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. 37 |x|
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 | |
Amendment No. 39 |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)
|x| 60 days after filing pursuant to paragraph (a)(i)x
| | 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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<PAGE>
KAMINSKI POLAND FUND
PROSPECTUS & APPLICATION
Class A Shares
[ , 1999]
MANAGED BY
KAMINSKI ASSET MANAGEMENT, INC.
319 1st Avenue North
MINNEAPOLIS, MN 55401
<PAGE>
Kaminski Poland Fund
Class A Shares
319 1st Avenue North
Minneapolis, MN 55401
Fund Literature (888) POL-FUND
Shareholder Services (888) 229-2105
The Kaminski Poland Fund (the "Fund") is a mutual fund that seeks long term
growth by investing in publicly traded securities of companies based in the
Republic of Poland. Kaminski Asset Management, Inc. (the "Advisor") is the
investment advisor to the Fund. There can be no assurance that the Fund will
achieve its investment objective.
The securities market in Poland is considered an "emerging market" with
greater risks than are present in the more developed economy and market of the
United States. The Fund should not be considered a complete investment program.
See the Appendix "Special Considerations and Risks" at the end of this
Prospectus.
This Prospectus sets forth basic information about the Fund that
prospective investors should know before investing. It should be read and
retained for future reference. The Fund is a separate series of Advisors Series
Trust (the "Trust"), an open-end registered management investment company. A
Statement of Additional Information (the "SAI") dated [ , 1999], as may be
amended from time to time, has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. This SAI is available
without charge upon request to the Fund at the address or telephone number given
above. The SEC maintains an internet site (http://www.sec.gov) that contains the
SAI, other material incorporated by reference and other information about
companies that file electronically with the SEC.
Mutual fund shares are not deposits or obligations of (or endorsed or
guaranteed by) any bank, nor are they federally insured or otherwise protected
by the Federal Deposit Insurance Corporation ("FDIC"), the Federal Reserve Board
or any other agency. Investing in any mutual fund involves investment risks,
including the possible loss of principal, and the value and return of any mutual
fund will fluctuate. In the case of this Fund, investors should be prepared to
accept significant volatility in share price and potentially substantial loss of
principal.
These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission nor has the Securities
and Exchange Commission or any state securities commission passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
Prospectus dated [ , 1999]
<PAGE>
Expense Table.................................... 2
Financial Highlights............................. 3
Investment Objectives and Policies............... 4
Management of the Fund........................... 6
Investor Guide................................... 7
Services Available to Shareholders............... 9
How to Redeem Your Shares........................ 10
Distributions and Taxes.......................... 11
General Information.............................. 12
Appendix, Special Considerations and Risks....... 13
EXPENSE TABLE
Expenses are one of several factors to consider when investing in the Fund.
There are two types of expenses involved: shareholder transaction expenses, such
as sales loads, and annual operating expenses, such as investment advisory fees.
The Fund has adopted a plan of distribution under which it will pay the Advisor,
as Distribution Coordinator, a fee at the annual rate of up to 0.25% of the
Fund's net assets. A long-term shareholder may pay more, directly and
indirectly, in such fees than the maximum sales charge permitted under the rules
of the National Association of Securities Dealers. Shares will be redeemed at
the next calculated net asset value per share.
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)(a)............................ 5.75%
Maximum Sales Load Imposed on Reinvested Dividends................... None
Maximum Deferred Sales Load (b)...................................... 1.00%
Redemption Fees...................................................... None
(a) The sales load you pay is subject to breakpoints. See "Investor Guide" in
this prospectus for further information.
(b) The deferred sales load (as a percentage of original purchase price or
redemption proceeds, whichever is lower) will be imposed on redemptions made
within 18 months of purchase. This deferred sales load will apply only sales
made above the $500,000 breakpoint amount.
Annual Operating Expenses
(As a percentage of average net assets)
Investment Advisory Fees, net of fee waivers........................... ---
12b-1 Fees............................................................. 0.25%
Other Expenses (after expense reimbursement)........................... 2.50%
------
Total Operating Expenses (after expense reimbursement)................. 2.75%
======
The Advisor has voluntarily agreed to reduce its fees and/or pay expenses of the
Fund to insure that the Fund's expenses will not exceed 2.75%. If the Advisor
had not limited the Fund's expenses, "Investment Advisory Fees" would have been
1.45%, "Other Expenses" would have been 15.87%, and "Total Operating Expenses"
would have been 17.57% for the Fund's fiscal year ended June 30, 1998. The
Advisory Agreement permits reimbursement by the Fund to the Advisor of fees
waived or expenses reimbursed within a three-year period following such fee
waivers or expenses reimbursements provided they are approved by the Board of
Trustees, and the resulting Fund expenses do not exceed 2.75%. The Advisor may
seek reimbursement before current expenses of the Fund are paid. See "Management
of the Fund."
<PAGE>
Example
This table illustrates the net operating expenses that would be incurred by an
investment in the Fund over different time periods assuming a $1,000 investment,
a 5% annual return.
Assuming redemption 1 Year 3 Years 5 Years 10 Years
at the end of period $ 93 $ 138 $194 $346
Assuming no redemption $28 $85 $145 $306
The Example shown above should not be considered a representation of past or
future expenses and actual expenses may be greater or less than those shown. In
addition, federal regulations require the Example to assume a 5% annual return,
but the Fund's actual return may be higher or lower. See "Management of the
Fund."
<PAGE>
FINANCIAL HIGHLIGHTS
The table that follows includes financial information related to another class
of shares of the Fund not subject to sales loads because Class A shares were not
offered during the periods shown. The financial information for the period ended
June 30, 1998, was audited by PricewaterhouseCoopers LLP, whose report dated
August 21, 1998 is included in the 1998 Annual Report of the Fund.
For a capital share outstanding throughout the period
<TABLE>
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July 1, 1998 July 9, 1997*
through through
December 31, 1998 June 30, 1998
(Unaudited)
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<S> <C>
Net asset value, beginning of period $ $ 10.00
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Loss from investment operations:
Net investment loss++ (0.08)
Net realized and unrealized loss on investments (1.67)
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Total from investment operations (1.75)
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Net asset value, end of period $ $ 8.25
==================================================================================================
Total Return (17.60%)**
Ratios/supplemental data:
Net assets, end of period (thousands) $ $ 1,362
Ratio of expenses to average net assets:
Before expense reimbursement 17.57 %+
After expense reimbursement 2.75 %+
Ratio of net investment loss to average net assets:
Before expense reimbursement (16.30%)+
After expense reimbursement (1.48%)+
Portfolio turnover rate 25.74%
</TABLE>
*Commencement of operations.
++Annualized.
++Net investment loss per share is calculated using the ending balance prior to
consideration of adjustments for permanent book and tax differences.
**Not Annualized.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
What is the Fund's investment objective?
The investment objective of the Fund is long term growth of capital. There can
be no assurance that the Fund will achieve its objective.
How does the Fund seek to achieve its objective?
Kaminski Asset Management, Inc. (the "Advisor"), selects equity securities for
the Fund's portfolio that are issued by companies based in the Republic of
Poland. While there are currently over 190 stocks listed on the Warsaw Stock
Exchange, the Fund will invest only in certain of these stocks and will have a
fairly limited portfolio. In addition, the Fund may invest in shares of
investment companies that are being created as part of the privatization of
state-owned companies.
In selecting stocks for the Fund's portfolio, the Advisor can purchase stocks of
issuers with aggregate market capitalization greater than $10 million and an
annual rate of earnings growth that is greater than 10%. Currently, these
criteria are met by approximately 85% of all Warsaw Stock Exchange listed
companies. After a security is purchased, if it subsequently fails to meet
either of these criteria, the Advisor will consider liquidating some or all of
the position, but it is not required to eliminate the security from the Fund's
portfolio. This is an operating policy of the Fund, and not a fundamental
policy, and it may be changed by a vote of the Trustees of the Trust.
Because the Polish market is limited in market capitalization, the Fund may have
to close to new investors if its total assets exceed the amount that the Advisor
believes can be invested effectively.
What investment opportunities exist in the Republic of Poland?
Until relatively recently, Poland had a centrally planned economy, primarily
influenced by socialist and communist political philosophies and characterized
by nationalized industries, fixed prices and limited external trade. Since the
late 1980's, the Republic of Poland has undertaken political and economic
reforms, founded upon an ideological shift from socialism and communism to
capitalism. In 1990, a fully free election for the government was held. These
reforms have had the effect of creating a market-driven economy and have made
foreign investment possible.
The transition to a market-driven economy has been difficult and had the
immediate effect of high inflation rates, increased unemployment and a
significant decline in living standards as real wages fell. In addition, most of
Poland's external trade was formerly limited to the former Soviet Union and
other Warsaw Pact countries. As a consequence of all of these factors, Poland
experienced a significant drop in GDP.
In the last few years, these reforms have led to an improvement in the economy
of the Republic of Poland, which has been growing in real terms. In addition,
significant progress has been made in reducing inflation and government budget
deficits.
In 1998, the GDP of the Republic of Poland was approximately $150 billion. By
way of comparison, in the same period, the GDP for the United States was $8.13
trillion. In 1997, the average GDP per capita of Poland was $3,876.
The Advisor believes that current conditions in Poland will result in a
significant level of economic activity, offering the potential for long-term
capital appreciation from investment in equity securities of issuers based
there. The Advisor believes that the strategic location of Poland between
Western Europe and Russia and Asia should benefit its economy by permitting it
to take advantage of the modernization, technology and capital available in
Western Europe and the large consumer base to the east. The privatization of
formerly state-run enterprises and the substantial restructuring of established
industries as the economy shifts from a quota-driven command economy to a free
market, supply and demand-driven economy and as companies begin to identify and
exploit domestic and export markets should result in investment opportunities.
The private sector, however, is not as developed in Poland as it is in Western
Europe. The total population of Poland is approximately 39 million and is
well-educated (relative to other emerging markets), with literacy rates that
compare favorably to those in Western Europe. For example, the literacy rates
averaged 99% in 1997 as compared with 100% in Germany in the same period. Annual
wage rates, however, are significantly lower than in the United States and
Germany.
<PAGE>
What risks are associated with an investment in the Fund?
There are risks associated with all securities, but an investment in the Fund
entails more risks than in most other mutual funds. First, there are currency
risks. Most of the Fund's portfolio securities will be denominated in Polish
zlotys, and changes in the value of the zloty relative to the U.S. dollar will
affect the Fund's net asset value. If the dollar increases in value in relation
to the zloty and the price of securities is unchanged, the value of the Fund's
portfolio will decrease, and vice versa. Second, while regulation of securities
and the Warsaw Stock Exchange is similar to the regulatory framework in the
U.S., there is considerably less experience with regulation in Poland. Third,
the securities market in Poland is considered to be an "emerging market", with
greater risks than are present in the more developed economy and market of the
U.S. There is significantly less liquidity than in U.S. markets, which may lead
to difficulties in selling the Fund's portfolio securities. Finally, because the
Fund concentrates its investments in Poland, it will be subject to economic and
political developments that affect that country, unlike other international
funds which diversify among several countries. These risks are described in
detail in the Appendix at the end of this Prospectus, and you should read this
Appendix carefully before investing. Also, you should not consider the Fund to
be a complete investment program, in which you should invest all, or even a
significant portion, of your assets.
Other securities the Fund might purchase and other investment techniques.
Under normal market conditions, the Fund will invest at least 80% of its total
assets in common stocks of companies based in the Republic of Poland. If the
Advisor believes that market conditions warrant a temporary defensive posture,
the Fund may invest without limit in high quality, short-term debt securities
and money market instruments. These short-term debt securities and money market
instruments include commercial paper, certificates of deposit, bankers'
acceptances, U.S. Government securities and repurchase agreements. The Fund may
buy or write options on equities and on stock indices, and it may engage in
foreign exchange transactions. More information about these investments is
contained in the SAI.
Lending securities.
To increase its income, the Fund may lend securities from its portfolio to
brokers, dealers and other financial institutions. No more than one-third of the
Fund's total assets may be represented by loaned securities. The Fund's loans of
portfolio securities will be collateralized at all times by high quality liquid
securities equal in value to the securities loaned.
Investment restrictions.
The Fund has adopted certain investment restrictions, which are described fully
in the Statement of Additional Information. Like the Fund's investment
objective, certain of these restrictions are fundamental and may be changed only
by a majority vote of the Fund's outstanding shares. As a fundamental policy the
Fund must, under normal circumstances, invest at least 80% of its assets in
securities of issuers based in the Republic of Poland. The Fund is
non-diversified, which means that as to 50% of its total assets, no more than 5%
may be invested in the securities of a single issuer and the Fund's position in
any single issuer may not represent more than 10% of such issuer's voting
securities.
There is, of course, no assurance that the Fund's objective will be achieved.
Because prices of common stocks and other securities fluctuate, the value of an
investment in the Fund will vary as the market value of its investment portfolio
changes.
<PAGE>
MANAGEMENT OF THE FUND
The Board of Trustees of the Trust establishes the Fund's policies and
supervises and reviews the management of the Fund.
The Advisor.
The Fund's Advisor is Kaminski Asset Management, Inc., 319 1st Avenue North,
Minneapolis, MN 55401. The Advisor, which is controlled by M.G. Kaminski,
incorporated in December, 1996. Mr. Kaminski is the President and Chief
Executive Officer of the Advisor and the portfolio manager of the Fund. Mr.
Kaminski was, from October, 1992, until December, 1996, a Vice President of
PaineWebber Incorporated and was responsible for client assets aggregating
approximately $100 million in 1996. Prior to joining PaineWebber, Mr. Kaminski
was associated with Piper Jaffray, Inc.
The Advisor provides the Fund with advice on buying and selling securities,
manages the investments of the Fund, furnishes the Fund with office space and
certain administrative services, and provides most of the personnel needed by
the Fund. As compensation, the Fund pays the Advisor a monthly management fee
based upon the average daily net assets of the Fund at the annual rate of 1.45%
of average net assets on the first $20 million of net assets of the Fund,
reduced to 1.25% on assets in excess of $20 million. This fee is higher than
that paid by most mutual funds.
The Administrator.
Investment Company Administration, LLC (the "Administrator") prepares various
federal and state regulatory filings, reports and returns for the Fund, prepares
reports and materials to be supplied to the trustees, monitors the activities of
the Fund's custodian, shareholder servicing agent and accountants, and
coordinates the preparation and payment of Fund expenses and reviews the Fund's
expense accruals. For its services, the Administrator receives a monthly fee at
the rate annual rate of 0.20%, subject to a $30,000 annual minimum. Other
operating expenses.
The Fund is responsible for its own operating expenses. The Advisor has agreed
to reduce fees payable to it by the Fund and to pay Fund operating expenses to
the extent necessary to limit the Fund's aggregate annual operating 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
Fund's obligation are subject to reimbursement by the Fund to the Advisor, if so
requested by the Advisor, in subsequent fiscal years if the aggregate amount
actually paid by the Fund toward the operating expenses for such fiscal year
(taking into account the reimbursement) does 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.
Pursuant to a plan of distribution adopted by the Trust, on behalf of the Fund,
pursuant to Rule 12b-1 under the 1940 Act (the "Plan"), the Fund may reimburse
the Advisor for distribution and related expenses incurred by the Advisor up to
.25% of the Fund's average net assets. Expenses permitted to be paid 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.
<PAGE>
The Plan allows excess distribution expenses to be carried forward by the
Advisor, as distribution coordinator, and resubmitted in a subsequent fiscal
year, provided that (i) distribution expenses cannot be carried forward for more
than three years following initial submission; (ii) the Trustees have made a
determination at the time of initial submission that the distribution expenses
are appropriate to be carried forward and (iii) the Trustees make a further
determination, at the time any distribution expenses which have been carried
forward are submitted for payment, that payment at the time is appropriate,
consistent with the objectives of the Plan and in the current best interests of
shareholders.
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.
Brokerage transactions.
The Advisor considers a number of factors in determining which brokers or
dealers to use for the Fund's portfolio transactions. While these are more fully
discussed in the Statement of Additional Information, the factors include, but
are not limited to, the reasonableness of commissions, quality of services and
execution, and the availability of research which the Advisor may lawfully and
appropriately use in its investment advisory capacities. Provided the Fund
receives prompt execution at competitive prices, the Advisor may also consider
the sale of Fund shares as a factor in selecting broker/dealers for the Fund's
portfolio transactions. Because there are relatively few broker/dealers who can
handle transactions in Polish securities, the Fund will be limited in its
selection of broker/dealers and may have to pay higher commission rates than are
paid by institutions on U.S. securities. INVESTOR GUIDE
How to purchase shares of the Fund.
There are several ways to purchase shares of the Fund. An Application Form,
which accompanies this Prospectus, is used if you send money directly to the
Fund by mail or by wire. If you have questions about how to invest, or about how
to complete the Application Form, please call an account representative at (888)
229-2105.
You may send money to the Fund by mail.
If you wish to invest by mail, simply complete the Application Form and mail it
with a check (made payable to the Kaminski Poland Fund) to the Fund's
Shareholder Servicing Agent:
Kaminski Poland Fund
P.O. Box 640947
Cincinnati, OH 45264-0947
You may wire money to the Fund.
