File No. 333-17391
811-07959
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 40 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
Amendment No. 42 [X]
ADVISORS SERIES TRUST
(Exact name of registrant as specified in charter)
4455 E. Camelback Road, Suite 261E
Phoenix, AZ 85018
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number (including area code): (602) 952-1100
ROBERT H. WADSWORTH
Advisors Series Trust
4455 E. Camelback Road, Suite 261E
Phoenix, AZ 85018
(Name and address of agent for service of process)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after the
effective date of the registration statement.
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[X] 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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PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED MARCH 15, 1999
NATIONAL ASSET MANAGEMENT CORE EQUITY FUND,
A SERIES OF ADVISORS SERIES TRUST
National Asset Management Core Equity Fund is a core equity fund
designed for institutional investors. The Fund seeks to provide investors with
high total investment return.
The Securities and Exchange Commission has not approved or disapproved
of these securities or passed upon the adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
The date of this prospectus is __________, 1999
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY ANY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
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NATIONAL ASSET MANAGEMENT CORE EQUITY FUND'S INVESTMENT GOAL
High total investment return. This consists of capital appreciation and current
income.
NATIONAL ASSET MANAGEMENT CORE EQUITY FUND'S PRINCIPAL INVESTMENT STRATEGIES
The Fund primarily invests in common stocks of large and middle capitalization
U.S. companies ("core"companies'). The Advisor stresses a blend of growth and
value securitiesby utilizing its multiple attribute philosophy and process.
PRINCIPAL RISKS OF INVESTING IN NATIONAL ASSET MANAGEMENT CORE EQUITY FUND
There is the risk that you could lose money on your investment in the National
Asset Management Core Equity Fund. This could happen if any of the following
events happen:
+ The stock market goes down
+ Interest rates go up which can result in a decline in the equity
market
+ Large and medium capitalization stocks fall out of favor with the
stock market
+ Stocks in the Fund's portfolio do not increase their earnings at
the rate anticipated
WHO MAY WANT TO INVEST IN NATIONAL ASSET MANAGEMENT CORE EQUITY FUND
The Fund may be appropriate for investors who:
Are pursuing a long-term goal such as retirement
Want to diversify their investment portfolio by investing in a mutual fund that
emphasizes investments in core companies
Want to reduce the volatility of a pure growth or value style of investing.
Are willing to accept higher short-term risk along with higher potential for
long-term total return
The Fund may not be appropriate for investors who:
Are pursuing a short-term goal or investing emergency reserves
Wish to have the equity portion of their portfolio invested in stocks other than
core U.S. companies
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FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price)................................. None
Maximum deferred sales charge (load)
(as a percentage of the lower of original purchase
price or redemption proceeds)........................................... None
ANNUAL FUND OPERATING EXPENSES*
(expenses that are deducted from Fund assets)
Management Fees......................................................... 0.50%
Distribution and Service (12b-1) Fees................................... 0.00%
Other Expenses.......................................................... 0.45%
Total Annual Fund Operating Expenses.................................... 0.95%
Fee Reduction and/or Expense Reimbursement.............................. %
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Net Expenses............................................................ 0.95%
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* Other Expenses are estimated for the first fiscal year of the Fund. The
Advisor has contractually agreed to reduce its fees and/or pay expenses of the
Fund for a minimum ten-year period to insure that Total Fund Operating Expenses
will not exceed 0.95%.If the Advisor does waive any of its fees or pay Fund
expenses, the Fund may reimburse the Advisor in future years. The Fund may
terminate this expense reimbursement arrangement at any time.
EXAMPLE
This example is intended to help you compare the costs of investing in the Fund
with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, under the assumptions, your costs would be:
One Year.................................... $
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Three Years................................. $
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INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
The Fund's investment goal is to provide investors with high total investment
return by using multiple attributes of styles of stocks to diversify the
portfolio. High total investment return consists of capital appreciation and
current income.
Under normal market conditions, the Fund will invest at least 65% of its assets
in the equity securities generally considered to be core holdings. A company's
market capitalization is the total market value of its outstanding common stock.
The Fund considers core holdings to be large and medium size companies with a
market capitalization of over $1 billion.
The Advisor uses a blend of growth and value attributes in the selection of
securities to best posture the portfolio to benefit from the current economic
environment. To determine which style of investing to focus on, the Advisor
utilizes the following indicators:
+ Fundamental indicators which focus on economic momentum, S & P
500 earnings and interest rates.
+ Valuation indicators which include comparisons of value versus
growth stocks focusing on price to sales ratios and price to
earnings trends.
+ Technical indicators which include an analysis of the relative
strength between value versus growth and high versus low quality
trends.
The Fund will normally invest in the following three attributes, or types of
equity securities:
+ Growth Securities. Common stocks that meet the Advisor's criteria
for five-year annual earnings-per-share growth rates. These
securities must also exhibit no decline in the annual
earnings-per-share rate during the last five years.
+ Securities with low price-to-earnings ratios. The Advisor defines
these securities at those common stocks with price-to-earnings
ratios below the average of the companies included in the S&P 500
Index.
+ Securities that pay high dividends. Common stocks that pay
dividends at a rate above the average of the companies included
in the S&P 500 Index.
The Advisor utilizes a systematic, disciplined investment process when
evaluating individual securities. This includes:
+ Screening a database for liquidity and the attribute criteria
listed above
+ Scoring each issue emphasizing fundamental, valuation and
technical indicators, and
+ Security analysis that further analyzes the company and the
stock.
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Under normal market conditions, the Fund will stay fully invested in stocks.
However, the Fund may temporarily depart from its principal investment
strategies by making short-term investments in cash equivalents in response to
adverse market, economic or political conditions. This may result in the Fund
not achieving its investment objective.
In keeping with its investment approach, the Advisor does not anticipate
frequent buying and selling of securities. This means that the Fund should have
a low rate of portfolio turnover and the potential to be a tax efficient
investment. This should result in the realization and distribution to
shareholders of lower capital gains, which would be considered tax efficient.
The anticipated lack of frequent trading also leads to lower transaction costs,
which could help to improve performance.
RISKS OF INVESTING IN THE NATIONAL ASSET MANAGEMENT
CORE EQUITY FUND
The principal risks of investing in the Fund that may adversely affect the
Fund's net asset value or total return are discussed above in "Principal risks
of investing in National Asset Management Core Equity Fund." Risks which are
characteristic of equity investing are MARKET RISK, the risk that the market
value of a security may move up and down, sometimes rapidly and unpredictably.
These fluctuations may cause a security to be worth less than the price
originally paid for it, or less than it was worth at an earlier time. Market
risk may affect a single issuer, industry, sector of the economy or the market
as a whole; MANAGEMENT RISK, the risk that a strategy used by the Advisor may
not produce the intended result; and VALUATION RISK, the risk that the markets
may not place the expected value on a particular stock holding. In addition,
equity investing currently involves YEAR 2000 RISK, the risk that the Fund's
operations could be disrupted by year 2000-related computer system problems.
This situation may negatively affect the companies in which the Fund invests and
by extension the value of the Fund's shares. Although the Fund's service
providers are taking steps to address this issue, there may still be some risk
of adverse effects.
INVESTMENT ADVISOR
National Asset Management Corporation is the investment advisor to the Fund. The
investment advisor's address is 101 South Fifth Street, Louisville, KY 40202. As
of December 31, 1998, the investment advisor manages over $10 billion in assets
for institutional investors and other investment companies. The investment
advisor provides advice on buying and selling securities for the Fund. The
investment advisor also furnishes the Fund with office space and certain
administrative services and provides most of the personnel needed by the Fund.
For its services, the Fund pays the investment advisor a monthly management fee
based upon the average daily net assets of the Fund at the annual rate of 0.50%.
The Advisors's Investment Management Group, a group of experienced investment
professionals, each of whom has the Chartered Financial Analyst designation,
will be responsible for the day-to-day management of the Fund.
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ADVISOR INVESTMENT RETURNS
Set forth in the table below are certain performance data provided by the
Advisor relating to its individually managed equity accounts. These accounts
have substantially the same investment objective as the Fund and were managed
using substantially similar investment strategies and techniques as those
contemplated for use by the Fund. The Investment Management Group for these
accounts will also manage the Fund. The results presented are not intended to
predict or suggest the return to be experienced by the Fund or the return an
investor might achieve by investing in the Fund.
Results may differ because of, among other things, differences in brokerage
commissions paid, account expenses, including investment advisory fees ( which
expenses and fees may be higher for the Fund than for the accounts), the size of
positions taken in relation to account size, diversification of securities,
timing of purchases and sales, timing of cash additions and withdrawals, the
private character of the composite accounts compared with the public character
of the Fund, and the tax-exempt status of some of the account holders compared
with shareholders in the Fund. Investors should be aware that the use of
different methods of determining performance might have adversely affected the
performance figures shown below.
