FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No._ [ ]
Post-Effective Amendment No. 6 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 6 [X]
(Check appropriate box or boxes.)
METAMARKETS.COM FUNDS
(Exact Name of Registrant as Specified in Charter)
444 DeHaro Street - Suite 220
San Francisco, CA 94107
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (415) 575-3000
Donald L. Luskin
444 DeHaro Street - Suite 220
San Francisco, CA 94107
(Name and Address of Agent for Service)
copy to:
Stuart H. Coleman, Esq.
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038-4982
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
----
on (DATE) pursuant to paragraph (b)
----
x 60 days after filing pursuant to paragraph (a)(1)
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on (DATE) pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on (DATE) pursuant to paragraph (a)(2) of Rule 485
----
If appropriate, check the following box:
this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
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<PAGE>
METAMARKETS.COM FUNDS
PROSPECTUS
____________, 2001
o METAMARKETS INDEX FUND
ADVISED BY
METAMARKETS INVESTMENTS LLC
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
FUND SHARES OR DETERMINED WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A CRIME.
<PAGE>
TABLE OF CONTENTS
DESCRIPTION OF THE FUND - OBJECTIVES, RISK/RETURN AND EXPENSES
ADDITIONAL INFORMATION ON INVESTMENT STRATEGIES AND RISKS
FUND MANAGEMENT
SHAREHOLDER INFORMATION
BACK COVER
<PAGE>
DESCRIPTION OF THE FUND
OBJECTIVES, RISK/RETURN AND EXPENSES
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INVESTMENT OBJECTIVE The Fund seeks to provide investment results
that correspond, before expenses, generally
to the price and yield performance of the
___________ Index.*
PRINCIPAL INVESTMENT To achieve its goal, the Fund will invest,
STRATEGIES under normal circumstances, at least
80% of its total assets in the stocks
included in the Index. The actual percentage
of the Fund's assets invested in these stocks
typically will be higher.
The Index includes the common stocks of 100
leading companies in the "Internet Economy,"
as compiled by __________. The Index is a
"modified capitalization-weighted" index,
which means that its component stocks are
weighted in proportion to their market
capitalization (i.e., the number of a
company's outstanding shares multiplied by
the market price per share). Individual
company weightings in the Index are modified
based on industry sectors so that, in the
opinion of the Index compilers, the Index is
representative of the overall Internet
Economy.
The industry sectors representing the
Internet Economy include online retail,
business-to-business, broadband
communications, networking equipment,
telecommunications, wireless communications,
computer hardware, computer software, network
security, and online entertainment. The
companies selected from these sectors for
inclusion in the Index are not just
"dot-coms," but are those companies the
compilers believe are creating a new age of
business, commerce and culture made possible
by innovative technologies and instantaneous,
low cost methods of communication.
The Fund will invest in all of the stocks in
the Index in substantially the same
proportion to their weighting in the Index.
To the extent that 25% or more of the stocks
that comprise the Index are issued by
companies in the same industry, the Fund will
be concentrated in the stocks of companies in
that industry. It is important that an
investor realize that the Fund's decision to
concentrate or not to concentrate at any
given time is not discretionary and will, in
all cases, be a direct result of the stocks
of the issuers that comprise the Index.
The Fund may invest in options and futures
contracts and lend securities to minimize the
gap in performance that normally exists
between any index fund and its index. This
gap occurs mainly because, unlike an index, a
fund incurs expenses and must keep a small
portion of its assets in cash to meet
redemptions and for other purposes. By using
options and futures, the Fund potentially can
offset a portion of the gap attributable to
its cash holdings. And any income realized
through securities lending may help reduce
the portion of the gap attributable to
expenses.
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*
________________(R) and the _______________ Index (R) are trademarks of
_________________, and have been licensed for use by the Fund. The Fund is not
sponsored, endorsed, sold or promoted by ______________, and _______________
makes no representation about the advisability of investing in the Fund.
The remainder of the Fund's assets, under
normal circumstances, may be invested in
securities representing other equity indexes,
such as the NASDAQ 100, or shares of
companies not represented in the Index.
Pending investment or to provide liquidity
for redemptions, the Fund may hold cash and
cash equivalents, such as money market
instruments, or invest in money market mutual
funds.
PRINCIPAL INVESTMENT MARKET RISK. Stocks fluctuate in price, often
RISKS based on factors unrelated to the issuers'
value. The value of your investment in the
Fund will fluctuate in response to movements
in the stock market and the activities of
individual portfolio companies. As a result,
you could lose money by investing in the
Fund, particularly if there is a sudden
decline in the share prices of the Fund's
holdings or an overall decline in the stock
market.
SPECIAL RISKS OF INVESTING IN COMPANIES
REPRESENTING THE INTERNET ECONOMY. Investing
in companies representing the Internet
Economy involves a high degree of risk not
normally associated with investments in more
seasoned companies. Some Internet Economy
companies are relatively young and
unseasoned, or offer innovative technologies
subject to uncertain market acceptance and
unpredictable competitive forces. Many stocks
of Internet Economy companies have risen in
value based on anticipation of future
earnings and company viability and are
currently operating at a loss. If these
future projections prove to be overly
optimistic, shares of these companies may
experience significant declines in market
value. As a result, the prices of the shares
of such companies may be very volatile.
There is no assurance that the Fund will
achieve its investment objective. The Index
and the Fund's investments may not
appreciate, and could depreciate, during the
time you are invested in the Fund, even if
you are a long-term investor.
RISKS OF INVESTING IN A LIMITED NUMBER OF
ISSUERS AND INDUSTRIES. The Fund is
non-diversified and may invest a greater
percentage of its assets in a particular
company compared with other funds. In
addition, to the extent the stocks of
companies that comprise the Index are
concentrated in one or more industries or
groups of industries that make up the
Internet Economy, the Fund's investments also
will be so concentrated. Greater risk and
increased volatility is associated with
investments in a single industry of the stock
market (as opposed to investments in a
broader range of industries). The value of
the Fund's shares may be especially sensitive
to factors and risks that specifically affect
such industry or company, and as a result,
the Fund's share price may fluctuate more
widely than the value of the shares of a
mutual fund that invests in a broader range
of industries and companies. The Index has a
large proportion of technology and
telecommunications stocks which may be more
volatile than other industries or groups of
industries of the market.
RISKS OF USING OPTIONS AND FUTURES AND
LENDING SECURITIES. Successful use of options
and futures is subject to the adviser's
ability to predict correctly movements in the
direction of the market. A relatively small
investment could have a large impact on the
Fund's performance. Lending portfolio
securities could subject the Fund to risk of
loss if the institution it has loaned the
securities to breaches its agreement with the
Fund.
<PAGE>
PERFORMANCE BAR CHART AND TABLE
Because the Fund is new, no performance returns are presented in this part of
this prospectus. Annual performance returns provide some indication of the risks
of investing in the Fund by showing changes in performance from year to year.
Comparison of Fund performance to an appropriate index indicates how the Fund's
average annual returns compare with those of a broad measure of market
performance.
FEES AND EXPENSES
If you purchase and hold shares of the Fund, you will pay certain fees and
expenses, which are described in the tables. Shareholder transaction fees are
paid from your account. Annual fund operating expenses are paid out of Fund
assets, and are reflected in the share price.
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Shareholder Fees (fees paid directly
from your account)
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Redemption Fee (as a % of 1.50%
amount redeemed)1
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Annual Fund Operating Expenses (fees
paid from Fund assets)
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Management Fee 0.50%
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Distribution (12b-1) Fee 0.25%
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Other Expenses2 0.29%
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Total Annual Fund
Operating Expenses2 1.04%
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Less Expense Reimbursement2 (0.04)%
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Net Operating Expenses2 1.00%
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1 The redemption fee is charged only when selling shares you have owned
for 90 days or less.
2 Other Expenses are based on estimated amounts for the current fiscal
year. The investment adviser has contractually agreed to reimburse the
Fund to the extent such Other Expenses exceed .25% of the Fund's
average daily net assets for the fiscal period ending July 31, 2001.
EXPENSE EXAMPLE
Use the example at the right to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. It illustrates the amount
of fees and expenses you would pay, assuming the following:
o $10,000 investment
o 5% annual return
o no changes in the Fund's operating expenses
o reinvestment of all dividends and distributions
o redemption at the end of each time period shown
Your actual costs may be higher or lower. The 1 Year figure in the example is
based on net operating expenses, and the 3 Years figure in the example is based
on net operating expenses for the first year and total annual fund operating
expenses thereafter, which does not reflect the reimbursement of a portion of
fund operating expenses described above.
1 3
Year Years
$___ $___
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<PAGE>
ADDITIONAL INFORMATION ON INVESTMENT STRATEGIES AND RISKS
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PRINCIPAL STRATEGIES
Under normal market conditions, the Fund invests at least 80% of its total
assets in the stocks of companies that comprise the _______ Index. That portion
of its assets is not actively managed; rather, the investment adviser simply
tries to match, before fees and expenses, the total return of the Index. The
Fund attempts to achieve, in both rising and falling markets, a correlation of
approximately __% between the capitalization-weighted total return of its
assets, before fees and expenses, and the Index. A 100% correlation would mean
the total return of the Fund's assets would increase and decrease exactly the
same as the Index. The Fund also may invest up to 20% of its total assets in the
stocks of companies not represented in the Index, securities representing other
equity indexes, or futures and options on stock index futures, and, to provide
liquidity for purposes such as to pay redemptions and fees, in money market
instruments.
The Fund generally is not managed according to traditional methods of "active"
investment management, which involve the buying and selling of securities based
upon economic, financial and market analysis and investment judgment. Instead,
with respect to at least 80% of its total assets, the Fund will be managed by
utilizing an "indexing" investment approach to determine which securities are to
be purchased or sold to replicate, to the extent feasible and before fees and
expenses, the investment characteristics of the Index.
The Fund may invest some assets in options and futures contracts. The Fund may
not invest in such contracts and options for purposes other than hedging if the
sum of the amount of initial margin deposits and premiums paid for unexpired
options with respect to such contracts, other than for bona fide hedging
purposes, exceeds 5% of the liquidation value of the Fund's assets, after taking
into account unrealized profits and unrealized losses on such contracts and
options.
PRINCIPAL RISKS
SPECIAL RISKS OF INVESTING IN COMPANIES REPRESENTING THE INTERNET ECONOMY.
Stocks of many companies in the Internet Economy involve a high degree of risk
not normally associated with the securities of more seasoned companies. As a
result, the prices of the stocks of Internet Economy companies may be very
volatile.
Internet Economy companies are concentrated in certain industry groups including
online retail, business-to-business, broadband communications, networking
equipment, telecommunications, wireless communications, hardware, software,
network security, and online entertainment. As a result, the companies in which
the Fund invests at any given time may represent a limited number of industries,
and the Fund's share price may be subject to greater volatility.
The Fund may have to sell stocks at a loss to fund shareholder redemptions.
Redemptions are more likely to occur when prices of Internet Economy company
stocks are declining, and their prices may fall more rapidly than those of other
securities.
TRACKING ERROR RISK. A variety of factors may interfere with the Fund's ability
to match its investment performance to the investment performance of the Index.
Like any index fund, the Fund will bear transaction costs to trade its portfolio
securities, and pay management fees and other expenses. It will be required to
keep a small amount of cash on hand for business operations. Also, the frequency
and size of shareholder purchases and redemptions of Fund shares will contribute
to tracking errors. The Fund generally gives the same weight to a given stock as
the Index does, but there are a variety of factors that may cause the weights of
stocks in the Fund to differ from those in the Index.
RISKS RELATING TO OPTIONS AND FUTURES. The risks related to the use of options
and futures contracts include: (i) when used for hedging purposes, the
correlation between movements in the market price of the Fund's investments
(held or intended for purchase) being hedged and in the price of the futures
contract or option may be imperfect; (ii) possible lack of a liquid secondary
market for closing out options or futures positions; and (iii) losses due to
unanticipated market movements.
