SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 X
Pre-Effective Amendment No. 1
Post-Effective Amendment No. [1]
File No. 33-95102 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 X
Amendment No. 1 [2]
File No. 811-9078 [X]
S.I.S. MERCATOR FUND, INC.
(Formerly, NAVIGATOR FUND, INC.)
(Exact Name of Registrant as Specified in Charter)
1325 Morris Drive, Suite 203, Wayne, PA 19087
(Address of Principal Executive Office)(Zip Code)
Registrant's Telephone Number, including Area Code
(610) 993-0670
Richard T. Coghlan, President
S.I.S. Mercator Fund, Inc.
1325 Morris Drive, Suite 203, Wayne, PA 19087
Name and Address of Agent for Service)
Copies of communications to Stephen W. Kline, Esquire,
Stradley, Ronon, Stevens & Young, Great Valley Corporate
Center, 30 Valley Stream Parkway, Malvern, PA 19355,
(610) 640-5801.
Approximate Date of Public Offering - As soon as possible
after this registration statement is declared [It is
proposed that this filing will become]
effective. [(check appropriate box):
Immediately upon filing pursuant to paragraph (b)
On __________________ pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
On (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
On February 8, 1996 pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:]
This [post-effective amendment designates a
new effective date for a previously filed
post-effective amendment.
The] Registrant is registering [has
registered] an indefinite number of shares of
common stock under the Securities Act of 1933
pursuant to Rule 24f-2 under the Investment Company
Act of 1940. The registrant has not yet sold any
securities pursuant to rule 24f-2. [Registrant
will file a rule 24f-2 Notice and an opinion of
counsel regarding the legality of the issuance of
its shares within 60 days after the end of its
fiscal year.]
<PAGE>
FORM N-1A
CROSS REFERENCE SHEET
(as required by Rule 481)
<TABLE>
<S> <S> <S>
FORM N-1A PART A ITEM NO.
PROSPECTUS LOCATION
Item 1. Cover Page..........................Cover Page
Item 2. Synopsis........................... Prospectus
Summary
Item 3. Condensed Financial Information.....Not Applicable
Item 4. General Description of Registrant...Investment
Objectives and
Policies;
Policy
Overview; The
Global Equity
Portfolio; The
Global Income
Portfolio;
Fixed Income
Securities;
Investment
Risks; General
Information
Item 5. Management of the Fund............. Management of
the Fund; Fund
Administration
Item 6. Capital Stock and Other Securities. Dividends,
Distributions
and Taxes;
General
Information
Item 7. Purchase of Securities Being
Offered............................ Price of
Portfolio
Shares;
Distribution of
Fund Shares
Item 8. Redemption or Repurchase........... Redemption of
Shares;
Exchange of
Shares
Item 9. Pending Legal Proceedings.......... Not Applicable
FORM N-1A PART B ITEM NO.
LOCATION IN STATEMENT OF ADDITIONAL INFORMATION
Item 10. Cover Page......................... Cover Page
Item 11. Table of Contents.................. Table of
Contents
Item 12. General Information and History.... General
Information
Item 13. Investment Objectives and Policies. Investment
Objectives and
Policies;
Fundamental
Policies;
Operating
Policies;
Options Futures
and Loans
Item 14. Management of the Fund............. Management of
the Fund
Item 15. Control Persons and Principal
Holders of Securities.............. Not Applicable
Item 16. Investment Advisory and Other
Services........................... Investment
Management
Services
Item 17. Brokerage Allocation and Other
Practices.......................... Investment
Manager
Services
Item 18. Capital Stock and Other Securities. General
Information
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered........ Sale of Fund
Shares;
Purchase and
Redemption of
Shares;
Distribution
Item 20. Tax Status......................... Tax Status
Item 21. Underwriters....................... Distribution
Item 22. Calculation of Performance Data.... Calculation of
Performance
Data
Item 23. Financial Statements............... Not Applicable
[Financial
Statements]
FORM N-1A PART C ITEM NO.
LOCATION IN PART C
Item 24. Financial Statements and Exhibits.. Financial
Statements and
Exhibits
Item 25. Persons Controlled by or Under
Common Control with Registrant..... Persons
Controlled by
or Under Common
Control with
Registrant
Item 26. Number of Holders of Securities.... Number of
Holders of
Securities
Item 27. Indemnification.................... Indemnification
Item 28. Business and Other Connections of
Investment Advisor................. Business and
Connections of
Investment
Advisor and
Subadvisors
Item 29. Principal Underwriters............. Principal
Underwriters
Item 30. Location of Accounts and Records... Location of
Accounts and
Records
Item 31. Management Services................ Management
Services
Item 32. Undertakings....................... Undertakings
/TABLE
<PAGE>
S.I.S. Mercator Fund, Inc.
1325 Morris Drive, Suite 203
Wayne, Pennsylvania 19087
Telephone: 610-993-0670
PROSPECTUS
October 31
[November 20], 1995
S.I.S. Mercator Fund, Inc. (the Fund ) is an open-
end, diversified investment company that consists
of two Portfolios:
i) the Global Equity Portfolio, whose investment
objective is to achieve a high rate of total
return, with emphasis on capital appreciation, by
investing principally in equity securities of
companies located anywhere in the world, but
predominately in the developed countries, and
ii) the Global Income Portfolio, whose investment
objective is to achieve a relatively stable
[seek a ] rate of total return with emphasis
on yield, by investing [which fluctuates less
than that of the Global Equity Portfolio by
putting emphasis on income. The Portfolio
invests] principally in fixed income
securities and, to a lesser extent, in equity
securities of high quality companies located
predominately in the developed countries with, at
most, very limited exposure to less developed
countries.
The minimum initial investment in each Portfolio
is $100,000. Subsequent investments are not
subject to a minimum purchase requirement. The
Fund, in its discretion, may waive the initial
minimum purchase requirement.
This prospectus contains a concise statement of
information about the Fund a prospective investor
should know before investing and should be
retained for future reference. A Statement of
Additional Information, dated October 31
[November 20] , 1995, containing additional
information about the Fund, has been filed with
the Securities and Exchange Commission and is
incorporated by reference into this prospectus. A
copy may be obtained without charge by writing to
the Fund at the address given above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <S>
Prospectus Summary............................. 1
Investment Objectives & Policies............... 5 S.I.S.
Policy Overview................................ 7 Mercator
The Global Equity Portfolio.................... 8 [9] Fund,
The Global Income Portfolio.................... 9 Inc.
Fixed Income Securities........................ 11
Foreign Currency Transactions.................. 12
Borrowing and Lending.......................... 13
Futures Contracts and Options.................. 14
Investment Risks............................... 14
Management of the Fund......................... 18
Fund Administration............................ 19 [20]
Shareholder Services........................... 20
Distribution of Fund Shares.................... 20 [21]
Price of Portfolio Shares...................... 22
Purchase of Shares............................. 23
Exchange of Shares............................. 25
Dividends, Distribution & Taxes................ 25 [26]
Redemption of Shares........................... 28 [29]
Performance Calculations....................... 31 [32]
General Information............................ 32 [33]
/TABLE
<PAGE>
No dealer, salesman or other person has been
Prospectus
authorized to give any information or to make
October 31
[November 20] , 1995
any representation other than those contained
in this prospectus, and if given or made, such
information or representation may not be relied
upon as being authorized by the Fund, the
Advisor, the Administrator, the Distributor or
any affiliate thereof. This prospectus does not
constitute an offer to sell or a solicitation
Strategic
of any offer to buy in any state to any person
Investment
to whom it is unlawful to make such offer in
Services
such state.
Investment Advisor
<PAGE>
Prospectus Summary
Investment Objectives
S.I.S. Mercator Fund,Inc. is an open-end
investment company consisting of two
separate, diversified portfolios: the Global
Equity Portfolio, which seeks a high rate of
total return, with emphasis on capital
appreciation, by investing principally in
equity securities of companies around the
world, including the United States, and the
Global Income Portfolio, which seeks a
relatively stable rate of total return , with
emphasis on yield, by investing [which
fluctuates less than that of the Global
Equity Portfolio, by putting emphasis on
income. The Portfolio invests]
principally in high-quality, liquid, fixed
income securities having less investment
risk. (See page 5.)
Investment Policies
Both Portfolios are widely diversified to
reduce risk. At least 65% of the total
assets of each Portfolio will be invested in
securities of companies and/or governments in
at least three different countries.
Portfolio allocations are adjusted according
to international business cycle developments
in order to take advantage of, and also to
minimize, the special risks associated with
changing economic conditions. The Portfolios
provide a flexible investment approach that
tries to anticipate, and protect against,
business cycle risks. (See page 7.)
Investment Advisor
Strategic Investment Services (the
and Distributor
"Advisor") [has not previously managed a
mutual fund but it] has extensive
experience managing global accounts in a
manner consistent with the investment
objectives and policies of the Portfolios.
East Coast Consultants, Inc. serves as
distributor of the Fund's shares. (See pages
18 and 20.)
Risks
Each Portfolio is subject to risks associated
with business cycles in the countries in
which it invests, political uncertainties and
exchange rate fluctuations. The global
nature of the Portfolios has the potential to
reduce risks substantially, but also is
subject to risks that do not exist in a
single country fund. (See page 14.)
Share Transactions
Shares are sold and redeemed by the Fund at
the current net asset value of the shares.
The purchase and redemption of shares must be
requested in writing, signed by a person who
is authorized to give instructions for the
investor's account. (See pages 23 and 28.)
Share Exchanges
Investors may exchange shares of one
Portfolio for those of the other Portfolio,
without payment of a fee. (See page 25.)
Dividends
The Fund intends to pay annual dividends from
net investment income and make annual
distributions of any net capital gains.
Capital gains distributions and dividend
payments will be automatically reinvested in
additional shares, at net asset value, unless
payment in cash is requested in writing by
the shareholder.
Fund Expenses
There is no sales charge or shareholder
transaction expenses.
Annual Portfolio Operating Expenses
(as a percentage of average net assets)
<TABLE>
<S> <S>
Management Fee......................0.90%
12b-1 Fee...........................0.25%
Other Expenses......................0.75%
Total Fund Operating Expenses.......1.90%
</TABLE>
Example:
The following example illustrates
maximum expenses that are expected to be
incurred on a $1,000 investment in each
Portfolio, assuming a 5% annual return. The
example assumes that all dividends and
distributions are reinvested in Portfolio
shares.
1 year 3 years
19 60
The amounts shown in this example
should not be considered representative of
past or future expenses. Actual expenses may
be greater or less than those shown.
Further, while the example assumes a 5%
annual return, the Portfolio's actual
performance will vary and may be greater or
less than 5% per year.
The foregoing table and example are
provided is to assist the investor in
understanding the various direct and indirect
costs and expenses that an investor in the
Fund would bear. The table and example show
each Portfolio's estimated expenses as a
percentage of its estimated average annual
assets. The "Other Expenses" shown are based
on estimates for fiscal year ended
[ending] October 31, 1996, the initial
fiscal year of Fund investment operations.
Actual expenses may vary. For more detailed
information, see "The Advisor," the
"Administrator," "Shareholder Services" and
"Distribution of Fund Shares."
Investment Objectives & Policies
The Fund is an open-end, investment
company consisting of two separate,
diversified Portfolios.
i) The Global Equity Portfolio,
invests principally in equity securities of
companies located anywhere in the world, but
predominately in industrialized countries.
Its investment objective is to achieve a high
rate of total return, with emphasis on
capital appreciation. Most investments will
be made in equity securities which the
Advisor believes have the potential for
capital appreciation. The receipt of
dividend income of the Portfolio will also be
a factor in selecting equity investments.
Also, the Portfolio may hold fixed-income
securities when, in the Advisor's judgment,
these securities offer an attractive rate of
total return in relation to anticipated
returns on equity securities.
ii) The Global Income Portfolio
invests principally in medium and long-term,
liquid, high quality fixed income securities
issued by governments, supranational
organizations and companies located in
industrialized countries, with, at most, very
limited exposure to less-developed countries.
Its investment objective is to achieve a
relatively stable [seek a ] rate of
total return with emphasis on yield [which
fluctuates less than that of the Global
Equity Portfolio by putting emphasis on
income] . To a lesser extent, it may also
invest in equity securities which have an
attractive rate of return and whose market
prices the Advisor expects will remain
relatively stable in relation to the price of
fixed income securities.
iii) Each Portfolio ordinarily will
invest at least 65% of its total assets in
securities of companies and/or governments of
at least three different countries. Neither
Portfolio will invest more than 25% of its
total assets in securities of companies in a
single industry. Country allocations, sector
and asset selections, as well as duration and
maturity decisions, will be based on the
Advisor's continuing research of economic,
financial and political developments in the
major industrialized countries. Portfolio
holdings will be widely diversified. The
Portfolios may invest in securities of
companies and governments in the Far East,
Western Europe, South Africa, Australia,
Canada, as well as the U.S. and other areas.
