File No. 333-17391
811-07959
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO. 57 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 59 [X]
ADVISORS SERIES TRUST
(Exact name of registrant as specified in charter)
4455 E. Camelback Road, Suite 261E
Phoenix, AZ 85018
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number (Including Area Code): (602) 952-1100
Robert H. Wadsworth
Advisors Series Trust
4455 E. Camelback Road, Suite 261E
Phoenix, Az 85018
(Name and address of agent for service of process)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after the
effective date of the registration statement.
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days axter 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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THE ROCKHAVEN FUND (RAMEX) AND THE ROCKHAVEN PREMIER DIVIDEND FUND (RAMCX), EACH
A SERIES OF ADVISORS SERIES TRUST
This Prospectus describes two mutual funds.
The Rockhaven Fund is a mutual fund with the investment objective of obtaining
above average current income together with capital appreciation. The Rockhaven
Premier Dividend Fund (referred to in this Prospectus as the "Premier Dividend
Fund") is a mutual fund with a primary investment objective of obtaining high
current income and a secondary objective of seeking capital appreciation. (The
two funds collectively are referred to as the "Funds.") Both Funds attempt to
achieve their objective by investing in a diversified portfolio of equity
securities.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF THESE
SECURITIES OR PASSED ON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is ______ , 1999
<PAGE>
AN OVERVIEW OF THE FUNDS
WHAT ARE THE FUNDS' INVESTMENT OBJECTIVES?
The investment objective of The Rockhaven Fund is to obtain above average
current income together with capital appreciation. Capital appreciation and
current yield are given equal emphasis. The primary investment objective of the
Premier Dividend Fund is to obtain high current income, with a secondary
objective of seeking capital appreciation. The objectives of the Funds may be
changed only with shareholder approval.
WHAT ARE THE FUNDS' PRINCIPAL INVESTMENT STRATEGIES?
The Funds invest primarily in income-producing equity securities. In selecting
investments, Rockhaven Asset Management, LLC (the "Advisor") selects common
stocks that it believes have good value, attractive yield and potential for
dividend growth. Based on the Advisor's assessment of market and economic
conditions and outlook, it also invests a varying portion of each Fund's
portfolio in preferred stocks and convertible securities.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUNDS?
You may lose money by investing in the Funds. Other principal risks you should
consider include:
MARKET DECLINE - A company's stock price or the overall stock market may
experience a sudden decline.
THE EFFECT OF INTEREST RATES - The Funds may invest in bonds and other debt
instruments which may be affected by interest rate changes and changes in the
creditworthiness of the bond or debt instrument issuer.
FOREIGN SECURITY RISK - Both Funds may invest in stocks of foreign companies.
Stocks of foreign companies may involve greater volatility and political and
economic risks.
DEFENSIVE INVESTMENTS - the Funds may invest up to 100% of its assets in cash,
cash equivalents, and high quality, short-term debt securities and money market
instruments for temporary defensive purposes. During such a period, the Funds
may not reach their investment objectives. For example, should the market
advance during this period, the Funds may not participate as much as they would
have if they had been more fully invested.
YEAR 2000 RISK - A fund could be adversely affected if the computer systems used
by the Advisor and other service providers do not properly process and calculate
information related to dates beginning January 1, 2000. This is commonly known
as the "Year 2000 Problem." This situation may negatively affect the companies
in which the Funds invest and by extension the value of the Funds' shares.
Although the Funds' service providers are taking steps to address this issue,
there may still be some risk of adverse effects.
WHO MAY WANT TO INVEST IN THE FUNDS
The Funds may be appropriate for investors who:
* Are willing to hold their shares for a long period of time (e.g. in
preparation for retirement);
* Are diversifying their investment portfolio by investing in a mutual fund
that concentrates in equity securities, including securities convertible
into equities, and corporate bonds;
* Are willing to accept higher short-term risk in exchange for a higher
potential for a long-term total return.
Shares of the Funds are not bank deposits, nor are they guaranteed or endorsed
by AmSouth Bancorporation or any other bank. Shares of the Funds are not insured
by the Federal Deposit Insurance Corporation ("FDIC"), Federal Reserve Board or
any other agency.
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FEES AND EXPENSES OF THE FUNDS
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Funds.
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price) 5.75%
ANNUAL OPERATING EXPENSES OF EACH FUND*
(expenses that are deducted from the assets of each Fund)
Management Fees 0.75%
Distribution and Service (12b-1) Fees 0.25%
Other Expenses X%
Total Annual Fund Operating Expenses X%
Fee Waiver and/or Expense Reimbursement* X%
Actual Operating Expenses X%
The Advisor has contractually agreed to reduce its fees and/or pay expenses of
each Fund for an indefinite period to insure that total Fund annual operating
expenses do not exceed 1.50%. This contract may only be terminated by the Board
of Trustees. The Advisor reserves the right to be reimbursed for any waiver of
its fees or expenses paid on behalf of the Funds if a Fund's expenses are less
than the limit agreed to by the Funds. The Trustees may terminate this expense
reimbursement arrangement at any time.
EXAMPLE
This example is intended to help you compare the cost of investing in the Funds
with the cost of investing in other mutual funds.
This Example assumes that you invest $10,000 in one Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, under the assumptions, your costs would be:
One Year $ 718
Three Years $1,021
Five Years $1,345
Ten Years $2,256
INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
The Rockhaven Fund's investment goal is to obtain above average current income
together with capital appreciation. The Premier Dividend Fund's investment goal
is to obtain high current income with a secondary objective of capital
appreciation.
Both Funds attempt to achieve their objectives by investing in a diversified
portfolio of equity securities. Under normal market conditions, each Fund will
invest at least 65% of its total assets in income-producing equity securities,
consisting of common and preferred stocks and securities convertible into common
stocks, such as convertible bonds and convertible preferred stocks.
The Advisor expects that the Premier Dividend Fund will maintain a higher
percentage of its portfolio in convertible securities than will The Rockhaven
Fund. The Fund may depart from its principal investment strategies by making
short-term investments in cash equivalents in response to adverse market,
economic or political conditions. This may result in the Fund not achieving its
investment objective.
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Although the Funds will be managed with consideration given to tax efficiency,
each Fund's portfolio turnover rate has and could exceed 100%. A high portfolio
turnover rate (100% or more) has the potential to result in the realization and
distribution to shareholders of higher capital gains. This may mean that you
would be likely to have a higher tax liability. A high portfolio turnover rate
also leads to higher transaction costs, which could negatively affect the Funds'
performance. The Advisor expects that the turnover rate for the Funds will not
exceed 200%.
OTHER SECURITIES THE FUNDS MAY PURCHASE
Under normal market conditions, each Fund may invest up to 35% of the value of
its total assets in corporate bonds, notes, rights and warrants, as well as
short-term obligations. In addition, each Fund may also invest in the following
types of securities. Please refer to the SAI for more detailed descriptions of
the securities.
EQUITY-LINKED SECURITIES
In periods of abnormally high cash inflows to the Funds, the Funds may invest,
for a short period of time, in equity-linked derivatives, more commonly referred
to as SPDRs ("Standard & Poor's ("S&P") Depository Receipts") and MidCap SPDRs
("S&P's MidCap 400 Depository Receipts"). Each of these instruments are
derivative securities whose value follows a well-known securities index or
basket of securities.
OPTIONS
Each Fund may write covered call options without limit on equity securities.
FOREIGN SECURITIES
The Funds may invest in securities of foreign issuers, including Depositary
Receipts with respect to securities of foreign issuers. Up to 50% of a Fund's
total assets may be invested in foreign securities which are listed on a
national securities exchange, but investments in other foreign securities are
not expected to exceed 5% of either Fund's total assets. The Funds may also
invest in securities issued by companies within emerging or developing
countries, which involve greater risks than other foreign investments.
LOWER RATED SECURITIES
Each Fund may invest in debt securities which are rated lower than investment
grade by a rating agency, but in no event will a Fund purchase a security rated
lower than "C" or the equivalent. (A description of the ratings of Moody's
Investors Service, Inc. and Standard and Poor's Corporation is included in the
SAI.) The Funds may also invest up to 50% of their total assets in convertible
securities rated as low as C. If a security held by a Fund is downgraded below
C, the Fund will dispose of it in an orderly manner.
PRINCIPAL RISKS OF INVESTING IN THE FUNDS
These are the principal risks of investing in the Funds that may adversely
affect a Fund's net asset value or total return.
MARKET RISK. The risk that the market value of a security may move up and down,
sometimes rapidly and unpredictably. These fluctuations may cause a security to
be worth less than the price originally paid for it, or less than it was worth
at an earlier time. Market risk may affect a single issuer, industry, sector of
the economy or the market as a whole.
FOREIGN SECURITIES RISK. Both Funds may invest in securities of foreign
companies. Investing in foreign securities may involve greater risks, including
(1) economic and political instability, (2) less publicly available information,
(3) less strict auditing and financial reporting requirements, (4) less
governmental supervision and regulation of securities markets and (5) greater
possibility of not being able to sell securities on a timely basis.
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YEAR 2000 RISK. Many computer systems, as originally encoded, cannot distinguish
the year 2000 from the year 1900. If not corrected, computer systems may
misinterpret and read incorrectly dates occurring after December 31, 1999. This
is commonly known as the "Year 2000 Problem." The Year 2000 Problem could have a
negative impact on handling securities trades and pricing and accounting
services. The Funds' Board of Trustees have adopted a Year 2000 Project Plan
that the Board of Trustees believes is reasonably designed to address the Year
2000 Problem with respect to the Advisor's and the Fund's service providers'
computer systems. For example, should the Board of Trustees determine that a
service provider is not converting to a Year 2000 compliant system, the Board of
Trustees will replace that service provider. The Advisor and the Funds' service
providers have assured the Fund that they are moving towards Year 2000 compliant
computer systems. This is not a guarantee that the Funds will not experience an
adverse impact from the Year 2000 Problem. It is important to keep in mind that
the Year 2000 Problem may adversely affect the issuers in which the Funds invest
and, by extension, the value of the shares held by the Funds.
FUNDS' PERFORMANCE
[INSERT PERFORMANCE]
PRIOR PERFORMANCE OF THE PORTFOLIO MANAGER
Prior to founding the Advisor, Mr. Wiles was Senior Vice President of Federated
Investors, where he was the portfolio manager of Federated Utility Fund. He was
also portfolio manager of Federated Equity-Income Fund from August 1, 1991, to
January 31, 1997, and had full discretionary authority over the selection of
investments for that fund. The Federated Equity-Income Fund has investment
objectives, policies, strategies and risks substantially similar to those of The
Rockhaven Fund. The cumulative total return for the Federated Equity-Income Fund
Class A Shares from August 1, 1991 through January 31, 1997 was 139.82%, absent
the imposition of a sales charge. The cumulative total return for the same
period for the Standard & Poor's 500 Composite Stock Price Index ("S&P 500
Index") was 135.09%. At January 31, 1997, the Federated Equity-Income Fund had
approximately $970 million in total net assets. Average annual returns for the
one-year, three-year and five-year periods ended January 31, 1997 and for the
entire period during which Mr. Wiles managed that fund compared with the
performance of the Standard & Poor's 500 Index were:
<TABLE>
<CAPTION>
Federated Equity-Income Fund (a) S&P 500 Lipper Equity
with sales load without sales load Index (b) Income Fund Index (c)
--------------- ------------------ --------- ---------------------
<S> <C> <C> <C> <C>
One Year 16.48% 23.26% 26.34% 19.48%
Three Years 14.85% 17.03% 20.72% 15.09%
Five Years 15.20% 16.51% 17.02% 14.73%
August 1, 1991 16.05% 17.25% 16.78% 14.99%
Through January 31, 1997
</TABLE>
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(a) Average annual total return reflects changes in share prices and
reinvestment of dividends and distributions and is net of fund expenses.
During the period from August 1, 1991 through January 31, 1997, the
operating expense ratio of the Federated Equity-Income Fund ranged from
.95% to 1.05% of that fund's average daily net assets. The expense ratio
for The Rockhaven Fund is higher, and the effect of those expenses may
result in less favorable performance.
(b) The Standard & Poor's 500 Index is an unmanaged index of common stocks that
is considered to be generally representative of the United States stock
market. The Index is adjusted to reflect reinvestment of dividends.
(c) The Lipper Equity Income Fund Index is equally weighted and composed of the
largest mutual funds within its investment objective. These funds seek high
current income and growth of income through investing 60% of more of their
respective portfolios in equity securities.
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Historical performance is not indicative of future performance. The Federated
Equity-Income Fund is a separate fund and its historical performance is not
indicative of the potential performance of The Rockhaven Fund. Share prices and
investment returns will fluctuate reflecting market conditions, as well as
changes in company-specific fundamentals of portfolio securities.
