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 [ ]
Pre-Effective Amendment No. [ ]
Post Effective Amendment No. 1 [X]
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 3 [X]
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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 Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (703) 834-1888
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James C. Tso, President
Sage/Tso Investment Management L.P.
8027 Leesburg Pike
Vienna , Virginia 22182
(Name and Address of Agent for Service)
COPIES TO:
Clifford J. Alexander, Esq. Joseph M. O'Donnell, Esq.
Kirkpatrick & Lockhart LLP FPS Services, Inc.
1800 Massachusetts Avenue, N.W. 3200 Horizon Drive
Washington, DC 20036-1800 King of Prussia, Pennsylvania
19406
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
[X] ON APRIL 30, 1997, PURSUANT TO PARAGRAPH (B).
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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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As filed with the U.S. Securities and Exchange Commission on April 30, 1997
<PAGE>
TABLE OF CONTENTS
Registration Statement of Sage/Tso Trust
1. Cross-Reference Sheet
2. America Asia Allocation Growth Fund - Part A - Prospectus
3. America Asia Allocation Growth Fund - Part B - Statement of Additional
Information
4. America Asia Allocation Growth Fund - Part C - Other Information
5. Signature Page
6. Index to Exhibits
<PAGE>
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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1. Cover Page Cover Page of Prospectus
2. Synopsis Prospectus Summary; Expense Summary
3. Condensed Financial Information Financial Highlights
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 Prospectus Summary; How to Purchase
Offered 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
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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 Principal Shareholders
Holders of Securities
16. Investment Advisory and Other Investment Advisory and Other
Services Services
17. Brokerage Allocation and Other Portfolio Transactions
Practices
<PAGE>
PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
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(CONTINUED)
18. Capital Stock and Other Securities Other Information
19. Purchase, Redemption and Pricing of Purchases; Redemptions
Securities Being Offered
20. Tax Status Taxes
21. Underwriters Underwriter
22. Calculation of Performance Data Performance Information
23. Financial Statements Incorporated by reference to the
Semi-Annual Report (unaudited)
dated March 31, 1997
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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* Item is inapplicable at this time or answer is negative.
<PAGE>
SUPPLEMENT DATED APRIL 30, 1997
TO THE PROSPECTUS OF
SAGE/TSO TRUST
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The following information provides new and additional information beyond that
contained in the Prospectus and should be read in conjunction with such
Prospectus.
FINANCIAL HIGHLIGHTS
The following are unaudited "Financial Highlights" of the America Asia
Allocation Growth Fund of Sage/Tso Trust for the period ended March 31, 1997 and
are incorporated by reference into the Statement of Additional Information. The
Statement of Additional Information may be obtained without charge and is
incorporated by reference into the Prospectus.
The table below sets forth financial data for one share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
CLASS A SHARES CLASS D SHARES
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FOR THE PERIOD FOR THE PERIOD
DECEMBER 18, 1996 * THROUGH OCTOBER 2, 1996* THROUGH
MARCH 31, 1997 MARCH 31, 1997
(UNAUDITED) (UNAUDITED)
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<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD .................. $ 4.75 $ 5.00
Loss From Investment Operations
Net investment loss ................................ (0.02) (0.02)
Net gains (losses) on securities
(both realized and unrealized) ............... (0.22) (0.47)
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Total from investment operations ............. (0.24) (0.49)
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NET ASSET VALUE, END OF PERIOD ........................ $ 4.51 $ 4.51
========= ===========
TOTAL RETURN ^ ........................................ (5.05%)(1) (9.80%)(1)
RATIOS SUPPLEMENTAL DATA
Net assets, end of period (in 000s) ................ $ 240 1,427
Ratio of expenses to average net assets
Before expense reimbursement ..................... 16.09%(2) 16.09%(2)
After expense reimbursement ...................... 2.75%(2) 2.75%(2)
Ratio of net investment income to average net assets
Before expense reimbursement ..................... (14.45%)(2) (14.45%)(2)
After expense reimbursement ...................... (1.11%)(2) (1.11%)(2)
Portfolio turnover rate ............................... 52.50% 52.50%
Average commission rate paid .......................... $ 0.0478 $ 0.0478
</TABLE>
* Commencement of investment operations.
^ Total return calculation does not reflect sales load.
(1) Not Annualized.
(2) Annualized.
ADMINISTRATOR, TRANSFER AGENT, FUND ACCOUNTING AGENT AND UNDERWRITER
Effective November 1, 1996, the following information supersedes all references
to Fund/Plan Services, Inc., the Fund's administrator, transfer agent and fund
accounting agent and Fund/Plan Broker Services, Inc., the Fund's
underwriter/distributor:
1. Fund/Plan Services, Inc. changed its name to FPS Services and Fund/Plan
Broker Services changed its name to FPS Broker Services, Inc.
2. The new mailing address for FPS Services, Inc. and FPS Broker Services,
Inc. is: ...........3200 Horizon Drive King of Prussia, Pennsylvania
19406-0903
THE EFFECTIVE DATE OF THE PROSPECTUS IS NOW DEEMED TO BE APRIL 30, 1997
<PAGE>
PART A: PROSPECTUS
Sage/Tso Prospectus dated August 1, 1996 is incorporated by reference to
Pre-Effective No. 2 as filed with the U.S. Securities and Exchange Commission
via EDGAR on June 26, 1996.
<PAGE>
SAGE/TSO TRUST
AMERICA ASIA ALLOCATION GROWTH FUND
STATEMENT OF ADDITIONAL INFORMATION
AUGUST 1, 1996
AS SUPPLEMENTED APRIL 30, 1997
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This Statement of Additional Information dated August 1, 1996 as Supplemented
April 30, 1997 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 August 1, 1996 as Supplemented April
30, 1997. 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 address and telephone numbers below.
