The Barrett Funds
Barrett Growth Fund
Prospectus
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Objectives and Process
The Barrett Growth Fund seeks to achieve long-term capital appreciation and to
maximize after-tax returns. Since its founding in 1937, the Fund's investment
advisor, Barrett Associates, Inc., has invested client assets in stocks of
high-quality, superior growth companies at~reasonable prices. The investment
advisor performs~comprehensive, independent research in order to identify those
companies with the following~characteristics: proven products, high profit
margins, strong prospects for growth in unit sales and market share, superior
management, significant insider ownership and sound balance sheets.
As of September 30, 1999, Barrett Associates, Inc. supervised over $1.6
billion for 400 families,~individuals, foundations and other entities. Many of
the firm's clients have utilized Barrett's services for more than three
generations.
The Barrett Growth Fund was organized to provide investors with a
cost-efficient~opportunity to benefit from Barrett Associates' investment
philosophy of "Growth at a Reasonable Price," without being required to maintain
a large account balance. The Fund seeks to meet~shareholder goals by purchasing
and holding stocks for the long term and minimizing turnover,~thereby taking
advantage of favorable long-term capital gains tax rates.
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BARRETT GROWTH FUND
Purchasing high-quality
growth stocks at reasonable
prices for long-term capital appreciation
PROSPECTUS
October 28, 1999
THE BARRETT FUNDS
C/O Firstar Mutual Fund Services, LLC
615 East Michigan St.
Milwaukee, WI 53202
(877) 363-6333
Shares of the Barrett Growth Fund are sold on a no-load basis through investment
advisors, consultants, financial planners, brokers, dealers and other investment
professionals. Shares are available for IRAs and retirement plans.
AS WITH ALL MUTUAL FUNDS, THE U.S. SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THESE SECURITIES AND DOES NOT GUARANTEE THE ACCURACY OR
COMPLETENESS OF THIS PROSPECTUS. IT IS A CRIMINAL OFFENSE TO SUGGEST OTHERWISE.
TABLE OF CONTENTS
Page
Investment Goal and Philosophy...........................................1
Investment Process.......................................................1
Principal Risks of Investing in the Fund.................................1
Fund Performance.........................................................2
Fees and Expenses........................................................2
Investment Advisor and Portfolio Management Team.........................3
Advisor's Investment Performance.........................................5
More Information about the Fund's Investments............................6
Additional Risk Information..............................................7
Purchasing Shares........................................................7
Selling Shares...........................................................8
Account Options..........................................................8
Retirement Investing.....................................................9
Account Instructions....................................................11
Marketing and Distribution..............................................12
Distributions and Taxation..............................................12
Financial Highlights....................................................13
INVESTMENT GOAL AND PHILOSOPHY
The goal of the Fund is to achieve long-term capital appreciation and to
maximize after-tax returns. The Fund takes a conservative approach to growth
stock investing which emphasizes "Growth at a Reasonable Price." The Fund will
invest in common stocks of high-quality companies that the investment advisor
believes have superior growth potential and where the stocks can be purchased at
reasonable prices. The Fund has a long-term investment outlook. The Fund
generally undertakes a "buy and hold" strategy in order to reduce turnover and
maximize after-tax returns.
INVESTMENT PROCESS
The Fund invests primarily in a diversified portfolio of common stocks of large
and mid-sized U.S. companies selected by the Fund's investment advisor, Barrett
Associates, Inc., which was founded in 1937. The advisor performs comprehensive,
independent research designed to identify companies with proven products and
performance, strong fundamental financial characteristics and attractive growth
prospects. The advisor seeks companies that dominate their markets and benefit
from technological advantages, economies of scale or other factors that limit
the ability of competitors to enter the same markets. The advisor also prefers
companies with superior management and insider ownership, and its portfolio
managers frequently meet with the management of companies to confirm investment
decisions for the Fund.
The investment advisor selects companies for investment by the Fund which it
believes will experience earnings growth in excess of 12% per year or at least
50% higher than the average growth rate of companies in the same industry in the
Standard & Poor's 500 Stock Index. The portfolio management team also evaluates
the fundamental financial characteristics of companies to identify companies
with strong cash flow combined with low or manageable debt burdens. The advisor
believes that such companies are able to sustain attractive growth rates, or
grow through acquisitions or investment in research and development.
Once high-quality growth companies are identified, the advisor uses financial
statements and fundamental analysis to identify companies whose stocks can be
purchased at reasonable prices. The Fund generally seeks to avoid investment in
companies whose price-to-earnings ratios are significantly in excess of their
growth rates. The advisor believes that avoiding such overpriced stocks reduces
risk and increases the likelihood that the Fund will be able to achieve its goal
of capital appreciation. On an ongoing basis, the advisor analyzes the global
economic and financial outlook in order to anticipate and respond to changing
business, economic and political trends that may affect the Fund's existing and
prospective investments. SEE MORE INFORMATION ABOUT THE FUND'S INVESTMENTS ON
PAGE 6.
PRINCIPAL RISKS OF INVESTING IN THE FUND
The principal risk of investing in the Fund is that common stock prices are
subject to market, economic and business risks that will cause their prices to
fluctuate over time. While common stocks have historically been a leading choice
of long-term investors, stock prices may decline over short or even extended
periods. Therefore, the value of your investment in the Fund may go up and down
and you could lose money. In addition, the Fund's investment success depends on
the skill of the investment advisor in evaluating, selecting and monitoring the
Fund's assets. If the advisor's conclusions about growth rates or stock values
are incorrect, the Fund may not perform as anticipated.
Like all mutual funds, the Fund and its service providers utilize systems that
must accurately process date related information on or after January 1, 2000. If
the systems used by the Fund or its service providers are negatively affected by
the Year 2000 issues, the Fund may not be able to handle securities trades,
payments of interest and dividends, or pricing and account services. Although,
at this time, there can be no assurance that there will be no adverse impact on
the Fund, the Fund's service providers have advised the Fund that they have been
actively working on necessary changes to their computer systems to prepare for
the Year 2000 and expect that their systems, and those of other parties they
deal with, will be adapted in time for that event. The Year 2000 issue could
also adversely affect the companies in which the Fund invests, and therefore,
could affect their prices. The advisor considers this risk when selecting
investments for the Fund.
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FUND PERFORMANCE
The Barrett Growth Fund commenced investment operations on December 29, 1998.
For the period from commencement of investment operations through September 30,
1999 (approximately nine months), the Fund's total return was 4.90% and the
total return of the S&P 500 Stock Index was 4.30% for the same period. Please
note that past performance is not necessarily an indication of how the Fund will
perform in the future. These performance figures are provided in order to give
some indication of the risks of an investment in the Fund by comparing the
Fund's performance with a broad measure of market performance. IN ADDITION TO
THE INFORMATION IN THIS SECTION, YOU MAY ALSO REVIEW THE INVESTMENT ADVISOR'S
PRIOR PERFORMANCE RECORD IN THE SECTION ENTITLED ADVISOR'S INVESTMENT
PERFORMANCE ON PAGE 5.
FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay if you buy
and hold shares of the Fund.
SHAREHOLDER TRANSACTION FEES
(Fees paid directly from your investment)
Maximum Sales Charge on Purchases ..............................None
Sales Charge on Reinvested Dividends............................None
Redemption Fees.................................................None*
Exchange Fees...................................................None
* Currently, there is a $12.00 wire redemption fee assessed by the Custodian.
This fee is subject to change.
Annual Fund Operating Expenses
(Expenses that are deducted from Fund assets)
Advisory Fees...................................................1.00%
Distribution and Service (12b-1) Fees ..........................0.25%
Other Expenses(1) ..............................................3.97%
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Total Annual Fund Operating Expenses............................5.22%
Less Advisor's Fee Waiver/Assumption of Expenses(2) ...........(3.97)%
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ACTUAL TOTAL ANNUAL FUND OPERATING EXPENSES.....................1.25%
1 The Other Expenses figure is based on actual expenses incurred during
the last fiscal year and reflects initial organizational expenses which
were a one-time charge.
2 Barrett Associates has contractually agreed through October 31, 2000
to waive its advisory fees and/or assume as its own expense certain
expenses otherwise payable by the Fund to the extent necessary to ensure
that Actual Total Annual Fund Operating Expenses do not exceed 1.25% of
average daily net assets.
The following Expense Example shows the expenses that you could pay over time
and will help you to compare the cost of investing in the Fund with the cost of
investing in other mutual funds. The Example assumes that you invest $10,000 in
the Fund and that you earn a 5% annual return, with no change in Fund expense
levels. The $10,000 and 5% figures are required by SEC rules to aid in
comparisons between funds. Because the Fund's actual return and expenses will be
different, the Example is for comparison only.
EXPENSE EXAMPLE
ONE YEAR THREE YEARS FIVE YEARS
$127 $1,561* $2,596*
* Please note that only the first year in the Three Years and Five Years
examples reflects the effect of the contractual fee waiver. The amounts for
the second through fifth years assume that no fee waiver was continued.
If the fee waiver was continued, the Three Years and Five Years expense
example amounts would be $394 and $680.
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INVESTMENT ADVISOR AND PORTFOLIO MANAGEMENT TEAM
Barrett Associates, Inc. serves as the investment advisor for the Fund and is
responsible for managing the investment of the Fund's portfolio of securities.
As investment advisor, the firm identifies companies for investment, determines
when securities should be purchased or sold by the Fund and selects brokers or
dealers to execute transactions for the Fund's portfolio.
Barrett Associates was founded in 1937 and currently manages approximately $1.6
billion of client assets, of which approximately $1.3 billion is invested in
equity securities. The firm has approximately 400 client relationships,
including families, individuals, foundations and other organizations or
entities. Many of the client relationships are in their third generation. The
Fund was organized in order to provide investors with a cost-efficient
opportunity to invest according to Barrett Associates' long-term equity
investing philosophy of "Growth at a Reasonable Price," without being required
to maintain a large account balance.
The Fund pays Barrett Associates a monthly investment advisory fee at the annual
rate of 1.00% of the Fund's average daily net assets. However, Barrett
Associates has contractually agreed through October 31, 2000 to waive all or a
portion of the advisory fee, or to assume as its own expense certain expenses
otherwise payable by the Fund in order to limit the Fund's total annual
operating expenses to 1.25%. After October 31, 2000, Barrett Associates may
determine to continue to control Fund operating expenses under a contractual or
voluntary arrangement, or it may end the arrangement. When the Fund's assets
grow to a point where fee waivers are no longer necessary, Barrett Associates
may seek to recoup amounts it previously waived or paid. Barrett Associates
shall only be entitled to recoup such amounts for a period of three years from
the date such amount was waived or paid.
Barrett Associates uses a team approach for security selection and decision
making. The nine members of the portfolio management team, which is led by the
firm's Director of Research, Robert J. Voccola, C.F.A., average over twenty
years of investment management experience per person and have a significant
ownership interest in the firm. The following are the names and backgrounds of
the portfolio managers.
JOHN D. BARRETT, II
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
A graduate of Yale University, Mr. Barrett received his M.B.A. from New York
University, and has over thirty years experience in investment research and
management. Mr. Barrett became a controlling stockholder of Barrett Associates
in 1970. Prior to joining Barrett Associates he was a partner at Clark, Dodge &
Co. Mr. Barrett is responsible for portfolio management and firm policy as well
as for servicing many client relationships. Mr. Barrett also serves as a
Director of various Morgan Stanley mutual funds.
ROBERT E. HARVEY, C.F.A.
PRESIDENT AND CHIEF OPERATING OFFICER
Mr. Harvey graduated from Bowdoin College, received an M.B.A. from the
University of Virginia and has twenty-three years of investment experience. From
1976 until 1991 he served as an officer and a Managing Director at Scudder,
Stevens and Clark where he was the portfolio manager for the Scudder Growth and
Income Fund and the AARP Growth and Income Fund. Mr. Harvey served as Director
of U.S. Equities at Bessemer Trust from 1991 until 1993. Mr. Harvey joined
Barrett Associates in 1994, and is currently responsible for firm management,
portfolio management, new services and marketing. Mr. Harvey is a stockholder
and Director of The Ashforth Company, which is a controlling stockholder of
Barrett Associates, Inc.
JAMES R. RUTHERFORD
VICE CHAIRMAN
Mr. Rutherford graduated from Miami University of Ohio and pursued graduate
studies at New York University. He has over thirty years experience in
investment research and management. Prior to joining Barrett in 1973, Mr.
Rutherford was a portfolio manager at Manufacturers Hanover Trust and at Clark,
Dodge & Co.
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Mr. Rutherford serves as a portfolio manager and analyst and specializes in
research concerning the financial, basic industry and consumer industries.
ROBERT J. VOCCOLA, C.F.A.
DIRECTOR OF RESEARCH AND MANAGING DIRECTOR
A graduate of Lehigh University, Mr. Voccola received an M.B.A. from Columbia
University Graduate School of Business, and has over thirty years of investment
experience. Prior to joining Barrett Associates in 1987, Mr. Voccola was a
Securities Analyst at Clark, Dodge & Co. and Director of Individual Account
Management at Bernstein Macauley. Mr. Voccola is Barrett Associates' Director of
Research, and a portfolio manager and analyst specializing in the areas of
technology, telecommunications and information services.
LARRY W. SEIBERT, C.F.A.
MANAGING DIRECTOR
Mr. Seibert is a graduate of Columbia University and received his M.B.A. from
New York University. Prior to joining Barrett Associates, Mr. Seibert served
from 1990 to 1998 as a Technology Analyst and Portfolio Manager at Avatar
Associates, Inc., where he co-managed $3.3 billion of the firm's private client
and institutional assets. Mr. Seibert began his career as an auditor at KPMG
Peat Marwick in 1984, and later was a financial analyst at Goldman Sachs. Mr.
Seibert is a portfolio manager, and a member of Barrett Associates' research
team, specializing in technology, internet/new media and telecommunications
companies.
HENRY A. COLLINS
MANAGING DIRECTOR
Mr. Collins graduated from Brown University and has over thirty years of
investment experience. He was Director of Research at Clark, Dodge & Co. and
later served as Senior Vice President, Director of Research, and a member of the
Board of Directors of Kidder Peabody. Mr. Collins joined Barrett Associates in
1990 and is responsible for portfolio management and securities research in the
technology, telecommunications and healthcare sectors.
PETER H. SHRIVER, C.F.A.
MANAGING DIRECTOR
Mr. Shriver joined Barrett Associates in 1989 and provides portfolio management
and securities research in the healthcare, consumer products and services,
information services, financial and international sectors. Immediately prior to
joining Barrett Associates, Mr. Shriver served as a Securities Analyst at Peter
B. Cannell and Co. and was a Mergers and Acquisition Specialist at Henry
Ansbacher from 1986 until 1989. Mr. Shriver is a graduate of Drake University
and received his M.B.A. from New York University.
LESLIE J. LAMMERS, C.F.A.
MANAGING DIRECTOR
Ms. Lammers served as a Private Banker, Team Head and Product Manager at J.P.
Morgan, Inc. from 1979 until 1992, after which she served as Vice President and
Portfolio Manager at Scudder, Stevens and Clark, managing $250 million of assets
for individuals. Prior to joining J.P. Morgan, she was a software database
designer at Intel Corporation. Ms. Lammers joined Barrett Associates in 1997 and
specializes in portfolio management and research relating to telecommunications,
the internet/new media and retailing. She graduated from the University of Texas
with a Bachelors of Business Administration.
CHRISTINA A. BATER, C.F.P.
ASSOCIATE MANAGING DIRECTOR
Ms. Bater joined Barrett Associates in 1984 after graduating from the University
of Buffalo. She served as a Portfolio Administrator, Trader and Client Service
Specialist until 1992, at which time she assumed securities research
responsibilities. Ms. Bater is currently responsible for portfolio management,
as well as research of companies in the energy, retailing and distribution,
internet/new media and basic industry sectors.
