<PAGE>
<PAGE>
Prospectus January 18, 1999
Marsico Focus Fund
For Investors Seeking Long-Term Growth of Capital
Marsico Growth & Income Fund
For Investors Seeking Long-Term Growth of Capital
with a Limited Emphasis on Income
The Securities and Exchange Commission has not approved or disapproved
these securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
[LOGO]
Marsico Funds
We do the work.(SM)
<PAGE>
<PAGE>
Your Guide
to the Prospectus
This Prospectus is designed to help you make an informed decision about
whether investing in the Marsico Focus Fund ("Focus Fund") or the
Marsico Growth & Income Fund ("Growth & Income Fund") is appropriate for
you. When we are discussing the Focus Fund and the Growth & Income Fund
together, we will refer to them as the "Funds." The investment adviser
for both Funds is Marsico Capital Management, LLC (the "Adviser").
We have divided the Prospectus into four sections to make it easy for
you to find what you are looking for.
The first section, The Funds, contains a discussion of the objectives,
principal risks, performance history, and fees of each Fund. In
particular, this section tells you four important things about each
Fund:
* Each Fund's investment goal - what the Fund is trying to achieve.
* The principal investment policies of each Fund - how each Fund
tries to meet its investment goal.
* The investment selection process used by each Fund - this section
specifies each Fund's primary types of investments and principal
investment strategies.
* Risks you should be aware of - the principal risks associated with
each Fund.
The other three sections of the Prospectus - Who Manages the Funds, How
to Buy and Sell Shares, and Financial Highlights - provide detailed
information about how the Funds are managed, the services and privileges
available to the Funds' shareholders, how shares are priced, how to buy
and sell shares, and financial information.
PROSPECTUS 2<PAGE>
<PAGE>
Table of Contents
The Funds 4
- ---------------------------------------------------------
The Goals of Each Fund 4
The Principal Investments and Policies of the Funds 4
Other Investment Policies of the Funds 5
The Investment Selection Process Used by the Funds 6
The Principal Risks of Investing in the Funds 7
Performance History 10
Expenses 11
Who Manages the Fund 13
- ---------------------------------------------------------
The Investment Adviser 13
The Portfolio Manager 13
How to Buy and Sell Shares 14
- ---------------------------------------------------------
Pricing of Fund Shares 14
Instructions For Opening and Adding to an Account 15
Telephone and Wire Transactions 16
Additional Purchase Information 17
Instructions For Selling Fund Shares 19
Additional Redemption Information 20
How to Exchange Shares 22
Retirement Services Plan 23
Automatic Services for Fund Investors 25
Shareholder Communications 26
Dividends and Distributions 26
Taxes 26
Financial Highlights 28
- ---------------------------------------------------------
PROSPECTUS 3
<PAGE>
<PAGE>
The Funds
The Goals of Each Fund
........................................................................
* The Focus Fund seeks long-term growth of capital.
* The Growth & Income Fund seeks long-term growth of capital with a
limited emphasis on income.
The Principal Investments and
Policies of the Funds
........................................................................
* The Focus Fund invests primarily in the common stocks of large
companies, normally a core position of 20-30 common stocks that
are selected for their long-term growth potential.
* The Growth & Income Fund invests primarily in the common stocks of
large companies that are selected for their growth potential. In
addition, at least 25% of its total assets are invested in
securities that have income potential. The Adviser may shift
assets between the growth and income components of the Fund
depending on its analysis of relevant market, financial, and
economic conditions. However, investors should keep in mind that
the Growth & Income Fund is not designed to produce a consistent
level of income.
* The Focus Fund is a "non-diversified" portfolio, which means that
it can invest in fewer securities at any one time than diversified
portfolios. Conversely, the Growth & Income Fund is a "diversi-
THE FUNDS' GOALS may be changed by the Board of Trustees without
shareholder approval. You will receive advance written notice of any
material changes to your Fund's goals.
A WORD ABOUT THE FUNDS: The Funds are mutual funds, which are pooled
investment vehicles that are professionally managed and that give you
the opportunity to participate in financial markets. The Funds strive to
reach their stated goals, although no assurances can be given that they
will achieve their goals. Investments in the Funds are not bank deposits
and are not insured by the FDIC or any government agency. The Funds do
not represent complete investment programs. You could lose money by
investing in the Funds.
PROSPECTUS 4
<PAGE>
<PAGE>
fied" portfolio, which means that it is required to invest in the
securities of a greater number of companies and other issuers than
a non-diversified portfolio. (Please refer to the side panel on
page 6 for more information).
* Both Funds may invest without limit in foreign securities. These
investments may be publicly traded in the United States or on a
foreign exchange, and may be bought and sold in a foreign
currency. The Adviser generally selects foreign securities on a
stock-by-stock basis based on growth potential.
* Under adverse market conditions or in the event of exceptional
redemption requests, each Fund may hold cash or cash-equivalents
and invest without limit in money market securities, U.S.
government obligations and short-term debt securities. Under these
circumstances, the Funds may not participate in stock market
advances or declines to the same extent that they would if they
remained more fully invested in common stocks. Both Funds may also
purchase high-grade commercial paper, certificates of deposit, and
may enter into repurchase agreements.
Other Investment Policies of the Funds
........................................................................
* Primarily for hedging purposes, the Funds may use options,
including options on securities and securities indices, futures,
and foreign currency contracts.
* Because income is a part of the Growth & Income Fund's goal, in
addition to investing in stocks with dividend paying
characteristics, the Fund may invest up to 25% of its total assets
in debt securities, including high-yield bonds and mortgage and
asset backed securities. As part of this portion of the Growth &
Income Fund's portfolio, the Fund may also invest a total of up to
5% of its total assets for non-hedging purposes in options,
futures and other types of derivatives, including forward
contracts, swap-related products, zero
"LARGE COMPANIES": Both Funds invest primarily in the equity securities
of large companies that the Adviser believes have earnings growth
potential. Large companies are often referred to as "large
capitalization" companies because they typically have a market
capitalization of $5 billion or more. Market capitalization is
calculated by multiplying the number of shares outstanding by the stock
price of the company.
MORTGAGE AND ASSET BACKED SECURITIES represent shares in a pool of
mortgages or other debt, like car loans. These securities involve
prepayment risk, which is the risk that the underlying mortgages or
other debt may be refinanced or paid off prior to their maturities
during a period of declining interest rates.
HIGH-YIELD BONDS are securities that involve the risk that the issuer
may not be able to meet its payment obligation. For this reason, high-
yield bonds are given a low to medium credit rating by Moody's (Baa and
lower) and Standard & Poors (BBB and lower), and are considered to be
mostly speculative in nature.
PROSPECTUS 5
<PAGE>
<PAGE>
coupon, pay-in-kind, and step coupon securities.
* Under normal market conditions, the Focus Fund may invest up to
10% of its total assets in all types of fixed income securities
and up to 5% of its total assets in high-yield bonds and mortgage
and asset backed securities.
* Each Fund may invest up to 15% of its net assets in illiquid
investments, which are securities that cannot be sold or disposed
of quickly in the normal course of business. The Funds may also
invest in the securities of other investment companies to a
limited extent and intend to do so primarily for cash management
purposes.
The Investment Selection Process Used by the Funds
........................................................................
In selecting investments for the Funds, the Adviser uses an approach
that combines "top-down" economic analysis with "bottom-up" stock
selection.
* The "top-down" approach takes into consideration such macro-
economic factors as interest rates, inflation, the regulatory
environment, and the global competitive landscape. In addition,
the Adviser also examines such factors as the most attractive
global investment opportunities, industry consolidation, and the
sustainability of economic trends. As a result of the "top-down"
analysis, the Adviser identifies sectors, industries, and
companies which should benefit from the overall trends the Adviser
has observed.
* The Adviser then looks for individual companies with earnings
growth potential that may not be recognized by the market at
large. In determining whether a particular company is suitable for
investment by the Funds, the Adviser focuses on a number of
different attributes, including the company's specific market
expertise or dominance; its franchise durability and pricing
power; solid fundamentals (e.g., a strong balance sheet, improving
returns on equity, and the ability to
"DIVERSIFIED" VS. "NON-DIVERSIFIED": All mutual funds must elect to be
"diversified" or "non-diversified," which will affect the number and
size of the positions that they can take in the securities of different
issuers. As a "diversified" portfolio, the Growth & Income Fund cannot
invest, with respect to 75% of its total assets, more than 5% of its
total assets in the securities of any issuer. In contrast, as a "non-
diversified" portfolio, the Focus Fund cannot invest, with respect to
50% of its total assets, more than 5% of its total assets in the
securities of any issuer. As such, the Focus Fund has the ability to
take larger positions with respect to a greater number of issuers than
the Growth & Income Fund.
As a result, the Focus Fund typically will hold the securities of
fewer companies than the Growth & Income Fund. Neither Fund may invest
more than 25% of its total assets in a single issuer (other than U.S.
government securities) and neither Fund may own more than 10% of the
outstanding voting shares of any issuer.
PROSPECTUS 6
<PAGE>
<PAGE>
generate free cash flow); strong management, and reasonable
valuations in the context of projected growth rates. This is
called bottom-up stock selection.
* As part of this fundamental, bottom-up research, the Adviser may
visit with various levels of a company's management, as well as
with its customers, suppliers, and competitors. The Adviser also
prepares detailed earnings and cash flow models of companies.
These models permit the Adviser to project earnings growth and
other important characteristics under different scenarios. Each
model is customized to follow a particular company and is intended
to replicate and describe a company's past, present, and future
performance. The models are comprised of quantitative information
and detailed narratives that reflect updated interpretations of
corporate data.
* The Funds' investments generally are anchored by stable growth
companies. However, the Funds' portfolios also typically include
more aggressive growth companies and companies undergoing
significant changes: e.g., the introduction of a new product line,
the appointment of a new management team, or an acquisition. As a
result, the Funds may invest in certain companies for relatively
short-term periods. Such short-term activity may cause the Funds
to incur higher brokerage costs, which may adversely affect the
Fund's performance, and may produce increased taxable
distributions.
The Principal Risks of Investing in the Funds
........................................................................
RISKS IN GENERAL
Domestic and foreign economic growth and market conditions, interest
rate levels, and political events are among the factors affecting the
securities markets of the Funds' investments. There is a risk the
Adviser will not accurately predict the direction of these
PROSPECTUS 7
<PAGE>
<PAGE>
and other factors and, as a result, the Adviser's investment decisions
may not accomplish what they were intended to achieve. You could lose
money investing in the Funds. You should consider your own investment
goals, time horizon, and risk tolerance before investing in the Funds.
COMMON STOCKS (BOTH FUNDS)
Both Funds invest primarily in common stocks of large companies, which
subjects the Funds and their shareholders to the risks associated with
common stock investing. These risks include the financial risk of
selecting individual companies that do not perform as anticipated, the
risk that the stock markets in which the Funds invest may experience
periods of turbulence and instability, and the general risk that
domestic and global economies may go through periods of decline and
cyclical change.
Many factors affect an individual company's performance, such as
the strength of its management or the demand for its product or
services. Negative performance may affect the earnings growth potential
anticipated by the Adviser in picking the individual stocks in the
Funds' portfolios.
There are overall stock market risks that may affect the value of
the Funds. Over time, stock markets tend to move in cycles, with periods
when stock prices rise generally and periods when stock prices decline
generally. The value of the Funds' investments may increase and decrease
more than the stock markets in general.
RISKS OF FOREIGN INVESTING (BOTH FUNDS)
Both Funds may invest without limit in foreign securities. Foreign
investments may be riskier than U.S. investments because of factors such
as unstable international political and economic conditions, currency
fluctuations, foreign controls on investment and currency exchange,
withholding taxes, a lack of adequate company information, less liquid
and more
YEAR 2000 ISSUES: While Year 2000 related computer problems could have a
negative effect on the Funds, the Adviser is working to avoid any
problems associated with Year 2000 issues and to obtain assurances from
service providers that they are taking similar steps. However, the Funds
could be adversely affected if the computer systems used by the Adviser
and the Funds' other service providers do not properly process and
calculate date-related information from and after January 1, 2000.
PROSPECTUS 8
<PAGE>
<PAGE>
volatile markets, and a lack of government regulation. Investments in
emerging markets involve even greater risks such as immature economic
structures and different legal systems.
FIXED INCOME INVESTING (BOTH FUNDS)
Credit Risk: The Funds could lose money if the issuer of a fixed income
security cannot meet its financial obligations or goes bankrupt.
Interest Rate Risk: The value of a Fund's investments in fixed income
securities may fall when interest rates rise.
High-Yield Securities: High-yield securities, also referred to as "junk
bonds," are considered to be more speculative than higher quality
securities. They are more susceptible to credit risk than investment-
grade securities. This is especially true during periods of economic
uncertainty or during economic downturns. The value of lower quality
securities are subject to greater volatility and are generally more
dependent on the ability of the issuer to meet interest and principal
payments than is the case for higher quality securities. Issuers of
high-yield securities may not be as strong financially as those issuing
bonds with higher credit ratings.
RISK OF NON-DIVERSIFICATION (FOCUS FUND)
As previously mentioned, the Focus Fund is a non-diversified portfolio,
which means that, at any given time, it may hold fewer securities than
portfolios that are "diversified." This increases the risk that the
value of the Focus Fund could go down because of the poor performance of
a single investment.
OTHER RISKS
The Funds may also invest in options, futures, and foreign currencies,
and may enter into certain types
EURO-CONVERSION RISK: On January 1, 1999, eleven European countries
began conversion to a common currency. Investments traded in the markets
in these countries are now denominated in the new currency, referred to
as the "Euro." Conversion to the Euro may present certain risks to
investments of the Funds held in one of the currencies that is being
replaced. The Adviser, however, does not believe that the conversion
will have a material impact on the Funds' investments.
PROSPECTUS 9
<PAGE>
<PAGE>
of short sales. If these practices are used by the Funds, the intent
would be primarily to hedge the Funds' portfolios. Investors should not
regard the possible use by the Funds of these practices as a significant
factor in the performance of the Funds or in making their investment
decisions. Investing for hedging purposes may result in certain
transaction costs which may reduce a Fund's performance. In addition, no
assurances can be given that each derivative position will achieve a
perfect correlation with the security or currency that it is being
hedged against.
As noted above, the Growth & Income Portfolio may invest up to 5%
of its total assets in certain derivative instruments for non-hedging
purposes. Engaging in such practices may be used to increase returns;
however, they sometimes may also reduce returns or increase volatility
and exposure.
Performance History
........................................................................
The bar charts below show each Fund's annual return for 1998, the first
full year in which the Funds were operational, together with the best
and worst quarters since inception. The accompanying table gives some
indication of the risks of an investment in the Funds by comparing each
Fund's performance to that of the S&P 500 Index, a widely recognized
unmanaged index of stock performance. All presentations below assume
reinvestment of dividends and distributions. As with all mutual funds,
past results are not an indication of future performance.
TOTAL RETURN AS OF 12/31/98 (Funds' inception: 12/31/97)
- ------------------------------------------------------------------------
FOCUS FUND
........................................................................
[GRAPH]
1998 51.30%
Best Quarter (3-31-98) 23.10%
Worst Quarter (9-30-98) -10.11%
GROWTH & INCOME FUND
........................................................................
[GRAPH]
1998 43.40%
Best Quarter (12-31-98) 24.26%
Worst Quarter (9-30-98) -11.84%
PROSPECTUS 10
<PAGE>
<PAGE>
ANNUAL TOTAL RETURN AS OF 12/31/98
- ------------------------------------------------------------------------
1 YEAR (INCEPTION 12/31/97)
........................................................................
[GRAPH]
Focus Fund 51.30%
Growth & Income Fund 43.40%
S&P 500 28.58%
Expenses
........................................................................
As an investor, you pay certain fees and expenses in connection with the
Funds, which are described in the table below. There are no sales loads
or exchange fees associated with an investment in the Funds. Fund
operating expenses are paid out of the assets of each Fund, so their
effect is included in each Fund's share price. Annual Fund operating
expenses, indicated in the table below, reflect expenses for the Funds'
first fiscal year ended September 30, 1998.
SHAREHOLDER FEES (fees paid directly from your investment)
- ------------------------------------------------------------------------
FOCUS FUND GROWTH & INCOME FUND
........................................................................
Wire Redemption Fee $10 $10
IRA Redemption Fee 15 15
ANNUAL FUND OPERATING EXPENSES (expenses that are deducted from Fund
- ------------------------------------------------------------------------
assets)
- ------------------------------------------------------------------------
FOCUS FUND GROWTH & INCOME FUND
........................................................................
Management Fees 0.85% 0.85%
Distribution 12b-1 Fees<Fa> 0.25 0.25
Other Expenses<Fb> 0.46 0.68
Total Fund Operating Expenses<Fc> 1.56 1.78
[FN]
<Fa> The Funds have adopted a Rule 12b-1 plan which allows the Funds to
pay distribution fees for the sale and distribution of its shares.
The maximum level of distribution expenses is 0.25% per year of
each Fund's average net assets. As these fees are paid out of each
Fund's assets on an on-going basis, over time these fees will
increase the cost of your investment and may cost you more than
paying other types of sales charges.
<Fb> These expenses include custodian, transfer agency, and administration
fees and other customary Fund expenses.
<Fc> The Adviser has voluntarily agreed to limit the total expenses of
each Fund (excluding interest, taxes, brokerage, and extraordinary
expenses) to an
PROSPECTUS 11
<PAGE>
<PAGE>
annual rate of 1.60% of the Focus Fund's average net assets and
1.50% of the Growth & Income Fund's average net assets until
January 1, 2000. This fee waiver is voluntary and may be
terminated at any time. The Adviser is entitled to reimbursement
from a Fund of any fees waived pursuant to this arrangement if
such reimbursements do not cause a Fund to exceed existing expense
limitations. For the fiscal year ended September 30, 1998, the
Adviser waived a portion of its Management Fee for the Growth &
Income Fund, so that the actual Management Fee paid by that Fund
was 0.58% of average net assets, reducing total expenses from
1.78% to 1.50%.
EXAMPLE
This example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds. The example
should not be considered indicative of future investment returns and
operating expenses, which may be more or less than those shown. This
example is based on the Annual Fund Operating Expenses described in the
table, which do not reflect fee waivers for the Growth & Income Fund
during the fiscal year ended September 30, 1998.
This example assumes that you invest $10,000 in the Funds for the
time periods indicated and then redeem all of your shares at the end of
those periods. The example also assumes that your investment has a 5%
return each year and that each Fund's operating expenses remain the
same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
SHAREHOLDER TRANSACTION EXPENSES
- ------------------------------------------------------------------------
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
........................................................................
Focus Fund $159 $493 $850 $1,856
Growth & Income Fund 181 560 964 2,095
Please note that the above example is an estimate of the expenses to be
incurred by shareholders of the Funds. Actual expenses may be higher or
lower than those reflected above.
PROSPECTUS 12
<PAGE>
<PAGE>
Who Manages
the Fund
The Investment Adviser
........................................................................
Marsico Capital Management, LLC (the "Adviser" or "Marsico Capital"),
located at 1200 17th Street, Suite 1300, Denver, CO 80202, serves as the
investment adviser to the Funds under an Investment Advisory and
Management Agreement (the "Agreement") with The Marsico Investment Fund
(the "Trust"). The Agreement provides that the Adviser will furnish
continuous investment advisory and management services to the Funds.
Marsico Capital was organized in September 1997 as a registered
investment adviser. In addition to the Funds, Marsico Capital provides
investment management services to other mutual funds and private
accounts and, as of December 31, 1998, had approximately $4 billion
under management. Thomas F. Marsico is Chairman and Chief Executive
Officer of the Adviser.
The Adviser manages the investment portfolios of the Funds,
subject to policies adopted by the Trust's Board of Trustees. Under the
Agreement, the Adviser, at its own expense and without reimbursement
from the Trust, furnishes office space and all necessary office
facilities, equipment and executive personnel necessary for managing the
Funds. Marsico Capital also pays the salaries and fees of all officers
and trustees of the Trust who are also officers, directors, or employees
of Marsico Capital. The Trust pays the salaries and fees of all other
trustees of the Trust. For its services, the Adviser receives a fee of
0.85% per year of the average daily net assets of each Fund.
The Portfolio Manager
........................................................................
Mr. Marsico manages the investment program of the Funds and is primarily
responsible for the day-to-day management of the Funds' portfolios. Mr.
Marsico has 19 years of experience as a securities analyst and a
portfolio manager. Prior to forming Marsico Capital, Mr. Marsico served
as the Portfolio Manager of the Janus Twenty Fund from January 31, 1988
through August 11, 1997 and served in the same capacity for the Janus
Growth & Income Fund from May 31, 1991 (the Fund's inception date)
through August 11, 1997.
PROSPECTUS 13
<PAGE>
<PAGE>
How to Buy and
Sell Shares
Pricing of Fund Shares
........................................................................
The price you pay for a share of a Fund, and the price you receive upon
selling or redeeming a share of a Fund, is called the Fund's net asset
value ("NAV"). The NAV is calculated by taking the total value of a
Fund's assets, subtracting its liabilities, and then dividing by the
number of shares that have already been issued. This is a standard
calculation, and forms the basis for all transactions involving buying,
selling, exchanging or reinvesting shares. The NAV is generally
calculated as of the close of trading on the New York Stock Exchange
(usually 4:00 p.m. Eastern time) every day the Exchange is open. Your
order will be priced at the next NAV calculated after your order is
accepted by the Fund's transfer agent, Sunstone Financial Group, Inc.
(the "Transfer Agent"). The Fund's investments are valued based on
market value, or where market quotations are not readily available,
based on fair value as determined in good faith by the Funds' Board of
Trustees. The Funds may use pricing services to determine market value.
PROSPECTUS 14
<PAGE>
<PAGE>
Instructions For Opening and Adding to an Account
........................................................................
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
- ------------------------------------------------------------------------
BY MAIL BY MAIL
........................................................................
Complete and sign the Account Complete the investment slip
Application or an IRA Application. that is included in your account
statement, and write your account
Make your check payable to either number on your check. If you no
the Marsico Focus Fund or the longer have your investment slip,
Marsico Growth & Income Fund please reference your name, account
* For IRA accounts, please number, and address on your check.
specify the year for which the
contribution is made.
MAIL YOUR APPLICATION AND CHECK TO: MAIL THE SLIP AND THE CHECK TO:
........................................................................
The Marsico Funds The Marsico Funds
c/o Sunstone Financial Group, Inc. c/o Sunstone Financial Group, Inc.
P.O. Box 3210 P.O. Box 3210
Milwaukee, WI 53201-3210 Milwaukee, WI 53201-3210
BY OVERNIGHT COURIER, SEND TO:
........................................................................
The Marsico Funds
c/o Sunstone Financial Group, Inc.
207 East Buffalo Street
Suite 315
Milwaukee, WI 53202
BY TELEPHONE BY TELEPHONE
........................................................................
Telephone transactions may not be You must select this service on
used for initial purchases. your account application before
making your first telephone trans-
action. Thereafter, you may call
1-888-860-8686 to purchase shares
in an existing account. Investments
made by electronic funds transfer
must be in amounts of at least $50
and not greater than $50,000, and
will be effective at the NAV next
computed after your instruction is
accepted by the Transfer Agent.
PROSPECTUS 15
<PAGE>
<PAGE>
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT
- ------------------------------------------------------------------------
BY WIRE BY WIRE
........................................................................
Call 1-888-860-8686 for instruc- Send your investment to UMB Bank,
tions and to obtain an investor N.A. by following the instructions
account number or an IRA account listed in the column to the left.
number prior to wiring the funds.
Send your investment to UMB Bank,
N.A. with these instructions:
* UMB Bank, N.A.
* ABA#: 101000695
* For Credit to the Marsico Funds
* A/C#: 987-085-8118
* For further credit to: investor
account number; name(s) of
investor(s); SSN or TIN; name
of Fund to be purchased.
AUTOMATIC SERVICES
........................................................................
WITH AN INITIAL INVESTMENT indicate on your application which of the
automatic service(s) described on p. 25 that you want. Return your
application with your investment.
