THE CRUELTY FREE VALUE FUND
8260 Greensboro Drive, Suite 250
McLean, Virginia 22102-3801
PROSPECTUS April 8, 1997
"The greatness of a nation and its moral progress can be judged by
the way its animals are treated. I hold that, the more helpless a
creature, the more entitled it is to protection by man from the
cruelty of man."
Mahatma Gandhi
The Cruelty Free Value Fund (the "Fund") is a mutual fund which seeks
capital appreciation by investing in common stocks of companies which
meet the investment adviser's screening process regarding the humane
treatment of animals.
While providing its shareholders with an investment seeking capital
growth, the Fund is also dedicated to providing an innovative way to
help end the suffering and abuse of animals and the extinction of
hundreds of species annually. All investments made by the Fund will
be screened by the investment adviser, Beacon Global Advisors, Inc.
(the "Advisor") using its guidelines concerning the humane treatment
of animals. The Fund will not knowingly invest in a company that
does not pass this screening process. See "Animal Policy." The Fund
will invest principally in equity securities of small companies with
market capitalizations ranging from $100 million to $1 billion that
Dreman Value Advisors, Inc. ("Dreman" or the "Subadvisor") believes
to be undervalued.
The Fund is a separate series of shares of Beacon Global Advisors
Trust (the "Trust"), an open-end, diversified management investment
company. The Advisor has entered into an agreement with Zurich
Investment Management, Inc. ("ZIM") which in turn has entered into an
agreement with its wholly owned subsidiary, Dreman, pursuant to which
Dreman acts as subadvisor and manages the day-to-day investment
program of the Fund.
The Fund is designed for long-term investors and not as a trading
vehicle, and is not intended to present a complete investment
program. As an adjunct to Dreman's traditional "long" investment
strategy, however, the Fund may incorporate short-selling techniques
to hedge the portfolio in volatile market environments. There can be
no assurance that the Fund will achieve its investment objective.
This Prospectus sets forth concisely information about the Fund that
an investor should know before investing in the Fund. Please read
this Prospectus carefully and retain it for future reference. A
Statement of Additional Information, dated April 8, 1997,
provides further discussion of certain areas which may be of interest
to some investors. It has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. The
Statement of Additional Information can be obtained without charge by
calling the Fund at (800) 892-9626, or writing to the Fund at the
address above.
The Securities and Exchange Commission maintains a Website
(http:\\www.sec.gov) that contains the Statement of Additional
Information, material incorporated by reference, and other
information regarding the Fund.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED
BY, ANY BANK OR OTHER DEPOSITORY INSTITUTION. SHARES ARE NOT
INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.<PAGE>
TABLE OF CONTENTS
Page
Expense Summary. . . . . . . . . . . . . . . . . . . . . . 9
Historical Investment Results of the Subadvisor. . . . . .10
Mission Statement. . . . . . . . . . . . . . . . . . . . .12
Introduction . . . . . . . . . . . . . . . . . . . . . . .13
Investment Objective . . . . . . . . . . . . . . . . . . .13
Investment Policies and Strategies . . . . . . . . . . . .14
Animal Policy. . . . . . . . . . . . . . . . . . . . . . .14
Investment Process . . . . . . . . . . . . . . . . . . . .15
Investment Practices and Risk Factors. . . . . . . . . . .15
Management of the Fund . . . . . . . . . . . . . . . . . .17
Distribution Plan. . . . . . . . . . . . . . . . . . . . .21
How to Purchase Shares . . . . . . . . . . . . . . . . . .21
How to Redeem Shares . . . . . . . . . . . . . . . . . . .23
Net Asset Value. . . . . . . . . . . . . . . . . . . . . .26
Dividends and Taxes. . . . . . . . . . . . . . . . . . . .27
Performance Information. . . . . . . . . . . . . . . . . .28
General Information. . . . . . . . . . . . . . . . . . . .29
Distributor: Investment Adviser:
Beacon Global Advisors, Inc. Beacon Global Advisors, Inc.
8260 Greensboro Drive, Suite 250 8260 Greensboro Drive, Suite 250
McLean, Virginia 22102-3801 McLean, Virginia 22102-3801
(800) 662-9992 (800) 662-9992
(703) 883-0865 (703) 883-0865
THIS PROSPECTUS IS NOT AN OFFERING OF THE SECURITIES HEREIN DESCRIBED
IN ANY JURISDICTION OR TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR THE
FUND TO MAKE SUCH AN OFFER OR SOLICITATION. NO SALES REPRESENTATIVE,
DEALER, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR
MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS.
<PAGE>
Expense Summary
Shareholder Transaction Expenses:
Maximum sales charge imposed on purchases
(as a percentage of offering price) . . . . . . NONE
Maximum sales charge imposed on reinvested
dividends (as a percentage of offering price) . NONE
Deferred sales charge (as a percentage of
original purchase price). . . . . . . . . . . . NONE
Redemption fees (as a percentage of
amount redeemed) (1). . . . . . . . . . . . . . NONE
(1) If you want to redeem shares by wire transfer, the Fund's
transfer agent charges a fee (currently $9.00) for each wire
redemption. Purchases and redemptions may also be made through
broker-dealers and others who may charge a commission or other
transaction fee for their services.
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Advisory Fees (after fee waivers)(2) . . . . . 0.00%
12b-1 Fees . . . . . . . . . . . . . . . . . . 0.25%
Other Expenses (3) . . . . . . . . . . . . . . 1.70%
Total Fund Operating Expenses (after
fee waivers)(3). . . . . . . . . . . . . . . . 1.95%
(2) The above table reflects the Advisor's voluntary undertaking to
waive all or a portion of its fees and to reimburse certain expenses
to limit the total operating expenses of the Fund for the first year
of operations to 1.95% of the Fund's average daily net assets. The
Advisor reserves the right to terminate this waiver or any
reimbursement at any time, in its sole discretion. Any reductions in
the Advisor's fee are subject to reimbursement by the Fund within the
following three years, to the extent such reimbursement would not
cause total operating expenses to exceed 1.95%. Absent such waiver,
advisory fees for the Fund would be 1.25% and total operating
expenses would be 3.20% of the Fund's average daily net assets on an
annualized basis. See "Management of the Fund" for advisory fee
breakpoints. Although the Advisor has not previously provided
investment advisory services to U.S. registered investment companies,
the Advisor has been engaged in the investment advisory business and
has provided investment advice to individuals, offshore investment
funds and corporations since 1994.
(3) For purposes of this table and because the Fund has no operating
history, "Other Expenses" is based on estimated amounts for the
current fiscal year.
Example
Based on the level of expenses listed above, an investor would pay
the following expenses on a $1,000 investment assuming (i) 5% annual
return and (ii) redemption at the end of each time period:
1 Year $20
3 Years $61
The foregoing example should not be considered a representation of
past or future expenses. Actual expenses may be more or less than
those shown. The purpose of the expense tables and example is to
assist the investor in understanding the various costs and expenses
that may be directly or indirectly borne by shareholders of the Fund.
For more complete descriptions of the various costs and expenses, see
"Management of the Fund" and "Distribution Plan."
Historical Investment Results of the Subadvisor
The table below, which was supplied by the Subadvisor, shows
composite performance results relating to certain assets which it manages.
This composite is comprised of the assets of one registered investment company
and all those assets of similarly managed discretionary accounts of the
Subadvisor's tax-exempt clients. These results are not those of the Fund. The
Fund had no investment operations or performance prior to the date of this
prospectus. The investment objectives of these accounts are substantially
similar to that of the Fund and they are managed using substantially similar
investment strategies and techniques as those contemplated by the Fund, except
that no screening for the humane treatment of animals was used by the
Subadvisor. If the screening criteria that will be used in managing the Fund
(using data available as of December, 1996) had been applied with respect to
the accounts, less than 5% of the investments in the accounts at any one time
over the eight year period ending December 31, 1996, would have been
prohibited investments for the Fund and the differential in performance
immaterial. It cannot be determined that future holdings of the Fund would be
substantially identical to those in the otherwise similar accounts managed by
the Subadvisor.
The accounts, with the exception of the registered investment
company, are not subject to certain limitations, diversification
requirements and other restrictions that are imposed by the
Investment Company Act of 1940, as amended (the "Act") and the
Internal Revenue Code on investment companies such as the Fund. If
these restrictions had been applicable to the accounts, such
restrictions might have adversely affected the performance reflected
below.
The performance presented is not intended to predict or suggest that
such returns will be experienced by the Fund or by an investor
investing in the Fund. An investor should not rely on the following
performance information to be an indication of future performance of
the Fund or the composite performance of similar Dreman accounts.
Different methods of determining performance from those described in
the footnotes below may result in different performance figures.
DREMAN VALUE ADVISORS, INC.
SMALL CAP EQUITY COMPOSITE (SCEC) vs. RUSSELL 2000 INDEX
SCEC Russell 2000
Year Total Index
Ended Return Total Return
1989 + 7.2% +16.2%
1990 -11.6% -19.5%
1991 +50.5% +46.0%
1992 +29.0% +18.4%
1993 + 1.7% +18.9%
1994 + 0.3% - 1.9%
1995 +43.7% +28.5%
1996 +30.5% +16.5%
Another way to consider the above schedule is as follows: a hypothetical
$10,000 investment in the Small Cap Equity Composite on December 31, 1988
would have grown to $35,195 by December 31, 1996, including reinvestment of
dividends. The average annual rate of return from December 31, 1988
through December 31, 1996, including reinvestment of dividends, is
17.0% for the Small Cap Equity Composite and 13.8% for the Russell
2000 Index. The average annual rate of return for the period
December 31, 1991 through December 31, 1996, including reinvestment
of dividends, is 19.8% for the Small Cap Equity Composite and 15.6%
for the Russell 2000 Index.
NOTES TO INVESTMENT PERFORMANCE
1. Types of Accounts included in the Small Cap Equity Composite
The Small Cap Equity Composite performance figures from 1989 (the
year the Subadvisor began managing assets using the small cap
strategy) through 1992 are the equally-weighted average of the
time-weighted returns from within the composite. From January 1993
onward, performance is portfolio size-weighted pursuant to new standards
established by the Association for Investment Management and Research ("AIMR")
which became effective in January 1993. From January 1989 through December
1996, the composite includes one registered investment company and all the
Subadvisor's similarly managed discretionary accounts of tax-exempt clients.
At December 31, 1996 the composite, which included seven accounts and one
registered investment company, had total assets of $308 million. New accounts
are eligible for inclusion in the composite upon completion of the first full
quarter under management. Closed accounts are eligible for inclusion in the
composite through completion of the last full quarter under management.
2. Calculation of Rates of Return
All rate of return calculations conform to standards established by
AIMR. All accounts are valued monthly based on principal market values.
Account returns are calculated monthly utilizing the Bank
Administration Institute (BAI) methodology where security and cash
flows are "day-weighted" during the month. All amounts are rounded
to the nearest one-tenth of one percent.
3. Fees
Fees are contractual with each individual client and vary among
clients. Performance is net of expenses including investment
management fees and transaction costs. It is expected that Fund
expenses will be higher than the average expenses borne by the
accounts.
4. Russell 2000 Index
The Russell 2000 Index was chosen for comparison purposes because it
contains companies with market capitalizations similar to the market
capitalization of companies eligible for investment by the Fund. The
Russell 2000 Index is a widely recognized unmanaged index of common
stock prices comprised of the smallest 2000 stocks in the Russell
3000 Index, which is an annual ranking of 3000 common stocks by
market capitalization. The Russell 2000 Index represents
approximately 10% of the total market capitalization of the Russell
3000 Index.
Mission Statement
The Advisor has created The Cruelty Free Value Fund as a means for
individuals and institutions to pool their assets and invest in
companies that satisfy the Subadvisor's small cap growth profile and
also do not harm animals. Securities considered for investment by
the Fund will be screened by the Advisor and the Advisor will exclude
for investment those companies (or subsidiaries of such companies)
that, in its opinion, (1) employ animal testing in their product
development; (2) sponsor inappropriate uses of animals as
entertainment (e.g. bullfights, rodeos or circuses); (3) slaughter
animals by any method; (4) sell captured wild animals as pets or sell
dogs raised in "puppy mills"; (5) have been found to have violated
either a state cruelty law or the federal Animal Welfare Act; or (6)
otherwise have a corporate policy which results in the unnecessary
pain and suffering of animals.
The Fund will specifically consider for investment, within the
investment style of the Subadvisor, companies which have adopted
cruelty free or humane policies towards animals.
