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PROSPECTUS JUNE 16, 1998
PUGET SOUND MARKET NEUTRAL PORTFOLIO
Puget Sound Market Neutral Portfolio (the "Fund") is a newly
organized mutual fund and the first series of Puget Sound
Alternative Investment Series Trust (the "Trust"), a registered
open-end management investment company.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's objective is to seek long-term capital appreciation
while maintaining minimal exposure to general equity market risk.
The Fund seeks to achieve its objective through a diversified
portfolio using a non-traditional, "market neutral" investment
strategy. For a description of the risks of an investment in the
Fund, see "The Fund's Objective" and "Investment Strategy and
Risks."
FEES AND EXPENSES
The Fund offers two classes of shares: Institutional Shares and
Investor Shares. Investor Shares, unlike Institutional Shares,
bear a 12b-1 marketing fee, shareholder servicing fee and a sales
commission (unless waived).
WHY READING THIS PROSPECTUS IS IMPORTANT
This Prospectus explains the objective, risks and strategy of the
Fund that a prospective investor ought to know before investing.
To highlight terms and concepts important to mutual fund
investors, we have provided "Plain English" explanations along the
way. Reading this Prospectus will help you to decide whether the
Fund is the right investment for you. We suggest that you keep it
for future reference.
ADDITIONAL INFORMATION ABOUT THE FUND
A Statement of Additional Information ("SAI") (dated June 16,
1998), which has been filed with the Securities and Exchange
Commission (the "SEC"), contains more information about the Fund
and is, by reference, part of this Prospectus. The SAI may be
obtained, upon request and without charge, along with other
information about the Fund, by writing to Puget Sound Alternative
Investment Series Trust, 3435 Stelzer Road, Columbus, Ohio 43219
or by calling our Shareholder Services Department toll free at
1-877-77-PUGET (1-877-777-8438). The SAI, material incorporated by
reference into this Prospectus and the SAI, and other information
regarding registrants that file electronically with the SEC may
also be obtained at the SEC's Website (http://www.sec.gov).
For more information about establishing an account, or any other
information about the Fund, call toll free 1-877-77-PUGET
(1-877-777-8438).
IT IS IMPORTANT TO NOTE THAT SHARES OF THE FUND ARE NOT GUARANTEED
OR INSURED BY THE FDIC OR ANY AGENCY OF THE U.S. GOVERNMENT. AS
WITH ANY INVESTMENT IN COMMON STOCKS, WHICH ARE SUBJECT TO WIDE
FLUCTUATIONS IN MARKET VALUE, YOU COULD LOSE MONEY BY INVESTING IN
THE FUND.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
FUND SYNOPSIS............................................... 1
SUMMARY OF EXPENSES......................................... 3
THE FUND'S OBJECTIVE........................................ 5
WHO SHOULD CONSIDER INVESTING............................... 6
INVESTMENT STRATEGY AND RISKS............................... 7
PORTFOLIO TRANSACTIONS...................................... 12
PERFORMANCE INFORMATION OF THE SUB-ADVISER.................. 12
MANAGEMENT OF THE FUND...................................... 14
INSTITUTIONAL AND INVESTOR SHARES........................... 16
HOW TO PURCHASE SHARES...................................... 17
SHAREHOLDER SERVICES........................................ 21
HOW TO REDEEM SHARES........................................ 21
SHARE PRICE................................................. 22
DISTRIBUTIONS AND TAXES..................................... 23
GENERAL INFORMATION......................................... 24
</TABLE>
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FUND SYNOPSIS
WHO SHOULD CONSIDER INVESTING (PAGE 6)
- - Investors looking for a simple, efficient way to diversify their stock, bond
and cash investments with direct exposure to a long/short, equity strategy.
- - Investors seeking a portfolio that offers the potential for capital
appreciation with minimal exposure to general equity market risk.
- - Investors wanting growth of capital over the long term -- at least five years.
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PLAIN ENGLISH ABOUT
INVESTING FOR
THE LONG TERM
The Fund is intended to be a long-term investment vehicle and is not designed to
provide investors with a means of speculating on short-term fluctuations in the
stock market.
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WHO SHOULD NOT INVEST
- - Investors unwilling to accept fluctuations in share price.
- - Investors seeking a mutual fund that exposes them to equity market risk.
RISKS OF THE FUND (PAGE 7)
The Fund's total return and share value will fluctuate, so an investor could
lose money over short or even extended periods. The Fund is subject to, among
other risks:
- - Investment risk (The chance that Fund shares may lose value, depending on
market, economic, political and other conditions affecting the Fund's
portfolio).
- - Short Sale Risk (The risk that Fund shares may lose value as a result of
selling borrowed shares).
- - Portfolio Turnover Risk (The risk that the Fund's portfolio turnover may vary
significantly from time to time).
INVESTMENT ADVISER AND SUB-ADVISER (PAGE 14)
Puget Sound Asset Management Co., LLC ("PSAM"), Seattle, Washington, is the
Fund's investment adviser and Fiduciary Asset Management Co. ("FAMCO" or the
"Sub-Adviser"), Clayton, Missouri, is the Fund's sub-adviser. PSAM is recently
organized and has not previously served as a mutual fund adviser. FAMCO, in
addition to serving as the Fund's sub-adviser, serves as an investment adviser
to another mutual fund and to taxable and tax-exempt accounts.
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DISTRIBUTIONS
Distributions to Fund shareholders out of any dividends or interest that the
Fund has received as well as distributions of any net long-term capital gains
are paid at least annually. All distributions may include dividends and capital
gains that are taxable.
INCEPTION DATE: June 16, 1998.
ESTIMATED EXPENSE RATIO (GIVING EFFECT TO FEE WAIVERS):
Institutional Shares 2.17%
Investor Shares 2.67%
SUITABLE FOR IRAS: Yes.
MINIMUM INITIAL INVESTMENT: $1,000,000 for Institutional Shares, $2,500 for
Investor Shares, $1,000 for IRAs and custodial accounts for minors.
HOW TO PURCHASE SHARES (PAGE 17)
SHAREHOLDER SERVICES (PAGE 21)
- - Systematic Withdrawal Plan.
- - Automatic Investment Plan.
- - Retirement Plans.
HOW TO REDEEM SHARES (PAGE 21)
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SUMMARY OF EXPENSES
The following information is designed to help you understand the various costs
and expenses you would bear, directly or indirectly, as an investor in the Fund.
This table illustrates the transaction expenses you will incur as a shareholder
in the Fund. For more information about shareholder transaction expenses, see
"Institutional and Investor Shares" and "How to Purchase Shares."
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PLAIN ENGLISH ABOUT
FUND EXPENSES
All mutual funds have operating expenses. These expenses, which are deducted
from a fund's gross income, are expressed as a percentage of the net assets of
the fund. The Fund pays higher investment advisory fees than some other mutual
funds. Some types of non-traditional investments, such as market neutral
strategies, are often more complex and require greater time and resources to
manage than other more traditional equity mutual funds. This additional effort
is reflected in higher investment advisory fees.
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SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES INVESTOR SHARES
<S> <C> <C>
Maximum Sales Load
Imposed on Purchases
(as a % of offering
price)(1).............. None 3.00%
Sales Load Imposed on
Reinvested
Distributions (and
other Distributions)... None None
Deferred Sales Load...... None None
Redemption Fees(2)....... None None
Exchange Fees............ Not Applicable Not Applicable
</TABLE>
- ---------------
(1) A reduced sales charge on Investor Shares applies in some cases. See "How to
Purchase Shares -- Reduced Sales Charges (Investor Shares Only)."
(2) Redemptions by wire transfer are subject to a wire fee (currently $5) that
is deducted from the redemption proceeds.
The next table illustrates the operating expenses that you would incur as a
shareholder of the Fund. These expenses are deducted from the Fund's income
before it is paid to you, and include investment advisory expenses as well as
the cost of maintaining accounts, administering the Fund, providing shareholder
services, distribution and other activities. Since the Fund had not commenced
operations as of the date of this Prospectus, the expenses shown are estimates
for the Fund's first full fiscal year. For more information about the Fund's
operating expenses, see "Management of the Fund" and "Institutional and Investor
Shares."
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ESTIMATED ANNUAL FUND OPERATING EXPENSES
(AS A % OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES INVESTOR SHARES
<S> <C> <C>
Management Fees (after
fee waiver)(1)......... 1.75% 1.75%
12b-1 Fees (after fee
waiver)(2)............. None 0.25%
Other Operating
Expenses............... 0.42% 0.67%
Total Operating Expenses
(after fee
waivers)(3)(4)......... 2.17% 2.67%
</TABLE>
- ---------------
(1) The Trust's investment adviser has voluntarily agreed to reduce its fees to
the amount shown in the table above. Without such voluntary reduction, the
adviser would be entitled to receive investment advisory fees at an annual
rate of 2.00% of the average daily net assets of the Fund.
(2) The Trust's distributor has voluntarily agreed to reduce its fees to the
amount shown in the table above. Without such voluntary reduction, the
distributor would be entitled to receive 12b-1 fees at an annual rate of
0.50% of the average daily net assets of the Investor Shares. Because of the
ongoing nature of the 12b-1 fees, long-term shareholders of Investor Shares
may pay more than the economic equivalent of the maximum front-end sales
charge permitted by rules of the National Association of Securities Dealers,
Inc.
(3) Total Operating Expenses do not include dividend expenses incurred in
connection with short sales, which are included in and reduce the investment
return of the Fund.
(4) Without the voluntary fee reduction disclosed in footnotes (1) and (2)
above, Total Operating Expenses of the Fund would be 2.42% and 3.17% for the
Institutional Shares and Investor Shares, respectively.
The following example illustrates the hypothetical expenses that you would incur
on a $1,000 investment over various periods. The example assumes (1) that the
Fund provides a return of 5% a year and (2) that you redeem your investment at
the end of each period.
EXAMPLE*
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES INVESTOR SHARES
<S> <C> <C>
One Year................ $22 $ 56
Three Years............. $68 $110
</TABLE>
* Under SEC rules, newly-organized funds, such as the Fund, are required to show
expenses in an example for one- and three-year periods only.
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF ACTUAL EXPENSES OR
PERFORMANCE FROM THE PAST OR FUTURE, WHICH MAY BE HIGHER OR LOWER THAN THOSE
SHOWN.
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A WORD ABOUT RISK
THIS PROSPECTUS DESCRIBES THE RISKS YOU WILL FACE AS AN INVESTOR IN THE FUND. IT
IS IMPORTANT TO KEEP IN MIND ONE OF THE MAIN AXIOMS OF INVESTING: THE HIGHER THE
RISK OF LOSING MONEY, THE HIGHER THE POTENTIAL REWARD. AS YOU CONSIDER AN
INVESTMENT IN THE FUND, YOU SHOULD ALSO TAKE INTO ACCOUNT YOUR PERSONAL
TOLERANCE FOR SHARE PRICE VOLATILITY.
LOOK FOR THIS "CAUTION" SYMBOL ## THROUGHOUT THIS PROSPECTUS. IT IS USED TO MARK
DETAILED INFORMATION ABOUT SOME OF THE TYPES OF RISKS THAT YOU, AS A SHAREHOLDER
OF THE FUND, WILL CONFRONT.
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THE FUND'S OBJECTIVE
The Fund's objective is to seek long-term capital appreciation while maintaining
minimal exposure to general equity market risk. The Fund seeks to achieve its
objective by taking both long and short positions in equity securities. Although
the Fund's investment strategy seeks to minimize the risk associated with
investing in the equity market, an investment in the Fund will be subject to the
risk of poor stock selection by the Fund. In other words, the Fund may not be
successful in executing its strategy of taking long positions in stocks that
outperform the market and short positions in stocks that underperform the
market. See "Investment Strategy and Risks."
Except as explicitly set forth in this Prospectus or in the SAI, the investment
objective and policies of the Fund may be changed by the Board of Trustees of
the Trust without shareholder approval.
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PLAIN ENGLISH ABOUT
MARKET NEUTRAL
INVESTING
There are many different styles of market neutral investing, such as long/short
equity portfolios, convertible bond hedging, fixed income hedging and risk
arbitrage.
In this Prospectus, market neutral investing refers to an equity fund that holds
two diversified portfolios: a long portfolio of stocks identified as
undervalued, held simultaneously with a short portfolio of stocks identified as
overvalued.
- -------------------------------------------------------------------------------
## BECAUSE OF THE SEVERAL TYPES OF RISKS DESCRIBED ON THE FOLLOWING PAGES, YOUR
INVESTMENT IN THE FUND, AS IS THE CASE WITH MANY INVESTMENTS IN STOCKS AND
BONDS, COULD LOSE MONEY.
5
<PAGE> 8
WHO SHOULD CONSIDER INVESTING
The Fund may be a suitable investment for you if:
- - You want to add a non-traditional investment strategy to your existing mix of
stock, bond and money market funds.
- - You want an investment fund that seeks to provide long-term growth of capital
by taking advantage of stock market inefficiencies while maintaining minimal
exposure to general equity market risk.
- - You are looking for an investment that performs differently than a diversified
stock or bond fund.
- - You characterize your investment temperament as "safety oriented."
This Fund is not appropriate if you are a "market-timer." Investors who engage
in excessive in-and-out trading activity generate additional costs that are
borne by all the Fund's shareholders. To minimize such costs, which reduce the
ultimate returns achieved by you and other shareholders, the Fund has adopted
the following policies:
- - The Fund reserves the right to reject any purchase request, including requests
that it regards as disruptive to the efficient management of the portfolio.
This could be because of timing of the investment or because of a history of
excessive trading by that investor.
- - The Fund reserves the right to stop offering shares at any time.
6
<PAGE> 9
INVESTMENT STRATEGY AND RISKS
This section explains how the Fund tries to achieve long-term capital
appreciation while maintaining minimal exposure to general equity market risk.
It also explains three important risks -- investment risk, short sale risk, and
portfolio turnover risk -- faced by investors in the Fund. The investment
strategy can be changed by the Trust's Board of Trustees without shareholder
approval.
Market neutral strategies are designed to produce returns that do not depend on
the stock market's direction; hence the term "market neutral." Using this type
of strategy, the Fund could hypothetically increase shareholder value in a down
market or conversely decrease shareholder value in up markets.
Part of the Fund's objective is to maintain minimal exposure to general equity
market risk, or volatility of total returns. This maintenance of minimal
exposure to volatility of total returns is important, since volatility is
extremely high for a diversified common stock portfolio when measured over short
periods. To illustrate the volatility of stock prices, the following table shows
the best, worst and average annual total returns (dividend income plus changes
in market value) for the U.S. stock market over various periods as measured by
the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500"), a widely
used barometer of stock market activity. Note that the returns shown do not
include the cost of buying and selling stocks or other expenses that a
real-world investment portfolio would incur.
- -------------------------------------------------------------------------------
PLAIN ENGLISH ABOUT
VOLATILITY
The most commonly accepted measure of risk in any financial asset class is the
volatility of its total returns. Volatility risk, quite simply, refers to the
fact that a diversified portfolio may fluctuate in value and show a loss during
any interim period.
Increasing the length of period during which stocks are held tends to reduce the
volatility risk. Another method is to create a long portfolio of attractive
stocks and a short portfolio of unattractive stocks in which the overall
volatility of returns is low.
- -------------------------------------------------------------------------------
7
<PAGE> 10
S&P 500 AVERAGE ANNUAL RETURNS (1927-1997)
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS 20 YEARS
<S> <C> <C> <C> <C>
Best................. 53.99 23.92 20.06 16.86
Worst................ (43.34) (12.47) (0.89) 3.11
Average.............. 10.99 10.25 10.83 10.95
</TABLE>
The table covers all the 1-, 5-, 10- and 20-year periods from 1927 through 1997.
