
excess distribution is treated as having been realized ratably over the period
during which the Fund held the PFIC shares. The Fund itself will be subject to
tax on the portion, if any, of an excess distribution that is so allocated to
prior Fund taxable years and an interest factor will be added to the tax, as if
the tax had been payable in such prior taxable years. Certain distributions from
a PFIC as well as gain from the sale of PFIC shares are treated as excess
distributions. Excess distributions are characterized as ordinary income even
though,
18
<PAGE>
absent application of the PFIC rules, certain excess distributions might have
been classified as capital gain.
The Fund may be eligible to elect alternative tax treatment with respect to PFIC
shares. Under an election that currently is available in some circumstances, the
Fund generally would be required to include in its gross income its share of the
earnings of a PFIC on a current basis, regardless of whether distributions were
received from the PFIC in a given year. If this election were made, the special
rules, discussed above, relating to the taxation of excess distributions, would
not apply. In addition, another election would involve marking to market the
Fund's PFIC shares at the end of each taxable year, with the result that
unrealized gains would be treated as though they were realized and reported as
ordinary income. Any mark-to-market losses and any loss from an actual
disposition of Fund shares would be deductible as ordinary losses to the extent
of any net mark-to-market gains included in income in prior years.
Currency Fluctuations -- "Section 988" Gains or Losses
Gains or losses attributable to fluctuations in exchange rates which occur
between the time the Fund accrues receivables or 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.
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. The excess of net long-term capital gains over the
short-term capital losses realized and distributed by the Fund to its U.S.
shareholders as capital gains distributions, whether paid in cash or in shares,
is taxable to the shareholders as long-term capital gain, regardless of the
length of time a shareholder has held his or her Fund stock, and is 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.
19
<PAGE>
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. If a
shareholder held shares for six months or less and during that period received a
distribution taxable to the shareholder as long-term capital gain, any loss
realized on the sale of such shares during such six-month period would be a
long-term loss to the extent of such distribution.
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 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 and
certain types of U.S. shareholders subject to special treatment under the U.S.
federal income tax law (e.g., banks and life insurance companies) may be subject
to U.S. tax rules that differ significantly from those summarized above.
20
<PAGE>
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 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.
21
<PAGE>
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, taking into account BramCap's
advice, 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.
Experts
- - -------
The Financial Statements of the Fund as of June 30, 1998, incorporated by
reference into this Statement of Additional Information have been so
incorporated by reference in reliance on the report of PricewaterhouseCoopers
LLP, independent certified public accountants, given on the authority of said
firm as experts in accounting and auditing.
22
<PAGE>
Financial Statements
- - --------------------
The Fund's financial statements and notes thereto appearing in the June 30, 1998
Annual Report to Shareholders and the report thereon of PricewaterhouseCoopers
LLP, independent certified public accountants, appearing therein, are
incorporated by reference in this Statement of Additional Information. The Fund
will furnish, without charge, a copy of such Annual Report to Shareholders 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.
23
<PAGE>
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.
<PAGE>
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.
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.
2
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements
Included in Part A of the Registration Statement:
Financial Highlights.
Included in Part B of the Registration Statement:
Financial Statements for the year ended June 30, 1998,
including notes thereto, are incorporated by reference in the
Statement of Additional Information from the Registrant's
Annual Report dated as of June 30, 1998 filed with the
Securities and Exchange Commission on August 4, 1998.
(b) Exhibits
1. Articles of Incorporation*
2. By-Laws*
3. Not Applicable
4. Not Applicable
5. Form of Investment Advisory Agreement*
6. Not Applicable
7. Not Applicable
8. Form of Custodian Agreement*
9. (a) Form of Administrative and Fund Accounting Agreement*
(b) Form of Transfer Agent Agreement*
10. Opinion and Consent of Dechert Price & Rhoads*
11. Consent of Independent Certified Public Accountants
12. Not Applicable
13. Investment Representation Letters*
- - ------------------------
* Filed electronicaly with Post-Effective Amendment No. 5 on October 30,
1997.
<PAGE>
14. Form of Individual Retirement Account Disclosure Statement,
Individual Retirement Custodial Account and Application Forms*
15. Service and Distribution Plan*
16. Schedule for computation of performance quotation provided
in response to Item 22
17. Financial Data Schedule
18. Not Applicable
19. Powers of Attorney of Mesdames Bramwell, Benham and Seger and
Messrs. Armstrong, Keane and Sargent*
Item 25. Persons Controlled by or under Common Control with Registrant.
Not applicable.
Item 26. Number of Holders of Securities.
