As filed with the Securities and Exchange Commission on January 25, 2000
Securities Act Registration No. 333-29687
Investment Company Act Registration No. 811-8267
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No.___ [ ]
Post-Effective Amendment No. 3 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 5 [X]
KOPP FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
7701 France Avenue South
Suite 500 55435
Edina, Minnesota (Zip Code)
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (612) 841-0400
Kathleen S. Tillotson
Kopp Funds, Inc.
7701 France Avenue South, Suite 500
Edina, Minnesota 55435
(Name and Address of Agent for Service)
Copies to:
Carol A. Gehl
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, Wisconsin 53202
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to Rule 485(b).
[X] on January 25, 2000 pursuant to Rule 485(b).
[ ] 60 days after filing pursuant to Rule 485(a)(1).
[ ] on (date) pursuant to Rule 485(a)(1).
[ ] 75 days after filing pursuant to Rule 485(a)(2).
[ ] on (date) pursuant to Rule 485(a)(2).
<PAGE>
PROSPECTUS
25 January 2000
[Logo]
Kopp Funds
Kopp Emerging Growth Fund
7701 France Avenue South, Suite 500
Edina, Minnesota 55435
Telephone: 1-888-533-KOPP
Facsimile: 1-612-841-0411
Website: www.koppfunds.com
The investment objective of the Kopp Emerging
Growth Fund ("Fund") is long-term capital appreciation.
The Fund seeks to achieve its investment objective by
investing primarily in common stocks of companies that
Kopp Investment Advisors, Inc. ("Advisor") believes
have the potential for superior growth.
The Fund is a long-term investment, intended to
complement your other investments. Under federal
securities laws, the Fund is "not diversified." As a
result, it may be more vulnerable than a "diversified"
fund to fluctuations in the value of the companies in
the Fund's portfolio.
This Prospectus contains information you should
consider before you invest in the Fund. Please read it
carefully and keep it for future reference.
____________________
Neither the Securities and Exchange Commission ("SEC") nor any state
securities commission has approved or disapproved these securities
or determined if this Prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
___________________
* Not FDIC-Insured
* No Bank Guarantee
* May Lose Value
<PAGE>
TABLE OF CONTENTS
HIGHLIGHTS 3
FEES AND EXPENSES OF THE FUND 5
INVESTMENT OBJECTIVE 6
INVESTMENT STRATEGY 6
IMPLEMENTATION OF INVESTMENT OBJECTIVE 7
PERFORMANCE OF INVESTMENT ADVISOR 8
FINANCIAL HIGHLIGHTS OF THE FUND 11
FUND MANAGEMENT AND DISTRIBUTION 12
YOUR ACCOUNT 13
VALUATION OF FUND SHARES 19
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS, AND TAX TREATMENT 20
ADDITIONAL INFORMATION 21
You should rely only on the information contained
in this document and the Fund's Statement of Additional
Information ("SAI"). We have not authorized anyone to
provide you with information that is different. This
Prospectus is not an offer to sell securities in any
state or jurisdiction in which an offering may not
lawfully be made.
<PAGE>
HIGHLIGHTS
What is the objective of the Fund?
The Fund's objective is long-term capital
appreciation. For more information, see "Investment
Objective."
What is the Fund's investment strategy?
The Fund's investment strategy is to invest
primarily in common stocks of companies that Advisor
believes have the potential for revenue and earnings
growth superior to that of companies with similar
market or business characteristics. These companies,
which may be characterized as emerging and re-emerging
growth companies, will typically have small-to-medium
market capitalizations. An emerging growth company is
a newer business organized to address an industry
niche, which may have unstable cash reserves, but the
potential to experience accelerating returns. A re-
emerging growth company is a more established company
experiencing a potential resurgence in sales and
earnings due to new industry leadership, restructuring,
or both.
Advisor uses a "buy discipline" when making
purchase decisions for the Fund. This "buy discipline"
involves three key components. First, Advisor gathers
research on potential investment candidates. Then
Advisor reviews certain fundamental attributes that it
believes a "buy" candidate should possess. Finally,
Advisor values companies by considering price-to-sales
ratios and price-to-earnings ratios within a peer
group. From this process, securities are selected and
then purchased when their prices are within a pre-
determined range.
Under normal circumstances, the Fund will be fully
invested in common stocks, except that a small portion
of the Fund's assets may be held in short-term money
market securities and cash. Because companies
considered by Advisor to be "emerging growth" are often
in the same or related market sectors, the Fund may be
heavily invested in a single sector. In addition,
because the Fund is not subject to the diversification
rules of the Investment Company Act of 1940, as amended
("1940 Act"), the Fund may take large positions in
individual companies. For more information, see
"Investment Strategy" and "Implementation of Investment
Objective."
What are the principal risks of investing in the Fund?
Because the Fund will invest primarily in small-to-
medium capitalization stocks, which are more volatile
than investments in large companies, you should expect
that the value of the Fund's shares will be more
volatile than the shares of a fund that invests in
large capitalization stocks. Thus, especially in the
short term, the share price will fluctuate and may, at
redemption, be worth more, or less, than the initial
purchase price - accordingly, you may lose money on
your investment. Stock values also can decline for an
extended period of time. In addition, because the Fund
is not subject to the diversification rules of the 1940
Act, a larger percentage of the Fund's assets may be
invested in fewer companies than is typical of other
mutual funds. This concentration may increase
volatility. Because the Fund intends to qualify as a
regulated investment company under federal income tax
laws, it will, however, be subject to the
diversification requirements of the Internal Revenue
Code of 1986, as amended ("Code").
Other risks associated with investing in the Fund
include:
* Liquidity Risk: Certain securities may be diffucult
or impossible to sell at the time and price
that the Fund seeks.
* Market Risk: The market value of a security will move
up and down, sometimes rapidly and
unpredictably due to sector rotation or other
economic or market trends.
* Opportunity Risk: An investment opportunity may be missed because
the assets necessary to take advantage of it are
tied up in other investments.
* Management Risk: Advisor may simply do a poor job
of selecting stocks for the Fund.
* Concentration Risk: Performance of one, two, or a few stocks may
have a substantial effect on the overall
performance of the Fund, both up and down.
For more information, see "Implementation of Investment Objective."
<PAGE>
Is an investment in the Fund appropriate for me?
The Fund is suitable for long-term investors only.
It is not a short-term investment vehicle. An
investment in the Fund may be appropriate if you:
* seek long-term capital appreciation;
* seek a mutual fund for the aggressive equity
portion of your portfolio;
* have no immediate financial requirements for this
investment; and
* are willing to accept a high degree of volatility.
The Fund is designed for investors who have the
financial ability to undertake greater risk in exchange
for the potential to realize greater financial gains in
the future.
Performance History
The return information provided in the bar chart
and tables below illustrate how the Fund's performance
can vary, which is one indication of the risks of
investing in the Fund. The information shows changes
in the Fund's performance from year to year and shows
how the Fund's average annual returns for a two-year
period compare with those of a broad-based measure of
market performance over the life of the Fund. Please
keep in mind that past performance is not necessarily
indicative of future returns.
Class A Shares Class A Shares
Calendar Year Total Returns Best and Worst Quarterly Performance
1/1/98 to 12/31/99
0.25% 148.20% Best Quarter Return Worst Quarter Return
1998 1999 68.04% (23.95)%
(4th quarter '99) (3rd quarter '98)
Average Annual Total Returns as of December 31, 1999*
Fund One Year Since Inception
Class A (load adjusted) 139.57% 33.86% (10/1/97)
Class I 149.14% 36.58% (10/1/97)
Russell 2000** 21.26% 6.08% (10/1/97)
_______________
* Because the Class C shares do not have annual returns
for at least one calendar year, return information for
the Class C shares is not included.
** A stock market index comprising the 2000 smallest
U.S. domiciled publicly traded common stocks that are
included in the Russell 3000 index.
The Fund's 1999 returns were primarily achieved as
a result of its investment in technology companies
during a period favorable for these stocks. Investors
should not expect that such returns can be consistently
achieved.
Please note that the returns presented in the
chart entitled "Class A Shares Calendar Year Total
Returns" and in the table entitled "Class A Shares Best
and Worst Quarterly Performance" do not reflect the
3.50% maximum sales charge imposed on the Fund's Class
A shares. If this sales charge were reflected, the
returns would be less than those shown above. The
returns presented in the table entitled "Average Annual
Total Returns as of December 31, 1999" do, however,
reflect this sales charge.
<PAGE>
FEES AND EXPENSES OF THE FUND
The following table describes the fees and
expenses that you may pay if you buy and hold shares of
the Fund.
Class A Class C Class I
Shareholder Fees (fees paid directly
from your investment)
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price) 3.50%(1) None None
Maximum deferred sales charge (load) imposed on
redemptions (as a percentage of amount redeemed) 1.00%(2) 1.00%(3) None
Redemption fee (as a percentage of amount
redeemed)(4) None None 1.00%(5)
Annual Fund Operating Expenses (expenses that are
deducted from Fund assets) (6)
Management fee 1.00% 1.00% 1.00%
Distribution and service (12b-1) fees(7) 0.35% 1.00% None
Other expenses 0.35% 0.31% 0.35%
----- ----- -----
Total Annual Operating Expenses(8) 1.70% 2.31% 1.35%
_______________ ===== ===== =====
(1)This sales charge is the maximum applicable to
purchases of Class A shares. You may not have to
pay this sales charge because waivers and reduced
sales charges are available. See "Your
Account-Class A Shares."
(2)A contingent deferred sales charge ("CDSC") of 1%
may be imposed on redemptions of certain Class A
shares which were purchased without a sales charge
and redeemed within 24 months of purchase. The
CDSC is based on the lesser of the then current
value or the original purchase price of the shares
being redeemed and is not imposed on shares
acquired by reinvesting dividends or capital gains.
See "Your Account-Class A Shares."
(3)A CDSC of 1% may be imposed on redemptions of
certain Class C shares which are redeemed within 12
months of purchase. The CDSC is based on the
lesser of the then current value or the original
purchase price of the shares being redeemed and is
not imposed on shares acquired by reinvesting
dividends or capital gains. See "Your
Account-Class C Shares."
(4)If you redeem shares by wire, you will be charged a
$12 service fee. See "Your Account-Redeeming or
Selling Shares."
(5)A redemption fee of 1% of the then current value of
the shares redeemed may be imposed on redemptions
of Class I shares made within 24 months of
purchase. Redemption fees are paid directly into
Fund assets to help cover the costs that short-term
trading generates. See "Your Account-Class I Shares."
(6)Fund operating expenses are deducted from Fund
assets before computing the daily share price or
making distributions. As a result, they do not
appear on your account statement, but instead
reduce the amount of total return you receive.
(7)The distribution and service fees applicable to
Class A shares is currently set at 0.35%; however,
the Rule 12b-1 distribution and shareholder
servicing plan ("Plan") allows the Fund to pay up
to 0.50% in these fees. The distribution and
service fees applicable to Class C shares under the
Plan is 1.00%, which is the amount currently being
paid by the Fund. Further, while the Fund
currently has no intention of paying any
distribution or service fees for the Class I
shares, the Plan allows the Fund to pay up to 0.50%
in these fees. For information relating to the
Plan, see "Your Account-Distribution and
Shareholder Servicing Plan."
(8)For the fiscal year ended September 30, 1999,
Advisor voluntarily waived its management fee to
the extent necessary to ensure that the total
annual operating expenses for the (i) Class A
shares did not exceed 1.50%, (ii) Class C shares
did not exceed 2.15%, and (iii) Class I shares did
not exceed 1.15%. "Total Annual Operating
Expenses" are presented before such waivers. If
such waivers were included in the calculation of
total expenses for the fiscal year ended September
30, 1999, "Management Fee" and "Total Annual
Operating Expenses" for the Class A shares would be
0.80% and 1.50%, respectively, and 0.84% and 2.15%,
respectively, for the Class C shares, and 0.80% and
1.15%, respectively, for the Class I shares.
Beginning January 31, 2000, Advisor has voluntarily
agreed to waive its management fee and/or reimburse
the Fund's operating expenses to the extent
necessary to ensure that the total annual operating
expenses for the (i) Class A shares do not exceed
1.75%, (ii) Class C shares do not exceed 2.40%, and
(iii) Class I shares do not exceed 1.40%. For
additional information, see "Fund Management and
Distribution-Management."
<PAGE>
Example
The following Example is intended to help you
compare the cost of investing in the Fund with the cost
of investing in other mutual funds. The Example
assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your
shares at the end of those periods. The Example also
assumes that you have a 5% return each year and that
the total annual operating expenses remain the same
each year. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be
as follows:
1 Year 3 Years 5 Years 10 Years
Class A(1) 517 867 1,241 2,288
Class A(2) 276 536 923 2,088
Class I(3) 241 427 739 1,623
Class C(4) 337 721 1,235 2,645
You would pay the following expenses if you did
not redeem your shares:
1 Year 3 Years 5 Years 10 Years
Class A(1) 517 867 1,241 2,288
Class I 137 427 739 1,623
Class C 234 721 1,235 2,645
__________
(1) Only the 3.50% maximum sales charge
imposed on purchases of Class A shares is
reflected in the Example.
(2) Only the 1% CDSC imposed on certain
redemptions of Class A shares is reflected in
the Example.
(3) The 1% redemption fee imposed on certain
redemptions of Class I shares is reflected in
the Example.
(4) The 1% CDSC imposed on certain redemptions
of Class C shares is reflected in the Example.
INVESTMENT OBJECTIVE
The Fund's investment objective is to seek long-
term capital appreciation. Under normal market
conditions, the Fund will attempt to achieve this
objective by investing at least 65% of its assets in
common stocks of emerging and re-emerging growth
companies. The Fund may also hold cash and money
market instruments to provide the Fund with liquidity
and flexibility.
INVESTMENT STRATEGY
In managing the Fund's portfolio, Advisor seeks
investments in emerging growth companies that have a
small-to-medium market capitalization. A small-cap
company would typically have a market capitalization of
up to $1 billion, while a medium-cap company would have
a market capitalization of up to $3 billion. Advisor's
general strategy is to be fully invested, holding
securities for their long-term growth potential over a
three- to five-year time frame. Companies considered
by Advisor to be "emerging growth" are often in the
same or related market sectors. Thus, the Fund may be
heavily invested in a single sector. However, one
sector, like technology, may include numerous
subsectors or industries, like networking, data
storage, software applications, semiconductors, voice-
processing, or wireless. The Fund may be concentrated
in one sector, while being diversified among several
industries. In addition, the Fund may take large
positions in individual companies. To the extent the
Fund concentrates its investments in this way, it will
be more susceptible to adverse economic, political,
regulatory, or market developments affecting the
sector, industry, or individual company in which the
Fund has invested.
<PAGE>
When making purchase decisions for the Fund,
Advisor uses a "buy discipline" that involves three key
components:
* Research
Advisor gathers research on potential
investment candidates from a wide variety of
sources. To further qualify prospective
investments, it analyzes information from
corporate contacts, industry conferences, and
visits with company management.
* Fundamentals
Once the research phase is complete, Advisor
reviews certain fundamental attributes that it
believes a "buy" candidate should possess,
including (i) management excellence, (ii)
leading industry position or product, (iii)
projected annual revenue or sales growth of 15%
or more and projected earnings growth of 20% or
more, (iv) significant investment in research
and development, and (v) strong financial
position including a low debt-to-total-capital
ratio.
* Valuation
Finally, Advisor values companies by
considering price-to-sales ratios and price-to-
earnings ratios within a peer group. For
companies with earnings, the price-to-earnings
ratio relative to a company's forecasted growth
rate is the most important measure in Advisor's
quantitative analytical process.
Advisor then constructs a list of securities for
the Fund and purchases them when their prices are
within a pre-determined range. Advisor continually
monitors companies for variations from expectations.
Advisor makes sell decisions for the Fund based on
a number of factors, including significant
deterioration in a company's underlying fundamentals,
strong price appreciation suggesting an overweighted
position or overvalued security, change in theme or
sector orientation, or better relative value in other
securities.
IMPLEMENTATION OF INVESTMENT OBJECTIVE
In implementing its investment objective, the Fund
may invest in the following securities and use the
following investment techniques. Some of these
securities and investment techniques involve special
risks, which are described below, elsewhere in this
Prospectus, and in the Fund's SAI.
Common Stocks and Other Equity Securities
The Fund will invest in common stocks and other
equity securities. Other equity securities may include
depositary receipts or shares and warrants and other
securities convertible or exchangeable into common
stock. Common stocks and other equity securities
generally increase or decrease in value based on the
earnings of a company and on general industry and
market conditions. A fund that invests a significant
amount of its assets in common stocks and other equity
securities is likely to have greater fluctuations in
share price than a fund that invests a significant
portion of its assets in fixed-income securities.
Small Capitalization Companies
The Fund will invest a substantial portion of its
assets in the common stocks of small companies. While
companies with a smaller market capitalization have the
potential for significant capital appreciation, the
equity securities of these companies also involve
greater risks than those of larger, more established
companies. Small-cap companies may lack the management
experience or depth, financial resources, product
diversification, and competitive strength of large-cap
companies. The market for small-cap securities is
generally less liquid and subject to greater price
volatility than the market for large-cap securities.
<PAGE>
Non-Diversification and Concentration
As a "non-diversified" fund, the Fund may invest
in a more limited number of companies than
"diversified" mutual funds. However, for income tax
purposes, the Fund (i) may not invest more than 25% of
its assets in the securities of any one company or in
the securities of any two or more companies controlled
by the Fund which may be deemed to be engaged in the
same, similar, or related trades or businesses and (ii)
with respect to 50% of its assets, may not invest more
than 5% of its assets in the securities of any one
company and may not own more than 10% of the
outstanding voting securities of a single company.
Thus, as a "non-diversified" fund, the Fund may invest
up to 50% of its assets in the securities of as few as
two companies, up to 25% each, so long as the Fund does
not control the two companies and the two companies are
engaged in different businesses. The Fund may also
invest up to 50% of its assets in the securities of as
few as ten companies, up to 5% each, so long as the
Fund does not own in excess of 10% of any company's
outstanding voting stock. Non-diversification involves
an increased risk of loss to the Fund when the market
value of a security declines.
The Fund intends to invest more than 25% of its
assets in securities of companies in one or more market
sectors, such as technology or health-care services. A
market sector may be made up of companies in a number
of different industries. The Fund will only
concentrate its investments in a particular market
sector if Advisor believes that the potential
investment return justifies the additional risk
associated with concentration in that sector. Through
price appreciation, the Fund may also invest more than
5% or, in some cases, 10% of its assets in the
securities of a single company. Advisor will closely
monitor these positions and sell or trim them as
appropriate. The performance of one, two, or a few
stocks may have a substantial effect on the Fund's
performance, both up and down.
Temporary Strategies
Prior to investing the proceeds from sales of Fund
shares, to meet ordinary daily cash needs, and to
retain the flexibility to respond promptly to changes
in market and economic conditions, the Fund may hold
cash and/or invest all or a portion of its assets in
money market instruments, which are short-term fixed-
income securities issued by private and governmental
institutions. It is impossible to predict when or for
how long Advisor may employ these strategies for the
Fund. To the extent the Fund engages in any of these
temporary strategies, the Fund's ability to achieve its
investment objective will be diminished.