Investors should not rely on the following performance data as an indication of
future performance of the Advisor or the Fund.
ADVISOR'S EQUITY COMPOSITE
FOR PERIOD ENDED 12/31/98 AVERAGE ANNUAL TOTAL RETURN
------------------------- ---------------------------
One Year 33.2%
Three Years 30.6%
Five Years 25.2%
Ten Years 20.7%
1. Results account for both income and capital appreciation or depreciation
(total return). Returns are dollar weighted and net of commissions and
management fees. The composite represents all discretionary accounts that do not
have material restrictions and comply with AIMR standards with a Level I and
Level II verification.
2. Investors should note that the Fund will compute and disclose its average
annual total return using the standard formula required by SEC rules, which
differs from returns calculated under the method noted above. The SEC total
return calculation method requires that the Fund compute and disclose an average
annual compounded rate of return for one, five and ten year periods or shorter
periods from inception. The calculation provides a rate of return from a
hypothetical initial investment of $1,000 to an ending value as if shares were
redeemed at the end of the period. The formula requires that returns to be shown
for the Fund will be net of Fund advisory fees and all other portfolio operating
expenses.
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SHAREHOLDER INFORMATION
HOW TO BUY SHARES
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 1-800-282-2340. To open an account
by wire, call 1-800-282-2340 for instructions. You may also buy shares of the
Fund through your financial representative. After your account is open, you may
add to it at any time.
You may open a Fund account with $500,000. You may add to your account at any
time with $5,000. The minimum investment requirements may be waived from time to
time by the Fund.
BY MAIL. You may send money to the Fund by mail. All purchases by check should
be in U.S. dollars. Third party checks and cash will not be accepted. If you
wish to invest by mail, simply complete the Application Form and mail it with a
check (made payable to the National Asset Management Core Equity Fund) to the
Fund at the following address:
National Asset Management Core Equity Fund
P.O. Box 640856
Cincinnati, OH 45264-0856
BY WIRE. If you are making an initial investment in the Fund by wire, before you
wire funds, yopu should call the Transfer Agent at (800) 282-2340 to advise them
that you are making an investment by wire. The Transfer Agent will provide an
account number for you and will aski for your name and the dollar amount you are
investing. You will then receive your accoun t number and an order confirmation
n umber. You should then complete the Fund account application included with the
prospectus. Include the date and the order confirmation number on the Account
Application and mail the completed Account Application to the address at the top
fo the Account Application. Your bank should transmit immediately available
funds by wire in your name to:
Star Bank , N.A. Cinti/Trust
ABA #0420-001-3
Attn: National Asset Management Core Equity Fund
Account name (shareholder name)
Shareholder account number
If you are making a subsequent purchase, your bank should wire funds as
indicated above. Before each wire purchase, you should be sure to notify the
Transfer Agent. It is essnetial that your bank include complete information
about your account in all wire instructions. If you have questions about how to
invest by wire, you may call the Transfer Agent. Your bank may charge you a fee
for sending a wire to the Fund.
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THROUGH FINANCIAL ADVISORS. You may buy and sell shares of the Fund through
certain financial advisors (and their agents) that have made arrangements with
the Fund to sell its shares. When you place your order with such an advisor or
its authorized agent, your order is treated as if you had placed it directly
with the Fund's Transfer Agent, and you will pay or receive the next price
calculated by the Fund. The financial advisor (or agent) holds your shares in an
omnibus account in the advisor's (or agent's) name, and maintains your
individual ownership records. The Fund may pay the financial advisor (or its
agent) for maintaining these records as well as providing other shareholder
services. The broker (or its agent) may charge you a fee for handling your
order. The financial advisor (or agent) is responsible for processing your order
correctly and promptly, keeping you advised regarding the status of your
individual account, confirming your transactions and ensuring that you receive
copies of the Fund's prospectus.
HOW TO SELL SHARES
You may sell (redeem) your Fund shares on any day the New York Stock Exchange
("NYSE") is open for business either directly to the Fund or through your
investment representative.
REDEMPTIONS BY MAIL
You may redeem your shares by simply sending a written request to the Fund. You
should give your account number and state whether you want all or some of your
shares redeemed. The letter should be signed by all of the shareholders whose
names appear in the account registration. You should send your redemption
request to the Transfer Agent at the following address:
National Asset Management Core Equity Fund
P.O. Box 5536
Hauppauge, NY 11788-0132
Payment of your redemption proceeds will normally be made promptly, but no later
than seven days after the receipt of a written request that meets the
requirements described above. If you did not purchase your shares with a
certified check, the Fund may delay payment of your redemption proceeds until
your check has cleared, which may take up to 15 days.
REDEMPTION BY TELEPHONE.
If you complete the Redemption by Telephone portion of the Fund's Application
Form, you may redeem some or all of your shares by telephone. You may redeem
your shares on any day the NYSE is open by calling the Fund's Shareholder
Servicing Agent at (800)___________ before 4:00 p.m., Eastern time. Redemption
proceeds will be mailed on the next business day. If you request, your
redemption proceeds will be wired on the next business day to the bank account
you have designated on the Application Form. The minimum amount that may be
wired is $1,000. Wire charges, if any, will be deducted from your redemption
proceeds. You may not use the telephone redemption for retirement accounts.
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When you establish telephone privileges, you are authorizing the Fund and its
Transfer Agent to act upon the telephone instructions of the person or persons
you have designated in your Application Form. Such persons may request that the
shares in your account be redeemed.
Before executing an instruction received by telephone, the Fund and the Transfer
Agent will use procedures to confirm that the telephone instructions are
genuine. These procedures will include recording the telephone call and asking
the caller for a form of personal identification. If the Fund and the Transfer
Agent follow these procedures, they will not be liable for any loss, expense, or
cost arising out of any telephone redemption or exchange request that is
reasonably believed to be genuine. This includes any fraudulent or unauthorized
request.
You may have difficulties in making a telephone redemption during periods of
abnormal market activity. If this should occur, you may make your redemption
request in writing.
OTHER REDEMPTION INFORMATION
Certain redemption requests require that the signature or signatures on the
account will have to be guaranteed. Call the Transfer Agent at
1-800-_____________ for further details.
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. The Fund
may suspend the right of redemption under certain extraordinary circumstances in
accordance with the rules of the Securities and Exchange Commission.
The Fund may redeem the shares in your account if the value of your account is
less than $5,000 as a result of redemptions you have made. This does not apply
to retirement plan or Uniform Gifts or Transfers to Minors Act accounts. You
will be notified that the value of your account is less than $5,000 before the
Fund makes an involuntary redemption. You will then have 30 days in which to
make an additional investment to bring the value of your account to at least
$5,000 before the Fund takes any action.
The Fund has the right to pay redemption proceeds in whole or in part by a
distribution of securities from the Fund's portfolio. It is not expected that
the Fund would do so except in unusual circumstances.
PRICING OF FUND SHARES
The price of Fund shares is based on the Fund's net asset value. The net asset
value of the Fund's shares is determined by dividing the Fund's assets, minus
its liabilities, by the number of shares outstanding. The Fund's assets are the
market value of securities held in its portfolio, plus any cash and other
assets. The Fund's liabilities are fees and expenses it owes. The number of Fund
shares outstanding is the amount of shares which have been issued to
shareholders. The price you will pay to buy Fund shares or the amount you will
receive when you sell your Fund shares is based on the net asset value next
calculated after your order is received and accepted.
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The net asset value of the Fund's shares is determined as of the close of
regular trading on the NYSE. This is normally 4:00 p.m., Eastern time. Fund
shares will not be priced on days that the NYSE is closed for trading.
DIVIDENDS AND DISTRIBUTIONS
The Fund will make distributions of dividends and capital gains, if any,
annually, usually after the end of the year. Because of its investment
strategies, the Fund expects that its distributions will consist of both capital
gains and dividends.
You can choose from three distribution options: (1) reinvest all distributions
in additional Fund shares; (2) receive distributions from net investment income
in cash while reinvesting capital gains distributions in additional Fund shares;
or (3) receive all distributions in cash. If you wish to change your
distribution option, write to the Transfer Agent at before the payment of the
distribution. If you do not select an option when you open your account, all
distributions will be reinvested in Fund shares. You will receive a statement
confirming reinvestment of distributions in additional Fund shares promptly
following the quarter in which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within a specified
period, the Transfer Agent will notify you that you have the option of
requesting another check or reinvesting the distribution in the Fund. If the
Transfer Agent does not receive your election, the distribution will be
reinvested in the Fund. Similarly, if the Fund or the Transfer Agent sends you
correspondence returned as "undeliverable," distributions will automatically be
reinvested in the Fund.