As of August 31, 1998, there were 7,971 record holders of
shares of The Bramwell Growth Fund, the only series of the
Registrant's common stock.
Item 27. Indemnification.
The Registrant is incorporated under the laws of the State of
Maryland and is subject to Section 2-418 of the Corporation
and Associations Article of the General Corporation Law of the
State of Maryland (Maryland Law) controlling the
indemnification of directors and officers. Since the
Registrant has its executive offices in the State of New York,
and is qualified as a foreign corporation doing business in
such State, the persons covered by the foregoing statute may
also be entitled to and subject to the limitations of the
indemnification provisions of Section 721-726 of the New York
Business Corporation Law.
The general effect of these statutes is to protect directors,
officers, employees and agents of the Registrant against legal
liability and expenses incurred by reason of their positions
with the Registrant. The statutes provide for indemnification
for liability for proceedings not brought on behalf of the
corporation and for those brought on behalf of the
corporation, and in each case place conditions under which
indemnification will be permitted, including requirements that
the indemnified person acted in good faith. Under certain
conditions, payment of expenses in advance of final
disposition may be permitted. The Articles of Incorporation of
the Registrant make the indemnification if its directors,
officers, employees and agents mandatory subject only to the
conditions and limitations imposed by the applicable
provisions of the Maryland Law and by the provisions of
Section 17(h) of the Investment Company Act of 1940 (the 1940
Act) as
2
<PAGE>
interpreted and required to be implemented by SEC Release No.
IC-11330 of September 4, 1980.
In referring in its Articles of Incorporation to, and making
indemnification of directors subject the conditions and
limitations of, both the applicable provisions of the Maryland
Law and Section 17(h) of the 1940 Act, the Registrant intends
that conditions and limitations on the extent of the
indemnification of directors and officers imposed by the
provisions of either the Maryland Law or Section 17(h) shall
apply and that any inconsistency between the two will be
resolved by applying the provisions of said Section 17(h) if
the condition or limitation imposed by Section 17(h) is the
more stringent. In referring in its Articles of Incorporation
to SEC Release No. IC-11330 as the source for interpretation
and implementation of said Section 17(h), the Registrant
understands that it would be required under its Articles of
Incorporation to use reasonable and fair means in determining
whether indemnification of a director or officer should be
made and undertakes to use either (1) a final decision on the
merits by a court or other body before whom the proceeding was
brought that the person to be indemnified (indemnitee) was not
liable to the Registrant or to its security holders by reason
of willful malfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of
his or her office (disabling conduct) or (2) in the absence of
such a decision, a reasonable determination, based upon a
review of the facts, that the indemnitee was not liable by
reason of such disabling conduct, by (a) the vote of a
majority of a quorum of directors who are neither "interested
persons" (as defined in the 1940 Act) of the Registrant nor
parties to the proceeding, or (b) an independent legal counsel
in a written opinion. Also, the Registrant will make advances
of attorney's fees or other expenses incurred by a director or
officer in his or her defense only if (in addition to his or
her undertaking to repay the advance if he or she is not
ultimately entitled to indemnification) (1) the indemnitee
provides a security for his or her undertaking, (2) the
Registrant shall be insured against losses arising by reason
of any lawful advances, or (3) a majority of a quorum of the
non-interested, non-party directors of the Registrant, or an
independent legal counsel in a written opinion, shall
determine, based on a review of readily available facts, that
there is reason to believe that the indemnitee ultimately will
be found entitled to indemnification. In addition, the
Registrant will maintain a directors' and officers' errors and
omissions liability insurance policy protecting directors and
officers against liability for claims made by reason of any
acts, errors or omissions committed in their capacity as
directors or officers. The policy will contain certain
exclusions, among which is exclusion from coverage for active
or deliberate dishonest or fraudulent acts and exclusion for
fines or penalties imposed by law or other matters deemed
uninsurable.
Insofar as indemnification for liability arising under the
Securities Act of 1933 (the 1933 Act) may be permitted to
directors, officers and controlling persons of the
3
<PAGE>
Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the 1933 Act and will be governed by the final adjudication of
such issue.
Item 28. Business and Other Connections of Investment Adviser
The descriptions of the Investment Adviser under the caption
"Management of the Fund" in the Prospectus and in the
Statement of Additional Information constituting Parts A and
B, respectively, of this Registration Statement are
incorporated by reference herein.
Bramwell Capital Management, Inc. also acts as investment
adviser to entities and individuals which are not registered
investment companies and as a subadviser to a registered
investment company.
Item 29. Principal Underwriters
Not Applicable.
Item 30. Location of Accounts and Records.
