BARRETT GROWTH FUND
Purchasing high quality
growth stocks at reasonable
prices for long-term capital appreciation
PROSPECTUS
OCTOBER 30, 2000
THE BARRETT FUNDS
C/O FIRSTAR MUTUAL FUND SERVICES, LLC
615 EAST MICHIGAN STREET
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 ...................................... 3
Investment Advisor and Portfolio Management Team ....... 4
Advisor's Investment Performance ....................... 6
Additional Information about the Fund's
Investments............................................. 7
Purchasing Shares ...................................... 8
Selling Shares ......................................... 8
Account Options ........................................ 9
Retirement Investing ................................... 10
Account Instructions ................................... 12
Marketing and Distribution ............................. 13
Distributions and Taxation ............................. 13
Financial Highlights ................................... 14
INVESTMENT GOAL AND PHILOSPHY
The Barrett Growth Fund seeks to achieve long-term capital appreciation and to
maximize after-tax returns. The Fund takes a conservative approach to growth
stock investing that emphasizes "Growth at a Reasonable Price." The Fund invests
in common stocks of high-quality companies that the investment advisor believes
have superior growth potential and whose 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 as
part of the investment process.
The investment advisor selects companies for investment by the Fund that 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 Composite Stock Price Index (S&PR 500 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 ADDITIONAL INFORMATION ABOUT THE FUND'S
INVESTMENTS on page 7.
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.
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.
FUND PERFORMANCE
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 and an index of funds with similar
investment objectives. 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 6. Please note that past
performance is not necessarily an indication of how the Fund will perform in the
future.
ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
1999 33.53%
The Barrett Growth Fund's performance for Best Quarter: Q4 1999 27.55%
calendar year 2000 through September 30, 2000 Worst Quarter: Q3 1999 -4.11%
was 4.38%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
SINCE INCEPTION
1 YEAR 12/29/98
------ --------------
Barrett Growth Fund 33.53% 33.43%
S&PR 500 Index1<F1> 21.04% 19.06%
Russell 3000 Index2<F2> 21.03% 19.62%
Lipper Growth Fund Index3<F3> 27.62% 27.67%
1<F1> The S&P 500R 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 500R Index reflects the
reinvestment of dividends and capital gains but does not reflect the
deduction of any investment management fees.
2<F2> The Russell 3000 Index is an unmanaged index which measures the
performance of those companies within the 3,000 largest U.S. companies
based on total market capitalization, which represents approximately
98% of the investable U.S. equity market.
3<F3> The Lipper Large Cap Growth Fund Index is an equally-weighted
performance index, adjusted for capital gains distributions and income
dividends, of the 30 largest mutual funds within the Growth Funds
category, as reported by Lipper Analytical Services, Inc.
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*<F4>
Exchange Fees None
*<F4> Currently, there is a $12.00 fee assessed by the Custodian if you choose
to redeem shares by a bank wire transfer. These fees are 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 1.56%
-----
Annual Fund Operating Expenses 2.81%
Less Advisor's Fee Waiver/Assumption of Expenses*<F5> 1.56%
-----
ACTUAL TOTAL ANNUAL FUND OPERATING EXPENSES 1.25%
*<F5> Barrett Associates has contractually agreed through October 31, 2001
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 Expense 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 actual return and expenses will be
different, the Expense Example is for comparison only.
EXPENSE EXAMPLE
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
$127 $723*<F6> $1,346*<F6> $3,025*<F6>
*<F6> Please note that only the first year in the Three Years, Five
Years and Ten Years examples reflects the effect of the
advisor's contractual fee waiver. The amounts for the second
through tenth years assume that no fee waiver was continued.
If the fee waiver was continued, the Three Years, Five Years
and Ten Years expense example amounts would be $397, $686 and
$1,511, respectively.
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 $2
billion of client assets, of which approximately $1.7 billion is invested in
equity securities. The firm has approximately 500 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.
