Filed Pursuant to Rule 497(c)
Registration Nos: 333-76293
811-9291
Prospectus
dated October 28, 1999
Bearguard Funds, Inc.
BEARGUARD FUND
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
1-888-288-2880
www.bearguardfund.com
The investment objective of the Bearguard Fund (the
"Fund") is capital appreciation. The Fund engages in
short sales of common stocks and other equity securities
of companies that the Fund's investment adviser, Skye
Investment Advisors LLC (the "Adviser"), believes are
overvalued.
This Prospectus contains information you should
consider before you invest in the Fund. Please read it
carefully and keep it for future reference.
____________________
The Securities and Exchange Commission (the "SEC") has not
approved or disapproved of these securities or passed upon
the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
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TABLE OF CONTENTS
Page No.
RISK/RETURN SUMMARY 1
PERFORMANCE INFORMATION 3
FEES AND EXPENSES OF THE FUND 3
INVESTMENT OBJECTIVE 4
HOW THE FUND INVESTS 4
FUND MANAGEMENT 7
HOW TO PURCHASE SHARES 8
HOW TO REDEEM SHARES 11
VALUATION OF FUND SHARES 13
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX TREATMENT 13
YEAR 2000 ISSUE 14
_____________________________
In deciding whether to invest in the Fund, you
should rely only on information in this Prospectus or
the Statement of Additional Information (the "SAI").
The Fund has not authorized others to provide
additional information. The Fund does not authorize
the use of this Prospectus in any state or jurisdiction
in which such offering may not legally be made.
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RISK/RETURN SUMMARY
What are the goals of the Fund?
The Fund's goal is capital appreciation. The
Fund's goal is sometimes referred to as the Fund's
investment objective. The Fund cannot guarantee that
it will achieve its investment goal.
What are the Fund's principal investment strategies?
The Fund attempts to achieve its goal by engaging
in short sales of securities that the Adviser believes
will decrease in value. In determining which stocks to
short, the Adviser focuses on a company's fundamentals
and selects those companies whose stock price it
believes to be unrealistic when compared to its
earnings growth rate. A short sale is a transaction in
which the Fund sells a security it does not own. A
short sale will result in profits or losses to the Fund
based on the price of the stock when the short sale was
entered into compared to the price when the short
position is closed out and after deducting transaction
and carrying costs. The Fund will primarily engage in
short sales of mid- to large-cap domestic common
stocks. The Fund also invests in U.S. government and
investment grade corporate notes, bonds and other
investment grade money market instruments to
collateralize or "cover" its short positions. These
debt securities will have an average maturity of three
years or less.
What are the main risks of investing in the Fund?
The main risks of investing in the Fund are:
* Reverse Stock The Fund is subject
Market Risk: to stock market risks and significant fluctuations in
value. However, this risk is opposite of a typical
stock mutual fund, because the Fund's short investments
may increase in value when the stock market decreases
in value. Similarly, if the stock market significantly
increases in value, the Fund may significantly decrease
in value. Increases or decreases in value of stocks
are generally greater than for bonds or other debt
securities.
* Stock Selection/ The Adviser's
Management Risk: short selling strategy may fail to produce the
intended result. The stocks the Adviser determines
to sell short may increase in value or not decrease
in value when the stock market in general is
declining. Accordingly, if the Adviser is incorrect
in determining which stocks to sell short, the
Fund is likely to experience a loss on the transaction.
* Short Selling Short selling is
Risks: speculative and involves greater risks than investing
in stocks. Therefore, an investment in the Fund may be
more volatile than investments in many other mutual
funds. Because short sales require the Fund to deliver
the stock involved in the short sale at a price
determined at the time the transaction was originally
entered into, later increases in the price of such
stock could result in significant losses to the Fund.
Unlike stock investments, these losses could be
significantly larger than the Fund's original
investment in the transaction, could be potentially
unlimited and may result from general market forces,
such as a lack of stock available for short sellers to
borrow for delivery, or improving conditions with a
company. In addition, to replace the borrowed stock,
the Fund may be required to pay a premium, which would
increase the cost of the stock sold. A broker or other
lender may request that the borrowed stock be returned
on short notice, and if that occurs at a time when
other short sellers of that security are receiving
similar requests, a "short squeeze" can occur resulting
in significant increases in the market price of a
stock. As a result, the Fund may be required to
replace the stock sold short, with purchases on the
open market at prices significantly greater than those
at which the securities were sold short. In addition,
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occasionally a stock may have significant increases in
value immediately upon the stock market opening, which
can result in significant losses to short sellers,
including the Fund. The Fund may find it difficult to
establish new short positions when in declining markets
due to regulatory restrictions.
* Segregation Risk: As a result of the Fund's
short selling investment strategy, the Fund will set
aside in a segregated account a significant portion of
its assets in liquid securities to collateralize or
"cover" its short positions. These assets may not be
sold while the corresponding short position is open
unless they are replaced by similar assets.
Accordingly, the segregation of a large portion of the
Fund's assets to collateralize or "cover" its short
positions could impede portfolio management or the
Fund's ability to meet redemption requests or other
current obligations, including margin calls, without
liquidating short positions. If the Fund is required
to liquidate short positions to meet redemption
requests, this may result in additional costs to the
Fund and may lower the Fund's performance.
* Mid-Cap Risks: Medium capitalization
companies may not have the size, resources or other
assets of large capitalization companies. As a result,
medium capitalization companies may have a lack of
depth in management, limited product lines, a lack of
capital to support growth and development and limited
revenues. Medium capitalization companies often have
narrower markets than larger capitalization companies
and the stocks of medium capitalization companies may
be less liquid as a result. Medium capitalization
companies may be subject to greater market risks and
fluctuations in value than larger capitalization
companies and may not correspond to changes in value of
the stock market in general.
