KALMAR
POOLED
INVESTMENT
TRUST
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KALMAR "GROWTH-WITH-VALUE" SMALL CAP FUND
PROSPECTUS DATED APRIL 28, 2000
This prospectus offers shares of the Kalmar "Growth-with-Value" Small
Cap Fund. The Fund seeks long-term capital appreciation by investing
in small capitalization companies. Using the adviser's purposefully
integrated "Growth-with-Value" investment philosophy, the Fund invests
in companies which the adviser believes have the potential for
significant business growth and capital appreciation, yet whose
stocks, at the time of purchase, are trading at undervalued prices in
the public trading markets. The adviser believes that its
"Growth-with-Value" investment philosophy of purchasing promising,
growing companies that may also be undervalued can result in both
lower risk and higher return when compared to many other small company
investment strategies.
Please read this prospectus before investing, and keep it on file for
future reference. It gives important information about this mutual
fund, including information on investment policies, risks and fees.
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION ("SEC"), NOR HAS
THE SEC DETERMINED WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE. IT
IS A CRIMINAL OFFENSE TO SUGGEST OTHERWISE.
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TABLE OF
CONTENTS
Page
Investment and Performance Summary ....................... 3
Financial Highlights ..................................... 6
Fund Performance ......................................... 7
Adviser's Performance Record ............................. 7
Additional Investment and Risk Information ............... 9
Fund Management .......................................... 10
Shareholder Information .................................. 13
Pricing of Fund Shares ................................... 13
How to Purchase Shares ................................... 13
How to Redeem Shares ..................................... 14
Dividends & Distributions ................................ 16
Tax Consequences ......................................... 17
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INVESTMENT KALMAR "GROWTH-WITH-VALUE" SMALL CAP FUND
AND
PERFORMANCE
SUMMARY
INVESTMENT OBJECTIVE:
Long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGY:
The Fund normally invests in a broad range of common stocks of
small capitalization companies. Small capitalization ("small cap")
companies are small sized companies, typically those with total
market values and company revenues of less than $1.5 billion at
the time of investment. Using its "Growth-with-Value" investment
philosophy, the Fund's adviser, Kalmar Investment Advisers
("Kalmar"), seeks to invest in companies which it believes have
the potential for significant future business growth and capital
appreciation, yet whose stocks, at the time of purchase, are also
trading at prices that are undervalued in the public trading
markets.
Kalmar's "Growth-with-Value" investment philosophy INTEGRATES what
it 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 their stocks. In effect,
Kalmar seeks to purchase dynamic companies, capable of strong
present and future growth, by offering solutions to real problems
or innovative products and services to growing markets of
substance. Yet importantly at the same time, Kalmar carefully
seeks to buy such companies' stocks at inexpensive or undervalued
prices. Kalmar does not speculate on "futuristic" developments
that may not prove out, nor does it buy every other growth
manager's favorite highly-valued "momentum stocks" that will live
or die on each penny of the next quarter's earnings per share.
Kalmar instead seeks to own dynamic, forward looking companies,
but with a lower risk stock market approach to doing so.
This investment philosophy is a primarily fundamentals-driven
approach, with the goal of fewer, better investment decisions, for
longer holding periods and larger gains. Kalmar views its
"Growth-with-Value" philosophy as a relatively conservative
approach to small company investing. Kalmar also believes that
this approach 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
cap investment managers. By investing with a longer-term focus,
and thereby limiting trading and portfolio turnover, the Fund
seeks to generate higher long-term returns, to limit transaction
costs and to increase tax efficiency for its shareholders.
The Fund's research/portfolio management team uses an independent,
hands-on, in-house-research-driven approach to their investment
management decision-making. To identify solid, well managed,
rapidly growing small cap companies that are worthy of investment,
the Fund's portfolio managers perform traditional fundamental
security analysis, screening and research, which is based on a
given company's publicly available financial information, its and
its industry's revenue and earnings track record and prospects.
Complementing this, however, the team also employs in-depth
business analysis to specifically evaluate the company's
management and controls, profit model, technology, research and
development pipeline, competitive positioning, growth strategy and
dynamics. As essential aspects of this, they engage in extensive
and on-going management contact, inspect company facilities, and
cross check 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 and strategists 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 at the time of
investment have not yet been fully recognized and
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exploited by other institutional small company investors. Such
companies may be followed by relatively few securities analysts,
and, therefore, may be 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.
PRINCIPAL RISKS AND SPECIAL CONSIDERATIONS:
(BULLET) The Fund invests in common stocks which are subject to
market, economic and business risks that will cause their prices
to fluctuate over time. While common stocks have historically
been a leading choice of long-term investors, stock prices may
decline over short or even more extended periods. Therefore, the
value of your investment in the Fund may go up and down,
sometimes rapidly and unpredictably, and you could lose money.
(BULLET) A preponderant portion of the Fund's investments will be
in small cap stocks. Investments in small cap 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. Further, the market for
small cap stocks is generally less liquid than the markets for
larger stocks, which can contribute to increased price
volatility of such stocks.
(BULLET) The Fund may be appropriate for you if you want to focus
on small cap stocks and are willing to ride out stock market
fluctuations in pursuit of potentially high long-term returns.
PERFORMANCE SUMMARY:
The bar chart below shows changes in the performance of the Fund's
annual total return from calendar year to calendar year. As with
all mutual funds, past performance is not necessarily an indicator
of how the Fund will perform in the future.
KALMAR "GROWTH-WITH-VALUE" SMALL CAP FUND
CALENDAR YEAR TOTAL RETURN AS OF 12/31/99
(GRAPHIC OMITTED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Performance Years 1998 1999
---- ----
Annual Returns -7.66% 6.01%
FOR THE FUND'S FIRST TWO FULL CALENDAR YEARS:
Best Quarter: Quarter Ended 6/30/99 15.00%
Worst Quarter: Quarter Ended 9/30/98 (20.59)%
FOR MORE INFORMATION ABOUT PERFORMANCE SINCE INCEPTION PLEASE SEE
"FUND PERFORMANCE" ON PAGES 7 AND 8.
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The table below shows how the Fund's average annual total returns
for the past calendar year and since inception (April 11, 1997)
compare to those of the Russell 2000 Index (a widely recognized
unmanaged index of small stocks) for the same periods. This
performance information provides some indication of the risks of
investing in the Fund by showing changes in the Fund's performance
from year to year and by showing how the Fund's average annual
returns for one year and the life of the Fund compare with those
of a broad measure of market performance. This table assumes
reinvestments of dividends and distributions. Past performance is
not necessarily an indicator of future results.
AVERAGE ANNUAL TOTAL RETURN AS OF 12/31/99
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (2.73 YEARS)
-------- --------------
<S> <C> <C>
Kalmar "Growth-with-Value" Small Cap Fund 6.01% 14.09%
Russell 2000 Index 21.26% 16.40%
</TABLE>
FEES AND EXPENSES OF THE FUND:
This table describes the fees and expenses that you may pay if you
buy and hold shares of the Fund.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
Maximum Sales Charge (Load) on Purchases .................... None
Maximum Deferred Sales Charge ............................... None
Maximum Sales Charge on Reinvested Dividends ................ None
Redemption Fee .............................................. None
Exchange Fee ................................................ None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM
FUND ASSETS)
Management Fee ............................................. 1.00%
Distribution and Service (12b-1) Fees ...................... None
Other Expenses ............................................. 0.25%
---------------- --------
Total Annual Fund Operating Expenses ....................... 1.25%
EXAMPLE: This example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other mutual
funds.
THE EXAMPLE ASSUMES THAT YOU INVEST $10,000 IN THE FUND FOR THE
TIME PERIODS INDICATED AND THEN SELL ALL OF YOUR SHARES AT THE END
OF THOSE PERIODS. THE EXAMPLE ALSO ASSUMES THAT YOUR INVESTMENT
HAS A 5% RETURN EACH YEAR AND THAT THE FUND'S OPERATING EXPENSES
REMAIN THE SAME OVER THE TIME PERIODS. ALTHOUGH YOUR ACTUAL COSTS
MAY BE HIGHER OR LOWER, BASED ON THESE ASSUMPTIONS YOUR COSTS
WOULD BE:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
$127 $397 $686 $1,511
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FINANCIAL
HIGHLIGHTS
This financial highlights table is intended to help you understand
the Fund's financial performance for the periods presented.
Certain information reflects financial results for a single Fund
share. The total returns in the table represent the rate that you
would have earned (or lost) on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information
has been audited by PricewaterhouseCoopers LLP, whose report,
along with the Fund's financial statements, is included in the
Fund's annual report, which is available upon request.