Barrett Associates uses a team approach for security selection and decision
making. The ten members of the portfolio management team, which is led by the
firm's Director of Research, Robert J. Voccola, 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 over twenty-four 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.
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. Mr. Rutherford serves as a
portfolio manager and analyst and specializes in research concerning the
financial services, basic industry and consumer products sectors.
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
Advisory 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 securities
research in the technology and telecommunications 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
& 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.
JANIS M. INSCHO, C.F.A.
Managing Director
Ms. Inscho is a graduate of Emory University and received her M.B.A.
from Georgia State University. Prior to joining Barrett Associates, Ms.
Inscho was Director and Chief Investment Officer of the Private Client
Group of Lazard Asset Management, a division of Lazard Freres & Co. At
Lazard she managed over 100 client relationships representing
approximately $1.2 billion in assets. Previously, Ms. Inscho was a
Senior Vice President at Warburg, Pincus Counselors. Ms. Inscho is a
portfolio manager and a member of the Barrett Associates research team,
focusing primarily in the healthcare sector.
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.
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, 2001 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, 2001, 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 waived. Barrett Associates shall only be entitled
to recoup such amounts for a period of three years from the date such amount
was waived.
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 COMPOSITE1<F7>
1991 39.0%
1992 2.9%
1993 0.2%
1994 0.7%
1995 34.9%
1996 31.3%
1997 31.4%
1998 26.7%
1999 30.8%
For the 9 months ended 9/30/00 1.7%
1<F7> 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 that is used to
calculate returns for mutual funds.
AVERAGE ANNUAL TOTAL RETURNS AS OF SEPTEMBER 30, 2000
<TABLE> SINCE
INCEPTION
1 YEAR 3 YEARS 5 YEARS ON 12/31/92
------ ------- ------- -----------
<S> <C> <C> <C> <C>
Barrett Associates Equity Growth Composite 22.57% 19.83% 24.66% 19.40%
S&P 500R Index1<F16> 13.28% 16.44% 21.69% 19.05%
Lipper Large Cap Growth Fund Index2<F17> 22.34% 17.98% 20.26% 17.93%
</TABLE>
1<F16> The S&P 500R 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 500R Index reflects the
reinvestment of dividends and capital gains but does not reflect the
deduction of any management fees.
2<F17> The Lipper Large Cap Growth Fund Index is an equally-weighted
performance index, adjusted for capital gains distributions and income
dividends, of the 30 largest mutual funds within the Growth Funds
category, as reported by Lipper Analytical Services, Inc.
ADDITIONAL 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 of Trustees without shareholder
approval. However, shareholders would receive advance 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 25% 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 Standard & Poor's Depository Receipts(R),
which are receipts representing an ownership interest in a portfolio of the
stocks that make up the S&P 500R Index.
The Fund normally intends to remain substantially 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 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 return to Fund
shareholders.
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 12 of this Prospectus as well as in
the Fund's Shareholder Application. Please call toll-free 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. The Fund 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 portfolio 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. 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.
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, or by
certain third parties who are authorized to accept redemption requests on the
Fund's behalf. 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 12 of this Prospectus as well as
in the Fund's Shareholder Application. Please call toll-free 877-363-6333 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 Shareholder 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
process 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 from 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 long as there are seven days
between investments. The Fund does not charge a fee for participating in the
Automatic Investment Plan. However, Firstar will charge a $25 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 or Firstar 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 12 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, 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, in its discretion, hold any initial contribution uninvested until
the expiration of the seven-day revocation period. Firstar does not anticipate
that it will exercise its discretion but reserves the right to do so.
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 59-1/2, 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 59-1/2).
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 the following: (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 Firstar
Funds as investment options.
ACCOUNT INSTRUCTIONS
TO OPEN AN ACCOUNT TO ADD TO AN ACCOUNT TO SELL SHARES
------------------ -------------------- --------------
Regular Account Regular Account All requests to sell
Minimum: $2,500 Minimum: $1,000 shares from IRA
Retirement Account Retirement Account accounts must be in
Minimum: $1,000 Minimum: None writing.
