[Front cover]
KALMAR
POOLED
INVESTMENT
TRUST
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[GRAPHIC] Kalmar Logo
"GROWTH-WITH-VALUE"
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KALMAR
POOLED
INVESTMENT
TRUST
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KALMAR "GROWTH-WITH-VALUE" SMALL CAP FUND
A SERIES OF
KALMAR POOLED INVESTMENT TRUST
BARLEY MILL HOUSE
3701 KENNETT PIKE
GREENVILLE, DELAWARE 19807
(800) 282-2319
PROSPECTUS DATED JANUARY 31, 1997
This prospectus offers shares of the Kalmar "Growth-with-Value" Small
Cap Fund (the "Fund"), which is a series of Kalmar Pooled Investment
Trust (the "Trust"), an open-end diversified management investment
company commonly known as a mutual fund. The Trust currently offers
shares of both the Fund and the Kalmar "Growth-with-Value" Micro Cap
Fund, each of which has a diversified portfolio of assets and a specific
investment objective and policies. Shares of the Kalmar "Growth-with-
Value" Micro Cap Fund are offered by a separate prospectus.
The Fund's investment objective is long-term capital appreciation. The
Fund was created to offer investors the opportunity to invest in small
capitalization stocks according to the longer-term "Growth-with-Value"
investment philosophy, and with the small cap and micro cap investing
expertise of the investment professionals of Fund's investment adviser,
Kalmar Investment Advisers (the "Adviser"). Using this investment
philosophy, the Fund will invest primarily in a diversified portfolio of
common stocks of companies with market capitalizations ranging from $50
million to $1 billion at the time of investment which, in the Adviser's
opinion, have the potential for significant business growth and capital
appreciation, and yet whose stocks are, at the time of purchase, trading
at at least reasonable to, preferably, undervalued prices in the public
trading markets. The Fund believes that its philosophy of purchasing
promising, growing companies that may also be undervalued can result in
lower risk and higher return when compared to many other small company
investment strategies. See "Investment Objectives and Policies."
Shares of the Fund may be purchased on a no-load basis without sales or
distribution charges through the Fund's distributor or through
investment management and financial consultants or brokers, and may be
purchased or redeemed at any time. Requests to purchase or redeem
shares will be processed at the net asset value per share next
determined following receipt and acceptance of the investor's purchase
order or redemption request. See "How to Purchase Shares," "How to
Redeem Shares" and "Calculation of Net Asset Value."
This Prospectus sets forth information about the Fund that a prospective
investor should know before investing, and should be read and retained
for future reference. More information about both the Fund and the
Kalmar "Growth-with-Value" Micro Cap Fund has been filed with the U.S.
Securities and Exchange Commission and is contained in a "Statement of
Additional Information" dated January 31, 1997, as amended from time to
time, which is available upon request and without charge by writing or
calling the Fund or its distributor at the addresses and numbers set
forth on the back cover of this prospectus. The Statement of Additional
Information is incorporated by reference into this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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KALMAR
POOLED
INVESTMENT
TRUST
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TABLE OF CONTENTS
Page
----
Prospectus Summary.................................... 3
Fund Expenses......................................... 4
Adviser's Investment Performance...................... 6
Investment Objective and Policies..................... 7
Investment Philosophy............................ 7
Investment Policies.............................. 7
Other Investment Practices....................... 10
Risks and Special Considerations...................... 11
Management of the Fund................................ 12
Board of Trustees................................ 12
Investment Adviser............................... 12
Fund Officers and Portfolio Managers............. 14
Distributor...................................... 16
Administrator, Transfer Agent and Custodian...... 16
Expenses.............................................. 16
Calculation of Net Asset Value........................ 17
How to Purchase Shares................................ 17
How to Redeem Shares.................................. 19
Retirement Plans...................................... 21
Performance Information............................... 22
General Information................................... 22
Dividends, Capital Gains Distributions and Taxes...... 23
Shareholder Accounts.................................. 24
<PAGE>
KALMAR
POOLED
INVESTMENT
TRUST
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PROSPECTUS SUMMARY
INVESTMENT OBJECTIVE AND POLICIES. The objective of the Kalmar "Growth-
with-Value" Small Cap Fund is long-term capital appreciation. The Fund
was created to offer investors the opportunity to invest in small
capitalization stocks according to the longer term "Growth-with-Value"
investment philosophy and with the small cap and micro cap investing
expertise of the investment professionals of the Fund's investment
adviser, Kalmar Investment Advisers (the "Adviser"). Using this
investment philosophy, the Fund will invest primarily in a diversified
portfolio of common stocks of companies with market capitalizations
ranging from $50 million to $1 billion at the time of investment which,
in the Adviser's opinion, have the potential for significant business
growth and capital appreciation, and yet whose stocks are, at the time
of purchase, trading at at least reasonable to, preferably, undervalued
prices in the public trading markets. The Fund believes that its
philosophy of purchasing promising, growing companies that may be also
undervalued can result in both lower risk and higher return when
compared to many other small company investment strategies.
The Fund utilizes the Adviser's "Growth-with-Value" investment
philosophy which purposefully seeks to integrate the best elements of
creative growth company investing, with discriminating value-seeking
investment discipline, in a longer term context. With its intent of
owning the "good growth businesses" underlying its stocks, the Adviser
seeks to make fewer, better investment decisions for longer holding
periods and larger gains, based on in-depth, in-house, hands-on research
and company business analysis. The resulting low relative levels of
trading and portfolio turnover versus typical "aggressive growth" or
"emerging growth" investment styles can produce meaningful transaction
cost savings to benefit all Fund shareholders as well as greater tax
efficiency for taxable shareholders, by producing a preponderance of
long-term, as opposed to short term, capital gains. Importantly, the
Adviser's "Growth-with-Value" philosophy and in-depth research seek both
lower risks and higher reward relative to small company equity markets
generally through its integrated strategy of investing in solid,
promising, smaller growth companies that have not yet been fully
recognized and exploited by other institutional investors and, hence,
whose stocks may be purchased at undervalued levels. See "Investment
Objective and Policies."
INVESTMENT ADVISER. Kalmar Investment Advisers serves as the investment
adviser for the Fund. Over the past fifteen years, the Adviser's
portfolio management team has managed micro cap and small cap assets in
separate accounts now totaling in excess of $600 million for a variety
of clients such as high net worth individuals and family trusts,
corporations, pensions and profit-sharing plans and other institutions
such as endowments, foundations, hospitals and other charitable
institutions, all according to the same longer-term oriented "Growth-
with-Value" philosophy utilized by the Fund. Kalmar invests assets of
its own profit-sharing plan in shares of the Fund, as do members of its
investment team and other employees. The Adviser selects investments
and supervises the assets of the Fund in accordance with the investment
objective, policies and restrictions of the Fund, subject to the
supervision and direction of the officers and Board of Trustees of the
Trust. For its services, the Adviser is paid a monthly fee at the
annual rate of 1.00% of the Fund's average daily net assets. This fee
is comparable to the fees charged by most small company equity mutual
fund managers, however, it is higher than that charged by many other
mutual funds. See "Investment Adviser."
ADVISER'S INVESTMENT PERFORMANCE. Information about the performance
record of the Adviser's portfolio management team for its separately
managed accounts over the past thirteen years is provided in the section
of the Prospectus called "Adviser's Investment Performance."
HOW TO INVEST. Shares of the Fund may be purchased on a no-load basis,
without sales or distribution charges, and are sold through investor
relationships with investment management and financial consultants,
brokers or dealers, or directly by the Fund's distributor. The public
offering price of shares of the Fund is the net asset value per share of
the Fund next determined after receipt and acceptance of an order and
payment satisfactory to the Fund. The minimum initial investment is
$10,000 and subsequent investments must total at least $1,000. The
minimum initial investment amount for investments by qualified
retirement accounts is $1,000 and there is no minimum for subsequent
investments. An application is included with this prospectus and
further information is available by calling (800) 282-2319. See "How To
Purchase Shares."
HOW TO REDEEM SHARES. Shares may be redeemed by the Fund, or
repurchased by the Distributor, at the net asset value per share next
determined after receipt and acceptance of a redemption request in
proper form by the Fund, without the imposition of sales charges or
redemption fees. See "How to Redeem Shares."
DIVIDEND REINVESTMENT. The Fund intends to pay dividends from its net
investment income and any net realized capital gains, if any, on an
annual basis. Any dividends and distribution payments will be
reinvested at net asset value in additional full and fractional shares
of the Fund, unless the shareholder specifically elects to receive such
distributions in cash. See "Dividends, Distributions and Taxes."
RISKS AND SPECIAL CONSIDERATIONS. Prospective investors should consider
the following factors: (1) investments in small capitalization stocks
involve greater risks than investments in larger, more established
companies, are more volatile, and may suffer significant losses as well
as realize substantial gains; (2) the market for small capitalization
stocks is generally less liquid than the markets for larger stocks,
which can contribute to increased price volatility of such stocks; (3)
the Fund may lend its securities which entails a risk of loss should a
borrower fail financially; (4) to the extent that the Fund invests in
foreign securities, such investment may involve political, economic or
currency risks not ordinarily associated with domestic securities; and
(5) although the Adviser's portfolio management team has extensive
investment management experience with private separately managed
accounts, it has not previously served as the adviser to a mutual fund.
See "Risks and Special Considerations."
ORGANIZATION AND MANAGEMENT OF THE FUND. The Fund is a series of Kalmar
Pooled Investment Trust (the "Trust"), which is an open-end diversified
management investment company commonly known as a mutual fund. The
Trust also offers shares of the Kalmar "Growth-with-Value" Micro Cap
Fund through a separate prospectus. The Fund's assets are held by its
custodian, Wilmington Trust Company, and the Fund's administrative,
transfer agency and fund accounting services are provided by Rodney
Square Management Corporation. The distributor of the Fund's shares is
Rodney Square Distributors, Inc. See "Management of the Fund" and
"General Information."
FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES: There are no transactional expenses
paid by shareholders in connection with purchases or redemptions of the
Fund's shares.
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Contingent Deferred Sales Charge None
Redemption Fees None
ESTIMATED ANNUAL OPERATING EXPENSES: These expenses, which cover the
cost of investment management, administration, distribution, marketing
and shareholder communications, are quoted as a percentage of average
daily net assets of the Fund. The expenses are factored into the Fund's
share price and are not billed directly to shareholders.
Advisory Fee (after voluntary waiver) 0.97%
12b-1 Fees None
Other Expenses 0.28%
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Total Operating Expenses 1.25%1
1 For the current fiscal year, the Adviser has voluntarily agreed to
waive its fee or assume certain expenses of the Fund so that the total
annual operating costs of the Fund will not exceed 1.25% of the average
daily net assets of the Fund. Absent the Adviser's actions to limit the
operating expenses, the Fund would pay an annual advisory fee of 1.00%
and it is estimated that the total operating expenses of the Fund during
its first fiscal year would be 1.28% on an annualized basis.
EXAMPLE: The following example illustrates the expenses that an
investor would pay on a $1,000 investment in the Fund over various time
periods assuming a 5% annual rate of return and redemption at the end of
each time period.
ONE YEAR THREE YEARS
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$13 $40
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES IN FUTURE YEARS MAY BE GREATER
OR LESSER THAN THOSE SHOWN. THE PURPOSE OF THE ABOVE EXPENSE TABLES AND
EXAMPLE IS TO ASSIST THE INVESTOR IN UNDERSTANDING THE VARIOUS EXPENSES
THAT AN INVESTOR IN EITHER CLASS OF SHARES OF THE FUND WILL BEAR
DIRECTLY OR INDIRECTLY. THE FUND IS NEW AND THEREFORE THE AMOUNTS OF
THE "ADVISORY FEE (AFTER VOLUNTARY WAIVER)" AND "OTHER EXPENSES" IN THE
EXPENSE TABLE AND THE NUMBERS IN THE EXAMPLE ARE BASED ON ESTIMATED
AMOUNTS FOR THE CURRENT FISCAL YEAR.
ADVISER'S INVESTMENT PERFORMANCE
Set forth below is certain information relating to separate accounts
managed by the Fund's portfolio management team. These accounts are
managed according to the same investment objective and "Growth-with-
Value" investment philosophy, and are subject to substantially similar
investment policies and techniques as those used by the Fund. See
"Investment Objectives and Policies." The performance record shown
below relates to the activities of the portfolio management team with
respect to its activities at Kalmar Investments Inc. ("Kalmar
Investments"), which provides advisory services to separately managed
accounts, and is the sister company of the Adviser. See "Investment
Adviser." The results presented are not intended to predict or suggest
the return to be experienced by the Fund or the return that an
individual investor might achieve by investing in the Fund. The Fund's
results may be different from the composite of separate accounts shown
due to the fact that the average market capitalization of the companies
included in the separate account portfolios has been approximately $250
million, and the Fund may purchase shares of companies leading to a
greater market capitalization. The Fund's results may also be different
because of, among other things, differences in fees and expenses, and
because private accounts are not subject to certain investment
limitations, diversification requirements, and other restrictions
imposed by the Investment Company Act of 1940, as amended (the
"Investment Company Act") and the Internal Revenue Code, as amended,
which, if applicable, may have adversely affected the performance of
such accounts.
YEAR KALMAR RUSSELL 2000 S & P 500
ENDING NET RETURN* TOTAL RETURN TOTAL RETURN
- - ------ ----------- ------------ ------------
12/31/84 1.46 (7.30) 6.26
12/31/85 33.98 31.05 31.76
12/31/86 28.14 5.68 18.70
12/31/87 (1.90) (8.77) 5.22
12/31/88 23.58 24.89 16.57
12/31/89 38.42 16.24 31.65
12/31/90 (7.58) (19.51) (3.14)
12/31/91 65.52 46.05 30.45
12/31/92 8.87 18.41 7.62
12/31/93 27.11 19.91 10.06
12/31/94 3.08 (1.82) 1.30
12/31/95 25.35 26.21 37.54
12/31/96 7.06 14.76 22.99
CUMULATIVE
RETURN KALMAR* RUSSELL S & P 500
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13 Years*
1984-1996 755.98% 303.58% 588.22%
AVERAGE ANNUAL
RETURN
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13 Years*
1984-1996 17.96% 11.33% 16.00%
* THE RESULTS SHOWN ABOVE REPRESENT A COMPOSITE OF DISCRETIONARY, FEE
PAYING, SEPARATE ACCOUNTS UNDER MANAGEMENT FOR AT LEAST SIX MONTHS,
REFLECT THE REINVESTMENT OF ANY DIVIDENDS OR CAPITAL GAINS, AND ARE
SHOWN AFTER DEDUCTION OF ADVISORY, BROKERAGE OR OTHER EXPENSES
(EXCLUDING FEES SUCH AS CUSTODY FEES WHICH ARE PAID SEPARATELY BY THE
INVESTOR). CERTAIN INDIVIDUAL ACCOUNTS THAT ARE SUBJECT TO INVESTMENT
RESTRICTIONS, TAX, INCOME OR OTHER SPECIAL CONSIDERATIONS THAT CONSTRAIN
THE INVESTMENT PROCESS ARE EXCLUDED FROM THE COMPOSITE FIGURES SHOWN
ABOVE.
INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objective is long-term capital appreciation. The
investment objective of the Fund is a fundamental policy, which means
that it may not be changed without the approval of the holders of a
majority of the Fund's outstanding voting securities. The Fund seeks to
achieve its objective by investing primarily in a diversified portfolio
of common stocks of smaller companies which, in the Adviser's opinion,
have the potential for significant business growth and capital
appreciation, and yet whose stocks are, at the time of purchase, trading
at at least reasonable to, preferably, undervalued prices in the public
trading markets. There can be no assurance that the Fund will achieve
its objective.
INVESTMENT PHILOSOPHY.
The Fund utilizes the Adviser's "Growth-with-Value" investment
philosophy, which integrates what the Adviser believes to be the best
elements of creative growth company investing, with discriminating value-
seeking investment discipline, all with a view toward longer-term
ownership of the "good growth businesses" underlying its portfolio
holdings. The investment philosophy is a primarily bottom-up,
fundamentals-driven approach, with the goal of fewer, better investment
decisions, for longer holding periods and larger gains. The Adviser
views its "Growth-with-Value" philosophy as a relatively conservative
approach to small company investing, yet one which the Adviser believes
can result in both lower risk and higher rewards over the longer term
when compared to the small company equity markets generally, or to the
typical high-turnover "aggressive growth" or "emerging growth"
investment styles of most other small company investment managers. By
investing with a longer-term focus, and thereby limiting trading and
portfolio turnover, the Fund seeks to limit transaction costs and to
increase tax efficiency for its shareholders.
In identifying, analyzing, selecting, and monitoring investments, the
Fund's portfolio management team utilizes an independent, hands-on,
fundamental, in-house-research-driven approach. To identify solid, well
managed, rapidly growing small capitalization companies, and qualify
such companies for investment, the Fund's portfolio managers perform
fundamental research and business analysis of a given company's publicly
available financial information, engage in extensive and on-going
management contact, facility visits, and appropriate cross checks with
customers, suppliers, competitors, etc., as well as with industry trade
groups, consultants and such other "experts" as they deem appropriate.
The portfolio management team, of course, also attempts to utilize the
best information provided by Wall Street analysts, strategists, etc., to
complement its in-house research and investment management decision
making.
As a central ingredient in its investment philosophy and investment
selection process, the Fund seeks to invest in promising smaller
companies which meet its objectives for above average future business
value growth, but which have not yet been fully recognized and exploited
by other institutional small company investors. Such companies may be
followed by relatively few, or sometimes no securities analysts, and,
therefore, may be inefficiently valued and available for purchase at
undervalued prices. By investing in such companies over the longer-
term, the Fund's investors can benefit both from their vigorous
potential earnings and business value growth and also from the potential
re-valuation upward of their securities as their business success
attracts larger numbers of additional investors and greater "Wall
Street" sponsorship over time.
Except as described herein, the following investment policies are not
fundamental policies of the Fund which means that the Trustees may
change such policies without the affirmative vote of a "majority of the
outstanding voting securities" of the Fund, as defined in the Investment
Company Act.
INVESTMENT POLICIES.
The Fund seeks to achieve its objective by investing, under normal
market conditions, at least 65% of its total assets in smaller companies
in terms of market capitalization, whose stock market capitalization
(total market value of outstanding shares) range from $50 million to $1
billion at the time of investment. Small capitalization growth
companies often pay no dividends and, therefore, current income is not a
factor in the selection of stocks. Capital appreciation is likely to be
the predominant component of the Fund's return. In the event that the
Adviser, through fundamental investment analysis, identifies a company
whose stock appears to be substantially overvalued in the trading
markets, the Fund may engage in short sales of the company's stock.
This process allows the Fund to realize profits if the value of a
company's stock drops as was anticipated by the Adviser.
In addition, the Fund may invest in other types of securities such as
preferred stocks, securities convertible into common stocks, as well as
certain debt securities, consistent with its long-term capital
appreciation objective. The Fund may invest up to 15% of its assets in
foreign securities, including sponsored or unsponsored American
Depository Receipts ("ADRs"). The Fund may also buy and sell options on
individual securities or indices, for purposes of achieving additional
return or for hedging purposes, although at no time will more than 5% of
the Fund's assets be allocated to premiums or margins required to
establish options positions for non-hedging purposes, and no more than
10% of the Fund's assets will be subject to obligations underlying such
options. Additional information about the Fund's investments, policies
and restrictions is provided below and in the Fund's Statement of
Additional Information.
EQUITY SECURITIES. The Fund will predominately purchase common stocks,
which represent an ownership interest in the issuer, entitle the holder
to participate in any income and/or capital gains of the issuer and
generally have voting rights. The Fund may also purchase investment
grade securities with an equity component such as convertible preferred
stock, debt securities convertible into or exchangeable for common stock
and securities such as warrants or rights that are convertible into
common stock. A convertible security is a security that may be
converted either at a stated price or rate within a specified period of
time into a specified number of shares of common or preferred stock. By
investing in convertible securities, the Fund seeks to participate in
the capital appreciation of the common stock into which the securities
are convertible through the conversion feature. A warrant is a security
that gives the holder the right, but not the obligation, to subscribe
for newly created securities of the issuer or a related company at a
fixed price either at a certain date or during a set period. Rights
represent a preemptive right to purchase additional shares of stock at
the time of new issuance, before stock is offered to the general public,
so that the stockholder can retain the same percentage after the new
stock offering.
The Fund's assets will be invested primarily in equity securities of
small companies, however, it may, consistent with its objective, invest
a portion of its total assets in equity securities of larger
capitalization companies if the Adviser believes that suitable small
company opportunities are not available or if such larger stocks have
strong growth potential and meet the Adviser's "Growth-with-Value"
criteria and investment discipline.
Although the Adviser anticipates that the majority of the Fund's assets
will ordinarily be invested in U.S.-based companies, the Fund may invest
in foreign securities, provided such investments are consistent with the
Fund's objective and policies and meet the "Growth-with-Value"
philosophy. The Fund generally limits its foreign investing to
securities of Canadian companies traded on Canadian or U.S. exchanges or
markets, or shares of foreign companies traded as sponsored or
unsponsored American Depository Receipts ("ADRs"), which are receipts
typically issued by a U.S. bank or trust company evidencing ownership of
underlying securities issued by a foreign company. "Sponsored" ADRs are
issued jointly by the issuer of the underlying security and a
depository, whereas "unsponsored" ADRs are issued without participation
of the issuer of the deposited security.
CASH OR CASH EQUIVALENTS. Although the Fund intends to remain
substantially fully invested, the Fund may invest its assets in cash or
cash equivalents, during periods when excess cash is generated through
purchases and sales of its shares, or when the Fund desires to hold cash
to maintain liquidity for redemptions or pending investment in suitable
securities. There may also be times when economic or market conditions
are such that the Adviser deems a temporary defensive position to be
appropriate, during which the Fund may invest up to 100% of its net
assets in the types of short-term, cash equivalent investments described
below.
The Fund may invest in short-term debt securities, including time
deposits, certificates of deposit or banker's acceptances issued by
commercial banks or savings and loan associations meeting certain
qualifications. The Fund may also purchase commercial paper rated A-1
or A-2 by S&P or Prime-1 or Prime 2 by Moody's, or, if not rated, issued
by a corporation having an outstanding unsecured debt issue rated high-
grade (A or better by S&P or by Moody's); and may invest in short term
corporate obligations rated high-grade (A or better by S&P or Moody's).
The Fund may also purchase U.S. Government obligations including bills,
notes, bonds and other debt securities issued by the U.S. Treasury; and
may invest in U.S. Government agency securities issued or also
guaranteed by U.S. Government sponsored instrumentalities and federal
agencies. The Fund may also invest in repurchase agreements
collateralized by the cash equivalent securities listed above.
DEBT SECURITIES. In addition to the short-term, high quality, cash-
equivalent debt securities listed above and investment grade convertible
debt (those rated Baa or higher by S&P and BBB or higher by Moody's),
the Fund is authorized to invest up to 5% of its assets in lower-rated
or "compromised" corporate debt securities such as bonds, debentures and
notes (those rated BB or lower by S&P or Ba or lower by Moody's) and
unrated securities of comparable quality. The Fund may invest in such
debt securities, sometimes referred to as "junk bonds," when the
Adviser, through fundamental research and investment analysis, believes
that the securities possess intrinsic value in excess of the current
market price, or have the potential for capital appreciation as a result
of improvement in the creditworthiness of the issuer. The Fund may also
buy such securities when the Adviser believes that the Issuer is likely
to negotiate to replace such securities with equity securities. Lower-
rated securities (including those which are in default) are considered
to be predominately speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the
obligation and generally involve more credit risk than securities in the
high rating categories. See "Debt Securities-Risks" in the Statement of
Additional Information for further information concerning the risks of
lower-rated securities.
OPTIONS. The Fund may purchase or sell options on individual securities
as well as on indices of securities as a means of achieving additional
return or of hedging the value of the Fund's portfolio. A call option
is a contract that gives the holder of the option the right, in return
for a premium paid, to buy from the seller the security underlying the
option at a specified exercise price at any time during the term of the
option or, in some cases, only at the end of the term of the option.
The seller of the call option has the obligation upon exercise of the
option to deliver the underlying security upon payment of the exercise
price. A put option is a contract that gives the holder of the option
the right, in return for a premium paid, to sell to the seller the
underlying security at a specified price. The seller of the put option,
on the other hand, has the obligation to buy the underlying security
upon exercise at the exercise price.
If the Fund has sold an option, it may terminate its obligation by
effecting a closing purchase transaction. This is accomplished by
purchasing an option of the same series as the option previously sold.
There can be no assurance that a closing purchase transaction can be
effected when the Fund so desires.
The purchaser of an option risks a total loss of the premium paid for
the option if the price of the underlying security does not
increase or decrease sufficiently to justify exercise. The seller of
an option, on the other hand, will recognize the premium as income if
the option expires unrecognized but forgoes any capital appreciation
in excess of the exercise price in the case of a call option and may be
required to pay a price in excess of current market value in the case
of a put option. Options purchased and sold other than on an exchange
in private transactions also impose on the Fund the credit risk that
the counterparty will fail to honor its obligations. The Fund will not
purchase options if, as a result, its aggregate obligations relating to
outstanding options exceeds 10% of the Fund's assets.
REPURCHASE AGREEMENTS. For purposes of cash management only, the Fund
may enter into repurchase agreements with qualified brokers, dealers,
banks and other financial institutions deemed creditworthy by the
Adviser under standards adopted by the Board of Trustees. Under
repurchase agreements, the Fund may purchase any of the cash equivalent
securities described above and simultaneously commit to resell such
securities at a future date to the seller at an agreed upon price plus
interest. The seller will be required to collateralize the agreement by
transferring securities to the Fund with an initial market value,
including accrued interest, that equals or exceeds the repurchase price,
and the seller will be required to transfer additional securities to the
Fund on a daily basis to ensure that the value of the collateral does
not decrease below the repurchase price. No more than 15% of the Fund's
net assets will be invested in illiquid securities, including repurchase
agreements which have a maturity of longer than seven days. For
purposes of the diversification test for qualification as a regulated
investment company under the Internal Revenue Code, repurchase
agreements are not counted as cash, cash items or receivables, but
rather as securities issued by the counter-party to the repurchase
agreements. If the seller of the underlying security under the
repurchase agreement should default on its obligation to repurchase the
underlying security, the Fund may experience delay or difficulty in
recovering its cash. To the extent that in the meantime, the value of
the security purchased had decreased, the Fund could experience a loss.
While management of the Fund acknowledges these risks, it is expected
that they can be controlled through stringent security selection and
careful monitoring procedures.
