FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No._ [ ]
Post-Effective Amendment No. 5 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 5 [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)
x immediately upon filing pursuant to paragraph (b)
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on November 22, 2000 pursuant to paragraph (b)
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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
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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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METAMARKETS.COM FUNDS
PROSPECTUS
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NOVEMBER 22, 2000
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o OPENFUND
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.
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TABLE OF CONTENTS
Description of the Fund - Objectives, Risks/Return
and Expenses
Financial Highlights
Additional Information on Investment Strategies and Risks
Fund Management
Shareholder Information
Back Cover
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DESCRIPTION OF THE FUND
OBJECTIVES, RISK/RETURN AND EXPENSES
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INVESTMENT OBJECTIVE The Fund seeks to provide investors with
capital growth.
PRINCIPAL INVESTMENT
STRATEGIES The Fund invests principally in the common
stocks of companies that the investment
adviser believes are innovative growth
companies at the leading edge of
technological, social and economic change.
These are companies which define the "New
Economy." They demonstrate the ability to
innovate, continuously learn and productively
change. Through innovative use of technology
or the imaginative use of organizational
techniques or marketing methods, they are
redefining the way goods and services are
provided in the economy. These are companies
that make us more efficient at work, and
change the way we relax and play.
The Fund will engage in frequent portfolio
trading in an attempt to take advantage of
short-term trends in valuation and momentum.
To implement the Fund's strategy, the adviser
will select from those companies based in the
U.S. or, to a limited extent, in foreign
countries that are expected to provide or
benefit from advances and improvements in
technology, consumer services or business
practices. These companies may include those
that develop, produce or distribute products
or services in the Internet, electronics,
communications, healthcare, biotechnology,
and computer software and hardware sectors,
as well as the consumer marketing, media,
entertainment and financial services sectors.
The Fund's investments may range from small
companies developing new technologies or
practicing innovative methods to provide
consumer services (including those with
market capitalizations below $500 million) to
large blue chip companies with established
track records of developing and marketing
these advances. The Fund also may invest in
the preferred stocks and convertible
securities (including those rated below
investment grade, so-called junk bonds) of
these companies and engage in short selling
and, from time to time, leverage, futures and
options transactions.
PRINCIPAL INVESTMENT
RISKS MARKET RISK. Stocks fluctuate in price, often
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.
SMALL CAPITALIZATION AND TECHNOLOGY SECTOR
RISKS. The Fund will invest in small
capitalization companies and companies in the
technology sector, which carry additional
risks. These companies typically have less
predictable earnings than other companies. In
addition, small-cap stocks trade less
frequently and in more limited volume than
those of larger, more established companies.
As a result, technology and small-cap stocks
may fluctuate significantly more in value
than other stocks. Thus, the Fund's share
price should be expected to fluctuate
significantly more than the share prices of
many other types of mutual funds.
RISKS OF PORTFOLIO TURNOVER. The Fund will
engage in short-term trading, which could
increase the Fund's transaction costs and
taxable distributions, and lower the Fund's
after-tax performance accordingly.
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, form time to time, the companies in
which the Fund invests at any given time may
represent a limited number of industries.
Accordingly, the Fund's portfolio may be more
sensitive to changes in the market value of a
single company or industry.
RISKS OF INVESTING IN LOWER-RATED SECURITIES.
The Fund may invest in lower-rated
convertible securities which have speculative
characteristics and higher credit risk. With
this type of investment, a greater likelihood
exists that adverse economic changes can
result in a decrease in value of the security
and the company's weakened capacity to make
interest and principal payments on a timely
basis.
RISKS OF INVESTING IN FOREIGN SECURITIES.
Foreign securities involve special risks,
such as exposure to currency exchange rate
fluctuations, and tend to be more volatile
than U.S. securities.
RISKS OF USING CERTAIN INVESTMENT TECHNIQUES.
The Fund may not always be able to close out
an established short position at any
particular time or at an acceptable price.
The Fund can buy securities with borrowed
money (a form of leverage), which could have
the effect of magnifying the Fund's gains or
losses.
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.
PERFORMANCE BAR CHART AND TABLE
The Fund has not completed a full calendar year of operations and, thus, 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 OpenFund, you will pay certain fees and
expenses, which are described in the tables. Annual Fund operating expenses are
paid out of Fund assets and are reflected in the share price.
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Annual Fund Operating Expenses
(fees paid from Fund assets)
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Management Fee 1.00%
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Distribution (12b-1) Fee .25%
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Other Expenses1 1.80%
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Total Annual Fund
Operating Expenses1 3.05%
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Less Waivers and
Expense Reimbursements1 (1.60)%
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Net Operating Expenses1 1.45%
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1 Expense information (other than the Management Fee and the
Distribution (12b-1) Fee) has been restated from the actual numbers
for the fiscal period ended July 31, 2000 to reflect current expenses.
The investment adviser contractually agreed to waive its fees and pay
all Fund expenses through February 28, 2000 and to reimburse the Fund
to the extent Other Expenses exceeded .20% of the Fund's average daily
net assets for the fiscal period ended July 31, 2000. As a result, Net
Operating Expenses were 1.04% for the fiscal period ended July 31,
2000. For the fiscal year ending July 31, 2001, the investment adviser
has contractually agreed to continue to reimburse the Fund to the
extent Other Expenses exceed .20% of the Fund's average daily net
assets.
