File No. 333-17391
811-07959
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 11 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [ ]
Amendment No. 12 [X]
ADVISORS SERIES TRUST
(Exact name of registrant as specified in charter)
4455 E. Camelback Road, Suite 261E
Phoenix, AZ 85018
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number (including area code): (602) 952-1100
ROBERT H. WADSWORTH
Advisors Series Trust
4455 E. Camelback Road, Suite 261E
Phoenix, AZ 85018
(Name and address of agent for service of process)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of the registration statement.
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on October 31, 1997 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of Rule 485
If appropriate, check the following box
[ ] this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
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Title of Securities Being Registered:
Shares of Beneficial Interest, $.01 Par Value
<PAGE>
InformationTech 100r Fund
160 Sansome Street
San Francisco, CA 94104
(415) 705-7777
The InformationTech 100r Fund (the "Fund") is a mutual fund that seeks
capital appreciation by investing in the 100 stocks that make up the
InformationWeek 100r Index (the "Index"). Bay Isle Financial Corporation (the
"Advisor"), the investment advisor to the Fund, has created and maintains the
Index and intends for the composition of the Fund's portfolio to be similar to
that of the Index. However, the Fund is not an index fund, and its performance
will differ from that of the Index. See "Investment Objectives and Policies."
There can be no assurance that the Fund will achieve its investment objective.
The Fund concentrates its investments in companies engaged in information
technologies and its net asset value could be subject to greater fluctuation.
This Prospectus sets forth basic information about the Fund that
prospective investors should know before investing. It should be read and
retained for future reference. The Fund is a separate series of Advisors Series
Trust (the "Trust"), an open-end registered management investment company. A
Statement of Additional Information dated October 31, 1997 has been filed with
the Securities and Exchange Commission and is incorporated herein by reference.
This Statement of Additional Information is available without charge upon
request to the Fund at the address or telephone number given above.
TABLE OF CONTENTS
Expense Table 2
Financial Highlights 3
Investment Objective and Policies 4
Management of the Fund 5
Investor Guide 6
Services Available to Shareholders 8
How to Redeem Your Shares 8
Distributions and Taxes 10
General Information 11
These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission nor has the Securities
and Exchange Commission or any state securities commission passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
Prospectus dated October 31, 1997
EXPENSE TABLE
Expenses are one of several factors to consider when investing in the Fund.
There are two types of expenses involved: shareholder transaction expenses, such
as sales loads, and annual operating expenses, such as investment advisory fees.
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases None
Maximum Sales Load Imposed on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees
(as a percentage of amount redeemed in six months) 1%
Annual Operating Expenses
(As a percentage of average net assets)
Investment Advisory Fees 0.95% 12b-1 Fees None Other Expenses (estimated
for the current fiscal year) 0.55% Total Operating Expenses (estimated for
the current fiscal year) 1.50%
The purpose of the above table is to provide an understanding of the various
expenses which may be borne directly or indirectly by an investment in the Fund.
Actual expenses may be more or less than those shown. A fee of 1% (paid to the
Fund) is imposed on shares redeemed if the shares have been held for less than
six months. See "How to Redeem Your Shares." The Fund's total operating expenses
are not expected to exceed 1.50% of average net assets annually, but in the
event that they do, the Advisor has agreed to reduce its fees to insure that the
expenses for the Fund will not exceed 1.50%. If the Advisor did not limit the
Fund's expenses, it is expected that "Other Expenses" in the above table would
be 1.55%, and "Total Operating Expenses" would be 2.50%. If the Advisor does
waive any of its fees, the Fund may reimburse the Advisor in future years. See
"Management of the Fund."
Example
This table illustrates the net operating expenses that would be incurred by an
investment in the Fund over different time periods assuming a $1,000 investment,
a 5% annual return, and redemption at the end of each time period.
1 Year 3 Years
$ 15 $ 47
The Example shown above should not be considered a representation of past or
future expenses and actual expenses may be greater or less than those shown. In
addition, federal regulations require the Example to assume a 5% annual return,
but the Fund's actual return may be higher or lower. See "Management of the
Fund."
The minimum initial investment in the Fund is $5,000, with subsequent minimum
investments of $1,000 or more ($2,000 and $500, respectively, for retirement
plans). Shares will be redeemed at their net asset value.
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout the period (Unaudited) April 8,
1997* through August 31, 1997
Net asset value, beginning of period $20.00
Income from investment operations:
Net investment income (0.06)
Net realized and unrealized gain on investments 6.25
Total from investment operations 6.19
Net asset value, end of period $26.19
Total return 30.95%**
Ratios/supplemental data:
Net assets, end of period (thousands) $841
Ratio of expenses to average net assets:
Before expense reimbursement 19.55%***
After expense reimbursement 1.50%***
Ratio of net investment loss to average net assets:
Before expense reimbursement (18.90%)***
After expense reimbursement (0.87%)***
Portfolio turnover rate 4.11%
Average commission rate paid per share $.1000
*Commencement of operations.
**Not annualized.
***Annualized.
INVESTMENT OBJECTIVES AND POLICIES
What is the Fund's investment objective?
The investment objective of the Fund is capital appreciation which it attempts
to achieve by investing in the 100 stocks that make up the InformationWeekr 100
Index (the "Index"). The Advisor intends for the composition of the Fund's
portfolio to be similar to that of the Index. However, the Fund is not an index
fund, and its performance will differ from that of the Index. InformationTech
100 is a registered trademark of Bay Isle Financial corporation. InformationWeek
is a registered trademark of CMP Media and is in no way affiliated with the
InformationTech 100 Mutual Fund.
What is the InformationWeekr 100 Index?
The Index is designed to provide technology investors with an effective way to
measure the growth and performance of information technology's impact on North
American businesses. It consists of the common stocks of 100 companies in a
group of industries representing a mix of information technology (e.g.,
software, hardware, Internet-related, networking, services, communications)
which supports and fuels North American business. Products from the information
technology industry group are used by businesses to cut costs, boost
productivity, serve as an agent of competition, and themselves create new
products and services. The Index excludes biotechnology, medical, consumer
electronics and software, and similar companies often included in broader
technology indices. Specific industries include, but are not limited to,
communications, networking, software, hardware and semi-conductor companies. The
Index is an equal-weighted index whose value, by convention, has been set to
100.00 as of the close of trading on March 1, 1995. The Index is rebalanced to
an equal weighting per company after the close of trading on the third Friday of
each December. (Because the Index is equal-weighted, after rebalancing each
stock in the Index represents approximately one percent of the Index.) On the
date the Index is rebalanced, the Advisor will review the 100 companies to
determine if each is still appropriate for the portfolio of the Fund. The
Advisor requires each security in the Index and the Fund to be listed on a
national securities exchange or the NASDAQ national market system, and be issued
by a company with total equity market capitalization in excess of $250 million
which, in the Advisor's opinion, is in sound financial and operational
condition. If, during the year, a company goes out of business, merges with
another company, falls below $150 million in total equity market capitalization,
or its securities are otherwise judged by the Advisor no longer to be suitable
for inclusion in the Index, the Advisor may delete the security from both the
Index and the Fund's portfolio and add another to both in its place.
The Fund's holdings may vary from the Index
Because the Advisor determines the composition of the Index, it also determines
composition of the Fund's portfolio. Normally, the Fund buys and sells stocks in
order to match the composition of the Index. (This means that the Advisor does
not select securities for the Fund's portfolio primarily based on traditional
economic, financial and market analyses.) However, to reduce transaction costs,
the Fund will not normally buy odd lots of securities and it may, if desirable,
purchase or sell securities in blocks. It may also not invest new cash received
every day. These policies may cause a particular stock to be over- or
under-weighted in the Fund relative to its Index weighting. They may also cause
the performance of the Fund's portfolio as a whole to differ from the
performance of the Index. The Advisor does not expect the Fund's annual turnover
rate to exceed 50%.
There is, of course, no assurance that the Fund's objective will be achieved.
Because prices of common stocks and other securities fluctuate, the value of an
investment in the Fund will vary as the market value of its investment portfolio
changes. Like other mutual funds concentrating investments in a specific
industry, the Fund's holdings, and its net asset value, will be more affected by
developments in the information technology industries and could be subject to
greater fluctuation.
Other securities the Fund might purchase
The Advisor intends for the Fund to be as fully invested as possible, and the
Fund expects to invest at least 95% of its total assets in the common stocks
that comprise the Index. However, the Fund may maintain up to 5% of its total
assets in high quality, short-term debt securities and money market instruments
to meet redemption requests and other needs for liquid assets. These short-term
debt securities and money market instruments include commercial paper,
certificates of deposit, bankers' acceptances, U.S. Government securities and
repurchase agreements. The Fund may also purchase securities convertible into
the common stocks comprising the Index, as well as warrants and rights to
purchase these stocks. In addition, the Fund may invest in options on stocks and
stock indices.
Lending securities
To increase its income, the Fund may lend securities from its portfolio to
brokers, dealers and other financial institutions. No more than one-third of the
Fund's total assets may be represented by loaned securities. The Fund's loans of
portfolio securities will be collateralized at all times by high quality liquid
securities equal in value to the securities loaned.
Foreign securities
The Fund may invest in securities of foreign issuers, including Depositary
Receipts with respect to securities of foreign issuers, if they are included in
the Index. There is no limit on investment in foreign securities which are
listed on a national securities exchange, but investments in other foreign
securities are not expected to exceed 5% of the Fund's total assets.
Investment restrictions
The Fund has adopted certain investment restrictions, which are described fully
in the Statement of Additional Information. Like the Fund's investment
objective, certain of these restrictions are fundamental and may be changed only
by a majority vote of the Fund's outstanding shares. As a fundamental policy,
the Fund is diversified, which means at least 75 percent of the value of its
total assets is represented by cash and cash items (including receivables),
Government securities, securities of other investment companies, and other
securities for the purposes of this calculation limited in respect of any one
issuer to an amount not greater in value than 5 percent of the value of the
total assets of such issuer and to not more than 10 percent of the outstanding
voting securities of such issuer. The Fund intends to concentrate its
investments in the information technology group of industries, but it does not
intend to concentrate in any single industry. The Fund may borrow money, but
only for temporary purposes or to meet redemption requests, and up to 10% of its
total assets.
MANAGEMENT OF THE FUND
The Board of Trustees of the Trust establishes the Fund's policies and
supervises and reviews the management of the Fund.
The Advisor
The Fund's Advisor, Bay Isle Financial Corporation, 160 Sansome Street, 17th
Floor, San Francisco, CA 94104, has been in the investment advisory business
since 1987. The Advisor has not previously managed a mutual fund, but it
provides investment advisory services to individual and institutional accounts
with an aggregate value in excess of $250 million. William F. K. Schaff, CFA, a
co-founder and controlling person of the Advisor, is principally responsible for
the management of the Fund's portfolio. Mr. Schaff has been Chief Investment
Officer and has been managing accounts of other clients of the Advisor since
1987.
The Advisor provides the Fund with advice on buying and selling securities,
manages the investments of the Fund, furnishes the Fund with office space and
certain administrative services, and provides most of the personnel needed by
the Fund. As compensation, the Fund pays the Advisor a monthly management fee
based upon the average daily net assets of the Fund at the annual rate of 0.95%.
This fee is higher than that paid by most mutual funds. The Advisor will donate
10% of its fees it collects from the Fund to charities qualifying under section
501(c)(3) of the Internal Revenue Code of 1986 (the ("Code")). However, the
Advisor will not make any donations while it is waiving any part of its fees or
reimbursing the Fund for expenses in excess of the 1.50% limit.
The Administrator
Investment Company Administration Corporation (the "Administrator") prepares
various federal and state regulatory filings, reports and returns for the Fund,
prepares reports and materials to be supplied to the trustees, monitors the
activities of the Fund's custodian, shareholder servicing agent and accountants,
and coordinates the preparation and payment of Fund expenses and reviews the
Fund's expense accruals. For its services, the Administrator receives a monthly
fee at the annual rate of 0.20% of average net assets, subject to a $30,000
annual minimum.
Other operating expenses
The Fund is responsible for its own operating expenses, including but not
limited to, the advisory and administration fees, custody and shareholder
servicing agent fees, legal and auditing expenses, federal and state
registration fees, and fees to the Trust's disinterested trustees. The Advisor
may reduce its fees or reimburse the Fund for expenses at any time in order to
reduce the Fund's expenses. Reductions made by the Advisor in its fees or
payments or reimbursements of expenses which are the Fund's obligation are
subject to reimbursement by the Fund provided the Fund is able to do so and
remain in compliance with any applicable expense limitations.
Brokerage transactions
The Advisor considers a number of factors in determining which brokers or
dealers to use for the Fund's portfolio transactions. While these are more fully
discussed in the Statement of Additional Information, the factors include, but
are not limited to, the reasonableness of commissions, quality of services and
execution, and the availability of research which the Advisor may lawfully and
appropriately use in its investment advisory capacities. Provided the Fund
receives prompt execution at competitive prices, the Advisor may also consider
the sale of Fund shares as a factor in selecting broker-dealers for the Fund's
portfolio transactions.
INVESTOR GUIDE
How to purchase shares of the Fund
There are several ways to purchase shares of the Fund. An application form,
which accompanies this Prospectus, is used if you send money directly to the
Fund by mail or wire. If you have questions about how to invest, or about how to
complete the Application Form, please call an account representative at (800)
385-7003.
You may send money to the Fund by mail
If you wish to invest by mail, simply complete the Application Form and mail it
with a check (made payable to the InformationTech 100r Fund) to the Fund's
Shareholder Servicing Agent:
InformationTech 100 Fund
P.O. Box 640947
Cincinnati, OH 45264-0947
You may wire money to the Fund
Before sending a wire, you should call the Fund at (800) 385-7003 between 9:00
a.m. and 5:00 p.m., Eastern time, on a day when the New York Stock Exchange
("NYSE") is open for trading, in order to receive an account number. It is
important to call and receive this account number, because if your wire is sent
without it or without the name of the Fund, there may be a delay in investing
the money you wire. You should then ask your bank to wire money to:
Star Bank, N.A. Cinti/Trust
ABA # 0420-0001-3
Attn: InformationTech 100 Fund
DDA #486444847
for further credit to: [your name and account #]
Your bank may charge you a fee for sending a wire to the Fund.
You may purchase shares through an investment dealer
You may be able to invest in shares of the Fund through an investment dealer, if
the dealer has made arrangements with the Distributor. The dealer may place an
order for you with the Fund; the price you will pay will be the net asset value
which is next calculated after receipt of the order from the dealer. It is the
responsibility of the dealer to place your order promptly. A dealer may charge
you a fee for placing your order, but you could avoid paying such a fee by
sending an Application Form and payment directly to the Fund. The dealer may
also hold the shares you purchase in its omnibus account rather than in your
name in the records of the Fund's transfer agent. The Fund may reimburse the
dealer for maintaining records of your account as well as for other services
provided to you.
