Commission File No. 333-23459
Commission File No. 811-08095
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 1
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 2
CLS ADVISORONE FUNDS
(Exact Name of Registrant as Specified in Charter)
14747 CALIFORNIA STREET, OMAHA, NE 68154-1979
(Address of Principal Executive Offices-Zip Code)
Registrant's Telephone Number, including Area Code: (402) 493-3313
W. PATRICK CLARKE, CHAIRMAN AND PRESIDENT
14747 CALIFORNIA STREET, OMAHA, NE 68154-1979
(Name and Address of Agent for Service)
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as
practicable after the effective date of this Registration Statement.
It is proposed that this filing will become effective (check
appropriate box).
/ XXX / immediately upon filing pursuant to paragraph (b) of Rule 485
/ / on (date) pursuant to paragraph (b) of Rule 485.
/ / 60 days after filing pursuant to paragraph (a)(1).
/ / on (date) pursuant to paragraph (a)(1).
/ / 75 days after filing pursuant to paragraph (a)(2).
/ / on (date) pursuant to paragraph (a)(2) on Rule 485.
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
The 24(f)-2 Notice for the fiscal year ended April 30, 1998, was filed with the
Commission on July 29, 1998.
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CLS ADVISORONE FUNDS
THE AMERIGO FUND
THE CLERMONT FUND
CROSS REFERENCE SHEET TO FORM N-1A
PART A.
ITEM A. PROSPECTUS CAPTION
1 Cover Page
2 Highlights
Synopsis of Financial Information
3 Financial Highlights
4 The Trust and its Management
Investment Objectives and Policies
Securities and Investment Practices
5 The Trust and its Management
5A Not Applicable
6(a) Other Information - Shares of Beneficial Interest
6(b) Not Applicable
6(c) Other Information - Shares of Beneficial Interest
6(d) Not Applicable
6(e) Highlights
6(f)(g) Dividends, Distributions and Taxes
6(h) Not Applicable
7(a) Not Applicable
7(b) How Net Asset Value is Determined
How To Buy Shares
7(c) How To Buy Shares
Exchange Privilege
Other Shareholder Services
7(d) How To Buy Shares
Highlights
7(e) Not Applicable
7(f) Not Applicable
7(g) Not Applicable
8(a) How To Make Withdrawals (Redemptions)
8(b) How To Make Withdrawals (Redemptions)
8(c) Shareholder Accounts
8(d) How To Make Withdrawals (Redemptions)
9 Not Applicable
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CLS ADVISORONE FUNDS
THE AMERIGO FUND
THE CLERMONT FUND
14747 California Street
Omaha, NE 68154-1979
800-635-3427
402-397-3313
The CLS AdvisorOne Funds (the "Trust") is an open-end, management
investment company consisting of two separate diversified, no-load series with
different investment objectives (each a "Fund" and collectively, the "Funds").
The Funds seek to achieve their investment objectives by investing primarily in
shares of open-end investment companies, commonly known as "mutual funds", and
closed-end investment companies.
THE AMERIGO FUND'S INVESTMENT OBJECTIVE IS CAPITAL APPRECIATION AND
LONG-TERM GROWTH OF CAPITAL WITHOUT REGARD TO CURRENT INCOME.
THE CLERMONT FUND'S INVESTMENT OBJECTIVE IS GROWTH OF CAPITAL AND A
REASONABLE LEVEL OF CURRENT INCOME.
ADDITIONAL INFORMATION
This Prospectus sets forth basic information about the Trust and the Funds
that a prospective investor should know before investing and it should be
retained for future reference. A STATEMENT OF ADDITIONAL INFORMATION, dated
__________, 1998, has been filed with the Securities and Exchange Commission and
is incorporated herein by reference. The Statement of Additional Information is
available upon request and without charge by contacting the Trust at the address
given above or by calling 1-800-808-3829 or (614) 760-2158.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
TABLE OF CONTENTS
Page
Highlights................................ 2
Synopsis of Financial Information......... 3
Financial Highlights...................... 5
Investment Objectives and Policies........ 6
Securities and Investment Practices....... 9
The Trust and Its Management.............. 19
How To Buy Shares......................... 21
How To Make Withdrawals (Redemptions)..... 23
Other Shareholder Services................ 24
Shareholder Accounts...................... 25
Dividends, Distributions and Taxes........ 25
How Net Asset Value is Determined......... 27
Performance Information and Reports....... 27
Other Information......................... 28
INVESTMENT ADVISER: CLARKE LANZEN SKALLA INVESTMENT FIRM, INC.
PROSPECTUS DATED _________, 1998
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HIGHLIGHTS
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INVESTMENT OBJECTIVES: The Amerigo Fund's investment objective is capital
appreciation and long-term growth of capital without regard to current income.
The Clermont Fund's investment objective is growth of capital and a
reasonable level of current income.
LIQUIDITY: As open-end investment companies, the Funds continuously offer
and redeem shares of beneficial interest at the next determined net asset value
per share. See "How to Buy Shares" and "How to Make Withdrawals (Redemptions)."
NO SALES OR REDEMPTION CHARGES OR 12B-1 FEES: There are no commissions,
fees or charges for the purchase or redemption of shares. The Funds also do not
charge 12b-1 fees. See "Synopsis of Financial Information", "How to Buy Shares"
and "How to Make Withdrawals (Redemptions)."
MINIMUM INITIAL INVESTMENT: A minimum initial investment of $2,500 is
required to open an account, except an IRA account for which the minimum is
$1,000. Subsequent investments must be at least $100. Each Fund has the right to
redeem the shares in an account and pay the proceeds to the shareholder if the
value of the account drops below $1,000 ($500 for an IRA) because of shareholder
redemptions. The shareholder will be given 30 days written notice and an
opportunity to restore the account to $1,000 ($500 for an IRA). See "How to Buy
Shares", "Other Shareholder Services" and "Shareholder Accounts."
INVESTMENT ADVISER AND MANAGER: Clarke Lanzen Skalla Investment Firm, Inc.
is the Funds' investment adviser (the "Investment Adviser" or the "Manager").
The Manager has been an investment adviser to individuals, employee benefit
plans, trusts and corporations since 1989. See "The Trust and Its Management."
SHARES AVAILABLE THROUGH: Your investment adviser. See "How to Buy Shares."
HOW TO BUY SHARES: Complete the New Account Application and forward with
payment as directed. Orders in good form accompanied by payment (ordinary check,
bank check, bank wire, and money order) are accepted immediately and priced at
the next determined net asset value per share after receipt of the order. See
"How to Buy Shares" and "How Net Asset Value is Determined."
SHAREHOLDER INQUIRIES: Shareholder inquiries should be directed to the
Funds by writing the Funds c/o Mutual Funds Service Company, 6000 Memorial
Drive, Dublin, Ohio 43017, or calling 1-800-808-3829. To protect the
confidentiality of shareholder accounts, information relating to a specific
account will be disclosed pursuant to a telephone inquiry if the shareholder
identifies the account by account number or by the taxpayer identification
number listed on the account.
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RISK FACTORS: Each Fund concentrates its investments in the shares of other
investment companies. Consequently, in addition to a shareholder bearing his
proportionate share of the expenses of a Fund, a shareholder also indirectly
bears similar expenses of the underlying investment companies. Each Fund may
invest, through investment companies, in what are sometimes referred to as "junk
bonds." Such securities are speculative investments which carry greater risks
than higher quality debt securities. Each Fund may invest, through investment
companies, in foreign securities which may involve risks in addition to those of
U.S. investments, including increased political and economic risk, as well as
exposure to currency fluctuation. Each Fund may use various investment
techniques to hedge the Fund's risks, including futures contracts and options,
and underlying investment companies may invest in asset-backed securities.
Special risk factors apply to those investments. See "Investment Objectives and
Policies" and "Securities and Investment Practices" for a more detailed
description of the risks associated with an investment in the Funds.
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SYNOPSIS OF FINANCIAL INFORMATION
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THE THE
AMERIGO CLERMONT
FUND FUND
---- ----
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge (Load)
Imposed on Purchases..................... none none
Maximum Deferred Sales Charge (Load).......... none none
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends...................... none none
Redemption Fee................................ none none
Exchange Fee.................................. none none
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fees.............................. 1.00% 1.00%
Distribution (12b-1) Fees.................... none none
Other Expenses (after any expense reimburse-
ment*)..................................... 0.15% 0.15%
------ -----
TOTAL FUND OPERATING EXPENSES 1.15% 1.15%
(after any expense reimbursement or waiver*)
*Expenses used in these illustrations summarize expenses actually incurred
for each Fund for the period from July 14, 1997 (date of commencement of
operations) through April 30, 1998.
EXAMPLE
This example is intended to help you compare the cost of investing in each
Fund with the cost of investing in other mutual funds.
The Example assumes that you invest $1,000 in each Fund for the time
periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that each Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
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THE AMERIGO FUND THE CLERMONT FUND
---------------- -----------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- -------- ------ ------- ------- --------
$12 $37 $63 $140 $12 $37 $63 $140
During the period ended April 30, 1998, the Manager waived management fees
and reimbursed expenses in order to reduce the operating expenses of each Fund.
Expenses shown as "after any expense reimbursement" are based on actual fees
paid by each Fund. Had expenses not been reimbursed, Other Expenses, as a
percentage of average net assets, would have been 3.45% for The Amerigo Fund and
4.95% for The Clermont Fund. Total Fund Operating Expenses, as a percentage of
average net assets, would have been 4.45% for The Amerigo Fund and 5.95% for The
Clermont Fund.
The Manager presently intends to waive management fees or reimburse each
Fund through an expense reimbursement fee to the extent necessary to keep total
expenses of each Fund at 1.15% of average daily net assets. The Manager may
change this policy at any time without notice to shareholders. This would, in
some circumstances, have a material adverse effect on the net income of the
Funds and the return earned by shareholders. For planning purposes, prospective
investors and shareholders should assume that expense reimbursements will not be
made.
The tables above are meant to assist an investor in understanding the
various costs and expenses that an investor in the Funds will bear directly or
indirectly. The Funds do not impose an exchange fee or redemption fee. For more
complete descriptions of the various costs and expenses of the Funds see "The
Trust and Its Management."
An investor in the Funds should recognize that he may invest directly in
mutual funds and that, by investing in mutual funds indirectly through the
Funds, he will bear not only his proportionate share of the expenses of the
Funds (including operating costs and investment advisory and administrative
fees) but also, indirectly, similar expenses of the underlying funds. An
investor in the Funds through a managed account program who pays an advisory fee
for asset allocation should recognize that the combined expenses of the program
and of the Funds (including their indirect expenses) will involve greater fees
and expenses than present in other types of investments. In addition, a Fund
shareholder indirectly bears expenses paid by an underlying fund related to the
distribution of its shares. Finally, an investor should recognize that, as a
result of the Funds' policies of investing in other underlying funds, he may
receive taxable capital gains distributions to a greater extent than would be
the case if he invested directly in the underlying funds. See "Dividends,
Distributions and Taxes."
THE TABLE AND HYPOTHETICAL EXAMPLES ABOVE ARE FOR ILLUSTRATIVE PURPOSES
ONLY. THE INVESTMENT RATE OF RETURN AND EXPENSES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE PERFORMANCE OR EXPENSES AS ACTUAL RATES OF
RETURN AND EXPENSES MAY BE MORE OR LESS THAN THE RATE AND AMOUNTS SHOWN.
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FINANCIAL HIGHLIGHTS
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The financial highlights for The Amerigo Fund and The Clermont Fund are
listed below. This information has been audited in conjunction with the audit of
the financial statements of the CLS AdvisorOne Funds by KPMG Peat Marwick LLP,
independent certified public accountants, for the period from July 14, 1997*
through April 30, 1998.
THE AMERIGO FUND THE CLERMONT FUND
NET ASSET VALUE, BEGINNING OF PERIOD $10.00 $10.00
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INVESTMENT OPERATIONS:
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NET INVESTMENT INCOME 0.02 0.17
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Net realized and unrealized gains
FROM INVESTMENTS 1.39 0.80
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TOTAL 1.41 0.97
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DISTRIBUTIONS:
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FROM NET INVESTMENT INCOME (0.02) (0.16)
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IN EXCESS OF NET INVESTMENT INCOME (0.02) --
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TOTAL (0.04) (0.16)
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NET ASSET VALUE, END OF PERIOD $11.37 $10.81
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TOTAL RETURN 14.11%(1) 9.84%(1)
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RATIOS/SUPPLEMENTAL DATA:
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NET ASSETS, END OF PERIOD $7,557,532 $4,440,554
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RATIO OF EXPENSES TO AVERAGE NET ASSETS 1.15%(2) 1.15%(2)
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Ratio of net investment income to
AVERAGE NET ASSETS 0.15%(2) 2.53%(2)
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Ratio of expenses to average net assets,
before voluntary expense reductions
AND REIMBURSEMENTS 4.45%(2) 5.95%(2)
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Ratio of net investment income (loss) to
average net assets before voluntary
EXPENSE REDUCTIONS AND REIMBURSEMENTS (3.15%)(2) (2.27%)(2)
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PORTFOLIO TURNOVER RATE 14.36%(1) 22.24%(1)
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*Date of Commencement of Operations
(1) Not annualized.
(2) Annualized.
Financial Statements and Notes pertaining thereto appear in the Statement of
Additional Information.
5
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INVESTMENT OBJECTIVES AND POLICIES
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GENERAL
Each Fund seeks to achieve its investment objective by investing primarily
in a portfolio of open-end or closed-end investment companies (the "underlying
funds"), although it may invest up to 100% of its total assets in one underlying
fund. At times, for temporary defensive purposes when warranted by general
economic and financial conditions, a Fund may invest up to 100% of its total
assets directly in, or in underlying funds investing in, (or enter into
repurchase agreements (maturing in seven days or less) with banks and
broker-dealers with respect to) short-term debt securities, including U.S.
Treasury bills and other short-term U.S. Government securities, corporate bonds,
commercial paper, certificates of deposit, bankers' acceptances and other money
market instruments. A Fund may also invest directly in, or in underlying funds
investing in, futures contracts and options thereon. However, a Fund normally
will invest its assets in underlying funds. Although the Funds may invest in
shares of the same underlying fund, the percentage of each Fund's assets so
invested may vary and the Manager will determine that such investments are
consistent with the investment objectives and policies of each Fund. The
underlying funds in which a Fund invests may, but need not, have the same
investment policies as the Fund. The investments which may be made by underlying
funds in which the Funds invest and the risks associated with those investments
are further described under "Securities and Investment Practices."
Although a Fund may invest in a number of different types of mutual funds,
a Fund will typically invest in the following types of mutual funds: aggressive
growth, growth, growth and income, small capitalization, specialty and industry
sector funds; international and global stock funds (including developed and
emerging markets, regional funds and country specific funds) and international
and global bond funds; U.S. Government securities, corporate bond and high yield
bond funds; utility and money market funds. Since a Fund is subject to the risks
of each investment type, the Fund and its performance are affected by many
factors.
The Manager will vary the percentage of a Fund's assets invested in each
type of underlying fund or security based upon the mix of such funds or
securities that the Manager believes will be most likely to achieve the Fund's
investment objective. In allocating assets among asset classes, the Manager will
employ both fundamental and technical analysis to assess relative risk and
reward potential throughout the financial markets, with the objective of
providing shareholders the best opportunity for achieving a Fund's investment
objective. Generally, in seeking a Fund's investment objective, the Manager will
alter the composition of the Fund's portfolio as economic and market trends
change. A Fund's portfolio is expected to vary considerably among the various
asset classes as these changes occur. The Manager substantially underweights
asset classes that it believes have above average market risk with below average
market potential over the short term; and it overweights asset classes that it
believes represent above average market potential with below average market
risk. By allocating its investments in this manner, a Fund believes it will not
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be exposed to the same degree of market risk as a fund which, for example,
invests in only one asset class. However, the allocation process is not limited
to determining the degree to which a Fund's assets should be invested in the
different asset classes. The Manager continually explores opportunities in
various subclasses of assets: geoeconomic considerations (i.e., foreign versus
domestic), maturities of fixed income securities (i.e., "short term" versus
"long term"), market capitalization (i.e., "blue chip" versus small
capitalization), and sector rotation (i.e., "high tech" versus staple
industries).
A Fund may purchase "no-load" mutual funds, which are sold and purchased
without a sales charge, and "load" mutual funds, but only if the load, or sales
commission, is by previous agreement waived for purchases or sales made by a
Fund. However, when the Manager believes it is appropriate, a Fund may also
purchase mutual funds that charge a redemption fee of up to 2% for short-term
sales, but not mutual funds that charge a sales load upon redemption. The
underlying mutual funds in which a Fund invests may incur distribution expenses
in the form of 12b-1 fees.
The Manager selects underlying funds in which to invest based, in part, on
their investment objectives and policies, their investment adviser and portfolio
manager, and on analysis of their past performance (absolute, relative and
risk-adjusted). The Manager also considers other factors in the selection of
underlying funds, including, but not limited to, fund size, liquidity, expense
ratio, quality of shareholder service, reputation and tenure of portfolio
manager, general composition of its investment portfolio and current and
expected portfolio holdings. Typically, a Fund will invest its assets in mutual
funds from several different mutual funds families, managed by a variety of
investment advisers, and utilizing a variety of different investment objectives
and styles.
Each Fund is a diversified mutual fund because at least 75 percent of the
value of each Fund's total assets will be represented by cash and cash items
(including receivables), Government securities, securities of other investment
companies, and other securities for the purposes of this calculation limited in
respect of any one issuer to an amount not greater in value than 5 percent of
the value of the total assets of each Fund and to not more than 10 percent of
the outstanding voting securities of such issuer.
The Trust may, in the future, seek to achieve each Fund's investment
objective by investing all of the Fund's assets in a no-load, diversified,
open-end management investment company having substantially the same investment
objective as the Fund. Each Fund's investment policies permit such an
investment. Shareholders will receive 30 days prior written notice with respect
to any such investment.
Except as otherwise provided herein, each Fund's investment objective and
its related policies and activities are not fundamental and may be changed by
the Trustees of the Trust, on behalf of a Fund, without approval of the
shareholders of that Fund.
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THE AMERIGO FUND
The investment objective of the The Amerigo Fund is capital appreciation
and long-term growth of capital without regard to current income. The underlying
funds in which it invests will consist of funds which seek capital growth or
appreciation by investing primarily in common stock or securities convertible
into or exchangeable for common stock (such as convertible preferred stock,
convertible debentures or warrants).
The Fund also may invest up to 20% of its total assets in underlying funds
which invest primarily in long- or short-term bonds and other fixed income
securities (such as securities issued or guaranteed or insured by the U.S.
Government, its agencies or instrumentalities, commercial paper, preferred
stock, convertible preferred stock or convertible debentures) whenever the
Manager believes that these underlying funds offer a potential for capital
appreciation. These underlying funds may invest in investment grade bonds or in
bonds which are not considered investment grade (commonly referred to as "junk
bonds"). See "Securities and Investment Practices High Yield Securities."
The underlying funds in which the The Amerigo Fund invests may incur more
risk than those in which the The Clermont Fund invests. For example, they may
trade their portfolios more actively (which results in higher brokerage
commissions and increased realization of taxable capital gains) and/or invest in
companies whose securities are subject to more erratic market movements. The
underlying funds also may invest up to 100% of their assets in securities of
foreign issuers and engage in foreign currency transactions with respect to
these investments; invest up to 15% of their assets in restricted or illiquid
securities; invest up to 5% of their assets in warrants; invest in asset-backed
securities; lend their portfolio securities; sell securities short; borrow money
in amounts up to 25% of their assets for investment purposes (i.e., leverage
their portfolios); write (sell) or purchase call or put options on securities or
on stock indexes; and enter into futures contracts and options on futures
contracts. The risks associated with these investments are described in
"Securities and Investment Practices."
THE CLERMONT FUND
The investment objective of the The Clermont Fund is growth of capital and
a reasonable level of current income. The underlying funds in which it invests
will consist of funds which invest primarily in common stock or securities
convertible into or exchangeable for common stock (such as convertible preferred
stock, convertible debentures or warrants) and which seek long-term capital
growth or appreciation with current income typically of secondary importance.
The Fund will also invest at least 20% of its total assets in underlying
funds which invest primarily in long- or short-term bonds and other fixed income
securities (such as securities issued or guaranteed or insured by the U.S.
Government, its agencies or instrumentalities, commercial paper, preferred
stock, convertible preferred stock or convertible debentures). These underlying
funds may invest in investment grade bonds or in bonds which are not considered
investment grade (commonly referred to as "junk bonds"). See "Securities and
Investment Practices - High Yield Securities."
