Filed pursuant to
Rule 497(c)
File No. 33-79742
811-8546
<PAGE>
Prospectus
November 1, 1999
The Securities and Exchange Commission has not approved or disapproved of these
securities or passed on the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
[Bramwell Funds Logo]
Bramwell Growth Fund
For Investors Seeking Primarily Long-Term Capital Growth
and Secondarily Current Income
Bramwell Focus Fund
For Investors Seeking Long-Term Capital Appreciation
The Bramwell Funds, Inc.
Elizabeth R. Bramwell, CFA
President and Chief Investment Officer
<PAGE>
How to Use This Prospectus
This prospectus is designed to help you make an informed decision about
investing in the Bramwell Growth Fund or the Bramwell Focus Fund. When both
funds are discussed together, they will be referred to as the "Funds," and when
discussed individually, the "Fund." The investment adviser for both of the Funds
is Bramwell Capital Management, Inc.
The prospectus has four main sections each covering different topics.
The Funds covers such topics as the Funds' investment goals, principal
strategies, investment selection process, principal risks, performance history
and fees and expenses.
Management of the Funds discusses the background and experience of the directors
of the Funds and the people and entities who are mainly responsible for the
day-to-day operation of the Funds.
How to Buy and Sell Shares covers the investment options available to you should
you decide to invest in the Funds as well as how to set up your account.
Financial Highlights provides you with additional performance data and financial
information.
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Table of Contents
The Funds 4
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Goals of Each Fund 4
Principal Strategies of the Funds 4
Investment Selection Process 4
Principal Risks 6
Performance History 7
Expenses 8
Management of the Funds 9
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Investment Adviser 9
Portfolio Manager 9
Board of Directors 11
How to Buy and Sell Shares 12
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Net Asset Value 12
How to Open and Add to Your Account 12
Additional Purchase Information 14
How to Sell Your Shares 14
Telephone and Wire Transactions 16
Signature Guarantees 17
Financial Service Agents 17
Exchange Privileges 18
Retirement Plans 19
Automatic Investment Plans 19
Shareholder Communications 20
Dividends and Distributions 20
Taxes 21
Financial Highlights 22
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The Funds
Goals of Each Fund
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The Bramwell Growth Fund seeks primarily long-term capital growth and
secondarily current income. The Bramwell Focus Fund seeks long-term capital
appreciation.
Principal Strategies of the Funds
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The Bramwell Growth Fund is a diversified fund that invests primarily in a
broad range of common stocks of companies that the adviser believes have above
average growth potential.
The Bramwell Focus Fund is a non-diversified fund with a concentrated
portfolio, normally comprised of 20 to 30 securities, that invests primarily in
common stocks of companies that the adviser believes have above average growth
potential.
Why a Mutual Fund?
A mutual fund is a pooled investment vehicle that allows investors an
opportunity to participate in the financial markets under continual supervision
by professional management and with economies of scale not generally achieved by
an individual. Although a fund strives to achieve its stated investment goals,
no assurance can be given that it will do so. You may lose money by investing.
Investment in a mutual fund is not insured by the FDIC or any governmental
agency. An individual mutual fund is not a complete or balanced investment
program.
Diversified Funds
o Invest in a broad number of securities.
o Cannot invest, with respect to 75% of their assets, more than 5% of their
assets in the securities of any one issuer.
o Are less dependent on the performance of any single investment choice.
Non-Diversified Funds
o Invest in a limited number of securities.
o Cannot invest, with respect to 50% of their assets, more than 5% of their
assets in the securities of any one issuer.
o Have greater volatility and potential risk because a non-diversified
fund's value is more dependent on the performance of each investment
choice.
Neither type of fund may invest more than 25% of its total assets in a single
issuer (other than securities issued by the U.S. government) and neither type of
fund may own more than 10% of the outstanding voting shares of any one issuer.
Investment Selection Process
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The Funds' adviser, Bramwell Capital Management, Inc. ("BramCap") attempts to
identify companies that are expected to grow as a result of the potential
long-term return from their investment in
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research, development, capital spending and market expansion. The potential
return on investment may not be reflected in a one-year period in the equity
market. In addition, BramCap looks for companies that it perceives to be
attractively valued relative to their future growth prospects, as well as to
that of the market as a whole. To provide BramCap more flexibility in the
selection of potential investments, the Board of Directors of the Funds may
modify each Fund's investment objectives without shareholder approval.
When selecting investments for the Funds, BramCap utilizes a blended "top-down"
and "bottom-up" approach. In top-down analysis, focus is on such macroeconomic
factors as inflation, interest and tax rates, currency and political climate. 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. To
the extent current income is a secondary investment objective of the Bramwell
Growth Fund, BramCap also analyzes a company's dividend paying characteristics
when selecting investments for that Fund.
BramCap sells investments when the valuation of the underlying company relative
to its future growth rate appears to have become excessive, or the fundamentals
of a company are perceived to be deteriorating, or more attractive alternative
investments surface.
Fundamental research supports investment decisions. Information sources include
corporate financial reports and press releases, company presentations, meetings
with management, general economic and industry data supplied by government
agencies and trade associations, and research reports provided by Wall Street
analysts.
BramCap then synthesizes and analyzes information gathered from fundamental
research to develop financial and valuation models for each individual company
in order to project future sales and earnings growth potential and relative
valuations and to facilitate informed investment decisions.
Core Investments
Both Funds invest primarily in common stocks of companies headquartered in the
United States. Both Funds may also invest up to 25% of their assets, measured at
the time of investment, in equities of foreign issuers.
Risk Management
Both Funds may hold cash or cash equivalents and invest without limit in U.S.
government obligations when adverse economic or market conditions exist, in the
event of exceptional redemption requests or when BramCap determines that a
temporary defensive position is advisable. Under these circumstances, the Funds
may not achieve their investment goals.
Although not anticipated to be widely used, the Funds may also use for risk or
portfolio
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management purposes various techniques and hedging instruments to increase or
decrease their exposure to the effects of possible changes in security prices,
currency exchange rates or other factors that affect the value of the Funds'
portfolios. These techniques and instruments include, but are not limited to,
options on securities and securities indices, futures, foreign currency
contracts, repurchase agreements, short sales and securities lending. Please see
the Statement of Additional Information for a complete description of the
investment policies and restrictions of each Fund.
Principal Risks
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General Risks
Investment in any mutual fund has inherent risks. The Funds are subject to the
same general risks as all mutual funds. Both Funds will invest primarily in the
common stocks of various companies, subjecting the Fund, and you as a
shareholder, to the risks of common stock investing. While both Funds are best
suited for investors seeking long-term performance, the Bramwell Focus Fund
should be regarded as a more aggressive portfolio and the Funds are not intended
either by themselves or together to constitute a balanced investment program.
There is no assurance that the investment objectives of the Funds will be
realized or that a Fund's portfolio will not decline in value. You may lose
money by investing in the Funds. You should consider your own risk tolerance,
investment goals and investment timeline before committing money to an
investment in any mutual fund. Significant factors that can affect the Funds'
performance are:
Market Risk
Economic conditions change and stock markets are volatile. Political and
economic factors such as changes in inflation and interest rates, currency
fluctuations, political climate and taxes may have a negative impact on the
performance of the Funds.
Individual Company Risk
Changes in factors specific to a particular company, such as its competitive
position, quality of management or demand for its products and services, may
also have a negative impact on the performance of the Funds.
Foreign Investing Risk
Both Funds may invest up to 25% of their assets in foreign equities. Foreign
investments may be riskier than U.S. investments because of factors such as
unstable international political and economic conditions, currency fluctuations,
foreign controls on investment and currency exchange, withholding taxes, a lack
of adequate company information, less liquid and more volatile markets, immature
economic structures, unfamiliar legal systems and a lack of government
regulation.
Hedging Risk
Investing for hedging purposes may result in certain transaction costs which may
reduce a Fund's performance. In addition, no
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assurances can be given that each hedge will be perfectly correlated with the
security or currency that it is being hedged against.