OTHER RISKS
INTERNET AND OTHER INTERACTIVE FUND RISKS. Since the Fund is designed
specifically for on-line investors, an interruption in transmissions over the
Internet generally or a problem in the transmission of the MetaMarkets.com Web
site in particular could result in a delay or interruption in your ability to
access the MetaMarkets.com Web site, place purchase or sale orders with the Fund
or otherwise interact with the Fund.
Since the Fund's investment adviser intends to post updates of the Fund's
holdings in real time, to the extent practicable, there is a risk that investors
may use such information to the detriment of the Fund. The Fund's Board has
considered this and determined that the investment adviser's use of the Web site
is nonetheless in the best interests of the Fund and its shareholders. The Board
will monitor the use of the Web site to determine that it continues to be in the
best interests of the Fund and its shareholders.
FUND MANAGEMENT
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INVESTMENT ADVISER
MetaMarkets Investments LLC, located at 444 DeHaro Street, Suite 220, San
Francisco, California 94107, serves as the Fund's investment adviser. The
investment adviser was formed in August 1999 and is the investment adviser to
OpenFund and MetaMarkets IPO & New Era Fund. Donald L. Luskin, the investment
adviser's President and Chief Executive Officer, was formerly the Chief
Executive Officer of Barclays Global Mutual Funds and the Vice Chairman of
Barclays Global Investors, one of the world's largest investment management
organizations. The investment adviser is responsible for making investment
decisions for the Fund, placing purchase and sale orders and providing research,
statistical analysis and continuous supervision of the Fund's investment
portfolio. Investment decisions for the Fund are made by a team of the
investment adviser's portfolio managers; the team collaborates in making
portfolio recommendations and no individual is primarily responsible for making
recommendations to the team. The Fund has agreed to pay the investment adviser
an investment advisory fee at the annual rate of 0.50% of the Fund's average
daily net assets.
The Fund's investment adviser intends to operate the Fund as an interactive
mutual fund integrating real time investor participation with the investment
process. The Fund intends to post on its Web site updates of its holdings in
real time, to the extent practicable. In addition, part of the investment
adviser's Web site supports communication technologies such as discussion
boards, chat rooms, webcams, and on-line polls through which Fund shareholders
and others may interact with the Fund's portfolio managers, celebrated business
and technology Think Tank visionaries, and each other to share ideas about the
Fund, stocks, market conditions and other related topics.
The Fund and the Fund's investment adviser each have adopted a code of ethics
that permits its personnel, subject to such code, to invest in securities,
including securities that may be purchased or held by the Fund. The investment
adviser's code of ethics restricts the personal securities transactions of its
employees, and requires portfolio managers and other investment personnel to
comply with the code's preclearance and disclosure procedures. Its primary
purpose is to ensure that personal trading by its employees does not
disadvantage any fund advised by the investment adviser.
SHAREHOLDER INFORMATION
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PRICING OF FUND SHARES
The Fund's per share net asset value (NAV) is calculated by adding the total
value of the Fund's investments and other assets, subtracting its liabilities
and then dividing that figure by the number of outstanding shares.
The Fund's NAV is determined and its shares are priced at the close of regular
trading on the New York Stock Exchange, normally at 4:00 p.m. Eastern time, on
days the Exchange is open, except Columbus Day and Veterans' Day. The New York
Stock Exchange is closed on weekends, national holidays and Good Friday. On days
that the New York Stock Exchange closes early, the Fund's shares will be priced
at the time the Exchange closes. Foreign securities held by the Fund may trade
on days when the Fund does not calculate its NAV and thus affect the Fund's NAV
on days when investors will not be able to purchase or redeem Fund shares.
Your order for purchase, sale or exchange of shares is priced at the next NAV
calculated after the Fund receives your completed order form. A purchase order
is complete when the Fund receives your wire, check or other form of payment.
The Fund's investments are valued each business day generally by using available
market quotations or, if market quotations are not available, at fair value
determined by the Fund's Board or in accordance with procedures approved by the
Board. For further information regarding the methods employed in valuing the
Fund's investments, see the Statement of Additional Information (SAI).
DISTRIBUTION PLAN
The Fund's 12b-1 fees compensate the Fund's distributor and other dealers and
investment representatives for services and expenses relating to the sale and
distribution of the Fund's shares. Because 12b-1 fees are paid from Fund assets
on an ongoing basis, over time they will increase the cost of your investment
and may cost you more than paying other types of sales charges.
HOW TO BUY AND SELL SHARES
GENERAL
The Fund is designed specifically for on-line investors. You can buy Fund shares
directly from the Fund or through selected on-line brokers. The Fund may be
offered through exclusive distribution agreements with a limited number of firms
for a period of time. You can access the Fund at the MetaMarkets.com Web site on
the Internet. By clicking one of the Fund order icons, you can quickly and
easily place a purchase or sale order for shares. You will be prompted to enter
your trading password whenever you perform a transaction so that the Fund can be
sure each purchase or sale is secure. For your own protection, only you or your
co-account holder(s) should place orders through your Fund account. When you
purchase shares, you will be asked to: (1) affirm your consent to receive all
Fund documentation electronically, (2) provide your e-mail address and (3)
affirm that you have read the Prospectus. The Fund's current Prospectus will be
readily available for viewing and printing on the Web site.
To become a Fund shareholder, you will need to open an account and consent to
receive all shareholder information about the Fund electronically. The Fund may
deliver paper-based shareholder information in certain circumstances at no extra
cost to the investor. If you call or e-mail the Fund to request paper-based
shareholder information, or if you revoke your consent to receive all
shareholder information electronically, the Fund will deliver such information
to you and you may be charged a transaction fee of up to $12 to cover the costs
of printing, shipping and handling (a fee will not be charged for delivery of
confirmations or statements). Shareholder information includes prospectuses,
annual and semi-annual reports, proxy materials, confirmations and statements.
PURCHASING AND ADDING TO YOUR SHARES
MINIMUM INVESTMENT
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ACCOUNT TYPE INITIAL SUBSEQUENT
Regular $2,500 $ 250
(non-retirement)
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Retirement (IRA) $1,000 $250
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Automatic
Investment Plan $1,000 $250
To make your initial investment, follow the instructions on the account
application at the end of this Prospectus. To make subsequent investments, click
the Fund Purchase Order icon and follow the instructions. The Fund offers an
Automatic Investment Plan and Directed Dividend Option, which are convenient
ways of buying Fund shares. These also are described on the account application
and in the SAI.
All purchases must be in U.S. dollars. A fee will be charged for any checks that
do not clear. Third-party checks not originally made payable to the order of the
investor are not accepted.
The Fund may waive the minimum purchase requirements or reject any purchase
order in whole or in part.
SELLING YOUR SHARES
You may sell (i.e., redeem) your shares at any time. Your sales price will be
the next NAV computed after your sell order is received by the Fund, its
transfer agent, or your investment representative. Normally you will receive
your proceeds within a week after your request is received. For Fund shares held
90 days or less, the Fund will deduct a redemption fee of 1.50% of the NAV of
such shares redeemed or exchanged. No redemption fee will be charged on the sale
or exchange of Fund shares held for more than 90 days, or shares representing
the reinvestment of dividends and capital gains distibutions. The fee will be
retained by the Fund and used primarily to offset the transaction costs imposed
on the Fund and its shareholders. For purposes of calculating the 90-day holding
period, the Fund will employ the "first in, first out" method, which assumes
that the shares redeemed or exchanged are the ones you have held the longest or
acquired through the reinvestment of dividends or distributions. The redemption
fee may be waived, modified or discontinued at any time, or from time to time.
To sell Fund shares, click the Fund Sell Order icon and follow the instructions.
o VERIFYING TELEPHONE REDEMPTIONS
The Fund will make efforts to insure that telephone redemptions are only made by
authorized shareholders. All telephone calls are recorded for your protection
and you will be asked for information to verify your identity. Given these
precautions, unless you have specifically indicated on your application that you
do not want the telephone redemption feature, you may be responsible for any
fraudulent telephone orders. If appropriate precautions have not been taken, the
transfer agent may be liable for losses due to unauthorized transactions.
o REDEMPTIONS WITHIN 15 DAYS OF INITIAL INVESTMENT
Before selling recently purchased shares, please note that if your initial
investment was by check, the Fund may delay sending you the proceeds until the
check has cleared (which may take up to 15 days from the date of purchase). You
can avoid this delay by purchasing shares with a certified check.
o DELAYING PAYMENT OF REDEMPTION PROCEEDS
Payment for shares may be delayed when permitted by the SEC in order to protect
remaining shareholders.
o REDEMPTION IN KIND
The Fund reserves the right to make payment in securities rather than cash,
known as "redemption in kind." This could occur under extraordinary
circumstances, such as a very large redemption that could affect Fund operations
(for example, more than 1% of the Fund's net assets). Redemption in kind would
consist of securities equal in market value to your shares. When you convert
these securities to cash, you might have to pay brokerage charges.
o CLOSING OF SMALL ACCOUNTS
If your account falls below $500, the Fund may ask you to increase your balance.
If it is still below $500 after 30 days, the Fund may close your account and
send you the proceeds at the current NAV upon redemption.
EXCHANGING YOUR SHARES
You can exchange your Fund shares for shares of another fund in the
MetaMarkets.com family of funds. The Fund and the MetaMarkets IPO & New Era
Fund each charge a redemption fee equal to 1.50% of the NAV of Fund shares
exchanged if you have owned such shares for 90 days or less.
You must exchange shares worth $500 or more and meet the minimum investment
requirements for the fund into which you are exchanging. Exchanges from one fund
to another are taxable.
To exchange your Fund shares, click the Fund Exchanges icon and follow the
instructions. Be sure to read the current prospectus for any fund into which you
are exchanging before investing.
IMPORTANT INFORMATION ABOUT EXCHANGES. If Fund shares are purchased by check,
the shares cannot be exchanged until your check has cleared. This could take up
to 15 days from the date of purchase. The Fund may reject an exchange request
from a shareholder who has made more than eight exchanges between investment
portfolios offered by Fund management in a year, or more than four exchanges in
a calendar quarter. Although unlikely, the Fund may reject any exchanges or,
upon 60-days' notice to shareholders, change or terminate the exchange
privilege. The exchange privilege is available only in states where new Fund
shares may be sold. The registration and tax identification numbers of the two
accounts must be identical.
INTERACTIVE FUND
The discussion boards, chat rooms and interactive features of the Fund,
including the display of Fund holdings, are presented for information purposes
only and may be discontinued at any time. MetaMarkets.com Funds also may
terminate the ability to buy and sell Fund shares on its Web site at any time,
in which case you may continue to buy and sell Fund shares pursuant to the
alternative procedures described in the "How to Buy, Sell and Exchange Shares"
pamphlet attached to this Prospectus. Prices and other data posted during the
day on the MetaMarkets.com Web site will be based on sources believed reliable,
but whose accuracy cannot be assured.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Any investment in the Fund typically involves several tax considerations. The
information below is meant as a general summary for U.S. citizens and residents.
Because each person's tax situation is different, you should consult your tax
adviser about the tax implications of your investment in the Fund.
All dividends and distributions will be automatically reinvested in Fund shares.
The Fund usually pays its shareholders dividends from its net investment income
and distributes any capital gains annually.
Dividends paid by the Fund are taxable to U.S. shareholders as ordinary income
(unless your investment is in an IRA or tax-advantaged account). Except for
tax-advantaged accounts, any sale or exchange of Fund shares may generate a tax
liability. Of course, withdrawals or distributions from tax-advantage accounts
may be taxable when received.
Dividends are taxable in the year in which they are paid, even if they appear on
your account statement the following year. Dividends and distributions are
treated in the same manner for federal income tax purposes whether you receive
them in cash or in additional shares. High portfolio turnover and more volatile
markets can result in taxable distributions to shareholders, regardless of
whether their shares increased in value.