Your dealer is responsible for sending your money to the Fund promptly after
placing the order to purchase shares, and the Fund may cancel the order if
payment is not received from the dealer promptly.
Minimum investments
The minimum initial investment in the Fund is $5,000. The minimum subsequent
investment is $1,000. However, if you are starting an Automatic Investment Plan
(see below), the minimum initial investment is $2,000. If you are investing in
an Individual Retirement Account ("IRA"), the minimum initial and subsequent
investments are $2,000 and $500, respectively.
Subsequent investments
You may purchase additional shares of the Fund by sending a check, with the stub
from an account statement, to the Fund at the address above. Please also write
your account number on the check. (If you do not have a stub from an account
statement, you can write your name, address and account number on a separate
piece of paper and enclose it with your check.) If you want to send additional
money for investment by wire, it is important for you to call the Fund at (800)
385-7003.
When is money invested in the Fund?
Any money received for investment in the Fund, whether sent by check or by wire,
is invested at the net asset value of the Fund which is next calculated after
the money is received (assuming the check or wire correctly identifies the Fund
and account). The net asset value is calculated at the close of regular trading
of the NYSE, currently 4:00 p.m., Eastern time. A check or wire received after
the NYSE closes is invested as of the next calculation of the Fund's net asset
value.
What is the net asset value of the Fund?
The Fund's net asset value per share is calculated by dividing the value of the
Fund's total assets, less its liabilities, by the number of its shares
outstanding. In calculating the net asset value, portfolio securities are valued
using current market values, if available. Securities for which market
quotations are not readily available are valued at fair values determined in
good faith by or under the supervision of the Board of Trustees of the Trust.
The fair value of short-term obligations with remaining maturities of 60 days or
less is considered to be their amortized cost.
Other information
First Fund Distributors, Inc., 4455 E. Camelback Road, Suite 261E, Phoenix, AZ
85018, an affiliate of the Administrator, is the principal underwriter
("Distributor") of the Fund's shares. The Distributor may waive the minimum
investment requirements for purchases by certain group or retirement plans. All
investments must be made in U.S. dollars, and checks must be drawn on U.S.
banks. Third party checks will not be accepted. A charge may be imposed if any
check used for investment does not clear. The Fund and the Distributor reserve
the right to reject any investment, in whole or in part. Federal tax law
requires that investors provide a certified taxpayer identification number and
other certifications on opening an account in order to avoid backup withholding
of taxes. See the Application Form for more information about backup
withholding. The Fund is not required to issue share certificates; all shares
are normally held in non-certificated form on the books of the Fund, for the
account of the shareholder.
SERVICES AVAILABLE TO SHAREHOLDERS
Retirement Plans
You may obtain a prototype IRA plan from the Fund. Shares of the Fund are also
eligible investments for other types of retirement plan.
Automatic investing by check
You may make regular monthly investments in the Fund using the "Automatic
Investment Plan." A check is automatically drawn on your personal savings or
checking account each month for a predetermined amount (but not less than $100),
as if you had written a check directly. Upon receipt of the withdrawn funds, the
Fund automatically invests the money in additional shares of the Fund at the
current net asset value. Applications for this service are available from the
Fund. There is no charge by the Fund for this service. The Fund may terminate or
modify this privilege at any time, and shareholders may terminate their
participation by notifying the Shareholder Servicing Agent in writing,
sufficiently in advance of the next withdrawal.
Automatic withdrawals
The Fund offers a Automatic Withdrawal Plan whereby shareholders may request
that a check drawn in a predetermined amount be sent to them each month or
calendar quarter. To start this Program, your account must have Fund shares with
a value of at least $10,000, and the minimum amount that may be withdrawn each
month or quarter is $50. The Program may be terminated or modified by a
shareholder or the Fund at any time without charge or penalty. A withdrawal
under the Automatic Withdrawal Plan involves a redemption of shares of the Fund,
and may result in a gain or loss for federal income tax purposes. In addition,
if the amount withdrawn exceeds the dividends credited to your account, the
account ultimately may be depleted.
HOW TO REDEEM YOUR SHARES
You have the right to redeem all or any portion of your shares of the Fund at
their net asset value on each day the NYSE is open for trading. Redemption in
writing
You may redeem your shares by simply sending a written request to the Fund. You
should give your account number and state whether you want all or part of your
shares redeemed. The letter should be signed by all of the shareholders whose
names appear in the account registration. You should send your redemption
request to:
InformationTech 100 Fund
150 Motor Parkway
Suite 109
Hauppauge, NY 11788
Signature guarantee
If the value of the shares you wish to redeem exceeds $5,000, the signatures on
the redemption request must be guaranteed by an "eligible guarantor
institution." These institutions include banks, broker-dealers, credit unions
and savings institutions. A broker-dealer guaranteeing a signature must be a
member of a clearing corporation or maintain net capital of at least $100,000.
Credit unions must be authorized to issue signature guarantees. Signature
guarantees will be accepted from any eligible guarantor institution which
participates in a signature guarantee program. A notary public is not an
acceptable guarantor.
Redemption by telephone
If you complete the Redemption by Telephone portion of the Fund's Application
Form, you may redeem shares on any business day the NYSE is open by calling the
Fund's Shareholder Servicing Agent at (800) 385-7003 before 4:00 p.m. Eastern
time. Redemption proceeds will be mailed or wired, at your direction, on the
next business day to the bank account you designated on the Application Form.
The minimum amount that may be wired is $1,000 (wire charges, if any, will be
deducted from redemption proceeds). Telephone redemptions cannot be made for IRA
accounts.
By establishing telephone redemption privileges, you authorize the Fund and its
Shareholder Servicing Agent to act upon the instruction of any person who makes
the telephone call to redeem shares from your account and transfer the proceeds
to the bank account designated in the Application Form. The Fund and the
Shareholder Servicing Agent will use procedures to confirm that redemption
instructions received by telephone are genuine, including recording of telephone
instructions and requiring a form of personal identification before acting on
these instructions. If these normal identification procedures are followed,
neither the Fund nor the Shareholder Servicing Agent will be liable for any
loss, liability, or cost which results from acting upon instructions of a person
believed to be a shareholder with respect to the telephone redemption privilege.
The Fund may change, modify, or terminate these privileges at any time upon at
least 60-days' notice to shareholders.
You may request telephone redemption privileges after your account is opened;
however, the authorization form will require a separate signature guarantee.
Shareholders may experience delays in exercising telephone redemption privileges
during periods of abnormal market activity.
What price is used for a redemption?
The redemption price is the net asset value of the Fund's shares, next
determined after shares are validly tendered for redemption. All signatures of
account holders must be included in the request, and a signature guarantee, if
required, must also be included for the request to be valid.
When are redemption payments made?
As noted above, redemption payments for telephone redemptions are sent on the
day after the telephone call is received. Payments for redemptions sent in
writing are normally made promptly, but no later than seven days after the
receipt of a valid request. However, the Fund may suspend the right of
redemption under certain extraordinary circumstances in accordance with rules of
the Securities and Exchange Commission.
If shares were purchased by wire, they cannot be redeemed until the day after
the Application Form is received. If shares were purchased by check and then
redeemed shortly after the check is received, the Fund may delay sending the
redemption proceeds until it has been notified that the check used to purchase
the shares has been collected, a process which may take up to 15 days. This
delay can be avoided by investing by wire or by using a certified or official
bank check to make the purchase.
Redemption Fee
The Fund is intended as a long-term investment, not as a short-term trading
vehicle. In order to prevent excessive brokerage costs, a one percent redemption
fee, paid to the Fund, will be deducted from the proceeds of any redemption of
shares held less than six months. This fee will not be charged to retirement
plan accounts or in the case of redemptions resulting from the death of the
shareholder.
Other information about redemptions
A redemption may result in recognition of a gain or loss for federal income tax
purposes. Due to the relatively high cost of maintaining smaller accounts, the
shares in your account (unless it is a retirement plan or Uniform Gifts or
Transfers to Minors Act account) may be redeemed by the Fund if, due to
redemptions you have made, the total value of your account is reduced to less
than $500. If the Fund determines to make such an involuntary redemption, you
will first be notified that the value of your account is less than $500, and you
will be allowed 30 days to make an additional investment to bring the value of
your account to at least $500 before the Fund takes any action.
DISTRIBUTIONS AND TAXES
Dividends and other distributions
Dividends from net investment income, if any, are normally declared and paid by
the Fund in December. Capital gains distributions, if any, are also normally
made in December, but the Fund may make an additional payment of dividends or
distributions if it deems it desirable at another time during any year.
Dividends and capital gain distributions (net of any required tax withholding)
are automatically reinvested in additional shares of the Fund at the net asset
value per share on the reinvestment date unless you have previously requested in
writing to the Shareholder Servicing Agent that payment be made in cash.
Any dividend or distribution paid by the Fund has the effect of reducing the net
asset value per share on the record date by the amount of the dividend or
distribution. You should note that a dividend or distribution paid on shares
purchased shortly before that dividend or distribution was declared will be
subject to income taxes even though the dividend or distribution represents, in
substance, a partial return of capital to you.
Taxes
The Fund intends to qualify and elect to be treated as a regulated investment
company under Subchapter M of the Code. As long as the Fund continues to
qualify, and as long as the Fund distributes all of its income each year to the
shareholders, the Fund will not be subject to any federal income or excise
taxes. Distributions made by the Fund will be taxable to shareholders whether
received in shares (through dividend reinvestment) or in cash. Distributions
derived from net investment income, including net short-term capital gains, are
taxable to shareholders as ordinary income. A portion of these distributions may
qualify for the intercorporate dividends-received deduction. Distributions
designated as capital gains dividends are taxable as long-term capital gains
regardless of the length of time shares of the Fund have been held. Although
distributions are generally taxable when received, certain distributions made in
January are taxable as if received the prior December. You will be informed
annually of the amount and nature of the Fund's distributions. Additional
information about taxes is set forth in the Statement of Additional Information.
You should consult your own advisers concerning federal, state and local
taxation of distributions from the Fund.
GENERAL INFORMATION
The Trust
The Trust was organized as a Delaware business trust on October 3, 1996. The
Agreement and Declaration of Trust permits the Board of Trustees to issue an
unlimited number of full and fractional shares of beneficial interest, without
par value, which may be issued in any number of series. The Board of Trustees
may from time to time issue other series, the assets and liabilities of which
will be separate and distinct from any other series.
Shareholder Rights
Shares issued by the Fund have no preemptive, conversion, or subscription
rights. Shareholders have equal and exclusive rights as to dividends and
distributions as declared by the Fund and to the net assets of the Fund upon
liquidation or dissolution. The Fund, as a separate series of the Trust, votes
separately on matters affecting only the Fund (e.g., approval of the Investment
Advisory Agreement); all series of the Trust vote as a single class on matters
affecting all series jointly or the Trust as a whole (e.g., election or removal
of Trustees). Voting rights are not cumulative, so that the holders of more than
50% of the shares voting in any election of Trustees can, if they so choose,
elect all of the Trustees. While the Trust is not required and does not intend
to hold annual meetings of shareholders, such meetings may be called by the
Trustees in their discretion, or upon demand by the holders of 10% or more of
the outstanding shares of the Trust for the purpose of electing or removing
Trustees. As of October 10, 1997, the Fund was controlled by Du Bain 1991 Trust,
Myron Du Bain Trustee.
Performance Information
From time to time, the Fund may publish its total return in advertisements and
communications to investors. Total return information will include the Fund's
average annual compounded rate of return over the most recent four calendar
quarters and over the period from the Fund's inception of operations. The Fund
may also advertise aggregate and average total return information over different
periods of time. The Fund's total return will be based upon the value of the
shares acquired through a hypothetical $1,000 investment at the beginning of the
specified period and the net asset value of those shares at the end of the
period, assuming reinvestment of all distributions. Total return figures will
reflect all recurring charges against Fund income. You should note that the
investment results of the Fund will fluctuate over time, and any presentation of
the Fund's total return for any prior period should not be considered as a
representation of what an investor's total return may be in any future period.
Shareholder Inquiries
Shareholder inquiries should be directed to the Shareholder Servicing Agent at
(800) 385-7003.
Advisor
Bay Isle Financial Corporation
160 Sansome Street, 17th Floor
San Francisco, CA 94104
(415) 705-7777
Distributor
First Fund Distributors, Inc.
4455 East Camelback Road, Suite 261E
Phoenix, AZ 85018
Custodian
Star Bank, N.A.
425 Walnut Street
Cincinnati, OH 45202
Transfer Agent
American Data Services, Inc.
150 Motor Parkway, Suite 109
Hauppauge, NY 11788
(800) 385-7003
Auditors
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, NY 10017
Legal Counsel
Paul, Hastings, Janofsky & Walker, LLP
345 California Street, 29th Floor
San Francisco, CA 94104
<PAGE>
INFORMATIONTECH 100(R) FUND
Statement of Additional Information
Dated October 31, 1997
This Statement of Additional Information is not a prospectus, and it should be
read in conjunction with the prospectus dated October 31, 1997, as may be
amended from time to time, of the InformationTech 100(R) Fund (the "Fund"), a
series of Advisors Series Trust (the "Trust"). Bay Isle Financial Corporation
(the "Advisor") is the Advisor to the Fund. A copy of the prospectus may be
obtained from the Fund at 160 Sansome Street, San Francisco, CA 94104; telephone
(415) 705-7777.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Cross-reference to sections
Page in the prospectus
<S> <C> <C>
Investment Objective and Policies.................... B-2 The Fund at a Glance; The Fund in
Detail
Management........................................... B-13 Management of the Fund
Portfolio Transactions and Brokerage................. B-15 Management of the Fund
Net Asset Value...................................... B-16 Investor Guide
Taxation ........................................... B-17 Distributions and Taxes
Dividends and Distributions.......................... B-19 Distributions and Taxes
Performance Information.............................. B-19 General Information
General Information.................................. B-20 General Information
Appendix............................................. B-21 Not applicable
Statements of Assets and Liabilities................. B-23 Not applicable
Independent Auditor's Report......................... B-24 Not applicable
</TABLE>
SAI-1-97.IT100
B-1
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of the Fund is capital appreciation which it
attempts to achieve by investing in the 100 stocks that make up the
InformationWeek 100 Index (the "Index"). There is no assurance that the Fund
will achieve its objective. The discussion below supplements information
contained in the prospectus as to investment policies of the Fund.
Convertible Securities and Warrants
The Fund may invest in convertible securities and warrants. A
convertible security is a fixed income security (a debt instrument or a
preferred stock) which may be converted at a stated price within a specified
period of time into a certain quantity of the common stock of the same or a
different issuer. Convertible securities are senior to common stocks in an
issuer's capital structure, but are usually subordinated to similar
non-convertible securities. While providing a fixed income stream (generally
higher in yield than the income derivable from common stock but lower than that
afforded by a similar nonconvertible security), a convertible security also
affords an investor the opportunity, through its conversion feature, to
participate in the capital appreciation attendant upon a market price advance in
the convertible security's underlying common stock.