Non-Diversified Portfolio Risk
The Bramwell Focus Fund is a non-diversified fund, meaning that it may hold
fewer securities than a diversified portfolio. This increases the risk that the
value of the Bramwell Focus Fund could be affected to a greater degree by the
underperformance of any single investment choice.
Y2K Risk
The inability of some computers to recognize the Year 2000 could potentially
disrupt Fund operations and affect Fund performance. BramCap has taken steps to
enable its systems to handle this issue. BramCap has also sought assurances that
its service providers and business partners have taken similar steps as well.
However, it is impossible to know in advance exactly how this issue will affect
Fund administration, Fund performance, companies in which the Funds invest or
securities markets in general.
Performance History
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The bar chart and table that follow are intended to indicate the risks of
investing in the Funds as well as their relative performance. The bar chart
shows the Bramwell Growth Fund's calendar year total returns for each whole year
since its inception, August 1, 1994, together with the best and worst quarters
during that period. The bar chart is intended to indicate the risks of investing
in the Fund by showing the difference in the Fund's investment returns from one
year to the next. The table shows the relative performance of the Bramwell
Growth Fund by comparing the Fund's average annual total returns to that of the
S&P 500 Index, a widely recognized unmanaged index of stock performance, for
calendar year periods ending December 31, 1998. How the Fund has performed in
the past is not necessarily an indication of how it will perform in the future.
[Bramwell Growth Fund Bar Chart: 1995- 32.55%; 1996 - 12.82%; 1997 - 33.67%;
1998 - 34.50%]
Best Quarter (12-31-98) 22.70% Worst Quarter (9-30-98) (9.98)%
The Bramwell Growth Fund's total return for the period from January 1, 1999 to
September 30, 1999 was 3.15%.
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Calendar Year Periods Since Inception
Ending December 31, 1998 One Year on 8/1/94
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Bramwell Growth Fund 34.50% 25.81%
S&P 500 28.58% 27.69%
Note: The Bramwell Focus Fund commenced operations on November 1, 1999, and
therefore has no prior performance history to report.
Fees and Expenses
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All mutual fund investors pay certain fees and expenses when they invest. The
tables below describe the fees and expenses that you may pay if you buy and hold
shares of the Funds.
Shareholder Fees (fees paid directly from your investment)
Both Funds
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Sales Charges or Loads None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)
Bramwell Growth Fund Bramwell Focus Fund
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Management Fees 1.00% 1.00%
Distribution (12b-1) Fees (a) 0.25% 0.25%
Other Expenses (b) 0.33% 0.93%(c)
Total Annual Fund Operating Expenses (d) 1.58% 2.18%
(a) The Funds have adopted Rule 12b-1 plans which authorize the Funds to pay
expenses related to the distribution of their shares. The maximum
distribution fee is 0.25% of each Fund's average net assets per year.
Because these fees are paid out of the Funds' assets on an ongoing basis,
the distribution expenses you pay over time will increase the cost of your
investment and may cost you more than paying other types of sales charges.
(b) Such expenses include custodian, transfer agency and administration fees
and other customary Fund expenses.
(c) Other Expenses for the Bramwell Focus Fund are based on estimated amounts
for the current fiscal year.
(d) BramCap has voluntarily agreed to limit the total expenses of the Funds
(excluding interest, taxes, brokerage and extraordinary expenses) to an
annual rate of 1.75% of each Fund's average net assets until June 30, 2001.
After such date, the expense limitation may be terminated or revised at any
time. BramCap expects to waive a portion of its management fee for the
Bramwell Focus Fund so that actual management fees paid by the Fund would
be 0.57% of average net assets, reducing the total expenses from 2.18% to
1.75%.
Example
This example is intended to help you compare the cost of investing in the Funds
with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example
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also assumes that your investment has a 5.0% return each year and that the
Funds' operating expenses remain the same. Although your actual costs may be
higher or lower, your costs - based on these assumptions - would be:
One Year Three Years Five Years Ten Years
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Bramwell Growth Fund $161 $499 $860 $1,878
Bramwell Focus Fund $221 $682 N/A N/A
Management of the Funds
Investment Adviser
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Bramwell Capital Management, Inc. ("BramCap"), located at 745 Fifth Avenue, New
York, NY 10151, serves as investment adviser to the Funds under Investment
Advisory Agreements which provide that BramCap will furnish continuous
investment advisory services and management to the Funds. In addition to the
Funds, BramCap is the adviser to individual and institutional accounts.
BramCap supervises and manages the investment portfolios of the Funds. Subject
to policies adopted by the Board of Directors of the Funds, BramCap directs the
purchase or sale of investment securities in the day-to-day management of the
Funds' investment portfolios. BramCap, at its own expense and without
reimbursement from the Funds, furnishes office space and all necessary office
facilities, equipment and executive personnel for making the investment
decisions necessary for managing the Funds and maintaining their organization.
BramCap also pays the salaries and fees of all Officers and Directors of The
Bramwell Funds, Inc. (except the fees paid to disinterested Directors). For its
services, BramCap receives a fee of 1% per year of the average daily net assets
of each Fund.
Portfolio Manager
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Elizabeth R. Bramwell, who is the founder, sole shareholder and Chief Executive
Officer of BramCap, as well as President and Chief Investment Officer of The
Bramwell Funds, Inc., manages the investment program of each Fund and is
primarily responsible for the day-to-day management of each Fund's portfolio.
Ms. Bramwell, a Chartered Financial Analyst, has more than thirty years of
experience as a securities analyst/portfolio manager.
Ms. Bramwell's Prior Record
Prior to forming BramCap in February 1994, Ms. Bramwell was President, Chief
Investment Officer, Portfolio Manager and a Trustee of The Gabelli Growth Fund
from its inception, 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
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had full discretionary authority over the selection of investments for, and was
responsible for the day-to-day management of, 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)
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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 all actual fees
and expenses incurred by The Gabelli Growth Fund.
(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 to 1.85% in 1989, 1.50% in 1990, 1.45% in 1991,
1.41% in 1992, 1.41% in 1993, and 1.36% in 1994, reflecting, in general,
economies of scale associated with an increase in assets under management.
Using the expense ratio of the Bramwell Growth Fund for the fiscal year
ending June 30, 1999 of 1.58%, The Gabelli Growth Fund Performance
portrayed above would be higher in those time periods in which its expense
ratio was less than 1.58% and lower in those time periods in which its
expense ratio was more than 1.58%.
(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. Although the
Bramwell Growth Fund and The Gabelli Growth Fund have substantially similar
objectives, policies, and strategies, The Gabelli Growth Fund is a separate fund
and its historical performance is not indicative of the future performance of
the Bramwell Growth 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 and Director of Research of Gabelli &
Company from 1985 through 1989.
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Board of Directors
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The Funds, as part of The Bramwell Funds, Inc., are governed by its Board of
Directors. The Board of Directors is responsible for overseeing the business and
affairs of the Funds. In addition to Ms. Bramwell, the 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. Barriger 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 Hayden 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); 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), United Water Resources (1996-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,
Securities and Exchange Commission (1956-1960).
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Martha R. Seger, Ph.D.
220 Park Avenue
Birmingham, MI 40889
Chairman, Martha Seger & Associates (1992-present); Current Director, Amerisure,
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).
How to Buy and Sell Shares
Net Asset Value
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The price at which you purchase and redeem shares of a Fund is equal to the net
asset value ("NAV") per share of the Fund as determined on the date of your
purchase or redemption. The NAV is calculated by taking the total value of a
Fund's assets, subtracting out the Fund's liabilities, and dividing the result
by the number of Fund shares outstanding. This calculation is performed by the
Administrator for the Funds, Sunstone Financial Group, Inc., at 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
Board of Directors of The Bramwell Funds, Inc. To the extent a Fund holds
securities listed primarily on a foreign exchange, the NAV of a Fund may change
on a day when you are not able to purchase or redeem shares because the foreign
exchange may have different days of operation.
You can place an order to buy or sell shares of a Fund, as described as follows,
by contacting the Funds' Transfer Agent, Firstar Mutual Fund Services, LLC. Your
order, if in proper form, will be processed upon receipt. Once accepted, the
purchase price or sale price of your order will be equal to the next NAV
calculation.