PERFORMANCE OF INVESTMENT ADVISOR
The following tables and charts show Advisor's
historical composite performance data for all actual,
fee paying, discretionary private accounts managed by
Advisor that have investment objectives, policies,
strategies, and risks substantially similar to those of
the Fund. Since inception of Advisor on June 30, 1990
through December 1999, these accounts have shown an
annual return of approximately 36%. The private
accounts that are included in Advisor's composite are
not subject to the same types of expenses to which the
Fund is subject nor to the specific tax restrictions
and investment limitations imposed on the Fund by the
Code and the 1940 Act. Consequently, the performance
results for Advisor's composite could have been
adversely affected if the private accounts included in
the composite had been regulated as investment
companies under the federal tax and securities laws.
Advisor's performance information has been
calculated in accordance with recommended standards of
the Association for Investment Management and Research
("AIMR"), retroactively applied to all time periods.
All returns presented were calculated on a total return
basis and include all dividends and interest, if any,
accrued income, if any, and realized and unrealized
gains and losses. All returns reflect the deduction of
investment advisory fees, brokerage commissions, and
execution costs paid by Advisor's private accounts
without provision for federal or state income taxes.
Custodial fees, if any, were not included in the
calculation. If custodial fees had been included,
Advisor's performance would have been lower. Also
excluded from the returns are expenses and fees,
including the advisory fee and any sales or redemption
charges, that an investor in the Fund will bear, since
the performance data presented does not represent the
performance of the Fund. If such expenses and fees
were included, Advisor's performance would have been
lower. Cash and equivalents are included in
performance returns. Total return is calculated
monthly in accordance with the "time-weighted" rate of
return method provided for by the AIMR standards,
accounted for on a trade-date and accrual basis. No
leveraged positions were utilized. Principal additions
and withdrawals are weighted in computing the monthly
returns based on the timing of these transactions. The
monthly returns are geometrically linked to derive
annual total returns.
<PAGE>
Also included in the first table below is an
annual measure of Advisor's composite dispersion. The
measure of composite dispersion illustrates the
internal risk associated with accounts included in the
composite.
The following data is provided to illustrate the
past performance of Advisor in managing accounts which
are substantially similar to the Fund as measured
against specified market indices and does not represent
the performance of the Fund. You should not consider
this performance data as an indication of the future
performance of the Fund or Advisor.
Private Account Performance History
Year 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Annual Annual
Return Dispersion
1990 * * -26.89% 28.72% * *
1991 32.80% 4.35% 10.68% 31.51% 101.42% 47.3%
1992 -10.76% -4.18% 17.49% 33.80% 34.43% 27.5%
1993 -2.37% 30.38% 21.19% 2.74% 58.49% 22.9%
1994 -10.53% -6.70% 22.14% 23.52% 25.95% 12.6%
1995 5.32% 17.00% 13.96% -7.16% 30.37% 10.4%
1996 -0.37% 9.54% 1.12% 0.20% 10.58% 9.2%
1997 -16.48% 26.12% 21.04% -21.58% -0.02% 7.8%
1998 5.29% -8.32% -26.40% 42.82% 1.47% 8.2%
1999 8.32% 27.30% 7.26% 70.70% 152.47% 35.6%
1 Year Rate of Return (12/31/98 - 12/31/99) 152.47%
3 Year Rate of Return - Annualized (12/31/96 - 12/31/99) 36.82%
5 Year Rate of Return - Annualized (12/31/94 - 12/31/99) 29.85%
Since Inception - Annualized (6/30/90 - 12/31/99) 36.19%
* Not applicable
Growth of a Unit Value
June 30, 1990 through December 31, 1999
The graphic on page 9 of the Prospectus contains a
chart which plots the growth of $10,000 invested on
June 30, 1990. The graphic compares Advisor's
composite performance of this investment to the Russell
2000. The plot points for the graphic are as follows
(numbers are in thousands):
Time Period Advisor Russell 2000
06-30-90 $10.00 $10.00
06-30-90 to 09-30-90 7.31 7.49
09-30-90 to 12-31-90 9.41 7.82
12-31-90 to 03-31-91 12.50 10.11
03-31-91 to 06-30-91 13.04 9.90
06-30-91 to 09-30-91 14.43 10.65
09-30-91 to 12-31-91 18.98 11.23
12-31-91 to 03-31-92 16.94 12.05
03-31-92 to 06-30-90 16.23 11.15
06-30-92 to 09-30-92 19.07 11.41
09-30-92 to 12-31-92 25.52 13.07
<PAGE>
Time Period Advisor Russell 2000
12-31-92 to 03-31-93 $24.91 $13.55
03-31-93 to 06-30-93 32.48 13.80
06-30-93 to 09-30-93 39.36 14.96
09-30-93 to 12-31-93 40.44 15.29
12-31-93 to 03-31-94 36.18 14.85
03-31-94 to 06-30-94 33.76 14.21
06-30-94 to 09-30-94 41.23 15.14
09-30-94 to 12-31-94 50.93 14.80
12-31-94 to 03-31-95 53.64 15.42
03-31-95 to 06-30-95 62.76 16.77
06-30-95 to 09-30-95 71.52 18.35
09-30-95 to 12-31-95 66.40 18.68
12-31-95 to 03-31-96 66.15 19.56
03-31-96 to 06-30-96 72.46 20.50
06-30-96 to 09-30-96 73.28 20.48
09-30-96 to 12-31-96 73.42 21.44
12-31-96 to 03-31-97 61.32 20.26
03-31-97 to 06-30-97 77.34 23.44
06-30-97 to 09-30-97 93.61 26.83
09-30-97 to 12-31-97 73.41 25.84
12-31-97 to 03-31-98 77.30 28.42
03-31-98 to 06-30-98 70.87 27.05
06-30-98 to 09-30-98 52.16 21.50
09-30-98 to 12-31-98 74.49 24.95
12-31-98 to 03-31-99 80.69 23.52
03-31-99 to 06-30-99 102.72 27.06
06-30-99 to 09-30-99 110.17 25.27
09-30-99 to 12-31-99 188.06 29.87
Average Annualized Return in Percent
Period Ending
December 31, 1999 Advisor Composite Performance Russell 2000
1 Year 152.47% 19.62%
2 Years 60.05% 7.47%
3 Years 36.82% 11.66%
4 Years 29.73% 12.42%
5 Years 29.85% 15.05%
6 Years 29.19% 11.79%
7 years 33.02% 12.52%
8 years 33.20% 13.00%
9 years 39.48% 16.05%
Since Inception* 36.19% 12.20%
______________
*June 30, 1990.
<PAGE>
Annualized Rate of Return
June 30, 1990 through December 31, 1999
The graphic on page 11 of the Prospectus contains
a bar chart which shows the annualized rate of return
from June 30, 1990 through December 31, 1999 for the
Advisor composite (36.19%) versus the NASDAQ OTC Index
(25.73%), the Russell 2000 (12.20%), and the S&P 500
Index (18.86%).
FINANCIAL HIGHLIGHTS OF THE FUND
The financial highlights table is intended to help
you understand the Fund's financial performance for the
fiscal years ended September 30, 1999 and 1998. The
total returns presented in the table represent the rate
that an investor would have earned or lost on an
investment in the Fund for the stated periods (assuming
reinvestment of all dividends and distributions and
excluding sales charges). This information has been
audited by KPMG LLP, whose report, along with the
Fund's financial statements, are included in the Fund's
annual report, which is available upon request.
<TABLE>
Year Ended Year Ended
September 30, 1999 September 30, 1998
------------------------------------------------
Class A Class I Class C(1) Class A Class I
<S> <C> <C> <C> <C>
(For a share outstanding through
the fiscal year)
Net asset value, beginning of period $ 5.81 $ 5.84 $ 8.09 $10.00 $10.00
Income from investment operations:
Net investment loss(2) (0.14) (0.09) (0.07) (0.09) (0.06)
Net realized and unrealized
gains (losses) on investments 6.22 6.25 3.83 (4.10) (4.10)
------ ------ ------ ------- -------
Total from investment operations 6.08 6.16 3.76 (4.19) (4.16)
------ ------ ------ ------- -------
Net asset value, end of year $11.89 $12.00 $11.85 $ 5.81 $ 5.84
====== ====== ====== ======== =======
Total return 104.65%(3) 105.48% 46.48%(4) (41.90)%(3) (41.60)%
(Supplemental data and ratios)
Net assets, end of period (000's) $404,630 $64,653 $1,891 $216,533 $27,577
Ratio of expenses to average
net assets 1.50%(5) 1.15%(5) 2.15%(6),(7) 1.50%(5) 1.15%(5)
Ratio of net investment loss
to average net assets (1.44%)(8) (1.09%)(8) (2.09%)(9) (1.30%)(8) (0.95%)(8)
Portfolio turnover rate(10) 41.3% 41.3% 41.3% 19.7% 19.7%
________________________
</TABLE>
(1) The Class C shares were first offered to investors on February 19, 1999.
(2) Net investment loss per share is calculated using the ending balance
of undistributed net investment loss prior to
consideration of adjustments for permanent book and
tax differences.
(3) Total return excludes sales charges.
(4) Not annualized.
(5) Absent voluntary fee waivers for the years ended September 30, 1999
and 1998, respectively, the ratio of expenses to
average net assets would have been 1.79% and 1.96%
for Class A and 1.40% and 1.65% for Class I.
Included in these fee waivers, for the years ended
September 30, 1999 and 1998, respectively were 12b-1
fee waivers of 0.09% and 0.15% for Class A and 0.05%
and 0.19% for Class I.
(6) Absent voluntary fee waivers for the period February 19, 1999 through
September 30, 1999, the ratio of expenses to average
net assets would have been 2.31% for Class C. No
12b-1 fee waivers are included in these fee waivers
since Class C had already incurred its maximum 12b-1
and shareholder servicing fees.
(7) Annualized.
(8) Absent voluntary fee waivers for the years ended September 30, 1999
and 1998, respectively, the ratio of net investment
(loss) to average net assets would have been (1.73%)
and (1.76%) for Class A and (1.34%) and (1.45%) for
Class I.
(9) Absent voluntary fee waivers for the period February 19, 1999 through
September 30, 1999, the ratio of net investment
(loss) to average net assets would have been (2.25%)
for Class C.
(10) Calculated on the basis of the Fund as a whole without distinguishing
between the classes of shares issued.
<PAGE>
FUND MANAGEMENT AND DISTRIBUTION
Management
The Fund has entered into an Investment Advisory
Agreement with Advisor under which Advisor manages the
Fund's investments and business affairs, subject to the
supervision of the Fund's Board of Directors.
Advisor. Advisor was organized in March 1990 and
serves as investment advisor to individual and
institutional clients. Under the Investment Advisory
Agreement, the Fund pays Advisor an annual management
fee of 1.00% of the Fund's average daily net assets
attributable to each class of shares. The advisory fee
is accrued daily and paid monthly. For the fiscal year
ended September 30, 1999, Advisor voluntarily agreed to
waive its management fee to the extent necessary to
ensure that (i) the total annual operating expenses for
the Class A shares did not exceed 1.50% of average
daily net assets, (ii) the total annual operating
expenses for the Class I shares did not exceed 1.15% of
average daily net assets, and (iii) the total annual
operating expenses for the Class C shares did not
exceed 2.15% of average daily net assets. As a result
of such waiver, the annual management fee paid by the
Fund to Advisor for the fiscal year ended September 30,
1999 was 0.80% of the Fund's average daily net assets.
Advisor may from time to time voluntarily (but is not
required to) waive all or a portion of its fee and/or
reimburse all or a portion of class operating expenses
(which waiver and/or reimbursement would be effected on
a monthly basis). Beginning January 31, 2000, Advisor
has voluntarily agreed to waive its management fee
and/or reimburse the Fund's operating expenses to the
extent necessary to ensure that the Fund's total annual
operating expenses for the (i) Class A shares do not
exceed 1.75% of average daily net assets, (ii) Class C
shares do not exceed 2.40% of average daily net assets,
and (iii) Class I shares do not exceed 1.40% of average
daily net assets. Any waivers or reimbursements will
have the effect of lowering the overall expense ratio
for the applicable class and increasing its overall
return to investors at the time any such amounts are
waived and/or reimbursed. Any such waiver or
reimbursement is subject to later adjustment during the
term of the Investment Advisory Agreement to allow
Advisor to recoup amounts waived or reimbursed to the
extent actual fees and expenses for a specific month
are less than the expense limitation caps. As of
September 30, 1999, there was $733,440 of unreimbursed
distribution and shareholder servicing fees accrued.
Under the Investment Advisory Agreement, not only
is Advisor responsible for management of the Fund's
assets, but also for portfolio transactions and
brokerage.
Investment Committee. Advisor's Portfolio
Management Committee is primarily responsible for the
day-to-day management of the Fund's assets. The
Portfolio Management Committee is headed by LeRoy C.
Kopp, the President and Chief Investment Officer of
Advisor. The Portfolio Management Committee is
assisted in its efforts by a team of research analysts
and associates. The Portfolio Management Committee
makes all investment decisions for the Fund by majority
vote.
Custodian, Transfer Agent, and Administrator
Firstar Bank, N.A. acts as custodian of the Fund's
assets. Firstar Mutual Fund Services, L.L.C. serves as
transfer agent for the Fund ("Transfer Agent") and as
the Fund's administrator. Firstar Bank, N.A. and
Firstar Mutual Fund Services, L.L.C. are affiliated
entities and are collectively referred to in this
Prospectus as "Firstar." Firstar serves as custodian,
transfer agent, administrator, or some combination
thereof, to over 600 mutual funds, representing
approximately $87 billion in total assets.
Distributor
Centennial Lakes Capital, Inc., a registered
broker-dealer and member of the National Association of
Securities Dealers, Inc. ("NASD"), acts as distributor
of the Fund's shares ("Distributor"). As compensation
for its services, the Distributor may retain all or a
portion of (i) the initial sales charge from purchases
of Class A shares, (ii) the CDSC from redemptions of
Class A and Class C shares, if applicable, and (iii)
the distribution and service fees payable with respect
to Class A and Class C shares.
<PAGE>
From time to time, the Distributor may implement
programs that offer additional compensation in
connection with sales of Class A and Class C shares.
In some instances, this compensation may be made
available only to certain qualifying brokers whose
representatives have sold or are expected to sell
significant amounts of shares. All of such payments
will be made by the Distributor out of its own assets.
These programs will not change the price you will pay
for shares or the amount that the Fund will receive
from such a sale. No such programs or additional
compensation will be offered to the extent that they
are prohibited by the laws of any state or any self-
regulatory agency with jurisdiction over the
Distributor, such as the NASD.
YOUR ACCOUNT
Choosing a Class
The Fund offers three classes of shares: Class A,
Class C and Class I. Class A and Class C shares are
designed for "retail" investors, with a minimum initial
investment of $5,000 ($2,000 for retirement accounts).
Class I shares are designed for "institutional"
investors, with a minimum initial investment of $5
million. Each class has its own cost structure.
Class A Class C Class I
* Front-end sales charge * No front-end * No front-end
with break points sales charge. sales charge.
and certain exceptions.
* Contingent * Contingent deferred * Redemption fee payable
deferred sales sales charge imposed on payable on certain
charge imposed on certain redemptions. redemptions.
certain redemptions.
* Current distribution * Current distribution * No current
and service fees and service fees distribution
equal to 0.35% of equal to 1.00% of or service fees.
average net assets. average net assets.
Class A Shares
Class A shares are offered and sold on a continual
basis at the next offering price ("Offering Price"),
which is the sum of the net asset value per share
(computed after the purchase order and funds are
received by the Transfer Agent) and the sales charge
indicated below:
Total Sales Charge
As a As a
Percentage Percentage
of Offering of Your
Your Investment Price Investment
Up to $99,999 3.50% 3.63%
$100,000 - $249,999 3.00% 3.09%
$250,000 - $499,999 2.00% 2.04%
$500,000 - $999,999 1.00% 1.01%
$1,000,000 - $4,999,999 None None
No sales charge is imposed on the reinvestment of
dividends or capital gains. For information on how to
reduce the sales charge or to determine whether you
qualify to purchase shares at net asset value, see
"-Class A Front-End Sales Charge Waivers and
Reductions," below. Class A shares are also currently
subject to distribution and service fees in an
aggregate amount of 0.35% of the average daily net
assets attributable to such shares, although the Plan,
which is described in more detail under "-Distribution
and Shareholder Servicing Plan," permits the payment of
up to 0.50% in such fees.
Investments in Class A shares above $1 million are
not assessed an initial sales charge. However, you may
be charged a 1% CDSC on shares redeemed within 24
months of purchase. The imposition of the CDSC
<PAGE>
may be waived by the Distributor. See "-Class A and Class C
CDSC Waivers," below. For purposes of the CDSC, all
purchases made during a calendar month are counted as
having been made on the last day of that month. The
CDSC is based on the lesser of the then current value
or the original Offering Price of the shares being
redeemed, and is not imposed on shares acquired through
the reinvestment of dividends or capital gains. To
avoid the imposition of the CDSC, the Fund will first
redeem any shares held in your account that are not
subject to the CDSC and then redeem shares in the order
in which they were purchased.
Class C Shares
Class C shares are offered and sold on a continual
basis at their net asset value (computed after the
purchase order and funds are received by the Transfer
Agent) without any initial sales charge. However, you
may be charged a 1% CDSC on shares redeemed within 12
months of purchase. The imposition of the CDSC may be
waived by the Distributor. See "-Class A and Class C
CDSC Waivers," below. For purposes of the CDSC, all
purchases made during a calendar month are counted as
having been made on the last day of that month. The
CDSC is based on the lesser of the then current value
or the original purchase price of the shares being
redeemed and is not imposed on shares acquired through
the reinvestment of dividends or capital gains. To
avoid the imposition of the CDSC, the Fund will first
redeem any shares held in your account that are not
subject to the CDSC and then redeem shares in the order
in which they were purchased. The Fund has also
adopted a Rule 12b-1 plan with respect to the Class C
shares pursuant to which the Fund pays distribution and
service fees in an aggregate amount of 1.00% of the
average daily net assets attributable to such shares.
See "-Distribution and Shareholder Servicing Plan" for
more information.
Class I Shares
Class I shares are offered and sold on a continual
basis at their net asset value (computed after the
purchase order and funds are received by the Transfer
Agent) without any initial sales charge. However, you
may be charged a redemption fee of 1% of the value of
the shares on redemptions made within 24 months of
purchase. The imposition of the redemption fee may be
waived by the Fund. Redemption fees are paid directly
into Fund assets to help cover the costs that short-
term trading generates. In addition, as described in
more detail under "-Distribution and Shareholder
Servicing Plan," the Fund has adopted a Rule 12b-1 plan
with respect to the Class I shares which permits the
payment of up to 0.50% in distribution and service
fees. For the foreseeable future, however, the Fund
has no intention of paying any distribution or service
fees in connection with the Class I shares.