* Debt Securities The Fund invests in debt
Risks: securities to cover its short positions. Debt
securities are subject to interest rate risk. If
interest rates increase, the value of debt securities
generally decrease. Similarly, if interest rates
decrease, the value of debt securities generally
increase. As the maturity of a debt security
lengthens, these fluctuations in value based on
interest rate changes increase. Because the Fund holds
debt securities to cover its short positions, shares in
the Fund may fluctuate based on interest rate changes
in addition to changes in the value of securities sold
short. In addition, the value of debt securities is
subject to changes in the credit quality of the issuer.
* High Costs/ Because of the transaction
Tax Effects: costs associated with short selling, such as
dividends paid on stocks sold short to the broker
or other institution that lent the stock or turnover
of portfolio securities, the Fund may have
higher costs than other equity funds. In addition,
profitable short sales will generally be taxable
as short- term capital gains to Fund shareholders
which are taxed at a higher rate than long-term
capital gains. Accordingly, the Fund's investment
strategy is not tax efficient.
* New Fund Risks: The Fund has no operating
history. The Adviser's short selling investment
strategy has not been previously implemented in a
mutual fund managed by the Adviser. The Fund's
portfolio manager has not previously managed a mutual
fund.
You should be aware that you may lose money by
investing in the Fund. Because of the Fund's primary
focus on short selling, you should not consider it a
complete investment program for the equity portion of
your portfolio.
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Is the Fund an appropriate investment for me?
The Fund is suitable for long-term investors only.
The Fund is not a short-term investment vehicle. The
Fund is subject to a high degree of volatility and
risk. The Fund is not suitable as a single investment
for conservative investors, for investors seeking
preservation of capital, for income investors or for
investors who are only willing to accept a moderate
degree of risk. An investment in the Fund may be
appropriate if:
* your goal is capital appreciation;
* you want to hedge your long equity positions;
* you want to allocate some portion of your long-
term investments to short selling; and
* you are willing to accept potentially significant
short-term to intermediate-term fluctuations in value
of the Fund's shares and/or possible loss of principal.
PERFORMANCE INFORMATION
The bar chart and performance table are not
included because the Fund has been in operation for
less than a full calendar year.
FEES AND EXPENSES OF THE FUND
The following table describes the fees and
expenses that you may pay if you buy and hold shares of
the Fund.
Investor Institutional
Class Class
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases None None
Maximum Deferred Sales Charge (Load) None None
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends None None
Redemption Fee None None
Exchange Fee None None
Annual Fund Operating Expenses (expenses that are deducted from Fund assets)(1)
Management Fees 1.25% 1.25%
Distribution and Service (12b-1) Fees 0.25%(2) 0.00%
Other Expenses(3) 2.97% 2.97%
Total Annual Fund Operating Expenses(3) 4.47% 4.22%
Fee Waiver/Expense Reimbursement(3) 1.72% 1.72%
Net Expenses 2.75% 2.50%
____________
(1)Fund operating expenses are deducted from Fund
assets before computing the daily share price or
making distributions. As a result, they will not
appear on your account statement, but instead
reduce the amount of total return you receive.
(2)Because Rule 12b-1 fees are paid out of the Fund's
assets on an on-going basis, over time these fees
will increase the cost of your investment and could
cost long-term investors of the Investor Class more
than other types of sales charges. For more
information, see "Distribution and Shareholder
Servicing Plan."
(3)"Other Expenses" have been estimated for the
current fiscal year since the Fund will not begin
operations until October 28, 1999. Pursuant to the
Investment Advisory Agreement between the Adviser
and the Fund, the Adviser has contractually agreed
to waive its management fee and/or reimburse the
Fund's other expenses to the extent necessary to
ensure that the total annual operating expenses do
not exceed 2.75% of the Investor Class's average
net assets and 2.50% of the Institutional Class's
average net assets until October 31, 2000. After such
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date, the total operating expense limitations
may be terminated or revised at any time. "Other
expenses" are presented before any such waivers or
reimbursements. Any waiver or reimbursement is
subject to later adjustment to allow the Adviser to
recoup amounts waived or reimbursed, including
initial organization costs of the Fund, to the
extent actual fees and expenses for a period are
less than the expense limitation cap, provided,
however, that the Adviser shall only be entitled to
recoup such amounts for a period of three years
from the date such amount was waived or reimbursed.
For additional information, see "Fund Management."
Example
The following Example is intended to help you
compare the cost of investing in the Fund with the cost
of investing in other mutual funds. The Example
assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your
shares at the end of those periods. The Example also
assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same.
In addition, the Example assumes the reinvestment of
dividends and distributions. Please note that the one
year numbers are based on the Fund's net expenses
because the Fund has agreed to waive its management fee
and/or reimburse the Fund's expenses until October 31,
2000, as described above. Although your actual costs
may be higher or lower, based on these assumptions your
costs would be as follows:
1 Year 3 Years
Investor Class $278 $1,352
Institutional Class $253 $1,281
INVESTMENT OBJECTIVE
The Fund's investment objective is capital appreciation.
HOW THE FUND INVESTS
The Fund Engages in Short Sales of Stock
The Fund seeks to achieve its investment objective
by engaging primarily in short sales of common stocks.
