Investment Company Administration Corporation
4455 E. Camelback Rd., Suite 261E
Phoenix, Arizona 85018
(602) 952-1100
January 30, 1998
Securities and Exchange Commission
Attn: Filing Desk, Stop 1-4
450 Fifth Street, N.W.
Washington, DC 20549
Re: Advisors Series Trust
File No. 333-17391 and 811-07959
Dear Sir or Madam:
On behalf of the above Registrant and pursuant to Rule 497(c) under
the Securities Act of 1933, I enclose for filing via EDGAR for the
Avatar Advantage Balanced Fund series of the registrant a copy of
the Prospectus dated January 6, 1998.
Sincerely yours,
/s/Robert H. Wadsworth
Robert H. Wadsworth
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The Avatar Advantage
Balanced Fund
PROSPECTUS
January 6, 1998
900 Third Avenue
New York, NY 10022
(888) 263-6452
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The Avatar Advantage Balanced Fund (the "Fund") is a mutual fund with the
investment objective of seeking long-term capital appreciation. The Fund
attempts to achieve its objective by investing in equity securities during
rising stock markets and limiting loss during market declines. See "Investment
Objective and Policies." Shares are available on a no-load basis to investors.
There can be no assurance that the Fund will achieve its investment objective.
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 (the "SAI") dated January 6, 1998 has been
filed with the Securities and Exchange Commission ("SEC") and is incorporated
herein by reference. This SAI is available without charge upon request to the
Fund at the address given on this page. The SEC maintains an internet site
(http://www.sec.gov) that contains the SAI, other material incorporated by
reference and other information about companies that file electronically with
the SEC.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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Table of Contents
Expense Table.................. 2
Investment Objective and Policies 3
Management of the Fund......... 7
Investor Guide................. 10
Services Available to
Shareholders................. 13
How to Redeem Your Shares...... 13
Distributions and Taxes........ 16
General Information............ 17
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.
The Fund is a no-load mutual fund and has no shareholder transaction expenses.
The Fund has adopted a plan of distribution under which it will pay the Advisor,
as Distribution Coordinator, a fee at the annual rate of up to 0.25% of the
Fund's net assets. A long-term shareholder may pay more, directly and
indirectly, in such fees than the maximum sales charge permitted under the rules
of the National Association of Securities Dealers ("NASD"). Shares will be
redeemed at net asset value per share.
Annual Operating Expenses
(As a percentage of average net
assets)
Investment Advisory Fee 0.75%
12b-1 Fee 0.25%
Other Expenses (1) 0.40%
----
Total Fund Operating
Expenses (2) 1.40%
1) Other Expenses are estimated for the first fiscal year of the Fund.
(2) The Advisor has agreed to reduce its fees to insure that the expenses for
the Fund will not exceed 1.40%. If the Advisor did not limit the Fund's
expenses, it is expected that "Other Expenses" in the above table would be 1.45%
and "Total Operating Expenses" would be 2.45%. 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
$14 $44
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."
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The minimum initial investment in the Fund is $2,500, with subsequent minimum
investments of $250 or more ($1,000 and $50, respectively, for retirement
plans). Shares will be redeemed at their net asset value.
Investment Objective And Policies
What is the Fund's investment objective?
The investment objective of the Fund is to seek long-term capital appreciation
by participating in rising stock markets and preserving the bulk of those
profits during high-risk periods. There can be no assurance that the Fund will
achieve its objective.
How does the Fund seek to achieve its objective?
Avatar Investors Associates Corp. (the "Advisor" or "Avatar Associates")
believes the portfolio's allocation mix of stocks, bonds and cash has the
greatest impact on risk and performance. The asset allocation decision is based
on a proprietary asset allocation model that measures the risk and potential
reward of investing in stocks and bonds as opposed to the safety of cash
reserves. When the
Advisor believes market risk in a given asset class (stocks and/or bonds) is
low, it maintains a large commitment (as fully invested as practicable) to
equity and/or fixed income securities. When the Advisor believes market risk in
a given asset class (stocks and/or bonds) is high, it systematically reduces
equity and/or fixed income exposure. These shifts are generally made in
increments of five to ten percent of the Fund's total net assets, as conditions
warrant based on the Advisor's asset allocation model. However, the Fund will at
all times maintain at least 25% of the value of its total assets in fixed income
senior securities.
The Advisor's asset allocation model measures liquidity in the market place.
