O'SHAUGHNESSY CORNERSTONE GROWTH FUND
O'SHAUGHNESSY CORNERSTONE VALUE FUND
60 Arch Street, Greenwich, Connecticut 06830
(800) 797-0773
The Funds
O'Shaughnessy Cornerstone Growth Fund ("Cornerstone Growth Fund")
and O'Shaughnessy Cornerstone Value Fund ("Cornerstone Value
Fund") (each a "Fund," and together, the "Funds") are separate
investment portfolios or series of O'Shaughnessy Funds, Inc., an
open-end, diversified management investment company or mutual
fund.
Investment Objective
The investment objective of the Cornerstone Growth Fund is to seek
long-term growth of capital. The investment objective of the
Cornerstone Value Fund is to seek total return, consisting of
capital appreciation and current income.
Strategy Indexing(TM)
Each Fund seeks to achieve its investment objective through a
process of Strategy Indexing(TM) which is pursued through the
implementation of an investment strategy developed by
O'Shaughnessy Capital Management, Inc., the Funds' investment
manager (the "Manager"). The Funds will invest substantially all
of their assets in common stocks selected through such strategies.
The investment strategy of Cornerstone Growth Fund (the
"Cornerstone Growth Strategy") entails the selection of 50 common
stocks from the O'Shaughnessy All Stocks Universe(TM) which meet
certain criteria, as described below.
The investment strategy of Cornerstone Value Fund (the
"Cornerstone Value Strategy") entails the selection of 50 common
stocks from the O'Shaughnessy Market Leaders Universe(TM) which
meet certain criteria, as described below. (The Cornerstone Growth
Strategy and the Cornerstone Value Strategy are each referred to
as a "Strategy.")
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PROSPECTUS
October 11, 1996
(Supplemented November 20, 1996)
This Prospectus contains the information you should know about the
Funds before you invest. Please keep it for future reference. A
statement containing additional information about the Funds, dated
October 11, 1996, has been filed with the Securities and Exchange
Commission and is incorporated by reference into this Prospectus.
It is available, at no charge, by calling or by writing the Funds
at the telephone number or address set forth above.
O'Shaughnessy Capital Management, Inc.-Manager
First Fund Distributors, Inc.-Distributor
<PAGE>
2
Risk/Reward
Each Fund's Strategy provides a rigorous and disciplined approach
to investing, based on a buy and hold philosophy over the course
of each year, and has, in the Manager's judgment, the potential to
provide superior returns. However, each Fund intends to adhere to
its respective Strategy (subject to applicable federal tax
requirements relating to mutual funds) regardless of the
performance of the stock market or other economic factors or
indicators in a particular period, which may result in losses to
the Fund.
Purchase of Shares
Shares of the Funds will be offered to investors during the
continuous offering at a price equal to the next determined net
asset value per share. There are no fees or charges to purchase or
sell shares or to reinvest dividends. There are no Rule 12b-1
fees.
TABLE OF CONTENTS
ABOUT THE FUNDS ............................................ 2
MANAGEMENT AND ORGANIZATION OF THE FUNDS ................... 15
INFORMATION ABOUT YOUR ACCOUNT.............................. 17
INFORMATION ON DISTRIBUTIONS AND TAXES...................... 24
PERFORMANCE INFORMATION..................................... 26
NET ASSET VALUE............................................. 27
OTHER SHAREHOLDER SERVICES.................................. 27
ABOUT THE FUNDS
TRANSACTION AND FUND EXPENSES
The following table and example should help you understand the
kinds of expenses you will bear directly or indirectly as a Fund
shareholder. In the table, "Shareholder Transaction Expenses,"
shows that you pay no sales charges. All the money you invest in
the Funds goes to work for you, subject to the fees noted in the
table. "Annual Fund Operating Expenses" shows how much it would
cost to operate each Fund for a year, based on estimated expenses
through the end of each Fund's first full year. These costs you
pay indirectly, because they are deducted from the Fund's total
assets before the daily share price is calculated and before
dividends and other distributions are made. You will not see these
expenses on your account statement.
<TABLE>
<CAPTION>
Fee Table Cornerstone Cornerstone
Growth Fund Value Fund
------------ -----------
<S> <C>
Shareholder Transaction Expenses:
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)...................................... None None
Maximum Sales Charge Imposed on Dividend Reinvestments.................... None None
Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, whichever is lower)........................ None None
Redemption fee (a)........................................................ None None
Exchange Fee (b).......................................................... None None
</TABLE>
<PAGE>
3
<TABLE>
<CAPTION>
Annual Fund Operating Expenses Cornerstone Cornerstone
(as a percentage of average net assets): Growth Fund Value Fund
----------- -----------
<S> <C> <C>
Management Fees (c) (d)................................................... 0.74% 0.74%
Rule 12b-1 Fees........................................................... None None
Other Expenses (d) (e).................................................... 0.76% 0.76%
---- ----
Total Fund Operating Expenses (d)......................................... 1.50% 1.50%
==== ====
</TABLE>
(a) Shareholders who effect redemptions of Fund shares by wire
transfer will pay a $10.00 wire transfer fee. See "Information
About Your Account -- Redemption of Shares."
(b) Shareholders who effect exchanges of shares of a Fund for
shares of another fund by telephone in accordance with the
exchange privilege will be charged a $5.00 exchange fee. See
"Information About Your Account -- Exchange Privilege."
(c) See "Management and Organization of the Funds -- Management."
(d) To limit each Fund's expenses during its initial period of
operations, the Manager has voluntarily agreed to reduce its fees
or reimburse each Fund through at least September 30, 1997 to
ensure that the Fund's total operating expenses do not exceed
2.00% of average net assets annually. Any such reductions made by
the Manager in its fees or reimbursement of expenses with respect
to a Fund are subject to reimbursement by the Fund to the Manager
(recapture by the Manager), provided the Fund is able to effect
such reimbursement while keeping total operating expenses at or
below 2.00% of average net assets annually, and that no
reimbursement will be made after September 30, 2000. Any amounts
reimbursed will have the effect of increasing fees otherwise paid
by a Fund.
(e) "Other Expenses" is based on estimated amounts for the current
fiscal year.
Example
An investor would pay the following expenses on a $1,000
investment assuming: (1) the operating expense ratio set forth in
the table above; (2) a 5% annual return through out the period;
and (3) redemption at the end of the period:
Cornerstone Cornerstone
Growth Fund Value Fund
----------- ----------
One year.......................... $15 $15
Three years....................... $47 $47
The table and example are intended to assist investors in
understanding the costs and expenses that a shareholder in each
Fund will bear directly or indirectly. "Other Expenses" is based
on estimated amounts for the current fiscal year. The example
should not be considered a representation of past or future
expenses or annual rate of return, and actual expenses or annual
rate of return may be more or less than those shown.
<PAGE>
4
INVESTMENT OBJECTIVE AND STRATEGIES
To help you decide whether either or both of the Cornerstone
Growth Fund and Cornerstone Value Fund are appropriate for you,
this section takes a closer look at each Fund's investment
objective and Strategy.
What is each Fund's objective?
The investment objective of the Cornerstone Growth Fund is to seek
long-term growth of capital. The investment objective of the
Cornerstone Value Fund is to seek total return, consisting of
capital appreciation and current income. There can be no assurance
that either Fund will achieve its investment objective.
How does each Fund achieve its objective?
The Cornerstone Growth Fund seeks to achieve its investment
objective through a process of Strategy Indexing,(TM) which is
pursued through the implementation of the Cornerstone Growth
Strategy. The Cornerstone Value Fund seeks to achieve its
investment objective through a process of Strategy Indexing,(TM)
which is pursued through the implementation of the Cornerstone
Value Strategy. Each Strategy was developed by the Manager.
Other than assets temporarily maintained in cash or liquid
short-term securities pending investment, to meet redemption
requests or to comply with federal tax laws applicable to mutual
funds, each Fund will invest substantially all of its assets in
common stocks selected through the respective Strategy, as
described more fully below.
What is the Cornerstone Growth Strategy?
The Cornerstone Growth Strategy selects the 50 stocks with the
highest one-year price appreciation as of the date of purchase
from the O'Shaughnessy All Stocks Universe(TM) that also meet the
following criteria: (i) annual earnings that are higher than the
previous year, and (ii) a price-to-sales ratio below 1.5. A
stock's price-to-sales ratio is computed by dividing the market
value of the stock by the issuer's most recent twelve month sales.
What is the O'Shaughnessy All Stocks Universe(TM) ?
The O'Shaughnessy All Stocks Universe(TM) consists of all the
common stocks in the Standard & Poor's Compustat ("S&P Compustat")
database (the "COMPUSTAT(R) Database") with market capitalizations
exceeding $150 million. Currently, the COMPUSTAT(R) Database
consists of the stocks of 9,629 issuers, and the O'Shaughnessy All
Stocks Universe(TM) consists of the stocks of 4,085 issuers.
What is the Cornerstone Value Strategy?
The Cornerstone Value Strategy involves the selection of the 50
highest dividend-yielding common stocks from the O'Shaughnessy
Market Leaders Universe(TM).
What is the O'Shaughnessy Market Leaders Universe(TM) ?
The O'Shaughnessy Market Leaders Universe(TM) consists of those
stocks in the COMPUSTAT(R) Database which are not power utility
companies and which have (i) market capitalizations exceeding the
average
<PAGE>
5
of the COMPUSTAT(R) Database; (ii) twelve month sales which are
fifty percent greater than the average for the COMPUSTAT(R)
Database; (iii) a number of shares outstanding which exceeds the
average for the COMPUSTAT(R) Database; and (iv) cash flow which
exceeds the average for the COMPUSTAT(R) Database. Currently, the
O'Shaughnessy Market Leaders Universe(TM) consists of the stocks
of 441 issuers.