To determine which companies are ineligible for investment because of
their inhumane policies with respect to animals, the Advisor will
rely primarily on lists of such companies prepared by organizations
such as People for the Ethical Treatment of Animals ("PETA"), The
National Anti-Vivisection Society ("NAVS") and The American
Anti-Vivisection Society ("AAVS"). Any company included on such
lists will be ineligible for investment. If the Advisor becomes
aware of other companies that are not listed but appear to have
inhumane policies, such other companies will also be ineligible for
investment by the Fund. This method of "screening out" companies
could result in the exclusion of a company that has corrected its
practices and policies in the period since it was listed, or it could
result in an investment by the Fund in a company which engages in
inhumane practices but has escaped listing by any of the monitoring
organizations. The Fund will not knowingly invest in a company that
does not pass the screening process.
The Advisor has made a commitment to donate a percentage of its
management fees to fund projects that directly help animals and raise
public awareness of animal-related issues at such time as the Fund
attains more than $20 million in assets.
The Advisor will establish a foundation that will be dedicated to
these concerns and has selected an outside advisory board of
directors that will review specific projects of animal welfare
organizations. The foundation will be funded once the Fund reaches
the asset level specified above. The board of directors of the
foundation will review projects submitted by such animal welfare
organizations, then select and financially support those programs
deemed to have the greatest potential impact on improving the lives
of animals.
The board of directors of the foundation will be responsible for the
ongoing due diligence to ensure that all donations are being used as
directed. Shareholders of the Fund will be informed of the
foundation's progress. Members of the advisory board of the
foundation will be prominent people involved in the animal rights
movement.
The Advisor, through ZIM, has selected Dreman Value Advisors, Inc.
("Dreman" or the "Subadvisor") to provide the day-to-day management
of the Fund's portfolio. Dreman is well-known for its disciplined
and conservative value-oriented strategy for stock selection.
Introduction
This Prospectus provides the information which is needed for a
potential investor to make an informed decision before purchasing
shares of the Fund. The money that an investor uses to purchase
shares of the Fund will be pooled with other shareholders' money and
collectively invested, or "managed," by the Advisor and Subadvisor in
accordance with the Fund's investment objective. Other parts of this
Prospectus provide information concerning an investment in the Fund
such as the risks involved, the companies which provide
services to the Fund, the expenses of managing the Fund and the
procedures by which shares of the Fund may be purchased or redeemed.
Please read this Prospectus carefully before you invest or send money
and keep it for your future reference.
Investment Objective
The investment objective of the Fund is capital appreciation. The
Fund's Advisor and Subadvisor will seek to attain this objective
while maintaining the Fund's commitment to encourage the humane
treatment of animals. See "Animal Policy."
This objective is fundamental and may not be changed without a vote
of the holders of the majority of the outstanding voting securities
of the Fund. The Fund's investment policies described below are not
fundamental and may be changed without shareholder approval.
Additional investment policies and investment restrictions are
described in the Statement of Additional Information. There can be
no assurance that the Fund will achieve its investment objective.
Investment Policies and Strategies
The Fund's assets will be invested primarily in common stock or
preferred stock of small capitalization companies, i.e., those
companies with market capitalizations at the time of purchase ranging
from $100 million to $1 billion, that the Subadvisor believes to be
undervalued. According to the Subadvisor, securities of a company
may be undervalued as a result of overreactions by investors to
unfavorable news about a company, industry or the stock markets in
general or as a result of market decline, poor economic conditions,
tax-loss selling or actual or anticipated unfavorable developments
affecting the company. Under normal market conditions, at least 65%
of the total assets of the Fund will be invested in securities of
companies whose market capitalizations are less than $1 billion.
Under normal circumstances the Fund expects to be almost fully
invested in common stocks. The Subadvisor generally follows a
value-oriented investment approach to the selection of individual
securities. See "Investment Process." The Fund may diversify its
holdings among many different companies and industries which not only
meet the Subadvisor's criteria for growth described below under
"Investment Process," but also meet the Advisor's screening process
with respect to the humane treatment of animals. See "Animal Policy."
The Fund may also engage in portfolio management techniques such as
selling short, selling short against-the-box, and lending securities.
See "Investment Practices and Risk Factors."
If securities held by the Fund no longer satisfy the Animal Policy,
the Fund will seek to dispose of the securities as soon as is
economically practicable, which may cause the Fund to sell the
securities at a time not desirable from a purely financial
standpoint.
Animal Policy
The Fund is dedicated to providing an investment program to help end
the suffering, abuse and extinction of animals. The Advisor believes
that sound investments may be made which are compatible with a
commitment to protect the well-being of animals. All investments
made by the Fund will be screened toward achieving such policy and
the following guidelines have been established for such screening
process. These guidelines will help to provide a cruelty free
portfolio of investments.
The Fund will not invest in companies (or subsidiaries of such
companies) that, in the opinion of the Advisor, (1) employ animal
testing in their product development; (2) sponsor inappropriate uses
of animals as entertainment (e.g. bullfights, rodeos or circuses);
(3) slaughter animals by any method; (4) sell captured wild animals
as pets or sell dogs raised in "puppy mills"; (5) have been found to
have violated either a state cruelty law or the federal Animal
Welfare Act; or (6) otherwise have a corporate policy which results
in the unnecessary pain and suffering of animals.
The Advisor may gather screening information through publicly
available sources such as corporate annual reports, and newswire
services, but mainly through animal welfare publications by such
organizations as PETA, NAVS and AAVS. Research information may also
be gathered from financial and business organization reporting
services such as Dun & Bradstreet and Bloomberg. Any company
included on lists provided by the animal welfare organizations
selected by the Advisor will be ineligible for investment. If the
Advisor becomes aware of other companies that are not listed but
appear to have inhumane policies, such other companies will also be
ineligible for investment by the Fund.
The Fund's Animal Policy limits the investments available for it to
consider compared with other mutual funds which do not have such a
policy. Under certain economic conditions, this could cause the
Fund's investment performance to be better or worse than similar
funds that do not have an Animal Policy.
The Board of Trustees will have the authority, without the vote of
shareholders, to determine the manner in which the Fund implements
its stated commitment to encourage the humane treatment of animals.
There can be no assurance that each investment of the Fund will
satisfy the Animal Policy, but only that the Advisor will seek to
screen each security contemplated for investment by the Fund for its
compliance with the Animal Policy. Further, information provided by
organizations which the Advisor utilizes for screening purposes may
be incomplete or inaccurate.
Investment Process
The Subadvisor's investment approach for stock selection is centered
around value investing. Value investing refers to the process by
which an investment professional chooses certain stocks because that
professional believes that they are undervalued in the market place.
The initial criteria for stock selection utilizes a stock's
Price/Earnings Ratio ("P/E"). A low P/E value is important because,
in the opinion of the Subadvisor, it tends to be a historic
indicator of undervaluation. The second criteria considered is the
price-to-book ratio. The Subadvisor concentrates on stocks whose
market price is low in relation to book value. Further quantitative
analysis of these stocks focuses on adequate trading liquidity,
measuring financial strength, and testing earnings against certain
requirements.
The Subadvisor believes that this approach to stock selection is
conservative in nature and only companies that possess strong
financial characteristics will be considered for investment. The
Subadvisor closely analyzes the stocks and favors those that
have shown above average growth on both a five- and ten-year basis,
exhibit sound finances and demonstrate above-average long term
earnings prospects.
For temporary defensive purposes, the Fund may invest up to 100% of
its total assets in money market instruments. To the extent that the
Fund is invested in temporary defensive instruments, it will not be
pursuing its investment objective.
Investment Practices and Risk Factors
There is no such thing as a guaranteed investment and no one can see
into the future. The risks inherent in investing in the Fund are
similar to those of investing directly in equity securities, that is,
the value of the investment may fluctuate in response to a variety of
situations and factors. Accordingly, the value of an investment in
the Fund will fluctuate over time and may be valued higher or lower
at the time of redemption. The Fund is designed for long-term
investors who can accept the risks entailed in seeking capital
appreciation through investment primarily in common stocks. An
investment in the Fund should be only a part of an overall investment
strategy. No assurance can be given as to the success of the
Advisor's and Subadvisor's investment program. The Advisor and
Subadvisor attempt to reduce the overall risks by investing in a
diversified portfolio through the implementation of the above-
described investment process. Although the Advisor has not previously
provided investment advisory services to registered investment
companies, the Advisor has been engaged in the investment advisory
business providing investment advice to individuals, corporations and
offshore investment funds since 1994. The Subadvisor, Dreman Value
Advisors, Inc., has over eleven years of experience managing mutual
funds.
Small Cap Securities
The Fund's investment primarily in smaller companies involves greater
risk than investment in larger, more established companies.
Investments in securities of companies with small market
capitalizations are generally considered to offer greater opportunity
for appreciation and to involve greater risks of depreciation than
securities of companies with larger market capitalizations. Since
the securities of companies with small capitalizations are not as
broadly traded as those of companies with larger market
capitalizations, these securities are often subject to wider and more
abrupt fluctuations in market price.
Among the reasons for the greater price volatility of these
securities are the less certain growth prospects of smaller firms,
the lower degree of liquidity in the markets for such stocks compared
to larger capitalization stocks, and the greater sensitivity of small
companies to changing economic conditions. In addition to exhibiting
greater volatility, small company stocks may, to a degree, fluctuate
independently of larger company stocks. Small company stocks may
decline in price as large company stock prices rise, or rise in price
as large company stock prices decline. Investors should therefore
expect that the value of the Fund's shares may be more volatile than
the shares of a fund that invests in larger capitalization stocks.
Short Sales Against-the-Box
The Fund may make short sales against-the-box, in which it sells
securities short only if it owns or has the right to obtain without
payment of additional consideration an equal amount of the same type
of securities sold. Short selling against-the-box may defer
recognition of gains or losses into a later tax period. This
strategy is employed to protect the asset base in volatile markets.
Short Sales
The Fund may attempt to limit exposure to a possible decline in the
market value of portfolio securities through short sales of
securities which the Subadvisor believes possess volatility
characteristics similar to those being hedged. The Fund also may use
short sales in an attempt to realize gain. To effect a short sale,
the Fund borrows a security from a brokerage firm to make delivery to
the buyer. The Fund then is obligated to replace the borrowed
security by purchasing it at the market price at the time of
replacement. Until the security is replaced, the Fund is required to
pay the lender any accrued interest or dividends and may be required
to pay a premium.
The Fund will realize a gain if the security declines in price
between the date of the short sale and the date on which the Fund
replaces the borrowed security. The Fund will incur a loss if the
price of the security increases between those dates. The amount of
any gain will be decreased, and the amount of any loss increased, by
the amount of any premium or interest the Fund may be required to pay
in connection with a short sale. A short position may be adversely
affected by imperfect correlation between movements in the price of
the security sold short and the securities being hedged.
No short sale will be effected which will, at the time of making such
short sale transaction, cause the aggregate market value of all
securities sold short to exceed 25% of the value of the Fund's net
assets.
Management of the Fund
The Board of Trustees
The Trust has a Board of Trustees that establishes the Fund's
policies and oversees and reviews the management of the Fund. The
day-to-day operations of the Fund are administered by the officers of
the Trust and by the Advisor and Subadvisor pursuant to the terms of
the Investment Advisory Agreement and Subadvisory Agreement,
respectively. The Trustees review the various services
provided by the Advisor and Subadvisor to ensure that the Fund's
general investment policies and programs are being carried out and
administrative services are being provided to the Fund in a
satisfactory manner. Information pertaining to the Trustees and
executive officers is set forth in the Statement of Additional
Information.
The Investment Adviser
Beacon Global Advisors, Inc. (the "Advisor"), 8260 Greensboro Drive,
Suite 250, McLean, Virginia 22102-3801, serves as the Fund's
investment adviser and manager, and is an investment adviser
registered as such under the Investment Advisers Act of 1940, as
amended. The Advisor is a subsidiary of Beacon Global Advisors, Ltd.
of Nassau, Bahamas, a company which designs and markets specialized
global asset management programs for pension funds, endowments and
foundations, and other institutional and high net worth individual
investors. Beacon Global Advisors, Ltd. specializes in establishing
offshore investment funds. The Advisor does not have any past
experience managing U.S. mutual funds. As of December 31, 1996, the
Advisor had discretionary authority with respect to approximately $72
million in assets.