UNDERWRITER: ADVISER:
FPS Broker Services, Inc. SAGE/TSO Investment Management L.P.
3200 Horizon Drive 8027 Leesburg Pike, Suite 610
King of Prussia, Pennsylvania 19406-0903 Vienna, Virginia 22182
(888) 289-4769 (610) 239-4500 (888) AAA-5876 (703) 356-3720
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.
<PAGE>
TABLE OF CONTENTS
Page
The Trust and the Fund.........................................................
The Greater Asia Region........................................................
Investment Policies and Techniques.............................................
American Depository Receipts................................................
Convertible Securities......................................................
Foreign Securities..........................................................
Hedging and Derivatives.....................................................
Repurchase Agreements.......................................................
Loans of Portfolio Securities...............................................
Illiquid Securities.........................................................
Rule 144A Securities........................................................
Other Investments...........................................................
Investment Restrictions........................................................
Investment Advisory and Other Services
Investment Advisory Agreement...............................................
Administrator...............................................................
Underwriter.................................................................
Distributor.................................................................
Trustees and Officers..........................................................
Principal Shareholders.........................................................
Net Asset Value................................................................
Taxes..........................................................................
Federal Income Tax..........................................................
Foreign Taxes...............................................................
Portfolio Transactions.........................................................
Performance Information
In General..................................................................
Total Return Calculation....................................................
Yield Calculation...........................................................
Performance and Advertisements .............................................
Other Information..............................................................
Shareholder Liability.......................................................
Limitations on Trustees' Liability..........................................
Legal Counsel...............................................................
Independent Accountants.....................................................
Reports to Shareholders.....................................................
Financial Statements...........................................................
i
<PAGE>
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 rights and obligations of ADR
holders and the practices of market participants.
1
<PAGE>
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.
HEDGING AND DERIVATIVES
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FUTURES TRANSACTIONS
Although the Fund may engage in futures transactions for the purchase or sale
for future delivery of securities, the Fund does not have the current intention
of doing so in the foreseeable future. While futures contracts provide for the
delivery of securities, deliveries usually do not occur. Contracts are generally
terminated by entering into offsetting transactions. The Fund may engage in
futures transactions on U.S. or foreign exchanges or boards of trade. In the
U.S., futures exchanges and trading are regulated under the Commodity Exchange
Act by the Commodity Futures Trading Commission (CFTC), a U.S. government
agency.
The Fund may enter into such futures contracts to protect against the adverse
effects of fluctuations in security prices, or interest rates, without actually
buying or selling the securities underlying the contract. A stock index futures
contract obligates the seller to deliver (and the purchaser to take) an amount
of cash equal to a specific dollar amount times the difference between the value
of a specific stock index at the close of the last trading day of the contract
and the price at which the agreement was made.
With respect to options on futures contracts, when the Fund is temporarily not
fully invested, it may purchase a call option on a futures contract to hedge
against a market advance due to declining interest rates. The purchase of a call
option on a futures contract is similar in some respects to the purchase of a
call option on an individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based, or
the price of the underlying debt securities, it may or may not be less risky
than ownership of the futures contract or underlying debt securities.
2
<PAGE>
The writing of a call option on a futures contract constitutes a partial hedge
against the declining price of the security or foreign currency which is
deliverable upon exercise of the futures contract. The writing of a put option
on a futures contract constitutes a partial hedge against the increasing price
of the security or foreign currency which is deliverable upon exercise of the
futures contract.
To the extent that market prices move in an unexpected direction, the Fund may
not achieve the anticipated benefits of futures contracts or options on futures
contracts or may realize a loss. Further, with respect to options on futures
contracts, the Fund may seek to close out an option position by writing or
buying an offsetting position covering the same securities or contracts and have
the same exercise price and expiration date. The ability to establish and close
out positions on options will be subject to the maintenance of a liquid
secondary market, which cannot be assured.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS
The Fund may enter into futures contracts provided that such obligations
represent no more than 15% of the Fund's net assets. Under the Commodity
Exchange Act, the Fund may enter into futures transactions for hedging purposes
without regard to the percentage of assets committed to initial margin and for
other than hedging purposes provided that assets committed to initial margin do
not exceed 5% of the Fund's net assets. To the extent required by law, the Fund
will set aside cash and appropriate liquid assets in a segregated account to
cover its obligations related to futures contracts.
FOREIGN CURRENCY HEDGING STRATEGIES -- SPECIAL CONSIDERATIONS
Although the Fund may use options and futures on foreign currencies and forward
currency contracts to hedge against movements in the values of the foreign
currencies in which the Fund's securities are denominated, the Fund does not
currently intend to use such hedging strategies in the foreseeable future. Such
currency hedges can protect against price movements in a security the Fund owns
or intends to acquire that are attributable to changes in the value of the
currency in which it is denominated. Such hedges do not, however, protect
against price movements in the securities that are attributable to other causes.
The value of hedging instruments on foreign currencies depends on the value of
the underlying currency relative to the U.S. dollar. Because foreign currency
transactions occurring in the interbank market might involve substantially
larger amounts than those involved in the use of such hedging instruments, the
Fund could be disadvantaged by having to deal in the odd lot market (generally
consisting of transactions of less than $1 million) for the underlying foreign
currencies at prices that are less favorable than for round lots.
The Fund might seek to hedge against changes in the value of a particular
currency when no hedging instruments on that currency are available or such
hedging instruments are more expensive than certain other hedging instruments.
