File No. 33-17391
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. 19 [x]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [ ]
Amendment No. 21 [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)
[x] immediately upon filing pursuant to paragraph (b)
[ ] on (date) 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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Kaminski Poland Fund
210 North 2nd Street, Suite 050
Minneapolis, MN 55401
Fund Literature (888) POL-FUND
Shareholder Services (888) 229-2105
The Kaminski Poland Fund (the "Fund") is a mutual fund that seeks long term
growth by investing in publicly traded securities of companies based in the
Republic of Poland. Kaminski Asset Management, Inc. (the "Advisor") is the
investment advisor to the Fund. There can be no assurance that the Fund will
achieve its investment objective.
The securities market in Poland is considered an "emerging market" with
greater risks than are present in the more developed economy and market of the
U.S. The Fund should not be considered a complete investment program. See the
Appendix "Special Considerations and Risks" at the end of this prospectus.
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 ("SAI") dated February 17, 1998, as may be
amended from time to time, 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. 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.
Mutual fund shares are not deposits or obligations of (or endorsed or
guaranteed by) any bank, nor are they federally insured or otherwise protected
by the Federal Deposit Insurance Corporation ("FDIC"), the Federal Reserve Board
or any other agency. Investing in any mutual fund involves investment risks,
including the possible loss of principal, and the value and return of any mutual
fund will fluctuate. In the case of this Fund, investors should be prepared to
accept significant volatility in share price and potentially substantial loss of
principal.
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 February 17, 1998
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TABLE OF CONTENTS
Expense Table ............................................................. 2
Financial Highlights ...................................................... 3
Investment Objectives and Policies ........................................ 4
Management of the Fund .................................................... 6
Investor Guide ............................................................ 7
Services Available to Shareholders ........................................ 8
How to Redeem Your Shares ................................................. 8
Distributions and Taxes ................................................... 10
General Information ....................................................... 10
Appendix, Special Considerations and Risks ................................ 11
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 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. Shares will be redeemed at
net asset value per share.
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases............................ None
Maximum Sales Load Imposed on Reinvested Dividends................. None
Deferred Sales Load................................................ None
Redemption Fees.................................................... None
Annual Operating Expenses
(As a percentage of average net assets)
Investment Advisory Fees............................................. 1.45%
12b-1 Fees........................................................... 0.25%
Other Expenses (after expense reimbursement)......................... 1.05%
----
Total Operating Expenses (after expense reimbursement)............... 2.75%
====
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. The Fund's total operating
expenses are not expected to exceed 2.75% 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 2.75%. "Other Expenses" in the above
table have been estimated for the first fiscal year of the Fund. 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 3.25%. 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
$ 28 $ 85
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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 $1,000, with subsequent minimum
investments of $250 or more.
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout the period (Unaudited)
- --------------------------------------------------------------------------------
July 9, 1997*
through
December 31, 1997
- --------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.00
Loss from investment operations:
Net investment loss (0.04)
Net realized and unrealized loss on investments (0.90)
-----
Total from investment operations (0.94)
-----
Less distributions:
From net investment income --
-----
Net asset value, end of period $ 9.06
=====
Total Return (9.40%)**
Ratios/supplemental data:
Net assets, end of period (thousands) $ 850
Ratio of expenses to average net assets:
Before expense reimbursement 27.86 %***
After expense reimbursement 2.75 %***
Ratio of net investment loss to average net assets:
Before expense reimbursement (25.90%)***
After expense reimbursement (0.80%)***
Portfolio turnover rate 0.00%
Average commission rate paid per share $0.1396
*Commencement of operations.
**Not Annualized.
***Annualized.
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INVESTMENT OBJECTIVES AND POLICIES
What is the Fund's investment objective?
The investment objective of the Fund is long term growth of capital. There can
be no assurance that the Fund will achieve its objective.
How does the Fund seek to achieve its objective?
Kaminski Asset Management, Inc. (the "Advisor") selects equity securities for
the Fund's portfolio that are issued by companies based in the Republic of
Poland. While there are currently over 190 stocks listed on the Warsaw Stock
Exchange, the Fund will invest only in certain of these stocks and will have a
fairly limited portfolio. In addition, the Fund may invest in shares of
investment companies that are being created as part of the privatization of
state-owned companies.
In selecting stocks for the Fund's portfolio, the Advisor can purchase stocks of
issuers with aggregate market capitalization greater than $10 million and an
annual rate of earnings growth that is greater than 10%. Currently, these
criteria are met by approximately 85% of all Warsaw Stock Exchange listed
companies. After a security is purchased, if it subsequently fails to meet
either of these criteria, the Advisor will consider some or all of the position,
but it is not required to eliminate the security from the Fund's portfolio. This
is an operating policy of the Fund, and not a fundamental policy, and it may be
changed by a vote of the Trustees of the Trust. The Advisor does not expect the
Fund's annual turnover rate to exceed 50%.
Because the Polish market is limited in market capitalization, the Fund may have
to close to new investors if its total assets exceed the amount that the Advisor
believes can be invested effectively.
What investment opportunities exist in the Republic of Poland?
Until relatively recently, Poland had a centrally planned economy, primarily
influenced by socialist and communist political philosophies and characterized
by nationalized industries, fixed prices and limited external trade. Since the
late 1980's, the Republic of Poland has undertaken political and economic
reforms, founded upon an ideological shift from socialism and communism to
capitalism. In 1990, a fully free election for the government was held. These
reforms have had the effect of creating a market-driven economy and have made
foreign investment possible.