The Fund also invests in U.S. government and corporate
notes and bonds to collateralize or "cover" its short
positions. Because the Fund invests in debt securities
to collateralize or "cover" its short positions, the
Fund expects to generate income as a by-product of its
investment strategy. A short sale is a transaction in
which the Fund sells a security it does not own. To
complete the transaction, the Fund must borrow the
security from a broker or other institution to make
delivery to the buyer. The Fund then incurs an
obligation to replace the borrowed security to the
broker or other institution at some time (typically
unspecified) in the future. The Fund may close out a
short position by purchasing the security at the market
price at such time. The Fund also is obligated to pay
dividends on securities sold short to the broker or
other institution that lent the Fund the security,
which results in additional costs to the Fund. The
Fund will realize profits or losses on the price of the
stock at the time the short sale is entered into when
compared to the price when the short position is closed
out. The stocks the Fund shorts will primarily be
common stocks of companies that the Adviser believes
are reasonably liquid. The Adviser makes this
determination based on a company's market
capitalization. The Fund generally shorts common
stocks of companies with medium to large market
capitalizations (companies with a market capitalization
of at least $1.0 billion). Of the 70% to 90% of the
Fund's net assets representing short positions, the
Fund will invest at least 90% of those assets in
companies with a market capitalization of at least
$1.0 billion. In monitoring the liquidity of the
Fund's securities, the Adviser also considers the
percentage of the Fund's net assets committed to short
positions, the percentage of the issuer's securities
shorted by the Fund and others and the Fund's cash
inflows and outflows. The Adviser will pursue its
short sales through a diversified portfolio of short
positions and will not enter into a single short
position exceeding 5% of its net assets. In addition,
the Fund will have short positions across diverse
industry sectors and will not establish a short
position if more than 15% of the Fund's total assets
would be invested in companies in the same industry.
The Fund Follows a Value Approach
The Adviser generally follows a value approach to
investing for the Fund. Because the Fund tries to
achieve its investment objective through short sales,
the Fund will implement the value approach by focusing
on securities of companies that the Adviser believes
are overvalued relative to their intrinsic worth and
possess certain characteristics
<PAGE>
that the Adviser
believes will lead to a lower market price over time.
In identifying short positions for the Fund, the
Adviser focuses on a company's fundamentals and selects
those securities that the Adviser believes are
expensive relative to their fundamentals and have an
above average chance of declining in value. In
implementing the value approach, the Adviser examines a
company's financial statements, its debt structure and
interest burden, its price relative to its earnings and
sales, and its operating margins and cash flow. The
Adviser seeks companies whose price-to-earnings ratio
is greater than its growth rate of earnings, whose cash
flow is negative and whose management has made claims
the Adviser believes to be unrealistic or exaggerated.
Because of the Fund's focus on short selling, you
should not consider it a complete investment program
for the equity portion of your portfolio.
Securities Sold Short
Although the Fund is not required to invest a
specified percentage of its assets in short positions
at all times, under normal circumstances, the Fund
expects that 70% to 90% of the Fund's net assets will
represent short positions. Short sales will primarily
be of mid- to large-cap domestic common stocks. Common
stocks are units of ownership of a corporation. In
pursuing its investment objective, the Fund may also
short to a limited extent sponsored American Depositary
Receipts ("ADRs"). ADRs are receipts typically issued
by a U.S. bank or trust company evidencing ownership of
the underlying foreign security and denominated in U.S.
dollars.
All short sale positions will be fully
collateralized. The Fund will set aside in a
segregated custodial account an amount of cash, U.S.
government securities or other liquid debt securities
equal to the excess of the current market value, as
calculated on a daily basis, of the securities sold
short over the amount of collateral deposited with the
broker or other institution in respect of the short
sale (not including the proceeds of the short sale).
These assets may not be sold while the corresponding
short position is open unless they are replaced by
similar assets.
Risks of Short Selling
Short selling is speculative and involves greater
risks than investing in stocks. An investment in the
Fund may be more volatile than investments in many
other mutual funds. A short sale is profitable to the
Fund if the price of the stock at the time it is closed
out is less than at the time the short sale was entered
into and after factoring in transaction costs
(including dividends paid on stocks sold short to the
broker or other institution that lent the Fund the
stock). Alternatively, if the price of the stock is
greater at the time it is closed out than at the time
of the short sale and after factoring in transaction
costs (including dividends paid on stocks sold short to
the broker or other institution that lent the Fund the
stock), the transaction will result in a loss to the
Fund. These losses could be significantly larger than
losses resulting from stock investments. With stocks,
a fund can only lose the amount of its original
investment. With short positions, however, a fund's
losses could be potentially unlimited due to general
market forces, such as a lack of stock available for
short sellers to borrow for delivery, or improving
conditions with a company. For example, the Fund may
be subject to "short squeeze" risk resulting in
significant increases in the market price of a stock
when the broker or other institution that lent the
stock in question to the Fund demands the security when
other short sellers of that same stock are receiving
similar demands. As a result, the Fund may be required
to replace securities previously sold short, with
purchases on the open market at prices significantly
greater than those at which the securities were sold
short. In addition, occasionally a stock may have
significant increases in value immediately upon the
stock market opening or after a halt in trading on the
security, which can result in significant losses to
short sellers, including the Fund. In addition, the
Fund may find it difficult to establish new short
positions when in declining markets due to regulatory
restrictions.
Short selling also involves stock selection,
management and reverse stock market risk. Like a
typical stock mutual fund, the Fund is subject to stock
market risks and significant fluctuations in value.
However, this risk is opposite of a typical stock
mutual fund, because the Fund's short investments may
increase in value when the stock market decreases in
value. Similarly, if the stock market significantly
increases in value, the Fund may significantly decrease
in value. Increases or decreases in value of stocks
are generally greater than for bonds or other debt
securities. In addition, the Adviser's short selling
strategy may not produce the intended result. The
stocks the Adviser determines to sell short may
increase in value or not decrease in value when the
stock market in general is declining. Accordingly, if
the Adviser is incorrect in determining which stocks to
sell short, the Fund is likely to experience a loss on
the transaction.
As a result of the Fund's short selling investment
strategy, the Fund will set aside in a segregated
account a significant portion of its assets in liquid
securities to collateralize or "cover" its short
positions. These assets may not
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be sold while the
corresponding short position is open unless they are
replaced by similar assets. Accordingly, the
segregation of a large portion of the Fund's assets to
collateralize or "cover" its short positions could
impede portfolio management or the Fund's ability to
meet redemption requests or other current obligations,
including margin calls, without liquidating short
positions. If the Fund is required to liquidate short
positions to meet redemption requests, this may result
in additional costs to the Fund.