How does investment through the Cornerstone Growth Strategy and the Cornerstone
Value Strategy work?
Upon commencement of operations of the Cornerstone Growth Fund and
Cornerstone Value Fund, the Manager will purchase 50 stocks for
each Fund as dictated by the Cornerstone Growth Strategy and the
Cornerstone Value Strategy, respectively, based on information as
of commencement of operations of the Fund. Each Fund's holdings of
each stock in its portfolio will initially be weighted equally by
dollar amount. Thereafter, the Manager will re-balance the
portfolio of each Fund annually in the first fifteen business days
of the succeeding year (the "Re-Balance Date"), in accordance with
the Fund's respective Strategy, based on information as of the
immediately preceding December 31. That is, on the Re-Balance Date
of each year, stocks meeting the Strategy's criteria as of the
immediately preceding December 31 will be purchased for the Fund
to the extent not then held, stocks which no longer meet the
criteria as of such date will be sold, and the holdings of all
stocks in the Fund that continue to meet the criteria will be
appropriately increased or decreased to result in equal weighting
of all stocks in the portfolio.
When a Fund receives new cash flow from the sale of its shares
over the course of the year, such cash will first be used to the
extent necessary to meet redemptions. The balance of any such cash
will be invested in the 50 stocks selected for the Fund pursuant
to the applicable Strategy as of the most recent rebalancing of
the Fund's portfolio, based on equal weightings by dollar amount
and without any intention to rebalance the portfolio on an interim
basis. It is anticipated that such purchases will generally be
made on a weekly basis, but may be on a more or less frequent
basis in the discretion of the Manager, depending on certain
factors, including the size of the Fund and the amount of cash to
be invested. To the extent redemptions exceed new cash flow into a
Fund, the Fund will meet redemption requests by selling securities
on a pro rata basis, based on equal weightings by dollar amount.
Thus, interim purchases and sales of securities between annual
Re-Balance Dates will be based on the original allocation for the
year and will be made without regard to price appreciation or
depreciation and without regard to whether or not a particular
security continues to meet the Strategy's criteria.
Will the Manager deviate from the Strategies?
The Manager is committed to a rigorous, disciplined approach and
cannot presently anticipate any circumstances which would cause it
to diverge from the Strategies described above in managing the
Funds.
However, to the extent necessary to comply with federal tax
laws applicable to regulated investment companies such as the
Funds, the Manager reserves a limited right to modify the
Strategies. See "Information On Distributions and Taxes -- Status
as a Regulated Investment Company" below.
Is there anything else I should know about the Strategies?
Each Fund offers a disciplined approach to investing, based on a
buy and hold philosophy over the course of each year, which
ignores market timing and rejects active management. Each Fund
will adhere to its respective Strategy regardless of the
performance of the stock market in a particular period.
<PAGE>
6
The Manager anticipates that the 50 stocks held in each Fund's
portfolio will remain the same throughout the course of a year,
despite any adverse developments concerning an issuer, an
industry, the economy or the stock market generally. However, due
to purchases and redemptions of Fund shares during the year,
changes in the market value of the stock positions held in a
Fund's portfolio and compliance with the federal tax laws, it is
likely that stock positions will not be weighted equally at all
times during a year.
The Funds will be substantially fully invested in stocks
selected as described above at all times.
How can I decide if the Funds are an appropriate investment for me?
Consider your investment goals, your time horizon for achieving
them, and your tolerance of risk. The Funds are not appropriate
investments for those who seek short-term investments, since the
Manager expects the benefits of investing in the Funds to be
derived from investing assets in accordance with the Cornerstone
Growth Strategy and the Cornerstone Value Strategy over the
long-term. See "What is the historical performance of the
Strategies?" below. A discussion of the risks associated with
investment in the Funds is contained in "Risk Factors" below.
Is there other information I should review before making a decision?
Be sure to review "Other Investment Policies and Practices" which
discusses certain additional investment practices of the Funds. In
addition, historical information relating to the performance of
the Cornerstone Growth Strategy and the Cornerstone Value Strategy
over time is discussed below.
What is the historical performance of the Strategies?
The following graphs and tables compare the actual performance of
the S&P 500 Index (the "S&P 500") and the hypothetical performance
of each of the Cornerstone Growth Strategy and Cornerstone Value
Strategy for the historical periods indicated. Returns for each
Strategy are the returns on a hypothetical portfolio of stocks
which was rebalanced annually in accordance with such Strategy for
the historical periods indicated. The Strategies have been
developed and tested solely by the Manager.
Actual performance of the Funds may differ from the quoted
performance of the Strategies for the following reasons: each Fund
may not be fully invested at all times; not all stocks in the
Fund's portfolio may be weighted equally at all times due to
appreciation or depreciation in a stock's value; purchases and
sales of stocks for the Fund's portfolio are likely to occur
between annual rebalancings due to cash inflows and outflows (from
purchases and redemptions of Fund shares) during the year; in
managing the Funds, the Manager may make limited modifications to
the Strategies as necessary to comply with federal tax laws; and
the returns of the Strategies do not reflect the advisory fees,
commission costs, expenses or taxes which would be borne by the
Funds.
Because the returns for the Strategies are hypothetical, they
do not represent actual trading or the impact that material
economic and market factors might have had on the Manager's
decision-making under actual circumstances. However, except as
described above, the Manager can presently foresee no
circumstances that would cause deviation from the Strategies in
managing the Funds. All returns contained in the graphs and charts
below reflect reinvestment of dividends and other earnings.
<PAGE>
7
(This graph represents the hypothetical performance of the Cornerstone Growth
Strategy as applied retroactively in backtesting to December 31, 1954. The
performance of the Cornerstone Growth Strategy does not represent the
performance of the Cornerstone Growth Fund, nor does it (or the performance of
the S&P 500) reflect the advisory fees, commissions, expenses or taxes which
would be borne by the Fund. The Strategy's performance, as well as that of the
S&P 500, would be lower if such fees and expenses were deducted. Past
performance of the Cornerstone Growth Strategy is not predictive of future
performance of the Strategy or the Fund.)
Cornerstone Growth Strategy Stocks
Hypothetical Total Return on a $10,000 Investment
[INSERT GRAPH]
<PAGE>
8
Annual results for S&P 500 and Hypothetical Results for
Cornerstone Growth Strategy Stocks,
December 31, 1954-December 31, 1995.
(This table represents the hypothetical performance of Cornerstone Growth
Strategy as applied retroactively in backtesting to December 31, 1954. The
performance of the Cornerstone Growth Strategy does not represent the
performance of the Cornerstone Growth Fund, nor does it (or the performance of
the S&P 500) reflect the advisory fees, commissions, expenses or taxes which
would be borne by the Fund. The Strategy's performance, as well as that of the
S&P 500, would be lower if such fees and expenses were deducted. Past
performance of the Cornerstone Growth Strategy is not predictive of future
performance of the Strategy or the Fund.)
================================================================================
Cornerstone Growth Cornerstone Growth
Year ending: S&P 500 Strategy Strategy vs. S&P 500
- --------------------------------------------------------------------------------
31-Dec-55 31.56% 30.40% -1.16%
31-Dec-56 6.56% 18.00% 11.44%
31-Dec-57 -10.78% -17.90% -7.12%
31-Dec-58 43.36% 52.80% 9.44%
31-Dec-59 11.96% 24.10% 12.14%
31-Dec-60 0.47% 12.60% 12.13%
31-Dec-61 26.89% 51.10% 24.21%
31-Dec-62 -8.73% -17.20% -8.47%
31-Dec-63 22.80% 20.80% -2.00%
31-Dec-64 16.48% 30.00% 13.52%
31-Dec-65 12.45% 44.10% 31.65%
31-Dec-66 -10.06% -0.10% 9.96%
31-Dec-67 23.98% 83.30% 59.32%
31-Dec-68 11.06% 50.50% 39.44%
31-Dec-69 -8.50% -28.10% -19.60%
31-Dec-70 4.01% -2.60% -6.61%
31-Dec-71 14.31% 32.10% 17.79%
31-Dec-72 18.98% 19.70% 0.72%
31-Dec-73 -14.66% -27.50% -12.84%
31-Dec-74 -26.47% -29.10% -2.63%
31-Dec-75 37.20% 37.60% 0.40%
31-Dec-76 23.84% 32.50% 8.66%
31-Dec-77 -7.18% 26.40% 33.58%
31-Dec-78 6.56% 38.30% 31.74%
31-Dec-79 18.44% 38.70% 20.26%
31-Dec-80 32.42% 62.70% 30.28%
31-Dec-81 -4.91% -9.00% -4.09%
31-Dec-82 21.41% 37.10% 15.69%
31-Dec-83 22.51% 32.70% 10.19%
31-Dec-84 6.27% -2.00% -8.27%
31-Dec-85 32.16% 42.50% 10.34%
31-Dec-86 18.47% 17.70% -0.77%
31-Dec-87 5.23% -5.40% -10.63%
<PAGE>
9
31-Dec-88 16.81% 29.70% 12.89%
31-Dec-89 31.49% 23.80% -7.69%
31-Dec-90 -3.17% -3.30% -0.13%
31-Dec-91 30.55% 51.40% 20.85%
31-Dec-92 7.67% 25.50% 17.83%
31-Dec-93 9.99% 30.30% 20.31%
31-Dec-94 1.31% -5.30% -6.61%
31-Dec-95 36.80% 18.20% -18.60%
- --------------------------------------------------------------------------------
Summary results for S&P 500 and Hypothetical Results for
Cornerstone Growth Strategy Stocks,
December 31, 1954-December 31, 1995.