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE FOR THE APRIL 11, 1997(DAGGER)
FISCAL YEAR ENDED FISCAL YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997
----------------- ----------------- ---------------
<S> <C> <C> <C>
Net asset value at beginning of
period ............................. $12.65 $13.70 $10.00
=======================================================
INVESTMENT OPERATIONS
Net investment income ................ (0.11) (0.07) (0.04)
Net realized and unrealized gain
(loss) on investments ............... 0.87 (0.98) 4.66
-------------------------------------------------------
Total from investment operations ...... 0.76 (1.05) 4.62
=======================================================
DISTRIBUTIONS
From net realized gain on investments. -- -- (0.57)
In excess of net realized gain on
investments ........................ -- -- (0.35)
-------------------------------------------------------
Total distributions .................. -- -- (0.92)
-------------------------------------------------------
Net asset value at end of period ..... $13.41 $12.65 $13.70
=======================================================
Total return ......................... 6.01% (7.66)% 46.35%
RATIOS (TO AVERAGE NET ASSETS)/
SUPPLEMENTAL DATA:
Expenses ............................. 1.25% 1.24% 1.25%*(DAGGER)(DAGGER)
Net investment income ................ (0.78)% (0.52)% (0.51)%*(DAGGER)(DAGGER)
Portfolio turnover rate .............. 52.49% 27.41% 34.39%
Net assets at end of period
(000 omitted) ...................... $195,290 $237,540 $226,706
<FN>
* ANNUALIZED.
(DAGGER) COMMENCEMENT OF OPERATIONS.
(DAGGER)(DAGGER) RODNEY SQUARE MANAGEMENT CORPORATION, THE FUND'S
PRIOR ADMINISTRATOR AND ACCOUNTING AGENT, WAIVED A PORTION OF ITS
ADMINISTRATION AND ACCOUNTING FEES FOR THE PERIOD ENDED DECEMBER
31, 1997. IF THESE EXPENSES HAD BEEN INCURRED BY THE FUND, THE
ANNUALIZED RATIO OF EXPENSES TO AVERAGE DAILY NET ASSETS FOR THE
PERIOD ENDED DECEMBER 31, 1997 WOULD HAVE BEEN 1.32%.
</FN>
</TABLE>
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INVESTMENT
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FUND
PERFORMANCE
The following table and line graph show the Fund's performance for
the period April 11, 1997 through December 31, 1999 versus The
Russell 2000 Index, The Russell 2000 Value Index and The Lipper
Small Cap Core Index. The Russell 2000 and The Russell 2000 Value
are unmanaged stock market indices without any associated
expenses, and the returns assume the reinvestment of all
dividends. The Lipper Small Cap Core Index from inception to
August 31, 1999 is an unweighted index of mutual fund performance
which consists of the average return of the 30 largest small cap
funds. After August 31, 1999, the Lipper Small Cap Core Index is
calculated using a weighted average composite index formula which
is rebased annually. The Fund's past performance does not predict
future results.
COMPARATIVE PERFORMANCE
INCEPTION TO DATE
CUMULATIVE TOTAL RETURN 4/11/97 TO 12/31/99
----------------------- --------------------
Kalmar Small Cap Fund 43.25%
Russell 2000 Index 51.28%
Russell 2000 Value 20.86%
Lipper Small Cap Core 49.08%
KALMAR "GROWTH-WITH-VALUE" SMALL CAP FUND GROWTH OF $10,000 VS.
THE RUSSELL 2000 INDEX, THE RUSSELL 2000 VALUE INDEX AND THE
LIPPER SMALL CAP CORE INDEX
SINCE
AVERAGE ANNUAL RETURN 1 YEAR INCEPTION
-------------------- ------ ---------
Kalmar Small Cap Fund 6.01% 14.09%
Russell 2000 21.26% 16.40%
Russell 2000 Value (1.49%) 7.20%
Lipper Small Cap Core 20.17% 15.77%
(GRAPHIC OMITTED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
KALMAR "GROWTH-WITH-VALUE" SMALL CAP FUND GROWTH OF $10,000 VS.
THE RUSSELL 2000 INDEX, THE RUSSELL 2000 VALUE INDEX AND THE
LIPPER SMALL CAP CORE INDEX
<TABLE>
<CAPTION>
Year Kalmar Small Cap Russell 2000 Lipper Small Cap Russell 2000 Value
---- ---------------- ------------ ---------------- ------------------
<S> <C> <C> <C> <C>
4/11/97 $10,000 $10,000 $10,000 $10,000
12/31/97 $14,635 $12,786 $12,602 $13,114
12/31/98 $13,514 $12,460 $12,495 $12,268
12/31/99 $14,325 $15,128 $14,908 $12,086
</TABLE>
- ----------- Shown below is performance information for a composite of separate
ADVISER'S accounts managed by the Fund's portfolio management team. The
PERFORMANCE performance data for the separate accounts is net of all fees and
RECORD expenses. Use of the additional expenses of the Fund would have
very modestly lowered the following separate account performance
results. These accounts are managed with the same investment
objective and "Growth-with-Value" investment philosophy, and are
subject to substantially identical investment policies and
techniques as those used by the Fund. This performance record
reflects the activities of the Fund's portfolio managers for
accounts which they manage at Kalmar Investments Inc. ("Kalmar
Investments"), a registered advisory firm that is the sister
company of the 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 because the average
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market capitalization of the companies included in the separate
account portfolios has been approximately $350 million, and the
Fund's portfolio may have a higher average 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. For performance data relating to the Fund, see
"Performance Summary" on page 4. Past performance results of
similarly managed accounts are not indicative of the Fund's future
performance.
<TABLE>
<CAPTION>
YEAR KALMAR SEPARATE ACCOUNT RUSSELL 2000 S & P 500
ENDING NET RETURN* TOTAL RETURN TOTAL RETURN
-------- ----------------------- ------------ ------------
<S> <C> <C> <C>
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
12/31/97 36.30 22.24 33.34
12/31/98 (6.52) (2.55) 28.57
12/31/99 7.06 21.26 20.95
</TABLE>
CUMULATIVE
RETURN KALMAR* RUSSELL 2000 S & P 500
---------- ------ ------------ ---------
15 Years*
1985-1999 1,050.43 545.53 1,243.78
AVERAGE ANNUAL
RETURN
--------------
15 Years*
1985-1999 17.69 13.24 18.91
* THE ABOVE RETURNS WERE CALCULATED USING THE PERFORMANCE
MEASUREMENT STANDARDS OF THE ASSOCIATION FOR INVESTMENT
MANAGEMENT AND RESEARCH ("AIMR"). RESULTS MAY HAVE BEEN
DIFFERENT IF THE SEC METHOD OF CALCULATING TOTAL RETURN HAD
BEEN USED INSTEAD OF THE AIMR METHOD.
THE RESULTS SHOWN ABOVE (1) REPRESENT A COMPOSITE OF
DISCRETIONARY, FEE PAYING, SEPARATE ACCOUNTS UNDER MANAGEMENT
FOR AT LEAST SIX MONTHS, (2) REFLECT THE REINVESTMENT OF ANY
DIVIDENDS OR CAPITAL GAINS, AND (3) 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.
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ADDITIONAL
INVESTMENT
AND
RISK
INFORMATION
INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES
The Fund's investment objective is long-term capital appreciation.
This investment objective may not be changed without shareholder
approval.
Under normal market conditions, the Fund will preponderantly
invest in small cap companies, ones whose stock market
capitalizations (total market value of outstanding shares) range
from $50 million to $1.5 billion at the time of investment. At a
minimum, 65% of its total assets will be invested in small cap
companies. Small cap 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 main component of
the Fund's return.
In addition, the Fund may invest in preferred stocks, securities
convertible into common stocks, and certain debt securities,
consistent with its long-term capital appreciation objective.
The Fund will purchase primarily 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 may, consistent with its objective, invest a portion of
its total assets in equity securities of larger capitalization
companies if Kalmar believes that suitable small company
opportunities are not available or if such larger stocks have
strong growth potential and meet Kalmar's "Growth-with-Value"
criteria and investment discipline.
TEMPORARY DEFENSIVE POSITIONS
When adverse economic or market conditions occur, the Fund
temporarily may invest up to 100% of its net assets in short-term,
cash equivalent investments. The Fund may be unable to achieve its
investment objective when taking a temporary defensive position.
While reserving the right to make such strategic moves, Kalmar has
never taken so extreme a position in their 18 years experience and
generally believes in remaining fully invested.
RISK FACTORS
Investing in the Fund involves the following risks:
(BULLET) SMALL COMPANY RISK. 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.
Furthermore, while securities of small cap companies may offer
greater opportunity for capital appreciation than larger
companies, investment in such companies presents greater risks
than investment in larger, more established companies. Indeed,
historically, small cap 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
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exhibiting greater volatility, small cap stocks may, to a
degree, fluctuate independently of larger company stocks. Small
cap 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 price 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 small 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 the 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.