How to Open and Add to Your Account
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You may purchase shares of the Funds by any of the following methods.
<TABLE>
<CAPTION>
To Open an Account
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<S> <C>
By Mail or Courier o Complete and sign the
Purchase Application.
o Make your check payable to:
Bramwell Funds
o Mail to:
The Bramwell Funds, Inc.
Firstar Mutual Fund
Services, LLC
Milwaukee, WI 53201-0701
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o Overnight Courier to:
The Bramwell Funds, Inc.
Firstar Mutual Fund
Services, LLC
615 East Michigan Street,
3rd Floor
Milwaukee, WI 53202
By Telephone o Telephone transactions
may not be used for initial
purchases.
o If you want to make
subsequent telephone
transactions, please select
this service on your initial
Purchase Application or call
1-800-BRAMCAP
(1-800-272-6227) to set up
your account.
By Wire o Call the Transfer Agent at
1-800-BRAMCAP to notify them
that you intend to purchase
shares by wire and to verify
wire instructions.
o Then, wire funds care of:
Firstar Bank Milwaukee, N.A.
Milwaukee, WI
ABA #: 075000022
Credit:
Firstar Mutual Fund
Services, LLC
Account #: 112-952-137
Further credit:
The Bramwell Funds, Inc.
Name of Fund to be purchased
Shareholder Account #:_________
Shareholder
Name/Registration:
__________________
Include your name, address
and taxpayer identification
number.
To Add an Account
-----------------
By Mail or Courier o Additional investment
forms will be included with
each shareholder statement
that you receive.
o If you wish to add to an
account, complete this form
and include it with your
check name made payable to:
Bramwell Funds
o Print your account name,
address and Bramwell account
number on your check.
o Mail or overnight the
form and check to the
appropriate address listed above.
By Telephone o Call 1-800-BRAMCAP to
make your purchase from a
bank checking or money market
account by electronic funds
transfer. Specify your
account name, address and
Bramwell account number.
o This service must be
established by you in advance
by following the
instructions listed above.
By Wire o Follow the instructions listed
above. Please note that
wires may be rejected if they
do not contain complete
account information.
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</TABLE>
All purchases must be made in U.S. dollars and checks must be drawn on U.S.
banks. No cash will be accepted. You will be charged a $25 fee for any check
returned to the Transfer Agent for reasons such as insufficient funds, stop
payment, or a closed account. You will also be responsible for any losses
suffered by the Funds as a result. The management of the Funds reserves the
right to reject any purchase order for Fund shares.
If you have any questions, a 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).
Minimum Investment Requirements Initial Additional
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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
Additional Purchase Information
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Federal regulations require that you provide a certified taxpayer identification
number whenever you open or reopen an account. Congress has mandated that if you
fail to provide and certify to the accuracy of your social security number or
other taxpayer identification number, the Funds will be required to withhold 31%
of all dividends, distributions and payments, including redemption proceeds, to
which you are entitled, as a backup withholding procedure.
For reasons of economy and convenience, the Funds will not issue certificates
for shares purchased.
How to Sell Your Shares
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You may sell (redeem) your shares at any time. Ordinarily, the Funds will make
payment to you by check for the shares that you sold (redeemed) within three
business days after the Transfer Agent receives your properly completed request.
Your shares will be sold at the next NAV per share calculated after your request
is received in proper form by the Transfer Agent. 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 Funds to determine the fair
market value of their net assets. Payment for shares that you purchased by check
will not be made until your check has cleared, which may take up to 15 calendar
days from your original purchase date. The
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Funds reserve the right to make payments wholly or partly in portfolio
securities if the Board of Directors of The Bramwell Funds, Inc. determines that
it is in the best interests of a Fund to do so.
You may request the sale of your shares by any of the following methods.
By Mail or Courier Request the sale of your shares in a letter that includes:
o Your Bramwell account
number.
o The name of the Fund
whose shares you wish to
sell.
o The number of shares or
dollar amount to be sold.
o The signatures of all account
owners exactly as they are
registered on the account.
o How and where to send the proceeds.
o In the case of shares being
redeemed from an IRA or SEP/IRA
Plan, a statement of whether
or not federal income tax
should be withheld
(in the absence of any statement,
federal tax will be withheld).
o Mail to:
The Bramwell, Funds, Inc.
Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
Overnight Courier to:
The Bramwell Funds, Inc.
Firstar Mutual Fund Services, LLC
615 East Michigan Street, 3rd Floor
Milwaukee, WI 53202
Note: You may need to obtain any required signature
guarantees or ther documentation.
By Telephone o You must select this
service in writing prior to
making a telephone
redemption.
o Thereafter, call
1-800-BRAMCAP
(1-800-272-6227) to redeem
shares of a Fund.
o Proceeds must be mailed
directly to you or
transmitted to your
predesignated bank account
at a domestic bank.
o To change your
designated account, send a
written request with
appropriate signature
guarantees to the Transfer
Agent.
o To change your mailing
address, call 1-800-BRAMCAP
or send a written request
with appropriate signature
guarantees to the Transfer
Agent.
o 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 change.
o The Funds rserve the
right to limit your number of
telephone redemptions, and
once made, they may not be
modified or canceled.
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<PAGE>
o During periods of
substantial economic or
market changes, telephone
redemptions may be difficult
to implement. If you are
unable to contact the
Transfer Agent by telephone,
you may also redeem your
shares by delivering a
redemption request to the
Transfer Agent by mail as
previously described.
o As with purchases by telephone,
the Funds will not be held
liable for following instructions
communicated by telephone that
they reasonably believe are genuine.
.
By Wire o Contact the Transfer
Agent at 1-800-BRAMCAP with
wire instructions.
o Payment will normally be
made in federal funds on the
next business day.
o The Transfer Agent will
wire redemption proceeds
only to the bank and account
designated on your initial
Purchase Application or in
written instructions
subsequently received by the
Transfer Agent.
o The recipient bank must
be a commercial bank that is
a member of the Federal
Reserve System.
o The Transfer Agent
currently charges a $12.00
fee for each payment made by
wire, which fee will be
deducted from your account.
Telephone and Wire Transactions
- --------------------------------------------------------------------------------
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 next determined NAV per share of the Fund calculated after 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 your order. To preserve flexibility, the
Funds may revise or remove the ability to purchase shares by phone, or may
charge a fee for such service, although currently, the Funds do not expect to
charge a fee. You will be notified in advance of any changes in these policies.
You may also request by telephone a change of address, a change in investments
made through an Automatic Investment Plan (see page 19), and a change in the
manner in which you receive dividends (see page 20).
The Funds will employ reasonable procedures to confirm that your telephone
instructions are genuine. These 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 of all telephone instructions. Assuming the Funds follow these
procedures, the Funds will not be liable for any loss, cost, or expense for
acting upon telephone instructions or for any
16
<PAGE>
unauthorized telephone redemption. As a result of this policy, you will bear the
risk of any loss unless the Funds have failed to follow their procedure(s).
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 fees that your
bank may charge for these services.
Signature Guarantees
- --------------------------------------------------------------------------------
Signature guarantees are designed to protect both you and the Funds 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.
You are required to obtain a signature guarantee for each account owner if:
o You change ownership on your account.
o You want redemption proceeds sent to a different address from that
registered on your account.
o Redemption proceeds are to be made payable to someone other than your
account's registered owner(s).
o Redemption proceeds are transmitted by federal wire transfer to your bank.
o A change of address request has been received by the Transfer Agent within
the past 15 days.
o Redemption is equal to or in excess of $25,000.
Financial Service Agents
- --------------------------------------------------------------------------------
You may also purchase (and sell) shares through a Financial Service Agent by
opening and maintaining an account with a securities broker or other financial
institution.
If you purchase shares 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 your purchase orders and funds, and of
crediting your account 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 their procedures, your purchase will be processed at the net
asset value calculated at 4:00 p.m. New York City time on that day.
