JULY 19, 2000
ALPHA ANALYTICS INVESTMENT TRUST
SUPPLEMENT TO PROSPECTUS
DATED JANUARY 24, 2000
ALPHA ANALYTICS SMALL CAP QUANT FUND: The Alpha Analytics Small Cap Quant Fund
has ceased operations and shares of the Fund are no longer available for
purchase.
ALPHA ANALYTICS VALUE FUND: Cambiar Investors, Inc., sub-adviser to the Alpha
Analytics Value Fund, is an affiliate of United Asset Management Corporation.
Old Mutual, plc and United Asset Management Corporation announced an agreement
for Old Mutual to acquire United Asset Management. Old Mutual is a UK-based
financial services group with substantial asset management, insurance and
banking businesses. The closing of the transaction is expected to take place
during the fourth quarter of 2000 and is subject to a number of conditions. As
required by the Investment Company Act of 1940, the Value Fund's shareholders
will be asked to approve a new sub-advisory agreement with Cambiar Investors,
Inc. to take effect upon the consummation of the transaction. The new agreement
will be identical to the current agreement in all respects except for its
effective and termination dates. The new agreement will have no effect on the
contractual sub-advisory fee. No changes are currently planned which would
affect the services provided to the Value Fund.
This supplement, and the Prospectus dated January 24, 2000, provide the
information a prospective investor ought to know before investing and should be
retained for future reference. A Statement of Additional Information has been
filed with the Security and Exchange Commission dated July 19, 2000, which is
incorporated herein by reference and can be obtained without charge by calling
the Fund toll free: 877-ALPHA40 (877) 257-4240.
<PAGE>
ALPHA ANALYTICS INVESTMENT TRUST
ALPHA ANALYTICS VALUE FUND
ALPHA ANALYTICS DIGITAL FUTURE FUND
STATEMENT OF ADDITIONAL INFORMATION
July 19, 2000
This Statement of Additional Information ("SAI") is not a prospectus.
It should be read in conjunction with the Prospectus of Alpha Analytics Value
Fund and Alpha Analytics Digital Future Fund dated December 16, 1999, and the
Supplement to Prospectus dated July 19, 2000. This SAI incorporates by reference
the Fund's Annual Report to Shareholders for the fiscal year ended June 30, 1999
("Annual Report"). A free copy of the Prospectus or Annual Report can be
obtained by writing the Transfer Agent at American Data Services, Inc., at P.O.
Box 5536, Hauppauge, New York 11788-0132, or by calling 1-877-257-4240.
TABLE OF CONTENTS
-----------------
PAGE
----
DESCRIPTION OF THE TRUST AND FUNDS..........................................2
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK
CONSIDERATIONS..............................................................3
INVESTMENT LIMITATIONS......................................................6
INVESTMENT ADVISORY ARRANGEMENTS............................................9
TRUSTEES AND OFFICERS......................................................11
PORTFOLIO TRANSACTIONS AND BROKERAGE.......................................12
DETERMINATION OF SHARE PRICE...............................................13
TAX STATUS.................................................................13
INVESTMENT PERFORMANCE.....................................................15
CUSTODIAN..................................................................16
TRANSFER AGENT.............................................................16
ACCOUNTANTS................................................................16
DISTRIBUTOR................................................................16
FINANCIAL STATEMENTS.......................................................17
<PAGE>
DESCRIPTION OF THE TRUST AND FUNDS
Alpha Analytics Value Fund (the "Value Fund") and Alpha Analytics
Digital Future Fund ( the "Digital Future Fund") (each a "Fund" or collectively,
the "Funds") were organized as diversified series of Alpha Analytics Investment
Trust (the "Trust"). The Trust is an open-end investment company established
under the laws of Ohio by an Agreement and Declaration of Trust dated August 18,
1998 (the "Trust Agreement") and has no prior history. The Trust Agreement
permits the Trustees to issue an unlimited number of shares of beneficial
interest of separate series without par value.
The Fund does not issue share certificates. All shares are held in
non-certificate form registered on the books of the Fund and the Transfer Agent
for the account of the shareholder. Each share of a series represents an equal
proportionate interest in the assets and liabilities belonging to that series
with each other share of that series and is entitled to such dividends and
distributions out of income belonging to the series as are declared by the
Trustees. The shares do not have cumulative voting rights or any preemptive or
conversion rights, and the Trustees have the authority from time to time to
divide or combine the shares of any series into a greater or lesser number of
shares of that series so long as the proportionate beneficial interest in the
assets belonging to that series and the rights of shares of any other series are
in no way affected. In case of any liquidation of a series, the holders of
shares of the series being liquidated will be entitled to receive as a class a
distribution out of the assets, net of the liabilities, belonging to that
series. Expenses attributable to any series are borne by that series. Any
general expenses of the Trust not readily identifiable as belonging to a
particular series are allocated by or under the direction of the Trustees in
such manner as the Trustees determine to be fair and equitable. No shareholder
is liable to further calls or to assessment by the Trust without his or her
express consent.
Any Trustee of the Trust may be removed by vote of the shareholders
holding not less than two-thirds of the outstanding shares of the Trust. The
Trust does not hold an annual meeting of shareholders. When matters are
submitted to shareholders for a vote, each shareholder is entitled to one vote
for each whole share he owns and fractional votes for fractional shares he owns.