(This table represents the hypothetical performance of Cornerstone Growth
Strategy as applied retroactively in backtesting to December 31, 1954. The
performance of the Cornerstone Growth Strategy does not represent the
performance of the Cornerstone Growth Fund, nor does it (or the performance of
the S&P 500) reflect the advisory fees, commissions, expenses or taxes which
would be borne by the Fund. The Strategy's performance, as well as that of the
S&P 500 would be lower if such fees and expenses were deducted. Past performance
of the Cornerstone Growth Strategy is not predictive of future performance of
the Strategy or the Fund.)
- --------------------------------------------------------------------------------
S&P 500 Cornerstone Growth Strategy
- --------------------------------------------------------------------------------
Arithmetic average 12.43% 21.15%
Standard deviation of return 16.05% 25.67%
Sharpe risk-adjusted ratio* 42.00 60.00
1-yr return** 36.80% 18.20%
3-yr compounded** 15.09% 13.41%
5-yr compounded** 16.46% 22.61%
10-yr compounded** 14.79% 16.96%
15-yr compounded** 14.77% 17.39%
20-yr compounded** 14.56% 22.50%
25-yr compounded** 11.49% 17.63%
30-yr compounded** 10.67% 17.46%
35-yr compounded** 11.03% 18.26%
40-yr compounded** 10.77% 17.93%
Compound Annual Return 11.23% 18.22%
$10,000 becomes: $786,093 $9,544,063
Maximum return 43.36% 83.30%
Minimum return -26.47% -29.10%
* The Sharpe risk-adjusted ratio (the "Sharpe ratio") takes a portfolio's
volatility, as measured by its standard deviation of return, into account.
The higher the Sharpe ratio, the better the portfolio's risk-adjusted
return. The Sharpe ratio is calculated by subtracting the risk free Treasury
bill return from the portfolio's return and then dividing that number by the
portfolio's overall standard deviation of return.
** Quoted return is for the most recent period ended December 31, 1995.
<PAGE>
10
(This graph represents the hypothetical performance of Cornerstone Value
Strategy as applied retroactively in backtesting to December 31, 1951. The
performance of the Cornerstone Value Strategy does not represent the performance
of the Cornerstone Value Fund, nor does it (or the performance of the S&P 500)
reflect the advisory fees, commissions, expenses or taxes which would be borne
by the Fund. The Strategy's performance, as well as that of the S&P 500 would be
lower if such fees and expenses were deducted. Past performance of the
Cornerstone Value Strategy is not predictive of future performance of the
Strategy or the Fund.)
Cornerstone Value Strategy Stocks
Hypothetical Total Return on a $10,000 Investment
[INSERT CORNERSTONE VALUE GRAPH]
<PAGE>
11
Annual results for S&P 500 and Hypothetical Results for
Cornerstone Value Strategy Stocks,
December 31, 1951-December 31, 1995.
(This table represents the hypothetical performance of Cornerstone Value
Strategy as applied retroactively in backtesting to December 31, 1951. The
performance of the Cornerstone Value Strategy does not represent the performance
of the Cornerstone Value Fund, nor does it (or the performance of the S&P 500)
reflect the advisory fees, commissions, expenses or taxes which would be borne
by the Fund. The Strategy's performance, as well as that of the S&P 500, would
be lower if such fees and expenses were deducted. Past performance of the
Cornerstone Value Strategy is not predictive of future performance of the
Strategy or the Fund.)
================================================================================
Cornerstone Value Cornerstone Value
Year ending: S&P 500 Strategy Strategy vs. S&P 500
- --------------------------------------------------------------------------------
12/31/52 18.37% 14.30% -4.07%
12/31/53 -0.99% 1.20% 2.19%
12/31/54 52.62% 52.50% -0.12%
12/31/55 31.56% 28.10% -3.46%
12/31/56 6.56% 14.80% 8.24%
12/31/57 -10.78% -13.50% -2.72%
12/31/58 43.36% 44.90% 1.54%
12/31/59 11.96% 9.60% -2.36%
12/31/60 0.47% -0.03% -0.50%
12/31/61 26.89% 24.40% -2.49%
12/31/62 -8.73% -2.60% 6.13%
12/31/63 22.80% 18.80% -4.00%
12/31/64 16.48% 20.30% 3.82%
12/31/65 12.45% 17.60% 5.15%
12/31/66 -10.06% -10.20% -0.14%
12/31/67 23.98% 23.70% -0.28%
12/31/68 11.06% 26.50% 15.44%
12/31/69 -8.50% -15.00% -6.50%
12/31/70 4.01% 11.30% 7.29%
12/31/71 14.31% 15.80% 1.49%
12/31/72 18.98% 14.00% -4.98%
12/31/73 -14.66% -5.90% 8.76%
12/31/74 -26.47% -12.30% 14.17%
12/31/75 37.20% 58.20% 21.00%
12/31/76 23.84% 39.20% 15.36%
12/31/77 -7.18% 3.30% 10.48%
12/31/78 6.56% 3.30% -3.26%
12/31/79 18.44% 25.60% 7.16%
12/31/80 32.42% 20.30% -12.12%
12/31/81 -4.91% 12.80% 17.71%
12/31/82 21.41% 19.60% -1.81%
12/31/83 22.51% 38.60% 16.09%
12/31/84 6.27% 4.70% -1.57%
12/31/85 32.16% 35.00% 2.84%
<PAGE>
12
12/31/86 18.47% 20.60% 2.13%
12/31/87 5.23% 11.60% 6.37%
12/31/88 16.81% 26.50% 9.69%
12/31/89 31.49% 37.60% 6.11%
12/31/90 -3.17% -7.00% -3.83%
12/31/91 30.55% 36.90% 6.35%
12/31/92 7.67% 11.60% 3.93%
12/31/93 9.99% 20.40% 10.41%
12/31/94 1.31% 4.80% 3.49%
12/31/95 36.80% 26.70% -10.10%
- --------------------------------------------------------------------------------
Summary results for S&P 500 and Hypothetical Results for
Cornerstone Value Strategy Stocks,
December 31, 1951-December 31, 1995.
(This table represents the hypothetical performance of Cornerstone Value
Strategy as applied retroactively in backtesting to December 31, 1951. The
performance of the Cornerstone Value Strategy does not represent the performance
of the Cornerstone Value Fund, nor does it (or the performance of the S&P 500)
reflect the advisory fees, commissions, expenses or taxes which would be borne
by the Fund. The Strategy's performance, as well as that of the S&P 500, would
be lower if such fees and expenses were deducted. Past performance of the
Cornerstone Value Strategy is not predictive of future performance of the
Strategy or the Fund.)
- --------------------------------------------------------------------------------
S&P 500 Cornerstone Value Strategy
- --------------------------------------------------------------------------------
Arithmetic average 13.17% 16.56%
Standard deviation of return 16.77% 17.12%
Sharpe risk-adjusted ratio* 46.00 66.00
1-yr return** 36.80% 26.70%
3-yr compounded** 15.09% 16.93%
5-yr compounded** 16.46% 19.55%
10-yr compounded** 14.79% 18.20%
15-yr compounded** 14.77% 19.27%
20-yr compounded** 14.56% 18.84%
25-yr compounded** 12.19% 17.33%
30-yr compounded** 10.67% 15.34%
35-yr compounded** 11.03% 15.33%
40-yr compounded** 10.77% 14.59%
Compound Annual Return 11.90% 15.30%
$10,000 becomes: $1,406,068 $5,246,810
Maximum return 52.62% 58.20%
Minimum return -26.47% -15.00%
* The Sharpe ratio takes a portfolio's volatility, as measured by its
standard deviation of return, into account. The higher the Sharpe ratio, the
better the portfolio's risk-adjusted return. The Sharpe ratio is calculated
by subtracting the risk free Treasury bill return from the portfolio's
return and then dividing that number by the portfolio's overall standard
deviation of return.
** Quoted return is for the most recent period ended December 31, 1995.
- --------------------------------------------------------------------------------
<PAGE>
13
OTHER INVESTMENT POLICIES AND PRACTICES
This section takes a detailed look at other investment policies
and practices of the Funds. The Funds' investments are subject to
further restrictions and risks described in the Statement of
Additional Information.
Shareholder approval is required to change a Fund's investment
objective and certain investment restrictions noted in the
following section as "fundamental policies." The Manager also
follows certain "operating policies" which can be changed without
shareholder approval. However, significant changes in operating
policies are discussed with shareholders in Fund reports.
The Funds' holdings in certain kinds of investments cannot
exceed maximum percentages of total assets, which are set forth
below. While these restrictions provide a useful level of detail
about a Fund's investments, investors should not view them as an
accurate gauge of the potential risk of such investments. The net
effect of a particular investment depends on its volatility and
the size of its overall return in relation to the performance of
all the Fund's other investments.
Cash and Short-Term Securities. Each Fund may temporarily invest a
portion of its total assets in cash or liquid short-term
securities pending investment of such assets in stocks in
accordance with the Fund's Strategy, to meet redemption requests,
and to the extent necessary to comply with the federal tax laws
applicable to regulated investment companies. The Manager will not
use investments in cash and short-term securities for temporary
defensive purposes.
Short-term securities in which the Funds may invest include
certificates of deposit, commercial paper, notes, obligations
issued or guaranteed by the U.S. Government or any of its agencies
or instrumentalities, and repurchase agreements involving such
securities. See "Repurchase Agreements," below.
The Manager does not expect assets invested in cash or liquid
short-term securities to exceed 5% of the Fund's total assets at
any time.
Repurchase Agreements. As described above in "Cash and Short-Term
Securities," each Fund may invest in short-term securities
pursuant to repurchase agreements. The Funds may only enter into
repurchase agreements with a member bank of the Federal Reserve
System or well-established securities dealer in U.S. government
securities. In the event of a bankruptcy or default by the seller
of the repurchase agreement, the Fund may suffer delays and incur
costs or possible losses in liquidating the underlying security
which is held as collateral, and the Fund may incur a loss if the
value of the collateral declines during this period. As a matter
of operating policy, the Fund may not invest more than 15% of a
Fund's total assets in repurchase agreements maturing in more than
seven days.