INVESTMENTS IN MUTUAL FUNDS. The Fund may invest in shares of other
open and closed-end investment companies which principally invest in
securities of the type in which the Fund invests. This approach will
most likely be used for cash management purposes. The Fund may only
invest in other investment companies within limits set by the Investment
Company Act, which currently allows the Fund to invest up to 10% of its
total assets in other investment companies, although not more than 5% of
the Fund's total assets may be invested in any one investment company
and the Fund's investment in another investment company may not
represent more than 3% of the securities of any one investment company.
Investments in other investment companies will generally involve
duplication of advisory fees and other expenses. The Fund may also
acquire securities of other investment companies beyond such limits
pursuant to a merger, consolidation or reorganization.
OTHER INVESTMENT PRACTICES.
SHORT SALES. If the Fund anticipates that the price of a security will
decline, it may sell the security short and borrow the same security
from a broker or other institution to complete the sale. The Fund may
realize a profit or loss depending upon whether the market price of the
security decreases or increases between the date of the short sale and
the date on which the Fund must replace the borrowed security. The Fund
is required by SEC rules to collateralize short positions by placing
assets in a segregated account and the Fund will not sell securities if,
immediately after and as a result of the sale, the value of all
securities sold short by the Fund exceeds 10% of its total assets. The
value of any one issuer in which the Fund is short may not exceed the
lesser of 2% of the Fund's net assets or 2% of the securities of any
class of the issuers' securities. The Fund's policy regarding short
sales is fundamental.
BORROWING. As a matter of fundamental policy, the Fund may borrow up to
one third of its total assets, taken at market value as a temporary
measure for extraordinary or emergency purposes to meet redemptions or
to settle securities transactions. Any borrowing will be done from a
bank with the required asset coverage of at least 300%. In the event
that such asset coverage shall at any time fall below 300%, the Fund
shall, within three days thereafter (not including Sunday or holidays)
or such longer period as the SEC may prescribe by rules and regulations,
reduce the amount of its borrowings to such an extent that the asset
coverage of such borrowings shall be at least 300%. The Fund will not
pledge more than 10% of its net assets, or issue senior securities as
defined in the Investment Company Act, except for notes to banks.
LENDING OF PORTFOLIO SECURITIES. The Fund may from time to time lend
securities from its portfolio, with a value not exceeding one-third of
its total assets, to banks, brokers and other financial institutions and
receive collateral in cash, a letter of credit issued by a bank or
securities issued or guaranteed by the U.S. Government which will be
maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities. The lending of
securities is a common practice in the securities industry. The Fund
engages in security loan arrangements with the primary objective of
increasing the Fund's income either through investing the cash
collateral in money market mutual funds, short-term interest bearing
obligations or by receiving a loan premium from the borrower. Under the
securities loan agreement, the Fund continues to be entitled to all
dividends or interest on any loaned securities. As with any extension
of credit, there are risks of delay in recovery and loss of rights in
the collateral should the borrower of the security fail financially.
The Fund's policy regarding lending of portfolio securities is
fundamental.
During the period of such a loan, the Fund receives the income on both
the loaned securities and the collateral and thereby increases its
yield. In the event that the borrower defaults on its obligation to
return borrowed securities because of insolvency or otherwise, the Fund
could experience delays and costs in gaining access to the collateral
and could suffer a loss to the extent the value of the collateral falls
below the market value of the borrowed securities.
ILLIQUID AND RESTRICTED SECURITIES. The Fund may invest up to 15% of
its net assets in securities which may be considered illiquid, by virtue
of the absence of a readily available market, legal or contractual
restrictions on resale, longer maturities, or other factors limiting the
marketability of the security. Generally, an illiquid security is any
security that cannot be disposed of within seven days in the ordinary
course of business at approximately the amount at which the Fund has
valued the security. This policy does not limit the acquisition of (i)
restricted securities eligible for resale to qualified institutional
buyers pursuant to Rule 144A under the Securities Act of 1933 or (ii)
commercial paper issued pursuant to Section 4(2) of the Securities Act
of 1933, that are determined to be liquid in accordance with guidelines
established by the Board of Trustees of the Trust. While maintaining
oversight, the Board of Trustees has delegated the day-to-day function
of determining liquidity to the Adviser.
RISKS AND SPECIAL CONSIDERATIONS
SMALL CAPITALIZATION SECURITIES. Investments in common stocks in
general are subject to market, economic and business risks that will
cause their price to fluctuate over time. Therefore, an investment in
the Fund may be more suitable for long-term investors who can bear the
risk of these fluctuations. Additionally, securities of companies with
smaller revenues and capitalizations may offer greater opportunity for
capital appreciation than larger companies, but investment in such
companies present greater risks than securities of larger, more
established companies. Indeed, historically, small capitalization
stocks have been more volatile in price than larger capitalization
stocks. Among the reasons for the greater price volatility of these
securities are the lower degree of liquidity in the markets for such
stocks, and the potentially greater sensitivity of such small companies
to changes in or failure of management, and in many other changes in
competitive, business, industry and economic conditions, including risks
associated with limited product lines, markets, management depth, or
financial resources. Besides exhibiting greater volatility, micro and
small company stocks may, to a degree, fluctuate independently of larger
company stocks. Small company stocks may decline in price as large
company stocks rise, or rise in price as large company stocks decline.
Investors should therefore expect that the value of the Fund's shares
will be more volatile than the shares of a fund that invests in larger
capitalization stocks. Additionally, while the markets in securities of
such companies have grown rapidly in recent years, such securities may
trade less frequently and in smaller volume than more widely held
securities. The values of these securities may fluctuate more sharply
than those of other securities, and a Fund may experience some
difficulty in establishing or closing out positions in these securities
at prevailing market prices. There may be less publicly available
information about the issuers of these securities or less market
interest in such securities than in the case of larger companies, and it
may take a longer period of time for the prices of such securities to
reflect the full value of their issuers' underlying earnings potential
or assets. The Fund should not be considered suitable for investors who
are unable or unwilling to assume the risks of loss inherent in such a
program, nor should investment in the Fund be considered a balanced or
complete investment program.
FOREIGN INVESTMENT. Investments in foreign securities may involve risks
not ordinarily associated with investments in domestic securities.
These risks may include legal, political or economic developments such
as fluctuations in currency rates, imposition of withholding taxes or
exchange controls or other governmental restrictions or political or
policy changes. In addition, with respect to certain countries, there
is the possibility of expropriation of assets, confiscatory taxation, or
political or social unrest that could adversely affect the value of
foreign securities. There may be less publicly available information
about foreign companies than about U.S. companies, and foreign companies
may not be subject to accounting, auditing and financial reporting
standards that are as uniform as those applicable to U.S. companies.
The Fund will attempt to limit risks associated with foreign investing
by investing primarily in securities of stable, developed countries such
as Canada.
INVESTMENT ADVISER. The Adviser has not previously served as the
investment adviser for a mutual fund, and therefore, historical
information about the performance of a mutual fund managed by the
Adviser is not available. However, the performance record of the
Adviser's portfolio management team for its separately managed accounts
over the past thirteen years is provided in the section of the
Prospectus called "Adviser's Investment Performance."
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The Board of Trustees of the Trust consists of five individuals, two of
whom are not "interested persons" of the Trust as defined in the
Investment Company Act. The members of the Trust's Board of Trustees
are fiduciaries for the Fund's shareholders and, in this regard, are
governed by the laws of the State of Delaware. The Trustees establish
policy for the operation of the Fund, and appoint the officers who
conduct the daily business of the Fund. The following is a list of the
Trustees and a brief statement of their principal occupations:
FORD B. DRAPER, JR.* Chairman, President and Treasurer of the Trust;
Founder, President, Director and Chief
Investment Officer of Kalmar Investments since
1982 and Kalmar Investment Advisers since
inception.
WENDELL FENTON* President of the law firm of Richards, Layton
and Finger (joined 1971).
JOHN J. QUINDLEN Trustee of The Rodney Square Fund and Kiewit
Mutual Fund; Senior Vice President and Chief
Financial Officer of E.I. Dupont de Nemours &
Co. from 1954 through 1993 (retired).
DAVID M. REESE, JR.* Portfolio manager/research analyst for Kalmar
Investments from 1982 through March, 1996;
private investor.
DAVID D. WAKEFIELD Executive Secretary, Longwood Foundation and
Welfare Foundation, 1992 to present; Chairman
and President, J.P. Morgan Delaware from 1989
to 1992.
*"Interested person" of the Trust as that term is defined in the
Investment Company Act.
INVESTMENT ADVISER
Kalmar Investment Advisers, located at 3701 Kennett Pike, Greenville,
Delaware 19807 (previously defined as the "Adviser") serves as the
investment adviser for the Fund pursuant to an investment advisory
agreement dated January 31, 1997 (the "Advisory Agreement"). The
Advisory Agreement initially will be in effect for two years, and may be
renewed each year thereafter, provided its continuance is approved
annually by the Board of Trustees, including a majority of the Trustees
who are not "interested persons" of the Fund as defined in the
Investment Company Act.
The Adviser manages the investments of the Fund in accordance with the
Fund's stated investment objective, philosophy and policies and subject
to its limitations or restrictions. Subject to the supervision of the
Board of Trustees, the Adviser makes the Fund's day-to-day investment
decisions, selects brokers and dealers to execute portfolio transactions
and generally manages the Fund's investments. In selecting brokers, the
Adviser seeks to obtain the best net results for the Fund, taking into
account such factors as price (including the applicable brokerage
commission or dealer spread), size of order, difficulty of execution and
operational facilities of the firm involved and the firm's risk in
positioning a block of securities. While the Adviser generally seeks
favorable and competitive commission rates, the Fund does not
necessarily pay the lowest commission or spread available. In addition,
consistent with rules established by the National Association of
Securities Dealers, Inc., the Fund may consider sales of shares of the
Fund as a factor in the selection of brokers or dealers to execute
portfolio transactions for the Fund.
Because of its longer-term investment philosophy, the Fund does not
intend to engage in frequent trading tactics which could result in high
turnover, less favorable tax consequences (i.e., a high proportion of
short-term capital gains relative to long term capital gains) or
increased trading and brokerage expenses paid by the Fund. The Fund
anticipates that its annual portfolio turnover rate should not exceed
50% under normal conditions, although it is impossible to predict
portfolio turnover rates. The Adviser will buy or sell portfolio
securities without regard to holding period if, in its judgment, such
transactions are advisable in light of opportunities in particular
stocks, or a change in circumstances for any particular company or
companies, or in general market, economic or financial conditions.
The Adviser, which is registered as an investment adviser under the
Investment Advisers Act of 1940, is presently wholly-owned by its
founder, Ford B. Draper, Jr. The Adviser utilizes a team approach in
managing the Fund's portfolio with Mr. Draper, as chief investment
officer, leading and supervising the portfolio management team. The
Adviser is the "sister" company to Kalmar Investments, a registered
investment adviser founded in 1982, which has been providing investment
advice to and managing the assets of private accounts since its
inception according to the same investment objective and "Growth-
with-Value" philosophy used by the Fund. The Adviser was organized as a
separate company on November 6, 1996 for the sole purpose of functioning
as the adviser to the Kalmar Funds. The ownership and management of the
Adviser is identical to that of Kalmar Investments, and the same
portfolio management team approach used in managing the assets of the
Fund is used to manage the assets of Kalmar's private accounts.
Kalmar Investments presently manages approximately $600 million
primarily in micro capitalization and small capitalization stocks in
separately managed accounts for clients such as high net worth
individuals and family trusts, corporations, pensions and profit-sharing
plans and institutions such as endowments, foundations, hospitals and
charitable institutions. Kalmar Investments invests assets of its own
profit-sharing plan in shares of the Fund, as do members of its
investment team and other employees.
For its services, the Adviser is paid a monthly fee at the annual rate
of 1.00% of the Fund's average daily net assets. This fee is comparable
to the fees charged by most small company equity mutual fund managers,
however, it is higher than that paid by many other mutual funds for
investment advisory services. During the Fund's first fiscal year, the
Adviser has voluntarily agreed to limit its fees or assume certain
expenses of the Fund to keep the total annual operating costs of the
Fund within specified limits, see "Fund Expenses."
FUND OFFICERS AND PORTFOLIO MANAGERS
[Photo]
FORD B. DRAPER, JR.
CHAIRMAN, PRESIDENT, TREASURER AND CHIEF INVESTMENT OFFICER
A graduate of Yale University, Mr. Draper also received an M.B.A. from
Columbia University Graduate School of Business, and has thirty years
experience in investment research and management. Mr. Draper began his
career in 1967 in the investment research and capital management
departments of Smith, Barney & Co. In 1970, he joined Baker, Fentress &
Company, a publicly-owned closed-end mutual fund, where he performed
original investment research on a broad spectrum of companies and
industries. In 1972, he became Vice President with responsibilities
that included trading, investment research, investment strategy, and
management of the fund's portfolio. For the following ten years at
Baker, Fentress, Mr. Draper developed positive investment performance
for the then $250 million fund. Mr. Draper founded Kalmar Investments
in 1982, which provides investment management services to separately
managed accounts.
[Photo]
JORDAN J. COX
PORTFOLIO MANAGER/RESEARCH ANALYST
After a BA in Economics and Applied Mathematics from Lehigh University
and the University of Oregon Doctoral program in Economics, Mr. Cox
worked from 1986-1989 as a research analyst and Vice President for
Ferris Baker, Watts, and from 1989-1990 as Director of Institutional
Research for Johnston Lemon & Co., both regional brokerage firms. His
research focused on small to medium sized companies with emphasis in the
computer software and service industries. From 1990-1995 he moved into
that industry, as Senior Director of New Business Development of Systems
& Computer Technology, a publicly traded computer software and services
firm. Mr. Cox joined Kalmar Investments in 1995.
[Photo]
GREGORY A. HARTLEY, C.F.A.
PORTFOLIO MANAGER/RESEARCH ANALYST
Mr. Hartley graduated from Indiana University's School of Business, held
an accounting position, and later earned an M.B.A. from Indiana
University's Graduate School of Business. Mr. Hartley joined Kalmar
Investments in 1993 after nine years of investment experience. From
1984-1993, he worked for Ashford Capital Management, Inc., a then $100
million investment management and consulting firm. As a senior analyst
and member of the investment committee doing original research on small
growth companies, from health care to specialty manufacturing and
financial services to technology, he was responsible for new idea stock
selection and management of over $50 million in portfolio holdings. Mr.
Hartley joined Kalmar Investments in 1993.
[Photo]
LINN M. MORROW
DIRECTOR OF CLIENT SERVICES
Mr. Morrow, with eighteen years experience in investment-related client
services, holds a BS in Economics from the University of Pennsylvania's
Wharton School. He began his career with Salomon Brothers in 1968, and
subsequently worked in the corporate trust departments of Chemical Bank,
NY and the Mellon Bank, NA. In 1985 he joined Delaware Investment
Advisers as Vice President of Client Services. For ten years at
Delaware, his responsibilities were acting as liaison between clients
and the investment team, client reviews, client communications and new
business. Mr. Morrow joined Kalmar Investments in 1996 to direct its
client services.
[Photo]
CURT J. ORGANT, C.F.A. (I & II)
PORTFOLIO MANAGER/RESEARCH ANALYST
Mr. Organt earned a BS in Finance from LaSalle University and an MBA
from Wake Forest University. He subsequently worked at T. Rowe Price
Associates in Baltimore as an analyst and assistant portfolio manager
from 1992-1996. His research focused on small companies in many
industries for the T. Rowe Price O.T.C. Fund, the Small Cap Value Fund,
and the New Horizons Fund. Mr. Organt joined Kalmar Investments in
1996.
[Photo]
DANA F. WALKER, C.F.A.
PORTFOLIO MANAGER/RESEARCH ANALYST
After the University of Virginia's McIntire School of Commerce, Mr.
Walker worked from 1982-1986 for Delfi Management, Inc., investment
advisor to the Sigma Funds, a then $350 million mutual fund group. As a
senior analyst doing original research in consumer-related industries,
health care, retailing, and distribution, he was responsible for
investment selections from these areas for the Sigma funds and for
portfolios of DP Asset Management, an affiliated $100 million investment
advisory firm. Mr. Walker joined Kalmar Investments in 1986.
DISTRIBUTOR
Rodney Square Distributors, Inc. ("RSD"), a subsidiary of Wilmington
Trust Company located at 1105 North Market Street, Wilmington, DE 19890,
has been engaged to distribute the Fund's shares pursuant to a
distribution agreement dated January 31, 1997 (the "Distribution
Agreement"). Under the Distribution Agreement, RSD directly or through
its affiliates, provides distribution and underwriting services,
investor support and certain administrative services.
ADMINISTRATOR, TRANSFER AGENT AND CUSTODIAN
Rodney Square Management Corporation ("Rodney Square"), a subsidiary of
Wilmington Trust Company located at Rodney Square North, 1100 N. Market
Street, Wilmington, DE 19890 serves as the Fund's Administrator,
Transfer Agent and Dividend Paying Agent and also provides accounting
services to the Fund pursuant to separate Administration, Transfer
Agency and Accounting Services Agreements with the Trust, each dated
January 31, 1997.
As Administrator, Rodney Square supplies office facilities, non-
investment related statistical and research data, stationery and office
supplies, executive and administrative services, internal auditing and
regulatory compliance services. Rodney Square also assists in the
preparation of reports to shareholders, prepares proxy statements,
updates prospectuses and makes filings with the U.S. Securities and
Exchange Commission (the "SEC") and state securities authorities.
Rodney Square performs certain budgeting and financial reporting and
compliance monitoring activities. For the services provided as
Administrator, Rodney Square receives annual fees equal to 0.15% of the
average annual net assets of the Trust for the first $50 million in
assets and 0.10% for assets in excess of $50 million, subject to certain
minimum amounts. Rodney Square has also agreed to waive specified
portions of its fees during the Fund's first year of operations,
provided the Adviser would have otherwise been required to waive its
fees under the voluntary waiver described under "Fund Expenses." Rodney
Square also serves as the Transfer Agent and Dividend Paying Agent of
the Fund as well as the Accounting Agent to the Fund. As Transfer Agent
and Dividend Paying Agent, Rodney Square is responsible for
administering the issuance, transfer and redemption or repurchase of
shares, as well as the payment of distributions and dividends. As
Accounting Agent, Rodney Square determines the Fund's net asset value
per share and provides accounting services to the Fund.
The custodian for the Fund is Wilmington Trust Company ("WTC"), Rodney
Square North, 1100 N. Market Street, Wilmington, DE 19890-0001.
EXPENSES
Except as indicated above, the Fund is responsible for the payment of
the pro rata portions of the Trust's expenses attributable to the Fund,
as distinguished from any other series of the Trust, other than those
borne by the Adviser, and such expenses may include, but are not limited
to: (a) management fees; (b) the charges and expenses of the Fund's
legal counsel and independent auditors; (c) brokers' commissions, mark-
ups and mark-downs and any issue or transfer taxes chargeable to the
Fund in connection with its securities transactions; (d) all taxes and
corporate fees payable by the Fund to governmental agencies; (e) the
fees of any trade association of which the Trust or Fund is a member;
(f) the cost of certificates, if any, representing shares of the Fund;
(g) amortization and reimbursements of the organization expenses of the
Trust or Fund and the fees and expenses involved in registering and
maintaining registration of the Trust and its shares with the SEC, the
costs of notice filings with the various states and the preparation and
printing of the Trust's registration statements and prospectuses for
such purposes; (h) allocable communications expenses with respect to
investor services and all expenses of shareholders and trustees'
meetings and of preparing, printing and mailing prospectuses and reports
to shareholders; (i) litigation and indemnification expenses and other
extraordinary expenses not incurred in the ordinary course of the
Trust's business; and (j) compensation for employees of the Trust.
CALCULATION OF NET ASSET VALUE
Rodney Square determines the net asset value per share ("net asset
value") of the Fund as of the close of regular trading on each day that
the New York Stock Exchange is open for unrestricted trading from Monday
through Friday (generally 4:00 p.m.) and on which there is a purchase or
redemption of the Fund's shares. The net asset value is determined by
dividing the value of the Fund's securities, plus any cash and other
assets, less all liabilities, by the number of shares outstanding.
Expenses and fees of the Fund, including management, distribution and
shareholder servicing fees, are accrued daily and taken into account for
the purpose of determining the net asset value.
Fund securities listed or traded on a securities exchange for which
representative market quotations are available will be valued at the
last quoted sales price on the security's principal exchange on that
day. Listed securities not traded on an exchange that day will be
valued at the mean between the last bid and asked price on that day, if
any. Unlisted securities which are quoted on the National Association
of Securities Dealers National Market System for which there are sales
of such securities on such day, shall be valued at the last sale price
reported on such system the day the security is valued. If there are no
such sales on such day, the value shall be the mean between the closing
asked price and closing bid price. Securities for which market
quotations are not readily available and all other assets will be valued
at their respective fair value as determined in good faith by, or under
procedures established by, the Board of Trustees. In determining fair
value, the Fund or its service providers may employ an independent
pricing service.
Money market securities with less than sixty days remaining to maturity
when acquired by the Fund will be valued on an amortized cost basis by
the Fund, excluding unrealized gains or losses thereon from the
valuation. This is accomplished by valuing the security at cost and
then assuming a constant amortization to maturity of any premium or
discount from cost versus par value at maturity. If the Fund acquires a
money market security with more than sixty days remaining to its
maturity, it will be valued at current market value until the 60th day
prior to maturity, and will then be valued on an amortized cost basis
based upon the value on such date unless the Trustees determine during
such 60-day period that this amortized cost value does not represent
fair market value.
Each share of the Fund will bear, pro-rata, all of the common expenses
of the Fund. The net asset values of all outstanding shares of the Fund
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
such shares. All income earned and expenses incurred by the Fund will
be borne on a pro-rata basis by each outstanding share, based on each
share's percentage in the Fund represented by the value of such shares.
HOW TO PURCHASE SHARES
Shares of the Fund are offered on a no-load basis, without the
imposition of any sales or distribution fees through investment
management and financial consultants, brokers or dealers, or directly
through the Fund's distributor. Shares of the Kalmar "Growth-with-
Value" Micro Cap Fund series of the Trust (the "Micro Cap Fund") may be
purchased in a similar manner, and such shares are offered through a
separate prospectus. The Fund's shares are offered at the net asset
value per share next determined after the receipt and acceptance of a
purchase order and payment in proper form by the Fund. Information on
how to invest in the Fund is presented below, and any requests for
applications, additional information or questions may be directed to
Rodney Square at 800 282-2319.
MINIMUM INVESTMENT. The minimum initial investment for the Fund is
$10,000, and subsequent investments must total at least $1,000. The
minimum initial investment requirement for qualified retirement accounts
is $1,000 and there is no minimum for subsequent investments.
PURCHASE PRICE. Purchase orders for shares of the Fund which are
received in proper form and accepted by the Fund prior to the close of
regular trading hours on the New York Stock Exchange (currently 4:00
p.m. Eastern time) on any day that the Fund calculates its net asset
value per share, are priced according to the net asset value determined
on that day. Purchase orders received in proper form and accepted by
the Fund after the close of the Exchange on a particular day are priced
as of the time the net asset value per share is next determined.
IN-KIND PURCHASES. At the discretion of the Fund, investors may be
permitted to purchase Fund shares by transferring securities to the Fund
that: (i) meet the Fund's investment objective and policies; (ii) are
acquired by the Fund for investment and not for retail purposes; (iii)
are liquid securities which are not restricted as to transfer either by
law or liquidity of market; and (iv) at the discretion of the Fund, the
value of any such security (except U.S. Government Securities) being
exchanged together with other securities of the same issuer owned by the
Fund will not exceed 5% of the net assets of the Fund immediately after
the transactions.
Securities transferred to the Fund will be valued in accordance with the
same procedures used to determine the Fund's net asset value. All
dividends, interests, subscription, or other rights pertaining to such
securities shall become the property of the Fund and must be delivered
to the Fund by the investor upon receipt from the issuer. Investors who
are permitted to transfer such securities will be required to recognize
all gains or losses on such transfers, and pay taxes thereon, if
applicable, measured by the difference between the fair market value of
the securities and the investors' bases therein.
Purchases may be made in one of the following ways:
PURCHASES BY MAIL. Shareholders may purchase shares by sending a check
drawn on a U.S. bank payable to the Kalmar "Growth-with-Value" Small Cap
Fund, along with a completed shareholder application, to Kalmar "Growth-
with-Value" Fund, c/o Rodney Square Management Corporation, P.O. Box
8987, Wilmington, DE 19899-9752. A shareholder application sent by
overnight mail should be sent to Kalmar "Growth-with-Value" Fund, c/o
Rodney Square Management Corporation, 1105 N. Market St., 3rd Floor,
Wilmington, DE 19801. If a subsequent investment is being made,
investors should use the purchase stub and return envelope from the most
recent account statement and the check should also indicate the
investor's Fund account number.
PURCHASES BY WIRE. To purchase shares by wiring federal funds, Rodney
Square must first be notified by calling (800) 282-2319 to request an
account number and furnish the Fund with a tax identification number.
Following notification to Rodney Square, federal funds and registration
instructions should be wired through the Federal Reserve System to:
RODNEY SQUARE MANAGEMENT CORPORATION
C/O WILMINGTON TRUST COMPANY
WILMINGTON, DE
DDA #2731-2705
ABA #0311 000 92
ATTENTION: KALMAR "GROWTH-WITH-VALUE" SMALL CAP FUND
FURTHER CREDIT [SHAREHOLDER NAME AND ACCOUNT NUMBER]
For initial purchases by wire, a completed application with signature(s)
of investor(s) must promptly be filed with Rodney Square at one of the
addresses stated above under "Purchases By Mail." Investors should be
aware that some banks may impose a wire service fee.
AUTOMATIC INVESTMENT PLAN. Shareholders may purchase Fund shares
through an Automatic Investment Plan. The Plan provides a convenient
method by which investors may have monies deducted directly from their
checking, savings or bank money market accounts for investment in the
Fund. Under the Plan, Rodney Square, at regular intervals, will
automatically debit a shareholder's bank checking account in an amount
of $100 or more (subsequent to the $10,000 minimum initial investment),
as specified by the shareholder. A shareholder may elect to invest the
specified amount monthly, bimonthly, quarterly, semi-annually or
annually. The purchase of Fund shares will be effected at the net asset
value at the close of regular trading on the New York Stock Exchange
(currently 4:00 p.m. Eastern time) on or about the 20th day of the
month. To obtain an Application for the Automatic Investment Plan,
check the appropriate box of the Application accompanying this
Prospectus or call Rodney Square at (800) 282-2319.