The accounts, books and other documents required to be
maintained by Registrant pursuant to Section 31(a) of the 1940
Act and the rules promulgated thereunder are in the physical
possession of Registrant, Registrant's Custodian and
Registrant's Administrator as follows: the documents required
to be maintained by paragraphs (4), (5), (6), (7), (9), (10)
and (11) of Rule 31a-1(b) will be maintained by the
Registrant; the documents required to be maintained by
paragraphs (1), (2)(i-iii), (8) and (12) of Rule 31a-1(b) will
be maintained by Registrant's Administrator; and all other
records will be maintained by the Registrant's Custodian.
Item 31. Management Services
Not Applicable.
4
<PAGE>
Item 32. Undertakings
The Registrant undertakes to call a meeting of shareholders
for the purpose of voting upon the question of removal of a
director, if requested to do so by the holders of at least 10%
of the Fund's outstanding shares, and that it will assist
communication with other shareholders as required by Section
16(c) of the Investment Company Act of 1940.
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, Registrant certifies that it meets
all of the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York and State of New York on the
30th day of October, 1998.
THE BRAMWELL FUNDS, INC.
By: *
--------------------------
Elizabeth R. Bramwell
President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
Signatures Title Date
- - ---------- ----- ----
* Director and President 10/30/98
- - ---------------------
Elizabeth R. Bramwell (principal executive,
financial and accounting
officer)
* Director 10/30/98
- - ---------------------
J. Sinclair Armstrong
* Director 10/30/98
- - ---------------------
Isabel H. Benham
* Director 10/30/98
- - ---------------------
George F. Keane
* Director 10/30/98
- - ---------------------
James C. Sargent
* Director 10/30/98
- - ---------------------
Martha R. Seger
* By: /s/ Margaret A. Bancroft
-------------------------------
Margaret A. Bancroft
as Attorney-in-Fact
<PAGE>
Exhibits
- - --------
99.B11 Consent of Independent Certified Public Accountants
99.B16 Schedule for computation of performance quotation provided in
response to Item 22
27 Financial Data Schedule
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
The Bramwell Funds, Inc.
We consent to the incorporation by reference in Post-Effective Amendment No. 6
to the Registration Statement on Form N-1A of The Bramwell Funds, Inc. of our
report dated July 17, 1998, on our audit of the financial statements and
financial highlights of The Bramwell Growth Fund, which constitutes The Bramwell
Funds, Inc., which report is included in the Annual Report for the year ended
June 30, 1998 which is also incorporated by reference in the Registration
Statement. We also consent to the reference to our Firm under the caption
"EXPERTS" in the Statement of Additional Information and under the caption
"Financial Highlights" in the Prospectus.
\s\ PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
October 28, 1998
Exhibit 16
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATION
FOR THE ONE YEAR PERIOD ENDED JUNE 30, 1998
Total Return = (Ending Redeemable Value/Initial Value) - 1
Total Return =
39.5% = (24,971/17,906) - 1
FOR THE PERIOD FROM AUGUST 1, 1994 (COMMENCEMENT OF OPERATIONS) TO JUNE 30, 1998
Cumulative Total Return =(Ending Redeemable Value/Initial Payment) - 1 of
$10,000
Cumulative Total Return = 149.7%
149.7% = (24,971/10,000) - 1
Total Return = (Ending Redeemable Value/Initial Payment)1/n - 1 of $10,000
Total Return = 26.3%
26.3% = (24,971/10,000)1/3.9 - 1
<TABLE> <S> <C>
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 128,384,251
<INVESTMENTS-AT-VALUE> 208,995,299
<RECEIVABLES> 1,340,272
<ASSETS-OTHER> 62,424
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 210,397,995
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<OTHER-ITEMS-LIABILITIES> 321,625
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<DIVIDEND-INCOME> 1,071,596
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<EXPENSES-NET> (2,630,260)
<NET-INVESTMENT-INCOME> (1,194,521)
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<APPREC-INCREASE-CURRENT> 40,370,192
<NET-CHANGE-FROM-OPS> 52,602,877
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (8,645,470)
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<NUMBER-OF-SHARES-SOLD> 3,045,628
<NUMBER-OF-SHARES-REDEEMED> 1,719,248
<SHARES-REINVESTED> 422,349
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<ACCUMULATED-NII-PRIOR> 0
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<GROSS-ADVISORY-FEES> 1,587,601
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,630,260
<AVERAGE-NET-ASSETS> 158,795,958
<PER-SHARE-NAV-BEGIN> 17.53
<PER-SHARE-NII> (0.13)
<PER-SHARE-GAIN-APPREC> 6.82
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