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THE CRUELTY FREE VALUE FUND
8260 Greensboro Drive, Suite 250
McLean, Virginia 22102-3801
(800) 892-9626
PROSPECTUS April 1, 1998
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"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 separate, diversified investment
portfolio offered by Beacon Global Advisors Trust (the "Trust"), a no-load,
open-end management investment company. The Fund seeks to achieve capital
appreciation by investing in common stocks of companies which meet a screening
process regarding the humane treatment of animals.
While providing shareholders with an investment seeking capital appreciation,
the Fund is 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 will be screened by the investment advisor, Beacon Global
Advisors, Inc. (the "Advisor") using its guidelines concerning the humane
treatment of animals, 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 Scudder Kemper Investments, Inc. (the
"Subadvisor" or "SKI") (formerly known as Zurich Kemper Value Advisors and
Dreman Value Advisors, Inc.) believes to be undervalued.
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 the
Subadvisor'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 the information about the Fund that a
prospective investor should know before investing. It should be read and
retained for future reference. A Statement of Additional Information ("SAI"),
dated April 1, 1998, about the Fund has been filed with the U.S. Securities
and Exchange Commission (the "SEC") and is incorporated by reference into this
Prospectus in its entirety. The SAI can be obtained without charge by calling
the Fund at (800) 892-9626, or writing to the Fund at the address above. The
SAI, material incorporated by reference into this Prospectus, and any other
information regarding the Fund is maintained electronically with the SEC at
its Internet Web sight (http: \\www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE U.S. SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE U.S.
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.
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TABLE OF CONTENTS
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PAGE
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Expense Summary.................................................... 3
Financial Highlights............................................... 4
Historical Investment Results of the Subadvisor.................... 4
Mission Statement and Animal Policy................................ 6
Introduction....................................................... 7
Investment Objective............................................... 8
Investment Policies and Strategies................................. 8
Investment Process................................................. 8
Investment Practices and Risk Factors.............................. 9
Management of the Fund............................................. 10
Distribution Plan.................................................. 13
Description of Shares of Beneficial Interest....................... 13
How to Purchase Shares............................................. 14
How to Redeem Shares............................................... 16
Net Asset Value.................................................... 18
Dividends and Taxes................................................ 18
Performance Information............................................ 20
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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
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.
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EXPENSE SUMMARY
The following table illustrates all expenses and fees that a shareholder of
the Fund will incur.
SHAREHOLDER TRANSACTION EXPENSES:
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Maximum Sales Load Imposed on Purchases............................. None
Maximum Sales Load Imposed on Reinvested Dividends.................. None
Deferred Sales Load................................................. None
Redemption Fees..................................................... None
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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)
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Management Fees.............................. 0.00% (after reimbursement)
12b-1 Fees................................... 0.25%
Other Expenses............................... 1.70% (after reimbursement)
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Total Fund Operating Expenses................ 1.95% (after reimbursement)
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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:
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1 YEAR 3 YEARS 5 YEARS 10 YEARS
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<S> <C> <C> <C>
$20 $61 $105 $227
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The above table reflects a continuation through the current fiscal year of the
Advisor's voluntary undertaking, to waive all or a portion of the Management
Fees and to reimburse certain expenses to limit the Total Operating Expenses
of the Fund 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 fee waivers and reimbursement of expenses, the Management Fees, Other
Expenses, and Total Fund Operating Expenses, respectively, would be: 1.25%,
28.19%, and 29.69%. See "Management of the Fund" for advisory fee breakpoints.
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."
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FINANCIAL HIGHLIGHTS
The following sets forth information for THE CRUELTY FREE VALUE FUND regarding
per share income and capital changes for the period of commencement of
operations to November 30, 1997, which have been audited by Johnson Lambert &
Co., independent accountants, whose unqualified report on the November 30,
1997 financial statements appears in the Fund's Annual Report to Shareholders.
This information should be read in conjunction with the financial statements
and accompanying notes appearing in the 1997 Annual Report to Shareholders
which are incorporated by reference into the Statement of Additional
Information.