EXCHANGE PRIVILEGE. Shareholders of the Fund may exchange all or a
portion of their shares of the Fund for shares of the Micro Cap Fund,
and shareholders of the Micro Cap Fund may similarly exchange into the
Fund, provided the Fund is authorized to sell its shares in the state
where the purchaser is located. A purchase or redemption of shares
through an exchange will be effected at the relative net asset values
per share of each Fund next determined after receipt and acceptance of
the request.
To obtain a Prospectus of the Micro Cap Fund, or to obtain more
information about exchanges or place exchange orders contact Rodney
Square at (800) 282-2319. The Fund reserves the right to terminate or
modify the exchange offer described here and will give shareholders
sixty days notice of such termination or modification as required by the
SEC.
HOW TO REDEEM SHARES
Shareholders may redeem all or a portion of their shares without charge
on any day that the Fund calculates its net asset value. See
"Calculation of Net Asset Value." Except as noted below, redemption
requests received and accepted by Rodney Square prior to the close of
regular trading hours on the Exchange on any business day that the Fund
calculates its per share net asset value are effective at the net asset
value per share determined that day. Redemption requests received and
accepted by Rodney Square after the close of the Exchange are effective
as of the time the net asset value per share is next determined.
Redemption proceeds are normally sent on the next business day following
receipt and acceptance by the Fund of the redemption request but, in any
event, redemption proceeds are sent within seven business days of
receipt and acceptance of the request, or earlier if required under
applicable law. Redemption requests should be accompanied by the Fund's
name and the shareholder's account number. Corporations, other
organizations, trusts, fiduciaries and other institutional investors may
be required to furnish certain additional documentation to authorize
redemptions.
Delivery of the proceeds of a redemption of shares purchased and paid
for by check shortly before the receipt of the request may be delayed
until the Fund determines that the Custodian has completed collection of
the purchase check which may take up to 10 days. Also, redemption
requests for accounts for which purchases were made by wire may be
delayed until the Fund receives a completed application for the account.
The Board of Trustees may suspend the right of redemption or postpone
the date of payment during any period when (a) trading on the New York
Stock Exchange is restricted as determined by the SEC or such Exchange
is closed for other than weekends and holidays, (b) the SEC has by order
permitted such suspension, or (c) an emergency, as defined by rules of
the SEC, exists during which time the sale of Fund shares or valuation
of securities held by the Fund are not reasonably practicable.
Shares may be redeemed in one of the following ways:
REDEMPTION BY MAIL. A written redemption request must (i) identify the
shareholder's account number, (ii) state the number of shares or dollar
amount to be redeemed, and (iii) be signed by each registered owner
exactly as the shares are registered. A redemption request for an
amount in excess of $25,000, or for any amount if for payment other than
to the shareholder of record, or if the proceeds are to be sent
elsewhere than the address of record, must be accompanied by a guarantee
of their signature by an "eligible guarantor institution" as defined in
Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, brokers, dealers, credit unions,
national securities exchanges, registered securities associations,
clearing agencies and savings associations. Broker-dealers guaranteeing
signatures must be a member of a clearing corporation or maintain net
capital of at least $100,000. Credit unions must be authorized to issue
signature guarantees. Signature guarantees will be accepted from any
eligible guarantor institution which participates in a signature
guarantee program. A signature and a signature guarantee are required
for each person in whose name the account is registered. The transfer
agent may require additional supporting documents for redemptions made
by corporations, executors, administrators, trustees and guardians.
Written redemption instructions should be submitted to Kalmar "Growth-
with-Value" Small Cap Fund, c/o Rodney Square Management Corporation,
P.O. Box 8987, Wilmington, DE 19899-9752. A redemption order sent by
overnight mail should be sent to Kalmar "Growth-with-Value" Small Cap
Fund, c/o Rodney Square Management Corporation, P.O. Box 8987, 1105 N.
Market Street, 3rd Floor, Wilmington, DE 19801. A redemption request
will not be deemed to be properly received until the transfer agent
receives all required documents in proper form. Questions with respect
to the proper form for redemption requests should be directed to the
transfer agent at (800) 282-2319.
REDEMPTION BY TELEPHONE. Shareholders who prefer to redeem their shares
by telephone must elect to do so by completing the telephone redemption
section of the shareholder application which describes the telephone
redemption procedures in more detail and requires certain information
that will be used to identify the shareholder when a telephone
redemption request is made. Telephone redemptions may be made in
amounts up to $50,000 by instructing the transfer agent at (800)
282-2319. In order to arrange for redemption by wire or telephone after
an account has been opened, or to change the bank or account designated
to receive redemption proceeds, a written request must be sent to the
transfer agent at the address listed above. A signature guarantee is
required of all shareholders in order to change telephone redemption
privileges.
Neither the Fund nor any of its service contractors will be liable for
any loss or expense in acting upon any telephone instructions that are
reasonably believed to be genuine. In attempting to confirm that
telephone instructions are genuine, the Fund will use such procedures as
are considered reasonable, including requesting a shareholder to
correctly state his or her Fund account number, the name in which his or
her account is registered, the number of shares to be redeemed and
certain other information necessary to identify the shareholder.
During times of drastic economic or market changes, the telephone
redemption privilege may be difficult to implement. In the event that
shareholders are unable to reach Rodney Square by telephone, you may
make a redemption request by mail. The Fund or Rodney Square reserves
the right to refuse a wire or telephone redemption if it is believed
advisable to do so. Procedures for redeeming Fund shares by wire or
telephone may be modified or terminated at any time by the Fund.
REDEMPTIONS BY WIRE. Redemption proceeds may be wired to a
predesignated bank account at any commercial bank in the United States
if the amount is $1,000 or more. The receiving bank may charge a fee
for this service. Amounts redeemed by wire are normally wired on the
next business day after receipt and acceptance of redemption
instructions (if received before the close of regular trading on the
Exchange), but in no event later than five days following such receipt
and acceptance.
IN-KIND REDEMPTION. The Fund will satisfy redemption requests in cash
to the fullest extent feasible, so long as such payments would not, in
the opinion of the Adviser or the Board of Trustees, result in the
necessity of the Fund selling assets under disadvantageous conditions
and to the detriment of the remaining shareholders of the Fund.
Pursuant to the Fund's Agreement and Declaration of Trust, payment for
shares redeemed may be made either in cash or in-kind, or partly in cash
and partly in-kind. Any portfolio securities paid or distributed in-
kind would be valued as described under "Calculation of Net Asset
Value." In the event that an in-kind distribution is made, a
shareholder may incur additional expenses, such as the payment of
brokerage commissions, on the sale or other disposition of the
securities received from the Fund. In-kind payments need not constitute
a cross-section of the Fund's portfolio. Where a shareholder has
requested redemption of all or a part of the shareholder's investment,
and where the Fund completes such redemption in-kind, the Fund will not
recognize gain or loss for federal tax purposes, on the securities used
to complete the redemption but the shareholder will recognize gain or
loss equal to the difference between the fair market value of the
securities received and the shareholder's basis in the Fund shares
redeemed.
INVOLUNTARY REDEMPTION. The Fund reserves the right to redeem an
investor's account where the account is inactive and is worth less than
the minimum initial investment when the account was established,
currently $10,000. In calculating the minimum amount necessary to avoid
involuntary redemption, the Fund will include amounts held in both the
Fund and the Micro Cap Fund together. The Fund will advise the
shareholder of its intention to redeem the account in writing at least
sixty (60) days prior to effecting such redemption, during which time
the shareholder may purchase additional shares in any amount necessary
to bring the account back to the appropriate minimum amount, and the
Fund will not redeem any account that is worth less than the appropriate
minimum amount solely on account of a market decline.
SYSTEMATIC WITHDRAWAL PLAN. Shareholders who own shares with a value of
$10,000 or more may participate in the Systematic Withdrawal Plan.
Under the Plan, shareholders may automatically redeem a portion of their
Fund shares monthly, bimonthly, quarterly, semiannually or annually.
The minimum withdrawal available is $100. The redemption of Fund shares
will be effected at their net asset value at the close of the NYSE on or
about the 25th day of the month at the frequency selected by the
shareholder. If you expect to purchase additional Fund shares, it may
not be to your advantage to participate in the Systematic Withdrawal
Plan because contemporary purchases and redemption may result in adverse
tax consequences. For further details about this service, see the
Application or call the Transfer Agent at (800) 282-2319.
RETIREMENT PLANS
Shares of the Fund are available for use in all types of tax-deferred
retirement plans such as IRA's, employer-sponsored defined contribution
plans (including 401(k) plans) and tax-sheltered custodial accounts
described in Section 403(b)(7) of the Internal Revenue Code. Qualified
investors benefit from the tax-free compounding of income dividends and
capital gains distributions. Application forms and brochures describing
investments in the Fund for retirement plans can be obtained from Rodney
Square by calling (800) 282-2319. The following is a description of the
types of retirement plans for which the Fund's shares may be used for
investment:
INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS"). Individuals, who are not
active participants (and, when a joint return is filed, who do not have
a spouse who is an active participant) in an employer maintained
retirement plan are eligible to contribute on a deductible basis to an
IRA account. The IRA deduction is also available for individual
taxpayers and married couples with adjusted gross incomes not in excess
of certain specified limits. All individuals who have earned income may
make nondeductible IRA contributions to the extent that they are not
eligible for a deductible contribution. Income earned by an IRA account
will continue to be tax-deferred. A special IRA program is available
for employers under which the employers may establish IRA accounts for
their employees in lieu of establishing tax qualified retirement plans.
Known as SEP-IRA's (Simplified Employee Pension-IRA), they free the
employer of many of the recordkeeping requirements of establishing and
maintaining a tax qualified retirement plan trust.
If you are entitled to receive a distribution from a qualified
retirement plan, you may rollover all or part of that distribution into
the Fund's IRA. Your rollover contribution is not subject to the limits
on annual IRA contributions. You can continue to defer Federal income
taxes on your contribution and on any income that is earned on that
contribution.
WTC makes available its services as an IRA Custodian for each
shareholder account that is established as an IRA. For these services,
WTC receives an annual fee of $10.00 per account, which fee is paid
directly to WTC by the IRA shareholder. If the fee is not paid by the
date due, shares of the Fund owned by the shareholder in the IRA account
will be redeemed automatically for purposes of making the payment.
401(K) PLANS AND OTHER DEFINED CONTRIBUTION PLANS. The Fund's shares
may be used for investment in defined contribution plans by both self-
employed individuals (sole proprietorships and partnerships) and
corporations who wish to use shares of the Fund as a funding medium for
a retirement plan qualified under the Internal Revenue Code. Such plans
typically allow investors to make annual deductible contributions, which
may be matched by their employers up to certain percentages based on the
investor's pre-contribution earned income.
403(B)(7) RETIREMENT PLANS. The Fund's shares are also available for
use by schools, hospitals, and certain other tax-exempt organizations or
associations who wish to use shares of the Fund as a funding medium for
a retirement plan for their employees. Contributions are made to the
403(b)(7) Plan as a reduction to the employee's regular compensation.
Such contributions, to the extent they do not exceed applicable
limitations (including a generally applicable limitation of $9,500 per
year), are excludable from the gross income of the employee for Federal
Income tax purposes.
PERFORMANCE INFORMATION
Advertisements, sales literature and communications to shareholders may
contain measures of the Fund's performance, including various
expressions of total return, current yield or current distribution rate.
They may also cite statistics relating to volatility and risk and
compare such measures to those of other funds. The Fund's total return
may be calculated on an annualized and aggregate basis for various
periods as will be stated in the advertisement. Average annual return
reflects the average percentage change per year in value of an
investment in the Fund. Aggregate total return reflects the total
percentage change over the stated period.
The Fund may compare its investment performance to other mutual funds,
or groups of mutual funds, with similar or dissimilar investment
objectives and policies that are tracked or ranked by independent
services such as Lipper Analytical Services, Inc. or Morningstar, Inc.
or other financial or industry publications that monitor the performance
of mutual funds, investment managers and the like. The Fund may also
compare its performance to unmanaged stock indices such as the Russell
2000 Small Capitalization Index, which is composed of the 2000 smallest
stocks in the Russell 3000, a market value weighted index of the 3,000
largest U.S. publicly-traded companies, or the Standard & Poor's 500
Stock Index, an unmanaged index composed of 400 industrial stocks, 40
financial stocks, 40 utility stocks and 20 transportation stocks.
Comparisons of performance assume reinvestment of dividends. The Fund
may also quote performance information or information relating to fund
management, investment philosophy or investment techniques, that is
published in financial and business publications including Money
Magazine, Forbes, Barron's or The Wall Street Journal, etc. Further
information about the sources for comparative performance and other
information that may be utilized by the Fund, and information about the
Fund's calculation of performance figures, is contained in the Fund's
Statement of Additional Information.
All data will be based on the Fund's past investment results and does
not predict future performance. Investment performance, which will
vary, is based on many factors, including market conditions, the
composition of the investments in the Fund, and the Fund's operating
expenses. Investment performance also often reflects the risk
associated with the Fund's investment objective and policies. In
addition, averages are generally unmanaged, and items included in the
calculations of such averages may not be identical to the formula used
by the Fund to calculate its performance. These factors should be
considered when comparing the Fund to other mutual funds and other
investment vehicles.
GENERAL INFORMATION
SHARES OF BENEFICIAL INTEREST AND VOTING RIGHTS. The Trust was
organized as a Delaware business trust on November 6, 1996. The Trust's
Agreement and Declaration of Trust permits the trustees to issue an
unlimited number of shares of beneficial interest in various series or
classes (subseries) with a par value of $0.01 per share. Each series,
in effect, represents a separate mutual fund with its own investment
objective and policies. The Board of Trustees has the power to
designate additional series or classes of shares of beneficial interest
and to classify or reclassify any unissued shares with respect to such
series or classes.
The Trust's Agreement and Declaration of Trust gives shareholders the
right to vote: (i) for the election or removal of trustees; (ii) with
respect to additional matters relating to the Trust as required by the
Investment Company Act; and (iii) on such other matters as the trustees
consider necessary or desirable. The shares of the Fund each have one
vote and, when issued, will be fully paid and non-assessable and within
each series or class, have no preference as to conversion, exchange,
dividends, retirement or other features. The shares of the Trust which
the trustees may, from time to time, establish, shall have no preemptive
rights. The shares of the Trust have non-cumulative voting rights,
which means that the holders of more than 50% of the shares voting for
the election of trustees can elect 100% of the trustees if they choose
to do so. A shareholder is entitled to one vote for each full share
held (and a fractional vote for each fractional share held), then
standing in their name on the books of the Trust. On any matter
submitted to a vote of shareholders, all shares of the Trust then issued
and outstanding and entitled to vote on a matter shall vote without
differentiation between separate series on a one-vote-per share basis.
If a matter to be voted on does not affect the interests of all series
of the Trust, then only the shareholders of the affected series shall be
entitled to vote on the matter.
SHAREHOLDER MEETINGS. Pursuant to the Trust's Agreement and Declaration
of Trust, the Trust does not intend to hold shareholder meetings except
when required to elect trustees, or with respect to additional matters
relating to the Trust as required under the Investment Company Act.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
The Fund intends to declare and pay annual dividends to its shareholders
of substantially all of its net investment income, if any, earned during
the year from its investments. The Fund will distribute net realized
capital gains, if any, once with respect to each year. Expenses of the
Fund, including the advisory fee, are accrued each day. Reinvestments
of dividends and distributions in additional shares of the Fund will be
made at the net asset value determined on the ex date of the dividend or
distribution unless the shareholder has elected in writing to receive
dividends or distributions in cash. An election may be changed by
notifying Rodney Square in writing thirty days prior to record date.
Shareholders may call Rodney Square for more information. All shares of
the Fund will share proportionately in the investment income and
expenses of the Fund.
The Fund intends to qualify annually to be treated as a regulated
investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). As such, the Fund will not be subject
to federal income tax, or to any excise tax, to the extent its earnings
are distributed as provided in the Code and by satisfying certain other
requirements relating to the sources of its income and diversification
of its assets.
Dividends from net investment income or net short-term capital gains
will be taxable to shareholders as ordinary income, whether received in
cash or in additional shares. For corporate investors in the Fund,
dividends from net investment income will generally qualify in part for
the 70% corporate dividends-received deduction. However, the portion of
the dividends so qualified depends on the aggregate qualifying dividend
income received by the Fund from domestic (U.S.) sources.
Distributions paid by the Fund from long-term capital gains, whether
received in cash or in additional shares, are taxable to investors as
long-term capital gains, regardless of the length of time an investor
has owned shares in the Fund. The Fund does not seek to realize any
particular amount of capital gains during a year; rather, realized gains
are a byproduct of management activities. Consequently, capital gains
distributions may be expected to vary considerably from year to year.
Also, if purchases of shares in a Fund are made shortly before the
record date for a capital gains distribution or a dividend, a portion of
the investment will be returned as a taxable distribution.
Dividends which are declared in October, November or December to
shareholders of record in such a month but which, for operational
reasons, may not be paid to the shareholder until the following January,
will be treated for tax purposes as if paid by the Fund and received by
the shareholder on December 31 of the calendar year in which they are
declared.
A sale or redemption of shares of the Fund is a taxable event and may
result in a capital gain or loss to shareholders subject to tax. Any
loss incurred on sale or exchange of a Fund's shares held for six months
or less will be treated as a long-term capital loss to the extent of any
capital gain dividends received with respect to such shares.
Investors should also be aware that, if the Fund has unrealized gains at
the time they purchase shares in the Fund, part of their purchase price
may be returned to them in the form of a capital gain distribution when
and if such gains are later realized by the Fund. Moreover, on
commencement of the Fund, existing clients of Adviser will have the
opportunity to transfer their assets to the Fund on a tax-free basis;
any gain inherent in such assets at the time of contribution will
carryover to the Fund.
In addition to federal taxes, shareholders may be subject to state and
local taxes on distributions. It is recommended that shareholders
consult their tax advisers regarding specific questions as to federal,
state, local or foreign taxes. Each year, the Fund will mail you
information on the tax status of the Fund's dividends and distributions
made to you.
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not
complied with IRS taxpayer identification regulations. You may avoid
this withholding requirement by certifying on your account registration
form your proper taxpayer identification number and by certifying that
you are not subject to backup withholding.
The tax discussion set forth above is included for general information
only. Prospective investors should consult their own tax advisers
concerning the federal, state, local or foreign tax consequences of an
investment in the Fund. Additional information on tax matters relating
to the Fund and to its shareholders is included in the Statement of
Additional Information.
SHAREHOLDER ACCOUNTS
Rodney Square, as Transfer Agent, maintains for each shareholder an
account expressed in terms of full and fractional shares of the Fund
rounded to the nearest 1/1000th of a share. In the interest of economy
and convenience, the Fund does not issue share certificates. Each
shareholder is sent a statement at least quarterly showing all purchases
in or redemption from the shareholder's account. The statement also
sets forth the balance of shares held in the shareholder's account.
<PAGE>
KALMAR
POOLED
INVESTMENT
TRUST
- - ----------
INVESTMENT ADVISER
Kalmar Investment Advisers
Barley Mill House
3701 Kennett Pike
Greenville, DE 19807
UNDERWRITER
Rodney Square Distributors, Inc.
1105 N. Market Street
Wilmington, DE 19890
SHAREHOLDER SERVICES
Rodney Square Management Corporation
Rodney Square North
1100 N. Market Street
Wilmington, DE 19890-0001
CUSTODIAN
Wilmington Trust Company
Rodney Square North
1100 N. Market Street
Wilmington, DE 19890-0001
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
AUDITORS
Coopers & Lybrand, L.L.P.
2400 Eleven Penn Center
Philadelphia, PA 19103
<PAGE>
KALMAR "GROWTH-WITH-VALUE" SMALL CAP FUND
- - ------------------------------------------------------------------------------
SHAREHOLDER APPLICATION
- - ------------------------------------------------------------------------------
Send Completed Application to:
KALMAR KALMAR POOLED INVESTMENT TRUST
POOLED C/O RODNEY SQUARE MANAGEMENT CORPORATION
INVESTMENT P.O. BOX 8987
TRUST WILMINGTON, DE 19899-9752
- - ------------------------------------------------------------------------------
1. ACCOUNT REGISTRATION - PLEASE PRINT
__ INDIVIDUAL OR JOINT ACCOUNT
- - ------------------------------------------------------------------------------
First name Middle initial Last name Social Security Number
- - ------------------------------------------------------------------------------
Joint owner(s) (Joint ownership means "joint tenants with rights of
survivorship" unless otherwise specified.)
- - ------------------------------------------------------------------------------
__ GIFT/TRANSFER TO A MINOR
_____________________________ As Custodian for ______________________________
Name of Custodian - ONE ONLY Minor's Name
Under the __________ Uniform Gift/Transfer to Minors Act.
State
- - -------------------------------------------------
Minor's Social Security Number
- - ------------------------------------------------------------------------------
__ TRUST __ CORPORATION __ PARTNERSHIP __ OTHER ENTITY ___________________
- - ------------------------------------------------------------------------------
Name of Entity (Corporate Resolution/Partnership Agreement Required)
- - -------------------------------------------------
Taxpayer Identification Number
- - -------------------------------
Name of each trustee (if any)
- - -------------------------------------------------
Date of trust document (must be completed for trust registration)
- - ------------------------------------------------------------------------------
2. ADDRESS
ACCOUNT HOLDER
- - ------------------------------------------------------------------------------
Street Address Daytime Phone (including Area Code)
(P.O. Box acceptable if street address is given)
- - ------------------------------------------------------------------------------
City State Zip code Evening Phone (including Area Code)
I am a citizen of: __ U.S. __ __________________________________________
INTERESTED PARTY,DUPLICATE ACCOUNT STATEMENT
- - ------------------------------------------------------------------------------
Number and Street Telephone No. (Include Area Code)
- - ------------------------------------------------------------------------------
Apartment, Floor or Room Number
- - ------------------------------------------------------------------------------
City State Zip
- - ------------------------------------------------------------------------------
3. INITIAL INVESTMENT - MINIMUM $10,000
Enclosed is a check payable to the Kalmar "Growth-with-Value" Small Cap Fund
for $_________
__ By Federal Funds wire (Please call (800) 282-2319 for instructions):
- - ------------------------------------------------------------------------------
Name of Bank Wire Amount ($) Wire Date
- - ------------------------------------------------------------------------------
4. DISTRIBUTIONS
All dividends and distributions will be automatically reinvested in additional
shares at net asset value unless otherwise indicated by checking the box
below:
___ Do NOT reinvest my dividends and capital gains.
If dividends adn distributions are distributed in cash, you have the option to
receive such amounts either by direct deposit into your bank account or by
check. Please check one box below:
__ Direct Deposit __ Check
PLEASE ATTACH A VOIDED CHECK IF YOU CHOOSE DIRECT DEPOSIT.
- - ------------------------------------------------------------------------------
5. SIGNATURE AND TAX CERTIFICATIONS
I have received and read the Prospectus for the Kalmar "Growth-with-Value"
Small Cap Fund and agree to its terms; I am of legal age. I understand that
investment in these shares involves investment risks, including possible loss
of principal. If a corporate customer, I certify that appropriate corporate
resolutions authorizing investment in Kalmar "Growth-with-Value" Small Cap
Fund have been duly adopted.
I certify under penalties of perjury that the Social Security number or
taxpayer identification number shown above is correct. Unless the box below
is checked, I certify under penalties of perjury that I am not subject to
backup withholding because the Internal Revenue Service (a) has not notified
me that I am as a result of failure to report all interest or dividends, or
(b) has notified me that I am no longer subject to backup withholding. The
certifications in this paragraph are required from all nonexempt persons to
prevent backup withholding of 31% of all taxable distributions and gross
redemption proceeds under the federal income tax law.
__ Check here if you are subject to backup withholding.
- - ------------------------------------------------------------------------------
Signature Date
- - ------------------------------------------------------------------------------
Signature Date
Check one: __ Owner __ Trustee __ Custodian __ Other________
- - ------------------------------------------------------------------------------
6. OPTIONAL SHAREHOLDER PRIVILEGES
A. TELEPHONE REDEMPTION AUTHORIZATION
I/We hereby authorize the use of cash transfers to effect redemptions of
shares from my/our account according to telephone instructions from any one of
the authorized signers listed in Section 7 C and to send the proceeds to
(CHECK ONE OR MORE OF THE FOLLOWING):
__ My address of record as indicated in Section 2 (must be $50,000 or less
and address must be established for a minimum of 60 days)
__ My bank as designated below
__ Wire proceeds to my bank via the Federal Funds Wire System (minimum
$1,000) as designated below
__ All of the above
- - ------------------------------------------------------------------------------
Bank Name Bank Routing Transit #
- - ------------------------------------------------------------------------------
Bank Account # (Checking/Savings) Account Holder
- - ------------------------------------------------------------------------------
Bank Address: Street City State Zip
PLEASE ATTACH A VOIDED CHECK OF THE BANK ACCOUNT DESIGNATED ABOVE.
- - ------------------------------------------------------------------
Telephone redemption by wire can be used only with financial institutions that
are participants in the Federal Reserve Bank Wire System. If the financial
institution you designate is not a Federal Reserve participant, telephone
redemption proceeds will be mailed to the named financial institution. In
either case, it may take a day or two, upon receipt for your financial
institution to credit your bank account with the proceeds, depending on its
internal crediting procedures.
- - ------------------------------------------------------------------------------
B. AUTOMATIC INVESTMENT PLAN -- (SUBJECT TO THE $10,000 MINIMUM INITIAL
PURCHASE)
I hereby request that RSMC, the Fund's Transfer Agent, draw an automatic
clearing house ("ACH") debit electronically on the bank checking account
designated on a monthly basis and invest the amount collected in Kalmar
"Growth-with-Value" Small Cap Fund shares. The shares are purchased on the
same day that the Transfer Agent draws the debit, and a confirmation is sent
to you.
Mark one of your personal checks "VOID" and attach the voided check to this
application. As soon as your bank accepts your authorizations, debits will be
generated and purchased of Kalmar "Growth-with-Value" Small Cap Fund shares
will begin. Please note that your bank must be able to accept ACH transactions
and/or may be a member of an ACH Association. The Fund cannot guarantee
acceptance by your bank. Please allow one (1) month for processing of this
automatic option before the first debit occurs.
Please begin Automatic Investing for me on _________________, 19___ and invest
$_______________ (minimum of $100) in shares of the Kalmar "Growth-with-Value"
Small Cap Fund on the 20th of each month.