IN WRITING IN WRITING IN WRITING
---------- ---------- ---------
Complete the Complete the detachable Write a letter of
application. investment slip from instruction that
your account statement, includes:
or if the slip is not - your name(s) and
available, include a signature(s)
note specifying the - your account number
Fund's name, your - the Fund name
account number and the - the dollar amount you
name on the account. want to sell
Proceeds will be send
to the address of
record unless
specified in the
letter and accompanied
by a signature
guarantee.
Mail your application Mail the slip, along Mail your letter to:
along with your with your check* made
check*<F7> made payable payable to "Barrett
to "Barrett Growth Fund" Growth Fund" to:
to:
Firstar Mutual Fund Firstar Mutual Fund Firstar Mutual Fund
Services, LLC Services, LLC Services, LLC
Third Floor Third Floor Third Floor
615 E. Michigan Street 615 E. Michigan Street 615 E. Michigan Street
Milwaukee, Wisconsin 53202 Milwaukee, Wisconsin 53202 Milwaukee, Wisconsin
53202
BY TELEPHONE**<F8> BY TELEPHONE**<F8> BY-TELEPHONE**<F8>
------------------ ------------------ ------------------
If-your-bank-is-a-member If you have not already When you are ready to
of Automated Clearing completed the portion of sell shares, call
House (ACH), your account the Shareholder 1-877-363-6333 and
can be set up with the Application related to select how you would
ACH feature. Complete telephone purchases, call like to receive the
the portion on the 1-877-363-6333 to obtain proceeds:
Shareholder Application an application. After
related to telephone the request is completed, - Mail check to the
purchases. call to request the address of record
amount to be transferred - Wire funds to a
to your account. domestic financial
institution
- Mail to a previously
designated alternate
address
- Electronically transfe
the funds via ACH
BY WIRE BY WIRE BY WIRE
------- ------- -------
To obtain instructions To obtain instructions Be sure the Fund has
for Federal Funds wire for Federal Funds wire your bank account
purchases for the Fund, purchases for the Funds, information on file.
please call Firstar at please call Firstar at Proceeds will be wired
1-877-363-6333. 1-877-363-6333. to your bank. There is
a $12.00 wire fee
charged for this
service.
AUTOMATICALLY AUTOMATICALLY AUTOMATICALLY
------------- ------------- -------------
AUTOMATIC INVESTMENT - FOR ALL SERVICES - Call SYSTEMATIC WITHDRAWAL
Indicate on your us to request a form to PLAN - Call us to
application which add any automatic request a form to add
automatic service(s) you investing service. the plan. Complete the
want. Complete and Complete and return the form, specifying the
return your application forms along with any amount and frequency of
with your investment. other required materials. withdrawals you would
like. You must own
shares in an open
account valued at
$10,000 when you first
authorize the
systematic withdrawal
plan.
*<F7> 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.
**<F8> 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 Fund, 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 of the Fund by wire or
telephone may be modified or terminated at any time.
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 the distributor or the
advisor, and 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, 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 gain that it has realized on the sale of securities. These income and
gain 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 through 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, which you will
receive in January. 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 redemption
proceeds if you do not provide your correct certified social security or
taxpayer identification number and certify that you are not subject to backup
withholding, or if the IRS instructs the Fund to do so.
A sale 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 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 tax. 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 year ended June 30, 2000. 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.