All shares of the Fund have equal voting rights and liquidation rights. The
Trustees can amend the Declaration of Trust, except that any amendment that
adversely effects the rights of shareholders must be approved by the
shareholders affected. Each share of the Fund is subject to redemption at any
time if the Board of Trustees determines in its sole discretion that failure to
so redeem may have materially adverse consequences to all or any of the Fund's
shareholders.
As of December 1, 1999 the following persons may be deemed to have
beneficially owned five percent (5%) or more of the Fund:
FUND NAME/ADDRESS PERCENTAGE
---- ------------ ----------
Value Wildwood Enterprises 38.03%
Attn: Trust Opr/Mutual Funds
P.O. Box 60520
Los Angeles, CA 90060-0520
Value Robert Gipson 34.41%
1901 Ave. of the Stars
Suite 1231
Los Angeles, CA 90067
2
<PAGE>
As of December 1, 1999 the officers and trustees, as a group,
beneficially owned 34.72% of the Value Fund.
For information concerning the purchase and redemption of shares of
the Fund, see "How to Buy Shares" and "How to Redeem Shares" in the Funds'
Prospectus. For a description of the methods used to determine the share price
and value of a Fund's assets, see "Price of Shares" in the Funds' Prospectus.
ADDITIONAL INFORMATION ABOUT FUND INVESTMENTS AND RISK CONSIDERATIONS
This section contains a more detailed discussion of some of the
investments the Funds may make and some of the techniques they may use (see the
Prospectus, "Information About Investments").
A. FOREIGN SECURITIES. Each Fund may invest up to 25% of its assets in
foreign equity securities by purchasing American Depository Receipts ("ADRs").
ADRs are certificates evidencing ownership of shares of a foreign-based issuer
held in trust by a bank or similar financial institution. They are alternatives
to the direct purchase of the underlying securities in their national markets
and currencies. The Digital Future Fund may also purchase the equity securities
of Canadian companies listed on Canadian exchanges. To the extent that a Fund
does invest in foreign securities, such investments may be subject to special
risks. Purchases of foreign securities are usually made in foreign currencies
and, as a result, the Fund may incur currency conversion costs and may be
affected favorably or unfavorably by changes in the value of foreign currencies
against the U.S. dollar. In addition, there may be less information publicly
available about a foreign company then about a U.S. company, and foreign
companies are not generally subject to accounting, auditing and financial
reporting standards and practices comparable to those in the U.S. Other risks
associated with investments in foreign securities include changes in
restrictions on foreign currency transactions and rates of exchanges, changes in
the administrations or economic and monetary policies of foreign governments,
the imposition of exchange control regulations, the possibility of expropriation
decrees and other adverse foreign governmental action, the imposition of foreign
taxes, less liquid markets, less government supervision of exchanges, brokers
and issuers, difficulty in enforcing contractual obligations, delays in
settlement of securities transactions and greater price volatility. In addition,
investing in foreign securities will generally result in higher commissions than
investing in similar domestic securities.
B. EQUITY SECURITIES. Equity securities include common stock, rights and
warrants. Common stocks, the most familiar type, represent an equity (ownership)
interest in a corporation. Warrants are options to purchase equity securities at
a specified price for a specific time period. Rights are similar to warrants,
but normally have a short duration and are distributed by the issuer to its
shareholders. Although equity securities have a history of long-term growth in
value, their prices fluctuate based on changes in a company's financial
condition and on overall market and economic conditions.
3
<PAGE>
C. OPTION TRANSACTIONS. The Digital Future Fund may invest up to 5%
of its net assets in option transactions involving individual securities and
market indices. An option involves either (a) the right or the obligation to buy
or sell a specific instrument at a specific price until the expiration date of
the option, or (b) the right to receive payments or the obligation to make
payments representing the difference between the closing price of a market index
and the exercise price of the option expressed in dollars times a specified
multiple until the expiration date of the option. Options are sold (written) on
securities and market indices. The purchaser of an option on a security pays the
seller (the writer) a premium for the right granted but is not obligated to buy
or sell the underlying security. The purchaser of an option on a market index
pays the seller a premium for the right granted, and in return the seller of
such an option is obligated to make the payment. A writer of an option may
terminate the obligation prior to expiration of the option by making an
offsetting purchase of an identical option. Options are traded on organized
exchanges and in the over-the-counter market. Options on securities which a Fund
sells (writes) will be covered or secured, which means that it will own the
underlying security (for a call option); will segregate with the Custodian high
quality liquid debt obligations equal to the option exercise price (for a put
option); or (for an option on a stock index) will hold a portfolio of securities
substantially replicating the movement of the index (or, to the extent it does
not hold such a portfolio, will maintain a segregated account with the Custodian
of high quality liquid debt obligations equal to the market value of the option,
marked to market daily). When a Fund writes options, it may be required to
maintain a margin account, to pledge the underlying securities or U.S.
government obligations or to deposit liquid high quality debt obligations in a
separate account with the Custodian.