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For the Period
April 29, 1997* through
November 30, 1997
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NET ASSET VALUE, BEGINNING OF PERIOD.................... $ 25.00
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Income from investment operations:
Net investment loss................................. (0.05)
Net realized and unrealized gain on investments..... 3.01
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Total from investment operations.................. 2.96
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NET ASSET VALUE, END OF PERIOD.......................... $ 27.96
=======
TOTAL RETURN............................................ 11.84%(1)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s)................... $ 1,168
Ratio of expenses to average net assets:
Before expense reimbursement........................ 29.69%(2)
After expense reimbursement......................... 1.95%(2)
Ratio of net investment loss to average net assets:
Before expense reimbursement........................ (28.16%)(2)
After expense reimbursement......................... (0.42%)(2)
Portfolio turnover rate............................... 15.06%(1)
Average commission rate paid.......................... $0.0698
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*Commencement of investment operations
(1) Not Annualized
(2) Annualized
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
investment objectives of these accounts, including the registered investment
company, are substantially similar to that of the Fund and they are managed
using substantially similar investment strategies and techniques as those of
the Fund, except that no screening for the humane treatment of animals was
used by the Subadvisor. If the screening criteria that had been used in
managing the Fund (using data available as of December, 1997) had been applied
with respect to the accounts, less than 5% of the investments in the accounts
at any one time over the nine year period ending December 31, 1997, would have
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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 SKI accounts. Different methods of determining
performance from those described in the footnotes below, including the
standard methods used by mutual funds, will result in different performance
figures.
SCUDDER KEMPER INVESTMENTS, INC.
SMALL CAP EQUITY COMPOSITE (SCEC) VS. RUSSELL 2000 INDEX
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<CAPTION>
SCEC Russell 2000 The Cruelty Free
Year Total Index Value Fund
Ended Return Total Return Total Return
----- ------ ------------ ----------------
<S> <C> <C> <C>
1989 + 7.2% +16.2% N/A
1990 -11.6% -19.5% N/A
1991 +50.5% +46.0% N/A
1992 +29.0% +18.4% N/A
1993 + 1.7% +18.9% N/A
1994 + 0.3% - 1.9% N/A
1995 +43.7% +28.5% N/A
1996 +30.5% +16.5% N/A
1997 +18.8% +20.52% 11.84%*
</TABLE>
* For the period from commencement of investment operations, April 29, 1997
through December 31, 1997.
The above schedule reflects the total return of the accounts in the Small Cap
Equity Composite since inception, January 1, 1989. The registered investment
company was added on May 22, 1992.
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 $41,810 by December 31, 1997, including reinvestment of
dividends. The average annual rate of return from December 31, 1988 through
December 31, 1997, including reinvestment of dividends, is 17.2% for the Small
Cap Equity Composite and 14.6% for the Russell 2000 Index. The average annual
rate of return for the period December 31, 1991 through December 31, 1997,
including reinvestment of dividends, is 19.6% for the Small Cap Equity
Composite and 16.4% for the Russell 2000 Index.
NOTES TO INVESTMENT RESULTS OF SUBADVISOR
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
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standards established by the Association for Investment Management and
Research ("AIMR") which became effective in January 1993. From January 1989
through December 1997, the composite includes one registered investment
company and all the Subadvisor's similarly managed discretionary accounts of
tax-exempt clients. At December 31, 1997 the composite, which included six
accounts and one registered investment company, had total assets of
$1,189,417,970. 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 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. Fund expenses are higher than the average expenses borne by
the accounts. If the Fund's fee expenses were applied to the Small Cap Equity
Composite, performance results would have been lower.
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 and the accounts. 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 AND ANIMAL POLICY
The Advisor has created the 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.
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 (i.e. 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.
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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 People for the
Ethical Treatment of Animals, The National Anti-Vivisection Society and The
American Anti-Vivisection Society. Research information may also be gathered
from financial and business organization reporting services such as Dun &
Bradstreet and Bloomberg. Any company included on lists of companies that are
inhumane 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.
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.
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.
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.
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. It is
expected that members of the advisory board of the foundation will be
prominent people involved in the animal rights movement.
INTRODUCTION
This Prospectus provides information which is helpful for potential investors
in making 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
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redeemed. Please read this Prospectus carefully before investing or sending
money and please retain for 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
"Mission Statement and 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 SAI. 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 "Mission Statement and 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."
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.
