PROSPECTUS
July 1, 1999
ATALANTA/SOSNOFF INVESTMENT TRUST
101 PARK AVENUE
NEW YORK, NEW YORK 10178
(877) 767-6633
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The Atalanta/Sosnoff Investment Trust currently offers four separate series of
shares to investors: the Atalanta/Sosnoff Fund, the Atalanta/Sosnoff Focus Fund,
the Atalanta/Sosnoff Value Fund and the Atalanta/Sosnoff Balanced Fund
(individually a
"Fund" and collectively the "Funds").
Atalanta/Sosnoff Capital Corporation (Delaware) (the "Adviser"), 101 Park
Avenue, New York, New York 10178, manages each Fund's investments. The Adviser
is a registered investment adviser that has advised individual, institutional
and corporate clients since 1982.
- - The ATALANTA/SOSNOFF FUND seeks long-term capital appreciation, through equity
investments in companies which the Adviser believes are entering into a period
of accelerating earnings momentum.
- - The ATALANTA/SOSNOFF FOCUS FUND is a non-diversified fund that seeks long-term
capital appreciation by concentrating its investments in a core position of
20-25 common stocks of companies which the Adviser believes are entering into a
period of accelerating earnings momentum.
- - The ATALANTA/SOSNOFF VALUE FUND seeks long-term capital appreciation by
investing primarily in equity securities which the Adviser believes are
fundamentally undervalued. The Fund uses a "value" investment approach, choosing
companies with relatively low price/earnings ratios, appropriate debt/equity
ratios and positive free cash flow.
- - The ATALANTA/SOSNOFF BALANCED FUND seeks to preserve capital while producing
long-term capital appreciation by investing in a blend of equity and
fixed-income securities. Convertible debentures and preferred stocks also will
be part of the investment universe.
This Prospectus sets forth concisely the information about the Funds that
you should know before investing. Please retain this Prospectus for future
reference. A Statement of Additional Information dated July 1, 1999 has been
filed with the Securities and Exchange Commission and is hereby incorporated by
reference in its entirety. The Fund's address is 101 Park Avenue,New York, New
York 10178 and its telephone number is toll-free: 1-877- SOSNOFF
(1-877-767-6633). A copy of the Statement of Additional Information can be
obtained at no charge by calling or writing the Funds.
<PAGE>
TABLE OF CONTENTS
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Expense Information............................................................2
Financial Highlights...........................................................3
Prior Performance of the Adviser...............................................4
Investment Objectives, Investment Methodology and
Risk Considerations..........................................................6
How to Purchase Shares........................................................16
Shareholder Services..........................................................17
How to Redeem Shares..........................................................18
Exchange Privilege............................................................20
Dividends and Distributions...................................................21
Taxes.........................................................................21
Operation of the Funds........................................................22
Service Plan..................................................................25
Calculation of Share Price....................................................26
Performance Information.......................................................26
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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<PAGE>
EXPENSE INFORMATION
- -------------------
Shareholder Transaction Expenses
- --------------------------------
Sales Load Imposed on Purchases................................. None
Sales Load Imposed on Reinvested Dividends...................... None
Redemption Fees................................................. None*
* A wire redemption fee is charged by the Funds' Custodian in the case of
redemptions made by wire. Such fee is subject to change and is currently
$9. See "How to Redeem Shares."
Annual Fund Operating Expenses (as a percentage of average net assets)
- ------------------------------
<TABLE>
<CAPTION>
Atalanta/Sosnoff Atalanta/Sosnoff Atalanta/Sosnoff Atalanta/Sosnoff
Fund Focus Fund Value Fund Balanced Fund
---- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Management Fees .75% .75% .75% .75%
12b-1 Fees .25% .25% .25% .25%
Other Expenses .50% .50% .50% .50%
----- ----- ----- -----
Total Fund Operating Expenses 1.50% 1.50% 1.50% 1.50%
===== ===== ===== =====
</TABLE>
The purpose of this table is to assist you in understanding the various costs
and expenses that an investor in the Funds will bear directly or indirectly. The
percentages expressing "Other Expenses" are based on estimated amounts for the
current fiscal year. THE EXAMPLE BELOW SHOULD NOT BE CONSIDERED A REPRESENTATION
OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
Example
- -------
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Atalanta/Sosnoff Atalanta/Sosnoff Atalanta/Sosnoff Atalanta/Sosnoff
Fund Focus Fund Value Fund Balanced Fund
---- ---------- ---------- -------------
<S> <C> <C> <C> <C>
1 Year $15 $15 $15 $15
3 Years 47 47 47 47
</TABLE>
- 2 -
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------
The following information, which relates only to the Atalanta/Sosnoff Fund and
is unaudited, is an integral part of the Fund's financial statements and should
be read in conjunction with the financial statements. The financial statements
as of November 30, 1998 appear in the Statement of Additional Information of the
Trust, which can be obtained at no charge by calling Countrywide Fund Services,
Inc. (Nationwide call toll-free 1-877-SOSNOFF (1-877-767-6633) or by writing to
the Trust at the address on the front of this Prospectus. Information is not
provided for the Atalanta/Sosnoff Focus Fund, the Atalanta/Sosnoff Value Fund or
the Atalanta/Sosnoff Balanced Fund because the public offering of the shares of
these series has not yet commenced as of the date of this Prospectus.
FINANCIAL HIGHLIGHTS
FOR THE PERIOD ENDED NOVEMBER 30, 1998(a) (UNAUDITED)
================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD:
Net asset value at beginning of period ........................ $ 10.00
---------
Income (loss) from investment operations:
Net investment loss ........................................ (0.01)
Net realized and unrealized gains on investments ........... 0.67
---------
Total from investment operations .............................. 0.66
---------
Net asset value at end of period .............................. $ 10.66
=========
RATIOS AND SUPPLEMENTAL DATA:
Total return .................................................. 6.60%(c)
=========
Net assets at end of period (000's) .......................... $ 9,777
=========
Ratio of net expenses to average net assets(b) ................ 1.50%(d)
Ratio of net investment loss to average net assets ............ (0.30%)(d)
Portfolio turnover rate ....................................... 156%(d)
(a) Represents the period from the initial public offering of shares (June 17,
1998) through November 30, 1998.
(b) Absent fee waivers and expense reimbursements by the Adviser, the ratio of
expenses to average net assets would have been 2.75%(d) for the period
ended November 30, 1998.
(c) Unannualized.
(d) Annualized.
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<PAGE>
PRIOR PERFORMANCE OF THE ADVISER
- --------------------------------
The investment performance illustrated below represents the composite
performance of all the separate accounts (the "Equity Composite" and the
"Balanced Composite") managed by the Adviser which were managed with investment
objectives, policies and strategies substantially similar to those to be
employed by the Adviser in managing the Atalanta/Sosnoff Fund and the
Atalanta/Sosnoff Balanced Fund, respectively. Martin T. Sosnoff, the Adviser's
Chief Investment Officer and Chairman of its investment committee, has been
primarily responsible for the day- to-day management of the Equity Composite and
the Balanced Composite throughout the entire period presented. Mr. Sosnoff is
likewise responsible for the day-to-day management of each Fund's portfolio. Mr.
Sosnoff founded Atalanta Capital Corp. in 1970 and became its Chief Investment
Officer in 1976. After Mr. Sosnoff founded the Adviser in 1981, all the accounts
he managed transferred from Atalanta Capital Corp. to the Adviser. Mr. Sosnoff
has not managed a registered investment company other than the Atalanta/Sosnoff
Fund.
The performance data below represents the prior performance of the Equity
Composite and the Balanced Composite and not the prior performance of the Funds
and should not be relied upon by investors as an indication of future
performance of the Funds. As a point of comparison for the Equity Composite, the
performance of the Standard & Poor's 500 Stock Index (the "S&P 500 Index") is
also presented. As points of comparison for the Balanced Composite, the
performance of the S&P 500 Index, the Lehman Brothers Intermediate
Government/Corporate Bond Index and a composite index consisting of 65% of the
S&P 500 Index and 35% of the Lehman Brothers Intermediate Government/Corporate
Bond Index (the "65/35 Composite Index") is presented. The S&P 500 Index is an
unmanaged capitalization-weighted measure of 500 widely held common stocks
listed on the New York Stock Exchange, the American Stock Exchange and Over The
Counter market. The Lehman Brothers Intermediate Government/Corporate Bond Index
is a widely recognized bond index composed of intermediate-term debt instruments
calculated by Lehman Brothers. The Lehman Brothers Intermediate
Government/Corporate Bond Index is being used to portray the pattern of bond
movement over the stated period.
- 4 -
<PAGE>
PERIODIC RATES OF RETURN - FOR THE PAST 10 YEARS
Equity Composite S&P
(dollar weighted 500
and net of fees) Index
---------------- -----
1989 34.95% 31.60%
1990 -0.70% -3.11%
1991 46.63% 30.33%
1992 4.63% 7.62%
1993 18.05% 10.06%
1994 -3.52% 1.31%
1995 34.76% 37.58%
1996 10.55% 22.96%
1997 25.86% 33.37%
1998 30.41% 28.56%
Quarter ended March 31, 1999 8.84% 4.98%
ANNUALIZED RETURNS - FOR PERIODS ENDED MARCH 31, 1999
Equity Composite S&P 500 Index
---------------- -------------
1 year 25.71% 18.44%
5 years 21.92% 26.25%
10 years 19.00% 18.95%
PERIODIC RATES OF RETURN - FOR THE PAST 10 YEARS
Lehman Brothers
Intermediate
Balanced Government/
Composite Corporate S&P 65/35
(dollar weighted Bond 500 Composite
and net of fees) Index Index Index
---------------- ----- ----- -----
1989 26.83% 12.75% 31.60% 24.84%
1990 3.63% 9.17% -3.11% 1.38%
1991 31.94% 14.62% 30.33% 24.79%
1992 6.69% 7.17% 7.62% 7.51%
1993 13.81% 8.78% 10.06% 9.62%
1994 -2.30% -1.93% 1.31% 0.19%
1995 29.82% 15.31% 37.58% 29.46%
1996 7.89% 4.06% 22.96% 16.09%
1997 20.66% 7.87% 33.37% 24.11%
1998 27.07% 8.42% 28.56% 22.10%
Quarter
ended
March 31, 1999 6.19% -0.19% 4.98% 3.17%
ANNUALIZED RETURNS - FOR PERIODS ENDED MARCH 31, 1999
Lehman Brothers
Intermediate
Government
Corporate 65/35
Balanced Composite Bond Index S&P 500 Index Composite Index
------------------ ---------- ------------- ---------------
1 year 23.40% 6.56% 18.44% 14.93%
5 years 18.14% 6.99% 26.25% 19.45%
10 years 15.98% 8.38% 18.95% 15.36%
- 5 -
<PAGE>
While the Adviser will employ for the Atalanta/Sosnoff Fund and the
Atalanta/Sosnoff Balanced Fund investment objectives, policies and strategies
that are substantially similar to those that were employed in managing the
Equity Composite and the Balanced Composite, respectively, the Adviser, in
managing the Funds, may be subject to certain restrictions imposed by the
Investment Company Act of 1940 and the Internal Revenue Code on its investment
activities to which, as the investment adviser to the Composites, it was not
previously subject. Examples include limits on the percentage of assets invested
in securities of issuers in a single industry and requirements on distributing
income to shareholders. Such restrictions, if they had been applicable to the
Composites, may have adversely affected the performance results of the
Composites.
The Atalanta/Sosnoff Fund and the Atalanta/Sosnoff Balanced Fund may incur
operating expenses that were not incurred by the Equity Composite and Balanced
Composite. It is anticipated that the fees and expenses of the Atalanta/Sosnoff
Fund and the Atalanta/Sosnoff Balanced Fund will be higher than those of the
Composites, which will lower performance results. While the Composites' incur
inflows and outflows of cash, there can be no assurance that the continuous
offering of each Fund's shares and each Fund's obligation to redeem their shares
will not impact the each Fund's performance.
The performance data above represents the prior performance of each
Composite and not the prior performance of the corresponding Fund and should not
be relied upon by investors as an indication of future performance of the Funds.
The performance of each Composite, which is unaudited, has otherwise been
computed by the Adviser in accordance with the standards formulated by the
Association for Investment Management and Research ("AIMR"). This method of
calculating performance differs from the standardized methodology used by mutual
funds to calculate performance and results in a total return different from that
derived from the standardized methodology. All performance data presented is net
of advisory fees and other expenses.
- 6 -
<PAGE>
INVESTMENT OBJECTIVES, INVESTMENT METHODOLOGY AND RISK CONSIDERATIONS
The Funds are series of the Atalanta/Sosnoff Investment Trust (the
"Trust"). The Funds are not intended to be a complete investment program, and
there is no assurance that each Fund's investment objective can be achieved.
Each Fund's investment objective may be changed by the Board of Trustees without
shareholder approval, but only after notification has been given to shareholders
and after this Prospectus has been revised accordingly. If there is a change in
a Fund's investment objective, shareholders should consider whether the Fund
remains an appropriate investment in light of their then current financial
position and needs. Unless otherwise indicated, all investment practices and
limitations of the Fund are nonfundamental policies which may be changed by the
Board of Trustees without shareholder approval.
INVESTMENT OBJECTIVES
The ATALANTA/SOSNOFF FUND seeks long-term capital appreciation, through
equity investments in companies which the Adviser believes are entering into a
period of accelerating earnings momentum. Under normal circumstances, at least
65% of the total assets of the Fund will be invested in common stocks and
securities convertible into common stocks (such as convertible bonds,
convertible preferred stocks and warrants). Although the Fund can invest in
companies of any size, the Fund generally invests in larger, more established
companies.
The ATALANTA/SOSNOFF FOCUS FUND is a non-diversified fund that seeks
long-term capital appreciation by normally concentrating its investments in a
core position of 20-25 large capitalization companies which the Adviser believes
are entering into a period of accelerating earnings momentum. Under normal
circumstances, at least 65% of the total assets of the Fund will be invested in
common stocks and securities convertible into common stocks (such as convertible
bonds, convertible preferred stocks and warrants) of medium to large
capitalization companies.
The ATALANTA/SOSNOFF VALUE FUND seeks long-term capital appreciation by
investing primarily in equity securities which the Adviser believes are
fundamentally undervalued. Under normal circumstances, at least 65% of the total
assets of the Fund will be invested in common stocks and securities convertible
into common stocks (such as convertible bonds, convertible preferred stocks and
warrants) of of medium to large capitalization companies. The Fund uses a
"value" investment approach, choosing companies with positive free cash flow,
relatively low price/earnings ratios and appropriate debt/equity ratios as
compared to other companies in the same industry, to specific
- 7 -
<PAGE>
competitors and to the overall market.
The ATALANTA/SOSNOFF BALANCED FUND seeks to preserve capital while
producing long-term capital appreciation by investing in a blend of equity and
fixed-income securities. Under normal circumstances, 65% (maximum of 75%) of the
Balanced Fund's assets will be invested in equity securities and 35% will be
invested in cash, cash equivalents and fixed-income securities.
INVESTMENT METHODOLOGY AND RISK CONSIDERATIONS
GROWTH FUNDS:
ATALANTA/SOSNOFF FUND
AND ATALANTA/SOSNOFF FOCUS FUND
The Adviser selects stocks for the two Growth Funds by using quantitative
screening techniques and fundamental investment analysis. The Adviser first
employs a quantitative screening strategy to a large capitalization universe of
stocks by searching for companies which may have the following general
characteristics, among others: market capitalization over $2 billion; earnings
growth rate above market(i.e. the S&P Index, industry averages) for at least 12
months; relative price/earnings ratio in the lower one-third of its historical
range over the past 5 years; and earnings per share estimated by the Adviser to
be above the consensus as reported in financial industry publications. Through
its evaluation of these general criteria, the Adviser reduces the initial
universe of stocks to a selected list of stocks which are then subjected to
further fundamental research analysis. The Adviser may examine various factors
including, but not limited to, the following:
Earnings Momentum - Which companies will experience an accelerating rate of
growth during the next business period?
Growth Rate P/E - What price to earnings ratio is being paid for the
company's rate of growth and where does that place it relative to its peers
in its industry and the overall market?
Earnings Stability - How consistently has the company been able to grow
operating income over an economic period and how consistently has the
company met earnings estimates?
Price Performance - Has the stock outperformed the market indices through
the current stock market period?
The Adviser may also cultivate a dialogue with the senior management of the
companies it analyzes. Such a hands-on approach emphasizes direct contact
whereby impressions gained by
- 8 -
<PAGE>
interviewing management are verified against the assessments of vendors,
competitors and suppliers. The Adviser's conclusions are often quantified by the
development of an earnings model which may be gauged against the investment
community's expectations.
The Adviser's fundamental approach is disciplined by two additional steps.