The transition to a market-driven economy has been difficult and had the
immediate effect of high inflation rates, increased unemployment and a
significant decline in living standards as real wages fell. In addition, most of
Poland's external trade was formerly limited to the former Soviet Union and
other Warsaw Pact countries. As a consequence of all of these factors, Poland
experienced a significant drop in GDP.
In the last few years, these reforms have led to an improvement in the economy
of the Republic of Poland, which has been growing in real terms. In addition,
significant progress has been made in reducing inflation and government budget
deficits. In 1997, the GDP of the Republic of Poland was approximately $135.25
billion. By way of comparison, in the same period, the GDP for the United States
was $8.13 trillion. In 1997, the average GDP per capita of Poland was $3,459.
The Advisor believes that current conditions in Poland will result in a
significant level of economic activity, offering the potential for long-term
capital appreciation from investment in equity securities of issuers based
there. The Advisor believes that the strategic location of Poland between
Western Europe and Russia and Asia should benefit its economy by permitting it
to take advantage of the modernization, technology and capital available in
Western Europe and the large consumer base to the east. The privatization of
formerly state-run enterprises and the substantial restructuring of established
industries as the economy shifts from a quota-driven command economy to a free
market, supply and demand-driven economy and as companies begin to identify and
exploit domestic and export markets should result in investment opportunities.
The private sector, however, is not as developed in Poland as it is in Western
Europe.
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The total population of Poland is approximately 38.6 million and is
well-educated (relative to other emerging markets), with literacy rates that
compare favorably to those in Western Europe. For example, the literacy rates
averaged 99% in 1993 as compared with 100% in Germany in the same period. Annual
wage rates, however, are significantly lower than in the United States and
Germany.
What risks are associated with an investment in the Fund?
There are risks associated with all securities, but an investment in the Fund
entails more risks than in most other mutual funds. First, there are currency
risks. Most of the Fund's portfolio securities will be denominated in Polish
zlotys, and changes in the value of the zloty relative to the U.S. dollar will
affect the Fund's net asset value. If the dollar increases in value in relation
to the zloty and the price of securities is unchanged, the value of the Fund's
portfolio will decrease, and vice versa. Second, while regulation of securities
and the Warsaw Stock Exchange is similar to the regulatory framework in the
U.S., there is considerably less experience with regulation in Poland. Third,
the securities market in Poland is considered to be an "emerging market," with
greater risks than are present in the more developed economy and market of the
U.S. There is significantly less liquidity than in U.S. markets, which may lead
to difficulties in selling the Fund's portfolio securities. Finally, because the
Fund concentrates its investments in Poland, it will be subject to economic and
political developments that affect that country, unlike other international
funds which diversify among several countries. These risks are described in
detail in the Appendix at the end of this prospectus, and you should read this
Appendix carefully before investing. Also, you should not consider the Fund to
be a complete investment program, in which you should invest all, or even a
significant portion, of your assets.
Other securities the Fund might purchase and other investment techniques.
Under normal market conditions, the Fund will invest at least 80% of its total
assets in common stocks of companies based in the Republic of Poland. If the
Advisor believes that market conditions warrant a temporary defensive posture,
the Fund may invest without limit in high quality, short-term debt securities
and money market instruments. 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
buy or write options on equities and on stock indices, and it may engage in
foreign exchange transactions. More information about these investments is
contained in the SAI.
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.
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 must, under normal circumstances, invest at least 80% of its assets in
securities of issuers based in the Republic of Poland. The Fund is diversified,
which means that as to 75% of its total assets, no more than 5% may be invested
in the securities of a single issuer and the Fund's position in any single
issuer may not represent more than 10% of such issuer's voting securities.
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.
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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 is Kaminski Asset Management, Inc., 210 North 2nd Street,
Suite 050, Minneapolis, MN 55401. The Advisor, which is controlled by M.G.
Kaminski, commenced operations in December, 1996. Mr. Kaminski is the President
and Chief Executive Officer of the Advisor and the portfolio manager of the
Fund. Neither the Advisor nor Mr. Kaminski has previously advised a mutual fund,
but Mr. Kaminski, who was from October, 1992 until December, 1996 a Vice
President of PaineWebber Incorporated, was responsible for client assets
aggregating approximately $100 million in 1996. Prior to joining PaineWebber,
Mr. Kaminski was associated with Piper Jaffray, Inc.
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 1.45%
of average net assets on the first $20 million of net assets of the Fund,
reduced to 1.25% on assets in excess of $20 million. This fee is higher than
that paid by most mutual funds.
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 rate annual rate of 0.20%, 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 within the following three years, provided
the Advisor specifically requests reimbursement, the Board of Trustees approves
the reimbursement at the time of the request, and the Fund is able to make the
reimbursement and still remain in compliance with the Advisor's voluntary
expense limitation.
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. Because there are
relatively few broker-
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dealers who can handle transactions in Polish securities, the Fund will be
limited in its selection of broker-dealers and may have to pay higher commission
rates than are paid by institutions on U.S. securities.
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 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)
229-2105.
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 Kaminski Poland Fund) to the Fund's
Shareholder Servicing Agent:
Kaminski Poland 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) 229-2105 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 Kaminski Poland Fund
DDA # 486479769
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 $1,000. The minimum subsequent
investment is $250.
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 (888)
229-2105.