Per share data for a share of beneficial interest outstanding for the entire
period 2and selected information for the period are as follows:
DECEMBER 29,
YEAR ENDED 19981<F9> THROUGH
JUNE 30, 2000 JUNE 30, 1999
------------- -------------
NET ASSET VALUE
Beginning of Period $10.94 $10.00
OPERATIONS
Net investment loss2<F10> (0.03) (0.01)
Net realized and unrealized
gains on securities 3.40 0.95
------ ------
Total from investment operations 3.37 0.94
------ ------
LESS DISTRIBUTIONS
Distributions from capital gains (0.25) --
------ ------
(0.25) --
------ ------
NET ASSET VALUE
End of year $14.06 $10.94
------ ------
------ ------
Total Return 30.92% 9.40%3<F11>
Net assets at end of period (000s omitted) $21,440 $9,752
RATIO OF EXPENSES TO AVERAGE NET ASSETS
Before expense reimbursement 2.81% 5.22%4<F12>
After expense reimbursement 1.25% 1.44%4<F12>
RATIO OF NET INVESTMENT LOSS TO
AVERAGE NET ASSETS
Before expense reimbursement (1.85%) (4.02)%4<F12>
After expense reimbursement (0.29%) (0.24)%4<F12>
Portfolio turnover rate 35% 30%
1<F9> Commencement of operations.
2<F10> Net investment income (loss) per share is calculated using the
ending balances prior to consideration or adjustment for
permanent book-to-tax differences.
3<F11> Not annualized.
4<F12> Annualized.
BARRETT GROWTH FUND
c/o Firstar Mutual Fund Services, LLC
615 East Michigan Avenue
Milwaukee, WI 53202
Toll Free: (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, Connecticut 06032
ADMINISTRATOR, FUND ACCOUNTANT &
TRANSFER AGENT
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
CUSTODIAN
Firstar Bank, N.A.
425 Walnut Street
Cincinnati, OH 45202
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 semi-annual 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 its last 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 other shareholder inquiries. In
addition, 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 EDGAR Database on the Commission's Internet
site at http://www.sec.gov. Copies of this information also may be obtained,
upon payment of a duplicating fee, by writing to the Public Reference Section of
the Commission, Washington, DC 20549-0102 or by electronic request at
[email protected]. You may call the Commission at 202-942-8090 for information
about the operation of the public reference room.
BARRETT GROWTH FUND
THE BARRETT FUNDS
565 Fifth Avenue
New York, NY 10017
(877) 363-6333
STATEMENT OF ADDITIONAL INFORMATION
Dated October 30, 2000
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 30, 2000. The Prospectus may be obtained by writing or calling
the Fund at the address and number shown above.
TABLE OF CONTENTS
GENERAL INFORMATION 4
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 7
REVERSE REPURCHASE AGREEMENTS 8
BORROWING 8
FUTURES 9
OPTIONS 10
INDEX OPTIONS 12
RISKS OF OPTIONS 13
OTHER INVESTMENTS 14
INVESTMENT RESTRICTIONS 14
ADDITIONAL INFORMATION ABOUT PURCHASES AND SALES 15
PURCHASING SHARES 15
SELLING SHARES 16
MANAGEMENT OF THE TRUST 18
TRUSTEES AND OFFICERS 18
COMPENSATION OF TRUSTEES 20
PRINCIPAL SHAREHOLDERS 21
INVESTMENT ADVISOR AND MANAGEMENT AGREEMENT 22
CODE OF ETHICS 23
SERVICE AGREEMENTS 23
ADMINISTRATOR 23
FUND ACCOUNTING 24
TRANSFER AGENT 24
CUSTODIAN 25
DISTRIBUTOR 25
DISTRIBUTION PLAN 26
INDEPENDENT ACCOUNTANTS 26
PORTFOLIO TRANSACTIONS AND TURNOVER 26
SHARES OF BENEFICIAL INTEREST 28
DIVIDENDS 28
ADDITIONAL INFORMATION ON DISTRIBUTIONS AND TAXES 28
DISTRIBUTIONS 28
TAXES 29
INVESTMENT PERFORMANCE 31
YIELD INFORMATION 31
TOTAL RETURN PERFORMANCE 32
FINANCIAL STATEMENTS 33
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 advance 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
objective. 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 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 as
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 that 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: () the frequency of trades and trading volume for the security; ()
whether at least three dealers are willing to purchase or sell the security and
the number of potential purchasers; and () 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. 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
highgrade 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 Fund's 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; 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 therefore, are 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 shortterm 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 the 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 the 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.
