UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT
OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-08902
Exact Name of Registrant as Specified in Charter: 1838 Investment Advisors Funds
Address of Principal Executive Offices: 113 King Street, Armonk, NY 10504
Name and address of agent for service: Richard Walz,
113 King Street, Armonk, NY 10504
Copies to: Thomas E. Stabile,
113 King Street,
Armonk, NY 10504
Registrant's telephone number, including area code: (914) 273-4545
Date of fiscal year end: October 31
Date of reporting period: October 31, 2005
ITEM 1: Reports to Shareholders
1838 INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
FELLOW SHAREHOLDER:
For the year ending October 31, 2005, the total return of the Morgan Stanley
Capital International Europe, Australia and Far East Index (the "EAFE") was
18.09%. During this period, the 1838 International Equity Fund had a total
return of 22.20%, outperforming the EAFE benchmark by 4.11%. During the second
half of the year, the period from April 30, 2005 through October 31, 2005, these
numbers were 8.63% for the EAFE, 11.70% for the Fund's net asset value per share
growth and 3.07% for the outperformance of the Fund over the EAFE.
MARKET DEVELOPMENTS:
Equity market indices in all major international regions showed very strong
absolute results during the year ending October 31, 2005. Within EAFE, the
Japanese market led the pack with a 22.41% gain, closely followed by Asia
ex-Japan at 21.77% and Europe at 16.69%. Many emerging markets did even better.
Equity markets were boosted by corporate earnings generally beating analysts'
expectations, continued high economic growth in the US, China, India and even
Japan and some improvement in leading indicators for economic growth in Europe.
A strengthening of the US dollar versus the yen and European currencies also
supported the earnings outlook. In Japan, the re-election of the popular Prime
Minister Junichiro Koizumi and the much improved balance sheets of the banks led
predominantly foreigners to step up investments in the equity market.
All sectors participated in the rallying markets, led by those that are
particularly sensitive to economic growth such as Materials, Energy and
Industrials. However, Technology and Telecommunications stocks lagged the
broader market indices.
RELATIVE PERFORMANCE BY REGION:
The Fund's allocation to regions not part of EAFE such as Canada, Mexico and
other emerging markets provided a relatively high - 28% - contribution to
overall outperformance during the year. In Canada, the stock price of oil and
gas producer Encana gained 84.9%, while in Mexico, those of mobile phone
services provider America Movil and of retailer Wal Mart de Mexico rose 79.0%
and 48.6% respectively. Our holding in ICICI Bank in India benefited greatly -
with a 50.0% rise in share price - from continued emerging markets strength. The
Fund's selection in Japan showed very strong relative returns, boosted by a 110%
gain in Kobe Steel and gains in Kubota (tractors) and Sumitomo Realty &
Development of around 50%. The portfolio had below benchmark exposure to Japan -
on average 17.7% versus 22.0% for the benchmark, the negative effect of which
was offset however by the exposure to Emerging Markets. In Asia ex-Japan and in
Europe, the portfolio also experienced favorable stock selection results.
RELATIVE PERFORMANCE BY SECTOR:
The Fund outperformed the benchmark in all ten MSCI sectors, with
proportionately the strongest relative results in Materials, Telecommunications,
Industrials and Consumer Discretionary. The largest positive contributors in
each of those sectors were respectively Kobe Steel, America Movil, Grupo
Ferrovial (the Spanish construction group) and Continental (German tire and
braking systems manufacturer). Only in Financials was the outperformance minimal
in size, due to disappointing share price developments in Royal Bank of
Scotland, HSBC - both with slowdown in consumer lending in the UK partly to
blame - and DBS Group (lender in Singapore and Hong Kong).
We made a few switches in the banking industry holdings to increase the growth
potential, selling out of Danske Bank and Bank of Nova Scotia and establishing
positions in National Bank of Greece and Akbank (in Turkey).
CONCLUSION:
The Fund showed strong absolute and relative performance during this year. The
5-year long headwind of "value" stocks over "growth" stocks abated during the
year and strong stock selection across all sectors and major regions created
outperformance above our historical average. Since August 3, 2005, the Fund has
a ten year track record. Through October the annualized performance since
inception was 2.18% above the benchmark after Fund expenses, which ranked the
Fund in the top quartile for one, three, five and ten year performances amongst
Foreign Large
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1838 INTERNATIONAL EQUITY FUND
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Cap Growth Funds, according to Morningstar. We will strive to continue to manage
the Fund with our conservative growth strategy, focusing on market leaders with
strategies in place to continue profitable growth. We thank you for your
confidence in our team.
Sincerely,
Hans van den Berg
President and Portfolio Manager
November 11, 2005
INTERNATIONAL EQUITY FUND
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT*
AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED OCTOBER 31, 2005
- --------------------------------------------------------------------------------
FINAL VALUE
10 OF A $10,000
1 YEAR 5 YEAR YEAR INVESTMENT
----- ----- ----- -----------
FUND 22.20% 3.39% 7.97% $21,536
EAFE 18.09% 3.02% 5.81% $17,587
[LINE CHART OMITTED -- PLOT POINTS AS FOLLOWS:]
1838 INTERNATIONAL
EQUITY FUND EAFE
OCT-95 $10,000 $10,000
OCT-96 10,911 11,047
OCT-97 12,572 11,559
OCT-98 13,440 12,673
OCT-99 17,351 15,608
OCT-00 18,230 15,156
OCT-01 13,866 11,366
OCT-02 11,917 9,865
OCT-03 14,722 12,532
OCT-04 17,624 14,892
OCT-05 21,550 17,587
* PAST PERFORMANCE OF THE FUND IS NO GUARANTEE OF FUTURE RESULTS. CURRENT
PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA SHOWN. THE 1838
INTERNATIONAL EQUITY FUND COMMENCED OPERATIONS ON AUGUST 3, 1995. THE VALUES
SHOWN REFLECT A HYPOTHETICAL INITIAL INVESTMENT OF $10,000 WITH DISTRIBUTIONS
REINVESTED. RETURNS MAY BE HIGHER DUE TO THE ADVISER'S MAINTENANCE OF THE
FUND'S EXPENSE CAP. PLEASE BEAR IN MIND THAT INVESTING IN FOREIGN SECURITIES
INVOLVES SPECIAL RISKS SUCH AS CURRENCY FLUCTUATION, LESS EXTENSIVE
REGULATION OF FOREIGN BROKERS AND POSSIBLE POLITICAL INSTABILITY. THE EAFE
IS AN UNMANAGED INDEX REPRESENTING THE MARKET VALUE WEIGHTED PRICE OF 1,100
STOCKS OF THE MAJOR STOCK EXCHANGES IN EUROPE, AUSTRALIA AND THE FAR EAST
WITHOUT ANY ASSOCIATED EXPENSES AND THE RETURNS ASSUME REINVESTMENT OF ALL
DISTRIBUTIONS. YOU CANNOT INVEST DIRECTLY IN AN INDEX. PLEASE READ THE
PROSPECTUS CAREFULLY BEFORE INVESTING. DISTRIBUTED BY MBIA CAPITAL MANAGEMENT
CORPORATION. SEE THE FINANCIAL HIGHLIGHTS ON PAGE 12 FOR MORE DETAILS.
