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PROSPECTUS
[LOGO]
2801 Ocean Drive, Suite 204
Vero Beach, Florida 32963
toll free (877) 745-GOLF or -4653
The Golf Associated Fund (the "Fund") is an open-end management investment
company, or mutual fund. The Fund's objective is to seek long-term growth of
capital. Income is an incidental consideration. The Fund will strive to achieve
its objective by investing primarily in equity securities of companies that are
involved in or associated with the golf industry ("Golf Investments") and that
offer the potential for capital appreciation. Golf Investment companies may not
be involved in the golf industry other than as sponsors, advertisers, licensees,
marketers or media. These companies also may only spend a small portion of their
overall budgets on such activities.
The Fund offers Class A shares (sold subject to a 5.75% maximum front-end
sales charge) and Class B shares (sold subject to a maximum 5.0% contingent
deferred sales charge, declining over a six-year period). Class B shares
currently are not available for purchase. The Fund requires a minimum initial
investment of $1,000, except for certain investment plans for which lower limits
may apply.
Golf Investment Management, Inc. serves as the investment adviser
("Adviser") to the Fund. Wallington Asset Management, Inc. serves as investment
subadviser ("Subadviser") to the Fund.
You should read this Prospectus and retain it for future reference. This
Prospectus is designed to set forth concisely the information about the Fund you
should consider before investing. A Statement of Additional Information ("SAI"),
dated December 23, 1998, containing additional information about the Fund, has
been filed with the Securities and Exchange Commission ("SEC") and is
incorporated herein by reference. You may request a copy of the SAI, without
charge, by contacting the Fund at the address or telephone number above.
The SEC maintains an Internet Website (http://www.sec.gov) that contains
the SAI, material incorporated by reference and other information regarding the
Fund.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
December 23, 1998
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TABLE OF CONTENTS
Page
OVERVIEW OF THE FUND ................................................... 2
FEES AND EXPENSES OF THE FUND .......................................... 3
ABOUT THE GOLF ASSOCIATED FUND ......................................... 4
PORTFOLIO TRANSACTIONS AND
BROKERAGE ............................................................ 6
BEFORE INVESTING: ALTERNATIVE
PURCHASE PLANS ....................................................... 7
HOW TO INVEST IN THE FUND .............................................. 8
WHAT CLASS A SHARES WILL COST .......................................... 10
WHAT CLASS B SHARES WILL COST .......................................... 11
HOW TO SELL SHARES ..................................................... 12
DETERMINATION OF NET ASSET
VALUE ................................................................ 14
PERFORMANCE INFORMATION ................................................ 15
MANAGEMENT AND ADMINISTRATION
OF THE FUND .......................................................... 16
DISTRIBUTION PLANS...................................................... 17
DIVIDENDS AND OTHER
DISTRIBUTIONS ........................................................ 17
TAXES .................................................................. 18
GENERAL INFORMATION ABOUT
THE FUND ............................................................. 18
APPENDIX A - INVESTMENT
TECHNIQUES............................................................ A-1
OVERVIEW OF THE FUND
What is the Golf Associated Fund's investment objective?
The Fund seeks to provide long-term growth of capital. Income is an
incidental consideration. To achieve its objective, the Fund invests primarily
in equity securities of companies that are involved in or associated with the
golf industry and that offer the potential for capital appreciation. The Adviser
believes that Golf Investments offer a wide range of potential investments that
fit the Fund's objective of long-term growth of capital and allow an investor to
support those companies which support or are involved in the golf industry.
There can be no assurance that the Fund will be able to achieve its investment
objective. For a further discussion of the Fund's investment objective and
policies and the risks associated with investing in the Fund, see "About the
Golf Associated Fund" below.
What are some of the risks of investing in the Fund?
The price of Fund shares will fluctuate as the daily price of the
securities in which the Fund invests fluctuate. As a result, your shares may be
worth more or less than your original investment. Golf Investments may involve
significantly greater risks and therefore the Fund may experience greater
volatility than a mutual fund that does not concentrate its investments. The
Fund's performance will be closely tied to and affected by the golf industry, to
the extent that the Fund invests in such companies. By itself, the Fund does not
constitute a balanced investment program.
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How do I invest in the Fund?
You may purchase Fund shares through your broker-dealer or directly from
the Fund by completing and signing the account application found in this
Prospectus. The minimum initial investment is $1,000 or $250 for retirement
accounts. The Fund offers investors an option of purchasing Class A shares or
Class B shares. Class A shares are offered at net asset value per share plus a
maximum initial sales charge of 5.75% of the offering price. Class B shares are
offered at net asset value per share, but charge a 5% maximum contingent
deferred sales charge ("CDSC") on amounts redeemed within six years of purchase.
See "How to Invest in the Fund," "What Class A Shares Will Cost" and "What Class
B Shares Will Cost."
How do I sell my shares of the Fund?
Fund shares may be sold back to the Fund at the net asset value, less the
applicable CDSC on Class B shares, next determined after receipt of your sales
request by the Fund's transfer agent, PFPC Inc. ("Transfer Agent") in good
order. You may sell your shares by contacting your broker-dealer, by telephone
or by written request. See "How to Sell Shares."
Who is the Fund's Investment Adviser?
Golf Investment Management, Inc. serves as the investment adviser to the
Fund. Wallington Asset Management, Inc. serves as the investment subadviser to
the Fund.
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FEES AND EXPENSES
OF THE FUND
The following tables are intended to assist you in understanding the
expenses associated with investing in each class of shares of the Fund. Because
the Fund's shares were not offered for sale prior to the date of this
Prospectus, "Other Expenses" are based on estimated expenses.
Shareholder Transaction Expenses:
Class A Class B
------- -------
Maximum Sales Charge Imposed on
Purchases (as a % of offering price) 5.75% None
Maximum Contingent Deferred Sales
Charge (as a % of original purchase
price or redemption proceeds,
whichever is lower) None 5%*
Wire Redemption Fee (per transaction) $12.00 $12.00
- ----------
* Declining over a six-year period as follows: 5% during the first year, 4%
during the second year, 3% during the third and fourth years, 2% during the
fifth year, 1% during the sixth year and 0% thereafter. Class B shares
automatically convert to Class A shares eight years after purchase. See "What
Class B Shares Will Cost" below for a further discussion.
Annual Fund Operating Expenses:
Class A Class B
------- -------
Management Fees 1.00% 1.00%
Rule 12b-1 Fees 0.25%* 1.00%
Other Expenses (after reimbursement) 0.45% 0.45%
---- ----
Total Fund Operating Expenses
(after fee waiver and reimbursement) 1.70% 2.45%
==== ====
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* The Fund's Rule 12b-1 Distribution Plan permits Class A shares to charge up
to 1.00% of Class A average daily net assets; however, the Board has authorized
a Rule 12b-1 fee of only up to 0.25%.
The Adviser voluntarily has agreed to waive all or a portion of its fees
and to reimburse certain expenses to the extent that Class A and Class B annual
operating expenses exceed 1.70% and 2.45%, respectively, of that class' average
daily net assets
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for the fiscal year ending October 31, 1999. Absent such waiver
and/or reimbursement, Other Expenses and Total Fund Operating Expenses for Class
A shares are estimated to be 0.45% and 1.70% and for Class B shares are
estimated to be 0.45% and 2.45%. Any reduction in the Adviser's fee is subject
to reimbursement by the Fund within the following three years, to the extent
that such reimbursement would not cause total operating expenses to exceed 1.70%
for Class A shares and 2.45% for Class B shares. In subsequent years, overall
expenses for the Fund may not fall below the percentage limitations until the
Adviser has been fully reimbursed for fees foregone or expenses it paid under
the investment advisory agreement.
Example of the Effect of Fund Expenses:
The impact of Fund operating expenses on earnings is illustrated in the
example below assuming a hypothetical investment of $1,000 in the Fund and a 5%
annual return. An investor in the Fund would pay transaction and operating
expenses at the end of each period as follows:
1 Year 3 Years
------ -------
Class A Shares $74 $108
Class B Shares (assuming sale of
all shares at end of period) $75 $106
Class B Shares (assuming no
sale of shares) $25 $ 76
This is an illustration only and should not be considered a representation
of future expenses. Actual expenses and performance may be greater or less than
that shown above. The purpose of the above tables is to assist investors in
understanding the various costs and expenses that will be borne directly or
indirectly by shareholders. Due to the imposition of Rule 12b-1 fees, it is
possible that long-term shareholders of the Fund may pay more in total sales
charges than the economic equivalent of the maximum front-end sales charge
permitted by the rules of the National Association of Securities Dealers, Inc.
For a further discussion of these costs and expenses, see "Distribution Plans."
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ABOUT THE GOLF
ASSOCIATED FUND
Investment Objective. The investment objective of the Fund is to achieve
long-term growth of capital. Income is an incidental consideration.
Investment Strategies and Policies. The Fund will strive to achieve its
objective by investing primarily in equity securities of companies that are
involved in or associated with the golf industry ("Golf Investments") and that
offer the potential for capital appreciation. Golf Investments include
investments in companies that (1) manufacture, distribute, wholesale or retail
golf equipment, golf apparel, chemicals and fertilizers used on golf courses,
(2) provide services to golf facilities and events, (3) host or sponsor golf
events, (4) serve as licensees or marketing partners of the professional golf
associations tours, (5) manage or own golf facilities, (6) design or develop
golf courses, or (7) provide programming or produce magazines regarding golf
events. The companies who are sponsors, advertisers, licensees, marketers or
media otherwise may not be involved in the Golf industry other than as sponsors,
advertisers or marketers. In addition, they may spend only a small portion of
their overall budgets on such activities.
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The Adviser believes that Golf Investments offer a wide range of potential
investments for the Fund that fit the Fund's objective of long-term growth of
capital and allow an investor to support those companies that support or are
involved in the Golf industry.
The investment philosophy of the Fund is to accumulate a diversified
portfolio of Golf Investments. The Fund may diversify its holdings among many
different companies and industries that meet the Adviser's definition of Golf
Investments. The Fund will seek to invest primarily in the equity securities of
companies that the Subadviser believes will offer the potential for superior
long-term growth. The Subadviser will purchase securities when it believes the
market is underestimating the future potential of the company and sell those
securities when it believes the market is overestimating the future potential of
the company.
The Subadviser will focus on applying a disciplined and valuation-oriented
approach. This approach is based on valuation factors such as, but not limited
to, price-to-earnings ratio, price-to-book ratio and price-to-cash flow ratio.
Additional fundamental factors incorporated in the analysis of specific equity
positions include quality of management, projected earnings growth and quality
of those earnings. Balance sheet items also are evaluated to determine the
inherent financial condition of each company.
Under normal market conditions, the Fund will invest at least 65% of its
total assets in equity securities of Golf Investments. Equity securities include
common stocks, preferred stocks and securities that are convertible into common
stocks such as rights and warrants. It is the Fund's policy to sell a security
if it no longer is deemed to be a Golf Investment. The Fund may invest up to 35%
of its total assets in equity securities that are not related to or associated
with the Golf industry and in investment-grade debt securities, U.S. government
securities, repurchase agreements or other short-term money market instruments.
Until the Fund has sufficient assets under management, the Fund may not be able
to meet these investment limitations. This may affect adversely the Fund's
ability to achieve its investment objective.
The Fund may invest up to 15% of its total assets in foreign securities and
American Depository Receipts ("ADRs"). The Fund also may invest up to 15% of its
net assets in illiquid securities, including restricted securities. The Fund may
invest in shares of other investment companies to the extent permitted by the
Investment Company Act of 1940, as amended (the "1940 Act"). In addition, for
temporary defensive purposes, the Fund may hold up to 100% of its assets in cash
and high quality short-term fixed income securities. The investment grade
securities in which the Fund can invest include convertible securities and debt
securities that are rated BBB by Standard & Poor's ("S&P") or Baa by Moody's
Investor Services, Inc. ("Moody's"), or deemed to be of comparable quality as
determined by the Subadviser at the time of purchase. The Fund may retain a
security that has been downgraded below investment grade if, in the opinion of
the Subadviser, it is in the Fund's best interest. For a discussion of the
instruments the Fund may use, see Appendix A - Investment Techniques.
The Fund's investment objective and certain investment restrictions are
fundamental policies and may not be changed without the affirmative vote of at
least the majority of the outstanding shares of the Fund, as defined in the 1940
Act. All other investment policies of the Fund not specified as fundamental may
be changed by the Board of Trustees of the Fund ("Trustees" or the "Board")
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without shareholder approval. There can be no assurance that the Fund will
achieve its objective.
Other Investment Practices. The Fund may borrow money as a temporary
measure for extraordinary or emergency purposes and to meet redemption requests
without immediately selling portfolio securities. In addition, the Fund may lend
securities to broker-dealers and financial institutions, provided that the
borrower at all times maintains cash collateral in an amount equal to at least
100% of the market value of the securities loaned. Such loans will not be made
if, as a result, the aggregate amount of all outstanding loans by any Fund would
exceed 331/3% of its total assets. For a more detailed discussion of these
practices, see the SAI.
Risks of Investing in the Fund. All investment securities are subject to
inherent market risks and fluctuations in value due to earnings, economic and
political conditions and other factors. Thus, the Fund cannot give any assurance
that its investment objective will be achieved. Because the Fund invests
primarily in equity securities, the value of your investment will fluctuate.
Golf Investments. Some of the companies in which the Fund invests may
involve significantly greater risks and, therefore, the Fund's net asset value
may experience greater volatility than a mutual fund that does not concentrate
its investments. The Fund's performance will be tied closely to and affected by
the Golf industry, to the extent that the Fund invests in such companies. The
long-term growth potential for the Golf industry is encouraging due to two
factors: (1) the demographic shifts in the U.S. population and (2) increased
spending on entertainment. Nevertheless, Golf industry securities tend to be
somewhat seasonal, corresponding with interest in golfing activities beginning
in late winter until autumn. By investing in securities of companies that are
associated with the Golf industry in addition to securities of companies
involved in the Golf industry, the Fund seeks to diversify its holdings in an
attempt to provide steady growth. However, the Fund by itself does not
constitute a balanced investment program.
General Market Risk. The Fund invests primarily in common stocks. The
market risks associated with stocks include the possibility that the entire
market for common stocks could suffer a decline in price over short or extended
time periods. This could affect the net asset value of your Fund shares. The
U.S. stock market tends to be cyclical, with periods when stock prices generally
rise and periods when stock prices generally decline. In addition, certain
sectors of the market can be more volatile than the general market, creating
greater opportunities, but also greater risks. Thus, while stock markets in
general might rise, the particular market sectors in which the Fund invests
might decline. Thus, the Fund generally will be a suitable investment only for
that portion of your assets that is available for longer-term investment.