17
<PAGE>
The Funds understand 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 Funds under the
Funds' 12b-1 plan. Certain Financial Service Agents may enter into agreements
with the Funds which permit them to confirm purchase orders on behalf of
customers by phone, with payment to follow no later than the Funds' 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.
Exchange Privileges
- --------------------------------------------------------------------------------
The following table describes your exchange privileges:
From: To: Minimum Transfer Amount:
- --------------------------------------------------------------------------------
Bramwell Growth Fund Bramwell Focus Fund $1,000
Firstar Money Market $1,000
Bramwell Focus Fund Bramwell Growth Fund $1,000
Firstar Money Market $1,000
Firstar Money Market(a) Bramwell Growth Fund $1,000
Bramwell Focus Fund $1,000
(a) The Firstar Money Market Fund ("Firstar Money Market") is described in a
separate prospectus which contains more complete information about that
fund. You 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
carefully before authorizing any investment in shares of that fund.
How to Exchange Your Shares
Telephone Exchanges
To make a telephone exchange, call the Transfer Agent at 1-800-BRAMCAP. You must
have selected the telephone exchange option on your initial Purchase Application
when your account was opened. Otherwise, complete a written request for
telephone exchange privileges, including signature guarantees, and send it to
the Transfer Agent prior to making a telephone exchange. Currently, a $5.00 fee
is charged to your account for each telephone exchange. The fee will be charged
to the account from which the funds are being withdrawn prior to effecting the
exchange.
Written Exchanges
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, 3rd Floor, Milwaukee, WI 53202. There is no fee for a written
exchange request.
Your exchange will be made at the NAV per share of the shares to be redeemed,
and
18
<PAGE>
the NAV per share of the shares to be purchased, in both cases as next
determined after the exchange request is received. Once your 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 Funds 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 Funds and
its other investors (or in the case of Firstar, Firstar and its other
investors). You 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, you may realize a capital gain or loss. Before making an
exchange request, you should consult with your tax advisor to determine the tax
consequences of a particular exchange.
Redemption at the Option of the Funds
In order to relieve the Funds of the cost of maintaining very small accounts,
the Funds reserve the right to redeem all of the shares in your account if the
net asset value of your account remains below $500. Before such involuntary
redemption occurs, the Funds will give you 30 days' written notice to bring your
account balance up to $500. 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 your account drops below $500 as the result of market
action.
Retirement Plans
- --------------------------------------------------------------------------------
The Funds offer a variety of retirement plans including IRAs and SEP/IRAs that
may allow you to shelter a portion of your 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 by calling 1-800-BRAMCAP (1-800-272-6227).
Automatic Investment Plans
- --------------------------------------------------------------------------------
You may automatically purchase shares of the Funds on a regular basis ($50
minimum per transaction) under each Fund's Automatic Investment Plan. Under the
plans, your designated bank or other financial institution debits a
preauthorized amount from your account each month or quarter and applies the
amount to the purchase of Fund shares. An Automatic Investment Plan must be
implemented with a financial institution that is a member of the Automated
Clearing House. Also, the Funds must have a currently effective registration in
those states in which it is required. Applications to establish an Automatic
Investment Plan are available from the Transfer Agent by calling 1-800-BRAMCAP
(1-800-272-6227).
19
<PAGE>
Using an Automatic Investment Plan facilitates dollar-cost averaging because
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 you against losses in a declining
market.
Shareholder Communications
- --------------------------------------------------------------------------------
Each Fund will provide you with the following statements and reports to keep you
informed regarding the status of your investment account:
Confirmation Statements After each transaction that affects
your account balance or account
registration.
Account Statements Regular account statements quarterly.
You will also receive a yearly
statement explaining the tax
characteristics of any dividends or
distributions that you may have
received throughout the year.
Financial Reports At least semi-annually. The annual
report will include audited financial
statements. To reduce Fund expenses,
one copy of each report will be mailed
to each taxpayer identification number
even though you may have more than one
account in the Funds.
If you have questions about your account, have general questions about investing
in the Funds, or wish to have additional information sent to you, please call
1-800-BRAMCAP (1-800-272-6227). In addition, if you wish to make a change in
your address of record or a change in the investments you make through the
Automatic Investment Plan, call 1-800-BRAMCAP.
Dividends and Distributions
- --------------------------------------------------------------------------------
The Funds intend to pay dividends from net investment income and net realized
capital gains (not offset by capital loss carryovers) on an annual basis in
December. You may elect to reinvest all income dividends and capital gains
distributions in shares of the appropriate Fund or you may elect to receive all
dividends and distributions in cash. You make this election on your initial
Purchase Application. If you do not specify an election, all income dividends
and capital gains distributions will automatically be reinvested in full and
fractional shares of the appropriate Fund calculated to the nearest 1,000th of a
share. Shares will be purchased at the NAV in effect on the business day after
the dividend record date and will be credited to your account on such date.
Reinvested dividends and distributions receive the same tax treatment as those
paid in cash.
You may change your election at any time by calling the Transfer Agent at
1-800-BRAMCAP (1-800-272-6227) or by sending written notification to The
Bramwell Funds, Inc., Firstar Mutual Fund Services, LLC, P.O. Box 701,
Milwaukee, WI 53201-0701. Your new election will become effective for
distributions with a dividend record date on or after the date that the Transfer
Agent receives notice of your election.
20
<PAGE>
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. You should consult your own tax advisor
with regard to the federal tax consequences of your prospective purchase,
ownership or disposition of shares of a 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 shareholders as ordinary income. Dividends from
net investment income and net short-term capital gains may be eligible for the
corporate dividends-received deduction.
The excess of net long-term capital gains over net short-term capital losses
realized and distributed by a Fund to its 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 a 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 a 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.
A 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 a Fund for the preceding year.
Distributions by a Fund generally will be subject to state and local taxes.
21
<PAGE>
Foreign Income Taxes
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. It is not expected
that a Fund will be able to "pass through" these taxes to shareholders but such
taxes generally will be deductible by a Fund.
Financial Highlights
The financial highlights table is intended to help you understand the financial
performance of the Funds. Because the Bramwell Focus Fund commenced operations
on November 1, 1999, it has no prior performance history to report. The
following table contains information about the Bramwell Growth Fund from its
inception, August 1, 1994. Certain information in the table reflects financial
results for a single Fund share. The total returns in the table represent the
rate that you would have earned if you had invested in the Bramwell Growth Fund
(assuming reinvestment of all dividends and distributions). The information in
the table has been audited by PricewaterhouseCoopers LLP, whose report, along
with the Fund's financial statements, are included in the Fund's annual report,
which is available by calling 1-800-BRAMCAP (1-800-272-6227).
22
<PAGE>
Bramwell Growth Fund
<TABLE>
<CAPTION>
For the Period
Year Year Year Year August 1, 19941
Ended Ended Ended Ended to
Selected Per-Share Data2 June 30, 1999 June 30, 1998 June 30, 1997 June 30, 1996 June 30, 1995
- ----------------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $23.05 $17.53 $14.60 $12.30 $10.00
Income from investment operations:
Net investment loss (0.18) (0.13) (0.15) (0.08) --3
Net realized and unrealized gains
on securities 4.45 6.82 3.35 2.42 2.31
------ ------ ------ ------ ------
Total from investment operations 4.27 6.69 3.20 2.34 2.31
Less distributions:
Distributions from capital gains (1.25) (1.17) (0.27) (0.04) (0.01)
------ ------ ------ ------ ------
Net asset value, end of period $26.07 $23.05 $17.53 $14.60 $12.30
====== ====== ====== ====== ======
Total return 19.4% 39.5% 22.2% 19.0% 23.1%4
Supplemental data and ratios:
Net assets, end of period (000S) $268,726 $205,922 $125,924 $141,455 $62,241
Ratio of expenses to average net 1.58% 1.66% 1.75% 1.75% 1.75%6
assets5
Ratio of net investment loss to average (0.79)% (0.75)% (0.85)% (0.66)% (0.11)%6
net assets5
Portfolio turnover rate 38% 49% 82% 118% 80%4
</TABLE>
1 Commencement of operations.
2 Information presented relates to a share of capital stock of the Bramwell
Growth 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 years ended June 30, 1999 and 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.