Before sending a wire, you should call the Fund at (888) 229-2105 between 9:00
a.m. and 5:00 p.m., Eastern time, on a day when the New York Stock Exchange
("NYSE") is open for trading, in order to receive an account number. It is
important to call and receive this account number, because if your wire is sent
without it or without the name of the Fund, there may be a delay in investing
the money you wire. You should then ask your bank to wire money to:
Star Bank, N.A. Cinti/Trust
ABA # 0420-0001-3
for credit to Kaminski Poland Fund
DDA # 486479769
for further credit to [your name and account #]
Your bank may charge you a fee for sending a wire to the Fund.
You may purchase shares through an investment dealer.
<PAGE>
You may be able to invest in and redeem shares of the Fund through an investment
broker or dealer, if the broker/dealer has made arrangements with the
Distributor. The broker/dealer is authorized to designate intermediaries to
accept orders on the Fund's behalf. The broker/dealer or the authorized designee
may place an order for you with the Fund; the Fund will be deemed to have
received the order when the authorized broker/dealer or authorized designee
accepts the order. The price you will pay will be the net asset value which is
next calculated after the acceptance of the order by the authorized
broker/dealer or the authorized designee plus the applicable sales charge as set
forth in the following table. A broker/dealer may charge you a fee for placing
your order. The broker/dealer may also hold the shares you purchase in its
omnibus account rather than in your name in the records of the Fund's transfer
agent. The Fund may reimburse the broker, dealer, or other agent for maintaining
records of your account as well as for other services provided to you.
Your broker/dealer is responsible for sending your money to the Fund promptly
after placing the order to purchase shares, and the Fund may cancel the order if
payment is not received from the broker/dealer promptly.
Minimum investments.
The minimum initial investment in the Fund is $1,000. The minimum subsequent
investment is $250.
What is the price you pay for each share of the Fund?
When you invest in the Fund, you 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 table.
<TABLE>
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Sales Charge Sales Charge Portion of Sales
as a Percentage of as a Percentage of Charge Retained
Amount of Purchase Offering Price Net Asset Value by Dealers
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.00%
$50,000 but less than $100,000 4.75% 5.00% 4.00%
$100,000 but less than $250,000 3.75% 3.90% 3.00%
$250,000 but less than $500,000 2.50% 2.60% 2.00%
$500,000 but less than $1,000,000 1.75% 1.80% 1.50%
$1,000,000 or more - - -
</TABLE>
Sales Charge Reductions.
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 Fund's
Shareholder Servicing Agent (888-229-2105) should be notified of current Fund
holdings prior to the purchase of additional shares.
<PAGE>
Subsequent investments.
You may purchase additional shares of the Fund by sending a check, with the stub
from an account statement, to the Fund at the address above. Please also write
your account number on the check. (If you do not have a stub from an account
statement, you can write your name, address and account number on a separate
piece of paper and enclose it with your check.) If you want to send additional
money for investment by wire, it is important for you to call the Fund at (888)
229-2105.
When is money invested in the Fund?
Any money received for investment in the Fund, less the applicable sales charge,
whether sent by check or by wire, is invested at the net asset value of the Fund
which is next calculated after the money is received (assuming the check or wire
correctly identifies the Fund and account). The net asset value is calculated at
the close of regular trading of the NYSE, currently 4:00 p.m., Eastern time. A
check or wire received after the NYSE closes is invested as of the next
calculation of the Fund's net asset value.
What is the net asset value of the Fund?
The Fund's net asset value per share is calculated by dividing the value of the
Fund's total assets, less its liabilities, by the number of its shares
outstanding. In calculating the net asset value, portfolio securities are valued
using current market values, if available. Securities for which market
quotations are not readily available are valued at fair values determined in
good faith by or under the supervision of the Board of Trustees of the Trust.
The fair value of short-term obligations with remaining maturities of 60 days or
less is considered to be their amortized cost.
Other information.
First Fund Distributors, Inc., 4455 E. Camelback Road, Suite 261E, Phoenix, AZ
85018, an affiliate of the Administrator, is the principal underwriter
("Distributor") of the Fund's shares. The Distributor may waive the minimum
investment requirements for purchases by certain group or retirement plans. All
investments must be made in U.S. dollars, and checks must be drawn on U.S.
banks. Third party checks will not be accepted. A charge may be imposed if any
check used for investment does not clear. The Fund and the Distributor reserve
the right to reject any investment, in whole or in part. Federal tax law
requires that investors provide a certified taxpayer identification number and
other certifications on opening an account in order to avoid backup withholding
of taxes. See the Application Form for more information about backup
withholding. The Fund is not required to issue share certificates; all shares
are normally held in non-certificated form on the books of the Fund, for the
account of the shareholder.
SERVICES AVAILABLE TO SHAREHOLDERS
Retirement Plans.
You may obtain prototype IRA plans from the Fund. Shares of the Fund are also
eligible investments for other types of retirement plans.
Automatic investing by check.
You may make regular monthly investments in the Fund using the "Automatic
Investment Plan." A check is automatically drawn on your personal checking
account each month for a predetermined amount (but not less than $50), as if you
had written it directly. Upon receipt of the withdrawn funds, the Fund
automatically invests the money in additional shares of the Fund at the current
net asset value. Applications for this service are available from the Fund.
There is no charge by the Fund for this service. The Fund may terminate or
modify this privilege at any time, and shareholders may terminate their
participation by notifying the Shareholder Servicing Agent in writing,
sufficiently in advance of the next withdrawal.
Automatic withdrawals.
The Fund offers a Systematic Withdrawal Program whereby shareholders may request
that a check drawn in a predetermined amount be sent to them each month or
calendar quarter. To start this Program, your account must have Fund shares with
a value of at least $10,000, and the minimum amount that may be withdrawn each
month or quarter is $50. The Program may be terminated or modified by a
shareholder or the Fund at any time without charge or penalty. A withdrawal
under the Systematic Withdrawal Program involves a redemption of shares of the
Fund, and may result in a gain or loss for federal income tax purposes. In
addition, if the amount withdrawn exceeds the dividends credited to your
account, the account ultimately may be depleted.
<PAGE>
HOW TO REDEEM YOUR SHARES
You have the right to redeem all or any portion of your shares of the Fund at
their net asset value on each day the NYSE is open for trading. A deferred sales
load of 1.00% (as a percentage of original purchase price or redemption
proceeds, whichever is lower) will be imposed on redemptions made within 18
months of purchase. This deferred sales load will apply to only to sales made
above the $500,000 breakpoint amount. In order to keep any applicable deferred
sales load as low as possible, shares not subject to a deferred sales load will
be sold first, on a first-in, first-out basis.
Redemption in writing.
If you purchased shares directly from the Fund, you may redeem your shares by
simply sending a written request to the Fund. You should give your account
number and state whether you want some or all of your shares redeemed. The
letter should be signed by all of the shareholders whose names appear in the
account registration. You should send your redemption request to:
Kaminski Poland Fund
150 Motor Parkway, Suite 109
Hauppauge, NY 11788-0132
Signature guarantee.
If the value of the shares you wish to redeem exceeds $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 the Fund's Application Form, you may redeem shares on any
business day the NYSE is open by calling the Fund's Shareholder Servicing Agent
at (888) 229-2105 before 4:00 p.m. Eastern time. Redemption proceeds will be
mailed or wired, at your direction, on the next business day to the bank account
you designated on the Application Form. The minimum amount that may be wired is
$1,000 (wire charges, if any, will be deducted from redemption proceeds).
Telephone redemptions cannot be made for IRA accounts.
By establishing telephone redemption privileges, you authorize the Fund and its
Shareholder Servicing Agent to act upon the instruction of any person who makes
the telephone call to redeem shares from your account and transfer the proceeds
to the bank account designated in the Application Form. The Fund and the
Shareholder Servicing Agent will use procedures to confirm that redemption
instructions received by telephone are genuine, including recording of telephone
instructions and requiring a form of personal identification before acting on
these instructions. If these normal identification procedures are followed,
neither the Fund nor the Shareholder Servicing Agent will be liable for any
loss, liability, or cost which results from acting upon instructions of a person
believed to be a shareholder with respect to the telephone redemption privilege.
The Fund may change, modify, or terminate these privileges at any time upon at
least 60-days' notice to shareholders.
You may request telephone redemption privileges after your account is opened;
however, the authorization form will require a separate signature guarantee.
Shareholders may experience delays in exercising telephone redemption privileges
during periods of abnormal market activity.
What price is used for a redemption?
The redemption price is the net asset value of the Fund's shares less the
Deferred Sales Charge (if applicable), 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.
<PAGE>
When are redemption payments made?
As noted above, redemption payments for telephone redemptions are sent on the
day after the telephone call is received. Payments for redemptions sent in
writing are normally made promptly, but no later than seven days after the
receipt of a valid request. However, the Fund may suspend the right of
redemption under certain extraordinary circumstances in accordance with rules of
the Securities and Exchange Commission.
If shares were purchased by wire, they cannot be redeemed until the day after
the Application Form is received. If shares were purchased by check and then
redeemed shortly after the check is received, the Fund may delay sending the
redemption proceeds until it has been notified that the check used to purchase
the shares has been collected, a process which may take up to 15 days. This
delay can be avoided by investing by wire or by using a certified or official
bank check to make the purchase.
Other information about redemptions.
A redemption may result in recognition of a gain or loss for federal income tax
purposes. Due to the relatively high cost of maintaining smaller accounts, the
shares in your account (unless it is a retirement plan or Uniform Gifts or
Transfers to Minors Act account) may be redeemed by the Fund if, due to
redemptions you have made, the total value of your account is reduced to less
than $500. If the Fund determines to make such an involuntary redemption, you
will first be notified that the value of your account is less than $500, and you
will be allowed 30 days to make an additional investment to bring the value of
your account to at least $500 before the Fund takes any action.
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 from 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.
DISTRIBUTIONS AND TAXES
Dividends and other distributions.
Dividends from net investment income, if any, are normally declared and paid by
the Fund in December. Capital gains distributions, if any, are also normally
made in December, but the Fund may make an additional payment of dividends or
distributions if it deems it desirable at another time during any year.
Dividends and capital gain distributions (net of any required tax withholding)
are automatically reinvested in additional shares of the Fund at the net asset
value per share on the reinvestment date unless you have previously requested in
writing to the Shareholder Servicing Agent that payment be made in cash. Any
dividend or distribution paid by the Fund has the effect of reducing the net
asset value per share on the record date by the amount of the dividend or
distribution. You should note that a dividend or distribution paid on shares
purchased shortly before that dividend or distribution was declared will be
subject to income taxes even though the dividend or distribution represents, in
substance, a partial return of capital to you.
Taxes.
The Fund has qualified and intends to continue elect to be treated as a
regulated investment company under Subchapter M of the Code. As long as the Fund
continues to qualify, and as long as the Fund distributes all of its income each
year to the shareholders, the Fund will not be subject to any federal income or
excise taxes. Distributions made by the Fund will be taxable to shareholders
whether received in shares (through dividend reinvestment ) or in cash.
Distributions derived from net investment income, including net short-term
capital gains, are taxable to shareholders as ordinary income. A portion of
these distributions may qualify for the intercorporate dividends-received
deduction. Distributions designated as capital gains dividends are taxable as
long-term capital gains regardless of the length of time shares of the Fund have
been held. Although distributions are generally taxable when received, certain
distributions made in January are taxable as if received the prior December. You
will be informed annually of the amount and nature of the Fund's distributions.
Additional information about taxes is set forth in the Statement of Additional
Information. You should consult your own advisers concerning federal, state and
local taxation of distributions from the Fund.
<PAGE>
GENERAL INFORMATION
The Trust.
The Trust was organized as a Delaware business trust on October 3, 1996. The
Agreement and Declaration of Trust permits the Board of Trustees to issue an
unlimited number of full and fractional shares of beneficial interest, with par
value of 0.01 per share which may be issued in any number of series. The Board
of Trustees may from time to time issue other series, the assets and liabilities
of which will be separate and distinct from any other series.
Shareholder Rights.
Shares issued by the Fund have no preemptive, conversion, or subscription
rights. Shareholders have equal and exclusive rights as to dividends and
distributions as declared by the Fund and to the net assets of the Fund upon
liquidation or dissolution. The Fund, as a separate series of the Trust, votes
separately on matters affecting only the Fund (e.g., approval of the Investment
Advisory Agreement); all series of the Trust vote as a single class on matters
affecting all series jointly or the Trust as a whole (e.g., election or removal
of Trustees). Voting rights are not cumulative, so that the holders of more than
50% of the shares voting in any election of Trustees can, if they so choose,
elect all of the Trustees. While the Trust is not required and does not intend
to hold annual meetings of shareholders, such meetings may be called by the
Trustees in their discretion, or upon demand by the holders of 10% or more of
the outstanding shares of the Trust for the purpose of electing or removing
Trustees.
Year 2000 Risk.
Like other business organizations around the world, the Fund could be adversely
affected if the computer systems used by its investment 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." Failure of computer systems used for securities trading could result
in settlement and liquidity problems for the Fund and investors. That failure
could have a negative impact on handling securities trades and pricing and
accounting services. Additionally, the services provided to the Fund depend on
the interaction of computer systems with those of brokers, information vendors
and other parties; therefore, any failure of the computer systems of those
parties may cause service problems for the Fund. The Board of Trustees of the
Fund has adopted a Year 2000 Project Plan that is reasonably designed to address
the Year 2000 Problem with respect to the Advisor's and other service providers'
computer systems. Included in the Year 2000 Project Plan is a contingency plan
for the retention of other service providers to replace those services providers
whose performance in converting to Year 2000 compliant data processing equipment
has been deemed to be less than satisfactory. There can be no assurance that
these actions will be sufficient to avoid any adverse impact on the Fund. The
extent of that risk cannot be ascertained at this time.
Performance Information.
From time to time, the Fund may publish its total return in advertisements and
communications to investors. Total return information will include the Fund's
average annual compounded rate of return over the most recent four calendar
quarters and over the period from the Fund's inception of operations. The Fund
may also advertise aggregate and average total return information over different
periods of time. The Fund's total return will be based upon the value of the
shares acquired through a hypothetical $1,000 investment at the beginning of the
specified period and the net asset value of those shares at the end of the
period, assuming reinvestment of all distributions. Total return figures will
reflect all recurring charges against Fund income. You should note that the
investment results of the Fund will fluctuate over time, and any presentation of
the Fund's total return for any prior period should not be considered as a
representation of what an investor's total return may be in any future period.
<PAGE>
Shareholder Inquiries.
Shareholder inquiries should be directed to the Shareholder Servicing Agent at
(888) 229-2105.
APPENDIX
SPECIAL CONSIDERATIONS AND RISKS
Because the Fund will invest primarily in equity securities of issuers based in
the Republic of Poland, an investor in the Fund should be aware of special
considerations and risks relating to investments in those issuers, and
international investment generally, which typically are not associated with
investments in securities issued by U.S. companies. The Fund is designed for
long term investment, and an investment in its shares should be considered
speculative.
Currency fluctuations.
The Fund generally will hold assets denominated and traded in the Polish zloty,
and most of its income will be received or realized in zlotys, although the Fund
will compute its net asset value and calculate and distribute any income in U.S.
dollars. Accordingly, changes in the value of the zloty against the dollar will
result in corresponding changes in the dollar value of the Fund's assets
denominated in zlotys and in the Fund's net asset value, and will also change
the dollar value of income and gains derived in zlotys. If the value of the
zloty falls relative to the dollar between accrual of the income and the payment
of Fund distributions, the amount of zlotys required to be converted into
dollars to pay these distributions will increase, and the Fund could be required
to sell portfolio securities to make the distributions. Similarly, if the value
of the zloty declines between the time the Fund incurs expenses in dollars and
the time the expenses are paid, the amount of zlotys required to be converted
into dollars to pay the expenses will be greater than the zloty equivalent of
such expenses at the time they were incurred.
The Advisor generally will not seek to hedge against a decline in the value of
the Fund's portfolio securities resulting from a decline in the value of the
zloty. As a result, the Fund will be subject to the risk of changes in the value
of the zloty affecting the value of its portfolio securities, as well as the
value of interest, dividends and net realized capital gains received in zlotys.
Economic and Political Factors.
The economy of Poland generally differs from the U.S. economy in such respects
as general development, rate of inflation, volatility of the rate of growth of
gross domestic product and balance of payments position, among others. The
following table sets forth some key economic indicators:
1996 1997 1998
GDP at current prices (Zl billion) 366.2 474.7 526.5
Real GDP growth (%) 6.2 7.0 5.3
Consumer price inflation (%) 19.9 13.0 9.8
Current account ($21 billion) (8.15) (12.1) (12.8)
Exchange rate, average (Zl:$) 2.71 3.3 3.5
Source: The Economist Intelligence Unit
Poland has had a centrally planned socialist economy for many years. Recently
the government has generally implemented reforms directed at economic
liberalization, including efforts to decentralize the decision-making process
and to establish market-oriented economics. However, there can be no assurance
that current or future governments will continue to pursue these policies.
