UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-CSR
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CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
INVESTMENT COMPANY ACT FILE NUMBER 811-8689
THE NEVIS FUND, INC.
(Exact name of registrant as specified in charter)
--------
1119 St. Paul Street
Baltimore, MD 21202
(Address of principal executive offices) (Zip code)
Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04112-0446
(Name and address of agent for service)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 1-877-44-NEVIS
DATE OF FISCAL YEAR END: MAY 31, 2004
DATE OF REPORTING PERIOD: MAY 31, 2004
Item 1. REPORTS TO STOCKHOLDERS.
[The Nevis Fund Logo Omitted]
ANNUAL REPORT TO SHAREHOLDERS
MAY 31, 2004
TABLE OF CONTENTS
Letter to Shareholders................................................. 1
Manager's Discussion and Analysis of Fund Performance.................. 2
Statement of Net Assets................................................ 4
Statement of Operations................................................ 6
Statements of Changes in Net Assets.................................... 7
Financial Highlights................................................... 8
Notes to Financial Statements.......................................... 9
Report of Independent Registered Public Accounting Firm................ 11
Directors and Officers of the Nevis Fund (Unaudited)................... 12
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to the Fund's portfolio securities is available (i)
without charge, upon request, by calling 1-877-44-NEVIS; and (ii) on the U.S.
Securities and Exchange Commission's website at http://www.sec.gov.
LETTER TO SHAREHOLDERS THE NEVIS FUND, INC.
July 29, 2004
Dear Fellow Shareholder:
The Nevis Fund's Net Asset Value ("NAV") on May 31, 2004 was $12.49, up 26.8%
from the May 31, 2003 NAV of $9.85. This compares to the S&P 500 Index which
increased 18.3% and the Russell 2000 Index which increased 30.3% over the same
period.
The equity market's performance over the past year has been a stark reminder
that the market's actions are mere reflections of human emotion. It took 21/2
years and a 75% drop in the NASDAQ Composite Index to undo the excesses of the
1990's and to reflect the onset of the past recession. So it should come as no
surprise that an outstanding calendar 2003 (the NASDAQ Composite Index increased
50.8%) might be followed by a predictable period of self-doubt. With thoughts of
2000-2002, the Piper is looking over his shoulder to see if everyone is still
following.
Bear market memories are still fresh and investors are understandably cautious.
The first question they ask is: Is the economic recovery for real? Followed by:
When will we see job growth? Won't interest rates have to rise if the demand for
capital increases? If interest rates rise, won't this slow economic growth? And
so on, and so on. These are reasonable questions, but not unique to a
post-recession economic environment. In our opinion, an increase in capital
expenditures is the most meaningful indicator to future economic growth; and our
first-hand experience indicates that the companies the Fund owns are both
increasing their own capital expenditure budgets, and reporting that their
customers are doing the same.
We cannot know what the economy is going to do in the future, nor how the market
will react. We do believe however, that there is a strong positive correlation
between corporate earnings and equity market performance. Recent economic and
employment data suggest to us that corporate earnings are more likely to
surprise on the upside than to disappoint. For example, FedEx announced a 47%
increase in its fourth quarter earnings on June 23; citing a strong global
economy as the primary driver behind the Company's double digit increase in
units shipped. FedEx's earnings release acknowledged that the combination of
ongoing expense cutting and small price increases resulted in expanding profit
margins. While FedEx is much larger than the kinds of companies in which we
invest, we believe the underlying improvements reflected in FedEx's operating
margin are similar to what we are seeing from the Fund's holdings.
We are focused on the growth prospects of our individual holdings; more
specifically, at what rate we expect revenues and earnings might increase over
the next 18-24 months; and where a company's stock could potentially sell, given
its prospects. We are encouraged by the recent quarterly earnings reports from
the Fund's equity holdings and expect continued improvement.
Please be aware that, unlike other mutual funds, The Nevis Fund owns only a
limited number of companies. On May 31, 2004, your Fund owned only 20 positions,
with the top 10 representing over 57% of the Fund's assets. This level of
concentration means that your Fund will likely be more volatile than the major
indices. Moreover, in the short-term, especially during periods of market
uncertainty, our holdings tend to fall more than the indices due in part to
inefficiencies related to lower liquidity.
Thank you for your support.