23
<PAGE>
The Bramwell Funds, Inc.
Bramwell Growth Fund
Bramwell Focus Fund
- --------------------------------------------------------------------------------
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, N.A.
Transfer and
Dividend Disbursing Agent
Firstar Mutual Fund Services, LLC
24
<PAGE>
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<PAGE>
This page is intentionally left blank
<PAGE>
Where to go for Additional Information About the Funds
- --------------------------------------------------------------------------------
For additional information about the Bramwell Growth Fund or the Bramwell Focus
Fund, the following documents are available to you:
Annual/Semi-Annual Reports - Additional information about the Funds' investments
is available in each Fund's annual and semi-annual reports to shareholders. In
these reports, you will find a discussion of the market conditions and
investment strategies that significantly affected the Funds' performance during
the most recent fiscal year.
Statement of Additional Information - Additional information about the Funds'
structure and operations can be found in the Statement of Additional
Information. The information presented in the Statement of Additional
Information is incorporated by reference into this prospectus and is legally
considered to be part of this prospectus.
To request a free copy of any of the materials described above, or to make any
other inquiries, please call, write, or e-mail us:
The Bramwell Funds, Inc.
Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
1-800-BRAMCAP (1-800-272-6227)
E-mail: [email protected]
Visit our web site: www.bramwell.com
Obtaining Information From the Securities and Exchange Commission
- --------------------------------------------------------------------------------
Reports and other information about the Funds (including the Funds' Statement of
Additional Information) may also be obtained from the Securities and Exchange
Commission:
1. By going to the Commission's Public Reference Room in Washington, D.C.
where you can review and copy the information. Information on the operation
of the Public Reference Room may be obtained by calling the Commission at
1-800-SEC-0330.
2. By accessing the Commission's Internet site at www.sec.gov where you can
view, download and print the information.
3. By writing to the Public Reference Section of the Securities and Exchange
Commission, Washington, D.C. 20549-6009, where, upon payment of a
duplicating fee, copies of the information will be sent to you.
SEC file number 811-8546
[Bramwell Funds Logo]
<PAGE>
The Bramwell Funds, Inc.
Bramwell Growth Fund
A No-Load Diversified Mutual Fund for Investors Seeking
Primarily Long-Term Capital Growth and Secondarily Current Income
Bramwell Focus Fund
A No-Load Non-Diversified Mutual Fund for Investors Seeking
Long-Term Capital Appreciation
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1999
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus for the Bramwell Growth Fund and the Bramwell
Focus Fund (each a "Fund" and together, the "Funds") dated November 1, 1999, 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. The Bramwell Growth
Fund's Annual Report is incorporated herein by reference.
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
Fundamental Investment Policies 1
Investment Objectives and Non-Fundamental Policies 2
Further Information About Potential Investments and Fund Risks 2
Directors and Officers 14
Investment Advisory Services 18
Other Services 18
Distribution Plan 20
Portfolio Transactions and Brokerage 20
Performance Information 22
Tax Status 24
Net Asset Value 29
Capital Structure 30
Further Information about Redemption of Shares 31
Experts 31
Financial Statements 31
Appendix 33
<PAGE>
Fundamental Investment Policies
- --------------------------------------------------------------------------------
The fundamental policies of each Fund are listed below. They may not be changed
without the approval of a majority of a Fund's outstanding voting securities,
which is defined as 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.
Fundamental Investment Policies of the Bramwell Growth Fund
o 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).
o 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).
Fundamental Investment Policies of the Bramwell Focus Fund
o With respect to 50% 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).
o With respect to 50% 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).
Fundamental Investment Policies of Both the Bramwell Growth Fund and the
Bramwell Focus Fund
o The Funds may not issue senior securities or borrow money except for
temporary purposes in amounts up to 10% of their 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 Funds will not make any
investments while outstanding borrowings exceed 5% of the value of their
total assets.
o The Funds may not invest 25% or more of their net assets in one or more
issuers conducting their principal business in the same industry.
<PAGE>
o The Funds may not make loans, although they may invest in debt securities,
enter into repurchase agreements and lend their portfolio securities.
o The Funds may not invest in securities or other assets that the Board of
Directors determines to be illiquid if more than 15% of that Fund's net
assets would be invested in such securities.
o The Funds 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 their net assets.
o The Funds may not purchase or sell real estate or make real estate mortgage
loans or invest in real estate limited partnerships, except that the Funds
may purchase or sell securities issued by entities engaged in the real
estate industry or instruments backed by real estate.
o The Funds may not act as underwriters of securities issued by others,
except to the extent they may be deemed to be underwriters in connection
with the disposition of portfolio securities of their Funds.
The percentage limitations set forth above, as well as those described elsewhere
in the Prospectus and this SAI, apply only at the time an investment is made or
other relevant action is taken by a Fund, except with respect to the fundamental
investment policy concerning the issuance of senior securities and borrowing
money.
Investment Objectives and Non-Fundamental Policies
- --------------------------------------------------------------------------------
In order to provide a degree of flexibility, each Fund's investment objectives,
as well as other Fund policies which are not deemed fundamental, may be modified
by the Board of Directors without shareholder approval. Any change in a 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, a Fund will not change its
investment objectives, non-fundamental policies or investment restrictions
without written notice to shareholders.
As a non-fundamental policy, each 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.
Further Information About Potential Investments and Fund Risks
- --------------------------------------------------------------------------------
Each Fund may invest from time to time in any of the following securities up to
the limits as stated below or use any of the following investment techniques to
increase or decrease its
2
<PAGE>
exposure to the effects of possible changes in security prices, currency
exchange rates or other factors that affect the value of its portfolio. These
techniques may be used by the Funds for risk or portfolio management purposes
or, in the case of securities lending and repurchase agreements, for incidental
income and not for speculation. The following descriptions are designed to
inform you about the general characteristics and related risks of these
investments and investment techniques.
Cash and Cash Equivalents
Each Fund may hold cash and cash equivalents without limit when a temporary
defensive position is deemed advisable. The cash equivalents in which a 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 adjust when such known lending rates
change. There is no secondary market for commercial paper master notes. The
investment adviser, Bramwell Capital Management, Inc. ("BramCap") will monitor
the creditworthiness of the issuer of the commercial paper master notes while
any borrowings are outstanding.
U.S. Government Obligations
Each Fund may invest without limit in U.S. Government obligations when a
temporary defensive position is advisable. Examples of the types of U.S.
Government obligations that may be held by each Fund include, in addition to
U.S. Treasury bonds, notes and bills, the obligations of the Federal Home Loan
Bank, Federal Farm Credit Bank, Federal Land Bank, 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 Bank, Tennessee Valley
Authority, Resolution Funding Corporation and Maritime Administration.
Obligations of certain agencies and instrumentalities of the U.S. Government,
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
3
<PAGE>
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.
Foreign Securities
Each Fund invests primarily in securities of companies domiciled in the United
States, but each 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 Depository
Receipts ("ADRs") or closed-end investment companies. It is possible that some
material information about unsponsored ADRs will be unavailable.
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.
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. You should recognize that foreign markets have
different clearance and settlement procedures and in certain markets there have
been times when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such transactions.
Delays in settlement could result in temporary periods when assets of a Fund are
uninvested and no return is earned thereon. The inability of a 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 a Fund
due to subsequent declines in value of the portfolio security or, if a 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, a 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 a 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.
4
<PAGE>
Because investments in foreign securities will usually involve currencies of
foreign countries, and because each Fund may hold foreign currencies, the value
of the assets of a 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 a Fund may incur costs in connection with conversions between
various currencies. Although each 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 a Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to resell that currency to the dealer. Each 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.
As a result of these and other factors, foreign securities purchased by a Fund
may be subject to greater price fluctuation and risk than securities of U.S.
companies.
Illiquid or Restricted Securities
Each 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. A 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.