Furthermore, the transition from a centrally planned, socialist economy to a
competitive market economy resulted in the past in certain disruptions; for
example, in 1990 and 1991 GDP declined 11.6% and 7.0%, unemployment rose from
under 12% in 1991 to over 16% in 1994, before declining to 11% at the end of
December, 1997. There can be no assurance that disruptions will not occur again
in the future. In addition, business entities in Poland do not have any
significant recent history of operating in a market-oriented economy, and the
ultimate impact of Poland's attempts to move toward a more market-oriented
environment is unclear.
<PAGE>
Although a democratic system of government is now generally established in
Poland, the country remains exposed to risks of political change or periods of
uncertainty. Nationalization, expropriation or confiscatory taxation, currency
blockage, government regulation, social instability or diplomatic developments
could adversely affect its economy or its securities markets. In addition, many
of the countries near Poland are similarly exposed to these same uncertainties,
and disruptions in any of these countries could adversely affect the economy of
Poland.
As a result of Poland's recent socialist history, the country does not have a
body of laws and court decisions comparable to those of the U.S. Laws may not
exist to cover all contingencies or to protect adequately, and the
administration of these laws may be subject to considerable discretion. There
also can be no assurance that laws and related interpretations will not be
changed or applied in a manner that will adversely affect the Fund and its
assets.
The Polish Commercial Code sets forth requirements regarding capitalization,
shareholders meetings, records and auditing for Polish companies. Recent
amendments to the Commercial Code are aimed at modernizing its legal norms and
adapting them to models prevailing in the European Community. All joint stock
companies, limited liability companies and certain other entities are required
to have annually audited financial statements.
Foreign Investment and Repatriation.
Currently, there are no restrictions on foreign investment in Polish securities,
except with respect to securities of issuers whose business relates to operation
of sea or air ports, real estate, the defense industry, wholesale trading of
imported consumer goods or legal services. Investments may be made in such
industries if authorization is obtained from the Ministry of Privatization.
Also, permission must be sought from the relevant licensing authority to
purchase shares of issuers in industries where licenses from the Polish
government are required, such as the banking or brokerage industry or a business
involving the production of alcohol, cigarettes or medicine.
In early 1990, internal convertibility of the Polish zloty was introduced. Both
the initial investment in and any profits resulting from business activities may
be freely repatriated, provided the currency exchange is made at an authorized
foreign exchange bank. In the case of dividends, repatriation is only allowed
after an audit certificate has been issued and the necessary taxes have been
paid. The National Bank of Poland is responsible for overseeing the banking
system in Poland and for controlling monetary policy and exchange rates.
Characteristics of Securities Markets and Regulation.
The securities markets in Poland are much smaller than those in the U.S.
Although a stock exchange first opened in Warsaw in 1817 and before World War II
there were seven stock exchanges operating in Poland, the capital markets in
Poland did not operate after that war until 1991. In structuring the capital
markets and their regulation in 1991, the Polish government reviewed several
contemporary world markets and based the system on the securities markets in
France, with assistance from the Societe des Bourses Francaises. In 1991, the
Act on Public Trading in Securities and Trust Funds was adopted, and the Polish
Securities Commission was created. The Warsaw Stock Exchange (the "WSE") was
also established by the State Treasury as a joint stock company. The WSE is a
self-regulatory organization (as are stock exchanges in the U.S.), and its rules
must be approved by the Polish Securities Commission. In 1994, the WSE was
admitted as a member of the International Federation of Stock Exchanges. The
Polish Securities Commission is responsible for monitoring the Polish securities
market, supervising all public trading, including trading on the WSE, and
regulating brokers. In addition, a Brokers Association is responsible for
regulating the activities and conduct securities traded over-the-counter. The
disclosure requirements are less stringent for issuers whose securities are
traded over-the-counter. Clearing and settlement occurs within three business
days through the National Depository for Securities, which is operated by the
WSE.
<PAGE>
Notwithstanding the similarities between the U.S. and Polish securities markets
in terms of structure and regulation, there are significant differences. There
is, for example, substantially less trading volume on the WSE than the New York
Stock Exchange (the "NYSE"), and its aggregate market capitalization at December
31, 1997 was less than 1/10th of 1% of the aggregate market capitalization of
the NYSE. There is also a high concentration of market capitalization and
trading volume in a relatively small number of issuers representing a limited
number of industries, as well as a high concentration of investors. There are,
for example, nearly 3,000 companies listed on the NYSE, while there are less
than 200 issuers listed on the WSE. As a result, the securities markets in
Poland are subject to a lack of liquidity and high price volatility relative to
the U.S. securities markets. In addition, securities traded in Poland may be
subject to risks due to the inexperience of financial intermediaries, the lack
of a sufficient capital base to expand operations and the possibility of
restrictions on trading. Finally, since current regulations governing securities
markets have only existed since 1991, the regulators in Poland do not have the
experience of regulators in the U.S., where federal securities regulation has
been in effect since 1933.
<PAGE>
ADVISOR
Kaminski Asset Management, Inc.
319 1st Avenue North
Minneapolis, MN 55401
Web page: www.polfund.com
(888) POL-FUND
DISTRIBUTOR
First Fund Distributors, Inc.
4455 E. Camelback Road, Suite 261-E
Phoenix, Arizona 85018
CUSTODIAN
Star Bank, N.A.
425 Walnut Street
Cincinnati, OH 45202
TRANSFER AGENT
American Data Services, Inc.
150 Motor Parkway, Suite 109
Hauppauge, NY 11788
(888) 229-2105
AUDITORS
PricewaterhouseCoopers LLP
650 Third Avenue South, Suite 1300
Minneapolis, MN 55402
LEGAL COUNSEL
Paul, Hastings, Janofsky & Walker LLP
345 California Street, 29th Floor
San Francisco, CA 94104
<PAGE>
KAMINSKI POLAND FUND
Statement of Additional Information
Dated [ ], 1999
This Statement of Additional Information is not a prospectus and contains
information in addition to that set forth in: the prospectus for the Class I
shares of the Kaminski Poland Fund dated [ ], 1999, and the prospectus for the
Class A shares of the Kaminski Poland Fund, dated October 30, 1998, each as may
be revised from time to time (each a "prospectus" and collectively, the
"prospectuses"). Kaminski Poland Fund (the "Fund") is a series of Advisors
Series Trust (the "Trust"). Kaminski Asset Management, Inc. (the "Advisor"), is
the Advisor to the Fund. Copies of the prospectuses may be obtained from the
Fund at 319 1st Avenue North, Minneapolis, Minnesota, telephone number (612)
305-9026.
TABLE OF CONTENTS
Cross-reference to sections
Page in the prospectus
Investment Objective and Policies....... B-2 Investment Objectives and
Policies
Management.............................. B-11 Management of the Fund
Distribution Arrangements............... B-14 Management of the Fund
Portfolio Transactions and Brokerage.... B-14 Management of the Fund
Net Asset Value......................... B-15 Investor Guide
Taxation .......................... B-15 Distributions and Taxes
Dividends and Distributions............. B-18 Distributions and Taxes
Performance Information................. B-19 General Information
General Information..................... B-20 General Information
Appendix................................ B-20 Not applicable
B-1
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of the Fund is long term growth of capital, which
it attempts to achieve by investing in equity securities that are issued by
companies based in the Republic of Poland. There is no assurance that the Fund
will achieve its objective. The discussion below supplements information
contained in the prospectus as to investment policies of the Fund.
Convertible Securities and Warrants
The Fund may invest in convertible securities and warrants. A convertible
security is a fixed income security (a debt instrument or a preferred stock)
which may be converted at a stated price within a specified period of time into
a certain quantity of the common stock of the same or a different issuer.
Convertible securities are senior to common stocks in an issuer's capital
structure, but are usually subordinated to similar non-convertible securities.
While providing a fixed income stream (generally higher in yield than the income
derivable from common stock but lower than that afforded by a similar
nonconvertible security), a convertible security also affords an investor the
opportunity, through its conversion feature, to participate in the capital
appreciation attendant upon a market price advance in the convertible security's
underlying common stock.
A warrant gives the holder a right to purchase at any time during a
specified period a predetermined number of shares of common stock at a fixed
price. Unlike convertible debt securities or preferred stock, warrants do not
pay a fixed dividend. Investments in warrants involve certain risks, including
the possible lack of a liquid market for resale of the warrants, potential price
fluctuations as a result of speculation or other factors, and failure of the
price of the underlying security to reach or have reasonable prospects of
reaching a level at which the warrant can be prudently exercised (in which event
the warrant may expire without being exercised, resulting in a loss of the
Fund's entire investment therein).
Short-Term Investments
The Fund may invest in any of the following securities and instruments:
Bank Certificates or Deposit, Bankers' Acceptances and Time Deposits. The Fund
may acquire certificates of deposit, bankers' acceptances and time deposits.
Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank for a definite period of time and earning a
specified return. Bankers' acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning in effect that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Certificates of deposit and bankers' acceptances acquired by the Fund will be
dollar- denominated obligations of domestic or foreign banks or financial
institutions which at the time of purchase have capital, surplus and undivided
profits in excess of $100 million (including assets of both domestic and foreign
branches), based on latest published reports, or less than $100 million if the
principal amount of such bank obligations are fully insured by the U.S.
Government. If the Fund holds instruments of foreign banks or financial
institutions, it may be subject to additional investment risks that are
different in some respects from those incurred by a fund which invests only in
debt obligations of U.S. domestic issuers. See "Foreign Investments" below. Such
risks include future political and economic developments, the possible
imposition of withholding taxes by the particular country in which the issuer is
located on interest income payable on the securities, the possible seizure or
nationalization of foreign deposits, the possible establishment of exchange
controls, or the adoption of other foreign governmental restrictions which might
adversely affect the payment of principal and interest on these securities.
Domestic banks and foreign banks are subject to different governmental
regulations with respect to the amount and types of loans which may be made and
interest rates which may be charged. In addition, the profitability of the
banking industry depends largely upon the availability and cost of funds for the
purpose of financing lending operations under prevailing money market
conditions. General economic conditions as well as exposure to credit losses
arising from possible financial difficulties of borrowers play an important part
in the operations of the banking industry.
As a result of federal and state laws and regulations, domestic banks are,
among other things, required to maintain specified levels of reserves, limited
in the amount which they can loan to a single borrower, and subject to other
regulations designed to promote financial soundness. However, such laws and
regulations do not necessarily apply to foreign bank obligations that the Fund
may acquire.
B-2
<PAGE>
In addition to purchasing certificates of deposit and bankers' acceptances,
to the extent permitted under its investment objectives and policies stated
above and in its prospectus, the Fund may make interest-bearing time or other
interest-bearing deposits in commercial or savings banks. Time deposits are
non-negotiable deposits maintained at a banking institution for a specified
period of time at a specified interest rate.
Savings Association Obligations. The Fund may invest in certificates of
deposit (interest-bearing time deposits) issued by savings banks or savings and
loan associations that have capital, surplus and undivided profits in excess of
$100 million, based on latest published reports, or less than $100 million if
the principal amount of such obligations is fully insured by the U.S.
Government.
Commercial Paper, Short-Term Notes and Other Corporate Obligations. The
Fund may invest a portion of its assets in commercial paper and short-term
notes. Commercial paper consists of unsecured promissory notes issued by
corporations. Issues of commercial paper and short-term notes will normally have
maturities of less than nine months and fixed rates of return, although such
instruments may have maturities of up to one year.
Commercial paper and short-term notes will consist of issues rated at the
time of purchase "A-2" or higher by S&P, "Prime-1" or "Prime-2" by Moody's, or
similarly rated by another nationally recognized statistical rating organization
or, if unrated, will be determined by the Advisor to be of comparable quality.
These rating symbols are described in the Appendix.
Corporate obligations include bonds and notes issued by corporations to
finance longer-term credit needs than supported by commercial paper. While such
obligations generally have maturities of ten years or more, the Fund may
purchase corporate obligations which have remaining maturities of one year or
less from the date of purchase and which are rated "AA" or higher by S&P or "Aa"
or higher by Moody's.
Investment Company Securities
The Fund may invest in shares of other investment companies. The Fund may
invest in money market mutual funds in connection with its 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.
Government Obligations
The Fund may make short-term investments in U.S. Government obligations.
Such obligations include Treasury bills, certificates of indebtedness, notes and
bonds, and issues of such entities as the Government National Mortgage
Association ("GNMA"), Export-Import Bank of the United States, Tennessee Valley
Authority, Resolution Funding Corporation, Farmers Home Administration, Federal
Home Loan Banks, Federal Intermediate Credit Banks, Federal Farm Credit Banks,
Federal Land Banks, Federal Housing Administration, Federal National Mortgage
Association ("FNMA"), Federal Home Loan Mortgage Corporation, and the Student
Loan Marketing Association.
Some of these obligations, such as those of the GNMA, are supported by the
full faith and credit of the U.S. Treasury; others, such as those of the
Export-Import Bank of United States, are supported by the right of the issuer to
borrow from the Treasury; others, such as those of the FNMA, are supported by
the discretionary authority of the U.S. Government to purchase the agency's
obligations; still others, such as those of the Student Loan Marketing
Association, are supported only by the credit of the instrumentality. No
assurance can be given that the U.S. Government would provide financial support
to U.S. Government-sponsored instrumentalities if it is not obligated to do so
by law.
The Fund may invest in sovereign debt obligations of foreign countries. A
sovereign debtor's willingness or ability to repay principal and interest in a
timely manner may be affected by a number of factors, including its cash flow
situation, the extent of its foreign reserves, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of the debt
service burden to the economy as a whole, the sovereign debtor's policy toward
principal international lenders and the political constraints to which it may be
subject. Emerging market governments could default on their sovereign debt. Such
sovereign debtors also may be dependent on expected disbursements from foreign
governments, multilateral agencies and other entities abroad to reduce principal
and interest arrearages on their debt. The commitments on the part of these
governments, agencies and others to make such disbursements may be conditioned
on a sovereign debtor's implementation of economic reforms and/or economic
performance and the timely service of such debtor's obligations. Failure to meet
such conditions could result in the cancellation of such third parties'
commitments to lend funds to the sovereign debtor, which may further impair such
debtor's ability or willingness to service its debt in a timely manner.
B-3
<PAGE>
Foreign Investments and Currencies
The Fund will invest in securities of foreign issuers that are not publicly
traded in the United States. The Fund may also invest in depositary receipts and
in foreign currency futures contracts and may purchase and sell foreign currency
on a spot basis.
Depositary Receipts. Depositary Receipts ("DRs") include American
Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"), Global
Depositary Receipts ("GDRs") or other forms of depositary receipts. DRs are
receipts typically issued in connection with a U.S. or foreign bank or trust
company which evidence ownership of underlying securities issued by a foreign
corporation.
Risks of Investing in Foreign Securities. Investments in foreign securities
involve certain inherent risks, which are described in the Fund's prospectus.
Options on Securities
Purchasing Put and Call Options. The Fund may purchase covered "put" and
"call" options with respect to securities which are otherwise eligible for
purchase by the Fund subject to certain restrictions. The Fund will engage in
trading of such derivative securities exclusively for hedging purposes.
If the Fund purchases a put option, the Fund acquires the right to sell the
underlying security at a specified price at any time during the term of the
option (for "American-style" options) or on the option expiration date (for
"European-style" options). Purchasing put options may be used as a portfolio
investment strategy when the Advisor perceives significant short-term risk but
substantial long-term appreciation for the underlying security. The put option
acts as an insurance policy, as it protects against significant downward price
movement while it allows full participation in any upward movement. If the Fund
is holding a security which it feels has strong fundamentals, but for some
reason may be weak in the near term, the Fund may purchase a put option on such
security, thereby giving itself the right to sell such security at a certain
strike price throughout the term of the option. Consequently, the Fund will
exercise the put only if the price of such security falls below the strike price
of the put. The difference between the put's strike price and the market price
of the underlying security on the date the Fund exercises the put, less
transaction costs, will be the amount by which the Fund will be able to hedge
against a decline in the underlying security. If during the period of the option
the market price for the underlying security remains at or above the put's
strike price, the put will expire worthless, representing a loss of the price
the Fund paid for the put, plus transaction costs. If the price of the
underlying security increases, the profit the Fund realizes on the sale of the
security will be reduced by the premium paid for the put option less any amount
for which the put may be sold.
If the Fund purchases a call option, it acquires the right to purchase the
underlying security at a specified price at any time during the term of the
option. The purchase of a call option is a type of insurance policy to hedge
against losses that could occur if the Fund has a short position in the
underlying security and the security thereafter increases in price. The Fund
will exercise a call option only if the price of the underlying security is
above the strike price at the time of exercise. If during the option period the
market price for the underlying security remains at or below the strike price of
the call option, the option will expire worthless, representing a loss of the
price paid for the option, plus transaction costs. If the call option has been
purchased to hedge a short position of the Fund in the underlying security and
the price of the underlying security thereafter falls, the profit the Fund
realizes on the cover of the short position in the security will be reduced by
the premium paid for the call option less any amount for which such option may
be sold.
Prior to exercise or expiration, an option may be sold when it has
remaining value by a purchaser through a "closing sale transaction," which is
accomplished by selling an option of the same series as the option previously
purchased. The Fund generally will purchase only those options for which the
Advisor believes there is an active secondary market to facilitate closing
transactions.