Class A Front-End Sales Charge Waivers and Reductions
Waivers for Certain Investors. The following
individuals and institutions may purchase Class A
shares without any initial sales charge:
* certain retirement plans, such as profit-sharing,
pension, 401(k), and simplified employee pension plans
(SEP's and SIMPLE's), subject to minimum requirements
with respect to the number of employees or amount of
purchase, which may be established by the Distributor
(currently, those criteria require that the employer
establishing the plan have 25 or more eligible
employees or that the amount invested total at least $1
million within 13 months of the initial investment);
* persons who have taken a distribution from a
retirement plan invested in Class A, Class C or Class I
shares of the Fund, to the extent of the distribution,
provided that the distribution is reinvested within 90
days of the payment date;
* government entities that are prohibited from
paying mutual fund sales charges;
* registered broker-dealers who have entered into a
selling or service agreement with the Distributor and
who have achieved certain sales objectives of the Fund,
for their investment accounts only, and certain
employees of such broker-dealers, and their spouses,
children, grandchildren, and parents, in accordance
with the internal policies and procedures of the
employing broker-dealer;
<PAGE>
* owners of private accounts managed by Advisor who
are no longer eligible for separate account management
by Advisor and who completely liquidate their private
account and purchase Fund shares with the proceeds
within 90 days of the liquidation;
* trust companies investing $1 million or more for
common trust or collective investment funds;
* registered investment companies;
* any person who purchases shares of the Fund with
redemption proceeds from a money market fund, provided
that this sales charge waiver is only available (i) to
persons who immediately prior to their investment in
the money market fund were shareholders of the Fund,
(ii) to the extent of the investment in the money
market fund being redeemed, and (iii) for one such
purchase within 12 months of redemption;
* "wrap accounts" for the benefit of clients of
registered broker-dealers having a selling or service
agreement with the Distributor; and
* any person who purchases shares of the Fund with
redemption proceeds from a registered investment
company other than the Fund and on which the investor
paid either a front-end sales charge or a contingent
deferred sales charge, provided that the proceeds are
invested in the Fund within ten days of the redemption.
Please contact your investment professional, the
Distributor, or the Transfer Agent for more information
on purchases at net asset value.
Reducing Sales Charges. If you are not eligible
for a waiver, there are two ways that you can combine
multiple purchases of Class A shares to take advantage
of the breakpoints in the sales charge schedule:
namely, you may participate in the Fund's Right of
Accumulation program or execute a Letter of Intent.
Both options are described in detail in the SAI.
Class A and Class C CDSC Waivers
The primary purpose of the CDSC is to encourage
long-term investing in the Fund. Accordingly, the CDSC
on Class A and Class C shares may be waived if:
* the redemption results from the death or total and
permanent disability of the shareholder which occurs
after the purchase of the shares being redeemed; or
* the selling broker-dealer elects to waive receipt
of a commission, if any, paid at the time of sale.
Distribution and Shareholder Servicing Plan
The Fund has adopted a plan pursuant to Rule 12b-1
under the 1940 Act ( "Plan") with respect to each class
of shares. Under the terms of the Plan, the Class A
and Class I shares may be required to pay the
Distributor (i) a distribution fee for the promotion
and distribution of shares of up to 0.25% of the
average daily net assets of the Fund attributable to
each class (computed on an annual basis) and (ii) a
shareholder servicing fee for personal service provided
to shareholders of up to 0.25% of the average daily net
assets of the Fund attributable to each class (computed
on an annual basis). Payments under the Plan with
respect to Class A shares are currently limited to
0.35%, which represents a 0.10% distribution fee and a
0.25% shareholder servicing fee; the Fund currently has
no intention of paying any Rule 12b-1 fees in
connection with the Class I shares. The Plan also
provides that the Class C shares may be required to pay
the Distributor (i) a distribution fee of up to 0.75%
of the average daily net assets of the Fund
attributable to such class (computed on an annual
basis) and (ii) a shareholder servicing fee of up to
0.25% of the average daily net assets of the Fund
attributable to such class (computed on an annual
basis). The Fund currently intends to make payments
under the Plan with respect to the Class C shares to
the maximum extent allowable under the Plan. Because
Rule 12b-1 fees are paid out of the Fund's net assets
on an ongoing basis, over time these fees will increase
the cost of your investment and could cost you more
than paying other types of sales charges.
<PAGE>
Investing in the Fund
Before opening an account and investing in Fund
shares, you should contact your investment
professional. Then, you should:
(1) Read this Prospectus carefully.
(2) Determine how much you would like to invest.
The minimum initial investment requirements
are:
(a) Class A and Class C shares:
* Non-retirement account: $5,000
* Retirement account: $2,000
* Subsequent investments: $100 or more
* Automatic Investment Plan ("AIP"): $3,000
(to maintain the plan, you must
invest at least $50 per month)
(b) Class I shares:
* All accounts: $5 million
* Subsequent investments: No minimum
The Fund may change or waive these minimums
at any time.
(3) Complete the appropriate parts of the account
application, carefully following the
instructions. If you have questions, please
contact your investment professional or the
Fund at 1-888-533-KOPP. Account applications
will be accepted by the Distributor, the
Transfer Agent, or investment professionals
who have entered into a selling or service
agreement with the Distributor.
(4) Make your initial investment, and any
subsequent investments, following the
instructions set forth below.
Buying Shares
Opening an Account. You may open an account by
completing an account application and paying for your
shares by check or wire. You may also open an account
using the Fund's exchange privilege, which is discussed
in detail in the SAI. All new account applications
should be given to your investment professional or
forwarded to the Distributor or the Transfer Agent,
whose addresses appear on the inside back cover page of
this Prospectus. If your application is accepted, your
shares will be bought at the next Offering Price or at
net asset value, as applicable, computed after your
order is received in proper form by the Transfer Agent.
See "Valuation of Fund Shares." The Fund does not
consider the U.S. Postal Service or other independent
delivery services to be its agents. Deposit in the
mail or with a delivery service does not constitute
receipt by the Transfer Agent. If you use an
investment professional, it is his or her
responsibility to transmit your order to buy shares to
the Transfer Agent before the close of business on the
day you place your order. A confirmation indicating
the details of each purchase transaction will be sent
to you promptly.
By check
* Make out a check for the investment amount,
payable to "Kopp Emerging Growth Fund." Payment should
be made in U.S. funds by check drawn on a U.S. bank,
savings and loan, or credit union. Neither cash nor
third-party checks will be accepted.
* You may be charged a transaction fee in addition
to the sales charge with respect to Class A shares sold
by certain broker-dealers. Certain broker-dealers may
also charge a transaction fee for purchases of Class C
shares.
<PAGE>
* If your check does not clear, you will be charged
a $20 service fee. You will also be responsible for
any losses suffered by the Fund as a result.
* All applications to purchase Fund shares are
subject to acceptance by the Fund and are not binding
until so accepted. The Fund reserves the right to
decline to accept a purchase application in whole or in
part.
By wire
* Instruct your bank to use the following
instructions when wiring funds:
Wire to: Firstar Bank, N.A.
ABA Number 075000022
Credit: Firstar Mutual Fund Services, L.L.C.
Account 112-952-137
Further credit: Kopp Emerging Growth Fund
(class of shares being purchased)
(shareholder account number)
(shareholder name/account registration)
* Please call 1-888-533-KOPP prior to wiring any
funds to notify the Transfer Agent that the wire is
coming and to confirm the wire instructions.
* The Fund is not responsible for the consequences
of delays resulting from the banking or Federal Reserve
wire system.
Adding to an Account. You may add to your account
by check or wire. You may also add to your account
using the Fund's exchange privilege. Please see the
SAI for more information. A confirmation indicating
the details of each subsequent purchase transaction
will be sent to you promptly.
By check
* Make out a check for the investment amount,
payable to "Kopp Emerging Growth Fund." Neither cash
nor third-party checks will be accepted.
* Fill out the detachable investment slip from an
account statement or send a note specifying your
account number and the name(s) in which the account is
registered.
* Deliver the check and your investment slip or note
to your investment professional, the Distributor, or
the Transfer Agent.
By wire
* Follow the wire instructions used to open an
account.
Automatic Investment Plan. The Automatic
Investment Plan ("AIP") is a method of using dollar
cost averaging, which is an investment strategy that
involves investing a fixed amount of money at a regular
time interval. By always investing the same amount,
you will be purchasing more shares when the price is
low and fewer shares when the price is high. The AIP
allows you to make regular, systematic investments in
Class A or Class C shares of the Fund from your bank
checking account. The minimum initial investment for
investors using the AIP is $3,000. Please refer to the
SAI for instructions as to how you may establish the
AIP for your account, or call 1-888-533-KOPP.
Special Notes on Investing in the Fund. When the
Fund's net assets total $1 billion, no new
shareholders, other than certain qualified retirement
plans, will be accepted. If you are a shareholder at
that time, however, you
<PAGE>
will be able to continue to add
to your account through new purchases, including
purchases through reinvestment of dividends or capital
gains distributions, and may be able to open accounts
for others.
Short-term or excessive trading into and out of
the Fund may harm performance by disrupting investment
strategies and by increasing expenses. Accordingly,
the Fund may decline to accept an application or may
reject a purchase order, including an exchange,
particularly from a market timer or an investor who, in
Advisor's opinion, has a pattern of short-term or
excessive trading or whose trading has been or may be
disruptive to the Fund. For these purposes, Advisor
may consider an investor's trading history in the Fund
or other mutual funds.
Redeeming or Selling Shares
To Redeem or Sell Some or All of Your Shares.
Generally, you may sell or request redemption of part
or all of your Fund shares at any time. The price per
share will be the net asset value next computed (less
the redemption fee or CDSC, if applicable) after your
redemption request is received in proper form by the
Transfer Agent. See "Valuation of Fund Shares." The
Fund does not consider the U.S. Postal Service or other
independent delivery services to be its agents.
Deposit in the mail or with a delivery service does not
constitute receipt by the Transfer Agent. If you use
an investment professional, it is his or her
responsibility to transmit your order to sell shares to
the Transfer Agent before the close of business on the
day you place your order. The Fund normally will mail
your redemption proceeds within one or two business
days and, in any event, no later than seven business
days after receipt by the Transfer Agent of a
redemption request in good order. However, the Fund
may hold payment until investments that were made by
check, telephone, or pursuant to the AIP have been
collected (which may take up to 15 days from the
initial investment date). Redemptions may be made by
written request, telephone, or wire. You may also
redeem shares using the Fund's exchange privilege, as
discussed in the SAI.
By written request
* Write a letter of instruction relating to the Kopp
Emerging Growth Fund. Include your share class, your
account number, the name(s) in which the account is
registered, and the dollar value or number of shares
you wish to sell.
* Include all signatures and any additional
documents that may be required. See "Redeeming
Shares-Special Situations," below.
* Forward the materials to the Transfer Agent.
* A check will be mailed to the name(s) and address
in which the account is registered, or otherwise
according to your letter of instruction.
By telephone
* Fill out the "Telephone Redemption" section of
your new account application.
* To place your redemption request, please call
1-888-533-KOPP.
* Redemption requests by telephone are available for
redemptions of $1,000 to $75,000. Redemption requests
for less than $1,000 or more than $75,000 must be in
writing.
* Proceeds redeemed by telephone will be mailed or
wired only to your address or bank of record as shown
on the records of the Transfer Agent.
* To arrange for telephone redemptions after an
account has been opened or to change the bank, account,
or address designated to receive redemption proceeds, a
written request must be sent to the Transfer Agent.
The request must be signed by each shareholder of the
account, with the signatures guaranteed. Further
documentation may be requested from corporations,
executors, administrators, trustees, and guardians.
See "Redeeming Shares-Special Situations," below.
* To reduce the costs associated with market timing,
the Fund reserves the right to refuse any request made
by telephone and may limit the amount involved or the
number of telephone redemptions.
* Once you place a telephone redemption request, it
cannot be canceled or modified.
<PAGE>
* Neither the Fund nor the Transfer Agent will be
responsible for the authenticity of redemption
instructions received by telephone. Accordingly, you
bear the risk of loss. However, the Fund will use
reasonable procedures to ensure that instructions
received by telephone are genuine, including recording
telephonic transactions and sending written
confirmation of such transactions to investors.
* You may experience difficulty in implementing a
telephone redemption during periods of drastic economic
or market changes. If you are unable to contact the
Transfer Agent by telephone, you may also redeem shares
by written request, as noted above.
By wire
* Fill out the "Telephone Redemption" section of
your new account application.
* To verify that the telephone redemption privilege
is in place on an account, or to request the forms to
add it to an existing account, please call 1-888-533-KOPP.
* Redemption requests by telephone which are to be
transmitted via wire transfer are available for
redemptions of $75,000 or less. Redemption requests
for more than $75,000 must be in writing.
* Funds will be wired on the next business day. A
$12 fee will be deducted from your account.
Special Situations. If you are acting as an
attorney-in-fact for another person, or as a trustee or
on behalf of a corporation, additional documentation
may be required in order to effect a redemption.
Questions regarding such circumstances may be directed
to your investment professional, or to the Transfer
Agent by calling 1-888-533-KOPP. In addition, the Fund
requires a signature guarantee for all authorized
owners of an account: (i) when you submit a written
redemption request for more than $75,000; (ii) when you
add the telephone redemption option to your existing
account; (iii) if you transfer ownership of your
account to another individual or entity; or (iv) if you
request redemption proceeds to be sent to an address
other than the address that appears on your account. A
signature guarantee may be obtained from any eligible
guarantor institution. These institutions include
banks, saving associations, credit unions, brokerage
firms, and others. A notary public stamp or seal is
not acceptable.
Redemptions in Kind. The Fund reserves the right
to redeem in kind (i.e., in securities or assets other
than cash) any redemption request during any 90-day
period in excess of the lesser of (i) $250,000 or (ii)
1% of the net asset value of the class of shares being
redeemed. Please see the SAI for more information.
IRAs. Shareholders who have an Individual
Retirement Account ("IRA") or other retirement plan
must indicate on their redemption requests whether or
not to withhold federal income taxes. Redemption
requests failing to indicate an election will be
subject to withholding.
Termination of Accounts. Your account may be
terminated by the Fund if, at the time of any
redemption of shares in your account, the value of the
remaining shares in the account falls below $1,000. A
check for the proceeds of redemption will be sent to
you within seven days of the redemption.
Fee for Special Services. The Fund may charge a
fee for special services, such as providing
shareholders with historical account statements, that
are beyond the normal scope of its services.
VALUATION OF FUND SHARES
The price of Fund shares is based on the Fund's
net asset value, which is calculated using the market
price method of valuation and is determined as of the
close of trading (generally 4:00 p.m. Eastern Time) on
each day the New York Stock Exchange ("NYSE") is open
for business. The Fund does not determine net asset
value on days the NYSE is closed. The NYSE is closed
on New Year's Day, Martin Luther King, Jr. Day,
President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day. In addition, if any of these holidays
falls on a Saturday, the NYSE will not be open for
trading on the preceding Friday, and when such holiday
falls on a Sunday, the NYSE will not be open for
trading on the succeeding Monday, unless unusual
business conditions exist, such as the ending of a
monthly or yearly accounting period. The price at
which a purchase order or redemption request is
effected is based on the next calculation of net asset
value after the order is placed or the request is
received.
<PAGE>
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS, AND TAX TREATMENT
For federal income tax purposes, all dividends and
distributions of net realized short-term capital gains
you receive from the Fund are taxable as ordinary
income, whether reinvested in additional shares or
received in cash. Distributions of net realized long-
term capital gains you receive from the Fund, whether
reinvested in additional shares or received in cash,
are taxable as a capital gain. The capital gain
holding period (and the applicable tax rate) is
determined by the length of time the Fund has held the
security and not the length of time you have held
shares in the Fund. You will be informed annually as
to the amount and nature of all dividends and capital
gains paid during the prior year. Such capital gains
and dividends may also be subject to state or local
taxes. If you buy shares of the Fund when it has
realized but not yet distributed income or capital
gains, you will be "buying a dividend" by paying the
full price for the shares and then receiving a portion
of the price back in the form of a taxable
distribution. If you are not required to pay taxes on
your income, you are generally not required to pay
federal income taxes on the amounts distributed to you.
Dividends and capital gains, if any, will be
distributed at least annually in December. Please
note, however, that the objective of the Fund is
capital appreciation, not the production of
distributions. You should measure the success of your
investment by the value of your investment at any given
time and not by the distributions you receive. The
Fund expects that, because of its investment objective,
its distributions will consist primarily of long-term
capital gains.
All dividends and capital gains distributions will
automatically be reinvested in additional Fund shares
at the then prevailing net asset value unless you
specifically request that dividends or capital gains or
both be paid in cash. The election to receive
dividends in cash or reinvest them in shares may be
changed by writing to the Fund at Kopp Funds, Inc., c/o
Firstar Mutual Fund Services, L.L.C., P.O. Box 701,
Milwaukee, Wisconsin 53201-0701. Such notice must be
received at least ten days prior to the record date of
any dividend or capital gain distribution.
<PAGE>
ADDITIONAL INFORMATION
INVESTMENT ADVISOR
Kopp Investment Advisors, Inc.
7701 France Avenue South, Suite 500
Edina, Minnesota 55435
DISTRIBUTOR
Centennial Lakes Capital Inc.
7701 France Avenue South, Suite 500
Edina, Minnesota 55435
CUSTODIAN
Firstar Bank, N.A.
For overnight deliveries, use: For regular mail deliveries, use:
Kopp Funds, Inc. Kopp Funds, Inc.
c/o Firstar Bank, N.A. c/o Firstar Bank, N.A.
Third Floor P.O. Box 701
615 E. Michigan Street Milwaukee, Wisconsin 53201-0701
Milwaukee, Wisconsin 53202
TRANSFER AGENT AND ADMINISTRATOR
Firstar Mutual Fund Services, L.L.C.
For overnight deliveries, use: For regular mail deliveries, use:
Kopp Funds, Inc. Kopp Funds, Inc.
c/o Firstar Mutual c/o Firstar Mutual
Fund Services, L.L.C. Fund Services, L.L.C.
Third Floor P.O. Box 701
615 E. Michigan Street Milwaukee, Wisconsin 53201-0701
Milwaukee, Wisconsin 53202
The SAI for the Fund contains additional information
about the Fund. Additional information about the
Fund's investments is contained in the Fund's annual
and semi-annual reports to shareholders. The Fund's
annual report provides a discussion of the market
conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal
year. The Fund's SAI, which is incorporated by
reference into this Prospectus, annual reports and semi-
annual reports are available without charge upon
request to the address, toll-free telephone number, or
Website noted on the cover page of this Prospectus.
These documents may also be obtained from certain
financial intermediaries.
Information about the Fund (including the SAI) can be
reviewed and copied at the SEC's Public Reference Room
in Washington, D.C. Please call the SEC at 1-202-942-
8090 for information relating to the operation of the
Public Reference Room. Reports and other information
about the Fund are also available on the SEC's Internet
Website located at http://www.sec.gov. Alternatively,
copies of this information may be obtained, upon
payment of a duplicating fee, by electronic request at
the following E-mail address: publicinfo@secgov, or by
writing the Public Reference Section of the SEC,
Washington, D.C. 20549-6009.
The Fund's 1940 Act File Number is 811-8267.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
Kopp Funds, Inc.
Kopp Emerging Growth Fund
7701 France Avenue South, Suite 500
Edina, Minnesota 55435
Telephone: 1-888-533-KOPP
Facsimile: 1-612-841-0411
Website: www.koppfunds.com
This Statement of Additional Information ("SAI")
is not a prospectus and should be read together with
the Prospectus of the Kopp Emerging Growth Fund
("Fund") dated January 25, 2000. The Fund is a series
of Kopp Funds, Inc. ("Corporation").