The purchase and writing of options involves certain risks; for
example, the possible inability to effect closing transactions at favorable
prices and an appreciation limit on the securities set aside for settlement, as
well as (in the case of options on a stock index) exposure to indeterminate
liability. The purchase of options limits a Fund's potential loss to the amount
of the premium paid and can afford the Fund the opportunity to profit from
favorable movements in the price of an underlying security to a greater extent
than if transactions were effected in the security directly. However, the
purchase of an option could result in a Fund losing a greater percentage of its
investment than if the transaction were effected directly. When a Fund writes a
covered call option, it will receive a premium, but it will give up the
opportunity to profit from a price increase in the underlying security above the
exercise price as long as its obligation as a writer continues, and it will
retain the risk of loss should the price of the security decline. When a Fund
writes a covered put option, it will receive a premium, but it will assume the
risk of loss should the price of the underlying security fall below the exercise
price. When a Fund writes a covered put option on a stock index, it will assume
the risk that the price of the index will fall below the exercise price, in
which case the Fund may be required to enter into a closing transaction at a
loss. An analogous risk would apply if a Fund writes a call option on a stock
index and the price of the index rises above the exercise price.
4
<PAGE>
D. FUTURES CONTRACTS. The Digital Future Fund may invest up to 5% of
its net assets in futures contracts. When the Digital Future Fund purchases a
futures contract, it agrees to purchase a specified underlying instrument at a
specified future date. When a Fund sells a futures contract, it agrees to sell
the underlying instrument at a specified future date. The price at which the
purchase and sale will take place is fixed when the Fund enters into the
contract. Some currently available futures contracts are based on specific
securities, such as U.S. Treasury bonds or notes, and some are based on indices
of securities, such as the Standard & Poor's 500 Composite Stock Price Index
("S&P 500"). Futures can be held until their delivery dates, or can be closed
out before then if a liquid secondary market is available.
The value of a futures contract tends to increase and decrease in
tandem with the value of its underlying instrument. Therefore, purchasing
futures contracts will tend to increase a Fund's exposure to positive and
negative price fluctuations in the underlying instrument, much as if it had
purchased the underlying instrument directly. When a Fund sells a futures
contract, by contrast, the value of its futures position will tend to move in a
direction contrary to the market. Selling futures contracts, therefore, will
tend to offset both positive and negative market price changes, much as if the
underlying instrument had been sold. Successful use of futures contracts will
depend on the Adviser's ability to predict the future direction of stock prices
or interest rates and incorrect predictions by the Adviser may have an adverse
effect on the Funds. In this regard, it should be noted that the skills and
techniques necessary to arrive at such predictions are different from those
needed to predict price changes in individual stocks.
E. BORROWING. Each Fund may borrow up to one third of the value of its total
assets as a temporary measure for extraordinary or emergency purposes (including
to meet redemption requests). Because the Funds' investments will fluctuate in
value, whereas the interest obligations on borrowed funds may be fixed, during
times of borrowing, the Funds' net asset value may tend to increase more when
its investments increase in value, and decrease more when its investments
decrease in value. In addition, interest costs on borrowings may fluctuate with
changing market interest rates and may partially offset or exceed the return
earned on the borrowed funds. Also, during times of borrowing under adverse
market conditions, the Funds might have to sell portfolio securities to meet
interest or principal payments at a time when fundamental investment
considerations would not favor such sales. No Fund will purchase any securities
while borrowings representing more than 5% of its assets are outstanding.
F. WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Each Fund may
purchase securities on a when-issued or delayed delivery basis. Delivery of and
payment for these securities may take place as long as a month or more after the
date of the purchase commitment. The value of these securities is subject to
market fluctuation during this period and no income accrues to the Fund until
settlement takes place. The Fund maintains with the Custodian a segregated
account containing high grade liquid securities in an amount at least equal to
these commitments. In when-issued and delayed delivery transactions, the Fund
relies on the seller to complete the transaction. The seller's failure to
complete the transaction may cause the Fund to miss a price or yield considered
to be advantageous. A Fund may engage in these types of purchases in order to
buy securities that fit within its investment objective at attractive prices,
not to increase its investment leverage.
5
<PAGE>
G. REPURCHASE AGREEMENTS Each Fund may invest in repurchase
agreements fully collateralized by obligations issued by the U.S. Government or
by agencies of the U.S. Government ("U.S. Government obligations"). A repurchase
agreement is a short-term investment in which the purchaser (i.e., the Fund)
acquires ownership of a U.S. Government obligation (which may be of any
maturity) and the seller agrees to repurchase the obligation at a future time at
a set price, thereby determining the yield during the purchaser's holding period
(usually not more than seven days from the date of purchase). Any repurchase
transaction in which the Fund engages will require full collateralization of the
seller's obligation during the entire term of the repurchase agreement. In the
event of a bankruptcy or other default of the seller, the Fund could experience
both delays in liquidating the underlying security and losses in value. However,
each Fund intends to enter into repurchase agreements only with Firstar Bank,
N.A. (the Fund's Custodian), other banks with assets of $1 billion or more and
registered securities dealers determined by the Adviser to be creditworthy. The
Adviser monitors the creditworthiness of the banks and securities dealers with
which the Fund engages in repurchase transactions.