Writing Call Options. The Fund may write covered call options. A call
option is "covered" if the Fund owns the security underlying the call or has an
absolute right to acquire the security without additional cash consideration
(or, if additional cash consideration is required, cash or cash equivalents in
such amount as are held in a segregated account by the Custodian). The writer of
a call option receives a premium and gives the purchaser the right to buy the
security underlying the option at the exercise price. The writer has the
obligation upon exercise of the option to deliver
B-4
<PAGE>
the underlying security against payment of the exercise price during the option
period. If the writer of an exchange- traded option wishes to terminate his
obligation, he may effect a "closing purchase transaction." This is accomplished
by buying an option of the same series as the option previously written. A
writer may not effect a closing purchase transaction after it has been notified
of the exercise of an option.
Effecting a closing transaction in the case of a written call option will
permit the Fund to write another call option on the underlying security with
either a different exercise price, expiration date or both. Also, effecting a
closing transaction will permit the cash or proceeds from the concurrent sale of
any securities subject to the option to be used for other investments of the
Fund. If the Fund desires to sell a particular security from its portfolio on
which it has written a call option, it will effect a closing transaction prior
to or concurrent with the sale of the security.
The Fund will realize a gain from a closing transaction if the cost of the
closing transaction is less than the premium received from writing the option or
if the proceeds from the closing transaction are more than the premium paid to
purchase the option. The Fund will realize a loss from a closing transaction if
the cost of the closing transaction is more than the premium received from
writing the option or if the proceeds from the closing transaction are less than
the premium paid to purchase the option. However, because increases in the
market price of a call option will generally reflect increases in the market
price of the underlying security, any loss to the Fund resulting from the
repurchase of a call option is likely to be offset in whole or in part by
appreciation of the underlying security owned by the Fund.
Risks Of Investing in Options. There are several risks associated with
transactions in options on securities. Options may be more volatile than the
underlying securities and, therefore, on a percentage basis, an investment in
options may be subject to greater fluctuation than an investment in the
underlying securities themselves. There are also significant differences between
the securities and options markets that could result in an imperfect correlation
between these markets, causing a given transaction not to achieve its objective.
In addition, a liquid secondary market for particular options may be absent for
reasons which include the following: there may be insufficient trading interest
in certain options; restrictions may be imposed by an exchange on opening
transactions or closing transactions or both; trading halts, suspensions or
other restrictions may be imposed with respect to particular classes or series
of options of underlying securities; unusual or unforeseen circumstances may
interrupt normal operations on an exchange; the facilities of an exchange or
clearing corporation may not at all times be adequate to handle current trading
volume; or one or more exchanges could, for economic or other reasons, decide or
be compelled at some future date to discontinue the trading of options (or a
particular class or series of options), in which event the secondary market on
that exchange (or in that class or series of options) would cease to exist,
although outstanding options that had been issued by a clearing corporation as a
result of trades on that exchange would continue to be exercisable in accordance
with their terms.
A decision as to whether, when and how to use options involves the exercise
of skill and judgment, and even a well-conceived transaction may be unsuccessful
to some degree because of market behavior or unexpected events. The extent to
which the Fund may enter into options transactions may be limited by the
Internal Revenue Code of 1986 (the "Code") requirements for qualification of the
Fund as a regulated investment company. See "Dividends and Distributions" and
"Taxation."
In addition, when trading options on foreign exchanges, many of the
protections afforded to participants in United States option exchanges will not
be available. For example, there may be no daily price fluctuation limits in
such exchanges or markets, and adverse market movements could therefore continue
to an unlimited extent over a period of time. Although the purchaser of an
option cannot lose more than the amount of the premium plus related transaction
costs, this entire amount could be lost. Moreover, the Fund as an option writer
could lose amounts substantially in excess of its initial investment, due to the
margin and collateral requirements typically associated with such option
writing. See "Dealer Options".
Dealer Options. The Fund will engage in transactions involving dealer
options as well as exchange-traded options. Certain additional risks are
specific to dealer options. While the Fund might look to a clearing corporation
to exercise exchange-traded options, if the Fund were to purchase a dealer
option it would need to rely on the dealer from which it purchased the option to
perform if the option were exercised. Failure by the dealer to do so would
result in the loss of the premium paid by the Fund as well as loss of the
expected benefit of the transaction.
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<PAGE>
Exchange-traded options generally have a continuous liquid market while
dealer options may not. Consequently, the Fund may generally be able to realize
the value of a dealer option it has purchased only by exercising or reselling
the option to the dealer who issued it. Similarly, when the Fund writes a dealer
option, the Fund may generally be able to close out the option prior to its
expiration only by entering into a closing purchase transaction with the dealer
to whom the Fund originally wrote the option. While the Fund will seek to enter
into dealer options only with dealers who will agree to and which are expected
to be capable of entering into closing transactions with the Fund, there can be
no assurance that the Fund will at any time be able to liquidate a dealer option
at a favorable price at any time prior to expiration. Unless the Fund, as a
covered dealer call option writer, is able to effect a closing purchase
transaction, it will not be able to liquidate securities (or other assets) used
as cover until the option expires or is exercised. In the event of insolvency of
the other party, the Fund may be unable to liquidate a dealer option. With
respect to options written by the Fund, the inability to enter into a closing
transaction may result in material losses to the Fund. For example, because the
Fund must maintain a secured position with respect to any call option on a
security it writes, the Fund may not sell the assets which it has segregated to
secure the position while it is obligated under the option. This requirement may
impair the Fund's ability to sell portfolio securities at a time when such sale
might be advantageous.
The Staff of the Securities and Exchange Commission (the "Commission") has
taken the position that purchased dealer options are illiquid securities. The
Fund may treat the cover used for written dealer options as liquid if the dealer
agrees that the Fund may repurchase the dealer option it has written for a
maximum price to be calculated by a predetermined formula. In such cases, the
dealer option would be considered illiquid only to the extent the maximum
purchase price under the formula exceeds the intrinsic value of the option.
Accordingly, the Fund will treat dealer options as subject to the Fund's
limitation on illiquid securities. If the Commission changes its position on the
liquidity of dealer options, the Fund will change its treatment of such
instruments accordingly.
Foreign Currency Options. The Fund may buy or sell put and call options on
foreign currencies. A put or call option on a foreign currency gives the
purchaser of the option the right to sell or purchase a foreign currency at the
exercise price until the option expires. The Fund will use foreign currency
options separately or in combination to control currency volatility. Among the
strategies employed to control currency volatility is an option collar. An
option collar involves the purchase of a put option and the simultaneous sale of
a call option on the same currency with the same expiration date but with
different exercise (or "strike") prices. Generally, the put option will have an
out-of-the- money strike price, while the call option will have either an
at-the-money strike price or an in-the-money strike price. Foreign currency
options are derivative securities. Currency options traded on U.S. or other
exchanges may be subject to position limits which may limit the ability of the
Fund to reduce foreign currency risk using such options.
As with other kinds of option transactions, the writing of an option on
foreign currency will constitute only a partial hedge, up to the amount of the
premium received. The Fund could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on foreign currency may constitute an effective hedge
against exchange rate fluctuations: however, in the event of exchange rate
movements adverse to the Fund's position, the Fund may forfeit the entire amount
of the premium plus related transaction costs.
Spread Transactions. The Fund may purchase covered spread options from
securities dealers. These covered spread options are not presently
exchange-listed or exchange-traded. The purchase of a spread option gives the
Fund the right to put securities that it owns at a fixed dollar spread or fixed
yield spread in relationship to another security that the Fund does not own, but
which is used as a benchmark. The risk to the Fund, in addition to the risks of
dealer options described above, is the cost of the premium paid as well as any
transaction costs. The purchase of spread options will be used to protect the
Fund against adverse changes in prevailing credit quality spreads, i.e., the
yield spread between high quality and lower quality securities. This protection
is provided only during the life of the spread options.
Forward Currency Contracts
The Fund may enter into forward currency contracts in anticipation of
changes in currency exchange rates. A forward currency contract is an obligation
to purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. For example, the Fund might purchase a
particular currency or enter into a forward currency contract to preserve the
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<PAGE>
U.S. dollar price of securities it intends to or has contracted to purchase.
Alternatively, it might sell a particular currency on either a spot or forward
basis to hedge against an anticipated decline in the dollar value of securities
it intends to or has contracted to sell. Although this strategy could minimize
the risk of loss due to a decline in the value of the hedged currency, it could
also limit any potential gain from an increase in the value of the currency.
Repurchase Agreements
The Fund may enter into repurchase agreements with respect to its portfolio
securities. Pursuant to such agreements, the Fund acquires securities from
financial institutions such as banks and broker-dealers as are deemed to be
creditworthy by the Advisor, subject to the seller's agreement to repurchase and
the Fund's agreement to resell such securities at a mutually agreed upon date
and price. The repurchase price generally equals the price paid by the Fund plus
interest negotiated on the basis of current short-term rates (which may be more
or less than the rate on the underlying portfolio security). Securities subject
to repurchase agreements will be held by the Custodian or in the Federal
Reserve/Treasury Book-Entry System or an equivalent foreign system. The seller
under a repurchase agreement will be required to maintain the value of the
underlying securities at not less than 102% of the repurchase price under the
agreement. If the seller defaults on its repurchase obligation, the Fund will
suffer a loss to the extent that the proceeds from a sale of the underlying
securities are less than the repurchase price under the agreement. Bankruptcy or
insolvency of such a defaulting seller may cause the Fund's rights with respect
to such securities to be delayed or limited. Repurchase agreements are
considered to be loans under the 1940 Act.
When-Issued Securities, Forward Commitments and Delayed Settlements
The Fund may purchase securities on a "when-issued," forward commitment or
delayed settlement basis. In this event, the Custodian will set aside cash or
liquid portfolio securities equal to the amount of the commitment in a separate
account. Normally, the Custodian will set aside portfolio securities to satisfy
a purchase commitment. In such a case, the Fund may be required subsequently to
place additional assets in the separate account in order to assure that the
value of the account remains equal to the amount of the Fund's commitment. It
may be expected that the Fund's net assets will fluctuate to a greater degree
when it sets aside portfolio securities to cover such purchase commitments than
when it sets aside cash.
The Fund does not intend to engage in these transactions for speculative
purposes but only in furtherance of its investment objectives. Because the Fund
will set aside cash or liquid portfolio securities to satisfy its purchase
commitments in the manner described, the Fund's liquidity and the ability of the
Advisor to manage it may be affected in the event the Fund's forward
commitments, commitments to purchase when-issued securities and delayed
settlements ever exceeded 15% of the value of its net assets.
The Fund will purchase securities on a when-issued, forward commitment or
delayed settlement basis only with the intention of completing the transaction.
If deemed advisable as a matter of investment strategy, however, the Fund may
dispose of or renegotiate a commitment after it is entered into, and may sell
securities it has committed to purchase before those securities are delivered to
the Fund on the settlement date. In these cases the Fund may realize a taxable
capital gain or loss. When the Fund engages in when-issued, forward commitment
and delayed settlement transactions, it relies on the other party to consummate
the trade. Failure of such party to do so may result in the Fund's incurring a
loss or missing an opportunity to obtain a price credited to be advantageous.
The market value of the securities underlying a when-issued purchase,
forward commitment to purchase securities, or a delayed settlement and any
subsequent fluctuations in their market value is taken into account when
determining the market value of the Fund starting on the day the Fund agrees to
purchase the securities. The Fund does not earn interest on the securities it
has committed to purchase until they are paid for and delivered on the
settlement date.
Borrowing
The Fund is authorized to borrow money from time to time for temporary,
extraordinary or emergency purposes or for clearance of transactions in amounts
up to 10% of the value of its total assets at the time of such borrowings. The
use of borrowing by the Fund involves special risk considerations that may not
be associated with other funds having similar objectives and policies. Since
substantially all of the Fund's assets fluctuate in value, whereas
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<PAGE>
the interest obligation resulting from a borrowing will be fixed by the terms of
the Fund's agreement with its lender, the asset value per share of the Fund will
tend to increase more when its portfolio securities increase in value and to
decrease more when its portfolio assets decrease in value than would otherwise
be the case if the Fund did not borrow funds. In addition, interest costs on
borrowings may fluctuate with changing market rates of interest and may
partially offset or exceed the return earned on borrowed funds. Under adverse
market conditions, the Fund might have to sell portfolio securities to meet
interest or principal payments at a time when fundamental investment
considerations would not favor such sales.
Lending Portfolio Securities
The Fund may lend its portfolio securities in an amount not exceeding
one-third of its total assets to financial institutions such as banks and
brokers if the loan is collateralized in accordance with applicable regulations.
Under the present regulatory requirements which govern loans of portfolio
securities, the loan collateral must, on each business day, at least equal the
value of the loaned securities and must consist of cash, letters of credit of
domestic banks or domestic branches of foreign banks, or securities of the U.S.
Government or its agencies. To be acceptable as collateral, letters of credit
must obligate a bank to pay amounts demanded by the Fund if the demand meets the
terms of the letter. Such terms and the issuing bank would have to be
satisfactory to the Fund. Any loan might be secured by any one or more of the
three types of collateral. The terms of the Fund's loans must permit the Fund to
reacquire loaned securities on five days' notice or in time to vote on any
serious matter and must meet certain tests under the Code.
Short Sales
The Fund is authorized to make short sales of securities it owns or has the
right to acquire at no added cost through conversion or exchange of other
securities it owns (referred to as short sales "against the box") and to make
short sales of securities which it does not own or have the right to acquire.
In a short sale that is not "against the box," the Fund sells a security
which it does not own, in anticipation of a decline in the market value of the
security. To complete the sale, the Fund must borrow the security (generally
from the broker through which the short sale is made) in order to make delivery
to the buyer. The Fund is then obligated to replace the security borrowed by
purchasing it at the market price at the time of replacement. The Fund is said
to have a "short position" in the securities sold until it delivers them to the
broker. The period during which the Fund has a short position can range from one
day to more than a year. Until the security is replaced, the proceeds of the
short sale are retained by the broker, and the Fund is required to pay to the
broker a negotiated portion of any dividends or interest which accrue during the
period of the loan. To meet current margin requirements, the Fund is also
required to deposit with the broker additional cash or securities so that the
total deposit with the broker is maintained daily at 150% of the current market
value of the securities sold short (100% of the current market value if a
security is held in the account that is convertible or exchangeable into the
security sold short within 90 days without restriction other than the payment of
money).
Short sales by the Fund that are not made "against the box" create
opportunities to increase the Fund's return but, at the same time, involve
specific risk considerations and may be considered a speculative technique.
Since the Fund in effect profits from a decline in the price of the securities
sold short without the need to invest the full purchase price of the securities
on the date of the short sale, the Fund's net asset value per share will tend to
increase more when the securities it has sold short decrease in value, and to
decrease more when the securities it has sold short increase in value, than
would otherwise be the case if it had not engaged in such short sales. The
amount of any gain will be decreased, and the amount of any loss increased, by
the amount of any premium, dividends or interest the Fund may be required to pay
in connection with the short sale. Furthermore, under adverse market conditions
the Fund might have difficulty purchasing securities to meet its short sale
delivery obligations, and might have to sell portfolio securities to raise the
capital necessary to meet its short sale obligations at a time when fundamental
investment considerations would not favor such sales.
If the Fund makes a short sale "against the box," the Fund would not
immediately deliver the securities sold and would not receive the proceeds from
the sale. The seller is said to have a short position in the securities sold
until it delivers the securities sold, at which time it receives the proceeds of
the sale. To secure its obligation to deliver securities sold short, the Fund
will deposit in escrow in a separate account with the Custodian an equal amount
of the securities sold short or securities convertible into or exchangeable for
such securities. The Fund can close out its short position by purchasing and
delivering an equal amount of the securities sold short, rather than by
delivering securities
SAI10-98.pol.wpd/ AMD. #29
B-8
<PAGE>
already held by the Fund, because the Fund might want to continue to receive
interest and dividend payments on securities in its portfolio that are
convertible into the securities sold short.
The Fund's decision to make a short sale "against the box" may be a
technique to hedge against market risks when the Advisor believes that the price
of a security may decline, causing a decline in the value of a security owned by
the Fund or a security convertible into or exchangeable for such security. In
such case, any future losses in the Fund's long position would be reduced by a
gain in the short position. The extent to which such gains or losses in the long
position are reduced will depend upon the amount of securities sold short
relative to the amount of the securities the Fund owns, either directly or
indirectly, and, in the case where the Fund owns convertible securities, changes
in the investment values or conversion premiums of such securities.
The extent to which the Fund may enter into short sales transactions may be
limited by the Code requirements for qualification of the Fund as a regulated
investment company. See "Taxation."
Illiquid Securities
The Fund may not invest more than 15% of the value of its net assets in
securities that at the time of purchase have legal or contractual restrictions
on resale or are otherwise illiquid. The Advisor will monitor the amount of
illiquid securities in the Fund's portfolio, under the supervision of the
Trust's Board of Trustees, to ensure compliance with the Fund's investment
restrictions.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933 (the "Securities Act"), securities
which are otherwise not readily marketable and repurchase agreements having a
maturity of longer than seven days. Securities which have not been registered
under the Securities Act are referred to as private placement or restricted
securities and are purchased directly from the issuer or in the secondary
market. Mutual funds do not typically hold a significant amount of these
restricted or other illiquid securities because of the potential for delays on
resale and uncertainty in valuation. Limitations on resale may have an adverse
effect on the marketability of portfolio securities and the Fund might be unable
to dispose of restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemption requests
within seven days. The Fund might also have to register such restricted
securities in order to dispose of them, resulting in additional expense and
delay. Adverse market conditions could impede such a public offering of
securities.