/s/ David R. Wilmerding, III /s/ Jon C. Baker
David R. Wilmerding, III Jon C. Baker
Co-Manager Co-Manager
1
MANAGER'S DISCUSSION AND ANALYSIS OF FUND PERFORMANCE
Fiscal year 2004
The Nevis Fund started fiscal year 2004 with 24 equity holdings and ended with
20. During fiscal 2004, we sold the following 15 holdings in their entirety that
we had held as of May 31, 2003: ActivCard, American Tower, Avid Technology,
Clarus, Clear Channel Communications, Crown Holdings, Ditech Communications,
Dick's Sporting Goods, Imax, MicroStrategy, Parametric Technology, TIBCO
Software, Trimble Navigation, Tweeter Home Entertainment Group, and WebMD. We
sold the following 5 holdings in their entirety that we purchased during the
fiscal year ended May 31, 2004: Advanced Digital Information, Alvarion, Computer
Network Technology, KVH Industries and Stellent. Additionally, we sold partial
amounts from the positions in companies that we either held in the Fund last
year or purchased during the year and continue to hold in the Fund, including:
Armor Holdings, Aspect Communications, Central Garden & Pet, Connetics, Ionics,
Primus Knowledge Solutions, and Providian Financial.
During the course of the most recent fiscal year, we purchased 11 new holdings:
Aspect Communications, Aspen Technology, Authentidate Holding, Autobytel,
Bentley Pharmaceuticals, CoStar Group, DaVita, Gevity HR, Mapinfo, Opsware, and
Scientific Games.
The Nevis Fund's Net Asset Value (NAV) increased from $9.85 per share on May 31,
2003 to $12.49 per share on May 31, 2004, an increase of 26.8%. This return
compares to an increase of 30.3% for the Russell 2000 Index, an increase of
25.1% for the NASDAQ Composite Index, and an increase of 18.3% for the S&P 500
Index.
The top five companies contributing negatively to the Fund's performance as
measured on the basis of realized and unrealized losses for the period were
ActivCard, KVH Industries, Authentidate Holding, Computer Network Technology and
Imax. The top five companies contributing positively to the Fund's performance
as measured on the basis of realized and unrealized gains for the period were
Armor Holdings, Scientific Games, Primus Knowledge Solutions, Wind River Systems
and Dick's Sporting Goods.
THE FUND'S CONCENTRATED POSITIONS OFTEN TRANSLATE INTO HIGHER INDUSTRY
WEIGHTINGS THAN INDICES TYPICALLY HAVE, THEREBY RESULTING IN RETURNS THAT
DEVIATE FROM THE INDICES.
As of May 31, 2004, the Fund had, on a tax basis, $32,811,980 in net unrealized
losses and $95,571,838 in accumulated tax loss carryforwards.
2
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT IN
THE NEVIS FUND, VERSUS THE RUSSELL 2000 INDEX
[Line Graph Omitted]
[Plot points for EDGAR purposes are as follows:]
The Nevis Fund Russell 2000 Index
6/30/98 $10,000 $10,000
May 99 $19,010 $ 9,711
May 00 $33,821 $10,673
May 01 $20,327 $11,280
May 02 $11,135 $11,224
May 03 $10,753 $10,306
May 04 $13,635 $13,427
- ---------------------------------------------------------
Total Return1
- ---------------------------------------------------------
Annualized Annualized Annualized Cumulative
One Year 3 Year 5 Year Inception Inception
Return Return Return to Date2 to Date2
- ---------------------------------------------------------
26.80% -12.46% -6.43% 5.38% 36.36% The Nevis Fund, Inc.
- ---------------------------------------------------------
30.29% 5.98% 6.70% 5.10% 34.27 Russell 2000 Index
- ---------------------------------------------------------
1 These figures represent past performance as of May 31, 2004. Past performance
is no guarantee of future results. The investment return and principal value
of an investment will fluctuate, so an investor's shares, when redeemed, may
be worth more or less than their original cost. The performance in the above
table does not reflect the deduction of taxes the shareholder would pay on
fund distributions or redemption of fund shares. There are specific risks,
including increased volatility and above average price fluctuations, inherent
in investing in technology, science and small capitalized companies. During
certain prior fiscal periods, the Fund benefitted substantially from first-day
realized and unrealized gains from initial public offerings. These gains were
particularly noteworthy given the Fund's relatively small asset base during
portions of these periods. It is unlikely that the Fund will benefit to the
same extent from these types of gains in the future, especially if Fund assets
remain at current levels or if they increase. The Russell 2000 Index consists
of the smallest 2,000 companies in a group of 3,000 U.S. companies in the
Russell 3000 Index, as ranked by market capitalization.
2 The Nevis Fund commenced operations on June 29, 1998.
3
STATEMENT OF NET ASSETS THE NEVIS FUND, INC.