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ADVISOR'S INVESTMENT PERFORMANCE
The tables below show the annual returns and long-term performance record
established by Barrett Associates while managing client accounts according to
the same investment goal and strategies as those used for the Fund. Please note
that the performance results shown are those of the investment advisor and not
the investment results of the Fund. The results are not intended to predict or
suggest the return to be experienced by the Fund or the return an individual
investor might achieve by investing in the Fund.
The Fund's results may be different from the composite performance figures shown
because of, among other things, differences in fees and expenses. The composite
performance figures reflect the deduction of all advisory fees and trading
costs, but do not reflect custody fees, which are paid by clients directly. The
overall expenses of the advisor's client accounts are generally lower than those
experienced by Fund shareholders and, therefore, the performance of the Fund
would generally be lower. The Fund's results may also be different because
private accounts are not subject to certain investment limitations,
diversification requirements and other restrictions imposed on mutual funds by
the Investment Company Act of 1940 or the Internal Revenue Code which, if
applicable, could have adversely affected the performance of the client
accounts.
BARRETT ASSOCIATES EQUITY GROWTH COMPOSITE(1)
CHART
1991 1992 1993 1994 1995 1996 1997 1998 9 mths.
9/30/99
39.0% 2.9% 0.2% 0.7% 34.9% 31.3% 31.4% 27.7% 7.9%
AVERAGE ANNUAL TOTAL RETURNS AS OF 9/30/99
SINCE
INCEPTION
1 YEAR 3 YEARS 5 YEARS ON 1/1/91
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Barrett Associates Equity
Growth Composite 30.7% 24.7% 26.5% 19.1%
S&P 500 Index(2) 30.9% 20.0% 20.5% 18.4%
Lipper Growth Fund Index(3) 27.8% 25.1% 25.0% 19.5%
1 The Barrett Associates Equity Growth Composite is an unaudited composite made
up of all fully discretionary "equity growth" accounts of $300,000 or more,
reflects the reinvestment of all capital gains and dividends and also
reflects the deduction of all investment management and brokerage fees. All
figures are total return and the composite is equal weighted by account.
Individual account performance is calculated on the average capital base. This
methodology means that each change in capital for an account during the time
period (monthly) is multiplied by the ratio of days remaining to the total
days in the time period. The sum of the average changes in capital is then
added to the beginning market value to give the average capital base for the
time period. This methodology differs from the standard SEC method which is
used to calculate returns for mutual funds.
2 The S&P 500 Index is a capitalization weighted index of five hundred large
capitalization stocks which is designed to measure broad domestic securities
markets. The performance of the S&P 500 Index presented reflects the
reinvestment of dividends and capital gains but does not reflect the deduction
of any investment management fees.
3 The Lipper Growth Fund Index is an equally-weighted performance index,
adjusted for capital gains distributions and income dividends, of the 30
largest funds within the Growth Funds category, as reported by Lipper
Analytical Services, Inc.
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MORE INFORMATION ABOUT THE FUND'S INVESTMENTS
The Fund's investment objective is long-term capital appreciation and the
maximization of after-tax returns. This objective may be changed or modified in
the future by action of the Fund's Board without shareholder approval. However,
shareholders would receive advanced written notice of any such change.
TYPES OF INVESTMENTS. The Fund invests primarily in common stocks of large and
mid-sized U.S. companies, as well as securities of companies that operate
globally, provided their shares are traded on U.S. stock exchanges. It may also
purchase securities with an equity component such as preferred stock, warrants,
rights or other securities that are convertible into or exchangeable for shares
of common stock. The Fund may invest up to 10% of its net assets in foreign
investments, and will normally make such investments through the purchase of
American Depository Receipts (ADRs). ADRs are receipts issued by U.S. banks or
trust companies representing ownership interests of securities issued by foreign
companies.
From time to time, the Fund may purchase options, futures contracts or other
instruments (such as depository receipts) which relate to a particular stock
index. These investments allow the Fund to quickly invest excess cash in order
to gain exposure to the markets until the Fund can purchase individual stocks.
For example, the Fund may purchase S&P 500 Depository Receipts, which are
receipts representing an ownership interest in a portfolio of the stocks that
make up the S&P 500.
The Fund normally intends to remain substantially fully invested in common
stocks and other equity securities. However, the Fund may invest in high-quality
money market instruments during times when excess cash is generated or when cash
is held pending investment in suitable growth stocks. Such money market
investments include short-term obligations of the U.S. government, its agencies
or instrumentalities, bank obligations, commercial paper, repurchase agreements
or money market mutual funds. Tax-exempt money market instruments may be used to
minimize the taxable income generated from cash management investing. The Fund
has authority to invest up to 100% of its assets in such short-term money market
instruments for temporary or defensive purposes in response to extreme or
adverse market, economic or other conditions. Under these circumstances, the
Fund may be unable to pursue its investment goal of capital appreciation.
STOCK SELECTION PROCESS. The investment advisor identifies stocks for investment
using its own research and analysis techniques, and supplements its internal
research with the research and analysis of major U.S. investment and brokerage
firms. When analyzing a company's growth prospects, the advisor considers the
growth in a company's market share and unit sales, as well as growth in overall
revenues and earnings per share. The investment advisor uses a proprietary
database containing detailed financial information of over 6,000 companies to
analyze comparative growth rates, and looks for companies that are growing
substantially faster than their peers in the same industries. The advisor also
analyzes the fundamental financial strength of such companies, as evidenced by
their debt burden or ability to generate excess cash, in order to determine
whether the company's growth rate can be sustained over time.
Once the Fund identifies a high-quality growth company, it seeks to purchase the
company's stock at reasonable prices. Using fundamental financial statement
analysis, the advisor compares a company's price-to-earnings ratio with its
growth rate, in order to evaluate the price of the stock relative to its future
earnings. The advisor generally seeks companies with price-to-earnings multiples
as low as one times the company's growth rate. When deciding between two
high-quality growth companies, the advisor will normally choose the company
which has a lower ratio of price-to-earnings compared to its growth rate. This
approach is designed to allow the Fund to pay a lower price for the future
earnings stream of one company versus another company with a similar earnings
stream. The Fund may purchase stocks with higher price-to-earnings ratios
relative to their growth rates if market conditions reflect generally higher
stock prices. The Fund seeks to reduce its exposure to risk by avoiding very
small companies (less than $1
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billion market capitalization), companies which have no current earnings and
companies that carry excessive debt burdens.
The Fund has a long-term investment outlook. It generally undertakes a "buy and
hold" strategy to reduce portfolio turnover and maximize after-tax returns. When
the advisor anticipates that individual stocks will be sold, it attempts to
manage the liquidation process to take advantage of longer holding periods for
favorable capital gains tax rates in order to optimize after-tax returns to the
Fund's shareholders.
ADDITIONAL RISK INFORMATION
If the advisor determines that the condition of the financial markets calls for
a temporary or defensive position to reduce risk through a substantial
investment in cash and cash equivalents, such a position would make it difficult
to achieve the objective of capital appreciation.
To the extent that the Fund invests in foreign companies, its investments may
involve political, economic or currency risks not ordinarily associated with
U.S. securities. The Fund may use certain techniques involving a form of
leverage, which could have the effect of magnifying the Fund's gains or losses,
or could result in increased volatility of the Fund's share price. In order to
limit such risks, the Fund limits the percentage of its assets that can be
exposed to such leveraging techniques.
PURCHASING SHARES
You may purchase shares of the Fund without any sales charge through an
investment advisor, financial planner, broker, dealer or other investment
professional. Shares are also available through "fund supermarkets" or similar
programs which offer access to a broad array of mutual funds. A completed
application must be submitted to the Fund, along with payment of the purchase
price by check or wire. The Fund reserves the right to reject any purchase order
or to suspend the offering of its shares. PLEASE NOTE THAT PURCHASE
INSTRUCTIONS, MAILING ADDRESSES AND TELEPHONE NUMBERS ARE SET FORTH IN THE
ACCOUNT INSTRUCTIONS CHART INCLUDED ON PAGE 11 OF THIS PROSPECTUS AS WELL AS IN
THE FUND'S SHAREHOLDER APPLICATION. PLEASE CALL TOLL FREE 1-877-363-6333 WITH
ANY QUESTIONS.
MINIMUM INVESTMENTS. The minimum initial investment is $2,500 and additional
investments must total at least $1,000. The minimum initial investment for
qualified retirement accounts is $1,000 ($500 for Education IRAs) and there is
no minimum for subsequent investments. TheFund may also change or waive its
policies concerning minimum investment amounts at any time.
PURCHASE PRICE. You may buy shares at the Fund's net asset value per share
(NAV), which is calculated as of the close of the New York Stock Exchange
(usually 4:00 P.M. eastern time) every day the exchange is open. Your order will
be priced at the next NAV calculated after your order is accepted by the Fund.
The Fund has certain limited arrangements which permit third parties to accept
orders on the Fund's behalf, so that investors can receive the NAV next
calculated after the order is accepted by the third party.
The NAV is determined by dividing the value of the Fund's securities, cash and
other assets, minus all liabilities by the number of shares outstanding. The
Fund's securities are valued each day at their market value, which usually means
the last quoted sale price on the security's principal exchange on that day. If
market quotations are not readily available, securities will be priced at their
fair value as determined in good faith by, or under procedures adopted by, the
Board of Trustees. The Fund may use independent pricing services to assist in
calculating the NAV.
IN-KIND PURCHASES. The Fund may permit investors to purchase shares by
transferring securities to the Fund that meet the Fund's investment objective
and policies. Securities transferred to the Fund will be valued in the same way
that securities in the Fund's portfolio are valued for purposes of calculating
its NAV. In-kind purchases generally are taxable transactions to investors.
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SELLING SHARES
You may sell your shares at any time. The sale price will be the next NAV
calculated after your order is accepted by the Fund's transfer agent. No fees
are imposed by the Fund when shares are sold. PLEASE NOTE THAT SELLING
INSTRUCTIONS, MAILING ADDRESSES AND TELEPHONE NUMBERS ARE SET FORTH IN THE
ACCOUNT INSTRUCTIONS CHART ON PAGE 11 OF THIS PROSPECTUS AS WELL AS IN THE
FUND'S SHAREHOLDER APPLICATION. PLEASE CALL WITH ANY QUESTIONS.
HOW TO SELL. You may sell your shares by giving instructions to the Fund's
transfer agent by mail or by telephone. In order to sell by telephone, you will
need to elect the telephone redemption option on the application. The Fund will
use reasonable procedures to confirm that instructions communicated by telephone
are genuine and, if the procedures are followed, will not be liable for any
losses due to unauthorized or fraudulent telephone transactions. During times of
drastic economic or market changes, the telephone redemption privilege may be
difficult to implement and the Fund reserves the right to suspend this
privilege.
Certain written requests to sell shares require a signature guarantee. For
example, a signature guarantee may be required if you sell a large amount of
shares, if your address of record on the account application has been changed
within the last 30 days, or if you ask that the proceeds be sent to a different
person or address. A signature guarantee is used to help protect you and the
Fund from fraud. You can obtain a signature guarantee from most banks and
securities dealers, but not from a notary public. Please call the Fund to learn
if a signature guarantee is needed or to make sure that it is completed
appropriately in order to avoid any processing delays.
SALE PROCEEDS. The Fund is responsible for processing requests to sell shares on
a timely basis. Checks are normally mailed or proceeds are wired on the next day
after receipt and acceptance of selling instructions (if received before the
close of regular trading on the NYSE). In no event will proceeds be mailed or
wired later than 7 days following such receipt and acceptance (or earlier if
required by applicable law). If the shares being sold have recently been
purchased by check, the Fund reserves the right not to make the sale proceeds
available until it reasonably believes that the check has been collected. This
could take up to 10 business days.
Sale proceeds may be wired to your predesignated bank account at any commercial
bank in the United States if the amount is $1,000 or more. The receiving bank
may charge a fee for this service. Alternatively, proceeds may be mailed to your
bank or to your account address of record if the address has been established
for a minimum of 60 days.
GENERAL POLICIES. The Fund also reserves the right to make a "redemption
in-kind" if the amount you are redeeming is large enough to affect Fund
operations or if the redemption would otherwise disrupt the Fund. For example,
the Fund may redeem shares in-kind if the amount represents more than 1% of the
Fund's assets. When the Fund makes a "redemption in-kind" it pays the redeeming
shareholder in portfolio securities rather than cash. A "redemption in-kind" is
a taxable transaction to the redeeming shareholder. In addition, if your account
balance falls below $1,000, the Fund may request that you increase your balance.
If it is still below $1,000 after 60 days, the Fund may automatically close your
account and send you the proceeds.
ACCOUNT OPTIONS
AUTOMATIC INVESTMENT PLAN. Shareholders who wish to make regular additional
investments (monthly, bimonthly, quarterly or yearly) in amounts of $50 or more
to an existing Fund account may do so through the Fund's Automatic Investment
Plan. Under this Plan, your designated bank or other financial institution
debits a preauthorized amount to your checking account on a business day of your
choosing and applies the amount to the purchase of Fund shares. The Fund can
accommodate up to four investments per month as
-8-
<PAGE>
long as there are 7 days between investments. The Fund does not charge a fee for
participating in the Automatic Investment Plan. However, Firstar will charge a
$20 service fee against your Fund account for any purchase under this Plan that
does not clear due to insufficient funds or, if prior to notifying the Fund in
writing or by telephone of your intention to terminate your participation in
this Plan, you close your bank account or in any manner prevent withdrawal of
funds from your designated bank account. To use this service, you must authorize
the transfer of funds by completing the Automatic Investment Plan Application,
which may be obtained from the Fund. The Fund reserves the right to suspend,
modify or terminate the Automatic Investment Plan without notice.
EXCHANGE PRIVILEGES. You may exchange all or a portion of your shares in the
Fund for shares of either the Firstar Money Market Fund or the Firstar
Tax-Exempt Money Market Fund. The shareholders of these funds may also exchange
into the Fund. Once the Fund receives and accepts an exchange request, the
purchase or redemption of shares will be effected at the Fund's next determined
NAV.
SYSTEMATIC WITHDRAWAL PLAN. Shareholders may elect to participate in the Fund's
Systematic Withdrawal Plan. By making this election, you can arrange for
automatic withdrawals from your Fund account into a pre-authorized bank account
according to the schedule you select which may be on a monthly basis or in
certain designated months. The Fund does not charge a fee for participating in
the Systematic Withdrawal Plan. The Systematic Withdrawal option may be in any
amount you select, subject to a $100 minimum. To begin distributions, a
shareholder must have a Fund account valued at $10,000 or more. Normally,
shareholders should not make automatic investments in a Fund at the same time
they are receiving systematic withdrawals from that Fund because such
shareholders could realize capital gains on the systematic withdrawals from that
Fund while they are automatically investing in that Fund. The Systematic
Withdrawal Plan may be terminated at any time by written notice.
Please call the Fund toll free at 1-877-363-6333 regarding any of these
account options. PLEASE SEE THE CHART ON PAGE 11 FOR ADDITIONAL
ACCOUNT INSTRUCTIONS.
RETIREMENT INVESTING
You may purchase Fund shares for use in all types of tax-deferred qualified
retirement plans such as Individual Retirement Accounts (IRAs),
employer-sponsored retirement plans (including 401(k) Plans), and tax-sheltered
custodial accounts described in Section 403(b) of the Internal Revenue Code.
Distributions of net investment income and capital gains will be automatically
reinvested in the Fund through such plans or accounts. Special applications are
required for certain of these plans or accounts, which can be obtained by
calling the Fund. The following is a brief description of the retirement
investing options.
