East Coast Consultants, Inc.
1325 Morris Drive, Suite 203
Wayne, PA 19087
(610) 640-2150
1933 Act Rule 485(b)
1933 Act File No. 33-95102
1040 Act File No. 811-9078
February 28, 1997
FILED via EDGAR
Filing Desk
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: S.I.S. Mercator Fund Inc.
File Nos. 33-95102 and 811-9078
Gentlemen:
Pursuant to Rule 485(b) under the Securities Act of 1933, submitted
electronically via the EDGAR system, please find Post-Effective Amendment No.
3 ("Amendment") to the Registration Statement of S.I.S. Mercator
Fund, Inc.(the "Fund") under the Securities Act of 1933.
The purpose of this filing is to include in the Registration, audited
financial statements for the fiscal year ended October 31, 1996 and to
update certain other information which does not relect material changes.
Please direct questions or comments relating to this filing to me at the
above referenced telephone number.
Sincerely,
Richard T. Coghlan
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. [3] File No. 33-95102 X
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. [4] 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.
It is proposed that this filing will become effective
(check appropriate box):
[/X /] 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 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. Registrant has filed 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.
FORM N-1A
CROSS REFERENCE SHEET
(as required by Rule 481)
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.... Financial
Highlights
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............... Financial Statements
FORM N-1A PART C ITEM NO. LOCATION IN PART C
Item 24. Financial Statements and Exhibits.. 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................ None
S.I.S. Mercator Fund, Inc.
1325 Morris Drive, Suite 203
Wayne, Pennsylvania 19087
Telephone: 610-993-0670
PROSPECTUS
February 28, 1997 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 seek a rate of total return 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 February 28, 1997 ,
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.
TABLE OF CONTENTS
Prospectus Summary............................. 3
Fund Expenses .............................. 3
Financial Highlights....................... 4
Investment Objectives & Policies............... 5
Policy Overview................................ 5
The Global Equity Portfolio.................... 6
The Global Income Portfolio.................... 6
Fixed Income Securities........................ 7
Foreign Currency Transactions.................. 7
Borrowing and Lending.......................... 7
Futures Contracts and Options.................. 8
Investment Risks............................... 8
Management of the Fund......................... 9
Fund Administration............................ 9
Shareholder Services........................... 9
Distribution of Fund Shares.................... 10
Price of Portfolio Shares...................... 10
Purchase of Shares............................. 10
Exchange of Shares............................. 11
Dividends, Distribution & Taxes................ 12
Redemption of Shares........................... 13
Performance Calculations....................... 14
General Information............................ 14
No dealer, salesman or other person has been
authorized to give any information or to make
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
of any offer to buy in any state to any person
to whom it is unlawful to make such offer in
such state.
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
(sometimes referred to as GEP), 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 (sometimes referred to as GIP),
which seeks a rate of total return 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 5 .)
Investment Advisor
Strategic Investment Services, Inc.
is the Investment Advisor to both portfolios of the fund.
East Coast Consultants, Inc. serves as distributor of the Fund's
shares. (See pages 9 and 10 .)
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 8. )
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 10-13 .)
Share Exchanges
Investors may exchange shares of one
Portfolio for those of the other
Portfolio, without payment of a fee.
(See page 11 .)
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)
GEP GIP
Management Fee .................. 0.90% 0.90%
Other Expenses.................. 0.91% 0.94%
12b-1 Fee........................... 0.01% 0.00%
Total Fund Operating Expenses.....1.82% 1.84%
For a description these expenses, see pages 9-10
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.
Global Equity Portfolio
1 year 3 years 5 years 10 years
18 57 99 214
Global Income Portfolio
1 year 3 years 5 years 10 years
19 58 100 216
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 actual expenses as a
percentage of its average annual assets for the fiscal year ending
October 31, 1996, the initial fiscal year of Fund investment
operations. For more detailed
information, see "The Advisor," the "Administrator," "Shareholder
Services" and "Distribution of Fund Shares."
Financial Highlights
The following table sets forth the per share operating performance data
for a share of capital stock outstanding, total return, ratios to average
net assets and other supplemental data for the year indicated. This
information has been derived from information provided in the Fund's
financial statements which have been audited by Tait, Weller & Baker for the
period November 8, 1995 (commencement of operations) to October 31, 1996.
The Fund's Annual Report contains additional financial information and is
available free of charge upon request by calling the Fund at 610-993-2150.
Global Equity Global Income
Portfolio Portfolio
For The Period Ended October 31, 1996
Per Share Data
Net asset value at
beginning of period 10.00 10.00
Income from investment operations:
Net investment income 0.05 0.50
Net realized and
unrealized gain (loss) 0.84 0.26
Total from investment operations 0.89 0.76
Less distributions from net investment
income (0.07) (0.28)
Net asset value at end of period 10.82 10.48
Total Return (1) 8.89% 7.79%
Ratios/Supplemental
Data
Ratio of operating
expenses to average net assets 1.82%(2) 1.84%(2)
Ratio of net investment
income to average net assets 0.40%(2) 4.88%(2)
Portfolio turnover 42% 29%
Average commission rate paid $.0317 n/a
Net assets at end of
period (in thousands) $26,137 $12,870
(1) Total return has not been annualized.
(2) Annualized.
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 seek a rate of total return 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, according 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 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 secu-
rities 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 collateralized 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 , Inc.
("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, certain 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 certain 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. Both are Pennsylvania corporations formed in 1989.
Richard T. Coghlan, President and a director of the Fund, the Distributor
and the Advisor, owns a controlling interest in these
corporations 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
assets, 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
accordance 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, Union Bank of California,
("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, Inc. and the investor's payment has been received by the
Custodian. Share certificates will not be issued by the Fund
except upon the shareholder's written request, which must be
made to the Transfer Agent. 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 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 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.
To order shares for purchase by federal funds wire, the
Transfer Agent must be notified first by calling 610-993-2150 to
obtain an account number and to provide your federal tax
identification number. Following notification, the investor must
have the bank wire transmitted to Union Bank of California
ABA #1210-0001-5 for credit to Union Bank of California Global Custody,
Account #001-054831 for further credit ( S.I.S. Mercator Equity Portfolio
A/C #01643 "or" S.I.S. Mercator Income Portfolio A/C #01644, depending
on the particular Portfolio selected.)
Checks should be made out to S.I.S. Mercator Global Equity Portfolio or S.I.S.
Mercator Global Income Portfolio and mailed to Union Bank of California
Global Custody, 475 Sansome Street, 15th Floor, San Francisco, CA 94111.
Attn: Ingrid Butcher. Separate checks will be required if investing in both
portfolios.
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.
Shares may be purchased in conjunction with an Individual Retirement
Account (IRA). This will require additional forms to be completed which are
available from the Distributor. Shareholders interested in this option need
to give careful consideration to the tax implications and the restrictions
that apply. Interested investors should consult with their tax advisor
before investing.
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, may be legally sold
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 November and 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. Dividends and
distributions paid on shares purchased
shortly before the record date for a dividend or distribution
will have the economic 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 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 and
began operations on November 8, 1995.
As of January 31, 1997, the following entities held more than 25% of
the shares of S.I.S. Mercator Fund: Fox Family Partnership, a
Pennsylvania Limited Partnership, whose sole general partner is
Richard J. Fox of 1325 Morris Drive, Suite 201, Wayne PA 19087,
with a holding of 60%, a percentage sufficient to elect the Board of
Directors of the Fund.
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
Union 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. 1-610-993-2150.
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
February 28, 1997.
TABLE OF CONTENTS
Page
Investment Objectives and Policies. . . . . . . . . . . 1
Fundamental Policies. . . . . . . . . . . . . . . . . . 1
Operating Policies. . . . . . . . . . . . . . . . . . . 2
Writing Listed Covered Call Options . . . . . . . . . . 3
Purchasing Listed Call Options. . . . . . . . . . . . . 4
Purchasing Listed Put Options . . . . . . . . . . . . . 5
Dealer Options. . . . . . . . . . . . . . . . . . . . . 5
Futures Contracts . . . . . . . . . . . . . . . . . . . 6
Lending Portfolio Securities. . . . . . . . . . . . . . 8
Foreign Currency Transactions . . . . . . . . . . . . . 8
Investment Performance. . . . . . . . . . . . . . . . . 9
Management of the Fund. . . . . . . . . . . . . . . . . 10
Principal Holders of Securities . . . . . . . . . . . . 11
Investment Management Services. . . . . . . . . . . . . 11
Sale of Fund Shares . . . . . . . . . . . . . . . . . . 12
Distribution. . . . . . . . . . . . . . . . . . . . . . 13
Tax Status. . . . . . . . . . . . . . . . . . . . . . . 13
Principal Shareholders. . . . . . . . . . . . . . . . . 16
Financial Statements. . . . . . . . . . . . . . . . . . 16
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 annualized total return of the Fund for the period beginning
November 8, 1995 and ending October 31, 1996 was as follows:
Global Equity Portfolio 8.89%
Global Income Portfolio 7.79%
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 30 day yield as of October 31, 1996, of the Fund was as follows:
Global Equity Portfolio 0.1424%
Global Income Portfolio 5.1630%
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 52 . President and
Chairman of the Board of
Directors. Also, President,
director and controlling
stockholder of the Advisor and
Distributor.
Howard W. Gross Age 67 . Director. Business
Consultant, West Palm Beach,
Florida. Previously,
Executive Vice President,
Henkel Corp.
Stephen Michael Alexander Age 46 . Director. Chief
Executive Officer, IHI Alchen,
Inc., Bryn Mawr, Pennsylvania.
Lee G. Fishman Age 43 . Director. President,
BPM Group, Inc., Merion
Station, Pennsylvania.
Elliot C. Kauffman Age 28 . Treasurer and Senior
Investment Manager of the
Advisor.
Brian R. Cassidy Age 32 . 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
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
The Fund pays 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 amounts of such
transactions and related commissions for each Portfolio respectively
was $15,560,530 and $48,906 for the Global Equity Portfolio and
$2,642,348 and $3,485 for the Global Income Portfolio
The Investment Management Agreements between the Advisor and
the Fund were approved by the Portfolios' initial shareholders on
November 8, 1995 and became effective on the same date. As of
June 3, 1996, the predecessor Advisor (Strategic Investment
Services) underwent a reorganization, pursuant to which the
current Advisor assumed the business of the predecessor and the
investment advisory agreements with the current Advisor were
approved by the Board of Directors of the Fund. Richard T.
Coghlan controlled the predecesor Advisor and controls the
current Advisor. The only changes effected by the new agreements
were the commencement date and name of the Advisor. 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
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. The total amounts paid to
the advisor by the Fund under the investment advisory agreements
for the period ending October 31, 1996 (since inception) were
$240,174 for the Global Equity Portfolio and $111,282 for the
Global Income Portfolio.
The advisor also serves as the Administrator and Transfer Agent
of the Fund under an Administration Agreement and Transfer
Agent 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. The total amounts paid to
the advisor for these services for the period ending October 31, 1996
(since inception) were $91,863 for the Global Equity Portfolio and
$46,167 for the Global Income Portfolio.
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 is authorized to make 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.
Payments made to East Coast Consultants as compensation to the
underwriter, for the period ending October 31, 1996, were $2,935 for
the Global Equity Portfolio and $432 for the Global Income Portfolio.
The Plan remains in effect until November 7, 1997 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 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).
PRINCIPAL SHAREHOLDERS
As of January 31, 1997, the following entities held more than 5% of the
shares of the Global Equity Portfolio: Fox Family Partnership, a Pennsylvania
Limited Partnership, whose sole general partner is Richard J. Fox of 1325
Morris Drive, Suite 201, Wayne, PA 19087, with a holding of 87% and Jeffrey
M. & Dominique Reiff of 680 Merion Square Road, Gladwyn, PA 19035 holding 6%.
There were four shareholders with holdings over 5% of the Global Income
Portfolio: the Geraldine D. Fox Foundation with 12%, the Richard J. Fox
Foundation with 49%, the National Organization of Hearing Research with 9%,
and the Institute for Bio-Information Research with 27% all at 1325 Morris
Drive, Suite 201, Wayne, PA 19087.
The directors and officers of the Fund, as a group, own less than 1% of the
outstanding shares of either Portfolio. The Fox Family Partnership and the
Richard J. Fox Foundation have enough votes to control the policies of
both Portfolios whose shares they own and to elect the board of directors.
FINANCIAL STATEMENTS
The audited financial statements of the Fund for its fiscal year ended
October 31, 1996 as set forth in the Fund's Annual Report to Shareholders,
and the report therein of Tait, Weller & Baker, independant accountants,
also appearing therein are incorporated herein by reference.
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
Part A Financial Highlights for each Series of shares of
Registrant
Part B
(1) Statement of Net Assets**
(2) Statement of Operation**
(3) Statement of Changes in Net Assets**
(4) Financial Highlights**
(5) Report of Tait Weller & Baker, dated
November 18, 1996**
(6) Notes to Financial Statements**
(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) (i) Distribution Agreement with East
Coast Consultants, Inc.***
(ii) Dealer Agreement with East Cosat
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 - filed with Rule
24f-2 Notice on December 27, 1996
(11) Consent of Independent Accountant****
(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 *****
(18) None
(19) Financial Statements contained in Annual
Report ot Shareholders, dated October 31, 1996****
* Previously filed with original registration statement on
July 28, 1995.
** The financial statements are contained in the Report to Shareholders
as of October 31, 1996 and are incorporated by reference into the
Statement of Additional Information, except the Financial Highlights,
which are set forth in the prospectus. The financial statements
listed above (other then the financial highlights) are included
with this filing as Exhibit 19
*** Previously filed with origional registration statement on
July 28, 1995, and filed via EDGAR herein.
***** Included with this filing
Item 25. Persons Controlled by or Under Common Control with
Registrant
None
Item 26. Number of Holders of Securities
(1) (2)
Number of Record Holders
Title of Class as of December 31, 1996
Global Equity Portfolio 10
Global Income Portfolio 6
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."
PART C
EXHIBIT LIST
EXHIBIT PAGE
(1) Consent of Independent Accountants
<2) Articles of Incorporation
(3) By-Laws
(4) Investment Advisory Agreement re the
Global Equity Portfolio
(5) Investment Advisory Agreement re the
Global Income Portfolio
(6) Distribution Agreement with East
Coast Consultants, Inc.
(7) Dealer Agreement with East Coast
Consultants, Inc.
(8) Custody Agreement with Bank of
California, N.A.
(9) Administration Agreement - Global
Equity Portfolio
(10) Administration Agreement - Global
Income Portfolio
(11) Transfer Agency Agreement
(12) Shareholder Service Plan
(13) Subscription Agreement under Section 14(a)(3)
of Investment Company Act of 1940
(14) Distribution Plan
(15) Code of Ethics
(16) Schedule for computation of performance
quotations
(17) Financial Data Schedule; Global Equity
Portfolio Financial Report
(18) Financial Data Schedule; Global Income
Portfolio Financial Report
(19) Financial Statements contained in Annual Report to
Shareholders, dated October 31, 1996
(1) Letter to Shareholders
(2) Global Equity Portfolio
Portfolio of Investments
(3) Global Income Portfolio
Portfolio of Investments
(4) Statement of Assets and Liablilities
(5) Statement of Changes in Net Assets
(6) Statement of Operations
(7) Financial Highlights
(8) Notes to Financial Statements
(9) Report of Independent Certified
Public Accountants
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., certifies that it meets all of the requirements for
effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933, and has duly caused this
Post-Effective Amendment to its Registration Statement, (Commission file
Nos. 33-95102 and 811-9078) to be signed on its behalf by the
undersigned, thereunto duly authorized, in Tredyffrin Township and the
Commonwealth of Pennsylvania on the 25th day of February, 1997.
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 to the Registration Statement (file No. 33-95102)
has been signed below the following persons in the capacity and on the
date indicated.
Signature Title Date
President, February 25, 1997
Richard T. Coghlan Principal Executive
Richard T. Coghlan Officer and Director
Elliot C. Kauffman Treasurer February 25, 1997
Elliot C. Kauffman
Brian Cassidy Secretary February 25, 1997
Brian Cassidy
Stephen Michael Alexander Director February 25, 1997
Stephen Michael Alexander
Lee G. Fishman Director February 25, 1997
Lee G. Fishman
CONSENT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS
TAIT, WELLER & BAKER
Certified Public Accountants
We have issued our report dated November 18, 1996 accompanying the
October 31, 1996 financial statements of S.I.S. Mercator Fund, Inc.
(comprising, respectively, the Global Equity Portfolio and the Global
Income Portfolio) which are incorporated by reference in Part B of
Post Effective Amendment No. 3 to this Registration Statement and
Prospectus. We consent to the use of the aforementioned report in
the Registration Statement and Prospectus.
/S/ TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 18, 1997
ARTICLES OF INCORPORATION
OF
NAVIGATOR FUND, INC.
FIRST: I, the understigned, Stephen W. Kline, whose post office address is
30 Valley Stream Parkway, Malvern, Pennsylvania 19355, being at least
eighteen years of age, hereby associate myself as incorporator with the
intention of forming a corporation (hereinafter referred to as the
"Corporation ") under the general laws of the State of Maryland.
SECOND: The name of the Corporation is Navigator Fund, Inc.
THIRD: The purpose for which the Corporation is formed is to operate as an
open-end, management investment company. The Corporation may exercise all of
the powers provided in these Articles or granted by law.
FOURTH: The post office address of the principal office of the Corporation in
the State of Maryland is:
c/o The Corporation Trust Incorporated
32 South Street
Baltimore, MD 21202
The name and post office address of the initial resident agent of the
Corporation in the State of Maryland is:
The Corporation Trust Incorporated
32 South Street
Baltimore, MD 21202
FIFTH: The total number of shares of stock which the Corporation shall have
authority to issue is One Billion (1,000,000,000) shares of common stock,
of a par value of one cent ($.01) per share and having an aggregate par
value of Ten Million Dollars ($10,000,000), One Hundred Million (100,000,000)
such shares being designated and classified the "Global Equity Portfolio
shares" and One Hundred Million (100,000,000) the "Global Income Portfolio
shares" and having the respective rights, powers, resrictions, qualifications
and characteristics set fourth herein.
Subject to the provisions of these Articles of Incorporation, the Board of
Directors shall have the power to authorized the issuance of shares of
stock of the Corporation for such consideration as may be fixed by the
Board of Directors. The Board of Directors of the Corporation are
authorized to increase or decrease the total of authorized shares of
common stock of the Corporation, without a vote of the shareholders in
accordance with the applicable provisions of the Maryland General Corporation
Law.
The Board of Directors of the Corporation shall have the power to
classify and reclassify any unissued shares of stock of the Corporation,
from time to time, by setting or changing the preferences, conversion, or
other rights, voting powers, restrictions, limitations as to dividends,
qualifications, terms and conditions of redemption and other characteristics
as the Board my determine. At any time when there are no shares outstanding
of a class of shares previously classified by the Board of Directors or
designated herein, such class may be terminated by the Board of Directors.
The term "class" as used herein shall include series of shares.
The holder of each share of stock of the Corporation shall be entitled to
one vote for each full share and a fractional vote for each fractional share
of stock. On any matter submitted to a vote of stockholders, all shares of
the Corporation then issued and outstanding shall be voted in the aggregate,
and not by class, except (1) when otherwise expressly provided by the
maryland General Corporation Law, or (2) when required by the Investment
Company Act of 1940, as amended, shares shall be voted by class, or (3)
when the matter to be voted does not affect any interest of a class, then only
stockholders of the affected class shall be entitled to vote thereon.