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PORTFOLIO TRANSACTIONS AND BROKERAGE
The Subadviser will place orders to execute securities transactions that
are designed to implement the Fund's investment objective and policies. In
placing such orders, the Subadviser will seek the most favorable price and
efficient execution available. In order to obtain brokerage and research
6
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services, however, a higher commission sometimes may be paid. Brokerage
commissions normally are paid on exchange-traded securities transactions.
When selecting a broker or dealer to execute portfolio transactions, the
Subadviser considers many factors, including the rate of commission or the size
of the broker-dealer's "spread," the size and difficulty of the order, the
nature of the market for the security, operational capabilities of the
broker-dealer and the research, statistical and economic data furnished by the
broker-dealer to the Subadviser.
The Fund normally will not invest for short-term trading purposes. However,
the Fund may sell securities without regard to the length of time they have been
held. In general, the Fund's annual portfolio turnover rate is not expected to
exceed 100%; however, financial market conditions may warrant an increase above
this level.
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BEFORE INVESTING: ALTERNATIVE PURCHASE PLANS
Before you invest in the Fund, you must decide which class of shares is
best for you, Class A shares or Class B shares. The Fund offers two classes of
shares, Class A shares and Class B shares, which represent interests in the same
portfolio of securities. Class B shares currently are not available for purchase
from the Fund. The primary difference between these classes lies in their sales
charge structures and ongoing expenses.
o Class A Shares may be purchased at a price equal to their net asset
value per share next determined after receipt of an order, plus a maximum
sales charge of 5.75% imposed at the time of purchase. Ongoing Rule 12b-1
fees for Class A shares are lower than the ongoing Rule 12b-1 fees for
Class B shares. No CDSC is charged for Class A shares.
o Class B Shares may be purchased at net asset value with no initial
sales charge. As a result, the entire amount of your purchase is invested
immediately. Class B shares are subject to higher ongoing Rule 12b-1 fees
than Class A shares. A maximum CDSC of 5% may be imposed on redemptions of
Class B shares made within six years of purchase. After eight years, Class
B shares automatically convert to Class A shares, which have lower ongoing
Rule 12b-1 fees and no CDSC.
Factors in Choosing a Class of Shares. You can invest in the class of
shares that you believe will be most beneficial given the amount you wish to
invest, the length of time you plan to keep the investment and class expenses.
You should consider whether, during the anticipated length of your intended
investment in the Fund, the accumulated ongoing Rule 12b-1 fees plus the CDSC on
Class B shares would exceed the initial sales charge plus accumulated ongoing
Rule 12b-1 fees on Class A shares purchased at the same time. For short-term
investments, Class A shares are subject to higher costs than Class B shares
because of the initial sales charge. For long-term investments, Class A shares
are more suitable than Class B shares because Class A shares are subject to
lower ongoing Rule 12b-1 fees. Depending on the number of years you hold Class A
shares, the continuing Rule 12b-1 fees on Class B shares eventually would exceed
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the initial sales charge plus the ongoing Rule 12b-1 fees on Class A shares
during the life of your investment.
You might determine that it would be more advantageous to purchase Class B
shares in order to invest all of your purchase payment initially. However, your
investment would remain subject to higher ongoing Rule 12b-1 fees and subject to
a CDSC if you redeem Class B shares during the first six years after purchase.
Another factor to consider is whether the potentially higher return of Class A
shares due to lower ongoing charges will offset the initial sales charge paid on
such shares.
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HOW TO INVEST IN THE FUND
Initial Offering of Shares. The Fund will offer its shares for sale during
a period scheduled to end at the close of business on December 30, 1998. During
this period, the Fund's distributor, Rafferty Capital Markets, Inc.
("Distributor") and participating dealers will accept subscription orders. After
the close of this period, subscriptions will be due and payable, shares will be
issued and the Fund will commence operations. To the extent that payment is made
to the Distributor or a participating dealer during this period, such persons
may benefit from the temporary use of funds. The Fund currently intends to
commence operations on December 31, 1998. Any orders received prior to that date
will be accepted and processed on December 31, 1998, or such later date the Fund
commences operations.
Continuous Offering of Shares. Fund shares are offered at the daily public
offering price, which is the net asset value per share next computed after
receipt of the investor's order. See "Determination of Net Asset Value." Class B
shares currently are not offered for sale by the Fund.
Minimum Investment. You may open a Fund account with as little as $1,000.
You may open a Fund account with $250 for individual retirement accounts
("IRAs"), Roth IRAs and Education IRAs or, at the Fund's discretion, a lesser
amount for Simplified Employee Pension Plans ("SEPs"), salary reduction SEPs
("SARSEPs"), SIMPLE IRAs and qualified or other retirement plans. Automatic
investment plans allow you to open an account with as little as $50 a month,
provided you invest at least $600 a year.
Purchase Procedures. You may invest in the Fund through your broker-dealer,
by mail or by bank wire transfer. When placing an order to buy shares, you
should specify whether the order is for Class A shares or Class B shares. All
purchase orders that fail to specify a class automatically will be invested in
Class A shares, which include a front-end sales charge. The Fund and the
Distributor reserve the right to reject any purchase order and to suspend the
offering of Fund shares for a period of time.
Through Broker-Dealers. Shares of the Fund may be purchased through
brokers, investment advisers and other financial intermediaries that have
selling agreements with the Distributor. You may be charged a transaction fee or
other fee for their services at the time of purchase.
All purchase orders received by the Transfer Agent prior to the close of
regular trading on the New York Stock Exchange ("NYSE") - generally 4:00 p.m.,
Eastern time - will be executed at that day's offering price. Purchase orders
received by your broker-dealer prior to the close of regular trading on the NYSE
8
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and transmitted to the Transfer Agent before 5:00 p.m. Eastern time, on that day
also will receive that day's offering price. Otherwise, all purchase orders
accepted after the offering price is determined will be executed at the offering
price determined as of the close of regular trading on the NYSE on the next
trading day.
By Mail. You may purchase shares of a Fund directly by completing and
signing the Account Application included with the Prospectus and making out a
check payable to "Golf Associated Fund". Third party checks will not by accepted
by the Fund. All purchases must be in U.S. Dollars.
Mail the check, along with the completed Account Application, to Golf
Associated Fund, c/o PFPC Inc., P.O. Box 8941, Wilmington, Delaware 19899-9752.
Completed Account Applications and checks also may be sent by overnight or
express mail. To ensure proper delivery, please use the following address: Golf
Associated Fund, c/o PFPC Inc., 400 Bellevue Parkway, Suite 108, Wilmington,
Delaware 19809.
By Bank Wire Transfer. To purchase Fund Shares for a new account by wire
transfer, please call the Transfer Agent toll free at (877) 745-GOLF or -4653 to
obtain a Fund account number. You must send a completed Account Application to
the Fund at the above address immediately following the investment. Payment for
Fund shares should be wired through the Federal Reserve System as follows:
PNC Bank
Philadelphia, PA
ABA number 031-0000-53
Credit DDA 8601956282
For further credit to Golf Associated Fund
Class of Shares: _____________________________________________________
Shareholder name: ____________________________________________________
Shareholder account number: __________________________________________
Your bank may charge a fee for such services. If the purchase is canceled
because your wire transfer is not received, you may be liable for any loss the
Transfer Agent may incur.
Automatic Investment Plans. A variety of automatic investment plans are
available for the purchase of Fund shares. These options provide for automatic
monthly investments of $50 or more through automatic investing, payroll or
government direct deposit. You may change the amount to be invested
automatically or may discontinue this service at any time without penalty. If
you discontinue this service before reaching the required account minimum, the
account must be brought up to the minimum in order to remain open. You will
receive a periodic confirmation of all activity for your account. For additional
information on these plans, see the Account Application or contact the Fund toll
free at (877) 745-GOLF or -4653.
Retirement Plans. Fund shares may be purchased as an investment in an IRA
plan, a Roth IRA and an Education IRA. In addition, shares may be purchased as
an investment for self-directed IRAs, defined contribution plans, Simplified
Employee Pension Plans ("SEPs"), Savings Incentive Match Plans for Employees
("SIMPLEs") and other retirement plans. For more detailed information on
retirement plans, contact the Fund toll free at (877) 745-GOLF or -4653.
Redemption of Low Balance Accounts. Due to the high cost of maintaining
accounts with low balances, the Fund will redeem shares in any account if the
account
9
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balance falls below the required minimum value of $500, except for retirement
accounts.
You will be given 30 days' notice to bring your account balance to the
minimum required or the Fund may redeem shares in the account and pay you the
proceeds. The Fund does not apply this minimum account balance requirement to
accounts that fall below the minimum due to market fluctuation. Accounts
established under an Automatic Investment Plan that have been discontinued prior
to meeting the $1,000 account minimum are subject to this policy.
Subsequent Investments. Once an account has been opened, subsequent
purchases may be made through your broker-dealer, by mail, by bank wire, by
automatic investing or direct deposit. The minimum for additional investments is
$50 for all accounts. If you would like to purchase additional shares of the
Fund by bank wire, you must call the Transfer Agent to assure that your purchase
takes place the same day. Otherwise, purchases will take effect the next
business day.
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WHAT CLASS A SHARES
WILL COST
The public offering price for Class A shares is the next determined net
asset value per share plus a sales charge determined in accordance with the
following schedule:
Sales Charge as a Percentage of
-------------------------------
<TABLE>
<CAPTION>
Net Amount Dealer Concession
Offering Invested as Percentage of
Amount Of Purchase Price (Net Asset Value) Offering Price(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Less than $50,000 5.75% 6.10% 5.50%
$50,000 but less than $100,000 4.75% 4.99% 4.50%
$100,000 but less than $250,000 3.75% 3.90% 3.50%
$250,000 but less than $500,000 2.75% 2.83% 2.50%
$500,000 but less than $1,000,000 2.00% 2.04% 1.75%
$1,000,000 and over 0.00% 0.00% 0.00%(2)
</TABLE>
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(1) During certain periods, the Distributor may pay 100% of the sales
charge to participating dealers. Otherwise, it will pay the dealer concession
shown above. The dealer's concession may be changed from time to time.
(2) There is no initial sales charge on purchases of Class A shares for
$1,000,000 or more. However, a 1% contingent deferred sales charge will be
imposed on redemptions of such shares made within 12 months of purchase.
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In addition, Class A shares are subject to a Rule 12b-1 fee of 0.25% of
their average daily net assets.
Cumulative Purchase Privilege and Letters of Intent. You may purchase Class
A shares at a reduced sales charge through the Cumulative Purchase Privilege or
by executing a Letter of Intent. For more information, see the SAI, call your
broker-dealer or call the Fund toll free at (877) 745-GOLF or -4653.
Waivers of Class A Sales Charges. Fund shares may be sold at net asset
value without any sales charge to the: Adviser; Subadviser; officers and
Trustees of the Fund; directors, officers and full-time employees of the Adviser
and the Subadviser and their affiliates; registered representatives and
employees of broker-dealers that are parties to dealer agreements with the
Distributor (or financial institutions that have arrangements with such
broker-dealers); and all such persons' immediate relatives and their beneficial
accounts. The dealer concession also will be adjusted in a like manner. Fund
shares also may be purchased without sales charges by investors who participate
in certain broker-dealer wrap fee investment programs.
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WHAT CLASS B
SHARES WILL COST
Class B shares may be purchased at net asset value without a front-end
sales charge, but are subject to a CDSC on redemptions of Class B shares sold
within six years of purchase. The CDSC is a maximum of 5%, declining over six
years. In addition, Class B shares are subject to a Rule 12b-1 fee of 1.00% of
its average daily net assets. Class B shares are offered for sale only for
purchases of less than $250,000.
The CDSC is based on the original purchase price or the current market
value of the shares being sold, whichever is less. The CDSC imposed depends on
the amount of time you have held Class B shares. The longer the time between the
purchase and sale of shares, the lower the rate of the CDSC. If you own Class B
shares for more than six years, you do not have to pay a sales charge when
redeeming those shares.
Redemption During: CDSC on Shares Being Sold
1st year since purchase............................5%
2nd year since purchase........................... 4%
3rd year since purchase............................3%
4th year since purchase............................3%
5th year since purchase............................2%
6th year since purchase............................1%
Thereafter.........................................0%
CDSC calculations are based on the number of shares involved, not on the value
of your account. The CDSC will not be imposed on the redemption of Class B
shares acquired as dividends or other distributions, or on any increase in the
net asset value of the redeemed Class B shares above the original purchase
price.
Minimizing the CDSC. When you redeem Class B shares, the Fund automatically
will minimize the CDSC by assuming you are selling:
o First, Class B shares owned through reinvested dividends, upon which no
CDSC is imposed; and
o Second, Class B shares held in the customer's account the longest.
Waiver Of The Contingent Deferred Sales Charge. Under certain
circumstances, the CDSC for Class B shares will be waived. The CDSC for Class B
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shares currently is waived in the following cases: (1) to make certain
distributions from a retirement plan; (2) because of shareholder death or
disability; or (3) any partial or complete redemption in connection with a
distribution without penalty under Section 72(t) of the Internal Revenue Code of
1986, as amended (the "Code"), from a qualified retirement plan, including an
IRA upon attaining age 70 1/2.
The Distributor may require documentation prior to waiver of the CDSC
described above, including distribution letters, certification by plan
administrators, applicable tax forms or death or physicians certificates.
Class B Share Conversion. Class B shares automatically will convert to
Class A shares eight years after the end of the calendar month in which the
shareholder's order to purchase was accepted. The conversion will be effected at
the net asset value per share. Dividends and other distributions paid to
shareholders by the Fund in the form of additional Class B shares also
automatically will convert to Class A shares on a pro rata basis. A conversion
from Class B shares to Class A shares will benefit you because Class A shares
have lower ongoing Rule 12b-1 fees than Class B shares. Such conversion will not
be treated as a taxable event.
- --------------------------------------------------------------------------------
HOW TO SELL SHARES
General. You may sell all or any part of your investment by redeeming Fund
shares at the next determined net asset value per share, less any applicable
CDSC, after receipt of your request. The amount you receive will depend on the
market value of the investments in the Fund's portfolio at the time of
determination of net asset value. Shares of the Fund may be redeemed through
your broker-dealer, by written request or by telephone to the Transfer Agent
subject to the procedures described below. When you redeem shares over the
telephone, those redemption proceeds will be sent only to your address of record
or to a bank account specified in your Account Application. In addition,
redemption proceeds may be sent by wire transfer to a bank account specified in
your Account Application. You will be charged $12.00 for wire redemptions to
cover transaction costs.
By Mail. You may redeem Fund shares by sending a written request for
redemption to Golf Associated Fund, c/o PFPC Inc., P.O. Box 8941, Wilmington,
Delaware 19899-9752. Any such requests sent overnight or express mail should be
directed to the Golf Associated Fund, c/o PFPC Inc., 400 Bellevue Parkway, Suite
108, Wilmington, Delaware 19809.