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 Fund 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 Fund 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.
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." 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 common
stocks that might otherwise result; and the Fund may purchase such contracts in
order to offset increases in the cost of common stocks that it intends 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
effects 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 prices that 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's 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 the Advisor 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.
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 security 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 expiration 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 the portfolio
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 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 Fund 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
security 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 Fund. Secured put options will generally be written in circumstances
where the Advisor 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
security 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.
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's
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.
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 price of a particular security. Accordingly, successful use by the Fund of
options on indices is subject to the Advisors' 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.
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
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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.
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
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investment policies and 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 cannot 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 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
The Fund has made certain limited arrangements that permit third parties to
accept purchases and redemption orders on the Fund's behalf. Third parties
may charge transaction fees or set different minimum investment amounts. In
addition, third parties are authorized to designate other intermediaries to
receive purchase and redemption orders on the Fund's behalf.
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 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 receivables 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
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 $25 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 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. 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 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
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 (*).
NAME, ADDRESS POSITION(S) HELD PRINCIPAL OCCUPATION(S)
AND AGE WITH REGISTRANT DURING THE PAST 5 YEARS
------- --------------- -----------------------
John D. Barrett, II* Chairman of the Chief Executive Officer of Barrett
565 Fifth Avenue Board of Trustees Associates, Inc.; Director of
New York, NY 10017 various mutual funds managed by
Age 65 Morgan Stanley Asset Management,
Inc.
Robert E. Harvey* President and President and Chief Operating
565 Fifth Avenue Trustee Officer of Barrett Associates, Inc.
New York, NY 10017 since 1994; Director of The Ashforth
Age 46 Company; previously Director of 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,
565 Fifth Avenue Inc. since 1973.
New York, NY 10017
Age 67
R. Bruce Cameron Trustee Managing Director and Chief
535 Madison Ave. Financial Officer, Berkshire Capital
19th Flr. Corporation (investment banking
New York, NY 10022 company) since 1983.
Age 44
Gerard E. Jones Trustee Partner of the law firm of Richards
43 Arch Street & O'Neil, LLP since 1972; Director
Greenwich, CT 06830 of four mutual funds managed by
Age 63 Morgan Stanley Asset Management,
Inc.
Ronald E. Kfoury Trustee Managing Director, Analect, Limited
90 Park Avenue (management consulting) since 1992.
New York, NY 10016
Age 42
Robert J. Voccola Vice President Managing Director and Director of
565 Fifth Avenue Research of Barrett Associates, Inc.
New York, NY 10017 since 1987.
Age 61
Larry W. Seibert Vice President Managing Director of Barrett
565 Fifth Avenue Associates, Inc. since 1998;
New York, NY 10017 previously Technology Analyst and
Age 38 Portfolio Manager of Avatar
Associates, Inc.
Henry A. Collins Vice President Managing Director of Barrett
565 Fifth Avenue Associates, Inc. since 1990.
New York, NY 10017
Age 59
Peter H. Shriver Vice President & Managing Director of Barrett
565 Fifth Avenue Treasurer Associates, Inc. since 1989.
New York, NY 10017
Age 48
Leslie J. Lammers Vice President Managing Director of Barrett
565 Fifth Avenue Associates, Inc. since 1997;
New York, NY 10017 previously, Vice President and
Age 50 Portfolio Manager of Scudder,
Stevens and Clark, Inc.
Janis M. Inscho Vice President Managing Director of Barrett
565 Fifth Avenue Associates, Inc. since June 2000;
New York, NY 10017 previously, Director and Chief
Age 47 Investment Officer of the Private
Client Group of Lazard Asset
Management; Senior Vice President at
Warburg, Pincus Counselors.