INDIVIDUAL RETIREMENT ACCOUNTS (IRAS). If you are not an active participant
(and, if a joint return is filed, your spouse is not an active participant) in
an employer-sponsored retirement plan, or if you have an adjusted gross income
within certain specified limits, you are eligible to make a deductible
contribution to an IRA account. If you are not eligible for deductible
contributions, you may still make nondeductible IRA contributions. Distributions
from qualified retirement plans may be rolled over into an IRA account holding
Fund shares. You can continue to defer Federal income taxes on your IRA account,
your rollover contribution, and on any income that is earned on that
contribution.
Firstar Bank Milwaukee, N.A., makes its services as an IRA Custodian available
for each shareholder account that is established as an IRA. For these services,
Firstar receives an annual fee of $12.50 per account (maximum $25.00 per social
security number), which is paid directly to Firstar by the IRA shareholder. If
the annual fee is not paid by the date due, shares of the Fund owned by the
shareholder in the IRA account will be automatically sold to pay the annual fee.
Firstar may, at its discretion, hold any initial contribution uninvested until
the expiration of the 7 day revocation period. Firstar does not anticipate that
it will exercise its discretion but reserves the right to do so.
-9-
<PAGE>
TRADITIONAL IRA. In a Traditional IRA, amounts contributed to the IRA may be tax
deductible at the time of contribution depending on your income and whether you
are an "active participant" in an employer-sponsored retirement plan. Amounts
invested are permitted to grow tax-free until they are distributed, and then
distributions will be taxed except to the extent that the distribution
represents a return of your own contributions for which you did not claim a
deduction. If you take distributions before age 591_2, or fail to begin taking
distributions after age 70 1/2, you may experience adverse tax consequences.
ROTH IRA. In a Roth IRA, amounts contributed to the IRA are not tax deductible
at the time of contribution. Amounts invested are permitted to grow tax-free and
distributions from the IRA are not subject to tax if you have held the IRA for
certain minimum periods of time (generally, until age 591_2).
EDUCATION IRA. In an Education IRA, nondeductible contributions of up to $500
per year per child are permitted to grow tax-free. Distributions used to pay for
post-secondary educational expenses are not subject to tax.
SIMPLIFIED EMPLOYEE PENSION PLAN (SEP). A special IRA program is available for
employers under which the employers may establish IRA accounts for their
employees in lieu of establishing tax qualified retirement plans. Known as
SEP-IRA's, they free the employer of many of the recordkeeping requirements of
establishing and maintaining a tax qualified retirement plan trust.
SIMPLE IRA. An IRA may also be used in connection with a SIMPLE Plan established
by employers (or by a self-employed individual). Under a SIMPLE Plan, you may
elect to have your employer make salary reduction contributions on your behalf,
and the employer must either match those contributions or make non-elective
contributions for all eligible participants whether or not they are making
salary reduction contributions. A number of special rules apply to SIMPLE Plans,
including (1) a SIMPLE Plan generally is available only to employers with no
more than 100 employees; (2) contributions must be made on behalf of all
employees of the employer (other than bargaining unit employees) who satisfy
certain minimum participation requirements; (3) contributions are made to a
special SIMPLE IRA that is separate and apart from the other IRAs of employees;
(4) the distribution penalty tax (if otherwise applicable) is increased to 25%
on withdrawals during the first two years of participation in a SIMPLE IRA; and
(5) amounts withdrawn during the first two years of participation may be rolled
over tax-free only into another SIMPLE IRA (and not to a Traditional IRA or to a
Roth IRA).
403(B) PLANS. The Fund's shares are also available for use by schools,
hospitals, and certain other tax-exempt organizations or associations who wish
to use shares of the Fund as a funding medium for a retirement plan for their
employees. Contributions are made to the 403(b) Plan as a reduction to the
employee's regular compensation. Such contributions, to the extent they do not
exceed applicable limitations (including a generally applicable limitation of
$10,000 per year), are excludable from the gross income of the employee for
federal income tax purposes.
401(K) PLANS AND OTHER QUALIFIED PENSION OR PROFIT-SHARING PLANS. The Fund's
shares may be used for investment by either self-employed individuals (sole
proprietorships and partnerships) or corporations who wish to use shares of the
Fund as a funding medium for retirement plans qualified under the Internal
Revenue Code. Such plans often allow employees to make elective tax-deferred
contributions out of their salaries, which may be matched by their employers up
to certain percentages based on the employee's pre-contribution earned income.
In addition to such contributions, or in lieu thereof, the employer may make
non-elective contributions for employees whether or not they are making elective
contributions. Please contact the Fund for information about establishing a
401(k) plan for your company using the Barrett Growth Fund together with the
Firstar Money Market Fund and the Firstar Tax-Exempt Money Market Fund as
investment options.
-10-
<PAGE>
ACCOUNT INSTRUCTIONS
To Open an Account
- -------------------
Regular Account Minimum: $2,500
Retirement Account Minimum: $1,000
To Add to an Account
- ---------------------
Regular Account Minimum: $1,000
Retirement Account Minimum: None
To Sell Shares
- -------------
All requests to sell shares from IRA accounts must be in writing.
In Writing
- -------------
Complete the application.
In Writing
- -------------
Complete the detachable investment slip from your account statement, or if the
slip is not available, include a note specifying the Fund's name, your account
number and the name on the account.
In Writing
- -------------
Write a letter of instruction that includes:
- - your name(s) and signature(s)
- - your account number
- - the Fund's name
- - the dollar amount you want to sell
Proceeds will be sent to the address of record unless specified in the letter
and accompanied by a signature guarantee.
Mail your application along with your
check* made payable to "Barrett Growth
Fund" to:
Firstar Mutual Fund Services, LLC
Third Floor
615 E. Michigan Street
Milwaukee, WI 53202
Mail the slip, along with your check* made payable to "Barrett Growth Fund" to:
Firstar Mutual Fund Services, LLC
Third Floor
615 E. Michigan Street
Milwaukee, WI 53202
Mail your letter to:
Firstar Mutual Fund Services, LLC
Third Floor
615 E. Michigan Street
Milwaukee, WI 53202
By Telephone**
- -------------
If your bank is a member of Automated Clearing House (ACH), your account can be
set up with the ACH feature. Complete the portion on the Shareholder Application
related to telephone purchases.
By Telephone**
- -------------
If you have not already completed the portion of the Shareholder Application
related to telephone purchases, call 1-877-363-6333 to obtain an application.
After the request is completed, call to request the amount to be transferred to
your account.
By Telephone**
- --------------
When you are ready to sell shares, call 1-877-363-6333 and select how you would
like to receive the proceeds:
- - Mail check to the address of record
- - Wire funds to a domestic financial institution
- - Mail to a previously designated alternate address
- - Electronically transfer the funds via ACH
By Wire
- -------------
To obtain instructions for Federal Funds wire purchases for the Fund, please
call toll free 1-877-363-6333.
By Wire
- -------------
To obtain instructions for Federal Funds wire purchases for the Funds, please
call toll free 1-877-363-6333.
By Wire
- -------------
Be sure the Fund has your bank account information on file. Proceeds will be
wired to your bank. There is a $12.00 wire fee charged for this service.
Automatically
- -------------
Automatic Investment Plan - Indicate on your application which automatic
service(s) you want. Complete and return your application with your investment.
Automatically
- -------------
All Services - Call us to request a form to add any automatic investing service.
Complete and return the forms along with any other required materials.
Automatically
- -------------
Automatic Withdrawal Plan - Call us to request a form to add the plan. Complete
the form, specifying the amount and frequency of withdrawals you would like. Be
sure to maintain an account balance of $10,000 or more.
* All checks should be in U.S. Dollars and drawn on U.S. banks. If your check is
returned for any reason, you may be charged for any resulting fees or losses.
Third-party checks will not be accepted.
**Unless you have instructed us otherwise, only one account owner needs to call
in redemption requests. All telephone calls are recorded for your protection
and reasonable procedures are taken to verify the identity of the caller (such
as providing your account number and taxpayer identification number). If such
measures are followed to ensure against unauthorized transactions, neither the
Trust, the Advisor, the Transfer Agent nor the Distributor will be responsible
for any losses. Written confirmation will be provided for all purchase,
exchange and redemption transactions initiated by the telephone. The Fund
reserves the right to refuse a request to sell shares by wire or telephone if
it is believed advisable to do so. Procedures for selling shares o f the Fund
by wire or telephone may be modified or terminated at any time.
-11-
<PAGE>
MARKETING AND DISTRIBUTION
The Fund's shares are offered through financial supermarkets and retirement
plans, investment advisors and consultants, financial planners, brokers, dealers
and other investment professionals. The Fund's principal (i.e. primary)
underwriter and national Distributor is T.O. Richardson Securities, Inc. The
shares are offered and sold without any sales charges imposed by the Fund or its
Distributor. Investment professionals who offer the Fund's shares are generally
paid separately by their individual clients. If you invest through a third
party, the policies and fees may be different than those described in this
Prospectus. For example, third parties may charge transaction fees or set
different minimum investment amounts.
The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Under this Plan, the Fund will reimburse the
distributor or others for amounts spent in connection with the sales and
distribution of its shares or for shareholder servicing activities. Distribution
activities include the preparation, printing and mailing of prospectuses,
shareholder reports and sales materials for marketing purposes, marketing
activities, advertising and payments to brokers or others who sell shares of the
Fund. Shareholder servicing activities include ongoing maintenance and service
of shareholder accounts for the Fund, responding to inquiries regarding
shareholder accounts and acting as agent or intermediary between shareholders
and the Fund or its service providers. The maximum amount that the Fund may pay
is 0.25% per year of the average daily net assets of the Fund. Because these
fees are paid out of the Fund's assets on an ongoing basis, over time these fees
will increase the cost of your investment and may cost you more than paying
other types of sales charges. The Fund currently expects that the fees of the
Plan will primarily be used to compensate mutual fund supermarkets or retirement
plan recordkeepers for their activities on behalf of the Fund and its
shareholders.
Firstar Mutual Fund Services, LLC serves as the administrator, transfer agent,
and dividend disbursing agent for the Fund. The Fund may also compensate other
parties who provide transfer agency services in addition to those provided by
Firstar Mutual Fund Services, LLC. Firstar Bank Milwaukee, N.A. serves as the
custodian for the Fund.
DISTRIBUTIONS AND TAXATION
The Fund will distribute substantially all of the net investment income and net
capital gains that it has realized on the sale of securities. These income and
gains distributions will generally be paid once each year, on or before December
31st. Distributions will automatically be reinvested in additional shares of the
Fund, unless you elect to have the distributions paid to you in cash. There are
no sales charges or transaction fees for reinvested dividends and all shares
will be purchased at NAV.
Distributions made by the Fund are taxable to most investors (unless the
investment is in an IRA or qualified retirement plan or account), whether
received in cash or additional shares. Income dividends and short-term capital
gains are taxed as ordinary income. Long-term capital gains are taxed as such,
regardless of how long you own your shares of the Fund. The tax status of
distributions made to you, whether ordinary income or long-term capital gain,
will be detailed in your annual tax statement from the Fund. Distributions
declared in December, but paid in January, are taxable as if they were paid in
December. If the Fund distributes unrealized gains soon after you purchase
shares, a portion of your investment may be returned to you as a taxable
distribution.
By law, the Fund must withhold 31% of your taxable distributions and proceeds if
you do not provide a correct taxpayer identification number ("TIN") or certify
that your TIN is correct, or if the IRS instructs the Fund to do so.
A sale or exchange of Fund shares is a taxable event and may result in a capital
gain or loss to you if you are subject to tax. For tax purposes, an exchange of
Fund shares for shares of either the Firstar Money Market
-12-
<PAGE>
Fund or the Firstar Tax-Exempt Money Market Fund is the same as a sale. Non-U.S.
investors may be subject to U.S. withholding and estate taxes. In addition,
distributions from the Fund or gains from the sale or exchange of Fund shares
may be subject to state or local taxes.
BECAUSE EVERYONE'S TAX SITUATION IS UNIQUE, ALWAYS CONSULT YOUR TAX PROFESSIONAL
ABOUT FEDERAL, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES.
Financial Highlights
The financial highlights table is intended to help you understand the Fund's
financial performance for the fiscal period ended June 30, 1999. Certain
information reflects financial results for a single Fund share. The Total Return
in the table represents the rate that an investor would have earned on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by KPMG LLP, whose report,
along with the Fund's financial statements are included in the Fund's Annual
Report to Shareholders which is available upon request.
<TABLE>
<CAPTION>
Per share data for a share of beneficial interest outstanding for the entire DECEMBER 29, 1998*
period and selected information for the period are as follows: THROUGH
JUNE 30, 1999
-----------------
<S> <C>
NET ASSET VALUE
Beginning of period $10.00
OPERATIONS
Net investment los (0.01)(1)
Net realized and unrealized gains on investments 0.95
-------
Total from operations 0.94
-------
NET ASSET VALUE
End of period $10.94
=======
Total Return 9.40%
Net Assets at end of period (000s omitted) $9,752
RATIO OF EXPENSES TO AVERAGE NET ASSETS
Before fee waiver/expense reimbursement 5.22%(2)
After fee waiver/expense reimbursement 1.44%(2)
RATIO OF NET INVESTMENT LOSS TO AVERAGE NET ASSETS
Before fee waiver/expense reimbursemen (4.02)%(2)
After fee waiver/expense reimbursement (0.24)%(2)
Portfolio turnover rate 30%
* Commencement of operations.
1 Net investment income (or loss) per share is calculated using the ending
balance of undistributed net investment income (or loss) prior to
consideration of adjustments for permanent book to tax differences.
2 Annualized.
</TABLE>
-13-
<PAGE>
BARRETT GROWTH FUND
c/o Firstar Mutual Fund Services, LLC
615 East Michigan Avenue
Milwaukee, WI 53202
(877) 363-6333
INVESTMENT ADVISOR
BARRETT ASSOCIATES, INC.
565 Fifth Avenue
New York, NY 10017
DISTRIBUTOR
T.O. RICHARDSON SECURITIES, INC.
2 Bridgewater Road
Farmington, CT 06032
ADMINISTRATOR, FUND ACCOUNTANT &
TRANSFER AGENT
FIRSTAR MUTUAL FUND SERVICES, LLC
615 East Michigan Street
Milwaukee, WI 53202
CUSTODIAN
FIRSTAR BANK MILWAUKEE, N.A.
615 East Michigan Street
Milwaukee, WI 53202
LEGAL COUNSEL
Stradley Ronon Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103
AUDITORS
KPMG LLP
303 East Wacker Drive
Chicago, IL 60601
ADDITIONAL INFORMATION
A Statement of Additional Information (SAI) contains additional information
about the Fund and is incorporated by reference into this Prospectus. The Fund's
annual and semiannual reports to shareholders contain additional information
about the Fund's investments. In the Fund's annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Fund's performance during each fiscal year.
You may obtain a free copy of these documents by calling or writing the Fund as
shown above. You also may call the toll-free number shown above to request other
information about the Fund and to make shareholder inquiries.
You may review and copy the SAI and other information about the Fund by visiting
the Securities and Exchange Commission's Public Reference Room in Washington,
DC. or by visiting the Commission's internet site at http://www.sec.gov. Copies
of this information also maybe obtained, upon payment of a duplicating fee, by
writing to the Public Reference Section of the Commission, Washington, DC
20549-6009. You may call the Commission at 1-800-SEC-0330 for information about
the operation of the public reference room.
<PAGE>
Investment Team
John D. Barrett II, Chairman, CEO and Portfolio Manager.~Joined Firm: 1970.
Formerly with Clark, Dodge and Co.~Education: B.A. Yale University, M.B.A. New
York University.~Years of Experience: 36.