TELEPHONE AND WIRE TRANSACTIONS
........................................................................
Only bank accounts held at domestic financial institutions that are
Automated Clearing House (ACH) members can be used for telephone
transactions. With respect to purchases made by telephone, the Funds and
their agents will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. Such procedures may
include, among others, requiring some form of personal identification
prior to acting upon telephone instructions, providing written
confirmation of all such transactions, and/or tape recording all
telephone instructions. If reasonable procedures are followed, the Funds
will not be liable for any loss, cost, or expense for acting upon an
investor's telephone instructions or for any unauthorized telephone
redemption.
If you purchase your initial shares by wire, the Transfer Agent
first must have received a completed Account Application and issued an
account number to you. The account number must be included in the wiring
instructions set forth above.
PROSPECTUS 16
<PAGE>
<PAGE>
The Transfer Agent must receive your Account Application to establish
shareholder privileges and to verify your account information. Payment
of redemption proceeds may be delayed and taxes may be withheld unless
the Funds receive a properly completed and executed account application.
Shares purchased by wire will be purchased at the NAV next
determined after the Transfer Agent receives your wired funds and all
required information is provided in the wire instructions. If the
Transfer Agent is notified no later than 3:00 p.m. Eastern time of the
wire instructions, and the wired funds are received by the Transfer
Agent no later than 5:00 p.m. Eastern time, then the shares purchased
will be priced at the NAV determined on that business day. If the wire
is not received by 5:00 p.m. Eastern time, the purchase will be
effective at the NAV next calculated after receipt of the wire.
Additional Purchase Information
........................................................................
If you contemplate needing to exchange or redeem your investment shortly
after your purchase, you should purchase shares by wire. The Funds may
hold redemption proceeds until the proceeds used to purchase shares have
been collected (e.g. your check has cleared, or your ACH payments have
been received), but in no event for more than 15 calendar days.
If you fail to provide and certify to the accuracy of your social
security number or tax identification number, the Funds will be required
to withhold 31% of all dividends, distributions, and payments, including
redemption proceeds.
Please note that the Funds are offered and sold only to persons
residing in the United States or Puerto Rico. Applications will only be
accepted if they contain a U.S. or Puerto Rico address. This Prospectus
should not be considered a solicitation to buy or an offer to sell
shares of the Funds in any jurisdiction where it would be unlawful under
the securities laws of that jurisdiction.
EXCHANGE PRIVILEGE: As a convenience, the Funds' shareholders may
exchange all or part of their investment in the Funds for the Marsico
Shares of Nations Prime Fund ("Nations Money Market Fund"), a money
market fund advised by NationsBanc Advisers, Inc. (and not by the
Adviser) that invests in a diversified portfolio of high quality money
market instruments. THE SHARES OF THE NATIONS MONEY MARKET FUND ARE NOT
OFFERED BY THIS PROSPECTUS. For important information on this exchange
feature, please see p. 22 of this Prospectus.
PROSPECTUS 17<PAGE>
<PAGE>
The Funds will not accept your Purchase Application if you are
investing for another person as attorney-in-fact. The Funds will not
accept accounts with "Power of Attorney" or "POA" in the registration
section of the Purchase Application.
All purchases must be made in U.S. dollars and checks must be
drawn on U.S. banks. No cash, credit cards or third party checks will be
accepted. A $20 fee will be charged against your account for any payment
check returned to the Transfer Agent or for any incomplete ACH or other
electronic funds transfer, or for insufficient funds, stop payment,
closed account, or other reasons. You will also be responsible for any
losses suffered by the Funds as a result. The Funds reserve the right to
reject any purchase order for Fund shares.
MINIMUM INVESTMENTS
- ------------------------------------------------------------------------
INITIAL ADDITIONAL
........................................................................
Regular accounts $2,500 $100
Traditional IRAs, and IRA Rollovers 1,000 100
Spousal IRAs 500 100
Roth IRAs 1,000 100
SEP-IRAs 500 100
Gifts to minors 500 50
Automatic Investment Plans 1,000 50
INVESTMENTS MADE THROUGH FINANCIAL SERVICES AGENTS
If you invest through a financial services agent (rather than directly
with the Funds through the Transfer Agent), the policies and fees may be
different than those described here. Financial advisers, financial
supermarkets, and other financial services agents may charge transaction
and other fees and may set different minimum investments or limitations
on buying or selling shares. Consult a representative of your financial
services agent if you have any questions. Your financial services agent
is responsible for transmitting your orders in a timely manner.
Certain financial services agents may enter into agreements with
the Funds or their agents which permit them to confirm orders on behalf
of customers by phone, with payment to follow later, in accordance with
the Transfer Agent's procedures. If payment is not received within the
time specified, the transaction may be rescinded, and the financial
services agent will be held liable for any resulting fees or losses.
PROSPECTUS 18
<PAGE>
<PAGE>
Instructions For Selling Fund Shares
........................................................................
TO SELL SHARES
- ------------------------------------------------------------------------
BY MAIL
........................................................................
Write a letter of instruction that includes:
* the name(s) and signature(s) of all account owners
* your account number
* the Fund name
* the dollar or share amount you want to sell
* how and where to send the proceeds
* if redeeming from your IRA, please note applicable withholding
requirements
Obtain a signature guarantee or other documentation, if required.
MAIL YOUR REQUEST TO: BY OVERNIGHT COURIER, SEND TO:
........................................................................
The Marsico Funds The Marsico Funds
c/o Sunstone Financial Group, Inc. c/o Sunstone Financial Group, Inc.
207 East Buffalo Street, Suite 315 207 East Buffalo Street, Suite 315
Milwaukee, WI 53202 Milwaukee, WI 53202
BY TELEPHONE
........................................................................
* You must select this service in * Unless you decline telephone
writing before making your first privileges on your account
telephone redemption. Thereafter, application, as long as the Funds
you may redeem Fund shares by take reasonable measures to
calling 1-888-860-8686. verify the order, you may be
Redemption proceeds will be responsible for any fraudulent
mailed directly to you or wired telephone order.
to your predesignated bank
account.
* You may redeem as little as $500
and as much as $50,000 by
telephone redemptions.
SYSTEMATIC WITHDRAWAL PLAN
........................................................................
Call us to request a Systematic Withdrawal Plan. It may be set-up over
the phone or by letter of instruction.
For specific information on how to redeem your account, and to determine
if a signature guarantee or other documentation is required, please call
toll free in the U.S. 1-888-860-8686.
PROSPECTUS 19
<PAGE>
<PAGE>
As explained under "How to Exchange Shares," (p. 22) shareholders
in the Funds may exchange all or part of their investment for shares of
the Nations Money Market Fund. To redeem shares from the Nations Money
Market Fund, follow the same procedures that apply to redeeming shares
of the Marsico Funds. If you have any questions about redeeming shares
of the Nations Money Market Fund, please call 1-888-860-8686. Please
note that when redeeming less than all of your shares of the Nations
Money Market Fund, your proceeds will exclude accrued and unpaid income
from the Nations Money Market Fund through the date of the redemption.
When redeeming your entire balance from the Nations Money Market Fund,
accrued income will automatically be paid to you when the income is
collected and paid from the Nations Money Market Fund, at the end of the
month.
Additional Redemption Information
........................................................................
PAYMENT OF REDEMPTION PROCEEDS
You may sell shares at any time. Your shares will be sold at the next
NAV per share calculated after your order is accepted by the Transfer
Agent. Your order will be processed promptly and you will generally
receive the proceeds within seven days after receiving your properly
completed request. Payment of the redemption proceeds for shares of the
Funds where you request wire payment will normally be made in federal
funds on the next business day.
Before selling recently purchased shares, please note that if the
Transfer Agent has not yet collected payment for the shares you are
selling, it may delay sending the proceeds for up to 15 calendar days.
This procedure is intended to protect the Funds and their shareholders
from loss.
The Transfer Agent will wire redemption proceeds only to the bank
and account designated on the Purchase Application or in written
instructions subsequently received by the Transfer Agent, and
PROSPECTUS 20
<PAGE>
<PAGE>
only if the bank is a member of the Federal Reserve System. The Transfer
Agent currently charges a $10 fee for each payment by wire of redemption
proceeds, which will be deducted from your redemption proceeds.
If the dollar or share amount requested to be redeemed is greater
than the current value of your account, your entire account balance will
be redeemed. If you choose to redeem your account in full, any automatic
service currently in effect for the account will be terminated unless
you indicate otherwise in writing.
SIGNATURE GUARANTEES
A signature guarantee of each owner is required to redeem shares in the
following situations: (i) if you change ownership on your account; (ii)
when you want the redemption proceeds sent to a different address than
that registered on the account; (iii) if the proceeds are to be made
payable to someone other than the account's owner(s); (iv) any
redemption transmitted by federal wire transfer to a bank other than
your bank of record; and (v) if a change of address request has been
received by the Transfer Agent within the last 15 days. In addition,
signature guarantees are required for all redemptions of $50,000 or more
from any shareholder account.
Signature guarantees are designed to protect both you and the
Funds from fraud. Signature guarantees can be obtained from most banks,
credit unions or savings associations, or from broker/dealers, municipal
securities broker/dealers, government securities broker/dealers,
national securities exchanges, registered securities exchanges or
clearing agencies deemed eligible by the Securities and Exchange
Commission. Notaries public cannot provide signature guarantees.
PROSPECTUS 21
<PAGE>
<PAGE>
CORPORATE, TRUST AND OTHER ACCOUNTS
Redemption requests from corporate, trust, and institutional accounts,
and executors, administrators, and guardians, require documents in
addition to those described above, evidencing the authority of the
officers, trustees or others. In order to avoid delays in processing
redemption requests for these accounts, you should call the Funds at
1-888-860-8686 before making the redemption request to determine what
additional documents are required.
TRANSFER OF OWNERSHIP
In order to change the account registration or transfer ownership of an
account, additional documents will be required. In order to avoid delays
in processing these requests, you should call the Funds at
1-888-860-8686 before making your request to determine what additional
documents are required.
REDEMPTION INITIATED BY THE FUNDS
If your account balance falls below $500, your Fund may ask you to
increase your balance. If your account balance is still below $500 after
30 days, the Fund may close your account and send you the proceeds. This
minimum balance requirement does not apply to IRAs and other
tax-sheltered investment accounts. The right of redemption by the Funds
will not apply if the value of your account drops below $500 because of
market performance.
How to Exchange Shares
........................................................................
You may exchange all or a portion of your investment from one Marsico
Fund to another. Any new account established through an exchange will
have the same privileges as your original account and will also be
subject to the minimum investment requirements described above. Aside
from this requirement, there is a $500 minimum for exchanging shares
under the program. There is currently no fee for an exchange. Exchanges
will be executed on the basis
MORE INFORMATION ABOUT THE EXCHANGE PRIVILEGE: The Funds are intended as
long-term investment vehicles and not to provide a means of speculating
on short-term market movements. In addition, excessive trading can hurt
the Funds' performance and shareholders. Therefore, the Funds may
terminate, without notice, the exchange privilege of any investor who
uses the exchange privilege excessively (more than six times each year).
This policy does not apply to investors who have elected to participate
in the Automatic Exchange Program, described on page 25.
The Funds may change or temporarily suspend the exchange privilege
during unusual market conditions.
During periods of significant economic or market change,
telephone transactions may be difficult to complete. If you are unable
to contact the Funds by telephone, you may also mail the requests to the
Funds at the address listed under Instructions for Opening and Adding to
an Account, page 15.
PROSPECTUS 22<PAGE>
<PAGE>
of the relative NAV of the shares exchanged. An exchange is considered
to be a sale of shares for federal income tax purposes on which you may
realize a taxable gain or loss.
In addition to your ability to exchange all or a portion of your
investment between the Funds, you may also exchange Fund shares for
shares of the Nations Money Market Fund by sending a written exchange
request to Marsico Funds or, if you have established telephone exchange
privileges, call 1-888-860-8686. Please read that Prospectus before
making an exchange into the Nations Money Market Fund. This exchange
privilege is offered as a convenience to the Funds' shareholders. Please
note that when exchanging from a Fund to the Nations Money Market Fund,
you will begin accruing income from the Nations Money Market Fund the
day following the exchange. When exchanging less than all of the balance
from the Nations Money Market Fund to the Focus Fund or the Growth &
Income Fund, your exchange proceeds will exclude accrued and unpaid
income from the Nations Money Market Fund through the date of exchange.
When exchanging your entire balance from the Nations Money Market Fund,
accrued income will automatically be exchanged into the Fund you are
exchanging into when the income is collected and paid from the Nations
Money Market Fund, at the end of the month.
Retirement Services Plan
........................................................................
The Funds offer a wide variety of retirement plans for individuals and
institutions, including large and small businesses. For information on
establishing retirement accounts and for a complete list of retirement
accounts offered, please call 1-888-860-8686. Complete instructions
about how to establish and maintain your plan and how to open accounts
for you and your employees will be included in the retirement plan kit
you receive in the mail.
ABOUT THE NATIONS MONEY MARKET FUND: Please be sure to read the Nations
Money Market Fund Prospectus before investing in that Fund.
The Nations Money Market Fund seeks current income to the extent
consistent with the preservation of capital and the maintenance of
liquidity by investing in a diversified portfolio of high quality money
market instruments with remaining maturities of 397 days or less from
the date of purchase.
The Nations Money Market Fund is managed by NationsBanc Advisers,
Inc. and not by the Adviser. Stephens Inc. is the distributor of the
Nations Money Market Fund's shares.
PROSPECTUS 23<PAGE>
<PAGE>
The retirement plans currently available to shareholders of the
Funds include:
TRADITIONAL IRA AND IRA ROLLOVERS: an individual retirement account.
Your contribution may or may not be deductible depending on your
circumstances. Rollovers are not deductible. Assets can grow tax-free
and distributions are taxable as income.
SPOUSAL IRA: an IRA funded by a working spouse in the name of a
non-earning spouse.
SEP-IRA: an individual retirement account funded by employer
contributions. Your assets grow tax-free and distributions are taxable
as income.
GIFT TO MINORS: an account established for the benefit of a minor with
an adult administering the account.
ROTH IRA: an IRA with non-deductible contributions, tax-free growth of
assets, and tax-free distributions for qualified distributions.
403(b): an arrangement that allows employers of charitable or
educational organizations to make voluntary salary reduction
contributions to a tax deferred account.
PROSPECTUS 24
<PAGE>
<PAGE>
Automatic Services for Fund Investors
........................................................................
Buying or selling shares automatically is easy with the services
described below. With each service, you select a schedule and an amount,
subject to certain restrictions. You can set up most of these services
with your application or by calling 1-888-860-8686.
FOR INVESTING
- ------------------------------------------------------------------------
AUTOMATIC INVESTMENT PLAN PAYROLL DIRECT DEPOSIT PLAN
........................................................................
For making automatic investments For making automatic investments
from a designated bank account. from your payroll check.
DIVIDEND REINVESTMENT
........................................................................
If the investor does not specify
an election, all income dividends
and capital gains distributions
will be automatically reinvested
in shares of the Funds.
FOR INVESTING AND FOR SELLING SHARES
- ------------------------------------------------------------------------
AUTOMATIC EXCHANGE PLAN
........................................................................
For making regular exchanges from
one Fund into another or between
a Fund and the Nations Money
Market Fund. This plan is
available to IRA accounts having
a minimum balance of $1,000.
FOR SELLING SHARES
- ------------------------------------------------------------------------
SYSTEMATIC WITHDRAWAL PLAN
........................................................................
For making regular withdrawals
from the Funds.
PROSPECTUS 25
<PAGE>
<PAGE>
Shareholder Communications
........................................................................
ACCOUNT STATEMENTS. Every quarter, Marsico investors automatically
receive regular account statements. You will also be sent a yearly
statement detailing the tax characteristics of any dividends and
distributions you have received.
CONFIRMATIONS. Confirmation Statements will be sent after each
transaction that affects your account balance or account registration.
REGULATORY MAILINGS. Financial reports will be sent at least
semiannually. Annual reports will include audited financial statements.
To reduce fund expenses, one copy of each report will be mailed to each
taxpayer identification number even though the investor may have more
than one account in the Fund.
Dividends and Distributions
........................................................................
The Funds intend to pay distributions on an annual basis. You may elect
to reinvest income dividends and capital gain distributions in shares of
the Funds or receive these distributions in cash. Dividends and any
distributions from the Funds are automatically reinvested in the Funds
at NAV, unless you elect to have dividends of $10 or more paid in cash.
Reinvested dividends and distributions receive the same tax treatment as
those paid in cash.
If you are interested in changing your election, you may call the
Transfer Agent at 1-888-860-8686 or send written notification to The
Marsico Investment Fund, P.O. Box 3210, Milwaukee, WI 53201-3210.
Taxes
........................................................................
Fund dividends and distributions are taxable to most investors (unless
your investment is in an IRA or other tax-advantaged account). Dividends
paid by a Fund out of net ordinary income and distributions
PROSPECTUS 26
<PAGE>
<PAGE>
of net short-term capital gains are taxable to the Fund's shareholders
as ordinary income. Dividends from net ordinary income may be eligible
for the corporate dividends-received deduction.
Distributions by a Fund of net capital gains (the excess of net
long-term capital gains over net short-term capital losses) to
shareholders are generally taxable to the shareholders at the applicable
long-term capital gains rate, regardless of how long the shareholder has
held shares of the Fund.
Shareholders that sell, exchange, or redeem shares generally will
have a capital gain or loss from the sale, redemption, or exchange. The
amount of the gain or loss and the rate of tax will depend mainly upon
the amount paid for the shares, the amount received from the sale,
exchange, or redemption, and how long the shares were held.
A dividend or capital gains distribution declared by a Fund in
October, November, or December, but paid during January of the following
year will be considered to be paid on December 31 of the year it was
declared.
If the value of shares is reduced below a shareholder's cost as a
result of a distribution by a Fund, the distribution will be taxable
even though it, in effect, represents a return of invested capital.
Investors considering buying shares just prior to a dividend or capital
gain distribution payment date should be aware that, although the price
of shares purchased at that time may reflect the amount of the
forthcoming distribution, those who purchase just prior to the record
date for a distribution may receive a distribution which will be taxable
to them.
Shareholders will be advised annually as to the federal tax status
of dividends and capital gain distributions made by each Fund for the
preceding year. Distributions by the Funds generally will be subject to
state and local taxes.
Additional tax information may be found in the Statement of
Additional Information. Because everyone's tax situation is unique,
always consult your tax professional about federal, state, and local tax
consequences of an investment in the Funds.
PROSPECTUS 27
<PAGE>
<PAGE>
Financial Highlights
........................................................................
The financial highlights table is intended to help you understand the
Fund's financial performance and other financial information for the
fiscal period ended September 30, 1998. Certain information reflects
financial results for a single Fund share. "Total Return" shows how much
an investment in each Fund increased from December 31, 1997, the date of
inception for the Funds, through September 30, 1998, assuming
reinvestment of all dividends and distributions. This information has
been audited by PricewaterhouseCoopers LLP, the Trust's independent
accountants, whose report, along with the Funds' financial statements,
are included in the SAI, which is available upon request.
THE MARSICO INVESTMENT FUND Period Ended September 30, 1998<F*>
- ------------------------------------------------------------------------
Financial Highlights For a Fund Share Outstanding Throughout the Period.
<TABLE>
<CAPTION>
GROWTH &
FOCUS FUND INCOME FUND
..............................................................................................
<S> <C> <C>
Net Asset Value, Beginning of Period $10.00 $10.00
Income from Investment Operations
Net investment loss (0.01) (0.01)
Net realized and unrealized
gains on investments 2.37 1.55
------------------------
Total from investment operations 2.36 1.54
Net Asset Value, End of Period $12.36 $11.54
Total Return<F1> 23.60% 15.40%
Supplemental Data and Ratios
Net assets, end of period (000s) $858,257 $263,519
Ratio of expenses to average net assets,
less waivers and before expenses paid indirectly<F2>,<F3> 1.56% 1.51%
Ratio of net investment loss to average net assets,
net of waivers and expenses paid indirectly<F2> (0.27)% (0.14)%
Ratio of expenses to average net assets, before
waivers and expenses paid indirectly<F2> 1.56% 1.78%
Ratio of net investment loss to average net assets,
before waivers and expenses paid indirectly<F2> (0.27)% (0.41)%
Portfolio turnover rate<F1> 170% 141%
<FN>
<F1> Not annualized.
<F2> Annualized.
<F3> The ratio of Net Expenses to average net assets was 1.56% and 1.50%
for the Focus Fund and the Growth & Income Fund, respectively. Net
Expenses represent Total Expenses less waiver of fees and expenses
paid indirectly.
<F*> From December 31, 1997 (commencement of operations).
</TABLE>
PROSPECTUS 28
<PAGE>
<PAGE>
THE MARSICO INVESTMENT FUND
The Marsico Focus Fund
The Marsico Growth & Income Fund
........................................................................
INVESTMENT ADVISER
Marsico Capital Management, LLC
ADMINISTRATOR
Sunstone Financial Group, Inc.
DISTRIBUTOR
Sunstone Distribution Services, LLC
COUNSEL
Dechert Price & Rhoads
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
TRANSFER AND DIVIDEND DISBURSING AGENT
Sunstone Financial Group, Inc.
CUSTODIAN
State Street Bank and Trust Company
PROSPECTUS 29
<PAGE>
<PAGE>
THE MARSICO INVESTMENT FUND SEC file number 811-8397
- ------------------------------------------------------------------------
Marsico Focus Fund
Marsico Growth & Income Fund
WHERE TO GO FOR MORE INFORMATION
........................................................................
You will find more information about the Marsico Focus Fund and the
Marsico Growth & Income Fund in the following documents:
ANNUAL AND SEMIANNUAL REPORTS
........................................................................
Our annual and semiannual reports list the holdings in each Fund,
describe Fund performance, include financial statements for the Funds,
and discuss the market conditions and strategies that significantly
affected the Funds' performance.
STATEMENT OF ADDITIONAL INFORMATION
........................................................................
The Statement of Additional Information contains additional and more
detailed information about each Fund, and is considered to be a part of
this Prospectus.
THERE ARE THREE WAYS TO GET A COPY OF THESE DOCUMENTS:
- ------------------------------------------------------------------------
1. Call or write for one, and a copy will be sent without charge.
THE MARSICO INVESTMENT FUND
P.O. BOX 3210
MILWAUKEE, WI 53201-3210
1-888-860-8686
www.marsicofunds.com
2. Call or write to the Public Reference Section of the Securities
and Exchange Commission ("SEC") and ask them to mail you a copy.
The SEC charges a fee for this service. You can also drop by the
Public Reference Section and copy the documents while you are
there. Information about the Public Reference Section may be
obtained by calling the number below.
PUBLIC REFERENCE SECTION OF THE SEC
WASHINGTON, D.C. 20549-6009
1-800-SEC-0330
3. Go to the SEC's website (www.sec.gov) and download a free
text-only version.
PROSPECTUS 30<PAGE>
<PAGE>
THE MARSICO INVESTMENT FUND [LOGO]
P.O. Box 3210, Milwaukee, WI 53201-3210 MARSICO FUNDS
1-888-860-8686 We do the work.(SM)
<PAGE>
<PAGE>
THE MARSICO INVESTMENT FUND
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 18, 1999
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the prospectus for The Marsico
Investment Fund dated January 18, 1999, as amended from time to time, a
copy of which may be obtained without charge by calling 1-888-860-8686
or writing to Sunstone Financial Group, Inc., P.O. Box 3210, Milwaukee,
WI 53201-3210.