DISTRIBUTIONS ARE MADE ON A PER SHARE BASIS REGARDLESS OF HOW LONG YOU HAVE
OWNED YOUR SHARES. THEREFORE, IF YOU INVEST SHORTLY BEFORE THE DISTRIBUTION
DATE, SOME OF YOUR INVESTMENT WILL BE RETURNED TO YOU IN THE FORM OF A
DISTRIBUTION.
You will be notified in January each year about the federal tax status of
distributions made by the Fund. Depending on your residence for tax purposes,
distributions also may be subject to state and local taxes, including
withholding taxes. Foreign shareholders may be subject to special withholding
requirements. There is a penalty on certain pre-retirement distributions from
retirement accounts.
<PAGE>
For more information about the Fund, the following documents are available free
upon request:
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Fund, including its
operations and investment policies. It is incorporated by reference and is
legally considered a part of this Prospectus.
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YOU CAN GET FREE COPIES OF THE SAI OR REQUEST OTHER INFORMATION AND DISCUSS YOUR
QUESTIONS ABOUT THE FUND ON THE FUND'S INTERNET SITE OR BY E-MAIL:
METAMARKETS.COM FUNDS
INTERNET: HTTP://WWW.METAMARKETS.COM
TELEPHONE: 1-877-METAMKT (1-877-638-2658)
E-MAIL: [email protected]
SHAREHOLDERS WILL BE ALERTED BY E-MAIL WHEN A PROSPECTUS AMENDMENT, ANNUAL OR
SEMI-ANNUAL REPORT, OR PROXY MATERIALS ARE AVAILABLE.
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Certain instructions on how to buy and sell Fund shares are provided in the "How
to Buy, Sell and Exchange Shares" pamphlet attached to this Prospectus.
You can review information about the Fund, including the Fund's SAI, at the
Public Reference Room of the Securities and Exchange Commission in Washington,
D.C. (for information, call 1-202-942-8090). You can get text-only copies:
o After paying a duplicating fee, by writing the Public Reference Section of
the Commission, Washington, D.C. 20549-0102, or by e-mail request to
[email protected].
o Free from the Commission's Web site at http://www.sec.gov.
MetaMarkets Index Fund
a series of MetaMarkets.com Funds
Investment Company Act file no. 811-09351.
Distributed by BISYS Fund Services Limited Partnership
<PAGE>
HOW TO BUY, SELL AND EXCHANGE SHARES
INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT
BY INTERNET
Initial Investment:
1. Carefully read and complete the account application which you can
download from the MetaMarkets.com Web site or obtain by calling
1-877-METAMKT, and follow the instructions.
2. Make check, bank draft or money order payable to "MetaMarkets.com
Funds, MetaMarkets Index Fund."
3. Mail your payment and a signed copy of the
completed account application to: MetaMarkets.com Funds
c/o BISYS Fund Services
P. O. Box 182208
Columbus, Ohio 43218-2208
Subsequent Investment:
1. Provide the following information:
o Fund name: ____________________
o Amount invested: ____________________
o Account name: ____________________
o Account number: ____________________
2. Include your account number on your
check or money order and mail it to: MetaMarkets.com Funds
c/o BISYS Fund Services
P. O. Box 182208
Columbus, Ohio 43218-2208
or, for Overnight Service, send it to:
MetaMarkets.com Funds
c/o BISYS Fund Services
Attn: T.A. Operations
3435 Stelzer Road
Columbus, Ohio 43219
ELECTRONIC PAYMENTS
You may pay electronically if your U.S. bank participates in the Automated
Clearing House (ACH).
To establish an electronic purchase option, complete the account application as
directed, or call 1-877-638-2658. Your account can generally be set up for
electronic purchases within 15 days.
Call 1-877-638-2658 to arrange a transfer from your bank account.
<PAGE>
WIRE TRANSFER PAYMENTS
To pay by wire transfer, complete the account application as directed and
request an account number by calling 1-877-638-2658. Follow the instructions
below after receiving your account number.
Instruct your bank to wire transfer your investment to:
Huntington National Bank
Routing Number: ABA # 044000024
DDA#01899622494
Include:
Your fund number (_______)
Your account number
After instructing your bank to wire the funds, call 1-877-638-2658 to advise us
of the amount being transferred and the name of your bank.
ELECTRONIC VS. WIRE TRANSFER
Wire transfers allow financial
institutions to send funds to each
other, almost instantaneously. Your
bank may change a wire transfer fee.
With an electronic purchase or sale,
the transaction is made through the
Automated Clearing House (ACH) and
may take up to eight days to clear.
There is generally no fee for ACH
transactions.
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You can add to your account by using the convenient options described in the
account application. For more information about these options, also see the SAI.
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INSTRUCTIONS FOR SELLING SHARES
By Internet Provide the following information:
o your Fund and account number: _______________
o amount you wish to sell: _______________
o address where your check should be sent or where your funds
should be wired or electronically transferred: ___________
--------------------------------------------------------------------------------
By Telephone Call 1-877-638-2658 with instructions as to how you wish to (UNLESS
YOU HAVE DECLINED receive your funds (mail, wire, electronic transfer).
TELEPHONE SALES PRIVILEGES)
TO RECEIVE YOUR REDEMPTION PROCEEDS BY WIRE TRANSFER, you must indicate this
option on your application. Your payment will be wired to your bank ordinarily
on the next business day. The Fund and your bank may charge a wire transfer fee.
TO RECEIVE YOUR REDEMPTION PROCEEDS ELECTRONICALLY, your bank must participate
in the Automated Clearing House (ACH) and must be a U.S. bank. Your payment will
be credited ordinarily within seven days. Your bank may charge for this service.
<PAGE>
INSTRUCTIONS FOR EXCHANGING SHARES
To exchange your Fund shares, provide the following information:
o Your name and telephone number: _______________
o The exact name on your account and account number: _______________
o Taxpayer identification number (usually your Social Security number):____
o Dollar value or number of shares to be exchanged: _______________
o The name of the Fund from which the exchange is to be made: ________
o The name of the Fund into which the exchange is being made: _________
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METAMARKETS.COM FUNDS
MetaMarkets Index Fund
STATEMENT OF ADDITIONAL INFORMATION
____________, 2001
--------------------------------------------------------------------------------
This Statement of Additional Information ("SAI"), which is not a
prospectus, supplements and should be read in conjunction with the current
Prospectus for MetaMarkets Index Fund (the "Fund") of MetaMarkets.com Funds (the
"Company"), dated ____________, 2001, as it may be revised from time to time. To
obtain a copy of the Prospectus, please access the Company's Web site at
http://www.MetaMarkets.com, go to the Fund Prospectus and follow the
instructions, or call toll free 1-877-METAMKT (1-877-638-2658). When investing
in the Fund, you will be asked to consent to receive all information about the
Fund electronically.
TABLE OF CONTENTS
PAGE
Description of the Company and the Fund.................................B-2
Management of the Company...............................................B-16
Management Arrangements.................................................B-20
Purchase and Redemption of Shares.......................................B-23
Determination of Net Asset Value........................................B-24
Shareholder Services and Privileges.....................................B-25
Performance Information.................................................B-26
Dividends, Distribution and Taxes.......................................B-26
Portfolio Transactions..................................................B-28
Information About the Company and the Fund..............................B-29
Counsel and Independent Auditors........................................B-30
<PAGE>
DESCRIPTION OF THE COMPANY AND THE FUND
GENERAL
The Company is a Massachusetts business trust that was formed on May
21, 1999. The Fund is a separate portfolio of the Company, an open-end
management investment company, known as a mutual fund.
MetaMarkets Investments LLC (the "Adviser") serves as the Fund's
investment adviser.
BISYS Fund Services Ohio, Inc. (the "Administrator") serves as the
Fund's administrator. BISYS Fund Services Limited Partnership (the
"Distributor"), an affiliate of the Administrator, serves as the Fund's
distributor.
INDEX FUNDS
The Fund seeks to achieve its objective by investing at least 80% of
its assets in the same stocks and in substantially the same percentages as the
stocks that comprise the ______ Index. The net asset value of index funds and
funds which are not actively managed, such as the Fund, may be
disproportionately affected by the following risks: short- and long-term changes
in the characteristics of the companies whose securities make up the index;
modifications in the criteria for companies selected to make up the index;
suspension or termination of the operation of the index; and the activities of
issuers whose market capitalization represents a disproportionate amount of the
total market capitalization of the index.
Inclusion of a security in the ___ Index in no way implies an opinion
by the sponsor of the Index as to its attractiveness as an investment. In the
future, subject to prior notice to the Fund's shareholders, the Fund may select
a different index if such a standard of comparison is deemed to be more
representative of the performance of the Internet Economy. The Fund is not
sponsored, endorsed, sold or promoted by the sponsor of the Index.
CERTAIN PORTFOLIO SECURITIES
The following information supplements and should be read in
conjunction with the Fund's Prospectus. The portfolio securities described
below are not part of the Fund's principal investment strategies.
CONVERTIBLE SECURITIES. While the Fund invests principally in common
stocks, from time to time it may invest in convertible securities. Convertible
securities may be converted at either a stated price or stated rate into
underlying shares of common stock and, therefore, are deemed to be equity
securities for purposes of the Fund's management policies. Convertible
securities have characteristics similar to both fixed-income and equity
securities. Convertible securities generally are subordinated to other similar
but non-convertible securities of the same issuer, although convertible bonds,
as corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock, of the
same issuer. Because of the subordination feature, however, convertible
securities typically have lower ratings than similar non-convertible securities.
Although to a lesser extent than with fixed-income securities, the
market value of convertible securities tends to decline as interest rates
increase and, conversely, tends to increase as interest rates decline. In
addition, because of the conversion feature, the market value of convertible
securities tends to vary with fluctuations in the market value of the underlying
common stock. A unique feature of convertible securities is that 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 prices of the convertible
securities tend to rise as a reflection of the value of the underlying common
stock. While no securities investments are without risk, investments in
convertible securities generally entail less risk than investments in common
stock of the same issuer.
Convertible securities provide for a stable stream of income with
generally higher yields than common stocks, but there can be no assurance of
current income because the issuers of the convertible securities may default on
their obligations. A convertible security, in addition to providing fixed
income, offers the potential for capital appreciation through the conversion
feature, which enables the holder to benefit from increases in the market price
of the underlying common stock. There can be no assurance of capital
appreciation, however, because securities prices fluctuate. Convertible
securities, however, generally offer lower interest or dividend yields than
non-convertible securities of similar quality because of the potential for
capital appreciation.
WARRANTS. A warrant is an instrument issued by a corporation which
gives the holder the right to subscribe to a specified amount of the
corporation's capital stock at a set price for a specified period of time. The
prices of warrants do not necessarily move parallel to the prices of the
underlying common stock. Warrants have no voting rights, receive no dividends
and have no rights with respect to the assets of the issuer. If a warrant is not
exercised within the specified time period, it becomes worthless.
INVESTMENT COMPANIES. The Fund may invest in securities issued by
other investment companies, including participations in equity indices such as
Standard & Poor's Depositary Receipts and Nasdaq-100 Index Tracking Shares
described below. The Fund also may invest its cash reserves in securities issued
by money market mutual funds. Under the Investment Company Act of 1940, as
amended (the "1940 Act"), the Fund's investment in such securities, subject to
certain exceptions, currently is limited to (i) 3% of the total voting stock of
any one investment company, (ii) 5% of the Fund's total assets with respect to
any one investment company and (iii) 10% of the Fund's total assets in the
aggregate. Investments in the securities of other investment companies may
involve duplication of advisory fees and certain other expenses.
DEPOSITARY RECEIPTS. The Fund may invest in the securities of foreign
issuers in the form of American Depositary Receipts and American Depositary
Shares (collectively, "ADRs") and Global Depositary Receipts and Global
Depositary Shares (collectively, "GDRs") and other forms of depositary receipts.
These securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are receipts typically issued
by a United States bank or trust company which evidence ownership of underlying
securities issued by a foreign corporation. GDRs are receipts issued outside the
United States typically by non-United States banks and trust companies that
evidence ownership of either foreign or domestic securities. Generally, ADRs in
registered form are designed for use in the United States securities markets and
GDRs in bearer form are designed for use outside the United States.
These securities may be purchased through "sponsored" or "unsponsored"
facilities. A sponsored facility is established jointly by the issuer of the
underlying security and a depositary, whereas a depositary may establish an
unsponsored facility without participation by the issuer of the deposited
security. Holders of unsponsored depositary receipts generally bear all the
costs of such facilities and the depositary 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.
SPDRs, DIAMONDS AND NASDAQ-100 SHARES. The Fund may invest in Standard
& Poor's Depositary Receipts ("SPDRs"). SPDRs are units of beneficial interest
in an investment trust sponsored by a wholly-owned subsidiary of the American
Stock Exchange, Inc. (the "Exchange") which represent proportionate undivided
interests in a portfolio of securities consisting of substantially all of the
common stocks, in substantially the same weighting, as the component stocks of
the Standard & Poor's 500 Stock Index (the "S&P 500 Index"). SPDRs are listed on
the Exchange and traded in the secondary market on a per-SPDR basis.
The Fund also may invest in DIAMONDS. DIAMONDS are units of beneficial
interest in an investment trust representing proportionate undivided interests
in a portfolio of securities consisting of all the component common stocks of
the Dow Jones Industrial Average (the "DJIA"). DIAMONDS are listed on the
Exchange and may be traded in the secondary market on a per-DIAMONDS basis.
Nasdaq-100 Index Tracking Stock (also referred to as "Nasdaq-100
Shares") represents undivided ownership interests in a portfolio of stocks which
consists substantially of all of the securities, in substantially the same
weighting, as the component securities of the Nasdaq-100 Index, and is intended
to provide investment results that, before expenses, generally correspond to the
price and yield performance of such Index. Nasdaq-100 Shares are listed for
trading on the Exchange and are bought and sold in the secondary market like
ordinary shares of stock at any time during the trading day.
SPDRs are designed to provide investment results that generally
correspond to the price and yield performance of the component common stocks of
the S&P 500 Index. DIAMONDS are designed to provide investors with investment
results that generally correspond to the price and yield performance of the
component common stocks of the DJIA. Nasdaq-100 Shares are designed to provide
investment results that generally correspond to the price and yield performance
of the component common stocks of the Nasdaq-100 Index. The values of SPDRs,
DIAMONDS and Nasdaq-100 Shares are subject to change as the values of their
respective component common stocks fluctuate according to the volatility of the
market. Investments in SPDRs, DIAMONDS and Nasdaq-100 Shares involve certain
inherent risks generally associated with investments in a broadly based
portfolio of common stocks, including the risk that the general level of stock
prices may decline, thereby adversely affecting the value of each unit of SPDRs,
DIAMONDS and/or Nasdaq-100 Shares invested in by the Fund. Moreover, the Fund's
investment in SPDRs, DIAMONDS and/or Nasdaq-100 Shares may not exactly match the
performance of a direct investment in the respective indices to which they are
intended to correspond. Additionally, the respective investment trusts may not
fully replicate the performance of their respective benchmark indices due to the
temporary unavailability of certain index securities in the secondary market or
due to other extraordinary circumstances, such as discrepancies between each of
the investment trusts and the indices with respect to the weighting of
securities or the number of, for example, larger capitalized stocks held by an
index and each of the investment trusts.
ILLIQUID SECURITIES. The Fund may invest up to 15% of the value of its
net assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Fund's investment objective.
These securities may include securities that are not readily marketable, such as
securities that are subject to legal or contractual restrictions on resale,
repurchase agreements providing for settlement in more than seven days after
notice, and certain privately negotiated, non-exchange traded options and
securities used to cover such options and certain other derivatives. As to these
securities, the Fund is subject to a risk that should the Fund desire to sell
them when a ready buyer is not available at a price the Fund deems
representative of their value, the value of the Fund's net assets could be
adversely affected.
INVESTMENT TECHNIQUES
The following information supplements and should be read in
conjunction with the Fund's Prospectus.
BORROWING MONEY. The Fund is permitted to borrow to the extent
permitted under the 1940 Act, which permits an investment company to borrow an
amount up to 33-1/3% of the value of its total assets. The Fund currently
intends to borrow money only for temporary or emergency (not leveraging)
purposes in an amount up to 15% of the value of its total assets (including the
amount borrowed) at the time the borrowing is made. While such borrowings exceed
5% of the value of the Fund's total assets, the Fund will not make any
additional investments.
DERIVATIVES. The Fund may invest in, or enter into, derivatives, such
as options and futures, for a variety of reasons, including to hedge certain
market risks, to provide a substitute for purchasing or selling particular
securities or to increase potential income gain. Derivatives may provide a
cheaper, quicker or more specifically focused way for the Fund to invest than
"traditional" securities would. Futures and options on the __Index are not
currently available and may not be liquid if they become available.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular derivative and the
portfolio as a whole. Derivatives permit the Fund to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed in much the same way as the Fund can increase or decrease the level of
risk, or change the character of the risk, of its portfolio by making
investments in specific securities.
However, derivatives may entail investment exposures that are greater
than their cost would suggest, meaning that a small investment in derivatives
could have a large potential impact on the Fund's performance.
If the Fund invests in derivatives at inopportune times or judges
market conditions incorrectly, such investments may lower the Fund's return or
result in a loss. The Fund also could experience losses if its derivatives were
poorly correlated with its other investments, or if the Fund were unable to
liquidate its position because of an illiquid secondary market. The market for
many derivatives is, or suddenly can become, illiquid. Changes in liquidity may
result in significant, rapid and unpredictable changes in the market or prices
for derivatives.
Although neither the Company nor the Fund will be a commodity pool,
certain derivatives subject the Fund to the rules of the Commodity Futures
Trading Commission which limit the extent to which the Fund can invest in such
derivatives. The Fund may invest in futures contracts and options with respect
thereto for hedging purposes without limit. However, the Fund may not invest in
such contracts and options for other purposes if the sum of the amount of
initial margin deposits and premiums paid for unexpired options with respect to
such contracts, other than for bona fide hedging purposes, exceeds 5% of the
liquidation value of the Fund's assets, after taking into account unrealized
profits and unrealized losses on such contracts and options; provided, however,
that in the case of an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in calculating the 5% limitation.
The Fund may purchase call and put options and write (i.e., sell)
covered call and put option contracts. When required by the Securities and
Exchange Commission (the "SEC"), the Fund will segregate permissible liquid
assets to cover its obligations relating to its purchase of derivatives. To
maintain this required cover, the Fund may have to sell portfolio securities at
disadvantageous prices or times since it may not be possible to liquidate a
derivative position at a reasonable price.
Derivatives may be purchased on established exchanges or through
privately negotiated transactions referred to as over-the-counter derivatives.
Exchange-traded derivatives generally are guaranteed by the clearing agency
which is the issuer or counterparty to such derivatives. This guarantee usually
is supported by a daily variation margin payment system operated by the clearing
agency in order to reduce overall credit risk. As a result, unless the clearing
agency defaults, there is relatively little counterparty credit risk associated
with derivatives purchased on an exchange. By contrast, no clearing agency
guarantees over-the-counter derivatives. Therefore, each party to an
over-the-counter derivative bears the risk that the counterparty will default.
Accordingly, the Adviser will consider the creditworthiness of counterparties to
over-the-counter derivatives in the same manner as it would review the credit
quality of a security to be purchased by the Fund. Over-the-counter derivatives
are less liquid than exchange-traded derivatives since the other party to the
transaction may be the only investor with sufficient understanding of the
derivative to be interested in bidding for it.
FUTURES TRANSACTIONS--IN GENERAL. The Fund may enter into futures contracts in
U.S. domestic markets. Engaging in these transactions involves risk of loss to
the Fund which could adversely affect the value of the Fund's net assets.
Although the Fund intends to purchase or sell futures contracts only if there is
an active market for such contracts, no assurance can be given that a liquid
market will exist for any particular contract at any particular time. Many
futures exchanges and boards of trade limit the amount of fluctuation permitted
in futures contract prices during a single trading day. Once the daily limit has
been reached in a particular contract, no trades may be made that day at a price
beyond that limit or trading may be suspended for specified periods during the
trading day. Futures contract prices could move to the limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of futures positions and potentially subjecting the Fund to
substantial losses.
Successful use of futures by the Fund also is subject to the Adviser's
ability to predict correctly movements in the direction of the relevant market
and, to the extent the transaction is entered into for hedging purposes, to
ascertain the appropriate correlation between the transaction being hedged and
the price movements of the futures contract. For example, if the Fund uses
futures to hedge against the possibility of a decline in the market value of
securities held in its portfolio and the prices of such securities instead
increase, the Fund will lose part or all of the benefit of the increased value
of securities which it has hedged because it will have offsetting losses in its
futures positions. Furthermore, if in such circumstances the Fund has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements. The Fund may have to sell such securities at a time when it may be
disadvantageous to do so.
Pursuant to regulations and/or published positions of the SEC, the
Fund may be required to segregate permissible liquid assets to cover its
obligations relating to its transactions in derivatives in an amount generally
equal to the value of the underlying securities. To maintain this required
cover, the Fund may have to sell portfolio securities at disadvantageous prices
or times since it may not be possible to liquidate a derivative position at a
reasonable price. The segregation of such assets will have the effect of
limiting the Fund's ability otherwise to invest those assets.
SPECIFIC FUTURES TRANSACTIONS. The Fund may purchase and sell stock index
futures contracts. A stock index future obligates the Fund to pay or receive an
amount of cash equal to a fixed dollar amount specified in the futures contract
multiplied by the difference between the settlement price of the contract on the
contract's last trading day and the value of the index based on the stock prices
of the securities that comprise it at the opening of trading in such securities
on the next business day.
OPTIONS--IN GENERAL. The Fund may purchase and write (i.e., sell) call or put
options with respect to specific securities. A call option gives the purchaser
of the option the right to buy, and obligates the writer to sell, the underlying
security or securities at the exercise price at any time during the option
period, or at a specific date. Conversely, a put option gives the purchaser of
the option the right to sell, and obligates the writer to buy, the underlying
security or securities at the exercise price at any time during the option
period, or at a specific date.
A covered call option written by the Fund is a call option with
respect to which the Fund owns the underlying security or otherwise covers the
transaction by segregating cash or liquid securities. A put option written by
the Fund is covered when, among other things, the Fund segregates cash or liquid
securities having a value equal to or greater than the exercise price of the
option to fulfill the obligation undertaken. The principal reason for writing
covered call and put options is to realize, through the receipt of premiums, a
greater return than would be realized on the underlying securities alone. The
Fund receives a premium from writing covered call or put options which it
retains whether or not the option is exercised.
There is no assurance that sufficient trading interest to create a
liquid secondary market on a securities exchange will exist for any particular
option or at any particular time, and for some options no such secondary market
may exist. A liquid secondary market in an option may cease to exist for a
variety of reasons. In the past, for example, higher than anticipated trading
activity or order flow, or other unforeseen events, at times have rendered
certain of the clearing facilities inadequate and resulted in the institution of
special procedures, such as trading rotations, restrictions on certain types of
orders or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such event, it might
not be possible to effect closing transactions in particular options. If, as a
covered call option writer, the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise or it otherwise covers its position.