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
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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 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 $50), 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. The 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:
Kaminski Poland Fund
150 Motor Parkway, Suite 109
Hauppauge, NY 11788-0132
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 (888) 229-2105 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
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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.
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
10
<PAGE>
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 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) 229-2105.
APPENDIX
SPECIAL CONSIDERATIONS AND RISKS
Because the Fund will invest primarily in equity securities of issuers based in
the Republic of Poland, an investor in the Fund should be aware of special
considerations and risks relating to investments in those issuers, and
international investment generally, which typically are not associated with
investments in securities issued by U.S. companies. The Fund is designed for
long term investment, and an investment in its shares should be considered
speculative.
Currency fluctuations.
The Fund generally will hold assets denominated and traded in the Polish zloty,
and most of its income will be received or realized in zlotys, although the Fund
will compute its net asset value and calculate and distribute any income in U.S.
dollars. Accordingly, changes in the value of the zloty against the dollar will
result in corresponding changes in the dollar value of the Fund's assets
denominated in zlotys and in the Fund's net asset value, and will also change
the dollar value of income and gains derived in zlotys. If the value of the
zloty falls relative to the dollar between accrual of the income and the payment
of Fund distributions, the amount of zlotys required to be converted into
dollars to pay these distributions will increase, and the Fund could be required
to sell portfolio securities to make the distributions. Similarly, if the value
of the zloty declines between the time the Fund incurs expenses in dollars and
the time the expenses are paid, the amount of zlotys required to be converted
into dollars to pay the expenses will be greater than the zloty equivalent of
such expenses at the time they were incurred.
The Advisor generally will not seek to hedge against a decline in the value of
the Fund's portfolio securities resulting from a decline in the value of the
zloty. As a result, the Fund will be subject to the risk of changes in the value
of the zloty affecting the value of its portfolio securities, as well as the
value of interest, dividends and net realized capital gains received in zlotys.
11
<PAGE>
Economic and Political Factors.
The economy of Poland generally differs from the U.S. economy in such respects
as general development, rate of inflation, volatility of the rate of growth of
gross domestic product and balance of payments position, among others. The
following table sets forth some key economic indicators:
1994 1995 1996
---- ---- ----
GDP at current prices (Zl billion) 210.4 285.5 366.2
Real GDP growth (%) 5.3 7.0 6.2
Consumer price inflation (%) 32.2 27.8 19.9
Current account ($ billion) (2.6) (4.3) (8.15)
Exchange rate, average (Zl:$) 2.27 2.43 2.71
1997
----
GDP at current prices (Zl billion) 474.7
Real GDP growth (%) 7.0
Consumer price inflation (%) 13.0
Current account ($ billion) (12.1)
Exchange rate, average (Zl:$) 3.51
Source: The Economist Intelligence Unit
Poland has had a centrally planned socialist economy for many years. Recently
the government has generally implemented reforms directed at economic
liberalization, including efforts to decentralize the decision-making process
and to establish market-oriented economics. However, there can be no assurance
that current or future governments will continue to pursue these policies.
Furthermore, the transition from a centrally planned, socialist economy to a
competitive market economy resulted in the past in certain disruptions; for
example, in 1990 and 1991 GDP declined 11.6% and 7.0%, unemployment rose from
under 12% in 1991 to over 16% in 1994, before declining to 13% at the end of
March, 1997. There can be no assurance that disruptions will not occur again in
the future. In addition, business entities in Poland do not have any significant
recent history of operating in a market-oriented economy, and the ultimate
impact of Poland's attempts to move toward a more market-oriented environment is
unclear.
Although a democratic system of government is now generally established in
Poland, the country remains exposed to risks of political change or periods of
uncertainty. Nationalization, expropriation or confiscatory taxation, currency
blockage, government regulation, social instability or diplomatic developments
could adversely affect its economy or its securities markets. In addition, many
of the countries near Poland are similarly exposed to these same uncertainties,
and disruptions in any of these countries could adversely affect the economy of
Poland.
As a result of Poland's recent socialist history, the country does not have a
body of laws and court decisions comparable to those of the U.S. Laws may not
exist to cover all contingencies or to protect adequately, and the
administration of these laws may be subject to considerable discretion. There
also can be no assurance that laws and related interpretations will not be
changed or applied in a manner that will adversely affect the Fund and its
assets.
The Polish Commercial Code sets forth requirements regarding capitalization,
shareholders meetings, records and auditing for Polish companies. Recent
amendments to the Commercial Code are aimed at modernizing its legal norms and
adapting them to models prevailing in the European Community. All joint stock
companies, limited liability companies and certain other entities are required
to have annually audited financial statements.
Foreign Investment and Repatriation.
Currently, there are no restrictions on foreign investment in Polish securities,
except with respect to securities of issuers whose business relates to operation
of sea or air ports, real estate, the defense industry, wholesale trading of
imported consumer goods or legal services. Investments may be made in such
industries if authorization is obtained from the Ministry of Privatization.
Also, permission must be sought from the relevant licensing authority to
purchase shares of issuers in industries where licenses from the Polish
government are required, such as the banking or brokerage industry or a business
involving the production of alcohol, cigarettes or medicine.
12
<PAGE>
In early 1990, internal convertibility of the Polish zloty was introduced. Both
the initial investment in and any profits resulting from business activities may
be freely repatriated, provided the currency exchange is made at an authorized
foreign exchange bank. In the case of dividends, repatriation is only allowed
after an audit certificate has been issued and the necessary taxes have been
paid. The National Bank of Poland is responsible for overseeing the banking
system in Poland and for controlling monetary policy and exchange rates.