A warrant gives the holder a right to purchase at any time during a
specified period a predetermined number of shares of common stock at a fixed
price. Unlike convertible debt securities or preferred stock, warrants do not
pay a fixed dividend. Investments in warrants involve certain risks, including
the possible lack of a liquid market for resale of the warrants, potential price
fluctuations as a result of speculation or other factors, and failure of the
price of the underlying security to reach or have reasonable prospects of
reaching a level at which the warrant can be prudently exercised (in which event
the warrant may expire without being exercised, resulting in a loss of the
Fund's entire investment therein).
Other Corporate Debt Securities
The Fund may invest in non-convertible debt securities of foreign and
domestic companies over a cross-section of industries. The debt securities in
which the Fund may invest will be of varying maturities and may include
corporate bonds, debentures, notes and other similar corporate debt instruments.
The value of a longer-term debt security fluctuates more widely in response to
changes in interest rates than do shorter-term debt securities.
Risks of Investing in Debt Securities
There are a number of risks generally associated with an investment in
debt securities (including convertible securities). Yields on short-,
intermediate-, and long-term securities depend on a variety of factors,
including the general condition of the money and bond markets, the size of a
particular offering, the maturity of the obligation, and the rating of the
issue.
Debt securities with longer maturities tend to produce higher yields
and are generally subject to potentially greater capital appreciation and
depreciation than obligations with short maturities and lower yields. The market
prices of debt securities usually vary, depending upon available yields. An
increase in interest rates will generally reduce the value of such portfolio
investments, and a decline in interest rates will generally increase the value
of such portfolio investments. The ability of the Fund to achieve its investment
objective also depends on the continuing ability of the issuers of the debt
securities in which the Fund invests to meet their obligations for the payment
of interest and principal when due.
Risks of Investing in Lower-Rated Debt Securities
The Fund may invest a portion of its net assets in convertible debt
securities, which may be rated below "Baa" by Moody's Investors Services, Inc.
("Moody's") or "BBB" by Standard & Poor's Corporation ("S&P") or below
investment grade by other recognized rating agencies, or in unrated securities
of comparable quality under certain circumstances. Securities with ratings below
"Baa" and/or "BBB" are commonly referred to as "junk bonds." Such bonds are
subject to greater market fluctuations and risk of loss of income and principal
than higher rated bonds for a variety of reasons, including the following:
Sensitivity to Interest Rate and Economic Changes. The economy and
interest rates affect high yield securities differently from other securities.
For example, the prices of high yield bonds have been found to be less
SAI-1-97.IT100
B-2
<PAGE>
sensitive to interest rate changes than higher-rated investments, but more
sensitive to adverse economic changes or individual corporate developments.
Also, during an economic downturn or substantial period of rising interest
rates, highly leveraged issuers may experience financial stress which would
adversely affect their ability to service their principal and interest
obligations, to meet projected business goals, and to obtain additional
financing. If the issuer of a bond defaults, the Fund may incur additional
expenses to seek recovery. In addition, periods of economic uncertainty and
changes can be expected to result in increased volatility of market prices of
high yield bonds and the Fund's asset values.
Payment Expectations. High yield bonds present certain risks based on
payment expectations. For example, high yield bonds may contain redemption and
call provisions. If an issuer exercises these provisions in a declining interest
rate market, the Fund would have to replace the security with a lower yielding
security, resulting in a decreased return for investors. Conversely, a high
yield bond's value will decrease in a rising interest rate market, as will the
value of the Fund's assets. If the Fund experiences unexpected net redemptions,
it may be forced to sell its high yield bonds without regard to their investment
merits, thereby decreasing the asset base upon which the Fund's expenses can be
spread and possibly reducing the Fund's rate of return.
Liquidity and Valuation. To the extent that there is no established
retail secondary market, there may be thin trading of high yield bonds, and this
may impact the Advisor's ability to accurately value high yield bonds and the
Fund's assets and hinder the Fund's ability to dispose of the bonds. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of high yield bonds, especially
in a thinly traded market.
Credit Ratings. Credit ratings evaluate the safety of principal and
interest payments, not the market value risk of high yield bonds. Also, since
credit rating agencies may fail to timely change the credit ratings to reflect
subsequent events, the Advisor must monitor the issuers of high yield bonds in
the Fund's portfolio to determine if the issuers will have sufficient cash flow
and profits to meet required principal and interest payments, and to assure the
bonds' liquidity so the Fund can meet redemption requests. The Fund will not
necessarily dispose of a portfolio security when its rating has been changed.
Short-Term Investments
The Fund may invest in any of the following securities and instruments:
Bank Certificates or Deposit, Bankers' Acceptances and Time Deposits.
The Fund may acquire certificates of deposit, bankers' acceptances and time
deposits. Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank for a definite period of time and earning a
specified return. Bankers' acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning in effect that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Certificates of deposit and bankers' acceptances acquired by the Fund will be
dollar-denominated obligations of domestic or foreign banks or financial
institutions which at the time of purchase have capital, surplus and undivided
profits in excess of $100 million (including assets of both domestic and foreign
branches), based on latest published reports, or less than $100 million if the
principal amount of such bank obligations are fully insured by the U.S.
Government. If the Fund holds instruments of foreign banks or financial
institutions, it may be subject to additional investment risks that are
different in some respects from those incurred by a fund which invests only in
debt obligations of U.S. domestic issuers. See "Foreign Investments" below. Such
risks include future political and economic developments, the possible
imposition of withholding taxes by the particular country in which the issuer is
located on interest income payable on the securities, the possible seizure or
nationalization of foreign deposits, the possible establishment of exchange
controls, or the adoption of other foreign governmental restrictions which might
adversely affect the payment of principal and interest on these securities.
Domestic banks and foreign banks are subject to different governmental
regulations with respect to the amount and types of loans which may be made and
interest rates which may be charged. In addition, the profitability of the
banking industry depends largely upon the availability and cost of funds for the
purpose of financing lending operations under prevailing money market
conditions. General economic conditions as well as exposure to credit losses
arising from possible financial difficulties of borrowers play an important part
in the operations of the banking industry.
As a result of federal and state laws and regulations, domestic banks
are, among other things, required to maintain specified levels of reserves,
limited in the amount which they can loan to a single borrower, and subject to
other
SAI-1-97.IT100
B-3
<PAGE>
regulations designed to promote financial soundness. However, such laws and
regulations do not necessarily apply to foreign bank obligations that the Fund
may acquire.
In addition to purchasing certificates of deposit and bankers'
acceptances, to the extent permitted under its investment objectives and
policies stated above and in its prospectus, the Fund may make interest-bearing
time or other interest-bearing deposits in commercial or savings banks. Time
deposits are non-negotiable deposits maintained at a banking institution for a
specified period of time at a specified interest rate.
Savings Association Obligations. The Fund may invest in certificates of
deposit (interest-bearing time deposits) issued by savings banks or savings and
loan associations that have capital, surplus and undivided profits in excess of
$100 million, based on latest published reports, or less than $100 million if
the principal amount of such obligations is fully insured by the U.S.
Government.
Commercial Paper, Short-Term Notes and Other Corporate Obligations. The
Fund may invest a portion of its assets in commercial paper and short-term
notes. Commercial paper consists of unsecured promissory notes issued by
corporations. Issues of commercial paper and short-term notes will normally have
maturities of less than nine months and fixed rates of return, although such
instruments may have maturities of up to one year.
Commercial paper and short-term notes will consist of issues rated at
the time of purchase "A-2" or higher by S&P, "Prime-1" or "Prime-2" by Moody's,
or similarly rated by another nationally recognized statistical rating
organization or, if unrated, will be determined by the Advisor to be of
comparable quality. These rating symbols are described in the Appendix.
Corporate obligations include bonds and notes issued by corporations to
finance longer-term credit needs than supported by commercial paper. While such
obligations generally have maturities of ten years or more, the Fund may
purchase corporate obligations which have remaining maturities of one year or
less from the date of purchase and which are rated "AA" or higher by S&P or "Aa"
or higher by Moody's.
Money Market Funds
The Fund may under certain circumstances invest a portion of its assets
in money market funds. The Investment Company Act of 1940 (the "1940 Act")
prohibits the Fund from investing more than 5% of the value of its total assets
in any one investment company. or more than 10% of the value of its total assets
in investment companies as a group, and also restricts its investment in any
investment company to 3% of the voting securities of such investment company.
The Advisor will not impose advisory fees on assets of the Fund invested in a
money market mutual fund. However, an investment in a money market mutual fund
will involve payment by the Fund of its pro rata share of advisory and
administrative fees charged by such fund.
Government Obligations
The Fund may make short-term investments in U.S. Government
obligations. Such obligations include Treasury bills, certificates of
indebtedness, notes and bonds, and issues of such entities as the Government
National Mortgage Association ("GNMA"), Export-Import Bank of the United States,
Tennessee Valley Authority, Resolution Funding Corporation, Farmers Home
Administration, Federal Home Loan Banks, Federal Intermediate Credit Banks,
Federal Farm Credit Banks, Federal Land Banks, Federal Housing Administration,
Federal National Mortgage Association ("FNMA"), Federal Home Loan Mortgage
Corporation, and the Student Loan Marketing Association.
Some of these obligations, such as those of the GNMA, are supported by
the full faith and credit of the U.S. Treasury; others, such as those of the
Export-Import Bank of United States, are supported by the right of the issuer to
borrow from the Treasury; others, such as those of the FNMA, are supported by
the discretionary authority of the U.S. Government to purchase the agency's
obligations; still others, such as those of the Student Loan Marketing
Association, are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. Government would provide financial support
to U.S. Government-sponsored instrumentalities if it is not obligated to do so
by law.
The Fund may invest in sovereign debt obligations of foreign countries.
A sovereign debtor's willingness or ability to repay principal and interest in a
timely manner may be affected by a number of factors, including its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the sovereign debtor's policy toward
principal
SAI-1-97.IT100
B-4
<PAGE>
international lenders and the political constraints to which it may be subject.
Emerging market governments could default on their sovereign debt. Such
sovereign debtors also may be dependent on expected disbursements from foreign
governments, multilateral agencies and other entities abroad to reduce principal
and interest arrearages on their debt. The commitments on the part of these
governments, agencies and others to make such disbursements may be conditioned
on a sovereign debtor's implementation of economic reforms and/or economic
performance and the timely service of such debtor's obligations. Failure to meet
such conditions could result in the cancellation of such third parties'
commitments to lend funds to the sovereign debtor, which may further impair such
debtor's ability or willingness to service its debt in a timely manner.
Foreign Investments and Currencies
The Fund may invest in securities of foreign issuers that are not
publicly traded in the United States. The Fund may also invest in depositary
receipts and in foreign currency futures contracts and may purchase and sell
foreign currency on a spot basis.
Depositary Receipts. Depositary Receipts ("DRs") include American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), Global
Depositary Receipts ("GDRs") or other forms of depositary receipts. DRs are
receipts typically issued in connection with a U.S. or foreign bank or trust
company which evidence ownership of underlying securities issued by a foreign
corporation.
Risks of Investing in Foreign Securities. Investments in foreign
securities involve certain inherent risks, including the following:
Political and Economic Factors. Individual foreign economies of certain
countries may differ favorably or unfavorably from the United States' economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, diversification and balance of payments
position. The internal politics of certain foreign countries may not be as
stable as those of the United States. Governments in certain foreign countries
also continue to participate to a significant degree, through ownership interest
or regulation, in their respective economies. Action by these governments could
include restrictions on foreign investment, nationalization, expropriation of
goods or imposition of taxes, and could have a significant effect on market
prices of securities and payment of interest. The economies of many foreign
countries are heavily dependent upon international trade and are accordingly
affected by the trade policies and economic conditions of their trading
partners. Enactment by these trading partners of protectionist trade legislation
could have a significant adverse effect upon the securities markets of such
countries.
Currency Fluctuations. The Fund may invest in securities denominated in
foreign currencies. Accordingly, a change in the value of any such currency
against the U.S. dollar will result in a corresponding change in the U.S. dollar
value of the Fund's assets denominated in that currency. Such changes will also
affect the Fund's income. The value of the Fund's assets may also be affected
significantly by currency restrictions and exchange control regulations enacted
from time to time.
Market Characteristics. The Advisor expects that many foreign
securities in which the Fund invest will be purchased in over-the-counter
markets or on exchanges located in the countries in which the principal offices
of the issuers of the various securities are located, if that is the best
available market. Foreign exchanges and markets may be more volatile than those
in the United States. While growing in volume, they usually have substantially
less volume than U.S. markets, and the Fund's foreign securities may be less
liquid and more volatile than U.S. securities. Moreover, settlement practices
for transactions in foreign markets may differ from those in United States
markets, and may include delays beyond periods customary in the United States.
Foreign security trading practices, including those involving securities
settlement where Fund assets may be released prior to receipt of payment or
securities, may expose the Fund to increased risk in the event of a failed trade
or the insolvency of a foreign broker-dealer.
Transactions in options on securities and currency contracts may not be
regulated as effectively on foreign exchanges as similar transactions in the
United States, and may not involve clearing mechanisms and related guarantees.
The values of such positions also could be adversely affected by the imposition
of different exercise terms and procedures and margin requirements than in the
United States. The values of the Fund's positions may also be adversely impacted
by delays in its ability to act upon economic events occurring in foreign
markets during non-business hours in the United States.
SAI-1-97.IT100
B-5
<PAGE>
Legal and Regulatory Matters. Certain foreign countries may have less
supervision of securities markets, brokers and issuers of securities, and less
financial information available to issuers, than is available in the United
States.
Taxes. The interest and dividends payable on certain of the Fund's
foreign portfolio securities may be subject to foreign withholding taxes, thus
reducing the net amount of income available for distribution to the Fund's
shareholders.
Costs. To the extent that the Fund invests in foreign securities, its
expense ratio is likely to be higher than those of investment companies
investing only in domestic securities, since the cost of maintaining the custody
of foreign securities is higher.
Emerging markets. Some of the securities in which the Fund may invest
may be located in developing or emerging markets, which entail additional risks,
including less social, political and economic stability; smaller securities
markets and lower trading volume, which may result in a less liquidity and
greater price volatility; national policies that may restrict the Fund's
investment opportunities, including restrictions on investment in issuers or
industries, or expropriation or confiscation of assets or property; and less
developed legal structures governing private or foreign investment.
In considering whether to invest in the securities of a foreign
company, the Advisor considers such factors as the characteristics of the
particular company, differences between economic trends and the performance of
securities markets within the U.S. and those within other countries, and also
factors relating to the general economic, governmental and social conditions of
the country or countries where the company is located. The extent to which the
Fund will be invested in foreign companies and countries and depository receipts
will fluctuate from time to time within the limitations described in the
prospectus, depending on the Advisor's assessment of prevailing market, economic
and other conditions.