MANAGEMENT OF THE FUND
INVESTMENT ADVISOR
Rockhaven Asset Management, LLC, organized in February, 1997, is the investment
advisor to the Funds. The investment advisor provides asset management services
to individuals and institutional investors. The investment advisor's address is
100 First Avenue, Suite 850, Pittsburgh, Pennsylvania 15222. The investment
advisor will provide advice on buying and selling securities. The investment
advisor will also furnish the Funds with office space and certain administrative
services and provide most of the personnel needed by the Funds. For its
services, each Fund will pay the investment advisor a monthly management fee
based upon the average daily net assets of the Fund at the annual rate of 0.75%.
For the fiscal year of the Funds ended September 30, 1999, the Advisor waived
its full fee of [XXX] and paid Fund expenses of [XXX] for The Rockhaven Fund and
[XXX] for the Premier Dividend Fund.
PORTFOLIO MANAGER
Christopher H. Wiles is principally responsible for the day-to-day management of
the Funds' portfolios. Mr. Wiles (who along with AmSouth Bank of Alabama and its
parent, AmSouth Bancorporation, controls the Advisor) is the President of the
Advisor and has been active in the investment field professionally since 1984.
Prior to founding the Advisor, Mr. Wiles was Senior Vice President of Federated
Investors, where he was the portfolio manager of Federated Utility Fund. He was
also portfolio manager of Federated Equity-Income Fund from August 1, 1991, to
January 31, 1997.
ACCOUNT INFORMATION
WHAT IS THE NET ASSET VALUE OF A FUND?
Each 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.
WHEN IS MONEY INVESTED IN A FUND?
Any money received for investment in a Fund from an investor, whether sent by
check or by wire, is invested at the net asset value, less the sales load (if
applicable), of that Fund which is next calculated after the money is received
(assuming the check or wire correctly identifies the Fund and account). Orders
received from dealers are invested at the net asset value, less the sales load
(if applicable), next calculated after the order is received. The net asset
value is calculated at the close of regular trading of the NYSE, generally 4:00
p.m., Eastern time. The NAV is not calculated on days that the NYSE is closed
for trading. The NYSE usually closes at 4 p.m., Eastern time, on weekdays,
except for holidays. A check or wire received after the NYSE closes is invested
as of the next calculation of the Fund's net asset value.
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WHAT IS THE PRICE YOU PAY FOR EACH SHARE OF THE FUNDS?
When you invest in the Funds, you generally pay the "offering price" of a share.
The offering price of shares is the net asset value per share plus a sales
charge that is based on the amount purchased, as described in the following
table.
Sales Charge as percent of:
Offering Your
Amount of Purchase price Investment
- ------------------ ----- ----------
Up to $99,999 5.75% 6.10%
$100,000 to $249,999 4.50% 4.71%
$250,000 to $499,999 3.25% 3.36%
$500,000 to $999,999 2.00% 2.04%
$1,000,000 or more none none
LETTER OF INTENT - An investor may qualify for an immediate reduced sales charge
on purchases by completing the Letter of Intent section on the Application Form.
The investor will state an intention to purchase, during the next 13 months a
specified amount of shares which, if made at one time, would qualify for a
reduced sales charge.
RIGHTS OF ACCUMULATION - The reduced sales charges applicable to purchases apply
on a cumulative basis over any period of time. Thus the value of all shares of
the Fund owned by an investor (including the investor's own account, IRA
account, or other account), taken at current net asset value, can be combined
with a current purchase of shares to determine the rate of sales charge
applicable to the current purchase in order to receive the cumulative quantity
reduction. When opening a new account, the fact that the investor currently
holds shares of the Fund must be indicated on the Application Form in order to
receive the cumulative quantity discount. For subsequent purchases, the Funds'
Shareholder Servicing Agent (888.229.2105) should be notified of current Fund
holdings prior to the additional purchase of shares.
PURCHASES AT NET ASSET VALUE - Shares of the Funds may be purchased at net asset
value for the following shareholders:
(i) Shareholders who make additional purchases into any account that existed on
or before September 17, 1999, (ii) Officers, trustees, directors and full time
employees of the Trust, the Advisor, the Administrator and affiliates of those
companies, or by their family members, (iii) Registered representatives and
employees of firms which have selling agreements with the Distributor, (iv)
Investors making purchases through retail fund "supermarkets" for a higher
minimum initial investment of $3,000, (v) Investment advisors, financial
planners or other intermediaries who place trades for their own accounts or the
accounts of their clients and who charge a management, consulting or other fee
for their services, (vi) Pension, profit-sharing or other employee benefit plans
qualified under Section 401 of the Internal Revenue Code and deferred
compensation and annuity plans under Sections 403 and 457 of the Internal
Revenue Code, (vii) By such other investors who are determined to have acquired
shares under circumstances not involving any sales expense to the Fund or
Distributor.
The Distributor has the right to decide whether a purchase may be made at net
asset value.
At the Advisor's discretion, the Advisor may pay supplemental distribution
assistance, out of its own resources, to any dealer who has executed a selling
agreement with the Distributor through which a Fund share purchase is made.
Additionally, the Advisor, at its discretion, may pay a "finders fee" to any
person who has assisted the Advisor or Distributor in securing additional
investments in the Funds.
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HOW TO INVEST
OPENING A NEW ACCOUNT
There are several ways to purchase shares of either Fund. An Application Form,
which accompanies this Prospectus, is used if you send money directly to a Fund
by mail or by wire. If you have questions about how to invest, or about how to
complete the Application Form, please call an account representative at
888.229.2105. First Fund Distributors, Inc., 4455 E. Camelback Road, Suite 261E,
Phoenix, Arizona 85018, an affiliate of the Administrator, is the principal
underwriter ("Distributor") of the Funds' shares.
PURCHASING SHARES BY MAIL
If you wish to invest by mail, simply complete the Application Form and mail it
with a check (made payable to either the Rockhaven Fund or the Rockhaven Premier
Dividend Fund) to the Funds' Shareholder Servicing Agent, American Data
Services, Inc. at the following address:
Rockhaven Funds
P.O. Box 640947
Cincinnati, OH 45264-0947
If you wish to send your Application Form and check via an overnight delivery
service (such as FedEx), delivery cannot be made to a post office box. In that
case, you should use the following address:
Rockhaven Funds
c/o Firstar Bank, N.A.
Mutual Fund Custody Department
425 Walnut Street, M.L. 6118, Sixth Floor
Cincinnati, OH 45202
PURCHASING SHARES BY WIRE
To open an account by wire, call 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:
Firstar Bank, N.A. Cinti/Trust
ABA #0420-0001-3
for credit to [The Rockhaven Fund or The Rockhaven Premier Dividend Fund]
DDA #486444862
for further credit to [your name and account number]
Your bank or financial institution may charge you a fee for sending a wire to
the Fund.
PURCHASING SHARES THROUGH AN INVESTMENT DEALER
You may buy and sell shares of each Fund through certain brokers (and their
agents, together "brokers") that have made arrangements with the Funds. An order
placed with such a broker is treated as if it were placed directly with the
Fund, and will be executed at the next share price calculated by the Fund. Your
shares will be held in a pooled account in the broker's name, and the broker
will maintain your individual ownership information. The Fund may pay the broker
for maintaining these records as well as providing other shareholder services.
In addition, the broker may charge you a fee for handling your order. The broker
is responsible for processing your order correctly and promptly, keeping you
advised of the status of your individual account, confirming your transactions
and ensuring that you receive copies of the Fund's Prospectus.
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Investment Advisors or Financial Planners may charge a management, consulting or
other fee for their services. Investment advisors and financial planners placing
trades for their own accounts or for accounts of their clients and clients of
such investment advisors or financial planners placing trades for their own
accounts may be able to place these trades with the Funds at Net Asset Value if
the accounts are linked to the master account of such investment advisor or
financial planner on the books and records of the broker or agent. Additionally,
retirement and deferred compensation plans and trusts used to fund those plans,
including, but not limited to, those defined in section 401(a), 403(b), or 457
of the Internal Revenue Code and "rabbi trusts" may also purchase at Net Asset
Value.
MINIMUM INVESTMENTS
The minimum initial investment in each Fund is $1,000. The minimum subsequent
investment is $100. For purchases through retail fund "supermarkets" where an
investor is able to purchase shares of the Funds at net asset value, the minimum
initial investment is $3,000.
ADDITIONAL INVESTMENTS
You may add to your account at any time with $100 or more by sending a check,
with the stub from an account statement, to the Fund at the address listed
previously. 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. You may also make additional purchases
through an investment dealer, as described above.
HOW TO SELL SHARES
You have the right to redeem all or any portion of your shares of a Fund at
their net asset value on each day the NYSE is open for trading.
REDEMPTION IN WRITING
You may redeem your shares by simply sending a written request to the Fund which
you own. 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:
[The Rockhaven Fund or The Rockhaven Premier Dividend Fund]
c/o American Data Services
150 Motor Parkway
Hauppauge, NY 11788
SIGNATURE GUARANTEE
If the value of the shares you wish to redeem exceeds $100,000, 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 a Fund's Application
Form, you may redeem shares on any business day the NYSE is open by calling the
Funds' 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.
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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 Funds 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.
Either 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 a Fund's shares, next determined
after shares are validly tendered for redemption. All signatures of account
holders must be included in the request, and a signature guarantee, if required,
must also be included for the request to be valid.
WHEN ARE REDEMPTION PAYMENTS MADE?
As noted above, redemption payments for telephone redemptions are sent on the
day after the telephone call is received. Payments for redemptions sent in
writing are normally made promptly, but no later than seven days after the
receipt of a request that meets requirements described above. However, either
Fund may suspend the right of redemption under certain extraordinary
circumstances in accordance with rules of the SEC.
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, a Fund may delay sending the
redemption proceeds until it has been notified that the check used to purchase
the shares has been collected, a process which may take up to 15 days. This
delay may be avoided by investing by wire or by using a certified or official
bank check to make the purchase.
REPURCHASES FROM DEALERS
A Fund may accept orders to repurchase shares from an investment dealer on
behalf of a dealer's customers. The net asset value for a repurchase is that
next calculated after receipt of the order from the dealer. The dealer is
responsible for forwarding any documents required in connection with a
redemption, including a signature guarantee, promptly, and the Fund may cancel
the order if these documents are not received promptly.
REINVESTMENT AFTER REDEMPTION
If you redeem shares in your Fund account, you can reinvest within 90 days from
the date of redemption all or any part of the proceeds in shares of either Fund,
at net asset value, on the date the Shareholder Servicing Agent receives your
purchase request. To take advantage of this option, send your reinvestment check
along with a written request to the Shareholder Servicing Agent with ninety days
from the date of your redemption. Include your account number and a statement
that you are taking advantage of the "Reinvestment Privilege". If your
reinvestment is into a new account, it must meet the minimum investment and
other requirements of the Fund into which the reinvestment is being made.
9
<PAGE>
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 a Fund if, due to
redemptions you have made, the total value of your account is reduced to less
than $500. If a 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.
If the Board of Trustees should determine that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment wholly
or partly in cash, the Fund may pay redemption proceeds in whole or in part by a
distribution in kind of securities form the portfolio of the Fund, in compliance
with the Trust's election to be governed by Rule 18f-1 under the 1940 Act.
Pursuant to Rule 18f-1, the Fund is obligated to redeem shares solely in cash up
to the lesser of $250,000 or 1% of the net asset value of the Fund during any
90-day period for any one shareholder. If shares are redeemed in kind, the
redeeming shareholder will likely incur brokerage costs in converting the assets
into cash.
OTHER POLICIES
The Fund may waive the minimum investment requirements for purchases by certain
groups or retirement plans. All investments must be made in U.S. funds, and
checks must be drawn on U.S. banks. Third party checks are not accepted. The
Fund may charge you if your check is returned for insufficient funds. The Fund
reserves the right to reject any investment, in whole or in part. The IRS
requires that you provide the Fund or your Broker with a taxpayer identification
number and other information upon opening an account. You must specify whether
you are subject to backup withholding. Otherwise, you may be subject to backup
withholding at a rate of 31%.
SERVICES AVAILABLE TO SHAREHOLDERS
RETIREMENT PLANS
You may obtain prototype IRA plans from the Funds. Shares of the Funds are also
eligible investments for other types of retirement plans.
AUTOMATIC INVESTING BY CHECK
You may make regular monthly investments in the Funds using the "Automatic
Investment Plan." A check is automatically drawn on your personal checking
account each month for a predetermined amount (but not less than $100), as if
you had written it directly. Upon receipt of the withdrawn funds, a 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 Funds.
There is no charge by a Fund for this service. Either 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
Each Fund offers an Automatic Withdrawal Plan whereby shareholders may request
that a check drawn in a predetermined amount be sent to them each month or
calendar quarter. To start this Program, your account must have Fund shares with
a value of at least $10,000, and the minimum amount that may be withdrawn each
month or quarter is $50. This Program may be terminated or modified by a
shareholder or a Fund at any time without charge or penalty. A withdrawal under
the Automatic Withdrawal Plan involves a redemption of shares of the Fund, and
may result in a gain or loss for federal income tax purposes. In addition, if
the amount withdrawn exceeds the dividends credited to your account, the account
ultimately may be depleted.
10
<PAGE>
EXCHANGE PRIVILEGE
You may exchange your shares of either of the Funds (in amounts of $1,000 or
more) for shares of the other Fund. For more information, call the Shareholder
Servicing Agent at 888.229.2105.