In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments. If such securities are subject to purchase by institutional buyers
in accordance with Rule 144A promulgated by the Commission under the Securities
Act, the Trust's Board of Trustees may determine that such securities are not
illiquid securities notwithstanding their legal or contractual restrictions on
resale. In all other cases, however, securities subject to restrictions on
resale will be deemed illiquid.
Risks of Investing in Small Companies
As stated in the prospectus, the Fund may purchase securities of companies
with market capitalization as low as $10 million. Additional risks of such
investments include the markets on which such securities are frequently traded.
In many instances the securities of smaller companies are traded only
over-the-counter or on a regional securities exchange, and the frequency and
volume of their trading is substantially less than is typical of larger
companies. Therefore, the securities of smaller companies may be subject to
greater and more abrupt price fluctuations. When making large sales, the Fund
may have to sell portfolio holdings at discounts from quoted prices or may have
to make a series of small sales over an extended period of time due to the
trading volume of smaller company securities. Investors should be aware that,
based on the foregoing factors, an investment in the Fund may be subject to
greater price fluctuations than an investment in a fund that invests exclusively
in larger, more established companies. The Advisor's research efforts may also
play a greater role in selecting securities for the Fund than in a fund that
invests in larger, more established companies.
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<PAGE>
Investment Restrictions
The Trust (on behalf of the Fund) has adopted the following restrictions as
fundamental policies, which may not be changed without the favorable vote of the
holders of a "majority," as defined in the 1940 Act, of the outstanding voting
securities of the Fund. Under the 1940 Act, the "vote of the holders of a
majority of the outstanding voting securities" means the vote of the holders of
the lesser of (i) 67% of the shares of the Fund represented at a meeting at
which the holders of more than 50% of its outstanding shares are represented or
(ii) more than 50% of the outstanding shares of the Fund.
As a matter of fundamental policy, the Fund is non-diversified; i.e., as to
50% of the value of a its total assets: (i) no more than 5% of the value of its
total assets may be invested in the securities of any one issuer (other than
U.S. Government securities); and (ii) the Fund may not purchase more than 10% of
the outstanding voting securities of an issuer. The Fund's investment objective
is also fundamental. The Fund will also, as a matter of fundamental policy,
invest at least 80% of its total assets, under normal market conditions, in
securities of issuers based in the Republic of Poland.
In addition, the Fund may not:
1. Issue senior securities, borrow money or pledge its assets, except that
(i) the Fund may borrow on an unsecured basis from banks for temporary or
emergency purposes or for the clearance of transactions in amounts not exceeding
10% of its total assets (including the amount borrowed), provided that it will
not make investments while borrowings in excess of 5% of the value of its total
assets are outstanding; and (ii) this restriction shall not prohibit the Fund
from engaging in options and foreign currency transactions or short sales;
2. Purchase securities on margin, except such short-term credits as may be
necessary for the clearance of transactions:
3. Act as underwriter (except to the extent the Fund may be deemed to be an
underwriter in connection with sale of securities in its investment portfolio);
4. Invest 25% or more of its total assets, calculated at the time of
purchase and taken at market value, in one industry (other than U.S. Government
securities);
5. Purchase of sell real estate or interests in real estate or real estate
limited partnerships (although the Fund may purchase and sell securities which
are secured by real estate and securities of companies which invest or deal in
real estate);
6. Purchase or sell commodities or commodity futures contracts, except that
the Fund may purchase and sell foreign currency contracts in accordance with any
rules of the Commodity Futures Trading Commission;
7. Make loans of money (except for purchases of debt securities consistent
with the investment policies of the Fund and except for repurchase agreements);
or
8. Make investments for the purpose of exercising control or management.
The Fund observes the following restrictions as a matter of operating but
not fundamental policy, pursuant to positions taken by federal regulatory
authorities:
The Fund may not:
1. Invest in the securities of other investment companies or purchase any
other investment company's voting securities or make any other investment in
other investment companies except to the extent permitted by federal law; or
2. Invest more than 15% of its assets in securities which are restricted as
to disposition or otherwise are illiquid or have no readily available market
(except for securities which are determined by the Board of Trustees to be
liquid).
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<PAGE>
MANAGEMENT
The overall management of the business and affairs of the Trust is vested
with its Board of Trustees. The Board approves all significant agreements
between the Trust and persons or companies furnishing services to it, including
the agreements with the Advisor, Administrator, Custodian and Transfer Agent.
The day to day operations of the Trust are delegated to its officers, subject to
the Fund's investment objectives and policies and to general supervision by the
Board of Trustees.
The Trustees and officers of the Trust, their ages and positions with the
Trust, their business addresses and principal occupations during the past five
years are:
<TABLE>
<S> <C> <C>
Name, address and age Position Principal Occupation During Past Five Years
Walter Auch, Sr. (Born 1921) Trustee Director, Mutual Funds, Nicholas-Applegate, Brinson
6002 N. 62d Place Funds (since 19940, Smith Barney Trak Fund, Pimco
Paradise Valley, AZ 85253 Advisors L.P., Banyan Realty Trust, Banyan Land
Fund II and Legend Properties.
Eric M. Banhazl (Born 1957)* Trustee, Senior Vice President, Investment Company
2025 E. Financial Way President and Administration Corporation; Vice President, First Fund
Glendora, CA 91740 Treasurer Distributors, Inc.; Assistant Treasurer, RNC
Mutual Fund Group; Treasurer, Guinness Flight
Investment Funds, Inc. and Professionally Managed
Portfolios.
Donald E. O'Connor Trustee Retired; formerly Executive Vice President and
(Born 1936) chief Operating Officer of ICI Mutual Insurance
1700 Taylor Avenue Company (until January 1997), Vice President,
Fort Washington, MD 20744 Operations, Investment Company Institute (until
June 1993).
George T. Wofford III Trustee Vice President, Information Services, Federal
(Born 1939) Home Loan Bank San Francisco (since March 1993);
305 Glendora Circle formerly Director of Management Information
Danville, CA 94526 Services, Morrison & Foerster (law firm).
Steven J. Paggioli (Born 1950) Vice President Executive Vice President, Robert H. Wadsworth &
479 W. 22d Street Associates, Inc. and Investment Company Administration
New York, NY 10011 Corporation; Vice President, First Fund Distributors,
Inc.; President and Trustee, Professionally Managed
Portfolios; Director, Managers Funds, Inc.
Robert H. Wadsworth Vice President President, Robert H. Wadsworth & Associates, Inc.,
(Born 1940) Investment Company Administration Corporation and
4455 E. Camelback Road First Fund Distributors, Inc.; Vice President,
Suite 261E Professional Managed Portfolios; President Guinness
Phoenix, AZ 85018 Flight Investment Funds, Inc.; Director, Germany
Fund, Inc. New Germany Fund, Inc., Central European
Equity Fund, Inc. and Deutsche Funds, Inc.
Chris O. Kissack (Born 1949) Secretary Employed by Investment Company Administration
4455 E. Camelback Road (since July 1996); formerly employed by Bank One, N.A.
Suite 261E (From August 1995 until July 1996); O'Connor,
Phoenix, AZ 85018 Cavanagh, Anderson, Killingsworth and Beshears
(law firm) (until August 1995).
</TABLE>
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<PAGE>
*denotes Trustee who is an "interested person" of the Trust under the 1940 Act.
Name and Position Aggregate Compensation from The Trust*
Walter E. Auch, Sr., Trustee $12,000
Donald E. O'Connor, Trustee $12,000
George T. Wofford III, Trustee $12,000
*Estimated for the current fiscal year. For the fiscal year ended June 30, 1998,
the aggregate compensation paid by the Trust to each Trustee was $8,500. The
Trust has no pension or retirement plan. No other entity affiliated with the
Trust pays any compensation to the Trustees.
The Advisor
Subject to the supervision of the Board of Trustees, investment management
and related services are provided by the Advisor, pursuant to an Investment
Advisory Agreement (the "advisory Agreement").
Under the Advisory Agreement, the Advisor agrees to invest the assets of
the Fund in accordance with the investment objectives, policies and restrictions
of the Fund as set forth in the Fund's and Trust's governing documents,
including, without limitation, the Trust's Agreement and Declaration of Trust
and By-Laws; the Fund's prospectus, statement of additional information, and
undertakings; and such other limitations, policies and procedures as the
Trustees of the Trust may impose from time to time in writing to the Advisor. In
providing such services, the Advisor shall at all times adhere to the provision
and restrictions contained in the federal securities laws, applicable state
securities laws, the Code and other applicable law.
Without limiting the generality of the foregoing, the Advisor has agreed to
(i) furnish the Fund with advice and recommendations with respect to the
investment of the Fund's assets, (ii) effect the purchase and sale of portfolio
securities; (iii) manage and oversee the investment of the Fund, subject to the
ultimate supervision and direction of the Trust's Board of Trustees; (iv) vote
proxies and take other actions with respect to the Fund's securities; (v)
maintain the books and records required to be maintained with respect to the
securities in the Fund's portfolio; (vi) furnish reports, statements and other
data on securities, economic conditions and other matters related to the
investment of the Fund's assets which the Trustees or other officers of the
Trust may reasonably request; and (vii) render to the Trust's Board of Trustees
such periodic and special reports as the Board may reasonably request. The
Advisor has also agreed, at its own expense, to maintain such staff and employ
or retain such personnel and consult with such other persons as it shall from
time ti time determine to be necessary to the performance of its obligations
under the Advisory Agreement. Personnel of the Advisor may serve as officers of
the Trust provided they do so without compensation from the Trust. Without
limiting the generality of the foregoing, the staff and personnel of the Advisor
shall be deemed to include persons employed or retained by the Advisor to
furnish statistical information, research, and other factual information, advice
regarding economic factors and trends, information with respect to technical and
scientific developments, and such other information, advice and assistance as
the Advisor or the Trust's Board of Trustees may desire and reasonably request.
With respect to the operation fo the Fund, the Advisor has agreed to be
responsible for the expenses of printing and distributing extra copies of the
Fund's prospectus, statement of additional information, and sales and marketing
materials (but not the legal, auditing or accounting fees attendant thereto) to
prospective investors (but not to existing shareholders); and the costs of any
special Board of Trustees meetings or shareholder meetings convened for the
primary benefit of the Advisor.
As compensation for the Advisor's services, the Fund pays it an advisory
fee at the rate specified in the prospectus. In addition to the fees payable to
the Advisor and the Administrator, the Trust is responsible for its operating
expenses, including: fees and expenses incurred in connection with the issuance,
registration and transfer of its shares; brokerage and commission expenses; all
expenses of transfer, receipt, safekeeping, servicing and accounting for cash,
securities and other property of the Trust for the benefit of the Fund including
all fees and expenses of its custodian, shareholder services agent and
accounting services agent; interest charges on any borrowings, costs and
expenses of pricing and calculation its daily net asset value and of maintaining
its books of account required under the 1940 Act; taxes, if any; a pro rata
portion of expenditures in connection with meetings of the Fund's shareholders
and the Trust's Board of Trustees that are properly payable by the fund;
salaries and expenses of officers and fees and expenses of members of the
Trust's Board of Trustees or members of any advisory board or committee who are
not member of, affiliated with or interested persons of the Advisor or
Administrator; insurance premiums on property or personnel of the Fund which
insure to its benefit, including liability and fidelity bond insurance; the cost
of preparing and printing reports, proxy statements, prospectuses and statements
of additional information of the Fund or other communications for distributing
to existing shareholders; legal, auditing and accounting fees; trade association
dues; fees and expense (including legal fees) of registering and maintaining and
servicing shareholder accounts, including
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<PAGE>
charges for transfer, shareholder record keeping, dividend disbursing,
redemption, and other agents for the benefit of the Fund, if any; and all other
charges and costs of its operation plus any extraordinary and non-recurring
expenses, except as otherwise prescribed in the Advisory Agreement.
The Fund is responsible for its own operating expenses. The Advisor has
agreed to reduce fees payable to it by the Fund and to pay Fund operating
expenses to the extent necessary to limit the Fund's aggregate annual operating
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 Fund's obligation are subject to reimbursement by the Fund to the Advisor,
if so requested by the Advisor, in subsequent fiscal years if the aggregate
amount actually paid by the Fund toward the operating expenses for such fiscal
year (taking into account the reimbursement) does 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 July 9, 1997 and ending June 30, 1998, the
Advisor earned $13,159 in advisory fees. The Advisor voluntarily agreed to limit
total fund operating expenses to 2.75% of average net assets annually. As a
result of that limitation, the Advisor waived the full amount of its fee and
paid Fund operating expenses in the amount of $121,213.
The Advisor is controlled by M. G. Kaminski.
Under the Advisory Agreement, the Advisor will not be liable to the Trust
of the Fund or any shareholder for any act or commission in the course of, or
connected with, rendering services or for any loss sustained by the Trust except
in the case of a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages will be limited as
provided in the 1940 Act) or willful misfeasance, bad faith or gross negligence,
or reckless disregard of its obligations and duties under the Agreement.
The Advisory Agreement will remain in effect for a period not to exceed two
years. Thereafter, if not terminated, the Advisory Agreement will continue
automatically for successive annual periods, provided that such continuance is
specifically approved at least annually (i) by majority vote of the Independent
Trustees cast in person at a meeting called for the purpose of voting on such
approval, and (ii) by the Board of Trustees or by vote of a majority of the
outstanding voting securities of the Fund.
The Administrator.
The Administrator has agreed to be responsible for providing such services
as the Trustees may reasonably request, including but not limited to (i)
maintaining the Trust's books and records (other than financial or accounting
books and records maintained by any custodian, transfer agent or accounting
services agent); (ii) overseeing the Trust's insurance relationships; (iii)
preparing for the Trust (or assisting counsel and/or auditors in the preparation
of all required tax returns, proxy statements and reports to the Trust's
shareholders and Trustees and reports to and other filings with the Commission
and any other governmental agency (the Trust agreeing to supply or cause to be
supplied to the Administrator all necessary financial and other information in
connection with the foregoing); (iv) preparing such applications and reports as
may be necessary to permit the offer and sale of the shares of the Trust under
the securities or "blue sky" laws of the various states selected by the Trust
(the Trust agreeing to pay all filing fees or other similar fees in connection
therewith); (v) responding to all inquiries or other communications of
shareholders, if any, which are directed to the Administrator, or if any such
inquiry or communication is more properly to be responded to by the Trust's
custodian, transfer agent or accounting services agent, overseeing their
response thereto; (vi) overseeing all relationships between the Trust and any
custodian(s), transfer agent(s) and accounting services agent(s), including the
negotiation of agreements and the supervision of the performance of such
agreements; and (vii) authorizing and directing any of the Administrator's
directors, officers and employees who may be elected as Trustees or officers of
the Trust to serve in the capacities in which they are elected. All services to
be furnished by the Administrator under this Agreement may be furnished through
the medium of any such directors, officers or employees of the Administrator.
For its services, the Administrator receives a fee monthly at the following
annual rate:
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
B-13
<PAGE>
DISTRIBUTION ARRANGEMENTS
Pursuant to the Distribution Plan ("Plan") adopted by the Trustees, the
Fund pays the Advisor, as Distribution Coordinator, an annual fee for the
Advisor's services in such capacity including its expenses in connection with
the promotion and distribution of the Fund's shares and related shareholder
servicing (collectively, "Distribution Expenses"). The Plan provides that the
Advisor shall furnish to the Board of Trustees of the Trust, for its review, on
a quarterly basis, a written report of the monies paid to it under the Plan with
respect to the Fund, and shall furnish the Board of Trustees of the Trust with
such other information as the Board of Trustees may reasonably request in
connection with the payments made under the Plan in order to enable the Board of
Trustees to make an informed determination of whether the Plan should be
continued.
The Plan may not be amended to increase materially the amount to be spent
for distribution and servicing of shares of the Fund without approval by a
majority of the outstanding voting securities of the Fund. The Plan may be
terminated at any time, without penalty, by vote of a majority of the
outstanding voting securities of the Fund, and any Distribution Agreement under
the Plan may be likewise terminated on not more than sixty (60) days' written
notice. Once terminated, no further payments shall be made under the Plan
notwithstanding the existence of any unreimbursed current or carried forward
Distribution Expenses. Any fees paid by the Fund shall be refundable if in any
given year the fees are greater than the Distribution Expenses for that year.
During the period beginning July 9, 1997 and ending June 30, 1998, the Fund
paid to the Distribution Coordinator distribution fees totaling $1,977.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Advisory Agreement states that the Advisor shall be responsible for
broker-dealer selection and for negotiation of brokerage commission rates,
provided that the Advisor shall not direct orders to an affiliated person of the
Advisor without general prior authorization to use such affiliated broker or
dealer by the Trust's Board of Trustees. The Advisor's primary consideration in
effecting a securities transaction will be execution at the most favorable
price. In selecting a broker-dealer to execute each particular transaction, the
Advisor may take the following into consideration: the best net price available;
the reliability, integrity and financial condition of the broker-dealer. the
size of and difficulty in executing the order; and the value of the expected
contribution of the broker-dealer to the investment performance of the Fund on a
continuing basis. The price to the Fund in any transaction may be less favorable
than that available from another broker-dealer if the difference is reasonably
justified by other aspects of the portfolio execution services offered.