Robert E. Harvey, C.F.A., President, COO and Portfolio Manager. Joined Firm:
1994. Formerly with Scudder, Stevens and Clark and Bessemer Trust Company.
Education: B.A. Bowdoin College, M.B.A. University of Virginia. Years of
Experience: 23.
James R. Rutherford, Vice Chairman and Portfolio Manager. Joined Firm: 1973.
Formerly with Manufacturer's Hanover Trust Company. Education: B.A. Miami
University of Ohio.~Years of Experience: 41.
Robert J. Voccola, C.F.A., Managing Director, Director of Research and Portfolio
Manager. Joined Firm: 1987. Formerly with Bernstein Macauley, L.F. Rothschild,
and Clark, Dodge and Co. ~Education: B.S. Lehigh University, M.B.A. Columbia
University.~Years of Experience: 32.
Henry A. Collins, Managing Director and Portfolio Manager.~Joined Firm: 1990.
Formerly with Kidder, Peabody as Director of Equity Research and Clark, Dodge
and Co.~Education: B.S. Brown University. Years of Experience: 33.
Peter H. Shriver, C.F.A., Managing Director and Portfolio Manager.~Joined Firm:
1989. Formerly with Peter B. Cannell & Company and~Henry Ansbacher Inc.
Education: B.A. Drake University, M.A.,~M.B.A. New York University. Years of
Experience: 13.
Larry W. Seibert, C.F.A., Managing Director and Portfolio Manager.~Joined Firm:
1999. Formerly with Avatar Associates,~Goldman Sachs and KPMG, LLP. Education:
B.A. Columbia University,~M.B.A. New York University. Years of Experience: 15.
Leslie J. Lammers, C.F.A., Managing Director and Portfolio Manager.~Joined Firm:
1997. Formerly with Scudder, Stevens and~Clark and Morgan Guaranty Trust
Company.~Education: B.B.A. University of Texas. Years of Experience: 19.
Christina Bater, C.F.P., Associate Managing Director and Portfolio Manager.
Joined Firm: 1984. Education: B.S. University of Buffalo.~Years of Experience:
8.
<PAGE>
BARRETT GROWTH FUND~Features:
Liquidity
You may redeem or exchange your shares on a~daily basis, on all days during
which the~New York Stock Exchange is open for business.*1
Automatic Investment Plan
Barrett Growth Fund offers the Automatic Investment Plan, an easy way to invest
in the~Fund on a regular basis. Barrett will deduct a~specified amount from your
bank checking or~savings account on a monthly basis to purchase~shares in your
account.*2
Retirement Accounts
Barrett Growth Fund offers a wide array of~qualified retirement plan
accounts,~including IRA Plans.
Questions
Barrett keeps in constant contact with your~advisor, including monthly portfolio
updates~and new prospectus/shareholder report~information as soon as it is
available. You may~wish to check with your stock broker, financial~planner or
investment advisor for the latest~information regarding The Barrett Funds.
*1 Shares are redeemed at market price which may be more or less than the
original amount invested. *2 The Automatic Investment Plan does not ensure a
profit nor protect against loss in a~declining market.
C/O FIRSTAR MUTUAL FUND SERVICES, LLC
615 EAST MICHIGAN STREET
MILWAUKEE, WI 53202
(877) 363-6333
www.barrettassociates.com
<PAGE>
BARRETT GROWTH FUND
THE BARRETT FUNDS
565 FIFTH AVENUE
NEW YORK, NY 10017
(877) 363-6333
STATEMENT OF ADDITIONAL INFORMATION
DATED OCTOBER 28, 1999
This Statement of Additional Information (SAI) relates to the Barrett
Growth Fund which is a series of The Barrett Funds, a registered open-end
management investment company commonly known as a mutual fund. This SAI is not a
Prospectus and should be read in conjunction with the Prospectus for the Fund
dated October 28, 1999. The Prospectus may be obtained by writing or calling the
Fund at the address and number shown above.
<PAGE>
TABLE OF CONTENTS
ADDITIONAL INFORMATION ABOUT THE FUND'S INVESTMENTS 4
Convertible Securities 4
Warrants and Rights 5
Illiquid Securities 5
Rule 144A Securities 5
When Issued, Delayed Delivery Securities and Forward Commitments 6
American Depository Receipts 6
U.S. Government Securities 6
Bank Obligations 7
Loans of Portfolio Securities 7
Repurchase Agreements 8
Reverse Repurchase Agreements 8
Borrowing 9
Futures 9
Options 11
Index Options 13
Risks of Options 14
Other Investments 15
INVESTMENT RESTRICTIONS 15
ADDITIONAL INFORMATION ABOUT PURCHASES AND SALES 17
MANAGEMENT OF THE TRUST 19
INVESTMENT ADVISOR AND MANAGEMENT AGREEMENT 22
CODE OF ETHICS 24
SERVICE AGREEMENTS 24
PORTFOLIO TRANSACTIONS AND TURNOVER 27
SHARES OF BENEFICIAL INTEREST 29
DIVIDENDS 30
ADDITIONAL INFORMATION ON DISTRIBUTION AND TAXES 30
INVESTMENT PERFORMANCE 31
FINANCIAL STATEMENTS 33
<PAGE>
GENERAL INFORMATION
The Barrett Growth Fund (the "Fund") is a series of The Barrett Funds,
a business trust organized in the state of Delaware on September 30, 1998 (the
"Trust"). The Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), which is
authorized to issue multiple series and classes of shares. Each series
represents interests in a separate portfolio of investments. The Trust is
authorized to issue an unlimited number of shares of beneficial interest, par
value $0.001. The Barrett Growth Fund is the first and only series of the Trust
and is classified as a "diversified" series as that term is defined in the 1940
Act.
ADDITIONAL INFORMATION ABOUT THE FUND'S INVESTMENTS
The Fund's investment objective is long-term capital appreciation and
the maximization of after-tax returns. The Fund seeks to achieve its objective
by investing primarily in a diversified portfolio of common stocks of large and
mid-sized growth companies. The Fund's investment objective is not fundamental,
and therefore may be changed in the future by action of the Board of Trustees of
the Trust. Shareholders would not be asked to vote on any change in the
investment objective, but would receive ample advanced written notice of any
such change.
The Fund's Prospectus outlines the principal investment strategies of
the Fund. The following discussion of investment techniques and instruments
supplements and should be read in conjunction with the investment information
set forth in the Fund's Prospectus, and includes some information about
strategies that are not considered to be principal investment strategies. The
investment practices described below, except for the discussion of certain
investment restrictions, are not fundamental and may be changed by the Board of
Trustees without the approval of the shareholders. In seeking to meet the
investment objective of the Fund, the Fund's investment advisor, Barrett
Associates, Inc. (the "Advisor"), may cause the Fund to invest in any type of
security whose characteristics are consistent with the Fund's investment
program. The securities in which the Fund may invest include those described
below.
CONVERTIBLE SECURITIES
Traditional convertible securities include corporate bonds, notes and
preferred stocks that may be converted into or exchanged for common stock, and
other securities that also provide an opportunity for equity participation.
These securities are generally convertible either at a stated price or a stated
rate (that is, for a specific number of shares of common stock or other
security). As with other fixed income securities, the price of a convertible
security to some extent varies inversely with interest rates. While providing a
fixed-income stream (generally higher in yield than the income derivable from a
common stock but lower than that afforded by a non-convertible debt security), a
convertible security also affords the investor an opportunity, through its
conversion feature, to participate in the capital appreciation of the common
stock into which it is convertible. As the market price of the underlying common
stock declines, convertible securities tend to trade increasingly on a yield
basis and so may not experience market value declines to the same extent as the
underlying common stock. When the market price of the underlying common stock
increases, the price of a convertible security tends to rise as a reflection of
the value of the underlying common stock. To obtain such a higher yield, the
Fund
4
<PAGE>
may be required to pay for a convertible security an amount in excess of the
value of the underlying common stock. Common stock acquired by the Fund upon
conversion of a convertible security will generally be held for so long as the
Advisor anticipates such stock will provide the Fund with opportunities which
are consistent with the Fund's investment objective and policies.
WARRANTS AND RIGHTS
The Fund may invest in warrants; however, not more than 10% of the
Fund's total assets (at the time of purchase) will be invested in warrants other
than warrants acquired in units or attached to other securities. Warrants are
pure speculation in that they have no voting rights, pay no dividends and have
no rights with respect to the assets of the corporation issuing them. Warrants
basically are options to purchase equity securities at a specific price valid
for a specific period of time. They do not represent ownership of the
securities, but only the right to buy them. Warrants differ from call options in
that warrants are issued by the issuer of the security which may be purchased on
their exercise, whereas call options may be written or issued by anyone. The
prices of warrants do not necessarily move parallel to the prices of the
underlying securities. Rights represent a preemptive right to purchase
additional shares of stock at the time of new issuance, before stock is offered
to the general public, so that the stockholder can retain the same ownership
percentage after the offering.
ILLIQUID SECURITIES
The Fund may invest up to 15% of its net assets in illiquid securities.
The term "illiquid securities" for this purpose means securities 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 securities. Illiquid
securities are considered to include generally, among other things, certain
written over-the-counter options, securities or other liquid assets being used
as cover for such options, repurchase agreements with maturities in excess of
seven days, certain loan participation interests and other securities whose
disposition is restricted under the federal securities laws. The Fund's illiquid
investments may include privately placed securities which are not registered for
sale under the Securities Act of 1933, as amended (the "1933 Act").
RULE 144A SECURITIES
The Fund may invest in securities that are restricted as to resale, but
which are regularly traded among qualified institutional buyers because they are
exempt under Rule 144A from the registration requirements of the 1933 Act. The
Board of Trustees of the Trust has instructed the Advisor to consider the
following factors in determining the liquidity of a security purchased under
Rule 144A: (i) the frequency of trades and trading volume for the security; (ii)
whether at least three dealers are willing to purchase or sell the security and
the number of potential purchasers; (iii) whether at least two dealers are
making a market in the security, the method of soliciting offers and the
mechanics of transfer). Although having delegated the day-to-day functions, the
Board of Trustees will continue to monitor and periodically review the Advisor's
selection of Rule 144A securities, as well as the Advisor's determinations as to
their liquidity. Investing in securities under Rule 144A could affect the Fund's
illiquidity to the extent that qualified institutional buyers become, for a
time, uninterested in purchasing these securities.
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After the purchase of a security under Rule 144A, the Board of Trustees and the
Advisor will continue to monitor the liquidity of that security to ensure that
the Fund has no more than 15% of its net assets in illiquid securities.
WHEN ISSUED, DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS
The Fund may enter into forward commitments for the purchase or sale of
securities, including on a "when issued" or "delayed delivery" basis in excess
of customary settlement periods for the type of security involved. In some
cases, a forward commitment may be conditioned upon the occurrence of a
subsequent event, such as approval and consummation of a merger, corporate
reorganization or debt restructuring, i.e., a when, as and if issued security.
When such transactions are negotiated, the price is fixed at the time of the
commitment, with payment and delivery taking place in the future, generally a
month or more after the date of the commitment. While the Fund will only enter
into a forward commitment with the intention of actually acquiring the security,
the Fund may sell the security before the settlement date if it is deemed
advisable.
Securities purchased under a forward commitment are subject to market
fluctuation, and no interest (or dividends) accrues to the Fund prior to the
settlement date. The Fund will segregate with its Custodian cash or liquid
high-grade debt securities in an aggregate amount at least equal to the amount
of its outstanding forward commitments.
AMERICAN DEPOSITORY RECEIPTS
The Fund may make foreign investments through the purchase and sale of
sponsored or unsponsored American Depository Receipts ("ADRs"). ADRs are
receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. The Fund may
purchase ADRs whether they are "sponsored" or "unsponsored." "Sponsored" ADRs
are issued jointly by the issuer of the underlying security and a depository,
whereas "unsponsored" ADRs are issued without participation of the issuer of the
deposited security. Holders of unsponsored ADRs 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 in respect of the deposited securities. Therefore, there may
not be a correlation between information concerning the issuer of the security
and the market value of an unsponsored ADR. ADRs may result in a withholding tax
by the foreign country of source which will have the effect of reducing the
income distributable to shareholders.
U.S. GOVERNMENT SECURITIES
U.S. Government securities are obligations of, or guaranteed by, the
U.S. Government, its agencies or instrumentalities. The U.S. Government does not
guarantee the net asset value of the Funds' shares. Some U.S. Government
securities, such as Treasury bills, notes and bonds, and securities guaranteed
by the Government National Mortgage Association ("GNMA"), are supported by the
full faith and credit of the United States; others, such as those of the Federal
Home Loan Banks, are supported by the right of the issuer to borrow from the
U.S. Treasury;
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others, such as those of the Federal National Mortgage Association ("FNMA"), are
supported by the discretionary authority of the U.S. Government to purchase the
agency's obligations; and still others, such as those of the Student Loan
marketing Association, are supported only by the credit of the instrumentality.
U.S. Government securities include securities that have no coupons, or have been
stripped of their unmatured interest coupons, individual interest coupons from
such securities that trade separately, and evidences of receipt of such
securities. Such securities may pay no cash income, and are purchased at a deep
discount from their value at maturity. Because interest on zero coupon
securities is not distributed on a current basis but is, in effect, compounded,
zero coupon securities tend to be subject to greater market risk than
interest-payment securities, such as CATs and TIGRs, which are not issued by the
U.S. Treasury, and are new therefore not U.S. Government securities, although
the underlying bond represented by such receipt is a debt obligation of the U.S.
Treasury. Other zero coupon Treasury securities (STRIPs and CUBEs) are direct
obligations of the U.S. Government.
BANK OBLIGATIONS
Certificates of deposit are short-term obligations of commercial banks.
A bankers' acceptance is a time draft drawn on a commercial bank by a borrower,
usually in connection with international commercial transactions. Certificates
of deposit may have fixed or variable rates.
LOANS OF PORTFOLIO SECURITIES
The Fund may lend its investment securities to approved borrowers who
need to borrow securities in order to complete certain transactions, such as
covering short sales, avoiding failures to deliver securities or completing
arbitrage operations. By lending its investment securities, the Fund attempts to
increase its income through the receipt of interest on the loan. Any gain or
loss in the market price of the securities loaned that might occur during the
term of the loan would be for the account of the Fund. The Fund may lend its
investment securities to qualified brokers, dealers, domestic and foreign banks
or other financial institutions, so long as the terms, the structure and the
aggregate amount of such loans are not inconsistent with the 1940 Act or the
rules and regulations or interpretations of the Securities and Exchange
Commission (the "SEC") thereunder, which currently require that: (a) the
borrower pledge and maintain with a Fund collateral consisting of cash, an
irrevocable letter of credit issued by a bank or securities issued or guaranteed
by the United States Government having a value at all times not less than 100%
of the value of the securities loaned; (b) the borrower add to such collateral
whenever the price of the securities loaned rises (i.e., the borrower "marks to
the market" on a daily basis); (c) the loan be made subject to termination by a
Fund at any time; and (d) the Fund receives reasonable interest on the loan
(which may include the Fund investing any cash collateral in interest bearing
short-term investments). All relevant facts and circumstances, including the
creditworthiness of the broker, dealer or institution, will be considered in
making decisions with respect to the lending of securities, subject to review by
the Board of Trustees.
At the present time, the staff of the SEC does not object if an
investment company pays reasonable negotiated fees in connection with loaned
securities so long as such fees are set forth in a written contract and approved
by the investment company's Board of Trustees. In addition, voting rights may
pass with the loaned securities, but if a material event occurs affecting an
investment on a loan, the loan must be called and the securities voted.