First, prospective purchases are screened against valuation criteria such as
historical and relative price to earnings ratios. Next, specific target prices
(what the Adviser thinks the stock is worth) are established for each stock.
Securities are bought and sold based upon the relationship of the stock's
current price to its target price. For example, if a stock's target price is
higher than its current price, the Adviser will consider buying the stock.
Conversely, as a stock's current price approaches its target price, the Adviser
will consider selling.
The Atalanta/Sosnoff Focus Fund is a non-diversified fund and therefore may
invest more than 5% of its total assets in the securities of one or more
issuers. Because a relatively high percentage of the assets of the Fund may be
invested in the securities of a limited number of issuers, the value of shares
of the Fund may be more sensitive to any single economic, business, political or
regulatory occurrence than the value of shares of a diversified investment
company. This fluctuation, if significant, may affect the performance of the
Fund.
ATALANTA/SOSNOFF VALUE FUND
The Adviser's value philosophy seeks to identify stocks priced
below-average in comparison to such factors as earnings and book value
(shareholders' equity divided by shares outstanding). Value investing is
predicated on the Adviser's ability to identify undervalued securities. The
Adviser emphasizes stocks that have relatively low price/earnings ratios and low
debt/equity ratios compared to other companies in the same industry, to specific
competitors and the overall market, and positive free cash flow. The dividend
yield (annual dividend rate divided by current stock price) of these stocks
tends to be higher.
The Adviser will use a bottom-up approach (focusing on specific companies
rather than the overall market level or industry sectors) in selecting
securities. Before a security is purchased, the Adviser will analyze company
reports and other public information to develop an opinion on the company's
value. The Adviser's company selection process includes but is not limited to
those that demonstrate strong cash flows, significant barriers to competition,
and moderate or low requirements for capital reinvestment. While the Adviser
intends to invest
- 9 -
<PAGE>
primarily in companies which are leaders in their respective industries, the
Adviser may also invest in smaller, less seasoned companies.
Investments in smaller or newer companies may suffer more significant
losses because they lack depth of management, may be unable to generate funds
necessary for growth or potential development, or be developing or marketing new
products or services for which markets are not yet established and may never
become established. In addition, such companies may be insignificant factors in
their industries and may become subject to intense competition from larger or
more established companies. Securities of smaller or newer companies may have
more limited trading markets than the markets for securities of larger or more
established issuers, and may be subject to wide price fluctuations. Investments
in such companies tend to be more volatile and somewhat more speculative.
BALANCED FUND:
ATALANTA/SOSNOFF BALANCED FUND
The Balanced Fund's blend of equity securities (the "equity segment") and
cash, cash equivalents and fixed-income securities (the "fixed-income segment")
is determined by systematically integrating a macroeconomic outlook (which
involves a review of domestic factors such as Gross Domestic Product momentum,
interest rates, inflation, corporate earnings and a review of international
factors such as geopolitical events, currency parities and other variables) with
individual security analysis. In addition, the Adviser will make asset
allocation decisions in anticipation of interest rate changes and monetary
policy decisions.
The equity segment of the Fund will consist primarily of larger, more
established companies which the Adviser believes are entering into a period of
accelerating earnings momentum. The Adviser uses quantitative screening
techniques, followed by fundamental research analysis to select the stocks. In
effect, the equity segment's security selection process is identical to that
used by the Atalanta/Sosnoff Fund.
The fixed-income segment of the Fund will own a mix of Federal, agency and
corporate securities. The Adviser's analysis of currencies, inflation rates,
Federal Reserve policy, Gross Domestic Product momentum, interest rates and
geopolitical events is coupled with fundamental bottom-up security research in
selecting securities that make-up the fixed-income segment. The Adviser believes
the most critical variable in managing the fixed-income segment is the overall
duration(the time it takes an investor to recoup his/her investment) of the
segment. Thus, the
- 10 -
<PAGE>
Adviser will actively manage the duration and maturity of the Fund's
fixed-income segment, and will seek to enhance returns from interest rate
anticipation, sector allocations and individual security analysis. For example,
if the Adviser anticipates a decline in interest rates it will extend the
segment's duration. Conversely, if the Adviser anticipates an increase in
interest rates its duration will be reduced, depending on the Adviser's
analysis. In addition, the Adviser monitors yield disparities among different
asset classes and sectors and will invest the portfolio accordingly. This
determination is a function of the Adviser's assessment of the securities'
credit worthiness and historical yield. For example, if in the opinion of the
Adviser the disparity between the yield of corporate and federal and agency
securities is historically large (i.e., corporate is higher), then corporate
securities might be more attractive; if the disparity is smaller, federal and
agency securities might be more attractive because of their reduced risk as
compared to corporate securities.
Because the Fund intends to allocate 65% of its total assets to equity
securities and 35% of its total assets to cash, cash equivalents and
fixed-income securities, it may not be able to achieve, at times, a total return
as high as that of a portfolio with complete freedom to invest its assets
entirely in any one type of security. Likewise, since a portion of the Fund's
portfolio will normally consist of fixed-income securities, the Fund may not
achieve the degree of capital appreciation that a portfolio investing solely in
equity securities might achieve. It should be noted that, although the Fund
intends to invest in fixed-income securities to reduce the price volatility of
the Fund's shares, intermediate and long-term fixed-income securities do
fluctuate in value more than short-term fixed-income securities. The flow of
funds between the equity and fixed-income segments of the Fund is an ongoing
process.
ADDITIONAL INVESTMENT INFORMATION
- ---------------------------------
EQUITY SECURITIES. Each Fund may invest in common stocks and securities
convertible into common stocks (such as convertible bonds, convertible preferred
stocks and warrants). Each Fund may also invest in preferred stocks and
convertible bonds which are rated at the time of purchase in the five highest
grades assigned by Moody's Investors Service, Inc. (Aaa, Aa, A, Baa or Ba) or
Standard & Poor's Ratings Group (AAA, AA, A, BBB or BB) or in unrated securities
determined by the Adviser to be of comparable quality. Preferred stocks and
bonds rated Ba, or BB are considered high-yield/high-risk securities. Changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity of the issuers of these securities to pay principal and interest or to
pay the preferred stock obligations than is the case with higher grade
securities.
- 11 -
<PAGE>
Subsequent to its purchase by a Fund, a security may cease to be rated or its
rating may be reduced below Ba or BB, and the Adviser will consider such an
event to be relevant in its determination of whether the Fund should continue to
hold such security.
Investments in equity securities are subject to inherent market risks and
fluctuations in value due to earnings, economic conditions and other factors
beyond the control of the Adviser. As a result, the return and net asset value
of the Funds will fluctuate.
FIXED-INCOME SECURITIES. Each Fund may invest in fixed-income securities,
including U.S. Government obligations and corporate debt securities (such as
bonds and debentures) maturing in more than one year from the date of purchase
and preferred stocks of domestic issuers rated at the time of purchase in the
five highest grades assigned by Moody's Investors Service, Inc. (Aaa, Aa, A, Baa
or Ba) or Standard & Poor's Ratings Group (AAA, AA, A, BBB or BB) or, if
unrated, which are determined by the Adviser to be of comparable quality.
Fixed-income securities rated Ba or BB have speculative characteristics and
changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity of the issuers of these securities to pay principal and
interest or to pay the preferred stock obligations than is the case with higher
grade securities. Subsequent to its purchase by a Fund, a security may cease to
be rated or its rating may be reduced below Ba or BB and the Adviser will
consider such an event to be relevant in its determination of whether the Fund
should continue to hold such security.
Investments in fixed-income securities are subject to inherent market risks
and fluctuations in value due to changes in earnings, economic conditions,
quality ratings and other factors beyond the control of the Adviser.
Fixed-income securities are also subject to price fluctuations based upon
changes in the level of interest rates, which will generally result in all those
securities experiencing appreciation when interest rates decline and
depreciation when interest rates rise. As a result, the return and net asset
value of a Fund will fluctuate.
TEMPORARY DEFENSIVE POSITION. When the Adviser believes substantial price
risks exist for common stocks and securities convertible into common stocks each
Fund may temporarily hold for defensive purposes all or a portion of its assets
in short-term obligations such as bank debt instruments (certificates of
deposit, bankers' acceptances and time deposits), commercial paper, shares of
money market investment companies, U.S. Government obligations having a maturity
of less than one year or
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<PAGE>
repurchase agreements. When the Adviser takes a temporary defensive position,
the Fund may not achieve its investment objective.
U.S. GOVERNMENT OBLIGATIONS. "U.S. Government obligations" include
securities which are issued or guaranteed by the United States Treasury, by
various agencies of the United States Government, and by various
instrumentalities which have been established or sponsored by the United States
Government. U.S. Treasury obligations are backed by the "full faith and credit"
of the United States Government. Other U.S. Government obligations may or may
not be backed by the full faith and credit of the United States. In the case of
securities not backed by the full faith and security of the United States, the
investor must look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert a claim against
the United States in the event the agency or instrumentality does not meet its
commitments. Shares of the Funds are not guaranteed or backed by the Unites
States Government.
REPURCHASE AGREEMENTS. Repurchase agreements are transactions by which a
Fund purchases a security and simultaneously commits to resell that security to
the seller at an agreed upon time and price, thereby determining the yield
during the term of the agreement. In the event of a bankruptcy or other default
of the seller of a repurchase agreement, a Fund could experience both delays in
liquidating the underlying security and losses. To minimize these possibilities,
the Funds intend to enter into repurchase agreements only with the Custodian,
banks having assets in excess of $10 billion and the largest and, in the
Adviser's judgment, most creditworthy primary U.S. Government securities
dealers. The Funds will only enter into repurchase agreements which are
collateralized by U.S. Government obligations or other liquid high-grade debt
obligations. Collateral for repurchase agreements is held in safekeeping in the
customer-only account of the Funds' Custodian at the Federal Reserve Bank. At
the time a Fund enters into a repurchase agreement, the value of the collateral,
including accrued interest, will equal or exceed the value of the repurchase
agreement and, in the case of a repurchase agreement exceeding one day, the
seller agrees to maintain sufficient collateral so that the value of the
underlying collateral, including accrued interest, will at all times equal or
exceed the value of the repurchase agreement. A Fund will not enter into a
repurchase agreement not terminable within seven days if, as a result thereof,
more than 15% of the value of its net assets would be invested in such
securities and other illiquid securities.
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<PAGE>
FOREIGN SECURITIES. The Funds will invest primarily in domestic equity
securities, although each may invest in foreign companies through the purchase
of sponsored American Depository Receipts (certificates of ownership issued by
an American bank or trust company as a convenience to investors in lieu of the
underlying shares which such bank or trust company holds in custody) or other
securities of foreign issuers that are publicly traded in the United States. To
the extent that a Fund invests in such securities, such investments may be
subject to special risks, including future political and economic developments
and the possibility of seizure or nationalization of companies, imposition of
withholding taxes on income, establishment of exchange controls or adoption of
other restrictions, that might affect an investment adversely.
OPTIONS AND FUTURES. Each Fund may write covered call and covered put
options on equity and debt securities that it is eligible to purchase. Call
options written by a Fund give the holder the right to buy the underlying
securities from a Fund at a stated exercise price; put options written by a Fund
give the holder the right to sell the underlying security to a Fund at a stated
exercise price. These options are all covered by the Fund. In the case of call
options, the Fund will own the underlying securities as long as the option is
outstanding, while in the case of put options, the Fund will maintain a
segregated account of cash, U.S. Government obligations or other liquid
securities which can be liquidated promptly to satisfy any obligation of the
Fund to purchase the underlying securities. Each Fund may also write straddles
(combinations of puts and calls on the same underlying security). A Fund will
receive a premium from writing a put or call option, which increases the Fund's
return in the event the option expires unexercised or is closed out at a profit.
The amount of the premium will reflect, among other things, the relationship of
the market price of the underlying security to the exercise price of the option
and the remaining term of the option. By writing a call option, a Fund limits
its opportunity to profit from any increase in the market value of the
underlying security above the exercise price of the option. By writing a put
option, a Fund assumes the risk that it may be required to purchase the
underlying security for an exercise price higher than its then current market
value, resulting in a potential capital loss unless the security subsequently
appreciates in value.
Each Fund may purchase put options to hedge against a decline in the value
of its portfolio. By using put options in this manner, 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. Each Fund may
purchase call options on securities or on relevant stock indices to hedge
against an increase in the value of securities
- 14 -
<PAGE>
that it wants to buy sometime in the future. The premium paid for the call
option and any transaction costs will increase the cost of securities acquired,
upon exercise of the option, and, unless the price of the underlying security
rises sufficiently, the option may expire worthless.
The purchaser of an option risks a total loss of the premium paid for the
option if the price of the underlying security does not increase or decrease
sufficiently to justify exercise. The seller of an option, on the other hand,
will recognize the premium as income if the option expires unrecognized but
forgoes any capital appreciation in excess of the exercise price in the case of
a call option and may be required to pay a price in excess of current market
value in the case of a put option.
Each Fund may purchase either exchange-traded or over-the-counter options
on securities. Each Fund's ability to terminate options positions established in
the over-the-counter market may be more limited than in the case of
exchange-traded options and may also involve the risk that securities dealers
participating in such transactions would fail to meet their obligations to the
Fund. Each Fund will not purchase any option, which in the opinion of the
Adviser, is illiquid if, as a result thereof, more than 15% of the Fund's net
assets would be invested in illiquid securities.
Each Fund may purchase and sell futures contracts, including stock and bond
index futures contracts, to hedge against changes in prices. Each Fund will not
engage in futures transactions for speculative purposes. Stock and bond index
futures contracts are based on indexes that reflect the market value of common
stock or bonds of the firms included in the indexes. An index futures contract
is an agreement pursuant to which two parties agree to take or make delivery of
an amount of cash equal to the differences between the value of the index at the
close of the last trading day of the contract and the price at which the index
contract was originally written. Each Fund may also write call options and
purchase put options on futures contracts as a hedge to attempt to protect
securities in its portfolio against decreases in value. When a Fund writes a
call option on a futures contract, it is undertaking the obligation of selling a
futures contract at a fixed price at any time during a specified period if the
option is exercised. Conversely, as purchaser of a put option on a futures
contract, a Fund is entitled (but not obligated) to sell a futures contract at
the fixed price during the life of the option.
Each Fund may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the Fund's
existing futures positions and premiums paid for related options would exceed 5%
of the market
- 15 -
<PAGE>
value of the Fund's total assets. When a Fund purchases futures contracts, an
amount of cash and cash equivalents, equal to the underlying commodity value of
the futures contracts (less any related margin deposits), will be deposited in a
segregated account with the Fund's custodian (or the broker, if legally
permitted) to collateralize the position and thereby insure that the use of such
futures contract is unleveraged. When a Fund sells futures contracts, it will
either own or have the right to receive the underlying future or security, or
will make deposits to collateralize the position as discussed above. When a Fund
uses futures and options on futures as hedging devices, there is a risk that the
prices of the securities subject to the futures contracts may not correlate
perfectly with the prices of the securities in the Fund's portfolio. This may
cause the futures contract and any related options to react differently than the
portfolio securities to market changes. In addition, the Adviser could be
incorrect in its expectations about the direction or extent of market factors
such as stock and bond price movements. In these events, a Fund may lose money
on the futures contract or option. It is not certain that a secondary market for
positions in futures contracts or for options will exist at all times. Although
the Adviser will consider liquidity before entering into these transactions,
there is no assurance that a liquid secondary market on an exchange or otherwise
will exist for any particular futures contract or option at any particular time;
therefore, these transactions have an unlimited potential for loss.
LENDING PORTFOLIO SECURITIES. The Funds may, from time to time, lend
securities on a short-term basis (i.e., for up to seven days) to banks, brokers
and dealers and receive as collateral cash, U.S. Government obligations or
irrevocable bank letters of credit (or any combination thereof), which
collateral will be required to be maintained at all times in an amount equal to
at least 100% of the current value of the loaned securities plus accrued
interest. It is the present intention of the Trust, which may be changed without
shareholder approval, that loans of portfolio securities will not be made with
respect to any Fund if as a result the aggregate of all outstanding loans
exceeds one-third of the value of that Fund's total assets. Securities lending
will afford a Fund the opportunity to earn additional income because a Fund will
continue to be entitled to the interest payable on the loaned securities and
also will either receive as income all or a portion of the interest on the
investment of any cash loan collateral or, in the case of collateral other than
cash, a fee negotiated with the borrower. Such loans will be terminable at any
time. Loans of securities involve risks of delay in receiving additional
collateral or in recovering the securities lent or even loss of rights in the
collateral in the event of the insolvency of the borrower of the securities. A
Fund will have the right to regain record ownership of loaned securities in
order to exercise beneficial
- 16 -
<PAGE>
rights. A Fund may pay reasonable fees in connection with arranging such loans.