SPECIFIC OPTIONS TRANSACTIONS. The Fund may purchase and sell call and put
options in respect of specific securities (or groups or "baskets" of specific
securities) or stock indices listed on national securities exchanges or traded
in the over-the-counter market. An option on a stock index is similar to an
option in respect of specific securities, except that settlement does not occur
by delivery of the securities comprising the index. Instead, the option holder
receives an amount of cash if the closing level of the stock index upon which
the option is based is greater than, in the case of a call, or less than, in the
case of a put, the exercise price of the option. Thus, the effectiveness of
purchasing or writing stock index options will depend upon price movements in
the level of the index rather than the price of a particular stock.
Successful use by the Fund of options will be subject to the Adviser's
ability to predict correctly movements in the prices of individual stocks, the
stock market generally, or interest rates. To the extent such predictions are
incorrect, the Fund may incur losses.
SWAP AGREEMENTS. The Fund may enter into swap agreements in an attempt
to obtain a particular return when it is considered desirable to do so, possibly
at a lower cost than if the Fund had invested directly in the asset that yielded
the desired return. Swap agreements are two-party contracts entered into
primarily by institutional investors for periods ranging from a few weeks to
more than a year. In a standard swap transaction, two parties agree to exchange
the returns (or differentials in rates of return) earned or realized on
particular predetermined investments or instruments, which may be adjusted for
an interest factor. The gross returns to be exchanged or "swapped" between the
parties are generally calculated with respect to a "notional amount," i.e., the
return on or increase in value of a particular dollar amount invested at a
particular interest rate, or in a "basket" of securities, such as those
representing a particular index.
The Fund may purchase cash-settled options on equity index swaps in
pursuit of its investment objective. Equity index swaps involve the exchange by
the Fund with another party of cash flows based upon the performance of an index
or a portion of an index of securities which usually includes dividends. A
cash-settled option on a swap gives the purchaser the right, but not the
obligation, in return for the premium paid, to receive an amount of cash equal
to the value of the underlying swap as of the exercise date. These options
typically are purchased in privately negotiated transactions from financial
institutions, including securities brokerage firms.
Most swap agreements entered into by the Fund would calculate the
obligations of the parties to the agreement on a "net basis." Consequently, the
Fund's current obligations (or rights) under a swap agreement generally will be
equal only to the net amount to be paid or received under the agreement based on
the relative values of the positions held by each party to the agreement (the
"net amount"). The risk of loss with respect to swaps is limited to the net
amount of interest payments that the Fund is contractually obligated to make. If
the other party to a swap defaults, the Fund's risk of loss consists of the net
amount of payments that the Fund contractually is entitled to receive.
FUTURE DEVELOPMENTS. The Fund may take advantage of opportunities in
options and futures contracts and options on futures contracts and any other
derivatives which are not presently contemplated for use by the Fund or which
are not currently available but which may be developed, to the extent such
opportunities are both consistent with the Fund's investment objective and
legally permissible for the Fund. Before entering into such transactions or
making any such investment, the Fund will provide appropriate disclosure in its
Prospectus or Statement of Additional Information.
FORWARD COMMITMENTS. The Fund may purchase securities on a forward
commitment or when-issued basis, which means that delivery and payment take
place a number of days after the date of the commitment to purchase. The payment
obligation and the interest rate receivable on a forward commitment or
when-issued security are fixed when the Fund enters into the commitment but the
Fund does not make a payment until it receives delivery from the counterparty.
The Fund will commit to purchase such securities only with the intention of
actually acquiring the securities, but the Fund may sell these securities before
the settlement date if it is deemed advisable. The Fund will segregate
permissible liquid assets at least equal at all times to the amount of the
Fund's purchase commitments.
Securities purchased on a forward commitment or when-issued basis are
subject to changes in value (generally changing in the same way, i.e.,
appreciating when interest rates decline and depreciating when interest rates
rise) based upon the public's perception of the creditworthiness of the issuer
and changes, real or anticipated, in the level of interest rates. Securities
purchased on a forward commitment or when-issued basis may expose the Fund to
risks because they may experience such fluctuations prior to their actual
delivery. Purchasing securities on a when-issued basis can involve the
additional risk that the yield available in the market when the delivery takes
place actually may be higher than that obtained in the transaction itself.
Purchasing securities on a forward commitment or when-issued basis when the Fund
is fully or almost fully invested may result in greater potential fluctuation in
the value of the Fund's net assets and its net asset value per share.
LENDING PORTFOLIO SECURITIES. The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to borrow
securities to complete certain transactions. In connection with such loans, the
Fund continues to be entitled to payments in amounts equal to the dividends,
interest or other distributions payable on the loaned securities which affords
the Fund an opportunity to earn interest on the amount of the loan and at the
same time to earn income on the loaned securities' collateral. Loans of
portfolio securities may not exceed 33-1/3% of the value of the Fund's total
assets, and the Fund will receive collateral consisting of cash, U.S. Government
securities or irrevocable letters of credit which will be maintained at all
times in an amount equal to at least 100% of the current market value of the
loaned securities. Such loans are terminable by the Fund at any time upon
specified notice. The Fund might experience risk of loss if the institution with
which it has engaged in a portfolio loan transaction breaches its agreement with
the Fund. In connection with its securities lending transactions, the Fund may
return to the borrower or a third party which is unaffiliated with the Fund, and
which is acting as a "placing broker," a part of the interest earned from the
investment of collateral received for securities loaned.
NON-DIVERSIFIED STATUS. The Fund's classification as a
"non-diversified" investment company means that the proportion of the Fund's
assets that may be invested in the securities of a single issuer is not limited
by the 1940 Act. A "diversified" investment company is required by the 1940 Act
generally, with respect to 75% of its total assets, to invest not more than 5%
of such assets in the securities of a single issuer. Since a relatively high
percentage of the Fund's assets may be invested in the securities of a limited
number of issuers, some of which may be in the same industry, the Fund's
portfolio may be more sensitive to changes in the market value of a single
issuer or industry. However, to meet Federal tax requirements, at the close of
each quarter the Fund may not have more than 25% of its total assets invested in
any one issuer and, with respect to 50% of its total assets, not more than 5% of
its total assets invested in any one issuer. These limitations do not apply to
U.S. Government securities.
SIMULTANEOUS INVESTMENTS. Investment decisions for the Fund are made
independently from those of the other funds advised by the Adviser. If, however,
orders for the same security for more than one fund are placed with the same
broker, the Adviser may, but is not obligated to, aggregate or "bunch" such
orders. The Adviser generally will seek to aggregate orders when it believes
such aggregation may result in better execution (including better execution
prices). While in some cases this could have a detrimental effect upon the price
or value of a security for a particular fund, or upon its ability to complete an
entire order, in other cases coordination and the ability to participate in
volume transactions will be beneficial to such fund.
INVESTMENT RESTRICTIONS
The Fund's investment objective is a fundamental policy, which cannot
be changed without approval by the holders of a majority (as defined in the 1940
Act) of the Fund's outstanding voting shares. In addition, the Fund has adopted
investment restrictions numbered 1 through 7 as fundamental policies. The Fund
has adopted investment restrictions numbered 8 through 10 as non-fundamental
policies, which may be changed by vote of a majority of the Company's Board
members at any time, subject to applicable regulatory requirements. The Fund may
not:
1. Invest 25% or more of the value of its total assets in the
securities of issuers in any single industry, except to the extent the Fund's
benchmark Index as described in the Prospectus is so concentrated, and provided
that there shall be no limitation on the purchase of obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
2. Invest in commodities, except that the Fund may purchase and sell
options, forward contracts, futures contracts, including those relating to
indices, and options on futures contracts or indices.
3. Purchase, hold or deal in real estate, or oil, gas or other mineral
leases or exploration or development programs, but the Fund may purchase and
sell securities that are secured by real estate or issued by companies that
invest or deal in real estate or real estate investment trusts.
4. Borrow money, except to the extent permitted under the 1940 Act
(which currently limits borrowing to no more than 33-1/3% of the value of the
Fund's total assets). For purposes of this Investment Restriction, the entry
into options, forward contracts, futures contracts, including those relating to
indices, and options on futures contracts or indices shall not constitute
borrowing.
5. Lend any securities or make loans to others, if, as a result, more
than 33-1/3% of its total assets would be lent to others, except that this
limitation does not apply to the purchase of debt obligations and the entry into
repurchase agreements. However, the Fund may lend its portfolio securities in an
amount not to exceed 33-1/3% of the value of its total assets. Any loans of
portfolio securities will be made according to guidelines established by the SEC
and the Company's Board.
6. Act as an underwriter of securities of other issuers, except to the
extent the Fund may be deemed an underwriter under the Securities Act of 1933,
as amended, by virtue of disposing of portfolio securities.
7. Issue any senior security (as such term is defined in Section 18(f)
of the 1940 Act), except to the extent the activities permitted in Investment
Restriction Nos. 4, 8 and 9 may be deemed to give rise to a senior security.
8. Purchase securities on margin, but the Fund may make margin
deposits in connection with transactions in options, forward contracts, futures
contracts, including those relating to indices, and options on futures contracts
or indices.
9. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
purchase of securities on a when-issued or forward commitment basis and the
deposit of assets in escrow in connection with short-selling, writing covered
put and call options and collateral and initial or variation margin arrangements
with respect to options, forward contracts, futures contracts, including those
relating to indices, and options on futures contracts or indices.
10. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are illiquid, if, in
the aggregate, more than 15% of the value of the Fund's net assets would be so
invested.
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from a change in values or assets will not
constitute a violation of such restriction. With respect to Investment
Restriction No. 4, however, if borrowings exceed 33-1/3% of the value of the
Fund's total assets as a result of a change in values or assets, the Fund must
take steps to reduce such borrowings at least to the extent of such excess.
MANAGEMENT OF THE COMPANY
The Company's Board is responsible for the management and supervision
of the Fund. The Board approves all significant agreements with those companies
that furnish services to the Fund. These companies are as follows:
MetaMarkets Investments LLC................ Investment Adviser
BISYS Fund Services Ohio, Inc. ............ Administrator, Transfer Agent and
Fund Accountant
BISYS Fund Services Limited Partnership ... Distributor
Investors Bank & Trust Company ............ Custodian
Board members and officers of the Company, together with information
as to their principal business occupations during at least the last five years,
are shown below. Each Board member who is an "interested person" of the Company,
as defined in the 1940 Act, is indicated by an asterisk.
Name, Address Position(s) Held Principal Occupation(s)
and Age With Company During Past 5 Years
------------------------- -------------------- -------------------
*Donald L. Luskin Board Member, President President and Chief
444 DeHaro Street, and Treasurer Executive Officer of
Suite 220 MetaMarkets.com, Inc.
San Francisco, CA 94107 and the Adviser since
Age: 46 inception in June 1999.
From 1997 to 1998, Mr.
Luskin was Chief
Executive Officer of
Barclays Global Mutual
Funds and, from 1996 to
1997, he was Vice
Chairman of Barclays
Global Investors
("Barclays"), one of the
world's largest
investment management
organizations. From 1987
to 1996, Mr. Luskin
served in various other
executive capacities for
Barclays and its
predecessors. Prior
thereto, he served as a
director and Senior Vice
President of Jefferies &
Company, Inc.
("Jefferies & Co."), an
investment bank and
registered
broker-dealer, where he
created the POSIT
crossing network,
currently operated by
the Investment
Technology Group.
Formerly, Mr. Luskin was
a hedge fund manager and
member of the Chicago
Board Options Exchange
and the Pacific Stock
Exchange. He is the
author of the books,
"Index Options and
Futures: The Complete
Guide," and editor of
"Portfolio Insurance: A
Guide to Dynamic
Hedging."
Tracy G. Herrick Board Member Since 1981, President of
1150 University Avenue Tracy G. Herrick, Inc.,
Palo Alto, CA 94301 an economic consulting
Age: 66 firm, and a director of
Jefferies & Co. Mr.
Herrick also is a
director of Anderson
Capital Management,
Inc., a registered
investment adviser, and
of The Committee For
Monetary Research and
Education.