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REPURCHASE AGREEMENTS
When the Fund enters into a repurchase agreement, it purchases
securities from a bank or broker-dealer which simultaneously agrees to
repurchase the securities at a mutually agreed upon time and price, thereby
determining the yield during the term of the agreement. As a result, a
repurchase agreement provides a fixed rate of return insulated from market
fluctuations during the term of the agreement. The term of a repurchase
agreement generally is short, possibly overnight or for a few days, although it
may extend over a number of months (up to one year) from the date of delivery.
Repurchase agreements will be fully collateralized and the collateral will be
marked-to-market daily. The Fund may not enter into a repurchase agreement
having more than seven days remaining to maturity if, as a result, such
agreement, together with any other illiquid securities held by the Fund, would
exceed 15% of the value of the net assets of the Fund.
In the event of bankruptcy or other default by the seller of the
security under a repurchase agreement, the Fund may suffer time delays and incur
costs or possible losses in connections with the disposition of the collateral.
In such event, instead of the contractual fixed rate of return, the rate of
return to the Fund would be dependent upon intervening fluctuations of the
market value of the underlying security and the accrued interest on the
security. Although the Fund would have rights against the seller for breach of
contract with respect to any losses arising from market fluctuations following
the failure of the seller to perform, the ability of the Fund to recover damages
from a seller in bankruptcy or otherwise in default would be reduced.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements involve sales of portfolio securities of
the Fund to member banks of the Federal Reserve System or securities dealers
believed creditworthy, concurrently with an agreement by the Series to
repurchase the same securities at a later date at a fixed price which is
generally equal to the original sales price plus interest. The Fund retains
record ownership and the right to receive interest and principal payments on the
portfolio securities involved. In connection with each reverse repurchase
transaction, the Fund will segregate cash, U.S. government securities, equity
securities and/or investment and non-investment grade debt securities in an
amount equal to the repurchase price. Any assets held in any segregated
securities, options, futures, forward contracts or other derivative transactions
shall be liquid, unencumbered and marked-to-market daily (any such assets held
in a segregated account are referred to in this Statement of Additional
Information as "Segregated Assets").
A reverse repurchase agreement involves the risk that the market value
of the securities retained by the Fund may decline below the price of the
securities the Series has sold but is obligated to repurchase under the
agreement. In the event the buyer of securities under a reverse repurchase
agreement files for bankruptcy or becomes insolvent, the Fund's use of the
proceeds of the agreement may be restricted pending a determination by the other
party, or its trustee or receiver, whether to enforce the Fund's obligation to
repurchase the securities. Reverse repurchase agreements are considered
borrowings and as such, are subject to the same investment limitations.
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BORROWING
The Fund may borrow money as a temporary measure for extraordinary
purposes or to facilitate redemptions subject to the fundamental investment
restriction described below under the heading "Investment Restrictions." The
Fund will not borrow money in excess of 33 1/3% of the value of its total
assets. The Fund has no intention of increasing its net income through
borrowing. Any borrowing will be done from a bank with the required asset
coverage of at least 300%. In the event that such asset coverage shall at any
time fall below 300%, the Fund shall, within three days thereafter (not
including weekends or holidays), or such longer period as the SEC may prescribe
by rules and regulations, reduce the amount of its borrowings to such an extent
that the asset coverage of such borrowings shall be at least 300%.
FUTURES
The Fund may enter into contracts for the purchase or sale for future
delivery of securities. A purchase of a futures contract means the acquisition
of a contractual right to obtain delivery to the Fund of the securities or
foreign currency called for by the contract at a specified price and future
date. When the Fund enters into a futures transaction, it must deliver to the
futures commission merchant selected by the Fund an amount referred to as
"initial margin."
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This amount is maintained by the futures commission merchant in segregated
account at the custodian bank. Thereafter, a "variation margin" may be paid by
the Fund to, or drawn by the Fund from, such account in accordance with controls
set for such accounts, depending upon changes in the price of the underlying
securities subject to the futures contract.
The Fund may enter into futures contracts and engage in options on
futures to the extent that no more than 5% of the Fund's assets are required as
futures contract margin deposits and premiums on options, and may engage in such
transactions to the extent that obligations relating to such futures and related
options on futures transactions represent not more than 25% of the Fund's
assets.
The Fund will enter into futures transactions on domestic exchanges
and, to the extent such transactions have been approved by the Commodity Futures
Trading Commission for sale to customers in the United States, on foreign
exchanges. In addition, the Fund may sell stock index futures in anticipation of
or during a market decline to attempt to offset the decrease in market value of
their common stocks that might otherwise result; and they may purchase such
contracts in order to offset increases in the cost of common stocks that they
intend to purchase. Unlike other futures contracts, a stock index futures
contract specifies that no delivery of the actual stocks making up the index
will take place. Instead, settlement in cash must occur upon the termination of
the contract. While futures contracts provide for the delivery of securities,
deliveries usually do not occur. Contracts are generally terminated by entering
into offsetting transactions.
The Fund may enter into futures contracts to protect against the
adverse affects of fluctuations in security prices, interest or foreign exchange
rates without actually buying or selling the securities or foreign currency. For
example, if interest rates are expected to increase, the Fund might enter into
futures contracts for the sale of debt securities. Such a sale would have much
the same effect as selling an equivalent value of the debt securities owned by
the Fund. If interest rates did increase, the value of the debt securities in
the portfolio would decline, but the value of the futures contracts to the Fund
would increase at approximately the same rate, thereby keeping the net asset
value of the Fund from declining as much as it otherwise would have. Similarly,
when it is expected that interest rates will decline, futures contracts may be
purchased to hedge in anticipation of subsequent purchases of securities at
higher prices. Since the fluctuations in the value of futures contracts should
be similar to those of debt securities, the Fund could take advantage of the
anticipated rise in value of debt securities without actually buying them until
the market had stabilized. At that time, the futures contracts could be
liquidated and the Fund could then buy debt securities on the cash market.
To the extent that market prices move in an unexpected direction, the
Fund may not achieve the anticipated benefits of futures contracts or may
realize a loss. For example, if the Fund is hedged against the possibility of an
increase in interest rates which would adversely affect the price of securities
held in its portfolio and interest rates decrease instead, the Fund would lose
part or all of the benefit of the increased value which it has because it would
have offsetting losses in its futures position. In addition, in such situations,
if the Fund had insufficient cash, it may be required to sell securities from
its portfolio to meet daily variation margin requirements. Such sales of
securities may, but will not necessarily, be at increased
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prices which reflect the rising market. The Fund may be required to sell
securities at a time when it may be disadvantageous to do so.
OPTIONS
The Fund may invest in options that are listed on U.S. exchanges or
traded over-the-counter. Certain over-the-counter options may be illiquid. Thus,
it may not be possible to close options positions and this may have an adverse
impact on the Fund' ability to effectively hedge its securities. The Fund
considers over-the-counter options to be illiquid. Accordingly, the Fund will
only invest in such options to the extent consistent with its 15% limit on
investments in illiquid securities. The Fund may purchase and write call or put
options on securities but will only engage in option strategies for
non-speculative purposes. In addition, the Fund will only engage in option
transactions (other than index options) to the extent that no more than 25% of
its total assets are subject to obligations relating to such options.
PURCHASING CALL OPTIONS - The Fund may purchase call options on
securities. When the Fund purchases a call option, in return for a premium paid
by the Fund to the writer of the option, the Fund obtains the right to buy the
security underlying the option at a specified exercise price at any time during
the term of the option. The writer of the call option has the obligation to
deliver the underlying security against payment of the exercise price. The
advantage of purchasing call options is that the Fund may alter portfolio
characteristics and modify portfolio maturities without incurring the cost
associated with transactions.
The Fund may, following the purchase of a call option, liquidate its
position by effecting a closing sale transaction. This is accomplished by
selling an option of the same series as the option previously purchased. The
Fund will realize a profit from a closing sale transaction if the price received
on the transaction is more than the premium paid to purchase the original call
option; the Fund will realize a loss from a closing sale transaction if the
price received on the transaction is less than the premium paid to purchase the
original call option.
Although the Fund will generally purchase only those call options for
which there appears to be an active secondary market, there is no assurance that
a liquid secondary market on an exchange will exist for any particular option,
or at any particular time, and for some options no secondary market on an
exchange may exist. In such event, it may not be possible to effect closing
transactions in particular options, with the result that the Fund would have to
exercise its options in order to realize any profit and would incur brokerage
commissions upon the exercise of such options and upon the subsequent
disposition of the underlying securities acquired through the exercise of such
options. Further, unless the price of the underlying security changes
sufficiently, a call option purchased by the Fund may expire without any value
to the Fund, in which event it would realize a capital loss which will be
short-term unless the option was held for more than one year.
COVERED CALL WRITING - The Fund may write covered call options from
time to time on such portions of its portfolio, without limit, as Barrett
Associates determines is appropriate in seeking to achieve the Fund's investment
objective. The advantage to the Fund of writing covered calls is that it
receives a premium which is additional income. However, if the security rises in
value, the Fund may not fully participate in the market appreciation.
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During the option period for a covered call option, the writer may be
assigned an exercise notice by the broker-dealer through whom such call option
was sold, requiring the writer to deliver the underlying security against
payment of the exercise price. This obligation is terminated upon the expiration
of the option or upon entering a closing purchase transaction. A closing
purchase transaction, in which the Fund, as writer of an option, terminates its
obligation by purchasing an option of the same fund as the option previously
written, cannot be effected with respect to an option once the option writer has
received an exercise notice for such option.
Closing purchase transactions will ordinarily be effected to realize a
profit on an outstanding call option, to prevent an underlying security from
being called, to permit the sale of the underlying security or to enable the
Fund to write another call option on the underlying security with either a
different exercise price or expirations date or both. The Fund may realize a net
gain or loss from a closing purchase transaction depending upon whether the net
amount of the original premium received on the call option is more or less than
the cost of effecting the closing purchase transaction. Any loss incurred in a
closing purchase transaction may be partially or entirely offset by the premium
received from a sale of a different call option on the same underlying security.
Such a loss may also be wholly or partially offset by unrealized appreciation in
the market value of the underlying security. Conversely, a gain resulting from a
closing purchase transaction could be offset in whole or in part by a decline in
the market value of the underlying security.
If a call option expires unexercised, the Fund will realize a
short-term capital gain in the amount of the premium on the option less the
commission paid. Such a gain, however, may be offset by depreciation in the
market value of the underlying security during the option period. If a call
option is exercised, the Fund will realize a gain or loss from the sale of the
underlying security equal to the difference between the cost of the underlying
security and the proceeds of the sale of the security plus the amount of the
premium on the option less the commission paid.
The Fund will write call options only on a covered basis, which means
that the Fund will own the underlying security subject to a call option at all
times during the option period. Unless a closing purchase transaction is
effected, the Fund would be required to continue to hold a security which it
might otherwise wish to sell or deliver a security it would want to hold. The
exercise price of a call option may be below, equal to or above the current
market value of the underlying security at the time the option is written.
PURCHASING PUT OPTIONS - The Fund may purchase put options. The Fund
will, at all times during which it holds a put option, own the security covered
by such option.
A put option purchased by the Fund gives it the right to sell one of
its securities for an agreed price up to an agreed date. The Fund intends to
purchase put options in order to protect against a decline in the market value
of the underlying security below the exercise price less the premium paid for
the option ("protective puts"). The ability to purchase put options will allow
the Fund to protect unrealized gains in an appreciated security in their
portfolios without actually selling the security. If the security does not drop
in value, the Fund will lose the value of the premium paid. The Fund may sell a
put option which it has previously purchased prior to the
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sale of the securities underlying such option. Such sale will result in a net
gain or loss depending on whether the amount received on the sale is more or
less than the premium and other transaction costs paid on the put option which
is sold.
The Fund may sell a put option purchased on individual portfolio
securities. Additionally, the Series may enter into closing sale transactions. A
closing sale transaction is one in which the Fund, when it is the holder of an
outstanding option, liquidates its position by selling an option of the same
series as the option previously purchased.
WRITING PUT OPTIONS - The Fund may also write put options on a secured
basis which means that the Fund will maintain in a segregated account with its
custodian segregated assets in an amount not less than the exercise price of the
option at all times during the option period. The amount of segregated assets
held in the segregated account will be adjusted on a daily basis to reflect
changes in the market value of the securities covered by the put option written
by the Series. Secured put options will generally be written in circumstances
where Barrett Associates wishes to purchase the underlying security for the
Fund's portfolio at a price lower than the current market price of the security.
In such event, the Fund would write a secured put option at an exercise price
which, reduced by the premium received on the option, reflects the lower price
it is willing to pay.
Following the writing of a put option, the Fund may wish to terminate
the obligation to buy the security underlying the option by effecting a closing
purchase transaction. This is accomplished by buying an option of the same
series as the option previously written. The Fund may not, however, effect such
a closing transaction after it has been notified of the exercise of the option.
STRADDLES - The Fund may write covered straddles consisting of a
combination of a call and a put written on the same underlying security. A
straddle will be covered when sufficient assets are deposited to meet the Fund's
immediate obligations. The Fund may use the same liquid assets to cover both the
call and put options where the exercise price of the call and put are the same,
or the exercise price of the call is higher than that of the put. In such cases,
the Fund will also segregate liquid assets equivalent to the amount, if any, by
which the put is "in the money."
INDEX OPTIONS
The Fund may purchase exchange-listed put and call options on stock
indices and sell such options in closing sale transactions for hedging purposes.
The Fund may purchase call options on broad market indices to temporarily
achieve market exposure when the Fund is not fully invested. The Fund may also
purchase exchange-listed call options on particular market segment indices to
achieve temporary exposure to a specific industry. The Fund may purchase put
options on broad market indices in order to protect its fully invested portfolio
from a general market decline. Put options on market segments may be bought to
protect the Fund from a decline in value of heavily weighted industries in the
Fund's portfolio. Put options on stock indices may be used to protect the Fund'
investments in the case of a major redemption. While the option is open, the
Fund will maintain a segregated account with its custodian in an amount equal to
the market value of the option.
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Options on indices are similar to regular options except that an option
on an index gives the holder the right, upon exercise, to receive an amount of
cash if the closing level of the index upon which the option is based is greater
than (in the case of a call) or lesser than (in the case of a put) the exercise
price of the option. This amount of cash is equal to the difference between the
closing price of the index and the exercise price of the option expressed in
dollars times a specified multiple (the "multiplier").
RISKS OF OPTIONS
The purchase and writing of options involves certain risks. During the
option period, the covered call writer has, in return for the premium on the
option, given up the opportunity to profit from a price increase in the
underlying securities above the exercise price, but, as long as its obligation
as a writer continues, has retained the risk of loss should the price of the
underlying security decline. The writer of an option has no control over the
time when it may be required to fulfill its obligation as a writer of the
option. Once an option writer has received an exercise notice, it cannot effect
a closing purchase transaction in order to terminate its obligation under the
option and must deliver the underlying securities at the exercise price. If a
put or call option purchased by the Fund is not sold when it has remaining
value, and if the market price of the underlying security, in the case of a put,
remains equal to or greater than the exercise price or, in the case of a call,
remains less than or equal to the exercise price, the Fund will lose its entire
investment in the option. Also, where a put or call option on a particular
security is purchased to hedge against price movements in a related security,
the price of the put or call option may move more or less than the price of the
related security. There can be no assurance that a liquid market will exist when
a Fund seeks to close out an option position. Furthermore, if trading
restrictions or suspensions are imposed on the options markets, the Fund may be
unable to close out a position.