BORROWING AND PLEDGING. A Fund may borrow money from banks provided that,
immediately after any such borrowing, there is asset coverage of 300% for all
borrowings of the Fund. A Fund will not make any borrowing which would cause its
outstanding borrowings to exceed one-third of its total assets. A Fund may
pledge assets in connection with borrowings but will not pledge more than
one-third of its total assets. Borrowing magnifies the potential for gain or
loss on the portfolio securities of a Fund and, therefore, if employed,
increases the possibility of fluctuation in a Fund's net asset value. This is
the speculative factor known as leverage. The Funds' policies on borrowing and
pledging are fundamental policies which may not be changed without the
affirmative vote of a majority of its outstanding shares. It is each Fund's
present intention, which may be changed by the Board of Trustees without
shareholder approval, to limit its borrowings to 5% of its total assets and to
borrow only for emergency or extraordinary purposes and not for leverage.
PORTFOLIO TURNOVER. Each Fund does not intend to use short-term trading as
a primary means of achieving its investment objective. The Adviser expects the
Atalanta/Sosnoff Focus Fund and the Atalanta/Sosnoff Balanced Fund to maintain
lower portfolio turnover than the Atalanta/Sosnoff Fund and the Atalanta/Sosnoff
Value Fund. However, a Fund's rate of portfolio turnover will depend upon market
and other conditions, and it will not be a limiting factor when portfolio
changes are deemed necessary or appropriate by the Adviser. Although the annual
portfolio turnover rate of each Fund cannot be accurately predicted, it is not
expected to exceed 150%, but may be either higher or lower. A 100% turnover rate
would occur, for example, if all the securities of a Fund were replaced once in
a one-year period. High turnover involves correspondingly greater commission
expenses and transaction costs. High turnover may result in a Fund recognizing
greater amounts of income and capital gains, which would increase the amount of
income and capital gains which the Fund must distribute to shareholders in order
to maintain its status as a regulated investment company and to avoid the
imposition of federal income or excise taxes (see "Taxes").
HOW TO PURCHASE SHARES
- ----------------------
Your initial investment in the Funds ordinarily must be at least $5,000
($2,000 for tax-deferred retirement plans). The Funds may, in the Adviser's sole
discretion, accept certain accounts with less than the stated minimum initial
investment. Shares of the Funds are sold on a continuous basis at the net asset
value next determined after receipt of a purchase order by
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<PAGE>
the Trust. Purchase orders received by dealers prior to 4:00 p.m., Eastern time,
on any business day and transmitted to the Trust's transfer agent, Countrywide
Fund Services, Inc. (the "Transfer Agent"), by 5:00 p.m., Eastern time, that day
are confirmed at the net asset value determined as of the close of the regular
session of trading on the New York Stock Exchange on that day. It is the
responsibility of dealers to transmit properly completed orders so that they
will be received by the Transfer Agent by 5:00 p.m., Eastern time. Dealers may
charge a fee for effecting purchase orders. Direct purchase orders received by
the Transfer Agent, by 4:00 p.m., Eastern time, are confirmed at that day's net
asset value. Direct investments received by the Transfer Agent after 4:00 p.m.,
Eastern time, and orders received from dealers after 5:00 p.m., Eastern time,
are confirmed at the net asset value next determined on the following business
day. If you establish your account through a brokerage firm, you will need to
contact your broker to receive account information. The Transfer Agent will not
have access to your individual account information.
You may open an account and make an initial investment in the Funds by
sending a check and a completed account application form to Countrywide Fund
Services, Inc., P.O. Box 5354, Cincinnati, Ohio 45201-5354. Checks should be
made payable to the appropriate Fund. An account application is included in this
Prospectus. Please mark the appropriate box indicating the Fund or Funds you are
purchasing.
The Trust mails you confirmations of all purchases or redemptions of the
Funds shares. Certificates representing shares are not issued. The Trust and its
principal underwriter, Atalanta/Sosnoff Management Corporation (the
"Distributor") reserve the right to limit the amount of investments and to
refuse to sell to any person.
Investors should be aware that the Funds' account application contains
provisions in favor of the Trust, the Transfer Agent, the Distributor and
certain of their affiliates, excluding such entities from certain liabilities
(including, among others, losses resulting from unauthorized shareholder
transactions) relating to the various services made available to investors.
Should an order to purchase shares be canceled because your check does not
clear, you will be responsible for any resulting losses or fees incurred by the
Trust or the Transfer Agent in the transaction.
You may also purchase shares of the Funds by wire. Please telephone the
Transfer Agent (Nationwide call toll-free 1-877-SOSNOFF (1-877-767-6633)) for
instructions. You should be prepared to give the name in which the account is to
be
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<PAGE>
established, the address, telephone number and taxpayer identification number
for the account, and the name of the bank which will wire the money.
Your investment will be made at the net asset value next determined after
your wire is received together with the account information indicated above. If
the Trust does not receive timely and complete account information, there may be
a delay in the investment of your money and any accrual of dividends. To make
your initial wire purchase, you are required to mail a completed account
application to the Transfer Agent. Your bank may impose a charge for sending
your wire. There is presently no fee for receipt of wired funds, but the Trust
reserves the right to charge shareholders for this service upon thirty days
prior notice to shareholders.
You may purchase and add shares to your account by mail or by bank wire.
Checks should be sent to Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio 45201-5354. Checks should be made payable to the applicable
Fund. Bank wires should be sent as outlined above. You may also make additional
investments at the Trust's offices at 101 Park Avenue, New York, New York 10178.
Each additional purchase request must contain the name of your account and your
account number to permit proper crediting to your account. While there is no
minimum amount required for subsequent investments, the Trust reserves the right
to impose such a requirement.
SHAREHOLDER SERVICES
- --------------------
Contact the Transfer Agent (Nationwide call toll-free 1-877-SOSNOFF
(1-877-767-6633)) for additional information about the shareholder services
described below.
Automatic Withdrawal Plan
-------------------------
If the shares in your account have a value of at least $25,000, you may
elect to receive, or may designate another person to receive, monthly, quarterly
or annual payments in a specified amount of not less than $100 each. There is no
charge for this service.
Tax-Deferred Retirement Plans
-----------------------------
Shares of the Funds are available for purchase in connection with the
following tax-deferred retirement plans:
-- Keogh Plans for self-employed individuals.
-- Individual retirement account (IRA) plans for individuals and their
non-employed spouses, including Roth IRAs and Education IRAs.
-- Qualified pension and profit-sharing plans for employees, including
those profit-sharing plans with a 401(k) provision.
-- 403(b)(7) custodial accounts for employees of public school systems,
hospitals, colleges and other non-profit organizations meeting certain
requirements of the Internal Revenue Code.
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<PAGE>
Direct Deposit Plans
--------------------
Shares of the Funds may be purchased through direct deposit plans offered
by certain employers and government agencies. These plans enable a shareholder
to have all or a portion of his or her payroll or social security checks
transferred automatically to purchase shares of the Funds.
Automatic Investment Plan
-------------------------
You may make automatic monthly investments in the Funds from your bank,
savings and loan or other depository institution account on either the 15th or
the last business day of the month or both. The minimum initial and subsequent
investments must be $100 under the plan. The Transfer Agent pays the costs
associated with these transfers, but reserves the right, upon thirty days
written notice, to make reasonable charges for this service. Your depository
institution may impose its own charge for debiting your account which would
reduce your return from an investment in the Funds.
HOW TO REDEEM SHARES
- --------------------
You may redeem shares of the Funds on each day that the Trust is open for
business by sending a written request to the Transfer Agent. The request must
state the number of shares or the dollar amount to be redeemed and your account
number. The request must be signed exactly as your name appears on the Trust's
account records. If the shares to be redeemed have a value of $25,000 or more,
your signature must be guaranteed by any eligible guarantor institution,
including banks, brokers and dealers, credit unions, national securities
exchanges, registered securities associations, clearing agencies and savings
associations. If the name(s) or the address on your account has been changed
within 30 days of your redemption request, you will be required to request the
redemption in writing with your signature guaranteed, regardless of the value of
the shares being redeemed.
Redemption requests may direct that the proceeds be wired directly to your
existing account in any commercial bank or brokerage firm in the United States
as designated on your application. There is currently a $9 charge by the
Custodian for processing wire redemptions. The Transfer Agent reserves the
right, upon thirty days' written notice, to change the processing fee. All
charges will be deducted from your account by redemption of shares in your
account. Your bank or brokerage firm may also impose a charge for processing the
wire. In the event that wire transfer of funds is impossible or impractical, the
redemption proceeds will be sent by mail to the designated account.
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<PAGE>
You will receive the net asset value per share next determined after
receipt by the Transfer Agent of your redemption request in the form described
above. Payment is normally made within three business days after tender in such
form, provided that payment in redemption of shares purchased by check will be
effected only after the check has been collected, which may take up to fifteen
days from the purchase date. To eliminate this delay, you may purchase shares of
the Funds by certified check or wire.
You may also redeem your shares through a brokerage firm or financial
institution that has been authorized to accept orders on behalf of the Funds at
the applicable Fund's net asset value next determined after your order is
received by such organization in proper form before 4:00 p.m., Eastern time, or
such earlier time as may be required by such organization. These organizations
may be authorized to designate other intermediaries to act in this capacity.
Such an organization may charge you transaction fees on redemptions of Fund
shares and may impose other charges or restrictions or account options that
differ from those applicable to shareholders who redeem shares directly through
the Transfer Agent.
The Trust and the Transfer Agent will consider all written and verbal
instructions as authentic and will not be responsible for the processing of
exchange instructions received by telephone which are reasonably believed to be
genuine or the delivery or transmittal of the redemption proceeds by wire. The
affected shareholders will bear the risk of any such loss. The privilege of
exchanging shares by telephone is automatically available to all shareholders.
The Trust or the Transfer Agent, or both, will employ reasonable procedures to
determine that telephone instructions are genuine. If the Trust and/or the
Transfer Agent do not employ such procedures, they may be liable for losses due
to unauthorized or fraudulent instructions. These procedures may include, among
others, requiring forms of personal identification prior to acting upon
telephone instructions, providing written confirmation of the transactions
and/or tape recording telephone instructions.
At the discretion of the Trust or the Transfer Agent, corporate investors
and other associations may be required to furnish an appropriate certification
authorizing redemptions to ensure proper authorization. The Trust reserves the
right to require you to close your account if at any time the value of your
shares is less than $5,000 (based on actual amounts invested, unaffected by
market fluctuations), or such other minimum amount as the Fund may determine
from time to time. After notification to you of the Trust's intention to close
your account, you will be given sixty days to increase the value of your account
to the minimum amount.
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<PAGE>
The Trust reserves the right to suspend the right of redemption or to
postpone the date of payment for more than three business days under unusual
circumstances as determined by the Securities and Exchange Commission. Under
unusual circumstances, when the Board of Trustees deems it appropriate, the
Trust may make payment for shares redeemed in portfolio securities of the Fund
taken at current value.
EXCHANGE PRIVILEGE
- ------------------
Shares of the Funds may be exchanged for each other at net asset value. You
may exchange shares by written request or by telephone. You must sign your
written request exactly as your name appears on our account records. If you are
unable to exchange shares by telephone due to such circumstances as unusually
heavy market activity, you can exchange shares by mail or in person. Your
exchange will be processed at the next determined net asset value after the
Transfer Agent receives your request.
You may only exchange shares into a Fund which is authorized for sale in
your state of residence and you must meet that Fund's minimum initial investment
requirements. The Board of Trustees may change or discontinue the exchange
privilege after giving shareholders 60 days' prior notice. Any gain or loss on
an exchange of shares is a taxable event.
DIVIDENDS AND DISTRIBUTIONS
- ---------------------------
The Atalanta/Sosnoff Fund, the Atalanta/Sosnoff Focus Fund and the
Atalanta/Sosnoff Value Fund each expects to distribute substantially all of its
net investment income, if any, on an annual basis. The Atalanta/Sosnoff Balanced
Fund expects to distribute substantially all of its net investment income, if
any, on a quarterly basis. Each Fund expects to distribute any net realized
long-term capital gains at least once each year. Management will determine the
timing and frequency of the distributions of any net realized short-term capital
gains.
Distributions are paid according to one of the following options:
Share Option - income distributions and capital gains distributions
reinvested in additional shares.
Income Option - income distributions and short-term capital gains
distributions paid in cash; long-term capital gains
distributions reinvested in additional shares.
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<PAGE>
Cash Option - income distributions and capital gains distributions paid
in cash.
You should indicate your choice of option on your application. If no option
is specified on your application or you have established your account through a
brokerage firm, distributions will automatically be reinvested in additional
shares. All distributions will be based on the net asset value in effect on the
payable date.
If you select the Income Option or the Cash Option and the U.S. Postal
Service cannot deliver your checks or if your checks remain uncashed for six
months, your dividends may be reinvested in your account at the then current net
asset value and your account will be converted to the Share Option. No interest
will accrue on amounts represented by uncashed distribution checks.
TAXES
- -----
Each Fund intends to qualify for the special tax treatment afforded a
"regulated investment company" under Subchapter M of the Internal Revenue Code
so that it does not pay federal taxes on income and capital gains distributed to
shareholders. Each Fund intends to distribute substantially all of its net
investment income and any realized capital gains to its shareholders.
Distributions of net investment income and from net realized short-term capital
gains, if any, are taxable to investors as ordinary income. Dividends
distributed by the Funds from net investment income may be eligible, in whole or
in part, for the dividends received deduction available to corporations.
Distributions of net capital gains (i.e., the excess of net long-term
capital gains over net short-term capital losses) by a Fund to its shareholders
are taxable to the recipient shareholders as capital gains, without regard to
the length of time a shareholder has held Fund shares. The maximum capital gains
rate for individuals is 20% with respect to assets held for more than 12 months.
The maximum capital gains rate for corporate shareholders is the same as the
maximum tax rate for ordinary income. Redemptions and exchanges of shares of the
Funds are taxable events on which a shareholder may realize a gain or loss.
The Funds' use of hedging techniques, such as foreign currency forwards,
futures and options, involves greater risk of unfavorable tax consequences than
funds not engaging in such techniques. Hedging may also result in the
application of the mark-to-market and straddle provisions of the Internal
Revenue Code. These provisions could result in an increase (or decrease) in the
amount of taxable dividends paid by the Funds as well as affect whether
dividends paid by the Funds are classified as capital gains or ordinary income.
- 23 -
<PAGE>
The Funds will mail to each of their shareholders a statement indicating
the amount and federal income tax status of all distributions made during the
year. In addition to federal taxes, shareholders of the Funds may be subject to
state and local taxes on distributions. Shareholders should consult their tax
advisors about the tax effect of distributions and withdrawals from the Funds
and the use of the Automatic Withdrawal Plan and Exchange Privilege. The tax
consequences described in this section apply whether distributions are taken in
cash or reinvested in additional shares. See "Taxes" in the Statement of
Additional Information for further information.
OPERATION OF THE FUNDS
- ----------------------
Each Fund is a series of the Atalanta/Sosnoff Investment Trust (the
"Trust"), an open-end management investment company organized as an Ohio
business trust on January 29, 1998. The Atalanta/Sosnoff Fund, the
Atalanta/Sosnoff Value Fund and the Atalanta/Sosnoff Balanced Fund are
diversified series of the Trust. The Atalanta/Sosnoff Focus Fund is a
non-diversified series of the Trust. The Board of Trustees supervises the
business activities of the Trust. Like other mutual funds, the Trust retains
various organizations to perform specialized services for the Funds.
The Trust retains Atalanta/Sosnoff Capital Corporation (Delaware), 101 Park
Avenue, New York, New York 10178 (the "Adviser"), to manage the Funds'
investments. The Adviser is a registered investment adviser that has been
advising individual, institutional and corporate clients since 1982. The Adviser
is a wholly-owned subsidiary of Atalanta/Sosnoff Capital Corporation ("A/SCC"),
a public company listed on the New York Stock Exchange(NYSE: ATL). Martin T.
Sosnoff is the controlling shareholder of A/SCC.
As of the date of this Prospectus, Atalanta/Sosnoff Management Corporation
(the "Distributor") may be deemed to control the Atalanta/Sosnoff Fund by virtue
of its ownership of more than 25% of its shares.
Martin T. Sosnoff, C.F.A., Chairman of the Board of the Adviser, the
Distributor and A/SCC, is primarily responsible for the day-to-day management of
each Fund. Mr. Sosnoff founded the Adviser in 1981. He has authored two books on
the money management business, Humble on Wall Street (1975) and Silent Investor,
Silent Loser (1986), and currently writes a column for Forbes magazine. Mr.