There shall be no cumulative voting.
Notwithstanding any provision of the Maryland General Corporation Law
requiring more than a majority of the votes of all classes, or any class,
of stock entitled to vote on a matter, including but not limited to amending
the Articles of Incorporation, the Corporation may take or authorize
corporate action upon the favorable vote of a majority of the shares of
stock of all classes, or the class or classes entitled to vote thereon
as provided in the preceding paragraph.
Except as to unissued shares with are reclassified as provided herein, each
class of stock of the Corporation shall have the following powers,
preferences, rights, and the characteristics, restrictions and
limitations thereof shall be as follows:
1. All consideration received by the Corporation for the issue or sale of
stock of a class, together with all assets, income and proceeds derived
from the sale, exchange or liquidation of assets of such class, and any
funds or payments derived from any reinvestment thereof, shall belong to
such class and shall be so recorded upon the books of account of the
Corporation.
2. The assets of any class of stock shall be charged with the liabilitites of
such class, and with such share of the general liabilities of the
Corporation as the Board of Directors may determine.
3. Dividends or distributions on shares of a class of stock shall be paid
only out of earnings, surplus or other legally available assets of such
class.
4. In the event of the liquidation or dissolution of the Corporation,
stockholders of a class shall be entitled to receive out of the assets of
the Corporation available for distribution to stockholders, but other
than general assets not belonging to any particular class of stock, the
assets belonging to such class, and the assets so distriutable to the
stockholders of any class shall be distributed among such stockholders in
proportion to the number of shares of such class held by them and recorded
on the books of the Corporation. In the event that there are any general
assets of the Corporation not belonging to any particular class of stock
and available for distribution, such assets shall be distributed to the
holders of stock of all classes in proportion to the relative net asset
values of the respective classes determined as provided by the Board of
Directors.
5. The holders of the shares of stock of the Corporation shall have no
preemptive rights to subscribe to new or additional shares of its stock
or other securities.
6. The Global Equity Portfolio shares and the Global Income Portfolio shares
be redeemable at the net asset value thereof, calculated as provided by
the Board of Directors, and the proceeds of redemption shall by payable in
cash or in other assets lawfully available therefore, or a combination
thereof, as determine by the Board of Directors. The Board of Directors
may, from time to time, place such restrictions on the right of redemption
and the manner of effecting redemptions as, in their judgment, is necessary
and desirable provided, however, that no such restriction may be imposed
which is not permitted by the requirements of the Investment Company Act
of 1940, as amended. Subject to the foregoing, the Global Equity
Portfolio shares and the Global Income Portfolio shares shall be redeemable by
the holders thereof upon request. In addition, the Corporation shall have
the right to require redemption of the shares of any Portfolio at the net
asset value of such shares upon such terms and in such manner as the Board
of Directors shall determine, in accordance with the applicable provisions of
the Maryland General Corporation Law.
SIXTH: The Board of Directors initially shall consist of four (4) directors,
and the name of the directors who shall act as such until successors or
additional directors are elected and qualify are Richard T. Coghlan,
Howard W. Gross, Stephen Michael Alexander and Lee G. Fishman. Thereafter,
but prior to the issuance by the Corporation of any capital stock the
number of Directors shall be established as provided in the Bylaws of the
Corporation, but shall not be less than three.
SEVENTH: (a) To the fullest extent that limitations on the liability of
directors and officers are permitted by the Maryland General Corporation Law,
as amended from time to time, no director or officer of the Corporation shall
have any liability to the Corporation or its security holders for money
damages. This limitation on liability applies to liabilities incurred for
acts or omissions occurring at the time a person serves as a director or
officer of the Corporation, whether or not such person is a director or
officer at the time of any proceeding in which liability is asserted.
(b) Notwithstanding the foregoing, this Article SEVENTH shall not operate
to protect any director or officer of the Corporation against any
liabiltiy to the Corporation or its security holders to which such person
would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties invovled in the
conduct of such person's office.
EIGHTH: The Corporation reserves the right to amend, alter, change or repeal
any provision contained in these Articles of Incorporation, and all rights,
contract and otherwise, conferred herein upon the stockholders are granted
subject to such reservation.
IN WITHNESS WHEREOF, the undersigned incorporation of Navigator Fund, Inc.
who executed the foregoing Articles of Incorporation, hereby acknoledges the
same to be his act and further acknowledges that, to the best of his
knowledge, the matters and facts set forth herein are true in all material
respects under the penalties of perjury.
Dated the 3rd day of July, 1995.
Stephen W. Kline
NAVIGATOR FUND INC.
ARTICLES OF AMENDMENT
NAVIGATOR FUND, INC., a Maryland corporation having its principal office
in Maryland in Baltimore City (hereinafter called the "Corpation"), hereby
certifies to the State Department of Asseessments and Taxation that:
FIRST: The Corporation is registered as an open-end management company
under the Investment Company Act of 1940.
SECOND: The Articles of Incorporation of the Corporation, as amended and
supplemented, are hereby by deleting the only paragraph of Article
SECOND in its entirety and inserting the following paragraph in lieu thereof:
The name of the corporation is S.I.S. Mercator Fund, Inc.
THIRD: The Articles of Incorporation of the Corporation are further
amended by deleting the old corporate name from the Articles of
Incorporation wherever it appears, and inserting in lieu thereof the
new corporate name as changed hereby.
FOURTH: The amendments to the Articles of Incorporation of the Corporation
as set forth above have been duly approved by a majority of the entire
Board of Directors of the Corporation as required by law and are limited
to changes permitted by Section 2-605(a)(4) of the Maryland General Corporation
Law to be made without action by the stockholders of the Coporation.
FIFTH: The amendments to the Articles of Incorporation of the Corporation
as set forth above do not change the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifiacitons, or terms or conditions of redemption of the shares that are
the subject of the name changes.
SISTH: The Articles of Amendment shall become effective upon accepting
by the Maryland State of Assessments and Taxation.
IN WITNESS WHEREOF, NAVATOR FUND, INC. has caused there Articles of
Amendment to be signed in it sname on its behalf by its Chairman and
President and attested by its Secretary, on 9/28/, 1995.
NAVIGATOR FUND, INC.
By:
Dr. Richard T. Coghlan
Attest:
Brian R. Cassidy
S.I.S. MERCATOR FUND, INC.
* * * * * * * * *
BYLAWS
* * * * * * * * *
ARTICLE I
Section 1. Fiscal Year. The fiscal year of the Corporation shall begin
and end on such dates as may be established by resolution of the Board
of Directors.
Section 2. Registered Office. The registered office of the Corporation
in Maryland shall be located at 32 South Street, Baltimore, Maryland
21202. The name of its Resident Agent is The Corporation Trust
Incorporated, whose address is the same as above.
Section 3. Other Offices. The Corporation shall also have a place of
business in Wayne, Pennsylvania, and shall have the power to have such
additional offices for the conduct of its business at such places as the
Board of Directors may from time to time designate.
ARTICLE II
Meetings of Stockholders
Section 1. Place of Meeting. Annual Meetings, if held, shall be held in
such place as the Board of Directors may by resolution establish. In the
absence of any specific resolution, Annual Meetings of Stockholders shall
be held at the Corporation's principal office in Wayne, Pennsylvania.
Meetings of stockholders for any other purpose may be held at such place as
shall be stated in the Notice of the Meeting, or in a duly executed Waiver
of Notice thereof.
Section 2. Annual Meetings. The Corporation is not required to hold an
Annual Meeting in any year in which the Corporation is not required to
convene a meeting under the Investment Company Act of 1940 (the "Act").
If the Corporation is required by the Act to hold a meeting of stockholders
to elect directors, the meeting shall be designated an Annual Meeting of
Stockholders for that year and shall be held no later than 60 days after
the occurrence of the event requiring the meeting; except if an Order is
granted by the Securities and Exchange Cimmission exempting the Corporation
from the operations of Section 16(a) of the Act or a no-action position of
similar effect is obtained, in which event such meeting shall be held no
later than 120 days after the occurrence of the event requiring the Meeting.
Otherwise, Annual Meetings shall be held only if called by the Board of
Directors of the Corporation and, if called, shall be held during the month
of May on such date as fixed by the Board of Directors by resolution.
Section 3. Special Meetings. Special Meetings of the
Stockholders may be called at any time by the President, or by a majority
of the Board of Directors, and shall be called by the President or
Secretary upon written request of the holders of shares entitled to cast
not less than ten per cent of all the votes entitled to be cast at such
meeting.
Section 4. Notice. Not less than ten or more than ninety days before
the date of every Annual or Special Stockholders Meeting, the Secretary
shall give to each Stockholder entitled to vote at such meeting written
notice stating the time and place of the meeting and the purpose or
purposes for which the meeting is called. Business transacted at any
Special Meeting of Stockholders shall be limited to the purposes stated in
the Notice.
Section 5. Record Date for Meetings. The Board of Directors may fix in
advance a date not more than ninety days, nor less than ten days, prior to
the date of any Annual or Special Meeting of the Stockholders as a record
date for the determination of the Stockholders entitled to receive notice
of the meeting, and to vote at any meeting and any adjournment thereof.
If an Annual Meeting is held to elect directors pursuant to the
requirements of the Act, the Board shall fix the record date within the
time required for holding such Annual Meeting as provided in Section 2 of
this Article but not more than ninety nor less than ten days prior to such
meeting. Only those stockholders who are stockholders of record on the date
so fixed shall be entitled to receive notice of, and to vote, at such
meeting and any adjournment thereof as the case may be, notwithstanding any
transfer of any stock on the books of the Corporation after ant such record
date fixed as aforesaid.
Section 6. Quorum. At any meeting of stockholders, the presence in person
or by proxy of stockholders entitled to cast a majority of all the votes
entitled to be cast at the meeting shall constitute a quorum. If, however,
a quorum shall not be present, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have the power to adjourn
the meeting, until a time, without notice other than announcement at the
meeting, until a quorum shall be present. At such adjourned meeting at which
a quorum shall be present any business may be transacted which might have
been transacted at the meeting as originally called.
Section 7. Majority. Except as otherwise required by applicable law, a
majority of all votes cast at a meeting at which a quorum is present is
sufficient to approve any matter which properly comes before the meeting,
provided that directors shall be elected by plurality vote.
Section 8. Proxies. A stockholder may vote in person or by proxy, but no
proxy shall be valid after eleven months from its date, unless otherwise
provided in the proxy. At all meetings of Stockholders, unless the voting
is conducted by inspectors, all questions relating to the qualification of
voters and the validity of proxies and the acceptance or rejection of votes
shall be decided by the Chairman of the meeting.
Section 9. Inspectors. At any election of Directors, the Board of
Directors prior thereto may, or, if they have not so acted, the Chairman
of the meeting may, and upon the request of the holders of ten (10%)
percent of the shares entitled to vote at such election shall, appoint an
inspector of election who shall first subscribe an oath of affirmation to
execute faithfully the duties of inspector at such election with strict
impartiality and according to the best of their ability, and shall after
the election make a certificate of the result of the vote taken. No
candidate for the office of Director shall be appointed an inspector of
election. The Chairman of the meeting may cause a vote by ballot to be taken
upon the request of the holders of ten (10%) percent of the stock entitled
to vote on such election or matter.
ARTICLE III
Directors
Section 1. General Powers. The business of the Corporation shall be
managed by its Board of Directors, which may exercise all powers of the
Corporation, except such as are by statute, or the Articles of
Incorporation, or by these By-Laws conferred upon or reserved to the
stockholders.
Section 2. Number and Term of Office. The number of Directors which shall
constitute the whole Board shall be determined from time to time by the
Board of Directors, but shall not be fewer than three, nor more than
fifteen. Each Director shall hold office until death, resignation,
retirement or removal. Directors need not be stockholders.
Section 3. Election. Directors shall be elected by the Stockholders
except that any vacancy in the Board of Directors may be filled by a
majority vote of the entire Board of Directors if immediately after filling
such vacancy at least two-thirds of the Board of Directors have been
elected by the stockholders. In the event that at any time less than a
majority of the Directors of the Corporation were elected by the
stockholders, the Corporation shall cause possible, a meeting of
stockholders to be held for the purpose of electing Directors, as provided
in Article II Section 2 hereof.
Section 4. Place of Meeting. Meetings of the Board of Directors, regular
or special, may be held at any place in or out of the State of Maryland as
the Board may from time to time determine.
Section 5. Quorum. At all meetings of the Board of Directors a majority
of the entire Board of Directors shall constitute a quorum for the
transaction of business and the action of a majority of the Directors
present at any meeting at which a quorum is present shall be the action of
the Board of Directors, except as otherwise provided by applicable law. If
a quorum shall not be present at any meeting of Directors, the Directors
present thereat may by a majority vote adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 6. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to
time be determined by the Board of Directors.
Section 7. Special Meetings. Special Meetings of the Board of Directors
may be called by the President on one day's notice to each Director;
Special Meetings shall be called by the President or Secretary in like
manner and on like notice on the written request of two Directors.
Section 8. Informal Actions. Any action required or permitted to be
taken at any meeting of the Board of Directors or of any Committee thereof
may be taken without a meeting, if a written consent to such action is
signed in one or more counterparts by all members of the Board or of such
Committee, as the case may be, and such written consent is filed with the
minutes of proceedings of the Board or Committee.
Section 9. Committees. The Board of Directors may by resolution passed by
a majority of the whole Board appoint from among its members an executive
committee and other committees composed of two or more Directors, and may
delegate to such committees, in the intervals between meetings of the Board
of Directors, any or all of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, except as
otherwise provided in section 2-411 of the Maryland General Corporation Law.
In the absence of any member of such committe, the members thereof present
at any meeting, whether or not they constitute a quorom, may appoint a member
of the Board of Directorsto act in the place of such absent member.
Section 10. Action of Committees. The Committees shall report the same to
the Board of Directors at the meeting next succeeding, and any action by the
Committee shall be subject to revision and alteration by the Board of
Directors.
Section 11. Compensation. Any Director, whether or not a salaried officer
or employee of the Corporation, may be compensated for services as Director
or as a member of a Committee of Directors, or as Chairman of the Board or
Chairman of a committee by fixed periodic payments or by fees for
attendance at meetings or by both, and may be reimbursed for transportation
and other expenses, all in such manner and amounts as the Board of
Directors may from time to time determine.
ARTICLE IV
Notices
Section 1. Form. Notices to stockholders shall be in writing and delivered
personally or mailed to the stockholders at their addresses appearing on the
books of the Corporation. Notices to Directors shall be oral or by
telephone or telegram or in writing delivered personally or mailed to the
Directors at their addresses appearing on the books of the Corporation.
Notice by mail shall be deemed to be given at the time when the same shall
be mailed. Notice to Directors need not state the purpose of a Regular or
Special Meeting.
Section 2. Waiver. Whenever any notice of the time, place or purpose of
any meeting of the stockholders, Directors or committee is required to be
given under the provisions of Maryland law or under the provisions of the
Articles of Incorporation or these By-Laws, a waiver thereof in writing,
signed by the person or persons entitled to such notice and filed with the
records of the meeting, whether before or after the holding thereof, or
actual attendance at the meeting of stockholders in person or by proxy, or
at the meeting of Directors or committe in person, shall be deemed
equivalent to the giving of such notice to such persons.
ARTICLE V
Officers
Section 1. Number. The officers of the Corporation shall be chosen by the
Board of Directors and shall include: (1) a President who shall be the
Chief Executive Officer of the Corporation; (2) a Secretary; and (3) a
Treasurer. The Board of Directors may, from time to time, elect or
appoint a Controller, one or more Vice Presidents, Assistant Secretaries
and Assistant Treasurers. Two or more offices may be held by the same
person but no officer shall execute, acknowledge or verify any instrument
in more than one capacity, if such instrument is required by law, the
Articles of Incorporation or these By-Laws to be executed, acknowledged or
verified by two or more officers.
Section 2. Other Officers. The Board of Directors from time to time may
appoint such other officers and agents as it shall deem advisable, who
shall hold their offices for such terms and shall exercise such powers and
perform such duties as shall be determined from time to time by the Board.
The Board of Directors from time to time may delegate to one or more
officers or Agents the power to appoint any such subordinate officers or
agents and to prescribe the respective rights, terms of office,
authorities and duties.
Section 3. Compensation. The salaries or other compensation of all
officers and agents of the Corporation shall be fixed by the Board of
Directors, except that the Board of Directors may delegate to any person
or group of persons the power to fix the salary or other compensation of
any subordinate officers or agents appointed pursuant to Section 2 of this
Article V.
Section 4. Tenure. The officers of the Corporation shall serve at the
pleasure of Board of Directors. Any officer may be removed by the
affirmative vote of a majority of the Board of Directors whenever, in its
judgment, the best interests of the Corporation will be served thereby.
Any vacancy occurring in any office of the Corporation by death,
resignation, removal, or otherwise shall be filled by the Board of
Directors.
Section 5. President. The President shall be the chief executive officer
of the Corporation; he shall see that all orders and resolutions of the
Board are carried into effect. The President shall perform such other
duties and have such other powers as the Board of Directors may from time
to time prescribe.
Section 6. Vice-Presidents. The Vice-Presidents, in the order of their
seniority, shall in the absence or disability of the President, perform the
duties and exercise the powers of the President and shall perform such
other duties as the Board of Directors may from time to time prescribe.
Section 7. Secretary. The Secretary and/or an Assistant Secretary shall
attend all meetings of the Board of Directors and all meetings of the
Stockholders and record all the proceedings thereof and shall perform like
duties for any committee when required. The Secretary shall give, or cause
to be given, notice of meetings of the Stockholders and of the Board of
Directors, and shall perform such other duties as may be prescribed by the
Board of Directors or President, under whose supervision the Secretary shall
be. The Secretary shall keep in safe custody the seal of the Corporation
and, when authorized by the Board of Directors, affix and attest the same
to any instrument requiring it. The Board of Directors may give general
authority to any other officer to affix the seal of the Corportation
and to attest the affixing by such Officer's signature.
Section 8. Assistant Secretaries. The Assistant Secretaries, in order of
their seniority, shall in the absence or disability of the Secretary,
perform the duties and exercise the powers of the Secretary and shall
perform such other duties as the Board of Directors shall prescribe.
Section 9. Treasurer. The Treasurer, unless another officer of the
Corporation has been so designated, shall be the chief financial officer
of the Corporation.
Section 10. Assistant Treasurers. The Assistant Treasurers, in the order
of their seniority, shall in the absence or disability of the Treasurer,
perform the duties and exercise the powers of the Treasurer and shall
perform such other duties as the Board of Directors may from time to time
prescribe.
ARTICLE VI
Net Asset Value
Section 1. Net Asset Value. The net asset value per
share of each class of stock of the Corporation shall be determined by
dividing the total current market value of the investments and other assets
belonging to each class, less any liabilities attributable to such class,
by the total outstanding shares of such class. Securities which are listed
on a securities exchange for which market quotations are available shall be
valued at the last quoted sale price of the day or, if there is no such
reported sale, at the mean between the most recent quoted bid and asked
prices. Price information on listed securities will be taken from the
exchange where the security is primarily traded. Unlisted securities for
which market quotations are readily available will be valued at the mean
between the most recent quited bid and asked prices. The value of other
assets and securities for which no quotations are readily available will
be determined in good faith at fair market value using methods
established by the Board of Directors.
The net asset value per share of each Portfolio shall be determined as of
the close of the New York Stock Exchange on each day that the Exchange is
open for business, except as otherwise described in the registration
statement of the Corporation.