Lending of Portfolio Securities. Like other mutual funds, each
Fund may from time to time lend securities from its portfolio to
banks, brokers and other financial institutions to earn additional
income. The principal risk is that the borrower may default on its
obligation to return borrowed securities, because of insolvency or
otherwise. In this event, the Fund could experience delays in
recovering its securities and capital. In accordance with
applicable law, each Fund may not lend portfolio securities
representing in excess of 33 % of its respective total assets. The
lending policy is a fundamental policy.
Borrowing. Each Fund may borrow money in an amount up to 33 % of
its respective total assets from banks for extraordinary or
emergency purposes such as meeting anticipated redemptions, and
may pledge assets in connection with such borrowing. The borrowing
policy is a fundamental policy.
Industry Concentration. Each Fund may not invest more than 25% of
its total assets in any one industry (excluding U.S. Government
securities). If upon rebalancing, the stocks selected by a Fund's
Strategy would result in more than 25% of the Fund's total assets
being invested in a single industry, the Manager will be required
to deviate from the Strategy in investing the portfolio so as not
to violate the Fund's concentration policy. The concentration
policy is a fundamental policy.
<PAGE>
14
Diversification. In order to maintain each Fund's status as a
diversified investment company, with respect to 75% of the Fund's
total assets: 1) not more than 5% of the Fund's assets may be
invested in the securities of a single issuer (excluding U.S.
Government Securities); and 2) the Fund may not hold more than 10%
of the outstanding voting securities of a single issuer. The
diversification policy is a fundamental policy.
Portfolio Transactions. In executing portfolio transactions, the
Funds seek to obtain the best net results, taking into account
such factors as price (including the applicable brokerage
commission or dealer spread), size of order, difficulty of
execution, operational facilities of the firm involved and the
firm's risk in positioning a block of securities. While the Funds
generally seek reasonably competitive commission rates, the Funds
do not necessarily pay the lowest commission or spread available.
In addition, consistent with the Conduct Rules of the National
Association of Securities Dealers, Inc., the Manager may consider
sales of shares of the Funds as a factor in the selection of
brokers or dealers to execute portfolio transactions for the
Funds.
Portfolio Turnover. As described above, in accordance with each
Fund's Strategy, the Fund's portfolio will be rebalanced as of
December 31 of each year. That is, stocks meeting the respective
Strategy's criteria will be purchased for the portfolio to the
extent not then held, stocks which no longer meet the criteria
will be sold, and the holdings of all stocks in the portfolio that
continue to meet the criteria will be appropriately increased or
decreased to result in equal weighting of all stocks in the
portfolio. The Funds anticipate that their annual turnover rates
should not exceed 75% under normal conditions.
COMPUSTAT(R) Database. Although S&P Compustat obtains information
for inclusion in or for use in the COMPUSTAT(R) Database from
sources which S&P Compustat considers reliable, S&P Compustat does
not guarantee the accuracy or completeness of the COMPUSTAT(R)
Database. S&P Compustat makes no warranty, express or implied, as
to the results to be obtained by the Funds, or any other persons
or entity from the use of the COMPUSTAT(R) Database. S&P Compustat
makes no express or implied warranties, and expressly disclaims
all warranties of merchantability or fitness for a particular
purpose with respect to the COMPUSTAT(R) Database. "Standard &
Poor's" and "S&P" are trademarks of The McGraw-Hill Companies,
Inc. The Funds are not sponsored, endorsed, sold or promoted by
S&P Compustat and S&P Compustat makes no representation regarding
the advisability of investing in the Funds.
RISK FACTORS
What are some of the potential risks associated with the Strategies?
The Strategy Indexing(TM) utilized by each Fund provides a
disciplined approach to investing, based on a buy and hold
philosophy during the course of each year, which ignores market
timing and rejects active management. Each Fund will adhere to its
respective Strategy (subject to applicable federal tax
requirements relating to mutual funds), despite any adverse
developments concerning an issuer, an industry, the economy or the
stock market generally. This could result in substantial losses to
a Fund, if for example, the stocks selected for a Fund's portfolio
for a given year are experiencing financial difficulty, or are out
of favor in the market because of weak performance, poor earnings
forecast, negative publicity or general market cycles. The Funds
are not appropriate investments for those who are not comfortable
with a Fund's Strategy.
There can be no assurance that the market factors that caused
the stocks held in a Fund's portfolio to meet a Strategy's
investment criteria as of rebalancing in any given year will
continue during such year until the next rebalancing, that any
negative conditions adversely affecting a stock's price will not
<PAGE>
15
develop and/or deteriorate during a given year, or that share
prices of a stock will not decline during a given year.
As described above, each Fund's portfolio is rebalanced
annually in accordance with its respective Strategy. Rebalancing
may result in elimination of better performing assets from a
Fund's portfolio and increases in investments in securities with
relatively lower total return.
What are some potential risks associated with investing primarily in common
stocks?
The fundamental risk associated with any common stock fund is the
risk that the value of the stocks it holds might decrease. Stock
values may fluctuate in response to the activities of an
individual company or in response to general market and/or
economic conditions. Historically, common stocks have provided
greater long-term returns and have entailed greater short-term
risks than other investment choices. Smaller or newer issuers are
more likely to realize more substantial growth as well as suffer
more significant losses than larger or more established issuers.
Investments in such companies can be both more volatile and more
speculative. The Funds are not appropriate investments for those
who are unable or unwilling to assume the risk involved generally
with investment in common stocks.
Are there any additional risks associated with investment in the Funds?
There is no guarantee that the investment objective of a Fund will
be achieved or that the value of a shareholder's investment in the
Fund will not decrease.
MANAGEMENT AND ORGANIZATION OF THE FUNDS
MANAGEMENT
Who runs the Funds?
General Oversight. O'Shaughnessy Funds is governed by a Board of
Directors that meets regularly to review the Funds' investment,
performance, expenses, and other business affairs. The Board
elects the Funds' officers.
Manager. O'Shaughnessy Capital Management, Inc. acts as investment
manager of each Fund pursuant to a management agreement with
O'Shaughnessy Funds on behalf of the Fund (the "Management
Agreement"). In its capacity as investment manager, the Manager is
responsible for selection and management of each Fund's portfolio
investments. For its services, each Fund pays the Manager a fee
each month, at the annual rate of 0.74 % of the Fund's average
daily net assets.
The Manager's office is located at 60 Arch Street, Greenwich,
Connecticut 06830. O'Shaughnessy Capital Management, Inc. was
incorporated in 1988. The Manager also serves as portfolio
consultant to a unit investment trust with assets in excess of
$180 million. The Manager has no experience actively managing
open-end investment companies such as the Funds.
Portfolio Management. James P. O'Shaughnessy has had the
day-to-day responsibility for managing the portfolio of each Fund
and developing and executing each Fund's investment program since
the commencement of operations of each Fund. For the past five
years, Mr. O'Shaughnessy has served as President of the Manager,
and in such capacity, has managed equity accounts for high net
worth individuals and served as portfolio consultant to a unit
investment trust. Mr. O'Shaughnessy is recognized as a leading
expert and pioneer in quantitative equity analysis. He is the
author of two financial books, Invest Like the Best and What Works
on Wall Street.
<PAGE>
16
Distributor. O'Shaughnessy Funds has entered into a Distribution
Agreement (the "Distribution Agreement") with First Fund
Distributors, Inc. (the "Distributor"), a registered
broker-dealer, to act as the principal distributor of the shares
of the Funds. The Distribution Agreement provides the Distributor
with the right to distribute shares of the Funds through other
broker-dealers or financial institutions with whom the Distributor
has entered into selected dealer agreements. The address of the
Distributor is 4455 E. Camelback Road, Suite 261 E, Phoenix,
Arizona 85018. The Distributor provides distribution services to
the Funds at no cost to the Funds.
Administrator. Pursuant to an Administration Agreement, Investment
Company Administration Corporation (the "Administrator") serves as
administrator of the Funds. The Administrator provides certain
administrative services, including, among other responsibilities,
coordinating relationships with independent contractors and
agents, preparing for signature by officers and filing of certain
documents required for compliance with applicable laws and
regulations, preparing financial statements, and arranging for the
maintenance of books and records. For its services, each Fund pays
the Administrator a fee each month, at the annual rate of 0.10% of
the first $100 million of the Fund's average daily net assets,
0.05% of the next $100 million of such net assets, and 0.03% of
such net assets over $200 million, with a minimum fee of $40,000
annually per Fund. The address of the Administrator is 4455 E.
Camelback Rd., Suite 261 E, Phoenix, Arizona 85018. The
Administrator and the Distributor are under common control and are
therefore considered affiliates of each other.
Transfer Agent and Custodian. Firstar Trust Company acts as the
Funds' transfer and dividend disbursing agent (the "Transfer
Agent"), as well as the Funds' custodian (the "Custodian"). The
address of the Transfer Agent and Custodian is 615 E. Michigan
Street, Third Floor, Milwaukee, Wisconsin 53202.
How are expenses of the Funds determined?
The Management Agreement identifies the expenses to be paid by
each Fund. In addition to the fees paid to the Manager, each Fund
pays certain additional expenses, including but not limited to,
the following: shareholder service expenses; custodial,
accounting, legal, and audit fees; administrative fees; costs of
preparing and printing prospectuses and reports sent to
shareholders; registration fees and expenses; proxy and annual
meeting expenses (if any); and independent Director fees and
expenses.
ORGANIZATION
How are the Funds organized?
