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UNITED STATES File No. 333-01973
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 File No. 811-07573
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. 1
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Post Effective Amendment No. [ ]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No __________ [ ]
Sage/Tso Trust
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(Exact name of Registrant as Specified in Charter)
7799 Leesburg Pike, Suite 900
Falls Church, Virginia 22043
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(Address of Principal Exec (Zip Code)
Registrant's Telephone Number, including Area Code (703) 255-1233
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James C. Tso, President
Sage/Tso Investment Management L.P.
7799 Leesburg Pike, Suite 900
Falls Church, Virginia 22043
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(Name and Address of Agent for Service)
COPIES TO:
Clifford J. Alexander, Esq. Joseph M. O'Donnell, Esq.
Kirkpatrick & Lockhart LLP Fund/Plan Services, Inc.
1800 Massachusetts Avenue, N.W. 2 West Elm Street
Washington, DC 20036-1800 Conshohocken, Pennsylvania 19428
Approximate date of proposed public
offering: As soon as practicable after the effective date
of this Registration Statement.
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Registrant has previously elected to register an indefinite number of shares of
its securities under this Registration Statement pursuant to Rule 24f-2 of the
Investment Company Act of 1940, as amended. Registrant will file a Notice
pursuant to Rule 24f-2 within two months after the fiscal year end.
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Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
As filed with the U.S. Securities and Exchange TOTAL PAGES: 46
Commission on May 6, 1996 INDEX TO EXHIBITS, PAGE: na
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TABLE OF CONTENTS
Registration Statement of Sage/Tso Trust
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Page
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1. Cross-Reference Sheet...................................................................................3
2. America Asia Allocation Growth Fund - Part A - Prospectus...............................................5
3. America Asia Allocation Growth Fund - Part B - Statement of Additional Information.....................27
4. America Asia Allocation Growth Fund - Part C - Other Information.......................................40
5. Signature Page.........................................................................................44
6. Index to Exhibits......................................................................................45
</TABLE>
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<TABLE>
<CAPTION>
SAGE/TSO TRUST
CROSS REFERENCE SHEET PURSUANT TO RULE 481a
Form N-1A Item Caption in Prospectus
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Part A INFORMATION REQUIRED IN A PROSPECTUS
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<S> <C> <C>
1. Cover Page Cover Page of Prospectus
2. Synopsis Prospectus Summary; Expense Summary
3. Condensed Financial Information *
4. General Description of Registrant Investment Objective and Policies; Risk Factors;
Prospectus Summary; The Trust and the Fund;
Investment Limitations; Description of Permitted
Investments and Risk Factors; General Information
5. Management of the Fund Prospectus Summary; Management of the Fund;
Distribution Plan
5A. Management's Discussion of Fund Performance *
6. Capital Stock and Other Securities Prospectus Summary; General Information;
Dividends and Taxes; Net Asset Value
7. Purchase of Securities Being Offered Prospectus Summary; How to Purchase Shares;
Shareholder Services
8. Redemption or Repurchase Prospectus Summary; How to Redeem Shares
9. Pending Legal Proceedings *
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
- ------ -------------------------------------------------------------
10. Cover Page Cover Page of the Statement of Additional
Information
11. Table of Contents Table of Contents
12. General Information and History *
13. Investment Objectives and Policies Investment Policies and Techniques; Investment
Restrictions; Portfolio Transactions
14. Management of the Fund The Trust; Investment Advisory and Other Services;
Trustees and Officers
15. Control Persons and Principal Holders of
Securities *
16. Investment Advisory and Other Services Investment Advisory and Other Services
17. Brokerage Allocation and Other Practices Portfolio Transactions
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Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
(continued)
18. Capital Stock and Other Securities Other Information
19. Purchase, Redemption and Pricing of
Securities Being Offered Purchases; Redemptions
20. Tax Status Taxes
21. Underwriters Underwriter
22. Calculation of Performance Data Performance Information
23. Financial Statements *
Part C OTHER INFORMATION
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Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Registration Statement.
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<FN>
* Item is inapplicable at this time or answer is negative.
</FN>
</TABLE>
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AMERICA ASIA ALLOCATION GROWTH FUND
7799 Leesburg Pike, Suite 900
Falls Church, Virginia 22043
PROSPECTUS June __, 1996
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America Asia Allocation Growth Fund (the "Fund") seeks maximum long-term capital
growth by investing in the equity securities of companies located in the
"Greater Asia Region", as well as in the United States and Canada. The Fund will
focus on both American and Asian companies that are expected to benefit from the
development and growth of the economies of the countries located in the "Greater
Asia Region", as well as U.S. and Canadian companies that benefit from an
effective employment of Asian American talent in management, science or
technology. Under normal circumstances, the Fund will invest at least 65% of its
total assets in such securities. The Fund is designed for long-term investors
and not as a trading vehicle, and is not intended to present a complete
investment program. See "Investment Objective and Policies".
The Fund is a separate series of Sage/Tso Trust (the "Trust"), an open-end,
diversified management investment company commonly known as a mutual fund.
Sage/Tso Investment Management L.P. (the "Adviser") serves as the investment
adviser of the Fund managing its assets in accordance with its investment
objectives.
The Fund offers its shares through two separate classes of shares: Class A
Shares and Class D Shares. Both classes of shares are identical except as to the
expenses borne by each class. These alternative classes permit investors to
choose the method of purchasing shares most beneficial to them.
This Prospectus sets forth concisely the information regarding the Fund that an
investor should know before investing in the Fund. Investors should read this
Prospectus and retain it for future reference. A Statement of Additional
Information dated June __, 1996, which may be revised from time to time,
provides a further discussion of certain areas which may be of interest to some
investors. It has been filed with the Securities and Exchange Commission and is
incorporated herein by reference. To request a copy, write to the Fund at the
address above or call (800)___________.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
Page
Prospectus Summary.............................................................7
Expense Summary................................................................8
The Trust and the Fund.........................................................9
Investment Objective and Policies..............................................9
Risk Factors..................................................................10
Management of the Fund........................................................12
The Distribution Plans........................................................14
How to Purchase Shares........................................................14
Purchase of Class D Shares...............................................16
Purchase of Class A Shares...............................................16
How to Redeem Shares..........................................................17
Shareholder Services..........................................................19
Net Asset Value...............................................................19
Dividends and Taxes...........................................................20
Performance Information.......................................................21
General Information...........................................................22
Description of Permitted Investments and Risk Factors.........................23
Underwriter: Adviser:
Fund/Plan Broker Services, Inc. Sage/Tso Investment Management L.P.
2 W. Elm Street 7799 Leesburg Pike, Suite 900
Conshohocken, Pennsylvania 19428 Falls Church, Virginia 22043
(800)______ (800)_________
(610)______ (703) 255-1233
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED IN ANY
JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE FUND TO MAKE
SUCH AN OFFER OR SOLICITATION. NO SALES REPRESENTATIVE, DEALER, OR OTHER
PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE
ANY REPRESENTATION OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS.
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PROSPECTUS SUMMARY
What is the Fund's Investment Objective? America Asia Allocation Growth Fund
(the "Fund") seeks to achieve long-term capital growth. There can be no
assurance that the Fund will be able to achieve its investment objective.
See "Investment Objective and Policies".
What are the Permitted Investments? The Fund intends to invest substantially all
its assets in equity securities of companies located in the "Greater Asia
Region", as well as in the United States and Canada. The Fund will focus on both
American and Asian companies that are expected to benefit from the development
and growth of the economies of the countries located in the "Greater Asia
Region", as well as U.S. and Canadian companies that benefit from an effective
employment of Asian American talent in management, science or technology. The
Adviser defines the "Greater Asia Region" to include Australia, China, Hong
Kong, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, The Philippines,
Singapore, South Korea, Taiwan and Thailand. In addition, any company in which
the Fund invests must, in the opinion of the Adviser, conduct business in
accordance with the stated philosophy of the Fund. The Fund initially intends to
invest most of its assets in common stocks and sponsored or unsponsored American
Depository Receipts. See "Investment Objective and Policies" and "Description of
Permitted Investments and Risk Factors".
What is the stated philosophy of the Fund? In addition to the fundamental
investment objective of the Fund, the Adviser has established certain guidelines
which currently prohibit the Fund from investing in companies that supply
products or services that are harmful to humans, engage in labor practices that
violate human rights, or exclusively produce or provide services used for
military purposes. See "Investment Objective and Policies".
What are the Risks Involved with an Investment in the Fund? The investment
policies of the Fund have certain risks and considerations of which investors
should be aware. The Fund invests in securities that fluctuate in value, and
investors should expect the Fund's net asset value per share to fluctuate.
Investing in the equity securities of foreign companies involves special risks
and considerations not typically associated with investing in the equity
securities of U.S. companies. The securities markets in the Greater Asia Region
(with the exception of Japan) and other emerging markets are substantially
smaller, less liquid and more volatile than the major securities markets in the
United States. There may be different accounting standards, differences in
securities regulation, higher brokerage costs, currency exchange rate
fluctuations and conversion costs, and less publicly available information about
foreign companies and securities issued thereby. See "Investment Objective and
Policies", "Risk Factors" and "Description of Permitted Investments and Risk
Factors".
Who is the Investment Adviser? Sage/Tso Investment Management L.P. serves as the
investment adviser of the Fund. See "Expense Summary" and "Management of the
Fund".
Who is the Administrator, Transfer Agent and Fund Accounting Agent? Fund/Plan
Services, Inc. serves as the administrator, transfer agent and fund accounting
agent for the Fund. See "Management of the Fund".
Who is the Distributor? Fund/Plan Broker Services, Inc. serves as the
distributor of the Fund's shares. See "Management of the Fund".
Is There a Sales Load? Purchases of Class A Shares are subject to a maximum
sales charge of 5.00%. Class D Shares are not subject to a sales charge. Both
classes of shares are subject to annual 12b-1 Plan expenses. See "The
Distribution Plans" and "How to Purchase Shares".
Is There a Minimum Investment? The minimum initial investment for Class A Shares
is $5,000 ($2,000 for IRA and SEP accounts) and $200 for subsequent investments.
The minimum initial investment for Class D Shares is $10,000 ($2,000 for IRA and
SEP accounts) and $200 for subsequent investments.
How do I Purchase Shares? Class D Shares are offered at net asset value per
share to registered investment advisers on behalf of their clients. Class A
Shares are offered at the net asset value per share plus a maximum initial sales
charge of 5.00% of the offering price. See "How to Purchase Shares".
How do I Redeem Shares? Shares of the Fund may be redeemed at the current net
asset value per share next
7
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determined after receipt by the transfer agent of a redemption request in proper
form. Signature guarantees may be required for certain redemption requests. See
"How to Redeem Shares".
How are Distributions Paid? Substantially all of the net investment income
(exclusive of capital gains) of the Fund is distributed in the form of annual
dividends. If any capital gains are realized, substantially all of them will be
distributed by the Fund at least annually. All dividends and distributions are
paid in additional shares (without sales charge) unless payment in cash is
requested. See "Dividends and Taxes".
8
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EXPENSE SUMMARY
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Shareholder Transaction Expenses:
Class A Class D
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Maximum sales charge imposed on purchases
(as a percentage of offering price)................................................. 5.00%(1) None
Maximum sales charge imposed on reinvested
dividends (as a percentage of offering price)....................................... None None
Deferred sales charge (as a percentage of
original purchase price)........................................................... None None
Redemption fees (as a percentage of
amount redeemed) (2)................................................................ None None
<FN>
(1) Reduced for purchases of $100,000 and over. See "How to Purchase Shares".
(2) If you want to redeem shares by wire transfer, the Fund's transfer agent
charges a fee (currently $9.00) for each wire redemption. Purchases and
redemptions may also be made through broker-dealers and others who may
charge a commission or other transaction fee for their services.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Annual Fund Operating Expenses:
(as a percentage of average net assets) Class A Class D
- --------------------------------------- ------- -------
<S> <C> <C>
Advisory Fees (after fee waivers)(3)............................................... 0.71% 0.71%
12b-1 Fees......................................................................... 0.35% 0.35%
Other Expenses (4)................................................................. 1.69% 1.69%
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Total Fund Operating Expenses (after fee waivers)(3).............................. 2.75% 2.75%
===== =====
<FN>
(3) The Adviser has, on a voluntary basis, agreed to waive all or a portion of
its fees and to reimburse certain expenses of the Fund necessary to limit
the total operating expenses for the first year of operations to 2.75% of
the Fund's average net assets. The Adviser reserves the right to terminate
this waiver or any reimbursement at any time, in its sole discretion.
Absent such waivers, advisory fees for the Fund would be 2.00% and
estimated total operating expenses would be 4.04% of the Fund's average
daily net assets on an annualized basis.
(4) For purposes of this table, "Other Expenses" is based on estimated amounts
for the current fiscal year because the Fund has no operating history.
</FN>
</TABLE>
Example
Based on the level of expenses listed above, and (i) imposition of the maximum
sales charge for Class A Shares, (ii) 5% annual return and (iii) redemption at
the end of each time period, the total expenses relating to an investment of
$1,000 would be as follows:
Class A Class D
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1 Year $ 76 $ 28
3 Years $131 $ 85
The foregoing example should not be considered a representation of past or
future expenses. Actual expenses may be more or less than those shown. The
purpose of the expense tables and example is to assist the investor in
understanding the various costs and expenses that may be directly or indirectly
borne by shareholders of the Fund. Additional information may be found under
"Management of the Fund". The rules of the Securities and Exchange Commission
require that the maximum sales charge be reflected in the above table with
respect to Class A Shares. However, certain investors may qualify for a reduced
sales charge. See "How to Purchase Shares".
Long-term holders of Class A Shares may eventually pay more than the economic
equivalent of the maximum front-end sales charges otherwise permitted by the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
(the "NASD").
9
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THE TRUST AND THE FUND
Sage/Tso Trust (the "Trust") is an open-end, diversified management investment
company organized as a business trust under the laws of the State of Delaware.
The Trust is organized to offer separate series of shares and is currently
comprised of one series called America Asia Allocation Growth Fund (the "Fund").
The Fund currently offers two separate classes of shares and additional classes
of shares may be added without shareholder approval. Class A Shares and Class D
Shares differ with respect to sales charges and minimum initial investment.
Except for these differences, each share of the Fund represents an undivided
proportionate interest in the Fund.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is long-term capital growth. This objective
is fundamental and may not be changed without a vote of the holders of the
majority of the outstanding voting securities of the Fund. The Fund's investment
policies described below are not fundamental and may be changed without
shareholder approval. Additional investment policies and restrictions are
described in the Statement of Additional Information.