TAX CONSEQUENCES
Dividends are taxable to you as ordinary income. The rate you pay on capital
gain distributions will depend on how long the Fund held the securities that
generated the gains, not on how long you owned your Fund shares. You will be
taxed in the same manner whether you receive your dividends and capital gain
distributions in cash or reinvest them in additional Fund shares.
If you sell your Fund shares, it is considered a taxable event for you.
Depending on the purchase price and the sale price of the shares you sell, you
may have a gain or a loss on the transaction. You are responsible for any tax
liabilities generated by your transaction.
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NATIONAL ASSET MANAGEMENT CORE EQUITY FUND,
A SERIES OF ADVISORS SERIES TRUST
For investors who want more information about the Fund, the following document
is available free upon request:
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Fund and is incorporated into this prospectus.
You can get free copies of the SAI, request other information and discuss your
questions about the Fund by contacting the Fund at:
American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788-0132
Telephone: 1-800-282-2340
You can review and copy information including the Fund's SAI at the Public
Reference Room of the Securities and Exchange Commission in Washington, D.C. You
can obtain information on the operation of the Public Reference Room by calling
1-800-SEC-0330. You can get text-only copies:
For a fee, by writing to the Public Reference Room of the Commission,
Washington, DC 20549-6009 or by calling 10800-SEC-0330.
Free of charge from the Commission's Internet website at http://www.sec.gov
(Investment Company Act file no. 811-7959)
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STATEMENT OF ADDITIONAL INFORMATION SUBJECT TO COMPLETION, DATED
MARCH 15, 1999
STATEMENT OF ADDITIONAL INFORMATION
DATED __________, 1999
NATIONAL ASSET MANAGEMENT CORE EQUITY FUND,
a Series of Advisors Series Trust
101 South Fifth Street
Louisville, KY 40202
This Statement of Additional Information ("SAI") is not a prospectus, and it
should be read in conjunction with the Prospectus dated _______, 1999, as may be
revised, of the NATIONAL ASSET MANAGEMENT CORE EQUITY FUND (the "Fund"), a
series of Advisors Series Trust (the "Trust"). National Asset Management
Corporation (the "Advisor") is the advisor to the Fund. A copy of the Fund's
Prospectus may be obtained by contacting First Fund Distributors, Inc., the
Fund's distributor (the "Distributor"), at the above-listed address; telephone
_____________.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY ANY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE
OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY STATE.
B-1
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TABLE OF CONTENTS
Page
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The Trust................................ B-3
Investment Objective and Policies ....... B-3
Portfolio Transactions and Brokerage .... B-8
Portfolio Turnover ...................... B-9
Determination of Net Asset Value ........ B-10
Purchase and Redemption of Fund Shares .. B-11
Management .............................. B-14
Dividends and Distributions ............. B-18
Tax Matters.............................. B-19
Performance Information ................. B-21
General Information ..................... B-22
Appendex................................. B-23
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THE TRUST
Advisors Series Trust is an open-end, non-diversified management investment
company organized as a Delaware business trust under the laws of the State of
Delaware on October 3, 1996. The Trust currently consists of fourteen series of
shares of beneficial interest, par value $0.01 per share. This SAI relates only
to the Fund.
The Trust is registered with the SEC as a management investment company. Such a
registration does not involve supervision of the management or policies of the
Fund. The Prospectus of the Fund and this SAI omit certain of the information
contained in the Registration Statement filed with the SEC. Copies of such
information may be obtained from the SEC upon payment of the prescribed fee.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek to provide investors with high
total investment return. This consists of capital appreciation and current
income. The Fund primarily invests in common stocks of large and medium
capitalization U.S. companies. There is no assurance that the Fund will achieve
its objective. The Fund is classified as a "diversified" fund under federal
securities laws. The discussion below supplements information contained in the
Fund's Prospectus as to investment policies of the Fund.
In addition to the risks associated with particular types of securities, which
are discussed below, the Fund is subject to general market risks. The Fund
invests primarily in common stocks. The market risks associated with stocks
include the possibility that the entire market for common stocks could suffer a
decline in price over a short or even an extended period. This could affect the
net asset value of your Fund shares. The U.S. stock market tends to be cyclical,
with periods when stock prices generally rise and periods when stock prices
generally decline.
EQUITY SECURITIES. The equity securities in which the Fund invests generally
consist of common stock and securities convertible into or exchangeable for
common stock. Under normal market conditions, at least 65% of the value of the
Fund's total assets will be invested in the equity securities of U.S. companies.
The securities in which the Fund invests are expected to be either listed on an
exchange or traded in an over-the-counter market.
CONVERTIBLE SECURITIES. The Fund may invest in convertible securities, which are
securities generally offering fixed interest or dividend yields which may be
converted either at a stated price or stated rate for common or preferred stock.
Although to a lesser extent than with fixed-income securities generally, the
market value of convertible securities tends to decline as interest rates
increase, and increase as interest rates decline. Because of the conversion
feature, the market value of convertible securities also tends to vary with
fluctuations in the market value of the underlying common or stock.
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FOREIGN SECURITIES. The Fund may invest up to 10% of its total assets in
securities of foreign companies which are traded on a national securities
exchange, including sponsored and unsponsored American Depositary Receipts
("ADRs"). ADRs are receipts typically issued by a U.S. bank or trust company
evidencing ownership of the underlying securities of foreign issuers, and other
forms of depository receipts for securities of foreign issuers. Generally, ADRs,
in registered form, are denominated in U.S. dollars and are designed for use in
the U.S. securities markets. Thus, these securities are not denominated in the
same currency as the securities in which they ma6 be converted. In addition, the
issuers of the securities underlying unsponsored ADRs are not obligated to
disclose material information in the United States and, therefore, there may be
less information available regarding such issuers and there may not be a
correlation between such information and the market value of the ADRs.
Investments in foreign securities involve special risks, costs and opportunities
which are in addition to those inherent in domestic investments. Political,
economic or social instability of the issuer or the country of issue, the
possibility of expropriation or confiscatory taxation, limitations on the
removal of assets or diplomatic developments, and the possibility of adverse
changes in investment or exchange control regulations are among the inherent
risks. Securities of some foreign companies are less liquid, mor volatile and
more difficult to value than securities of comparable U.S. companies. Foreign
companies are not subject to the regulatory requirements of U.S. companies and,
as such, there may be less publicly available information about such companies.
Moreover, foreign companies are not subject to uniform accounting, auditing and
financial reporting standards and requirements comparable to those applicable to
U.S. companies. Currency fluctuations will affect the net asst value of the Fund
irrespective of the performance of the underlying investments in foreign
issuers.
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 sell 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 sell them, resulting in additional expense and delay. Adverse market
conditions could impede such a public offering of securities.
B-4
<PAGE>
In recent years, however, a large institutional market has developed for certain
securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not reflect the actual liquidity of such
investments. If such securities are subject to purchase by institutional buyers
in accordance with Rule 144A promulgated by the SEC under the Securities Act,
the Trust's Board of Trustees may determine that such securities are not
illiquid securities despite their legal or contractual restrictions on resale.
In all other cases, however, securities subject to restrictions on resale will
be deemed illiquid.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements. Under such
agreements, the seller of the security agrees to repurchase it at a mutually
agreed upon time and price. The repurchase price may be higher than the purchase
price, the difference being income to the Fund, or the purchase and repurchase
prices may be the same, with interest at a stated rate due to the Fund together
with the repurchase price on repurchase. In either case, the income to the Fund
is unrelated to the interest rate on the U.S. Government security itself. Such
repurchase agreements will be made only with banks with assets of $500 million
or more that are insured by the Federal Deposit Insurance Corporation or with
Government securities dealers recognized by the Federal Reserve Board and
registered as broker-dealers with the Securities and Exchange Commission ("SEC")
or exempt from such registration. The Fund will generally enter into repurchase
agreements of short durations, from overnight to one week, although the
underlying securities generally have longer maturities. The Fund may not enter
into a repurchase agreement with more than seven days to maturity if, as a
result, more than 15% of the value of its net assets would be invested in
illiquid securities including such repurchase agreements.