EARNINGS AND TAXES
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income, if any, are normally declared and paid by
each Fund each quarter. Capital gains distributions, if any, are also normally
made in December, but a 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 a 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.
TAXES
Each Fund intends to qualify and elect to be treated as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986 (the "Code"). As
long as a Fund continues to qualify, and as long as the Fund distributes all of
its income each year to the shareholders, that Fund will not be subject to any
federal income or excise taxes. Distributions made by a 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 a 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 a 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 Funds.
RULE 12b-1 FEES
The Funds have adopted a Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940. The Distribution Plan permits the Funds to pay
the Advisor, as Distribution Coordinator, for the sale and distribution of Fund
shares at an annual rate of up to .25%% of each Fund's average daily net assets
annually. Payments made by the Funds pursuant to the Plan will represent
compensation for distribution and service activities, not reimbursement for
specific expenses incurred. Because these fees are paid out of the Funds' assets
on an on-going basis, over time these fees will increase the cost of your
investment in the Funds and may cost you more than paying other types of sales
charges.
11
<PAGE>
FINANCIAL HIGHLIGHTS
[INSERT FINANCIAL HIGHLIGHTS]
12
<PAGE>
THE ROCKHAVEN FUND AND THE ROCKHAVEN PREMIER DIVIDEND FUND, EACH A SERIES OF
ADVISORS SERIES TRUST (THE "TRUST")
For investors who want more information about the Funds, the following document
is available free upon request:
Statement of Additional Information (SAI): The SAI provides more detailed
information about the Funds and is incorporated into this Prospectus.
You can get free copies of the SAI, request other information and discuss your
questions about the Funds by contacting 888.229.2105, or the Funds at:
The Rockhaven Funds
100 First Avenue
Suite 1050
Pittsburgh, PA 15222
Telephone: 1-412-434-8217
You can review and copy information including the Fund's SAI at the Public
Reference Room of the Securities and Exchange Commission in Washington, D.C. You
can obtain information on the operation of the Public Reference Room by calling
1-800-SEC-0330. You can get text-only copies:
For a fee, by writing to the Public Reference Room of the Commission,
Washington, DC 20549-6009 or by calling 1-800-SEC-0330.
Free of charge from the Commission's Internet website at http://www.sec.gov
(The Trust's Investment Company Act file no. is 811-7959)
<PAGE>
THE ROCKHAVEN FUND
THE ROCKHAVEN PREMIER DIVIDEND FUND
STATEMENT OF ADDITIONAL INFORMATION
DATED ___________, 1999
This Statement of Additional Information ("SAI") is not a prospectus,
and it should be read in conjunction with the Prospectus dated , 1999, as may be
revised, of The Rockhaven Fund and The Rockhaven Premier Dividend Fund (the
"Premier Dividend Fund"), each a series of Advisors Series Trust (the "Trust").
Collectively, both The Rockhaven Fund and The Rockhaven Premier Dividend Fund
may be referred to as the "Funds."). Rockhaven Asset Management, LLC (the
"Advisor") is the Advisor to each of the Funds. A copy of the prospectus may be
obtained from the Funds at 100 First Avenue, Suite 850, Pittsburgh, PA 15222,
telephone (800) 522-3508.
TABLE OF CONTENTS
Page
----
The Trust B-2
Investment Objective and Policies B-2
Investment Restrictions B-12
Portfolio Transactions and Brokerage B-13
Portfolio Turnover B-14
Determination of Net Asset Value B-14
Purchase and Redemption of Fund Shares B-15
Management B-18
Distribution Agreement B-21
Distribution Plan B-22
Taxation B-22
Dividends and Distributions B-25
Performance Information B-26
General Information B-26
Appendix - Description of Commercial Paper Ratings B-28
B-1
<PAGE>
THE TRUST
Advisors Series Trust is an open-end, non-diversified management investment
company organized as a Delaware business trust under the laws of the State of
Delaware on October 3, 1996. The Trust currently consists of seventeen series of
shares of beneficial interest, par value $0.01 per share. This SAI relates only
to the Funds.
The Trust is registered with the SEC as a management investment company. Such a
registration does not involve supervision of the management or policies of the
Funds. The Prospectus of the Funds and this SAI omit certain of the information
contained in the Registration Statement filed with the SEC. Copies of such
information may be obtained from the SEC upon payment of the prescribed fee.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of The Rockhaven Fund is seeking above average current
income together with capital appreciation. The primary investment objective of
the Premier Dividend Fund is seeking high current income, and the Fund has a
secondary objective of seeking capital appreciation. There is no assurance that
the Funds will achieve their objective. The discussion below supplements
information contained in the Funds' Prospectus as to investment policies of the
Funds.
EQUITY SECURITIES
In addition to the risks associated with particular types of securities, which
are discussed below, the Funds are subject to general market risks. The Funds
invests primarily in common stocks. The market risks associated with stocks
include the possibility that the entire market for common stocks could suffer a
decline in price over a short or even an extended period. This could affect the
net asset value of your Fund's shares. The U.S. stock market tends to be
cyclical, with periods when stock prices generally rise and periods when stock
prices generally decline.
CONVERTIBLE SECURITIES AND WARRANTS
The Funds 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
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).
B-2
<PAGE>
RISKS OF INVESTING IN DEBT SECURITIES
There are a number of risks generally associated with an investment in debt
securities (including convertible securities). Yields on short, intermediate,
and long-term securities depend on a variety of factors, including the general
condition of the money and bond markets, the size of a particular offering, the
maturity of the obligation, and the rating of the issue.
Debt securities with longer maturities tend to produce higher yields and are
generally subject to potentially greater capital appreciation and depreciation
than obligations with short maturities and lower yields. The market prices of
debt securities usually vary, depending upon available yields. An increase in
interest rates will generally reduce the value of such portfolio investments,
and a decline in interest rates will generally increase the value of such
portfolio investments. The ability of the Funds to achieve their investment
objective also depends on the continuing ability of the issuers of the debt
securities in which the Funds invest to meet their obligations for the payment
of interest and principal when due.
RISKS OF INVESTING IN LOWER-RATED DEBT SECURITIES
As set forth in the prospectus, each Fund may invest a portion of its net assets
in debt securities, which may be rated below "Baa" by Moody's or "BBB" by S&P or
below investment grade by other recognized rating agencies, or in unrated
securities of comparable quality under certain circumstances. Securities with
ratings below "Baa" and/or "BBB" are commonly referred to as "junk bonds." Such
bonds are subject to greater market fluctuations and risk of loss of income and
principal than higher rated bonds for a variety of reasons, including the
following:
SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES. The economy and interest
rates affect high yield securities differently from other securities. For
example, the prices of high yield bonds have been found to be less sensitive to
interest rate changes than higher-rated investments, but more sensitive to
adverse economic changes or individual corporate developments. Also, during an
economic downturn or substantial period of rising interest rates, highly
leveraged issuers may experience financial stress which would adversely affect
their ability to service their principal and interest obligations, to meet
projected business goals, and to obtain additional financing. If the issuer of a
bond defaults, a Fund may incur additional expenses to seek recovery. In
addition, periods of economic uncertainty and changes can be expected to result
in increased volatility of market prices of high yield bonds and the Fund's
asset values.
PAYMENT EXPECTATIONS. High yield bonds present certain risks based on payment
expectations. For example, high yield bonds may contain redemption and call
provisions. If an issuer exercises these provisions in a declining interest rate
market, a Fund would have to replace the security with a lower yielding
security, resulting in a decreased return for investors. Conversely, a high
yield bond's value will decrease in a rising interest rate market, as will the
value of the Fund's assets. If a Fund experiences unexpected net redemptions, it
may be forced to sell its high yield bonds without regard to their investment
merits, thereby decreasing the asset base upon which the Fund's expenses can be
spread and possibly reducing that Fund's rate of return.
LIQUIDITY AND VALUATION. To the extent that there is no established retail
secondary market, there may be thin trading of high yield bonds, and this may
impact the Advisor's ability to accurately value high yield bonds and a Fund's
assets and hinder a Fund's ability to dispose of the bonds. Adverse publicity
and investor perceptions, whether or not based on fundamental analysis, may
decrease the values and liquidity of high yield bonds, especially in a thinly
traded market.
B-3
<PAGE>
CREDIT RATINGS. Credit ratings evaluate the safety of principal and interest
payments, not the market value risk of high yield bonds. Also, since credit
rating agencies may fail to timely change the credit ratings to reflect
subsequent events, the Advisor must monitor the issuers of high yield bonds in a
Fund's portfolio to determine if the issuers will have sufficient cash flow and
profits to meet required principal and interest payments, and to assure the
bonds' liquidity so that Fund can meet redemption requests. A Fund will dispose
of a portfolio security in an orderly manner when its rating has been downgraded
below C.
SHORT-TERM INVESTMENTS
The Funds may invest in any of the following securities and instruments:
CERTIFICATES OF DEPOSIT, BANKERS' ACCEPTANCES AND TIME DEPOSITS. The Funds may
hold 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 Funds will be
dollar-denominated obligations of domestic banks, savings and loan associations
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.
In addition to buying certificates of deposit and bankers' acceptances, the
Funds also 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.
COMMERCIAL PAPER AND SHORT-TERM NOTES. The Funds may invest a portion of its
assets in commercial paper and short-term notes. Commercial paper consists of
unsecured promissory notes issued by corporations. 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 Standard & Poor's Ratings Group, "Prime-1" or
"Prime-2" by Moody's Investors Service, Inc., 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.
EQUITY-LINKED DERIVATIVES-SPDRS AND MIDCAP SPDRS
The Funds may invest in Standard & Poor's ("S&P") Depository Receipts ("SPDRs")
and S&P's MidCap 400 Depository Receipts ("MidCap SPDRs"). Each of these
instruments are derivative securities whose value follows a well-known
securities index or basket of securities.
SPDRs and MidCap SPDRs are designed to follow the performance of S&P 500 Index
and the S&P MidCap 400 Index, respectively. Because the prices of SPDRs, MidCap
SPDRs, WEBS, DIAMONDS and OPALS are correlated to diversified portfolios, they
are subject to the risk that the general level of stock prices may decline, that
the underlying indices decline or that financial condition of specific issuers
in the underlying indices may become impaired. However, these securities may not
fully replicate the performance of the underlying indices. In addition, because
SPDRs and MidCap SPDRs will continue to be traded even when trading is halted in
component stocks of the underlying indices, price quotations for these
securities may, at times, be based upon non-current price information with
respect to some of even all of the stocks in the underlying indices.
B-4
<PAGE>
Spiders are interests in a unit investment trust ("UIT") and are American Stock
Exchange-traded securities that represent ownership in the SPDR Trust, a trust
which has been established to accumulate and hold a portfolio of common stocks
that is intended to track the price performance and dividend yield of the
Underlying Indices. This trust is sponsored by a subsidiary of the American
Stock Exchange. Spiders may be used for several reasons, including but not
limited to: facilitating the handling of cash flows or trading, or reducing
transaction costs. The UIT will issue Spiders in aggregations known as "Creation
Units" in exchange for a "Portfolio Deposit" consisting of (a) a portfolio of
securities substantially similar to the component securities of the Underlying
Indices, (b) a cash payment equal to a pro rata portion of the dividends accrued
on the UIT's portfolio securities since the last dividend payment by the UIT,
net of expenses and liabilities, and (c) a cash payment or credit ("Balancing
Amount") designed to equalize the net asset value of the Underlying Indices and
the net asset value of a Portfolio Deposit.
Spiders are not individually redeemable, except upon termination of the UIT. To
redeem, the Fund must accumulate enough Spiders to reconstitute a Creation Unit.
The liquidity of small holdings of Spiders, therefore, will depend upon the
existence of a secondary market. Upon redemption of a Creation Unit, the
Portfolio will receive securities and cash identical to the Portfolio Deposit
required of an investor wishing to purchase a Creation Unit that day. The price
of Spiders is derived from and based upon the securities held by the UIT.
Accordingly, the level of risk involved in the purchase or sale of a Spider is
similar to the risk involved in the purchase or sale of traditional common
stock, with the exception that the pricing mechanism for Spiders is based on a
basket of stocks. Disruptions in the markets for the securities underlying
Spiders purchased or sold by the Fund could result in losses on Spiders. Trading
in Spiders involves risks similar to the risks involved in the writing of
options on securities.
OPTIONS ON SECURITIES AND SECURITIES INDICES
WRITING CALL OPTIONS. Each Fund may write covered call options. A call option is
"covered" if a 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
a 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 a Fund. If
a 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.
A 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. A Fund will realize a loss from a closing transaction if the cost of
B-5
<PAGE>
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 a 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 that Fund.
STOCK INDEX OPTIONS. Each Fund may also purchase put and call options with
respect to the S&P 500 and other stock indices. Such options may be purchased as
a hedge against changes resulting from market conditions in the values of
securities which are held in a Fund's portfolio or which it intends to purchase
or sell, or when they are economically appropriate for the reduction of risks
inherent in the ongoing management of a Fund.