Sosnoff chairs an investment committee of three senior executives of the Adviser
in managing each Fund's portfolio. Craig B. Steinberg is President and a
Director of the Adviser and has been employed by the Adviser since 1985. Paul P.
Tanico is Executive Vice President of the Adviser and has been employed by the
Adviser since 1997.
- 24 -
<PAGE>
Each Fund pays the Adviser a fee, payable monthly, at the annual rate of
.75% of the average value of its daily net assets. The Adviser has voluntarily
agreed to waive fees and reimburse Fund expenses in order to maintain each
Fund's expenses at 1.50%. The Adviser reserves the right to discontinue the fee
waivers and expense reimbursements at any time.
In addition to the advisory fee, each Fund is responsible for the payment
of all of its operating expenses, including fees and expenses in connection with
membership in investment company organizations, brokerage fees and commissions,
legal, auditing and accounting expenses, expenses of registering shares under
federal and state securities laws, insurance expenses, taxes or governmental
fees, fees and expenses of the custodian, transfer agent, administrator, and
accounting and pricing agent of the Fund, fees and expenses of members of the
Board of Trustees who are not interested persons of the Trust, the cost of
preparing and distributing prospectuses, statements, reports and other documents
to shareholders, expenses of shareholders' meetings and proxy solicitations, and
such extraordinary or non-recurring expenses as may arise, including litigation
to which the Fund may be a party and indemnification of the Trust's officers and
Trustees with respect thereto.
Atalanta/Sosnoff Management Corporation, 101 Park Avenue, New York, New
York (the "Distributor"), a wholly-owned subsidiary of the Adviser, serves as
principal underwriter for the Trust and, as such, is the exclusive agent for
distribution of the Funds' shares. Martin T. Sosnoff, Chairman of the Board of
the Adviser and A/SCC, is also Chairman of the Board of the Distributor.
The Trust has retained Countrywide Fund Services, Inc., P.O. Box 5354,
Cincinnati, Ohio (the "Transfer Agent"), to serve as the Funds' transfer agent,
dividend paying agent and shareholder service agent. The Transfer Agent is a
wholly-owned indirect subsidiary of Countrywide Credit Industries, Inc., a New
York Stock Exchange listed company principally engaged in the business of
residential mortgage lending. The Transfer Agent also provides accounting and
pricing services to the Funds. The Transfer Agent receives a monthly fee from
each Fund for calculating daily net asset value per share and maintaining such
books and records as are necessary to enable it to perform its duties.
In addition, the Transfer Agent has been retained to provide administrative
services to the Funds. In this capacity, the Transfer Agent supplies executive,
administrative and regulatory services, supervises the preparation of tax
returns, and coordinates the preparation of reports to shareholders and reports
to and filings with the Securities and Exchange
- 25 -
<PAGE>
Commission and state securities authorities.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and subject to its objective of seeking best execution
of portfolio transactions, the Adviser may consider sales of shares of the Funds
as a factor in the selection of brokers and dealers to execute portfolio
transactions of the Funds. Subject to the requirements of the Investment Company
Act of 1940 (the "1940 Act") and procedures adopted by the Board of Trustees,
the Funds may execute portfolio transactions through any broker or dealer and
pay brokerage commissions to a broker (i) which is an affiliated person of the
Trust, or (ii) which is an affiliated person of such person, or (iii) an
affiliated person of which is an affiliated person of the Trust, the Adviser or
the Distributor.
Shares of each Fund have equal voting rights and liquidation rights and are
voted in the aggregate and not by Fund except in matters where a separate vote
is required by the 1940 Act or when the matter affects only the interests of a
particular Fund. When matters are submitted to shareholders for a vote, each
shareholder is entitled to one vote for each full share owned and fractional
votes for fractional shares owned. The Trust does not normally hold annual
meetings of shareholders. The Trustees shall promptly call and give notice of a
meeting of shareholders for the purpose of voting upon removal of any Trustee
when requested to do so in writing by shareholders holding 10% or more of the
Trust's outstanding shares. The Trust will comply with the provisions of Section
16(c) of the 1940 Act in order to facilitate communications among shareholders.
YEAR 2000 READINESS. Computer users around the world are faced with the dilemma
of the Year 2000 issue, which stems from the use of two digits in most computer
systems to designate the year. When the year advances from 1999 to 2000, many
computers will not recognize "00" as the Year 2000. This issue could potentially
affect every aspect of computer-related activity, on an individual and corporate
level. The Funds could be adversely impacted if the computer systems used by the
Adviser and other service providers have not been converted to meet the
requirements of the new century. The Funds' Adviser has evaluated its internal
systems and expects them to handle the change of millennium. The Adviser is
monitoring on an ongoing basis the progress of the Funds' service providers to
convert their systems to comply with the requirements of the Year 2000. The
Adviser currently has no reason to believe that these service providers will not
be fully and timely complaint. However, you should be aware that there can be no
assurance that all systems will be successfully converted prior to January 1,
2000, in which case it would become necessary for the Funds to enter into
agreements with new service providers or to make other arrangements. In
addition, although the Adviser considers an
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<PAGE>
issuer's Year 2000 compliance status in the investment decision process,
companies in which the Funds invest may experience Year 2000 difficulties and
the Funds are unable to predict to what extent the Year 2000 issue will impact
the value of those securities.
SERVICE PLAN
- ------------
Pursuant to Rule 12b-1 under the 1940 Act, the Trust has adopted a service
plan (the "Plan") under which each Fund is required to compensate the
Distributor for its services to the Fund. The Distributor is responsible for the
payment of any expenses related to the distribution or promotion of Fund shares,
including payments to securities dealers and others who are engaged in
activities related to the servicing of shareholder accounts such as maintaining
personnel who render shareholder support services not otherwise provided by the
Transfer Agent; expenses of formulating and implementing marketing and
promotional activities, including direct mail promotions and mass media
advertising; expenses of preparing, printing and distributing sales literature
and prospectuses and statements of additional information and reports; expenses
of obtaining such information, analyses and reports with respect to marketing
and promotional activities as the Trust may, from time to time, deem advisable;
and any other expenses related to the servicing of Fund shareholders or the
distribution of Fund shares.
The annual limitation for payments to the Distributor pursuant to the Plan
is .25% of each Fund's average daily net assets. In the event the Plan is
terminated by a Fund in accordance with its terms, that Fund will not be
required to make any payments to the Distributor after the date the Plan
terminates.
Pursuant to the Plan, the Distributor may make payments to banks or other
financial institutions that provide shareholder services and administer
shareholder accounts. The Glass-Steagall Act prohibits banks from engaging in
the business of underwriting, selling or distributing securities. Although the
scope of this prohibition under the Glass-Steagall Act has not been clearly
defined by the courts or appropriate regulatory agencies, management of the
Trust believes that the Glass-Steagall Act should not preclude a bank from
providing such services. However, state securities laws on this issue may differ
from the interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law. If a
bank were prohibited from continuing to perform all or a part of such services,
management of the Trust believes that there would be no material impact on the
Funds or their shareholders. Banks may charge their customers fees for offering
these services to the extent
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<PAGE>
permitted by applicable regulatory authorities, and the overall return to those
shareholders availing themselves of the bank services will be lower than to
those shareholders who do not. The Funds may from time to time purchase
securities issued by banks which provide such services; however, in selecting
investments for the Funds, no preference will be shown for such securities.
CALCULATION OF SHARE PRICE
- --------------------------
On each day that the Trust is open for business, the share price (net asset
value) of the shares of each Fund is determined as of the close of the regular
session of trading on the New York Stock Exchange, currently 4:00 p.m., Eastern
time. The Trust is open for business on each day the New York Stock Exchange is
open for business. The net asset value per share of a Fund is calculated by
dividing the sum of the value of the securities held by the Fund plus cash or
other assets minus all liabilities (including estimated accrued expenses) by the
total number of shares outstanding of the Fund, rounded to the nearest cent.
U.S. Government obligations are valued at their most recent bid prices as
obtained from one or more of the major market makers for such securities. Other
portfolio securities are valued as follows: (1) securities which are traded on
stock exchanges or are quoted by NASDAQ are valued at the last reported sale
price as of the close of the regular session of trading on the New York Stock
Exchange on the day the securities are being valued, or, if not traded on a
particular day, at the closing bid price, (2) securities traded in the
over-the-counter market, and which are not quoted by NASDAQ, are valued at the
last sale price (or, if the last sale price is not readily available, at the
last bid price as quoted by brokers that make markets in the securities) as of
the close of the regular session of trading on the New York Stock Exchange on
the day the securities are being valued, (3) securities which are traded both in
the over-the-counter market and on a stock exchange are valued according to the
broadest and most representative market, and (4) securities (and other assets)
for which market quotations are not readily available are valued at their fair
value as determined in good faith in accordance with consistently applied
procedures established by and under the general supervision of the Board of
Trustees. The net asset value per share of a Fund will fluctuate with the value
of the securities it holds.
PERFORMANCE INFORMATION
- -----------------------
From time to time, each Fund may advertise its "average annual total
return." Each Fund may also advertise "yield." Both yield and average annual
total return figures are based on historical earnings and are not intended to
indicate future
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<PAGE>
performance.
The "average annual total return" of a Fund refers to the average annual
compounded rates of return over the most recent 1, 5 and 10 year periods or,
where the Fund has not been in operation for such period, over the life of the
Fund (which periods will be stated in an advertisement) that would equate an
initial amount invested at the beginning of a stated period to the ending
redeemable value of the investment. The calculation of "average annual total
return" assumes the reinvestment of all dividends and distributions. Each Fund
may also advertise total return (a "nonstandardized quotation") which is
calculated differently from "average annual total return." A nonstandardized
quotation of total return may be a cumulative return which measures the
percentage change in the value of an account between the beginning and end of a
period, assuming no activity in the account other than reinvestment of dividends
and capital gains distributions. A nonstandardized quotation of total return may
also indicate average annual compounded rates of return over periods other than
those specified for "average annual total return." A nonstandardized quotation
of total return will always be accompanied by a Fund's "average annual total
return" as described above.
The "yield" of a Fund is computed by dividing the net investment income per
share earned during a thirty-day (or one month) period stated in the
advertisement by the maximum public offering price per share on the last day of
the period (using the average number of shares entitled to receive dividends).
The yield formula assumes that net investment income is earned and reinvested at
a constant rate and annualized at the end of a six-month period.
From time to time, each Fund may advertise its performance rankings as
published by recognized independent mutual fund statistical services such as
Lipper Analytical Services, Inc. ("Lipper"), or by publications of general
interest such as Forbes, Money, The Wall Street Journal, Business Week, Barron's
Fortune or Morningstar Mutual Fund Values. Each Fund may also compare its
performance to that of other selected mutual funds, average of the other mutual
funds within its category as determined by Lipper, or recognized indicators such
as the Dow Jones Industrial Average, the S&P 500 Index or the Lehman Brothers
Intermediate Government/Corporate Bond Index. In connection with a ranking, the
Funds may provide additional information, such as the particular category of
funds to which the ranking relates, the number of funds in the category, the
criteria upon which the ranking is based, and the effect of fee waivers and/or
expense reimbursements, if any. Each Fund may also present its performance and
other investment characteristics, such as volatility or a temporary defensive
posture, in light of the Adviser's view of current or past market conditions or
historical trends.
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<PAGE>
ATALANTA/SOSNOFF INVESTMENT TRUST
101 Park Avenue
New York, New York 10178
BOARD OF TRUSTEES
Howard A. Drucker
Anthony G. Miller
Toni E. Sosnoff
Irving L. Straus
Aida L. Wilder
INVESTMENT ADVISER
ATALANTA/SOSNOFF CAPITAL CORPORATION (DELAWARE)
101 Park Avenue
New York, New York 10178
212-867-5000
INDEPENDENT AUDITORS
ARTHUR ANDERSEN LLP
425 Walnut Street
Cincinnati, Ohio 45202
LEGAL COUNSEL
WILLKIE FARR & GALLAGHER
787 Seventh Avenue
New York, New York 10019-6099
DISTRIBUTOR
ATALANTA/SOSNOFF MANAGEMENT CORPORATION
101 Park Avenue
New York, New York 10178
TRANSFER AGENT
COUNTRYWIDE FUND SERVICES, INC.
P.O. Box 5354
Cincinnati, Ohio 45201-5354
Shareholder Services
- --------------------
Nationwide: (Toll-Free 1-877-SOSNOFF (1-877-767-6633))
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus, in connection
with the offering contained in this Prospectus, and if given or made, such
information or representations must not be relied upon as being authorized by
the Funds. This Prospectus does not constitute an offer by the Funds to sell
shares in any State to any person to whom it is unlawful for the Funds to make
such offer in such State.
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<PAGE>
ATALANTA/SOSNOFF INVESTMENT TRUST
---------------------------------
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
July 1, 1999
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Prospectus of the Atalanta/Sosnoff Investment Trust (the
"Trust") dated July 1, 1999. A copy of the Trust's Prospectus can be obtained by
writing the Trust at 312 Walnut Street, 21st floor, Cincinnati, Ohio 45202 or by
calling the Trust nationwide toll-free at 1-877-SOSNOFF (1-877-767-6633).
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
Atalanta/Sosnoff Investment Trust
101 Park Avenue
New York, New York 10178
THE TRUST...................................................................
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS...............................
QUALITY RATINGS OF CORPORATE BONDS AND PREFERRED STOCKS.....................
INVESTMENT LIMITATIONS......................................................
TRUSTEES AND OFFICERS.......................................................
THE INVESTMENT ADVISER......................................................
THE DISTRIBUTOR.............................................................
SERVICE PLAN................................................................
SECURITIES TRANSACTIONS.....................................................
PORTFOLIO TURNOVER..........................................................
CALCULATION OF SHARE PRICE..................................................
TAXES.......................................................................
REDEMPTION IN KIND..........................................................
HISTORICAL PERFORMANCE INFORMATION..........................................
CUSTODIAN...................................................................
AUDITORS....................................................................
COUNTRYWIDE FUND SERVICES, INC..............................................
FINANCIAL STATEMENTS........................................................
- 2 -
<PAGE>
THE TRUST
- ---------
The Atalanta/Sosnoff Investment Trust was organized as an Ohio business trust on
January 29, 1998. The Trust currently offers four series of shares to investors:
the Atalanta/Sosnoff Fund, the Atalanta/Sosnoff Focus Fund, the Atalanta/Sosnoff
Value Fund and the Atalanta/Sosnoff Balanced Fund (referred to individually as a
"Fund" and collectively as the "Funds"). Each Fund has its own investment
objective(s) and policies. The Atalanta/Sosnoff Fund, the Atalanta/Sosnoff Value
Fund and the Atalanta/Sosnoff Balanced Fund, are diversified series of the
Trust. Each Fund has its own investment objective(s) and policies. The
Atalanta/Sosnoff Focus Fund is a non-diversified series.
Each share of a Fund represents an equal proportionate interest in the
assets and liabilities belonging to that Fund with each other share of that Fund
and is entitled to such dividends and distributions out of the income belonging
to the Fund as are declared by the Trustees. The shares do not have cumulative
voting rights or any preemptive or conversion rights, and the Trustees have the
authority from time to time to divide or combine the shares of any Fund into a
greater or lesser number of shares so long as the proportionate beneficial
interest in the assets belonging to that Fund and the rights of shares of any
other Fund are in no way affected. In case of any liquidation of a Fund, the
holders of shares of the Fund or Funds being liquidated will be entitled to
receive as a class a distribution out of the assets, net of the liabilities,
belonging to the Fund. Expenses attributable to any Fund are borne by that Fund.
Any general expenses of the Trust not readily identifiable as belonging to a
particular Fund are allocated by or under the direction of the Trustees in such
manner as the Trustees determine to be fair and equitable. Generally, the
Trustees allocate such expenses on the basis of relative net assets or number of
shareholders. No shareholder is liable to further calls or to assessment by the
Trust without his express consent.
DEFINITIONS, POLICIES AND RISK CONSIDERATIONS
- ---------------------------------------------
A more detailed discussion of some of the terms used and investment
methodology described in the Prospectus (see "Investment Objectives, Investment
Methodology and Risk Considerations") appears below:
MAJORITY. As used in the Prospectus and this Statement of Additional
Information, the term "majority" of the outstanding shares of the Trust means
the lesser of (1) 67% or more of the outstanding shares of the Trust (or the
applicable Fund) present at a meeting, if the holders of more than 50% of the
outstanding shares of the Trust (or the applicable Fund) are present or
represented at such meeting or (2) more than 50% of the outstanding shares of
the Trust (or the applicable Fund).