Characteristics of Securities Markets and Regulation.
The securities markets in Poland are much smaller than those in the U.S.
Although a stock exchange first opened in Warsaw in 1817 and before World War II
there were seven stock exchanges operating in Poland, the capital markets in
Poland did not operate after that war until 1991. In structuring the capital
markets and their regulation in 1991, the Polish government reviewed several
contemporary world markets and based the system on the securities markets in
France, with assistance from the Societe des Bourses Francaises. In 1991, the
Act on Public Trading in Securities and Trust Funds was adopted, and the Polish
Securities Commission was created. The Warsaw Stock Exchange (the "WSE") was
also established by the State Treasury as a joint stock company. The WSE is a
self-regulatory organization (as are stock exchanges in the U.S.), and its rules
must be approved by the Polish Securities Commission. In 1994, the WSE was
admitted as a member of the International Federation of Stock Exchanges.
The Polish Securities Commission is responsible for monitoring the Polish
securities market, supervising all public trading, including trading on the WSE,
and regulating brokers. In addition, a Brokers Association is responsible for
regulating the activities and conduct of brokers. Currently, there are two
categories of publicly traded securities: securities listed on the WSE and
securities traded over-the-counter. The disclosure requirements are less
stringent for issuers whose securities are traded over-the-counter. Clearing and
settlement occurs within three business days through the National Depository for
Securities, which is operated by the WSE.
Notwithstanding the similarities between the U.S. and Polish securities markets
in terms of structure and regulation, there are significant differences. There
is, for example, substantially less trading volume on the WSE than the New York
Stock Exchange (the "NYSE"), and its aggregate market capitalization at December
31, 1997 was less than 1% of the aggregate market capitalization of the New York
Stock Exchange. There is also a high concentration of market capitalization and
trading volume in a relatively small number of issuers representing a limited
number of industries, as well as a high concentration of investors. There are,
for example, nearly 3,000 companies listed on the NYSE, while there are less
than 200 issuers listed on the WSE. As a result, the securities markets in
Poland are subject to a lack of liquidity and high price volatility relative to
the U.S. securities markets. In addition, securities traded in Poland may be
subject to risks due to the inexperience of financial intermediaries, the lack
of a sufficient capital base to expand operations and the possibility of
restrictions on trading. Finally, since current regulations governing securities
markets have only existed since 1971, the regulators in Poland do not have the
experience of regulators in the U.S., where federal securities regulation has
been in effect since 1933.
13
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<PAGE>
ADVISOR
Kaminski Asset Management, Inc.
210 North 2nd Street, Suite 050
Minneapolis, MN 55401
Web page: www.polfund.com
DISTRIBUTOR
First Fund Distributors, Inc.
4455 E. Camelback Road, Suite 261-E
Phoenix, Arizona 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
(888) 229-2105
AUDITORS
Price Waterhouse, LLP
33 South 6th Street
Suite 3100
Minneapolis, MN 55402
LEGAL COUNSEL
Paul, Hastings, Janofsky & Walker, LLP
345 California Street, 29th Floor
San Francisco, CA 94104
<PAGE>
KAMINSKI POLAND FUND
PROSPECTUS & APPLICATION
February 17, 1998
MANAGED BY
KAMINSKI ASSET MANAGEMENT, INC.
210 NORTH 2ND STREET SUITE 050
MINNEAPOLIS, MN 55401
<PAGE>
KAMINSKI POLAND FUND
Statement of Additional Information
Dated February 17, 1998
This Statement of Additional Information is not a prospectus, and it should be
read in conjunction with the prospectus dated February 17, 1998, as may be
amended from time to time, of the Kaminski Poland Fund (the "Fund"), a series of
Advisors Series Trust (the "Trust"). Kaminski Asset Management, Inc. (the
"Advisor") is the Advisor to the Fund. A copy of the prospectus may be obtained
from the Fund at 210 North 2nd Street, #050, Minneapolis, Minnesota, telephone
number (612) 305-9026.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Cross-reference to sections
Page in the prospectus
---- ---------------------------
<S> <C> <C>
Investment Objective and Policies................... B-2 Investment Objectives and Policies
Management.......................................... B-11 Management of the Fund
Portfolio Transactions and Brokerage................ B-13 Management of the Fund
Net Asset Value..................................... B-14 Investor Guide
Taxation............................................ B-15 Distributions and Taxes
Dividends and Distributions......................... B-17 Distributions and Taxes
Performance Information............................. B-17 General Information
General Information................................. B-18 General Information
Appendix............................................ B-19 Not applicable
</TABLE>
B-1
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of the Fund is long term growth of capital,
which it attempts to achieve by investing in equity securities that are issued
by companies based in the Republic of Poland. 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).
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 regulations designed to promote financial soundness. However, such laws
and regulations do not necessarily apply to foreign bank obligations that the
Fund may acquire.
B-2
<PAGE>
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 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
B-3
<PAGE>
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 will 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, which are described in the Fund's
prospectus.
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.
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.
B-4
<PAGE>
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 its initial investment, due to the
margin and collateral requirements typically associated with such option
writing. See "Dealer Options".
B-5
<PAGE>
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.
B-6
<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.
B-7
<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
331/3% 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.