The distinctive characteristics of options on stock indices create certain risks
that are not present with stock options generally. Because the value of an index
option depends upon movements in the level of the index rather than the price of
a particular stock, whether a Fund will realize a gain or loss on the purchase
or sale of an option on an index depends upon movements in the level of stock
prices in the stock market generally rather than movements in the price of a
particular stock. Accordingly, successful use by a Fund of options on a stock
index would be subject to the Advisor's ability to predict correctly movements
in the direction of the stock market generally. This requires different skills
and techniques than predicting changes in the price of individual stocks.
Index prices may be distorted if trading of certain stocks included in the index
is interrupted. Trading of index options also may be interrupted in certain
circumstances, such as if trading were halted in a substantial number of stocks
included in the index. If this were to occur, a Fund would not be able to close
out options which it had purchased, and if restrictions on exercise were
imposed, that Fund might be unable to exercise an option it holds, which could
result in substantial losses to that Fund. It is the policy of the Funds to
purchase put or call options only with respect to an index which the Advisor
believes includes a sufficient number of stocks to minimize the likelihood of a
trading halt in the index.
RISKS OF INVESTING IN OPTIONS. There are several risks associated with
transactions in options on securities and indices. Options may be more volatile
than the underlying instruments and, therefore, on a percentage basis, an
investment in options may be subject to greater fluctuation than an investment
in the underlying instruments 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 option 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
a Fund may enter into options transactions may be limited by the Internal
Revenue Code requirements for qualification as a regulated investment company.
See "Dividends, Distributions and Taxes."
B-6
<PAGE>
DEALER OPTIONS. Each Fund may engage in transactions involving dealer options as
well as exchange-traded options. Certain risks are specific to dealer options.
While the Funds might look to a clearing corporation to exercise exchange-traded
options, if a 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 a 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, a 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 a Fund writes a dealer option, that
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 that
Fund originally wrote the option. While a 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 that Fund, there can be no assurance
that a Fund will at any time be able to liquidate a dealer option at a favorable
price at any time prior to expiration. Unless a 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, a Fund
may be unable to liquidate a dealer option. With respect to options written by a
Fund, the inability to enter into a closing transaction may result in material
losses to that Fund. For example, because a Fund must maintain a secured
position with respect to any call option on a security it writes, that 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 that 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. A 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. With that
exception, however, a Fund will treat dealer options as subject to that Fund's
limitation on unmarketable securities. If the Commission changes its position on
the liquidity of dealer options, each Fund will change its treatment of such
instruments accordingly.
FOREIGN INVESTMENTS AND CURRENCIES
Each Fund may invest in securities of foreign issuers that are publicly traded
in the United States. Each Fund may also invest in depositary receipts.
DEPOSITARY RECEIPTS. Depositary Receipts ("DRs") include American Depositary
Receipts ("ADRs"), European Depositary Receipts ("EDRs"), Global Depositary
Receipts ("GDRs") or other forms of depositary receipts. DRs are receipts
typically issued in connection with a U.S. or foreign bank or trust company
which evidence ownership of underlying securities issued by a foreign
corporation.
RISKS OF INVESTING IN FOREIGN SECURITIES. Investments in foreign securities
involve certain inherent risks, including the following:
POLITICAL AND ECONOMIC FACTORS. Individual foreign economies of certain
countries may differ favorably or unfavorably from the United States' economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, diversification and balance of payments
position. The internal politics of certain foreign countries may not be as
stable as those of the United States. Governments in certain foreign countries
B-7
<PAGE>
also continue to participate to a significant degree, through ownership interest
or regulation, in their respective economies. Action by these governments could
include restrictions on foreign investment, nationalization, expropriation of
goods or imposition of taxes, and could have a significant effect on market
prices of securities and payment of interest. The economies of many foreign
countries are heavily dependent upon international trade and are accordingly
affected by the trade policies and economic conditions of their trading
partners. Enactment by these trading partners of protectionist trade legislation
could have a significant adverse effect upon the securities markets of such
countries.
LEGAL AND REGULATORY MATTERS. Certain foreign countries may have less
supervision of securities markets, brokers and issuers of securities, and less
financial information available to issuers, than is available in the United
States.
TAXES. The interest payable on certain of a Fund's foreign portfolio securities
may be subject to foreign withholding taxes, thus reducing the net amount of
income available for distribution to the Fund's shareholders.
RISK FACTORS REGARDING EMERGING MARKETS INVESTMENTS. Investments in securities
issued by the governments of emerging or developing countries, and of companies
within those countries, involves greater risks than other foreign investments.
Investments in emerging or developing markets involve exposure to economic and
legal structures that are generally less diverse and mature (and in some cases
the absence of developed legal structures governing private and foreign
investments and private property), and to political systems which can be
expected to have less stability, than those of more developed countries. The
risks of investment in such countries may include matters such as relatively
unstable governments, higher degrees of government involvement in the economy,
the absence until recently of capital market structures or market-oriented
economies, economies based on only a few industries, securities markets which
trade only a small number of securities, restrictions on foreign investment in
stocks, and significant foreign currency devaluations and fluctuations. Emerging
markets can be substantially more volatile than both U.S. and more developed
foreign markets. Such volatility may be exacerbated by illiquidity. The average
daily trading volume in all of the emerging markets combined is a small fraction
of the average daily volume of the U.S. market. Small trading volumes may result
in a Fund being forced to purchase securities at substantially higher prices
than the current market, or to sell securities at much lower prices than the
current market.
In considering whether to invest in the securities of a foreign company, the
Advisor considers such factors as the characteristics of the particular company,
differences between economic trends and the performance of securities markets
within the U.S. and those within other countries, and also factors relating to
the general economic, governmental and social conditions of the country or
countries where the company is located. The extent to which a Fund will be
invested in foreign companies and countries and depository receipts will
fluctuate from time to time within the limitations described in the prospectus,
depending on the Advisor's assessment of prevailing market, economic and other
conditions.
REPURCHASE AGREEMENTS. The Funds may enter into repurchase agreements. Under
such agreements, the seller of the security agrees to repurchase it at a
mutually agreed upon time and price. The repurchase price may be higher than the
purchase price, the difference being income to the Funds, or the purchase and
repurchase prices may be the same, with interest at a stated rate due to the
Funds together with the repurchase price on repurchase. In either case, the
income to the Funds is unrelated to the interest rate on the U.S. Government
security itself. Such repurchase agreements will be made only with banks with
assets of $500 million or more that are insured by the Federal Deposit Insurance
Corporation or with Government securities dealers recognized by the Federal
Reserve Board and registered as broker-dealers with the Securities and Exchange
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Commission ("SEC") or exempt from such registration. The Funds will generally
enter into repurchase agreements of short durations, from overnight to one week,
although the underlying securities generally have longer maturities. A Fund may
not enter into a repurchase agreement with more than seven days to maturity if,
as a result, more than 15% of the value of its net assets would be invested in
illiquid securities including such repurchase agreements.
For purposes of the Investment Company Act of 1940 (the "1940 Act"), a
repurchase agreement is deemed to be a loan from the Fund to the seller of the
U.S. Government security subject to the repurchase agreement. It is not clear
whether a court would consider the U.S. Government security acquired by a Fund
subject to a repurchase agreement as being owned by the Fund or as being
collateral for a loan by the Fund to the seller. In the event of the
commencement of bankruptcy or insolvency proceedings with respect to the seller
of the U.S. Government security before its repurchase under a repurchase
agreement, a Fund could encounter delays and incur costs before being able to
sell the security. Delays may involve loss of interest or a decline in price of
the U.S. Government security. If a court characterizes the transaction as a loan
and the Fund has not perfected a security interest in the U.S. Government
security, the Fund may be required to return the security to the seller's estate
and be treated as an unsecured creditor of the seller. As an unsecured creditor,
a Fund would be at the risk of losing some or all of the principal and income
involved in the transaction. As with any unsecured debt instrument purchased for
the Funds, the Advisor seeks to minimize the risk of loss through repurchase
agreements by analyzing the creditworthiness of the other party, in this case
the seller of the U.S. Government security.
Apart from the risk of bankruptcy or insolvency proceedings, there is also the
risk that the seller may fail to repurchase the security. However, the Funds
will always receive as collateral for any repurchase agreement to which they are
a party securities acceptable to the Advisor, the market value of which is equal
to at least 100% of the amount invested by the Funds plus accrued interest, and
the Funds will make payment against such securities only upon physical delivery
or evidence of book entry transfer to the account of its Custodian. If the
market value of the U.S. Government security subject to the repurchase agreement
becomes less than the repurchase price (including interest), the Funds will
direct the seller of the U.S. Government security to deliver additional
securities so that the market value of all securities subject to the repurchase
agreement will equal or exceed the repurchase price. It is possible that the
Funds could be unsuccessful in seeking to impose on the seller a contractual
obligation to deliver additional securities.
WHEN-ISSUED SECURITIES, FORWARD COMMITMENTS AND DELAYED SETTLEMENTS
Each Fund may purchase securities on a "when-issued," forward commitment or
delayed settlement basis. In this event, the Custodian will set aside liquid
assets 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, a Fund may be required subsequently to set aside
additional assets in order to assure that the value of the account remains equal
to the amount of that Fund's commitment. It may be expected that a 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 Funds do not intend to engage in these transactions for speculative purposes
but only in furtherance of their investment objectives. Because a Fund will set
aside liquid assets to satisfy its purchase commitments in the manner described,
that Fund's liquidity and the ability of the Advisor to manage it may be
affected in the event that Fund's forward commitments, commitments to purchase
when-issued securities and delayed settlements ever exceeded 15% of the value of
its net assets.
A 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, a Fund may dispose
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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 that Fund
on the settlement date. In these cases a Fund may realize a taxable capital gain
or loss. When a 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 a 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 a Fund starting on the day that Fund agrees to purchase the
securities. A Fund does not earn interest on the securities it has committed to
purchase until they are paid for and delivered on the settlement date.
BORROWING
Each 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 5% of the value of its total assets at the time of such borrowings
INVESTMENT COMPANIES
The Funds may invest in shares of other investment companies. The Funds may
invest in money market mutual funds in connection with their management of daily
cash positions. In addition to the advisory and operational fees a Fund bears
directly in connection with its own operation, the Fund would also bear its pro
rata portions of each other investment company's advisory and operational
expenses.
ILLIQUID SECURITIES
Neither Fund may 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 Funds' portfolios, under the supervision of the
Trust's Board of Trustees, to ensure compliance with the Funds' 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 Funds might be
unable to sell restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemption requests
within seven days. The Funds might also have to register such restricted
securities in order to sell 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 reflect the actual liquidity of such
investments. If such securities are subject to purchase by institutional buyers
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in accordance with Rule 144A promulgated by the SEC under the Securities Act,
the Trust's Board of Trustees may determine that such securities are not
illiquid securities despite their legal or contractual restrictions on resale.
In all other cases, however, securities subject to restrictions on resale will
be deemed illiquid.
GOVERNMENT OBLIGATIONS
Each 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.
ZERO COUPON SECURITIES
Each Fund may invest up to 35% of its net assets in zero coupon securities. Zero
coupon securities are debt securities which have been stripped of their
unmatured interest coupons and receipts, or certificates representing interests
in such stripped debt obligations or coupons. Because a zero coupon security
pays no interest to its holder during its life or for a substantial period of
time, it usually trades at a deep discount from its face or par value and will
be subject to greater fluctuations of market value in response to changing
interest rates than debt obligations of comparable maturities which make current
distributions of interest.
VARIABLE AND FLOATING RATE INSTRUMENTS
Each Fund may acquire variable and floating rate instruments. Such instruments
are frequently not rated by credit rating agencies; however, unrated variable
and floating rate instruments purchased by a Fund will be determined by the
Advisor under guidelines established by the Trust's Board of Trustees to be of
comparable quality at the time of the purchase to rated instruments eligible for
purchase by a Fund. In making such determinations, the Advisor will consider the
earning power, cash flow and other liquidity ratios of the issuers of such
instruments (such issuers include financial, merchandising, bank holding and
other companies) and will monitor their financial condition. An active secondary
market may not exist with respect to particular variable or floating rate
instruments purchased by a Fund. The absence of such an active secondary market
could make it difficult for the Funds to dispose of the variable or floating
rate instrument involved in the event of the issuer of the instrument defaulting
on its payment obligation or during periods in which a Fund is not entitled to
exercise its demand rights, and a Fund could, for these or other reasons, suffer
a loss to the extent of the default. Variable and floating rate instruments may
be secured by bank letters of credit.
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INVESTMENT RESTRICTIONS
The Trust (on behalf of each 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. If a percentage
representation is adhered to at the time of investment, a subsequent increase or
decrease in percentage resulting from a change in the value of assets will not
constitute a violation of that restriction, except with respect to policies on
borrowing and illiquid securities, or as otherwise noted.
Each Fund is diversified. This means that as to 75% of each Fund's total assets
(1) no more than 5% may be in the securities of a single issuer, (2) neither
Fund may hold more than 10% of the outstanding voting securities of a single
issuer.