(BULLET) MANAGEMENT RISK. As with all mutual funds, the Fund is
subject to the risk that an investment strategy used by Kalmar
may fail to produce the intended result.
(BULLET) OPPORTUNITY RISK. As with all mutual funds, the Fund is
subject to the risk of missing out on an opportunity because the
assets necessary to take advantage of it are tied up in less
advantageous investments.
(BULLET) YEAR 2000 RISK. The Fund did not experience any
malfunctions or errors in the computer systems used by its
service providers when the date changed from 1999 to 2000. Based
on operations since January 1, 2000, the Fund does not expect
any significant impact to its on-going business as a result of
the "Year 2000 issue." However, it is possible that the full
impact of the date change, which was of concern due to computer
programs that use two digits instead of four digits to define
years, has not been fully recognized. For example, it is
possible that Year 2000 or similar issues, such as leap
year-related problems, may affect the computer systems used by
the Fund's service providers at month, quarter or year end. The
Fund believes that any such problems are likely to be minor and
correctable.
- ----------- INVESTMENT ADVISER
FUND
MANAGEMENT Kalmar Investment Advisers, located at 3701 Kennett Pike,
Wilmington, Delaware 19807, serves as the investment adviser for
the Fund. Kalmar manages the investments of the Fund according to
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, Kalmar makes the Fund's
day-to-day investment decisions, selects brokers and dealers to
execute portfolio transactions and generally manages the Fund's
investments. As of December 31, 1999, Kalmar (and its affiliates)
managed approximately $800 million primarily in small
capitalization and micro capitalization stocks in separately
managed accounts including the Fund itself. Kalmar's clients
include high net worth individuals and family trusts,
corporations, pensions and profit-sharing plans and institutions
such as endowments, foundations, hospitals and charitable
institutions. Kalmar (and its affiliates) invests assets of its
own profit-sharing plan in shares of the Fund, as do members of
its investment team and other employees. As compensation for its
services, for the fiscal year ended December 31, 1999, the Fund
paid Kalmar a monthly advisory fee at the annual rate of 1.00% of
the Fund's average daily net assets.
PORTFOLIO MANAGEMENT TEAM
Kalmar's founder, Ford B. Draper, Jr., owns a majority interest in
Kalmar. Kalmar utilizes a team approach in managing the Fund's
portfolio with Mr. Draper, as chief investment officer, leading
and supervising the research/portfolio management team. The list
below describes the business experience of the Fund's officers and
portfolio managers.
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(Graphic omitted)
FORD B. DRAPER, JR.
CHAIRMAN, PRESIDENT AND CHIEF INVESTMENT OFFICER
A graduate of Yale University, Mr. Draper also received an M.B.A.
in Finance from Columbia University Graduate School of Business,
and has over thirty-three 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 this then $250 million fund.
Mr. Draper founded Kalmar Investments in 1982, which provides
investment management services to separately managed accounts.
(Graphic omitted)
RAYMOND F. REED, C.F.A.
PORTFOLIO MANAGER/RESEARCH ANALYST
Mr. Reed is a graduate of the University of Pennsylvania and
received an M.B.A. in Finance from New York University. He began
his investment career with Martin Simpson & Company in 1981. As
Vice President and Principal, he conducted investment research on
emerging and established technology companies. After six years, he
joined Mabon, Nugent & Company as a Senior Analyst responsible for
research coverage of computer industry stocks. In March 1990, Mr.
Reed joined Janney Montgomery Scott as a Senior Vice President of
Research following regional special situations and technology
companies. Mr. Reed was recognized in the Wall Street Journal's
All-Star Analysts Survey in 1993 and 1995. Mr. Reed joined Legg
Mason Wood Walker in 1995. As a Managing Director of Research, he
was responsible for creation, operation and supervision of the
Business and Information Services Group within the firm's capital
markets strategy. Mr. Reed joined Kalmar Investments in 1999 as a
Portfolio Manager/Research Analyst. He has nineteen years small
cap research and investment experience.
(Graphic omitted)
DANA F. WALKER, C.F.A.
PORTFOLIO MANAGER/RESEARCH ANALYST
After graduating from the University of Virginia's McIntire School
of Commerce, Mr. Walker worked from 1982-1986 for Delfi
Management, Inc., investment adviser 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. He has
eighteen years small cap research and investment experience.
(Graphic omitted)
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 prior small
cap 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, at Ashford he was responsible
for new idea stock selection and management of over $50 million in
portfolio holdings. He has sixteen years small cap research and
investment experience.
11
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KALMAR
POOLED
INVESTMENT
TRUST
- -----------
(Graphic omitted)
GREGORY S. TRAVERS, C.F.A.
PORTFOLIO MANAGER/RESEARCH ANALYST
After receiving a BS degree in Finance from Penn State University,
Mr. Travers began his career with PNC Bank as an Investment
Accountant. After two years he joined the Provident Mutual
Management Company as Quantitative Equity Analyst. As a
Quantitative Equity Analyst he worked closely with portfolio
managers in the development of equity selection models, to provide
insight on market behavior, and to screen for new ideas. In 1993,
Mr. Travers became a Portfolio Manager/Research Analyst for
Martindale Andres & Company, a $2.5 billion equity manager,
focusing on small cap portfolios. Mr. Travers joined Kalmar
Investments in 1998 as a Portfolio Manager/Research Analyst. Mr.
Travers has eleven years small cap research and investment
experience.
(Graphic omitted)
STEFFEN J. TORRES
RESEARCH ANALYST
After receiving a BS degree in Economics and International
Relations with a minor in Business Administration from the
University of Delaware, Mr. Torres began his career with Vanguard.
After four years he joined T. Rowe Price Associates as a member of
the Equity Investment Team. In 1996 he joined the Wilmington Trust
Company as a Portfolio Manager in the Asset Management Department.
As a Portfolio Manager, he was responsible for $130 million for
individuals, profit sharing plans and endowments. Mr. Torres
joined Kalmar Investments in 1998 as a Research Analyst. Mr.
Torres has seven years experience in investment research.
(Graphic omitted)
LARRY F. CARLIN, C.F.A.
RESEARCH ANALYST
Mr. Carlin graduated from Villanova University and earned an MBA
from Georgetown University. While attending Georgetown University,
Mr. Carlin worked in the Finance Department as a Research Analyst
where he studied the factors contributing to equity mutual fund
investment performance. Prior to joining Kalmar, Mr. Carlin worked
as a Research Analyst and Consultant at Investment Counseling
Inc., a firm that provides consulting services to money management
firms. Mr. Carlin joined Kalmar Investments in 1998 as a Research
Analyst. Mr. Carlin has six years experience in investment
research.
(Graphic omitted)
FORD B. DRAPER, III
MANAGER, TRADING DEPARTMENT
After earning a BA in International Relations from Lynchburg
College, plus additional travel and business education, Mr. Draper
joined Kalmar Investments in 1991. There he built the firm's
professional trading operations team and specialized information
systems focusing on small cap equities, which he continues to
manage along with other management responsibilities. He has eight
years small cap trading and investment experience.
(Graphic omitted)
LINN M. MORROW
DIRECTOR OF CLIENT SERVICES
Mr. Morrow, with over twenty 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 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.
12
<PAGE>
KALMAR
POOLED
INVESTMENT
TRUST
- -----------
- ----------- SHAREHOLDER INFORMATION
PRICING OF
FUND SHARES The Fund's share price is based upon its net asset value per
share. The Fund's administrator and accounting agent, PFPC Inc.
("PFPC"), determines the net asset value per share as of the close
of regular trading on each day that the New York Stock Exchange
("NYSE") 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.
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, 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.
The Fund will value money market securities with less than sixty
days remaining to maturity when acquired by the Fund on an
amortized cost basis, 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.
- ----------- Shares of the Fund are offered without the imposition of any sales
HOW TO or distribution fees. However, certain broker-dealers or service
PURCHASE agents may charge you transaction or other account fees for
SHARES effecting transactions in Fund shares. The Fund's shares are
offered at the net asset value per share next determined after the
receipt of a purchase request in good 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 PFPC at (800)
282-2319. The Fund reserves the right to refuse any purchase or
exchange request if Fund management, in its sole discretion,
determines that such a request could adversely affect the Fund's
net asset value, including if the purchaser has previously engaged
in excessive trading in the Fund's shares.