Options on Securities
Purchasing Put and Call Options. The Fund may purchase covered "put"
and "call" options with respect to securities which are otherwise eligible for
purchase by the Fund subject to certain restrictions. The Fund will engage in
trading of such derivative securities exclusively for hedging purposes.
If the Fund purchases a put option, the Fund acquires the right to sell
the underlying security at a specified price at any time during the term of the
option (for "American-style" options) or on the option expiration date (for
"European-style" options). Purchasing put options may be used as a portfolio
investment strategy when the Advisor perceives significant short-term risk but
substantial long-term appreciation for the underlying security. The put option
acts as an insurance policy, as it protects against significant downward price
movement while it allows full participation in any upward movement. If the Fund
is holding a security which it feels has strong fundamentals, but for some
reason may be weak in the near term, the Fund may purchase a put option on such
security, thereby giving itself the right to sell such security at a certain
strike price throughout the term of the option. Consequently, the Fund will
exercise the put only if the price of such security falls below the strike price
of the put. The difference between the put's strike price and the market price
of the underlying security on the date the Fund exercises the put, less
transaction costs, will be the amount by which the Fund will be able to hedge
against a decline in the underlying security. If during the period of the option
the market price for the underlying security remains at or above the put's
strike price, the put will expire worthless, representing a loss of the price
the Fund paid for the put, plus transaction costs. If the price of the
underlying security increases, the profit the Fund realizes on the sale of the
security will be reduced by the premium paid for the put option less any amount
for which the put may be sold.
If the Fund purchases a call option, it acquires the right to purchase
the underlying security at a specified price at any time during the term of the
option. The purchase of a call option is a type of insurance policy to hedge
against losses that could occur if the Fund has a short position in the
underlying security and the security thereafter increases in price. The Fund
will exercise a call option only if the price of the underlying security is
above the strike price at the time of exercise. If during the option period the
market price for the underlying security remains at or below the strike price of
the call option, the option will expire worthless, representing a loss of the
price paid for the option, plus transaction costs. If the call option has been
purchased to hedge a short position of the Fund in the underlying security and
the price of the underlying security thereafter falls, the profit the Fund
realizes on the cover of the short position in the security will be reduced by
the premium paid for the call option less any amount for which such option may
be sold.
SAI-1-97.IT100
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<PAGE>
Prior to exercise or expiration, an option may be sold when it has
remaining value by a purchaser through a "closing sale transaction," which is
accomplished by selling an option of the same series as the option previously
purchased. The Fund generally will purchase only those options for which the
Advisor believes there is an active secondary market to facilitate closing
transactions.
Writing Call Options. The Fund may write covered call options. A call
option is "covered" if the Fund owns the security underlying the call or has an
absolute right to acquire the security without additional cash consideration
(or, if additional cash consideration is required, cash or cash equivalents in
such amount as are held in a segregated account by the Custodian). The writer of
a call option receives a premium and gives the purchaser the right to buy the
security underlying the option at the exercise price. The writer has the
obligation upon exercise of the option to deliver the underlying security
against payment of the exercise price during the option period. If the writer of
an exchange-traded option wishes to terminate his obligation, he may effect a
"closing purchase transaction." This is accomplished by buying an option of the
same series as the option previously written. A writer may not effect a closing
purchase transaction after it has been notified of the exercise of an option.
Effecting a closing transaction in the case of a written call option
will permit the Fund to write another call option on the underlying security
with either a different exercise price, expiration date or both. Also, effecting
a closing transaction will permit the cash or proceeds from the concurrent sale
of any securities subject to the option to be used for other investments of the
Fund. If the Fund desires to sell a particular security from its portfolio on
which it has written a call option, it will effect a closing transaction prior
to or concurrent with the sale of the security.
The Fund will realize a gain from a closing transaction if the cost of
the closing transaction is less than the premium received from writing the
option or if the proceeds from the closing transaction are more than the premium
paid to purchase the option. The Fund will realize a loss from a closing
transaction if the cost of the closing transaction is more than the premium
received from writing the option or if the proceeds from the closing transaction
are less than the premium paid to purchase the option. However, because
increases in the market price of a call option will generally reflect increases
in the market price of the underlying security, any loss to the Fund resulting
from the repurchase of a call option is likely to be offset in whole or in part
by appreciation of the underlying security owned by the Fund.
Risks Of Investing in Options. There are several risks associated with
transactions in options on securities. Options may be more volatile than the
underlying securities and, therefore, on a percentage basis, an investment in
options may be subject to greater fluctuation than an investment in the
underlying securities themselves. There are also significant differences between
the securities and options markets that could result in an imperfect correlation
between these markets, causing a given transaction not to achieve its objective.
In addition, a liquid secondary market for particular options may be absent for
reasons which include the following: there may be insufficient trading interest
in certain options; restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; trading halts, suspensions or
other restrictions may be imposed with respect to particular classes or series
of options of underlying securities; unusual or unforeseen circumstances may
interrupt normal operations on an exchange; the facilities of an exchange or
clearing corporation may not at all times be adequate to handle current trading
volume; or one or more exchanges could, for economic or other reasons, decide or
be compelled at some future date to discontinue the trading of options (or a
particular class or series of options), in which event the secondary market on
that exchange (or in that class or series of options) would cease to exist,
although outstanding options that had been issued by a clearing corporation as a
result of trades on that exchange would continue to be exercisable in accordance
with their terms.
A decision as to whether, when and how to use options involves the
exercise of skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or unexpected events. The
extent to which the Fund may enter into options transactions may be limited by
the Internal Revenue Code of 1986 (the "Code") requirements for qualification of
the Fund as a regulated investment company. See "Dividends and Distributions"
and "Taxation."
In addition, when trading options on foreign exchanges, many of the
protections afforded to participants in United States option exchanges will not
be available. For example, there may be no daily price fluctuation limits in
such exchanges or markets, and adverse market movements could therefore continue
to an unlimited extent over a period of time. Although the purchaser of an
option cannot lose more than the amount of the premium plus related transaction
costs, this entire amount could be lost. Moreover, the Fund as an option writer
could lose amounts substantially in excess of
SAI-1-97.IT100
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<PAGE>
its initial investment, due to the margin and collateral requirements typically
associated with such option writing. See "Dealer Options" below.
Dealer Options. The Fund will engage in transactions involving dealer
options as well as exchange-traded options. Certain additional risks are
specific to dealer options. While the Fund might look to a clearing corporation
to exercise exchange-traded options, if the Fund were to purchase a dealer
option it would need to rely on the dealer from which it purchased the option to
perform if the option were exercised. Failure by the dealer to do so would
result in the loss of the premium paid by the Fund as well as loss of the
expected benefit of the transaction.
Exchange-traded options generally have a continuous liquid market while
dealer options may not. Consequently, the Fund may generally be able to realize
the value of a dealer option it has purchased only by exercising or reselling
the option to the dealer who issued it. Similarly, when the Fund writes a dealer
option, the Fund may generally be able to close out the option prior to its
expiration only by entering into a closing purchase transaction with the dealer
to whom the Fund originally wrote the option. While the Fund will seek to enter
into dealer options only with dealers who will agree to and which are expected
to be capable of entering into closing transactions with the Fund, there can be
no assurance that the Fund will at any time be able to liquidate a dealer option
at a favorable price at any time prior to expiration. Unless the Fund, as a
covered dealer call option writer, is able to effect a closing purchase
transaction, it will not be able to liquidate securities (or other assets) used
as cover until the option expires or is exercised. In the event of insolvency of
the other party, the Fund may be unable to liquidate a dealer option. With
respect to options written by the Fund, the inability to enter into a closing
transaction may result in material losses to the Fund. For example, because the
Fund must maintain a secured position with respect to any call option on a
security it writes, the Fund may not sell the assets which it has segregated to
secure the position while it is obligated under the option. This requirement may
impair the Fund's ability to sell portfolio securities at a time when such sale
might be advantageous.
The Staff of the Securities and Exchange Commission (the "Commission")
has taken the position that purchased dealer options are illiquid securities.
The Fund may treat the cover used for written dealer options as liquid if the
dealer agrees that the Fund may repurchase the dealer option it has written for
a maximum price to be calculated by a predetermined formula. In such cases, the
dealer option would be considered illiquid only to the extent the maximum
purchase price under the formula exceeds the intrinsic value of the option.
Accordingly, the Fund will treat dealer options as subject to the Fund's
limitation on illiquid securities. If the Commission changes its position on the
liquidity of dealer options, the Fund will change its treatment of such
instruments accordingly.
Foreign Currency Options. The Fund may buy or sell put and call options
on foreign currencies. A put or call option on a foreign currency gives the
purchaser of the option the right to sell or purchase a foreign currency at the
exercise price until the option expires. The Fund will use foreign currency
options separately or in combination to control currency volatility. Among the
strategies employed to control currency volatility is an option collar. An
option collar involves the purchase of a put option and the simultaneous sale of
a call option on the same currency with the same expiration date but with
different exercise (or "strike") prices. Generally, the put option will have an
out-of-the-money strike price, while the call option will have either an
at-the-money strike price or an in-the-money strike price. Foreign currency
options are derivative securities. Currency options traded on U.S. or other
exchanges may be subject to position limits which may limit the ability of the
Fund to reduce foreign currency risk using such options.
As with other kinds of option transactions, the writing of an option on
foreign currency will constitute only a partial hedge, up to the amount of the
premium received. The Fund could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on foreign currency may constitute an effective hedge
against exchange rate fluctuations: however, in the event of exchange rate
movements adverse to the Fund's position, the Fund may forfeit the entire amount
of the premium plus related transaction costs.
Spread Transactions. The Fund may purchase covered spread options from
securities dealers. These covered spread options are not presently
exchange-listed or exchange-traded. The purchase of a spread option gives the
Fund the right to put securities that it owns at a fixed dollar spread or fixed
yield spread in relationship to another security that the Fund does not own, but
which is used as a benchmark. The risk to the Fund, in addition to the risks of
dealer options described above, is the cost of the premium paid as well as any
transaction costs. The purchase of spread options will be used to protect the
Fund against adverse changes in prevailing credit quality spreads, i.e., the
yield spread between high quality and lower quality securities. This protection
is provided only during the life of the spread options.
SAI-1-97.IT100
B-8
<PAGE>
Forward Currency Contracts
The Fund may enter into forward currency contracts in anticipation of
changes in currency exchange rates. A forward currency contract is an obligation
to purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. For example, the Fund might purchase a
particular currency or enter into a forward currency contract to preserve the
U.S. dollar price of securities it intends to or has contracted to purchase.
Alternatively, it might sell a particular currency on either a spot or forward
basis to hedge against an anticipated decline in the dollar value of securities
it intends to or has contracted to sell. Although this strategy could minimize
the risk of loss due to a decline in the value of the hedged currency, it could
also limit any potential gain from an increase in the value of the currency.
Repurchase Agreements
The Fund may enter into repurchase agreements with respect to its
portfolio securities. Pursuant to such agreements, the Fund acquires securities
from financial institutions such as banks and broker-dealers as are deemed to be
creditworthy by the Advisor, subject to the seller's agreement to repurchase and
the Fund's agreement to resell such securities at a mutually agreed upon date
and price. The repurchase price generally equals the price paid by the Fund plus
interest negotiated on the basis of current short-term rates (which may be more
or less than the rate on the underlying portfolio security). Securities subject
to repurchase agreements will be held by the Custodian or in the Federal
Reserve/Treasury Book-Entry System or an equivalent foreign system. The seller
under a repurchase agreement will be required to maintain the value of the
underlying securities at not less than 102% of the repurchase price under the
agreement. If the seller defaults on its repurchase obligation, the Fund will
suffer a loss to the extent that the proceeds from a sale of the underlying
securities are less than the repurchase price under the agreement. Bankruptcy or
insolvency of such a defaulting seller may cause the Fund's rights with respect
to such securities to be delayed or limited.
Repurchase agreements are considered to be loans under the 1940 Act.
When-Issued Securities, Forward Commitments and Delayed Settlements
The Fund may purchase securities on a "when-issued," forward commitment
or delayed settlement basis. In this event, the Custodian will set aside cash or
liquid portfolio securities equal to the amount of the commitment in a separate
account. Normally, the Custodian will set aside portfolio securities to satisfy
a purchase commitment. In such a case, the Fund may be required subsequently to
place additional assets in the separate account in order to assure that the
value of the account remains equal to the amount of the Fund's commitment. It
may be expected that the Fund's net assets will fluctuate to a greater degree
when it sets aside portfolio securities to cover such purchase commitments than
when it sets aside cash.
The Fund does not intend to engage in these transactions for
speculative purposes but only in furtherance of its investment objectives.
Because the Fund will set aside cash or liquid portfolio securities to satisfy
its purchase commitments in the manner described, the Fund's liquidity and the
ability of the Advisor to manage it may be affected in the event the Fund's
forward commitments, commitments to purchase when-issued securities and delayed
settlements ever exceeded 15% of the value of its net assets.
The Fund will purchase securities on a when-issued, forward commitment
or delayed settlement basis only with the intention of completing the
transaction. If deemed advisable as a matter of investment strategy, however,
the Fund may dispose of or renegotiate a commitment after it is entered into,
and may sell securities it has committed to purchase before those securities are
delivered to the Fund on the settlement date. In these cases the Fund may
realize a taxable capital gain or loss. When the Fund engages in when-issued,
forward commitment and delayed settlement transactions, it relies on the other
party to consummate the trade. Failure of such party to do so may result in the
Fund's incurring a loss or missing an opportunity to obtain a price credited to
be advantageous.
The market value of the securities underlying a when-issued purchase,
forward commitment to purchase securities, or a delayed settlement and any
subsequent fluctuations in their market value is taken into account when
determining the market value of the Fund starting on the day the Fund agrees to
purchase the securities. The Fund does not earn interest on the securities it
has committed to purchase until they are paid for and delivered on the
settlement date.
SAI-1-97.IT100
B-9
<PAGE>
Borrowing
The Fund is authorized to borrow money from time to time for temporary,
extraordinary or emergency purposes or for clearance of transactions in amounts
up to 10% of the value of its total assets at the time of such borrowings. The
use of borrowing by the Fund involves special risk considerations that may not
be associated with other funds having similar objectives and policies. Since
substantially all of the Fund's assets fluctuate in value, whereas the interest
obligation resulting from a borrowing will be fixed by the terms of the Fund's
agreement with its lender, the asset value per share of the Fund will tend to
increase more when its portfolio securities increase in value and to decrease
more when its portfolio assets decrease in value than would otherwise be the
case if the Fund did not borrow funds. In addition, interest costs on borrowings
may fluctuate with changing market rates of interest and may partially offset or
exceed the return earned on borrowed funds. Under adverse market conditions, the
Fund might have to sell portfolio securities to meet interest or principal
payments at a time when fundamental investment considerations would not favor
such sales.