EXPENSE EXAMPLE
Use the example at the right to help 1 Year 3 Years 5 Years 10 Years
you compare the cost of investing in
the Fund with the cost of investing $148 $792 $1,461 $3,252
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, 5 and 10 years figures in the
example are 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.
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FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Fund's financial performance for the period of the Fund's operations. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). These figures have been audited by Pricewaterhouse Coopers LLP,
whose report, along with the Fund's financial statements, are included in the
annual report, which is available upon request.
FINANCIAL HIGHLIGHTS
For the eleven months ended July 31, 2000(a)
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Net Asset Value, Beginning of Period $12.50
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INCOME FROM INVESTMENT OPERATIONS
Net investment income (0.09)(e)
Net realized and unrealized gains from investments 9.13 (e)
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Total From Investment Operations 9.04
LESS DISTRIBUTIONS
Dividends (from net investment income) (0.02)
Distributions (from capital gains) (0.10)
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Total Distributions (0.12)
Net Asset Value, End of Period $21.42
TOTAL RETURN 72.18%(b)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses (including dividend expenses) to
average net assets(d) 1.04% (c)
Ratio of expenses (excluding dividend expenses) to
average net assets(d) 1.02%(c)
Ratio of net investment loss to average net assets (0.79%)(c)
Ratio of expenses (including dividend expenses) to
average net assets* 2.97%(c)
Portfolio turnover rate 2,318%(b)
Net Assets, End of Period (000) $31,503
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* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated.
(a) Period from August 31, 1999 (commencement of operations) to July 31, 2000.
(b) Not annualized.
(c) Annualized.
(d) The investment adviser contractually agreed to reimburse the Fund to the
extent certain operating expenses exceeded 0.20% of the Fund's average daily
assets for the period ended July 31, 2000, limiting overall expenses of the
Fund to a maximum of 1.45% of the Fund's average daily net assets.
(e) The amount shown for a share outstanding throughout the period does not
accord with the earned income or the change in aggregate gains and losses
in the portfolio of securities during the period because of the timing
of sales and purchases of Fund shares in relation to fluctuating market
values during the period.
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ADDITIONAL INFORMATION ON INVESTMENT STRATEGIES
AND RISKS
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PRINCIPAL STRATEGIES
The Fund invests in securities of companies which, in the opinion of the Fund's
investment adviser, are innovative growth companies at the leading edge of
technological, social and economic change. These are companies which define the
"New Economy."
Much is being written about the New Economy. Visit the Web site at
http://www.MetaMarkets.com if you want to find out where you can read more about
it.
While the Fund typically invests principally in common stocks, it also may
invest in convertible securities and preferred stocks and other equity
securities having the characteristics of common stocks (generally, in each case
up to 10% of the Fund's assets). Convertible securities are exchangeable for
another form of the issuer's securities, and generally are subordinated to other
similar but non-convertible securities of the same issuer and, thus, typically
have lower credit ratings than similar non-convertible securities. The Fund may
invest up to 10% of its assets in convertible securities rated below investment
grade (Baa/BBB) and as low as the lowest rating assigned by the rating agencies
(C/D) or the unrated equivalent as determined by the adviser. Preferred stock
has preference over common stock in the payment of dividends and the liquidation
of assets, but ordinarily does not carry voting rights.
Although the Fund will invest principally in securities of U.S. issuers, it may
invest up to 20% of its total assets in the equity securities of foreign
issuers, including common stocks, preferred stocks, convertible securities and
depositary receipts, such as ADRs.
The Fund may sell short securities of companies that the investment adviser
believes will underperform amidst the challenges of the New Economy. In
addition, the Fund may engage in short-selling for hedging purposes, such as to
limit exposure to a possible market decline in the value of its portfolio
securities. Generally, the Fund would sell a security it does not own. To
complete the transaction, the Fund must borrow the security to make delivery to
the buyer. The Fund is obligated to replace the security borrowed by purchasing
it subsequently at the market price at the time of replacement. No securities
will be sold short if, after effect is given to any such short sale, the total
market value of all securities sold short would exceed 25% of the value of the
Fund's net assets.
The Fund may invest some assets in options and futures contracts. These
instruments are used primarily to hedge the Fund's portfolio but may be used to
increase returns; however, they sometimes may reduce returns or increase
volatility. 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.
The Fund may borrow money from banks, brokers or dealers for investment
purposes. Borrowing for investment purposes is known as "leverage." To the
extent the Fund uses leverage, it would limit such leverage to 25% of its total
assets.
The Fund, from time to time, may take temporary defensive positions that are
inconsistent with the Fund's principal investment strategies in an attempt to
respond to adverse market, economic, political, or other conditions and invest
some or all of its assets in money market instruments. During these periods, the
Fund may not achieve its investment objective.
PRINCIPAL RISKS
MARKET AND MANAGEMENT RISK. The Fund is actively managed and, thus, is subject
to the risk that its portfolio management practices might not achieve its goals.
Over time, growth companies are expected to increase their earnings at an
above-average rate. If these expectations are not met, their stock prices can
fall drastically--even if earnings show an absolute increase.
The Fund may purchase securities of companies which have no earnings or have
experienced losses. The Fund generally will make these investments based on a
belief that actual or anticipated products or services will produce future
earnings. If the anticipated event is delayed or does not occur, or if investor
perceptions about the company change, the company's stock price may decline
sharply and its securities may become less liquid. The Fund may also purchase
securities of companies in initial public offerings or shortly thereafter. The
prices of these companies' securities may be very volatile.