H. SHORT SALES. The Digital Future Fund may sell a security short in
anticipation of a decline in the market value of the security. When a Fund
engages in a short sale, it sells a security which it does not own. To complete
the transaction, a Fund must borrow the security in order to deliver it to the
buyer. The Fund must replace the borrowed security by purchasing it at the
market price at the time of replacement, which may be more or less than the
price at which the Fund sold the security. A Fund will incur a loss as a result
of the short sale if the price of the security increases between the date of the
short sale and the date on which the Fund replaces the borrowed security. A Fund
will realize a profit if the security declines in price between those dates.
In connection with their short sales, the Digital Future Fund will
each be required to maintain a segregated account with the Custodian of cash or
high grade liquid assets equal to the market value of the securities sold less
any collateral deposited with its broker. Each Fund will limit its short sales
so that no more than 10% of its net assets (less all its liabilities other than
obligations under the short sales) will be deposited as collateral and allocated
to the segregated account. However, the segregated account and deposits will not
necessarily limit the Fund's potential loss on a short sale, which is unlimited.
INVESTMENT LIMITATIONS
FUNDAMENTAL. The investment limitations described below have been
adopted by the Trust with respect to each Fund and are fundamental
("Fundamental"), I.E., they may not be changed without the affirmative vote of a
majority of the outstanding shares of each Fund. As used in the Prospectus and
the Statement of Additional Information, the term "majority" of the outstanding
shares of the Fund means the lesser of (1) 67% or more of the outstanding shares
of the Fund present at a meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented at such meeting; or
(2) more than 50% of the outstanding shares of the Fund. Other investment
practices which may be changed by the Board of Trustees without the approval of
shareholders to the extent permitted by applicable law, regulation or regulatory
policy are considered non-fundamental ("Non-Fundamental").
6
<PAGE>
1. BORROWING MONEY. The Funds will not borrow money, except (a) from a
bank, provided that immediately after such borrowing there is an asset coverage
of 300% for all borrowings of the Fund; or (b) from a bank or other persons for
temporary purposes only, provided that such temporary borrowings are in an
amount not exceeding 5% of the Fund's total assets at the time when the
borrowing is made. This limitation does not preclude the Fund from entering into
reverse repurchase transactions, provided that the Fund has an asset coverage of
300% for all borrowings and repurchase commitments of the Fund pursuant to
reverse repurchase transactions.
2. SENIOR SECURITIES. The Funds will not issue senior securities. This
limitation is not applicable to activities that may be deemed to involve the
issuance or sale of a senior security by the Fund, provided that the Fund's
engagement in such activities is consistent with or permitted by the Investment
Company Act of 1940, as amended, the rules and regulations promulgated
thereunder or interpretations of the Securities and Exchange Commission or its
staff.
3. UNDERWRITING. The Funds will not act as underwriter of securities issued
by other persons. This limitation is not applicable to the extent that, in
connection with the disposition of portfolio securities (including restricted
securities), the Fund may be deemed an underwriter under certain federal
securities laws.
4. REAL ESTATE. The Funds will not purchase or sell real estate. This
limitation is not applicable to investments in marketable securities which are
secured by or represent interests in real estate. This limitation does not
preclude the Fund from investing in mortgage-related securities or investing in
companies engaged in the real estate business or that have a significant portion
of their assets in real estate (including real estate investment trusts).
5. COMMODITIES. The Funds will not purchase or sell commodities unless
acquired as a result of ownership of securities or other investments. This
limitation does not preclude the Fund from purchasing or selling options or
futures contracts, from investing in securities or other instruments backed by
commodities or from investing in companies which are engaged in a commodities
business or have a significant portion of their assets in commodities.
6. LOANS. The Funds will not make loans to other persons, except (a) by
loaning portfolio securities, (b) by engaging in repurchase agreements, or (c)
by purchasing nonpublicly offered debt securities. For purposes of this
limitation, the term "loans" shall not include the purchase of a portion of an
issue of publicly distributed bonds, debentures or other securities.
7. CONCENTRATION. No Fund will invest 25% or more of its total assets in a
particular industry except that the Digital Future Fund will invest 25% or more
of its total assets in the information technology industry sector. This
limitation is not applicable to investments in obligations issued or guaranteed
by the U.S. government, its agencies and instrumentalities or repurchase
agreements with respect thereto.
8. DIVERSIFICATION. With respect to securities comprising 75% of the value
of its total assets, the Digital Future Fund will not purchase securities of any
one issuer (other than cash, cash items (including receivables), securities
issued or guaranteed by the U.S. government or it agencies or instrumentalities
and repurchase agreements collateralized by such securities, and securities of
other investment companies) if as a result more than 5% of the value of its
total assets would be invested in the securities of that issuer or the Fund
would own more than 10% of the outstanding voting securities of the issuer.
7
<PAGE>
With respect to the percentages adopted by the Trust as maximum
limitations on its investment policies and limitations, an excess above the
fixed percentage will not be a violation of the policy or limitation unless the
excess results immediately and directly from the acquisition of any security or
the action taken. This paragraph does not apply to the borrowing policy set
forth in paragraph 1 above.