Lending Portfolio Securities
The Fund may lend its portfolio securities in an amount not exceeding
30% of its total assets to financial institutions such as banks and brokers if
the loan is collateralized in accordance with applicable regulations. Under the
present regulatory requirements which govern loans of portfolio securities, the
loan collateral must, on each business day, at least equal the value of the
loaned securities and must consist of cash, letters of credit of domestic banks
or domestic branches of foreign banks, or securities of the U.S. Government or
its agencies. To be acceptable as collateral, letters of credit must obligate a
bank to pay amounts demanded by the Fund if the demand meets the terms of the
letter. Such terms and the issuing bank would have to be satisfactory to the
Fund. Any loan might be secured by any one or more of the three types of
collateral. The terms of the Fund's loans must permit the Fund to reacquire
loaned securities on five days' notice or in time to vote on any serious matter
and must meet certain tests under the Code.
Short Sales
The Fund is authorized to make short sales of securities it owns or has
the right to acquire at no added cost through conversion or exchange of other
securities it owns (referred to as short sales "against the box") and to make
short sales of securities which it does not own or have the right to acquire.
In a short sale that is not "against the box," the Fund sells a
security which it does not own, in anticipation of a decline in the market value
of the security. To complete the sale, the Fund must borrow the security
(generally from the broker through which the short sale is made) in order to
make delivery to the buyer. The Fund is then obligated to replace the security
borrowed by purchasing it at the market price at the time of replacement. The
Fund is said to have a "short position" in the securities sold until it delivers
them to the broker. The period during which the Fund has a short position can
range from one day to more than a year. Until the security is replaced, the
proceeds of the short sale are retained by the broker, and the Fund is required
to pay to the broker a negotiated portion of any dividends or interest which
accrue during the period of the loan. To meet current margin requirements, the
Fund is also required to deposit with the broker additional cash or securities
so that the total deposit with the broker is maintained daily at 150% of the
current market value of the securities sold short (100% of the current market
value if a security is held in the account that is convertible or exchangeable
into the security sold short within 90 days without restriction other than the
payment of money).
Short sales by the Fund that are not made "against the box" create
opportunities to increase the Fund's return but, at the same time, involve
specific risk considerations and may be considered a speculative technique.
Since the Fund in effect profits from a decline in the price of the securities
sold short without the need to invest the full purchase price of the securities
on the date of the short sale, the Fund's net asset value per share will tend to
increase more when the securities it has sold short decrease in value, and to
decrease more when the securities it has sold short increase in value, than
would otherwise be the case if it had not engaged in such short sales. The
amount of any gain will be decreased, and the amount of any loss increased, by
the amount of any premium, dividends or interest the Fund may be required to pay
in connection with the short sale. Furthermore, under adverse market conditions
the Fund might have difficulty purchasing securities to meet its short sale
delivery obligations, and might have to sell portfolio securities to raise the
capital necessary to meet its short sale obligations at a time when fundamental
investment considerations would not favor such sales.
SAI-1-97.IT100
B-10
<PAGE>
If the Fund makes a short sale "against the box," the Fund would not
immediately deliver the securities sold and would not receive the proceeds from
the sale. The seller is said to have a short position in the securities sold
until it delivers the securities sold, at which time it receives the proceeds of
the sale. To secure its obligation to deliver securities sold short, the Fund
will deposit in escrow in a separate account with the Custodian an equal amount
of the securities sold short or securities convertible into or exchangeable for
such securities. The Fund can close out its short position by purchasing and
delivering an equal amount of the securities sold short, rather than by
delivering securities already held by the Fund, because the Fund might want to
continue to receive interest and dividend payments on securities in its
portfolio that are convertible into the securities sold short.
The Fund's decision to make a short sale "against the box" may be a
technique to hedge against market risks when the Advisor believes that the price
of a security may decline, causing a decline in the value of a security owned by
the Fund or a security convertible into or exchangeable for such security. In
such case, any future losses in the Fund's long position would be reduced by a
gain in the short position. The extent to which such gains or losses in the long
position are reduced will depend upon the amount of securities sold short
relative to the amount of the securities the Fund owns, either directly or
indirectly, and, in the case where the Fund owns convertible securities, changes
in the investment values or conversion premiums of such securities.
The extent to which the Fund may enter into short sales transactions
may be limited by the Code requirements for qualification of the Fund as a
regulated investment company. See "Taxation."
Illiquid Securities
The Fund may not invest more than 15% of the value of its net assets in
securities that at the time of purchase have legal or contractual restrictions
on resale or are otherwise illiquid. The Advisor will monitor the amount of
illiquid securities in the Fund's portfolio, under the supervision of the
Trust's Board of Trustees, to ensure compliance with the Fund's investment
restrictions.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933 (the "Securities Act"), securities
which are otherwise not readily marketable and repurchase agreements having a
maturity of longer than seven days. Securities which have not been registered
under the Securities Act are referred to as private placement or restricted
securities and are purchased directly from the issuer or in the secondary
market. Mutual funds do not typically hold a significant amount of these
restricted or other illiquid securities because of the potential for delays on
resale and uncertainty in valuation. Limitations on resale may have an adverse
effect on the marketability of portfolio securities and the Fund might be unable
to dispose of restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemption requests
within seven days. The Fund might also have to register such restricted
securities in order to dispose of them, resulting in additional expense and
delay. Adverse market conditions could impede such a public offering of
securities.
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the Securities Act,
including repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments. If such securities are subject to purchase by institutional buyers
in accordance with Rule 144A promulgated by the Commission under the Securities
Act, the Trust's Board of Trustees may determine that such securities are not
illiquid securities notwithstanding their legal or contractual restrictions on
resale. In all other cases, however, securities subject to restrictions on
resale will be deemed illiquid.
Risks of Investing in Small Companies
As stated in the prospectus, the Fund may purchase securities of
companies with market capitalization as low as $250 million. Additional risks of
such investments include the markets on which such securities are frequently
traded. In many instances the securities of smaller companies are traded only
over-the-counter or on a regional securities exchange, and the frequency and
volume of their trading is substantially less than is typical of larger
companies. Therefore, the securities of smaller companies may be subject to
greater and more abrupt price fluctuations. When making
SAI-1-97.IT100
B-11
<PAGE>
large sales, the Fund may have to sell portfolio holdings at discounts from
quoted prices or may have to make a series of small sales over an extended
period of time due to the trading volume of smaller company securities.
Investors should be aware that, based on the foregoing factors, an investment in
the Fund may be subject to greater price fluctuations than an investment in a
fund that invests exclusively in larger, more established companies. The
Advisor's research efforts may also play a greater role in selecting securities
for the Fund than in a fund that invests in larger, more established companies.
Investment Restrictions
The Trust (on behalf of the Fund) has adopted the following
restrictions as fundamental policies, which may not be changed without the
favorable vote of the holders of a "majority," as defined in the 1940 Act, of
the outstanding voting securities of the Fund. Under the 1940 Act, the "vote of
the holders of a majority of the outstanding voting securities" means the vote
of the holders of the lesser of (i) 67% of the shares of the Fund represented at
a meeting at which the holders of more than 50% of its outstanding shares are
represented or (ii) more than 50% of the outstanding shares of the Fund.
As a matter of fundamental policy, the Fund is diversified; i.e., as to
75% of the value of a its total assets: (i) no more than 5% of the value of its
total assets may be invested in the securities of any one issuer (other than
U.S. Government securities); and (ii) the Fund may not purchase more than 10% of
the outstanding voting securities of an issuer. The Fund's investment objective
is also fundamental. Also as a matter of fundamental policy, the Fund
concentrates in those industries which comprise, in the Advisor's opinion, the
"information technology" sector of industries.
In addition, the Fund may not:
1. Issue senior securities, borrow money or pledge its assets, except
that (i) the Fund may borrow on an unsecured basis from banks for temporary or
emergency purposes or for the clearance of transactions in amounts not exceeding
10% of its total assets (not including the amount borrowed), provided that it
will not make investments while borrowings in excess of 5% of the value of its
total assets are outstanding; and (ii) this restriction shall not prohibit the
Fund from engaging in options and foreign currency transactions or short sales;
2. Purchase securities on margin, except such short-term credits as may
be necessary for the clearance of transactions;
3. Act as underwriter (except to the extent the Fund may be deemed to
be an underwriter in connection with the sale of securities in its investment
portfolio);
4. Invest 25% or more of its total assets, calculated at the time of
purchase and taken at market value, in any one industry (other than U.S.
Government securities);
5. Purchase or sell real estate or interests in real estate or real
estate limited partnerships (although the Fund may purchase and sell securities
which are secured by real estate and securities of companies which invest or
deal in real estate);
6. Purchase or sell commodities or commodity futures contracts, except
that the Fund may purchase and sell foreign currency contracts in accordance
with any rules of the Commodity Futures Trading Commission;
7. Make loans of money (except for purchases of debt securities
consistent with the investment policies of the Fund and except for repurchase
agreements); or
8. Make investments for the purpose of exercising control or
management.
The Fund observes the following restrictions as a matter of operating
but not fundamental policy, pursuant to positions taken by federal regulatory
authorities:
The Fund may not:
1. Invest in the securities of other investment companies or purchase
any other investment company's voting securities or make any other investment in
other investment companies except to the extent permitted by federal law; or
2. Invest more than 15% of its assets in securities which are
restricted as to disposition or otherwise are illiquid or have no readily
available market (except for securities which are determined by the Board of
Trustees to be liquid).
SAI-1-97.IT100
B-12
<PAGE>
MANAGEMENT
The overall management of the business and affairs of the Trust is
vested with its Board of Trustees. The Board approves all significant agreements
between the Trust and persons or companies furnishing services to it, including
the agreements with the Advisor, Administrator, Custodian and Transfer Agent.
The day to day operations of the Trust are delegated to its officers, subject to
the Fund's investment objectives and policies and to general supervision by the
Board of Trustees.
The Trustees and officers of the Trust, their ages and positions with
the Trust, their business addresses and principal occupations during the past
five years are:
<TABLE>
<CAPTION>
Name, address and age Position Principal Occupation During Past Five Years
<S> <C> <C>
Walter E. Auch, Sr. (75) Trustee Director, Geotech Communications, Inc., Nicholas-Applegate
6001 N. 62d Place Investment Trust, Brinson Funds (since 1994), Smith Barney Trak
Paradise Valley, AZ 85253 Fund, Pimco Advisors L.P., Banyan Realty Trust, Banyan Land Fund
II and Legend Properties.
Eric M. Banhazl (39)* Trustee, Senior Vice President, Investment Company Administration
2025 E. Financial Way President and Corporation; Vice President, First Fund Distributors; President,
Glendora, CA 91740 Treasurer RNC Mutual Fund Group; Treasurer, Guiness Flight Investment
Funds, Inc. and Professionally Managed Portfolios.
Donald E. O'Connor (60) Trustee Retired; formerly Executive Vice President and
Chief Operating Officer 1700 Taylor Avenue of ICI Mutual Insurance Company
(until January, 1997), Vice President, Fort Washington MD, 20744 Operations,
Investment Company Institute (until June, 1993).
George T. Wofford III (57) Trustee Vice President, Information Services, Federal
Home Loan Bank of San 305 Glendora Circle Francisco (since March, 1993);
formerly Director of Management Danville, CA 94526 Information Services,
Morrison & Foerster (law firm).
Steven J. Paggioli (46) Vice Executive Vice President, Robert H. Wadsworth & Associates, Inc.
479 W. 22d Street President and Investment Company Administration Corporation; Vice President
New York, NY 10011 First Fund Distributors, Inc.; President and Trustee, Professionally
Managed Portfolios; Director, Managers Funds, Inc.
Robert H. Wadsworth (57) Vice President, Robert H. Wadsworth & Associates, Inc., Investment
4455 E. Camelback Road, 261E President Company Administration Corporation and First Fund Distributors, Inc.;
Phoenix, AZ 85018 Vice President, Professionally Managed Portfolios; President,
Guinness Flight Investment Funds, Inc.; Director, Germany Fund, Inc.,
New Germany Fund, Inc. and Central European Equity Fund, Inc.
Chris O. Kissack (48) Secretary Employed by Investment Company Administration Corporation (since
4455 E. Camelback Road, 261E July, 1996); formerly employed by Bank One, N.A. (from August, 1995
Phoenix, AZ 85018 until July, 1996); O'Connor, Cavanagh, Anderson, Killingsworth and
Beshears (law firm) (until August, 1995) .
</TABLE>
* denotes Trustee who is an "interested person" of the Trust under the 1940 Act.
SAI-1-97.IT100
B-13
<PAGE>
Name and Position Aggregate Compensation from The Trust*
Walter E. Auch, Sr., Trustee $5,000
Donald E. O'Connor, Trustee $5,000
George T. Wofford III, Trustee $5,000
*Estimated for the current fiscal year. The Trust has no pension or retirement
plan. No other entity affiliated with the Trust pays any compensation to the
Trustees.
The Advisor
Subject to the supervision of the Board of Trustees, investment
management and related services are provided by the Advisor, pursuant to an
Investment Advisory Agreement (the "Advisory Agreement").
Under the Advisory Agreement, the Advisor agrees to invest the assets
of the Fund in accordance with the investment objectives, policies and
restrictions of the Fund as set forth in the Fund's and Trust's governing
documents, including, without limitation, the Trust's Agreement and Declaration
of Trust and By-Laws; the Fund's prospectus, statement of additional
information, and undertakings; and such other limitations, policies and
procedures as the Trustees of the Trust may impose from time to time in writing
to the Advisor. In providing such services, the Advisor shall at all times
adhere to the provisions and restrictions contained in the federal securities
laws, applicable state securities laws, the Code, and other applicable law.
Without limiting the generality of the foregoing, the Advisor has
agreed to (i) furnish the Fund with advice and recommendations with respect to
the investment of the Fund's assets, (ii) effect the purchase and sale of
portfolio securities; (iii) manage and oversee the investments of the Fund,
subject to the ultimate supervision and direction of the Trust's Board of
Trustees; (iv) vote proxies and take other actions with respect to the Fund's
securities; (v) maintain the books and records required to be maintained with
respect to the securities in the Fund's portfolio; (vi) furnish reports,
statements and other data on securities, economic conditions and other matters
related to the investment of the Fund's assets which the Trustees or the
officers of the Trust may reasonably request; and (vi) render to the Trust's
Board of Trustees such periodic and special reports as the Board may reasonably
request. The Advisor has also agreed, at its own expense, to maintain such staff
and employ or retain such personnel and consult with such other persons as it
shall from time to time determine to be necessary to the performance of its
obligations under the Advisory Agreement. Personnel of the Advisor may serve as
officers of the Trust provided they do so without compensation from the Trust.