- - ------------------------------------------------------------------------------
Name of Bank:
- - ------------------------------------------------------------------------------
Bank Address: Bank Telephone #:
- - ------------------------------------------------------------------------------
Signature of Depositor/Date Signature of Joint Depositor (if any)/Date:
I understand that my ACH debit will be dated on or about the 20th of the month
specified. I agree that if such debit is not honored upon presentation, RSMC
may discontinue this service without prior notice, and any purchase of Fund
shares may be reversed. RSMC is under no obligation to notify the undersigned
as to the nonpayment of any debit. I further understand that the net asset
value of Kalmar "Growth-with-Value" Small Cap Fund shares at the time of
reversal may be less than the net asset value on the day of the original
purchase. RSMC is authorized to redeem sufficient additional full and
fractional shares from my account to make up the deficiency. Automatic
Investing may be discontinued by RSMC by written notice to the shareholder at
least thirty (30) days prior to any payment date or by the investor by
written notice to RSMC provided that the notice is received not later than ten
(10) business days prior to the specified investment date.
- - ------------------------------------------------------------------------------
C. SYSTEMATIC WITHDRAWL PLAN -- (ACCOUNT BALANCES MUST BE GREATER THAN
$10,000)
Frequency of withdrawls (check one): __ monthly __ bi-monthly __ quarterly
__ semi-annually __ annually
I/We authorize RSMC to make periodic redemptions of Kalmar "Growth-with-Value"
Small Cap Fund shares as necessary to provide the payments indicated below.
Method of Payment: (check one): __ Check __ Automatic Clearing House ("ACH")
electronic credit (SEE INSTRUCTIONS BELOW)
If you have chosen ACH credit option to your bank account, please mark one of
your pesonal checks "VOID" and attach the voided check to this application
Please note that your bank must be able to accept ACH transactions and/or may
be a member of an ACH Association. The Fund cannot guarantee acceptance by
your bank.
The first withdrawl is to be made about the 25th day of ______________, 19___
Amount of each withdrawl (minimum $100): $ __________________
- - ------------------------------------------------------------------------------
Name of Bank: Bank Address:
- - ------------------------------------------------------------------------------
Signature of Depositor/Date Signature of Joint Depositor (if any)/Date
THIS APPLICATION MUST BE RECEIVED BY THE 10TH OF THE MONTH INDICATED TO BECOME
EFFECTIVE FOR THAT MONTH.
- - ------------------------------------------------------------------------------
<PAGE>
[Back cover]
KALMAR POOLED INVESTMENT TRUST
BARLEY MILL HOUSE
3701 KENNETT PIKE
GREENVILE, DE 19807
(PHONE) 302-658-7575
(FAX) 302-658-7513
<PAGE>
[Front cover]
KALMAR
POOLED
INVESTMENT
TRUST
- - ----------
[GRAPHIC] Kalmar Logo
"GROWTH-WITH-VALUE"
<PAGE>
KALMAR
POOLED
INVESTMENT
TRUST
- - ----------
KALMAR "GROWTH-WITH-VALUE" MICRO CAP FUND
A SERIES OF
KALMAR POOLED INVESTMENT TRUST
BARLEY MILL HOUSE
3701 KENNETT PIKE
GREENVILLE, DELAWARE 19807
(800) 282-2319
PROSPECTUS DATED JANUARY 31, 1997
This prospectus offers shares of the Kalmar "Growth-with-Value" Micro Cap
Fund (the "Fund"), which is a series of Kalmar Pooled Investment Trust (the
"Trust"), an open-end diversified management investment company commonly
known as a mutual fund. The Trust currently offers shares of both the Fund
and the Kalmar "Growth-with-Value" Small Cap Fund, each of which has a
diversified portfolio of assets and a specific investment objective and
policies. Shares of the Kalmar "Growth-with-Value" Small Cap Fund are
offered by a separate prospectus.
The Fund's investment objective is long-term capital appreciation. The
Fund was created to offer investors the opportunity to invest in micro
capitalization stocks according to the longer-term "Growth-with-Value"
investment philosophy, and with the micro cap and small cap investing
expertise of the investment professionals of the Fund's investment adviser,
Kalmar Investment Advisers (the "Adviser"). Using this investment
philosophy, the Fund will invest primarily in a diversified portfolio of
common stocks of small or emerging growth companies (so-called "micro cap"
companies) with market capitalizations under $250 million at the time of
investment which, in the Advisers' opinion, have the potential for
significant business growth and capital appreciation, and yet whose stocks
are, at the time of purchase, trading at least reasonable to, preferably,
undervalued prices in the public trading markets. The Fund believes that
its philosophy of purchasing promising, growing companies that may also be
undervalued can result in lower risk and higher return when compared to
many other micro cap investment strategies. See "Investment Objectives and
Policies."
Shares of the Fund may be purchased on a no-load basis without sales or
distribution charges through the Fund's distributor or through investment
management and financial consultants or brokers, and may be purchased or
redeemed at any time. Requests to purchase or redeem shares will be
processed at the net asset value per share next determined following
receipt and acceptance of the investor's purchase order or redemption
request. See "How to Purchase Shares," "How to Redeem Shares" and
"Calculation of Net Asset Value."
This Prospectus sets forth information about the Fund that a prospective
investor should know before investing, and should be read and retained for
future reference. More information about both the Fund and the Kalmar
"Growth-with-Value" Small Cap Fund has been filed with the U.S. Securities
and Exchange Commission and is contained in a "Statement of Additional
Information" dated January 31, 1997 as amended from time to time, which is
available upon request and without charge by writing or calling the Fund or
its distributor at the addresses and numbers set forth on the back cover of
this prospectus. The Statement of Additional Information is incorporated
by reference into this Prospectus.
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.
<PAGE>
KALMAR
POOLED
INVESTMENT
TRUST
- - ----------
TABLE OF CONTENTS
Page
----
Prospectus Summary.................................... 3
Fund Expenses......................................... 4
Adviser's Investment Performance...................... 6
Investment Objective and Policies..................... 7
Investment Philosophy............................ 7
Investment Policies.............................. 7
Other Investment Practices....................... 10
Risks and Special Considerations...................... 11
Management of the Fund................................ 12
Board of Trustees................................ 12
Investment Adviser............................... 13
Fund Officers and Portfolio Managers............. 14
Distributor...................................... 15
Administrator, Transfer Agent and Custodian...... 15
Expenses.............................................. 16
Calculation of Net Asset Value........................ 16
How to Purchase Shares................................ 17
How to Redeem Shares.................................. 19
Retirement Plans...................................... 21
Performance Information............................... 22
General Information................................... 22
Dividends, Capital Gains Distributions and Taxes...... 23
Shareholder Accounts.................................. 24
<PAGE>
KALMAR
POOLED
INVESTMENT
TRUST
- - ----------
PROSPECTUS SUMMARY
INVESTMENT OBJECTIVE AND POLICIES. The objective of the Kalmar "Growth-
with-Value" Micro Cap Fund is long-term capital appreciation. The Fund was
created to offer investors the opportunity to invest in micro
capitalization stocks according to the longer-term "Growth-with-Value"
investment philosophy and with the micro cap and small cap investing
expertise of the investment professionals of the Fund's investment adviser,
Kalmar Investment Advisers (the "Adviser"). Using this investment
philosophy, the Fund will invest primarily in a diversified portfolio of
common stocks of small, emerging growth companies with market
capitalizations under $250 million at the time of investment which, in the
Adviser's opinion, have the potential for significant business growth and
capital appreciation, and yet whose stocks are, at the time of purchase,
trading at at least reasonable to, preferably, undervalued prices in the
public trading markets. The Fund believes that its philosophy of
purchasing promising, growing companies that may be also undervalued can
result in both lower risk and higher return when compared to many other
small company investment strategies.
The Fund utilizes the Adviser's "Growth-with-Value" investment philosophy
which purposefully seeks to integrate the best elements of creative growth
company investing, with discriminating value-seeking investment discipline,
and in a longer-term context. With its intent of owning the "good growth
businesses" underlying its stocks, the Adviser seeks to make fewer, better
investment decisions for longer holding periods and larger gains, based on
in-depth, in-house, hands-on research and company business analysis. The
resulting low relative levels of trading and portfolio turnover versus
typical "aggressive growth" or "emerging growth" investment styles can
produce meaningful transaction cost savings to benefit all fund
shareholders as well as greater tax efficiency for taxable shareholders by
producing a preponderance of longer term as opposed to short term, capital
gains. Importantly, the Adviser's "Growth-with-Value" philosophy and in-
depth research seek both lower risks and higher reward relative to micro
cap equity markets generally through its integrated strategy of investing
in promising, small or emerging growth companies that have not yet been
fully recognized and exploited by other institutional investors and, hence,
whose stocks may be purchased at undervalued levels. See "Investment
Objective and Policies."
INVESTMENT ADVISER. Kalmar Investment Advisers serves as the investment
adviser for the Fund. Over the past fifteen years, the Adviser's portfolio
management team has managed micro cap and small cap assets in separate
accounts now totaling in excess of $600 million for a variety of clients
such as high net worth individuals and family trusts, corporations,
pensions and profit-sharing plans and other institutions such as
endowments, foundations, hospitals and other charitable institutions, all
according to the same longer-term oriented "Growth-with-Value" philosophy
utilized by the Fund. Kalmar invests assets of its own profit-sharing
plan in shares of the Fund, as do members of its investment team and other
employees. The Adviser selects investments and supervises the assets of
the Fund in accordance with the investment objective, policies and
restrictions of the Fund, subject to the supervision and direction of the
officers and Board of Trustees of the Trust. For its services, the Adviser
is paid a monthly fee at the annual rate of 1.00% of the Fund's average
daily net assets. This fee is comparable to the fees charged by most micro
cap equity mutual fund managers, however it is higher than that charged by
many other mutual funds. See "Investment Adviser."
ADVISER'S INVESTMENT PERFORMANCE. Information about the performance record
of the Adviser's portfolio management team for its separately managed
accounts over the past thirteen years is provided in the section of the
Prospectus called "Adviser's Investment Performance."
HOW TO INVEST. Shares of the Fund may be purchased on a no-load basis,
without sales or distribution charges, and are sold through investor
relationships with investment management and financial consultants, brokers
or dealers, or directly by the Fund's distributor. The public offering
price of shares of the Fund is the net asset value per share of the Fund
next determined after receipt and acceptance of an order and payment
satisfactory to the Fund. The minimum initial investment is $10,000 and
subsequent investments must total at least $1,000. The minimum initial
investment amount for investments by qualified retirement accounts is
$1,000 and there is no minimum for subsequent investments. An application
is included with this prospectus and further information is available by
calling (800) 282-2319. See "How To Purchase Shares."
HOW TO REDEEM SHARES. Shares may be redeemed by the Fund, or repurchased
by the Distributor, at the net asset value per share next determined after
receipt and acceptance of a redemption request in proper form by the Fund,
without the imposition of sales charges or redemption fees. See "How to
Redeem Shares."
DIVIDEND REINVESTMENT. The Fund intends to pay dividends from its net
investment income and any net realized capital gains, if any, on an annual
basis. Any dividends and distribution payments will be reinvested at net
asset value in additional full and fractional shares of the Fund, unless
the shareholder specifically elects to receive such distributions in cash.
See "Dividends, Distributions and Taxes."
RISKS AND SPECIAL CONSIDERATIONS. Prospective investors should consider
the following factors: (1) investments in very small, development stage or
emerging growth company stocks, so-called "micro cap" stocks, involve
greater risks than investments in securities of larger, more established
companies, are more volatile, and may suffer significant losses as well as
realize substantial gains; (2) the market for micro cap stocks is less
liquid than markets for larger stocks, which increases the volatility of
micro cap stocks, and may result in substantial price decreases in a
falling market; (3) the Fund may lend its securities which entails a risk
of loss should a borrower fail financially; (4) to the extent that the Fund
invests in foreign securities, such investment may involve political,
economic or currency risks not ordinarily associated with domestic
securities; and (5) although the Adviser's portfolio management team has
extensive investment management experience with private separately managed
accounts, it has not previously served as the adviser to a mutual fund.
See "Risks and Special Considerations."
ORGANIZATION AND MANAGEMENT OF THE FUND. The Fund is a series of Kalmar
Pooled Investment Trust (the "Trust"), which is an open-end diversified
management investment company commonly known as a mutual fund. The Trust
also offers shares of the Kalmar "Growth-with-Value" Small Cap Fund through
a separate prospectus. The Fund's assets are held by its custodian,
Wilmington Trust Company, and the Fund's administrative, transfer agency
and fund accounting services are provided by Rodney Square Management
Corporation. The distributor of the Fund's shares is Rodney Square
Distributors, Inc. See "Management of the Fund" and "General Information."
FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES: These are no transactional expenses paid
by shareholders in connection with purchases or redemptions of the Fund's
shares.
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Contingent Deferred Sales Charge None
Redemption Fees None
ESTIMATED ANNUAL OPERATING EXPENSES: These expenses, which cover the cost
of investment management, administration, distribution, marketing and
shareholder communications, are quoted as a percentage of average daily net
assets of the Fund. The expenses are factored into the Fund's share price
and are not billed directly to shareholders.
Advisory Fee (after voluntary waiver) 0.50%
12b-1 Fees None
Other Expenses 0.75%
Total Operating Expenses 1.25%(1)
(1) For the current fiscal year, the Adviser has voluntarily agreed to
waive its fee or assume certain expenses of the Fund so that the total
annual operating costs of the Fund will not exceed 1.25% of the average
daily net assets of the Fund. Absent the Adviser's actions to limit the
operating expenses, the Fund would pay an annual advisory fee of 1.00% and
it is estimated that the total operating expenses of the Fund during its
first fiscal year would be 1.75% on an annualized basis.
EXAMPLE: The following example illustrates the expenses that an investor
would pay on a $1,000 investment in the Fund over various time periods
assuming a 5% annual rate of return and redemption at the end of each time
period.
One Year Three Years
-------- -----------
$13 $40
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES IN FUTURE YEARS MAY BE GREATER OR
LESSER THAN THOSE SHOWN. THE PURPOSE OF THE ABOVE EXPENSE TABLES AND
EXAMPLE IS TO ASSIST THE INVESTOR IN UNDERSTANDING THE VARIOUS EXPENSES
THAT AN INVESTOR IN EITHER CLASS OF SHARES OF THE FUND WILL BEAR DIRECTLY
OR INDIRECTLY. THE FUND IS NEW AND THEREFORE THE AMOUNTS OF THE "ADVISORY
FEE (AFTER VOLUNTARY WAIVER)" AND "OTHER EXPENSES" IN THE EXPENSE TABLE AND
THE NUMBERS IN THE EXAMPLE ARE BASED ON ESTIMATED AMOUNTS FOR THE CURRENT
FISCAL YEAR.
ADVISER'S INVESTMENT PERFORMANCE
Set forth below is certain information relating to separate accounts
managed by the Fund's portfolio management team. These accounts are
managed according to the same investment objective and "Growth-with-Value"
investment philosophy, and are subject to substantially similar investment
policies and techniques as those used by the Fund. See "Investment
Objectives and Policies." The performance record shown below relates to
the activities of the portfolio management team with respect to its
activities at Kalmar Investments Inc. ("Kalmar Investments"), which
provides advisory services to separately managed accounts, and is the
sister company of the Adviser. See "Investment Adviser." The results
presented are not intended to predict or suggest the return to be
experienced by the Fund or the return that an individual investor might
achieve by investing in the Fund. The Fund's results may be different from
the composite of separate accounts shown due to the fact that the average
market capitalization of the companies included in the separate account
portfolios has been approximately $250 million, while the Fund will
generally only purchase shares of companies with market capitalizations
below $250 million. The Fund's results may also be different because of,
among other things, differences in fees and expenses, and because private
accounts are not subject to certain investment limitations, diversification
requirements, and other restrictions imposed by the Investment Company Act
of 1940, as amended (the "Investment Company Act") and the Internal Revenue
Code, as amended, which, if applicable, may have adversely affected the
performance of such accounts.
YEAR KALMAR RUSSELL 2000 S & P 500
ENDING NET RETURN* TOTAL RETURN TOTAL RETURN
- - ------ ----------- ------------ ------------
12/31/84 1.46 (7.30) 6.26
12/31/85 33.98 31.05 31.76
12/31/86 28.14 5.68 18.70
12/31/87 (1.90) (8.77) 5.22
12/31/88 23.58 24.89 16.57
12/31/89 38.42 16.24 31.65
12/31/90 (7.58) (19.51) (3.14)
12/31/91 65.52 46.05 30.45
12/31/92 8.87 18.41 7.62
12/31/93 27.11 19.91 10.06
12/31/94 3.08 (1.82) 1.30
12/31/95 25.35 26.21 37.54
12/31/96 7.06 14.76 22.99
CUMULATIVE
RETURN KALMAR* RUSSELL S & P 500
- - ---------- ------- ------- ---------
13 Years*
1984-1996 755.98% 303.58% 588.22%
AVERAGE ANNUAL
RETURN
- - --------------
13 Years*
1984-1996 17.96% 11.33% 16.00%
*THE RESULTS SHOWN ABOVE REPRESENT A COMPOSITE OF DISCRETIONARY, FEE
PAYING, SEPARATE ACCOUNTS UNDER MANAGEMENT FOR AT LEAST SIX MONTHS, REFLECT
THE REINVESTMENT OF ANY DIVIDENDS OR CAPITAL GAINS, AND ARE SHOWN AFTER
DEDUCTION OF ADVISORY, BROKERAGE OR OTHER EXPENSES (EXCLUDING FEES SUCH AS
CUSTODY FEES WHICH ARE PAID SEPARATELY BY THE INVESTOR). CERTAIN
INDIVIDUAL ACCOUNTS THAT ARE SUBJECT TO INVESTMENT RESTRICTIONS, TAX,
INCOME OR OTHER SPECIAL CONSIDERATIONS THAT CONSTRAIN THE INVESTMENT
PROCESS ARE EXCLUDED FROM THE COMPOSITE FIGURES SHOWN ABOVE
INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objective is long-term capital appreciation. The
investment objective of the Fund is a fundamental policy, which means that
it may not be changed without the approval of the holders of a majority of
the Fund's outstanding voting securities. The Fund seeks to achieve its
objective by investing primarily in a diversified portfolio of common
stocks of small, emerging growth companies with market capitalizations or
total revenues under $250 million at the time of investment which, in the
Adviser's opinion, have the potential for significant business growth and
capital appreciation, and yet whose stocks are, at the time of purchase,
trading at at least reasonable to, preferably, undervalued prices in the
public trading markets. There can be no assurance that the Fund will
achieve its objective.
INVESTMENT PHILOSOPHY.
The Fund utilizes the Adviser's "Growth-with-Value" investment philosophy,
which integrates what the Adviser believes to be the best elements of
creative growth company investing, with discriminating value-seeking
investment discipline, all with a view toward longer-term ownership of the
"good growth businesses" underlying its portfolio holdings. The investment
philosophy is a primarily bottom-up, fundamentals-driven approach, with the
goal of fewer, better investment decisions, for longer holding periods and
larger gains. The Adviser views its "Growth-with-Value" philosophy as a
relatively conservative approach to micro cap investing, yet one which the
Adviser believes can result in both lower risk and higher rewards over the
longer term when compared to the micro cap equity markets generally, or to
the high-turnover "aggressive growth" or "emerging growth" investment
styles of most other micro cap investment managers. By investing with a
longer-term focus, and thereby limiting trading and portfolio turnover, the
Fund seeks to limit transaction costs and to increase tax efficiency for
its shareholders.
In identifying, analyzing, selecting, and monitoring investments, the
Fund's portfolio management team utilizes an independent, hands-on,
fundamental, in-house-research-driven approach. To identify solid, well
managed, rapidly growing micro cap companies, and qualify such companies
for investment, the Fund's portfolio managers perform fundamental research
and business analysis of a given company's publicly available financial
information, engage in extensive and on-going management contact, facility
visits, and appropriate cross checks with customers, suppliers,
competitors, etc., as well as with industry trade groups, consultants and
such other "experts" as they deem appropriate. The portfolio management
team, of course, also attempts to utilize the best information provided by
Wall Street analysts, strategists, etc., to complement its in-house
research and investment management decision making.
As a central ingredient in its investment philosophy and investment
selection process, the Fund seeks to invest in promising companies which
meet its objectives for above average future business value growth, but
which have not yet been fully recognized and exploited by other
institutional micro cap investors. Such companies may be followed by
relatively few, or sometimes no securities analysts, and their securities,
therefore, may be inefficiently valued and available for purchase at
undervalued prices. By investing in such companies over the longer-term,
the Fund's investors can benefit both from their vigorous potential
earnings and business value growth and also from the potential re-valuation
upward of their securities as their business success attracts larger
numbers of additional investors and greater "Wall Street" sponsorship over
time.
Except as described herein, the following investment policies are not
fundamental policies of the Fund, which means that the Trustees may change
such policies without the affirmative vote of a "majority of the
outstanding voting securities" of the Fund, as defined in the Investment
Company Act.
INVESTMENT POLICIES.
The Fund seeks to achieve its objective by investing, under normal market
conditions, at least 65% of its total assets in companies whose stock
market capitalization (total market value of outstanding shares) is under
$250 million at the time of investment. Such companies often pay no
dividends and, therefore, current income is not a factor in the selection
of stocks. Capital appreciation is likely to be the predominant component
of the Fund's return. In the event that the Adviser, through fundamental
research and investment analysis, identifies a company whose stock appears
to be substantially overvalued in the trading markets, the Fund may engage
in short sales of the company's stock. This process allows the Fund to
realize profits if the value of a company's stock drops as anticipated by
the Adviser.
In addition, the Fund may invest in other types of securities such as
securities convertible into common stocks, as well as certain debt
securities, consistent with its long-term capital appreciation objective.
The Fund may invest up to 15% of its assets in foreign securities,
including sponsored or unsponsored American Depository Receipts ("ADRs").
The Fund may also buy and sell options on individual securities or indices,
for purposes of achieving additional return or for hedging purposes,
although at no time will more than 5% of the Fund's assets be allocated to
premiums or margin required to establish options positions for non-hedging
purposes, and no more than 10% of the Fund's assets will be subject to
obligations underlying such options. Additional information about the
Fund's investments, policies and restrictions is provided below and in the
Fund's Statement of Additional Information.
EQUITY SECURITIES. The Fund will predominantly purchase common stocks,
which represent an ownership interest in the issuer, entitle the holder to
participate in any income and/or capital gains of the issuer and generally
have voting rights. The Fund may also purchase investment grade securities
with an equity component such as convertible preferred stock, debt
securities convertible into or exchangeable for common stock and securities
such as warrants or rights that are convertible into common stock. A
convertible security is a security that may be converted either at a stated
price or rate within a specified period of time into a specified number of
shares of common or preferred stock. By investing in convertible
securities, the Fund seeks to participate in the capital appreciation of
the common stock into which the securities are convertible through the
conversion feature. A warrant is a security that gives the holder the
right, but not the obligation, to subscribe for newly created securities of
the issuer or a related company at a fixed price either at a certain date
or during a set period. Rights represent a preemptive right to purchase
additional shares of stock at the time of new issuance, before stock is
offered to the general public, so that the stockholder can retain the same
percentage after the new stock offering.
The Fund's assets will be invested primarily in equity securities of small,
so-called "micro cap" companies, however, it may, consistent with its
objective, invest a portion of its total assets in equity securities of
larger capitalization companies if the Adviser believes that suitable micro
cap company opportunities are not available or if such larger stocks have
strong growth potential and meet the Adviser's "Growth-with-Value" criteria
and investment discipline.
Although the Adviser anticipates that the majority of the Fund's assets
will ordinarily be invested in U.S.-based companies, the Fund may invest in
foreign securities, provided such investments are consistent with the
Fund's objective and policies and meet the "Growth-with-Value" philosophy.
The Fund generally limits its foreign investing to securities of Canadian
companies traded on Canadian or U.S. exchanges or markets, or shares of
foreign companies traded as sponsored or unsponsored American Depository
Receipts ("ADRs"), which are receipts typically issued by a U.S. bank or
trust company evidencing ownership of underlying securities issued by a
foreign company. "Sponsored" ADRs are issued jointly by the issuer of the
underlying security and a depository, whereas "unsponsored" ADRs are issued
without participation of the issuer of the deposited security.
CASH OR CASH EQUIVALENTS. Although the Fund intends to remain
substantially fully invested, the Fund may invest its assets in cash or
cash equivalents, during periods when excess cash is generated through
purchases and sales of its shares, or when the Fund desires to hold cash to
maintain liquidity for redemptions or pending investment in suitable
securities. There may also be times when economic or market conditions are
such that the Adviser deems a temporary defensive position to be
appropriate, during which the Fund may invest up to 100% of its net assets
in the types of short-term, cash equivalent investments described below.
The Fund may invest in short-term debt securities, including time deposits,
certificates of deposit or banker's acceptances issued by commercial banks
or savings and loan associations meeting certain qualifications. The Fund
may also purchase commercial paper rated A-1 or A-2 by S&P or Prime-1 or
Prime-2 by Moody's, or, if not rated, issued by a corporation having an
outstanding unsecured debt issue rated A or better by S&P or by Moody's;
and may invest in short term corporate obligations rated A or better by S&P
or Moody's.
The Fund may also purchase U.S. Government obligations including bills,
notes, bonds and other debt securities issued by the U.S. Treasury; and may
invest in U.S. Government agency securities issued or guaranteed by U.S.
Government sponsored instrumentalities and federal agencies. The Fund may
also invest in repurchase agreements collateralized by the cash equivalent
securities listed above.
DEBT SECURITIES. In addition to short-term, high quality, cash-equivalent
debt securities listed above and investment grade convertible debt (those
rated Baa or higher by S&P and BBB or high by Moody's), the Fund is
authorized to invest up to 5% of its assets in lower-rated or "compromised"
corporate debt securities such as bonds, debentures and notes (those rated
BB or lower by S&P or Ba or lower by Moody's) and unrated securities of
comparable quality. The Fund may invest in such debt securities, sometimes
referred to as "junk bonds," when the Adviser, through fundamental research
and investment analysis, believes that the securities possess intrinsic
value in excess of the current market price, or have the potential for
capital appreciation as a result of improvement in the creditworthiness of
the issuer. The Fund may also buy such securities when the Adviser
believes that the Issuer is likely to negotiate to replace such securities
with equity securities. Lower-rated securities (including those which are
in default) are considered to be predominately speculative with respect to
the issuer's capacity to pay interest and repay principal in accordance
with the terms of the obligation and generally involve more credit risk
than securities in the high rating categories. See "Debt Securities-Risks"
in the Statement of Additional Information for further information
concerning the risks of lower-rated securities.
OPTIONS. The Fund may purchase or sell options on individual securities as
well as on indices of securities as a means of achieving additional return
or of hedging the value of the Fund's portfolio. A call option is a
contract that gives the holder of the option the right, in return for a
premium paid, to buy from the seller the security underlying the option at
a specified exercise price at any time during the term of the option or, in
some cases, only at the end of the term of the option. The seller of the
call option has the obligation upon exercise of the option to deliver the
underlying security upon payment of the exercise price. A put option is a
contract that gives the holder of the option the right, in return for a
premium paid, to sell to the seller the underlying security at a specified
price. The seller of the put option, on the other hand, has the obligation
to buy the underlying security upon exercise at the exercise price.