In requesting a redemption, you should provide your account name, account
number, the class of shares to be redeemed, and the number of or percentage of
shares or the dollar value of shares to be redeemed. In addition, any written
request must be signed by a shareholder and all co-owners of the account with
exactly the same name or names used in establishing the account. Your request
must be in writing and your signature guaranteed on any written redemption
request and on any certificates of shares (or an accompanying stock power) for
the following types of requests: redemptions from any account that has had an
address change in the past 30 days, redemptions of greater than $10,000,
redemptions that are sent to a third party and redemptions that are sent to an
address other than the address of record. A signature guarantee may be obtained
from a national bank, a state bank that is insured by the Federal Deposit
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<PAGE>
Insurance Corporation, a trust company, or by any member firm of the New York,
American, Boston, Chicago, Pacific or Philadelphia Stock Exchanges.
A redemption request will not be deemed properly received until the
Transfer Agent receives all required information and documents in proper form.
The redemption price will be the net asset value per share next determined after
receipt by the Transfer Agent of all required documents in proper form.
Questions with respect to the proper form for redemption requests should be
directed to the Transfer Agent toll free at (877) 745-GOLF or -4653.
By Telephone. If you have selected telephone redemption privileges on the
Account Application or have subsequently arranged for such privilege, you may
redeem Fund shares by calling the Transfer Agent toll free at (877) 745-GOLF or
- -4653 prior to the close of regular trading on the NYSE, generally 4:00 p.m.,
Eastern time.
By establishing such telephone services, you authorize the Fund or its
agents to act upon verbal instructions to redeem Fund shares for any account for
which such service has been authorized. In an effort to prevent unauthorized or
fraudulent telephone transaction requests, the Transfer Agent will employ
reasonable procedures specified by the Fund to confirm that such instructions
are genuine. For instance, the Transfer Agent will require some form of personal
identification prior to acting upon telephone instructions, provide written
confirmation after such transactions, and record telephone instructions. When
acting on instructions believed to be genuine, the Fund, Adviser, Transfer Agent
and its trustees, directors, officers and employees are not liable for any loss
resulting from a fraudulent telephone transaction request and the investor will
bear the risk of loss. To the extent that the Fund, Adviser, Transfer Agent and
their trustees, directors, officers and employees do not employ such procedures,
some or all of them may be liable for losses due to unauthorized or fraudulent
transactions.
You also should be aware that telephone redemption or exchanges may be
difficult to implement in a timely manner during periods of drastic economic or
market changes. If such conditions occur, redemption orders can be made by mail.
Systematic Withdrawal Plan. Withdrawal plans are available that provide for
regular periodic withdrawals of $50 or more on a monthly, quarterly, semiannual
or annual basis. Under these plans, sufficient Fund shares are redeemed to
provide the amount of the periodic withdrawal payment. The purchase of Fund
shares while participating in the Systematic Withdrawal Plan ordinarily will be
disadvantageous to you because you will be paying a sales charge on the purchase
of those shares at the same time that you are redeeming Fund shares upon which
you may already have paid a sales charge. Therefore, the Fund will not knowingly
permit the purchase of Fund shares through the Systematic Investment Plan if you
are at the same time making systematic withdrawals. The Fund reserves the right
to cancel systematic withdrawals if insufficient shares are available for two or
more consecutive months.
Reinstatement Privilege. If you redeem any or all of your Fund shares, you
may reinvest all or any portion of the redemption proceeds in Fund shares at net
asset value without any sales charge, provided that such reinvestment is made
within 90 calendar days after the redemption date. A reinstatement pursuant to
this privilege will not cancel the redemption transaction; therefore, (1) any
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<PAGE>
gain realized on the transaction will be recognized for Federal income tax
purposes, while (2) any loss realized will not be recognized to the extent the
proceeds are reinvested in Fund shares. The reinstatement privilege may be
utilized by a shareholder only once, irrespective of the number of shares
redeemed, except that the privilege may be utilized without limitation in
connection with transactions whose sole purpose is to transfer a shareholder's
interest in the Fund to a defined contribution plan, IRA, SEP or SIMPLE. You
must notify the Fund if you intend to exercise the reinstatement privilege.
Contact the Fund for further information.
Receiving Payment. Payment of redemption proceeds normally will be made in
cash within seven days following the Fund's receipt of your request for
redemption in proper form. For investments that have been made by check, payment
on redemption requests may be delayed until the Transfer Agent is reasonably
satisfied that the purchase payment has been collected by the Fund, which may
take up to 15 days. To avoid redemption delays, purchases may be made by
cashiers or certified check or by direct wire transfers. The proceeds of a
redemption may be more or less than the original cost of Fund shares.
The Fund has the right to suspend redemption or postpone payment at times
when the NYSE is closed (other than customary weekend or holiday closings) or
during periods of emergency or other periods as permitted by the SEC. In the
case of any such suspension, you may either withdraw your request for redemption
or receive payment based upon the net asset value next determined, less any
applicable CDSC, after the suspension is lifted. If a redemption check remains
outstanding after six months, the Fund reserves the right to redeposit those
funds into your account. For more information on receiving payment, see
"Redeeming Shares" in the SAI.
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DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined as of the close of
normal trading on the NYSE (currently 4:00 p.m., Eastern time) each day the NYSE
is open for business. The Fund's net asset value serves as the basis for the
purchase and redemption price of its shares, less any applicable sales charges.
The net asset value per share of the Fund is calculated by dividing the market
value of the Fund's securities plus the value of its other assets, less all
liabilities, by the total number of Fund shares outstanding. The per share net
asset value of each class of shares may differ as a result of the different
daily expense accruals applicable to that class.
The Fund's equity securities and other assets are valued at their market
value based on the last sales price as reported by the principal securities
exchange or The Nasdaq Stock Market on which the securities are traded, or,
lacking any sales on a particular day, on the basis of the last current bid
price prior to the close of trading on the NYSE. Trading in foreign markets
usually is completed each day prior to the close of the NYSE. However, events
may occur that affect the values of such securities and the exchange rates
between the time of valuation and the close of the NYSE. Should events
materially affect the value of such securities during this period, the
securities are priced at fair value, as determined in good faith and pursuant to
procedures approved by the Board.
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Over-the-counter securities are valued on the basis of the last bid price
on that date prior to the close of trading. Debt securities (other than
short-term securities) normally will be valued on the basis of prices provided
by a pricing service and may take into account appropriate factors such as
institution-size trading in similar groups of securities, yield, quality, coupon
rate, maturity, type of issue, trading characteristics and other market data. In
some cases, the prices of debt securities may be determined using quotes
obtained from brokers. Securities for which market quotations are not readily
available are valued at fair value, as determined in good faith and pursuant to
procedures approved by the Board.
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PERFORMANCE
INFORMATION
From time to time the Fund may advertise or include in other written
materials its average annual total return and cumulative total return of each
class and compare its performance to that of other mutual funds with similar
investment objectives and to relevant indices. Performance information is
computed separately for each class in accordance with the methods described
below.
When the Fund advertises the total return of its shares, it will be
calculated for the one-, five-, and ten-year periods or, if such periods have
not yet elapsed, the period since the Fund commenced operations through the most
recent calendar quarter. Total return is measured by comparing the value of an
investment in the Fund at the beginning of the relevant period to the redemption
value of the investment at the end of the period (assuming reinvestment of any
dividends and capital gain distributions at net asset value). The total return
represents the average annual compounded rate of return on an investment of
$1,000 at the public offering price (in the case of Class A shares, giving
effect to the maximum initial sales charge of 5.75% and, in the case of Class B
shares, giving effect to the deduction of any CDSC that would be payable).
In addition, the Fund may advertise its total return in the same manner,
but without taking into account the initial sales charge or the CDSC. The Fund
also may advertise total return calculated without annualizing the return, and
total return may be presented for other periods. By not annualizing the returns,
the total return calculated in this manner simply will reflect the increase in
net asset value per Class A share and Class B shares over a period of time,
adjusted for dividends and other distributions. Class A share and Class B share
performance may be compared with various indices.
All data will be based on the Fund's past investment results and does not
predict future performance. Investment performance, which will vary, is based on
many factors, including market conditions, the composition of the Fund's
investment portfolio and operating expenses. Investment performance also often
reflects the risks associated with the Fund's investment objective and policies.
These factors should be considered when comparing the Fund's investment results
to those of other mutual funds and other investment vehicles. For more
information on investment performance, see the SAI.
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<PAGE>
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MANAGEMENT AND ADMINISTRATION OF THE FUND
Board of Trustees. The Fund's business and affairs are managed under the
direction of its Board of Trustees. The Trustees are responsible for the general
supervision of the Fund's business affairs and for exercising all the Fund's'
powers except those reserved to the shareholders. The Fund's day-to-day
operations are the responsibility of the Fund's officers.
Investment Adviser. Golf Investment Management, Inc., 2801 Ocean Drive,
Suite 204, Vero Beach, Florida 32963, provides investment advice to the Fund.
The Adviser is a newly created investment adviser and has had no previous
experience advising investment companies. The Adviser was organized as a Florida
corporation in June 1998. Michael T. Williams, CFP, CFS, owns a controlling
interest in the Adviser and controls Wilshire Financial Group, Inc., a
registered investment adviser since 1991.
The Adviser manages the investment of Fund assets, in accordance with its
investment objective, policies and limitations, subject to the general
supervision and control of the Trustees and the officers of the Fund. The
Adviser bears all costs associated with providing these advisory services and
the expenses of the Trustees who are affiliated persons of the Adviser. The
Adviser, from its own resources, also may pay certain expenses in connection
with the distribution of Fund shares.
Under an investment agreement between the Fund and the Adviser, the Fund
pays the Adviser a fee at an annualized rate, based on a percentage of its daily
net assets of 1.00%.
Subadviser. The Adviser has entered into an agreement with Wallington Asset
Management, Inc., 8900 Keystone Crossing, Suite 1015, Indianapolis, Indiana
46240, to provide investment advice and portfolio management services, including
placement of brokerage orders, on behalf of the Fund. The Subadviser, founded in
1988, is a registered investment adviser. The Subadviser provides financial
services to retail and institutional clients, with over $100 million in assets
under management as of October 31, 1998. For investment advisory services to the
Fund, the Adviser pays the Subadviser a monthly fee at an annual rate equal to
0.40% of the Fund's average daily net assets.
Portfolio Management. Investment decisions are made by a Committee of the
Subadviser organized for that purpose, and no single person is primarily
responsible for making recommendations to the Committee. The Committee is
subject to the oversight of the Adviser and Subadviser.
Administrator, Fund Accountant and Transfer Agent. PFPC Inc., Bellevue
Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware 19809, provides
administrative, accounting and transfer agency services to the Fund. As
compensation for administrative and accounting services, the Fund pays PFPC Inc.
an annual fee equal to: 0.10% of the Fund's first $250 million of average daily
net assets; .075% of the next $250 million; .05% of the next $250; and .03% on
average daily net assets in excess of $750 million, subject to a monthly minimum
fee of $8,333. From time to time, PFPC Inc. may waive a portion of its fee.
Distributor. Rafferty Capital Markets, Inc., 550 Mamaroneck Avenue,
Harrison, New York 10528, serves as the distributor of the Fund's shares. The
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<PAGE>
Distributor has entered into dealer agreements with participating dealers who
will distribute shares of the Fund.
Custodian. PNC Bank, N.A., Airport Business Center, 200 Stevens Drive,
Lester, Pennsylvania 19113, serves as the custodian of the Fund's portfolio
securities.
Independent Auditors. PricewaterhouseCoopers LLP, 30 Seventeenth Street,
Philadelphia, Pennsylvania 19103, are the auditors of and the independent
accountants for the Fund.
- --------------------------------------------------------------------------------
DISTRIBUTION PLANS
Pursuant to a distribution plan pertaining to Class A and Class B shares
(the "Plan"), the Fund is authorized to compensate the Distributor for services
rendered and expenses borne in connection with the distribution of Fund shares
and in connection with the servicing or maintenance of existing Fund shareholder
accounts. Pursuant to the Plan, distribution fees are paid for activities
relating to the distribution of Fund shares, including costs of printing and
dissemination of sales material or literature, prospectuses and reports used in
connection with the sale of Fund shares. Service fees are paid for the ongoing
maintenance and servicing of existing shareholder accounts, including payments
to broker-dealers who provide shareholder liaison services to their customers
who are holders of the Fund, provided they meet certain criteria.
With respect to Class A and Class B shares, the Plan authorizes the Fund to
pay the Distributor a distribution and service fee of up to 1.00% of the average
daily net assets attributable to such class. However, the Board of Trustees has
authorized the Fund to pay only 0.25% for Class A shares. These fees are
computed daily and paid monthly. Payments made to the Distributor under the Plan
represent compensation for distribution and service activities, not
reimbursement for specific expenses incurred. The Fund is not obligated under
the Plan to pay any distribution or service fees in excess of the amounts set
forth above. All expenses of distribution and marketing in excess of the maximum
amounts permitted by the Plan will be borne by the Adviser. If the Plan is
terminated with respect to a particular class, the Fund's obligation to make
payments to the Distributor pursuant to the Plan will cease and the Fund will
not be required to make any payment past the date the Plan terminates.
- --------------------------------------------------------------------------------
DIVIDENDS AND OTHER
DISTRIBUTIONS
Dividends and other distributions paid on each class of Fund shares are
calculated at the same time and in the same manner. Dividends from the net
investment income of the Fund normally are declared annually. The Fund also
distributes to its shareholders substantially all of its net realized capital
gains on portfolio securities and net realized gains from foreign currency
transactions after the end of the year in which the gains are realized.
Unless you elect otherwise on the Account Application, all dividends and
other distributions on the Class A or Class B shares automatically will be
declared and paid in additional shares of the Fund. However, you may choose to
have distributions of net capital gain paid in shares and dividends paid in cash
or to have all such distributions and dividends paid in cash. An election may be
17
<PAGE>
changed at any time by delivering written notice that is received by the
transfer agent at least 10 days prior to the payment date for a dividend or
other distribution.
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TAXES
The Fund intends to qualify for treatment as a regulated investment company
("RIC") under Subchapter M of the Code. By doing so, the Fund (but not its
shareholders) will be relieved of Federal income tax on the part of its
investment company taxable income and net capital gain it distributes to its
shareholders for that year. If the Fund fails to qualify as a RIC for any
taxable year, its taxable income, including net capital gain, will be taxed at
corporate income tax rates (up to 35%) and it will not receive a deduction for
distributions to its shareholders.