The Advisor continuously reviews, supervises and administers the
Fund's investment programs and implements its screening policy,
subject to the supervision of, and policies established by, the
Trustees of the Trust. The Advisor currently delegates certain of
these services to the Subadvisor.
For its services as investment adviser, the Fund pays the Advisor a
monthly fee which is calculated daily by applying an annual rate of
1.25% of the first $100 million of average daily net assets, 1.00%
of average daily net assets from $100 million to $500 million, and
0.75% of average daily net assets over $500 million. From time to
time, the Advisor may voluntarily waive all or a portion of its
management fee and/or absorb certain expenses of the Fund without
further notification of the commencement or termination of any such
waiver or absorption. Any such waiver or absorption will have the
effect of lowering the overall expense ratio of the Fund and
increasing the Fund's overall return to investors at the time any
such amounts are waived and/or absorbed. The Advisor has voluntarily
agreed to waive all or a portion of its fee, and/or to reimburse
expenses of the Fund to the extent necessary in order to limit net
operating expenses for the first year of operations to an annual rate
of not more than 1.95% of the Fund's average daily net assets. The
Advisor reserves the right to terminate its voluntary fee waiver and
reimbursement at any time at its sole discretion. Any amounts waived
or reimbursed by the Advisor are subject to reimbursement by the Fund
within the following three years, provided that the Fund is able to
effect such reimbursement and remain in compliance with the expense
limitation of 1.95%.
The Subadvisors
Zurich Investment Management, Inc. ("ZIM"), 222 South Riverside
Plaza, Chicago, Illinois 60606 and Dreman Value Advisors, Inc.
("Dreman" or the "Subadvisor"), 280 Park Avenue, 40th Floor, New
York, New York 10017-1216, are wholly owned subsidiaries of Zurich
Kemper Investments, Inc. (formerly named Kemper Financial Services,
Inc.)("ZKI"), which is one of the largest investment managers in the
country and has been engaged in the management of investment funds
for more than forty-eight years.
ZKI and its affiliates, including ZIM and Dreman, provide investment
advice and manage investment portfolios for the Kemper Funds,
affiliated insurance companies and other corporate, pension,
profit-sharing and individual accounts representing approximately $80
billion under management.
Pursuant to a subadvisory agreement between ZIM and the Advisor, ZIM
has entered into a subadvisory agreement with Dreman to provide an
investment program for the Fund, subject to the supervision of the
Advisor, in accordance with the objective and policies of the Fund.
Dreman provides the Fund and the Advisor with investment research,
advice, information and recommendations concerning securities to be
acquired, held or sold by the Fund and places orders to implement
those recommendations that survive the Advisor's screening criteria.
For its services, ZIM receives from the Advisor and pays to Dreman,
an annual fee of 0.50% of the first $50 million of average daily net
assets; 0.35% of average daily net assets from $50 million to $100
million; and 0.25% of average daily net assets over $100 million.
While the Advisor has no previous experience managing U.S. registered
investment companies, Dreman has managed mutual funds since 1985 and
is currently responsible for investments with a market value over
$3.8 billion.
The investment management team at Dreman responsible for overseeing
all investments made by the Fund includes William F. Coughlin, CFA,
James R. Neel, CFA and Christian C. Bertelsen. Their respective
biographies follow.
William F. Coughlin, CFA, 39, Managing Director and Portfolio
Manager, Dreman Value Advisors, Inc. Before joining Dreman Value
Advisors, Inc. in 1988 and serving as a Portfolio Manager since that
time, Mr. Coughlin spent seven years working for NYNEX Corporation.
From 1980 to 1983 he was responsible for the financial planning and
corporate finance activities at New England Telephone in Boston.
Through 1986, he served as Investment Director for NYNEX's $12
billion pension fund. In that capacity he headed investment
research, asset allocation and quantitative equity analysis, and
managed the fund's $650 million in-house portfolio. He also served
as Director of Investments for the NYNEX Foundation during his
tenure. Mr. Coughlin received his BA and MBA degrees in Finance from
Babson College.
James R. Neel, CFA, 53, President and Chief Executive Officer, Dreman
Value Advisors, Inc. from 1995 to present. Prior thereto, Mr. Neel
was an Executive Vice President and equity portfolio manager for
ZIM institutional accounts. Mr. Neel joined ZKI in 1989 as chief
equity portfolio strategist and was responsible for managing various
equity mutual funds including Kemper Blue Chip Fund, Kemper Growth
Fund and Kemper Retirement Fund Series. Mr. Neel received his BA and
MBA degrees in Finance from Michigan State University.
Christian C. Bertelsen, 53, Chief Investment Officer, Dreman Value
Advisors, Inc. from 1996 to present. Mr. Bertelsen has been
Portfolio Manager of the Kemper-Dreman Contrarian Fund since March,
1996. Prior to that, Mr. Bertelsen was Senior Vice President of
Eagle Asset Management, a subsidiary of Raymond James Financial Inc.,
where he managed institutional assets, a variable annuity for Bankers
Trust, The Heritage Value Trust Mutual Fund, as well as assets for
private individuals. Before joining Eagle Asset Management, Mr.
Bertelsen was a Senior Vice President at Colonial Management
Associates in Boston where he managed the Colonial Fund and headed
Colonial Advisory Services. Mr. Bertelsen previously was a Senior
Vice President and portfolio manager for Batterymarch Financial
Management. Mr. Bertelsen is a member of the Investment Analysts
Society of Boston and the AIMR. He received a BA degree in History
and Economics from Boston University.
The Administrator
FPS Services, Inc. ("FPS"), 3200 Horizon Drive, P.O. Box 61503, King
of Prussia, PA 19406-0903, serves as the Administrator pursuant to an
agreement with the Fund. Under this agreement, FPS provides the Fund
with administrative services including regulatory reporting,
compliance filings, dissemination of certain information to the
Fund's shareholders, and financial and management reporting. FPS
also provides all necessary office space, equipment, personnel and
facilities. Subject to an minimum annual fee of $55,000, FPS
receives an annual fee, accrued daily and paid monthly, of 0.15% of
the average daily net assets of the Fund for providing administrative
services.
The Transfer Agent and Fund Accountant
As Transfer Agent, FPS maintains the records of each shareholder's
account, answers shareholder inquiries concerning accounts, processes
purchases and redemptions of the Fund's shares, acts as dividend and
distribution disbursing agent and performs other shareholder service
functions. As Fund Accountant, FPS performs certain accounting and
pricing services for the Fund, including the daily calculation of the
Fund's net asset value per share.
The Custodian
The Bank of New York, 48 Wall Street, New York, New York 10286,
serves as Custodian for the safekeeping of securities, cash and other
assets of the Fund.
Fund Expenses
The Fund is responsible for all of its own expenses. Such expenses
may include, but are not limited to: management fees; legal expenses;
audit fees; printing costs (e.g. costs of printing annual reports,
semi-annual reports and prospectuses which are distributed to
existing shareholders); brokerage commissions for portfolio trades;
registering and qualifying shares of the Fund for sale with the
Securities and Exchange Commission and with various state securities
commissions; the organization of the Fund; transfer agent, custodian
and administrator fees; obtaining quotations of portfolio securities
and pricing the Fund's shares; trade association dues; all costs
associated with shareholder meetings and the preparation and
dissemination of proxy materials (although the Fund is not required
to hold annual shareholder meetings); liability insurance and
fidelity bonds; fees for Trustees who are not officers, directors or
employees of the Advisor; and any extraordinary and nonrecurring
expenses which are not expressly assumed by the Advisor.
Portfolio Transactions and Brokerage
The Subadvisor will use its best efforts to obtain the best available
price and most favorable execution with respect to all transactions
of the Fund. Subject to policies established by the Board of
Trustees, however, the Fund may pay a broker-dealer (other than the
Advisor or Subadvisor) a commission for effecting a portfolio
transaction for the Fund in excess of the amount of commission
another broker-dealer would have charged if the Subadvisor determines
in good faith that the commission paid was reasonable in relation to
the brokerage or research services provided by such broker-dealer.
In selecting and monitoring broker-dealers and negotiating
commissions, consideration will be given to a broker-dealer's
reliability, the quality of its execution services on a continuing
basis and its financial condition. All commissions paid are reviewed
quarterly by the Board of Trustees of the Trust.
It is not the Fund's practice to allocate brokerage or principal
business on the basis of sales of its shares which may be made
through brokers or dealers. However, the Subadvisor may place
portfolio orders with qualified broker-dealers who recommend the Fund
to clients, and may, when a number of brokers and dealers can provide
best net results on a particular transaction, consider such
recommendations by a broker or dealer in selecting among
broker-dealers.
Portfolio Turnover
The Fund may purchase and sell securities without regard to the
length of time the security is intended to be or has been held. A
100% turnover rate occurs, for example, if all of the Fund's
portfolio securities are replaced during one year. High portfolio
activity (100% or more) increases the Fund's transaction costs,
including brokerage commissions. The Fund anticipates that the
portfolio turnover generally will not exceed 100% annually.
Distribution Plan
The Board of Trustees of the Trust has adopted a distribution plan
(the "Distribution Plan") for the shares of the Fund pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended. As
provided in the Distribution Plan, the Fund will pay an annual fee up
to 0.25% of the average daily net assets of the Fund to the
Distributor. From this amount, the Distributor may make payments to
financial institutions and intermediaries such as banks, savings and
loan associations, insurance companies, investment counselors, and
broker-dealers who assist in the distribution of the shares of the
Fund or provide services with respect to shares of the Fund, pursuant
to service agreements with the Fund. The Distribution Plan is
characterized as a compensation plan because the distribution fee
will be paid to the Distributor without regard to the distribution or
shareholder service expenses incurred by the Distributor or the
amount of payments made to financial institutions and intermediaries.
The Fund intends to operate the Distribution Plan in accordance with
its terms and within the rules of the National Association of
Securities Dealers, Inc. (the "NASD") concerning sales charges.
The fees paid to the Distributor under the Distribution Plan are
subject to review and approval by the Trust's independent Trustees
who have the authority to reduce the fees or terminate the
Distribution Plan at any time. All payments made pursuant to the
Distribution Plan shall be made for the purpose of selling shares
issued by the Fund or servicing shareholder accounts.
How to Purchase Shares
General
Shares of the Fund may be purchased from the Fund at the net asset
value next determined after receipt by the Fund's transfer agent, FPS
Services, Inc. (the "Transfer Agent"), of a purchase order in proper
form. There is no sales load in connection with the purchase of
shares. Shares of the Fund are offered only to residents of states
in which the shares are registered or qualified for sale.
Purchase orders for shares of the Fund that are received by the
Transfer Agent in proper form by the close of the New York Stock
Exchange ("NYSE")(currently 4:00 p.m. Eastern time), on any day that
the NYSE is open for trading, will be purchased at the Fund's next
determined net asset value. Orders for Fund shares received after
4:00 p.m. Eastern time will be purchased at the net asset value
determined on the following business day.
The Fund reserves the right to reject any purchase order or suspend
the offering of shares of the Fund. The Fund also reserves the right
to vary the initial and subsequent investment minimums, or to waive
the minimum investment requirements for any investor. The Fund will
not accept for a purchase order a check which has been endorsed by a
third party.
Purchases By Mail
Before shares of the Fund may be purchased for the first time, please
complete the application accompanying this Prospectus and mail it to
the Transfer Agent, together with a check payable to "The Cruelty
Free Value Fund." The check or money order and application should be
mailed to FPS Services, Inc, 3200 Horizon Drive, P.O. Box 61503, King
of Prussia, PA 19406-0903. If this is an initial purchase, please
send a minimum of $1,000 (also $1,000 for IRA and SEP accounts).
Purchases By Wire Transfer
Before making an initial investment by wire, an investor must first
telephone the Transfer Agent at (800) 892-9626 or (610) 239-4600 in
order to be assigned an account number. The investor's name, account
number, taxpayer identification number or Social Security number and
address must be specified in the wire. In addition, an account
application should be promptly forwarded to: FPS Services, Inc., 3200
Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406-0903.
Shareholders having an account with a commercial bank that is a
member of the Federal Reserve System may purchase shares of the Fund
by requesting their bank to transmit funds by wire to: United
Missouri Bank KC N.A., ABA #10-10-00695/Attention: FPS Services,
Inc., A/C 98-7037-071-9/FBO "The Cruelty Free Value Fund", along with
the shareholder's name and account number as specified on the
shareholder's account registration.
Additional investments may be made at any time through the wire
procedures described above, which must include a shareholder's name
and account number. The shareholder's bank may impose a fee for
investments by wire. The Fund will not be responsible for the
consequence of delays, including delays in the banking or Federal
Reserve wire systems.