If the Fund has sold an option, it may terminate its obligation by
effecting a closing purchase transaction. This is accomplished by
purchasing an option of the same series as the option previously sold.
There can be no assurance that a closing purchase transaction can be
effected when the Fund so desires.
The purchaser of an option risks a total loss of the premium paid for the
option if the price of the underlying security does not increase
or decrease sufficiently to justify exercise. The seller of an option,
on the other hand, will recognize the premium as income if the option
expires unrecognized but forgoes any capital appreciation in excess of
the exercise price in the case of a call option and may be required to
pay a price in excess of current market value in the case of a put option.
Options purchased and sold other than on an exchange in private
transactions also impose on the Fund the credit risk that the counterparty
will fail to honor its obligations. The Fund will not purchase options if,
as a result, its aggregate obligations relating to outstanding options
exceeds 10% of the Fund's assets.
REPURCHASE AGREEMENTS. For purposes of cash management only, the Fund may
enter into repurchase agreements with qualified brokers, dealers, banks and
other financial institutions deemed creditworthy by the Adviser under
standards adopted by the Board of Trustees. Under repurchase agreements,
the Fund may purchase any of the cash equivalent securities described above
and simultaneously commit to resell such securities at a future date to the
seller at an agreed upon price plus interest. The seller will be required
to collateralize the agreement by transferring securities to the Fund with
an initial market value, including accrued interest, that equals or exceeds
the purchase price and the seller will be required to transfer additional
securities to the Fund on a daily basis to ensure that the value of the
collateral does not decrease below the repurchase price. No more than 15%
of the Fund's net assets will be invested in illiquid securities, including
repurchase agreements which have a maturity of longer than seven days. For
purposes of the diversification test for qualification as a regulated
investment company under the Internal Revenue Code, repurchase agreements
are not counted as cash, cash items or receivables, but rather as
securities issued by the counter-party to the repurchase agreements. If
the seller of the underlying security under the repurchase agreement should
default on its obligation to repurchase the underlying security, the Fund
may experience delay or difficulty in recovering its cash. To the extent
that in the meantime, the value of the security purchased had decreased,
the Fund could experience a loss. While management of the Fund
acknowledges these risks, it is expected that they can be controlled
through stringent security selection and careful monitoring procedures.
INVESTMENTS IN MUTUAL FUNDS. The Fund may invest in shares of other open
and closed-end investment companies which principally invest in securities
of the type in which the Fund invests. This approach will most likely be
used for cash management purposes. The Fund may only invest in other
investment companies within limits set by the Investment Company Act, which
currently allows the Fund to invest up to 10% of its total assets in other
investment companies, although not more than 5% of the Fund's total assets
may be invested in any one investment company and the Fund's investment in
another investment company may not represent more than 3% of the securities
of any one investment company. Investments in other investment companies
will generally involve duplication of advisory fees and other expenses.
The Fund may also acquire securities of other investment companies beyond
such limits pursuant to a merger, consolidation or reorganization.
OTHER INVESTMENT PRACTICES.
SHORT SALES. If the Fund anticipates that the price of a security will
decline, it may sell the security short and borrow the same security from a
broker or other institution to complete the sale. The Fund may realize a
profit or loss depending upon whether the market price of the security
decreases or increases between the date of the short sale and the date on
which the Fund must replace the borrowed security. The Fund is required by
SEC rules to collateralize short positions by placing assets in a
segregated account and the Fund will not sell securities if, immediately
after and as a result of the sale, the value of all securities sold short
by the Fund exceeds 10% of its total assets. The value of any one issuer
in which the Fund is short may not exceed the lesser of 2% of the Fund's
net assets or 2% of the securities of any class of the issuers' securities.
The Fund's policy regarding short sales is fundamental.
BORROWING. As a matter of fundamental policy, the Fund may borrow up to
one third of its total assets, taken at market value as a temporary measure
for extraordinary or emergency purposes to meet redemptions or to settle
securities transactions. Any borrowing will be done from a bank with the
required asset coverage of at least 300%. In the event that such asset
coverage shall at any time fall below 300%, the Fund shall, within three
days thereafter (not including Sunday or holidays) or such longer period as
the SEC may prescribe by rules and regulations, reduce the amount of its
borrowings to such an extent that the asset coverage of such borrowings
shall be at least 300%. The Fund will not pledge more than 10% of its net
assets, or issue senior securities as defined in the Investment Company
Act, except for notes to banks.
LENDING OF PORTFOLIO SECURITIES. The Fund may from time to time lend
securities from its portfolio, with a value not exceeding one-third of its
total assets, to banks, brokers and other financial institutions and
receive collateral in cash, a letter of credit issued by a bank or
securities issued or guaranteed by the U.S. Government which will
be maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities. The lending of securities
is a common practice in the securities industry. The Fund engages in
security loan arrangements with the primary objective of increasing the
Fund's income either through investing the cash collateral in money market
mutual funds, short-term interest bearing obligations or by receiving a
loan premium from the borrower. Under the securities loan agreement, the
Fund continues to be entitled to all dividends or interest on any loaned
securities. As with any extension of credit, there are risks of delay in
recovery and loss of rights in the collateral should the borrower of the
security fail financially. The Fund's policy regarding lending of
portfolio securities is fundamental.
During the period of such a loan, the Fund receives the income on both the
loaned securities and the collateral and thereby increases its yield. In
the event that the borrower defaults on its obligation to return borrowed
securities because of insolvency or otherwise, the Fund could experience
delays and costs in gaining access to the collateral and could suffer a
loss to the extent the value of the collateral falls below the market value
of the borrowed securities.
ILLIQUID AND RESTRICTED SECURITIES. The Fund may invest up to 15% of its
net assets in securities which may be considered illiquid, by virtue of the
absence of a readily available market, legal or contractual restrictions on
resale, longer maturities, or other factors limiting the marketability of
the security. Generally, an illiquid security is any security that cannot
be disposed of within seven days in the ordinary course of business at
approximately the amount at which the Fund has valued the security. This
policy does not limit the acquisition of (i) restricted securities eligible
for resale to qualified institutional buyers pursuant to Rule 144A under
the Securities Act of 1933 or (ii) commercial paper issued pursuant to
Section 4(2) of the Securities Act of 1933, that are determined to be
liquid in accordance with guidelines established by the Board of Trustees
of the Trust. While maintaining oversight, the Board of Trustees has
delegated the day-to-day function of determining liquidity to the Adviser.
RISKS AND SPECIAL CONSIDERATIONS
MICRO CAP COMPANIES. Investments in common stocks in general are subject
to market, economic and business risks that will cause their price to
fluctuate over time. Therefore, an investment in the Fund may be more
suitable for long-term investors who can bear the risk of these
fluctuations. Additionally, the Fund will invest in relatively small, new
or unseasoned companies which may be in their early stages of development,
or small companies positioned in new and emerging industries where the
opportunity for rapid growth is expected to be above average. Securities
of such companies may offer greater opportunity for capital appreciation
than larger companies, but investments in such companies present greater
risks than securities of larger, more established companies. The companies
in which the Fund will generally invest may have relatively small revenues,
limited or very focused product lines, and may have a small share of the
market for their products or services or a very large share of an emerging
market. Small or development stage companies may lack depth of management,
they may be unable to internally generate funds necessary for growth or
potential development or to generate such funds through external financing
on favorable terms, or they may be developing or marketing new products or
services for which markets are not yet established and may never become
well established. Due to these and other factors, such companies may
suffer significant losses as well as realize substantial growth and
profitability, and investments in such companies will be volatile and are
therefore speculative. Indeed, historically, micro capitalization stocks
have been more volatile in price than larger capitalization stocks. Among
the reasons for the greater price volatility of these securities are the
lower degree of liquidity in the markets for such stocks, and the
potentially greater sensitivity of such small companies to changes in or
failure of management and in many other changes in competitive, business,
industry and economic conditions, including risks associated with limited
product lines, markets, management depth, or financial resources. Besides
exhibiting greater volatility, micro and small company stocks may, to a
degree, fluctuate independently of larger company stocks. Micro and small
company stocks may decline in price as large company stocks rise, or rise
in price as large company stocks decline. Investors should therefore
expect that the value of the Fund's shares will be more volatile than the
shares of a fund that invests in larger capitalization stocks.
Additionally, while the markets in securities of such companies have grown
rapidly in recent years, such securities may trade less frequently and in
smaller volume than more widely held securities. The values of these
securities may fluctuate more sharply than those of other securities, and a
Fund may experience some difficulty in establishing or closing out
positions in theses securities at prevailing market prices. There may be
less publicly available information about the issuers of these securities
or less market interest in such securities than in the case of larger
companies, and it may take a longer period of time for the prices of such
securities to reflect the full value of their issuers' underlying earnings
potential or assets. The Fund should not be considered suitable for
investors who are unable or unwilling to assume the risks of loss inherent
in such a program, nor should investment in the Fund be considered a
balanced or complete investment program.
FOREIGN INVESTMENT. Investments in foreign securities may involve risks
not ordinarily associated with investments in domestic securities. These
risks may include legal, political or economic developments such as
fluctuations in currency rates, imposition of withholding taxes or exchange
controls or other governmental restrictions or political or policy changes.
In addition, with respect to certain countries, there is the possibility of
expropriation of assets, confiscatory taxation, or political or social
unrest that could adversely affect the value of foreign securities. There
may be less publicly available information about foreign companies than
about U.S. companies, and foreign companies may not be subject to
accounting, auditing and financial reporting standards that are as uniform
as those applicable to U.S. companies. The Fund will attempt to limit
risks associated with foreign investing by investing primarily in
securities of stable, developed countries such as Canada.
INVESTMENT ADVISER. The Adviser has not previously served as the
investment adviser for a mutual fund, and therefore, historical information
about the performance of a mutual fund managed by the Adviser is not
available. However, the performance record of the Adviser's portfolio
management team for its separately managed accounts over the past thirteen
years is provided in the section of the Prospectus called "Adviser's
Investment Performance."
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES
The Board of Trustees of the Trust consists of five individuals, two of
whom are not "interested persons" of the Trust as defined in the Investment
Company Act. The members of the Trust's Board of Trustees are fiduciaries
for the Fund's shareholders and, in this regard, are governed by the laws
of the State of Delaware. The Trustees establish policy for the operation
of the Fund, and appoint the officers who conduct the daily business of the
Fund. The following is a list of the Trustees and a brief statement of
their principal occupations:
FORD B. DRAPER, JR.* Chairman, President and Treasurer of the Trust;
Founder, President, Director and Chief Investment
Officer of Kalmar Investments since 1982 and
Kalmar Investment Advisers since inception.
WENDELL FENTON* President of the law firm of Richards, Layton and
Finger (joined 1971).
JOHN J. QUINDLEN Trustee of The Rodney Square Fund and Kiewit
Mutual Fund; Senior Vice President and Chief
Financial Officer of E.I. Dupont de Nemours & Co.
from 1954 through 1993 (retired).
DAVID M. REESE, JR.* Portfolio manager/research analyst for Kalmar
Investments from 1982 through March, 1996; private
investor.
DAVID D. WAKEFIELD Executive Secretary, Longwood Foundation and
Welfare Foundation, 1992 to present; Chairman and
President, J.P. Morgan Delaware from 1989 to 1992.
*"Interested person" of the Trust as that term is defined in the Investment
Company Act.
INVESTMENT ADVISER
Kalmar Investment Advisers, located at 3701 Kennett Pike, Greenville,
Delaware 19807 (previously defined as the "Adviser") serves as the
investment adviser for the Fund pursuant to an investment advisory
agreement dated January 31, 1997 (the "Advisory Agreement"). The Advisory
Agreement initially will be in effect for two years, and may be renewed
each year thereafter, provided its continuance is approved annually by the
Board of Trustees, including a majority of the Trustees who are not
"interested persons" of the Fund as defined in the Investment Company Act.
The Adviser manages the investments of the Fund in accordance with the
Fund's stated investment objective, philosophy and policies and subject to
its limitations or restrictions. Subject to the supervision of the Board
of Trustees, the Adviser makes the Fund's day-to-day investment decisions,
selects brokers and dealers to execute portfolio transactions and generally
manages the Fund's investments. In selecting brokers, the Adviser seeks to
obtain the best net results for the Fund, taking into account such factors
as price (including the applicable brokerage commission or dealer spread),
size of order, difficulty of execution and operational facilities of the
firm involved and the firm's risk in positioning a block of securities.
While the Adviser generally seeks favorable and competitive commission
rates, the Fund does not necessarily pay the lowest commission or spread
available. In addition, consistent with rules established by the National
Association of Securities Dealers, Inc., the Fund may consider sales of
shares of the Fund as a factor in the selection of brokers or dealers to
execute portfolio transactions for the Fund.
Because of its longer-term investment philosophy, the Fund does not intend
to engage in frequent trading tactics which could result in high turnover,
less favorable tax consequences (i.e., a high proportion of short-term
capital gains relative to long-term capital gains) or increased trading and
brokerage expenses paid by the Fund. The Fund anticipates that its annual
portfolio turnover rate should not exceed 50% under normal conditions,
although it is impossible to predict portfolio turnover rates. The Adviser
will buy or sell portfolio securities without regard to holding period if,
in its judgment, such transactions are advisable in light of opportunities
in particular stocks, or a change in circumstances for any particular
company or companies, or in general market, economic or financial
conditions.
The Adviser, which is registered as an investment adviser under the
Investment Advisers Act of 1940, is presently wholly-owned by its founder,
Ford B. Draper, Jr. The Adviser utilizes a team approach in managing the
Fund's portfolio with Mr. Draper, as chief investment officer, leading and
supervising the portfolio management team. The Adviser is the "sister"
company to Kalmar Investments, a registered investment adviser founded in
1982, which has been providing investment advice to and managing the assets
of private accounts since its inception according to the same investment
objective and "Growth-with-Value" philosophy used by the Fund. The Adviser
was organized as a separate company on November 6, 1996 for the sole
purpose of functioning as the adviser to the Kalmar Funds. The ownership
and management of the Adviser is identical to that of Kalmar Investments,
and the same portfolio management team approach used in managing the assets
of the Fund is used to manage the assets of Kalmar Investments' private
accounts.
Kalmar Investments presently manages approximately $600 million primarily
in micro capitalization and small capitalization stocks in separately
managed accounts for clients such as high net worth individuals and family
trusts, corporations, pensions and profit-sharing plans and institutions
such as endowments, foundations, hospitals and charitable institutions.
Kalmar Investments invests assets of its own profit-sharing plan in shares
of the Fund, as do members of its investment team and other employees.
For its services, the Adviser is paid a monthly fee at the annual rate of
1.00% of the Fund's average daily net assets. This fee is comparable to
the fee charged by most micro cap equity mutual fund managers, however, it
is higher than that paid by many other mutual funds for investment advisory
services. During the Fund's first fiscal year, the Adviser has voluntarily
agreed to limit its fees or assume certain expenses of the Fund to keep the
total annual operating costs of the Fund's classes within specified limits,
see "Fund Expenses."
FUND OFFICERS AND PORTFOLIO MANAGERS
[Photo]
FORD B. DRAPER, JR.
CHAIRMAN, PRESIDENT, TREASURER AND CHIEF INVESTMENT OFFICER
A graduate of Yale University, Mr. Draper also received an M.B.A. from
Columbia University Graduate School of Business, and has thirty years
experience in investment research and management. Mr. Draper began his
career in 1967 in the investment research and capital management
departments of Smith, Barney & Co. In 1970, he joined Baker, Fentress &
Company, a publicly-owned closed-end mutual fund, where he performed
original investment research on a broad spectrum of companies and
industries. In 1972, he became Vice President with responsibilities that
included trading, investment research, investment strategy, and management
of the fund's portfolio. For the following ten years at Baker, Fentress,
Mr. Draper developed positive investment performance for the then $250
million fund. Mr. Draper founded Kalmar Investments in 1982, which
provides investment management services to separately managed accounts.
[Photo]
JORDAN J. COX
PORTFOLIO MANAGER/RESEARCH ANALYST
After a BA in Economics and Applied Mathematics from Lehigh University and
the University of Oregon Doctoral program in Economics, Mr. Cox worked from
1986-1989 as a research analyst and Vice President for Ferris Baker, Watts,
and from 1989-1990 as Director of Institutional Research for Johnston Lemon
& Co., both regional brokerage firms. His research focused on small to
medium sized companies with emphasis in the computer software and service
industries. From 1990-1995 he moved into that industry, as Senior Director
of New Business Development of Systems & Computer Technology, a publicly
traded computer software and services firm. Mr. Cox joined Kalmar
Investments in 1995.
[Photo]
GREGORY A. HARTLEY, C.F.A.
PORTFOLIO MANAGER/RESEARCH ANALYST
Mr. Hartley graduated from Indiana University's School of Business, held an
accounting position, and later earned an M.B.A. from Indiana University's
Graduate School of Business. Mr. Hartley joined Kalmar Investments in 1993
after nine years of investment experience. From 1984-1993, he worked for
Ashford Capital Management, Inc., a then $100 million investment management
and consulting firm. As a senior analyst and member of the investment
committee doing original research on small growth companies, from health
care to specialty manufacturing and financial services to technology, he
was responsible for new idea stock selection and management of over $50
million in portfolio holdings. Mr. Hartley joined Kalmar Investments in
1993.
[Photo]
LINN M. MORROW
DIRECTOR OF CLIENT SERVICES
Mr. Morrow, with eighteen years experience in investment-related client
services, holds a BS in Economics from the University of Pennsylvania's
Wharton School. He began his career with Salomon Brothers in 1968, and
subsequently worked in the corporate trust departments of Chemical Bank, NY
and the Mellon Bank, NA. In 1985 he joined Delaware Investment Advisers as
Vice President of Client Services. For ten years at Delaware, his
responsibilities were acting as liaison between clients and the investment
team, client reviews, client communications and new business. Mr. Morrow
joined Kalmar Investments in 1996 to direct its client services.
[Photo]
CURT J. ORGANT, C.F.A. (I & II)
PORTFOLIO MANAGER/RESEARCH ANALYST
Mr. Organt earned a BS in Finance from LaSalle University and an MBA from
Wake Forest University. He subsequently worked at T. Rowe Price Associates
in Baltimore as an analyst and assistant portfolio manager from 1992-1996.
His research focused on small companies in many industries for the T. Rowe
Price O.T.C. Fund, the Small Cap Value Fund, and the New Horizons Fund.
Mr. Organt joined Kalmar Investments in 1996.
[Photo]
DANA F. WALKER, C.F.A.
PORTFOLIO MANAGER/RESEARCH ANALYST
After the University of Virginia's McIntire School of Commerce, Mr. Walker
worked from 1982-1986 for Delfi Management, Inc., investment advisor to the
Sigma Funds, a then $350 million mutual fund group. As a senior analyst
doing original research in consumer-related industries, health care,
retailing, and distribution, he was responsible for investment selections
from these areas for the Sigma funds and for portfolios of DP Asset
Management, an affiliated $100 million investment advisory firm. Mr.
Walker joined Kalmar Investments in 1986.
DISTRIBUTOR
Rodney Square Distributors, Inc. ("RSD"), a subsidiary of Wilmington Trust
Company located at 1105 North Market Street, Wilmington, DE 19890, has been
engaged to distribute the Fund's shares pursuant to a distribution
agreement dated January 31, 1997 (the "Distribution Agreement"). Under the
Distribution Agreement, RSD directly or through its affiliates, provides
distribution and underwriting services, investor support and certain
administrative services.
ADMINISTRATOR, TRANSFER AGENT AND CUSTODIAN
Rodney Square Management Corporation ("Rodney Square"), a subsidiary of
Wilmington Trust Company located at Rodney Square North, 1100 N. Market
Street, Wilmington, DE 19890 serves as the Fund's Administrator, Transfer
Agent and Dividend Paying Agent and also provides accounting
services to the Fund pursuant to separate Administration, Transfer Agency
and Accounting Services Agreements with the Trust, each dated January 31,
1997.
As Administrator, Rodney Square supplies office facilities, non-investment
related statistical and research data, stationery and office supplies,
executive and administrative services, internal auditing and regulatory
compliance services. Rodney Square also assists in the preparation of
reports to shareholders, prepares proxy statements, updates prospectuses
and makes filings with the U.S. Securities and Exchange Commission (the
"SEC") and state securities authorities. Rodney Square performs certain
budgeting and financial reporting and compliance monitoring activities.
For the services provided as Administrator, Rodney Square receives annual
fees equal to 0.15% of the average annual net assets of the Trust for the
first $50 million in assets and 0.10% for assets in excess of $50 million,
subject to certain minimum amounts. Rodney Square has also agreed to waive
specified portions of its fees during the Fund's first year of operations,
provided the Adviser would have otherwise been required to waive its fees
under the voluntary waiver described under "Fund Expenses." Rodney Square
also serves as the Transfer Agent and Dividend Paying Agent of the Fund as
well as the Accounting Agent to the Fund. As Transfer Agent and Dividend
Paying Agent, Rodney Square is responsible for administering the issuance,
transfer and redemption or repurchase of shares, as well as the payment of
distributions and dividends. As Accounting Agent, Rodney Square determines
the Fund's net asset value per share and provides accounting services to
the Fund.
The custodian for the Fund is Wilmington Trust Company ("WTC"), Rodney
Square North, 1100 N. Market Street, Wilmington, DE 19890-0001.
EXPENSES
Except as indicated above, the Fund is responsible for the payment of the
pro rata portions of the Trust's expenses attributable to the Fund, as
distinguished from any other series of the Trust, other than those borne by
the Adviser, and such expenses may include, but are not limited to: (a)
management fees; (b) the charges and expenses of the Fund's legal counsel
and independent auditors; (c) brokers' commissions, mark-ups and mark-downs
and any issue or transfer taxes chargeable to the Fund in connection with
its securities transactions; (d) all taxes and corporate fees payable by
the Fund to governmental agencies; (e) the fees of any trade association of
which the Trust or Fund is a member; (f) the cost of certificates, if any,
representing shares of the Fund; (g) amortization and reimbursements of the
organization expenses of the Trust or Fund and the fees and expenses
involved in registering and maintaining registration of the Trust and its
shares with the SEC, the costs of notice filings with the various states
and the preparation and printing of the Trust's registration statements and
prospectuses for such purposes; (h) allocable communications expenses with
respect to investor services and all expenses of shareholders and trustees'
meetings and of preparing, printing and mailing prospectuses and reports to
shareholders; (i) litigation and indemnification expenses and other
extraordinary expenses not incurred in the ordinary course of the Trust's
business; and (j) compensation for employees of the Trust.
CALCULATION OF NET ASSET VALUE
Rodney Square determines the net asset value per share ("net asset value")
of the Fund as of the close of regular trading on each day that the New
York Stock Exchange is open for unrestricted trading from Monday through
Friday (generally 4:00 p.m.) and on which there is a purchase or redemption
of the Fund's shares. The net asset value is determined by dividing the
value of the Fund's securities, plus any cash and other assets, less all
liabilities, by the number of shares outstanding. Expenses and fees of the
Fund, including management, distribution and shareholder servicing fees,
are accrued daily and taken into account for the purpose of determining the
net asset value.
Fund securities listed or traded on a securities exchange for which
representative market quotations are available will be valued at the last
quoted sales price on the security's principal exchange on that day.
Listed securities not traded on an exchange that day will be valued at the
mean between the last bid and asked price on that day, if any. Unlisted
securities which are quoted on the National Association of Securities
Dealers National Market System for which there are sales of such securities
on such day, shall be valued at the last sale price reported on such system
the day the security is valued. If there are no such sales on such day,
the value shall be the mean between the closing asked price and closing bid
price. Securities for which market quotations are not readily available
and all other assets will be valued at their respective fair value as
determined in good faith by, or under procedures established by, the Board
of Trustees. In determining fair value, the Fund or its service providers
may employ an independent pricing service.
Money market securities with less than sixty days remaining to maturity
when acquired by the Fund will be valued on an amortized cost basis by the
Fund, excluding unrealized gains or losses thereon from the valuation.
This is accomplished by valuing the security at cost and then assuming a
constant amortization to maturity of any premium or discount from cost
versus par value at maturity. If the Fund acquires a money market security
with more than sixty days remaining to its maturity, it will be valued at
current market value until the 60th day prior to maturity, and will then be
valued on an amortized cost basis based upon the value on such date unless
the Trustees determine during such 60-day period that this amortized cost
value does not represent fair market value.
Each share of the Fund will bear, pro-rata, all of the common expenses of
the Fund. The net asset values of all outstanding shares of the Fund 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 such
shares. All income earned and expenses incurred by the Fund will be borne
on a pro-rata basis by each outstanding share, based on each share's
percentage in the Fund represented by the value of such shares.
HOW TO PURCHASE SHARES
Shares of the Fund are offered on a no-load basis, without the imposition
of any sales or distribution fees through investment management and
financial consultants, brokers or dealers, or directly through the Fund's
distributor. Shares of the Kalmar "Growth-with-Value" Small Cap Fund
series of the Trust (the "Small Cap Fund") may be purchased in a similar
manner, and such shares are offered through a separate prospectus. The
Fund's shares are offered at the net asset value per share next determined
after the receipt and acceptance of a purchase order and payment in proper
form by the Fund. Information on how to invest in the Fund is presented
below, and any requests for applications, additional information or
questions may be directed to Rodney Square at (800) 282-2319.
MINIMUM INVESTMENT. The minimum initial investment for the Fund is
$10,000, and subsequent investments must total at least $1,000. The
minimum initial investment requirement for qualified retirement accounts is
$1,000 and there is no minimum for subsequent investments.
PURCHASE PRICE. Purchase orders for shares of the Fund which are received
in proper form and accepted by the Fund prior to the close of regular
trading hours on the New York Stock Exchange (currently 4:00 p.m. Eastern
time) on any day that the Fund calculates its net asset value per share,
are priced according to the net asset value determined on that day.
Purchase orders received in proper form and accepted by the Fund after the
close of the Exchange on a particular day are priced as of the time the net
asset value per share is next determined.
IN-KIND PURCHASES. At the discretion of the Fund, investors may be
permitted to purchase Fund shares by transferring securities to the Fund
that: (i) meet the Fund's investment objective and policies; (ii) are
acquired by the Fund for investment and not for retail purposes; (iii) are
liquid securities which are not restricted as to transfer either by law or
liquidity of market; and (iv) at the discretion of the Fund, the value of
any such security (except U.S. Government Securities) being exchanged
together with other securities of the same issuer owned by the Fund will
not exceed 5% of the net assets of the Fund immediately after the
transactions.