2
1838 INTERNATIONAL EQUITY FUND
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MARKET SECTOR DIVERSIFICATION
OCTOBER 31, 2005
CONSUMER DISCRETIONARY 10.89%
CONSUMER STAPLES 10.01%
ENERGY 8.26%
FINANCIALS 25.90%
HEALTH CARE 5.87%
INDUSTRIALS 11.02%
INFORMATION TECHNOLOGY 7.12%
MATERIALS 8.03%
OTHER 2.95%
TELECOMMUNICATION SERVICES 5.45%
UTILITIES 4.50%
EXPENSE EXAMPLE
OCTOBER 31, 2005
As a shareholder of the Fund, you incur two types of costs: (1) transaction
costs, reinvested dividends, or other distributions; redemption fees; and
exchange fees; and (2) ongoing costs, including management fees and other Fund
expenses. This Example is intended to help you understand your ongoing costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds. The Example is based on an investment
of $1,000 invested at the beginning of the period and held for the entire period
(May 1, 2005 - October 31, 2005).
ACTUAL EXPENSES
The first line of the table below provides information about actual account
values and actual expenses. Although the Fund charges no sales load or
transaction fees, you will be assessed fees for outgoing wire transfers,
returned checks and stop payment orders at prevailing rates charged by
MBIA-MISC, the Fund's transfer agent. If you request that a redemption be made
by wire transfer, currently a $15.00 fee is charged by the Fund's transfer
agent. You will be charged a transaction fee equal to 2.00% of the net amount of
the redemption if you redeem your shares within 60 days of purchase. IRA
accounts will be charged a $15.00 annual maintenance fee. To the extent the Fund
invests in shares of other investment companies as part of its investment
strategy, you will indirectly bear your proportionate share of any fees and
expenses charged by the underlying funds in which the Fund invests in addition
to the expenses of the Fund. Actual expenses of the underlying funds are
expected to vary among the various underlying funds.
3
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1838 INTERNATIONAL EQUITY FUND
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EXPENSE EXAMPLE (Continued)
OCTOBER 31, 2005
These expenses are not included in the example below. The example below
includes, but is not limited to, management fees, shareholder servicing fees,
fund accounting, custody and transfer agent fees. However, the example below
does not include portfolio trading commissions and related expenses, interest
expense and other extraordinary expenses as determined under generally accepted
accounting principles. You may use the information in this line, together with
the amount you invested, to estimate the expenses that you paid over the period.
Simply divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the first
line under the heading entitled "Expenses Paid During Period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical
account values and hypothetical expenses based on the Fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the Fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare the ongoing costs of
investing in the Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder reports
of the other funds.
PLEASE NOTE THAT THE EXPENSES SHOWN IN THE TABLE ARE MEANT TO HIGHLIGHT YOUR
ONGOING COSTS ONLY AND DO NOT REFLECT ANY TRANSACTIONAL COSTS, SUCH AS SALES
CHARGES (LOADS), REDEMPTION FEES, OR EXCHANGE FEES. THEREFORE, THE SECOND LINE
OF THE TABLE IS USEFUL IN COMPARING ONGOING COSTS ONLY, AND WILL NOT HELP YOU
DETERMINE THE RELATIVE TOTAL COSTS OF OWNING DIFFERENT FUNDS. IN ADDITION, IF
THESE TRANSACTIONAL COSTS WERE INCLUDED, YOUR COSTS WOULD HAVE BEEN HIGHER.
BEGINNING ENDING EXPENSES PAID
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD
5/1/05 10/31/05 5/1/05 - 10/31/05
- -----------------------------------------------------------------------------------------------------------
Actual $1,000.00 $1,117.01 $6.67
- -----------------------------------------------------------------------------------------------------------
Hypothetical (5% return before expenses) 1,000.00 1,018.90 6.36
- -----------------------------------------------------------------------------------------------------------
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 1.25%, MULTIPLIED
BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 184/365 (TO
REFLECT THE ONE-HALF YEAR PERIOD). THIS EXPENSE RATIO REFLECTS AN EXPENSE
WAIVER.