Section 2. Fair Value. If events which materially affect the value of the
investments of the Portfolios of the Corporation occur subsequent to the
close of the various foreign markets on which securities held by that
Portfolio are traded, the investments affected thereby will be valued at
fair value in good faith and in accordance with methods determined by the
Board of Directors.
Section 3. Lending of Securities. Each Portfolio is authorized to lend
its portfolio securities to brokers, dealers and other institutional
borrowers, provided that a Portfolio shall not make any such loan if,
when made, more than one-third of the then current market value of the
Portfolio's assets would consist of lent securities.
ARTICLE VII
Stock
Section 1. Certificates. Each stockholder shall be entitled, upon written
request, to a certificate or certificates for the class of shares and the
full number of shares of such class owned by such stockholder. Each
certificate shall be signed by the President or a Vice-President and
counter-signed by the Secretary or an Assistant Secretary or the Treasurer
or an Assistant Treasurer.
Section 2. Signature. Where a certificate is signed (1) by a transfer
agent or an assistant transfer agent or (2) by a transfer clerk acting on
behalf of the Corporation and a registrar, the signature of any such
President, Vice-President, Treasurer, Assistant Treasurer, Secretary or
Assistant Secretary may be a facsimile. In case any officer who has
signed any certificate ceases to be an officer of the Corporation before
the certificate is issued, the certificate may nevertheless be issued by
the Corporation with the same effect as if the officer had not ceased to
be such officer as of the date of its issue.
Section 3. Recording and Transfer without Certificates. Notwithstanding
the foregoing provisions of this Article, the Corporation shall have full
power to participate in any program approved by the Board of Directors
providing for the recording and transfer of ownership of shares of the
Corporation's stock by electronic or other means without the issuance of
certificates.
Section 4. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been
stolen, lost or destroyed, upon the making of an affidavit of that fact by
the person claiming the certificate of stock to be stolen, lost or destroyed,
or upon other satisfactory evidence of such loss or destruction. When
authorizing such issuance of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such stolen, lost, or destroyed certificate or
certificates, or his legal representative, to give the Corporation a bond
with sufficient surety to indemnify it against any loss or claim that may
be made by reason of the issuance of a new certificate.
Section 5. Registered Stockholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner and shall
not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not it
shall have express or other notice thereof, except as otherwise provided
by laws of Maryland.
Section 6. Transfer Agents and Registrars. The Board of Directors may,
from time to time, appoint or remove transfer agents and/or registrars of
shares of stock of the Corporation, and it may appoint the same person as
both transfer agent and registrar. Upon any such appointment being made
all certificates representing shares of stock thereafter issued shall be
countersigned by one of such transfer agents or by one of such registrars
or by both and shall not be valid unless so countersigned. If the same
person shall be both transfer agent and registrar, only countersignature
by such person shall be required.
Section 7. Stock Ledger. The Corporation shall maintain an original
stock ledger containing the names and addresses of all stockholders and
the number and class of shares held by each stockholder. Such stock ledger
may be in written form or any other form capable of being converted into
written form within a reasonable time for visual inspection.
Section 8. Transfers of Stock. Upon surrender to the Corporation or the
Transfer Agent of the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession assignment, or authority to
transfer, it shall be the duty of the Corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
Section 9. Redemption. The shares of Common Stock of the Corporation
shall be redeemable at the net asset value thereof, calculated as provided
by the Board of Directors, and the proceeds of redemption shall be payable
in cash or in other assets lawfully available therefore, or a combination
thereof, as determined by the Board of Directors. The Board of Directors
may, from time to time, place such restrictions on the right of redemption
and the manner of effecting redemptions as, in their judgment, is necessary
and desirable provided, however, that no such restriction may be imposed
which is not permitted by the Investment Copmany Act of 1940, as amended.
Subject to the foregoing, shares of the Corporation shall be redeemable
by the holders thereof upon request.
ARTICLE VIII
General Provisions
Section 1. Dividends. With respect to "dividends" (including dividends
designated as "short" or "long" term "capital gains" distributions to
satisfy requirements of the Internal Revenue Code of 1986, as amended
from time to time):
(a) Such dividends shall be automatically reinvested solely in additional
shares (or fractions thereof) of the class of stock in respect of which
such dividends were declared at the net asset value on the reinvestment
date, provided that a stockholder may notify the Corporation in writing of
an election to receive dividends in cash.
(b) The Board of Directors, in declaring any dividend, may fix a record
date not earlier than the date of declaration or more than 90 days after
the date of declaration, as of which the Stockholders entitled to receive
such dividend shall be determined, notwithstanding any transfer or the
repurchase or issue (or sale) of any shares occurring after such record
date.
(c) Dividends on shares of stock, whether payable in stock or cash, shall
be paid out of earnings, capital surplus or other lawfully available assets.
All dividend payments, or distributions in the nature of a dividend payment,
shall be accompanied by a written statement clearly indicating what portion
of such payment per share is made from the following sources:
(i)Accumulated or undistributed net income, not including profits or losses
from the sale of securities or other properties;
(ii)Accumulated or undistributed net profits from the sale of securities or
other properties;
(iii)Paid-in capital.
(d)Anything in these By-Laws to the contrary notwithstanding, the Board of
Directors may at any time declare and distribute pro rata among the
stockholders of a record date fixed as above provided, a "stock dividend"
out of either authorized but unissued shares of the Corporation.
Section 2. Rights in Securities. The Board of Directors, on behalf of
the Corporation, shall have the authority to exercise all of the rights of
the Corporation as owner of any securities which might be exercised by any
individual owning such securities in his own right; including but not
limited to, the rights to vote by proxy for any and all purposes, to
consent to the reorganization, merger or consolidation of any company or to
consent to the sale, lease or mortgage of all or substantially all of the
property and assets of any company; and to exchange any of the shares of
stock of any company for the shares of stock issued therefor upon any such
reorganization, merger, consolidation, sale lease or mortgage.
Section 3. Reports. The Corporation shall furnish Stockholders with
reports of its financial condition as required by Section 30(d) of the Act
and the rules thereunder.
Section 4. Bonding of Officers and Employees. All Officers and Employees
of the Corporation shall be bonded to such extent, and in such manner, as
may be required by law.
Section 5. Seal. The Corporate seal shall have inscribed thereon the
names of the Corporation, the year of its organization and the words
"Corporate Seal, Maryland." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed, or otherwise reproduced.
ARTICLE IX
Indemnification of
Officers and Directors
Section 1.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.
ARTICLE X
Amendments
Section 1.These By-Laws may be altered or repealed at any Regular or
Special Meeting of the Board of Directors, provided therein.
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 3rd day of June, 1996, by and between S.I.S. MERCATOR
FUND, INC., a Maryland corporation (the "Fund") and Strategic Investment
Services, Inc. a corporation organized under the laws of Pennsylvania (the
"Manager").
1.Duties of Advisor
The Fund hereby employs the Manager to manage the investment and
reinvestment of the assets of the Global Equity Portfolio (the "Portfolio"),
to continuously review, supervise and administer the Portfolio's investment
program, to determine in its discretion the securities to be purchased or
sold and the portion of the Portfolio's assets to be uninvested, to provide
the Fund with records concerning the Manager's activities which the Fund is
required to maintain, and to render regular reports to the Fund's officers
and the Board of Directors of the Fund, all in compliance with the objectives,
policies, and limitations set forth in the Fund's registration statement.
The Manager accepts such employment and agrees tp provide, at its own
expense, the office space, furnishings and equipment and the personnel
required by it to perform the services described herein on the terms and for
compensation provided herein.
2.Portfolio Transactions
The Manager is authorized to select the brokers or dealers that will execute
the purchases and sales of portfolio securities for the Portfolio and is
directed to use its best efforts to obtain the best available price and
most favorable execution. It is understood, however, that the Manager
shall not be deemed to have acted unlawfully, or to have breached a
fiduciary duty to the Fund or in respect of the Portfolio, or be in breach
of any obligation owing to the Fund or in respect of the Portfolio under
this Agreement, or otherwise, solely by reason of its having caused the
Portfolio to pay a member of a securities exchange, a broker or a dealer
a commission for effecting a securities transaction for the Portfolio in
excess of the amount of the commission another member of an exchange,
broker or dealer would have charged if the Manager determines in good
faith that the commission paid was reasonable to the brokerage or research
services provided by such member, broker or dealer, viewed in terms of that
particular transaction or the Manager's overall responsibilities with
respect to its accounts, including the Fund, as to which it exercises
investment discretion. The Manager will promptly communicate to the officers
and directors of the Fund such information relating to transactions for the
Portfolio as they may reasonably request.
3.Compensation of the Manager
For the services to be rendered by the Manager as provided in Section 1 of
this Agreement, the Fund shall pay to the Manager, at the end of each
month, a fee equal to one-twelfth of .90 percent of the average daily net
assets of the Portfolio. In the event that this Agreement is terminated
at other than a month-end, the fee for such month shall be prorated.
4.Reports
The Fund and the Manager agree to furnish to each other information with
regard to their respective affairs as each may reasonably request.
5.Status of the Manager
The services of the Manager to the Fund or in respect of the Portfolio, are
not to be deemed exclusive, and the Manager shall be free to render similar
services to others as long as its services to the Fund, or in respect of
the Portfolio, are not impaired thereby. The Manager shall be deemed to
be an independent contractor and shall, unless otherwise expressly provided
or authorized, have no authority to act for or represent the Fund in any
way or otherwise be deemed an agent of the Fund.
6.Liability of Manager
The Manager shall not be liable to the Fund or any shareholder thereof for
errors of judgment or in absence of negligence in the performance of its
duties hereunder.
No provision of this Agreement shall be deemed to protect the Manager
against any liability to the Fund to which it might otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties or the reckless disregard of its obligations
under this Agreement.
7.Duration and Termination
This Agreement shall become effective on June 3, 1996 (the "Effective Date")
and shall continue in effect until November 7, 1997, provided that it has
first been approved in accordance with Section 15 of the Investment Company
Act of 1940, as amended ("Act"). Thereafter, this Agreement may be
continued in effect for successive one-year periods provided each such
continuance is approved at least annually by a vote of the Fund's Board of
Directors, including the vote of a majority of the directors who are not
parties to this Agreement or interest persons of any party, cast in person,
at a meeting called for the purpose of voting such approval. In addition,
the question of continuance of this Agreement may be presented to the
shareholders of the Fund; in such event, such continuance shall be effected
only if approved by the affirmative vote of the holders of a majority of
the outstanding voting securities of the Portfolio.
This Agreement may at any time be terminated without payment of any penalty
either by vote of the Board of Directors of the Fund or by vote of the
holders of a majority of the outstanding voting securities of the
Portfolio, on sixty days written notice to the Manager.
This Agreement shall automatically terminate in the event of its assignment.
This Agreement may be terminated by the Manager after ninety days written
notice to the Fund.
Any notice under this Agreement shall be given in writing, addressed and
delivered, or mailed postpaid, to the other party at any office of such
party.
As used in this Section 9, the terms "assignment," "interested persons,"
and a "vote of the holders of a majority of the outstanding securities"
shall have the respective meanings set forth in Section 2(a)(4),
Section 2(a)(19), Section 2(a)(42) of the Act and Rule l8f-2 thereunder.
8.Severability
If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
executed this 3rd day of June, 1996.
Strategic Investment Services, Inc. S.I.S. Mercator Fund, Inc.
By:_________________________ By:_________________________
President
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 3rd day of June, 1996, by and between S.I.S. MERCATOR
FUND, INC., a Maryland corporation (the "Fund") and Strategic Investment
Services, Inc. a corporation organized under the laws of Pennsylvania
(the "Manager").
1.Duties of Advisor
The Fund hereby employs the Manager to manage the investment and
reinvestment of the assets of the Global Income Portfolio (the "Portfolio"),
to continuously review, supervise and administer the Portfolio's investment
program, to determine in its discretion the securities to be purchased or
sold and the portion of the Portfolio's assets to be uninvested, to provide
the Fund with records concerning the Manager's activities which the Fund is
required to maintain, and to render regular reports to the Fund's officers
and the Board of Directors of the Fund, all in compliance with the objectives,
policies and limitations set forth in the Fund's registration statement. The
Manager accepts such employment and agrees to provide, at its own expense,
the office space, furnishings and equipment and the personnel required by it
to perform the services described herein on the terms and for the
compensation provided herein.
2.Portfolio Transactions
The Manager is authorized to select the brokers or dealers that will
execute the purchases and sales of portfolio securities for the Portfolio
and is directed to use its best efforts to obtain the best available price
and most favorable execution. It is understood, however, that the Manager
shall not be deemed to have acted unlawfully, or to have breached a
fiduciary duty to the Fund or in respect of the Portfolio, or be in breach
of any obligation owing to the Fund or in respect of the Portfolio under
this Agreement, or otherwise, solely by reason of its having caused the
Portfolio to pay a member of a securities exchange, a broker or a dealer a
commission for effecting a securities transaction for the Portfolio in
excess of the amount of commission another member of an exchange, broker or
dealer would have charged if the Manager determines in good faith that the
commission paid was reasonable in relation to the brokerage or research
services provided by such member, broker or dealer, viewed in terms of
that particular transaction or the Manager's overall responcibilities
with respect to its accounts, including the Fund, as to which it
exercises investment discretion. The Manager will promptly communicate
to the officers and directos of the Fund such information relating to
transactions for the Portfolio as they may reasonably request.
3.Compensation of the Manager
For the services to be rendered by the Manager as provided in Section 1 of
this Agreement, the Fund shall pay to the Manager, at the end of each
month, a fee equal to one-twelfth of .90 percent of the average daily net
assets of the Portfolio. In the event that this Agreement is terminated
at other than a month-end, the fee for such month shall be prorated.
4.Reports
The Fund and the Manager agree to furnish to each other information with
regard to their respective affairs as each may reasonably request.
5.Status of the Manager
The services of the Manager to the Fund or in respect of the Portfolio, are
not to be deemed exclusive, and the Manager shall be free to render similar
services to others as long as its services to the Fund, or in respect of
the Portfolio, are not impaired thereby. The Manager shall be deemed to be
an independent contractor and shall, unless otherwise expressly provided or
authorized, have no authority to act for or represent the Fund in any way
or otherwise be deemed an agent of the Fund.
6.Liability of Manager
The Manager shall not be liable to the Fund or any shareholder thereof for
errors of judgment or in absence of negligence in the performance of its
duties hereunder.
No provision of this Agreement shall be deemed to protect the Manager
against any liability to the Fund to which it might otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties or the reckless disregard of its obligations
under this Agreement.
7.Duration and Termination
This Agreement shall become effective on June 3, 1996 (the "Effective Date")
and shall continue in effect until November 7, 1997 provided that it has
first been approved in accordance with Section 15 of the Investment Company
Act of 1940, as amended ("Act"). Thereafter, this Agreement may be
continued in effect for successive one-year periods provided each such
continuance is approved at least annually by a vote of the Fund's Board of
Directors, including the vote of a majority of the directors who are not
parties to this Agreement or interested persons of any such party, cast in
person, at a meeting called for the purpose of voting such approval. In
addition, the question of continuance of this Agreement may be presented to
the shareholders of the Fund; in such event, such continuance shall be
effected only if approved by the affirmative vote of the holders of a
majority of the outstanding voting securities of the Portfolio.
This Agreement may at any time be terminated without payment of any
penalty either by vote of the Board of Directors of the Fund or by vote
of the holders of a majority of the outstanding voting securities of the
Portfolio, on sixty days written notice to the Manager.
This Agreement shall automatically terminate in the event of its assignment.
This Agreement may be terminated by the Manager after ninety days written
notice to the Fund.
Any notice under this Agreement shall be given in writing, addressed and
delivered, or mailed postpaid, to the other party at any office of such
party.
As used in this Section 9, the terms "assignment," "interested persons,"
and a "vote of the holders of a majority of the outstanding securities"
shall have the respective meanings set forth in Section 2(a)(4),
Section 2(a)(19), Section 2(a)(42) of the Act and Rule l8f-2 thereunder.
8.Severability
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
executed this 3rd day of June, 1996.
Strategic Investment Services
S.I.S. Mercator Fund, Inc.
By:_________________________ By:_________________________
President
AGREEMENT
Agreement made this 8th day of November, 1995, between S.I.S. Mercator Fund,
Inc. (the "Fund"), a Maryland corporation, and East Coast Consultants, Inc.,
a Pennsylvania corporation ("Distributor").
In consideration of the mutual promises and undertakings herein contained,
and intending to be legally bound, the parties agree as follows:
(1)The Fund hereby authorizes the Distributor to promote, sell and
supervise the sale of shares issued by the Fund pursuant to the
Registration Statement filed by the Fund with the U.S. Securities and
Exchange Commission on Form N-1A, as amended from time to time, during
the term of this Agreement.
(2)Sales of Fund shares shall be effected in a manner consistent with the
Registration Statement.
(3)In carrying out its responsibilities under this Agreement, Distributor
shall use its best efforts to ensure that its personnel comply with
applicable federal and state regulatory requirements regarding the sale
of securities, and with the applicable rules of the National Association
of Securities Dealers, Inc. ("NASD").
(4)Distributor shall use its best efforts to encourage and promote the
sale of Fund shares and, to this end, avail itself of the resources
provided under the Fund's Distribution Plan ("Plan").
(5)Distributor shall be responsible for, and shall bear the cost of, its
own registration as a securities dealer under federal and state law and of
its membership in the NASD. Distributor shall request the Fund to register
or qualify the Fund's shares under the laws of such jurisdictions as
Distributor shall recommend. The Fund shall bear the costs of such
registrations and qualifications.
(6)This Agreement shall become effective on the effective date of the
registration statement of the Fund, provided that prior to such date this
Agreement has been approved by a vote of a majority of the Directors of the
Fund, including a majority of the "Disinterested Directors," as defined in
the Plan, cast in person at a meeting called for the purpose of voting on
such approval, and shall continue in effect until November 7, 1997, and may
be continued thereafter for consecutive terms each of one year, provided that
any such continuance is approved in the manner provided above.
(7)This Agreement shall terminate automatically in the event of its
assignment and may be terminated by either party without penalty upon
sixty days written notice.
(8)The terms "person" and "assignment" shall have the meanings ascribed
thereto, respectively, under the 1940 Act.
(9)No compensation shall be paid to Distributor hereunder. Compensation
shall be payable to Distributor solely pursuant to the Plan. Distributor
understands that if the Plan is terminated as to one or more Fund
Portfolios, no further payments shall be made by the Fund pursuant to the
Plan in respect of such Portfolio(s).
(10)Any notice required or permitted to be given by either party to the
other shall be deemed sufficient if sent by registered or certified mail,
postage prepaid, addressed by the party giving notice to the other party at
the last address furnished by the other party to the party giving notice.
IN WITNESS WHEREOF, and Fund and Distributor have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of
the day and year above written.
S.I.S. Mercator Fund, Inc.
By ____________________________
East Coast Consultants, Inc.
By ____________________________
Date:
S.I.S. Mercator Fund, Inc.
1325 Morris Drive
Suite 203
Wayne, Pennsylvania 19087
610-993-0670
East Coast Consultants, Inc.
1325 Morris Drive
Suite 203
Wayne. Pennsylvania 19087
East Coast Consultants, Inc., ("Distributor") has been appointed Distributor
of the capital stock of S.I.S. Mercator Fund, Inc. ("Fund"). During the term
of this compensation agreement, Distributor shall remain a memeber of the
National Association of Securities Dealers, Inc. ("NASD") and will act in
accordance with the following terms:
1. Distributor will abide by Rule 26 of the Rules of Fair Practice of the NASD
("Rules of Fair Practice"), and all other rules and regulations that are
now or may become applicable to transactions hereunder.