Securities transferred to the Fund will be valued in accordance with the
same procedures used to determine the Fund's net asset value. All
dividends, interests, subscription, or other rights pertaining to such
securities shall become the property of the Fund and must be delivered to
the Fund by the investor upon receipt from the issuer. Investors who are
permitted to transfer such securities will be required to recognize all
gains or losses on such transfers, and pay taxes thereon, if applicable,
measured by the difference between the fair market value of the securities
and the investors' bases therein.
Purchases may be made in one of the following ways:
PURCHASES BY MAIL. Shareholders may purchase shares by sending a check
drawn on a U.S. bank payable to the Kalmar "Growth-with-Value" Micro Cap
Fund, along with a completed shareholder application, to Kalmar "Growth-
with-Value" Micro Cap Fund, c/o Rodney Square Management Corporation, P.O.
Box 8987, Wilmington, DE 19899-9752. A shareholder application sent by
overnight mail should be sent to Kalmar "Growth-with-Value" Micro Cap Fund,
c/o Rodney Square Management Corporation, 1105 N. Market St., 3rd Floor,
Wilmington, DE 19801. If a subsequent investment is being made, investors
should use the purchase stub and return envelope from the most recent
account statement and the check should also indicate the investor's Fund
account number.
PURCHASES BY WIRE. To purchase shares by wiring federal funds, Rodney
Square must first be notified by calling (800) 282-2319 to request an
account number and furnish the Fund with a tax identification number.
Following notification to Rodney Square, federal funds and registration
instructions should be wired through the Federal Reserve System to:
RODNEY SQUARE MANAGEMENT CORPORATION
C/O WILMINGTON TRUST COMPANY
WILMINGTON, DE
DDA #_________________
ABA #0311 000 92
ATTENTION: KALMAR "GROWTH-WITH-VALUE" MICRO CAP FUND
FURTHER CREDIT [SHAREHOLDER NAME AND ACCOUNT NUMBER]
For initial purchases by wire, a completed application with signature(s) of
investor(s) must promptly be filed with Rodney Square at one of the
addresses stated above under "Purchases By Mail." Investors should be
aware that some banks may impose a wire service fee.
AUTOMATIC INVESTMENT PLAN. Shareholders may purchase Fund shares through
an Automatic Investment Plan. The Plan provides a convenient method by
which investors may have monies deducted directly from their checking,
savings or bank money market accounts for investment in the Fund. Under
the Plan, Rodney Square, at regular intervals, will automatically debit a
shareholder's bank checking account in an amount of $100 or more
(subsequent to the $10,000 minimum initial investment), as specified by the
shareholder. A shareholder may elect to invest the specified amount
monthly, bimonthly, quarterly, semi-annually or annually. The purchase of
Fund shares will be effected at the net asset value at the close of regular
trading on the New York Stock Exchange (currently 4:00 p.m. Eastern time)
on or about the 20th day of the month. To obtain an Application for the
Automatic Investment Plan, check the appropriate box of the Application
accompanying this Prospectus or call Rodney Square at (800) 282-2319.
EXCHANGE PRIVILEGE. Shareholders of the Fund may exchange all or a portion
of their shares of the Fund for shares of the Small Cap Fund, and
shareholders of the Small Cap Fund may similarly exchange into the Fund,
provided the Fund is authorized to sell its shares in the state where the
purchaser is located. A purchase or redemption of shares through an
exchange will be effected at the relative net asset values per share of
each Fund next determined after receipt and acceptance of the request.
To obtain a Prospectus of the Small Cap Fund, or to obtain more information
about exchanges or place exchange orders contact Rodney Square at (800) 282-
2319. The Fund reserves the right to terminate or modify the exchange
offer described here and will give shareholders sixty days notice of such
termination or modification as required by the SEC.
HOW TO REDEEM SHARES
Shareholders may redeem all or a portion of their shares without charge on
any day that the Fund calculates its net asset value. See "Calculation of
Net Asset Value." Except as noted below, redemption requests received and
accepted by Rodney Square prior to the close of regular trading hours on
the Exchange on any business day that the Fund calculates its per share net
asset value are effective at the net asset value per share determined that
day. Redemption requests received and accepted by Rodney Square after the
close of the Exchange are effective as of the time the net asset value per
share is next determined. Redemption proceeds are normally sent on the
next business day following receipt and acceptance by the Fund of the
redemption request but, in any event, redemption proceeds are sent within
seven business days of receipt and acceptance of the request, or earlier if
required under applicable law. Redemption requests should be accompanied
by the Fund's name and the shareholder's account number. Corporations,
other organizations, trusts, fiduciaries and other institutional investors
may be required to furnish certain additional documentation to authorize
redemptions.
Delivery of the proceeds of a redemption of shares purchased and paid for
by check shortly before the receipt of the request may be delayed until the
Fund determines that the Custodian has completed collection of the purchase
check which may take up to 10 days. Also, redemption requests for accounts
for which purchases were made by wire may be delayed until the Fund
receives a completed application for the account. The Board of Trustees
may suspend the right of redemption or postpone the date of payment during
any period when (a) trading on the New York Stock Exchange is restricted as
determined by the SEC or such Exchange is closed for other than weekends
and holidays, (b) the SEC has by order permitted such suspension, or (c) an
emergency, as defined by rules of the SEC, exists during which time the
sale of Fund shares or valuation of securities held by the Fund are not
reasonably practicable.
Shares may be redeemed in one of the following ways:
REDEMPTION BY MAIL. A written redemption request must (i) identify the
shareholder's account number, (ii) state the number of shares or dollar
amount to be redeemed, and (iii) be signed by each registered owner exactly
as the shares are registered. A redemption request for an amount in excess
of $25,000, or for any amount if for payment other than to the shareholder
of record, or if the proceeds are to be sent elsewhere than the address of
record, must be accompanied by a guarantee of their signature by an
"eligible guarantor institution" as defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934. Eligible guarantor institutions include
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings
associations. Broker-dealers guaranteeing signatures must be a member of a
clearing corporation or maintain net capital of at least $100,000. Credit
unions must be authorized to issue signature guarantees. Signature
guarantees will be accepted from any eligible guarantor institution which
participates in a signature guarantee program. A signature and a signature
guarantee are required for each person in whose name the account is
registered. The transfer agent may require additional supporting documents
for redemptions made by corporations, executors, administrators, trustees
and guardians.
Written redemption instructions should be submitted to Kalmar "Growth-with-
Value" Micro Cap Fund, c/o Rodney Square Management Corporation, P.O. Box
8987, Wilmington, DE 19899-9752. A redemption order sent by overnight mail
should be sent to Kalmar "Growth-with-Value" Micro Cap Fund, c/o Rodney
Square Management Corporation, P.O. Box 8987, 1105 N. Market Street, 3rd
Floor, Wilmington, DE 19801. A redemption request will not be deemed to
be properly received until the transfer agent receives all required
documents in proper form. Questions with respect to the proper form for
redemption requests should be directed to the transfer agent at (800) 282-
2319.
REDEMPTION BY TELEPHONE. Shareholders who prefer to redeem their shares by
telephone must elect to do so by completing the telephone redemption
section of the shareholder application which describes the telephone
redemption procedures in more detail and requires certain information that
will be used to identify the shareholder when a telephone redemption
request is made. Telephone redemptions may be made in amounts up to
$50,000 by instructing the transfer agent at (800) 282-2319. In order to
arrange for redemption by wire or telephone after an account has been
opened, or to change the bank or account designated to receive redemption
proceeds, a written request must be sent to the transfer agent at the
address listed above. A signature guarantee is required of all
shareholders in order to change telephone redemption privileges.
Neither the Fund nor any of its service contractors will be liable for any
loss or expense in acting upon any telephone instructions that are
reasonably believed to be genuine. In attempting to confirm that telephone
instructions are genuine, the Fund will use such procedures as are
considered reasonable, including requesting a shareholder to correctly
state his or her Fund account number, the name in which his or her account
is registered, the number of shares to be redeemed and certain other
information necessary to identify the shareholder.
During times of drastic economic or market changes, the telephone
redemption privilege may be difficult to implement. In the event that
shareholders are unable to reach Rodney Square by telephone, you may make a
redemption request by mail. The Fund or Rodney Square reserves the right
to refuse a wire or telephone redemption if it is believed advisable to do
so. Procedures for redeeming Fund shares by wire or telephone may be
modified or terminated at any time by the Fund.
REDEMPTIONS BY WIRE. Redemption proceeds may be wired to a predesignated
bank account at any commercial bank in the United States if the amount is
$1,000 or more. The receiving bank may charge a fee for this service.
Amounts redeemed by wire are normally wired on the next business day after
receipt and acceptance of redemption instructions (if received before the
close of regular trading on the Exchange), but in no event later than five
days following such receipt and acceptance.
IN-KIND REDEMPTION. The Fund will satisfy redemption requests in cash to
the fullest extent feasible, so long as such payments would not, in the
opinion of the Adviser or the Board of Trustees, result in the necessity of
the Fund selling assets under disadvantageous conditions and to the
detriment of the remaining shareholders of the Fund. Pursuant to the
Fund's Agreement and Declaration of Trust, payment for shares redeemed may
be made either in cash or in-kind, or partly in cash and partly in-kind.
Any portfolio securities paid or distributed in-kind would be valued as
described under "Calculation of Net Asset Value." In the event that an in-
kind distribution is made, a shareholder may incur additional expenses,
such as the payment of brokerage commissions, on the sale or other
disposition of the securities received from the Fund. In-kind payments
need not constitute a cross-section of the Fund's portfolio. Where a
shareholder has requested redemption of all or a part of the shareholder's
investment, and where the Fund completes such redemption in-kind, the Fund
will not recognize gain or loss for federal tax purposes, on the securities
used to complete the redemption but the shareholder will recognize gain or
loss equal to the difference between the fair market value of the
securities received and the shareholder's basis in the Fund shares
redeemed.
INVOLUNTARY REDEMPTION. The Fund reserves the right to redeem an
investor's account where the account is inactive and is worth less than the
minimum initial investment when the account was established, currently
$10,000. In calculating the minimum amount necessary to avoid involuntary
redemption, the Fund will include amounts held in both the Fund and the
Small Cap Fund together. The Fund will advise the shareholder of its
intention to redeem the account in writing at least sixty (60) days prior
to effecting such redemption, during which time the shareholder may
purchase additional shares in any amount necessary to bring the account
back to the appropriate minimum amount, and the Fund will not redeem any
account that is worth less than the appropriate minimum amount solely on
account of a market decline.
SYSTEMATIC WITHDRAWAL PLAN. Shareholders who own shares with a value of
$10,000 or more may participate in the Systematic Withdrawal Plan. Under
the Plan, shareholders may automatically redeem a portion of their Fund
shares monthly, bimonthly, quarterly, semiannually or annually. The
minimum withdrawal available is $100. The redemption of Fund shares will
be effected at their net asset value at the close of the NYSE on or about
the 25th day of the month at the frequency selected by the shareholder. If
you expect to purchase additional Fund shares, it may not be to your
advantage to participate in the Systematic Withdrawal Plan because
contemporary purchases and redemption may result in adverse tax
consequences. For further details about this service, see the Application
or call the Transfer Agent at (800) 282-2319.
RETIREMENT PLANS
Shares of the Fund are available for use in all types of tax-deferred
retirement plans such as IRA's, employer-sponsored defined contribution
plans (including 401(k) plans) and tax-sheltered custodial accounts
described in Section 403(b)(7) of the Internal Revenue Code. Qualified
investors benefit from the tax-free compounding of income dividends and
capital gains distributions. Application forms and brochures describing
investments in the Fund for retirement plans can be obtained from Rodney
Square by calling (800) 282-2319. The following is a description of the
types of retirement plans for which the Fund's shares may be used for
investment:
INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS"). Individuals, who are not active
participants (and, when a joint return is filed, who do not have a spouse
who is an active participant) in an employer maintained retirement plan are
eligible to contribute on a deductible basis to an IRA account. The IRA
deduction is also available for individual taxpayers and married couples
with adjusted gross incomes not in excess of certain specified limits. All
individuals who have earned income may make nondeductible IRA contributions
to the extent that they are not eligible for a deductible contribution.
Income earned by an IRA account will continue to be tax-deferred. A
special IRA program is available for employers under which the employers
may establish IRA accounts for their employees in lieu of establishing tax
qualified retirement plans. Known as SEP-IRA's (Simplified Employee
Pension-IRA), they free the employer of many of the recordkeeping
requirements of establishing and maintaining a tax qualified retirement
plan trust.
If you are entitled to receive a distribution from a qualified retirement
plan, you may rollover all or part of that distribution into the Fund's
IRA. Your rollover contribution is not subject to the limits on annual IRA
contributions. You can continue to defer Federal income taxes on your
contribution and on any income that is earned on that contribution.
WTC makes available its services as an IRA Custodian for each shareholder
account that is established as an IRA. For these services, WTC receives an
annual fee of $10.00 per account, which fee is paid directly to WTC by the
IRA shareholder. If the fee is not paid by the date due, shares of the
Fund owned by the shareholder in the IRA account will be redeemed
automatically for purposes of making the payment.
401(K) PLANS AND OTHER DEFINED CONTRIBUTION PLANS. The Fund's shares may
be used for investment in defined contribution plans by both self-employed
individuals (sole proprietorships and partnerships) and corporations who
wish to use shares of the Fund as a funding medium for a retirement plan
qualified under the Internal Revenue Code. Such plans typically allow
investors to make annual deductible contributions, which may be matched by
their employers up to certain percentages based on the investor's pre-
contribution earned income.
403(B)(7) RETIREMENT PLANS. The Fund's shares are also available for use
by schools, hospitals, and certain other tax-exempt organizations or
associations who wish to use shares of the Fund as a funding medium for a
retirement plan for their employees. Contributions are made to the
403(b)(7) Plan as a reduction to the employee's regular compensation. Such
contributions, to the extent they do not exceed applicable limitations
(including a generally applicable limitation of $9,500 per year), are
excludable from the gross income of the employee for Federal Income tax
purposes.
PERFORMANCE INFORMATION
Advertisements, sales literature and communications to shareholders may
contain measures of the Fund's performance, including various expressions
of total return, current yield or current distribution rate. They may also
cite statistics relating to volatility and risk and compare such measures
to those of other funds. The Fund's total return may be calculated on an
annualized and aggregate basis for various periods as will be stated in the
advertisement. Average annual return reflects the average percentage
change per year in value of an investment in the Fund. Aggregate total
return reflects the total percentage change over the stated period.
The Fund may compare its investment performance to other mutual funds, or
groups of mutual funds, with similar or dissimilar investment objectives
and policies that are tracked or ranked by independent services such as
Lipper Analytical Services, Inc. or Morningstar, Inc. or other financial or
industry publications that monitor the performance of mutual funds,
investment managers, and the like. The Fund may also compare its
performance to unmanaged stock indices such as the Russell 2000 Small
Capitalization Index, which is composed of the 2000 smallest stocks in the
Russell 3000, a market value weighted index of the 3,000 largest U.S.
publicly-traded companies, or the Standard & Poor's 500 Stock Index, an
unmanaged index composed of 400 industrial stocks, 40 financial stocks, 40
utility stocks and 20 transportation stocks. Comparisons of performance
assume reinvestment of dividends. The Fund may also quote performance
information or information relating to fund management, investment
philosophy or investment techniques, that is published in financial and
business publications including Money Magazine, Forbes, Barron's or The
Wall Street Journal, etc. Further information about the sources for
comparative performance and other information that may be utilized by the
Fund, and information about the Fund's calculation of performance figures,
is contained in the Fund's Statement of Additional Information.
All data will be based on the Fund's past investment results and does not
predict future performance. Investment performance, which will vary, is
based on many factors, including market conditions, the composition of the
investments in the Fund, and the Fund's operating expenses. Investment
performance also often reflects the risk associated with the Fund's
investment objective and policies. In addition, averages are generally
unmanaged, and items included in the calculations of such averages may not
be identical to the formula used by the Fund to calculate its performance.
These factors should be considered when comparing the Fund to other mutual
funds and other investment vehicles.
GENERAL INFORMATION
SHARES OF BENEFICIAL INTEREST AND VOTING RIGHTS. The Trust was organized
as a Delaware business trust on November 6, 1996. The Trust's Agreement
and Declaration of Trust permits the trustees to issue an unlimited number
of shares of beneficial interest in various series or classes (subseries)
with a par value of $0.01 per share. Each series, in effect, represents a
separate mutual fund with its own investment objective and policies. The
Board of Trustees has the power to designate additional series or classes
of shares of beneficial interest and to classify or reclassify any unissued
shares with respect to such series or classes.
The Trust's Agreement and Declaration of Trust gives shareholders the right
to vote: (i) for the election or removal of trustees; (ii) with respect to
additional matters relating to the Trust as required by the Investment
Company Act; and (iii) on such other matters as the trustees consider
necessary or desirable. The shares of the Fund each have one vote and,
when issued, will be fully paid and non-assessable and within each series
or class, have no preference as to conversion, exchange, dividends,
retirement or other features. The shares of the Trust which the trustees
may, from time to time, establish, shall have no preemptive rights. The
shares of the Trust have non-cumulative voting rights, which means that the
holders of more than 50% of the shares voting for the election of trustees
can elect 100% of the trustees if they choose to do so. A shareholder is
entitled to one vote for each full share held (and a fractional vote for
each fractional share held), then standing in their name on the books of
the Trust. On any matter submitted to a vote of shareholders, all shares
of the Trust then issued and outstanding and entitled to vote on a matter
shall vote without differentiation between separate series on a one-vote-
per share basis. If a matter to be voted on does not affect the interests
of all series of the Trust, then only the shareholders of the affected
series shall be entitled to vote on the matter.
SHAREHOLDER MEETINGS. Pursuant to the Trust's Agreement and Declaration of
Trust, the Trust does not intend to hold shareholder meetings except when
required to elect trustees, or with respect to additional matters relating
to the Trust as required under the Investment Company Act.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
The Fund intends to declare and pay annual dividends to its shareholders of
substantially all of its net investment income, if any, earned during the
year from its investments. The Fund will distribute net realized capital
gains, if any, once with respect to each year. Expenses of the Fund,
including the advisory fee, are accrued each day. Reinvestments of
dividends and distributions in additional shares of the Fund will be made
at the net asset value determined on the ex date of the dividend or
distribution unless the shareholder has elected in writing to receive
dividends or distributions in cash. An election may be changed by
notifying Rodney Square in writing thirty days prior to record date.
Shareholders may call Rodney Square for more information. All shares of
the Fund will share proportionately in the investment income and expenses
of the Fund.
The Fund intends to qualify annually to be treated as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986,
as amended (the "Code"). As such, the Fund will not be subject to federal
income tax, or to any excise tax, to the extent its earnings are
distributed as provided in the Code and by satisfying certain other
requirements relating to the sources of its income and diversification of
its assets.
Dividends from net investment income or net short-term capital gains will
be taxable to shareholders as ordinary income, whether received in cash or
in additional shares. For corporate investors in the Fund, dividends from
net investment income will generally qualify in part for the 70% corporate
dividends-received deduction. However, the portion of the dividends so
qualified depends on the aggregate qualifying dividend income received by
the Fund from domestic (U.S.) sources.
Distributions paid by the Fund from long-term capital gains, whether
received in cash or in additional shares, are taxable to investors as long-
term capital gains, regardless of the length of time an investor has owned
shares in the Fund. The Fund does not seek to realize any particular
amount of capital gains during a year; rather, realized gains are a
byproduct of management activities. Consequently, capital gains
distributions may be expected to vary considerably from year to year.
Also, if purchases of shares in a Fund are made shortly before the record
date for a capital gains distribution or a dividend, a portion of the
investment will be returned as a taxable distribution.
Dividends which are declared in October, November or December to
shareholders of record in such a month but which, for operational reasons,
may not be paid to the shareholder until the following January, will be
treated for tax purposes as if paid by the Fund and received by the
shareholder on December 31 of the calendar year in which they are declared.
A sale or redemption of shares of the Fund is a taxable event and may
result in a capital gain or loss to shareholders subject to tax. Any loss
incurred on sale or exchange of a Fund's shares held for six months or less
will be treated as a long-term capital loss to the extent of any capital
gain dividends received with respect to such shares.
In addition to federal taxes, shareholders may be subject to state and
local taxes on distributions. It is recommended that shareholders consult
their tax advisers regarding specific questions as to federal, state, local
or foreign taxes. Each year, the Fund will mail you information on the tax
status of the Fund's dividends and distributions made to you.
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not complied
with IRS taxpayer identification regulations. You may avoid this
withholding requirement by certifying on your account registration form
your proper taxpayer identification number and by certifying that you are
not subject to backup withholding.
The tax discussion set forth above is included for general information
only. Prospective investors should consult their own tax advisers
concerning the federal, state, local or foreign tax consequences of an
investment in the Fund. Additional information on tax matters relating to
the Fund and to its shareholders is included in the Statement of Additional
Information.
SHAREHOLDER ACCOUNTS
Rodney Square, as Transfer Agent, maintains for each shareholder an account
expressed in terms of full and fractional shares of the Fund rounded to the
nearest 1/1000th of a share. In the interest of economy and convenience,
the Fund does not issue share certificates. Each shareholder is sent a
statement at least quarterly showing all purchases in or redemption from
the shareholder's account. The statement also sets forth the balance of
shares held in the shareholder's account.
<PAGE>
KALMAR
POOLED
INVESTMENT
TRUST
- - ----------
INVESTMENT ADVISER
Kalmar Investment Advisers
Barley Mill House
3701 Kennett Pike
Greenville, DE 19807
UNDERWRITER
Rodney Square Distributors, Inc.
1105 N. Market Street
Wilmington, DE 19890
SHAREHOLDER SERVICES
Rodney Square Management Corporation
Rodney Square North
1100 N. Market Street
Wilmington, DE 19890-0001
CUSTODIAN
Wilmington Trust Company
Rodney Square North
1100 N. Market Street
Wilmington, DE 19890-0001
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
AUDITORS
Coopers & Lybrand, L.L.P.
2400 Eleven Penn Center
Philadelphia, PA 19103
<PAGE>
KALMAR "GROWTH-WITH-VALUE" MICRO CAP FUND
- - ------------------------------------------------------------------------------
SHAREHOLDER APPLICATION
- - ------------------------------------------------------------------------------
Send Completed Application to:
KALMAR KALMAR POOLED INVESTMENT TRUST
POOLED C/O RODNEY SQUARE MANAGEMENT CORPORATION
INVESTMENT P.O. BOX 8987
TRUST WILMINGTON, DE 19899-9752
- - ------------------------------------------------------------------------------
1. ACCOUNT REGISTRATION - PLEASE PRINT
__ INDIVIDUAL OR JOINT ACCOUNT
- - ------------------------------------------------------------------------------
First name Middle initial Last name Social Security Number
- - ------------------------------------------------------------------------------
Joint owner(s) (Joint ownership means "joint tenants with rights of
survivorship" unless otherwise specified.)
- - ------------------------------------------------------------------------------
__ GIFT/TRANSFER TO A MINOR
_____________________________ As Custodian for ______________________________
Name of Custodian - ONE ONLY Minor's Name
Under the __________ Uniform Gift/Transfer to Minors Act.
State
- - -------------------------------------------------
Minor's Social Security Number
- - ------------------------------------------------------------------------------
__ TRUST __ CORPORATION __ PARTNERSHIP __ OTHER ENTITY ___________________
- - ------------------------------------------------------------------------------
Name of Entity (Corporate Resolution/Partnership Agreement Required)
- - -------------------------------------------------
Taxpayer Identification Number
- - -------------------------------
Name of each trustee (if any)
- - -------------------------------------------------
Date of trust document (must be completed for trust registration)
- - ------------------------------------------------------------------------------
2. ADDRESS
ACCOUNT HOLDER
- - ------------------------------------------------------------------------------
Street Address Daytime Phone (including Area Code)
(P.O. Box acceptable if street address is given)
- - ------------------------------------------------------------------------------
City State Zip code Evening Phone (including Area Code)
I am a citizen of: __ U.S. __ __________________________________________
INTERESTED PARTY,DUPLICATE ACCOUNT STATEMENT
- - ------------------------------------------------------------------------------
Number and Street Telephone No. (Include Area Code)
- - ------------------------------------------------------------------------------
Apartment, Floor or Room Number
- - ------------------------------------------------------------------------------
City State Zip
- - ------------------------------------------------------------------------------
3. INITIAL INVESTMENT - MINIMUM $10,000
Enclosed is a check payable to the Kalmar "Growth-with-Value" Micro Cap Fund
for $_________
__ By Federal Funds wire (Please call (800) 282-2319 for instructions):
- - ------------------------------------------------------------------------------
Name of Bank Wire Amount ($) Wire Date
- - ------------------------------------------------------------------------------
4. DISTRIBUTIONS
All dividends and distributions will be automatically reinvested in additional
shares at net asset value unless otherwise indicated by checking the box
below:
___ Do NOT reinvest my dividends and capital gains.
If dividends adn distributions are distributed in cash, you have the option to
receive such amounts either by direct deposit into your bank account or by
check. Please check one box below:
__ Direct Deposit __ Check
PLEASE ATTACH A VOIDED CHECK IF YOU CHOOSE DIRECT DEPOSIT.
- - ------------------------------------------------------------------------------
5. SIGNATURE AND TAX CERTIFICATIONS
I have received and read the Prospectus for the Kalmar "Growth-with-Value"
Micro Cap Fund and agree to its terms; I am of legal age. I understand that
investment in these shares involves investment risks, including possible loss
of principal. If a corporate customer, I certify that appropriate corporate
resolutions authorizing investment in Kalmar "Growth-with-Value" Micro Cap
Fund have been duly adopted.
I certify under penalties of perjury that the Social Security number or
taxpayer identification number shown above is correct. Unless the box below
is checked, I certify under penalties of perjury that I am not subject to
backup withholding because the Internal Revenue Service (a) has not notified
me that I am as a result of failure to report all interest or dividends, or
(b) has notified me that I am no longer subject to backup withholding. The
certifications in this paragraph are required from all nonexempt persons to
prevent backup withholding of 31% of all taxable distributions and gross
redemption proceeds under the federal income tax law.