Dividends distributed by the Fund (including distributions of net
short-term capital gain), if any, are taxable to its shareholders as ordinary
income (at rates up to 39.6% for individuals), regardless of whether the
dividends are reinvested in Fund shares or received in cash. Distributions of a
Fund's net capital gain (i.e., the excess of net long-term gain over net
short-term capital loss), if any, are taxable to its shareholders as long-term
capital gains, regardless of how long they have held their Fund shares and
whether the distributions are reinvested in Fund shares or received in cash. A
shareholder's sale (redemption) of Fund shares may result in a taxable gain,
depending on whether the redemption proceeds are more or less than the adjusted
basis for the shares. An exchange of Fund shares for shares of another portfolio
of the Trust generally will have similar consequences.
Dividends and other distributions declared by the Fund in October, November
or December of any year and payable to shareholders of record on a date in that
month will be deemed to have been paid by the Fund and received by its
shareholders on December 31 if they are paid by the Fund during the following
January. Shareholders receive Federal income tax information regarding dividends
and other distributions after the end of each year.
The Fund is required to withhold 31% of all dividends, capital gain
distributions and redemption proceeds payable to individuals and certain other
non-corporate shareholders who do not provide the Fund with a correct taxpayer
identification number. Withholding at that rate also is required from dividends
and capital gain distributions payable to such shareholders who otherwise are
subject to backup withholding. When you sell Fund shares, it generally is
considered a taxable event to you.
The foregoing is only a summary of some of the important Federal income tax
considerations generally affecting the Fund and its shareholders. See the SAI
for a further discussion. There may be other Federal, state or local tax
considerations applicable to a particular investor. You are therefore urged to
consult your tax adviser.
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
Organization of the Fund and Voting Rights. The Fund was organized as a
Massachusetts business trust on June 11, 1998 and registered with the SEC as an
open-end management investment company under the 1940 Act. The Fund may issue
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<PAGE>
unlimited shares of beneficial interest, no par value, in such separate and
distinct series and classes of shares as the Trustees shall from time to time
establish. The shares of beneficial interest of the Fund are offered through two
classes of shares.
Class A and Class B shares have equal voting rights, except that in matters
affecting only a particular class, only shares of that class are entitled to
vote. Share voting rights are not cumulative, and shares have no preemptive or
conversion rights. Fund shares are nontransferable.
As a Massachusetts business trust, the Fund is not obligated to conduct
annual shareholder meetings. However, the Fund will hold special shareholder
meetings whenever required to do so under the Federal securities laws or the
Fund's Declaration of Trust or its By-Laws. Shareholders may remove Trustees
from office by votes cast at a special meeting of shareholders. If requested by
the shareholders of at least 10% of the outstanding shares of the Fund, the
Trustees will call a special meeting of shareholders to vote on the removal of a
Trustee and will assist in communications with other shareholders.
Fund Expenses. The Fund pays all of its own expenses. These expenses
include organizational costs, expenses for legal, accounting and auditing
services, preparing (including typesetting and printing) reports, prospectuses,
supplements thereto and notices to its existing shareholders, advisory and
management fees, fees and expenses of the custodian and transfer and dividend
disbursing agents, the distribution fee, the expense of issuing and redeeming
shares, the cost of registering shares under the Federal and state laws,
shareholder meeting and related proxy solicitation expenses, the fees and
out-of-pocket expenses of Trustees who are not affiliated with the Adviser,
insurance, brokerage costs, litigation, and other expenses properly payable by
the Fund.
Master/Feeder Option. The Fund may in the future seek to achieve its
investment objective by investing all of its net assets in another investment
company ("Master Fund") having the same investment objective and substantially
the same investment policies and restrictions as those of the Fund. It is
expected that any such investment company would be managed by the Adviser in
substantially the same manner as the Fund. If permitted by applicable laws and
policies then in effect, any such investment may be made at the sole discretion
of the Trustees without further approval of shareholders of the Fund. However,
the Fund's shareholders will be given 30 days' prior notice of any such
investment. Such investment would be made only if the Trustees determine it
would be in the best interests of the Fund and its shareholders. In making that
determination, the Trustees will consider, among other things, the benefits to
shareholders and/or the opportunity to reduce costs and achieve operational
efficiencies. No assurance can be given that costs will be materially reduced if
this option is implemented.
Year 2000. The Fund could be affected adversely if the computer systems
used by the Adviser, the Fund and their service providers, or companies in which
the Fund invests do not properly process and calculate information that relates
to dates beginning on January 1, 2000 and beyond. The Adviser has taken steps
that it believes are reasonably designed to address the potential failure of
computer systems used by the Adviser and the Fund's service providers to address
the Year 2000 issue. There can be no assurance that these steps will be
sufficient to avoid any adverse impact.
Shareholder Inquiries. Shareholder inquiries can be made by telephone to
the Fund toll free at (877) 745-GOLF or -4653.
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APPENDIX A
INVESTMENT TECHNIQUES
Debt Securities. Debt securities are likely to decline in value in times of
rising market interest rates and to rise in value in times of falling interest
rates ("interest rate risk"). In general, the longer the maturity of a debt
security, the more pronounced is the effect of a change in interest rates on the
value of the security. Debt securities are subject to the risk of an issuer's
inability to meet principal and interest payments on its obligations ("credit
risk") and are subject to price volatility due to such factors as interest rate
sensitivity, market perception of the creditworthiness of the issuer and market
liquidity ("market risk").
American Depository Receipts. ADRs are dollar denominated receipts
representing interests in the securities of a foreign issuer, which securities
may not necessarily be denominated in the same currency as the securities into
which they may be converted. ADRs are receipts typically issued by United States
banks and trust companies that evidence ownership of underlying securities
issued by a foreign corporation. Generally, ADRs in registered form are designed
for use in domestic securities markets and are traded on exchanges or in
over-the-counter ("OTC") markets in the United States.
Convertible Securities. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issue within a
particular period of time at a specified price or formula. A convertible
security entitles the holder to receive interest paid or accrued on debt or
dividends paid on preferred stock until the convertible stock matures or is
redeemed, converted or exchanged. Convertible securities have unique investment
characteristics in that they generally have higher yields than common stocks,
but lower yields than comparable nonconvertible securities, are less subject to
fluctuation in value than the underlying stock because they have fixed-income
characteristics and provide the potential for capital appreciation if the market
price of the underlying common stock increases.
Foreign Securities. Investments in securities of foreign issuers, or
securities principally traded overseas, may involve certain special risks due to
foreign economic, political and legal developments, including favorable or
unfavorable changes in currency exchange rates, exchange control regulations,
expropriation of assets or nationalization, imposition of withholding taxes on
dividend or interest payments, and possible difficulty in obtaining and
enforcing judgments against foreign entities. Furthermore, foreign issuers are
subject to different, often less comprehensive, accounting, reporting and
disclosure requirements than domestic issuers. The securities of some foreign
companies and foreign securities markets are less liquid and at times more
volatile than securities of comparable U.S. companies and U.S. securities
markets. Foreign brokerage commissions and other fees generally are higher than
in the United States. Foreign settlement procedures and trade regulation may
involve certain risks (such as delay in payment or delivery of securities or in
the recovery of assets held abroad) and expenses not present in the settlement
of domestic investments. There also are special tax considerations that apply to
foreign currency denominated securities.
Repurchase Agreements. A repurchase agreement is a transaction in which the
Fund purchases securities and commits to resell the securities to the original
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seller (a member bank of the Federal Reserve System or securities dealers who
are members of a national securities exchange or are market makers in U.S.
Government securities) at an agreed upon date and price reflecting a market rate
of interest unrelated to the coupon rate or maturity of the purchased
securities. Repurchase agreements carry certain risks not associated with direct
investment in securities, including possible declines in the market value of the
underlying securities and delays and costs to the Fund if the other party
becomes bankrupt.
Restricted Securities and Illiquid Investments. The Fund may purchase and
hold illiquid investments, including securities that are not readily marketable
and securities that are not registered ("restricted securities") under the
Securities Act of 1933, as amended ("1933 Act"), but which can be offered and
sold to "qualified institutional buyers" pursuant to Rule 144A under the 1933
Act. The Fund will not invest more than 15% of its net assets in illiquid
investments. The term "illiquid investments" for this purpose means investments
that cannot be disposed of within seven days in the ordinary course of business
at approximately the amount at which a Fund has valued the investments. Under
the current SEC staff guidelines, illiquid investments also include repurchase
agreements not terminable in seven days and restricted securities not determined
to be liquid pursuant to guidelines established by the Board.
Temporary Defensive Purposes. For temporary defensive purposes during
anticipated periods of general market decline, the Fund may invest up to 100% of
its net assets in money market instruments, including securities issued by the
U.S. Government, its agencies or instrumentalities and repurchase agreements
secured thereby, as well as bank certificates of deposit and banker's
acceptances issued by banks having net assets of at least $1 billion as of the
end of their most recent fiscal year, high-grade commercial paper, and other
long- and short-term debt instruments that are rated A or higher by S&P or
Moody's or deemed to be of equal quality by the Subadviser. For a description of
S&P or Moody's commercial paper and corporate debt ratings, see the Appendix to
the SAI.
U.S. Government Securities. U.S. Government Securities are high-quality
instruments issued or guaranteed as to principal or interest by the U.S.
Treasury or by an agency or instrumentality of the U.S. Government. U.S.
Government Securities include direct obligations of the U.S. Treasury (such as
Treasury bills, Treasury notes and Treasury bonds). Not all U.S. Government
Securities are backed by the full faith and credit of the United States. Some
are backed by the right of the issuer to borrow from the U.S. Treasury; others
are backed by discretionary authority of the U.S. Government to purchase the
agencies' obligations; while others are supported only by the credit of the
instrumentality. In the case of securities not backed by the full faith and
credit of the United States, the investor must look principally to the agency
issuing or guaranteeing the obligation for ultimate repayment.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, OR IN THE SAI INCORPORATED
HEREIN BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR PRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFERING BY THE FUND IN ANY JURISDICTION IN WHICH SUCH AN OFFERING MAY NOT
LAWFULLY BE MADE.
PROSPECTUS
December 23, 1998
Investment Advisor
Golf Investment Management, Inc.
2801 Ocean Drive, Suite 204
Vero Beach, FL 32963
Subadvisor
Wallington Asset Management, Inc.
8900 Keystone Crossing, Suite 1015
Indianapolis, IN 46240
Administrator, Transfer Agent & Fund Accountant
PFPC Inc.
Bellevue Corporate Center
400 Bellevue Parkway
Wilmington, DE 19809
Custodian
PNC Bank, N.A.
Airport Business Center
200 Stevens Drive
Lester, PA 19113
Counsel
Kirkpatrick & Lockhart, LLP
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800
Independent Auditors
PricewaterhouseCoopers LLP
30 Seventeenth Street
Philadelphia, PA 19103
[LOGO]
2801 Ocean Drive, Suite 204
Vero Beach, Florida 32963
(877) 745-GOLF or -4653
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
GOLF ASSOCIATED FUND
2801 Ocean Drive, Suite 204
Vero Beach, Florida 32963
toll free
(877) 745-GOLF or -4653
December 23, 1998
This is a Statement of Additional Information ("SAI") for the Golf
Associated Fund (the "Fund"), an open-end diversified management investment
company. The Fund offers Class A shares and Class B shares. Currently, only
Class A shares are available for purchase. This SAI is not a prospectus and
should be read in conjunction with the Fund's Prospectus dated December 23,
1998. A copy of the Fund's Prospectus is available, without charge, upon request
to the Fund at the telephone number or address above.
TABLE OF CONTENTS
Page
GENERAL INFORMATION............................................................1
INVESTMENT INFORMATION.........................................................1
INVESTMENT LIMITATIONS.........................................................6
NET ASSET VALUE................................................................7
PERFORMANCE INFORMATION........................................................8
INVESTING IN THE FUND..........................................................9
Class A Share Cumulative Purchase Privilege (Right of Accumulation)...9
Class A Share Letter of Intent........................................9
REDEEMING SHARES..............................................................10
Systematic Withdrawal Plan...........................................10
Telephone Transactions...............................................11
Redemptions in Kind..................................................11
Receiving Payment....................................................11
CONVERSION OF CLASS B SHARES..................................................11
TAXES .....................................................................12
FUND INFORMATION..............................................................14
Management of the Fund...............................................14
Investment Adviser and Subadviser....................................15
Brokerage Practices..................................................16
Distribution of Shares...............................................17
Administration of the Fund...........................................18
Potential Liability..................................................18
APPENDIX.....................................................................A-1
AUDITED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS...........B-1
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GENERAL INFORMATION
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The Golf Associated Fund (the "Fund") was established as a
Massachusetts business trust under a Declaration of Trust dated June 11, 1998.
The Fund has two classes of shares, Class A shares sold subject to a 5.75%
maximum front-end sales charge ("Class A shares") and Class B shares sold
subject to a maximum 5% contingent deferred sales charge ("CDSC"), declining
over a six-year period ("Class B shares"). Currently, the Fund only offers Class
A shares for sale.
INVESTMENT INFORMATION
- ----------------------
The following information supplements the discussion in the Prospectus
of the investment objective, policies and limitations of the Fund. Please refer
to the sections in the Prospectus entitled "About the Golf Associated Fund" and
Appendix A - Investment Techniques for a discussion of the investment objective,
policies and techniques of the Fund. Golf Investment Management, Inc. (the
"Adviser") serves as the Fund's investment adviser. Wallington Asset Management,
Inc. serves as the Fund's investment subadviser (the "Subadviser"). Capitalized
terms not otherwise defined herein shall have the same meaning as assigned in
the Prospectus.
The Fund may engage in the investment strategies discussed below. There
is no assurance that any of these strategies or any other strategies and methods
of investment available to the Fund will result in the achievement of the Fund's
objective.
AMERICAN DEPOSITORY RECEIPTS ("ADRS"). ADRs include ordinary shares and
New York shares. ADRs may be purchased through "sponsored" or "unsponsored"
facilities. A sponsored facility is established jointly by the issuer of the
underlying security and a depository, whereas a depository may establish an
unsponsored facility without participation by the issuer of the depository
security. Holders of unsponsored depository receipts generally bear all the
costs of such facilities and the depository of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited security or to pass through voting
rights to the holders of such receipts of the deposited securities. ADRs are not
necessarily denominated in the same currency as the underlying securities to
which they may be connected. Generally, ADRs in registered form are designed for
use in the U.S. securities market and ADRs in bearer form are designed for use
outside the United States.
BANKER'S ACCEPTANCES. The Fund may invest in banker's acceptances. A
banker's acceptance is a short-term credit instrument used to finance commercial
transactions. Generally, an acceptance is a time draft drawn on a bank by an
exporter or an importer to obtain a stated amount of funds to pay for specific
merchandise. The draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an
asset, or it may be sold in the secondary market at the going rate of interest
for a specified maturity. Although maturities for acceptances can be as long as
270 days, most acceptances have maturities of six months or less.