The Fund's purchases of options on indices will subject them to the
following risks described below. First, because the value of an index option
depends upon movements in the level of the index rather than the price of a
particular security, whether the Fund will realize gain or loss on the purchase
of an option on an index depends upon movements in the level of prices in the
market generally or in an industry or market segment rather than movements in
the level of prices in the market generally or in an industry or market segment
rather than movements in the price of a particular security. Accordingly,
successful use by the Fund of options on indices is subject to Barrett
Associates' ability to predict correctly the direction of movements in the
market generally or in a particular industry. This requires different skills and
techniques than predicting changes in the prices of individual securities.
Second, index prices may be distorted if trading of a substantial
number of securities included in the index is interrupted causing the trading of
options on that index to be halted. If a trading halt occurred, the Fund would
not be able to close put options which it had purchased and the Fund may incur
losses if the underlying index moved adversely before trading resumed. If a
trading halt occurred and restrictions prohibiting the exercise of options were
imposed through the close of trading on the last day before expiration,
exercises on that day would be settled on the basis of a closing index value
that may not reflect current price information for securities representing a
substantial portion of the value of the index.
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Third, if the Fund holds an index option and exercises it before final
determination of the closing index value for that day, it runs the risk that the
level of the underlying index may change before closing. If such a change causes
the exercised option to fall "out-of-the-money," the Fund will be required to
pay the difference between the closing index value and the exercise price of the
option (times the applicable multiplier) to the assigned writer. Although the
Fund may be able to minimize this risk by withholding exercise instructions
until just before the daily cutoff time or by selling rather than exercising the
option when the index level is close to the exercise price, it may not be
possible to eliminate this risk entirely because the cutoff times for index
options may be earlier than those fixed for other types of options and may occur
before definitive closing index values are announced.
OTHER INVESTMENTS
The Board of Trustees may, in the future, authorize the Fund to invest
in securities other than those listed in this SAI and in the prospectus,
provided such investments would be consistent with the Fund's investment
objective and that it would not violate any fundamental investment policies or
restrictions.
INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT POLICIES AND RESTRICTIONS: The Fund has adopted the
following fundamental investment restrictions which cannot be changed without
the approval of a "majority of the outstanding voting securities" of the Fund.
Under the 1940 Act, a "majority of the outstanding voting securities" of a fund
means the vote of: (i) more than 50% of the outstanding voting securities of the
fund; or (ii) 67% or more of the voting securities of the fund present at a
meeting, if the holders of more than 50% of the outstanding voting securities
are present or represented by proxy, whichever is less.
CONCENTRATION: The Fund will not make investments that will result in
the concentration (as that term may be defined in the 1940 Act, any
rule or order thereunder, or U.S. Securities and Exchange Commission
("SEC") staff interpretation thereof) of its investments in the
securities of issuers primarily engaged in the same industry, provided
that this restriction does not limit the Fund from investing in
obligations issued or guaranteed by the U.S. government, or its
agencies or instrumentalities. The SEC staff currently takes the
position that a fund concentrates its investments in a particular
industry if more than 25% of its net assets is invested in issuers
within the industry.
SENIOR SECURITIES & BORROWING: The Fund may not borrow money or issue
senior securities, except as the 1940 Act, any rule or order
thereunder, or SEC staff interpretation thereof, may permit.
UNDERWRITING: The Fund may not underwrite the securities of other
issuers, except that the Fund may engage in transactions involving the
acquisition, disposition or resale of its portfolio securities, under
circumstances where it may be considered to be an underwriter under the
Securities Act of 1933.
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REAL ESTATE: The Fund may not purchase or sell real estate, unless
acquired as a result of ownership of securities or other instruments
and provided that this restriction does not prevent the Fund from
investing in issuers which invest, deal or otherwise engage in
transactions in real estate or interests therein, or investing in
securities that are secured by real estate or interests therein.
COMMODITIES: The Fund may not purchase or sell physical commodities,
unless acquired as a result of ownership of securities or other
instruments and provided that this restriction does not prevent the
Fund from engaging in transactions involving futures contracts and
options thereon or investing in securities that are secured by physical
commodities.
LENDING: The Fund may not make loans, provided that this restriction
does not prevent the Fund from purchasing debt obligations, entering
into repurchase agreements, loaning its assets to broker/dealers or
institutional investors and investing in loans, including assignments
and participation interests.
NON-FUNDAMENTAL POLICIES AND RESTRICTIONS: In addition to the fundamental
policies and investment restrictions described above, and the various general
investment policies described in the Prospectus, the Fund will be subject to the
following investment restrictions, which are considered non-fundamental and may
be changed by the Board of Trustees without shareholder approval.
OTHER INVESTMENT COMPANIES: The Fund is permitted to invest in other
investment companies, including open-end, closed-end or unregistered
investment companies, either within the percentage limits set forth in
the 1940 Act, any rule or order thereunder, or SEC staff
interpretation thereof, or without regard to percentage limits in
connection with a merger, reorganization, consolidation or other
similar transaction. However, the Fund may not operate as a "fund of
funds" which invests primarily in the shares of other investment
companies as permitted by Section 12(d)(1)(F) or (G) of the 1940 Act,
if its own shares are utilized as investments by such a "fund of
funds."
ILLIQUID SECURITIES: The Fund may not invest more than 15% of its net
assets in securities which it can not sell or dispose of in the
ordinary course of business within seven days at approximately the
value at which the Fund has valued the investment.
In applying the Fund's fundamental policy concerning concentration
that is described above, it is a matter of non-fundamental policy that
investments in certain categories of companies will not be considered
to be investments in a particular industry. For example: (i) financial
service companies will be classified according to the end users of
their services, for example, automobile finance, bank finance and
diversified finance will each be considered a separate industry; (ii)
technology companies will be divided according to their products and
services, for example, hardware, software, information services and
outsourcing, or telecommunications will each be a separate industry;
(iii) asset-backed securities will be classified according to the
underlying assets securing
16
<PAGE>
such securities; and (iv) utility companies will be divided according
to their services, for example, gas, gas transmission, electric and
telephone will each be considered a separate industry.
ADDITIONAL INFORMATION ABOUT PURCHASES AND SALES
PURCHASING SHARES
You may purchase shares of the Fund without any sales charge through an
investment advisor, financial planner, broker, dealer or other investment
professional or through a fund supermarket or retirement plan. Shares of the
Fund are offered on a continuous basis by the distributor. Other persons may
receive compensation for their marketing and shareholder servicing activities in
the form of 12b-1 fees payable by the Fund under its 12b-1 Plan.
The Fund reserves the right to reject any purchase order and to suspend
the offering of shares of the Fund. The minimum initial investment is $2,500 and
additional investments must total at least $1,000. The minimum initial
investment for qualified retirement accounts is $1,000 ($500 for Education IRAs)
and there is no minimum for subsequent investments in these accounts. The Fund
may also change or waive its policies concerning minimum investment amounts at
any time. The Fund's Transfer Agent maintains all shareholder and shareholder
transaction(s) records for the Fund.
The Fund does not intend to issue certificates representing shares
purchased. You will have the same rights of ownership with respect to such
shares as if certificates had been issued.
You may buy shares at the Fund's net asset value per share (NAV), which
is calculated as of the close of the New York Stock Exchange ("NYSE") (usually
4:00 P.M. eastern time) every day the exchange is open. As of the date of this
SAI, the Fund is informed that the NYSE 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 NAV is determined by dividing the value of the Fund's securities,
cash and other assets, minus all expenses and liabilities, by the number of
shares outstanding. The Fund's securities are valued each day at their market
value, which usually means the last quoted sale price on the security's
principal exchange on that day. Expenses and fees of the Fund, including
management, distribution and shareholder servicing fees, are accrued daily and
taken into account for the purpose of determining the net asset value.
Cash and receivable are valued at their realizable amounts. Interest is
recorded as accrued and dividends are recorded on the ex-dividend date.
Portfolio securities listed on a securities exchange or on the NASDAQ National
Market System for which market quotations are readily available are valued at
the last quoted sale price of the day or, if there is no such reported sale,
within the range of the most recent quoted bid and ask prices. The current
market value of any option held by the Fund is its last sale price on the
relevant exchange before the time when assets are valued. Lacking any sales that
day or if the last sale price is outside the bid and ask prices, options are
valued within the range of the current closing bid and ask prices if the
17
<PAGE>
valuation is believed to reflect the contract's market value. The value of a
foreign security is determined as of the close of trading on the foreign
exchange on which it is traded or as of the scheduled close of trading on the
NYSE, if that is earlier. Generally, trading in corporate bonds, U.S. government
securities and money market instruments is substantially completed each day at
various times before the scheduled close of the NYSE. The value of these
securities used in computing the NAV of each class is determined as of such
time.
When you buy shares, if you submit a check or a draft that is returned
unpaid to the Fund, the Fund may impose a $10 charge against your account for
each returned item. All checks, drafts, wires and other payment mediums used to
buy or sell shares of the Fund must be denominated in U.S. dollars. The Fund
may, in our sole discretion, either (a) reject any order to buy or sell shares
denominated in any other currency or (b) honor the transaction or make
adjustments to your account for the transaction as of a date and with a foreign
currency exchange factor determined by the drawee bank.
SELLING SHARES
Shares of the Fund may be redeemed on any business day that the Fund
calculates its NAV. The sale price will be the next NAV calculated after your
order is accepted by the Fund's transfer agent. No fees are imposed by the Fund
when shares are sold.
You may sell your shares by giving instructions to the Fund's transfer
agent by mail or by telephone. The Fund will use reasonable procedures to
confirm that instructions communicated by telephone are genuine and, if the
procedures are followed, will not be liable for any losses due to unauthorized
or fraudulent telephone transactions. During times of drastic economic or market
changes, the telephone redemption privilege may be difficult to implement and
the Fund reserves the right to suspend this privilege.
Certain written requests to sell shares require a signature guarantee.
For example, a signature guarantee may be required if you sell shares worth
$10,000 or more if your address of record on the account application has been
changed within the last 30 days, or if you ask that the proceeds be sent to a
different person or address. A signature guarantee is used to help protect you
and the Fund from fraud. You can obtain a signature guarantee from most banks
and securities dealers, but not from a notary public. Signature guarantees must
appear together with the signature(s) of the registered owner(s), on: (1) a
written request for redemption; or (2) a separate instrument of assignment,
which should specify the total number of shares to be redeemed (this "stock
power" may be obtained from the Fund or from most banks or stock brokers).
If you sell shares through a securities dealer or investment
professional, it is such person's responsibility to transmit the order to the
Fund in a timely fashion. Any loss to you resulting from failure to do so must
be settled between you and such person.
Delivery of the proceeds of a redemption of shares purchased and paid
for by check shortly before the receipt of the request may be delayed until the
Fund determines that the Custodian has completed collection of the purchase
check which may take up to 10 days. Also, redemption requests for accounts for
which purchases were made by wire may be delayed until
18
<PAGE>
the Fund receives a completed application for the account. The Board of Trustees
may suspend the right of redemption or postpone the date of payment during any
period when (a) trading on the New York Stock Exchange is restricted as
determined by the SEC or such exchange is closed for other than weekends and
holidays, (b) the SEC has by order permitted such suspension, or (c) an
emergency, as defined by rules of the SEC, exists during which time the sale of
Fund shares or valuation of securities held by the Fund are not reasonably
practicable.
Redeeming shares through a systematic withdrawal plan may reduce or
exhaust the shares in your account if payments exceed distributions received
from the Fund. This is especially likely to occur if there is a market decline.
If a withdrawal amount exceeds the value of your account, your account will be
closed and the remaining balance in your account will be sent to you. Because
the amount withdrawn under the plan may be more than your actual yield or
income, part of the payment may be a return of your investment.
If dividend checks are returned to the Fund marked "unable to forward"
by the postal service, we will consider this a request by you to change your
dividend option to reinvest all distributions. The proceeds will be reinvested
in additional shares at NAV until we receive new instructions.
If mail is returned as undeliverable or we are unable to locate you or
verify your current mailing address, we may deduct the costs of any efforts to
find you from your account. These costs may include a percentage of the account
when a search company charges a percentage fee in exchange for its location
services.
Distribution or redemption checks sent to you do not earn interest or
any other income during the time the checks remain uncashed. Neither the Fund
nor its affiliates will be liable for any loss caused by your failure to cash
such checks.
The Fund also reserves the right to make a "redemption in-kind" if the
amount you are redeeming is large enough to affect Fund operations or if the
redemption would otherwise disrupt the Fund. For example, the Fund may redeem
shares in-kind if the amount represents more than 1% of the Fund's assets. When
the Fund makes a "redemption in-kind" it pays the redeeming shareholder in
portfolio securities rather than cash. A redemption in-kind is a taxable
transaction to the redeeming shareholder. If shares are redeemed in kind, the
redeeming shareholder may incur brokerage costs in converting the assets to
cash. The method of valuing securities used to make redemptions in kind will be
the same as the method of valuing portfolio securities is described above. Such
valuation will be made as of the same time the redemption price is determined.
In addition, if your account balance falls below $1,000, the Fund may
request that you increase your balance. If it is still below $1,000 after 60
days, the Fund may automatically close your account and send you the proceeds.
MANAGEMENT OF THE TRUST
TRUSTEES AND OFFICERS
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<PAGE>
The Trust is governed by a Board of Trustees which is responsible for
protecting the interests of shareholders. The Trustees are experienced business
persons who meet throughout the year to oversee the Trust's activities, review
contractual arrangements with companies that provide services to the Fund, and
review performance. The names and business addresses of the Trustees and
officers of the Trust, together with information as to their principal
occupations during the past five years, are listed below. The Trustees who are
considered "interested persons" of the investment advisor or of the Trust, as
defined in Section 2(a)(19) of the 1940 Act, are noted with an asterisk (*).
<TABLE>
<CAPTION>
NAME, ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION(S)
AND AGE WITH REGISTRANT DURING THE PAST 5 YEARS
------- --------------- -----------------------
<S> <C> <C>
John D. Barrett, II* Chairman of the Board of Chief Executive Officer of Barrett Associates,
565 Fifth Avenue Trustees Inc.; Director of various mutual funds managed
New York, NY 10017 by Morgan Stanley Asset Management, Inc.
Age 64
Robert E. Harvey* President and Trustee President and Chief Operating Officer of
565 Fifth Avenue Barrett Associates, Inc. since 1994; Director
New York, NY 10017 of The Ashforth Company; previously Director of
Age 45 U.S. Equities at Bessemer Trust from 1991 until
1993 and Managing Director at Scudder, Stevens
and Clark from 1976 until 1991.
James R. Rutherford* Trustee Vice Chairman of Barrett Associates, Inc. since
565 Fifth Avenue 1973.
New York, NY 10017
Age 66
R. Bruce Cameron Trustee Managing Director and Chief Financial Officer,
535 Madison Ave. 19th Flr. Berkshire Capital Corporation (investment
New York, NY 10022 banking company) since 1983.
Age 43
Gerard E. Jones Trustee Partner of the law firm of Richards & O'Neil,
43 Arch Street LLP since 1972; Director of four mutual funds
Greenwich, CT 06830 managed by Morgan Stanley Asset Management, Inc.
Age 62
Ronald E. Kfoury Trustee Managing Director, Analect, Limited (management
90 Park Avenue consulting) since 1992.
New York, NY 10016
Age 41
Robert J. Voccola Vice President Managing Director and Director of Research of
565 Fifth Avenue Barrett Associates, Inc. since 1987.
New York, NY 10017
Age 61
20
<PAGE>
<CAPTION>
NAME, ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION(S)
AND AGE WITH REGISTRANT DURING THE PAST 5 YEARS
------- --------------- -----------------------
<S> <C> <C>
Larry Seibert Vice President Managing Director of Barrett Associates, Inc.
565 Fifth Avenue since 1998; previously Technology Analyst and
New York, NY 10017 Portfolio Manager of Avatar Associates, Inc.