FOREIGN SECURITIES RISK. Securities of foreign issuers (including ADRs)
fluctuate in price, often based on factors unrelated to the issuers' value, and
such fluctuations can be pronounced. Foreign securities tend to be more volatile
than U.S. securities because they include special risks, such as exposure to
currency fluctuations, a lack of comprehensive company information, political
instability, and differing auditing and legal standards.
LOWER RATED SECURITIES RISK. Higher yielding (and, therefore, higher risk)
convertible securities, such as those rated below investment grade, may be
subject to certain risks with respect to the issuing entity and to greater
market fluctuations than lower yielding, higher rated convertible securities.
The retail secondary market for these securities may be less liquid than that of
higher rated securities; adverse conditions could make it difficult at times for
the Fund to sell these securities or could result in lower prices than those
used in calculating the Fund's net asset value.
RISK OF USING CERTAIN INVESTMENT TECHNIQUES. With respect to short sales, the
price at the time the Fund replaces the security borrowed may be more (and the
Fund would lose money) or less (and the Fund would make money) than the price at
which the security was sold by the Fund. The amount of any gain will be
decreased, and the amount of any loss increased, by the amount of any premium or
amounts in lieu of interest the Fund may be required to pay in connection with a
short sale.
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) and in the price of
the futures contract or option may be imperfect; (ii) possible lack of a liquid
secondary market closing out options or futures positions; and (iii) losses due
to unanticipated market movements.
Leveraging is a sophisticated investment technique that amplifies the effect on
net asset value of any increase or decrease in the market value of the Fund's
portfolio. These borrowings will be subject to interest costs which may or may
not be recovered by any appreciation of the securities purchased.
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.
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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
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. Set
forth below is the investment advisory fee rate payable to the investment
adviser by the Fund:
Average Daily Net Annual Rate of
Assets of the Fund Advisory Fee
on the first $250 million 1.00%
on the next $500 million .75%
on assets in excess of $750 million .50%
The Fund's investment adviser operates the Fund as an interactive mutual fund
integrating real time investor participation with the investment process. The
Fund posts 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.
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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 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. 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 account
statements.
PURCHASING AND ADDING TO YOUR SHARES
MINIMUM INVESTMENT
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ACCOUNT TYPE INITIAL SUBSEQUENT
Regular
(non-retirement) $1,000 $250
Retirement (IRA) $100 $50
Automatic
Investment Plan $250 $50
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.
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 under extraordinary circumstances or as
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 Fund portfolio 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 NAV upon redemption.
EXCHANGING YOUR SHARES
You can exchange your Fund shares for shares of another fund in the
MetaMarkets.com family of funds. No transaction fees are charged for exchanges
from the Fund, but the MetaMarkets IPO & New Era Fund charges a redemption fee
of 1.50% of NAV for shares redeemed or exchanged within 90 days of purchase,
including purchases by exchange.
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 calendar 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 trading activity and 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 can not 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-advantaged 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. Additional information about the
Fund's investments is available in the Fund's annual and semi-annual reports to
shareholders. In the Fund's annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
Fund's performance during its last fiscal year.
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YOU CAN GET FREE COPIES OF THE SAI, THE ANNUAL REPORT, THE SEMI-ANNUAL REPORT 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.
-------------------------------------------------------------------------------
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. 20549-6009, or by e-mailing your request
to [email protected].
o Free from the Commission's Web site at http://www.sec.gov.
OpenFund, 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,
OpenFund."
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.
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.
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: _______________
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By Telephone Call 1-877-638-2658 with instructions as to how you
(UNLESS YOU HAVE DECLINED wish to receive your funds (mail, wire, electronic
TELEPHONE SALES PRIVILEGES) transfer).
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.
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: ______________
<PAGE>
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METAMARKETS.COM FUNDS
OpenFund
STATEMENT OF ADDITIONAL INFORMATION
November 22, 2000
-------------------------------------------------------------------------------
This Statement of Additional Information ("SAI"), which is not a
prospectus, supplements and should be read in conjunction with the current
Prospectus for OpenFund (the "Fund") of MetaMarkets.com Funds (the "Company"),
dated November 22, 2000, 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). The Fund's most
recent annual report and semi-annual report to shareholders are supplied with
this SAI, and the financial statements, accompanying notes and report of
independent auditors appearing in the annual report are incorporated by
reference into this SAI. 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.....................................2
Management of the Company..................................................17
Management Arrangements....................................................20
Purchase and Redemption of Shares..........................................24
Determination of Net Asset Value...........................................25
Shareholder Services and Privileges........................................26
Performance Information....................................................27
Dividends, Distribution and Taxes..........................................28
Portfolio Transactions.....................................................30
Information About the Company and the Fund.................................31
Counsel and Independent Auditors...........................................33
Appendix...................................................................34
<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.
CERTAIN PORTFOLIO SECURITIES
The following information supplements and should be read in
conjunction with the Fund's Prospectus. The portfolio securities described
below, other than convertible securities, are not part of the Fund's principal
investment strategies.
CONVERTIBLE SECURITIES. While the Fund typically invests principally
in common stocks, part of its principal investment strategy from time to time
may include investing 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 a specific 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 Stock
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.
FOREIGN GOVERNMENT OBLIGATIONS; SECURITIES OF SUPRANATIONAL ENTITIES.