Without limiting the generality of the foregoing, the staff and personnel of the
Advisor shall be deemed to include persons employed or retained by the Advisor
to furnish statistical information, research, and other factual information,
advice regarding economic factors and trends, information with respect to
technical and scientific developments, and such other information, advice and
assistance as the Advisor or the Trust's Board of Trustees may desire and
reasonably request. With respect to the operation of the Fund, the Advisor has
agreed to be responsible for the expenses of printing and distributing extra
copies of the Fund's prospectus, statement of additional information, and sales
and advertising materials (but not the legal, auditing or accounting fees
attendant thereto) to prospective investors (but not to existing shareholders);
and the costs of any special Board of Trustees meetings or shareholder meetings
convened for the primary benefit of the Advisor.
As compensation for the Advisor's services, the Fund pays it an
advisory fee at the rate specified in the prospectus. In addition to the fees
payable to the Advisor and the Administrator, the Trust is responsible for its
operating expenses, including: fees and expenses incurred in connection with the
issuance, registration and transfer of its shares; brokerage and commission
expenses; all expenses of transfer, receipt, safekeeping, servicing and
accounting for the cash, securities and other property of the Trust for the
benefit of the Fund including all fees and expenses of its custodian,
shareholder services agent and accounting services agent; interest charges on
any borrowings; costs and expenses of pricing and calculating its daily net
asset value and of maintaining its books of account required under the 1940 Act;
taxes, if any; a pro rata portion of expenditures in connection with meetings of
the Fund's shareholders and the Trust's Board of Trustees that are properly
payable by the Fund; salaries and expenses of officers and fees and expenses of
members of the Trust's Board of Trustees or members of any advisory board or
committee who are not members of, affiliated with or interested persons of the
Advisor or Administrator; insurance premiums on property or personnel of the
SAI-1-97.IT100
B-14
<PAGE>
Fund which inure to its benefit, including liability and fidelity bond
insurance; the cost of preparing and printing reports, proxy statements,
prospectuses and statements of additional information of the Fund or other
communications for distribution to existing shareholders; legal, auditing and
accounting fees; trade association dues; fees and expenses (including legal
fees) of registering and maintaining registration of its shares for sale under
federal and applicable state and foreign securities laws; all expenses of
maintaining and servicing shareholder accounts, including all charges for
transfer, shareholder recordkeeping, dividend disbursing, redemption, and other
agents for the benefit of the Fund, if any; and all other charges and costs of
its operation plus any extraordinary and non-recurring expenses, except as
otherwise prescribed in the Advisory Agreement.
The Advisor may agree to waive certain of its fees or reimburse the
Fund for certain expenses, in order to limit the expense ratio of the Fund. In
that event, subject to approval by the Trust's Board of Trustees, the Fund may
reimburse the Advisor in subsequent years for fees waived and expenses
reimbursed, provided the expense ratio before reimbursement is less than the
expense limitation in effect at that time.
The Advisor is controlled by William F. K. Schaff.
Under the Advisory Agreement, the Advisor will not be liable to the
Trust or the Fund or any shareholder for any act or omission in the course of,
or connected with, rendering services or for any loss sustained by the Trust
except in the case of a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages will be limited as
provided in the 1940 Act) or of willful misfeasance, bad faith or gross
negligence, or reckless disregard of its obligations and duties under the
Agreement.
The Advisory Agreement will remain in effect for a period not to exceed
two years. Thereafter, if not terminated, the Advisory Agreement will continue
automatically for successive annual periods, provided that such continuance is
specifically approved at least annually (i) by a majority vote of the
Independent Trustees cast in person at a meeting called for the purpose of
voting on such approval, and (ii) by the Board of Trustees or by vote of a
majority of the outstanding voting securities of the Fund.
The Advisory Agreement is terminable by vote of the Board of Trustees
or by the holders of a majority of the outstanding voting securities of the Fund
at any time without penalty, on 60 days written notice to the Advisor. The
Advisory Agreement also may be terminated by the Advisor on 60 days written
notice to the Trust. The Advisory Agreement terminates automatically upon its
assignment (as defined in the 1940 Act).
The Administrator. The Administrator has agreed to be responsible for
providing such services as the Trustees may reasonably request, including but
not limited to (i) maintaining the Trust's books and records (other than
financial or accounting books and records maintained by any custodian, transfer
agent or accounting services agent); (ii) overseeing the Trust's insurance
relationships; (iii) preparing for the Trust (or assisting counsel and/or
auditors in the preparation of) all required tax returns, proxy statements and
reports to the Trust's shareholders and Trustees and reports to and other
filings with the Commission and any other governmental agency (the Trust
agreeing to supply or cause to be supplied to the Administrator all necessary
financial and other information in connection with the foregoing); (iv)
preparing such applications and reports as may be necessary to permit the offer
and sale of the shares of the Trust under the securities or "blue sky" laws of
the various states selected by the Trust (the Trust agreeing to pay all filing
fees or other similar fees in connection therewith); (v) responding to all
inquiries or other communications of shareholders, if any, which are directed to
the Administrator, or if any such inquiry or communication is more properly to
be responded to by the Trust's custodian, transfer agent or accounting services
agent, overseeing their response thereto; (vi) overseeing all relationships
between the Trust and any custodian(s), transfer agent(s) and accounting
services agent(s), including the negotiation of agreements and the supervision
of the performance of such agreements; and (vii) authorizing and directing any
of the Administrator's directors, officers and employees who may be elected as
Trustees or officers of the Trust to serve in the capacities in which they are
elected. All services to be furnished by the Administrator under this Agreement
may be furnished through the medium of any such directors, officers or employees
of the Administrator.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Advisory Agreement states that the Advisor shall be responsible for
broker-dealer selection and for negotiation of brokerage commission rates,
provided that the Advisor shall not direct orders to an affiliated person of the
Advisor without general prior authorization to use such affiliated broker or
dealer by the Trust's Board of Trustees. The Advisor's primary consideration in
effecting a securities transaction will be execution at the most favorable
price. In
SAI-1-97.IT100
B-15
<PAGE>
selecting a broker-dealer to execute each particular transaction, the Advisor
may take the following into consideration: the best net price available; the
reliability, integrity and financial condition of the broker-dealer; the size of
and difficulty in executing the order; and the value of the expected
contribution of the broker-dealer to the investment performance of the Fund on a
continuing basis. The price to the Fund in any transaction may be less favorable
than that available from another broker-dealer if the difference is reasonably
justified by other aspects of the portfolio execution services offered.
Subject to such policies as the Advisor and the Board of Trustees of
the Trust may determine, the Advisor shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of its having caused the Fund to pay a broker or dealer that
provides (directly or indirectly) brokerage or research services to the Advisor
an amount of commission for effecting a portfolio transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Advisor determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Advisor's overall responsibilities with respect to
the Fund. The Advisor is further authorized to allocate the orders placed by it
on behalf of the Fund to such brokers or dealers who also provide research or
statistical material, or other services, to the Trust, the Advisor, or any
affiliate of either. Such allocation shall be in such amounts and proportions as
the Advisor shall determine, and the Advisor shall report on such allocations
regularly to the Advisor and the Trust, indicating the broker-dealers to whom
such allocations have been made and the basis therefor. The Advisor is also
authorized to consider sales of shares of the Fund as a factor in the selection
of brokers or dealers to execute portfolio transactions, subject to the
requirements of best execution, i.e., that such brokers or dealers are able to
execute the order promptly and at the best obtainable securities price.
On occasions when the Advisor deems the purchase or sale of a security
to be in the best interest of the Fund as well as other clients of the Advisor,
the Advisor, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be so purchased or sold in order to obtain the most
favorable price or lower brokerage commissions and the most efficient execution.
In such event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Advisor in the manner
it considers to be the most equitable and consistent with its fiduciary
obligations to the Fund and to such other clients.
NET ASSET VALUE
The net asset value of the Fund's shares will fluctuate and is
determined as of the close of trading on the New York Stock Exchange (the
"NYSE") (currently 4:00 p.m. Eastern time) each business day. The NYSE annually
announces the days on which it will not be open for trading. The most recent
announcement indicates that it will not be open on the following days: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. However, the NYSE may close on days not
included in that announcement.
The net asset value per share is computed by dividing the value of the
securities held by the Fund plus any cash or other assets (including interest
and dividends accrued but not yet received) minus all liabilities (including
accrued expenses) by the total number of shares in the Fund outstanding at such
time.
Generally, trading in and valuation of foreign securities is
substantially completed each day at various times prior to the close of the
NYSE. In addition, trading in and valuation of foreign securities may not take
place on every day in which the NYSE is open for trading. In that case, the
price used to determine the Fund's net asset value on the last day on which such
exchange was open will be used, unless the Trust's Board of Trustees determines
that a different price should be used. Furthermore, trading takes place in
various foreign markets on days in which the NYSE is not open for trading and on
which the Fund's net asset value is not calculated. Occasionally, events
affecting the values of such securities in U.S. dollars on a day on which the
Fund calculates its net asset value may occur between the times when such
securities are valued and the close of the NYSE that will not be reflected in
the computation of the Fund's net asset value unless the Board or its delegates
deem that such events would materially affect the net asset value, in which case
an adjustment would be made.
Generally, the Fund's investments are valued at market value or, in the
absence of a market value, at fair value as determined in good faith by the
Advisor and the Trust's Pricing Committee pursuant to procedures approved by or
under the direction of the Board.
The Fund's securities, including ADRs, EDRs and GDRs, which are traded
on securities exchanges are valued
SAI-1-97.IT100
B-16
<PAGE>
at the last sale price on the exchange on which such securities are traded, as
of the close of business on the day the securities are being valued or, lacking
any reported sales, at the mean between the last available bid and asked price.
Securities that are traded on more than one exchange are valued on the exchange
determined by the Advisor to be the primary market. Securities traded in the
over-the-counter market are valued at the mean between the last available bid
and asked price prior to the time of valuation. Securities and assets for which
market quotations are not readily available (including restricted securities
which are subject to limitations as to their sale) are valued at fair value as
determined in good faith by or under the direction of the Board.
Short-term debt obligations with remaining maturities in excess of 60
days are valued at current market prices, as discussed above. Short-term
securities with 60 days or less remaining to maturity are, unless conditions
indicate otherwise, amortized to maturity based on their cost to the Fund if
acquired within 60 days of maturity or, if already held by the Fund on the 60th
day, based on the value determined on the 61st day.
Corporate debt securities are valued on the basis of valuations
provided by dealers in those instruments, by an independent pricing service,
approved by the Board, or at fair value as determined in good faith by
procedures approved by the Board. Any such pricing service, in determining
value, will use information with respect to transactions in the securities being
valued, quotations from dealers, market transactions in comparable securities,
analyses and evaluations of various relationships between securities and yield
to maturity information.
An option that is written by the Fund is generally valued at the last
sale price or, in the absence of the last sale price, the last offer price. An
option that is purchased by the Fund is generally valued at the last sale price
or, in the absence of the last sale price, the last bid price. If an options
exchange closes after the time at which the Fund's net asset value is
calculated, the last sale or last bid and asked prices as of that time will be
used to calculate the net asset value.
Any assets or liabilities initially expressed in terms of foreign
currencies are translated into U.S. dollars at the official exchange rate or,
alternatively, at the mean of the current bid and asked prices of such
currencies against the U.S. dollar last quoted by a major bank that is a regular
participant in the foreign exchange market or on the basis of a pricing service
that takes into account the quotes provided by a number of such major banks. If
neither of these alternatives is available or both are deemed not to provide a
suitable methodology for converting a foreign currency into U.S. dollars, the
Board in good faith will establish a conversion rate for such currency.
All other assets of the Fund are valued in such manner as the Board in
good faith deems appropriate to reflect their fair value.
TAXATION
The Fund will be taxed, under the Code, as a separate entity from any
other series of the Trust, and it intends to elect to qualify for treatment as a
regulated investment company ("RIC") under Subchapter M of the Code. In each
taxable year that the Fund so qualifies, the Fund (but not its shareholders)
will be relieved of federal income tax on that part of its investment company
taxable income (consisting generally of interest and dividend income, net short-
term capital gains and net realized gains from currency transactions) and net
capital gain that is distributed to shareholders.
In order to qualify for treatment as a RIC, the Fund must distribute
annually to shareholders at least 90% of its investment company taxable income
and must meet several additional requirements. Among these requirements are, in
general, the following: (1) at least 90% of the Fund's gross income each taxable
year must be derived from dividends, interest, payments with respect to
securities loans and gains from the sale or other disposition of securities or
foreign currencies, or other income derived with respect to its business of
investing in securities or currencies; (2) less than 30% of the Fund's gross
income each taxable year may be derived from the sale or other disposition of
securities held for less than three months; (3) at the close of each quarter of
the Fund's taxable year, at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. Government securities, securities of
other RICs and other securities, limited in respect of any one issuer, to an
amount that does not exceed 5% of the value of the Fund's assets and that does
not represent more than 10% of the outstanding voting securities of such issuer;
and (4) at the close of each quarter of the Fund's taxable year, not more than
25% of the value of its assets may be invested in securities (other than U.S.
Government securities or the securities of other RICs) of any one issuer.
Distributions of net investment income and net realized capital gains
by the Fund will be taxable to shareholders whether made in cash or reinvested
in shares. In determining amounts of net realized capital gains to be
distributed, any
SAI-1-97.IT100
B-17
<PAGE>
capital loss carryovers from prior years will be applied against capital gains.
Shareholders receiving distributions in the form of additional shares will have
a cost basis for federal income tax purposes in each share so received equal to
the net asset value of a share of the Fund on the reinvestment date. Fund
distributions also will be included in individual and corporate shareholders'
income on which the alternative minimum tax may be imposed.
The Fund intends to declare and pay dividends and other distributions
annually, as stated in the Prospectus. In order to avoid the payment of any
federal excise tax based on net income, the Fund must declare on or before
December 31 of each year, and pay on or before January 31 of the following year,
distributions at least equal to 98% of its ordinary income for that calendar
year and at least 98% of the excess of any capital gains over any capital losses
realized in the one-year period ending October 31 of that year, together with
any undistributed amounts of ordinary income and capital gains (in excess of
capital losses) from the previous calendar year.
The Fund may receive dividend distributions from U.S. corporations. To
the extent that the Fund receives such dividends and distributes them to its
shareholders, and meets certain other requirements of the Code, corporate
shareholders of the Fund may be entitled to the "dividends received" deduction.
Availability of the deduction is subject to certain holding period and
debt-financing limitations.
The use of hedging strategies, such as entering into forward contracts
and purchasing options, involves complex rules that will determine the character
and timing of recognition of the income received in connection therewith by the
Fund. Income from foreign currencies (except certain gains therefrom that may be
excluded by future regulations) and income from transactions in options and
forward contracts derived by the Fund with respect to its business of investing
in securities or foreign currencies will qualify as permissible income under
Subchapter M of the Code.
For accounting purposes, when the Fund purchases an option, the premium
paid by the Fund is recorded as an asset and is subsequently adjusted to the
current market value of the option. Any gain or loss realized by the Fund upon
the expiration or sale of such options held by the Fund generally will be
capital gain or loss.