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For temporary defensive purposes, the Fund may invest up to 100% of its total
assets in money market instruments. To the extent and for the time period 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 than it was at the time of
purchase. 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. The
Advisor has been engaged in the investment advisory business providing
investment advice to individuals, corporations and offshore investment funds
since 1994. The Subadvisor has over twelve 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. Historically, funds that invest in small
company stocks exhibit more volatility; 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
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
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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. 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, at such a level
that (i) the amount deposited in the account plus the amount deposited with
the broker as collateral will equal the current value of the security sold
short and (ii) the amount deposited in the segregated account plus the amount
deposited with the broker as collateral will not be less than the market value
of the security at the time it was sold short; or otherwise cover its short
position in accordance with positions taken by the SEC.
In addition to the short sales discussed above, the Fund may also make short
sales "against the box", i.e., short sales made when the Fund owns securities
identical to those sold short. The Fund may only engage in short sale
transactions in securities listed on one or more national securities exchange
or on NASDAQ.
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 SAI.
THE INVESTMENT ADVISOR
Beacon Global Advisors, Inc., 8260 Greensboro Drive, Suite 250, McLean,
Virginia 22102-3801, serves as the Fund's investment advisor and manager and
is registered as an investment advisor under the Investment Advisers Act of
1940, as amended. As of December 31, 1997, the Advisor was investment
management consultant to other mutual funds and individuals with respect to
approximately $100 million in assets. The Advisor is a registered
broker/dealer in the U.S. with a correspondent clearing agreement with Bear,
Stearns & Company in New York, one of the world's leading investment banking
firms. The Advisor's international banking relationship is maintained with
MeesPierson (CI) Limited. MeesPierson is a wholly owned subsidiary of
MeesPierson N.V., which in turn is a wholly owned subsidiary of Fortis Bank
Nederland N.V., part of the international insurance, banking and investment
group, Fortis, headquartered in London, England.
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. The principles of
Beacon Global Advisors, Ltd., including the principles of Beacon Global
Advisors, Inc., have many years of experience in the asset management and
international banking arena. As a group, their experience totals over one
hundred and twenty-five years. This expertise covers a multitude of financial
services and disciplines from international banking and mutual fund
management, through global investment consulting. Those principles responsible
for managing the Fund are John H. Groth, Robert J. Henrich, Jr. and Richard A.
Ollen. Their biographies are as follows:
John H. Groth, 56, Founder and a Managing Director of Beacon Global Advisors,
Inc. Mr. Groth served as First Vice President with E.F. Hutton & Co. and Paine
Webber, Inc. from 1983 through 1994. He has also been a consultant with
Coopers & Lybrand, a major international accounting firm and was CEO and
Chairman of his
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own full service U.S. investment brokerage firm which he founded in 1970. Mr.
Groth currently serves on the Board of Directors of several industrial and
investment companies. He also serves as a Trustee of The Washington Opera in
Washington, DC. He has a graduate degree in Political Science and
International Relations from the University of Maryland--specializing in
Russian and Asian Studies.
Robert J. Henrich, Jr., 48, Founder and a Managing Director of Beacon Global
Advisors, Inc. Mr. Henrich served as First Vice 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. He holds a Bachelor of Science degree in Geology from the University
of Maryland and earned his Masters of Business Administration from the Florida
Institute of Technology.
Richard A. Ollen, 65, Director of Beacon Global Advisors, Inc. Mr. Ollen
served as President and Director of American Guaranty & Trust Company,
Wilmington, Delaware. Before assuming those responsibilities, he was President
and Director of GEICO Investment Services Company. He was formerly Chairman
and President of the Board of The Growth Fund of Washington, President and
Trustee of Government Securities Cash Fund and GEICO Qualified Dividend Fund.
Prior to joining GEICO, Mr. Ollen served as President and Director of the
Massachusetts Company, one of the oldest corporate trustees in the U.S. He
currently serves as Trustee of Northeastern University in Boston,
Massachusetts. He has served as Chairman of the Board of Regents 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. 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.
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 some of these services to the Subadvisor.
For its services as investment advisor, 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 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 SUBADVISOR
Scudder Kemper Investments, Inc., (formerly known as Zurich Kemper Value
Advisors and Dreman Value Advisors, Inc.), 345 Park Avenue New York, New York,
10154 serves as the Fund's investment subadvisor. The Subadvisor 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.