The Fund's audited financial statements for the
year ended September 30, 1999, are incorporated herein
by reference to the Fund's 1999 Annual Report.
A copy of the Fund's 1999 Annual Report and/or its
Prospectus is available without charge upon request to
the above-noted address, toll-free telephone number, or
website.
This Statement of Additional Information is dated January 25, 2000.
<PAGE>
TABLE OF CONTENTS
FUND ORGANIZATION 3
FUND POLICIES: FUNDAMENTAL AND NON-FUNDAMENTAL 3
IMPLEMENTATION OF INVESTMENT OBJECTIVE 5
DIRECTORS AND OFFICERS 7
PRINCIPAL SHAREHOLDERS 9
INVESTMENT ADVISOR 10
FUND TRANSACTIONS AND BROKERAGE 11
CUSTODIAN, TRANSFER AGENT, AND DIVIDEND-DISBURSING AGENT 12
ADMINISTRATOR AND FUND ACCOUNTANT 12
DISTRIBUTOR 13
ARRANGEMENTS WITH BROKER-DEALERS AND OTHER FINANCIAL
INTERMEDIARIES 14
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN 14
PURCHASE, EXCHANGE, AND PRICING OF SHARES 16
REDEMPTIONS IN KIND 19
TAXATION OF THE FUND 19
PERFORMANCE INFORMATION 19
INDEPENDENT ACCOUNTANTS 21
FINANCIAL STATEMENTS 21
You should rely only on the information contained
in this document and the Fund's Prospectus. We have
not authorized anyone to provide you with information
that is different. This SAI is not an offer to sell
securities in any state or jurisdiction in which an
offering may not lawfully be made.
<PAGE>
FUND ORGANIZATION
The Corporation is an open-end management
investment company, commonly referred to as a mutual
fund. The Corporation is organized as a Minnesota
company and was incorporated on June 12, 1997.
The Corporation is authorized to issue shares of
common stock in series and classes. The Corporation
currently offers one series of shares: the Kopp
Emerging Growth Fund. The shares of common stock of
the Fund are further divided into three classes: Class
A, Class C and Class I. Each share of common stock of
each class of shares of the Fund is entitled to one
vote, and each share is entitled to participate equally
in dividends and capital gains distributions by the
respective class of shares and in the residual assets
of the respective class in the event of liquidation.
However, each class of shares bears its own expenses,
is subject to its own sales and redemption charges, if
any, and has exclusive voting rights on matters
pertaining to the Rule 12b-1 distribution and
shareholder servicing plan as it relates to that class.
No certificates will be issued for shares held in
your account. You will, however, have full shareholder
rights.
Generally, the Fund will not hold annual
shareholders' meetings unless required by the
Investment Company Act of 1940, as amended ("1940
Act"), or Minnesota law.
FUND POLICIES: FUNDAMENTAL AND NON-FUNDAMENTAL
The following are the Fund's fundamental
investment policies which cannot be changed without the
approval of a majority of the Fund's outstanding voting
securities. As used herein, a "majority of the Fund's
outstanding voting securities" means the lesser of (i)
67% of the shares of common stock of the Fund
represented at a meeting at which more than 50% of the
outstanding shares are present, or (ii) more than 50%
of the outstanding shares of common stock of the Fund.
The Fund:
1. May not issue senior securities, except as
permitted under the 1940 Act;
2. May (i) borrow money from banks and (ii) make
other investments or engage in other
transactions permissible under the 1940 Act
which may involve a borrowing, provided that
the combination of (i) and (ii) shall not
exceed 33 1/3% of the value of the Fund's
assets (including the amount borrowed), less
the Fund's liabilities (other than
borrowings), except that the Fund may borrow
up to an additional 5% of its assets (not
including the amount borrowed) from a bank
for temporary or emergency purposes (but not
for leverage or the purchase of investments).
The Fund may also borrow money from other
persons to the extent permitted by applicable
law;
3. May not act as an underwriter of another
company's securities, except to the extent
that the Fund may be deemed to be an
underwriter within the meaning of the
Securities Act of 1933, as amended ("1933
Act"), in connection with the purchase and
sale of portfolio securities;
4. May not invest more than 25% of its assets in
securities of companies in any one industry.
This restriction does not apply to
obligations issued or guaranteed by the U.S.
government, its agencies, or
instrumentalities;
5. May not purchase or sell real estate unless
acquired as a result of ownership of
securities or other instruments (but this
shall not prohibit the Fund from purchasing
or selling securities or other instruments
backed by real estate or of issuers engaged
in real estate activities);
<PAGE>
6. May not make loans if, as a result, more than
33 1/3% of the Fund's assets would be lent to
other persons, except through purchases of
debt securities or other debt instruments or
engaging in repurchase agreements;
7. May not purchase or sell physical commodities
unless acquired as a result of ownership of
securities or other instruments (but this
shall not prevent the Fund from purchasing or
selling options, futures contracts, or other
derivative instruments, or from investing in
securities or other instruments backed by
physical commodities); and
8. Notwithstanding any other fundamental
investment policy or restriction, may invest
all of its assets in the securities of a
single open-end management investment company
with substantially the same fundamental
investment objective, policies, and
restrictions as the Fund.
The Fund's investment objective, which is to seek
long-term capital appreciation, is also a fundamental
investment policy which cannot be changed without the
approval of a majority of the Fund's outstanding voting
securities.
The following are the Fund's non-fundamental
investment policies which may be changed by the Board
of Directors of the Fund without shareholder approval.
The Fund may not:
1. Sell securities short, unless the Fund owns
or has the right to obtain securities
equivalent in kind and amount to the
securities sold short, or unless it covers
such short sale as required by the current
rules and positions of the Securities and
Exchange Commission ("SEC") or its staff, and
provided that transactions in options,
futures contracts, options on futures
contracts, or other derivative instruments
are not deemed to constitute selling
securities short.
2. 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
deposits in connection with futures
contracts, options on futures contracts, or
other derivative instruments shall not
constitute purchasing securities on margin.
3. Invest in illiquid securities if, as a result
of such investment, more than 15% of its net
assets would be invested in illiquid
securities, or such other amounts as may be
permitted under the 1940 Act.
4. Purchase securities of other investment
companies except in compliance with the 1940
Act.
5. Engage in futures or options on futures
transactions which are impermissible pursuant
to Rule 4.5 under the Commodity Exchange Act
("CEA") and, in accordance with Rule 4.5,
will use futures or options on futures
transactions solely for bona fide hedging
transactions (within the meaning of the CEA);
provided, however, that the Fund may, in
addition to bona fide hedging transactions,
use futures and options on futures
transactions if the aggregate initial margin
and premiums required to establish such
positions, less the amount by which any such
options positions are in the money (within
the meaning of the CEA), do not exceed 5% of
the Fund's net assets.
6. Make any loans other than loans of portfolio
securities, except through purchases of debt
securities or other debt instruments or
engaging in repurchase agreements with
respect to portfolio securities.
7. Borrow money except from banks or through
reverse repurchase agreements or mortgage
dollar rolls, and will not purchase
securities when bank borrowings exceed 5% of
its assets.
<PAGE>
Unless noted otherwise, if a percentage
restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from
a change in the Fund's assets or in the market value of
the investment will not constitute a violation of that
restriction.
IMPLEMENTATION OF INVESTMENT OBJECTIVE
The following information supplements the
discussion of the Fund's investment objective and
strategy described in the Prospectus under the headings
"Investment Objective" and "Investment Strategy."
Depositary Receipts
The Fund may invest in the equity securities of
foreign companies by purchasing depositary receipts,
including American Depositary Receipts ("ADRs") and
European Depositary Receipts ("EDRs"). These
securities may not necessarily be denominated in the
same currency as the securities into which they may be
converted. Generally, ADRs, in registered form, are
denominated in U.S. dollars and are designed for use in
the U.S. securities markets, while EDRs, in bearer
form, may be denominated in other currencies and are
designed for use in European securities markets. ADRs
are receipts typically issued by a U.S. bank or trust
company evidencing ownership of the underlying
securities. EDRs are European receipts evidencing a
similar arrangement. For purposes of the Fund's
investment policies, ADRs and EDRs are deemed to have
the same classification as the underlying securities
they represent. Thus, an ADR or EDR representing
ownership of common stock will be treated as common
stock.
Investments in securities of foreign companies
involve risks which are in addition to the usual risks
inherent in domestic investments. In many countries
there is less publicly available information about
companies than is available in the reports and ratings
published about companies in the U.S. Additionally,
foreign companies are not subject to uniform
accounting, auditing, and financial reporting
standards. Other risks that may be present in foreign
investment include expropriation; confiscatory
taxation; withholding taxes on dividends and interest;
less extensive regulation of foreign brokers,
securities markets, and companies; costs incurred in
conversions between currencies; the illiquidity and
volatility of foreign securities markets; the
possibility of delays in settlement in foreign
securities markets; limitations on the use or transfer
of assets (including suspension of the ability to
transfer currency from a given country); the difficulty
of enforcing obligations in other countries; diplomatic
developments; and political or social instability.
Foreign economies may differ from the U.S. economy in
various respects, and many foreign securities are less
liquid and their prices are more volatile than
comparable U.S. securities. From time to time, foreign
securities may be difficult to liquidate rapidly
without adverse price effects. Certain costs
attributable to foreign investing, such as custody
charges and brokerage costs, are higher than those
attributable to domestic investing.
Convertible Securities
The Fund may invest in convertible securities,
which are bonds, debentures, notes, preferred stocks,
or other securities that may be converted into or
exchanged for a specified amount of common stock or
warrants of the same or a different company within a
particular period of time at a specified price or
formula. A convertible security entitles the holder to
receive interest normally paid or accrued on debt or
the dividend paid on preferred stock until the
convertible security matures or is redeemed, converted,
or exchanged. Convertible securities have unique
investment characteristics in that they generally (i)
have higher yields than common stocks, but lower yields
than comparable non-convertible securities; (ii) are
less subject to fluctuation in value than the
underlying stock (or warrant) since they have fixed
income characteristics; and (iii) provide the potential
for capital appreciation if the market price of the
underlying common stock (or warrant) increases. A
convertible security may be subject to redemption at
the option of the issuer at a price established in the
convertible security's governing instrument. If a
convertible security held by the Fund is called for
redemption, the Fund will be required to permit the
issuer to redeem the security, convert it into the
underlying common stock (or warrant), or sell it to a
third party.
<PAGE>
Borrowing
The Fund is authorized to borrow money from banks
and make other investments or engage in other
transactions permissible under the 1940 Act which may
be considered a borrowing (such as mortgage dollar
rolls and reverse repurchase agreements), provided that
the amount borrowed cannot exceed 33 1/3% of the value
of the Fund's net assets. The Fund's borrowings create
an opportunity for greater return to the Fund and,
ultimately, the Fund's shareholders, but at the same
time increase exposure to losses. In addition,
interest payments and fees paid by the Fund on any
borrowings may offset or exceed the return earned on
borrowed funds. The Fund currently intends to borrow
money only for temporary, extraordinary, or emergency
purposes.
Lending Portfolio Securities
The Fund may lend portfolio securities with a
value not exceeding 33 1/3% of the Fund's total assets
to brokers or dealers, banks or other institutional
borrowers of securities as a means of earning income.
In return, the Fund will receive collateral in cash or
money market instruments. Such collateral will be
maintained at all times in an amount equal to at least
100% of the current market value of the loaned
securities. The purpose of such securities lending is
to permit the borrower to use such securities for
delivery to purchasers when such borrower has sold
short. The Fund will continue to receive the
equivalent of the interest or dividends paid by the
issuer of the securities lent, and the Fund may also
receive interest on the investment of collateral, or a
fee from the borrower as compensation for the loan.
The Fund may pay reasonable custodial and
administrative fees in connection with the loan. The
Fund will retain the right to call, upon notice,
securities loaned. While there may be delays in
recovery or even a risk of loss of collateral should
the borrower fail financially, the Fund's investment
advisor will review the credit worthiness of the
entities to which such loans are made to evaluate those
risks. Although the Fund is authorized to lend, the
Fund does not presently intend to engage in lending.
Non-Diversification
While the Fund is "non-diversified," which means
that it is permitted to invest its assets in a more
limited number of companies than "diversified" mutual
funds, the Fund intends to diversify its assets to
qualify for tax treatment as a regulated investment
company under the Internal Revenue Code of 1986, as
amended ("Code"). To qualify (i) not more than 25% of
the total value of the Fund's assets may be invested in
securities of any one issuer or of any two or more
issuers controlled by the Fund, which, pursuant to the
regulations under the Code, may be deemed to be engaged
in the same, similar, or related trades or businesses,
and (ii) with respect to 50% of the total value of the
Fund's assets (a) not more than 5% of its total assets
may be invested in the securities of any one issuer and
(b) the Fund may not own more than 10% of the
outstanding voting securities of any one issuer. These
percentage limitations do not apply to investments in
U.S. government securities or the securities of other
regulated investment companies. To the extent that a
relatively high percentage of the Fund's assets are
invested in the securities of a limited number of
companies, the Fund's portfolio may be more susceptible
to a single economic, political, or regulatory
occurrence than the portfolio of a diversified mutual
fund.
Concentration
The Fund has adopted a fundamental investment
policy which prohibits the Fund from investing more
than 25% of its assets in the securities of companies
in any one industry. An industry is defined as a
business-line subsector of a stock-market sector.
While the Fund may be heavily invested in a single
market sector like technology or health care, for
example, it will not invest more than 25% of its assets
in securities of companies in any one industry or
subsector. Technology industries or subsectors include
networking; data storage; software applications;
semiconductors; voice-processing; telecommunications
equipment; laser-based components and subsystems; and
wireless business lines. Health-care services
industries or subsectors include managed-care
organizations and home health-care/sub-acute care.
Industries in the sector of medical devices/hospital
supplies include research reagents/ histrumentations,
ophthalmology, and imaging.
<PAGE>
Temporary Strategies
As described in the Prospectus under the heading
"Implementation of Investment Objective," prior to
investing proceeds from sales of Fund shares, to meet
ordinary daily cash needs, and to retain the
flexibility to respond promptly to changes in market
and economic conditions, the Fund may hold cash and/or
invest all or a portion of its assets in money market
instruments. The money market instruments which the
Fund may purchase are limited to:
U.S. Government Securities. Obligations issued or
guaranteed as to principal and 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),
including Treasury bills, notes, and bonds;
Bank Obligations. Obligations (including
certificates of deposit, bankers' acceptances,
commercial paper (see below), and other debt
obligations) of banks subject to regulation by the U.S.
government and having total assets of $1 billion or
more, and instruments secured by such obligations, not
including obligations of foreign branches of domestic
banks;
Obligations of Savings Institutions. Certificates
of deposit of savings banks and savings and loan
associations, having total assets of $1 billion or
more;
Fully Insured Certificates of Deposit.
Certificates of deposit of banks and savings
institutions, having total assets of less than $1
billion, if the principal amount of the obligation is
insured by the Bank Insurance Fund or the Savings
Association Insurance Fund (each of which is
administered by the Federal Deposit Insurance
Corporation), limited to $100,000 principal amount per
certificate and to 15% or less of the Fund's total
assets in all such obligations and in all illiquid
assets, in the aggregate;
Commercial Paper. Commercial paper rated within
the two highest grades by Moody's Investors Service,
Inc. ("Moody's") or Standard & Poor's Corporation
("S&P") or, if not rated, issued by a company having an
outstanding debt issue rated at least Aaa by Moody's or
AAA by S&P; and
Money Market Funds. Securities issued by
registered investment companies holding themselves out
as money market funds which attempt to maintain a
stable net asset value of $1.00 per share.
DIRECTORS AND OFFICERS
Under the laws of the State of Minnesota, the
Board of Directors of the Fund is responsible for
managing the Fund's business and affairs.
The directors and officers of the Fund, together
with information as to their principal business
occupations during the last five years, and other
information, are shown below. Each director who is
deemed an "interested person" of the Fund, as defined
in the 1940 Act, is indicated by an asterisk. The
directors and officers listed below have served as such
since inception of the Fund on June 12, 1997, except as
otherwise noted.
*LeRoy C. Kopp, Chief Executive Officer, President
and a Director of the Fund.
Mr. Kopp, 65 years old, is the founder, President
and Chief Investment Officer of Kopp Investment
Advisors, Inc. ("Advisor"). Prior to founding Advisor
in 1990, Mr. Kopp spent 30 years with Dain Bosworth
Inc., where he was the Manager of the Edina, Minnesota,
branch and a Senior Vice President. Mr. Kopp has
received a number of business and community honors and
awards, including Upper Midwest Entrepreneur of the
Year for Emerging Companies. Mr. Kopp graduated with
distinction with a B.B.A. degree from the University of
Minnesota
<PAGE>
in 1956. Mr. Kopp served as Chief Financial
Officer and Treasurer of the Fund from February 1998 to
December 1998.
Kathleen S. Tillotson, Executive Vice President
and Secretary of the Fund.
Ms. Tillotson, 43 years old, joined Advisor in
March 1996 as Vice President and General Counsel.
Since January 1, 2000, she has also been the Secretary
of Advisor and of Centennial Lakes Capital, Inc., the
Fund's distributor ("Distributor"). From June 1998
through December 1999, she served as the Assistant
Secretary of the Distributor. In 1981, Ms. Tillotson
graduated from Tulane University School of Law magna
cum laude. Before joining Advisor in 1996, Ms.
Tillotson practiced law as an associate and principal
with law firms in Boston and Minneapolis.
John P. Flakne, Chief Financial Officer and Treasurer of the Fund.
Mr. Flakne, 34 years old, joined Advisor in
December 1998 as Controller. On January 1, 2000, he
became Advisor's Chief Financial Officer and Treasurer
and the Chief Executive Officer and Chief Financial
Officer of the Distributor. In 1989, Mr. Flakne
graduated from the University of Minnesota with a
B.S.B. in Accounting and a Computer Science minor.
Before joining Advisor in December 1998, Mr. Flakne
held various accounting-related positions as follows:
From August 1989 until December 1994, Mr. Flakne worked
for Coopers & Lybrand L.L.P., Minneapolis, Minnesota,
first as an Associate and eventually as a Manager; from
January 1995 until June 1997, Mr. Flakne worked for
Carlson Companies, Inc., Minnetonka, Minnesota, first
as a Manager and then as Interim Director of the
Corporate Audit function; from July 1997 until January
1998, Mr. Flakne worked for Bertram, Vallez, Kaplan &
Talbot, Ltd., New Hope, Minnesota, a CPA and business
consulting firm, as a Senior Manager; and from February
1998 until November 1998, Mr. Flakne worked for
Caterpillar Paving Products Inc., Brooklyn Park,
Minnesota, a division of Caterpillar Inc., as
Controller. Mr. Flakne is a CPA. Mr. Flakne has
served as Chief Financial Officer and Treasurer of the
Fund since December 1998.
Robert L. Stehlik, a Director of the Fund.
Mr. Stehlik, 61 years old, has been a Director of
the Fund since September 8, 1997. Mr. Stehlik is
currently the Senior Vice President of People's Bank of
Commerce, which is based in Minneapolis, Minnesota.