Age 37
Henry A. Collins Vice President Managing Director of Barrett Associates, Inc.
565 Fifth Avenue since 1990.
New York, NY 10017
Age 58
Peter H. Shriver Vice President & Treasurer Managing Director of Barrett Associates, Inc.
565 Fifth Avenue since 1989.
New York, NY 10017
Age 47
Leslie J. Lammers Vice President Managing Director of Barrett Associates, Inc.
565 Fifth Avenue since 1997; previously Vice President and
New York, NY 10017 Portfolio Manager of Scudder, Stevens and
Age 49 Clark, Inc.
Paula J. Elliott Secretary Vice President of Barrett Associates, Inc.
565 Fifth Avenue
New York, NY 10017
Age 49
</TABLE>
COMPENSATION OF TRUSTEES:
The Trust does not compensate the Trustees who are officers or
employees of the Advisor or its affiliates. The independent Trustees receive a
fee of $250 for each meeting of the Trustees which they attend in person or by
telephone. Trustees are reimbursed for travel and other out-of-pocket expenses.
The Board of Trustees held three meetings since the organization of the Trust on
September 30, 1998. The Board is expected to hold regular quarterly meetings
each year, and, for the fiscal year that began on July 1, 1998, the Trustees are
expected to receive the annual compensation shown below from the Trust for
serving on the Board and attending such meetings. The Trust does not offer any
retirement benefits for Trustees. As of September 30, 1999, the officers and
Trustees, as a group, owned beneficially 1.30% of the outstanding shares of the
Barrett Growth Fund.
AGGREGATE
COMPENSATION
NAME OF TRUSTEE TITLE FROM TRUST
John D. Barrett, II Chairman of the Board None
Robert E. Harvey Trustee and President None
James R. Rutherford Trustee None
R. Bruce Cameron Trustee $1,000
Gerard E. Jones Trustee $1,000
Ronald E. Kfoury Trustee $1,000
21
<PAGE>
PRINCIPAL SHAREHOLDERS
As of September 30, 1999, the following persons owned beneficially 5% or more of
the outstanding shares of the Fund:
<TABLE>
<CAPTION>
- ------------------------------------------------------------ ----------------------------------------------
NAME AND ADDRESS PERCENTAGE OF FUND SHARES OWNED
- ------------------------------------------------------------ ----------------------------------------------
<S> <C>
P.C. Potter & L.N. Potter, Tr. 9.5%
Philip C. Potter Charitable Remainder Unitrust
44 Rockwood Lane.
Greenwich, CT 06830-3844
- ------------------------------------------------------------ ----------------------------------------------
Braun Fund LP 8.3%
6 E. 45th St. Rm 1401
New York, NY 10017-2414
- ------------------------------------------------------------ ----------------------------------------------
John D. Barrett II, Tr. 7.8%
Grenold & Dorothy Collins
Alaska Charitable Trust
565 5th Ave. Fl. 25
New York, NY 10017-2413
- ------------------------------------------------------------ ----------------------------------------------
Robert E. Harvey Tr. 6.8%
Trust for Marna Ashforth
Barrett Associates
565 5th Ave. Fl. 25
New York, NY 10017-2413
- ------------------------------------------------------------ ----------------------------------------------
John D. Barrett II, Tr. 6.3%
Elizabeth E. Swope
Charitable Remainder Ann. Trust
Barrett Associates
565 5th Ave. Fl. 25
New York, NY 10017-2413
- ------------------------------------------------------------ ----------------------------------------------
</TABLE>
INVESTMENT ADVISOR AND MANAGEMENT AGREEMENT Barrett Associates, Inc. ("Barrett
Associates" or the "Advisor") having its principal offices located at 565 Fifth
Avenue, New York, NY 10017, is the Fund's investment advisor. Barrett Associates
is registered as an investment advisor under the Investment Advisers Act of
1940, as amended.
Barrett Associates serves as investment advisor to the Fund pursuant to
an Investment Management Agreement with the Trust dated as of November 11, 1998
(the "Management Agreement"). Under the Management Agreement, the Advisor,
subject to the supervision of the Trustees, provides a continuous investment
program for each Fund, including investment research and management with respect
to securities, investments and cash equivalents, in accordance with the Fund's
investment objective, policies and restrictions as set forth in its prospectus,
this SAI and the resolutions of the Trustees. The Advisor is responsible for
effecting all security transactions on behalf of the Fund, including the
allocation of principal business and portfolio brokerage and the negotiation of
commissions. The Advisor also maintains books and
22
<PAGE>
records with respect to the securities transactions of the Fund and furnishes to
the Trustees such periodic or other reports as the Trustees may request.
The Fund is obligated to pay the Advisor a monthly fee equal to an
annual rate of 1.00% of the Fund's average daily net assets. The Advisor has
contractually agreed to waive its advisory fee or assume as its own expense
certain expenses otherwise payable by the Fund to the extent necessary to ensure
that total operating expenses of the Fund do not exceed 1.25% of average daily
net assets through October 31, 2000. To the extent that the Advisor waives fees
or makes payments to limit Fund expenses, it may seek to recoup such waived fees
or expense payments after this practice is discontinued.
Barrett Associates is an independent, privately-owned firm. Its
stockholders consist of nine senior officers of the firm, together with a
subsidiary of a privately-held real estate firm named The Ashforth Company,
located at 3003 Summer Street, Stamford, Connecticut 06905. The Fund's chairman,
John D. Barrett, II owns 25% of Barrett Associates' outstanding stock and
therefore is deemed to have a controlling interest in the firm under the 1940
Act. The Ashforth Company holds a 55% interest in Barrett Associates, through a
wholly-owned subsidiary, and therefore is also deemed to control the firm. The
remaining shares of the common stock are held by senior officers of Barrett
Associates. The Ashforth Company was founded in 1896. Its principal business is
real estate, with ownership of 1.3 million square feet of office property.
During the term of the Management Agreement, the Advisor pays all
expenses incurred by it in connection with its activities thereunder except the
cost of securities (including brokerage commissions, if any) purchased for the
Fund. The services furnished by the Advisor under the Management Agreement are
not exclusive, and the Advisor is free to perform similar services for others.
Unless sooner terminated in accordance with its terms, the Management
Agreement is initially effective for a period of two years and may be continued
from year to year, provided that such continuance is approved at least annually
by a vote of the holders of a "majority" (as defined in the 1940 Act) of the
outstanding voting securities of the Fund, or by the Trustees, and in either
event by vote of a majority of the Trustees of the Trust who are not parties to
either Management Agreement or "interested persons" (as defined in the 1940 Act)
of any such party, cast in person at a meeting called for the purpose of voting
on such approval. The required shareholder approval of any continuance will be
effective with respect to the Fund if a majority of the outstanding voting
securities of the Fund votes to approve such continuance.
The Management Agreement will automatically terminate in the event of
its "assignment" as that term is defined in the 1940 Act, and may be terminated
without penalty at any time upon 60 days' written notice to the other party: (i)
by the majority vote of all the Trustees or by majority vote of the outstanding
voting securities of the Fund; or (ii) by the Advisor.
The Management Agreement may be amended by the parties provided, in
most cases, that such amendment is specifically approved by the vote of a
majority of the outstanding voting securities of the Fund and by the vote of a
majority of the Trustees who are not interested
23
<PAGE>
persons of the Fund or of the Advisor, cast in person at a meeting called for
the purpose of voting upon such approval.
Under the terms of the Management Agreement, the Advisor will be liable
to the Fund or the Trust only for losses resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services, willful
misfeasance, bad faith, gross negligence, or reckless disregard of duty.
The Advisor and the Trust have agreed that the Trust may use the name
"Barrett" only so long as Barrett Associates serves as investment advisor for
the Trust or Fund, or as Barrett Associates may permit.
CODE OF ETHICS
Both the Fund and the Advisor have adopted a Code of Ethics that
governs the conduct of employees of the Fund and Advisor who may have access to
information about the Fund's securities transactions. The Code of Ethics
recognizes that such persons owe a fiduciary duty to the Fund's shareholders and
must place the interests of shareholders ahead of their own interests. Among
other things, the Code of Ethics requires preclearance of personal securities
transactions; certain blackout periods for personal trading of securities which
may be considered for purchase or sale by the Fund or other clients of the
Advisor; and prohibitions against personal trading of initial public offerings.
Violations of the code are subject to review by the Trustees and could result in
severe penalties.
SERVICE AGREEMENTS
As more fully described below, the Trust has entered into a number of
agreements with Firstar Mutual Funds Services, LLC ("Firstar"), a Wisconsin
limited liability company, pursuant to which management-related and other
services are performed for the Fund. Firstar serves as the Administrator,
Transfer and Dividend Disbursing Agent, and Fund Accountant. Firstar Bank
Milwaukee, N.A. serves as the Fund's custodian. The principal offices of Firstar
and Firstar Bank Milwaukee, N.A. are located at 615 Michigan Avenue, Milwaukee,
Wisconsin 53202.
ADMINISTRATOR
Pursuant to an Administration Agreement with the Trust dated as of
November 11, 1998 (the "Administration Agreement"), Firstar serves as
Administrator of the Fund and subject to the direction and control of the
Trustees, supervises all aspects of the operation of the Fund except those
performed by the Fund's Advisor. As administrator, Firstar receives asset-based
fees at the annual rates of 0.06% on the first $200 million of average daily net
assets, 0.05% on the next $500 million of average daily net assets and 0.03% on
average daily net assets above $700 million, subject to a minimum amount of
$30,000 per year.
Under the Administration Agreement, Firstar provides certain
administrative services and facilities for the Fund. These services include
preparing and maintaining books, records, tax and financial reports, and
monitoring compliance with state and federal regulatory requirements.
24
<PAGE>
FUND ACCOUNTING
Pursuant to an Accounting Agreement with the Trust dated as of November
11, 1998 (the "Accounting Agreement"), Firstar is responsible for accounting
relating to the Fund and its investment transactions; maintaining certain books
and records of the Fund; determining daily the net asset values per share of the
Fund and calculating yield, dividends and capital gain distributions; and
preparing security position, transaction and cash position reports.
Under the Accounting Agreement, Firstar maintains portfolio trading
records and records of brokerage activity in order to provide monthly brokerage
reports which identify brokers and set forth commission amounts. Firstar also
monitors periodic distributions of gains or losses on portfolio sales and
maintains a daily listing of portfolio holdings. Firstar is responsible for
expenses accrued and payment reporting services. Firstar provides tax accounting
services and tax-related financial information to the Trust. Firstar also
monitors compliance with the regulatory requirements relating to maintaining
accounting records.
TRANSFER AGENT
Pursuant to a Transfer Agency Agreement with the Trust dated as of
November 11, 1998 (the "Transfer Agency Agreement"), Firstar also acts as the
Trust's transfer, dividend disbursing and redemption agent. Firstar provides
certain shareholder and other services to the Trust, including: furnishing
account and transaction information; providing mailing labels for the
distribution to the Fund's shareholders of financial reports, prospectuses,
proxy statements and other such materials; providing compliance reporting;
calculating distribution plan and marketing expenses; and maintaining
shareholder account records.
Firstar is responsible for processing orders for Fund shares and
ensuring appropriate participation with the National Securities Clearing
Corporation for transactions with Fund shares. If so requested by the Trust,
Firstar will produce shareholder lists and reports for proxy solicitations.
Firstar receives and processes redemption requests and administers distribution
of redemption proceeds. Firstar also handles shareholder inquiries and provides
routine account information. In addition, Firstar prepares and files appropriate
tax related information concerning dividends and distributions to shareholders.
CUSTODIAN
Pursuant to a Custodian Servicing Agreement with the Trust dated as of
November 11, 1998 (the "Custodian Agreement"), Firstar Bank Milwaukee, N.A. (the
"Custodian") acts as the custodian of the Trust's securities and cash. The
Custodian is located at 615 East Michigan Street, Milwaukee, Wisconsin 53202.
Portfolio securities purchased in the U.S. are maintained in the custody of the
Custodian and may be entered into the Federal Reserve Book Entry System of the
security depository system of the Depository Trust Corporation. The Custodian
maintains separate accounts in the name of each Fund of the Trust. The Custodian
is responsible for holding and making payments of all cash received for the
account of the relevant Fund.
From each account the Custodian may make payments for the purchase of
securities, payment of interest, taxes, fees and other operating expenses. The
Custodian is authorized to
25
<PAGE>
endorse and collect checks, drafts or other orders for payment. The Custodian is
also responsible for the release or delivery of portfolio securities.
Additionally, the Custodian monitors compliance with the regulatory requirements
of the Treasury Department, Internal Revenue Service and the laws of the states.
The Custodian is compensated on the basis of an annual fee based on market value
of assets of each Fund and on fees for certain transactions.
DISTRIBUTOR
T.O. Richardson Securities, Inc. (the "Distributor"), located at 2
Bridgewater Road, Farmington, Connecticut, 06032 serves as the principal
underwriter and national distributor for the shares of the Fund pursuant to a
Distribution Agreement with the Trust dated as of November 11, 1998 (the
"Distribution Agreement"). T.O. Richardson Securities, Inc. is registered as a
broker-dealer under the Securities Exchange Act of 1934 and each state's
securities laws and is a member of the NASD. The offering of the Fund's shares
is continuous. The Distribution Agreement provides that the Distributor, as
agent in connection with the distribution of Fund shares, will use appropriate
efforts to solicit orders for the sale of Fund shares and undertake such
advertising and promotion as it deems reasonable, including, but not limited to,
advertising, compensation to underwriters, dealers and sales personnel, printing
and mailing prospectuses to persons other than current Fund shareholders, and
printing and mailing sales literature.
DISTRIBUTION PLAN
The Board of Trustees has adopted a Distribution Plan on behalf of the
Fund, in accordance with Rule 12b-1 under the 1940 Act. The Fund is authorized
under the Plan to use the assets of the Fund to reimburse the Advisor, the
Distributor or others for expenses incurred by such parties in the promotion and
distribution of the shares of the Fund. The Plan authorizes the use of
distribution fees to pay expenses including, but not limited to, printing
prospectuses and reports used for sales purposes, preparing advertising and
sales literature, and other distribution-related expenses. The maximum amount
payable under the Plan is 0.25% of the Fund's average net assets on an annual
basis. Because these fees are paid out of the Fund's assets on an ongoing basis,
over time these fees will increase the cost of your investment.
The NASD's maximum sales charge rule relating to mutual fund shares
establishes limits on all types of sales charges, whether front-end, deferred or
asset-based. This rule may operate to limit the aggregate distribution fees to
which shareholders may be subject under the terms of the Plan.
The Plan requires that any person authorized to direct the disposition
of monies paid or payable by the Fund pursuant to the Plan or any related
agreement prepare and furnish to the Trustees for their review, at least
quarterly, written reports complying with the requirements of the Rule and
setting out the amounts expended under the Plan and the purposes for which those
expenditures were made. The Plan provides that so long as it is in effect the
selection and nomination of Trustees who are not interested persons of the Trust
will be committed to the discretion of the Trustees then in office who are not
interested persons of the Trust.
Neither the Plan nor any related agreements can take effect until
approved by a majority vote of both all the Trustees and those Trustees who are
not interested persons of the Trust and
26
<PAGE>
who have no direct or indirect financial interest in the operation of the Plan
or in any agreements related to the Plan, cast in person at a meeting called for
the purpose of voting on the Plan and the related agreements. The Trustees
approved the Plan on November 11, 1998 and it took effect on December 18, 1999.
The Plan will continue in effect only so long as its continuance is
specifically approved at least annually by the Trustees in the manner described
above for Trustee approval of the Plan. The Plan for the Fund may be terminated
at any time by a majority vote of the Trustees who are not interested persons of
the Trust and who have no direct or indirect financial interest in the
operations of the Plan or in any agreement related to the Plan or by vote of a
majority of the outstanding voting securities of the Fund.