Notwithstanding any of the foregoing limitations, any investment
company, whether organized as a trust, association or corporation, or a personal
holding company, may be merged or consolidated with or acquired by the Trust,
provided that if such merger, consolidation or acquisition results in an
investment in the securities of any issuer prohibited by said paragraphs, the
Trust shall, within ninety days after the consummation of such merger,
consolidation or acquisition, dispose of all of the securities of such issuer so
acquired or such portion thereof as shall bring the total investment therein
within the limitations imposed by said paragraphs above as of the date of
consummation.
NON-FUNDAMENTAL. The following limitations have been adopted by the
Trust with respect to the Fund and are Non-Fundamental (see "Investment
Restrictions" above).
1. PLEDGING. The Funds will not mortgage, pledge, hypothecate or in any
manner transfer, as security for indebtedness, any assets of the Fund except as
may be necessary in connection with borrowings described in limitation (1)
above. Margin deposits, security interests, liens and collateral arrangements
with respect to transactions involving options, futures contracts, short sales
and other permitted investments and techniques are not deemed to be a mortgage,
pledge or hypothecation of assets for purposes of this limitation.
2. BORROWING. No Fund will purchase any security while borrowings
representing more than 5% of its total assets are outstanding.
3. MARGIN PURCHASES. No Fund will purchase securities or evidences of
interest thereon on "margin." This limitation is not applicable to short term
credit obtained by a Fund for the clearance of purchases and sales or redemption
of securities, or to arrangements with respect to transactions involving
options, futures contracts, short sales and other permitted investments and
techniques.
4. SHORT SALES. The Alpha Analytics Value Fund will not effect short sales
of securities.
5. OPTIONS. The Alpha Analytics Value Fund will not purchase or sell puts,
calls, options or straddles.
8
<PAGE>
6. ILLIQUID INVESTMENTS. No Fund will invest in securities for which there
are legal or contractual restrictions on resale and other illiquid securities.
7. LOANS OF PORTFOLIO SECURITIES. No Fund will make loans of portfolio
securities (the Funds have no current intention to loan portfolio securities).
INVESTMENT ADVISORY ARRANGEMENTS
INVESTMENT ADVISER. The investment adviser to each Fund is Alpha
Analytics Investment Group LLC, 1901 Avenue of the Stars, Suite 1100, Los
Angeles, CA 90067 (the "Adviser"). Robert E. Gipson, is a Trustee and the
President of the Trust. He is also the President and managing member of the
Adviser and, as such, controls the Adviser. As a result, he is an affiliate of
the Trust and the Adviser.
Under the terms of each Fund's management agreement (each an
"Agreement" or collectively the "Agreements"), the Adviser manages each Fund's
investments subject to approval of the Board of Trustees and pays all of the
expenses of each Fund except brokerage, taxes, interest, fees and expenses of
the non-interested person trustees and extraordinary expenses. As compensation
for its management services and agreement to pay the Fund's expenses, each Fund
is obligated to pay the Adviser a fee computed and accrued daily and paid
monthly at an annual rate of 1.50% of the average daily net assets of the Fund.
The Adviser may waive all or part of its fee, at any time, and at its sole
discretion, but such action shall not obligate the Adviser to waive any fees in
the future. For the period January 1, 1999 (commencement of operations) through
July 31, 1999, the Value Fund paid advisory fees of $14,090.
The Adviser retains the right to use the name "Alpha Analytics" or
any variation thereof in connection with another investment company or business
enterprise with which the Adviser is or may become associated. The Trust's right
to use the name "Alpha Analytics" in connection with each Fund automatically
ceases ninety days after termination of the respective Agreement and may be
withdrawn by the Adviser on ninety days written notice.
The Adviser may make payments to banks or other financial
institutions that provide shareholder services and administer shareholder
accounts. The Glass-Steagall Act prohibits banks from engaging in the business
of underwriting, selling or distributing securities. Although the scope of this
prohibition under the Glass-Steagall Act has not been clearly defined by the
courts or appropriate regulatory agencies, management of the Funds believes that
the Glass-Steagall Act should not preclude a bank from providing such services.
However, state securities laws on this issue may differ from the interpretations
of federal law expressed herein and banks and financial institutions may be
required to register as dealers pursuant to state law. If a bank were prohibited
from continuing to perform all or a part of such services, management of the
Funds believes that there would be no material impact on any Fund or its
shareholders. Banks may charge their customers fees for offering these services
to the extent permitted by applicable regulatory authorities, and the overall
return to those shareholders availing themselves of the bank services will be
lower than to those shareholders who do not. Each Fund may from time to time
purchase securities issued by banks which provide such services; however, in
selecting investments for the Funds, no preference will be shown for such
securities.
9
<PAGE>
SUB-ADVISER. Cambiar Investors, Inc., ("Cambiar") is the Sub-adviser
to the Value Fund. Cambiar is a wholly-owned subsidiary of United Asset
Management Corporation, a holding company. Under the terms of the Sub-Advisory
Agreement, the Sub-adviser receives a fee from the Adviser computed and accrued
daily and paid monthly at an annual rate of 0.50% of the average daily net
assets of the Fund.