4
1838 INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS OCTOBER 31, 2005
- --------------------------------------------------------------------------------
VALUE
INDUSTRY SHARES (NOTE 2)
--------- -------- -----------
AUSTRIA -- 1.87%
Erste Bank Der Oester Spark Banks............................... 6,580 $ 342,142
--------------
AUSTRALIA -- 2.11%
BHP Billiton Ltd. Metal & Mining...................... 24,838 384,943
--------------
CANADA -- 2.23%
Encana Corporation Oil & Gas........................... 8,921 408,405
--------------
FINLAND -- 1.33%
Fortum OYJ Electric-Intergrated................ 13,710 242,518
--------------
FRANCE -- 9.31%
AXA, Inc. Insurance........................... 11,335 328,136
Axalato* Technology Hardware................. 7,012 190,797
BNP Paribas Banks............................... 3,177 240,825
Essilor International Health Care Equipment & Supplies.... 4,126 339,544
LVMH Moet-Hennessy L. Vuitton SA Consumer Durables & Apparel......... 2,784 225,356
Total SA (B Shares) Oil & Gas........................... 1,503 378,026
--------------
1,702,684
--------------
GERMANY -- 10.09%
Continental AG Automobiles & Components............ 4,686 357,949
Deutsche Bank AG Banks............................... 2,377 222,273
E. ON AG Electric Utilites................... 3,836 347,391
adidas-Salomon AG Consumer Durables & Apparel......... 1,212 203,248
SAP AG Software............................ 1,217 208,575
Siemens AG Industrial Conglomerate............. 3,223 239,470
Celesio AG Pharmaceuticals..................... 3,142 265,540
--------------
1,844,446
--------------
GREECE -- 2.49%
National Bank of Greece-Cstock Banks............................... 5,773 225,137
Coca-Cola Hellenic Bottling SA Beverages........................... 8,461 230,498
--------------
455,635
--------------
HONG KONG -- 2.77%
Esprit Holdings Ltd. Retailing........................... 38,994 276,239
China Resources Power Holdings Electric Utilities.................. 384,000 230,875
--------------
507,114
--------------
See notes to financial statements.
5
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1838 INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS -- CONTINUED OCTOBER 31, 2005
- --------------------------------------------------------------------------------
VALUE
INDUSTRY SHARES (NOTE 2)
--------- -------- -----------
HUNGARY -- 1.39%
Mol Magyar Olaj GDR Oil & Gas........................... 2,750 $ 253,687
--------------
INDIA -- 1.51%
ICICI Bank Ltd. - Sponsored ADR Banks............................... 11,663 275,830
--------------
IRELAND -- 4.63%
Allied Irish Bank PLC. Banks............................... 12,548 263,033
Anglo Irish Bank Corp. Banks............................... 28,094 380,720
CRH PLC Construction Materials.............. 8,093 201,933
--------------
845,686
--------------
INDONESIA -- 0.85%
PT Indonesian Satellite Telecommunication Services.......... 6,456 155,590
--------------
ISRAEL -- 1.46%
TEVA Pharmaceutical Ind. - ADR Pharmaceuticals..................... 7,007 267,107
--------------
JAPAN -- 19.76%
Canon Inc. Office Electronics.................. 4,500 238,192
Casio Computer CO Ltd Electronic Equipment & Instruments.. 14,400 217,486
Daiwa Securities Group Diversified Financial Services...... 27,000 221,801
Hoya Corp. Health Care Equipment & Services.... 8,000 280,207
JSR Corp. Chemicals........................... 9,600 226,308
Kobe Steel Ltd. Construction Materials.............. 129,000 381,151
Kubota Corporation Machinery........................... 45,000 327,395
Sharp Corp. Household Durables.................. 12,000 164,783
SMC Corp. Machinery........................... 1,900 252,859
Sumitomo Realty & Dev. Co., Ltd. Real Estate......................... 17,000 275,024
Terumo Corp. Pharmaceuticals..................... 7,800 236,616
Toray Industries Inc. Industrial Materials................ 49,000 271,884
Toyota Motor Corp. Automobiles & Components............ 11,200 519,372
--------------
3,613,078
--------------
MEXICO -- 3.23%
America Movil SA (L Shares) - ADR Wireless Telecommunication Services. 12,044 316,155
Wal-Mart De Mexico Retail.............................. 5,633 273,953
--------------
590,108
--------------
NETHERLANDS -- 4.07%
ING Groep NV Diversified Financial Services...... 10,388 299,436
Koninklijke Numico NV* Food Products....................... 5,841 236,440
Reed Elsevier NV Media............................... 15,523 208,951
--------------
744,827
--------------
See notes to financial statements.
6
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1838 INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS -- CONTINUED OCTOBER 31, 2005
- --------------------------------------------------------------------------------
VALUE
INDUSTRY SHARES (NOTE 2)
--------- -------- -----------
NORWAY -- 1.42%
Telenor ASA Telecommunication Services.......... 26,610 $ 259,659
--------------
SINGAPORE -- 2.71%
DBS Group Holdings Ltd. Banks............................... 22,255 201,260
Keppel Corp. Ltd. Diversified Financials.............. 42,900 294,030
--------------
495,290
--------------
SPAIN -- 2.88%
Banco Popular Espanol SA Banks............................... 17,482 212,166
Grupo Ferrovial SA Construction & Engineering.......... 4,249 313,750
--------------
525,916
--------------
SWEDEN -- 2.47%
Ericsson (LM) Tel - Sponsored ADR Telecommunications Equipment........ 7,179 235,543
Getinge AB (B Shares) Health Care Equipment & Services.... 17,271 215,861
--------------
451,404
--------------
SWITZERLAND -- 4.20%
Nestle SA - Sponsored ADR Food Products....................... 3,328 247,454
Novartis AG - Registered Shares Pharmaceuticals..................... 5,658 303,898
SGS SA Commercial Services................. 295 217,100
--------------
768,452
--------------
TURKEY -- 1.44%
Akbank T.A.S.* Banks............................... 21,195 263,369
--------------
UNITED KINGDOM -- 12.67%
Barclays PLC Banks............................... 22,803 225,813
BP Amoco Oil & Gas........................... 42,134 466,822
Capita Group PLC Commercial Services & Supplies...... 27,054 186,691
HSBC Holdings PLC Banks............................... 14,095 221,496
Reckitt Benckiser PLC Household Products.................. 7,644 231,008
Royal Bank of Scotland Group PLC Banks............................... 8,517 235,887
Sabmiller PLC Brewery............................. 14,151 267,277
Tesco PLC Food & Drug Retailing............... 40,880 217,715
Vodafone Airtouch PLC Wireless Telecommunication Services. 100,508 264,369
--------------
2,317,078
--------------
TOTAL COMMON STOCK (Cost $12,451,234).............................................. 17,714,968
--------------
See notes to financial statements.