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The underlying funds in which the The Clermont Fund invests may be
authorized to invest up to 100% of their assets in the securities of foreign
issuers and engage in foreign currency transactions with respect to these
investments; invest up to 10% of their assets in restricted or illiquid
securities; invest up to 5% of their assets in warrants; invest in asset-backed
securities; lend their portfolio securities; sell securities short; borrow money
in amounts up to 25% of their assets for investment purposes; write or purchase
call or put options on securities or stock indexes; and enter into futures
contracts and options on futures contracts. The risks associated with these
investments are described in "Securities and Investment Practices."
Additional information about the investment policies of the Funds appears
in the Statement of Additional Information. There can be no assurance that the
investment objective of the Funds will be achieved.
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SECURITIES AND INVESTMENT PRACTICES
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The following pages contain more detailed information about types of
instruments in which a Fund or its underlying funds may invest, strategies the
Manager may employ in pursuit of a Fund's investment objective, and a summary of
related risks. Any restrictions listed supplement those discussed earlier. A
complete listing of a Fund's limitations and more detailed information about
each Fund's investments are contained in the Statement of Additional
Information.
OPEN-END INVESTMENT COMPANIES. Any investment in a mutual fund involves
risk and, although the Funds may invest in a number of underlying funds, this
practice does not eliminate investment risk. Moreover, investing through the
Funds in an underlying portfolio of mutual funds involves certain additional
expenses and certain tax results which would not be present in a direct
investment in the underlying funds. See "Dividends, Distributions and Taxes."
The Funds and any "affiliated persons" (as defined in the 1940 Act) may
purchase in the aggregate only up to 3% of the total outstanding securities of
any underlying fund Accordingly, when affiliated persons hold shares of any of
the underlying funds, each Fund's ability to invest fully in shares of those
funds is restricted, and the Manager must then, in some instances, select
alternative investments that would not have been its first preference.
The 1940 Act also provides that an underlying fund whose shares are
purchased by a Fund will be obligated to redeem shares held by the Fund only in
an amount up to 1% of the underlying fund's outstanding securities during any
period of less than 30 days. Shares held by a Fund in excess of 1% of an
underlying fund's outstanding securities therefore, will be considered not
readily marketable securities which together with other such securities may not
exceed 15% of The Amerigo Fund's assets and 10% of The Clermont Fund's assets.
Under certain circumstances an underlying fund may determine to make
payment of a redemption by a Fund wholly or partly by a distribution in kind of
securities from its portfolio, in lieu of cash, in conformity with the rules of
the Securities and Exchange Commission. In such cases, the Funds may hold
securities distributed by an underlying fund until the Manager determines that
it is appropriate to dispose of such securities.
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Investment decisions by the investment advisers of the underlying funds are
made independently of the Funds and their Manager. Therefore, the investment
adviser of one underlying fund may be purchasing shares of the same issuer whose
shares are being sold by the investment adviser of another such fund. The result
of this would be an indirect expense to a Fund without accomplishing any
investment purpose.
CLOSED-END INVESTMENT COMPANIES. The Funds may invest their assets in
"closed-end" investment companies (or "closed-end funds"), subject to the
investment restrictions set forth below. The Funds, together with any company or
companies controlled by the Funds, and any other investment companies having the
Manager as an investment adviser, may purchase in the aggregate only up to 3% of
the total outstanding voting stock of any closed-end fund. Shares of closed-end
funds are typically offered to the public in a one-time initial public offering
by a group of underwriters who retain a spread or underwriting commission of
between 4% or 6% of the initial public offering price. Such securities are then
listed for trading on the New York Stock Exchange, the American Stock Exchange,
the National Association of Securities Dealers Automated Quotation System
(commonly known as "NASDAQ") and, in some cases, may be traded in other
over-the-counter markets. Because the shares of closed-end funds cannot be
redeemed upon demand to the issuer like the shares of an open-end investment
company (such as a Fund), investors seek to buy and sell shares of closed-end
funds in the secondary market.
A Fund generally will purchase shares of closed-end funds only in the
secondary market. A Fund will incur normal brokerage costs on such purchases
similar to the expenses a Fund would incur for the purchase of securities of any
other type of issuer in the secondary market. A Fund may, however, also purchase
securities of a closed-end fund in an initial public offering when, in the
opinion of the Manager, based on a consideration of the nature of the closed-end
fund's proposed investments, the prevailing market conditions and the level of
demand for such securities, they represent an attractive opportunity for growth
of capital. The initial offering price typically will include a dealer spread,
which may be higher than the applicable brokerage cost if a Fund purchased such
securities in the secondary market.
The shares of many closed-end funds, after their initial public offering,
frequently trade at a price per share which is less than the net asset value per
share, the difference representing the "market discount" of such shares. This
market discount may be due in part to the investment objective of long-term
appreciation, which is sought by many closed-end funds, as well as to the fact
that the shares of closed-end funds are not redeemable by the holder upon demand
to the issuer at the next determined net asset value but rather are subject to
the principles of supply and demand in the secondary market. A relative lack of
secondary market purchasers of closed-end fund shares also may contribute to
such shares trading at a discount to their net asset value.
A Fund may invest in shares of closed-end funds that are trading at a
discount to net asset value or at a premium to net asset value. There can be no
assurance that the market discount on shares of any closed-end fund purchased by
a Fund will ever decrease. In fact, it is possible that this market discount may
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increase and a Fund may suffer realized or unrealized capital losses due to
further decline in the market price of the securities of such closed-end funds,
thereby adversely affecting the net asset value of a Fund's shares. Similarly,
there can be no assurance that any shares of a closed-end fund purchased by a
Fund at a premium will continue to trade at a premium or that the premium will
not decrease subsequent to a purchase of such shares by a Fund.
Closed-end funds may issue senior securities (including preferred stock and
debt obligations) for the purpose of leveraging the closed-end fund's common
shares in an attempt to enhance the current return to such closed-end fund's
common shareholders. A Fund's investment in the common shares of closed-end
funds that are financially leveraged may create an opportunity for greater total
return on its investment, but at the same time may be expected to exhibit more
volatility in market price and net asset value than an investment in shares of
investment companies without a leveraged capital structure.
ILLIQUID AND RESTRICTED SECURITIES. An underlying fund may invest not more
than 15% of its total assets in securities for which there is no readily
available market ("illiquid securities") which would include securities the
disposition of which would be subject to legal restrictions (so-called
"restricted securities") and repurchase agreements having more than seven days
to maturity. A considerable period of time may elapse between an underlying
fund's decision to dispose of such securities and the time when the fund is able
to dispose of them, during which time the value of the securities (and therefore
the value of the underlying fund's shares held by a Fund) could decline.
FOREIGN SECURITIES. An underlying fund may invest up to 100% of its assets
in securities of foreign issuers. There may be less publicly available
information about these issuers than is available about companies in the U.S.
and foreign auditing requirements may not be comparable to those in the U.S. In
addition, the value of the underlying fund's foreign securities may be adversely
affected by fluctuations in the exchange rates between foreign currencies and
the U.S. dollar, as well as other political and economic developments, including
the possibility of expropriation, confiscatory taxation, exchange controls or
other foreign governmental restrictions. In addition, income received by an
underlying fund from sources within foreign countries, such as dividends and
interest payable on foreign securities, may be subject to foreign taxes,
including taxes withheld from payments on those securities. Moreover, the
underlying funds will generally calculate their net asset values and complete
orders to purchase, exchange or redeem shares only on a Monday-Friday basis
(excluding holidays on which the NYSE is closed). Foreign securities in which
the underlying funds may invest may be listed primarily on foreign stock
exchanges which may trade on other days (such as Saturday). As a result, the net
asset value of an underlying fund's portfolio may be significantly affected by
such trading on days when the Manager does not have access to the Funds. Under
the Investment Company Act of 1940 (the "1940 Act"), an underlying fund may
maintain its foreign securities in the custody of non-U.S. banks and securities
depositories.
EXPOSURE TO EMERGING MARKETS. An underlying fund may invest in emerging
markets securities. Investments in emerging market securities include additional
risks to those generally associated with foreign investing. The extent of
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economic development, political stability, and market depth varies widely in
comparison to more developed nations. The economies of these countries may be
subject to greater social, economic, and political uncertainties or may be based
on only a few industries. All of these factors can make emerging market
securities more volatile.
FOREIGN CURRENCY TRANSACTIONS. In connection with its portfolio
transactions in securities traded in a foreign currency, an underlying fund may
enter into forward contracts to purchase or sell an agreed upon amount of a
specific currency at a future date which may be any fixed number of days from
the date of the contract agreed upon by the parties at a price set at the time
of the contract. Under such an arrangement, concurrently with the entry into a
contract to acquire a foreign security for a specified amount of currency, the
underlying fund would purchase with U.S. dollars the required amount of foreign
currency for delivery at the settlement date of the purchase. The underlying
fund would enter into similar forward currency transactions in connection with
the sale of foreign securities. The effect of such transactions would be to fix
a U.S. dollar price for the security to protect against a possible loss
resulting from an adverse change in the relationship between the U.S. dollar and
the subject foreign currency during the period between the date the security is
purchased or sold and the date on which payment is made or received, the normal
range of which is three to 14 days. These contracts are traded in the interbank
market conducted directly between currency traders (usually large commercial
banks) and their customers. A forward contract generally has no deposit
requirement and no commissions are charged at any stage for trades. Although
such contracts tend to minimize the risk of loss due to a decline in the value
of the subject currency, they tend to limit commensurably any potential gain
which might result should the value of such currency increase during the
contract period.
INDUSTRY CONCENTRATION. Although a Fund will not invest 25% or more of its
total assets in any one industry or underlying funds that concentrate their
investments in any one industry, a Fund, through its investment in the
underlying funds, may indirectly invest 25% or more of its total assets in one
industry.
MASTER DEMAND NOTES. Although the Funds themselves will not do so,
underlying funds (particularly money market mutual funds) may invest up to 100%
of their assets in master demand notes. Master demand notes are unsecured
obligations of U.S. corporations redeemable upon notice that permit investment
by an underlying fund of fluctuating amounts at varying rates of interest
pursuant to direct arrangements between the underlying fund and the issuing
corporation. Because they are direct arrangements between the underlying fund
and the issuing corporation, there is no secondary market for the notes.
However, they are redeemable at face value, plus accrued interest, at any time.
REPURCHASE AGREEMENTS. Underlying funds, particularly money market funds,
may enter into repurchase agreements with banks and broker-dealers under which
they acquire securities subject to an agreement with the seller to repurchase
the securities at an agreed upon time and price. The Funds also may enter into
repurchase agreements. These agreements are considered under the 1940 Act to be
loans by the purchaser collateralized by the underlying securities. If the
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seller should default on its obligation to repurchase the securities, the
underlying fund may experience delay or difficulties in exercising its rights to
realize upon the securities held as collateral and might incur a loss if the
value of the securities should decline. For a more complete discussion of
repurchase agreements, see "Investment Objectives and Policies" in the Statement
of Additional Information.
LOANS OF PORTFOLIO SECURITIES. A Fund or an underlying fund may lend its
portfolio securities provided: (1) the loan is secured continuously by
collateral consisting of U.S. Government securities or cash or cash equivalents
maintained on a daily mark-to-market basis in an amount at least equal to the
current market value of the securities loaned; (2) the Fund or the underlying
fund may at any time call the loan and obtain the return of the securities
loaned; (3) the Fund or the underlying fund will receive any interest or
dividends paid on the loaned securities; and (4) the aggregate market value of
securities loaned will not at any time exceed one-third of the total assets of
the Fund or the underlying fund. Loans of securities involve a risk that the
borrower may fail to return the securities or may fail to provide additional
collateral.
SHORT SALES. An underlying fund may sell securities short. In a short sale,
the underlying fund sells stock which it does not own, making delivery with
securities "borrowed" from a broker. The underlying fund is then obligated to
replace the security borrowed by purchasing it at the market price at the time
of replacement. This price may or may not be less than the price at which the
security was sold by the underlying fund. Until the security is replaced, the
underlying fund is required to pay to the lender any dividends or interest which
accrue during the period of the loan. In order to borrow the security, the
underlying fund may also have to pay a premium which would increase the cost of
the security sold. The proceeds of the short sale will be retained by the
broker, to the extent necessary to meet margin requirements, until the short
position is closed out.
The underlying fund also must deposit in a segregated account an amount of
cash or U.S. Government securities equal to the difference between (a) the
market value of the securities sold short at the time they were sold short and
(b) the value of the collateral deposited with the broker in connection with the
short sale (not including the proceeds from the short sale). While the short
position is open, the underlying fund must maintain daily the segregated account
at such a level that (1) the amount deposited in it plus the amount deposited
with the broker as collateral equals the current market value of the securities
sold short and (2) the amount deposited in it plus the amount deposited with the
broker as collateral is not less than the market value of the securities at the
time they were sold short. Depending upon market conditions, up to 80% of the
value of the underlying fund's net assets may be deposited as collateral for the
obligation to replace securities borrowed to effect short sales and allocated to
a segregated account in connection with short sales.
The underlying fund will incur a loss as a result of the short sale if the
price of the security increases between the date of the short sale and the date
on which the underlying fund replaces the borrowed security. The underlying fund
will realize a gain if the security declines in price between those dates. The
amount of any gain will be decreased and the amount of any loss increased by the
amount of any premium, dividends or interest the underlying fund may be required
to pay in connection with a short sale.
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A short sale is "against the box" if at all times when the short position
is open the underlying fund owns an equal amount of the securities or securities
convertible into, or exchangeable without further consideration for, securities
of the same issue as the securities sold short. Such a transaction serves to
defer a gain or loss for Federal income tax purposes.
OPTIONS ACTIVITIES. An underlying fund may write (i.e., sell) listed call
options ("calls") if the calls are "covered" throughout the life of the option.
A call is "covered" if the underlying fund owns the optioned securities. When an
underlying fund writes a call, it receives a premium and gives the purchaser the
right to buy the underlying security at any time during the call period (usually
not more than nine months in the case of common stock) at a fixed exercise price
regardless of market price changes during the call period. If the call is
exercised, the underlying fund will forgo any gain from an increase in the
market price of the underlying security over the exercise price.
An underlying fund may purchase a call on securities only to effect a
"closing purchase transaction" which is the purchase of a call covering the same
underlying security and having the same exercise price and expiration date as a
call previously written by the fund on which it wishes to terminate its
obligation. If the underlying fund is unable to effect a closing purchase
transaction, it will not be able to sell the underlying security until the call
previously written by the underlying fund expires (or until the call is
exercised and the fund delivers the underlying security).
An underlying fund also may write and purchase put options ("puts"). When
an underlying fund writes a put, it receives a premium and gives the purchaser
of the put the right to sell the underlying security to the fund at the exercise
price at any time during the option period. When an underlying fund purchases a
put, it pays a premium in return for the right to sell the underlying security
at the exercise price at any time during the option period. An underlying fund
also may purchase stock index puts which differ from puts on individual
securities in that they are settled in cash based on the values of the
securities in the underlying index rather than by delivery of the underlying
securities. Purchase of a stock index put is designed to protect against a
decline in the value of the portfolio generally rather than an individual
security in the portfolio. If any put is not exercised or sold, it will become
worthless on its expiration date.
An underlying fund's option positions may be closed out only on an exchange
which provides a secondary market for options of the same series, but there can
be no assurance that a liquid secondary market will exist at a given time for
any particular option. In this regard, trading in options on certain securities
(such as U.S. Government securities) is relatively new so that it is impossible
to predict to what extent liquid markets will develop or continue.
The underlying fund's custodian, or a securities depository acting for it,
generally acts as escrow agent as to the securities on which the underlying fund
has written puts or calls, or as to other securities acceptable for such escrow
so that no margin deposit is required of the underlying fund. Until the
underlying securities are released from escrow, they cannot be sold by the
underlying fund.
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In the event of a shortage of the underlying securities deliverable on
exercise of an option, the Options Clearing Corporation has the authority to
permit other, generally comparable securities to be delivered in fulfillment of
option exercise obligations. If the Options Clearing Corporation exercises its
discretionary authority to allow such other securities to be delivered, it may
also adjust the exercise prices of the affected options by setting different
prices at which otherwise ineligible securities may be delivered. As an
alternative to permitting such substitute deliveries, the Options Clearing
Corporation may impose special exercise settlement procedures.
FUTURES CONTRACTS. A Fund or an underlying fund may enter into futures
contracts for the purchase or sale of debt securities and stock indexes. A
futures contract is an agreement between two parties to buy and sell a security
or an index for a set price on a future date. Futures contracts are traded on
designated "contract markets" which, through their clearing corporations,
guarantee performance of the contracts.
Generally, if market interest rates increase, the value of outstanding debt
securities declines (and vice versa). Entering into a futures contract for the
sale of securities has an effect similar to the actual sale of securities,
although sale of the futures contract might be accomplished more easily and
quickly. For example, if a Fund or an underlying fund holds long-term U.S.
Government securities and it anticipates a rise in long-term interest rates, it
could, in lieu of disposing of its portfolio securities, enter into futures
contracts for the sale of similar long-term securities. If rates increased and
the value of the Fund or underlying fund's portfolio securities declined, the
value of the Fund or underlying fund's futures contracts would increase, thereby
protecting the Fund or the underlying fund by preventing the net asset value
from declining as much as it otherwise would have. Similarly, entering into
futures contracts for the purchase of securities has an effect similar to the
actual purchase of the underlying securities, but permits the continued holding
of securities other than the underlying securities. For example, if a Fund or
the underlying fund expects long-term interest rates to decline, it might enter
into futures contracts for the purchase of long-term securities so that it could
gain rapid market exposure that may offset anticipated increases in the cost of
securities it intends to purchase while continuing to hold higher-yield
short-term securities or waiting for the long-term market to stabilize.
A stock index futures contract may be used to hedge a Fund or an underlying
fund's portfolio with regard to market risk as distinguished from risk relating
to a specific security. A stock index futures contract does not require the
physical delivery of securities, but merely provides for profits and losses
resulting from changes in the market value of the contract to be credited or
debited at the close of each trade day to the respective accounts of the parties
to the contract. On the contract's expiration date, a final cash settlement
occurs. Changes in the market value of a particular stock index futures contract
reflect changes in the specified index of equity securities on which the future
is based.
There are several risks in connection with the use of futures
contracts. In the event of an imperfect correlation between the futures contract
and the portfolio position which is intended to be protected, the desired
protection may not be exposed to risk of loss. Further, unanticipated changes in
interest rates or stock price movements may result in a poorer overall
performance for a Fund or the underlying fund than if it had not entered into
futures contracts on debt securities or stock indexes.
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In addition, the market prices of futures contracts may be affected by
certain factors. First, all participants in the futures market are subject to
margin deposit and maintenance requirements. Rather than meeting additional
margin deposit requirements, investors may close futures contracts through
offsetting transactions which could distort the normal relationship between the
securities and futures markets. Second, from the point of view of speculators,
the deposit requirements in the futures market are less onerous than margin
requirements in the securities market. Therefore, increased participation by
speculators in the futures market may also cause temporary price distortions.
Finally, positions in futures contracts may be closed out only on an
exchange or board of trade which provides a secondary market for such futures.
There is no assurance that a liquid secondary market on an exchange or board of
trade will exist for any particular contract or at any particular time.
OPTIONS ON FUTURES CONTRACTS. A Fund or an underlying fund also may
purchase and sell listed put and call options on futures contracts. An option on
a futures contract gives the purchaser the right, in return for the premium
paid, to assume a position in a futures contract (a long position if the option
is a call and a short position if the option is a put), at a specified exercise
price at any time during the option period. When an option on a futures contract
is exercised, delivery of the futures position is accompanied by cash
representing the difference between the current market price of the futures
contract and the exercise price of the option. A Fund or underlying fund may
purchase put options on futures contracts in lieu of, and for the same purpose
as, a sale of a futures contract. It also may purchase such put options in order
to hedge a long position in the underlying futures contract in the same manner
as it purchases "protective puts" on securities.
As with options on securities, the holder of an option may terminate his
position by selling an option of the same series. There is no guarantee that
such closing transactions can be effected. A Fund or the underlying fund is
required to deposit initial margin and maintenance margin with respect to put
and call options on futures contracts written by it pursuant to brokers'
requirements similar to those applicable to futures contracts described above
and, in addition, net option premiums received will be included as initial
margin deposits.