MINIMUM INVESTMENT. The minimum initial investment in 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 by the Fund prior to the close of regular
trading hours on the NYSE (currently 4:00 p.m. Eastern time) on
any day that the Fund is open are priced according to the net
asset value determined on that day. Purchase orders received in
proper form by the Fund after the close of the NYSE 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, you may be
permitted to purchase Fund shares by transferring securities to
the Fund that: (1) meet the Fund's investment objective and
policies; (2) are acquired by the Fund for investment and not for
resale purposes; and (3) are liquid securities which are not
restricted as to transfer either by law or liquidity of market. 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 may not exceed 5%
of the net assets of the Fund immediately after the transactions.
13
<PAGE>
KALMAR
POOLED
INVESTMENT
TRUST
- -----------
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 you upon receipt from
the issuer. Purchases may be made in one of the following ways:
(BULLET) PURCHASES BY MAIL. You 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
PFPC Inc., P.O. Box 8965, Wilmington, DE 19899-8965. A
shareholder application sent by overnight mail should be sent to
Kalmar "Growth-with-Value" Fund, c/o PFPC Inc., 400 Bellevue
Parkway, Suite 108, Wilmington, DE 19809. If a subsequent
investment is being made, you should use the purchase stub and
return envelope from the most recent account statement and the
check should also indicate your Fund account number.
(BULLET) PURCHASES BY WIRE. To purchase shares by wiring federal
funds, you must first notify PFPC by calling (800) 282-2319 to
request an account number and furnish the Fund with a tax
identification number. Following notification to PFPC, federal
funds and registration instructions should be wired through the
Federal Reserve System to:
PFPC INC.
C/O PNC BANK, N.A.
PHILADELPHIA, PA
DDA #86-0179-1174
ABA #031-0000-53
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 PFPC at
one of the addresses stated above under "Purchases By Mail." You
should be aware that some banks might charge you a wire service
fee.
(BULLET) AUTOMATIC INVESTMENT PLAN. You may purchase Fund shares
through an Automatic Investment Plan. The Plan provides a
convenient method by which you may have monies deducted directly
from your checking, savings or bank money market accounts for
investment in the Fund. Under the Plan, PFPC, at regular
intervals, will automatically debit your bank checking account
in an amount of $100 or more (subsequent to the $10,000 minimum
initial investment), as specified by you. You 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 NYSE (currently 4:00 p.m. Eastern time) on or about the
20th day of the month. For further details about this service,
refer to the Application accompanying this Prospectus or call
PFPC at (800) 282-2319.
RETIREMENT PLANS. Shares of the Fund are available for use in 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. Qualified investors
benefit from the tax-free compounding of income dividends and
capital gains distributions. For more information, see "Retirement
Plans" in the Fund's Statement of Additional Information.
Application forms and brochures describing investments in the Fund
for retirement plans can be obtained from PFPC by calling (800)
282-2319.
- ----------- You may redeem all or a portion of your shares without charge on
HOW TO any day that the Fund calculates its net asset value. See "Pricing
REDEEM of Fund Shares." Except as noted below, redemption requests
SHARES received in good order by PFPC prior to the close of regular
trading hours on the NYSE 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 in good order by PFPC after the close of the NYSE are
effective as of the time the net asset value per share is next
determined. Redemption
14
<PAGE>
KALMAR
POOLED
INVESTMENT
TRUST
- -----------
proceeds are normally sent on the next business day following
receipt by the Fund of redemption requests in good order, but
under most circumstances not later than 7 business days following
such receipt, or as governed by law. Under certain circumstances
the Fund does reserve the right to make redemptions in portfolio
securities rather than cash (see "In-Kind Redemption"). 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
redemption.
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 NYSE is restricted, (b) the NYSE is
closed, (c) when an emergency exists and the Fund cannot sell its
shares or accurately determine the value of its assets, or (d) if
the SEC orders the Fund to suspend redemptions.
Shares may be redeemed in one of the following ways:
(BULLET) REDEMPTION BY MAIL. Your written redemption request must
(i) identify your 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 signature guarantee
by a guarantor institution that is acceptable to the Fund's
transfer agent, such as a domestic bank or trust company,
broker, dealer, clearing agency or savings association,
participating in a signature guarantee program recognized by the
Securities Transfer Association. The three recognized signature
guarantee programs are Securities Transfer Agents Medallion
Program (STAMP), Stock Exchanges Medallion Program (SEMP) and
New York Stock Exchange, Inc. Medallion Signature Program (MSP).
Signature guarantees that are not part of these programs will
not be accepted. A signature and a signature guarantee are
required for each person in whose name the account is
registered. PFPC may require additional supporting documents for
redemptions made by corporations, executors, administrators,
trustees and guardians. You should submit written redemption
instructions to Kalmar "Growth-with-Value" Small Cap Fund, c/o
PFPC Inc., P.O. Box 8965, Wilmington, DE 19899-8965. A
redemption order sent by overnight mail should be sent to Kalmar
"Growth-with-Value" Small Cap Fund, c/o PFPC Inc., 400 Bellevue
Parkway, Suite 108, Wilmington, DE 19809. A redemption request
will not be deemed to be properly received until PFPC receives
all required documents in proper form. Questions regarding the
proper form for redemption requests should be directed to PFPC
at (800) 282-2319.
(BULLET) REDEMPTION BY TELEPHONE.You may redeem shares by
telephone 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. You may redeem by telephone amounts
up to $50,000 by instructing PFPC 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, you should send a written request
to PFPC 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.
15
<PAGE>
KALMAR
POOLED
INVESTMENT
TRUST
- -------------
During times of drastic economic or market changes, the
telephone redemption privilege may be difficult to implement. In
the event that you are unable to reach PFPC by telephone, you
may make a redemption request by mail. The Fund or PFPC 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.
(BULLET) REDEMPTIONS BY WIRE. The Fund will wire redemption
proceeds 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 you a fee for this service. Amounts
redeemed by wire are normally wired on the next business day
after receipt of redemption instructions in proper form (if
received before the close of regular trading on the NYSE), but
in no event later than five days following such receipt.
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 Kalmar or the Board of Trustees,
result in the necessity of the Fund selling assets under adverse
conditions and to the detriment of the Fund's remaining
shareholders. 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 "Pricing of Fund Shares." In the event that
the Fund makes an in-kind distribution, you 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
if 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 your
account if it is inactive and worth less than the minimum initial
investment when the account was established, currently $10,000.
The Fund will advise you of its intention to redeem your account
in writing at least sixty (60) days prior to effecting such
redemption, during which time you may purchase additional shares
in any amount necessary to bring the account back to the
appropriate minimum amount. The Fund will not redeem your account
if it is worth less than the appropriate minimum amount solely
because of a market decline. Additionally, the Fund reserves the
right to close a shareholder's account, after prior warning and
notification, if the shareholder has engaged in excessive trading
in the Fund's shares.
SYSTEMATIC WITHDRAWAL PLAN. If you own shares with a value of
$10,000 or more, you may participate in the Systematic
Withdrawal Plan. Under this Plan, you may automatically redeem a
portion of your Fund shares monthly, 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 you. 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 PFPC at (800) 282-2319.
- ------------- The Fund intends to declare and pay annual dividends to its
DIVIDENDS AND shareholders of substantially all of its net investment income,
DISTRIBUTIONS if any, earned during the year from its investments. The Fund
will distribute net realized capital gains, if any, once each
year. 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
you have elected in writing to receive dividends or
distributions in cash. You may change an election by notifying
PFPC in writing thirty days prior to the record date. You may
call PFPC for more information. Expenses of the Fund, including
the advisory fee, are accrued each day. All shares of the Fund
will share proportionately in the Fund's investment income and
expenses.
16
<PAGE>
KALMAR
POOLED
INVESTMENT
TRUST
- ------------
- ------------ As with any investment, you should consider how your Fund
TAX investment will be taxed. The tax information in this prospectus
CONSEQUENCES is provided as general information only and should not be
considered as tax advice or relied on by an investor. You should
consult your own tax professional concerning the various 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.
The Fund intends to qualify annually to be treated as a regulated
investment company under the Internal Revenue Code of 1986, as
amended (the "Code"). As such, the Fund will not be subject to
federal income or excise taxes on the earnings it distributes to
shareholders provided the Fund satisfies certain requirements and
restrictions in the Code.
Unless your investment in the Fund is through a tax-deferred
retirement account, such as a 401(k) plan or IRA, you need to be
aware of the possible tax consequences when:
-- The Fund makes distributions; and
-- You sell Fund shares, including an exchange to another fund.
When you open your Fund account, you should provide your social
security or taxpayer identification number on your account
registration form. By providing this information, you will avoid
being subject to a federal backup withholding tax of 31% on
taxable distributions and redemption proceeds.