BramCap will take reasonable steps to bring a Fund into compliance with this
policy if the level of illiquid investments exceeds 15%. A 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 a Fund or less than their fair value. 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 a 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 Funds is satisfied that there is sufficient trading activity and reliable
price information. Investing in Rule 144A securities could
5
<PAGE>
have the effect of increasing the level of illiquidity of a Fund's portfolio if
qualified institutional buyers become, for a time, uninterested in purchasing
such 144A securities.
Other Investment Companies
In seeking to attain its investment objectives, each Fund may invest in
securities issued by other investment companies within the limits prescribed by
the 1940 Act. Each 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% of the outstanding voting stock of any one investment company will
be owned by either Fund. As a shareholder of another investment company, a 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
Each 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. Each 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 a Fund
in units or attached to securities are not subject to these restrictions.
Convertible Securities
Each 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 S&P or Moody's or that are determined by BramCap
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 stock 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.
6
<PAGE>
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 non-convertible 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
non-convertible securities.
Unseasoned Issuers
Each 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 a
Fund's investments in all such companies to exceed 5% of the value of its net
assets.
Securities Lending
For incremental income purposes, a 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. In compliance with
Securities and Exchange Commission guidelines, any loans by a Fund of securities
in its portfolio would be required to be secured with collateral (consisting of
any combination of U.S. currency, securities issued or guaranteed by the United
States Government or any agency thereof, or irrevocable letters of credit or
other debt securities issued by entities rated within the two highest grades
assigned by S&P or Moody's or determined by BramCap 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 a 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 a Fund will
receive all dividends, interest or other distributions on loaned securities and
a Fund must be able to vote loaned securities whenever the right to vote is
material to a Fund's performance.
7
<PAGE>
Securities lending involves the risk that the borrowing institution will fail to
redeliver the securities when due. However, loans of securities each Fund will
be fully collateralized at all times by at least 100% of the current market
value of the lent securities. Securities lending also involves the risk of delay
in receiving additional collateral, and possibly a loss of rights in the
collateral if the borrower of the securities becomes insolvent.
Repurchase Agreements
Repurchase agreements may be entered into by each Fund for incremental income
purposes. A repurchase agreement provides a means for a Fund to earn income on
funds for periods as short as overnight. It is an arrangement under which a 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 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 a Fund is unrelated to the interest
rate on the security itself.
Each 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 BramCap to
be of equivalent quality. BramCap is responsible for monitoring compliance with
this rating standard during the term of any repurchase agreement. A 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.
Short Sales
Each 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 a Fund's net assets or 5% of
each issuer's voting securities. A 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.
Short sales involve transactions in which a Fund sells a security it does not
own in anticipation of a market price decline in that security. If the market
price of the security goes up, a Fund could face unlimited liability.
Options
Each 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
8
<PAGE>
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 a Fund. A 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.
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. Each Fund may write a call
or put option only if the option is "covered." This means that so long as a 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 a 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.
Each 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.
Each 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 a Fund
the right to sell such instrument at the option exercise price. A 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 a Fund sells a call option, the premium that it
receives may serve as a partial hedge, to the extent of the option premium,
against a decrease in the value of the underlying securities or instruments in
its portfolio or will increase the Fund's income. The sale of put options can
also provide income.
Even though a Fund will receive the option premium to help protect it against
loss, a call sold by a 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.
9
<PAGE>
A 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.
Futures
Each 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 a 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.
Each 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 a 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 a 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.
10
<PAGE>
A 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 a Fund
seeks to close out a futures or futures option position. A Fund would be exposed
to possible loss on the position during the interval because 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.
The Funds may use options and futures as a hedging technique. Options and
futures may fail as a hedging technique 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
BramCap's ability to predict correctly the direction of stock prices, interest
rates and other economic factors.
Currency Transactions
When a 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. Each Fund has no specific
limitation on the percentage of assets it may commit to forward foreign currency
contracts, subject to its stated investment objective and policies, except that
a Fund will not enter into such contracts if the amount of assets set aside to
cover such contracts would impede portfolio management or a Fund's ability to
meet redemption requests. Although forward foreign currency exchange contracts
will be used to protect a Fund from adverse currency movements, they also
involve the risk that anticipated currency movements will not be accurately
predicted.
When a 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 a Fund's incurring a loss or missing an opportunity to obtain a price
considered to be advantageous.
11
<PAGE>
Each 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 a Fund could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses.
A 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.
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. Each 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.
A 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 a 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.
A 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.
A 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 a 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 during the particular time that a 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
12
<PAGE>
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 a 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.
Segregated Accounts
Futures contracts, options, options on futures contracts, foreign forward
currency contracts and foreign currency contracts require a 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
a 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.
13
<PAGE>
Directors and Officers
- --------------------------------------------------------------------------------
The business and affairs of the Funds are managed under the direction of the
Board of Directors. The Directors and Officers of the Funds 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 Funds During the Past Five Years
- --------------------- -------------- --------------------------
<S> <C> <C>
Elizabeth R. Bramwell* Director, President and President and Chief Executive Officer, Bramwell
745 Fifth Avenue Chief Executive, Capital Management (February 1994-present);
New York, NY 10151 Age: 58 Financial and President, Chief Investment Officer, Portfolio
Investment Officer Manager and Trustee, The Gabelli Growth Fund
(April 1987-February 1994).
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: 84 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: 90 Barriger 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
Hayden Stone Corp. (1968-1978).
14
<PAGE>
Positions held Principal Occupations
Name, Address and Age with the Funds During the Past Five Years
- --------------------- -------------- --------------------------
George F. Keane Director Chairman of the Board, Trigen Energy
745 Fifth Avenue Corporation (1994-present); President Emeritus
New York, NY 10151 and founding Chief Executive Officer
Age: 70 (1971-1992), The Common Fund (investment
management); 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); United Water
Resources (1996-present) and Security
Capital Real Estate Funds (1997-present).
James C. Sargent Director Counsel, Opton, Handler, Gottlieb, Feiler &
745 Fifth Avenue Katz (1995-present) (law firm); Director,
New York, NY 10151 Scan-Graphics (1992-present), Austin's
Age: 83 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, Securities and Exchange
Commission (1956-1960).
Martha R. Seger, Ph.D. Director Chairman, Martha Seger & Associates
220 Park Avenue (1992-present); Current Director, Amerisure,
Birmingham, MI 40889 Fluor, Kroger, Tucson Electric Power and Xerox;
Age: 67 Governor, Federal Reserve Board (1984-1991);
Commissioner of Financial Institutions,
State of Michigan (1981-1982); Chief Economist,
Detroit Bank & Trust (Comerica)(1967-1974).
15
<PAGE>
Positions held Principal Occupations
Name, Address and Age with the Funds 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: 53 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: 61
</TABLE>
- ---------------------
* Directors who are "interested persons" of the Funds, as defined in the
Investment Company Act of 1940 (the "1940 Act"). The Directors of the Funds
who are officers or employees of the investment adviser receive no
remuneration from the Funds. Each of the other Directors is paid an annual
retainer of $3,000 per Fund and a fee of $500 for each meeting attended
per Fund and is reimbursed for the expenses of attending meetings.
16
<PAGE>
The following table sets forth information regarding compensation of the
Directors by the Funds for the fiscal year ended June 30, 1999. Officers of the
Funds and Directors who are interested persons of the Funds do not receive any
compensation from the Funds. Neither Fund provides compensation in the form of
pension or retirement benefits to any of its Directors.
Compensation Table
(Fiscal YEAR ended June 30, 1999)
<TABLE>
<CAPTION>
Total
Pension or Compensation
Retirement From
Aggregate Benefits Estimated the Funds
Compensation Accrued Annual Benefits and Fund
From as Part of Upon Complex Paid2
Name of Director the Funds1 Fund Expenses Retirement to Directors
---------------- --------- -------------- ---------- ------------
<S> <C> <C> <C> <C>
Elizabeth R. Bramwell $0 None N/A $0
J. Sinclair Armstrong $10,000 None N/A $10,000
Isabel H. Benham $10,000 None N/A $10,000
George F. Keane $10,000 None N/A $10,000
James C. Sargent $10,000 None N/A $10,000
Martha R. Seger $10,000 None N/A $10,000
</TABLE>
- --------------------------
1 Aggregate Compensation from the Funds of $10,000 is comprised of $5,000
received from the Bramwell Growth Fund for services rendered to it during
the fiscal year ended June 30, 1999 and an estimate of $5,000 for future
payments to be made by the Bramwell Focus Fund for services rendered to it
during the fiscal year ending June 30, 2000.