2. Orders for shars received from Distributor and accepted by the Fund will
be executed at the public offering price applicable to each order, as
described in the then effective prospectus and Statement of Additional
Information of the Fund. All orders are subject to acceptance by the Fund,
which reserves the right, in its sole discretion, to reject any order.
3. Distributor agrees to sell shares only in accordance with the terms of
the prospectus and Statement of Additional Information of the Fund that
are effective at the time of the sale.
4. The Fund will pay Distributor for each sale of Fund shares made by
Distributor hereunder that qualifies as "new gross sales" within the
meaning of Section 26(d)(2) of the Rules of Fair Practice, a maximum
fee of .25% (25 basis points) of the net asset value of such shares at
the time of sale, as determined by the Fund. The Fund shall also make to
Distributor, or to such person(s) as Distributor may require, such other
payments for the purposes set forth in Section 2. of the Fund's
Distribution Plan, which section is incorporated herein by reference,
provided thatthe total payments made by the Fund for such purposes
hereunder and otherwise shall not exceed the limit set forth in Section 2.(c)
of said Plan.
5. If any shares sold by Distributor under the terms of this agreement are
tendered to the Fund for redemption within seven business days after the
date of confirmation of the original purchase order therefor, after
notice thereof, Distributor shall promptly pay the Fund the full amount
paid to DIstributor pursuant to Section 4 herein in respect of such sale.
The Fund shall notify Distributor of any such redemption within ten days
after the date thereof. The Fund reserves the right, upon notice to
Distributor, to suspend sales or withdraw the offering of shares
entirely, to change the offering price as provided in the prospectus, or
to modify or cancel this agreement.
6. Each prospective investor shall be entitled to a copy of the current
prospectus and Statement of Additional Information without charge upon
request.
7. All communications to the Fund and/or Distributor shall be sent to 1325
Morris Drive, Suite 203, Wayne, Pennsylvania 19087. Any notice to a party
shall be duly given if mailed, delivered or telecopied to such party at
its address as set forth herein.
8. This agreement may be terminated at any time, without payment of any
penalty, by Distributor, or by vote of a majority of the members or the
Board of DIrectors of the Fund who are not interested persons of the Fund
and have no direct or indirect financial interest in the operation of the
Fund's Distribution Plan or in any agreement, including this agreement,
related to such Plan, or by vote of a majority of the outstanding
voting securities of the Fund, on not more than sixty days written
notice to Dealer. In addition, this agreement will terminate automatically
in the event of its assignment. For the purpose of this agreement, the
terms "interested persons" and "assignment" shall have the meanings ascribed
thereto, respectively, by Section 2(a)(19) and 2(s)(4) of the Investment
Company Act of 1940. Otherwise, this agreement shall be construed in
accordance with the laws of the Commonwealth of Pennsylvania.
9. Distributor understands that the Fund currently issues two series of
shares and that the Board of Directors of the Fund and the shareholders of
each such series have approved the Distribution Plan of the Fund in
respect of each such series and, further, that the Fund and/or the
shareholders of each Series may terminate this agreement as to either or
both series of shares.
Accepted:
East Coast Consultants, Inc.
Date:
By:
CUSTODIAN AGREEMENT
(FOREIGN AND DOMESTIC SECURITIES)
This Custodian Agreement is made by and between S.I.S. Mercator Fund, Inc.
("Principal") and THE BANK OF CALIFORNIA, NATIONAL ASSOCIATION ("Custodian").
Principal desires that Custodian hold and administer on behalf of Principal
certain Securities (as herein defined) and cash. Custodian is willing to
do so on the terms and conditions set forth in this Agreement. Accordingly,
Principal and Custodian agree as follows:
1. Definitions. Certain terms used in this Agreement are defined as follows:
(a)"Account" means, collectively, each custodianship account maintained by
Custodian pursuant to Paragraph 3 of this Agreement. It is understood that
the Custodian will maintain separate accounts for each Portfolio of the
Principal described in the prospectus of Principal and as of the date
hereof, there are two such Portfolios described in the prospectus.
(b)"Eligible Foreign Securities Depository", ("Depository") shall mean a
securities depository or clearing agency incorporated or organized under
the laws of a country other than the United States which operates (i) the
central system for handling securities or equivalent book-entries in that
country, or (ii) a transnational system for the central handling of
securities or equivalent book-entries.
(c)"Investment Manager" means an investment advisor or manager identified
by Principal in a written notice to Custodian as having the authority to
direct Custodian regarding the management, acquisition, or disposition of
Securities.
(d)"Securities" means domestic or foreign securities or both within the
meaning of Section 2(a)(36) of the Investment Company Act of 1940
("1940 Act") and regulations issued by the U.S. Securities and Exchange
Commission ("SEC") under Section 17(f) of the 1940 Act, 17 C.F.R.
270.17f-5(c)(1), as amended, which are held by Custodian in the Account,
and shall include all income and proceeds of sale of such securities or
other property of Principal.
(e)"Eligible Foreign Custodian", ("Sub-Custodian") shall mean (i) a banking
institution or trust company incorporated or organized under the laws of a
country other than the United States that is regulated as such by that
country's government or an agency thereof and that has shareholders' equity
in excess of $200 million in U.S. currency (or a foreign currency equivalent
thereof), (ii) a majority owned direct or indirect subsidiary of a
qualified U.S. bank or bank holding company that is incorporated or organized
under the laws of a country other than the United States and that has
shareholders' equity in excess of $100 million in U.S. currency (or a
foreign currency equivalent thereof, (iii) a banking institution or trust
company incorporated or organized under the laws of a country other than
the United States or a majority owned direct or indirect subsidiary of a
qualified U.S. bank as defined in Rule 17f-5 or bank holding company that is
incorporated or organized under the laws of a country other than the
United States which has such other qualifications as shall be specified
in Instructions and approvedby the Bank; or (iv)any other entity that shall
have been so qualified by exemptive order, rule or other appropriate action
of the SEC. Custodian shall evaluate and determine at least annually the
continued eligibility of each Sub-Custodian as described in Paragraph 5(d)
of this Agreement.
2.Representations
(a)Principal represents that with respect to any Account established by
Principal to hold Securities, Principal is authorized to enter into this
Agreement and to retain Custodian on the terms and conditions and for the
purposes described herein.
(b)Custodian represents that (i) it is organized under the laws of the
United States and has its principal place of business in the United States,
(ii) it is a bank within the meaning of Section 202(a)(2) of the Investment
Advisers Act of 1940 and Section 2(a)(5) of the Investment Company Act of
1940, as amended, and (iii) it has equity capital in excess of $2 million.
3.Establishment of Accounts. Principal hereby establishes with Custodian,
and may in the future establish, one or more Accounts in Principal's name.
Each Account shall consist of Securities or cash delivered to and receipted
for by Custodian or by any Sub-Custodian. Custodian, in its sole discretion,
may reasonably refuse to accept any property now or hereafter delivered to
it for inclusion in an Account. Principal shall be notified promptly of
such refusal and any such property shall be immediately returned to
Principal.
4.Custody. Subject to the terms of this Agreement, Custodian shall be
responsible for the safekeeping and custody of the cash and Securities.
Custodian may (i) retain possession of all or any portion of the cash and/or
Securities in a foreign branch or other office of Custodian, or (ii) retain,
in accordance with Paragraph 5 of this Agreement, one or more Sub-Custodians
to hold all or any portion of the cash and/or Securities. Custodian and
any Sub-Custodian may, in accordance with Paragraph 5 of this Agreement,
deposit definitive or book-entry Securities with one or more Depositories.
(a)If Custodian retains possession of Securities, Custodian shall ensure
the Securities are at all times properly identified as being held for the
appropriate Account. Custodian shall segregate physically the Securities
from other securities or property held by Custodian. Custodian shall not
be required to segregate physically the Securities from other securities
or property held by Custodian for third parties as Custodian, but Custodian
shall maintain adequate records showing the true ownership of the Securities.
(b)If Custodian deposits Securities with a Sub-Custodian, Custodian shall
maintain adequate records showing the identity and location of the
Sub-Custodian, the Securities held by the Sub-Custodian, and each Account
to which such Securities belong.
(c)If Custodian or any Sub-Custodian deposits Securities with a Depository,
Custodian shall maintain, or shall cause the Sub-Custodian to maintain,
adequate records showing the identity and location of the Depository, the
Securities held by the Depository, and each Account to which such Securities
belong.
(d)If Principal directs Custodian to deliver certificates or other physical
evidence of ownership of Securities to any broker or other party, other
than a Sub-Custodian or Depository employed by Custodian for purposes of
maintaining the Account, Custodian's sole responsibility shall be to
exercise due care and diligence in effecting the delivery as instructed by
Principal. Upon completion of the delivery, Custodian shall be discharged
completely of any further liability or responsibility with respect to the
safekeeping and custody of Securities so delivered.
(e)Custodian shall ensure that (i) the Securities will not be subject to
any right, charge, security interest, lien, or claim of any kind in favor
of Custodian or any Sub-Custodian or Depository except for Custodian's
expenses relating to the Securities' safe custody or administration, and
(ii) the beneficial ownership of the Securities will be freely transferable
without the payment of money or value other than for safe custody or
administration.
(f)Principal or its authorized representatives shall have reasonable access
to inspect books and records maintained by Custodian or any Sub-Custodian or
Depository holding Securities hereunder to verify the accuracy of such books
and records. Custodian shall notify Principal promptly of any applicable
law or regulation in any country where Securities are held that would
restrict such access or inspection.
5.Sub-Custodians and Depositories. With Principal's advance written
approval, as provided in Paragraph 5(c) of this Agreement, Custodian may
from time to time retain one or more Sub-Custodians and Depositories to
hold Securities hereunder.
(a)Custodian shall exercise reasonable care in the selection of
Sub-Custodians and Depositories. In making its selection, Custodian shall
consider (i) the Sub-Custodian's or Depository's financial strength,
general reputation and standing in the country in which it is located,
its ability to provide efficiently the custodial services required, and
the relative cost of such services, (ii) whether the Sub-Custodian or
Depository would provide a level of safeguards for safekeeping and custody
of Securities not materially different from those prevailing in the U.S.,
(iii) whether the Sub-Custodian or Depository has branches in the U.S. in
order to facilitate jurisdiction over and enforcement of judgements against
it, and, (iv) in the case of a Depository, the number of its participants
and its operating history.
(b)Custodian shall give written notice to Principal of its intention to
deposit Securities with a Sub-Custodian or (directly or through a
Sub-Custodian) with a Depository. The notice shall identify the proposed
Sub-Custodian or Depository and shall include reasonably available
information relied on by Custodian in making the selection.
(c)Within 30 days of its receipt of a notice from Custodian pursuant to
Paragraph 5(b) of this Agreement regarding Custodian's proposed selection
of one or more Sub-Custodians or Depositories, Principal shall give written
notice to Custodian of Principal's approval or disapproval of the proposed
selection. If Principal has not responded within 30 days of receipt of
Custodian's request for approval of a Sub-Custody, Principal will be deemed
to have approved such Sub-Custody. Principal hereby approves Custodian's
retention of those Sub-Custodians and Depositories, if any, which are
identified in Appendix A of this Agreement.
(d)Custodian shall evaluate and determine at least annually the continued
eligibility of each Sub-Custodian and Depository approved by Principal to
act as such hereunder. In discharging this responsibility, Custodian
shall (i) monitor continuously the day to day services and reports provided
by each Sub-Custodian or Depository, (ii) at least annually, obtain and
review the annual financial report published by such Sub-Custodian or
Depository and any reports on such Sub-Custodian or Depository prepared by a
reputable independent analyst, (iii) at least triennially, physically
inspect the operations of such Sub-Custodian or Depository and (iv)
Custodian shall provide Principal with a report of its annual review of
each Sub-Custodian and Depository.
(e)If Custodian determines that any Sub-Custodian or Depository no longer
satisfies the applicable requirements described in Paragraph 1(b) (in the
case of a Depository) or Paragraph 1(e) (in the case of a Sub-Custodian) of
this Agreement or is otherwise no longer capable or qualified to perform
the functions contemplated herein, Custodian shall promptly give written
notice thereof to Principal. The notice shall, in addition, either (i)
indicate Custodian's intention to transfer Securities held by the removed
Sub-Custodian or Depository to another Sub-Custodian or Depository
previously approved by Principal, or (ii) include a notice pursuant to
Paragraph 5(b) of this Agreement of Custodian's intention to deposit
Securities with a new Sub-Custodian or Depository.
6. Registration. Subject to any specific instructions from Principal,
Custodian shall hold or cause to be held all Securities in the name of
Custodian, or any Sub-Custodian or Depository approved by Principal
pursuant to Paragraph 5 of this Agreement, or in the name of a nominee of
any of them, as Custodian shall determine to be appropriate under the
circumstances.
7.Transactions. Principal or any Investment Manager from time to time may
instruct Custodian (which in turn shall be responsible for giving
appropriate instructions to any Sub-Custodian or Depository) regarding
the purchase or sale of Securities and currencies in accordance with this
Paragraph 7:
(a)Custodian shall effect and account for each Securities and currency sale
on the date such transaction actually settles; provided, however, that
Principal may in its sole discretion direct Custodian, in such manner as
shall be acceptable to Custodian, to account for Securities and currency
purchases and sales on contractual settlement date, regardless of whether
settlement of such transactions actually occurs on contractual settlement
date. Principal may, from time to time, direct Custodian to change the
accounting method employed by Custodian in a written notice delivered to
Custodian at least thirty (30) days prior to the date a change in accounting
method shall become effective.
(b)Custodian shall effect purchases by charging the Account with the
amount necessary to make the purchase and effecting payment to the seller
or broker for the securities or other property purchased. Custodian shall
have no liability of any kind to any person, including Principal, except in
the case of negligent or intentional tortious acts, willful misconduct, or
disregard of the provisions of the Agreement if the Custodian effects
payment on behalf of Principal, and the seller or broker fails to deliver the
securities or other property purchased. Custodian shall exercise such care
and diligence as would be employed by a prudent custodian and due diligence
in examining and verifying the certificates or other indicia of ownership
of the property purchased before accepting them.
(c)Custodian shall effect sales by delivering certificates or other indicia
of ownership of the Property, and, as instructed, shall receive cash for
such sales. Custodian shall have no liability of any kind to any person,
including Principal, if Custodian exercises due diligence and delivers
such certificates or indicia of ownership and the purchaser or broker
fails to effect payment. If a purchase or sale is effected through a
Depository, Custodian shall exercise such ordinary care and diligence as
would be employed by a prudent custodian and due diligence in verifying
proper consummation of the transaction by the Depository.
(d)Principal or, where applicable, the Investment Manager, is responsible
for ensuring Custodian receives timely instructions and/or funds to enable
Custodian to effect settlement of any purchase or sale of Securities or
Currency Transactions. If Custodian does not receive such timely
instructions or funds, Custodian shall have no liability of any kind to
any person, including Principal, for failing to effect settlement.
However, Custodian shall use reasonable efforts to effect settlement as
soon as possible after receipt of appropriate instructions. Principal shall
be liable fir interest compensation at market rate and/or principal amounts
to Custodian and/or its counterparty for failure to deliver instructions
or funds in a timely manner to effect settlements of foriegn exchange
movement. Custodian shall make effect settlements of foreign securities under
the prevailing practices of the market of settlement.
(e) At the direction of Principal or the Investment Manager, as the case
may be, Custodian shall convert currency in the Account to other currencies
through customary channels including, without limitation, Custodian or any
of its affiliates, as shall be necessary to effect any transaction directed
by Principal or the Investment Manager. Principal or the Investment Manager,
as the case may be, acknowledges that 1) the foreign currency exchange
department is a part of the Custodian or one of its affiliates or
subsidiaries, 2) the Account is not obligated to effect foreign currency
exchange with custodian, 3) the Custodian will recieve benefits for such
foreign currency transactions which are in addition to the compensation
which the Custodian recieves for administering the Account, and 4) the
Custodian will make available the relevent data so that Principal or the
Investment Manager, as the case may be, can determine that the foreign
currency exchange transactions are as favorable to the Account as terms
generally available in arm's length transactions between unrelated parties.
(f) Custodian shall have no responsibility to manage or recommend
investments of the Account or to initiate any purchase , sale, or other
investment transaction in the absence of instructions from Principal or,
where applicable, an Investment Manager.
8.Capital Changes; Income.
(a) Custodian shall, without further instructions from Principal or any
Investment Manager, exchange temporary certificates and may surrender and
exchange Securities for other securities in connection with any
reorganization, recapitalization, or similar transaction in which the
owner of the Securities is not given an option. Custodian has no
responsibility to effect any such exchange unless it has received actual
notice of the event permitting or requiring such exchange at its office
designated in Paragraph 14 of this Agreement or at the office of its
designated agents.
(b) Custodian, or its designated agents, shall, as Principal's agent, to
surrender against payment maturing obligations and obligations called for
redemption, and to collect and receive payments of interest and principal,
dividends, warrants, and other things of value in connection with
Securities. Except as otherwise provided in Paragraph 15(d) of this
Agreement, Custodian or its designated agents shall not be obligated to
enforce collection of any item by legal process or other means.
(c) Custodian or its designated agents are authorized to sign for Principal
all declarations, affidavits, certificates, or other documents that may be
required to collect or receive payments or distributions with respect to
Securities. Custodian or its designated agents are authorized to disclose,
without further consent of Principal, Principal's identity to issuers of
Securities, or the agents of such issuers, who may request such disclosure.
9.Notices re Account Securities. Custodian shall notify Principal or,
where applicable, the Investment Manager, of any reorganization,
recapitalization, or similar transaction not covered by Paragraph 8, and
any subscription rights, proxies, and other shareholder information
pertaining to the Securities actual notice of which is received by
Custodian at its office designated in Paragraph 14 of this Agreement or
at the offices of its designated agents. Custodian's sole responsibility
in this regard shall be to give notices to Principal or the Investment
Manager, as the case may be, within a reasonable time after Custodian
receives them, and Custodian shall not otherwise be responsible for the
timeliness of such notices. Custodian has no responsibility to respond or
otherwise act with respect to any such notice unless and untill Custodian
has received appropriate instructions from Principal or the Investment
Manager.
10.Taxes. Custodian shall pay or cause to be paid from the Account all
taxes and levies in the nature of taxes imposed on the Account or the
Securities thereof by any country. Custodian will use its best efforts
to give the Investment Manager advance written notice of the imposition of
such taxes. However, Custodian shall use reasonable efforts to obtain
refunds of taxes withheld on Securities or the income thereof that are
available under applicable tax laws, treaties, and regulations.
11.Cash. The Principal may from time to time, direct Custodian to hold
Account cash in The HighMark Group of mutual funds or in any investment
company for which Custodian or its affiliates or subsidiaries, acts as
investment advisor, custodies the assets, or provides other services.
Principal shall designate the particular HighMark fund or such other
above-mentioned fund that Principal deems appropriate for the Account.
Principal or an Investment Manager, where applicable, acknowledges that
Custodian will receive fees for such services which will be in addition
to those fees charged by Custodian as agent for the Account.
12.Reports.Custodian shall give written reports to Principal showing (i)
each transaction involving Securities effected by or reported to Custodian,
(ii) the identity and location of Securities held by Custodian as of the
date of the report, (iii) any transfer of location of Securities not
otherwise reported, and (iv) such other information as shall be agreed upon
by Principal and Custodian. Unless otherwise agreed upon by Principal and
Custodian, Custodian shall provide the reports described in this Paragraph
12 on a monthly basis.