In such cases, the Fund may hedge against price movements in that currency by
entering into transactions using hedging instruments on other currencies, the
values of which the Adviser believes will have a high degree of positive
correlation to the value of the currency being hedged. The risk that movements
in the price of the hedging instrument will not correlate perfectly with
movements in the price of the currency being hedged is magnified when this
strategy is used.
Settlement of hedging transactions involving foreign currencies might be
required to take place within the country issuing the underlying currency. Thus,
the Fund might be required to accept or make delivery of the underlying foreign
currency in accordance with any U.S. or foreign regulations regarding the
maintenance of foreign banking arrangements by U.S. residents and might be
required to pay any fees, taxes and charges associated with such delivery
assessed in the issuing country.
FORWARD CURRENCY CONTRACTS
A forward currency contract involves an obligation to purchase or sell a
specific currency at a specified future date, which may be any fixed number of
days from the contract date agreed upon by the parties, at a price set at the
time the contract is entered into.
The Fund may enter into forward currency contracts to purchase or sell foreign
currencies for a fixed amount of U.S. dollars or another foreign currency. The
Fund also may use forward currency contracts for "cross-hedging." Under this
strategy, the Fund would increase its exposure to foreign currencies that the
Adviser believes might rise in value relative to the U.S. dollar, or the Fund
would shift its exposure to foreign currency fluctuations from one country to
another.
3
<PAGE>
As is the case with futures contracts, holders and writers of forward currency
contracts can enter into offsetting closing transactions, similar to closing
transactions on futures, by selling or purchasing, respectively, an instrument
identical to the instrument held or written. Secondary markets generally do not
exist for forward currency contracts, with the result that closing transactions
generally can be made for forward currency contracts only by negotiating
directly with the contra party. Thus, there can be no assurance that the Fund
will in fact be able to close out a forward currency contract at a favorable
price prior to maturity. In addition, in the event of insolvency of the contra
party, the Fund might be unable to close out a forward currency contract at any
time prior to maturity. In either event, the Fund would continue to be subject
to market risk with respect to the position, and would continue to be required
to maintain a position in securities denominated in the foreign currency or to
maintain cash or securities in a segregated account.
The precise matching of forward currency contracts amounts and the value of the
securities involved generally will not be possible because the value of such
securities, measured in the foreign currency, will change after the foreign
currency contract has been established. Thus, the Fund might need to purchase or
sell foreign currencies in the spot (cash) market to the extent such foreign
currencies are not covered by forward contracts. The projection of short-term
currency market movements is extremely difficult, and the successful execution
of a short-term hedging strategy is highly uncertain.
LIMITATIONS ON THE USE OF FORWARD CURRENCY CONTRACTS
The Fund may enter into forward currency contracts or maintain a net exposure to
such contracts only if (1) the consummation of the contracts would not obligate
the Fund to deliver an amount of foreign currency in excess of the value of its
portfolio securities or other assets denominated in that currency, or (2) the
Fund maintains cash, U.S. government securities or liquid, high-grade debt
securities in a segregated account in an amount not less than the value of its
total assets committed to the consummation of the contract and not covered as
provided in (1) above, as marked to market daily.
OPTIONS
The Fund may buy put and call options and write covered call and secured put
options but has no current intention of actively engaging in such transactions.
Such options may relate to particular securities, stock indices, or financial
instruments and may or may not be listed on a national securities exchange and
issued by the Options Clearing Corporation. Options trading is a highly
specialized activity which entails greater than ordinary investment risk.
Options on particular securities may be more volatile than the underlying
securities, and therefore, on a percentage basis, an investment in options may
be subject to greater fluctuation than an investment in the underlying
securities themselves.
The Fund will write call options only if they are "covered." In the case of a
call option on a security, the option is "covered" if the Fund owns the security
underlying the call or has an absolute and immediate right to acquire that
security without additional cash consideration (or, if additional cash
consideration is required, liquid assets, such as cash, U.S. Government
securities or other liquid high grade debt obligations, in such amount held in a
segregated account by its custodian) upon conversion or exchange of other
securities held by it. For a call option on an index, the option is covered if
the Fund maintains with its custodian a diversified stock portfolio, or liquid
assets equal to the contract value. A call option is also covered if the Fund
holds a call on the same security or index as the call written where the
exercise price of the call held is (i) equal to or less than the exercise price
of the call written; or (ii) greater than the exercise price of the call written
provided the difference is maintained by the Fund in liquid assets such as cash,
U.S. Government securities and other high-grade debt obligations in a segregated
account with its custodian. The Fund will write put options only if is "secured"
by liquid assets maintained in a segregated account by the Fund's custodian in
an amount not less than the exercise price of the option at all times during the
option period.
PURCHASING CALL OPTIONS
The Fund may purchase call options to the extent that premiums paid by the Fund
do not aggregate more than 10% of the Fund's total assets. When the Fund
purchases a call option, in return for a premium paid by the Fund to the writer
of the option, the Fund obtains the right to buy the security underlying the
option at a specified exercise price at any time during the term of the option.
The writer of the call option, who receives the premium upon writing the option,
has the obligation, upon exercise of the option, to deliver the underlying
security against payment of the exercise price. The advantage of purchasing call
options is that the Fund may alter portfolio characteristics and modify
portfolio maturities
4
<PAGE>
without incurring the cost associated with transactions.
The Fund may, following the purchase of a call option, liquidate its position by
effecting a closing sale transaction. This is accomplished by selling an option
of the same series as the option previously purchased. The Fund will realize a
profit from a closing sale transaction if the price received on the transaction
is more than the premium paid to purchase the original call option; the Fund
will realize a loss from a closing sale transaction if the price received on the
transaction is less than the premium paid to purchase the original call option.