Mr. Stehlik has held this position since September
1998. For four years prior to that, he served as the
Senior Vice President of Richfield Bank & Trust Co.,
based in Richfield, Minnesota. Prior to that, he
served in various capacities at First Bank (now U.S.
Bank), based in Minneapolis, Minnesota, including
Senior Vice President.
Thomas R. Stuart, a Director of the Fund.
Mr. Stuart, 54 years old, has been a Director of
the Fund since September 8, 1997. Since May 1988, Mr.
Stuart has served as Chairman and Chief Executive
Officer of the Bureau of Engraving, Inc., a
manufacturer of interconnect devices and a provider of
commercial printing and home education services based
in Minneapolis, Minnesota.
The address of Mr. Kopp, Ms. Tillotson, and Mr.
Flakne is 7701 France Avenue South, Suite 500, Edina,
Minnesota 55435. Mr. Stehlik's address is 9330
Sheffield Circle, Bloomington, Minnesota 55437. Mr.
Stuart's address is 3400 Technology Drive, Minneapolis,
Minnesota 55418.
As of December 31, 1999, officers and directors of
the Fund beneficially owned none of the shares of the
Fund's then outstanding Class A or Class C shares and
83.26% of the Fund's then outstanding Class I shares.
<PAGE>
Directors and officers of the Fund who are also
officers, directors, or employees of Advisor do not
receive any remuneration from the Fund for serving as
directors or officers. Accordingly, neither Mr. Kopp,
Ms. Tillotson, Mr. Flakne, nor Mr. Kulka receive any
remuneration from the Fund for their services as
directors and/or officers. However, Messrs. Stehlik
and Stuart receive the following fees for their
services as directors of the Fund:
Name Cash Other Total
Compensation(1) Compensation
Robert L. Stehlik $15,000 $0 $15,000
Thomas R. Stuart $15,000 $0 $15,000
__________
(1)Each director who is not deemed an "interested
person" of the Fund, as defined in the 1940 Act,
receives $3,500 for each Board of Directors meeting
attended by such person, a $1,000 per fiscal year
stipend if all such meetings are attended, and
reimbursement of reasonable expenses incurred in
connection therewith. The Board held four meetings
during fiscal 1999 and both of the disinterested
directors attended all four meetings. Thus, each
disinterested director received $15,000 during such
time period from the Fund. Disinterested directors
may elect to receive their compensation in the form
of cash, shares of the Fund, or both.
PRINCIPAL SHAREHOLDERS
As of December 31, 1999, the following persons
owned of record or are known by the Fund to own
beneficially 5% or more of a class of the Fund's
outstanding shares:
<TABLE>
Percentage
Name and Address Number of Shares Percentage of Fund
- ---------------------------- ------------------------------------------------------------ ----------
Class A Class C Class I Class A Class C Class I
<S> <C> <C> <C> <C> <C> <C> <C>
Kopp Investment Advisors, Inc. N/A 2,376,286.879 N/A 41.82% 5.84%
7701 France Avenue South,
Ste 500
Edina, MN 55435
LeRoy C. Kopp(1) N/A 1,587,964.471 N/A 27.94% 3.90%
7701 France Avenue South,
Ste 500
Edina, MN 55435
Kopp Family Foundation N/A 722,281.831 N/A 12.71% 1.78%
7701 France Avenue South
Ste 500
Edina, MN 55435
Lake Region Healthcare Corporation N/A 25,562.372 N/A N/A 7.92% N/A 0.06%
712 South Cascade Street
Fergus Falls, MN 56537
Robert E. Murphy and N/A 17,652.251 N/A N/A 5.47% N/A 0.04%
Judith P. Murphy, Trustees
Robert E. Murphy Revocable Trust
1470 West 35th Street
Minneapolis, MN 55408
____________
</TABLE>
(1) Includes 607,708.865 shares held in an IRA account
for the benefit of Mr. Kopp.
Based on the foregoing, as of December 31, 1999,
LeRoy C. Kopp owned a controlling interest in the
Fund's Class I shares (82.47%); however no person owned
a controlling interest in the Fund. Shareholders with
a controlling interest could affect the outcome of
proxy voting or the direction of management of the
Fund.
<PAGE>
INVESTMENT ADVISOR
Kopp Investment Advisors ("Advisor") is the
investment advisor to the Fund. Advisor and Centennial
Lakes Capital, Inc. ("Distributor") are wholly-owned
subsidiaries of Kopp Holding Company ("KHC") which is
controlled by LeRoy C. Kopp, the President and Chief
Investment Officer of Advisor and sole shareholder of
KHC. Kathleen S. Tillotson is the Vice President,
Secretary and General Counsel of Advisor, and John P.
Flakne is the Chief Financial Officer and Treasurer of
the Advisor. Ms. Tillotson is also the Secretary of
the Distributor and Mr. Flakne is the Chief Executive
Officer and Chief Financial Officer of the Distributor.
The investment advisory agreement between the Fund
and Advisor dated as of October 1, 1997 ("Advisory
Agreement") had an initial term of two years and is now
required to be approved annually by the Board of
Directors of the Fund or by vote of a majority of the
Fund's outstanding voting securities. Each annual
renewal must also be approved by the vote of a majority
of the Fund's directors who are not parties to the
Advisory Agreement or interested persons of any such
party, cast in person at a meeting called for the
purpose of voting on such approval. The Advisory
Agreement was most recently approved on August 9, 1999
by the full Board of Directors, including a majority of
the disinterested directors. The Advisory Agreement is
terminable without penalty on 60 days' written notice
by the Board of Directors, by vote of a majority of the
Fund's outstanding voting securities, or by Advisor,
and will terminate automatically in the event of its
assignment.
Under the terms of the Advisory Agreement, Advisor
manages the Fund's investments and business affairs,
subject to the supervision of the Board of Directors.
At its expense, Advisor provides office space and all
necessary office facilities, equipment, and personnel
for managing the investments of the Fund. As
compensation for its services, the Fund pays Advisor an
annual management fee of 1.00% of the Fund's average
daily net assets attributable to each class of shares.
The advisory fee is accrued daily and paid monthly.
Advisor voluntarily agreed that for the fiscal
year ended September 30, 1999, Advisor would waive its
management fees to the extent necessary to ensure that
(i) the total annual operating expenses for the Class A
shares of the Fund would not exceed 1.50% of average
daily net assets, (ii) the total annual operating
expenses for the Class I shares would not exceed 1.15%
of average daily net assets, and (iii) the total annual
operating expenses for the Class C shares would not
exceed 2.15%. Advisor may from time to time
voluntarily (but is not required or obligated to) waive
all or a portion of its fee and/or reimburse all or a
portion of class operating expenses. Beginning
January 31, 2000, Advisor has voluntarily agreed to
waive its management fee and/or reimburse the Fund's
operating expenses to the extent necessary to ensure
that the Fund's total annual operating expenses for the
(i) Class A shares do not exceed 1.75% of average daily
net assets, (ii) Class C shares do not exceed 2.40% of
average daily net assets, and (iii) Class I shares do
not exceed 1.40% of average daily net assets. Any
waiver of fees or reimbursement of expenses will be
made on a monthly basis and, with respect to the
latter, will be paid to the Fund by reduction of
Advisor's fee. Any such waiver/reimbursement is
subject to later adjustment during the term of the
Advisory Agreement to allow Advisor to recoup amounts
waived/reimbursed to the extent actual fees and
expenses for a specific month are less than the expense
limitation caps.
For the fiscal years ended September 30, 1998 and
1999, the Advisor waived 0.31% and 0.20%, respectively,
of its annual management fee so that the Fund operating
expenses would not exceed the limits described above.
For the fiscal year ended September 30, 1998, Advisor
received $1,772,722 attributable to Class A shares and
$159,542 attributable to Class I shares. For the
fiscal year ended September 30, 1999, Advisor received
$2,578,525 attributable to Class A shares, $366,047
attributable to Class I shares and $4,153 attributable
to Class C shares. As of September 30, 1999, there was
$733,440 of unreimbursed distribution and shareholder
servicing fees accrued.
<PAGE>
FUND TRANSACTIONS AND BROKERAGE
Under the Advisory Agreement, Advisor is
responsible for decisions to buy and sell securities
for the Fund and for the placement of the Fund's
securities business, the negotiation of the commissions
to be paid on such transactions, and the allocation of
portfolio brokerage and principal business. Trades may
be done with brokers, dealers and, on occasion,
issuers. Remuneration for trades may include
commissions, dealer spreads, mark-ups, and mark-downs.
In executing transactions on behalf of the Fund,
Advisor has no obligation to deal with any particular
broker or dealer. Rather, Advisor seeks to obtain the
best qualitative execution. The best net price is an
important factor, but Advisor also considers the full
range and quality of a broker's services, as described
below. Recognizing the value of the range of services,
the Fund may not pay the lowest commission or spread
available on any particular transaction. Brokerage may
be allocated based on the sale of the Fund's shares
where best execution and price may be obtained from
more than one broker.
Section 28(e) of the Securities Exchange Act of
1934, as amended ("Section 28(e)"), permits an
investment advisor, under certain circumstances, to
cause an account to pay a broker who supplies brokerage
and research services a commission for effecting a
transaction in excess of the amount of commission
another broker would have charged for effecting the
transaction. Brokerage and research services include
(i) furnishing advice as to the value of securities,
the advisability of investing, purchasing, or selling
securities, and the availability of securities or
purchasers or sellers of securities; (ii) furnishing
analyses and reports concerning issuers, industries,
sectors, securities, economic factors and trends,
portfolio strategy, and the performance of accounts;
and (iii) effecting securities transactions and
performing functions incidental thereto (such as
clearance, settlement, and custody).
In selecting brokers, Advisor considers investment
and market information and other research, such as
economic, securities, and market research provided by
such brokers and the quality and reliability of
brokerage services, including execution capability and
financial responsibility. Accordingly, the commissions
charged by any such broker may be greater than the
amount another firm might charge if Advisor determines
in good faith that the amount of such commissions is
reasonable in relation to the value of the research
information and brokerage services provided by such
broker. Advisor believes that the research information
received in this manner provides the Fund with benefits
by supplementing the research otherwise available to
the Fund. Any such higher commissions will not,
however, be paid by the Fund unless (i) Advisor
determines in good faith that the amount is reasonable
in relation to the services in terms of the particular
transaction or in terms of Advisor's overall
responsibilities with respect to the accounts,
including the Fund, as to which it exercises investment
discretion; (ii) such payment is made in compliance
with applicable state and federal laws; and (iii) in
the opinion of Advisor, the total commissions paid by
the Fund are reasonable in relation to the benefits to
the Fund over the long term.
Advisor places portfolio transactions for other
advisory accounts in addition to the Fund. Research
services furnished by firms through which the Fund
effects its securities transactions may be used by
Advisor in servicing all of its accounts; that is, not
all of such services may be used by Advisor in
connection with the Fund. Advisor believes it is not
possible to measure separately the benefits from
research services received by each of the accounts
(including the Fund) managed by it. Because the volume
and nature of the trading activities of the accounts
are not uniform, the amount of commissions in excess of
those charged by another broker (if any) paid by each
account for brokerage and research services will vary.
However, Advisor believes any such costs to the Fund
will not be disproportionate to the benefits received
by the Fund on a continuing basis.
As of January 1, 2000, Advisor will allocate to
the Fund all securities purchased in initial public
offerings in which Advisor's clients have the
opportunity to participate. Advisor believes that
through this policy, the greatest number of its
clients, direct and indirect, will benefit. Of course,
no assurance can be made that any such allocations to
the Fund will be profitable to Fund shareholders.
Advisor expects that, at the present rate of such
allocations, such allocations will not have a material
effect on the Fund's performance. Advisor generally
seeks to allocate portfolio transactions equitably
whenever concurrent decisions are made to purchase or
sell securities by the Fund and another advisory
account. In some cases, this procedure could have an
adverse effect on the price or the amount of securities
<PAGE>
available to the Fund. Other than as described above,
there can be no assurance that a particular purchase or
sale opportunity will be allocated to the Fund. In
making allocations between the Fund and other advisory
accounts, certain factors considered by Advisor are the
respective investment objectives, the relative size of
portfolio holdings of the same or comparable
securities, the availability of cash for investment,
and the size of investment commitments generally held.
The aggregate amount of brokerage commissions paid
by the Fund for the fiscal years ended September 30,
1998 and 1999 was $150,375 and $66,454, respectively.
During fiscal 1999, the Fund did not pay brokerage
commissions with respect to transactions for which
research services were provided; however, neither the
Fund nor Advisor had any agreement or understanding
with any broker or dealer to direct brokerage to such
broker or dealer because of research services provided.
The Fund, Advisor and Distributor have,
collectively, adopted a Code of Ethics, as required by
Rule 17j-1 of the 1940 Act. The Code of Ethics permits
personnel of Advisor and Distributor to invest in
securities for their own accounts, subject to various
conditions and certain restrictions. The Code of
Ethics is on public file with, and available from, the
Securities and Exchange Commission.
CUSTODIAN, TRANSFER AGENT, AND DIVIDEND-DISBURSING
AGENT
As custodian of the Fund's assets, Firstar Bank,
N.A., 615 East Michigan Street, Milwaukee, Wisconsin
53202, has custody of all securities and cash of the
Fund, delivers and receives payment for portfolio
securities sold, receives and pays for portfolio
securities purchased, collects income from investments,
if any, and performs other duties, all as directed by
the officers of the Fund. Firstar Bank has also agreed
to extend a redemption line-of-credit to the Fund
through July 31, 2000. Firstar Mutual Fund Services,
L.L.C., an affiliate of Firstar Bank, N.A., acts as
transfer agent and dividend-disbursing agent for the
Fund ("Transfer Agent").
ADMINISTRATOR AND FUND ACCOUNTANT
The Transfer Agent also provides administrative
and fund accounting services to the Fund pursuant to
separate administration and fund accounting agreements
dated as of October 1, 1997, as amended
("Administrative Agreement" and "Fund Accounting
Agreement," respectively). Under these Agreements, the
Transfer Agent calculates the daily net asset value of
each class of shares; prepares and files all federal
and state tax returns; oversees the Fund's insurance
relationships; participates in the preparation of
registration statements, proxy statements and reports;
prepares compliance filings relating to the
registration of the Fund's shares pursuant to state
securities laws; compiles data for and prepares notices
to the SEC; prepares financial statements for annual
and semi-annual reports; monitors the Fund's expense
accruals and performs securities valuations; monitors
compliance with the Fund's investment policies; and
generally assists in the Fund's administrative
operations. For the foregoing services, the Transfer
Agent receives from the Fund the following fees,
computed daily and payable monthly based on the average
net assets per class of shares: (i) pursuant to the
Administration Agreement, the Transfer Agent receives a
fee at the annual rate of 0.07 of 1% on the first $200
million, 0.05 of 1% on the next $400 million, and 0.03
of 1% on average net assets in excess of $600 million,
subject to an annual minimum of $70,000 (for all
classes of shares), plus out-of-pocket expenses; and
(ii) pursuant to the Fund Accounting Agreement, the
Transfer Agent receives a fee of $45,000 on the first
$100 million, 1.875 of 1% on the next $200 million, and
1.125 of 1% on average net assets in excess of $300
million, plus out-of-pocket expenses. For the fiscal
years ended September 30, 1998 and 1999, the Transfer
Agent received $150,195 and $231,702, respectively, for
its services under the Administration Agreement and
$57,693 and $71,076, respectively, for its services
under the Fund Accounting Agreement.
<PAGE>
DISTRIBUTOR
Under a distribution agreement dated as of October 1, 1997,
as amended and restated ("Distribution
Agreement"), Centennial Lakes Capital, Inc.
("Distributor") acts as principal distributor of the
Fund's shares. The Distributor's principal business
address is 7701 France Avenue South, Suite 500, Edina,
Minnesota 55435. The Distributor is controlled by
KHC, which in turn is controlled by LeRoy C. Kopp. Mr.
Kopp also controls Advisor. Accordingly, the
Distributor and Advisor are affiliated entities.
The Distribution Agreement provides that the
Distributor will use its best efforts to distribute the
Fund's shares, which shares are offered for sale
continuously at (i) net asset value per share plus a
maximum initial sales charge of 3.50% of the offering
price, in the case of Class A shares, and (ii) net
asset value per share without the imposition of a front-
end sales charge, in the case of Class C and Class I
shares. Investments in Class A shares above $1 million
are not assessed an initial sales charge. However, the
Distributor may impose a 1% contingent deferred sales
charge ("CDSC") on such shares redeemed within 24
months of purchase. The Distributor may also impose a
1% CDSC on Class C shares redeemed within 12 months of
purchase. In addition, redemptions of Class I shares
within 24 months of purchase may be charged a 1%
redemption fee. The Fund does not currently have any
arrangements that result in breakpoints in, or the
elimination of, sales charges or redemption fees for
directors and/or other affiliated persons of the Fund,
although the Fund has historically waived the initial
minimum investment requirements for such persons with
respect to their purchases of Class I shares. Certain
waivers and/or reductions of sales charges and
redemption fees are, however, available to other
persons and institutions, as described in the
Prospectus under the heading "Your Account." Any sales
charges assessed become the property of the
Distributor; redemption fees are the property of the
Fund.
With respect to Class A shares, the Distributor
may pay a portion of the applicable initial sales
charge due upon the purchase of such shares to the
broker-dealer, if any, involved in the trade, as
follows:
Portion of Initial
Dollar Amount Initial Sales Charge
of Shares Sales Paid to Broker-
Purchased Charge(1) Dealer(1)(2)
Up to $99,999 3.50% 3.00%
$100,000 - $249,999 3.00% 2.55%
$250,000 - $499,999 2.00% 1.70%
$500,000 - $999,999 1.00% 0.85%
$1,000,000 - $4,999,999 None None(3)
_____________________
(1) Reflected as a percentage of the offering price
of Class A shares. The offering price is the sum of
the net asset value per share plus the initial sales
charge indicated in the table ("Offering Price").
(2) At the discretion of the Distributor, all sales
charges may at times be paid to the broker-dealer,
if any, involved in the trade. A broker-dealer paid
all or substantially all of the sales charge may be
deemed an "underwriter" under the 1933 Act.
(3) The Distributor may, in its discretion and out
of its own assets, pay a 1% commission to broker-
dealers who initiate and are responsible for
purchases of Class A shares between $1,000,000 -
$4,999,999. The Distributor may also pay a 1%
commission to broker-dealers who initiate and are
responsible for purchases of Class C shares.
Pursuant to the terms of the Distribution
Agreement, the Distributor bears the costs of printing
prospectuses and shareholder reports which are used for
selling purposes, as well as advertising and any other
costs attributable to the distribution of Fund shares.
Certain of these expenses may be reimbursed pursuant to
the terms of the Rule 12b-1 distribution and
shareholder servicing plan discussed below.