Purchases Through Broker-Dealers
The Fund may accept telephone orders only from brokers, financial
institutions or service organizations that have been previously
approved by the Fund. It is the responsibility of such brokers,
financial institutions or service organizations to promptly forward
purchase orders and payments for the same to the Fund. Brokers,
financial institutions, service organizations, banks and bank trust
departments through which an investor purchases shares of the Fund,
may charge the shareholder a transaction fee or other fee for their
services at the time of purchase.
Wire orders for shares of the Fund received by dealers prior to 4:00
p.m. Eastern time, and received by the Transfer Agent before 5:00
p.m. Eastern time on the same day, are confirmed at that day's net
asset value. Orders received by dealers after 4:00 p.m. Eastern
time are confirmed at the net asset value on the following business
day. It is the dealer's obligation to place the order with FPS before
5:00 p.m. Eastern time.
Subsequent Investments
Once an account has been opened, subsequent purchases may be made by
mail, bank wire, automatic investing or direct deposit. The minimum
for subsequent investments is $100 for all accounts.
When making subsequent investments by mail, please return the bottom
portion of a previous confirmation with your investment in the
envelope that is provided with each confirmation statement. Your
check should be made payable to "The Cruelty Free Value Fund" and
mailed to FPS Services, Inc., P.O. Box 412797, Kansas City, Missouri
64141-2797. Orders to purchase shares are effective on the day the
Transfer Agent receives your check or money order.
All investments must be made in U.S. dollars and, to avoid fees and
delays, checks must be drawn only on banks located in the United
States. A charge (minimum of $20) will be imposed if any check used
for the purchase of shares is returned. Investors who purchase Fund
shares by check or money order may not receive redemption proceeds
until there is reasonable belief that the check has cleared, which
may take up to fifteen calendar days after the purchase date. The
Fund and the Transfer Agent each reserves the right to reject any
purchase order in whole or in part. The Fund and the Transfer Agent
will not accept checks which have been endorsed by a third party.
Automatic Investment Plan
Once an account has been opened, a shareholder can make additional
purchases of shares of the Fund through an automatic investment plan.
An investor may authorize the automatic withdrawal of funds from his
or her bank account by opening his or her account with a minimum of
$1,000 and completing the appropriate section on the new account
application enclosed with this Prospectus. Subsequent monthly
investments are subject to a minimum required amount of $50. The
automatic deductions may be made on the 10th, 15th or 20th of the
month and may be made monthly, quarterly, semi-annually or annually.
How to Redeem Shares
Shareholders may redeem their shares of the Fund without being
subject to any redemption charge on any business day that the NYSE is
open for business. Redemptions will be effective at the current net
asset value per share next determined after the receipt by the
Transfer Agent of a redemption request meeting the requirements
described below.
Redemption By Mail
Shareholders may redeem their shares by submitting a written request
for redemption to FPS Services, Inc., 3200 Horizon Drive, P.O. Box
61503, King of Prussia, PA 19406-0903.
A written redemption request to the Transfer Agent must be in good
order, which means that it must: (i) identify the shareholder's
account name and account number; (ii) state the number of shares or
dollar amount to be redeemed and (iii) be signed by each registered
owner exactly as the shares are registered. To prevent fraudulent
redemptions, a signature guarantee for the signature of each person
in whose name an account is registered is required for all written
redemption requests exceeding $10,000 or where proceeds are to be
mailed to an address other than the address of record. A guarantee
may be obtained from any commercial bank, credit union, member firm
of a national securities exchange, registered securities association,
clearing agency or savings and loan association. A credit union
must be authorized to issue signature guarantees. Signature
guarantees will be accepted from any eligible guarantor institution
that participates in a signature guarantee program. Notary public
endorsement will not be accepted. The Transfer Agent may require
additional supporting documents for redemptions made by corporations,
executors, administrators, trustees or guardians and retirement
plans.
A redemption request will not be deemed to be properly received until
the Transfer Agent receives all required documents in proper form.
Questions with respect to the proper form for redemption requests
should be directed to the Transfer Agent at (800) 892-9626 or (610)
239-4600.
Redemption By Telephone
Shareholders who have so indicated on the application, or have
subsequently arranged in writing to do so, may redeem shares by
calling the Transfer Agent at (800) 892-9626 or (610) 239-4600 during
normal business hours. In order to arrange for redemption by wire or
telephone after an account has been opened, or to change the bank or
account designated to receive redemption proceeds, a written request
with a signature guarantee must be sent to the Transfer Agent at the
address listed above, under the caption "Redemption By Mail."
The Fund reserves the right to refuse a wire or telephone redemption
if it is believed advisable to do so. Procedures for redeeming Fund
shares by wire or telephone may be modified or terminated at any
time.
During periods of unusual economic or market changes, telephone
redemptions may be difficult to implement. In such event,
shareholders should follow the procedures for redemption by mail.
General Redemption Information
A redemption request will not be deemed to be properly received until
the Transfer Agent receives all required documents in proper form.
If you have any questions with respect to the proper form for
redemption requests you should contact the Transfer Agent at (800)
892-9626 or (610) 239-4600.
Redemptions will be processed only on a business day during which the
NYSE is open for business. Redemptions will be effective at the
current net asset value per share next determined after the receipt
by the Transfer Agent of a redemption request meeting the
requirements described above. The Fund may, however, delay mailing
the proceeds of a redemption until it is reasonably satisfied that
the check used to pay for the shares has cleared, which may take up
to 15 days after the purchase date. Payment may also be made by
wire directly to any bank previously designated by an investor on his
or her new account application. There is a $9.00 charge for
redemptions made by wire to domestic banks. Wires to foreign or
overseas banks may be charged at higher rates. It should also be
noted that banks may impose a fee for wire services. In addition,
there may be fees for redemptions made through brokers, financial
institutions and service organizations.
Except as noted below, redemption requests received in proper form by
the Transfer Agent prior to the close of regular trading hours on the
NYSE on any business day on which the Fund calculates its net asset
value are effective as of that day. Redemption requests received
after the close of the NYSE will be effected at the net asset value
per share determined on the next business day following receipt.
The Fund will satisfy redemption requests for cash to the fullest
extent feasible, as long as such payments would not, in the opinion
of the Board of Trustees, result in the need for the Fund to sell
assets under disadvantageous conditions or to the detriment of the
remaining shareholders of the Fund. Pursuant to the Fund's Trust
Instrument, however, payment for shares redeemed may also be made in-
kind, or partly in cash and partly in-kind.
The Fund has elected, pursuant to Rule 18f-1 under the 1940
Act to redeem its shares solely in cash up to the lesser of $250,000
or 1% of the net asset value of the Fund, during any 90 day period
for any one shareholder. Any portfolio securities paid or
distributed in-kind would be in readily marketable securities and
valued in the manner described below. See "Net Asset Value." In the
event that an in-kind distribution is made, a shareholder may incur
additional expenses, such as brokerage commissions, on the sale or
other disposition of the securities received from the Fund. In-kind
payments need not constitute a cross-section of the Fund's portfolio.
The Fund may suspend the right of redemption or postpone the date of
payment for more than seven days during any period when (1) trading
on the NYSE is restricted or the NYSE is closed, other than customary
weekend and holiday closings; (2) the Securities and Exchange
Commission has, by order, permitted such suspension; (3) an emergency
exists, as defined by rules of the Securities and Exchange
Commission, making disposal of portfolio investments or determination
of the value of the net assets of the Fund not reasonably
practicable.
Shares of the Fund may be redeemed through certain brokers, financial
institutions, service organizations, banks, and bank trust
departments who may charge the investor a transaction or other fee
for their services at the time of redemption. Such additional
transaction fees would not otherwise be charged if the shares were
redeemed directly from the Fund.
Minimum Balances
Due to the relatively high cost of maintaining smaller accounts, the
Fund reserves the right to involuntarily redeem shares in any account
at its then current net asset value (which will be promptly paid to
the shareholder) if at any time the total investment does not have a
value of at least $500 as a result of redemptions, but not market
fluctuations. A shareholder will be notified that the value of his
or her account is less than the required minimum and such shareholder
will be allowed at least 60 days to bring the value of his or her
account up to the minimum before the redemption is processed.
Telephone Purchases
The Fund only accepts telephone purchases from brokers, financial
institutions or service organizations; individuals are not able to
make purchases by telephone.
Telephone Redemptions
Shareholders who wish to redeem their shares by telephone must first
elect the option, as described above. Neither the Fund nor any of
its service contractors will be liable for any loss or expense in
acting upon telephone instructions that are reasonably believed to be
genuine. In this regard, the Fund and the Transfer Agent require
personal identification information before accepting a telephone
redemption. To the extent that the Fund or the Transfer Agent fails
to use reasonable procedures to verify the genuineness of telephone
instructions, the Fund may be liable for losses due to fraudulent or
unauthorized instructions. The Fund reserves the right to refuse a
telephone redemption if it is believed advisable to do so. Written
confirmation will be provided for all redemption transactions
initiated by telephone. Proceeds from a telephone redemption shall
only be sent to the shareholder's address of record or wired to the
shareholder's bank account on file with the Transfer Agent.
NET ASSET VALUE
The net asset value per share is calculated as of the date of this
Prospectus, once daily as of the close of regular trading on the
NYSE, currently 4:00 p.m. Eastern time. Currently, the NYSE is
closed on the following holidays or days on which the following
holidays are observed: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas.
The net asset value per share is computed by adding the value of all
securities and other assets in the portfolio, deducting any
liabilities, and dividing by the total number of outstanding shares.
Expenses are accrued daily and applied when determining the net asset
value. The Fund's equity securities are valued based on market
quotations or, when no market quotations are available, at fair value
as determined in good faith by, or under the direction of, the Board
of Trustees. Market quotations are generally the last reported sales
price on the principal exchange on which the security trades, or if
no sale price is reported, the mean of the latest bid and asked
prices is used. Securities traded over-the-counter are priced at the
mean of the latest bid and asked prices. When market quotations are
not readily available, securities and other assets are valued at fair
value as determined in good faith by the Board of Trustees.
Securities are valued through valuations obtained from a commercial
pricing service or at the most recent mean of the bid and asked
prices provided by investment dealers in accordance with procedures
established by the Board of Trustees.
Short-term investments having a maturity of 60 days or less are
valued at amortized cost, which the Board of Trustees believes
represents fair value. When a security is valued at amortized cost,
it is valued at its cost when purchased, and thereafter by assuming a
constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market
value of the instrument. All other securities and other assets are
valued at their fair value as determined in good faith under
procedures established by and under the supervision of the Board of
Trustees.
DIVIDENDS AND TAXES
Dividends
The Fund intends to distribute its net investment income, if any,
annually. Any net gain realized from the sale of portfolio
securities also will be distributed at least annually unless it is
used to offset losses carried forward from prior years, in which case
no such gain will be distributed. Such income dividends and capital
gain distributions are reinvested automatically in additional shares
at net asset value, unless a shareholder elects to receive them in
cash. Distribution options may be changed by writing to the Fund any
time prior to the dividend record date.
Any check tendered in payment of dividends or other distributions
which cannot be delivered by the post office or which remains
uncashed for a period of more than one year may be reinvested in the
shareholder's account at the then current net asset value, and the
dividend option may be changed from cash to reinvest. Dividends are
reinvested on the ex-dividend date at the net asset value determined
at the close of business on that date. Dividends and distributions
are treated the same for tax purposes whether received in cash or
reinvested in additional shares. Please note that shares purchased
shortly before the record date for a dividend or distribution may
have the effect of returning capital although such dividends and
distributions are subject to taxes.
Taxes
The Fund intends to conduct its operations so as to qualify as a
"regulated investment company" for purposes of the Internal Revenue
Code of 1986, as amended (the "Code"), which will relieve the Fund of
any liability for federal income tax to the extent that its earnings
and net realized capital gains are distributed to shareholders. To
so qualify, the Fund will, among other things, limit its investments
so that, at the close of each quarter of its taxable year, (i) not
more than 25% of the market value of the Fund's total assets will be
invested in the securities of any single issuer and (ii) with respect
to at least 50% of the market value of its total assets, not more
than 5% of the market value of its total assets will be invested in
the securities of any single issuer, and the Fund will not own more
than 10% of the outstanding voting securities of any single issuer.
An investment in the Fund has certain tax consequences, depending on
the type of account. The Fund intends to distribute all of its net
investment income and net realized gains to shareholders.