13.Instructions from Principal.
(a) Principal shall certify or cause to be certified to Custodian in
writing the names and specimen signatures of all persons authorized to
give instructions, notices, or other communications on behalf of Principal
or any Investment Manager. Such certification shall remain effective until
Custodian receives notice to the contrary.
(b) Principal or authorized Investment Manager, as the case may be, may
give instruction, notice, or other communication called for by this
Agreement to Custodian in writing, or by telecopy, telex, telegram, or
other form of electronic communication acceptable to Custodian. Unless
otherwise expressly provided, all Instructions shall continue in full
force and effect until canceled or superseded. Principal or Investment
Manager may give and Custodian may accept oral instructions on an exception
basis; provided, however, that Principal or Investment Manager shall
promptly confirm any oral communications in writing or by telecopy or
other means permitted hereunder. Principal will hold Custodian harmless for
the failure of Principal or Investment Manager to send confirmations in
writing, the failure of such confirmation to conform to the telephone
instructions received or the Custodian's failure to produce such confirmation
at any subsequent time. The Custodian may electronically record any
instruction given by telephone, or any other telephone discussions with
respect to the Custody Account.
(c) All such communications shall be deemed effective upon receipt by
Custodian at its address specified in Paragraph 14 of this Agreement, as
amended from time to time. Custodian without liability may rely upon and
act in accordance with any instruction that Custodian using due care
believes has been given by Principal or an Investment Manager.
(d) Custodian may at any time request instructions from Principal and may
await such instructions without incurring liability. Custodian has no
obligation to act in the absence of such requested instructions, but may,
however, without liability take such action as it deems reasonably
appropriate to carry out the purposes of this Agreement.
14.Addresses. Until further notice from either party, all communications
called for under this Agreement shall be addressed as follows:
If to Principal:
Name:
S.I.S. Mercator Fund, Inc.
Street Address: 1325 Morris Drive, Suite 203
City, State, Zip: Wayne, PA 19087
Attn: Mr. Elliot Kauffman
Telephone: (610) 993-0670
Telecopier: (610) 640-2367
Telex (Answerback):
If to Custodian:
THE BANK OF CALIFORNIA, NATIONAL ASSOCIATION
Mitsubishi Global Custody
Attn: Ms. Janet E. Potter, Vice President
475 Sansome Street, 15th Floor
San Francisco, California 94111
Telephone: (415) 291-7685
Telecopier: (415) 291-7697
Telex (Answerback): 215748/MBCTD UR
15.Custodian's Responsibilities and Liabilities:
(a)Custodian's duties and responsibilities shall be limited to those
expressly set forth in this Agreement, or as otherwise agreed by Custodian
in writing. In carrying out its responsibilities, Custodian shall exercise
no less than the same degree of care and diligence it exercises with
respect to similar property of its own.
(b)Custodian (i) shall not be required to maintain any special insurance
for the benefit of Principal, and (ii) shall not be liable or responsible
for any loss of or damage to Securities resulting from any causes beyond
Custodian's reasonable control including, without limitations, acts of God,
war, government action, civil commotion, fire, earthquake, or other casualty
or disaster. However, Custodian shall use reasonable efforts to replace
Securities lost or damaged due to such causes with securities of the same
class and issue with all rights and privileges pertaining thereto. The
Custodian shall be liable to the Principal for any loss which shall occur as
the result of the failure of a Sub-Custodian to exercise reasonable care
with respect to the safekeeping of assets to the same extent that the
Custodian would be liable to the principal if the Custodian were holding such
securities and cash in their own premises. The Custodian shall be liable to
the Principal only to the extent of the Principal's direct damages, to be
determined based on the market value of the property which is subject to
loss and without reference to any special conditions or circumstances.
(c)The parties intend that Custodian shall not be considered a fiduciary of
the Account. Accordingly, Custodian shall have no power to make decisions
regarding any policy, interpretation, practice, or procedure with respect
to the Account, but shall perform the ministerial and administrative
functions described in this Agreement as provided herein and within the
framework of policies, interpretations, rules, practices, and procedures
made by Principal or an investment manager, where applicable, as the same
shall be reflected in instructions to Custodian to Principal or any
Investment Manager.
(d)Custodian shall not be required to appear in or defend any legal
proceedings with respect to the Account or the Securities unless Custodian
has been indemnified to its reasonable satisfaction against loss and
expense (including reasonable attorneys' fees).
(e)With respect to legal proceedings referred to in paragraph 15(d) of
this agreement, Custodian may consult with counsel acceptable to it after
written notification to Principal concerning its duties and
responsibilities under this Agreement, and shall not be liable for any
action taken or not taken in good faith on the advice of such counsel.
16.Indemnities.
(a)Principal hereby agrees to indemnify Custodian against all liability,
claims, demands, damages, losses, and costs, including reasonable
attorneys' fees and expenses of legal proceedings, resulting from
Custodian's compliance with instructions from Principal or any Investment
Manager and the terms of this Agreement, except where Custodian has acted
with negligence or willful misconduct or in disregard of the terms of this
Agreement.
(b)Custodian's right to indemnity under Paragraph 16(a) of this Agreement
shall survive the termination of this Agreement, but is subject to the
following terms. Custodian will promptly notify Principal of the assertion
of any indemnifiable claim hereunder and will not settle any such claim
without the express written consent of Principal. Principal shall be
entitled to defend any such claim with counsel of its choice. Custodian
may join in the defense assumed by Principal, at its own expense,
with counsel of its choise.
17.Compensation; Expenses. Principal shall reimburse Custodian for all
reasonable out-of-pocket expenses and processing costs incurred by
Custodian in the administration of the Account including, without
limitation, reasonable counsel fees incurred by Custodian pursuant to
Paragraph 15(e) of this Agreement. Principal also shall pay Custodian
reasonable compensation for its services hereunder as specified in
Appendix B. Custodian shall be entitled to withdraw such expenses or
compensation from the Account if Principal fails to pay the same to
Custodian within 45 days after Custodian has sent an appropriate billing to
Principal; provided, however, that Custodian will give Principal ten (10)
days prior written notice before withdrawing such funds.
18.Amendment; Termination. This Agreement may be amended at any time by a
written instrument signed by the parties. Either party may terminate
this Agreement and the Account upon 90 days' written notice to the other
unless the parties agree on a different time period. Upon such
termination, Custodian shall deliver or cause to be delivered the
Securities, less any amounts due and owing to Custodian under this
Agreement, to a successor custodian designated by Principal or, if a
successor custodian has not accepted appointment by the effective date of
termination of the Account, to Principal. Upon completion of such delivery
Custodian shall be discharged of any further liability or resposibility
with respect to the Securities so delivered.
19.Successors. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors in interest.
Without consent of the parties, this agreement cannot be assigned to any
third party.
20.Governing Law. The validity, construction, and administration of this
Agreement shall be governed by the applicable laws of the United States
from time to time in force and effect and, to the extent not preempted by
such laws of the United States, by the laws of the State of California
from time to time in force and effect.
21.Effective Date. This Agreement shall be effective as of the date
appearing below, and shall supersede any prior or existing agreements
between the parties pertaining to the subject matter hereof.
Date:
By:
Authorized Signature
"Principal"
The Bank of California, National Association
By:
Title:
By:
Title:
"Custodian"
S.I.S. MERCATOR FUND, INC.
ADMINISTRATION AGREEMENT
AGREEMENT made this 3rd day of June, 1996, by and between S.I.S. Mercator
Fund, Inc., a Maryland corporation (the "Fund"), on behalf of the Global
Equity Portfolio (the "Portfolio"), a separate series of the Fund, and
Strategic Investment Services, Inc., a Pennsylvania corporation (the
"Administrator").
WHEREAS, the Fund has been organized and operates as an investment company
registered under the Investment Company Act of 1940 for the purposes of
investing and reinvesting its assets in securities, as set forth in its
Registration Statement under the Investment Company Act of 1940 ("1940 Act")
and the Securities Act of 1933 ("1933 Act"), as heretofore amended and
supplemented;
WHEREAS, the Fund, desires to avail itself of the services, assistance and
facilities of an administrator and to have an administrator perform various
administrative and other services for it and the Portfolio; and
WHEREAS, the Administrator desires to provide such services.
NOW, THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is agreed as follows:
1.Employment of the Administrator. The Fund hereby employs the
Administrator to supervise the administrative affairs of the Fund and
the Portfolio, subject to the direction of the board of directors of the
Fund, on the terms hereinafter set forth. The Administrator hereby
accepts such employment and agrees to render the services described
herein for the compensation herein provided.
2.Services to be Provided by the Administrator.
A.The Administrator shall supervise the administrative affairs of the Fund
and the Portfolio. Specifically, the Administrator shall:
(1)supervise the services provided to the Fund for the benefit of the
Portfolio by the Portfolio's custodian, dividend disbursing agent, printer,
insurance carriers (as well as agents and brokers), independent accountants,
legal counsel and other persons who provide services to the Fund, and for
the benefit of the Portfolio;
(2)assist the Fund to comply with the provisions of applicable federal,
state, local and foreign securities, tax, organizational and other laws
that (i) govern the business of the Fund in respect of the Portfolio
(except those that govern investment of the Portfolio's assets), (ii)
regulate the offering of the Portfolio's shares and (iii) provide for
the taxation of the Fund or Portfolio;
(3)make and maintain the corporate records of the Fund, and those
pertaining to the Portfolio, as required by rules 31a-1 of the 1940 Act,
in conformity with rules 31a-2 and 31a-3 of said Act;
(4)assist the Fund to conduct any meetings of Portfolio shareholders;
(5)provide persons to serve as officers of the Fund; and
(6)provide such other administrative services for the benefit of the
Portfolio as the board of directors may reasonably request.
B.In carrying out its responsibilities under Section A herein, to the
extent the Administrator deems necessary or desirable, and at the expense
of the Portfolio, the Administrator shall be entitled to consult with, and
obtain the assistance of, the persons described in Section A, paragraph (1)
herein who provide services to the Fund.
C.The Administrator, at its own expense, shall provide the Fund with such
office facilities and equipment as may be necessary to conduct the
administrative affairs of the Fund in respect of the Portfolio.
3.Expenses of the Fund. It is understood that the Portfolio will pay all
of its own expenses incurred to conduct its administrative affairs.
4.Compensation of the Administrator. For the services to be rendered by
the Administrator as provided in Section 2 of this Agreement, the Portfolio
shall pay to the Administrator, at the end of each month, a fee equal to
one-twelfth of .25 percent of the net assets of the Portfolio. If this
Agreement is terminated prior to the end of any month, the fee for such
month shall be prorated.
5.Activities of the Administrator. The services of the Administrator to
the Fund or in respect of the Portfolio are not to be deemed exclusive,
and the Administrator shall be free to render similar services to others as
long as its services to the Fund or in respect of the Portfolio are not
impaired thereby.
6.Liability of the Administrator. No provision of this Agreement shall be
deemed to protect the Administrator against any liability to the Fund or
its shareholders to which it might otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of
its duties or the reckless disregard of its obligations under this
Agreement.
7.Duration and Termination.
A.This Agreement shall become effective on the date written below, provided
that prior to such date it shall have been approved by the board of
directors of the Fund, and shall continue in effect until terminated by
the Fund or the Administrator on 60 days written notice to the other.
B.Any notice under this Agreement shall be given in writing addressed and
delivered, or mailed post-paid, to the other party at the principal
business office of such party.
8.Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
9.Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and effective on the 3rd day of June, 1996.
Strategic Investment Services, Inc. S.I.S. Mercator Fund, Inc.
By:________________________ By:___________________________
President
S.I.S. MERCATOR FUND, INC.
ADMINISTRATION AGREEMENT
AGREEMENT made this 3rd day of June, 1996, by and between S.I.S. Mercator
Fund, Inc., a Maryland corporation (the "Fund"), on behalf of the Global
Income Portfolio (the "Portfolio"), a separate series of the Fund, and
Strategic Investment Services, Inc., a Pennsylvania corporation (the
"Administrator").
WHEREAS, the Fund has been organized and operates as an investment company
registered under the Investment Company Act of 1940 for the purposes of
investing and reinvesting its assets in securities, as set forth in its
Registration Statement under the Investment Company Act of 1940 ("1940
Act") and the Securities Act of 1933 ("1933 Act"), as heretofore amended
and supplemented;
WHEREAS, the Fund, desires to avail itself of the services, assistance and
facilities of an administrator and to have an administrator perform various
administrative and other services for it and the Portfolio; and
WHEREAS, the Administrator desires to provide such services.
NOW, THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is agreed as follows:
1.Employment of the Administrator. The Fund hereby employs the
Administrator to supervise the administrative affairs of the Fund and
the Portfolio, subject to the direction of the board of directors of the
Fund, on the terms hereinafter set forth. The Administrator hereby accepts
such employment and agrees to render the services described herein for the
compensation herein provided.
2.Services to be Provided by the Administrator.
A. The Administrator shall supervise the administrative affairs of the
Fund and the Portfolio. Specifically, the Administrator shall:
(1)supervise the services provided to the Fund for the benefit of the
Portfolio by the Portfolio's custodian, dividend disbursing agent, printer,
insurance carriers (as well as agents and brokers), independent accountants,
legal counsel and other persons who provide services to the Fund, and for
the benefit of the Portfolio;
(2)assist the Fund to comply with the provisions of applicable federal,
state, local and foreign securities, tax, organizational and other laws
that (i) govern the business of the Fund in respect of the Portfolio
(except those that govern investment of the Portfolio's assets), (ii)
regulate the offering of the Portfolio's shares and (iii) provide for the
taxation of the Fund or Portfolio;
(3)make and maintain the corporate records of the Fund, and those
pertaining to the Portfolio, as required by rules 31a-1 of the 1940 Act,
in conformity with rules 31a-2 and 31a-3 of said Act;
(4)assist the Fund to conduct any meetings of Portfolio shareholders;
(5)provide persons to serve as officers of the Fund; and
(6) provide such other administrative services for the benefit of the
Portfolio as the board of directors may reasonably request.
B. In carrying out its responsibilities under Section A herein, to the
extent the Administrator deems necessary or desirable, and at the expense
of the Portfolio, the Administrator shall be entitled to consult with,
and obtain the assistance of, the persons described in Section A,
paragraph (1) herein who provide services to the Fund.
C. The Administrator, at its own expense, shall provide the Fund with such
office facilities and equipment as may be necessary to conduct the
administrative affairs of the Fund in respect of the Portfolio.
3. Expenses of the Fund. It is understood that the Portfolio will pay all
of its own expenses incurred to conduct its administrative affairs.
4. Compensation of the Administrator. For the services to be rendered by
the Administrator as provided in Section 2 of this Agreement, the Portfolio
shall pay to the Administrator, at the end of each month, a fee equal to
one-twelfth of .25 percent of the net assets of the Portfolio. If this
Agreement is terminated prior to the end of any month, the fee for such
month shall be prorated.
5. Activities of the Administrator. The services of the Administrator to
the Fund or in respect of the Portfolio are not to be deemed exclusive,
and the Administrator shall be free to render similar services to others
as long as its services to the Fund or in respect of the Portfolio are not
impaired thereby.
6.Liability of the Administrator. No provision of this Agreement shall
be deemed to protect the Administrator against any liability to the Fund
or its shareholders to which it might otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of
its duties or the reckless disregard of its obligations under this
Agreement.
7.Duration and Termination.
A. This Agreement shall become effective on the date written below,
provided that prior to such date it shall have been approved by the board
of directors of the Fund, and shall continue in effect until terminated by
the Fund or the Administrator on 60 days written notice to the other.
B. Any notice under this Agreement shall be given in writing addressed and
delivered, or mailed post-paid, to the other party at the principal
business office of such party.
8. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
9. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and effective on the 3rd day of June, 1996.
Strategic Investment Services, Inc. S.I.S. Mercator Fund, Inc.
By:________________________ By:___________________________
President
TRANSFER AGENCY AGREEMENT
THIS AGREEMENT is made as of the 3rd day of June, 1996 between S.I.S.
MERCATOR FUND, INC., a Maryland corporation (the "Fund"), and STRATEGIC
INVESTMENT SERVICES, INC., a Pennsylvania corporation (the "Transfer Agent").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end, diversified management
investment company under the Investment Company Act of 1940, as amended
(the "1940 Act"); and
WHEREAS, the Fund desires to retain the Transfer Agent to serve as the
Fund's transfer agent and registrar, and the Transfer Agent is willing to
furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints the Transfer Agent to serve as
transfer agent and registrar for the Fund with respect to the shares of
the Fund's Common Stock, $.01 par value ("Shares") for the period and on
the terms set forth in this Agreement. The Fund presently intends to
issue two separate series or classes of shares, which are described in
the Prospectus delivered to the Transfer Agent herewith, and the Fund may
classify and reclassify additional series or classes of Shares hereafter.
The Transfer Agent shall identify to each such series or class property
belonging to such series or class and in reports, records, confirmations
and notices to the Fund and Shareholders and shall issue shares on a per
series basis as provided in the Prospectus. The Transfer Agent accepts
such appointment and agrees to furnish the services herein set forth in
return for the compensation provided herein. Any class of shares created
by the Fund after the date hereof shall be included hereunder upon
mutual agreement of the fund and the Transfer Agent
2. Delivery of Documents. The Fund has furnished the Transfer Agent with
copies properly certified or authenticated of each of the following:
(a)Resolutions of the Fund's Board of Directors authorizing the
appointment of the Transfer Agent as transfer agent and registrar for the
Fund and approving this Agreement;
(b) Appendix A identifying and containing the signatures of the Fund's
officers and other persons authorized to issue Oral Instructions and to
sign Written Instructions, as hereinafter defined, on behalf of the Fund
and to execute stock certificates representing Shares;
(c) The Fund's Articles of Incorporation and all amendments thereto (such
Articles of Incorporation, as presently in effect and as they shall from
time to time be amended, are herein called the "Charter");
(d) The Fund's By-Laws and all amendments thereto (such By-Laws, as
presently in effect and as they shall from time to time be amended, are
herein called the "By-Laws");
(e) The Custodian Agreement between Bank of California, N.A. and the Fund
(the "Custodian Agreement"); and
(f) The Fund's Registration Statement on Form N-1A under the Securities Act
of 1933, as amended (the "1933 Act") (File No. 33-95102) and under the 1940
Act as filed with the SEC on July 25, 1995 relating to Shares. The Fund
will furnish the Transfer Agent from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing, if any.
3. Definitions.
(a)"Authorized Person." As used in this Agreement, the term "Authorized
Person" means any officer of the Fund and any other person, whether or not
any such person is an officer or employee of the Fund, duly authorized by
the Board of Directors of the Fund to give Oral and Written Instructions on
behalf of the Fund and listed on the Certificate annexed hereto as Appendix
A or any amendment thereto as may be received by the Transfer Agent from
time to time.
(b)"Oral Instructions." As used in this Agreement, the term "Oral
Instructions" means oral instructions actually received by the Transfer
Agent from an Authorized Person or from a person reasonably believed by the
Transfer Agent to be an Authorized Person. The Fund agrees to deliver to
the Transfer Agent, at the time and in the manner specified in Paragraph
4(b) of this Agreement, Written Instructions confirming Oral Instructions.
(c)"Written Instructions." As used in this Agreement, the term "Written
Instructions" means written instructions delivered by hand, mail, tested
telegram, cable, telex or facsimile sending device, and received by the
Transfer Agent and signed by an Authorized Person. Written Instructions
include electronic transmission properly originated and confirmed by the
Fund.