May 31, 2004
Market
Value
Shares (000)
-------- ----------
COMMON STOCK 97.0%
AEROSPACE & DEFENSE 4.7%
Armor Holdings* 37,700 $ 1,410
- --------------------------------------------------------------------------------
BIOLOGICAL PRODUCTS 6.2%
Connetics* 86,550 1,849
- --------------------------------------------------------------------------------
COMPUTERS & SERVICES 5.3%
Authentidate Holding* 125,048 1,576
- --------------------------------------------------------------------------------
CONSUMER PRODUCTS 4.7%
Central Garden & Pet* 37,528 1,395
- --------------------------------------------------------------------------------
DRUGS 4.8%
Bentley Pharmaceuticals* 112,989 1,424
- --------------------------------------------------------------------------------
ELECTRONIC COMPONENTS 6.9%
Vicor* 147,975 2,057
- --------------------------------------------------------------------------------
ENTERTAINMENT 6.9%
Scientific Games, Cl A* 110,979 2,055
- --------------------------------------------------------------------------------
FINANCIAL SERVICES 4.6%
Providian Financial* 100,072 1,361
- --------------------------------------------------------------------------------
INFORMATION RETRIEVAL SERVICES 7.8%
Autobytel* 67,224 702
CoStar Group* 39,456 1,633
- --------------------------------------------------------------------------------
2,335
- --------------------------------------------------------------------------------
MEASURING DEVICES 11.3%
FLIR Systems* 40,424 1,989
Ionics* 54,526 1,377
- --------------------------------------------------------------------------------
3,366
- --------------------------------------------------------------------------------
MEDICAL SERVICES 4.3%
DaVita* 27,384 1,271
- --------------------------------------------------------------------------------
SERVICES-BUSINESS SERVICES 8.2%
Gevity HR 37,185 975
Opsware* 180,078 1,453
- --------------------------------------------------------------------------------
2,428
- --------------------------------------------------------------------------------
SERVICES-COMPUTER PROGRAMMING SERVICES 10.2%
Primus Knowledge Solutions* 645,065 1,374
Wind River Systems* 163,248 1,680
- --------------------------------------------------------------------------------
3,054
- --------------------------------------------------------------------------------
SERVICES-PREPACKAGED SOFTWARE 11.1%
Aspect Communications* 110,168 1,414
Aspen Technology* 128,467 811
Mapinfo* 107,107 1,071
- --------------------------------------------------------------------------------
3,296
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Cost $61,681) 28,877
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
4
STATEMENT OF NET ASSETS THE NEVIS FUND, INC.
May 31, 2004
Market
Value
Shares (000)
-------- ----------
CASH EQUIVALENT 3.2%
SEI Daily Income Trust 937,918 $ 938
- --------------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(Cost $938) 938
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS 100.2%
(Cost $62,619) 29,815
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (0.2)%
Investment Advisory Fee Payable (37)
Other Assets and Liabilities, Net (31)
- --------------------------------------------------------------------------------
TOTAL OTHER ASSETS AND LIABILITIES (68)
- --------------------------------------------------------------------------------
NET ASSETS:
Paid in Capital (unlimited authorization -- no par value)
based on 2,381,992 outstanding shares of beneficial interest 158,130
Accumulated net realized loss on investments (95,579)
Net unrealized depreciation on investments (32,804)
- --------------------------------------------------------------------------------
TOTAL NET ASSETS 100.0% $ 29,747
- --------------------------------------------------------------------------------
Net Asset Value, Offering and Redemption Price Per Share $ 12.49
- --------------------------------------------------------------------------------
* NON-INCOME PRODUCING SECURITY
CL -- CLASS
The accompanying notes are an integral part of the financial statements.
5
STATEMENT OF OPERATIONS (000) THE NEVIS FUND, INC.
For the year ended May 31, 2004
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
- --------------------------------------------------------------------------------
Interest Income $ 7
Dividend Income 2
- --------------------------------------------------------------------------------
Total Investment Income 9
- --------------------------------------------------------------------------------
EXPENSES:
Investment Advisory Fees (See Note 4) 527
- --------------------------------------------------------------------------------
Total Expenses 527
- --------------------------------------------------------------------------------
Net Investment Loss (518)
- --------------------------------------------------------------------------------
Net Realized Loss on Investments (3,589)
Net Change in Unrealized Appreciation/Depreciation on Investments 12,303
- --------------------------------------------------------------------------------
Net Realized and Unrealized Gain on Investments 8,714
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $ 8,196
================================================================================
The accompanying notes are an integral part of the financial statements.
6
STATEMENTS OF CHANGES IN NET ASSETS (000) THE NEVIS FUND, INC.