The Subadvisor provides investment advice and manages investment portfolios
for the Zurich Kemper Funds and Scudder Funds, affiliated insurance companies
and other corporate, pension, profit-sharing and individual
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accounts representing approximately $200 billion under management. The
Subadvisor has managed mutual funds since 1985.
The Subadvisor 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, the Advisor
pays to the Subadvisor, 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.
The investment management team at the Subadvisor responsible for overseeing
all investments made by the Fund includes William F. Coughlin, CFA. His
biography is as follows.
William F. Coughlin, CFA, 40, Vice President and Portfolio Manager, Scudder
Kemper Investments, 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.
THE ADMINISTRATOR
First Data Investor Services Group, Inc. ("Investor Services Group"), a wholly
owned subsidiary of First Data Corporation, which has its principal business
address at 4400 Computer Drive, Westboro, MA 01581, serves as the
Administrator pursuant to an agreement with the Fund. Under this agreement,
Investor Services Group 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. Investor Services Group also provides all necessary office space,
equipment, personnel and facilities. Subject to a minimum annual fee of
$55,000, Investor Services Group 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, Investor Services Group 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, Investor Services Group 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 (i.e. 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 SEC and with various state securities commissions; the
organization of the Fund; transfer agent, custodian and administrator fees;
obtaining quotations for 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
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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.
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 Act. 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 Beacon Global
Advisors, Inc. (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.
DESCRIPTION OF SHARES OF BENEFICIAL INTEREST
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. 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. All
accounts will be maintained in book entry form and no share certificates will
be issued.
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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.
Ms. Caroline Gabel may be deemed to be a "control person" (as defined in the
Act) of the Fund, because as of January 9, 1998, she owned of record 45.86% of
the Fund.
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.
HOW TO PURCHASE SHARES
GENERAL
Shares of the Fund are offered on a continuous basis at the net asset value
next determined following receipt by the Fund's transfer agent, First Data
Investor Services Group, Inc. (the "Transfer Agent"), of a purchase order in
proper form. Purchasers of Fund shares pay no "sales load"; the full amount of
the purchase price goes toward the purchase of shares of the Fund.
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.
PURCHASES BY MAIL
An account may be opened and shares of the Fund purchased by completing the
Account Application Form (the "Application") accompanying this Prospectus and
mailing it, together with a check or money order for the desired amount,
payable to "The Cruelty Free Value Fund" c/o First Data Investor Services
Group, Inc., 3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406-
0903. The minimum amount for an initial purchase of shares is $250. The
minimum amount for IRA and SEP accounts is also $250.
PLEASE NOTE: The Fund will not accept third party checks for the purchase of
shares. Third party checks are those that are made out to someone other than
the Fund and are endorsed over to the Fund. In order to ensure receipt of good
funds, the Fund reserves the right to delay sending redemption proceeds up to
15 days if shares were recently purchased by check. A $20 fee will be charged
to the account for any payment check returned to the custodian.
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PURCHASES BY WIRE TRANSFER
Shareholders may also pay for shares by instructing their commercial bank that
is a member of the Federal Reserve System to wire Federal funds to the
Transfer Agent. The bank must include the full name(s) in which the account is
registered and the Fund account number, and should address its wire as
follows:
UMB Bank KC NA
ABA #10-10-00695
For: First Data Investor Services Group, Inc.
Account Number: 98-7037-071-9
FBO: "The Cruelty Free Value Fund"
Account of (exact name(s) of account registration)
Shareholder Account # _____________
Before making an initial investment by wire transfer, an investor must first
telephone the Transfer Agent at (800) 892-9626 or (610) 239-4600 to request an
account number and furnish the Fund with the appropriate taxpayer
identification number or Social Security number. In addition, a completed
Application with signature(s) of account owner(s) must be promptly forwarded
to: First Data Investor Services Group, Inc., 3200 Horizon Drive, P.O. Box
61503, King of Prussia, PA 19406-0903. The bank may impose a fee for
investments by wire transfer. 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
Shares of the Fund may also be purchased by telephone through an investor's
broker, financial institution or service organization that has 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 Investor Services Group 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 a check or money order for the desired amount
in the envelope that is provided with each confirmation statement. Checks
should be made payable to "The Cruelty Free Value Fund" and mailed to First
Data Investor Services Group, Inc., P.O. Box 412797, Kansas City, Missouri
64141-2797. Orders to purchase shares are effective on the day the Transfer
Agent receives the 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 U.S. 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 business 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.