The Fund may invest in obligations issued or guaranteed by one or more foreign
governments or any of their political subdivisions, agencies or
instrumentalities that are determined by the Adviser to be of comparable quality
to the other obligations in which the Fund may invest. Such securities also
include debt obligations of supranational entities. Supranational entities
include international organizations designated or supported by governmental
entities to promote economic reconstruction or development and international
banking institutions and related government agencies. Examples include the
International Bank for Reconstruction and Development (the World Bank), the
European Coal and Steel Community, the Asian Development Bank and the
InterAmerican Development Bank.
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.
CORPORATE DEBT SECURITIES. The Fund may invest in corporate debt
securities, which include corporate bonds, debentures, notes and other similar
instruments. Debt securities may be acquired with warrants attached. Corporate
income-producing securities also may include forms of preferred or preference
fixed, floating or variable, and may vary inversely with respect to a reference
rate. The rate of return or return of principal on some debt obligations may be
linked or indexed to the level of exchange rates between the U.S. dollar and a
foreign currency or currencies.
Variable and floating rate securities provide for a periodic
adjustment in the interest rate paid on the interest rate paid on the
obligations. The terms of such obligations may provide that interest rates are
adjusted periodically based upon an interest rate adjustment index as provided
in the respective obligations. The adjustment intervals may be regular, and
range from daily up to annually, or may be event based, such as based on a
change in the prime rate.
The Fund may invest in floating rate debt instruments ("floaters").
The interest rate on a floater is a variable rate which is tied to another
interest rate, such as a money-market index or Treasury bill rate. The interest
rate on a floater resets periodically, typically every six months. Because of
the interest rate reset feature, floaters provide the Fund with a certain degree
of protection against rises in interest rates, although the Fund will
participate in any declines in interest rates as well.
The Fund also may invest in inverse floating rate debt instruments
("inverse floaters"). The interest rate on an inverse floater resets in the
opposite direction from the market rate of interest to which the inverse floater
is indexed. An inverse floating rate security may exhibit greater price
volatility than a fixed rate obligation of similar credit quality.
MONEY MARKET INSTRUMENTS. In an attempt to respond to adverse market,
economic, political or other conditions, the Fund may take a temporary defensive
position that is inconsistent with its principal investment strategies and
invest some or all of its assets in money market instruments, including U.S.
Government securities, repurchase agreements, bank obligations and commercial
paper. The Fund also may purchase money market instruments when it has cash
reserves or in anticipation of taking a market position.
INVESTMENT TECHNIQUES
The following information supplements and should be read in
conjunction with the Fund's Prospectus.
LEVERAGE. Leveraging (that is, buying securities using borrowed money)
amplifies the effect on net asset value of any increase or decrease in the
market value of the Fund's portfolio. These borrowings will be subject to
interest costs which may or may not be recovered by any appreciation of the
securities purchased. For borrowings for investment purposes, the 1940 Act
requires the Fund to maintain continuous asset coverage (that is, total assets
including borrowings, less liabilities exclusive of borrowings) of 300% of the
amount borrowed. If the required coverage should decline as a result of market
fluctuations or other reasons, the Fund may be required to sell some of its
portfolio holdings within three days to reduce the amount of its borrowings and
restore the 300% asset coverage, even though it may be disadvantageous from an
investment standpoint to sell securities at that time. The Fund also may be
required to maintain minimum average balances in connection with such borrowing
or pay a commitment or other fee to maintain a line of credit; either of these
requirements would increase the cost of borrowing over the stated interest rate.
The Fund may enter into reverse repurchase agreements with banks,
brokers or dealers. This form of borrowing involves the transfer by the Fund of
an underlying debt instrument in return for cash proceeds based on a percentage
of the value of the security. The Fund retains the right to receive interest and
principal payments on the security. At an agreed upon future date, the Fund
repurchases the security at principal plus accrued interest. Except for these
transactions, the Fund's borrowings generally will be unsecured.
SHORT-SELLING. In these transactions, the Fund generally sells a
security it does not own in anticipation of a decline in the market value of the
security. To complete the transaction, the Fund must borrow the security to make
delivery to the buyer. The Fund is obligated to replace the security borrowed by
purchasing it subsequently at the market price at the time of replacement. The
price at such time may be more or less than the price at which the security was
sold by the Fund, which would result in a loss or gain, respectively. The Fund
also may make short sales "against the box," in which the Fund enters into a
short sale of a security it owns. The Fund will not sell securities sold short
if, after effect is given to any such short sale, the total market value of all
securities sold short would exceed 25% of the value of the Fund's net assets.
Until the Fund closes its short position or replaces the borrowed
security, it will: (a) segregate permissible liquid assets in an amount which,
together with the amount deposited as collateral, always equals the current
value of the security sold short; or (b) otherwise cover its short position.
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.
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 or on exchanges located outside the United States. Foreign
markets may offer advantages such as trading opportunities or arbitrage
possibilities not available in the United States. Foreign markets, however, may
have greater risk potential than domestic markets. For example, some foreign
exchanges are principal markets so that no common clearing facility exists and
an investor may look only to the broker for performance of the contract. In
addition, any profits that the Fund might realize in trading could be eliminated
by adverse changes in the currency exchange rate, or the Fund could incur losses
as a result of those changes. Transactions on foreign exchanges may include both
commodities which are traded on domestic exchanges and those which are not.
Unlike trading on domestic commodity exchanges, trading on foreign commodity
exchanges is not regulated by the Commodity Futures Trading Commission.