Because of the transaction costs associated with
short selling, such as brokerage fees and dividends
paid on stocks sold short to the broker or other
institution that lent the stock, the Fund may have
higher expenses than other equity funds. In addition,
to replace the borrowed stock, the Fund may be required
to pay a premium, which would increase the cost of the
security sold and may lower the Fund's performance.
You should be aware that the closing of a short sale
that is profitable to the Fund will result in short-
term capital gains to you. Gains will be realized only
when the Fund closes a short sale and will remain
unrealized until such time.
Debt Securities Held by the Fund
The Fund also invests in investment grade U.S.
government and investment grade corporate notes and
bonds to collateralize or "cover" its short positions.
Debt securities are obligations of the issuer to pay
interest and repay principal. The Fund expects that
its debt securities will have an average maturity of
three years or less.
Changes in market interest rates affect the value
of debt securities. If interest rates increase, the
value of debt securities generally decrease.
Similarly, if interest rates decrease, the value of
debt securities generally increase. As the maturity of
a debt security lengthens, these fluctuations in value
based on interest rate changes increase. Because the
Fund holds debt securities to cover its short
positions, shares in the Fund may fluctuate based on
interest rate changes in addition to changes in the
value of securities sold short.
Changes in the credit quality of the issuer also
affect the value of debt securities. Lower-rated debt
securities generally pay a higher interest rate.
Although the Fund primarily invests in investment grade
debt securities, the value of these securities may
decrease due to changes in ratings over time. For
additional information regarding securities ratings,
please see the SAI and the Appendix to the SAI.
The Fund may invest in the following types of debt
securities:
* Corporate debt securities, including bonds,
debentures and notes;
* U.S. government securities;
* Commercial paper (including variable amount master
demand notes); and
* Bank obligations, such as certificates of deposit,
banker's acceptances and time deposits of domestic and
foreign banks, domestic savings association and their
subsidiaries and branches (in amounts in excess of the
current $100,000 per account insurance coverage
provided by the Federal Deposit Insurance Corporation).
Derivatives Transactions
Although not part of its principal investment
strategy, from time to time the Fund may also invest in
short positions through transactions other than short
sales of securities. The Fund may purchase or sell put
options on securities and indices or stock index
futures when the Adviser believes that a particular
security or market index will decline in value and that
such investments would offer benefits to the Fund not
available through the short sale of a particular
security. This could occur, for example, if the Fund
received large cash inflows and the Adviser desired to
take a short position generally pending investment in
individual short positions. Futures are agreements for
the future sale by one person and purchase by another
person of a financial instrument, such as a stock
index, or its cash equivalent at a future date for a
set price. A put option is a contract in which the
buyer pays a premium to the seller to obtain the right,
but not the obligation, to sell to the seller a
specific security at an agreed upon price at or before
a certain time. A put option on an index generally
operates in the same manner as a put option on a
specific security, except that the buyer must deliver
cash rather than the underlying security to the buyer.
The buyer of an option generally benefits from
favorable movements in the price of the underlying
asset but is not exposed to corresponding losses due to
adverse movements in the value of the underlying asset.
The Fund may also write call options, which
<PAGE>
obligate the Fund to sell a security at a set price upon
exercise. This would generate premium income for the
Fund. The Fund's use of options involves risks
different from, or greater than, the risks associated
with investing directly in traditional securities,
including liquidity risk, interest rate risk, market
risk, credit risk and management risk. Options also
involve the risk of mispricing or improper valuation
and the risk that changes in the value of the option
may not correlate perfectly with the underlying
security or index. The Fund could lose more than the
principal amount invested with certain options. In
addition, suitable option transactions may not be
available in all circumstances and there can be no
assurance that the Fund will engage in such
transactions to reduce exposure to other risks when
that would be beneficial.
Temporary, Defensive Strategies
To respond to adverse market, economic, political
or other conditions, on a temporary basis the Adviser
may hold cash and/or invest all or a portion of the
Fund's assets in money market instruments, which are
short-term fixed income securities issued by private
and governmental institutions. Because of the Fund's
focus on short selling, adverse market conditions may
include periods of rapid appreciation in the stock
markets. Money market instruments include:
* Commercial paper;
* Short-term U.S. government securities;
* Banker's acceptances;
* Certificates of deposit;
* Time deposits; and
* Other short-term fixed income securities.
If these temporary, defensive strategies are used, it
is impossible to predict when or for how long the
Adviser may employ these strategies for the Fund. To
the extent the Fund engages in this temporary,
defensive strategy, the Fund may not achieve its
investment objective. Pending investment or to pay
redemption requests and expenses of the Fund, the Fund
may also hold a portion of its assets in short-term
money market securities and cash. See the Fund's SAI
for additional information.
The Fund Has No Minimum Holding Period for its
Investments
The Fund has no minimum holding period for its
investments. However, the Fund will typically hold a
short position open for nine months to one year. The
Fund typically closes out a short position when the
Adviser anticipates that the security is nearing its
fair value. For example, the Fund will close out a
short position when the company's price is consistent
with its growth rate.
The Fund will attempt to maximize investment
returns. Potential tax consequences to Fund
shareholders will be a secondary consideration.
Investors may realize taxable capital gains as a result
of frequent trading of the Fund's assets and the Fund
incurs transaction costs in connection with buying and
selling securities. Tax and transaction costs lower
the Fund's effective return for investors.
FUND MANAGEMENT
Adviser
Skye Investment Advisors LLC (the "Adviser") is
the investment adviser to the Fund. The Fund has
entered into an Investment Advisory Agreement with the
Adviser under which the Adviser manages the Fund's
investments and business affairs, subject to the
supervision of the Fund's Board of Directors. The
Adviser is a California limited liability company
located at 985 University Avenue, Suite 26, Los Gatos,
California 95032. The Adviser and its predecessor
companies have been serving clients since 1985. As of
June 30, 1999, the Adviser managed approximately $10
million for individual and institutional clients.