For example, while the average annual return on stocks for all the 5-year
periods was 10.25, average annual returns for the 5-year periods ranged from
- -12.47 (from 1927 through 1932), to 23.92 (from 1949 through 1954). These
average returns reflect past performance of the stocks that were then included
in the S&P 500 and should not be regarded as an indication of future returns
from either the stock market as a whole or the Fund in particular.
The Sub-Adviser screens a large universe of stocks to find the 1400 most liquid
common stocks that are publicly traded in the United States. Securities held in
the Fund consist of all size companies, or market capitalization.
## THE FUND IS SUBJECT TO INVESTMENT RISK, WHICH IS THE POSSIBILITY THAT CHANGES
IN MARKET, ECONOMIC, POLITICAL AND OTHER CONDITIONS COULD HURT STOCK
PERFORMANCE.
In general, during periods of high political or economic instability, equity
investments may lose some of their appeal for investors. This could result in
loss of value for the Fund, even though the Fund seeks to be less volatile than
many other equity funds. However, if the Fund holds long positions in stocks
that underperform the market and short positions in stocks that outperform the
market, then the losses of the Fund may exceed those of other stock mutual
funds.
8
<PAGE> 11
## THE FUND IS SUBJECT TO SHORT SALE RISK, WHICH IS THE POSSIBILITY THAT FUND
SHARES MAY LOSE VALUE AS A RESULT OF SELLING BORROWED SHARES.
The Fund's short portfolio poses additional risks for the Fund investor. The
short portfolio represents stocks that the Fund has borrowed from their owners,
and then sold to other investors. The Fund remains obligated to return the
borrowed stocks to their owners. To do this, the Fund will have to purchase the
borrowed stocks back, at some time in the future, and pay whatever the market
price for those stocks may then be. If the price of those stocks has gone up
since the Fund borrowed the stocks and sold them, the Fund will lose money on
the investment. A fund that engages in short selling is more risky than other
equity mutual funds. Although the Fund's gain is limited to the amount for which
it sold the borrowed security, its potential loss is unlimited.
- -------------------------------------------------------------------------------
PLAIN ENGLISH ABOUT
SELLING SHORT
Selling short is selling a security that you do not own. You borrow the security
from your broker, then immediately sell it. Later, you repurchase and deliver
the security to pay back your borrowed shares to the broker. Short sales are
made because the seller anticipates a decline in the price of the security.
If the price of the stock goes down between the time that you borrowed the stock
and when you repurchase it, you make money. If the price of the stock goes up
between the time that you borrowed the stock and when you repurchase it, you
lose money.
Your potential loss in short selling is unlimited. Thus, successful short
selling requires a great deal of experience, diligence and attention.
- -------------------------------------------------------------------------------
## THE FUND IS SUBJECT TO PORTFOLIO TURNOVER RISK, WHICH IS THE POSSIBILITY
THAT THE FUND'S PORTFOLIO TURNOVER MAY VARY SIGNIFICANTLY FROM TIME TO TIME.
In general, the Sub-Adviser does not consider the level of portfolio turnover
when deciding which securities to buy, sell and sell short. The rate of the
Fund's portfolio turnover may vary significantly from time to time depending on
the volatility of economic and market conditions. Although the rate of portfolio
turnover is difficult to predict, under normal circumstances the Sub-Adviser
expects an annual portfolio turnover rate of each of the long and short
portfolios not to exceed 200%. This expected aggregate portfolio turnover rate
of 400% for the Fund is higher than the portfolio turnover rate for many other
mutual funds. The Sub-Adviser views the rate of portfolio turnover as indicative
of many market inefficiencies, or opportunities.
High portfolio turnover can involve correspondingly greater brokerage
commissions and other transaction costs. These costs are borne directly by the
Fund. Turnover could involve the realization of capital gains that would be
taxable when distributed to shareholders of the Fund. The extent that the Fund's
portfolio turnover results in the realization of net short-term capital gains,
such gains are usually taxed to shareholders at ordinary income tax rates. See
"Portfolio Transactions" and "Distributions and Taxes."
9
<PAGE> 12
SECURITIES SELECTION AND PORTFOLIO DIVERSIFICATION
The Fund employs an active investment approach. The Fund attempts to achieve its
objective by taking long positions in stocks traded in the markets of the United
States that the Sub-Adviser has identified as undervalued and short positions in
stocks traded in the markets of the United States that the Sub-Adviser has
identified as overvalued. By taking long and short positions in stocks with
similar characteristics, the Fund attempts to cancel out the effect of general
stock market movements on the Fund's performance.
The Sub-Adviser will determine the size of each long or short position by
analyzing the tradeoff between the attractiveness of each position and its
impact on the risk of the overall portfolio.
The Sub-Adviser seeks to construct a diversified portfolio containing both long
and short positions that have minimal net exposure to the U.S. equity market.
The Sub-Adviser selects long and short positions with matching risk
characteristics, within specific capitalization ranges (e.g., large cap, mid cap
and small cap) and certain other risk factors. In general, the Sub-Adviser
attempts to buy highly liquid stocks for the Fund; in other words, stocks that
trade with great frequency.
- -------------------------------------------------------------------------------
PLAIN ENGLISH ABOUT
PORTFOLIO
DIVERSIFICATION
In general, the more diversified a fund's portfolio of stocks, the less likely
that a specific stock's poor performance will hurt the fund.
- -------------------------------------------------------------------------------
The Fund borrows securities that are then sold short. Until the Fund replaces
the borrowed security, it will maintain daily a segregated account with the
Fund's custodian. This account will contain cash, U.S. Government securities or
other liquid securities. The amount deposited in the Fund's account, plus any
amount deposited with a broker or other custodian as collateral, will at least
equal the current market value of the securities sold short. Depending on the
arrangements made with such brokers or custodians, the Fund may not receive any
payments (including interest) on collateral deposited with such brokers or
custodians. The Fund will not use leverage as part of its investment strategy.
In other words, the Fund will not make a short sale if, after completing the
transaction, the market value of all the securities sold short exceeds 100% of
the Fund's net assets.
OTHER RISK CONSIDERATIONS
COMMON STOCKS AND OTHER EQUITY SECURITIES. Common stocks and similar equity
securities are securities that represent an ownership interest (or the right to
acquire such an interest) in a company and include securities exercisable for or
convertible into common stocks (e.g., warrants). While offering greater
potential for long-term growth, common stocks and similar equity securities are
more volatile and more risky than some other forms of investment. Therefore, the
value of your investment in the Fund may sometimes decrease instead of increase.
The Fund may invest in equity securities of companies with relatively small
market capitalization. Securities of such companies may be more volatile than
the securities of larger, more established companies and the broad equity market
indices. See "Small Companies" below. The Fund's investments may include
securities traded "over-the-counter" as well as those traded on a securities
exchange. Some over-the-counter securities may be more difficult to sell under
some market conditions. In addition, the Fund's investments may include
securities of other investment companies, including investment companies that
invest primarily in securities other than equity securities. As an investor in
another investment
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<PAGE> 13
company, the Fund will indirectly bear its share of the expenses of that
investment company. These expenses are in addition to the Fund's own costs of
operations. In some cases, investing in an investment company may involve the
payment of a premium over the value of the assets held in that investment
company's portfolio.
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PLAIN ENGLISH ABOUT
LARGE CAP, MID
CAP AND SMALL
CAP STOCKS
Stocks of publicly traded companies -- and mutual funds that hold these stocks
- -- can be classified by the companies' market value or capitalization. The Fund
defines large cap as companies with a market value exceeding $5 billion. Mid cap
companies are those with a market value between $1 billion and $5 billion. Small
cap companies are those with a market value less than $1 billion.
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SMALL COMPANIES. The Fund may invest in companies with relatively small market
capitalization. Investments in companies with relatively small capitalization
may involve greater risk than is usually associated with stocks of larger
companies. These companies often have sales and earnings growth rates which
exceed those of companies with larger capitalization. Such growth rates may in
turn be reflected in more rapid share price appreciation. However, companies
with smaller capitalization often have limited product lines, markets or
financial resources and may be dependent upon a relatively small management
group. The securities may have limited marketability and may be subject to more
abrupt or erratic movements in price than securities of companies with larger
capitalization or market averages in general. The net asset value per share of
the Fund therefore may fluctuate more widely than market averages.
REPURCHASE AGREEMENTS. Any Fund assets not invested in common stocks or other
equity securities will generally be held in the form of cash or in repurchase
agreements. Under a repurchase agreement, the Fund will buy securities from a
seller, usually a bank or brokerage firm, with the understanding that the seller
will repurchase the securities at a higher price at a later date (usually seven
days or less from the date of original purchase). If the seller fails to
repurchase the securities, the Fund has rights to sell the securities to third
parties. Repurchase agreements can be regarded as loans by the Fund to the
seller, collateralized by the securities that are the subject of the agreement.
Repurchase agreements afford an opportunity for the Fund to earn a return on
available cash at relatively low credit risk, although the Fund may be subject
to various delays and risks of loss if the seller fails to meet its obligation
to repurchase, including (a) possible declines in the value of the underlying
security during the period while the Fund seeks to enforce its rights thereto,
(b) possible reduced levels of income and lack of access to income during this
period and (c) possible inability to enforce rights and the expenses involved in
enforcement or attempted enforcement. The Fund treats repurchase agreements
maturing in more than seven days as illiquid securities. The Fund has a policy
of not investing more than 15% of the Fund's net assets (taken at current value)
in illiquid securities.
"YEAR 2000" MATTERS. Many of the services provided to the Fund depend on the
smooth functioning of computer systems. Many systems in use today cannot
distinguish between the year 1900 and the year 2000. Should any of the service
systems fail to process information properly, such failure could have an adverse
impact on the Fund's operations and services provided to shareholders. PSAM, the
Sub-Adviser, the Distributor, the Administrator, the Transfer Agent, the Fund
Accountant, the Custodian and certain other service providers to the Fund have
reported that each expects to modify its systems, as necessary, prior to January
1, 2000 to address this so-called "Year 2000 problem." However, there
11
<PAGE> 14
can be no assurance that the problem will be corrected in all respects and that
the Fund's operations and services provided to shareholders will not be
adversely affected.
MANAGEMENT. The Sub-Adviser has previous experience managing a mutual fund, but
PSAM has not previously served as a mutual fund adviser.
PORTFOLIO TRANSACTIONS
Portfolio turnover considerations will not limit the Sub-Adviser's investment
discretion in managing the Fund's assets. The Sub-Adviser anticipates that the
Fund's portfolio turnover rates will vary significantly from time to time
depending on the volatility of economic and market conditions, but will not
ordinarily exceed 200% annually for each of the long and the short portfolios.
This expected aggregate portfolio turnover rate of 400% for the Fund is higher
than the portfolio turnover rate for many other mutual funds. The Sub-Adviser
views the rate of portfolio turnover as indicative of many market
inefficiencies, or opportunities. High portfolio turnover may involve higher
costs and higher levels of taxable gains.
The Sub-Adviser selects brokers and dealers to execute portfolio transactions
for the Fund. In selecting brokers, the Sub-Adviser may consider research and
brokerage services furnished to it, and may cause the Fund to pay higher
commissions in recognition of the provision of these services. Subject to
seeking best price and execution, the Sub-Adviser may allocate Fund portfolio
transactions to brokers or dealers whose customers have invested in the Trust.
PERFORMANCE INFORMATION OF
THE SUB-ADVISER
The table below presents information about the investment performance of all the
discretionary, fee-paying accounts managed by FAMCO with investment objectives,
policies and strategies substantially similar to that of the Fund (the
"Accounts"). The investment performance is shown for the period from June 1,
1995, the date FAMCO began managing the Accounts, to March 31, 1998, on an
annual return basis, with returns for periods of less than one year not
annualized, and on an average annual return and cumulative return basis. During
the entire period FAMCO has managed the Accounts, John L. Dorian, the individual
responsible for the day-to-day portfolio management of the Fund, has been the
portfolio manager of the Accounts.
The gross investment performance for the Accounts has been examined by Deloitte
& Touche LLP in accordance with standards established by the American Institute
of Certified Public Accountants, for use in connection with the registration
statement of the Trust under the Securities Act of 1933, as amended (the
"Securities Act"). The gross investment performance has been computed in
accordance with the Performance Presentation Standards established by the
Association for Investment Management and Research. The gross investment
performance represents total return, assuming reinvestment of all dividends and
proceeds from capital transactions. The method for calculating performance
produces a different
12
<PAGE> 15
result than if the performance information were calculated using the SEC's
method for calculating the total return of a mutual fund. In the table below,
the gross investment performance has been adjusted for estimated net fees and
expenses, before waivers and reimbursements, of each of the Institutional Shares
and the Investor Shares of the Fund. The performance information shown
reflecting adjustment for the estimated net fees and expenses of the Investor
Shares also reflects the deduction of the sales charge applicable to such
shares. Deloitte & Touche LLP has not examined the net investment performance
presented below.
THE INFORMATION PROVIDED BELOW DOES NOT REPRESENT THE PERFORMANCE OF THE FUND,
WHICH IS NEWLY-ORGANIZED AND HAS NO PERFORMANCE RECORD OF ITS OWN. THE FOLLOWING
PERFORMANCE INFORMATION SHOULD NOT BE CONSIDERED A PREDICTION OF FUTURE
PERFORMANCE OF THE FUND. THE FUND'S PERFORMANCE MAY BE HIGHER OR LOWER THAN THAT
SHOWN BELOW.
<TABLE>
<CAPTION>
ACCOUNTS(%)
NET OF INSTITUTIONAL NET OF INVESTOR
SHARES FEES AND SHARES FEES
ANNUAL RETURNS EXPENSES AND EXPENSES
<S> <C> <C>
1/1/98 - 3/31/98................ (3.64) (6.62)
1997............................ 20.81 16.41
1996............................ 25.28 20.72
6/1/95* - 12/31/95.............. 5.02 1.51
AVERAGE ANNUAL RETURNS THROUGH 3/31/98
1 Year.......................... 12.16 8.07
Since 6/1/95*................... 16.24 14.17
CUMULATIVE RETURNS THROUGH 3/31/98
1 Year.......................... 12.16 8.07
Since 6/1/95*................... 53.15 45.56
</TABLE>
- ---------------
* 6/1/95 is the date FAMCO began managing the Accounts.
The Fund's expenses, timing of purchases and sales of portfolio securities,
availability of cash flows, and brokerage commissions are all reasons that might
cause performance results of the Fund to vary from the Accounts. In addition,
the Accounts are not subject to the diversification requirements, specific tax
restrictions and investment limitations imposed on the Fund by the Investment
Company Act of 1940, as amended (the "1940 Act") or the Internal Revenue Code of
1986, as amended (the "Code"). Consequently, the performance results of the
Accounts could have been less favorable had the Accounts been subject to these
requirements, restrictions and limitations.
13
<PAGE> 16
MANAGEMENT OF THE FUND
PSAM is the investment adviser of the Fund and has responsibility for the
management of the Fund's affairs, under the supervision of the Trust's Board of
Trustees. The Fund's investment portfolio is managed on a day-to-day basis by
the Sub-Adviser, under the general oversight of PSAM and the Trust's Board of
Trustees. PSAM monitors and evaluates the Sub-Adviser to help assure it is
managing the Fund consistently with the Fund's investment objective and
restrictions and applicable laws and guidelines. PSAM does not, however,
determine what investments will be purchased or sold for the Fund.