- 3 -
<PAGE>
REPURCHASE AGREEMENTS. Repurchase agreements are transactions by which a
Fund purchases a security and simultaneously commits to resell that security to
the seller at an agreed upon time and price, thereby determining the yield
during the term of the agreement. In the event of a bankruptcy or other default
by the seller of a repurchase agreement, a Fund could experience both delays in
liquidating the underlying security and losses. To minimize these possibilities,
each Fund intends to enter into repurchase agreements only with its Custodian,
with banks having assets in excess of $10 billion and with broker-dealers who
are recognized as primary dealers in U.S. Government obligations by the Federal
Reserve Bank of New York. Collateral for repurchase agreements is held in
safekeeping in the customer-only account of the Fund's Custodian at the Federal
Reserve Bank. A Fund will not enter into a repurchase agreement not terminable
within seven days if, as a result thereof, more than 15% of the value of its net
assets would be invested in such securities and other illiquid securities.
Although the securities subject to a repurchase agreement might bear
maturities exceeding one year, settlement for the repurchase would never be more
than one year after the Fund's acquisition of the securities and normally would
be within a shorter period of time. The resale price will be in excess of the
purchase price, reflecting an agreed upon market rate effective for the period
of time the Fund's money will be invested in the securities, and will not be
related to the coupon rate of the purchased security. At the time a Fund enters
into a repurchase agreement, the value of the underlying security, including
accrued interest, will equal or exceed the value of the repurchase agreement,
and in the case of a repurchase agreement exceeding one day, the seller will
agree that the value of the underlying security, including accrued interest,
will at all times equal or exceed the value of the repurchase agreement. The
collateral securing the seller's obligation must be of a credit quality at least
equal to the Trust's investment criteria for portfolio securities and will be
held by the Custodian or in the Federal Reserve Book Entry System.
For purposes of the Investment Company Act of 1940, a repurchase agreement
is deemed to be a loan from a Fund to the seller subject to the repurchase
agreement and is therefore subject to that Fund's investment restriction
applicable to loans. It is not clear whether a court would consider the
securities purchased by that Fund subject to a repurchase agreement as being
owned by a Fund or as being collateral for a loan by the Fund to the seller. In
the event of the commencement of bankruptcy or insolvency proceedings with
respect to the seller of the securities before repurchase of the security under
a repurchase agreement, a Fund may encounter delay and incur costs before being
able to sell the security. Delays may involve
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<PAGE>
loss of interest or decline in price of the security. If a court characterized
the transaction as a loan and a Fund has not perfected a security interest in
the security, that Fund may be required to return the security to the seller's
estate and be treated as an unsecured creditor of the seller. As an unsecured
creditor, a Fund would be at the risk of losing some or all of the principal and
income involved in the transaction. As with any unsecured debt obligation
purchased for a Fund, the Adviser seeks to minimize the risk of loss through
repurchase agreements by analyzing the creditworthiness of the obligor, in this
case, the seller. Apart from the risk of bankruptcy or insolvency proceedings,
there is also the risk that the seller may fail to repurchase the security, in
which case a Fund may incur a loss if the proceeds to a Fund of the sale of the
security to a third party are less than the repurchase price. However, if the
market value of the securities subject to the repurchase agreement becomes less
than the repurchase price (including interest), a Fund will direct the seller of
the security to deliver additional securities so that the market value of all
securities subject to the repurchase agreement will equal or exceed the
repurchase price. It is possible that a Fund will be unsuccessful in seeking to
enforce the seller's contractual obligation to deliver additional securities.
LOANS OF PORTFOLIO SECURITIES. Each Fund may lend its portfolio securities
subject to the restrictions stated in the Prospectus. Under applicable
regulatory requirements (which are subject to change), the loan collateral must,
on each business day, at least equal the value of the loaned securities. To be
acceptable as collateral, letters of credit must obligate a bank to pay amounts
demanded by a Fund if the demand meets the terms of the letter. Such terms and
the issuing bank must be satisfactory to a Fund. The Funds receive amounts equal
to the dividends or interest on loaned securities and also receives one or more
of (a) negotiated loan fees, (b) interest on securities used as collateral, or
(c) interest on short-term debt securities purchased with such collateral;
either type of interest may be shared with the borrower. The Funds may also pay
fees to placing brokers as well as custodian and administrative fees in
connection with loans. Fees may only be paid to a placing broker provided that
the Trustees determine that the fee paid to the placing broker is reasonable and
based solely upon services rendered, that the Trustees separately consider the
propriety of any fee shared by the placing broker with the borrower, and that
the fees are not used to compensate the Adviser or any affiliated person of the
Trust or an affiliated person of the Adviser or other affiliated person. The
terms of the Funds' loans must meet applicable tests under the Internal Revenue
Code and permit the Funds to reacquire loaned securities on five days' notice or
in time to vote on any important matter.
- 5 -
<PAGE>
BANK DEBT INSTRUMENTS. Bank debt instruments in which the Funds may invest
consist of certificates of deposit, bankers' acceptances and time deposits
issued by national banks and state banks, trust companies and mutual savings
banks, or of banks or institutions the accounts of which are insured by the
Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance
Corporation. Certificates of deposit are negotiable certificates evidencing the
indebtedness of a commercial bank to repay funds deposited with it for a
definite period of time (usually from fourteen days to one year) at a stated or
variable interest rate. Bankers' acceptances are credit instruments evidencing
the obligation of a bank to pay a draft which has been drawn on it by a
customer, which instruments reflect the obligation both of the bank and of the
drawer to pay the face amount of the instrument upon maturity. Time deposits are
non-negotiable deposits maintained in a banking institution for a specified
period of time at a stated interest rate. Investments in time deposits maturing
in more than seven days will be subject to the Trust's restrictions on illiquid
investments (see "Investment Limitations").
COMMERCIAL PAPER. Commercial paper consists of short-term (usually from one
to two hundred seventy days) unsecured promissory notes issued by corporations
in order to finance their current operations. Each Fund will only invest in
commercial paper rated A-1 by Standard & Poor's Ratings Group or Prime-1 by
Moody's Investors Service, Inc. or unrated paper of issuers who have outstanding
unsecured debt rated AA or better by Standard & Poor's or Aa or better by
Moody's. Certain notes may have floating or variable rates. Variable and
floating rate notes with a demand notice period exceeding seven days will be
subject to the Trust's restrictions on illiquid investments (see "Investment
Limitations") unless, in the judgment of the Adviser, subject to the direction
of the Board of Trustees, such note is liquid.
The rating of Prime-1 is the highest commercial paper rating assigned by
Moody's Investors Service, Inc. Among the factors considered by Moody's in
assigning ratings are the following: valuation of the management of the issuer;
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; evaluation of the
issuer's products in relation to competition and customer acceptance; liquidity;
amount and quality of long-term debt; trend of earnings over a period of 10
years; financial strength of the parent company and the relationships which
exist with the issuer; and recognition by the management of obligations which
may be present or may arise as a result of public interest questions and
preparations to meet such obligations. These factors are all considered in
determining whether the commercial paper is rated Prime-1. Commercial paper
rated A-1 (highest
- 6 -
<PAGE>
quality) by Standard & Poor's Ratings Group has the following characteristics:
liquidity ratios are adequate to meet cash requirements; long-term senior debt
is rated "A" or better, although in some cases "BBB" credits may be allowed; the
issuer has access to at least two additional channels of borrowing; basic
earnings and cash flow have an upward trend with allowance made for unusual
circumstances; typically, the issuer's industry is well established and the
issuer has a strong position within the industry; and the reliability and
quality of management are unquestioned. The relative strength or weakness of the
above factors determines whether the issuer's commercial paper is rated A-1.
FOREIGN SECURITIES. Subject to the Trust's investment policies and quality
and maturity standards, each Fund may invest in the securities (payable in U.S.
dollars) of foreign issuers. Because a Fund may invest in foreign securities, an
investment in a Fund involves risks that are different in some respects from an
investment in a fund which invests only in securities of U.S. domestic issuers.
Foreign investments may be affected favorably or unfavorably by changes in
currency rates and exchange control regulations. There may be less publicly
available information about a foreign company than about a U.S. company, and
foreign companies may not be subject to accounting, auditing and financial
reporting standards and requirements comparable to those applicable to U.S.
companies. There may be less governmental supervision of securities markets,
brokers and issuers of securities. Securities of some foreign companies are less
liquid or more volatile than securities of U.S. companies, and foreign brokerage
commissions and custodian fees are generally higher than in the United States.
Settlement practices may include delays and may differ from those customary in
United States markets. Investments in foreign securities may also be subject to
other risks different from those affecting U.S. investments, including local
political or economic developments, expropriation or nationalization of assets,
restrictions on foreign investment and repatriation of capital, imposition of
withholding taxes on dividend or interest payments, currency blockage (which
would prevent cash from being brought back to the United States), and difficulty
in enforcing legal rights outside the United States.
WRITING COVERED CALL OPTIONS. Each Fund may write covered call options on
equity securities to earn premium income, to assure a definite price for a
security it has considered selling, or to close out options previously
purchased. A call option gives the holder (buyer) the right to purchase a
security at a specified price (the exercise price) at any time until a certain
date (the expiration date). A call option is "covered" if a Fund owns the
underlying security subject to the call option at all times during the option
period. A covered call writer is
- 7 -
<PAGE>
required to deposit in escrow the underlying security in accordance with the
rules of the exchanges on which the option is traded and the appropriate
clearing agency.
The writing of covered call options is a conservative investment technique
which the Adviser believes involves relatively little risk. However, there is no
assurance that a closing transaction can be effected at a favorable price.
During the option period, the covered call writer has, in return for the premium
received, given up the opportunity for capital appreciation above the exercise
price should the market price of the underlying security increase, but has
retained the risk of loss should the price of the underlying security decline.
As long as the Securities and Exchange Commission continues to take the
position that unlisted options are illiquid securities, each Fund will not
commit more than 15% of its net assets to unlisted covered call transactions and
other illiquid securities.
WRITING COVERED PUT OPTIONS. Each Fund may write covered put options on
equity securities to assure a definite price for a security if it is considering
acquiring the security at a lower price than the current market price or to
close out options previously purchased. A put option gives the holder of the
option the right to sell, and the writer has the obligation to buy, the
underlying security at the exercise price at any time during the option period.
The operation of put options in other respects is substantially identical to
that of call options. When a Fund writes a covered put option, it maintains in a
segregated account with its Custodian cash or liquid securities in an amount not
less than the exercise price at all times while the put option is outstanding.
The risks involved in writing put options include the risk that a closing
transaction cannot be effected at a favorable price and the possibility that the
price of the underlying security may fall below the exercise price, in which
case a Fund may be required to purchase the underlying security at a higher
price than the market price of the security at the time the option is exercised.
PURCHASING PUT OPTIONS. Each Fund may purchase put options. As the holder
of a put option, a Fund has the right to sell the underlying security at the
exercise price at any time during the option period. Each Fund may enter into
closing sale transactions with respect to such options, exercise them or permit
them to expire. Each Fund may purchase put options for defensive purposes in
order to protect against an anticipated decline in the value of its securities.
An example of such use of put options is provided below.
- 8 -
<PAGE>
Each Fund may purchase a put option on an underlying security (a
"protective put") owned as a defensive technique in order to protect against an
anticipated decline in the value of the security. Such hedge protection is
provided only during the life of the put option when a Fund, as the holder of
the put option, is able to sell the underlying security at the put exercise
price regardless of any decline in the underlying security's market price. For
example, a put option may be purchased in order to protect unrealized
appreciation of a security where the Adviser deems it desirable to continue to
hold the security because of tax considerations. The premium paid for the put
option and any transaction costs would reduce any capital gain otherwise
available for distribution when the security is eventually sold.
Each Fund may also purchase put options at a time when a Fund does not own
the underlying security. By purchasing put options on a security it does not
own, a Fund seeks to benefit from a decline in the market price of the
underlying security. If the put option is not sold when it has remaining value,
and if the market price of the underlying security remains equal to or greater
than the exercise price during the life of the put option, a Fund will lose its
entire investment in the put option. In order for the purchase of a put option
to be profitable, the market price of the underlying security must decline
sufficiently below the exercise price to cover the premium and transaction
costs, unless the put option is sold in a closing sale transaction.
Each Fund will commit no more than 5% of its assets to premiums when
purchasing put options. The premium paid by a Fund when purchasing a put option
will be recorded as an asset in a Fund's statement of assets and liabilities.
This asset will be adjusted daily to the option's current market value, which
will be the latest sale price at the time at which a Fund's net asset value per
share is computed (close of trading on the New York Stock Exchange), or, in the
absence of such sale, the latest bid price. The asset will be extinguished upon
expiration of the option, the selling (writing) of an identical option in a
closing transaction, or the delivery of the underlying security upon the
exercise of the option.
PURCHASING CALL OPTIONS. Each Fund may purchase call options. As the holder
of a call option, a Fund has the right to purchase the underlying security at
the exercise price at any time during the option period. Each Fund may enter
into closing sale transactions with respect to such options, exercise them or
permit them to expire. Each Fund may purchase call options for the purpose of
increasing its current return or avoiding tax consequences which could reduce
its current return. Each Fund may also purchase call options in order to acquire
the underlying securities. Examples of such uses of call options are provided
below.
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<PAGE>
Call options may be purchased by each Fund for the purpose of acquiring the
underlying securities for its portfolio. Utilized in this fashion, the purchase
of call options enables a Fund to acquire the securities at the exercise price
of the call option plus the premium paid. At times the net cost of acquiring
securities in this manner may be less than the cost of acquiring the securities
directly. This technique may also be useful to a Fund in purchasing a large
block of securities that would be more difficult to acquire by direct market
purchases. So long as it holds such a call option rather than the underlying
security itself, a Fund is partially protected from any unexpected decline in
the market price of the underlying security and in such event could allow the
call option to expire, incurring a loss only to the extent of the premium paid
for the option.
Each Fund will commit no more than 5% of its assets to premiums when
purchasing call options. Each Fund may also purchase call options on underlying
securities it owns in order to protect unrealized gains on call options
previously written by it. A call option would be purchased for this purpose
where tax considerations make it inadvisable to realize such gains through a
closing purchase transaction. Call options may also be purchased at times to
avoid realizing losses that would result in a reduction of a Fund's current
return. For example, where a Fund has written a call option on an underlying
security having a current market value below the price at which such security
was purchased by a Fund, an increase in the market price could result in the
exercise of the call option written by a Fund and the realization of a loss on
the underlying security with the same exercise price and expiration date as the
option previously written.
OPTIONS TRANSACTIONS GENERALLY. Option transactions in which a Fund may
engage involve the specific risks described above as well as the following
risks: the writer of an option may be assigned an exercise at any time during
the option period; disruptions in the markets for underlying instruments could
result in losses for options investors; imperfect or no correlation between the
option and the securities being hedged; the insolvency of a broker could present
risks for the broker's customers; and market imposed restrictions may prohibit
the exercise of certain options. In addition, the option activities of a Fund
may affect its portfolio turnover rate and the amount of brokerage commissions
paid by a Fund. The success of a Fund in using the option strategies described
above depends, among other things, on the Adviser's ability to predict the
direction and volatility of price movements in the options and securities
markets and the Adviser's ability to select the proper time, type and duration
of the options.
- 10 -
<PAGE>
STOCK INDEX FUTURES CONTRACTS. Each Fund may enter into S&P Index (or other
major market index) futures contracts ("Futures" or "Futures Contracts") as a
hedge against changes in prevailing levels of stock values in order to establish
more definitely the effective return on securities held or intended to be
acquired by each Fund. A Fund's hedging may include the purchase of Futures in
anticipation of purchasing underlying index stocks prior to the availability of
sufficient assets to purchase such stocks or to offset potential increase in
stocks prices. When selling Futures Contracts, a Fund will segregate cash assets
to cover any related liability.
Each Fund will not enter into Futures Contracts for speculation and will
only enter into Futures Contracts which are traded on national futures exchanges
and are standardized as to maturity date and underlying financial instrument.
The principal Futures exchanges in the United States are the Board of Trade of
the City of Chicago and the Chicago Mercantile Exchange. Futures exchanges and
trading are regulated under the Commodity Exchange Act by the Commodity Futures
Trading Commission.
A Fund will not enter into a Futures Contract if, as a result thereof, more
than 5% of a Fund's total assets (taken at market value at the time of entering
into the contract) would be committed to "margin" (down payment) deposits on
such Futures Contracts.
WARRANTS AND RIGHTS. Warrants are options to purchase equity securities at
a specified price and are valid for a specific time period. Rights are similar
to warrants, but normally have a short duration and are distributed by the
issuer to its shareholders. Each Fund may purchase warrants and rights, provided
that each Fund does not presently intend to invest more than 5% of its net
assets at the time of purchase in warrants and rights other than those that have
been acquired in units or attached to other securities.