The Global Equity Portfolio does not intend
to invest more than 10% of the value of its
total assets in securities of governments or
companies in developing countries, whereas
the Global Income Portfolio will limit
investments in such securities to not more
than 5% of its total assets. The investment
objectives of the Portfolios may not be
changed without shareholder approval.
Policy Overview
The Global Equity and Global Income
Portfolios are managed in accordance with the
concept that broad diversification across
individual assets, sectors, asset types,
countries and time, applied consistently, ac-
cording to quantitative forecasts of changing
business cycle conditions in the United
States and other countries, can reduce risk
and increase returns. Asset selection is
based, in part, on the Advisor's view of the
business cycle, not only in a single country
but within all the major economies.
Considerations that the Advisor believes are
crucial to rational asset allocation include:
the expected direction of interest rates,
including movements in the yield curve, the
anticipated direction of exchange rates, the
perceived direction of economic activity and
corporate profitability, inflation and
inflationary expectations, central bank
policies, taxes, other fiscal policies as
well as money and credit growth. Portfolio
allocation decisions are based on the
Advisor's long-term view, but are also
constantly monitored for changes in economic
conditions, the political situation and
investment markets to determine whether
events are consistent with the Advisor's
expectations and whether any developments are
occurring that might cause those expectations
to change. The composition of each Portfolio
is adjusted to reflect the Advisor's view of
changing conditions.
The Fund is designed for individual and
institutional investors seeking globally
diversified investment portfolios, based on
active research and management, which take
into account changes in different countries'
business cycles. The Portfolios are intended
for long-term investors who can accept the
risks entailed in investment in foreign
securities. The Fund provides a flexible
investment approach that tries to anticipate,
and protect against, the cycle risks
involved. The Portfolios should not be
relied upon as a complete investment program,
or used to play short-term swings in the
investment markets.
The Global Equity Portfolio
The Global Equity Portfolio invests
principally in common stocks of large,
liquid, high-capitalization companies in the
major industrialized countries which, the
Advisor believes, have the potential for
growth of capital or income or both. The
Portfolio may invest in American Depository
Receipts and Global Depository Receipts for
which there is, in the Advisor's judgment, a
liquid market. In order to increase total
return, the Portfolio may invest up to 25% of
its assets in other types of securities,
including warrants, that have higher current
yields, including convertible securities,
preferred stocks, bonds, notes and other debt
securities as described under "Fixed Income
Securities."
The Global Income Portfolio
The Global Income Portfolio invests in
a globally diversified portfolio consisting
principally of medium and long-term U.S. and
foreign fixed income obligations. The
emphasis is on large, liquid issues carrying
a high credit rating, as described under
"Fixed Income Securities." Ordinarily, most
investments will be in government debt or the
debt of supranational institutions [rated
at least AA by Standard & Poor's Corporation
("S&P") or a comparable rating by Moody's
Investors Services, Inc. ("Moody's")] .
Market and maturity selections are based on
relative and absolute business-cycle
developments in order to maximize income and
capital gains potential while minimizing
risk. Allocation decisions will depend on
the level of interest rates available in
different countries, relative interest rates
within the country, i.e., the yield curve,
the expected change in interest rates and the
outlook for the currency exchange rates.
These conditions will depend on, among other
things, the stability and ability of the
government's fiscal policy, monetary policy,
balance of payments, inflation and the growth
rate of the economy.
Ordinarily, the Portfolio will hold at
least 65% of its investments in at least
three different countries, but may invest in
fixed income obligations of only one country
for temporary, defensive purposes. Normally,
the Portfolio's assets will be invested
principally in fixed income securities issued
or guaranteed by the U.S. or foreign
governments, their agencies and
instrumentalities and supranational
organizations. To a lesser extent,
investments may be made in domestic and
foreign corporate obligations rated at least
investment grade (BBB). There may also be
circumstances when the Portfolio will hold
equities, including preferred and convertible
stocks, and relatively high yielding, high
quality common stocks, but not in excess of
40% of the total value of the Portfolio.
Such investments will be made, if conditions
seem appropriate, in order to protect the
capital value of the Portfolio while
continuing to emphasize income. This will
depend on the circumstances at the time, and
available investment opportunities, and will
become increasingly likely if interest rates
are expected to increase.
By investing in both international and
domestic fixed-income securities, the
Portfolio can expand its investment horizons
while providing an effective means of
reducing volatility associated with
concentration in a single country or region.
Since the economies, interest rates, and
currency exchange rates of various countries
often follow different cycles, the resulting
variation of performance by the world's
fixed-income markets, in the Advisor's
opinion, provides an effective means of
diversification.
Fixed Income Securities
Both Portfolios may invest in fixed-
income securities of the types described
below, having intermediate and long
maturities. Ratings are determined at the
time of purchase and the Portfolios are not
obligated to sell securities in the event of
a subsequent rating reduction.
The Portfolios may invest in debt
securities issued by the U.S. Treasury,
including bills, notes and bonds, U.S.
Government Agency Obligations issued or
guaranteed by U.S. government-sponsored
instrumentalities and federal agencies, debt
securities issued by foreign governments and
supranational organizations, such as the
European Coal and Steel Community, the
European Economic Community and the World
Bank [rated at least AA by S&P or a
comparable rating by Moody's] . In
addition, the Portfolios may invest in U.S.
and foreign corporate debt securities,
including banks (e.g., bonds and debentures)
which are rated at least Baa3 by Moody's
Investors Services, Inc. ("Moody's") or BBB
by Standard & Poor's Corporation ("S&P")
[or BBB by S&P] or if unrated, when
the Advisor determines that they are of
comparable quality to similar issues of the
same issuer rated at least BBB or Baa3.
[Debt securities rated Baa3 or BBB may have
some speculative characteristics.]
Each Portfolio, for temporary or
defensive purposes, may invest as much as 80%
of the value of its total assets in domestic
and/or foreign money market instruments
including, but not limited to, government
obligations, certificates of deposit, bankers
acceptances, high quality commercial paper,
short-term corporate debt issues, and
repurchase agreements.
Foreign Currency Transactions
Foreign investments of the Portfolios
ordinarily will be denominated, and purchased
by, the Portfolios in foreign currencies.
Foreign currency exchange transactions
normally will be transacted either on a spot
(i.e., cash) basis at the spot (current) rate
prevailing in the foreign currency exchange
markets, or by entering into forward
contracts to purchase or sell foreign
currencies. A forward foreign currency
exchange contract is an obligation to
purchase or sell 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. Such contracts may
also be used to protect the Portfolios
against an increase in the level of foreign
exchange rates and they may be bought or sold
to hedge the value of a Portfolio's assets,
in terms of U.S. dollars, against adverse
changes in exchange rates between foreign
currencies and the U.S. dollar. The Advisor,
as part of its fundamental research, also
provides forecasts of currency movements
against the dollar. As a result, there may
be times when, in the Advisor's opinion, it
will be appropriate to hedge the foreign
currency exposure of a Portfolio back into
dollars in order to reduce risk or improve
the expected return.
Borrowing and Lending
Each Portfolio may borrow money from
banks as a temporary measure for
extraordinary purposes or to facilitate
redemptions. A Portfolio will not borrow
money in excess of 33 1/3% of the value of
its total assets and will maintain asset
coverage in respect of borrowings of at least
300%. If asset coverage falls below 300%,
within three business days thereafter, the
Portfolio will reduce its borrowings to a
level where asset coverage is at least 300%.
The Fund has no intention of increasing
Portfolio income through borrowing;
therefore, investment securities will not be
purchased by a Portfolio if it has
outstanding borrowings in excess of 5% of its
net assets. The Portfolios are also
authorized to lend their securities holdings
to securities firms and institutional
investors for the purpose of increasing their
income or reducing expenses. While the
Portfolios are authorized to loan a maximum
of 33 1/3% of their assets, they have no
intention to commit more than 5% of their
assets to securities loans for the
foreseeable future.
Futures Contracts and Options
The Portfolios are authorized to buy
and sell financial futures contracts, options
to buy and sell such contracts, as well as
put and call options on securities.
Financial futures contracts would include
contracts on securities indices, interest
rates, currencies. However, the Advisor has
no present intention to commit more than 5%
of each Portfolio's assets to these types of
investments for the foreseeable future.
Investment Risks
Naturally, there can be no assurance
that the Portfolios will achieve their
investment objectives. The Portfolios should
not be relied upon as a complete investment
program, or used to take advantage of short-
term swings in the investment markets.
Investors should also understand, and
consider carefully, the special risks
involved in foreign investing. These risks
are often heightened for investments in
emerging or developing countries.
Foreign Currency
Investments in foreign securities
normally will be denominated in foreign
currencies. As a result, the value of the
assets of the Portfolios, as measured in U.S.
dollars, may be affected significantly by
changes in foreign currency exchange rates,
currency restrictions, and exchange control
regulations. Further, the Portfolios may
incur costs in converting currencies.
Costs
The expenses of individual investors of
investing directly in foreign securities are
high relative to similar costs of investing
in U.S. securities. While the Fund offers an
efficient way for investors to participate in
foreign securities markets, Portfolio
expenses, including advisory and custodian
fees, are higher than typical domestic equity
and fixed income mutual funds.
Economic Factors
The economies of the countries in which
the Fund may invest (Portfolio Countries)
may differ, favorably or unfavorably, from
the U.S. economy and may be less developed or
diverse. Certain countries are heavily
dependent upon international trade and,
accordingly, have been and may continue to be
affected by protectionist measures, as well
as dependent on a limited number of
commodities, and thus sensitive to changes in
world prices for these commodities. Further,
there is no assurance that the pattern of
growth exhibited by certain Portfolio
Countries in the past will continue.
Political Factors
The internal politics of many Portfolio
Countries are not as stable as in the United
States. Further, certain governments
continue to participate to a substantial
degree, though ownership interest or
regulation, in their respective economies and
securities markets. Action by these
governments could include restriction on
foreign investment, expropriation of assets,
and/or imposition of taxes. Any of these
actions could have a significant effect on
market prices of securities, the ability of
the Fund to repatriate capital and income,
and the value of the Portfolios' investments.
Market Characteristics
Many of the securities markets of
Portfolio Countries have substantially less
volume than the New York Stock Exchange
("NYSE") or U.S. bond markets, and the
securities of some companies in these
countries may be less liquid and subject to
greater price volatility than securities of
comparable U.S. companies. Further,
securities settlement practices of some
Portfolio Countries may be subject to delays
and otherwise differ from those customary in
the U.S. markets.
Legal and Regulatory
Certain Portfolio Countries use
different accounting, auditing, and financial
reporting standards, may have less
governmental supervision of securities
markets, brokers, and issuers of securities,
and less financial information available to
investors than is usual in the United States.
Also, there may be difficulty in enforcing
the Fund's legal rights outside the United
States.
Repurchase Agreements
The Portfolios may enter into
repurchase agreements with banks or broker-
dealers. Under the Investment Company Act of
1940, repurchase agreements are considered
collaterized loans by the Portfolio to the
seller, secured by the securities transferred
to the Portfolio. Repurchase agreements will
be fully collateralized by securities in
which the Portfolios are authorized to
invest. Such collateral will be marked-to-
market daily. If the seller of the
underlying security under the repurchase
agreement should default on its obligation to
repurchase the underlying security, the
Portfolio might experience delay or
difficulty in recovering its cash. If, in
the meantime, the value of the collateral had
decreased, the Portfolio could experience a
loss. The Fund considers repurchase
agreements having a maturity of more than 7
days to be illiquid securities and they are
subject to the Fund's policy that a Portfolio
may not invest more than 15% of its net
assets in illiquid securities.
Management of the Fund
The Board of Directors is responsible
for establishing Fund policies and overseeing
the management of the Fund. They have
retained Strategic Investment Services
("Advisor") to provide investment management
services to each of the Portfolios. The
Advisor provides the Portfolios with
continuous investment programs, and a trading
department, and selects brokers and dealers
to effect securities transactions. Portfolio
securities transactions are placed with a
view to obtaining best price and execution
and, subject to this goal, may be placed with
brokers which have assisted in the sale of a
Portfolio's shares. Dr. Richard T. Coghlan,
President of the Advisor, is primarily
responsible for day-to-day management of the
Fund's investments. While neither the
Advisor nor Dr. Coghlan has previously
managed a mutual fund, they have served as
investment advisor to two investment
partnerships with substantially identical
investment policies to the Fund's Portfolios.