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 and options with respect thereto 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.
The Fund may purchase and sell currency futures. A foreign currency
future obligates the Fund to purchase or sell an amount of a specific currency
at a future date at a specific price.
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.
The Fund may purchase and sell call and put options on foreign
currency. These options convey the right to buy or sell the underlying currency
at a price which is expected to be lower or higher than the spot price of the
currency at the time the option is exercised or expires.
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, foreign currencies 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.
FOREIGN CURRENCY TRANSACTIONS. The Fund may enter into foreign
currency transactions for a variety of purposes, including: to fix in U.S.
dollars, between trade and settlement date, the value of a security the Fund has
agreed to buy or sell; to hedge the U.S. dollar value of securities the Fund
already owns, particularly if it expects a decrease in the value of the currency
in which the foreign security is denominated; or to gain exposure to the foreign
currency in an attempt to realize gains.
Foreign currency transactions may involve, for example, the Fund's
purchase of foreign currencies for U.S. dollars or the maintenance of short
positions in foreign currencies. A short position would involve the Fund
agreeing to exchange an amount of a currency it did not currently own for
another currency at a future date in anticipation of a decline in the value of
the currency sold relative to the currency the Fund contracted to receive. The
Fund's success in these transactions will depend principally on the Adviser's
ability to predict accurately the future exchange rates between foreign
currencies and the U.S. dollar.
Currency exchange rates may fluctuate significantly over short periods
of time. They generally are determined by the forces of supply and demand in the
foreign exchange markets and the relative merits of investments in different
countries, actual or perceived changes in interest rates and other complex
factors, as seen from an international perspective. Currency exchange rates also
can be affected unpredictably by intervention by U.S. or foreign governments or
central banks, or the failure to intervene, or by currency controls or political
developments in the United States or abroad.
FOREIGN SECURITIES. Foreign securities markets generally are not as
developed or efficient as those in the United States. Securities of some foreign
issuers are less liquid and more volatile than securities of comparable U.S.
issuers. Similarly, volume and liquidity in most foreign securities markets are
less than in the United States and, at times, volatility of price can be greater
than in the United States.
Because evidences of ownership of foreign securities usually are held
outside the United States, the Fund's investment in such securities will be
subject to additional risks which include possible adverse political and
economic developments, seizure or nationalization of foreign deposits and
adoption of governmental restrictions which might adversely affect or restrict
the payment of principal and interest on the foreign securities to investors
located outside the country of the issuer, whether from currency blockage or
otherwise. Moreover, foreign securities held by the Fund may trade on days when
the Fund does not calculate its net asset value and thus affect the Fund's net
asset value on days when investors have no access to the Fund.
Developing countries have economic structures that are generally less
diverse and mature, and political systems that are less stable, than those of
developed countries. The markets of developing countries may be more volatile
than the markets of more mature economies; however, such markets may provide
higher rates of return to investors. Many developing countries providing
investment opportunities for the Fund have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have adverse
effects on the economies and securities markets of certain of these countries.
Since foreign securities often are purchased with and payable in
currencies of foreign countries, the value of these assets as measured in U.S.
dollars may be affected favorably or unfavorably by changes in currency rates
and exchange control regulations.
FIXED-INCOME SECURITIES. The Fund may invest, to a limited extent, in
fixed-income securities, including those rated below investment grade by Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's Ratings Services ("S&P")
or Fitch IBCA, Duff & Phelps ("Fitch" and together with S&P and Moody's, the
"Rating Agencies"). Even though interest-bearing securities are investments
which promise a stable stream of income, the prices of such securities generally
are inversely affected by changes in interest rates and, therefore, are subject
to the risk of market price fluctuations. The values of fixed-income securities
also may be affected by changes in the credit rating or financial condition of
the issuer. Once the rating of a portfolio security has been changed, the Fund
will consider all circumstances deemed relevant in determining whether to
continue to hold the security.
LOWER RATED SECURITIES. The Fund may invest in higher yielding (and,
therefore, higher risk) convertible securities and, to a limited extent, in debt
securities (junk bonds). These securities include those rated below Baa by
Moody's and below BBB by S&P and Fitch. These securities may be subject to
certain risks and to greater market fluctuations than lower yielding investment
grade securities. These securities are considered by the Rating Agencies to be,
on balance, predominantly speculative as to the payment of principal and
interest and generally involve more credit risk than investment grade
securities. The retail market for these securities may be less liquid than that
of investment grade securities. Adverse market conditions could make it
difficult for the Fund to sell these securities or could result in the Fund
obtaining lower prices for these securities which would adversely affect the
Fund's net asset value. See "Appendix" for a general description of the Rating
Agencies' ratings. Although ratings may be useful in evaluating the safety of
interest and principal payments, they do not evaluate the market value risk of
these securities. The Fund will rely on the Adviser's judgment, analysis and
experience in evaluating the creditworthiness of an issuer.
Companies that issue certain of these securities often are highly
leveraged and may not have available to them more traditional methods of
financing. Therefore, the risk associated with acquiring the securities of such
issuers generally is greater than is the case with the higher rated securities.
For example, during an economic downturn or a sustained period of rising
interest rates, highly leveraged issuers of these securities may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations also may be affected adversely by
specific corporate developments, forecasts, or the unavailability of additional
financing. The risk of loss because of default by the issuer is significantly
greater for the holders of these securities because such securities generally
are unsecured and often are subordinated to other creditors of the issuer.