<PAGE>
<PAGE>
TABLE OF CONTENTS
INVESTMENT OBJECTIVES AND POLICIES 1
TYPES OF SECURITIES AND INVESTMENT TECHNIQUES 3
TRUSTEES AND OFFICERS 23
INVESTMENT ADVISORY AND OTHER SERVICES 27
DISTRIBUTION PLAN 28
PORTFOLIO TRANSACTIONS AND BROKERAGE 29
PERFORMANCE INFORMATION 31
TAX STATUS 33
NET ASSET VALUE 37
CAPITAL STRUCTURE 38
HOW TO BUY AND SELL SHARES 39
HOW TO EXCHANGE 41
FINANCIAL STATEMENTS 42
DISTRIBUTION 53
SERVICE PROVIDERS 53
APPENDIX - A: GLOSSARY OF INVESTMENT TERMS A-1
APPENDIX - B: RATINGS OF INVESTMENT SECURITIES B-1
i
<PAGE>
<PAGE>
INTRODUCTION
------------
INVESTMENT OBJECTIVES AND POLICIES
The Marsico Focus Fund ("Focus Fund") is a non-diversified fund
that seeks long-term growth of capital.
The Marsico Growth & Income Fund ("Growth & Income Fund") is a
diversified fund that seeks long-term capital growth with a limited
emphasis on income. The Growth & Income Fund places a stronger emphasis
on the growth objective but invests at least 25% of its total assets in
securities that have income potential.
FUNDAMENTAL INVESTMENT RESTRICTIONS
As indicated in the Prospectus, the Funds are subject to certain
fundamental policies and restrictions that may not be changed without
shareholder approval. Shareholder approval means approval by the lesser
of (i) more than 50% of the outstanding voting securities of the Trust
(or a particular Fund if a matter affects just that Fund), or (ii) 67%
or more of the voting securities present at a meeting if the holders of
more than 50% of the outstanding voting securities of the Trust (or a
particular Fund) are present or represented by proxy. As fundamental
policies, each Fund may not:
(1) Invest 25% or more of the value of their respective
total assets in any particular industry (other than U.S.
government securities).
(2) Invest directly in real estate; however, the Funds may
own debt or equity securities issued by companies engaged in those
businesses.
(3) Purchase or sell physical commodities other than foreign
currencies unless acquired as a result of ownership of securities
(but this limitation shall not prevent the Funds from purchasing
or selling options, futures, swaps and forward contracts or from
investing in securities or other instruments backed by physical
commodities).
(4) Lend any security or make any other loan if, as a
result, more than 25% of a Fund's total assets would be lent to
other parties (but this limitation does not apply to purchases of
commercial paper, debt securities or repurchase agreements).
(5) Act as an underwriter of securities issued by others,
except to the extent that a Fund may be deemed an underwriter in
connection with the disposition of portfolio securities of such
Fund.
(6) Issue senior securities, except as permitted under the
Investment Company Act of 1940.
- 1 -
<PAGE>
<PAGE>
(7) Borrow money, except that the Funds may borrow money for
temporary or emergency purposes (not for leveraging or investment)
in an amount not exceeding 33 1/3% of the value of their
respective total assets (including the amount borrowed) less
liabilities (other than borrowings). If borrowings exceed 33 1/3%
of the value of a Fund's total assets by reason of a decline in
net assets, the Fund will reduce its borrowings within three days
to the extent necessary to comply with the 33 1/3% limitation.
This policy shall not prohibit reverse repurchase agreements,
deposits of assets to margin or guarantee positions in futures,
options, swaps or forward contracts, or the segregation of assets
in connection with such contracts. Neither Fund will purchase
securities while its borrowings exceed 5% of that Fund's total
assets.
In addition to the foregoing, as a fundamental policy, the Growth
& Income Fund may not own more than 10% of the outstanding voting
securities of any one issuer and, as to seventy-five percent (75%) of
the value of its total assets, purchase the securities of any one issuer
(except cash items and "government securities" as defined under the
Investment Company Act of 1940, as amended (the "1940 Act")), if
immediately after and as a result of such purchase, the value of the
holdings of the Growth & Income Fund in the securities of such issuer
exceeds 5% of the value of the Growth & Income Fund's total assets.
As a fundamental policy, the Focus Fund may not own more than 10%
of the outstanding voting securities of any one issuer and, as to fifty
percent (50%) of the value of its total assets, purchase the securities
of any one issuer (except cash items and "government securities" as
defined under the Investment Company Act of 1940, as amended (the "1940
Act")), if immediately after and as a result of such purchase, the value
of the holdings of the Focus Fund in the securities of such issuer
exceeds 5% of the value of the Focus Fund's total assets.
ADDITIONAL INVESTMENT RESTRICTIONS
The Trustees have adopted additional investment restrictions for
the Funds. These restrictions are operating policies of the Funds and
may be changed by the Trustees without shareholder approval. The
additional investment restrictions adopted by the Trustees to date
include the following:
(a) A Fund will not (i) enter into any futures contracts and
related options for purposes other than bona fide hedging
transactions within the meaning of Commodity Futures Trading
Commission ("CFTC") regulations if the aggregate initial margin
and premiums required to establish positions in futures contracts
and related options that do not fall within the definition of bona
fide hedging transactions will exceed 5% of the fair market value
of a Fund's net assets, after taking into account unrealized
profits and unrealized losses on any such contracts it has entered
into; and (ii) enter into any futures contracts if the aggregate
- 2 -
<PAGE>
<PAGE>
amount of such Fund's commitments under outstanding futures
contracts positions would exceed the market value of its total
assets.
(b) The Funds do not currently intend to sell securities
short, unless they own or have the right to obtain securities
equivalent in kind and amount to the securities sold short without
the payment of any additional consideration therefor, and provided
that transactions in futures, options, swaps and forward contracts
are not deemed to constitute selling securities short.
(c) The Funds do not currently intend to purchase securities
on margin, except that the Funds may obtain such short-term
credits as are necessary for the clearance of transactions, and
provided that margin payments and other deposits in connection
with transactions in futures, options, swaps and forward contracts
shall not be deemed to constitute purchasing securities on
margin.
(d) A Fund may not mortgage or pledge any securities owned
or held by such Fund in amounts that exceed, in the aggregate, 15%
of that Fund's net asset value, provided that this limitation does
not apply to reverse repurchase agreements, deposits of assets to
margin, guaranteed positions in futures, options, swaps or forward
contracts, or the segregation of assets in connection with such
contracts.
(e) The Funds do not currently intend to purchase any
securities or enter into a repurchase agreement if, as a result,
more than 15% of their respective net assets would be invested in
repurchase agreements not entitling the holder to payment of
principal and interest within seven days and in securities that
are illiquid by virtue of legal or contractual restrictions on
resale or the absence of a readily available market. The Trustees,
or the Funds' investment adviser acting pursuant to authority
delegated by the Trustees, may determine that a readily available
market exists for securities eligible for resale pursuant to Rule
144A under the Securities Act of 1933, as amended, ("Rule 144A
Securities"), or any successor to such rule, and Section 4(2)
commercial paper. Accordingly, such securities may not be subject
to the foregoing limitation.
(f) The Funds may not invest in companies for the purpose of
exercising control of management. For purposes of the Funds'
restriction on investing in a particular industry, the Funds will
rely primarily on industry classifications as published by
Bloomberg L.P. To the extent that Bloomberg L.P. classifications
are so broad that the primary economic characteristics in a single
class are materially different, the Funds may further classify
issuers in accordance with industry classifications as published
by the Securities and Exchange Commission ("SEC").
Except as otherwise noted herein and in the Funds' prospectus, a
Fund's investment objectives and policies may be changed by a vote of
the Trustees without a vote of shareholders.
- 3 -
<PAGE>
<PAGE>
TYPES OF SECURITIES AND INVESTMENT TECHNIQUES
ILLIQUID INVESTMENTS
Each Fund may invest up to 15% of its net assets in illiquid
securities, for which there is a limited trading market and for which a
low trading volume of a particular security may result in abrupt and
erratic price movements. A Fund may be unable to dispose of its holdings
in illiquid securities at acceptable prices and may have to dispose of
such securities over extended periods of time. Marsico Capital will
take reasonable steps to bring a Fund into compliance with this policy
if the level of illiquid investments exceeds 15%. Each Fund may invest
in (i) securities that are sold in private placement transactions
between their issuers and their purchasers and that are neither listed
on an exchange nor traded over-the-counter, and (ii) securities that are
sold in transactions between qualified institutional buyers pursuant to
Rule 144A under the Securities Act of 1933, as amended. Such securities
are subject to contractual or legal restrictions on subsequent transfer.
As a result of the absence of a public trading market, such restricted
securities may in turn be less liquid and more difficult to value than
publicly traded securities. Although these securities may be resold in
privately negotiated transactions, the prices realized from the sales
could, due to illiquidity, be less than those originally paid by a Fund
or less than their fair value and in some instances, it may be difficult
to locate any purchaser. In addition, issuers whose securities are not
publicly traded may not be subject to the disclosure and other investor
protection requirements that may be applicable if their securities were
publicly traded. If any privately placed or Rule 144A securities held
by a Fund are required to be registered under the securities laws of one
or more jurisdictions before being resold, a Fund may be required to
bear the expenses of registration. Securities which are freely tradable
under Rule 144A may be treated as liquid if the Trustees of the Fund are
satisfied that there is sufficient trading activity and reliable price
information. Investing in Rule 144A securities could have the effect of
increasing the level of illiquidity of the Fund's portfolio to the
extent that qualified institutional buyers become, for a time,
uninterested in purchasing such 144A securities.
See Appendix A for risks associated with certain other investments.
The Trustees have authorized Marsico Capital Management, LLC
("Marsico Capital") to make liquidity determinations with respect to its
securities, including Rule 144A Securities and commercial paper. Under
the guidelines established by the Trustees, Marsico Capital will
consider the following factors: 1) the frequency of trades and quoted
prices for the obligation; (2) the number of dealers willing to purchase
or sell the security and the number of other potential purchasers; 3)
the willingness of dealers to undertake to make a market in the
security; and 4) the nature of the security and the nature of
marketplace trades, including the time needed to dispose of the
security, the method of soliciting offers and the mechanics of the
transfer. In the case of commercial paper, Marsico Capital will also
consider whether the paper is traded flat or in default as to principal
and interest and any ratings of the paper by a nationally recognized
statistical rating organization ("NRSRO"). A foreign security that may
be
- 4 -
<PAGE>
<PAGE>
freely traded on or through the facilities of an offshore exchange or
other established offshore securities market is not deemed to be a
restricted security subject to these procedures.
ZERO COUPON, PAY-IN-KIND AND STEP COUPON SECURITIES
Each Fund may invest up to 5% of its assets in zero coupon, pay-
in-kind and step coupon securities. Zero coupon bonds are issued and
traded at a discount from their face value. They do not entitle the
holder to any periodic payment of interest prior to maturity. Step
coupon bonds trade at a discount from their face value and pay coupon
interest. The coupon rate is low for an initial period and then
increases to a higher coupon rate thereafter. The discount from the face
amount or par value depends on the time remaining until cash payments
begin, prevailing interest rates, liquidity of the security and the
perceived credit quality of the issuer. Pay-in-kind bonds normally give
the issuer an option to pay cash at a coupon payment date or give the
holder of the security a similar bond with the same coupon rate and a
face value equal to the amount of the coupon payment that would have
been made.
Current federal income tax law requires holders of zero coupon
securities and step coupon securities to report the portion of the
original issue discount on such securities that accrues during a given
year as interest income, even though the holders receive no cash
payments of interest during the year. In order to qualify as a
"regulated investment company" under the Internal Revenue Code of 1986
and the regulations thereunder (the "Code"), a Fund must distribute its
investment company taxable income, including the original issue discount
accrued on zero coupon or step coupon bonds. BECAUSE A FUND WILL NOT
RECEIVE CASH PAYMENTS ON A CURRENT BASIS IN RESPECT OF ACCRUED ORIGINAL-
ISSUE DISCOUNT PAYMENTS, IN SOME YEARS THAT FUND MAY HAVE TO DISTRIBUTE
CASH OBTAINED FROM OTHER SOURCES IN ORDER TO SATISFY THE DISTRIBUTION
REQUIREMENTS UNDER THE CODE. A Fund might obtain such cash from selling
other portfolio holdings which might cause that Fund to incur capital
gains or losses on the sale. Additionally, these actions are likely to
reduce the assets to which Fund expenses could be allocated and to
reduce the rate of return for that Fund. In some circumstances, such
sales might be necessary in order to satisfy cash distribution
requirements even though investment considerations might otherwise make
it undesirable for a Fund to sell the securities at the time.
Generally, the market prices of zero coupon, step coupon and pay-
in-kind securities are more volatile than the prices of securities that
pay interest periodically and in cash and are likely to respond to
changes in interest rates to a greater degree than other types of debt
securities having similar maturities and credit quality.
- 5 -
<PAGE>
<PAGE>
PASS-THROUGH SECURITIES
The Growth & Income Fund and the Focus Fund may invest up to 25%
and 5% of their respective total assets in various types of pass-through
securities, such as mortgage-backed securities and asset-backed
securities. A pass-through security is a share or certificate of
interest in a pool of debt obligations that have been repackaged by an
intermediary, such as a bank or broker-dealer. The purchaser of a pass-
through security receives an undivided interest in the underlying pool
of securities. The issuers of the underlying securities make interest
and principal payments to the intermediary which are passed through to
purchasers, such as the Funds. The most common type of pass-through
securities are mortgage-backed securities. Government National Mortgage
Association ("GNMA") Certificates are mortgage-backed securities that
evidence an undivided interest in a pool of mortgage loans. GNMA
Certificates differ from bonds in that principal is paid back monthly by
the borrowers over the term of the loan rather than returned in a lump
sum at maturity. A Fund will generally purchase "modified pass-through"
GNMA Certificates, which entitle the holder to receive a share of all
interest and principal payments paid and owned on the mortgage pool, net
of fees paid to the "issuer" and GNMA, regardless of whether or not the
mortgagor actually makes the payment. GNMA Certificates are backed as to
the timely payment of principal and interest by the full faith and
credit of the U.S. government.
Freddie Mac issues two types of mortgage pass-through securities:
mortgage participation certificates ("PCs") and guaranteed mortgage
certificates ("GMCs"). PCs resemble GNMA Certificates in that each PC
represents a pro rata share of all interest and principal payments made
and owned on the underlying pool. Freddie Mac guarantees timely payments
of interest on PCs and the full return of principal. GMCs also represent
a pro rata interest in a pool of mortgages. However, these instruments
pay interest semiannually and return principal once a year in guaranteed
minimum payments. This type of security is guaranteed by FHLMC as to
timely payment of principal and interest but it is not guaranteed by the
full faith and credit of the U.S. government.
Fannie Mae issues guaranteed mortgage pass-through certificates
("Fannie Mae Certificates"). Fannie Mae Certificates resemble GNMA
Certificates in that each Fannie Mae Certificate represents a pro rata
share of all interest and principal payments made and owned on the
underlying pool. This type of security is guaranteed by Fannie Mae as to
timely payment of principal and interest but it is not guaranteed by the
full faith and credit of the U.S. government.
Except for GMCs, each of the mortgage-backed securities described
above is characterized by monthly payments to the holder, reflecting the
monthly payments made by the borrowers who received the underlying
mortgage loans. The payments to the security holders (such as the
Funds), like the payments on the underlying loans, represent both
principal and interest. Although the underlying mortgage loans are for a
specified period of time, such as 20 or 30 years, the borrowers can, and
typically do,
- 6 -
<PAGE>
<PAGE>
pay them off sooner. Thus, the security holders frequently receive
prepayments of principal in addition to the principal that is part of
the regular monthly payments. A portfolio manager will consider
estimated prepayment rates in calculating the average weighted maturity
of a Fund. A borrower is more likely to prepay a mortgage that bears a
relatively high rate of interest. This means that in times of declining
interest rates, higher yielding mortgage-backed securities held by a
Fund might be converted to cash and that a Fund would be forced to
accept lower interest rates when that cash is used to purchase
additional securities in the mortgage-backed securities sector or in
other investment sectors. Additionally, prepayments during such periods
will limit a Fund's ability to participate in as large a market gain as
may be experienced with a comparable security not subject to prepayment.
Asset-backed securities represent interests in pools of consumer
loans and are backed by paper or accounts receivables originated by
banks, credit card companies or other providers of credit. Generally,
the originating bank or credit provider is neither the obligor nor the
guarantor of the security, and interest and principal payments
ultimately depend upon payment of the underlying loans by individuals.
OTHER INCOME-PRODUCING SECURITIES
Other types of income producing securities that the Funds may
purchase include, but are not limited to, the following types of
securities:
VARIABLE AND FLOATING RATE OBLIGATIONS. These types of securities
are relatively long-term instruments that often carry demand features
permitting the holder to demand payment of principal at any time or at
specified intervals prior to maturity.
STANDBY COMMITMENTS. These instruments, which are similar to a
put, give a Fund the option to obligate a broker, dealer or bank to
repurchase a security held by that Fund at a specified price.
TENDER OPTION BONDS. Tender option bonds are relatively long-term
bonds that are coupled with the agreement of a third party (such as a
broker, dealer or bank) to grant the holders of such securities the
option to tender the securities to the institution at periodic
intervals.
INVERSE FLOATERS. Inverse floaters are debt instruments whose
interest bears an inverse relationship to the interest rate on another
security. The Funds will not invest more than 5% of their respective net
assets in inverse floaters.
The Funds will purchase standby commitments, tender option bonds
and instruments with demand features primarily for the purpose of
increasing the liquidity of their portfolios.
- 7 -
<PAGE>
<PAGE>
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS
FUTURES CONTRACTS. To the extent described in the Prospectus,
each Fund may enter into contracts for the purchase or sale for future
delivery of fixed-income securities, foreign currencies or contracts
based on financial indices, including indices of U.S. government
securities, foreign government securities, equity or fixed-income
securities. U.S. futures contracts are traded on exchanges which have
been designated "contract markets" by the CFTC and must be executed
through a futures commission merchant ("FCM"), or brokerage firm, which
is a member of the relevant contract market. Through their clearing
corporations, the exchanges guarantee performance of the contracts as
between the clearing members of the exchange.
The buyer or seller of a futures contract is not required to
deliver or pay for the underlying instrument unless the contract is held
until the delivery date. However, both the buyer and seller are required
to deposit "initial margin" for the benefit of the FCM when the contract
is entered into. Initial margin deposits are equal to a percentage of
the contract's value, as set by the exchange on which the contract is
traded, and may be maintained in cash or certain other liquid assets by
the Funds' custodian for the benefit of the FCM. Initial margin payments
are similar to good faith deposits or performance bonds. Unlike margin
extended by a securities broker, initial margin payments do not
constitute purchasing securities on margin for purposes of the Fund's
investment limitations. If the value of either party's position
declines, that party will be required to make additional "variation
margin" payments for the benefit of the FCM to settle the change in
value on a daily basis. The party that has a gain may be entitled to
receive all or a portion of this amount. In the event of the bankruptcy
of the FCM that holds margin on behalf of a Fund, that Fund may be
entitled to return of margin owed to such Fund only in proportion to the
amount received by the FCM's other customers. Marsico Capital will
attempt to minimize the risk by careful monitoring of the
creditworthiness of the FCMs with which the Funds do business and by
depositing margin payments in a segregated account with the Funds'
custodian.
The Funds intend to comply with guidelines of eligibility for
exclusion from the definition of the term "commodity pool operator"
adopted by the CFTC and the National Futures Association, which regulate
trading in the futures markets. The Funds will use futures contracts and
related options primarily for bona fide hedging purposes within the
meaning of CFTC regulations. To the extent that the Funds hold positions
in futures contracts and related options that do not fall within the
definition of bona fide hedging transactions, the aggregate initial
margin and premiums required to establish such positions will not exceed
5% of the fair market value of a Fund's net assets, after taking into
account unrealized profits and unrealized losses on any such contracts
it has entered into.
Although a Fund will segregate cash and liquid assets in an amount
sufficient to cover its open futures obligations, the segregated assets
would be available to that Fund immediately upon closing out the futures
position, while settlement of securities
- 8 -
<PAGE>
<PAGE>
transactions could take several days. However, because a Fund's cash
that may otherwise be invested would be held uninvested or invested in
other liquid assets so long as the futures position remains open, such
Fund's return could be diminished due to the opportunity losses of
foregoing other potential investments.
A Fund's primary purpose in entering into futures contracts is to
protect that Fund from fluctuations in the value of securities or
interest rates without actually buying or selling the underlying debt or
equity security. For example, if the Fund anticipates an increase in the
price of stocks, and it intends to purchase stocks at a later time, that
Fund could enter into a futures contract to purchase a stock index as a
temporary substitute for stock purchases. If an increase in the market
occurs that influences the stock index as anticipated, the value of the
futures contracts will increase, thereby serving as a hedge against that
Fund not participating in a market advance. This technique is sometimes
known as an anticipatory hedge. To the extent a Fund enters into futures
contracts for this purpose, the segregated assets maintained to cover
such Fund's obligations with respect to the futures contracts will
consist of other liquid assets from its portfolio in an amount equal to
the difference between the contract price and the aggregate value of the
initial and variation margin payments made by that Fund with respect to
the futures contracts. Conversely, if a Fund holds stocks and seeks to
protect itself from a decrease in stock prices, the Fund might sell
stock index futures contracts, thereby hoping to offset the potential
decline in the value of its portfolio securities by a corresponding
increase in the value of the futures contract position. A Fund could
protect against a decline in stock prices by selling portfolio
securities and investing in money market instruments, but the use of
futures contracts enables it to maintain a defensive position without
having to sell portfolio securities.
If a Fund owns Treasury bonds and the portfolio manager expects
interest rates to increase, that Fund may take a short position in
interest rate futures contracts. Taking such a position would have much
the same effect as that Fund selling Treasury bonds in its portfolio. If
interest rates increase as anticipated, the value of the Treasury bonds
would decline, but the value of that Fund's interest rate futures
contract would increase, thereby keeping the net asset value of that
Fund from declining as much as it may have otherwise. If, on the other
hand, a portfolio manager expects interest rates to decline, that Fund
may take a long position in interest rate futures contracts in
anticipation of later closing out the futures position and purchasing
the bonds. Although a Fund can accomplish similar results by buying
securities with long maturities and selling securities with short
maturities, given the greater liquidity of the futures market than the
cash market, it may be possible to accomplish the same result more
easily and more quickly by using futures contracts as an investment tool
to reduce risk.
The ordinary spreads between prices in the cash and futures
markets, due to differences in the nature of those markets, are subject
to distortions. First, all participants in the futures market are
subject to initial margin and variation margin requirements. Rather than
meeting additional variation margin requirements, investors may close
out futures contracts through offsetting transactions which could
distort the
- 9 -
<PAGE>
<PAGE>
normal price relationship between the cash and futures markets. Second,
the liquidity of the futures market depends on participants entering
into offsetting transactions rather than making or taking delivery of
the instrument underlying a futures contract. To the extent participants
decide to make or take delivery, liquidity in the futures market could
be reduced and prices in the futures market distorted. Third, from the
point of view of speculators, the margin deposit requirements in the
futures market are less onerous than margin requirements in the
securities market. Therefore, increased participation by speculators in
the futures market may cause temporary price distortions. Due to the
possibility of the foregoing distortions, a correct forecast of general
price trends by the portfolio manager still may not result in a
successful use of futures.
Futures contracts entail risks. Although the Funds believe that
use of such contracts will benefit the Funds, a Fund's overall
performance could be adversely affected by entering into such contracts
if the portfolio manager's investment judgment proves incorrect. For
example, if a Fund has hedged against the effects of a possible decrease
in prices of securities held in its portfolio and prices increase
instead, that Fund will lose part or all of the benefit of the increased
value of these securities because of offsetting losses in its futures
positions. In addition, if a Fund has insufficient cash, it may have to
sell securities from its portfolio to meet daily variation margin
requirements. Those sales may be, but will not necessarily be, at
increased prices which reflect the rising market and may occur at a time
when the sales are disadvantageous to such Fund.
The prices of futures contracts depend primarily on the value of
their underlying instruments. Because there are a limited number of
types of futures contracts, it is possible that the standardized futures
contracts available to a Fund will not match exactly such Fund's current
or potential investments. A Fund may buy and sell futures contracts
based on underlying instruments with different characteristics from the
securities in which it typically invests--for example, by hedging
investments in portfolio securities with a futures contract based on a
broad index of securities--which involves a risk that the futures
position will not correlate precisely with the performance of such
Fund's investments.