James E. Mitchell Board Member Director of Finance and
1550 Waverly Street Administration of the
Palo Alto, CA 94301 Lucile Packard
Age: 58 Foundation for
Children's Health, a
non-profit foundation
focusing on children's
health issues. From 1974
to 1990, Mr. Mitchell
was Chief Financial
Officer of Lane
Publishing Co. and, from
1990 to 1998, he was
Vice President of
Finance and
Administration of Sunset
Publishing Corporation,
a subsidiary of Time
Warner Inc.
George G. C. Parker Board Member Dean Witter Professor of
Graduate School of Business Finance and Management
Stanford University (Teaching), Associate
Stanford, CA 94305 Dean for Academic
Age: 61 Affairs, Director of the
MBA Program and
Co-director of the
Financial Management
Program at Stanford
University Graduate
School of Business.
Professor Parker also is
a board member of
Bailard, Biehl and
Kaiser, Inc., a
registered investment
adviser, Continental
Airlines Inc. and
several investment
companies in the
Dresdner/RCM Mutual
Funds complex.
Richard F. Froio Vice President Since April 1999, an
3435 Stelzer Road and Secretary employee of BISYS Fund
Columbus, OH 43219 Services, Inc., general
Age: 32 partner of the
Distributor, and an
officer of other
investment companies
administered by the
Administrator or its
affiliates. From March
1998 to April 1999, an
employee of Loomis,
Sayles & Company. From
February 1997 to March
1998, an employee of
Fidelity Management and
Research Company. From
October 1995 to February
1997, Vice President,
South Shore Security
Systems, Inc.
Sandra B. Souter Assistant Vice President Since June 1999, an
3435 Stelzer Road, and Assistant Secretary employee of BISYS Fund
Columbus, OH 43219 Services, Inc. and an
Age: 39 officer of other
investment companies
administered by the
Administrator or its
affiliates. Prior
thereto, Vice President
in the Retirement and
Asset Management
Division of First Union
Bank.
The Company has a standing nominating committee comprised of its Board
members who are not "interested persons" of the Company, as defined in the 1940
Act. The function of the nominating committee is to select and nominate all
candidates who are not "interested persons" of the Company for election to the
Company's Board.
The Company does not pay any remuneration to its officers and Board
members other than fees and expenses to those Board members who are not
directors, officers or employees or holders of 5% or more of the outstanding
voting securities of the Adviser or the Administrator or any of their
affiliates. The aggregate amount of compensation paid to each such Board member
by the Company for the 11 month fiscal period ended July 31, 2000 was as
follows:
<TABLE>
<CAPTION>
Total Compensation
Name of Aggregate From Fund and
Board Member Compensation from Fund Complex
Company Paid to Board Members
------------------ ------------------- ----------------------
<S> <C> <C>
Tracy G. Herrick $2,500 $2,500
James E. Mitchell $2,500 $2,500
George G. C. Parker $2,500 $2,500
</TABLE>
MANAGEMENT ARRANGEMENTS
INVESTMENT ADVISER. MetaMarkets Investments LLC, located at 444 DeHaro
Street, Suite 220, San Francisco, California 94107, serves as the Fund's
investment adviser. The Adviser is a wholly-owned subsidiary of MetaMarkets.com,
Inc., a holding company organized under California law in February 1999.
Europ@Web B.V. may be deemed a control person of the Adviser by virtue of its
share holdings in MetaMarkets.com, Inc. In addition, Locatelli B.V. and
Compagnie Financiere du Nord may each be deemed a control person of the Adviser
because of Locatelli B.V.'s 99% interest in Europ@Web B.V. and Compagnie
Financiere du Nord's ownership in Europ@Web B.V., respectively.
The Adviser provides investment advisory services pursuant to the
Investment Advisory Agreement (the "Agreement") dated July 20, 1999 with the
Company. The Agreement is subject to annual approval by (i) the Company's Board
or (ii) vote of a majority (as defined in the 1940 Act) of the outstanding
voting securities of the Fund, provided that in either event the continuance
also is approved by a majority of the Board members who are not "interested
persons" (as defined in the 1940 Act) of the Company or the Adviser, by vote
cast in person at a meeting called for the purpose of voting on such approval.
The Agreement is terminable without penalty, on 60 days' notice, by the
Company's Board or by vote of the holders of a majority of the Fund's shares,
or, on not less than 90 days' notice, by the Adviser. The Agreement will
terminate automatically, as to the Fund, in the event of its assignment (as
defined in the 1940 Act).
Under the terms of the Agreement, the Company has agreed to pay the
Adviser a monthly fee at the annual rate of 0.50% of the Fund's average daily
net assets.
From time to time, the Adviser may waive receipt of its fees and/or
voluntarily assume certain expenses of the Fund, which would have the effect of
lowering the overall expense ratio of the Fund and increasing yield to its
investors. The Fund will not pay the Adviser at a later time for any amounts it
may waive, nor will the Fund reimburse the Adviser for any amounts it may
assume.
ADMINISTRATOR. BISYS Fund Services Ohio, Inc., located at 3435 Stelzer
Road, Columbus, Ohio 43219, a wholly-owned subsidiary of The BISYS Group, Inc.,
provides certain administrative services pursuant to the Administration
Agreement (the "Administration Agreement") dated July 20, 1999 with the Company.
Under the Administration Agreement with the Company, the Administrator generally
assists in all aspects of the Fund's operations, other than providing investment
advice, subject to the overall authority of the Company's Board in accordance
with Massachusetts law. In connection therewith, the Administrator provides the
Fund with office facilities, personnel, and certain clerical and bookkeeping
services (e.g., preparation of reports to shareholders and the SEC and filing of
federal, state and local income tax returns) that are not being furnished by the
Fund's custodian. The Administration Agreement will continue until July 20, 2004
and thereafter is subject to annual approval by (i) the Company's Board or (ii)
vote of a majority (as defined in the 1940 Act) of the outstanding voting
securities of the Fund, provided that in either event the continuance also is
approved by a majority of the Board members who are not "interested persons" (as
defined in the 1940 Act) of the Company or the Administrator, by vote cast in
person at a meeting called for the purpose of voting such approval. The
Administration Agreement was approved by the Company's Board, including a
majority of the Board members who are not "interested persons" of any party to
the Administration Agreement, at a meeting held on July 20, 1999. The
Administration Agreement is terminable without penalty, at any time if for
cause, by the Company's Board or by vote of the holders of a majority of the
Fund's outstanding voting securities, or, on not less than 90 days' notice, by
the Administrator. The Administration Agreement will terminate automatically in
the event of its assignment (as defined in the 1940 Act).
As compensation for the Administrator's services under the
Administration Agreement and under the Transfer Agency and Fund Accounting
Agreement, the Company has agreed to pay the Administrator a monthly fee at the
annual rate set forth below as a percentage of the Fund's average daily net
assets:
Average Daily Net Annual Rate of
Assets of the Fund Fee Payable
on the first $500 million .13%
on the next $250 million .10%
on the next $250 million .085%
on assets in excess of $1 billion .075%
The Company has agreed to pay the Administrator a minimum annual fee of $75,000
for the first year under the Administration Agreement, $162,500 for the second
year and $187,500 for years three, four and five.
DISTRIBUTOR. BISYS Fund Services Limited Partnership, located at 3435
Stelzer Road, Columbus, Ohio 43219, a wholly-owned subsidiary of The BISYS
Group, Inc., acts as the distributor of the Fund's shares on a best efforts
basis pursuant to a Distribution Agreement (the "Distribution Agreement") dated
July 20, 1999, with the Company. Shares are sold on a continuous basis by the
Distributor as agent, although the Distributor is not obliged to sell any
particular amount of shares.
DISTRIBUTION PLAN. Rule 12b-1 (the "Rule") adopted by the SEC under
the 1940 Act provides, among other things, that an investment company may bear
expenses of distributing its shares only pursuant to a plan adopted in
accordance with the Rule. The Company's Board has adopted such a plan (the
"Distribution Plan") pursuant to which the Fund pays the Distributor for
distribution-related services and shareholder servicing at an annual rate of
0.25% of the value of the Fund's average daily net assets. Under the
Distribution Plan, the Distributor may make payments to certain financial
institutions, securities dealers and other industry professionals that have
entered into agreements with the Distributor ("Service Organizations") in
respect of these services. The Distributor determines the amounts to be paid to
Service Organizations. Service Organizations receive such fees in respect of the
average daily value of shares owned by their clients. From time to time, the
Distributor may defer or waive receipt of fees under the Distribution Plan while
retaining the ability to be paid by the Fund under the Distribution Plan
thereafter. The fees payable to the Distributor under the Distribution Plan for
advertising, marketing and distributing are payable without regard to actual
expenses incurred. The Company's Board believes that there is a reasonable
likelihood that the Distribution Plan will benefit the Fund and its
shareholders.
A quarterly report of the amounts expended under the Distribution
Plan, and the purposes for which such expenditures were incurred, must be made
to the Board members for their review. In addition, the Distribution Plan
provides that it may not be amended to increase materially the costs which
shareholders may bear for distribution pursuant to the Distribution Plan without
shareholder approval and that other material amendments of the Distribution Plan
must be approved by the Company's Board, and by the Board members who are
neither "interested persons" (as defined in the 1940 Act) of the Company nor
have any direct or indirect financial interest in the operation of the
Distribution Plan or in the related Distribution Plan agreements, by vote cast
in person at a meeting called for the purpose of considering such amendments.
The Distribution Plan and related agreements are subject to annual approval by
such vote of the Board members cast in person at a meeting called for the
purpose of voting on the Distribution Plan. As to the Fund, the Distribution
Plan is terminable at any time by vote of a majority of the Board members who
are not "interested persons" and who have no direct or indirect financial
interest in the operation of the Distribution Plan or in the Distribution Plan
agreements or by vote of the holders of a majority of the Fund's outstanding
shares. As to the Fund, a Distribution Plan agreement is terminable without
penalty, at any time, by such vote of the Board members, upon not more than 60
days' written notice to the parties to such agreement or by vote of the holders
of a majority of the Fund's outstanding shares. A Distribution Plan agreement
will terminate automatically, as to the Fund, in the event of its assignment (as
defined in the 1940 Act).
TRANSFER AND DIVIDEND DISBURSING AGENT, FUND ACCOUNTANT AND CUSTODIAN.
BISYS Fund Services Ohio, Inc. is the Company's transfer and dividend disbursing
agent (the "Transfer Agent"). Under a Transfer Agency Agreement with the
Company, the Transfer Agent arranges for the maintenance of shareholder account
records for the Fund, the handling of certain communications between
shareholders and the Fund and the payment of dividends and distributions payable
by the Fund. For these and other services, the Transfer Agent receives the fee
described under "Administrator" above and a monthly fee computed on the basis of
the number of shareholder accounts it maintains for the Fund during the month,
and is reimbursed for certain out-of-pocket expenses.
BISYS Fund Services Ohio, Inc. (the "Fund Accountant") provides fund
accounting services to the Fund pursuant to a Fund Accounting Agreement with the
Company. Under the Fund Accounting Agreement, the Fund Accountant receives the
fee described under "Administrator" above.
Investors Bank & Trust Company (the "Custodian") acts as custodian of
the Fund's investments. Under a custodian agreement with the Company, the
Custodian provides for the holding of the Fund's securities and the retention of
all necessary accounts and records. For its custody services, the Custodian
receives a monthly fee based on the market value of the Fund's assets held in
custody and receives certain securities transactions charges.