Based on its experience and research, the Advisor believes that changes in
financial liquidity -- for example, money, credit and reserves -- are the best
measure of investment market risk. When this liquidity expands beyond what is
needed by the "real" or production side of the economy, much of the excess moves
into the stock and bond markets. This movement causes stock and bond prices to
rise. On the other hand, when liquidity is contracting, economic demands siphon
money away from the stock and bond markets. Investment risks increase, and stock
and bond prices are subject to declines. Thus, the Advisor makes orderly asset
mix decisions by measuring and reacting to current market risk
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evels as quantified by the Advisor's models.
The Advisor's Liquidity research includes a very broad range of variables, each
graded separately and blended into a model. The stock and bond models are of the
"scoring" variety. That is, the weight range of each indicator is determined by
its ability to add to incremental performance. The Advisor has separate models
for stocks and bonds. The Advisor's Equity Liquidity Model inputs are grouped
into three areas: Economic Liquidity, Investor Liquidity and Market Momentum.
The Bond Liquidity Model inputs are grouped into four areas: Economic Liquidity,
Investor Liquidity, Market Momentum and Inflation Variables.
Economic Liquidity measures the direct actions of the Federal Reserve Bank, the
direction of interest rates, the shape and change in the yield curve, bank
reserves and asset changes, and current valuation levels. Investor Liquidity
measures include flow of funds data and the actions and assessments of diverse
investor groups. These are often referred to as sentiment indicators. Market
Momentum measures include price changes, volume characteristics and intensity of
the market. Inflation Variables include widely recognized commodity indices and
spot prices of economically sensitive commodities. These separate models for
stocks and bonds are individually monitored and are combined into a matrix that
determines the appropriate stock, bond and cash allocation for any given reading
of stock and bond liquidity. Any shifts in this mix are dictated by the data
produced by the model. The model is updated daily to enable the Advisor to
respond to rapidly changing environments. There is, of course, no assurance that
the Fund's objective will be achieved. Because prices of common stocks, bonds
and other securities fluctuate, the value of an investment in the Fund will vary
as the market value of its investment portfolio changes.
How does the Advisor select equity securities for the Fund's portfolio?
The Advisor selects equity securities, consisting of common stocks and
securities having the characteristics of common stocks, such as convertible
securities, rights and warrants, on the basis of both quantitative and
qualitative analysis. It screens a universe of more than 3,400 stocks for
liquidity, in order to identify stocks with sufficient trading volume to
establish or eliminate a position quickly and cost-effectively. This screen
reduces the list of potential candidates to 600 to 700 actively traded issues.
The Advisor then ranks each security on both growth and value factors, to
identify stocks that possess good
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growth potential at reasonable prices. The Advisor's qualitative analysis
involves identifying the investment themes and stocks that are the best
performers in the current market environment. The Standard and Poors 500 ("S&P
500") benchmarks are employed to determine industry and sector weight. Industry
groups, sectors, and market capitalization quintiles all have ranges in which
the Advisor can be over- or underweight relative to the benchmark. When the
Advisor desires maximum exposure to equities, the Fund's diversified portfolio
is expected to have between 50 and 70 separate securities. The Advisor may sell
a stock when its model calls for a reduction in the exposure to equities, when
the stock becomes less attractive due to deteriorating fundamentals or when the
stock's price falls to a pre-set limit. The Advisor does not expect the Fund's
annual turnover rate to exceed 150%. High portfolio turnover will increase
transaction costs and may result in higher taxes for investors.
How does the Advisor select bonds for the Fund's portfolio?
The Advisor concentrates on U.S. Government Securities thus avoiding the risks
associated with corporate debt. The Advisor actively adjusts the maturity and
duration. Utilizing various strategies, the Advisor tailors the holdings based
on current bond market research and analysis. Quantitative analysis helps
determine optimal bond portfolio duration while qualitative analysis helps to
assess carefully various maturity combinations to achieve a duration target.
What does the Fund use for cash reserves?
The Advisor uses high quality, short-term debt securities and money market
instruments as cash reserves for the Fund. 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 buy mortgage-backed securities.
Other investments and investment techniques. The Fund may also make the
following investments or use the techniques described below. More information
about them is contained in the SAI. In addition to these, the Fund may buy or
write options on equities and sell securities short, although it does not expect
to invest more than 5% of its total net assets in options or have short
positions exceeding 5% of its total net assets.