QUALITY RATINGS OF CORPORATE BONDS AND PREFERRED STOCKS
- -------------------------------------------------------
The ratings of Moody's Investors Service, Inc. and Standard & Poor's
Ratings Group for corporate bonds in which each Fund may invest are as follows:
Moody's Investors Service, Inc.
-------------------------------
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
- 11 -
<PAGE>
Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
Standard & Poor's Ratings Group
-------------------------------
AAA - Bonds rated AAA have the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA - Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A - Bonds rated A have a strong capacity to pay interest and repay
principal 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
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
- 12 -
<PAGE>
BB, B, CCC and CC - Bonds rated BB, B, CCC and CC are regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
The ratings of Moody's Investors Service, Inc. and Standard & Poor's
Ratings Group for preferred stocks in which each Fund may invest are as follows:
Moody's Investors Service, Inc.
-------------------------------
aaa - An issue which is rated aaa is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.
aa - An issue which is rated aa is considered a high-grade preferred stock.
This rating indicates that there is reasonable assurance that earnings and asset
protection will remain relatively well maintained in the foreseeable future.
a - An issue which is rated a is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the "aaa"
and "aa" classifications, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.
baa - An issue which is rated baa is considered to be medium grade, neither
highly protected nor poorly secured. Earnings and asset protection appear
adequate at present but may be questionable over any great length of time.
ba - An issue which is rated ba is considered to have speculative elements
and its future cannot be considered well assured. Earnings and asset protection
may be very moderate and not well safeguarded during adverse periods.
Uncertainty of position characterizes preferred stocks in this class.
Standard & Poor's Ratings Group
-------------------------------
AAA - This is the highest rating that may be assigned by Standard & Poor's
to a preferred stock issue and indicates an extremely strong capacity to pay the
preferred stock obligations.
AA - A preferred stock issue rated AA also qualifies as a high-quality
fixed income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated AAA.
- 13 -
<PAGE>
A - An issue rated A is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the diverse
effects of changes in circumstances and economic conditions.
BBB - An issue rated BBB is regarded as backed by an adequate capacity to
pay the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the A category.
BB, B and CCC - Preferred stock rated BB, B and CCC are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay preferred stock obligations. BB indicates the lowest degree of speculation
and CCC the highest degree of speculation. While such issues will likely have
some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
INVESTMENT LIMITATIONS
- ----------------------
The Trust has adopted certain fundamental investment limitations designed
to reduce the risk of an investment in each of Funds. These limitations may not
be changed with respect to any Fund without the affirmative vote of a majority
of the outstanding shares of that Fund.
Under these fundamental limitations, each Fund MAY NOT:
(1) Issue senior securities, pledge its assets or borrow money, or purchase
securities on margin except that it may do so if, immediately after such
borrowing, the value of the Fund's assets, including all borrowings then
outstanding, less its liabilities (excluding all borrowings), is equal to
at least 300% of the aggregate amount of borrowings then outstanding, and
may pledge its assets to secure all such borrowings;
(2) Underwrite securities issued by others except to the extent the Fund may be
deemed to be an underwriter under the federal securities laws in connection
with the disposition of portfolio securities;
(3) Make short sales of securities or maintain a short position, except short
sales "against the box";
- 14 -
<PAGE>
(4) Make loans to other persons, except (a) by loaning portfolio securities, or
(b) by engaging in repurchase agreements. For purposes of this limitation,
the term "loans" shall not include the purchase of marketable bonds,
debentures, commercial paper or corporate notes, and similar marketable
evidences of indebtedness;
(5) Write, purchase or sell commodities, commodities contracts or related
options;
(6) Invest more than 25% of its total assets in the securities of issuers in
any particular industry (other than securities of the United States
Government, its agencies or instrumentalities);
(7) Invest in interests in real estate or real estate limited partnerships
(although it may invest in real estate investment trusts and purchase
securities secured by real estate or interests therein, or issued by
companies or investment trusts which invest in real estate or interests
therein);
The following fundamental limitation is applicable only to THE
ATALANTA/SOSNOFF FUND, THE ATALANTA/SOSNOFF VALUE FUND AND THE
ATALANTA/SOSNOFF BALANCED FUND. EACH OF THESE FUNDS MAY NOT:
(8) Purchase the securities of any issuer if with respect to 75% of the value
of the total assets of the Fund, more than 5% of the value of the total
assets of the Fund would be invested in the securities of any one issuer or
the Fund would own more than 10% of the outstanding voting securities of
such issuer, provided that this limitation shall not apply to the purchase
of securities issued by the U.S. Government, its agencies or
instrumentalities.
Percentage restrictions stated as an investment limitation apply at the
time of investment; if a later increase or decrease in percentage beyond the
specified limits results from a change in securities values or total assets, it
will not be considered a violation. However, in the case of the borrowing
limitation (limitation number 1, above), each Fund will, to the extent
necessary, reduce its existing borrowings to comply with the limitation.
TRUSTEES AND OFFICERS
- ---------------------
The following is a list of the Trustees and executive officers of the
Trust. Each Trustee who is an "interested person" of the Trust, as defined by
the Investment Company Act of 1940 Act, is indicated by an asterisk.
- 15 -
<PAGE>
Estimated Annual
Compensation
Name Age Position Held From the Trust
- ---- --- ------------- ----------------
*Anthony G. Miller 39 Chairman, $ 0
President and Trustee
*Toni E. Sosnoff 55 Vice President 0
and Trustee
+Howard A. Drucker 56 Trustee 8,000
+Irving L. Straus 77 Trustee 8,000
+Aida L. Wilder 50 Trustee 8,000
Robert L. Bennett 57 Treasurer 0
Tina D. Hosking 30 Secretary 0
* Mr. Miller and Mrs. Sosnoff, as affiliated persons of Atalanta/Sosnoff
Capital Corporation (Delaware), the Funds' investment adviser, and
Atalanta/Sosnoff Management Corporation, the Funds' principal underwriter,
are "interested persons" of the Trust within the meaning of Section
2(a)(19) of the Investment Company Act of 1940.
+ Member of Audit Committee.
The principal occupations of the Trustees and executive officers of the
Trust during the past five years are set forth below:
ANTHONY G. MILLER, 101 Park Avenue, New York, New York, is President and a
Trustee of the Trust. He is Executive Vice President, Chief Operating Officer
("COO") and Chief Financial Officer ("CFO") of Atalanta/Sosnoff Capital
Corporation (Delaware) (the investment adviser to the Trust and parent of
Atalanta/Sosnoff Management Corporation) and Atalanta/Sosnoff Capital
Corporation (parent of Atalanta/Sosnoff Capital Corporation (Delaware)). Mr.
Miller is also Executive Vice President, COO and CFO of Atalanta/Sosnoff
Management Corporation (the Funds principal underwriter).
TONI E. SOSNOFF, 101 Park Avenue, New York, New York, is Vice President of
Atalanta/Sosnoff Capital Corporation (Delaware), (the investment adviser to the
Trust and parent of Atalanta/Sosnoff Management Corporation).
HOWARD A. DRUCKER, 25 East End Avenue, New York, New York is an attorney
and the president of Fundamental Management Corp. which provides real estate
management services. He is also a general partner of East Hartford Estates,
L.P., a real estate company; and a real estate investor and manager with various
properties throughout the United States.
- 16 -
<PAGE>
IRVING L. STRAUS, 1501 Broadway #1809, New York, New York, is a Trustee of
the Trust. He is also Chairman of Straus Corporate Communications, a public
relations firm; and President of 100% No-Load Mutual Fund Council, a trade
organization. Mr. Straus also serves as assistant secretary for Spectral
Diagnostics, Inc. which is a publicly-held company in the biotechnology field.
AIDA L. WILDER, 24 Old Albany Post Rd., Rhinebeck, New York, is a Trustee
of the Trust. She is also the Vice President of Wilder Consolidated Enterprises
which engages in restaurant operations and has served in this capacity since
1979.
ROBERT L. BENNETT, 312 Walnut Street, Cincinnati, Ohio, is First Vice
President and Chief Operations Officer of Countrywide Fund Services, Inc. (a
registered transfer agent). He is also Treasurer for the Dean Family of Funds,
Williamsburg Investment Trust, The New York State Opportunity Funds, Wells
Family of Real Estate Funds and The Winter Harbor Fund (all of which are
registered investment companies).
TINA D. HOSKING, 312 Walnut Street, Cincinnati, Ohio, is Associate General
Counsel of Countrywide Fund Services, Inc. She is also Secretary of The Winter
Harbor Fund, The Bjurman Funds, Dean Family of Funds, The James Advantage Funds,
UC Investment Trust, Williamsburg Investment Trust, Wells Family of Real Estate
Funds and The New York State Opportunity Funds and Assistant Secretary of The
Gannett Welsh & Kotler Funds, The Westport Funds and Lake Shore Family of Funds.
Each non-interested Trustee will receive a quarterly retainer of $1,000 and
a $1,000 fee for each Board meeting attended and will be reimbursed for travel
and other expenses incurred in the performance of their duties.
THE INVESTMENT ADVISER
- ----------------------
Atalanta/Sosnoff Capital Corporation (Delaware) (the "Adviser") is the
investment adviser for all four Funds. The Adviser is a wholly-owned subsidiary
of Atalanta/Sosnoff Capital Corporation ("A/SCC"), a public company listed on
the New York Stock Exchange (NYSE: ATL). Martin T. Sosnoff is the controlling
shareholder, Chairman and a Director of A/SCC and the Chairman and a Director of
the Adviser and Atalanta/Sosnoff Management Corporation, the Trust's principal
underwriter (the "Distributor"). Anthony G. Miller is Executive Vice President,
COO and CFO of the Adviser, A/SCC and the Distributor. Messrs. Sosnoff and
Miller, by reason of such affiliation, may directly or indirectly receive
benefits from the advisory fees paid to the Adviser. Mr. Miller is also the
President and a Trustee of the Trust.
- 17 -
<PAGE>
Under the terms of the advisory agreements between the Trust and the
Adviser, the Adviser manages each Fund's investments. Each Fund pays the Adviser
a fee computed and accrued daily and paid monthly at an annual rate of .75% of
its average daily net assets.
Each Fund is responsible for the payment of all expenses incurred in
connection with the organization, registration of shares and operations of that
Fund, including such extraordinary or non-recurring expenses as may arise, such
as litigation to which a Fund may be a party. Each Fund may have an obligation
to indemnify the Trust's officers and Trustees with respect to such litigation,
except in instances of willful misfeasance, bad faith, gross negligence or
reckless disregard by such officers and Trustees in the performance of their
duties. The Adviser bears promotional expenses in connection with the
distribution of each Fund's shares. The compensation and expenses of any
officer, Trustee or employee of the Trust who is an officer, director, employee
or stockholder of the Adviser are paid by the Adviser.
By its terms, the advisory agreement for the Atalanta/Sosnoff Fund will
remain in force until June 1, 2000. The advisory agreement for the
Atalanta/Sosnoff Focus Fund, the Atalanta/Sosnoff Value Fund, and the
Atalanta/Sosnoff Balanced Fund and will remain in force until June 1, 2001. Each
of the advisory agreements will remain in force from year to year thereafter,
subject to annual approval by (a) the Board of Trustees or (b) a vote of the
majority of the Fund's outstanding voting securities; provided that in either
event continuance is also approved by a majority of the Trustees who are not
interested persons of the Trust, by a vote cast in person at a meeting called
for the purpose of voting such approval. Each Fund's advisory agreement may be
terminated at any time, on sixty days' written notice, without the payment of
any penalty, by the Board of Trustees, by a vote of the majority of the Fund's
outstanding voting securities, or by the Adviser. Each of the advisory
agreements automatically terminates in the event of its assignment, as defined
by the 1940 Act and the rules thereunder.
THE DISTRIBUTOR
- ---------------
Atalanta/Sosnoff Management Corporation (the "Distributor") is the
exclusive agent for distribution of shares of the Funds. The Distributor is
obligated to sell the shares on a best efforts basis only against purchase
orders for the shares. Shares of the Funds are offered to the public on a
continuous basis. The Distributor pays from its own resources promotional
expenses in connection with the distribution of each Fund's shares and any other
expenses incurred by it in the performance of its obligations under the
Underwriting Agreement with that Fund.
- 18 -
<PAGE>
SERVICE PLAN
- ------------
As stated in the Prospectus, the Trust has adopted a service plan (the
"Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940 which
permits each Fund to compensate the Distributor for its services to that Fund.
The Distributor is responsible for the payment of any expenses incurred in the
distribution and promotion of each Fund's shares or activities related to the
servicing of shareholder accounts, including but not limited to, office space
and equipment, telephone facilities and expenses, answering routine inquiries
regarding the Trust, processing shareholder transactions, and providing such
other shareholder services as the Trust might reasonably request; formulating
and implementing of marketing and promotional activities; the printing of
prospectuses, statements of additional information and reports used for sales
purposes, advertisements, expenses of preparation and printing of sales
literature, promotion, marketing and sales expenses, and other shareholder
servicing-related expenses, including any servicing fees paid to securities
dealers or other firms who have executed a distribution or service agreement
with the Distributor. The Plan expressly limits payments to the Distributor in
any fiscal year to a maximum of .25% of the average daily net assets of each
Fund.
Agreements implementing the Plan (the "Implementation Agreements"),
including agreements with dealers wherein such dealers agree for a fee to act as
agents for the sale of each Fund's shares, are in writing and have been approved
by the Board of Trustees. All payments made pursuant to the Plan are made in
accordance with written agreements.
The continuance of the Plan and Implementation Agreements must be
specifically approved at least annually by a vote of the Trust's Board of
Trustees and by a vote of the Trustees who are not interested persons of the
Trust and have no direct or indirect financial interest in the Plan (the
"Independent Trustees") at a meeting called for the purpose of voting on such
continuance. The Plan may be terminated by each Fund at any time by a vote of a
majority of the Independent Trustees or by a vote of the holders of a majority
of the outstanding shares of that Fund. In the event a Plan is terminated in
accordance with its terms, that Fund will not be required to make any payments
to the Distributor after the termination date. The Plan may not be amended to
increase materially the amount to be spent under the Plan without shareholder
approval. All material amendments to the Plan must be approved by a vote of the
Trust's Board of Trustees and by a vote of the Independent Trustees.
- 19 -
<PAGE>
In approving the Plan, the Trustees determined, in the exercise of their
business judgment and in light of their fiduciary duties as Trustees, that there
is a reasonable likelihood that the Plan will benefit each Fund and its
shareholders. The Board of Trustees believes that expenditure of each Fund's
assets for distribution and shareholder servicing expenses under the Plan should
assist in the growth of a Fund which will benefit the Fund and its shareholders
through increased economies of scale, greater investment flexibility, greater
portfolio diversification and less chance of disruption of planned investment
strategies. The Plan will be renewed only if the Trustees make a similar
determination for each subsequent year of the Plan. There can be no assurance
that the benefits anticipated from the expenditure of the Funds' assets for
shareholder servicing will be realized. While the Plan is in effect, all amounts
spent by the Funds pursuant to the Plan and the purposes for which such
expenditures were made must be reported quarterly to the Board of Trustees for
its review. In addition, the selection and nomination of those Trustees who are
not interested persons of the Trust are committed to the discretion of the
Independent Trustees during such period.
By reason of their ownership of shares of the Adviser and the Distributor,
Anthony G. Miller and Toni E. Sosnoff may each be deemed to have a financial
interest in the operation of the Plan.
SECURITIES TRANSACTIONS
- -----------------------
Decisions to buy and sell securities for the Funds and the placing of the
Funds' securities transactions and negotiation of commission rates where
applicable are made by the Adviser and are subject to review by the Board of
Trustees of the Trust. In the purchase and sale of portfolio securities, the
Adviser seeks best execution for the Funds, taking into account such factors as
price (including the applicable brokerage commission or dealer spread), the
execution capability, financial responsibility and responsiveness of the broker
or dealer and the brokerage and research services provided by the broker or
dealer. The Adviser generally seeks favorable prices and commission rates that
are reasonable in relation to the benefits received.
Generally, the Funds attempt to deal directly with the dealers who make a
market in the securities involved unless better prices and execution are
available elsewhere. Such dealers usually act as principals for their own
account. On occasion, portfolio securities for the Funds may be purchased
directly from the issuer.
- 20 -
<PAGE>
The Adviser is specifically authorized to select brokers who also provide
brokerage and research services to the Funds and/or other accounts over which
the Adviser exercises investment discretion and to pay such brokers a commission
in excess of the commission another broker would charge if the Adviser
determines in good faith that the commission is reasonable in relation to the
value of the brokerage and research services provided. The determination may be
viewed in terms of a particular transaction or the Adviser's overall
responsibilities with respect to the Funds and to accounts over which it
exercises investment discretion.