7
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1838 INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS -- CONTINUED OCTOBER 31, 2005
- --------------------------------------------------------------------------------
VALUE
SHARES (NOTE 2)
-------- -----------
SHORT-TERM INVESTMENT -- 2.95%
Evergreen Institutional Money Market Fund - I Shares (Cost $538,926)........... 538,926 $ 538,926
--------------
TOTAL INVESTMENTS (Cost $12,990,160) -- 99.84%.................................... 18,253,894
OTHER ASSETS AND LIABILITIES, NET -- 0.16% .................................... 29,286
--------------
NET ASSETS -- 100.00%............................................................... $ 18,283,180
==============
MARKET SECTOR DIVERSIFICATION
As a Percentage of Total Investments
Consumer Discretionary -- 10.89% Information Technology -- 7.12% Consumer
Staples -- 10.01% Materials -- 8.03%
Energy -- 8.26% Other -- 2.95%
Financials -- 25.90% Telecommunication Services -- 5.45%
Health Care -- 5.87% Utilities -- 4.50%
Industrials -- 11.02%
* Non-income producing security
ADR -- American Depository Receipt
See notes to financial statements.
8
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1838 INTERNATIONAL EQUITY FUND
STATEMENTS OF ASSETS AND LIABILITIES OCTOBER 31, 2005
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (identified cost $12,990,160) (Note 2)............ $18,253,894
Foreign Cash (identified cost $8,830)................................... 8,480
Receivables:
Fund shares sold..................................................... 10,000
Dividends, interest and foreign tax reclaims......................... 39,553
Reimbursement due from advisor....................................... 97,879
-----------
Total assets....................................................... 18,409,806
-----------
LIABILITIES:
Accrued expenses........................................................ 126,626
-----------
Total liabilities.................................................. 126,626
-----------
NET ASSETS.............................................................. $18,283,180
===========
NET ASSETS CONSIST OF:
Shares of beneficial interest........................................... $ 1,190
Additional capital paid-in.............................................. 16,904,914
Undistributed net investment income..................................... 156,909
Accumulated net realized loss on investments............................ (4,046,277)
Net unrealized appreciation on:
Investments.......................................................... 5,263,383
Translation of assets and liabilities in foreign currencies.......... 3,061
-----------
NET ASSETS.............................................................. $18,283,180
===========
Shares of beneficial interest outstanding............................... 1,190,446
-----------
NET ASSET VALUE, offering and redemption price per share
(Net assets/Outstanding shares of beneficial interest)............... $ 15.36
===========
See notes to financial statements.
9
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1838 INTERNATIONAL EQUITY FUND
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 2005
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends..................................................................... $ 509,834
Interest...................................................................... 8,791
Foreign taxes withheld........................................................ (53,845)
-----------
Total investment income................................................... 464,780
-----------
EXPENSES:
Investment advisory fees (Note 4)............................................. 184,790
Legal fees.................................................................... 114,030
Administration fees (Note 4).................................................. 60,000
Accounting fees (Note 4)...................................................... 60,000
Trustees' fees (Note 4)....................................................... 28,560
Registration fees............................................................. 24,547
Custodian fees................................................................ 22,233
Insurance..................................................................... 22,055
Transfer agency fees (Note 4)................................................. 20,000
Reports to shareholders....................................................... 15,298
Audit fees.................................................................... 12,379
CCO Fees...................................................................... 2,384
Other......................................................................... 19,022
-----------
Total expenses............................................................... 585,298
Advisory fees waived (Note 4)................................................ (184,790)
Reimbursement from advisor (Note 4).......................................... (92,637)
-----------
Total expenses, net....................................................... 307,871
-----------
Net investment income.................................................. 156,909
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain (loss) from:
Investment transactions...................................................... 7,233,482
Foreign currency transactions................................................ (99,652)
-----------
Total net realized gain................................................... 7,133,830
-----------
Change in unrealized appreciation (depreciation) of:
Investments.................................................................. (1,611,986)
Translation of assets and liabilities in foreign currencies.................. (27,790)
-----------
Total change in unrealized appreciation (depreciation).................... (1,639,776)
-----------
Net realized/unrealized gain on investments and foreign currency...... 5,494,054
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............................. $ 5,650,963
===========
See notes to financial statements.
10
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1838 INTERNATIONAL EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED OCTOBER 31,
- --------------------------------------------------------------------------------
2005 2004
----------- -----------
DECREASE IN NET ASSETS:
Operations:
Net investment income.......................................... $ 156,909 $ 247,748
Net realized gain from investment and
foreign currency transactions................................ 7,133,830 5,679,915
Change in unrealized appreciation (depreciation) of
investments and foreign currency............................. (1,639,776) 1,883,650
----------- -----------
Net increase in net assets resulting from operations....... 5,650,963 7,811,313
----------- -----------
Decrease in net assets from Fund share transactions (Note 5)...... (17,408,046) (27,861,758)
----------- -----------
Decrease in net assets............................................ (11,757,083) (20,050,445)
NET ASSETS:
Beginning of year................................................. 30,040,263 50,090,708
----------- -----------
End of year (including undistributed net investment
income of $156,909 and $0, respectively) ...................... $18,283,180 $30,040,263
=========== ===========
See notes to financial statements.
11
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1838 INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following table includes selected data for a share outstanding throughout
each fiscal year and other performance information derived from the financial
statements. It should be read in conjuntion with the financial statements and
notes thereto.
FOR THE FISCAL YEARS ENDED OCTOBER 31,
------------------------------------------------------
2005 2004 2003 2002 2001
------- ------- ------- ------- -------
NET ASSET VALUE, BEGINNING OF YEAR................. $12.57 $10.50 $8.50 $9.89 $14.59
------- ------ ------- ------- -------
INVESTMENT OPERATIONS:
Net investment income............................. 0.13 0.10 0.05 0.01 0.03
Net realized and unrealized gain (loss) on
investments and foreign currency transactions... 2.66 1.97 1.95 (1.40) (3.19)
------- ------ ------- ------- -------
Total from investment operations.............. 2.79 2.07 2.00 (1.39) (3.16)
------- ------ ------- ------- -------
DISTRIBUTIONS:
From net short-term realized gain on investments.. -- -- -- -- (0.22)
From net long-term realized gain on investments... -- -- -- -- (1.32)
------ ------ ------- ------- -------
Total distributions............................. -- -- -- -- (1.54)
------ ------ ------- ------- -------
NET ASSET VALUE, END OF YEAR....................... $15.36 $12.57 $10.50 $8.50 $9.89
======= ====== ======= ======= =======
TOTAL RETURN....................................... 22.20% 19.71% 23.53% (14.05)% (23.94)%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses (net of fee waivers)1.................... 1.25% 1.25% 1.23% 1.10% 1.04%
Expenses (excluding fee waivers) ................. 2.37% 1.48% N/A N/A N/A
Net investment income............................. 0.64% 0.63% 0.55% 0.08% 0.26%
Portfolio turnover rate............................ 16.61% 36.70% 45.93% 31.51% 41.58%
Net assets, end of year (in 000's)................. $18,285 $30,040 $50,091 $56,507 $72,007
1 The adviser has voluntarily agreed to waive its fees and/or reimburse the
Fund so the total operating expenses do not exceed 1.25% of average daily net
assets.