Futures and Options on Futures. The Fund may enter into futures contracts, or
options on those contracts, involving interest
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rates, securities and securities indices, for hedging purposes or as a
substitute for positions in the underlying securities. As a general rule, the
Fund will not purchase or sell futures if, immediately thereafter, more than 25%
of its total assets would be hedged. There are risks involved in the use of
futures and options on futures, including the risk that the prices of the
hedging vehicles may not correlate perfectly with the prices of the securities
in the Fund's portfolio. This may cause the futures contracts or options to
react differently from the Fund's portfolio securities to market changes. In
addition, the Advisor could be incorrect in its expectations about the direction
or extent of market movements. In these events, the Fund could lose money on the
futures contracts or options. It is also not certain that a secondary market for
positions in futures contracts or options will exist at all times, although the
Advisor will consider liquidity before entering into these transactions.
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 loaned. The Fund's loans of
portfolio securities will be collateralized at all times by high quality liquid
securities. Under the presentregulatory 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 Internal Revenue Code of
1986 (the "Code").
U.S. Government Securities. The Fund may invest in direct obligations of the
United States, such as Treasury bills, notes and bonds, as well as obligations
of U.S. agencies and instrumentalities. Not all securities issued by agencies
and instrumentalities of the U.S. Government are backed by the full faith and
credit of the United States. Some, such as securities issued by the Federal
National Mortgage Association, are supported solely or primarily by
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the creditworthiness of the issuer. If an obligation is not backed by the full
faith and credit of the United States, the Fund must look principally to the
agency or instrumentality issuing or guaranteeing the security for repayment and
may not be able to assert a claim against the U.S. Government if the agency or
instrumentality does not meet its commitments. The Fund may also invest in
mortgage-backed securities.
Investment restrictions.
The Fund has adopted certain investment restrictions, which are described fully
in the SAI. 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 a diversified fund.
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, Avatar Associates, 900 Third Avenue, New York, NY 10022 has
provided asset management services to individuals and institutional investors
since 1970. Currently the Advisor manages approximately $4 billion in assets.
The Advisor was established and is controlled by its President, Edward S.
Babbitt, Jr. Two members of the firm, Charles M. White and Elizabeth Sonders,
are principally responsible for the management of the Fund's portfolio. Mr.
White has been a Managing Director and Vice President of the Advisor since 1992,
having joined the firm in 1988 as a Portfolio Manager. Ms. Sonders was named a
Managing Director of the firm on January 1, 1998. Previously, she was a Vice
President and Portfolio Manager of the Advisor since 1989, having joined the
firm in 1986.
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 0.75%.
Prior Performance of the Advisor.
The following table sets forth composite performance data relating to the
historical performance of institutional
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private accounts managed by the Advisor for the periods indicated, that have
investment objectives, policies, strategies and risks substantially similar to
those of the Fund. The data is provided to illustrate the past performance of
the Advisor in managing substantially similar accounts and does not represent
the performance of the Fund. You should not consider this performance data as an
indication of future performance of the Fund or of the Advisor.
The composite performance data shown below were calculated in accordance with
recommended standards of the Association for Investment
Management and Research (AIMR*). All returns presented were calculated on a
total return basis and include all dividends and interest, accrued income and
realized and unrealized gains and losses. All returns reflect the deduction of
investment advisory fees, brokerage commission and execution costs paid by
institutional private accounts of the Advisor without provision for federal or
state income taxes. Custodial fees, if any, were not included in the
calculation. The Advisor's Composite includes all actual, fee-paying,
discretionary institutional private accounts managed by the Advisor that have
investment objectives, policies, strategies and risks substantially similar to
those of the Fund. Securities transactions are accounted for on the trade date
and accrual accounting is used. Cash and equivalents are included in performance
returns. Beginning in January, 1994, the quarterly returns of the Advisor's
Composite combine the individual accounts' returns (calculated on a
time-weighted rate of return that is revalued whenever cash flows exceed 3% of
the value of the account) by asset-weighting each individual account's asset
value as of the beginning of the quarter. Quarterly returns prior to that time
are equally-weighted. The yearly returns are computed by geometrically linking
the returns of each quarter within the calendar year.
The institutional private accounts that are included in the
* AIMR is a non-profit membership and education organization with more than
60,000 members worldwide that, among other things, has formulated a set of
performance presentation standards for investment advisers. These AIMR
performance presentation standards are intended to (i) promote full and fair
presentations by investment advisers of their performance results, and (ii)
ensure uniformity in reporting so that performance results of investment
advisers are directly comparable.