The Fund seeks maximum long-term capital growth by investing in the equity
securities of companies located in the "Greater Asia Region", as well as in the
United States and Canada. The Fund will focus on both American and Asian
companies that are expected to benefit from the development and growth of the
economies of the countries located in the "Greater Asia Region", as well as U.S.
and Canadian companies that benefit from an effective employment of Asian
American talent in management, science or technology. The Adviser defines the
"Greater Asia Region" to include Australia, China, Hong Kong, India, Indonesia,
Japan, Malaysia, New Zealand, Pakistan, The Philippines, Singapore, South Korea,
Taiwan and Thailand. The countries constituting the Greater Asia Region may be
changed by the Board of Trustees without shareholder approval.
The Adviser also employs a specific philosophy in implementing the investment
objective of the Fund pursuant to certain guidelines established by the Adviser.
These guidelines prohibit the Fund from investing in companies that: (1) Supply
products or services that are harmful to humans. For example, the Fund will not
invest in companies that produce tobacco products. (2) Engage in labor practices
that violate human rights. For example, the Fund will not invest in companies
that employ child or prison labor. (3) Exclusively produce or provide services
used for military purposes. For example, the Fund will not invest in companies
that manufacture weapon systems. The Board of Trustees may, from time to time,
amend these guidelines without shareholder approval.
The Fund will also seek to invest in U.S. companies that are benefitting from an
effective employment of Asian American talent in management, science or
technology. Asian Americans, whether they were born in the U.S. or immigrated to
America for educational or business reasons, are a rapidly increasing component
of the U.S. population and are therefore playing more significant roles in the
companies for which they work. The Fund may invest in companies where Asian
American talent contributes to a company's profitability, development of new
technology or discovery of scientific advances. Some of these companies may be
founded or are led by entrepreneurial management of Asian American heritage.
Others rely on Asian American talent for a critical aspect of their operations.
In addition, Asian Americans present a natural business connection to the
emerging economies of Asia. The Adviser believes that investments in these
companies offer special opportunities due to their effective use of Asian
American talent and, in some cases, special risks because of the early stage of
their business development.
Under normal market conditions, the Fund will invest at least 65% of its assets
in equity securities described above. Equity securities include common and
preferred stocks, convertible securities, rights and warrants to purchase common
stocks and sponsored and unsponsored American Depository Receipts ("ADRs"),
European Depository Receipts ("EDRs"), or Global Depository Receipts
("GDRs")(collectively "Depository Receipts"). Initially, the Fund intends to
invest primarily in Depository Receipts or other similar securities representing
an interest in securities of foreign issuers rather than directly in the stock
of those companies. The Fund also intends to initially limit its purchase of
non-U.S. stocks to those that may be purchased on U.S. stock markets.
The Fund may also invest up to 35% of its total assets in other equity
securities, U.S. government securities, short-term money market instruments
(such as U.S. Treasury bills, commercial paper, certificates of deposit and
bankers'
10
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acceptances) and repurchase agreements. Debt securities convertible into common
stocks will be investment grade or, if unrated, will be comparable quality as
determined by the Adviser under the supervision of the Board of Trustees. See
"Description of Permitted Investments and Risk Factors".
The Fund will not limit its investments to any particular type of company. The
Fund may invest in companies, large or small, whose earnings are believed to be
in a relatively strong growth trend, or in companies in which significant
further growth is not anticipated and whose market value per share is thought to
be undervalued. The Fund may invest in small relatively less well-known
companies. These companies may present greater opportunities for capital
appreciation, but may also involve greater risk. See "Risk Factors".
The Adviser will consider an issuer of securities to be located in the Greater
Asia Region, United States or Canada to be those: (i) which are organized under
the laws of a country in those regions; (ii) which derive at least 50% of its
revenues or profits from goods produced or sold, investments made, or services
performed in these regions or which have at least 50% of their assets situated
in these regions; or (iii) for which the principal securities trading markets
(including ADR's) are in these regions. The Adviser will determine if a company
meets any one of the above criteria through fundamental research, review of
existing public data on such companies, and through personal interviews and
visits to such companies.
There is no requirement that the Fund, at any given time, invest in any one
particular country or in all of the countries listed above or in any other Asian
countries. The Fund has no set policy for allocating investments between
American and Asian companies, nor among the various countries in the Greater
Asia Region. Allocation of investments among the various countries will depend
on the relative attractiveness of the stocks of issuers in the respective
countries. Government regulation and restrictions in many of the countries of
interest may limit the amount, mode and extent of investment in companies in
such countries.
The Fund may engage in foreign currency exchange contracts to protect the value
of its assets against future changes in the level of currency exchange rates.
Although the Fund has no present intentions to engage in transactions involving
the use of options and futures contracts, the Fund may engage in such
transactions for purposes of increasing its investment return or hedging against
market changes. The Fund may also buy and sell stock index futures contracts for
hedging purposes. See "Risk Factors" and "Description of Permitted Investments
and Risk Factors".
For temporary defensive purposes, the Fund may invest up to 100% of its total
assets in short-term U.S. investments, such as cash or cash equivalents,
commercial paper, short-term bank obligations, government and agency securities,
and repurchase agreements. To the extent that the Fund is invested in temporary
defensive instruments, it will not be pursuing its investment objective. See
"Description of Permitted Investments and Risk Factors" and the Statement of
Additional Information.
Although the Fund cannot accurately predict its portfolio turnover rate, under
normal circumstances the portfolio turnover rate is not expected to exceed 100%
per year. A portfolio turnover rate in excess of 100% may result in higher
transaction costs to the Fund and may increase the amount of taxes payable by
the Fund's shareholders.
For a further discussion of the Fund's permitted investments, see "Description
of Permitted Investments and Risk Factors" and the Statement of Additional
Information.
Investment Process
The Adviser employs a "top-down" assessment approach of countries, regions and
economies and a "bottom up" assessment approach of stocks within selected
sectors. The Adviser's approach in selecting investments for the Fund is value
driven. The best growth companies in both America and Asia will be considered
for investment by applying sound fundamental and technical analysis. The best
Asian American companies will also be considered for investment by the Adviser.
The Adviser considers some of the best growth companies to be those with
promising profit synergies, particularly those in America and Asia that have
mutually beneficial business connections.
11
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RISK FACTORS
Investments in securities of the Greater Asia Region may be subject to certain
risks not typically associated with securities of U.S. issuers. Because of its
emphasis on the Greater Asia Region, the Fund should be considered as a vehicle
for diversification of investments and not as a balanced investment program. See
"Description of Permitted Investments and Risk Factors". Although the Adviser
has not previously provided investment advisory services to registered
investment companies, the Adviser has been engaged in the investment advisory
business and providing investment advice to individuals, trusts and retirement
plans since 1992.
Greater Asia Region's Economy
In the past five years, the newly emerging securities markets in the Greater
Asia Region have had strong economic growth which has been reflected in stronger
market returns than those of Western Europe and the United States on average and
have demonstrated significant growth in market capitalization, in numbers of
listed securities and in volume of transactions. Over this same period, the
underlying economies of the region have grown against a background of high
savings rates and generally moderate inflation. There can be no assurance that
this strong economic growth will continue over the long term.
Greater Asia Region Opportunity
The Adviser believes that in contrast to more developed economies, the newly
industrialized countries of the Greater Asian Region are in an earlier, more
dynamic growth state of their development. This growth has been characterized
by, among other factors, low labor costs, strong demand from export markets for
consumer products, high productivity, long work weeks, pro-business governments
and a strong work ethic. Historically, South Korea, Hong Kong, Singapore and
Taiwan have been examples of these traits. Today, however, the economies of
Malaysia, Indonesia, Thailand, India, Australia, New Zealand, China and others
are starting to exhibit many of these same characteristics and appear to be
accelerating.
The Adviser acknowledges the existence of potential political uncertainty in
Asia that may impact on the liquidity and value of certain portfolio
investments. Currently, the Adviser is monitoring jurisdictional disputes
between the People's Republic of China and the Republic of China and between
South Korea and North Korea. The Adviser is also monitoring upcoming events in
Hong Kong. Hong Kong is a British colony which will transfer sovereignty to the
Peoples Republic of China in 1997. There can be no guarantee that property
rights will continue to be safeguarded in Hong Kong after 1997, although
recently China has moved toward free enterprise and has established stock
exchanges of its own.
The Adviser believes that these uncertainties, as of the date of this
prospectus, will not have a long-term negative impact on the value of an
investment in the Fund. The Adviser further believes that vigilant monitoring of
events in the Greater Asia Region may mitigate a temporary period of
instability.
Many of the stock markets of the Greater Asia Region are either fully open for
foreign investors or are in the process of opening. The Adviser believes that
the opening of these markets offers particular opportunities for investment.
Foreign Securities
Investing in foreign securities generally involves somewhat different investment
risks from those affecting securities of U.S. issuers. There may be limited
publicly available information with respect to foreign issuers, and foreign
issuers are not generally subject to uniform accounting, auditing, and financial
and other reporting standards and requirements comparable to those applicable to
domestic companies. Therefore, disclosure of certain material information may
not be made and less information may be available to investors investing in
foreign companies than in the U.S. There may also be less government supervision
and regulation of foreign securities exchanges, brokers and listed companies
than in the U.S. Many foreign securities markets have substantially less volume
than U.S. national securities exchanges, and securities of some foreign issuers
are less liquid and subject to greater price volatility. Brokerage commissions
and other transaction costs on foreign securities exchanges are generally higher
than in the U.S. Dividends and interest paid by foreign issuers may be subject
to withholding and other foreign taxes, which may decrease the net return on
foreign investments. Additional risks include future adverse political and
economic developments, the possibility that a foreign jurisdiction might impose
or change withholding taxes, possible seizure, nationalization or expropriation
of the foreign issuer, and the possible adoption of restrictions and exchange
controls. Certain costs attributable to foreign investing, such as custody
charges, are higher than those attributable to domestic investing.
12
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Smaller Companies
The Fund may invest in securities of all types of issuers, large or small, whose
earnings are believed by the Adviser to be in a relatively strong growth trend
or whose assets are substantially undervalued. Smaller companies often have
limited product lines, markets or financial resources, or may depend on a
limited management group. The securities of such companies may trade less
frequently and in limited volume, and only in the over-the-counter market or on
a regional securities exchange. As a result, these securities may fluctuate in
value more than those of larger, more established companies.
Emerging Markets
The risks of investing in foreign markets generally may be intensified in the
case of investments in emerging markets or countries with limited or developing
capital markets. Investing in securities of issuers in the Greater Asia Region
involves special risks. The Fund's investment focus in that region makes the
Fund particularly subject to political, social, or economic conditions
experienced in that region. Many of the countries in the Greater Asia Region
constitute "developing" or "emerging" economies and markets. Risks of investing
in such markets include: (i) less social, political, and economic stability;
(ii) smaller securities markets and lower trading volume, which may result in a
lack of liquidity and in greater price volatility; (iii) certain national
policies that may restrict the Fund's investment opportunities, including
restrictions on investments in issuers or industries deemed sensitive to
national interests, or expropriation or confiscation of assets or property,
which could result in a Fund's loss of its entire investment in that market; and
(iv) less developed legal structures governing private or foreign investment or
allowing for judicial redress for injury to private property.
The economies of many of the countries in which the Fund may invest may differ
favorably or unfavorably from the U.S. economy in such respects as growth of
gross domestic product, rates of inflation, currency depreciation, capital
reinvestment, resource self-sufficiency, and balance of payments positions.
Economies in emerging markets generally are heavily dependent upon international
trade and, accordingly, have been and may continue to be affected adversely by
trade barriers, exchange controls, managed adjustments in relative currency
values, and other protectionist measures negotiated or imposed by the countries
with which they trade.
The securities markets in the Greater Asia Region (with the exception of Japan)
are substantially smaller, less liquid and more volatile than the major
securities markets in the United States. A high proportion of the shares of many
issuers may be held by a limited number of persons and financial institutions. A
limited number of issuers may represent a disproportionately large percentage of
market capitalization and trading value and the securities markets are
susceptible to being influenced by large investors trading significant blocks of
securities.
Options and Futures Transactions
The use of futures and related options involves certain special risks. Futures
and options transactions involve costs and may result in losses. Certain risks
arise because of the possibility of imperfect correlations between movements in
the prices of index futures and options and movements in the prices of the
underlying stock index or of the securities in the Fund's portfolio that are the
subject of a hedge. Similarly, there may be imperfect correlations between
movements in the prices of foreign currency futures contracts and options and
movements in the prices of the underlying currency. The successful use of
options and futures further depends on the Adviser's ability to forecast market
movements correctly. Other risks arise from the Fund's potential inability to
close out its futures or options positions, and there can be no assurance that a
liquid secondary market will exist for any future or option at any particular
time. The Fund generally expects that its options and futures transactions will
be conducted on recognized exchanges. In certain instances, however, the Fund
may purchase and sell options in the over-the-counter markets. The Fund's
ability to terminate options in the over-the-counter markets may be more limited
than for exchange-traded options and may also involve the risk that securities
dealers participating in such transactions would be unable to meet their
obligations to the Fund.
Currency Factors
In the event that the Fund invests a significant portion of its assets in
foreign securities directly, the Fund's investment performance could be
significantly affected by changes in foreign currency exchange rates. The value
of the Fund's assets denominated in foreign currencies would increase or
decrease in response to fluctuations in the value of these foreign currencies
relative to the U.S. dollar. Currency exchange rates can be volatile at times in
response to supply
13
<PAGE>
and demand in the currency exchange markets, international balances of payments,
governmental intervention, speculation and other political and economic
conditions.
MANAGEMENT OF THE FUND
The Board of Trustees
The Trust has a Board of Trustees that establishes the Fund's policies and
supervises and reviews the management of the Fund. The day-to-day operations of
the Fund are administered by the officers of the Trust and by the Adviser
pursuant to the terms of the Investment Advisory Agreement with the Fund. The
Trustees review the various services provided by the Adviser to ensure that the
Fund's general investment policies and programs are being properly carried out
and that administrative services are being provided to the Fund in a
satisfactory manner. Information pertaining to the Trustees and executive
officers is set forth in the Statement of Additional Information.
The Investment Adviser
Sage/Tso Investment Management L.P. serves as the Fund's investment adviser and
manager, and is an investment adviser registered as such under the Investment
Advisers Act of 1940, as amended. The Adviser is a successor to Strategic
Investment Advisors, an SEC registered investment advisory firm owned solely by
James C. Tso. Since 1992, Mr. Tso has provided investment advisory services to
individuals and institutional clients and currently manages $10 million in
assets. Mr. Tso serves as President and Chief Investment Officer of the Fund.
The principal business address of the Adviser is 7799 Leesburg Pike, Suite 900,
Falls Church, Virginia 22043.
As the Fund's investment adviser, the Adviser makes the investment decisions
concerning the assets of the Fund and continuously reviews, supervises and
administers the Fund's investment programs, subject to the supervision of, and
policies established by the Trustees of the Fund.