In addition to the risks which apply to all options transactions, there
are several special risks relating to options on futures contracts. The ability
to establish and close out positions on such options will be subject to the
development and maintenance of a liquid secondary market. It is not certain that
this market will develop. Compared to the use of futures contracts, the purchase
of options on futures contracts involves less potential risk to a Fund or the
underlying fund because the maximum amount at risk is the premium paid for the
options (plus transaction costs). However, there may be circumstances when the
use of an option on a futures contract would result in a loss to a Fund or an
underlying fund when the use of futures contract would not, such as when there
is no movement in the prices of the underlying securities. Writing an option on
a futures contract involves risks similar to those arising in the sale of
futures contracts, as described above.
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HEDGING. A Fund or an underlying fund may employ many of the investment
techniques described in this section not only for investment purposes, but also
for hedging purposes. For example, an underlying fund may purchase or sell put
and call options on common stocks to hedge against movements in individual
common stock prices, or a Fund or an underlying fund may purchase and sell stock
index futures and related options to hedge against marketwide movements in
common stock prices. Although such hedging techniques generally tend to minimize
the risk of loss that is hedged against, they also may limit commensurably the
potential gain that might have resulted had the hedging transaction not
occurred. Also, the desired protection generally resulting from hedging
transactions may not always be achieved.
LEVERAGE THROUGH BORROWING. Each Fund has a fundamental policy that the
Fund may not borrow more than 25% of the value of its net assets on an unsecured
basis from banks to increase its holdings of portfolio securities. Likewise, an
underlying fund may borrow up to 25% of the value of its net assets on an
unsecured basis from banks to increase its holdings of portfolio securities.
Under the 1940 Act, the Fund or the underlying fund is required to maintain
continuous asset coverage of 300% with respect to such borrowings and to sell
(within three days) sufficient portfolio holdings to restore such coverage if it
should decline to less than 300% due to market fluctuations or otherwise, even
if disadvantageous from an investment standpoint. Leveraging will exaggerate the
effect of any increase or decrease in the value of portfolio securities on the
Fund or the underlying fund's net asset value, and money borrowed will be
subject to interest costs (which may include commitment fees and/or the cost of
maintaining minimum average balances) which may or may not exceed the interest
and option premiums received from the securities purchased with borrowed funds.
WARRANTS. An underlying fund may invest in warrants, which are options to
purchase equity securities at specific prices valid for a specific period of
time. The prices do not necessarily move parallel to the prices of the
underlying securities. Warrants have no voting rights, receive no dividends and
have no rights with respect to the assets of the issuer. If a warrant is not
exercised within the specified time period, it will become worthless and the
underlying fund will lose the purchase price and the right to purchase the
underlying security.
HIGH YIELD SECURITIES. Investing in high yield, high risk securities
involves special risks in addition to the risks associated with investments in
higher rated debt securities. High yield, high risk securities may be regarded
as predominantly speculative with respect to the issuer's continuing ability to
meet principal and interest payments.
High yield, high risk securities may be more susceptible to real or
perceived adverse economic and competitive industry conditions than higher grade
securities. The prices of high yield, high risk securities have been found to be
less sensitive to interest rate changes than more highly rated investments, but
more sensitive to adverse economic downturns or individual corporate
developments. A projection of an economic downturn or of a period of rising
interest rates, for example, could cause a decline in high yield, high risk
security prices because the advent of a recession could lessen the ability of a
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highly leveraged company to make principal and interest payments on its debt
securities. If the issuer of high yield, high risk securities defaults, an
underlying fund may incur additional expenses to seek recovery. In the case of
high yield securities structured as zero coupon or payment-in-kind securities,
the market prices of such securities are affected to a greater extent by
interest rate changes, and therefore tend to be more volatile than securities
which pay interest periodically and in cash.
The secondary markets on which high yield, high risk securities are traded
may be less liquid than the market for higher grade securities. Less liquidity
in the secondary trading markets could adversely affect and cause large
fluctuations in the daily net asset value of an underlying fund's shares.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of high yield, high risk
securities, especially in a thinly traded market.
There may be special tax considerations associated with investing in high
yield, high risk securities structured as zero coupon or payment-in-kind
securities. An underlying fund records the interest on these securities as
income even though it receives no cash interest until the security's maturity or
payment date. An underlying fund will be required to distribute all or
substantially all such amounts annually and may have to obtain the cash to do so
by selling securities which otherwise would continue to be held. Shareholders
will be taxed on these distributions.
The use of credit ratings as the sole method of evaluating high yield, high
risk securities can involve certain risks. For example, credit ratings evaluate
the safety of principal and interest payments, not the market value risk of high
yield, high risk securities. Also, credit rating agencies may fail to change
credit ratings in a timely fashion to reflect events since the security was last
rated.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES
An underlying fund may invest in mortgage pass-through securities, which
are securities representing interest in pools of mortgage loans secured by
residential or commercial real property in which payments of both interest and
principal on the securities are generally made monthly, in effect passing
through monthly payments made by individual borrowers on mortgage loans which
underlie the securities (net of fees paid to the issuer or guarantor of the
securities). Early repayment of principal on some mortgage-related securities
(arising from prepayments of principal due to sale of the underlying property,
refinancing, or foreclosure, net of fees and costs which may be incurred) may
expose an underlying fund to a lower rate of return upon reinvestment of
principal. Also, if a security subject to prepayment has been purchased at a
premium in the event of prepayment the value of the premium would be lost.
Like other fixed income securities, when interest rates rise, the value of
a mortgage-related security generally will decline; however, when interest rates
are declining, the value of mortgage-related securities with prepayment features
may not increase as much as other fixed income securities.
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An underlying fund may invest in collateralized mortgage obligations
(CMOs), which are hybrid mortgage-related instruments. Similar to a bond,
interest and pre-paid principal on a CMO are paid, in most cases, semiannually.
CMOs are collateralized by portfolios of mortgage pass-through securities and
are structured into multiple classes with different stated maturities. Monthly
payments of principal, including prepayments, are first returned to investors
holding the shortest maturity class; investors holding the longer maturity
classes receive principal only after the first class has been retired.
Other mortgage-related securities in which an underlying fund may invest
include other securities that directly or indirectly represent a participation
in, or are secured by and payable from, mortgage loans on real property, such as
CMO residuals or stripped mortgage-backed securities ("SMB"), and may be
structured in classes with rights to receive varying proportions of principal
and interest. SMBs are usually structured with two classes that receive
specified proportions of the monthly interest and principal payments from a pool
of mortgage securities. One class may receive all of the interest payments and
is thus termed an interest-only class ("IO"), while the other class may receive
all of the principal payments and is thus termed the principal-only class
("PO"). The value of IOs tends to increase as rates rise and decrease as rates
fall; the opposite is true for POs. During times when interest rates are
experiencing fluctuations, such securities can be difficult to price on a
consistent basis. The market for SMBs is not as fully developed as other
markets; SMBs, therefore, may be illiquid. In addition, the underlying funds may
invest in other asset-backed securities that have been offered to investors or
will be offered to investors in the future. Several types of asset-backed
securities have already been offered to investors, including certificates for
automobile receivables, which represent undivided fractional interests in a
trust whose assets consist of a pool of motor vehicle retail installment sales
contracts and security interest in the vehicles securing the contracts.
PORTFOLIO TURNOVER
Because the Manager may employ defensive investment strategies when market
trends are not considered favorable, the Manager may occasionally change the
entire portfolio in a Fund. High transaction costs could result when compared
with other funds. Trading may also result in realization of net short-term
capital gains upon which shareholders may be taxed at ordinary tax rates when
distributed from a Fund. See "Dividends, Distributions and Taxes."
The active asset allocation approach of a Fund can produce high
portfolio turnover ratios when calculated in accordance with SEC rules. The
portfolio turnover rates for the period from July 14, 1997 (date of commencement
of operations) through April 30, 1998 for The Amerigo Fund and The Clermont Fund
were 14.36% and 22.24%, respectively.
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THE TRUST AND ITS MANAGEMENT
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The Trust was organized as a Massachusetts business trust on March 3, 1997.
Each Fund is a diversified open-end management investment company. The Trust's
offices are at 14747 California Street, Omaha, Nebraska 68154-1979. The business
and affairs of the Trust are under the direction of its Board of Trustees.
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Each Fund has retained the services of Clarke Lanzen Skalla Investment
Firm, Inc. as investment adviser (the "Manager"). The Manager has been an
investment adviser to individuals, employee benefit plans, trusts and
corporations since 1989. Although the Manager has been an investment adviser,
and has been selecting mutual funds for its clients, for nine years, the Manager
has had approximately 13 months experience in managing mutual funds. The Manager
serves each Fund pursuant to an Investment Advisory Contract under the terms of
which it has agreed to provide an investment program within the limitations of
the Fund's investment policies and restrictions, and to furnish all executive,
administrative, and clerical services required for the transaction of Fund
business, other than accounting services and services which are provided by the
Fund's custodian, transfer agent, independent accountants and legal counsel.
The Manager maintains its offices at 14747 California Street, Omaha,
Nebraska 68154-1979. As of January 30, 1998, the Manager held discretionary
investment authority over approximately $739 million of assets. The Manager is
controlled by W. Patrick Clarke through ownership of voting common stock. Mr.
Clarke, a director and the President of the Manager, is Chairman, President and
a Trustee of the Trust.
The Manager earns an annual fee, payable in monthly installments, from each
Fund at the rate of 1.00% of the Fund's average net assets.
Accounting, stock transfer, and dividend disbursing services are provided
to the Fund by Mutual Funds Service Company, 6000 Memorial Drive, Dublin, Ohio
43017. Mutual Funds Service Company also serves as Administrator to the Fund
pursuant to an Administration Services Agreement. Services provided to the Fund
include coordinating and monitoring any third party services to the Fund;
providing the necessary personnel to perform administrative functions for the
Fund; assisting in the preparation, filing and distribution of proxy materials,
periodic reports to Trustees and shareholders, registration statements and other
necessary documents. The Fund incurs an annual administrative fee, payable
monthly, of .05% of the Fund's average net assets, subject to a minimum annual
fee of $30,000.
A broker-dealer may use a portion of the commissions paid by a Fund to
reduce the Fund's expenses. The Manager may take into account sales of shares of
a Fund in selecting broker-dealers to effect portfolio transactions on behalf of
a Fund.
The Manager may use its resources to pay expenses associated with the sale
of a Fund's shares. This may include payments to parties such as banks or
broker-dealers that provide shareholder support services or engage in the sale
of a Fund's shares. However, the Funds do not pay the Manager any separate fees
for this service.
Each Fund may effect portfolio transactions with or through CLS Brokerage
Services, Inc., an affiliate of the Manager, when the Manager determines that
the Fund will receive the best net price and execution. This standard would
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allow CLS Brokerage Services, Inc. to receive no more than the remuneration that
would be expected to be received by an unaffiliated broker in a commensurate
arm's-length transaction.
Information concerning the Trustees and officers of the Trust appears in
the Statement of Additional Information.
PORTFOLIO MANAGER
Randal D. Skalla is the portfolio manager primarily responsible for the
day-to-day management of the Funds.
Mr. Skalla, a Trustee and Vice President of the Trust, has been employed by
the Manager since December 1989, has been a director and the Chief Investment
Officer of the Manager since December 1992, and has managed the Funds since
their inception in July 1997. He is a graduate of Brigham Young University where
he earned a Bachelor of Science degree in Economics and a Masters of Business
Administration degree with an emphasis in Finance and Investments.
TRANSFER AGENT
Mutual Funds Service Company, 6000 Memorial Drive, Dublin, Ohio 43017
provides stock transfer, dividend disbursing and accounting and administrative
services to the Funds.
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HOW TO BUY SHARES
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Shares of each Fund are offered continuously and sold at the net asset
value per share next determined after receipt by the Fund of both a purchase
order in good form and payment. (See "How Net Asset Value is Determined.") Net
asset value generally changes each day.
MINIMUM INITIAL INVESTMENT -- The minimum initial investment to open an account
is $2,500, except an Individual Retirement Account (IRA) which has a $500
minimum. Subsequent investments in any account may be made in amounts of at
least $100.
OPENING AN ACCOUNT --You may open an account through your investment
adviser (by mail or bank wire) as follows:
BY MAIL: To purchase shares, fill out the New Account Application accompanying
this Prospectus (including the Client Profile) and give it to your investment
adviser. A check payable to The Amerigo Fund or The Clermont Fund must accompany
the New Account Application. Your investment adviser should mail the New Account
Application and the check to the following address:
CLS ADVISORONE FUNDS, C/O MUTUAL FUNDS SERVICE COMPANY, P.O. BOX 7177,
DUBLIN, OHIO 43017
21
<PAGE>
BY BANK WIRE: If the wire order is for a new account in a Fund, YOU MUST
TELEPHONE THE FUND PRIOR TO MAKING YOUR INITIAL INVESTMENT. Call 1-800-808-3829,
or (614) 760-2158. Advise the Fund of the amount you wish to invest and obtain
an account number and instructions. Have your bank wire federal funds to:
STAR BANK, N.A. CINTI/TRUST
(ABA #: 042-00001-3)
ATTENTION: THE CLS ADVISORONE FUNDS
(and Name of Fund -- see below)
Credit Account Number (account number for Fund as follows):
THE AMERIGO FUND
Account Number 486464423
THE CLERMONT FUND
Account Number 486464431
Account Name (your name)
Personal Account No. (your CLS AdvisorOne Funds account number)
On new accounts, your investment adviser must send a completed New Account
Application (including the Client Profile) to CLS AdvisorOne Funds c/o Mutual
Funds Service Company, P.O. Box 7177, Dublin, OH 43017 on the same day your wire
is sent. A Fund will not permit redemptions until it receives the New Account
Application in good order.
SUBSEQUENT INVESTMENTS--Subsequent investments in an existing account in a
Fund may be made by mailing a check payable to The Amerigo Fund and/or The
Clermont Fund (please include your account number(s) on the check) and mail as
follows:
THE CLS ADVISORONE FUNDS
C/O MUTUAL FUNDS SERVICE COMPANY
P.O. BOX 7177
DUBLIN, OH 43017
Subsequent investments may also be made by bank wire as described above. IT
IS NECESSARY TO NOTIFY A FUND PRIOR TO EACH WIRE PURCHASE. Wires sent without
notifying the Fund will result in a delay of the effective date of your
purchase.
AUTOMATIC ACCOUNT BUILDER--Periodic investments in an existing account can
be made by selecting this option. (See "Other Shareholder Services.")
WHEN PURCHASES ARE EFFECTIVE--Shares of each Fund are sold at net asset
value per share next determined after receipt by Mutual Funds Service Company of
both a purchase order in good form and payment.
22
<PAGE>
If a shareholder's check is dishonored, the purchase and any dividends paid
thereon, if any, will be reversed. If shares are purchased with federal funds,
they may be redeemed at any time thereafter and the shareholder may secure his
funds as explained below. (See "How to Make Withdrawals (Redemptions).")
However, if shares are purchased by check(s) or the Automatic Account Builder,
Mutual Funds Service Company will delay payment of redemption proceeds until the
check used to purchase shares, or Automatic Account Builder order, has cleared
which could be fifteen (15) calendar days or more subsequent to the purchase of
the shares. A Fund will forward the proceeds promptly once the check has
cleared.
FINANCIAL INSTITUTIONS--You may buy shares or sell shares of a Fund through
a broker or financial institution who may charge you a fee for this service. If
you are purchasing shares of a Fund through a program of services offered or
administered by a securities dealer or financial institution, you should read
the program materials in conjunction with this Prospectus.
Certain financial institutions that have entered into sales agreements with
the Trust may enter confirmed purchase orders on behalf of customers by
telephone to purchase shares of a Fund. Payment is due no later than a Fund's
pricing on the following business day. If payment for the purchase of shares is
not received in a timely manner, the financial institution could be held liable
for any loss incurred by a Fund.
- --------------------------------------------------------------------------------
HOW TO MAKE WITHDRAWALS (REDEMPTIONS)
- --------------------------------------------------------------------------------
Shares are redeemed and funds withdrawn at net asset value per share, and
there are no redemption fees. (See "How Net Asset Value Is Determined.")
BY MAIL--A shareholder may redeem shares by mailing a written request in
good order to CLS AdvisorOne Funds c/o Mutual Funds Service Company, P.O. Box
7177, Dublin, OH 43017. Good order means that the request must be signed by the
shareholder(s) and the signature(s) must be guaranteed by an eligible guarantor
institution (a bank, broker-dealer, credit union, securities exchange and
association, clearing agency and savings association). The Funds do not accept
signatures guaranteed by a notary public. Further documentation may be required
as to the authority of the person requesting redemption of shares held of record
in the name of corporations, executors, administrators, trustees, guardians or
other fiduciaries. The Funds may waive these requirements in certain instances.
Amounts withdrawn are mailed without charge to the address printed on your
account statement.
BY TELEPHONE--A shareholder may redeem by telephone: 1-800-808-3829, or
call (614) 760-2158. Shareholders who wish to use this procedure must so elect
on the New Account Application. Amounts withdrawn from an account by telephone
are mailed without charge to the address printed on your account statement.
23
<PAGE>
As a special service, a shareholder may arrange to have amounts in excess
of $1,000 wired in federal funds to a designated commercial bank account. To use
this procedure please designate on the New Account Application a bank and bank
account number to receive the proceeds of wire withdrawals. There is no charge
for this service.
A shareholder may change the bank account designated to receive
redemptions. This may be done at any time upon written request to the Funds. The
shareholder's signature must be guaranteed. Further documentation may be
required from corporations, executors, administrators, trustees, guardians, or
other fiduciaries.
Neither the Funds nor Mutual Funds Service Company will be responsible for
any loss, expense, or cost arising from any telephone redemption request made
according to the authorization set forth in the New Account Application if they
reasonably believe such request to be genuine and follow reasonable procedures
designed to verify the identity of the person requesting the redemption. Mutual
Funds Service Company will provide each investor seeking telephone redemption
privileges with a personalized security code which, along with other
information, will be required of the caller upon request of a telephone
redemption. Other information may also be required and calls may be recorded.
WHEN REDEMPTIONS ARE EFFECTIVE--Redemptions are made at the net asset value
per share next determined after receipt of a redemption request in good order.
(See "How Net Asset Value Is Determined.")
WHEN PAYMENTS ARE MADE--Amounts withdrawn by telephone are normally mailed
or wired on the next business day following the effective date of the order for
withdrawal. Amounts withdrawn by mail are normally sent by mail within one
business day after request is received, and must be mailed within seven days
with the following exception: If shares are purchased by check, Mutual Funds
Service Company will not pay a redemption until reasonably satisfied the check,
used to purchase shares, has been collected which could be fifteen (15) calendar
days or more after shares are first paid for, unless payment was made with
federal funds. The Fund will forward proceeds promptly once the check has
cleared. (See "How to Buy Shares.")
- --------------------------------------------------------------------------------
OTHER SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
AUTOMATIC ACCOUNT BUILDER: Regular investments in a Fund of $100 or more
may be deducted from a shareholder's checking or savings account and invested in
shares of the Fund. A shareholder's bank must be a member of the Automated
Clearing House (ACH). Shareholders wishing to add to their investment account
must complete the Automatic Account Builder section of the New Account
Application. There is no additional charge for this service.
24
<PAGE>
SYSTEMATIC WITHDRAWAL PROGRAM: A Systematic Withdrawal Program is offered
for any investor who wishes to receive regular distributions of $100 or more
from his account. The investor must either own or purchase shares having a value
of at least $10,000 and advise a Fund in writing of the amount to be distributed
and the desired frequency, i.e., monthly, quarterly or annually. This option may
be exercised by completing the appropriate section of the New Account
Application. The investor should realize that if withdrawals exceed income
dividends, the invested principal may be depleted. The investor may make
additional investments and may change or stop the program at any time. There is
no charge for this program.
- --------------------------------------------------------------------------------
SHAREHOLDER ACCOUNTS
- --------------------------------------------------------------------------------
Each Fund maintains an account for each shareholder in full and fractional
shares. Each Fund reserves the right to reject any purchase order, and to waive
minimum purchase requirements.
CONFIRMATION STATEMENT -- All purchase and sale transactions, and dividend
reinvestments, are confirmed promptly after they become effective.
ACCOUNTS BELOW MINIMUM -- Each Fund reserves the right to redeem shares in
any account for their then current net asset value and pay the proceeds to the
shareholder if at any time the account has shares valued at less than $1,000
($500 for an IRA) as a result of redemptions by the shareholder. Each Fund also
reserves the right to redeem the shares in any account which may have been
opened under a waiver of minimum purchase requirements if sufficient additional
shares were not subsequently purchased to meet these requirements. Before a
redemption is processed, the shareholder will be allowed 30 days after written
notice from a Fund to make an additional investment sufficient to bring the
value of shares in the account to $1,000 ($500 for an IRA).