Any security, option, or other position entered into or held by the
Fund that substantially diminishes the Fund's risk of loss from any other
position held by that Fund may constitute a "straddle" for federal income tax
purposes. In general, straddles are subject to certain rules that may affect the
amount, character and timing of the Fund's gains and losses with respect to
straddle positions by requiring, among other things, that the loss realized on
disposition of one position of a straddle be deferred until gain is realized on
disposition of the offsetting position; that the Fund's holding period in
certain straddle positions not begin until the straddle is terminated (possibly
resulting in the gain being treated as short-term capital gain rather than
long-term capital gain); and that losses recognized with respect to certain
straddle positions, which would otherwise constitute short-term capital losses,
be treated as long-term capital losses. Different elections are available to the
Fund that may mitigate the effects of the straddle rules.
Certain options and forward contracts that are subject to Section 1256
of the Code ("Section 1256 Contracts") and that are held by the Fund at the end
of its taxable year generally will be required to be "marked to market" for
federal income tax purposes, that is, deemed to have been sold at market value.
Sixty percent of any net gain or loss recognized on these deemed sales and 60%
of any net gain or loss realized from any actual sales of Section 1256 Contracts
will be treated as long-term capital gain or loss, and the balance will be
treated as short-term capital gain or loss.
Section 988 of the Code contains special tax rules applicable to
certain foreign currency transactions that may affect the amount, timing and
character of income, gain or loss recognized by the Fund. Under these rules,
foreign exchange gain or loss realized with respect to foreign
currency-denominated debt instruments, foreign currency forward contracts and
foreign currency-denominated payables and receivables is treated as ordinary
income or loss. Some part of the Fund's gain or loss on the sale or other
disposition of shares of a foreign corporation may, because of changes in
foreign currency exchange rates, be treated as ordinary income or loss under
Section 988 of the Code, rather than as capital gain or loss.
The Fund may be subject to foreign withholding taxes on dividends and
interest earned with respect to securities of foreign corporations. The Fund may
also be subject to special rules under the Code that apply to income derived
from stock issued by a "passive foreign investment company" ("PFIC"), which
might subject the Fund to a non-deductible federal income tax. The Fund may be
able to avoid the PFIC tax by electing to be taxed on its share of PFIC income
(whether or nor such income is actually distributed by the PFIC. The Fund will
endeavor to limit its exposure to the PFIC tax by investing in PFICs only where
the election to be taxed currently will be made. Because it is not always
possible
SAI-1-97.IT100
B-18
<PAGE>
to identify a foreign issuer as a PFIC before an investment is made, however,
the Fund may incur the PFIC tax in some instances.
Redemptions and exchanges of shares of the Fund will result in gains or
losses for tax purposes to the extent of the difference between the proceeds and
the shareholder's adjusted tax basis for the shares. Any loss realized upon the
redemption or exchange of shares within six months from their date of purchase
will be treated as a long-term capital loss to the extent of distributions of
long-term capital gain dividends with respect to such shares during such
six-month period. All or a portion of a loss realized upon the redemption of
shares of the Fund may be disallowed to the extent shares of the Fund are
purchased (including shares acquired by means of reinvested dividends) within 30
days before or after such redemption.
Distributions and redemptions may be subject to state and local income
taxes, and the treatment thereof may differ from the federal income tax
treatment. Foreign taxes may apply to non-U.S. investors.
The above discussion and the related discussion in the Prospectus are
not intended to be complete discussions of all applicable federal tax
consequences of an investment in the Fund. The law firm of Heller, Ehrman, White
& McAuliffe has expressed no opinion in respect thereof. Nonresident aliens and
foreign persons are subject to different tax rules, and may be subject to
withholding of up to 30% on certain payments received from the Fund.
Shareholders are advised to consult with their own tax advisers concerning the
application of foreign, federal, state and local taxes to an investment in the
Fund.
DIVIDENDS AND DISTRIBUTIONS
Dividends from the Fund's investment company taxable income (whether
paid in cash or invested in additional shares) will be taxable to shareholders
as ordinary income to the extent of the Fund's earnings and profits.
Distributions of the Fund's net capital gain (whether paid in cash or invested
in additional shares) will be taxable to shareholders as long-term capital gain,
regardless of how long they have held their Fund shares.
Dividends declared by the Fund in October, November or December of any
year and payable to shareholders of record on a date in one of such months will
be deemed to have been paid by the Fund and received by the shareholders on the
record date if the dividends are paid by the Fund during the following January.
Accordingly, such dividends will be taxed to shareholders for the year in which
the record date falls.
The Fund or any securities dealer effecting a redemption of the Fund's
shares by a shareholder will be required to file information reports with the
IRS with respect to distributions and payments made to the shareholder. In
addition, the Fund will be required to withhold federal income tax at the rate
of 31% on taxable dividends, redemptions and other payments made to accounts of
individual or other non-exempt shareholders who have not furnished their correct
taxpayer identification numbers and made certain required certifications on the
Account Application Form or with respect to which the Fund or the securities
dealer has been notified by the IRS that the number furnished is incorrect or
that the account is otherwise subject to withholding. Amounts withheld under
these rules will be creditable against a shareholder's federal income tax
liability.
PERFORMANCE INFORMATION
Total Return
Average annual total return quotations used in the Fund's advertising
and promotional materials are calculated according to the following formula:
P(1 + T)n = ERV
where "P" equals a hypothetical initial payment of $1000; "T" equals average
annual total return; "n" equals the number of years; and "ERV" equals the ending
redeemable value at the end of the period of a hypothetical $1000 payment made
at the beginning of the period.
Under the foregoing formula, the time periods used in advertising will
be based on rolling calendar quarters, updated to the last day of the most
recent quarter prior to submission of the advertising for publication. Average
annual
SAI-1-97.IT100
B-19
<PAGE>
total return, or "T" in the above formula, is computed by finding the average
annual compounded rates of return over the period that would equate the initial
amount invested to the ending redeemable value. Average annual total return
assumes the reinvestment of all dividends and distributions.
Yield
Annualized yield quotations used in the Fund's advertising and
promotional materials are calculated by dividing the Fund's investment income
for a specified thirty-day period, net of expenses, by the average number of
shares outstanding during the period, and expressing the result as an annualized
percentage (assuming semi-annual compounding) of the net asset value per share
at the end of the period. Yield quotations are calculated according to the
following formula:
YIELD = 2 [(a-b + 1)6 - 1]
cd
where "a" equals dividends and interest earned during the period; "b" equals
expenses accrued for the period, net of reimbursements; "c" equals the average
daily number of shares outstanding during the period that are entitled to
receive dividends and "d" equals the maximum offering price per share on the
last day of the period.
Except as noted below, in determining net investment income earned
during the period ("a" in the above formula), the Fund calculates interest
earned on each debt obligation held by it during the period by (1) computing the
obligation's yield to maturity, based on the market value of the obligation
(including actual accrued interest) on the last business day of the period or,
if the obligation was purchased during the period, the purchase price plus
accrued interest; (2) dividing the yield to maturity by 360 and multiplying the
resulting quotient by the market value of the obligation (including actual
accrued interest). Once interest earned is calculated in this fashion for each
debt obligation held by the Fund, net investment income is then determined by
totaling all such interest earned.
For purposes of these calculations, the maturity of an obligation with
one or more call provisions is assumed to be the next date on which the
obligation reasonably can be expected to be called or, if none, the maturity
date.
Other information
Performance data of the Fund quoted in advertising and other
promotional materials represents past performance and is not intended to predict
or indicate future results. The return and principal value of an investment in
the Fund will fluctuate, and an investor's redemption proceeds may be more or
less than the original investment amount. In advertising and promotional
materials the Fund may compare its performance with data published by Lipper
Analytical Services, Inc. ("Lipper") or CDA Investment Technologies, Inc.
("CDA"). The Fund also may refer in such materials to mutual fund performance
rankings and other data, such as comparative asset, expense and fee levels,
published by Lipper or CDA. Advertising and promotional materials also may refer
to discussions of the Fund and comparative mutual fund data and ratings reported
in independent periodicals including, but not limited to, The Wall Street
Journal, Money Magazine, Forbes, Business Week, Financial World and Barron's.
GENERAL INFORMATION
The Trust is a newly organized entity and has no prior business
history. The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest and to divide or
combine the shares into a greater or lesser number of shares without thereby
changing the proportionate beneficial interest in the Fund. Each share
represents an interest in the Fund proportionately equal to the interest of each
other share. Upon the Fund's liquidation, all shareholders would share pro rata
in the net assets of the Fund available for distribution to shareholders.
The Declaration of Trust does not require the issuance of stock
certificates. If stock certificates are issued, they must be returned by the
registered owners prior to the transfer or redemption of shares represented by
such certificates.
If they deem it advisable and in the best interest of shareholders, the
Board of Trustees may create additional series of shares which differ from each
other only as to dividends. The Board of Trustees has created two series of
shares, and may create additional series in the future, which have separate
assets and liabilities. Income and operating expenses not specifically
attributable to a particular Fund are be allocated fairly among the Funds by the
Trustees, generally on the basis of the relative net assets of each Fund.
SAI-1-97.IT100
B-20
<PAGE>
Rule 18f-2 under the 1940 Act provides that as to any investment
company which has two or more series outstanding and as to any matter required
to be submitted to shareholder vote, such matter is not deemed to have been
effectively acted upon unless approved by the holders of a "majority" (as
defined in the Rule) of the voting securities of each series affected by the
matter. Such separate voting requirements do not apply to the election of
Trustees or the ratification of the selection of accountants. The Rule contains
special provisions for cases in which an advisory contract is approved by one or
more, but not all, series. A change in investment policy may go into effect as
to one or more series whose holders so approve the change even though the
required vote is not obtained as to the holders of other affected series.
The Fund's custodian, Star Bank, 425 Walnut Street, Cincinnati, Ohio
45202 is responsible for holding the Funds' assets. American Data Services, 24
W. Carver Street, Huntington, NY 11743 acts as the Fund's accounting services
agent. The Fund's independent accountants, McGladrey & Pullen, LLP, 555 Fifth
Avenue, New York, NY 10017, assist in the preparation of certain reports to the
Securities and Exchange Commission and the Fund's tax returns.
Shares of the Fund owned by the Trustees and officers as a group were
less than 1% at October 10, 1997. As of October 10, 1997, the Fund was
controlled by the Du Bain 1991 Trust, 160 Sansome St., San Francisco, CA 94104,
which owned 68.63% of the Fund's outstanding shares. The controlling shareholder
would be able to control decisions made by shareholders with respect to matters
affecting only the Fund, such as the Investment Advisor Agreement.
On October 10, 1997, the following additional persons owned of record
and/or beneficially more than 5% of the Fund's outstanding voting securities:
William K. Schaff, Gary Pollack, JTWROS, 160 Sansome St., San
Francisco, CA 94104; 6.81% record.
Robert S. Sweet, 772 Via Santa Catarina, Claremont, CA 91711; 5.84%
record.
APPENDIX
Description of Ratings
Moody's Investors Service, Inc.: Corporate Bond Ratings
Aaa--Bonds which are rated Aaa are judged to be of the best quality and
carry the smallest degree of investment risk. Interest payments are protected by
a large or by an 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 which are 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 as in Aaa securities or 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 than in Aaa securities.
Moody's applies numerical modifiers "1", "2" and "3" to both the Aaa
and Aa rating classifications. The modifier "1" indicates that the security
ranks in the higher end of its generic rating category; the modifier "2"
indicates a mid-range ranking; and the modifier "3" indicates that the issue
ranks in the lower end of its generic rating category.
A--Bonds which are rated A possess many favorable investment attributes
and are to be considered as 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 which are rated Baa are considered as medium grade
obligations, i.e., 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 period of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Standard & Poor's Corporation: Corporate Bond Ratings
AAA--This is the highest rating assigned by Standard & Poor's 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 they 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 adequate 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.
SAI-1-97.IT100
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<PAGE>
Commercial Paper Ratings
Moody's commercial paper ratings are assessments of the issuer's
ability to repay punctually promissory obligations. Moody's employs the
following three designations, all judged to be investment grade, to indicate the
relative repayment capacity of rated issuers: Prime 1--highest quality; Prime
2--higher quality; Prime 3--high quality.
A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment. Ratings are graded into four categories,
ranging from "A" for the highest quality obligations to "D" for the lowest.
Issues assigned the highest rating, A, are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with the numbers "1", "2" and "3" to indicate the relative degree of safety. The
designation A-1 indicates that the degree of safety regarding timely payment is
either overwhelming or very strong. A "+" designation is applied to those issues
rated "A-1" which possess extremely strong safety characteristics. Capacity for
timely payment on issues with the designation "A-2" is strong. However, the
relative degree of safety is not as high as for issues designated A-1. Issues
carrying the designation "A-3" have a satisfactory capacity for timely payment.
They are, however, somewhat more vulnerable to the adverse effect of changes in
circumstances than obligations carrying the higher designations.
SAI-1-97.IT100
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<PAGE>
<TABLE>
<CAPTION>
ADVISORS SERIES TRUST
STATEMENTS OF ASSETS AND LIABILITIES
FEBRUARY 25, 1997
American Trust InformationTech
Allegiance Fund 100(R) Fund
<S> <C> <C>
Assets
Cash in bank.................................................... $50,000 $50,000
Prepaid registration fees (Note 3).............................. 19,425 17,976
Deferred organization costs (Note 4)............................ 18,500 18,500
------ ------
Total assets................................................ $87,925 $86,476
Liabilities
Payable for registration expenses and organization costs........ $37,925 $36,476
------- -------
Net Assets
Applicable to 7,500 shares of beneficial interest issued
and outstanding; an unlimited number of shares
(par value $.01) authorized..................................... $50,000 $50,000
====== =======
Number of shares outstanding......................................... 5,000 2,500
Net Asset Value (Offering and Redemption Price) per share............ $10.00 $20.00
===== ======
</TABLE>
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
1. American Trust Allegiance Fund and InformationTech 100(R) Fund (each a
"Fund" and collectively the "Funds") are two series of Advisors Series
Trust (the "Trust"), a Delaware business trust organized on October 3, 1996
and registered under the Investment Company Act of 1940 as an open-end
management investment company.
2. The Trust, on behalf of the Funds, has entered into Investment Advisory
Agreements with Bay Isle Financial Corporation and American Trust Company
(the "Advisors"), a Distribution Agreement with First Fund Distributors,
Inc. (the "Distributor") and an Administration Agreement with Investment
Company Administration Corporation (the "Administrator"). (See "Management"
in the Statement of Additional Information.) Certain officers and Trustees
of the Trust are officers and/or directors of the Advisor, the Distributor
and the Administrator.
The Advisors have agreed to waive their fees, and/or reimburse each Fund
for other operating expenses, to the extent necessary to limit each Fund's
total annual operating expenses. American Trust Allegiance Fund will limit
its expenses to 1.45% of the Fund's average net assets annually.