For providing investment advisory services, the Fund pays the Adviser a monthly
fee which is calculated daily by applying an annual rate of 2.00% of the average
daily net assets of the Fund. The investment advisory fee is higher than that
paid by most investment companies, although the Adviser believes the fee to be
comparable to that paid by investment companies with similar investment
objectives and policies. From time to time, the Adviser may voluntarily waive
all or a portion of its management fee and/or absorb certain expenses of the
Fund without further notification of the commencement or termination of any such
waiver or absorption. Any such waiver or absorption will have the effect of
lowering the overall expense ratio of the Fund and increasing the Fund's overall
return to investors at the time any such amounts are waived and/or absorbed. The
Adviser has voluntarily agreed to waive all or a portion of its fee, and/or to
reimburse expenses of the Fund to the extent necessary in order to limit net
operating expenses for the first year of operations to an annual rate of not
more than 2.75% of the Fund's average daily net assets. The Adviser reserves the
right to terminate its voluntary fee waiver and reimbursement at any time, in
its sole discretion. Any reductions in its fee that are made by the Adviser are
subject to reimbursement by the Fund within the following three years, provided
that the Fund is able to effect such reimbursement and remain in compliance with
applicable expense limitations.
Portfolio Management
James C. Tso is primarily responsible for the day-to-day management of the
Fund's investment portfolio. Since 1992 Mr. Tso has managed investment
portfolios for clients and developed model portfolios consistent with the
investment objectives of the Fund. Mr. Tso's thirty years of experience includes
mergers and acquisitions and international banking and marketing investments. In
addition, Mr. Tso has provided financial and estate planning to clients. He has
a B.A. in Finance from New York University, an M.A. from Occidental College, and
a J.D. from George Mason University. Since 1975, Mr. Tso has held leadership
positions with various national Asian American organizations and was national
president of the Organization of Chinese Americans in 1987.
The Underwriter and Distributor
Fund/Plan Broker Services, Inc. ("FPBS"), 2 W. Elm Street, Conshohocken,
Pennsylvania 19428, was engaged pursuant to an agreement for the limited purpose
of acting as underwriter to facilitate the registration of shares of the
14
<PAGE>
Fund under state securities laws and to assist in the sale of shares.
The Administrator
Fund/Plan Services, Inc. ("Fund/Plan"), which has its principal business address
at 2 W. Elm Street, Conshohocken, Pennsylvania 19428, serves as administrator of
the Fund pursuant to an Administrative Services Agreement. The services that
Fund/Plan provides to the Fund include: coordinating and monitoring of any third
parties furnishing services to the Fund; providing the necessary office space,
equipment and personnel to perform administrative and clerical functions for the
Fund; preparing, filing and distributing proxy materials, periodic reports to
shareholders, registration statements and other documents; and responding to
shareholder inquiries.
The Custodian, Transfer Agent and Fund Accounting/Pricing Agent
The Bank of New York, 90 Washington Street, New York, New York 10286 is
custodian for the securities and cash of the Fund.
Fund/Plan serves as the Fund's transfer agent. As a transfer agent, it maintains
the records of each shareholder's account, answers shareholder inquiries
concerning accounts, processes purchases and redemptions of the Fund's shares,
acts as dividend and distribution disbursing agent and performs other
shareholder service functions. Shareholder inquiries should be addressed to the
transfer agent at (800) ________.
Fund/Plan also performs certain accounting and pricing services for the Fund,
including the daily calculation of the Fund's net asset value per share.
Fund Expenses
Each class of shares of the Fund will bear, pro rata, all of the common expenses
of the Fund. Such expenses may include, but are not limited to: management fees;
legal expenses; audit fees; printing costs (e.g. costs of printing annual
reports, semi-annual reports and prospectuses which are distributed to existing
shareholders); brokerage commissions; the expenses of registering and qualifying
shares of the Fund for sale with the Securities and Exchange Commission and with
various state securities commissions; expenses of the organization of the Fund;
transfer agent, custodian and administrator fees; the expenses of obtaining
quotations of portfolio securities and pricing the Fund's shares; trade
association dues; all costs associated with shareholder meetings and the
preparation and dissemination of proxy materials; costs of liability insurance
and fidelity bonds; fees for Trustees who are not officers, directors or
employees of the Adviser; and any extraordinary and nonrecurring expenses which
are not expressly assumed by the Adviser. Due to the specific distribution
expenses and other costs that will be allocable to each class, the net asset
value of and dividends paid to each class of the Fund will vary.
THE DISTRIBUTION PLANS
The Board of Trustees of the Fund has adopted separate distribution plans for
each class of shares pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (the "Distribution Plans", or each a "Plan"). As provided in
each Plan, each class of shares will pay an annual fee up to 0.35% of the
respective classes' average daily net assets to Fund/Plan Broker Services, Inc.
("FPBS"), the Fund's distributor, as compensation for its services. From this
amount, FPBS may make payments to financial institutions and intermediaries such
as banks, savings and loan associations, insurance companies, investment
counselors, and broker-dealers who assist in the distribution of the respective
class of shares of the Fund or provide services with respect to both classes of
shares of the Fund, pursuant to service agreements with the Fund. In addition,
payments will be made to the Fund's Adviser. Each Plan is characterized as a
compensation plan because the distribution fee will be paid to FPBS as
distributor without regard to the distribution or shareholder service expenses
incurred by FPBS or the amount of payments made to financial institutions and
intermediaries. The Fund intends to operate the Distribution Plans, in
accordance with its terms and within NASD rules concerning sales charges.
The Fund may also execute brokerage or other agency transactions through an
affiliate of the Adviser or through FPBS for which the affiliate or FPBS may
receive "usual and customary" compensation. The Adviser will use its best
efforts to obtain the best available price and most favorable execution with
respect to all transactions of the Fund. However, subject to policies
established by the Board of Trustees, the Fund may pay a broker-dealer a
commission for effecting a portfolio transaction for the Fund in excess of the
amount of commission another broker-dealer would have charged
15
<PAGE>
if the Adviser determines in good faith that the commission paid was reasonable
in relation to the brokerage or research services provided by such
broker-dealer. In selecting and monitoring broker-dealers and negotiating
commissions, consideration will be given to a broker-dealer's reliability, the
quality of its execution services on a continuing basis and its financial
condition.
The fees paid to FPBS under the Distribution Plans are subject to the review and
approval by the Trust's unaffiliated trustees who may reduce the fees or
terminate the Distribution Plans at any time. All such payments made pursuant to
the Distribution Plans shall be made for the purpose of selling shares issued by
each respective class of shares. The distribution fee of one class will not be
used to subsidize the sale of the other class of shares.
HOW TO PURCHASE SHARES
General
- -------
The Fund offers two classes of shares to the general public on a continuous
basis through the Fund's distributor, Fund/Plan Broker Services, Inc. ("FPBS"),
either by mail or by telephone. Class A Shares are sold with an initial sales
charge; Class D Shares are sold without an initial sales charge. Both classes of
shares are subject to annual distribution expenses pursuant to Rule 12b-1. See
"The Distribution Plans". Shares of the Fund are offered only to residents of
states in which the shares are eligible for purchase.
Purchase orders for shares of the Fund that are received by Fund/Plan in proper
form by the close of regular trading on the New York Stock Exchange
("NYSE")(currently 4:00 p.m. Eastern time), on any day that the NYSE is open for
trading, will be purchased at the Fund's next determined public offering price.
Orders for Fund shares received after 4:00 p.m. Eastern time will be purchased
at the public offering price determined on the following business day. When
market conditions are extremely busy, it is possible that investors may
experience difficulties placing orders by telephone, and investors may wish to
place orders by mail.
The Fund reserves the right to reject any purchase order and to suspend the
offering of shares of the Fund. The Fund reserves the right to vary the initial
investment minimum and minimums for additional investments at any time. In
addition, the Adviser may waive the minimum initial investment requirement for
any investor.
Shareholders may purchase Class A Shares and Class D Shares of the Fund in one
of the ways explained below.
Purchases By Mail
Both classes of the Fund may be purchased initially by completing the
application accompanying this Prospectus and mailing it to the transfer agent,
together with a check payable to "America Asia Allocation Growth Fund". The
check or money order and application should be mailed to Fund/Plan Services,
Inc, 2 W. Elm Street, P.O. Box 874, Conshohocken, Pennsylvania 19428-0874. If
this is an initial purchase for Class A Shares, please send a minimum of $5,000
(or $2,000 for IRA and SEP accounts). If this is an initial purchase for Class D
Shares, please send a minimum of $10,000 (or $2,000 for IRA and SEP accounts).
Subsequent investments in an existing account in the Fund may be made at any
time by sending a check payable to "America Asia Allocation Growth Fund", c/o
Fund/Plan Services, Inc., P.O. Box 412797, Kansas City, Missouri 64141-2797.
Please enclose the stub of your account statement, and indicate the amount of
the investment.
Purchases By Wire Transfer Before making an initial investment by wire, an
investor must first telephone the transfer agent at (800)________ or
(610)________ in order to be assigned an account number. The investor's name,
account number, taxpayer identification number or Social Security number and
address must be specified in the wire. In addition, an account application
should be promptly forwarded to: Fund/Plan Services, Inc., 2 W. Elm Street, P.O.
Box 874, Conshohocken, Pennsylvania 19428-0874. Shareholders having an account
with a commercial bank that is a member of the Federal Reserve System may
purchase shares of the Fund by requesting their bank to transmit funds by wire
to:
United Missouri Bank KC NA
ABA #10-10-00695
16
<PAGE>
For: Fund/Plan Services, Inc.
A/C 98-7037-071-9
FBO "America Asia Allocation Growth Fund"
Shareholder Name and Account Number
Additional investments may be made at any time through the wire procedures
described above, which must include a shareholder's name and account number. The
shareholder's bank may impose a fee for investments by wire. The Fund will not
be responsible for the consequence of delays, including delays in the banking or
Federal Reserve wire systems.
Purchases Through Broker-Dealers
The Fund may accept telephone orders from brokers, financial institutions or
service organizations which have been previously approved by the Fund. It is the
responsibility of such brokers, financial institutions or service organizations
to promptly forward purchase orders and payments for the same to the Fund.
Shares of the Fund purchased through brokers, financial institutions, service
organizations, banks and bank trust departments, may charge the shareholder a
transaction fee or other fee for its services at the time of purchase.
Wire orders for shares of the Fund received by dealers prior to 4:00 p.m.
Eastern time, and received by Fund/Plan before 5:00 p.m. Eastern time on the
same day, are confirmed at that day's public offering price. Orders received by
dealers after 4:00 p.m. Eastern time are confirmed at the public offering price
on the following business day. It is the dealer's obligation to place the order
with Fund/Plan before 5:00 p.m. Eastern time.
Subsequent Investments
Once an account has been opened, subsequent purchases may be made by mail, bank
wire, automatic investing or direct deposit. The minimum for subsequent
investments for Class A Shares is $200 for all accounts. The minimum for
subsequent investments for Class D Shares is $200 for all accounts. When making
additional investments by mail, simply return the remittance portion of a
previous confirmation with your investment in the envelope that is provided with
each confirmation statement. Your check should be made payable to "America Asia
Allocation Growth Fund" and mailed to Fund/Plan Services, Inc., P.O. Box 412797,
Kansas City, Missouri 64141-2797. Orders to purchase shares are effective on the
day Fund/Plan receives your check or money order.
All investments must be made in U.S. dollars, and, to avoid fees and delays,
checks must be drawn only on banks located in the United States. A charge
(minimum of $20) will be imposed if any check used for the purchase of shares is
returned. The Fund and Fund/Plan each reserve the right to reject any purchase
order in whole or in part.
PURCHASE OF CLASS D SHARES
Class D Shares of the Fund may be purchased by registered investment advisers on
behalf of their clients at the net asset value next determined after receipt of
a purchase order in proper form by the transfer agent. Shares may also be bought
and sold through any securities dealer having a dealer agreement with FPBS, the
Fund's principal underwriter.
The minimum initial investment for Class D Shares is $10,000 ($2,000 for IRA and
SEP accounts) and subsequent purchases must be at least $200.
PURCHASE OF CLASS A SHARES
Class A Shares of the Fund are offered at the public offering price which is the
current net asset value per share next determined after receipt of a purchase
order in proper form by the transfer agent, plus any applicable sales charge.
The sales charge is a variable percentage of the offering price, depending upon
the amount of the sale. No sales charge will be assessed on the reinvestment of
distributions. See "Reduced Sales Charges". Shares may also be bought and sold
through any securities dealer having a dealer agreement with FPBS, the Fund's
principal underwriter.
The minimum initial investment for Class A Shares is $5,000 ($2,000 for IRA and
SEP accounts) and subsequent purchases must be at least $200.
17
<PAGE>
The following table shows the regular sales charge on Class A Shares of the Fund
together with the reallowance paid to dealers and the agency commission paid to
brokers, collectively the "commission":
<TABLE>
<CAPTION>
Sales Charge as Reallowance and Bro-
Sales Charge as Percentage kerage Commission
Percentage of of Net Amount as Percentage of
Class A Shares Amount of Purchase Offering Price Invested Offering Price
- --------------------------------- -------------- -------- --------------
<S> <C> <C> <C> <C>
Less than $100,000............................... 5.00% 5.25% 4.75%
$ 100,000 or more but less than $200,000........ 4.50% 5.24% 4.25%
$ 200,000 or more but less than $300,000........ 4.00% 4.17% 3.85%
$ 300,000 or more but less than $500,000........ 3.50% 3.63% 3.35%
$ 500,000 or more but less than $1,000,000...... 2.50% 2.56% 2.40%
$1,000,000 and over.............................. 1.50% 1.52% 1.45%
</TABLE>
The commissions shown in the table apply to sales through financial institutions
and intermediaries. Under certain circumstances, the Distributor or a
sub-distributor may use its own funds to compensate financial institutions and
intermediaries in amounts that are in addition to the commissions shown above.
The Distributor or a sub-distributor may, from time to time and at its own
expense, provide promotional incentives, in the form of cash or other
compensation, to certain financial institutions and intermediaries whose
registered representatives have sold or are expected to sell significant amounts
of shares of the Fund. Such other compensation may take the form of payments for
travel expenses, including lodging, incurred in connection with trips taken by
qualifying registered representatives to places within or outside of the United
States. Under certain circumstances, commissions up to the amount of the entire
sales charge may be reallowed to certain financial institutions and
intermediaries, who might then be deemed to be "underwriters" under the
Securities Act of 1933, as amended.
Reduced Sales Charges
The sales charge for purchases of Class A Shares of the Fund may be reduced
through Rights of Accumulation or Letter of Intent. To qualify for a reduced
sales charge, an investor must so notify his or her distributor at the time of
each purchase of shares which qualifies for the reduction.
Rights of Accumulation
A shareholder may qualify for a reduced sales charge by aggregating the net
asset values of shares requiring the payment of an initial sales charge,
previously purchased and currently owned, with the dollar amount of shares to be
purchased.