For the years ended May 31,
- ---------------------------------------------------------------------------------------------------------------------
2004 2003
-------------- -----------
OPERATIONS:
Net Investment Loss $ (518) $ (361)
Net Realized Loss on Investments (3,589) (43,396)
Net Change in Unrealized Appreciation/Depreciation on Investments 12,303 41,428
- ---------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets Resulting From Operations 8,196 (2,329)
- ---------------------------------------------------------------------------------------------------------------------
SHARES TRANSACTIONS:
Proceeds from Shares Issued 4,912 3,998
Redemption Fees (See Note 7) 50 7
Cost of Shares Repurchased (15,059) (6,660)
- ---------------------------------------------------------------------------------------------------------------------
Decrease in Net Assets from Capital Share Transactions (10,097) (2,655)
- ---------------------------------------------------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS (1,901) (4,984)
- ---------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Year 31,648 36,632
- ---------------------------------------------------------------------------------------------------------------------
NET ASSETS:
End of Year (including undistributed net investment
income of $0 and $5, respectively) $29,747 $31,648
=====================================================================================================================
CAPITAL SHARE TRANSACTIONS:
Shares Issued 387 523
Shares Redeemed (1,216) (902)
=====================================================================================================================
NET DECREASE IN SHARES FROM CAPITAL SHARE TRANSACTIONS (829) (379)
=====================================================================================================================
The accompanying notes are an integral part of the financial statements.
7
FINANCIAL HIGHLIGHTS THE NEVIS FUND, INC.
For a Share Outstanding throughout each period
for the periods ended May 31,
Realized Ratio
Net and Net Net of Net
Asset Unrealized Distributions Asset Assets Ratio Investment
Value Net Gains (Losses) Total from From Value End of Expenses Loss Portfolio
Beginning Investment on Investment Capital End Total of Period to Average to Average Turnover
of Year Loss Securities Operations Gains of Year Return+ (000) Net Assets Net Assets Rate
===================================================================================================================================
2004 $ 9.85 $(0.22) $ 2.86 $2.64 $ -- $12.49 26.80% $ 29,747 1.50% (1.48)% 61.35%
2003 10.20 (0.11) (0.24) (0.35) -- 9.85 (3.43) 31,648 1.50 (1.43) 51.24
2002 18.62 (0.32) (8.10) (8.42) -- 10.20 (45.22) 36,632 1.50 (1.33) 26.20
2001 30.98 (0.31) (12.05) (12.36) -- 18.62 (39.90) 80,011 1.50 (1.45) 21.86
2000 19.01 (0.19) 14.81(1) 14.62 (2.65) 30.98 77.91* 197,497 1.50 (1.24) 56.50
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR ROUND TO $0.
* THE FUND BENEFITED SUBSTANTIALLY FROM FIRST-DAY REALIZED AND UNREALIZED GAINS FROM INITIAL PUBLIC OFFERINGS DURING FISCAL 2000.
THESE GAINS WERE PARTICULARLY NOTEWORTHY GIVEN THE FUND'S RELATIVELY SMALL ASSETS DURING PORTIONS OF FISCAL 2000. IT IS UNLIKELY
THAT THE FUND WILL BENEFIT TO THE SAME EXTENT FROM THESE TYPES OF GAINS IN THE FUTURE, ESPECIALLY IF FUND ASSETS REMAIN AT
CURRENT LEVELS OR IF THEY INCREASE.
+ RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED. RETURNS DO NOT REFLECT THE DEDUCTION OF TAXES THAT A
SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
(1) THE AMOUNT SHOWN FOR THE YEAR ENDED MAY 31, 2000 FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD DOES NOT ACCORD WITH THE
AGGREGATE NET GAINS ON INVESTMENTS FOR THAT PERIOD BECAUSE OF THE SALES AND REPURCHASES OF FUND SHARES IN RELATION TO
FLUCTUATING MARKET VALUE OF THE INVESTMENTS OF THE FUND.
</FN>
The accompanying notes are an integral part of the financial statements.
8
NOTES TO FINANCIAL STATEMENTS THE NEVIS FUND, INC.
May 31, 2004
1. ORGANIZATION:
THE NEVIS FUND, INC. (the "Fund") was incorporated in Maryland on February 20,
1998. The Fund is registered under the Investment Company Act of 1940, as
amended, as a non-diversified open-end management investment company. The Fund's
prospectus provides a description of the Fund's investment goals and strategies.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of the significant accounting policies followed by
the Fund.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with accounting principles generally accepted in the United States, requires
management to make estimates and assumptions that affect the reported amount
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
SECURITY VALUATION -- Securities listed on a securities exchange, and for
which quotations are readily available, are valued at the last quoted sale
price on the principal exchange or market (foreign or domestic) on which they
are traded on valuation date, or, if there is no such reported sale on the
valuation date, at the most recent quoted bid price. Securities that are
quoted on the NASDAQ national market system are valued at the official
closing price. Short term investments that have remaining maturities of sixty
days or less at time of purchase may be valued at amortized cost, which
approximates market value. Securities and other assets for which market
quotations are not readily available (which may include certain restricted
securities which are subject to limitations as to their sale), or securities
for which market quotations are not reliable, are valued at their fair values
as determined in good faith by or under the supervision of the Fund's Board
of Directors (the "Board"), in accordance with methods that are specifically
authorized by the Board. In determining fair value, the Board considers all
relevant qualitative and quantitative information available. These factors
are subject to change over time and are reviewed periodically. The values
assigned to fair value investments are based on available information and do
not necessarily represent amounts that might ultimately be realized. If a
significant event which is likely to impact the value of one or more
securities held by the Fund occurs after the time at which the market for
such security(ies) closes but before the time that the Fund's net asset value
is calculated on any business day, such event may be taken into account in
determining the fair value of such security(ies) at the time the Fund
calculates its net asset value. For these purposes, significant events after
the close of trading may include, among others, securities trading in other
markets, corporate announcements, natural and other disasters, and political
and other events. Further, because of the inherent uncertainty of valuation,
those estimated values may differ significantly from the values that would
have been used had a ready market for the investments existed, and the
differences could be material. At May 31, 2004, no securities were fair
valued.