Although the Fund will generally purchase only those call options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an Exchange will exist for any particular option, or
at any particular time, and for some options no secondary market on an Exchange
may exist. In such event, it may not be possible to effect closing transactions
in particular options, with the result that the Fund would have to exercise its
options in order to realize any profit and would incur brokerage commissions
upon the exercise of such options and upon the subsequent disposition of the
underlying securities acquired through the exercise of such options. Further,
unless the price of the underlying security changes sufficiently, a call option
purchased by the Fund may expire without any value to the Fund, in which event
the Fund would realize a capital loss which will be short-term unless the option
was held for more than one year.
COVERED CALL WRITING
Although the Fund may write covered call options from time to time on such
portions of its portfolio, the Fund does not have the current intention of doing
so in the foreseeable future. The Fund may write covered call options, without
limit, as the Adviser determines is appropriate in pursuing the Fund's
investment objective. The advantage to the Fund of writing covered calls is that
the Fund receives a premium which is additional income. However, if the security
rises in value, the Fund may not fully participate in the market appreciation.
The Fund's obligation under a covered call option is terminated upon the
expiration of the option or upon entering a closing purchase transaction. In a
closing purchase transaction, the Fund, as writer of an option, terminates its
obligation by purchasing an option of the same series as the option previously
written.
Closing purchase transactions will ordinarily be effected to realize a profit on
an outstanding call option, to prevent an underlying security from being called,
to permit the sale of the underlying security or to enable the Fund to write
another call option on the underlying security with either a different exercise
price or expiration date or both. The Fund may realize a net gain or loss from a
closing purchase transaction depending upon whether the net amount of the
original premium received on the call option is more or less than the cost of
effecting the closing purchase transaction. Any loss incurred in a closing
purchase transaction may be partially or entirely offset by the premium received
from a sale of a different call option on the same underlying security. Such a
loss may also be wholly or partially offset by unrealized appreciation in the
market value of the underlying security. Conversely, a gain resulting from a
closing purchase transaction could be offset in whole or in part by a decline in
the market value of the underlying security.
During the option period, a covered call option writer may be assigned an
exercise notice by the broker-dealer through whom such call option was sold,
requiring the writer to deliver the underlying security against payment of the
exercise price. A closing purchase transaction cannot be effected with respect
to an option once the option writer has received an exercise notice for such
option.
The Fund will write call options only on a covered basis, which means that the
Fund will own the underlying security subject to a call option at all times
during the option period. Unless a closing purchase transaction is effected, the
Fund would be required to continue to hold a security which it might otherwise
wish to sell or deliver a security it would want to hold. The exercise price of
a call option may be below, equal to or above the current market value of the
underlying security at the time the option is written.
PURCHASING PUT OPTIONS
Although the Fund may invest up to 10% of its total assets in the purchase of
put options, the Fund does not have the current intention of doing so in the
foreseeable future. The Fund will, at all times during which it holds a put
option, own the security covered by such option. With regard to the writing of
put options, the Fund will limit the aggregate value of the obligations
underlying such put options to 50% of its total net assets. The purchase of the
put on
5
<PAGE>
substantially identical securities held will constitute a short sale for tax
purposes, the effect of which is to create short-term capital gain on the sale
of the security and to suspend running of its holding period (and treat it as
commencing on the date of the closing of the short sale) or that of a security
acquired to cover the same if at the time the put was acquired, the security had
not been held for more than one year.
A put option purchased by the Fund gives it the right to sell one of its
securities for an agreed price up to an agreed date. The Fund intends to
purchase put options in order to protect against a decline in the market value
of the underlying security below the exercise price less the premium paid for
the option ("protective puts"). The Fund may sell a put option which it has
previously purchased prior to the sale of the securities underlying such option.
Such sale will result in a net gain or loss depending on whether the amount
received on the sale is more or less than the premium and other transaction
costs paid on the put option which is sold. The Fund may sell a put option
purchased on individual portfolio securities. Additionally, the Fund may enter
into closing sale transactions. A closing sale transaction is one in which the
Fund, when it is the holder of an outstanding option, liquidate its position by
selling an option of the same series as the option previously purchased.
WRITING PUT OPTIONS
Although the Fund may also write put options on a secured basis, the Fund does
not have the current intention of doing so in the foreseeable future. Writing
put options on a secured basis means that the Fund will maintain in a segregated
account with its custodian, cash or U.S. Government securities in an amount not
less than the exercise price of the option at all times during the option
period. The amount of cash or U.S. Government securities held in the segregated
account will be adjusted on a daily basis to reflect changes in the market value
of the securities covered by the put option written by the Fund. Secured put
options will generally be written in circumstances where the Adviser wishes to
purchase the underlying security for the Fund's portfolio at a price lower than
the current market price of the security.
FOREIGN CURRENCY TRANSACTIONS
Although the Fund values its assets daily in U.S. dollars, it is not required to
convert its holdings of foreign currencies to U.S. dollars on a daily basis. The
Fund's foreign currencies generally will be held as "foreign currency call
accounts" at foreign branches of foreign or domestic banks. These accounts bear
interest at negotiated rates and are payable upon relatively short demand
periods. If a bank became insolvent, the Fund could suffer a loss of some or all
of the amounts deposited. The Fund may convert foreign currency to U.S. dollars
from time to time. Although foreign exchange dealers generally do not charge a
stated commission or fee for conversion, the prices posted generally include a
"spread", which is the difference between the prices at which the dealers are
buying and selling foreign currencies.