EXPENSES. All expenses incurred in the operation of the Company are
borne by the Company, except to the extent specifically assumed by others. The
expenses borne by the Company include: taxes, interest, brokerage fees and
commissions, if any, fees of Board members who are not officers, directors,
employees or holders of 5% or more of the outstanding voting securities of the
Adviser or the Administrator or any of their affiliates, SEC fees, state Blue
Sky qualification fees, advisory and administration fees, charges of custodians,
transfer and dividend disbursing agents' fees, certain insurance premiums,
industry association fees, auditing and legal expenses, costs of maintaining the
Company's existence, costs of independent pricing services, costs attributable
to investor services (including, without limitation, telephone and personnel
expenses), costs of calculating the Fund's net asset value, costs of
shareholders' reports and corporate meetings, costs of preparing and printing
certain prospectuses and statements of additional information, and any
extraordinary expenses. Expenses attributable to the Fund are charged against
the assets of the Fund; other expenses of the Company are allocated among its
funds on the basis determined by the Company's Board including, without
limitation, proportionately in relation to the net assets of each fund.
PURCHASE AND REDEMPTION OF SHARES
GENERAL PURCHASE INFORMATION. The minimum initial investment for the
Fund is $2,500, and subsequent investments must be at least $250. For IRAs and
participants in the Automatic Investment Plan, the minimum initial investment is
$1,000, and subsequent investments for IRAs must be at least $250. For full-time
or part-time employees of the Adviser or any of its affiliates, the minimum
initial investment is $500, and subsequent investments must be at least $100.
For full-time or part-time employees of the Adviser or any of its affiliates who
elect to have a portion of their pay directly deposited into their Fund
accounts, the minimum initial or subsequent investment must be at least $50. The
Adviser, its affiliates and Service Organizations may impose initial or
subsequent investment minimums which are higher or lower than those specified
above and may impose different minimums for different types of accounts or
purchase arrangements. In addition, purchases of shares made in connection with
certain shareholder privileges may have different minimum investment
requirements. The Company reserves the right to reject any purchase order in
whole or in part, including purchases made with foreign checks and third party
checks not originally made payable to the order of the investor. Share
certificates will not be issued.
REOPENING AN ACCOUNT. An investor may reopen an account with a minimum
investment of $500 without filing a new account application during the calendar
year the account is closed or during the following calendar year, provided the
information on the old account application is still applicable.
REDEMPTION FEE. The Fund will deduct a redemption fee equal to 1.50%
of the net asset value of Fund shares redeemed or exchanged within 90 days of
the issuance of such shares. The redemption fee will be deducted from the
redemption proceeds and retained by the Fund and used primarily to offset the
transaction costs that short-term trading imposes on the Fund and its
shareholders. No redemption fee will be charged on the redemption or exchange of
shares held longer than 90 days or acquired through the reinvestment of
dividends or capital gains distributions. The redemption fee may be waived,
modified or terminated at any time, or from time to time.
REDEMPTION COMMITMENT. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record, limited in amount during
any 90-day period to the lesser of $250,000 or 1% of the value of the Fund's net
assets at the beginning of such period. Such commitment is irrevocable without
the prior approval of the SEC. In the case of requests for redemption in excess
of such amount, the Company's Board reserves the right to make payments in whole
or in part in the Fund's portfolio securities or other assets in case of an
emergency or any time a cash distribution would impair the liquidity of the Fund
to the detriment of the existing shareholders. In this event, the securities
would be valued in the same manner as the Fund is valued. If the recipient sells
such securities, brokerage charges would be incurred.
SUSPENSION OF REDEMPTIONS. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the New York Stock
Exchange is closed (other than customary weekend and holiday closing), (b) when
trading in the markets the Fund normally utilizes is restricted, or when an
emergency exists as determined by the SEC so that disposal of the Fund's
investments or determination of its net asset value is not reasonably
practicable, or (c) for such other periods as the SEC by order may permit to
protect the Fund's shareholders.
DETERMINATION OF NET ASSET VALUE
GENERAL. Expenses and fees, including the advisory fee and fees paid
pursuant to the Distribution Plan, are accrued daily and taken into account for
the purpose of determining the net asset value of the Fund's shares.
The Fund's securities, including covered call options written by the
Fund, are valued at the closing market price on the securities exchange or
national securities market on which such securities primarily are traded.
Securities not listed on an exchange or national securities market, or
securities in which there were no transactions, are valued at the average of the
most recent bid and asked prices, except in the case of open short positions
where the asked price is used for valuation purposes. Bid price is used when no
asked price is available. Debt securities maturing in 60 days or less generally
are carried at amortized cost, which approximates value, except where to do so
would not reflect accurately their fair value, in which case such securities
would be valued at their fair value as determined under the supervision of the
Company's Board. Any securities or other assets for which recent market
quotations are not readily available are valued at fair value as determined in
good faith by the Company's Board or in accordance with procedures approved by
the Board.
Restricted securities, as well as securities or other assets for which
market quotations are not readily available, or are not valued by a pricing
service approved by the Company's Board are valued at fair value as determined
in good faith by the Board or in accordance with procedures approved by the
Board. The method of valuation will be reviewed on a current basis. In making a
good faith valuation of restricted securities, generally the following factors
will be taken into consideration: restricted securities which are, or are
convertible into, securities of the same class of securities for which a public
market exists usually will be valued at market value less the same percentage
discount at which purchased. This discount may be revised periodically.
Restricted securities not of the same class as securities for which a public
market exists usually will be valued initially at cost. Any subsequent
adjustment from cost will be based upon considerations deemed relevant.
SHAREHOLDER SERVICES AND PRIVILEGES
The services and privileges described under this heading may not be
available to clients of certain Service Organizations, and some Service
Organizations may impose certain conditions or fees on their clients which are
different from those described in the Prospectus or this Statement of Additional
Information. Such investors should consult their Service Organization in this
regard.
EXCHANGE PRIVILEGE. The Exchange Privilege enables you to purchase, in
exchange for shares of the Fund, shares of another fund advised by the Adviser.
A 1.50% redemption fee will be charged upon an exchange of Fund shares held for
90 days or less. The shares being exchanged must have a current value of at
least $500; furthermore, when establishing a new account by exchange, the shares
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made.
Shares will be exchanged at the next determined net asset value. No
fees currently are charged shareholders directly in connection with exchanges
although the Company reserves the right, upon not less than 60 days' written
notice, to charge shareholders a nominal administrative fee in accordance with
rules promulgated by the SEC. The Company reserves the right to reject any
exchange request in whole or in part. The Exchange Privilege may be modified or
terminated at any time upon notice to shareholders.
The exchange of shares of one fund for shares of another is treated
for federal income tax purposes as a sale of the shares given in exchange by the
shareholder and, therefore, an exchanging shareholder may realize a taxable gain
or loss.
AUTOMATIC INVESTMENT PLAN. The Automatic Investment Plan permits you
to purchase shares of the Fund (minimum initial investment of $1,000 and minimum
subsequent investments of $250 per transaction) at regular intervals selected by
you. Provided your bank or other financial institution allows automatic
withdrawals, shares may be purchased by transferring funds from the bank account
designated by you. At your option, the account designated will be debited in the
specified amount, and shares will be purchased, once a month, on either the
first or fifteenth day, or twice a month, on both days. Only an account
maintained at a domestic financial institution which is an Automated Clearing
House member may be so designated. This service enables you to make regularly
scheduled investments and may provide you with a convenient way to invest for
long-term financial goals. You should be aware, however, that periodic
investment plans do not guarantee a profit and will not protect an investor
against loss in a declining market. To establish an Automatic Investment Plan
account, you must check the appropriate box and supply the necessary information
on the account application. You may cancel your participation in the Automatic
Investment Plan or change the amount of purchase at any time by accessing the
Company's Website at http://www.MetaMarkets.com and following the relevant
instructions, and your cancellation will be effective three business days
following receipt. The Company may modify or terminate the Automatic Investment
Plan at any time or charge a service fee. No such fee currently is contemplated.
DIRECTED DISTRIBUTION PLAN. The Directed Distribution Plan enables you
to invest automatically dividends and capital gain distributions, if any, paid
by the Fund in shares of another fund advised by the Adviser of which you are a
shareholder. Shares of the other fund will be purchased at the then-current net
asset value. Minimum subsequent investments do not apply. Investors desiring to
participate in the Directed Distribution Plan should check the appropriate box
and supply the necessary information on the account application. The Plan is
available only for existing accounts and may not be used to open new accounts.
The Company may modify or terminate the Directed Distribution Plan at any time
or charge a service fee. No such fee currently is contemplated.
PERFORMANCE INFORMATION
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000 payment
made at the beginning of the period (assuming the reinvestment of dividends and
distributions), dividing by the amount of the initial investment, taking the
"n"th root of the quotient (where "n" is the number of years in the period) and
subtracting 1 from the result.
Total return is calculated by subtracting the amount of the Fund's net
asset value per share at the beginning of a stated period from the net asset
value per share at the end of the period (after giving effect to the
reinvestment of dividends and distributions during the period), and dividing the
result by the net asset value per share at the beginning of the period.
From time to time, advertising materials for the Fund may refer to or
discuss current or past business, political, economic or financial conditions,
such as U.S. monetary or fiscal policies and actual or proposed tax legislation.
However, a portfolio manager, analyst or other employee of the Adviser may
express views regarding a particular company, security, industry, or market
sector which are the views of only that individual as of the time expressed and
do not necessarily represent the views of the Adviser. Any such views are
subject to change at any time based upon market or other conditions and the
Adviser disclaims any responsibility to update such views. These views may not
be relied on as investment advice and, because investment decisions for the Fund
are based on numerous factors, may not be relied on as an indication of trading
intent on behalf of the Fund.
Advertising materials may also include biographical information
relating to portfolio personnel and may refer to or include commentary relating
to investment strategy; asset growth; current or past business; political
economic or financial conditions; and other matters of general interest to
investors. In addition, from time to time, advertising materials for the Fund
may include information concerning retirement and investing for retirement,
average life expectancy and pension and social security benefits. Comparative
performance information may be used from time to time in advertising or
marketing the Fund's shares, including relevant indices and data from the ___
Index, Lipper Analytical Services, Inc., Morningstar, Inc., S&P 500 Index,
Russell 2000 Index, Nasdaq-100 Index, EAFE Index, the Dow Jones Industrial
Average, CDA/Wiesenberger Investment Companies Service, Mutual Fund Values;
Mutual Fund Forecaster, Mutual Fund Investing and other industry publications.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund intends to qualify as a "regulated investment company" under
the Internal Revenue Code of 1986, as amended (the "Code"), if such
qualification is in the best interests of its shareholders. To qualify as a
regulated investment company, the Fund must pay out to its shareholders at least
90% of its net income (consisting of net investment income and net short-term
capital gain), and must meet certain asset diversification and other
requirements. Qualification as a regulated investment company relieves the Fund
from any liability for federal income taxes to the extent its earnings are
distributed in accordance with the applicable provisions of the Code. If the
Fund did not qualify as a regulated investment company, it would be treated for
tax purposes as an ordinary corporation subject to federal income tax. The term
"regulated investment company" does not imply the supervision of management or
investment practices or policies by any government agency.
Any dividend or distribution paid shortly after an investor's purchase
may have the effect of reducing the aggregate net asset value of his or her
shares below the cost of investment. Such a distribution would be a return on
investment in an economic sense although taxable as stated in the Prospectus. In
addition, if a shareholder holds shares for six months or less and has received
a capital gain dividend with respect to such shares, any loss incurred on the
sale of such shares will be treated as a long-term capital loss to the extent of
the capital gain dividend received.
In general, dividends (other than capital gain dividends) paid by the
Fund to U.S. corporate shareholders may be eligible for the dividends received
deduction to the extent that the Fund's income consists of dividends paid by
U.S. corporations on shares that have been held by the Fund for at least 46 days
during the 90-day period commencing 45 days before the shares become
ex-dividend. In order to claim the dividends received deduction, the investor
must have held Fund shares for at least 46 days during the 90-day period
commencing 45 days before the Fund shares become ex-dividend. Additional
restrictions on an investor's ability to claim the dividends received deduction
may apply.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gains and losses. However, a portion of the gain or loss
realized from the disposition of non-U.S. dollar denominated securities
(including debt instruments, certain financial futures and options, and certain
preferred stock) may be treated as ordinary income or loss under Section 988 of
the Code. Finally, all or a portion of the gain realized from engaging in
"conversion transactions" may be treated as ordinary income under Section 1258.