As compensation for its services under the
Distribution Agreement, the Distributor may retain all
or a portion of (i) the initial sales charge from
purchases of Class A shares; (ii) the CDSC from
redemptions of Class A and Class C shares, if
applicable; and (iii) the Rule 12b-1 fees payable with
respect to the Class A and Class C shares (as described
under "Distribution and Shareholder Servicing Plan,"
below). For the fiscal years ended September 30, 1998
and 1999, the aggregate dollar amount of initial sales
charges imposed on purchases of Class A shares was
$10,604,987 and $923,997; the aggregate dollar amount
of CDSCs imposed on redemptions of Class A or Class C
<PAGE>
shares was $0 and $0; and the aggregate dollar amount
of Rule 12b-1 fees payable with respect to Class A or
Class C shares was $897,166 and $1,131,965,
respectively. Of these amounts, the Distributor
retained $1,992,628 and $181,831 from Class A sales
charges; $0 and $0 from Class A and Class C CDSCs; and
$55,083 and $129,086 from Class A and Class C 12b-1
fees.
ARRANGEMENTS WITH BROKER-DEALERS AND OTHER FINANCIAL
INTERMEDIARIES
The Distributor has entered into agreements with
registered broker-dealers pursuant to which such broker-
dealers have agreed to sell the Fund's shares to the
public. Certain of these broker-dealers have also
agreed to perform, with respect to shareholders who
purchase Fund shares through the broker-dealer, certain
shareholder servicing functions which would ordinarily
be performed by the Transfer Agent. The Fund has
agreed to compensate certain of these broker-dealers
for the shareholder services they provide and the
Transfer Agent, in turn, has agreed to reduce its
transfer agency and servicing fee by a like amount for
those shareholder accounts which are serviced by such
broker-dealers. Under these arrangements, the Fund,
however, will not pay more than $16 per year per
account in transfer agency and shareholder servicing
fees.
The Fund may also pay, directly or indirectly
through arrangements with Advisor and/or the
Distributor, amounts to financial intermediaries that
purchase shares of the Fund through an omnibus-type
account and provide administrative services relating to
the Fund to their customers; provided that the Fund
will not pay more for these services through
intermediary relationships than it would if the
intermediaries' customers were direct shareholders in
the Fund.
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN
Description of Plan
With respect to each class of shares, the Fund has
adopted a Rule 12b-1 plan under the 1940 Act ("Plan")
pursuant to which certain distribution and shareholder
servicing fees may be paid to the Distributor. Under
the terms of the Plan, the Class A and Class I shares
may be required to pay the Distributor (i) a
distribution fee for the promotion and distribution of
shares of up to 0.25% of the average daily net assets
of the Fund attributable to each class (computed on an
annual basis), and (ii) a shareholder servicing fee for
personal service provided to shareholders of up to
0.25% of the average daily net assets of the Fund
attributable to each class (computed on an annual
basis). Payments under the Plan with respect to Class
A shares are currently limited to 0.35%, which
represents a 0.10% distribution fee and a 0.25%
shareholder servicing fee; the Fund currently has no
intention of paying any Rule 12b-1 fees in connection
with the Class I shares. The Plan also provides that
the Class C shares may be required to pay the
Distributor (i) a distribution fee of up to 0.75% of
the average daily net assets of the Fund attributable
to such class (computed on an annualized basis) and
(ii) a shareholder servicing fee of up to 0.25% of the
average daily net assets of the Fund attributable to
such class (computed on an annual basis). The Fund
currently intends to make payments under the Plan with
respect to the Class C shares to the maximum extent
allowable under such Plan. The Distributor is
authorized, in turn, to pay all or a portion of these
fees to any registered securities dealer, financial
institution or other person ("Recipient") who renders
assistance in distributing or promoting the sale of
Fund shares, or who provides certain shareholder
services to Fund shareholders, pursuant to a written
agreement ("Rule 12b-1 Related Agreement"). To the
extent such fee is not paid to such persons, the
Distributor may use the fee for its own distribution
expenses incurred in connection with the sale of Fund
shares, or for any of its shareholder servicing
expenses. The Plan is a "reimbursement" plan, which
means that the fees paid by the Fund under the Plan are
intended to reimburse the Distributor for services
rendered and commission fees borne up to the maximum
allowable distribution and shareholder servicing fees.
If the Distributor is due more money for its services
rendered and commission fees borne than are immediately
payable because of the expense limitation under the
Plan, the unpaid amount is carried forward from period to
<PAGE>
period while the Plan is in effect until such time
as it may be paid. No interest, carrying, or other
finance charges will be borne by the Fund with respect
to unpaid amounts carried forward.
Payment of the distribution and servicing fees is
to be made quarterly, within 30 days after the close of
the quarter for which the fee is payable, after the
Distributor forwards to the Board of Directors of the
Fund a written report of all amounts expensed pursuant
to the Plan; provided, however, that the aggregate
payments by the Fund under the Plan to the Distributor
and all Recipients currently may not exceed 0.35% (on
an annualized basis) with respect to the Class A and
Class I shares, and 1.00% (on an annualized basis) with
respect to the Class C shares, of the average daily net
assets of the Fund attributable to each such class of
shares for that quarter.
From time to time, the Distributor may engage in
activities that jointly promote the sale of shares of
one or more classes of shares, the cost of which may
not be readily identifiable as related to any one
class. Generally, the distribution expenses
attributable to such joint distribution activities will
be allocated among each class of shares on the basis of
its respective net assets, although the Board of
Directors may allocate such expenses in any other
manner it deems fair and equitable.
The Plan, including a form of the Rule 12b-1
Related Agreement, has been unanimously approved by the
Board of Directors, including all of the members of the
Board who are not "interested persons" of the Fund as
defined in the 1940 Act and who have no direct or
indirect financial interest in the operation of the
Plan or any Rule 12b-1 Related Agreements
("Disinterested Directors") voting separately.
The Plan, and any Rule 12b-1 Related Agreement
which is entered into, will continue in effect for a
period of more than one year only so long as its
continuance is specifically approved at least annually
by a vote of a majority of the Fund's Board of
Directors, and of the Disinterested Directors, cast in
person at a meeting called for the purpose of voting on
the Plan, or the Rule 12b-1 Related Agreement, as
applicable. In addition, the Plan, and any Rule 12b-1
Related Agreement, may be terminated with respect to
any class at any time, without penalty, by vote of a
majority of the outstanding voting securities of the
applicable class, or by vote of a majority of
Disinterested Directors (on not more than 60 days'
written notice in the case of the Rule 12b-1 Related
Agreement only).
Amounts Expensed Under the Plan
For the fiscal year ended September 30, 1999, the
Fund paid out $1,131,965 under the Plan. Of this
amount, $64,156 was spent on advertising, $33,278 was
spent on printing and mailing prospectuses to other
than current shareholders, and $1,034,531 was spent on
compensation to broker-dealers. The Distributor
retained $129,086 of the amounts expensed under the
Plan.
As of September 30, 1999, unreimbursed expenses
which were incurred by the Distributor under the Plan
and which have been carried forward to fiscal 2000
amount to $733,440 (or 0.18% of the net assets
attributable to the Fund's Class A and Class C shares
as of September 30, 1999).
Interests of Certain Persons
With the exception of Advisor, in its capacity as
the Fund's investment advisor, and the Distributor, in
its capacity as principal distributor of Fund shares,
no "interested person" of the Fund, as defined in the
1940 Act, and no director of the Fund who is an
"interested person" has or had a direct or indirect
financial interest in the Plan or any Rule 12b-1
Related Agreement.
Anticipated Benefits to the Fund
The Board of Directors considered various factors
in connection with its decision to approve and continue
the Plan, including: (i) the nature and causes of the
circumstances which make implementation and
continuation of the Plan necessary and appropriate;
(ii) the way in which the Plan addresses those
circumstances, including the nature and amount of
expenditures; (iii) the nature of the anticipated
benefits; (iv) the merits of possible alternative plans
or pricing structures; (v) the relationship of the Plan
to other distribution efforts of the Fund,
<PAGE>
including the sales charge on Class A shares; and
(vi) the possible benefits of the Plan to any other
person relative to those of the Fund.
Based upon its review of the foregoing factors and
the material presented to it, and in light of its
fiduciary duties under relevant state law and the 1940
Act, the Board of Directors determined, in the exercise
of its business judgment, that the Plan was reasonably
likely to benefit the Fund and its shareholders in at
least one or several potential ways. Specifically, the
Board concluded that the Distributor and any Recipients
operating under Rule 12b-1 Related Agreements would
have little or no incentive to incur promotional
expenses on behalf of the Fund if a Rule 12b-1 plan
were not in place to reimburse them, thus making the
adoption of the Plan important to the initial success
and thereafter, continued viability of the Fund. In
addition, the Board determined that the payment of Rule
12b-1 fees to these persons should motivate them to
provide an enhanced level of service to Fund
shareholders, which would, of course, benefit such
shareholders. Finally, the Plan would help to increase
net assets under management in a relatively short
amount of time, given the marketing efforts on the part
of the Distributor and Recipients to sell Fund shares,
which should result in certain economies of scale.
While there is no assurance that the expenditure
of Fund assets to finance distribution of Fund shares
will have the anticipated results, the Board of
Directors believes there is a reasonable likelihood
that one or more of such benefits will result, and
since the Board will monitor the distribution and
shareholder servicing expenses of the Fund, it will be
able to evaluate the benefit of such expenditures in
deciding annually whether to continue the Plan.
PURCHASE, EXCHANGE, AND PRICING OF SHARES
Purchase of Shares
The Fund offers three classes of shares: Class A,
Class C and Class I. As discussed above under the
heading "Distributor," the Class A shares are offered
and sold subject to an initial sales charge (with
certain exceptions), while the Class C and Class I
shares are offered and sold without being subject to an
initial sales charge. In addition, a CDSC may be
charged on certain redemptions of Class A and Class C
shares and a redemption fee may be charged on certain
redemptions of Class I shares. Please see "Your
Account" in the Prospectus for more information.
As noted above, Class A shares may be purchased
without the imposition of an initial sales charge under
certain circumstances. In addition, the initial sales
charge may be reduced if multiple purchases of Class A
shares are combined. You may combine purchases of
Class A shares to take advantage of the breakpoints in
the sales charge schedule by participating in either
the Fund's Right of Accumulation ("ROA") program or by
executing a Letter of Intent ("LOI").
* Right of Accumulation. The ROA allows you to
purchase Class A shares at the sales charge applicable
to the sum of (i) the dollar amount then being
purchased, plus (ii) the higher of either (a) the
current market value (calculated at the applicable
Offering Price) or (b) the actual purchase price of all
Fund shares already held by you, your spouse, and your
minor children or you and members of a "qualified
group." A "qualified group" is one that was formed at
least one year prior to the ROA purchase, has a purpose
other than buying Fund shares at a discount, has more
than ten members, can arrange meetings between the
Distributor and group members, agrees to include Fund
literature in mailings to its members, agrees to
arrange for payroll deductions or other bulk
transmissions of investments to the Fund, and meets
other uniform criteria that allow the Distributor to
achieve cost savings in distributing shares of the
Fund. To receive the ROA, at the time of purchase, you
must give your investment professional, the
Distributor, or the Transfer Agent sufficient
information to determine whether the purchase will
qualify for a reduced sales charge.
<PAGE>
* Letter of Intent. You may also qualify for a
reduced sales charge on the purchase of Class A shares
by completing the LOI section of the account
application. By completing the LOI, you express an
intention to invest during the next 13-month period a
specified amount (minimum of at least $100,000) which,
if made at one time, would qualify for a reduced sales
charge. Any shares you own on the date you execute the
LOI may be used as a credit toward the completion of
the LOI. However, the reduced sales charge will only
apply to new purchases. Any redemptions made during
the 13-month period will be subtracted from the amount
of the purchases for purposes of determining whether
the terms of the LOI have been satisfied. If, at the
end of the 13-month period covered by the LOI, the
total amount of purchases (less redemptions) does not
equal the amount indicated, you will be required to pay
the difference between the sales charge paid at the
reduced rate and the sales charge applicable to the
purchases actually made. Shares equal to 5% of the
amount specified in the LOI will be held in escrow
during the 13-month period and are subject to
involuntary redemption to assure any payment of a
higher applicable sales charge. By signing the
purchase application and checking the box labeled
"Letter of Intent," you grant to the Distributor a
security interest in the reserved shares and appoint
the Distributor as attorney-in-fact to sell any or all
of the reserved shares to cover any additional sales
charges if you do not fulfill your undertaking.
Signing an LOI does not bind you to purchase the full
amount indicated, but you must complete the intended
purchase in accordance with the terms of the LOI to
obtain the reduced sales charge. For more information
on the LOI, please contact your investment
professional, the Distributor, or the Transfer Agent.
You may reach the Distributor or the Transfer Agent by
calling 1-888-533-KOPP.
The Fund also offers an Automatic Investment Plan
("AIP"), which is a method of using dollar cost
averaging. Dollar cost averaging is an investment
strategy that involves investing a fixed amount of
money at a regular time interval. By always investing
the same amount, you will be purchasing more shares
when the price is low and fewer shares when the price
is high. Since such a program involves continuous
investment regardless of fluctuating share values, you
should consider your financial ability to continue the
program through periods of low share price levels. A
program of regular investment cannot ensure a profit or
protect against a loss from declining markets.
The AIP allows you to make regular, systematic
investments in Class A or Class C shares of the Fund
from your bank checking account. The minimum initial
investment for investors using the AIP is $3,000. If
you elect this option, all dividends and capital gains
distributions will be automatically reinvested in Fund
shares. With respect to Class A shares, the sales
charge on future purchases may be reduced by using the
Fund's ROA or LOI. To establish the AIP, complete the
appropriate section in the account application. Under
certain circumstances (such as discontinuation of the
AIP before the minimum initial investment is reached),
the Fund reserves the right to close your account.
Prior to closing any account for failure to reach the
minimum initial investment, the Fund will give you
written notice and 60 days in which to reinstate the
AIP or otherwise reach the minimum initial investment.
Your account may be closed in periods of declining
share prices.
Under the AIP, you may choose to make investments
on certain days of each month (at least seven days
apart) in amounts of $50 or more. There is no service
fee charged by the Fund for participating in the AIP.
However, a service fee of $20 will be deducted from
your Fund account for any AIP purchase that does not
clear due to insufficient funds or, if prior to
notifying the Fund in writing or by telephone of your
intention to terminate the plan, you close your bank
account or in any manner prevent withdrawal of funds
from the designated checking account. You can set up
the AIP with most financial institutions.
If you purchase (or redeem) shares of the Fund
through a financial intermediary, certain features of
the Fund relating to such transactions may not be
available or may be modified. In addition, certain
operational policies of the Fund, including those
related to settlement and dividend accrual, may vary
from those applicable to direct shareholders of the
Fund and may vary among intermediaries. We urge you to
consult your financial intermediary for more
information regarding these matters. In addition, the
Fund may pay, directly or indirectly through
arrangements with Advisor and/or the Distributor,
amounts to financial intermediaries that provide
<PAGE>
transfer agent type and/or other administrative
services to their customers provided, however, that the
Fund will not pay more for these services through
intermediary relationships than it would if the
intermediaries' customers were direct shareholders in
the Fund. See "Arrangements with Broker-Dealers and
Other Financial Intermediaries." Certain financial
intermediaries may charge an advisory, transaction, or
other fee for their services. You will not be charged
for such fees if you purchase (or redeem) your Fund
shares directly from the Fund without the intervention
of a financial intermediary.
Exchange of Shares
You may exchange Class A or Class C shares for
Class I shares at any time so long as the Class I
minimum initial investment requirement is met. The
value of the shares to be exchanged will be the net
asset value (less the CDSC, if applicable) next
determined after receipt of instructions for exchange;
the price of the shares being purchased will be the net
asset value next determined after receipt of
instructions for exchange.
You may also exchange shares of the Fund for
shares of the Firstar Money Market Fund, a no-load
money market fund managed by an affiliate of the
Transfer Agent. The Firstar Money Market Fund is
unrelated to the Fund. This exchange privilege is a
convenient way to buy shares in a money market fund in
order to respond to changes in your goals or market
conditions. The value of the shares to be exchanged
will be the net asset value (less the CDSC, if
applicable, with respect to Class A or Class C shares
or the redemption fee, if applicable, with respect to
Class I shares) next determined after receipt of
instructions for exchange; the price of the shares
being purchased will be at net asset value. Before
exchanging into the Firstar Money Market Fund, please
read the applicable prospectus, which may be obtained
by calling 1-888-533-KOPP, and open an account in the
Firstar Money Market Fund.
The Fund reserves the right to modify or terminate
the exchange privilege at any time. Call the Transfer
Agent at 1-888-533-KOPP to request instructions for an
exchange. An exchange is not a tax-free transaction.
Pricing of Shares
The Class A shares of the Fund are offered to the
public at the Offering Price, which is the sum of the
net asset value per share (next computed after the time
the purchase application and funds are received in
proper order by the Transfer Agent) and the applicable
initial sales charge. The Class C and Class I shares
of the Fund are offered to the public at their net
asset value (next computed after the time the purchase
application and funds are received in proper order by
the Transfer Agent) without any initial sales charge.
As previously noted, the initial sales charge may
be waived for certain individuals and institutions due
to anticipated economies of scale in sales efforts and
expense. For more information, please see "Your
Account-Class A Front-End Sales Charge Waivers and
Reductions" in the Prospectus.
The net asset value per share for each class is
determined as of the close of trading (generally 4:00
p.m. Eastern Time) on each day the New York Stock
Exchange ("NYSE") is open for business. Purchase
orders and redemption requests received on a day the
NYSE is open for trading, prior to the close of trading
on that day, will be valued as of the close of trading
on that day. Applications for the purchase of shares
and requests for the redemption of shares received
after the close of trading on the NYSE will be valued
as of the close of trading on the next day the NYSE is
open. The Fund is not required to calculate its net
asset value on days during which the Fund receives no
orders to purchase or redeem shares. Net asset value
per share for each class of shares is calculated by
taking the market value of the total assets per class,
including interest or dividends accrued, but not yet
collected, less all liabilities, and dividing by the
total number of shares outstanding in that class. The
result, rounded to the nearest cent, is the net asset
value per share.
In determining net asset value, expenses are
accrued and applied daily and securities and other
assets for which market quotations are available are
valued at market value. Common stocks and other equity-
type securities are valued at the last sales price on
the national securities exchange or NASDAQ on which
such securities are primarily traded; however,
securities traded on a national securities exchange or
NASDAQ for which there were no transactions on a given
day, and securities not listed on a national securities
exchange or
<PAGE>
NASDAQ, are valued at the average of the
most recent bid and asked prices. Any securities or
other assets for which market quotations are not
readily available are valued at fair value as
determined in good faith by the Board of Directors of
the Fund or its delegate. The Board of Directors may
approve the use of pricing services to assist the Fund
in the determination of net asset value. All money
market instruments held by the Fund will be valued on
an amortized cost basis.
REDEMPTIONS IN KIND
The Fund has filed a Notification under Rule 18f-1
of the 1940 Act, pursuant to which it has agreed to pay
in cash all requests for redemption by any shareholder
of record, limited in amount with respect to each
shareholder during any 90-day period to the lesser
amount of (i) $250,000, or (ii) 1% of the net asset
value of the class of shares of the Fund being
redeemed, valued at the beginning of the election
period. The Fund intends to also pay redemption
proceeds in excess of such lesser amount in cash, but
reserves the right to pay such excess amount in kind,
if it is deemed to be in the best interest of the Fund
to do so. If you receive an in kind distribution, you
will likely incur a brokerage charge on the disposition
of such securities through a securities dealer.