REPURCHASE AGREEMENTS
The repurchase price under the repurchase agreements described in the Prospectus
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
6
<PAGE>
continuously by collateral marked-to-market daily, and maintained in an amount
at least equal to the current market 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
7
<PAGE>
U.S. government, its agencies or instrumentalities;
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.
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 or swap
transactions.
(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 or swap
transactions.
(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
8
<PAGE>
York or American Stock Exchanges, except warrants acquired as a
result of its holdings of common stocks.
(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
FPS Services, Inc. (FPS), 3200 Horizon Drive, King of Prussia, Pennsylvania
19406-0903 (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
9
<PAGE>
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.
Pursuant to this Administrative Services Agreement, FPS 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
FPS Broker Services, Inc. ("FPSB"), 3200 Horizon Drive, King of Prussia,
Pennsylvania 19406-0903, 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
FPS Broker Services, Inc. ("FPSB") 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 FPSB 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 FPSB
as compensation for its services. From this amount, FPSB 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 FPSB as distributor without regard to the distribution or shareholder
service expenses incurred by FPSB 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.
10
<PAGE>
TRUSTEES AND OFFICERS
Information pertaining to the Trustees and executive officers of the Fund is set
forth below.
<TABLE>
<CAPTION>
NAME AND ADDRESS Age POSITION PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
- ---------------- --- -------- -------------------------------------------
<S> <C> <C> <C>
James C. Tso * 49 Chairman and Private investor; President and registered investment
7799 Leesburg Pike, President advisor of Strategic Investment Advisors since 1992;
Suite 900 President of Capital Finance Group (1989-1992); Member of
Falls Church, VA 22043 the Virginia State Bar Association since 1984; and
Independent Consultant to Capital area firms on strategic
planning and implementation focusing on mergers, venture
capital and corporate finance since 1981.
William L. Fang 45 Trustee Deputy General Counsel of the Edison Electric Institute
6838 Camus Place ("EEI") since 1996; Various other employment positions
Springfield, VA 22152 with EEI since 1982.
Dr. Stuart S. Malawer 51 Trustee Distinguished Professor of Law & International Trade and
6533 Sunny Hill Court Director of the Center for International Trade Policy at
McLean, VA 22101 George Mason University (GMU); Founder and Director of
International Transactions Graduate Program at GMU
(1990-1995); Limited Partner to various real estate
partnerships in Maryland and New York since 1992;
Shareholder and President for Virginia Institutional
Investors, Ltd. since 1988; General Partner of Malawer
and Associates of Virginia, real estate investment, since
1980; General Partner of SMR, Co. since 1980; and General
Partner of Malawer & Associates, law firm since 1980.
Dr. John N. Paden 59 Trustee Developer of a Center for Asia Pacific Economic
9009 Ellenwood Lane Cooperation at George Mason University (GMU); Clarence J.
Fairfax, VA 22030 Robinson Professor of International Studies at GMU since
19XX; Executive committee member of a U.S.-China
scholarly exchange program since 1984.
Patricia A. Shelton 45 Trustee President of PRAMM Consulting Group, Inc., a research,
11790 Great Owl Circle management consulting and marketing firm, since 1993;
Reston, VA 22094
</TABLE>
<TABLE>
<CAPTION>
COMPENSATION TABLE
TRUSTEES AND OFFICERS
ESTIMATED AGGREGATE COMPENSATION ESTIMATED TOTAL COMPENSATION FROM
FROM TRUST FOR TRUST AND FUND COMPLEX
NAME OF TRUSTEE FISCAL YEAR ENDED MAY 31, 1997 PAID TO TRUSTEES1
- --------------- ------------------------------ -----------------
<S> <C> <C>
James C. Tso * $0 $0
William L. Fang $0 $0
Dr. Stuart S. Malawer $0 $0
Dr. John N. Paden $2,000 $2,000
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
ESTIMATED AGGREGATE COMPENSATION ESTIMATED TOTAL COMPENSATION FROM
FROM TRUST FOR TRUST AND FUND COMPLEX
NAME OF TRUSTEE FISCAL YEAR ENDED MAY 31, 1997 PAID TO TRUSTEES1
- --------------- ------------------------------ -----------------
<S> <C> <C>
Patricia A. Shelton $2,000 $2,000
</TABLE>
* This Trustee is considered an "Interested Person" of the Trust as defined
under the 1940 Act.
1 This amount represents the estimated aggregate amount of compensation
paid to the Trustees for service on the Board of Trustees for the
calendar year ending December 31, 1997.
No officer or Trustee of the Trust who is also an officer or employee of the
Adviser receives any compensation from the Trust for services to the Trust. The
Trust pays each Trustee who is not affiliated with the Adviser a fee of $2,000
per year and reimburses each Trustee and officer for out-of-pocket expenses in
connection with travel and attendance at Board meetings.
PRINCIPAL SHAREHOLDERS
As of April 2, 1997, the officers and Trustees of the Fund, together as a group,
owned beneficially 60,423 shares (15%) of the Fund. As of April 2, 1997, the
following persons owned of record or beneficially more than 5% of the
outstanding voting shares of the Fund:
CLASS A
NAME & ADDRESS PERCENTAGE OF CLASS PERCENTAGE OF FUND
Retirement Accounts & Co. 46.51% 6.66%
Denver, CO
Florence R. MacDonald 11.83% N/A
Hagerstown, MD
Margaret A. Cavanaugh 7.08% N/A
Arlington, VA
Robert J. Bues 5.56% N/A
Arlington, VA
CLASS D
NAME & ADDRESS PERCENTAGE OF CLASS PERCENTAGE OF FUND
Semper Trust c/o Jim C. Tso 11.55% 9.89%
Reston, VA
Stemple Family Ltd. Partnership 8.88% 7.60%
White Stone, VA
James & Yvonne Tso 6.00% 5.14%
Reston, VA
Semper Trust c/o Harry L. Stemple 5.92% 5.07%
White Stone, VA
12
<PAGE>
CLASS D (CONTINUED)
NAME & ADDRESS PERCENTAGE OF CLASS PERCENTAGE OF FUND
Yvonne Tso 5.92% 5.07%
Reston, VA
==========
Semper Trust c/o George E. Fulcher 5.12% N/A
Annandale, VA
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 net assets attributable to a class of shares by the total number of
outstanding shares for that class.