Distributions are subject to federal income tax and may also be
subject to state and local income taxes. Distributions are generally
taxable when they are paid, whether in cash or by reinvestment in
additional shares, except that distributions declared in October,
November or December and paid in the following January are taxable as
if they were paid on December 31. If you have a qualified retirement
account, taxes are generally deferred until distributions are made
from the retirement account.
For federal income tax purposes, income dividends and short-term
capital gain distributions are taxed as ordinary income.
Distributions of net capital gains (the excess of net long-term
capital gain over net short-term capital loss) are usually taxed as
long-term capital gains, regardless of how long a shareholder has
held the Fund's shares. The tax treatment of distributions of
ordinary income or capital gains will be the same whether the
shareholder reinvests the distributions or elects to receive them in
cash.
Shareholders may be subject to a 31 percent back-up withholding on
reportable dividend and redemption payments if a certified taxpayer
identification number is not on file with the Fund, or if to the
Fund's knowledge, an incorrect number has been furnished. An
individual's taxpayer identification number is his/her social
security number.
Shareholders will be advised annually of the source and tax status of
all distributions for federal income tax purposes. Information
accompanying a shareholder's statement will show the portion of those
distributions that are not taxable in certain states. Further
information regarding the tax consequences of investing in the Fund
is included in the Statement of Additional Information. The above
discussion is intended for general information only. Investors
should consult their own tax advisers for more specific information
on the tax consequences of particular types of distributions.
The Fund intends to make sufficient distributions prior to the end of
each calendar year in order to avoid liability for federal excise
tax.
Sale or redemption of the Fund's shares is a taxable event to the
shareholder.
PERFORMANCE INFORMATION
Performance information such as total return for the Fund may be
quoted in advertisements or in communications to shareholders. Such
performance information may be useful in reviewing the performance of
the Fund and for providing a basis for comparison with other
investment alternatives. However, because the net investment return
of the Fund changes in response to fluctuations in market conditions,
interest rates and Fund expenses, any given performance quotation
should not be considered representative of the Fund's performance for
any future period. The value of an investment in the Fund will
fluctuate and an investor's shares, when redeemed, may be worth more
or less than their original cost.
The Fund's total return is the change in value of an investment in
the Fund over a particular period, assuming that all distributions
have been reinvested. Thus, total return reflects not only income
earned, but also variations in share prices at the beginning and end
of the period. Average annual return reflects the average percentage
change per year in the value of an investment in the Fund. Aggregate
total return reflects the total percentage change over the stated
period. Please refer to the Statement of Additional Information for
more information on performance.
GENERAL INFORMATION
The Trust
The Trust is an open-end management investment company organized as a
business trust under the laws of the State of Delaware. The Trust is
organized to offer separate series of shares and is currently
offering a single series of shares called The Cruelty Free Value
Fund.
Trustees and Officers of the Fund
The Trustees of the Fund oversee the operation of the Fund. The
officers of the Fund who are employees or officers of the Advisor
serve without compensation from the Fund.
Description of Shares
The Trust is authorized to issue an unlimited number of shares of
beneficial interest with no par value. Shares of the Fund represent
equal proportionate interests in the assets of the Fund only, and
have identical voting, dividend, redemption, liquidation and other
rights. All shares issued are fully paid and non-assessable, and
shareholders have no preemptive or other right to subscribe to any
additional shares. Currently, there is one class of shares issued by
the Fund. The validity of the shares of beneficial interest offered
by this prospectus will be passed on by Kirkpatrick & Lockhart LLP,
1800 Massachusetts Avenue, N.W., Washington, DC 20036-1800. All
accounts will be maintained in book entry form and no share
certificates will be issued.
Voting Rights
A shareholder is entitled to one vote for each full share held and a
fractional vote for each fractional share held. All shares of the
Fund participate equally in regard to dividends, distributions, and
liquidations with respect to the Fund. Shareholders do not have
preemptive, conversion or cumulative voting rights.
Shareholder Meetings
The Trustees are not required, and do not intend, to hold annual
meetings of shareholders. The Trustees have undertaken to the SEC,
however, that they will promptly call a meeting of shareholders for
the purpose of voting upon the question of removal of any Trustee
when requested to do so by holders of not less than 10% of the
outstanding shares of the Fund. In addition, subject to certain
conditions, shareholders of the Fund may apply to the Fund to
communicate with other shareholders to request a shareholders'
meeting to vote upon the removal of a Trustee or Trustees.
Shareholder Reports and Inquiries
The Fund issues unaudited financial information semiannually and
audited financial statements annually. Shareholder inquiries should
be addressed to the Fund c/o Beacon Global Advisors, Inc., 8260
Greensboro Drive, Suite 250, McLean, Virginia 22102-3801 (800)
662-9992 or (703) 883-0865. Purchase and redemption transactions
should be made through the Transfer Agent by calling (800) 892-9626
or (610) 239-4600.<PAGE>
ACCOUNT APPLICATION FORM
THE CRUELTY FREE VALUE FUND
A. Initial Investment
Indicate amount of investment:
The minimum initial investment is $1,000 and subsequent purchases
must be at least $100. Amount of Investment: $____________
__ Enclosed is my check (payable to The Cruelty Free Value Fund)
__ Bank wire sent (Instructions to be provided upon establishment of
account)
B. REGISTRATION (Please Print)
(Complete one)
__Individual (Use line 1) __Joint Account (use lines 1 & 2)
__Gift/Transfer to Minor (Use lines 3, 4, & 5)
__Corporations, Partnerships, Trusts and Others (Use lines 6 & 7)
1. Individual
First name Middle Initial Last Name
Social Security # U.S. Citizen __ Yes __ No
2. Joint Tenant
First Name Middle Initial Last Name
Social Security # U.S. Citizen __ Yes __ No
Country of Citizenship
Check one: __ Joint Tenancy (Right of Survivorship)
__ Tenants in Common
3. Uniform Gift/Transfer to Minors
Name of Custodian (name one only)
4. Minor's Name
5. Under the ___________ UGMA/UTMA
State
As Custodian For (name one only) Minor's Social Security #
6. Corporations, Partnerships, Trusts and Others
Corporation or Entity name ___________________
Please attach a copy of a Corporate Resolution
Tax ID Number _________________
7. Type of Registration
__ Corporation __ Partnership __ Other sponsored IRA &
Retirement Plans __ Other
C. MAILING ADDRESS
____________________________________________________________________
Street Address & Apt. # City State Zip
Daytime Phone Number ( )
Evening Phone Number ( )
Duplicate Confirmation Statement sent to:___________________________
__ Please check here if this is a modification to an existing
account. Existing account number: ______________.
D. DIVIDEND OPTIONS
Check one only: if none are checked all dividend income and
capital gains, if any, will be reinvested.
[ ] All dividend income and capital gains reinvested.
[ ] All dividend income and capital gains paid by check.
[ ] Dividend income paid by check and capital gains reinvested.
E. TELEPHONE PRIVILEGE
Proceeds of telephone redemption requests are paid by check and
mailed to the address of record or wired to your bank account.
I (we)authorize FPS Services to act upon instructions received
by telephone from me (us) to redeem shares. Neither the Fund nor FPS
Services will be liable for properly acting upon telephone
instructions believed to be genuine. Please attach a voided personal
check and complete below.
__________________________________________________________________
Name of Bank City State Branch Office
____________________________________________________________________
Bank Routing Number Bank Account Number
F. CUSTOMER AGREEMENT
1. I(we) have full right, power, authority and legal capacity, and
am(are) of legal age in my (our) state of residence to purchase
shares of the Fund. I (We) affirm that I (we) have received and read
the current prospectus of the Fund and agree to its terms. I(We)
understand the investment objectives and program, and have determined
that the Fund is a suitable investment, based upon my (our)
investment needs and financial situation. I(We) agree that FPS
Services or any of their affiliate officers, directors or employees
will not be liable for any loss, expense or cost for acting upon any
instructions or inquiries believed genuine.
2. I(We) understand and acknowledge that a return on the selected
fund(s) is not guaranteed.
3. This Agreement shall be governed by the laws of the Commonwealth
of Pennsylvania.
G. SIGNATURES
Taxpayer Identification Number Certification. Under penalties of
perjury, I(we) certify the following:
1. I(We) certify that the number shown on this form is my(our)
correct tax identification number.
2. I(We) am not (are not) subject to back-up withholding as a result
of a failure to report all interest and dividends, or the Internal
Revenue Service has notified me (us) that I (we) are no longer
subject to back-up withholding.
The Internal Revenue Service does not require your consnt to any
provisions of this document other than the certifications required to
avoid back-up withholding.
__________________________________________________ _____
Signature [ ] Owner [ ] Custodian Date
[ ] Trustee
__________________________________________________ ______
Signature of Joint Owner (if applicable) Date
__ Check box if you have been notified by the IRS that you are
subject to back-up withholding.
Mail completed application forms to:
The Cruelty Free Value Fund
FPS Services, Inc.
3200 Horizon Boulevard
P.O. Box 61503
King of Prussia, PA 19406-0903
For assistance call (800) 892-9626
<PAGE>
INVESTMENT ADVISER
Beacon Global Advisors, Inc.
8260 Greensboro Drive, Suite 250
McLean, Virginia 22102-3801
(800) 662-9992
(703) 883-0865
DISTRIBUTOR
Beacon Global Advisors, Inc.
8260 Greensboro Drive, Suite 250
McLean, Virginia 22102-3801
(800) 662-9992
(703) 883-0865
SHAREHOLDER SERVICES
FPS Services, Inc.
3200 Horizon Drive, P.O. Box 61503
King of Prussia, Pennsylvania 19406-0903
(800) 892-9626
(610) 239-4600
CUSTODIAN
The Bank of New York
48 Wall Street
New York, New York
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, DC 20036-1800
AUDITORS
Ernst & Young LLP
1225 Connecticut Avenue, N.W.
Washington, DC 20036
For Additional Information about
The Cruelty Free Value Fund call (800) 892-9626
http://www.crueltyfree.com
<PAGE>
THE CRUELTY FREE VALUE FUND
STATEMENT OF ADDITIONAL INFORMATION
April 8, 1997
This Statement of Additional Information dated April 8, 1997 is
not a prospectus but should be read in conjunction with the
Prospectus describing The Cruelty Free Value Fund (the "Fund") dated
April 8, 1997. The Prospectus may be amended or supplemented
from time to time. No investment in shares should be made without
first reading the Prospectus. This Statement of Additional
Information is intended to provide additional information regarding
the activities and operations of the Fund, and should be read in
conjunction with the Prospectus. A copy of the Prospectus may be
obtained without charge from Beacon Global Advisors, Inc. (the
"Advisor" and "Distributor") at the address and telephone number
below.
Distributor: Investment Advisor:
Beacon Global Advisors, Inc. Beacon Global Advisors, Inc.
8260 Greensboro Drive, Suite 250 8260 Greensboro Drive, Suite 250
McLean, Virginia 22102-3801 McLean, Virginia 22102-3801
(800) 662-9992 (800) 662-9992
(703) 883-0865 (703) 883-0865
No person has been authorized to give any information or to make any
representations not contained in this Statement of Additional
Information or in the Prospectus in connection with the offering made
by the Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by
the Trust or its distributor. The Prospectus does not constitute an
offering by the Trust or by the distributor in any jurisdiction in
which such offering may not lawfully be made.