For investment management services, the
Advisor receives a monthly fee from each
Portfolio which, on an annual basis, equals
.90% of the average net asset value of the
Portfolio. The fee rate is higher than most
mutual funds, but is believed comparable to
fee rates paid by mutual funds which invest
in foreign securities.
In addition to the fees of the Advisor,
the Fund is responsible to pay all expenses
incurred in its operation, including, among
other things, expenses for legal and
independent accountant services, shareholder
reports, state and federal registration of
its shares, fees and expenses of
disinterested directors, printing costs,
insurance, interest, taxes, fees and costs of
organizations and persons providing services
to the Fund, including the Advisor,
Distributor, Administrator and Custodian.
Fund Administration
The Advisor also serves as
administrator of the Fund and provides cer-
tain administrative services necessary for
the Fund's operations. These services
include administration of the Fund's business
affairs, supervision of services provided by
other organizations providing services to the
Fund, including the custodian, dividend
disbursing agent, legal counsel and
independent accountants, preparation of
certain Fund records and documents, record
keeping and accounting services. For these
services, each Portfolio pays the Advisor a
monthly fee which, on an annual basis, equals
.25% of the average net assets of each
Portfolio.
Shareholder Services
The Fund has adopted a Shareholder
Services Plan for each Portfolio which is
designed to promote the retention of
shareholder accounts. Under this Plan, the
Portfolios are each authorized to pay East
Coast Consultants, Inc. (see "Distribution of
Fund Shares") a monthly fee which, on an
annual basis, may not exceed .25% of the
average net assets of the Portfolio.
Payments under the Plan would be used, among
other things, to compensate persons and/or
organizations that provide services to
shareholders that are designed to encourage
them to maintain their investments in the
Portfolios.
Distribution of Fund Shares
East Coast Consultants, Inc. (the
"Distributor") serves as distributor of the
Fund's shares pursuant to an agreement which
provides that the Distributor will use its
best efforts to promote the sale and
retention of Fund shares.
The Portfolios have adopted a
Distribution Plan pursuant to which each
Portfolio pays the Distributor a monthly fee
which, on an annual basis, may not exceed
.25% of each Portfolio's average net assets,
for providing certain distribution services.
These services can include: promotion of the
sale of Portfolio shares, preparation of
advertising and promotional materials,
payment of compensation to persons who have
been instrumental in the sale of Portfolio
shares, and for other services and materials,
including the cost of printing Fund
prospectuses, reports and advertising
material provided to investors, and to defray
overhead expenses of the Distributor incurred
in connection with the promotion and sale of
Fund shares.
The principal office of the Advisor and
the Distributor is located at 1325 Morris
Drive, Suite 203, Wayne, Pennsylvania 19087.
The Advisor is a Pennsylvania partnership
formed in 1989 by bringing together existing
research and management activities. The
general partners of the Advisor are East
Coast Consultants, Inc. and F.I.P. Corp.,
both Pennsylvania corporations. Richard T.
Coghlan, President and a director of the
Fund, the Distributor and the Advisor, owns a
controlling interest in these corporations
and, therefore, also controls the Advisor.
Dr. Coghlan serves as portfolio manager of
the Fund and has been the chief investment
officer of the Advisor since it was
organized. Since 1989, the Advisor has
managed a number of investment accounts,
including two limited partnerships, whose
investment objectives and policies closely
paralleled those of the Global Equity and
Global Income Portfolios.
Price of Portfolio Shares
Each Portfolio's shares are sold at the
current net asset value per share, which is
determined as of the close of the NYSE, on
each day that the exchange is open for
trading, by dividing the total market value
of the Portfolio's investments and other as-
sets, less any liabilities, by the number of
outstanding shares of the Portfolio. Price
information on listed securities is taken
from the exchange where the security is
primarily traded. Securities are valued at
the last quoted sales price on the day when
the valuation is made. Securities listed on
a foreign exchange are valued at the latest
quoted market price available before the time
when assets are valued. Other assets and
securities for which no quotations are
readily available are valued at fair value as
determined in good faith by, or under the
direction of, the Board of Directors. Debt
securities may be valued on the basis of
prices provided by a pricing service using
methods approved by the Board of Directors.
All assets and liabilities initially
expressed in foreign currencies will be
converted into U.S. dollars at the bid price
of such currencies against the U.S. dollar
last quoted by a major bank or broker on the
day of valuation. If such quotations are not
available as of the close of the NYSE, the
rate of exchange will be determined in accor-
dance with policies established in good faith
by the Board of Directors. Portfolio
securities will be traded in foreign markets
which are open at times when the NYSE is
closed. As a result, the net asset value of
the Fund's shares might be significantly
affected at times when shareholders have no
access to the Fund.
Purchase of Shares
In order to open a new account, it is
necessary to complete and return to the
Administrator, at 1325 Morris Drive, Suite
203, Wayne, PA, a properly completed Account
Registration Form and remit a check or wire
order in payment of Fund shares to the Fund's
custodian, Bank of California, N.A.
("Custodian"), at the address set forth
below. An initial purchase must be in the
amount of at least $100,000, which can be
invested in either Portfolio. The Fund, in
its discretion, is authorized to waive the
minimum initial purchase requirement. There
is no minimum purchase requirement for
subsequent investments.
Shares are purchased at the next-
determined net asset value after the
investor's properly completed Account
Registration Form has been received by the
Transfer Agent, Strategic Investment
Services, and the investor's payment has been
received by the Custodian in the form of
federal funds. Share certificates will not
be issued by the Fund except upon the
shareholders's written request, which must be
made to the Transfer Agent. The Fund
ordinarily is credited with federal funds
within one business day after receipt of an
investor's check. Thus, if [If] a
check is received by the Custodian by the
close of the NYSE (4:00 P.M. Eastern Time),
shares will be priced at the net asset value
calculated as of the close of the NYSE on the
business day following receipt of the
check [that day]. If the check is
received after the close of the NYSE, shares
will be priced, as of the close of the NYSE,
on the second [next] business day
following receipt of the investor's check.
In order to prevent lengthy processing delays
caused by the clearing of foreign checks, the
Fund will only accept a foreign check which
has been drawn in U.S. dollars and has been
issued by a foreign bank with a U.S.
correspondent bank. [Checks should be
made payable to the Portfolio selected,
either S.I.S. Mercator Equity Portfolio or
S.I.S. Mercator Income Portfolio. Investors
desiring to purchase shares of both
Portfolios should write a separate check for
each Portfolio]
To order shares for purchase by federal
funds wire, the Transfer Agent must be
notified first by calling 610-993-0670
[2150] to obtain an account number and to
provide your federal tax identification
number. Following notification, federal
funds and registration instructions should be
wired through the Federal Reserve System
[the investor must have the bank wire
transmitted] to: Mitsubishi Global
Custody The Bank of California 475 Sansome
Street, 15th Floor [ABA #1210-0001-5 for
credit to] San Francisco, California
94111 [Mitsubishi Global Custody, Account
#001-054831 for further credit to S.I.S.
Mercator Equity Portfolio A/C #01643 or
S.I.S. Mercator Income Portfolio A/C #01644,
depending on the Portfolio selected.]
A completed Account Registration Form,
properly executed, must be filed with the
Transfer Agent immediately subsequent to the
initial wire [or check]. Investors
should note that some banks may impose a wire
service fee. The Fund reserves the right to
suspend the offering of shares at any time
and to reject any specific purchase request.
Exchange of Shares
Shares of each Portfolio may be
exchanged for shares of the other Portfolio,
at the relative net asset values of the
shares, without payment of a fee. Exchanges
may be made only for shares of a Portfolio
which, at the time of exchange, are
registered for sale, or exempt from
registration, in the shareholder's state of
residence. For federal income tax purposes,
an exchange of shares is treated as if the
shareholder had redeemed shares of one
Portfolio and reinvested the proceeds in
shares of the other Portfolio. Thus, a gain
or loss on the shares exchanged (redeemed)
may be realized by the shareholder at the
time of the exchange. The Fund reserves the
right to restrict the frequency of, or
otherwise modify, condition, terminate or
impose charges on the exchange privilege upon
30 days prior written notice to shareholders.
Shareholders interested in an exchange of
shares should contact the Transfer Agent.
Dividends, Distributions and Taxes
The Portfolios will distribute their
net investment income annually, in December,
at which time they will also distribute
substantially any net long-term capital gains
and any net short-term capital gains realized
during the fiscal year. Any net realized
short-term capital gains will be distributed
as ordinary income dividends, not capital
gains.
Dividends and distributions are
automatically reinvested in additional shares
of the Portfolio unless the shareholder has
notified the Administrator, in writing, of an
election to receive dividends and/or
distributions in cash. Dividends are
reinvested on the ex-dividend date, at the
net asset value of the shares, determined as
of the close of the NYSE on that date.
Dividends (including short-term capital
gains) are treated as ordinary income and
distributions are treated as long-term
capital gains for U.S. federal tax purposes,
whether received in cash or reinvested in
additional shares, and regardless of the
length of time the Portfolio's shares have
been held. Shares purchased shortly before
the record date for a dividend or
distribution will have the effect of a return
of capital, even though such dividends and
distributions are subject to taxes.
Dividends and distributions may also be
subject to state and local taxes. The Fund
will notify shareholders each year of the
amount of dividends and any distributed long-
term capital gains.
The Advisor intends to monitor the
anticipated after-tax returns of the
Portfolios, as well as the anticipated pre-
tax returns and, where appropriate, will act
to minimize realized capital gains. This is
likely to be a more important consideration
for the Global Equity Portfolio, in which
capital gains are expected to play a larger
role than in the Global Income Portfolio.
However, the same principle will apply to
both Portfolios. Realization of gains will
be deferred only when not in conflict with
the investment objectives of the Portfolios
but, in general, this approach, which may be
implemented by refraining from selling
appreciated securities and/or selling
depreciated securities at a loss to offset
realized gains, will be followed where
appropriate in the judgment of the Advisor.
Dividends and interest received by the
Portfolios in certain countries will be
subject to foreign withholding taxes. If
more than 50% of a Portfolio's total assets
at the close of its taxable year consists of
securities of foreign corporations and
governments, the Portfolio may elect to
"pass-through" to shareholders, for foreign
tax credit purposes under the Internal
Revenue Code of 1986, as amended ("Code"),
the amount of foreign income taxes paid by
the Fund with respect to its holdings of
foreign securities. A Portfolio will make
such an election only if management deems it
to be in the best interests of shareholders.
If this election is made, shareholders of the
Portfolio will be required to include in
their gross income their pro-rata share of
foreign taxes paid by the Portfolio.
However, shareholders will be entitled to
treat their pro-rata share of foreign taxes
paid as either a deduction (an itemized
deduction in the case of individuals) or a
foreign tax credit (but not both) against
U.S. income taxes on their federal tax
return.
Each Portfolio intends to qualify for
taxation as a "regulated investment company"
under the Code, so that they will not be
subject to federal income tax with respect to
amounts distributed to shareholders.
Further, in the opinion of legal counsel for
the Fund, the shares of the Portfolios are
exempt from Pennsylvania county personal
property taxes. A portion of the dividends
paid by the Portfolios may be eligible for
the dividends received deduction available to
certain corporations under the Code. The tax
discussion set forth above is included for
general information only. Prospective
investors should consult their own tax
advisors concerning the tax consequences of
an investment in the Portfolios.
Redemption of Shares
Shareholders may redeem shares of a
Portfolio, without charge, on any day when
the NYSE is open. Redemption proceeds will
ordinarily be sent on the next business day
but, in any event, they will be sent within
seven calendar days of the receipt of a
redemption request in proper form. Payment
may also be made by wire directly to any bank
previously designated by the shareholder in
his or her Account Registration Form. The
Fund makes no charge for redemptions by wire,
however, the shareholder's bank may impose a
fee for wire services. The Fund will honor
redemption requests of shareholders who
recently purchased shares by check, but will
not send the proceeds until it is reasonably
satisfied that the purchase check has
cleared, which may take up to 15 days from
the purchase date.
Redemption requests received in "proper
form" by the Administrator prior to the close
of business of the NYSE on any day when the
exchange is open are priced at the net asset
value of the shares calculated as of the
close of the exchange on that day.
Redemption requests received in proper form
by the Administrator after the close of the
NYSE are priced at the net asset value per
share determined on the next day when the
NYSE is open for trading.
"Proper form" means the written
redemption request includes the following:
1. The shareholder's account number
and Portfolio name;
2. The amount of the transaction
(specified in dollars or shares);
3. The signatures of all owners
exactly as they are registered;
4. Other supporting legal
documentation that might be required, in the
case of estates, corporations, trusts, and
certain other account;
5. Telephone confirmation, if
requested.