For purposes of the Investment Company Act of 1940 (the "1940 Act"), a
repurchase agreement is deemed to be a loan from the Fund to the seller of the
U.S. Government security subject to the repurchase agreement. It is not clear
whether a court would consider the U.S. Government security acquired by the Fund
subject to a repurchase agreement as being owned by the Fund or as being
collateral for a loan by the Fund to the seller. In the event of the
commencement of bankruptcy or insolvency proceedings with respect to the seller
of the U.S. Government security before its repurchase under a repurchase
agreement, the Fund may encounter delays and incur costs before being able to
sell the security. Delays may involve loss of interest or a decline in price of
the U.S. Government security. If a court characterizes the transaction as a loan
and the Fund has not perfected a security interest in the U.S. Government
security, the Fund may be required to return the security to the seller's estate
and be treated as an unsecured creditor of the seller. As an unsecured creditor,
the Fund would be at the risk of losing some or all of the principal and income
involved in the transaction. As with any unsecured debt instrument purchased for
the Fund, the Advisor seeks to minimize the risk of loss through repurchase
agreements by analyzing the creditworthiness of the other party, in this case
the seller of the U.S. Government security.
B-5
<PAGE>
Apart from the risk of bankruptcy or insolvency proceedings, there is also the
risk that the seller may fail to repurchase the security. However, the Fund will
always receive as collateral for any repurchase agreement to which it is a party
securities acceptable to it, the market value of which is equal to at least 100%
of the amount invested by the Fund plus accrued interest, and the Fund will make
payment against such securities only upon physical delivery or evidence of book
entry transfer to the account of its Custodian. If the market value of the U.S.
Government security subject to the repurchase agreement becomes less than the
repurchase price (including interest), the Fund will direct the seller of the
U.S. Government security to deliver additional securities so that the market
value of all securities subject to the repurchase agreement will equal or exceed
the repurchase price. It is possible that the Fund will be unsuccessful in
seeking to impose on the seller a contractual obligation to deliver additional
securities.
SHORT-TERM INVESTMENTS
The Fund may invest in any of the following securities and instruments:
CERTIFICATES OF DEPOSIT, BANKERS' ACCEPTANCES AND TIME DEPOSITS. The Fund may
hold certificates of deposit, bankers' acceptances and time deposits.
Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank for a definite period of time and earning a
specified return. Bankers' acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning in effect that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Certificates of deposit and bankers' acceptances acquired by the Fund will be
dollar-denominated obligations of domestic banks, savings and loan associations
or financial institutions which, at the time of purchase, have capital, surplus
and undivided profits in excess of $100 million (including assets of both
domestic and foreign branches), based on latest published reports, or less than
$100 million if the principal amount of such bank obligations are fully insured
by the U.S. Government.
In addition to buying certificates of deposit and bankers' acceptances, the Fund
also may make interest-bearing time or other interest-bearing deposits in
commercial or savings banks. Time deposits are non-negotiable deposits
maintained at a banking institution for a specified period of time at a
specified interest rate.
COMMERCIAL PAPER AND SHORT-TERM NOTES. The 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. Commercial paper and
short-term notes will normally have maturities of less than nine months and
fixed rates of return, although such instruments may have maturities of up to
one year.
Commercial paper and short-term notes will consist of issues rated at the time
of purchase "A-2" or higher by Standard & Poor's Ratings Group, "Prime-1" or
"Prime-2" by Moody's Investors Service, Inc., or similarly rated by another
nationally recognized statistical rating organization or, if unrated, will be
determined by the Advisor to be of comparable quality. These rating symbols are
described in the Appendix.
B-6
<PAGE>
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions that may not be
changed without approval by a "majority of the outstanding shares" of the Fund
which, as used in this SAI, means the vote of the lesser of (a) 67% or more of
the shares of the Fund represented at a meeting, if the holders of more than 50%
of the outstanding shares of the Fund are present or represented by proxy, or
(b) more than 50% of the outstanding shares of the Fund.
The Fund may not:
(1) Make loans to others, except (a) through the purchase of debt securities in
accordance with its investment objective and policies, or (b) to the extent the
entry into a repurchase agreement is deemed to be a loan.
(2) Borrow money, except for temporary or emergency purposes. Any such
borrowings will be made only if immediately thereafter there is an asset
coverage of at least 400% of all borrowings.
(3) Mortgage, pledge or hypothecate any of its assets except in connection with
any borrowings.
(4) Purchase securities on margin, participate on a joint or joint and several
basis in any securities trading account, or underwrite securities. (Does not
preclude the Fund from obtaining such short-term credit as may be necessary for
the clearance of purchases and sales of its portfolio securities.)
(5) Purchase real estate, commodities or commodity contracts. (As a matter of
operating policy, the Board of Trustees may authorize the Fund in the future to
engage in certain activities regarding futures contracts for bona fide hedging
purposes; any such authorization will be accompanied by appropriate notification
to shareholders.)
(6) Issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit the Fund from (a) making any
permitted borrowings, mortgages or pledges or (b) entering into options, futures
or repurchase transactions.
The Fund observes the following policies, which are not deemed fundamental and
which may be changed without shareholder vote. The Fund may not:
(8) Invest in any issuer for purposes of exercising control or management.
(9) Invest in securities of other investment companies except as permitted under
the 1940 Act.
(10) Invest, in the aggregate, more than 15% of its net assets in securities
with legal or contractual restrictions on resale, securities which are not
readily marketable and repurchase agreements with more than seven days to
maturity.
B-7
<PAGE>
If a percentage or rating restriction on investment or use of assets set forth
herein or in the Prospectus is adhered to at the time a transaction is effected,
later changes in percentage resulting from any cause other than actions by the
Fund will not be considered a violation. If the value of the Fund's holdings of
illiquid securities at any time exceeds the percentage limitation applicable at
the time of acquisition due to subsequent fluctuations in value or other
reasons, the Board of Trustees will consider what actions, if any, are
appropriate to maintain adequate liquidity.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Pursuant to the Investment Advisory Agreement, the Advisor determines which
securities are to be purchased and sold by the Fund and which broker-dealers
will be used to execute the Fund's portfolio transactions. Purchases and sales
of securities in the over-the-counter market will be executed directly with a
"market-maker" unless, in the opinion of the Advisor, a better price and
execution can otherwise be obtained by using a broker for the transaction.
Purchases of portfolio securities for the Fund also may be made directly from
issuers or from underwriters. Where possible, purchase and sale transactions
will be made through dealers (including banks) which specialize in the types of
securities which the Fund will be holding, unless better executions are
available elsewhere. Dealers and underwriters usually act as principal for their
own account. Purchases from underwriters will include a concession paid by the
issuer to the underwriter and purchases from dealers will include the spread
between the bid and the asked price. If the execution and price offered by more
than one broker, dealer or underwriter are comparable, the order may be
allocated to a broker, dealer or underwriter that has provided research or other
services as discussed below.
In placing portfolio transactions, the Advisor will use its best efforts to
choose a broker-dealer capable of providing the services necessary to obtain the
most favorable price and execution available. The full range and quality of
services available will be considered in making these determinations, such as
the size of the order, the difficulty of execution, the operational facilities
of the firm involved, the firm's risk in positioning a block of securities, and
other factors. In those instances where it is reasonably determined that more
than one broker-dealer can offer the most favorable price and execution
available, consideration may be given to those broker-dealers which furnish or
supply research and statistical information to the Advisor that it may lawfully
and appropriately use in its investment advisory capacities, as well as provide
other services in addition to execution services. The Advisor considers such
information, which is in addition to and not in lieu of the services required to
be performed by it under its Agreement with the Fund, to be useful in varying
degrees, but of indeterminable value. Portfolio transactions may be placed with
broker-dealers who sell shares of the Fund subject to rules adopted by the
National Association of Securities Dealers, Inc.
B-8
<PAGE>
While it is the Fund's general policy to seek first to obtain the most favorable
price and execution available, in selecting a broker-dealer to execute portfolio
transactions for the Fund, weight is also given to the ability of a
broker-dealer to furnish brokerage and research services to the Fund or to the
Advisor, even if the specific services are not directly useful to the Fund and
may be useful to the Advisor in advising other clients. In negotiating
commissions with a broker or evaluating the spread to be paid to a dealer, the
Fund may therefore pay a higher commission or spread than would be the case if
no weight were given to the furnishing of these supplemental services, provided
that the amount of such commission or spread has been determined in good faith
by the Advisor to be reasonable in relation to the value of the brokerage and/or
research services provided by such broker-dealer. The standard of reasonableness
is to be measured in light of the Advisor's overall responsibilities to the
Fund.