PSAM, One Yesler Building, Suite 200, Seattle, Washington, was organized in 1998
as a Washington limited liability company. PSAM offers innovative investment
products to financial intermediaries. PSAM's principal has been in the
investment management business since 1983; however, PSAM has no prior experience
managing mutual funds. Zwick Financial Corp. Profit Sharing Trust, a profit
sharing plan, owns more than 25% of the voting interests of PSAM and therefore
is regarded to control PSAM for purposes of the 1940 Act.
FAMCO, 8112 Maryland Avenue, Suite 310, Clayton, Missouri, was organized in 1994
as a Missouri corporation and, in addition to serving as the Fund's sub-adviser,
currently serves as an investment adviser to another mutual fund and to taxable
and tax-exempt accounts. Charles Walbrant, FAMCO's President, owns 100% of the
voting interests of FAMCO and therefore is regarded to control FAMCO for
purposes of the 1940 Act. John L. Dorian has day-to-day responsibility for
managing the Fund's portfolio. Mr. Dorian has served as Chief Investment
Officer-Equities of FAMCO since May, 1995. From May, 1990 to May, 1995, Mr.
Dorian was a Managing Director-Equity Portfolio Manager at First Quadrant Corp.
- -------------------------------------------------------------------------------
PLAIN ENGLISH ABOUT
THE FUND'S
SUB-ADVISER
FAMCO provides investment advisory services to many institutional clients. As of
March 31, 1998, FAMCO managed over $3 billion in assets. The individual who
manages the Fund is John L. Dorian, Chief Investment Officer - Equities of
FAMCO. Mr. Dorian has 17 years experience managing investment portfolios and 10
years experience managing assets using a market neutral strategy. Mr. Dorian
has a B.S., M.S. and M.B.A. from Florida State University, Tallahassee,
Florida.
- -------------------------------------------------------------------------------
The Trust intends to apply for an exemptive order from the SEC to permit PSAM,
subject to the approval of the Trust's Board of Trustees and certain other
conditions, to enter into sub-advisory agreements with sub-advisers other than
the current sub-adviser of the Fund without obtaining shareholder approval. The
exemptive request will also seek to permit, without obtaining shareholder
approval, the terms of an existing sub-advisory agreement to be changed or the
employment of an existing sub-adviser to be continued after events that would
otherwise cause an automatic termination of a sub-advisory agreement, if such
changes or continuation are approved by the Trust's Board of Trustees. There is
no assurance that the SEC will issue the exemptive order. This Prospectus would
be revised and the shareholders notified if the sub-adviser of the Fund is
changed or a new sub-adviser is added.
ADVISORY AND SUB-ADVISORY FEES AND OTHER EXPENSES
The Fund has agreed to pay PSAM a management fee at the annual percentage rate
of 2.00% of the Fund's average daily net assets. PSAM has voluntarily agreed,
however, to reduce the annual rate of its fee with respect to the Fund to 1.75%
of the Fund's average daily net assets. PSAM may terminate this voluntary
agreement at any time. PSAM pays FAMCO a sub-advisory fee at the annual
percentage rate of 1.50% of the Fund's average daily net assets.
14
<PAGE> 17
In addition to the investment advisory fee, the Fund pays all expenses not
expressly assumed by PSAM, including taxes, brokerage commissions, fees and
expenses of registering and qualifying the Fund's shares under federal and state
securities laws, fees of the Fund's custodian, transfer agent, independent
accountants and legal counsel, expenses of shareholders' and trustees' meetings,
expenses of preparing, printing and mailing prospectuses to existing
shareholders and fees of trustees who are not directors, officers or employees
of PSAM or the Distributor and its affiliates.
ADMINISTRATOR, TRANSFER AGENT AND CUSTODIAN
BISYS Fund Services Ohio, Inc. (the "Administrator"), a wholly-owned subsidiary
of The BISYS Group, Inc., serves as the Trust's administrator and generally
assists the Trust in all aspects of its administration and operation. As
compensation for its administrative services, the Administrator receives a
monthly fee based upon an annual percentage rate of 0.15% of the average daily
net assets of the Trust.
BISYS Fund Services, Inc. (the "Transfer Agent") has entered into an agreement
with the Trust for the provision of transfer agency services and dividend
disbursing services for the Trust. As compensation for its transfer agency
services and dividend disbursing services, the Transfer Agent receives $20,000
per year as a base fee plus $10,000 per year for each class after the initial
class and $25 per year per shareholder. The principal business address of the
Transfer Agent is 3435 Stelzer Road, Columbus, Ohio 43219.
Custodial Trust Company (the "Custodian") serves as the custodian of the assets
of the Fund. The principal address of the Custodian is 101 Carnegie Center,
Princeton, New Jersey 08540.
DISTRIBUTOR
Institutional and Investor Shares of the Fund are sold on a continuous basis by
BISYS Fund Services, L.P., the Trust's distributor (the "Distributor").
Solely for the purpose of compensating the Distributor for services and expenses
primarily intended to result in the sale of Investor Shares, such shares are
subject to an annual distribution fee of up to 0.50% of the average daily net
assets attributable to such shares in accordance with a Distribution Plan (the
"Distribution Plan") adopted by the Trust pursuant to Rule 12b-1 under the 1940
Act. Currently, the Fund pays the Distributor an annual distribution fee of
0.25% of the Fund's average daily net assets attributable to Investor Shares.
Activities which the Distributor may pay for using is revenues under the
Distribution Plan include (but are not limited to) the development and
implementation of direct mail promotions and advertising for sales of Investor
Shares, the preparation, printing and distribution of prospectuses for the Fund
to recipients other than existing shareholders, and payments to wholesalers of
Investor Shares. The Distribution Plan is of the type known as a "compensation"
plan. This means that, although the Trustees of the Trust are expected to take
into account the expenses of the Distributor in their periodic review of the
Distribution Plan, the fees are payable to compensate the Distributor for
services rendered even if the amount paid exceeds the Distributor's expenses.
15
<PAGE> 18
SHAREHOLDER SERVICING AGENTS
The Distributor may also provide (or arrange for another intermediary or agent
to provide) certain additional services to Investor Shares' shareholders of the
Fund (the Distributor or such entity is referred to as a "Servicing Agent" in
such capacity). Such services may include transfer agent and sub-transfer agent
services, accounting services, personal and/or account maintenance services and
other administrative and recordkeeping services to both record owners and
non-record owners of Investor Shares. A Servicing Agent will be paid some or all
of the shareholder servicing fees charged with respect to Investor Shares
pursuant to a Shareholder Servicing Plan for such shares (the "Shareholder
Servicing Plan"). For the services provided, the Shareholder Servicing Plan
permits the Fund to pay annual fees of up to 0.25% of the average daily net
asset value of Investor Shares for which such Servicing Agents provide services
for the benefit of customers.
INSTITUTIONAL AND INVESTOR SHARES
The Fund offers two classes of shares to investors. The two classes of shares
are Institutional Shares and Investor Shares. The following table sets forth
basic investment and fee information for each class.
<TABLE>
<CAPTION>
ANNUAL
MINIMUM SHAREHOLDER ANNUAL
FUND SUBSEQUENT SERVICING DISTRIBUTION
NAME OF CLASS INVESTMENT* INVESTMENTS* FEE FEE
<S> <C> <C> <C> <C>
Institutional........ $1 million $10,000 None None
Investor............. $ 2,500 $ 250 0.25% 0.25%**
</TABLE>
- ---------------
* Certain exceptions apply. See "Institutional Shares" and "Investor Shares"
below.
** With fee waiver.
The offering price of Fund shares is based on the net asset value per share next
determined after an order is received. See "Share Price," "How to Purchase
Shares" and "How to Redeem Shares."
INSTITUTIONAL SHARES
Institutional Shares may be purchased by individuals, endowments, foundations,
Taft-Hartley plans and plan sponsors of 401(a), 401(k), 457 and 403(b) plans and
by certain other entities that PSAM permits to purchase Institutional Shares,
which decision shall be at the sole discretion of PSAM. In order to be eligible
to purchase Institutional Shares, an institution, plan or individual must make
an initial investment of at least $1,000,000 in the Fund. In its sole
discretion, PSAM may waive this minimum investment requirement and PSAM intends
to do so for officers and affiliates of PSAM, for the spouse, parents, children,
siblings, grandparents and grandchildren of such officers and affiliates, for
employees of the Sub-Adviser, the Administrator and the Distributor and for
Trustees of the Trust and their spouses. Institutional Shares are sold without
any initial or deferred sales charges and are not subject to any ongoing
distribution expenses or shareholder servicing fees.
16
<PAGE> 19
INVESTOR SHARES
Investor Shares may be purchased by individuals, financial institutions, other
financial intermediaries and certain individual retirement accounts. In order to
be eligible to purchase Investor Shares, an eligible investor must make an
initial investment of at least $2,500 in the Fund. Certain exceptions apply to
this minimum investment requirement, such as for IRAs and custodial accounts for
minors. In addition, PSAM may, in its sole discretion, waive the minimum
investment requirement for any potential investors. Investor Shares are subject
to an annual shareholder servicing fee equal to an amount of up to 0.25% of the
average daily net assets attributable to Investor Shares, an annual distribution
fee equal to an amount of up to 0.50% (currently this fee has been voluntarily
reduced by the Distributor to 0.25%) of the average daily net assets
attributable to Investor Shares and a sales charge to the net asset value of the
shares being purchased, unless such sales charge is waived by PSAM. As described
above, the Distribution Plan for Investor Shares permits an annual distribution
fee of up to 0.50% of the Fund's average daily net assets attributable to
Investor Shares.
GENERAL
As described above, shares of the Fund may be sold to corporations or other
institutions such as trusts, foundations or broker-dealers purchasing for the
accounts of others ("Shareholder Organizations"). Investors purchasing and
redeeming shares of the Fund through a Shareholder Organization may be charged a
transaction-based fee or other fee for the services provided by the Shareholder
Organization. Each such Shareholder Organization is responsible for transmitting
to its customers a schedule of any such fees and information regarding any
additional or different conditions regarding purchases and redemptions of Fund
shares. Customers of Shareholder Organizations should read this Prospectus in
light of the terms governing accounts with their particular organization.
HOW TO PURCHASE SHARES
You may make an initial purchase of shares of the Fund by sending a completed
application form and payment to:
Puget Sound Alternative Investment Series Trust
P.O. Box 182304
Columbus, OH 43218-2304
The minimum initial investment to purchase the Fund's Institutional Shares is
$1,000,000, and subsequent investments must be $10,000. The minimum initial
investment to purchase the Fund's Investor Shares is $2,500 for regular accounts
and $1,000 for IRAs and custodial accounts for minors. Subsequent investments
must be at least $250, except if participating in the Automatic Investment Plan,
in which case the minimum subsequent investment is $50. The minimum investment
amount for both Institutional and Investor Shares may be waived by PSAM, in its
sole discretion. See "Shareholder Services" below for further information about
minimum investments in certain other circumstances.
17
<PAGE> 20
Upon acceptance of your order, the Fund's shareholder servicing agent will open
an account for you, apply the payment to the purchase of full and fractional
Fund shares and mail a statement of account confirming the transaction.
After an account has been established, you may send subsequent investments at
any time directly to the Fund at the above address. The remittance must be
accompanied by either the account identification slip detached from a statement
of account or a note containing sufficient information to identify the account,
i.e., the Fund name, your account number or your name and social security
number.
Subsequent investments can also be made by federal funds wire. To purchase
shares by wire, call toll free 1-877-77-PUGET (1-877-777-8438) to obtain
instructions regarding the bank account number into which the funds should be
wired and other pertinent information.
Certificates will not be issued for shares. The Fund reserves the right to
reject any purchase order for any reason which the Fund in its sole discretion
deems appropriate. Although the Fund does not anticipate that it will do so, it
reserves the right to suspend or change the terms of the offering of its shares.
Except for the broker-dealer transaction-based or other fees described in the
next paragraph, the price you pay for Institutional Shares will be the per share
net asset value next calculated after a proper investment order is received by
the Fund or an authorized broker-dealer of the Fund or any such broker-dealer's
authorized designee, and the price you pay for Investor Shares will be the per
share net asset value next calculated after a proper investment order is
received by the Fund or an authorized broker-dealer of the Fund or any such
broker-dealer's authorized designee, plus any applicable sales charge. The net
asset value of the Fund's shares is calculated once daily as of the close of
regular trading on the New York Stock Exchange on each day the Exchange is open
for trading. See "Share Price." Portfolio securities are valued at their market
value as more fully described in the SAI.
The Fund may accept telephone orders from broker-dealers, and other
intermediaries designated by such broker-dealers, who have been previously
approved by the Distributor. The Fund will be deemed to have received a purchase
order when an approved broker-dealer or its authorized designee accepts such
order. It is the responsibility of such broker-dealers to promptly forward
purchase or redemption orders to the Fund. In addition to any sales charge,
broker-dealers may charge the investor a transaction-based fee or other fee for
their services at either the time of purchase or the time of redemption. Such
fees may vary among broker-dealers but in all cases will be retained by the
broker-dealers and not remitted to the Fund, PSAM or the Sub-Adviser.
18
<PAGE> 21
SALES CHARGES
Institutional Shares are offered to the public at net asset value. Investor
Shares are offered at public offering prices determined by adding the following
sales charges to the net asset value of the shares being purchased. On each
purchase, the net asset value is invested in the Fund and the sales charge is
paid to the Distributor. The Distributor reallows a portion of the sales charge
to the dealer responsible for your order, as shown in the following table.
<TABLE>
<CAPTION>
SALES CHARGE
AS A % OF SALES CHARGE
PUBLIC AS A % OF DEALER REALLOWANCE
AMOUNT OF OFFERING NET AMOUNT AS A % OF PUBLIC
PURCHASE ($) PRICE INVESTED OFFERING PRICE
<S> <C> <C> <C>
Up to 100,000........ 3.00 3.09 2.70
100,000 but less than
250,000............ 2.50 2.56 2.25
250,000 but less than
500,000............ 2.00 2.04 1.80
500,000 but less than
1,000,000.......... 1.00 1.01 0.90
1,000,000 or more.... 0.00 0.00 0.00
</TABLE>
REDUCED SALES CHARGES
(INVESTOR SHARES ONLY)
AMOUNTS REDEEMED FROM OTHER MUTUAL FUNDS
No sales charge applies on amounts invested in the Fund that represent the
proceeds of an investor's redemption, within the 30 days immediately preceding
investment in the Fund, of shares of another mutual fund on which the investor
paid a front-end sales charge equal to or greater than the amount required. To
qualify for this arrangement, the investor must furnish a broker's confirmation
statement (or other documentation satisfactory to the Fund) showing the payment
of the sales charge. This arrangement is not available if the investor paid a
contingent deferred sales charge on the redemption.
LETTER OF INTENT
An investor may obtain a reduced sales charge by means of a written Letter of
Intent that expresses the intention of such investor to invest a certain amount
in shares of the Fund within a period of 13 months. Each purchase of shares
under a Letter of Intent will be made at the public offering price plus the
sales charge applicable at the time of such purchase to a single transaction of
the total dollar amount indicated in the Letter of Intent. The 13-month period
during which the Letter of Intent is in effect will begin on the date of the
earliest purchase to be included. Five percent of all investments made by a
shareholder under a Letter of Intent will be held in escrow for the period of
the Letter. If the investor does not fulfill the Letter of Intent, the amount of
the sales charge that would apply in the absence of the Letter will be paid to
the Distributor out of the escrowed portion of the shareholder's account. The
Letter of Intent program may be modified or eliminated at any time or from time
to time by the Fund without notice.