See notes to financial statements.
12
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1838 INTERNATIONAL EQUITY FUND
NOTES TO THE FINANCIAL STATEMENTS OCTOBER 31, 2005
- --------------------------------------------------------------------------------
NOTE 1 - DESCRIPTION OF THE FUNDS
The 1838 Investment Advisors Funds (the "Trust") was organized as a Delaware
business trust on December 9, 1994, and is an open-end, management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"). The Trust's Agreement and Declaration of Trust permits the Trustees
to issue an unlimited number of shares of beneficial interest. The Trust
consists of one Fund, the 1838 International Equity Fund (the "Fund"). The Fund
commenced operations on August 3, 1995. The Fund's investment objective is
capital appreciation, with a secondary objective of income. The Fund seeks to
achieve its objective by investing at least 80% of its total assets in a
diversified portfolio of equity securities of issuers located in countries other
than the United States.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION. The Fund's securities for which representative market
quotations are available will be valued at the last sale price or official
closing price (closing bid price or last evaluated quote if no sale has
occurred) on the security's principal market or exchange on which it trades.
Prices for securities traded in the over-the-counter market, including listed
debt and preferred securities, whose primary market is believed to be
over-the-counter, normally are supplied by independent pricing services. If
market quotations or official closing prices are not readily available or do not
accurately reflect fair value for a security or if a security's value has been
materially affected by events occurring after the close of the exchange or
market on which the security is principally traded (for example, a foreign
exchange or market), but prior to the NAV calculation, then that security may be
valued by another method that the Board of Trustees believes accurately reflects
fair value. Securities for which market quotations are not readily available and
all other assets will be valued at their respective fair value as determined in
good faith by, or under procedures established by the Board of Trustees. In
determining fair value, the Trustees may employ an independent pricing service.
FEDERAL INCOME TAXES. The Fund intends to remain qualified as a "regulated
investment company" under Subchapter M of the Internal Revenue Code of 1986 and
to distribute all of its taxable income to its shareholders. Therefore, no
federal income or excise tax provision is required.
FOREIGN CURRENCY TRANSLATIONS. The books and records of the Fund are maintained
in U.S. dollars. Foreign currency amounts are translated into U.S. dollars on
the following basis:
(i) market value of investment securities, assets and liabilities at
the daily rates of exchange, and
(ii) purchases and sales of investment securities, dividend and interest
income and certain expenses at the rates of exchange prevailing
on the respective dates of such transactions.
The Fund does 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 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 Fund's
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, resulting from
changes in exchange rates.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. In connection with portfolio
purchases and sales of securities denominated in a foreign currency, the Fund
may enter into forward foreign currency exchange contracts ("FFCEC").
Additionally, the Fund may enter into these contracts to hedge certain foreign
currency assets. Foreign currency exchange contracts are recorded at fair value.
Certain risks may arise upon entering into these contracts from the potential
inability of counterparties to meet the terms of their contracts. Realized gains
or losses arising from such transactions are included in net realized gain
(loss) from foreign currency transactions. There were no FFCEC to hedge foreign
currency assets outstanding at October 31, 2005.
13
<Page>
1838 INTERNATIONAL EQUITY FUND
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED OCTOBER 31, 2005
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS AND BOOK/TAX DIFFERENCES. All distributions by the
Fund will be made annually in December. Additional distributions may be made by
the Fund to the extent necessary. Distributions of net investment income and net
realized gains are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles in the United States of
America ("GAAP"). These differences are primarily due to differing treatments of
gains or losses on foreign currency transactions and losses deferred due to wash
sales. Net investment income, short-term gains and foreign currency gains are
taxed as ordinary income and long-term gains are taxed as capital gains. There
were no distributions during the fiscal years ended October 31, 2005 and 2004.
At October 31, 2005, the components of distributable earnings on a tax basis
were as follows:
UNDISTRIBUTED CAPITAL LOSS NET UNREALIZED
ORDINARY INCOME CARRYFORWARD APPRECIATION
-------------- ----------- ------------
$57,257 $(3,863,627) $5,263,383
As of October 31, 2005, the following table shows the capital loss carryovers
available to offset possible future capital gains for the Fund:
AMOUNT EXPIRATION DATE
------------- ---------------
$(3,863,627) 10/31/2011
During the year ended October 31, 2005, there were no reclassifications required
to align financial reporting with tax reporting.
At October 31, 2005, the following table shows for federal tax purposes the
aggregate cost of investments, the net unrealized appreciation/(depreciation) of
those investments, the aggregate gross unrealized appreciation of all securities
with an excess of market value over tax cost and the aggregate gross unrealized
depreciation of all securities with an excess of tax cost over mar-ket value.
AGGREGATE NET UNREALIZED GROSS UNREALIZED GROSS UNREALIZED
TAX COST APPRECIATION APPRECIATION DEPRECIATION
- -------------- ------------- -------------- --------------
$12,990,511 $5,263,383 $5,436,028 $172,645
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS. The preparation of
financial statements in conformity with GAAP requires management to make
estimates and assumptions that may affect the reported amounts of 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.
OTHER. Investment security transactions are accounted for on a trade date basis.
The specific identification method is utilized for determining realized gain or
loss on investments for both financial and federal income tax reporting
purposes. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Interest income is recorded on an accrual basis.