Futures prices can also diverge from the prices of their
underlying instruments, even if the underlying instruments closely
correlate with a Fund's investments. Futures prices are affected by
factors such as current and anticipated short-term interest rates,
changes in volatility of the underlying instruments and the time
remaining until expiration of the contract. Those factors may affect
securities prices differently from futures prices. Imperfect
correlations between a Fund's investments and its futures positions also
may result from differing levels of demand in the futures markets and
the securities markets, from structural differences in how futures and
securities are traded, and from imposition of daily price fluctuation
limits for futures contracts. A Fund may buy or sell futures contracts
with a greater or lesser value than the securities it wishes to hedge or
is considering purchasing in order to attempt to compensate for
differences in historical volatility between the futures contract and
the securities, although this may
- 10 -
<PAGE>
<PAGE>
not be successful in all cases. If price changes in a Fund's futures
positions are poorly correlated with its other investments, its futures
positions may fail to produce desired gains or result in losses that are
not offset by the gains in that Fund's other investments.
Because futures contracts are generally settled within a day from
the date they are closed out, compared with a settlement period of three
days for some types of securities, the futures markets can provide
superior liquidity to the securities markets. Nevertheless, there is no
assurance that a liquid secondary market will exist for any particular
futures contract at any particular time. In addition, futures exchanges
may establish daily price fluctuation limits for futures contracts and
may halt trading if a contract's price moves upward or downward more
than the limit in a given day. On volatile trading days when the price
fluctuation limit is reached, it may be impossible for a Fund to enter
into new positions or close out existing positions. If the secondary
market for a futures contract is not liquid because of price fluctuation
limits or otherwise, a Fund may not be able to promptly liquidate
unfavorable futures positions and potentially could be required to
continue to hold a futures position until the delivery date, regardless
of changes in its value. As a result, such Fund's access to other assets
held to cover its futures positions also could be impaired.
OPTIONS ON FUTURES CONTRACTS. The Funds may buy and write put and
call options on futures contracts. An option on a future gives a Fund
the right (but not the obligation) to buy or sell a futures contract at
a specified price on or before a specified date. The purchase of a call
option on a futures contract is similar in some respects to the purchase
of a call option on an individual security. Depending on the pricing of
the option compared to either the price of the futures contract upon
which it is based or the price of the underlying instrument, ownership
of the option may or may not be less risky than ownership of the futures
contract or the underlying instrument. As with the purchase of futures
contracts, when a Fund is not fully invested it may buy a call option on
a futures contract to hedge against a market advance.
The writing of a call option on a futures contract constitutes a
partial hedge against declining prices of the security or foreign
currency which is deliverable under, or of the index comprising, the
futures contract. If the futures' price at the expiration of the option
is below the exercise price, a Fund will retain the full amount of the
option premium which provides a partial hedge against any decline that
may have occurred in that Fund's portfolio holdings. The writing of a
put option on a futures contract constitutes a partial hedge against
increasing prices of the security or foreign currency which is
deliverable under, or of the index comprising, the futures contract. If
the futures' price at expiration of the option is higher than the
exercise price, a Fund will retain the full amount of the option premium
which provides a partial hedge against any increase in the price of
securities which that Fund is considering buying. If a call or put
option a Fund has written is exercised, such Fund will incur a loss
which will be reduced by the amount of the premium it received.
Depending on the degree of correlation between the change in the value
of its portfolio securities and changes in the value of
- 11 -
<PAGE>
<PAGE>
the futures positions, a Fund's losses from existing options on futures
may to some extent be reduced or increased by changes in the value of
portfolio securities.
The purchase of a put option on a futures contract is similar in
some respects to the purchase of protective put options on portfolio
securities. For example, a Fund may buy a put option on a futures
contract to hedge its portfolio against the risk of falling prices or
rising interest rates.
The amount of risk a Fund assumes when it buys an option on a
futures contract is the premium paid for the option plus related
transaction costs. In addition to the correlation risks discussed above,
the purchase of an option also entails the risk that changes in the
value of the underlying futures contract will not be fully reflected in
the value of the options bought.
FORWARD CONTRACTS. A forward contract is an agreement between two
parties in which one party is obligated to deliver a stated amount of a
stated asset at a specified time in the future and the other party is
obligated to pay a specified amount for the assets at the time of
delivery. The Funds may enter into forward contracts to purchase and
sell government securities, equity or income securities, foreign
currencies or other financial instruments. Forward contracts generally
are traded in an interbank market conducted directly between traders
(usually large commercial banks) and their customers. Unlike futures
contracts, which are standardized contracts, forward contracts can be
specifically drawn to meet the needs of the parties that enter into
them. The parties to a forward contract may agree to offset or terminate
the contract before its maturity, or may hold the contract to maturity
and complete the contemplated exchange.
The following discussion summarizes the Fund's principal uses of
forward foreign currency exchange contracts ("forward currency
contracts"). A Fund may enter into forward currency contracts with
stated contract values of up to the value of that Fund's assets. A
forward currency contract is an obligation to buy or sell an amount of a
specified currency for an agreed price (which may be in U.S. dollars or
a foreign currency). A Fund will exchange foreign currencies for U.S.
dollars and for other foreign currencies in the normal course of
business and may buy and sell currencies through forward currency
contracts in order to fix a price for securities it has agreed to buy or
sell ("transaction hedge"). A Fund also may hedge some or all of its
investments denominated in a foreign currency or exposed to foreign
currency fluctuations against a decline in the value of that currency
relative to the U.S. dollar by entering into forward currency contracts
to sell an amount of that currency (or a proxy currency whose
performance is expected to replicate or exceed the performance of that
currency relative to the U.S. dollar) approximating the value of some or
all of its portfolio securities denominated in that currency ("position
hedge") or by participating in options or futures contracts with respect
to the currency. A Fund also may enter into a forward currency contract
with respect to a currency where the Fund is considering the purchase or
sale of investments denominated in that currency but has not yet
selected
- 12 -
<PAGE>
<PAGE>
the specific investments ("anticipatory hedge"). In any of these
circumstances a Fund may, alternatively, enter into a forward currency
contract to purchase or sell one foreign currency for a second currency
that is expected to perform more favorably relative to the U.S. dollar
if the portfolio manager believes there is a reasonable degree of
correlation between movements in the two currencies ("cross-hedge").
These types of hedging minimize the effect of currency
appreciation as well as depreciation, but do not eliminate fluctuations
in the underlying U.S. dollar equivalent value of the proceeds of or
rates of return on a Fund's foreign currency denominated portfolio
securities. The matching of the increase in value of a forward contract
and the decline in the U.S. dollar equivalent value of the foreign
currency denominated asset that is the subject of the hedge generally
will not be precise. Shifting a Fund's currency exposure from one
foreign currency to another removes that Fund's opportunity to profit
from increases in the value of the original currency and involves a risk
of increased losses to such Fund if its portfolio manager's projection
of future exchange rates is inaccurate. Proxy hedges and cross-hedges
may result in losses if the currency used to hedge does not perform
similarly to the currency in which hedged securities are denominated.
Unforeseen changes in currency prices may result in poorer overall
performance for a Fund than if it had not entered into such contracts.
The Funds will cover outstanding forward currency contracts by
maintaining liquid portfolio securities denominated in or whose value is
tied to, the currency underlying the forward contract or the currency
being hedged. To the extent that a Fund is not able to cover its forward
currency positions with underlying portfolio securities, the Funds'
custodian will segregate cash or other liquid assets having a value
equal to the aggregate amount of such Fund's commitments under forward
contracts entered into with respect to position hedges, cross-hedges and
anticipatory hedges. If the value of the securities used to cover a
position or the value of segregated assets declines, a Fund will find
alternative cover or segregate additional cash or liquid assets on a
daily basis so that the value of the covered and segregated assets will
be equal to the amount of such Fund's commitments with respect to such
contracts. As an alternative to segregating assets, a Fund may buy call
options permitting such Fund to buy the amount of foreign currency being
hedged by a forward sale contract or a Fund may buy put options
permitting it to sell the amount of foreign currency subject to a
forward buy contract.
While forward contracts are not currently regulated by the CFTC,
the CFTC may in the future assert authority to regulate forward
contracts. In such event, the Funds' ability to utilize forward
contracts may be restricted. In addition, a Fund may not always be able
to enter into forward contracts at attractive prices and may be limited
in its ability to use these contracts to hedge Fund assets.
OPTIONS ON FOREIGN CURRENCIES. The Funds may buy and write
options on foreign currencies in a manner similar to that in which
futures or forward contracts on foreign currencies will be utilized. For
example, a decline in the U.S. dollar value of a foreign
- 13 -
<PAGE>
<PAGE>
currency in which portfolio securities are denominated will reduce the
U.S. dollar value of such securities, even if their value in the foreign
currency remains constant. In order to protect against such diminutions
in the value of portfolio securities, a Fund may buy put options on the
foreign currency. If the value of the currency declines, such Fund will
have the right to sell such currency for a fixed amount in U.S. dollars,
thereby offsetting, in whole or in part, the adverse effect on its
portfolio.
Conversely, when a rise in the U.S. dollar value of a currency in
which securities to be acquired are denominated is projected, thereby
increasing the cost of such securities, a Fund may buy call options on
the foreign currency. The purchase of such options could offset, at
least partially, the effects of the adverse movements in exchange rates.
As in the case of other types of options, however, the benefit to a Fund
from purchases of foreign currency options will be reduced by the amount
of the premium and related transaction costs. In addition, if currency
exchange rates do not move in the direction or to the extent desired, a
Fund could sustain losses on transactions in foreign currency options
that would require such Fund to forego a portion or all of the benefits
of advantageous changes in those rates.
The Funds may also write options on foreign currencies. For
example, to hedge against a potential decline in the U.S. dollar value
of foreign currency denominated securities due to adverse fluctuations
in exchange rates, a Fund could, instead of purchasing a put option,
write a call option on the relevant currency. If the expected decline
occurs, the option will most likely not be exercised and the decline in
value of portfolio securities will be offset by the amount of the
premium received.
Similarly, instead of purchasing a call option to hedge against a
potential increase in the U.S. dollar cost of securities to be acquired,
a Fund could write a put option on the relevant currency which, if rates
move in the manner projected, will expire unexercised and allow that
Fund to hedge the increased cost up to the amount of the premium. As in
the case of other types of options, however, the writing of a foreign
currency option will constitute only a partial hedge up to the amount of
the premium. If exchange rates do not move in the expected direction,
the option may be exercised and a Fund would be required to buy or sell
the underlying currency at a loss which may not be offset by the amount
of the premium. Through the writing of options on foreign currencies, a
Fund also may lose all or a portion of the benefits which might
otherwise have been obtained from favorable movements in exchange rates.
The Funds may write covered call options on foreign currencies. A
call option written on a foreign currency by a Fund is "covered" if that
Fund owns the foreign currency underlying the call or has an absolute
and immediate right to acquire that foreign currency without additional
cash consideration (or for additional cash consideration held in a
segregated account by its custodian) upon conversion or exchange of
other foreign currencies held in its portfolio. A call option is also
covered if a Fund has a call on the same foreign currency in the same
principal amount as the call written if the exercise price of the call
held (i) is equal to or less than the exercise price
- 14 -
<PAGE>
<PAGE>
of the call written or (ii) is greater than the exercise price of the
call written, if the difference is maintained by such Fund in cash or
other liquid assets in a segregated account with the Funds' custodian.
The Funds also may write call options on foreign currencies for
cross-hedging purposes. A call option on a foreign currency is for
cross-hedging purposes if it is designed to provide a hedge against a
decline due to an adverse change in the exchange rate in the U.S. dollar
value of a security which a Fund owns or has the right to acquire and
which is denominated in the currency underlying the option. Call options
on foreign currencies which are entered into for cross-hedging purposes
are not covered. However, in such circumstances, a Fund will
collateralize the option by segregating cash or other liquid assets in
an amount not less than the value of the underlying foreign currency in
U.S. dollars marked-to-market daily.
OPTIONS ON SECURITIES. In an effort to increase current income,
the Growth & Income Fund may write covered put and call options and buy
put and call options on securities that are traded on United States and
foreign securities exchanges and over-the-counter. The Growth & Income
Fund may write and buy options on the same types of securities that the
Fund may purchase directly.
A put option written by a Fund is "covered" if that Fund (i)
segregates cash not available for investment or other liquid assets with
a value equal to the exercise price of the put with the Funds' custodian
or (ii) holds a put on the same security and in the same principal
amount as the put written and the exercise price of the put held is
equal to or greater than the exercise price of the put written. The
premium paid by the buyer of an option will reflect, among other things,
the relationship of the exercise price to the market price and the
volatility of the underlying security, the remaining term of the option,
supply and demand and interest rates.
A call option written by a Fund is "covered" if that Fund owns the
underlying security covered by the call or has an absolute and immediate
right to acquire that security without additional cash consideration (or
for additional cash consideration held in a segregated account by the
Funds' custodian) upon conversion or exchange of other securities held
in its portfolio. A call option is also deemed to be covered if a Fund
holds a call on the same security and in the same principal amount as
the call written and the exercise price of the call held (i) is equal to
or less than the exercise price of the call written or (ii) is greater
than the exercise price of the call written if the difference is
maintained by that Fund in cash and other liquid assets in a segregated
account with its custodian.
The Funds also may write call options that are not covered for
cross-hedging purposes. A Fund collateralizes its obligation under a
written call option for cross-hedging purposes by segregating cash or
other liquid assets in an amount not less than the market value of the
underlying security, marked-to-market daily. A Fund would write a call
option for cross-hedging purposes, instead of writing a covered call
option, when
- 15 -
<PAGE>
<PAGE>
the premium to be received from the cross-hedge transaction would exceed
that which would be received from writing a covered call option and its
portfolio manager believes that writing the option would achieve the
desired hedge.
The writer of an option may have no control over when the
underlying securities must be sold, in the case of a call option, or
bought, in the case of a put option, since with regard to certain
options, the writer may be assigned an exercise notice at any time prior
to the termination of the obligation. Whether or not an option expires
unexercised, the writer retains the amount of the premium. This amount,
of course, may, in the case of a covered call option, be offset by a
decline in the market value of the underlying security during the option
period. If a call option is exercised, the writer experiences a profit
or loss from the sale of the underlying security. If a put option is
exercised, the writer must fulfill the obligation to buy the underlying
security at the exercise price, which will usually exceed the then-
current market value of the underlying security.
The writer of an option that wishes to terminate its obligation
may effect a "closing purchase transaction." This is accomplished by
buying an option of the same series as the option previously written.
The effect of the purchase is that the writer's position will be
canceled by the clearing corporation. However, a writer may not effect a
closing purchase transaction after being notified of the exercise of an
option. Likewise, an investor who is the holder of an option may
liquidate its position by effecting a "closing sale transaction." This
is accomplished by selling an option of the same series as the option
previously bought. There is no guarantee that either a closing purchase
or a closing sale transaction can be effected.
In the case of a written call option, effecting a closing
transaction will permit a Fund to write another call option on the
underlying security with either a different exercise price or expiration
date or both. In the case of a written put option, such transaction will
permit a Fund to write another put option to the extent that the
exercise price is secured by other liquid assets. Effecting a closing
transaction also will permit a Fund to use the cash or proceeds from the
concurrent sale of any securities subject to the option for other
investments. If a Fund desires to sell a particular security from its
portfolio on which it has written a call option, such Fund will effect a
closing transaction prior to or concurrent with the sale of the
security.
A Fund will realize a profit from a closing transaction if the
price of the purchase transaction is less than the premium received from
writing the option or the price received from a sale transaction is more
than the premium paid to buy the option. A Fund will realize a loss from
a closing transaction if the price of the purchase transaction is more
than the premium received from writing the option or the price received
from a sale transaction is a less than the premium paid to buy the
option. Because increases in the market of a call option generally will
reflect increases in the market price of the underlying security, any
loss resulting from the repurchase of a call option is likely to be
offset in whole or in part by appreciation of the underlying security
owned by a Fund.
- 16 -
<PAGE>
<PAGE>
An option position may be closed out only where a secondary market
for an option of the same series exists. If a secondary market does not
exist, the Fund may not be able to effect closing transactions in
particular options and the Fund would have to exercise the options in
order to realize any profit. If a Fund is unable to effect a closing
purchase transaction in a secondary market, it will not be able to sell
the underlying security until the option expires or it delivers the
underlying security upon exercise. The absence of a liquid secondary
market may be due to the following: (i) insufficient trading interest in
certain options, (ii) restrictions imposed by a national securities
exchange ("Exchange") on which the option is traded on opening or
closing transactions or both, (iii) trading halts, suspensions or other
restrictions imposed with respect to particular classes or series of
options or underlying securities, (iv) unusual or unforeseen
circumstances that interrupt normal operations on an Exchange, (v) the
facilities of an Exchange or of the Options Clearing Corporation ("OCC")
may not at all times be adequate to handle current trading volume, or
(vi) one or more Exchanges could, for economic or other reasons, decide
or be compelled at some future date to discontinue the trading of
options (or a particular class or series of options), in which event the
secondary market on that Exchange (or in that class or series of
options) would cease to exist, although outstanding options on that
Exchange that had been issued by the OCC as a result of trades on that
Exchange would continue to be exercisable in accordance with their
terms.
A Fund may write options in connection with buy-and-write
transactions. In other words, a Fund may buy a security and then write a
call option against that security. The exercise price of such call will
depend upon the expected price movement of the underlying security. The
exercise price of a call option may be below ("in-the-money"), equal to
("at-the-money") or above ("out-of-the-money") the current value of the
underlying security at the time the option is written. Buy-and-write
transactions using in-the-money call options may be used when it is
expected that the price of the underlying security will remain flat or
decline moderately during the option period. Buy-and-write transactions
using at-the-money call options may be used when it is expected that the
price of the underlying security will remain fixed or advance moderately
during the option period. Buy-and-write transactions using out-of-the-
money call options may be used when it is expected that the premiums
received from writing the call option plus the appreciation in the
market price of the underlying security up to the exercise price will be
greater than the appreciation in the price of the underlying security
alone. If the call options are exercised in such transactions, a Fund's
maximum gain will be the premium received by it for writing the option,
adjusted upwards or downwards by the difference between that Fund's
purchase price of the security and the exercise price. If the options
are not exercised and the price of the underlying security declines, the
amount of such decline will be offset by the amount of premium received.
The writing of covered put options is similar in terms of risk and
return characteristics to buy-and-write transactions. If the market
price of the underlying security rises or otherwise is above the
exercise price, the put option will expire worthless and a Fund's gain
will be limited to the premium received. If the market price
- 17 -
<PAGE>
<PAGE>
of the underlying security declines or otherwise is below the exercise
price, a Fund may elect to close the position or take delivery of the
security at the exercise price and that Fund's return will be the
premium received from the put options minus the amount by which the
market price of the security is below the exercise price.
A Fund may buy put options to hedge against a decline in the value
of its portfolio. By using put options in this way, a Fund will reduce
any profit it might otherwise have realized in the underlying security
by the amount of the premium paid for the put option and by transaction
costs.
A Fund may buy call options to hedge against an increase in the
price of securities that it may buy in the future. The premium paid for
the call option plus any transaction costs will reduce the benefit, if
any, realized by such Fund upon exercise of the option, and, unless the
price of the underlying security rises sufficiently, the option may
expire worthless to that Fund.
EURODOLLAR INSTRUMENTS. A Fund may make investments in Eurodollar
instruments. Eurodollar instruments are U.S. dollar-denominated futures
contracts or options thereon which are linked to the London Interbank
Offered Rate ("LIBOR"), although foreign currency-denominated
instruments are available from time to time. Eurodollar futures
contracts enable purchasers to obtain a fixed rate for the lending of
funds and sellers to obtain a fixed rate for borrowings. A Fund might
use Eurodollar futures contracts and options thereon to hedge against
changes in LIBOR, to which many interest rate swaps and fixed-income
instruments are linked.
SWAPS AND SWAP-RELATED PRODUCTS. The Growth & Income Fund may
enter into interest rate swaps, caps and floors on either an asset-based
or liability-based basis, depending upon whether it is hedging its
assets or its liabilities, and will usually enter into interest rate
swaps on a net basis (i.e., the two payment streams are netted out, with
the Fund receiving or paying, as the case may be, only the net amount of
the two payments). The net amount of the excess, if any, of a Fund's
obligations over its entitlement with respect to each interest rate swap
will be calculated on a daily basis and an amount of cash or other
liquid assets having an aggregate net asset value at least equal to the
accrued excess will be maintained in a segregated account by the Funds'
custodian. If a Fund enters into an interest rate swap on other than a
net basis, it would maintain a segregated account in the full amount
accrued on a daily basis of its obligations with respect to the swap. A
Fund will not enter into any interest rate swap, cap or floor
transaction unless the unsecured senior debt or the claims-paying
ability of the other party thereto is rated in one of the three highest
rating categories of at least one NRSRO at the time of entering into
such transaction. Marsico Capital will monitor the creditworthiness of
all counterparties on an ongoing basis. If there is a default by the
other party to such a transaction, a Fund will have contractual remedies
pursuant to the agreements related to the transaction.
- 18 -
<PAGE>
<PAGE>
The swap market has grown substantially in recent years with a
large number of banks and investment banking firms acting both as
principals and as agents utilizing standardizing swap documentation.
Marsico Capital has determined that, as a result, the swap market has
become relatively liquid. Caps and floors are more recent innovations
for which standardized documentation has not yet been developed and,
accordingly, they are less liquid than swaps. To the extent a Fund sells
(i.e., writes) caps and floors, it will segregate cash or other liquid
assets having an aggregate net asset value at least equal to the full
amount accrued on a daily basis, of its obligations with respect to any
caps or floors.
There is no limit on the amount of interest rate swap transactions
that may be entered into by a Fund. These transactions may in some
instances involve the delivery of securities or other underlying assets
by a Fund or its counterparty to collateralize obligations under the
swap. Under the documentation currently used in those markets, the risk
of loss with respect to interest rate swaps is limited to the net amount
of the payments that a Fund is contractually obligated to make. If the
other party to an interest rate swap that is not collateralized
defaults, a Fund would risk the loss of the net amount of the payments
that it contractually is entitled to receive. A Fund may buy and sell
(i.e., write) caps and floors without limitation, subject to the
segregation requirement described above.
ADDITIONAL RISKS OF OPTIONS ON FOREIGN CURRENCIES, FORWARD
CONTRACTS AND FOREIGN INSTRUMENTS. Unlike transactions entered into by
the Funds in futures contracts, options on foreign currencies and
forward contracts are not traded on contract markets regulated by the
CFTC or (with the exception of certain foreign currency options) by the
SEC. To the contrary, such instruments are traded through financial
institutions acting as market-makers, although foreign currency options
are also traded on certain Exchanges, such as the Philadelphia Stock
Exchange and the Chicago Board Options Exchange, subject to SEC
regulation. Similarly, options on currencies may be traded over-the-
counter. In an over-the-counter trading environment, many of the
protections afforded to Exchange participants will not be available. For
example, there are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a period
of time. Although the buyer of an option cannot lose more than the
amount of the premium plus related transaction costs, this entire amount
could be lost. Moreover, an option writer and buyer or seller of futures
or forward contracts could lose amounts substantially in excess of any
premium received or initial margin or collateral posted due to the
potential additional margin and collateral requirements associated with
such positions.
Options on foreign currencies traded on Exchanges are within the
jurisdiction of the SEC, as are other securities traded on Exchanges. As
a result, many of the protections provided to traders on organized
Exchanges will be available with respect to such transactions. In
particular, all foreign currency option positions entered into on an
Exchange are cleared and guaranteed by the OCC, thereby reducing the
risk of counterparty default. Further, a liquid secondary market in
options traded on an
- 19 -
<PAGE>
<PAGE>
Exchange may be more readily available than in the over-the-counter
market, potentially permitting a Fund to liquidate open positions at a
profit prior to exercise or expiration, or to limit losses in the event
of adverse market movements.