Subject to such policies as the Advisor and the Board of Trustees of the
Trust may determine, the Advisor shall not be deemed to have acted unlawfully or
to have breached any duty created by this Agreement or otherwise solely by
reason of its having caused the Fund to pay a broker or dealer that provides
(directly or indirectly) brokerage or research services to the Advisor an amount
of commission for effecting a portfolio transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction, if the Advisor determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Advisor's overall responsibilities with respect to
the Fund. The Advisor is further authorized to allocate the orders placed by it
on behalf of the Fund to such brokers or dealers who also provide research or
statistical material, or other services, to the Trust, the Advisor, or any
affiliate of either. Such allocation shall be in such amounts and proportions as
the Advisor shall determine, and the Advisor shall report on such allocations
regularly to the Advisor and the Trust, indicating the broker- dealers to whom
such allocations have been made and the basis therefor. The Advisor is also
authorized to consider sales of shares of the Fund as a factor in the selection
of brokers or dealers to execute portfolio transactions, subject to the
requirements of best execution, i.e., that such brokers or dealers are able to
execute the order promptly and at the best obtainable securities price.
On occasions when the Advisor deems the purchase or sale of a security yo
be in the best interest of the Fund as well as other clients of the Advisor, the
Advisor, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be so purchased or sold in order to obtain the most
favorable price of lower brokerage commissions and the most efficient execution.
In such event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Advisor in the manner
it considers to be most equitable and consistent with its fiduciary obligations
to the Fund and to such other clients.
Brokerage commissions paid during the period beginning July 9, 1997 and
ending June 30, 1998 aggregated $30,234.
B-14
<PAGE>
NET ASSET VALUE
The net asset value of the Fund's shares will fluctuate and is determined
as of the close of trading on the New York Stock Exchange (the "NYSE")
(currently 4:00p.m. Eastern time) each business day. The NYSE annually announces
the days on which it will not be open for trading. The most recent announcement
indicates that it will not be open on the following days: New Year's Day, Martin
Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. However, the NYSE may close
on days not included in that announcement.
The net asset value per share is computed by dividing the value of the
securities held by the Fund plus any other cash or other assets (including
interest and dividends accrued but not yet received) minus all liabilities
(including accrued expenses) by the total number of shares in the Fund
outstanding at such time.
Generally, trading in and valuation of securities in Poland is
substantially completed each day prior to the close of the NYSE. In addition,
trading in and valuation of those securities may not take place on every day in
which the NYSE is open for trading. In that case, the price used to determine
the Fund's net asset value on the last day on which such exchange was open will
be used, unless the Trust's Board of Trustees determines that a different price
should be used. Furthermore, trading takes place in Poland on days which the
NYSE is not open for trading on which the Fund's net asset value is not
calculated. Occasionally, events affecting the values of such securities in U.S.
dollars on a day on which the Fund calculates its net asset value may occur
between the times when such securities are valued and the close of the NYSE that
will not be reflected in the computation of the Fund's net asset value unless
the Board or its delegates deem that such events would materially affect the net
asset value, in which case and adjustment would be made.
Generally, the Fund's investments are valued at market value or, in the
absence of a market value, at fair value as determined in good faith by the
Advisor and the Trust's Valuation Committee pursuant to procedures approved by
or under the direction of the Board.
The Fund's securities, including ADRs, EDRs and GDRs, which are traded on
securities exchanges are valued at the last sale price on the exchange on which
such securities are traded, as of the close of business on the day the
securities are being valued or, lacking any reported sales, at the mean between
the last available bid and asked price. Securities that are traded on more than
one exchange are valued on the exchange determined by the Advisor to be the
primary market. Securities traded in the over-the-counter market are valued at
the mean between the last available bid and asked price prior to the time of
valuation. Securities and assets for which market quotations are not readily
available (including restricted securities which are subject to limitations as
to their sale) are valued at fair value as determined in good faith by or under
the direction of the Board.
Short-term debt obligations with remaining maturities in excess of 60 days
are valued at current market prices, as discussed above. Short-term securities
with 60 days or less remaining to maturity are, unless conditions indicate
otherwise, amortized to maturity based on their cost to the Fund if acquired
within 60 days of maturity or, if already held by the Fund on the 60th day,
based on the value determined on the 61st day.
Any assets or liabilities initially expressed in terms of foreign currencies are
translated into U.S. dollars at the official exchange rate or, alternatively, at
the mean of the current bid and asked prices of such currencies against the U.S.
dollar last quoted by a major bank that is a regular participant in the foreign
exchange market or on the basis of a pricing service that takes into account the
quotes provided by a number of such major banks. if neither of these
alternatives is available or both are deemed not to provide a suitable
methodology for converting a foreign currency into U.S. dollars, the Board in
good faith will establish a conversion rate for such currency.
All other assets of the Fund are valued in such manner as the Board in good
faith deems appropriate to reflect their fair value.
TAXATION
The Fund intends 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
B-15
<PAGE>
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 Fund.
In order to qualify as a regulated investment company, the Fund 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
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
B-16
<PAGE>
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.
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"
rules unless they are held by the dealer for investment and the dealer property
identifies the shares as held for investment.
B-17
<PAGE>
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 Fund 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 the Fund's net investment income, substantially all of which will
be declared as dividends to the Fund's shareholders.
The amount of income dividend payments by the Fund 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.
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.
B-18
<PAGE>
PERFORMANCE INFORMATION
Total Return
Average annual total return quotations used in the Fund's advertising and
promotional materials are calculated according to the following formula:
P(1 + T)n = ERV
where "P" equals a hypothetical initial payment of $1000; "T" equals average
annual total return; "n" equals the number of years; and "ERV" equals the ending
redeemable value at the end of the period of a hypothetical $1000 payment made
at the beginning of the period. Under the foregoing formula, the time periods
used in advertising will be based on rolling calendar quarters, updated to the
last day of the most recent quarter prior to submission of the advertising for
publication. Average annual 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 July 9, 1997 (commencement of operations) through June
30, 1998, the Kaminski Poland Fund had a Total Return of (17.6)%.
Yield
Annualized yield quotations used in the Fund's advertising and promotional
materials are calculated by dividing the Fund's investment income for a
specified thirty-day period, net of expenses, by the average number of shares
outstanding during the period, and expressing the result as an annualized
percentage (assuming semi-annual compounding) of the net asset value per share
at the end of the period. Yield quotations are calculated according to the
following formula:
YIELD = 2 [(a-b + 1)6 - 1]
cd
where "a" equals dividends and interest earned during the period; "b" equals
expenses accrued for the period, net of reimbursements; "c" equals the average
daily number of shares outstanding during the period that are entitled to
receive dividends and "d" equals the maximum offering price per share on the
last day of the period.
Except as noted below, in determining net investment income earned during
the period ("a" in the above formula), the Fund calculates interest earned on
each debt obligation held by it during the period by (1) computing the
obligation's yield to maturity, based on the market value of the obligation
(including actual accrued interest) on the last business day of the period or,
if the obligation was purchased during the period, the purchase price plus
accrued interest; (2) dividing the yield to maturity by 360 and multiplying the
resulting quotient by the market value of the obligation (including actual
accrued interest). Once interest earned is calculated in this fashion for each
debt obligation held by the Fund, net investment income is then determined by
totaling all such interest earned.
For purposes of these calculations, the maturity of an obligation with one
or more call provisions is assumed to be the next date on which the obligation
reasonably can be expected to be called or, if none, the maturity date.
Other information
Performance data of the Fund quoted in advertising and other promotional
materials represents past performance and is not intended to predict or
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.
B-19
<PAGE>
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 15 series of shares of
beneficial interest, par value of 0.01 per share. The Declaration of Trust
permits the Trustees to issue an unlimited number of full and fractional shares
of beneficial interest and to divide or combine the shares into a greater or
lesser number of shares without thereby changing the proportionate beneficial
interest in the Fund. Each share represents an interest in the Fund
proportionately equal to the interest of each other share. Upon the Fund's
liquidation, all shareholders would share pro rata in the net assets of the Fund
available for distribution to shareholders.
The Declaration of Trust does not require the issuance of stock
certificates. If stock certificates are issued, they must be returned by the
registered owners prior to the transfer or redemption of shares represented by
such certificates.
If they deem it advisable and in the best interest of shareholders, the
Board of Trustees may create additional series of shares which differ from each
other only as to dividends. The Board of Trustees has created 15 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 Fund's custodian, Star Bank, 425 Walnut Street, Cincinnati, Ohio 45202
is responsible for holding the Funds' assets. Citibank, N.A. acts as the Fund's
sub-custodian in Poland. American Data Services, 150 Motor Parkway, Suite 109,
Hauppague, NY 11788 acts as the Fund's accounting services agent. The Fund's
independent accountants, PricewaterhouseCoopers LLP 33 South 6th Street, Suite
3100, Minneapolis, MN 55402 assist in the preparation of certain reports to the
Securities and Exchange Commission and the Fund's tax returns.
Shares of the Fund owned by the Trustees and officers as a group were less
than 1% at June 30, 1998.
On June 30, 1998, the following additional persons owned of record and/or
beneficially more than 5% of the Fund's outstanding voting securities:
Mager, Donald V. and Shirley M., 2111 Delaware Ave., St. Paul, MN 55118,
6.13% record.
APPENDIX
Description of Ratings
Moody's Investors Service, Inc.: Corporate Bond Ratings
Aaa--Bonds which are rated Aaa are judged to be of the best quality and
carry the smallest degree of investment risk. Interest payments are protected by
a large or by an exceptionally stable margin, and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
Aa---Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
B-20
<PAGE>
Moody's applies numerical modifiers "1", "2" and "3" to both the Aaa and Aa
rating classifications. The modifier "1" indicates that the security ranks in
the higher end of its generic rating category; the modifier "2" indicates a
mid-range ranking; and the modifier "3" indicates that the issue ranks in the
lower end of its generic rating category.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
period of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Standard & Poor's Corporation: Corporate Bond Ratings
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA--Bonds rated AA also qualify as high-quality debt obligations. Capacity
to pay principal and interest is very strong, and in the majority of instances
they differ from AAA issues only in small degree.
A--Bonds rated A have a strong capacity to pay principal and interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB--Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for bonds in
this category than for bonds in the A category.
Commercial Paper Ratings
Moody's commercial paper ratings are assessments of the issuer's ability to
repay punctually promissory obligations. Moody's employs the following three
designations, all judged to be investment grade, to indicate the relative
repayment capacity of rated issuers: Prime 1--highest quality; Prime 2--higher
quality; Prime 3--high quality.
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment. Ratings are graded into four categories, ranging
from "A" for the highest quality obligations to "D" for the lowest.
Issues assigned the highest rating, A, are regarded as having the greatest
capacity for timely payment. Issues in this category are delineated with the
numbers "1", "2" and "3" to indicate the relative degree of safety. The
designation A-1 indicates that the degree of safety regarding timely payment is
either overwhelming or very strong. A "+" designation is applied to those issues
rated "A-1" which possess extremely strong safety characteristics. Capacity for
timely payment on issues with the designation "A-2" is strong. However, the
relative degree of safety is not as high as for issues designated A-1. Issues
carrying the designation "A-3" have a satisfactory capacity for timely payment.
They are, however, somewhat more vulnerable to the adverse effect of changes in
circumstances than obligations carrying the higher designations.
B-21
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits.
(1) Agreement and Declaration of Trust (1)
(2) By-Laws (1)
(3) Not applicable
(4) Form of Investment Advisory Agreement
(5) Distribution Agreement (2)
(6) Not applicable
(7) Custodian Agreement (3)
(8) (i) Administration Agreement with Investment Company
Administration Corporation (2)
(ii) Fund Accounting Service Agreement (2)
(iii) Transfer Agency and Service Agreement (2)
(9) Not applicable
(10) Consent of Auditors
(11) Not applicable
(12) Investment letters (3)
(13) Form of Distribution Plan
(14) Financial Data Schedule
(15) Multiple Class Plan
(1) Previously filed with the Registration Statement on Form N-1A (File No.
33-17391) 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. 33-17391) 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. 33-17391) on February 28, 1997 and incorporated
herein by reference.
(4) Previously filed with Post-Effective Amendment No. 26 to the
Registration Statement on Form N-1A (File No. 33-17391) on June 29, 1998 and
incorporated herein by reference.
Item 24. Persons Controlled by or under Common Control with Registrant.
None.
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.
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.
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
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.
Bay Isle Financial Corporation 801-27563
Kaminski Asset Management, Inc. 801-53485
Rockhaven Asset Management, LLC 801-54084
Chase Investment Counsel Corp. 801-3396
Avatar Investors Associates Corp. 801-7061
The Edgar Lomax Company 801-19358
Van Deventer & Hoch 801-6118
Al Frank Asset Management, Inc. 801-30528
Heritage West Advisors, LLC 801-55233
Howard Capital Management 801-10188
Segall Bryant & Hamill 801-47232
Item 27. Principal Underwriters.
(a) The Registrant's principal underwriter also acts as principal
underwriter for the following investment companies:
Guinness Flight Investment Funds, Inc.
Fleming Capital Mutual Fund Group
Fremont Mutual Funds
Jurika & Voyles Mutual Funds
Kayne Anderson Mutual Funds
Masters' Select Funds Trust
O'Shaughnessy Funds, Inc.
PIC Investment Trust
Purisima Fund
Professionally Managed Portfolios
Rainier Investment Management Mutual Funds
RNC Mutual Fund Group
Brandes Investment Funds
Titan Financial Services Fund
Trent Equity Fund
RNC Mutual Fund Group, Inc.
(b) The following information is furnished with respect to the officers and
directors of First Fund Distributors, Inc.:
Position and Offices Position and
Name and Principal with Principal Offices with
Business Address Underwriter Registrant
Robert H. Wadsworth President and Vice President
4455 E. Camelback Road Treasurer
Suite 261E
Phoenix, AZ 85018
Eric M. Banhazl Vice President President,
2025 E. Financial Way Treasurer
Glendora, CA 91741 and Trustee
Steven J. Paggioli Vice President and Vice President
479 West 22nd Street Secretary
New York, New York 10011
(c) Not applicable.
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
Bay Isle Financial Corporation, 160 Sansome Street, San Francisco, CA 94104
Kaminski Asset Management, Inc., 319 First Avenue, Suite400, 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
Van Deventer & Hoch, 800 North Brand Boulevard, Glendale, CA 91203
Al Frank Asset Management, Inc. 465 Forest Avenue, 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
(c) with respect to The Heritage West Dividend Capture 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, Star
Bank, 425 Walnut Street, Cincinnati, OH 45202.
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 director and assist in
communications with other shareholders.
(c) On behalf of each of its series, to change any disclosure of past
performance of an Advisor to a series to conform to changes in the
position of the staff of the Commission with respect to such
presentation.
<PAGE>
INDEX TO EXHIBITS
Exhibit Number Description
EX-2 Multiple Class Plan
EX-27.3 Financial Data Schedule
EX-99.B5 Advisory Agreement
EX-99.B15 Distribution Plan
EX-99.B11 Consent of Independent Auditor
<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 15th day of January, 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 January 15, 1999.
/s/ Eric M. Banhazl* President, Principal Financial
Eric M. Banhazl and Accounting Officer, and Trustee
/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
ADVISORS SERIES TRUST
MULTIPLE CLASS PLAN
OF
LIBERTY FREEDOM FUND
This Multiple Class Plan (this "Plan") is required by Securities and Exchange
Commission Rule 18f-3 promulgated under the Investment Company Act of 1940, as
amended (the "1940 Act").
This Plan shall govern the terms and conditions under which Liberty Freedom
Fund, a series of Advisors Series Trust (the "Trust") may issue separate classes
of shares representing interests in Liberty Freedom Fund (the "Fund"). To the
extent that a subject matter herein is covered by the Trust's Agreement and
Declaration of Trust or Bylaws, the Agreement and Declaration of Trust and
Bylaws will control in the event of any inconsistencies with the descriptions
herein.
SECTION 1. Rights and Obligations. Except as set forth herein, all classes of
shares issued by the Fund shall have identical voting, dividend, liquidation and
other rights, preferences, powers, restrictions, limitations, qualifications,
designations, and terms and conditions. The only differences among the various
classes of shares relate solely to the following: (a) each class may be subject
to different class expenses as discussed under Section 3 of this Plan; (b) each
class may bear a different identifying designation; (c) each class has exclusive
voting rights with respect to matters solely affecting such class (except as set
forth in Section 5 below); (d) each class may have different exchange
privileges; and (e) each class may provide differently for the automatic
conversion of that class into another class.