- --------------------------------------------------------------------------------
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
Each Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). In
any year in which a Fund qualifies as a regulated investment company and
distributes substantially all of its investment company taxable income (which
includes, among other items, the excess of net short-term capital gains over net
long-term capital losses) and its net capital gains (the excess of net long-term
capital gains over net short-term capital losses) the Fund will not be subject
to Federal income tax to the extent it distributes to shareholders such income
and capital gains in the manner required under the Code. Amounts not distributed
on a timely basis in accordance with a calendar year distribution requirement
are subject to a nondeductible 4% excise tax. To prevent imposition of the
excise tax each Fund must distribute for each calendar year an amount equal to
the sum of (1) at least 98% of its net ordinary income (excluding any capital
gains or losses) for the calendar year, (2) at least 98% of the excess of its
25
<PAGE>
capital gains over capital losses (adjusted for certain ordinary losses)
realized during the one-year period ending October 31 of such year, and (3) all
ordinary income and capital gains for previous years that were not distributed
during such years. A distribution will be treated as paid on December 31 of the
calendar year if it is declared by the Fund in October, November or December of
that year with a record date in such a month and paid by the Fund during January
of the following calendar year. Such distributions will be taxable to
shareholders in the calendar year in which the distributions are declared,
rather than the calendar year in which the distributions are received. The Fund
intends to distribute its income in accordance with this requirement to prevent
application of the excise tax.
Each year the Trust will notify shareholders of the tax status of dividends
and distributions.
Income received by a Fund from a mutual fund in that Fund's portfolio
(including dividends and distributions of short-term capital gains), as well as
interest received on money market instruments and net short-term capital gains
received by the Fund on the sale of mutual fund shares, will be distributed by
the Fund (after deductions for expenses) and will be taxable to shareholders as
ordinary income. Because the Funds are actively managed and can realize taxable
net short-term capital gains by selling shares of an underlying fund with
unrealized portfolio appreciation, investing in the Fund rather than directly in
the underlying funds may result in increased tax liability to the shareholder,
since the Fund must distribute its gain in accordance with the rules in the
Code.
Distributions of net capital gains (the excess of net long-term capital
gains over net short-term capital losses) received by a Fund from mutual funds,
as well as net long-term capital gains realized by a Fund from the purchase and
sale (or redemption) of mutual fund shares or other securities held (generally)
by a Fund for more than twelve months, will be distributed by the Fund and will
be taxable to shareholders as long-term capital gains (even if the shareholder
has held the shares for less than twelve months). The long-term capital gains,
including distributions of net capital gains, are currently subject to a maximum
federal tax rate of 20% which is less than the maximum rate imposed on other
types of taxable income. Furthermore, capital gains may be advantageous because,
unlike ordinary income, they may be offset by capital losses.
The tax treatment of distributions from a Fund is the same whether the
distributions are received in additional shares or in cash. Shareholders
receiving distributions in the form of additional shares will have a cost basis
for Federal income tax purposes in each shares received equal to the net asset
value of a shares of the Fund on the reinvestment date.
A Fund may invest in underlying funds with capital loss carry-forwards. If
such an underlying fund realizes capital gains, it will be able to offset the
gains to the extent of its loss carry-forwards in determining the amount of
capital gains which must be distributed to its shareholders. To the extent that
gains are offset in this manner, distributions to the Fund (and its
shareholders) will not be characterized as capital gain dividends, but may be
ordinary income.
Depending on the residence of the shareholder for tax purposes,
distributions also may be subject to state and local taxes, including
withholding taxes. Shareholders should consult their own tax advisers as to the
tax consequences of ownership of shares of the Trust in their particular
circumstances.
26
<PAGE>
The Funds generally will be required to withhold Federal income tax at a
rate of 31% ("backup withholding") from dividends paid to shareholders if (a)
the payee fails to furnish the Trust with and to certify the payee's correct
taxpayer identification number or social security number, (b) the Internal
Revenue Service (the "IRS") notifies the Trust that the payee has failed to
report properly certain interest and dividend income to the IRS and to respond
to notices to that effect or (c) the payee fails to certify that he is not
subject to backup withholding.
Each Fund will distribute investment company taxable income quarterly. Each
Fund will distribute any net realized capital gains at least annually. All
dividends and distributions will be reinvested automatically at net asset value
in additional shares of the Fund making the distribution, unless the shareholder
has notified the Fund in writing of his election to receive distributions in
cash.
- --------------------------------------------------------------------------------
HOW NET ASSET VALUE IS DETERMINED
- --------------------------------------------------------------------------------
Net asset value per share is determined at each closing of the New York
Stock Exchange each day the Exchange is open for business and each other day
during which there is a sufficient degree of trading that the current net asset
value of a Fund's shares might be materially affected by changes in the value of
the securities held by the Fund. Net asset value is obtained by dividing the
value of a Fund's assets, less its liabilities, by the total number of its
shares of beneficial interest outstanding at the time.
The assets of each Fund consist primarily of underlying funds, which are
valued at their respective net asset values under the 1940 Act. The underlying
funds value securities in their portfolios for which market quotations are
readily available at their current market value (generally the last reported
sale price) and all other securities and assets at fair value pursuant to
methods established in good faith by the board of directors of the underlying
fund. Money market funds with portfolio securities with a remaining maturity of
13 months or less and a weighted average maturity not exceeding 90 days may use
the amortized cost to value their securities. Securities having 60 days or less
remaining to maturity generally are valued at their amortized cost which
approximates market value.
Other assets of each Fund are valued at their current market value if
market quotations are readily available and, if market quotations are not
available, they are valued at fair value pursuant to methods established in good
faith by the Board of Trustees. Securities having 60 days or less remaining to
maturity are valued at their amortized cost.
- --------------------------------------------------------------------------------
PERFORMANCE INFORMATION AND REPORTS
- --------------------------------------------------------------------------------
A Fund's performance may be used from time to time in advertisements,
shareholder reports or other communications to shareholders or prospective
shareholders. Performance information may include the Fund's investment results
and/or comparisons of its investment results to various unmanaged indices or
27
<PAGE>
results of other mutual funds or investment or savings vehicles. A Fund's
investment results as used in such communications will be calculated on a total
rate of return basis in the manner set forth below. From time to time, fund
rankings may be quoted from various sources, such as Lipper Analytical Services,
Inc.
A Fund may provide period and average annualized "total return" quotations.
A Fund's "total return" refers to the change in the value of an investment in
the Fund over a stated period based on any change in net asset value per share
and including the value of any shares purchasable with any dividends or capital
gains distributed during such period. Period total return may be annualized.
Average annual total return smoothes out variations in performance.
An annualized total return is a compounded total return which assumes that
the period total return is generated over a one-year period, and that all
dividends and capital gain distributions are reinvested. An annualized total
return will be slightly higher than a period total return if the period is
shorter than one year, because of the assumed reinvestment.
Unlike some bank deposits or other investments which pay a fixed yield for
a stated period of time, the total return of a Fund will vary depending upon
interest rates, the current market value of the securities held by the Fund and
changes in the Fund's expenses. In addition, during certain periods for which
total return quotations may be provided, the Manager may have voluntarily agreed
to waive portions of its fees or reimburse Fund operating expenses on a
month-to-month basis. Such waivers will have the effect of increasing a Fund's
net income (and therefore its total return) during the period such waivers are
in effect.
Shareholders will receive financial reports semi-annually that include a
Fund's financial statements, including listings of investment securities held by
the Fund at those dates. Annual reports are audited by independent accountants.
- --------------------------------------------------------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
SHARES OF BENEFICIAL INTEREST
The Trust's Declaration of Trust permits the Trust to offer and sell an
unlimited number of full and fractional shares of beneficial interest in each of
the Trust's existing funds and to create additional funds. All shares have a par
value of $.10 per share, are fully paid, non-assessable and fully transferable
when issued. All shares are issued as full or fractional shares.
A fraction of a share has the same rights and privileges as a full share.
Each Fund of the Trust issues its own series of shares of beneficial interest.
The shares of each Fund represent an interest only in the Fund's assets (and
profits or losses) and in the event of liquidation, each share of a particular
Fund would have the same rights to dividends and assets as every other share of
the Fund. The Trust's Board of Trustees may authorize the creation of additional
series under the Declaration of Trust, each of which would invest its assets in
separate, individually managed portfolios.
28
<PAGE>
Each full or fractional share has a proportionate vote. On some issues,
such as the election of Trustees, all shares of the Trust vote together as one
series. On an issue affecting a particular Fund, only its shares vote as a
separate series. An example of such an issue would be a fundamental investment
restriction pertaining to only one Fund.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss as a
result of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Fund itself was unable to meet its
obligations.
When matters are submitted for shareholder vote, shareholders of each Fund
will have one vote for each full share held and proportionate, fractional votes
for fractional shares held. A separate vote of a Fund is required on any matter
affecting the Fund on which shareholders are entitled to vote. Shareholders of
one Fund are not entitled to vote on a matter that does not affect that Fund but
that does require a separate vote of any other Fund. There normally will be no
meetings of shareholders for the purpose of electing Trustees unless and until
such time as less than a majority of Trustees holding office have been elected
by shareholders, at which time the Trustees then in office will call a
shareholders' meeting for the election of Trustees. Any Trustee may be removed
from office upon the vote of shareholders holding at least two-thirds of the
Trust's outstanding shares at a meeting called for that purpose. The Trustees
are required to call such a meeting upon the written request of shareholders
holding at least 10% of the Trust's outstanding shares. Shareholders have under
certain circumstances (e.g., upon application and submission of certain
specified documents to the Trustees of the Fund by a specified number of
shareholders) the right to communicate with other shareholders in connection
with requesting a meeting of shareholders for the purpose of removing one or
more Trustees.
As stated in "Investment Objectives and Policies," except as otherwise
expressly provided herein, each Fund's investment objective and policies are not
fundamental and may be changed by the Trustees without shareholder approval. (No
such change would be made, however, without 30 days written notice to
shareholders.)
YEAR 2000
Like other mutual funds and businesses, The CLS AdvisorOne Funds could be
adversely affected if the computer systems used by the Investment Adviser,
Mutual Funds Service Co. and other service providers to The CLS AdvisorOne Funds
are unable to process and calculate date-related information and data from and
after January 1, 2000. Therefore, the Investment Adviser and Mutual Funds
Service Co. are currently taking steps they believe are reasonably designed to
assess any potential Year 2000 problems affecting the computer systems upon
which they or The CLS AdvisorOne Funds rely. In addition, The CLS AdvisorOne
Funds has obtained reasonable assurances that comparable steps are being taken
by its other service providers. All service providers have informed The CLS
AdvisorOne Funds that they plan to be Year 2000 compliant by the end of 1998,
and The CLS AdvisorOne Funds will continue to monitor their progress.
29
<PAGE>
INVESTMENT ADVISER
Clarke Lanzen Skalla Investment Firm, Inc.
ADDRESS OF FUNDS AND ADVISER
14747 California Street
Omaha, NE 68154-1979
800-635-3427
402-493-3313
CUSTODIAN
Star Bank, N.A.
Star Bank Center
425 Walnut Street
Cincinnati, OH 45202
TRANSFER AGENT & DIVIDEND
DISBURSING AGENT
Mutual Funds Service Company
6000 Memorial Drive
Dublin, OH 43017
800-808-3829
614-760-2158 (in Central Ohio)
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
1800 M Street, N.W.
Washington, D.C. 20030
AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, OH 43215
CLS ADVISORONE FUNDS
THE AMERIGO FUND
THE CLERMONT FUND
14747 California Street
Omaha, NE 68154-1979
800-635-3427
402-493-3313
<PAGE>
CLS ADVISORONE FUNDS
THE AMERIGO FUND
THE CLERMONT FUND
CROSS REFERENCE SHEET TO FORM N-1A
PART B.
ITEM NO. STATEMENT OF ADDITIONAL INFORMATION
10 Cover Page
11 Table of Contents
12 Not applicable
13(a)(b)(c) Investment Objectives and Policies
Investment Restrictions
13(d) Portfolio Turnover
14(a)(b) Officers and Trustees
14(c) Not applicable
15(a)(b) Not applicable
15(c) Officers and Trustees
16(a) Investment Adviser and Manager
Officers and Trustees
16(b) Investment Adviser and Manager
16(c) Purchase and Sale of Portfolio Securities
16(d) Not applicable
16(e) Not applicable
16(f) Not applicable
16(g) Not applicable
16(h) Description of the Trust
16(i) Not applicable
17 Purchase and Sale of Portfolio Securities
18(a) Description of the Trust
18(b) Not applicable
19(a) Additional Purchase and Redemption Information
19(b) Valuation of Portfolio Securities
Additional Purchase and Redemption Information
19(c) Not applicable
20 Distributions and Taxes
21(a) Not applicable
21(b) Not applicable
21(c) Not applicable
22(a) Not applicable
22(b) Performance Information
23 Financial Highlights
<PAGE>
THE AMERIGO FUND
AND
THE CLERMONT FUND
FUNDS OF CLS ADVISORONE FUNDS TRUST
STATEMENT OF ADDITIONAL INFORMATION DATED ___________, 1998
This Statement of Additional Information is not a prospectus. It should be
read in conjunction with the Prospectus of CLS AdvisorOne Funds dated
__________, 1998. A copy of the Prospectus may be obtained from CLS AdvisorOne
Funds c/o Mutual Funds Service Co., 6000 Memorial Drive, Dublin, Ohio 43017, or
by calling: 1-800-808-3829. Capitalized terms used and not otherwise defined
herein have the same meanings as defined in the Prospectus.
TABLE OF CONTENTS
-----------------
PAGE
Investment Objectives and Policies 2
Investment Restrictions 11
Portfolio Turnover 11
Purchase and Sale of Portfolio Securities 12
Valuation of Portfolio Securities 14
Performance Information 15
Additional Purchase and Redemption Information 19
Distributions and Taxes 20
Investment Adviser and Manager 21
Officers and Trustees 23
Description of the Trust 26
Principal Holders of Outstanding Shares 27
Financial Statements 28
Appendix
INVESTMENT ADVISER TRANSFER AGENT
Clarke Lanzen Skalla Investment Firm, Inc. Mutual Funds Service Co.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
GENERAL. The investment policies set forth below in this section represent
the Funds' policies as of the date of this Statement of Additional Information.
The investment policies are not fundamental and they may be changed by the
Trustees without shareholder approval. (No such change would be made, however,
without 30 days written notice to shareholders.)
Each Fund has adopted certain investment restrictions which cannot be
changed except with the vote of a majority of the Fund's outstanding shares.
These restrictions are applicable to the Funds and are described under
"Investment Restrictions" in this Statement of Additional Information.
For temporary defensive purposes, each Fund may invest up to 100% of its
total assets directly in, or in underlying funds investing in, (or enter into
repurchase agreements (maturing in seven days or less) with banks and
broker-dealers with respect to) short-term debt securities, including U.S.
Treasury bills and other short-term U.S. Government Securities, corporate bonds,
commercial paper, certificates of deposit, bankers' acceptances and other money
market instruments. Each Fund may also directly invest in futures contracts and
options thereon to the extent and for the purposes set forth in the Trust's
Prospectus.
MONEY MARKET INSTRUMENTS AND BONDS. When investing directly in money market
instruments or bonds, each Fund will limit its purchases, denominated in U.S.
dollars, to the following securities.
* U.S. Government Securities and Securities of its Agencies and
Instrumentalities - obligations issued or guaranteed as to principal
or interest by the United States or its agencies (such as the Export
Import Bank of the United States, Federal Housing Administration, and
Government National Mortgage Association) or its instrumentalities
(such as the Federal Home Loan Bank, Federal Intermediate Credit Banks
and Federal Land Bank), including Treasury bills, notes and bonds.
* Bank Obligations and Instruments Secured Thereby - obligations
(including certificates of deposit, time deposits and bankers'
acceptances) of domestic banks having total assets of $1,000,000,000
or more, instruments secured by such obligations and obligations of
foreign branches of such banks, if the domestic parent bank is
unconditionally liable to make payment on the instrument if the
foreign branch fails to make payment for any reason. Each Fund may
also invest in obligations (including certificates of deposit and
bankers' acceptances) of domestic branches of foreign banks having
assets of $1,000,000,000 or more, if the domestic branch is subject to
the same regulation as United States banks.
2
<PAGE>
* High Quality Commercial Paper - Each Fund may invest in commercial
paper rated no lower than "A-2" by Standard & Poor's Corporation or
"Prime-2" by Moody's Investors Services, Inc., or, if not rated,
issued by a company having an outstanding debt issue rated at least A
by Standard & Poor's or Moody's. See rating information in the
Appendix attached hereto.
* Private Placement Commercial Paper - Private placement commercial
paper ("Rule 144A securities") consists of unregistered securities
which are traded in public markets to qualified institutional
investors, such as the Funds. A Fund's risk is that the universe of
potential buyers for the securities, should the Fund desire to
liquidate a position, is limited to qualified dealers and
institutions, and therefore such securities could have the effect of
being illiquid.
* High Grade Corporate Obligations - obligations rated at least A by
Standard & Poor's or Moody's. See rating information in the Appendix
attached hereto.
* Repurchase Agreements Pertaining to the Above - Each Fund may invest
without limit in any of the above securities subject to repurchase
agreements with any Federal Reserve reporting dealer or member bank of
the Federal Reserve System. A repurchase agreement is an instrument
under which the purchaser (i.e., a Fund) acquires ownership of a debt
security and the seller agrees, at the time of the sale, to repurchase
the obligation at a mutually agreed upon time and price, thereby
determining the yield during the purchaser's holding period. This
results in a fixed rate of return insulated from market fluctuations
during such period. The underlying securities could be any of those
described above, some of which might bear maturities exceeding one
year. A Fund's risk is that the seller may fail to repurchase the
security on the delivery date. If the seller defaults, the underlying
security constitutes collateral for the seller's obligation to pay. It
is a policy of each Fund to make settlement on repurchase agreements
only upon proper delivery of the underlying collateral. Repurchase
agreements usually are for short periods, such as one week or less,
but could be longer. A Fund may enter into repurchase agreements with
its custodian (Star Bank, N.A., Cincinnati) when it is advantageous to
do so.
The Manager exercises due care in the selection of money market instruments
and bonds. However there is a risk that the issuers of the securities may not be
able to meet their obligations to pay interest or principal when due. There is
also a risk that some of a Fund's securities might have to be liquidated prior
to maturity at a price less than original amortized cost or value, face amount
or maturity value to meet larger than expected redemptions. Any of these risks,
if encountered, could cause a reduction in net income or in the net asset value
of a Fund.
3
<PAGE>
Description of Permitted Money Market Investments:
Commercial Paper - refers to promissory notes issued by corporations in
order to finance their short term credit needs.
U.S. Government Obligations - are bills, certificates of indebtedness,
notes and bonds issued by the U.S. Treasury and agencies, authorities and
instrumentalities of the U.S. Government established under the authority of an
act of Congress. Some obligations of U.S. Government agencies, authorities and
instrumentalities are supported by the full faith and credit of the U.S.
Treasury, as for example, the Government National Mortgage Association; others
by the right of the issuer to borrow from the Treasury, as in the case of
Federal Farm Credit Banks and Federal National Mortgage Association; and others
only by the credit of the agency, authority or instrumentality; as for example,
Federal Home Loan Mortgage and Federal Home Loan Bank.
Repurchase Agreements - A repurchase transaction occurs when an investor
buys a security and simultaneously agrees to resell it at a later date to the
person from whom it was bought, at a higher price.
The price differential represents interest for the period the security is
held. Repurchase transactions will normally be entered into with banks and
securities brokers. A Fund could suffer a loss if the bank or securities broker
with which the Fund had a repurchase agreement were to default.
Certificates of Deposit - are certificates issued against funds deposited
in a bank, are for a definite period of time, earn a specified or variable rate
of return and are normally negotiable.
Banker's Acceptances - are short-term credit instruments used to finance
the import, export, transfer or storage of goods. They are termed "accepted"
when a bank guarantees their payment at maturity.
Corporate Obligations - include bonds and notes issued by corporations in
order to finance longer term credit needs.