The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of the availability of a liquid
secondary market described above, as well as the risks regarding adverse
market movements, margining of options written, the nature of the
foreign currency market, possible intervention by governmental
authorities and the effects of other political and economic events. In
addition, exchange-traded options on foreign currencies involve certain
risks not presented by the over-the-counter market. For example,
exercise and settlement of such options must be made exclusively through
the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it
determines that foreign governmental restrictions or taxes would prevent
the orderly settlement of foreign currency option exercises, or would
result in undue burdens on the OCC or its clearing member, impose
special procedures on exercise and settlement, such as technical changes
in the mechanics of delivery of currency, the fixing of dollar
settlement prices or prohibitions on exercise.
In addition, options on U.S. government securities, futures
contracts, options on futures contracts, forward contracts and options
on foreign currencies may be traded on foreign exchanges and over-the-
counter in foreign countries. Such transactions are subject to the risk
of governmental actions affecting trading in or the prices of foreign
currencies or securities. The value of such positions also could be
adversely affected by (i) other complex foreign political and economic
factors, (ii) lesser availability than in the United States of data on
which to make trading decisions, (iii) delays in a Fund's ability to act
upon economic events occurring in foreign markets during non-business
hours in the United States, (iv) the imposition of different exercise
and settlement terms and procedures and margin requirements than in the
United States, and (v) low trading volume.
ADDITIONAL DERIVATIVE INSTRUMENT RISKS
Additional risks inherent in the use of derivative instruments include:
* the risk that interest rates, securities prices and
currency markets will not move in the direction that the
Portfolio Manager anticipates;
* imperfect correlation between the price of derivative
instruments and movement in the prices of the securities,
interest rates or currencies being hedged;
* the fact that skills needed to use these strategies
are different from those needed to select portfolio
securities;
* inability to close out certain hedged positions to
avoid adverse tax consequences;
* the possible absence of a liquid secondary market for
any particular instrument and possible exchange-imposed
price fluctuation limits,
- 20 -
<PAGE>
<PAGE>
either of which may make it difficult or impossible to close
out a position when desired;
* leverage risk, or the risk that adverse price
movements in an instrument can result in a loss
substantially greater than a Fund's initial investment in
that instrument (in some cases, the potential loss is
unlimited); and
* particularly in the case of privately negotiated
instruments, the risk that the counterparty will fail to
perform its obligations, which could leave a Fund worse off
than if it had not entered into the position.
Although the Funds believe the use of derivative instruments will
benefit the Funds, the Funds' performance could be worse than if the
Funds had not used such instruments if the Portfolio Manager's judgment
proves incorrect. When a Fund invests in a derivative instrument, it
may be required to segregate cash and other liquid assets or certain
portfolio securities with its custodian to "cover" the Fund's position.
Assets segregated or set aside generally may not be disposed of so long
as a Fund maintains the positions requiring segregation or cover.
Segregating assets could diminish the Fund's return due to the
opportunity losses of foregoing other potential investments with the
segregated assets.
SHORT SALES
Each Fund may engage in "short sales against the box." This
technique involves selling either a security that a Fund owns, or a
security equivalent in kind and amount to the security sold short that a
Fund has the right to obtain, for delivery at a specified date in the
future, without the payment of additional cost. A Fund will enter into
a short sale against the box to hedge against anticipated declines in
the market price of portfolio securities. If the value of the
securities sold short increases prior to the scheduled delivery date, a
Fund loses the opportunity to participate in the gain.
DEPOSITARY RECEIPTS
The Funds may invest in sponsored and unsponsored American
Depositary Receipts ("ADRs"), which are receipts issued by an American
bank or trust company evidencing ownership of underlying securities
issued by a foreign issuer. ADRs, in registered form, are designed for
use in U.S. securities markets. Unsponsored ADRs may be created without
the participation of the foreign issuer. Holders of these ADRs generally
bear all the costs of the ADR facility, whereas foreign issuers
typically bear certain costs in a sponsored ADR. The bank or trust
company depositary of an unsponsored ADR may be under no obligation to
distribute shareholder communications received from the foreign issuer
or to pass through voting rights. The Funds may also invest in European
Depositary Receipts ("EDRs"), Global Depositary Receipts ("GDRs") and in
other similar instruments representing securities of foreign companies.
EDRs are receipts issued by a European financial institution evidencing
an arrangement similar to that of ADRs. EDRs, in bearer form, are
designed for use in European securities markets.
- 21 -
<PAGE>
<PAGE>
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS
In a repurchase agreement, a Fund purchases a security and
simultaneously commits to resell that security to the seller at an
agreed-upon price on an agreed upon date within a number of days
(usually not more than seven) from the date of purchase. The resale
price reflects the purchase price plus an agreed- upon incremental
amount that is unrelated to the coupon rate or maturity of the purchased
security. A repurchase agreement involves the obligation of the seller
to pay the agreed-upon price, which obligation is in effect secured by
the value (at least equal to the amount of the agreed-upon resale price
and marked-to- market daily) of the underlying security or "collateral."
A Fund may engage in a repurchase agreement with respect to any security
in which it is authorized to invest. A risk associated with repurchase
agreements is the failure of the seller to repurchase the securities as
agreed, which may cause a Fund to suffer a loss if the market value of
such securities decline before they can be liquidated on the open
market. In the event of bankruptcy or insolvency of the seller, a Fund
may encounter delays and incur costs in liquidating the underlying
security. Repurchase agreements that mature in more than seven days will
be subject to the 15% limit on illiquid investments. While it is not
possible to eliminate all risks from these transactions, it is the
policy of the Funds to limit repurchase agreements to those parties
whose creditworthiness has been reviewed and found satisfactory by
Marsico Capital.
A Fund may use reverse repurchase agreements to provide cash to
satisfy unusually heavy redemption requests or for other temporary or
emergency purposes without the necessity of selling portfolio
securities, or to earn additional income on portfolio securities, such
as Treasury bills or notes. In a reverse repurchase agreement, a Fund
sells a portfolio security to another party, such as a bank or broker-
dealer, in return for cash and agrees to repurchase the instrument at a
particular price and time. While a reverse repurchase agreement is
outstanding, a Fund will maintain cash and appropriate liquid assets in
a segregated custodial account to cover its obligation under the
agreement. The Funds will enter into reverse repurchase agreements only
with parties that Marsico Capital deems creditworthy. Using reverse
repurchase agreements to earn additional income involves the risk that
the interest earned on the invested proceeds is less than the expense of
the reverse repurchase agreement transaction. This technique may also
have a leveraging effect on the Fund's portfolio, although the Fund's
intent to segregate assets in the amount of the reverse repurchase
agreement minimizes this effect.
HIGH-YIELD/HIGH-RISK SECURITIES
The Growth & Income Fund and the Focus Fund may invest up to 25%
and 5% of their respective total assets in debt securities that are
rated below investment grade (i.e., securities rated BB or lower by
Standard & Poor's Ratings Services ("Standard &Poor's") or Ba or lower
by Moody's Investors Service, Inc. ("Moody's")). Lower-rated securities
involve a higher degree of credit risk, which is the risk that the
issuer will not make interest or principal payments when due. In the
event of an unanticipated default, a Fund would experience a reduction
in its income, and could expect a decline in the market value of the
securities so affected. The Funds will not purchase debt securities
rated lower than "CCC-" by Standard & Poor's or "Caa" by Moody's.
Each Fund may invest in unrated debt securities of foreign and
domestic issuers. Unrated debt, while not necessarily of lower quality
than rated securities, may not have as
- 22 -
<PAGE>
<PAGE>
broad a market. Unrated debt securities will be included in the stated
limit for investments in high-yield investments by each Fund unless the
portfolio manager deems such securities to be the equivalent of
investment grade securities.
FINANCIAL AND MARKET RISKS. Investments in high-yield/high risk
securities involve a high degree of financial and market risks that can
result in substantial or, at times, even total losses. High-yield
securities are more vulnerable to real or perceived economic changes,
political changes or adverse developments specific to the issuer.
Issuers of such securities may have substantial capital needs and may
become involved in bankruptcy or reorganization proceedings. Among the
problems involved in investments in such issuers is the fact that it may
be difficult to obtain information about the condition of such issuers.
The market prices of such securities also are subject to abrupt and
erratic movements and above average price volatility, and the spread
between the bid and asked prices of such securities may be greater than
normally expected.
DISPOSITION OF PORTFOLIO SECURITIES. Although the Funds generally
will purchase securities for which the portfolio manager expects an
active market to be maintained, high-yield/high-risk securities may be
less actively traded than other securities and it may be difficult to
dispose of substantial holdings of such securities at prevailing market
prices. The Funds will limit holdings of any securities to amounts that
the portfolio manager believes could be readily sold, and holdings of
such securities would, in any event, be limited so as not to limit the
Funds' ability to readily dispose of securities to meet redemptions.
CREDIT RISK. The value of lower quality securities generally is
more dependent on the ability of the issuer to meet interest and
principal payments than is the case for higher quality securities.
Conversely, the value of higher quality securities may be more sensitive
to interest rate movements than lower quality securities. Issuers of
high-yield securities may not be as strong financially as those issuing
bonds with higher credit ratings. Investments in such companies are
considered to be more speculative than higher quality investments.
GENERAL CHARACTERISTICS OF FOREIGN SECURITIES.
Foreign securities involve certain inherent risks that are
different from those of domestic issuers, including political or
economic instability of the issuer or the country of issue, diplomatic
developments which could affect U.S. investments in those countries,
changes in foreign currency and exchange rates and the possibility of
adverse changes in investment or exchange control regulations. As a
result of these and other factors, foreign securities purchased by the
Funds may be subject to greater price fluctuation than securities of
U.S. companies.
Most foreign stock markets are not as large or liquid as in the
United States, fixed commissions on foreign stock exchanges are
generally higher than the negotiated commissions on U.S. exchanges, and
there is generally less government supervision and regulation of foreign
stock exchanges, brokers and companies than in the United States.
Investors should recognize that foreign markets have different clearance
and settlement procedures and in certain markets there have been times
when settlements have been unable to keep pace with the volume of
securities transactions, making it difficult to conduct such
transactions. Delays in settlement could result in temporary periods
when assets of the Funds are uninvested and no return is earned thereon.
The inability of the Funds to make intended security purchases due to
- 23 -
<PAGE>
<PAGE>
settlement problems could cause the Funds to miss attractive investment
opportunities. Inability to dispose of portfolio securities due to
settlement problems either could result in losses to the Funds due to
subsequent declines in value of the portfolio security or, if the Funds
have entered into a contract to sell the security, could result in a
possible liability to the purchaser. Payment for securities without
delivery may be required in certain foreign markets. Further, the Fund
may encounter difficulties or be unable to pursue legal remedies and
obtain judgments in foreign courts. Foreign governments can also levy
confiscatory taxes, expropriate assets, and limit repatriations of
assets. Typically, there is less publicly available information about a
foreign company than about a U.S. company, and foreign companies may be
subject to less stringent reserve, auditing and reporting requirements.
It may be more difficult for the Funds' agents to keep currently
informed about corporate actions such as stock dividends or other
matters which may affect the prices of portfolio securities.
Communications between the United States and foreign countries may be
less reliable than within the United States, thus increasing the risk of
delayed settlements of portfolio transactions or loss of certificates
for portfolio securities. Individual foreign economies may differ
favorably or unfavorably from the U.S. economy in such respects as
growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments
position.
Because investments in foreign securities will usually involve
currencies of foreign countries, and because the Funds may hold foreign
currencies, the value of the assets of the Funds as measured in U.S.
dollars may be affected favorably or unfavorably by changes in foreign
currency exchange rates and exchange control regulations, and the Funds
may incur costs in connection with conversions between various
currencies. Although the Funds value their assets daily in terms of U.S.
dollars, they do not intend to convert their holdings of foreign
currencies into U.S. dollars on a daily basis. The Funds will do so from
time to time, and investors should be aware of the costs of currency
conversion. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference (the
"spread") between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency
to the Funds at one rate, while offering a lesser rate of exchange
should the Funds desire to resell that currency to the dealer. The Funds
will conduct their foreign currency exchange transactions either on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market, or through entering into forward foreign
currency exchange contracts or purchasing or writing put or call options
on foreign currencies.
INVESTMENTS IN THE SHARES OF OTHER INVESTMENT COMPANIES
To a limited extent, each Fund may purchase securities of other
investment companies. The Adviser does not expect either Fund to invest
more that 5% of its total assets in shares issues by other investment
companies and, in no instance, will such investments exceed the levels
set forth in Section 12(d)(1)(A) of the 1940 Act. The Adviser
anticipates investing in shares of other investment companies primarily
as a means to invest cash in Funds consisting of short-term money market
instruments and U.S. government securities. To the extent that the Funds
invest in other investment companies, the Funds may incur duplicate
investment advisory and other fees.
- 24 -
<PAGE>
<PAGE>
TRUSTEES AND OFFICERS
The business and affairs of the Funds are managed under the
direction of the Board of Trustees. The Trustees and Officers of the
Funds and their principal occupations during the past five years are set
forth below.
<TABLE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE WITH THE FUND DURING THE PAST FIVE YEARS
<S> <C> <C>
Thomas F. Marsico <F1> Trustee, President, Chief Chairman and Chief Executive Officer,
1200 17th Street Executive Officer, and Chief Marsico Capital Management, LLC
Suite 1300 Investment Officer (September 1997 - present);
Denver, CO 80202 Executive Vice President,
DOB: 1955 Janus Investment Fund (1990 - 1997).
Barbara M. Japha <F1> Trustee, Vice President, and President and General Counsel,
1200 17th Street Secretary Marsico Capital Management, LLC
Suite 1300 (September 1997 - present); Law,
Denver, CO 80202 U S WEST, Inc. (September 1989 -
DOB: 1953 September 1997).
J. Jeffrey Riggs <F1> Trustee President, Essex Financial Group,
8400 East Prentice Avenue Inc. (Commercial Mortgage Bank)
Suite 1310 (More than five years); Principal,
Englewood, CO 80111 Metropolitan Homes, Inc. (January
DOB: 1953 1992 - Present); Principal, Baron
Properties, LLC (January 1997 -
Present).
Rono Dutta Trustee Senior Vice President - Planning,
1200 E. Algonquin Road United Airlines (November 1994 -
Elk Grove Village, IL Present); other positions with
60007 United Airlines (1985 - 1994);
DOB: 1951 previously, manager for planning,
Bell & Howell, and management
consultant, Booz, Allen and
Hamilton.
Theodore S. Halaby Trustee Partner, Halaby, Cross & Schluter
1873 South Ballaire (law firm) (October 1998 - present);
Suite 1400 Partner, Halaby, Cross, Lichty &
Denver, CO 80222 Schluter (law firm) (January 1996 -
DOB: 1940 September 1998); Partner, Halaby,
Cross, Lichty, Schluter & Buck (law
firm) (October 1994 - December
1995); Partner, Halaby, McCrea &
Cross (law firm) (more than five
years).
- 25 -
<PAGE>
<PAGE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE WITH THE FUND DURING THE PAST FIVE YEARS
<S> <C> <C>
Walter A. Koelbel, Jr. Trustee President, and other positions,
5291 Yale Circle Koelbel and Company (Real Estate
Denver, CO 80222 Development Company) (December 1976
DOB: 1952 - present)
Larry A. Mizel Trustee President, M.D.C. Holdings, Inc.
Suite 900 (Homebuilding and Mortgage Banking)
3600 South Yosemite Street (March 1996 - present); Chairman and
Denver, CO 80237 Chief Executive Officer, M.D.C.
DOB: 1942 Holdings, Inc. (More than five
years.
Michael D. Rierson Trustee Vice President, University
P. O. Box 248073 Advancement at University of Miami
Coral Gables FL 33124 (September 1998 - present);
DOB: 1952 Associate Dean, Kenan-Flagler
Business School at University of
North Carolina at Chapel Hill
(November 1993- September 1998);
Various positions at Duke
University, Durham, N.C. (October
1983 - November 1993).
<FN>
____________________
<F1> Trustees who are "interested persons" of the Funds, as defined in
the Investment Company Act of 1940, as amended, (the "1940 Act").
The Trustees of the Funds who are officers or employees of the
investment adviser receive no remuneration from the Funds. Each
of the other Trustees is paid an annual retainer of $12,000 and a
fee of $1,000 for each meeting attended and is reimbursed for the
expenses of attending meetings.
- 26 -
<PAGE>
<PAGE>
<CAPTION>
POSITIONS HELD PRINCIPAL OCCUPATIONS
NAME, ADDRESS AND AGE WITH THE FUND DURING THE PAST FIVE YEARS
<S> <C> <C>
Christopher J. Marsico Vice President, Treasurer, Vice President and Chief Operating
1200 17th Street and Chief Financial Officer, Marsico Capital Management,
Suite 1300 Officer LLC (September 1997 - Present); Vice
Denver, CO 80202 President, Corporate Development, U S
DOB: 1961 WEST, Inc. (February 1997 - September
1997); Vice President, U S West
Capital Corporation (January 1996 -
January 1997); Vice President, U S
WEST Financial Services, Inc. (March
1986 - December 1996).
Christie L. Austin Assistant Treasurer Vice President and Chief Financial
1200 17th Street Officer, Marsico Capital Management,
Suite 1300 LLC (October 1997 - Present);
Denver, CO 80202 President and Chief Financial Officer,
DOB: 1956 Englewood Mortgage Corporation
(October 1986 - September 1997).
Sander M. Bieber Assistant Secretary Partner, Dechert Price & Rhoads (law
1775 Eye Street, NW firm) (more than five years).
Washington, DC 20005
DOB: 1950
</TABLE>
- 27 -
<PAGE>
<PAGE>
<TABLE>
COMPENSATION RECEIVED FROM FUNDS
AS OF SEPTEMBER 30, 1998
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Pension or
Aggregate Retirement Estimated
Compensation Benefits Annual Total
From the Funds Accrued As Part Benefits Upon Compensation
of Funds' Retirement From Funds
Expenses
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Thomas F. Marsico $ 0 $ 0 $ 0 $ 0
Barbara M. Japha $ 0 $ 0 $ 0 $ 0
J. Jeffrey Riggs $ 15,000 $ 0 $ 0 $ 15,000
Rono Dutta $ 4,000 $ 0 $ 0 $ 4,000
Theodore S. Halaby $ 14,000 $ 0 $ 0 $ 14,000
Walter A. Koelbel, Jr. $ 16,000 $ 0 $ 0 $ 16,000
Larry A. Mizel $ 14,000 $ 0 $ 0 $ 14,000
Michael D. Rierson $ 0 $ 0 $ 0 $ 0
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
As of September 30, 1998, the Trustees and Executive Officers of the
Trust owned less than 1% of the outstanding shares of the Focus Fund and
approximately 1.50% of the outstanding shares of the Growth & Income
Fund. As of September 30, 1998, the Funds were not aware of any entities
that owned a controlling interest (ownership of greater than 25%) or
owned of record 5% or more of the outstanding shares of either Fund.
- 28 -
<PAGE>
<PAGE>
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISORY AGREEMENT. The Adviser of the Funds is
Marsico Capital Management, LLC. Under the terms of the Advisory
Agreement, Marsico Capital furnishes overall investment management for
the Funds, provides research and credit analysis, oversees the purchase
and sales of portfolio securities, maintains books and records with
respect to the Funds' securities transactions and provides periodic and
special reports to the Board of Trustees as required.
For the advisory services provided and expenses assumed by it, the
Adviser has agreed to a fee from each Fund, computed daily and payable
monthly, at an annual rate of 0.85% of average daily net assets. For the
year ended September 30, 1998, the Adviser was paid $2,590,083 by the
Focus Fund and $774,854 by the Growth & Income Fund, of which $249,672
was waived.
The Investment Advisory Agreement, with respect to each Fund, will
continue in effect for a period of two years from its effective date,
unless a period of shorter duration is agreed to by the Trust and the
Adviser. If not sooner terminated, the Advisory Agreement will continue
in effect for successive one year periods thereafter, provided that each
continuance is specifically approved annually by (a) the vote of a
majority of the Board of Trustees who are not parties to the Advisory
Agreement or interested persons (as defined in the 1940 Act), cast in
person at a meeting called for the purpose of voting on approval, and
(b) either (i) with respect to a Fund, the vote of a majority of the
outstanding voting securities of that Fund, or (ii) the vote of a
majority of the Board of Trustees. The Advisory Agreement is terminable
by vote of the Board of Trustees, or with respect to a Fund, by the
holders of a majority of the outstanding voting securities of that Fund,
at any time without penalty, on 60 days' written notice to the Adviser.
The Adviser may also terminate its advisory relationship with a Fund
without penalty on 90 days' written notice to the Trust. The Advisory
Agreement terminates automatically in the event of its assignment (as
defined in the 1940 Act).
As described in the Prospectus, the Adviser has voluntarily agreed
to limit the total expenses of each Fund (excluding interest, taxes,
brokerage and extraordinary expenses) to an annual rate of 1.60% for the
Focus Fund and 1.50% for the Growth & Income Fund. Pursuant to this
agreement, each Fund has agreed that through the period ending January
1, 2000, each Fund will reimburse the Adviser for any fee waivers or
expense reimbursements made pursuant to this agreement, since the
inception of each Fund, provided that any such waivers or reimbursements
made by a Fund will not cause the Fund's expense limitation to exceed
the amounts set forth above. Under this arrangement, the Adviser may be
reimbursed for fee waivers or expense reimbursements that occurred from
the inception of the Funds.
In November 1998, BankAmerica Corp. announced that its
NationsBank, N.A. subsidiary was exercising its option to acquire a 50%
ownership interest in the Adviser. This transaction is subject to
regulatory approval, the approval by the Funds' shareholders of new
investment management agreements between the Adviser and the Trust, and
the approval of the shareholders of the other investment companies for
which Marsico Capital serves as investment adviser. If the transaction
is consummated, NationsBank, N.A. will be deemed to have a controlling
interest in Marsico Capital, although the day-to-day investment
operations of
- 29 -
<PAGE>
<PAGE>
Marsico Capital are expected to remain substantially the same. The
transaction is expected to be completed during the first quarter of
1999.
ADMINISTRATION AGREEMENT. Pursuant to an Administration Agreement
(the "Administration Agreement"), Sunstone Financial Group, Inc. (the
"Administrator"), 207 East Buffalo Street, Suite 400, Milwaukee, WI,
53202, prepares and files all federal income and excise tax returns and
state income tax returns (other than those required to be made by the
Trust's Custodian or Transfer Agent), oversees the Trust's insurance
relationships, reviews drafts of the Trust's registration statement and
proxy statements, prepares securities registration compliance filings
pursuant to state securities laws, compiles data for and prepares
required notices and reports to the Securities and Exchange Commission,
prepares financial statements for annual and semiannual reports to
investors, monitors compliance with the Funds' investment policies and
restrictions, prepares and monitors the Funds' expense accruals and
causes all appropriate expenses to be paid from Fund assets, monitors
the Funds' status as a regulated investment company under Subchapter M
of the Internal Revenue Code of 1986, maintains and/or coordinates with
the other service providers the maintenance of the accounts, books and
other documents required pursuant to Rule 31a-1 under the 1940 Act and
generally assists in the Trust's administrative operations. The
Administrator, at its own expense and without reimbursement from the
Trust, furnishes office space and all necessary office facilities,
equipment, supplies and clerical and executive personnel for performing
the services required to be performed by it under the Administration
Agreement. For the foregoing, the Administrator receives from the Funds
a fee, computed daily and payable monthly, based on the Funds' average
net assets at the annual rate beginning at 0.14% and decreasing as the
assets of each Fund reach certain levels, subject to a minimum fee of
$62,500 per Fund. For the year ended September 30, 1998, the
Administrator received fees under the Administration Agreement of
$168,841 from the Focus Fund and $96,299 from the Growth & Income Fund.