19
<PAGE> 22
RIGHTS OF ACCUMULATION
Pursuant to rights of accumulation, a shareholder may combine a current purchase
of shares of the Fund with prior purchases of shares of the Fund. The public
offering price applicable to a purchase of shares is based on the sum of (i) the
shareholder's current purchase of shares of the Fund and (ii) the then current
net asset value of the shareholder's holdings of shares of the Fund.
PURCHASE BY CERTAIN INVESTORS
No sales charge applies in certain instances.
- - Shares of the Fund may be purchased at net asset value by investment advisers,
financial planners or other intermediaries who place trades for their own
accounts or the accounts of their clients and who charge a management,
consulting or other fee for their services; clients of such investment
advisers, financial planners or other intermediaries who place trades for
their own accounts if the accounts are linked to the master account of such
investment adviser, financial planner or other intermediary on the books and
records of the broker or agent; and retirement and deferred compensation plans
and trusts used to fund those plans, including, but not limited to, those
defined in Section 401(a), 401(k), 403(b) or 457 of the Code and rabbi trusts.
Investors may be charged a fee if they effect transactions through a broker or
agent.
- - There is no sales charge or initial investment minimum related to investments
by certain current and retired employees of PSAM, the Sub-Adviser, the
Distributor or the Administrator; current and former Trustees of the Trust;
registered representatives of broker-dealers that have selling arrangements
with the Distributor or the Administrator; the spouse, parents, children,
siblings, grandparents or grandchildren of the persons listed above; and any
trust, pension, profit sharing or other benefit plan for any of the foregoing
persons.
- - Shares of the Fund are available at net asset value for investments by
accounts of bank trust departments or trust companies.
- - Shares of the Fund are available at net asset value for investments in
participant-directed 401(a) and 401(k) plans that have 50 or more eligible
employees.
- - Shares of the Fund also may be purchased at net asset value through certain
broker-dealers and/or financial services organizations without any transaction
fee. Such organizations may receive compensation, in an amount of up to 0.35%
annually of the average value of the Fund shares held by their customers. This
compensation may be paid by PSAM and/or the Sub-Adviser out of their own
assets, or may be paid indirectly by the Fund in the form of servicing,
distribution or transfer agent fees.
The reduction or elimination of the sales charge in connection with sales
described above reflects the absence or reduction of sales expenses associated
with such sales. For more information on these reductions or waivers, please
call toll free 1-877-77-PUGET (1-877-777-8438).
20
<PAGE> 23
SHAREHOLDER SERVICES
The Fund offers the following shareholder services which are more fully
described in the SAI. Explanations and forms are available from the Fund.
SYSTEMATIC WITHDRAWAL PLAN. If the value of your account is at least $5,000,
you may have periodic cash withdrawals automatically paid to you or any person
you designate.
AUTOMATIC INVESTMENT PLAN. Voluntary monthly investments of at least $50 may be
made automatically by pre-authorized withdrawals from your checking account.
RETIREMENT PLANS. The Fund's shares may be purchased by all types of tax-
deferred retirement plans. The Fund makes available retirement plan forms for
IRAs.
HOW TO REDEEM SHARES
You can redeem your shares by sending a written request to Puget Sound
Alternative Investment Series Trust, P.O. Box 182304, Columbus, Ohio 43218-2304.
The request must include the name of the Fund, your account number, the exact
name(s) in which your shares are registered, and the number of shares or the
dollar amount to be redeemed. All owners of the shares must sign the request in
the exact names in which the shares are registered (this appears on your
confirmation statement) and should indicate any special capacity in which they
are signing (such as trustee or custodian or on behalf of a partnership,
corporation or other entity).
If you are redeeming shares worth more than $10,000, or requesting that the
proceeds check be made out to someone other than the registered owner(s), or be
sent to an address other than your record address, you must have your signature
guaranteed by an eligible guarantor. Eligible guarantors include commercial
banks, trust companies, savings associations, credit unions and brokerage firms
that are members of domestic securities exchanges. Before submitting your
redemption request, you should verify with the guarantor institution that it is
an eligible guarantor. Signature guarantees by notaries public are not
acceptable.
You may also redeem your shares by calling toll free 1-877-77-PUGET (1-877-
777-8438). When you telephone a redemption request, the proceeds are wired to
the bank account previously chosen by you. A telephone redemption request must
be received by the Fund prior to the close of regular trading on the New York
Stock Exchange. If you telephone your request to the Fund after the New York
Stock Exchange closes or on a day when the New York Stock Exchange is not open
for business, the Fund cannot accept your request and a new request will be
necessary. The Trust, the Transfer Agent and the Custodian are not responsible
for the authenticity of withdrawal instructions received by telephone.
Reasonable procedures will be adopted to verify that telephone instructions are
genuine.
You may select the telephone redemption service when you fill out your initial
application or you may select it later by sending written notification to the
Transfer
21
<PAGE> 24
Agent with a signature guarantee. If you decide to change the bank account to
which proceeds are to be wired, you must send in this change by written request
to the Transfer Agent with a signature guarantee. Telephonic redemptions may be
made only if your bank is a member of the Federal Reserve System or has a
correspondent bank that is a member of the System. If your account is with a
savings bank, it must have only one correspondent bank that is a member of the
System. In times of heavy market activity, a shareholder who encounters
difficulty in placing a redemption or exchange order by telephone may wish to
place the order by mail as described above.
The redemption price will be the net asset value per share next determined after
the redemption request and any necessary special documentation are received by
the Fund in proper form. See "Share Price."
Proceeds resulting from a written redemption request will normally be mailed to
you within seven days after receipt of your request, if it is in good order.
Telephonic redemption proceeds will normally be wired to your bank on the first
business day following receipt of a proper redemption request. If you purchased
your shares by check and your check was deposited less than 10 days prior to the
redemption request, the Fund may withhold redemption proceeds until your check
has cleared, which may take up to 10 days from the purchase date.
The Fund may suspend the right of redemption and may postpone redemptions for
more than seven days when the New York Stock Exchange is closed for other than
weekends or holidays, or if permitted by the rules of the SEC when trading on
the New York Stock Exchange is restricted or during an emergency which makes it
impracticable for the Fund to dispose of its securities or to determine fairly
the value of its net assets, or during any other period permitted by the SEC for
the protection of investors.
If the value of your account with the Fund falls below a minimum amount set by
the Board of Trustees of the Trust (currently $2,500), the Fund may close your
account and send you the balance. The Fund will notify you at least 60 days
before closing your account, to give you time to purchase additional shares to
bring your account value above the minimum. Accounts will not be closed solely
because the value of shares has fallen through market price movements.
SHARE PRICE
The Fund's share price, called its net asset value, is calculated each business
day as of the close of regular trading (generally 4:00 p.m. Eastern time) on the
New York Stock Exchange. Net asset value per share is computed by adding up the
total value of the Fund's investments and other assets, subtracting any
liabilities, or debts, and then dividing by the total number of Fund shares
outstanding:
<TABLE>
<S> <C>
Total Assets - Liabilities
(attributable to each class)
Net Asset Value = -----------------------------
Number of Shares Outstanding
(attributable to each class)
</TABLE>
22
<PAGE> 25
Daily net asset value, or NAV, is useful to you as a shareholder because the
NAV, multiplied by the number of Fund shares you own, gives you the dollar
amount you would have received had you sold all of your shares that day.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
The Fund intends to declare distributions to shareholders out of any dividends
or interest that the Fund has received at least annually, although it may do so
more frequently as determined by the Board of Trustees of the Trust. The Fund
intends to pay out as dividends substantially all of its net investment income
(which comes from dividends and interest it receives from its investments and
net short-term capital gains). The Fund also intends to distribute any net
long-term capital gains at least annually. If you request redemption of all your
shares at any time during a month, you will receive all declared dividends
through the date of redemption together with the proceeds of the redemption.
Each shareholder's dividends and other distributions are reinvested in
additional shares of the Fund at net asset value per share generally determined
at the close of business on the ex-distribution date, unless the shareholder
elects in writing to receive dividends and other distributions in cash.
If you own your Fund shares in a non-retirement account, the Fund will notify
you each year of the amount and taxability of the Fund's dividends and
distributions paid during the previous year (that is, the amount of dividends,
capital gains, and any return of capital that you receive). You will also be
notified of the amount, if any, of federal income taxes withheld from the
distribution.
INCOME TAX CONSIDERATIONS
The Fund intends to qualify as a "regulated investment company" for federal
income tax purposes and to meet all other requirements necessary for it to be
relieved of federal taxes on income and gains it distributes to shareholders.
The Fund will distribute substantially all of its ordinary income and capital
gain net income on a current basis.
Generally, Fund distributions will be taxable to you as ordinary income to the
extent derived from the Fund's investment income and net short-term capital
gains (i.e., net gains from securities held for 12 months or less).
Distributions designated by the Fund as deriving from net gains on securities
held for more than 12 months but not more than 18 months and from net gains on
securities held for more than 18 months will be taxable to you as such,
regardless of how long you have held the shares. Distributions will be taxable
as described above whether received in cash or in shares through the
reinvestment of distributions.
Dividends and distributions on Fund shares are generally subject to federal
income tax as described above to the extent they do not exceed the Fund's
realized income and gains, even though such dividends and distributions may
economically represent a return of a particular shareholder's investment. Such
distributions are likely
23
<PAGE> 26
to occur in respect of shares purchased at a time when the Fund's net asset
value reflects gains that are either unrealized, or realized but not
distributed.
Early in each calendar year, the Fund will notify you of the amount and tax
status of distributions paid to you for the preceding year.
Keep in mind that the tax information in this Prospectus is a summary of certain
U.S. federal income tax consequences of investing in the Fund. You should
consult your own tax adviser about the federal, foreign, state and local tax
consequences of investing in, redeeming or exchanging shares of the Fund.
GENERAL INFORMATION
Puget Sound Market Neutral Portfolio is the first series of Puget Sound
Alternative Investment Series Trust. The Trust is a diversified, open-end
management investment company organized as a Massachusetts business trust on
April 14, 1998. The Trust is authorized to issue an unlimited number of full and
fractional shares of beneficial interest in multiple series. Currently, the Fund
has two classes of shares, Institutional Shares and Investor Shares. Each share
in the Fund has one vote, with fractional shares voting proportionally. All
Trust shares entitled to vote will vote together irrespective of series or class
unless the rights of a particular series or class would be adversely affected by
the vote, in which case a separate vote of that series or class will be required
to decide the question. Shares are freely transferable, are entitled to
dividends as declared by the Trustees of the Trust, and, if the Fund were
liquidated, would receive the net assets of the Fund. The Fund may suspend the
sale of shares at any time and may refuse any order to purchase shares. The
Trust does not generally hold regular shareholder meetings and will do so only
when required by law. Shareholders may remove the Trustees of the Trust from
office by votes cast at a shareholder meeting or by written consent.
On May 29, 1998, BISYS Fund Services Ohio, Inc. held more than 25% of the
outstanding shares of the Fund and the Trust, and as a result, may be deemed to
"control" the Fund and the Trust as that term is defined in the 1940 Act.
Shareholders could, under certain circumstances, be held personally liable for
the obligations of the Trust. However, the risk of a shareholder incurring
financial loss on account of such liability is considered remote since it may
arise only in very limited circumstances.
24
<PAGE> 27
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<PAGE> 28
INVESTMENT ADVISER
Puget Sound Asset Management Co., LLC
One Yesler Building, Suite 200
Seattle, Washington 98104
DISTRIBUTOR
BISYS Fund Services, L.P.
3435 Stelzer Road
Columbus, Ohio 43219
TRANSFER AGENT
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP
50 Fremont Street
San Francisco, California 94105
CUSTODIAN
Custodial Trust Company
101 Carnegie Center
Princeton, New Jersey 08540
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, Massachusetts 02110
PGT-0001
- -------------------------------------------------------------------------------
PUGET SOUND LOGO
PUGET SOUND
ALTERNATIVE INVESTMENT
SERIES TRUST
PUGET SOUND MARKET NEUTRAL PORTFOLIO
PROSPECTUS
JUNE 16, 1998
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TOLL FREE: 1-877-77-PUGET
(1-877-777-8438)
<PAGE> 29
PUGET SOUND ALTERNATIVE INVESTMENT SERIES TRUST
STATEMENT OF ADDITIONAL INFORMATION
JUNE 16, 1998
This Statement of Additional Information is not a prospectus. This Statement of
Additional Information relates to the Puget Sound Market Neutral Portfolio
Prospectus dated June 16, 1998, and should be read in conjunction therewith. A
copy of the Prospectus may be obtained by writing to Puget Sound Alternative
Investment Series Trust, P.O. Box 182304, Columbus, OH 43218-2304, or calling
toll free 1-877-77-PUGET (1-877-777-8438).
<PAGE> 30
TABLE OF CONTENTS
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS ..................................... 1
MANAGEMENT OF THE TRUST ............................................................. 4
OWNERSHIP OF SHARES OF THE FUND ..................................................... 5
INVESTMENT ADVISORY AND OTHER SERVICES .............................................. 6
PORTFOLIO TRANSACTIONS AND BROKERAGE ................................................ 10
DESCRIPTION OF THE TRUST ............................................................ 11
HOW TO BUY SHARES .................................................................. 13
NET ASSET VALUE AND PUBLIC OFFERING PRICE ........................................... 13
SHAREHOLDER SERVICES ................................................................ 14
OPEN ACCOUNTS .............................................................. 14
SYSTEMATIC WITHDRAWAL PLAN ................................................. 14
IRAs ....................................................................... 14
REDEMPTIONS ......................................................................... 15
INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX STATUS ........................ 16
PERFORMANCE INFORMATION ............................................................. 18
EXPERTS ............................................................................. 19
INDEPENDENT AUDITORS' REPORT ........................................................ 20
SPECIMEN PRICE MAKE-UP .............................................................. 24
APPENDIX A -- Publications That May Contain Fund Information ........................ A-1
APPENDIX B -- Advertising and Promotional Literature ................................ B-1
</TABLE>
-i-
<PAGE> 31
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
The investment objective and policies of Puget Sound Market Neutral
Portfolio (the "Fund"), a series of Puget Sound Alternative Investment Series
Trust (the "Trust"), are summarized in the Prospectus under "The Fund's
Objective" and "Investment Strategy and Risks."
In addition, the following is an additional description of certain
investments of the Fund.
SHORT SALES. The Fund will seek to realize additional gains through
short sales. Short sales are transactions in which the Fund sells a security
that it does not own, in anticipation of a decline in the value of that security
relative to the long positions held by the Fund. To complete such a transaction,
the Fund must borrow the security to make delivery to the buyer. The Fund is
then obligated to replace the security borrowed by purchasing it in the market
at or prior to the time of replacement. The price at such time may be more or
less than the price at which the security was sold by the Fund. Until the
security is replaced, the Fund is required to repay the lender any dividends or
interest that accrue during the period of the loan. To borrow the security, the
Fund may also be required to pay a premium, which would increase the cost of the
security sold. The net proceeds of the short sale will be retained by the broker
(or by the Trust's custodian in a special custody account),to the extent
necessary to meet margin requirements, until the short position is closed out.
The Fund will also incur transaction costs in effecting short sales.