<PAGE>
TABLE OF CONTENTS
Page
The Trust and the Fund . . . . . . . . . . . . . . . . . . 34
Investment Policies and Techniques . . . . . . . . . . . . 34
Common Stock. . . . . . . . . . . . . . . . . . . . . . 34
Preferred Stock . . . . . . . . . . . . . . . . . . . . 34
Securities Lending. . . . . . . . . . . . . . . . . . . 35
Illiquid Securities . . . . . . . . . . . . . . . . . . 35
Short Sales . . . . . . . . . . . . . . . . . . . . . . 35
Rule 144A Securities. . . . . . . . . . . . . . . . . . 35
Borrowing . . . . . . . . . . . . . . . . . . . . . . . 35
Other Investments . . . . . . . . . . . . . . . . . . . 35
Investment Restrictions. . . . . . . . . . . . . . . . . . 36
Investment Advisory and Other Services
Investment Advisory Agreement . . . . . . . . . . . . . 37
Sub-Advisory Agreements.. . . . . . . . . . . . . . . . 38
Administrator, Transfer Agent and Fund Accountant . . . 38
Distributor . . . . . . . . . . . . . . . . . . . . . . 39
Trustees and Officers. . . . . . . . . . . . . . . . . . .40
Net Asset Value. . . . . . . . . . . . . . . . . . . . . .44
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . .45
Federal Income Tax. . . . . . . . . . . . . . . . . . .45
Portfolio Transactions . . . . . . . . . . . . . . . . . .45
Performance Information
In General. . . . . . . . . . . . . . . . . . . . . . .46
Total Return Calculation. . . . . . . . . . . . . . . .47
Performance and Advertisements . . . . . . . . . . . .48
Other Information. . . . . . . . . . . . . . . . . . . . .48
Financial Statements . . . . . . . . . . . . . . . . . . .49<PAGE>
THE TRUST AND THE FUND
This Statement of Additional Information relates to The Cruelty Free
Value Fund (the "Fund"), a separate series of Beacon Global Advisors
Trust (the "Trust"), a diversified, open-end management company
established on August 29, 1996 under Delaware law as a Delaware
business trust. The Trust Instrument permits the Trust to offer
separate series of shares of beneficial interest. The Trust
currently is comprised of one series, which offers its shares through
one class of shares. To the extent that the Trust is a newly formed
entity, it has no prior history.
Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectus. No
investment in shares of the Fund should be made without first reading
the Prospectus.
INVESTMENT POLICIES AND TECHNIQUES
The following supplements the information contained in the Prospectus
for the Fund regarding the permitted investments and risk factors and
the investment objective and policies of the Fund. Although the Fund may
engage in or purchase the securities or investment practices noted below, the
Fund has no current intention to lend securities, purchase illiquid
securities, purchase Rule 144A securities or borrow securities during the
coming year.
Common Stock
Common stock is defined as shares of a corporation that entitle the
holder to a pro rata share of the profits of the corporation, if any,
without a preference over any other shareholder or class of
shareholders, including holders of the corporation's preferred stock
and other senior equity. Common stock usually carries with it the
right to vote, and frequently, an exclusive right to do so. Holders
of common stock also have the right to participate in the remaining
assets of the corporation after all other claims, including those of
debt securities and preferred stock, are paid.
Preferred Stock
Generally, preferred stock receives dividends prior to distributions
on common stock and usually has a priority of claim over common
stockholders if the issuer of the stock is liquidated. Unlike common
stock, preferred stock does not usually have voting rights; preferred
stock, in some instances, is convertible into common stock. In order
to be payable, dividends on preferred stock must be declared by the
issuer's Board of Directors or Trustees. Dividends on the typical
preferred stock are cumulative, causing dividends to accrue even if
not declared by the issuer. There is, however, no assurance that
dividends will be declared by the issuers of the preferred stocks in
which the Fund invests.
Securities Lending
The Fund may lend portfolio securities to broker-dealers and
financial institutions provided that (1) the loan is secured
continuously by collateral marked-to-market daily, and maintained in
an amount at least equal to the current market value of the
securities loaned; (2) the Fund may call the loan at any time and
receive the securities loaned; (3) the Fund will receive any interest
or dividends paid on the loaned securities and (4) the aggregate
market value of securities loaned by the Fund will not at any time
exceed 33% of the total assets of the Fund.
Collateral will consist of U.S. government securities, cash
equivalents or irrevocable letters of credit. Loans of securities
involve a risk that the borrower may fail to return the securities or
may fail to maintain the proper amount of collateral. Therefore, the
Fund will only enter into portfolio loans after a review by the
Advisor, under the supervision of the Board of Trustees, including a
review of the creditworthiness of the borrower. Such reviews will be
monitored on an ongoing basis.
Illiquid Securities
The Board of Trustees has delegated the function of making day-to-day
determinations of liquidity to the Advisor or Subadvisor pursuant to
guidelines approved by the Board of Trustees. The Advisor will
monitor the liquidity of securities held by the Fund, and report
periodically on such determinations to the Board of Trustees. The
Fund will not invest more than 15% of its net assets in illiquid
securities (securities that may not be sold within seven days at
approximately the price used in determining the net asset value of
Fund shares), including restricted securities. See "Rule 144A
Securities" below.
Short Sales
To secure the Fund's obligation to replace any borrowed security, it
will place in a segregated account, an amount of cash or liquid
securities equal to the difference between the market value of the
securities sold short at the time of the short sale, and any cash or
liquid securities originally deposited with the broker in connection
with the short sale (excluding the proceeds of the short sale). The
Fund will thereafter maintain daily the segregated amount at such a
level that the amount deposited in it plus the amount originally
deposited with the broker as collateral will equal the greater of the
current market value of the securities sold short, or the market
value of the securities at the time they were sold short.
Rule 144A Securities
The Fund may invest in securities that are exempt from the
registration requirements of the Securities Act of 1933 pursuant to
Securities Exchange Commission ("SEC") Rule 144A. Those securities,
purchased pursuant to Rule 144A, are traded among qualified
institutional buyers, and may be subject to the Fund's limitation on
illiquid investment.
Investing in securities under Rule 144A could have the effect of
increasing the levels of the Fund's illiquidity to the extent that
qualified institutional buyers become, for a time, uninterested in
purchasing these securities. The Fund will limit its investments in
securities of issuers which the Fund is restricted from selling to
the public without registration under the Securities Act of 1933 to
no more than 5% of the Fund's net assets, excluding restricted
securities eligible for resale pursuant to Rule 144A that have been
determined to be liquid by the Fund's Board of Trustees.
Borrowing
The Fund may borrow money as a temporary measure for extraordinary
purposes or to facilitate redemptions. The Fund will not purchase
securities while its borrowings exceed 5% of its total assets. The
Fund has no intention of increasing its net income through borrowing.
Any borrowing will be done from a bank with the required asset
coverage of at least 300%.
Other Investments
Subject to prior disclosure to shareholders, the Board of Trustees
may, in the future, authorize the Fund to invest in securities other
than those listed here and in the prospectus, provided that such
investment would be consistent with the Fund's investment objective,
and that it would not violate any fundamental investment policies or
restrictions applicable to the Fund.
INVESTMENT RESTRICTIONS
The investment restrictions set forth below are fundamental
restrictions and may not be changed without the approval of a
majority of the outstanding voting shares (as defined in the 1940
Act) of the Fund. Unless otherwise indicated, all percentage
limitations listed below apply only at the time of the transaction.
Accordingly, if a percentage restriction is adhered to at the time of
investment, a later increase or decrease in the percentage which
results from a relative change in values or from a change in the
Fund's total assets will not be considered a violation.
Except as set forth under "INVESTMENT OBJECTIVE AND POLICIES" and
"DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS" in the
Prospectus, the Fund may not:
1. as to 75% of the Fund's total assets, invest more than 5%
of its total assets in the securities of any one issuer.
(This limitation does not apply to cash and cash items,
securities of investment companies, and obligations
issued or guaranteed by the U.S. government, its agencies
or instrumentalities).
2. invest 25% or more of the value of the Fund's total assets
in one particular industry.
3. issue senior securities or borrow money, except the Fund
may borrow from banks (i) for temporary or emergency
purposes in an amount not exceeding 5% of the Fund's
assets or (ii) to meet redemption requests that might
otherwise require the untimely disposition of portfolio
securities, in an amount up to 33% of the value of the
Fund's total assets (including the amount borrowed)
valued at market less liabilities (not including the
amount borrowed) at the time the borrowing was made.
While borrowing exceeds 5% of the value of the Fund's
total assets, the Fund will not purchase securities.
Interest paid on borrowing will reduce net income.
4. pledge, hypothecate, mortgage or otherwise encumber its
assets, except in an amount up to 33% of the value of
its net assets but only to secure borrowing for temporary
or emergency purposes, such as to effect redemptions.
5. make loans, except through loans of securities, provided
that, for purposes of this restriction, the acquisition of
bonds, debentures, other debt securities or instruments, or
participations or other interest therein and investments in
government obligations, commercial paper, certificates of
deposit, bankers' acceptances or similar instruments will
not be considered the making of a loan.
6. engage in the business of underwriting the securities of
others, except to the extent that the Fund might be
considered an underwriter under the Federal securities
laws in connection with its disposition of securities.
7. purchase or sell real estate (except that investments in
securities of issuers that invest in real estate or other
instruments supported by interests in real estate are not
subject to this limitation, and except that the Fund may
exercise rights under agreements relating to such
securities, including the right to enforce security
interests to hold real estate acquired by reason of such
enforcement until that real estate can be liquidated in
an orderly manner).
8. purchase or sell commodities or commodity futures
contracts unless acquired as a result of owning
securities or other instruments.
The following investment limitations, which are not fundamental and
may be changed by the Fund's Board of Trustees without shareholder
approval, provide that the Fund may not:
(i) purchase securities on margin.
(ii) purchase securities of other investment companies.
(iii) invest or sell interests in oil, gas or other mineral
exploration or development programs or leases.
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Advisory Agreement
The Fund and the Advisor have entered into an investment advisory
agreement (the "Investment Advisory Agreement"). The Investment
Advisory Agreement provides that the Advisor shall not be protected
against any liability to the Fund or its shareholders if it has
engaged in conduct constituting willful misfeasance, bad faith or
gross negligence on its part in the performance of its duties or from
reckless disregard of its obligations or duties thereunder.
The continuance of the Investment Advisory Agreement, after the first
two years, must be specifically approved at least annually (i) by the
vote of the Trustees or by a vote of the shareholders of Fund, and
(ii) by the vote of a majority of the Trustees who are not parties to
the Investment Advisory Agreement or "interested persons" of any
party thereto, cast in person at a meeting called for the purpose of
voting on such approval. The Investment Advisory Agreement will
terminate if assigned, and is terminable at any time without penalty
by the Trustees of the Fund, or by a majority of the outstanding
shares of the Fund on 60 days' written notice to the Advisor.
Subadvisory Agreements
The Advisor has entered into a Subadvisory Agreement with Zurich
Investment Management, Inc. ("ZIM") and ZIM has entered into a
Subadvisory Agreement with Dreman Value Advisors, Inc. ("Dreman" or
the "Subadvisor") to assist in the selection and management of the
Fund's investment securities. It is the responsibility of the
Subadvisor, under the direction of the Advisor, to make the
day-to-day investment decisions for the Fund, and to place the
purchase and sale orders for the portfolio transactions of the Fund,
consistent with the Animal Policy established by the Advisor and
subject to the general direction of the Advisor. The Advisor will
review proposed investments and the portfolio to ensure compliance
with the Fund's guidelines regarding the humane treatment of animals
and will instruct the Subadvisor as to how to implement these
guidelines.
For its services, ZIM receives from the Advisor and pays to Dreman an
annual fee equal to 0.50% of the first $50 million of the Fund's
average daily net assets, 0.35% of the Fund's average daily net
assets from $50 million to $100 million, and 0.25% of the Fund's
average daily net assets in excess of $100 million.
The continuance of the respective subadvisory agreements, after the
first two years, must be specifically approved at least annually (i)
by the vote of the Trustees or by a vote of the shareholders of Fund,
and (ii) by the vote of a majority of the Trustees who are not
parties to the respective subadvisory agreements or "interested
persons" of any party thereto, cast in person at a meeting called for
the purpose of voting on such approval. The subadvisory agreement
between ZIM and the Advisor will terminate if assigned, and is
terminable at any time without penalty by the Advisor, ZIM or by the
Trustees of the Fund, or by a majority of the outstanding shares of
the Fund on 60 days' written notice to the Advisor, Zim or the Fund.
The subadvisory agreements among the Advisor, Zim and Dreman
terminate by operation of law if assigned, and may be terminated at
any time without penalty by ZIM, Dreman or the Advisor on 60 days'
written notice by any party. The subadvisory agreement between ZIM
and Dreman will automatically terminate in the event of the
termination of the subadvisory agreement between ZIM and the Advisor.
Service Provider to the Trust
FPS Services, Inc. ("FPS"), 3200 Horizon Drive, P.O. Box 61503, King of
Prussia, Pennsylvania 19406-0903 has been engaged by the Trust to provide most
of the back office services on the Trust's behalf. Pursuant to an agreement
entitled "Multiple Services Agreement" (the "Agreement"), FPS provides the
services commonly and separately referred to as: Fund Administration, Fund
Accounting, Transfer Agency and Custody Administration. The Agreement was
approved by the Board of Trustees at the organizational meeting of the Trust
which was held on January 27, 1997. The management of the Trust oversees FPS
in the fulfillment of its obligations under the Agreement and FPS reports to
the Board on a quarterly basis with regard to those obligations.