The Trust pays all of its own expenses, including without
limitation, the cost of preparing and printing its registration
statements required under the Securities Act of 1933 and the 1940 Act
and any amendments thereto, the expense of registering its shares with
the Securities and Exchange Commission and in the various states,
advisory and administration fees, costs of organization and maintenance
of corporate existence, the printing and distribution costs of
prospectuses mailed to existing investors, reports to investors, reports
to government authorities and proxy statements, costs of meetings of
shareholders, fees paid to trustees who are not interested persons of
the Adviser, interest charges, taxes, legal expenses, association
membership dues, auditing services, insurance premiums, brokerage
commissions and expenses in connection with portfolio transactions, fees
and expenses of the custodian of the Trust's assets, charges of
securities pricing services, printing and mailing expenses and charges
and expenses of dividend disbursing agents, accounting services and
stock transfer agents.
- 30 -
<PAGE>
<PAGE>
DISTRIBUTION PLAN
The Funds have adopted a Distribution and Service Plan (the
"Plan") pursuant to Rule 12b-1 under the 1940 Act. The Plan authorizes
payments by the Funds in connection with the distribution of their
shares at an annual rate, as determined from time-to-time by the Board
of Trustees, or up to 0.25% of the Funds' average daily net assets.
Payments may be made by the Funds under the Plan for the purpose of
financing any activity primarily intended to result in the sales of
shares of the Funds as determined by the Board of Trustees. Such
activities typically include advertising; compensation for sales and
sales marketing activities of Financial Service Agents and others, such
as dealers or distributors; shareholder account servicing; production
and dissemination of prospectuses and sales and marketing materials; and
capital or other expenses of associated equipment, rent, salaries,
bonuses, interest and other overhead. To the extent any activity is one
which the Funds may finance without a Plan, the Funds may also make
payments to finance such activity outside of the Plan and not subject to
its limitations. Payments under the Plan are not tied exclusively to
actual distribution and service expenses, and the payments may exceed
distribution and service expenses actually incurred.
For the fiscal period ended September 30, 1998, the following
12b-1 payments were made under the Plan:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Focus Fund Growth & Income Fund Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Advertising $ 41,090.81 $ 12,881.82 $ 53,972.63
- ------------------------------------------------------------------------------------------------
Printing and Mailing of
Prospectuses to other than
current shareholders $ 134,098.23 $ 49,014.75 $ 183,112.98
- ------------------------------------------------------------------------------------------------
Compensation to Underwriters $ 53,312.99 $ 18,698.63 $ 72,011.62
- ------------------------------------------------------------------------------------------------
Compensation to Broker-Dealers $ 524,063.41 $143,990.61 $ 668,054.02
- ------------------------------------------------------------------------------------------------
Other<F*> $ 9,223.74 $ 3,312.29 $ 12,536.03
- ------------------------------------------------------------------------------------------------
TOTAL $ 761,789.18 $227,898.10 $ 989,687.28
- ------------------------------------------------------------------------------------------------
<FN>
<F*>This includes consulting fees, miscellaneous shipping, filing and
travel expenses, and storage of printed items.
</TABLE>
Administration of the Plan is regulated by Rule 12b-1 under the
1940 Act, which includes requirements that the Board of Trustees receive
and review at least quarterly reports concerning the nature and
qualification of expenses which are made, that the Board of Trustees
approve all agreements implementing the Plan and that the Plan may be
continued from year-to-year only if the Board of Trustees concludes at
least annually that continuation of the Plan is likely to benefit
shareholders.
- 31 -
<PAGE>
<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to the supervision of the Trustees, decisions to buy and
sell securities for the Funds and negotiation of their brokerage
commission rates are made by the Adviser. Transactions on United States
stock exchanges involve the payment by the Funds of negotiated brokerage
commissions. There is generally no stated commission in the case of
securities traded in the over-the-counter market but the price paid by
the Funds usually includes an undisclosed dealer commission or mark-up.
In certain instances, the Funds may make purchases of underwritten
issues at prices which include underwriting fees.
In selecting a broker to execute each particular transaction, the
Adviser takes the following into consideration: the best net price
available; the reliability, integrity and financial condition of the
broker; the size and difficulty in executing the order; the use of
brokerage credits to reduce service fees as contemplated in a board
approved program, and the value of the expected contribution of the
broker to the investment performance of the Funds on a continuing basis.
Accordingly, the cost of the brokerage commissions to the Funds in any
transaction may be greater than that available from other brokers if the
difference is reasonably justified by other aspects of the portfolio
execution services offered. For example, the Adviser will consider the
research and investment services provided by brokers or dealers who
effect or are parties to portfolio transactions of the Funds or the
Adviser's other clients. Such research and investment services include
statistical and economic data and research reports on particular
companies and industries as well as research software. Subject to such
policies and procedures as the Trustees may determine, the Adviser shall
not be deemed to have acted unlawfully or to have breached any duty
solely by reason of its having caused the Funds to pay a broker that
provides research services to the investment adviser an amount of
commission for effecting a portfolio investment transaction in excess of
the amount another broker would have charged for effecting that
transaction, if the investment adviser determines in good faith that
such amount of commission was reasonable in relation to the value of the
research service provided by such broker viewed in terms of either that
particular transaction or the investment adviser's ongoing
responsibilities with respect to the Funds.
Research and investment information is provided by these and other
brokers at no cost to the Adviser and is available for the benefit of
other accounts advised by the investment adviser and its affiliates, and
not all of the information will be used in connection with the Funds.
While this information may be useful in varying degrees and may tend to
reduce the Adviser's expenses, it is not possible to estimate its value
and in the opinion of the Adviser it does not reduce the Adviser's
expenses in a determinable amount. The extent to which the Adviser makes
use of statistical, research and other services furnished by brokers is
considered by the investment adviser in the allocation of brokerage
business but there is no formula by which such business is allocated.
The Adviser does so in accordance with its judgment of the best
interests of the Funds and their shareholders.
For the year ended September 30, 1998, the Focus Fund paid
$1,417,890 and the Growth & Income Fund paid $446,704, in commissions to
brokers. The Funds did not pay any commissions to brokers who were
affiliated with the Fund, Marsico Capital, or Sunstone Distribution
Services, and any affiliated person of the foregoing.
- 32 -
<PAGE>
<PAGE>
During the Funds' fiscal year ended September 30, 1998, the Funds
acquired securities of Merrill Lynch & Co. , one of the primary brokers
used in executing the Funds; portfolio transactions. As of September 30,
1998, the Funds held no securities of their regular brokers or dealers.
PERFORMANCE INFORMATION
From time to time, quotations of the Funds' performances may be
included in advertisements, sales literature or reports to shareholders
or prospective investors. These performance figures are calculated in
the following manner.
AVERAGE ANNUAL TOTAL RETURN
Average annual total return is the average annual compounded rate
of return for periods of one year, five years and ten years, all ended
on the last day of a recent calendar quarter. Average annual total
return quotations reflect changes in the price of a Fund's shares and
assume that all dividends and capital gains distributions during the
respective periods were reinvested in Fund shares. Average annual total
return is calculated by computing the average annual compounded rates of
return of a hypothetical investment over such periods, according to the
following formula (average annual total return is then expressed as a
percentage):
1/n
T = ---------
(ERV/P)-1
Where:
T = average annual total return
P = a hypothetical initial investment of $1,000
n = number of years
ERV = ending redeemable value: ERV is the value, at the end
of the applicable period, of a hypothetical $1,000
investment made at the beginning of the applicable
period.
It should be noted that average annual total return is based on
historical earnings and is not intended to indicate future performance.
Average annual total return for the Fund will vary based on changes in
market conditions and the level of the Fund's expenses.
In connection with communicating its average annual total return
to current or prospective shareholders, the Funds also may compare these
figures to the performance of other mutual funds tracked by mutual fund
rating services or to unmanaged indices which may assume reinvestment of
dividends but generally do not reflect deductions for administrative and
management costs.
- 33 -
<PAGE>
<PAGE>
COMPARISON OF PORTFOLIO PERFORMANCE
Comparison of the quoted non-standardized performance of various
investments is valid only if performance is calculated in the same
manner. Since there are different methods of calculating performance,
investors should consider the effect of the methods used to calculate
performance when comparing performance of a Fund with performance quoted
with respect to other investment companies or types of investments.
In connection with communicating its performance to current or
prospective shareholders, a Fund also may compare these figures to the
performance of unmanaged indices which may assume reinvestment of
dividends or interest but generally do not reflect deductions for
administrative and management costs. Examples include, but are not
limited to the Dow Jones Industrial Average, the Consumer Price Index,
Standard & Poor's 500 Composite Stock Price Index (S&P 500), the NASDAQ
OTC Composite Index, the NASDAQ Industrials Index, and the Russell 2000
Index.
From time to time, in advertising, marketing and other Fund
literature, the performance of a Fund may be compared to the performance
of broad groups of mutual funds with similar investment goals, as
tracked by independent organizations such as Investment Company Data,
Inc., Lipper Analytical Services, Inc., CDA Investment Technologies,
Inc., Morningstar, Inc., Value Line Mutual Fund Survey and other
independent organizations. When these organizations' tracking results
are used, a Fund will be compared to the appropriate fund category, that
is, by fund objective and portfolio holdings or the appropriate
volatility grouping, where volatility is a measure of a Fund's risk.
From time to time, the average price-earnings ratio and other attributes
of a Fund's or the model portfolio's securities, may be compared to the
average price-earnings ratio and other attributes of the securities that
comprise the S&P 500 Index.
Statistical and other information, as provided by the Social
Security Administration, may be used in marketing materials pertaining
to retirement planning in order to estimate future payouts of social
security benefits. Estimates may be used on demographic and economic
data.
Marketing and other Fund literature may include a description of
the potential risks and rewards associated with an investment in a Fund.
The description may include a "risk/return spectrum" which compares a
Fund to broad categories of funds, such as money market, bond or equity
funds, in terms of potential risks and returns. Money market funds are
designed to maintain a constant $1.00 share price and have a fluctuating
yield. Share price, yield and total return of a bond fund will
fluctuate. The share price and return of an equity fund also will
fluctuate. The description may also compare a Fund to bank products,
such as certificates of deposit. Unlike mutual funds, certificates of
deposit are insured up to $100,000 by the U.S. government and offer a
fixed rate of return.
Risk/return spectrums also may depict funds that invest in both
domestic and foreign securities or a combination of bond and equity
securities.
- 34 -
<PAGE>
<PAGE>
The total return for the fiscal period ended September 30, 1998
for the Focus Fund and Growth & Income Fund were 23.60% and 15.40%,
respectively. Returns for the Funds are based on net change in NAV and
are unannualized. Performance figures for each of the three quarters and
nine month period for the Growth & Income Fund, and for the quarter
ended March 31 for the Focus Fund, reflect fee waivers in effect. In the
absence of fee waivers, total returns would be reduced. The investment
return and principal value of an investment in the Funds will fluctuate
so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
TAX STATUS
Each Fund intends to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). Accordingly, each Fund generally must, among other things, (a)
derive in each taxable year at least 90% of its gross income from
dividends, interest, payments with respect to certain securities loans,
and gains from the sale or other disposition of stock, securities or
foreign currencies, or other income derived with respect to its business
of investing in such stock, securities or currencies; and (b) diversify
its holdings so that, at the end of each fiscal quarter, (i) at least
50% of the market value of its assets is represented by cash, U.S.
Government securities, the securities of other regulated investment
companies and other securities, with such other securities limited, in
respect of any one issuer, to an amount not greater than 5% of the value
of the Fund's total assets and 10% of the outstanding voting securities
of such issuer, and (ii) not more than 25% of the value of its total
assets is invested in the securities of any one issuer (other than U.S.
Government securities and the securities of other regulated investment
companies).
As a regulated investment company, a Fund generally will not be
subject to U.S. federal income tax on income and gains that it
distributes to shareholders, if at least 90% of each Fund's investment
company taxable income (which includes, among other items, dividends,
interest and the excess of any net short-term capital gains over net
long-term capital losses) for the taxable year is distributed. Each Fund
intends to distribute substantially all of such income.
Amounts not distributed on a timely basis in accordance with a
calendar year distribution requirement are subject to a nondeductible 4%
excise tax at the Fund level. To avoid the tax, each Fund must
distribute during each calendar year an amount equal to the sum of (1)
at least 98% of its ordinary income (not taking into account any capital
gains or losses) for the calendar year, (2) at least 98% of its capital
gains in excess of its capital losses (adjusted for certain ordinary
losses) for a one-year period generally ending on October 31 of the
calendar year, and (3) all ordinary income and capital gains for
previous years that were not distributed during such years. To avoid
application of the excise tax, each Fund intends to make distributions
in accordance with the calendar year distribution requirement.
A distribution will be treated as paid on December 31 of the
current calendar year if it is declared by a Fund in October, November
or December of that year with a record date in such a month and paid by
that Fund during January of the following year. Such distributions will
be taxable to shareholders in the calendar year in which the
distributions are declared, rather than the calendar year in which the
distributions are received.
- 35 -
<PAGE>
<PAGE>
ORIGINAL ISSUE DISCOUNT. Certain debt securities acquired by the
Funds may be treated as debt securities that were originally issued at a
discount. Original issue discount can generally be defined as the
difference between the price at which a security was issued and its
stated redemption price at maturity. Although no cash income is actually
received by a Fund, original issue discount that accrues on a debt
security in a given year generally is treated for federal income tax
purposes as interest and, therefore, such income would be subject to the
distribution requirements applicable to regulated investment companies.
Some debt securities may be purchased by the Funds at a discount
that exceeds the original issue discount on such debt securities, if
any. This additional discount represents market discount for federal
income tax purposes. The gain realized on the disposition of any taxable
debt security having market discount generally will be treated as
ordinary income to the extent it does not exceed the accrued market
discount on such debt security. Generally, market discount accrues on a
daily basis for each day the debt security is held by a Fund at a
constant rate over the time remaining to the debt security's maturity
or, at the election of a Fund, at a constant yield to maturity which
takes into account the semi-annual compounding of interest.
OPTIONS, FUTURES AND FOREIGN CURRENCY FORWARD CONTRACTS; STRADDLES. A
Fund's transactions in foreign currencies, forward contracts, options
and futures contracts (including options and futures contracts on
foreign currencies) will be subject to special provisions of the Code
that, among other things, may affect the character of gains and losses
realized by the Fund (i.e., may affect whether gains or losses are
ordinary or capital), accelerate recognition of income to the Fund,
defer Fund losses, and affect the determination of whether capital gains
and losses are characterized as long-term or short-term capital gains or
losses. These rules could therefore, in turn, affect the character,
amount, and timing of distributions to shareholders. These provisions
also may require the Fund to mark-to-market certain types of the
positions in its portfolio (i.e., treat them as if they were closed
out), which may cause the Fund to recognize income without receiving
cash with which to make distributions in amounts necessary to satisfy
its distribution requirements for relief from income and excise taxes.
Each Fund will monitor its transactions and may make such tax elections
as Fund management deems appropriate with respect to foreign currency,
options, futures contracts, forward contracts, or hedged investments.
The Funds' status as regulated investment companies may limit their
transactions involving foreign currency, futures, options, and forward
contracts.
Certain transactions undertaken by a Fund may result in
"straddles" for federal income tax purposes. The straddle rules may
affect the character of gains (or losses) realized by a Fund, and losses
realized by the Fund on positions that are part of a straddle may be
deferred under the straddle rules, rather than being taken into account
in calculating the taxable income for the taxable year in which the
losses are realized. In addition, certain carrying charges (including
interest expense) associated with positions in a straddle may be
required to be capitalized rather than deducted currently. Certain
elections that a Fund may make with respect to its straddle positions
may also affect the amount, character and timing of the recognition of
gains or losses from the affected positions.
Under certain circumstances, the Fund may recognize gain from a
constructive sale of an "appreciated financial position" it holds if it
enters into a short sale, forward contract or other transaction that
substantially reduces the risk of loss with respect to the appreciated
position.
- 36 -
<PAGE>
<PAGE>
In that event, the Fund would be treated as if it had sold and
immediately repurchased the property and would be taxed on any gain (but
not loss) from the constructive sale. The character of gain from a
constructive sale would depend upon the Fund's holding period in the
property. Loss from a constructive sale would be recognized when the
property was subsequently disposed of, and its character would depend on
the Fund's holding period and the application of various loss deferral
provisions of the Code. Constructive sale treatment does not apply to
transactions closed in the 90-day period ending with the 30th day after
the close of the taxable year, if certain conditions are met.
CURRENCY FLUCTUATIONS--"SECTION 988" GAINS OR LOSSES. Each Fund
will maintain accounts and calculate income by reference to the U.S.
dollar for U.S. federal income tax purposes. Some of a Fund's
investments will be maintained and income therefrom calculated by
reference to certain foreign currencies, and such calculations will not
necessarily correspond to the Fund's distributable income and capital
gains for U.S. federal income tax purposes as a result of fluctuations
in currency exchange rates. Furthermore, exchange control regulations
may restrict the ability of a Fund to repatriate investment income or
the proceeds of sales of securities. These restrictions and limitations
may limit a Fund's ability to make sufficient distributions to satisfy
the 90% distribution requirement for qualification as a regulated
investment company. Even if a fund so qualified, these restrictions
could inhibit its ability to distribute all of its income in order to be
fully relieved of tax liability.
Gains or losses attributable to fluctuations in exchange rates
which occur between the time a Fund accrues income or other receivables
(including dividends) or accrues expenses or other liabilities
denominated in a foreign currency and the time a Fund actually collects
such receivables or pays such liabilities generally are treated as
ordinary income or ordinary loss. Similarly, on disposition of some
investments, including debt securities and certain forward contracts
denominated in a foreign currency, gains or losses attributable to
fluctuations in the value of the foreign currency between the date of
the acquisition of the security or other instrument and the date of
disposition also are treated as ordinary gain or loss. These gains and
losses, referred to under the Code as "section 988" gains or losses,
increase or decrease the amount of the Funds' investment company taxable
income available to be distributed to its shareholders as ordinary
income. If section 988 losses exceed other investment company taxable
income during a taxable year, a Fund would not be able to make any
ordinary dividend distributions, or distributions made before the losses
were realized would be recharacterized as a return of capital to
shareholders, or, in some cases, as capital gain, rather than as an
ordinary dividend.
PASSIVE FOREIGN INVESTMENT COMPANIES. Each Fund may invest in
shares of foreign corporations which may be classified under the Code as
passive foreign investment companies ("PFICs"). In general, a foreign
corporation is classified as a PFIC if at least one-half of its assets
constitute investment-type assets, or 75% or more of its gross income is
investment-type income. If the Fund receives a so-called "excess
distribution" with respect to PFIC stock, the Fund itself may be subject
to a tax on a portion of the excess distribution, whether or not the
corresponding income is distributed by the Fund to shareholders. In
general, under the PFIC rules, an excess distribution is treated as
having been realized ratably over the period during which the Fund held
the PFIC shares. The Fund itself will be subject to tax on the portion,
if any, of an excess distribution that is so allocated to prior Fund
taxable years and an interest factor will be added to the tax, as if the
tax had been payable in such prior taxable
- 37 -
<PAGE>
<PAGE>
years. Certain distributions from a PFIC as well as gain from the sale
of PFIC shares are treated as excess distributions. Excess distributions
are characterized as ordinary income even though, absent application of
the PFIC rules, certain distributions might have been classified as
capital gain.
The Fund may be eligible to elect alternative tax treatment with
respect to PFIC shares. Under an election that currently is available in
some circumstances, the Fund generally would be required to include in
its gross income its share of the earnings of a PFIC on a current basis,
regardless of whether distributions were received from the PFIC in a
given year. If this election were made, the special rules, discussed
above, relating to the taxation of excess distributions, would not
apply. In addition, another election would involve marking to market the
Fund's PFIC shares at the end of each taxable year, with the result that
unrealized gains would be treated as though they were realized and
reported as ordinary income. Any mark-to-market losses and any loss from
an actual disposition of Fund shares would be deductible as ordinary
losses to the extent of any net mark-to-market gains included in income
in prior years.
Because the application of the PFIC rules may affect, among other
things, the character of gains, the amount of gain or loss and the
timing of the recognition of income with respect to PFIC shares, as well
as subject the Fund itself to tax on certain income from PFIC shares,
the amount that must be distributed to shareholders, and which will be
taxed to shareholders as ordinary income or long-term capital gains, may
be increased or decreased substantially as compared to a fund that did
not invest in PFIC shares.
DISTRIBUTIONS. Distributions of investment company taxable income
are taxable to a U.S. shareholder as ordinary income, whether paid in
cash or shares. Dividends paid by a Fund to a corporate shareholder, to
the extent such dividends are attributable to dividends received from
U.S. corporations by a Fund, may qualify for the dividends received
deduction. However, the revised alternative minimum tax applicable to
corporations may reduce the value of the dividends received deduction.
Distributions of net capital gains (the excess of net long-term capital
gains over net short-term capital losses), if any, designated by a Fund
as capital gain dividends, are taxable to shareholders at the applicable
mid-term or long-term capital gains rate, whether paid in cash or in
shares, regardless of how long the shareholder has held a Fund's shares,
and they are not eligible for the dividends received deduction.
Shareholders will be notified annually as to the U.S. federal tax status
of distributions, and shareholders receiving distributions in the form
of newly issued shares will receive a report as to the net asset value
of the shares received.
If the net asset value of shares is reduced below a shareholder's
cost as a result of a distribution by a Fund, such distribution
generally will be taxable even though it represents a return of invested
capital. Investors should be careful to consider the tax implications of
buying shares of a Fund just prior to a distribution. The price of
shares purchased at this time may reflect the amount of the forthcoming
distribution. Those purchasing just prior to a distribution will receive
a distribution which generally will be taxable to them.
DISPOSITION OF SHARES. Upon a redemption, sale or exchange of
shares of a Fund, a shareholder will realize a taxable gain or loss
depending upon the amount realized and the shareholder's basis in the
shares. A gain or loss will be treated as capital gain or loss if the
shares are capital assets in the shareholder's hands and generally will
be long-term or short-
- 38 -
<PAGE>
<PAGE>
term, depending upon the shareholder's holding period for the shares.
Any loss realized on a redemption, sale or exchange will be disallowed
to the extent the shares disposed of are replaced (including through
reinvestment of dividends) within a period of 61 days beginning 30 days
before and ending 30 days after the shares are disposed of. In such a
case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss. Any loss realized by a shareholder on the disposition
of a Fund's shares held by the shareholder for six months or less will
be treated for tax purposes as a long-term capital loss to the extent of
any distributions of capital gain dividends received or treated as
having been received by the shareholder with respect to such shares.
BACKUP WITHHOLDING. The Funds will be required to report to the
Internal Revenue Service (the "IRS") all distributions and gross
proceeds from the redemption of the Funds' shares, except in the case of
certain exempt shareholders. All distributions and proceeds from the
redemption of a Fund's shares will be subject to withholding of federal
income tax at a rate of 31% ("backup withholding") in the case of non-
exempt shareholders if (1) the shareholder fails to furnish the Funds
with and to certify the shareholder's correct taxpayer identification
number or social security number, (2) the IRS notifies the shareholder
or the Funds that the shareholder has failed to report properly certain
interest and dividend income to the IRS and to respond to notices to
that effect, or (3) when required to do so, the shareholder fails to
certify that he or she is not subject to backup withholding. If the
withholding provisions are applicable, any such distributions or
proceeds, whether reinvested in additional shares or taken in cash, will
be reduced by the amounts required to be withheld.
OTHER TAXATION. Distributions may also be subject to additional
state, local and foreign taxes depending on each shareholder's
particular situation. Non-U.S. shareholders may be subject to U.S. tax
rules that differ significantly from those summarized above. This
discussion does not address all of the tax consequences applicable to
the Funds or shareholders, and shareholders are advised to consult their
own tax advisers with respect to the particular tax consequences to them
of an investment in a Fund.