TAXES ON DISTRIBUTIONS. The Fund anticipates that its
distributions to shareholders will consist principally of capital
gains rather than dividend or interest income. Distributions from
the Fund to you are normally subject to federal, state, and local
income tax when they are paid as ordinary income, whether you
take them in cash or reinvest them in Fund shares. Any long-term
capital gains distributions are taxable to you as long-term
capital gains, no matter how long you have 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 you purchase shares in the Fund shortly before the
record date for a capital gains distribution or a dividend, you
will pay the full price for the shares and will receive some
portion of the price back as a taxable distribution.
Corporations may be entitled to take a dividends received
deduction for a portion of certain dividends they receive from
the Fund subject to limitation and restrictions provided in the
Code. Dividends that are declared in October, November or
December, but not paid until the following January, will be
treated for tax purposes as having been paid in December of the
year of declaration.
Every January, you will be sent a statement (IRS Form 1099-DIV)
showing the taxable distributions paid to you in the previous
year. The statement provides full information on your dividends
for tax purposes.
TAXES ON SALES. A sale or redemption of your Fund shares normally
is subject to federal, state, and local income tax, and may
result in a taxable gain or loss to you. Your exchange of Fund
shares for shares of another fund is treated for tax purposes
like a sale of your original shares and a purchase of your new
shares. Thus, the exchange may, like a sale, result in a taxable
gain or loss to you. Any loss incurred on a sale or exchange of
the 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 with respect to such shares.
17
<PAGE>
FOR MORE INFORMATION
FOR INVESTORS WHO WANT MORE INFORMATION ABOUT THE FUND, THE
FOLLOWING DOCUMENTS ARE AVAILABLE FREE UPON REQUEST:
ANNUAL/SEMI-ANNUAL REPORTS: Contain performance data and
information on portfolio holdings and operating results for the
Fund's most recently completed fiscal year or half-year. In the
Fund's Annual Report, you will find a discussion of the market
conditions and investment strategies that significantly affected
the Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): Provides a more
detailed description of the Fund's policies, investment
restrictions, risks, and business structure. This prospectus
incorporates the SAI by reference (legally the SAI is part of the
prospectus).
Copies of these documents and answers to questions about the Fund
may be obtained without charge by contacting:
Kalmar "Growth-with-Value" Small Cap Fund
c/o PFPC Inc.
400 Bellevue Parkway, Suite 108
Wilmington, Delaware 19809
(800) 282-2319
8:30 a.m. to 5:00 p.m. Eastern time
Information about the Fund (including the SAI) can be reviewed and
copied at the Public Reference Room of the Securities and Exchange
Commission in Washington, D.C. Copies of this information may be
obtained, upon payment of a duplicating fee, by writing the Public
Reference Room of the SEC, Washington, DC, 20549-6009. Information
on the operation of the Public Reference Room may be obtained by
calling the SEC at 1-(800)-SEC-0330. Reports and other information
about the Fund may be viewed on-screen or downloaded from the
SEC's Internet site at http://www.sec.gov. The investment company
registration number for the Kalmar "Growth-with-Value" Small Cap
Fund is 811-07853.
FOR MORE INFORMATION ON OPENING A NEW ACCOUNT, MAKING
CHANGES TO EXISTING ACCOUNTS, PURCHASING, EXCHANGING
OR REDEEMING SHARES, OR OTHER INVESTOR SERVICES,
PLEASE CALL 1-(800)-282-2319.
18
<PAGE>
KALMAR POOLED INVESTMENT TRUST
BARLEY MILL HOUSE
3701 KENNETT PIKE
WILMINGTON, DE 19807
(PHONE) 302-658-7575
(FAX) 302-658-7513
www.kalmarinvestments.com
KL01-4/28/00
<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, Wilmington, Delaware 19807
STATEMENT OF ADDITIONAL INFORMATION DATED APRIL 28, 2000
Kalmar Pooled Investment Trust has established two separate series of shares,
each with its own investment objective and policies. Information concerning the
Kalmar "Growth-with-Value" Small Cap Fund and the Kalmar "Growth-with-Value"
Micro Cap Fund is included in separate prospectuses, each dated April 28, 2000.
The Micro Cap Fund's shares are not currently offered to investors. This
Statement of Additional Information ("SAI") is not a prospectus and should be
read in conjunction with the current prospectus of the particular fund. A copy
of each prospectus may be obtained without charge at the addresses and telephone
numbers listed below.
INVESTMENT ADVISER: UNDERWRITER:
KALMAR INVESTMENT ADVISERS PROVIDENT DISTRIBUTORS, INC.
Barley Mill House 3200 Horizon Drive
3701 Kennett Pike King of Prussia, PA 19406
Wilmington, DE 19807 (610) 239-4590
(302) 658-7575
-1-
<PAGE>
TABLE OF CONTENTS
PAGE
Kalmar Pooled Investment Trust.................................................3
Investment Strategies..........................................................3
Investment Restrictions.......................................................11
Portfolio Brokerage and Turnover..............................................14
Management....................................................................15
Purchases.....................................................................19
Retirement Plans..............................................................19
Redemptions...................................................................21
Taxation......................................................................21
General Information...........................................................25
Performance...................................................................27
Financial Statements..........................................................30
Appendix.....................................................................A-1
-2-
<PAGE>
KALMAR POOLED INVESTMENT TRUST
FUND HISTORY AND CLASSIFICATION
Kalmar Pooled Investment Trust (the "Trust"), Barley Mill House, 3701 Kennett
Pike, Wilmington, Delaware 19807, is an open-end, diversified, management
investment company organized as a Delaware business trust on September 30, 1996.
The Trust has established 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 the Small
Cap Fund are offered and sold on a no-load basis, without the imposition of
sales or distribution charges. Shares of the Micro Cap Fund are not currently
offered to investors.
INVESTMENT STRATEGIES
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 SAI contains further information concerning the techniques and strategies
employed by the Funds' investment adviser, Kalmar Investment Advisers (the
"Adviser") in managing each Fund, the types of securities in which the Funds
will invest, the policies they will follow and the risks associated with the
Funds' investment activities.
CASH OR CASH EQUIVALENTS
Although the Funds intend to remain substantially fully invested, each 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 a Fund desires
to hold cash to maintain liquidity for redemptions or pending investment in
suitable securities. There also may be times when economic or market conditions
are such that the Adviser deems a temporary defensive position to be
appropriate, during which a Fund may invest up to 100% of its net assets in the
types of short-term, cash equivalent investments described below.
The Funds may invest in short-term debt securities, including time deposits,
certificates of deposit or bankers' acceptances issued by commercial banks or
savings and loan associations meeting certain qualifications. The Funds also may
purchase commercial paper rated A-1 or A-2 by Standard & Poor's Ratings Service
("S&P") or Prime-1 or Prime-2 by Moody's Investors Service, Inc. ("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 Funds may 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
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instrumentalities and federal agencies. The Funds may also invest in repurchase
agreements collateralized by the cash equivalent securities listed above.
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
generally rises when interest rates decline, and vice versa. 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.
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 maintain in segregated accounts with their
custodian cash or liquid securities in an aggregate amount at least equal to the
amount of its outstanding forward commitments.
FOREIGN SECURITIES AND ADRS Each Fund may invest up to 15% of its assets in
foreign securities, including sponsored or unsponsored American Depository
Receipts ("ADRs"). However, the Adviser anticipates that the majority of each
Fund's assets ordinarily will be invested in U.S. based companies.
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The Fund generally limits its foreign investing to ADRs and securities of
Canadian companies traded on Canadian or U.S. Exchanges or markets. 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.
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.
SHORT SALES
Each Fund is authorized to engage in short sales of stocks which the Adviser
believes are substantially overvalued. If a 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 Funds 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 Funds must replace the borrowed security. Whenever a Fund effects a short
sale, it will maintain in segregated accounts cash or 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
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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 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 Funds' policy regarding short sales may not be changed
without shareholder approval.
BORROWING
As a matter of fundamental policy, each 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%. Each 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.
DEBT SECURITIES
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 Funds may invest up to 5% of their 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 S&P or Baa by 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
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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
this SAI.
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. 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
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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
consistent with the Investment Company Act of 1940, as amended, (the "Investment
Company Act") or the rules, 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.
The Funds engage in security loan arrangements with the primary objective of
increasing the Funds' income either through investing the cash collateral in
money market mutual funds and short-term interest bearing obligations or by
receiving a loan premium from the borrower. Under the securities loan agreement,
each Fund continues to be entitled to all dividends or interest on any loaned
securities. 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. 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 Funds' policy regarding lending of portfolio
securities may not be changed without shareholder approval.
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.
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.
OPTIONS
The Funds 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 each Fund's portfolio, although at no time will more than 5% of
each Fund's assets be allocated to premiums or margins required to establish
options positions for non-hedging purposes, and no more than 10% of each Fund's
assets will be subject to obligations underlying such options.