B-8
<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 $10 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 large sales, the Fund
may have to sell portfolio holdings at discounts from quoted prices or may have
to make
B-9
<PAGE>
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. The Fund will also, as a matter of fundamental policy,
invest at least 80% of its total assets, under normal market conditions, in
securities of issuers based in the Republic of Poland.
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 (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 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 one industry (other than U.S. Government
securities);
5. Purchase of 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).
B-10
<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 Auch, Sr. (76) Trustee Director, Geotech Communications, Inc., Nicholas-
6002 N. 62d Place Applegate Investment Trust, Brinson Funds (since
Paradise Valley, AZ 85253 1940, Smith Barney Trak Fund, Pimco Advisors L.P.,
Banyan Realty Trust, Banyan Land Fund II and Legend
Properties.
Eric M. Banhazl (40)* Trustee, Senior Vice President, Investment Company
2025 E. Financial Way President and Administration Corporation; Vice President, First Fund
Glendora, CA 91740 Treasurer Distributors, Inc.; President, RNC Mutual Fund Group;
Treasurer, Guinness Flight Investment Funds, Inc. and
Professionally Managed Portfolios.
Donald E. O'Connor (61) Trustee Retired; formerly Executive Vice President and chief
1700 Taylor Avenue Operating Officer of ICI Mutual Insurance Company
Fort Washington, MD 20744 (until January 1997), Vice President, Operations,
Investment Company Institute (until June 1993).
George T. Wofford III (58) Trustee Vice President, Information Services, Federal Home
305 Glendora Circle Loan Bank San Francisco (since March 1993); formerly
Danville, CA 94526 Director of Management Information Services, Morrison
& Foerster (law firm).
Steven J. Paggioli (47) Vice President Executive Vice President, Robert H. Wadsworth &
479 W. 22d Street Associates, Inc. and Investment Company
New York, NY 10011 Administration Corporation; Vice President, First Fund
Distributors, Inc.; President and Trustee, Professionally
Managed Portfolios; Director, Managers Funds, Inc.
Robert H. Wadsworth (58) Vice President President, Robert H. Wadsworth & Associates, Inc.,
4455 E. Camelback Road Investment Company Administration Corporation and
Suite 261E First Fund Distributors, Inc.; Vice President,
Phoenix, AZ 85018 Professional 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 (49) Secretary Employed by Investment Company Administration
4455 E. Camelback Road (since July 1996); formerly employed by Bank One,
Suite 261E N.A. (From August 1995 until July 1996); O'Connor,
Phoenix, AZ 85018 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.
B-11
<PAGE>
Name and Position Aggregate Compensation from The Trust*
- ----------------- --------------------------------------
Walter E. Auch, Sr., Trustee $12,000
Donald E. O'Connor, Trustee $12,000
George T. Wofford III, Trustee $12,000
*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 provision 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 investment 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 other
officers of the Trust may reasonably request; and (vii) 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 ti 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 fo 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 marketing 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 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 calculation 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 member of, affiliated with or interested persons of the
Advisor or Administrator; insurance premiums on property or personnel of the
Fund which insure 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 distributing to existing shareholders; legal, auditing and
accounting fees; trade association dues; fees and expense (including legal fees)
of registering and maintaining and servicing shareholder accounts, including
charges for transfer, shareholder recordkeeping, dividend disbursing,
redemption, and other agents for the benefit of
B-12
<PAGE>
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 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
limitation in effect at that time.
The Advisor is controlled by M. G. Kaminski.
Under the Advisory Agreement, the Advisor will not be liable to the
Trust of the Fund or any shareholder for any act or commission 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 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 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 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 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
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<PAGE>
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
yo 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 of 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 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, Martin Luther King, Jr. Day, President's 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 other 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 securities in Poland is
substantially completed each day prior to the close of the NYSE. In addition,
trading in and valuation of those 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 Poland on days which the
NYSE is not open for trading 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 and 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 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
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<PAGE>
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.
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) 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 (3) 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 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 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.
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<PAGE>
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 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.
B-16
<PAGE>
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:
n
P(1 + T) = 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 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.
B-17
<PAGE>
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.
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. Citibank, N.A. acts as the
Fund's sub-custodian in Poland. American Data Services, 150 Motor Parkway, Suite
109, Hauppague, NY 11788 acts as the Fund's accounting services agent. The
Fund's independent accountants, Price Waterhouse,LLP 33 South 6th Street, Suite
3100, Minneapolis, MN 55402 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 February 13, 1998.
On December 31, 1997, the following additional persons owned of record
and/or beneficially more than 5% of the Fund's outstanding voting securities:
Mager, Donald V. and Shirley M., 2111 Delaware Ave., St. Paul, MN
55118, 10.50% record.
Hirdler, F. Carl, 328 N. Ocean Blvd. #305, Pompano Beach, FL 33062,
5.2% record.
B-18
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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.
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.
B-19
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
Contained in Part A, the Prospectus:
Financial Highlights
Contained in Part B, the Statement of Additional Information:
Incorporated by reference from Semi-Annual Reports to
Shareholders for the period ended December 31, 1997
(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.
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<PAGE>
(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.
Shares of Beneficial Interest
Number of record holders as of January 31, 1998
American Trust Allegiance Fund: 253
InformationTech 100 Fund: 21
Kaminski Poland Fund: 296
Ridgeway-Helms Millennium Fund: 105
The Rockhaven Fund: 29
The Rockhaven Premier Dividend Fund: 19
Chase Growth Fund: 68
The Avatar Advantage Equity Allocation Fund: 2
Edgar Lomax Value Fund: 36
The Al Frank Fund: 109
The Avatar Advantage Balanced Fund: 1
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
C-2
<PAGE>
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.