TAXATION OF THE FUND
The Fund intends to qualify annually for treatment
as a "regulated investment company" under Subchapter M
of the Code and, if so qualified, will not be liable
for federal income taxes to the extent earnings are
distributed to shareholders on a timely basis. In the
event the Fund fails to qualify as a "regulated
investment company," it will be treated as a regular
corporation for federal income tax purposes.
Accordingly, the Fund would be subject to federal
income taxes and any distributions that it makes would
be taxable and non-deductible by the Fund. What this
means for shareholders of the Fund is that the cost of
investing in the Fund would increase. Under these
circumstances, it would be more economical for
shareholders to invest directly in securities held by
the Fund, rather than invest indirectly in such
securities through the Fund.
PERFORMANCE INFORMATION
The Fund's historical performance or return may be
shown in the form of various performance figures,
including average annual total return, total return,
and cumulative total return. The Fund's performance
figures are based upon historical results and are not
necessarily representative of future performance.
Factors affecting the Fund's performance include
general market conditions, operating expenses,
investment management, and the imposition of sales
charges. Any additional fees charged by a dealer or
other financial services firm would reduce the returns
described in this section.
Total Return
Average annual total return and total return
figures measure both the net investment income
generated by, and the effect of any realized and
unrealized appreciation or depreciation of, the
underlying investments in a class of shares over a
specified period of time, assuming the reinvestment of
all dividends and distributions. Average annual total
return figures are annualized and therefore represent
the average annual percentage change over the specified
period. Total return figures are not annualized and
therefore represent the aggregate percentage or dollar
value change over the period.
The average annual total return of each class of
shares is computed by finding the average annual
compounded rates of return over the periods that would
equate the initial amount invested to the ending
redeemable value, according to the following formula:
<PAGE>
P(1+T)n = 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 stated periods at
the end of the stated periods.
Performance for a specific period is calculated by
first taking an investment (assumed to be $1,000)
("initial investment") in a class of shares on the
first day of the period and computing the "ending
value" of that investment at the end of the period.
The total return percentage is then determined by
subtracting the initial investment from the ending
value and dividing the remainder by the initial
investment and expressing the result as a percentage.
With respect to the Class A shares, this calculation
reflects the deduction of the maximum 3.50% initial
sales charge. In addition, the calculation assumes
that all income and capital gains dividends paid by the
Fund have been reinvested at the net asset value of the
applicable class of shares on the reinvestment dates
during the period. Total return may also be shown as
the increased dollar value of the hypothetical
investment over the period.
Cumulative total return represents the simple
change in value of an investment over a stated period
and may be quoted as a percentage or as a dollar
amount. Total returns may be broken down into their
components of income and capital (including capital
gains and changes in share price) in order to
illustrate the relationship between these factors and
their contributions to total return.
The average annual total returns for the one year
period ended September 30, 1999 and since inception
(10/1/97) are as follows: Class A shares: 97.51% and
7.13%; Class I shares: 105.48% and 9.54%. The Class C
shares total return since inception on February 19,
1999 through September 30, 1999 was 46.48%.
Comparisons
From time to time, in marketing and other Fund
literature, the performance of one or more classes of
shares may be compared to the performance of other
mutual funds in general or to the performance of
particular types of mutual funds with similar
investment goals, as tracked by independent
organizations. Among these organizations, Lipper
Analytical Services, Inc. ("Lipper"), a widely used
independent research firm which ranks mutual funds by
overall performance, investment objectives, and assets,
may be cited. Lipper performance figures are based on
changes in net asset value, with all income and capital
gains dividends reinvested. Such calculations do not
include the effect of any sales charges. Each class of
shares of the Fund will be compared to Lipper's
appropriate fund category; that is, by fund objective
and portfolio holdings.
The Fund's performance may also be compared to the
performance of other mutual funds by Morningstar, Inc.
("Morningstar"), which ranks funds on the basis of
historical risk and total return. Morningstar's
rankings range from five stars (highest) to one star
(lowest) and represent Morningstar's assessment of the
historical risk level and total return of a fund as a
weighted average for 3, 5, and 10 year periods.
Rankings are not absolute or necessarily predictive of
future performance.
Evaluations of the 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.
Sources for Fund performance and articles about the
Fund may include publications such as Money, Forbes,
Kiplinger's, Financial World, Business Week, U.S. News
and World Report, The Wall Street Journal, Barron's,
and a variety of investment newsletters.
The Fund may compare the performance of one or
more classes of shares to a wide variety of indices and
measures of inflation, including the Russell 2000
Index. There are differences and similarities between
the investments that the Fund may purchase and the
investments measured by these indices.
<PAGE>
The Fund's performance may also be discussed
during television interviews of Advisor personnel
conducted by news organizations to be broadcast in the
United States and elsewhere.
INDEPENDENT ACCOUNTANTS
KPMG LLP, 4200 Norwest Center, 90 South Seventh
Street, Minneapolis, Minnesota 55402, have been
selected as the independent accountants for the Fund.
FINANCIAL STATEMENTS
The following audited financial statements of the
Fund are incorporated herein by reference to the Fund's
1999 Annual Report as filed with the SEC on November
30, 1999:
(a) Independent Auditors' Report.
(b) Schedule of Investments as of September 30, 1999.
(c) Statement of Assets and Liabilities as of September 30, 1999.
(d) Statement of Operations for the year ended September 30, 1999.
(e) Statements of Changes in Net Assets for
the years ended September 30, 1998 and 1999.
(f) Financial Highlights for the years ended
September 30, 1998 and 1999 for Class A
and Class I, and for the period from
February 19, 1999 through September 30, 1999 for Class C.
(g) Notes to Financial Statements.
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits
See "Exhibit Index."
Item 24. Persons Controlled by or under Common Control with Registrant
Registrant neither controls any person nor is
under common control with any other person.
Item 25. Indemnification
Article VIII of Registrant's Articles of
Incorporation provides as follows:
(a) The Corporation shall indemnify such persons
for such expenses and liabilities, in such manner,
under such circumstances, and to the full extent
permitted by Section 302A.521 of the MBCA, as now
enacted or hereafter amended.
(b) A director of the Corporation shall not be
personally liable to the Corporation or its
shareholders for monetary damages for breach of
fiduciary duty as a director, except for (i)
liability based on a breach of duty of loyalty to
the Corporation or the shareholders; (ii)
liability for acts or omissions not in good faith
or that involve intentional misconduct or a
knowing violation of law; (iii) liability based on
the payment of an improper dividend or an improper
repurchase of the Corporation's stock under MBCA
Section 302A.559 or on the sale of unregistered
securities or securities fraud under MBCA 80A.23;
or (iv) liability for any transaction from which
the director derived an improper personal benefit.
If the MBCA is hereafter amended to authorize the
further elimination or limitation of the liability
of directors, then the liability of a director of
the Corporation, in addition to the limitation on
personal liability provided herein, shall be
limited to the fullest extent permitted by the
MBCA, as amended. Any repeal or modification of
this Article VIII by the shareholders of the
Corporation shall be prospective only and shall
not adversely affect any limitation on the
personal liability of a director of the
Corporation existing at the time of such repeal or
modification.
(c) Paragraphs (a) and (b) of this Article VIII
are qualified by Section 17(h) of the 1940 Act
which provides that neither the articles of
incorporation nor the bylaws of any registered
investment company may contain any provision which
protects or purports to protect any director or
officer of such company against any liability to
the company or its security holders to which such
officer or director would otherwise be subject by
reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties
involved in the conduct of his or her office.
Item 26. Business and Other Connections of the Investment Advisor
Besides serving as investment advisor to the
Registrant and other private accounts, Advisor is not
currently and has not during the past two fiscal years
engaged in any other business, profession, vocation, or
employment of a substantial nature. Information
regarding the business, profession, vocation, or
employment of a substantial nature of Advisor's
directors and officers is hereby incorporated by
reference to the information contained under "Directors
and Officers" in the Statement of Additional
Information.
<PAGE>
Item 27. Principal Underwriters
(a) None.
(b) The principal business address of
Centennial Lakes Capital, Inc.
("Centennial"), the Registrant's principal
underwriter, is 7701 France Avenue South,
Suite 500, Edina, Minnesota 55435. The
following information relates to each
director and officer of Centennial:
Positions and Offices Positions and Offices
Name With Underwriter With Registrant
John Flakne Chief Executive Officer, Chief Financial Officer
Chief Financial Officer and Treasurer
Kathleen Tillotson Secretary Executive Vice President
and Secretary
Gregory Kulka Vice President Vice President
(c) None.
Item 28. Location of Accounts and Records
All accounts, books or other documents required to
be maintained by Section 31(a) of the Investment
Company Act of 1940, as amended, and the rules
promulgated thereunder, are in the possession of Kopp
Investment Advisors, Registrant's investment advisor,
at Registrant's corporate offices, except records held
and maintained by Firstar Bank, N.A. and Firstar Mutual
Fund Services, L.L.C., 615 East Michigan Street,
Milwaukee, Wisconsin 53202, relating to the former's
function as custodian and the latter's function as
transfer agent, administrator, and fund accountant.
Item 29. Management Services
All management-related service contracts entered
into by Registrant are discussed in Parts A and B of
this Registration Statement.
Item 30. Undertakings.
(a) Registrant undertakes to furnish a copy of its
Annual Report to each person to whom a Statement of
Additional Information is delivered if the person is
not a shareholder of the Fund at the time the Statement
of Additional Information is so delivered.
(b) Registrant undertakes to furnish a copy of its
Annual Report to each person to whom a Prospectus is
delivered, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act
of 1933 and the Investment Company Act of 1940, the
Registrant certifies that it meets all of the
requirements for effectiveness of this registration
statement under Rule 485(b) under the Securities Act of
1933 and has duly caused this Post-Effective Amendment
No. 3 to the Registration Statement on Form N-1A to be
signed on its behalf by the undersigned, duly
authorized, in the City of Edina and State of Minnesota
on the 24th day of January, 2000.
KOPP FUNDS, INC. (Registrant)
By: /s/ LeRoy C. Kopp
-------------------------------------
LeRoy C. Kopp
Chief Executive Officer and President
Each person whose signature appears below
constitutes and appoints LeRoy C. Kopp his true and
lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to
sign any and all amendments to this Registration
Statement and to file the same, with all exhibits
thereto, and any other documents in connection
therewith, with the Securities and Exchange Commission
and any other regulatory body, granting unto said
attorney-in-fact and agent, full power and authority to
do and perform each and every act and thing requisite
and necessary to be done, as fully to all intents and
purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact
and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act
of 1933, this Post-Effective Amendment No. 3 to the
Registration Statement on Form N-1A has been signed
below by the following persons in the capacities and on
the date(s) indicated.
Name Title Date
/s/ LeRoy C. Kopp Director January 24, 2000
- ------------------
LeRoy C. Kopp
/s/ Robert L. Stehlik Director January 24, 2000
- ----------------------
Robert L. Stehlik
/s/ Thomas R. Stuart Director January 24, 2000
- ----------------------
Thomas R. Stuart
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
(a.1) Registrant's Articles of Incorporation(1)
(a.2) Certificate of Amendment to
Registrant's Articles of Incorporation (to
create Class A and Class I shares)(2)
(a.3) Certificate of Designation
to Registrant's Articles of Incorporation (to
create Class C shares)(3)
(b) Registrant's By-Laws(1)
(c) None
(d) Investment Advisory Agreement(2)
(e.1) Amended and Restated Distribution Agreement(3)
(e.2 Form of Selected Dealer Agreement(2)
(f) None
(g) (i) Custodian Agreement(2)
(ii) Amendment to Custodian
Agreement (to add Class C shares)(3)
(iii) Addendum to Custodian
Agreement (to change name)(3)
(h.1) (i) Transfer Agency Agreement(2)
(ii) Amendment to Transfer Agency
Agreement (relating to fee)(3)
(iii) Amendment to Transfer Agency
Agreement (to add Class C shares)(3)
(iv) Amendment to Transfer Agency
Agreement (relating to fee)
(h.2) (i) Administration Agreement(2)
(ii) Amendment to Administration Agreement
(to add Class C shares)(3)
(h.3) (i) Fund Accounting Agreement(2)
(ii) Amendment to Fund Accounting Agreement
(to add Class C shares)(3)
(iii) Amendment to Fund Accounting
Agreement (relating to fee)
(h.4) (i) Fulfillment Servicing Agreement(2)
(ii) Amendment to Fulfillment Servicing Agreement
(to add Class C shares)(3)
(h.5) Addendum to Firstar Servicing Agreements (to change name)(3)
(i) Opinion and Consent of Godfrey & Kahn, S.C.(2)
(j) Consent of KPMG Peat Marwick LLP
<PAGE>
(k) None
(l) Initial Subscription Agreement(2)
(m.1) Rule 12b-1 Distribution and Shareholder
Servicing Plan, as amended(3)
(m.2) Form of 12b-1 Related
Agreement (for Class A and Class I shares)(2)
(m.3) Form of 12b-1 Related
Agreement (for Class C shares)(3)
(n) Rule 18f-3 Multi-Class Plan, as amended(3)
(o) None
(p) Code of Ethics
___________________
(1) Incorporated by reference to the Registrant's
Registration Statement on Form N-1A as filed with the
Securities and Exchange Commission on June 20, 1997.
(2) Incorporated by reference to the
Registrant's Registration Statement on Form N-1A as
filed with the Securities and Exchange Commission on
September 16, 1997.
(3) Incorporated by reference to the
Registrant's Registration Statement on Form N-1A as
filed with the Securities and Exchange Commission on
December 29, 1998.
Exhibit h.1(iv)
SECOND AMENDMENT TO TRANSFER AGENT SERVICING AGREEMENT
THIS SECOND AMENDMENT is made and entered into as
of this first day of October, 1999, by and between Kopp
Funds, Inc., a corporation organized under the laws of
the State of Minnesota (hereinafter referred to as
"Company") and Firstar Mutual Fund Services, LLC, a
limited liability company organized under the laws of
the State of Wisconsin (hereinafter referred to as
"FMFS").
WHEREAS, the Transfer Agent Servicing Agreement,
as amended, dated as of October 1, 1997 ("Agreement"),
between the Company and FMFS provides that the Company
shall pay FMFS an annual fee for each Class A
shareholder account of $16, except for the accounts
serviced by broker-dealers who have a National
Securities Clearing Corporation Matrix Levels I, II, or
III networking reimbursement agreement with Distributor
where the annual fee shall be $13;
WHEREAS, Centennial Lakes Capital, Inc., the
distributor of the Class A shares of the Company
("Distributor"), has entered into selling agreements
with certain broker-dealers pursuant to which these
broker-dealers will perform certain shareholder
servicing functions that FMFS performs for other Class
A shareholders of the Company;
WHEREAS, Company desires that FMFS reduce its
shareholder servicing fee for those accounts that are
serviced in part by broker-dealers;
NOW, THEREFORE, in consideration of the premises,
the Company and FMFS do mutually agree as follows:
Effective October 1, 1999, the Company shall pay
FMFS (i) an annual fee of $13 per National Securities
Clearing Corporation Matrix Level III accounts and (ii)
an annual fee for closed accounts per the following
schedule:
10/1/99 - 06/30/00 $10 per account
07/1/00 - 12/31/00 $ 9 per account
01/1/01 - ongoing $ 8 per account
Effective January 1, 2000, the Company shall pay
FMFS $1 per phone call serviced by a customer service
representative.
IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be executed by a duly authorized
officer on one or more counterparts as of the day and
year first written above.
KOPP FUNDS, INC. FIRSTAR MUTUAL FUND SERVICES, INC.
By: /s/ John Flakne By: /s/ Joseph Neuberger
--------------------- ----------------------------
John Flakne Joseph Neuberger
Attest: /s/ Kathy Tillotson Attest: /s/ Victoria A. Kampa
---------------------- ------------------------
Kathy Tillotson Victoria A. Kampa
<PAGE>
EXHIBIT A
Transfer Agent and Shareholder Servicing
Annual Fee Schedule
(Effective October 1, 1999 unless otherwise noted)
Separate Series of Kopp Funds, Inc.
Name of Series Dated Added
Kopp Emerging Growth Fund - Class A October 1, 1997
Kopp Emerging Growth Fund - Class I October 1, 1997
Kopp Emerging Growth Fund - Class C December 31, 1998
Annual Fees:
$16.00 per shareholder account - load fund (matrix level I, II or IV)
$13.00 per shareholder account - load fund (matrix level III)
$14.00 per shareholder account - no-load fund
$10.00 per closed shareholder account
(effective October 1, 1999 to June 30, 2000)
$ 9.00 per closed shareholder account
(effective July 1, 2000 to December 31, 2000)
$ 8.00 per closed shareholder account form
(effective January 1, 2001 and ongoing)
$ 1.00 per phone call serviced by a customer service representative
(effective January 1, 2000)
Minimum annual fees of $10,000 for each additional fund or class
Extraordinary services quoted separately
Plus Out-of-Pocket Expenses, including but not limited to:
Telephone - toll free lines Proxies
Postage Retention of records
Programming (with prior approval) Microfilm/fiche of records
Stationery/envelopes Special reports
Mailing ACH fees
Insurance NSCC charges
ACH Shareholder Services
$125.00 per month per fund group
$ .50 per account setup and/or change
$ .50 per ACH item
$ 3.50 per correction, reversal, return item
Qualified Plan Fees (Billed to Investors) *
Annual maintenance fee per account $12.50 / acct. (Cap at $25.00 per SSN)
Education IRA $ 5.00 / acct. (Cap at $25.00 per SSN)
Transfer to successor trustee $15.00 / trans.
Distribution to participant $15.00 / trans. (Exclusive of SWP)
Refund of excess contribution $15.00 / trans.
Additional Shareholder Fees (Billed to Investors)
Any outgoing wire transfer $12.00 / wire
Return check fee $20.00 / item
Stop payment $20.00 / stop
(Liquidation, dividend, draft check)
Research fee $ 5.00 / item
(For requested items of the second calendar year [or previous]
to the request) (Cap at $25.00)
<PAGE>
EXHIBIT B
NSCC and DAZL
Out-of-Pocket Charges
NSCC Interfaces
Setup
Fund/SERV, Networking ACATS, Exchanges $5,000 setup (one time)
Commissions $5,000 setup (one time)
Processing
Fund/SERV $ 50.00 / month
Networking $250.00 / month
CPU Access $ 40.00 / month
Fund/SERV Transactions $ .35 / trade
Networking - per item $ .025 / monthly dividend fund
Networking - per item $ .015 / non-mo. dividend fund
First Data $ .10 / next-day Fund/SERV trade
First Data $ .15 / same-day Fund/SERV trade
NSCC Implementation
8 to 10 weeks lead time
DAZL (Direct Access Zip Link - Electronic mail interface to
financial advisor network)
Setup $5,000 / fund group
Monthly Usage $1,000 / month
Transmission $ .015 / price record
$ .025 / other record
Enhancement $ 125 / hour
Fees and out-of-pocket expenses are billed to the fund monthly
Exhibit h.3(iii)
AMENDMENT TO FUND ACCOUNTING SERVICING AGREEMENT
THIS AMENDMENT is made and entered into as of this
first day of January, 2000, by and between Kopp Funds,
Inc., a corporation organized under the laws of the
State of Minnesota (hereinafter referred to as
"Company") and Firstar Mutual Fund Services, LLC, a
limited liability company organized under the laws of
the State of Wisconsin (hereinafter referred to as
"FMFS").