NOTE 3 - PURCHASES AND SALES OF INVESTMENT SECURITIES
During the fiscal year ended October 31, 2005, purchases and sales of investment
securities, other than short-term investments, were as follows:
PURCHASES SALES
---------- -----------
$4,028,247 $21,885,928
14
<Page>
1838 INTERNATIONAL EQUITY FUND
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED OCTOBER 31, 2005
- --------------------------------------------------------------------------------
NOTE 4 - ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Van Kampen Asset Management ("VKAM") was appointed interim investment advisor to
the Fund on July 28, 2005. Prior to July 28, 2005, 1838 Investment Advisors, LP
("1838 Investment Advisors") served as investment advisor to the Fund.
Under the terms of the Fund's Interim Investment Advisory Agreement, VKAM
provides investment advice to the Fund for an annual fee at the rate of 0.75% of
average daily net assets. If the majority of the Fund's outstanding shares
approve an investment advisory contract between the Fund and VKAM by the end of
the 150-day period, the interim advisory fee will be paid to VKAM. If the
majority of the Fund's outstanding shares do not approve a contract between the
Fund and VKAM, the lesser of the interim advisory fee or the cost of VKAM's
services will be paid to VKAM. VKAM has voluntarily agreed to waive its interim
advisory fee and/or reimburse the Fund monthly to the extent that the total
operating expenses (excluding taxes, extraordinary expenses, brokerage
commissions and interest) exceed an annual rate of 1.25% of the Fund's average
daily net assets.
1838 Investment Advisors provided investment advice to the Fund for the period
through July 27, 2005 for an annual fee at the rate of 0.75% of average daily
net assets. 1838 Investment Advisors voluntarily waived its advisory fee and/or
reimbursed the Fund monthly to the extent that the total operating expenses
(excluding taxes, extraordinary expenses, brokerage commissions and interest)
exceeded an annual rate of 1.25% of the Fund's average daily net assets.
MBIA Municipal Investors Services Corporation ("MBIA MISC"), a direct,
wholly-owned subsidiary of MBIA Inc, serves as Administrator to the Trust
pursuant to an Administration Agreement with the Trust on behalf of the Fund
dated November 1, 2004. The Administrator is responsible for services such as
financial reporting, compliance monitoring and corporate management. The Trust
paid MBIA MISC a monthly asset-based fee at the annual rate of 0.06% of the
Fund's average daily net assets, with a minimum annual fee of $60,000. For the
fiscal year ended October 31, 2005, MBIA MISC's administration fees amounted to
$60,000.
MBIA MISC also serves as Accounting Agent to the Trust. As Accounting Agent,
MBIA MISC determines the Fund's net asset value per share and provides
accounting services to the Fund pursuant to an Accounting Services Agreement
with the Trust. The Trust pays MBIA MISC a monthly asset-based fee at the annual
rate of $60,000, plus 0.03% of average daily net assets in excess of $50
million. For the fiscal year ended October 31, 2005, MBIA MISC's accounting fees
amounted to $60,000.
MBIA MISC also serves as the Fund's transfer agent pursuant to a Transfer Agency
Agreement with the Trust. For these services, MBIA MISC receives an annual fee
of $20,000, and is reimbursed for out-of-pocket expenses. For the fiscal year
ended October 31, 2005, MBIA MISC's transfer agent fees amounted to $20,000.
MBIA Capital Management Corporation (the "distributor"), a direct, wholly-owned
subsidiary of MBIA Inc., entered into a Distribution Agreement with the Trust to
assist in securing purchasers for shares of the Fund. The distributor also
directly or through its affiliates, provides investor support services. The
distributor receives no compensation for distributing the Fund's shares, except
for reimbursement of its out-of-pocket expenses.
The Trustees of the Trust who are "interested persons" of the Trust, the
Investment Advisor or its affiliates and all personnel of the Trust or the
Investment Advisor performing services related to research, statistical and
investment activities are paid by the Investment Advisor or its affiliates.
15
<Page>
1838 INTERNATIONAL EQUITY FUND
NOTES TO THE FINANCIAL STATEMENTS -- CONTINUED OCTOBER 31, 2005
- --------------------------------------------------------------------------------
NOTE 5 - FUND SHARE TRANSACTIONS
At October 31, 2005, there were an unlimited number of shares of beneficial
interest with a $0.001 par value, authorized. The fol-lowing table summarizes
the activity in shares of the Fund:
FOR THE FISCAL YEAR FOR THE FISCAL YEAR
ENDED OCTOBER 31, 2005 ENDED OCTOBER 31, 2004
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- -------------
Shares sold..................................... 454,074 $6,544,090 250,288 $2,908,449
Shares redeemed................................. (1,654,064) (23,952,136) (2,628,487) (30,770,207)
--------- ----------- --------- -----------
Net decrease.................................... (1,199,990) $(17,408,046) (2,378,199) $(27,861,758)
============ ============
Shares outstanding:
Beginning of year.......................... 2,390,436 4,768,635
--------- ---------
End of year............................... 1,190,446 2,390,436
========= =========
NOTE 6 - CONCENTRATION OF RISKS
The Fund invests in securities of foreign issuers in various countries. These
investments may involve certain considerations and risks not typically
associated with investments in the U.S., as a result of, among other factors,
the possibility of future political and economical developments and the level of
government supervision and regulation of securities markets in the various
countries.
NOTE 7 - LIQUIDATION AND TERMINATION OF THE 1838 FIXED INCOME FUND (UNAUDITED)
At a meeting held on June 13, 2005, the Board of Trustees of the Trust
unanimously approved the liquidation and termination of the 1838 Fixed Income
Fund (the "Fixed Income Fund"). The outstanding shares of the Fixed Income Fund
were redeemed and operations were terminated as of the close of business on July
26, 2005.
NOTE 8 - SUBSEQUENT EVENT
At a meeting on December 13, 2005, the Fund's shareholders approved the
reorganization of the Fund into the Van Kampen International Growth Fund for
which VKAM serves as investment advisor.