__ Check here if you are subject to backup withholding.
- - ------------------------------------------------------------------------------
Signature Date
- - ------------------------------------------------------------------------------
Signature Date
Check one: __ Owner __ Trustee __ Custodian __ Other________
- - ------------------------------------------------------------------------------
6. OPTIONAL SHAREHOLDER PRIVILEGES
A. TELEPHONE REDEMPTION AUTHORIZATION
I/We hereby authorize the use of cash transfers to effect redemptions of
shares from my/our account according to telephone instructions from any one of
the authorized signers listed in Section 7 C and to send the proceeds to
(CHECK ONE OR MORE OF THE FOLLOWING):
__ My address of record as indicated in Section 2 (must be $50,000 or less
and address must be established for a minimum of 60 days)
__ My bank as designated below
__ Wire proceeds to my bank via the Federal Funds Wire System (minimum
$1,000) as designated below
__ All of the above
- - ------------------------------------------------------------------------------
Bank Name Bank Routing Transit #
- - ------------------------------------------------------------------------------
Bank Account # (Checking/Savings) Account Holder
- - ------------------------------------------------------------------------------
Bank Address: Street City State Zip
PLEASE ATTACH A VOIDED CHECK OF THE BANK ACCOUNT DESIGNATED ABOVE.
- - ------------------------------------------------------------------
Telephone redemption by wire can be used only with financial institutions that
are participants in the Federal Reserve Bank Wire System. If the financial
institution you designate is not a Federal Reserve participant, telephone
redemption proceeds will be mailed to the named financial institution. In
either case, it may take a day or two, upon receipt for your financial
institution to credit your bank account with the proceeds, depending on its
internal crediting procedures.
- - ------------------------------------------------------------------------------
B. AUTOMATIC INVESTMENT PLAN -- (SUBJECT TO THE $10,000 MINIMUM INITIAL
PURCHASE)
I hereby request that RSMC, the Fund's Transfer Agent, draw an automatic
clearing house ("ACH") debit electronically on the bank checking account
designated on a monthly basis and invest the amount collected in Kalmar
"Growth-with-Value" Micro Cap Fund shares. The shares are purchased on the
same day that the Transfer Agent draws the debit, and a confirmation is sent
to you.
Mark one of your personal checks "VOID" and attach the voided check to this
application. As soon as your bank accepts your authorizations, debits will be
generated and purchased of Kalmar "Growth-with-Value" Micro Cap Fund shares
will begin. Please note that your bank must be able to accept ACH transactions
and/or may be a member of an ACH Association. The Fund cannot guarantee
acceptance by your bank. Please allow one (1) month for processing of this
automatic option before the first debit occurs.
Please begin Automatic Investing for me on _________________, 19___ and invest
$_______________ (minimum of $100) in shares of the Kalmar "Growth-with-Value"
Micro Cap Fund on the 20th of each month.
- - ------------------------------------------------------------------------------
Name of Bank:
- - ------------------------------------------------------------------------------
Bank Address: Bank Telephone #:
- - ------------------------------------------------------------------------------
Signature of Depositor/Date Signature of Joint Depositor (if any)/Date:
I understand that my ACH debit will be dated on or about the 20th of the month
specified. I agree that if such debit is not honored upon presentation, RSMC
may discontinue this service without prior notice, and any purchase of Fund
shares may be reversed. RSMC is under no obligation to notify the undersigned
as to the nonpayment of any debit. I further understand that the net asset
value of Kalmar "Growth-with-Value" Micro Cap Fund shares at the time of
reversal may be less than the net asset value on the day of the original
purchase. RSMC is authorized to redeem sufficient additional full and
fractional shares from my account to make up the deficiency. Automatic
Investing may be discontinued by RSMC by written notice to the shareholder at
least thirty (30) days prior to any payment date or by the investor by
written notice to RSMC provided that the notice is received not later than ten
(10) business days prior to the specified investment date.
- - ------------------------------------------------------------------------------
C. SYSTEMATIC WITHDRAWL PLAN -- (ACCOUNT BALANCES MUST BE GREATER THAN
$10,000)
Frequency of withdrawls (check one): __ monthly __ bi-monthly __ quarterly
__ semi-annually __ annually
I/We authorize RSMC to make periodic redemptions of Kalmar "Growth-with-Value"
Micro Cap Fund shares as necessary to provide the payments indicated below.
Method of Payment: (check one): __ Check __ Automatic Clearing House ("ACH")
electronic credit (SEE INSTRUCTIONS BELOW)
If you have chosen ACH credit option to your bank account, please mark one of
your pesonal checks "VOID" and attach the voided check to this application
Please note that your bank must be able to accept ACH transactions and/or may
be a member of an ACH Association. The Fund cannot guarantee acceptance by
your bank.
The first withdrawl is to be made about the 25th day of ______________, 19___
Amount of each withdrawl (minimum $100): $ __________________
- - ------------------------------------------------------------------------------
Name of Bank: Bank Address:
- - ------------------------------------------------------------------------------
Signature of Depositor/Date Signature of Joint Depositor (if any)/Date
THIS APPLICATION MUST BE RECEIVED BY THE 10TH OF THE MONTH INDICATED TO BECOME
EFFECTIVE FOR THAT MONTH.
- - ------------------------------------------------------------------------------
<PAGE>
[Back cover]
KALMAR POOLED INVESTMENT TRUST
BARLEY MILL HOUSE
3701 KENNETT PIKE
GREENVILE, DE 19807
(PHONE) 302-658-7575
(FAX) 302-658-7513
<PAGE>
KALMAR "GROWTH-WITH-VALUE" SMALL CAP FUND
KALMAR "GROWTH-WITH-VALUE" MICRO CAP FUND
EACH A SERIES OF
KALMAR POOLED INVESTMENT TRUST
Barley Mill House
3701 Kennett Pike, Greenville, Delaware 19807
STATEMENT OF ADDITIONAL INFORMATION DATED JANUARY 31, 1997
Kalmar Pooled Investment Trust (the "Trust") currently offers two separate
series of shares, each with its own investment objective and policies.
Information concerning the Kalmar "Growth-with-Value" Small Cap Fund (the
"Small Cap Fund") and Kalmar "Growth-with-Value" Micro Cap Fund (the "Micro
Cap Fund") (collectively, the "Funds") is included in separate prospectuses,
each dated January 31, 1997. No investment in shares should be made
without first reading the applicable prospectus. A copy of each prospectus
may be obtained without charge at the addresses and telephone numbers listed
below.
INVESTMENT ADVISER: UNDERWRITER:
KALMAR INVESTMENT ADVISERS RODNEY SQUARE DISTRIBUTORS, INC.
Barley Mill House 1105 N. Market Street
3701 Kennett Pike Wilmington, DE 19890
Greenville, DE 19807 (800) 282-2319
(302) 658-7575
- - ------------------------------------------------------------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE
READ IN CONNECTION WITH THE CURRENT PROSPECTUS OF THE PARTICULAR FUND DATED
JANUARY 31, 1997. INVESTORS SHOULD RETAIN THIS STATEMENT OF ADDITIONAL
INFORMATION FOR FUTURE REFERENCE.
- - ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
----
Kalmar Pooled Investment Trust................................ 1
Investments................................................... 1
Investment Restrictions....................................... 6
Portfolio Brokerage and Turnover.............................. 9
Management.................................................... 9
Purchases..................................................... 14
Redemptions................................................... 16
Taxation...................................................... 16
General Information........................................... 18
Performance................................................... 18
Financial Statements.......................................... 20
Appendix...................................................... A-1
<PAGE>
KALMAR POOLED INVESTMENT TRUST
Kalmar Pooled Investment Trust (the "Trust"), Barley Mill House, 3701 Kennett
Pike, Greenville, Delaware 19807, is an open-end diversified, management
investment company which currently offers shares of two series representing
separate portfolios of investments, the Kalmar "Growth-with-Value" Small Cap
Fund (the "Small Cap Fund") and the Kalmar "Growth-with-Value" Micro Cap Fund
(the "Micro Cap Fund") (each individually, a "Fund" and collectively, the
"Funds."). Shares of both Funds are offered and sold on a no-load basis,
without the imposition of sales or distribution charges.
INVESTMENTS
Each Fund seeks to achieve its objective by following the philosophy outlined
in its prospectus and by making investments selected in accordance with its
investment policies and restrictions. The Funds will vary their investment
strategies as described in each Fund's prospectus to achieve their objectives.
This Statement of Additional Information contains further information
concerning the techniques and operations employed by the Fund's investment
adviser, Kalmar Investment Advisers (the "Adviser") in managing each Fund, the
securities in which the Funds will invest, and the policies they will follow,
and should be read in conjunction with the "Investment Objectives and
Policies" section of the prospectus of each Fund.
CONVERTIBLE SECURITIES
Traditional convertible securities include corporate bonds, notes and
preferred stocks that may be converted into or exchanged for common stock, and
other securities that also provide an opportunity for equity participation.
These securities are generally convertible either at a stated price or a
stated rate (that is, for a specific number of shares of common stock or other
security). As with other fixed income securities, the price of a convertible
security to some extent varies inversely with interest rates. While providing
a fixed-income stream (generally higher in yield than the income derivable
from a common stock but lower than that afforded by a non-convertible debt
security), a convertible security also affords the investor an opportunity,
through its conversion feature, to participate in the capital appreciation of
the common stock into which it is convertible. As the market price of the
underlying common stock declines, convertible securities tend to trade
increasingly on a yield basis and so may not experience market value declines
to the same extent as the underlying common stock. When the market price of
the underlying common stock increases, the price of a convertible security
tends to rise as a reflection of the value of the underlying common stock. To
obtain such a higher yield, the Funds may be required to pay for a convertible
security an amount in excess of the value of the underlying common stock.
Common stock acquired by the Funds upon conversion of a convertible security
will generally be held for so long as the Adviser anticipates such stock will
provide the Funds with opportunities which are consistent with the Funds'
investment objectives and policies.
WARRANTS
The Funds may invest in warrants, in addition to warrants acquired in units or
attached to securities. A warrant is an instrument issued by a corporation
which gives the holder the right to subscribe to a specified amount of the
issuer's capital stock at a set price for a specified period of time.
WHEN ISSUED, DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS
The Funds may enter into forward commitments for the purchase or sale of
securities, including on a "when issued" or "delayed delivery" basis in excess
of customary settlement periods for the type of security involved. In some
cases, a forward commitment may be conditioned upon the occurrence of a
subsequent event, such as approval and consummation of a merger, corporate
reorganization or debt restructuring, i.e., a when, as and if issued security.
When such transactions are negotiated, the price is fixed at the time of the
commitment, with payment and delivery taking place in the future, generally a
month or more after the date of the commitment. While the Funds will only
enter into a forward commitment with the intention of actually acquiring the
security, the Funds may sell the security before the settlement date if it is
deemed advisable.
Securities purchased under a forward commitment are subject to market
fluctuation, and no interest (or dividends) accrues to the Funds prior to the
settlement date. The Funds will segregate with its Custodian (as hereinafter
defined) cash or liquid high-grade debt securities in an aggregate amount at
least equal to the amount of its outstanding forward commitments.
AMERICAN DEPOSITORY RECEIPTS
The Funds may make foreign investments through the purchase and sale of
sponsored or unsponsored American Depository Receipts ("ADRs"). ADRs are
receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. The Funds
may purchase ADRs whether they are "sponsored" or "unsponsored". "Sponsored"
ADRs are issued jointly by the issuer of the underlying security and a
depository, whereas "unsponsored" ADRs are issued without participation of the
issuer of the deposited security. Holders of unsponsored ADRs generally bear
all the costs of such facilities and the depository of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited security or to pass through voting
rights to the holders of such receipts in respect of the deposited securities.
Therefore, there may not be a correlation between information concerning the
issuer of the security and the market value of an unsponsored ADR. ADRs may
result in a withholding tax by the foreign country of source which will have
the effect of reducing the income distributable to shareholders.
SHORT SALES
The Fund is authorized to engage in short sales of stocks which the Adviser
believes are substantially overvalued. Whenever the Fund effects a short
sale, it will set aside in segregated accounts cash, U.S. government
securities, high grade debt instruments or other liquid securities equal to
the difference between (a) the market value of the securities sold short and
(b) any cash or securities required to be deposited as collateral with the
broker in connection with the short sale (but not including the proceeds of
the short sale). Until the Fund replaces the security it borrowed to make the
short sale, it must maintain daily the segregated account at such a level that
(a) the amount deposited in it plus the amount deposited with the broker as
collateral will equal the current market value of the securities sold short.
No more than 10% of the value of the Fund's total net assets will be, when
added together, (a) deposited as collateral for the obligation to replace
securities borrowed to effect short sales, and (b) allocated to segregated
accounts in connection with short sales. The Fund's ability to make short
sales may be limited by a requirement applicable to "regulated investment
companies" under Subchapter M of the Internal Revenue Code that no more than
30% of the Fund's gross income in any year may be the result of gains from the
sale of property held for less than three months.
DEBT SECURITIES-RISKS
The Funds are also authorized to invest in debt securities, which may include
bonds, debentures, or notes (and cash equivalent debt securities as described
below). The Funds may invest their assets in debt securities pending
investment in suitable equity securities or if the Adviser believes such
securities have the potential for capital appreciation as a result of
improvement in the creditworthiness of the issuer. The receipt of income from
such debt securities is incidental to the Funds' investment objective of
capital appreciation.
The Fund may invest up to 5% of its net assets, at the time of investment, in
lower rated, fixed-income securities and unrated securities of comparable
quality, commonly referred to as "junk bonds." The market value of lower-
rated, fixed-income securities tends to reflect individual developments
affecting the issuer to a greater extent than the market value of higher rated
securities, which react primarily to fluctuations in the general level of
interest rates. Lower rated securities also tend to be more sensitive to
economic conditions than higher rated securities. These lower rated fixed-
income securities are considered by the rating agencies, on balance, to be
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligation
and will generally involve more credit risk than securities in the higher
rating categories. Even bonds rated BBB by Standard & Poor's Corporation
("S&P") or Baa by Moody's Investors Service ("Moody's"), ratings which are
considered investment grade, possess some speculative characteristics.
Issuers of high yielding, fixed-income securities are often highly leveraged
and may not have more traditional methods of financing available to them.
Therefore, the risk associated with acquiring the securities of such issuers
is generally greater than is the case with higher rated securities. For
example, during an economic downturn or a sustained period of rising interest
rates, highly leveraged issuers of high yielding securities may experience
financial stress. During these periods, such issuers may not have sufficient
cash flow to meet their interest payment obligations. The issuer's ability to
service its debt obligations may also be adversely affected by specific
developments affecting the issuer, the issuer's inability to meet specific
projected business forecasts, or the unavailability of additional financing.
The risk of loss due to default by the issuer may be significantly greater for
the holders of high yielding securities because such securities are generally
unsecured and are often subordinated to other creditors of the issuer. The
Fund may retain an issue that has defaulted because such issue may present an
opportunity for subsequent price recovery.
High yielding, fixed-income securities frequently have call or buy-back
features which permit an issuer to call or repurchase the securities from the
Fund. Although such securities are typically not callable for a period from
three to five years after their issuance, if a call were exercised by the
issuer during periods of declining interest rates, the Fund would likely have
to replace such called securities with lower yielding securities, thus
decreasing the net investment income to the Fund and dividends to
shareholders. The premature disposition of a high yielding security due to a
call or buy-back feature, the deterioration of the issuer's creditworthiness,
or a default may also make it more difficult for the Fund to manage the timing
of its receipt of income, which may have tax implications.
The Fund may have difficulty disposing of certain high yielding securities
because there may be a thin trading market for a particular security at any
given time. The market for lower rated, fixed-income securities generally
tends to be concentrated among a smaller number of dealers than is the case
for securities which trade in a broader secondary retail market. Generally,
purchasers of these securities are predominantly dealers and other
institutional buyers, rather than individuals. To the extent the secondary
trading market for a particular high yielding, fixed-income security does
exist, it is generally not as liquid as the secondary market for higher rated
securities. Reduced liquidity in the secondary market may have an adverse
impact on market price and the Fund's ability to dispose of particular issues,
when necessary, to meet the Fund's liquidity needs or in response to a
specific economic event, such as a deterioration in the creditworthiness of
the issuer. Reduced liquidity in the secondary market for certain securities
may also make it more difficult for the Fund to obtain market quotations based
on actual trades for purposes of valuing the Fund's portfolio. Current values
for these high yield issues are obtained from pricing services and/or a
limited number of dealers and may be based upon factors other than actual
sales.
For a description of debt security ratings, please refer to the "Appendix" in
the Statement of Additional Information.
LOANS OF PORTFOLIO SECURITIES.
Each Fund may lend its investment securities to approved borrowers who need to
borrow securities in order to complete certain transactions, such as covering
short sales, avoiding failures to deliver securities or completing arbitrage
operations. By lending its investment securities, a Fund attempts to increase
its income through the receipt of interest on the loan. Any gain or loss in
the market price of the securities loaned that might occur during the term of
the loan would be for the account of the Fund. Each Fund may lend its
investment securities to qualified brokers, dealers, domestic and foreign
banks or other financial institutions, so long as the terms, the structure and
the aggregate amount of such loans are not inconsistent with the Investment
Company Act of 1940, as amended, (the "1940 Act") or the Rules and Regulations
or interpretations of the Securities and Exchange Commission (the "SEC")
thereunder, which currently require that: (a) the borrower pledge and maintain
with a Fund collateral consisting of cash, an irrevocable letter of credit
issued by a bank or securities issued or guaranteed by the United States
Government having a value at all times not less than 100% of the value of the
securities loaned; (b) the borrower add to such collateral whenever the price
of the securities loaned rises (i.e., the borrower "marks to the market" on a
daily basis); (c) the loan be made subject to termination by a Fund at any
time; and (d) the Fund receives reasonable interest on the loan (which may
include the Fund investing any cash collateral in interest bearing short-term
investments). All relevant facts and circumstances, including the
creditworthiness of the broker, dealer or institution, will be considered in
making decisions with respect to the lending of securities, subject to review
by the Board of Trustees.
At the present time, the staff of the SEC does not object if an investment
company pays reasonable negotiated fees in connection with loaned securities
so long as such fees are set forth in a written contract and approved by the
investment company's Board of Trustees. In addition, voting rights may pass
with the loaned securities, but if a material event occurs affecting an
investment on a loan, the loan must be called and the securities voted.
WRITING COVERED CALL OPTIONS
The general reason for writing call options is to attempt to realize income.
By writing covered call options, each Fund gives up the opportunity, while the
option is in effect, to profit from any price increase in the underlying
security above the option exercise price. In addition, each Fund's ability to
sell the underlying security will be limited while the option is in effect
unless the Fund effects a closing purchase transaction. A closing purchase
transaction cancels out the Fund's position as the writer of an option by
means of offsetting purchase of an identical option prior to the expiration of
the option it has written. Covered call options serve as a partial hedge
against the price of the underlying security declining. Each Fund writes only
covered options, which means that so long as a Fund is obligated as the writer
of the option it will, through its custodian, have deposited the underlying
security of the option or, if there is a commitment to purchase the security,
a segregated cash reserve of cash, cash equivalents, U.S. Government
securities or other high grade liquid debt securities denominated in U.S.
dollars or non-U.S. currencies with a securities depository with a value equal
to or greater than the exercise price of the underlying securities. By
writing a put, a Fund will be obligated to purchase the underlying security at
a price that may be higher than the market value of that security at the time
of exercise for as long as the option is outstanding. Each Fund may engage in
closing transactions in order to terminate put options that it has written.
PURCHASING OPTIONS
A put option may be purchased to partially limit the risks of the value of an
underlying security or the value of a commitment to purchase that security for
forward delivery. The amount of any appreciation in the value of the
underlying security will be partially offset by the amount of the premium paid
for the put option and any related transaction costs. Prior to its
expiration, a put option may be sold in a closing sale transaction and profit
or loss from a sale will depend on whether the amount received is more or less
than the premium paid for the put option plus the related transaction costs.
A closing sale transaction cancels out a Fund's position as purchaser of an
option by means of an offsetting sale of an identical option prior to the
expiration of the option it has purchased. In certain circumstances, a Fund
may purchase call options on securities held in its investment portfolio on
which it has written call options or on securities which it intends to
purchase.
ILLIQUID AND RESTRICTED SECURITIES.
Each Fund may invest up to 15% of its net assets in illiquid or restricted
securities. Certain restricted securities eligible for resale to qualified
institutional purchasers pursuant to Rule 144A under the Securities Act of
1933 or commercial paper issued pursuant to Section 4(2) of the Securities Act
of 1933 may be treated as liquid securities for purposes of the 15%
limitation, under guidelines adopted by the board of Trustees of the Trust.
While maintaining oversight and review, the Board of trustees has delegated to
the Adviser to day-to-day functions of determining whether or not individual
securities are liquid for purposes of the Fund's 15% limitation on illiquid
investments (or for other purposes, such as the maintenance of liquid
collateral for securities positions). The Board of Trustees of the Trust has
instructed the Adviser to consider the following factors in determining the
liquidity of a security purchased under Rule 144A or commercial paper issued
pursuant to section 4(2); (i) the frequency of trades and trading volume for
the security; (ii) whether at least three dealers are willing to purchase or
sell the security and the number of potential purchasers; (iii) whether at
least two dealers are making a market in the security; and (iv) the nature of
the security and the nature of the marketplace trades (e.g., the time needed
to dispose of the security, the method of soliciting offers and the mechanics
of transfer). Although having delegated the day-to-day functions, the Board
of Trustees will continue to monitor and will periodically review the
Adviser's selection of Rule 144A securities as well as the Adviser's
determinations as to their liquidity.
If the Adviser determines that a security which was previously determined to
be liquid, is no longer liquid and, as a result, the Fund's holdings of
illiquid securities exceed the Fund's 15% limit on investment in such
securities, the Adviser will determine what action shall be taken to ensure
that the Fund continues to adhere to such limitation including disposing of
illiquid assets which may include such securities.
INVESTMENT RESTRICTIONS
The Funds have adopted the investment restrictions set forth below, some of
which (as indicated), are fundamental policies of each Fund and cannot be
changed without the approval of a majority of the outstanding voting
securities. As provided in the 1940 Act, a "vote of a majority of the
outstanding voting securities" means the affirmative vote of the lesser of:
(i) more than 50% of the outstanding shares; or (ii) 67% or more of the shares
present at a meeting if more than 50% of the outstanding shares are
represented at the meeting in person or by proxy. As a matter of fundamental
policy, each Fund may not:
1. As to 75% of its total assets, invest more than 5% of the total
assets of such Fund in the securities of any one issuer, other than
cash or cash items, or obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, or other investment
companies.
2. As to 75% of its total assets, purchase more than 10% of the
voting securities, or any class of securities, of any single issuer.
For purposes of this restriction, all outstanding fixed income
securities of an issuer are considered as one class.
3. Invest more than 25% of its total assets (taken at market value
at the time of each investment) in the securities of issuers in any
particular industry, except for temporary defensive purposes. This
limitation shall not apply to obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities; investments
in certificates of deposit and banker's acceptances will not be
considered investments in the banking industry; utility companies
will be divided according to their services; financial service
companies will be classified according to the end users of their
services; and asset-backed securities will be classified according
to the underlying assets securing such securities.
4. Invest in real estate or interests in real estate, however,
this will not prevent a Fund from investing in securities secured by
real estate or interests therein, or in publicly-held real estate
investment trusts or marketable securities of companies which may
represent indirect interests in real estate.
5. Purchase or sell commodities or commodity contracts, except
that the Funds may purchase or sell stock index options, stock index
futures, financial futures and related options on such futures.
6. Issue senior securities, except that a Fund may borrow money in
accordance with investment limitation 9, purchase securities on a
when-issued, delayed settlement or forward delivery basis, sell
securities short and enter into reverse repurchase agreements.
7. Purchase any securities on margin, except that the Fund may
obtain such short-term credit as may be necessary for the clearance
of purchases and sales of portfolio securities. The payment by the
Fund of initial or variation margin in connection with options
transactions, if applicable, shall not be considered the purchase of
a security on margin.
8. Make loans of money or property, except through: (i) the
purchase of debt instruments consistent with its investment
objective and policies; (ii) investment in repurchase agreements; or
(iii) loans of portfolio securities in a manner consistent with a
Fund's investment objective and policies and the provisions of the
Investment Company Act and regulations and SEC positions thereunder.
9. Borrow amounts in excess of 33 1/3% of its total assets, taken
at market value, and then only from banks (i) as a temporary measure
for extraordinary or emergency purposes such as the redemption of
Fund shares or (ii) in connection with reverse repurchase
agreements. Utilization of borrowings may exaggerate increases or
decreases in an investment company's net asset value. However, the
Fund will not purchase securities while borrowings exceed 5% of its
total assets, except to honor prior commitments and to exercise
subscription rights when outstanding borrowings have been obtained
exclusively for settlements of other securities transactions.
10. Mortgage, pledge, hypothecate or otherwise encumber its assets,
except in amounts up to 33 1/3% of its total assets, but only to
secure borrowings authorized in the preceding restriction or to
collateralize securities trading practices described in the
prospectuses and Statement of Additional Information for the Funds.
11. Underwrite securities of other issuers except insofar as the
Fund may be deemed an underwriter under the Securities Act of 1933,
as amended, in selling portfolio securities.
The policies set forth below are non-fundamental policies of each Fund and may
be amended without the approval of the shareholders of the respective Funds.
Each Fund will not:
1. Purchase securities of other investment companies, except to
the extent permitted under the 1940 Act or in connection with a
merger, consolidation, acquisition or reorganization, or in
accordance with any exemptive order granted by the SEC.
2. Make investments in securities for the purpose of exercising
control over or management of the issuer.
3. Invest more than 5% of its total assets in securities of
issuers having a record, together with predecessors, of less than
three years of continuous operation, except for certain real estate
investment trusts.
4. Purchase or sell interests in oil, gas or other mineral
exploration or development programs or leases, rights or royalty
contracts or exploration or development programs, except that the
Fund may invest in securities of companies which invest in or
sponsor such programs.
5. Invest in warrants if, at the time of acquisition, its
investment in warrants, valued at the lower of cost or market value,
would exceed 5% of the Fund's net assets; included within such
limitation, but not to exceed 2% of the Fund's net assets, are
warrants which are not listed on the New York or American Stock
Exchanges. For purposes of this policy, warrants acquired by the
Fund in units or attached to securities may be deemed to be without
value;
PORTFOLIO BROKERAGE AND TURNOVER
The Adviser, when effecting the purchases and sales of portfolio securities
for the account of a Fund, will seek execution of trades either: (i) at the
most favorable and competitive rate of commission charged by any broker,
dealer or member of an exchange; or (ii) at a higher rate of commission
charges if reasonable in relation to brokerage and research services provided
to the Funds or the Adviser by such member, broker, or dealer when viewed in
terms of either a particular transaction or the Adviser's overall
responsibilities to the Trust. Such services may include, but are not limited
to, any one or more of the following: information as to the availability of
securities for purchase or sale, statistical or factual information, or
opinions pertaining to investments. The Adviser may use research and services
provided to it by brokers and dealers in servicing all its clients, and not
all such services will be used by the Adviser in connection with the Funds.