In addition, neither Fund may:
1. Issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit the Fund from (a) making any
permitted borrowings, mortgages or pledges or (b) entering into options,
futures or repurchase transactions.
2. Mortgage, pledge or hypothecate any of its assets except in connection with
any borrowings.
3. Invest 25% or more of the market value of its assets in the securities of
companies engaged in any one industry, except that this restriction does
not apply to investment in the securities of the U.S. Government, its
agencies or instrumentalities.
4. Purchase real estate, commodities or commodity contracts. (As a matter of
operating policy, the Board of Trustees may authorize the Funds in the
future to engage in certain activities regarding futures contracts for bona
fide hedging purposes; any such authorization will be accompanied by
appropriate notification to shareholders.)
5. Make loans to others, except (a) through the purchase of debt securities in
accordance with its investment objective and policies, or (b) to the extent
the entry into a repurchase agreement is deemed to be a loan.
6. Borrow money or pledge its assets, except that the Funds may borrow on an
unsecured basis from banks for temporary or emergency purposes or for the
clearance of transactions in amounts not exceeding 5% of its total assets
(including the amount borrowed).
7. Purchase securities on margin, participate on a joint or joint and several
basis in any securities trading account, or underwrite securities. (Does
not preclude the Funds from obtaining such short-term credit as may be
necessary for the clearance of purchases and sales of its portfolio
securities.)
The Funds observe the following restrictions as a matter of operating but not
fundamental policy, pursuant to positions taken by federal regulatory
authorities. The Funds may not:
1. Invest in securities of other investment companies except as permitted
under the 1940 Act.
2. Invest, in the aggregate, more than 15% of its net assets in securities
with legal or contractual restrictions on resale, securities which are not
readily marketable and repurchase agreements with more than seven days to
maturity.
3. Invest in any issuer for purposes of exercising control or management; 4.
Sell securities short; or 5. Invest in stock index futures, currency or
financial futures or related options.
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PORTFOLIO TRANSACTIONS AND BROKERAGE
Pursuant to the Investment Advisory Agreement, the Advisor determines which
securities are to be purchased and sold by the Funds and which broker-dealers
will be used to execute the Funds' portfolio transactions. Purchases and sales
of securities in the over-the-counter market will be executed directly with a
"market-maker" unless, in the opinion of the Advisor, a better price and
execution can otherwise be obtained by using a broker for the transaction.
Purchases of portfolio securities for the Funds also may be made directly from
issuers or from underwriters. Where possible, purchase and sale transactions
will be made through dealers (including banks) which specialize in the types of
securities which the Funds will be holding, unless better executions are
available elsewhere. Dealers and underwriters usually act as principal for their
own account. Purchases from underwriters will include a concession paid by the
issuer to the underwriter and purchases from dealers will include the spread
between the bid and the asked price. If the execution and price offered by more
than one broker, dealer or underwriter are comparable, the order may be
allocated to a broker, dealer or underwriter that has provided research or other
services as discussed below.
In placing portfolio transactions, the Advisor will use its best efforts to
choose a broker-dealer capable of providing the services necessary to obtain the
most favorable price and execution available. The full range and quality of
services available will be considered in making these determinations, such as
the size of the order, the difficulty of execution, the operational facilities
of the firm involved, the firm's risk in positioning a block of securities, and
other factors. In those instances where it is reasonably determined that more
than one broker-dealer can offer the most favorable price and execution
available, consideration may be given to those broker-dealers which furnish or
supply research and statistical information to the Advisor that it may lawfully
and appropriately use in its investment advisory capacities, as well as provide
other services in addition to execution services. The Advisor considers such
information, which is in addition to and not in lieu of the services required to
be performed by it under its Agreement with the Funds, to be useful in varying
degrees, but of indeterminable value. Portfolio transactions may be placed with
broker-dealers who sell shares of the Funds subject to rules adopted by the
National Association of Securities Dealers, Inc.
While it is the Funds' general policy to seek first to obtain the most favorable
price and execution available, in selecting a broker-dealer to execute portfolio
transactions for the Funds, weight is also given to the ability of a
broker-dealer to furnish brokerage and research services to the Funds or to the
Advisor, even if the specific services are not directly useful to the Funds and
may be useful to the Advisor in advising other clients. In negotiating
commissions with a broker or evaluating the spread to be paid to a dealer, the
Funds may therefore pay a higher commission or spread than would be the case if
no weight were given to the furnishing of these supplemental services, provided
that the amount of such commission or spread has been determined in good faith
by the Advisor to be reasonable in relation to the value of the brokerage and/or
research services provided by such broker-dealer. The standard of reasonableness
is to be measured in light of the Advisor's overall responsibilities to the
Funds.
Investment decisions for the Funds are made independently from those of other
client accounts or mutual funds managed or advised by the Advisor. Nevertheless,
it is possible that at times identical securities will be acceptable for both
the Funds and one or more of such client accounts. In such event, the position
of the Funds and such client account(s) in the same issuer may vary and the
length of time that each may choose to hold its investment in the same issuer
may likewise vary. However, to the extent any of these client accounts seeks to
acquire the same security as a Fund at the same time, the Fund may not be able
to acquire as large a portion of such security as it desires, or it may have to
pay a higher price or obtain a lower yield for such security. Similarly, a Fund
may not be able to obtain as high a price for, or as large an execution of, an
order to sell any particular security at the same time. If one or more of such
client accounts simultaneously purchases or sells the same security that a Fund
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is purchasing or selling, each day's transactions in such security will be
allocated between the Fund and all such client accounts in a manner deemed
equitable by the Advisor, taking into account the respective sizes of the
accounts and the amount being purchased or sold. It is recognized that in some
cases this system could have a detrimental effect on the price or value of the
security insofar as the Fund is concerned. In other cases, however, it is
believed that the ability of a Fund to participate in volume transactions may
produce better executions for the Fund.
The Funds do not place securities transactions through brokers solely for
selling shares of the Funds, although the Funds may consider the sale of shares
as a factor in allocating brokerage. However, as stated above, broker-dealers
who execute brokerage transactions may effect purchases of shares of the Funds
for their customers. Brokerage commissions paid during the period beginning
October 1, 1998 and ending September 30, 1999, aggregated $XXX and $XXX, for The
Rockhaven Fund and the Premier Dividend Fund, respectively.
PORTFOLIO TURNOVER
Although the Funds generally will not invest for short-term trading purposes,
portfolio securities may be sold without regard to the length of them they have
been held when, in the opinion of the Advisor, investment considerations warrant
such action. Portfolio turnover rate is calculated by dividing (1) the lesser of
purchases or sales of portfolio securities for the fiscal year by (2) the
monthly average of the value of portfolio securities owned during the fiscal
year. A 100% turnover rate would occur if all the securities in the Fund's
portfolio, with the exception of securities whose maturities at the time of
acquisition were one year or less, were sold and either repurchased or replaced
within one year. A high rate of portfolio turnover (100% or more) generally
leads to higher transaction costs and may result in a greater number of taxable
transactions. It is anticipated that annual portfolio turnover rates will be
approximately 200% for each Fund.
Turnover during the fiscal year from October 1, 1998 through September 30, 1999
for The Rockhaven Fund and the Premier Dividend Fund was 113.36% and 120.16%,
respectively.
DETERMINATION OF NET ASSET VALUE
As noted in the Prospectus, the net asset value and offering price of shares of
each Fund will be determined once daily as of the close of public trading on the
New York Stock Exchange ("NYSE") (normally 4:00 p.m. Eastern time) on each day
that the NYSE is open for trading. The Funds do not expect to determine the net
asset value of their shares on any day when the NYSE is not open for trading
even if there is sufficient trading in their portfolio securities on such days
to materially affect the net asset value per share. However, the net asset value
of Fund shares may be determined on days the NYSE is closed or at times other
than 4:00 p.m. if the Board of Trustees decides it is necessary.
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 primarily traded in the NASDAQ National Market System
for which market quotations are readily available shall be valued at the last
sale price on the day of valuation, or if there has been no sale on such day, at
the mean between the bid and asked prices. Over-the-counter ("OTC") securities
which are not traded in the NASDAQ National Market System shall be valued at the
most recent trade price. 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.
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The net asset value per share of each Fund is calculated as follows: all
liabilities incurred or accrued are deducted from the valuation of total assets
which includes accrued but undistributed income; the resulting net assets are
divided by the number of shares of the Fund outstanding at the time of the
valuation and the result (adjusted to the nearest cent) is the net asset value
per share.
As of the date of this SAI, the NYSE is open for trading every weekday except
for the following holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
PURCHASE AND REDEMPTION OF FUND SHARES
The information provided below supplements the information contained in the
Funds' Prospectus regarding the purchase and redemption of each Fund's shares.
HOW TO BUY SHARES
Fund shares are purchased at the public offering price (net asset value plus the
applicable sales charge) next determined after the Transfer Agent receives your
order in proper form. In most cases, in order to receive that day's public
offering price, the Transfer Agent must receive your order in proper form before
the close of regular trading on the New York Stock Exchange ("NYSE"), currently
4:00 p.m. Orders are in proper form only after investment money is converted to
U.S. dollars. Orders paid by check and received by 4:00 p.m., Eastern Time, will
generally be available for the purchase of shares the following business day.
If you are considering redeeming or transferring shares to another person
shortly after purchase, you should pay for those shares with a certified check
to avoid any delay in redemption or transfer. Otherwise the Funds may delay
payment until the purchase price of those shares has been collected, which may
take up to 15 calender days. To eliminate the need for safekeeping, the Funds
will not issue certificates for your shares unless you request them.
The Trust reserves the right in its sole discretion (1) to suspend the continued
offering of the Funds' shares, (2) to reject purchase orders in whole or in part
when in the judgment of the Advisor or the Distributor such rejection is in the
best interest of the Funds, and (3) to reduce or waive the minimum for initial
and subsequent investments for certain fiduciary accounts or under circumstances
where certain economies can be achieved in sales of the Funds' shares.
Selected securities brokers, dealers or financial intermediaries may offer
shares of the Funds. Investors should contact these agents directly for
appropriate instructions, as well as information pertaining to accounts and any
service or transaction fees that may be charged by those agents. Purchase orders
through securities brokers, dealers and other financial intermediaries are
effected at the next-determined net asset value after receipt of the order by
such agent before the Funds' daily cutoff time, currently the close of regular
NYSE trading. Orders received after that time will be purchased at the
next-determined net asset value.
The Funds may also issue Fund shares in exchange for appropriate portfolio
securities. Such transactions may benefit the Funds by eliminating the
transaction costs that would otherwise be borne by the Funds in purchasing
portfolio securities in the stock markets. Under certain limited conditions, an
investor may purchase Fund shares with portfolio securities that are moved into
a Fund's portfolio on a tax-free basis for the investor. In such instance, the
unrealized gain or loss in the transferred portfolio would become unrealized
gain or loss for the Fund.
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DEALER COMMISSIONS
The Distributor pays a portion of the sales charges imposed on purchases of the
Funds' shares to retail dealers, as follows:
DEALER COMMISSION
AS A % OF
YOUR INVESTMENT OFFERING PRICE
--------------- --------------
Up to $49,000 5.00%
$50,000-$99,999 3.75
$100,000-$249,999 2.75
$250,000-$499,999 2.00
$500,000-$999,999 1.60
$1,000,000 and over *
* The Distributor pays a commission of up to 1.00% to financial institutions
that initiate purchases of $1 million or more.
HOW TO SELL SHARES
You can sell your Fund shares any day the NYSE is open for regular trading,
either directly to the Fund or through your investment representative. The Fund
will forward redemption proceeds or redeem shares for which it has collected
payment of the purchase price.
Payments to shareholders for shares of a Fund redeemed directly from the Fund
will be made as promptly as possible but no later than seven days after receipt
by the Fund's Transfer Agent of the written request in proper form, with the
appropriate documentation as stated in the Prospectus, except that a Fund may
suspend the right of redemption or postpone the date of payment during any
period when (a) trading on the NYSE is restricted as determined by the SEC or
the NYSE is closed for other than weekends and holidays; (b) an emergency exists
as determined by the SEC making disposal of portfolio securities or valuation of
net assets of the Fund not reasonably practicable; or (c) for such other period
as the SEC may permit for the protection of the Funds' shareholders. At various
times, a Fund may be requested to redeem shares for which it has not yet
received confirmation of good payment; in this circumstance, the Fund may delay
the redemption until payment for the purchase of such shares has been collected
and confirmed to the Fund.
SELLING SHARES DIRECTLY TO THE FUND
Send a signed letter of instruction to the Transfer Agent, along with any
certificates that represent shares you want to sell. The price you will receive
is the next net asset value calculated after the Fund receives your request in
proper form. In order to receive that day's net asset value, the Transfer Agent
must receive your request before the close of regular trading on the NYSE.
SELLING SHARES THROUGH YOUR INVESTMENT REPRESENTATIVE
Your investment representative must receive your request before the close of
regular trading on the NYSE to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Transfer Agent, and may charge you for its services. If you
sell shares having a net asset value of $100,000 or more, a signature guarantee
is required.