EXPOSURE TO FOREIGN MARKETS. Each Fund does not have a limitation on the
amount of its assets that may be invested in underlying funds investing in
foreign securities. Foreign securities, foreign currencies, and securities
issued by U.S. entities with substantial foreign operations may involve
significant risks in addition to the risks inherent in U.S. investments. The
value of securities denominated in foreign currencies and of dividends and
interest paid with respect to such securities will fluctuate based on the
relative strength of the U.S. dollar.
Foreign investments involve a risk of local political, economic, or social
instability, military action or unrest, or adverse diplomatic developments, and
may be affected by actions of foreign governments adverse to the interests of
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U.S. investors. Such actions may include the possibility of expropriation or
nationalization of assets, confiscatory taxation, restrictions on U.S.
investment or on the ability to repatriate assets or convert currency into U.S.
dollars, or other government intervention. There is no assurance that the
Manager will be able to anticipate these potential events or counter their
effects. These risks are magnified for underlying funds investing in developing
countries, which may have relatively unstable governments, economies based on
only a few industries, and securities markets that trade a small number of
securities.
Economies of particular countries or areas of the world may differ
favorably or unfavorably from the economy of the United States. Foreign markets
may offer less protection to investors than U.S. markets. It is anticipated that
in most cases underlying funds' best available market for foreign securities
will be on an exchange or in over-the-counter markets located outside of the
United States. Foreign stock markets, while growing in volume and
sophistication, are generally not as developed as those in the United States,
and securities of some foreign issuers (particularly those located in developing
countries) may be less liquid and more volatile than securities of comparable
U.S. issuers. Foreign security trading practices, including those involving
securities settlement where underlying funds' assets may be released prior to
receipt of payment, may result in increased risk in the event of a failed trade
or the insolvency of a foreign broker-dealer, and may involve substantial
delays. In addition, the underlying funds' costs of foreign investing, including
withholding taxes, brokerage commissions and custodial costs, are generally
higher than for investing in U.S. securities. In general, there is less overall
governmental supervision and regulation of securities exchanges, brokers, and
listed companies than in the United States. It may also be difficult for
underlying funds to enforce legal rights in foreign countries. Foreign issuers
are generally not bound by uniform accounting, auditing, and financial reporting
requirements and standards of practice comparable to those applicable to U.S.
issuers.
Some foreign securities impose restrictions on transfer within the United
States or to U.S. persons. Although securities subject to such transfer
restrictions may be marketable abroad, they may be less liquid than foreign
securities of the same class that are not subject to such restrictions.
Some underlying funds may invest in American Depository Receipts ("ADR's").
ADR's are certificates evidencing ownership of shares of a foreign issuer. These
certificates are issued by depository banks and generally trade on an
established market in the United States or elsewhere. The underlying shares are
held in trust by a custodian bank or similar financial institution in the
issuer's home country. The depository bank may not have physical custody of the
underlying securities at all times and may charge fees for various services,
including forwarding dividends and interest and corporate actions. ADR's are an
alternative to directly purchasing the underlying foreign securities in their
national markets and currencies. However, ADR's continue to be subject to many
of the risks associated with investing directly in foreign securities. These
risks include foreign exchange risk as well as the political and economic risks
of the underlying issuer's country.
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ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. Each Fund will comply
with guidelines established by the Securities and Exchange Commission with
respect to coverage of options and futures strategies by mutual funds, and if
the guidelines so require will set aside appropriate liquid assets in a
segregated custodial account in the amount prescribed. Securities held in a
segregated account cannot be sold while the futures or option strategy is
outstanding, unless they are replaced with other suitable assets. As a result,
there is a possibility that segregation of a large percentage of a Fund's assets
could impede portfolio management or the Fund's ability to meet redemption
requests or other current obligations.
CORRELATION OF PRICE CHANGES. Each Fund may invest in futures contracts and
options thereon. An underlying fund may invest in options (including options on
futures contracts) and futures contracts. Because there are a limited number of
types of exchange-traded options and futures contracts, it is likely that the
standardized contracts available will not match a Fund or underlying fund's
current or anticipated investments exactly. A Fund or an underlying fund may
invest in options and futures contracts based on securities with different
issuers, maturities, or other characteristics from the securities in which it
typically invests, which involves a risk that the options or futures position
will not track the performance of the Fund or underlying fund's other
investments.
Options and futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments match the Fund or
underlying fund's investments well. Options and futures prices are affected by
such factors as current and anticipated short-term interest rates, changes in
volatility of the underlying instrument, and the time remaining until expiration
of the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options and
futures markets and the securities markets, from structural differences in how
options and futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. A Fund or an underlying fund may purchase
or sell options and futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in volatility between the contract and the
securities, although this may not be successful in all cases. If price changes
in a Fund or underlying fund's options or futures positions are poorly
correlated with its other investments, the positions may fail to produce
anticipated gains or result in losses that are not offset by gains in other
investments.
FUTURES CONTRACTS. When a Fund or an underlying fund purchases a futures
contract, it agrees to purchase a specified underlying instrument at a specified
future date. When a Fund or an underlying fund sells a futures contract, it
agrees to sell the underlying instrument at a specified future date. The price
at which the purchase and sale will take place is fixed when the Fund or the
underlying fund enters into the contract. Some currently available futures
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contracts are based on specific securities, such as U.S. Treasury bonds or
notes, and some are based on indices of securities prices, such as the Standard
& Poor's Composite Index of 500 Stocks (S&P 500). Futures can be held until
their delivery dates, or can be closed out before then if a liquid secondary
market is available.
The value of a futures contract tends to increase and decrease in tandem
with the value of its underlying instrument. Therefore, purchasing futures
contracts will tend to increase a Fund or an underlying fund's exposure to
positive and negative price fluctuations in the underlying instrument, much as
if it had purchased the underlying instrument directly. When a Fund or an
underlying fund sells a futures contract, by contrast, the value of its futures
position will tend to move in a direction contrary to the market. Selling
futures contracts, therefore, will tend to offset both positive and negative
market price changes, much as if the underlying instrument had been sold.
FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures contract is
not required to deliver or pay for the underlying instrument unless the contract
is held until the delivery date. However, both the purchaser and seller are
required to deposit "initial margin" with a futures broker, known as a futures
commission merchant ("FCM") when the contract is entered into. Initial margin
deposits are typically equal to a percentage of the contract's value. If the
value of either party's position declines, that party will be required to make
additional "variation margin" payments to settle the change in value on a daily
basis. The party that has a gain may be entitled to receive all or a portion of
this amount. Initial and variation margin payments do not constitute purchasing
securities on margin for purposes of a Fund or an underlying fund's investment
limitations. In the event of the bankruptcy of an FCM that holds margin on
behalf of a Fund or an underlying fund, the Fund or the underlying fund may be
entitled to a return of margin owed to it only in proportion to the amount
received by the FCM's other customers, potentially resulting in losses to the
Fund or the underlying fund.
LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. Each Fund has filed a
notice of eligibility for exclusion from the definition of the term "commodity
pool operator" with the Commodity Futures Trading Commission (CFTC) and the
National Futures Association which regulate trading in the futures markets. Each
Fund intends to comply with Rule 4.5 under the Commodity Exchange Act, which
limits the extent to which the Fund can commit assets to initial margin deposits
and option premiums.
The above limitations on a Fund or underlying fund's investments in futures
contracts and options, and the Fund or underlying fund's policies regarding
futures contracts and options discussed elsewhere in this Statement of
Additional Information, may be changed as regulatory agencies permit.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
secondary market will exist for any particular options or futures contract at
any particular time. Options may have relatively low trading volume and
liquidity if their strike prices are not close to the underlying instrument's
current price. In addition, exchanges may establish daily price fluctuation
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limits for options and futures contracts, and may halt trading if a contract's
price moves upward or downward more than the limit in a given day. On volatile
trading days when the price fluctuation limit is reached or a trading halt is
imposed, it may be impossible for a Fund or an underlying fund to enter into new
positions or close out existing positions. If the secondary market for a
contract is not liquid because of price fluctuation limits or otherwise, it
could prevent prompt liquidation of unfavorable positions, and potentially could
require the Fund or an underlying fund to continue to hold a position until
delivery or expiration regardless of changes in its value. As a result, the Fund
or the underlying fund's access to other assets held to cover its options or
futures positions could also be impaired.
PURCHASING PUT AND CALL OPTIONS. Each Fund may invest in futures contracts
and options thereon. An underlying fund may invest in options (including options
on futures contracts) and futures contracts. By purchasing a put option, the
Fund or an underlying fund obtains the right (but not the obligation) to sell
the option's underlying instrument at a fixed strike price. In return for this
right, the Fund or an underlying fund pays the current market price for the
option (known as the option premium). Options have various types of underlying
instruments, including specific securities, indices of securities prices, and
futures contracts. A Fund or an underlying fund may terminate its position in a
put option it has purchased by allowing it to expire or by exercising the
option. If the option is allowed to expire, a Fund or an underlying fund will
lose the entire premium it paid. If a Fund or an underlying fund exercises the
option, it completes the sale of the underlying instrument at the strike price.
A Fund or an underlying fund may also terminate a put option position by closing
it out in the secondary market at its current price, if a liquid secondary
market exists.
The buyer of a typical put option can expect to realize a gain if security
prices fall substantially. However, if the underlying instrument's price does
not fall enough to offset the cost of purchasing the option, a put buyer can
expect to suffer a loss (limited to the amount of the premium paid, plus related
transaction costs).
The features of call options are essentially the same as those of put
options, except that the purchaser of a call option obtains the right to
purchase, rather than sell, the underlying instrument at the option's strike
price. A call buyer typically attempts to participate in potential price
increases of the underlying instrument with risk limited to the cost of the
option if security prices fall. At the same time the buyer can expect to suffer
a loss if security prices do not rise sufficiently to offset the cost of the
option.
WRITING PUT AND CALL OPTIONS. When a Fund or an underlying fund writes a
put option, it takes the opposite side of the transaction from the option's
purchaser. In return for receipt of the premium, the Fund or the underlying fund
assumes the obligation to pay the strike price for the option's underlying
instrument if the other party to the option chooses to exercise it. When writing
an option on a futures contract, a Fund or an underlying fund will be required
to make margin payments to an FCM as described above for futures contracts. A
Fund or an underlying fund may seek to terminate its position in a put option it
writes before exercise by closing out the option in the secondary market at its
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current price. If the secondary market is not liquid for a put option the Fund
or the underlying fund has written, however, the Fund or the underlying fund
must continue to be prepared to pay the strike price while the option is
outstanding, regardless of price changes, and must continue to set aside assets
to cover its position.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it received. If
security prices remain the same over time, it is likely that the writer will
also profit, because it should be able to close out the option at a lower price.
If security prices fall, the put writer would expect to suffer a loss. This loss
should be less than the loss from purchasing the underlying instrument directly,
however, because the premium received for writing the option should mitigate the
effects of the decline.
Writing a call option obligates a Fund or an underlying fund to sell or
deliver the option's underlying instrument, in return for the strike price, upon
exercise of the option. The characteristics of writing call options are similar
to those of writing put options, except that writing calls generally is a
profitable strategy if prices remain the same or fall. Through receipt of the
option premium, a call writer mitigates the effects of a price decline. At the
same time, because a call writer must be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is greater,
a call writer gives up some ability to participate in security price increases.
ILLIQUID INVESTMENTS. Each Fund and an underlying fund may invest in
illiquid investments, subject to certain restrictions provided in the Prospectus
and herein. Illiquid investments are investments that cannot be sold or disposed
of in the ordinary course of business at approximately the prices at which they
are valued. Under the supervision of the Board of Trustees, the Manager
determines the liquidity of the Fund's investments and, through reports from the
Manager, the Board monitors investments in illiquid instruments. In determining
the liquidity of the Fund's investments, the Manager may consider various
factors, including (1) the frequency of trades and quotations, (2) the number of
dealers and prospective purchasers in the marketplace, (3) dealer undertakings
to make a market, (4) the nature of the security (including any demand or tender
features), and (5) the nature of the marketplace for trades (including the
ability to assign or offset the Fund's rights and obligations relating to the
investment).
Investments currently considered by the Fund to be illiquid include
repurchase agreements not entitling the holder to payment of principal and
interest within seven days, and an investment in an underlying fund exceeding 1%
of the total outstanding securities of the underlying fund. Also, the Manager
may determine some restricted securities to be illiquid.
In the absence of market quotations, illiquid investments are priced at
fair value as determined in good faith by the Board of Trustees. If through a
change in values, net assets, or other circumstances, The Amerigo Fund and The
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Clermont Fund were in a position where more than 15% and 10% of their net
assets, respectively, were invested in illiquid securities, they would seek to
take appropriate steps to protect liquidity.
LOWER-QUALITY DEBT SECURITIES. Each Fund may invest in underlying funds
investing in lower quality debt securities. The market for lower-quality debt
securities may be thinner and less active than that for higher-quality debt
securities, which can adversely affect the prices at which the former are sold.
If market quotations are not available, lower-quality debt securities will be
valued in accordance with procedures established by the trustees of an
underlying fund, including the use of outside pricing services. Judgment plays a
greater role in valuing high-yield corporate debt securities than is the case
for securities for which more external sources for quotations and last-sale
information are available. Adverse publicity and changing investor perceptions
may affect the ability of outside pricing services to value lower-quality debt
securities and an underlying fund's ability to dispose of these securities.
Since the risk of default is higher for lower-quality debt securities, the
underlying fund manager's research and credit analysis are an especially
important part of managing securities of this type held by the underlying fund.
In considering investments for the underlying fund, the underlying fund manager
will attempt to identify those issuers of high-yielding securities whose
financial condition is adequate to meet future obligations, has improved, or is
expected to improve in the future. The underlying fund manager's analysis
focuses on relative values based on such factors as interest or dividend
coverage, asset coverage, earnings prospects, and the experience and managerial
strength of the issuer.
The underlying fund may choose, at its expense or in conjunction with
others, to pursue litigation or otherwise to exercise its rights as a security
holder to seek to protect the interests of security holders if it determines
this to be in the best interest of the underlying fund's shareholders.
RESTRICTED SECURITIES. Each Fund and an underlying fund may invest in
restricted securities as described in the Prospectus and herein. Restricted
securities generally can be sold in privately negotiated transactions, pursuant
to an exemption from registration under the Securities Act of 1933, or in a
registered public offering. Where registration is required, a Fund or an
underlying fund may be obligated to pay all or part of the registration expense
and a considerable period may elapse between the time it decides to seek
registration and the time it may be permitted to sell a security under an
effective registration statement. If, during such a period, adverse market
conditions were to develop, a Fund or an underlying fund might obtain a less
favorable price than prevailed when it decided to seek registration of the
security.
SHORT SALES. An underlying fund may enter into short sales. For example, if
the manager of an underlying fund anticipates a decline in the price of a stock
the underlying fund holds, it may sell the stock short. If the stock price
subsequently declines, the proceeds of the short sale could be expected to
offset all or a portion of the effect of the stock's decline.
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When an underlying fund enters into a short sale, it will be required to
set aside securities equivalent in kind and amount to those sold short (or
securities convertible or exchangeable into such securities) and will be
required to hold them aside while the short sale is outstanding. An underlying
fund will incur transaction costs, including interest expense, in connection
with opening, maintaining, and closing short sales.
ZERO COUPON BONDS. An underlying fund may invest in zero coupon bonds. Zero
coupon bonds do not make interest payments; instead, they are sold at a deep
discount from their face value and are redeemed at face value when they mature.
Because zero coupon bonds do not pay current income, their prices can be very
volatile when interest rates change. In calculating its dividends, the
underlying fund takes into account as income a portion of the difference between
a zero coupon bond's purchase price and its face value.
INVESTMENT RESTRICTIONS
The investment restrictions below have been adopted by the Trust with
respect to each Fund as fundamental policies. Under the 1940 Act, a
"fundamental" policy may not be changed without the vote of a majority of the
outstanding voting securities of a Fund, which is defined in the 1940 Act as the
lesser of (a) 67 percent or more of the shares present at a shareholder meeting
if the holders of more than 50 percent of the outstanding shares are present or
represented by proxy, or (b) more than 50 percent of the outstanding shares
("Majority Vote"). The percentage limitations contained in the restrictions
listed below apply at the time of the purchase of the securities. Provided that
nothing in the following investment restrictions shall prevent a Fund from
investing all or part of its assets in an open-end investment company having
substantially the same investment objective as the Fund, neither of the Funds
may:
(1) issue senior securities, except as permitted under the Investment
Company Act of 1940;
(2) underwrite securities issued by others, except to the extent that a
Fund may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 in the disposition of restricted securities;
(3) purchase or sell real estate unless acquired as a result of ownership
of securities or other instruments (but this shall not prevent a Fund
from investing in underlying funds which invest in securities or other
instruments backed by real estate or securities of companies engaged
in the real estate business);
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(4) purchase or sell physical commodities unless acquired as a result of
ownership of securities or other instruments (but this shall not
prevent a Fund from investing in underlying funds which purchase or
sell options and futures contracts or from investing in underlying
funds which invest in securities or other instruments backed by
physical commodities);
The following investment limitations are not fundamental and may be changed
without shareholder approval.
(i) The Funds do not currently intend to purchase securities on margin,
except that the Fund may obtain such short-term credits as are
necessary for the clearance of transactions, and provided that margin
payments in connection with futures contracts and options on futures
contracts shall not constitute purchasing securities on margin.
(ii) The Amerigo Fund does not currently intend to purchase any security
if, as a result, more than 15% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to
legal or contractual restrictions on resale or because they cannot be
sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(iii) The Clermont Fund does not currently intend to purchase any security
if, as a result, more than 10% of its net assets would be invested in
securities that are deemed to be illiquid because they are subject to
legal or contractual restrictions on resale or because they cannot be
sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued.
(iv) The Fund does not currently intend to purchase the securities of any
issuer (other than securities issued or guaranteed by domestic or
foreign governments or political subdivisions thereof) if, as a
result, more than 5% of its total assets would be invested in the
securities of business enterprises that, including predecessors, have
a record of less than three years of continuous operation.
(v) Each Fund does not currently intend to purchase warrants, valued at
the lower of cost or market, in excess of 5% of the Fund's net assets.
Warrants acquired by the Fund in units or attached to securities are
not subject to these restrictions.
(vi) Each Fund does not currently intend to invest in oil, gas, or other
mineral exploration or development programs or leases.
(vii) Each Fund does not currently intend to purchase the securities of any
issuer if those officers and Trustees of the Trust and those officers
and directors of the Manager who individually own more than 1/2 of 1%
of the securities of such issuer, together own more than 5% of such
issuer's securities.
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PORTFOLIO TURNOVER
Turnover rates are primarily a function of the Manager's response to market
conditions. In the Manager's opinion, it may be in the best interest of a Fund
to change its portfolio to a fully or partially defensive position at times.
This defensive investment strategy can produce high portfolio turnover ratios
when calculated in accordance with SEC rules.
The portfolio turnover rates for The Amerigo Fund and The Clermont Fund for
the period from July 14, 1997 (date of commencement of operations) through April
30, 1998 were 14.36% and 22.24%, respectively.
PURCHASE AND SALE OF PORTFOLIO SECURITIES
The Manager is authorized to place orders for the purchase and sale of
portfolio securities, and will do so in accordance with the policies described
below. The Manager is also responsible for the placement of transaction orders
for other accounts for which it or its affiliates act as investment adviser. In
selecting broker-dealers, subject to applicable limitations of the federal
securities laws, the Manager considers various relevant factors, including, but
not limited to: the size and type of the transaction; the nature and character
of the markets for the security to be purchased or sold; the execution
efficiency, settlement capability, and financial condition of the broker-dealer
firm; the broker-dealer's execution services rendered on a continuing basis; the
reasonableness of any commissions; and arrangements for payment of a Fund's
expenses.
Each Fund may execute portfolio transactions with broker-dealers who
provide research and execution services to the Fund or other accounts over which
the Manager or its affiliates exercise investment discretion. Such services may
include advice concerning the value of securities; the advisability of investing
in, purchasing, or selling securities; and the availability of securities or the
purchasers or sellers of securities. In addition, such broker-dealers may
furnish analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and performance of accounts;
effect securities transactions, and perform functions incidental thereto (such
as clearance and settlement).
The receipt of research from broker-dealers that execute transactions on
behalf of a Fund may be useful to the Manager in rendering investment management
services to the Fund or its other clients, and conversely, such research
provided by broker-dealers who have executed transaction orders on behalf of
other clients may be useful to the Manager in carrying out its obligations to
the Fund. The receipt of such research has not reduced the Manager's normal
independent research activities; however, it enables the Manager to avoid the
additional expenses that could be incurred if the Manager tried to develop
comparable information through its own efforts.