BORROWING. The Fund may borrow money to facilitate management of the
Fund's portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio instruments would be inconvenient or disadvantageous.
Such borrowing is not for investment purposes and will be repaid by the Fund
promptly.
As required by the Investment Company Act of 1940, as amended ("1940
Act"), the Fund must maintain continuous asset coverage (total assets, including
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assets acquired with borrowed funds, less liabilities exclusive of borrowings)
of 300% of all amounts borrowed. If at any time the value of the required asset
coverage declines as a result of market fluctuations or other reasons, the Fund
may be required to sell some of its portfolio investments within three days to
reduce the amount of its borrowings and restore the 300% asset coverage, even
though it may be disadvantageous from an investment standpoint to sell portfolio
instruments at that time.
The Fund may borrow money from a bank as a temporary measure for
extraordinary or emergency purposes in amounts not in excess of 5% of the value
of its total assets. This borrowing is not subject to the foregoing 300% asset
coverage requirement. The Fund may pledge portfolio securities as the Subadviser
deems appropriate in connection with any borrowings.
CERTIFICATES OF DEPOSIT. The Fund may invest in bank certificates of
deposit ("CDs") issued by domestic institutions with assets in excess of $1
billion. The Federal Deposit Insurance Corporation is an agency of the U.S.
Government that insures the deposits of certain banks and savings and loan
associations up to $100,000 per deposit. The interest on such deposits may not
be insured if this limit is exceeded. Current federal regulations also permit
such institutions to issue insured negotiable CDs in amounts of $100,000 or
more, without regard to the interest rate ceilings on other deposits. To remain
fully insured, these investments currently must be limited to $100,000 per
insured bank or savings and loan association.
COMMERCIAL PAPER. The Fund may invest in commercial paper that is
limited to obligations rated Prime-1 or Prime-2 by Moody's Investors Service,
Inc. ("Moody's") or A-1 or A-2 by Standard & Poor's ("S&P"). Commercial paper
includes notes, drafts or similar instruments payable on demand or having a
maturity at the time of issuance not exceeding nine months, exclusive of days of
grace or any renewal thereof. See the Appendix for a description of commercial
paper ratings.
COMMON STOCK. Common stock is defined as shares of a corporation that
entitle the holder to a pro rata share of the profits of the corporation, if
any, without a preference over any other shareholder or class of shareholders,
including holders of the corporation's preferred stock and other senior equity.
Common stock usually carries with it the right to vote, and frequently, an
exclusive right to do so. Holders of common stock also have the right to
participate in the remaining assets of the corporation after all other claims,
including those of debt securities and preferred stock, are paid.
CONVERTIBLE SECURITIES. The Fund may invest in convertible securities
as described in the Prospectus. While no securities investment is without some
risk, investments in convertible securities generally entail less risk than the
issuer's common stock, although the extent to which such risk is reduced depends
in large measure upon the degree to which the convertible security sells above
its value as a fixed income security. The Subadviser, on behalf of the Fund,
will decide to invest based upon a fundamental analysis of the long-term
attractiveness of the issuer and the underlying common stock, an evaluation of
the relative attractiveness of the current price of the underlying common stock,
and a judgment of the value of the convertible security relative to the common
stock at current prices. Convertible securities in which the Fund may invest
include corporate bonds, notes and preferred stock that can be converted into
(exchanged for) common stock. Convertible securities combine the fixed-income
characteristics of bonds and capital appreciation potential of preferred stock.
The market value of convertible securities tends to decline as interest rates
increase and, conversely, to increase as interest rates decline. While
convertible securities generally offer lower interest or dividend yields than
nonconvertible debt securities of similar quality, they do enable the investor
to benefit from increases in the market price of the underlying common stock.
FOREIGN SECURITIES. The Fund may invest in foreign securities. It is
anticipated that, in most cases, the best available market for foreign
2
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securities will be on exchanges or in over-the-counter markets located outside
the United States. Foreign stock markets, while growing in volume and
sophistication, generally are not as developed as those in the United States. In
general, there is less overall governmental supervision and regulation of
securities exchanges, brokers and listed companies than in the United States.
Investments in foreign securities also involve the risk of possible adverse
changes in investment or exchange control regulations, expropriation or
confiscatory taxation, limitation on or delays in the removal of funds or other
assets of the Fund, political or financial instability or diplomatic and other
developments that could affect such investments. Further, the economies of some
countries may differ favorably or unfavorably from the economy of the United
States.
It is the Fund's policy not to invest in foreign securities when there
are currency or trading restrictions in force or when, in the judgment of the
Subadviser, such restrictions are likely to be imposed. However, certain
currencies may become blocked (i.e., not freely available for transfer from a
foreign country), resulting in the possible inability of the Fund to convert
proceeds realized upon sale of portfolio securities of the affected foreign
companies into U.S. currency.
Because investments in foreign companies usually will involve
currencies of foreign countries and because the Fund may temporarily hold funds
in bank deposits in foreign currencies during the completion of investment
programs, the value of any of the assets of the Fund as measured in U.S. dollars
may be affected favorably or unfavorably by changes in foreign currency exchange
rates and exchange control regulations, and the Fund may incur costs in
connection with conversions between various currencies. The Fund will conduct
its foreign currency exchange transactions on a spot (i.e., cash) basis at the
spot rate prevailing in the foreign currency exchange market.
ILLIQUID INVESTMENTS AND RESTRICTED SECURITIES. The Fund will not
purchase or otherwise acquire any security if, as a result, more than 15% of its
net assets (taken at current value) would be invested in investments that are
illiquid by virtue of the absence of a readily available market or legal or
contractual restrictions on resale. This policy does not include restricted
securities eligible for resale pursuant to Rule 144A under the Securities Act of
1933, as amended ("1933 Act") that the Board of Trustees (the "Board") or the
Subadviser has determined, under Board-approved guidelines, are liquid.
The term "illiquid investments" for this purpose means investments that
cannot be disposed of within seven days in the ordinary course of business at
approximately the amount at which the Fund has valued the investments.
Investments currently considered to be illiquid include: (1) repurchase
agreements not terminable within seven days, (2) securities for which market
quotations are not readily available, (3) OTC options and their underlying
collateral, (4) bank deposits, unless they are payable at principal amount plus
accrued interest on demand or within seven days after demand and (5) restricted
securities not determined to be liquid pursuant to guidelines established by the
Board.
The Fund may not be able to sell illiquid investments when the
Subadviser considers it desirable to do so or may have to sell such investments
at a price that is lower than the price that could be obtained if the
investments were liquid. In addition, the sale of illiquid investments may
require more time and result in higher dealer discounts and other selling
expenses than does the sale of investments that are not illiquid. Illiquid
investments also may be more difficult to value due to the unavailability of
reliable market quotations for such investments, and investment in illiquid
investments may have an adverse impact on net asset value.
Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional markets for restricted securities
3
<PAGE>
that have developed as a result of Rule 144A provide both readily ascertainable
values for certain restricted securities and the ability to liquidate an
investment to satisfy share redemption orders. An insufficient number of
qualified institutional buyers interested in purchasing Rule 144A-eligible
securities held by the Fund, however, could affect adversely the marketability
of such portfolio securities and the Fund may be unable to dispose of such
securities promptly or at reasonable prices.
INVESTMENTS IN OTHER INVESTMENT COMPANIES. The Fund may invest in the
securities of other investment companies to the extent that such an investment
would be consistent with the requirements of the 1940 Act. Investments in the
securities of other investment companies may involve duplication of advisory
fees and certain other expenses. By investing in another investment company, the
Fund becomes a shareholder of that investment company. As a result, Fund
shareholders indirectly will bear the Fund's proportionate share of the fees and
expenses paid by shareholders of the other investment company, in addition to
the fees and expenses Fund shareholders directly bear in connection with the
Fund's own operations.
LENDING PORTFOLIO SECURITIES. The Fund may lend portfolio securities
with a value not exceeding 33 1/3% of its total assets to brokers, dealers, and
financial institutions. Borrowers are required continuously to secure their
obligations to return securities on loan from the Fund by depositing any
combination of short-term government securities and cash as collateral with the
Fund. The collateral must be equal to at least 100% of the market value of the
loaned securities, which will be marked to market daily. While the Fund's
portfolio securities are on loan, the Fund continues to receive interest on the
securities loaned and simultaneously earns either interest on the investment of
the collateral or fee income if the loan is otherwise collateralized. The Fund
may invest the interest received and the collateral, thereby earning additional
income. Loans would be subject to termination by the Fund on four business days'
notice or by the borrower on one day's notice. Borrowed securities must be
returned when the loan is terminated. Any gain or loss in the market price of
the borrowed securities that occurs during the term of the loan inures to the
Fund. The Fund may pay reasonable finders, borrowers, administrative and
custodial fees in connection with a loan. The Fund currently has no intention of
lending its portfolio securities.
PORTFOLIO TURNOVER. Although the Fund generally will not invest for
short-term trading purposes, portfolio securities may be sold from time to time
without regard to the length of time they have been held when, in the opinion of
the Subadviser, investment considerations warrant such action. Portfolio
turnover rate is calculated by dividing (1) the lesser of purchases or sales of
portfolio securities for the fiscal year by (2) the monthly average of the value
of portfolio securities owned during the fiscal year. A 100% turnover rate would
occur if all the securities in the Fund's portfolio, with the exception of
securities whose maturities at the time of acquisition were one year or less,
were sold and either repurchased or replaced within one year. A high rate of
portfolio turnover generally leads to transactions costs and may result in a
greater number of taxable transactions.
PREFERRED STOCK. The Fund may invest in preferred stock. A preferred
stock is a blend of the characteristics of a bond and common stock. It can offer
the higher yield of a bond and has priority over common stock in equity
ownership, but does not have the seniority of a bond and its participation in
the issuer's growth may be limited. Preferred stock has preference over common
stock in the receipt of dividends and in any residual assets after payment to
creditors should the issuer be dissolved. Although the dividend is set at a
fixed annual rate, in some circumstances it can be changed or omitted by the
issuer.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements
with banks that are members of the Federal Reserve System or securities dealers
who are members of a national securities exchange or are primary dealers in U.S.
Government Securities. Repurchase agreements generally are for a short period of
time, usually less than a week. Repurchase agreements with a maturity of more
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<PAGE>
than seven days are considered to be illiquid investments. The Fund may not
enter into such a repurchase agreement if, as a result, more than 15% of the
value of its net assets would then be invested in such repurchase agreements and
other illiquid investments. See "Illiquid Investments and Restricted Securities"
above.
The Fund follows certain procedures and guidelines adopted by the Board
designed to minimize the risks inherent in such transactions. These procedures
include effecting repurchase transactions only with large, well-capitalized and
well-established institutions whose financial condition will be monitored by the
Subadviser. In addition, the Fund will always receive, as collateral, securities
whose market value, including accrued interest, at all times will be equal to at
least 100% of the dollar amount invested by the Fund in each repurchase
agreement. If the seller defaults, the Fund might incur a loss if the value of
the collateral securing the repurchase agreement declines and might incur
disposition costs in connection with liquidating the collateral. In addition, if
bankruptcy or similar proceedings are commenced with respect to the seller of
the security, realization upon the collateral by the Fund may be delayed or
limited.
U.S. GOVERNMENT SECURITIES. Securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities ("U.S. Government Securities")
include Treasury Bills (which mature within one year of the date they are
issued), Treasury Notes (which have maturities of one to ten years) and Treasury
Bonds (which generally have maturities of more than 10 years). All such Treasury
securities are backed by the full faith and credit of the United States.
U.S. Government agencies and instrumentalities that issue or guarantee
securities include, but are not limited to, the Federal Housing Administration,
the Federal National Mortgage Association ("Fannie Mae"), the Farmers Home
Administration, the Export-Import Bank of the United States, the Small Business
Administration, the Government National Mortgage Association ("Ginnie Mae"), the
General Services Administration, the Central Bank for Cooperatives, the Federal
Home Loan Banks, the Federal Home Loan Mortgage Corporation ("Freddie Mac"), the
Farm Credit Banks, the Maritime Administration, the Tennessee Valley Authority,
the Resolution Funding Corporation and the Student Loan Marketing Association.
Securities issued or guaranteed by U.S. Government agencies and
instrumentalities are not always supported by the full faith and credit of the
United States. Some, such as securities issued by the Federal Home Loan Banks,
are backed by the right of the agency or instrumentality to borrow from the
Treasury. Others, such as securities issued by Fannie Mae, are supported only by
the credit of the instrumentality and by a pool of mortgage assets. If the
securities are not backed by the full faith and credit of the United States, the
owner of the securities must look principally to the agency issuing the
obligation for repayment and may not be able to assert a claim against the
United States in the event that the agency or instrumentality does not meet its
commitment.
WARRANTS AND RIGHTS. The Fund may purchase warrants and rights, which
are instruments that permit the Fund to acquire, by subscription, the capital
stock of a corporation at a set price, regardless of the market price for such
stock. The Fund currently does not intend to invest more than 5% of its net
assets in warrants. However, the Fund also may invest in warrants or rights
acquired by the Fund as part of a unit or attached to securities at the time of
purchase without limitation. Warrants may be either perpetual or of limited
duration. There is a greater risk that warrants might drop in value at a faster
rate than the underlying stock.
WHEN-ISSUED SECURITIES. The Fund may invest up to 5% of its net assets
in securities issued on a when-issued or delayed delivery basis at the time the
purchase is made. The Fund generally would not pay for such securities or start
earning interest on them until they are issued or received. However, when the
5
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Fund purchases debt obligations on a when-issued basis, it assumes the risks of
ownership, including the risk of price fluctuation, at the time of purchase, not
at the time of receipt. Failure of the issuer to deliver a security purchased by
the Fund on a when-issued basis may result in the Fund's incurring a loss or
missing an opportunity to make an alternative investment. When the Fund enters
into a commitment to purchase securities on a when-issued basis, it establishes
a separate account on its books and records or with its custodian consisting of
cash or liquid high-grade debt securities equal to the amount of the Fund's
commitment, which are valued at their fair market value. If on any day the
market value of this segregated account falls below the value of the Fund's
commitment, the Fund will be required to deposit additional cash or qualified
securities into the account until equal to the value of the Fund's commitment.
When the securities to be purchased are issued, the Fund will pay for the
securities from available cash, the sale of securities in the segregated
account, sales of other securities and, if necessary, from sale of the
when-issued securities themselves although this is not ordinarily expected.
Securities purchased on a when-issued basis are subject to the risk that yields
available in the market, when delivery takes place, may be higher than the rate
to be received on the securities the Fund is committed to purchase. Sale of
securities in the segregated account or sale of the when-issued securities may
cause the realization of a capital gain or loss.