Letter of Intent
An investor of Class A Shares may qualify for a reduced sales charge immediately
by signing a non-binding Letter of Intent stating the investor's intention to
invest during the next 13 months a specified amount which, if made at one time,
would qualify for a reduced sales charge. The first investment cannot be made
more than 90 days prior to the date of the Letter of Intent. Any redemptions
made during the 13-month period will be subtracted from the amount of purchases
in determining whether the Letter of Intent has been completed. During the term
of the Letter of Intent, the transfer agent will hold shares representing 5.00%
of the indicated amount in escrow for payment of a higher sales load if the full
amount indicated in the Letter of Intent is not purchased. The escrowed shares
will be released when the full amount indicated has been purchased. If the full
amount indicated is not purchased within the 13-month period, a shareholder's
escrowed shares will be redeemed in an amount equal to the difference in the
dollar amount of sales charge actually paid and the amount of sales charge the
shareholder would have had to pay on his or her aggregate purchases if the total
of such purchases had been made at a single time. It is the shareholder's
responsibility to notify the transfer agent at the time the Letter of Intent is
submitted that there are prior purchases that may apply.
The term "single purchaser" refers to (i) an individual, (ii) an individual and
spouse purchasing shares of the Fund for their own account or for trust or
custodial accounts of their minor children, or (iii) a fiduciary purchasing for
any
18
<PAGE>
one trust, estate or fiduciary account, including employee benefit plans created
under Sections 401 and 457 of the Internal Revenue Code of 1986, as amended,
including related plans of the same employer.
Sales Charge Waiver
The sales charge may be waived for purchases of Class A Shares by the following
types of investors: (1) any financial institution or adviser regulated by
federal or state governmental authority when the institution or adviser is
purchasing shares for its own account or for an account for which the
institution or adviser is authorized to make investment decisions (i.e., a
discretionary account); (2) Trustees, Officers and employees of the Fund, the
Adviser, and the distributor (including members of their immediate families and
their retirement accounts or plans); (3) Trustees, officers and employees of the
Fund's service providers; (4) customers, clients or accounts of the Adviser or
other investment advisers or financial planners who charge a fee for their
services; (5) retirement accounts or plans, or deferred compensation plans and
trusts funding such plans for which a depository institution, trust company or
other fiduciary holds shares purchased through the omnibus accounts for the
Fund; (6) qualified employee benefits plans created under Sections 401, 43(b)(7)
or 457 of the Internal Revenue Code (but not IRA's or SEP's); (7) and any
non-profit institution investing $1 million or more. The sales charge is also
waived for any registered representatives, employees or principals of securities
dealers (including members of their immediate families) having a sales agreement
with the distributor.
HOW TO REDEEM SHARES
Shareholders of both classes of shares may redeem their shares of the Fund
without being subject to a sales charge on any business day that the NYSE is
open for business. Redemptions will be effective at the current net asset value
per share next determined after the receipt by the transfer agent of a
redemption request meeting the requirements described below.
Redemption By Mail
Shareholders may redeem their shares by submitting a written request for
redemption to Fund/Plan Services, Inc., 2 W. Elm Street, P.O. Box 874,
Conshohocken, Pennsylvania 19428-0874.
A written request must be in good order which means that it must: (i) identify
the shareholder's account name and account number; (ii) state the number of
shares or dollar amount to be redeemed and (iii) be signed by each registered
owner exactly as the shares are registered. To prevent fraudulent redemptions, a
signature guarantee for the signature of each person in whose name an account is
registered is required for all written redemption requests exceeding $10,000. A
signature guarantee is also required when a redemption request of any amount is
sent to an address other than the address of record. A guarantee may be obtained
from any commercial bank, credit union, member firm of a national securities
exchange, registered securities association, clearing agency and savings and
loan association. A credit union must be authorized to issue signature
guarantees; notary public endorsement will not be accepted. Signature guarantees
will be accepted from any eligible guarantor institution that participates in a
signature guarantee program. The transfer agent may require additional
supporting documents for redemptions made by corporations, executors,
administrators, trustees or guardians and retirement plans.
Redemption By Telephone Shareholders who have so indicated on the application,
or have subsequently arranged in writing to do so, may redeem shares by calling
the transfer agent at (800)________ or (610)_________ during normal business
hours. In order to arrange for redemption by wire or telephone after an account
has been opened, or to change the bank or account designated to receive
redemption proceeds, a written request with a signature guarantee must be sent
to the transfer agent at the address listed above, under the caption "Redemption
By Mail".
The Fund reserves the right to refuse a wire or telephone redemption if it is
believed advisable to do so. Procedures for redeeming Fund shares by wire or
telephone may be modified or terminated at any time.
During periods of unusual economic or market changes, telephone redemptions may
be difficult to implement. In such event, shareholders should follow the
procedures for redemption by mail.
19
<PAGE>
General Redemption Information
A redemption request will not be deemed to be properly received until the
transfer agent receives all required documents in proper form. If you have any
questions with respect to the proper form for redemption requests you should
contact the transfer agent at (800) ______ or (610) _________.
Redemptions will be processed only on a business day during which the NYSE is
open for business. Redemptions will be effective at the current net asset value
per share next determined after the receipt by the transfer agent of a
redemption request meeting the requirements described above. The Fund normally
sends redemption proceeds on the next business day, but, in any event,
redemption proceeds are sent within seven calendar days of receipt of a
redemption request in proper form. Payment may also be made by wire directly to
any bank previously designated by an investor on his or her new account
application. There is a $9.00 charge for redemptions made by wire to domestic
banks. Wires to foreign or overseas banks may be charged at higher rates. It
should also be noted that banks may impose a fee for wire services. In addition,
there may be fees for redemptions made through brokers, financial institutions
and service organizations.
Except as noted below, redemption requests received in proper form by the
transfer agent prior to the close of regular trading hours on the NYSE on any
business day on which the Fund calculates its net asset value are effective as
of that day. Redemption requests received after the close of the NYSE will be
effected at the net asset value per share determined on the next business day
following receipt. No redemption will be processed until the transfer agent has
received a completed application with respect to the account.
The Fund will satisfy redemption requests for cash to the fullest extent
feasible, as long as such payments would not, in the opinion of the Board of
Trustees, result in the necessity of the Fund to sell assets under
disadvantageous conditions or to the detriment of the remaining shareholders of
the Fund.
Pursuant to the Fund's Trust Instrument, however, payment for shares redeemed
may also be made in kind, or partly in cash and partly in-kind. The Fund has
elected, pursuant to Rule 18f-1 under the 1940 Act to redeem its shares solely
in cash up to the lesser of $250,000 or 1% of the net asset value of the Fund,
during any 90 day period for any one shareholder. Any portfolio securities paid
or distributed in-kind would be in readily marketable securities and valued in
the manner described below. See "Net Asset Value." In the event that an in-kind
distribution is made, a shareholder may incur additional expenses, such as
brokerage commissions, on the sale or other disposition of the securities
received from the Fund. In-kind payments need not constitute a cross-section of
the Fund's portfolio.
The Fund may suspend the right of redemption or postpone the date of payment for
more than seven days during any period when (1) trading on the NYSE is
restricted or the NYSE is closed, other than customary weekend and holiday
closings; (2) the Securities and Exchange Commission has, by order, permitted
such suspension; (3) an emergency, as defined by rules of the Securities and
Exchange Commission, exists making disposal of portfolio investments or
determination of the value of the net assets of the Fund not reasonably
practicable.
Shares of the Fund may be redeemed through certain brokers, financial
institutions, service organizations, banks, and bank trust departments who may
charge the investor a transaction or other fee for their services at the time of
redemption. Such additional transaction fees would not otherwise be charged if
the shares were redeemed directly from the Fund.
Telephone Transactions
Shareholders who wish to initiate redemption transactions by telephone must
first elect the option, as described above. Neither the Fund nor any of its
service contractors will be liable for any loss or expense in acting upon
telephone instructions that are reasonably believed to be genuine. In this
regard, the Fund and its transfer agent require personal identification
information before accepting a telephone redemption. To the extent that the Fund
or its transfer agent fail to use reasonable procedures to verify the
genuineness of telephone instructions, the Fund may be liable for losses due to
fraudulent or unauthorized instructions. The Fund reserves the right to refuse a
telephone redemption if it is believed advisable to do so. Written confirmation
will be provided for all redemption transactions initiated by telephone.
Minimum Balances
Due to the relatively high cost of maintaining smaller accounts, the Fund
reserves the right to involuntarily redeem
20
<PAGE>
shares in any account at its then current net asset value (which will be
promptly paid to the shareholder) if at any time the total investment does not
have a value of at least $500 as a result of redemptions, but not market
fluctuations. A shareholder will be notified that the value of his or her
account is less than the required minimum and such shareholder will be allowed
at least 60 days to bring the value of his or her account up to the minimum
before the redemption is processed.
SHAREHOLDER SERVICES
The following special services are available to shareholders of the Fund. There
are no charges for the programs noted below and a shareholder may change or stop
these plans at any time by written notice to the Fund.
Automatic Investment Plan
Once an account has been opened, a shareholder can make additional monthly
purchases of shares of the Fund through an automatic investment plan. An
investor may authorize the automatic withdrawal of funds from his or her bank
account by opening his or her account with a minimum of $5,000 for Class A
Shares or $10,000 for Class D Shares, and completing the appropriate section on
the new account application enclosed with this Prospectus. Subsequent monthly
investments are subject to a minimum required amount of $100.
Retirement Plans
The Fund is available for investment by pension and profit sharing plans
including Individual Retirement Accounts, SEP, Keogh, 401(k) and 403(b) plans
through which an investor may purchase Fund shares. For details concerning any
of the retirement plans, please call the Fund at (800)_________or (610)
__________.
NET ASSET VALUE
The net asset value per share is calculated separately for each class of the
Fund and is computed once daily as of the close of regular trading on the NYSE,
currently 4:00 p.m. Eastern time. Currently, the NYSE is closed on the following
holidays or days on which the following holidays are observed: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas.
The net asset value per share is computed by adding the value of all securities
and other assets in the portfolio, deducting any liabilities, and dividing by
the total number of outstanding shares. Expenses are accrued daily and applied
when determining the net asset value. The Fund's equity securities are valued
based on market quotations or, when no market quotations are available, at fair
value as determined in good faith by, or under direction, of the Board of
Trustees.
Foreign securities are valued as of the close of trading on the primary exchange
on which they trade. The value is then converted to U.S. dollars using current
exchange rates. Securities listed on any national securities exchange are valued
at their last sale price on the exchange where the securities are principally
traded or, if there has been no sale on that date, at the mean between the last
reported bid and asked prices. Securities traded over-the-counter are priced at
the mean of the last bid and asked prices. Listed securities which are traded by
foreign investors in the Greater Asia Region in over-the-counter transactions
are valued at prices at which it is expected that such securities may be sold,
as determined in good faith by, or under the direction of, the Board of
Trustees.
Securities are valued through valuations obtained from a commercial pricing
service or at the most recent mean of the bid and asked prices provided by
investment dealers in accordance with procedures established by the Board of
Trustees.
Short-term investments having a maturity of 60 days or less are valued at
amortized cost, which the Board of Trustees believes represents fair value. When
a security is valued at amortized cost, it is valued at its cost when purchased,
and thereafter by assuming a constant amortization to maturity of any discount
or premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. All other securities and other assets are valued at
their fair value as determined in good faith under procedures established by and
under the supervision of the Board of Trustees.
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<PAGE>
Foreign currency exchange rates are generally determined prior to the close of
trading on the NYSE. Occasionally, events affecting the value of foreign
investments and such exchange rates occur between the time at which they are
determined and the close of trading on the NYSE. Such events would not normally
be reflected in a calculation of the Fund's net asset value on that day. If
events that materially affect the value of the Fund's foreign investments or the
foreign currency exchange rates occur during such period, the investments will
be valued at their fair value as determined in good faith by, or under the
direction of, the Board of Trustees. Foreign securities held by the Fund may be
traded on days and at times when the NYSE is closed. Accordingly, the net asset
value of the Fund may be significantly affected on days when shareholders have
no access to the Fund.
For valuation purposes, quotations of foreign portfolio securities, other assets
and liabilities and forward contracts stated in foreign currency are translated
into U.S. dollar equivalents at the prevailing market rates.
Net asset value is calculated separately for each class of the Fund based on
expenses applicable to the particular class. Although the methodology and
procedures for determining net asset value are identical for the Fund's classes,
the net asset value of the classes may differ because of the different fees and
expenses charged to each class.
DIVIDENDS AND TAXES
Dividends
The Fund will distribute its net investment income annually in December. Any net
gain realized from the sale of portfolio securities and net gains realized from
foreign currency transactions are distributed at least once each year unless
they are used to offset losses carried forward from prior years, in which case
no such gain will be distributed. Such income dividends and capital gain
distributions are reinvested automatically in additional shares at net asset
value, unless a shareholder elects to receive them in cash. Distribution options
may be changed at any time by requesting a change in writing.
Any check tendered in payment of dividends or other distributions which cannot
be delivered by the post office or which remains uncashed for a period of more
than one year may be reinvested in the shareholder's account at the then current
net asset value, and the dividend option may be changed from cash to reinvest.
Dividends are reinvested on the ex-dividend date (the "ex-date") at the net
asset value determined at the close of business on that date. Dividends and
distributions are treated the same for tax purposes whether received in cash or
reinvested in additional shares. Please note that shares purchased shortly
before the record date for a dividend or distribution may have the effect of
returning capital although such dividends and distributions are subject to
taxes.
Taxes
The Fund intends to conduct its operations so as to qualify as a "regulated
investment company" for purposes of the Internal Revenue Code of 1986, as
amended (the "Code"), which will relieve the Fund of any liability for federal
income tax to the extent that its earnings and net realized capital gains are
distributed to shareholders. To so qualify, the Fund will, among other things,
limit its investments so that, at the close of each quarter of its taxable year,
(i) not more than 25% of the market value of the Fund's total assets will be
invested in the securities of any single issuer and (ii) with respect to 50% of
the market value of its total assets, not more than 5% of the market value of
its total assets will be invested in the securities of any single issuer, and
the Fund will not own more than 10% of the outstanding voting securities of any
single issuer.
An investment in the Fund has certain tax consequences, depending on the type of
account. The Fund will distribute all of its net investment income to
shareholders. Distributions are subject to federal income tax and may also be
subject to state and local income taxes. Distributions are generally taxable
when they are paid, whether in cash or by reinvestment in additional shares,
except that distributions declared in October, November or December and paid in
the following January are taxable as if they were paid on December 31. If you
have a qualified retirement account, taxes are generally deferred until
distributions are made from the retirement account.
For federal income tax purposes, income dividends and short-term capital gain
distributions are taxed as ordinary income. Distributions of net capital gains
(the excess of net long-term capital gain over net short-term capital loss) are
usually taxed as long-term capital gains, regardless of how long a shareholder
has held the Fund's shares. The tax treatment of distributions of ordinary
income or capital gains will be the same whether the shareholder reinvests
22
<PAGE>
the distributions or elects to receive them in cash.