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Subject to applicable limitations of the federal securities laws,
broker-dealers may receive commissions for agency transactions that are in
excess of the amount of commissions charged by other broker-dealers in
recognition of their research and execution services. In order to cause a Fund
to pay such higher commissions, the Manager must determine in good faith that
such commissions are reasonable in relation to the value of the brokerage and
research services provided by such executing broker-dealers, viewed in terms of
a particular transaction or the Manager's overall responsibilities to the Fund
and its other clients. In reaching this determination, the Manager will not
attempt to place a specific dollar value on the brokerage and research services
provided, or to determine what position of the compensation should be related to
those services.
The Manager is authorized to use research services provided by and to place
portfolio transactions with brokerage firms that have provided assistance in the
distribution of shares of a Fund to the extent permitted by law. The Manager may
use research services provided by and place agency transactions with CLS
Brokerage Services, Inc., an affiliate of the Manager, if the commissions are
fair, reasonable, and comparable to commissions charged by non-affiliated,
qualified brokerage firms for similar services.
The Manager may allocate brokerage transactions to broker-dealers who have
entered into arrangements with the Manager under which the broker-dealer
allocates a portion of the commissions paid by a Fund toward payment of the
Fund's expenses, such as transfer agent fees or custodian fees. The transaction
quality must, however, be comparable to those of other qualified broker-dealers.
Section 11(a) of the Securities Exchange Act of 1934 prohibits members of
national securities exchanges from executing exchange transactions for accounts
which they or their affiliates manage, unless certain requirements are
satisfied. Pursuant to such requirements, the Board of Trustees has authorized
the Manager to execute portfolio transactions on national securities exchanges
in accordance with approved procedures and applicable SEC rules.
The Trustees periodically review the Manager's performance of its
responsibilities in connection with the placement of portfolio transactions on
behalf of each Fund and review the commissions paid by the Fund over
representative periods of time to determine if they are reasonable in relation
to the benefits to the Fund.
From time to time, the Trustees will review whether the recapture for the
benefit of a Fund of some portion of the brokerage commissions or similar fees
paid by the Fund on portfolio transactions is legally permissible and advisable.
Each Fund seeks to recapture soliciting broker-dealer fees on the tender of
portfolio securities, but at present no other recapture arrangements are in
effect. The Trustees intend to continue to review whether recapture
opportunities are available and are legally permissible and, if so, to determine
in the exercise of their business judgment whether it would be advisable for
each fund to seek such recapture.
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During the period from July 14, 1997 to April 30, 1998, neither The Amerigo
Fund nor The Clermont Fund paid any commissions on the purchase and sale of
securities.
VALUATION OF PORTFOLIO SECURITIES
Securities owned by each Fund and listed or traded on any national
securities exchange are valued at each closing of the New York Stock Exchange on
the basis of the last sale on such exchange each day that the exchange is open
for business. If there is no sale on that day, or if the security is not listed,
it is valued at its last bid quotation on the exchange or, in the case of
unlisted securities, as obtained from an established market maker. Futures
contracts are valued on the basis of the cost of closing out the liability,
i.e., at the settlement price of a closing contract or at the asked quotation
for such a contract if there is no sale. Money market instruments (certificates
of deposit, commercial paper, etc.) are valued either at amortized cost or at
original cost plus accrued interest, both of which approximate current value.
Fixed income securities are priced at the current quoted bid price. However,
U.S. Government Securities and other fixed income securities may be valued on
the basis of prices provided by an independent pricing service when such prices
are believed to reflect the fair market value of such securities. The prices
provided by a pricing service are determined without regard to bid or last sale
prices but take into account securities prices, yields, maturities, call
features, ratings, institutional size trading in similar groups of securities
and developments related to specific securities. Portfolio securities for which
market quotations are not readily available are to be valued by the Manager in
good faith at its own expense under the direction of the Trustees. Investments
in mutual funds are valued at net asset value; provided, however, the Funds'
investment in underlying mutual funds may be subject to a redemption fee.
Other assets, which include cash, prepaid and accrued items and amounts
receivable as income on investments and from the sale of portfolio securities,
are carried at book value, as are all liabilities. Liabilities include accrued
expenses, sums owed for securities purchased, and dividends payable.
PERFORMANCE INFORMATION
TOTAL RETURN. From time to time, each Fund may advertise its average annual
total returns for various periods of time. When applicable, depending on the
Fund, the periods of time shown will be for a one-year period; a five-year
period (or relevant portion thereof) and since inception. The calculation
assumes the reinvestment of all dividends and distributions. Examples of the
total return calculation for a Fund will assume a hypothetical investment of
$1,000 at the beginning of each period.
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It is computed by finding the average annual compounded rates of return
over the length of the base periods that would equate the initial amount
invested to the ending redeemable value, according to the following formula:
P (1+T)(to the nth power) = ERV
P = initial investment of $1,000
T = average annual total return
n = Number of years
ERV = ending redeemable value at the end of the base period
THE AMERIGO FUND:
0.79 YEARS
Total Return for Period
Beginning
July 14, 1997 and
ENDED APRIL 30, 1998
---------------------
Value of Account
At end of Period $1,141.09
Value of Account
At beginning of Period $1,000.00
Base Period Return $ 141.09
Total Return 14.11%
Values were computed according to the following formulas:
Since Inception: $1,000(1 + .14109) = $1,141.09
THE CLERMONT FUND:
0.79 YEARS
Total Return for Period
Beginning
July 14, 1997 and
ENDED APRIL 30, 1998
---------------------
Value of Account
At end of Period $1,098.35
Value of Account
At beginning of Period $1,000.00
Base Period Return $ 98.35
Total Return 9.84%
16
<PAGE>
Values were computed according to the following formulas:
Since Inception: $1,000(1 + .09835) = $1,098.35
The Total Return performance data in these hypothetical examples represent past
performance and the investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
Total returns quoted in advertising reflect all aspects of a Fund's return,
including the effect of reinvesting dividends and capital gain distributions,
and any change in the Fund's net asset value per share (NAV) over the period.
Average annual returns are calculated by determining the growth or decline in
value of a hypothetical historical investment in a Fund over a stated period,
and then calculating the annually compounded percentage rate that would have
produced the same result if the rate of growth or decline in value had been
constant over the period. For example, a cumulative return of 100% over ten
years would produce an average annual return of 7.18%, which is the steady
annual return rate that would equal 100% growth on a compounded basis in ten
years. While average annual returns are a convenient means of comparing
investment alternatives, investors should realize that a Fund's performance is
not constant over time, but changes from year to year, and that average annual
returns represent averaged figures as opposed to the actual year-to-year
performance of a Fund.
NONSTANDARDIZED TOTAL RETURN. In addition to the performance information
described above, a Fund may provide total return information for designated
periods, such as for the most recent rolling six months or most recent rolling
twelve months. A Fund may quote unaveraged or cumulative total returns
reflecting the simple change in value of an investment over a stated period.
Average annual and cumulative total returns may be quoted as a percentage or as
a dollar amount, and may be calculated for a single investment, a series of
investments, and/or a series of redemptions over any time period. Total returns
may be broken down into their components of income and capital (including
capital gains and changes in shares price) in order to illustrate the
relationship of these factors and their contributions to total return. Total
returns and other performance information may be quoted numerically or in a
table, graph or similar illustration.
OTHER INFORMATION CONCERNING FUND PERFORMANCE. A Fund may quote its
performance in various ways, using various types of comparisons to market
indices, other funds or investment alternatives, or to general increases in the
cost of living. All performance information supplied by a Fund in advertising is
historical and is not intended to indicate future returns. A Fund's share prices
and total returns fluctuate in response to market conditions and other factors,
and the value of a Fund's shares when redeemed may be more or less than their
original cost.
17
<PAGE>
A Fund may compare its performance over various periods to various indices
or benchmarks, including, but not limited to, the performance record of the
Standard & Poor's 500 Composite Stock Price Index (S&P), the Dow Jones
Industrial Average (DJIA), the NASDAQ Industrial Index, the Ten Year Treasury
Benchmark and the cost of living (measured by the Consumer Price Index, or CPI)
over the same period. Comparisons may also be made to yields on certificates of
deposit, treasury instruments or money market instruments. The comparisons to
the S&P and DJIA show how such Fund's total return compared to the record of a
broad average of common stock prices (S&P) and a narrower set of stocks of major
industrial companies (DJIA). The Fund may have the ability to invest in
securities or underlying funds not similar in composition to the indices.
Figures for the S&P and DJIA are based on the prices of unmanaged groups of
stocks, and unlike a Fund's returns, their returns do not include the effect of
paying brokerage commissions and other costs of investing.
Comparisons may be made on the basis of a hypothetical initial investment
in a Fund (such as $1,000), and reflect the aggregate cost of reinvested
dividends and capital gain distributions for the period covered (that is, their
cash value at the time they were reinvested). Such comparisons may also reflect
the change in value of such an investment assuming distributions are not
reinvested. Tax consequences of different investments may not be factored into
the figures presented.
A Fund's performance may be compared in advertising to the performance of
other mutual funds in general or to the performance of particular types of
mutual funds, especially those with similar objectives.
Other groupings of funds prepared by Lipper Analytical Services, Inc.
("Lipper") and other organizations may also be used for comparison to the Fund.
Although Lipper and other organizations such as Investment Company Data, Inc.
("ICD"), CDA Investment Technologies, Inc. ("CDA") and Morningstar Investors,
Inc. ("Morningstar"), include funds within various classifications based upon
similarities in their investment objectives and policies, investors should be
aware that these may differ significantly among funds within a grouping.
Performance rankings and ratings reported periodically in national
financial publications such as Money Magazine, Forbes, Business Week, The Wall
Street Journal, Micropal, Inc., Morningstar, Stanger's, Barron's, etc. will also
be used.
Ibbotson Associates of Chicago, Illinois (Ibbotson) and others provide
historical returns of the capital markets in the United States. A Fund may
compare its performance to the long-term performance of the U.S. capital markets
in order to demonstrate general long-term risk versus reward investment
scenarios. Performance comparisons could also include the value of a
hypothetical investment in common stocks, long-term bonds or treasuries. A Fund
may discuss the performance of financial markets and indices over various time
periods.
18
<PAGE>
A Fund may also discuss in advertising the relative performance of various
types of investment instruments, such as stocks, treasury securities and bonds,
over various time periods and covering various holding periods. Such comparisons
may compare these investment categories to each other or to changes in the CPI.
A Fund may advertise examples of the effects of periodic investment plans,
including the principle of dollar cost averaging. In such a program, the
investor invests a fixed dollar amount in a fund at periodic intervals, thereby
purchasing fewer shares when prices are high and more shares when prices are
low. While such a strategy does not assure a profit or guard against loss in a
declining market, the investor's average cost per share can be lower than if
fixed numbers of shares had been purchased at those intervals. In evaluating
such a plan, investors should consider their ability to continue purchasing
shares through periods of low price levels.
The Funds may be available for purchase through retirement plans or other
programs offering deferral of or exemption from income taxes, which may produce
superior after-tax returns over time. For example, a $1,000 investment earning a
taxable return of 10% annually, compounded monthly, would have an after-tax
value of $2,009 after ten years, assuming tax was deducted from the return each
year at a 31% rate. An equivalent tax-deferred investment would have an
after-tax value of $2,178 after ten years, assuming tax was deducted at a 31%
rate from the deferred earnings at the end of the ten-year period.
Evaluations of a Fund's performance made by independent sources may also be
used in advertisements concerning the Fund, including reprints of, or selections
from, editorials or articles about the Fund. These editorials or articles may
include quotations of performance from other sources such as Lipper or
Morningstar.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Each Fund is open for business and its net asset value per share (NAV) is
calculated each day the NYSE is open for trading. The NYSE has designated the
following holiday closings: New Year's Day, Washington's Birthday (observed),
Good Friday, Memorial Day (observed), Independence Day (observed), Labor Day,
Thanksgiving Day, and Christmas Day (observed). The NYSE may modify its holiday
schedule at any time.
Each Fund's net asset value is determined as of the close of the NYSE
(normally 4:00 p.m. Eastern time). However, NAV may be calculated earlier if
trading on the NYSE is restricted or as permitted by the SEC. To the extent that
portfolio securities are traded in other markets on days when the NYSE is
closed, a Fund's NAV may be affected on days when investors do not have access
to the Fund to purchase or redeem shares.
19
<PAGE>
Shareholders of The Amerigo Fund will be able to exchange their shares for
shares of The Clermont Fund. Shareholders of The Clermont Fund will be able to
exchange their shares for shares of The Amerigo Fund. No fee or sales load will
be imposed upon any such exchange.
Additional details about the exchange privilege is available from the
Fund's Transfer Agent. The exchange privilege may be modified, terminated or
suspended on 60 days' notice, and either Fund has the right to reject any
exchange application relating to such Fund's shares. The 60-day notification
requirement may be waived if (i) the only effect of a modification would be to
reduce or eliminate any applicable administrative fee, redemption fee, or
deferred sales charge ordinarily payable at the time of an exchange, or (ii) a
Fund suspends the redemption of the shares to be exchanged as permitted under
the 1940 Act or the rules and regulations thereunder or the Fund to be acquired
suspends the sale of its shares because it is unable to invest amounts
effectively in accordance with its investment objective and policies. In the
Prospectus, each Fund has notified shareholders that it reserves the right at
any time, without prior notice, to refuse exchange purchases by any person or
group if, in the Manager's judgment, the Fund would be unable to invest
effectively in accordance with its investment objective and policies, or would
otherwise potentially be adversely affected.
AUTOMATIC ACCOUNT BUILDER. An investor may arrange to have a fixed amount
of $100 or more automatically invested in shares of a Fund monthly by
authorizing his or her bank account to be debited to invest specified dollar
amounts in shares of the Fund. The investor's bank must be a member of the
Automatic Clearing House System. Stock certificates are not issued to Automatic
Account Builder participants.
Further information about these programs and an application form can be
obtained from the Transfer Agent.
SYSTEMATIC WITHDRAWAL PROGRAM. A systematic withdrawal plan is available
for shareholders having shares of a Fund with a minimum value of $10,000, based
upon the offering price. The plan provides for monthly, quarterly or annual
checks in any amount, but not less than $100 (which amount is not necessarily
recommended). Except as otherwise provided in the Prospectus, to the extent such
withdrawals exceed the current net asset value of reinvested dividends, they may
be subject to the contingent deferred sales charge. See "How to Buy Shares" and
"Other Shareholder Services" in the Prospectus.
Dividends and/or distributions on shares held under this plan are invested
in additional full and fractional shares at net asset value. The Transfer Agent
acts as agent for the shareholder in redeeming sufficient full and fractional
shares to provide the amount of the periodic withdrawal payment. The plan may be
terminated at any time.
20
<PAGE>
Withdrawal payments should not be considered as dividends, yield or income.
If periodic withdrawals continuously exceed reinvested dividends and
distributions, the shareholder's original investment will be correspondingly
reduced and ultimately exhausted.
Furthermore, each withdrawal constitutes a redemption of shares, and any
gain or loss realized must be recognized for federal income tax purposes. In
addition, withdrawals made concurrently with purchases of additional shares are
inadvisable because of the applicable sales charges to the withdrawal of the
Fund's shares. Each shareholder should consult his or her own tax adviser with
regard to the tax consequences of the plan, particularly if used in connection
with a retirement plan.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS. If you request to have distributions mailed to you and the
U.S. Postal Service cannot deliver your checks, or if your checks remain
uncashed for six months, the Manager may reinvest your distributions at the
then-current NAV. All subsequent distributions will then be reinvested until you
provide the Manager with alternate instructions.
DIVIDENDS. A portion of a Fund's dividends derived from certain U.S.
government obligations may be exempt from state and local taxation. Each Fund
will send each shareholder a notice in January describing the tax status of
dividends and capital gain distributions for the prior year.
CAPITAL GAIN DISTRIBUTIONS. Long-term capital gains earned by a Fund on the
sale of securities by the Fund and distributed to shareholders of the Fund are
federally taxable as long-term capital gains regardless of the length of time
shareholders have held their shares. Short-term capital gains distributed by a
Fund are taxable to shareholders as dividends not as capital gains.
Distributions from short-term capital gains do not qualify for the
dividends-received deduction.
TAX STATUS OF THE FUND. Each Fund intends to qualify each year as a
"regulated investment company" for tax purposes so that it will not be liable
for federal tax on income and capital gains distributed to shareholders. In
order to qualify as a regulated investment company and avoid being subject to
federal income or excise taxes at the Fund level, the Fund intends to distribute
substantially all of its net investment income and net realized capital gains
within each calendar year as well as on a fiscal year basis. Each Fund intends
to comply with other tax rules applicable to regulated investment companies.
21
<PAGE>
Each Fund is treated as a separate entity from the other CLS AdvisorOne
Funds.
OTHER TAX INFORMATION. The information above is only a summary of some of
the tax consequences generally affecting each Fund and its shareholders, and no
attempt has been made to discuss individual tax consequences. In addition to
federal income taxes, shareholders may be subject to state and local taxes on a
Fund's distributions. Investors should consult their tax advisers to determine
whether the Fund is suitable to their particular tax situation.
INVESTMENT ADVISER AND MANAGER
Clarke Lanzen Skalla Investment Firm, Inc. (the "Manager") is the
investment adviser and manager for, and has an Investment Advisory Contract
with, each Fund.
Pursuant to the Investment Advisory Contract with each Fund, the Manager,
subject to the supervision of the Board of Trustees and in conformity with the
stated objective and policies of the Fund, manages both the investment
operations of the Fund and the composition of the Fund's portfolio, including
the purchase, retention, disposition and loan of securities. In connection
therewith, the Manager is obligated to keep certain books and records of each
Fund. The Manager also administers each Fund's corporate affairs, and in
connection therewith, furnishes each Fund with office facilities, together with
those ordinary clerical and bookkeeping services which are not being furnished
by Star Bank, N.A., each Fund's custodian and Mutual Funds Service Co., each
Fund's transfer and disbursing agent. The management services of the Manager are
not exclusive under the terms of the Investment Advisory Contract and the
Manager is free to, and does, render management services to others.
The Investment Advisory Contract for each Fund was separately approved by a
vote of a majority of the Trustees, including a majority of those Trustees who
are not "interested persons" (as defined in the Investment Company Act of 1940)
of the Fund. The Investment Advisory Contract for each Fund is to remain in
force so long as renewal thereof is specifically approved at least annually by a
majority of the Trustees or by vote of a majority of the outstanding voting
shares of the Fund, and in either case by vote of a majority of the Trustees who
are not "interested persons" (as defined in the Investment Company Act of 1940)
at a meeting called for the purpose of voting on such renewal.
Each Investment Advisory Contract provides that the Manager will not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the matters to which the Investment Advisory
Contract relates except for a loss resulting from willful misfeasance, bad
faith, gross negligence or reckless disregard of duty. The Investment Advisory
Contract will terminate automatically if assigned and may be terminated without
penalty at any time upon 60 days' prior written notice by Majority Vote of the
Fund, by the Trustees, or by the Manager.
22
<PAGE>
Costs, expenses and liabilities of the Trust attributable to a particular
Fund are allocated to that Fund. Costs, expenses and liabilities which are not
readily attributable to a particular Fund are allocated among all of the Trust's
Funds. Thus, each Fund pays its proportionate share of: the fees of the Trust's
independent auditors, legal counsel, custodian, transfer agent and accountants;
insurance premiums; the fees and expenses of Trustees who do not receive
compensation from the Manager; association dues; the cost of printing and
mailing confirmations, prospectuses, proxies, proxy statements, notices and
reports to existing shareholders; state registration fees, including the cost of
printing and mailing of prospectuses and other materials incident to soliciting
new accounts; and other miscellaneous expenses.
The Manager earns an annual fee, payable in monthly installments as
follows. The fee for each Fund is based upon the average net assets of each Fund
and is at the rate of 1% of each Fund's average net assets.
The Manager presently intends to waive management fees or reimburse each
Fund through an expense reimbursement fee to the extent necessary to keep total
expenses at 1.15% of average daily net assets of each Fund. The Manager may
change this policy at any time without notice to shareholders.
For the period from July 14, 1997 (date of commencement of operations)
through April 30, 1998, The Amerigo Fund and The Clermont Fund paid total fees
to the Manager of $29,116 and $18,771, respectively.
For the period from July 14, 1997 through April 30, 1998, The Amerigo Fund
and The Clermont Fund each paid administrative fees of $22,500 to Mutual Funds
Service Co., the Administrator of the Funds, under its Administration Services
Agreement.