While it is the policy of each Fund generally not to engage in frequent
trading and turnover tactics for short-term gains, the Adviser will effect
portfolio transactions without regard to holding period if, in its judgment,
such transactions are advisable in light of a change in circumstances of a
particular company or within a particular industry or in general market,
economic or financial conditions. While the Funds anticipate that their
annual portfolio turnover rate should not exceed 50% under normal conditions,
it is impossible to predict portfolio turnover rates. The portfolio turnover
rate is calculated by dividing the lesser of a Fund's annual sales or
purchases of portfolio securities (exclusive of purchases or sales of
securities whose maturities at the time of acquisition were one year or less)
by the monthly average value of the securities in the portfolio during the
year. High portfolio turnover would involve additional transaction costs
(such as brokerage commissions) which are borne by a Fund, or adverse tax
effects. (See "Dividends, Distributions and Taxes" in the Prospectus). Each
Fund is subject to the Federal income tax requirement that less than 30% of a
Fund's gross income must be derived from gains from the sale or other
disposition of securities held for less than three months.
MANAGEMENT
INVESTMENT ADVISER AND ADVISORY AGREEMENT
Kalmar Investment Advisers (previously defined as the "Adviser") serves as the
investment adviser for both Funds. The Adviser was organized as a Delaware
business trust on November 6, 1996 for the sole purpose of serving as the
investment adviser for the series of the Trust. The Adviser is the sister
company to Kalmar Investments Inc. ("Kalmar Investments"), a Delaware
corporation which has been providing investment advisory services to
individual accounts since its inception in 1982. Both Kalmar Investments
and the Adviser are registered as investment advisers under the Investment
Advisers Act of 1940, and are wholly-owned by Ford B. Draper, Jr. The
investment personnel who comprise the portfolio management team at Kalmar
Investments and the Adviser are identical.
The Trust has entered into separate investment advisory agreements on behalf
of each Fund with the Adviser (the "Advisory Agreements"), for the provision
of investment advisory services to the Funds, subject to the supervision and
direction of the Board of Trustees. Pursuant to the Advisory Agreements, each
Fund is obligated to pay the Adviser a monthly fee equal to an annual rate of
1.00% of the respective Fund's average daily net assets. During each Fund's
first fiscal year, the Adviser has voluntarily agreed to limit its advisory
fees or to assume certain expenses of each Fund so that each Fund's total
operating costs do not exceed 1.25% on an annualized basis. The Adviser may
terminate this arrangement at any time.
The Advisory Agreements are each dated January 31, 1997, and are effective
for an initial period of two years. The Agreements may be renewed after their
initial term only so long as such renewal and continuance are specifically
approved at least annually by the Board of Trustees or by vote of a majority
of the outstanding voting securities of the respective Fund, and only if the
terms of the renewal thereof have been approved by the vote of a majority of
the Trustees who are not parties thereto or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval. The Advisory Agreements will terminate automatically in the event
of their assignment.
General expenses of the Trust (such as costs of maintaining corporate
existence, legal fees, insurances, etc.) will be allocated between the Funds
in proportion to their relative net assets. Expenses which relate exclusively
to a particular Fund, such as certain registration or notice filing fees,
brokerage commissions and other portfolio expenses, will be borne directly by
that Fund.
TRUSTEES AND OFFICERS
The Trustees and principal executive officers of the Trust and their principal
occupations for the past five years are listed below:
POSITION AND OFFICE PRINCIPAL OCCUPATION
NAME AND ADDRESS AGE WITH THE TRUST DURING THE PAST FIVE YEARS
- - ---------------- --- ------------------- --------------------------
Ford B. Draper, Jr.* 54 Chairman, President Founder, President Director,
Barley Mill House and Treasurer and Chief Investment Officer
3701 Kennett Pike of Kalmar Investments
Greenville, DE 19807 since 1982; President,
Kalmar Investment Advisers
since inception.
Wendell Fenton 57 Trustee President of the law firm of
Richards, Layton & Finger
(joined 1971).
John J. Quindlen 64 Trustee Trustee of The Rodney Square
Fund and Kiewit Mutual Fund;
Senior Vice President and
Chief Financial Officer of
E.I. Dupont de Nemours & Co.
from 1954 through 1993
(retired).
David D. Wakefield 66 Trustee Executive Secretary,
Longwood Foundation and
Welfare Foundation, 1992 to
present; Chairman and
President, J.P. Morgan
Delaware from 1989 to 1992.
David M. Reese, Jr.* 61 Trustee Semi-retired; previously,
Barley Mill House portfolio manager, research
3701 Kennett Pike analyst for Kalmar
Greenville, DE 19807 Investments from 1982
through March, 1996.
Lee B. Davis 55 Secretary; Secretary and Compliance
Barley Mill House Compliance Officer Officer, Kalmar Investments
3701 Kennett Pike since 1982 and Kalmar
Greenville, DE 19807 Investment Advisers since
inception.
- - --------------------
* Trustees who are "interested persons" as defined in the Investment
Company Act of 1940.
The officers conduct and supervise the daily business operations of the Trust,
while the trustees, in addition to the functions set forth under "Investment
Adviser" and "Distributor" review such actions and decide on general policy.
Compensation to officers and Trustees of the Trust who are affiliated with the
Adviser is paid by the Adviser, and not by the Trust.
Information relating to the compensation to be paid to the Trustees of the
Trust is set forth below:
Pension or
Estimated Retirement Total Com-
Aggregate Benefits Estimated pensation
Compensation Accrued as Annual From Trust
From Trust Part Benefits and Fund
Name and (Current Fiscal of Trust Upon Complex Paid
Position Year)1 Expenses Retirement to Trustees
- - -------- --------------- ---------- ------------ -----------
Ford B. Draper, Jr. $0 N/A N/A $0
Wendell Fenton $0 N/A N/A $0
John J. Quindlen $5000 N/A N/A $5000
David M. Reese, Jr. $5000 N/A N/A $5000
David D. Wakefield $5000 N/A N/A $5000
1 THE TRUSTEES WHO ARE "INTERESTED PERSONS" OF THE TRUST AS DEFINED IN THE
INVESTMENT COMPANY ACT RECEIVE NO COMPENSATION FROM THE TRUST. FOR THEIR
SERVICE AS TRUSTEES, THE "NON-INTERESTED" TRUSTEES RECEIVE $2,500 IN
ANNUAL FEES PER FUND PER TRUST MEETING ATTENDED, AS WELL AS REIMBURSEMENT
FOR OUT-OF-POCKET EXPENSES IN CONNECTION WITH TRAVEL AND ATTENDANCE AT
BOARD MEETINGS. THE TRUST HAS NOT COMPLETED A FULL FISCAL YEAR OF
OPERATIONS AND, AS OF THE DATE OF THIS STATEMENT OF ADDITIONAL
INFORMATION, ONE MEETING OF THE BOARD OF TRUSTEES WAS HELD IN THE PRIOR
FISCAL YEAR AT WHICH ALL OF THE TRUSTEES WERE PRESENT. THE AMOUNT IN
COLUMN 2 REPRESENTS THE ESTIMATED AGGREGATE COMPENSATION TO BE PAID TO
EACH TRUSTEE FROM THE TRUST FOR THE CURRENT FISCAL YEAR. IT IS EXPECTED
THAT THE TRUST WILL HOLD FOUR TRUSTEE MEETINGS PER YEAR.
The Trust has an Audit Committee which has the responsibility, among other
things, to (i) recommend the selection of the Trust's independent auditors;
(ii) review and approve the scope of the independent auditors' audit activity;
(iii) review the financial statements which are the subject of the independent
public auditors' certifications; and (iv) review with such independent public
auditors the adequacy of the Funds' basic accounting system and the
effectiveness of the Funds' internal accounting controls. There is no
separate Nominating or Investment Committee. Items pertaining to these
Committees are submitted to the full Board of Trustees.
The Trust has not adopted a pension plan or any other plan that would afford
benefits to its Trustees.
ADMINISTRATOR, TRANSFER AGENT AND FUND ACCOUNTING AGENT.
Rodney Square Management Corporation ("Rodney Square"), located at Rodney
Square North, 1100 N. Market Street, Wilmington, DE 19801-0001, provides
certain administrative services to the Trust pursuant to an Administration
Agreement. [Under the Administration Agreement, the Administrator: (1)
coordinates with the Custodian and Transfer Agent and monitors the services
they provide to the Funds; (2) coordinates and monitors any other third
parties furnishing services to the Funds; (3) provides the Funds 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
Funds as may be required by applicable federal or state law; (5) prepare and,
after approval by the Funds, arranges for the filing of such registration
statements and other documents with the Securities and Exchange Commission and
other federal and state regulatory authorities as may be required by
applicable law; (8) reviews and submits to the officers of the Trust, for
their approval, invoices or other requests for payment of the Funds' expenses
and instructs the Custodian to issue check in payment thereof; and (9) takes
such other action with respect to the Trust or the Funds as may be necessary
in the opinion of Rodney Square to perform its duties under the Agreement.]
As compensation for services performed under the Administration Agreement,
Rodney Square receives a fee payable monthly at an annual rate (as described
in each Fund's Prospectus) multiplied by the average daily net assets of the
Trust.
The Administration Agreement became effective as of January 31, 1997 for an
initial period of three years, and will remain in effect from year to year
thereafter, provided such continuance is approved at least annually by a vote
of the Trustees of the Trust. The Administration Agreement is also terminable
without payment of any penalty with respect to either Fund: (i) by the Trust
on sixty (60) days' written notice to Rodney Square; or (ii) by Rodney Square
on six (6) months' written notice to the Trust. The Administration Agreement
may also be terminable by the Trust or Rodney Square for cause.
DISTRIBUTOR
Rodney Square Distributors, Inc. ("RSD") serves as the principal underwriter
and distributor of each Fund's shares pursuant to a Distribution Agreement
with the Trust. Under the terms of the Distribution Agreement, RSD agrees to
use all reasonable efforts as agent to secure purchasers for the various
series of the Trust. RSD also assists the Trust in the production and
distribution of advertising, marketing and sales literature materials, and
review such materials for compliance with applicable regulations.
The Distribution Agreement provides that RSD, in the absence of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of reckless disregard of its obligations and duties under the
agreement, will not be liable to the Trust or its shareholders for losses
arising in connection with the sale of Fund shares.
Each Fund shall continue to bear the expense of all filing or registration
fees incurred in connection with the registration of shares under state
securities laws.
The Distribution Agreement became effective as of January 31, 1997, and will
remain in effect for a period of two years. Thereafter, the Distribution
Agreement continues in effect from year to year as long as its continuance is
approved at least annually by a majority of the Trustees, including a majority
of the Trustees who are not parties to the Distribution Agreement or
interested persons of any such party (the "Independent Trustees") and
terminates automatically in the event of its assignment. The Distribution
Agreement is also terminable without payment of any penalty with respect to
either Fund: (i) by such Fund (by vote of a majority of the Independent
Trustees or by vote of a majority of the outstanding voting securities of the
Fund) on sixty (60) days' written notice to RSD; or (ii) by RSD on sixty (60)
days' written notice to the Fund.
PURCHASES
Shares of the Funds are sold at the net asset value next determined after the
receipt and acceptance of a purchase application in proper form by Rodney
Square. The minimum initial investment for each Fund is $10,000 and subsequent
investments must total at least $1,000. The minimum investment amount for
investments by qualified retirement plans is $1,000 and there is no minimum
for subsequent investments for such accounts.
TAX-DEFERRED RETIREMENT PLANS
All types of tax-deferred retirement plans such as IRAs, employer-sponsored
defined contribution plans (including 401(k) plans) and tax-sheltered
custodial accounts described in Section 403(b)(7) of the Internal Revenue Code
of 1986, as amended are available to shareholders of the Funds. Qualified
investors benefit from the tax-free compounding of income dividends and
capital gains distributions.
INDIVIDUAL RETIREMENT ACCOUNTS (IRA)
Individuals, who are not active participants (and, when a joint return is
filed, who do not have a spouse who is an active participant) in an employer
maintained retirement plan are eligible to contribute on a deductible basis to
an IRA account. The IRA deduction is also retained for individual taxpayers
and married couples with adjusted gross incomes not in excess of certain
specified limits. All individuals who have earned income may make
nondeductible IRA contributions to the extent that they are not eligible for a
deductible contribution. Income earned by an IRA account will continue to be
tax deferred. A special IRA program is available for employers under which
the employers may establish IRA accounts for their employees in lieu of
establishing tax-qualified retirement plans. Known as SEP-IRAs (Simplified
Employee Pension-IRA), they free the employer of many of the recordkeeping
requirements of establishing and maintaining a tax-qualified retirement plan
trust.
If you are entitled to receive a distribution from a qualified retirement
plan, you may rollover all or part of that distribution into a Fund's IRA.
Your rollover contribution is not subject to the limits on annual IRA
contributions. You can continue to defer Federal income taxes on your
contribution and on any income that is earned on that contribution.
DEFINED CONTRIBUTION PLANS
Profit sharing plans and money purchase plans (the "Defined Contribution
Plans") are for use by both self-employed individuals (sole proprietorships
and partnerships) and corporations who wish to use shares of the Funds as a
funding medium for a retirement plan qualified under the Internal Revenue
Code.
Annual deductible contributions to the Defined Contribution Plans generally
may be made on behalf of each participant in a total amount of up to the
lesser of 20% of a self-employed participant's pre-contribution earned income
(after reducing the earned income by the self-employed's deduction for 1/2 of
his or her self-employment tax) (25% of a non-self-employed participant's
wages) or $30,000. Unless the employer chooses to take Social Security
contributions into account, the same percentage of earned income (or wages)
must be contributed on behalf of each participant in the Defined Contribution
Plans. Earned income and wages are limited for this purpose to $150,000 for
1994 indexed for cost of living adjustments in subsequent years.
403(B)(7) RETIREMENT PLANS
A 403(b)(7) Plan is for use by schools, hospitals, and certain other tax-
exempt organizations or associations who wish to use shares of the Funds as a
funding medium for a retirement plan for their employees. Contributions are
made to the 403(b)(7) Plan as a reduction to the employee's regular
compensation. Such contributions, to the extent they do not exceed applicable
limitations (including a generally applicable limitation of $9,500 per year),
are excludable from the gross income of the employee for Federal Income tax
purposes. Assets withdrawn from the 403(b)(7) Plan are subject to Federal
Income tax and to the additional 10% tax discussed above under "Defined
Contribution Plans."
In all these Plans, distributions of net investment income and capital gains
will be automatically reinvested.
REDEMPTIONS
Under normal circumstances, you may redeem your shares at any time without a
fee. The redemption price will be based upon the net asset value per share
next determined after receipt of the redemption request, provided it has been
submitted in the manner described in the Prospectus of each Fund. See "How to
Redeem Shares" in the Prospectus. The redemption price may be more or less
than your cost, depending upon the net asset value per share at the time of
redemption.
Payment for shares tendered for redemption is made by check within seven days
after receipt and acceptance of your redemption request by Rodney Square,
except that each Fund reserves the right to suspend the right of redemption,
or to postpone the date of payment upon redemption beyond seven days, (i) for
any period during which the New York Stock Exchange is restricted, (ii) for
any period during which an emergency exists as determined by the Securities
and Exchange Commission as a result of which disposal of securities owned by a
given Fund is not reasonably predictable or it is not reasonably practicable
for such Fund fairly to determine the value of its net assets, or (iii) for
such other periods as the Securities and Exchange Commission may by order
permit for the protection of Fund shareholders.
TAXATION
Each Fund intends to qualify each year as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
In order to so qualify, a Fund must, among other things (i) derive at least
90% of its gross income from dividends, interest, payments with respect to
certain securities loans, gains from the sale of securities or foreign
currencies, or other income (including but not limited to gains from options,
futures or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies; (ii) derive less than 30%
of its gross income from the sale or other disposition of stock or securities
or certain futures and options thereon held for less than three months ("short-
short gains"); (iii) distribute at least 90% of its dividends, interest and
certain other taxable income each year; and (iv) at the end of each fiscal
quarter maintain at least 50% of the value of its total assets in cash,
government securities, securities of other regulated investment companies, and
other securities of issuers which represent, with respect to each issuer, no
more than 5% of the value of a fund's total assets and 10% of the outstanding
voting securities of such issuer, and with no more than 25% of its assets
invested in the securities (other than those of the government or other
regulated investment companies) 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 and businesses.
To the extent a Fund qualifies for treatment as a regulated investment
company, it will not be subject to federal income tax on income and net
capital gains paid to shareholders in the form of dividends or capital gains
distributions. The Funds have elected to be treated as regulated investment
companies under Subchapter M of the Code and each intends to qualify as such
for each future fiscal year. The Directors reserve the right not to maintain
the qualification of the Fund as a regulated investment company if they
determine such course of action to be beneficial to you. In such case, the
Fund will be subject to federal, and possibly state, corporate taxes on its
taxable income and gains, and distributions to you will be taxable as ordinary
dividend income to the extent of the Fund's available earnings and profits.
Shareholders will be advised annually as to the Federal income tax
consequences of distributions made during the year.
An excise tax at the rate of 4% will be imposed on the excess, if any, of a
Fund's "required distributions" over actual distributions in any calendar
year. Generally, the "required distribution" is 98% of a fund's ordinary
income for the calendar year plus 98% of its capital gain net income
recognized during the one-year period ending on October 31 plus undistributed
amounts from prior years. The Funds intend to make distributions sufficient
to avoid imposition of the excise tax. Distributions declared by the Funds
during October, November or December to shareholders of record during such
month and paid by January 31 of the following year will be taxable to
shareholders in the calendar year in which they are declared, rather than the
calendar year in which they are received.
Each Fund will provide an information return to shareholders describing the
federal tax status of the dividends paid by the Fund during the preceding year
within 60 days after the end of each year as required by present tax law.
Individual shareholders will receive Form 1099-DIV and Form 1099-B as required
by present tax law during January of each year. If the Fund makes a
distribution after the close of its fiscal which is attributable to income or
gains earned in such earlier fiscal year, then the Fund shall send a notice to
its shareholders describing the amount and character of such distribution
within 60 days after the close of the year in which the distribution is made.
Shareholders should consult their tax advisors concerning the state or local
taxation of such dividends, and the federal, state and local taxation of
capital gains distributions.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and Treasury regulations currently in effect. For the
complete provisions, reference should be made to the pertinent Code sections
and regulations. The Code and regulations are subject to change by
legislative or administrative action at any time, and retroactively.
Dividends and distributions also may be subject to state and local taxes.
GENERAL INFORMATION
AUDITS AND REPORTS
The accounts of the Trust are audited each year by Coopers & Lybrand L.L.P.,
independent certified public accountants. Shareholders receive semi-annual
and annual reports of the Trust including the annual audited financial
statements and a list of securities owned.
PERFORMANCE
Current yield and total return may be quoted in advertisements, shareholder
reports or other communications to shareholders. Yield is the ratio of income
per share derived from a Fund's investments to a current maximum offering
price expressed in terms of percent. The yield is quoted on the basis of
earnings after expenses have been deducted. Total return is the total of all
income and capital gains paid to shareholders, assuming reinvestment of all
distributions, plus (or minus) the change in the value of the original
investment, expressed as a percentage of the purchase price. Occasionally, a
Fund may include its distribution rate in advertisements. The distribution
rate is the amount of distributions per share made by a Fund over a 12-month
period divided by the current maximum offering price.
The Securities and Exchange Commission rules require the use of standardized
performance quotations or, alternatively, that every non-standardized
performance quotation furnished by a Fund be accompanied by certain
standardized performance information computed as required by the Commission.
Current yield and total return quotations used by a Fund are based on the
standardized methods of computing performance mandated by the Securities and
Exchange Commission. An explanation of those and other methods used by a Fund
to compute or express performance follows.
CURRENT YIELD
As indicated below, current yield is determined by dividing the net investment
income per share earned during the period by the maximum offering price per
share on the last day of the period and analyzing the result. Expenses
accrued for the period include any fees charged to all shareholders during the
30-day base period. According to the Securities and Exchange Commission
formula:
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 = the maximum offering price per share on the last day of the
period.
TOTAL RETURN
As the following formula indicates, the average annual total return is
determined by multiplying a hypothetical initial purchase order of $1,000 by
the average annual compound rate of return (including capital
appreciation/depreciation and dividends and distributions paid and reinvested)
for the stated period less any fees charged to all shareholder accounts and
analyzing the result. The calculation assumes the maximum sales load is
deducted from the initial $1,000 purchase order and that all dividends and
distributions are reinvested at the public offering price on the reinvestment
dates during the period. The quotation assumes the account was completely
redeemed at the end of each one, five and ten-year period and assumes the
deduction of all applicable charges and fees. According to the Securities and
Exchange Commission formula:
n
P(1+T) = ERV
where:
P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10-year
periods, determined at the end of the 1, 5 or
10-year periods (or fractional portion thereof).
Regardless of the method used, past performance is not necessarily indicative
of future results, but is an indication of the return to shareholders only for
the limited historical period used.
COMPARISONS AND ADVERTISEMENTS
To help investors better evaluate how an investment in a Fund might satisfy
their investment objective; advertisements, sales literature and other
shareholder communications regarding a Fund may discuss yield or total return
for such Fund as reported by various financial publications. Advertisements,
sales literature and shareholder communications may also compare yield or
total return to yield or total return as reported by other investments,
indices, and averages. The following publications, indices, and averages may
be used:
Barron's Investor's Daily
Business Week Lipper Mutual Fund Performance Analysis
CDA Investment Technologies, Inc. Lipper Mutual Fund Indices
Changing Times, The Kiplinger Magazine Money
Consumer Digest Morningstar, Inc.
Financial World Mutual Fund Values
Forbes Nasdaq Indexes
Fortune
Investment Company Data, Inc.
Personal Investor
Personal Investing News
Russell 2000 Index
Russell 2000 Value and Growth Indexes
S&P 500 Composite Stock Price Index
S&P SmallCap 600 Index
S&P MidCap 400 Index
S&P/Barra Growth & Value Indexes
Success
The New York Times
U.S. News and World Report
USA Today
Wall Street Journal
Wiesenberger Investment Companies Services
Wilshire Medium & Small Cap Indexes
A Fund may also from time to time along with performance advertisements,
present its investments, as of a current date, in the form of the "Schedule of
Investments" included in the Semi-Annual and Annual Reports to the
shareholders of the Trust.
<PAGE>
FINANCIAL STATEMENTS
KALMAR POOLED INVESTMENT TRUST
Statements of Assets and Liabilities
as of December 13, 1996
Kalmar Small Cap Kalmar Micro Cap
Growth-with-Value Fund Growth-with-Value Fund
---------------------- ----------------------
Assets:
Cash $ 50,000 $ 50,000
Deferred Organizational
Costs 29,000 29,000
Total Assets 79,000 79,000
Liabilities:
Accrued Expenses 29,000 29,000
Net Assets $ 50,000 $ 50,000
========= =========
Net Asset Value, Redemption and
Offering Price Per Share
(5,000 and 5,000 outstanding
shares of beneficialinterest,
$0.001 par value per share,
unlimited authorization,
respectively) $10.00 $10.00
========= =========
The accompanying notes are an integral part of the financial statements.
<PAGE>
KALMAR POOLED INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 13, 1996
1. ORGANIZATION:
Kalmar Pooled Investment Trust (the "Trust") was organized on September
30, 1996 as a Delaware business trust. The Trust is registered under the
Investment Company Act of 1940, as amended, as an open-end diversified,
management investment company consisting of shares of two series -
Kalmar Small Cap Growth-with-Value Fund (the "Small Cap Fund") and Kalmar
Micro Cap Growth-with-Value Fund (the "Micro Cap Fund"). The Trust has
not commenced operations except those related to organizational matters
and the sale of 5,000 Small Cap Fund shares of beneficial interest and
5,000 Micro Cap Fund shares of beneficial interest (collectively, the
"initial shares") to Kalmar Investment Advisers (the "Adviser") on
December 13, 1996.
2. ORGANIZATIONAL COSTS AND TRANSACTIONS WITH AFFILIATES:
Organizational costs have been capitalized by the Trust and are being
amortized over sixty months commencing with operations. In the event any
of the initial shares of the Trust are redeemed by any holder thereof
during the period that the Trust is amortizing organizational costs, the
redemption proceeds payable to the holder thereof by the Trust 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 redemption.
Certain trustees and officers of the Trust are also officers of the
Trust's Adviser. Such trustees and officers are paid no fees by the
Trust for serving as trustees or officers of the Trust.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
of the Kalmar Pooled Investment Trust:
We have audited the accompanying Statement of Assets and Liabilities of Kalmar
Pooled Investment Trust (the "Trust") as of December 13, 1996. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of Kalmar Pooled Investment
Trust as of December 13, 1996 in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
December 16, 1996
<PAGE>
APPENDIX
Description of Corporate Bond Ratings
Moody's
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt-
edged." Interest payments are protected by large or exceptionally stable
margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa - Bonds rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large, fluctuation of protective elements may be of
greater amplitude, or there may be other elements present which make the long-
term risks appear somewhat larger.
A - Bonds rated A possess many favorable investment attributes and are
considered upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds rated Baa are considered medium grade obligations. They are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may
be lacking or may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba - Bonds rated Ba are judged to have predominantly speculative elements and
their future cannot be considered well assured. Often the protection of
interest and principal payments is very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms
of the contract over any long period of time may be small.
Note: Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond ratings. The modifier 1
indicates that the security ranks in the higher end of its generic rating
category; modifier 2 indicates a mid-range ranking; and modifier 3 indicates
that the issue ranks in the lower end of its generic rating category.
S&P
AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay principal and interest.
AA - Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong and, in the majority of instances,
differ from AAA issues only in small degree.
A - Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit protection parameters,
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to pay principal and interest for bonds in this
category than for bonds in the A category.
BB, B, CCC, CC - Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay
interest and repay principal in accordance with the terms of the obligations.
BB indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
<PAGE>
INVESTMENT ADVISER
Kalmar Investment Advisers
Barley Mill House
3701 Kennett Pike
Greenville, DE 19807
UNDERWRITER
Rodney Square Distributors, Inc.
1105 N. Market Street
Wilmington, DE 19890
SHAREHOLDER SERVICES
Rodney Square Management Corporation
Rodney Square North
1100 N. Market Street
Wilmington, DE 19890-0001
CUSTODIAN
Wilmington Trust Company
Rodney Square North
1100 N. Market Street
Wilmington, DE 19890-0001
LEGAL COUNSEL
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103-7098
AUDITORS
Coopers & Lybrand, L.L.P.
2400 Eleven Penn Center
Philadelphia, PA 19103