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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 a 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 Funds the credit risk that
the counterparty will fail to honor its obligations. The Funds will not purchase
options if, as a result, its aggregate obligations relating to outstanding
options exceeds 10% of each Fund's assets.
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
reserve of cash or liquid securities 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
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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.
REPURCHASE AGREEMENTS
For purposes of cash management only, the Funds 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, each 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 each 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 Funds acknowledges these risks, it is
expected that they can be controlled through stringent security selection and
careful monitoring procedures.
INVESTMENTS IN MUTUAL FUNDS
The Funds may invest in shares of other open and closed-end investment companies
which principally invest in securities of the type in which the Funds invest.
This approach will most likely be used for cash management purposes. The Funds
may only invest in other investment companies within limits set by the
Investment Company Act, which currently allows each Fund to invest up to 10% of
its total assets in other investment companies. No more than 5% of each Fund's
total assets may be invested in securities of any one investment company, nor
may the Fund acquire more than 3% of the voting securities of any investment
company. Investments in other investment companies will generally
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involve duplication of advisory fees and other expenses. The Funds may also
acquire securities of other investment companies beyond such limits pursuant to
a merger, consolidation or reorganization.
ILLIQUID AND RESTRICTED SECURITIES
Each 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.
The Board of Trustees 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). 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.
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 Fund's outstanding voting
securities. As provided in the Investment Company 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
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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. 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 bankers' 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.
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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 Investment Company 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
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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.
For the period from April 11, 1997 (commencement of operations) through December
31, 1997, the Small Cap Fund paid $98,814 in brokerage commissions.
For the fiscal year ended December 31, 1998, the Small Cap Fund paid the
following brokerage fees:
Total $ brokerage commissions: $ 205,186
Total $ amount of transactions executed by brokers providing research services:
$21,731,807
Total $ amount of commissions paid to brokers providing research services:
$108,526
For the fiscal year ended December 31, 1999, the Small Cap Fund paid the
following brokerage fees:
Total $ brokerage commissions: $293,209
Total $ amount of transactions executed by brokers providing research services:
$88,298,998
Total $ amount of commissions paid to brokers providing research services:
$266,632
PORTFOLIO TURNOVER
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 generally exceed 50%, although it is impossible to predict portfolio
turnover rates.
MANAGEMENT
INVESTMENT ADVISORY AGREEMENT
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<PAGE>
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. The Advisor 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. 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. For the
period from April 11, 1997 (commencement of operations) through December 31,
1997, the Small Cap Fund paid Advisory fees of $1,175,911. For the fiscal year
ended December 31, 1998, the Small Cap Fund paid Advisory fees of $2,394,274.
For the fiscal year ended December 31, 1999, the Small Cap Fund paid Advisory
fees of $2,056,012.
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
Under Delaware law, the Trust's Board of Trustees is responsible for
establishing each Fund's policies and for overseeing the management of the
Funds. The Board also elects the Trust's officers who conduct the daily business
of the Funds. The Trustees and officers of the Trust, their dates of birth and
principal occupations for the past five years are listed below. Trustees deemed
to be "interested persons" of the Trust for purposes of the Investment Company
Act are indicated by an asterisk.
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<PAGE>
<TABLE>
<CAPTION>
POSITION AND OFFICE PRINCIPAL OCCUPATION
NAME AND ADDRESS WITH THE TRUST DURING THE PAST FIVE YEARS
- ---------------- -------------- --------------------------
<S> <C> <C>
Ford B. Draper, Jr.* Trustee, Chairman, Founder, President, Director, and Chief
Barley Mill House President, Chief Investment Officer of Kalmar Investments
3701 Kennett Pike Financial Officer and since 1982; President, Kalmar Investment
Wilmington, DE 19807 Principal Accounting Advisers since inception.
Date of Birth: 5/42 Officer
Wendell Fenton Trustee Director of the law firm of Richards,
One Rodney Square Layton & Finger (joined 1971).
Wilmington, DE 19801
Date of Birth: 5/39
John J. Quindlen Trustee Trustee of WT Mutual Fund and WT
1250 W. Southwinds Boulevard (# 313) Investment Trust I; Senior Vice President
Vero Beach, FL 32963 and Chief Financial Officer of E.I. Dupont
Date of Birth: 5/32 de Nemours & Co. from 1954 through 1993
(retired).
David D. Wakefield Trustee Retired Private Investor, Executive
P.O. Box 601 Secretary, Longwood Foundation and Welfare
Mendenhall, PA 19357 Foundation, from 1992 to 1997; Chairman
Date of Birth: 10/30 and President, J.P. Morgan Delaware from
1989 to 1992.
David M. Reese, Jr. Trustee Semi-retired; previously, Portfolio
Barley Mill House Manager, Research Analyst for Kalmar
3701 Kennett Pike Investments from 1982 through March, 1996.
Wilmington, DE 19807
Date of Birth: 7/35
Linn M. Morrow Vice President Director of Client Services, Kalmar
Barley Mill House Investments since 1996; Vice President of
3701 Kennett Pike Client Services, Delaware investments,
Wilmington, DE 19807 1985-1996
Date of Birth: 2/43
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
POSITION AND OFFICE PRINCIPAL OCCUPATION
NAME AND ADDRESS WITH THE TRUST DURING THE PAST FIVE YEARS
- ---------------- -------------- --------------------------
<S> <C> <C>
Verna Knowles Treasurer Administration Director, Kalmar
Barley Mill House Investments since 1998; Treasurer, Kalmar
3701 Kennett Pike Investments since 1997; President, Books &
Wilmington, DE 19807 Balances Ltd. Since 1988.
Date of Birth: 11/45
Marjorie L. McMenamin Secretary; Operations Director, Kalmar Investments
Barley Mill House Compliance Officer since 1992 and Kalmar Investment Advisers
3701 Kennett Pike since 1997.
Wilmington, DE 19807
Date of Birth: 8/49
</TABLE>
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 paid to the Trustees by the Trust is
set forth below:
<TABLE>
<CAPTION>
Estimated Pension or Total
Aggregate Retirement Compensation
Compensation Benefits Estimated From Trust and
From Trust Accrued as Part Annual Benefits Fund
Name and (Current Fiscal of Trust Upon Complex Paid
Position Year)1 Expenses Retirement To Trustee
-------- ------ -------- ---------- ----------
<S> <C> <C> <C> <C>
Ford B. Draper, Jr. $0 N/A N/A $0
Wendell Fenton $5,000 N/A N/A $5,000
John J. Quindlen $5,250 N/A N/A $5,250
David M. Reese, Jr. $0 N/A N/A $0
David D. Wakefield $5,250 N/A N/A $5,250
</TABLE>
1 THE TRUSTEE WHO IS BOTH AN "INTERESTED PERSON" OF THE TRUST AS DEFINED IN THE
INVESTMENT COMPANY ACT AND AFFILIATE OF THE ADVISER RECEIVES NO COMPENSATION
FROM THE TRUST. FOR THEIR SERVICE AS TRUSTEES, THE OTHER TRUSTEES RECEIVE $3,000
IN ANNUAL FEES PLUS $500 PER TRUST MEETING ATTENDED, IN ADDITION TO
REIMBURSEMENT FOR OUT-OF-POCKET EXPENSES IN CONNECTION WITH TRAVEL AND
ATTENDANCE AT BOARD MEETINGS. MEMBERS OF THE AUDIT COMMITTEE ARE PAID $250 PER
AUDIT COMMITTEE MEETING ATTENDED. IT IS EXPECTED THAT THE TRUST WILL HOLD FOUR
TRUSTEE MEETINGS PER YEAR. THE TRUST HAS NOT ADOPTED A PENSION PLAN OR ANY OTHER
PLAN THAT WOULD AFFORD BENEFITS TO ITS TRUSTEES.
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<PAGE>
On April 11, 2000, the Trustees and officers of the Trust, as a group, owned
beneficially, or may be deemed to have owned beneficially, approximately 3% of
the outstanding shares of the Small Cap Fund.
The Trust has an Audit Committee which has the responsibility, among other
things, to (1) recommend the selection of the Trust's independent auditors; (2)
review and approve the scope of the independent auditors' audit activity; (3)
review the financial statements which are the subject of the independent public
auditors' certifications; and (4) review with such independent public auditors
the adequacy of the Funds' basic accounting system and the effectiveness of the
Funds' internal accounting controls.
ADMINISTRATOR, ACCOUNTING AGENT AND TRANSFER AGENT.
PFPC Inc., ("PFPC") 400 Bellevue Parkway, Wilmington, DE 19809, serves as
Administrator, Transfer Agent and Dividend Paying Agent of the Fund and also
provides accounting services to the Fund.
As Administrator, PFPC supplies office facilities, non-investment related
statistical and research data, stationery and office supplies, executive and
administrative services, internal auditing and regulatory compliance services.