Investment decisions for the Fund are made independently from those of other
client accounts or mutual funds managed or advised by the Advisor. Nevertheless,
it is possible that at times identical securities will be acceptable for both
the Fund and one or more of such client accounts. In such event, the position of
the Fund and such client account(s) in the same issuer may vary and the length
of time that each may choose to hold its investment in the same issuer may
likewise vary. However, to the extent any of these client accounts seeks to
acquire the same security as the Fund at the same time, the Fund may not be able
to acquire as large a portion of such security as it desires, or it may have to
pay a higher price or obtain a lower yield for such security. Similarly, the
Fund may not be able to obtain as high a price for, or as large an execution of,
an order to sell any particular security at the same time. If one or more of
such client accounts simultaneously purchases or sells the same security that
the Fund is purchasing or selling, each day's transactions in such security will
be allocated between the Fund and all such client accounts in a manner deemed
equitable by the Advisor, taking into account the respective sizes of the
accounts and the amount being purchased or sold. It is recognized that in some
cases this system could have a detrimental effect on the price or value of the
security insofar as the Fund is concerned. In other cases, however, it is
believed that the ability of the Fund to participate in volume transactions may
produce better executions for the Fund.
The Fund does not place securities transactions through brokers solely for
selling shares of the Fund, although the Fund may consider the sale of shares as
a factor in allocating brokerage. However, as stated above, broker-dealers who
execute brokerage transactions may effect purchases of shares of the Fund for
their customers.
PORTFOLIO TURNOVER
Although the Fund generally will not invest for short-term trading purposes,
portfolio securities may be sold without regard to the length of them they have
been held when, in the opinion of the Advisor, investment considerations warrant
such action. Portfolio turnover rate is calculated by dividing (1) the lesser of
purchases or sales of portfolio securities for the fiscal year by (2) the
monthly average of the value of portfolio securities owned during the fiscal
year. A 100% turnover rate would occur if all the securities in the Fund's
portfolio, with the exception of securities whose maturities at the time of
acquisition were one year or less, were sold and either repurchased or replaced
within one year. A high rate of portfolio turnover (100% or more) generally
leads to higher transaction costs and may result in a greater number of taxable
transactions.
B-9
<PAGE>
DETERMINATION OF NET ASSET VALUE
As noted in the Prospectus, the net asset value and offering price of shares of
the Fund will be determined once daily as of the close of public trading on the
New York Stock Exchange ("NYSE") (normally 4:00 p.m. Eastern time) on each day
that the NYSE is open for trading. The Fund does not expect to determine the net
asset value of its shares on any day when the NYSE is not open for trading even
if there is sufficient trading in its portfolio securities on such days to
materially affect the net asset value per share. However, the net asset value of
Fund shares may be determined on days the NYSE is closed or at times other than
4:00 p.m. if the Board of Trustees decides it is necessary.
In valuing the Fund's assets for calculating net asset value, readily marketable
portfolio securities listed on a national securities exchange or on NASDAQ are
valued at the last sale price on the business day as of which such value is
being determined. If there has been no sale on such exchange or on NASDAQ on
such day, the security is valued at the closing bid price on such day. Readily
marketable securities traded only in the over-the-counter market and not on
NASDAQ are valued at the current or last bid price. If no bid is quoted on such
day, the security is valued by such method as the Board of Trustees of the Trust
shall determine in good faith to reflect the security's fair value. All other
assets of the Fund are valued in such manner as the Board of Trustees in good
faith deems appropriate to reflect their fair value.
The net asset value per share of the Fund is calculated as follows: all
liabilities incurred or accrued are deducted from the valuation of total assets
which includes accrued but undistributed income; the resulting net assets are
divided by the number of shares of the Fund outstanding at the time of the
valuation and the result (adjusted to the nearest cent) is the net asset value
per share.
As of the date of this SAI, the NYSE is open for trading every weekday except
for the following holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
B-10
<PAGE>
PURCHASE AND REDEMPTION OF FUND SHARES
The information provided below supplements the information contained in the
Fund's Prospectus regarding the purchase and redemption of Fund shares.
HOW TO BUY SHARES
You may purchase shares of the Fund from selected securities brokers, dealers or
financial intermediaries. Investors should contact these agents directly for
appropriate instructions, as well as information pertaining to accounts and any
service or transaction fees that may be charged by those agents. Purchase orders
through securities brokers, dealers and other financial intermediaries are
effected at the next-determined net asset value after receipt of the order by
such agent before the Fund's daily cutoff time. Orders received after that time
will be purchased at the next-determined net asset value.
The public offering price of Fund shares is the net asset value. The Fund
receives the net asset value. Shares are purchased at the public offering price
next determined after the Transfer Agent receives your order in proper form. In
most cases, in order to receive that day's public offering price, the Transfer
Agent must receive your order in proper form before the close of regular trading
on the New York Stock Exchange ("NYSE"). If you buy shares through your
investment representative, the representative must receive your order before the
close of regular trading on the NYSE to receive that day's public offering
price. Orders are in proper form only after funds are converted to U.S. funds.
Orders paid by check and received by 2:00 p.m., Eastern Time, will generally be
available for the purchase of shares the following business day.
If you are considering redeeming or transferring shares to another person
shortly after purchase, you should pay for those shares with a certified check
to avoid any delay in redemption or transfer. Otherwise the Fund may delay
payment until the purchase price of those shares has been collected or, if you
redeem by telephone, until 15 calendar days after the purchase date. To
eliminate the need for safekeeping, the Fund will not issue certificates for
your shares unless you request them.
The Trust reserves the right in its sole discretion (i) to suspend the continued
offering of the Fund's shares, (ii) to reject purchase orders in whole or in
part when in the judgment of the Advisor or the Distributor such rejection is in
the best interest of the Fund, and (iii) to reduce or waive the minimum for
initial and subsequent investments for certain fiduciary accounts or under
circumstances where certain economies can be achieved in sales of the Fund's
shares.
HOW TO SELL SHARES
You can sell your Fund shares any day the NYSE is open for regular trading,
either directly to the Fund or through your investment representative. The Fund
will forward redemption proceeds or redeem shares for which it has collected
payment of the purchase price.
B-11
<PAGE>
Payments to shareholders for shares of the Fund redeemed directly from the Fund
will be made as promptly as possible but no later than seven days after receipt
by the Fund's Transfer Agent of the written request in proper form, with the
appropriate documentation as stated in the Prospectus, except that the Fund may
suspend the right of redemption or postpone the date of payment during any
period when (a) trading on the NYSE is restricted as determined by the SEC or
the NYSE is closed for other than weekends and holidays; (b) an emergency exists
as determined by the SEC making disposal of portfolio securities or valuation of
net assets of the Fund not reasonably practicable; or (c) for such other period
as the SEC may permit for the protection of the Fund's shareholders. At various
times, the Fund may be requested to redeem shares for which it has not yet
received confirmation of good payment; in this circumstance, the Fund may delay
the redemption until payment for the purchase of such shares has been collected
and confirmed to the Fund.
SELLING SHARES DIRECTLY TO THE FUND
Send a signed letter of instruction to the Transfer Agent, along with any
certificates that represent shares you want to sell. The price you will receive
is the next net asset value calculated after the Fund receives your request in
proper form. In order to receive that day's net asset value, the Transfer Agent
must receive your request before the close of regular trading on the NYSE.
SELLING SHARES THROUGH YOUR INVESTMENT REPRESENTATIVE
Your investment representative must receive your request before the close of
regular trading on the NYSE to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Transfer Agent, and may charge you for its services. If you
sell shares having a net asset value of $100,000 a signature guarantee is
required.
If you want your redemption proceeds sent to an address other than your address
as it appears on the Transfer Agent's records, a signature guarantee is
required. The Fund may require additional documentation for the sale of shares
by a corporation, partnership, agent or fiduciary, or a surviving joint owner.
Contact the Transfer Agent for details.
Signature guarantees may be obtained from a bank, broker-dealer, credit union
(if authorized under state law), securities exchange or association, clearing
agency or savings institution. A notary public cannot provide a signature
guarantee.
DELIVERY OF PROCEEDS
The Fund generally sends you payment for your shares the business day after your
request is received in proper form, assuming the Fund has collected payment of
the purchase price of your shares. Under unusual circumstances, the Fund may
suspend redemptions, or postpone payment for more than seven days, as permitted
by federal securities law.
B-12
<PAGE>
TELEPHONE REDEMPTIONS
Telephone transaction privileges are made available to shareholders
automatically upon opening an account unless the privilege is declined in the
Account Application. Upon receipt of any instructions or inquiries by telephone
from a shareholder or, if held in a joint account, from either party, or from
any person claiming to be the shareholder, the Fund or its agent is authorized,
without notifying the shareholder or joint account parties, to carry out the
instructions or to respond to the inquiries, consistent with the service options
chosen by the shareholder or joint shareholders in his or their latest Account
Application or other written request for services, including purchasing or
redeeming shares of the Fund and depositing and withdrawing monies from the bank
account specified in the Bank Account Registration section of the shareholder's
latest Account Application or as otherwise properly specified to the Fund in
writing.