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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 First Data Investor Services Group, 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
signature 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.
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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 there are
any questions with respect to the proper form for redemption requests the
Transfer Agent can be contacted 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 business 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 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 SEC has, by order, permitted such suspension; (3) an
emergency exists, as defined by rules of the SEC, 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 $250 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.
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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 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, Martin Luther King, Jr. 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
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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. The Fund intends to make sufficient
distributions prior to the end of each calendar year in order to avoid
liability for federal excise tax.
An investment in the Fund has certain tax consequences, depending on the type
of account. 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. Sale
or redemption of the Fund's shares are a taxable event to the shareholder. For
qualified retirement accounts, taxes are generally deferred until
distributions are made from the retirement account.
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 SAI. 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.
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.
THE TAXPAYER RELIEF ACT OF 1997
The Taxpayer Relief Act of 1997 (the "Relief Act"), which was signed into law
on August 5, 1997, is the most wide-ranging tax legislation since 1986.
Several provisions therein will impact the taxation of capital gains.
The Relief Act has lowered the tax rate on individuals, estates and trusts for
long-term capital gains from 28% to 20%, but increases the holding period of
the assets from more than one year to more than eighteen months. For persons
in the 15% income tax bracket, the new rate is 10%. Realized gains from
capital assets held more than one year, but eighteen months or less, will be
taxed at a 28% rate. Such gains will be termed "mid-term" capital gains. Also,
capital gains in property held for more than five years will be eligible for
an 18% tax rate, but this only applies to assets acquired after December 31,
2000; therefore, a shareholder would not benefit from this provision until the
year 2006.
The rates which applied under prior law are effective for sales of capital
before May 7, 1997. Sale of capital assets on or after May 7, 1997, but before
July 29, 1997, will be subject to a 20% tax rate for assets held more than one
year. These new tax rates, including the new mid-term category, apply to the
sales of capital assets on or after July 29, 1997.
19
<PAGE>
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 SAI for more
information on performance.
20
<PAGE>
INVESTMENT ADVISOR
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
First Data Investor Services Group, 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 10286
LEGAL COUNSEL
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, DC 20036-1800
AUDITORS
Johnson Lambert & Co.
7500 Old Georgetown Road
Bethesda, MD 20814
For Additional Information about
The Cruelty Free Value Fund call (800) 892-9626
http://www.crueltyfree.com
LOGO
[Recycle Logo Appears Here]
<PAGE>
PROSPECTUS
April 1, 1998
THE
CRUELTY FREE
VALUE FUND/TM/
For investment information
or a prospectus
call FPS Broker Services, Inc.
at 1-800-892-9626
Visit our WEB site
@http://www.crueltyfree.com
BEACON GLOBAL ADVISORS, INC
<PAGE>
THE CRUELTY FREE VALUE FUND
8260 Greensboro Drive, Suite 250
McLean, Virginia 22102-3801
(800) 892-9626
STATEMENT OF ADDITIONAL INFORMATION
APRIL 1, 1998
================================================================================
This Statement of Additional Information is not a prospectus but should be read
in conjunction with the current Prospectus for THE CRUELTY FREE VALUE FUND (the
"Fund"), a series of Beacon Global Advisors, Inc. (the "Trust"), dated April 1,
1998, and is incorporated by reference in its entirety into 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 the Fund's Distributor, Beacon Global Advisors,
Inc. at the address or 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
Additional Information on Investment Policies and Techniques
Common Stock
Preferred Stock
Securities Lending
Illiquid Securities
Short Sales
Rule 144A Securities
Borrowing
Other Investments
Investment Restrictions
Investment Advisory and Other Services
Investment Advisory Agreement
Sub-Advisory Agreement
Administrator, Transfer Agent and Fund Accountant
Distributor
Trustees and Officers
Compensation Table
Control Persons and Principal Holders of Securities
Net Asset Value
Additional Information Concerning Taxes
Federal Income Tax
Additional Information on Portfolio Transactions
Additional Information on Performance Information
In General
Total Return Calculation
Performance and Advertisements
Other Information
<PAGE>
THE TRUST AND THE FUND
This Statement of Additional Information provides additional information
regarding 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.