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
13
<PAGE>
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. 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
14
<PAGE>
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
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
15
<PAGE>
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 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
16
<PAGE>
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.
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.
LEGAL COUNSEL
The law firm of Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue, N.W.,
Washington, D.C. 20036-5891, counsel to the Fund, has passed upon the legality
of the shares offered by the Prospectus.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 30 South Seventeenth Street, Philadelphia, PA 19103,
serves as independent accountants for the Trust.
17
<PAGE>
REPORTS TO SHAREHOLDERS
Shareholders will receive unaudited semi-annual reports describing the Fund's
investment operations and annual financial statements audited by independent
certified public accountants. Inquiries regarding the Fund may be directed to
the Adviser at (888) AAA-JTSO.
FINANCIAL STATEMENTS
The Fund's unaudited semi-annual financial statements, including the notes
thereto, dated as of March 31, 1997, are incorporated by reference from the
Fund's March 31, 1997 Semi-Annual Report to shareholders.
18
<PAGE>
SAG/TSO TRUST
AMERICA ASIA ALLOCATION
GROWTH FUND
Statement of Assets and Liabilities
June 20, 1996
<PAGE>
Report of Independent Accountants
To the Shareholder and Board of Trustees
Sage/Tso Trust
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of America Asia
Allocation Growth Fund (constituting Sage/Tso Trust, hereafter referred to as
the "Trust") at June 20, 1996 in conformity with generally accepted accounting
principles. This financial statement is the responsibility of the Trust's
management; our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit of this financial statement
in accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statement is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statement, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
Thirty South Seventeenth Street
Philadelphia, PA
June 25, 1996
<PAGE>
SAGE/TSO TRUST
AMERICA ASIA ALLOCATION
GROWTH FUND
Statement of Assets and Liabilities
June 20, 1996
- --------------------------------------------------------------------------------
Assets
Cash $100,000
Deferred ogranization costs 68,000
Deferred offering costs 17,000
--------
185,000
Liabilities
Due to adviser 85,000
Net assets $100,000
========
Net assets consist of:
Portfolio shares of Class D (unlimited
authorization - no par value) 20,000 outstanding
shares of beneficial interest
Net asset value, offering and redemption price, Class D $ 5.00
=========
The accompanying notes are an integral part of these financial statements.
<PAGE>
SAGE/TSO TRUST
AMERICA ASIA ALLOCATION
GROWTH FUND
Statement of Assets and Liabilities
June 20, 1996
- --------------------------------------------------------------------------------
1. Organization
The Trust is organized as a Delaware Business Trust under a Declaration of
Trust dated February 9, 1996. The Trust is registered under the Investment
Company Act of 1940, as an open-end investment company with one fund,
America Asia Allocation Growth Fund (the "Fund"). The Declaration of Trust
permits the Trust to offer separate classes of shares in each fund, Class A
Shares and Class D Shares. The Fund has not commenced operations except
those related to organizational materials and the sale of initial shares of
beneficial interest to Sage/Tso Investment Management L.P.
2. Investment Advisory, Management, Distribution and Shareholder Servicing
Agreements
The trust has entered into the following service agreements:
Under the Investment Advisory Agreement with the Trust, Sage/Tso Investment
Management L.P. ("Adviser") will act as the investment adviser to the Fund.
For its investment advisory services to the Trust, the Adviser will be
entitled to a fee, which is calculated daily and paid monthly, at an annual
rate of 2.00% of the Fund's average daily net assets.
Under the Administration Agreement with the Trust, Fund/Plan Services, Inc.
("Fund/Plan") will provide the Trust with overall management services. The
Trust agrees to pay Fund/Plan each month an asset based fee calculated at
the annual rate of .15% on the first $50 million of average net assets of
the Trust; .10% on the next $50 million and .05% for those assets greater
than $100 million, subject to a minimum annual fee of $55,000 for the
initial class of shares and $12,000 for each additional class.
Fund/Plan Broker Services, Inc. ("FPBS") will serve as the Fund's
underwriter/distributor pursuant to Underwriting Agreement (the
"Underwriting Agreement") with the Trust. The Trustees of the Trust have
adopted a separate Distribution Plan for both the Trust's Class A and Class
D shares pursuant to RUle 12b-1 under the 1940 Act. As provided in each
plan, each class of shares will pay an annual fee up to .35% of the
respective classes average daily net assets as compensation to FPBS. The
Fund intends to operate the Distribution Plans in accordance with its terms
and within NASD rules concerning sales charges. In addition, purchases of
Class A shares are subject to a maximum sales charge of 5.00%.
Fund/Plan has also been engaged as the transfer agent and fund accounting
service provider for the Trust under the "Transfer Agent Services
Agreement" and "Accounting Services Agreement", respectively.