FEDERAL INCOME TAXES -- It is the Fund's intention to continue to qualify as
a regulated investment company. The Fund's policy is to comply with the
requirements of Subchapter M of the Internal Revenue Code and to distribute
all of its taxable income and net capital gains to its shareholders.
Accordingly, no provision for federal income or excise taxes is required.
SECURITY TRANSACTIONS AND RELATED INCOME -- Security transactions are
accounted for on the date the security is purchased or sold (trade date).
Costs used in determining realized gains and losses on the sales of
investment securities are based on the specific identification method.
Interest income is recognized on the accrual basis. Dividend income is
recorded on the ex-date.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net investment
income are declared and paid to shareholders annually. Any net realized
capital gains are distributed to shareholders at least annually.
3. TRANSACTIONS WITH AFFILIATES:
Certain officers of the Fund are also officers of SEI Investment Global Funds
Services (the "Administrator") and/or SEI Investments Distribution Co. (the
"Distributor"). Such officers are paid no fees by the Fund for serving as
officers of the Fund.
4. INVESTMENT MANAGEMENT ARRANGEMENTS:
The Fund and Nevis Capital Management LLC (the "Adviser") are parties to an
Investment Management Agreement under which the Adviser receives an annual fee
equal to 1.50% of the average daily net assets of the Fund. Pursuant to its
Investment Management Agreement with the Fund, the Adviser has agreed to bear
all ordinary expenses incurred by the Fund in the conduct of its operations. The
Fund will bear any extraordinary expenses incurred in the course of its
business.
During 2004, the Adviser and certain officers of the Adviser paid $2 million in
fines and interest to settle a public administrative and cease-and-desist
proceeding initiated by the Securities and Exchange Commission (the "SEC")
relating to the allocation of initial public offerings by the Adviser. The Fund
was not a party to the SEC proceeding and did not pay any of the expenses or
fines relating to this matter.
5. ADMINISTRATION, TRANSFER AGENCY AND SERVICES,
CUSTODIAN AND DISTRIBUTION AGREEMENTS:
As discussed above, the Adviser has agreed to bear all ordinary expenses
incurred in the conduct of the Fund's operations. This includes the following
contractual relationships:
The Fund and the Administrator are parties to an Administration Agreement under
which the Administrator provides administrative services for an annual fee,
computed daily and paid monthly, at the annual rate of 0.12% of the first $100
million of the average daily net assets of the Fund, 0.10% of the next
$100 million
9
NOTES TO FINANCIAL STATEMENTS (CONCLUDED) THE NEVIS FUND, INC.
May 31, 2004
of such assets, and 0.08% of such assets in excess of $200 million subject to a
minimum annual fee of $120,000. For the year ended May 31, 2004, the
Administrator received $120,000.
Forum Shareholder Services, LLC (the "Transfer Agent") serves as the transfer
agent and dividend disbursing agent for the Fund under a Transfer Agency and
Services Agreement with the Fund.
Wachovia Bank, N.A. serves as custodian (the "Custodian") for the Fund.
6. FEES PAID TO INDEPENDENT DIRECTORS
For the year ended May 31, 2004, the Fund paid $9,000 to Independent Director
Charles E. Noell, and $12,500 each to Independent Directors Bailey Morris-Eck
and Joseph R. Hardiman, respectively, for attendance at board and committee
meetings.
7. REDEMPTION FEE:
The Fund imposes a redemption fee equal to 2% on shares redeemed within 180 days
of their purchase. The redemption fee is intended to limit short-term trading in
the Fund. Any proceeds from the fees will be credited to the assets of the Fund.
For the year ended May 31, 2004, redemption fees in the amount of $50,445 were
retained by the Fund.
8. INVESTMENT TRANSACTIONS:
The cost of security purchases and the proceeds from security sales, other than
short-term investments, for the year ended May 31, 2004 were as follows (000):
Purchases................................ $20,800
Sales.................................... $31,770
9. FEDERAL TAX INFORMATION:
Dividends from net investment income and distributions from net realized capital
gains are determined in accordance with U.S. Federal income tax regulations,
which may differ from those amounts determined under accounting principles
generally accepted in the United States of America. These book/tax differences
are either temporary or permanent in nature.