This Statement of Additional Information should be read in conjunction with the
Prospectus of the Fund having the same date as this Statement of Additional
Information. 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.
ADDITIONAL INFORMATION ON
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 purchase the
securities or engage in 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 (including accrued interest and
dividends); (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 securities loans
after a review by the Advisor, under guidelines established by the supervision
of the Board of Trustees, including a review of the creditworthiness of the
borrower. Such reviews will be monitored by the Board of Trustees 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,
<PAGE>
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 U.S. Securities Exchange
Commission (the "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 Investment Company Act of 1940, as amended, (the
"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" "INVESTMENT POLICIES AND
STRATEGIES" INVESTMENT PROCESS" and "INVESTMENT PRACTICES 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 any senior securities (as defined in the Act) or borrow money,
except 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. Mortgage, pledge, hypothecate, 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.
<PAGE>
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:
1. Purchase securities on margin.
2. Purchase securities of other investment companies.
3. 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 if
such liability results 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 AGREEMENT
- ---------------------
The Advisor has entered into a Subadvisory Agreement with Scudder Kemper
Investments, Inc. (the "Subadvisor") (formerly known as Zurich Kemper Value
Advisors and Dreman Value Advisors, Inc.) 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, the Subadvisor receives 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 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 Subadvisory Agreement 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 will
terminate if assigned, and is terminable at any time without penalty by the
Advisor, Subadvisor 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,
Subadvisor or the Fund.
SERVICE PROVIDER TO THE TRUST
- -----------------------------
First Data Investor Services Group, Inc. ("Investor Services Group"), a wholly
owned subsidiary of First Data Corporation, which has its principal business
address at 4400 Computer Drive, Westboro, MA 01581 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
<PAGE>
Agreement" (the "Agreement"), Investor Services Group 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 Investor Services Group
in the fulfillment of its obligations under the Agreement and Investor Services
Group reports to the Board on a quarterly basis with regard to those
obligations.
Included among the many tasks which Investor Services Group 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) preparing
and, after approval by the Fund, filing and arranging for the distribution of
proxy materials and periodic reports to shareholders of the Fund as required by
applicable law; (5) preparing and, after approval by the Fund, arranging for
the filing of such registration statements and other documents with the and any
other federal or state regulatory authorities as may be required by applicable
law; (6) reviewing and submitting 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) taking such
other action with respect to the Fund as may be deemed necessary by Investor
Services Group to appropriately perform its duties under the Agreement.
For the fiscal year ended November 30, 1997, the Fund paid $14,000 and $32,440
in fees to FPS Services, Inc., Investor Service Group's predecessor, for Fund
Accounting and Fund Administration services, respectively.
DISTRIBUTOR
- -----------
Beacon Global Advisors, Inc. (the"Distributor") 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 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 the
Distributor as compensation for its services.
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 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 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. 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.
Pursuant to the Distribution Plan, for the period ending November 30, 1997, the
Distributor was paid $1,150, which was used to compensate various dealers.
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 Trust, their position with the Trust,
their addresses, affiliations, if any, with the Investment Advisor, and
principal occupations during the past five years are set forth below. Each
Trustee who is an "interested person" of the Fund, as that term is defined in
the Act, is indicated by an asterisk.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and Address Age Position with Principal Occupation During the past five years
Trust
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Louis T. Donatelli 64 Trustee President and sole stockholder of Donatelli & Klein, Inc., an investment
Artery Plaza company specializing in real estate development and corporate acquisitions
7200 Wisconsin Avenue including television properties. Mr. Donatelli has a long career in the
Suite 310 investment business, beginning in 1956 at Harris Upham & Co. In 1963, he
Bethesda, MD 20814 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 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* 56 Trustee Senior Policy Advisor to a member of the House of Representatives since 1970.