PFPC also assists in the preparation of reports to shareholders, prepares proxy
statements, updates prospectuses and makes filings with the SEC and state
securities authorities. PFPC performs certain budgeting and financial reporting
and compliance monitoring activities. As Accounting Agent, PFPC determines the
Fund's net asset value per share and provides accounting services to the Fund
pursuant to an Accounting Services Agreement.
As compensation for services performed under the Administration and Accounting
Services Agreement, PFPC receives a fee payable monthly at an annual rate (as
described above) multiplied by the average daily net assets of the Trust. The
administration fee earned by Rodney Square Management Corporation (the Trust's
prior administrator) ("Rodney Square") for the period ended December 31, 1997
amounted to $135,814, of which $54,651 was waived. The administration fee earned
by Rodney Square for the period January 1, 1998 through January 4, 1998 amounted
to $2,677 and the administration fee earned by PFPC for the period January 5,
1998, through December 31, 1998 amounted to $261,751. The administration fee
earned by PFPC for the period January 1, 1999, through December 31, 1999
amounted to $230,601.
PFPC serves as the Company's Transfer Agent and Dividend Disbursing Agent. As
part of PFPC's duties, PFPC: (i) processes shareholder purchase and redemption
orders; (ii) issues periodic statements to shareholders; (iii) processes
transfers, exchanges and dividend payments; and (iv) maintains all shareholder
records for each Fund account.
CUSTODIAN
The Trust employs PFPC Trust Company, The Eastwick Center, 8800 Tinicum Blvd.,
5th Floor, Philadelphia, PA 19153 as custodian of its assets. The custodian: (i)
maintains a separate
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<PAGE>
account or accounts in the name of the respective Funds; (ii) holds and
disburses portfolio securities; (iii) makes receipts and disbursements of money;
(iv) collects and receives income and other payments and distributions on
account of portfolio securities; (v) responds to correspondence from security
brokers and others relating to their respective duties; and (vi) makes periodic
reports concerning their duties.
INDEPENDENT PUBLIC ACCOUNTANT
PricewaterhouseCoopers LLP has been selected as independent accountants to each
Fund for the fiscal year ending December 31, 2000.
DISTRIBUTOR
Provident Distributors, Inc. ("PDI") 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, PDI agrees to use all
reasonable efforts as agent to secure purchasers for the various series of the
Trust. PDI 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 PDI, 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 notice filing fees incurred
in connection with the qualification of its shares under state securities laws.
PURCHASES
Under normal circumstances, you may purchase your shares at any time without a
fee. A description of the manner in which the Funds' shares are offered to
investors is set forth in each Fund's prospectus.
RETIREMENT PLANS
The following is a description of the types of retirement plans for which the
Funds' shares may be used for investment:
INDIVIDUAL RETIREMENT ACCOUNTS ("IRAS").
Individual taxpayers and married couples with adjusted gross incomes not in
excess of certain specified limits, 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 make deductible
contributions to an IRA account (subject to certain dollar limitations). All
individuals who have earned income may make nondeductible IRA contributions to
the extent that they are not eligible for a deductible
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<PAGE>
contribution. Income earned by an IRA account will not be currently taxed, but
will be taxed upon distribution. 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. (Note, however that no new SEP-IRAs may be established
after December 31, 1996.)
If you are entitled to receive a distribution from a qualified retirement plan,
you may rollover all or part of that distribution into your Fund IRA. Your
rollover contribution is not subject to the limits on annual IRA contributions.
You can continue to defer Federal income taxes on your rollover contribution and
on any income that is earned on that contribution.
Another option available to investors is a Roth IRA, which is available to
individuals within specified income limits. A Roth IRA is treated as a
traditional IRA with a few exceptions. The total yearly contributions to a Roth
IRA and a traditional IRA cannot exceed $2,000 per individual. Unlike a
traditional IRA, the contributions to a Roth IRA are nondeductible. Instead, the
advantages of a Roth IRA are backloaded. The buildup within the account (e.g.
interest and dividends), and the distribution of such buildup, is tax-free
subject to certain limitations. Amounts in a traditional IRA may be rolled over
into a Roth IRA subject to income and holding period limitations.
PFPC Trust Company makes available its services as an IRA Custodian for each
shareholder account that is established as an IRA. For these services, PFPC
Trust Company receives an annual fee of $10.00 per account, which fee is paid
directly to it by the IRA shareholder. If the fee is not paid by the date due,
shares of the Fund owned in the IRA account will be redeemed automatically for
purposes of making the payment.
401(K) PLANS AND OTHER DEFINED CONTRIBUTION PLANS
Profit sharing plans and money purchase pension plans (the "Defined Contribution
Plans") are for use by both self-employed individuals (sole proprietorships and
partnerships) and corporations that 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
25% of a participant's compensation from the employer for the year or $30,000
for self-employed participants. Contributions are based on earned income from
self-employment. 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.
403(B)(7) RETIREMENT PLANS
The Fund's shares may be used 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
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<PAGE>
not exceed applicable limitations (including a generally applicable limitation
of $10,500 per year, as adjusted periodically), 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.
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.
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, each 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) distribute at least 90% of its
dividends, interest and certain other taxable income each year; and (iii) 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 either or both of the Funds qualify for treatment as a regulated
investment company, such Fund 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 Trustees reserve the right not to
maintain the qualification of the Funds as a regulated investment company if
they determine such course of action to be beneficial to you. In such case, the
Funds 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 a Fund's
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<PAGE>
available earnings and profits. Shareholders will be advised annually as to the
Federal income tax consequences of distributions made during the year.
Under the Code, amounts not distributed on a timely basis in accordance with a
calendar year distribution requirement are subject to a nondeductible 4% excise
tax. To avoid the tax, each Fund must distribute during each calendar year, at
least the sum of (1) 98% of its ordinary income (not taking into account any
capital gains or losses) for the calendar year, (2) 98% of its capital gains in
excess of its capital losses for the twelve-month period ending on October 31 of
the calendar year or, upon election, during the calendar year and (3) all
ordinary income and net capital gains for previous years that were not
previously distributed. A distribution will be treated as paid during the
calendar year if it is paid during the calendar year or declared by the Fund in
October, November or December of the year, payable to shareholders of record as
of a specified date in such a month and actually paid by the Fund during January
of the following year. Any such distributions paid during January of the
following year will be deemed to be paid and received on December 31 of the year
the distributions are declared.
If a Fund is the holder of record of any stock on the record date for any
dividends payable with respect to such stock, such dividends shall be included
in the Fund's gross income as of the later of (a) the date such stock became
ex-dividend with respect to such dividends (i.e., the date on which a buyer of
the stock would not be entitled to receive the declared, but unpaid, dividends)
or (b) the date the Fund acquired such stock. Accordingly, in order to satisfy
the income distribution requirements, the Funds may be required to pay dividends
based on anticipated earnings, and shareholders may receive dividends in an
earlier year than would otherwise be the case.
The Funds' short sales against the box and transactions in futures contracts and
options will be subject to special provisions of the Code that, among other
things, may affect the character of gains and losses realized by the Funds
(i.e., may affect whether gains or losses are ordinary or capital), may
accelerate recognition of income to the Funds and may defer the Funds' losses.
These rules could therefore affect the character, amount and timing of
distributions to shareholders. These provisions also (a) will require the Funds
to mark-to-market certain types of the positions in its portfolio (i.e., treat
them as if they were closed out), and (b) may cause the Funds to recognize
income without receiving cash with which to make distributions in amounts
necessary to satisfy the 90% and 98% distribution requirements for avoiding
income and excise taxes described above. Each Fund will monitor transactions,
will make the appropriate tax elections and will make the appropriate entries in
its books and records when engaged in short sales against the box or acquiring
any futures contracts, options or hedged investments in order to mitigate the
effect of these rules and prevent disqualification of the Fund as a regulated
investment company.
FOREIGN WITHHOLDING TAXES
Income received by the Funds from investments in foreign securities may be
subject to withholding and other taxes imposed by foreign countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. It is impossible to
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determine the rate of foreign tax in advance since the amount of the Funds'
assets to be invested in various countries is not known.
PASSIVE FOREIGN INVESTMENT COMPANIES
If a Fund purchases shares in certain foreign investment entities, called
"passive foreign investment companies" (a "PFIC"), it may be subject to United
States Federal income tax on a portion of any "excess distribution" or gain from
the disposition of such shares even if such income is distributed as a taxable
dividend by the Fund to its shareholders. Additional charges in the nature of
interest may be imposed on the Fund in respect of deferred taxes arising from
such distributions or gains. If a Fund were to invest in a PFIC and elected to
treat the PFIC as a "qualified electing fund" under the Code, in lieu of the
foregoing requirements, the Fund might be required to include in income each
year a portion of the ordinary earnings and net capital gains of the qualified
electing fund, even if not distributed to the Fund, and such amounts would be
subject to the 90% and excise tax distribution requirements described above. In
order to make this election, the Fund would be required to obtain certain annual
information from the passive foreign investment companies in which it invests,
which may be difficult or not possible to obtain.