INVESTMENT LIMITATIONS
- ----------------------
In addition to the investment policies and limitations described above
and described in the Prospectus, the Fund has adopted the following investment
limitations that are fundamental policies and may not be changed without the
vote of a majority of the outstanding voting securities of the Fund. Under the
1940 Act, a "vote of the majority of the outstanding voting securities" of the
Fund means the affirmative vote of the lesser of: (1) more than 50% of the
outstanding shares of the Fund or (2) 67% or more of the shares of the Fund
present at a shareholders meeting if more than 50% of the outstanding shares are
represented at the meeting in person or by proxy.
For purposes of the following limitations, all percentage limitations
apply immediately after a purchase or initial investment. Except with respect to
borrowing money, if a percentage limitation is adhered to at the time of the
investment, a later increase or decrease in the percentage resulting from any
change in value or net assets will not result in a violation of such
restrictions. If at any time the Fund's borrowings exceed its limitations due to
a decline in net assets, such borrowings will be reduced promptly to the extent
necessary to comply with the limitation.
The Fund shall not:
1. LOANS. Lend any security or make any other loan if, as a result,
more than 33 1/3% of the value of the Fund's total assets would be
lent to other parties, except (1) through the purchase of a
portion of an issue of debt securities in accordance with the
Fund's investment objective, policies and limitations or (2) by
engaging in repurchase agreements with respect to portfolio
securities.
2. UNDERWRITING. Underwrite securities of any other issuer.
3. INVESTING REAL ESTATE OR MINERALS. Purchase, hold, or deal in real
estate (but this restriction shall not prevent the Fund from
investing directly or indirectly in portfolio instruments secured
by real estate or interests therein or acquiring securities of
real estate investment trusts or other issuers that deal in real
estate) or oil and gas interests.
4. SENIOR SECURITIES. Issue any senior security (as such term is
defined in Section 18(f) of the 1940 Act) (including the amount of
6
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senior securities issued by excluding liabilities and indebtedness
not constituting senior securities), except (1) that the Fund may
issue senior securities in connection with transactions in
options, futures, options on futures, forward contracts, and other
similar investments, (2) as otherwise permitted herein and in
Investment Limitations Nos. 5, 7, and 8.
5. PLEDGING, MORTGAGING, OR HYPOTHECATING ASSETS. Pledge, mortgage,
or hypothecate the Fund's assets, except (1) to the extent
necessary to secure permitted borrowings, (2) in connection with
the purchase of securities on a forward-commitment or
delayed-delivery basis or the sale of securities on a
delayed-delivery basis, and (3) in connection with options,
futures contracts, options on futures contracts, forward contracts
and other financial instruments.
6. INVESTING IN COMMODITIES. Invest in physical commodities, except
that the Fund may purchase and sell foreign currency, options,
futures contracts, options on futures contracts, forward
contracts, securities on a forward-commitment or delayed-delivery
basis, and other financial instruments.
7. BORROWING MONEY. Borrow money, except (1) as a temporary measure
for extraordinary or emergency purposes and then only in amounts
not to exceed 5% of the value of the Fund's total assets, (2) in
an amount up to 33 1/3% of the value of the Fund's total assets,
including the amount borrowed, in order to meet redemption
requests without immediately selling portfolio securities, (3) to
enter into reverse repurchase agreements, and (4) to lend
portfolio securities. For purposes of this investment limitation,
the purchase or sale of options, futures contracts, options on
futures contracts, forward contracts and other financial
instruments shall not constitute borrowing.
8. SHORT SALES. Make short sales of portfolio securities or purchase
any portfolio securities on margin but may obtain such short-term
credits as are necessary for the clearance of transactions, and
make margin payments in connection with options, futures
contracts, options on futures contracts, forward contracts and
other financial instruments.
9. INDUSTRY CONCENTRATION. Invest more than 25% of the value of its
total assets in the securities of issuers in any single industry,
provided that there shall be no limitation on the purchase of
obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.
10. DIVERSIFICATION. With respect to 75% of the Fund's total assets,
the Fund may not invest more than 5% of its assets (valued at
market value) in securities of any one issuer other than the U.S.
Government or its agencies and instrumentalities or purchase more
than 10% of the voting securities of any one issuer.
NET ASSET VALUE
- ---------------
The net asset value per share of Class A shares and Class B shares is
determined separately daily as of the close of regular trading on the New York
Stock Exchange (the "NYSE") each day the NYSE is open for business. The Fund is
open for business on days on which the NYSE is open ("Business Days"). The NYSE
currently observes the following holidays: New Year's Day, Martin Luther King,
Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.
The Board may suspend the right of redemption or postpone payment for
more than seven days at times (1) during which the NYSE is closed other than for
7
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the customary weekend and holiday closings, (2) during which trading on the NYSE
is restricted as determined by the Securities and Exchange Commission ("SEC"),
(3) during which an emergency exists as a result of which disposal by the Fund
of securities owned by it is not reasonably practicable or it is not reasonably
practical for the Fund fairly to determine the value of its net assets, or (4)
for such other periods as the SEC may by order permit for the protection of the
holders of Fund shares.
PERFORMANCE INFORMATION
- -----------------------
The Fund's performance data quoted in advertising and other promotional
materials represents past performance and is not intended to indicate future
performance. The investment return and principal value of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost. Average annual total return quotes for each class used
in the Fund's advertising and promotional materials are calculated according to
the following formula:
n
P(1+T) = ERV
where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
period at the end of that period
In calculating the ending redeemable value for Class A shares, the
Fund's current maximum sales charge of 5.75% is deducted from the initial $1,000
payment and, for Class B shares, the CDSC imposed on a redemption of Class B
shares held for the period is deducted. All dividends and other distributions by
the Fund are assumed to have been reinvested at net asset value on the
reinvestment dates during the period. Based on this formula, the total return,
or "T" in the formula above, is computed by finding the average annual
compounded rates of return over the period that would equate the initial amount
invested to the ending redeemable value.
In connection with communicating its total return to current or
prospective shareholders, the Fund also may compare these figures to the
performance of other mutual funds tracked by mutual fund rating services or to
other unmanaged indexes that may assume reinvestment of dividends but generally
do not reflect deductions for administrative and management costs. In addition,
the Fund may from time to time include in advertising and promotional materials
total return figures that are not calculated according to the formula set forth
above for both classes of shares. For example, in comparing the Fund's total
return with data published by Lipper Analytical Services, Inc. and CDA
Investment Technologies, Inc., or with such market indices as the Dow Jones
Industrial Average and the S&P 500 Index, the Fund calculates its cumulative
total return for both classes for the specified periods of time by assuming an
investment of $10,000 in that class of shares and assuming the reinvestment of
each dividend or other distribution at net asset value on the reinvestment date.
Percentage increases are determined by subtracting the initial value of the
investment from the ending value and by dividing the remainder by the beginning
value. The Fund does not, for these purposes, deduct from the initial value
invested any amount representing front-end sales charges charged on Class A
shares or CDSC charged on Class B shares. By not annualizing the performance and
excluding the effect of the front-end sales charge on Class A shares and the
CDSC on Class B shares, the total return calculated in this manner simply will
reflect the increase in net asset value per share over a period of time,
adjusted for dividends and other distributions. Calculating total return without
taking into account the sales charge or CDSC results in a higher rate of return
than calculating total return net of the front-end sales charge.
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INVESTING IN THE FUND
- ---------------------
Class A shares and Class B shares are sold at their next determined net
asset value on Business Days. The procedures for purchasing shares of the Fund
are explained in the Prospectus under "How to Invest in the Fund."
Class A Share Cumulative Purchase Privilege (Right of Accumulation)
-------------------------------------------------------------------
Certain investors may qualify for the Class A sales charge reductions
indicated in the sales charge schedule in the Prospectus by combining purchases
of Class A shares into a single "purchase," if the resulting purchase totals at
least $50,000. The term "purchase" refers to a single purchase by an individual,
or to concurrent purchases that, in the aggregate, are at least equal to the
prescribed amounts, by an individual, his spouse and their children under the
age of 21 years purchasing Class A shares for his or their own account; a single
purchase by a trustee or other fiduciary purchasing Class A shares for a single
trust, estate or single fiduciary account although more than one beneficiary is
involved, or a single purchase for the employee benefit plans of a single
employer. The term "purchase" also includes purchases by a "company," as the
term is defined in the 1940 Act, but does not include purchases by any such
company that has not been in existence for at least six months or that has no
purpose other than the purchase of Class A shares or shares of other registered
investment companies at a discount, provided, however, that it shall not include
purchases by any group of individuals whose sole organizational nexus is that
the participants therein are credit card holders of a company, policy holders of
an insurance company, customers of either a bank or broker-dealer, or clients of
an investment adviser.
The applicable Class A shares initial sales charge will be based on the
total of:
(1) the investor's current purchase;
(2) the net asset value (at the close of business on the
previous day) of (a) all Class A shares of the Fund held by the investor; and
(3) the net asset value of all Class A shares described in
paragraph (2) owned by another shareholder eligible to combine his purchase with
that of the investor into a single "purchase."
To qualify for the Cumulative Purchase Privilege on a purchase through
a selected dealer, the investor or selected dealer must provide the Fund's
distributor ("Distributor") with sufficient information to verify that each
purchase qualifies for the privilege or discount.
Class A Share Letter of Intent
------------------------------
Investors also may obtain the reduced sales charges shown in the
Prospectus by means of a written Letter of Intent, which expresses the
investor's intention to invest not less than $50,000 within a period of 13
months in Class A shares of the Fund. Each purchase of Class A shares under a
Letter of Intent will be made at the public offering price or prices applicable
at the time of such purchase to a single transaction of the dollar amount
indicated in the Letter.
The Letter of Intent is not a binding obligation upon the investor to
purchase the full amount indicated. The minimum initial investment under a
Letter of Intent is 5% of such amount. Class A shares purchased with the first
5% of such amount will be held in escrow (while remaining registered in the name
of the investor) to secure payment of the higher sales charge applicable to the
9
<PAGE>
shares actually purchased if the full amount indicated is not purchased, and
such escrowed Class A shares will be redeemed involuntarily to pay the
additional sales charge, if necessary. When the full amount indicated has been
purchased, the escrow will be released. To the extent an investor purchases more
than the dollar amount indicated on the Letter of Intent and qualifies for a
further reduced sales charge, the sales charge will be adjusted for the entire
amount purchased at the end of the 13-month period. The difference in sales
charge will be used to purchase additional Class A shares of the Fund subject to
the rate of sales charge applicable to the actual amount of the aggregate
purchases. An investor may amend his/her Letter of Intent to increase the
indicated dollar amount and begin a new 13-month period. In that case, all
investments subsequent to the amendment will be made at the sales charge in
effect for the higher amount. The escrow procedures discussed above will apply.
REDEEMING SHARES
- ----------------
The methods of redemption are described in the section of the
Prospectus entitled "How to Sell Shares."
SYSTEMATIC WITHDRAWAL PLAN
--------------------------
Shareholders may elect to make systematic withdrawals from the Fund
account of a minimum of $50 on a periodic basis. The amounts paid each period
are obtained by redeeming sufficient shares from an account to provide the
withdrawal amount specified. The Systematic Withdrawal Plan currently is not
available for shares held in an individual retirement account, Section 403(b)
annuity plan, defined contribution plan, simplified employee pension plan, or
other retirement plans, unless the shareholder establishes to the Adviser's
satisfaction that withdrawals from such an account may be made without
imposition of a penalty. Shareholders may change the amount to be paid without
charge not more than once a year by written notice to the Distributor or the
Adviser.
Redemptions will be made at net asset value determined as of the close
of regular trading on the NYSE on a day of each month chosen by the shareholders
or a day of the last month of each period chosen by the shareholder, whichever
is applicable. Systematic withdrawals of Class B shares, if made within six
years of purchase, will be charged the applicable CDSC as set forth in the
Prospectus. Under certain circumstances, the CDSC imposed on systematic
withdrawals may be waived. If the NYSE is not open for business on that day, the
shares will be redeemed at net asset value determined as of the close of regular
trading on the NYSE on the preceding Business Day, minus any applicable CDSC for
Class B shares. If a shareholder elects to participate in the Systematic
Withdrawal Plan, dividends and other distributions on all shares in the account
must be reinvested automatically in Fund shares. A shareholder may terminate the
Systematic Withdrawal Plan at any time without charge or penalty by giving
written notice to the Adviser or the Distributor. The Fund, its transfer agent
and the Distributor also reserve the right to modify or terminate the Systematic
Withdrawal Plan at any time.
Withdrawal payments are treated as a sale of shares rather than as a
dividend or a capital gain distribution. These payments are taxable to the
extent that the total amount of the payments exceeds the tax basis of the shares
sold. If the periodic withdrawals exceed reinvested dividends and other
distributions, the amount of the original investment may be correspondingly
reduced.
Ordinarily, a shareholder should not purchase additional Class A shares
if maintaining a Systematic Withdrawal Plan of Class A shares because the
shareholder may incur tax liabilities in connection with such purchases and
withdrawals. The Fund will not knowingly accept purchase orders from
shareholders for additional Class A shares if they maintain a Systematic
Withdrawal Plan unless the purchase is equal to at least one year's scheduled
withdrawals. In addition, a shareholder who maintains such a Plan may not make
periodic investments under the Fund's Systematic Investment Plan.
10
<PAGE>
TELEPHONE TRANSACTIONS
----------------------
Shareholders may redeem shares by placing a telephone request to the
Fund. The Fund, the Adviser, the Subadviser, the Distributor and their Trustees,
directors, officers and employees are not liable for any loss arising out of
telephone instructions they reasonably believe are authentic. In acting upon
telephone instructions, these parties use procedures that are reasonably
designed to ensure that such instructions are genuine, such as (1) obtaining
some or all of the following information: account number, name(s) and social
security number(s) registered to the account, and personal identification; (2)
recording all telephone transactions; and (3) sending written confirmation of
each transaction to the registered owner. If the Fund, the Adviser, the
Subadviser, the Distributor and their Trustees, directors, officers and
employees do not follow reasonable procedures, some or all of them may be liable
for any such losses.
REDEMPTIONS IN KIND
-------------------
The Fund is obligated to redeem shares for any shareholder for cash
during any 90-day period up to $250,000 or 1% of the Fund's net asset value,
whichever is less. Any redemption beyond this amount also will be in cash unless
the Board determine that further cash payments will have a material adverse
effect on remaining shareholders. In such a case, the Fund will pay all or a
portion of the remainder of the redemption in portfolio instruments, valued in
the same way as the Fund determines net asset value. The portfolio instruments
will be selected in a manner that the Board deems fair and equitable. A
redemption in kind is not as liquid as a cash redemption. If a redemption is
made in kind, a shareholder receiving portfolio instruments could receive less
than the redemption value thereof and could incur certain transaction costs.