Clarke Lanzen Skalla Investment Firm, Inc. was incorporated in Nebraska on
March 3, 1989 and maintains its principal offices at 14747 California Street,
Omaha, NE 68154-1979. The Manager is controlled by W. Patrick Clarke through the
ownership of voting common stock. The Manager's officers and directors are as
set forth as follows: W. Patrick Clarke, a director, President and Chief
Executive Officer; Randal D. Skalla, a director, Vice President and Chief
Investment Officer; Gary W. Lanzen, a director; and Todd P. Clarke, Executive
Senior Vice President, Secretary and Treasurer. Each of the foregoing
individuals is a Trustee and officer of the Trust.
OFFICERS AND TRUSTEES
The Trustees and executive officers of the Trust are listed below. Except
as indicated, each individual has held the office shown or other offices in the
same company for the last five years. Unless otherwise noted, the business
address of each Trustee and officer is 14747 California Street, Omaha, NE
23
<PAGE>
68154-1979 which is also the address of the Manager. Those Trustees who are
"interested persons" (as defined in the Investment Company Act of 1940) by
virtue of their affiliation with either Fund, the Trust or the Manager are
indicated by an asterisk (*).
The Trust is managed by its Trustees and officers. Their names, addresses,
ages, positions and principal occupations during the past five years are listed
below:
NAME, ADDRESS AND AGE POSITION HELD PRINCIPAL OCCUPATION
W. Patrick Clarke*, 53 Trustee, Chairman President and Chief
and President Executive Officer, Clarke
Lanzen Skalla Investment
Firm, Inc., an investment
adviser.
Randal D. Skalla*+, 36 Trustee, Vice Vice President and Chief
President Investment Officer, Clarke
Lanzen Skalla Investment
Firm, Inc., an investment
adviser.
Gary W. Lanzen*+, 44 Trustee A registered
representative of CLS
Brokerage Services, Inc.,
a broker-dealer, since
June 1997; Chief Financial
Officer, Secretary and
Treasurer of Clarke Lanzen
Skalla Investment Firm,
Inc., an investment
adviser, from ______ 199_
to March 1998.
Todd P. Clarke*+, 29 Trustee, Assistant Executive Senior Vice
Secretary and President of Clarke Lanzen
Assistant Treasurer Skalla Investment Firm,
Inc., an investment
adviser.
Susan Kineen*+, 47 Secretary and Senior Vice President and
Treasurer Comptroller of Clarke
Lanzen Skalla Investment
Firm, Inc., an investment
adviser, since April 1997;
Comptroller of Omaha
Community Playhouse from
December 1991 through
February 1997.
24
<PAGE>
H. Reese Hansen, 56 Trustee Dean of Brigham Young
Brigham Young University University J. Reuben Clark
J. Reuben Clark Law School Law School
P. O. Box 28000
Provo, UT 84602-8000
L. Merill Bryan, Jr., 53 Trustee President and Chief
Union Pacific Railroad Executive Officer, Union
1416 Dodge Street, Room 1100 Pacific Technologies, a
Omaha, NE 68179 computer and telecommunic-
ations systems and
services company.
Richard A. Zehnacker, 41 Trustee President, First Data
c/o First Data Resources Resources, a credit card
10825 Farnam Drive-C43 processing company.
Omaha, NE 68154
+14747 California Street, Omaha, Nebraska 68154-1979.
W. Patrick Clarke is Todd P. Clarke's father and H. Reese Hansen's
brother-in-law.
The following table shows the compensation paid by each of the Funds and
the Trust (the "Fund Complex") as a whole to the Trustees of the Funds and the
Fund Complex during the period from July 14, 1997 (date of commencement of
operations) until April 30, 1998.
COMPENSATION TABLE
Pension or
Retirement
Benefits Estimated Total
Accrued as Annual Compensation
Aggregate Part of Benefits from Registrant
Compensation Fund Upon and Fund Complex
TRUSTEE FROM THE TRUST EXPENSE RETIREMENT PAID TO TRUSTEES
W. Patrick Clarke None None None None
Randal D. Skalla None None None None
Gary W. Lanzen None None None None
Todd P. Clarke None None None None
H. Reese Hansen $5,400 None None $5,400
L. Merill Bryan, Jr. $5,400 None None $5,400
Richard A. Zehnacker $3,900 None None $3,900
25
<PAGE>
Neither the Trust nor either of the Funds pays any pension or retirement
benefits to any Trustee or officer or maintains any plan for such purpose.
The Trust pays each Trustee who is not an "interested person" an annual fee
of $4,000, plus $1,500 for each meeting of the Board of Trustees attended in
person or $750 for each meeting of the Board of Trustees attended
telephonically. H. Reese Hansen, L. Merill Bryan, Jr. and Richard A. Zehnacker
comprise the Audit Committee for the Trust. Each member of the Audit Committee
is paid $400 for each meeting of the Audit Committee attended. Trustee fees for
the Fund Complex totaled $14,700 for the period from July 14, 1997 (date of
commencement of operations) to April 30, 1998. Audit Committee fees for each of
the Funds totaled $600 for the period from July 14, 1997 (date of commencement
of operations) to April 30, 1998. All other officers and Trustees serve without
compensation from the Trust.
The Trustees and officers of the Trust own, in the aggregate, less than 1%
of The Amerigo Fund's total outstanding shares and 2.04% of The Clermont Fund's
total outstanding shares.
DESCRIPTION OF THE TRUST
TRUST ORGANIZATION. The assets of the Trust received for the issue or sale
of the shares of a Fund and all income, earnings, profits, and proceeds thereof,
subject only to the rights of creditors, are especially allocated to the Fund
and constitute the underlying assets of the Fund. The underlying assets of each
Fund are segregated on the books of account, and are to be charged with the
liabilities with respect to the Fund and with a share of the general expenses of
the Trust. Expenses with respect to the Trust are to be allocated in proportion
to the asset value of the respective funds except where allocations of direct
expense can otherwise be fairly made. The officers of the Trust, subject to the
general supervision of the Board of Trustees, have the power to determine which
expenses are allocable to a given fund, or which are general or allocable to all
of the funds. In the event of the dissolution or liquidation of the Trust,
shareholders of each fund are entitled to receive as a class the underlying
assets of such fund available for distribution.
SHAREHOLDER AND TRUSTEE LIABILITY. The Trust is an entity of the type
commonly known as a "Massachusetts business trust." Under Massachusetts law,
shareholders of such a trust may, under certain circumstances, be held
personally liable for the obligations of the trust. The Declaration of Trust
provides that the Trust shall not have any claim against shareholders except for
the payment of the purchase price of shares and requires that each agreement,
obligation, or instrument entered into or executed by the Trust or the Trustees
include a provision limiting the obligations created thereby to the Trust and
its assets.
26
<PAGE>
The Declaration of Trust provides for indemnification out of each fund's
property of any shareholder held personally liable for the obligations of the
Fund. The Declaration of Trust also provides that each Fund shall, upon request,
assume the defense of any claim made against any shareholder for any act or
obligation of the Fund and satisfy any judgment thereon. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which a Fund itself would be unable to meet its
obligations. The Manager believes that, in view of the above, the risk of
personal liability to shareholders is remote.
The Declaration of Trust further provides that the Trustees, if they have
exercised reasonable care, will not be liable for any neglect or wrongdoing, but
nothing in the Declaration of Trust protects Trustees against any liability to
which they would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of their office.
VOTING RIGHTS. Each Fund's capital consists of shares of beneficial
interest. As a shareholder, you receive one vote for each share you own. The
shares have no preemptive or conversion rights; the voting and dividend rights
the right of redemption, and the privilege of exchange are described in the
Prospectus. Shares are fully paid and nonassessable, except as set forth under
the heading "Shareholder and Trustee Liability" above. Shareholders representing
10% or more of the Trust or a Fund may, as set forth in the Declaration of
Trust, call meetings of the Trust or the Fund for any purpose related to the
Trust or Fund, as the case may be, including, in the case of a meeting of the
entire Trust, the purpose of voting on removal of one or more Trustees. The
Trust or a Fund may be terminated upon the sale of its assets to another
open-end management investment company, or upon liquidation and distribution of
its assets, if approved by the Board of Trustees. If not so terminated, the
Trust and the Fund will continue indefinitely.
CUSTODIAN. Star Bank, N.A., 425 Walnut Street, Cincinnati, OH 45202, is
custodian of the assets of the Portfolio. The custodian is responsible for the
safekeeping of each Fund's assets and the appointment of subcustodian banks and
clearing agencies. The custodian takes no part in determining the investment
policies of a Fund or in deciding which securities are purchased or sold by a
Fund. Each Fund may, however, invest in obligations of the custodian and may
purchase or sell securities from or to the custodian.
AUDITORS. KPMG Peat Marwick LLP, Two Nationwide Plaza, Columbus, Ohio 43215
serves as the Trust's independent auditors. The auditor performs an annual
audit of the financial statements for each Fund and may provide other audit,
tax, and related services.
27
<PAGE>
PRINCIPAL HOLDERS OF OUTSTANDING SHARES
As of July 27, 1998, the following persons owned 5% or more of The Clermont
Fund's outstanding shares of beneficial interest:
Name and Address Amount of Record Percentage
OF BENEFICIAL OWNER AND BENEFICIALLY OF FUND
------------------- ---------------- -------
Brent J. Welch 29,522.123 5.402%
Elizabeth E. Welch JTWROS
4632 S. 166th Circle
Omaha, NE 68135
Sterling Trust Co. C/F 85,647.684 15.671%
Davis & Davis P.C.
P. O. Box 2526
Waco, TX 76702
FINANCIAL STATEMENTS
The audited Financial Statements and the Notes thereto for the Funds, and
the Independent Auditors' Report of KPMG Peat Marwick LLP, independent public
accountants, are presented on the following pages.
28
<PAGE>
CLS AdvisorOne Funds
PORTFOLIO OF INVESTMENTS
April 30, 1998
<TABLE>
T H E A M E R I G O F U N D
<CAPTION>
Mutual Funds
% OF
LARGE CAP VALUE SHARES NET ASSETS VALUE
<S> <C> <C> <C>
Fidelity Advisor Growth Opportunities I Fund 14,821 9.12% $ 689,038
Warburg Pincus Growth and Income Fund 18,422 4.50% 340,068
Neuberger & Berman Partners Fund 3,607 1.39% 105,134
LARGE CAP GROWTH
Masters' Select Equity Fund 40,143 7.35% 555,176
Rydex OTC Fund (#) 18,860 7.06% 533,360
Rydex Nova Fund (#) 15,363 6.14% 464,125
MID CAP VALUE
Oakmark Select Fund (#) 35,941 9.20% 695,460
Neuberger & Berman Genesis Fund (#) 33,584 7.55% 570,262
Baron Asset Fund (#) 8,844 6.16% 465,299
SMALL CAP VALUE
Heartland Value Plus Fund 41,175 9.12% 689,270
Barr Rosenberg U.S. Small Capitalization Fund -- Advisor Class(#) 20,450 2.68% 202,453
Robertson Stephens Partners Fund 3,386 0.80% 60,643
Heartland Small Cap Contrarian Fund 374 0.07% 5,041
SMALL CAP GROWTH
TIP Funds Turner Small Cap Equity Fund (#) 9,856 3.73% 281,878
BONDS
Strong High Yield Bond Fund 15,958 2.55% 192,938
INTERNATIONAL STOCK
Janus Overseas Fund 37,345 10.07% 761,090
Federated International Small Company Fund -- Class A (#) 18,468 4.57% 345,356
SSgA Emerging Markets Fund 15,077 2.17% 164,187
Templeton Developing Markets Trust -- Advisor Class 7,183 1.29% 97,397
TOTAL MUTUAL FUNDS (Cost $6,506,397) 95.52% 7,218,175
------ ---------
Money Market Mutual Funds 200,000 2.65% 200,000
Alliance Prime Portfolio
Total Money Market Mutual Funds (Cost $200,000) 2.65% 200,000
----- ---------
TOTAL INVESTMENTS (COST $6,706,397) 98.17% 7,418,175
------ ---------
Other Assets in Excess of Liabilities 1.83% 139,357
----- -------
TOTAL NET ASSETS 100% $7,557,532
==== ==========
<FN>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
(#) REPRESENTS NON-INCOME PRODUCING SECURITIES
</FN>
</TABLE>
The following information was The Amerigo Fund's Investment
presented as a pie chart: Style % in U.S. stock funds
April 30, 1998:
COMPOSITION %
- ------------- VALUE BLEND GROWTH
Composition % based on 15.01% 20.55% LARGE
holdings of underlying
funds at April 30, 1998. 22.91% MEDIUM
U.S. Stocks 64.7% 12.67% 3.73% SMALL
International Stocks 21.0%
Cash 8.4%
Bonds 4.3%
Other 0.7%
<PAGE>
CLS AdvisorOne Funds
PORTFOLIO OF INVESTMENTS
April 30, 1998
<TABLE>
T H E C L E R M O N T F U N D
<CAPTION>
Mutual Funds % OF
SHARES NET ASSETS VALUE
<S> <C> <C> <C>
LARGE CAP VALUE
Oakmark Fund 13,754 13.63% $605,311
Invesco Total Return Fund 14,919 10.60% 470,559
Invesco Financial Strategic Utilities Fund 10,680 3.53% 156,677
LARGE CAP GROWTH
Rydex Nova Fund (#) 6,915 4.70% 208,893
MID CAP GROWTH
Baron Growth & Income Fund 9,142 5.52% 245,182
SMALL CAP VALUE
Third Avenue Value Fund 10,200 7.87% 349,252
Oakmark Small Capital Fund (#) 6,552 3.05% 135,306
Barr Rosenberg U.S. Small Capitalization Fund - Advisor Class (#) 10,958 2.44% 108,482
BONDS
Strong Corporate Bond Fund 39,785 10.06% 446,787
Fidelity Advisor High-Yield Fund 29,546 8.54% 379,368
Berwyn Income Fund 15,736 4.55% 202,046
INTERNATIONAL STOCK
Tweedy Browne Global Value Fund 37,930 16.25% 721,423
Oakmark International Small Cap Fund 15,111 3.20% 141,892
Brinson Global Equity Fund 3.11% 138,017
Total Mutual Funds (Cost $4,041,863) 97.05% 4,309,195
------ ---------
Other Assets in Excess of Liabilities 2.95% 131,359
----- -------
TOTAL NET ASSETS 100% $4,440,554
==== ==========
<FN>
(#) REPRESENTS NON-INCOME PRODUCING SECURITIES
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
</FN>
</TABLE>
The following information was The Clermont Fund's Investment
presented as a pie chart: Style % in U.S. stock funds
April 30, 1998:
COMPOSITION %
- ------------- VALUE BLEND GROWTH
Composition % based on 27.76% 4.70% LARGE
holdings of underlying
funds at April 30, 1998. 5.52% MEDIUM
U.S. Stocks 43.9% 13.36% SMALL
Bonds 24.5%
International Stocks 17.9%
Cash 10.7%
Other 3.0%
<PAGE>
CLS AdvisorOne Funds
STATEMENTS OF ASSETS AND LIABILITIES
April 30, 1998
The The
Amerigo Clermont
Fund Fund
Assets:
Investments, at market value
(cost $6,706,397 and $4,041,863,
respectively) $7,418,175 $ 4,309,195
Cash 125,310 105,904
Receivable from advisor 29,749 27,805
Unamortized organization costs 43,709 43,709
Prepaid expense and other assets 2,723 2,723
Total Assets 7,619,666 4,489,336
Less Liabilities:
Management fees payable 32,144 21,799
Other accrued liabilities 29,990 26,983
Total Liabilities 62,134 48,782
Net Assets $ 7,557,532 $ 4,440,554
=========== ===========
Components of Net Assets:
Capital $ 6,782,973 $ 4,160,163
Accumulated undistributed
net investment income --- 1,247
Accumulated undistributed
net realized gains 62,781 11,812
Net unrealized appreciation of investments 711,778 267,332
TOTAL NET ASSETS $7,557,532 $4,440,554
========== ==========
Capital Stock Outstanding 664,460 410,965
======= =======
Net Asset Value -- Offering and $11.37 $10.81
Redemption Price Per Share ====== ======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
CLS AdvisorOne Funds
STATEMENTS OF OPERATIONS
For the Period from July 14, 1997* through April 30, 1998
The The
Amerigo Clermont
Fund Fund
Investment Income:
Dividends $42,300 $79,860
Total Investment Income 42,300 79,860
Expenses:
Investment advisory fees 32,144 21,799
Audit fees 9,891 9,910
Custodian fees 5,525 4,002
Trustee fees 10,387 10,335
Legal expense 4,802 4,802
Amortization of organization expense 8,423 8,423
Transfer agent fees 14,373 13,659
Fund accounting fees 15,932 15,932
Administrative fees 23,897 23,897
Printing and postage expense 12,155 12,155
Registration 1,342 1,342
Miscellaneous expenses 4,349 2,906
TOTAL EXPENSES BEFORE VOLUNTARY EXPENSE
REDUCTIONS AND REIMBURSEMENTS 143,220 129,162
------- -------
Expenses voluntarily reduced (3,028) (3,028)
Reimbursement of expenses by advisor (102,771) (101,142)
Net Expenses 37,421 24,992
Net Investment Income 4,879 54,868
Realized and Unrealized Gains from Investments:
Net realized gains from investment transactions 62,781 11,812
Net increase in unrealized appreciation
of investments 711,778 267,332
Net Realized and Unrealized Gains
from Investments 774,559 279,144
Net Increase in Net Assets Resulting
from Operations $ 779,438 $ 334,012
========= ==========
* Date of commencement of operations
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
CLS AdvisorOne Funds
STATEMENTS OF CHANGES IN NET ASSETS
For the Period from July 14, 1997* through April 30, 1998
The The
Amerigo Clermont
Fund Fund
Increase In Net Assets:
Operations:
Net investment income $ 4,879 $ 54,868
Net realized gains from
investment transactions 62,781 11,812
Net increase in unrealized
appreciation of investments 711,778 267,332
Net Increase in Net Assets Resulting
from Operations 779,438 334,012
Dividends and Distributions to Shareholders:
From net investment income (4,879) (53,621)
In excess of net investment income (12,682) --
Net Decrease in Net Assets Resulting
from Dividends and Distributions
to Shareholders (17,561) (53,621)
Capital Transactions:
Proceeds from shares subscribed 7,093,071 4,416,816
Reinvestment of dividends 17,561 53,621
Cost of shares redeemed (364,977) (360,274)
Net Increase in Net Assets Resulting
from Capital Transactions 6,745,655 4,110,163
Net Increase In Net Assets 7,507,532 4,390,554
Net Assets - Beginning of Period 50,000 50,000
NET ASSETS - END OF PERIOD $ 7,557,532 $ 4,440,554
=========== ===========
Share Transactions:
Subscribed 692,016 435,133
Reinvested 1,735 5,288
Redeemed (34,291) (34,456)
Net Increase in Shares Outstanding 659,460 405,965
======= =======
* Date of commencement of operations
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
CLS AdvisorOne Funds
FINANCIAL HIGHLIGHTS
For the Period from July 14, 1997* through April 30, 1998
The The
Amerigo Clermont
Fund Fund
Net Asset Value, Beginning of Period $ 10.00 $ 10.00
Investment Operations:
Net investment income 0.02 0.17
Net realized and unrealized gains
from investments 1.39 0.80
Total 1.41 0.97
Distributions:
From net investment income (0.02) (0.16)
In excess of net investment income (0.02) --
Total (0.04) (0.16)
Net Asset Value, End of Period $ 11.37 $ 10.81
Total Return
14.11%(1) 9.84%(1)
Ratios/Supplemental Data:
Net assets, end of period
Ratio of expenses to average net assets $ 7,557,532 $ 4,440,554
Ratio of net investment income to 1.15%(2) 1.15%(2)
average net assets
Ratio of expenses to average net 0.15%(2) 2.53%(2)
assets, before voluntary expense
reductions and reimbursements
Ratio of net investment income (loss) 4.45%(2) 5.95%(2)
to average net assets before voluntary
expense reductions and reimbursements
Portfolio turnover rate (3.15%)(2) (2.27%)(2)
14.36%(1) 22.24%(1)
(1) Not annualized.
(2) Annualized.