(d)"Shares." As used in this Agreement the term "Shares" means each
separate class of shares of common stock issued by the Fund that are
subject to this Agreement and as to which the services provided hereunder
relate.
4. Instructions Consistent with Charter, etc.
(a) Unless otherwise provided in this Agreement, the Transfer Agent shall
act only upon Oral or Written Instructions. Although the Transfer Agent
may know of the provisions of the Charter and By-Laws of the Fund, the
Transfer Agent may assume that any Oral or Written Instructions received
hereunder are not in any way inconsistent with any provisions of such
Charter or By-Laws or any vote, resolution or proceeding of the
Shareholders, or of the Board of Directors, or of any committee thereof.
(b) The Transfer Agent shall be entitled to rely upon any Oral Instructions
and any Written Instructions actually received by the Transfer Agent
pursuant to this Agreement. The Fund agrees to forward to the Transfer
Agent Written Instructions confirming Oral Instructions in such manner
that the Written Instructions are received by the Transfer Agent by the
close of business of the same day that such Oral Instructions are given to
the Transfer Agent. The Fund agrees that the fact that such confirming
Written Instructions are not received by the Transfer Agent shall in no
way affect the validity of the transactions or enforceability of the
transactions authorized by the Fund by giving Oral Instructions. The Fund
agrees that the Transfer Agent shall incur no liability to the Fund in acting
upon oral Instructions given to the Transfer Agent hereunder concerning
such transactions, provided such instructions reasonably appearing to have
been recieved from an Authorized Person and provided further, if such oral
or Written Instructions were received from an Affiliate, that such Affiliate
has acted without negligence (unless such Affiliate has received and
transmitted erroneous instructions received from an Authorized Person that
is not an Afflilate).
(c)In the case of any stock split, recapitalization or other capital
adjustment requiring a change in the form of Share certificates, the
Transfer Agent will, at the Fund's expense, issue Share certificates in
the new form in exchange for, or upon transfer of, outstanding Share
certificates in the old form, upon receiving:
(i) a Certificate authorizing the issuance of Share certificates in the
new form;
(ii) a certified copy of any amendment to the Charter with respect to the
change;
(iii) specimen Share certificates for each class of Shares in the new form
approved by the Board of Directors of the Fund, with a Certificate signed
by the Secretary of the Fund as to such approval; and
(iv) an opinion of counsel for the Fund with respect to the validity of
the Shares in the new form and the status of such Shares under the
Securities Act of 1933, as amended, and any other applicable federal law
or regulation (i.e., if subject to registration, that the Shares have
been registered and that the Registration Statement has become effective
or, if exempt, the specific grounds therefor).
5. Transactions Not Requiring Instructions. In the absence of contrary
Written Instructions, the Transfer Agent is authorized to take the
following actions:
(a) Issuance of Shares. Upon receipt of a purchase order from an investor
for the purchase of Shares and sufficient information to enable the
Transfer Agent to establish a Shareholder account, and after confirmation
of receipt or crediting of Federal funds for such order or receipt of such
other consideration for such shares as may be described in the Prospectus
from the Fund's Custodian, the Transfer Agent shall issue and credit the
account of such investor with Shares, based on the current net asset
value of such Shares, as provided by the Fund or its agent.
(b) Transfer of Shares; Uncertificated Securities. Where a Shareholder
does not hold a certificate representing the number of Shares in his
account and does provide the Transfer Agent with written instructions for
the transfer of such Shares, which include a signature guaranteed by a
national bank, a member of a National Securities Exchange or such other
person as may be acceptable to the Transfer Agent, and such other
appropriate documentation to permit a transfer, then the Transfer Agent
shall register such Shares and shall deliver them pursuant to instructions
received from the transferor, puruant to the law of the State of Maryland
and other applicable law relating to the transfer of shares of common stock.
(c) Stock Certificates. If at any time the Fund issues stock certificates,
the following provisions will apply:
(i) The Fund will supply the Transfer Agent with a sufficient supply of
stock certificates representing Shares, in the form approved from time to
time by the Board of Directors of the Fund, and, from time to time, shall
replenish such supply upon request of the Transfer Agent. Such stock
certificates shall be properly signed, manually or by facsimile signature,
by the duly authorized officers of the Fund, whose names and positions
shall be set forth as indicated on Appendix A, and shall bear the
corporate seal or facsimile thereof of the Fund, notwithstanding the
death, resignation or removal of any officer of the Fund, such executed
certificates bearing the manual or facsimile signature of such officer
shall remain valid and be issued to Shareholders until the Transfer Agent
is otherwise directed by Written Instructions.
(ii) In the case of the loss or destruction of any certificate representing
Shares, no new certificate shall be issued in lieu thereof, unless there
shall first have been furnished an appropriate bond of indemnity issued
by the surety company approved by the Transfer Agent, except upon the
receipt by the Transfer Agent of Written Instructions from the Fund.
(iii) Upon receipt of signed stock certificates in proper form for
transfer, and upon cancellation or destruction thereof, the Transfer Agent
shall countersign, register and issue new certificates for the same number
of Shares in the name of the transferee and shall deliver them pursuant to
instructions received from the transferor and the law of the State of
Maryland relating to the transfer of shares of common stock.
(iv) Upon receipt of the stock certificates, which shall be in proper form
for transfer, together with the Shareholder's instructions to hold such
stock certificates for safekeeping, the Transfer Agent shall reduce such
Shares to uncertificated status, while retaining the appropriate
registration in the name of the Shareholder upon the transfer books.
(v) Upon receipt of written instructions from a Shareholder of
uncertificated securities for a certificate in the number of shares in
his account, the Transfer Agent will issue such stock certificates and
deliver them to the Shareholder.
(d) Redemption of Shares. Upon receipt of a redemption order from a
stockholder and/or in accordance with Written Instructions, the Transfer
Agent shall promptly obtain and notify the Custodian of the amount
necessary to pay such redemption and shall record the redemption of the
appropriate number of Shares from the redeeming Shareholder's account and
arrange for direct payment of redemption proceeds to such Shareholders by
the Fund's Custodian, by wire transfer or otherwise as provided in
Written Instructions in accordance with such procedures and controls as
are provided in the Prospectus or as may be mutually agreed upon from
time to time by among the Fund, the Transfer Agent and the Fund's Custodian.
6. Authorized Shares. The Fund's authorized capital stock is described in
the Fund's Charter. The Transfer Agent shall record issues of all Shares
and shall notify the Fund in case any proposed issue of Shares by the Fund
shall result in an over-issue as defined by Section 8-104(2) of Article 8
of the Maryland Uniform Commercial Code. In case any issue of Shares
would result in such an over-issue, the Transfer Agent shall refuse to
issue said Shares and shall not countersign and issue certificates for
such Shares. The Fund agrees to notify the Transfer Agent promptly of any
change in the number of authorized Shares and any change in the number of
Shares registered under the 1933 Act or termination of the Fund's declaration
under Rule 24(f)-2 of the 1940 Act. The Transfer Agent shall provide the Fund
with the necessary information to prepare Form 24f-2 under the 1940 Act.
7. Dividends and Distributions. The Fund shall furnish the Transfer Agent
with appropriate evidence of action by the Fund's Board of Directors
authorizing the declaration and payment of dividends and distributions.
The Transfer Agent shall notify the Custodian of the amount of cash
necessary to pay such dividend or distribution and, after deducting any
amount required to be withheld by any applicable tax laws, rules and
regulations or other applicable laws, rules and regulations, the Transfer
Agent shall in accordance with the instructions in proper form from a
Shareholder and the provisions of the Fund's Charter, issue and credit
the account of the Shareholder with an appropriate number of Shares, or,
if the Shareholder so elects, request the Custodian to pay such dividends or
distribution in cash to Shareholders.
The Transfer Agent shall prepare, file with the Internal Revenue Service
and other appropriate taxing authorities, and address and mail to
Shareholders such returns and information relating to dividends and
distributions paid by the Fund as are required to be so prepared, filed
and mailed by applicable laws, rules and regulations, or such substitute
form of notice as may from time to time be permitted or required by the
Internal Revenue Service. On behalf of the Fund, the Transfer Agent shall
process and confirm shareholder addresschanges, recording new addresses and
shall mail certain requests for Shareholders' certifications under penalties
of perjury and insrtuct the Custodian to pay on a timely basis to the
appropriate Federal authorities any taxes to be withheld on dividends and
distributions paid by the Fund, all as required by applicable Federal tax
laws and regulations.
8.Communications with Shareholders.
(a)Communications to Shareholders. The Transfer Agent will address and
mail all communications by the Fund to its Shareholders, with copies to
such persons as may be designated in Written Instructions from the Fund.
Without limiting the foregoing, the Transfer Agent will prepare, address
and mail confirmations of purchases, redemptions and transfers of Fund
Shares, account changes, dividends and distributions, 1099's and other
tax information, and account statements, and will address and mail
dividend and distribution notices, reports to Shareholders and proxy
material for its meetings of Shareholders. The Transfer Agent will receive
and tabulate the proxy cards forthe meetings of the Fund's Shareholders and
notify the Fund of the results of such tabulations.
(b) Correspondence. The Transfer Agent will answer such correspondence
from Shareholders, securities brokers and others relating to its duties
hereunder and such other correspondence as may from time to time be
mutually agreed upon between the Transfer Agent and the Fund.
9. Records. The Transfer Agent shall maintain records of the accounts for
each Shareholder showing the following information:
(a) name, address and tax identification or Social Security number;
(b) number and class of Shares held and number and class of Shares for
which certificates, if any, have been issued, including certificate numbers
and denominations;
(c) historical information regarding the account of each Shareholder,
including dividends and distributions paid and the date and price for all
transactions on a Shareholder's account;
(d) any stop or restraining order placed against a Shareholder's account;
(e) any correspondence relating to the current maintenance of a
Shareholder's account;
(f) information with respect to withholdings; and
(g) any information required in order for the Transfer Agent to perform
any calculations contemplated or required by this Agreement.
The books and records pertaining to the Fund which are in the possession
of the Transfer Agent shall be the property of the Fund and shall be
returned to the Fund or its designee upon request. Such books and records
shall be prepared and maintained as required by the 1940 Act and other
applicable laws and rules and regulations. The Fund, or the Fund's
authorized representatives, shall have access to such books and records
at all times during the Transfer Agent's normal business hours. Upon the
request of the Fund, copies of any such books and records shall be
provided by the Transfer Agent to the Fund or the Fund's authorized
representitive or designee at the Funds expense.
10. Ongoing Functions. The Transfer Agent will perform the following
functions on an ongoing basis:
(a) furnish state-by-state registration reports to the Fund;
(b) provide toll-free lines for direct Shareholder use, plus customer
liaison staff with on-line inquiry capacity;
(c) provide the Fund with duplicate confirmations of stockholder activity,
whether executed through a dealer or directly with the Transfer Agent;
(d) provide Shareholder lists and statistical information concerning
accounts to the Fund; and
(e) provide timely notification of Fund activity and such other
information as may be agreed upon from time to time between the Transfer
Agent and the Fund's Custodian, to the Fund or the Custodian and such
reports to the Fund as may be reasonably requested by the Fund.
11. Cooperation with Accountants. The Transfer Agent shall cooperate with
the Fund's independent public accountants and shall take all reasonable
action in the performance of its obligations under this Agreement to
assure that the necessary information is made available to such
accountants for the expression of their opinion as such may be required
by the Fund from time to time.
12. Confidentiality. The Transfer Agent agrees on behalf of itself and its
employees to treat confidentially all records and other information
relative to the Fund and its Shareholders, except, after prompt prior
notification to and approved in writing by the Fund, which approval may
not be withhold where the Transfer Agent reasonably believes that it may
be exposed to civil or criminal contempt proceedings for failure to comply,
when requested to divulge such information by duly constituted authorities,
or when so requested by the Fund.
13. Equipment Failures. In the event of equipment failures beyond the
Transfer Agent's control, the Transfer Agent shall, at no additional
expense to the Fund, promptly notify the Fund and take prompt, reasonable
steps to minimize service interruptions but shall have no liability with
respect thereto except, at its own expense, to reconstruct any records of
the Fund that the Transfer Agent is required to prepare and maintain
hereunder.
14. Right to Receive Advice. The Transfer Agent shall be protected in any
action or inaction that the Transfer Agent takes in reliance on its legal
counsel. The Transfer Agent shall notify the Fund of the receipt of such
advice within a reasonable time.
15. Compliance with Governmental Rules and Regulations. The Transfer Agent
agrees to perform its duties hereunder in accordance with applicable law;
however, the Transfer Agent assumes no responsibility for ensuring that
the Fund complies with the requirements of the 1933 Act, the 1934 Act, the
1940 Act, the CEA and any laws, rules and regulations of governmental
authorities having jurisdiction.
16. Compensation. As compensation for the services rendered by the
Transfer Agent during the term of this Agreement, each Portfolio of the
Fund will pay to the Transfer Agent annual fees of $25 per shareholder
account, but not less than $20,000 per year. The minimum fee shall be
paid on a pro rata basis for any period of less than one year when this
agreement is in effect and may be paid on a monthly basis.
17.Indemnification.
(a) The Fund agrees to indemnify and hold harmless the Transfer Agent from
all taxes, charges, expenses (except expenses that are inherent to its
duties hereunder), assessments, claims and liabilities, including (without
limitation) reasonable attorneys' fees and disbursements, arising directly
or indirectly from any action or thing which the Transfer Agent takes or
does or omits to take or do upon Oral or Written Instructions provided by,
or on behalf of, the Fund, provided that the Transfer Agent shall not be
indemnified against any liability (or any expenses incident to such
liability) arising out of the Transfer Agent's own misfeasance, bad
faith or negligence or disregard of its duties in connection with the
performance of its duties and obligations specfically described in this
Agreement.
(b) he Transfer Agent shall not pay or settle any claim, demand, expense or
liability to which it may seek indemnity pursuant to paragraph (a) above
(an "Indemnifiable Claim") without the express written consent of the Fund.
The Transfer Agent shall notify the Fund promptly of receipt of
notification of an Indemnifiable Claim. Unless the Fund notifies the
Transfer Agent within 30 days of receipt of Written Notice of such
Indemnifiable Claim that the Fund does not intend to defend such
Indemnifiable Claim, the Fund shall defend the Transfer Agent for such
Indemnifiable Claim. The Fund shall have the right to defend any
Indemnifiable Cliam at its own expense, such defence to be conducted by
counsel selected by the Fund. Further, the Transfer Agent may join the Fund
in such defense at the Transfer Agent's own expense, but to the extent that
it shall so desire the Fund shall direct such defense. If the Fund shall
fail or refuse to defend, pay or settle an Idemnifiable Claim, the
Transfer Agent, at the Fund's Expense, Cinsistent with the limitation
concerning attorneys' fees expressed in Paragraph 17(a) hereof, may provide
its own defense.
18. Responsibility of the Transfer Agent. In the performance of its duties
hereunder, the Transfer Agent shall be obligated to exercise due care and
diligence and to act in a timely manner and in good faith to assure the
accuracy and completeness of all services performed under this Agreement.
The Transfer Agent shall be under no duty to take any action on behalf of
the Fund except as specifically set forth herein or as may be specifically
agreed to by the Transfer Agent in writing.
The Transfer Agent shall have no liability to the Fund for any losses or
damages the nature of which is or was remote, unforeseen, unforeseeable or
beyond the scope of reasonable anticipation at the time this Agreement was
executed.
19. Duration and Termination. This Agreement may be terminated by either
party upon not less than 180 days prior written notice. The foregoing
provisions notwithstanding, either party may terminate this Agreement in
the event of a material breach of the terms hereof after written notice to
the other party of such breach and a reasonable time for cure of such
breach, unless such breach is not curable and, in such circumstances, this
Agreement shall terminate, at the option of the injured party, three
months after the date such notice is given.
20. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
21. Amendments. This Agreement or any part hereof may be changed or waived
only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
22. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
23. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior
agreements and understandings relating to the subject matter hereof,
provided that the parties hereto may embody in one or more separate
documents their agreement, if any, any agreements with respect to Written
or Oral Instructions. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement shall be deemed to be a contract made in Pennsylvania and
governed by Pennsylvania law. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby. This Agreement
shall be binding and shall inure to the benefit of the parties hereto and
their respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first
above written.
S.I.S. MERCATOR FUND, INC.
Attest: ______________________ By: __________________________
STRATEGIC INVESTMENT SERVICES, INC.
Attest: ______________________ By: __________________________
SHAREHOLDER SERVICES PLAN
The Shareholder Services Plan (the "Plan") of S.I.S. Mercator Fund, Inc., a
Maryland corporation (the "Fund"), which is an open-end, diversified
management investment company registered under the Investment Company Act
of 1940, as amended (the "Act"), is adopted by the Board of Directors of
the Fund on July 7, 1995.
1. Purpose. The Board of Directors of the Fund desires to provide a source
of funds from which to make payments to persons ("Service Fees") for
personal services and/or the maintenance of shareholder accounts.
2. Service Fees.
(a) The Fund shall make payments periodically to, or as directed by, the
Distributor to be used to pay service fees to persons who provide
shareholder services. Such services may include personal services, such
as providing shareholders with information regarding the Fund or their
Fund accounts, the maintenance of shareholder accounts, and such other
services, including dissemination of investment, financial or economic
newsletters and other communications regarding the Fund or the accounts of
shareholders, as, in the opinion of the Distributor, are designed to
encourage or facilitate continued maintenance of shareholder accounts of
the Fund, otherwise retain the loyalty of shareholders to the Fund.
(b) The aggregate amount of all payments by each Portfolio of the Fund
hereunder shall not exceed .25% of the average annual net asset value of
each Portfolio for each fiscal year of the Fund, based on the net asset
value of each Portfolio calculated as of the last business day of each
month. Payments hereunder may be made by the Portfolios monthly or on
such other basis as the Distributor may request.
3. Reports. At least quarterly, in each year that this Plan remains in
effect, the Distributor shall prepare and furnish to the Board of
Directors of the Fund a written report, which the Board shall review,
setting forth, on a per Portfolio basis, the amounts expended or to be
expended hereunder and purposes for which such expenditures were or are to
be made. The Distributor shall keep and maintain adequate records and
books of account in respect of such payments.
4. Approval of Plan. The Plan shall become effective as to a Portfolio
after approval of the Plan by a majority vote of the Fund's Board of
Directors.
5. Term. This Plan shall become effective when the registration statement
of the Fund under the Securities Act of 1933 is declared effective and
shall continue in effect thereafter until terminated by either party as
provided herein.
6. Termination. This Plan may be terminated at any time as to a Portfolio
by the Distributor or by a majority vote of the directors of the Fund or by
vote of the holders of a majority of the outstanding voting securities of
the Portfolio. If the Plan is terminated, the obligation of the Portfolio(s)
affected by the termination to make payments pursuant to the Plan shall cease
and no further payments shall be made by such Portfolio(s) and any
agreements pursuant to which plan payments are made shall so provide
7. Miscellaneous. All agreements with any person or organization relating
to the implementation of this Plan shall be in writing and any agreement
related to this Plan shall be subject to approval by the Board of Directors
of the Fund and shall be subject to termination without penalty, pursuant
to the provisions of Section 6 hereof.