The Fund will incur a loss as a result of the short sale if the price
of the security increases between the date of the short sale and the date which
the Fund replaces the borrowed security. The Fund will realize a gain if the
security declines in price between those dates. The amount of any gain will be
decreased, and the amount of loss increased, by the amount of the premium,
dividends, interest, or expense the Fund may be required to pay in connection
with a short sale. An increase in the value of a security sold short by the Fund
over the price at which it was sold short will result in a loss to the Fund.
There can be no assurance that the Fund will be able to close out the position
at any particular time or at any acceptable price.
The staff of the Securities and Exchange Commission is of the opinion
that a short sale involves the creation of a senior security and is, therefore,
subject to the limitations of Section 18 of the Investment Company Act of 1940,
as amended (the "1940 Act"). The staff has taken the position that in order to
comply with the provisions of Section 18, the Fund must put in a segregated
account (not with the broker) an amount of cash or securities equal to the
difference between: (a) the market value of the securities sold short at the
time they were sold short, and (b) any cash or securities required to be
deposited as collateral with the broker in connection with the short sale (not
including the proceeds from the short sale). In addition, until the Fund
replaces the borrowed security, it must daily maintain the segregated account at
such a level that the amount deposited in it plus the amount deposited with the
broker as collateral will equal the current market value of the securities sold
short.
-1-
<PAGE> 32
MISCELLANEOUS INVESTMENT PRACTICES
PORTFOLIO TURNOVER. A change in securities held by the Fund is known as
"portfolio turnover" and almost always involves the payment by the Fund of
brokerage commissions or dealer markup and other transaction costs on the sale
of the securities as well as the reinvestment of the proceeds in other
securities. Portfolio turnover is not a limiting factor with respect to
investment decisions. As disclosed in the Prospectus, high portfolio turnover
involves correspondingly greater brokerage commissions and other transaction
costs, which will be borne directly by the Fund, and could involve realization
of capital gains that would be taxable when distributed to shareholders of the
Fund. To the extent that portfolio turnover results in the realization of net
short-term capital gains, such gains are ordinarily taxed to shareholders at
ordinary income tax rates. See "Portfolio Transactions and Brokerage" and
"Income Dividends, Capital Gains Distributions and Tax Status."
INVESTMENT RESTRICTIONS
In addition to its investment objective and policies set forth in the
Prospectus, the following investment restrictions are fundamental policies of
the Fund:
The Fund will not:
(1) Borrow money in excess of 33 1/3% of the value (taken at
the lower of cost or current value) of the Fund's total assets (not
including the amount borrowed) at the time the borrowing is made. Short
sales and related borrowings of securities are not subject to this
restriction.
(2) Underwrite securities issued by other persons except to
the extent that, in connection with the disposition of its portfolio
investments, it may be deemed to be an underwriter under certain
federal securities laws.
(3) Purchase or sell real estate, although it may purchase
securities of issuers which deal in real estate, securities which are
secured by interests in real estate, and securities which represent
interests in real estate, and it may acquire and dispose of real estate
or interests in real estate acquired through the exercise of its rights
as a holder of debt obligations secured by real estate or interests
therein.
(4) Purchase securities (other than securities of the U.S.
government, its agencies or instrumentalities) if, as a result of such
purchase, more than 25% of the Fund's total assets would be invested in
any one industry.
(5) Purchase or sell commodities or commodity contracts,
except that the Fund may purchase and sell stock index and other
financial futures contracts and options, and may enter into swap
agreements, foreign exchange contracts and other financial transactions
not involving physical commodities.
(6) Make loans, except by purchase of debt obligations, by
entering into repurchase agreements, or by lending its portfolio
securities.
(7) Issue any class of securities which is senior to the
Fund's shares of beneficial interest. (For the purpose of this
restriction none of the following is deemed to be a senior security:
any borrowing permitted by restriction (1) above; any pledge or other
encumbrance of assets; short sales; any collateral arrangements with
respect to short sales, swaps, options, future contracts and options on
future contracts and with respect to initial and variation margin; and
the purchase or sale of options, future contracts or options on future
contracts.)
-2-
<PAGE> 33
Notwithstanding the latitude permitted by Restrictions 1, and 5 above
and Restrictions (g) and (h) below, the Fund has no current intention of (a)
borrowing money except (i) as a temporary measure to facilitate the meeting of
redemption requests (not for leverage) which might otherwise require the
untimely disposition of portfolio investments or (ii) for extraordinary or
emergency purposes or (b) purchasing interest rate futures.
In addition to the foregoing fundamental investment restrictions, it is
contrary to the Fund's present policy, which may be changed without shareholder
approval, to:
(a) Invest in warrants or rights (other than warrants or rights
acquired by the Fund as a part of a unit or attached to securities at the time
of purchase).
(b) Write, purchase or sell options on particular securities (as
opposed to market indices).
(c) Buy or sell oil, gas or other mineral leases, rights or royalty
contracts.
(d) Make investments for the purpose of exercising control of a
company's management.
(e) Purchase or sell futures contracts or options thereon.
(f) Invest in (i) securities which at the time of investment are not
readily marketable, (ii) securities restricted as to resale (excluding
securities determined by the trustees of the Trust (the "Trustees") (or the
person designated by the Trustees to make such determinations) to be readily
marketable) and (iii) repurchase agreements maturing in more than seven days,
if, as a result, more than 15% of the Fund's net assets (taken at current value)
would then be invested in (i), (ii) and (iii) above.
(g) Pledge, hypothecate, mortgage or otherwise encumber any of its
assets, except that the Fund may pledge assets having a value not exceeding 10%
of its total assets (taken at cost) to secure borrowings permitted by
fundamental restriction (1) above. (For the purposes of this restriction,
collateral arrangements with respect to options, short sales, stock index,
interest rate, currency or other futures, options on futures contracts and
collateral arrangements with respect to initial and variation margin are not
deemed to be a pledge or other encumbrance of assets. Collateral arrangements
with respect to swaps and other derivatives are also not deemed to be a pledge
or other encumbrance of assets.)
(h) Purchase securities on margin, except such short-term credits as
may be necessary for the clearance of purchases and sales of securities. (For
this purpose, the deposit or payment of initial or variation margin in
connection with futures contracts or related options transactions is not
considered the purchase of a security on margin.)
(i) Make short sales of securities or maintain a short position, if,
when added together, more than 100% of the value of the Fund's net assets would
be (i) deposited as collateral for the obligation to replace securities borrowed
to effect short sales, and (ii) allocated to segregated accounts in connection
with short sales. Short sales "against the box" are not subject to this
limitation.
(j) Invest in securities of other investment companies, except to the
extent permitted by the 1940 Act, or by exemptive order issued by the Securities
and Exchange Commission.
-3-
<PAGE> 34
The investment policies of the Fund set forth in the Prospectus and in
this Statement of Additional Information may be changed by PSAM subject to
review and approval by the Board of Trustees of the Trust (the "Board of
Trustees"), without shareholder approval, except that any Fund policy explicitly
identified as "fundamental" may not be changed without the approval of the
holders of a majority of the outstanding shares of the Fund (which in the
Prospectus and this Statement of Additional Information means the lesser of (i)
67% of the shares of the Fund represented at a meeting at which 50% or more of
the outstanding shares are represented or (ii) more than 50% of the outstanding
shares).
MANAGEMENT OF THE TRUST
The Board of Trustees is responsible for the overall supervision of the
operations of the Fund. The Trustees can perform the duties imposed on them by
the 1940 Act and the Massachusetts General laws. In addition to their other
duties, the Trustees appoint the officers of the Fund annually and approve the
selection and termination of the Fund's sub-advisers.
The Trustees and officers of the Trust, their ages, addresses and
principal occupations during the past five years are as follows (an asterisk
indicates a Trustee who is an "interested person" of the Trust as defined in the
1940 Act):
*MARGARET M. TOWLE (49) --- CHAIRMAN OF THE BOARD OF TRUSTEES, TRUSTEE AND
PRESIDENT. Chief Executive Officer, Chief Investment Officer and Portfolio
Manager of PSAM since February, 1998; self-employed investment advisory
consultant since October, 1997; formerly Chairman, Chief Executive Officer,
Director and Secretary of Towle Associates, Inc., an international investment
advisory firm, from October, 1991 to September, 1997. Ph.D. in political economy
and public finance from the University of Washington in 1982 and M.A. in public
administration from the University of Washington in 1976.
*IRIMGA MCKAY (38) --- TRUSTEE AND VICE PRESIDENT. 1230 Columbia Street, San
Diego, California 92101. Senior Vice President of BISYS Fund Services, L.P.
since November, 1994; formerly Senior Vice President of Concord Financial Group
from 1988 to 1992.
GREG MADDOX (30) --- VICE PRESIDENT. 1230 Columbia Street, San Diego, California
92101. Vice President of BISYS Fund Services Ohio, Inc. since June, 1997;
formerly Director at BISYS Fund Services Ohio, Inc. from April, 1991 to June,
1997.
BRYAN HAFT (33) --- VICE PRESIDENT AND SECRETARY. 3435 Stelzer Road, Columbus,
Ohio 43219. Registration and Compliance Officer at BISYS Fund Services Ohio,
Inc. since November, 1991.
PAUL T. KANE (41) --- TREASURER. 3435 Stelzer Road, Columbus, Ohio 43219. Vice
President of the Tax and Financial Services Division of BISYS Fund Services
Ohio, Inc. since December, 1997; formerly Director of the Shareholder Reporting
Division of Fidelity Service Company from March, 1985 to December, 1997.
MARY BECHMANN (40) --- TRUSTEE. 13416 Middle Fork Lane, Los Altos Hills,
California 94022; Self-employed private investor since June, 1996; formerly
Managing Director at Baccharis Capital, a private equity fund, from June, 1992
to June, 1996. M.B.A. from Stanford University in 1985.
JOHN W. PEAVY III (53) --- TRUSTEE. 8214 Westchester, Suite 910, Dallas, Texas
75225; President of Peavy Financial Services, Inc. since March, 1982; formerly
Chairman of the Board of Directors and Chief Investment Officer of Founders
Trust Company from April, 1993 to May, 1998. Ph.D. in finance from the
University of Texas at Arlington in 1978; M.B.A. from the Wharton School at the
University of Pennsylvania in 1968.
-4-
<PAGE> 35
JOSEPH C. PELLEGRINO (56) --- TRUSTEE. 1501 Alcoa Building, Pittsburgh,
Pennsylvania 15219; Vice President - Pension Fund Investments and Analysis at
Aluminum Company of America since August, 1991. Doctor of Jurisprudence degree
from Duquesne University in 1984; Ph.D. in finance from Northwestern University
in 1972 and M.B.A. from the University of Pittsburgh in 1966.
The address of each Trustee and officer of the Trust affiliated with
PSAM is One Yesler Building, Suite 200, Seattle, Washington 98104.
The Trust pays no compensation to its officers or to the Trustees
listed above who are officers or employees of PSAM or BISYS Fund Services Ohio,
Inc. Each Trustee who is not an officer or employee of PSAM or BISYS Fund
Services Ohio, Inc. is compensated at the rate of $5,000 per annum. The Trust
provides no pension or retirement benefits to its Trustees, but has adopted a
deferred payment arrangement under which each Trustee who is to receive fees
from the Trust may elect not to receive such fees from the Trust on a current
basis but to receive in a subsequent period an amount equal to the value that
such fees would have if they had been invested in the Fund on the normal payment
date for such fees. As a result of this method of calculating the deferred
payments, the Fund, upon making the deferred payments, will be in the same
financial position as if the fees had been paid on the normal payment dates.
The following table estimates the amount of compensation to be paid (or
deferred in lieu of current payment) by the Trust during its fiscal year ending
May 30th to the persons who are to serve as Trustees during such period:
<TABLE>
<CAPTION>
TOTAL
AGGREGATE COMPENSATION
COMPENSATION FROM TRUST AND
PERSON FROM TRUST FUND COMPLEX*
- ------ ---------- -------------
<S> <C> <C>
Margaret M. Towle $ 0 $ 0
Irimga McKay $ 0 $ 0
Mary Bechmann $5,000 $5,000
John W. Peavy III $5,000 $5,000
Joseph C. Pellegrino $5,000 $5,000
</TABLE>
* No Trustee receives any compensation from any mutual fund affiliated with PSAM
other than the Trust.
OWNERSHIP OF SHARES OF THE FUND
As of May 29, 1998, BISYS Fund Services Ohio, Inc., an Ohio corporation
and a wholly-owned subsidiary of The BISYS Group, Inc., owned of record and
beneficially 100% of the Investor Shares and Institutional Shares of the Fund as
a result of its investment of $100,000 "seed capital" in the Fund, and
therefore, may be deemed to "control" the Fund as that term is defined in the
1940 Act. The address of BISYS Fund Services Ohio, Inc., is 3435 Stelzer Road,
Columbus, Ohio 43219.
As of May 29, 1998, the Trustees and officers of the Trust beneficially
owned as a group no outstanding shares of the Fund.
-5-
<PAGE> 36
INVESTMENT ADVISORY AND OTHER SERVICES
BACKGROUND
As described in the Prospectus, the Fund is governed by the Board of
Trustees, who are generally responsible for the broad supervision and overall
direction of the Fund. The Fund has engaged PSAM, as the investment adviser of
the Fund. The assets of the Fund are managed on a day-to-day basis by Fiduciary
Asset Management Co. ("FAMCO" or the "Sub-Adviser"), the Fund's sub-adviser,
under the general oversight of PSAM and the Board of Trustees.
If the Fund in the future has multiple sub-advisers, then PSAM will
allocate assets of the Fund between the then current sub-advisers based on
continuing qualitative and quantitative assessment of the sub-advisers' skills
in managing assets.
The Sub-Adviser has discretion, subject to oversight by the Board of
Trustees and PSAM, to purchase and sell portfolio assets consistent with the
objective and policies set forth in its sub-advisory agreement with PSAM and
established for it by PSAM. PSAM is paid a management fee by the Fund for its
services, and a certain portion of that management fee (as set forth below) is
forwarded to the Sub-Adviser as compensation for its services.
INVESTMENT ADVISER AND SUB-ADVISER
Under a separate investment advisory agreement with the Fund, PSAM
provides investment advice for, and supervises the investment programs of, the
Fund. In this capacity, PSAM, subject to the authority of the Board of Trustees,
is responsible for the overall management of the Fund's business affairs.
PSAM, located at One Yesler Building, Suite 200, Seattle, Washington
98104, is an independently-owned investment adviser. The principal of PSAM,
Margaret M. Towle, has over 16 years experience in the investment management,
brokerage and consulting business. PSAM is presently owned by Margaret M. Towle
and Zwick Financial Corp. Profit Sharing Trust. Zwick Financial Corp. Profit
Sharing Trust owns more than 25% of the voting interests of PSAM and therefore
is regarded to control PSAM for purposes of the 1940 Act.
FAMCO, located at 8112 Maryland Ave., Suite 310, Clayton, Missouri, was
formed in June, 1994, and is currently 100% owned by Charles D. Walbrandt, the
President of FAMCO. As of June 1, 1998, FAMCO had managed over $3 billion of
assets.
As disclosed in this Statement of Additional Information under the
heading "Management of the Trust", Margaret M. Towle is the Chairman of the
Board of Trustees, a Trustee and the President of the Trust as well as the Chief
Executive Officer, Chief Investment Officer, Portfolio Manager and a member of
PSAM.