16
<Page>
1838 INTERNATIONAL EQUITY FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OF THE 1838 INVESTMENT ADVISORS FUNDS
We have audited the accompanying statement of assets and liabilities of
International Equity Fund, a series of 1838 Investment Advisors Funds, including
the schedule of investments, as of October 31, 2005, and the related statement
of operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended and the financial highlights
for each of the three years in the period then ended. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on the financial statements and
financial highlights based on our audits. The financial highlights for each of
the two years in the period ended October 31, 2002 were audited by other
auditors whose report dated December 12, 2002 expressed an unqualified opinion
on those financial highlights.
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. We were
not engaged to perform an audit of the Trust's internal control over financial
reporting. Our audit included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Trust's internal control over financial reporting.
Accordingly, we express no such opinion. 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, 2005 by correspondence with the custodian. 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
International Equity Fund as of October 31, 2005, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the three
years in the period then ended, in conformity with accounting principles
generally accepted in the United States of America.
TAIT, WELLER & BAKER LLP
Philadelphia, PA
December 6, 2005 (Except for Note 8, as to which the date is December 13, 2005)
17
<Page>
1838 INTERNATIONAL EQUITY FUND
ADDITIONAL INFORMATION REGARDING THE TRUSTEES AND OFFICERS OF THE TRUST
(UNAUDITED)
- --------------------------------------------------------------------------------
LENGTH OF
POSITION(S) PRINCIPAL OCCUPTION TIME SERVED;
NAME, ADDRESS AND AGE WITH THETRUST AND DIRECTORSHIPS DURING THE PAST FIVE YEARS TERM OF OFFICE
- ---------------------------------------------------------------------------------------------------------------------------
W. Thacher Brown (57) Chairman and Retired. Formerly President and Director, 1838 1995 to
113 King Street Trustee of the Trust Investment Advisors, LLC (successor company present;
Armonk, NY 10504 to 1838 Investment Advisors, Inc. and 1838 indefinite
Investment Advisors, L.P.) (1988 - 2004);
President and Chief Executive Officer, 1838
Investment Advisors, Inc. (1988 - 1998);
Formerly President, MBIA Asset Management,
LLC (successor company to MBIA Asset
Management Corp.); Director, 1838 Bond-
Debenture Trading Fund; Airgas, Inc. and
Harleysville Mutual Insurance Company,
Harleysville Group.
- ---------------------------------------------------------------------------------------------------------------------------
Charles D. Dickey, Jr. (87) Trustee of Retired. Formerly Chairman and CEO of Scott 1995 to
113 King Street the Trust Paper Company (retired as CEO 1983; present;
Armonk, NY 10504 retired as Director, 1988); Formerly Director indefinite
of General Electric Company (retired 1991).
- ---------------------------------------------------------------------------------------------------------------------------
Frank B. Foster, III (71) Trustee of Chairman, DBH Assoc. (1987-Present); 1995 to
113 King Street the Trust Director, OAO Technology Solutions Inc. present;
Armonk, NY 10504 (NASDAQ) (1997-2004); Director; Airgas indefinite
Inc. (1986-2004).
- ---------------------------------------------------------------------------------------------------------------------------
Robert P. Hauptfuhrer (73) Trustee of Director, Quaker Chemical Corp. (1977-Present). 1995 to
113 King Street the Trust present;
Armonk, NY 10504 indefinite
- ---------------------------------------------------------------------------------------------------------------------------
Johannes B. van den Berg (48) President & Managing Director, Morgan Stanley Investment 1995 to
100 Front Street Portfolio Manager Management (2005-present); Managing Director, present;
West Conshohocken, PA 19428 of the Trust 1838 Investment Advisors, LP (successor company indefinite
to 1838 Investment Advisors, LLC, 1838 Investment
Advisors, Inc. and 1838 Investment Advisors, L.P.)
(1997 - 2005); Managing Director and Portfolio
Manager, 1838 Investment Advisors (1994-1998);
President, MeesPierson Capital Management, Inc.
(1994-1998).
18
<page>
1838 INTERNATIONAL EQUITY FUND
ADDITIONAL INFORMATION REGARDING THE TRUSTEES AND OFFICERS OF THE TRUST
(UNAUDITED)
- --------------------------------------------------------------------------------
LENGTH OF
POSITION(S) PRINCIPAL OCCUPTION TIME SERVED;
NAME, ADDRESS AND AGE WITH THE TRUST AND DIRECTORSHIPS DURING THE PAST FIVE YEARS TERM OF OFFICE
- -------------------------------------------------------------------------------------------------------------------------------
Richard Walz (46) Treasurer and Chief Director of Operations of MBIA's fixed income 2005 to
113 King Street Compliance Officer business, Chief Compliance Officer of MBIA present;
Armonk, NY 10504 of the Trust Capital Management Corp., MBIA Municipal indefinite
Investor Service Corp. and Colorado
Investors Service Corp.
Additional information about the Board of Trustees and Officers can be found in
the Statement of Additional Information (SAI) and available upon request without
charge by calling 877-367-1838.
PORTFOLIO PROXY VOTING POLICIES AND PROCEDURES (UNAUDITED)
- --------------------------------------------------------------------------------
The Funds have adopted the Advisor's proxy voting policies and procedures to
govern the voting of proxies relating to the voting securities of the Funds. You
may obtain a copy of these proxy voting procedures, without charge, by calling
(800) 367-1838 or on the SEC's website at http:// www.sec.gov.
Information regarding how the Funds voted proxies relating to portfolio
securities during the most recent 12 month period ended June 30, 2005 is
available, without charge, by calling (800) 367-1838 or on the SEC's website at
http:// www.sec.gov.
QUARTERLY STATEMENT OF INVESTMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
Each Fund files a complete statement of investments with the Security and
Exchange Commission for the first and third quarters for each fiscal year on
Form N-Q. Shareholders may view the filed Form N-Q by visiting the Commission's
website at sec.gov. The filed form may also be viewed and copied at the
Commission's Public Reference Room in Washington, D.C. Information regarding the
operations of the Public Reference Room may be obtained by calling
1-800/SEC-0330.