<PAGE>
SAGE/TSO TRUST
AMERICA ASIA ALLOCATION
GROWTH FUND
Notes to Financial Statements
June 20, 1996
- --------------------------------------------------------------------------------
3. Organizational Costs, Offering Costs and Transactions with Affiliates
Organizational costs have been capitalized by the Fund and are being
amortized over 60 months commencing with operations. In the event any of
the initial shares are redeemed by any holder thereof during the period
that the Fund is amortizing its organizational costs, the redemption
proceeds payable to the holder thereof by the Fund will be reduced by the
unamortized organizational costs in the same ratio as the number of initial
shares being redeemed bears to the number of initial shares outstanding at
the time of the redemption.
Offering costs have been capitalized by the Fund and will be amortized over
twelve months commencing with operations.
Certain officers and/or trustees of the Trust are also officers of the
Adviser. The Trust pays each unaffiliated Trustee an annual fee for
attendance of quarterly, interim and committee meetings. Compensation of
officers and affiliated Trustees of the Trust is paid by the Adviser.
<PAGE>
SAGE/TSO TRUST
FORM N-1A
PART C -- OTHER INFORMATION
<TABLE>
<CAPTION>
Item 24. Financial Statements and Exhibits.
----------------------------------
(a) Financial Statements.
<S> <C> <C>
Included in Part A: Unaudited Financial Highlights dated March 31, 1997.
Included in Part B: (1) Independent Auditors Report relating to Statement of Assets and
Liabilities at June 20,
1996.
(2) Statement of Assets and Liabilities and related notes as of June
20, 1996.
</TABLE>
(b) Exhibits:
Exhibits filed pursuant to Form N-1A:
(1) Trust Instrument is incorporated by reference to
Registrant's Registration Statement as filed with the
Commission on March 26, 1996 ("Registration Statement").
(2) By-Laws are incorporated by reference to Registrant's
Registration Statement.
(3) Voting Trust Agreement -- None
(4) All Instruments Defining the Rights of Holders -- None
(5) Investment Advisory Contracts -- Investment Advisory
Agreement between Sage/Tso Trust and Sage/Tso Investment
Management L.P. is incorporated by reference to
Registrant's Registration Statement as filed with the
Commission on June 26, 1996.
(6) Underwriting Agreement -- Underwriting Agreement between
Sage/Tso Trust and Fund/Plan Broker Services, Inc. is
incorporated by reference to Registrant's Registration
Statement as filed with the Commission on June 26, 1996.
(7) Bonus, Profit Sharing, Pension or Other Similar Contracts
-- None
(8) Custodian Agreements --
(a) Custody Agreement between The Bank of New York and
Sage/Tso Trust is incorporated by reference to
Registrant's Registration Statement as filed with
the Commission on June 26, 1996.
(b) Custody Administration Agreement between Sage/Tso
Trust and FPS Services, Inc. is incorporated by
reference to Registrant's Registration Statement as
filed with the Commission on June 26, 1996.
(9) (a) Transfer Agent Services Agreement -- Transfer Agent
Services Agreement between Sage/Tso Trust and FPS
Services, Inc. is incorporated by reference to
Registrant's Registration Statement as filed with
the Commission on June 26, 1996.
<PAGE>
(b) Administration Agreement -- Administration Agreement
between Sage/Tso Trust and FPS Services, Inc. is
incorporated by reference to Registrant's
Registration Statement as filed with the Commission
on June 26, 1996.
(c) Accounting Services Agreement -- Accounting Services
Agreement between Sage/Tso Trust and FPS Services,
Inc. is incorporated by reference to Registrant's
Registration Statement as filed with the Commission
on June 26, 1996.
(10) (a) Opinion and Consent of Kirkpatrick & Lockhart LLP
regarding the legality of the securities being
issued -- incorporated by reference to Registrant's
Registration Statement as filed with the Commission
on June 26, 1996.
(11) Consent of Independent Auditors -- Filed herewith
electronically.
(12) Financial Statements Omitted from Item 23. -- None
(13) Agreements or Understandings Made in Consideration
for Providing the Initial Capital -- incorporated by
reference to Registrant's Registration Statement as
filed with the Commission on June 26, 1996.
(14) Model Plan -- None
(15) (a) Plan of Distribution pursuant to Rule 12b-1 with
respect to Class A Shares -- incorporated by
reference to Registrant's Registration Statement as
filed with the Commission on June 26, 1996.
(b) Plan of Distribution pursuant to Rule 12b-1 with
respect to Class D Shares -- incorporated by
reference to Registrant's Registration Statement as
filed with the Commission on June 26, 1996.
(16) Schedule for Computation of Performance Quotations
-- None.
(17) Financial Data Schedule -- Filed herewith
electronically.
(18) Multiple Class Plan pursuant to Rule 18f-3 --
incorporated by reference to Registrant's
Registration Statement as filed with the Commission
on June 26, 1996.
(19) Trustees' Powers of Attorney -- incorporated by
reference to Registrant's Registration Statement as
filed with the Commission on June 26, 1996.
Item 25. Persons Controlled by or Under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities as of April 2, 1997.
Class A 19
Class D 104
Total 123
<PAGE>
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 ByLaws 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., 8027 Leesburg Pike, Suite 610,
Vienna, VA 22182 provides investment advisory services to individual
and institutional investors, and as of March 31, 1997 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) FPS Broker Services, Inc. ("FPSB"), the principal underwriter
for the Registrant's securities, currently acts as principal
underwriter for the following entities:
Bjurman Funds
CT&T Funds
Farrell Alpha Strategies
Focus Trust, Inc.
The Homestate PA Growth Fund
IAA Trust Mutual Funds
Matthews International Funds
McM Funds
Polynous Trust
Sage\Tso Trust
Smith Breeden Series Fund
Smith Breeden Short Duration U.S. Government Fund
Smith Breeden Trust
The Stratton Funds, Inc.