Subject always to the control of the Board of Trustees, the
Sub-Adviser, at its expense, furnishes continuously an investment program for
the Value Fund. The Sub-Adviser must use its best judgement to make investment
decisions on behalf of the Value Fund, place all orders for the purchase and
sale of portfolio securities and execute all agreements related thereto. The
Sub-Adviser makes its officers and employees available to the Adviser from time
to time at reasonable times to review investment policies of the Value Fund and
to consult with the Adviser regarding the investment affairs of the Fund. The
Sub-Adviser maintains books and records with respect to the securities
transactions of the Value Fund and renders to the Adviser such periodic and
special reports as the Adviser or the Trustees may request. The Sub-Adviser pays
all expenses incurred by it in connection with its activities under this
Agreement other than the cost (including taxes and brokerage commissions, if
any) of securities and investments purchased for the Value Fund.
10
<PAGE>
TRUSTEES AND OFFICERS
The Board of Trustees supervises the business activities of the
Trust. The names of the Trustees and executive officers of the Trust are shown
below. Each Trustee who is an "interested person" of the Trust, as defined in
the Investment Company Act of 1940, is indicated by an asterisk.
<PAGE>
<TABLE>
<CAPTION>
============================== ================== ===============================================================================
NAME, ADDRESS AND AGE POSITION PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS
------------------------------ ------------------ -------------------------------------------------------------------------------
<S> <C> <C>
Robert E. Gipson* President and Vice President of Sundance Group, Inc., a holding company, from 1993 to present;
1901 Avenue of the Stars Trustee Chairman of National Mercantile Bancorp from June 1997 to present; Director of
Suite 1100 National Mercantile Bancorp from October 1996 to present; Of Counsel at Gipson,
Los Angeles, CA 90067 Hoffman & Pancione from July 1997 to present; Officer at Gipson, Hoffman &
Year of Birth: 1946 Pancione from December 1983 to July 1997; Owner/Officer of Corporate Management
Group, Inc., a business and financial consulting company, from August 1988 to
present; President of Sundance Catalog Co., an enterprise selling merchandise
through catalogs, a retail store, an outlet store and an Internet website, from
May 2000 to present.
------------------------------ ------------------ ----------------------------------------------------------------------------------
Jack P. McNally* Secretary, Vice President of Corporate Management Group, Inc. from 1989 to present.
1901 Avenue of the Stars Treasurer and
Suite 1100 Trustee
Los Angeles, CA 90067
Year of Birth: 1955
------------------------------ ------------------ ----------------------------------------------------------------------------------
Donald J. Alschuler Trustee Partner of Donlyn Company, a private investment company, from 1962 to present;
13104 Nimrod Place Vice President of Lyndon Distribution Services, Inc., a warehousing and
Los Angeles, CA 90049 distribution company, from 1988 to 1998; Chairman of Wisdom, Inc., a business
Year of Birth: 1935 advisory services company, from 1991 to present; President of Modern Service
Office Supply Co., Inc., an office products marketer and distributor, from 1963
to 1993.
------------------------------ ------------------ ----------------------------------------------------------------------------------
Michelle M. Schoeffel Trustee Chief Executive Officer and Chairwoman of Pacific
550 South Hope Street American Securities, a broker/dealer, from January 1998 to
Suite 1025 present; Vice President of Mellon Private Asset Management from
Los Angeles, CA 90071 November 1993 to April 1997.
Year of Birth: 1960
------------------------------ ------------------ ----------------------------------------------------------------------------------
Felice R. Cutler Trustee Retired Partner at the Law Offices of Cutler & Cutler from 1966 to 1998;
813 Greenway Drive Director of Aegis Consumer Funding Group, Inc., a consumer finance company, from
Beverly Hills, CA 90210 1996 to 1998; Trustee of Astra Institutional Securities Trust and Astra
Year of Birth: 1937 Institutional Trust from 1995 to 1997; Director and Trustee of Pilgrim Group
from 1986 to 1995. Family of Funds
============================== ================== ==================================================================================
</TABLE>
11
<PAGE>
Trustee fees are Trust expenses and each series of the Trust pays a
portion of the Trustee fees. The following table sets forth the Trustees'
compensation for the first fiscal period of the Trust ended July 31, 1999.
======================================= ====================================
TOTAL COMPENSATION
FROM TRUST (THE TRUST IS
NAME NOT IN A FUND COMPLEX)
--------------------------------------- ------------------------------------
Robert E. Gipson $0
--------------------------------------- ------------------------------------
Jack P. McNally $0
--------------------------------------- ------------------------------------
Donald J. Alschuler $6,000
--------------------------------------- ------------------------------------
Michelle M. Schoeffel $6,000
--------------------------------------- ------------------------------------
Felice R. Cutler $6,000
======================================= ====================================
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to policies established by the Board of Trustees of the
Trust, the Adviser is responsible for each Fund's portfolio decisions and the
placing of each Fund's portfolio transactions. In placing portfolio
transactions, the Adviser seeks the best qualitative execution for each Fund,
taking into account such factors as price (including the applicable brokerage
commission or dealer spread), the execution capability, financial responsibility
and responsiveness of the broker or dealer and the brokerage and research
services provided by the broker or dealer. The Adviser generally seeks favorable
prices and commission rates that are reasonable in relation to the benefits
received. Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc., and subject to its obligation of seeking best
qualitative execution, the Adviser may give consideration to sales of shares of
the Trust as a factor in the selection of brokers and dealers to execute
portfolio transactions.