In addition, the Fund will pay
redemption proceeds to a pre-authorized bank
account of the investor pursuant to a request
made by the investor by telephone.
In order to arrange for redemption by
wire or telephone after an account has been
opened, or to change the bank or account
designated to receive redemption proceeds, a
written request must be sent to the Transfer
Agent.
The Fund reserves the right to refuse a
wire or telephone redemption if it is
believed advisable to do so [management
has reason to doubt the authenticity of the
request. The Fund will employ reasonable
procedures to confirm that instructions
communicated by telephone are genuine. The
Fund may request the caller to provide
certain personal or account information for
the purpose of establishing the caller's
identity. The Fund will not be liable for
following instructions that it reasonably
believes are genuine]. Procedures for
redeeming Fund shares by wire or telephone
may be modified or terminated at any time by
the Fund.
The Fund may suspend the right of
redemption or postpone payment at times when
the NYSE is closed or when emergency exists,
as determined by the U.S. Securities and
Exchange Commission. Further, if the Board
of Directors determines it would be
detrimental to the best interest of a
Portfolio's remaining shareholders to make a
redemption payment in cash, the redemption
proceeds may consist, in whole or in part, of
readily marketable securities. Portfolio
securities distributed in redemption of Fund
shares would be valued as described under
"Price of Portfolio Shares" and the
shareholder will incur expenses, such as the
payment of brokerage commissions, on the sale
of such securities.
Performance Calculations
From time to time, performance
information, such as yield or total return
for each Portfolio may be quoted in
advertisements or in communications to
shareholders. Performance quotations of the
Portfolios represent their past performance
and should not be considered as
representative of future results. Current
yield will be calculated by dividing the net
investment income earned per share by the
Portfolio, during the period stated in the
advertisement or communication (based on the
average daily number of shares entitled to
receive dividends outstanding during the
period), by the maximum net asset value per
share on the last day of the period, and
annualizing the result on a semi-annual
compounded basis.
A Portfolio's total return may be
calculated on an annualized and aggregate
basis for various periods (which periods will
be stated in the advertisement or
communication). Average annual return
reflects the average percentage change per
year in value of an investment in a
Portfolio. Aggregate total return reflects
the total percentage change over the stated
period.
To assist investors to better evaluate
how an investment in a Portfolio might
satisfy their investment objective, the
Portfolios may disseminate performance data
such as yield and/or total return
information. Communications may compare the
investment performance of the Portfolios to
benchmarks, indices or averages, including
indices published by the Lipper Organization;
Morgan Stanley; Shearson Lehman Hutton;
Salomon Brothers; Dow Jones; Standard &
Poor's and others.
General Information
The Fund was incorporated in Maryland
on July 6, 1995. The Portfolios expect to
be capitalized by investments of
approximately $26,660,000 in the Global
Equity Portfolio and $12,979,000 in the
Global Income Portfolio of securities and
cash distributed as the result of liquidation
of certain investment partnerships. These
transactions will constitute tax-free
reorganizations under the Code.
Shareholders will participate pro rata
in the dividends, distributions and net
assets of the Portfolio(s) whose shares they
own. The Fund is not required, and does not
intend, to hold regular annual shareholder
meetings, but may hold special meetings for
consideration of proposals requiring
shareholder approval, such as changing
fundamental policies or, upon the written
request of the holders of 10% of the Fund's
shares, to replace its Directors. The Fund
sends semi-annual and annual reports of
financial condition to shareholders of
record. The annual report includes a list of
portfolio securities and audited financial
statements.
Each share entitles the owner one vote
in all matters affecting the Portfolio whose
shares the holder owns, which are submitted
to a vote of shareholders, and on such other
matters, submitted to a vote, such as the
election of directors, which affect the Fund,
in general.
Custodian and Dividend Disbursing Agent
The Bank of California, N.A., 475
Sansome Street, 15th Floor, San Francisco,
California 94111, is the Custodian of the
cash and securities held by each of the
Portfolios and Dividend Disbursing Agent.
Counsel and Independent Accountants
Stradley, Ronon, Stevens & Young serves
as legal counsel for the Fund. The firm of
Tait, Weller & Baker has been selected
independent accountants for the Fund.
Information for Shareholders
Investor and shareholder inquiries
should be directed to East Coast Consultants,
Inc. at 1325 Morris Drive, Suite 203, Wayne,
Pennsylvania 19087, Telephone No. 1-610-993-
0670 [2150]. <PAGE>
STATEMENT OF ADDITIONAL INFORMATION
S.I.S. MERCATOR FUND, INC.
This Statement of Additional
Information is not a prospectus, and should
be read in conjunction with the prospectus,
which can be obtained, without charge, from
East Coast Consultants, Inc., the Distributor
of the Fund, at 1325 Morris Drive, Suite 203,
Wayne, PA 19087, telephone No. 610-993-0670.
The date of this Statement of Additional
Information,
and the prospectus to which it relates, is
November 1 [20] , 1995.
TABLE OF CONTENTS
<TABLE>
<S> <S>
Page
Investment Objectives and Policies 1
Fundamental Policies Operating Policies 2
Writing Listed Covered Call Options 3
Purchasing Listed Call Optins 5
Purchasing Listed Call [Put]
Options 5
Dealer Options 6
Futures Contracts 7
Lending Portfolio Securities 9
Foreign Currency Transactions 9
Investment Performance 9 [11]
Management of the Fund 11
Principal Holders of Securities 11 [13]
Investment Management Services 13
Sale of Fund Shares 14 [15]
Distribution 15 [16]
Tax Status 16
/TABLE
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the
discussion under "Investment Objectives and
Policies" in the prospectus. The "Fundamental
Policies" of the Portfolios are described below
and may not be changed without the approval of the
lesser of: a vote of the holders of a majority of
the outstanding shares of the Portfolio or, 67% of
the shares represented at a meeting of
shareholders of the Portfolio at which the holders
of at least 50% or of the shares are represented.
FUNDAMENTAL POLICIES
As a matter of fundamental policy, each
Portfolio will not:
(1) borrow money, except from banks as a
temporary measure for extraordinary or emergency
purposes, including redemption of its shares, and
then only in amounts not exceeding 33 1/3% of its
total assets, valued at market. The Portfolios
also may acquire futures contracts and options
thereon as set forth in (2) below;
(2) purchase or sell commodities or
commodity contracts; except that the Portfolios
may (i) enter into financial (including currency)
futures contracts and options thereon on an
initial and variation margin basis;
(3) purchase the securities of any issuer
if, as a result, more than 25% of the value of the
Portfolio's total assets would be invested in the
securities of issuers having their principal
business activities in the same industry;
(4) make loans, although a Portfolio may
enter into repurchase agreements and lend its
portfolio securities;
(5) as to 75% of its total assets,
purchase the securities of an issuer if as a
result: (a) more than 5% of the value of the
Portfolio's assets would be invested in the
securities of that issuer or (b) it would own more
than 10% of the voting securities of that issuer;
(6) purchase or sell real estate although
it may purchase securities secured by real estate
or representing interests therein;
(7) issue senior securities;
(8) underwrite securities issued by other
persons, except to the extent that a Portfolio or
the Fund may be deemed to be an underwriter within
the meaning of the Securities Act of 1993 in
connection with the purchase and sale of
securities in the ordinary course of pursuing its
investment program.
OPERATING POLICIES
The following operating policies have been
established by the Board of Directors. A
Portfolio will not:
(1) invest in companies for the purpose of
exercising management or control;
(2) purchase a security if, as a result of
such purchase, more than 15% of the value of the
Portfolio's net assets would be invested in
illiquid securities, including repurchase
agreements which do not provide for payment within
seven days;
(3) purchase securities of any investment
company, except in compliance with the Investment
Company Act of 1940 and applicable state law; or
(4) sell securities short.
Operating policies are established, and may
be changed, by the Board of Directors without
approval of shareholders.
In determining the appropriate distribution
of investments among various countries and
geographic regions, the Advisor ordinarily
considers the following factors: prospects for
relative economic growth between foreign
countries; expected levels of inflation;
government policies influencing business
conditions; the outlook for currency
relationships; and the range of individual
investment opportunities available to
international investors.
In analyzing companies for investment in the
Global Equity Portfolio, the Advisor ordinarily
looks for one or more of the following
characteristics: an above-average earnings growth
per share; high return on invested capital,
healthy balance sheet; sound financial and
accounting policies and overall financial
strength; strong competitive advantages; effective
research and product development and marketing;
efficient service; pricing flexibility; strength
of management; and general operating
characteristics which will enable the companies to
compete successfully in their market place. While
current dividend income is not a prerequisite in
the selection of companies, the companies in which
the Portfolio invests normally will have a record
of paying dividends, which the Advisor expects to
increase in future years as earnings increase.
In analyzing investments in the Global
Income Portfolio, the Advisor will ordinarily look
for a high and sustainable real and nominal income
flow. The bonds included in the Portfolio will
generally be issued by national governments,
supranational institutions or securities of
high-quality companies with liquid markets. The
Global Income Portfolio may also invest in
relatively high yielding equities of good quality
companies at times when the Advisor believes the
market price of the equity securities is likely to
be more stable than that of debt securities.
WRITING LISTED COVERED CALL OPTIONS
The Portfolios may write (sell) listed
(exchange traded) covered call options and
purchase listed options to close out options
previously written. In writing covered call
options, a Portfolio would expect to generate
premium income, which should serve to enhance the
Portfolio's total return and reduce the effect of
any price decline of the optioned security or
currency. Covered call options will generally be
written on securities or currencies which, in the
Advisor's opinion, are not expected to experience
any major price increases in the near future but
which, over the long term, are deemed to be
attractive investments.
A call option gives the buyer the right to
purchase a security or currency at a specified
price (the exercise price), at expiration of the
option (European options) or at any time until the
expiration date of the option (American options).
As long as the obligation of the writer of a call
option continues, the buyer may require the seller
to deliver the underlying security or currency
against payment of the exercise price. This
obligation terminates upon the expiration of the
option, or such earlier time when the writer
effects a closing transaction by purchasing an
identical option. To secure the obligation to
deliver the underlying security or currency, the
option seller must deposit in escrow the
underlying security or currency or other assets in
accordance with the rules of the clearing
corporation. The Portfolio will sell covered call
options, only. This means that the Portfolio will
own the security or currency subject to the
option, or an option to purchase the same
underlying security or currency, having an
exercise price equal to or less than the exercise
price of the option it has sold, or will establish
and maintain with its custodian for the term of
the option, a segregated account consisting of
cash, U.S. government securities or other liquid,
high-grade debt obligations having a value equal
to the market value of the optioned securities or
currencies, and marked to market daily. A
Portfolio will not write a covered call option if,
as a result, the aggregate market value of all
optioned portfolio securities or currencies and
put option obligations exceeds 25% of the market
value of the Portfolio's net assets.
Portfolio securities or currencies on which
call options may be written will be purchased
solely on the basis of investment considerations
consistent with the Portfolios' investment
objectives. The Advisor believes writing covered
call options is a conservative investment
technique involving relatively little risk (in
contrast to writing uncovered options), but
capable of enhancing a Portfolio's total return.
When writing a covered call option, the Portfolio,
in return for the premium, gives up the
opportunity for profit from a price increase of
the optioned security or currency above the
exercise price, but conversely retains the risk of
loss should the price of the security or currency
decline. If a call option which the Fund has
written expires, the Fund will realize income in
the amount of the premium. If the call option is
exercised, the Fund will realize a gain or loss
from the sale of the underlying security or
currency.
The premium received is the market value of
an option. This value is established by market
factors and ordinarily fluctuates from day to day.
In determining whether a particular call option
should be written on a particular security or
currency, the Advisor will consider the
reasonableness of the anticipated premium and the
likelihood that a liquid secondary market will
exist for the option.
Closing transactions will be effected in
order to realize a profit on an outstanding call
option, to prevent an underlying security or
currency from being called, to permit the sale of
the underlying security or currency, or to permit
the Portfolio to write another call option on the
underlying security or currency with either a
different exercise price or expiration date or
both. There is, of course, no assurance that a
Portfolio will be able to effect such closing
transactions at favorable prices. If the
Portfolio cannot enter into such a transaction, it
may be required to hold a security or currency
that it might otherwise have sold.
Call options written by a Portfolio will
normally have expiration dates of less than nine
months from the date written. From time to time,
a Portfolio may purchase an underlying security or
currency for delivery in accordance with an
exercise notice of a call option assigned to it,
rather than delivering such security or currency
from its portfolio. In such cases, additional
costs may be incurred.