To the extent these differences are permanent, they are charged or credited to
paid-in-capital, undistributed net investment income or accumulated net realized
gain, as appropriate, in the period that the differences arise. Accordingly, the
following differences as of May 31, 2004, primarily attributable to certain net
operating losses, which for tax purposes have been reclassified to
paid-in-capital as follows (000):
INCREASE
UNDISTRIBUTED DECREASE
NET INVESTMENT PAID-IN
INCOME CAPITAL
-------------- --------
$513 ($513)
As of May 31, 2004 and May 31, 2003, there were no dividends and distributions
from the Fund.
As of May 31, 2004, the components of accumulated losses on a tax basis were as
follows (000):
Capital loss carryforwards:
Expiring in 2009 $ (15,922)
Expiring in 2010 (20,955)
Expiring in 2011 (35,702)
Expiring in 2012 (22,992)
--------
Total capital loss carryforwards (95,571)
Net unrealized depreciation (32,812)
--------
Total accumulated losses $(128,383)
For Federal income tax purposes, capital loss carryforwards may be carried
forward and applied against future capital gains.
At May 31, 2004, the total cost of securities and the net realized gains or
losses on securities sold for federal income tax purposes were different from
amounts reported for financial reporting purposes. The aggregate gross
unrealized appreciation and depreciation for securities held by the Fund at
May 31, 2004, is as follows (000):
Federal Tax Cost......................... $ 62,627
========
Aggregate gross unrealized
appreciation ......................... 6,400
Aggregate gross unrealized
depreciation ......................... (39,212)
---------
Net unrealized depreciation ............ $(32,812)
=========
10. CONCENTRATION/RISK:
The Fund is non-diversified, which means that it may invest in the securities of
relatively few companies. As a result, the Fund may be more susceptible to a
single adverse economic or regulatory occurrence affecting one or more of these
companies and may experience increased volatility due to its investments in
those securities.
11. COMMITMENTS AND CONTINGENCIES
The Fund is involved, from time to time, in litigation arising in the ordinary
course of business, which, in the opinion of management, is not expected to
result in any significant adverse impact on the Fund's net assets or results of
operations. The Fund is covered by a directors and officer's insurance policy
with an initial $500,000 deductible for various litigation matters.
10
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Shareholders
The Nevis Fund, Inc.:
We have audited the accompanying statement of assets and liabilities of The
Nevis Fund, Inc. (the "Fund"), as of May 31, 2004, and the related statement of
operations for the year then ended, and the statements of changes in net assets
for each of the years in the two-year period then ended and financial highlights
for each of the years in the three-year period then ended. These financial
statements and the financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and the financial highlights based on our audits. The financial
highlights for each of the years ended May 31, 2001 and prior, were audited by
other auditors who have ceased operations. Those auditors expressed an
unqualified opinion on those financial statements in their report dated July 12,
2001.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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 May 31, 2004, by correspondence with the custodian and
broker. As to securities purchased or sold but not yet received or delivered, we
performed other appropriate auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide 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
Nevis Fund, Inc. as of May 31, 2004 and the results of its operations for the
year then ended, and the changes in net assets for each of the years in the
two-year period then ended and financial highlights for each of the years in the
three-year period then ended, in conformity with U.S. generally accepted
accounting principles.
KPMG LLP
Philadelphia, Pennsylvania
July 27, 2004
11
DIRECTORS AND OFFICERS OF THE NEVIS FUND (UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------------
TERM OF NUMBER OF
OFFICE PORTFOLIOS
AND PRINCIPAL IN FUND
POSITION(S) LENGTH OF OCCUPATION(S) COMPLEX OTHER DIRECTORSHIPS
NAME, HELD WITH TIME DURING PAST OVERSEEN HELD BY
ADDRESS AND AGE REGISTRANT SERVED FIVE YEARS BY DIRECTOR DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED DIRECTORS*
- --------------------
David R., Wilmerding, President and Director Managing Member, Nevis 1 N/A
III Director since 1998 Capital Management LLC.
1119 St. Paul St.
Baltimore, MD 21202
43
- ------------------------------------------------------------------------------------------------------------------------------------
Jon C. Baker Senior Vice Director Managing Member, Nevis 1 N/A
1119 St. Paul St. President and since 1998 Capital Management LLC.
Baltimore, MD 21202 Director
40
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT DIRECTORS
- ---------------------
Joseph R. Hardiman Director Director Retired; President and Chief 1 Director, Corvis
1119 St. Paul St. since 1998 Executive Officer and a member Corporation
Baltimore, MD 21202 of the Board of Directors and the (optical networks),
67 Executive Committees of the National SoundView
Association of Securities Dealers, Inc. Technology Group,
and its wholly owned subsidiary, The Inc. (investment
Nasdaq Stock Market, Inc. from banking), Deutsche
September 1987 to January 1997. Asset Management
Funds and ISI
Family of Funds.