Under the Investment Advisory Agreement, the Fund pays
the Adviser an annual management fee of 1.25% of the
Fund's average daily net assets attributable to each
class of shares.
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The advisory fee is accrued daily and
paid monthly. Pursuant to the Investment Agreement,
the Adviser has contractually agreed to waive its
management fee and/or reimburse the Fund's other
expenses to the extent necessary to ensure that the
total annual operating expenses do not exceed 2.75% of
the Investor Class's average daily net assets and 2.50%
of the Institutional Class's average daily net assets
until October 31, 2000. After such time, the Adviser
may voluntarily waive all or a portion of its
management fee and/or reimburse all or a portion of
Fund operating expenses. The Adviser will waive fees
and/or reimburse expenses on a monthly basis and the
Adviser will pay the Fund by reducing its fee. Any
waivers or reimbursements will have the effect of
lowering the overall expense ratio for the Fund and
increasing its overall return to investors at the time
any such amounts were waived and/or reimbursed. Any
such waiver or reimbursement is subject to later
adjustment during the term of the Investment Advisory
Agreement to allow the Adviser to recoup amounts waived
or reimbursed, including initial organization costs of
the Fund, provided, however, that the Adviser shall
only be entitled to recoup such amounts for a period of
three years from the date such amount was waived or
reimbursed.
Under the Investment Advisory Agreement, not only
is the Adviser responsible for management of the Fund's
assets, but also for portfolio transactions and
brokerage.
Portfolio Manager. Chairman and Managing Member
of the Adviser since 1996, Paul L. McEntire graduated
Phi Beta Kappa from Stanford University in 1965 with a
Bachelor of Science degree in mathematics.
Mr. McEntire received a Master of Science in
mathematics from the State University of New York at
Buffalo in 1972 and a PhD in Engineering-Economic
Systems from Stanford University in 1982. Since 1989,
Mr. McEntire has served as Chairman and chief executive
officer of Skye Investments, Inc., the predecessor of
the Adviser. From 1994 to 1997, Mr. McEntire was a
broker with Brookstreet Securities Corporation in
Irvine, California, and from 1993 to 1994, Mr. McEntire
was a broker with PaineWebber, Inc. in Menlo Park,
California. Mr. McEntire was President and chief
executive officer of Skye Investment Advisors, Inc.
from 1985 to 1988.
Custodian
Firstar Bank Milwaukee, N.A. ("Firstar Bank"), 777
East Wisconsin Avenue, Milwaukee, Wisconsin 53202 acts
as custodian of the Fund's assets.
Transfer Agent and Administrator
Firstar Mutual Fund Services, LLC ("Firstar"),
Third Floor, 615 East Michigan Street, Milwaukee,
Wisconsin 53202 acts as transfer agent for the Fund
(the "Transfer Agent") and as the Fund's administrator.
Distributor
Rafferty Capital Markets, Inc., 1311 Mamaroneck
Avenue, White Plains, New York 10605, a registered
broker-dealer and member of the National Association of
Securities Dealers, Inc., acts as distributor of the
Fund's shares (the "Distributor").
HOW TO PURCHASE SHARES
Shares of the Fund may be purchased at net asset
value (as described below) through any dealer which has
entered into a sales agreement with the Distributor, in
its capacity as principal underwriter of shares of the
Fund, or through the Distributor directly. The
Transfer Agent may also accept purchase applications.
Choosing a Class
The Fund offers two classes of shares: Investor
Class and Institutional Class. The classes differ with
respect to their minimum investments and their cost
structure.
Investor Class Institutional Class
* Distribution and sharholder * No distribution and
servicing fee of up to 0.25% shareholder servicing fee.
of the average daily net
assets of the Investor Class.
<PAGE>
The Fund has adopted a plan pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended
(the "12b-1 Plan") with respect to the Investor Class,
which authorizes it to pay the Distributor and certain
financial intermediaries (such as broker-dealers) who
assist in distributing Investor Class shares or who
provide shareholder services to Investor Class
shareholders a distribution and shareholder servicing
fee of up to 0.25% of the average daily net assets of
the Fund attributable to the Investor Class (computed
on an annual basis). To the extent expenses are
incurred under the 12b-1 Plan, the 12b-1 Plan has the
effect of increasing the expenses of the Investor Class
from what they would otherwise be. Because Rule 12b-1
fees are paid out of the net assets of the Investor
Class on an on-going basis, over time these fees will
increase the cost of your investment and could cost
long-term investors of Investor Class shares more than
paying other types of sales charges. For additional
information on the 12b-1 Plan, please see the SAI.
Purchases of Fund Shares
Payment for Fund shares should be made by check or
money order in U.S. dollars drawn on a U.S. bank,
savings and loan or credit union.
Minimum Investments
Initial Subsequent Investment
Investor $ 2,000* $ 100*
Institutional $ 100,000 $1,000
*You can establish an account using the
Automatic Investment Plan for an initial
investment of $1,000 with a $50 monthly
investment as described below.
These minimums can be changed or waived by the Fund at
any time. The Fund has agreed to waive the
Institutional Class's minimums for certain pre-existing clients
of the Adviser. Please see the SAI for additional
information. You will be given at least 30 days'
notice of any increase in the minimum dollar amount of
subsequent investments.
Net Asset Value
Shares of the Fund are sold on a continual basis
at the net asset value per share next computed
following receipt of an order in proper form (as
described below under "Initial Investment" and
"Subsequent Investment") by a dealer, the Distributor
or the Transfer Agent, as the case may be. Net asset
value per share is calculated once daily as of the
close of trading (currently 4:00 p.m., Eastern Standard
Time) on each day the New York Stock Exchange (the
"NYSE") is open. See "Valuation of Fund Shares."
Initial Investment
You may purchase Fund shares by completing the
enclosed shareholder application and mailing it and a
check or money order payable to "Bearguard Funds, Inc."
to your securities dealer, the Distributor or the
Transfer Agent, as the case may be. The minimum
initial investment in the Investor Class is $2,000.