The Funds are investment portfolios or series of O'Shaughnessy
Funds. There are two other investment portfolios of O'Shaughnessy
Funds, shares of which are not offered for sale through this
Prospectus: O'Shaughnessy Aggressive Growth Fund and O'Shaughnessy
Dogs of the Market(TM) Fund (the "other O'Shaughnessy Funds"). The
charter of O'Shaughnessy Funds provides that the Board of
Directors may issue additional investment portfolios of shares
and/or additional classes of shares for each investment portfolio.
O'Shaughnessy Funds was organized as a corporation in Maryland on
May 20, 1996.
What is meant by "shares"?
As with all mutual funds, investors purchase shares when they
invest in the Funds. These shares are a part of the Funds'
authorized capital stock, but share certificates are not generally
issued.
<PAGE>
17
Each full share and fractional share entitles the shareholder
to: receive a proportional interest in the respective Fund's
capital gain distributions; and cast one vote per share on certain
Fund matters, including the election of Directors, changes in
fundamental policies, or approval of changes in the Management
Agreement.
Shareholder inquiries may be addressed to each Fund at the
address or telephone number set forth on the cover page of this
Prospectus.
Do the Funds have annual shareholder meetings?
The Funds are not required to hold annual meetings and do not
intend to do so except when certain matters, such as a change in a
Fund's fundamental policies, are to be decided. In addition,
shareholders representing at least 10% of all eligible votes may
call a special meeting if they wish, for the purpose of voting on
the removal of any Fund Director. If a meeting is held and you
cannot attend, you can vote by proxy. Before the meeting, you will
be sent proxy materials that explain the issues to be decided and
include a voting card for you to mail back.
INFORMATION ABOUT YOUR ACCOUNT
PURCHASE OF SHARES
The minimum initial investment in the Fund is $5,000 and the
minimum subsequent investment is $100, except that for retirement
plans, the minimum initial investment is $500 and the minimum
subsequent investment amount is $50.
Investors may make an initial purchase of shares and subsequent
investments in a Fund by mail or wire as described below. The
Funds reserve the right in their sole discretion to waive the
minimum investment amounts, including in the case of investments
by employees and affiliates of the Manager and family members of
any of the foregoing, and Individual Retirement Accounts ("IRAs")
of shareholders of the Funds.
The Internal Revenue Service requires the correct reporting of
social security numbers or tax identification numbers. The failure
to provide this information will result in the rejection of an
investor's Application.
How do I purchase shares by mail?
For initial investments, please send a completed Application,
together with a check payable to O'Shaughnessy Cornerstone Value
Fund or O'Shaughnessy Cornerstone Growth Fund, as the case may be,
to O'Shaughnessy Funds, Inc., c/o Firstar Trust Company, at P.O.
Box 701, Milwaukee, WI 53201-0701 (for Applications sent by U.S.
mail) or 615 E. Michigan Street, Third Floor, Milwaukee, WI 53202
(for Applications sent via overnight courier). Subsequent
investments must be accompanied by a letter indicating the name(s)
in which the account is registered and the account number or by
the remittance portion of the account statement and mailed to the
address stated above.
How do I purchase shares by wire?
If you are wiring funds, call the Transfer Agent at (800) 797-0773
for an account number if this is an initial investment or to
inform the Transfer Agent that a wire is expected if this is a
subsequent investment.
<PAGE>
18
For an initial investment, prior to or immediately after the
funds are wired, a completed Application should be sent to
O'Shaughnessy Funds, Inc., c/o Firstar Trust Company, at P.O. Box
701, Milwaukee, WI 53201-0701 (for Applications sent by U.S. mail)
or 615 E. Michigan Street, Third Floor, Milwaukee, WI 53202 (for
Applications sent via overnight courier). Instruct your bank to
wire federal funds to O'Shaughnessy Funds, c/o Firstar Trust
Company, ABA# 075000022, DDA# 112952137.
The wire should specify the name of the Fund, the name(s) in
which the account is registered, the shareholder's social security
number or employer tax identification number, the account number
and the amount being wired. Please indicate if this is an initial
or subsequent investment. Wire purchases are normally used only
for large purchases (over $5,000). Your bank may charge you a fee
for sending the wire.
What is the purchase price of Fund shares and when do purchases become
effective?
Purchases of Fund shares become effective and shares will be
priced at the net asset value per share ("NAV") next determined
after the investor's check or wire is received by the Transfer
Agent. NAV for each Fund is calculated as of the close of business
on the New York Stock Exchange ("NYSE") (currently 4:00 p.m.,
Eastern time). If your request is received in correct form before
4:00 p.m. Eastern time, your transaction will be priced at that
day's NAV. If your request is received after 4:00 p.m., it will be
priced at the next business day's NAV. Orders that request a
particular day or price for your transaction or any other special
conditions cannot be accepted.
The time at which transactions and shares are priced and the
time until which orders are accepted may be changed in case of an
emergency or if the NYSE closes at a time other than 4:00 p.m.,
Eastern time.
The purchase order must include the documentation specified
above. Please do not send purchase orders to the Funds; the Funds
forward purchase orders to the Transfer Agent and a purchase will
not become effective until the Transfer Agent receives all the
necessary documentation.
What are the conditions of purchase?
All purchase orders are subject to acceptance or rejection by the
Funds or the Distributor, in their sole discretion. The offering
of shares may be suspended whenever a Fund considers suspension
desirable or when required by any order, rule or regulation of any
governmental body having jurisdiction. Checks and money orders
should be drawn on United States banks; the Funds and the
Distributor reserve the right to reject checks drawn on foreign
banks.
The Transfer Agent will mail a confirmation of each completed
purchase to the investor. If an order is canceled because an
investor's check does not clear, the investor will be responsible
for any loss incurred by the respective Fund, the Transfer Agent,
the Distributor, the Administrator or the Manager. If the investor
is already a shareholder, the Fund may redeem shares from the
account to cover any loss. If the investor is not a shareholder or
if the loss is greater than the value of the shareholder's
account, the Distributor will be responsible for any loss to the
Fund, and will have the right to recover such amount from the
investor.
Who do I contact if I have questions about my account or need additional
information concerning investment in the Funds?
If you have investment questions about the Funds, or if you would
like any additional information relating to an investment in the
Funds, please call (800) 797-0773 (toll-free), or write to the
Distributor
<PAGE>
19
at First Fund Distributors, Inc., 4455 E. Camelback Road, Suite
261 E, Phoenix AZ 85018. If you are a shareholder and have
questions about your account, or if you wish to arrange for wire
transactions, please call the Transfer Agent at (800) 797-0773.
Before telephoning, please be sure to have your account number
and social security number or employer tax identification number
readily available.
Will I receive share certificates for shares purchased?
Share certificates will not be issued for shares unless the
investor sends a written request for certificates to O'Shaughnessy
Funds, Inc., c/o Firstar Trust Company at P.O. Box 701, Milwaukee,
WI 53201-0701 (for requests sent via U.S. mail) or 615 E. Michigan
Street, Third Floor, Milwaukee, WI 53202 (for requests sent via
overnight courier). Share certificates are issued only for full
shares and may be redeposited in the shareholder's account at any
time. In order to facilitate redemptions and exchanges, most
shareholders elect not to receive certificates, since a
shareholder wishing to redeem or exchange shares represented by a
certificate must surrender such certificate, properly endorsed on
the reverse side together with a signature guarantee. (See
"Redemption of Shares -- When are signature guarantees required?"
below). If a certificate is lost, the shareholder may incur an
expense in replacing it.
Can I purchase shares through broker-dealers other than the Distributor?
O'Shaughnessy Funds may enter into agreements with various outside
brokers on behalf of the Funds through which shareholders may
purchase shares. Such shares may be held by such outside brokers
in an omnibus account rather than in the name of the individual
shareholder. The Manager may reimburse the outside brokers for
providing shareholder services to the omnibus accounts in an
amount equal to what the Fund would otherwise have paid to provide
shareholder services to each individual shareholder account.
Investors may also arrange to purchase shares of each Fund
through other outside broker-dealers with which O'Shaughnessy
Funds does not have an arrangement, and such broker-dealers may
purchase shares of the Fund by telephone if they have made
arrangements in advance with the Fund. To place a telephone order
such broker-dealer should call the Transfer Agent at (800)
797-0773.
Purchases by broker-dealers become effective and shares will be
priced as described above. If an investor purchases shares through
broker-dealers other than the Distributor, such broker-dealers may
charge the investor a service fee that is reasonable for the
service performed, bearing in mind that the investor could have
acquired or redeemed each Fund's shares directly without the
payment of any fee. No part of any such service fee will be
received by the Distributor, the Manager, the Administrator or the
Funds.
EXCHANGE PRIVILEGE
Shares of each Fund may be exchanged for shares of each of the
other O'Shaughnessy Funds (i.e., O'Shaughnessy Aggressive Growth
Fund and O'Shaughnessy Dogs of the Market(TM) Fund and, as the
case may be, O'Shaughnessy Cornerstone Growth Fund or
O'Shaughnessy Cornerstone Value Fund). Prospectuses for the other
O'Shaughnessy Funds may be obtained by writing to the Distributor
at 4455 E. Camelback Road, Suite 261 E, Phoenix AZ 85018,
Attention: O'Shaughnessy Funds, Inc. or by calling (800) 797-0773
(toll-free).
You may also exchange shares of either Fund for shares of the
Portico Money Market Fund, a money market mutual fund not
affiliated with O'Shaughnessy Funds or the Manager. Prior to
making such an exchange, you should obtain and carefully read the
prospectus for the Portico Money Market Fund.
<PAGE>
20
The exchange privilege does not constitute an offering or
recommendation on the part of the Funds or the Manager of an
investment in the Portico Money Market Fund.