InformationTech 100(R) Fund will limit its expenses to 1.50% of the Fund's
average net assets annually. Any such waivers or reimbursements are subject
to repayment by a Fund in subsequent years, to the extent that a Fund's
operating expenses are then less than the limits just stated.
3. Prepaid registration fees are charged to income as the related shares are
issued.
4. Deferred organization costs will be amortized over a period of sixty months
from the date on which a Fund commences operations. In the event that the
original shares invested in a Fund are redeemed prior to the end of the
amortization period, the proceeds of the redemption payable in respect of
those shares will be reduced by the pro rata share (based on the
proportionate share of the original shares redeemed to the total number of
original shares outstanding at the time of redemption) of the unamortized
deferred organization costs as of the date of that redemption. In the event
a Fund is liquidated prior to the end of the amortization period the
holders of the original shares will bear the unamortized deferred
organization costs.
SAI-1-97.IT100
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<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Trustees and Shareholders
Advisors Series Trust
We have audited the accompanying statement of assets and liabilities of American
Trust Allegiance Fund and InformationTech 100 (R) Fund, each a series of
Advisors Series Trust, as of February 25, 1997. These financial statements are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures related to the schedule. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Trust Allegiance Fund
and InformationTech 100(R) Fund as of February 25, 1997, in conformity with
generally accepted accounting principles.
McGladrey & Pullen, LLP
New York, New York
February 25, 1997
SAI-1-97.IT100
B-24
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PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
The following financial statements are included in Part B of Pre-
Effective Amendment No. 2 to the Registration Statement and incorporated herein
by reference:
Statement of Assets and Liabilities, February 25, 1997
Notes to Statement of Assets and Liabilities
(b) Exhibits:
(1) Agreement and Declaration of Trust (1)
(2) By-Laws (1)
(3) Not applicable
(4) Specimen stock certificates (3)
(5) Form of Investment Advisory Agreement (2)
(6) Distribution Agreement (2)
(7) Not applicable
(8) Custodian Agreement (3)
(9) (1) Administration Agreement with Investment Company
Administration Corporation (2)
(2) Fund Accounting Service Agreement (2)
(3) Transfer Agency and Service Agreement (2)
(10) Opinion and consent of counsel (3)
(11) Consent of Independent Auditors (3)
(12) Not applicable
(13) Investment letters (3)
(14) Individual Retirement Account forms (5)
(15) Distribution Plan (4)
(16) Not applicable
(1) Previously filed with the Registration Statement on Form N-1A(File
No. 333-17391) on December 6, 1996 and incorporated herein by reference.
(2) Previously filed with Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A(File No. 333-17391) on January 29, 1997 and
incorporated herein by reference.
(3) Previously filed with Pre-Effective Amendment No. 2 to the
Registration Statement on Form N-1A(File No. 333-17391) on February 28, 1997 and
incorporated herein by reference.
(4) Previously filed with Post-Effective Amendment No. 2 to the
Registration Statement on Form N-1A(File No. 333-17391) on May 1, 1997 and
incorporated herein by reference.
(5) To be filed by amendment.
Item 25. Persons Controlled by or under Common Control with Registrant.
None.
Item 26. Number of Holders of Securities.
As of September 30, 1997, there were 132 holders of shares of
beneficial interest of the American Trust Allegiance Fund series of the
Registrant, 13
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holders of shares of the InformationTech 100 Fund series, 182 holders of shares
of the Kaminski Poland Fund series and 95 holders of shares of the
Ridgeway-Helms Millenium Fund series.
Item 27. Indemnification.
Article VI of Registrant's By-Laws states as follows:
Section 1. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of this
Article, "agent" means any person who is or was a Trustee, officer, employee or
other agent of this Trust or is or was serving at the request of this Trust as a
Trustee, director, officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise or was a
Trustee, director, officer, employee or agent of a foreign or domestic
corporation which was a predecessor of another enterprise at the request of such
predecessor entity; "proceeding" means any threatened, pending or completed
action or proceeding, whether civil, criminal, administrative or investigative;
and "expenses" includes without limitation attorney's fees and any expenses of
establishing a right to indemnification under this Article.
Section 2. ACTIONS OTHER THAN BY TRUST. This Trust shall indemnify any
person who was or is a party or is threatened to be made a party to any
proceeding (other than an action by or in the right of this Trust) by reason of
the fact that such person is or was an agent of this Trust, against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in connection with such proceeding, if it is determined that person acted in
good faith and reasonably believed:
(a) in the case of conduct in his official capacity as a Trustee
of the Trust, that his conduct was in the Trust's best
interests, and
(b) in all other cases, that his conduct was at least not opposed
to the Trust's best interests, and
(c) in the case of a criminal proceeding, that he had no
reasonable cause to believe the conduct of that person was
unlawful.
The termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent shall not of
itself create a presumption that the person did not act in good faith and in a
manner which the person reasonably believed to be in the best interests of this
Trust or that the person had reasonable cause to believe that the person's
conduct was unlawful.
Section 3. ACTIONS BY THE TRUST. This Trust shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action by or in the right of this Trust to procure a
judgment in its favor by reason of the fact that that person is or was an agent
of this Trust, against expenses actually and reasonably incurred by that person
in connection with the defense or settlement of that action if that person acted
in good faith, in a manner that person believed to be in the best interests of
this Trust and with such care, including reasonable inquiry, as an ordinarily
prudent person in a like position would use under similar circumstances.
Section 4. EXCLUSION OF INDEMNIFICATION. Notwithstanding any provision
to the contrary contained herein, there shall be no right to indemnification for
any liability arising by reason of willful misfeasance, bad faith, gross
negligence, or the reckless disregard of the duties involved in the conduct of
the agent's office with this Trust.
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No indemnification shall be made under Sections 2 or 3 of this Article:
(a) In respect of any claim, issue, or matter as to which that
person shall have been adjudged to be liable on the basis that
personal benefit was improperly received by him, whether or
not the benefit resulted from an action taken in the person's
official capacity; or
(b) In respect of any claim, issue or matter as to which that
person shall have been adjudged to be liable in the
performance of that person's duty to this Trust, unless and
only to the extent that the court in which that action was
brought shall determine upon application that in view of all
the circumstances of the case, that person was not liable by
reason of the disabling conduct set forth in the preceding
paragraph and is fairly and reasonably entitled to indemnity
for the expenses which the court shall determine; or
(c) of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court approval,
or of expenses incurred in defending a threatened or pending
action which is settled or otherwise disposed of without court
approval, unless the required approval set forth in Section 6
of this Article is obtained.
Section 5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of
this Trust has been successful on the merits in defense of any proceeding
referred to in Sections 2 or 3 of this Article or in defense of any claim, issue
or matter therein, before the court or other body before whom the proceeding was
brought, the agent shall be indemnified against expenses actually and reasonably
incurred by the agent in connection therewith, provided that the Board of
Trustees, including a majority who are disinterested, non-party Trustees, also
determines that based upon a review of the facts, the agent was not liable by
reason of the disabling conduct referred to in Section 4 of this Article.
Section 6. REQUIRED APPROVAL. Except as provided in Section 5 of this
Article, any indemnification under this Article shall be made by this Trust only
if authorized in the specific case on a determination that indemnification of
the agent is proper in the circumstances because the agent has met the
applicable standard of conduct set forth in Sections 2 or 3 of this Article and
is not prohibited from indemnification because of the disabling conduct set
forth in Section 4 of this Article, by:
(a) A majority vote of a quorum consisting of Trustees who are not
parties to the proceeding and are not interested persons of
the Trust (as defined in the Investment Company Act of 1940);
or
(b) A written opinion by an independent legal counsel.
Section 7. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by this Trust before the final disposition of the
proceeding upon a written undertaking by or on behalf of the agent, to repay the
amount of the advance if it is ultimately determined that he or she is not
entitled to indemnification, together with at least one of the following as a
condition to the advance: (i)security for the undertaking; or (ii) the existence
of insurance protecting the Trust against losses arising by reason of any lawful
advances; or (iii) a determination by a majority of a quorum of Trustees who are
not parties to the proceeding and are not interested persons of the Trust, or by
an independent legal counsel in a written opinion, based
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on a review of readily available facts that there is reason to believe that the
agent ultimately will be found entitled to indemnification. Determinations and
authorizations of payments under this Section must be made in the manner
specified in Section 6 of this Article for determining that the indemnification
is permissible.
Section 8. OTHER CONTRACTUAL RIGHTS. Nothing contained in this Article
shall affect any right to indemnification to which persons other than Trustees
and officers of this Trust or any subsidiary hereof may be entitled by contract
or otherwise.
Section 9. LIMITATIONS. No indemnification or advance shall be made
under this Article, except as provided in Sections 5 or 6 in any circumstances
where it appears:
(a) that it would be inconsistent with a provision of the
Agreement and Declaration of Trust of the Trust, a resolution
of the shareholders, or an agreement in effect at the time of
accrual of the alleged cause of action asserted in the
proceeding in which the expenses were incurred or other
amounts were paid which prohibits or otherwise limits
indemnification; or
(b) that it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
Section 10. INSURANCE. Upon and in the event of a determination by the
Board of Trustees of this Trust to purchase such insurance, this Trust shall
purchase and maintain insurance on behalf of any agent of this Trust against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such, but only to the extent that this Trust would
have the power to indemnify the agent against that liability under the
provisions of this Article and the Agreement and Declaration of Trust of the
Trust.
Section 11. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN. This Article does not
apply to any proceeding against any Trustee, investment manager or other
fiduciary of an employee benefit plan in that person's capacity as such, even
though that person may also be an agent of this Trust as defined in Section 1 of
this Article. Nothing contained in this Article shall limit any right to
indemnification to which such a Trustee, investment manager, or other fiduciary
may be entitled by contract or otherwise which shall be enforceable to the
extent permitted by applicable law other than this Article.
Item 28. Business and Other Connections of Investment Adviser.
The information required by this item with respect to American Trust
Company is as follows:
American Trust Company is a trust company chartered under the
laws of the State of New Hampshire. Its President and Director, Paul H.
Collins, is a director of:
MacKenzie-Childs, Ltd.
3260 State Road 90
Aurora, New York 13026
Great Northern Arts
Castle Music, Inc.
World Family Foundation
all with an address at
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Gordon Road, Middletown, New York
Robert E. Moses, a Director of American Trust Company, is a director
of:
Mascoma Mutual Hold Corp.
One The Green
Lebanon, NH 03766
Information required by this item is contained in the Form ADV of the
following entities and is incorporated herein by reference:
Name of investment adviser File No.
-------------------------- --------
Avatar Investors Associates Corp. 801-7061
Al Frank Asset Management, Inc. 801-30528
Bay Isle Financial Corporation 801-27563
Chase Investment Counsel Corp. 801-3396
The Edgar Lomax Company 801-19358
Kaminski Asset Management, Inc. 801-53485
Ridgeway Helms Investment Management 801-49884
Rockhaven Asset Management, LLC 801-54084
Van Deventer & Hoch 801-6118
Item 29. Principal Underwriters.
(a) The Registrant's principal underwriter also acts as principal
underwriter for the following investment companies:
Fremont Mutual Funds
Guinness Flight Investment Funds, Inc.
Jurika & Voyles Mutual Funds
Kayne Anderson Mutual Funds
LMH Fund, Inc.
Masters' Select Investment Trust
PIC Investment Trust
Professionally Managed Portfolios
Rainier Investment Management Mutual Funds
RNC Mutual Fund Group
O'Shaughnessy Funds, Inc.
(b) The following information is furnished with respect to the officers
and directors of First Fund Distributors, Inc.:
Position and Offices Position and
Name and Principal with Principal Offices with
Business Address Underwriter Registrant
- ----------------- --------------------- -------------
Robert H. Wadsworth President Vice
4455 E. Camelback Road and Treasurer President
Suite 261E
Phoenix, AZ 85018
Eric M. Banhazl Vice President President,
2025 E. Financial Way Treasurer
Glendora, CA 91741 and Trustee
Steven J. Paggioli Vice President & Vice
479 West 22nd Street Secretary President
New York, New York 10011
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(c) Not applicable.
Item 30. Location of Accounts and Records.
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the rules promulgated thereunder are in the possession of the following persons:
(a) the documents required to be maintained by paragraph (4) of Rule
31a-1(b) will be maintained by the Registrant;
(b) the documents required to be maintained by paragraphs (5), (6),
(10) and (11) of Rule 31a-1(b) will be maintained by the respective investment
advisors:
Al Frank Asset Management, Inc. 465 Forest Avenue, Laguna Beach, CA
92651
American Trust Company, One Court Street, Lebanon, NH 03766
Avatar Associates Investment Corp., 900 Third Avenue, New York, NY
10022
Bay Isle Financial Corporation, 160 Sansome Street, San Francisco, CA
94104
Chase Investment Counsel Corp., 300 Preston Avenue, Charlottesville, VA
22902
The Edgar Lomax Company, 6564 Loisdale Court, Springfield, VA 22150
Kaminski Asset Management, Inc., 210 snd Street, North, #050,
Minneapolis, MN 55401
Ridgeway Helms Investment Management, 303 Twin Dolphin Drive, Redwood
Shores, CA 94065
Rockhaven Asset Management, 100 First Avenue, Suite 1050, Pittsburgh, PA
15222
Van Deventer & Hoch, 800 North Bend Boulevard, Glendale, CA 91203
(c) all other documents will be maintained by Registrant's custodian,
Star Bank, 425 Walnut Street, Cincinnati, OH 45202.
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
Registrant hereby undertakes to:
(a) File, within four to six months of the effective date of the
amendment, a post-effective amendment containing financial
statements, which need not be audited, of the Al Frank Asset
Management Fund series of the Registrant.
(b) Furnish each person to whom a Prospectus is delivered a copy
of the applicable latest annual report to shareholders, upon
request and without charge.
(c) If requested to do so by the holders of at least 10% of the
Trust's outstanding shares, call a meeting of shareholders for
the purposes of voting upon the question of removal of a
director and assist in communications with other shareholders.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment
to the Registration Statement on Form N-1A of Advisors Series Trust to be signed
on its behalf by the undersigned, thereunto duly authorized in the City of
Phoenix and State of Arizona on the 27th day of October, 1997.
ADVISORS SERIES TRUST
By /s/ Eric M. Banhazl*
-------------------------
Eric M. Banhazl
President
This Amendment to the Registration Statement on Form N-1A of
Advisors Series Trust has been signed below by the following persons in the
capacities indicated on October 27, 1997.
/s/ Eric M. Banhazl* President, Principal Financial
- -------------------------------- and Accounting Officer, and Trustee
Eric M. Banhazl
/s/ Walter E. Auch Sr.* Trustee
- - -------------------------------
Walter E. Auch, Sr.
/s/ Donald E. O'Connor* Trustee
- - -------------------------------
Donald E. O'Connor
/s/ George T. Wofford III* Trustee
- - -------------------------------
George T. Wofford III
* /s/ Robert H. Wadsworth
- - -------------------------------
By: Robert H. Wadsworth
Attorney in Fact
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