Included among the many tasks which FPS performs on behalf of the Trust are:
(1) coordination and monitoring, through the Fund Administration function the
activities of any other third party service provider providing services to the
Fund (e.g. the Fund's independent auditors, printers, etc.);
(2) providing the Fund with necessary office space, telephones and other
communications facilities and personnel competent to perform the
responsibilities under the Agreement;
(3) maintenance of such books and records of the Fund as may be
required by applicable federal or state law;
(4) prepares and, after approval by the Fund, files and arranges for the
distribution of proxy materials and periodic reports to shareholders of the
Fund as required by applicable law;
(5) prepares and, after approval by the Fund, arranges for the filing of such
registration statements and other documents with the U.S. Securities and
Exchange Commission and any other federal or state regulatory authorities as
may be required by applicable law;
(6) reviews and submits to the officers of the Fund for their approval
invoices or other requests for payment of the Fund's expenses and instructs
the Custodian to issue checks in payment thereof; and
(7) takes such other action with respect to the Fund as may be deemed
necessary by FPS to appropriately perform its duties under the Agreement.
Pursuant to the Agreement, FPS receives a fee for performing Administrative
Services at the greater of a flat fee of $55,000 as compared to an asset based
fee computed at the annual rate of 0.15% of the first $50 million of total
average net assets, 0.10% of the next $50 million of total average net assets
and 0.05% of total net assets in excess of $100 million.
FPS also receives fees under the Agreement for providing the other services
mentioned.
Distributor
Beacon Global Advisors, Inc. serves as the Fund's Distributor
pursuant to a Distribution Agreement (the "Distribution Agreement").
Shares of the Fund are subject to a distribution plan (the
"Distribution Plan") pursuant to Rule 12b-1 under the 1940 Act. As
provided in the Distribution Plan, the Fund will pay an annual fee of
0.25% of the Fund's average daily net assets to Beacon Global
Advisors, Inc. as compensation for its services. From this amount,
Beacon Global Advisors, Inc. may make payments to financial
institutions and intermediaries such as banks, savings and loan
associations, insurance companies, investment counselors and
broker-dealers as compensation for services, reimbursement of
expenses incurred in connection with distribution assistance or
provision of shareholder services. The Distribution Plan is
characterized as a compensation plan because the distribution fee
will be paid to the distributor without regard to the distribution or
shareholder service expenses incurred by Beacon Global Advisors, Inc.
or the amount of payments made to financial institutions and
intermediaries. The Fund intends to operate the Distribution Plan in
accordance with its terms and within the rules of the National
Association of Securities Dealers, Inc. concerning sales charges.
Pursuant to such rules, the distributor is required to limit
aggregate initial sales charges and asset-based sales charges to
6.25% of total gross sales.
The Distribution Plan will continue in effect from year to year,
provided that each such continuance is approved at least annually by
a vote of the Board of Trustees, including a majority vote of the
Trustees who are not parties to the Distribution Plan or "interested
persons" of any party thereto ("Disinterested Trustees"), cast in
person at a meeting called for the purpose of voting on such
continuance. The Distribution Plan may be terminated at any time,
without penalty, by vote of a majority of the Disinterested Trustees
or by vote of the holders of a majority of the outstanding shares of
the Fund on not more than 60 days', nor less than 30 days' written
notice to any other party to the Distribution Plan. The Distribution
Plan may not be amended to increase materially the amounts to be
spent for the services described herein without approval by the
shareholders, and all material amendments are required to be approved
by the Board of Trustees. The Distribution Plan will automatically
terminate in the event of its assignment. Pursuant to the
Distribution Plan, the Board of Trustees will review at least
quarterly a written report of the distribution expenses incurred on
behalf of the Fund. The report will include an itemization of the
distribution expenses and the purpose of such expenditures.
TRUSTEES AND OFFICERS
The Trustees and executive officers of the Fund and their principal
occupations for the last five years are set forth below. Each
Trustee who is an "interested person" of the Fund, as that term is
defined in the 1940 Act, is indicated by an asterisk.
Position
Name Age with Fund Principal Occupation
Louis T.
Donatelli 63 Trustee President and sole stockholder of
Donatelli & Klein, Inc., an
investment company specializing
in real estate development and
corporate acquisitions including
television properties. Mr.
Donatelli has a long career in
the investment business,
beginning in 1956 at Harris Upham
& Co. In 1963, he joined Hayden,
Stone & Company, a New York Stock
Exchange member firm, and
achieved Partner status by 1968.
Mr. Donatelli founded Donatelli &
Klein, Inc. in 1974. Mr.
Donatelli holds a Bachelor of
Science degree from Villanova
University and has a graduate
degree in Business Management
from American University. Mr.
Donatelli is has been a member of the
Board of Trustees of the Rushmore
Natural Gas Index Fund since 1992. He
previously served as
a member of the Board of Trustees
at Villanova University and is a
Knight of Malta.
Caroline D.
Gabel 55 Trustee Senior Policy Advisor to a member
of the House of Representatives
since 1970. In this capacity,
she is responsible for
legislation within the
jurisdiction of the House
Committee on Transportation and
Infrastructure, including the
Clean Water Act, Superfund,
aviation, highways, mass transit,
water resources, railroads and
economic development. Ms. Gabel
currently serves as a member of
the Boards of Directors of
Orangutan Foundation
International and Defenders of
Wildlife and is a member of the
Board of Trustees of The
Washington Opera. She is on the
Board of Advisors of the National
Zoological Park and the
Smithsonian Institution and is a
member of the Directors' Circle
and Friends of the National Zoo.
Ms. Gabel is a graduate of
Wellesley College where she
received a Bachelor of Arts
degree in French, and of the
University of Pennsylvania, where
she received an MBA degree in
International Relations.
Robert J. 47 Executive Vice Founder and Managing Director of
Henrich, Jr.* President, Beacon Global Advisors, Inc. Mr.
Treasurer Henrich served as a First Vice
& Trustee President with E.F. Hutton & Co.
and Paine Webber, Inc. from 1979
through 1994. Before joining
E.F. Hutton, Mr. Henrich was a
pension plan consultant with
Jefferson Standard Insurance
Company. Mr. Henrich received
his Bachelor of Science degree in
Geology from the University of
Maryland and earned his MBA
degree from the Florida Institute
of Technology.
Peter G. 67 Trustee Engineering consultant to the
Koltnow American Trucking Associations
and Board Member of the ATA
Foundation since 1991. He is a
life member of the American
Society of Civil Engineers and
served as Chairman of the
Executive Committee of the
Transportation Research Board of
the National Research Council in
1979. Mr. Koltnow was counselor
to the President of the American
Trucking Association from 1985
through 1990. He was President
of the Highway Users Federation
from 1974 to 1985, and Vice
President of this same
organization from 1970 to 1974.
From 1953 to 1967, he held
traffic engineering positions in
Dayton, Ohio and Fresno, and Los
Angeles, California. Mr. Koltnow
has spent his entire working
career in the civil engineering
field. Mr. Koltnow has served as
a trustee on the Board of
Directors of the following mutual
funds: Growth Fund of Washington,
the GEICO Government Securities
Cash Fund and the GEICO Qualified
Dividend Fund. He was the co-founder
and first President of
the Candlelighters, an
international organization
providing education and support
to families faced with childhood
cancers, from 1970 through 1971.
He is a former board member of
the D.C. Division of the American
Cancer Society. Mr. Koltnow
received his Bachelor of Science
degree from Antioch College and
his Master of Science degree in
civil engineering from the
University of California at
Berkeley, California.
Richard A. 64 President Principal Officer for the Richard
Ollen* and Chairman Ollen Management Co. since 1993
of the Board and is also a Director and
Registered Principal of Beacon
Global Advisors, Inc. since 1995.
Mr. Ollen was past President and
Director of American Guaranty &
Trust Company, Wilmington,
Delaware from 1991 through 1993.
Prior to that, he was President
and Director of GEICO Investment
Services Company from 1981
through 1991. Mr. Ollen was
formerly Chairman and President
(1985 through 1991) for the Board
of The Growth Fund of Washington
and President and Trustee of
Government Securities Cash Fund
and GEICO Qualified Dividend Fund
(1982 through 1991). Prior to
joining GEICO, Mr. Ollen served
as President and Director (1970
through 1978) and as Vice
President (1965 through 1970) of
the Massachusetts Company
Distributors, Inc., a subsidiary
of the Massachusetts Company, one
of the oldest corporate trustees
in the United States. Mr. Ollen
currently serves as a member of
the Board of Overseers of
Northeastern University in
Boston, Massachusetts. He has
served as a member of the Board of
Regents (1980 through 1985) and as
Chairman of the Board of Regents
(1983 through 1985) of the College
for Financial Planning in Denver,
Colorado, and as a Director of the
International Board of Standards
and Practices for Certified
Financial Planners, Inc.
(IBCFP)(1986 through 1989).
Mr. Ollen received his Bachelor
of Science degree in Business
Administration from Northeastern
University. He received his MBA
degree from the University of
Pennsylvania, Wharton School of
Finance.
Michelle A. Whalen 27 Secretary Corporate Compliance
Administrator, FPS Services, Inc.
(June 1994 to Present); Mutual
Fund/Corporate Administrator,
Keane Tracers, Inc. (January 1992
to May 1994); Assistant Secretary
of First Mutual Funds (October
1995 to Present). Paralegal
Certification from The
Philadelphia Institute (January,
1992); Bachelor of Arts Degree in
English from LaSalle University
(May, 1991)
Jessica Ellis 34 Assistant Operations Manager for Beacon
Treasurer and Global Advisors, Inc. since
Assistant October, 1995. Mrs. Ellis began
Secretary her career in the securities
industry in 1984 and held various
positions with Scott &
Stringfellow, Inc., a New York
Stock Exchange member firm.
COMPENSATION TABLE
Trustees and Officers
Estimated Aggregate Estimated total
Compensation from Compensation from
Name of Trust for Fiscal Trust and Fund
Trustee Year End 11/30/97 Complex Paid to Trustees(1)
Louis T. Donatelli $3,600 $3,600
Caroline D. Gabel $3,600 $3,600
Robert J. Henrich, Jr.* $ 0 $ 0
Peter G. Koltnow $3,600 $3,600
Richard A. Ollen* $ 0 $ 0
* This Trustee is considered an "Interested Person" of the Trust as
defined under the 1940 Act.
(1) This amount represents the estimated aggregate amount of
compensation paid to the Trustees for service on the Board of
Trustees for the calendar year ending December 31, 1997.
No officer or Trustee of the Trust who is also an officer or employee
of the Advisor receives any compensation from the Trust for services
to the Trust. The Trust pays each Trustee who is not affiliated with
the Advisor an annual retainer of $1,000 plus a fee of $500 for
attendance at Board Meetings and reimburses each Trustee and officer
for out-of-pocket expenses in connection with travel and attendance
at such meetings. Members of the audit committee, Ms. Gabel and
Messrs. Donatelli and Koltnow, each receive $300 per audit committee
meeting attended.
NET ASSET VALUE
A more complete discussion of the Fund's determination of net asset
value is contained in the Prospectus. The net asset value per share
is computed by dividing the value of the assets of the Fund, less its
liabilities, by the number of shares outstanding.
The net asset value of all outstanding shares will be computed on a
pro-rata basis for each outstanding share based on the proportionate
participation in the Fund represented by the value of shares. All
income earned and expenses incurred by the Fund will be borne on a
pro-rata basis by each outstanding share.
Portfolio securities are valued and net asset value per share is
determined as of the close of regular trading on the New York Stock
Exchange ("NYSE") which currently is 4:00 p.m. (Eastern Time), on
each day the NYSE is open for trading.
TAXES
The following is only a summary of certain federal tax considerations
generally affecting the Fund and its shareholders that are not
described in the Prospectus, and is not intended as a substitute for
careful tax planning. Shareholders are urged to consult their tax
advisors with specific reference to their own tax situations,
including their state and local tax liabilities. Non-U.S. investors
should consult their tax advisors concerning the tax consequences of
ownership of shares of the Fund, including the possibility that
distributions may be subject to a 30% United States withholding tax.
Federal Income Tax
The following discussion of federal income tax consequences is based
on the Internal Revenue Code of 1986, as amended (the "Code") and the
regulations issued thereunder as in effect on the date of this
Statement of Additional Information. New legislation, as well as
administrative changes or court decisions, may significantly change
the conclusions expressed herein, and may have a retroactive effect
with respect to the transactions contemplated herein.