-6-
<PAGE> 37
ADVISORY AND SUB-ADVISORY AGREEMENTS
The Fund has entered into an advisory agreement (the "Advisory
Agreement") with PSAM, and PSAM has entered into a sub-advisory agreement with
the Sub-Adviser (the "Sub-Advisory Agreement"). As compensation for its
services, PSAM is entitled to a fee, payable quarterly, at the annual rate of
2.00% of the average daily net asset value of the Fund. This fee is higher than
the management fee paid by most investment companies. As compensation for the
services provided by the Sub-Adviser, PSAM has agreed to pay the Sub-Adviser a
fee at the annual rate of 1.50% of the average daily net asset value of the
Fund, which payment will be paid out of the fee received by PSAM from the Fund.
As described in the Prospectus, PSAM has agreed to certain voluntary
arrangements to reduce its fees in order to limit the Fund's expenses. These
arrangements may be modified or terminated by PSAM at any time.
The Advisory Agreement provides that it will continue in effect for two
years from its date of execution and thereafter from year to year if its
continuance is approved at least annually (i) by the Board of Trustees or by
vote of a majority of the outstanding voting securities of the Fund and (ii) by
vote of a majority of the Trustees who are not "interested persons" of the Trust
or PSAM, as that term is defined in the 1940 Act, cast in person at a meeting
called for the purpose of voting on such approval. Any amendment to the Advisory
Agreement must be approved (i) by vote of a majority of the outstanding voting
securities of the Fund and (ii) by vote of a majority of the Trustees who are
not such interested persons, cast in person at a meeting called for the purpose
of voting on such approval. The Advisory Agreement may be terminated without
penalty by vote of the Board of Trustees or by vote of a majority of the
outstanding voting securities of the Fund, upon sixty days' written notice to
PSAM, or by PSAM upon ninety days' written notice to the Trust, and terminates
automatically in the event of its assignment. In addition, the Advisory
Agreement will automatically terminate if the Trust or the Fund shall at any
time be required by PSAM to eliminate all reference to the word "Puget Sound" in
the name of the Trust or the Fund, unless the continuance of the agreement after
such change of name is approved by vote of a majority of the outstanding voting
securities of the Fund and by vote of a majority of the Trustees who are not
interested persons of the Trust or PSAM, cast in person at a meeting called for
the purpose of voting on such approval. The Advisory Agreement also provides
that PSAM shall not be subject to any liability in connection with the
performance of its services thereunder in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations and duties.
The Sub-Advisory Agreement provides that it will continue in effect for
two years from its date of execution and thereafter from year to year if its
continuance is approved at least annually (i) by the Board of Trustees or by
vote of a majority of the outstanding voting securities of the Fund and (ii) by
vote of a majority of the Trustees who are not "interested persons" of the
Trust, PSAM or the Sub-Adviser, as that term is defined in the 1940 Act, cast in
person at a meeting called for the purpose of voting on such approval. Any
amendment to the Sub-Advisory Agreement must be approved (i) by vote of a
majority of the outstanding voting securities of the Fund and (ii) by vote of a
majority of the Trustees who are not such interested persons, cast in person at
a meeting called for the purpose of voting on such approval. The Sub-Advisory
Agreement may be terminated without penalty by vote of the Board of Trustees or
by vote of a majority of the outstanding voting securities of the Fund, upon
sixty days' written notice to the Sub-Adviser, and terminates automatically in
the event of its assignment. The Sub-Advisory Agreement also provides that the
Sub-Adviser shall not be subject to any liability in connection with the
performance of its services thereunder in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations and duties.
-7-
<PAGE> 38
As described in the Prospectus, the Trust intends to apply for an
exemptive order from the Securities and Exchange Commission to permit PSAM,
subject to the approval of the Board of Trustees and certain other conditions,
to enter into sub-advisory agreements with sub-advisers other than the current
sub-adviser for the Fund and amend sub-advisory agreements with sub-advisers
without obtaining shareholder approval. See "Management of the Fund" in the
Prospectus.
The Sub-Adviser also provides investment advice to numerous other
corporate and fiduciary clients. These other clients sometimes invest in
securities in which the Fund also invests. If the Fund and such other clients
desire to buy or sell the same portfolio securities at the same time, purchases
and sales may be allocated, to the extent practicable, on a pro rata basis in
proportion to the amounts desired to be purchased or sold for each. It is
recognized that in some cases the practices described in this paragraph could
have a detrimental effect on the price or amount of the securities which the
Fund purchases or sells. In other cases, however, it is believed that these
practices may benefit the Fund. It is the opinion of the Board of Trustees that
the desirability of retaining the Sub-Adviser as the sub-adviser for the Fund
outweighs the disadvantages, if any, which might result from these practices.
ADMINISTRATOR
BISYS Fund Services Ohio, Inc. (the "Administrator"), under an
agreement with the Trust, provides management and administrative services to the
Fund, and, in general, supervises the operations of the Trust. The Administrator
does not provide investment advisory services. As part of its duties, the
Administrator provides office space, equipment and clerical personnel for
managing and administering the affairs of the Trust. The Administrator
supervises the provision of custodial, auditing, valuation, bookkeeping, legal,
and dividend disbursing services and provides other management and
administrative services. The Trust pays the Administrator a fee for its services
to the Fund at the annual rate of 0.15% of the Trust's average daily net assets.
TRUST EXPENSES
The Trust pays the compensation of its Trustees; registration, filing
and other fees in connection with requirements of regulatory authorities; all
charges and expenses of its custodian and transfer agent; the charges and
expenses of its independent accountants; all brokerage commissions and transfer
taxes in connection with portfolio transactions; all taxes and fees payable to
governmental agencies; the expenses of meetings of the shareholders and
Trustees; the charges and expenses of the Trust's legal counsel; interest on any
borrowings by the Fund; the cost of services, including services of counsel,
required in connection with the preparation of, and the cost of printing, the
Trust's registration statements and prospectuses, including amendments and
revisions thereto, annual, semiannual and other periodic reports of the Trust,
and notices and proxy solicitation material furnished to shareholders or
regulatory authorities, to the extent that any such materials relate to the
Trust or its shareholders; and the Trust's expenses of bookkeeping, accounting,
auditing and financial reporting, including related clerical expenses.
DISTRIBUTOR
As stated in the text of the Prospectus under the heading "Management
of the Fund," Institutional and Investor Shares are sold on a continuous basis
by the Trust's distributor, BISYS Fund Services, L.P. (the "Distributor"). Under
the Distributor's Contract between the Trust and the Distributor (the
"Distributor's Contract"), the Distributor is not obligated to sell any specific
amount of shares of the Trust and will purchase shares for resale only against
orders for shares.
-8-
<PAGE> 39
Pursuant to the Distribution Plan (the "Plan") described in the
Prospectus, in connection with the distribution of Investor Shares, the
Distributor receives certain distribution fees from the Trust. The Distributor
may pay all or a portion of the distribution fees it receives from the Trust to
participating and introducing brokers.
The Plan may be terminated with respect to Investor Shares by vote of a
majority of the Trustees who are not interested persons of the Trust (as defined
in the 1940 Act) and who have no direct or indirect financial interest in the
operation of the Plan or the Distributor's Contract, or by a vote of majority of
the outstanding voting securities of that class. Any change in the Plan that
would materially increase the cost to the Investors Shares to which the Plan
relates requires approval by the Investor Shares' shareholders. The Trustees
review quarterly a written report of such costs and the purposes for which such
costs have been incurred. Except as described above, the Plan may be amended by
vote of the Trustees, including a majority of the Trustees who are not
interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of the Plan or the
Distributor's Contract, cast in person at a meeting called for the purpose. For
so long as the Plan is in effect, selection and nomination of those Trustees who
are not interested persons of the Trust shall be committed to the discretion of
such disinterested persons.
The Distributor's Contract may be terminated at any time by not more
than 60 days' nor less than 30 days' written notice without payment of any
penalty either by the Distributor or by the Fund or class and will terminate
automatically, without the payment of any penalty, in the event of its
assignment.
The Distributor's Contract and the Plan will continue in effect with
respect to each class of shares to which they relate for successive one-year
periods, provided that each such continuance is specifically approved (i) by the
vote of a majority of the Trustees who are not interested persons of the Trust
(as defined in the 1940 Act) and who have no direct or indirect financial
interest in the operation of the Plan or the Distributor's Contract and (ii) by
the vote of a majority of the entire Board of Trustees, cast in person at a
meeting called for that purpose.
The Trustees believe that the Plan will provide benefits to the Trust.
The Trustees believe that the Plan will result in greater sales and/or fewer
redemptions of Investor Shares, although it is impossible to know for certain
the level of sales and redemptions of Investor Shares that would occur in the
absence of the Plan or under alternative distribution schemes. The Trustees
believe that the effect on sales and/or redemptions benefit the Trust by
reducing Fund expense ratio and/or by affording greater flexibility to the
Sub-Adviser.
ADDITIONAL ARRANGEMENTS
Custodial Arrangements. Custodial Trust Company (the "Custodian"), is
the Trust's custodian. The Custodian holds in safekeeping securities and cash
belonging to the Fund and, in such capacity, is the registered owner of
securities held in book entry form belonging to the Fund. Upon instruction, the
Custodian receives and delivers cash and securities of the Fund in connection
with Fund transactions and collects all dividends and other distributions made
with respect to Fund portfolio securities. Pursuant to an agreement with the
Trust, the Custodian receives compensation from the Fund for such services based
upon a percentage of the Fund's average daily net assets.
Independent Accountants. The Fund's independent accountants are
Deloitte & Touche LLP, 50 Fremont Street, San Francisco, California 94105.
Deloitte & Touche LLP conducts an annual audit of the Trust's financial
statements, assists in the preparation of the Fund's federal and state income
tax returns and consults with the Fund as to matters of accounting and federal
and state income taxation.
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PORTFOLIO TRANSACTIONS AND BROKERAGE
Transactions on U.S. stock exchanges and other agency transactions for
the account of the Fund involve the payment by the Fund of negotiated brokerage
commissions. Such commissions vary among different brokers. A particular broker
may charge different commissions according to such factors as the difficulty and
size of the transaction. There is generally no stated commission in the case of
securities traded in the over-the-counter markets, but the price paid by the
Fund usually includes an undisclosed dealer commission or markup. In
underwritten offerings, the price paid by the Fund includes a disclosed, fixed
commission or discount retained by the underwriter or dealer.
In addition to selecting portfolio investments for the Fund, the
Sub-Adviser selects brokers or dealers to execute securities purchases and sales
for the Fund's account. The Sub-Adviser selects only brokers or dealers which it
believes are financially responsible, will provide efficient and effective
services in executing, clearing and settling an order and will charge commission
rates which, when combined with the quality of the foregoing services, will
produce best price and execution for the transaction. This does not necessarily
mean that the lowest available brokerage commission will be paid. However, the
commissions are believed to be competitive with generally prevailing rates. The
Sub-Adviser will use its best efforts to obtain information as to the general
level of commission rates begin charged by the brokerage community from time to
time and will evaluate the overall reasonableness of brokerage commissions paid
on transactions by reference to such data. In making such evaluation, all
factors affecting liquidity and execution of the order, as well as the amount of
the capital commitment by the broker in connection with the order, are taken
into account. The Fund will not pay a broker a commission at a higher rate than
otherwise available for the same transaction in recognition of the value of
research services provided by the broker or in recognition of the value of any
other services provided by the broker which do not contribute to the best price
and execution of the transaction.
The Sub-Adviser's receipt of research services from brokers may
sometimes be a factor in its selection of a broker that it believes will provide
best price and execution for a transaction. These research services include not
only a wide variety of reports on such matters as economic and political
developments, industries, companies, securities, portfolio strategy, account
performance, daily prices of securities, stock and bond market conditions and
projections, asset allocation and portfolio structure, but also meetings with
management representatives of issuers and with other analysts and specialists.
Although it is in many cases not possible to assign an exact dollar value to
these services, they may, to the extent used, tend to reduce the Sub-Adviser's
expenses. Such services may be used by the Sub-Adviser in managing other client
accounts and in some cases may not be used with respect to the Fund. Receipt of
services or products other than research from brokers is not a factor in the
selection of brokers. Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., and subject to seeking best price and
execution, purchases of shares of the Fund by customers of broker-dealers may be
considered as a factor in the selection of broker-dealers to execute the Fund's
securities transactions.
The Sub-Adviser may cause the Fund to pay a broker-dealer that provides
brokerage and research services to the Sub-Adviser an amount of commission for
effecting a securities transaction for the Fund in excess of the amount another
broker-dealer would have charged for effecting that transaction. The Sub-Adviser
must determine in good faith that such greater commission is reasonable in
relation to the value of the brokerage and research services provided by the
executing broker-dealer viewed in terms of that particular transaction or the
Sub-Adviser's overall responsibilities to the Fund and its other clients. The
Sub-Adviser's authority to cause the Fund to pay greater commissions is also
subject to such policies as the Trustees of the Trust may adopt from time to
time.
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<PAGE> 41
DESCRIPTION OF THE TRUST
The Trust, registered as a diversified open-end management investment
company, is organized as a Massachusetts business trust under the laws of
Massachusetts by an Agreement and Declaration of Trust (the "Declaration of
Trust") dated April 14, 1998.
The Declaration of Trust currently permits the Trustees to issue an
unlimited number of full and fractional shares of each series. Each share of the
Fund represents an equal proportionate interest in the Fund with each other
share of the Fund and is entitled to a proportionate interest in the dividends
and distributions from the Fund. The shares of the Fund do not have any
preemptive rights. Upon termination of the Fund, whether pursuant to liquidation
of the Trust or otherwise, shareholders of the Fund are entitled to share pro
rata in the net assets of the Fund available for distribution to shareholders.
The Declaration of Trust also permits the Trustees to charge shareholders
directly for custodial, transfer agency and servicing expenses.
The Declaration of Trust also permits the Trustees, without shareholder
approval, to subdivide any series of shares into various classes of shares with
such dividend preferences and other rights as the Trustees may designate. The
Trustees may also, without shareholder approval, establish one or more
additional separate portfolios for investments in the Trust. Shareholders'
investments in such an additional portfolio would be evidenced by a separate
series of shares (i.e., a new "Fund").
The Declaration of Trust provides for the perpetual existence of the
Trust. The Trust or the Fund, however, may be terminated at any time by vote of
at least two-thirds of the outstanding shares of the Fund. The Declaration of
Trust further provides that the Trustees may also terminate the Trust or the
Fund upon written notice to the shareholders.
The shares of the Fund are divided into two classes - the Institutional
Shares and the Investor Shares. All expenses of the Fund are borne by all the
shares in the Fund, regardless of class, on a pro rata basis relative to the net
assets of each class, except for distribution fees and shareholder servicing
fees which are charged only to the Fund's Investor Shares.
The assets received by the Fund for the issue or sale of its shares and
all income, earnings, profits, losses and proceeds therefrom, subject only to
the rights of creditors, are allocated to, and constitute the underlying assets
of, the Fund. The underlying assets of the Fund will be segregated from the
assets of any other series that may be established in the future and are charged
with the expenses with respect to the Fund and with a share of the general
expenses of the Trust. Any expenses of the Fund that are specific to a
particular class of shares of the Fund are charged only to the shares of that
class. If at any future time the Trust issues more than one series of shares,
any general expenses of the Trust that are not readily identifiable as belonging
to the Fund are allocated by or under the direction of the Trustees in such
manner as the Trustees determine to be fair and equitable. While the expenses of
the Trust will be allocated to the separate books of account of each fund of the
Trust, certain expenses may be legally chargeable against the assets of all
funds of the Trust.