Stratton Growth Fund, Inc.
Stratton Monthly Dividend Shares, Inc.
The Timothy Plan
Trainer, Wortham First Mutual Funds
<PAGE>
(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 None
3200 Horizon Drive President
King of Prussia, PA 19406-0903
Lynne M. Cannon Senior Vice President None
3200 Horizon Drive Director and Principal
King of Prussia, PA 19406-0903
Rocco C. Cavalieri Director and None
3200 Horizon Drive Vice President
King of Prussia, PA 19406-0903
Gerald J. Holland Director and None
3200 Horizon Drive Senior Vice President
King of Prussia, PA 19406-0903
Joseph M. O'Donnell, Esq. Director and None
3200 Horizon Drive Vice President
King of Prussia, PA 19406-0903
Sandra L. Adams Assistant Vice President None
3200 Horizon Drive and Principal
King of Prussia, PA 19406-0903
Mary P. Efstration Secretary None
3200 Horizon Drive
King of Prussia, PA 19406-0903
John H. Leven Treasurer None
3200 Horizon Drive
King of Prussia, PA 19406-0903
<PAGE>
Bruno DiStefano Principal None
3200 Horizon Drive
King of Prussia, PA 19406-0903
</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.
(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.,
8027 Leesburg Pike, Suite 610, Vienna,Virginia 22182, 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, FPS Services
Inc., 3200 Horizon Drive, King of Prussia, PA 19406-0903.
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 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.
(b) 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.
<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 26th day of April, 1997.
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 President, Trustee and 4/26/97
- --------------------------- Principal Executive Officer
James C. Tso
/s/ William L. Fang Trustee, Secretary, Treasurer 4/26/97
- --------------------------- and Principal Financial Officer
William L. Fang
/s/ Stuart S. Malawer Trustee 4/26/97
- ---------------------------
Stuart S. Malawer
/s/ John N. Paden Trustee 4/26/97
- ---------------------------
John N. Paden
/s/ Patricia A. Shelton Trustee 4/26/97
- ---------------------------
Patricia A. Shelton
/s/ Joseph M. O'Donnell 4/26/97
- ---------------------------
By Joseph M. O'Donnell, as
Attorney-in-Fact and Agent
pursuant to Power of Attorney
<PAGE>
SAGE/TSO TRUST
INDEX TO EXHIBITS TO FORM N-1A
Exhibit
Number
99(11)(a) Consent of Independent Auditors
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> AMERICA ASIA ALLOCATION GROWTH FUND - CLASS A
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-02-1996
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 1954206
<INVESTMENTS-AT-VALUE> 1716449
<RECEIVABLES> 594
<ASSETS-OTHER> 18885
<OTHER-ITEMS-ASSETS> 58556
<TOTAL-ASSETS> 1794484
<PAYABLE-FOR-SECURITIES> 59337
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 68446
<TOTAL-LIABILITIES> 127783
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1861454
<SHARES-COMMON-STOCK> 53230
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (7174)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 50178
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (237757)
<NET-ASSETS> 1666701
<DIVIDEND-INCOME> 5437
<INTEREST-INCOME> 5313
<OTHER-INCOME> 0
<EXPENSES-NET> 17924
<NET-INVESTMENT-INCOME> (7174)
<REALIZED-GAINS-CURRENT> 50178
<APPREC-INCREASE-CURRENT> (237757)
<NET-CHANGE-FROM-OPS> (194753)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 53230
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1566701
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 13036
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 104989
<AVERAGE-NET-ASSETS> 103740
<PER-SHARE-NAV-BEGIN> 4.75
<PER-SHARE-NII> (.02)
<PER-SHARE-GAIN-APPREC> (.22)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 4.51
<EXPENSE-RATIO> 2.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> AMERICA ASIA ALLOCATION GROWTH FUND - CLASS D
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-02-1996
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 1954206
<INVESTMENTS-AT-VALUE> 1716449
<RECEIVABLES> 594
<ASSETS-OTHER> 18885
<OTHER-ITEMS-ASSETS> 58556
<TOTAL-ASSETS> 1794484
<PAYABLE-FOR-SECURITIES> 59337
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 68446
<TOTAL-LIABILITIES> 127783
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1861454
<SHARES-COMMON-STOCK> 316011
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (7174)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 50178
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (237757)
<NET-ASSETS> 1666701
<DIVIDEND-INCOME> 5437
<INTEREST-INCOME> 5313
<OTHER-INCOME> 0
<EXPENSES-NET> 17924
<NET-INVESTMENT-INCOME> (7174)
<REALIZED-GAINS-CURRENT> 50178
<APPREC-INCREASE-CURRENT> (237757)
<NET-CHANGE-FROM-OPS> (194753)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 308754
<NUMBER-OF-SHARES-REDEEMED> 12743
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1566701
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 13036
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 104989
<AVERAGE-NET-ASSETS> 1263586
<PER-SHARE-NAV-BEGIN> 5.00
<PER-SHARE-NII> (.02)
<PER-SHARE-GAIN-APPREC> (.47)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 4.51
<EXPENSE-RATIO> 2.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
Exhibit 99(11)
--------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this post-effective amendment No. 1 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated June
25, 1996, relating to the statement of assets and liabilities of America Asia
Allocation Growth Fund (constituting Sage/Tso Trust), which appears in such
Statement of Additional Information, and to the incorporation by reference of
our report into the Prospectus which constitutes part of this Registration
Statement. We also consent to the reference to us under the heading "Independent
Accountants" in such Statement of Additional Information
PRICE WATERHOUSE LLP
Philadelphia, PA
April 22, 1997