RECEIVING PAYMENT
-----------------
If shares of the Fund are redeemed by a shareholder through the
Distributor or a participating dealer, the redemption is settled with the
shareholder as an ordinary transaction. If a request for redemption is received
before the close of regular trading on the NYSE, shares will be redeemed at the
net asset value per share determined on that day, minus any applicable CDSC for
Class B shares. Requests for redemption received after the close of regular
trading on the NYSE will be executed on the next trading day. Payment for shares
redeemed normally will be made by the Fund to the Distributor or a participating
dealer by the third business day after the day the redemption request was made,
provided that certificates for shares have been delivered in proper form for
transfer to the Fund, or if no certificates have been issued, a written request
signed by the shareholder has been provided to the Distributor or a
participating dealer prior to settlement date.
Other supporting legal documents may be required from corporations or
other organizations, fiduciaries or persons other than the shareholder of record
making the request for redemption. Questions concerning the redemption of Fund
shares can be directed to registered representatives of the Distributor or a
participating dealer, or to the Adviser.
CONVERSION OF CLASS B SHARES
- ----------------------------
Class B shares of the Fund automatically will convert to Class A
shares, based on the relative net asset values per share of the two classes,
eight years after the end of the calendar month in which the shareholder's order
to purchase was accepted. For the purpose of calculating the holding period
required for conversion of Class B shares, the date of initial issuance shall
mean the date on which such Class B shares were issued. For purposes of
conversion to Class A shares, Class B shares will be held in a separate
11
<PAGE>
sub-account. Each time any Class B shares in the shareholder's regular account
(other than those in the sub-account) convert to Class A shares, a pro rata
portion of the Class B shares in the sub-account also will convert to Class A
shares. The portion will be determined by the ratio that the shareholder's Class
B shares converting to Class A shares bears to the shareholder's total Class B
shares not acquired through dividends and other distributions.
The availability of the conversion feature is subject to the continuing
availability of an opinion of counsel to the effect that the dividends and other
distributions paid on Class A shares and Class B shares will not result in
"preferential dividends" under the Code and the conversion of shares does not
constitute a taxable event. If the conversion feature ceased to be available,
the Class B shares would not be converted and would continue to be subject to
the higher ongoing expenses of the Class B shares beyond eight years from the
date of purchase. The Adviser has no reason to believe that this condition for
the availability of the conversion feature will not be met.
TAXES
- -----
GENERAL. In order to qualify for the favorable tax treatment as a
regulated investment company ("RIC") under the Code, the Fund must distribute
annually to its shareholders at least 90% of its investment company taxable
income (generally consisting of net investment income, net short-term capital
gain and net gains from certain foreign currency transactions) ("Distribution
Requirement") and must meet several additional requirements. With respect to the
Fund, these requirements include the following: (1) the Fund must derive at
least 90% of its gross income each taxable year from dividends, interest,
payments with respect to securities loans and gains from the sale or other
disposition of securities or foreign currencies, or other income (including
gains from options, futures or forward currency contracts) derived with respect
to its business of investing in securities or those currencies ("Income
Requirement"); (2) at the close of each quarter of the Fund's taxable year, at
least 50% of the value of its total assets must be represented by cash and cash
items, U.S. Government securities, securities of other RICs and other
securities, with those other securities limited, in respect of any one issuer,
to an amount that does not exceed 5% of the value of the Fund's total assets and
that does not represent more than 10% of the issuer's outstanding voting
securities; and (3) at the close of each quarter of the Fund's taxable year, not
more than 25% of the value of its total assets may be invested in securities
(other than U.S. Government securities or the securities of other RICs) of any
one issuer.
The Fund will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and its capital gain net
income for the one-year period ending on October 31 of that year, plus certain
other amounts.
A redemption of Fund shares will result in a taxable gain or loss to
the redeeming shareholder, depending on whether the redemption proceeds are more
or less than the shareholder's adjusted basis for the redeemed shares (which
normally includes any sales charge paid on Class A shares). However, special
rules apply when a shareholder disposes of Class A shares of the Fund through a
redemption within 90 days after purchase thereof and subsequently reacquires
Class A shares of the Fund without paying a sales charge due to the 90-day
reinstatement. In these cases, any gain on the disposition of the original Class
A shares will be increased, or loss decreased, by the amount of the sales charge
paid when those shares were acquired, and that amount will increase the adjusted
basis of the shares subsequently acquired. In addition, if shares of the Fund
are purchased (whether pursuant to the reinstatement privilege or otherwise)
within 30 days before or after redeeming other shares of the Fund (regardless of
class) at a loss, all or a portion of that loss will not be deductible and will
increase the basis of the newly purchased shares.
If shares of the Fund are sold at a loss after being held for six
months or less, the loss will be treated as long-term, instead of short-term,
capital loss to the extent of any capital gain distributions received on those
shares. Investors also should be aware that if shares are purchased shortly
before the record date for a dividend or other distribution, the shareholder
will pay full price for the shares and receive some portion of the price back as
a taxable distribution.
12
<PAGE>
INCOME FROM FOREIGN SECURITIES. Dividends and interest received by the
Fund may be subject to income, withholding or other taxes imposed by foreign
countries and U.S. possessions ("foreign taxes") that would reduce the yield on
its securities. Tax conventions between certain countries and the United States
may reduce or eliminate these foreign taxes, however, and many foreign countries
do not impose taxes on capital gains in respect of investments by foreign
investors.
The Fund may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation - other than a "controlled
foreign corporation" (i.e., a foreign corporation in which, on any day during
its taxable year, more than 50% of the total voting power of all voting stock
therein or the total value of all stock therein is owned, directly, indirectly,
or constructively, by "U.S. shareholders," defined as U.S. persons that
individually own, directly, indirectly, or constructively, at least 10% of that
voting power) as to which the Fund is a U.S. shareholder -- that, in general,
meets either of the following tests: (1) at least 75% of its gross income is
passive or (2) an average of at least 50% of its assets produce, or are held for
the production of, passive income. Under certain circumstances, the Fund will be
subject to Federal income tax on a portion of any "excess distribution" received
on the stock of a PFIC or of any gain on disposition of the stock (collectively
"PFIC income"), plus interest thereon, even if the Fund distributes the PFIC
income as a taxable dividend to its shareholders. The balance of the PFIC income
will be included in the Fund's investment company taxable income and,
accordingly, will not be taxable to it to the extent that income is distributed
to its shareholders.
If the Fund invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund" ("QEF"), then in lieu of the foregoing tax and
interest obligation, the Fund will be required to include in income each year
its pro rata share of the QEF's annual ordinary earnings and net capital gain
(the excess of net long-term capital gain over net short-term capital loss) --
which most likely would have to be distributed by the Fund to satisfy the
Distribution Requirement and avoid imposition of the Excise Tax -- even if those
earnings and gain were not distributed to the Fund by the QEF. In most instances
it will be very difficult, if not impossible, to make this election because of
certain requirements thereof.
The Fund may elect to "mark-to-market" its stock in any PFIC.
"Marking-to-market," in this context, means including in ordinary income each
taxable year the excess, if any, of the fair market value of a PFIC's stock over
the Fund's adjusted basis therein as of the end of that year. Pursuant to the
election, the Fund also would be allowed to deduct (as an ordinary, not capital,
loss) the excess, if any, of its adjusted basis in PFIC stock over the fair
market value thereof as of the taxable year-end, but only to the extent of any
net mark-to-market gains with respect to that stock included by the Fund for
prior taxable years. The Fund's adjusted basis in each PFIC's stock with respect
to which it makes this election will be adjusted to reflect the amounts of
income included and deductions taken under the election. Regulations proposed in
1992 would provide a similar election with respect to the stock of certain
PFICs.
Gains or losses (1) from the disposition of foreign currencies, (2)
from the disposition of debt securities denominated in foreign currency that are
attributable to fluctuations in the value of the foreign currency between the
dates of acquisition and disposition of the securities and (3) that are
attributable to fluctuations in exchange rates that occur between the time the
Fund accrues dividends, interest or other receivables or accrues expenses or
other liabilities denominated in a foreign currency and the time the Fund
actually collects the receivables or pays the liabilities, generally will be
treated as ordinary income or loss. These gains or losses, referred to under the
Code as "section 988" gains or losses, may increase or decrease the amount of
the Fund's investment company taxable income to be distributed to its
shareholders.
Investors are advised to consult their own tax advisers regarding the
status of an investment in the Fund under state and local tax laws.
13
<PAGE>
FUND INFORMATION
- ----------------
MANAGEMENT OF THE FUND
----------------------
TRUSTEES AND OFFICERS. The Fund's Trustees and Officers are listed
below with their addresses, principal occupations and present positions,
including any affiliation with Golf Investment Management, Inc.
<TABLE>
<CAPTION>
Position with Principal Occupation
Name the Fund During Past Five Years
---- -------- ----------------------
<S> <C> <C>
Michael T. Williams, CFP, CFS * (44) President and President, Golf Investment Management, Inc. (since
2801 Ocean Drive, Suite 204 Trustee 1998); President, Wilshire Financial Group (since 1991);
Vero Beach, FL 32963 Principal, Williams Financial Group (since 1991);
Registered Principal, Securities Service Network, Inc.
(since 1993).
John C. Bahl * (55) Trustee Proprietary Investor.
3055 Par Drive
Vero Beach, FL 32960
J. Kenneth Perry (38) Trustee PGA Tour Player, PGA Tour (since 1986).
418 Quail Ridge Road
Franklin, KY 42134
Scott M. Perry (40) Trustee Independent Contractor Salesman (Territory Manager) for
11221-6 St. Johns Industrial Pkwy So. Cross Creek Apparel (since 1989), Texace Corporation
Jacksonville, FL 32246 (since 1991), PGA Tour Apparel (since 1996) and Lynx
Golf Company (1992-1997); President, Fore Head Threads,
Inc. (embroidery company) (since 1998).
Eric M. Snelz (44) Trustee Partner, Intraform of Arizona (print distributorship)
5727 N. 7th Street, # 307 (since 1997); Regional Vice President, Moore Business
Phoenix, AZ 85014 Communications Services (1996-1997); Sales Manager,
Moore Business Forms and Systems (1993-1996).
John Kinney (61) Vice President Vice President, Golf Investment Management, Inc. (since
2801 Ocean Drive, Suite 204 1998); Owner, Combs Insurance (since 1991); Registered
Vero Beach, FL 32963 Representative, Dean Witter (1989-1991); Registered
Representative, E.F. Hutton (1987-1989).
Jeffrey P. Meyer (40) Treasurer Registered Representative, Securities Service Network,
2801 Ocean Drive, Suite 204 Inc. (since 1998); Vice President, Citrus Bank NA
Vero Beach, FL 32963 (1995-1998); Vice President, Wilshire Financial Group
(1993-1995).
Robert J. Zutz (45) Secretary Partner, Kirkpatrick & Lockhart LLP (law firm).
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036
- ---------------
</TABLE>
14
<PAGE>
* Messrs. Williams and Bahl are "interested persons" of the Fund as
defined in section 2(a)(19) of the 1940 Act.
The Fund's Declaration of Trust provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of their office.
The Fund currently pays Trustees who are not "interested persons" of
the Fund $1,000 per meeting of the Board. Each Trustee is reimbursed for any
expenses incurred in attending meetings. Because the Adviser performs
substantially all of the services necessary for the operation of the Fund, the
Fund requires no employees. No officer, director or employee of the Adviser
receives any compensation from the Fund for acting as a director or officer. The
following table provides an estimate of each Trustee's compensation for the
current fiscal year:
ESTIMATED COMPENSATION TABLE
Name of Person, Total Compensation From the Fund
Position Expected to Be Paid to Trustees1
-------- --------------------------------
Michael T. Williams, CFP, CFS None
Trustee
John C. Bahl, None
Trustee
J. Kenneth Perry, $ 4,000
Trustee
Scott M. Perry, $ 4,000
Trustee
Eric M. Snelz, $ 4,000
Trustee
No Trustee will receive any benefits upon retirement. Thus, no pension
or retirement benefits have accrued as part of the Fund's expenses.
- --------------
1 This amount represents the estimated aggregate amount of compensation
paid to each Trustee for service on the Board of Trustees for the fiscal
year ending October 31, 1999.
INVESTMENT ADVISER AND SUBADVISER
---------------------------------
As noted above, the investment adviser and administrator for the Fund
is Golf Investment Management, Inc. The Adviser was organized as a Florida
corporation in 1998.
The Adviser is responsible for overseeing the Fund's investment and
noninvestment affairs, subject to the control and direction of the Fund's Board.
The Fund entered into an Investment Advisory Agreement with the Adviser dated
October 7, 1998. The Investment Advisory Agreement requires that the Adviser
review and establish investment policies for the Fund and administer the Fund's
noninvestment affairs.
15
<PAGE>
Under a separate Subadvisory Agreement, the Subadviser, subject to the
direction and control of the Fund's Board, provides investment advice and
portfolio management services to the Fund for a fee payable by the Adviser.
The Advisory Agreement and the Subadvisory Agreement each were approved
by the Board (including all of the Trustees who are not "interested persons" of
the Adviser or the Subadviser, as defined under the 1940 Act) and by the sole
shareholder of the Fund in compliance with the 1940 Act. Each Agreement provides
that it will be in force for an initial two-year period and it must be approved
each year thereafter by (1) a vote, cast in person at a meeting called for that
purpose, of a majority of those Trustees who are not "interested persons" of the
Adviser, the Subadviser or the Fund, and by (2) the majority vote of either the
full Board or the vote of a majority of the outstanding shares of the Fund. The
Advisory and Subadvisory Agreement each automatically terminates on assignment,
and each is terminable on not more than 60 days' written notice by the Fund to
either party. In addition, the Advisory Agreement may be terminated on not less
than 60 days' written notice by the Adviser and the Subadvisory Agreement may be
terminated on not less than 60 days' written notice by the Adviser, or 90 days'
written notice by the Subadviser. Under the terms of the Advisory Agreement, the
Adviser automatically becomes responsible for the obligations of the Subadviser
upon termination of the Subadvisory Agreement.
The Adviser and the Subadviser shall not be liable to the Fund or any
shareholder for anything done or omitted by them, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon them by their agreements with the Fund or
the Adviser, as applicable, or for any losses that may be sustained in the
purchase, holding or sale of any security.
The Adviser has entered into agreement with the Subadviser to provide
investment advice and portfolio management services to the Fund for an annual
fee to be paid by the Adviser to the Subadviser of 0.40% of the Fund's average
daily net assets.
CLASS-SPECIFIC EXPENSES. The Fund may determine to allocate certain of
its expenses (in addition to distribution fees) to the specific class of the
Fund's shares to which those expenses are attributable.