The Transfer Agent will employ these and other reasonable procedures to confirm
that instructions communicated by telephone are genuine; if it fails to employ
reasonable procedures, the Fund may be liable for any losses due to unauthorized
or fraudulent instructions. An investor agrees, however, that to the extent
permitted by applicable law, neither the Fund nor its agents will be liable for
any loss, liability, cost or expense arising out of any redemption request,
including any fraudulent or unauthorized request. For information, consult the
Transfer Agent.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Transfer Agent by telephone. In this event,
you may wish to submit a written redemption request, as described in the
Prospectus, or contact your investment representative. The Telephone Redemption
Privilege is not available if you were issued certificates for shares that
remain outstanding. The Telephone Redemption Privilege may be modified or
terminated without notice.
REDEMPTIONS-IN-KIND
Subject to compliance with applicable regulations, the Fund has reserved the
right to pay the redemption price of its shares, either totally or partially, by
a distribution in kind of readily marketable portfolio securities (instead of
cash). The securities so distributed would be valued at the same amount as that
assigned to them in calculating the net asset value for the shares being sold.
If a shareholder received a distribution in kind, the shareholder could incur
brokerage or other charges in converting the securities to cash. The Trust has
filed an election under Rule 18f-1 committing to pay in cash all redemptions by
a shareholder of record up to amounts specified by the rule (approximately
$250,000).
B-13
<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.
PRINCIPAL OCCUPATION DURING
NAME, ADDRESS AND AGE POSITION PAST FIVE YEARS
- --------------------- -------- ---------------
Walter E. Auch, Sr. Trustee Director, Nicholas-Applegate Mutual
(born 1921) Funds, Brinson Place Funds (since
6001 N. 62nd Place 1994), Smith Barney Trak Fund, Pimco
Paradise Valley, AZ 85153 Advisors, L.P., Semele Land Fund II
and Legend Properties
Eric M. Banhazl* Trustee, Senior Vice President, Investment
(born 1957) President and Company Administration, LLC; Vice
2020 E. Financial Way Treasurer President, First Fund Distributors,
Glendora, CA 91741 Inc.; RNC Mutual Fund Group; RNC
Mutual Fund Group; Treasurer,
Guinness Flight Investment Funds,
Inc.
Donald E. O'Connor Trustee Financial Consultant; Director, The
(born 1936) Parnassus Fund and The Parnassus
1700 Taylor Avenue Income Fund; formerly Executive Vice
Fort Washington, MD 10744 President and Chief Operating
Officer of ICI Mutual Insurance
Company (until January 1997)
George T. Wofford III Trustee Vice President, Information
(born 1939) Services, Federal Home Loan Bank of
305 Glendora Circle San Francisco (since March 1993)
Danville, CA 94526
Steven J. Paggioli Vice Executive Vice President, Robert H.
(born 1950) President Wadsworth & Associates, Inc.,
915 Broadway Investment Company Administration,
New York, NY 10010 LLC; Vice President, First Fund
Distributors, Inc.; President and
Trustee, Professionally Managed
Portfolios; Trustee, Managers Funds
B-14
<PAGE>
Robert H. Wadsworth Vice President, Robert H. Wadsworth &
(born 1940) President Associates, Inc., Investment Company
4455 E. Camelback Rd. Administration, LLC and First Fund
Suite 261-E Distributors, Inc.; Vice President,
Phoenix, AZ 85018 Professionally Managed Portfolios;
President, Guinness Flight
Investment Funds, Inc.; Director,
Germany Fund, Inc., New Germany
Fund, Inc., Central European Equity
Fund, Inc. and Deutsche Funds, Inc.
Chris O. Kissack Secretary Employed by Investment Company
(born 1959) Administration, LLC (since July
4455 E. Camelback Rd. 1996); Formerly employed by Bank
Suite 261-E One, N.A. (from August 1995 until
Phoenix, AZ 85018 July 1996; O'Connor, Cavanagh,
Anderson, Killingsworth and Beshears
(law firm) (until August 1995)
* denotes Trustee who is an "interested person" of the Trust under the 1940 Act.
Set forth below is the rate of compensation received by the following Trustees
from all other portfolios of the Trust. This total amount is allocated among the
portfolios. The Trust has no pension or retirement plan. No other entity
affiliated with the Trust pays any compensation to the Trustees.
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
B-15
<PAGE>
ADVISOR
National Asset Management Corporation acts as investment advisor to the Fund
pursuant to an Investment Advisory Agreement (the "Advisory Agreement"). Subject
to such policies as the Board of Trustees may determine, the Advisor is
responsible for investment decisions for the Fund. Pursuant to the terms of the
Advisory Agreement, the Advisor provides the Fund with such investment advice
and supervision as it deems necessary for the proper supervision of the Fund's
investments. The Advisor continuously provides investment programs and determine
from time to time what securities shall be purchased, sold or exchanged and what
portion of the Fund's assets shall be held uninvested. The Advisor furnishes, at
its own expense, all services, facilities and personnel necessary in connection
with managing the investments and effecting portfolio transactions for the Fund.
The Advisory Agreement will continue in effect from year to year only if such
continuance is specifically approved at least annually by the Board of Trustees
or by vote of a majority of the Fund's outstanding voting securities and by a
majority of the Trustees who are not parties to the Advisory Agreement or
interested persons of any such party, at a meeting called for the purpose of
voting on such Advisory Agreement.
Pursuant to the terms of the Advisory Agreement, the Advisor is permitted to
render services to others. The Advisory Agreement is terminable without penalty
by the Trust on behalf of the Fund on not more than 60 days', nor less than 30
days', written notice when authorized either by a majority vote of the Fund's
shareholders or by a vote of a majority of the Board of Trustees of the Trust,
or by the Advisor on not more than 60 days', nor less than 30 days', written
notice, and will automatically terminate in the event of its "assignment" (as
defined in the 1940 Act). The Advisory Agreement provides that the Advisor under
such agreement shall not be liable for any error of judgment or mistake of law
or for any loss arising out of any investment or for any act or omission in the
execution of portfolio transactions for the Fund, except for wilful misfeasance,
bad faith or gross negligence in the performance of its duties, or by reason of
reckless disregard of its obligations and duties thereunder.
In the event the operating expenses of the Fund, including all investment
advisory and administration fees, but excluding brokerage commissions and fees,
taxes, interest and extraordinary expenses such as litigation, for any fiscal
year exceed the Fund's expense limitation, the Advisor shall reduce its advisory
fee (which fee is described below) to the extent of its share of such excess
expenses. The amount of any such reduction to be borne by the Advisor shall be
deducted from the monthly advisory fee otherwise payable with respect to the
Fund during such fiscal year; and if such amounts should exceed the monthly fee,
the Advisor shall pay to the Fund its share of such excess expenses no later
than the last day of the first month of the next succeeding fiscal year.
In consideration of the services provided by the Advisor pursuant to the
Advisory Agreement, the Advisor is entitled to receive from the Fund an
investment advisory fee computed daily and paid monthly based on a rate equal to
a percentage of the Fund's average daily net assets specified in the Prospectus.
However, the Advisor may voluntarily agree to waive a portion of the fees
payable to it on a month-to-month basis.
B-16
<PAGE>
ADMINISTRATOR
Pursuant to a separate Administration Agreement (the "Administration
Agreement"), Investment Company Administration, LLC is the administrator of the
Fund (the "Administrator"). The Administrator provides certain administrative
services to the Fund, including, among other responsibilities, coordinating the
negotiation of contracts and fees with, and the monitoring of performance and
billing of, the Fund's independent contractors and agents; preparation for
signature by an officer of the Trust of all documents required to be filed for
compliance by the Trust and the Fund with applicable laws and regulations
excluding those of the securities laws of various states; arranging for the
computation of performance data, including net asset value and yield; responding
to shareholder inquiries; and arranging for the maintenance of books and records
of the Fund, and providing, at its own expense, office facilities, equipment and
personnel necessary to carry out its duties. In this capacity, the Administrator
does not have any responsibility or authority for the management of the Fund,
the determination of investment policy, or for any matter pertaining to the
distribution of Fund shares.
Under the Administration Agreement, the Administrator is permitted to render
administrative services to others. The Fund's Administration Agreement will
continue in effect from year to year only if such continuance is specifically
approved at least annually by the Board of Trustees of the Trust or by vote of a
majority of the Fund's outstanding voting securities and, in either case, by a
majority of the Trustees who are not parties to the Administration Agreement or
"interested persons" (as defined in the 1940 Act) of any such party. The
Administration Agreement is terminable without penalty by the Trust on behalf of
the Fund on 60 days' written notice when authorized either by a majority vote of
the Fund's shareholders or by vote of a majority of the Board of Trustees,
including a majority of the Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Trust, or by the Advisor on 60 days' written
notice, and will automatically terminate in the event of their "assignment" (as
defined in the 1940 Act). The Administration Agreement also provide that neither
the Administrator or its personnel shall be liable for any error of judgment or
mistake of law or for any act or omission in the administration of the Fund,
except for willful misfeasance, bad faith or gross negligence in the performance
of its or their duties or by reason of reckless disregard of its or their
obligations and duties under the Administration Agreement.