The minimum initial investment in the Institutional
Class is $100,000. If mailing to the Distributor or
Transfer Agent, please send to the following address:
By Mail By Overnight Courier
Firstar Mutual Fund Services, LLC Firstar Mutual Fund Services, LLC
P.O. Box 701 Third Floor
Milwaukee, Wisconsin 53201-0701 615 East Michigan Street
Milwaukee, Wisconsin 53202
<PAGE>
The Fund does not consider the U.S. Postal Service or
other independent delivery services to be its agents.
Therefore, deposit in the mail or with such services,
or receipt at the Transfer Agent's post office box, of
purchase applications does not constitute receipt by
the Transfer Agent or the Fund. Do not mail letters by
overnight courier to the post office box.
If the securities dealer you have chosen to
purchase Fund shares through has not entered into a
sales agreement with the Distributor, such dealer may,
nevertheless, offer to place your order for the
purchase of Fund shares. Purchases made through such
dealers will be effected at the net asset value next
determined after receipt by the Fund of the dealer's
order to purchase shares. Such dealers may also charge
a transaction fee, as determined by the dealer. That
fee may be avoided if shares are purchased through a
dealer who has entered into a sales agreement with the
Distributor or through the Transfer Agent.
If your check does not clear, you will be charged
a $25 service fee. You will also be responsible for
any losses suffered by the Fund as a result. Neither
cash nor third-party checks will be accepted. All
applications to purchase Fund shares are subject to
acceptance by the Fund and are not binding until so
accepted. The Fund reserves the right to decline or
accept a purchase order application in whole or in
part.
Wire Purchases
You may also purchase Fund shares by wire. The
following instructions should be followed when wiring
funds to the Transfer Agent for the purchase of Fund
shares:
Wire to: Firstar Bank Milwaukee, N.A.
ABA Number: 075000022
Credit: Firstar Mutual Fund Services, LLC
Account: 112-952-137
Further Credit: Bearguard Funds, Inc.
(shareholder account number)
(shareholder name/account registration)
Please call 1-888-288-2880 prior to wiring any
funds to notify the Transfer Agent that the wire is
coming and to verify the proper wire instructions so
that the wire is properly applied when received. The
Fund is not responsible for the consequences of delays
resulting from the banking or Federal Reserve wire
system.
Telephone Purchases
The telephone purchase option allows you to make
subsequent investments directly from a bank checking or
savings account. To establish the telephone purchase
option on your account, complete the appropriate
section in the shareholder application. Only bank
accounts held at domestic financial institutions that
are Automated Clearing House ("ACH") members may be
used for telephone transactions. This option will
become effective approximately 15 business days after
the application form is received by the Transfer Agent.
Purchases must be in amounts of $1,000 or more and may
not be used for initial purchases of the Fund's shares.
To have Fund shares purchased at the offering price
determined at the close of regular trading on a given
date, the Transfer Agent must receive both your
purchase order and payment by Electronic Funds Transfer
through the ACH system prior to the close of regular
trading on such date. Most transfers are completed
within one business day. Subsequent investments may be
made by calling 1-888-288-2880.
Purchasing Shares Through Financial Intermediaries
If you purchase shares through a financial
intermediary (such as a broker-dealer), certain
features of the Fund relating to such transactions may
not be available or may be modified. In addition,
certain operational policies of the Fund, including
those related to settlement and dividend accrual, may
vary from those applicable to direct shareholders of
the Fund and may vary among intermediaries. You should
consult your financial intermediary for more
information regarding these matters. Certain financial
intermediaries may charge you transaction fees for
their services. You will not be charged such fees
directly by the Fund if you purchase your Fund shares
directly from the Fund without the
<PAGE>
intervention of a financial intermediary. The Fund's Investor
Class may, however, compensate financial intermediaries for
assistance under the Fund's 12b-1 Plan or otherwise.
Automatic Investment Plan
The Automatic Investment Plan ("AIP") allows you
to make regular, systematic investments in Investor
Class shares from your bank checking or NOW account.
The minimum initial investment for investors using the
AIP is $1,000 with a monthly minimum investment of $50.
To establish the AIP, complete the appropriate section
in the shareholder application. You should consider
your financial ability to continue in the AIP until the
minimum initial investment amount is met because the
Fund has the right to close an investor's account for
failure to reach the minimum initial investment. For
additional information on the AIP, please see the SAI.
Individual Retirement Accounts
You may invest in Investor Class shares by
establishing a tax-sheltered individual retirement
account ("IRA"). The minimum initial investment for
investors establishing IRAs is $500. The Fund offers
the Traditional IRA and Roth IRA. For additional
information on IRA options, please see the SAI.
Subsequent Investments
Additions to your account may be made by mail.
Any subsequent investment in the Investor Class must be
for at least $100. Any subsequent investment in the
Institutional Class must be for at least $1,000. When
making an additional purchase by mail, enclose a check
payable to "Bearguard Funds, Inc." and the Additional
Investment Form provided on the lower portion of your
account statement. Additions to your account of at
least $1,000 may also be made by wire. To make an
additional purchase by wire, please call 1-888-288-2880
for complete wiring instructions.
HOW TO REDEEM SHARES
In General
You may request redemption of part or all of your
Fund shares at any time at the next determined net
asset value. See "Valuation of Fund Shares." No
redemption request will become effective until a
redemption request is received in proper form (as
described below) by the Transfer Agent. You should
contact the Transfer Agent for further information on
documentation required for redemption of Fund shares.
The Fund normally will mail your redemption proceeds
the next business day and, in any event, no later than
seven business days after receipt of a redemption
request in good order. However, if you make a purchase
by check, the Fund may hold payment on redemption
proceeds until it is reasonably satisfied that the
check has cleared, which may take up to 12 days.
Redemptions may be made by written request, telephone
or wire.