"Conversion transactions" are defined to include certain forward, futures,
option and "straddle" transactions, transactions marketed or sold to produce
capital gains, or transactions described in Treasury regulations to be issued in
the future.
Under Section 1256 of the Code, any gain or loss realized by the Fund
from certain financial futures and options transactions (other than those taxed
under Section 988 of the Code) will be treated as 60% long-term capital gain or
loss and 40% short-term capital gain or loss. Gain or loss will arise upon the
exercise or lapse of such futures and options as well as from closing
transactions. In addition, any such futures or options remaining unexercised at
the end of the Fund's taxable year will be treated as sold for their then fair
market value, resulting in additional gain or loss to the Fund characterized as
described above.
Offsetting positions held by the Fund involving financial futures and
options may constitute "straddles." Straddles are defined to include "offsetting
positions" in actively traded personal property. The tax treatment of straddles
is governed by Sections 1092 and 1258 of the Code, which, in certain
circumstances, override or modify the provisions of Sections 988 and 1256 of the
Code. If the Fund was treated as entering into straddles by reason of its
futures or options transactions, such straddles could be characterized as "mixed
straddles" if the futures or options transactions comprising such straddles were
governed by Section 1256. The Fund may make one or more elections with respect
to "mixed straddles." Depending upon which election is made, if any, the results
to the Fund may differ. If no election is made, to the extent the straddle rules
apply to positions established by the Fund, losses realized by the Fund will be
deferred to the extent of unrealized gain in any offsetting positions. Moreover,
as a result of the straddle rules, short-term capital loss on straddle positions
may be recharacterized as long-term capital loss, and long-term capital gain on
straddle positions may be treated as short-term capital gain or ordinary income.
If the Fund either (1) holds an appreciated financial position with
respect to stock, certain debt obligations, or partnership interests
("appreciated financial position") and then enters into a short sale, futures,
forward, or offsetting notional principal contract (collectively, a "Contract")
respecting the same or substantially identical property or (2) holds an
appreciated financial position that is a Contract and then acquires property
that is the same as or substantially identical to the underlying property, the
Fund generally will be taxed as if the appreciated financial position were sold
at its fair market value on the date the Fund enters into the financial position
or acquires the property, respectively.
PORTFOLIO TRANSACTIONS
The Adviser is responsible for the selection of brokers to effect
securities transactions and the negotiation of brokerage commissions, if any.
Purchases and sale of securities on a securities exchange are effected through
brokers who charge a negotiated commission for their services. Transactions are
allocated to various dealers by the Fund's investment personnel in their best
judgment. The primary consideration is prompt and effective execution of orders
at the most favorable price. Subject to that primary consideration, dealers may
be selected to act on an agency basis for research, statistical or other
services to enable the Adviser to supplement its own research and analysis with
the views and information of other securities firms. Such services may include,
without limitation, providing research and related products (including news and
quotation equipment), financial publications and expenses for research-related
travel for visiting companies and meeting with companies' managements, other
means of obtaining investment information, due diligence, outside appraisers and
industry conference fees. The allocation of brokerage transactions also may take
into account a broker's sales of Fund shares.
To the extent research services are furnished by brokers through which
the Fund effects securities transactions, the Adviser may use such information
in advising other funds or accounts it advises and, conversely, to the extent
research services are furnished to the Adviser by brokers in connection with
other funds or accounts the Adviser advises, the Adviser also may use such
information in advising the Fund. Although it is not possible to place a dollar
value on these services, if they are provided, it is the opinion of the Adviser
that the receipt and study of any such services should not reduce the overall
expenses of its research department.
The overall reasonableness of brokerage commissions paid is evaluated
by the Adviser based upon its knowledge of available information as to the
general level of commissions paid by other institutional investors for
comparable services. The Fund may pay commission rates in excess of those
another broker or dealer would have charged for effecting the same transaction,
if the Adviser determines in good faith that the commission paid is reasonable
in relation to the value of the brokerage and research services provided.
When transactions are executed in the over-the-counter market, the
Adviser will deal with the primary market makers unless a more favorable price
or execution otherwise is obtainable.
INFORMATION ABOUT THE COMPANY AND THE FUND
Each share has one vote and shareholders will vote in the aggregate,
except as otherwise required by law. Each share, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Shares have no preemptive, conversion or subscription rights and are freely
transferable.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of a Massachusetts
business trust. However, the Company's Agreement and Declaration of Trust
("Trust Agreement") disclaims shareholder liability for acts or obligations of
the Company and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Company or a
Board member. The Trust Agreement provides for indemnification from the Fund's
property for all losses and expenses of any shareholder held personally liable
for the obligations of the Fund. Thus, the risk of a shareholder's incurring
financial loss on account of shareholder liability is limited to circumstances
in which the Fund itself would be unable to meet its obligations, a possibility
which management believes is remote. Upon payment of any liability incurred by
the Fund, the shareholder paying such liability will be entitled to
reimbursement from the general assets of the Fund. The Company intends to
conduct its operations in such a way so as to avoid, as far as possible,
ultimate liability of the shareholders for liabilities of the Fund.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Company to hold annual meetings of shareholders. As a result,
shareholders may not consider each year the election of Board members or the
appointment of auditors. However, the holders of at least 10% of the shares
outstanding and entitled to vote may require the Company to hold a special
meeting of shareholders for purposes of removing a Board member from office.
Shareholders may remove a Board member by the affirmative vote of two-thirds of
the Company's outstanding voting shares. In addition, the Company's Board will
call a meeting of shareholders for the purpose of electing Board members if, at
any time, less than a majority of the Board members then holding office have
been elected by shareholders.
The Company is a "series fund," which is a mutual fund divided into
separate portfolios, each of which is treated as a separate entity for certain
matters under the 1940 Act and for other purposes. A shareholder of one
portfolio is not deemed to be a shareholder of any other portfolio. For certain
matters shareholders vote together as a group; as to others they vote separately
by portfolio. From time to time, other portfolios may be established, without
shareholder approval, and sold pursuant to other offering documents.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise, to the holders of the outstanding voting securities of an investment
company, such as the Company, will not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each series affected by such matter. Rule 18f-2 further provides that a series
shall be deemed to be affected by a matter unless it is clear that the interests
of each series in the matter are identical or that the matter does not affect
any interest of such series. However, the Rule exempts the election of board
members from the separate voting requirements of the Rule.
To date, seven series have been authorized. All consideration received
by the Company for shares of one of the series, and all assets in which such
consideration is invested, belong to that series (subject only to the rights of
creditors of the Company) and will be subject to the liabilities related
thereto. The income attributable to, and expenses of, one series are treated
separately from those of the other series.
The Fund will post its annual and semi-annual financial statements on
the MetaMarkets.com Website and e-mail notice of such postings to all its
shareholders.
COUNSEL AND INDEPENDENT AUDITORS
Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York
10038-4982, as counsel for the Company, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the shares
being sold pursuant to the Prospectus.
PricewaterhouseCoopers LLP, 333 Market Street, San Francisco,
California 94105-2119, independent accountants, have been selected as the Fund's
independent auditors.
<PAGE>
PART C. OTHER INFORMATION
Item 23.
(a) Amended and Restated Agreement and Declaration of Trust.*
(b) Bylaws.*
(d)(1) Investment Advisory Agreement.**
(2) Administration Agreement.***
(e)(1) Distribution Agreement.***
(2) Distribution and Servicing Plan Agreement.***
(g) Custodian Agreement.***
(i) Opinion and Consent of Registrant's Counsel.***
(j) Consent of Independent Auditors.****
(m) Distribution and Servicing Plan Pursuant to Rule 12b-1.***
(p) Codes of Ethics adopted by Registrant and its Investment Adviser.**
Other: Notification of Election on Form N-18F-1.***
Power of Attorney.***
-----------------------
* Previously filed as part of Pre-Effective Amendment No. 2 to Registrant's
Registration Statement.
** Previously filed as part of Post-Effective Amendment No. 1 to Registrant's
Registration Statement.
*** Previously filed as part of Pre-Effective Amendment No. 3 to Registant's
Registration Statement.
**** To be filed by amendment.
Item 24. Persons Controlled By or Under Common Control with Registrant
Not applicable.
Item 25. Indemnification
Reference is made to Article EIGHTH of the Registrant's Amended and
Restated Agreement and Declaration of Trust previously filed as Exhibit (a). The
application of these provisions is limited by Article 10 of the Registrant's
By-Laws filed as Exhibit (b) to Pre-Effective Amendment No. 2 to Registrant's
Registration Statement on Form N-1A and by the following undertaking set forth
in the rules promulgated by the Securities and Exchange Commission:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to Board members,
officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in such Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a Board member, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such Board member, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in such Act and will be governed by the final
adjudication of such issue.
Reference is also made to the Distribution Agreement filed as
Exhibit (e) to Pre-Effective Amendment No. 3 to Registrant's
Registration Statement.
Item 26. Business and Other Connections of Investment Adviser
Registrant is fulfilling the requirement of this Item 26(a) to provide
a list of the officers and directors of MetaMarkets Investments LLC, the Fund's
investment adviser, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged in by
MetaMarkets Investments LLC or those of its officers and directors during the
past two years, by incorporating by reference the information contained in the
Form ADV filed with the SEC pursuant to the Investment Advisers Act of 1940 by
MetaMarkets Investments LLC (SEC File No. 801-56655).
Item 27. Principal Underwriters
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or exclusive
distributor:
Alpine Equity Trust
American Independence Funds Trust
American Performance Funds
AmSouth Funds
BB&T Funds
The Coventry Group
The Eureka Funds
FifthThird Funds
Governor Funds
Hirtle Callaghan Trust
HSBC Funds Trust and HSBC Mutual Funds Trust
Magna Funds
Mercantile Mutual Funds, Inc.
Meyers Investment Trust
MMA Praxis Mutual Funds
M.S.D.&T. Funds
Old Westbury Funds, Inc.
Pacific Capital Funds
Republic Advisor Funds Trust
Republic Funds Trust
Summit Investment Trust
US Allianz Variable Insurance Products Trust
Variable Insurance Funds
The Victory Portfolios
The Victory Variable Insurance Funds
Vintage Mutual Funds, Inc.
WHATIFI Funds
(b) The information required by this Item 27(b) regarding each
director or officer of BISYS Fund Services Limited Partnership is incorporated
by reference to Form BD filed pursuant to the Securities Exchange Act of 1934
(SEC File No. 8-32480).
Item 28. Location of Accounts and Records
1. Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02117-9130
2. BISYS Fund Services Ohio, Inc.
3435 Stelzer Road
Columbus, Ohio 43219-3035
3. MetaMarkets Investments LLC
444 DeHaro Street - Suite 220
San Francisco, CA 94107
Item 29. Management Services
Not Applicable.
Item 30. Undertakings
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of San Francisco, and State of
California, on the 6th day of December, 2000.
METAMARKETS.COM FUNDS
(Registrant)
By: /s/ Donald L. Luskin
--------------------------------
DONALD L. LUSKIN, PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
/s/ Donald L. Luskin President and Treasurer December 6, 2000
--------------------------- (Principal Executive
DONALD L. LUSKIN Officer and Chief Financial
and Accounting Officer)
and Board Member
/s/ Tracey G. Herrick* Board Member December 6, 2000
---------------------------
TRACEY G. HERRICK
/s/ James E. Mitchell* Board Member December 6, 2000
---------------------------
JAMES E. MITCHELL
/s/ George G.C. Parker* Board Member December 6, 2000
--------------------------
GEORGE G.C. PARKER
*By: /s/ Donald L. Luskin
--------------------------
Donald L. Luskin,
as attorney-in-fact