A Portfolio will realize a profit or loss
from a closing purchase transaction depending on
whether the cost of the transaction is less or
more than the premium received from writing the
option. Because increases in the market price of a
call option will generally reflect increases in
the market price of the underlying security or
currency, any loss resulting from the repurchase
of a call option is likely to be offset in whole
or in part by appreciation of the underlying
security or currency owned by the Fund.
PURCHASING LISTED CALL OPTIONS
The Portfolios may purchase listed call
options. As the holder of a call option, the
Portfolio has the right to purchase the underlying
security or currency, at the exercise price, at
any time during the option period (American
option) or at the expiration date of the option
(European option). The Portfolio may enter into
closing sale transactions with respect to such
options, exercise them or permit them to expire.
Call options may be purchased for the purpose of
increasing current return, to avoid tax
consequences which might reduce its current
return, or to acquire the optioned securities or
currencies.
The purchase of a call option enables the
Portfolio to acquire the optioned securities or
currencies at the exercise price of the call
option plus the premium paid. At times the net
cost of acquiring securities or currencies in this
manner may be less than the cost of acquiring the
securities or currencies directly. This technique
may also enable a Portfolio to purchase a large
block of securities or currencies that would be
difficult to acquire by direct market purchases.
So long as it holds such a call option rather than
the underlying security or currency itself, the
Fund is partially protected from any unexpected
decline in the market price of the underlying
security or currency and in such event could allow
the call option to expire, incurring a loss only
to the extent of the premium paid for the option
and transaction costs.
A Portfolio may also purchase call options
on securities or currencies it owns in order to
protect unrealized gains on call options
previously written by it. A call option would be
purchased for this purpose where tax
considerations make it inadvisable to realize such
gains through a closing purchase transaction. Call
options may also be purchased at times to avoid
realizing losses. Purchasing call options entails
the risk that the price of the optioned securities
will not exceed the exercise price of the option
in which case the option will expire without
value.
PURCHASING LISTED PUT OPTIONS
The Portfolios may purchase listed put
options. As the holder of a put option, the
Portfolio has the right to sell the optioned
security or currency at the exercise price at any
time during the option period. A Portfolio may
enter into closing sale transactions with respect
to such options, exercise them or permit them to
expire. A Portfolio may purchase put options for
defensive purposes in order to protect against an
anticipated decline in the value of its securities
or currencies. Such an option would permit the
Portfolio to sell the optioned security or
currency at the exercise price regardless of any
decline in the value of the security or currency.
For example, a put option may be purchased in
order to protect unrealized appreciation of a
security or currency where the Advisor deems it
desirable to continue to hold the security or
currency because of tax considerations. The
premium paid for the put option and any
transaction costs would reduce any capital gain
otherwise available for distribution when the
security or currency is eventually sold.
A Portfolio may also purchase put options
when it does not own the optioned security or
currency. By purchasing put options on a security
or currency it does not own, the Fund seeks to
benefit from a decline in the market price of the
underlying security or currency. If the put option
is not sold when it has remaining value, and if
the market price of the underlying security or
currency remains equal to or greater than the
exercise price during the life of the put option,
the Fund will lose its entire investment in the
put option. In order for the purchase of a put
option to be profitable, the market price of the
underlying security or currency must decline
sufficiently below the exercise price to cover the
premium and transaction costs, unless the put
option is sold in a closing sale transaction, in
which case the Portfolio's profit or loss on the
transaction will depend on whether the price it
paid for the option exceeds the price it received
on its sale (plus transaction costs).
DEALER OPTIONS
The Portfolios may also buy and sell dealer
options. Certain risks are specific to these
options. While the Portfolio looks to a clearing
corporation to exercise listed options, if a
Portfolio were to purchase a dealer option, it
would rely on the dealer from whom it purchased
the option to perform if the option were
exercised. Failure by the dealer to do so would
result in the loss of the premium paid by the
Portfolio, as well as loss of the expected benefit
of the transaction.
Listed options generally have a continuous
liquid market while dealer options have none.
Consequently, a Portfolio will generally be able
to realize the value of a dealer option it has
purchased only by exercising it or reselling it to
the dealer who issued it. Similarly, when a
Portfolio writes a dealer option, it generally
will be able to close out the option prior to its
expiration only by entering into a closing
purchase transaction with the dealer to which the
Portfolio sold the option. While the Portfolio
will seek to enter into dealer options only with
dealers who will agree, and which the Advisor
believes, will be capable of entering into closing
transactions, there can be no assurance that a
Portfolio will be able to liquidate a dealer
option at a favorable price at any time prior to
expiration. Until the Portfolio, as a covered
dealer call option writer, is able to effect a
closing purchase transaction, it will not be able
to liquidate the option securities or currency
until the option expires or is exercised. In the
event of insolvency of the contra party, the
Portfolio may be unable to liquidate a dealer
option. The inability to enter into a closing
transaction may result in material losses to a
Portfolio.
Dealer options and the assets used to secure
dealer options currently are considered illiquid
securities. Accordingly, dealer options will be
subject to the Portfolios' restriction that not
more than 15% of the value of a Portfolio's assets
may be invested in illiquid securities.
FUTURES CONTRACTS
The Portfolios may enter into financial
futures contracts, including stock index, interest
rate and currency futures. Futures contracts
provide for the future sale by one party and
purchase by another party of a specified amount of
specific securities or currencies at a specified
future time and at a specified price. Financial
futures contracts which are standardized as to
maturity date and the underlying financial
instruments are traded on national futures
exchanges, and include futures contracts on equity
securities, debt securities and foreign
currencies. The Portfolios will only buy and sell
standardized contracts.
Securities index futures contracts may be
used to provide a hedge for a portion of a
Portfolio's, as a cash management tool, or as an
efficient way for the Advisor to implement either
an increase or decrease in portfolio market
exposure in response to changing market
conditions. A Portfolio may purchase or sell
securities index futures with respect to any
securities index whose movements are expected by
the Advisor to have a significant correlation with
movements in the prices of all or portions of the
Portfolio's securities.
Interest rate or currency futures contracts
may be used as a hedge against changes in
prevailing levels of interest rates or currency
exchange rates in order to establish more
definitely the effective return on securities or
currencies held or intended to be acquired by the
Portfolio or protect the Portfolio from effects of
currency fluctuations. In this regard, a
Portfolio might sell interest rate futures as an
offset (hedge) against the effect of expected
increases in interest rates or currency exchange
rates and purchase such futures as an offset
against the effect of expected declines in
interest rates or currency exchange rates. The
Portfolios will engage in transactions in
financial futures contracts and options thereon
only for bona fide hedging, return enhancement and
risk management purposes.
Transactions in financial futures contracts,
and options thereon, will be limited so that
margin on transactions not considered hedging
under the rules of the Commodities Futures Trading
Corporation will not exceed 5% of a Portfolio's
net assets. When a Portfolio has a long position
in a futures contract or sells a put option on
futures contracts or securities, it must establish
a segregated account with its custodian bank
containing cash or highly liquid, short-term U.S.
government securities in an amount equal to the
purchase price of the contract or the strike price
of the put option (less any margin on deposit).
When the Portfolio sells a call option on a
futures contract, it must establish a segregated
account with its custodian bank containing cash or
highly liquid, short-term U.S. government
securities in an amount that, when added to the
amount of the margin deposit, equals the market
value of the instruments underlying the call
option (but are not less than the strike price of
the call option).
Successful use of futures contracts for
hedging purposes is subject to the Advisor's
ability to correctly predict movements in the
direction of the market. It is possible that, when
a Portfolio has sold futures to hedge its
portfolio against a decline in a market, the index
or indices, securities or currencies on which the
futures are written might advance and the value of
securities or currencies held in the Portfolio
might decline. If this were to occur, the
Portfolio would lose money on the futures and also
would experience a decline in value in its
portfolio securities or currencies. However, while
this might occur to a certain degree, the Advisor
believes that over time the value of the
Portfolio's investments will tend to move in the
same direction as the securities or currencies
underlying the futures, which are intended to
correlate to the price movements of the portfolio
securities or currencies sought to be hedged. It
is also possible that if a Portfolio were to hedge
against the possibility of a decline in the market
(adversely affecting securities or currencies held
in its portfolio) and prices instead increased,
the Portfolio would lose part or all of the
benefit of increased value of those securities or
currencies that it has hedged, because it would
have offsetting losses in its futures positions.
In addition, in such situations, if the Portfolio
had insufficient cash, it might have to sell
securities or currencies to meet daily variation
margin requirements. Such sales of securities or
currencies might be, but would not necessarily be,
at increased prices (which would reflect the
rising market). A Portfolio might have to sell
securities or currencies at a time when it would
be disadvantageous to do so.
In addition to the possibility that there
might be an imperfect correlation, or no
correlation at all, between price movements in the
futures contracts and the portion of the portfolio
being hedged, the price movements of futures
contracts might not correlate perfectly with price
movements in the underlying stock index, security
or currency due to market distortions. All
participants in the futures market are subject to
margin deposit and maintenance requirements.
Rather than meeting additional margin deposit
requirements, investors might close futures
contracts through offsetting transactions which
could distort the normal relationship between the
underlying instruments and futures markets. Also,
the margin requirements in the futures market are
less than margin requirements in the securities
markets; as a result the futures market might
attract more speculators than the securities
markets do. Increased participation by speculators
in the futures market might also cause temporary
price distortions. Due to the possibility of price
distortion in the futures market and also because
of the imperfect correlation between price
movements in the underlying instruments and
movements in the prices of futures contracts, even
a correct forecast of general market trends by the
Advisor might not result in a successful hedging
transaction over a very short time period.
LENDING PORTFOLIO SECURITIES
For the purpose of realizing additional
income, each Portfolio may make loans of
securities amounting to not more than 33 1/3% of
its total assets. Securities loans would be made
to broker-dealers and financial institutions
pursuant to agreements requiring the loans to be
secured by collateral at least equal to the
current value of the securities lent and "marked-
to-market" on a daily basis. Collateral will
consist of cash, U.S. or foreign securities,
letters of credit or cash equivalents. While the
securities are being lent, the Portfolio will
continue to receive the equivalent of the interest
or dividends paid by the issuer of the securities,
as well as interest on the investment of the
collateral or a fee from the borrower. The
Portfolio has a right to call a loan at any time.
The Portfolio will not have the right to vote
securities while they are on loan, but it will
call a loan in anticipation of any important vote.
The risks in lending portfolio securities, as with
other extensions of secured credit, consist of
possible delay in receiving additional collateral
or in the recovery of the securities or possible
loss of rights in the collateral should the
borrower fail financially. Loans will only be made
after analysis of the pertinent facts by the
Advisor when, in the judgment of the Advisor, the
income from such loans would justify the risk.
FOREIGN CURRENCY TRANSACTIONS
The Portfolios may engage in forward foreign
currency transactions to settle foreign securities
transactions and/or manage foreign currency risk.
A forward foreign currency exchange contract
involves an obligation to purchase or sell a
specific currency at a future date, which may be
any fixed number of days from the date of the
contract is agreed upon by the parties, at a price
set at the time of the contract. These contracts
are principally traded in the interbank market
conducted directly between currency traders
(usually large, commercial banks) and their
customers. A forward contract generally has no
deposit requirement, and no commissions are
charged for trades.
The Portfolios will generally enter into
forward foreign currency exchange contracts in two
circumstances. First, when a Portfolio enters
into a contract for the purchase or sale of a
security denominated in a foreign currency, it may
desire to lock in the U.S. dollar price of the
security, by entering into a forward contract for
the purchase or sale, for a fixed amount of
dollars, of the amount of foreign currency
involved in the underlying security transactions.
The Portfolio will be able to protect itself
against a loss resulting from an adverse change in
the relationship between the U.S. dollar and the
foreign currency during the period between the
date the security is purchased or sold and the
date on which payment is made or received.
Second, when the Advisor believes that the
currency of a particular foreign country may
suffer from, or enjoy, a substantial movement
against another currency, it may enter into a
forward contract to sell or buy the amount of one
or more foreign currencies, approximating the
value of some or all of a Portfolio's portfolio
securities denominated in that foreign currency.