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
CONSENT OF SOLE SHAREHOLDER
I, Richard T. Coghlan, the holder of all of the outstanding shares of
common stock of the Global Income Portfolio and the Global Equity Portfolio
of S.I.S. Mercator Fund, Inc. ("Fund") hereby approve:
1. the Investment Management Agreements between Strategic Investment
Services and the Fund for the Global Income Portfolio and the Global
Equity Portfolio, both agreements dated November 8, 1995; and
2.the Distribution Plan of the Fund, including the Agreement between the
Fund and East Coast Consultants, Inc., as approved by the board of
directors of the Fund at their meeting on July 7, 1995.
_________________________ ________________
Witness Richard T. Coghlan
November 8, 1995.
Date
DISTRIBUTION PLAN
The Distribution Plan (the "Plan") of S.I.S. Mercator Fund, Inc., a Maryland
corporation (the "Fund"), which is an open-end, diversified management
investment company registered under the Investment Company Act of 1940, as
amended (the "Act"), is adopted pursuant to Section 12(b) of the Act and
Rule 12b-1 promulgated thereunder ("Rule 12b-1").
1.Distributor. East Coast Consultants, Inc., a Pennsylvania corporation,
serves as Distributor of each Portfolio of the Fund's shares pursuant to a
Distribution Agreement approved by the Board of Directors of the Fund.
2.Distribution and Service Payments.
(a) The Fund shall make payments periodically to the Distributor to be
used by the Distributor, in its discretion, to (i) pay broker-dealers and
other persons who assist in the sale of Fund shares or who provide
promotional or advertising services to the Fund and (ii) pay other
advertising, promotional expenses and other expenses associated with
distribution of Fund shares.
(b) Payments under clause (ii) of Section 2(a) may be made for any
advertising and promotional expenses incurred relating to selling efforts,
including the incremental costs of printing prospectuses, statements of
additional information, annual reports and other periodic reports for
distribution to persons who are not shareholders of the Fund; the costs of
preparing and distributing any other supplemental sales literature; costs of
radio, television, newspaper and other advertising; telecommunications
expenses including the costs of telephones, telephone lines and other
communications equipment used in the sale of Fund shares, the salary of a
Marketing Director for the sale of Fund shares, the costs of sales meetings
and seminars, the costs of maintaining an office for the sale of the Fund's
shares and to defray the costs of such other products or services to be
used to sell or further the sale of Fund shares as may be approved by the
Board of Directors of the Fund as provided in clause (a) of Section 4 herein.
(c) The aggregate amount of all payments by each Portfolio of the Fund
hereunder shall not exceed .25% of the average annual net asset value of
each Portfolio for each fiscal year of the Fund, based on the net asset
value of each Portfolio calculated as of the last business day of each
month. Payments to the Distributor hereunder may be made by the Portfolios
monthly or on such other basis as the Distributor may request.
3. Reports. At least quarterly, in each year that this Plan remains in
effect, the Distributor shall prepare and furnish to the Board of Directors
of the Fund a written report, which the Board shall review, complying with
the requirements of Rule 12b-1, setting forth, on a per Portfolio basis,
the amounts expended or to be expended hereunder by the Distributor and
purposes for which such expenditures were or are to be made. The
Distributor shall keep and maintain adequate records and books of account
in respect of such payments.
4. Approval of Plan. The Plan shall become effective as to a Portfolio
after approval of the Plan by (a) a majority vote of the Fund's Board of
Directors (including a majority vote of the Disinterested Directors as
defined in Section 6), cast in person at a meeting called for the purpose
of voting on the Plan and (b) approval by the holders of a majority of the
outstanding voting securities of the Portfolio.
5. Term. This Plan shall remain in effect as to each Portfolio for one
year from its adoption date and may be continued thereafter as to each
Portfolio if this Plan and all related agreements are approved at least
annually by a majority vote of both the Board of Directors and the
Disinterested Directors of the Fund, cast in person at a meeting called
for the purpose of voting on such Plan and such agreements. This Plan may
not be amended to increase materially the amount to be paid by the
Portfolios for services hereunder unless such amendment is approved as
provided in Section 4 hereof. All other material amendments to this Plan
must be approved by a vote of both the Board of Directors of the Fund and a
majority vote of the Disinterested Directors, cast in person, at a meeting
called for the purpose of voting thereon.
6. Termination. This Plan may be terminated at any time as to a Portfolio
by the Distributor or by a majority vote of the directors who are not
interested persons (as defined in Section 2(a)(19) of the Act) of the Fund
and who have no direct or indirect financial interest in the operation of
the Plan or in any agreements related to the Plan (the "Disinterested
Directors") or by vote of the holders of a majority of the outstanding
voting securities of the Portfolio. If the Plan is terminated, the
obligation of the Portfolio(s) affected by the termination to make payments
pursuant to the plan shall cease and no further payments shall be made by
such Portfolio(s). This Plan shall terminate automatically in the event
of its "assignment," as defined in Section 2(a)(4) of the Act.
7. Nomination of "Disinterested" Directors. While this Plan shall be in
effect, the selection and nomination of the Disinterested Directors of the
Fund shall be committed to the discretion of such Directors.
8. Miscellaneous. All agreements with any person or organization relating
to the implementation of this Plan shall be in writing and any agreement
related to this Plan, including the Distribution Agreement, shall be
subject to approval by both the Board of Directors and the Disinterested
Directors of the Fund as provided in clause (a) of Section 4 and shall be
subject to termination without penalty, pursuant to the provisions of
Section 6 hereof.
S.I.S. MERCATOR FUND, INC.
CODE OF ETHICS
This Code of Ethics of S.I.S. MERCATOR FUND, INC. (the "Fund") is pursuant
to the requirements of Rule 17j-1 under the Investment Company Act of 1940,
as amended.
1.Definitions
(a)"Access Person" means each officer and director of the Fund and its
investment advisor and any partner or employee of these organizations, who,
in connection with his regular functions or duties, makes, participates in,
or obtains information regarding the purchase or sale of a security by the
Fund, or whose functions relate to the making of any recommendations with
respect to such purchases or sales; and any natural person in a control
relationship to the Fund who obtains information with respect to the Fund
with regard to the purchase or sale of a security.
(b)"Security" means all securities except securities issued by the
Government of the United States, bankers acceptances, certificates of
deposit, commercial paper, and shares of registered open-end investment
companies.
(c)A "security held or to be acquired" means a security which, within the
most recent 15 days (i) is or has been held by the Fund; or (ii) is being
or has been considered by the Fund for purchase by the Fund or its
investment adviser for purchase by the Fund.
(d)"Beneficial Ownership" shall have the meaning ascribed thereto under
Section 16 of the Securities Exchange Act of 1934.
(e)The term "Fund" includes all Portfolios of the Fund.
2. Prohibitions
No Access Person of the Fund:
(a)In connection with the purchase or sale by such person of a Security
held or to be acquired by the Fund:
(i) shall employ any device, scheme, or artifice to defraud the Fund;
(ii)make to the Fund any untrue statement of a material fact or omit to
state to the Fund a material fact necessary in order to make the statements
made, in light of the circumstances under which they are made, not
misleading;
(iii)engage in any act, practice, or course of business which operates or
would operate as a fraud or deceit upon the Fund; or
(iv)engage in any manipulative practice with respect to the Fund.
(b)Shall purchase or sell, directly or indirectly, any security in which
he has, or by reason of such transaction acquires, any direct or indirect
Beneficial Ownership and which to his or her actual knowledge at the time
of such purchase or sale:
(i)is being considered for purchase or sale by the Fund; or
(ii)is then being purchased or sold by the Fund.
3.Exempted Transactions
The prohibitions of Section 2 of this Code shall not apply to:
(a)Purchases or sales effected in any account over which the Access Person
has no direct or indirect influence or control.
(b)Purchases or sales of securities which are not eligible for purchase
or sale by the Fund.
(c)Purchases or sales which are non-volitional on the part of either the
Access Person or the Fund.
(d)Purchases which are part of an automatic dividend reinvestment plan.
(e)Purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities, to the extent such
rights were acquired from such issuer, and sales of such rights so acquired.
(f)Purchases or sales which receive the prior approval of the President of
the Fund because there exists only a remote potential for a conflict of
interest with the Fund because they would be very unlikely to affect a
highly institutional market, or because they clearly are not related
economically to the securities to be purchased, sold or held by the Fund.
The Secretary of the Fund shall record any action taken pursuant to this
Subsection 3(f).
4.Procedural Matters
(a)The Secretary of the Fund shall:
(i)Furnish a copy of this Code to each Access Person of the Fund.
(ii)Notify each Access Person of that person's obligation to the file
reports as provided by Section 5 of this Code.
(iii)Report to the Board of Directors the facts contained in any reports
filed with the Secretary pursuant to Section 5 of this Code when any such
report indicates that an Access Person engaged in a transaction in a
security held or to be acquired by the Fund.
(iv)Maintain the records required by paragraph (d) of Rule 17j-1.
(v)Maintain any records furnished to him or her pursuant to Section
2(f) herein.
5.Reporting
(a)Every Access Person shall report to the Fund the information described
in Section 5(c) of this Code with respect to transactions in any security
in which such Access Person has, or by reason of such transaction acquires,
any direct or indirect Beneficial Ownership in the security; provided,
however, that an Access Person shall not be required to make a report with
respect to transactions effected for any account over which such person
does not have any direct or indirect influence.
(b)A disinterested director of the Fund need only report a transaction in
a security if such director, at the time of that transaction, knew or, in
the ordinary course of fulfilling his official duties as a director of the
Fund, should have known that during the 15-day period immediately preceding
the date of the transaction by the director such security was purchased or
sold by the Fund or was being considered for purchase or sale by its
investment adviser.
(c)Every report shall be made not later than ten days after the end of the
calendar quarter in which the transaction to which the report relates was
effected, and shall contain the following information:
(i)The date of the transaction, the title and the number of shares, and
the principal amount of each security involved;
(ii)The nature of the transaction (i.e., purchase, sale, or any other
type of acquisition or disposition);
(iii)The price at which the transaction was effected; and
(iv)The name of the broker, dealer, or bank with or through whom the
transaction was effected.
(d)Any such report may contain a statement that the report shall not be
construed as an admission by the person making such report that he or
she has any direct or indirect Beneficial Ownership in the security to
which the report relates.
6.Violations
Upon being apprised of facts which indicate that a violation of this Code
may have occurred, the Board of Directors of the Fund shall determine
whether, in its judgment, the conduct being considered did in fact violate
the provisions of this Code. If the Board of Directors determines that a
violation of the Code has occurred, the Board may impose such sanctions as
it deems appropriate under the circumstances. If the person whose conduct
is being considered by the Board is a director of the Fund, he shall not be
eligible to participate in the judgement of the Board as to whether a
violation exists or in whether, or to what extent, sanctions should be
imposed.
Schedule for Computation of Performance Quotations
Global Equity Portfolio
Yield Calculation of 0.1424%
a=$44,524
b=$41,419
c=2,420,370
d=$10.82
Global Income Portfolio
Yield Calculatio of 5.1630%
a=$74,094
b=$19,225
c=1,229,907
d=$10.48
Average Annual Total Return for each Series:
For the period November 8, 1995 (commencement of operations) to
October 31, 1996
Global Equity Portfolio
P= $1.000.00
T= 8.89%
n= 1.00
ERV= $1,088.89
Global Income Portfolio
P= $1,000.00
T= 7.79%
n= 1.00
ERV= $1.077.91
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> GLOBAL EQUITY PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 20,939,555
<INVESTMENTS-AT-VALUE> 24,632,772
<RECEIVABLES> 860,888
<ASSETS-OTHER> 27,789
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 26,214,432
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 77,115
<TOTAL-LIABILITIES> 77,115
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 21,356,921
<SHARES-COMMON-STOCK> 2,415,581
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 103,025
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,000,091
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,677,280
<NET-ASSETS> 26,137,317
<DIVIDEND-INCOME> 380,060
<INTEREST-INCOME> 216,253
<OTHER-INCOME> 0
<EXPENSES-NET> 488,014
<NET-INVESTMENT-INCOME> 108,299
<REALIZED-GAINS-CURRENT> 2,099,673
<APPREC-INCREASE-CURRENT> 97,013
<NET-CHANGE-FROM-OPS> 2,304,985
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 164,442
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,796,623
<NUMBER-OF-SHARES-REDEEMED> 407,065
<SHARES-REINVESTED> 16,023
<NET-CHANGE-IN-ASSETS> 26,037,317
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 240,174
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 488,014
<AVERAGE-NET-ASSETS> 27,412,575
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.84
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.07
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.82
<EXPENSE-RATIO> 1.82
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> GLOBAL INCOME PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 11,577,171
<INVESTMENTS-AT-VALUE> 12,604,420
<RECEIVABLES> 278,117
<ASSETS-OTHER> 26,421
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12,908,958
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 39,359
<TOTAL-LIABILITIES> 39,359
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 10,950,844
<SHARES-COMMON-STOCK> 1,227,970
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 513,872
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 375,671
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,029,212
<NET-ASSETS> 12,869,599
<DIVIDEND-INCOME> 41,084
<INTEREST-INCOME> 797,311
<OTHER-INCOME> 0
<EXPENSES-NET> 229,351
<NET-INVESTMENT-INCOME> 609,044
<REALIZED-GAINS-CURRENT> 355,025
<APPREC-INCREASE-CURRENT> (9,170)
<NET-CHANGE-FROM-OPS> 954,899
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 356,834
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,329,642
<NUMBER-OF-SHARES-REDEEMED> 142,412
<SHARES-REINVESTED> 35,740
<NET-CHANGE-IN-ASSETS> 12,819,599
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 111,282
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 229,351
<AVERAGE-NET-ASSETS> 12,712,392
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.50
<PER-SHARE-GAIN-APPREC> 0.26
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.28
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.48
<EXPENSE-RATIO> 1.84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
LETTER TO SHAREHOLDERS
OCTOBER 1996
S.I.S. Mercator Fund, Inc. Dear
Shareholder:
S.I.S. Mercator Fund completed its first
fiscal year at the end of October 1996.
The period of operation is less than twelve
months, since the official starting day
was November 8th, 1995, with funding
taking place on the 10th. Over this period,
the Global Equity Portfolio (GEP)
provided a total return of 8.9% and the return
on the Global Income Portfolio (GIP) was 7.8%.
Both Portfolios started at a net asset value
of $10 and ended the year at $10.82 for
GEP and $10.48 for GIP. In addition,
dividend distributions were paid out at the
end of 1995 amounting to 7 cents a share
for GEP and 28 cents a share for GIP.
The performance of the two funds is shown
on page 3, both as a percentage return and
showing the return that would have been
received on a notional $100,000
investment. These returns are shown in
comparison with the leading, relevant,
global indices. For GEP this is the Morgan
Stanley Capital International World Index,
and for GIP it is the Salomon Brothers
World Government Bond Index.
The Global Income Portfolio easily
outperformed the World Bond Index,
maintaining a relative advantage
throughout the year. The main reason for the
outperformance came from our substantial
overweighting of Canadian bonds and
substantial underweighting of Japanese
bonds. In fact, the Fund held no Japanese
bonds at all through the year. As it turned
out, Japanese bonds performed much better
than we expected in yen terms, but this still
ended up as a significant negative return on
average once these were converted into
dollars.
The best performing area of the global bond
market was the Brady bonds, and other
developing market debt. These, however,
trade with junk-bond status and do not fit
in the general investment criteria for this
Portfolio. The majority of investments in
GIP are government bonds, or bonds of
very high quality.
Going forward we expect bond yields to fall
further into 1997, as it becomes obvious
that growth in the US economy is slowing
down and inflation remains under control.
Supporting this trend is further evidence of
continued weakness in Japan and the core
countries of Europe.
As we move through 1997, however, it
should become increasingly obvious that a
recovery is taking hold, particularly in
Europe. It is likely that growth rates will
turn out to be much stronger than current
forecasts, which continue to be marked
down. Recovery in Japan will be slower to
take hold, but we still expect a better
performance than suggested by present
pessimistic expectations.
The likely developments suggest that we
will need to change country weightings
over the course of the year, and
significantly reduce the average duration of
the Portfolio in order to protect capital.
The Global Equity Portfolio
underperformed the world equity index
from May. Up until that point, the Portfolio
had remained close to the world index. The
main explanation for this
underperformance is the poor performance by Japan
over this period. Although the Portfolio was
underinvested is Japan over most of this
latter period, the Morgan Stanley Index
seemed to be even less affected by the
weakness in Japan.
LETTER TO SHAREHOLDERS
OCTOBER 1996 - (continued)
S.I.S. Mercator Fund, Inc. The US market again
put in a very strong performance. Europe did well,
but not spectacularly in dollar terms, while
Japan provided negative returns. The
second section in Japan did even worse
than the first section. Canada did well, and
the Portfolio captured this, also including a
position in Canadian bonds.
The developing countries have turned in
very mixed performances. Some, such as
Hong Kong, Russia and Venezuela have
done well, but others like Thailand and
Korea have provided substantially negative
returns. Fortunately, GEP has very little
exposure in such markets. The emphasis is
very strongly on stocks of large
capitalization companies, based in the
major industrialized countries. Controlling risk
and volatility are major considerations, in
addition to achieving an above average
return over time.
Going forward, we think that conditions
favor the current Portfolio. Stock prices
have run up in nearly all the developed
countries, apart from Japan. Further
appreciation is expected where conditions
are already favorable, and even Japan
should finally make a positive contribution
in 1997.
Having said that, we are also aware that
stock prices have run up a long way in the
United States, and that at some time, a
correction will become inevitable. The
possibility exists that risks will increase in
the first half of 1997, and we will be
looking closely for signs that conditions are
about to change. In that event, we shall
naturally take steps to protect the asset
values under management. This will
mainly take the form of switching from stocks into
cash.
Both Portfolios are influenced by changes
in the external value of the dollar relative to
other currencies. In the last fiscal year, the
dollar gained ground against most
currencies, and particularly the yen. The
exceptions were the Canadian dollar, the
Australian dollar, the Italian Lira and,
towards the end, the British Pound. There
is still considerable bullish sentiment in
support of the dollar, but underlying
conditions are becoming less favorable.
Relative interest rates still favor the dollar,
but the direction of change is close to
turning. And that, in turn, will influence
expectations. This is happening at a time
when the US balance of payments has
failed to improve, and has even been deteriorating
further. Some improvement in the balance
of payments is expected over the next year,
but this is still likely to leave a large
deficit. If a relatively strong recovery takes hold in
Europe, and later in Japan, this will provide
further support for an end of the present
trend.
Through a combination of flexible
management and close monitoring of
business cycle developments we hope to
provide our shareholders with competitive
returns while controlling volatility and risk.
This approach by S.I.S. Mercator Fund is
very different from the current trend
towards indexing holdings to a particular
market regardless of prevailing conditions.
Sincerely,
Richard T. Coghlan
Chairman and President
GLOBAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
S.I.S. Mercator Fund, Inc.
COMMON STOCKS (81.6%)
Shares U.S. $ Value
NORTH AMERICA (39.2%)
United States (33.0%)
Adobe Systems Inc. 8,800 $304,700
Airtouch Communications Inc. (a)10,800
282,150
AMR Corp. (a) 5,650 474,600
Dow Chemical 3,800 295,450
Englehard Corp. 14,900 271,925
EMC Corp. (a) 16,550 434,438
Gateway 2000 Inc. (a) 13,400 630,638
General Motors Corp. 6,400 343,200
Hercules Inc. 5,600 266,700
Home Depot Inc. 7,740 424,733
International Business Machines Corp.