654 F Street, NE In this capacity, she is responsible for legislation within the jurisdiction of
Washington, DC 20002 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. Henrich, Jr.* 47 Executive Vice Founder and Managing Director of Beacon Global Advisors, Inc. Mr. Henrich
8260 Greensboro Drive President, served as a First Vice President with E.F. Hutton & Co. and Paine Webber, Inc.
Suite 250 Treasurer and from 1979 through 1994. Before joining E.F. Hutton, Mr. Henrich was a pension
McLean, VA 22102-3801 Trustee 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. Koltnow 68 Trustee Engineering consultant to the Koltnow American Trucking Associations and Board
9210 Fernwood Member of the ATA Foundation since 1991. He is a life member of the American
Bethesda, MD 20817 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. Ollen* 65 President and Principal Officer for the Richard Ollen Management Co. since 1993 and is also a
18 Summit Drive Chairman of the Director and Registered Principal of Beacon Global Advisors, Inc. since 1995.
Grantham, NH 03753 Board 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 U.S. Mr. Ollen currently serves as Trustee 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.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Michelle A. Whalen 28 Secretary Senior Corporate Compliance Administrator, (December 1997 to present),
3200 Horizon Drive Corporate Compliance Administrator (June 1994 to December 1997) First Data
King of Prussia, PA Investor Services Group, Inc.; Mutual Fund/Corporate Administrator, Keane
19406-0903 Tracers, Inc. (January 1992 to May 1994); Assistant Secretary of Trainer
Wortham First Mutual Funds (October 1995 to Present). She received her
Paralegal Certification from The Philadelphia Institute and her Bachelor of
Arts Degree in English from LaSalle University.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
COMPENSATION TABLE
The officers and Trustees of the Trust who are also officers or employees of the
Advisor or Investor Services Group receive no direct compensation from the
Trust for services to it. The Trust pays each of the other Trustees 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. Set forth are the total fees which were paid to
each of the Trustees from the commencement of operations until December 31,
1997.
Aggregate Total Compensation from
Compensation Trust and Fund
Name of Trustee from Trust Complex Paid to Trustees
- --------------- ---------- ------------------------
Louis T. Donatelli $1,500 $1,500
Caroline D. Gabel $1,000 $1,000
Robert J. Henrich, Jr. $ 0 $ 0
Peter G. Koltnow $1,500 $1,500
Richard A. Ollen $ 0 $ 0
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of January 9, 1998, the Trustees and officers, together as a group, owned
beneficially 25,445 shares or 58% of the Fund and Trust. As of January 9, 1998,
the following persons owned of record and beneficially more than 5% of the
outstanding voting shares of the Fund and Trust:
NAME & ADDRESS OF BENEFICIAL OWNERS PERCENTAGE
Caroline D. Gabel 45.86%
654 F Street NE
Washington, DC 20002
Robert J. Henrich 9.15%
Trst Beacon Global Advisors Ltd.
8260 Greensboro Drive, Suite 250
McLean, VA 22102
Rick F. Gartner and 5.11%
Lauralee C. Blanchard JT WROS
581 Cress Street
Laguna Beach, CA 92651
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.
<PAGE>
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.
ADDITIONAL INFORMATION
CONCERNING 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% U.S. withholding tax.
FEDERAL INCOME TAX
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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 U. S.
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.
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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.
ADDITIONAL INFORMATION ON
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.
ADDITIONAL INFORMATION ON
PERFORMANCE INFORMATION
IN GENERAL
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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
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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:
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.
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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
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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 that 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
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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
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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
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Johnson Lambert & Co., 7500 Old Georgetown Road, Bethesda, MD 20814 has been
selected as the independent auditors for the Fund to provide audit and tax
services. The books of the Fund will be audited at least once a year by Johnson
Lambert & Co.
REPORTS TO SHAREHOLDERS
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Shareholders will receive unaudited semi-annual reports describing the Fund's
investment operations and annual financial statements audited by independent
accountants.
SHAREHOLDER INQUIRIES
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Inquiries regarding the Fund may be directed to the Advisor by calling (800)
662-9992.
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FINANCIAL STATEMENTS
The audited financial statements and notes thereto for the Fund contained in the
Fund's 1997 Annual Report are incorporated by reference into this Statement of
Additional Information and have been audited by Johnson Lambert & Co., whose
report also appears in the Annual Report and is also incorporated by reference
herein. No other parts of the Annual Report are incorporated by reference
herein. Such financial statements and notes thereto have been incorporated
herein in reliance on the report of Johnson Lambert & Co., independent
accountants, given on the authority of said firm as experts in auditing and
accounting, incorporated by reference from the Fund's 1997 Annual Report to
Shareholders.