Christina A. Bater Assistant Vice Associate Managing Director and
565 Fifth Avenue President Portfolio Manager of Barrett
New York, NY 10017 Associates, Inc. since 1995.
Age 38
Paula J. Elliott Secretary Vice President of Barrett
565 Fifth Avenue Associates, Inc.
New York, NY 10017
Age 50
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 outofpocket expenses. The Board
holds regular quarterly meetings each year, and the Trustees receive annual
compensation from the Trust for serving on the Board and attending such
meetings. The Trust does not offer any retirement benefits for Trustees. For
the fiscal year ended June 30, 2000, the Trustees received the following
compensation from the Trust:
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
As of September 30, 2000, the officers and Trustees, as a group, owned
beneficially 1.07% of the outstanding shares of the Barrett Growth Fund.
PRINCIPAL SHAREHOLDERS
As of September 30, 2000, the following persons owned beneficially 5% or more of
the outstanding shares of the Fund:
PERCENTAGE OF
NAME AND ADDRESS FUND SHARES OWNED
---------------- -----------------
P.C. Potter & L.M. Potter, Tr. 5.53%
Philip C. Potter Charitable Remainder Unitrust
44 Rockwood Lane.
Greenwich, CT 06830-3844
Braun Fund LP 5.17%
6 E. 45th St. Rm 1401
New York, NY 10017-2414
Charles Schwab & Co., Inc. 13.52%
Special Custody Account for the
Benefit of Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104-4122
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 the 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 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, 2001. To the extent that the Advisor waives fees
to limit Fund expenses, it may seek to recoup such waived fees after this
practice is discontinued. For the fiscal year ended June 30, 2000, the Advisor
received no compensation from the Fund. Absent the waivers undertaken by the
Adviser, the Adviser would have been entitled to receive an advisory fee of
$132,925.
Barrett Associates is an independent, privately-owned firm. Its
stockholders consist of eleven 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 56% 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 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 the 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 contains 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 managementrelated and other
services are performed for the Fund. Firstar serves as the Administrator,
Transfer and Dividend Disbursing Agent, and Fund Accountant. The principal
offices of Firstar are located at 615 East Michigan Street, Milwaukee, Wisconsin
53202. Firstar Bank, N.A., located at 425 Walnut Street, Cincinnati, Ohio
45202, serves as the Fund's Custodian.
ADMINISTRATOR
Pursuant to a Fund Administration Servicing Agreement with the Trust dated
as of November 11, 1998 (the "Fund 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 Fund 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.
FUND ACCOUNTING
Pursuant to a Fund Accounting Servicing Agreement with the Trust dated as
of November 11, 1998 (the "Fund 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 Fund Accounting Agreement, Firstar maintains portfolio trading
records and records of brokerage activity in order to provide monthly brokerage
reports that 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 Servicing 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, N.A. (the
"Custodian") acts as the custodian of the Trust's securities and cash. The
Custodian is located at 425 Walnut Street, Cincinnati, OH 45202. 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 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
brokerdealer 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 adopted a Distribution Plan on behalf of the Fund, in
accordance with Rule 12b1 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 frontend, deferred or
assetbased. 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 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
became effective on December 18, 1998.
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.
The following is a breakdown of the expenses paid by the Fund pursuant to
the Plan for the fiscal year ended June 30, 2000:
Printing and Mailing of Prospectuses to Other than Current Shareholders $4,735
Compensation to Underwriter $23,463
Compensation to Broker/Dealers $12,658
* During the fiscal year, the Adviser (rather then the Fund) separately paid
$91,521 for distribution related expenses. Such expenses are the type that
could be paid for by the Fund under its Plan if there were sufficient funds
available.
INDEPENDENT ACCOUNTANTS
The Trust's independent accountants, KPMG LLP, 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
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 timetotime receive services
and products which serve both research and nonresearch functions. In such
event, the Advisor makes a good faith determination of the anticipated research
and nonresearch 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.