6,850 883,650
Intel Corp. 5,200 571,350
ITT Corp. (a) 6,500 273,000
Johnson Controls Inc. 3,500 255,500
Motorola Inc. 5,200 239,200
Micron Technology Inc. 10,000 253,750
Newmont Mining Corp. 1,622 75,018
Oakley Inc. (a) 19,000 285,000
Quaker Oats Co. 9,700 344,350
Read-Rite Corp. (a) 14,600 259,150
Tandem Computer Inc. (a) 24,800 313,100
Temple-Inland Inc. 4,600 235,750
United Healthcare Corp. 9,400 354,850
US West Media Group (a)18,000
281,250
Viacom Inc. - Class B (a) 8,000 261,000
8,614,452
Canada (6.2%)
Barrick Gold Corp. 25,000 653,125
BCE Inc. 10,900 501,400
Canadian Pacific Ltd. 18,700 472,175
1,626,700
GLOBAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS - continued
October 31, 1996
S.I.S. Mercator Fund, Inc.
Shares U.S. $ Value
EUROPE (18.1%)
Switzerland (3.2%)
Baer Holdings AG 420 $439,927
Magazine Globus 425 239,498
Grands Magazines Jemoli-Bearer 320
158,890
838,315
Germany (3.4%)
Deutsche Bank AG 5,000 231,012
Metro Holdings AG 3,600 295,237
Volkswagen AG 940 369,195
895,444
Finland (1.7%)
Nokia Corp. - Sponsored ADR-A 9,600
445,200
France (5.8%)
Club Mediterranee 3,810 239,352
CIE Generale Des Eaux 977 116,500
Lagardere Group 13,746 434,592
Rhone Poulenc 15,301 452,400
Union des Assurances de Paris 13,413
277,998
1,520,842
Italy (2.0%)
Fiat Spa 90,000 238,697
Credito Italiano Spa 270,000 275,597
514,294
GLOBAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS - continued
October 31, 1996
S.I.S. Mercator Fund, Inc
Shares U.S. $ Value
United Kingdom (2.0%)
Harrisons & Crosfield PLC 110,00 $229,053
Williams Holdings PLC 50,000 295,264
524,317
ASIA (24.3%)
Japan (22.1%)
Bank of Tokyo-Mitsubishi Ltd. 14,000
284,824
Fanuc 7,500 240,059
Honda Motor Corp. 12,000 286,228
Industrial Bank of Japan 13,000 258,780
Japan Asia Investment Co. (a) 26,000
253,080
Kajima Corp. 18,000 154,532
Kyocera 10,000 658,570
Matsushita Electronic Industrial Co. 30,000
478,800
Mitsubishi Heavy Industries 58,000 445,039
Mitsubishi Motors Corp. 118,000 974,753
Nippon Steel 96,000 279,493
Nomura Securities Co. Ltd. 25,000 412,154
Sakura Bank 30,000 284,123
Sega Enterprises 5,000 201,692
Sony Corp. 4,800 287,491
Sumitomo Bank 16,000 280,616
5,780,234
Australia (2.2%)
CSR Ltd. 84,600 284,004
Pacific Dunlop Ltd. 126,500 280,438
564,442
TOTAL COMMON STOCK (Cost:
$17,740,514) 21,324,240
GLOBAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS - continued
October 31, 1996
S.I.S. Mercator Fund, Inc.
FIXED INCOME SECURITIES
(4.0%)
Principal Amt. (b) U.S. $ Value
United States (1.1%)
Argentina Gov. Bond 9.25% due 02/23/01
300,000 $294,562
Canada (2.9%)
British Columbia Prov. 7.875% due
11/30/23 450,000 352,151
Canada Gov. Bond 8% due 06/01/23
500,000 415,996
768,147
TOTAL DEBT SECURITIES (Cost:
$953,218 )1,062,709
SHORT-TERM INVESTMENTS
(8.6%)
U.S. Treasury Bills 4.74% due 11/07/96
1,500,000 1,498,808
U.S. Treasury Bills 4.74% due 11/14/96
500,000 499,145
Highmark Money Market Fund 247,870
247,870
TOTAL SHORT-TERM INVESTMENT
(Cost $2,245,823) 2,245,823
TOTAL INVESTMENT IN SECURITIES
(Cost: $20,939,555) (Notes 2A
and 3) (94.2%) 24,632,772
CASH AND OTHER ASSETS IN EXCESS
OF LIABILITIES-NET (5.8%) 1,504,545
TOTAL NET ASSETS (100.0%)
$26,137,317
(a) non-income producing security
(b) in local currency
GLOBAL INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 1996
S.I.S. Mercator Fund, Inc.
FIXED INCOME SECURITIES
(88.4%)
Principal U.S. $ Value
Amt. (a)
NORTH AMERICA (63.3%)
United States (50.5%)
PDV America Inc. 7.25% due 08/01/98
100,000 $100,317
US Treasury Note 8.00% due 08/15/99
2,000,000 2,106,875
US Treasury Note 7.75% due 02/15/2001
400,000 425,625
US Treasury Note 8.0% due 05/15/2001
550,000 592,195
US Treasury Bond 5.625% due 02/15/2006
500,000 475,938
US Treasury Bond 8.0% due 11/15/2021
500,000 574,766
US Treasury Bond 7.5% due 11/15/2024
300,000 329,391
US Treasury Bond 7.625% due 02/15/2025
300,000 334,594
US Treasury Bond 6.75% due 08/15/2026
500,000 506,328
Republic of Argentina Bond 9.25% due
02/23/2001 600,000 589,125
Republic of Italy Bond 6.875% due
09/27/2023 500,000 472,394
6,507,548
Canada (12.8%)
Canadian Gov. Bond 9.75% due 06/01/2001
300,000 262,310
Ontario Prov. 7.75% due 12/08/2003
625,000 507,220
Canadian Gov. Bond 8.0% due 06/01/2023
500,000 415,996
British Colombia Prov. 7.875% due
11/30/2023 590,000 461,709
1,647,235
EUROPE (23.2%)
European CC (7.6%)
United Kingdom Bond 9.125% due
02/12/2001 400,000 579,453
Council of Europe Bond 6.75% due
05/11/2004 300,000 395,365
974,818
France (12.8%)
French Gov. Bond 8.125% due 05/25/99
3,000,000 641,650
Denmark Kingdom Notes 5.5% due
10/26/99 2,500,000 504,520
European Investment Bank Bond 6.125%
due 10/08/2004 2,500,000 501,012
1,647,182
Italy (2.8%)
General Electric Capital Bond 9.25% due
05/18/2004 550,000,000 360,505
GLOBAL INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS - continued
October 31,1996
S.I.S. Mercator Fund, Inc.
Shares/ U.S.$ Value
Principal Amt.
OTHER COUNTRIES (1.9%)
Australia (1.9%)
First Australia Prime Income Fund 28,000
$250,250
TOTAL DEBT SECURITIES (Cost:
$10,417,702) 11,387,538
COMMON STOCKS (3.1%)
BCE Inc. 5,000 230,000
Southern CO. 7,500 165,938
TOTAL COMMON STOCK (Cost:
$338,525) 395,938
SHORT-TERM INVESTMENTS
(6.4%)
U.S. Treasury Bills 4.74% due 11/07/96
$500,000 499,603
U.S. Treasury Bills 4.74% due 11/14/96
200,000 199,658
Highmark Money Market Fund 121,683
121,683
TOTAL SHORT-TERM INVESTMENTS
(Cost: $820,944) 820,944
TOTAL INVESTMENT IN SECURITIES
(Cost: $11,577,171) (Notes 2A and 3)
(97.9%)
12,604,420
CASH AND OTHER ASSETS IN EXCESS
OF LIABILITIES-NET (2.1%) 265,179
TOTAL NET ASSETS (100.0%)
$12,869,599
(a) in local currency
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996
S.I.S. Mercator Fund, Inc.
Global Equity Global Income
Portfolio Portfolio
ASSETS
Investment in securities, at value (identified cost $20,939,555
and $11,577,171 respectively) (Notes 1 and 2A) $24,632,772 $12,604,420
Cash (including foreign currencies) 692,983
Receivables:
Interest and dividends 65,732 278,117
Investment securities sold 765,656 -
Tax reclaims 29,500 -
Prepaid expenses 2,696 1,328
Deferred organization expenses (Note 2G) 25,093 25,093
Total assets $26,214,432 $12,908,958
LIABILITIES
Accrued expenses 77,115 39,359
Total liabilities 77,115 39,359
NET ASSETS (Note 4) $26,137,317 $12,869,599
Shares outstanding 2,415,581 1,227,970
Net asset value, offering and redemption price per share $10.82 $10.48
At October 31, 1996, the components of net assets were as follows:
Paid-in capital $21,356,921 $10,950,844
Undistributed net investment income 103,025 513,872
Undistributed realized gains on investments and foreign
currency transactions 1,000,091 375,671
Unrealized appreciation of investments and translation of
foreign currency denominated assets and liabilities 3,677,280 1,029,212
$26,137,317 $12,869,599
STATEMENT OF CHANGES IN NET ASSETS
For the period from November 8, 1995
(commencement of operations)
to October 31, 1996
S.I.S. Mercator Fund, Inc.
Global Equity Global Income
Portfolio Portfolio
OPERATIONS
Net investment income $108,299 $609,044
Net realized gain on investments and foreign
currency transactions 2,099,673 355,025
Net change in unrealized appreciation of
investments
and foreign currency denominated assets and
liabilities 97,013 (9,170)
Net increase in net assets resulting from
operations 2,304,985 954,899
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income
($0.07 and $0.28
per share, respectively) (164,442) (356,834)
CAPITAL SHARE TRANSACTION
Net increase in net assets from capital share
transactions (a) 23,896,774 12,221,534
Net increase in net assets 26,037,317
12,819,599
Net assets at the beginning of the period
100,000 50,000
Net assets at the end of the period (including
undistributed net
investment income of $103,025 and
$513,872, respectively) $26,137,317
$12,869,599
(a) A summary of capital share transactions
is as follows:
Global Equity Portfolio
Global Income Portfolio
Shares Value Shares Value
Shares sold 241,065 $2,541,747 30,672
$300,000
Shares issued in tax-free
reorganization (Note 1) 2,555,558
25,555,585 1,298,970 12,989,700
Shares issued in reinvestment of
distributions
to shareholders 16,023 164,442 35,740
356,834
2,812,646 28,261,774 1,365,382 13,646,534
Shares redeemed (407,065) (4,365,000)
(142,412) (1,425,000)
Net increase $2,405,581 $23,896,774
$1,222,970 $12,221,534
STATEMENT OF OPERATIONS
For the period from November 8, 1995
(commencement of operations)
to October 31, 1996
S.I.S. Mercator Fund, Inc.
Global Equity Global Income
Portfolio Portfolio
INVESTMENT INCOME
Income
Interest $216,253 $797,311
Dividends (net of foreign taxes withheld of
$42,493 and $1,996
respectively 380,060 41,084
Total income 596,313 838,395
EXPENSES
Investment management fees (Note 5)
240,174 111,282
Distribution expenses (Note 6) 2,935 23
Shareholder servicing fees (Note 6) 66,715
30,911
Administration (Note 5), accounting and
transfer agent 91,863 46,167
Professional fees 20,124 10,168
Registration and filing fees 15,877 9,011
Custody fees 26,796 6,889
Amortization of organization expenses 6,080
6,080
Directors' fees and expenses 6,537 3,255
Other operating expenses 10,913 5,165
Total expenses 488,014 229,351
Net investment income 108,299 609,044
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY
Net realized gain from investments
2,092,451 375,671
Net realized gain<loss> from foreign
currency transactions 7,222 (20,646)
Net change in unrealized appreciation of
investments 111,597 (13,231)
Net change in unrealized
appreciation/depreciation of foreign
currency denominated assets and liabilities
(14,584) 4,061
Net gain on investments and foreign
currency denominated
asset and liabilities 2,196,686 345,855
Net increase in net assets resulting from
operations $2,304,985 $954,899
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the
period from November 8, 1995
(commencement of operations)
to October 31, 1996
S.I.S. Mercator Fund, Inc.
Global Equity Global Income
Portfolio Portfolio
PERSHARE OPERATING
PERFORMANCE
Net asset value, beginning of period $10.00
$10.00
Net income (loss) from investment
operations
Net investment income 0.05 0.50
Net realized and unrealized gain (loss) on
investments
and foreign currency transactions 0.84 0.26
Total from investment operations 0.89 0.76
Less distributions
Distributions from net investment income
(0.07) (0.28)
Net asset value, end of period $10.82 $10.48
TOTAL RETURN *8.89% 7.79%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands)
$26,137 $12,870
Ratio to average net assets
Expenses ** 1.82% 1.84%
Net investment income** 0.40% 4.88%
Portfolio turnover rate 42% 29%
Average commission rate paid $.0317 n/a
* Total return has not been annualized
* Annualized
NOTES TO FINANCIAL STATEMENTS
October 31, 1996
S.I.S. Mercator Fund, Inc.
(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 to 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,
Inc. ("Strategic"), the Fund's investment
advisor.
On November 10, 1995, 2,555,558 shares of
the Global Equity Portfolio, having a value
of $25,555,585, were issued to a partnership
in an exchange which qualified as a tax-free
reorganization under the Internal Revenue
Code. The net assets of the partnership,
consisting principally of marketable
securities, were $25,555,585, including
unrealized appreciation of investments and
translation of assets and liabilities
denominated in foreign currencies of
$3,580,267 and undistributed net
investment income of $145,866.
On November 10, 1995, 1,298,970 shares of
the Global Income Portfolio, having a value
of $12,989,700, were issued to a foundation
in an exchange which qualified as a tax-free
reorganization under the Internal Revenue
Code. The net assets of the foundation,
consisting principally of marketable
securities, were $12,989,700, including
unrealized appreciation of investments and
translation of assets and liabilities
denominated in foreign currencies of
$1,038,381 and undistributed net
investment income of $276,228.
(2) Significant Accounting Policies
The Global Equity Portfolio's investment
objective is to achieve a high rate of 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. The Global Income Portfolio's
investment objective is to achieve a
relatively stable rate of total return with
emphasis on yield, by investing 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 price of each Portfolio's
shares will fluctuate daily and there can be
no assurance that the Portfolios will be
successful in achieving their stated
investment objectives.
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. Security Valuation. The securities held
by the Portfolios are valued as of the close
of the New York Stock Exchange (the
"NYSE"). Listed securities are valued at the
last quoted sales price on the exchange were
the security is principally traded. Securities
listed on foreign exchanges are valued the
latest quoted market price available prior to
the close of the NYSE. Debt securities may
be valued on the basis of prices provided by
a pricing service using methods approved
by the Fund's Board of Directors. Other
assets and securities for which no
quotations are readily available are valued
in good faith by, or under the direction of,
the Fund's Board of Directors.
B. Currency Translation. The market values
of all assets and liabilities denominated in
foreign currencies are recorded in the
financial statements after translation to the
U.S. dollar based upon the bid price of such
currencies against the U.S. dollar last
quoted by a major bank or broker. The cost
basis of such assets and liabilities is
determined based upon historical exchange
rates. Income and expenses are translated at
average exchange rates in effect as accrued
or incurred.
The Portfolios do not isolate that portion of
the results of operations resulting from
changes in foreign exchange rates on
investments from the fluctuations arising
from changes in market prices of securities
held. Such fluctuations are included with
the net realized and unrealized gain or loss
from investments.
Reported net realized foreign exchange
gains or losses arise from sales and
maturities of short-term securities, sales of
foreign currencies, currency gains or losses
realized between the trade and settlement
dates on securities transactions, the
difference between the amounts of
dividends, interest, and foreign withholding
taxes recorded on the Portfolios' books, and
the U.S. dollar equivalent of the amounts
actually received or paid. Net unrealized
foreign exchange gains and losses arise
from changes in the value of assets and
liabilities other than investments in
securities at fiscal year end, resulting from
changes in the exchange rate.
C. Forward Currency Contracts. The
Portfolios may enter into forward purchases
or sales of foreign currencies to hedge
certain foreign currency denominated assets
and liabilities against declines in market
value relative to the U.S. dollar. Forward
currency contracts are marked-to-market
daily and the change in market value is
recorded by the Portfolios as an unrealized
gain or loss. When the forward currency
contract is closed, the Portfolios record a
realized gain or loss equal to the difference
between the value of the forward currency
contract at the time it was opened and the
value at the time it was closed.
Investments in forward currency contracts
may expose the Portfolios to risks resulting
from unanticipated movements in foreign
currency exchange rates or failure of the
counterparty to the agreement to perform in
accordance with the terms of the contract.
D. 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.
E. Security Transactions, Interest and
Dividends. As is common in the industry,
security transactions are recorded on the
trade date. Interest income is accrued as
earned. Discounts and premiums are
amortized in accordance with Federal
income tax requirements. Dividends are
recorded on the ex-dividend date.
F. Distributions to Shareholders.
Distributions to shareholders are recorded
on the ex-dividend date. The character of
distributions paid to shareholders is
determined by reference to income as
determined for income tax purposes, after
giving effect to temporary differences
between the financial reporting and tax
basis of assets and liabilities, rather than
income as determined for financial
reporting purposes.
G. Deferred Organization Expenses. All of
the expenses incurred by the Fund in
connection with the organization on 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.
H. Use of Estimates. In preparing financial
statements in accordance with generally
accepted accounting principles,
management is required to make estimates
and assumptions that affect the reported
amounts of assets and liabilities and the
disclosure of contingent assets and
liabilities at the date of the financial
statements, and revenues and expenses
during the reporting period. Actual results
could differ from those estimates.
(3) Investments
For the period from November 8, 1995
(commencement of operations) to October
31, 1996, the cost of securities purchased
and the proceeds from securities sold,
excluding short-term notes, was $9,937,926
and $13,640,183, respectively, for the
Global Equity Portfolio, and $3,145,214
and ($3,308,793), respectively, for the
Global Income Portfolio.
At October 31, 1996 net unrealized
appreciation of investment securities
consisted of gross unrealized appreciation
and gross unrealized depreciation of
$4,433,116 and $(739,899), respectively,
for the Global Equity Portfolio and
$1,042,478 and $(15,229) respectively, for
the Global Income Portfolio.
(4) Capital Stock
At October 31, 1996, 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.
(5) 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.
(6) 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.
(7) Other Transactions with Affiliates
Certain officers and directors of the Fund are
also officers and/or directors of Strategic
and East Coast.
REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANS
S.I.S. Mercator Fund, Inc. Shareholders and
Board of Directors
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), including the
portfolios of investments, as of October 31,
1996, and the related statements of
operations and changes in net assets, and
the financial highlights for the period
November 8, 1995 (commencement of
operations) to October 31, 1996. These
financial statements and financial highlights
are the responsibility of the Fund's
management. Our responsibility is to
express an opinion on these financial
statements and financial highlights 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 financial
statements and financial highlights are free
of material misstatement. An audit includes
examining, on a test basis, evidence
supporting the amounts and disclosures in
the financial statements. Our procedures
included confirmation of securities owned
as of October 31, 1996 by correspondence
with the custodian and brokers. An audit
also includes assessing the accounting
principles used and significant estimates
made by management, as well as evaluation
the overall financial statement presentation.
We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and
financial highlights referred to above
present fairly, in all material respects, the
financial position of the Global Equity
Portfolio and the Global Income Portfolio
as of October 31, 1996, the results of their
operations, the changes in their net assets,
and the financial highlights for the period
from November 8, 1995 to October 31,
1996, in conformity with generally accepted
accounting principles.
Tait, Weller and Baker
Philadelphia, Pennsylvania
November 18, 1996