WHEREAS, the Fund Accounting Servicing Agreement
dated as of October 1, 1997 ("Agreement"), between the
Company and FMFS provides that the Company shall pay
FMFS as follows:
Domestic Equity Funds (reflects fee for 3 classes)
$33,000 for the first $40 million
1.50 of 1% (1.50 basis points) on the next $200 million
0.75 of 1% (0.75 basis points) on average net assets exceeding $240 million
Plus out-of-pocket expenses, including pricing service:
Domestic and Canadian Equities $0.15
Options $0.15
Corp/Gov/Agency Bonds $0.50
CMO's $0.80
International Equities and Bonds $0.50
Municipal Bonds $0.80
Money Market Instruments $0.80
WHEREAS, FMFS has instituted new fees as of the
day and year first written above;
THEREFORE, in consideration of the mutual
agreements herein made, the Company and FMFS agree as
follows:
Domestic Equity Funds (reflects fee for 3 classes)
$45,000 for the first $100 million
1.875 of 1% (1.875 basis points) on the next $200 million
1.125 of 1% (1.125 basis points) on average net assets exceeding $300 million
Plus out-of-pocket expenses, including pricing service:
Domestic and Canadian Equities $0.15
Options $0.15
Corp/Gov/Agency Bonds $0.50
CMO's $0.80
International Equities and Bonds $0.50
Municipal Bonds $0.80
Money Market Instruments $0.80
IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be executed by a duly authorized
officer on one or more counterparts as of the day and
year first written above.
KOPP FUNDS, INC. FIRSTAR MUTUAL FUND SERVICES, INC.
By: /s/ John Flakne By: /s/ Joseph Neuberger
-------------------- ---------------------------
John Flakne Joseph Neuberger
Attest: /s/ Kathy Tillotson Attest: /s/ Victoria A. Kampa
----------------------- ------------------------
Kathy Tillotson Victoria A. Kampa
<PAGE>
EXHIBIT A
Fund Accounting Services
Annual Fee Schedule
(Effective January 1, 2000)
Name of Series Dated Added
Kopp Emerging Growth Fund - Class A October 1, 1997
Kopp Emerging Growth Fund - Class I October 1, 1997
Kopp Emerging Growth Fund - Class C December 31, 1998
Domestic Equity Funds (reflects fee for 3 classes)
$45,000 basis points on the first $100 million
1.875 basis points on the next $200 million
1.125 basis points on average net assets exceeding $300 million
Plus out-of-pocket expenses, including pricing service:
Domestic and Canadian Equities $0.15
Options $0.15
Corp/Gov/Agency Bonds $0.50
CMO's $0.80
International Equities and Bonds $0.50
Municipal Bonds $0.80
Money Market Instruments $0.80
Fees and out-of-pocket expenses are billed to the fund monthly
Exhibit j
Consent of Independent Auditors
The Shareholders and Board of Directors
of Kopp Funds, Inc.:
We consent to the reference to our Firm in the
Prospectus under the heading "Financial Highlights of
the Fund" and in the Statement of Additional
Information under the heading "Independent
Accountants." In addition, we consent to the
incorporation by reference into the Statement of
Additional Information under the heading "Financial
Statements" of our report on the Fund's financial
statements for the year ended September 30, 1999, which
report is included in the Fund's 1999 Annual Report.
/s/ KPMG LLP
- ----------------------
KPMG LLP
Minneapolis, Minnesota
January 24, 2000
Exhibit (p)
Effective as of October 1, 1999
KOPP FUND GROUP
CODE OF ETHICS
I. PURPOSE AND CONSTRUCTION
This Code of Ethics ("Code") is adopted by Kopp
Investment Advisors, Inc. ("KIA"), Centennial Lakes
Capital, Inc. ("CLC"), and each investment company for
which KIA serves as investment adviser. Such
investment companies or, as appropriate, series
thereof, are individually referred to as a "Fund" and
collectively referred to as the "Funds." The purpose
of the Code is to prevent violations of certain
provisions of the Investment Company Act of 1940, as
amended ("1940 Act"), the Investment Advisers Act of
1940, as amended ("Advisers Act"), and the rules and
regulations thereunder. The Code establishes
procedures designed to prevent and detect violations of
such provisions; to ensure that employees comply with
their fiduciary obligations to KIA clients, including
the Funds; and to prevent employees with access to
certain information from engaging in investment
activities that might be harmful to the interests of
KIA's clients or that might enable employees to profit
illicitly from their relationship to KIA and its
clients. Effective as of October 1, 1999, this Code
supersedes the previous code of ethics and policies and
procedures of KIA.
II. DEFINITIONS
A. "Access Person" means any employee of Kopp Holding
Company.
B. "Advisory Person" means any Access Person who
makes any securities recommendation, participates in
the determination of which recommendation shall be
made, or whose functions or duties relate to the
determination of which recommendation shall be made.
C. "Affiliated Person" of another person means:
(1) any person directly or indirectly controlling,
controlled by, or under common control with such other
person;
(2) any officer, director, or employee of such other
person;
(3) if such other person is an investment company, any
investment adviser thereof or any member of an advisory
board thereof; and
(4) if such other person is an unincorporated
investment company not having a board of directors, the
depositor thereof.
D. "Beneficial Ownership" shall be determined in
accordance with the definition of "beneficial owner"
set forth in Rule 16a-1(a)(2) under the Securities
Exchange Act of 1934, as amended, that is, a person
must have a "direct or indirect pecuniary interest" to
have "Beneficial
<PAGE>
Ownership" of a Security. Although
the following list is not exhaustive, under the Rule
and this Code a person generally would be regarded to
be the beneficial owner of the following securities:
(1) securities held in the person's own name;
(2) securities held with another in joint tenancy, as
tenants in common, or in other joint ownership;
(3) securities held by a bank or broker as nominee or
custodian on such person's behalf or pledged as
collateral for a loan;
(4) securities held by members of the person's
immediate family sharing the same household ("immediate
family" means any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, sibling, mother-in-
law, father-in-law, son-in-law, daughter-in-law,
brother-in-law or sister-in-law, including adoptive
relationships);
(5) securities held by a relative not residing in the
person's home if the person is a custodian, guardian,
or otherwise has controlling influence over the
purchase, sale, or voting of such securities;
(6) securities held by a trust in which the person is
a beneficiary and has or shares the power to make
purchase or sale decisions;
(7) securities held by a trust for which the person
serves as a trustee and in which the person has a
pecuniary interest (including pecuniary interests by
virtue of performance fees and by virtue of holdings by
the person's immediate family);
(8) securities held by a general partnership or
limited partnership in which the person is a general
partner; and
(9) securities owned by a corporation that is an
Affiliated Person of the person.
E. "Client" means any person to whom KIA provides
investment advisory services for a fee, including the
Funds.
F. "Control" means the power to exercise a
controlling influence over the management or policies
of a company, unless such power is solely the result of
an official position with such company.
G. "Disinterested Director" means a Fund director who
is not an officer, director, or employee of Kopp
Holding Company or who is not otherwise an "interested
person" of such Fund as defined in 1940 Act Section
2(a)(19).
H. "Personal Securities Transaction" means a
transaction in a Security in which an individual has or
thereby acquires Beneficial Ownership. A person shall
be considered to be "engaging in" or "effecting" a
Personal Securities Transaction if such a Security is
involved, regardless of whether the transaction is
effected by that person or by some other person (such
as an immediate family member).
<PAGE>
I. "Purchase or Sale of a Security" includes any
contract to purchase or sell a Security, such as the
writing of an option to purchase or sell a Security.
J. "Security" has the meaning set forth in 1940 Act
Section 2(a)(36) - any note, stock, treasury stock,
bond, debenture, evidence of indebtedness, certificate
of interest or participation in any profit-sharing
agreement, collateral-trust certificate,
preorganization certificate or subscription,
transferable share, investment contract, voting-trust
certificate, certificate of deposit for a security,
fractional undivided interest in oil, gas, or other
mineral rights, any put, call, straddle, option, or
privilege on any security (including a certificate of
deposit) or on any group or index of securities
(including any interest therein or based on the value
thereof), or any put, call, straddle, option, or
privilege entered into on a national securities
exchange relating to foreign currency, or, in general,
any interest or instrument commonly known as a
`security', or any certificate of interest or
participation in, temporary or interim certificate for,
receipt for, guarantee of, or warrant or right to
subscribe to or purchase, any of the foregoing, except
that it shall not include securities issued by the
government of the United States, bankers' acceptances,
bank certificates of deposit, commercial paper and
shares of registered open-end investment companies.
III. RESTRICTIONS
A. Nondisclosure of Information. No Access
Person, Affiliated Person of an Access Person, or
Disinterested Director shall divulge to any person
contemplated or completed securities transactions of
any Client, except in the performance of his or her
duties, unless such information previously has become a
matter of public knowledge.
B. Section 17(d) Limitations. Neither any
Affiliated Person of a Fund, nor CLC, nor any
Affiliated Person of such person or of CLC, acting as
principal, shall enter into any transaction with a Fund
in contravention of 1940 Act Section 17(d) and the
rules and regulations thereunder.
C. Proscribed Activities. No Access Person,
Affiliated Person of an Access Person, or Disinterested
Director shall engage in any activity prohibited by
1940 Act Rule 17j-1(a) or Advisers Act Sections 206(1)
and (2). As a general matter, these provisions
prohibit (1) any device scheme, or artifice to defraud
any Client, (2) any untrue statement of a material fact
or omission to state a material fact necessary in order
to make the statements made, in light of the
circumstances under which they were made, not
misleading, (3) any act, practice, or course of
business that operates or would operate as a fraud or
deceit upon any Client or (4) any manipulative practice
with respect to any Client. The foregoing conduct also
may violate other antifraud provisions of the federal
securities laws.
D. Prohibition on Trading While In Possession of
Material Non-Public Information. No Access Person may
seek an improper benefit for himself or herself, a
Client, or anyone else from material, non-public
information about issuers, whether or not the
securities of such issuers are held in Client
portfolios or suitable for inclusion in their
portfolios. Any Access Person who believes he or she
may be in possession of such information and seeks to
act on it, should contact the General Counsel of KIA
immediately. This prohibition does not preclude an
Advisory Person from contacting officers and employees
of issuers or other investment professionals in
<PAGE>
seeking information about issuers and otherwise legally
performing his or her role as an Advisory Person.
E. Obligation to Exercise Best Judgment. An
Advisory Person shall act on his or her best judgment
in placing or recommending, or deciding not to place or
recommend, any transaction on behalf of a Client. An
Advisory Person shall not take into consideration his
or her personal financial situation in connection with
decisions regarding portfolio transactions by or on
behalf of a Client.
F. General Principles of Personal Investing. No
Access Person shall engage in any Personal Securities
Transaction that he or she has reason to know will be
detrimental to the best interests of any Client. When
engaging in Personal Securities Transactions, an Access
Person shall place Clients' interests first and conduct
such transactions in accordance with this Code and in
such a manner as to avoid any actual conflict of
interest or abuse of any such person's position of
trust and responsibility.
G. Limitations on Personal Securities
Transactions. (The Chief Executive Officer (CEO) of
KIA or his designee may grant exceptions to these
restrictions in cases of hardship or other appropriate
circumstances, such as the best interest of a Client.)
(1) Limitations Related to Timing of
Transactions. The timing of Personal Securities
Transactions shall be limited as follows:
(a) An Access Person shall not engage in
a Personal Securities Transaction with respect
to a particular Security on a day during which
any Client account has a pending "buy" or
"sell" order for the same Security until the
Client order is either executed or withdrawn
to the best knowledge of the Access Person.
(b) An Access Person shall not engage in
a Personal Securities Transaction with respect
to a particular Security (i) within two
calendar days before or after a Fund account
trades in the same Security or (ii) on the
same day that a Fund account trades in the
same Security.
(2) Initial Public Offering Limitations. An
Access Person shall not engage in any Personal
Securities Transaction that involves the purchase
of Securities in an initial public offering.
(3) Private Placement Limitations. Personal
Securities Transactions involving unregistered
Securities shall be limited as follows:
(a) An Access Person shall not engage in
any Personal Securities Transaction of a
private placement of Securities.
(b) An Access Person who has a
Beneficial Ownership interest in any Security
obtained through a prior private placement
shall disclose any such interest to KIA if and
when he or she becomes involved in a
subsequent investment decision relating to
that issuer.
<PAGE>
(4) Application to Disinterested Directors. These
restrictions shall not apply to a Disinterested
Director, provided that he or she has no actual
knowledge of information regarding the purchase and
sale of a Security by a Fund.
(5) Reports. KIA shall maintain and make available
written records of all actions taken under Section III
G hereof in the manner required by Rule 17j-1(d) under
the 1940 Act.
H. Prior Clearance of Personal Securities
Transactions. An Access Person may not enter an order
for a Personal Securities Transaction without first
obtaining the approval of the CEO or his or her
designee. Before effecting such a transaction, the
person shall notify the CEO or his or her designee of
the proposed transaction, including the amount of the
transaction and the Security involved. The CEO or his
or her designee, after appropriate inquiry, shall
determine whether such transaction is consistent with
the Code and shall promptly communicate to the person
making such request any determination that the
transaction is inconsistent with this Code.
Transaction clearances may be obtained only on the day
of the purchase or sale of a Security. Absent
extraordinary circumstances, no person shall be deemed
to have violated the Code for effecting a Personal
Securities transaction if such person has not been
advised by the CEO, or his or her designee, that the
transaction would be inconsistent with the Code. KIA
shall maintain and make available written records of
all actions taken under this Section III H in the
manner required by Rule 17j-1(d) under the 1940 Act.
The prior clearance requirements set forth herein shall
not apply to Disinterested Directors. When an Access
Person engages in a Personal Securities Transaction
placed through a trading desk other than KIA's, the
Access Person shall use his or her best efforts to
place the order or direct that the broker execute the
transaction after 2 p.m. that same day.
IV. REPORTING REQUIREMENTS
A. Initial and Annual Reports. Within ten days of
commencing employment and annually thereafter, each
Access Person shall submit to KIA a report of all
Securities owned by such Access Person or in which such
Access Person otherwise has a Beneficial Ownership
interest.
B. Duplicate Brokerage Statements. Every Access
Person shall direct his or her brokers to supply to KIA
on a monthly basis duplicate copies of periodic
statements for all Securities accounts.
C. Quarterly Report. No later than ten days after
the end of each calendar quarter, if requested, each
Access Person and Disinterested Director shall submit a
report which shall specify the following information
with respect to transactions during the then ended
calendar quarter in any Security in which such Access
Person or Disinterested Director has, or by reason of
such transaction acquired, any direct or indirect
Beneficial Ownership:
(1) the date of the transaction, the nature
of the transaction, the title and the number of
shares, and the principal amount of each Security
involved;
(2) the price at which the transaction was effected; and
<PAGE>
(3) the name of the broker, dealer, or bank
with or through whom the transaction was effected.
If no transactions have occurred during the
period, the report shall so indicate. Any report
required to be made pursuant to this Section IV C may
contain a statement that the report shall not be
construed as an admission by the person making such
report that he or she has any direct or indirect
Beneficial Ownership in the Security to which the
report relates.
D. Limitations on Reporting Requirements.
Notwithstanding the provisions of Sections IV A, B, and
C, no Access Person shall be required to make a report
or pre-clear a trade:
(1) with respect to transactions effected
for any account over which such person does not
have any direct or indirect influence or control;
or
(2) if such person is a Disinterested
Director, except that such Disinterested Director
shall file a quarterly report pursuant to Section
IV C hereof where such director knew or, in the
ordinary course of fulfilling his or her official
duties as a director of a Fund, should have known
that during the 15-day period immediately
preceding or after the date of the transaction in
a Security by the director, such Security is or
was purchased or sold by a Fund or such purchase
or sale by a Fund is or was considered by KIA on
behalf of the Fund.
E. Filing of Reports. All reports prepared
pursuant to this Article IV shall be filed with the
Operations Department of KIA.
F. Periodic Review. At least once each month, the
Operations Department shall review the records of each
Access Person's Personal Securities Transactions to
determine whether such transactions comply with the
provisions of this Code. The Operations Department
shall also review all initial, quarterly, and annual
reports.
G. Reports to Fund Board of Directors. Annually
on behalf of the Fund, CLC, and itself, KIA shall
prepare a written report to all Fund Boards of
Directors containing substantially the following
information:
(1) a certificate that the reporting person
has adopted procedures reasonably necessary to
prevent Access Persons from violating the Code,
and
(2) a list of any material violations that
required significant remedial action and the
action taken to remedy the violation.
V. ENFORCEMENT AND SANCTIONS
A. General. All material violations or apparent
violations of the Code shall be brought to the
attention of the CEO and General Counsel of KIA. The
appropriate individual or individuals shall determine
whether a material violation has occurred, and if so
found, sanctions may be imposed. Such sanctions may
include disgorgement of profits, charitable donation,
or any other reasonable or appropriate remedy.
<PAGE>
B. Non-Exclusivity of Sanctions. With respect to
violations involving a Fund, the imposition of
sanctions hereunder by KIA shall not preclude the
imposition of additional sanctions by the Board of
Directors of such Fund and shall not be deemed a waiver
of any rights by such Fund. Prior to any such
determination by a Fund's Board of Directors, the
person charged with a material violation shall have an
opportunity to respond to the charges in front of such
Board of Directors.
C. Certification of Compliance. Each Access
Person must certify annually in writing that (1) he or
she has read and understand the Code and recognizes
that he or she is subject hereto, (2) he or she has
complied with the requirements of the Code, and (3) he
or she has reported all Personal Securities
Transactions required to be disclosed or reported
pursuant to the requirements of the Code. KIA shall
maintain and make available copies of such written
certifications in the manner required by 1940 Act Rule
17j-1(d).
VI. GIFTS AND DIRECTORSHIPS
A. Gifts. No Access Person shall accept any
material gift or other thing of more than de minimis
value with respect to any Client account, including a
Fund, from any person or entity that does business with
KIA. This policy covers, among other things, gifts,
favors, gratuities, and social invitations offered by
any broker, Client, supplier, or other person or
organization with whom KIA has a business relationship.
B. Service as Director. An Access Person may not
serve as a director of a publicly traded company
without the prior written authorization of the CEO or
KIA. Should any Access Person receive such
authorization, any transaction by any Client account
involving the Securities of any such publicly traded
company while such Access Person is serving as a
director will be required to be approved in advance, in
writing, by the CEO of KIA.
C. Disinterested Directors. The restrictions set
forth in this section shall not apply to Disinterested
Directors.
VII. MISCELLANEOUS PROVISIONS
A. Amendment. KIA reserves the right to amend
this Code of Ethics, including the definition of Access
Person and Advisory Person, provided that any such
amendment shall be consistent with the 1940 Act and
other applicable securities laws.
B. Maintenance of Records. KIA shall, on its own
behalf and on behalf of the funds and CLC, maintain and
make available records with respect to the
implementation of the Code in the manner and for the
time required by the federal securities laws, including
without limitation 1940 Act Rule 17j-1(d) and Advisers
Act Rule 204-2(a)(12).