- ------------------------------------------------------------------------------------------------------------------------------------
Bailey Morris-Eck Director Director Senior Associate of the Reuters 1 Director of
Good Fellowship Farm since 1999 Foundation and Director of Reuters/ Reuters/Carnegie
3023 Black Rock Road Carnegie Public Policy Series. Served as Public Policy
Butler, MD 21023-1039 Vice President of the Bookings Institution Series, Investment
61 from April 1997 through April 1999. Served Company of America
as a Senior Advisor to the U.S. President America, AMF,
on Economic Policy and Summit Coordina- AMCAPFund, Inc. and
tion from 1994-1997. American Funds Group.
- ------------------------------------------------------------------------------------------------------------------------------------
Charles E. Noell Director Director General Partner of JMI Equity Fund, L.P. 1 Director, Peregrine
1119 St. Paul St. since 1998 Systems, Neon
Baltimore, MD 21202 Systems and Trans-
52 action Systems
Architects, Inc.
(software companies)
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS
- --------
Peter Golden Controller, Since Accounting Director of SEI Investments N/A N/A
One Freedom CFO and 2001 Distribution Co. since June 2001. Vice
Valley Drive Treasurer President of Funds Administration,
Oaks, PA 19456 J.P. Morgan Chase & Co., 2000-2001.
40 Vice President of Pension and Mutual
Fund Accounting, Chase Manhattan Bank,
1997-2000.
- ------------------------------------------------------------------------------------------------------------------------------------
Timothy D. Barto Vice President Since SEI Investments since 1999. General N/A N/A
One Freedom Valley and Assistant 1/25/00 Counsel, Vice President and Secretary
Drive Secretary of the Administration and Adviser,
Oaks, PA 19456 present. Associate, Dechert Price &
36 Rhoades (law firm), 1997-1997.
- ------------------------------------------------------------------------------------------------------------------------------------
12
- ------------------------------------------------------------------------------------------------------------------------------------
TERM OF NUMBER OF
OFFICE PORTFOLIOS
AND PRINCIPAL IN FUND
POSITION(S) LENGTH OF OCCUPATION(S) COMPLEX OTHER DIRECTORSHIPS
NAME, HELD WITH TIME DURING PAST OVERSEEN HELD BY
ADDRESS AND AGE REGISTRANT SERVED FIVE YEARS BY DIRECTOR DIRECTOR
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS (CONTINUED)
- --------------------
Lydia A. Gavalis Vice President Since 1998 SEI Investments since 1998; Vice N/A N/A
One Freedom Valley and Assistant President and Assistant Secretary of the
Drive Secretary Administration and Adviser, present.
Oaks, PA 19456 Assistant General Counsel and Director
40 of Arbitration, Philadelphia Stock
Exchange, 1989-1998.
- ------------------------------------------------------------------------------------------------------------------------------------
Christine M. Vice President Since SEI Investments since 1999; Vice N/A N/A
McCullough and Assistant 1/25/00 President and Assistant Secretary of
One Freedom Valley Secretary the Adviser, present. Associate, White &
Drive Williams LLP, 1991-1999.
Oaks, PA 19456
43
- ------------------------------------------------------------------------------------------------------------------------------------
William E. Zitelli, Jr. Vice President Since SEI Investments since 2000; Vice N/A N/A
One Freedom Valley and Assistant 11/29/00 President and Assistant Secretary of the
Drive Secretary Administration and Adviser, present.
Oaks, PA 19456 Vice President, Merrill Lynch & Co.
36 Asset Management Group, 1998-2000.
Associate, Pepper Hamilton LLP,
1997-1998.
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
*Director who is deemed to be an "interested person" of the Nevis Fund as defined in the 1940 Act is referred to as an "Interested
Director". Mr. Wilmerding, III and Mr. Baker are considered to be "interested persons" of the Nevis Fund as they are Managing
Members of Nevis Capital Management LLC, the Nevis Fund's Adviser.
</FN>
13
INVESTMENT ADVISER
Nevis Capital Management LLC
1119 St. Paul Street
Baltimore, MD 21202
ADMINISTRATOR
SEI Investments Global Funds Services
One Freedom Valley Drive
Oaks, PA 19456
DIRECTORS
Joseph Hardiman
Bailey Morris-Eck
Charles Noell
Jon Baker
David Wilmerding, III
DISTRIBUTOR
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, PA 19456
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG LLP
1601 Market Street
Philadelphia, PA 19103-2499
NEV-AR-002-0300
ITEM 2. CODE OF ETHICS.