The Adviser is specifically authorized to select brokers or dealers
who also provide brokerage and research services to the Funds and/or the other
accounts over which the Adviser exercises investment discretion and to pay such
brokers or dealers a commission in excess of the commission another broker or
dealer would charge if the Adviser determines in good faith that the commission
is reasonable in relation to the value of the brokerage and research services
provided. The determination may be viewed in terms of a particular transaction
or the Adviser's overall responsibilities with respect to the Trust and to other
accounts over which it exercises investment discretion.
Research services include supplemental research, securities and
economic analyses, statistical services and information with respect to the
availability of securities or purchasers or sellers of securities and analyses
of reports concerning performance of accounts. The research services and other
information furnished by brokers through whom the Funds effect securities
12
<PAGE>
transactions may also be used by the Adviser in servicing all of its accounts.
Similarly, research and information provided by brokers or dealers serving other
clients may be useful to the Adviser in connection with its services to the
Funds. Although research services and other information are useful to the Funds
and the Adviser, it is not possible to place a dollar value on the research and
other information received. It is the opinion of the Board of Trustees and the
Adviser that the review and study of the research and other information will not
reduce the overall cost to the Adviser of performing its duties to the Funds
under the Agreement.
Over-the-counter transactions will be placed either directly with
principal market makers or with broker-dealers, if the same or a better price,
including commissions and executions, is available. Fixed income securities are
normally purchased directly from the issuer, an underwriter or a market maker.
Purchases include a concession paid by the issuer to the underwriter and the
purchase price paid to a market maker may include the spread between the bid and
asked prices.
To the extent that the Trust and another of the Adviser's clients
seek to acquire the same security at about the same time, the Trust may not be
able to acquire as large a position in such security as it desires or it may
have to pay a higher price for the security. Similarly, the Trust may not be
able to obtain as large an execution of an order to sell or as high a price for
any particular portfolio security if the other client desires to sell the same
portfolio security at the same time. On the other hand, if the same securities
are bought or sold at the same time by more than one client, the resulting
participation in volume transactions could produce better executions for the
Trust. In the event that more than one client wants to purchase or sell the same
security on a given date, the purchases and sales will normally be made by
random client selection. For the period January 1, 1999 (commencement of
operations) through July 31, 1999, the Value Fund paid brokerage commissions of
$2,932.
DETERMINATION OF SHARE PRICE
The price (net asset value) of the shares of each Fund is determined
as of 4:00 p.m., Eastern time on each day the Trust is open for business and on
any other day on which there is sufficient trading in the Fund's securities to
materially affect the net asset value. The Trust is open for business on every
day except Saturdays, Sundays and the following holidays: New Year's Day, Martin
Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas. For a description of the methods
used to determine the net asset value (share price), see "Price of Shares" in
the Prospectus.
TAX STATUS
TAXATION OF THE FUNDS
Each Fund intends to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). Accordingly, the Fund will not be liable for federal income taxes on
its taxable net investment income and capital gain net income that are
distributed to shareholders, provided that the Fund distributes at least 90% of
its net investment income and net short-term capital gain for the taxable year
and satisfies certain other requirements.
13
<PAGE>
The Code imposes a non-deductible 4% excise tax on a regulated
investment company that fails to distribute during each calendar year an amount
equal to the sum of (1) at least 98% of its ordinary income for the calendar
year, (2) at least 98% of its net capital gains for the twelve-month period
ending on October 31 of the calendar year and (3) any portion (not taxable to
the Fund) of the respective balance from the preceding calendar year. Each Fund
intends to make such distributions as are necessary to avoid imposition of this
excise tax.
TAXATION OF THE SHAREHOLDER
Taxable distributions generally are included in a shareholder's gross
income for the taxable year in which they are received. However, dividends
declared in October, November or December and made payable to shareholders of
record in such a month will be deemed to have been received on December 31, if
the Fund pays the dividends during the following January. To the extent net
investment income of the Fund arises from dividends on domestic common or
preferred stock, some of the Fund's distributions will qualify for the 70%
corporate dividends-received deduction. All Shareholders will be notified
annually regarding the tax status of distributions received from a Fund.
Distributions by a Fund will result in a reduction in the fair market
value of the Fund's shares. Should a distribution reduce the fair market value
below a shareholder's cost basis, such distribution nevertheless would be
taxable to the shareholder as ordinary income or long-term capital gain, even
though, from an investment standpoint, it may constitute a partial return of
capital. In particular, investors should be careful to consider the tax
implications of buying shares of the Fund just prior to a distribution. The
price of such shares purchased at that time includes the amount of any
forthcoming distribution. Those investors purchasing the Fund's shares just
prior to a distribution may receive a return of investment upon distribution
which will nevertheless be taxable to them.
A shareholder of a Fund should be aware that a redemption of shares
(including any exchange into another Portfolio) is a taxable event and,
accordingly, a capital gain or loss may be recognized. If a shareholder of the
Fund receives a distribution taxable as long-term capital gain with respect to
shares of the Fund and redeems or exchanges shares before he has held them for
more than six months, any loss on the redemption or exchange (not otherwise
disallowed as attributable to an exempt-interest dividend) will be treated as
long-term capital loss to the extent of the long term capital gain recognized.