Because there is no established retail secondary market for many of
these securities, the Fund may be able to sell such securities only to a limited
number of dealers or institutional investors. To the extent a secondary trading
market for these securities does exist, it generally is not as liquid as the
secondary market for higher rated securities. The lack of a liquid secondary
market may have an adverse impact on market price and yield and the Fund's
ability to dispose of particular issues when necessary to meet the Fund's
liquidity needs or in response to a specific economic event such as a
deterioration in the creditworthiness of the issuer. The lack of a liquid
secondary market for certain securities also may make it more difficult for the
Fund to obtain accurate market quotations for purposes of valuing the Fund's
portfolio and calculating its net asset value. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of these securities. In such cases, judgment may play a
greater role in valuation because less reliable, objective data may be
available.
These securities may be particularly susceptible to economic
downturns. It is likely that an economic recession could disrupt severely the
market for such securities and may have an adverse impact on the value of such
securities. In addition, it is likely that any such economic downturn could
adversely affect the ability of the issuers of such securities to repay
principal and pay interest thereon and increase the incidence of default for
such securities.
The Fund may acquire these securities during an initial offering. Such
securities may involve special risks because they are new issues. The Fund has
no arrangement with any persons concerning the acquisition of such securities,
and the Adviser will review carefully the credit and other characteristics
pertinent to such new issues.
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. Fund investments in initial
public offerings ("IPOs") will be allocated on objective criteria designed to
promote fair and equitable allocations of investment opportunities among the
Fund and other funds advised by the Adviser, including giving priority to funds
not intending to shortly resell the IPO.
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 more than 25% of the value of its total assets in the
securities of issuers in any single industry, 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, Suite 220 and Treasurer Executive Officer of
San Francisco, CA 94107 MetaMarkets.com, Inc.
Age: 46 and the Adviser since
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
1150 University Avenue of Tracy G. Herrick,
Palo Alto, CA 94301 Inc., an economic
Age: 66 consulting 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
Graduate School of Business of Finance and
Stanford University Management (Teaching),
Stanford, CA 94305 Associate Dean for
Age: 61 Academic 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.
Trustees and officers of the Company, as a group, owned 2.06% of the
Fund's shares as of November 1, 2000.
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:
Total Compensation
Name of Aggregate From Fund and
Board Compensation from Fund Complex
Member Company Paid to Board Members
------------------------------------------------------------------------------
Tracy G. Herrick $2,500 $2,500
James E. Mitchell $2,500 $2,500
George G. C. Parker $2,500 $2,500
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 will continue until July 20, 2001 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 Adviser, by vote cast in person at a meeting called for
the purpose of voting on such approval. The Agreement was approved by the
Company's sole shareholder on August 6, 1999. 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 set forth below as a percentage of the
Fund's average daily net assets:
Average Daily Net Annual Rate of
Assets of the Fund Advisory Fee
on the first $250 million 1.00%
on the next $500 million .75%
on assets in excess of $750 million .50%
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.
The Adviser contractually agreed to reimburse the Fund to the extent
operating expenses exceeded 0.20% of the Fund's average daily net assets for the
period ended July 31, 2000, limiting overall expenses to a maximum of 1.45% of
the Fund's average daily net assets. The Adviser also waived its fees and paid
all Fund expenses through February 28, 2000. For the 11 month fiscal period
ended July 31, 2000, the Adviser earned fees of $210,691, waived fees of $61,880
and reimbursed or paid other Fund expenses of $534,933 (including $25,000 of
administration fees).
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 Agreement and Fund
Accounting Agreement, the Company has agreed to pay the Administrator a monthly
administration 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 Administration Fee
------------------ ------------------
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.
The Administrator voluntarily agreed to defer administration fees
earned during the period August 31, 1999 through November 31, 1999. The Adviser
paid these fees (totaling $25,000) during the nine month period ended August 31,
2000. The Fund paid total fees of $65,076 during the 11 month fiscal period
ended July 31, 2000.
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).
The Fund paid $52,673 in Distribution Plan fees for the 11 month
fiscal period ended July 31, 2000, all of which was used to compensate Service
Organizations.
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 $1,000, and subsequent investments must be at least $250. The minimum
initial investment is $100 for IRAs, and subsequent investments for IRAs must be
at least $50. The minimum initial investment for participants in the Automatic
Investment Plan is $250, and subsequent investments must be at least $50. 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 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. Any assets or liabilities initially expressed in terms
of foreign currency will be translated into dollars at the midpoint of the New
York interbank market spot exchange rate as quoted on the day of such
translation by the Federal Reserve Bank of New York or, if no such rate is
quoted on such date, at the exchange rate previously quoted by the Federal
Reserve Bank of New York or at such other quoted market exchange rate as may be
determined to be appropriate by the Adviser. Forward currency contracts will be
valued at the current cost of offsetting the contract. 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.
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 $250 and minimum
subsequent investments of $50 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.
The Fund's total return (non-annualized) for the fiscal period
beginning August 31, 1999 (commencement of the Fund's operations) through July
31, 2000 was 72.18% after waivers and reimbursements. Without waivers and
reimbursements, performance would have been lower.
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.
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. A
portfolio manager, analyst, or other employee of the Adviser may express views
regarding a particular company, security, industry, or market sector. The views
expressed by any such person 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.