The registrant has adopted a Code of Ethics that applies to the registrant's
principal executive officer, the principal financial officer, comptroller or
principal accounting officer, and any person who performs a similar function.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The registrant's Board of Directors has determined that the Board's Audit
Committee does not have an "audit committee financial expert," as the Securities
and Exchange Commission has defined that term. After carefully considering all
of the factors involved in the definition of "audit committee financial expert,"
the Board determined that none of the members of the audit committee met all
five qualifications in the definition, although some members of the Audit
Committee met some of the qualifications. The Board also determined that while
the Audit Committee members have general financial expertise, given the size and
type of The Nevis Fund Inc., the "Fund") and in light of the nature of the
accounting and valuation issues that the Fund has presented over the past
several years, it did not appear that the Audit Committee members lacked any
necessary skill to serve on the Audit Committee.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Fees billed by KPMG LLP Related to the Fund
KPMG LLP billed the Fund aggregate fees for services rendered to the Fund for
the last two fiscal years as follows:
- ------------------------------------------------------------------------------------------------------------------------------
2004 2003
- ------------------------------------------------------------------------------------------------------------------------------
All fees and All fees and All other fees All fees and All fees and All other fees
services to the services to and services to services to the services to and services to
Fund that were service service Fund that were service service
pre-approved affiliates that affiliates that pre-approved affiliates that affiliates that
were did not require were did not require
pre-approved pre-approval pre-approved pre-approval
- ------------------------------------------------------------------------------------------------------------------------------
(a) Audit $52,000 N/A $0 $24,641 N/A $0
Fees(1)
- ------------------------------------------------------------------------------------------------------------------------------
(b) Audit- $0 $0 $0 $0 $0 $0
Related
Fees
- ------------------------------------------------------------------------------------------------------------------------------
(c) Tax Fees $0 $0 $0 $0 $0 $0
- ------------------------------------------------------------------------------------------------------------------------------
(d) All $0 $0 $0 $0 $0 $0
Other
Fees
- ------------------------------------------------------------------------------------------------------------------------------
Notes:
(1) Audit fees include amounts related to the audit of the registrant's
annual financial statements and services normally provided by the
accountant in connection with statutory and regulatory filings.
(e)(1) Not Applicable.
(e)(2) Percentage of fees billed applicable to non-audit services pursuant to
waiver of pre-approval requirement were as follows:
---------------------------------------------------------------
2004 2003
---------------------------------------------------------------
Audit-Related Fees $0 $0
---------------------------------------------------------------
Tax Fees $0 $0
---------------------------------------------------------------
All Other Fees $0 $0
---------------------------------------------------------------
(f) Not Applicable.
(g) The aggregate non-audit fees and services billed by KPMG LLP for the last
two fiscal years were $0 and $0 for 2004 and 2003, respectively.
(h) Not Applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to open-end investment management companies.
ITEM 6. (RESERVED)
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to open-end investment management companies.
ITEM 8. PURCHASERS OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT COMPANY AND
AFFILIATED PURCHASERS.
Not applicable.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 10. CONTROLS AND PROCEDURES.
(a) The certifying officers, whose certifications are included herewith, have
evaluated the registrant's disclosure controls and procedures within 90 days of
the filing date of this report. In their opinion, based on their evaluation, the
registrant's disclosure controls and procedures are adequately designed, and are
operating effectively to ensure, that information required to be disclosed by
the registrant in the reports it files or submits under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms.
(b) There were no significant changes in the registrant's internal control over
financial reporting that occurred during the registrant's last fiscal half-year
that has materially affected, or is reasonably likely to materially affect, the
registrants internal control over financial reporting.
ITEMS 11. EXHIBITS.
(a)(1) Code of Ethics attached hereto.
(a)(2) A separate certification for the principal executive officer and the
principal financial officer of the registrant as required by Rule 30a-2(a) under
the Investment Company Act of 1940, as amended (17 CFR 270.30a-2(a)), are filed
herewith.
(b) Officer certifications as required by Rule 30a-2(b) under the Investment
Company Act of 1940, as amended (17 CFR 270.30a-2(b)) also accompany this filing
as an Exhibit.
- --------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) The Nevis Fund, Inc.
By (Signature and Title)* /s/ David R. Wilmerding, III
-----------------------------
David R. Wilmerding, III
Chief Executive Officer
Date: 08/05/04
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ David R. Wilmerding, III
----------------------------
David R. Wilmerding, III
Chief Executive Officer
Date: 08/05/04
By (Signature and Title)* /s/ Peter Golden
----------------------------
Peter Golden
Chief Financial Officer
Date: 08/05/04
* Print the name and title of each signing officer under his or her signature.