The Plan may not be amended so as to materially increase the amount of
the distribution fees for the Fund unless the amendment is approved by a vote of
at least a majority of the outstanding voting securities of the Fund. In
addition, no material amendment may be made unless approved by the Trustees in
the manner described above for Trustee approval of the Plan.
INDEPENDENT ACCOUNTANTS
The Trust's independent accountants, KPMG LLP, will audit the Trust's
annual financial statements and review the Trust's tax returns. KPMG LLP is
located at 303 East Wacker Drive, Chicago, IL 60601.
PORTFOLIO TRANSACTIONS AND TURNOVER
The Fund's portfolio securities transactions are placed by the Advisor.
The objective of the Fund is to obtain the best available prices in its
portfolio transactions, taking into account the costs, promptness of executions
and other qualitative considerations. There is no pre-existing commitment to
place orders with any broker, dealer or member of an exchange. The Advisor
evaluates a wide range of criteria in seeking the most favorable price and
market for the execution of transactions, including the broker's commission
rate, execution capability, positioning and distribution capabilities,
information in regard to the availability of securities, trading patterns,
statistical or factual information, opinions pertaining to trading strategy,
back office efficiency, ability to handle difficult trades, financial stability,
and prior performance in servicing the Advisor and its clients. In transactions
on equity securities and U.S. Government securities executed in the
over-the-counter market, purchases and sales are transacted directly with
principal market-makers except in those circumstances where, in the opinion of
the Advisor, better prices and executions are available elsewhere.
The Advisor, when effecting purchases and sales of portfolio securities
for the account of the Fund, will seek execution of trades either (i) at the
most favorable and competitive rate of commission charged by any broker, dealer
or member of an exchange, or (ii) at a higher rate of commission charges, if
reasonable, in relation to brokerage and research services provided to the Fund
or the Advisor by such member, broker, or dealer. Such services may include, but
are not limited to, any one or more of the following; information as to the
availability of securities for purchase or sale, statistical or factual
information, or opinions pertaining to investments. The Advisor may use research
and services provided by brokers and dealers in servicing all its
27
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clients, including the Fund, and not all such services will be used by the
Advisor in connection with the Fund. In accordance with the provisions of
Section 28(e) of the 1934 Act, the Advisor may from time-to-time receive
services and products which serve both research and non-research functions. In
such event, the Advisor makes a good faith determination of the anticipated
research and non-research use of the product or service and allocates brokerage
only with respect to the research component. Brokerage may also be allocated to
dealers in consideration of the Fund's share distribution but only when
execution and price are comparable to that offered by other brokers.
The Advisor provides investment advisory services to individuals and
other institutional clients, including corporate pension plans, profit-sharing
and other employee benefit trusts, and other investment pools. There may be
occasions on which other investment advisory clients advised by the Advisor may
also invest in the same securities as the Fund. When these clients buy or sell
the same securities at substantially the same time, the Advisor may average the
transactions as to price and allocate the amount of available investments in a
manner which is believes to be equitable to each client, including the Fund. On
the other hand, to the extent permitted by law, the Advisor may aggregate the
securities to be sold or purchased for the Fund with those to be sold or
purchased for other clients managed by it in order to obtain lower brokerage
commissions, if any.
The Fund does not engage in frequent trading and turnover tactics for
short-term gains, however, the Advisor will effect portfolio transactions
without regard to holding period if, in its judgment, such transactions are
advisable in light of a change in circumstances of a particular company or
within a particular industry or in general market, economic or financial
conditions. While the Fund anticipates that its annual portfolio turnover rate
should not exceed 50% under normal conditions, it is impossible to predict
portfolio turnover rates. The portfolio turnover rate is calculated by dividing
the lesser of the Fund's annual sales or purchases of portfolio securities
(exclusive of purchases or sales of securities whose maturities at the time of
acquisition were one year or less) by the monthly average value of the
securities in the portfolio during the year. For the period from December 18,
1998 through June 30, 1999, the Fund's portfolio turnover rate was 30%.
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SHARES OF BENEFICIAL INTEREST
The Trust is a series business trust that currently offers one series
of shares. The beneficial interest of the Trust is divided into an unlimited
number of shares, with a par value of $0.001 each. Each share has equal
dividend, voting, liquidation and redemption rights. There are no conversion or
preemptive rights. Shares, when issued, will be fully paid and nonassessable.
Fractional shares have proportional voting rights. Shares of the Fund do not
have cumulative voting rights, which means that the holders of more than 50% of
the shares voting for the election of trustees can elect all of the trustees if
they choose to do so and, in such event, the holders of the remaining shares
will not be able to elect any person to the Board of Trustees. Shares will be
maintained in open accounts on the books of the Transfer Agent, and certificates
for shares will generally not be issued.
If they deem it advisable and in the best interests of shareholders,
the Trustees may create additional series of shares, each of which represents
interests in a separate portfolio of investments and is subject to separate
liabilities, and may create multiple classes of shares of such series, which may
differ from each other as to expenses and dividends. If additional series or
classes of shares are created, shares of each series or class are entitled to
vote as a series or class only to the extent required by the 1940 Act or as
permitted by the Trustees. Upon the Trust's liquidation, all shareholders of a
series would share pro-rata in the net assets of such series available for
distribution to shareholders of the series, but, as shareholders of such series,
would not be entitled to share in the distribution of assets belonging to any
other series.
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DIVIDENDS
A shareholder will automatically receive all income dividends and
capital gain distributions in additional full and fractional shares of the Fund
at their net asset value as of the date of payment unless the shareholder elects
to receive such dividends or distributions in cash. Shareholders will receive a
confirmation of each new transaction in their account. The Trust will confirm
all account activity, including the payment of dividend and capital gain
distributions and transactions made as a result of an Automatic Withdrawal Plan
or an Automatic Investment Plan. Shareholders may rely on these statements in
lieu of stock certificates. Stock certificates representing shares of the Fund
will not be issued.
ADDITIONAL INFORMATION ON DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
Distributions of Net Investment Income. The Fund receives income
generally in the form of dividends and interest on its investments. This income,
less expenses incurred in the operation of the Fund, constitute its net
investment income from which dividends may be paid to you. Any distributions by
the Fund from such income will be taxable to you as ordinary income, whether you
take them in cash or in additional shares.
Effect of Foreign Investments on Distributions. Most foreign exchange
gains realized on the sale of debt securities are treated as ordinary income by
the Fund. Similarly, foreign exchange losses realized by the Fund on the sale of
debt securities are generally treated as ordinary losses by the Fund. These
gains when distributed will be taxable to you as ordinary dividends, and any
losses will reduce the Fund's ordinary income otherwise available for
distribution to you. This treatment could increase or reduce the Fund's ordinary
income distributions to you, and may cause some or all of the Fund's previously
distributed income to be classified as a return of capital.
Distributions of Capital Gains. The Fund may derive capital gains and
losses in connection with sales or other dispositions of its portfolio
securities. Distributions derived from the excess of net short-term capital gain
over net long-term capital loss will be taxable to you as ordinary income.
Distributions paid from long-term capital gains realized by the Fund will be
taxable to you as long-term capital gain, regardless of how long you have held
your shares in the Fund. Any net short-term or long-term capital gains realized
by the Fund (net of any capital loss carryovers) generally will be distributed
once each year, and may be distributed more frequently, if necessary, in order
to reduce or eliminate federal excise or income taxes on the Fund.
Information on the Tax Character of Distributions. The Fund will inform
you of the amount and character of your distributions at the time they are paid,
and will advise you of the tax status for federal income tax purposes of such
distributions shortly after the close of each calendar year. If you have not
held Fund shares for a full year, the Fund may designate and distribute to you
as ordinary income or capital gain a percentage of income that is not equal to
the actual amount of such income earned during the period of your investment in
the Fund.
TAXES
Election to be Taxed as a Regulated Investment Company. The Fund
intends to be treated as a regulated investment company under Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"), and intends to so
qualify during the current fiscal year. As a regulated investment company, the
Fund generally pays no federal income tax on the income and gains it distributes
to you. The Board reserves the right not to maintain the qualification of the
Fund as a regulated investment company if it determines such course of action to
be beneficial to you. In such case, the Fund will be subject to federal, and
possibly state, corporate taxes on its taxable income and gains, and
distributions to you will be taxed as ordinary dividend income to the extent of
the Fund's earnings and profits.
Excise Tax Distribution Requirements. The Code requires the Fund to
distribute at least 98% of its taxable ordinary income earned during the
calendar year and 98% of its capital gain net income earned during the twelve
month period ending October 31 (in addition to undistributed amounts from the
prior year) to you by December 31 of each year in order to avoid federal excise
taxes. The Fund intends to declare and pay sufficient dividends in December (or
in January that are treated by you as received in December) but does not
guarantee and can give no assurances that its distributions will be sufficient
to eliminate all such taxes.
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Redemption of Fund Shares. Redemptions and exchanges of Fund shares are
taxable transactions for federal and state income tax purposes that cause you to
recognize a gain or loss. If you hold your shares as a capital asset, the gain
or loss that you realize will be capital gain or loss. Any loss incurred on the
redemption or exchange of shares held for six months or less will be treated as
a long-term capital loss to the extent of any long-term capital gains
distributed to you by the Fund on those shares.
All or a portion of any loss that you realize upon the redemption of
your Fund shares will be disallowed to the extent that you purchase other shares
in the Fund (through reinvestment of dividends or otherwise) within 30 days
before or after your share redemption. Any loss disallowed under these rules
will be added to your tax basis in the new shares you purchase.
U.S. Government Obligations. Many states grant tax-free status to
dividends paid to you from interest earned on direct obligations of the U.S.
government, subject in some states to minimum investment requirements that must
be met by the fund. Investments in Government National Mortgage Association or
Federal National Mortgage Association securities, bankers' acceptances,
commercial paper and repurchase agreements collateralized by U.S. government
securities do not generally qualify for tax-free treatment. The rules on
exclusion of this income are different for corporations.
Dividends-Received Deduction for Corporations. Dividends paid by the
Fund will generally qualify in part for the 70% dividends-received deduction for
corporations, but the portion of the dividends so qualifies depends on the
aggregate taxable qualifying dividend income received by such Fund from domestic
(U.S.) sources. The dividends received deduction will be available only with
respect to dividends designated by the Fund as eligible for such treatment.
Additionally, if requested, the Fund will send to any such corporate
shareholders a statement each year advising the amount designated by the Fund as
eligible for such treatment. All dividends (including the deducted portion) must
be included in your alternative minimum taxable income calculation.
Investment in Complex Securities. The Fund may invest in complex
securities. Such investments may be subject to numerous special and complicated
tax rules. These rules could affect whether gains and losses recognized by the
Fund are treated as ordinary income or capital gain and/or accelerate the
recognition of income to the Fund or defer the Fund's ability to recognize
losses. In turn, these rules may affect the amount, timing or character of the
income distributed to you by the Fund.
INVESTMENT PERFORMANCE
For purposes of quoting and comparing the performance of the Fund to
that of other mutual funds and to relevant indices in advertisements or in
reports to shareholders, performance will be stated in terms of total return or
yield. Both "total return" and "yield" figures are based on the historical
performance of a fund, show the performance of a hypothetical investment and are
not intended to indicate future performance.
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YIELD INFORMATION.
From time to time, the Fund may advertise a yield figure. A portfolio's
yield is a way of showing the rate of income the portfolio earns on its
investments as a percentage of the portfolio's share price. Under the rules of
the SEC, yield must be calculated according to the following formula:
YIELD = 2 [ ( a-b + 1 )6 - 1 ]
------
cd
Where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of
the period.
Yields for the Fund used in advertising are computed by dividing the
Fund's interest and dividend income for a given 30-day period, net of expenses,
by the average number of shares entitled to receive distributions during the
period, dividing this figure by a Fund's offering price at the end of the period
and annualizing the result (assuming compounding of income) in order to arrive
at an annual percentage rate. Income is calculated for purposes of yield
quotations in accordance with standardized methods applicable to all stock and
bond mutual funds. Dividends from equity investments are treated as if they were
accrued on a daily basis, solely for the purposes of yield calculations. In
general, interest income is reduced with respect to bonds trading at a premium
over their par value by subtracting a portion of the premium from income on a
daily basis, and is increased with respect to bonds trading at a discount by
adding a portion of the discount to daily income. Capital gains and losses
generally are excluded from the calculation. Income calculated for the purpose
of calculating a Fund's yield differs from income as determined for other
accounting purposes. Because of the different accounting methods used, and
because of the compounding assumed in yield calculations, the yield quoted for a
Fund may differ from the rate of distributions the Fund paid over the same
period or the rate of income reported in the Fund's financial statements.
TOTAL RETURN PERFORMANCE
Under the rules of the Commission, funds advertising performance must
include total return quotes, "T" below, calculated according to the following
formula:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5 or 10)
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10 year periods
(or fractional portion thereof).
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The average annual total return will be calculated under the foregoing
formula and the time periods used in advertising will be based on rolling
calendar quarters, updated to the last day of the most recent quarter prior to
submission of the advertising for publication, and will cover prescribed
periods. When the period since inception is less than one year, the total return
quoted will be the aggregate return for the period. In calculating the ending
redeemable value, the maximum sales load is deducted from the initial $1,000
payment and all dividends and distributions by the Fund are assumed to have been
reinvested at net asset value as described in the prospectuses on the
reinvestment dates during the period. Total return, or "T" in the formula above,
is computed by finding the average annual compounded rates of return over the
prescribed periods (or fractional portions thereof) that would equate the
initial amount invested to the ending redeemable value. Any sales loads that
might in the future be made applicable at the time to reinvestments would be
included as would any recurring account charges that might be imposed by the
Fund.
The Fund may also from time to time include in such advertising an
aggregate total return figure or an average annual total return figure that is
not calculated according to the formula set forth above in order to compare more
accurately the Fund's performance with other measures of investment return. The
Fund may quote an aggregate total return figure in comparing the Fund's total
return with data published by Lipper Analytical Services, Inc. or with the
performance of various indices including, but not limited to, the Dow Jones
Industrial Average, the Standard & Poor's 500 Stock Index, Russell Indices, and
the Value Line Composite Index. For such purposes, each Fund calculates its
aggregate total return for the specified periods of time by assuming the
investment of $1,000 in Fund 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. To calculate its average annual total return, the aggregate return is
then annualized according to the Commission's formula for total return quotes,
outlined above. When the period since inception is less than one year, the total
return quoted will be the aggregate return for the period.
The Fund may also advertise the performance rankings assigned by
various publications and statistical services, including but not limited to SEI,
Lipper Mutual Performance Analysis, Intersec Research Survey of Non-U.S. Equity
Fund Returns, Frank Russell International Universe, and any other data which may
be presented from time to time by such analyses as Dow Jones, Morningstar, Inc.,
Chase Investment Performance, Wilson Associates, Stanger, CDA Investment
Technologies, Inc., the Consumer Price Index ("CPI"), The Bank Rate Monitor
National Index, IBC/Donaghue's Average/U.S. Government and Agency, or as they
appear in various publications including but not limited to The Wall Street
Journal, Forbes, Barron's, Fortune, Money Magazine, The New York Times,
Financial World, Financial Services Week, USA Today and other regional
publications.
FINANCIAL STATEMENTS
The Fund's Financial Statements for the fiscal period ended June 30,
1999, including the Report of Independent Accountants, are included in the
Fund's most recent Annual Report to
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Shareholders and are incorporated into this SAI by reference. The Annual Report
may be obtained free of charge by calling the Fund at 1-877-363-6333, or by
writing to the Fund at its address listed on the cover of this SAI.
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