If you exchange into shares of the Portico Money Market Fund
you may establish checkwriting privileges on the Portico Money
Market Fund. Contact the Transfer Agent at (800) 797-0773 for a
checkwriting application and signature card.
The exchange procedures are described below.
Is there any sales charge or minimum investment applicable to an exchange?
Shareholders of the Funds may exchange their Fund shares, without
the payment of any sales or service charge, for shares of any
other fund into which an exchange is permitted equal in value to
the net asset value of the shares being exchanged. All exchanges
are subject to all applicable terms set forth in the prospectus of
the fund into which the exchange is being made. If a shareholder
exchanges shares through a broker-dealer other than the
Distributor, such broker-dealer may charge the shareholder a
service fee, no part of which will be received by the Distributor,
the Manager, the Funds, or the fund into which the exchange is
being made.
At what price is an exchange effected?
An exchange is effected at the respective net asset values of the
two funds with respect to which shares are being exchanged as next
determined following receipt by the fund into which the exchange
is being made of all necessary documentation in connection with
the redemption of Fund shares as described below under "Redemption
Of Shares --How do I redeem shares by mail?"
Do current instructions concerning receipt of dividends and distributions carry
over to exchanged shares?
Dividend and distribution instructions with respect to exchanged
shares will remain the same as those given previously by the
shareholders to the fund from which the shareholder is exchanging
the shares, unless the shareholder designates a change in such
instructions by writing to the Transfer Agent. Please note that
such changed instructions (i) must be signed by the registered
owners(s) of the shares, exactly as the account is registered and
signature guaranteed, and (ii) include the name of the account,
the account number, and the name of the fund for which
instructions have changed.
What are the conditions applicable to an exchange?
Exchanges involving the redemption of shares recently purchased by
personal, corporate or government check will be permitted only
after the respective Fund has reasonable belief that the check has
cleared, which may take up to fifteen days after the purchase
date. The exchange privilege is available only in states where
shares of the other O'Shaughnessy Funds or the Portico Money
Market Fund may be sold legally.
Each of the Funds, the other O'Shaughnessy Funds and the
Portico Money Market Fund reserves the right to reject any order
to acquire its shares through exchange or otherwise and to
restrict or terminate the exchange privilege at any time. If the
exchange privilege is to be permanently terminated, each Fund will
provide its shareholders with written notice of such termination.
Each Fund reserves the right to suspend temporarily the telephone
exchange privilege in emergency circumstances or in cases where,
in the judgment of the Fund, continuation of the privilege would
be detrimental to the Fund and its shareholders as a whole. Such
temporary suspension can be without prior notification.
<PAGE>
21
How can I make exchanges by telephone?
Shareholders who have completed the section of the Fund's
Application entitled "Shareholder Privileges" are eligible to make
telephone requests for exchanges and may do so by telephoning the
Transfer Agent at (800) 797-0773. A shareholder who has not
completed the Shareholder Privileges section of the Application
but who wishes to become eligible to make telephone exchanges
should designate a change in such instructions by writing to the
Transfer Agent. Please note that such changed instructions must
(i) be signed by the registered owner(s) of the shares exactly as
the account is registered and signature guaranteed, and (ii)
include the name of the account, the account number and the name
of the Fund to which the exchange instructions relate. See
"Redemption Of Shares - How do I redeem shares by telephone?"
below, which describes the time of day at which telephone
redemptions and exchanges will be priced and processed. Telephone
requests for exchanges cannot be accepted with respect to shares
represented by certificates. Shares of the other O'Shaughnessy
Funds or the Portico Money Market Fund acquired pursuant to a
telephone request for exchange will be held under the same account
registration as the shares redeemed through the exchange.
The Funds will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Neither the
Funds nor any of their service contractors will be liable for any
loss or expense in acting on telephone instructions that are
reasonably believed to be genuine. In attempting to confirm that
telephone instructions are genuine, the Funds will use procedures
that are considered reasonable, including requesting a shareholder
to correctly state the account number, the names in which the
account is registered, the social security number(s) registered to
the account, and certain additional personal identification. A
full description of these procedures is contained in the SAI. To
the extent that the Funds fail to use reasonable procedures to
verify the genuineness of telephone instructions, they and/or
their service contractors may be liable for any such instructions
that prove to be fraudulent or unauthorized.
Shareholders should be aware that, at times, the volume of
telephone calls or other factors beyond a Fund's control may make
it difficult to reach the Transfer Agent by telephone. This will
be true particularly during periods of drastic economic market
changes. In such cases, shareholders should continue to telephone
or utilize the written exchange procedures described below.
Shareholders who effect exchanges of Fund shares by telephone
will be charged a $5.00 exchange fee.
How do I make exchanges by mail?
To exchange Fund shares by mail, send a written request for
exchange signed by the registered owner(s) of the shares, exactly
as the account is registered, to O'Shaughnessy Funds, Inc., c/o
Firstar Trust Company, at P.O. Box 701, Milwaukee, WI 53201-0701
(for requests sent by U.S. mail) or 615 E. Michigan Street, Third
Floor, Milwaukee, WI 53202 (for requests sent via overnight
courier). The request for exchange should include the following
information: the name of the account, the account number, the
number of Fund shares or the dollar value of Fund shares to be
exchanged, the shares of which other fund (either another
O'Shaughnessy Fund or the Portico Money Market Fund) shares of the
Fund are to be exchanged for, and the name on the account and the
account number (if already established) with such other fund.
REDEMPTION OF SHARES
Shareholders can redeem their shares by giving instructions to the
Transfer Agent in writing or by telephone. As more fully described
below, these redemption instructions may have to be accompanied by
additional documentation, which may include a signature guarantee.
<PAGE>
22
If a shareholder redeems shares through a broker-dealer other
than the Distributor, such broker-dealer may charge the
shareholder a service fee, no part of which will be received by
the Distributor, the Manager, the Administrator or the Funds.
How do I redeem shares by mail?
To redeem shares by mail, send a written request for redemption
signed by the registered owner(s) of the shares, exactly as the
account is registered to O'Shaughnessy Funds, Inc., c/o Firstar
Trust Company, at P.O. Box 701, Milwaukee, WI 53201-0701 (for
requests sent via U.S. mail) or 615 E. Michigan Street, Third
Floor, Milwaukee, WI 53202 (for requests sent via overnight
courier). The request for exchange should include the following:
the name of the account, the account number, the number of shares
or the dollar value of shares to be redeemed and whether proceeds
are to be sent by mail or wire, and if by wire, giving the wire
instructions; (ii) duly endorsed share certificates, if any have
been issued for the shares redeemed; (iii) any signature
guarantees that are required as described below; and (iv) any
additional documents which might be required for redemptions by
corporations, executors, administrators, trustees, guardians or
other similar shareholders. Except as otherwise directed by a Fund
in its discretion, the Transfer Agent will not redeem shares until
it has received all necessary documents; corporate and
institutional investors and fiduciaries should contact the
Transfer Agent to ascertain what additional documentation is
required.
May I send redemption requests to the Funds?
Please do not send redemption requests to the Funds. The Funds
must forward all redemption requests to the Transfer Agent and
instructions for redemption will not be effective until received
by the Transfer Agent. Shares redeemed will be priced at the net
asset value per share next determined after acceptance of a
complete redemption request by the Transfer Agent. Redemption
requests received by the Transfer Agent after the close of the
NYSE (currently 4:00 p.m., Eastern time) will be treated as though
received on the next business day. The Transfer Agent cannot
accept redemption requests that specify a particular date for
redemption or special redemption conditions.
When are signature guarantees required?
Except as indicated below, all of the signatures on any request
for redemption or share certificates tendered for redemption must
be guaranteed by a bank, broker-dealer, credit union (if
authorized under state law), securities exchange or association,
clearing agency or savings association. A notary public cannot
provide a signature guarantee.
The Funds will waive the signature guarantee requirement on a
redemption request that instructs that the proceeds be sent by
mail if all of the following conditions apply: (i) the redemption
is for $10,000 or less; (ii) the redemption check is payable to
the shareholder(s) of record; (iii) the redemption check is mailed
to the shareholder(s) at the address of record; and (iv) no shares
represented by certificate are being redeemed. Share certificates
submitted for redemption or exchange must be properly endorsed and
contain signature guarantees. In addition, each Fund in its
discretion may waive the signature guarantee for employees and
affiliates of the Manager, the Distributor and the Administrator,
and family members of the foregoing.
The requirement of a guaranteed signature protects against an
unauthorized person redeeming shares and obtaining the redemption
proceeds.
<PAGE>
23
How do I redeem shares by telephone?
Shareholders who have completed the section of the Fund
Application entitled "Shareholder Privileges" are eligible to make
telephone requests for redemptions (without charge) and may do so
by telephoning the Transfer Agent at (800) 797-0773. A shareholder
who has not completed the Shareholder Privileges section of the
Application but who wishes to become eligible to make telephone
redemptions, should designate a change in such instructions by
writing to the Transfer Agent. Please note that such changed
instructions must (i) be signed by the registered owner(s) of the
shares exactly as the account is registered and signature
guaranteed, and (ii) include the name of the account, the account
number and the name of the Fund.
Telephone redemptions cannot be accepted with respect to shares
represented by certificates or for IRA accounts. In such cases,
redemption can only be made by mail as described above under
"Redemption of Shares -- How do I redeem shares by mail?"
Telephone requests for redemptions (or exchanges -- see "Exchange
Privilege" above) received before the close of business of the
NYSE (currently 4:00 p.m., Eastern time) on a business day will be
priced and processed as of the close of business on that day;
requests received after that time will be processed as of the
close of business on the next business day.
As noted above, the Funds will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine
and may, along with their service contractors, be liable for a
failure to use such procedures. See "Exchange Privilege - - How
can I make exchanges by telephone?" above.