NET ASSET VALUE
Shares are purchased at their net asset value per share. Each
Fund calculates its net asset value (NAV) as follows:
(Value of Fund Assets)(Fund Liabilities)
NAV = ----------------------------------------
Number of Outstanding Shares
Net asset value is determined as of the end of trading hours on the NYSE
(currently 4:00 p.m. New York City time) on days that the NYSE is open.
A security listed or traded on a recognized stock exchange or
quoted on NASDAQ is valued at its last sale price prior to the time when
assets are valued on the principal exchange on which the security is
traded or on NASDAQ. If no sale is reported at that time the most
current bid price will be used. All other securities for which over-
the-counter market quotations are readily available are valued at the
most current bid price. Where quotations are not readily available, the
Funds' investments are valued at fair value as determined by management
and approved in good faith by the Trustees. Debt securities which will
mature in more than 60 days
- 39 -
<PAGE>
<PAGE>
are valued at prices furnished by a pricing service approved by the
Trustees subject to review and determination of the appropriate price by
Marsico Capital, whenever a furnished price is significantly different
from the previous day's furnished price. Securities which will mature
in 60 days or less are valued at amortized cost, which approximates
market value.
Generally, trading in foreign securities, as well as U.S.
Government securities and certain cash equivalents and repurchase
agreements, is substantially completed each day at various times prior
to the close of the NYSE. The values of such securities use in
computing the net asset value of the shares of the Funds are determined
as of such times. Foreign currency exchange rates are also generally
determined prior to the close of the NYSE. Occasionally, events
affecting the value of such securities and such exchange rates may occur
between the times at which they are determined and at the close of the
NYSE, which will not be reflected in the computation of net asset value.
If during such periods, events occur which materially affect the value
of such securities, the securities will be valued at their fair market
value as determined by management and approved in good faith by the
Trustees.
For purposes of determining the net asset value per share of each
Fund, all assets and liabilities initially expressed in foreign
currencies will be converted into United States dollars at the mean
between the bid and offer prices of such currencies against United
States dollars furnished by a pricing service approved by the Trustees.
A Fund's net asset value per share will be calculated separately
from the per share net asset value of the other fund of the Trust.
"Assets belonging to" a fund consist of the consideration received upon
the issuance of shares of the particular fund together with all net
investment income, earnings, profits, realized gains/losses and proceeds
derived from the investment thereof, including any proceeds from the
sale of such investments, any funds or payments derived from any
reinvestment of such proceeds, and a portion of any general assets of
the Trust not belonging to a particular series. Each fund will be
charged with the direct liabilities of that fund and with a share of the
general liabilities of the Trust's funds. Subject to the provisions of
the Charter, determinations by the Trustees as to the direct and
allocable expenses, and the allocable portion of any general assets,
with respect to a particular fund are conclusive.
CAPITAL STRUCTURE
DESCRIPTION OF SHARES. The Trust is an open-end management
investment company organized as a Delaware Business Trust on October 1,
1997. The Trust's Trust Instrument authorizes the Board of Trustees to
issue an unlimited number of shares of beneficial interest. Each share
of the Funds has equal voting, dividend, distribution and liquidation
rights.
Shares of the Trust have no preemptive rights and only such
conversion or exchange rights as the Board may grant in its discretion.
When issued for payment as described in the Prospectus, the Trust's
shares will be fully paid and non-assessable.
Shareholders are entitled to one vote for each full share held,
and fractional votes for fractional shares held, and will vote in the
aggregate and not by class or series except as otherwise required by the
1940 Act or applicable Delaware law.
- 40 -
<PAGE>
<PAGE>
Rule 18f-2 under the 1940 Act provides that any matter required to
be submitted to the holders of the outstanding voting securities of an
investment company such as the Trust shall not be deemed to have been
effectively acted upon unless approved by a majority of the outstanding
shares of each fund affected by the matter. A fund is affected by a
matter unless it is clear that the interests of each Fund in the matter
are substantially identical or that the matter does not affect any
interest of the Fund. Under Rule 18f-2 the approval of an investment
advisory agreement or 12b-1 distribution plan or any change in a
fundamental investment policy would be effectively acted upon with
respect to a fund only if approved by a majority of the outstanding
shares of such Fund. However, the rule also provides that the
ratification of independent accountants, the approval of principal
underwriting contracts and the election of directors may be effectively
acted upon by shareholders of the Trust voting without regard to
particular funds.
Notwithstanding any provision of Delaware law requiring for any
purpose the concurrence of a proportion greater than a majority of all
votes entitled to be cast at a meeting at which a quorum is present, the
affirmative vote of the holders of a majority of the total number of
shares of the Trust outstanding (or of a class or series of the Trust,
as applicable) will be effective, except to the extent otherwise
required by the 1940 Act and rules thereunder. In addition, the Trust
Instrument provides that, to the extent consistent with Delaware law and
other applicable law, the By-Laws may provide for authorization to be
given by the affirmative vote of the holders of less than a majority of
the total number of shares of the Trust outstanding (or of a class or
series).
If requested to do so by the holders of at least 10% of the
Trust's outstanding shares, the Trust will call a meeting of
shareholders for the purpose of voting upon the question of removal of a
Trustee, and to assist in communications with other shareholders as
required by Section 16(c) of the 1940 Act.
HOW TO BUY AND SELL SHARES
The right of redemption may be suspended, or the date of payment
postponed beyond the normal seven-day period by the Funds, under the
following conditions authorized by the 1940 Act: (1) for any period (a)
during which the New York Stock Exchange is closed, other than customary
weekend or holiday closings, or (b) during which trading on the New York
Stock Exchange is restricted; (2) for any period during which an
emergency exists as a result of which (a) disposal by the Fund of
securities owned by it is not reasonably practical, or (b) it is not
reasonably practical for a Fund to determine the fair value of its net
assets; and (3) for such other periods as the Securities and Exchange
Commission may by order permit for the protection of the Fund's
shareholders.
The value of shares of a Fund on redemption may be more or less
than the shareholder's cost, depending upon the market value of that
Fund's assets at the time. Shareholders should note that if a loss has
been realized on the sale of shares of a Fund, the loss may be
disallowed for tax purposes if shares of the same Fund are purchased
within (before or after) 30 days of the sale.
It is possible that conditions may exist in the future which
would, in the opinion of the Board of Trustees, make it undesirable for
the Funds to pay for redemptions in cash. In such
- 41 -
<PAGE>
<PAGE>
cases the Board may authorize payment to be made in portfolio securities
of the Funds. However, the Funds are obligated under the 1940 Act to
redeem for cash all shares presented for redemption by any one
shareholder up to $250,000 (or 1% of a Fund's net assets if that is
less) in any 90-day period. Securities delivered in payment of
redemptions are valued at the same value assigned to them in computing
the net asset value per share. Shareholders receiving such securities
generally will incur brokerage costs on their sales.
Any redemption or transfer of ownership request for corporate
accounts will require the following written documentation:
1. A written Letter of Instruction signed by the required
number of authorized officers, along with their
respective positions. For redemption requests in
excess of $50,000, the written request must be
signature guaranteed. Signature guarantees can be
obtained from most banks, credit unions or savings
associations, or from broker/dealers, national
securities exchanges, registered securities
associations or clearing agencies deemed eligible by
the Securities and Exchange Commission. Notaries
public cannot provide signature guarantees.
2. A certified Corporate Resolution that states the date
the Resolution was adopted and who is empowered to
act, transfer or sell assets on behalf of the
corporation.
3. If the Corporate Resolution is more than 60 days old
from the date of the transaction request, a
Certificate of Incumbency from the Corporate Secretary
which specifically states that the officer or officers
named in the resolution have the authority to act on
the account. The Certificate of Incumbency must be
dated within 60 days of the requested transaction. If
the Corporate Resolution confers authority on officers
by title and not by name, the Certificate of
Incumbency must name the officer(s) and their
title(s).
When redeeming shares from the Money Market Fund, if you redeem less
than all of the balance of your account, your redemption proceeds will
exclude accrued and unpaid income through the date of the redemption.
When redeeming your entire balance from the Money Market Fund, accrued
income will be paid separately when the income is collected and paid
from the Money Market Fund, at the end of the month.
AUTOMATIC INVESTMENT PLAN. The Funds offer an Automatic
Investment Plan whereby an investor may automatically purchase shares of
the Funds on a regular basis ($50 minimum per transaction). Under the
Automatic Investment Plan, an investor's designated bank or other
financial institution debits a pre-authorized amount on the investor's
account each designated period and applies the amount to the purchase of
a Fund's shares. The Automatic Investment Plan must be implemented with
a financial institution that is a member of the Automated Clearing House
(ACH). Also, the designated Fund must have a currently effective
registration in those states in which it is required. You may enroll in
the Automatic Investment Plan by completing the appropriate section of
the Account Application. If you wish
- 42 -
<PAGE>
<PAGE>
to establish an Automatic Investment Plan after your account has been
opened, please contact the Transfer Agent at 1-888-860-8686.
Automatic Investment Plan transactions are scheduled for the 5th
and/or 20th of every month. Transactions also may be scheduled monthly,
quarterly, semi-annually or annually. No service fee is currently
charged by the Funds for participation in the Automatic Investment Plan.
A $20 fee will be imposed by the Funds if sufficient funds are not
available in your account or your account has been closed at the time of
the automatic transaction and your purchase will be canceled. You will
also be responsible for any losses suffered by the Funds as a result.
You may adopt the Automatic Investment Plan at the time the account is
opened by completing the appropriate section of the Account Application.
Changes to bank information must be made in writing and signed by all
registered holders of the account with signatures guaranteed. A full
redemption of all funds from your account will automatically discontinue
Automatic Investment Plan privileges. Termination instructions must be
received by the Funds five business days prior to the effective date of
termination.
SYSTEMATIC WITHDRAWAL PLAN. The Funds offer a Systematic
Withdrawal Plan which allows you to designate that a fixed amount ($100
minimum per transaction limited to those shareholders with a balance of
$10,000 or greater upon commencement of participation in the Systematic
Withdrawal Plan) be distributed to you at regular intervals. The
redemption takes place on the 5th and/or 20th of the month but if the
day you designate falls on a Saturday, Sunday, or legal holiday, the
distribution shall be made on the prior business day. Any changes made
to the distribution information must be made in writing and signed by
each registered holder of the account with signatures guaranteed.
The Systematic Withdrawal Plan may be terminated by you at any
time without charge or penalty, and the Funds reserve the right to
terminate or modify the Systematic Withdrawal Plan upon 60 days' written
notice. Withdrawals involve redemption of funds and may result in a
gain or loss for federal income tax purposes. An application for
participation in the Systematic Withdrawal Plan may be obtained from the
Transfer Agent by calling 1-888-860-8686.
RETIREMENT PLANS. The Funds offer retirement plans that may allow
investors to shelter some of their income from taxes. Descriptions of
the plans, application forms, as well as descriptions of applicable
service fees and certain limitations on contributions and withdrawals,
are available by calling the Transfer Agent at 1-888-860-8686.
HOW TO EXCHANGE
As explained in the Prospectus, the Trust offers an exchange
program whereby shares of any Marsico Fund may be exchanged for shares
of another Marsico Fund that is available for investment at any time. In
addition, shareholders may exchange all or a portion of their investment
from each Fund for Marsico shares of Nations Prime Fund, as described in
the Prospectus.
- 43 -
<PAGE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
MARSICO FOCUS FUND
September 30, 1998
SCHEDULE OF INVESTMENTS
<CAPTION>
Number Market Value Percent
of Shares in Dollars of Net Assets
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS
AEROSPACE AND DEFENSE
Gulfstream Aerospace Corporation<F*> 1,007,570 $ 40,554,693 4.72%
AIRLINES
UAL Corporation<F*> 556,265 36,052,925 4.20
AUTOMOTIVE - CARS & LIGHT TRUCKS
Ford Motor Company 1,043,278 48,968,861 5.70
BEVERAGES - NON-ALCOHOLIC
Coca-Cola Enterprises Inc. 957,958 24,188,439 2.82
BREWERY
Anheuser-Busch Companies, Inc. 441,665 23,849,910 2.78
CABLE TELEVISION
MediaOne Group, Inc.<F*> 1,374,630 61,085,121 7.12
COMPUTER SOFTWARE
Microsoft Corporation<F*> 395,053 43,480,521 5.07
COMPUTERS - INFORMATION TECHNOLOGY
IMS Health Inc. 346,241 21,445,302 2.50
COMPUTERS - MEMORY DEVICES
EMC Corporation<F*> 1,500,375 85,802,695 10.00
COMPUTERS - MICRO
International Business Machines
Corporation 213,591 27,339,648 3.18
COSMETICS & TOILETRIES
L'OREAL 49,778 23,156,486 2.70
CRUISE LINES
Carnival Corporation 1,123,136 35,729,764 4.16
DIVERSIFIED FINANCIAL SERVICES
Associates First Capital Corporation 652,955 42,605,314 4.96
DIVERSIFIED MANUFACTURING OPERATIONS
General Electric Company 319,134 25,391,099 2.96
MEDICAL - DRUGS
Pfizer Inc. 289,749 30,695,285 3.58
Warner-Lambert Company 688,936 52,014,668 6.06
------------------------------
82,709,953 9.64
MULTIMEDIA
Time Warner Inc. 804,452 70,439,828 8.21
NETWORKING PRODUCTS
Cisco Systems, Inc.<F*> 688,170 42,537,508 4.96
RETAIL - APPAREL/SHOE
The Gap, Inc. 223,987 11,815,314 1.38
RETAIL - BUILDING PRODUCTS
The Home Depot, Inc. 575,329 22,725,495 2.65
SUPER-REGIONAL BANKS
Norwest Corporation 728,044 26,073,076 3.04
U.S. Bancorp 347,247 12,348,971 1.44
------------------------------
38,422,047 4.48
TELECOMMUNICATION EQUIPMENT
Lucent Technologies Inc. 73,502 5,076,232 0.59
-----------------------------
TOTAL COMMON STOCKS (COST $827,524,811) 813,377,155 94.78
==============================
PREFERRED STOCKS
AUTOMOTIVE - CARS & LIGHT TRUCKS
Porsche AG 5,777 10,032,217 1.17
------------------------------
TOTAL PREFERRED STOCKS (COST $10,084,388) 10,032,217 1.17
==============================
<CAPTION>
Principal/ Market Value Percent of
Shares in Dollars Net Assets
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
SSgA Money Market Fund 65,088 $ 5,088 0.00%
Federal Home Loan Bank,
4.95%, 10/1/98 $18,000,000 18,000,000 2.10
-------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $18,065,088) 18,065,088 2.10
===============================
TOTAL INVESTMENTS (COST $855,674,287) 841,474,460 98.05
Other Assets less Liabilities 16,782,198 1.95
-------------------------------
NET ASSETS $858,256,658 100.00%
===============================
<FN>
<F*> Non-income producing.
See notes to financial statements.
</TABLE>
- 44 -
<PAGE>
<PAGE>
<TABLE>
MARSICO GROWTH & INCOME FUND
September 30, 1998
SCHEDULE OF INVESTMENTS
<CAPTION>
Number Market Value Percent
of Shares in Dollars of Net Assets
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCKS
AEROSPACE AND DEFENSE
Gulfstream Aerospace Corporation<F*> 191,916 $ 7,724,619 2.93%
AIRLINES
Delta Air Lines, Inc. 64,823 6,304,037 2.39
UAL Corporation<F*> 75,815 4,913,760 1.87
------------------------------
11,217,797 4.26
APPLICATIONS SOFTWARE
PeopleSoft, Inc.<F*> 124,825 4,072,416 1.54
AUTOMOTIVE - CARS & LIGHT TRUCKS
Chrysler Corporation 106,882 5,116,976 1.94
Ford Motor Company 190,070 8,921,411 3.39
General Motors Corporation 91,060 4,979,844 1.89
------------------------------
19,018,231 7.22
BEVERAGES - NON-ALCOHOLIC
Coca-Cola Enterprises Inc. 133,474 3,370,219 1.28
BREWERY
Anheuser-Busch Companies, Inc. 129,546 6,995,484 2.65
BUILDING - RESIDENTIAL/COMMERCIAL
M.D.C. Holdings, Inc. 265,188 4,889,404 1.86
CABLE TELEVISION
MediaOne Group, Inc.<F*> 237,531 10,555,284 4.01
COMPUTER SOFTWARE
Microsoft Corporation<F*> 97,941 10,779,631 4.09
COMPUTERS - INFORMATION TECHNOLOGY
IMS Health Inc. 119,448 7,398,310 2.81
COMPUTERS - MEMORY DEVICES
EMC Corporation<F*> 208,900 11,946,469 4.53
COMPUTERS - MICRO
International Business Machines
Corporation 54,088 6,923,264 2.63
CRUISE LINES
Carnival Corporation 204,043 6,491,118 2.46
DIVERSIFIED FINANCIAL SERVICES
Associates First Capital Corporation 80,144 5,229,396 1.98
DIVERSIFIED MANUFACTURING OPERATIONS
General Electric Company 70,327 5,595,392 2.12
FINANCE - CREDIT CARD
MBNA Corporation 121,651 3,482,260 1.32
FINANCE - MORTGAGE LOAN BANKER
Fannie Mae 69,618 4,472,956 1.70
Hotels & Motels
Four Seasons Hotels, Inc. 69,472 1,424,176 0.54
MEDICAL - DRUGS
Pfizer Inc. 72,429 7,672,947 2.91
Schering-Plough Corporation 83,556 8,653,268 3.28
Warner-Lambert Company 121,609 9,181,479 3.49
------------------------------
25,507,694 9.68
MULTIMEDIA
Time Warner Inc. 157,451 13,786,803 5.23
NETWORKING PRODUCTS
Cisco Systems, Inc.<F*> 114,544 7,080,282 2.69
OIL COMPANIES - INTEGRATED
British Petroleum Company PLC 102,510 8,943,997 3.39
RADIO
Clear Channel Communications, Inc.<F*> 43,650 2,073,375 0.79
RENTAL - AUTO & EQUIPMENT
The Hertz Corporation 174,418 7,216,545 2.74
RETAIL - APPAREL/SHOE
The Gap, Inc. 89,092 4,699,603 1.78
RETAIL - BUILDING PRODUCTS
The Home Depot, Inc. 173,946 6,870,867 2.61
SUPER-REGIONAL BANKS
Northern Trust Corporation 113,714 7,760,980 2.95
Norwest Corporation 184,261 6,598,847 2.50
U.S. Bancorp 139,502 4,961,040 1.88
------------------------------
19,320,867 7.33
TELECOMMUNICATION EQUIPMENT
Lucent Technologies Inc. 109,037 7,530,368 2.86
TRANSPORTATION - RAIL
Kansas City Southern Industries, Inc. 182,380 6,383,300 2.42
------------------------------
TOTAL COMMON STOCKS (COST $244,161,306) 241,000,127 91.45
==============================
- 45 -
<PAGE>
<PAGE>
<CAPTION>
Number Market Value Percent
of Shares in Dollars of Net Assets
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS
BUILDING - RESIDENTIAL/COMMERCIAL
M.D.C. Holdings, Inc., 8.375%, 2/1/08 $ 2,700,000 2,598,750 0.98
RESORTS/THEME PARKS
Premier Parks, Inc., 12.000%, 8/15/03 2,400,000 2,604,000 0.99
-----------------------------
TOTAL CORPORATE BONDS (COST $5,239,693) 5,202,750 1.97
=============================
U.S. GOVERNMENT OBLIGATIONS
U.S. Treasury Bonds, 5.50%, 8/15/28 10,899,000 11,756,228 4.46
-----------------------------
II. Total U.S. Government Obligations
(COST $11,756,238) 11,756,228 4.46
=============================
<CAPTION>
Principal/ Market Value Percent of
A. Shares in Dollars Net Assets
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS
SSgA Money Market Fund 23,005 $ 23,005 0.01%
Federal Home Loan Bank,
4.95%, 10/1/98 $ 36,700,000 36,700,000 13.93
-------------------------------
TOTAL SHORT-TERM INVESTMENTS
(COST $36,723,005) 36,723,005 13.94
===============================
III. Total Investments (cost $297,880,242) 294,682,110 111.82
Liabilities less Other Assets (31,162,903) (11.82)
-------------------------------
NET ASSETS $263,519,207 100.00%
===============================
<FN>
<F*> Non-income producing.
See notes to financial statements.
</TABLE>
- 46 -
<PAGE>
<PAGE>
<TABLE>
THE MARSICO INVESTMENT FUND
September 30, 1998
STATEMENTS OF ASSETS AND LIABILITIES
<CAPTION>
Growth &
Focus Fund Income Fund
- ------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at value (cost $855,674,287 and
$297,880,242, respectively) $841,474,460 $294,682,110
Interest and dividends receivable 201,897 206,898
Receivable for investments sold 24,748,502 20,555,721
Receivable for capital stock sold 3,237,230 2,341,762
Organizational expenses, net of
accumulated amortization 117,008 117,008
Prepaid expenses and other assets 121,517 41,026
------------------------------------
TOTAL ASSETS 869,900,614 317,944,525
====================================
LIABILITIES
Payable for investments purchased 5,735,060 53,218,545
Payable for capital stock redeemed 4,600,812 795,585
Accrued investment advisory fee 578,888 138,423
Accrued distribution fee 200,107 59,828
Accrued expenses and other liabilities 529,089 212,937
Total Liabilities 11,643,956 54,425,318
------------------------------------
NET ASSETS $858,256,658 $263,519,207
====================================
NET ASSETS CONSIST OF
Paid-in-capital $912,084,861 $281,804,013
Accumulated net realized loss on investments (40,064,112) (15,144,125)
Accumulated net realized gain on foreign
currency transactions 433,914 57,257
Net unrealized depreciation on investments and
foreign currency translations (14,198,005) (3,197,938)
------------------------------------
NET ASSETS $858,256,658 $263,519,207
====================================
SHARES OUTSTANDING, $0.001 PAR VALUE
(UNLIMITED SHARES AUTHORIZED) 69,444,196 22,832,879
NET ASSET VALUE, REDEMPTION PRICE, AND
OFFERING PRICE PER SHARE (NET ASSETS/
SHARES OUTSTANDING) $ 12.36 $ 11.54
</TABLE>
- 47 -
<PAGE>
<PAGE>
<TABLE>
THE MARSICO INVESTMENT FUND
Period Ended September 30, 1998<F*>
STATEMENTS OF ASSETS AND LIABILITIES
<CAPTION>
Growth &
Focus Fund Income Fund
- ------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest $ 1,585,603 $ 650,283
Dividends (net of $25,835 and $9,949 of
non-reclaimable foreign withholding taxes) 2,338,610 598,844
------------------------------------
TOTAL INVESTMENT INCOME 3,924,213 1,249,127
EXPENSES
Investment advisory fees 2,590,083 774,854
Distribution fees 761,789 227,898
Transfer agent fees and expenses 565,809 194,772
Federal and state registration fees 333,695 114,038
Printing and postage expenses 110,314 35,320
Fund administration fees 168,841 96,299
Custody and fund accounting fees 95,468 52,745
Professional fees 53,346 53,346
Trustees' fees and expenses 46,593 46,593
Amortization of organizational costs 20,581 20,581
Miscellaneous 9,831 6,057
------------------------------------
TOTAL EXPENSES 4,756,350 1,622,503
Less waiver of fees - (249,672)
Less expenses paid indirectly (18,219) (5,442)
NET EXPENSES 4,738,131 1,367,389
====================================
NET INVESTMENT LOSS (813,918) (118,262)
====================================
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized loss on investments (40,087,882) (15,147,236)
Net realized gain on foreign currency transactions 433,914 57,257
Change in unrealized depreciation on investments
and foreign currency translations (14,198,005) (3,197,938)
------------------------------------
Net Loss on Investments (53,851,973) (18,287,917)
------------------------------------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS $(54,665,891) $(18,406,179)
<FN>
<F*>From December 31, 1997 (commencement of operations).
See notes to financial statements.