SECTION 2. Classes of Shares and Designation Thereof. The Fund may offer any or
all of the following classes of shares:
(a) Class A Shares. "Class A Shares" will be sold at their net asset value with
the imposition of a front-end sales load of 3.50%, but not contigent
deferred sales charge ("CDSC"). Class A Shares will be subject to a Rule
12b-1 distribution fee at an annual rate of 0.50% of the daily net assets
attributable to the Class A Shares, and will be subject to a shareholder
servicing fee at an annual rate of up to 0.25% of the daily net assets
attributable to Class A Shares. Expenses for Class A Shares, after fee
waivers and expense reimbursements are estimated to be 2.10%.
The current "Share Marketing Plan for Advisors Series Trust" shall be
applicable to the Class A Shares.
(b) Class I Shares. "Class I Shares" will be sold at their net asset value
without the imposition of a front-end sales load or a CDSC. Class I Shares
will not be subject to a Rule 12b-1 distribution fee and will not be
subject to a shareholder servicing fee.
1
<PAGE>
Expenses for Class I Shares, after fee waivers and expense reimbursements
are estimated to be 1.30%.
SECTION 3. Allocation of Expenses.
(a) Class Expenses. Each class of shares may be subject to different class
expenses consisting of: (1) Rule 12b-1 plan distribution fees and
shareholder service fees, if applicable to a particular class; (2) transfer
agency and other recordkeeping costs to the extent allocated to a
particular class; (3) Securities and Exchange Commission ("SEC") and blue
sky registration fees incurred separately by a particular class;
(4) litigation or other legal expenses relating solely to a particular
class; (5) printing and postage expenses related to the preparation and
distribution of class specific materials such as shareholder reports,
prospectuses and proxies to shareholders of a particular class;
(6) expenses of administrative personnel and services as required to
support the shareholders of a particular class; (7) audit or accounting
fees or expenses relating solely to a particular class; (8) director fees
and expenses incurred as a result of issues relating solely to a particular
class and (9) any other expenses subsequently identified that should be
properly allocated to a particular class, which shall be approved by the
Board of Trustees (collectively, "Class Expenses").
(b) Other Expenses. Except for the Class Expenses discussed above (which will
be allocated to the appropriate class), all expenses incurred by each Fund
will be allocated to each class of shares on the basis of the net asset
value of each class to the net asset value of the Trust or the Fund, as the
case may be.
(c) Waivers and Reimbursements of Expenses. Each Fund's Advisor and any
provider of services to the Funds may waive or reimburse the expenses of a
particular class or classes, provided, however, that such waiver shall not
result in cross-subsidization between classes.
SECTION 4. Allocation of Income. Each Fund will allocate income and realized and
unrealized capital gains and losses based on the relative net assets of each
class of shares.
SECTION 5. Conversions. Each Class A Share shall convert automatically to a
Class I Share on the first business day of the month next following the fourth
anniversary of its purchase and will no longer be subject to the fees associated
with the Distribution and Shareholder Service Plans. The conversion of such
share shall be effected on the basis of the relative net asset values of the two
classes, without the imposition of a front-end sales load, CDSC or other
charges. In no event will a class of shares automatically convert into shares of
a class with a distribution arrangement that could be viewed as less favorable
to the shareholder as measured by overall cost.
The implementation of this conversion feature is subject to the continuing
availability of a ruling of the Internal Revenue Service, or of an opinion of
counsel or tax adviser, stating that the
2
<PAGE>
conversion of one class of shares to another does not constitute a taxable event
under federal income tax law. The conversion feature may be suspended if such a
ruling or opinion is not available.
3
SECTION 6. Effective When Approved. This Plan shall not take effect until a
majority of the Trustees of the Trust, including a majority of the trustees who
are not interested persons of the Trust, find that this Plan, as proposed and
including the expense allocations, is in the best interests of each class
individually and the Trust as a whole.
SECTION 7. Amendments. This Plan may not be amended to materially change the
provisions of this Plan unless such amendment is approved in the manner
specified in Section 6 above.
4
<PAGE>
(Approved December 7, 1998)
5
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001027596
<NAME> ADVISORS SERIES TRUST
<SERIES>
<NUMBER> 3
<NAME> KAMINSKI POLAND FUND
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-9-1997
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 1,564,908
<INVESTMENTS-AT-VALUE> 1,313,389
<RECEIVABLES> 28,878
<ASSETS-OTHER> 19,669
<OTHER-ITEMS-ASSETS> 42,954
<TOTAL-ASSETS> 1,404,890
<PAYABLE-FOR-SECURITIES> 11,100
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 32,017
<TOTAL-LIABILITIES> 43,117
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,630,255
<SHARES-COMMON-STOCK> 164,970
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (13,532)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,414)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (251,536)
<NET-ASSETS> 1,361,773
<DIVIDEND-INCOME> 4,607
<INTEREST-INCOME> 6,919
<OTHER-INCOME> 0
<EXPENSES-NET> 25,058
<NET-INVESTMENT-INCOME> (13,532)
<REALIZED-GAINS-CURRENT> (3,414)
<APPREC-INCREASE-CURRENT> (251,536)
<NET-CHANGE-FROM-OPS> (268,482)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 195,353
<NUMBER-OF-SHARES-REDEEMED> 30,383
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,630,255
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 13,159
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 159,430
<AVERAGE-NET-ASSETS> 931,676
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (.08)
<PER-SHARE-GAIN-APPREC> (1.67)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.25
<EXPENSE-RATIO> 02.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
ADVISORS SERIES TRUST
FORM OF
INVESTMENT ADVISORY AGREEMENT
[Name of Advisor]
THIS INVESTMENT ADVISORY AGREEMENT is made as of the _______ day of
___________________, 199___, by and between ADVISORS SERIES TRUST, a Delaware
business trust (hereinafter called the "Trust"), on behalf of the following
series of the Trust, [Name of Series] (the "Fund") and [Name of Advisor] , a
[state of incorporation] [corporation, partnership, etc.] (hereinafter called
the "Advisor").
WITNESSETH:
WHEREAS, the Trust is an open-end management investment company, registered
as such under the Investment Company Act of 1940 (the "Investment Company Act");
and
WHEREAS, the Fund is a series of the Trust having separate assets and
liabilities; and
WHEREAS, the Advisor is registered as an investment adviser under the
Investment Advisers Act of 1940 (the "Advisers Act") (or is exempt from
registration) and is engaged in the business of supplying investment advice as
an independent contractor; and
WHEREAS, the Trust desires to retain the Advisor to render advice and
services to the Fund pursuant to the terms and provisions of this Agreement, and
the Advisor desires to furnish said advice and services;
NOW, THEREFORE, in consideration of the covenants and the mutual promises
hereinafter set forth, the parties to this Agreement, intending to be legally
bound hereby, mutually agree as follows:
1. Appointment of Advisor. The Trust hereby employs the Advisor and the
Advisor hereby accepts such employment, to render investment advice and related
services with respect to the assets of the Fund for the period and on the terms
set forth in this Agreement, subject to the supervision and direction of the
Trust's Board of Trustees.
2. Duties of Advisor.
(a) General Duties. The Advisor shall act as investment adviser to the Fund
and shall supervise investments of the Fund on behalf of the Fund in accordance
with the investment objectives, policies and restrictions of the Fund as set
forth in the Fund's and Trust's
1
<PAGE>
governing documents, including, without limitation, the Trust's Agreement and
Declaration of Trust and By-Laws; the Fund's prospectus, statement of additional
information and undertakings; and such other limitations, policies and
procedures as the Trustees may impose from time to time in writing to the
Advisor. In providing such services, the Advisor shall at all times adhere to
the provisions and restrictions contained in the federal securities laws,
applicable state securities laws, the Internal Revenue Code, the Uniform
Commercial Code and other applicable law.
Without limiting the generality of the foregoing, the Advisor shall:
(I) furnish the Funds with advice and recommendations with respect to the
investment of the Fund's assets and the purchase and sale of portfolio
securities for the Fund, including the taking of such steps as may be necessary
to implement such advice and recommendations (i.e., placing the orders); (ii)
manage and oversee the investments of the Funds, subject to the ultimate
supervision and direction of the Trust's Board of Trustees; (iii) vote proxies
for the Fund, file ownership reports under Section 13 of the Securities Exchange
Act of 1934 for the Fund, and take other actions on behalf of the Fund; (iv)
maintain the books and records required to be maintained by the Fund except to
the extent arrangements have been made for such books and records to be
maintained by the administrator or another agent of the Fund; (v) furnish
reports, statements and other data on securities, economic conditions and other
matters related to the investment of the Fund's assets which the Fund's
administrator or distributor or the officers of the Trust may reasonably
request; and (vi) render to the Trust's Board of Trustees such periodic and
special reports with respect to each Fund's investment activities as the Board
may reasonably request, including at least one in-person appearance annually
before the Board of Trustees.
(b) Brokerage. The Advisor shall be responsible for decisions to buy and
sell securities for the Fund, for broker-dealer selection, and for negotiation
of brokerage commission rates, provided that the Advisor shall not direct order
to an affiliated person of the Advisor without general prior authorization to
use such affiliated broker or dealer for the Trust's Board of Trustees. The
Advisor's primary consideration in effecting a securities transaction will be
execution at the most favorable price. In selecting a broker-dealer to execute
each particular transaction, the Advisor may take the following into
consideration: the best net price available; the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of the expected contribution of the
broker-dealer to the investment performance of the Fund on a continuing basis.
The price to the Fund in any transaction may be less favorable than that
available from another broker-dealer if the difference is reasonably justified
by other aspects of the portfolio execution services offered.
Subject to such policies as the Board of Trustees of the Trust may
determine, the Advisor shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of its
having caused the Fund to pay a broker or dealer that provides (directly or
indirectly) brokerage or research services to the Advisor an amount of
commission for effecting a portfolio transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction, if the Advisor determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in
2
terms of either that particular transaction or the Advisor's overall
responsibilities with respect to the Trust. The Advisor is further authorized to
allocate the orders placed by it on behalf of the Fund to such brokers or
dealers who also provide research or statistical material, or other services, to
the Trust, the Advisor, or any affiliate of either. Such allocation shall be in
such amounts and proportions as the Advisor shall determine, and the Advisor
shall report on such allocations regularly to the Trust, indicating the
broker-dealers to whom such allocations have been made and the basis therefor.
The Advisor is also authorized to consider sales of shares as a factor in the
selection of brokers or dealers to execute portfolio transactions, subject to
the requirements of best execution, i.e., that such brokers or dealers are able
to execute the order promptly and at the best obtainable securities price.
On occasions when the Advisor deems the purchase or sale of a security to
be in the best interest of one or more of the Fund as well as of other clients,
the Advisor, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be so purchased or sold in order to obtain the most
favorable price or lower brokerage commissions and the most efficient execution.
In such event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Advisor in the manner
it considers to be the most equitable and consistent with its fiduciary
obligations to the Funds and to such other clients.
3. Representations of the Advisor.
(a) The Advisor shall use its best judgment and efforts in rendering
the advice and services to the Funds as contemplated by this
Agreement.
(b) The Advisor shall maintain all licenses and registrations
necessary to perform its duties hereunder in good order.
(c) The Advisor shall conduct its operations at all times in
conformance with the Advisers Act, the Investment Company Act ,
and any other applicable state and/or self-regulatory
organization regulations.
(d) The Advisor shall maintain errors and omissions insurance in an
amount at least equal to that disclosed to the Board of Trustees
in connection with their approval of this Agreement.
4. Independent Contractor. The Advisor shall, for all purposes herein, be
deemed to be an independent contractor, and shall, unless otherwise expressly
provided and authorized to do so, have no authority to act for or represent the
Trust or the Fund in any way, or in any way be deemed an agent for the Trust or
for the Fund. It is expressly understood and agreed that the services to be
rendered by the Advisor to the Funds under the provisions of this Agreement are
not to be deemed exclusive, and the Advisor shall be free to render similar or
different services to others so long as its ability to render the services
provided for in this Agreement shall not be impaired thereby.
5. Advisor's Personnel. The Advisor shall, at its own expense, maintain
such staff and employ or retain such personnel and consult with such other
persons as it shall from time to time determine to be necessary to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Advisor shall be
deemed to include persons employed or retained by the Advisor to furnish
statistical information, research, and other factual information, advice
regarding economic factors and trends, information with respect to technical and
scientific developments, and such other information, advice and assistance as
the Advisor or the Trust's Board of Trustees may desire and reasonably request.
6. Expenses.
(a) With respect to the operation of the Fund, the Advisor shall be
responsible for (i) providing the personnel, office space and equipment
reasonably necessary for the operation of the Fund, (ii) the expenses of
printing and distributing extra copies of the Fund's prospectus, statement of
additional information, and sales and advertising materials (but not the legal,
auditing or accounting fees attendant thereto) to prospective investors (but not
to existing shareholders), and (iii) the costs of any special Board of Trustees
meetings or shareholder meetings convened for the primary benefit of the
Advisor. If the Advisor has agreed to limit the operating expenses of the Fund,
the Advisor shall also be responsible on a monthly basis for any operating
expenses that exceed the agreed upon expense limit.
(b) The Fund is responsible for and has assumed the obligation for payment
of all of its expenses, other than as stated in Subparagraph 6(a) above,
including but not limited to: fees and expenses incurred in connection with the
issuance, registration and transfer of its shares; brokerage and commission
expenses; all expenses of transfer, receipt, safekeeping, servicing and
accounting for the cash, securities and other property of the Trust for the
benefit of the Fund including all fees and expenses of its custodian,
shareholder services agent and accounting services agent; interest charges on
any borrowings; costs and expenses of pricing and calculating its daily net
asset value and of maintaining its books of account required under the
Investment Company Act; taxes, if any; a pro rata portion of expenditures in
connection with meetings of the Fund's shareholders and the Trust's Board of
Trustees that are properly payable by the Fund; salaries and expenses of
officers and fees and expenses of members of the Trust's Board of Trustees or
members of any advisory board or committee who are not members of, affiliated
with or interested persons of the Advisor; insurance premiums on property or
personnel of each Fund which inure to its benefit, including liability and
fidelity bond insurance; the cost of preparing and printing reports, proxy
statements, prospectuses and statements of additional information of the Fund or
other communications for distribution to existing shareholders; legal, auditing
and accounting fees; trade association dues; fees and expenses (including legal
fees) of registering and maintaining registration of its shares for sale under
federal and applicable state and foreign securities laws; all expenses of
maintaining and servicing shareholder accounts, including all charges for
transfer, shareholder recordkeeping, dividend disbursing, redemption, and other
agents for the benefit of the Funds, if any; and all other charges and costs of
its operation plus any extraordinary and non-recurring expenses, except as
herein otherwise prescribed.
(c) The Advisor may voluntarily absorb certain Fund expenses or waive the
Advisor's own advisory fee.
(d) To the extent the Advisor incurs any costs by assuming expenses which
are an obligation of a Fund as set forth herein, the Fund shall promptly
reimburse the Advisor for such costs and expenses, except to the extent the
Advisor has otherwise agreed to bear such expenses. To the extent the services
for which a Fund is obligated to pay are performed by the Advisor, the Advisor
shall be entitled to recover from such Fund to the extent of the Advisor's
actual costs for providing such services. In determining the Advisor's actual
costs, the Advisor may take into account an allocated portion of the salaries
and overhead of personnel performing such services.
7. Investment Advisory and Management Fee.
(a) The Fund shall pay to the Advisor, and the Advisor agrees to accept, as
full compensation for all investment management and advisory services furnished
or provided to such Fund pursuant to this Agreement, an annual management fee at
the rate set forth in Schedule A to this Agreement.
(b) The management fee shall be accrued daily by each Fund and paid to the
Advisor on the first business day of the succeeding month.
(c) The initial fee under this Agreement shall be payable on the first
business day of the first month following the effective date of this Agreement
and shall be prorated as set forth below. If this Agreement is terminated prior
to the end of any month, the fee to the Advisor shall be prorated for the
portion of any month in which this Agreement is in effect which is not a
complete month according to the proportion which the number of calendar days in
the month during which the Agreement is in effect bears to the number of
calendar days in the month, and shall be payable within ten (10) days after the
date of termination.
(d) The fee payable to the Advisor under this Agreement will be reduced to
the extent of any receivable owed by the Advisor to the Fund and as required
under any expense limitation applicable to a Fund.
(e) The Advisor voluntarily may reduce any portion of the compensation or
reimbursement of expenses due to it pursuant to this Agreement and may agree to
make payments to limit the expenses which are the responsibility of a Fund under
this Agreement. Any such reduction or payment shall be applicable only to such
specific reduction or payment and shall not constitute an agreement to reduce
any future compensation or reimbursement due to the Advisor hereunder or to
continue future payments. Any such reduction will be agreed to prior to accrual
of the related expense or fee and will be estimated daily and reconciled and
paid on a monthly basis.
(f) Any such reductions made by the Advisor in its fees or payment of
expenses which are the Fund's obligation are subject to reimbursement by the
Fund to the Advisor, if so requested by the Advisor, in subsequent fiscal years
if the aggregate amount actually paid by the Fund toward the operating expenses
for such fiscal year (taking into account the reimbursement) does not exceed the
applicable limitation on Fund expenses. The Advisor is permitted to be
reimbursed only fo 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
review and approval at time the reimbursement is made. Such reimbursement may
not be paid prior to the Fund's payment of current ordinary operating expenses.