Shareholders may be subject to a 31 percent back-up withholding on reportable
dividend and redemption payments ("back-up withholding") if a certified taxpayer
identification number is not on file with the Fund, or if to the Fund's
knowledge, an incorrect number has been furnished. An individual's taxpayer
identification number is his/her social security number.
Shareholders will be advised annually of the source and tax status of all
distributions for federal income tax purposes. Information accompanying a
shareholder's statement will show the portion of those distributions that are
not taxable in certain states. Further information regarding the tax
consequences of investing in the Fund is included in the Statement of Additional
Information. The above discussion is intended for general information only.
Investors should consult their own tax advisers for more specific information on
the tax consequences of particular types of distributions.
The Fund intends to make sufficient distributions prior to the end of each
calendar year in order to avoid liability for federal excise tax.
Dividends and interest received by the Fund from sources within foreign
countries may be subject to foreign income taxes withheld at the source. To the
extent that the Fund is liable for foreign income taxes so withheld, the Fund
intends to operate so as to meet the requirements of the Code to pass through to
the shareholders credit for foreign income taxes paid. Although the Fund intends
to meet Code requirements, in order to pass through credit for such taxes, there
can be no assurance that the Fund will be able to do so.
Sale, exchange or redemption of the Fund's shares is a taxable event to the
shareholder.
PERFORMANCE INFORMATION
Performance information such as total return for the Fund may be quoted in
advertisements or in communications to shareholders. Such performance
information may be useful in reviewing the performance of the Fund and for
providing a basis for comparison with other investment alternatives. However,
because the net investment return of the Fund changes in response to
fluctuations in market conditions, interest rates and Fund expenses, any given
performance quotation should not be considered representative of the Fund's
performance for any future period. The value of an investment in the Fund will
fluctuate and an investor's shares, when redeemed, may be worth more or less
than their original cost. Total return and yield are calculated separately for
Class A Shares and Class D Shares.
The Fund's total return is the change in value of an investment in the Fund over
a particular period, assuming that all distributions have been reinvested. Thus,
total return reflects not only income earned, but also variations in share
prices at the beginning and end of the period. Average annual return reflects
the average percentage change per year in the value of an investment in the
Fund. Aggregate total return reflects the total percentage change over the
stated period. Please refer to the Statement of Additional Information for more
information on performance.
The performance of Class D Shares will normally be higher than for Class A
Shares because of the sales charge which may be applicable to Class A Shares.
Shareholders may obtain current performance information about the Fund by
calling (800)__________ or (610)__________.
GENERAL INFORMATION
Trustees and Officers of the Fund
The Trustees of the Fund have overall responsibility for the operation of the
Fund. The officers of the Fund who are employees or officers of the Adviser
serve without compensation from the Fund.
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<PAGE>
Description of Shares
The Trust is authorized to issue an unlimited number of shares of beneficial
interest with no par value. Shares of the Fund represent equal proportionate
interests in the assets of the Fund only, and have identical voting, dividend,
redemption, liquidation and other rights. All shares issued are fully paid and
non-assessable, and shareholders have no preemptive or other right to subscribe
to any additional shares. Currently, there are two classes of shares issued by
the Fund. The validity of shares of beneficial interest offered by this
prospectus will be passed on by Kirkpatrick & Lockhart LLP, 1800 Massachusetts
Avenue, N.W., Washington, D.C. 20036-1800. All accounts will be maintained in
book entry form and no share certificates will be issued.
Voting Rights
A shareholder is entitled to one vote for each full share held (and a fractional
vote for each fractional share held). All shares of the Fund participate equally
in regard to dividends, distributions, and liquidations with respect to the
Fund. Shareholders do not have preemptive, conversion or cumulative voting
rights.
Shareholder Meetings
The Trustees are not required, and do not intend, to hold annual meetings of
shareholders. The Trustees have undertaken to the SEC, however, that they will
promptly call a meeting of shareholders for the purpose of voting upon the
question of removal of any Trustee when requested to do so by holders of not
less than 10% of the outstanding shares of the Fund. In addition, subject to
certain conditions, shareholders of the Fund may apply to the Fund to
communicate with other shareholders to request a shareholders' meeting to vote
upon the removal of a Trustee or Trustees.
Shareholder Reports and Inquiries
The Trust issues unaudited financial information semiannually and audited
financial statements annually. Shareholder inquiries should be addressed to the
Fund c/o Sage/Tso Investment Management L.P., 7799 Leesburg Pike, Suite 900,
Falls Church, Virginia 22043, (800)_________ or (703) 255-1233. Purchase and
redemption transactions should be made through the transfer agent by calling
(800) ________ or (610)_______.
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<PAGE>
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS
The following is a description of permitted investments for the Fund, and the
associated risk factors:
ADRs and EDRs - For many foreign securities, there are United States dollar
denominated American Depositary Receipts ("ADRs"), which are bought and sold in
the Unites States and are issued by domestic banks. ADRs represent the right to
receive securities of foreign issuers deposited in the domestic bank or a
correspondent bank. ADRs do not eliminate all the risk inherent in investing in
the securities of foreign issuers. By investing in ADRs rather than directly in
foreign issuer's stock however, the Fund will avoid currency risks during the
settlement period for either purchases or sales. In general, there is a large,
liquid market in the United States for most ADRs. ADRs may be available through
"sponsored" or "unsponsored" facilities. A sponsored facility is established
jointly by the issuer of the security underlying the receipt and a depositary;
whereas, an unsponsored facility may be established by a depositary without
participation by the issuer of the underlying security. Holders of the
unsponsored depositary receipts generally bear all the costs of the unsponsored
facility. The depositary of an unsponsored facility frequently is under no
obligation to distribute shareholder communications received from the issuer of
the deposited security or to pass through, to the holders of the receipts,
voting rights with respect to the deposited securities. The Fund may also invest
in European Depositary Receipts ("EDRs") which are receipts evidencing an
arrangement with a European bank similar to that for ADRs and are designed for
use in the European securities markets. EDRs are not necessarily denominated in
the currency of the underlying security.
Bankers' Acceptances - Bankers' acceptances are bills of exchange or time drafts
drawn on and accepted by a commercial bank or trust company. Bankers'
acceptances are used by manufacturers and exporters to finance the shipment and
storage of goods. Maturities are generally six months or less.
Certificates of Deposit - Certificates of deposit are interest bearing
instruments with a specific maturity. They are issued by banks and savings and
loan institutions in exchange for the deposit of funds and normally can be
traded in the secondary market prior to maturity. Certificates of deposit with
penalties for early withdrawal will be considered illiquid.
Commercial Paper - Commercial paper is a term used to describe unsecured
short-term promissory notes issued by banks, municipalities, corporations and
other entities. Maturities on these issues vary from a few to 270 days.
Convertible Securities - Convertible securities are corporate securities that
are exchangeable for a set number of another security at a prestated price.
Convertible securities typically have characteristics similar to both fixed
income and equity securities. Because of the conversion feature, the market
value of a convertible security tends to move with the market value of the
underlying stock. The value of a convertible security is also affected by
prevailing interest rates, the credit quality of the issuer, and any call
provisions.
Fixed Income Securities - Fixed income securities are debt obligations issued by
corporations, municipalities and other borrowers. The market value of fixed
income investments will change in response to interest rate changes and other
factors. During periods of falling interest rates, the values of outstanding
fixed income securities generally rise. Conversely, during periods of rising
interest rates, the values of such securities generally decline. Moreover, while
securities with longer maturities tend to produce higher yields, the prices of
longer maturity securities are also subject to greater market fluctuations as a
result of changes in interest rates. Changes by recognized agencies in the
rating of any fixed income security and in the ability of an issuer to make
payments of interest and principal will also affect the value of these
investments. Changes in the value of portfolio securities will not affect cash
income derived from these securities but will affect the Fund's net asset value.
Investment Companies
The Fund may invest in shares of other investment companies including foreign
investment companies. Some of the countries in which the Fund invests may not
permit direct investment. Investments in such countries may only be permitted
through foreign government approved or authorized investment vehicles, which may
include investment companies. Investing through such vehicles may involve
frequent or layered fees or expenses and may, as well, be subject to limitations
under the Investment Company Act of 1940 (the "1940 Act"). Under the 1940 Act,
the Fund may invest up to 10% of its assets in shares of investment companies
and up to 5% of its assets in any one investment
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<PAGE>
company as long as the investment does not represent more than 3% of the voting
stock of the acquired investment company.
Investment Grade Securities
Investment grade debt securities are those receiving one of the four highest
ratings from Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Ratings Group, or another nationally recognized statistical rating organization
("NRSRO") or, if unrated by any NRSRO, deemed comparable by the Adviser to such
rated securities. Securities rated in the lowest category of investment grade
are considered to have speculative characteristics.
Forward Foreign Currency Contracts, Currency Options, and Currency Futures
Contracts
In order to hedge against possible changes in the exchange rates of foreign
currencies in relation to the U.S. dollar, the Fund may enter into forward
currency exchange contracts and use options on foreign currencies, but only for
the purpose of hedging. Forward foreign currency contracts involve obligations
to purchase or sell a specified currency at a future date, which may be any
fixed number of days from the date of the contract agreed upon by the parties,
at a price set at the time of the contract. The Fund may enter into forward
contracts to sell foreign currency provided that no more than 15% of the Fund's
total assets would be required to purchase offsetting contracts.
Hedging
The Fund may engage in various portfolio strategies to reduce certain risks of
its investments and to attempt to enhance income. The Fund may invest up to 5%
of its total assets, taken at market value at the time of investment, in
premiums on such hedging strategies. These strategies currently include the use
of options, forward currency exchange contracts and futures contracts and
options thereon. The Fund's ability to use these strategies may be limited by
market conditions, regulatory limits and tax considerations and there can be no
assurance that any of these strategies will succeed.
IDRs
IDRs (International Depositary Receipts, also known as GDRs or Global Depositary
Receipts) are similar to ADRs except that they are bearer securities for
investors or traders outside the U.S., and for companies wishing to raise equity
capital in securities markets outside the U.S. Most IDRs have been used to
represent shares although it is possible to use them for bonds, commercial paper
and certificates of deposit. IDRs can be convertible to ADRs in New York making
them particularly useful for arbitrage between the markets. The Fund has no
current intention to invest in unsponsored IDRs.
Options and Futures
Although the Fund has no present intentions to engage in transactions involving
the use of options and futures contracts, the Fund may engage in such
transactions for purposes of increasing its investment return or hedging against
market changes. The Fund may buy and sell stock index futures contracts for
hedging purposes. An "index future" is a contract to buy or sell units of a
particular stock index at an agreed price on a specified future date. Depending
on the change in value of the index between the time when the Fund enters into
and terminates an index future transaction, the Fund realizes a gain or loss.
The Fund may buy and sell call and put options and index futures or on stock
indices in addition to or as an alternative to purchasing or selling index
futures or, to the extent permitted by applicable law, to earn additional
income. The Fund may seek to increase its current return by writing covered call
and put options on securities it owns or in which it may invest. The Fund
receives a premium for writing a call or put option, which increases the Fund's
return if the option expires unexercised or is closed out at a net profit. When
the Fund writes a call option, it gives up the opportunity to profit from any
increase in the price of a security above the exercise price of the option.
Repurchase Agreements
Repurchase agreements are agreements by which the Fund obtains a security and
simultaneously commits to return the security to the seller at an agreed upon
price on an agreed upon date within a number of days from the date of purchase.
The custodian will hold the security as collateral for the repurchase agreement.
The Fund bears a risk of loss in the event the other party defaults on its
obligations and the Fund is delayed or prevented from exercising its right to
dispose of the collateral, or if the Fund realizes a loss on the sale of the
collateral. The Fund will enter into repurchase agreements only with financial
institutions deemed to present minimal risk of bankruptcy during the term of the
agreement based on established guidelines. Repurchase agreements are considered
loans under the 1940 Act.
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<PAGE>
Restricted Securities - Restricted securities are securities that may not be
sold to the public without registration under the Securities Act of 1933, as
amended, absent an exemption from registration.
U.S. Government Securities - U.S. Government Securities include obligations
issued by agencies or instrumentalities of the U.S. Government including, among
others, Export Import Bank of the United States, Farmers Home Administration,
Federal Farm Credit System, Federal Housing Administration, Maritime
Administration, Small Business Administration, and The Tennessee Valley
Authority. Obligations of instrumentalities of the U.S. Government include
securities issued by, among others, Federal Home Loan Banks, Federal Home Loan
Mortgage Corporation, Federal Intermediate Credit Banks, Federal Land Banks,
Federal National Mortgage Association and the U.S. Postal Service. Some of these
securities are supported by the full faith and credit of the U.S. Treasury
(e.g., Government National Mortgage Association), others are supported by the
right of the issuer to borrow from the Treasury (e.g., Federal Farm Credit Bank)
and still others are supported only by the credit of the instrumentality (e.g.,
Federal National Mortgage Association). Guarantees of principal by agencies or
instrumentalities of the U.S. Government may be a guarantee of payment at the
maturity of the obligation so that in the event of a default prior to maturity
there might not be a market and thus no means of realizing on the obligation
prior to maturity. Guarantees as to the timely payment principal and interest do
not extend to the value or yield of these securities nor to the value of the
Fund's shares.
Warrants - Warrants are instruments that give holders the right, but not the
obligation, to buy shares of a company at a given price during a specified
period.
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INVESTMENT ADVISER
Sage/Tso Investment Management L.P.
7799 Leesburg Pike, Suite 900
Falls Church, Virginia 22043
(703)-255-1233
UNDERWRITER
Fund/Plan Broker Services, Inc.
2 W. Elm Street
Conshohocken, Pennsylvania 19428
(800)_________
(610)_________
SHAREHOLDER SERVICES
Fund/Plan Services, Inc.
2 W. Elm Street
Conshohocken, Pennsylvania 19428
(800)_________
(610)_________
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP 1800
Massachusetts Avenue, N.W.
Washington, DC 20036-1800
AUDITORS
[ To Be Determined ]
For Additional Information about America Asia Allocation Growth Fund call:
(800)_________
(610)_________
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AMERICA ASIA ALLOCATION GROWTH FUND
STATEMENT OF ADDITIONAL INFORMATION
June __, 1996
- --------------------------------------------------------------------------------
This Statement of Additional Information dated June __, 1996 is not a prospectus
but should be read in conjunction with the Prospectus describing Class A Shares
and Class D Shares of the America Asia Allocation Growth Fund (the "Fund") dated
June __, 1996. The Prospectus may be amended or supplemented from time to time.
No investment in shares should be made without first reading the Prospectus.