Alternatively, where appropriate, a Portfolio may
hedge all or part of its foreign currency exposure
through the use of a basket of currencies or a
proxy currency where such currencies or currency,
in the Advisor's judgment, act as an effective
proxy for the Portfolio's currency exposure. The
prediction of short-term currency market movement
is extremely difficult, and the successful
execution of a short term hedging strategy is
highly uncertain. The Advisor will consider the
effect a substantial commitment of Portfolio
assets to forward contracts would have on the
investment program of the Portfolio and the
flexibility of the Portfolio to purchase
additional securities. Other than as set forth
above, and immediately below, a Portfolio also
will not enter into forward contracts or maintain
a net exposure to such contracts where the
consummation of the contracts would obligate the
Portfolio to deliver an amount of foreign currency
in excess of the value of the Portfolio's
securities or other assets denominated in that
currency. A Portfolio, however, in order to avoid
excess transactions and transaction costs, may
maintain a net exposure to forward contracts in
excess of the value of the Portfolio's securities
or other assets denominated in that currency
provided the excess amount is covered by liquid,
high-grade debt securities, denominated in any
currency, at least equal at all times to the
amount of such excess. Under normal circumstances,
consideration of the prospects for currencies will
be incorporated into the longer term investment
decisions made with regard to overall
diversification strategies. However, the Advisor
believes that it is important to have the
flexibility to enter into such forward contracts
when it determines that the best interests of the
Portfolio will be served.
INVESTMENT PERFORMANCE
Total Return
The Portfolios compute their average annual
total return by determining the average annual
compounded rate of return during specified periods
that equates the initial amount invested to the
ending redeemable value of such investment. This
is done by dividing the ending redeemable value of
the hypothetical $1,000 initial payment by $1,000
and taking the root of the quotient equal to the
number of years (or fractional portion thereof)
covered by the computation and subtracting one
from the result. Average annual total return
figures are determined in accordance with standard
SEC requirements. The Portfolios compute their
aggregate total return by determining the
aggregate compounded rate of return during a
specified period that likewise equates the initial
amount invested to the ending redeemable value of
such investment. The calculations of average
annual total and aggregate total return assume the
reinvestment of all dividends and capital gain
distributions on the reinvestment dates during the
period and the deduction of all recurring charges.
The ending redeemable value is determined by
assuming complete redemption of the hypothetical
investment and the deduction of all non-recurring
charges at the end of the period covered by the
computations.
Yield
The yield of the Portfolios may be
calculated by dividing the net investment income
per share earned by the particular Portfolio
during a 30 day (or one month) period by the net
asset value per share on the last day of the
period and annualizing the result on a semi-annual
basis. A Portfolio's net investment income per
share earned during the period is based on the
average daily number of shares outstanding during
the period entitled to receive dividends and
includes dividends and interest earned during the
period minus expenses accrued for the period, net
of reimbursements.
MANAGEMENT OF THE FUND
The officers and directors of the Fund are
listed below. Unless otherwise noted, the address
of each is 1325 Morris Drive, Suite 203, Wayne,
Pennsylvania 19087.
Dr. Richard T. Coghlan*
Age 50. President and Chairman of the Board of
Directors. Also, President, director and
controlling stockholder of the Advisor and
Distributor.
Howard W. Gross
Age 65. Director. Business Consultant, West Palm
Beach, Florida. Previously, Executive Vice
President, Henkel Corp.
Stephen Michael Alexander
Age 44. Director. Chief Executive Officer, IHI
Alchen, Inc., Bryn Mawr, Pennsylvania.
Lee G. Fishman
Age 41. Director. President, BPM Group, Inc.,
Merion Station, Pennsylvania.
Elliot C. Kauffman
Age 27. Treasurer and Senior Investment Manager
of the Advisor.
Brian R. Cassidy
Age 30. Secretary and Senior Administrator of the
Advisor.
[*]Dr. Coghlan is an "interested" director of the
Fund, under the Investment Company Act of 1940, by
reason of being affiliated with the Advisor.
Compensation Table
<TABLE>
<S> <C> <C> <C> <C>
Pension or Total
Retirement Compensation
Benefits Estimated From
Aggregate Accrued Annual Registrant
Compensation as Part Benefits and Fund
Name of Person, From Registrant of Fund Upon Complex Paid
Position (Director's Fee) Expenses Retirement to Directors
Richard T. Coghlan-0- -0- -0- -0-
President and
Director
Howard W. Gross $2,000 -0- -0- $2,000
Director
Stephen Michael $2,000 -0- -0- $2,000
Alexander
Director
Lee G. Fishman $2,000 -0- -0- $2,000
Director
</TABLE>
The Fund will pay directors, except Dr.
Coghlan, fees of $2,000 per year as shown above,
plus reimbursement of expenses of attending
meetings of the Board.
PRINCIPAL HOLDERS OF SECURITIES
As of the date of the prospectus, the
officers and directors of the Fund, as a group,
owned less than 1% of the outstanding shares of
either Portfolio.
INVESTMENT MANAGEMENT SERVICES
Under the Management Agreements with the
Fund, the Advisor is responsible for supervising
and directing the investments of the Portfolios in
accordance with the Portfolio's investment
objectives, policies and restrictions. Dr.
Coghlan, President of the Advisor, is also
responsible for placing all security transactions
of the Portfolios, and negotiation of commissions
where possible.
In transactions on U.S. stock exchanges,
commissions are negotiated. Traditionally,
commission rates have generally not been
negotiated on foreign stock markets. In recent
years, however, an increasing number of foreign
stock markets have adopted systems of negotiated
rates, although a number of markets continue to
operate with schedules of minimum commission
rates. In the case of securities traded in the
over-the-counter markets, there is generally no
stated commission, but the security price usually
includes a markup. In underwritten offerings, the
price includes a disclosed, fixed commission.
It is expected that securities will
ordinarily be purchased in the primary markets for
the securities, whether over-the-counter or
listed, and that listed securities may be
purchased in the over-the-counter market if such
market is deemed, by the Advisor, the primary
market.
In purchasing and selling portfolio
securities, the Advisor seeks to obtain quality
execution at the most favorable prices through
responsible broker-dealers and, in the case of
agency transactions, at competitive commission
rates. Commission rates are checked for
competitiveness by reference to rates paid by
other institutional investors similar to the Fund.
The Advisor will consider such factors as the
price of the security, the rate of the commission,
the size and difficulty of the order, the
reliability, integrity, financial condition,
general execution and operational capabilities of
competing broker-dealers, and the brokerage and
research services they provide to the Advisor or
the Fund.
The Advisor may cause the Fund to pay a
broker-dealer who furnishes brokerage and/or
research services a commission for executing a
transaction that is in excess of the commission
another broker would have charged for executing
the transaction if the Advisor determines in good
faith that the commission is reasonable in
relation to the value of the brokerage or research
services provided. The Advisor may effect
principal transactions on behalf of the Portfolios
with dealers who furnish research services and
designate any such dealer to receive selling
concessions, discounts or other allowances in
connection with the acquisition of securities in
underwritings.
The Advisor receives a wide range of
research services from brokers and dealers
covering investment opportunities throughout the
world, including information on economies,
industries, groups of securities, individual
companies, statistics, political developments,
technical market action, pricing and appraisal
services, and performance analyses of all the
countries in which the Portfolios are likely to
invest. Each year, the Advisor assesses the
contribution of the brokerage and research
services provided by broker-dealers, and allocates
a portion of the brokerage business of its
clients, including the Fund, on the basis of these
assessments. In no instance is a broker or dealer
excluded from receiving business because it has
not been identified as providing research
services.
The Investment Management Agreements between
the Advisor and the Fund were approved by the
Portfolios' initial shareholders on October 18
[November 8], 1995 and became effective on
November 1, 1995 [the same date]. The
agreements require the Advisor to provide the
Portfolios with a continuous review of and
recommendations regarding investment of their
assets. The agreements continue in full force
until October 31 [November 7], 1997, and
may be continued thereafter from year to year if
renewed annually by a majority vote of the Board
of Directors of the Fund, or by a vote of the
holders of a majority of the outstanding voting
securities of the Portfolios, but in either case,
in order to effect any such continuance the terms
of the agreement must also be approved by a
majority vote, cast in person, of those Fund
Directors who are not parties to the agreement or
interested persons of any such party, as defined
by the Investment Company Act of 1940, at a
meeting called for the purpose of considering the
approval of the agreement. The agreement
terminates automatically if it is transferred or
assigned by either party, which would include a
change of control of the Advisor, and may be
terminated by either party without penalty on 60
days written notice.
SALE OF FUND SHARES
The Fund makes a continuous offering of its
shares, but retains the right to reject any offer
to purchase its shares.
The net asset value per share of each
Portfolio is calculated as of the close of trading
on the NYSE on each day the NYSE is open for
trading. The NYSE is closed on the following days:
New Year's Day, Washington's Birthday, Good
Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day, and the Fund
does not accept purchase or redemption orders on
these days.
Trading in securities owned by the
Portfolios may take place in various foreign
markets on days (such as Saturday) when the Fund
is not open for business and does not calculate
the net asset value of the Portfolios. Events
affecting the values of foreign portfolio
securities that occur after the markets for these
securities are closed but before the time the
Portfolios' net asset values are calculated will
not be reflected in the Portfolios' net asset
values unless the Advisor, in accordance with
policies adopted by the Board of Directors,
determines that the particular event should be
taken into account in computing the Portfolio's
net asset value, in which case the affected
securities would be valued in good faith, at fair
value.
Determination of net asset value (and the
offering and redemption price of shares) of the
Portfolios may be suspended when (a) the NYSE is
closed, other than customary weekend and holiday
closings, (b) trading on the NYSE is restricted
(c) an emergency exists as a result of which
disposal of securities owned by a Portfolio is not
reasonably practicable or it is not reasonably
practicable for the Portfolio fairly to determine
the value of its net assets, or (d) when the SEC
may, by order, permit for the protection of a
Portfolio's shareholders.
DISTRIBUTION
The Board of Directors of the Fund and
stockholders of each Portfolio approved a
Distribution Plan in accordance with Rule 12b-1
under the Investment Company Act of 1940 (the
"Plan") which provides for payment by each
Portfolio of expenses related to the distribution
of Fund shares and shareholder services. Under
the Plan each Portfolio makes monthly payments of
1/48th of 1% of the net asset value of the
Portfolio (.25% on an annual basis) based on the
net asset value of the Portfolio.
The Plan remains in effect until October 31
[November 7], 1996 and may be continued for
one year terms if approved at least annually by a
majority vote, cast in person, of both the Board
of Directors and Disinterested Directors of the
Fund, at a meeting called for the purpose of
voting on the Plan. The Plan may be terminated at
any time, without penalty, by a vote of a majority
of the Fund's disinterested directors, or by vote
of a majority of the outstanding voting securities
of the Portfolios. The Plan terminates
automatically in the event of an "assignment" of
the Plan as defined in section 2(a)(4) of the
Investment Company Act of 1940. Also while the
Plan remains in effect the nomination of the
Disinterested Directors of the Fund is committed
to the discretion of such Directors.
The Board of Directors believe there is a
reasonable likelihood that the Plan will benefit
the Portfolios and their shareholders by promoting
the sale of shares and encouraging the retention
of shares by holders. The benefits that would
accrue to the Portfolios by an increase in the
level of sales of shares are an enhanced ability
to expand investment opportunities with increased
cash and certain costs of operation would be
decreased in proportion to the size of the Portfolio.
TAX STATUS
Each Portfolio intends to qualify as a
"regulated investment company" under Subchapter M
of the Internal Revenue Code of 1986, as amended
("Code"). In order to so qualify, a Portfolio
must, among other things, (i) derive at least 90%
of its gross income from dividends, interest,
payments with respect to certain securities loans,
gains from the sale of securities or foreign
currencies, or other income (including but not
limited to gains from options, futures or forward
contracts) derived with respect to its business of
investing in such stock, securities or currencies;
(ii) derive less than 30% of its gross income from
the sale or other disposition of stock or
securities or certain futures and options thereon
held for less than three months ("short-short
gains"); (iii) distribute at least 90% of its
dividend, interest and certain other taxable
income each year; and (iv) at the end of each
fiscal quarter maintain at least 50% of the value
of its total assets in cash, government
securities, securities of other regulated
investment companies and other securities of
issuers which represent, with respect to each
issuer, no more than 5% of the value of a
Portfolio's total assets and 10% of the
outstanding voting securities of such issuer, and
with no more than 25% of its assets invested in
the securities (other than those of the government
or other regulated investment companies) of any
one issuer or of two or more issuers which the
Portfolio controls and which are engaged in the
same, similar or related trades and businesses.
To the extent each of the Portfolios
qualifies for treatment as a regulated investment
company, they will not be subject to federal
income tax on income and net capital gains paid to
shareholders in the form of dividends or capital
gains distributions.
An excise tax at the rate of 4% will be
imposed on the excess, if any, of each Portfolio's
"required distributions" over actual distributions
in any calendar year. Generally, the "required
distribution" is 98% of a Portfolio's ordinary
income for the calendar year, plus 98% of its
capital gain net income recognized during the one-
year period ending on October 31, plus
undistributed amounts from prior years. The
Portfolios intend to make distributions sufficient
to avoid imposition of the excise tax.