Shareholders should be aware that, at times, the volume of
telephone calls or other factors beyond a Fund's control may make
it difficult to reach the Transfer Agent by telephone. This will
be true particularly during periods of drastic economic or market
changes. In the event of difficulty in reaching the Transfer
Agent, shareholders should continue to telephone or utilize the
written redemption procedures described above under "Redemption of
Shares -- How do I redeem shares by mail?"
The Funds reserve the right to terminate the telephone
redemption privilege at any time and, if so terminated, will
provide the shareholders with written notice of such termination.
Each Fund reserves the right to suspend temporarily telephone
redemptions in emergency circumstances or in cases where, in the
judgment of the Fund, continuation of the privilege would be
detrimental to the Fund and its shareholders as a whole. Such
temporary suspension can be without prior notification.
What options do I have in receiving redemption proceeds?
Redemption proceeds may be sent to shareholders by mail or by wire
as described below. Wire redemptions will only be made if the
Transfer Agent has received appropriate written wire instructions.
Because of fluctuations in the value of a Fund's portfolio, the
net asset value of shares redeemed may be more or less than the
investor's cost.
Redemption By Mail. In the case of shareholders who request that
their redemption proceeds be sent by mail, the Transfer Agent
mails checks for redemption proceeds typically within one or two
business days, but no later than seven days, after it receives the
request and all the necessary documents.
Redemption By Wire. In the case of shareholders who request that
their redemption proceeds be sent by bank wire, the Transfer Agent
typically wires redemption proceeds the next business day, but no
later than seven days, after it receives the request and all
necessary documents.
Wire redemptions will be made only if the Transfer Agent has
received appropriate written instructions from the shareholder
either on the Fund Application or by separate letter. A
shareholder who has not indicated wire instructions on the
Application, but would like to have redemption proceeds
<PAGE>
24
wired to a particular bank for each redemption request, should so
designate by writing to the Transfer Agent. Please note that such
instructions must (i) be signed by the registered owner(s) of the
shares exactly as the account is registered and signature
guaranteed, and (ii) include the name of the account, the account
number and the name of the Fund to which the request relates.
A shareholder who would like to change the wire instructions
indicated on the Fund Application should designate a change in
such instructions by writing to the Transfer Agent and complying
with the requirements set forth in the preceding paragraph. There
is a $1,000 minimum on redemption proceeds by bank wire.
Shareholders who effect redemptions by wire transfer will pay a
$7.50 wire transfer fee to the Transfer Agent to cover costs
associated with the transfer. In addition, a shareholder's bank
may impose a charge for receiving wires.
When would the payment of proceeds be delayed?
Please note that shares paid for by personal, corporate or
government check cannot be redeemed before the respective Fund has
reasonable belief that the check has cleared, which may take up to
fifteen days after payment of the purchase price. This delay can
be avoided by paying for shares by certified check or bank-wire.
An investor will be notified promptly by the Transfer Agent if a
redemption request cannot be accepted.
Would my account ever be involuntarily redeemed?
Due to the relatively high cost to the Funds of maintaining small
accounts, we ask you to maintain an account balance of at least
$5,000. If your balance is below $5,000 for three months or longer
due to redemptions, we have the right to close your account after
giving you 60 days in which to increase your balance.
INFORMATION ON DISTRIBUTIONS AND TAXES
DIVIDENDS AND OTHER DISTRIBUTIONS GENERALLY
Dividend and capital gain distributions are reinvested in
additional shares of the Funds in your account unless you select
another option on your Application. The advantage of reinvesting
distributions arises from compounding; that is, you receive
dividends and capital gain distributions on an increasing number
of shares. Distributions not reinvested are paid by check or
transmitted to your bank account.
INCOME DIVIDENDS
Each Fund declares and pays dividends (if any) annually.
CAPITAL GAINS
A capital gain or loss is the difference between the purchase and
sale price of a security. If a Fund has net capital gains for the
year (after subtracting any capital losses), they are usually
declared and paid in December to shareholders of record on a
specified date that month.
<PAGE>
25
TAX INFORMATION
You need to be aware of the possible tax consequences when: (1) a
Fund makes a distribution to your account; (2) you sell Fund
shares; or (3) you exchange shares of a Fund for shares of one of
the other O'Shaughnessy Funds or the Portico Money Market Fund.
The following summary does not apply to retirement accounts, such
as IRAs, which are tax-deferred until you withdraw money from
them.
Will I pay taxes on redemptions or exchanges of Fund shares?
When you sell or exchange shares in a Fund, you may realize a gain
or loss. Unless you are a dealer in securities, such gain or loss
will be capital gain or loss. In addition, such gain or loss will
be a long-term capital gain or loss if you hold your shares for
more than one year, or short-term capital gain or loss if you hold
your shares for one year or less.
A loss recognized on a sale or exchange of shares of the Fund
will be disallowed if other Fund shares are acquired (whether
through automatic reinvestment of dividends or otherwise) within a
61-day period beginning 30 days before and ending 30 days after
the date that the shares are disposed of. In such case, the basis
of the shares acquired will be adjusted to reflect the disallowed
loss. In addition, if you realize a loss on the sale or exchange
of Fund shares held six months or less, your short-term loss
recognized is reclassified to long-term to the extent of any
long-term capital gain distribution received.
Will I pay taxes on Fund distributions?
Distributions of ordinary income and short-term capital gains are
taxable as ordinary income. The dividends of each Fund will be
eligible for the 70% deduction for dividends received by
corporations only to the extent the Fund's income consists of
dividends paid by U.S. corporations. Long-term gains are taxable
at the applicable long-term gain rate. The gain is long- or
short-term depending on how long the respective Fund held the
securities, not how long you held shares in the Fund.
What are the tax effects of buying shares before a distribution?
If you buy shares of a Fund shortly before or on the "record date"
-- the date that establishes you as the person to receive the
upcoming distribution -- you will receive, in the form of a
taxable distribution, a portion of the money you just invested.
Therefore, you may wish to find out the Fund's record date(s)
before investing. Of course, a Fund's share price may, at any
time, reflect undistributed capital gains or unrealized
appreciation.
The foregoing is a general and abbreviated summary of the
applicable provisions of the Code and Treasury regulations
presently in effect, and does not address the state and local tax
consequences of an investment in the Funds. For the complete
provisions, reference should be made to the pertinent Code
sections and the Treasury regulations promulgated thereunder. The
Code and the Treasury regulations are subject to change by
legislative or administrative action either prospectively or
retroactively. For additional information regarding the federal
income tax consequences of an investment in a Fund, see
"Additional Information about Dividends and Taxes" in the
Statement of Additional Information.
Shareholders are urged to consult their own tax advisers
regarding specific questions as to Federal, state, local or
foreign taxes. Foreign investors should consider applicable
foreign taxes in their evaluation of an investment in the Funds.
<PAGE>
26
STATUS AS A REGULATED INVESTMENT COMPANY
To maintain its status as a regulated investment company under the
Internal Revenue Code (the "Code"), each Fund must, among other
requirements, derive less than 30% of its gross income in any year
from the sale of stocks held for less than three months (the "30%
test").
As necessary to meet this requirement, the Manager may delay
selling some or all of those stocks held in a Fund's portfolio
which would otherwise be sold on the Re-Balance Date because they
no longer meet the relevant Strategy's criteria, if: (i) they have
been held for less than three months, and (ii) their sale would
cause the Fund to fail the 30% test. In addition, during the three
month period immediately prior to the Re-Balance Date, the Manager
reserves the right to vary the general policy of investing new
cash flow in all 50 stocks selected by the relevant Strategy as of
the last rebalancing by allocating new cash flow only to those
stocks which continue to meet the relevant Strategy's criteria as
of the date of investment or to liquid short-term securities. This
approach will enable the Manager to control investments in stocks
which would most likely be held for a period of less than three
months as a result of rebalancing, the gains from the sale of
which are subject to the 30% test. As such, it will minimize the
disruption to the Strategy which would be caused by the Fund's
compliance with the 30% test. For additional information on
maintaining each Fund's status as a regulated investment company,
see "Additional Information About Dividends and Taxes" in the
Statement of Additional Information.
PERFORMANCE INFORMATION
This section should help you understand the terms used to describe
Fund performance. The Funds' annual report will contain additional
performance information and will be available upon request and
without charge.
What is total return?
This tells you how much an investment in a Fund has changed in
value over a given time period. It reflects any net increase or
decrease in the share price and assumes that all dividends and
capital gains (if any) paid during the period were reinvested in
additional shares. Including reinvested distributions means that
total return numbers include the effect of compounding, i.e, you
receive income and capital gain distributions on an increasing
number of shares.
Advertisements for a Fund may include cumulative or compound
average annual total return figures, which may be compared with
various indices, other performance measures, or other mutual
funds.
What is cumulative total return?
This is the actual rate of return on an investment for a specified
period. A cumulative return does not indicate how much the value
of the investment may have fluctuated between the beginning and
the end of the period specified.
What is average annual total return?
This is always hypothetical. Working backward from the actual
cumulative return, it tells you what constant year-by-year return
would have produced the actual, cumulative return. By smoothing
out all the variations in annual performance, it gives you an idea
of the investment's annual contribution to your portfolio provided
you held it for the entire period in question.
<PAGE>
27
NET ASSET VALUE
The price at which each Fund's shares are purchased or redeemed is
the Fund's next determined net asset value per share. The net
asset value per share is calculated as of the close of the NYSE
(currently 4:00 p.m., Eastern time) on each day that the NYSE is
open for business and on each other day in which there is a
sufficient degree of trading in a Fund's portfolio securities that
the current net asset value of the Fund's shares may be materially
affected by changes in the value of the Fund's portfolio
securities.
How is net asset value determined?