This Statement of Additional Information is intended to provide additional
information regarding the activities and operations of the Fund, and should be
read in conjunction with the Prospectus. A copy of the Prospectus may be
obtained without charge from Sage/Tso Investment Management L.P. (the "Adviser")
at the addresses and telephone numbers below.
Underwriter: Adviser:
Fund/Plan Broker Services, Inc. Sage/Tso Investment Management L.P.
2 W. Elm Street 7799 Leesburg Pike, Suite 900
Conshohocken, Pennsylvania 19428 Falls Church, Virginia 22043
(610)________ (703) 255-1233
No person has been authorized to give any information or to make any
representations not contained in this Statement of Additional Information
or in the Prospectus in connection with the offering made by the
Prospectus and, if given or made, such information or representations must
not be relied upon as having been authorized by the Trust or its distributor.
The Prospectus does not constitute an offering by the Trust
or by the distributor in any jurisdiction in which such offering may
not lawfully be made.
29
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TABLE OF CONTENTS
<TABLE>
Page
<S> <C>
The Trust and the Fund...........................................................................................31
The Greater Asia Region..........................................................................................31
Investment Policies and Techniques...............................................................................31
American Depository Receipts..................................................................................31
Convertible Securities........................................................................................32
Foreign Securities............................................................................................32
Repurchase Agreements.........................................................................................32
Loans of Portfolio Securities.................................................................................32
Illiquid Securities...........................................................................................33
Rule 144A Securities..........................................................................................33
Other Investments.............................................................................................33
Investment Restrictions..........................................................................................33
Investment Advisory and Other Services
Investment Advisory Agreement.................................................................................35
Administrator.................................................................................................35
Underwriter...................................................................................................35
Distributor...................................................................................................36
Trustees and Officers............................................................................................36
Net Asset Value..................................................................................................37
Taxes............................................................................................................37
Federal Income Tax............................................................................................37
Foreign Taxes.................................................................................................38
Portfolio Transactions...........................................................................................38
Performance Information
In General....................................................................................................38
Total Return Calculation......................................................................................38
Yield Calculation.............................................................................................39
Performance and Advertisements ...............................................................................40
Other Information................................................................................................41
Shareholder Liability.........................................................................................41
Limitations on Trustees' Liability............................................................................41
</TABLE>
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THE TRUST AND THE FUND
This Statement of Additional Information relates to America Asia Allocation
Growth Fund (the "Fund"), a separate series of Sage/Tso Trust (the "Trust"), a
diversified, open-end management company established on February 9, 1996 under
Delaware law as a Delaware business trust. The Trust Instrument permits the
Trust to offer separate series of shares of beneficial interest. The Trust
currently is comprised of one series, which offers its shares through two
separate classes: Class A Shares and Class D Shares. To the extent that the
Trust is a newly formed entity, it has no prior history.
THE GREATER ASIA REGION
The Adviser believes that the rapidly growing economies in the Greater Asia
Region offer attractive opportunities for investment. The newly industrialized
nations of this region are in an earlier, more dynamic growth stage of their
development. The Adviser believes that the continued growth opportunities exist
due to structural changes taking place throughout the region. The relaxation of
trade barriers and the freer movement of capital are increasing the flow of
commerce within the region and fostering economic independence. As capital
investment increases, many of the Greater Asian Region countries are developing
more efficient capital markets for investment.
The following countries in the Greater Asia Region are designated as emerging or
less developed countries: India, The Philippines, Indonesia, Singapore,
Malaysia, Taiwan, Thailand and China. Although there is no universally accepted
definition, a developing country is generally considered to be a country which
is in the initial stages of industrialization. In these countries, the Fund
effectively may invest through investment funds subject to the provisions of the
Investment Company Act of 1940 relating to the purchase of securities of
investment companies.
The Chinese, Hong Kong and Taiwanese stock markets are undergoing a period of
growth and change which may result in trading volatility and difficulties in the
settlement and recording of transactions, and in interpreting and applying the
relevant law and regulations. In particular, the securities industry in China is
not well developed. China has no securities laws of nationwide applicability.
China governmental actions can have a significant effect on the economic
conditions in the Greater Asia Region, which could adversely affect the value
and liquidity of the Fund's investments. Although the Chinese Government has
recently begun to institute economic reform policies, there can be no assurances
that it will continue to pursue such policies or, if it does, that such policies
will succeed.
China and certain of the other Greater Asia Region countries do not have
comprehensive systems of laws, although substantial changes have occurred in
China in this regard in recent years. The bankruptcy laws pertaining to state
enterprises have rarely been used and are untried in regard to an enterprise
with foreign shareholders. The uncertainties faced by foreign investors in China
are exacerbated by the fact that many laws, regulations and decrees of China are
not publicly available, but merely circulated internally. Similar risks exist in
other Greater Asia Region countries.
INVESTMENT POLICIES AND TECHNIQUES
The following supplements the information contained in the Prospectus for the
Fund regarding the permitted investments and risk factors and the investment
objective and policies of the Fund.
American Depository Receipts
The Fund may invest in foreign securities by purchasing American Depository
Receipts ("ADRs"). These securities may not necessarily be denominated in the
same currency as the securities into which they may be converted. Generally,
ADRs, in registered form, are denominated in U.S. dollars and are designed for
use in the U.S. securities markets. ADRs are receipts typically issued by a U.S.
bank or trust company evidencing ownership of the underlying securities. For
purposes of the Fund's investment policies, ADRs are deemed to have the same
classification as the underlying securities they represent. Thus, an ADR
representing ownership of common stock will be treated as common stock. ADR
facilities may be established as either "unsponsored" or "sponsored". While ADRs
issued under these two types of facilities are similar in some respects, there
are distinctions between them relating to the
31
<PAGE>
rights and obligations of ADR holders and the practices of market participants.
Convertible Securities
The Fund may invest in convertible securities. Common stock occupies the most
junior position in a company's capital structure. Convertible securities entitle
the holder to exchange such securities for a specified number of shares of
common stock, usually of the same company, at specified prices within a certain
period of time, and to receive interest or dividends until the holder elects to
convert. The provisions of any convertible security determine its ranking in a
company's capital structure. In the case of subordinated convertible debentures,
the holder's claims on assets and earnings are subordinated to the claims of
other creditors, and are senior to the claims of preferred and common
shareholders. In the case of preferred stock and convertible preferred stock,
the holder's claims on assets and earnings are subordinated to the claims of all
creditors but are senior to the claims of common shareholders.
To the extent that a convertible security's investment value is greater than its
conversion value, its price will be primarily a reflection of such investment
value, and its price will be likely to increase when interest rates fall and
decrease when interest rates rise, as is the case with a fixed-income security.
If the conversion value exceeds the investment value, the price of the
convertible security will rise above its investment value and, in addition, may
sell at some premium over its conversion value. At such times, the price of the
convertible security will tend to fluctuate directly with the price of the
underlying equity security.
Foreign Securities
Investments in securities of foreign issuers may subject the Fund to investment
risks that differ in some respects from those related to investments in
obligations of U.S. domestic issuers. Such risks include future adverse
political and economic developments, the possible imposition of withholding
taxes on interest or other income, possible seizure, nationalization or
expropriation of foreign deposits, the possible establishment of exchange
controls or taxation at the source, greater fluctuations in value due to changes
in currency exchange rates, or the adoption of other foreign governmental
restrictions which might adversely affect the payment of principal and interest
on such obligations. Such investments may also have higher custodial fees and
sales commission than domestic investments. Foreign issuers of securities or
obligations are often subject to accounting treatment and engage in business
practices different from those regarding domestic issuers of similar securities
or obligations. Foreign branches of U.S. banks and foreign banks may be subject
to less stringent reserve requirements than those applicable to domestic
branches of U.S. banks. In addition, foreign markets may be characterized by
lower liquidity, greater price volatility, less regulation and higher
transaction costs than U.S. markets.
Repurchase Agreements
The repurchase price under the repurchase agreements described in the
Prospectuses generally equals the price paid by the Fund plus interest
negotiated on the basis of current short-term rates (which may be more or less
than the rate on the securities underlying the repurchase agreement). Repurchase
agreements may be considered to be loans by the Fund under the Investment
Company Act of 1940, as amended (the "1940 Act").
The financial institutions with whom the Fund may enter into repurchase
agreements are banks and non-bank dealers of U.S. Government securities that are
listed on the Federal Reserve Bank of New York's list of reporting dealers and
banks, if such banks and non-bank dealers are deemed creditworthy by the
Adviser. The Adviser will continue to monitor the creditworthiness of the seller
under a repurchase agreement, and will require the seller to maintain during the
term of the agreement the value of the securities subject to the agreement at
not less than the repurchase price. The Fund will only enter into a repurchase
agreement where the market value of the underlying security, including interest
accrued, will at all times be equal to or exceed the value of the repurchase
agreement.
The Fund may invest in repurchase agreements with foreign parties or a
repurchase agreement based on securities denominated in foreign currencies.
Legal structures in foreign countries, including bankruptcy laws, may offer less
protection to investors such as the Fund. Furthermore, foreign repurchase
agreements generally involve greater risks than repurchase agreements made in
the United States.
Loans of Portfolio Securities
The Fund may lend portfolio securities to broker-dealers and financial
institutions provided that (1) the loan is secured continuously by collateral
marked-to-market daily, and maintained in an amount at least equal to the
current market
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<PAGE>
value of the securities loaned; (2) the Fund may call the loan at any time and
receive the securities loaned; (3) the Fund will receive any interest or
dividends paid on the loaned securities and (4) the aggregate market value of
securities loaned by the Fund will not at any time exceed 33% of the total
assets of the Fund.
Collateral will consist of U.S. government securities, cash equivalents or
irrevocable letters of credit. Loans of securities involve a risk that the
borrower may fail to return the securities or may fail to maintain the proper
amount of collateral. Therefore, the Fund will only enter into portfolio loans
after a review by the Adviser, under the supervision of the Board of Trustees,
including a review of the creditworthiness of the borrower. Such reviews will be
monitored on an ongoing basis.
Illiquid Securities
The Board of Trustees has delegated the function of making day-to-day
determinations of liquidity to the Adviser pursuant to guidelines reviewed by
the Board of Trustees. The Adviser will monitor the liquidity of securities held
by the Fund, and report periodically on such determinations to the Board of
Trustees.
Rule 144A Securities
The Fund may invest in securities that are exempt from the registration
requirements of the Securities Act of 1933 pursuant to Securities Exchange
Commission ("SEC") Rule 144A. Those securities, purchased pursuant to Rule 144A,
are traded among qualified institutional buyers, and are subject to the Fund's
limitation on illiquid investment.
Investing in securities under Rule 144A could have the effect of increasing the
levels of the Fund's illiquidity to the extent that qualified institutional
buyers become, for a time, uninterested in purchasing these securities. The Fund
will limit its investments in securities of issuers which the Fund is restricted
from selling to the public without registration under the Securities Act of 1933
to no more than 10% of the Fund's net assets, excluding restricted securities
eligible for resale pursuant to Rule 144A that have been determined to be liquid
by the Fund's Board of Trustees.
Other Investments
Subject to prior disclosure to shareholders, the Board of Trustees may, in the
future, authorize the Fund to invest in securities other than those listed here
and in the prospectus, provided that such investment would be consistent with
the Fund's investment objective, and that it would not violate any fundamental
investment policies or restrictions applicable to the Fund.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental restrictions and may
not be changed without the approval of a majority of the outstanding voting
shares (as defined in the 1940 Act) of the Fund. Unless otherwise indicated, all
percentage limitations listed below apply only at the time of the transaction.
Accordingly, if a percentage restriction is adhered to at the time of
investment, a later increase or decrease in the percentage which results from a
relative change in values or from a change in the Fund's total assets will not
be considered a violation.
Except as set forth under "INVESTMENT OBJECTIVE AND POLICIES" and "DESCRIPTION
OF PERMITTED INVESTMENTS AND RISK FACTORS" in the Prospectus, the Fund may not:
1. purchase securities of any one issuer if, as a result,
more than 5% of the Fund's total assets would be
invested in securities of that issuer or the Fund would
own or hold more than 10% of the outstanding voting
securities of that issuer, except that up to 25% of the
Fund's total assets may be invested without regard to
this limitation, and except that this limit does not
apply to securities issued or guaranteed by the U.S.
government, its agencies and instrumentalities or to
securities issued by other investment companies;
2. purchase any security if, as a result of that purchase,
25% or more of the Fund's total assets would be
invested in securities of issuers having their
principal business activities in the same industry,
except that this limitation does not apply to
securities issued or guaranteed by the U.S. government,
its agencies or instrumentalities;
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<PAGE>
3 issue senior securities or borrow money, except as
permitted under the 1940 Act and then not in excess of
331/3 of the Fund's total assets (including the amount
of the senior securities issued but reduced by any
liabilities not constituting senior securities) at the
time of the issuance or borrowing, except that the Fund
may borrow up to an additional 5% of its total assets
(not including the amount borrowed) for temporary or
emergency purposes. The Fund will not purchase
securities when borrowings exceed 5% of its total
assets;
4. make loans, except through loans of securities or
through repurchase agreements, provided that, for
purposes of this restriction, the acquisition of bonds,
debentures, other debt securities or instruments, or
participations or other interest therein and
investments in government obligations, commercial
paper, certificates of deposit, bankers' acceptances or
similar instruments will not be considered the making
of a loan;
5. engage in the business of underwriting the securities
of others, except to the extent that the Fund might be
considered an underwriter under the Federal securities
laws in connection with its disposition of securities;
6. purchase or sell real estate, except that investments
in securities of issuers that invest in real estate or
other instruments supported by interests in real estate
are not subject to this limitation, and except that the
Fund may exercise rights under agreements relating to
such securities, including the right to enforce
security interests to hold real estate acquired by
reason of such enforcement until that real estate can
be liquidated in an orderly manner; or
7. purchase or sell physical commodities unless acquired
as a result of owning securities or other instruments,
but the Fund may purchase, sell or enter into financial
options and futures, forward and spot currency
contracts, other financial contracts or derivative
instruments;
The following investment limitations are not fundamental and may be changed
without shareholder approval:
(i) The Fund does not currently intend to engage in short
sales of securities or maintain a short position,
except that the Fund may (a) sell short ("against the
box") and (b) maintain short positions in connection
with its use of financial options and futures, forward
and spot currency contracts, swap transactions and
other financial contracts or derivative instruments.
(ii) The Fund does not currently intend to purchase
securities on margin, except for short-term credit
necessary for clearance of portfolio transactions and
except that the Fund may make margin deposits in
connection with its use of financial options and
futures, forward and spot currency contracts, swap
transactions and other financial contracts or
derivative instruments.
(iii) The Fund does not currently intend to purchase
securities of other investment companies except as
permitted by the 1940 Act and the rules and regulations
thereunder.
(iv) The Fund does not currently intend to invest in
companies for the purpose of exercising control or
management.