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,
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<PAGE>
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 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
C-4
<PAGE>
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
Gordon Road, Middletown, New York
Robert E. Moses, a Director of American Trust Company, is a director
of:
Mascoma Mutual Hold Corp.
On 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.
-------------------------- --------
C-5
<PAGE>
Bay Isle Financial Corporation 801-27563
Kaminski Asset Management, Inc. 801-53485
Ridgeway Helms Investment Management 801-49884
Rockhaven Asset Management, LLC 801-54084
Chase Investment Counsel Corp. 801-3396
Avatar Investors Associates Corp. 801-7061
The Edgar Lomax Company 801-19358
Van Deventer & Hoch 801-6118
Al Frank Asset Management, Inc. 801-30528
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
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
(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;
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<PAGE>
(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:
American Trust Company, One Court Street, Lebanon, NH 03766
Bay Isle Financial Corporation, 160 Sansome Street, San Francisco, CA
94104
Kaminski Asset Management, Inc., 210 Second 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
Chase Investment Counsel Corp., 300 Preston Avenue, Charlottesville, VA
22902
Avatar Associates Investment Corp., 900 Third Avenue, New York, NY 10022
The Edgar Lomax Company, 6564 Loisdale Court, Springfield, VA 22150
Van Deventer & Hoch, 800 North Bend Boulevard, Glendale, CA 91203
Al Frank Asset Management, Inc. 465 Forest Avenue, Laguna Beach, CA
92651
(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) Furnish each person to whom a Prospectus is delivered a copy
of the applicable latest annual report to shareholders, upon
request and without charge.
(b) 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.
(c) On behalf of each of its series, to change any disclosure of
past performance of an Advisor to a series to conform to
changes in the position of the staff of the Commission with
respect to such presentation.
(d) File a post-effective amendment for The Avatar Advantage
Equity Allocation Fund series, using financial statements
which may not be certified, within four to six months of the
effective date of Amendment No. 5 to the Registration
Statement as such requirement
C-7
<PAGE>
is interpreted by the staff of the Commission.
(e) File a post-effective amendment for The Avatar Advantage
Balanced Fund series, using financial statements which may not
be certified, within four to six months of the effective date
of Amendment No. 10 to the Registration Statement as such
requirement is interpreted by the staff of the Commission.
(f) File a post-effective amendment for The Avatar Advantage
International Equity Allocation Fund series, using financial
statements which may not be certified, within four to six
months of the effective date of Amendment No. 12 to the
Registration Statement as such requirement is interpreted by
the staff of the Commission.
C-8
<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 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 18 day of February, 1998.
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 February 18, 1998.
/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
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001027596
<NAME> ADVISORS SERIES TRUST
<SERIES>
<NUMBER> 3
<NAME> KAMINSKI POLAND FUND
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-9-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 768,839
<INVESTMENTS-AT-VALUE> 683,810
<RECEIVABLES> 64,377
<ASSETS-OTHER> 172,675
<OTHER-ITEMS-ASSETS> 40,178
<TOTAL-ASSETS> 961,040
<PAYABLE-FOR-SECURITIES> 39,527
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 71,290
<TOTAL-LIABILITIES> 110,817
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 937,421
<SHARES-COMMON-STOCK> 93,883
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (2,169)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (85,029)
<NET-ASSETS> 850,223
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,349
<OTHER-INCOME> 0
<EXPENSES-NET> 7,518
<NET-INVESTMENT-INCOME> (2,169)
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> (85,029)
<NET-CHANGE-FROM-OPS> (87,198)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 98,986
<NUMBER-OF-SHARES-REDEEMED> 5,103
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 850,223
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,911
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 75,806
<AVERAGE-NET-ASSETS> 564,190
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> (.02)
<PER-SHARE-DIVIDEND> (.92)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.06
<EXPENSE-RATIO> .03
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
ADVISORS SERIES TRUST
---------------------
DISTRIBUTION PLAN
(Rule 12b-1 Plan)
This Distribution Plan (the "Plan") is adopted in accordance
with Rule 12b-1 (the "Rule") under the Investment Company Act of 1940 (the
"Act"), by ADVISORS SERIES TRUST, a Delaware business trust (the "Trust") with
respect to certain series of its shares (each series, a "Fund"). The Plan has
been approved by a majority of the Trust's Board of Trustees, including a
majority of the Trustees who are not interested persons of the Trust and who
have no direct or indirect financial interest in the operation of the Plan (the
"Independent Trustees"), cast in person at a meeting called for the purpose of
voting on the Plan and, to the extent required by the Rule, by a majority of the
shareholders of each Fund.
In reviewing the Plan, the Board of Trustees considered the
proposed range and nature of payments and terms of the Investment Advisory
Agreement between the Trust on behalf of each Fund and the investment advisor to
that Fund (the "Advisor") and the nature and amount of other payments, fees and
commissions that may be paid to the Advisor, its affiliates and other agents of
the Trust. The Board of Trustees, including the Independent Trustees, concluded
that the proposed overall compensation of the Advisor and its affiliates was
fair and not excessive.