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 Lipper
Analytical Services, Inc., Morningstar, Inc., S&P 500 Index, Russell 2000 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 Adviser believes that the Fund qualified as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"), for the fiscal period ended August 31, 2000. The Fund intends to
continue to so qualify 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 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.
Investment by the Fund in securities issued or acquired at a discount,
or providing for deferred interest or for payment of interest in the form of
additional obligations could under special tax rules affect the amount, timing
and character of distributions to shareholders by causing the Fund to recognize
income prior to the receipt of cash payments. For example, the Fund could be
required to accrue a portion of the discount (or deemed discount) at which the
securities were issued each year and to distribute such income in order to
maintain its qualifications as a regulated investment company. In such case, the
Fund may have to dispense of securities which it might otherwise have continued
to hold in order to generate cash to satisfy these distribution requirements.
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.
For the 11 month fiscal period ended July 31, 2000, the Fund paid
$648,000 in brokerage commissions, gross spreads and concessions on principal
transactions, none of which was paid to a broker for brokerage or research
services. During the fiscal period, the Fund did not own any securities of its
regular broker-dealers or their parents.
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 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, five 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 also has the ability to
create, from time to time, new series without shareholder approval.
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.
As of November 1, 2000, the following shareholders were known to own
of record 5% or more of the Fund's shares:
Percentage of Total Fund Shares
Name and Address Outstanding
Charles Schwab & Co Inc.
Special Custody Account Of Customers
101 Montgomery Street
San Francisco, California 94104 11.99%
National Investor Services Corp.
For The Exclusive Benefit
Of Our Customers
55 Water Street, 32nd Floor
New York, New York 10041 6.24%
James D. Sansbury
Maureen E. Sansbury
25 Tagus Court
Portola Valley, California 94028 5.76%
Barry J. Small
145 Mason Street
Greenwich, Connecticut 06830 5.72%
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>
APPENDIX
Rating Categories
Description of certain ratings assigned by Standard & Poor's Ratings
Services ("S&P"), Moody's Investors Service ("Moody's") and Fitch IBCA, Duff &
Phelps ("Fitch"):
S&P
LONG-TERM
AAA
An obligation rated 'AAA' has the highest rating assigned by S&P. The obligor's
capacity to meet its financial commitment on the obligation is extremely strong.
AA
An obligation rated 'AA' differs from the highest rated obligations only in
small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A
An obligation rated 'A' is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher
rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB
An obligation rated 'BBB' exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
BB, B, CCC, CC, AND C
Obligations rated 'BB', 'B', 'CCC', 'CC', and 'C' are regarded as having
significant speculative characteristics. 'BB' indicates the least degree of
speculation and 'C' the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.
BB
An obligation rated 'BB' is less vulnerable to nonpayment than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
B
An obligation rated 'B' is more vulnerable to nonpayment than obligations rated
'BB', but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
CCC
An obligation rated 'CCC' is currently vulnerable to nonpayment, and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
CC
An obligation rated 'CC' is currently highly vulnerable to nonpayment.
C
A subordinated debt or preferred stock obligation rated 'C' is currently highly
vulnerable to nonpayment. The 'C' rating may be used to cover a situation where
a bankruptcy petition has been filed or similar action taken, but payments on
this obligation are being continued. A 'C' also will be assigned to a preferred
stock issue in arrears on dividends or sinking fund payments, but that is
currently paying.
D
An obligation rated 'D' is in payment default. The 'D' rating category is used
when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The 'D' rating also will be used upon the
filing of a bankruptcy petition or the taking of a similar action if payments on
an obligation are jeopardized.
r
The symbol 'r' is attached to the ratings of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
N.R.
The designation 'N.R.' indicates that no rating has been requested, that there
is insufficient information on which to base a rating, or that S&P does not rate
a particular obligation as a matter of policy.
Note: The ratings from 'AA' to 'CCC' may be modified by the addition of a plus
(+) or minus (-) sign designation to show relative standing within the major
rating categories.
SHORT-TERM
A-1
A short-term obligation rated 'A-1' is rated in the highest category by S&P. The
obligor's capacity to meet its financial commitment on the obligation is strong.
Within this category, certain obligations are given a plus sign (+) designation.
This indicates that the obligor's capacity to meet its financial commitment on
these obligations is extremely strong.
A-2
A short-term obligation rated 'A-2' is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher rating categories. However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory.
A-3
A short-term obligation rated 'A-3' exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
B
A short-term obligation rated 'B' is regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet is financial
commitment on the obligation.
C
A short-term obligation rated 'C' is currently vulnerable to nonpayment and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.
D
A short-term obligation rated 'D' is in payment default. The 'D' rating category
is used when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The 'D' rating also will be used upon the
filing of a bankruptcy petition or the taking of a similar action if payments on
an obligation are jeopardized.
MOODY'S
LONG-TERM
Aaa
Bonds rated 'Aaa' are judged to be of the best quality. They carry the smallest
degree of investment risk and are generally referred to as "gilt edged."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa
Bonds rated 'Aa' are judged to be of high quality by all standards. Together
with the 'Aaa' group they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in 'Aaa' securities or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the
long-term risk appear somewhat larger than the 'Aaa' securities.
A
Bonds rated 'A' possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa
Bonds rated 'Baa' are considered as medium-grade obligations (i.e., they are
neither highly protected nor poorly secured). Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba
Bonds rated 'Ba' are judged to have speculative elements; their future cannot be
considered as well-assured. Often the protection of interest and principal
payments may be very moderate, and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position characterizes bonds in
this class.