Research services include securities and economic analyses, reports on
issuers' financial conditions and future business prospects, newsletters and
opinions relating to interest trends, general advice on the relative merits of
possible investment securities for the Funds and statistical services and
information with respect to the availability of securities or purchasers or
sellers of securities. Although this information is useful to the Funds and the
Adviser, it is not possible to place a dollar value on it. Research services
furnished by brokers through whom the Funds effect securities transactions may
be used by the Adviser in servicing all of its accounts and not all such
services may be used by the Adviser in connection with the Funds.
The Funds have no obligation to deal with any broker or dealer in the
execution of securities transactions. However, the Adviser and other affiliates
of the Trust may effect securities transactions which are executed on a national
securities exchange or transactions in the over-the-counter market conducted on
an agency basis. The Funds will not effect any brokerage transactions in its
portfolio securities with the Adviser if such transactions would be unfair or
unreasonable to its shareholders. Over-the-counter transactions will be placed
either directly with principal market makers or with broker-dealers. Although
the Funds do not anticipate any ongoing arrangements with other brokerage firms,
brokerage business may be transacted from time to time with other firms. Neither
the Adviser, nor affiliates of the Trust, or the Adviser, will receive
reciprocal brokerage business as a result of the brokerage business transacted
by the Funds with other brokers.
CODE OF ETHICS. The Trust, the Adviser and the Distributor have each
adopted a Code of Ethics pursuant to Rule 17j-1 under the Investment Company Act
of 1940. The Code significantly restricts the personal investing activities of
all employees of the Adviser and the Distributor and, as described below,
imposes additional, more onerous, restrictions on investment personnel of the
Adviser. The Code requires that all access persons preclear any personal
securities investment (with limited exceptions, such as U.S. Government
obligations). The preclearance requirement
- 21 -
<PAGE>
and associated procedures are designed to identify any substantive prohibition
or limitation applicable to the proposed investment. The substantive
restrictions applicable to investment personnel of the Adviser include a ban on
acquiring any securities in an initial public offering and a prohibition from
profiting on short-term trading in securities.
PORTFOLIO TURNOVER
- ------------------
A Fund's portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for the fiscal year by the monthly
average of the value of the portfolio securities owned by the Funds during the
fiscal year. High portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs, which will be borne directly by the
Funds. The Adviser anticipates that each Fund's portfolio turnover rate normally
will not exceed 150%. A 100% turnover rate would occur if all of a Fund's
portfolio securities were replaced once within a one year period.
Generally, each Fund intends to invest for long-term purposes. However, the
rate of portfolio turnover will depend upon market and other conditions, and it
will not be a limiting factor when the Adviser believes that portfolio changes
are appropriate.
CALCULATION OF SHARE PRICE
- --------------------------
The share price (net asset value) of the shares of each Fund is determined
as of the close of the regular session of trading on the New York Stock Exchange
(currently 4:00 p.m., Eastern time), on each day the Trust is open for business.
The Trust is open for business on every day except Saturdays, Sundays and the
following holidays: New Year's Day, Martin Luther King, Jr. Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. The Trust may also be open for business on other days in
which there is sufficient trading in a Fund's portfolio securities that its net
asset value might be materially affected. For a description of the methods used
to determine the share price, see "Calculation of Share Price" in the
Prospectus.
TAXES
- -----
The Prospectus describes generally the tax treatment of distributions by
the Funds. This section of the Statement of Additional Information includes
additional information concerning federal taxes.
- 22 -
<PAGE>
Each Fund intends to qualify for the special tax treatment afforded a
"regulated investment company" under Subchapter M of the Internal Revenue Code
so that it does not pay federal taxes on income and capital gains distributed to
shareholders. To so qualify a Fund must, among other things, (i) derive at least
90% of its gross income in each taxable year from dividends, interest, payments
with respect to securities loans, gains from the sale or other disposition of
stock, securities or foreign currency, or certain other income (including but
not limited to gains from options, futures and forward contracts) derived with
respect to its business of investing in stock, securities or currencies; and
(ii) diversify its holdings so that at the end of each quarter of its taxable
year the following two conditions are met: (a) at least 50% of the value of the
Funds total assets are represented by cash, U.S. Government securities,
securities of other regulated investment companies and other securities (for
this purpose such other securities will qualify only if the Funds investments
are limited in respect to any issuer to an amount not greater than 5% of the
Funds assets and 10% of the outstanding voting securities of such issuer) and
(b) not more than 25% of the value of a Fund's assets is invested in securities
of any one issuer (other than U.S. Government securities or securities of other
regulated investment companies).
A Fund's net realized capital gains from securities transactions will be
distributed only after reducing such gains by the amount of any available
capital loss carryforwards. Capital losses may be carried forward to offset any
capital gains for eight years, after which any undeducted capital loss remaining
is lost as a deduction.
A federal excise tax at the rate of 4% will be imposed on the excess, if
any, of a Fund's "required distribution" over actual distributions in any
calendar year. Generally, the "required distribution" is 98% of a Fund's
ordinary income for the calendar year plus 98% of its net capital gains
recognized during the one year period ending on October 31 of the calendar year
plus undistributed amounts from prior years. Each Fund intends to make
distributions sufficient to avoid imposition of the excise tax.
The Trust is required to withhold and remit to the U.S. Treasury a portion
(31%) of dividend income on any account unless the shareholder provides a
taxpayer identification number and certifies that such number is correct and
that the shareholder is not subject to backup withholding.
- 23 -
<PAGE>
REDEMPTION IN KIND
- ------------------
Under unusual circumstances, when the Board of Trustees deems it in the
best interest of the Fund's shareholders, a Fund may make payment for shares
repurchased or redeemed in whole or in part in securities of the Fund taken at
current value. If any such redemption in kind is to be made, each Fund intends
to make an election pursuant to Rule 18f-1 under the 1940 Act. This election
will require the Funds to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net asset value of each Fund during any ninety day period
for any one shareholder. Should payment be made in securities, the redeeming
shareholder will generally incur brokerage costs in converting such securities
to cash. Portfolio securities which are issued in an in-kind redemption will be
readily marketable.
HISTORICAL PERFORMANCE INFORMATION
- ----------------------------------
From time to time, each Fund may advertise average annual total return.
Average annual total return quotations will be computed by finding the average
annual compounded rates of return over 1, 5 and 10 year periods that would
equate the initial amount invested to the ending redeemable value, according to
the following formula: P (1 + T)n = ERV Where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5 and 10 year periods at the end of the 1, 5 or 10
year periods (or fractional portion thereof)
The calculation of average annual total return assumes the reinvestment of
all dividends and distributions. If a Fund has been in existence less than one,
five or ten years, the time period since the date of the initial public offering
of shares will be substituted for the periods stated. Each Fund may also
advertise total return (a "nonstandardized quotation") which is calculated
differently from average annual total return. A nonstandardized quotation of
total return may be a cumulative return which measures the percentage change in
the value of an account between the beginning and end of a period, assuming no
activity in the account other than reinvestment of dividends and capital gains
distributions. A nonstandardized quotation may also indicate average annual
compounded rates of return without including the effect of any applicable
initial sales load or over periods other than those specified for average annual
total return. A nonstandardized quotation of total return will always be
accompanied by a Fund's average annual total return as described above.
- 24 -
<PAGE>
To help investors better evaluate how an investment in a Fund might satisfy
their investment objective, advertisements regarding the Funds may discuss
various measures of a Fund's performance, including current performance ratings
and/or rankings appearing in financial magazines, newspapers and publications
which track mutual fund performance. Advertisements may also compare performance
(using the calculation methods set forth in the Prospectus) to performance as
reported by other investments, indices and averages. When advertising current
ratings or rankings, the Funds may use the following publications or indices to
discuss or compare Fund performance:
Lipper Mutual Fund Performance Analysis measures total return and average
current yield for the mutual fund industry and ranks individual mutual fund
performance over specified time periods assuming reinvestment of all
distributions, exclusive of sales loads. Each Fund may provide comparative
performance information appearing in the Growth Funds, Value Funds, and Balanced
Funds category. In addition, the Funds may use comparative performance
information of relevant indices, including the S&P 500 Index, the Dow Jones
Industrial Average and the Lehman Brothers Intermediate Government/Corporate
Bond Index. The S&P 500 Index is an unmanaged index of 500 stocks, the purpose
of which is to portray the pattern of common stock price movement. The Dow Jones
Industrial Average is a measurement of general market price movement for 30
widely held stocks listed on the New York Stock Exchange. The Lehman Brothers
Intermediate Government/Corporate Bond Index is a widely recognized bond index
composed of all bonds of investment grade in the maturity of between one and
three years.
In assessing such comparisons of performance an investor should keep in
mind that the composition of the investments in the reported indices and
averages is not identical to the Funds' portfolios, that the averages are
generally unmanaged and that the items included in the calculations of such
averages may not be identical to the formula used by the Funds to calculate
performance. In addition, there can be no assurance that the Funds will continue
this performance as compared to such other averages.
PRINCIPAL SECURITY HOLDERS
- --------------------------
As of June 4, 1999, the Distributor owned of record 79.98% of the
Atalanta/Sosnoff Fund's outstanding shares. As of the share date, the Trustees
and officers of the Trust owned of record or beneficially less than 1% of the
outstanding shares of the Trust.
- 25 -
<PAGE>
CUSTODIAN
- ---------
Firstar Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45202, has been
retained to act as Custodian for the Funds' investments. Firstar Bank, acts as
each Fund's depository, safekeeps its portfolio securities, collects all income
and other payments with respect thereto, disburses funds as instructed and
maintains records in connection with its duties.
AUDITORS
- --------
The firm of Arthur Andersen LLP has been selected as independent public
accountants for the Trust for the fiscal year ended May 31, 1999. Arthur
Andersen LLP, 425 Walnut Street, Cincinnati, Ohio 45202 performs an annual audit
of the Trust's financial statements and advises the Trust as to certain
accounting matters.
COUNTRYWIDE FUND SERVICES, INC.
- -------------------------------
The Trust has retained Countrywide Fund Services, Inc. (the "Transfer
Agent") to act as each Fund's transfer agent. The Transfer Agent is an indirect
wholly-owned subsidiary of Countrywide Credit Industries, Inc., a New York Stock
Exchange listed company principally engaged in the business of residential
mortgage lending. The Transfer Agent maintains the records of each shareholder's
account, answers shareholders' inquiries concerning their accounts, processes
purchases and redemptions of each Fund's shares, acts as dividend and
distribution disbursing agent and performs other shareholder service functions.
The Transfer Agent receives from each Fund for its services as transfer agent a
fee payable monthly at an annual rate of $20 per account, provided, however,
that the minimum fee is $1,500 per month, per Fund. In addition, each Fund pays
out-of-pocket expenses, including but not limited to, postage, envelopes,
checks, drafts, forms, reports, record storage and communication lines.
The Transfer Agent also provides accounting and pricing services to each
Fund. For calculating daily net asset value per share and maintaining such books
and records as are necessary to enable the Transfer Agent to perform its duties,
each Fund pays the Transfer Agent a fee in accordance with the following
schedule:
Average Monthly Net Assets Monthly Fee
-------------------------- -----------
$ 0 - $ 50,000,000 $2,000
$ 50,000,000 - 100,000,000 $2,500
$100,000,000 - 200,000,000 $3,000
$200,000,000 - 300,000,000 $4,000
Over - 300,000,000 $5,000 + .001%
of average net assets
- 26 -
<PAGE>
In addition, each Fund pays all costs of external pricing services.
The Transfer Agent also provides administrative services to each Fund. In
this capacity, the Transfer Agent supplies non-investment related statistical
and research data, internal regulatory compliance services and executive and
administrative services. The Transfer Agent supervises the preparation of tax
returns, reports to shareholders of each Fund, reports to and filings with the
Securities and Exchange Commission and state securities commissions, and
materials for meetings of the Board of Trustees. For the performance of these
administrative services, each Fund pays the Transfer Agent a fee at the annual
rate of .15% of the average value of its daily net assets up to $50,000,000,
.125% of such assets from $50,000,000 to $100,000,000 and .10% of such assets in
excess of $100,000,000, provided, however, that the minimum fee is $1,000 per
month, per Fund.
FINANCIAL STATEMENTS
The Atalanta/Sosnoff Fund's statement of Assets and Liabilities as of May
6, 1998, which have been audited by Arthur Andersen LLP, and the
Atalanta/Sosnoff Fund's unaudited Financial Statements as of November 30, 1998,
are attached to this Statement of Additional Information.
- 27 -
<PAGE>
[LOGO]
Semi-Annual Report
November 30, 1998
(Unaudited)
Atalanta/Sosnoff Fund
<PAGE>
LETTER TO SHAREHOLDERS JANUARY 20, 1999
================================================================================
Dear Shareholder:
As Frank Sinatra used to sing and reminisce, "It was a very good year" but there
were times like late summer when panic embraced financial markets worldwide. The
destabilizing forces of deflation hurt emerging markets, Russia, Southeast Asia
and South America. Our stock market was 20 percent below where it is today with
downside volatility among even the most liquid of our giant multinationals like
GE, Coca-Cola, Microsoft and Cisco.
The world isn't out of the woods as yet, but through the coordinated efforts of
the G7 nations capital injections into Indonesia, Brazil, and South Korea were
timely and staved off total disarray. Russia is the sole exception, but this is
a small economy and the capital losses were sustained mainly by European banks
and their countries which guaranteed many of the loans outstanding.
Turning to our performance in this most volatile setting, we stayed ahead of the
market through the third quarter. When stock prices turned south, we exercised
our pragmatic loss discipline and reduced invested positions in equities by 20
percent. When the market rallied early in October on Federal Reserve Board
easing, we fell behind, but then quickly repositioned portfolios by adding to
our holdings in growth stocks and financial services.
By early December, we began to outperform again and have ended the year with
good absolute and relative performance. Through December 31, 1998, performance
totaled 14.70% versus 13.92% for the S&P 500 Index, and as of this writing we
have added another 6.63% in 1999 versus 2.28% for the S&P 500.
The underlying theme is the world has slowed down and we are likely to remain in
a deflationary environment with low interest rates for a year or two longer. We
continue to avoid investments in companies in the industrial sector. Most of our
holdings are counter cyclical as in healthcare, non-cyclical beneficiaries of
low interest rates and a weakening dollar, and the logical leaders in computer
software, hardware and telecommunications equipment.
We are more concerned about the deflationary forces in the world than the
predicament of President Clinton who should prevail in the Senate impeachment
proceedings. The air won't clear for a month or two. The price of oil hovers
near $10 a barrel and this could further destabilize the Mideast, Indonesia, and
our important trading partners like Mexico and Canada. South America is wobbly,
particularly Venezuela and Brazil. All these countries' budget deficits will
widen markedly, in Saudi Arabia and Russia, too. The chances of geopolitical
unrest have increased and our financial markets are beginning to reflect this
with increased volatility, daily.
We expect the world to muddle through the present deflationary environment, but
it will take some time. Recovery in Southeast Asia could be a year or more away.
At home, low interest rates, minimal inflation and a relatively buoyant consumer
sector should keep our GDP going at better than 2 percent which isn't much below
normal. The newest worry is weakness in the dollar, a reflection of our
unfavorable trade balance and somewhat alarming balance of payment deficit.
The stock market needs to digest the autumn rally and gain some confidence that
corporate earnings, particularly for large capitalization growth stocks, will
not disappoint.
We expect to maintain overweighted positions in technology and in the financial
sector, which includes brok[4s, banks, insurance underwriters, credit card
operators, mortgage agencies and commercial finance companies. Price-earnings
ratios remain very attractive relative to the S&P 500 Index which is ranked at
24 times projected '99 earnings. Many of our holdings sell at 50 percent of this
valuation with prospects of growing earnings at mid-teens levels.
Our Best Wishes for the New Year.
Sincerely,
Martin T. Sosnoff
1
<PAGE>
PORTFOLIO CHARACTERISTICS
NOVEMBER 30,1998 (UNAUDITED)
================================================================================
SECTOR CONCENTRATION VS. THE S&P 500 INDEX
[GRAPHIC OMITTED]
% of Portfolio
---------------------------------------
Atalanta/Sosnoff Fund S&P 500 Index
--------------------- -------------
Financial
Consumer Staples
Technology
Health Care
Consumer Cyclicals
Communications Services
Basic Materials
Capital Goods
Utilities
Energy
Transportation
TOP TEN HOLDINGS
% OF
STOCK SECTOR PORTFOLIO
----------------------------------------------------------
General Re Financial 6.0%
Microsoft Technology 5.4%
Philip Morris Consumer Staples 5.3%
Chancellor Media Consumer Staples 4.9%
IBM Technology 4.8%
Sun Microsystems Technology 4.2%
Cablevision Systems Consumer Staples 4.2%
Merrill Lynch Financial 4.0%
Time Warner Consumer Staples 3.4%
Citigroup Financial 3.3%
-----
Total: 45.5%
TOTAL RETURNS
INCEPTION INCEPTION
(JUNE 17, 1998)* (JUNE 17, 1998)*
TO NOVEMBER 30, 1998 TO DECEMBER 31, 1998
-------------------- --------------------
Atalanta/Sosnoff Fund 6.60% 14.70%
Lipper Growth Fund Index 1.62% 9.75%
S&P 500 Index 7.72% 13.92%
*Except for the Lipper Growth Fund Index which represents the periods from June
18, 1998.