VOTING RIGHTS
As summarized in the Prospectus, shareholders are entitled to one vote
for each full share held (with fractional votes for each fractional share held)
and may vote (to the extent provided in the Declaration of Trust) on the
election of Trustees and the termination of the Trust and on other matters
submitted to the vote of shareholders.
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<PAGE> 42
The Declaration of Trust provides that on any matter submitted to a
vote of all Trust shareholders, all Trust shares entitled to vote shall be voted
together irrespective of series or class unless the rights of a particular
series or class would be adversely affected by the vote, in which case a
separate vote of that series or class shall also be required to decide the
question. Also, a separate vote shall be held whenever required by the 1940 Act
or any rule thereunder. Rule 18f-2 under the 1940 Act provides in effect that a
series or class shall be deemed to be affected by a matter unless it is clear
that the interests of each series or class in the matter are substantially
identical or that the matter does not affect any interest of such series or
class. On matters affecting an individual series or class, only shareholders of
that series or class are entitled to vote. Consistent with the current position
of the Securities and Exchange Commission, shareholders of all series and
classes vote together, irrespective of series or class, on the election of
Trustees and the selection of the Trust's independent accountants, but
shareholders of each series vote separately on other matters requiring
shareholder approval, such as certain changes in investment policies of that
series or the approval of the investment advisory and sub-advisory agreements
relating to that series.
There will normally be no meetings of shareholders for the purpose of
electing Trustees except that, in accordance with the 1940 Act, (i) the Trust
will hold a shareholders' meeting for the election of Trustees at such time as
less than a majority of the Trustees holding office have been elected by
shareholders, and (ii) if, as a result of a vacancy on the Board of Trustees,
less than two-thirds of the Trustees holding office have been elected by the
shareholders, that vacancy may be filled only by a vote of the shareholders. In
addition, Trustees may be removed from office by a written consent signed by the
holders of two-thirds of the outstanding shares and filed with the Trust's
custodian or by a vote of the holders of two-thirds of the outstanding shares at
a meeting duly called for that purpose, which meeting shall be held upon the
written request of the holders of not less than 10% of the outstanding shares.
Upon written request by ten holders of shares having an aggregate net
asset value constituting 1% of the outstanding shares stating that such
shareholders wish to communicate with the other shareholders for the purpose of
obtaining the signatures necessary to demand a meeting to consider removal of a
Trustee, the Trust has undertaken to provide a list of shareholders or to
disseminate appropriate materials (at the expense of the requesting
shareholders).
Except as set forth above, the Trustees shall continue to hold office
and may appoint successor Trustees. Voting rights are not cumulative.
No amendment may be made to the Declaration of Trust without the
affirmative vote of a majority of the outstanding shares of the Trust, except
(i) to change the Trust's name or to cure technical problems in the Declaration
of Trust and (ii) to establish, change or eliminate the par value of any shares
(currently all shares have no par value).
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law shareholders could, under certain
circumstances, be held personally liable for the obligations of the Fund.
However, the Declaration of Trust disclaims shareholder liability for acts or
obligations of the Fund and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Trust
or the Trustees. The Declaration of Trust provides for indemnification out of
Fund property for all loss and expense of any shareholder held personally liable
for the obligations of the Fund. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is considered remote since it
is limited to circumstances in which the disclaimer is inoperative and the Fund
itself would be unable to meet its obligations.
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<PAGE> 43
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. The By-Laws of the Trust provide for indemnification by the Trust of
the Trustees and officers of the Trust except with respect to any matter as to
which any such person did not act in good faith in the reasonable belief that
such action was in the best interests of the Trust. No officer or Trustee may be
indemnified against any liability to the Trust or the Trust's shareholders to
which such person would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office.
HOW TO BUY SHARES
Subject to minimum initial investment requirements and certain other
conditions, an investor may make an initial purchase of shares of the Fund by
submitting a completed application form and payment to:
Puget Sound Alternative Investment Series Trust
P.O. Box 182304
Columbus, OH 43218-2304
The procedures for purchasing shares of the Fund are summarized in "How to
Purchase Shares" in the Prospectus.
NET ASSET VALUE AND PUBLIC OFFERING PRICE
The net asset value of the shares of the Fund is determined by dividing
the Fund's total net assets (the excess of its assets over its liabilities) by
the total number of shares of the Fund outstanding and rounding to the nearest
cent. Such determination is made as of the close of regular trading on the New
York Stock Exchange on each day on which that Exchange is open for unrestricted
trading, and no less frequently than once daily on each day during which there
is sufficient trading in the Fund's portfolio securities that the value of the
Fund's shares might be materially affected. The New York Stock Exchange is
expected to be closed on the following weekdays: New Year's Day, President's
Day, Good Friday, Martin Luther King Day, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. Equity securities listed on an
established securities exchange or on the NASDAQ National Market System are
normally valued at their last sale price on the exchange where primarily traded
or, if there is no reported sale during the day, and in the case of
over-the-counter securities not so listed, at the last bid price. Long-term debt
securities are valued by a pricing service, which determines valuations of
normal institutional-size trading units of long-term debt securities. Such
valuations are determined using methods based on market transactions from
comparable securities and on various relationships between securities which are
generally by institutional traders. Other securities for which current market
quotations are not readily available (including restricted securities, if any)
and all other assets are taken at fair value as determined in good faith by the
Trustees, although the actual calculations may be made by persons acting
pursuant to the direction of the Trustees.
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<PAGE> 44
SHAREHOLDER SERVICES
OPEN ACCOUNTS
A shareholder's investment in the Fund is automatically credited to an
open account maintained for the shareholder by BISYS Fund Services, Inc., the
shareholder servicing agent for Trust (the "Shareholder Serving Agent").
Following each transaction in the account, a shareholder will receive an account
statement disclosing the current balance of shares owned and the details of
recent transactions in the account. After the close of each fiscal year, the
Shareholder Servicing Agent will send each shareholder a statement providing
federal tax information on dividends and distributions paid to the shareholder
during the year. This should be retained as a permanent record. Shareholders
will be charged a fee for duplicate information.
The open account system permits the purchase of full and fractional
shares and, by making the issuance and delivery of certificates representing
shares unnecessary, eliminates the problems of handling and safekeeping
certificates, and the cost and inconvenience of replacing lost, stolen,
mutilated or destroyed certificates.
The costs of maintaining the open account system are borne by the
Trust, and no direct charges are made to shareholders. Although the Trust has no
present intention of making such direct charges to shareholders, it reserves the
right to do so. Shareholders will receive prior notice before any such charges
are made.
SYSTEMATIC WITHDRAWAL PLAN
A Systematic Withdrawal Plan, referred to in the Prospectus under
"Shareholder Services--Systematic Withdrawal Plan," provides for monthly,
quarterly, semiannual or annual withdrawal payments of $100 or more from the
account of a shareholder provided that the account has a value of at least
$5,000 at the time the plan is established.
Payments will be made either to the shareholder or to any other person
designated by the shareholder. If payments are issued to an individual other
than the registered owner(s), a signature guarantee will be required on the Plan
application. Income dividends and capital gain distributions will be reinvested
at the net asset value determined as of the close of regular trading on the New
York Stock Exchange on the record date for the dividend or distribution.
Since withdrawal payments represent proceeds from the liquidation of
shares, the shareholder should recognize that withdrawals may reduce and
possibly exhaust the value of the account, particularly in the event of a
decline in net asset value. Accordingly, the shareholder should consider whether
a Systematic Withdrawal Plan and the specified amounts to be withdrawn are
appropriate in the circumstances. The Fund makes no recommendations or
representations in this regard. It may be appropriate for the shareholder to
consult a tax adviser before establishing such a plan. See "Redemptions" and
"Income Dividends, Capital Gain Distributions and Tax Status" below for certain
information as to federal income taxes.
IRAs
Under "Shareholder Services--Retirement Plans," the Prospectus refers
to IRAs established under a prototype plan made available by the Fund. These
plans may be funded with shares of the Fund.
All income dividends and capital gain distributions of plan
participants must be reinvested. Plan documents and further information can be
obtained from the Fund.
Check with your financial or tax adviser as to the suitability of Fund
shares for your retirement plan.
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<PAGE> 45
REDEMPTIONS
The procedures for redemption of Fund shares are summarized in the
Prospectus under "How to Redeem Shares."
Except as noted below, signatures on redemption requests must be
guaranteed by commercial banks, trust companies, savings associations, credit
unions or brokerage firms that are members of domestic securities exchanges.
Signature guarantees by notaries public are not acceptable. However, as noted in
the Prospectus, a signature guarantee will not be required if the proceeds of
the redemption do not exceed $10,000 and the proceeds check is made payable to
the registered owner(s) and mailed to the record address.
If a shareholder selects the telephone redemption service in the manner
described in the next paragraph, Fund shares may be redeemed by calling toll
free 1-877-77-PUGET (1-877-777-8438). When a telephonic redemption request is
received, the proceeds are wired to the bank account previously chosen by the
shareholder and a nominal wire fee (currently $5.00) is deducted. Telephonic
redemption requests must be received by the Fund prior to the close of regular
trading on the New York Stock Exchange on a day when the Exchange is open for
business. Requests made after that time or on a day when the New York Stock
Exchange is not open for business cannot be accepted by the Fund and a new
request will be necessary.
In order to redeem shares by telephone, a shareholder must either
select this service when completing the Fund application or must do so
subsequently on the Service Options Form available from the Fund. When selecting
the service, a shareholder must designate a bank account to which the redemption
proceeds should be wired. Any change in the bank account so designated must be
made by furnishing to the Fund a completed Service Options Form with a signature
guarantee. Whenever the Service Options Form is used, the shareholder's
signature must be guaranteed as described above. Telephone redemptions may only
be made if an investor's bank is a member of the Federal Reserve System or has a
correspondent bank that is a member of the System. If the account is with a
savings bank, it must have only one correspondent bank that is a member of the
System. The Trust, and its transfer agent and custodian are not responsible for
the authenticity of withdrawal instructions received by telephone.
The redemption price will be the net asset value per share next
determined after the redemption request and any necessary special documentation
are received by the Fund in proper form. Proceeds resulting from a written
redemption request will normally be mailed to you within seven days after
receipt of your request in good order. Telephonic redemption proceeds will
normally be wired on the first business day following receipt of a proper
redemption request. In those cases where you have recently purchased your shares
by check and your check was received less than 10 days prior to the redemption
request, the Fund may withhold redemption proceeds until your check has cleared,
which may take up to 10 days from the purchase date.
The Fund will normally redeem shares for cash; however, the Fund
reserves the right to pay the redemption price wholly or partly in kind if the
Board of Trustees determines it to be advisable in the interest of the remaining
shareholders. If portfolio securities are distributed in lieu of cash, the
shareholder will normally incur brokerage commissions upon subsequent
disposition of any such securities. However, the Trust has elected to be
governed by Rule l8f-l under the 1940 Act pursuant to which the Trust is
obligated to redeem shares solely in cash for any shareholder during any 90-day
period up to the lesser of $250,000 or 1% of the total net asset value of the
Trust at the beginning of such period.
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<PAGE> 46
A redemption constitutes a sale of the shares for federal income tax
purposes on which the investor may realize a long- or short-term capital gain or
loss depending on the investor's holding period and adjusted basis in the
shares. See "Income Dividends, Capital Gains Distributions and Tax Status."
INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX STATUS
It is the policy of the Fund to pay its shareholders, as dividends,
substantially all net investment income and to distribute annually all net
realized capital gains, if any, after offsetting any capital loss carryovers.
Income dividends and capital gains distributions are payable in full
and fractional shares of the Fund based upon the net asset value determined as
of the close of regular trading on the New York Stock Exchange on the record
date for each dividend or distribution. Shareholders, however, may elect to
receive their income dividends or capital gains distributions, or both, in cash.
The election may be made at any time by submitting a written request to the
Fund. In order for a change to be in effect for any dividend or distribution, it
must be received by the Fund on or before the record date for such dividend or
distribution.
As required by federal law, detailed federal tax information will be
furnished to each shareholder for each calendar year on or before January 31 of
the succeeding year.
The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). In order so to qualify and to qualify for the favorable tax treatment
accorded regulated investment companies and their shareholders, the Fund must,
among other things, (i) derive at least 90% of its gross income from dividends,
interest, payments with respect to certain securities loans, gains from the sale
or other disposition of stock or securities, or other income (including but not
limited to gains from options, futures or forward contracts) derived with
respect to its business of investing in such stock or securities; (ii)
distribute with respect to each taxable year at least 90% of the sum of its
taxable net investment income, its net tax-exempt income, and the excess, if
any, of net short-term capital gains over net long-term capital losses for such
year; and (iii) at the end of each fiscal quarter maintain at least 50% of the
value of its total assets in cash, U.S. government securities, securities of
other regulated investment companies, and other securities of issuers which
represent, with respect to each issuer, no more than 5% of the value of the
Fund's total assets and 10% of the outstanding voting securities of such issuer,
with no more than 25% of its assets invested in the securities (other than those
of the U.S. government or other regulated investment companies) of any one
issuer or of two or more issuers which the Fund controls and which are engaged
in the same, similar or related trades and businesses. To satisfy these
conditions, the Fund may be limited in its ability to use certain investment
techniques and may be required to liquidate assets to distribute income.
Moreover, some investment techniques used by the Fund may change the character
and amount of income recognized by the Fund. As a regulated investment company,
the Fund will not be subject to federal income tax on income paid on a timely
basis to its shareholders in the form of dividends or capital gain
distributions.
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<PAGE> 47
An excise tax at the rate of 4% will be imposed on the excess, if any,
of the Fund's "required distribution" (as defined in the Code) over its actual
distributions in any calendar year. Generally, the "required distribution" is
98% of the Fund's ordinary income for the calendar year plus 98% of its capital
gain net income recognized during the one-year period ending on October 31 plus
undistributed amounts from prior years. The Fund intends to make distributions
sufficient to avoid imposition of the excise tax. Distributions declared by the
Fund during October, November or December to shareholders of record on a date in
any such month and paid by the Fund during the following January will be treated
for federal tax purposes as paid by the Fund and received by shareholders on
December 31 of the year in which declared.
Shareholders of the Fund will be subject to federal income taxes on
distributions made by the Fund, whether received in cash or additional shares of
the Fund. Distributions by the Fund of net income and short-term capital gains,
if any, will be taxable to shareholders as ordinary income. Pursuant to the
Taxpayer Relief Act of 1997, two different tax rates apply to net capital gains
(that is, the excess of net gains from capital assets held for more than one
year over net losses from capital assets held for not more than one year). One
rate (generally 28%) applies to net gains on capital assets held for more than
one year but not more than 18 months ("28% rate gains") and a second, preferred
rate (generally 20%) applies to the balance of such net capital gains ("adjusted
net capital gains"). Distributions of net capital gains will be treated in the
hands of shareholders as 28% rate gains to the extent designated by the Fund as
deriving from net gains from assets held for more than one year but not more
than 18 months, and the balance will be treated as adjusted net capital gains.
Distributions of 28% rate gains and adjusted net capital gains will be taxable
to shareholders as such, regardless of how long a shareholder has held shares in
the Fund. A loss on the sale of shares held for six months or less will be
treated as a long-term capital loss to the extent of any long-term capital gain
dividend paid to the shareholder with respect to such shares.
Dividends and distributions on Fund shares are subject to federal
income taxes even if in effect they are a return of capital.