BROKERAGE PRACTICES
-------------------
The Subadviser is responsible for the execution of the Fund's portfolio
transactions and must seek the most favorable price and execution for such
transactions. Best execution, however, does not mean that the Fund necessarily
will be paying the lowest commission or spread available. Rather, the Fund also
will take into account such factors as size of the order, difficulty of
execution, efficiency of the executing broker's facilities, and any risk assumed
by the executing broker.
It is a common practice in the investment advisory business for
advisers of investment companies and other institutional investors to receive
research, statistical and quotation services from broker-dealers who execute
portfolio transactions for the clients of such advisers. Consistent with the
policy of most favorable price and execution, the Subadviser may give
consideration to research, statistical and other services furnished by brokers
or dealers. In addition, the Subadviser may place orders with brokers who
provide supplemental investment and market research and securities and economic
analysis and may pay these brokers a higher brokerage commission or spread than
may be charged by other brokers, provided that the Subadviser determines in good
faith that such commission is reasonable in relation to the value of brokerage
and research services provided. Such research and analysis may be useful to the
Subadviser in connection with services to clients other than the Fund.
16
<PAGE>
The Fund may use the Distributor, its affiliates, or certain affiliates
of the Adviser as a broker for agency transactions in listed and
over-the-counter securities at commission rates and under circumstances
consistent with the policy of best execution. Commissions paid to the
Distributor, its affiliates or certain affiliates of the Adviser will not exceed
"usual and customary brokerage commissions." Rule l7e-1 under the 1940 Act
defines "usual and customary" commissions to include amounts that are
"reasonable and fair compared to the commission, fee or other remuneration
received or to be received by other brokers in connection with comparable
transactions involving similar securities being purchased or sold on a
securities exchange during a comparable period of time."
The Subadviser also may select other brokers to execute portfolio
transactions. In the over-the-counter market, the Fund generally deals with
primary market makers unless a more favorable execution can otherwise be
obtained.
The Fund may not buy securities from, or sell securities to, the
Distributor as principal. However, the Board has adopted procedures in
conformity with Rule 10f-3 under the 1940 Act whereby the Fund may purchase
securities that are offered in underwritings in which the Distributor is a
participant. The Board will consider the possibilities of seeking to recapture
for the benefit of expenses to the Fund of certain portfolio transactions, such
as underwriting commissions and tender offer solicitation fees, by conducting
such portfolio transactions through affiliated entities, including the
Distributor, but only to the extent such recapture would be permissible under
applicable regulations, including the rules of the National Association of
Securities Dealers, Inc. and other self-regulatory organizations.
Pursuant to Section 11(a) of the Securities Exchange Act of 1934, as
amended, the Fund has expressly consented to the Distributor executing
transactions on an exchange on its behalf.
DISTRIBUTION OF SHARES
----------------------
The Distributor and broker-dealers with whom the Distributor has
entered into dealer agreements offer shares of the Fund as agents on a best
efforts basis and are not obligated to sell any specific amount of shares. In
this connection, the Distributor makes distribution and servicing payments to
participating dealers in connection with the sale of shares of the Fund.
Rule 12b-1 under the 1940 Act provides that an investment company may
bear expenses of distributing its shares only pursuant to a plan adopted in
accordance with the Rule. The Fund has adopted a Distribution Plan with respect
to each class of shares (the "Plan"). The Plan permits the Fund to pay the
Distributor the monthly distribution and service fee out of the Fund's net
assets to finance activity that is intended to result in the sale and retention
of Class A and Class B shares. The Plan was approved by the Board, including a
majority of the Trustees who are not interested persons of the Fund (as defined
in the 1940 Act) and who have no direct or indirect financial interest in the
operation of the Plan or the Distribution Agreement ("Independent Trustees"). In
approving the Plan, the Board determined that there is a reasonable likelihood
that the Fund and its shareholders will benefit from the Plan.
The Plan may be terminated by vote of the Independent Trustees, or by
vote of a majority of the outstanding voting securities of a class of the Fund.
The Board reviews quarterly and annually a written report of Plan costs and the
purposes for which such costs have been incurred. The Plan may be amended by
vote of the Board, including a majority of the Independent Trustees, cast in
person at a meeting called for such purpose. Any change in the Plan that would
increase materially the distribution cost to a class requires shareholder
approval of that class.
17
<PAGE>
The Distribution Agreement may be terminated at any time on 60 days'
written notice without payment of any penalty by either party. The Fund may
effect such termination by vote of a majority of the outstanding voting
securities of the Fund or by vote of a majority of the Independent Trustees. For
so long as the Plan is in effect, selection and nomination of the Independent
Trustees shall be committed to the discretion of such disinterested persons. The
Distribution Agreement and the Plan will continue in effect for successive
one-year periods, provided that each such continuance is specifically approved
(1) by the vote of a majority of the Independent Trustees and (2) by the vote of
a majority of the entire Board cast in person at a meeting called for that
purpose.
ADMINISTRATION OF THE FUND
--------------------------
ADMINISTRATIVE, FUND ACCOUNTING AND TRANSFER AGENT SERVICES. PFPC Inc.
provides administrative, fund accounting and transfer agent services to the
Fund. Pursuant to an Administration and Accounting Services Agreement
("Administration Agreement") between the Fund and PFPC Inc. ("Administrator"),
the Administrator provides the Fund with administrative and accounting services
(other than investment advisory services), including portfolio accounting
services, tax accounting services and furnishing financial reports. As
compensation for these services, the Fund pays the Administrator an annual fee
equal to: 0.10% of the Fund's first $250 million of average daily net assets;
.075% of the next $250 million; .05% of the next $250; and .03% on average daily
net assets in excess of $750 million, subject to a monthly minimum fee of
$8,333. The Administrator also is entitled to reimbursement for certain
out-of-pocket expenses, including pricing expenses.
CUSTODIAN. Pursuant to a Custodian Agreement, PNC Bank N.A.
("Custodian") serves as the Custodian of the Fund's assets. Under the terms of
the Custodian Agreement, the Custodian holds and administers the assets in the
Fund's portfolio.
LEGAL COUNSEL. Kirkpatrick & Lockhart LLP, 1800 Massachusetts Avenue,
N.W., 2nd Floor, Washington, D.C.
20036, serves as counsel to the Fund.
INDEPENDENT ACCOUNTANTS. PricewaterhouseCoopers LLP, 30 S. Seventeenth
Street, Philadelphia, PA
19103-4094, is the independent accountant for the Fund.
POTENTIAL LIABILITY
-------------------
Under certain circumstances, shareholders may be held personally liable
as partners under Massachusetts law for obligations of the Fund. To protect its
shareholders, the Fund has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Fund. These documents require notice of this disclaimer to be given in each
agreement, obligation or instrument that the Fund or its Trustees enter into or
sign. In the unlikely event a shareholder is held personally liable for the
Fund's obligations, the Fund is required to use its property to protect or
compensate the shareholder. On request, the Fund will defend any claim made and
pay any judgment against a shareholder for any act or obligation of the Fund.
Therefore, financial loss resulting from liability as a shareholder will occur
only if the Fund itself cannot meet its obligations to indemnify shareholders
and pay judgments against them.
18
<PAGE>
APPENDIX
COMMERCIAL PAPER RATINGS
The rating services' descriptions of commercial paper ratings in which
the Fund may invest are:
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER DEBT
RATINGS
- -------
PRIME-1. Issuers (or supporting institutions) rated Prime-1 (P-1) have
a superior ability for repayment of senior short-term debt obligations. P-1
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation;
well-established access to a range of financial markets and assured sources of
alternate liquidity.
PRIME-2. Issuers (or supporting institutions) rated Prime-2 (P-2) have
a strong ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, may be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
DESCRIPTION OF STANDARD & POOR'S COMMERCIAL PAPER RATINGS
---------------------------------------------------------
A-1. This designation indicates that the degree of safety regarding
timely payment is very strong. Those issues determined to possess extremely
strong characteristics are denoted with a plus sign (+) designation.
A-2. Capacity for timely payment of issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
CORPORATE DEBT RATINGS
----------------------
The rating services' descriptions of corporate debt ratings in which
the Fund may invest are:
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC. CORPORATE DEBT RATINGS
---------------------------------------------------------------------
Aaa - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present that
make the long-term risks appear somewhat larger than the Aaa securities.
A - Bonds that are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present that suggest a susceptibility to impairment sometime in the future.
A-1
<PAGE>
Baa - Bonds that are rated Baa are considered medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds that are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B - Bonds that are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa - Bonds that are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca - Bonds that are rated Ca represent obligations that are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C - Bonds that are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the company ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking and the modifier 3
indicates that the company ranks in the lower end of its generic rating
category.
DESCRIPTION OF STANDARD & POOR'S CORPORATE DEBT RATINGS
-------------------------------------------------------
AAA - Debt rated AAA has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.
BB, B, CCC, CC, C - Debt rated "BB," "B," "CCC," "CC," and "C" is
regarded, on balance, as predominantly speculative with respect to capacity to
pay interest and repay principal in accordance with the terms of the obligation.
A-2
<PAGE>
"BB" indicates the lowest degree of speculation and "C" the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB - Debt rated "BB" has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions that could lead
to inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB-" rating.
B - Debt rated "B" has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"BB" or "BB-" rating.
CCC - Debt rated "CCC" has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial, or economic conditions, it is not likely
to have the capacity to pay interest and repay principal. The "CCC" rating
category is also used for debt subordinated to senior debt that is assigned an
actual or implied "B" or "B-" rating.
CC - The rating "CC" is typically applied to debt subordinated to
senior debt that is assigned an actual or implied "CCC" rating.
C - The rating "C" is typically applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC-" debt rating. The "C" rating
may be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
CI - The rating "CI" is reserved for income bonds on which no interest
is being paid.
D - Debt rated "D" is in payment default. The "D" rating category is
used when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The "D" rating also will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
Plus (+) or Minus (-) - The ratings from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within the
major categories.
NR - Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
A-3
<PAGE>
AUDITED FINANCIAL STATEMENTS
GOLF ASSOCIATED FUND
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 16, 1998
Assets:
Cash $100,000
Deferred offering expenses 53,500
Receivable from the Adviser 31,000
--------
Total Assets 184,500
--------
Liabilities:
Offering costs payable 53,500
Organization costs payable 31,000
--------
Total Liabilities 84,500
--------
Net Assets
Paid in capital (Applicable to 9,990 Class A shares of
beneficial interest issued and outstanding, 10 Class B
shares of beneficial interest issued and outstanding;
unlimited shares of each class authorized) $100,000
========
Calculation of Maximum offering price:
Class A shares
Net asset value and redemption price per share $10.00
($99,900/9,990 shares issued and outstanding)
Sales charge - 5.75% of public offering price .61
--------
Maximum offering price $10.61
========
Class B shares
Net asset value and offering price per share ($100/10 $10.00
shares issued and Outstanding) ========
See Notes to Financial Statements
B-1
<PAGE>
STATEMENT OF OPERATIONS
FOR THE PERIOD JUNE 11, 1998 TO OCTOBER 16, 1998
Expenses $31,000
Expense reduction (31,000)
Net Loss $ 0
========
See Notes to Financial Statements
B-2
<PAGE>
GOLF ASSOCIATED FUND
NOTES TO FINANCIAL STATEMENTS
1. Organization
The Golf Associated Fund (the "Fund") is an open-end management investment
company. The Fund was established as a Massachusetts business trust under a
Declaration of Trust dated June 11, 1998. The Fund currently offers two classes
of shares, Class A shares sold subject to a 5.75% maximum front-end sales charge
("Class A shares") and Class B shares sold subject to a maximum 5% contingent
deferred sales charge, declining over a six-year period ("Class B shares").
Costs incurred and to be incurred in connection with the organization of the
Fund, estimated at $31,000, will be borne by the Fund, subject to the expense
limitation agreement described in Note 2 below. Certain costs incurred and to be
incurred in connection with the initial offering of shares of the Fund,
estimated at $53,500, will be paid initially by the Fund's Adviser, Golf
Investment Management, Inc. ("GIM"). The Fund will reimburse GIM for such costs,
which will be deferred and amortized by the Fund over the period of benefit, not
to exceed 12 months from the date the Fund commences operations. The Fund has no
operations to date, other than the sale to GIM 99,990 Class A shares and 10
Class B shares, in each case on October 16, 1998.
2. Agreements
Pursuant to an advisory agreement between the Fund and GIM, GIM will manage the
fund's business and investment affairs. As compensation under the Advisory
Agreement, GIM will receive from the Fund an advisory fee, which is computed
daily and paid monthly, equal to 1.00% of the Fund's average daily net assets.
The adviser has voluntarily agreed to reduce its advisory fee to the extent
necessary to limit the Fund's operating expenses to a certain percentage of its
average net assets.
GIM has agreed to waive its fees and, if necessary, reimburse expenses for the
period June 11, 1998 to October 31, 1999 exceeding the annual rate of 1.70% of
average daily net assets for Class A shares and 2.45% of average daily net
assets for Class B shares, respectively. Any waivers or reimbursements made by
the Adviser during this period are subject to repayment by the Fund by October
31, 2001, provided that repayment does not result in the Fund's aggregate
expenses exceeding the foregoing expense limitations. GIM has agreed to
permanently waive repayment of expenses prior to the commencement of operations.
The Fund recorded its initial organization costs of $31,000 as an expense during
the period ended October 16, 1998 and recognized an offsetting expense reduction
as a result of the Adviser's commitment to reimburse these costs. The Fund may
be obliged to repay some or all of these costs to GIM if the Agreement's
conditions are met.
Pursuant to an Administrative and Accounting Service agreement, the Fund
retains PFPC, Inc. ("PFPC") an indirect wholly-owned subsidiary of PNC Bank N.A.
B-3
<PAGE>
as Administrator and Accounting Service Agent. In addition, PNC Bank N.A. serves
as the Fund's custodian and PFPC serves as transfer and dividend disbursing
agent.
3. Service Plan
Under the Service Plan relating to Class A shares and Class B shares, the Fund
bears the costs and expenses in connection with distribution of the Fund's
shares and pays the fees of Financial Institutions, securities dealers and other
service agents. For these service activities the Fund may make payments at a
rate up to .25% per annum of the average daily net assets of the Class A shares
and 1.00% per annum of the average daily net assets of the Class B shares.
B-4
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Board
of Trustees
Golf Associated Fund
In our opinion, the accompanying statement of assets and liabilities and the
statement of operations present fairly, in all material respects, the financial
position and results of operations of Golf Associated Fund (the "Fund") at
October 16, 1998 and for period June 11, 1998 to October 16, 1998, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these financial statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluation the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
2400 Eleven Penn Center
Philadelphia, PA
October 22, 1998
B-5