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Advisor's Composite are not subject to the same types of expenses to which the
Fund is subject nor to the diversification requirements, specific tax
restrictions and investment limitations imposed on the Fund by the Investment
Company Act or the Internal Revenue Code. Consequently, the performance results
for the Advisor's Composite could have been adversely affected if the
institutional private accounts included in the Composite had been regulated as
investment companies. To the extent that the Fund's operating expenses are
higher than those of the Advisor's Composite, the Fund's performance will be
correspondingly lower.
The investment results of the Advisor's Composite presented below are unaudited
and are not intended to predict or suggest the returns that might be experienced
by the Fund or an individual investing in the Fund. Investors should also be
aware that the use of a methodology different from that used below to calculate
performance, such as the method that mutual funds are required to use, could
result in different performance data.
Annualized Total Return For Years ended December 31, 1997
Number of Advisor's
Years Composite
One Year 14.5%
Three Years 17.1%
Five Years 12.2%
Ten Years 12.4%
Inception
(7/1/86 - 12/31/97) 12.1%
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 daily 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
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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 within three subsequent years provided the Fund is able to do so and remain
in compliance with any applicable expense limitations.
The Fund has adopted a Distribution Plan pursuant to Rule 12b-1. The Plan
permits the Fund to pay for distribution and related expenses at an annual rate
of up to 0.25% of the Fund's average net assets. The expenses which the Fund may
pay include: preparing and distributing prospectuses and other sales material;
advertising and public relations expenses; payments to financial intermediaries
and compensation of personnel involved in selling shares of the Fund.
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.
The Fund was established primarily to serve those investors in the qualified
retirement plan market. There are several ways to purchase shares of either
Fund. An Application Form, which accompanies this Prospectus, is used if you
send money directly to a Fund by mail or by wire. If you have questions about
how to invest, or about how to complete the Application Form, please call an
account representative at (888) 263-6452. First Fund Distributors, Inc., 4455 E.
Camelback Road, Suite 261E, Phoenix, Arizona 85018, an affiliate of the
Administrator, is the principal underwriter ("Distributor") of the Funds'
shares.
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 Avatar Advantage Balanced Fund) to
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the Fund's Shareholder Servicing Agent, American Data Services, Inc. at the
following address:
Avatar Advantage Balanced 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 (888) 263-6452 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
for credit to Avatar Advantage Balanced Fund DDA # 488840414 for further credit
to [your name and account number]
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 $2,500. The minimum subsequent
investment is $250. However, if you are investing in an Individual Retirement
Account ("IRA"), or you are starting an Automatic Investment Plan (see below),
the minimum initial and subsequent investments are $1,000 and $50, respectively.
Subsequent investments.
You may purchase additional shares of the Fund by sending a
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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 (888) 263-6452. You may also make additional purchases through an
investment dealer, as described above.
When is money invested in the Fund?
Any money received for investment in the Fund from an investor, 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). Orders received from dealers are invested at
the net asset value next calculated after the order is received. 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.
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 a check used to make an 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
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normally held in non-certificated form on the books of the Fund, for the account
of the shareholder. The Fund, under certain circumstances, may accept
investments of securities appropriate for the Fund's portfolio, in lieu of cash.
Prior to making such a purchase, you should call the Advisor to determine if
such an investment may be made. The Advisor may, at its own expense, pay third
parties for assistance in gathering assets for the Fund.
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 plans.
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 checking
account each month for a predetermined amount (but not less than $100), as if
you had written it 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 Systematic Withdrawal Program 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. This Program may be terminated or modified by a
shareholder or the Fund at any time without charge or penalty. A withdrawal
under the Systematic Withdrawal Program 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.
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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:
Avatar Advantage Balanced Fund
150 Motor Parkway, Suite 109
Hauppauge, NY 11788-0132
Signature guarantee.
If the value of the shares you wish to redeem exceeds $25,000, 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 (888) 263-6452 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
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nstructions 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 request that meets requirements described above. 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 may be avoided by investing by wire or by using a certified or official
bank check to make the purchase.
Repurchases from dealers.
The Fund may accept orders to repurchase shares from an investment dealer on
behalf of a dealer's customers. The net asset value for a repurchase is that
next calculated after receipt of the order from the dealer. The dealer is
responsible for forwarding any documents required in connection with a
redemption, including a signature guarantee, and the Fund may cancel the order
if these documents are not received promptly.
Other information about redemptions.
A redemption may result in recognition of a gain or loss for
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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 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
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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. The Board may also
authorize the issuance of additional classes of shares for an existing series.
The fiscal year of the Fund ends on December 31. 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.
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
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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
(888) 263-6452.
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