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If you want your redemption proceeds sent to an address other than your address
as it appears on the Transfer Agent's records, a signature guarantee is
required. The Funds may require additional documentation for the sale of shares
by a corporation, partnership, agent or fiduciary, or a surviving joint owner.
Contact the Transfer Agent for
details.
Signature guarantees may be obtained from a bank, broker-dealer, credit union
(if authorized under state law), securities exchange or association, clearing
agency or savings institution. A notary public cannot provide a signature
guarantee
DELIVERY OF PROCEEDS
The Funds generally send you payment for your shares the business day after your
request is received in proper form, assuming the Funds have collected payment of
the purchase price of your shares. Under unusual circumstances, the Funds may
suspend redemptions, or postpone payment for more than seven days, as permitted
by federal securities law.
TELEPHONE REDEMPTIONS
Telephone transaction privileges are made available to shareholders
automatically upon opening an account unless the privilege is declined in the
Account Application. Upon receipt of any instructions or inquiries by telephone
from a shareholder or, if held in a joint account, from either party, or from
any person claiming to be the shareholder, the Funds or their agent is
authorized, without notifying the shareholder or joint account parties, to carry
out the instructions or to respond to the inquiries, consistent with the service
options chosen by the shareholder or joint shareholders in his or their latest
Account Application or other written request for services, including purchasing
or redeeming shares of the Funds and depositing and withdrawing monies from the
bank account specified in the Bank Account Registration section of the
shareholder's latest Account Application or as otherwise properly specified to
the Funds in writing.
The Transfer Agent will employ these and other reasonable procedures to confirm
that instructions communicated by telephone are genuine; if such procedures are
observed, neither the Funds nor their agents will be liable for any loss,
liability, cost or expense arising out of any redemption request, including any
fraudulent or unauthorized request. For information, consult the Transfer Agent.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Transfer Agent by telephone. In this event,
you may wish to submit a written redemption request, as described in the
Prospectus, or contact your investment representative. The Telephone Redemption
Privilege is not available if you were issued certificates for shares that
remain outstanding. The Telephone Redemption Privilege may be modified or
terminated without notice.
REDEMPTIONS-IN-KIND
The Funds intend to pay cash (U.S. dollars) for all shares redeemed, but, under
abnormal conditions that make payment in cash unwise, the Fund may make payment
partly in its portfolio securities with a current amortized cost or market
value, as appropriate, equal to the redemption price. Although the Fund does not
anticipate that it will make any part of a redemption payment in securities, if
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such payment were made, an investor may incur brokerage costs in converting such
securities to cash. The Trust has elected to be governed by the provisions of
Rule 18f-1 under the Investment Company Act, which require that the Fund pay in
cash all requests for redemption by any shareholder of record limited in amount,
however, during any 90-day period to the lesser of $250,000 or 1% of the value
of the Fund's net assets at the beginning of such period.
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 objective and policies and to general supervision by the Board
of Trustees.
The Trustees and officers of the Trust, their birth dates and positions with the
Trust, their business addresses and principal occupations during the past five
years are:
WALTER E. AUCH, SR. (born 1921) Trustee
6001 N. 62nd Place, Paradise Valley, AZ 85153. Business Consultant and Director,
Nicholas-Applegate Institutional Mutual Funds, Salomon Smith Barney Trak Funds
and Concert Series, Pimco Advisors L.P., Banyan Strategic Realty Trust, Legend
Properties and Senele Group.
ERIC M. BANHAZL* (born 1957) Trustee, President and Treasurer
2020 E. Financial Way, Glendora, CA 91741. Executive Vice President, Investment
Company Administration, LLC; Vice President, First Fund Distributors, Inc.;
Treasurer, Guinness Flight Investment Funds, Inc.
DONALD E. O'CONNOR (born 1936) Trustee
1700 Taylor Avenue, Fort Washington, MD 20744. Retired; formerly Executive Vice
President and Chief Operating Officer of ICI Mutual Insurance Company (until
January, 1997); Vice President, Operations, Investment Company Institute (until
June, 1993); Independent Director, The Parnassus Fund, The Parnassus Income
Fund, and Allegiance Investment Trust.
GEORGE T. WOFFORD III (born 1939) Trustee
305 Glendora Circle, Danville, CA 94526. Senior Vice President, Information
Services, Federal Home Loan Bank of San Francisco.
STEVEN J. PAGGIOLI (born 1950) Vice President
915 Broadway, Suite 1605, New York, NY 10010. Executive Vice President,
Investment Company Administration, LLC; Vice President, First Fund Distributors,
Inc.; President and Trustee, Professionally Managed Portfolios; Trustee, The
Managers Funds.
ROBERT H. WADSWORTH (born 1940) Vice President
4455 E. Camelback Rd. Suite 261-E, Phoenix, AZ 85018. President, Robert H.
Wadsworth & Associates, Inc., Investment Company Administration, LLC and First
Fund Distributors, Inc.; Vice President, Professionally Managed Portfolios;
President, Guinness Flight Investment Funds, Inc.; Director, Germany Fund, Inc.,
New Germany Fund, Inc., Central European Equity Fund, Inc. and Deutsche Funds,
Inc.
CHRIS O. MOSER (born 1949) Secretary
4455 E. Camelback Rd. Suite 261-E, Phoenix, AZ 85018. Employed by Investment
Company Administration, LLC (since July 1996); Formerly employed by Bank One,
N.A. (From August 1995 until July 1996; O'Connor, Cavanagh, Anderson,
Killingsworth and Beshears (law firm) (until August 1995).
* denotes Trustee who is an "interested person" of the Trust under the 1940 Act.
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<PAGE>
Set forth below is the rate of compensation received by the following Trustees
from all other portfolios of the Trust. This total amount is allocated among the
portfolios. Disinterested Trustees receive an annual fee of $12,000.
Disinterested Trustees are also reimbursed for expenses in connection with each
Board meeting attended. No other compensation or retirement benefits were
received by any Trustee or officer from other portfolios of the Trust. The Trust
has no pension or retirement plan. No other entity affiliated with the Trust
pays any compensation to the Trustees.
For the fiscal year ended September 30, 1999, Trustees' fees and expenses in the
amount of $6,678 were allocated to the Funds.
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
The Declaration of Trust provides that the Trust will indemnify its Trustees and
officers against liabilities and expenses incurred in connection with litigation
in which they may be involved because of their offices with the Trust, unless,
as to liability to the Trust or its shareholders, it is finally adjudicated that
they engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in their offices or with respect to any matter
unless it is finally adjudicated that they did not act in good faith in the
reasonable belief that their actions were in the best interest of the Trust. In
the case of settlement, such indemnification will not be provided unless it has
been determined by a court or other body approving the settlement or other
disposition, or by a reasonable determination based upon a review of readily
available facts, by vote of a majority of disinterested Trustees or in a written
opinion of independent counsel, that such officers or Trustees have not engaged
in willful misfeasance, bad faith, gross negligence or reckless disregard of
their duties.
THE ADVISOR
Rockhaven Asset Management, LLC acts as investment advisor to the Funds pursuant
to an Investment Advisory Agreement (the "Advisory Agreement"). Subject to such
policies as the Board of Trustees may determine, the Advisor is responsible for
investment decisions for the Funds. Pursuant to the terms of the Advisory
Agreement, the Advisor provides the Funds with such investment advice and
supervision as it deems necessary for the proper supervision of the Funds'
investments. The Advisor continuously provides investment programs and determine
from time to time what securities shall be purchased, sold or exchanged and what
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<PAGE>
portion of the Funds' assets shall be held uninvested. The Advisor furnishes, at
its own expense, all services, facilities and personnel necessary in connection
with managing the investments and effecting portfolio transactions for the
Funds. The Advisory Agreement will continue in effect from year to year only if
such continuance is specifically approved at least annually by the Board of
Trustees or by vote of a majority of each Fund's outstanding voting securities
and by a majority of the Trustees who are not parties to the Advisory Agreement
or interested persons of any such party, at a meeting called for the purpose of
voting on such Advisory Agreement.
Pursuant to the terms of the Advisory Agreement, the Advisor is permitted to
render services to others. The Advisory Agreement is terminable without penalty
by the Trust on behalf of a Fund on not more than 60 days', nor less than 30
days', written notice when authorized either by a majority vote of the Fund's
shareholders or by a vote of a majority of the Board of Trustees of the Trust,
or by the Advisor on not more than 60 days', nor less than 30 days', written
notice, and will automatically terminate in the event of its "assignment" (as
defined in the 1940 Act). The Advisory Agreement provides that the Advisor under
such agreement shall not be liable for any error of judgment or mistake of law
or for any loss arising out of any investment or for any act or omission in the
execution of portfolio transactions for the Funds, except for wilful
misfeasance, bad faith or gross negligence in the performance of its duties, or
by reason of reckless disregard of its obligations and duties thereunder.
In the event the operating expenses of a Fund, including all investment advisory
and administration fees, but excluding brokerage commissions and fees, taxes,
interest and extraordinary expenses such as litigation, for any fiscal year
exceed the Fund's expense limitation, the Advisor shall reduce its advisory fee
(which fee is described below) to the extent of its share of such excess
expenses. The amount of any such reduction to be borne by the Advisor shall be
deducted from the monthly advisory fee otherwise payable with respect to the
Fund during such fiscal year; and if such amounts should exceed the monthly fee,
the Advisor shall pay to the Fund its share of such excess expenses no later
than the last day of the first month of the next succeeding fiscal year.
In consideration of the services provided by the Advisor pursuant to the
Advisory Agreement, the Advisor is entitled to receive from each Fund an
investment advisory fee computed daily and paid monthly based on a rate equal to
a percentage of the Fund's average daily net assets specified in the Prospectus.
However, the Advisor may voluntarily agree to waive a portion of the fees
payable to it on a month-to-month basis.
The Funds are responsible for their own operating expenses. The Advisor has
contractually agreed to reduce fees payable to it by the Funds and to pay the
Funds' operating expenses to the extent necessary to limit each Fund's aggregate
annual operating expenses (excluding interest and tax expenses) to the limit set
forth in the Expense Table (the "expense cap"). Any such reductions made by the
Advisor in its fees or payment of expenses which are the Funds' obligation are
subject to reimbursement by the Funds to the Advisor, if so requested by the
Advisor, in subsequent fiscal years if the aggregate amount actually paid by the
Funds toward the operating expenses for such fiscal year (taking into account
the reimbursement) do not exceed the applicable limitation on Fund expenses. The
Advisor is permitted to be reimbursed only for fee reductions and expense
payments made in the previous three fiscal years, but is permitted to look back
five years and four years, respectively, during the initial six years and
seventh year of the Fund's operations. Any such reimbursement is also contingent
upon Board of Trustees' subsequent review and ratification of the reimbursed
amounts. Such reimbursement may not be paid prior to the Fund's payment of
current ordinary operating expenses.
During the period beginning October 1, 1998 through September 30, 1999, the
Advisor earned $23,276 and $41,722 in advisory fees for The Rockhaven Fund and
the Premier Dividend Fund, respectively. The Advisor has contractually agreed to
limit total fund operating expenses to 1.50% of average net assets annually for
both Funds.
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<PAGE>
As a result of that limitation, the Advisor waived the full amount of its fee
and paid Fund operating expenses in the amount of $96,186 and $85,162 for The
Rockhaven Fund and the Premier Dividend Fund, respectively.
The Advisor is controlled by Christopher H. Wiles and AmSouth Bancorporation.
THE ADMINISTRATOR
Pursuant to an Administration Agreement (the "Administration Agreement"),
Investment Company Administration, LLC is the administrator of the Funds (the
"Administrator"). The Administrator provides certain administrative services to
the Funds, including, among other responsibilities, coordinating the negotiation
of contracts and fees with, and the monitoring of performance and billing of,
the Funds' independent contractors and agents; preparation for signature by an
officer of the Trust of all documents required to be filed for compliance by the
Trust and the Funds with applicable laws and regulations excluding those of the
securities laws of various states; arranging for the computation of performance
data, including net asset value and yield; responding to shareholder inquiries;
and arranging for the maintenance of books and records of the Funds, and
providing, at its own expense, office facilities, equipment and personnel
necessary to carry out its duties. In this capacity, the Administrator does not
have any responsibility or authority for the management of the Funds, the
determination of investment policy, or for any matter pertaining to the
distribution of Fund shares.
The Administration Agreement is terminable without penalty by the Trust on
behalf of the Fund or by the Administrator on 60 days' written notice (as
defined in the 1940 Act). The Administration Agreement also provides that
neither the Administrator or its personnel shall be liable for any error of
judgment or mistake of law or for any act or omission in the administration of
the Funds, except for willful misfeasance, bad faith or gross negligence in the
performance of its or their duties or by reason of reckless disregard of its or
their obligations and duties under the Administration Agreement.