</TABLE>
- 48 -
<PAGE>
<PAGE>
<TABLE>
THE MARSICO INVESTMENT FUND
Period Ended September 30, 1998<F*>
STATEMENTS OF CHANGES IN NET ASSETS
<CAPTION>
Growth &
Focus Fund Income Fund
- ------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS
Net investment loss $ (813,918) $ (118,262)
Net realized loss on investments (40,087,882) (15,147,236)
Net realized gain on foreign currency transactions 433,914 57,257
Change in unrealized depreciation on investments
and foreign currency translations (14,198,005) (3,197,938)
--------------------------------------
Net decrease in net assets resulting
from operations (54,665,891) (18,406,179)
--------------------------------------
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 1,280,834,349 368,490,350
Redemption of shares (367,961,800) (86,614,964)
--------------------------------------
Net increase from capital share transactions 912,872,549 281,875,386
--------------------------------------
TOTAL INCREASE IN NET ASSETS 858,206,658 263,469,207
NET ASSETS
Beginning of period 50,000 50,000
--------------------------------------
END OF PERIOD $ 858,256,658 $263,519,207
TRANSACTIONS IN SHARES
Shares sold 97,469,724 29,846,080
Shares redeemed (28,030,528) (7,018,201)
--------------------------------------
NET INCREASE 69,439,196 22,827,879
<FN>
<F*>From December 31, 1997 (commencement of operations).
See notes to financial statements.
</TABLE>
- 49 -
<PAGE>
<PAGE>
THE MARSICO INVESTMENT FUND
September 30, 1998
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
The Marsico Investment Fund (the "Trust") was organized on October 1,
1997 as a Delaware Business Trust and is registered under the Investment
Company Act of 1940, as amended (the "1940 Act") as an open-end
management investment company. The Focus Fund and the Growth & Income
Fund (collectively, the "Funds") are separate investment portfolios of
the Trust. The Focus Fund is a non-diversified fund that seeks long-term
growth of capital by normally investing in a core position of 20-30
common stocks. The Growth & Income Fund is a diversified fund, as
defined in the 1940 Act, that seeks long-term growth of capital with a
limited emphasis on income. The Funds commenced operations on December
31, 1997.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Funds in the preparation of their financial
statements. These policies are in conformity with generally accepted
accounting principles ("GAAP") for investment companies. The
presentation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates.
(A) INVESTMENT VALUATION - A security traded on a recognized stock
exchange is valued at the last sale price prior to the time when assets
are valued on the principal exchange on which the security is traded. If
no sale is reported on the valuation date, the most current bid price
will be used. All other securities for which over-the-counter market
quotations are readily available are valued at the most current closing
price. Debt securities which will mature in more than 60 days are valued
at prices furnished by a pricing service. Securities which will mature
in 60 days or less are valued at amortized cost, which approximates
market value. Any securities for which market quotations are not readily
available are valued at their fair value as determined in good faith by
the Funds' investment adviser pursuant to guidelines established by the
Board of Trustees.
(B) ORGANIZATION COSTS - Costs incurred by the Funds in connection
with their organization, registration and the initial public offering of
shares have been deferred and will be amortized over the period of
benefit, but not to exceed five years. If any of the original shares of
a Fund are redeemed by any holder thereof prior to the end of the
amortization period, the redemption proceeds will be reduced by the pro
rata share of the unamortized expenses as of the date of redemption. The
pro rata share by which the proceeds are reduced will be derived by
dividing the number of original shares of the Funds being redeemed by
the total number of original shares outstanding at the time of
redemption.
(C) EXPENSES - The Funds are charged for those expenses that are
directly attributable to each fund, such as advisory and custodian fees.
Expenses that are not directly attributable to a fund are typically
allocated among the funds in proportion to their respective net assets.
The Funds' expenses may be reduced by voluntary Advisory waivers and
uninvested cash balances earning interest or credits. Such credits are
included in Expenses Paid Indirectly in the Statement of Operations.
(D) FEDERAL INCOME TAXES - Each Fund intends to comply with the
requirements of the Internal Revenue Code necessary to qualify as a
regulated investment company and to make the requisite distributions of
income to its shareholders which will be sufficient to relieve it from
all or substantially all federal and state income and excise taxes.
- 50 -
<PAGE>
<PAGE>
(E) DISTRIBUTIONS TO SHAREHOLDERS - Dividends from net investment
income and net realized capital gains, if any, will be declared and paid
at least annually. Distributions to shareholders are recorded on the
ex-dividend date. Each Fund may periodically make reclassifications
among certain of its capital accounts as a result of the timing and
characterization of certain income and capital gains distributions
determined in accordance with federal tax regulations, which may differ
from GAAP. These reclassifications are due to differing treatments for
items such as deferral of wash sales, foreign currency transactions, net
operating losses, and Post-October capital losses. Accordingly, at
September 30, 1998, reclassifications were recorded to decrease net
investment loss by $813,918 and $118,262, decrease accumulated net
realized loss on investments by $23,770 and $3,111 and decrease paid-in
capital by $837,688 and $121,373 in the Focus and Growth & Income Funds,
respectively.
(F) FORWARD CURRENCY TRANSACTIONS AND FUTURES CONTRACTS - The Funds
enter into forward currency contracts in order to reduce their exposure
to changes in foreign currency exchange rates on their foreign holdings
and to lock in the U.S. dollar cost of firm purchase and sale
commitments for securities denominated in foreign currencies. A forward
currency contract is a commitment to purchase or sell a foreign currency
at a future date at a negotiated forward rate. The gain or loss arising
from the difference between the U.S. dollar cost of the original
contract and the value of the foreign currency in U.S. dollars upon
closing of such contract is included in net realized gain or loss from
foreign currency transactions.
Forward currency contracts held by the Funds are fully
collateralized by other securities. If held by the Funds, such
collateral would be in the possession of the Funds' custodian. The
collateral would be evaluated daily to ensure its market value equals or
exceeds the current market value of the corresponding forward currency
contracts.
Currency gain and loss is also calculated on payables and
receivables that are denominated in foreign currencies. The payables and
receivables are generally related to security transactions and income.
The change in net appreciation/depreciation of the payables and
receivables is recorded as unrealized appreciation/depreciation on
investments and foreign currency translations.
Futures contracts are marked to market daily and the resultant
variation margin is recorded as an unrealized gain or loss. When a
contract is closed, a realized gain or loss is recorded equal to the
difference between the opening and closing value of the contract.
Generally, open forward and futures contracts are marked to market
(i.e., treated as realized and subject to distribution) for federal
income tax purposes at fiscal year end.
Foreign-denominated assets and forward currency contracts may
involve more risks than domestic transactions, including currency risk,
political and economic risk, regulatory risk and market risk. Risks may
arise from the potential inability of a counterparty to meet the terms
of a contract and from unanticipated movements in the value of foreign
currencies relative to the U.S. dollar.
The Funds may enter into "futures contracts" and "options" on
securities, financial indexes and foreign currencies, forward contracts,
and interest rate swaps and swap-related products. The Funds intend to
use such derivative instruments primarily to hedge or protect from
adverse movements in securities prices, currency rates or interest
rates. The use of futures contracts and options may involve risks such
as the possibility of illiquid markets or imperfect correlation between
the value of the contracts and the underlying securities, or that the
counterparty will fail to perform its obligations.
(G) OTHER - Investment transactions are accounted for on a trade date
basis. Each Fund determines the gain or loss realized from the
investment transactions by comparing the original cost of the security
lot sold with the net sale proceeds. Dividend income is recognized on
the ex-dividend date. Certain dividends from foreign securities will be
recorded as soon as the Trust is informed of the dividend if such
information is obtained subsequent to the ex-dividend date. Interest
income is recognized on an accrual basis.
3. INVESTMENT ADVISORY AGREEMENT
The Funds have an agreement with Marsico Capital Management, LLC (the
"Adviser") to furnish investment advisory services to the Funds. Under
the terms of this agreement, the Adviser is
- 51 -
<PAGE>
<PAGE>
compensated at the rate of 0.85% of the average daily net assets of each
of the Focus and Growth & Income Funds. The Adviser has agreed to
voluntarily reduce fees for expenses (exclusive of brokerage, interest,
taxes and extraordinary expenses) that exceed the expense limitation of
1.60% and 1.50% for the Focus and the Growth & Income Funds,
respectively, until January 1, 1999. A fee of $249,672 was waived in the
Growth & Income Fund. The Adviser has an agreement with the Funds that
allows the Adviser the ability to seek reimbursement of any waivers made
to its advisory fee, subject to the Funds' ability to effect such
reimbursement and remain in compliance with applicable voluntary expense
limitations.
4. SERVICE AND DISTRIBUTION PLAN
The Funds have adopted a Service and Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act. The Plan authorizes payments
by the Funds in connection with the distribution of their shares at an
annual rate, as determined from time to time by the Board of Trustees,
of up to 0.25% of a Fund's average daily net assets.
5. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments, for the Funds for the period ended September 30, 1998 were
as follows:
<TABLE>
<CAPTION>
Growth &
Focus Fund Income Fund
- ------------------------------------------------------------------
<S> <C> <C>
PURCHASE
U.S. Government - $ 11,756,238
Other $1,471,447,701 416,499,825
SALES
U.S. Government - -
Other 594,208,304 151,953,272
</TABLE>
The cost of securities on a tax basis for the Focus and Growth & Income
Funds is $869,192,826 and $299,847,060, respectively. At September 30,
1998, gross unrealized appreciation and depreciation on investments for
federal income tax purposes were as follows:
<TABLE>
<CAPTION>
Growth &
Focus Fund Income Fund
- ------------------------------------------------------------------
<S> <C> <C>
Unrealized Appreciation $ 21,180,077 $ 8,035,192
(Unrealized Depreciation) (48,898,443) (13,200,142)
---------------------------
NET UNREALIZED DEPRECIATION
ON INVESTMENTS $(27,718,366) $ (5,164,950)
</TABLE>
At September 30, 1998, the Focus and Growth & Income Funds had deferred
Post-October capital losses of $26,111,659 and $13,120,050,
respectively. To the extent the Funds realize net capital gains, taxable
distributions to its shareholders will be offset by any unused capital
loss carryovers.
- 52 -
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Shareholders of
The Marsico Investment Fund
In our opinion, the accompanying statements of assets and liabilities,
including the schedules of investments, and the related statements of
operations and of changes in net assets and the financial highlights
present fairly, in all material respects, the financial position of the
Marsico Focus Fund and the Marsico Growth & Income Fund (constituting
The Marsico Investment Fund, hereafter referred to as the "Trust") at
September 30, 1998, and the results of each of their operations, the
changes in each of their net assets and the financial highlights for the
period December 31, 1997 (commencement of operations) through September
30, 1998, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Trust's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at September 30, 1998 by correspondence with
the custodian, provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Denver, Colorado
November 2, 1998
DISTRIBUTION
The Trust has entered into a distribution agreement with Sunstone
Distribution Services, LLC (the "Distributor"). Under the agreement, the
Distributor serves as each Fund's principal underwriter and acts as
exclusive agent for the Funds in selling their shares to the public. For
the marketing and distribution services provided, the Funds pay the
Distributor a fee at the annual rate of 0.0175% of each Fund's average
daily net assets subject to a minimum annual fee of $25,000 per Fund.
These fees are limited to .25% of each Fund's average daily net assets.
If the fees exceed .25% of each Fund's average daily net assets, neither
Fund will pay the difference. Any amount in excess of .25% will be borne
by Marsico Capital, and not charged to the Funds thereafter. During the
year ended September 30, 1998, The Distributor received as compensation
$53,313 from the Focus Fund and $18,699 from the Growth & Income Fund.
Certain officers and directors of Marsico Capital are also officers
and trustees of the Trust.
SERVICE PROVIDERS
Investment Adviser
Marsico Capital Management, LLC, 1200 17th Street, Suite 1300, Denver,
CO 80202
Administrator
Sunstone Financial Group, Inc., 207 East Buffalo Street, Suite 400,
Milwaukee, WI, 53202.
Counsel
Dechert Price & Rhoads, 1775 Eye St., NW, Washington DC 20006-2401.
Custodian
State Street Bank and Trust Company, 225 Franklin Street, Boston, MA
02110.
Independent Accounts
PricewaterhouseCoopers LLP, 950 Seventeenth Street, Denver, CO 80202
Transfer And Dividend Disbursing Agent
Sunstone Financial Group, Inc., LLC, 207 East Buffalo Street, Suite 400,
Milwaukee, WI, 53202.
- 53 -
<PAGE>
<PAGE>
APPENDIX - A
GLOSSARY OF INVESTMENT TERMS
This glossary provides a more detailed description of some of the types
of securities and other instruments in which the Funds may invest. The
Funds may invest in these instruments to the extent permitted by its
investment objective and policies. The Funds are not limited by this
discussion and may invest in any other types of instruments not
precluded by the policies discussed elsewhere in this Prospectus. Please
refer to the SAI for a more detailed discussion of certain instruments.
An asterisk ("<F*>") next to a security indicates that each Fund will
invest less than 5% of its net assets in that security.
I. EQUITY AND DEBT SECURITIES
BONDS are debt securities issued by a company, municipality, government
or government agency. The issuer of a bond is required to pay the holder
the amount of the loan (or par value) at a specified maturity and to
make scheduled interest payments.
COMMERCIAL PAPER is a short-term debt obligation with a maturity ranging
from 1 to 270 days issued by banks, corporations and other borrowers to
investors seeking to invest idle cash. For example, the Funds may
purchase commercial paper issued under Section 4(2) of the Securities
Act of 1933.
COMMON STOCK represents a share of ownership in a company and usually
carries voting rights and earns dividends. Unlike preferred stock,
dividends on common stock are not fixed but are declared at the
discretion of the issuer's board of directors.
CONVERTIBLE SECURITIES are preferred stocks or bonds that pay a fixed
dividend or interest payment and are convertible into common stock at a
specified price, or conversion ratio.
DEPOSITARY RECEIPTS are receipts for shares of a foreign-based
corporation that entitle the holder to dividends and capital gains on
the underlying security. Receipts include those issued by domestic banks
(American Depositary Receipts), foreign banks (Global or European
Depositary Receipts) and broker-dealers (depositary shares).
FIXED-INCOME SECURITIES are securities that pay a specified rate of
return. The term generally includes short- and long-term government,
corporate and municipal obligations that pay a specified rate of
interest or coupons for a specified period of time and preferred stock,
which pays fixed dividends.
HIGH-YIELD/HIGH-RISK SECURITIES are securities that are rated below
investment grade by the primary rating agencies (e.g., BB or lower by
Standard & Poor's and Ba or lower by Moody's). Other terms commonly used
to describe such securities include "lower rated bonds," "noninvestment
grade bonds" and "junk bonds."
INVERSE FLOATERS<F*> are debt instruments whose interest bears an
inverse relationship to the interest rate on another security. The Funds
will not invest more than 5% of their respective net assets in inverse
floaters.
MORTGAGE- AND ASSET-BACKED SECURITIES are shares in a pool of mortgages
or other debt. These securities are generally pass-through securities,
which means that principal and interest payments on the underlying
securities (less servicing fees) are passed through to shareholders on a
pro rata basis. These securities involve prepayment risk, which is the
risk that the underlying mortgages or other debt may be refinanced or
paid off prior to their maturities during periods of declining interest
rates. In that case, the Portfolio Manager may have to reinvest the
proceeds from the securities at a lower rate. Potential market
A-1
<PAGE>
<PAGE>
gains on a security subject to prepayment risk may be more limited than
potential market gains on a comparable security that is not subject to
prepayment risk.
PASSIVE FOREIGN INVESTMENT COMPANIES ("PFICS") are any foreign
corporations which generate certain amounts of passive income or hold
certain amounts of assets for the production of passive income. Passive
income includes dividends, interest, royalties, rents and annuities.
Income tax regulations may require the Fund to recognize income
associated with the PFIC prior to the actual receipt of any such income.
PAY-IN-KIND BONDS are debt securities that normally give the issuer an
option to pay cash at a coupon payment date or give the holder of the
security a similar bond with the same coupon rate and a face value equal
to the amount of the coupon payment that would have been made.
PREFERRED STOCK is a class of stock that generally pays dividends at a
specified rate and has preference over common stock in the payment of
dividends and liquidation. Preferred stock generally does not carry
voting rights.
REPURCHASE AGREEMENTS involve the purchase of a security by the Fund and
a simultaneous agreement by the seller (generally a bank or dealer) to
repurchase the security from the Fund at a specified date or upon
demand. This technique offers a method of earning income on idle cash.
These securities involve the risk that the seller will fail to
repurchase the security, as agreed. In that case, the Fund will bear the
risk of market value fluctuations until the security can be sold and may
encounter delays and incur costs in liquidating the security.
REVERSE REPURCHASE AGREEMENTS<F*> involve the sale of a security by the
Fund to another party (generally a bank or dealer) in return for cash
and an agreement by the Fund to buy the security back at a specified
price and time. This technique will be used primarily to provide cash to
satisfy unusually heavy redemption requests.
RULE 144A SECURITIES are securities that are not registered for sale to
the general public under the Securities Act of 1933, but that may be
resold to certain institutional investors.
STANDBY COMMITMENTS are obligations purchased by the Fund from a dealer
that give the Fund the option to sell a security to the dealer at a
specified price.
STEP COUPON BONDS are debt securities that trade at a discount from
their face value and pay coupon interest. The discount from the face
value depends on the time remaining until cash payments begin,
prevailing interest rates, liquidity of the security and the perceived
credit quality of the issuer.
STRIP BONDS are debt securities that are stripped of their interest
(usually by a financial intermediary) after the securities are issued.
The market value of these securities generally fluctuates more in
response to changes in interest rates than interest-paying securities of
comparable maturity.
TENDER OPTION BONDS<F*> are relatively long-term bonds that are coupled
with the agreement of a third party (such as a broker, dealer or bank)
to grant the holders of such securities the option to tender the
securities to the institution at periodic intervals.
U.S. GOVERNMENT SECURITIES include direct obligations of the U.S.
government that are supported by its full faith and credit. Treasury
bills have initial maturities of less than one year, Treasury notes have
initial maturities of one to ten years, and Treasury bonds may be issued
with any maturity but generally have maturities of at least ten years.
U.S. government securities also include indirect obligations of the U.S.
government that are issued by federal agencies and government sponsored
entities. Unlike Treasury securities, agency securities generally are
not backed by the full faith and credit of the U.S. government.
A-2
<PAGE>
<PAGE>
Some agency securities are supported by the right of the issuer to
borrow from the Treasury, others are supported by the discretionary
authority of the U.S. government to purchase the agency's obligations
and others are supported only by the credit of the sponsoring agency.
VARIABLE AND FLOATING RATE SECURITIES have variable or floating rates of
interest and, under certain limited circumstances, may have varying
principal amounts. These securities pay interest at rates that are
adjusted periodically according to a specified formula, usually with
reference to some interest rate index or market interest rate. The
floating rate tends to decrease the security's price sensitivity to
changes in interest rates.
WARRANTS are securities, typically issued with preferred stocks or
bonds, that give the holder the right to buy a proportionate amount of
common stock at a specified price, usually at a price that is higher
than the market price at the time of issuance of the warrant. The right
may last for a period of years or indefinitely.
WHEN-ISSUED, DELAYED DELIVERY AND FORWARD TRANSACTIONS generally involve
the purchase of a security with payment and delivery at some time in the
future--i.e., beyond normal settlement. The Funds do not earn interest
on such securities until settlement, and the Funds bear the risk of
market value fluctuations in between the purchase and settlement dates.
New issues of stocks and bonds, private placements and U.S. government
securities may be sold in this manner.
ZERO COUPON BONDS are debt securities that do not pay interest at
regular intervals, but are issued at a discount from face value. The
discount approximates the total amount of interest the security will
accrue from the date of issuance to maturity. The market value of these
securities generally fluctuates more in response to changes in interest
rates than in interest-paying securities of comparable maturity.
II. FUTURES, OPTIONS AND OTHER DERIVATIVES
FORWARD CONTRACTS are contracts to purchase or sell a specified amount
of property for an agreed upon price at a specified time. Forward
contracts are not currently exchange traded and are typically negotiated
on an individual basis. The Fund may enter into forward currency
contracts to hedge against declines in the value of securities
denominated in, or whose value is tied to, a currency other than the
U.S. dollar or to reduce the impact of currency appreciation on
purchases of such securities. It may also enter into forward contracts
to purchase or sell securities or other financial indices.
FUTURES CONTRACTS are contracts that obligate the buyer to receive and
the seller to deliver an instrument or money at a specified price on a
specified date. The Fund may buy and sell futures contracts on foreign
currencies, securities and financial indices including interest rates or
an index of U.S. government, foreign government, equity or fixed-income
securities. The Fund may also buy options on futures contracts. An
option on a futures contract gives the buyer the right, but not the
obligation, to buy or sell a futures contract at a specified price on or
before a specified date. Futures contracts and options on futures are
standardized and traded on designated exchanges.
INDEXED/STRUCTURED SECURITIES are typically short- to intermediate-term
debt securities whose value at maturity or interest rate is linked to
currencies, interest rates, equity securities, indices, commodity prices
or other financial indicators. Such securities may be positively or
negatively indexed (i.e., their value may increase or decrease if the
reference index or instrument appreciates). Indexed/structured
securities may have return characteristics similar to direct investments
in the underlying instruments and may be more volatile than the
underlying instruments. The Fund bears the market risk of an investment
in the underlying instruments, as well as the credit risk of the issuer.
INTEREST RATE SWAPS involve the exchange by two parties of their
respective commitments to pay or receive interest (e.g., an exchange of
floating rate payments for fixed rate payments).
OPTIONS are the right, but not the obligation, to buy or sell a
specified amount of securities or other assets on or before a fixed date
at a predetermined price. The Fund may purchase and write put and call
options on securities, securities indices and foreign currencies.
A-3
<PAGE>
<PAGE>
APPENDIX - B
RATINGS OF INVESTMENT SECURITIES
A rating of a rating service represents the service's opinion as
to the credit quality of the security being rated. However, the ratings
are general and are not absolute standards of quality or guarantees as
to the creditworthiness of an issuer. Consequently, the Fund's
investment adviser believes that the quality of debt securities in which
the Fund invests should be continuously reviewed. A rating is not a
recommendation to purchase, sell or hold a security, because it does not
take into account market value or suitability for a particular investor.
When a security has received a rating from more than one service, each
rating should be evaluated independently. Ratings are based on current
information furnished by the issuer or obtained by the ratings services
from other sources which they consider reliable. Ratings may be changed,
suspended or withdrawn as a result of changes in or unavailability of
such information, or for other reasons.
The following is a description of the characteristics of ratings
used by Moody's Investors Service, Inc. and Standard & Poor's
Corporation.
MOODY'S INVESTORS SERVICE, INC. RATINGS
Aaa--Bonds rated Aaa are judged to be the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. Although the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such bonds.
Aa--Bonds rated Aa are judged to be high quality by all standards.
Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa bonds or fluctuation
of protective elements may be of greater amplitude or there may be other
elements present which make the long term risk appear somewhat larger
than in Aaa bonds.
A--Bonds rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
Baa--Bonds rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Ba--Bonds rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B--Bonds rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
B-1
<PAGE>
<PAGE>
Caa--Bonds rated Caa are of poor standing. Such bonds may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca--Bonds rated Ca represent obligations which are speculative in
a high degree. Such bonds are often in default or have other marked
shortcomings.
STANDARD & POOR'S CORPORATION RATING
AAA--Bonds rated AAA have the highest rating. Capacity to pay
principal and interest is extremely strong.
AA--Bonds rated AA have a very strong capacity to pay principal
and interest and differ from AAA bonds only in small degree.
A--Bonds rated A have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than bonds
in higher rated categories.
BBB--Bonds rated BBB are regarded as having an adequate capacity
to pay principal and interest. Whereas they normally exhibit protection
parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay principal and interest
for bonds in this capacity than for bonds in higher rated categories.
BB--B--CCC--CC--Bonds rated BB, B, CCC and CC are regarded, on
balance, as predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with the
terms of the obligation. BB indicates the lowest degree of speculation
among such bonds and CC the highest degree of speculation. Although such
bonds will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major risk exposures to
adverse conditions.
B-2