(g) The Advisor may agree not to require payment of any portion of the
compensation or reimbursement of expenses otherwise due to it pursuant to this
Agreement. Any such agreement shall be applicable only with respect to the
specific items covered thereby and shall not constitute an agreement not to
require payment of any future compensation or reimbursement due to the Advisor
hereunder.
8. No Shorting; No Borrowing. The Advisor agrees that neither it nor any of
its officers or employees shall take any short position in the shares of the
Funds. This prohibition shall not prevent the purchase of such shares by any of
the officers or employees of the Advisor or any trust, pension, profit-sharing
or other benefit plan for such persons or affiliates thereof, at a price not
less than the net asset value thereof at the time of purchase, as allowed
pursuant to rules promulgated under the Investment Company Act. The Advisor
agrees that neither it nor any of its officers or employees shall borrow from
the Fund or pledge or use the Fund's assets in connection with any borrowing not
directly for the Fund's benefit. For this purpose, failure to pay any amount due
and payable to the Fund for a period of more than thirty (30) days shall
constitute a borrowing.
9. Conflicts with Trust's Governing Documents and Applicable Laws. Nothing
herein contained shall be deemed to require the Trust or the Fund to take any
action contrary to the Trust's Agreement and Declaration of Trust, By-Laws, or
any applicable statute or regulation, or to relieve or deprive the Board of
Trustees of the Trust of its responsibility for and control of the conduct of
the affairs of the Trust and Funds. In this connection, the Advisor acknowledges
that the Trustees retain ultimate plenary authority over the Fund and may take
any and all actions necessary and reasonable to protect the interests of
shareholders.
10. Reports and Access. The Advisor agrees to supply such information to
the Fund's administrator and to permit such compliance inspections by the Fund's
administrator as shall be reasonably necessary to permit the administrator to
satisfy its obligations and respond to the reasonable requests of the Trustees.
11. Advisor's Liabilities and Indemnification.
(a) The Advisor shall have responsibility for the accuracy and completeness
(and liability for the lack thereof) of the statements in the Fund's offering
materials (including the prospectus, the statement of additional information,
advertising and sales materials), except for information supplied by the
administrator or the Trust or another third party for inclusion therein.
(b) The Advisor shall be liable to the Fund for any loss (including
brokerage charges) incurred by the Fund as a result of any improper investment
made by the Advisor.
(c) In the absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the obligations or duties hereunder on the part of the
Advisor, the Advisor shall not be subject to liability to the Trust or the Fund
or to any shareholder of the Fund for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security by the Funds.
(d) Each party to this Agreement shall indemnify and hold harmless the
other party and the shareholders, directors, officers and employees of the other
party (any such person, an "Indemnified Party") against any loss, liability,
claim, damage or expense (including the reasonable cost of investigating and
defending any alleged loss, liability, claim, damage or expenses and reasonable
counsel fees incurred in connection therewith) arising out of the Indemnified
Party's performance or non-performance of any duties under this Agreement
provided, however, that nothing herein shall be deemed to protect any
Indemnified Party against any liability to which such Indemnified Party would
otherwise be subject by reason of willful misfeasance, bad faith or negligence
in the performance of duties hereunder or by reason of reckless disregard of
obligations and duties under this Agreement.
(e) No provision of this Agreement shall be construed to protect any
Trustee or officer of the Trust, or officer of the Advisor, from liability in
violation of Sections 17(h) and (i) of the Investment Company Act.
12. Non-Exclusivity; Trading for Advisor's Own Account. The Trust's
employment of the Advisor is not an exclusive arrangement. The Trust may from
time to time employ other individuals or entities to furnish it with the
services provided for herein. Likewise, the Advisor may act as investment
adviser for any other person, and shall not in any way be limited or restricted
from buying, selling or trading any securities for its or their own accounts or
the accounts of others for whom it or they may be acting, provided, however,
that the Advisor expressly represents that it will undertake no activities which
will adversely affect the performance of its obligations to the Fund under this
Agreement; and provided further that the Advisor will adhere to a code of ethics
governing employee trading and trading for proprietary accounts that conforms to
the requirements of the Investment Company Act and the Advisers Act and has been
approved by the Trust's Board of Trustees.
13. Term.
(a) This Agreement shall become effective at the time the Fund commences
operations pursuant to an effective amendment to the Trust's Registration
Statement under the Securities Act of 1933 and shall remain in effect for a
period of two (2) years, unless sooner terminated as hereinafter provided. This
Agreement shall continue in effect thereafter for additional periods not
exceeding one (l) year so long as such continuation is approved for the Fund at
least annually by (i) the Board of Trustees of the Trust or by the vote of a
majority of the outstanding voting securities of each Fund and (ii) the vote of
a majority of the Trustees of the Trust who are not parties to this Agreement
nor interested persons thereof, cast in person at a meeting called for the
purpose of voting on such approval. The terms "majority of the outstanding
voting securities" and "interested persons" shall have the meanings as set forth
in the Investment Company Act.
(b) The Fund may use the name [Name of Fund] or any name derived from or
using the name [Name of Advisor] only for so long as this Agreement or any
extension, renewal or amendment hereof remains in effect. Within sixty (60) days
from such time as this Agreement shall no longer be in effect, the Fund shall
cease to use such a name or any other name connected with the Advisor.
14. Termination; No Assignment.
(a) This Agreement may be terminated by the Trust on behalf of the Fund at
any time without payment of any penalty, by the Board of Trustees of the Trust
or by vote of a majority of the outstanding voting securities of a Fund, upon
sixty (60) days' written notice to the Advisor, and by the Advisor upon sixty
(60) days' written notice to a Fund. In the event of a termination, the Advisor
shall cooperate in the orderly transfer of the Fund's affairs and, at the
request of th Board of Trustees, transfer any and all books and records of the
Fund maintained by the Advisor on behalf of the Fund.
(b) This Agreement shall terminate automatically in the event of any
transfer or assignment thereof, as defined in the Investment Company Act.
15. Severability. If any provision of this Agreement shall be held or made
invalid by a court decision, statute or rule, or shall be otherwise rendered
invalid, the remainder of this Agreement shall not be affected thereby.
16. Captions. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
17. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Arizona without giving effect to the
conflict of laws principles thereof; provided that nothing herein shall be
construed to preempt, or to be inconsistent with, any federal law, regulation or
rule, including the Investment Company Act and the Advisers Act and any rules
and regulations promulgated thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their duly authorized officers, all on the day and year first above
written.
ADVISORS SERIES TRUST [Name of Advisor]
on behalf of the
[Name of Fund]
By: By:
Name: Robert H. Wadsworth Name:
Title: Vice President Title:
3
<PAGE>
Schedule A
Series or Fund of Advisors Series Trust Annual Fee rate
[Name of Fund] [ ] % of average net assets
4
ADVISORS SERIES TRUST
SHARE MARKETING PLAN
(Rule 12b-1 Plan)
(Fixed Compensation Plan in which Advisor
Acts as Distribution Coordinator)
This Share Marketing Plan (the "Plan") is adopted in accordance with Rule
12b-1 (the "Rule") under the Investment Company Act of 1940, (the "Company
Act"), by ADVISORS SERIES TRUST (the "Trust") with respect to the following
series: [name of Fund and Class, if appropriate] (the "Fund"). The Plan has been
approved by a majority of the Trust's Board of Trustees, including a majority of
the Trustees who are not interested persons of the Trust and who have no direct
or indirect financial interest in the operation of the Plan (the "independent
Trustees"), cast in person at a meeting called for the purpose of voting on the
Plan and by a majority of the shareholders [of each Class] of each Fund, as
required by the Company Act.
In reviewing the Plan, the Board of Trustees considered the proposed range
and nature of payments and terms of the investment advisory agreement between
the Trust on behalf of the Fund and _______________________ (the "Advisor") and
the nature and amount of other payments, fees and commissions that may be paid
to the Advisor, its affiliates and other agents of the Trust. The Board of
Trustees, including the independent Trustees, concluded that the proposed
overall compensation of the Advisor and its affiliates was fair and not
excessive.
In its considerations, the Board of Trustees also recognized that
uncertainty may exist from time to time with respect to whether payments to be
made by the Fund to the Advisor, as the initial "distribution coordinator," or
other firms under agreements with respect to the Fund may be deemed to
constitute impermissible distribution expenses. As a general rule, an investment
company may not finance any activity primarily intended to result in the sale of
its shares, except pursuant to the Rule. Accordingly, the Board of Trustees
determined that the Plan also should provide that payments by the Fund and
expenditures made by others out of monies received from the Fund which are later
deemed to be for the financing of any activity primarily intended to result in
the sale of Fund shares shall be deemed to have been made pursuant to the Plan.
The approval of the Board of Trustees included a determination that in the
exercise of the Trustees' reasonable business judgment and in light of their
fiduciary duties, there is a reasonable likelihood that the Plan will benefit
the Fund to which the Plan applies and its shareholders. The Plan also has been
approved by a vote of at least a majority of the outstanding voting securities
of the Fund, as defined in the Company Act.
<PAGE>
The provisions of the Plan are:
1. Annual Fee. The Fund will pay to the Advisor as the Fund's distribution
coordinator, an annual fee for the Advisor's services in connection with the
promotion and distribution of the Fund's shares and related shareholder
servicing (collectively, "Distribution Expenses"). The annual fee paid to the
Advisor under the Plan will be calculated daily and paid monthly by the Fund
based on the average daily net assets of each specified Class of each the Fund,
as follows:
at an annual rate of up to ___%. [Class , if applicable]
This fee is not tied exclusively to actual distribution and service
expenses, and the fee may exceed the expenses actually incurred.
2. Services Covered by the Plan. The fee paid under Section 1 of the Plan
is intended to compensate the Advisor for performing the following kinds of
services (but this list should not be viewed as exclusive of other similar
services): services primarily intended to result in the sale of the Fund's
shares ("distribution services"), including, but not limited to: (a) making
payments, including incentive compensation, to agents for and consultants to the
Advisor, any affiliate of the Advisor or the Trust, including pension
administration firms that provide distribution and shareholder related services
and broker-dealers that engage in the distribution of the Fund's shares; (b)
making payments to persons who provide support services in connection with the
distribution of the Fund's shares and servicing of the Fund's shareholders,
including, but not limited to, personnel of the Advisor, office space and
equipment, telephone facilities, answering routine inquiries regarding the Fund,
processing shareholder transactions and providing any other shareholder services
not otherwise provided by the Trust's transfer agency or other servicing
arrangements; (c) formulating and implementing marketing and promotional
activities, including, but not limited to, direct mail promotions and
television, radio, newspaper, magazine and other mass media advertising; (d)
printing and distributing prospectuses, statements of additional information and
reports of the Fund to prospective shareholders of the Fund; (e) preparing,
printing and distributing sales literature pertaining to the Fund; and (f)
obtaining whatever information, analyses and reports with respect to marketing
and promotional activities that the Trust may, from time to time, deem
advisable. Such services and activities shall be deemed to be covered by this
Plan whether performed directly by the Advisor or by a third party.
3. Written Reports. The Advisor (or Fund administrator) shall furnish to
the Board of Trustees of the Trust, for its review, on a quarterly basis, a
written report of the monies paid to the Advisor under the Plan with respect to
the Fund, and shall furnish the Board of Trustees of the Trust with such other
information as the Board of Trustees may reasonably request in connection with
the payments made under the Plan in order to enable the Board of Trustees to
make an informed determination of whether the Plan should be continued as to the
Fund.
<PAGE>
4. Termination. The Plan may be terminated as to the Fund at any time,
without penalty, by a vote of a majority of the independent Trustees or by vote
of a majority of the outstanding voting securities of the Fund, and the
Distribution Coordination Agreement under the Plan may be likewise terminated on
sixty (60) days' written notice. Failure to renew the Plan on an annual basis
within 15 months of its last prior renewal (or approval date) shall also
constitute termination of the Plan. Assignment of the Distribution Coordination
Agreement will automatically terminate it. Once either the Plan or the
Distribution Coordination Agreement is terminated, no further payments shall be
made under the Plan with respect to services performed or costs incurred after
the date of termination or with respect to unreimbursed current or carried
forward Distribution Expenses as of the date of termination.
5. Amendments. The Plan and the Distribution Coordination Agreement may be
amended with the approval of the Board of Trustees of the Trust provided that
neither the Plan nor the Distribution Coordination Agreement may be amended to
increase materially the amount to be spent for distribution and servicing of
shares without approval by a majority of the outstanding voting securities. All
material amendments to the Plan and the Distribution Coordination Agreement
shall also be approved by the independent Trustees cast in person at a meeting
called for the purpose of voting on any such amendment.
6. Selection of Independent Trustees. So long as the Plan is in effect, the
selection and nomination of the Trust's independent Trustees shall be committed
to the discretion of such independent Trustees.
7. Effective Date of Plan. The Plan shall take effect at such time as it
has received requisite Trustee and shareholder approval and, unless sooner
terminated, shall continue in effect for a period of more than one year from the
date of its execution only so long as such continuance is specifically approved
at least annually by the Board of Trustees of the Trust, including the
independent Trustees, cast in person at a meeting called for the purpose of
voting on such continuance.
8. Preservation of Materials. The Trust will preserve copies of the Plan,
any agreements relating to the Plan and any report made pursuant to Section 5
above, for a period of not less than six years (the first two years in an easily
accessible place) from the date of the Plan, agreement or report.
9. Meanings of Certain Terms. As used in the Plan, the terms "interested
person" and "majority of the outstanding voting securities" will be deemed to
have the same meaning that those terms have under the Company Act and the rules
and regulations under the Company Act, subject to any exemption that may be
granted to the Trust under the Company Act by the Securities and Exchange
Commission.
<PAGE>
This Plan and the terms and provisions thereof are hereby accepted and
agreed to by the Trust and Advisor, as distribution coordinator, as evidenced by
their execution hereof, as of the day of , 1998.
ADVISORS SERIES TRUST
on behalf of
By:
Title:
as Distribution Coordinator
By:
Title:
ADVISORS SERIES TRUST
Distribution Coordination Agreement
EXHIBIT ONLY
___________________________________
___________________________________
___________________________________
___________________________________
Ladies and Gentlemen:
This Distribution Coordination Agreement ("Agreement") has been adopted
pursuant to Rule 12b-1 under the Investment Company Act of 1940, (the "Company
Act"), by ADVISORS SERIES TRUST (the "Trust"), on behalf of following series of
the Trust: [name of Fund and Class, if appropriate] (the "Fund"), as governed by
the terms of the Trust's Share Marketing Plan pursuant to Rule 12b-1 (the
"Plan").
The Plan has been approved by a majority of the Trustees who are not
interested persons of the Trust and who have no direct or indirect financial
interest in the operation of the Plan (the "independent Trustees"), cast in
person at a meeting called for the purpose of voting on such Plan. Such approval
included a determination that in the exercise of the reasonable business
judgment of the Board of Trustees and in light of the Trustees' fiduciary
duties, there is a reasonable likelihood that the Plan will benefit the Fund and
its shareholders. The Plan also has been approved by a vote of at least a
majority of the outstanding voting securities of each Class of each Fund, as
defined by the Company Act.
I. To the extent you, in your capacity as the Distribution Coordinator
pursuant to this Agreement, provide eligible shareholder services of the type
identified in the Plan to the Fund, we shall pay you a monthly fee based on the
average net asset value of the Fund.
II. In no event may the aggregate annual fee paid to you pursuant to the
Plan exceed % of the value of the net assets of the Fund (determined in
the same manner as the Fund uses to compute its net assets as set forth
in its then-effective Prospectus), without approval by a majority of the
outstanding shares of the Fund.
<PAGE>
III. You shall furnish to the Board of Trustees of the Trust, for its
review, on a quarterly basis, a written report of the amounts expended under the
Plan by you with respect to the Fund and the purposes for which such
expenditures were made.
IV. All communications to the Fund shall be sent to you, as Distribution
Coordinator for the Fund, at the following address:
_______________________________________
_______________________________________
Any notice to you shall be duly given if mailed or telegraphed to you at
your address as indicated in this Agreement.
V. This Agreement may be terminated by us or by you, by the vote of a
majority of the Trustees of the Trust who are independent Trustees, or by a vote
of a majority of the outstanding shares of the Fund, on sixty (60) days' written
notice, all without payment of any penalty. This Agreement shall also be
terminated automatically in the event of its assignment by you or by any act
that terminates the Plan. If this Agreement is terminated your ability to
receive fees under the Plan shall be limited as provided for in the Plan.
VI. The provisions of the Plan between the Trust and the Fund, insofar as
they relate to you, are incorporated herein by reference.
This Agreement shall take effect on the date indicated below, and the terms
and provisions thereof are hereby accepted and agreed to by us as evidenced by
our execution hereof.
ADVISORS SERIES TRUST
By:
Authorized Officer
Dated:
<PAGE>
Agreed and Accepted:
(Name of Distribution Coordinator)
By:
Authorized Officer
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 37 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated August 21, 1998, relating to the financial
statements and financial highlights appearing in the June 30, 1998 Annual Report
to Shareholders of the Kaminski Poland Fund, which are also incorporated by
reference into the Registration Statement. We also consent to the references to
us under the heading "Financial Highlights" in the Prospectus and under the
heading "General Information" in the Statement of Additional Information.
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
January 15, 1999