2 The Funds are not part of any fund complex because they are not related to
any registered investment company and their 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 Funds.
As of September 30, 1999, the Officers and Directors of the Funds owned 1.82% of
the outstanding shares of capital stock of the Bramwell Growth Fund.
The Funds' shares are sold through broker-dealer intermediaries that establish
single, omnibus accounts with the Funds' transfer agent. As a result of this
arrangement, Charles Schwab & Co., Inc., and National Financial Services, Corp.
each technically own in excess of 5.0% and of the Funds' outstanding shares. The
beneficial owners of these shares, however, are the individual investors who
maintain accounts with these broker-dealers intermediaries.
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Investment Advisory Services
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Bramwell Capital Management, Inc. located at 745 Fifth Avenue, New York, NY
10151, serves as the Funds' investment adviser pursuant to an Investment
Advisory Agreement with each Fund. Under the terms of the agreements, BramCap
supervises and manages the investment portfolio of each Fund and, subject to
such policies as the Board of Directors of the Funds may determine, directs the
purchase or sale of investment securities in the day-to-day management of each
Fund's investment portfolio. BramCap, at its own expense and without
reimbursement from the Funds, furnishes office space and all necessary office
facilities, equipment and executive personnel for making the investment
decisions necessary for managing the Funds and maintaining each Fund's
organization, and will pay the salaries and fees of all officers and directors
of each Fund (except the fees paid to disinterested directors).
In addition to the Funds, BramCap is the adviser to individual and institutional
accounts. Elizabeth R. Bramwell, CFA, who is the founder, sole shareholder and
Chief Executive Officer of BramCap, as well as President and Chief Investment
Officer of the Bramwell Funds, Inc., manages the investment program of each Fund
and is primarily responsible for the day-to-day management of each Fund's
portfolio.
For the advisory services provided and expenses assumed by it, the Bramwell
Growth Fund pays BramCap a fee at an annual rate of 1.00% of the Fund's average
daily net assets, payable at the monthly rate of 1/12 of 1% on the first
business day of each calendar month. For the fiscal years ended June 30, 1999,
1998 and 1997, the Bramwell Growth Fund paid BramCap investment advisory fees of
$2,338,520, $1,587,601 and $1,249,859, respectively. During those periods,
BramCap earned investment advisory fees of $2,338,520, $1,587,601, and
$1,274,930, respectively, pursuant to its investment advisory agreement with the
Fund, but voluntarily waived $0, $0, and $25,071, 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 these periods.
For the advisory services provided and expenses assumed by it, the Bramwell
Focus Fund will pay BramCap a fee at an annual rate of 1.00% of the Fund's
average daily net assets payable at the monthly rate of 1/12 of 1% on the first
business day of each calendar month.
BramCap has voluntarily agreed to limit the total expenses (excluding interest,
taxes, brokerage and extraordinary expenses) of each Fund to an annual rate of
1.75% of each Fund's average net assets until June 30, 2001. After this date,
the expense limitation may be terminated or revised at any time.
Other Services
- --------------------------------------------------------------------------------
Each Fund has entered into an Administration and Fund Accounting Agreement with
Sunstone Financial Group, Inc. ("Sunstone"), 207 East Buffalo Street, Suite 400,
Milwaukee, Wisconsin, 53202. Under the terms of the agreements, Sunstone
prepares and files all federal income tax and excise tax returns and state
income tax returns (other than those required to be made by the Bramwell Funds'
custodian or transfer agent), oversees the Funds' insurance relationships,
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reviews drafts of the Funds' registration 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
semi-annual reports to investors, monitors compliance with the Funds' investment
policies and restrictions, performs securities valuation, calculates daily net
asset values of the Funds, maintains all general ledger accounts and related
subledgers, prepares and monitors the Funds' expense accruals and causes all
appropriate expenses to be paid from fund assets, monitors the Funds' 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 each Fund's
administrative operations. Sunstone, at its own expense and without
reimbursement from the Funds, 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 agreements. For
the foregoing, Sunstone receives from the Funds a fee, computed daily and
payable monthly, based on the average net assets of each Fund at the annual rate
of 0.150 of 1% on the first $50 million of average net assets per Fund, and
decreasing as the net assets of each Fund reach certain levels, subject to an
annual minimum fee of $60,000 per Fund, per year, plus out-of-pocket expenses.
For the fiscal years ended June 30, 1999, 1998 and 1997, the Bramwell Growth
Fund paid Sunstone fees of $229,426, $184,829, and $158,120, respectively.
The Funds pay all of their own expenses, including, without limitation, the cost
of preparing and printing their registration statements required under the
Securities Act of 1933 and the 1940 Act and any amendments thereto, the expense
of registering their 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 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 Funds'
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.
Firstar Mutual Fund Services, LLC, 615 East Michigan Street, Third Floor,
Milwaukee, Wisconsin, 53202, is the Funds' Transfer and Dividend Disbursing
Agent.
Firstar Bank Milwaukee, N.A., 777 East Wisconsin Avenue, Eleventh Floor,
Milwaukee, Wisconsin, 53201, is the Funds' Custodian. The Custodian is
responsible for the safekeeping of a Fund's assets and the appointment of any
subcustodian banks and clearing agencies.
PricewaterhouseCoopers LLP, 100 East Wisconsin Avenue, Milwaukee, Wisconsin,
53202, is the Funds' Independent Certified Public Accountant.
PricewaterhouseCoopers examines financial statements for each Fund and provides
other audit, tax and related services.
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Distribution Plan
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Each Fund has adopted a Service and Distribution Plan (the "Plan") pursuant to
Rule 12b-1 under the 1940 Act. The Board of Directors believes that the adoption
of such plans may stimulate new sales of each Fund's shares, causing growth in
the size of each Fund and potentially leading to economies of scale and lower
expense ratios for both current and new shareholders. Each Plan authorizes
payments by a 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 a 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; and production and dissemination of prospectuses and sales and
marketing materials to prospective investors. To the extent any activity is one
which a Fund may finance without a Plan, the Fund may also make payments to
finance such activity outside of the Plan and not subject to its limitations.
Payments under the Plan are not tied exclusively to actual distribution and
service expenses, and the payments may exceed distribution and service expenses
actually incurred.
For the fiscal year ended June 30, 1999, the distribution expenses related to
the Bramwell Growth Fund were $32,176 for Fund literature and materials,
$192,239 for advertising, $336,694 for broker fees, $46,202 for Fund reports and
materials for current shareholders and administration of current accounts, and
$27,969 for conferences and seminars. The Bramwell Growth Fund paid BramCap
$584,630 of the total $635,280 as reimbursement for these costs under the Plan,
with the balance being borne by BramCap.
Administration of each 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
incurred, 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 Transactions and Brokerage
- --------------------------------------------------------------------------------
Subject to the supervision of the Directors, decisions to buy and sell
securities for each Fund and negotiation of its brokerage commission rates are
made by the investment adviser. Transactions on United States stock exchanges
involve the payment by a 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 a Fund usually includes an
undisclosed dealer commission or mark-up. In certain instances, a Fund may make
purchases of underwritten issues at prices which include underwriting fees.
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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 a Fund on a continuing basis.
Accordingly, the cost of the brokerage commissions to a 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 a Fund or the investment adviser's other clients. Such
research and investment services include statistical and economic data and
research reports on particular companies and industries as well as research
software. Subject to such policies and procedures as the Directors may
determine, the investment adviser shall not be deemed to have acted unlawfully
or to have breached any duty solely by reason of its having caused a 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 a 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 a 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 a Fund and its
shareholders.