For its services, the Administrator receives a monthly fee from each Fund at the
following annual rate, subject to a $30,000 annual minimum:
FUND ASSET LEVEL FEE RATE
- ---------------- --------
First $50 million 0.20% of average daily net assets
Next $50 million 0.15% of average daily net assets
Next $50 million 0.10% of average daily net assets
Next $50 million, and thereafter 0.05% of average daily net assets
DISTRIBUTION AGREEMENT
The Trust has entered into a Distribution Agreement (the "Distribution
Agreement") with First Fund Distributors, Inc. (the "Distributor"), pursuant to
which the Distributor acts as the Funds' underwriter, provides certain
administration services and promotes and arranges for the sale of the Funds'
shares. The Distributor is an affiliate
of the Administrator.
The Distribution Agreement will continue in effect with respect to a Fund only
if such continuance is specifically approved at least annually by the Board of
Trustees or by vote of a majority of the Fund's outstanding voting securities
and, in either case, by a majority of the Trustees who are not parties to the
Distribution Agreement or "interested persons" (as defined in the 1940 Act) of
any such party. The Distribution Agreement is terminable without penalty by the
Trust on behalf of a Fund on 60 days' written notice when authorized either by a
majority vote of the Fund's shareholders or by vote of a majority of the Board
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<PAGE>
of Trustees of the Trust, including a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust, or by the
Distributor on 60 days' written notice, and will automatically terminate in the
event of its "assignment" (as defined in the 1940 Act). The Distribution
Agreement also provides that neither the Distributor nor its personnel shall be
liable for any act or omission in the course of, or connected with, rendering
services under the Distribution Agreement, except for willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations or duties.
DISTRIBUTION ARRANGEMENTS
Pursuant to a plan of distribution adopted by the Trust, on behalf of the Funds,
pursuant to Rule 12b-1 under the 1940 Act (the "Plan"), each Fund may pay
distribution and related expenses up to .25% of its average annual net assets,
as compensation, to the Advisor as Distribution Coordinator. Expenses permitted
to compensate the Advisor for include preparation, printing and mailing of
prospectuses, shareholder reports such as semi-annual and annual reports,
performance reports and newsletters, sales literature and other promotional
material to prospective investors, direct mail solicitations, advertising,
public relations, compensation of sales personnel, advisors or other third
parties for their assistance with respect to the distribution of the Fund's
shares, payments to financial intermediaries for shareholder support,
administrative and accounting services with respect to shareholders of the Fund
and such other expenses as may be approved from time to time by the Board of
Trustees of the Trust.
Under the Plan, the Trustees will be furnished quarterly with information
detailing the amount of expenses paid under the Plan and the purposes for which
payments were made. The Plan may be terminated at any time by vote of a majority
of the Trustees of the Trust who are not interested persons. Continuation of the
Plan is considered by such Trustees no less frequently than annually. During the
period beginning October 1, 1998 and ending September 30, 1999, The Rockhaven
Fund paid the Distribution Coordinator distribution fees totaling $7,759 and the
Premier Dividend Fund paid the Distribution Coordinator distribution fees
totaling $13,507. These fees were used to pay the Advisor for Fund advertising
expenses, presentation and road show expenses incurred, marketing-related
printing fees, and compensation to employees involved in distribution of Fund
shares.
TAXATION
The Funds intend to continue to qualify and elect to be treated as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, (the
"Code"), for each taxable year by complying with all applicable requirements
regarding the source of its income, the diversification of its assets, and the
timing of its distributions. The Fund's policy is to distribute to its
shareholders all of its investment company taxable income and any net realized
capital gains for each fiscal year in a manner that complies with the
distribution requirements of the Code, so that the Fund will not be subject to
any federal income or excise taxes based on net income. However, the Board may
elect to pay such excise taxes if it determines that payment is, under the
circumstances, in the best interests of the Funds.
In order to qualify as a regulated investment company, the Funds must, among
other things, (a) derive at least 90% of its gross income each year from
dividends, interest, payments with respect to loans of stock and securities,
gains from the sale or other disposition of stock or securities or foreign
currency gains related to investments in stock or securities, or other income
(generally including gains from options, futures or forward contracts) derived
with respect to the business of investing in stock, securities or currency, and
(b) diversify its holdings so that, at the end of each fiscal quarter, (i) at
least 50% of the market value of its assets is represented by cash, cash items,
U.S. Government securities, securities of other regulated investment companies
and other securities limited, for purposes of this calculation, in the case of
other securities of any one issuer to an amount not greater than 5% of the
Fund's assets or 10% of the voting securities of the issuer, and (ii) not more
than 25% of the value of its assets is invested in the securities of any one
issuer (other than U.S. Government securities or securities of other regulated
investment companies). As such, and by complying with the applicable provisions
of the Code, the Fund will not be subject to federal income tax on taxable
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<PAGE>
income (including realized capital gains) that is distributed to shareholders in
accordance with the timing requirements of the Code. If the Fund is unable to
meet certain requirements of the Code, it may be subject to taxation as a
corporation.
Distributions of net investment income and net realized capital gains by the
Fund will be taxable to shareholders whether made in cash or reinvested by the
Fund in shares. In determining amounts of net realized capital gains to be
distributed, any capital loss carry-overs from the eight prior taxable years
will be applied against capital gains. Shareholders receiving a distribution
from the Fund 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 or the securities dealer effecting a redemption of the Fund's shares by
a shareholder will be required to file information reports with the Internal
Revenue Service ("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 certain required
certifications on the New Account application 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.
The Fund intends to declare and pay dividends and other distributions, as stated
in the prospectuses. In order to avoid the payment of any federal excise tax
based on net income, the Fund must declare on or before December 31 of each
year, and pay on or before January 31 of the following year, distributions at
least equal to 98% of its ordinary income for that calendar year and at least
98% of the excess of any capital gains over any capital losses realized in the
one-year period ending October 31 of that year, together with any undistributed
amounts of ordinary income and capital gains (in excess of capital losses) from
the previous calendar year.
The Fund may receive dividend distributions from U.S. corporations. To the
extent that the Fund receives such dividends and distributes them to its
shareholders, and meets certain other requirements of the Code, corporate
shareholders of the Fund may be entitled to the "dividends received" deduction.
Availability of the deduction is subject to certain holding period and
debt-financing limitations.
If more than 50% in value of the total assets of the Fund at the end of its
fiscal year is invested in stock or securities of foreign corporations, the Fund
may elect to pass through to its shareholders the pro rata share of all foreign
income taxes paid by the Fund. If this election is made, shareholders will be
(i) required to include in their gross income their pro rata share of the Fund's
foreign source income (including any foreign income taxes paid by the Fund), and
(ii) entitled either to deduct their share of such foreign taxes in computing
their taxable income or to claim a credit for such taxes against their U.S.
income tax, subject to certain limitations under the Code, including certain
holding period requirements. In this case, shareholders will be informed in
writing by the Fund at the end of each calendar year regarding the availability
of any credits on and the amount of foreign source income (including or
excluding foreign income taxes paid by the Fund) to be included in their income
tax returns. If not more than 50% in value of the Fund's total assets at the end
of its fiscal year is invested in stock or securities of foreign corporations,
the Fund will not be entitled under the Code to pass through to its shareholders
their pro rata share of the foreign taxes paid by the Fund. In this case, these
taxes will be taken as a deduction by the Fund.
The Fund may be subject to foreign withholding taxes on dividends and interest
earned with respect to securities of foreign corporations.
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<PAGE>
The use of hedging strategies, such as entering into futures contracts and
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, futures contracts and forward contracts derived by the
Fund with respect to its business of investing in securities or foreign
currencies will qualify as permissible income under Subchapter M of the Code.
For accounting purposes, when the Fund purchases an option, the premium paid by
the Fund is recorded as an asset and is subsequently adjusted to the current
market value of the option. Any gain or loss realized by the Fund upon the
expiration or sale of such options held by the Fund generally will be capital
gain or loss.
Any security, option, or other position entered into or held by the Fund that
substantially diminishes the Fund's risk of loss from any other position held by
the 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, futures contracts 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, foreign currency denominated
payables and receivables and foreign currency options and futures contracts
(other than options and futures contracts that are governed by the
mark-to-market and 60/40 rules of Section 1256 of the Code and for which no
election is made) 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.
A shareholder who purchases shares of the Fund by tendering payment for the
shares in the form of other securities may be required to recognize gain or loss
for income tax purposes on the difference, if any, between the adjusted basis of
the securities tendered to the fund and the purchase price of the Fund's shares
acquired by the shareholder.
Section 475 of the Code requires that a "dealer" in securities must generally
"mark to market" at the end of its taxable year all securities which it owns.
The resulting gain or loss is treated as ordinary (and not capital) gain or
loss, except to the extent allocable to periods during which the dealer held the
security for investment. The "mark to market" rules do not apply, however, to a
security held for investment which is clearly identified in the dealer's records
as being held for investment before the end of the day in which the security was
acquired. The IRS has issued guidance under Section 475 that provides that, for
example, a bank that regularly originates and sells loans is a dealer in
securities, and subject to the "mark to market" rules. Shares of the Fund held
by a dealer in securities will be subject to the "mark to market"
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<PAGE>
rules unless they are held by the dealer for investment and the dealer property
identifies the shares as held for investment. 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
during such six-month period. All or a portion of a loss realized upon the
redemption of shares may be disallowed to the extent shares 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 prospectuses are not
intended to be complete discussions of all applicable federal tax consequences
of an investment in the Fund. The law firm of Paul, Hastings, Janofsky & Walker
LLP has expressed no opinion in respect thereof. Nonresident aliens and foreign
persons are subject to different tax rules, and may be subject to withholding of
up to 30% on certain payments received from the Fund. Shareholders are advised
to consult with their own tax advisers concerning the application of foreign,
federal, state and local taxes to an investment in the Fund.
DIVIDENDS AND DISTRIBUTIONS
The Funds will receive income in the form of dividends and interest earned on
its investments in securities. This income, less the expenses incurred in its
operations, is each Fund's net investment income, substantially all of which
will be declared as dividends to each Fund's shareholders.
The amount of income dividend payments by the Funds is dependent upon the amount
of net investment income received by the Fund from its portfolio holdings, is
not guaranteed and is subject to the discretion of the Board. The Fund does not
pay "interest" or guarantee any fixed rate of return on an investment in its
shares.
The Fund also may derive capital gains or losses in connection with sales or
other dispositions of its portfolio securities. Any net gain the Fund may
realize from transactions involving investments held less than the period
required for long-term capital gain or loss recognition or otherwise producing
short-term capital gains and losses (taking into account any carryover of
capital losses from the eight previous taxable years), although a distribution
from capital gains, will be distributed to shareholders with and as a part of
dividends giving rise to ordinary income. If during any year the Fund realizes a
net gain on transactions involving investments held more than the period
required for long-term capital gain or loss recognition or otherwise producing
long-term capital gains and losses, the Fund will have a net long-term capital
gain. After deduction of the amount of any net short-term capital loss, the
balance (to the extent not offset by any capital losses carried over from the
eight previous taxable years) will be distributed and treated as long-term
capital gains in the hands of the shareholders regardless of the length of time
the Fund's shares may have been held by the shareholders. For more information
concerning applicable capital gains tax rates, see your tax advisor.
Any dividend or distribution paid by the Fund reduces the Fund's net asset value
per share on the date paid by the amount of the dividend or distribution per
share. Accordingly, a dividend or distribution paid shortly after a purchase of
shares by a shareholder would represent, in substance, a partial return of
capital (to the extent it is paid on the shares so purchased), even though it
would be subject to income taxes.
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<PAGE>
Dividends and other distributions will be made in the form of additional shares
of the Fund unless the shareholder has otherwise indicated. Investors have the
right to change their elections with respect to the reinvestment of dividends
and distributions by notifying the Transfer Agent in writing, but any such
change will be effective only as to dividends and other distributions for which
the record date is seven or more business days after the Transfer Agent has
received the written request.
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 $1,000; "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 $1,000 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.
For the period from October 1, 1998 through September 30, 1999, The Rockhaven
Fund and the Premier Dividend Fund had Total Returns of 23.05% and 35.98%,
respectively.
OTHER INFORMATION
Performance data of the Fund quoted in advertising and other promotional
materials represents past performance and is not intended to predict or
guarantee 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
Advisors Series Trust is an open-end management investment company organized as
a Delaware Business Trust under the laws of the State of Delaware on October 3,
1996. The Trust currently consists of 19 series of shares of beneficial
interest, par value $0.01 per share. The Agreement and 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
B-26
<PAGE>
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 Agreement and 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 19 series of shares, and
may create additional series in the future, each of 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 Funds' custodian, Firstar Bank, 425 Walnut Street, Cincinnati, Ohio 45202 is
responsible for holding the Funds' assets. The Custodian does not participate in
decisions relating to the purchase and sale of securities by the Fund. American
Data Services, P.O. Box 5536, Hauppauge, NY 11788 acts as the Funds' accounting
services agent. The Fund's independent accountants, PricewaterhouseCoopers, LLP,
1177 Avenue of the Americas, New York, NY 10036, assist in the preparation of
certain reports to the Securities and Exchange Commission and the Funds' tax
returns. Paul, Hastings Janofsky & Walker are legal counsel to the Fund.
Shares of the Funds owned by the Trustees and officers as a group were less than
1% at November 22, 1999.