B
Bonds rated 'B' generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa
Bonds rated 'Caa' are of poor standing. Such issues may be in default or there
may be present elements of danger with respect to principal or interest.
Ca
Bonds rated 'Ca' represent obligations which are speculative in a high degree.
Such issues are often in default or have other marked shortcomings.
C
Bonds rated 'C' are the lowest rated class of bonds, and issues so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing.
Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from 'Aa' through 'Caa'. The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the
lower end of that generic rating category.
PRIME RATING SYSTEM (SHORT-TERM)
Issuers rated PRIME-1 (or supporting institutions) have a superior ability for
repayment of senior short-term debt obligations. Prime-1 repayment ability will
often be evidenced by many of the following characteristics:
Leading market positions in well-established industries.
High rates of return on funds employed.
Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated PRIME-2 (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. This will normally be evidenced
by many of the characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
Issuers rated PRIME-3 (or supporting institutions) have an acceptable ability
for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
FITCH
LONG-TERM INVESTMENT GRADE
AAA
HIGHEST CREDIT QUALITY. 'AAA' ratings denote the lowest expectation of credit
risk. They are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.
AA
VERY HIGH CREDIT QUALITY. 'AA' ratings denote a very low expectation of credit
risk. They indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to foreseeable
events.
A
HIGH CREDIT QUALITY. 'A' ratings denote a low expectation of credit risk. The
capacity for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB
GOOD CREDIT QUALITY. 'BBB' ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.
LONG-TERM SPECULATIVE GRADE
BB
SPECULATIVE. 'BB' ratings indicate that there is a possibility of credit risk
developing, particularly as the result of adverse economic change over time;
however, business or financial alternatives may be available to allow financial
commitments to be met. Securities rated in this category are not investment
grade.
B
HIGHLY SPECULATIVE. 'B' ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met; however, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.
CCC, CC, C
HIGH DEFAULT RISK. Default is a real possibility. Capacity for meeting financial
commitments is solely reliant upon sustained, favorable business or economic
developments. 'CC' ratings indicate that default of some kind appears probable.
'C' ratings signal imminent default.
DDD, DD, D
DEFAULT. The ratings of obligations in this category are based on their
prospects for achieving partial or full recovery in a reorganization or
liquidation of the obligor. While expected recovery values are highly
speculative and cannot be estimated with any precision, the following serve as
general guidelines. 'DDD' obligations have the highest potential for recovery,
around 90% - 100% of outstanding amounts and accrued interest. 'DD' ratings
indicate potential recoveries in the range of 50% - 90% and 'D' the lowest
recovery potential, i.e., below 50%.
Entities rated in this category have defaulted on some or all of their
obligations. Entities rated 'DDD' have the highest prospect for resumption of
performance or continued operation with or without a formal reorganization
process. Entities rated 'DD' and 'D' are generally undergoing a formal
reorganization or liquidation process; those rated 'DD' are likely to satisfy a
higher portion of their outstanding obligations, while entities rated 'D' have a
poor prospect of repaying all obligations.
SHORT-TERM
A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and thus
places greater emphasis on the liquidity necessary to meet financial commitments
in a timely manner.
F1
HIGHEST CREDIT QUALITY. Indicates the strongest capacity for timely payment of
financial commitments; may have an added "+" to denote any exceptionally strong
credit feature.
F2
GOOD CREDIT QUALITY. A satisfactory capacity for timely payment of financial
commitments, but the margin of safety is not as great as in the case of the
higher ratings.
F3
FAIR CREDIT QUALITY. The capacity for timely payment of financial commitment is
adequate; however, near-term adverse changes could result in a reduction
non-investment grade.
B
SPECULATIVE. Minimal capacity for timely payment of financial commitments plus
vulnerability to near-term adverse changes in financial and economic conditions.
C
HIGH DEFAULT RISK. Default is a real possibility. Capacity for meeting financial
commitments is solely reliant upon a sustained, favorable business and economic
environment.
D
DEFAULT. Denotes actual or imminent payment default.
'NR' indicates that Fitch does not rate the issuer or issue in question.
Notes to long-term and short-term ratings: A plus (+) or minus (-) sign
designation may be appended to a rating to denote relative status within major
rating categories. Such suffixes are not added to the 'AAA' long-term rating
category, to categories below 'CCC', or to short-term ratings other than 'F1.'
<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.
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 certifies that it meets all of
the requirements for effectiveness of the Registration Statement under Rule
485(b) under the Securities Act of 1933 and 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 21st day of November, 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 November 21, 2000
--------------------------- (Principal Executive
DONALD L. LUSKIN Officer and Chief Financial
and Accounting Officer)
and Board Member
/s/ Tracey G. Herrick* Board Member November 21, 2000
---------------------------
TRACEY G. HERRICK
/s/ James E. Mitchell* Board Member November 21, 2000
---------------------------
JAMES E. MITCHELL
/s/ George G.C. Parker* Board Member November 21, 2000
--------------------------
GEORGE G.C. PARKER
*By: /s/ Donald L. Luskin
--------------------------
Donald L. Luskin,
as attorney-in-fact
<PAGE>
METAMARKET.COM FUNDS
Post-Effective Amendment No. 5 to
Registration Statement on Form N-1A under
the Securities Act of 1933 and
the Investment Company Act of 1940
----------
EXHIBITS
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INDEX TO EXHIBITS
(j) Consent of Independent Auditors