Distributions declared by the Funds during
October, November or December to shareholders of
record during such month and paid by January 31 of
the following year will be taxable to shareholders
in the calendar year in which they are declared,
rather than the calendar year in which they are
received.
Gains or losses attributable to fluctuations
in exchange rates which occur between the time a
Portfolio accrues interest or other receivables or
accrues expenses or liabilities denominated in a
foreign currency and the time the Portfolio
actually collects such receivables, or pays such
liabilities, are generally treated as ordinary
income or loss. Similarly, a portion of the gains
or losses realized on disposition of debt
securities denominated in a foreign currency may
also be treated as ordinary gain or loss. These
gains, referred to under the Code as "Section 988"
gains or losses, may increase or decrease the
amount of a Portfolio's investment company taxable
income to be distributed to its shareholders,
rather than increasing or decreasing the amount of
the Portfolio's capital gains or losses.
When a Portfolio writes a call, or purchases
a put option, an amount equal to the premium
received or paid by it is included in the
Portfolio's assets and liabilities as an asset and
as an equivalent liability.
In writing a call, the amount of the
liability is subsequently "marked-to-market" to
reflect the current market value of the option
written. The current market value of a written
option is the last sale price on the principal
Exchange on which such option is traded or, in the
absence of a sale, the mean between the last bid
and asked prices. If an option which a Portfolio
has written expires on its stipulated expiration
date, the Portfolio recognizes a short-term
capital gain. If a Portfolio enters into a
closing purchase transaction with respect to an
option which the Portfolio has written, the
Portfolio realizes a short-term gain (or loss if
the cost of the closing transaction exceeds the
premium received when the option was sold) without
regard to any unrealized gain or loss on the
underlying security, and the liability related to
such option is extinguished. If a call option
which a Fund has written is exercised, the
Portfolio realizes a capital gain or loss from the
sale of the underlying security and the proceeds
from such sale are increased by the premium
originally received.
The premium paid by a Portfolio for the
purchase of a put option is recorded in the
Portfolio's statement of assets and liabilities as
an investment and is subsequently adjusted daily
to the current market value of the option. For
example, if the current market value of the option
exceeds the premium paid, the excess would be
unrealized appreciation and, conversely, if the
premium exceeds the current market value, such
excess would be unrealized depreciation. The
current market value of a listed option is the
last sale price on the principal Exchange on which
such option is traded or, in the absence of a
sale, the mean between the last bid and asked
prices. If an option which a Portfolio has
purchased expires on the stipulated expiration
date, the Portfolio realizes a capital loss for
federal income tax purposes equal to the cost of
the option. If a Portfolio exercises a put
option, it realizes a capital gain or loss (long-
term or short-term, depending on the holding
period of the underlying security) from the sale
which will be decreased by the premium originally
paid.
The amount of any realized gain or loss on
closing out an option on an index future will
result in a realized gain or loss for tax
purposes. Such options held by a Portfolio at the
end of each fiscal year on a broad-based stock
index will be required to be "marked-to-market"
for federal income tax purposes. Sixty percent of
any net gain or loss recognized on such deemed
sales or on any actual sales will be treated as
long-term capital gain or loss and the remainder
will be treated as short-term capital gain or
loss. Certain options, futures contracts and
options on futures contracts utilized by the
Portfolios will be "Section 1256 contracts." Any
gains or losses on Section 1256 contracts held by
a Portfolio at the end of each taxable year (and
on October 31 of each year for purposes of the 4%
excise tax) are "marked-to-market" with the result
that unrealized gains or losses are treated as
though they were realized and the resulting gain
or loss is treated as a 60/40 gain or loss.
Dividends eligible for designation under the
dividends received deduction and paid by a
Portfolio will qualify in part for the 70%
dividends received deduction for corporations
provided, that the Portfolio shares have been held
for at least 45 days.
The Portfolios will notify shareholders each
year of the amount of dividends and distributions,
including the amount of any distribution of long-
term capital gains and the portion of its
dividends which may qualify for the 70% deduction.
It is expected that certain dividends and
interest received by the Portfolios will be
subject to foreign withholding taxes. If more
than 50% in value of the total assets of a
Portfolio at the close of any taxable year
consists of stocks or securities of foreign
corporations, such fund may elect to treat any
foreign taxes paid by it as if paid by its
shareowners. The Portfolios will notify
shareowners in writing each year whether they have
made the election and the amount of foreign taxes
it has elected to have treated as paid by the
shareowners. If they make the election, its
shareowners will be required to include in gross
income their proportionate share of the amount of
foreign taxes paid by the Portfolios and will be
entitled to claim either a credit or deduction for
their share of the taxes in computing their U.S.
federal income tax subject to certain limitations.
No deduction for foreign taxes may be claimed by
shareowners who do not itemize deductions.
Generally, a credit for foreign taxes is
subject to the limitation that it may not exceed
the shareowner's U.S. tax attributable to his or
her total foreign source taxable income. For this
purpose, the source of each Portfolio's income
flows through to its shareowners. Gains from the
sale of securities will be treated as derived from
U.S. sources and certain currency fluctuation
gains, including fluctuation gains from foreign
currency denominated debt securities, receivables
and payables, will be treated income derived from
U.S. sources. The limitation on the foreign tax
credit is applied separately to foreign source
passive income (as defined for purposes of foreign
tax credit) such as foreign source passive income
received from the respective Portfolio. Because
of changes made by the Code, shareowners may be
unable to claim a credit for the full amount of
their proportionate share of the foreign taxes
paid by the Portfolios.
Shareholders may be subject to a 30% [31%]
withholding tax on the dividends, distributions
and redemption payments ("back-up withholding") if
their certified taxpayer identification number is
not on file with the Fund or if, to the Fund's
knowledge, the shareholder has furnished an
incorrect number.
The foregoing is a general and abbreviated
summary of the applicable provisions of the Code
and Treasury regulations currently in effect. For
the complete provisions, reference should be made
to the pertinent Code sections and regulations.
The Code and regulations are subject to change by
legislative or administrative action at any time
and retroactively.
Shareholders are urged to consult their tax
advisors regarding specific questions as to
federal, state and local taxes as well as the
application of the foreign tax credit.
The foregoing discussion relates solely to
U.S. federal income tax law. Non-U.S. investors
should consult their tax advisors concerning the
tax consequences of ownership of shares of the
Funds, including the possibility that
distributions may be subject to a 30% United
States withholding tax (or a reduced rate of
withholding provided by treaty).
95960.3<PAGE>
[FINANCIAL STATEMENT
TAIT, WELLER & BAKER
Certified Public Accountants
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
S.I.S. Mercator Fund, Inc.
Wayne, Pennsylvania
We have audited the accompanying statement of
assets and liabilities of S.I.S. mercator Fund,
Inc. (comprising, respectively, the Global Equity
Portfolio and the Global Income Portfolio) as of
November 8, 1995. This financial statement is the
responsibility of the Fund's management. Our
responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with
generally accepted auditing standards. Those
standards require that we plan and perform the
audit to obtain reasonable assurance about whether
the statement of assets and liabilities is free of
material misstatement. An audit includes
examining on a test basis, evidence supporting the
amounts and disclosures in the statement of assets
and liabilities. An audit also includes assessing
the accounting principles used and significant
estimates made by management, as well as
evaluating the overall financial statement
presentation. We believe that our audit of the
statement of assets and liabilities provides a
reasonable basis for our opinion.
In our opinion, the statement of assets and
liabilities referred to above presents fairly, in
all material respects, the financial position of
the Global Equity Portfolio and the Global Income
Portfolio as of November 8, 1995, in conformity
with generally accepted accounting principles.
/s/Tait, Weller & Baker
Philadelphia, Pennsylvania
November 8, 1995<PAGE>
S.I.S. MERCATOR FUND, INC.
Statement of Assets and Liabilities
November 8, 1995
<TABLE>
<S> <C> <C>
Global Global
Equity Income
Portfolio Portfolio
ASSETS
Cash $100,000 $50,000
Prepaid registration fees 2,300 2,300
Deferred organization expe
nse (Note 2B) 28,750 28,750
Total assets 131,050 81,050
LIABILITIES
Due to East Coast for expen
ses advanced (Note 2B) 27,800 27,800
Accrued expenses 3,250 3,250
Total liabilities 31,050 31,050
NET ASSETS (Note 3) $100,000 $50,000
Net asset value,
offering and redemption
price per share $10.00 $10.00
At November 8, 1995 the
components of
net assets were as follows:
Paid-in capital $100,000 $50,000
</TABLE>
See notes to statement of
assets and liabilities <PAGE>
S.I.S. MERCATOR FUND, INC.
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
November 8, 1995
(1) ORGANIZATION
S.I.S. Mercator Fund, Inc. (formerly Navigator
Fund, Inc.) (the "Fund"), is registered under the
Investment Company Act of 1940, as amended (the
"1940 Act"), as an open-end management investment
company and is authorized to issue shares in
separate series. The Fund currently offers shares
in two diversified series, the Global Equity
Portfolio and the Global Income Portfolio (the
"Portfolios").
The Fund was incorporated on July 6, 1995, and
between that date and November 8, 1995 the Fund
had no operations other than those relating to
organizational matters and the registration of its
shares under applicable securities laws. On
November 8, 1995 the Fund sold 10,000 shares of
the Global Equity Portfolio for $100,000 and 5,000
shares of the Global Income Portfolio for $50,000
(the "Initial Shares") to Richard T. Coghlan, an
Officer and director of the Fund and principal
shareholder of East Coast Consultants, Inc. ("East
Coast"), the Fund's principal underwriter and a
general partner of Strategic Investment Services
("Strategic"), the Fund's investment advisor.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant
accounting policies followed by the Portfolios in
the preparation of their financial statements.
These policies are in accordance with generally
accepted accounting principles.
A. Federal Income Taxes. The Portfolios intend
to comply with the requirements of the
Internal Revenue Code applicable to
regulated investment companies and to
distribute all of their taxable income to
their shareholders. Therefore, no federal
income tax provision is required.
B. Deferred Organization Expenses. All of the
expenses incurred by the Fund in connection
with the organization and the registration
of the Portfolios' shares were borne equally
by each Portfolio and are being amortized to
expense on a straight-line basis over a
period of five years. Certain of the Fund's
organization expenses were advanced by East
Coast which the Fund will reimburse after
operations commence.
(3) CAPITAL STOCK
At November 8, 1995, the authorized capital of the
Fund consisted of one billion shares of $.01 par
value common stock with 100 million shares
designated and classified the Global Equity
Portfolio and 100 million shares designated and
classified the Global Income Portfolio.
<PAGE>
S.I.S. MERCATOR FUND, INC
NOTES TO STATEMENT OF ASSETS AND LIABILITIES -
(Continued)
November 8, 1995
(4) INVESTMENT MANAGEMENT FEE AND ADMINISTRATION FEE
Investment Advisory Agreement. Strategic provides
investment management services to each of the
Portfolios under an Investment Advisory Agreement.
Strategic provides the Portfolios with continuous
investment programs, a trading department, and
selects brokers and dealers to effect securities
transactions. As compensation for its services
Strategic is paid a monthly fee which is equal to
the annual rate of 0.90% of each Portfolio's
average daily net assets.
Administration Agreement. Strategic also serves
as the Administrator of the Fund under an
Administration Agreement. The services include
the administration of the Fund's business affairs,
supervision of services provided by other
organizations providing services to the Fund,
including the custodian, dividend disbursing
agent, legal counsel and independent accountants,
preparation of certain Fund records and documents,
record keeping and accounting services. As
compensation for these services Strategic is paid
a monthly fee which is equal to the annual rate of
0.25% of each Portfolio's average daily net
assets.
(5) DISTRIBUTION PLANS
Distribution Plan. The Portfolios have adopted
Distribution Plans pursuant to rule 12b-1 under
the '40 Act, whereby each Portfolio may make
monthly payments at the annual rate of 0.25% of
each Portfolio's average net assets to East Coast
for providing certain distribution services.
These services can include: promotion of the sale
of Portfolio shares, preparation of advertising
and promotional materials, payment of compensation
to persons who have been instrumental in the sale
of Portfolio shares, and for other services and
materials, including the cost of printing Fund
prospectuses, reports and advertising material
provided to investors, and to defray overhead
expenses of East Coast incurred in connection with
the promotion and sale of Fund shares.