On November 22, 1999, the following additional persons owned of record and/or
beneficially more than 5% of The Rockhaven Fund's outstanding voting securities:
Lawrence R. Garlock, Janice O. Garlock, JT TEN, 303 Churchill Road, Greensburg,
PA 15601; 16.60% record.
On November 22, 1999, the following additional persons owned of record and/or
beneficially more than 5% of the Premier Dividend Fund's outstanding voting
securities: Lawrence R. Garlock, Janice O. Garlock, JTWROS, 303 Churchill Road,
Greensburg, PA 15601; 7.62% record.
The validity of the Funds' shares have been passed on by Paul, Hastings,
Janofsky & Walker LLP, 345 California Street, San Francisco, CA 94104.
B-27
<PAGE>
APPENDIX
DESCRIPTION OF COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE, INC..
Moody's commercial paper ratings are assessments of the issuer's ability to
repay punctually promissory obligations. Moody's employs the following
designations, all judged to be investment grade, to indicate the relative
repayment capacity of rated issuers: Prime 1--highest quality; Prime 2--higher
quality.
STANDARD & POOR'S RATINGS GROUP
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.
B-28
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Agreement and Declaration of Trust (1)
(b) By-Laws (1)
(c) Not applicable
(d) (i) Form of Investment Advisory Agreement (4)
(ii) Form of Amendment to Investment Advisory Agreement (5)
(e) Distribution Agreement (2)
(f) Not applicable
(g) Custodian Agreement (3)
(h) (i) Administration Agreement with Investment Company
Administration Corporation (2)
(ii) Fund Accounting Service Agreement (2)
(iii) Transfer Agency and Service Agreement (2)
(i) Opinion of Counsel(6)
(j) Not applicable
(k) Not applicable
(l) Investment letters (3)
(m) Form of Rule 12b-1 Plan (4)
(n) Not applicable
(o) Not applicable
- ----------
(1) Previously filed with the Registration Statement on Form N-1A (File No.
333-17391) on December 6, 1996 and incorporated herein by reference.
(2) Previously filed with Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-1A (File No. 333-17391) on January 29, 1997 and
incorporated herein by reference.
(3) Previously filed with Pre-Effective Amendment No. 2 to the Registration
Statement on Form N-1A (File No. 333-17391) on February 28, 1997 and
incorporated herein by reference.
(4) Previously filed with Post-Effective Amendment No. 37 to the Registration
Statement on Form N-1A (File No. 333-17391) on January 15, 1999 and
incorporated herein by reference.
(5) Previously filed with Post-Effective Amendment No. 45 to the Registration
Statement on Form N-1A (File No. 333-17391) on June 30, 1999 and
incorporated herein by reference.
(6) To be filed by amendment.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
<PAGE>
ITEM 25. INDEMNIFICATION.
Article VI of Registrant's By-Laws states as follows:
Section 1. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of this
Article, "agent" means any person who is or was a Trustee, officer, employee or
other agent of this Trust or is or was serving at the request of this Trust as a
Trustee, director, officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise or was a
Trustee, director, officer, employee or agent of a foreign or domestic
corporation which was a predecessor of another enterprise at the request of such
predecessor entity; "proceeding" means any threatened, pending or completed
action or proceeding, whether civil, criminal, administrative or investigative;
and "expenses" includes without limitation attorney's fees and any expenses of
establishing a right to indemnification under this Article.
Section 2. ACTIONS OTHER THAN BY TRUST. This Trust shall indemnify any
person who was or is a party or is threatened to be made a party to any
proceeding (other than an action by or in the right of this Trust) by reason of
the fact that such person is or was an agent of this Trust, against expenses,
judgments, fines, settlements and other amounts actually and reasonably incurred
in connection with such proceeding, if it is determined that person acted in
good faith and reasonably believed:
(a) in the case of conduct in his official capacity as a Trustee of the
Trust, that his conduct was in the Trust's best interests, and
(b) in all other cases, that his conduct was at least not opposed to the
Trust's best interests, and
(c) in the case of a criminal proceeding, that he had no reasonable cause
to believe the conduct of that person was unlawful.
The termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent shall not of
itself create a presumption that the person did not act in good faith and in a
manner which the person reasonably believed to be in the best interests of this
Trust or that the person had reasonable cause to believe that the person's
conduct was unlawful.
Section 3. ACTIONS BY THE TRUST. This Trust shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action by or in the right of this Trust to procure a judgment in
its favor by reason of the fact that that person is or was an agent of this
Trust, against expenses actually and reasonably incurred by that person in
connection with the defense or settlement of that action if that person acted in
good faith, in a manner that person believed to be in the best interests of this
Trust and with such care, including reasonable inquiry, as an ordinarily prudent
person in a like position would use under similar circumstances.
Section 4. EXCLUSION OF INDEMNIFICATION. Notwithstanding any provision to
the contrary contained herein, there shall be no right to indemnification for
any liability arising by reason of willful misfeasance, bad faith, gross
negligence, or the reckless disregard of the duties involved in the conduct of
the agent's office with this Trust.
<PAGE>
No indemnification shall be made under Sections 2 or 3 of this Article:
(a) In respect of any claim, issue, or matter as to which that person
shall have been adjudged to be liable on the basis that personal
benefit was improperly received by him, whether or not the benefit
resulted from an action taken in the person's official capacity; or
(b) In respect of any claim, issue or matter as to which that person shall
have been adjudged to be liable in the performance of that person's
duty to this Trust, unless and only to the extent that the court in
which that action was brought shall determine upon application that in
view of all the circumstances of the case, that person was not liable
by reason of the disabling conduct set forth in the preceding
paragraph and is fairly and reasonably entitled to indemnity for the
expenses which the court shall determine; or
(c) of amounts paid in settling or otherwise disposing of a threatened or
pending action, with or without court approval, or of expenses
incurred in defending a threatened or pending action which is settled
or otherwise disposed of without court approval, unless the required
approval set forth in Section 6 of this Article is obtained.
Section 5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of this
Trust has been successful on the merits in defense of any proceeding referred to
in Sections 2 or 3 of this Article or in defense of any claim, issue or matter
therein, before the court or other body before whom the proceeding was brought,
the agent shall be indemnified against expenses actually and reasonably incurred
by the agent in connection therewith, provided that the Board of Trustees,
including a majority who are disinterested, non-party Trustees, also determines
that based upon a review of the facts, the agent was not liable by reason of the
disabling conduct referred to in Section 4 of this Article.
Section 6. REQUIRED APPROVAL. Except as provided in Section 5 of this
Article, any indemnification under this Article shall be made by this Trust only
if authorized in the specific case on a determination that indemnification of
the agent is proper in the circumstances because the agent has met the
applicable standard of conduct set forth in Sections 2 or 3 of this Article and
is not prohibited from indemnification because of the disabling conduct set
forth in Section 4 of this Article, by:
(a) A majority vote of a quorum consisting of Trustees who are not parties
to the proceeding and are not interested persons of the Trust (as
defined in the Investment Company Act of 1940); or
(b) A written opinion by an independent legal counsel.
Section 7. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by this Trust before the final disposition of the
proceeding upon a written undertaking by or on behalf of the agent, to repay the
amount of the advance if it is ultimately determined that he or she is not
entitled to indemnification, together with at least one of the following as a
condition to the advance: (i)security for the undertaking; or (ii) the existence
of insurance protecting the Trust against losses arising by reason of any lawful
advances; or (iii) a determination by a majority of a quorum of Trustees who are
not parties to the proceeding and are not interested persons of the Trust, or by
an independent legal counsel in a written opinion, based 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.
<PAGE>
Section 8. OTHER CONTRACTUAL RIGHTS. Nothing contained in this Article
shall affect any right to indemnification to which persons other than Trustees
and officers of this Trust or any subsidiary hereof may be entitled by contract
or otherwise.
Section 9. LIMITATIONS. No indemnification or advance shall be made under
this Article, except as provided in Sections 5 or 6 in any circumstances where
it appears:
(a) that it would be inconsistent with a provision of the Agreement and
Declaration of Trust of the Trust, a resolution of the shareholders,
or an agreement in effect at the time of accrual of the alleged cause
of action asserted in the proceeding in which the expenses were
incurred or other amounts were paid which prohibits or otherwise
limits indemnification; or
(b) that it would be inconsistent with any condition expressly imposed by
a court in approving a settlement.
Section 10. INSURANCE. Upon and in the event of a determination by the
Board of Trustees of this Trust to purchase such insurance, this Trust shall
purchase and maintain insurance on behalf of any agent of this Trust against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such, but only to the extent that this Trust would
have the power to indemnify the agent against that liability under the
provisions of this Article and the Agreement and Declaration of Trust of the
Trust.
Section 11. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN. This Article does not
apply to any proceeding against any Trustee, investment manager or other
fiduciary of an employee benefit plan in that person's capacity as such, even
though that person may also be an agent of this Trust as defined in Section 1 of
this Article. Nothing contained in this Article shall limit any right to
indemnification to which such a Trustee, investment manager, or other fiduciary
may be entitled by contract or otherwise which shall be enforceable to the
extent permitted by applicable law other than this Article.
ITEM 26. 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.
360 State Road 90
Aurora, NY 13026
Great Northern Arts
Castle Music, Inc.
World Family Foundation
all with an address at
Gordon Road, Middletown, NY
Robert E. Moses, a Director of American Trust Company, is a director of:
Mascoma Mutual Hold Corp.
On The Green
Lebanon, NH 03766
<PAGE>
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.
-------------------------- --------
Kaminski Asset Management, Inc. 801-53485
Rockhaven Asset Management, LLC 801-54084
Capital Advisors, Inc. 801-14050
Chase Investment Counsel Corp. 801-3396
Avatar Investors Associates Corp. 801-7061
The Edgar Lomax Company 801-19358
AF Holdings, Inc. 801-30528
Heritage West Advisors, LLC 801-55233
Howard Capital Management 801-10188
Segall Bryant & Hamill 801-47232
National Asset Management Corporation 801-14666
Charter Financial Group, Inc. 801-50956
Chartwell Investment Partners 801-54124
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) The Registrant's principal underwriter also acts as principal
underwriter for the following investment companies:
Guinness Flight Investment Funds
Fleming Capital Mutual Fund Group, Inc.
Fremont Mutual Funds, Inc.
Jurika & Voyles Fund Group
Kayne Anderson Mutual Funds
Masters' Select Investment Trust
O'Shaughnessy Funds, Inc.
PIC Investment Trust
The Purisima Funds
Professionally Managed Portfolios
Rainier Investment Management Mutual Funds
RNC Mutual Fund Group, Inc.
Brandes Investment Trust
Allegiance Investment Trust
The Dessauer Global Equity Fund
Puget Sound Alternative Investment Trust
UBS Private Investor Funds
(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 and Vice President
4455 E. Camelback Road Treasurer
Suite 261E
Phoenix, AZ 85018
Eric M. Banhazl Vice President President,
2020 E. Financial Way, Ste. 100 Treasurer
Glendora, CA 91741 and Trustee
Steven J. Paggioli Vice President and Vice President
915 Broadway, Ste. 1605 Secretary
New York, New York 10010
(c) Not applicable.
<PAGE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the rules promulgated thereunder are in the possession of the following persons:
(a) the documents required to be maintained by paragraph (4) of Rule
31a-1(b) will be maintained by the Registrant;
(b) the documents required to be maintained by paragraphs (5), (6), (10)
and (11) of Rule 31a-1(b) will be maintained by the respective investment
advisors:
American Trust Company, One Court Street, Lebanon, NH 03766
Kaminski Asset Management, Inc., 319 First Avenue, Suite 400,
Minneapolis, MN 55401
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
AF Holdings, Inc. 465 Forest Avenue, Suite I, Laguna Beach, CA 92651
Heritage West Advisors, LLC, 1850 North Central Ave., Suite 610,
Phoenix, AZ 85004
Liberty Bank and Trust Company, 4101 Pauger St., Suite 105,
New Orleans, LA 70122
Howard Capital Management, 45 Rockefeller Plaza, Suite 1440,
New York, New York 10111
Segall Bryant & Hamill, 10 South Wacker Drive, Suite 2150,
Chicago, IL 60606
National Asset Management Corporation, 101 South Fifth Street,
Louisville, KY 40202
Charter Financial Group, Inc., 1401 I Street N.W., Suite 505,
Washington, DC 20005
Chartwell Investment Partners, 1235 Westlakes Drive, Suite 330,
Berwyn, PA 19312
Capital Advisors, Inc. 3205 S. Boston Ave., Suite 1300, Tulsa, OK 74013
(c) with respect to The Heritage West Preferred Securities Income Fund
series of the Registrant, all other records will be maintained by the
Registrant; and
(d) all other documents will be maintained by Registrant's custodian,
Firstar Bank, 425 Walnut Street, Cincinnati, OH 45202.
<PAGE>
ITEM 29. MANAGEMENT SERVICES.
Not applicable.
ITEM 30. 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 trustee 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant 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 1st day of December, 1999.
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 December 1, 1999.
/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