Alternatively, a Fund may make a mark-to-market election that will result in the
Fund being treated as if it had sold and repurchased all of the PFIC stock at
the end of each year. In this case, the Fund would report gains as ordinary
income and would deduct losses as ordinary losses to the extent of previously
recognized gains. The election, once made, would be effective for all subsequent
taxable years of the Fund, unless revoked with the consent of the IRS. By making
the election, the Fund could potentially ameliorate the adverse tax consequences
with respect to its ownership of shares in a PFIC, but in any particular year
may be required to recognize income in excess of the distributions received from
the PFICs owned and the proceeds from dispositions of PFIC company stock. The
Fund may have to distribute this "phantom" income and gain to satisfy its
distribution requirement and to avoid imposition of the 4% excise tax. The Funds
will make the appropriate tax elections, if possible, and take any additional
steps that are necessary to mitigate the effect of these rules.
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<PAGE>
DISTRIBUTIONS
Distributions of investment company taxable income (which includes interest and
the excess of net short-term capital gains over long-term capital losses, but
not the excess of net long-term capital gains over net short-term capital
losses) are taxable to a shareholder as ordinary income, whether paid in cash or
shares. Dividends paid by the Funds to corporate shareholders will generally
qualify for the 70% deduction available for dividends received by corporations
to the extent (1) the Fund's income consists of qualified dividends received
from U.S. corporations, and (2) certain income and other deductible limitations
imposed on the corporation. Distributions of net capital gains (which consists
of the excess of net long-term capital gains over net short-term capital
losses), if any, are taxable as long-term capital gains, whether paid in cash or
in shares, regardless of how long the shareholder has held each Fund's shares,
and are not eligible for the dividends received deduction. Shareholders
receiving distributions in the form of newly issued shares will have a basis in
such shares of each Fund equal to the fair market value of such shares on the
distribution date.
Gains or losses on the sales of securities by each Fund will be long-term
capital gains or losses if the securities have been held by the Fund for more
than twelve months. Gains or losses on the sale of securities held for twelve
months or less will be short-term capital gains or losses.
The price of shares purchased just prior to a distribution by the Funds may
reflect the amount of the forthcoming distribution. Those purchasing at that
time will receive a distribution that represents a return of investment, but
that will nevertheless be taxable to them.
SALES OF SHARES
Upon a sale or exchange of his or her shares, a shareholder will realize a
taxable gain or loss depending upon his or her basis in the shares. The gain or
loss will be treated as a long-term capital gain or loss if the shares have been
held for more than one year. Any loss realized on a sale or exchange will be
disallowed to the extent the shares disposed of are replaced within a period of
61 days beginning 30 days before and ending 30 days after the shares are bought
or sold. In such case, the basis of the shares acquired will be adjusted to
reflect the disallowed loss. Any loss realized by a shareholder on the sale of
each Fund's shares held by the shareholder for six months or less will be
treated for tax purposes as a long-term capital loss to the extent of any
distributions of long-term capital gains received by the shareholder with
respect to such shares. However, capital losses are deductible only against
capital gains except for individuals, who may deduct up to $3,000 of ordinary
income.
BACKUP WITHHOLDING
The Funds may be required to withhold Federal income tax at the rate of 31% with
respect to (1) taxable dividends and distributions and (2) proceeds of any
redemptions of each Fund's
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shares if a shareholder fails to provide the Funds with his or her correct
taxpayer identification number or to make required certifications, or who has
been notified by the Internal Revenue Service that he or she is subject to
backup withholding. Backup withholding is not an additional tax. Consequently,
any amounts withheld may be credited against a shareholder's federal income tax
liability.
Each Fund will provide an information return to shareholders describing the
federal tax status of the dividends paid by each 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 either Fund makes a
distribution after the close of its fiscal year which is attributable to income
or gains earned in such earlier fiscal year, then such 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 advisers 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 and is not to be relied
upon as tax advice. 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.
Shareholders are urged to consult their tax advisers regarding specific
questions about federal, state, local or foreign taxes.
Dividends and distributions also may be subject to state and local taxes which
are not discussed herein.
GENERAL INFORMATION
SHARES OF BENEFICIAL INTEREST AND VOTING RIGHTS
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 Funds 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
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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.
CODE OF ETHICS
The Adviser and the Board of Trustees of the Trust have each adopted a Code of
Ethics under Rule 17j-1 of the Investment Company Act. Each Code significantly
restricts the personal investing activities of directors and officers of the
Adviser and employees of the Adviser and the Trust with access to information
about current portfolio transactions. Among other provisions, each Code requires
that such directors, officers and employees with access to information about the
purchase or sale of portfolio securities obtain preclearance before executing
personal trades.
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.
AUDITS AND REPORTS
The accounts of the Trust are audited each year by PricewaterhouseCoopers LLP,
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.
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PRINCIPAL HOLDERS OF SECURITIES
As of April 4, 2000, the following persons or organizations held of record 5% or
more of the shares of the Fund:
The Trustees of Boston College 17.2%
Attn: Paul Haran
140 Commonwealth Avenue, More 310
Chestnut Hill, MA 02167
SK LLC 6.8%
380 E. Park Center Blvd.
Suite 100
Boise, ID 83707-0101
Frechette Fund, Inc. 6.6%
c/o Choate Hall & Stewart
ATTN: R.N. Hoehn
53 State Street
Boston, MA 02109
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 SEC 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 SEC. Current yield and total return quotations used by a Fund
are based on the standardized methods of computing performance mandated by the
SEC. 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
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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
SEC formula:
Yield = 2 [(a-b +1)6 - 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 SEC formula:
P(1+T)n = 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).
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The average annual total return of the Small Cap Fund for the fiscal year ended
December 31, 1999 was 6.01% and for the period from the Fund's inception on
April 11, 1997 through December 31, 1999 was 14.09%.
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 or information
services. Advertisements, sales literature and shareholder communications may
also compare yield or total return to yield or total return of other
investments, indices, and averages. The following publications, indices, and
averages may be used:
Barron's Personal Investor
Business Week Personal Investing News
CDA Investment Technologies, Inc Russell Indices
Changing Times, The Kiplinger Magazine S&P 500 Composite Stock Price Index
Consumer Digest S&P SmallCap 600 Index
Consumer Price Index S&P MidCap 400 Index
Dow Jones Composite Average S&P/Barra Growth & Value Indexes
Financial World Success
Forbes The New York Times
Fortune U.S. News and World Report
Investment Company Data, Inc. USA Today
Investor's Daily ValueLine Index
Lipper Mutual Fund Performance Analysis Wall Street Journal
Lipper Mutual Fund Indices Wiesenberger Investment Companies
Money Services
Morningstar, Inc. Wilshire Indices
Mutual Fund Values
Nasdaq Indexes
No Load Fund Investor
New York Stock Exchange Composite
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.
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In its reports, investor communications or advertisements, each Fund may also
include (1) descriptions and updates concerning its strategies and portfolio
investments; (2) its goals, risk factors and expenses compared with other mutual
funds; (3) the general biography or work experience of the portfolio managers of
the Fund; (4) portfolio manager commentary or market updates; (5) discussion of
macroeconomic factors affecting the Fund and its investments; and (6) other
information of interest to investors.
FINANCIAL STATEMENTS
The audited financial statements and the financial highlights for the Small Cap
Fund for the fiscal year ended December 31, 1999, as set forth in the Fund's
annual report to shareholders, and the report thereon of PricewaterhouseCoopers
LLP, the Fund's independent auditors, also appearing in the Fund's annual
report, are incorporated herein by reference.
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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
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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.
A-2
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INVESTMENT ADVISER
Kalmar Investment Advisers
Barley Mill House
3701 Kennett Pike
Wilmington, DE 19807
DISTRIBUTOR
Provident Distributors, Inc.
3200 Horizon Drive
King of Prussia, PA 19406
SHAREHOLDER SERVICES
PFPC Inc.
400 Bellevue Parkway, Suite 108
Wilmington, DE 19809
CUSTODIAN
PFPC Trust Company
The Eastwick Center
8800 Tinicum Blvd., 5th Floor
Philadelphia, PA 19153
LEGAL COUNSEL
Pepper Hamilton LLP
3000 Two Logan Square
18th & Arch Streets
Philadelphia, PA 19103-2799
AUDITORS
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, PA 19103