Shareholder Services Plan. The Portfolios have
also adopted Shareholder Services Plans (the
"Plans") which are designed to promote the
retention of shareholder accounts. Under these
Plans, the Portfolios are authorized to pay East
Coast a monthly fee which, on an annual basis, may
not exceed 0.25% of the average net assets of each
Portfolio. Payments under the Plans would be
used, among other things, to compensate persons
and/or organizations that provide services to
shareholders that are designed to encourage them
to maintain their investments in the Portfolios.
(6) OTHER TRANSACTIONS WITH AFFILIATES
Certain officers and directors of the Fund are
also officers and/or directors of Strategic and
East Coast.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
** [Statement of Assets and Liabilities as of
November 8, 1995 and Report of Independent
Accountants***]
(b) Exhibits
(1) Articles of Incorporation*
(i) Amendment to Articles of Incorporation
(2) By-Laws*
(3) None
(4) (i) Specimen Security of The Global Equity
Portfolio*
(ii) Specimen Security of The Global
Income Portfolio*
(5) (i) Investment Advisory Agreement re the
Global Equity Portfolio*
(ii) Investment Advisory Agreement re the
Global Income Portfolio*
(6) Agreement with East Coast Consultants,Inc.*
(7) None
(8) (i) Custody Agreement with Bank of
California, N.A. [*]
(9) (i) Administration Agreement - Global
Equity Portfolio*
(ii) Administration Agreement - Global
Income Portfolio*
(iii) Transfer Agency Agreement*
(iv) Shareholder Service Plan*
(10) Opinion of counsel - to be filed with Rule
24f-2 Notice
(11) Consent of Independent Accountants**
(12) Not applicable
(13) Subscription Agreement under Section
14(a)(3)of Investment Company Act of 1940
(14) None
(15) Distribution Plan*
(16) Schedule for computation of performance
quotations [**
(17) Financial Data Schedule]
*Previously filed with original registration
statement on
July 28, 1995.
**To be filed by amendment.
[***Included in Statement of Additional
Information.]
Item 25. Persons Controlled by or Under Common
Control with
Registrant
None [As of November 8, 1995,
Richard T. Coghlan, Chairman of the
Registrant and principal of the
investment advisor and distributor was
the sole shareholder of the
Registrant.]
Item 26. Number of Holders of Securities
(1)
(2)
Number
of Record Holders
Title of Class as of October
18 [November 8] , 1995
Par Value $.01
[Global Equity Portfolio]
1
[Global Income Portfolio
2]
Item 27. Indemnification
Section 1 of Article XI of the
Registrant's By-Laws provides for
indemnification, as set forth below.
With respect to the indemnification of
the Officers and Directors of the
corporation:
(a) the Corporation shall
indemnify each Officer and Director
made party to a proceeding, by reason
of service in such capacity, to the
fullest extent, and in the manner
provided under Section 2-418 of the
Maryland General Corporation Law: (i)
unless it is proved that the person
seeking indemnification did not meet
the standard of conduct set forth in
subsection (b)(1) of such section; and
(ii) provided, that the Corporation
shall not indemnify any Officer or
Director for any liability to the
Corporation or its security holders
arising from the willful misfeasance,
bad faith, gross negligence or
reckless disregard of the duties
involved in the conduct of such
person's office.
(b) The provisions of clause
(i) of paragraph (a) herein
notwithstanding, the Corporation shall
indemnify each Officer and Director
against reasonable expenses incurred
in connection with the successful
defense of any proceeding to which
such Officer or Director is a party by
reason of service in such capacity.
(c) The Corporation, in the
manner and to the extent provided by
applicable law, shall advance to each
Officer and Director who is made party
to a proceeding by reason of service
in such capacity the reasonable
expenses incurred by such person in
connection therewith.
Item 28. Business and Other Connections of
Investment Advisor
Registrant's Investment Advisor (the
"Advisor") was organized in March,
1989. The principal place of business
of the Advisor is 1325 Morris Drive,
Suite 203, Wayne, PA 19087. The
Advisor is engaged in the business of
providing investment advice and will
provide registrant with administrative
and transfer agency services.
The business, profession, vocation or
employment of a substantial nature in
which each officer of the Advisor is
or has been, during the past two
fiscal years, engaged for his own
account in the capacity of director,
officer, employee, partner or trustee
is as follows:
Dr. Richard T. Coghlan, Chief
Executive and Investment Officer of
the Advisor.
Brian R. Cassidy, investment
accountant of the Advisor since May,
1994, was previously a tax accountant
with the Internal Revenue Service.
Elliot C. Kauffman, a Senior
Investment Manager of the Advisor
since April, 1994, was previously a
Financial Auditor for McGraw-Hill,
Inc.
Item 29. Principal Underwriters
(a) East Coast Consultants, Inc.,
1325 Morris Drive, Suite 203,
Wayne, PA 19087.
(b) See response to item 28, which
is incorporated herein by
reference.
(c) None.
Item 30. Location of Accounts and Records
Accounts and records are maintained by
the Advisor at the address set forth
in response to item 28 and the
custodian at 475 Sansome Street, San
Francisco, CA 94111.
Item 31. Management Services
Registrant has entered into
Administration Agreements with the
Advisor which have been filed as
Exhibits 9(i) and (ii) to this
Registration Statement. Such services
are described in Part A hereof under
"Fund Administration."
Item 32. Undertakings
(a) Registrant hereby undertakes to
file an amendment to the
Registration Statement with
certified financial statements
showing the initial capital
received before accepting
subscriptions from any persons
in excess of 25.
(b) Registrant undertakes to file a
post-effective amendment using
uncertified financial statements
within four to six months from
the effective date of the
registration statement.
(c) Registrant undertakes, if
requested to do so by the
holders of at least 10% of its
outstanding shares, to call a
meeting of shareholders for the
purpose of voting on the
question of removal of a
director or directors, and to
assist in communications with
other shareholders as required
by section 16(c) of the
Investment Company Act of 1940.
<PAGE>
PART C
EXHIBIT LIST
EXHIBIT
PAGE
(1) Amendment No. 1 to Articles of
Incorporation
(2) Custody Agreement with Bank of California,
N.A. [Financial Data Schedule
Global Equity Portfolio
Global Income Portfolio
(2) Consent of Independent Accountants
(3) Subscription Agreement
under Section 14(a)(3) of
the Investment Company Act
of 1940
<PAGE>
Financial Data Schedule
THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM REGISTRANT'S
STATEMENT OF ASSETS AND LIABILITIES AS OF NOVEMBER
8, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH STATEMENT.
<TABLE>
<S> <C>
Global Equity Portfolio
Investment-cost 0
Investments 0
Receivables 0
Other assets $131,050
Balancing amount to total assets 0
Total assets 131,050
Accounts payable for securities 0
Senior long-term debt 0
Balancing amount to total liabilities 31,050
Total liabilities 31,050
Senior equity securities 0
Paid-in-capital-common shareholders $100,000
Number of shares or units- current period 10,000
Number of shares or units- prior period 0
Accumulated undistributed net
investment income (current year) 0
Over distribution of net
investment income 0
Accumulated undistributed net
realized gains (losses) 0
Over distribution of realized gains 0
Accumulated net unrealized
appreciation (depreciation) 0
Net assets 0
Dividend income 0
Interest income 0
Other income 0
Expenses-net 0
Net investment income (loss) 0
Realized gains (losses) on investments 0
Net increase (decrease) in
appreciation (depreciation) 0
Net increase (decrease) in net
assets resulting from operations 0
Net equalization charges and credits 0
</TABLE>
-1-<PAGE>
Financial Data Schedule
THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM REGISTRANT'S
STATEMENT OF ASSETS AND LIABILITIES AS OF NOVEMBER
8, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH STATEMENT.
Global Income Portfolio
<TABLE>
<S> <C>
Investment-cost 0
Investments 0
Receivables 0
Other assets 81,050
Balancing amount to total assets 0
Total assets 81,050
Accounts payable for securities 0
Senior long-term debt 0
Balancing amount to total liabilities 31,050
Total liabilities 31,050
Senior equity securities 0
Paid-in-capital-common shareholders 50,000
Number of shares or units-current period 5,000
Number of shares or units-prior period 0
Accumulated undistributed net
investment income (current year) 0
Over distribution of net
investment income 0
Accumulated undistributed net
realized gains (losses) 0
Over distribution of realized gains 0
Accumulated net unrealized
appreciation (depreciation) 0
Net assets 0
Dividend income 0
Interest income 0
Other income 0
Expenses-net 0
Net investment income (loss) 0
Realized gains (losses) on investments 0
Net increase (decrease) in
appreciation (depreciation) 0
Net increase (decrease) in net
assets resulting from operations 0
Net equalization charges and credits 0
</TABLE>
-2-<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS
We have issued our report dated November
8, 1995 accompanying the November 8, 1995
Statement of Assets and Liabilities of
S.I.S. Mercator Fund, Inc. (comprising,
respectively, the Global Equity Portfolio
and the Global Income Portfolio) which is
included in Part C of Post-Effective
Amendment No. 1 to this Registration
Statement and Prospectus. We consent to the
use of the aforementioned report in the
Registration Statement and Prospectus.
TAIT,
WELLER & BAKER
Philadelphia, Pennsylvania
November 16, 1995]
[AGREEMENT
This Agreement is made this 8th day of
November, 1995 among S.I.S. Mercator Fund, Inc., a
Maryland corporation (the "Fund"), and Richard T.
Coghlan ("Coghlan"), an individual residing at
Villanova, Pennsylvania.
W I T N E S S E T H:
WHEREAS, the Fund is comprised of two
classes of shares, designated the Global Equity
Portfolio and the Global Income Portfolio,
respectively ("Portfolios"), and
WHEREAS, Coghlan desires to acquire
shares of the Fund as provided herein.
NOW, THEREFORE, intending to be
legally bound, the parties agree as follows:
1. The Fund shall provide Coghlan
with copies of its registration statement filed
with the Securities and Exchange Commission under
the Investment Company Act of 1940 and the
Securities Act of 1933 ("Registration Statement").
2. Coghlan shall contribute cash in
the amount of $150,000 to the capital of the Fund.
$100,000 will be contributed to the Global Equity
Portfolio and $50,000 to the Global Income
Portfolio.
3. In consideration of the
contribution described in Section 2 above, the
Fund shall issue shares of common stock of the
Portfolios so designated at a purchase price per
share equal to the net asset value per share of
the Portfolios, calculated in the manner described
in the Registration Statement. For the purpose of
the initial issuance of shares, the purchase price
shall be $10.00 per share. The shares will not be
registered under the Securities Act of 1933, as
amended ("Act"), on the basis of an exemption from
registration set forth in section 4(2) of the Act
and may not be sold or transferred in absence of
registration under the Act except in a transaction
which is exempt from registration. The foregoing
restriction on transferability does not prohibit
redemption of the shares as provided in the
registration statement.
4. The Fund hereby represents and
warrants to Coghlan that upon issuance, on the
terms provided herein, the shares of the
Portfolios issued hereunder shall be duly and
validly issued, legally outstanding shares of
common stock of the Fund.
5. Coghlan represents and warrants
that he is buying the shares for investment and
has no present intention to sell or redeem the
shares.
IN WITNESS WHEREOF, the parties have
executed this Agreement as of the date first
written above.
S.I.S.
Mercator
Fund,
Inc.
Attest: ___________ By:
_________
Secretary President
Witness:_______________________
______________________________
Richard
T. Coghlan
-2- <PAGE>
Signatures
Pursuant to the requirements of the
Securities Act of 1933 and the Investment Company
Act of 1940, the Registrant, S.I.S. Mercator Fund,
Inc., tifies that it meets all of the
requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b)
under the Securities Act of 1933 and] duly
caused this Amendment No. 1 to the Registration
Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in
Tredyffrin Township, and the Commonwealth of
Pennsylvania on the 20th] day of October
[November] , 1995.
S.I.S.
Mercator Fund, Inc.
By:
[/s/Richard T. Coghlan]
Richard T. Coghlan,
President
Pursuant to the requirements of the
Securities Act of 1933, this Amendment No. 1 to
the Registration Statement has been signed below
by the following persons in the capacity and on
the date indicated.
Signature Title
Date
President,
October [November 20] , 1995
[/s/Richard T. Coghlan] Principal
Executive
Richard T. Coghlan Officer and Director
Treasurer,
October [November 20] , 1995
[/s/Elliot C. Kauffman] Principal
Elliot C. Kauffman Financial Officer
Director October
, [November 20,] 1995
Howard W. Gross
[/s/Stephen Michael Alexander] Director October
, [November 20,] 1995
Stephen Michael Alexander
[/s/Lee G. Fishman] Director
October , [November 20,] 1995
Lee G. Fishman
98770.1