(v) The Fund does not currently intend to invest in oil,
gas or mineral exploration or development programs or
leases, except that investment in securities of issuers
that invest in such programs or leases and investments
in asset-backed securities supported by receivables
generated by such programs or leases are not subject to
this prohibition.
(vi) The Fund does not currently intend to invest more than
5% of its net assets in warrants, including within that
amount no more than 2% in warrants which are not listed
on the New York or American Stock Exchanges, except
warrants acquired as a result of its holdings of common
stocks.
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<PAGE>
(vii) The Fund does not currently intend to purchase or
retain the securities of any issuer if, to the
knowledge of the Fund, any officer or director of the
Fund or of its investment manager owns beneficially
more than 1/2 of 1% of the outstanding securities of
such issuer, and such officers and directors of the
Fund or of its investment manager who own more than 1/2
of 1%, own in the aggregate more than 5% of the
outstanding securities of such issuer.
(viii) The Fund does not currently intend to invest more than
10% of its total assets in securities of companies less
than three years old. Such three-year period shall
include the operation of any predecessor company or
companies. To comply with certain state securities
restrictions, the Fund will not invest more than 5% of
its total assets in securities of such issuers;
however, if these restrictions are loosened, the Fund
reserves the right to invest up to 10% of its total
assets in securities of such issuers without advance
notice to shareholders.
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Advisory Agreement
The Fund and the Adviser have entered into an investment advisory agreement (the
"Investment Advisory Agreement"). The Investment Advisory Agreement provides
that the Adviser shall not be protected against any liability to the Fund or its
shareholders by reason of willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or from reckless disregard of its
obligations or duties thereunder.
The Investment Advisory Agreement provides that if, for any fiscal year, any
ratio of expenses of the Fund (including amounts payable to the Adviser but
excluding interest, taxes, brokerage, litigation and other extraordinary
expenses) exceeds limitations established by any state in which the shares of
the Fund are registered, the Adviser will bear the amount of such excess.
If the Fund is registered in California, and to the extent that the Fund
purchases securities of open-end investment companies, the Adviser will waive
its advisory fee on that portion of the Fund's assets invested in such
securities.
The continuance of the Investment Advisory Agreement, after the first two years,
must be specifically approved at least annually (i) by the vote of the Trustees
or by a vote of the shareholders of Fund, and (ii) by the vote of a majority of
the Trustees who are not parties to the Investment Advisory Agreement or
"interested persons" of any party thereto, cast in person at a meeting called
for the purpose of voting on such approval. The Investment Advisory Agreement
will terminate automatically in the event of its assignment, and is terminable
at any time without penalty by the Trustees of the Fund, or by a majority of the
outstanding shares of the Fund on not less than 30 days' nor more than 60 days'
written notice to the Adviser, or by the Adviser on 90 days' written notice to
the Fund.
Administrator
Fund/Plan Services, Inc., 2 W. Elm Street, Conshohocken, Pennsylvania 19428 (the
"Administrator") provides certain administrative services to the Fund pursuant
to an Administrative Services Agreement.
Under the Administrative Services Agreement, the Administrator: (1) coordinates
with the Custodian and Transfer Agent and monitors the services they provide to
the Fund; (2) coordinates with and monitors any other third parties furnishing
services to the Fund; (3) provides the Fund with necessary office space,
telephones and other communications facilities and personnel competent to
perform administrative and clerical functions; (4) supervises the maintenance by
third parties of such books and records of the Fund as may be required by
applicable federal or state law; (5) prepares and, after approval by the Fund,
files and arranges for the distribution of proxy materials and periodic reports
to shareholders of the Fund as required by applicable law; (6) prepares and,
after approval by the Fund, arranges for the filing of such registration
statements and other documents with the SEC and other federal and state
regulatory authorities as may be required by applicable law; (7) reviews and
submits to the officers of the Fund for their approval invoices or other
requests for payment of the Fund's expenses and instructs the Custodian to issue
checks in payment thereof, and (8) takes such other action with respect to the
Fund as may be necessary in the opinion of the Administrator to perform its
duties under the agreement.
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<PAGE>
Pursuant to this Administrative Services Agreement, Fund/Plan receives a fee
computed at the annual rate of 0.15% of the first $50 million of total average
net assets, 0.10% of the next $50 million of total average net assets and 0.05%
of total net assets in excess of $100 million. Pursuant to the Administrative
Services Agreement, aggregate administration fees shall not be less than $67,000
for both Class A Shares and Class D Shares of the Fund.
Underwriter
Fund/Plan Broker Services, Inc. ("FPBS"), 2 W. Elm Street, Conshohocken,
Pennsylvania 19428-0874, has been engaged pursuant to an agreement for the
limited purpose of acting as underwriter to facilitate the registration of
shares of the Fund under state securities laws and to assist in the sale of
shares.
Distributor
Fund/Plan Broker Services, Inc. ("FPBS") also serves as the distributor pursuant
to a Distribution Agreement (the "Distribution Agreement") which applies to
Class A and Class D shares of the Fund.
Class A Shares and Class D Shares of the Fund are subject to separate
distribution plans (the "Distribution Plans") pursuant to Rule 12b-1 under the
1940 Act. As provided in the Distribution Plan for Class A Shares, the Fund will
pay an annual fee of 0.35% of the Fund's average daily net assets attributable
to Class A Shares, to FPBS as compensation for its services. As provided in the
Distribution Plan for Class D Shares, the Fund will pay an annual fee of 0.35%
of the Fund's average daily net assets attributable to Class D Shares, to FPBS
as compensation for its services. From this amount, FPBS may make payments to
financial institutions and intermediaries such as banks, savings and loan
associations, insurance companies, investment counselors and broker-dealers as
compensation for services, reimbursement of expenses incurred in connection with
distribution assistance or provision of shareholder services. The Distribution
Plans are characterized as compensation plans because the distribution fee will
be paid to FPBS as distributor without regard to the distribution or shareholder
service expenses incurred by FPBS or the amount of payments made to financial
institutions and intermediaries. The Fund intends to operate the Distribution
Plans in accordance with their terms and within the rules of the National
Association of Securities Dealers, Inc. concerning sales charges. Pursuant to
such rules, the Distributor is required to limit aggregate initial sales charges
and asset-based sales charges to 6.25% of total gross sales of each class of
shares.
The Distribution Plans will continue in effect from year to year, provided that
each such continuance is approved at least annually by a vote of the Board of
Trustees, including a majority vote of the Rule 12b-1 trustees, cast in person
at a meeting called for the purpose of voting on such continuance. The
Distribution Plans may be terminated at any time, without penalty, by vote of a
majority of the Rule 12b-1 trustees or by vote of the holders of a majority of
the outstanding shares of the applicable class on not more than 60 days', nor
less than 30 days' written notice to any other party to the Plans. The Plans may
not be amended to increase materially the amounts to be spent for the services
described herein without approval by the shareholders of the applicable class,
and all material amendments are required to be approved by the Board of
Trustees. Each Plan will automatically terminate in the event of its assignment.
Pursuant to each Plan, the Board of Trustees will review at least quarterly a
written report of the distribution expenses incurred on behalf of each class of
shares of the Fund. The report will include an itemization of the distribution
expenses and the purpose of such expenditures.
TRUSTEES AND OFFICERS
Information pertaining to the Trustees and executive officers of the Fund is set
forth below.
James C. Tso, President and Director, 7799 Leesburg Pike, Suite 900, Falls
Church, Virginia 22043.
William L. Fang, Director, Address ________. Mr. Fang has been an Attorney with
Edison Electric Institute since 1982. Mr. Fang has a B.S. from Northwestern
University and a J.D. from the University of Virginia and he has held leadership
positions with the Organization of Chinese Americans since 1982.
[Additional Trustee information to be added]
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<PAGE>
NET ASSET VALUE
The net asset value per share is calculated separately for Class A Shares and
Class D Shares of the Fund. The net asset value per share is computed by
dividing the value of the assets of the Fund, less its liabilities, by the
number of shares of the respective class of shares outstanding.
Each class of the Fund will bear, pro-rata, all of the common expenses of the
Fund. The net asset value of all outstanding shares of each class will be
computed on a pro-rata basis for each outstanding share based on the
proportionate participation in the Fund represented by the value of shares of
the class. All income earned and expenses incurred by the Fund will be borne on
a pro-rata basis by each outstanding share of a class, based on each class'
percentage in the Fund represented by the value of such shares of such classes.
Portfolio securities are valued and net asset value per share is determined as
of the close of regular trading on the New York Stock Exchange ("NYSE") which
currently is 4:00 p.m. (Eastern Time), on each day the NYSE is open for trading.
The NYSE is open for trading every day except Saturdays, Sundays and the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
The calculation of the Fund's net asset values may not take place
contemporaneously with the determination of the prices of portfolio securities
held by the Fund. Events affecting the values of portfolio securities that occur
between the time their prices are determined and the close of the NYSE will not
be reflected in the Fund's calculation of net asset value unless the Board of
Trustees deems that the particular event would materially affect the net asset
value, in which case an adjustment will be made. Assets or liabilities initially
expressed in terms of foreign currencies are translated prior to the next
determination of the net asset value of the Fund's shares into U.S. dollars at
the prevailing market rates. The fair value of all other assets is added to the
value of securities to arrive at the total assets.
TAXES
The following is only a summary of certain federal tax considerations generally
affecting the Fund and its shareholders that are not described in the
Prospectus, and is not intended as a substitute for careful tax planning.
Shareholders are urged to consult their tax advisors with specific reference to
their own tax situations, including their state and local tax liabilities.
Non-U.S. investors should consult their tax advisors concerning the tax
consequences of ownership of shares of the Fund, including the possibility that
distributions may be subject to a 30% United States withholding tax.
Federal Income Tax
The following discussion of federal income tax consequences is based on the Code
and the regulations issued thereunder as in effect on the date of this Statement
of Additional Information. New legislation, as well as administrative changes or
court decisions, may significantly change the conclusions expressed herein, and
may have a retroactive effect with respect to the transactions contemplated
herein.
The Fund intends to qualify as a "regulated investment company" ("RIC") as
defined under Subchapter M of the Code. By following such a policy, the Fund
expects to eliminate or reduce to a nominal amount the federal income taxes to
which it may be subject. In order to qualify for treatment as a RIC under the
Code, the Fund generally must distribute annually to its shareholders at least
90% of its investment company taxable income (generally, net investment income
plus net short-term capital gain) (the "Distribution Requirement") and also must
meet several additional requirements. Among these requirements are the
following: (i) at least 90% of the Fund's gross income each taxable year must be
derived from dividends, interest, payments with respect to securities loans, and
gains from the sale or other disposition of stock or securities, or certain
other income; (ii) the Fund must derive less than 30% of its gross income each
taxable year from the sale or other disposition of stocks or securities held for
less than three months; (iii) at the close of each quarter of the Fund's taxable
year, at least 50% of the value of its total assets must be represented by cash
and cash items, U.S. Government securities, securities of other RlCs and other
securities, with such other securities limited, in respect to any one issuer, to
an amount that does not exceed 5% of the value of the Fund's assets and that
does not represent more than 10% of the outstanding voting securities of such
issuer and (iv) at the close of each quarter of the Fund's taxable year, not
more than 25% of the value of its assets may be invested in securities (other
than U.S. Government securities or the securities of other RlCs) of any one
issuer or of two or more issuers which the Fund controls and which are engaged
in the same, similar or related trades or businesses.
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<PAGE>
Notwithstanding the Distribution Requirement described above, which requires
only that the Fund distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital gain
(the excess of net long-term capital gain over net short-term capital loss), the
Fund will be subject to a nondeductible 4% federal excise tax to the extent that
it fails to distribute by the end of any calendar year 98% of its ordinary
income for that year and 98% of its capital gain net income (the excess of
short- and long-term capital gains over short- and long-term capital losses) for
the one-year period ending on October 31 of that year, plus certain other
amounts. The Fund intends to make sufficient distributions of its ordinary
income and capital gain net income prior to the end of each calendar year to
avoid liability for federal excise tax.
Any gain or loss recognized on a sale, redemption or exchange of shares of the
Fund by a non-exempt shareholder who is not a dealer in securities generally
will be treated as a long-term capital gain or loss if the shares have been held
for more than twelve months and otherwise generally will be treated as a
short-term capital gain or loss. If shares of the Fund on which a net capital
gain distribution has been received are subsequently sold, redeemed or exchanged
and such shares have been held for six months or less, any loss recognized will
be treated as a long-term capital loss to the extent of the long-term capital
gain distribution.
In certain cases, the Fund will be required to withhold, and remit to the United
States Treasury, 31% of any distributions paid to a shareholder who (1) has
failed to provide a correct taxpayer identification number, (2) is subject to
backup withholding by the Internal Revenue Service or (3) has not certified to
the Fund that such shareholder is not subject to backup withholding.
If the Fund fails to qualify as a RIC for any taxable year, it will be subject
to tax on its taxable income at regular corporate rates. In such an event, all
distributions from the Fund generally would be eligible for the corporate
dividend received deduction for corporate shareholders.
Foreign Taxes
Foreign governments may withhold taxes from dividends or interest paid with
respect to foreign securities typically at a rate between 10% and 35%. Tax
conversions between certain countries and the United States may reduce or
eliminate such taxes. The Fund intends to elect to pass-through foreign taxes
paid in order for a shareholder to take a credit or deduction if, at the close
of its fiscal year, more than 50% of the Fund's total assets are invested in
securities of foreign issuers.
PORTFOLIO TRANSACTIONS
The Fund does not have an obligation to deal with any broker/dealer or group of
broker/dealers in the execution of transactions in portfolio securities. Subject
to policies established by the Trustees, the Adviser is responsible for placing
the orders to execute transactions for the Fund. In placing orders, it is the
policy of the Fund to seek to obtain the best net results taking into account
such factors as price (including the applicable dealer spread), the size, type
and difficulty of the transaction involved, the firm's general execution and
operational facilities, and the firm's risk in positioning the securities
involved. While the Adviser generally seeks reasonably competitive spreads, the
Fund will not necessarily be paying the lowest spread available.
It is not the Fund's practice to allocate brokerage or principal business on the
basis of sales of its shares which may be made through brokers or dealers.
However, the Adviser may place portfolio orders with qualified broker/dealers
who recommend the Fund to clients, and may, when a number of brokers and dealers
can provide best net results on a particular transaction, consider such
recommendations by a broker or dealer in selecting among broker/dealers.
PERFORMANCE INFORMATION
In General
From time to time, the Fund may include general comparative information, such as
statistical data regarding inflation, securities indices or the features or
performance of alternative investments, in advertisements, sales literature and
reports to shareholders. The Fund may also include calculations, such as
hypothetical compounding examples or tax-free compounding examples, which
describe hypothetical investment results in such communications. Such
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<PAGE>
performance examples will be based on an express set of assumptions and are not
indicative of the performance of the Fund.