For the Fund's fiscal years ended June 30, 1999, 1998 and 1997, the Bramwell
Growth Fund paid a total of $178,236, $147,519 and $218,193, respectively, in
brokerage commissions with respect to portfolio transactions aggregating
$478,011,734, $303,812,815 and $402,062,130, respectively. Of such amount for
the fiscal year ended June 30, 1999, $152,200 in brokerage commissions with
respect to portfolio transactions aggregating $169,325,757 was placed with
brokers or dealers who provide research and investment information.
During the fiscal year ended June 30, 1999, the Bramwell Growth 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, 1999. The Fund held $779,375 of Merrill's stock on June 30, 1999 as an
investment.
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Performance Information
From time-to-time, a 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 a 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 a Fund's shares and assumes that any income dividends
and/or capital gains distributions made by a 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 a 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. A 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).
A Fund may quote its Fund's average annual total and/or aggregate total return
for various time periods in advertisements or communications to shareholders. A
Fund may also compare its 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. When these
organizations' tracking results are used, a Fund will be compared to its
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. For example, a 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 also be used in comparing Fund
performance.
Each 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
The performance of these unmanaged indices may assume reinvestment of dividends
or interest but generally does not reflect deductions for administrative and
management costs.
Performance figures are calculated in the following manner.
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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 a Fund's shares and assume that all dividends and capital gains
distributions during the respective periods were reinvested in Fund shares.
Average annual total return is calculated by computing the average annual
compound rates of return of a hypothetical investment over such periods,
according to the following formula (average annual total return is then
expressed as a percentage):
T = (ERV/P)1/n - 1
Where:
T = average annual total return
P = a hypothetical initial investment of $1,000
n = number of years
ERV = ending redeemable value: ERV is the value, at the
end of the applicable period, of a hypothetical
$1,000 investment made at the beginning of the
applicable period.
It should be noted that average annual total return is based on historical
earnings and is not intended to indicate future performance. Average annual
total return for a Fund will vary based on changes in market conditions and the
level of the Fund's expenses. The average annual returns for the Bramwell Growth
Fund for the fiscal year ended June 30, 1999 and since inception (August 1,
1994) through June 30, 1999 were 19.39% and 24.89%, respectively.
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 a Fund with performance quoted with respect to other investment companies or
types of investments.
From time to time, the average price-earnings ratio and other attributes of a
Fund'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 a Fund. The description may include a
"risk/return spectrum" which compares a Fund to other funds advised by BramCap,
or broad categories of funds, such as money market, bond or equity funds, in
terms of potential risks and returns. Money market
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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 a 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 Funds 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 advisers 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.
Each Fund intends to be taxed as a regulated investment company under Subchapter
M of the Code. Accordingly, a Fund generally must, among other things, (a)
derive in each taxable year at least 90% of its gross income from dividends,
interest, payments with respect to certain securities loans, and gains from the
sale or other disposition of stock, securities or foreign currencies, or other
income derived with respect to its business of investing in such stock,
securities or currencies; 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, a 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. Each Fund intends to distribute substantially all of such income.
If in any taxable year a Fund fails to qualify as a regulated investment company
under the Code, the Fund would be taxed in the same manner as an ordinary
corporation and distributions to its
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<PAGE>
shareholders would not be deductible by the Fund in computing its taxable
income. In addition, in the event of a failure to qualify, the Fund's
distributions, to the extent derived from the Fund's current or accumulated
earnings and profits, would constitute dividends (eligible for the corporate
dividends received deduction) which are taxable to shareholders as ordinary
income, even though those distributions might otherwise (at least in part) have
been treated in the shareholders' hands as long-term capital gains. If a Fund
fails to qualify as a regulated investment company in any year, it must pay out
its earnings and profits accumulated in that year in order to qualify again as a
regulated investment company.
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, each 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 Funds intend 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 a 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.
Taxation of 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 a 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 a 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 a Fund
may result in "straddles" for federal income tax purposes. The straddle rules
may affect the character of gains or losses realized by a Fund. In addition,
losses realized by a Fund on positions that are part of a straddle may be
deferred under the straddle rules, rather than being taken into account in
calculating the taxable income for the taxable year in which such losses are
realized. Because only a few regulations implementing the straddle rules have
been promulgated, the consequences of such transactions to a Fund are not
entirely clear. The straddle rules may increase the amount of short-term capital
gain realized by a Fund, which is taxed as ordinary income when distributed to
shareholders.
A Fund may make one or more of the elections available under the Code which are
applicable to straddles. If a Fund makes any of the elections, the amount,
character and timing of the
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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 a 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 a 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 a 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
Each 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 a 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 a Fund held the PFIC shares. A 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, absent application of the PFIC rules, certain excess distributions might
have been classified as capital gain.
A 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 a
Fund's PFIC shares at the
26
<PAGE>
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 a 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 a 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 a Fund to a corporate shareholder, to the extent such dividends are
attributable to dividends received from U.S. corporations by a 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 a 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.
If the net asset value of shares is reduced below a shareholder's cost as a
result of a distribution by a 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 a 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 a 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
27
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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
Each 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.
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Net Asset Value
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Shares are purchased at their net asset value per share. Each Fund calculates
its net asset value (NAV) as follows:
NAV = [(Value of Fund Assets) - (Fund Liabilities)]/
Number of Outstanding Shares
Net asset value is determined as of the end of trading hours on the NYSE
(currently 4:00 p.m. New York City time) on days that the NYSE is open.
A security listed or traded on a recognized stock exchange or quoted on NASDAQ
is valued at its last sale price prior to the time when assets are valued on the
principal exchange on which the security is traded or on NASDAQ. If no sale is
reported at that time, the most current bid price will be used. All other
securities for which over-the-counter market quotations are readily available
are valued at the most current bid price. Where quotations are not readily
available, a Fund's investments are valued at fair value as determined by
management and approved in good faith by the Directors. Debt securities which
will mature in more than 60 days and equity securities are valued at prices
furnished by a pricing service approved by the Directors subject to review and
determination of the appropriate price by BramCap, whenever a furnished price is
significantly different from the previous day's furnished price. Securities
which will mature in 60 days or less are valued at amortized cost, which
approximates market value.
Generally, trading in foreign securities, as well as U.S. Government securities
and certain cash equivalents and repurchase agreements, is substantially
completed each day at various times prior to the close of the NYSE. The values
of such securities used in computing the net asset value of the shares of the
Funds are determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the value of such securities and such exchange rates may occur between
the times at which they are determined and at the close of the NYSE, which will
not be reflected in the computation of net asset value. If during such periods,
events occur which materially affect the value of such securities, the
securities will be valued at their fair market value as determined by management
and approved in good faith by the Directors.
For purposes of determining the net asset value per share of each Fund, all
assets and liabilities initially expressed in foreign currencies will be
converted into United States dollars at the mean between the bid and offer
prices of such currencies against United States dollars furnished by a pricing
service approved by the Directors.
Each 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
29
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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 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
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Description of Shares
The Bramwell Growth Fund and the Bramwell Focus Fund are series of The Bramwell
Funds, Inc. (the "Company"), 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 allocated to each of the Bramwell Growth Fund and the Bramwell
Focus Fund. The shares of each Fund have equal voting, dividend, distribution
and liquidation rights, 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, each Fund's shares will be fully paid
and non-assessable.
Shareholders of each Fund 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.
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.
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.
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
30
<PAGE>
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).
Further Information about Redemption of Shares
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The right of redemption may be suspended, or the date of payment postponed
beyond the normal seven-day period by each 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
a Fund of securities owned by it is not reasonably practical, or (b) it is not
reasonably practical for a 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 a Fund's shareholders.
The value of shares of a 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 a 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 a 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 a Fund.
However, the Funds have obligated themselves 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 Bramwell Growth Fund as of June 30, 1999,
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.
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<PAGE>
Financial Statements
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The Bramwell Growth Fund's financial statements and notes thereto appearing in
the June 30, 1999 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.
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APPENDIX
Ratings of Investment Securities
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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 Funds' investment adviser believes that the quality of
debt securities in which a 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.
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