OTHER TAX CONSIDERATIONS
Distributions to shareholders may be subject to additional state,
local and non-U.S. taxes, depending on each shareholder's particular tax
situation. Shareholders subject to tax in certain states may be exempt from
state income tax on distributions made by the Fund to the extent such
distributions are derived from interest on direct obligations of the United
States Government. Shareholders are advised to consult their own tax advisers
with respect to the particular tax consequences to them of an investment in
shares of a Fund.
14
<PAGE>
INVESTMENT PERFORMANCE
Each Fund may periodically advertise "average annual total return."
"Average annual total return," as defined by the Securities and Exchange
Commission, is computed by finding the average annual compounded rates of return
for the period indicated that would equate the initial amount invested to the
ending redeemable value, according to the following formula:
P(1+T)n=ERV
Where: P = a hypothetical $1,000 initial investment
T = average annual total return
n = number of years
ERV = ending redeemable value at
the end of the applicable
period of the hypothetical
$1,000 investment made at
the beginning of the
applicable period.
The computation assumes that all dividends and distributions are reinvested at
the net asset value on the reinvestment dates and that a complete redemption
occurs at the end of the applicable period.
In addition to providing average annual total return, the Funds may
also provide non-standardized quotations of total return for differing periods
and may provide the value of a $10,000 investment (made on the date of the
initial public offering of the Funds' shares) as of the end of a specified
period.
Each Fund's investment performance will vary depending upon market
conditions, the composition of the Fund's portfolio and operating expenses of
the Fund. These factors and possible differences in the methods and time periods
used in calculating non-standardized investment performance should be considered
when comparing the Fund's performance to those of other investment companies or
investment vehicles. The risks associated with each Fund's investment objective,
policies and techniques should also be considered. At any time in the future,
investment performance may be higher or lower than past performance, and there
can be no assurance that any performance will continue. For the period January
1, 1999 (commencement of operations) through July 31, 1999, the Value Fund's
average annual total return was 19.20%.
From time to time, in advertisements, sales literature and
information furnished to present or prospective shareholders, the performance of
any of the Funds may be compared to indices of broad groups of unmanaged
securities considered to be representative of or similar to the portfolio
holdings of the Funds or considered to be representative of the stock market in
general. The Funds may use the Standard & Poor's 500 Stock Index or the Dow
Jones Industrial Average.
15
<PAGE>
In addition, the performance of any of the Funds may be compared to
other groups of mutual funds tracked by any widely used independent research
firm which ranks mutual funds by overall performance, investment objectives and
assets, such as Lipper Analytical Services, Inc. or Morningstar, Inc. The
objectives, policies, limitations and expenses of other mutual funds in a group
may not be the same as those of any of the Funds. Performance rankings and
ratings reported periodically in national financial publications such as
Barron's and Fortune also may be used.
CUSTODIAN
Firstar Bank, N.A., 425 Walnut Street, Cincinnati, Ohio 45202, is
Custodian of the Funds' investments. The Custodian acts as the Funds'
depository, safekeeps its portfolio securities, collects all income and other
payments with respect thereto, disburses funds at the Funds' request and
maintains records in connection with its duties.
TRANSFER AGENT
American Data Services, Inc. ("ADS"), P.O. Box 5536, Hauppauge, New
York 11788-0132, acts as the Funds' transfer agent and, in such capacity,
maintains the records of each shareholder's account, answers shareholders'
inquiries concerning their accounts, processes purchases and redemptions of the
Funds' shares, acts as dividend and distribution disbursing agent and performs
other accounting and shareholder service functions. In addition, ADS, in its
capacity as Fund Administrator, provides the Funds with certain monthly reports,
record-keeping and other management-related services. For the period January 1,
1999 (commencement of operations) through July 31, 1999, the Adviser paid fees
of $25,664 on behalf of the Value Fund to ADS for these services.
ACCOUNTANTS
The firm of McCurdy & Associates, CPA's, 27955 Clemens Road,
Westlake, Ohio 44145, has been selected as independent public accountants for
the Trust for the fiscal year ending July 31, 2000. McCurdy & Associates
performs an annual audit of the Funds' financial statements and provides
financial, tax and accounting consulting services as requested.
DISTRIBUTOR
AmeriMutual Fund Distributors, Inc. (the "Distributor"), P.O. Box
5536, Hauppauge, New York 11788-0132, is the exclusive agent for distribution of
shares of the Funds. The Distributor is obligated to sell the shares of the
Funds on a best efforts basis only against purchase orders for the shares.
Shares of the Funds are offered to the public on a continuous basis. The
Distributor is an affiliated company of ADS, the Funds' transfer agent.
16
<PAGE>
FINANCIAL STATEMENTS
The financial statements and independent auditor's report required to
be included in the statement of additional information are hereby incorporated
by reference to the Funds' Annual Report to the shareholders for the period
ended July 31, 1999. The Trust will provide the Annual Report without charge by
calling the Fund at 877-ALPHA40 (877-257-4240).