From time to time, the yield and total return of the Fund may be quoted in
advertisements, shareholder reports or other communications to shareholders.
Performance information will be calculated for Class A Shares and Class D Shares
of the Fund and will vary due to the effect of expense ratios on the performance
calculations.
Total Return Calculation
The Fund computes average annual total return by determining the average annual
compounded rate of return during specified periods that equate the initial
amount invested to the ending redeemable value of such investment. This is done
by dividing the ending redeemable value of a hypothetical $1,000 initial payment
by $1,000 and raising the quotient to a power equal to one divided by the number
of years (or fractional portion thereof) covered by the computation and
subtracting one from the result. This calculation can be expressed as follows:
ERV = P (1 + T)n
Where: ERV = ending redeemable value at the end of the period covered by the
computation of a hypothetical $1,000 payment made at the
beginning of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in terms of years.
T = average annual total return.
The Fund computes the aggregate total return by determining the aggregate
compounded rate of return during specified period that likewise equate the
initial amount invested to the ending redeemable value of such investment. The
formula for calculating aggregate total return is as follows:
Aggregate Total Return = [ ERV - 1 ]
---
P
Where: ERV = ending redeemable value at the end of the period covered by the
computation of a hypothetical $1,000 payment made at the
beginning of the period.
P = hypothetical initial payment of $1,000.
The calculations of average annual total return and aggregate total return
assume the reinvestment of all dividends and capital gain distributions on the
reinvestment dates during the period. The ending redeemable value (variable
"ERV" in each formula) is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations.
Since performance will fluctuate, performance data for the Fund should not be
used to compare an investment in the Fund's shares with bank deposits, savings
accounts and similar investment alternatives which often provide an agreed-upon
or guaranteed fixed yield for a stated period of time. Shareholders should
remember that performance is generally a function of the kind and quality of the
instruments held in a portfolio, portfolio maturity, operating expenses and
market conditions.
Yield Calculation
Yield, in its simplest form, is the ratio of income per share derived from the
Fund's investments to a current maximum offering price expressed in terms of a
percentage. The yield is quoted on the basis of earnings after expenses have
been deducted. The yield of the Fund is calculated by dividing the net
investment income per share
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<PAGE>
earned during a 30-day (or one month) period by the maximum offering price per
share on the last day of the period and annualizing the result. The Fund's net
investment income per share earned during the period is based on the average
daily number of shares outstanding during the period entitled to receive
dividends and includes dividends and interest earned during the period minus
expenses accrued for the period, net of reimbursements. This calculation can be
expressed as follows:
6
YIELD = 2 [ ( a - b + 1) - 1 ]
-------
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = maximum offering price per share on the last day of the
period.
For the purpose of determining net investment income earned during the period
(variable "a" in the formula), dividend income on equity securities held by the
Fund is recognized by accruing 1/360 of the stated dividend rate of the security
each day that the security is in the Fund. Except as noted below, interest
earned on any debt obligations held by the Fund is calculated by computing the
yield to maturity of each obligation held by the Fund based on the market value
of the obligation (including actual accrued interest) at the close of business
on the last business day of the month, the purchase price (plus actual accrued
interest) and dividing the result by 360 and multiplying the quotient by the
market value of the obligation (including actual accrued interest) in order to
determine the interest income on the obligation for each day of the subsequent
month that the obligation is held by the Fund. For purposes of this calculation,
it is assumed that each month contains 30 days. The date on which the obligation
reasonably may be expected to be called or, if none, the maturity date. With
respect to debt obligations purchased at a discount or premium, the formula
generally calls for amortization of the discount or premium. The amortization
schedule will be adjusted monthly to reflect changes in the market values of
such debt obligations.
Expenses accrued for the period (variable "b" in the formula) include all
recurring fees charged by the Fund to all shareholder accounts in proportion to
the length of the base period and the Fund's mean (or median) account size.
Undeclared earned income will be subtracted from the offering price per capital
share (variable "d" in the formula).
Performance and Advertisements
From time to time, in marketing and other fund literature, the Fund's
performance may be compared to the performance of other mutual funds in general
or to the performance of particular types of mutual funds with similar
investment goals, as tracked by independent organizations. Among these
organizations, Lipper Analytical Services, Inc. ("Lipper"), a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives and assets, may be cited. Lipper performance figures are
based on changes in net asset value, with all income and capital gains dividends
reinvested. Such calculations do not include the effect of any sales charges
imposed by other funds. The Fund will be compared to Lipper's appropriate fund
category, that is, by fund objective and portfolio holdings. The Fund's
performance may also be compared to the average performance of its Lipper
category.
The Fund's performance may also be compared to the performance of other mutual
funds by Morningstar, Inc. ("Morningstar") which ranks funds on the basis of
historical risk and total return. Morningstar's rankings range from five stars
(highest) to one star (lowest) and represent Morningstar's assessment of the
historical risk level and total return of a fund as a weighted average for
three, five and ten year periods. Ranks are not absolute or necessarily
predictive of future performance.
The Fund may compare its performance to a wide variety of indices including the
Japan, East Asia and Standard & Poor's 500 Indices.
40
<PAGE>
In assessing such comparisons of yield, return or volatility, an investor should
keep in mind that the composition of the investments in the reported indices and
averages is not identical to those of the Fund, that the averages are generally
unmanaged, and that the items included in the calculations of such averages may
not be identical to the formula used by the Fund to calculate its figures.
Because certain of the Fund's investments are denominated in foreign currencies,
the strength or weakness of the U.S. dollar as against these currencies may
account for part of the Fund's investment performance. Historical information
regarding the value of the dollar versus foreign currencies may be used from
time to time in advertisements concerning the Fund.
OTHER INFORMATION
Shareholder Liability
The Trust is an entity of the type commonly known as a "Delaware business
trust". Under Delaware law, shareholders of such a trust could, under certain
circumstances, be held personally liable as partners for the obligations of the
trust. Even if, however, the Fund were held to be a partnership, the possibility
of the shareholders incurring financial loss for that reason appears remote
because the Trust Instrument contains an express disclaimer of shareholder
liability for obligations of the Trust and requires that notice of such
disclaimer be given in each agreement, obligation or instrument entered into or
executed by or on behalf of the Trust or the Trustees, and because the Trust
Instrument provides for indemnification out of the Trust property for any
shareholder held personally liable for the obligations of the Trust.
Limitation of Trustees' Liability
The Trust Instrument provides that a Trustee shall be liable only for his own
willful defaults and, if reasonable care has been exercised in the selection of
officers, agents, employees or investment advisers, shall not be liable for any
neglect or wrongdoing of any such person. The Trust Instrument also provides
that the Trust will indemnify its Trustees and officers against liabilities and
expenses incurred in connection with actual or threatened litigation in which
they may be involved because of their offices with the Trust unless it is
determined in the manner provided in the Trust Instrument that they have not
acted in good faith in the reasonable belief that their actions were in the best
interests of the Trust. However, nothing in the Trust Instrument shall protect
or indemnify a Trustee against any liability for his willful misfeasance, bad
faith, gross negligence or reckless disregard of his duties.
41
<PAGE>
SAGE/TSO TRUST
FORM N-1A
PART C -- OTHER INFORMATION
Part C. Other Information
Item 24. Financial Statements and Exhibits.
----------------------------------
(a) Financial Statements.
(To be filed by amendment.)
(b) Exhibits:
Exhibits filed pursuant to Form N-1A:
(1) Trust Instrument is incorporated by reference to Exhibit
No. (1) of Registrant's Registration Statement No.
33-01973 filed March 26, 1996.
(2) By-Laws are incorporated by reference to Exhibit No. (2)
of Registrant's Registration Statement No. 33-01973
filed March 26, 1996.
(3) Voting Trust Agreement -- None
(4) All Instruments Defining the Rights of Holders -- None
(5) Investment Advisory Contracts -- (To be filed by
Amendment.)
(6) Underwriting Agreement -- (To be filed by Amendment.)
(7) Bonus, Profit Sharing, Pension or Other Similar
Contracts -- None
(8) Custodian Agreements -- (To be filed by Amendment.)
(9) (a) Transfer Agent Services Agreement -- (To be filed by
Amendment.)
(b) Administration Agreement -- (To be filed by Amendment.)
(c) Accounting Services Agreement -- (To be filed by
Amendment.)
(10)(a) Opinion and Consent of Kirkpatrick & Lockhart LLP
regarding the legality of the securities being issued --
(To be filed by Amendment.)
(11)Consent of Independent Auditors -- (To be filed by
Amendment.)
(12)Financial Statements Omitted from Item 23. -- None
(13)Agreements or Understandings Made in Consideration for
Providing the Initial Capital -- None
(14)Model Plan -- None
(15)(a) Plan of Distribution pursuant to Rule 12b-1 with
respect to Class A Shares -- (To be filed by
Amendment.)
42
<PAGE>
(b) Plan of Distribution pursuant to Rule 12b-1 with
respect to Class D Shares -- (To be filed by
Amendment.)
(16)Schedule for Computation of Performance Quotations --
None.
(17)Financial Data Schedule -- None.
(18)Multiple Class Plan pursuant to Rule 18f-3 -- (To be
filed by Amendment.)
(19)Trustees' Powers of Attorney -- (To be filed by Amendment.)
Item 25. Persons Controlled by or Under Common Control with Registrant.
---------------------------------------------------------------
None.
Item 26. Number of Holders of Securities.
--------------------------------
None.
Item 27. Indemnification.
----------------
Reference is made to Article X of the Registrant's Trust Instrument.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and
controlling persons of the Registrant by the Registrant pursuant to
the Trust's Trust Instrument, its By-Laws or otherwise, the
Registrant is aware that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy
as expressed in the Act and, therefore, is unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by trustees, officers or controlling persons of the Registrant
in connection with the successful defense of any act, suit or
proceeding) is asserted by such trustees, officers or controlling
persons in connection with shares being registered, the Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed
by the final adjudication of such issues.
Item 28. Business and Other Connections of Investment Adviser.
-----------------------------------------------------
Sage/Tso Investment Management L.P., 7799 Leesburg Pike, Falls
Church, Virginia 22043 provides investment advisory services to
individual and institutional investors, and as of December 31, 1995
had approximately $10 million in assets under management.
For information as to any other business, vocation or employment of
a substantial nature in which each Trustee or officer of the
Registrant's investment adviser has been engaged for his own account
or in the capacity of Trustee, officer, employee, partner or
trustee, reference is made to Form ADV (File #801- 40902) filed by
it under the Investment Advisers Act of 1940.
Item 29. Principal Underwriter.
----------------------
(a) Fund/Plan Broker Services, Inc. ("FPBS"), the principal
underwriter for the Registrant's securities, currently acts as
principal underwriter for the following entities:
The Brinson Funds, Inc.
Chicago Trust Funds
Fairport Funds
43
<PAGE>
First Mutual Funds
Focus Trust, Inc.
IAA Trust Mutual Funds
Matthews International Funds
McM Funds
Smith Breeden Series Fund
Smith Breeden Short Duration U.S. Government Fund
Smith Breeden Trust
The Stratton Funds, Inc.
The Japan Alpha Fund
Stratton Growth Fund, Inc.
Stratton Monthly Dividend Shares, Inc.
The Timothy Plan
(b) The table below sets forth certain information as to the
Underwriter's Directors, Officers and Control Persons:
<TABLE>
<CAPTION>
Position Position and
Name and Principal and Offices Offices with
Business Address with Underwriter Registrant
------------------ ----------------- -----------
<S> <C> <C>
Kenneth J. Kempf Director and President None
2 W. Elm Street
Conshohocken, PA 19428-0874
Lynne M. Cannon Vice President and None
2 W. Elm Street Principal
Conshohocken, PA 19428-0874
Rocco C. Cavalieri Director and None
2 W. Elm Street Vice President
Conshohocken, PA 19428-0874
Gerald J. Holland Director, None
2 W. Elm Street Vice President
Conshohocken, PA 19428-0874 and Principal
Joseph M. O'Donnell, Esq. Director and None
2 W. Elm Street Vice President
Conshohocken, PA 19428-0874
Sandra L. Adams Assistant Vice President None
2 W. Elm Street and Principal
Conshohocken, PA 19428-0874
Mary P. Efstration Secretary None
2 W. Elm Street
Conshohocken, PA 19428-0874
John H. Leven Treasurer None
2 W. Elm Street
Conshohocken, PA 19428-0874
</TABLE>
James W. Stratton may be considered a control person of the Underwriter due to
his direct or indirect ownership of Fund/Plan Services, Inc., the parent of the
Underwriter.
44
<PAGE>
(c) Not Applicable.
Item 30. Location of Accounts and Records.
---------------------------------
All records described in Section 31(a) of the 1940 Act and the Rules
17 CFR 270.31a-1 to 31a-3 promulgated thereunder, are maintained by
the Trust's Investment Adviser, Sage/Tso Investment Management L.P.,
7799 Leesburg Pike, Suite 900, Falls Church, Virginia 22043, except
for those maintained by the Fund's Custodian, The Bank of New York,
277 Park Avenue, New York, New York 10172 and the Trust's
Administrator, Transfer Agent and Fund Accounting Services Agent,
Fund/Plan Services Inc., 2 W. Elm Street, Conshohocken, PA 19428.
Item 31. Management Services.
--------------------
There are no management-related service contracts not discussed in
Part A or Part B.
Item 32. Undertakings.
-------------
(a) Registrant hereby undertakes to file an amendment to this
Registration Statement with certified financial statements
showing the initial capital received before accepting
subscriptions from any person in excess of 25 if Registrant
proposes to raise its initial capital pursuant to Section
14(a)(3) of the 1940 Act.
(b) Registrant hereby undertakes to file a post-effective
amendment within four to six months from the effective date of
this Registration Statement under the Securities Act of 1933.
Registrant understands that such post-effective amendment will
contain reasonably current financial statements which need not
be certified by independent public accountants.
(c) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
Annual Report to Shareholders upon request and without charge.
(d) The Registrant hereby undertakes to promptly call a meeting of
shareholders for the purpose of voting upon the question of
removal of any director or directors when requested in writing
to do so by the record holders of not less than 10 percent of
the Registrant's outstanding shares and to assist its
shareholders in accordance with the requirements of Section
16(c) of the Investment Company Act of 1940 relating to
shareholder communications.
45
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Falls Church, and State of Virginia on the 6 th day of May, 1996.
Sage/Tso Trust
--------------------------
Registrant
By /s/ James C. Tso
--------------------------
James C. Tso
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement of Sage/Tso Trust has been signed below by the following persons in
the capacities and on the date indicated.
Signature Capacity Date
- ---------- -------- ----
/s/ James C. Tso As Sole Trustee 5/6/96
James C. Tso
/s/ James C. Tso As President and 5/6/96
James C. Tso Principal Executive Officer
/s/ James C. Tso As Treasurer and 5/6/96
James C. Tso Principal Accounting and
Financial Officer
46
<PAGE>