For the fiscal year ended June 30, 2000, the Fund paid $30,077 in brokerage
commissions on transactions totaling $13,893,234, and for the period from
commencement of operations on December 29, 1998 through the first fiscal year
ended June 30, 1999, the Fund paid $20,013 in brokerage commissions on
transactions totaling $7,411,347. All brokerage commissions were paid to
broker-dealers who provided research or brokerage services to the Advisor.
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 that it 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%. For the
fiscal year ended June 30, 2000, the Fund's portfolio turnover rate was 35%.
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 prorata 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.
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 Systematic 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, constitutes 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.
Distributions of Capital Gains. The Fund may derive capital gains or
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 net 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, to reduce
or eliminate federal excise or income taxes on the Fund.
Beginning in the year 2001 for shareholders in the 15% federal income tax
bracket (or in the year 2006 for shareholders in the 28% or higher bracket),
capital gain dividends from the Fund's sale of securities held for more than
five years may be subject to a reduced rate of tax.
Effect of Foreign Investments on Distributions. Most foreign exchange gain
realized on the sale of debt securities is treated as ordinary income by the
Fund. Similarly, foreign exchange loss realized on the sale of debt securities
generally is treated as ordinary loss. This gain when distributed will be
taxable to you as ordinary income, and any loss will reduce the Fund's ordinary
income otherwise available for distribution to you. This treatment could
increase or decrease 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.
The Fund may be subject to foreign withholding taxes on income from certain
foreign securities. This, in turn, could reduce ordinary income distributions
to you.
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 has
elected to be treated as a regulated investment company under Subchapter M of
the Internal Revenue Code (the "Code"). The Fund has qualified as a regulated
investment company for its most recent fiscal year, and intends to continue to
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 shareholders. In such case, the Fund will be subject to
federal, and possibly state and 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. To avoid federal excise taxes, the
Code requires the Fund to distribute to you by December 31 of each year, at a
minimum, the following amounts: 98% of its taxable ordinary income earned during
the calendar year; 98% of its capital gain net income earned during the twelve-
month period ending October 31; and 100% of any undistributed amounts from the
prior year. The Fund intends to declare and pay these distributions in December
(or to pay them in January, in which case you must treat them as received in
December) but can give no assurances that its distributions will be sufficient
to eliminate all taxes.
Redemption of Fund Shares. Redemptions (including redemptions in kind) and
exchanges of Fund shares are taxable transactions for federal and state income
tax purposes. If you redeem your Fund shares or exchange your Fund shares for
shares of either the Firstar Money Market Fund or the Firstar Tax-Exempt Money
Market Fund, the IRS will require that you report any gain or loss on your
redemption or exchange. If you hold your shares as a capital asset, the gain or
loss that you realize will be capital gain or loss.
Beginning in the year 2001 for shareholders in the 15% federal income tax
bracket (or in the year 2006 for shareholders in the 28% or higher bracket),
gain from the sale of Fund shares held for more than five years may be subject
to a reduced rate of tax.
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. States grant tax-free status to dividends
paid to you from interest earned on certain U.S. Government securities, subject
in some states to minimum investment or reporting 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 generally
do not 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
generally will qualify for the 70% dividends-received deduction for
corporations, but the portion of the dividends that 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 that may be subject to numerous special and complex tax rules. These
rules could affect whether gain or loss recognized by the Fund is treated as
ordinary or capital, or as interest or dividend income. These rules could also
accelerate the recognition of income to the Fund (possibly causing the Fund to
sell securities to raise the cash for necessary distributions) and/or defer the
Fund's ability to recognize a loss, and, in limited cases, subject the Fund to
U.S. federal income tax on income from certain foreign securities. These rules
could, therefore, 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.
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 30day 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 at the
end of the 1, 5, or 10 year periods (or fractional portion
thereof).
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 Prospectus 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 of 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 NonU.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 year ended June 30, 2000,
including the Report of Independent Accountants, are included in the Fund's most
recent Annual Report to 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.