The Fund intends to qualify as a "regulated investment company"
("RIC") as defined under Subchapter M of the Code. By following such
a policy, the Fund expects to eliminate or reduce to a nominal amount
the federal income taxes to which it may be subject. In order to
qualify for treatment as a RIC under the Code, the Fund generally
must distribute annually to its shareholders at least 90% of its
investment company taxable income (generally, net investment income
plus net short-term capital gain) (the "Distribution Requirement")
and also must meet several additional requirements. Among these
requirements are the following: (i) at least 90% of the Fund's gross
income each taxable year must be derived from dividends, interest,
payments with respect to securities loans, and gains from the sale or
other disposition of stock or securities, or certain other income;
(ii) the Fund must derive less than 30% of its gross income each
taxable year from the sale or other disposition of stocks or
securities held for less than three months; (iii) at the close of
each quarter of the Fund's taxable year, at least 50% of the value of
its total assets must be represented by cash and cash items, U.S.
Government securities, securities of other RICs and other securities,
with such other securities limited, in respect to any one issuer, to
an amount that does not exceed 5% of the value of the Fund's assets
and that does not represent more than 10% of the outstanding voting
securities of such issuer and (iv) at the close of each quarter of
the Fund's taxable year, not more than 25% of the value of its assets
may be invested in securities (other than U.S. Government securities
or the securities of other RICs) of any one issuer or of two or more
issuers which the Fund controls and which are engaged in the same,
similar or related trades or businesses. Notwithstanding the
Distribution Requirement described above, which requires only that
the Fund distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net
capital gain (the excess of net long-term capital gain over net
short-term capital loss), the Fund will be subject to a nondeductible
4% federal excise tax to the extent that it fails to distribute by
the end of any calendar year 98% of its ordinary income for that year
and 98% of its capital gain net income (the excess of short- and
long-term capital gains over short- and long-term capital losses) for
the one-year period ending on October 31 of that year, plus certain
other amounts. The Fund intends to make sufficient distributions of
its ordinary income and capital gain net income prior to the end of
each calendar year to avoid liability for federal excise tax.
Any gain or loss recognized on a sale, redemption or exchange of
shares of the Fund by a non-exempt shareholder who is not a dealer in
securities generally will be treated as a long-term capital gain or
loss if the shares have been held for more than twelve months and
otherwise generally will be treated as a short-term capital gain or
loss. If shares of the Fund on which a net capital gain distribution
has been received are subsequently sold, redeemed or exchanged and
such shares have been held for six months or less, any loss
recognized will be treated as a long-term capital loss to the extent
of the long-term capital gain distribution.
In certain cases, the Fund will be required to withhold, and remit to
the United States Treasury, 31% of any distributions paid to a
shareholder who (1) has failed to provide a correct taxpayer
identification number, (2) is subject to backup withholding by the
Internal Revenue Service or (3) has not certified to the Fund that
such shareholder is not subject to backup withholding.
If the Fund fails to qualify as a RIC for any taxable year, it will
be subject to tax on its taxable income at regular corporate rates.
In such an event, all distributions from the Fund generally would be
eligible for the corporate dividend received deduction for corporate
shareholders.
PORTFOLIO TRANSACTIONS
The Fund does not have an obligation to deal with any broker/dealer
or group of broker/dealers in the execution of transactions in
portfolio securities.
Subject to policies established by the Trustees, the Subadvisor is
responsible for placing the orders to execute transactions for the
Fund. In placing orders, it is the policy of the Fund to seek to
obtain the best net results taking into account such factors as price
(including the applicable dealer spread), the size, type and
difficulty of the transaction involved, the firm's general execution
and operational facilities, and the firm's risk in positioning the
securities involved. While the Subadvisor generally seeks reasonably
competitive spreads, the Fund will not necessarily be paying the
lowest spread available.
PERFORMANCE INFORMATION
In General
From time to time, the Fund may include general comparative
information, such as statistical data regarding inflation, securities
indices or the features or performance of alternative investments, in
advertisements, sales literature and reports to shareholders. The
Fund may also include calculations, such as hypothetical compounding
examples or tax-free compounding examples, which describe
hypothetical investment results in such communications. Such
performance examples will be based on an express set of assumptions
and are not indicative of the performance of the Fund. The Fund also
may include historical performance of the Dreman advisory accounts
with substantially similar investment policies.
From time to time, the total return of the Fund may be quoted in
advertisements, shareholder reports or other communications to
shareholders.
Total Return Calculation
The Fund computes average annual total return by determining the
average annual compounded rate of return during specified periods
that equate the initial amount invested to the ending redeemable
value of such investment. This is done by dividing the ending
redeemable value of a hypothetical $1,000 initial payment by $1,000
and raising the quotient to a power equal to one divided by the
number of years (or fractional portion thereof) covered by the
computation and subtracting one from the result. This calculation
can be expressed as follows:
Average Annual Total Return = P (1 + T)n = ERV
Where: ERV = ending redeemable value at the end of
the period covered by the computation of
a hypothetical $1,000 payment made at the
beginning of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation,
expressed in terms of years.
T = average annual total return.
The Fund computes the aggregate total return by determining the
aggregate compounded rate of return during specified periods that
likewise equate the initial amount invested to the ending redeemable
value of such investment. The formula for calculating aggregate
total return is as follows:
Aggregate Total Return = [ ERV - 1 ]
P
Where: ERV = ending redeemable value at the end of
the period covered by the computation of
hypothetical $1,000 payment made at the
beginning of the period.
P = hypothetical initial payment of $1,000.
The calculations of average annual total return and aggregate total
return assume the reinvestment of all dividends and capital gain
distributions on the reinvestment dates during the period. The
ending redeemable value (variable "ERV" in each formula) is
determined by assuming complete redemption of the hypothetical
investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations.
Since performance will fluctuate, performance data for the Fund
should not be used to compare an investment in the Fund's shares with
bank deposits, savings accounts and similar investment alternatives
which often provide an agreed-upon or guaranteed fixed yield for a
stated period of time. Shareholders should remember that performance
is generally a function of the kind and quality of the instruments
held in a portfolio, portfolio maturity, operating expenses and
market conditions.
Performance and Advertisements
From time to time, in marketing and other fund literature, the Fund's
performance may be compared to the performance of other mutual funds
in general or to the performance of particular types of mutual funds
with similar investment goals, as tracked by independent
organizations. Among these organizations, Lipper Analytical
Services, Inc. ("Lipper"), a widely used independent research firm
which ranks mutual funds by overall performance, investment
objectives and assets, may be cited. Lipper performance figures are
based on changes in net asset value, with all income and capital
gains dividends reinvested. Such calculations do not include the
effect of any sales charges imposed by other funds. The Fund will be
compared to Lipper's appropriate fund category, that is, by fund
objective and portfolio holdings. The Fund's performance may also be
compared to the average performance of its Lipper category.
The Fund's performance may also be compared to the performance of
other mutual funds by Morningstar, Inc. ("Morningstar") which ranks
funds on the basis of historical risk and total return.
Morningstar's rankings range from five stars (highest) to one star
(lowest) and represent Morningstar's assessment of the historical
risk level and total return of a fund as a weighted average for
three-, five- and ten-year periods. Ranks are not absolute or
necessarily predictive of future performance. The Fund may also
compare its performance to a wide variety of indices.
In assessing such comparisons of yield, return or volatility, an
investor should keep in mind that the composition of the investments
in the reported indices and averages is not identical to those of the
Fund, that the averages are generally unmanaged, and that the items
included in the calculations of such averages may not be identical to
the formula used by the Fund to calculate its figures.
OTHER INFORMATION
Limitation of Trustees' Liability
The Trust Instrument provides that a Trustee shall be liable only for
his or her own willful defaults and, if reasonable care has been
exercised in the selection of officers, agents, employees or
investment advisers, shall not be liable for any neglect or
wrongdoing of any such person. The Trust Instrument also provides
that the Trust will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with actual or
threatened litigation in which they may be involved because of their
offices with the Trust unless it is determined in the manner provided
in the Trust Instrument that they have not acted in good faith in the
reasonable belief that their actions were in the best interests of
the Trust. However, nothing in the Trust Instrument shall protect or
indemnify a Trustee against any liability for his willful
misfeasance, bad faith, gross negligence or reckless disregard of his
duties.
Custodian
The Bank of New York, 48 Wall Street, New York, New York 10286 is
custodian of the Fund's assets pursuant to a custody agreement.
Under the custody agreement, The Bank of New York (i) maintains a
separate account or accounts in the name of the Fund, (ii) holds and
transfers portfolio securities on account of the Fund, (iii) accepts
receipts and makes disbursements of money on behalf of the Fund, (iv)
collects and receives all income and other payments and distributions
on account of the Fund's securities, and (v) makes periodic reports
to the Board of Trustees concerning the Fund's operations.
Independent Auditors
Ernst & Young LLP, 1225 Connecticut Avenue, N.W., Washington, DC
20036 has been selected as the independent auditors for the Fund.
Ernst & Young LLP provides audit and tax services. The books of the
Fund will be audited at least once a year by Ernst & Young LLP.
Reports to Shareholders
Shareholders will receive unaudited semi-annual reports describing
the Fund's investment operations and annual financial statements
audited by independent accountants.
Shareholder Inquiries
Inquiries regarding the Fund may be directed to the Advisor by
calling (800) 662-9992.<PAGE>
THE CRUELTY FREE VALUE FUND
Statement of Assets and Liabilities
March 26, 1997
Assets
Cash $ 56,666
Deferred Organization Costs 84,991
Pre-Paid Assets 9,935
_______
Total Assets $151,592
_______
Liabilities
Due to Beacon Global Advisors, Inc.
for Organization Costs $ 41,657
Other Liabilities 9,935
_______
Total Liabilities $ 51,592
_______
Net Assets $100,000
Net Asset Value:
Portfolio shares (unlimited
authorization - no par value) 4,000
outstanding shares of beneficial interest $25.00
The accompanying notes are an integral part of this financial
statement.
<PAGE>
THE CRUELTY FREE VALUE FUND
Statement of Assets and Liabilities
March 26, 1997
1. Organization
The Cruelty Free Value Fund (the "Fund") is a series of
Beacon Global Advisors Trust (the "Trust"). The Trust is
organized as a Delaware Business Trust under a Trust
Instrument dated August 29, 1996 and is registered under the
Investment Company Act of 1940, as amended, as an open-end
investment company offering shares in the Fund. The Fund
has not commenced operations except those related to
organizational matters and the sale of initial shares of
beneficial interest to the initial shareholder, Beacon
Global Advisors, Ltd. on March 26, 1997.
The Fund intends to qualify as a regulated investment company
as defined under Subchapter M of the Internal Revenue Code of
1986, and will distribute substantially all net investment
income and realized net capital gains to shareholders.
Therefore, no provision for income taxes will be required.
2. Deferred Organizational Costs
Organizational costs have been capitalized by the Fund and
are being amortized over 60 months beginning with the
commencement of operations. In the event any of the initial
shares are redeemed by the holder thereof during the period
that the Fund is amortizing its organizational costs, the
redemption proceeds payable to the holder thereof by the Fund
will be reduced by the unamortized organizational costs in
the same ratio as the number of initial shares being redeemed
bears to the number of initial shares outstanding at the time
of the redemption.
3. Transactions with Affiliates
In connection with the organization of the Fund, Beacon
Global Advisors, Inc. (the "Advisor") incurred organizational
costs on behalf of the Fund for which it is reimbursed by the
Fund.
Certain officers and/or trustees of the Trust are also
officers of the Advisor. The Trust pays each unaffiliated
Trustee a fee for attendance at quarterly, interim and
committee meetings. Compensation of officers and affiliated
Trustees of the Trust is paid by the Advisor.
<PAGE>
Report of Independent Auditors
To the Shareholders and Board of Trustees of The Cruelty Free
Value Fund,
We have audited the accompanying statement of assets and
liabilities of The Cruelty Free Value Fund as of March 26, 1997.
This statement of assets and liabilities is the responsibility of
the Fund's management. Our responsibility is to express an
opinion on the statement of assets and liabilities based on our
audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
statement of assets and liabilities is free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement
of assets and liabilities. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall statement of assets
and liabilities presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred
to above presents fairly, in all material respects, the financial
position of The Cruelty Free Value Fund as of March 26, 1997, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
April 1, 1997
<PAGE>