Redemptions, sales and exchanges of the Fund's shares are taxable
events and, accordingly, shareholders may realize gains and losses on these
transactions. Provided the shareholder holds the shares as a capital asset, any
gain realized upon a taxable disposition of shares will be treated as 28% rate
gain if the shares have been held for more than 12 months but not more than 18
months, and as adjusted net capital gains if the shares have been held for more
than 18 months. Otherwise, the gain on the redemption, sale or exchange of Fund
shares will be treated as short-term capital gain. In general, any loss realized
upon a taxable disposition of shares will be treated as a long-term capital loss
if the shares have been held for more than 12 months, and otherwise as
short-term capital loss. No loss will be allowed on the sale of Fund shares to
the extent the shareholder acquired other shares of the same Fund within 30 days
prior to the sale of the loss shares or 30 days after such sale.
If the Fund engages in hedging transactions, including hedging
transactions in options, futures contracts, and straddles, or other similar
transactions, it will be subject to special tax rules (including constructive
sale, mark-to-market, straddle, wash sale, and short sale rules), the effect of
which may be to accelerate income to the Fund, defer losses to the Fund, cause
adjustments in the holding periods of the Fund's securities, or convert
short-term capital losses into long-term capital losses. These rules could
therefore affect the amount, timing and character of distributions to
shareholders. The Fund will endeavor to make any available elections pertaining
to such transactions in a manner believed to be in the best interests of the
Fund.
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<PAGE> 48
The Fund is required to withhold 31% of any redemption proceeds, income
dividends and capital gain distributions it pays to you (1) if you do not
provide a correct, certified taxpayer identification number, (2) if the Fund is
notified that you have underreported income in the past, or (3) if you fail to
certify to the Fund that you are not subject to such withholding.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Code and regulations currently in effect. For the complete
provisions, reference should be made to the pertinent Code sections and
regulations. The Code and regulations are subject to change by legislative or
administrative action.
Dividends and distributions also may be subject to state and local
taxes. Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, foreign, state or local taxes.
The foregoing discussion relates solely to U.S. investors. Non-U.S.
investors should consult their tax advisers concerning the tax consequences of
ownership of shares of the Fund, including the possibility that distributions
may be subject to a 30% United States withholding tax (or a reduced rate of
withholding provided by treaty).
PERFORMANCE INFORMATION
Quotations of average annual total return for the Fund will be
expressed in terms of the average annual compounded rate of return of a
hypothetical investment in the Fund or class over periods of one, five, and ten
years (or for such shorter periods as shares of the Fund have been offered),
calculated pursuant to the following formula: P (1 + T) [n exponent]= ERV (where
P = a hypothetical initial payment of $1,000, T = the average annual total
return, n = the number of years, and ERV = the ending redeemable value of a
hypothetical $1,000 payment made at the beginning of the period). Except as
noted below, all total return figures reflect the deduction of a proportional
share of Fund expenses on an annual basis, and assume that (i) the maximum sales
load (or other charges deducted from payments) is deducted from the initial
$1,000 payment and (ii) all dividends and distributions are reinvested when
paid. Quotations of total return may also be shown for other periods. The Fund
may also, with respect to certain periods of less than one year, provide total
return information for that period that is unannualized. Any such information
would be accompanied by standardized total return information.
The Fund may from time to time include its total return information in
advertisements or in information furnished to present or prospective
shareholders. The Fund may from time to time also include in advertisements or
information furnished to present or prospective shareholders the ranking of its
total return information relative to such figures for groups of mutual funds
categorized as having similar investment objectives or being in the same general
investment category. Performance information may also be used to compare the
performance of the Fund to certain standards or indices for stock market
performance.
-18-
<PAGE> 49
Performance information about the Fund will be provided in the Fund's
annual report, which report will be available upon request and without charge.
In addition, from time to time, articles about the Fund regarding performance,
rankings and other characteristics of the Fund may appear in publications
including, but not limited to the publications included in Appendix A. In
particular, the performance of the Fund may be compared in some or all of these
publications to the performance of various indices and investments for which
reliable performance data is available and to averages, performance rankings, or
other information prepared by recognized mutual fund statistical services. Such
publications may also publish their own rankings or performance reviews of
mutual funds, including the Fund. References to or reprints of such articles may
be used in the Fund's promotional literature. References to articles regarding
personnel of the sub-adviser(s) who have portfolio management responsibility may
also be used in the Fund's promotional literature. For additional information
about the Fund's advertising and promotional literature, see Appendix B.
EXPERTS
The statement of assets and liabilities of the Trust as of May 28, 1998
appearing in this Statement of Additional Information has been audited by
Deloitte & Touche LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein, and is included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
-19-
<PAGE> 50
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Trustees
Puget Sound Market Neutral Portfolio:
We have audited the accompanying statement of assets and liabilities of the
Puget Sound Market Neutral Portfolio, a series of the Puget Sound Alternative
Investment Series Trust ("Trust"), as of May 28, 1998. This financial statement
is the responsibility of the Trust's management. Our responsibility is to
express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, such statement of assets and liabilities presents fairly, in all
material respects, the financial position of Puget Sound Market Neutral
Portfolio, in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
San Francisco, California
May 28, 1998
-20-
<PAGE> 51
PUGET SOUND MARKET NEUTRAL PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
MAY 28, 1998
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Cash $100,000
Deferred organization expenses 52,500
--------
Total Assets 152,500
LIABILITIES:
Accrued organization expenses 52,500
--------
NET ASSETS: $100,000
========
NET ASSETS CONSIST OF:
Capital $100,000
========
NET ASSETS:
Institutional Shares $ 100
Investor Shares 99,900
--------
$100,000
========
SHARES OUTSTANDING:
Institutional Shares 10
Investor Shares 9,990
--------
10,000
========
NET ASSET VALUE:
Institutional Shares - Offering and redemption
price per share $ 10.00
========
Investor Shares - Redemption price per share $ 10.00
========
Maximum Sales Charge (Investor Shares) 3.00%
Investors Shares - Maximum Offering Price
per share
Net Asset Value of Investor Shares/
(100% - Maximum Sales Charge) $ 10.31
========
</TABLE>
See notes to Statement of Assets and Liabilities.
-21-
<PAGE> 52
PUGET SOUND MARKET NEUTRAL PORTFOLIO
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
MAY 28, 1998
1. ORGANIZATION
The Puget Sound Alternative Investment Series Trust (the "Trust") was
organized as a Massachusetts business trust on April 14, 1998. The
Trust is a diversified open-end management investment company
registered under the Investment Company Act of 1940 (the "1940 Act").
There are an unlimited number of authorized units of beneficial
interest ("shares") of the Trust which may be divided into an unlimited
number of series of shares. Currently, there is one series; the Puget
Sound Market Neutral Portfolio (the "Fund"). The Fund offers two
classes of shares: Institutional Shares and Investor Shares.
The Fund has had no operations other than those actions relating to
organizational matters. As of May 28, 1998, both Institutional and
Investor shares have been issued and all outstanding shares of the Fund
are owned by BISYS Fund Services Ohio, Inc.
The objective of the Fund is to seek long term capital appreciation,
while maintaining minimal exposure to general market equity risk. The
Fund seeks to achieve its objective through a diversified portfolio
using a non-traditional "market neutral" investment strategy.
2. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION EXPENSES: All costs incurred by the Trust in connection
with the organization of the Fund and the initial public offering of
shares of the Fund, principally professional fees and printing, have
been deferred. Upon commencement of investment operations of the Fund,
the deferred organization expenses will be amortized on a straight-line
basis over a period of five years. In the event that any of the initial
shares of the Fund are redeemed during the amortization period by any
holder thereof, the redemption proceeds will be reduced by any
unamortized organization expenses in the same proportion as the number
of said shares being redeemed bears to the number of initial shares
that are outstanding at the time of redemption.
FEDERAL INCOME TAXES: The Fund intends to comply with the requirements
of the Internal Revenue Code necessary to qualify as a regulated
investment company and to make the requisite distributions of taxable
income to its shareholders which will be sufficient to relieve it from
all or substantially all federal income taxes.
3. RELATED PARTY TRANSACTIONS
Puget Sound Asset Management Co., LLC ("PSAM") will serve as the
investment adviser of the Fund. The sub-adviser will be Fiduciary Asset
Management Co. ("FAMCO" or the "Sub-Adviser"). Under the terms of the
proposed investment advisory agreement between the Trust and PSAM, PSAM
will be entitled to receive a fee at the annual rate of 2.00% of the
average daily net assets of the Fund. PSAM has agreed to voluntarily
reduce the fee to the annual rate of 1.75% of the average daily net
assets of the Fund; however, PSAM may terminate this reduction of fees
at any time. PSAM will pay FAMCO a sub-advisory fee at the annual rate
of 1.50% of the average daily net assets of the Fund.
-22-
<PAGE> 53
BISYS Fund Services Ohio, Inc., a wholly-owned subsidiary of The BISYS
Group, Inc., will serve as the administrator for the Fund. BISYS Fund
Services, L.P., (the "Distributor") will act as the Trust's principal
underwriter and distributor. BISYS Fund Services, Inc. will serve as
transfer agent for and provide fund accounting services to the Trust.
Under the Trust's proposed Distribution Plan (the "Distribution Plan"),
the Fund will pay a monthly distribution fee to the Distributor as
compensation for its services in connection with the Distribution Plan
at an annual rate equal to 0.50% of the average daily net assets of
Investor Shares of the Fund. Currently, the Distributor has voluntarily
reduced this annual rate to 0.25%. This reduction of fees may cease at
any time.
The Distributor may also provide a servicing agent to perform personal
and account maintenance services to the Investor Shares' shareholders
of the Fund. For these services, the Trust's Shareholder Servicing Plan
permits the Fund to pay fees up to 0.25% of average daily net assets of
Investor Shares.
Certain officers of the Trust are affiliated with PSAM or the
Distributor and its affiliates. Such persons are not paid directly by
the Trust for serving in those capacities.
-23-
<PAGE> 54
SPECIMEN PRICE MAKE-UP
PUGET SOUND MARKET NEUTRAL PORTFOLIO
INVESTOR SHARES
<TABLE>
<CAPTION>
Total Offering Price Per Investor Share (as of May 28, 1998):
<S> <C>
Net Asset Value and Redemption Price
Per Share ($99,900 / 9,990) $10.00
Maximum Offering Price Per Share
($10.00 x 100 / 97.0) $10.31
</TABLE>
-24-
<PAGE> 55
APPENDIX A
<TABLE>
<CAPTION>
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION
<S> <C>
ABC and affiliates Fund Action
Adam Smith's Money World Fund Decoder
America On Line Global Finance
Anchorage Daily News (the) Guarantor
Atlanta Constitution Hartford Courant
Atlanta Journal Houston Chronicle
Arizona Republic INC
Austin American Statesman Indianapolis Star
Baltimore Sun Individual Investor
Bank Investment Marketing Institutional Investor
Barron's National Public Radio International Herald Tribune
Bergen County Record (NJ) Internet
Bloomberg Business News Investment Advisor
Bond Buyer Investment Company Institute
Boston Business Journal Investment Dealers Digest
Boston Globe Investment Profiles
Boston Herald Investment Vision
Broker World Investor's Daily
Business Radio IRA Reporter
Business Week Journal of Commerce
CBS and affiliates Kansas City Star
CDA Investment Technologies KCMO (Kansas City)
CFO KOA-AM (Denver)
Changing Times LA Times
Chicago Sun Times Leckey, Andrew (syndicated column)
Chicago Tribune Lear's
Christian Science Monitor Life Association News
Christian Science Monitor News Service Lifetime Channel
Cincinnati Enquirer Miami Herald
Cincinnati Post Milwaukee Sentinel
CNBC Money
CNN Money Maker
Columbus Dispatch Money Management Letter
CompuServe Morningstar
Dallas Morning News Mutual Fund Market News
Dallas Times-Herald Mutual Funds Magazine
Denver Post National Underwriter
Des Moines NBC and affiliates
Detroit Free Press New England Business
Donoghues Money Fund Report New England Cable News
Dorman, Dan (syndicated column) New Orleans Times-Picayune
Dow Jones News Service New York Daily News
Economist New York Times
FACS of the Week Network Newark Star Ledger
Fee Adviser Newsday
Financial News Network Newsweek
Financial Planning Nightly Business Report
Financial Planning on Wall Orange County Register
Financial Research Corp. Orlando Sentinel
Financial Services Week Palm Beach Post
Financial World Pension World
Fitch Insights Pensions and Investments
Forbes Personal Investor
Fort Worth Star-Telegram Philadelphia Inquirer
Fortune Porter, Sylvia (syndicated column)
Fox Network and affiliates
</TABLE>
A-1
<PAGE> 56
<TABLE>
<S> <C>
Portland Oregonian Tampa Tribune
Prodigy Time
Public Broadcasting Service Tobias, Andrew (syndicated column)
Quinn, Jane Bryant (syndicated column) Toledo Blade
Registered Representative UPI
Research Magazine US News and World Report
Resource USA Today
Register Reuters USA TV Network
Rocky Mountain News Value Line
Rukeyser's Business (syndicated column) Wall Street Journal
Sacramento Bee Wall Street Letter
San Diego Tribune Wall Street Week
San Francisco Chronicle Washington Post
San Francisco Examiner WBZ
San Jose Mercury WBZ-TV
Seattle Post-Intelligencer WCVB-TV
Seattle Times WEEI
Street Securities Industry Management WHDH
Smart Money Worcester Telegram
St. Louis Post Dispatch World Wide Web
St. Petersburg Times Worth Magazine
Standard & Poor's Outlook WRKO
Standard & Poor's Stock Guide
Stanger's Investment Advisor
Stockbroker's Register
Strategic Insight
</TABLE>
A-2
<PAGE> 57
APPENDIX B
ADVERTISING AND PROMOTIONAL LITERATURE
Puget Sound Alternative Investment Series Trust's advertising and promotional
material may include, but is not limited to, discussions of the following
information:
- - Puget Sound Alternative Investment Series Trust's participation in wrap
fee and no transaction fee programs
- - Characteristics of the adviser and sub-adviser(s), including the
locations of offices, investment practices and clients
- - Specific and general investment philosophies, strategies, processes and
techniques
- - Specific and general sources of information, economic models, forecasts
and data services utilized, consulted or considered in the course of
providing advisory or other services
- - Industry conferences at which the adviser and sub-adviser(s)
participate
- - Current capitalization, levels of profitability and other financial
information
- - Identification of portfolio managers, researchers, economists,
principals and other staff members and employees
- - The specific credentials of the above individuals, including but not
limited to, previous employment, current and past positions, titles and
duties performed, industry experience, educational background and
degrees, awards and honors
- - Specific identification of, and general reference to, current
individual, corporate and institutional clients, including pension and
profit sharing plans
- - Current and historical statistics relating to:
- total dollar amount of assets managed
- Puget Sound Alternative Investment Series Trust's assets
managed in total and by series
- the growth of assets
- asset types managed
References may be included in Puget Sound Alternative Investment Series
Trust's advertising and promotional literature about 401(k) and retirement plans
that offer its series.
The information may include, but is not limited to:
- - Specific and general references to industry statistics regarding 401(k)
and retirement plans including historical information and industry
trends and forecasts regarding the growth of assets, numbers of plans,
funding vehicles, participants, sponsors and other demographic data
relating to plans, participants and sponsors, third party and other
administrators, benefits consultants and firms with whom Puget Sound
Alternative Investment Series Trust may or may not have a relationship.
B-1
<PAGE> 58
- - Specific and general reference to comparative ratings, rankings and
other forms of evaluation as well as statistics regarding the series of
Puget Sound Alternative Investment Series Trust as 401(k) or retirement
plan funding vehicles produced by industry authorities, research
organizations and publications.
B-2