* Date of commencement of operations
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
CLS AdvisorOne Funds
NOTES TO FINANCIAL STATEMENTS
April 30, 1998
The CLS AdvisorOne Funds (the "Trust") was organized as a Massachusetts business
trust on March 3, 1997 and is registered under the Investment Company Act of
1940, as amended (the "Act"), as an open-end management investment company. The
Trust consists of The Amerigo Fund and The Clermont Fund (individually, a
"Fund"; collectively, the "Funds") which are two separate diversified, no-load
series with different investment objectives. Each Fund commenced operations July
14, 1997. Prior to the commencement of operations, the Trust had no operations
other than incurring organizational expenses and the sale of initial shares of
beneficial interest. The Amerigo Fund's investment objective is capital
appreciation and long-term growth of capital without regard to current income.
The Clermont Fund's investment objective is growth of capital and a reasonable
level of current income.
1. SIGNIFICANT ACCOUNTING POLICIES: The following is a summary of significant
accounting policies followed by the Trust in the preparation of its financial
statements. The policies are in conformity with generally accepted accounting
principles. Preparation of the financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
income and expenses for the period. Actual results could differ from these
estimates.
SECURITY VALUATION: Each Fund seeks to achieve its investment objective by
investing in a portfolio of open-end or closed-end investment companies (the
"underlying funds"). Underlying open-end funds are valued at their respective
net asset values as reported by such investment companies under the 1940 Act.
The underlying funds value securities in their portfolios for which market
quotations are readily available at their current market values (generally the
last reported sale price) and all other securities and assets at fair value
pursuant to methods established by the board of directors of the underlying
funds. Other assets of each Fund are valued at their current market value if
quotations are readily available. Otherwise, they are valued at fair value
pursuant to methods established in good faith by the Board of Trustees.
The shares of many closed-end investment companies, after their initial public
offering, frequently trade at a price per share which is different than the net
asset value per share. The difference represents a market premium or market
discount of such shares. There can be no assurance that the market discount on
shares of any closed-end investment company purchased by a Fund will decrease.
Similarly, there can be no assurance that the market premium on shares of any
closed-end investment company purchased by a Fund will not decrease.
FOREIGN SECURITIES: An underlying fund may invest its assets in securities of
foreign issuers. Investment in securities of foreign issuers carry certain risks
not ordinarily associated with investments in securities of domestic issuers.
Such risks include political and economic developments, including the possible
expropriation of assets, confiscatory taxation, imposition of exchange controls
or other foreign governmental laws and restrictions. In addition, there may be
less publicly available information about foreign issuers than is available
about domestic issuers, and the value of the underlying funds' foreign
securities may be adversely affected by fluctuations in exchange rates between
foreign currencies and the U.S. dollar. Interest and dividend income from
foreign sources received by an underlying fund may be subject to foreign taxes.
<PAGE>
CLS AdvisorOne Funds
NOTES TO FINANCIAL STATEMENTS
April 30, 1998
LOANS OF PORTFOLIO SECURITIES: A Fund may lend its portfolio securities
provided: (1) the loan is secured continuously by collateral consisting of U.S.
Government securities or cash or cash equivalents maintained on a daily
mark-to-market basis in an amount at least equal to the current market value of
the loaned securities; (2) the Fund may at any time call the loan and obtain the
return of 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 will not at any time exceed one-third of the total assets of
the Fund. Loans of securities involve a risk that the borrower may fail to
return the securities or may fail to provide additional collateral. As of April
30, 1998, the Funds had no outstanding loans of securities.
REPURCHASE AGREEMENTS: Repurchase agreements are transactions in which the Funds
purchase securities from a bank or recognized securities dealer and
simultaneously commit to resell the securities to the bank or dealer at an
agreed-upon date and price reflecting a market rate of interest unrelated to the
coupon rate or maturity of the purchased securities. The Funds may invest in
repurchase agreements with institutions believed by Clarke Lanzen Skalla
Investment Firm, Inc. to present minimal credit risk. Each repurchase agreement
is recorded at cost. The Funds require that the securities purchased in a
repurchase agreement be transferred to the custodian in a manner sufficient to
enable the Funds to obtain those securities in the event of a counterparty
default. The seller, under the repurchase agreement, is required to maintain the
value of the securities at least equal to the repurchase price, including
accrued interest.
SECURITY TRANSACTIONS: The Funds record purchases and sales of investments on
the trade date. The Funds calculate realized gains and losses from sales of
investments on the first-in first-out basis. The Funds recognize interest income
on the accrual basis and record dividend income on the ex-dividend date.
DISTRIBUTIONS TO SHAREHOLDERS: The Funds record distributions to shareholders on
the ex-dividend date. On a quarterly basis, the Funds declare and pay dividends
from net investment income, if any. On an annual basis, the Funds declare and
pay net capital gain dividends, if any. Dividends from net investment income and
net capital gain dividends are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to expiring capital losses carried forward
and deferrals of certain losses. Permanent book and tax basis differences have
been reclassified among the components of net assets.
FEDERAL INCOME TAXES: Each Fund intends to qualify as a regulated investment
company by complying with provisions of the Internal Revenue Code available to
investment companies. Each Fund will distribute its taxable income to its
shareholders sufficient to relieve it from all Federal income taxes and excise
taxes. Therefore, neither Fund recognized a provision for Federal income taxes
or excise taxes for the period ended April 30, 1998.
OTHER: Expenses directly attributable to a Fund are charged to the Fund, while
expenses which are attributable to more than one series of the Trust are
allocated among the respective series based upon relative net assets or another
appropriate basis.
2. RELATED PARTY TRANSACTIONS: Each Fund has retained Clarke Lanzen Skalla
Investment Firm, Inc. (the "Manager") as investment advisor pursuant to an
Investment Advisory Contract under the terms of which it has agreed to provide
an investment program within the limitations of the Fund's investment policies
and restrictions. Certain officers and directors of the Fund are also
<PAGE>
officers and directors of the Manager. The Manager earns an annual fee from each
Fund at the rate of 1.00% of each Fund's average daily net assets.
The Manager presently intends to waive management fees or reimburse each Fund
through an expense reimbursement to the extent necessary to keep total expenses
of each Fund at or below 1.15% of average daily net assets. The Manager may
change this policy at any time without notice to shareholders. Pursuant to such
intentions, the Manager reimbursed The Amerigo Fund and The Clermont Fund
$102,771 and $101,142, respectively, for the period from July 14, 1997
(commencement of operations) through April 30, 1998. To the extent the Funds do
not increase net assets, the Funds are reliant on the ability of the advisor to
continue to provide fee waivers and reimbursements. The advisor is dependent
upon achieving its own financial goals, including targeted increases in the
Funds' net assets through net sales of fund shares, in order to provide such
support to the funds.
In addition to the aforementioned reimbursements, Mutual Funds Services Co., the
Funds Administrator, Accountant, and Shareholder Servicing Dividend and Transfer
Agent voluntarily agreed to waive its fees for the period from the commencement
of operations through July 31, 1997.
3. INVESTMENT TRANSACTIONS: For the period from July 14, 1997 (commencement of
operations) through April 30, 1998, purchases and sales of portfolio securities
(excluding short-term securities) were as follows:
The Amerigo Fund The Clermont Fund
Purchases $7,146,619 $4,735,852
Sales $605,436 $635,098
Cost of investments for financial reporting purposes differs from cost basis for
Federal income tax purposes by the amount of losses recognized for financial
reporting purposes in excess of Federal income tax reporting purposes. As of
April 30, 1998, the gross unrealized appreciation and depreciation of
investments and the aggregate cost basis of investments for Federal income tax
purposes was as follows:
The Amerigo Fund The Clermont Fund
Gross unrealized appreciation $726,248 $280,832
Gross unrealized depreciation (15,005) (15,917)
----------------- -----------------
Net unrealized appreciation $711,243 $264,915
----------------- -----------------
Aggregate cost basis $6,706,932 $4,044,280
4. SHARES OF BENEFICIAL INTEREST: The Trust's Declaration of Trust permits the
Trust to offer and sell an unlimited number of full and fractional shares of
beneficial interest ("shares") in each of the Trust's existing Funds and to
create additional Funds. Each Fund issues its own series of shares. All shares
have a par value of $0.10 per share, are fully-paid, non-assessable and
fully-transferable when issued. All shares are issued as full or fractional
shares. A fraction of a share has the same rights and privileges as a full
share. Each full or fractional share has a proportionate vote. On issues
affecting the Trust as a whole, all shares of the Trust vote together as one
series. On issues affecting a particular Fund, only its shares vote.
<PAGE>
Independent Auditors' Report
The Shareholders and Board of Trustees of The CLS AdvisorOne Funds:
We have audited the accompanying statements of assets and liabilities of The CLS
AdvisorOne Funds-- The Amerigo Fund and The Clermont Fund including the
portfolios of investments, as of April 30, 1998, and the related statements of
operations, statements of changes in net assets and the financial highlights for
the period from July 14, 1997 (date of commencement of operations) through April
30, 1998. These financial statements and the financial highlights are the
responsibility of The CLS AdvisorOne Funds' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of April
30, 1998, by confirmation with the custodian and other appropriate audit
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the aforementioned funds comprising The CLS AdvisorOne Funds at April 30,
1998, the results of their operations, the changes in their net assets and the
financial highlights for the period from July 14, 1997 through April 30, 1998,
in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Columbus, Ohio
May 22, 1998
<PAGE>
APPENDIX
DESCRIPTION OF MOODY'S INVESTORS SERVICE INC.'S CORPORATE BOND RATINGS:
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than the Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
short-comings.
C - Bonds which are rated C are the lowest-rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies numerical modifiers, 1, 2, and 3, in each generic rating
classification from Aa through C in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
<PAGE>
DESCRIPTION OF STANDARD & POOR'S CORPORATION'S CORPORATE BOND RATINGS:
AAA - Debt rated AAA has the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher-rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.
BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB-rating.
B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB-rating.
CCC - Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial, or, economic conditions, it is not likely to have
the capacity to pay interest and repay principal. The CCC rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied B or B-rating.
CC - Debt rated CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC debt rating.
C - The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC-debt rating. The C rating may be used
to cover a situation where a bankruptcy petition has been filed but debt service
payments are continued.
CI - The rating CI is reserved for income bonds on which no interest is
being paid.
D - Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating will also be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
The ratings from AA to D may be modified by the addition of a plus or minus to
show relative standing within the major rating categories.
<PAGE>
A-1 AND P-1 COMMERCIAL PAPER RATINGS:
Commercial paper rated A-1 by Standard & Poor's Corporation ("S&P") has the
following characteristics: Liquidity ratios are adequate to meet cash
requirements. Long term senior debt is rated "A" or better. The issuer has
access to at least two additional channels of borrowing. Basic earnings and cash
flow have an upward trend. Typically, the issuer's industry is well established
and the issuer has a strong position within the industry. The reliability and
quality of management are unquestioned. Relative strength or weakness of the
above factors determines whether the issuer's commercial paper is A-1, A-2, or
A-3.
The rating P-1 is the highest commercial paper rating assigned by Moody's
Investors Services, Inc. ("Moody's"). Among the factors considered by Moody's in
assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and (8) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations.
<PAGE>
- ------------------------------------------------------------------------------
PART C
- ------------------------------------------------------------------------------
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Financial Statements included in Part A
Financial Highlights
Financial Statements included in Part B
Statements of Assets and Liabilities -- April 30, 1998
Statements of Operations -- For the period from July 14, 1997
through April 30, 1998
Statement of Changes in Net Assets -- For the period from July
14, 1997 through April 30, 1998
Financial Highlights -- For the period from July 14, 1997
through April 30, 1998
Notes to Financial Statements
Independent Auditors' Report dated May 22, 1998
Statements and schedules other than those listed above are omitted because
they are not required, or because the information required is included in the
financial statements or notes thereto.
(b) EXHIBITS:
1. Declaration of Trust -- filed as an exhibit to Registrant's
Registration Statement on Form N-1A filed with the
Commission on or about March 17, 1997, which exhibit is
incorporated herein by reference.
2. By-laws of the Trust -- filed as an exhibit to Registrant's
Registration Statement on Form N-1A filed with the
Commission on or about March 17, 1997, which exhibit is
incorporated herein by reference.
3. Not Applicable.
4. Not Applicable.
5. (i) Investment Advisory Agreement, dated March 3, 1997,
between Clarke Lanzen Skalla Investment Firm, Inc. and
Registrant with regard to The Amerigo Fund -- filed as an
exhibit to Registrant's Registration Statement on Form N-1A
filed with the Commission on or about March 17, 1997, which
exhibit is incorporated herein by reference.
(ii) Investment Advisory Agreement, dated March 3, 1997,
between Clarke Lanzen Skalla Investment Firm, Inc. and
Registrant with regard to The Clermont Fund -- filed as an
exhibit to Registrant's Registration Statement on Form N-1A
filed with the Commission on or about March 17, 1997, which
exhibit is incorporated herein by reference.
6. Not Applicable.
7. Not Applicable.
<PAGE>
8. Custody Agreement between Registrant and Star Bank, National
Association -- filed as an exhibit to Registrant's
Registration Statement on Form N-1A filed with the
Commission on or about March 17, 1997, which exhibit is
incorporated herein by reference.
9. (i) Administration Agreement between the Trust and Mutual
Funds Service Co. -- filed as an exhibit to Registrant's
Registration Statement on Form N-1A filed with the
Commission on or about March 17, 1997, which exhibit is
incorporated herein by reference.
(ii) Accounting Services Agreement between the Trust and
Mutual Funds Service Co. -- filed as an exhibit to
Registrant's Registration Statement on Form N-1A filed with
the Commission on or about March 17, 1997, which exhibit is
incorporated herein by reference.
(iii) Administration Services Agreement between the Trust
and Mutual Funds Service Co. -- filed as an exhibit to
Registrant's Registration Statement on Form N-1A filed with
the Commission on or about March 17, 1997, which exhibit is
incorporated herein by reference.
10. Opinion and Consent of Counsel -- filed as an exhibit to
Registrant's Pre-Effective Amendment No. 1 on June 13, 1997,
which exhibit is incorporated herein by reference.
11. Independent Auditors' Consent is filed herewith.
12. Not Applicable.
13. Investment Representation Letter of Initial Shareholder --
filed as an exhibit to Registrant's Pre-Effective Amendment
No. 1 on June 13, 1997, which exhibit is incorporated herein
by reference.
14. Not Applicable.
0
15. Not Applicable.
16. Schedules for computation of performance quotations for
The Amerigo Fund and The Clermont Fund are filed herewith.
17. Financial Data Schedules for The Amerigo Fund and The
Clermont Fund are filed herewith.
18. Not Applicable.
19. Powers of Attorney of Trustees of Registrant -- filed as an
exhibit to Registrant's Registration Statement on Form N-1A
filed with the Commission on or about March 17, 1997, which
exhibit is incorporated herein by reference.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
<PAGE>
Item 26. NUMBER OF HOLDERS OF SECURITIES AT July 31, 1998.
Title of Number of
CLASS FUND RECORD HOLDERS
Shares of
Beneficial Interest The Amerigo Fund 365
Shares of
Beneficial Interest The Clermont Fund 174
Item 27. INDEMNIFICATION
Reference is made to Section 5.3 of the Declaration of Trust
filed herewith. As provided therein, the Trust is required
to indemnify its officers and trustees against claims and
liability arising in connection with the affairs of the
Trust, except liability arising from breach of trust, bad
faith, willful misfeasance, gross negligence or reckless
disregard of duties. The Trust is obligated to undertake the
defense of any action brought against any officer, trustee
or shareholder, and to pay the expenses thereof if he or she
acted in good faith and in a manner he reasonably believed
to in or not opposed to the best interest of the Trust, and
with respect to any criminal action had no reasonable cause
to believe his or her conduct was unlawful. Other conditions
are applicable to the right of indemnification as set forth
in the Declaration of Trust. In applying these provisions,
the Trust will comply with the provisions of Investment
Company Act.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Not Applicable.
Item 29. PRINCIPAL UNDERWRITERS.
Not Applicable.
Item 30. LOCATION OF ACCOUNTS AND RECORDS.
Registrant's Declaration of Trust, By-laws, and Minutes of
Trustees' and Shareholders' Meetings, and contracts and like
documents are in the physical possession of Mutual Funds
Service Co., the Registrant's fund accountant, administrator
and transfer agent, at 6000 Memorial Drive, Dublin, Ohio
43017 or Clarke Lanzen Skalla Investment Firm, Inc., 14747
California Street, Omaha, NE 68154-1979. Certain custodial
records are in the custody of Star Bank, N.A., each Fund's
custodian, at 425 Walnut Street, Cincinnati, Ohio 45202. All
other records are kept in the custody of Clarke Lanzen
Skalla Investment Firm, Inc., 14747 California Street,
Omaha, NE 68154-1979 and Mutual Funds Service Co., 6000
Memorial Drive, Dublin, OH 43017.
Item 31. MANAGEMENT SERVICES.
Not Applicable.
Item 32. UNDERTAKINGS.
(a) Not Applicable.
(b) Not Applicable.
(c) If the information call for by Item 5A of this
Registration Statement is contained in the latest
annual report to shareholders, Registrant
undertakes to furnish each person to whom a
prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders,
upon request and without charge.
(d) The Registrant undertakes to call a meeting of
shareholders for the purpose of voting upon the
question of removal of one or more trustees, if
requested to do so by the holders of at least 10%
of the Registrant's outstanding shares, and will
assist communications among shareholders as set
forth within Section 16(c) of the 1940 Act.
<PAGE>
- ------------------------------------------------------------------------------
SIGNATURES
- ------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that this Amendment to
its Registration Statement meets all of the requirements for effectiveness of
this Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Omaha, and the State of Nebraska on the 19th day of
August, 1998.
CLS ADVISORONE FUNDS
BY: /s/ Gary W. Lanzen
-----------------------
Gary W. Lanzen
Secretary/Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the date indicated.
SIGNATURE TITLE
/s/ W. Patrick Clarke Chairman, President and Trustee
- ---------------------
W. Patrick Clarke
/s/ Gary W. Lanzen Trustee
- ---------------------
Gary W. Lanzen
/s/ Randal D. Skalla Vice President and Trustee
- ---------------------
Randal D. Skalla
/s/ Todd P. Clarke Assistant Treasurer, Assistant Secretary
- --------------------- and Trustee
Todd P. Clarke
/s/ Susan R. Kineen
- --------------------- Principal Financial Officer and
Susan R. Kineen Principal Accounting Officer
/s/ H. Reese Hansen* Trustee
- ---------------------
H. Reese Hansen
/s/ L. Merill Bryan, Jr.* Trustee
- ------------------------
L. Merill Bryan, Jr.
/s/ Richard A. Zehnacker* Trustee
- ------------------------
Richard A. Zehnacker
*By: /s/ W. Patrick Clarke
---------------------
W. Patrick Clarke
Executed by W. Patrick Clarke on behalf
of those indicated pursuant to Powers of Attorney
INDEPENDENT AUDITORS' CONSENT
The Board of Trustees of
the CLS AdvisorOne Funds:
We consent to the use of our report included herein dated May 22, 1998 on the
financial statements of the CLS AdvisorOne Funds -- The Amerigo Fund and The
Clermont Fund -- for the period from July 14, 1997 through April 30, 1998 and to
the references to our firm under the headings "Financial Highlights" in the
prospectus and "Auditors" and "Financial Statements" in the Statement of
Additional Information.
KMPG Peat Marwick LLP
Columbus, Ohio
August 19, 1998
EXHIBIT 16
CLS ADVISORONE FUNDS
THE AMERIGO FUNDS
TOTAL RETURN COMPUTATION SCHEDULE
Method by which total return (ending redeemable value) is computed:
P(1 + T)nth power = ERV
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the one, five, or ten year periods (or fractional portion
thereof)
THE AMERIGO FUND 0.79 YEAR
- ---------------- ---------
Beginning Account Balance $1,000.00
Average Annual Total Return 14.11%
Ending Redeemable Value $1,141.09
Formula Computation:
0.79 year: $1,000(1 - .1411) = $1,141.09
The total return quotation shown above was computed for the period from July 14,
1997 through April 30, 1998.
<PAGE>
EXHIBIT 16
CLS ADVISORONE FUNDS
THE CLERMONT FUND
TOTAL RETURN COMPUTATION SCHEDULE
Method by which total return (ending redeemable value) is computed:
P(1 + T)nth power = ERV
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the one, five, or ten year periods (or fractional portion
thereof)
THE CLERMONT FUND 0.79 YEAR
- ----------------- ---------
Beginning Account Balance $1,000.00
Average Annual Total Return 9.84%
Ending Redeemable Value $1,098.35
Formula Computation:
0.79 year: $1,000(1 - .0984) = $1,098.35
The total return quotation shown above was computed for the period from July 14,
1997 through April 30, 1998.
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