In consideration of the services provided by the Administrator pursuant to the
Administration Agreement, the Administrator receives from the Fund a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the Fund's
average daily net assets, on an annualized basis for the Fund's then-current
fiscal year.
DISTRIBUTION AGREEMENT
The Trust has entered into a Distribution Agreement (the "Distribution
Agreement") with First Fund Distributors, Inc. (the "Distributor"), pursuant to
which the Distributor acts as the Fund's exclusive underwriter, provides certain
administration services and promotes and arranges for the sale of the
B-17
<PAGE>
Fund's shares. The Distributor is an affiliate of the Administrator. The
Distribution Agreement provides that the Distributor will bear the expenses of
printing, distributing and filing prospectuses and statements of additional
information and reports used for sales purposes, and of preparing and printing
sales literature and advertisements not paid for by the Distribution Plan. The
Trust pays for all of the expenses for qualification of the Fund's shares for
sale in connection with the public offering of such shares, and all legal
expenses in connection therewith. In addition, pursuant to the Distribution
Agreement, the Distributor provides certain sub-administration services to the
Trust, including providing officers, clerical staff and office space.
The Distribution Agreement will continue in effect with respect to the Fund only
if such continuance is specifically approved at least annually by the Board of
Trustees or by vote of a majority of the Fund's outstanding voting securities
and, in either case, by a majority of the Trustees who are not parties to the
Distribution Agreement or "interested persons" (as defined in the 1940 Act) of
any such party. The Distribution Agreement is terminable without penalty by the
Trust on behalf of the Fund on 60 days' written notice when authorized either by
a majority vote of the Fund's shareholders or by vote of a majority of the Board
of Trustees of the Trust, including a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust, or by the
Distributor on 60 days' written notice, and will automatically terminate in the
event of its "assignment" (as defined in the 1940 Act). The Distribution
Agreement also provides that neither the Distributor nor its personnel shall be
liable for any act or omission in the course of, or connected with, rendering
services under the Distribution Agreement, except for willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations or duties.
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 gain or loss recognition or otherwise producing long-term
capital gains and losses, the Fund will have a net long-term capital gain. After
B-18
<PAGE>
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.
TAX MATTERS
Each series of the Trust is treated as a separate entity for federal income tax
purposes. The Fund intends to qualify and elect to be treated as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986 (the
"Code"), provided it complies with all applicable requirements regarding the
source of its income, diversification of its assets and timing of distributions.
The Fund's policy is to distribute to its shareholders all of its investment
company taxable income and any net realized long-term 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. To comply with the requirements, the Fund must also distribute (or be
deemed to have distributed) by December 31 of each calendar year (i) at least
98% of its ordinary income for such year, (ii) at least 98% of the excess of its
realized capital gains over its realized capital losses for the 12-month period
ending on October 31 during such year and (iii) any amounts from the prior
calendar year that were not distributed and on which the Fund paid no federal
income tax.
Net investment income consists of interest and dividend income, less expenses.
Net realized capital gains for a fiscal period are computed by taking into
account any capital loss carryforward of the Fund.
Distributions of net investment income and net short-term capital gains are
taxable to shareholders as ordinary income. In the case of corporate
shareholders, a portion of the distributions may qualify for the intercorporate
dividends-received deduction to the extent the Fund designates the amount
distributed as a qualifying dividend. This designed amount cannot, however,
exceed the aggregate amount of qualifying dividends received by the Fund for its
taxable year. In view of the Fund's investment policy, it is expected that
B-19
<PAGE>
dividends from domestic corporations will be part of the Fund's gross income and
that, accordingly, part of the distributions by the Fund may be eligible for the
dividends-received deduction for corporate shareholders. However, the portion of
the Fund's gross income attributable to qualifying dividends is largely
dependent on that Fund's investment activities for a particular year and
therefore cannot be predicted with any certainty. The deduction may be reduced
or eliminated if the Fund shares held by a corporate investor are treated as
debt-financed or are held for less than 46 days.
Any long-term capital gain distributions are taxable to shareholders as
long-term capital gains regardless of the length of time shares have been held.
Capital gains distributions are not eligible for the dividends-received
deduction referred to in the previous paragraph. Distributions of any net
investment income and net realized capital gains will be taxable as described
above, whether received in shares or in cash. Shareholders who choose to receive
distributions in the form of additional shares will have a cost basis for
federal income tax purposes in each share so received equal to the net asset
value of a share on the reinvestment date. Distributions are generally taxable
when received. However, distributions declared in October, November or December
to shareholders of record on a date in such a month and paid the following
January are taxable as if received on December 31. Distributions are includable
in alternative minimum taxable income in computing a shareholder's liability for
the alternative minimum tax.
A redemption of Fund shares may result in recognition of a taxable gain or loss.
Any loss realized upon a redemption of shares within six months from the date of
their purchase will be treated as a long-term capital loss to the extent of any
amounts treated as distributions of long-term capital gains during such
six-month period. Any loss realized upon a redemption may be disallowed under
certain wash sale rules to the extent shares of the same Funds are purchased
(through reinvestment of distributions or otherwise) within 30 days before or
after the redemption.
Under the Code, the Fund will be required to report to the Internal Revenue
Service ("IRS") all distributions of taxable income and capital gains as well as
gross proceeds from the redemption of Fund shares, except in the case of exempt
shareholders, which includes most corporations. Pursuant to the backup
withholding provisions of the Code, distributions of any taxable income and
capital gains and proceeds from the redemption of Fund shares may be subject to
withholding of federal income tax at the rate of 31 percent in the case of
non-exempt shareholders who fail to furnish the Fund with their taxpayer
identification numbers and with required certifications regarding their status
under the federal income tax law. If the withholding provisions are applicable,
any such distributions and proceeds, whether taken in cash or reinvested in
additional shares, will be reduced by the amounts required to be withheld.
Corporate and other exempt shareholders should provide the Fund with their
taxpayer identification numbers or certify their exempt status in order to avoid
possible erroneous application of backup withholding. The Fund reserves the
right to refuse to open an account for any person failing to provide a certified
taxpayer identification number.
The foregoing discussion of U.S. federal income tax law relates solely to the
application of that law to U.S. citizens or residents and U.S. domestic
corporations, partnerships, trusts and estates. Each shareholder who is not a
B-20
<PAGE>
U.S. person should consider the U.S. and foreign tax consequences of ownership
of shares of the Fund, including the possibility that such a shareholder may be
subject to a U.S. withholding tax at a rate of 30 percent (or at a lower rate
under an applicable income tax treaty) on amounts constituting ordinary income.
This discussion and the related discussion in the Prospectus have been prepared
by Fund management, and counsel to the Fund has expressed no opinion in respect
thereof.
PERFORMANCE INFORMATION
From time to time, the Fund may state its total return in advertisements and
investor communications. Total return may be stated for any relevant period as
specified in the advertisement or communication. Any statements of total return
will be accompanied by information on the Fund's average annual compounded rate
of return over the most recent four calendar quarters and 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 may be compared to relevant indices, including Standard
& Poor's 500 Composite Stock Index and indices published by Lipper Analytical
Services, Inc. From time to time, evaluations of the Fund's performance by
independent sources may also be used in advertisements and in information
furnished to present or prospective investors in the Fund.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's total return for any period should
not be considered as a representation of what an investment may earn or what an
investor's total return may be in any future period.
The Fund's average annual compounded rate of return is determined by reference
to a hypothetical $1,000 investment that includes capital appreciation and
depreciation for the stated period, according to the following formula:
n
P(1+T) = ERV
Where: P = a hypothetical initial purchase order of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1,000 purchase at the
end of the period
Aggregate total return is calculated in a similar manner, except that the
results are not annualized.
B-21
<PAGE>
GENERAL INFORMATION
With respect to certain funds, the Trust may offer more than one class of
shares. The Trust has reserved the right to create and issue additional series
or classes. Each share of a series or class represents an equal proportionate
interest in that series or class with each other share of that series or class.
Currently, the Fund has only one class of shares.