19
<page>
INTERIM INVESTMENT ADVISER
-----------
VAN KAMPEN ASSET MANAGEMENT
1221 AVENUE OF THE AMERICAS
NEW YORK, NY 10020
DISTRIBUTOR
-----------
MBIA CAPITAL MANAGEMENT CORPORATION
113 KING STREET
ARMONK, NY 10504
ACCOUNTING, ADMINISTRATOR
AND TRANSFER AGENT
-----------
MBIA MUNICIPAL INVESTORS SERVICE CORPORATION
113 KING STREET
ARMONK, NY 10504
CUSTODIAN
-----------
WACHOVIA NATIONAL BANK
123 S. BROAD STREET
PHILADELPHIA, PA 19109
LEGAL COUNSEL
-----------
PEPPER HAMILTON LLP
3000 TWO LOGAN SQUARE
EIGHTEENTH & ARCH STREETS
PHILADELPHIA, PA 19103
AUDITORS
-----------
TAIT, WELLER & BAKER LLP
1818 MARKET STREET
SUITE 2400
PHILADELPHIA, PA 19103
1838
INVESTMENT ADVISORS FUNDS
-------------------------
INTERNATIONAL EQUITY FUND
ANNUAL REPORT
OCTOBER 31, 2005
AR 10/05
ITEM 2: Code of Ethics
The Board of Trustees has adopted a code of ethics that applies to the principal
executive officer, principal financial officer, principal accounting officer or
controller of the Registrant.
ITEM 3: Audit Committee Financial Expert
The Board of Trustees of the registrant has determined that Frank B. Foster,
III, the Chairman of the Board's Audit Committee, possesses the technical
attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as
an "audit committee financial expert," and has designated Mr. Foster as the
Audit Committee's financial expert. Mr. Foster is an "independent" Director
pursuant to paragraph (a)(2)of Item 3 to Form N-CSR.
ITEM 4: Principal Accountant Fees and Services
(a) AUDIT FEES. The aggregate fees billed for each of the last two fiscal years
for professional services rendered by the principal accountant for the audit of
the registrant's annual financial statements or services that are normally
provided by the accountant in connection with statutory and regulatory filings
or engagements for those fiscal years were $14,000 and $23,500 for the fiscal
years ending October 31, 2005 and October 31, 2004, respectively.
(b) AUDIT-RELATED FEES. There were no fees billed in each of the last two fiscal
years for assurance and related services by the principal accountant that are
reasonably related to the performance of the audit of the registrant's financial
statements and are not reported under paragraph 4(a).
(c) TAX FEES. The aggregate fees billed in each of the last two fiscal years for
professional services rendered by the principal accountant for tax compliance,
<page>
tax advice and tax planning, including federal, state and local income tax
return preparation and related advice and determination of taxable income and
miscellaneous tax advice were $2,000 and $4,000 for the fiscal years ending
October 31, 2005 and October 31, 2004, respectively.
(d) ALL OTHER FEES. The were no fees billed in each of the last two fiscal years
for products and services provided by the principal accountant, other than the
services reported above in Items 4(a) through (c).
(e)(1) The Fund's Audit Committee has adopted written policies relating to the
pre-approval of the audit and non-audit services performed by the Fund's
independent auditors. Unless a type of service to be provided by the independent
auditors has received general pre-approval, it requires specific pre-approval by
the Audit Committee. Under the policies, on an annual basis, the Fund's Audit
Committee reviews and pre-approves the services to be provided by the
independent auditors without having obtained specific pre-approval from the
Audit Committee. The Audit Committee has delegated pre-approval authority to the
Audit Committee Chairperson. In addition, the Audit Committee pre-approves any
permitted non-audit services to be provided by the independent auditors to the
registrant's investment adviser or any entity controlling, controlled by, or
under common control with the adviser if such services related directly to the
operations and financial reporting of the Fund.
(e)(2) None of the services described above, provided in the fiscal year ended
October 31, 2005 or the fiscal year ended October 31, 2004, were approved
pursuant to the de minimis exception provided in Rule 2-01(c)(7)(i)(C) of
Regulation S-X promulgated by the SEC.
(f) Not applicable.
(g) Not applicable.
(h) Not Applicable.
ITEM 5: Audit Committee of Listed Registrant.
The Registrant has a separately designated standing audit committee established
in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934,
as amended. The audit committee of the Registrant is comprised of: Frank B.
Foster, III, Charles D. Dickey, Jr. and Robert P. Hauptfuhrer.
ITEM 6: Schedule of Investments.
Schedule is included as part of the report to shareholders filed under Item 1 of
this form.
ITEM 7: Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
Not applicable, as registrant is not a closed-end management investment company.
ITEM 8: Portfolio Managers of Closed-End Management Investment Companies
Not applicable, as registrant is not a closed-end management investment company.
ITEM 9: Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers
Not applicable, as registrant is not a closed-end management investment company.
ITEM 10: Submission of Matters to a Vote of Security Holders
No material changes.
2
<page>
ITEM 11: CONTROLS AND PROCEDURES.
(a) The Registrant's principal executive and principal financial
officers, or persons performing similar functions, have concluded that the
Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c)
under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR
270.30a-3(c))) are effective, as of a date within 90 days of the filing date of
the report that includes the disclosure required by this paragraph, based on
their evaluation of these controls and procedures required by Rule 30a-3(b)
under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under
the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or
240.15d-15(b)).
(b) There were no changes in the Registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d)) that occurred during the Registrant's second fiscal quarter of the
period covered by this report that have materially affected, or are reasonably
likely to materially affect, the Registrant's internal control over financial
reporting.
ITEM 12: EXHIBITS.
(a)(1) Not applicable.
(a)(2) Separate certification for each principal executive and
principal financial officer of the Registrant as required by Rule 30a-2(a) under
the Act (17CFR270.30a-2(a)) pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
(a)(3) Not applicable.
(b) Certification of principal executive officer and principal
financial officer of the Registrant pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
3
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.
1838 Investment Advisors Funds
BY: /s/ Johannes B. van den Berg
----------------------------
Johannes B. van den Berg
President
Date: January 6, 2006
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: /s/ Johannes B. van den Berg
----------------------------
Johannes B. van den Berg
President
(Principal Executive Officer)
Date: January 6, 2006
BY: /s/ Richard Walz
------------------
Richard Walz
Treasurer
(Principal Financial Officer)
Date: January 6, 2006
4