In its considerations, the Board of Trustees also recognized
that uncertainty may exist from time to time with respect to whether payments to
be made by the Trust to the Advisor, as the initial "distribution coordinator,"
or other firms under agreements with respect to a Fund may be deemed to
constitute impermissible distribution expenses. As a general rule, an investment
company may not finance any activity primarily intended to result in the sale of
its shares except pursuant to the Rule. Accordingly, the Board of Trustees
determined that the Plan also should provide that payments by the Trust and
expenditures made by others out of monies received from the Trust which are
later deemed to be for the financing of any
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<PAGE>
activity primarily intended to result in the sale of shares shall be deemed to
have been made pursuant to the Plan.
The approval of the Board of Trustees included a determination
that in the exercise of the Trustees' reasonable business judgment and in light
of their fiduciary duties, there is a reasonable likelihood that the Plan will
benefit the Trust, each Fund to which the Plan applies and its shareholders. If
required by the Rule, the Plan also has been approved by a vote of at least a
majority of the outstanding voting securities of each Fund, as defined in the
Act.
The provisions of the Plan are:
1. Annual Fee. The Trust will pay to Advisor, as a Fund's
distribution coordinator, an annual fee for the Advisor's services in such
capacity including its expenses in connection with the promotion and
distribution of the Fund's shares and related shareholder servicing
(collectively, "Distribution Expenses"). The annual fee paid to an Advisor under
the Plan will be calculated daily and paid monthly by each Fund on the first day
of each month based on the average daily net assets of the Fund, as set forth in
the Advisor's acceptance of this Plan.
2. Distribution Expenses in Excess of or Less Than Amount of
Fee. All Distribution Expenses in excess of the fee rates provided for in this
Plan may be carried forward and resubmitted in a subsequent fiscal year provided
that (i) Distribution Expenses cannot be carried forward for more than three
years following initial submission; and (ii) the Trust's Board of Trustees has
made a determination at the time of initial submission that the Distribution
Expenses are appropriate to be reimbursed. The fees paid by the Trust on behalf
of each Fund shall be refundable if in any given year the fees are greater than
the Distribution Expenses for that year. Distribution expenses will be paid on a
first-in, first-out basis.
3. Expenses Covered by the Plan. The fee paid under Section 1
of the Plan may be used to pay for any expenses primarily intended to result in
the sale of a Fund's shares ("distribution services"), including, but not
limited to: (a) costs of payments, including incentive compensation, made to
agents for and consultants to an Advisor, any affiliate of the
-2-
<PAGE>
Advisor or the Trust, including pension administration firms that provide
distribution and shareholder related services and broker-dealers that engage in
the distribution of the Fund's shares; (b) payments made to, expenses of and
direct overhead of, persons who provide support services in connection with the
distribution of a Fund's shares and servicing of a Fund's shareholders,
including, but not limited to, personnel of an Advisor, answering routine
inquiries regarding the Fund, processing shareholder transactions and providing
any other shareholder services not otherwise, or in lieu of those, provided by
the Trust's transfer agency or other servicing arrangements; (c) all payments
made pursuant to the form of Share Marketing Agreement attached hereto as an
exhibit; (d) costs relating to the formulation and implementation of marketing
and promotional activities, including, but not limited to, direct mail
promotions and television, radio, newspaper, magazine and other mass media
advertising; (e) costs of printing and distributing prospectuses, statements of
additional information and reports of the Fund to prospective shareholders; (f)
costs involved in preparing, printing and distributing sales literature
pertaining to the Fund; and (g) costs involved in obtaining whatever
information, analyses and reports with respect to marketing and promotional
activities that the Trust may, from time to time, deem advisable. Such expenses
shall be deemed incurred whether paid directly by an Advisor as distribution
coordinator or by a third party to the extent reimbursed therefor by an Advisor.
4. Written Reports. Each Advisor shall furnish to the Board of
Trustees of the Trust, for its review, on a quarterly basis, a written report of
the monies paid to it under the Plan with respect to a Fund, and shall furnish
the Board of Trustees of the Trust with such other information as the Board of
Trustees may reasonably request in connection with the payments made under the
Plan in order to enable the Board of Trustees to make an informed determination
of whether the Plan should be continued as to the Fund.
5. Termination. The Plan may be terminated as to any Fund at
any time, without penalty, by vote of a majority of the outstanding voting
securities of the Fund, and any Share Marketing Agreement under the Plan may be
likewise terminated on not more than sixty (60) days' written notice. Once
terminated, no further payments shall be made under the Plan notwithstanding
-3-
<PAGE>
the existence of any unreimbursed current or carried forward Distribution
Expenses.
6. Amendments. The Plan and any Share Marketing Agreement may
not be amended to increase materially the amount to be spent for distribution
and servicing of shares of a Fund pursuant to Section 1 hereof without approval
by a majority of the outstanding voting securities of the Fund. All material
amendments to the Plan and any Share Marketing Agreement entered into with third
parties shall be approved by the Independent Trustees cast in person at a
meeting called for the purpose of voting on any such amendment. An Advisor may
assign its responsibilities and liabilities under the Plan to another party who
agrees to act as "distribution coordinator" for the Trust with the consent of a
majority of the Independent Trustees. An Advisor may assign its liabilities and
projected revenues (subject to the termination rights stated herein) to a third
party with the consent of a majority of the Independent Trustees.
7. Selection of Independent Trustees. So long as the Plan is
in effect, the selection and nomination of the Trust's Independent Trustees
shall be committed to the discretion of such Independent Trustees.