Redemptions may also be made through brokers or
dealers. Such redemptions will be effected at the net
asset value next determined after receipt by the Fund
of the broker or dealer's instruction to redeem shares.
Some brokers or dealers may charge a fee in connection
with such redemptions.
Investors who have an Individual Retirement
Account must indicate on their redemption requests
whether or not federal income tax should be withheld.
Redemption requests failing to make an election will be
subject to withholding.
Your account may be terminated by the Fund on not
less than 30 days' notice if, at the time of any
redemption of shares in your account, the value of the
remaining shares in the account falls below $2,000 for
Investor Class investors or below $100,000 for
Institutional Class investors. Upon any such
termination, a check for the proceeds of redemption
will be sent to you within seven days of the
redemption.
Written Redemption
For most redemption requests, you need only
furnish a written, unconditional request to redeem your
shares at net asset value to the Transfer Agent:
<PAGE>
By Mail By Overnight Courier
Firstar Mutual Fund Services, LLC Firstar Mutual Fund Services, LLC
P.O. Box 701 Third Floor
Milwaukee, Wisconsin 53201-0701 615 East Michigan Street
Milwaukee, Wisconsin 53202
To be in proper form, requests for redemption must (i)
be signed exactly as the shares are registered,
including the signature of each owner, and (ii) specify
the number of shares or dollar amount to be redeemed.
Redemption proceeds made by written redemption request
may also be wired to a commercial bank that you have
authorized on your account application. The Transfer
Agent will charge a $12 service fee for wire
transactions. Additional documentation may be
requested from corporations, executors, administrators,
trustees, guardians, agents or attorneys-in-fact. The
Fund does not consider the U.S. Postal Service or other
independent delivery services to be its agents.
Therefore, deposit in the mail or with such services,
or receipt at the Transfer Agent's post office box of
redemption requests does not constitute receipt by the
Transfer Agent or the Fund. Do not mail letters by
overnight courier to the post office box. Any written
redemption requests received within 15 days after an
address change must be accompanied by a signature
guarantee.
Telephone Redemption
You may also redeem your shares by calling the
Transfer Agent at 1-888-288-2880. Redemption requests
by telephone are available for redemptions of $1,000 or
more. Redemption requests for less than $1,000 must be
in writing. In order to utilize this procedure, you
must have previously elected this option on your
shareholder application and the redemption proceeds
must be mailed directly to you or transmitted to your
predesignated account via wire or ACH transfer. Funds
sent via ACH are automatically credited to your account
within three business days. There is currently no
charge for this service. To change the designated
account, send a written request with signature(s)
guaranteed to the Transfer Agent. To change the
address, call the Transfer Agent or send a written
request with signature(s) guaranteed to the Transfer
Agent. Additional documentation may be requested from
corporations, executors, administrators, trustees,
guardians, agents or attorneys-in-fact. No telephone
redemption requests will be allowed within 15 days of
any address change. The Fund reserves the right to
limit the number of telephone redemptions you may make.
You may not modify or cancel a telephone redemption
request.
The Transfer Agent will use reasonable procedures
to ensure that instructions received by telephone are
genuine. These procedures may include requiring some
form of personal identification prior to acting upon
telephone instructions, recording telephonic
transactions and/or sending written confirmation of
such transactions to you. Assuming procedures such as
the above have been followed, neither the Fund nor the
Transfer Agent will be liable for any loss, cost or
expense for acting upon your telephone instructions or
for any unauthorized telephone redemption. The Fund
reserves the right to refuse a telephone redemption
request if so advised.
Redeeming Shares Through Financial Intermediaries
If you redeem shares through a financial
intermediary (such as a broker-dealer), such financial
intermediary may charge you transaction fees for their
services. You will not be charged such fees if you
redeem your Fund shares directly through the Fund
without the intervention of a financial intermediary.
Systematic Withdrawal Plan
The Systematic Withdrawal Plan ("SWP") allows
Investor Class investors to make automatic withdrawals
from their accounts at regular intervals. Redemptions
for the purpose of satisfying such withdrawals may
reduce or even exhaust your account. If the amount
remaining in your account is not sufficient to make a
SWP payment, the remaining amount will be redeemed and
the SWP will be terminated. Please see the SAI for
more information.
Signature Guarantees
Signature guarantees are required for:
* redemption requests to be mailed or wired to a
person other than the registered owner(s) of the
shares;
* redemption requests to be mailed or wired to other
than the address that appears of record; and
<PAGE>
* any redemption request if a change of address has
been received by the Fund or the Transfer Agent within
the last 15 days.
A signature guarantee may be obtained from any eligible
guarantor institution, as defined by the SEC. These
institutions include banks, saving associations, credit
unions, brokerage firms and others. Please note that a
notary public stamp or seal is not acceptable.
Redemption in Kind
The Fund has reserved the right to redeem in kind
(i.e., in securities positions) any redemption request
during any 90-day period in excess of the lesser of:
(i) $250,000 or (ii) 1% of the net asset value of the
class of shares being redeemed. Please see the SAI for
more information.
VALUATION OF FUND SHARES
Net asset value for the Fund is calculated by
taking the value of the Fund's total assets, including
interest or dividends accrued, but not yet collected,
less all liabilities, and dividing by the total number
of shares outstanding. The result, rounded to the
nearest cent, is the net asset value per share. The
net asset value per share is determined as of the close
of trading (generally 4:00 p.m. Eastern Standard Time)
on each day the NYSE is open for business. Net asset
value is not determined on days the NYSE is closed.
The price at which a purchase order or redemption
request is effected is based on the next calculation of
net asset value after the order is placed. In
determining net asset value, expenses are accrued and
applied daily and investments for which market
quotations are readily available are valued at market
value. Any investments for which market quotations are
not readily available are valued at fair value as
determined in good faith by the Board of Directors of
the Fund.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX
TREATMENT
For federal income tax purposes, all dividends
paid by the Fund and distributions of net realized
short-term capital gains are taxable as ordinary income
whether reinvested or received in cash unless you are
exempt from taxation or entitled to a tax deferral.