2
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1998 (UNAUDITED)
================================================================================
ASSETS
Investment securities:
At acquisition cost ........................................ $ 9,007,023
===========
At market value (Note 1) ................................... $ 9,873,975
Dividends receivable .......................................... 6,083
Receivable for capital shares sold ............................ 13,400
Organization costs, net (Note 1) .............................. 51,876
Other assets .................................................. 21,317
-----------
TOTAL ASSETS ........................................... 9,966,651
-----------
LIABILITIES
Bank overdraft ................................................ 69,311
Payable for securities purchased .............................. 105,134
Payable to affiliates (Note 3) ................................ 13,806
Other accrued expenses and liabilities ........................ 1,708
-----------
TOTAL LIABILITIES .......................................... 189,959
-----------
NET ASSETS .................................................... $ 9,776,692
===========
Net assets consist of:
Paid-in capital ............................................... $ 9,445,256
Accumulated net investment loss ............................... (12,187)
Accumulated net realized losses from security transactions .... (523,329)
Net unrealized appreciation on investments .................... 866,952
-----------
Net assets .................................................... $ 9,776,692
===========
Shares of beneficial interest outstanding
(unlimited number of shares authorized, no par value) ...... 917,246
===========
Net asset value, offering price and
redemption price per share (Note 1) ........................ $ 10.66
===========
See accompanying notes to financial statements.
3
<PAGE>
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED NOVEMBER 30, 1998(a) (UNAUDITED)
================================================================================
INVESTMENT INCOME
Dividends ..................................................... $ 49,347
---------
EXPENSES
Investment advisory fees (Note 3) ............................. 30,767
Distribution expense (Note 3) ................................. 10,255
Accounting services fees (Note 3) ............................. 10,000
Trustees' fees and expenses ................................... 9,627
Professional fees ............................................. 7,861
Postage and supplies .......................................... 7,823
Registration fees ............................................. 7,503
Transfer agent fees (Note 3) .................................. 7,500
Organization expense (Note 1) ................................. 5,764
Administration fees (Note 3) .................................. 5,740
Custodian fees ................................................ 4,820
Insurance expense ............................................. 4,573
Other expenses ................................................ 1,360
---------
TOTAL EXPENSES ............................................ 113,593
Fees waived and expenses reimbursed by the Adviser (Note 3) ... (52,059)
---------
NET EXPENSES .............................................. 61,534
---------
NET INVESTMENT LOSS .............................................. (12,187)
---------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS
Net realized losses from security transactions ................ (523,329)
Net change in unrealized appreciation/
depreciation on investments ............................... 866,952
---------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS ................. 343,623
---------
NET INCREASE IN NET ASSETS FROM OPERATIONS ....................... $ 331,436
=========
(a) Represents the period from the initial public offering of shares (June 17,
1998) through November 30, 1998.
See accompanying notes to financial statements.
4
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED NOVEMBER 30, 1998(a) (UNAUDITED)
================================================================================
FROM OPERATIONS:
Net investment loss ......................................... $ (12,187)
Net realized losses from security transactions .............. (523,329)
Net change in unrealized appreciation/
depreciation on investments ............................. 866,952
-----------
Net increase in net assets from operations ..................... 331,436
-----------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold ................................... 9,724,526
Payments for shares redeemed ................................ (379,270)
-----------
Net increase in net assets from capital share transactions ..... 9,345,256
-----------
TOTAL INCREASE IN NET ASSETS ................................... 9,676,692
NET ASSETS:
Beginning of period (Note 1) ................................ 100,000
-----------
End of period ............................................... $ 9,776,692
===========
ACCUMULATED NET INVESTMENT LOSS ................................ $ (12,187)
===========
CAPITAL SHARE ACTIVITY:
Shares sold ................................................. 944,945
Shares redeemed ............................................. (37,699)
-----------
Net increase in shares outstanding .......................... 907,246
Shares outstanding, beginning of period (Note 1) ............ 10,000
-----------
Shares outstanding, end of period ........................... 917,246
===========
(a) Represents the period from the initial public offering of shares (June 17,
1998) through November 30, 1998.
See accompanying notes to financial statements.
5
<PAGE>
FINANCIAL HIGHLIGHTS
FOR THE PERIOD ENDED NOVEMBER 30, 1998(a) (UNAUDITED)
================================================================================
PER SHARE DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD:
Net asset value at beginning of period ........................ $ 10.00
---------
Income (loss) from investment operations:
Net investment loss ........................................ (0.01)
Net realized and unrealized gains on investments ........... 0.67
---------
Total from investment operations .............................. 0.66
---------
Net asset value at end of period .............................. $ 10.66
=========
RATIOS AND SUPPLEMENTAL DATA:
Total return .................................................. 6.60%(c)
=========
Net assets at end of period (000's) .......................... $ 9,777
=========
Ratio of net expenses to average net assets(b) ................ 1.50%(d)
Ratio of net investment loss to average net assets ............ (0.30%)(d)
Portfolio turnover rate ....................................... 156%(d)
(a) Represents the period from the initial public offering of shares (June 17,
1998) through November 30, 1998.
(b) Absent fee waivers and expense reimbursements by the Adviser, the ratio of
expenses to average net assets would have been 2.75%(d) for the period
ended November 30, 1998 (Note 3).
(c) Unannualized.
(d) Annualized.
See accompanying notes to financial statements.
6
<PAGE>
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1998 (UNAUDITED)
================================================================================
Market
COMMON STOCKS -- 101.0% Shares Value
- --------------------------------------------------------------------------------
BASIC MATERIALS -- 2.3%
Monsanto ....................................... 4,900 $ 222,031
----------
CAPITAL GOODS -- 1.8%
Waste Management ............................... 4,100 175,787
----------
COMMUNICATION SERVICES -- 2.2%
MCI WorldCom* .................................. 3,700 218,300
----------
CONSUMER CYCLICALS -- 7.5%
Costco Companies* .............................. 3,500 219,625
Saks* .......................................... 8,700 239,250
Wal-Mart Stores ................................ 3,600 271,125
----------
730,000
----------
CONSUMER STAPLES -- 25.9%
Cablevision Systems - Class A* ................. 9,800 405,475
Chancellor Media* .............................. 12,700 478,631
Fox Entertainment Group - Class A* ............. 8,400 198,450
Liberty Media Group - Class A* ................. 6,800 274,125
News Corporation Limited - ADR ................. 4,500 113,344
Philip Morris Companies ........................ 9,100 509,031
Rite Aid ....................................... 4,900 227,237
Time Warner .................................... 3,100 327,825
----------
2,534,118
----------
FINANCIAL -- 31.2%
Allstate ....................................... 4,200 171,150
American International Group ................... 3,000 282,000
Bank One ....................................... 3,700 189,856
CIT Group - Class A ............................ 3,500 98,219
Chase Manhattan ................................ 2,600 164,938
Citigroup ...................................... 6,300 316,181
Dime Bancorp ................................... 6,000 159,375
Fannie Mae ..................................... 4,300 312,825
First Union .................................... 3,200 194,400
General Re ..................................... 2,500 583,750
Golden West Financial .......................... 2,000 189,375
Merrill Lynch .................................. 5,200 390,000
----------
3,052,069
----------
7
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
================================================================================
Market
COMMON STOCKS -- 101.0% (Continued) Shares Value
- --------------------------------------------------------------------------------
HEALTH CARE -- 13.4%
Bristol-Myers Squibb ........................... 1,000 $ 122,562
Johnson & Johnson .............................. 3,100 251,875
Pfizer ......................................... 2,600 290,225
Sofamor Danek Group* ........................... 2,000 223,625
United HealthCare .............................. 4,100 185,013
Warner-Lambert ................................. 3,100 234,050
----------
1,307,350
----------
TECHNOLOGY -- 15.6%
Cisco Systems* ................................. 1,700 128,138
International Business Machines ................ 2,800 462,000
Microsoft* ..................................... 4,300 524,600
Sun Microsystems* .............................. 5,500 407,344
----------
1,522,082
----------
UTILITIES -- 1.1%
Niagara Mohawk Power* .......................... 7,300 112,238
----------
TOTAL COMMON STOCKS (Cost $9,007,023) $9,873,975
LIABILITIES IN EXCESS OF OTHER ASSETS-- (1.0%) (97,283)
----------
NET ASSETS-- 100.0% $9,776,692
==========
* Non-income producing security.
ADR-American Depository Receipt.
See accompanying notes to financial statements.
8
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998 (UNAUDITED)
================================================================================
1. SIGNIFICANT ACCOUNTING POLICIES
The Atalanta/Sosnoff Fund (the Fund) is a diversified series of the
Atalanta/Sosnoff Investment Trust (the Trust), an open-end management investment
company registered under the Investment Company Act of 1940. The Trust was
organized as an Ohio business trust on January 29, 1998. The Fund was
capitalized on May 6, 1998 when Atalanta/Sosnoff Capital Corporation (Delaware)
(the Adviser) purchased the initial 10,000 shares of the Fund at $10.00 per
share. The public offering of shares of the Fund commenced on June 17, 1998. The
Fund had no operations prior to the public offering of shares except for the
initial issuance of shares.
The Fund seeks long-term capital appreciation, through equity investments in
companies entering into a cycle of accelerating earnings momentum.
The following is a summary of the Fund's significant accounting policies:
Securities valuation -- The Fund's portfolio securities are valued as of the
close of the regular session of trading on the New York Stock Exchange
(currently 4:00 p.m., Eastern time). Securities which are traded on stock
exchanges or are quoted by NASDAQ are valued at the last reported sale price or,
if not traded on a particular day, at the closing bid price. Securities traded
in the over-the-counter market, and which are not quoted by NASDAQ, are valued
at the last sale price, if available, otherwise, at the last quoted bid price.
Securities for which market quotations are not readily available are valued at
fair value as determined in good faith in accordance with consistently applied
procedures established by and under the general supervision of the Board of
Trustees.
Share valuation -- The net asset value per share of the Fund is calculated daily
by dividing the total value of the Fund's assets, less liabilities, by the
number of shares outstanding, rounded to the nearest cent. The offering and
redemption price per share of the Fund is equal to the net asset value per
share.
Investment income -- Dividend income is recorded on the ex-dividend date.
Interest income is accrued as earned.
Distributions to shareholders-- Dividends arising from net investment income, if
any, are declared and paid annually to shareholders of the Fund. Net realized
short-term capital gains, if any, may be distributed throughout the year and net
realized long-term capital gains, if any, are distributed at least once each
year. Income dividends and capital gain distributions are determined in
accordance with income tax regulations, which may differ from generally accepted
accounting principles.
Security transactions -- Security transactions are accounted for on trade date.
Securities sold are valued on a specific identification basis.
Organization costs -- Costs incurred by the Fund in connection with its
organization and registration of shares, net of certain expenses, have been
capitalized and are being amortized on a straight-line basis over a five year
period beginning with the commencement of operations.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles 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.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
Federal income tax-- It is the Fund's policy to comply with the special
provisions of the Internal Revenue Code (the Code) available to regulated
investment companies. As provided therein, in any fiscal year in which the Fund
so qualifies and distributes at least 90% of its taxable net income, the Fund
(but not the shareholders) will be relieved of federal income tax on the income
distributed. Accordingly, no provision for income taxes has been made.
In order to avoid imposition of the excise tax applicable to regulated
investment companies, it is also the Fund's intention to declare as dividends in
each calendar year at least 98% of its net investment income (earned during the
calendar year) and 98% of its net realized capital gains (earned during the
twelve months ended October 31) plus undistributed amounts from prior years.
There were no dividends required to be declared by the Fund during 1998.
As of November 30, 1998, net unrealized appreciation on investments was $834,325
for federal income tax purposes, of which $1,165,919 related to appreciated
securities and $331,594 related to depreciated securities based on a federal
income tax cost basis of $9,039,650. The difference between the federal income
tax cost of portfolio investments and the financial statement cost is due to
certain timing differences in the recognition of capital losses under income tax
regulations and generally accepted accounting principles.
2. INVESTMENT TRANSACTIONS
During the period ended November 30, 1998, cost of purchases and proceeds from
sales of portfolio securities, other than short-term investments, amounted to
$15,123,843 and $5,593,491, respectively.
3. TRANSACTIONS WITH AFFILIATES
The President of the Trust is also Executive Vice President of the Adviser and
of Atalanta/Sosnoff Management Corporation (the Distributor), the principal
underwriter for the Fund and exclusive agent for the distribution of Fund
shares. The Vice President of the Trust is also Vice President of the Adviser.
Certain other officers of the Trust are also officers of Countrywide Fund
Services, Inc. (CFS), the administrative services agent, shareholder servicing
and transfer agent and accounting services agent for the Trust.
INVESTMENT ADVISORY AGREEMENT
The Fund's investments are managed by the Adviser pursuant to the terms of an
Investment Advisory Agreement. The Fund pays the Adviser an investment advisory
fee, computed and accrued daily and paid monthly, at an annual rate of 0.75% of
average daily net assets of the Fund.
The Adviser currently intends to voluntarily waive its investment advisory fees
and reimburse the Fund for expenses incurred to the extent necessary to limit
total operating expenses of the Fund to a maximum level of 1.50% of the Fund's
average daily net assets. Accordingly, the Adviser waived its investment
advisory fees of $30,767 and reimbursed the Fund for $21,292 of other operating
expenses during the period ended November 30, 1998.
ADMINISTRATION AGREEMENT
Under the terms of an Administration Agreement, CFS supplies non-investment
related statistical and research data, internal regulatory compliance services
and executive and administrative services for the Fund. CFS supervises the
preparation of tax returns, reports to shareholders of the Fund, reports to and
filings with the Securities and Exchange Commission and state securities
commissions and materials for meetings of the Board of Trustees. For these
services, CFS receives a monthly fee at an annual rate of 0.15% on the Fund's
average daily net assets up to $50 million; 0.125% on such net assets between
$50 million and $100 million; and 0.10% on such net assets in excess of $100
million, subject to a $1,000 minimum monthly fee.
10
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
================================================================================
ACCOUNTING SERVICES AGREEMENT
Under the terms of an Accounting Services Agreement, CFS calculates the daily
net asset value per share and maintains the financial books and records of the
Fund. For these services, CFS receives a fee, based on current asset levels, of
$2,000 per month from the Fund. In addition, the Fund reimburses CFS for
out-of-pocket expenses related to the pricing of the Fund's portfolio
securities.
TRANSFER AGENT AGREEMENT
Under the terms of a Transfer, Dividend Disbursing, Shareholder Service and Plan
Agency Agreement, CFS maintains the records of each shareholder's account,
answers shareholders' inquiries concerning their accounts, processes purchases
and redemptions of the Fund's shares, acts as dividend and distribution
disbursing agent and performs other shareholder service functions. For these
services, CFS receives a monthly fee at an annual rate of $20 per shareholder
account from the Fund, subject to a $1,500 minimum monthly fee. In addition, the
Fund reimburses CFS for out-of-pocket expenses including, but not limited to,
postage and supplies.
DISTRIBUTION PLAN
The Fund has adopted a Plan of Distribution (the Plan) under which the Fund may
directly incur or reimburse the Distributor for expenses related to the
distribution and promotion of Fund shares. The annual limitation for payment of
such expenses under the Plan is 0.25% of the Fund's average daily net assets.
The Fund incurred distribution expenses of $10,255 under the Plan during the
period ended November 30, 1998.
11
<PAGE>
ATALANTA/SOSNOFF INVESTMENT TRUST
101 Park Avenue o New York, NY 10178
toll free 1-877-SOSNOFF (767-6633)
website o www.atalantasosnoff.com
e-mail o [email protected]
BOARD OF TRUSTEES
Howard A. Drucker
Anthony G. Miller
Toni E. Sosnoff
Irving L. Straus
Aida L. Wilder
INVESTMENT ADVISER
Atalanta/Sosnoff Capital Corp. (Delaware)
101 Park Avenue o New York, NY 10178
DISTRIBUTOR
Atalanta/Sosnoff Management Corporation
101 Park Avenue o New York, NY 10178
TRANSFER AGENT
Countrywide Fund Services, Inc.
P.O. Box 5354 o Cincinnati, OH 45201-5354