Each Fund determines the net asset value per share by subtracting
the Fund's total liabilities from the Fund's total assets (the
value of the securities that the Fund holds plus cash and other
assets), dividing the remainder by the total number of shares
outstanding, and adjusting the result to the nearest full cent.
How are the securities held in a Fund's portfolio valued?
Securities listed on the NYSE, American Stock Exchange or other
national exchanges are valued at the last sale price on such
exchange on the day as of which the net asset value per share is
to be calculated. Over-the-counter securities included in the
NASDAQ National Market System are valued at the last sale price.
If there is no sale on a particular security on such day, it is
valued at the mean between the bid and asked prices. Other
securities, to the extent that market quotations are readily
available, are valued at market value in accordance with
procedures established by the Board of Directors. Any securities
and other assets, for which market quotations are not readily
available, are valued in good faith in a manner determined by the
Directors of the Funds best to reflect their fair value.
OTHER SHAREHOLDER SERVICES
Automatic Investment Plan
An Automatic Investment Plan allows a shareholder to make
automatic monthly or quarterly investments into a Fund account, in
amounts of at least $100, by having the Transfer Agent draw an
automatic clearing house (ACH) debit electronically against a
shareholder's checking or savings account. A shareholder may
establish an Automatic Investment Plan by completing the
appropriate section on the Application for new accounts or by
calling the Transfer Agent at (800) 797-0773 and requesting an
Automatic Investment Plan Application for existing accounts. A
shareholder should be aware that a signed Application should be
received by the Transfer Agent at least 15 business days prior to
the initial transaction. The Transfer Agent will assess a $20 fee
if the automatic investment cannot be made due to insufficient
funds, stop payment, or for any other reason. The Fund cannot
guarantee acceptance by your bank.
Systematic Cash Withdrawal Plan
When an account of $10,000 or more is opened or when an existing
account reaches that size, a shareholder may participate in the
Fund's Systematic Cash Withdrawal Plan by filling out the
appropriate part of the Application. Under this plan, a
shareholder may receive (or designate a third party to receive) a
monthly or quarterly check in a stated amount of not less than
$50. Shares of the respective Fund will be redeemed as necessary
to meet withdrawal payments. All participants must
<PAGE>
28
elect to have their dividends and capital gain distributions
reinvested automatically. A shareholder who decides later to use
this service should call the Transfer Agent at (800) 797-0773.
Reports to Shareholders
Each time a shareholder invests, redeems, transfers or exchanges
Fund shares, or receives a distribution from a Fund, the Fund will
send a confirmation of the transaction which will include a
summary of all of the shareholder's most recent transactions.
At such time as prescribed by law, each Fund will send to each
shareholder the following reports (if they are applicable), which
may be used in completing U.S. income tax returns:
Form 1099-DIV Report taxable distributions during the preceding
calendar year. (If a shareholder did not receive
taxable distributions in the previous year, such
shareholder will not be sent a 1099-DIV.)
Form 1099-B Reports redemption proceeds paid (including those
resulting from exchanges) during the preceding
calendar year.
Form 1099-R Report distributions from retirement plan accounts
during the preceding calendar year.
Form 5498 Reports contributions to IRAs for the previous
calendar year.
If an investor's shares are held by an outside broker in an
omnibus account, it is the responsibility of such outside broker
to provide shareholders whose shares are held in the omnibus
account with any reports prescribed by law which the shareholders
require in order to complete their U.S. income tax returns.
Shareholders will also receive annual and semi-annual reports
including the financial statements of the Funds for the respective
periods.
Retirement Plans
Eligible investors may invest in the Funds under the following
prototype retirement plans:
- Individual Retirement Account (IRA)
- Simplified Employee Pension (SEP) for sole proprietors,
partnerships and corporations
- Profit-Sharing and Money Purchase Pension Plans for
corporations and their employees
The minimum initial investment is $500 and the minimum
subsequent investment is $50 for retirement plans.
Automatic Reinvestment Plan
For the convenience of investors, all dividends and distributions
are automatically reinvested in full and fractional shares of the
Funds at the net asset value per share at the close of business on
the record date, unless otherwise specified on the Application or
requested by a shareholder in writing. If the Transfer Agent does
not receive a written request for subsequent dividends and/or
distributions to be paid in cash at least three full business days
prior to a given record date, the dividends and/or distributions
to be paid to a shareholder will be reinvested. If a shareholder
elects to receive dividends and distributions in cash and the U.S.
Postal Service cannot deliver the checks, or if the checks remain
uncashed for six months, the shareholder's distribution checks
will be reinvested into the shareholder's account at the then
current net asset value.
<PAGE>
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<PAGE>
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<PAGE>
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, and, if given or
made, such other information or representations must not be relied upon as
having been authorized by the Fund, the Investment Adviser, the Administrator or
the Distributor. This Prospectus does not constitute an offering in any state in
which such offering may not lawfully be made.
INVESTMENT MANAGER
O'Shaughnessy Capital Management, Inc.
60 Arch Street
Greenwich, Connecticut 06830
ADMINISTRATOR
Investment Company Administration Corporation
4455 E. Camelback Road, Suite 261 E
Phoenix, Arizona 85018
DISTRIBUTOR
First Fund Distributors, Inc.
4455 E. Camelback Road, Suite 261 E
Phoenix, Arizona 85018
TRANSFER AGENT
Firstar Trust Company
615 E. Michigan Street
Milwaukee, Wisconsin 53202
AUDITORS
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, New York 10017-2416
LEGAL COUNSEL
Shereff, Friedman, Hoffman & Goodman, LLP
919 Third Avenue
New York, New York 10022
<PAGE>
O'SHAUGHNESSY CORNERSTONE VALUE FUND
O'SHAUGHNESSY
CORNERSTONE GROWTH FUND
[INSERT COVER ARTWORK]
Prospectus
October 11, 1996
<PAGE>
O'SHAUGHNESSY AGGRESSIVE GROWTH FUND
Supplement dated November 20, 1996 to Prospectus dated October 11, 1996
The Fee Table on page 2 of the prospectus should read as follows:
<TABLE>
<CAPTION>
Fee Table
<S> <C>
Shareholder Transaction Expenses:
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)...................................................... None
Maximum Sales Charge Imposed on Dividend Reinvestments.................................... None
Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, whichever is lower)........................................ None
Redemption fee (a)........................................................................ None
Exchange Fee (b).......................................................................... None
Annual Fund Operating Expenses (as a percentage of average net assets):
Management Fees (c) (d)................................................................... 1.00%
Rule 12b-1 Fees........................................................................... None
Other Expenses (d) (e).................................................................... 0.80%
----
Total Fund Operating Expenses (d)......................................................... 1.80%
====
</TABLE>
(a) Shareholders who effect redemptions of Fund shares by wire transfer will
pay a $10.00 wire transfer fee. See "Information About Your Account --
Redemption of Shares."
(b) Shareholders who effect exchanges of shares of the Fund for shares of
another fund by telephone in accordance with the exchange privilege will be
charged a $5.00 exchange fee. See "Information About Your Account --
Exchange Privilege."
(c) See "Management and Organization of the Fund -- Management."
(d) To limit the Fund's expenses during its initial period of operations,
the Manager has voluntarily agreed to reduce its fees or reimburse the Fund
through at least September 30, 1997 to ensure that the Fund's total
operating expenses do not exceed 2.00% of average net assets annually. Any
such reductions made by the Manager in its fees or reimbursement of expenses
with respect to the Fund are subject to reimbursement by the Fund to the
Manager (recapture by the Manager), provided the Fund is able to effect such
reimbursement while keeping total operating expenses at or below 2.00% of
average net assets annually, and that no reimbursement will be made after
September 30, 2000. Any amounts reimbursed will have the effect of
increasing fees otherwise paid by the Fund.
(e) "Other Expenses" is based on estimated amounts for the current fiscal
year.
<PAGE>
O'SHAUGHNESSY DOGS OF THE MARKET FUND
Supplement dated November 20, 1996 to Prospectus dated October 11, 1996
The Fee Table on page 2 of the prospectus should read as follows:
<TABLE>
<CAPTION>
Fee Table
<S> <C>
Shareholder Transaction Expenses:
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)...................................................... None
Maximum Sales Charge Imposed on Dividend Reinvestments.................................... None
Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, whichever is lower)........................................ None
Redemption fee (a)........................................................................ None
Exchange Fee (b).......................................................................... None
Annual Fund Operating Expenses (as a percentage of average net assets):
Management Fees (c) (d)................................................................... 0.90%
Rule 12b-1 Fees........................................................................... None
Other Expenses (d) (e).................................................................... 0.80%
----
Total Fund Operating Expenses (d)......................................................... 1.70%
====
</TABLE>
(a) Shareholders who effect redemptions of Fund shares by wire transfer will
pay a $10.00 wire transfer fee. See "Information About Your Account --
Redemption of Shares."
(b) Shareholders who effect exchanges of shares of the Fund for shares of
another fund by telephone in accordance with the exchange privilege will be
charged a $5.00 exchange fee. See "Information About Your Account --
Exchange Privilege."
(c) See "Management and Organization of the Fund -- Management."
(d) To limit the Fund's expenses during its initial period of operations,
the Manager has voluntarily agreed to reduce its fees or reimburse the Fund
through at least September 30, 1997 to ensure that the Fund's total
operating expenses do not exceed 2.00% of average net assets annually. Any
such reductions made by the Manager in its fees or reimbursement of expenses
with respect to the Fund are subject to reimbursement by the Fund to the
Manager (recapture by the Manager), provided the Fund is able to effect such
reimbursement while keeping total operating expenses at or below 2.00% of
average net assets annually, and that no reimbursement will be made after
September 30, 2000. Any amounts reimbursed will have the effect of
increasing fees otherwise paid by the Fund.
(e) "Other Expenses" is based on estimated amounts for the current fiscal
year.