The shares of each series or class participate equally in the earnings,
dividends and assets of the particular series or class. Expenses of the Trust
which are not attributable to a specific series or class are allocated amount
all the series in a manner believed by management of the Trust to be fair and
equitable. Shares have no pre-emptive or conversion rights. Shares when issued
are fully paid and non-assessable, except as set forth below. Shareholders are
entitled to one vote for each share held. Shares of each series or class
generally vote together, except when required under federal securities laws to
vote separately on matters that only affect a particular class, such as the
approval of distribution plans for a particular class.
The Trust is not required to hold annual meetings of shareholders but will hold
special meetings of shareholders of a series or class when, in the judgment of
the Trustees, it is necessary or desirable to submit matters for a shareholder
vote. Shareholders have, under certain circumstances, the right to communicate
with other shareholders in connection with requesting a meeting of shareholders
for the purpose of removing one or more Trustees. Shareholders also have, in
certain circumstances, the right to remove one or more Trustees without a
meeting. No material amendment may be made to the Trust's Declaration of Trust
without the affirmative vote of the holders of a majority of the outstanding
shares of each portfolio affected by the amendment. The Trust's Declaration of
Trust provides that, at any meeting of shareholders of the Trust or of any
series or class, a Shareholder Servicing Agent may vote any shares as to which
such Shareholder Servicing Agent is the agent of record and which are not
represented in person or by proxy at the meeting, proportionately in accordance
with the votes cast by holders of all shares of that portfolio otherwise
represented at the meeting in person or by proxy as to which such Shareholder
Servicing Agent is the agent of record. Any shares so voted by a Shareholder
Servicing Agent will be deemed represented at the meeting for purposes of quorum
requirements. Shares have no preemptive or conversion rights. Shares, when
issued, are fully paid and non-assessable, except as set forth below. Any series
or class may be terminated (i) upon the merger or consolidation with, or the
sale or disposition of all or substantially all of its assets to, another
entity, if approved by the vote of the holders of two-thirds of its outstanding
shares, except that if the Board of Trustees recommends such merger,
consolidation or sale or disposition of assets, the approval by vote of the
holders of a majority of the series' or class' outstanding shares will be
sufficient, or (ii) by the vote of the holders of a majority of its outstanding
shares, or (iii) by the Board of Trustees by written notice to the series' or
class' shareholders. Unless each series and class is so terminated, the Trust
will continue indefinitely.
The Trust's Declaration of Trust also provides that the Trust shall maintain
appropriate insurance (for example, fidelity bonding and errors and omissions
insurance) for the protection of the Trust, its shareholders, Trustees,
officers, employees and agents covering possible tort and other liabilities.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.
B-22
<PAGE>
APPENDIX
COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICE, INC.
Prime-1--Issuers (or related supporting institutions) rated "Prime-1" have a
superior ability for repayment of senior short-term debt obligations. "Prime-1"
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries, high
rates of return on funds employed, conservative capitalization structures with
moderate reliance on debt and ample asset protection, broad margins in earnings
coverage of fixed financial charges and high internal cash generation, and
well-established access to a range of financial markets and assured sources of
alternate liquidity.
Prime-2--Issuers (or related supporting institutions) rated "Prime-2" have a
strong ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternative liquidity is maintained.
STANDARD & POOR'S RATINGS GROUP
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus (+) sign designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
B-23
<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 (2)
(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) Form of opinion of Counsel
(10) Not applicable
(11) Not applicable
(12) Investment letters (3)
(13) Not applicable
(14) Not applicable
(15) Not applicable
(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.
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
H. N. Howard & Sons, Inc. 801-10188
Segall Bryant & Hamill 801-47232
National Asset Management Corporation 801-14666
<PAGE>
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
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
915 Broadway Secretary
New York, New York 10010
(c) Not applicable.
<PAGE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the rules promulgated thereunder are in the possession of the following persons:
(a) the documents required to be maintained by paragraph (4) of Rule
31a-1(b) will be maintained by the Registrant;
(b) the documents required to be maintained by paragraphs (5), (6),
(10) and (11) of Rule 31a-1(b) will be maintained by the respective investment
advisors:
American Trust Company, One Court Street, Lebanon, NH 03766
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
H. N. Howard & Son, Inc., 45 Rockefeller Plaza, 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.
<PAGE>
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>
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 12th day of March, 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 March 12, 1999.
/s/ Eric M. Banhazl* President, Principal Financial
- ---------------------------- and Accounting Officer, and Trustee
Eric M. Banhazl
/s/ Walter E. Auch Sr.* Trustee
- ----------------------------
Walter E. Auch, Sr.
/s/ Donald E. O'Connor* Trustee
- ----------------------------
Donald E. O'Connor
/s/ George T. Wofford III* Trustee
- ----------------------------
George T. Wofford III
* /s/ Robert H. Wadsworth
- ----------------------------
By: Robert H. Wadsworth
Attorney in Fact
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
Ex. 99B.10 Form of opinion of counsel
FORM OF OPINION LETTER
Law Offices of Paul, Hastings, Janofsky & Walker LLP
345 California Street
San Francisco, California 94104?2635
Telephone (415) 835-1600
Facsimile (415) 217-5333
Internet www.phjw.com
_______________, 1999
(415) 835-1600 27217.91123
www.phjw.com
Advisors Series Trust
2025 East Financial Way, Suite 101
Glendora, CA 91741
Re: NATIONAL ASSET MANAGEMENT CORE EQUITY FUND
Ladies and Gentlemen:
We have acted as counsel to Advisors Series Trust, a Delaware business trust
(the "Trust"),in connection with post-effective amendments to the Trust's
Registration Statement filed on Form N-1A with the Securities and Exchange
Commission (the "Post-Effective Amendments") and including Post-Effective
Amendment #40, relating to the issuance by the Trust of an indefinite number of
$0.01 par value shares of beneficial interest (the "Shares") of National Asset
Management Core Equity Fund (the "Fund"), a series of the Trust.
In connection with this opinion, we have assumed the authenticity of all
records, documents and instruments submitted to us as originals, the genuineness
of all signatures, the legal capacity of natural persons and the conformity to
the originals of all records, documents and instruments submitted to us as
copies. We have based our opinion upon our review of the following records,
documents and instruments:
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<PAGE>
(a) the Trust's Certificate of Trust as filed with the Secretary of State
of Delaware on October 3, 1996, certified to us as in effect on the
date hereof;
(b) the Trust's Agreement and Declaration of Trust dated October 3, 1996
(the "Trust Instrument"), certified to us by an officer of the Trust
as being true and complete and in effect on the date hereof;
(c) the Bylaws of the Trust certified to us by an officer of the Trust as
being true and complete and in effect on the date hereof;
(d) resolutions of the Trustees of the Trust adopted at a meeting on
___________, 1999 authorizing the establishment of the Fund and the
issuance of its Shares.
(e) the Post-Effective Amendments; and
(f) a certificate of an officer of the Trust concerning certain factual
matters relevant to this opinion.
In rendering our opinion below, we have not conducted an independent examination
of the books and records of the Trust for the purpose of determining whether all
of the Shares were fully paid prior to their issuance and do not believe it to
be our obligation to do so.
Our opinion below is limited to the federal law of the United States of America
and the business trust law of the State of Delaware. We are not licensed to
practice law in the State of Delaware, and we have based our opinion below
solely on our review of Chapter 38 of Title 12 of the Delaware Code (the
"Delaware Business Trust Act") and the case law interpreting such Chapter as
reported in Delaware Laws Annotated (CSC The United States Corporation Company,
April 1997) as updated on Lexis on September 18, 1998. We have not undertaken a
review of other Delaware law or of any administrative or court decisions in
connection with rendering this opinion. We disclaim any opinion as to any law
other than that of the United States of America and the business trust law of
the State of Delaware as described above, and we disclaim any opinion as to any
statute, rule, regulation, ordinance, order or other promulgation of any
regional or local governmental authority.
Based on the foregoing and our examination of such questions of law as we have
deemed necessary and appropriate for the purpose of this opinion, and assuming
that (i) all of the Shares will be issued and sold for cash at the per share
2
<PAGE>
public offering price on the date of their issuance in accordance with
statements in the Fund's Prospectus included in the Post-Effective Amendments
and in accordance with the Trust Instrument, (ii) all consideration for the
Shares will be actually received by the Trust, and (iii) all applicable
securities laws will be complied with, then it is our opinion that, when issued
and sold by the Trust, the Shares will be legally issued, fully paid and
nonassessable.
This opinion is rendered to you in connection with the Post-Effective Amendments
and is solely for your benefit. This opinion may not be relied upon by you for
any other purpose or relied upon by any other person, firm, corporation or other
entity for any purpose, without our prior written consent. We disclaim any
obligation to advise you of any developments in areas covered by this opinion
that occur after the date of this opinion.
Sincerely yours,
Paul, Hastings, Janofsky & Walker LLP
3