8. Effective Date of Plan. The Plan shall take effect, with
respect to each Fund, at such time as it has received requisite Trustee and
shareholder approval and, unless sooner terminated, shall continue in effect for
a period of more than one year from the date of its execution only so long as
such continuance is specifically approved at least annually by the Board of
Trustees of the Trust, including the Independent Trustees, cast in person at a
meeting called for the purpose of voting on such continuance.
9. Preservation of Materials. The Trust will preserve copies
of the Plan, any agreements relating to the Plan and any report made pursuant to
Section 5 above, for a period of not less than six years (the first two years in
an easily accessible place) from the date of the Plan, agreement or report.
10. Meanings of Certain Terms. As used in the Plan, the terms
"interested person" and "majority of the outstanding voting securities" will be
deemed to have the same meaning that
-4-
<PAGE>
those terms have under the Act and the rules and regulations under the Act,
subject to any exemption that may be granted to the Trust under the Act by the
Securities and Exchange Commission.
-5-
<PAGE>
ACCEPTANCE AS TO (Name)
The undersigned Advisor, as distribution coordinator, hereby
accepts and agrees to this Plan and the terms and provisions thereof, and agrees
to a fee pursuant to Section 1 of the Plan at the annual rate of ___%, as of
this ___ day of ________ 19__.
[NAME OF ADVISOR]
as Distribution Coordinator
By:
Title:
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<PAGE>
ADVISORS SERIES TRUST
---------------------
Share Marketing Agreement
- -----------------------------------
- -----------------------------------
- -----------------------------------
- -----------------------------------
Ladies and Gentlemen:
This Share Marketing Agreement has been adopted pursuant to
Rule 12b-1 under the Investment Company Act of 1940, (the "Act"), by ADVISORS
SERIES TRUST, a Delaware business trust (the "Trust"), on behalf of various
series of the Trust (each series, a "Fund"), as governed by the terms of a
Distribution Plan (Rule 12b-1 Plan) (the "Plan").
The Plan has been approved by a majority of the Trustees who
are not interested persons of the Trust or the Funds and who have no direct or
indirect financial interest in the operation of the Plan (the "Independent
Trustees"), cast in person at a meeting called for the purpose of voting on such
Plan. Such approval included a determination that in the exercise of the
reasonable business judgment of the Board of Trustees and in light of the
Trustees' fiduciary duties, there is a reasonable likelihood that the Plan will
benefit each Fund and its shareholders.
1. To the extent you provide eligible shareholder services of the type
identified in the Plan to the Fund(s) identified in the attached Schedule (the
"Schedule"), we shall pay you a monthly fee based on the average net asset value
of shares of the Fund(s)during any month which are attributable to customers of
your firm, at the rate set forth on the Schedule.
-7-
<PAGE>
2. You shall furnish us and the Trust with such information as shall
reasonably be requested by the Trust's Board of Trustees with respect to the
services performed by you and the fees paid to you pursuant to the Schedule.
3. We shall furnish to the Board of Trustees of the Trust, for its
review,on a quarterly basis, a written report of the amounts expended under the
Plan by us with respect to the Fund(s) and the purposes for which such
expenditures were made.
4. No person is authorized to make any representations concerning a
Fund or shares of a Fund except those contained in that Fund's then-effective
Prospectus or Statement of Additional Information and any such information as
may be released by a Fund as information supplemental to such Prospectus or
Statement of Additional Information.
5. Additional copies of each such Prospectus or Statement of Additional
Information and any printed information issued as supplemental to each such
Prospectus or Statement of Additional Information will be supplied by each Fund
to you in reasonable quantities upon request.
6. In no transaction shall you have any authority whatever to act as
agent of a Fund and nothing in this Agreement shall constitute you or a Fund the
agent of the other. This Agreement does not authorize you to act as an
underwriter of shares of a Fund or as a dealer in shares of a Fund.
7. All communications to a Fund shall be sent to:
_____________________________________,
as Distribution Coordinator for the
_________________________ Fund,
_____________________________________
_____________________________________
-8-
<PAGE>
Any notice to you shall be duly given if mailed or telegraphed to you
at your address as indicated in this Agreement.
8. This Agreement may be terminated by us or by you, by the vote of a
majority of the Trustees of the Trust who are Independent Trustees, or by a vote
of a majority of the outstanding shares of a Fund, on sixty (60) days' written
notice, all without payment of any penalty. It shall also be terminated
automatically by any act that terminates the Plan.
9. The provisions of the Plan between the Trust and us, insofar as they
relate to you, are incorporated herein by reference.
This Agreement shall take effect on the date indicated below, and the
terms and provisions thereof are hereby accepted and agreed to by us as
evidenced by our execution hereof.
_______________________________
Distribution Coordinator
By:____________________________
Authorized Officer
Dated:_____________________________
Agreed and Accepted:
_____________________________
(Name)
By:__________________________
Authorized Officer
-9-
<PAGE>
ADVISORS SERIES TRUST
___________________
SCHEDULE TO SHARE MARKETING AGREEMENT
BETWEEN _____________________
AS DISTRIBUTION COORDINATOR
AND
_______________________________
(Name)
Pursuant to the provisions of the Share Marketing Agreement between the
above parties with respect to Advisors Series Trust, ___________________________
_______________________________, as Distribution Coordinator, shall pay a
monthly fee to the above-named party based on the average net asset value of
shares of the Fund during the previous calendar month the sales of which are
attributable to the above-named party, as follows:
Fund Class Fee
---- ----- ---
-10-