Distributions paid by a Fund from net realized long-
term capital gains, whether received in cash or
reinvested in additional shares, are taxable as a
capital gain. The capital gain holding period (and the
applicable tax rate) is determined by the length of
time the Fund has held the security and not the length
of time you have held shares in the Fund. For short
sales, the Fund's holding period is determined by
reference to the period the Fund has held the security
delivered at the time of closing out the short sale.
Since the Fund engages in short sales without owning
the underlying security during the investment period,
the Fund anticipates that substantially all of its
capital gains distributions from short sales will be
short-term capital gains. Accordingly, the Fund's
investment strategy is not tax efficient because your
capital gains will generally be taxable as ordinary
income. Investors are informed annually as to the
amount and nature of all dividends and capital gains
paid during the prior year. Such capital gains and
dividends may also be subject to state or local taxes.
If you are not required to pay taxes on your income,
you are generally not required to pay federal income
taxes on the amounts distributed to you.
The Fund intends to pay dividends and distribute
capital gains, if any, at least annually. When a
dividend or capital gain is distributed, the Fund's net
asset value decreases by the amount of the payment. If
you purchase shares shortly before a distribution, you
will be subject to income taxes on the distribution,
even though the value of your investment (plus cash
received, if any) remains the same. All dividends and
capital gains distributions will automatically be
reinvested in additional Fund shares at the then
prevailing net asset value unless you specifically
request that either dividends or capital gains or both
be paid in cash. You may change an election by
telephone, subject to certain limitations, by calling
the Transfer Agent at 1-888-288-2880.
If you request to have dividends and/or capital
gains paid in cash, you may choose to have such amounts
mailed or sent via electronic funds transfer ("EFT").
Transfers via EFT generally take up to three business
days to reach the investor's bank account.
If you elect to receive distributions and
dividends by check and the post office cannot deliver
such check, or if such check remains uncashed for six
months, the Fund reserves the right to reinvest the
distribution check in your account at the Fund's then
current net asset value per share and to reinvest all
subsequent distributions in shares of the Fund.
<PAGE>
If you do not furnish the Fund with your correct
social security number or taxpayer identification
number, the Fund is required by federal law to withhold
federal income tax from your distributions and
redemption proceeds at a rate of 31%.
This section is not intended to be a full
discussion of federal income tax laws and the effect of
such laws on you. There may be other federal, state or
local tax considerations applicable to you. You are
urged to consult your own tax advisor.
YEAR 2000 ISSUE
The Fund's operations depend on the seamless
functioning of computer systems in the financial
service industry, including those of the Adviser,
Firstar and Firstar Bank. Many computer software
systems in use today cannot properly process date-
related information after December 31, 1999 because of
the method by which dates are encoded and calculated.
This failure, commonly referred to as the "Year 2000
Issue," could adversely affect the handling of security
trades, pricing and account servicing for the Fund.
The Adviser has made compliance with the Year 2000
Issue a high priority and has taken steps that it
believes are reasonably designed to address the Year
2000 Issue with respect to its computer systems. The
Adviser does not currently anticipate that the Year
2000 Issue will have a material impact on its ability
to continue to fulfill its duties as investment adviser
to the Fund. In addition, Firstar and Firstar Bank
have represented to the Adviser that they do not
currently anticipate that the Year 2000 Issue will have
a material impact on their ability to continue to
fulfill their duties as service providers to the Fund.
However, there can be no assurance that the computer
systems of the companies in which the Fund invests will
be timely converted or that the value of such
investments will not be adversely affected by the Year
2000 Issue.
<PAGE>
DIRECTORS CUSTODIAN
Paul L. McEntire, Chairman Firstar Bank Milwaukee, N.A.
Robert E. Larson 777 East Wisconsin Avenue
Robert W. Lishman, Jr. Milwaukee, Wisconsin 53202
Thomas M. Cover
Charles D. Feinstein
David G. Luenberger ADMINISTRATOR, TRANSFER AGENT
Edward C. Murphy AND DIVIDEND-DISBURSING AGENT
PRINCIPAL OFFICERS
Paul L. McEntire, President Firstar Mutual Fund Services, LLC
Thomas F. Burns, Jr., Third Floor
Treasurer and Secretary 615 East Michigan Street
Milwaukee, Wisconsin 53202
INVESTMENT ADVISER
INDEPENDENT ACCOUNTANTS
Skye Investment Advisors LLC
985 University Avenue, Suite 26 PricewaterhouseCoopers LLP
Los Gatos, California 95032 100 East Wisconsin Avenue,
Suite 1500
Milwaukee, Wisconsin 53202
DISTRIBUTOR
LEGAL COUNSEL
Rafferty Capital Markets, Inc.
1311 Mamaroneck Avenue Godfrey & Kahn, S.C.
White Plains, New York 10605 780 North Water Street
Milwaukee, Wisconsin 53202
The SAI for the Fund contains additional
information about the Fund. The Fund's SAI, which is
incorporated by reference into this Prospectus, is
available without charge upon request to the address,
toll-free telephone number or website noted on the
cover page of this Prospectus. The SAI may also be
obtained from certain financial intermediaries,
including the Fund's Distributor, who purchase and sell
Fund shares. General inquiries regarding the Fund can
be directed to the Fund at the address and toll-free
telephone number on the cover page of this Prospectus.
Information about the Fund (including the SAI) can
be reviewed and copied at the SEC's Public Reference
Room in Washington, D.C. Please call the SEC at
1-800-SEC-0330 for information relating to the
operation of the Public Reference Room. Other
information about the Fund is available on the SEC's
Internet site at http://www.sec.gov or upon payment of
a duplicating fee, by writing the Public Reference Room
of the SEC, Washington, D.C. 20549-6009.
The Fund's 1940 Act File Number is 811-9291.
